GreenBox POS (Form: 10-Q, Received: 11/15/2021 17:18:37)

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 September 30, 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)

(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 November 9, 2021 was 43,179,241 Shares of Common Stock (One Class)

TABLE OF CONTENTS

		Page
PART I Consolidated Financial Information

Item 1.	Unaudited Condensed Consolidated Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets	3
	Unaudited Condensed Consolidated Statements of Operations	4
	Unaudited Condensed Consolidated Statements of Stockholders’ Deficit	5
	Unaudited Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis or Plan of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures	28

PART II Other Information

Item 1.	Legal Proceedings	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30
Signatures		31

PART I - FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

GREENBOX POS

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	September 30,			December 31,
	2021			2020

ASSETS

Current Assets:
Cash and cash equivalents	$	29,707,254		$	-
Restricted cash		-			1,832,735
Accounts receivable, net of allowance for bad debt of $288,764 and $0, respectively		229,346			10,000
Accounts receivable from fines and penalties from merchants, net of allowance for bad debt of $6,665,031		2,789,231			2,789,230
Inventory		177,779			-
Cash due from gateways, net		19,418,353			7,303,949
Prepaid and other current assets		260,963			70,130
Total current assets		52,582,926			12,006,044

Non-current Assets:
Property and equipment, net		1,630,379			57,264
Other assets		197,954			81,636
Goodwill		6,049,487			-
Intangible Assets, net		7,992,432			-
Operating lease right-of-use assets, net		668,865			117,795
Total non-current assets		16,539,117			256,695

Total assets	$	69,122,043		$	12,262,739

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable	$	801,598		$	210,094
Other current liabilities		3,583,956			68,138
Payment processing liabilities, net		6,634,457			10,199,956
Note payable, payroll protection plan loan		272,713			272,713
Short-term notes payable, net of debt discount of…		3,448			-
Convertible debt, net of debt discount of $0 and $2,993,408, respectively		-			856,592
Current portion of operating lease liabilities		375,488			120,110

Total current liabilities		11,671,660			11,727,603
Long term liabilities		645,131			149,900
Operating lease liabilities, less current portion		294,490			-

Total liabilities		12,611,281			11,877,503

Commitments and contingencies

Stockholders' Equity:
Common stock, par value $0.001, 82,500,000 shares authorized, shares issued and outstanding of 42,865,022 and 30,275,023, respectively.		42,865			30,711
Additional paid-in capital		90,290,826			12,079,074
Accumulated deficit		(31,143,296	)		(11,724,549	)
Less: Treasury stock, at cost; 300,000 and 0 shares, respectively		(2,679,633	)		-
Total stockholders' equity		56,510,762			385,236

Total liabilities and stockholder's equity	$	69,122,043		$	12,262,739

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

Table of Contents

GREENBOX POS

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020

Revenue	$	8,045,469		$	3,056,271		$	19,174,089		$	5,536,335
Cost of revenue		2,420,748			1,845,295			5,337,999			3,504,283

Gross profit		5,624,721			1,210,976			13,836,090			2,032,052

Operating expenses:
Advertising and marketing		37,179			59,099			84,509			86,368
Research and development		1,043,385			243,923			2,504,976			798,157
General and administrative		784,158			366,734			1,648,383			613,156
Payroll and payroll taxes		1,250,451			436,216			2,871,581			1,279,174
Professional fees		789,772			344,641			2,114,996			852,234
Stock compensation for employees		3,777,572			-			5,867,072			-
Stock compensation for services		238,238			-			10,418,996			-
Depreciation and amortization		457,633			5,764			477,886			16,856
Total operating expenses		8,378,388			1,456,377			25,988,399			3,645,945

Income (Loss) from operations		(2,753,667	)		(245,401	)		(12,152,309	)		(1,613,893	)

Other income (expense):
Interest expense		(4,736	)		(48,931	)		(598,994	)		(372,553	)
Interest expense - debt discount		-			(83,500	)		(2,993,408	)		(121,918	)
Derivative expense		-			(925,576	)		-			(925,576	)
Changes in fair value of derivative liability		-			819,366			-			(383,769	)
Gain from extinguishment of convertible debt		-			-			-			2,630,795
Merchant liability settlement		-			-			(364,124	)		-
Other income or expense		(37,497	)		(5,768	)		(56,057	)		(2,434	)
Total other expense, net		(42,233	)		(244,409	)		(4,012,583	)		824,545

