Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Apr. 24, 2020 | Jun. 30, 2019 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | OLB GROUP, INC. | ||
Entity Central Index Key | 0001314196 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Entity Current Reporting Status | Yes | ||
Entity Well Known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | false | ||
Entity Public Float | $ 16,493,376 | ||
Entity Common Stock, Shares Outstanding | 5,411,905 | ||
Entity File Number | 000-52994 | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation State Country Code | DE |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Current Assets: | ||
Cash | $ 507,616 | $ 111,586 |
Accounts receivable, net | 479,404 | 406,110 |
Prepaid expenses | 16,706 | 21,135 |
Other current assets | 108,278 | 8,278 |
Total Current Assets | 1,112,004 | 547,109 |
Other Assets: | ||
Property and equipment, net | 36,653 | 65,945 |
Intangible assets, net | 3,335,239 | 4,148,096 |
Deferred offering costs | 210,305 | |
Goodwill | 6,858,216 | 6,858,216 |
Other long-term assets | 316,512 | 379,908 |
TOTAL ASSETS | 11,868,929 | 11,999,274 |
Current Liabilities: | ||
Accounts payable | 592,853 | 467,526 |
Accrued expenses - related party | 1,012,023 | 640,009 |
Accrued expenses | 73,625 | 73,625 |
Other accrued liabilities | 4,767 | 15,152 |
Deferred revenue | 99,594 | |
Note payable - current portion | 325,000 | |
Note payable - related party - current portion | 386,467 | 25,000 |
Total Current Liabilities | 2,494,329 | 1,221,312 |
Long Term Liabilities: | ||
Note payable, net | 9,175,000 | 9,500,000 |
Notes payable - related parties | 3,000,000 | 3,000,000 |
Total Liabilities | 14,669,329 | 13,721,312 |
Commitments and contingencies (Note 14) | ||
Stockholders' Deficit: | ||
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding | ||
Common stock, $0.0001 par value; 200,000,000 shares authorized, 5,411,905 and 5,411,905 shares issued and outstanding, respectively | 541 | 541 |
Additional paid-in capital | 16,050,938 | 15,785,888 |
Accumulated deficit | (18,851,879) | (17,508,467) |
Total Stockholders' Deficit | (2,800,400) | (1,722,038) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 11,868,929 | $ 11,999,274 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 5,411,905 | 5,411,905 |
Common stock, shares outstanding | 5,411,905 | 5,411,905 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 3 Months Ended | 12 Months Ended | ||
Apr. 08, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Revenue: | ||||
Transaction and processing fees | $ 10,177,931 | $ 8,863,008 | [1] | |
Merchant equipment sales and other | 88,797 | 35,756 | [1] | |
Other revenue | 24,796 | 121,112 | [1] | |
Total revenue | 10,291,524 | 9,019,876 | [1] | |
Operating expenses: | ||||
Processing and servicing costs, excluding merchant portfolio amortization | 6,723,666 | 5,992,619 | [1] | |
Amortization expense | $ 90,739 | 812,857 | 541,904 | [1] |
Salaries and wages | 1,490,762 | 1,401,192 | [1] | |
Outside commissions | 115,584 | 181,510 | [1] | |
General and administrative expenses | 1,417,518 | 1,435,717 | [1] | |
Total operating expenses | 10,560,387 | 9,552,942 | [1] | |
(Loss) income from operations | (268,863) | (533,066) | [1] | |
Other Income (Expense): | ||||
Interest expense | (866,875) | (800,467) | [1] | |
Interest expense, related party | (382,279) | (82,849) | ||
Gain from settlement | 172,390 | [1] | ||
Gain on settlement of payables | 16,039 | [1] | ||
Other | 2,215 | 6,799 | [1] | |
Total other expense | (1,074,549) | (860,478) | [1] | |
Net Loss | $ (1,343,412) | $ (1,393,544) | [1] | |
Net loss per share, basic and diluted | $ (0.25) | $ (0.26) | [1] | |
Weighted average shares outstanding, basic and diluted | 5,452,626 | 5,411,446 | [1] | |
Predecessor | ||||
Revenue: | ||||
Transaction and processing fees | 3,164,949 | |||
Merchant equipment sales and other | 9,590 | |||
Other revenue | ||||
Total revenue | 3,174,539 | |||
Operating expenses: | ||||
Processing and servicing costs, excluding merchant portfolio amortization | 1,748,141 | |||
Amortization expense | 90,739 | |||
Salaries and wages | 374,345 | |||
Outside commissions | 508,296 | |||
General and administrative expenses | 367,524 | |||
Total operating expenses | 3,089,045 | |||
(Loss) income from operations | 85,494 | |||
Other Income (Expense): | ||||
Interest expense | (832,564) | |||
Interest expense, related party | ||||
Gain from settlement | ||||
Gain on settlement of payables | ||||
Other | 908 | |||
Total other expense | (831,656) | |||
Net Loss | $ (746,162) | |||
[1] | Includes the consolidated results from operations of OLB, CrowdPay and Omnisoft from January 1, 2018 through December 31, 2018 and the net assets acquired from GACP from April 9, 2018 through December 31, 2018. |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Deficit - USD ($) | Common Stock | Additional Paid In Capital | Accumulated Deficit | Total |
Balance at Dec. 31, 2017 | $ 541 | $ 15,592,265 | $ (16,114,923) | $ (522,117) |
Balance, shares at Dec. 31, 2017 | 5,411,072 | |||
Common stock issued for services | 3,750 | 3,750 | ||
Common stock issued for services, shares | 833 | |||
Warrants issued as non-cash interest | 7,660 | 7,660 | ||
Stock based compensation | 182,213 | 182,213 | ||
Net loss | (1,393,544) | (1,393,544) | ||
Balance at Dec. 31, 2018 | $ 541 | 15,785,888 | (17,508,467) | (1,722,038) |
Balance, shares at Dec. 31, 2018 | 5,411,905 | |||
Stock based compensation | 265,050 | 265,050 | ||
Net loss | (1,343,412) | (1,343,412) | ||
Balance at Dec. 31, 2019 | $ 541 | $ 16,050,938 | $ (18,851,879) | $ (2,800,400) |
Balance, shares at Dec. 31, 2019 | 5,411,905 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 3 Months Ended | 12 Months Ended | ||
Apr. 08, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net loss | $ (1,343,412) | $ (1,393,544) | [1] | |
Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operations: | ||||
Depreciation and amortization | 842,149 | 582,559 | ||
Paid in kind interest | ||||
Stock based compensation | 265,050 | 185,963 | ||
Non-cash interest expense | 7,660 | |||
Gain on settlement of payables | (16,039) | |||
Bad debt expense | 38,113 | |||
Changes in assets and liabilities: | ||||
Accounts receivable | (73,294) | 63,869 | ||
Prepaid expenses | 4,429 | 63,810 | ||
Other current assets | (100,000) | (8,278) | ||
Other long-term assets | 63,396 | (26,576) | ||
Accounts payable | 125,327 | 149,161 | ||
Accrued expenses - related party | 372,014 | 239,310 | ||
Other accrued liabilities | (10,385) | (17,100) | ||
Deferred revenue | 99,594 | |||
Other long-term liabilities | ||||
Net Cash Provided by (Used in) Operating Activities | 244,868 | (131,092) | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
Purchase of property and equipment | ||||
Proceeds from note receivable | 174,967 | |||
Cash received in business combination | 42,711 | |||
Net Cash provided by Investing Activities | 217,678 | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
Proceeds from notes payable - related parties | 361,467 | 3,055,000 | ||
Payment on notes payable – related parties | (30,000) | |||
Payment of deferred offering costs | (210,305) | |||
Payment on notes payable | (3,000,000) | |||
Net Cash provided by Financing Activities | 151,162 | 25,000 | ||
Net Change in Cash | 396,030 | 111,586 | ||
Cash - Beginning of Period | 111,586 | |||
Cash - End of Period | 507,616 | 111,586 | ||
Cash Paid For: | ||||
Interest | 876,875 | 728,000 | ||
Income taxes | ||||
Predecessor | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net loss | (746,162) | |||
Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operations: | ||||
Depreciation and amortization | 109,225 | |||
Paid in kind interest | 275,369 | |||
Stock based compensation | ||||
Non-cash interest expense | ||||
Gain on settlement of payables | ||||
Bad debt expense | ||||
Changes in assets and liabilities: | ||||
Accounts receivable | 99,190 | |||
Prepaid expenses | 35,445 | |||
Other current assets | (298) | |||
Other long-term assets | 6,775 | |||
Accounts payable | (219,888) | |||
Accrued expenses - related party | (3,156) | |||
Other accrued liabilities | 63,905 | |||
Deferred revenue | ||||
Other long-term liabilities | (2,511) | |||
Net Cash Provided by (Used in) Operating Activities | (382,106) | |||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
Purchase of property and equipment | (6,274) | |||
Proceeds from note receivable | 182,362 | |||
Cash received in business combination | ||||
Net Cash provided by Investing Activities | 176,088 | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
Proceeds from notes payable - related parties | ||||
Payment on notes payable – related parties | ||||
Payment of deferred offering costs | ||||
Payment on notes payable | ||||
Net Cash provided by Financing Activities | ||||
Net Change in Cash | (206,018) | |||
Cash - Beginning of Period | 225,227 | $ 225,227 | ||
Cash - End of Period | 19,209 | |||
Cash Paid For: | ||||
Interest | 458,812 | |||
Income taxes | ||||
[1] | Includes the consolidated results from operations of OLB, CrowdPay and Omnisoft from January 1, 2018 through December 31, 2018 and the net assets acquired from GACP from April 9, 2018 through December 31, 2018. |
Consolidated Statements of Ca_2
Consolidated Statements of Cash Flows (Parenthetical) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Consideration | |
Consideration issued | $ 12,500,000 |
Identified assets and liabilities | |
Cash | 42,711 |
Accounts and other receivables | 480,302 |
Note receivable | 174,967 |
Prepaid expenses | 84,945 |
Long-term assets | 348,367 |
Property and equipment | 106,600 |
Accounts payable | (180,231) |
Accrued Expenses | (105,877) |
Merchant portfolios | 2,190,000 |
Tradename | 2,500,000 |
Total identified assets and liabilities | 5,641,784 |
Excess purchase price allocated to goodwill | $ 6,858,216 |
Background and Recent Acquisiti
Background and Recent Acquisitions | 12 Months Ended |
Dec. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BACKGROUND AND RECENT ACQUISITIONS | NOTE 1 — BACKGROUND AND RECENT ACQUISITIONS Background The OLB Group, Inc. (“OLB” the “Company”) was incorporated in the State of Delaware on November 18, 2004 and provides services through its wholly-owned subsidiaries. The Company provides integrated financial and transaction processing services to businesses throughout the United States. Through its eVance Capital, Inc. subsidiary (“eVance”), the Company provides an integrated suite of third-party merchant payment processing services and related proprietary software enabling products that deliver credit and debit card-based internet payment processing solutions primarily to small and mid-sized merchants operating in physical “brick and mortar” business environments, on the internet and in retail settings requiring both wired and wireless mobile payment solutions. eVance operates as an independent sales organization (“ISO”) generating individual merchant processing contracts in exchange for future residual payments. As a wholesale ISO, eVance has a direct contractual relationship with the merchants and takes greater responsibility in the approval and monitoring of merchants than do retail ISOs and as a result, receives additional consideration for this service and risk. The Company’s Securus365, Inc. subsidiary operates as a retail ISO and receives residual income as commission for merchants it places with third party processors. CrowdPay.us, Inc. (“CrowdPay”) is a Crowdfunding platform used to facilitate a capital raise anywhere from $1,000,0000 -$50,000,000 of various types of securities under Regulation D, Regulation Crowdfunding, Regulation A and the Securities Act of 1933. To date, the activities of this subsidiary have been insignificant. OmniSoft.io, Inc. (“OmniSoft”) operates a software platform for small merchants The Omnicommerce applications work on an iPad, mobile device and the web and allows you to sell a store’s products in a physical, retail setting. To date, the activities of this subsidiary have been insignificant when compared to the overall business. The Company also provides ecommerce development and consulting services on a project by project basis. Memorandum of Sale On April 9, 2018, Securus365, Inc., a Delaware corporation (“Securus”), eVance Capital, Inc., a Delaware corporation (“eVance Capital”), and eVance Inc., a Delaware corporation (“eVance”, and collectively with Securus and eVance Capital, the “Purchasers”), each of which Purchaser is a newly formed wholly-owned subsidiary of OLB, entered into a Memorandum of Sale (the “Memorandum of Sale”) by and among the Purchasers and GACP Finance Co., LLC, a Delaware limited liability company (“GACP”), in its capacity as administrative agent and collateral agent to certain secured lenders of the Debtors (as defined below), pursuant to which the Purchasers acquired substantially all of the assets of the Debtors (the “Asset Acquisition”) through a foreclosure sale arranged by GACP under the Uniform Commercial Code of the State of New York (“UCC”) of the collateral of Excel Corporation (“Excel”) and its subsidiaries Payprotec Oregon, LLC, Excel Business Solutions, Inc. and eVance Processing, Inc. (Excel and such subsidiaries, collectively, the “Debtors”) under the Loan and Security Agreement, dated as of November 2, 2016, by and among GACP, the lenders thereunder and the Debtors and related loan documents, as amended (the “Excel Loan and Security Agreement”). GACP exercised its post-default remedies and realized on the collateral securing the Debtors’ obligations under the Excel Loan and Security Agreement by conducting a public auction of certain assets of the Debtors on April 9, 2018 in accordance with the UCC. The Purchasers submitted the Memorandum of Sale at such auction, which constituted the Purchasers’ bid for substantially all of the assets of the Debtors (“Acquired Assets”), which bid was accepted by GACP on April 9, 2018 in connection with the simultaneous signing and closing (the “Closing”) of the transactions contemplated under the Memorandum of Sale and the Credit Agreement (defined below). In consideration for the sale and transfer of the Acquired Assets at the Closing, the Purchasers assumed certain post-Closing obligations under assigned contracts and issued GACP a note payable in the amount of $12,500,000, through the deemed simultaneous financing of such purchase price to the Purchasers under the Credit Agreement. Pursuant to the Memorandum of Sale, the Purchasers purchased from GACP and accepted all of the Debtors’ right, title and interest in and to the Acquired Assets “as is”, “where is” and “with all faults” and without any representations or warranties, express or implied, of any nature whatsoever. Any representations made by the parties in the Memorandum of Sale did not survive the Closing, and there is no indemnification rights for either party’s breach. Common Control Mergers Effective May 9, 2018, the Company entered into a share exchange agreement with CrowdPay for which the Company issued 2,916,667 shares of common stock for all of the authorized stock of CrowdPay. CrowdPay became a wholly owned subsidiary of OLB. The Company’s two majority stockholders were the two stockholders of CrowdPay and as a result this transaction was accounted for as a common control merger. See Note 7. Effective May 9, 2018, the Company entered into a share exchange agreement with OmniSoft, Inc., a Delaware corporation for which the Company issued 1,833,333 shares of common stock for all of the authorized stock of OmniSoft. OmniSoft became a wholly owned subsidiary of OLB. The Company’s two majority stockholders were the two stockholders of OmniSoft and as a result this transaction was accounted for as a common control merger. See Note 7. Reverse Stock Split On November 12, 2019, the Company effected a one-for-thirty reverse stock split of its common stock (the “Reverse Split”). All shares, options and warrants throughout these consolidated financial statements and Annual Report on Form 10-K have been retroactively restated to reflect the Reverse Split. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s accounting estimates include the collectability of receivables, useful lives of long-lived assets and recoverability of those assets, valuation allowances for income taxes, stock-based compensation and estimates made for business combinations. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, eVance, Securus, CrowdPay, and OMNISOFT. All significant intercompany transactions and balances have been eliminated. Segments Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision–making group in deciding how to allocate resources and in assessing performance. Our chief operating decision–making group is composed of the chief executive officer. We currently operate in one segment surrounding our ISO operations. Cash and Cash Equivalents The Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less as cash and cash equivalents. The carrying amount of financial instruments included in cash and cash equivalents approximates fair value because of the short maturities for the instruments held. The Company had no cash equivalents as of December 31, 2019 and 2018. Concentration of Credit Risk Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of cash and accounts receivable. The Company’s cash is deposited with major financial institutions. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation insurable amount. Accounts Receivable Accounts receivable represent contractual residual payments due from the Company’s processing partners or other customers. Residual payments are determined based on transaction fees and revenues from the credit and debit card processing activity of merchants for which the Company’s processing partners pay the Company. Based on collection experience and periodic reviews of outstanding receivables, management considers all accounts receivable for our residual payments to be fully collectible and accordingly, no allowance for doubtful accounts is required; however, CrowdPay has a recorded an allowance of $38,113 as of both December 31, 2019 and 2018, respectively. Reserve for Chargeback Losses Disputes between a cardholder and a merchant periodically arise as a result of, among other things, cardholder dissatisfaction with merchandise quality or merchant services. Such disputes may not be resolved in the merchant’s favor. In these cases, the transaction is “charged back” to the merchant, which means the purchase price is refunded to the customer through the merchant’s bank and charged to the merchant. If the merchant has inadequate funds, the Company must bear the credit risk for the full amount of the transaction. The Company evaluates the risk for such transactions and estimates the potential loss for chargebacks based primarily on historical experience and records a loss reserve accordingly. For the years ended December 31, 2019 and 2018, we had losses related to chargebacks of $111,482 and $0, respectively. Property and Equipment Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to seven years. Leasehold improvements are amortized over the lesser of the remaining term of the lease or the estimated useful life of the asset. Expenditures for repairs and maintenance are expensed as incurred. Impairment of Long-Lived Assets The Company periodically reviews the carrying value of its long-lived assets held and used at least annually or when events and circumstances warrant such a review. If significant events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. Cash flow projections are sometimes based on a group of assets, rather than a single asset. If cash flows cannot be separately and independently identified for a single asset, the Company determines whether impairment has occurred for the group of assets for which it can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, it measures any impairment by comparing the fair value of the asset group to its carrying value. If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment in the amount of the difference is recorded. Merchant Portfolios Merchant portfolios are valued at fair value of merchant customers on the date of acquisition and are amortized over their estimated useful lives (7 years). Goodwill The Company accounts for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill. The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance with its policies, the Company performed a quantitative assessment of indefinite lived intangibles and goodwill and determined there was no impairment as of at December 31, 2019 and 2018. Business Combinations Acquisitions are accounted for using the acquisition method of accounting. The purchase price of an acquisition is allocated to the assets acquired and liabilities assumed using the estimated fair values at the acquisition date. Transaction costs are expensed as incurred. The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired and identified based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customer lists, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Stock-based Compensation We account for equity-based transactions with nonemployees under the provisions of ASC Topic No. 505-50, Equity-Based Payments to Non-Employees We account for employee stock-based compensation in accordance with the guidance of Financial Accounting Standards Board (“FASB”) ASC Topic 718, Compensation — Stock Compensation, Net Loss per Share Basic net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common shares for the year ended December 31, 2019 and 2018 does not include warrants to acquire 40,000 shares of common stock. The weighted average number of common shares for the year ended December 31, 2019 and 2018 does not include 223,249 and 269,617 options, respectively, to purchase common stock because of their anti-dilutive effect. Revenue Recognition and Cost of Revenues Prior to the adoption of ASC 606, in 2018 the Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. The Company receives a percentage of recurring monthly transaction related fees comprised of credit and debit card fees charged to merchants, net of association fees, otherwise known as Interchange, as well as certain service charges and convenience fees, for payment processing services, including authorization, capture, clearing, settlement and information reporting of electronic transactions. Fees are calculated on either a percentage of the dollar volume of the transaction or a fixed fee or a hybrid of the two and are recognized at the time of the transaction. In the case of “wholesale” residual revenue in which the Company has a direct contractual relationship with the merchant, bears risk of chargebacks and performs underwriting on the merchants, the Company records the full discount charged to the merchant as revenue and the related interchange and other processing fees as expenses. In cases of residual revenue where the Company is not responsible for merchant underwriting and has no chargeback liability and has no or limited contractual relationship with the merchant, the Company records the amount it receives from the processor net of interchange and other processing fees as revenue. The Company adopted ASU 2014-09, Revenue from Contracts with Customers ● Identification of a contract with a customer; ● Identification of the performance obligations in the contract; ● Determination of the transaction price; ● Allocation of the transaction price to the performance obligations in the contract; and ● Recognition of revenue when or as the performance obligations are satisfied. Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Shipping and handling activities associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment activity and recognized as revenue at the point in time at which control of the goods transfers to the customer. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less. Transaction and processing fees Fees for the Company’s transaction and processing arrangements are typically billed and paid on a monthly basis. The Company receives a percentage of recurring monthly transaction related fees comprised of credit and debit card fees charged to merchants, net of association fees, otherwise known as Interchange, as well as certain service charges and convenience fees, for payment processing services, including authorization, capture, clearing, settlement and information reporting of electronic transactions. Fees are calculated on either a percentage of the dollar, volume of the transaction or a fixed fee or a hybrid of the two and are recognized at the time of the transaction. These merchant services represents a single performance obligation satisfied over time and that the same measure of progress should be used to measure the Company’s progress toward complete satisfaction of the performance obligation. The Company will recognize revenue on a monthly basis as the services are transferred to the customer in short daily increments that qualify for series guidance as the best measure of the transfer of control. In wholesale contracts, the Company recognizes transaction and processing fees on a gross basis as the Company is the principal in the merchant services. The Company has concluded it is the principal because it has a direct contractual relationship with the merchant, is primarily responsible for the delivery of services to the merchants, including performing underwriting, has discretion in setting prices, and bears risk of chargebacks and other merchant losses. The Company also has the unilateral ability to accept or reject a transaction based on criteria established by the Company. As the principal, the Company records the full discount charged to the merchant as revenue and the related interchange and other processing fees within cost of revenues. In retail contracts, the Company is not responsible for merchant underwriting, has no chargeback liability and has no or limited contractual relationship with the merchant. As such, the Company records the net amount it receives from the processor, after interchange and other interchange and other processing fees, as revenue. Merchant equipment sales and other The Company generates revenue through the sale and rental of merchant equipment. The Company satisfies its performance obligation upon delivery of equipment to merchants and recognizes revenue at a point in time. The Company allows for customer returns which are accounted for as variable consideration. The Company estimates these amounts based on historical experience and reduces revenue recognized. The Company invoices customers upon delivery of the equipment to merchants, and payments from such customers are due upon invoicing. The Company offers hardware installment sales to customers with terms ranging from three to forty-eight months. The Company allocates a portion of the consideration received from these arrangements to a financing component when it determines that a significant financing component exists. The financing component is subsequently recognized as financing revenue separate from hardware revenue, within subscription and services-based revenue, over the terms of the arrangement with the customer. Pursuant to practical expedients afforded under ASC 606, the Company does not recognize a financing component for hardware installment sales that have a term of one year or less. Deferred Revenue From time to time the Company may launch new products or services to its merchants. In the event step 1 under ASC 606 is not met, the Company will record deferred revenue upon receipt of the payment by the customer. In November 2019, the Company began billing existing merchants for its cloud-based omni-channels software, ShopFast. Merchants are billed monthly with the ability to opt out and receive a refund for up to 30 days after they are billed. Due to the lack of historical data related to these services, customer activity and the associated billings and refunds, $99,594 has been recorded as deferred revenue as of December 31, 2019. During the year ended December 31, 2019, $223,670 of revenue was recognized from performance obligations satisfied (or partially satisfied) in previous periods in connection with a legal settlement. Disaggregation of Revenue The following table presents the Company's revenue disaggregated by revenue source December 31, Revenue from contracts with customers: Wholesale contracts $ 6,202,083 Retail contracts $ 2,689,506 Other transaction and processing fees $ 1,399,935 Total transaction and processing fees $ 10,291,524 Income Taxes Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to tax net operating loss carryforwards. The deferred tax assets and liabilities represent the future tax return consequences of these differences, which will either be taxable or deductible when assets and liabilities are recovered or settled, as well as operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established against deferred tax assets when in the judgment of management, it is more likely than not that such deferred tax assets will not become available. Because the judgment about the level of future taxable income is dependent to a great extent on matters that may, at least in part, be beyond the Company’s control, it is at least reasonably possible that management’s judgment about the need for a valuation allowance for deferred taxes could change in the near term. Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. As of December 31, 2019 and 2018, no liability for unrecognized tax benefits was required to be reported. Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic No. 