UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


 

(MARK ONE)

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2021

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

 

For the transition period from  ______________ to ______________

 

Commission file number: 001-34294

 

GREENBOX POS

(Exact name of small business issuer as specified in its charter)

 

Nevada

22-3962936

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification Number)

 

3131 Camino Del Rio North, Suite 1400

San Diego, CA 

92108

(Address of principal executive offices)

(Zip Code)

 

(619)-631-8261

(Registrant’s telephone number, including area code)

 

8880 RIO SAN DIEGO DR., SUITE 102, SAN DIEGO, CA, 92108

(Former name or former address, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

GBOX

The Nasdaq Stock Market LLC (Nasdaq Capital Market)

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒ No ☐   

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒ No ☐ 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

 

Large accelerated filer   ☐

Accelerated filer   ☐

Non-accelerated filer ☒

Smaller reporting company   ☒

 

Emerging growth company   ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒

 

Number of shares outstanding of the issuer’s classes of common equity, as of May 12, 2021 was 41,905,571 Shares of Common Stock (One Class)

 

 

 

 

TABLE OF CONTENTS

 

   

Page

PART I   Consolidated Financial Information

 
     

Item 1.

Condensed Consolidated Financial Statements

3

 

Condensed Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020 

3

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020 (unaudited)

4

 

Condensed Consolidated Statements of Stockholders’ Deficit for the Three Months Ended March 31, 2021 and 2020 (unaudited)

5

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (unaudited)

6

 

Notes to (unaudited) Condensed Consolidated Financial Statements

7

     

Item 2.

Management’s Discussion and Analysis or Plan of Operation

19

Item 3.

Controls and Procedures

24

     

PART II  Other Information

 
     

Item 1.

Legal Proceedings

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 3.

Defaults Upon Senior Securities

25

Item 4.

Mine Safety Disclosures

25

Item 5.

Other Information

25

Item 6.

Exhibits

25

Signatures

26

 

 

 

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

GREENBOX POS

CONSOLIDATED BALANCE SHEETS 

 

   

March 31,

   

December 31,

 
   

2021

   

2020

 
                 

ASSETS

               
                 

Current Assets:

               

Cash and cash equivalents

  $ 35,696,589     $ -  

Restricted cash

    -       1,832,735  

Accounts receivable, net

    10,000       10,000  

Accounts receivables from fines and fees from merchant, net of allowance for bad debt of

$6,665,031 and $6,665,031, respectively.

    2,789,230       2,789,230  

Cash due from gateways, net

    11,848,709       7,303,949  

Prepaid and other current assets

    2,452,753       70,130  

Total current assets

    52,797,281       12,006,044  
                 

Non-current Assets:

               

Property and equipment, net

    62,362       57,264  

Operating lease right-of-use assets, net

    87,837       117,795  

Other assets

    81,636       81,636  

Total non-current assets

    231,835       256,695  
                 

Total assets

  $ 53,029,116     $ 12,262,739  
                 
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

               
                 

Current Liabilities:

               

Accounts payable

  $ 178,038     $ 210,094  

Other current liabilities

    98,995       68,138  

Payment processing liabilities, net

    5,355,115       10,199,956  

Note payable, payroll protection plan loan

    272,713       272,713  

Convertible debt, net of debt discount of $0 and $2,993,408, respectively

    -       856,592  

Current portion of operating lease liabilities

    89,017       120,110  
                 

Total current liabilities

    5,993,878       11,727,603  

Long-term debt

    149,900       149,900  
                 

Total liabilities

    6,143,778       11,877,503  
                 

Commitments and contingencies

               
                 

Stockholders' Equity:

               

Common stock, par value $0.001, 82,500,000 shares authorized, shares issued and

outstanding of 40,917,331 and 30,710,646, respectively

    40,918       30,711  

Additional paid-in capital

    71,898,401       12,079,074  

Accumulated deficit

    (25,053,981 )     (11,724,549 )

Total stockholders' equity

    46,885,338       385,236  
                 

Total liabilities and stockholder's equity

  $ 53,029,116     $ 12,262,739  

 

The accompanying notes are an integral part of these condensed unaudited financial statements.

 

 

GREENBOX POS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   

Three Months Ended March 31,

 
   

2021

   

2020

 
                 

Net revenue

  $ 4,749,441     $ 187,205  

Cost of revenue

    1,593,771       247,305  
                 

Gross profit (loss)

    3,155,670       (60,100 )
                 

Operating expenses:

               

Advertising and marketing

    24,725       11,885  

Research and development

    653,381       286,548  

Payroll and payroll taxes

    559,201       402,462  

Professional fees

    457,752       212,298  

General and administrative

    566,195       142,050  

Stock compensation for employees

    797,613       4,130  

Stock compensation for services

    9,453,825       -  

Depreciation and amortization

    6,009       5,376  

Total operating expenses

    12,518,701       1,064,749  
                 

Loss from operations

    (9,363,031 )     (1,124,849 )
                 

Other income (expense):

               

Interest expense - debt discount

    (2,993,408 )     (30,076 )

Interest expense

    (594,258 )     (288,590 )

Changes in fair value of derivative liability

    -       (3,822,385 )

Merchant liability settlement

    (364,124 )     -  

Merchant fines and penalty income

    -       24,060  

Other income or expense

    (14,611 )     -  

Total other expense, net

    (3,966,401 )     (4,116,991 )
                 

Loss before provision for income taxes

    (13,329,432 )     (5,241,840 )
                 

Income tax provision

    -       -  
                 

Net loss

  $ (13,329,432 )   $ (5,241,840 )
                 
                 

Earnings (loss) per share:

               

Basic and diluted

  $ (0.38 )   $ (0.18 )
                 

Weighted average number of common shares outstanding:

               

Basic and diluted

    34,917,106       28,993,402  

 

The accompanying notes are an integral part of these condensed unaudited financial statements.

 

 

GREENBOX POS

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT

(UNAUDITED)

 

   

Common Stock

   

Additional Paid-In

   

Accumulated

   

Total Stockholders' Equity

 
   

 Shares

   

Amount

   

To be Issued

   

Amount

   

Capital

   

Deficit

   

(Deficit)

 
                                                         

Balance at December 31, 2020

    30,710,645     $ 30,711       -     $ -     $ 12,079,074     $ (11,724,549 )   $ 385,236  
                                                         

Common stock issued for exercise of warrant

    1,777,778       1,778       -       -       3,518,222       -       3,520,000  
                                                         

Common stock issued for conversion of convertible debt

    1,944,444       1,944       -       -       3,848,056       -       3,850,000  
                                                         

Common shares issued for restricted shares to executive

    83,333       83       -       -       (83 )     -       -  
                                                         

Common stock issued for services

    783,859       784       -       -       9,453,041       -       9,453,825  
                                                         

Common stock issued for interest for convertible debt

    96,664       97       -       -       594,258       -       594,355  
                                                         

Common stock issued for non-cash stock option exercise

    39,332       39       -       -       (39 )     -       -  
                                                         

Common stock issued for stock options exercised

    5,500       6       -       -       2,244       -       2,250  
                                                         

Issuances of common stock, net of issuance costs of $4,305,758

    4,772,500       4,773       -       -       45,800,718       -       45,805,491  
                                                         

Payment for previous common stock repurchased under treasury method

    -       -       -       -       (4,194,000 )     -       (4,194,000 )
                                                         

Issuances of common stock from previous unregistered shares

    703,276       703       -       -       (703 )     -       -  
                                                         

Stock compensation expense

    -       -       -       -       797,613       -       797,613  
                                                         

Net loss

    -       -       -       -       -       (13,329,432 )     (13,329,432 )
                                                         