Income (Loss) before provision for income taxes		(2,795,900	)		(489,810	)		(16,164,892	)		(789,348	)

Income tax provision		3,253,855			-			3,253,855			-

Net income (loss)	$	(6,049,755	)	$	(489,810	)	$	(19,418,747	)	$	(789,348	)


Earnings (loss) per share:
Basic and diluted	$	(0.14	)	$	(0.02	)	$	(0.49	)	$	(0.03	)

Weighted average number of common shares outstanding:
Basic and diluted		42,065,842			29,488,393			39,949,732			29,488,393

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

Table of Contents

GREENBOX POS

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

	Common Stock										Treasury Stock			Additional Paid-In			Accumulated			Total Stockholders' Equity
	Shares			Amount			To be Issued		Amount		at Cost			Capital			Deficit			(Deficit)

Balance at June 30, 2021		42,236,219		$	42,327			-	$	-	$	(933,343	)	$	73,916,018		$	(25,093,541	)	$	47,931,461

Exercise of warrants - common stocks issued from issuable		106,667			107			-		-		-			211,094			-		$	211,201

Issuances of stock for services		251,998			252			-		-		-			164,660			-		$	164,912

Issuances of stock for stock option exercises		13,217			13			-		-		-			(13	)		-		$	-

Issuances of stock to board members for services		8,935			9			-		-		-			82,495			-		$	82,504

Issuances of common stock for acquisition of ChargeSavvy		1,000,000			1,000			-		-		-			12,139,000			-		$	12,140,000

Stock option expense		-			-			-		-		-			3,777,572			-		$	3,777,572

Correction of number of shares issued and outstanding due to incorrect common stock split		(542,014	)		(843	)		-		-		-			-			-		$	(843	)

Treasury Stock		(210,000	)		-			-		-		(1,746,290	)		-			-		$	(1,746,290	)

Net loss		-			-			-		-		-			-			(6,049,755	)	$	(6,049,755	)

Balance at September 30, 2021		42,865,022		$	42,865			-	$	-	$	(2,679,633	)	$	90,290,826		$	(31,143,296	)	$	56,510,762

	Common Stock										Treasury Stock		Additional Paid-In			Accumulated			Total Stockholders' Equity
	Shares			Amount			To be Issued		Amount		at Cost		Capital			Deficit			(Deficit)
Balance at June 30, 2020		30,191,690		$	30,192			-	$	-	$	-	$	1,547,318		$	(7,016,707	)	$	(5,439,197	)

Common stock issued for stock options exercised		83,333			83			-		-		-		32,417			-			32,500

Stock compensation expense		-			-			-		-		-		162,633			-			162,633

Common stock repurchased from common stock issued		(1,000,000	)		(1,000	)		-		-		-		(809,000	)		-			(810,000	)

Common stock issued upon conversion of note payable		1,000,000			1,000			-		-		-		809,000			-			810,000

Net loss		-			-			-		-		-		-			(489,810	)		(489,810	)

Balance at September 30, 2020		30,275,023		$	30,275			-	$	-	$	-	$	1,742,368		$	(7,506,517	)	$	(5,733,874	)

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

Table of Contents

GREENBOX POS

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

	Common Stock										Treasury Stock			Additional Paid-In			Accumulated			Total Stockholders' Equity
	Shares			Amount			To be Issued		Amount		at cost			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		1,884,445			1,884			-		-		-			3,729,316			-			3,731,200

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		709,037			709			-		-		-			10,427,127			-			10,427,836

Common stock issued for interest for convertible debt		96,664			97			-		-		-			594,258			-			594,355

Common stock issued for non-cash stock option exercise		70,112			70			-		-		-			(70	)		-			-

Common stock issued for stock options exercised		18,717			19			-		-		-			2,231			-			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

Issuance of common stock		1,171,849			1,172			-		-		-			(1,172	)		-			-

Issuances of common stock from previous unregistered shares		703,276			703			-		-		-			(703	)		-			-

Stock compensation expense		-			-			-		-		-			5,867,073			-			5,867,073

Payment for previous common stock repurchased under treasury method		-			-			-		-		-			(4,194,000	)		-			(4,194,000	)

Purchases of treasury stock		(300,000	)		(300	)		-		-		(2,679,633	)		-			-			(2,679,933	)

Issuances of common stock for acquisition of ChargeSavvy		1,000,000			1,000			-		-					12,139,000			-			12,140,000

Net loss		-			-			-		-		-			-			(19,418,747	)		(19,418,747	)