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as described below: Level 1: Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2: Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly. Level 2 inputs include quoted prices for similar assets, quoted prices in markets that are not considered to be active, and observable inputs other than quoted prices such as interest rates. Level 3: Level 3 inputs are unobservable inputs. The following required disclosure of the estimated fair value of financial instruments has been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The methods and assumptions used to estimate the fair values of each class of financial instruments are as follows: Accounts Receivable, and Accounts Payable. The items are generally short-term in nature, and accordingly, the carrying amounts reported on the consolidated balance sheets are reasonable approximations of their fair values. The carrying amounts of Notes Payable approximate the fair value as the notes bear interest rates that are consistent with current market rates. Subsequent Events Management evaluates events that have occurred after the balance sheet date and through the date the financial statements are issued. Based upon the review, management did not identify any recognized or non-recognized subsequent events which would have required an adjustment or disclosure in the financial statements, except as described in Note 16 Subsequent Events Recent Accounting Standards In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, and also issued subsequent amendments to the initial guidance, ASU 2018-19, ASU 2019-04, ASU 2019-05, and ASU 2019-11 (collectively, Topic 326), to introduce a new impairment model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses (CECL). Under Topic 326, an entity is required to estimate CECL on available-for-sale (AFS) debt securities only when the fair value is below the amortized cost of the asset and is no longer based on an impairment being “other-than-temporary”. Topic 326 also requires the impairment calculation on an individual security level and requires an entity use present value of cash flows when estimating the CECL. The credit-related losses are required to be recognized through earnings and non-credit related losses are reported in other comprehensive income. In April 2019, the FASB further clarified the scope of Topic 326 and addressed issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayment. The new guidance will require modified retrospective application to all outstanding instruments, with a cumulative effect adjustment recorded to opening retained earnings as of the beginning of the first period in which the guidance becomes effective. The amendments in this Update for the Company are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted in any interim period after the issuance of this of this Update. The Company is evaluating the impact of the adoption of the new standard on its consolidated financial statement and disclosures. Recently Adopted Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers, to establish ASC Topic 606, (ASC 606). ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition and most industry-specific guidance throughout the Industry Topics of the Codification. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance includes a five-step framework that requires an entity to: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when the entity satisfies a performance obligation. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company has reviewed other recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position. |
Liquidity and Capital Resources
Liquidity and Capital Resources | 12 Months Ended |
Dec. 31, 2019 | |
Liquidity and Capital Resources [Abstract] | |
LIQUIDITY AND CAPITAL RESOURCES | NOTE 3 — LIQUIDITY AND CAPITAL RESOURCES At December 31, 2019, the Company had cash of $507,616 and a working capital deficit of $1,382,325. For the year ended December 31, 2019, the Company’s net loss was $1,343,412. As a result of the Company’s operating cash flows and working capital needs, which required it to obtain loans from a related party, at December 31, 2019 the Company was not in compliance with certain financial covenants required by the Credit Agreement. Further, in connection with the response to the COVID-19 pandemic in the United States, the Company has experienced certain disruptions to its business and has observed disruptions for the Company’s customers and merchants which has resulted in a decline in transaction volume. While the volume of processing transactions by merchants in March was relatively in-line with the Company’s expectations, it is expected that the number of transactions and resulting revenue could be as much as 40% lower than March during the month of April. We estimate that the number of transactions will continue to decline, along with revenues, until the response to the COVID-19 pandemic allows customers to make more point of purchase transactions for merchants and more merchants provide for additional contactless and online purchase options. Based on this, the Company expects an overall decrease in revenue and cash flows from operations during the remainder of 2020 as compared to 2019. As a result of these factors, the Company determined it was necessary to take certain corporate actions in connection with its overall analysis to determine whether or not his has sufficient liquidity to continue as a going concern for a period of at least twelve months from the date its financial statements were issued. On April 24, 2020, the Company entered into Amendment No. 4 to Loan and Security Agreement (“Amendment No. 4”) amending the Credit Agreement. The purpose of Amendment No. 4 was to extend the Maturity Date of the indebtedness to April 9, 2022 and to waive any outstanding events of default. In consideration for the foregoing, the Credit Agreement was amended to include a new principal repayment schedule under the note whereby the Company paid an amount equal to $125,000 upon execution of Amendment No. 4 and the Company agreed to make a monthly payment of $25,000 per month, commencing May 1, 2020, and on the first business day of each calendar month thereafter until the required balloon payment on April 9, 2022. In the event that the Company does not make a monthly payment, Messrs. Yakov and Herzog will have the ability to make an equity contribution to the Company for the sole purpose of paying the monthly payment obligation of the Company under the Credit Agreement. In addition, included in the working capital deficit described above as of December 31, 2019 was accrued payroll, a note payable and other expenses due to the Company’s Chief Executive Officer, Mr. Ronny Yakov, in the amount of $993,458, which he has agreed to defer receiving payment until December 31, 2022. The Company also believes that it has reduced operating expenses sufficiently during 2019 allowing it to maintain its ongoing operations despite the anticipated decrease in revenues during 2020. 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 financial statements are issued. As mentioned above, in the event that the response to the pandemic results in a greater than anticipated reduction in processing transaction volume or revenue or expenses are otherwise do not meet our expectations, the Company can further reduce or defer expenses. More specifically, the Company could (a) implement certain discretionary cost reduction initiatives relating to our spend on employee travel and entertainment, consulting costs and marketing expenses, (b) negotiate additional deferred salary arrangements with Mr. Yakov or other employees, (c) furlough employees or reduce headcount, (d) negotiate extensions of payments of rent and utilities, or (e) enter in or to additional short term loans with Mr. Yakov whereby certain of our expenses as they come due continue to be paid by him and not immediately reimbursed as a normal business expense. In addition, on December 10, 2019, Mr. John Herzog, a related party and significant stockholder, provided a letter to the Company whereby he addressed his prior commitments to provide financial assistance to the Company and agreed to assist with our ongoing working capital needs, upon request through the earlier of (a) the closing of a potential public offering of the Company’s common stock and warrants or (b) November 2020 (other than our obligations to pay principal or interest with respect to the Credit Agreement). Other than with respect to our long-term debt, there are no other limitations or restrictions to the amount of working capital funding that may be provided by Mr. Herzog. In the event that we deem it necessary to request an advance from Mr. Herzog, we expect to negotiate the terms of such advance at that time. Mr. Herzog has committed to not terminate this commitment during its term, but we do not believe that we have recourse in the event that such commitment is terminated. Finally, the Company has applied for a Paycheck Protection Program loan for approximately $225,000 under the CARES Act and it is planning a public offering of its Common Stock during 2020. Although proceeds from either not assured, additional working capital would be available from both initiatives if the Company were successful in obtaining capital from either source. Additional Information Regarding Our Credit Agreement Although, following the execution of Amendment No. 4, we are in compliance, we have not complied with these obligations at certain times since the Credit Agreement was entered into and were obligated to obtain certain waivers and modifications of these provisions to avoid an acceleration event under the Credit Agreement. If we are not able to remain in compliance with these obligations, the creditor may accelerate the maturity of the loan or may require us to adhere to stricter financial covenants in exchange for a waiver. While we expect to comply with these financial covenants, we cannot guarantee our ability to do so. Although it has entered into Amendment No. 4 which extended the maturity date, the Company is exploring refinancing solutions for more advantageous terms for its long-term debt either with new debtholders. If the Company is unable to refinance its debt or is unable to satisfy its obligations as they become due, the Company may be required to sell assets to repay all or part of the debt or replace the debt with less favorable terms. With respect to its senior debt, the Company is required to maintain the following financial covenants in order to avoid an event of default: (1) a Fixed Charge Coverage Ratio not be less than 1.20:1.00, measured in each case on a trailing twelve month basis and (2) net revenue of the Company shall not be less than $9,000,000 until June 30, 2021 and $10,000,000 from and after July 1, 2021, on a trailing twelve-month basis. The Fixed Charge Coverage Ratio is defined as the ratio of (A) EBITDA for each fiscal month minus unfinanced capital expenditures (but not less than zero) for such fiscal month to (B) the sum of (i) all principal payments scheduled to be made during or with respect to such period, plus (ii) all interest expense for such period paid or required to be paid in cash during such period, plus (iii) all federal, state, and local income taxes paid or required to be paid for such period, plus (iv) all cash distributions, dividends, redemptions and other cash payments made or required to be made during such period with respect to equity issued by the Company. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 4 — PROPERTY AND EQUIPMENT Property and equipment are summarized as follows: December 31, 2019 2018 Furniture and Fixtures $ 14,895 $ 14,895 Office Equipment 73,205 73,205 Leasehold improvements 6,208 6,208 Computer Software 12,292 12,292 106,600 106,600 Accumulated depreciation (69,947 ) (40,655 ) Property and equipment, net $ 36,653 $ 65,945 Depreciation expense was $29,292 and $40,655 for the years ended December 31, 2019 and 2018, respectively. As it pertains to the predecessor, for the period from January 1, 2018 through April 8, 2018, depreciation expense was $18,486. |
Intangible Assets
Intangible Assets | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | NOTE 5 — INTANGIBLE ASSETS Other assets consist of the following as of: December 31 2019 2018 Merchant Portfolios $ 2,190,000 $ 2,190,000 Less Accumulated Amortization (854,761 ) (208,571 ) Net residual portfolios $ 1,335,239 $ 1,981,429 December 31 2019 2018 Trade name $ 2,500,000 $ 2,500,000 Less Accumulated Amortization (500,000 ) (333,333 ) Net trade name $ 2,000,000 $ 2,166,667 Amortization expense amounted to $812,857 and $541,904 for the years ended December 31, 2019 and 2018. The predecessor’s amortization expense for the period from January 1, 2018 to April 8, 2018 was $90,739. The Company’s merchant portfolios and tradename are being amortized over respective useful lives of 7 and 5 years. The following sets forth the estimated amortization expense related to amortizing intangible assets for the years ended December 31: 2020 $ 812,857 2021 $ 812,857 2022 $ 812,857 2023 $ 479,524 2024 $ 312,857 Thereafter $ 104,287 Total $ 3,335,239 The weighted average remaining useful life of amortizing intangible assets was 5 years at December 31, 2019. |
Business Combinations
Business Combinations | 12 Months Ended |
Dec. 31, 2019 | |
Business Combinations [Abstract] | |
BUSINESS COMBINATIONS | NOTE 6 — BUSINESS COMBINATIONS As disclosed in Note 1, on April 9, 2018, the Company entered into a Memorandum of Sale by and among the Purchasers and GACP. In consideration for the sale and transfer of the Acquired Assets at the Closing, the Company assumed certain post-Closing obligations under assigned contracts and issued GACP a note payable for $12,500,000, through the deemed simultaneous financing of such purchase price to the Purchasers under the Credit Agreement. The Company accounted for the transaction as a business combination under ASC 805 and as a result, allocated the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date as outlined in the table below. The results of operations of the business acquired by the Company have been included in the consolidated statements of operations since the date of acquisition. The excess of the purchase price over the estimated fair values of the underlying identifiable assets acquired and liabilities assumed was allocated to goodwill. The amount assigned to goodwill was deemed appropriate based on several factors, including: (i) the multiple paid by market participants for businesses in the merchant card processing business; (ii) levels of eVance Payments, current and future projected cash flows; and (iii) the Company’s strategic business plan. Goodwill is expected to be deductible for tax purposes. The allocation of the purchase price and the estimated fair market values of the assets acquired and liabilities assumed are shown below: Consideration Consideration issued $ 12,500,000 Identified assets and liabilities Cash 42,711 Accounts and other receivables 480,302 Note receivable 174,967 Prepaid expenses 84,945 Long-term assets 348,367 Property and equipment 106,600 Accounts payable (180,231 ) Accrued Expenses (105,877 ) Merchant portfolios 2,190,000 Tradename 2,500,000 Total identified assets and liabilities 5,641,784 Excess purchase price allocated to goodwill $ 6,858,216 Unaudited pro forma results of operations for the years ended December 31, 2018, as if the Company and its subsidiaries had been combined on January 1, 2018, follow. The pro forma results include estimates and assumptions which management believes are reasonable. The pro forma results do not include any anticipated cost savings or other effects of the planned integration of these entities, and are not necessarily indicative of the results that would have occurred if the business combination had been in effect on the date indicated, or which may result in the future. The unaudited pro forma results of operations are as follows: 2018 Revenues $ 12,194,415 Operating loss $ (124,442 ) Net loss $ (1,290,262 ) Net loss per share – basic and diluted $ (0.24 ) |
