S-1/A: DMINT Inc. Files Amended S-1 for Spin-Off from OLB Group, Eyes NASDAQ Listing

DMINT Inc., a Bitcoin mining company, has filed an amended S-1 registration statement detailing its planned spin-off from The OLB Group and its application to list on the NASDAQ Capital Market.

Summary

• DMINT Inc., currently a wholly-owned subsidiary of The OLB Group, is preparing for a spin-off distribution to OLB stockholders.
• The spin-off will distribute DMINT common shares and Class A shares to OLB shareholders on a pro-rata basis.
• DMINT plans to list its common shares on the NASDAQ Capital Market, but there is no guarantee of approval or an active trading market.
• The company operates a Bitcoin mining facility in Selmer, Tennessee, with 1,000 mining computers, though only 400 are currently operational due to power constraints.
• DMINT aims to expand its operations to 5,000 miners in two phases, requiring additional capital and power capacity.
• The company has mined 56.93 Bitcoin since commencing operations through September 30, 2024.
• The spin-off is expected to be taxable to OLB shareholders for U.S. federal income tax purposes.
• DMINT has a working capital deficiency of $22,992,637 as of September 30, 2024, and a net loss of $3,407,862 for the nine months ended September 30, 2024.
• The company plans to convert its debt to OLB into common shares and Class A shares at $5.00 per share or Class A share, which will be distributed to OLB shareholders as part of the spin-off.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there are plans for expansion and a focus on efficiency, the company faces significant financial challenges, regulatory risks, and market uncertainties. The lack of a guaranteed NASDAQ listing and the potential for a taxable spin-off also contribute to a cautious outlook.

Positives

• DMINT owns a 15,000 square foot facility in Selmer, Tennessee, with the capacity to expand to 5,000 miners.
• The company has begun discussions with Pickwick Electric Cooperative to secure up to 20MW of power capacity.
• DMINT has all the necessary electrical hardware and cooling solutions to operate up to 5,000 miners.
• The company has a plan to scale its operations in two phases, with the first phase expected to be completed within 90 days of receiving necessary funding.
• DMINT has a cost of $0.061 per kWh, which is lower than the national average of $0.0947 per kWh.

Negatives

• DMINT currently operates only 400 of its 1,000 mining computers due to power limitations.
• The company has a significant working capital deficiency of $22,992,637 as of September 30, 2024.
• DMINT has incurred a net loss of $3,407,862 for the nine months ended September 30, 2024.
• The company is dependent on third-party funding to expand its operations.
• There is no guarantee that DMINT's application to list on NASDAQ will be approved or that an active trading market will develop.
• The Class A shares will be restricted from sale for six months after the distribution date and there is no expectation of a trading market for them.

Risks

• The company has a history of losses and may not be able to achieve profitability.
• DMINT relies on OLB for financing and may not be able to secure funding on reasonable terms.
• The company may identify material weaknesses in its internal control over financial reporting.
• The Bitcoin mining industry is subject to rapid technological changes and intense competition.
• Disruptions in equipment and infrastructure may result in loss of business.
• The company is dependent on third parties for critical equipment and may face supply chain issues.
• DMINT is exposed to the risk of nonperformance by counterparties, including power suppliers.
• Bitcoin mining is energy-intensive and may face regulatory restrictions.
• Bitcoin exchanges are largely unregulated and may be subject to fraud and failures.
• The company may face reputational risks due to the volatile nature of the Bitcoin market.
• Regulatory changes may restrict the use of Bitcoin and adversely affect the business.
• The value of Bitcoin is subject to volatility and may impact the company's financial condition.
• The company may be impacted by cybersecurity threats and hacks.
• The company may be subject to tax determinations that change the classification of Bitcoin.
• The company is dependent on third-party software and personnel.
• OLB may default on a Master Equipment Finance Agreement and DMINT may lose 100 mining computers pledged as collateral.
• The company may not be able to manage growth effectively.
• The company may not be able to compete with other companies, some of whom have greater resources and experience.
• Limited transaction capacity and scaling issues may impact mining results.
• The properties included in our mining network may experience damages.
• The company is exposed to risk of nonperformance by counterparties, including our counterparties under our power arrangements.
• Bitcoin mining activities are energy-intensive, which may restrict the geographic locations of miners and have a negative environmental impact.
• Bitcoin exchanges and other trading venues are relatively new and, in most cases, largely unregulated and may therefore be subject to fraud and failures.
• Our business may be significantly impacted by reputational risks and may impact how our business is perceived by customers, counterparties, and regulators.
• Regulatory changes or actions may alter the nature of an investment in us or restrict the use of Bitcoin in a manner that adversely affects our business, prospects or operations.
• The development and acceptance of Bitcoin and algorithmic protocols governing the issuance of and transactions in Bitcoin is subject to a variety of factors that are difficult to evaluate.
• Banks and financial institutions may not provide banking services, or may cut off services, to businesses that provide Bitcoinrelated services or that accept Bitcoin as payment, including financial institutions of investors in our securities.
• The impact of geopolitical events on the supply and demand for Bitcoin is uncertain.
• Acceptance and/or widespread use of Bitcoins is uncertain.
• Political or economic crises may motivate large-scale sales of Bitcoins, which could result in a reduction in value and adversely affect us.
• Transactional fees may decrease demand for Bitcoin and prevent expansion.
• Bitcoin inventory, including that maintained by or for us, may be exposed to cybersecurity threats and hacks.
• Macro-market events or perception of the Bitcoin industry in general could negatively impact our financial condition.
• It may be illegal in the future, to acquire, own, hold, sell or use Bitcoin, participate in the blockchain or utilize similar digital assets in one or more countries, the ruling of which would adversely affect us.
• If regulatory changes or interpretations require the regulation of Bitcoin or other digital assets under the securities laws of the United States or elsewhere, including the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940 or similar laws of other jurisdictions and interpretations by the SEC, CFTC, IRS, Department of Treasury or other agencies or authorities, we may be required to register and comply with such regulations, including at a state or local level.
• Lack of liquid markets, possible manipulation of blockchain/Bitcoin-based assets and lack of effectiveness of safeguards for our Bitcoin may adversely affect us.
• Our dependence on third-party software and personnel may leave us vulnerable to price fluctuations and rapidly changing technology.
• OLB may default on a Master Equipment Finance Agreement and we may lose 100 mining computers pledged as collateral.
• Failure to comply with, or changes in, laws, regulations and enforcement activities may adversely affect the products, services and markets in which we operate.
• Our common shares and Class A shares have never been publicly traded and there is no existing market for our common shares or Class A shares. An active trading market that will provide you with adequate liquidity for our common shares or Class A shares may not develop.
• If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline.
• Substantial sales of our common shares may occur in connection with the Spin-Off Distribution, which could cause our share price to decline.
• You may experience future dilution as a result of future equity offerings and other issuances of our common shares, preferred shares or other securities.
• The market price of our common shares may be subject to significant fluctuations.
• If our common shares do not meet NASDAQs minimum share price requirement, and if we cannot cure such deficiency within the prescribed timeframe, our common shares could be delisted.
• We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common shares less attractive to investors.
• Our historical financial information may not be representative of the results we would have achieved as a stand -alone public company and may not be a reliable indicator of our future results.
• We may have difficulty operating as an independent, publicly traded company.
• Our ability to meet our capital needs may be harmed by the loss of financial support from OLB.
• As a newly-incorporated company, we may not have the surplus or net profits required by law to pay dividends.
• We believe that the Spin-Off Distribution generally will be taxable to our shareholders for U.S. federal income tax purposes.
• Certain of our directors and executive officers are director and/or executive officers of OLB and own shares of its common stock, which could cause conflicts of interests.
• As an emerging growth company under applicable law, we will be subject to lessened disclosure requirements, which could leave our stockholders without information or rights available to stockholders of more mature companies.