Balance at September 30, 2021		42,865,022			42,865			-		-		(2,679,633	)		90,290,826			(31,143,296	)		56,510,762

	Common Stock												Treasury Stock		Additional Paid-In			Accumulated			Total Stockholders' Equity
	Shares			Amount			To be Issued			Amount			at cost		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 from conversion of convertible debt		1,854,701			1,855			-			-			-		213,695			-			215,550

Common stocks issued for professional fees		9,833			10			-			-			-		4,120			-			4,130

Common stocks - issued donation		16,667			17			-			-			-		7,983			-			8,000

Common stock issued for stock options exercised		83,333			83			-			-			-		32,417			-			32,500

Stock compensation expense		-			-			-			-			-		162,633			-			162,633

Common stock repurchased from common stock issued		(1,000,000	)		(1,000	)		-			-			-		(809,000	)		-			(810,000	)

Common stock issued upon conversion of note payable		1,000,000			1,000			-			-			-		809,000			-			810,000

Net loss		-			-			-			-			-		-			(789,348	)		(789,348	)

Balance at September 30, 2020		30,275,023		$	30,275			-		$	-		$	-	$	1,742,368		$	(7,506,517	)	$	(5,733,874	)

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

Table of Contents

GREENBOX POS

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended September 30,
	2021			2020

Cash flows from operating activities:
Net loss	$	(19,418,747	)	$	(789,348	)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation expense		477,886			16,856
Noncash lease expense		(1,202	)		(966	)
Stock compensation expense		5,867,072			162,633
Common stocks issued for professional fees		10,418,996			4,130
Common stocks - issued donation		-			8,000
Proceeds from exercise of stock options		-			32,500
Stock compensation issued for interest		598,994			-
Interest expense - debt discount		2,993,408			121,918
Derivative expense		-			925,576
Gain (loss) on extinguishment of debt		-			(2,630,795	)
Changes in fair value of derivative liability		-			383,769
Changes in assets and liabilities:
Other receivable, net		(154,556	)		47,714
Inventory		(53,278	)		-
Prepaid and other current assets		(184,172	)		(34,878	)
Cash due from gateways, net		(12,114,404	)		3,124,085
Other assets		679,558			(70,000	)
Accounts payable		370,487			220,465
Other current liabilities		3,384,258			32,107
Accrued interest		-			(286,461	)
Payment processing liabilities, net		(6,898,339	)		(1,397,810	)
Net cash provided by (used in) operating activities		(14,034,039	)		(130,505	)

Cash flows from investing activities:
Purchases of property and equipment		(97,818	)		(12,332	)
Acquisition of Northeast		(2,500,000	)		-
Net cash used in investing activities		(2,597,818	)		(12,332	)

Cash flows from financing activities:
Treasury stock repurchase		(2,679,633	)		-
Proceeds from stock option exercises		2,250			-
Borrowings from convertible debt		-			178,000
Repayments on convertible debt		-			(670,000	)
Borrowings from notes payable		350,000			1,954,480
Principal payments on notes payable		-			(1,147,919	)
Proceeds from exercise of warrant		3,731,200			-
Repurchase of common stock from stockholder		(4,194,000	)		(810,000	)
Proceeds from issuance of common stock		45,805,491			-
Net cash provided by (used in) financing activities		43,015,308			(495,439	)

Cash acquired from acquisition of Northeast and ChargeSavvy		1,491,068			-

Net increase in cash, cash equivalents, and restricted cash		27,874,519			(638,276	)

Cash, cash equivalents, and restricted cash – beginning of period		1,832,735			763,110

Cash, cash equivalents, and restricted cash – end of period	$	29,707,254		$	124,834

Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	4,639		$	575,014
Income taxes	$	800		$	800


Non-cash financing and investing activities:
Convertible debt conversion to common stock	$	3,850,000		$	137,500
Common stock issued for acquisition of ChargeSavvy	$	12,140,000		$	-
Interest accrual from convertible debt converted to common stock	$	594,355		$	78,050
Short-term notes payable converted to common stock	$	-		$	810,000

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

Table of Contents

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”), and was incorporated in the state of Nevada on April 10, 2007. 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 (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.”

On May 21, 2021, the Company acquired all of the outstanding stock of Northeast Merchant Systems, Inc. (“Northeast”) in a transaction treated as a business combination. Northeast is a merchant services company providing merchant credit card processing through their own Bank Identification Number (BIN) with the acquiring bank Merrick. This involves inside operations for new merchants that include sales assistance and applications processing, underwriting, and onboarding; inside operations for existing merchants include risk monitoring and customer service. Outside operations include: equipment service or replacement; sales calls and applications, site inspections and identity verification; security verification; and on-site customer service and technical support.