Common Control Mergers
Common Control Mergers | 12 Months Ended |
Dec. 31, 2019 | |
Common Control Mergers [Abstract] | |
COMMON CONTROL MERGERS | NOTE 7 — COMMON CONTROL MERGERS On May 9, 2018, the Company acquired 100% of Omnisoft in exchange for the issuance of 1,833,333 shares of common stock. The acquisition of Omnisoft, was determined to be a common control transaction as each Company has the same two shareholders with a majority ownership. As a result, the assets and liabilities assumed were recorded on the Company’s consolidated financial statements at their respective carry-over basis. Under ASC 805, “Business Combinations,” the Company recorded the common control merger as of the earliest date presented in these consolidated financial statements, or January 1, 2018. Accounts receivable $ 250 Accounts payable (602 ) Accrued expenses – related party (265,319 ) Net liabilities assumed $ (265,671 ) On May 9, 2018, the Company acquired 100% of Crowdpay in exchange for 2,916,667 shares of common stock. The acquisition of Crowdpay as a wholly owned subsidiary is considered a common control transaction as each Company has the same shareholder with a majority ownership. As a result, the assets and liabilities assumed were recorded on the Company’s consolidated financial statements at their respective carry-over basis. Under ASC 805, “Business Combinations,” the Company recorded the common control merger as of the earliest date presented in these condensed consolidated financial statements, or January 1, 2018. Accounts receivable $ 27,540 Other receivable – related party 1,705 Accounts payable and accrued expenses (48,472 ) Accrued expenses – related party (149,645 ) Net liabilities assumed $ (168,872 ) |
Notes Payable
Notes Payable | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | NOTE 8 — NOTES PAYABLE In order to finance the Asset Acquisition, GACP, as administrative agent and collateral agent (“Agent”), and as the initial sole lender thereunder, provided a term loan of $12,500,000 (the “Term Loan”) to the Purchasers, Omnisoft, and CrowdPay, each of Omnisoft and Crowdpay being affiliates of the Company’s majority stockholder (collectively, the “Borrowers”), which obligations are guaranteed by the Company (collectively with the Borrowers, the “Loan Parties”), under the Loan and Security Agreement (the “Credit Agreement”), dated as of April 9, 2018, by and among the Loan Parties, the lenders from time to time party thereto as lenders (the “Lenders”) and the Agent. The Term Loan matures in full on April 9, 2022, the third anniversary of the Closing. $1,000,000 of the principal amount under the Term Loan must be repaid on or prior to July 15, 2018, and an additional $2,000,000 in principal due on or prior to October 31, 2018 (in each case subject to earlier repayment under certain circumstances, including if a Loan Party consummates an equity financing), $125,000 upon execution of Amendment No. 4 and the Company agreed to make a monthly payment of $25,000 per month, commencing May 1, 2020 and on the first business day of each calendar month thereafter, with the remaining principal due upon maturity. The Term Loan can be prepaid without penalty in part by the Loan Parties with ten days’ prior written notice to the Agent, and in full within thirty days’ prior written notice. The Term Loan is subject to an interest rate of 9.0% per annum, payable monthly in arrears. The obligations of the Loan Parties under the Credit Agreement are secured by all of their respective assets and the Loan Parties pledged all of their assets as collateral for their obligations under the Credit Agreement. Additionally, the Company pledged its ownership interests in the Purchasers and any of its other subsidiaries that it may form or acquire from time to time. The Credit Agreement includes customary representations, warranties and financial and other covenants of the Loan Parties for the benefit of the Lenders and the Agent. The obligations of the Loan Parties under the Credit Agreement are subject to customary events of default for a secured term loan. Each Loan Party is jointly and severally liable for the obligations under the Credit Agreement. On July 30, 2018, the Company entered into Amendment No. 1 to the Loan and Security Agreement (the “Amendment”) amending that certain Loan and Security Agreement, dated as of April 9, 2018 (the “Original Credit Agreement,” by and among GACP Finance Co., LLC, as administrative agent and collateral agent, the lenders party thereto, Securus365, Inc., eVance, Inc., eVance Capital, Inc., Omnisoft and CrowdPay as borrowers, and the Company, as parent guarantor. Pursuant to the Amendment, among other things, the lenders (i) waived the Company’s existing defaults under the Original Credit Agreement for its failure to make payment of $1,000,000 (the “initial payment”) under the Original Credit Agreement on or prior to July 15, 2018 and to deliver to the lenders unaudited monthly financial statements and compliance certificates of the Company, (ii) extended the date on which the initial payment was required to be made to July 30, 2018 and extended the date on which the Company is required to provide audited financial statements for the fiscal years ended December 31, 2017 and 2018, (iii) permitted the Company to enter into a subordinated loan arrangement for the Note concurrently with the Amendment such that the Company could make the initial payment under the terms of the Amendment and Original Credit Agreement, and permitted the Note to be repaid either from the sale of the Note Collateral Shares or at any time after the second payment under the Amendment and Original Credit Agreement. The Company borrowed $1,000,000 from a related party (Note 11) in order to make its first scheduled payment. On November 14, 2018, the $2,000,000 second payment due under the Original Credit Agreement that was due by October 31, 2018 was paid. The Company borrowed $2,000,000 from a related party (Note 10) in order to make its second scheduled payment. On February 5, 2019, the Company entered into Amendment No. 3 to Loan and Security Agreement (the “Amendment No. 3”) amending the Original Credit Agreement as the same was amended by the Amendment (the “Original Credit Agreement,” and as amended, by the Amendment and Amendment No. 3 the “Credit Agreement”), by and among GACP Finance Co., LLC, as administrative agent and collateral agent, the lenders party thereto, Securus365, Inc., eVance, Inc., eVance Capital, Inc., Omnisoft and CrowdPay, as borrowers, and the Company, as parent guarantor. Pursuant to the Amendment No. 3, among other things, the lenders waived the Company’s existing default under the Original Credit Agreement for its failure to comply with certain financial covenants set forth in the Original Credit Agreement and the parties amended the terms of the financial covenants that the Company must comply with. The Company is required to maintain a Fixed Charge Coverage Ratio of (x) not less than 1.10:1.00 and (y) on or after the end of the first full fiscal month ended January 31, 2020, the Fixed Charge Coverage Ratio shall not be less than 1.20:1.00, measured in each case on a trailing twelve month and Consolidated Net Revenue shall not be less than $10,000,000. On April 24, 2020, the Company entered into Amendment No. 4 to Loan and Security Agreement (“Amendment No. 4”) amending the Credit Agreement. The purpose of Amendment No. 4 was to extend the Maturity Date of our indebtedness and to waive certain outstanding events of default. Specifically, the Maturity Date of our indebtedness was extended for one year to April 9, 2022. The lenders also waived the Company’s existing default under the Original Credit Agreement from the date the default occurred until the date of Amendment No. 4. These defaults were: (i) failure to to notify the Agent that one or more of the Loan Parties received proceeds from litigation above $99,999.99 and use the proceeds to make a prepayment of the Loans), (ii) one or more of the Loan Parties incurred indebtedness in an aggregate amount of $386,467 during fiscal year 2019 as a result of not reimbursing business expenses paid by Mr. Yakov in the ordinary course, which indebtedness is not permitted under Section 5.23(f) of the Credit Agreement (“ Debt Default Although, following the execution of Amendment No. 4, we are in compliance, we have not complied with these obligations at certain times since the Credit Agreement was entered into and were obligated to obtain certain waivers and modifications of these provisions to avoid an acceleration event under the Credit Agreement. If we are not able to remain in compliance with these obligations, the creditor may accelerate the maturity of the loan or may require us to adhere to stricter financial covenants in exchange for a waiver. While we expect to comply with these financial covenants, we cannot guarantee our ability to do so. Although it has entered into Amendment No. 4 which extended the maturity date, the Company is exploring refinancing solutions for more advantageous terms for its long-term debt either with new debtholders. If the Company is unable to refinance its debt or is unable to satisfy its obligations as they become due, the Company may be required to sell assets to repay all or part of the debt or replace the debt with less favorable terms. Total interest expense for the GACP loan incurred during the year ended December 31, 2019 was $866,875, $73,625 of which is accrued as of December 31, 2019. Total interest expense incurred during the year ended December 31, 2018 was $791,625, $73,625 of which was accrued as of December 31, 2018. |
Warrants
Warrants | 12 Months Ended |
Dec. 31, 2019 | |
Warrants [Abstract] | |
WARRANTS | NOTE 9 — WARRANTS Pursuant to and as additional consideration for the Term Loan under the Credit Agreement, on April 9, 2018 the Pursuant to and as additional consideration for the Term Loan under the Credit Agreement, on April 9, 2018 the Company issued to GACP a Warrant to purchase 40,000 shares of common stock of the Company at an exercise price of $7.50 per share, subject to adjustment as set forth in the Warrant. The Warrant is exercisable by GACP at any time from the Issuance Date until the later of (i) the third (3 rd rd As additional consideration for the Term Loan under the Credit Agreement, on April 9, 2018 the Company also entered into a letter agreement (the “Additional Warrants Agreement”) with GACP, pursuant to which the Company agreed that if the Company at any time after the Closing and prior to the satisfaction of all outstanding obligations under the Credit Agreement requests for GACP to provide debt financing for the acquisition of a company or operating business by the Company or its subsidiaries, and GACP or its affiliates provide all of the debt financing for such acquisition, the Company will issue to GACP a warrant to purchase 6,667 shares of the Company’s common stock (an “Additional Warrant”) upon the closing of such debt-financing, with such Additional Warrant in substantially the same form as the Warrant, up to a total of four (4) Additional Warrants for four debt-financed acquisitions under the Additional Warrants Agreement. The exercise price of the Additional Warrants, if issued, will be $9.00 per share for the first Additional Warrant, $10.50 per share for the second Additional Warrant, $12.00 per share for the third Additional Warrant and $13.50 per share for the fourth Additional Warrant, with the number of shares and exercise price subject to adjustment as set forth in the Additional Warrants Agreement and the Additional Warrant. The warrants have an exercise price of $7.50 and expire in three years. The aggregate fair value of the warrants, which was charged to interest expense, totaled $7,660 based on the Black Scholes Merton pricing model using the following estimates: exercise price of $7.50, 2.28% risk free rate, 114.11% volatility and expected life of the warrants of 3 years. A summary of the status of the Company’s outstanding stock warrants and changes during the year is presented below: Range of Exercise Number Outstanding Weighted Average Remaining Weighted Average $7.50 40,000 1.27 years $7.50 The aggregate intrinsic value represents the total pretax intrinsic value, based on warrants with an exercise price less than the Company’s stock price as of December 31, 2019, which would have been received by the warrant holder had the warrant holder exercised their warrants as of that date. |
Stock Options
Stock Options | 12 Months Ended |
Dec. 31, 2019 | |
Stock Options [Abstract] | |