Future Outlook

DMINT plans to expand its operations to 5,000 miners in two phases, contingent on raising at least $16 million after the spin-off. The company also plans to focus on Bitcoin mining in the United States and may invest in R&D to enhance its technology and efficiency.

Management Comments

• OLB believes that its lines of business are not accurately valued in the capital market, and the Spin-Off Distribution will enable each company (OLB and DMINT) to increase its business focus, alleviate market confusion and attract new investors.
• The board of directors of OLB determined that a spin-off, in the form contemplated by the Spin-Off Distribution is in the best interests of OLB and its stockholders.
• We believe this phase can be completed within 90 days of receipt of the funds necessary to expand our capabilities.

Industry Context

The document highlights the increasing competition and difficulty in Bitcoin mining, which is driving the need for more efficient and less costly energy resources. It also notes the evolving regulatory landscape for Bitcoin and digital assets, which could impact the company's operations.

Comparison to Industry Standards

• The document mentions that DMINT's operational cost from June 2023 to May 2024 of $0.061 per kWh is lower than the national average in the industrial section as of January 2024 of approximately $0.0947 per kWh, indicating a cost advantage.
• The document notes that the average hashrate of the mining operation since the Company commenced operations in 2021 is 10 petahash per second, which is a standard metric for measuring mining performance.
• The document mentions that the company uses Foundry USA mining pool, a U.S.-based, institutional-grade mining pool focused on security and reliability, which is a common practice in the industry to increase the chances of successfully mining a block.
• The document notes that the company uses the Full Pay Per Share (FPPS) payout methodology, which is a common method for distributing rewards among participants in a mining pool.

Management Changes

Legal Proceedings

• The Company is currently in a contract dispute with a contractor. The Company has paid $100,000 to the contractor for work completed and materials provided and returned materials to offset the potential liability of approximately $444,000.

Related Party Transactions

• Since inception, the cost of the Companys operations have been solely funded by our parent company The OLB Group, Inc.(OLB).
• On December 22, 2023, OLB and DMINT entered into a Shared Services Agreement (the SSA) whereby OLB provides financial and accounting services and tax related services to DMINT.
• Concurrently with the Spin-Off Distribution, we plan to enter into an agreement with OLB to convert the entire amount due to OLB into common shares and Class A shares of the Company at $5.00 per share or Class A share.

Stakeholder Impact

• Shareholders of OLB will receive DMINT common shares and Class A shares, which may be subject to market volatility and tax liabilities.
• Employees may be affected by changes in management and the company's financial performance.
• Customers may be impacted by the company's ability to expand its operations and maintain its services.
• Suppliers may be affected by the company's ability to pay for equipment and services.
• Creditors may be impacted by the company's ability to repay its debts.

Next Steps

• DMINT will apply to list its common shares on NASDAQ.
• The company will seek to expand its power capacity and infrastructure to accommodate additional mining computers.
• DMINT will negotiate with Pickwick Electric Cooperative for additional power.
• The company will seek to raise at least $16 million in capital after the spin-off.
• DMINT will convert its debt to OLB into common shares and Class A shares.

Key Dates

Keywords

Bitcoin mining, cryptocurrency, spin-off, NASDAQ, digital assets, blockchain, mining computers, power capacity, financial statements, capital raise