On July 13, 2021 (the “Closing Date”), GreenBox POS (the “Company”) entered into and closed on a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Charge Savvy LLC, an Illinois limited liability company (“Charge Savvy”), and Charge Savvy’s three members (collectively, the “Sellers”). As a result of the Purchase Agreement, the Company purchased all of Charge Savvy’s issued and outstanding membership interests from the Sellers and Charge Savvy became a wholly owned subsidiary of the Company. Although the Purchase Agreement is dated July 9th, it was entered into and closed on July 13th.The purchase price under the Purchase Agreement for the all-stock transaction consisted of 1,000,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) being issued and delivered to Sellers in proportion to the Sellers’ share of their membership interests in Charge Savvy. The share price at issuance was $12.14. Charge Savvy is a global Fintech company that specializes on developing software and providing payment processing and point of sale services to the merchant services industry. Charge Savvy also owns an approximately 61,000 square foot office building located in Chicago, Illinois where it is headquartered.

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 interim consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. All intercompany transactions and balances have been eliminated in the accompanying consolidated financial statements.

Table of Contents

1.	DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (continued)

Unaudited Interim Financial Information

Certain information and footnote disclosures normally included in the Company’s annual audited financial statements and accompanying notes have been condensed or omitted in these accompanying interim consolidated financial statements and footnotes. Accordingly, the accompanying interim consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2020.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The results of operations presented in this quarterly report on Form 10-Q are not necessarily indicative of the results of operations that may be expected for any future periods. In the opinion of management, these unaudited consolidated financial statements include all adjustments and accruals, consisting only of normal, recurring adjustments that are necessary for a fair statement of the results of all interim periods reported herein.

COVID-19 considerations

In December 2019, a novel strain of coronavirus (“COVID-19”) was identified and the disease has since spread across the world. In March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, and created significant volatility and disruption in the financial and capital markets. The full extent to which the COVID-19 outbreak will impact the Company’s business, results of operations, financial condition and cash flows will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning COVID-19 and the actions to contain or treat its impact and the economic impact and the economic impact on local, regional, national and international markets. As the COVID-19 pandemic continues, the Company’s results of operations, financial condition and cash flows may be materially adversely affected, particularly if the pandemic persists for a significant period of time.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. These provisions are not expected to have a material effect on the Company’s unaudited consolidated 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 materially differ from those estimates.

Cash Due from Gateways and Payment Processing Liabilities

The Company’s primary source of revenues is 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 arrears strategy. While reserve and payment in arrears restrictions are in effect for a merchant payout, the Company records gateway debt against these amounts until released.

Therefore, the total Cash due from gateways on the unaudited consolidated balance sheets represents the amount owed to the Company for processing.

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2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

Revenue Recognition

Revenue is recognized upon transfer of control of promised goods or services to the Company’s customers or when the Company satisfies any performance obligations under contract. The amount of revenue reflects the consideration the Company expects to be entitled to in exchange for the respective goods or services provided. Further, under Accounting Standards Codification 606, “Revenue from Contracts with Customers”, (“ASC 606”), contract assets or contract liabilities that arise from past performance but require a further performance before the obligation can be fully satisfied must be identified and recorded on the balance sheet until respective settlements have been met.

The Company’s primary revenue source is generated from payment processing services. Payment processing services 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, at a point in time.

Fair Value of Financial Instruments

The Company assesses the fair value of financial instruments based on the provisions of ASC 820, Fair Value Measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability between market participants on the measurement date. ASC 820 also establishes a hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The standard describes three levels of inputs that may be used to measure fair value:

Level 1- Quoted prices in active markets for identical assets or liabilities.

Level 2- Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3- Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table describes the valuation techniques used to calculate the fair value for assets in Level 3. The significant unobservable input used in the fair value measurement of the Company’s identifiable intangible assets is discount rate. The change in this input could result in a change of fair value measurement:

	Fair Value at May 21, 2021		Valuation Technique	Unobservable Input	Range

Customer Relationship	$	276,583	Multiple-period excess earnings method	Discount rate		15.90	%

	Fair Value at July 13, 2021		Valuation Technique	Unobservable Input	Range

Customer Relationship	$	5,543,612	Multiple-period excess earnings method	Discount rate		55.70	%
Business Technology/IP	$	2,611,088	Royalty relief method	Discount rate		53.70	%

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2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Goodwill and Other Intangible Assets

The Company accounts for acquisitions of businesses in accordance with the acquisition method. Goodwill represents the excess of the purchase price of acquired businesses over the fair value of the identifiable assets acquired and liabilities assumed. Acquisition costs are expensed as incurred.