Balance at March 31, 2021

    40,917,331     $ 40,918       -     $ -     $ 71,898,401     $ (25,053,981 )   $ 46,885,338  

 

   

Common Stock

   

Additional Paid-In

   

Accumulated

   

Total Stockholders' Equity

 
   

 Shares

   

Amount

   

To be Issued

   

Amount

   

Capital

   

Deficit

   

(Deficit)

 
                                                         

Balance at December 31, 2019

    28,310,489     $ 28,310       115,854     $ 116     $ 1,321,404     $ (6,717,169 )   $ (5,367,339 )
                                                         

Shares issuable adjustment

    -       -       (115,854 )     (116 )     116       -       -  
                                                         

Common stocks issued for settlement of convertible notes

    1,000,000       1,000       -       -       114,550       -       115,550  
                                                         

Common stock issued for professional fees

    9,833       10       -       -       4,120       -       4,130  
                                                         

Net loss

    -       -       -       -       -       (5,241,840 )     (5,241,840 )
                                                         

Balance at March 31, 2020

    29,320,322     $ 29,320       -     $ -     $ 1,440,190     $ (11,959,009 )   $ (10,489,499 )

 

The accompanying notes are an integral part of these condensed unaudited financial statements.

 

 

GREENBOX POS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   

Three Months Ended March 31,

 
   

2021

   

2020

 
                 

Cash flows from operating activities:

               

Net loss

  $ (13,329,432 )   $ (5,241,840 )
                 

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

               

Depreciation expense

    6,010       5,376  

Interest expense - debt discount

    2,993,408       30,076  

Stock compensation expense for employees

    797,613       4,130  

Stock compensation expense for services

    9,453,825       -  

Shares issued for interest

    594,355       -  

Changes in fair value of derivative liability

    -       3,822,385  

Noncash lease expense

    (1,135 )     4,406  

Changes in assets and liabilities:

               

Accounts receivable

    -       37,205  

Prepaid and other current assets

    (2,382,623 )     (42,614 )

Cash due from gateways, net

    (4,544,760 )     5,024,520  

Accounts payable

    (32,056 )     (6,271 )

Other current liabilities

    30,857       (15,100 )

Accrued interest

    -       7,135  

Payment processing liabilities, net

    (4,844,841 )     (3,361,564 )

Net cash provided by (used in) operating activities

    (11,258,779 )     267,844  
                 

Cash flows from investing activities:

               

Purchases of property and equipment

    (11,108 )     (12,564 )

Net cash used in investing activities

    (11,108 )     (12,564 )
                 

Cash flows from financing activities:

               

Repayments on convertible debt

    -       (270,000 )

Borrowings from short-term notes payable

    -       (441,911 )

Proceeds from stock option exercises

    2,250       -  

Proceeds from exercise of warrant

    3,520,000       -  

Repurchase of common stock from stockholder

    (4,194,000 )     -  

Proceeds from issuances of common stock

    45,805,491       -  

Net cash provided by financing activities

    45,133,741       (711,911 )
                 

Net increase (decrease) in cash, cash equivalents, and restricted cash

    33,863,854       (456,631 )
                 

Cash, cash equivalents, and restricted cash – beginning of period

    1,832,735       763,110  
                 

Cash, cash equivalents, and restricted cash  end of period

  $ 35,696,589     $ 306,479  
                 
                 

Supplemental disclosures of cash flow information

               

Cash paid during the period for:

               

Interest

  $ -     $ 339,505  

Income taxes

  $ -     $ 800  
                 

Disclosures of non-cash activities under investing activities:

               

Convertible debt converted to common stock

  $ 3,850,000     $ 57,500  

Interest accrual from convertible debt converted to common stock

  $ -     $ 58,050  

 

The accompanying notes are an integral part of these condensed unaudited financial statements.

 

 

GREENBOX POS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1.

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

 

Organization

 

GreenBox POS (the “Company” or “PubCo”) is a tech company formed with the intent of developing, marketing and selling innovative blockchain-based payment solutions, which the Company believes will cause favorable disruption in the payment solutions marketplace. The Company’s core focus is to develop and monetize disruptive blockchain-based applications, integrated within an end-to-end suite of financial products, capable of supporting a multitude of industries. The Company’s proprietary, blockchain-based systems are designed to facilitate, record and store a virtually limitless volume of tokenized assets, representing cash or data, on a secured, immutable blockchain-based ledger.

 

The Company was formerly known as ASAP Expo, Inc (“ASAP”), which was incorporated April 10, 2007 under the laws of the State of Nevada. On January 4, 2020, PubCo and GreenBox POS LLC, a Washington limited liability company (“PrivCo”), entered into an Asset Purchase Agreement (the “Agreement”), to memorialize a verbal agreement (the “Verbal Agreement”) entered into on April 12, 2018, by and among PubCo (the buyer) and PrivCo, which was formed on August 10, 2017 (the seller). On April 12, 2018, pursuant to the Verbal Agreement, PubCo acquired PrivCo’s blockchain gateway and payment system business, point of sale system business, delivery business and kiosk business, bank and merchant accounts, as well as all intellectual property related thereto (the “GreenBox Business”). As consideration for the GreenBox Business, on April 12, 2018, PubCo assumed PrivCo’s liabilities that had been incurred in the normal course of the GreenBox Business (the “GreenBox Acquisition”).

 

For accounting and reporting purposes, PubCo deemed the GreenBox Acquisition a “Reverse Acquisition” with PrivCo designated the “accounting acquirer” and PubCo designated the “accounting acquiree.”

 

Name Change

 

On May 3, 2018, PubCo formally changed its name to GreenBox POS LLC, then subsequently changed its name to GreenBox POS on December 13, 2018. Unless the context otherwise requires, all references to “the Company,” “we,” “our”, “us” and “PubCo” refer to GreenBox POS. Unless the context otherwise requires, all references to “PrivCo” or the “Private Company” refer to GreenBox POS LLC, a limited liability company, formed in the state of Washington.

 

Basis of Presentation and Consolidation

 

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The financial statements include the combined accounts of PubCo and PrivCo. All amounts are presented in U.S. Dollars unless otherwise stated. The accompanying financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”).

 

Unaudited Interim Financial Information

 

These unaudited interim financial statements have been prepared in accordance with GAAP for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been made. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2021.

 

The balance sheets and certain comparative information as of December 31, 2020 are derived from the audited financial statements and related notes for the year ended December 31, 2020 (“2020 Annual Financial Statements”), included in the Company’s 2020 Annual Report on Form 10-K. These unaudited interim financial statements should be read in conjunction with the 2020 Annual Financial Statements.

 

Use of Estimates

 

The preparation of financial statements in conformity with the 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.

 

 

GREENBOX POS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

 

1.

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (continued)

 

Cash, Cash Equivalents and Restricted Cash

 

The Company’s cash, cash equivalent and Restricted cash represents the following:

 

 

Cash and cash equivalents consist of cash on hand, cash on deposit with banks, and highly liquid debt investments with a maturity of three months or less when purchased. The Company has cash equivalents of $0 and $0, excluding cash held for settlement liabilities, as of March 31, 2021 and December 31, 2020, respectively.

 

 

Restricted Cash – The Company’s technology enables transactional blockchain ledger to instantly reflect all transactions details. The final cash settlement of each transaction is subject to the gateway policies. This final disposition takes days to weeks to complete in accordance with these policies. Each policy is an integral part of the transactional contracts between the Company, its Independent Sales Organizations (ISOs), its agents, and the merchant clients. While the ledger reflects a held balance for the merchant, in reserve or payment in arears, the Company holds funds in a trust account as cash deemed restricted. The Company’s books reflect such restricted cash as a restricted cash and trust accounts, and the sum balance due to merchants and ISOs as settlement liabilities.