STOCK OPTIONS | NOTE 10 — STOCK OPTIONS On April 10, 2018, the Company entered into an employment agreement with its VP of Finance pursuant to which he was granted 265,172 common stock options. The grant shall vest at the rate of 1/5 beginning on each anniversary of the effective date of grant. The options have an exercise price of $0.003 and expire in three years after each vest date. The aggregate fair value of the options totalled $1,192,535 based on the Black Scholes Merton pricing model using the following estimates: exercise price of $0.003, 2.43% risk free rate, 123.7% volatility and expected life of the options of 5 years. The fair value is being amortized over the applicable vesting period and credited to additional paid in capital. On January 1, 2018, pursuant to the terms on the employment agreement with Mr. Yakov he was granted 6,667 common stock options. The grant shall vest at the rate of 1/3 beginning on each anniversary of the effective date of grant. The options have an exercise price of $0.03 and expire in three years after each vest date. The aggregate fair value of the options totalled $39,812 based on the Black Scholes Merton pricing model using the following estimates: exercise price of $0.03, 2.13% risk free rate, 123.7% volatility and expected life of the options of 3 years. The fair value is being amortized over the applicable vesting period and credited to additional paid in capital. On January 1, 2019, pursuant to the terms on the employment agreement with Mr. Yakov he was granted 6,667 common stock options. The grant shall vest at the rate of 1/3 beginning on each anniversary of the effective date of grant. The options have an exercise price of $0.03 and expire in three years after each vest date. The aggregate fair value of the options totalled $39,814 based on the Black Scholes Merton pricing model using the following estimates: exercise price of $0.03, 2.47% risk free rate, 104.8% volatility and expected life of the options of 3 years. The fair value is being amortized over the applicable vesting period and credited to additional paid in capital. On November 13, 2019, the Company entered into an agreement with the above holder of 265,172 common stock options and on November 25, 2019, the Company entered into an agreement with the holder of 13,334 common stock options, whereby the Company and option holders each agreed that the exercise price pertaining to those options would not be adjusted for the effects of the Reverse Stock Split. As are result, the exercise price of $0.003 associated with the options granted to the VP of Finance was modified to be $0.0001, and the exercise price of $0.03 associated with the options granted to Mr. Yakov was modified to be $0.001. The Company evaluated the impact of the option modification and concluded that there was no material impact to the consolidated financial statements. For the year ended Stock Options Shares Weighted Aggregate Intrinsic Options outstanding at January 1 271,839 $ 0.0001 — Granted 6,667 $ 0.001 — Exercised — $ — — Forfeited — $ — — Options outstanding December 31 278,506 $ 0.0001 $ 4,177,590 Shares exercisable at December 31 55,257 $ 0.0001 $ 828,855 |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 11 — RELATED PARTY TRANSACTIONS On March 12, 2018, the Company received $30,000 from Mr. John Herzog. The advance was used for operating expenses, was unsecured, non interest bearing and due on demand. This was repaid in full on April 19, 2018. On July 30, 2018, pursuant to the terms of the Amendment (Note 8), the Company issued to Mr. John Herzog, a significant stockholder of the Company a subordinated promissory note in the principal amount of $1,000,000 (the “Note”) for cash proceeds of $1,000,000. The Note initially matured on March 31, 2019 (though the Company had the right to prepay the Note, in whole or in part, at any time prior to maturity) and bears interest at a rate of 12% per annum, compounding annually. The Note is subordinated to the Credit Agreement. The Company used the proceeds received to make the initial payment under the Credit Agreement. On November 14, 2018, the Company issued to John Herzog, a subordinated promissory note in the principal amount of $2,000,000 for cash proceeds of $2,000,000. On March 1, 2019, the Company entered into Amendment No. 1 to Subordinated Promissory Note (the “Subordinated Note Amendment”) with Mr. Herzog. The purpose of the Subordinated Note Amendment was to amend that certain subordinated promissory note issued on July 26, 2018 in the principal amount of $1,000,000 to reflect an increase in the amount of principal due under the note from $1,000,000 to $3,000,000 reflecting a payment made by the payee to the Company of $2,000,000 on November 14, 2018 (the proceeds of which were used by the Company to make a second required payment under the Credit Agreement) and to extend the maturity date of the Note from March 31, 2019 to September 30, 2020. On June 25, 2019, the Company entered into Amendment No. 2 to the subordinated promissory note with Mr. Herzog. The purpose of the amendment was to amend the maturity date of such subordinated promissory note such that it will be extended until September 30, 2022. Total interest expense on the loans from Mr. Herzog for the years ended December 31, 2019 and 2018, was $360,000 and $82,849, respectively. Total accrued interest December 31, 2019 and 2018 is $402,849 and $52,849, respectively. As of December 31, 2019 and 2018, the Company has total accrued compensation due to Mr. Yakov of $568,027 and $568,292, respectively, and advances to be repaid to Mr. Yakov of $17,684 and $17,684, respectively. On August 10, 2018, Ronny Yakov, the CEO, loaned the Company $25,000, for working capital purposes. Mr. Yakov loaned the Company an additional $361,467 to the Company during the year ended December 31, 2019. The loans are unsecured, bear interest at 12% and are due on demand. As of December 31, 2019 and 2018 there is $22,279 and $1,184 of interest accrued, respectively, on these loans. Interest expense for the years ended December 31, 2019 and 2018 was $21,096 and $1,553, respectively. |
Preferred Stock
Preferred Stock | 12 Months Ended |
Dec. 31, 2019 | |
Preferred Stock | |
PREFERRED STOCK | NOTE 12 — PREFERRED STOCK Our certificate of incorporation authorizes the issuance of 50,000,000 shares of blank check preferred stock with such designation, rights and preferences as may be determined from time to time by our board of directors. No shares of preferred stock are currently issued or outstanding. Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, redemption, voting or other rights which could adversely affect the voting power or other rights of the holders of common stock. We may issue some or all of the preferred stock to effect a business transaction. In addition, the preferred stock could be utilized as a method of discouraging, delaying or preventing a change in control of us. |
Common Stock
Common Stock | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
COMMON STOCK | NOTE 13 — COMMON STOCK On April 12, 2018, the Company issued 833 shares of common stock for services previously rendered for total non-cash expense of $3,750. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 14 — COMMITMENTS AND CONTINGENCIES In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements. On October 20, 2017, the Company entered into a new employment agreement with its founder and president for 7 years effective January 1, 2018 through December 31, 2024. The agreement provides for an annual salary of $375,000, fringe benefits ($2,500 monthly automobile allowance, any benefit plans of the Company and 4 weeks paid vacation), an incentive bonus of $200,000 based on the achievement of certain performance criteria and an acquisition bonus equal to two (2%) percent of the gross purchase price paid in connection therewith upon the closing of any acquisition directly or indirectly by the Company or its subsidiaries during the Employment Period of any company or business (including purchases of all or substantially all of the assets of any such entity) having then existing sales of not less than three million five hundred thousand dollars ($3,500,000). As of December 31, 2019, no bonuses have been earned, paid or accrued. On December 11, 2019, the Company entered into a settlement agreement to resolve disputes in ongoing litigation it initiated, relating to a residual payments owed pertaining to a portfolio of merchants acquired by the Company when it acquired Payprotec Oregon, LLC (the “Portfolio”), whereby it received the sum of $734,250. The Company recorded $172,390 of the settlement to a gain in other income. This was the portion of the settlement pertaining to services provided prior to the acquisition of the portfolio on April 9, 2018. The remaining $561,860 has been recognized in revenue for the year ended December 31, 2019, of which $223,670 pertains to performance obligations satisfied in the prior year. Office Lease The Company leases its Georgia office facilities under an operating lease which initial term expired in November 2019. The Company has continued to lease the location on a month-to-month basis. Monthly lease payments are $9,046. |
Income Tax
Income Tax | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAX | NOTE 15 — INCOME TAX Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The income tax provision (benefit) consist of the following: For the Years Ended 2019 2018 Federal: Current $ — $ — Deferred — — State and local: Current — — Deferred — — Net deferred tax assets consist of the following components as of December 31: 2019 2018 Deferred Tax Assets: NOL Carryover $ 1,195,800 $ 944,000 Payroll accrual 7,500 9,000 Allowance for Doubtful Accounts 10,300 12,000 Related party accrual 145,900 213,000 Depreciation and amortization 253,327 - Less valuation allowance (1,612,827 ) (1,178,000 ) Net deferred tax assets $ — $ — The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pre-tax income from continuing operations for the period ended December 31, due to the following: 2019 2018 Book loss $ (282,000 ) $ (292,600 ) State taxes (81,000 ) (138,500 ) Meals and entertainment 1,200 6,800 Stock options 71,600 60,000 Other nondeductible expenses — 4,300 Other adjustments 53,481 — Adjustment to deferred tax assets (198,108 ) — Valuation allowance 434,827 360,000 $ — $ — At December 31, 2019, the Company had operating loss carry forwards of approximately $4,429,000, $3,417,085 of which expire from 2021 – 2027, and no expiration on the remaining amount. In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s net operating loss carryforwards may be limited in the event of a change in ownership. A full Section 382 analysis has not been prepared and NOLs could be subject to limitation under Section 382. The Company’s policy is to record interest and penalties on uncertain tax positions as a component of income tax expense. No interest or penalties were recorded during the years ended December 31, 2019 and 2018. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position in the next twelve months. The Company files income tax returns in the U.S. federal jurisdiction, New York and Georgia which remain subject to examination by the various taxing authorities beginning with the tax year ended December 31, 2016 (or the tax year ended December 31, 2002 if the Company were to utilize its NOLs). No tax audits were commenced or were in process during the years ended December 31, 2019 and 2018. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 16 — SUBSEQUENT EVENTS Pursuant to the terms on the employment agreement with Mr. Yakov, he was granted 6,667 common stock options on January 1, 2020. On January 30, 2020, the World Health Organization declared the COVID-19 (coronavirus) outbreak a "Public Health Emergency of International Concern" and on March 10, 2020, declared it to be a pandemic. The virus and actions taken to mitigate its spread have had and are expected to continue to have a broad adverse impact on the economies and financial markets of many countries, including the geographical areas in which the Company operates. In response to the pandemic, the Company is working with merchants to address potential changes to the purchase patterns of consumers. In addition, it is focusing on servicing merchants that sell products with an extended delivery time frame, that have products that are paid for in advance, and that work in the catering, ticketing, limo and travel related businesses which have been directly impacted by the social distancing requirement of the pandemic. Further, for those of the Company’s employees that are able to perform their job remotely, the Company has implemented a “remote work” policy and provided employees with the technology necessary to do continue to do their jobs from home and for those employees that are unable to perform their job from a remote location, the Company has taken steps to ensure appropriate distancing and added sanitizing stations along with requiring frequent hand washing and work station cleaning. While it is unknown how long these conditions will last and what the complete financial impact it will have on the Company, the financial services and payment technology industries in which we operate depend heavily upon the overall level of consumer, business and government spending. A sustained deterioration in general economic conditions resulting in less consumer, business and government spending may adversely affect our financial performance by reducing the number or average purchase amount of transactions we process. If our customers make fewer sales of products and services using electronic payments, or consumers spend less money through electronic payments, whether due to the outbreak of the COVID-19 virus, change of consumer behavior or otherwise, we will have fewer transactions to process at lower dollar amounts, resulting in lower revenue making it reasonably possible that we are financially vulnerable to the effects of the pandemic. Amendment No. 4 to Loan and Security Agreement] On April 24, 2020, the Company entered into Amendment No. 4 to Loan and Security Agreement (“Amendment No. 4”) amending the Credit Agreement. The purpose of Amendment No. 4 was to extend the Maturity Date of our indebtedness and to waive certain outstanding events of default. Specifically, the Maturity Date of our indebtedness was extended for one year to April 9, 2022. The lenders also waived the Company’s existing default under the Original Credit Agreement for its (i) failure to (x) to notify the Agent that one or more of the Loan Parties received Extraordinary Receipts above $99,999.99 (as such term is specifically defined in the Credit Agreement, but which include proceeds from litigation or insurance claims) and (y) to deliver a reinvestment notice in respect of such Extraordinary Receipts and/or to make the required prepayment of the Loans from such Extraordinary Receipts, in each case, as required by Section 1.08(e) of the Credit Agreement, (ii) one or more of the Loan Parties incurred indebtedness in an aggregate amount of approximately $386,467 during fiscal year 2019 as a result of not reimbursing business expenses paid by Mr. Yakov in the ordinary course, which indebtedness is not permitted under Section 5.23(f) of the Credit Agreement (“ Debt Default In consideration for the foregoing, the Credit Agreement was amended to include a new repayment schedule under the note whereby the Company paid an amount equal to $125,000 upon execution of Amendment No. 4 and the Company agreed to make a monthly payment of $25,000 per month, commencing May 1, 2020 and on the first business day of each calendar month thereafter. In the event that the Company does not make a monthly payment, Messrs. Yakov and Herzog will have the ability to make an equity contribution to the Company for the sole purpose of paying the monthly payment obligation of the Company under the Credit Agreement. In addition, the Company is required to pay to Lenders 100% of the proceeds from any favorable judgments from ongoing litigation and 20% of the net proceeds from any future equity offering completed by the Company. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s accounting estimates include the collectability of receivables, useful lives of long-lived assets and recoverability of those assets, valuation allowances for income taxes, stock-based compensation and estimates made for business combinations. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, eVance, Securus, CrowdPay, and OMNISOFT. All significant intercompany transactions and balances have been eliminated. |
Segments | Segments Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision–making group in deciding how to allocate resources and in assessing performance. Our chief operating decision–making group is composed of the chief executive officer. We currently operate in one segment surrounding our ISO operations. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less as cash and cash equivalents. The carrying amount of financial instruments included in cash and cash equivalents approximates fair value because of the short maturities for the instruments held. The Company had no cash equivalents as of December 31, 2019 and 2018. |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of cash and accounts receivable. The Company’s cash is deposited with major financial institutions. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation insurable amount. |