Goodwill and other intangible assets acquired in a business combination determined to have an indefinite useful life are generally not amortized, but instead are tested for impairment at least annually and more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value.

Other intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever management believes that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. To the extent that the carrying value is determined to be unrecoverable, an impairment loss is recognized through a charge to expense. As of December 31, 2020, the Company does not believe that impairment indicators are present, and accordingly, based on this assessment, no further impairment analysis was performed.

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 more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. As of September 30, 2021, we have no material unrecognized tax benefits, and we expect no material unrecognized tax benefits for the next 12 months.

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 and nine months ended September 30, 2021 and 2020, as there are no potential shares outstanding other than options 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 and nine months ended September 30, 2020.

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2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

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.	ACQUISITIONS

On May 21, 2021, the Company acquired all the outstanding stock of Northeast Merchant Systems, Inc. (“Northeast”). Northeast is a merchant services company providing merchant credit card processing through their own Bank Identification Number (BIN) with the acquiring bank Merrick. This involves inside operations for new merchants that include sales assistance and applications processing, underwriting, and onboarding; inside operations for existing merchants include risk monitoring and customer service. Outside operations include: equipment service or replacement; sales calls and applications; site inspections and identity verification; security verification; and on-site customer service and technical support.

Preliminary Purchase Price Allocation

The acquisition qualified as a business combination and was accounted for using the acquisition method. Accordingly, the total fair value of consideration transferred of $2,500,000 for the acquisition was allocated to the net tangible, intangible and liabilities acquired using fair value estimates at the date of acquisition. The excess of the purchase price over the fair value of the net tangible and intangible assets acquired was allocated to goodwill, which is taxable.

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3.	ACQUISITIONS (continued)

The following summarizes the estimated fair values of the net assets acquired:

Tangible assets (liabilities):
Net assets and liabilities	$	(70,057	)


Intangible assets:
Customer relationships		276,583
Goodwill		2,293,474
		2,570,057

Total net assets acquired	$	2,500,000

The acquisition was funded through cash on hand, and there were no costs associated with the acquisition. The agreement also provides for a future additional contingent purchase price payment (earn-out) of $500,000, which is derived using the performance of Northeast and is based on a predetermined formula. The Company believes that is unlikely that the targets will be achieved and, accordingly, has not adjusted the purchase price or provided an accrual for this contingency.

Preliminary Purchase Price Allocation

The acquisition qualified as a business combination and was accounted for using the acquisition method. Accordingly, the total fair value of consideration transferred of $12,140,000 for the acquisition was allocated to the net tangible, intangible and liabilities acquired using fair value estimates at the date of acquisition. The excess of the purchase price over the fair value of the net tangible and intangible assets acquired was allocated to goodwill, which is taxable.

The following summarizes the estimated fair values of the net assets acquired:

Tangible assets (liabilities):
Net assets and liabilities	$	(375,681	)
Land/Building		604,968
		229,287

Intangible assets:
Customer relationships		5,543,612
Business Technology/IP		2,611,088
Goodwill		3,756,013
		11,910,713

Total net assets acquired	$	12,140,000

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4.	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 due from gateways, net – a Current Asset. Of these funds, we record the sum balance due to Merchants and ISOs as Payment processing liabilities, net – a Current Liability.

5.	GOODWILL

As of September 30, 2021 goodwill and intangible assets consists of the following:

	September 30, 2021
Acquisition of Northeast	$	2,293,474
Acquisition of ChargeSavvy	$	3,756, 013
Total	$	6,049,487

6.	INTANGIBLE ASSETS

As of September 30, 2021 goodwill and intangible assets consists of the following:

	September 30, 2021
	Amortization Period	Cost		Accumulated Amortization			Net
Customer relationships	5 years	$	5,820,195	$	(308,297	)	$	5,511,898
Business Technology/IP	5 years	$	2,611,088	$	(130,554	)	$	2,480,534

Total goodwill and intangibles							$	7,992,432

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6.	INTANGIBLE ASSETS (continued)

Intangible assets with finite lives are amortized over the estimated periods benefitted on a straight- line basis. Amortization expense on intangible assets with finite lives for the period from May 21, 2021 (the acquisition date of Northeast) to September 30, 2021 was $846,586 and is included in depreciation and amortization expense in the unaudited condensed consolidated statement of operations and comprehensive loss. Amortization expense related to intangible assets for each of the next five fiscal years and thereafter is expected as follows:

Years Ending
December 31,
2021	$	421,564
2022		1,686,257
2023		1,686,257
2024		1,686,257
2025		1,686,257
Thereafter		825,840
	$	7,992,432

7.	CONVERTIBLE NOTES PAYABLE

Convertible notes payable consisted of the following:

	September 30, 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.