 

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.

 

   

March 31,

2021

   

December 31,

2020

 
                 

Cash and cash equivalents

  $ 35,696,589     $ -  

Restricted cash

    -       1,832,735  
                 

Total cash, cash equivalents, and restricted cash

  $ 35,696,589     $ 1,832,735  

 

Cash Due from Gateways and Payment Processing Liabilities

 

The Company’s primary source of revenues continues to be payment processing services for its merchant clients. When such merchant makes a sale, the process of receiving the payment card information, engaging the banks for transferring the proceeds to the merchant’s account via digital gateways, and recording the transaction on a blockchain ledger are the activities for which the Company gets to collect fees.

 

In 2021 and 2020 the Company utilized several gateways. The gateways have strict guidelines pertaining to scheduling of the release of funds to merchants based on several criteria, such as return and chargeback history, associated risk for the specific business vertical, average transaction amount and so on. In order to mitigate processing risks, these policies determine reserve requirements and payment in arear strategy. While reserve and payment in arear restrictions are in effect for a merchant payout, the Company records gateway debt against these amounts until released.

 

Therefore, the total gateway balances reflected in the Company’s books represent the amount owed to the Company for processing – these are funds from transactions processed and not yet distributed.

 

Advertising and Marketing Costs

 

Advertising and marketing costs are recorded as general and administrative expenses when they are incurred. Advertising and marketing expenses were $24,725 and $11,885 for the three months ended March 31, 2021 and 2020, respectively.

 

Research and Development Costs

 

Research and development costs, which are expensed as incurred, are primarily comprised of costs and expenses for salaries and benefits for research and development personnel, outsourced contract services, and supplies and materials costs. Research and development expenses were $653,381 and $286,548 for the three months ended March 31, 2021 and 2020, respectively.

 

 

GREENBOX POS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Revenue Recognition

 

Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers outlines the basic criteria that must be met to recognize revenue and provide guidance for presentation of revenue and for disclosure related to revenue recognition policies in financial statements filed with the Securities and Exchange Commission. Management believes the Company’s revenue recognition policies conform to ASC 606.

 

The Company recognizes revenue when 1) it is realized or realizable and earned, 2) there is persuasive evidence of an arrangement, 3) delivery and performance has occurred, 4) there is a fixed or determinable sales price, and 5) collection is reasonably assured.

 

The Company generates revenue from payment processing services, licensing fees and equipment sales.

 

 

Payment processing revenue is based on a percentage of each transaction’s value and/or upon fixed amounts specified per each transaction or service and is recognized as such transactions or services are performed.

 

 

Licensing revenue is paid in advance and is recorded as unearned income, which is amortized monthly over the period of the licensing agreement.

 

 

Equipment revenue is generated from the sale of POS products, which is recognized when goods are shipped.

 

Accounts Receivable and Allowance for Bad Debt

 

The Company maintains an allowance for doubtful accounts for estimated losses from the inability of customers to make required payments. The allowance for doubtful accounts is evaluated periodically based on the aging of accounts receivable, the financial condition of customers and their payment history, historical write-off experience and other assumptions, such as current assessment of economic conditions.

 

Property and Equipment

 

Property and equipment are stated at cost. Depreciation is computed primarily using the straight-line method over the estimated useful lives of the assets, which range from three to eight years. Leasehold improvements are amortized over the shorter of the useful life of the related assets or the lease term. Expenditures for repairs and maintenance are charged to expense as incurred. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period.

 

Fair Value of Financial Instruments

 

The Company utilizes ASC 820-10, Fair Value Measurement and Disclosure, for valuing financial assets and liabilities measured on a recurring basis. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:

 

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

The Company’s financial instruments consisted of cash, accounts payable and accrued liabilities, advances to due to or from affiliated companies, notes payable to officers.  The estimated fair value of cash, accounts payable and accrued liabilities, due to or from affiliated companies, and notes payable approximates its carrying amount due to the short maturity of these instruments.

 

 

GREENBOX POS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Income Taxes

 

Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net of operating loss carry forwards and credits, by applying enacted statutory tax rates applicable to future years.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred tax assets will be realized.  Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

 

Long-Lived Asset Impairments

 

The Company reviews long-lived assets, including property and equipment and intangible assets, for impairment when events or changes in business conditions indicate that their carrying value may not be recovered, and at least annually. The Company considers assets to be impaired and writes them down to estimated fair value if expected associated undiscounted cash flows are less than the carrying amounts. Fair value is the present value of the associated cash flows.

 

Earnings Per Share

 

A basic earnings per share is computed by dividing net income to common stockholders by the weighted average number of shares outstanding for the year. Dilutive earnings per share include the effect of any potentially dilutive debt or equity under the treasury stock method, if including such instruments is dilutive. The Company’s diluted earnings/loss per share is the same as the basic earnings/loss per share for the three months ended March 31, 2021 and 2020, as there are no potential shares outstanding that would have a dilutive effect.

 

Reverse Common Stock Split (1 for 6)

 

On February 17, 2021, the Company effected a reverse stock split of the Company’s shares of common stock outstanding and a proportional decrease of the Company’s authorized shares of common stock at a ratio of one-for-six (the “Stock Split”). Following the Stock Split, the Company has 82,500,000 shares of common stock authorized (the number of authorized shares of Preferred Stock remains 5,000,000). As a result, common shares information has been retrospectively restated accordingly in the financial statements as of and for the three months ended March 31, 2020.

 

Recently Adopted Accounting Updates

 

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This standard removes, modifies, and adds certain disclosure requirements for fair value measurements, and is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU No. 2018-13 in the first quarter of fiscal 2020, coinciding with the standard’s effective date, and the adoption did not have any impact to the Company’s financial statements.

 

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company’s accounting for the service element of a hosting arrangement that is a service contract is not affected by the proposed amendments and will continue to be expensed as incurred in accordance with existing guidance. This standard does not expand on existing disclosure requirements except to require a description of the nature of hosting arrangements that are service contracts. This standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, and can be adopted either prospectively or retrospectively. Accordingly, the Company adopted the updated disclosure requirements of ASU No. 2018-15 prospectively in the first quarter of fiscal 2020, coinciding with the standard’s effective date, and the adoption did not have any impact to the Company’s financial statements.

 

 

GREENBOX POS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740, Income Taxes, while also clarifying and amending existing guidance, including interim-period accounting for enacted changes in tax law. This standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted ASU No. 2019-12 in the first quarter of fiscal 2020 and the adoption did not have any impact to the Company’s financial statements.  

 

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard provides optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this standard apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The amendments in this standard are elective and are effective upon issuance for all entities. The Company is evaluating the expedients and exceptions provided by the amendments in this standard to determine their impact.

 

Other recently issued accounting updates are not expected to have a material impact on the Company’s Interim Financial Statements.

 

3.

SETTLEMENT PROCESSING

 

The Company’s proprietary blockchain-based technology serves as the settlement engine for all transactions within the Company’s ecosystem. The blockchain ledger provides a robust and secure platform to log immense volumes of immutable transactional records in real time. Generally speaking, blockchain is a distributed ledger that uses digitally encrypted keys to verify, secure and record details of each transaction conducted within an ecosystem. Unlike general blockchain-based systems, GreenBox uses proprietary, private ledger technology to verify every transaction conducted within the GreenBox ecosystem. The verification of transaction data comes from trusted partners, all of whom have been extensively vetted by us. GreenBox facilitates all financial elements of our closed-loop ecosystem and we act as the administrator for all related accounts. Using our TrustGateway technology, we seek authorization and settlement for each transaction from Gateways to the issuing bank responsible for the credit/debit card used in the transaction. When the Gateway settles the transaction, our TrustGateway technology composes a chain of blockchain instructions to our ledger manager system.