Accounts Receivable | Accounts Receivable Accounts receivable represent contractual residual payments due from the Company’s processing partners or other customers. Residual payments are determined based on transaction fees and revenues from the credit and debit card processing activity of merchants for which the Company’s processing partners pay the Company. Based on collection experience and periodic reviews of outstanding receivables, management considers all accounts receivable for our residual payments to be fully collectible and accordingly, no allowance for doubtful accounts is required; however, CrowdPay has a recorded an allowance of $38,113 as of both December 31, 2019 and 2018, respectively. |
Reserve for Chargeback Losses | Reserve for Chargeback Losses Disputes between a cardholder and a merchant periodically arise as a result of, among other things, cardholder dissatisfaction with merchandise quality or merchant services. Such disputes may not be resolved in the merchant’s favor. In these cases, the transaction is “charged back” to the merchant, which means the purchase price is refunded to the customer through the merchant’s bank and charged to the merchant. If the merchant has inadequate funds, the Company must bear the credit risk for the full amount of the transaction. The Company evaluates the risk for such transactions and estimates the potential loss for chargebacks based primarily on historical experience and records a loss reserve accordingly. For the years ended December 31, 2019 and 2018, we had losses related to chargebacks of $111,482 and $0, respectively. |
Property and Equipment | Property and Equipment Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to seven years. Leasehold improvements are amortized over the lesser of the remaining term of the lease or the estimated useful life of the asset. Expenditures for repairs and maintenance are expensed as incurred. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company periodically reviews the carrying value of its long-lived assets held and used at least annually or when events and circumstances warrant such a review. If significant events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. Cash flow projections are sometimes based on a group of assets, rather than a single asset. If cash flows cannot be separately and independently identified for a single asset, the Company determines whether impairment has occurred for the group of assets for which it can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, it measures any impairment by comparing the fair value of the asset group to its carrying value. If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or asset group, impairment in the amount of the difference is recorded. |
Merchant Portfolios | Merchant Portfolios Merchant portfolios are valued at fair value of merchant customers on the date of acquisition and are amortized over their estimated useful lives (7 years). |
Goodwill | Goodwill The Company accounts for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill. The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance with its policies, the Company performed a quantitative assessment of indefinite lived intangibles and goodwill and determined there was no impairment as of at December 31, 2019 and 2018. |
Business Combinations | Business Combinations Acquisitions are accounted for using the acquisition method of accounting. The purchase price of an acquisition is allocated to the assets acquired and liabilities assumed using the estimated fair values at the acquisition date. Transaction costs are expensed as incurred. The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired and identified based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customer lists, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. |
Stock-based Compensation | Stock-based Compensation We account for equity-based transactions with nonemployees under the provisions of ASC Topic No. 505-50, Equity-Based Payments to Non-Employees We account for employee stock-based compensation in accordance with the guidance of Financial Accounting Standards Board (“FASB”) ASC Topic 718, Compensation — Stock Compensation, |
Net Loss per Share | Net Loss per Share Basic net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common shares for the year ended December 31, 2019 and 2018 does not include warrants to acquire 40,000 shares of common stock. The weighted average number of common shares for the year ended December 31, 2019 and 2018 does not include 223,249 and 269,617 options, respectively, to purchase common stock because of their anti-dilutive effect. |
Revenue Recognition and Cost of Revenues | Revenue Recognition and Cost of Revenues Prior to the adoption of ASC 606, in 2018 the Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. The Company receives a percentage of recurring monthly transaction related fees comprised of credit and debit card fees charged to merchants, net of association fees, otherwise known as Interchange, as well as certain service charges and convenience fees, for payment processing services, including authorization, capture, clearing, settlement and information reporting of electronic transactions. Fees are calculated on either a percentage of the dollar volume of the transaction or a fixed fee or a hybrid of the two and are recognized at the time of the transaction. In the case of “wholesale” residual revenue in which the Company has a direct contractual relationship with the merchant, bears risk of chargebacks and performs underwriting on the merchants, the Company records the full discount charged to the merchant as revenue and the related interchange and other processing fees as expenses. In cases of residual revenue where the Company is not responsible for merchant underwriting and has no chargeback liability and has no or limited contractual relationship with the merchant, the Company records the amount it receives from the processor net of interchange and other processing fees as revenue. The Company adopted ASU 2014-09, Revenue from Contracts with Customers ● Identification of a contract with a customer; ● Identification of the performance obligations in the contract; ● Determination of the transaction price; ● Allocation of the transaction price to the performance obligations in the contract; and ● Recognition of revenue when or as the performance obligations are satisfied. Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Shipping and handling activities associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment activity and recognized as revenue at the point in time at which control of the goods transfers to the customer. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less. |
Transaction and processing fees | Transaction and processing fees Fees for the Company’s transaction and processing arrangements are typically billed and paid on a monthly basis. The Company receives a percentage of recurring monthly transaction related fees comprised of credit and debit card fees charged to merchants, net of association fees, otherwise known as Interchange, as well as certain service charges and convenience fees, for payment processing services, including authorization, capture, clearing, settlement and information reporting of electronic transactions. Fees are calculated on either a percentage of the dollar, volume of the transaction or a fixed fee or a hybrid of the two and are recognized at the time of the transaction. These merchant services represents a single performance obligation satisfied over time and that the same measure of progress should be used to measure the Company’s progress toward complete satisfaction of the performance obligation. The Company will recognize revenue on a monthly basis as the services are transferred to the customer in short daily increments that qualify for series guidance as the best measure of the transfer of control. In wholesale contracts, the Company recognizes transaction and processing fees on a gross basis as the Company is the principal in the merchant services. The Company has concluded it is the principal because it has a direct contractual relationship with the merchant, is primarily responsible for the delivery of services to the merchants, including performing underwriting, has discretion in setting prices, and bears risk of chargebacks and other merchant losses. The Company also has the unilateral ability to accept or reject a transaction based on criteria established by the Company. As the principal, the Company records the full discount charged to the merchant as revenue and the related interchange and other processing fees within cost of revenues. In retail contracts, the Company is not responsible for merchant underwriting, has no chargeback liability and has no or limited contractual relationship with the merchant. As such, the Company records the net amount it receives from the processor, after interchange and other interchange and other processing fees, as revenue. |
Merchant equipment sales and other | Merchant equipment sales and other The Company generates revenue through the sale and rental of merchant equipment. The Company satisfies its performance obligation upon delivery of equipment to merchants and recognizes revenue at a point in time. The Company allows for customer returns which are accounted for as variable consideration. The Company estimates these amounts based on historical experience and reduces revenue recognized. The Company invoices customers upon delivery of the equipment to merchants, and payments from such customers are due upon invoicing. The Company offers hardware installment sales to customers with terms ranging from three to forty-eight months. The Company allocates a portion of the consideration received from these arrangements to a financing component when it determines that a significant financing component exists. The financing component is subsequently recognized as financing revenue separate from hardware revenue, within subscription and services-based revenue, over the terms of the arrangement with the customer. Pursuant to practical expedients afforded under ASC 606, the Company does not recognize a financing component for hardware installment sales that have a term of one year or less. |
Deferred Revenue | Deferred Revenue From time to time the Company may launch new products or services to its merchants. In the event step 1 under ASC 606 is not met, the Company will record deferred revenue upon receipt of the payment by the customer. In November 2019, the Company began billing existing merchants for its cloud-based omni-channels software, ShopFast. Merchants are billed monthly with the ability to opt out and receive a refund for up to 30 days after they are billed. Due to the lack of historical data related to these services, customer activity and the associated billings and refunds, $99,594 has been recorded as deferred revenue as of December 31, 2019. During the year ended December 31, 2019, $223,670 of revenue was recognized from performance obligations satisfied (or partially satisfied) in previous periods in connection with a legal settlement. Disaggregation of Revenue The following table presents the Company's revenue disaggregated by revenue source December 31, Revenue from contracts with customers: Wholesale contracts $ 6,202,083 Retail contracts $ 2,689,506 Other transaction and processing fees $ 1,399,935 Total transaction and processing fees $ 10,291,524 |
Income Taxes | Income Taxes Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to tax net operating loss carryforwards. The deferred tax assets and liabilities represent the future tax return consequences of these differences, which will either be taxable or deductible when assets and liabilities are recovered or settled, as well as operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established against deferred tax assets when in the judgment of management, it is more likely than not that such deferred tax assets will not become available. Because the judgment about the level of future taxable income is dependent to a great extent on matters that may, at least in part, be beyond the Company’s control, it is at least reasonably possible that management’s judgment about the need for a valuation allowance for deferred taxes could change in the near term. Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. As of December 31, 2019 and 2018, no liability for unrecognized tax benefits was required to be reported. |
Fair Value Measurements | Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic No. 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as described below: Level 1: Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2: Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly. Level 2 inputs include quoted prices for similar assets, quoted prices in markets that are not considered to be active, and observable inputs other than quoted prices such as interest rates. Level 3: Level 3 inputs are unobservable inputs. The following required disclosure of the estimated fair value of financial instruments has been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The methods and assumptions used to estimate the fair values of each class of financial instruments are as follows: Accounts Receivable, and Accounts Payable. The items are generally short-term in nature, and accordingly, the carrying amounts reported on the consolidated balance sheets are reasonable approximations of their fair values. The carrying amounts of Notes Payable approximate the fair value as the notes bear interest rates that are consistent with current market rates. |
Subsequent Events | Subsequent Events Management evaluates events that have occurred after the balance sheet date and through the date the financial statements are issued. Based upon the review, management did not identify any recognized or non-recognized subsequent events which would have required an adjustment or disclosure in the financial statements, except as described in Note 16 Subsequent Events |