8.	PAYROLL PROTECTION PROGRAM LOAN

On April 29, 2020, the Company obtained a $272,713, 2-year loan from a regional bank (the “Lender”) pursuant to the U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) under Title 1 of the CARES Act. The loan bears interest of 1.00% per annum and no payments were due for the first six months. The Company certified in the Application that 100% of the loaned funds were utilized during the 24-week covered period commencing April 29, 2020 to pay for qualified payroll and payroll related costs, and as such, requested that the entire principal balance be forgiven. The Company expects the entire PPP loan to be forgiven and the Company is awaiting SBA approval to extinguish the loan.

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9.	LONG-TERM DEBT

On June 9, 2020, the Company entered into a 30 year loan agreement with the SBA under the CARES Act in the amount of $149,900. The loan bears interest at 3.75% per annum and requires monthly principal and interest payments of $731 beginning June 9, 2021. Both the Chief Executive Officer and Chairman of the Company signed personal guarantees under this loan.

On May 8, 2020, Charge Savvy executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the TNB’s business. As of December 31, 2020, the loan payable, Emergency Injury Disaster Loan noted above is not in default.

Pursuant to that certain Loan Authorization and Agreement (the “SBA Loan Agreement”), Charge Savvy borrowed an aggregate principal amount of the EIDL Loan of $150,000, with proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75% per annum and will accrue only on funds actually advanced from the date of each advance. Installment payments, including principal and interest, are due monthly beginning May 8, 2021 (twelve months from the date of the SBA Loan) in the amount of $731. The balance of principal and interest is payable thirty years from the date of the SBA Loan. In connection therewith, the Company also received a $10,000 grant, which does not have to be repaid. During the year ended December 31, 2020, $10,000 was recorded in Economy injury disaster loan (EIDL) grant income in the Statements of Operations. On Aug 24, 2021, Charge Savvy was granted an increase in loan principal in the amount of $350,000 on identical terms.

In connection therewith, Charge Savvy executed (i) loans for the benefit of the SBA (the “SBA Loan”), which contains customary events of default and (ii) Security Agreements, granting the SBA a security interest in all tangible and intangible personal property of Charge Savvy, which also contains customary events of default (the “SBA Security Agreement”).

10.

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:

	September 30, 2021			December 31, 2020
Risk-free interest rate		0.29	%		0.29	%
Expected term	5 years			5 years
Expected volatility		396.64	%		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 stock compensation expense for employees of $5,867,072 and $0 for the nine months ended September 30, 2021 and 2020, respectively, and $3,777,572 and $0 for the three months ended September 30, 2021 and 2020, respectively. The Company recorded stock compensation expense for services of $10,418,996 and $4,130 for the nine months ended September 30, 2021 and 2020, respectively, and $238,238 and $0 for the three months ended September 30, 2021 and 2020, respectively.

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10.

STOCK OPTION AWARDS (continued)

A summary of the status of our stock options is presented below as of September 30, 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		0.001	$	3,365,527

Granted		232,286			10.59
Exercised		(146,278	)		0.46
Forfeited or expired		-			2.50

Outstanding at September 30, 2021		600,615			6.72		0.014		6,146,166

Exercisable as of September 30, 2021		491,711			4.91		-		5,969,376
Vested and expected to Vest as of September 30, 2021		593,250			6.31		-		7,202,059

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $12.14 as of September 30, 2021, which would have been received by the option holders had all option holders exercised their options as of that date. As of September 30, 2021, there was unrecognized compensation cost related to non-vested stock options granted in the amount of $2,128,990.

11.

STOCK REPURCHASE PROGRAM

On May 13, 2021, GreenBox POS (the “Company”) announced that the Company’s Board of Directors approved a share repurchase program (the “Share Repurchase Program”), providing for the repurchase of a portion of the Company’s outstanding common stock. From May 13, 2021 to September 30, 2021, the Company has repurchased a total of 300,000 shares at an aggregate cost of $2,679,633.