 

When consumers use credit/debit cards to pay for transactions with merchants who use our ecosystem, the transaction starts with the consumer purchasing tokens from us. The issuance of tokens is accomplished when we load a virtual wallet with a token, which then transfers credits to the merchant’s wallet on a dollar for dollar basis, after which the merchant releases its goods or services to the consumer. These transfers take place instantaneously and seamlessly, allowing the transaction experience to seem like any other ordinary credit/debit card transaction to the consumer and merchant. While our blockchain ledger records transaction details instantaneously, the final cash settlement of each transaction can take days to weeks, depending upon contract terms between us and the gateways we use, between us and our ISOs, and between us and/or our ISOs and merchants who use our services. In the case where we have received transaction funds, but not yet paid a merchant or an ISO, we hold funds in either a trust account or as cash deemed restricted within our operating accounts. We record the total of such funds as Cash held for Settlements – a Current Asset. Of these funds, we record the sum balance due to Merchants and ISOs as Settlement Liabilities to Merchants and Settlement Liabilities to ISOs, respectively.

 

 

GREENBOX POS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

 

3.

SETTLEMENT PROCESSING (continued)

 

The table below shows the status of transaction settlements:

 

   

March 31,

2021

   

December 31,

2020

 
                 

Settlement Processing Assets:

               

Cash held for settlements

  $ 100,532     $ 1,832,735  

Cash due from gateways

    7,532,137       1,922,669  

Amounts due from gateways and merchants – hold and fees

    6,493,594       1,063,272  

Reserves (1)

    4,316,572       5,381,281  

Total before allowance for uncollectable

    18,442,835       10,199,957  

Allowance for uncollectable – hold and fees

    (6,594,126 )     (2,896,008 )
                 

Total settlement processing assets  cash due from gateways

  $ 11,848,709     $ 7,303,949  
                 
                 

Settlement Processing Liabilities:

               

Settlement liabilities to merchants

  $ 5,355,115     $ 10,199,956  

Settlement liabilities to independent sales organizations (ISO)

    -       -  

Refund allowances

    -       -  
                 

Total settlement processing liabilities

  $ 5,355,115     $ 10,199,956  

 

(1) Reserves are essentially an escrow fund that protects a gateway/card issuer from financial losses. In the Reserve, funds are held until chargeback time limits expire.

 

4.

PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

   

March 31,

2021

   

December 31,

2020

 
                 

Computers

  $ 59,991     $ 48,883  

Furniture and fixtures

    40,320       40,320  

Kiosks

    6,472       6,473  

Vehicles

    4,578       4,578  

Total property and equipment

    111,361       100,254  

Less accumulated depreciation

    (48,999 )     (42,990 )
                 

Total property and equipment, net

  $ 62,362     $ 57,264  

 

Depreciation expense was $6,010 and $5,376 for the three months ended March 31, 2021 and 2020, respectively.

 

12

 

GREENBOX POS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

 

5.

CONVERTIBLE NOTES PAYABLE

 

Convertible notes payable consisted of the following:

 

   

March 31,

2021

   

December 31,

2020

 
                 

October 27, 2020 ($3,850,000) – 10% one-time interest charge with outstanding principal and interest due July 27, 2021.

  $ -     $ 3,850,000  
                 

Total convertible notes payable

    -       3,850,000  

Debt discount

    -       (2,993,408 )
                 

Total convertible notes payable, net of debt discount

  $ -     $ 856,592  

 

Kingswood Capital (Syndicate Convertible Note) - $3,850,000

 

On October 27, 2020, the Company issued a convertible promissory note for $3,850,000 to various lenders through its placement agent, Kingswood Capital (“Kingswood Note”), due July 27, 2021 (the “Maturity Date”) with conversion price to common stock of $1.98 per share. The Kingswood Note included an original issue discount of $350,000, netting the balance received by the Company from Kingswood Note at $3,500,000.  The Company also provided warrant of 1,944,444 with a fixed exercise price to common stock of $1.98 per share under the Kingswood Note.   The Company valued its warrant of 1,944,444 with fixed exercise price of $1.98 using Black-Scholes valuation method which amounted to $3,498,667 and recorded as a debt discount at the time of issuance of warrant.  The convertible debt was converted in February 2021.

 

6.

NOTE PAYABLE, PAYROLL PROTECTION PLAN LOAN

 

On April 29, 2020, the Company entered into a loan agreement with Preferred Bank under Paycheck Protection Program administered by SBA in the amount of $272,713. Under this loan program, the loan may be forgiven if utilized for specific purpose specified under the CARES Act and PPP guideline. The loan bears interest of 1.00% per annum and matures on April 29, 2022.

 

7.

LONG-TERM DEBT

 

On June 9, 2020, the Company entered into a loan agreement with SBA under CARES Act in the amount of $150,000. The loan requires monthly payment of $731 after 12 months with maturity date of June 1, 2050 with interest rate at 3.75% per annum. Both Nisan and Errez, individually, signed personal guarantees for this Purchase Agreement.

 

 

GREENBOX POS 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

 

8.

INCOME TAXES

 

The Company did not have income tax provision (benefit) due to net loss and deferred tax assets having a full valuation allowances as of and for the three months ended March 31, 2021 and 2020.

 

The provision for income taxes differs from the amounts computed by applying the federal statutory tax rate of 21% to earnings before income taxes, as follows:

 

   

Three Months Ended March 31,

 
   

2021

   

2020

 
                 

Book income at statutory rate

    21.00 %     21.00 %

Others

    -       -  

Change in valuation allowance

    -21.00 %     -21.00 %
                 

Effective income tax rate

    0.00 %     0.00 %

 

Deferred tax assets and liabilities consist of the following tax-effected temporary differences:

 

   

March 31,

2021

   

December 31,

2020

 
                 

Deferred tax assets (liabilities):

               

Net operating loss carryforward

  $ 2,135,000     $ 1,066,726  

Depreciation

    -       -  

Others

    -       -  

Total deferred tax assets, net

    2,135,000       1,066,726  

Valuation allowance

    (2,135,000 )     (1,066,726 )
                 

Net deferred tax assets (liabilities)

  $ -     $ -  

 

The Company uses the liability method of accounting for income taxes as set forth in ASC 740. Under the liability method, deferred taxes are determined based on differences between the financial statement and tax bases of assets and liabilities using enacted tax rates. As of March 31, 2021, the Company had federal and California net operating loss carryforwards of approximately $6.2 million. The federal and California net operating loss carryforwards will expire at various dates from 2027 through 2029; however, $6.2 million of the Federal operating loss does not expire and will be carried forward indefinitely.

 

As of March 31, 2021 and December 31, 2020, the Company maintained full valuation allowance for net operating loss carryforward deferred tax asset. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The amount of the deferred tax asset considered realizable, however, could be reduced if estimates of future taxable income are reduced.

 

The Company files a consolidated federal income tax return and files tax returns in various state and local jurisdictions. The statutes of limitations for its consolidated federal income tax returns are open for years 2017 and after, and state and local income tax returns are open for years 2016 and after. 

 

 

GREENBOX POS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

 

9.

STOCK OPTION AWARDS

 

The Company adopted the 2020 Incentive and Non-statutory Stock Option Plan (“2020 Plan”) in June 2020, which provided for the grant of incentive stock options and nonqualified stock options to our employees and directors. The 2020 Plan provides for up to 3.3 million shares of Common Stock. Options granted under the 2020 Plan generally have a term of ten years and generally vest and become exercisable at various times from the option grant dates. The 2020 Plan provide for the grant of incentive stock options, non-qualified stock options and restricted stock to our employees, directors and independent contractors. These options will have such vesting or other provisions as may be established by the Board of Directors at the time of each grant.