Recent Accounting Standards | Recent Accounting Standards In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, and also issued subsequent amendments to the initial guidance, ASU 2018-19, ASU 2019-04, ASU 2019-05, and ASU 2019-11 (collectively, Topic 326), to introduce a new impairment model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses (CECL). Under Topic 326, an entity is required to estimate CECL on available-for-sale (AFS) debt securities only when the fair value is below the amortized cost of the asset and is no longer based on an impairment being “other-than-temporary”. Topic 326 also requires the impairment calculation on an individual security level and requires an entity use present value of cash flows when estimating the CECL. The credit-related losses are required to be recognized through earnings and non-credit related losses are reported in other comprehensive income. In April 2019, the FASB further clarified the scope of Topic 326 and addressed issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayment. The new guidance will require modified retrospective application to all outstanding instruments, with a cumulative effect adjustment recorded to opening retained earnings as of the beginning of the first period in which the guidance becomes effective. The amendments in this Update for the Company are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted in any interim period after the issuance of this of this Update. The Company is evaluating the impact of the adoption of the new standard on its consolidated financial statement and disclosures. |
Recently Adopted Accounting Standards | Recently Adopted Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers, to establish ASC Topic 606, (ASC 606). ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition and most industry-specific guidance throughout the Industry Topics of the Codification. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance includes a five-step framework that requires an entity to: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when the entity satisfies a performance obligation. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company has reviewed other recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Schedule of revenue disaggregated | December 31, Revenue from contracts with customers: Wholesale contracts $ 6,202,083 Retail contracts $ 2,689,506 Other transaction and processing fees $ 1,399,935 Total transaction and processing fees $ 10,291,524 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | NOTE 4 — PROPERTY AND EQUIPMENT Property and equipment are summarized as follows: December 31, 2019 2018 Furniture and Fixtures $ 14,895 $ 14,895 Office Equipment 73,205 73,205 Leasehold improvements 6,208 6,208 Computer Software 12,292 12,292 106,600 106,600 Accumulated depreciation (69,947 ) (40,655 ) Property and equipment, net $ 36,653 $ 65,945 Depreciation expense was $29,292 and $40,655 for the years ended December 31, 2019 and 2018, respectively. As it pertains to the predecessor, for the period from January 1, 2018 through April 8, 2018, depreciation expense was $18,486. |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of other assets | December 31 2019 2018 Merchant Portfolios $ 2,190,000 $ 2,190,000 Less Accumulated Amortization (854,761 ) (208,571 ) Net residual portfolios $ 1,335,239 $ 1,981,429 December 31 2019 2018 Trade name $ 2,500,000 $ 2,500,000 Less Accumulated Amortization (500,000 ) (333,333 ) Net trade name $ 2,000,000 $ 2,166,667 |
Schedule of estimated amortization expense related to amortizing intangible assets | 2020 $ 812,857 2021 $ 812,857 2022 $ 812,857 2023 $ 479,524 2024 $ 312,857 Thereafter $ 104,287 Total $ 3,335,239 |
Business Combinations (Tables)
Business Combinations (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Business Combinations [Abstract] | |
Summary of estimated fair market values of the assets acquired and liabilities | Consideration Consideration issued $ 12,500,000 Identified assets and liabilities Cash 42,711 Accounts and other receivables 480,302 Note receivable 174,967 Prepaid expenses 84,945 Long-term assets 348,367 Property and equipment 106,600 Accounts payable (180,231 ) Accrued Expenses (105,877 ) Merchant portfolios 2,190,000 Tradename 2,500,000 Total identified assets and liabilities 5,641,784 Excess purchase price allocated to goodwill $ 6,858,216 |
Schedule of unaudited pro forma results of operations | 2018 Revenues $ 12,194,415 Operating loss $ (124,442 ) Net loss $ (1,290,262 ) Net loss per share – basic and diluted $ (0.24 ) |
Common Control Mergers (Tables)
Common Control Mergers (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Common Control Mergers | |
Schedule of common control merger as of the earliest date presented in these consolidated financial statements | Accounts receivable $ 250 Accounts payable (602 ) Accrued expenses – related party (265,319 ) Net liabilities assumed $ (265,671 ) |
Schedule of consolidated statement of operations | Accounts receivable $ 27,540 Other receivable – related party 1,705 Accounts payable and accrued expenses (48,472 ) Accrued expenses – related party (149,645 ) Net liabilities assumed $ (168,872 ) |
Warrants (Tables)
Warrants (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Warrants [Abstract] | |
Schedule of outstanding stock warrants | Range of Exercise Number Outstanding Weighted Average Remaining Weighted Average $7.50 40,000 1.27 years $7.50 |
Stock Options (Tables)
Stock Options (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Stock Options [Abstract] | |
Schedule of outstanding stock options and changes | For the year ended Stock Options Shares Weighted Aggregate Intrinsic Options outstanding at January 1 271,839 $ 0.0001 — Granted 6,667 $ 0.001 — Exercised — $ — — Forfeited — $ — — Options outstanding December 31 278,506 $ 0.0001 $ 4,177,590 Shares exercisable at December 31 55,257 $ 0.0001 $ 828,855 |
Income Tax (Tables)
Income Tax (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax provision (benefit) | For the Years Ended 2019 2018 Federal: Current $ — $ — Deferred — — State and local: Current — — Deferred — — |
Schedule of net deferred tax assets | 2019 2018 Deferred Tax Assets: NOL Carryover $ 1,195,800 $ 944,000 Payroll accrual 7,500 9,000 Allowance for Doubtful Accounts 10,300 12,000 Related party accrual 145,900 213,000 Depreciation and amortization 253,327 - Less valuation allowance (1,612,827 ) (1,178,000 ) Net deferred tax assets $ — $ — |
Schedule of income tax provision | 2019 2018 Book loss $ (282,000 ) $ (292,600 ) State taxes (81,000 ) (138,500 ) Meals and entertainment 1,200 6,800 Stock options 71,600 60,000 Other nondeductible expenses — 4,300 Other adjustments 53,481 — Adjustment to deferred tax assets (198,108 ) — Valuation allowance 434,827 360,000 $ — $ — |
Background and Recent Acquisi_2
Background and Recent Acquisitions (Details) - USD ($) | May 09, 2018 | Dec. 31, 2019 |
Maximum [Member] | ||
Capital raise | $ 50,000,000 | |
Minimum [Member] | ||
Capital raise | $ 10,000,000 | |
Crowdpay [Member] | ||
Shares of common stock will issued | 2,916,667 | |
Omnisoft [Member] | ||
Shares of common stock will issued | 1,833,333 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Accounting Policies [Abstract] | |
Wholesale contracts | $ 6,202,083 |
Retail contracts | 2,689,506 |
Other transaction and processing fees | 1,399,935 |
Total transaction and processing fees | $ 10,291,524 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details Textual) | 12 Months Ended | |
Dec. 31, 2019USD ($)Segmentshares | Dec. 31, 2018USD ($)shares | |
Summary of Significant Accounting Policies (Textual) | ||
Weighted average number of common shares anti-dilutive effect | shares | 223,249 | 269,617 |
Number of segment | Segment | 1 | |
Allowance for doubtful accounts | $ 38,113 | $ 38,113 |
Chargeback reserves | $ 111,482 | 0 |
Acquisition over estimated useful lives, description | Merchant portfolios are valued at fair value of merchant customers on the date of acquisition and are amortized over their estimated useful lives (7 years). | |
Deferred Revenue | $ 99,594 | |
Performance obligations | $ 223,670 | |
Credit duration | 30 days | |
Warrants [Member] | ||
Summary of Significant Accounting Policies (Textual) | ||
Weighted average number of common shares anti-dilutive effect | shares | 40,000 |
Liquidity and Capital Resourc_2
Liquidity and Capital Resources (Details) - USD ($) | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Liquidity and Capital Resources (Textual) | ||||
Cash | $ 507,616 | $ 111,586 | ||
Working capital deficit | 1,382,325 | |||
Net loss | (1,343,412) | $ (1,393,544) | [1] | |
Principal repayment | $ 125,000 | |||
Loan maturity date | Apr. 9, 2022 | |||
Loan and security agreement, description | The purpose of Amendment No. 4 was to extend the Maturity Date of the indebtedness to April 9, 2022 and to waive any outstanding events of default. In consideration for the foregoing, the Credit Agreement was amended to include a new principal repayment schedule under the note whereby the Company paid an amount equal to $125,000 upon execution of Amendment No. 4 and the Company agreed to make a monthly payment of $25,000 per month, commencing May 1, 2020, and on the first business day of each calendar month thereafter until the required balloon payment on April 9, 2022. | |||
Defer receiving payment | $ 993,458 | |||
Fixed Charge Coverage Ratio | 1.20:1.00 | |||
Net revenue, description | Net revenue of the Company shall not be less than $9,000,000 until June 30, 2021 and $10,000,000 from and after July 1, 2021, on a trailing twelve-month basis. | |||
Paycheck Protection Program [Member] | ||||
Liquidity and Capital Resources (Textual) | ||||
Loan and security agreement, description | The Company has applied for a Paycheck Protection Program loan for approximately $225,000 under the CARES Act and it is planning a public offering of its Common Stock during 2020. | |||
[1] | Includes the consolidated results from operations of OLB, CrowdPay and Omnisoft from January 1, 2018 through December 31, 2018 and the net assets acquired from GACP from April 9, 2018 through December 31, 2018. |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Property and equipment, gross | $ 106,600 | $ 106,600 |
Accumulated depreciation | (69,947) | (40,655) |
Property and equipment, net | 36,653 | 65,945 |
Software Development [Member] | ||
Property and equipment, gross | 12,292 | 12,292 |
Furniture and Fixtures [Member] | ||
Property and equipment, gross | 14,895 | 14,895 |
Office Equipment [Member] | ||
Property and equipment, gross | 73,205 | 73,205 |
Leasehold improvements [Member] | ||
Property and equipment, gross | $ 6,208 | $ 6,208 |
Property and Equipment (Detai_2
Property and Equipment (Details Textual) - USD ($) | 3 Months Ended | 12 Months Ended | |
Apr. 08, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
Property and Equipment (Textual) | |||
Depreciation expense | $ 29,292 | $ 40,655 | |
Predecessor [Member] | |||
Property and Equipment (Textual) | |||
Depreciation expense | $ 18,486 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Merchant Portfolios | $ 2,190,000 | $ 2,190,000 |
Less Accumulated Amortization | (854,761) | (208,571) |
Net residual portfolios | 1,335,239 | 1,981,429 |
Trade name | 2,500,000 | 2,500,000 |
Less Accumulated Amortization | (500,000) | (333,333) |
Net trade name | $ 2,000,000 | $ 2,166,667 |
Intangible Assets (Details 1)
Intangible Assets (Details 1) | Dec. 31, 2019USD ($) |
Intangible Assets [Abstract] | |
2020 | $ 812,857 |
2021 | 812,857 |
2022 | 812,857 |
2023 | 479,524 |
2024 | 312,857 |
Thereafter | 104,287 |
Total | $ 3,335,239 |
Intangible Assets (Details Text
Intangible Assets (Details Textual) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Apr. 08, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | [1] | |
Intangible assets (Textual) | ||||
Weighted average useful life of amortizing intangible assets | 5 years | |||
Amortization expense | $ 90,739 | $ 812,857 | $ 541,904 | |
Minimum [Member] | ||||
Intangible assets (Textual) | ||||
Portfolios and tradename are being amortized over respective useful lives | 5 years | |||
Maximum [Member] | ||||
Intangible assets (Textual) | ||||
Portfolios and tradename are being amortized over respective useful lives | 7 years | |||
[1] | Includes the consolidated results from operations of OLB, CrowdPay and Omnisoft from January 1, 2018 through December 31, 2018 and the net assets acquired from GACP from April 9, 2018 through December 31, 2018. |
Business Combinations (Details)
Business Combinations (Details) - USD ($) | Apr. 09, 2018 | Dec. 31, 2018 |
Consideration | ||
Consideration issued | $ 12,500,000 | |
Identified assets and liabilities | ||
Cash | 42,711 | |
Accounts and other receivables | 480,302 | |
Note receivable | 174,967 | |
Prepaid expenses | 84,945 | |
Long-term assets | (348,367) | |
Property and equipment | 106,600 | |
Accounts payable | (180,231) | |
Accrued Expenses | 105,877 | |
Merchant portfolios | (2,190,000) | |
Tradename | (2,500,000) | |
Total identified assets and liabilities | 5,641,784 | |
Excess purchase price allocated to goodwill | $ 6,858,216 | |
GACP [Member] | ||
Consideration | ||
Consideration issued | $ 12,500,000 | |
Identified assets and liabilities | ||
Cash | 42,711 | |
Accounts and other receivables | 480,302 | |
Note receivable | 174,967 | |
Prepaid expenses | 84,945 | |
Long-term assets | 348,367 | |
Property and equipment | 106,600 | |
Accounts payable | (180,231) | |
Accrued Expenses | (105,877) | |
Merchant portfolios | 2,190,000 | |
Tradename | 2,500,000 | |
Total identified assets and liabilities | 5,641,784 | |
Excess purchase price allocated to goodwill | $ 6,858,216 |
Business Combinations (Details
Business Combinations (Details 1) | 12 Months Ended |
Dec. 31, 2018USD ($)$ / shares | |
Business combinations [Abstract] | |
Revenues | $ 12,194,415 |
Operating loss | (124,442) |
Net loss | $ (1,290,262) |
Net loss per share - basic and diluted | $ / shares | $ (0.24) |
Business Combinations (Detail_2
Business Combinations (Details Textual) | Apr. 09, 2018 |
GACP Finance Co., LLC, [Member] | |
Business Combinations (Textual) | |
Description of acquired assets | The Purchasers assumed certain post-Closing obligations under assigned contracts and issued GACP a note payable in the amount of $12,500,000, through the deemed simultaneous financing of such purchase price to the Purchasers under the Credit Agreement. |
Common Control Mergers (Details
Common Control Mergers (Details) - USD ($) | Dec. 31, 2018 | May 09, 2018 |
Accounts receivable | $ 480,302 | |
Other receivable - related party | $ 174,967 | |
Omnisoft [Member] | ||
Accounts receivable | $ 250 | |
Accounts payable | (602) | |
Accrued expenses - related party | (265,319) | |
Net liabilities assumed | (265,671) | |
Crowdpay [Member] | ||
Accounts receivable | 27,540 | |
Other receivable - related party | 1,705 | |
Accounts payable and accrued expenses | (48,472) | |
Accrued expenses - related party | (149,645) | |
Net liabilities assumed | $ (168,872) |
Common Control Mergers (Detai_2
Common Control Mergers (Details Textual) | 1 Months Ended |
May 09, 2018shares | |
Omnisoft [Member] | |
Common Control Mergers (Textual) | |
Acquired interest rate | 100.00% |
Issuance of common shares | 1,833,333 |
Crowdpay [Member] | |
Common Control Mergers (Textual) | |
Acquired interest rate | 100.00% |
Issuance of common shares | 2,916,667 |
Notes Payable (Details)
Notes Payable (Details) - USD ($) | Apr. 24, 2020 | Feb. 05, 2019 | Nov. 14, 2018 | Jul. 15, 2018 | Oct. 31, 2018 | Jul. 30, 2018 | Dec. 31, 2019 | Dec. 31, 2018 |
Term loan, maturity date | Apr. 9, 2022 | |||||||