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12.

RELATED PARTY TRANSACTIONS

The Company had the following related party transactions:

●

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 (the “Haller Network”). The Haller Network is an amalgamation of the collective networks of Haller and two companies owned or majority-owned by Haller, which are Sky Financial & Intelligence, LLC (“Sky”), and Charge Savvy, 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 with whom the Company does business through their respective business relationship with MTrac.

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

■

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”).

■

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%). As a result of the Purchase Agreement, the Company purchased all of Charge Savvy’s issued and outstanding membership interests and Charge Savvy became a wholly owned subsidiary of the Company. The purchase price under the Purchase Agreement for the all-stock transaction consisted of 1,000,000 shares of Common Stock being issued and delivered to the Sellers in proportion to the Sellers’ share of their membership interests in Charge Savvy. The share price at issuance was $12.14.

The Company did not pay any commissions to the related parties mentioned above for the three and nine months ended September 30, 2021 and 2020.

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13.

COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company has the following legal proceedings:

	●	*Corporate Performance Consulting, LLC (CPC) v. GreenBox POS* – On April 7, 2021 CPC filed a complaint against GreenBox in San Diego Superior Court. Plaintiff CPC alleges breach of contract, breach of implied covenant of good faith and fair dealing, goods and services rendered, negligent misrepresentation, violation of CA Business and Professions Code Section 17200, and unjust enrichment. The crux of CPC’s claim is that GreenBox failed to compensate for certain consulting and corporate advisory services. GreenBox believes the claims are without merit and intends to defend itself vigorously. On June 17, 2021 GreenBox filed a Cross-Complaint for breach of contract, breach of implied covenant of good faith and fair dealing, negligent misrepresentation, unjust enrichment, and rescission. The parties are now in the discovery phase. The Case Management Conference is scheduled for April 29, 2022.

	●	*GreenBox POS v. A.M.P of Florida, Inc. (AMP)* – On March 9, 2021, GreenBox POS (mistakenly identified as “GreenBox POS, LLC”) filed suit against AMP in U.S.D.C for the middle district of Florida alleging breach of oral contract, conversion, and civil theft. GreenBox filed suit in order to recover processed funds unlawfully withheld by AMP. The parties are in the discovery phase and discussing settlement. Although it is premature to provide a predicted outcome at this time, GreenBox is confident that this matter will be resolved well in advance of the 2022 trial date.

	●	*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 June 30, 2020, both parties have abandoned the matter and no further action was required by either party.

	●	*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. In that related action, Plaintiffs MTrac have objected to participating in the Arbitration as Plaintiffs have never consented to or executed any contracts with TGPF whereby Plaintiffs agreed to arbitration.

Operating Leases

The Company entered into the following operating facility leases:

●

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.

●

Camino Del Rio – On and effective April 2021, the Company entered into an operating facility lease for its corporate office located in San Diego with monthly lease payments of $33,135 per month.

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 Company has recorded operating lease right of use assets and operating lease liabilities of $668,865 and $669,978 respectively, as of September 30, 2021. The difference between the operating lease ROU asset and operating lease liabilities represents differences in the cash paid and straight-line lease expense recognized. The adoption of ASC 842 did not materially impact our results of operations, cash flows, or presentation thereof.

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GREENBOX POS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

14.

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:

●

November 2, 2021 (Convertible Note Offering): On November 2, 2021, the Company entered into a placement agency agreement (the “Placement Agency Agreement”) with EF Hutton, division of Benchmark Investments, LLC (“EF Hutton”), as the exclusive placement agent relating to the sale and issuance to selected institutional investors (the “Investors”) in a registered direct offering of 8% senior convertible notes due 2023 in the aggregate original principal amount of $100 million (the “Notes”). The Notes have an original issue discount of sixteen percent (16%) resulting in gross proceeds to the Company of $84 million. The Notes and Shares are being offered pursuant to a prospectus supplement to the Company's effective shelf registration statement Form S-3 (Registration No. 333-257798). EF Hutton served as the sole placement agent for the transaction pursuant to the terms of the Placement Agency Agreement. Under the terms of the Placement Agency Agreement, the Company will pay our placement agent a fee of $6,720,000 in connection with the Offering. The Convertible Note Offering closed and was funded on November 9, 2021.

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ITEM 2. MANAGEMENT’S 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 Name Changes

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.”