 

The Company applies the provisions of ASC 718, “Compensation - Stock Compensation,” using a modified prospective application, and the Black-Scholes model to value stock options. Under this application, the Company records compensation expense for all awards granted. Compensation costs will be recognized over the period that an employee provides service in exchange for the award.

 

The fair value of each share option award on the date of grant was estimated using the Black-Scholes method based on the following weighted-average assumptions:

 

   

March 31, 2021

   

December 31, 2020

 

Risk-free interest rate

    0.29 %     0.29

%

Expected term

 

5 years

   

5 years

 

Expected volatility

    229.49 %     289.33% to 279.18

%

Expected dividend yield

    -       -  

 

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected term of the option award; the expected term represents the weighted-average period of time that option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; and the expected dividend yield is based upon the Company’s dividend rate at the time fair value is measured and future expectations. 

 

The Company recorded $797,613 and $4,130 compensation expenses recorded under this method for the three months ended March 31, 2021 and 2020, respectively.

 

A summary of the status of our stock options is presented below as of March 31, 2021:

 

   

Shares

   

Weighted-

Average

Exercise

Price

   

Weighted-

Average

Remaining

Contractual

Life

(In Years)

   

Aggregate

Intrinsic

Value

 

Outstanding at December 31, 2020

    514,607     $ 2.30       0.00       3,365,527  
                                 

Granted

    100,000       7.63       0.00          

Exercised

    (44,832 )     2.50       0.00          

Forfeited or expired

    (68,428

)

    2.50       0.00          
                                 

Outstanding at March 31, 2021

    496,782       4.80       0.00       7,018,853  
                                 

Exercisable as of March 31, 2021

    496,782       4.81       0.00       6,954,941  

Vested and Expected to Vest as of March 31, 2021

    496,782       4.81       0.00       6,954,941  

 

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $14.00 as of March 31, 2021, which would have been received by the option holders had all option holders exercised their options as of that date. As of March 31, 2021, there was unrecognized compensation cost related to non-vested stock options granted in the amount of $25,717.

 

 

GREENBOX POS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

 

10.

RELATED PARTY TRANSACTIONS

 

The Company had the following related party transactions:

 

 

Pop N Pay, LLC – In addition to his employment with the Company, Dan Nusinovich owns 100% of Pop N Pay, LLC (“PNP”), a Delaware registered limited liability company, that he formed on August 20, 2018. During the late summer of 2018, when both market opportunity and demand necessitated opening additional bank accounts to support our payment processing products and services, we turned to PNP to open new accounts, as a trustee, on our behalf. For his assistance, Dan, through his ownership of PNP, received approximately $3,000 (in addition to Dan’s salary) in early 2019, for services rendered in the fourth quarter of 2018. PNP was legally closed as of March 31, 2021.

     
 

Kenneth Haller and the Haller Companies

 

 

Kenneth Haller (“Haller”) became the Company’s Senior Vice President of Payment Systems in November 2018. The Company began working indirectly with Haller earlier in 2018, both individually and through our relationship with MTrac Tech Corporation (“MTrac”), which in turn has business relationships with Haller. Haller brings considerable advantages to the Company’s platform development and business development efforts and capabilities, including transactional business relations and a large network of agents, which the Company believes, are capable of processing $1 billion transactions annually (the “Haller Network”). The Haller Network is an amalgamation of the collective networks of Haller and three companies owned or majority-owned by Haller, which are Sky Financial & Intelligence, LLC (“Sky”), Charge Savvy, LLC, Cultivate, LLC (collectively, the “Haller Companies”), each of which has formalized business relationships with the Company, as well as with some of the Company’s partners, which the Company believes allows the Company to maximize and diversity the Company’s market penetration capabilities. Haller, through Sky, owns controlling interests in Charge Savvy, LLC and Cultivate, LLC, with whom we do business indirectly, through their respective business relationship with MTrac.

 

The following are certain transactions between the Company and the Haller Companies:

 

 

o

Sky Financial & Intelligence, LLC – Haller owns 100% of Sky Financial & Intelligence LLC (“Sky”), a Wyoming limited liability company, and serves as its sole Managing Member. Sky is a strategic merchant services company that focuses on high risk merchants and international credit card processing solutions. In 2018, Sky was using GreenBox’s QuickCard payment system as its main payment processing infrastructure, through Sky’s relationship with MTrac. It was through this successful relationship, that we came to know Haller and the Haller Network. Realizing that the Haller Network and Haller’s unique skill set was highly complementary to our business objectives, we commenced discussions to retain Haller through his consulting firm, Sky, for a senior role, directly responsible for growing GreenBox’s operations. Subsequently, in November 2018, Haller was appointed as our Senior Vice President of Payment Systems, for a monthly consulting fee of $10,000, paid to Sky (“Haller Consulting Fee”). This relationship was referenced in press releases as GreenBox’s “acquisition of Sky MIDs Technologies” (see Sky MIDs below). As our relationship with Haller / Sky is non-exclusive, Haller and the Haller Companies provide services to other companies, including those listed below. Any revenue generated by Haller and/or the Haller Companies through these other relationships is in addition to the Haller Consulting Fee.

 

 

Charge Savvy, LLC – Sky owns 68.4% of Charge Savvy, LLC (“Charge Savvy”), an Illinois limited liability company. Haller serves as one of three Managing Members of Charge Savvy, along with Higher Ground Capital, LLC (owns 14%), and Jeff Nickel (owns 17.4%). The three managing members of Charge Savvy own the same percentages of Cultivate, as they do Charge Savvy. On January 25, 2021, the Company issued a press release announcing it had entered into a non-binding Memorandum of Understanding to acquire Charge Savvy, for total consideration of up to $52 million in restricted shares of the Company’s common stock with $31 million of that all-shares amount due upon closing. Charge Savvy was, until August 2020, one of the largest ISOs that we utilized in our ecosystem. The transaction assumes a per share price of $12.00. The all-stock transaction is subject to the negotiation and signing of definitive transaction documents, the completion of an audit of Charge Savvy’s financial statements, and customary closing conditions.
     
 

Sky Mids –Previous references in press releases issued by PubCo in or about August 2018 regarding a “Sky Mids Acquisition” are references to the non-exclusive working relationship between PrivCo (and subsequently, PubCo) and Sky / Haller. The designation “Sky MIDs” was a colloquial reference to Sky, based upon a Sky-owned and operated website, which is no longer in use. While an acquisition of Sky has not formally been executed, nor have we (nor subsequently, PubCo) executed a formal engagement with Haller nor Sky, previous statements regarding the nature of our relationship with Sky Mids, which include our beliefs in the advantages of this relationship, accurately represent the working relationship between the Company and Sky / Haller.

 

The Company did not pay any commissions to the related parties mentioned above for the three months ended March 31, 2021 and 2020.

 

 

GREENBOX POS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

 

11.

COMMITMENTS AND CONTINGENCIES

 

Legal Proceedings

 

The Company has the following legal proceedings:

 

 

America 2030 Capital Limited and Bentley Rothschild Capital Limited – On or about October 31, 2018, Nisan and Errez received constitutive notice, regarding arbitration against Nisan, Errez, PrivCo and possibly PubCo, from Bentley Rothschild Capital Limited ("Bentley") and America 2030 Capital Limited (“America 2030”), both located in Nevis, West Indies, and both claiming breach of contract by Nisan and Errez of Nisan and Errez’s respective individual Master Loan Agreements and seeking forfeiture of 266,667 PubCo shares that PrivCo had transferred, on or about August 1, 2018, from PrivCo’s Control Shares under the terms of the MLAs. As of March 31, 2020, both parties have abandoned the matter and no further action was required by either party.
     