Loan and security agreement, description | (i) failure to to notify the Agent that one or more of the Loan Parties received proceeds from litigation above $99,999.99 and use the proceeds to make a prepayment of the Loans), (ii) one or more of the Loan Parties incurred indebtedness in an aggregate amount of $386,467 during fiscal year 2019 as a result of not reimbursing business expenses paid by Mr. Yakov in the ordinary course, which indebtedness is not permitted under Section 5.23(f) of the Credit Agreement (“Debt Default”) and (iii) Lender has not received financial statements and covenant compliance certificate of the Company as parent guarantor and the Borrowers for the fiscal year ended December 31, 2019 within 90-days of such fiscal year end as required by Section 5.15(a) of the Credit Agreement. In addition, Amendment No. 4 provides the Company with a limited waiver permitting the Company to incur government funded indebtedness from the United States CARES Act loan programs. Further, the financial covenants were amended whereby Consolidated Net Revenue for any rolling 12 month period shall not be less than $9,000,000 until June 30, 2021 and $10,000,000 from and after July 1, 2021. | (i) waived the Company’s existing defaults under the Original Credit Agreement for its failure to make payment of $1,000,000 (the “initial payment”) under the Original Credit Agreement on or prior to July 15, 2018 and to deliver to the lenders unaudited monthly financial statements and compliance certificates of the Company, (ii) extended the date on which the initial payment was required to be made to July 30, 2018 and extended the date on which the Company is required to provide audited financial statements for the fiscal years ended December 31, 2017 and 2018, (iii) permitted the Company to enter into a subordinated loan arrangement for the Note concurrently with the Amendment such that the Company could make the initial payment under the terms of the Amendment and Original Credit Agreement, and permitted the Note to be repaid either from the sale of the Note Collateral Shares or at any time after the second payment under the Amendment and Original Credit Agreement. The Company borrowed $1,000,000 from a related party (Note 11) in order to make its first scheduled payment. | ||||||
Company borrowed | $ 361,467 | $ 3,055,000 | ||||||
Interest expenses | $ 73,625 | 73,625 | ||||||
Notes payable , description | The Company is required to maintain a Fixed Charge Coverage Ratio of (x) not less than 1.10:1.00 and (y) on or after the end of the first full fiscal month ended January 31, 2020, the Fixed Charge Coverage Ratio shall not be less than 1.20:1.00, measured in each case on a trailing twelve month and Consolidated Net Revenue shall not be less than $10,000,000. | |||||||
GACP Finance Co., LLC [Member] | ||||||||
Term loan, description | The initial sole lender thereunder, provided a term loan of $12,500,000 (the “Term Loan”) to the Purchasers, Omnisoft, and CrowdPay, each of Omnisoft and Crowdpay being affiliates of the Company’s majority stockholder (collectively, the “Borrowers”), which obligations are guaranteed by the Company (collectively with the Borrowers, the “Loan Parties”), under the Loan and Security Agreement (the “Credit Agreement”), dated as of April 9, 2018, by and among the Loan Parties, the lenders from time to time party thereto as lenders (the “Lenders”) and the Agent. | |||||||
GACP loan [Member] | ||||||||
Interest expenses | $ 866,875 | $ 73,625 | ||||||
Notes Payable [Member] | ||||||||
Term loan, principal amount | $ 1,000,000 | |||||||
Additional principal payment due | $ 2,000,000 | $ 2,000,000 | ||||||
Loan of interest, percentage | 9.00% | |||||||
Term loan, maturity date | Oct. 31, 2018 | Apr. 9, 2022 | ||||||
Company borrowed | $ 2,000,000 | |||||||
Notes payable , description | $125,000 upon execution of Amendment No. 4 and the Company agreed to make a monthly payment of $25,000 per month, commencing May 1, 2020 and on the first business day of each calendar month thereafter, |
Warrants (Details)
Warrants (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Sep. 30, 2019 | |
Warrants [Abstract] | ||
Range of Exercise Prices | $ 7.50 | |
Number Outstanding | 40,000 | |
Weighted Average Remaining Contractual Life | 1 year 3 months 8 days | |
Weighted Average Exercise Price | $ 7.50 |
Warrants (Details Textual)
Warrants (Details Textual) - USD ($) | Jan. 03, 2019 | Jan. 03, 2019 | Apr. 09, 2018 | Jan. 03, 2018 | Dec. 31, 2019 |
Warrants (Textual) | |||||
Exercise price | $ 7.50 | ||||
GACP Finance Co., LLC, [Member] | Warrants [Member] | |||||
Warrants (Textual) | |||||
Warrant to purchase shares of common stock | 40,000 | ||||
Exercise price | $ 7.50 | ||||
Exercise price description | The exercise price of the Additional Warrants, if issued, will be $9.00 per share for the first Additional Warrant, $10.50 per share for the second Additional Warrant, $12.00 per share for the third Additional Warrant and $13.50 per share for the fourth Additional Warrant, with the number of shares and exercise price subject to adjustment as set forth in the Additional Warrants Agreement and the Additional Warrant. | ||||
Expire term | 3 years | ||||
Fair value of warrants | $ 7,660 | ||||
Exercise price | $ 7.50 | ||||
Risk free rate | 2.28% | ||||
Volatility | 114.11% | ||||
Expected life | 3 years | ||||
Warrants exercise price | $ 0.003 | ||||
Dividend yield | 15000.00% | ||||
GACP Finance Co., LLC, [Member] | Additional Warrants Agreement [Member] | |||||
Warrants (Textual) | |||||
Warrants to purchase of common stock | 6,667 | ||||
Mr. Yakov [Member] | |||||
Warrants (Textual) | |||||
Expire term | 3 years | ||||
Exercise price | $ 0.0001 | $ 0.0001 | $ 0.001 | ||
Risk free rate | 2.47% | 2.47% | 2.13% |
Stock Options (Details)
Stock Options (Details) - Equity Option [Member] | 12 Months Ended |
Dec. 31, 2019USD ($)$ / sharesshares | |
Options outstanding, Shares | shares | 271,839 |
Granted, shares | shares | 6,667 |
Exercised, shares | shares | |
Forfeited, shares | shares | |
Options outstanding, shares | shares | 278,506 |
Shares exercisable, shares | shares | 55,257 |
Options outstanding, Weighted Average Exercise Price | $ / shares | $ 0.0001 |
Granted, Weighted Average Exercise Price | $ / shares | 0.001 |
Exercised, Weighted Average Exercise Price | $ / shares | |
Forfeited, Weighted Average Exercise Price | $ / shares | |
Options outstanding, Weighted Average Exercise Price | $ / shares | 0.0001 |
Shares exercisable, Weighted Average Exercise Price | $ / shares | $ 0.0001 |
Options outstanding, Aggregate Intrinsic Value | $ | $ 4,177,590 |
Shares exercisable, Aggregate Intrinsic Value | $ | $ 828,855 |
Stock Options (Details Textual)
Stock Options (Details Textual) - USD ($) | Nov. 25, 2019 | Nov. 13, 2019 | Jan. 03, 2019 | Jan. 03, 2019 | Apr. 10, 2018 | Jan. 03, 2018 |
VP [Member] | ||||||
Options granted | 265,172 | |||||
Options exercise price | $ 0.003 | |||||
Grant vest rate | The grant shall vest at the rate of 1/5 beginning on each anniversary of the effective date of grant. | |||||
Aggregate fair value | $ 1,192,535 | |||||
Exercise price | $ 0.0001 | |||||
Risk free rate | 2.43% | |||||
Volatility rate | 123.70% | |||||
Expected life | 5 years | |||||
Mr. Yakov [Member] | ||||||
Options granted | 13,334 | 265,172 | 6,667 | 6,667 | ||
Options exercise price | $ 0.003 | $ 0.03 | $ 0.03 | $ 0.03 | ||
Grant vest rate | the exercise price of $0.003 associated with the options granted to the VP of Finance was modified to be $0.0001, and the exercise price of $0.03 associated with the options granted to Mr. Yakov was modified to be $0.001. | The grant shall vest at the rate of 1/3 beginning on each anniversary of the effective date of grant. | The grant shall vest at the rate of 1/3 beginning on each anniversary of the effective date of grant. | |||
Aggregate fair value | $ 39,814 | $ 39,814 | $ 39,812 | |||
Exercise price | $ 0.0001 | $ 0.0001 | $ 0.001 | |||
Risk free rate | 2.47% | 2.47% | 2.13% | |||
Volatility rate | 104.80% | 123.70% | ||||
Expected life | 3 years | 4 years |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | Nov. 14, 2018 | Aug. 10, 2018 | Mar. 12, 2018 | Jul. 30, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Jul. 26, 2018 | |
Related Party Transactions (Textual) | ||||||||
Accrued expenses due to related parties | $ 3,000,000 | $ 3,000,000 | ||||||
Total interest expense | 866,875 | 800,467 | [1] | |||||
Accrued interest on loans | 22,279 | 1,184 | ||||||
Note [Member] | Minimum [Member] | ||||||||
Related Party Transactions (Textual) | ||||||||
Principal amount | $ 1,000,000 | |||||||
Note [Member] | Maximum [Member] | ||||||||
Related Party Transactions (Textual) | ||||||||
Principal amount | 3,000,000 | |||||||
John Herzog [Member] | ||||||||
Related Party Transactions (Textual) | ||||||||
Borrowed from related party | $ 30,000 | |||||||
Related party transactions interest rate | 12.00% | |||||||
Principal amount | $ 1,000,000 | |||||||
Cash proceeds | $ 1,000,000 | |||||||
Mr. Herzog | ||||||||
Related Party Transactions (Textual) | ||||||||
Principal amount | $ 2,000,000 | $ 1,000,000 | ||||||
Cash proceeds | 2,000,000 | |||||||
Reflecting payment | $ 2,000,000 | |||||||
Description of credit agreement | The maturity date of the Note from March 31, 2019 to September 30, 2020 | |||||||
Total interest expense | 360,000 | 82,849 | ||||||
Mr. Yakov [Member] | ||||||||
Related Party Transactions (Textual) | ||||||||
Accrued compensation | 568,027 | 568,292 | ||||||
Repaid advances | 17,684 | 17,684 | ||||||
Ronny Yakov [Member] | ||||||||
Related Party Transactions (Textual) | ||||||||
Borrowed from related party | $ 25,000 | |||||||
Related party transactions interest rate | 12.00% | |||||||
Additional loan amount | $ 361,467 | |||||||
Total interest expense | $ 21,096 | $ 1,553 | ||||||
[1] | Includes the consolidated results from operations of OLB, CrowdPay and Omnisoft from January 1, 2018 through December 31, 2018 and the net assets acquired from GACP from April 9, 2018 through December 31, 2018. |
Preferred Stock (Details)
Preferred Stock (Details) - shares | Dec. 31, 2019 | Dec. 31, 2018 |
Preferred Stock (Textual) | ||
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Common Stock (Details)
Common Stock (Details) - Common Stock - USD ($) | Apr. 12, 2019 | Apr. 12, 2018 | Dec. 31, 2018 |
Issuance of common stock for services | 833 | 833 | |
Non-cash expense | $ 3,750 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) | Dec. 11, 2019 | Oct. 20, 2017 | Dec. 31, 2019 |
Commitments and Contingencies (Textual) | |||
Employment agreement, description | The Company entered into a new employment agreement with its founder and president for 7 years effective January 1, 2018 through December 31, 2024. | ||
Annual salary | $ 375,000 | ||
Monthly automobile allowance | $ 2,500 | ||
Paid vacation period | 28 days | ||
Incentive bonus | $ 200,000 | ||
Operating lease expiring | Nov. 30, 2019 | ||
Monthly lease payments | $ 9,046 | ||
Percentage of acquisition | 2.00% | ||
Description of employment period | The Employment Period of any company or business (including purchases of all or substantially all of the assets of any such entity) having then existing sales of not less than three million five hundred thousand dollars ($3,500,000). | ||
Other income | $ 734,250 | 172,390 | |
Recognized in revenue | 561,860 | ||
Performance obligations value | $ 223,670 |
Income Tax (Details)
Income Tax (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Federal: | ||
Current | ||
Deferred | ||
State and local: | ||
Current | ||
Deferred |
Income Tax (Details 1)
Income Tax (Details 1) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred Tax Assets: | ||
NOL Carryover | $ 1,195,800 | $ 944,000 |
Payroll accrual | 7,500 | 9,000 |
Allowance for Doubtful Accounts | 10,300 | 12,000 |
Related party accrual | 145,900 | 213,000 |
Depreciation and amortization | 253,327 | |
Less valuation allowance | (1,612,827) | (1,178,000) |
Net deferred tax assets |
Income Tax (Details 2)
Income Tax (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Effective Income Tax Rate Reconciliation, Amount [Abstract] | ||
Book loss | $ (282,000) | $ (292,600) |
State taxes | (81,000) | (138,500) |
Meals and entertainment | 1,200 | 6,800 |
Stock options | 71,600 | 60,000 |
Other nondeductible expenses | 4,300 | |
Other adjustments | 53,481 | |
Adjustment to deferred tax assets | (198,108) | |
Valuation allowance | 434,827 | 360,000 |
Income tax provision |
Income Tax (Details Textual)
Income Tax (Details Textual) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Income Taxes (Textual) | |
Net operating loss carry forwards | $ 4,429,000 |
Net federal and state net operating loss | $ 3,417,085 |
Operating loss carry forwards description | Expire from 2021 – 2027, and no expiration on the remaining amount. |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event [Member] - USD ($) | Jan. 01, 2020 | Apr. 24, 2020 |
Subsequent Events (Textual) | ||
Granted common stock option | 6,667 | |
Subsequent events, description | The Company entered into Amendment No. 4 to Loan and Security Agreement ("Amendment No. 4") amending the Credit Agreement. The purpose of Amendment No. 4 was to extend the Maturity Date of our indebtedness and to waive certain outstanding events of default. Specifically, the Maturity Date of our indebtedness was extended for one year to April 9, 2022. The lenders also waived the Company's existing default under the Original Credit Agreement for its (i) failure to (x) to notify the Agent that one or more of the Loan Parties received Extraordinary Receipts above $99,999.99 (as such term is specifically defined in the Credit Agreement, but which include proceeds from litigation or insurance claims) and (y) to deliver a reinvestment notice in respect of such Extraordinary Receipts and/or to make the required prepayment of the Loans from such Extraordinary Receipts, in each case, as required by Section 1.08(e) of the Credit Agreement, (ii) one or more of the Loan Parties incurred indebtedness in an aggregate amount of approximately $386,467 during fiscal year 2019 as a result of not reimbursing business expenses paid by Mr. Yakov in the ordinary course, which indebtedness is not permitted under Section 5.23(f) of the Credit Agreement ("Debt Default") and (iii) Lender has not received financial statements and other information of the Company as parent guarantor and the Borrowers for the fiscal year ended December 31, 2019 within 90-days of such fiscal year end as required by Section 5.15(a) of the Credit Agreement. In addition, Amendment No. 4 provides the Company with a limited waiver permitting the Company to incur government funded indebtedness from the United States CARES Act loan programs. Further, the financial covenants were amended whereby Consolidated Net Revenue shall not be less than (x) until June 30, 2021 $9,000,000 and (y) from and after July 1, 2021, $10,000,000, on a trailing twelve-months basis. | |
Settlement Amount | $ 125,000 | |
Monthly payment of per month | $ 25,000 | |
Net proceeds percentage | 100.00% | |
Future equity offering [Member] | ||
Subsequent Events (Textual) | ||
Net proceeds percentage | 20.00% |