 

DCSM et al v. Greenbox POS – On November 25, 2019, four companies (the “Plaintiffs”) filed a complaint against GreenBox POS, LLC, GreenBox POS, Global Payout, Inc., MTrac Tech Corporation and Cultivate Technologies, LLC (collectively the “Defendants”) in the Superior Court of the State of California. Plaintiffs filed suit to recover processed funds and processing fees alleged to be withheld illegally (collectively, the “Withholding Suit”). The parties discussed arbitration and Plaintiffs later dismissed the case with prejudice. Plaintiffs refiled on February 28, 2020.   The parties attended mediation on November 12, 2020, came to an agreement, and subsequently executed a Settlement Agreement and Release on or around November 23, 2020, whereby GreenBox is to pay $3.8M by March 15, 2021. On December 14, 2020 Plaintiffs filed a Request for Dismissal with prejudice. The Company settled in the amount of $3.8M and was paid in February 2021. The Company had payment processing liability in the amount of $3.4M which was off-set against $3.8M payment and recorded loss on merchant liability settlement in the amount of approximately $360,000 which was recorded in other expense in the unaudited condensed consolidated statements of operations for the three months ended March 31, 2021. The Court has now dismissed the case.

     
  The Good People Farms, LLC (TGPF) – TGPF initiated an arbitration in AAA on or about April 20, 2020 against Greenbox POS, Fredi Nisan, Ben Errez, MTrac Tech., Vanessa Luna, and Jason LeBlanc. The matter was placed in abeyance for some time. On January 15, 2021 GreenBox filed a counter-claim for fraud – intentional misrepresentation, breach of contract, breach of covenant of good faith and fair dealing, violation of California Business and Professions Code Section 17200, and accounting. An arbitrator has been selected and the parties are awaiting the scheduling of the preliminary conference. The arbitration is stayed pending further proceedings in the separate but related action filed by MTrac in San Diego Superior Court. 

 

Operating Leases

 

The Company entered into the following operating facility lases:

 

 

Hyundai Rio Vista – On October 4, 2018, the Company entered into an operating facility lease for its corporate office located in San Diego with 38 months term and with option to renew. The lease started on October 4, 2018 and expires on October 3, 2021

 

The Company entered into an operating lease for corporate location on October 4, 2018. Rent expense paid under the lease agreements for the three months ended March 31, 2021 and 2020 was $33,104 and $22,390, respectively.

 

For operating leases, we calculated right of use assets and lease liabilities based on the present value of the remaining lease payments as of the date of adoption using the incremental borrowing rate. The adoption of ASC 842 resulted in recording an adjustment to operating lease right of use asset and operating lease liabilities of $87,837 and $89,017 respectively, as of March 31, 2021. The difference between the operating lease ROU asset and operating lease liabilities at transition represented existing deferred rent expenses and tenant improvements, and indirect costs that was derecognized. The adoption of ASC 842 did not materially impact our results of operations, cash flows, or presentation thereof.

 

 

GREENBOX POS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

 

12.

SUBSEQUENT EVENTS

 

The Company follows the guidance in FASB ASC Topic 855, Subsequent Events (“ASC 855”), which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before the consolidated financial statements are issued or are available to be issued. ASC 855 sets forth (i) the period after the balance sheet date during which management of a reporting entity evaluates events or transactions that may occur for potential recognition or disclosure in the consolidated financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its consolidated financial statements, and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. Accordingly, the Company did not have any subsequent events that require disclosure other than the following:

 

April 2021 (Facility Lease) – In April 2021, the Company entered into a facility lease agreement for corporate office effective May 1, 2021 with lease expiring in June 2023 and monthly lease payment of $33,000.

 

 

 

 

 

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

 

Disclaimer Regarding Forward Looking Statements

 

Our Management’s Discussion and Analysis or Plan of Operations contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

 

Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

 

Overview Organization and New Name

 

Organization – GreenBox POS (the “Company” or “PubCo”) was formerly known as ASAP Expo, Inc (“ASAP”), which was incorporated April 10, 2007 under the laws of the State of Nevada. On January 4, 2020, PrivCo and GreenBox POS, a Nevada corporation (“PubCo”) entered into the Agreement to memorialize the Verbal Agreement with PrivCo which was formed on August 10, 2017 (the seller). On April 12, 2018, pursuant to the Verbal Agreement, PubCo acquired PrivCo’s blockchain gateway and payment system business, point of sale system business, delivery business and kiosk business, and bank and merchant accounts, as well as all intellectual property related thereto (the “GreenBox Business”). As consideration for the GreenBox Business, on April 12, 2018, PubCo assumed PrivCo’s liabilities that had been incurred in the normal course of the GreenBox Business (collectively, the “GreenBox Acquisition”). For accounting and reporting purposes, PubCo deemed the GreenBox Acquisition a “Reverse Acquisition” with PrivCo designated the “accounting acquirer” and PubCo designated the “accounting acquiree.”

 

New Name On May 3, 2018, PubCo formally changed its name to GreenBox POS LLC, then subsequently changed its name to GreenBox POS on December 13, 2018.

 

Underwritten Public Offering and Nasdaq Listing

 

On February 16, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Kingswood, as representative of the underwriters listed therein (the “Underwriters”), pursuant to which the Company agreed to sell to the Underwriters in a firm commitment underwritten public offering (the “Offering”) an aggregate of 4,150,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a public offering price of $10.50 per share. In addition, the Underwriters were granted an over-allotment option (the “Over-allotment Option”) for a period of 45 days to purchase up to an additional 622,500 shares of Common Stock. The Common Stock began trading on the Nasdaq Capital Market under the symbol GBOX on February 17, 2021. The gross proceeds from the Offering were approximately $50.11 million as the representative of the Underwriters exercised in full its over-allotment option, before deducting underwriting discounts and commissions and other offering expenses. Pursuant to the Underwriting Agreement, the Company also granted Kingswood a right of first refusal, for a period of 12 months from the commencement of the Offering, to act as sole investment banker, sole book-runner, and/or sole placement agent, at Kingswood’s sole discretion, for each and every future public and private equity, equity-linked or debt offering, including all equity linked financings undertaken during such period by the Company, or any of the Company’s successors or subsidiaries.

 

Management Discussion and Analysis

 

This MD&A section pertaining to the period prior to Q1/2021 was prepared by the management of GreenBox POS (OTC: GRBX) (“GreenBox”, “GRBX”, the “Company”); the parts of this section pertaining to Q1/2021 and beyond were prepared by the management of GreenBox POS (NASDAQ: GBOX), in conjunction with the discussion the financial activity disclosed from the perspectives of on-going Q1/2021 and plans and projections for the remainder of 2021.

 

 

Q4/2020 signified the return of operations in full scale for the Company, with processing volumes in December of 2020 increasing to $84M. The trend continues into Q1/2021, with monthly average processing volumes increasing to over $100M. During Q4/2020 the Company completed two capital raises – in October and in December of 2020, primarily directed towards the acceleration of the development and deployment of the Company’s newest technology, code name Gen3 (Generation 3, following its initial technology release in January 2019 – Gen1, and in April 2020 - Gen2). Two of the Company’s top executives, Chairman Mr. Errez and CEO Mr. Nisan, personally participated in the December 2020 raise. Gen3 technology is material to the Company plans and business performance and is projected to impact the industry as a whole, in particular with the launch of the GreenBox Smart Contract Token technology, scheduled to be released in Q2/2021. Throughout 2020 the Company continued to increase its investment in research and development, improving its acquiring platform and enabling safer, faster and significantly more scalable services. These technology improvements allow for major new capabilities, including Real Time Payments (RTP), a very sought-after payment feature. This change also reduces the Company COGS, trend that continues to be observed in Gen3 increased business efficiencies. Gen3 is an improved platform is performing better than its predecessor platform and increase total volumes while increasing profit margins and operating sustainability is observed and expected to persist through 2021. The Company returned to ramping up commercial large-scale operations, on-boarding large number of clients, and increasing the Company operational bandwidth to accommodate the needs of its clients. Q1/2021 continued to execute on these management directives. Covid-19 pandemic appears to have little impact on the Company’s business, and the rate of increase in operational figures observed is expected to remain unimpacted for rest of 2021.

 

Management is focused on the following KPI (Key Performance Indices):

 

KPI

Description

Annual Transactional Processing Volume (ATPV)

The Company plans to process $1.65B in FY 2021, including previously increased processing volumes projections from $600M to $1.2B, and including the expected processing of the acquired ChargeSavvy portfolio, projected to add another $450M. The Company’s Book of Business exceeds the processing goals for the year.

Annual Gross Profit Margin (AGPM)

This index matches the Company goals and remains at levels supporting the Company’s financial projections.

Annual Gross Profit (AGP)

At the targeted Annual Transactional Processing Volume goal and targeted Annual Gross Profit Margin, projected Annual Gross Profit is $24-26M for FY2021.

Annual EBITDA

The Company objective is to stay with EBITDA at around 3% of Total Transactional Volume. At the targeted Annual Transactional Processing Volume goal, the Annual EBITDA equals $26M.

 

In order to process the targeted ATPV goal, $1.65B, the Company must be able to process over $100M/month in a consistent fashion, as business performance in Q1/2021 demonstrated. The Company estimates the target deployment timeframe for its Smart Contract Token technology in Q2/2021, further improving on volumes and efficiencies.

 

KPI

Description

Average Monthly Transaction Count (AMTC)

The Company projects an AMTC of around 500,000

New Clients Backlog (NCB)

The Company will continue to invest in on-boarding technologies in order to expedite the process and reduce backlog. There are five client statuses: application, KYC, on-boarding, integration, processing. Current backlog of clients at application stage is greater than 2,000. Our goal is to bring the NCB down to 200.

Client Attrition

Current attrition rates are under 5%. Company goal is to reduce it further and keep it under 3%.

 

Based on the above and the current traction in Q2/21, the Company is comfortable with its volumes, gross revenues and EBITDA projections. The Company owns all the IP rights for operations in its space: tokenizer, gateway, ledger manager and blockchain substrate. Other, supporting patents, such as fraud proofing, on-boarding accelerators, and an all new blockchain implementation, are pending.

 

With the visibility into the Company’s operation management has in Q2/2021 and the Company uplisting to NASDAQ in Feb/2021, the current plan is to grow the Company organically to the size and value afforded by the senior exchange.

 

The ATPV, Profitability and other major KPIs remain sensitive to regulatory changes and global and national economic trends. These will impact and influence the Company’s product line, its potential mergers and acquisitions targets, its joint ventures and the Company’s technology emphasis.

 

 

RESULTS OF OPERATIONS

 

Three Months Ended March 31, 2021 (Unaudited) Compared to Three Months Ended March 31, 2020 (Unaudited):

 

   

Three Months Ended March 31,

                 
   

2021

   

2020

   

Changes

 
           

% of

           

% of

                 
   

Amount

   

Revenue

   

Amount

   

Revenue

   

Amount

   

%

 
                                                 

Net revenue

  $ 4,749,441       100.0 %   $ 187,205       100.0 %   $ 4,562,236       2437.0 %

Cost of revenue

    1,593,771       33.6 %     247,305       132.1 %     1,346,466       544.5 %

Gross profit (loss)

    3,155,670       66.4 %     (60,100 )     -32.1 %     3,215,770       -5350.7 %
                                                 

Operating expenses:

                                               

Advertising and marketing

    24,725       0.5 %     11,885       6.3 %     12,840       108.0 %

Research and development

    653,381       13.8 %     286,548       153.1 %     366,833       128.0 %

Payroll and payroll taxes

    559,201       11.8 %     402,462       215.0 %     156,739       38.9 %

Professional fees

    457,752       9.6 %     212,298       113.4 %     245,454       115.6 %

General and administrative

    566,195       11.9 %     142,050       75.9 %     424,145       298.6 %

Stock compensation for employees

    797,613       16.8 %     4,130       2.2 %     793,483       19212.7 %

Stock compensation for services

    9,453,825       199.1 %     -       0.0 %     9,453,825    

 

 

Depreciation and amortization

    6,009       0.1 %     5,376       2.9 %     633       11.8 %

Total operating expenses

    12,518,701       263.6 %     1,064,749       568.8 %     11,453,952       1075.7 %
                                                 

Loss from operations

    (9,363,031 )     -197.1 %     (1,124,849 )     -600.9 %     (8,238,182 )     732.4 %
                                                 

Other Income (Expense):

                                               

Interest expense - debt discount

    (2,993,408 )     -63.0 %     (30,076 )     -16.1 %     (2,963,332 )     9852.8 %

Interest expense

    (594,258 )     -12.5 %     (288,590 )     -154.2 %     (305,668 )     0.0 %

Changes in fair value of derivative liability

    -       0.0 %     (3,822,385 )     -2041.8 %     3,822,385       -100.0 %

Merchant liability settlement

    (364,124 )     -7.7 %     -       0.0 %     (364,124 )     -100.0 %

Merchant fines and penalty income

    -       0.0 %     24,060       12.9 %     (24,060 )     -100.0 %

Other income or expense

    (14,611 )     -0.3 %     -       0.0 %     (14,611 )  

 

 

Total other income (expense)

    (3,966,401 )     -83.5 %     (4,116,991 )     -2199.2 %     150,590       -3.7 %
                                                 

Loss before provision for income taxes

    (13,329,432 )     -280.7 %     (5,241,840 )     -2800.1 %     (8,087,592 )     154.3 %
                                                 

Provision for income taxes

    -       0.0 %     -       0.0 %     -       0.0 %
                                                 

Net loss

  $ (13,329,432 )     -280.7 %   $ (5,241,840 )     -2800.1 %   $ (8,087,592 )     154.3 %

 

Net Revenue

 

Net revenue increased by $4,562,236, or 2437.0%, to $4,749,441 in the first quarter of fiscal 2021 from $187,205 in the first quarter last year. The change in net sales reflected the following:

 

 

Continued work on technology launch of new platforms, including Crypto, FOREX and transactional routing. Onboarding of existing merchants and new clients resumed in March\2020, with volume of revenues in April exceeding the first three months combined.

 

 

Covid-19 impact on certain client business verticals and shift between focus categories.

 

 

Higher volume transaction processing.

 

 

Cost of Revenue

 

Cost of revenue increased by $1,346,466, or 544.5%, to $1,593,771 in the first quarter of fiscal 2021 from $247,305 in the first quarter last year.  Payment processing consists of various processing fees paid to Gateways, as well as commission payments to the Independent Sales Organizations (“ISO”) responsible for establishing and maintaining merchant relationships, from which the processing transactions ensue. Most orders are delivered directly to the customer, without any handling, storage or processing by us. Cost of revenues decreased due to the following:

 

 

Increased automation by installation of two new platforms, FOREX and Crypto, that are much more streamlined and less demand for manual work.

 

 

Installation and integration of an advance transactional routing technology.

 

 

Revocations of the license agreement with MTrac and moving operations inhouse for better efficiency and higher margins.

 

 

Termination of service to problematic and low revenue producing clients.

 

 

Onboarding of higher profitability clients.

 

Operating Expenses

 

Operating expenses increased by $11,453,952, or 1075.7%, to $12,518,701 in the first quarter of fiscal 2021 from $1,064,749 in the first quarter last year. The increase was due to higher general administrative expenses and the following:

 

 

Increased R&D investment towards the completion and launch of the new technologies (Crypto and FOREX platforms, and advanced transactional routing technology).

 

 

Settlement of legal disputes and associated payments.

 

 

Stock compensation expense for employees and services

 

 

Professional fees related to legal and audits.

 

Non-Operating Expenses

 

We incurred interest expense related to various debt in the amount of $2,993,408 and $ for the three months ended March 31, 2021 and 2020, respectively. We incurred a loss from changes in fair value of derivative liability of $3,822,385 for the three months ended March 31, 2020 and none for three months ended March 31, 2021.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Our principal liquidity requirements are for working capital and capital expenditures. We fund our liquidity requirements primarily through cash on hand, cash flows from operations and borrowings from through debt. We ended March 31, 2021 with $35,696,589 of cash, cash equivalents, and restricted cash compared with $1,832,735 as of December 31, 2020.

 

The following table summarizes our cash flows from operating, investing and financing activities:

 

   

Three Months Ended March 31,

 
   

2021

   

2020

 
                 

Net cash provided by (used in) operating activities

  $ (11,258,779 )   $ 267,844  

Net cash provided by (used in) investing activities

    (11,108

)

    (12,564

)

Net cash provided by (used in) financing activities

    45,133,741       (711,911

)

                 

Net increase (decrease) in cash, cash equivalents, and restricted cash

  $ 33,863,854     $ (456,631

)

 

 

Operating Activities For the three months ended March 31, 2021 and 2020, net cash provided by (used in) operating activities was $(11,258,779) and $267,844, respectively. The cash provided by operating activities was primarily due to timing of settlement of assets and liabilities including stock compensation expenses.

 

Investing Activities – Cash used in investing activities primarily consisted of purchases of property and equipment.

 

Financing Activities – Net cash used in financing activities primarily consisted of payments of convertible debt and short-term notes payable debt for the three months ended March 31, 2020. Net cash provided by financing activities primarily consisted of proceeds from the Offering of $45,805,491 for the three months ended March 31, 2021.

 

CRITICAL ACCOUNTING POLICIES

 

Our critical accounting estimates are included in our significant accounting policies as described in Note 2 of the consolidated financial statements of this Form 10-Q. Those consolidated financial statements were prepared in accordance with GAAP.  Critical accounting estimates are those that we believe are most important to the portrayal of our financial condition and results of operations. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense. Our estimates are evaluated on an ongoing basis and drawn from historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. Actual results may differ from our estimates.  Management believes that the following accounting estimates reflect the more significant judgments and estimates we use in preparing our consolidated financial statements.

 

Revenue Recognition

 

Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers outlines the basic criteria that must be met to recognize revenue and provide guidance for presentation of revenue and for disclosure related to revenue recognition policies in financial statements filed with the Securities and Exchange Commission. Management believes the Company’s revenue recognition policies conform to ASC 606.

 

The Company recognizes revenue when 1) it is realized or realizable and earned, 2) there is persuasive evidence of an arrangement, 3) delivery and performance has occurred, 4) there is a fixed or determinable sales price, and 5) collection is reasonably assured.

 

The Company generates revenue from payment processing services, licensing fees and equipment sales.

 

 

Payment processing revenue is based on a percentage of each transaction’s value and/or upon fixed amounts specified per each transaction or service and is recognized as such transactions or services are performed.

 

 

Licensing revenue is paid in advance and is recorded as unearned income, which is amortized monthly over the period of the licensing agreement.

 

 

Equipment revenue is generated from the sale of POS products, which is recognized when goods are shipped.

 

 

ITEM 3. CONTROLS AND PROCEDURES

 

Our management, with the participation of our Chief Executive Officer and Executive Vice President, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

Based on management's evaluation, our Chief Executive Officer and Executive Vice President concluded that, as a result of the material weaknesses described below, as of March 31, 2021, our disclosure controls and procedures are not designed at a reasonable assurance level and are ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Executive Vice President, as appropriate, to allow timely decisions regarding required disclosure. The material weaknesses, which relate to internal control over financial reporting, that were identified are: 

 

 

a)

We did not have enough personnel in our accounting and financial reporting functions. As a result, we were not able to achieve adequate segregation of duties and were not able to provide for adequate reviewing of the financial statements. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis.

 

Management believes that the hiring of additional personnel who have the technical expertise and knowledge with the non-routine or technical issues we have encountered in the past will result in both proper recording of these transactions and a much more knowledgeable finance department as a whole. Due to the fact that our accounting staff consists of a Principal Financial Officer, a bookkeeper and external accounting consultants, additional personnel will also ensure the proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support us if personnel turnover issues within the department occur. We believe this will eliminate or greatly decrease any control and procedure issues we may encounter in the future.

 

We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

Management currently is not aware of any legal matters or pending litigation that would have a significant effect on the Company’s financial statements as of March 31, 2021.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

 

 

3.1

Certificate of Change Pursuant to NRS 78.209, filed with the Nevada Secretary of State on February 16, 2021 (Incorporated by Reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 17, 2021.)

10.1+

Form of Board of Directors Agreement entered into on February 16, 2021, by and between the Company and each of Ms. Baer and Messrs. Caragol and Laniado (Incorporated by Reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 19, 2021).

31.1

Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).

31.2

Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).

32.1*

Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*

Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

 

+ Management compensatory plan or contract.

 

* In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

GREENBOX POS

(Registrant)

 
       

Date: May 13, 2021

By:

/s/ Fredi Nisan

 
   

Fredi Nisan

Chief Executive Officer (Principal Executive Officer)

       

 

       

Date: May 13, 2021

By:

/s/ Benjamin Chung

 
   

Benjamin Chung

Chief Financial Officer (Principal Financial Officer and

Principal Accounting Office)

 

 

 

 

 

26

 

Exhibit 31.1

 

Certification of Principal Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act

 

I, Fredi Nisan, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2021 of GreenBox POS;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

By:

/s/ Fredi Nisan

 

Fredi Nisan

 

Chief Executive Officer

(Principal Executive Officer)

 

Date: May 13, 2021

 

 

 

 

 

Exhibit 31.2

 

Certification of Principal Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act

 

I, Benjamin Chung, certify that:

 

 

1.

I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2021 of GreenBox POS;

   

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

By:

/s/ Benjamin Chung

 
Benjamin Chung
 

Chief Financial Officer

(Principal Financial Officer)

 

Date: May 13, 2021

 

 

 

Exhibit 32.1

 

Certification of Principal Executive Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act

 

I, Fredi Nisan, the Principal Executive Officer of GreenBox POS (the “Company”), hereby certify that, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, to my knowledge:

 

1.

The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2021 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

   

By:

/s/ Fredi Nisan

Name:

Fredi Nisan

Title:

Chief Executive Officer

(Principal Executive Officer)

Date: May 13, 2021

 

 

 

 

 

 

 

Exhibit 32.2

 

Certification of Principal Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act

 

I, Benjamin Chung, the Principal Financial Officer of GreenBox POS (the “Company”), hereby certify that, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, to my knowledge:

 

1.

The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2021 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

   

By:

/s/ Benjamin Chung

Name:

Benjamin Chung

Title:

Chief Financial Officer

(Principal Financial Officer)

Date: May 13, 2021