Name Changes

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 EF Hutton, formerly known as Kingswood Capital Markets, division of Benchmark Investments, LLC (“Hutton”), 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 Hutton 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 Hutton’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.

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Management Discussion and Analysis

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 Q3/2021, 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, which was initially released in end of 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. Q3/2021 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 $1.85B in FY 2021, including previously increased processing volumes projections from $600M to $1.85B, 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 $16-20M for FY2021.

In order to process the targeted ATPV goal, $1.85B, the Company must be able to process over $100M/month in a consistent fashion, as business performance in Q2 and Q3 2021 demonstrated. The Company estimates the deployment for its Smart Contract Token technology in Q4/2021 will 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 and Q3/21, the Company is comfortable with its volume and gross revenues 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 that management has into the Company’s operations in Q3/2021 and the Company’s 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.

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RESULTS OF OPERATIONS

Three Months Ended September 30, 2021 (Unaudited) Compared to Three Months September 30, 2020 (Unaudited):

	Three Months Ended September 30,
	2021						2020						Changes
				% of						% of
	Amount			Revenue			Amount			Revenue			Amount			%

Revenue	$	8,045,469			100.0	%	$	3,056,271			100.0	%	$	4,989,198			163.2	%
Cost of revenue		2,420,748			30.1	%		1,845,295			60.4	%		575,453			31.2	%
Gross profit		5,624,721			69.9	%		1,210,976			39.6	%		4,413,745			364.5	%

Operating expenses:
Advertising and marketing		37,179			0.5	%		59,099			1.9	%		(21,920	)		-37.1	%
Research and development		1,043,385			13.0	%		243,923			8.0	%		799,462			327.8	%
General and administrative		784,158			9.7	%		366,734			12.0	%		417,424			113.8	%
Payroll and payroll taxes		1,250,451			15.5	%		436,216			14.3	%		814,235			186.7	%
Professional fees		789,772			9.8	%		344,641			11.3	%		445,131			129.2	%
Stock compensation for employees		3,777,572			47.0	%		-			0.0	%		3,777,572			n/a
Stock compensation for services		238,238			3.0	%		-			0.0	%		238,238			n/a
Depreciation and amortization		457,633			5.7	%		5,764			0.2	%		451,869			7839.5	%
Total operating expenses		8,378,388			104.1	%		1,456,377			47.7	%		6,922,011			475.3	%

Income (Loss) from operations		(2,753,667	)		-34.2	%		(245,401	)		-8.0	%		(2,508,266	)		1022.1	%

Other Income (Expense):
Interest expense		(4,736	)		-0.1	%		(48,931	)		-1.6	%		44,195			-90.3	%
Interest expense - debt discount		-			0.0	%		(83,500	)		-2.7	%		83,500			-100.0	%
Derivative expense		-			0.0	%		(925,576	)		-30.3	%		925,576			-100.0	%
Changes in fair value of derivative liability		-			0.0	%		819,366			26.8	%		(819,366	)		-100.0	%
Gain from extinguishment of convertible debt		-			0.0	%		-			0.0	%		-			n/a
Merchant liability settlement		-			0.0	%		-			0.0	%		-			n/a
Other income or expense		(37,497	)		-0.5	%		(5,768	)		-0.2	%		(31,729	)		550.1	%
Total other income (expense)		(42,233	)		-0.5	%		(244,409	)		-8.0	%		202,176			-82.7	%

Income (Loss) before provision for income taxes		(2,795,900	)		-34.8	%		(489,810	)		-16.0	%		(2,306,090	)		470.8	%

Provision for income taxes		3,253,855			40.4	%		-			0.0	%		3,253,855			0.0	%

Net income (loss)	$	(6,049,755	)		-75.2	%	$	(489,810	)		-16.0	%	$	(5,559,945	)		1135.1	%

Gross Revenue

Gross revenue increased by $4,989,198 or 163.2%, to $8,045,469 for the three months ended September 30, 2021, from $3,056,271 for the three months ended September 30, 2020. The change in net revenue reflected the following:

●

Continued work on technology launch of new platforms in late 2020 which was fully effective in the three months ended September 30, 2021.

●

Increase in processing volume in the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

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Cost of Revenue

Cost of revenue increased by $575,453 or 31.2%, to $2,420,748 for the three months ended September 30, 2021, from $1,845,295 for the three months ended September 30, 2020. 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. Cost of revenues increased due to the following:

●

Increased volume, resulting in higher processing fees paid to Gateways and commission payments to ISOs

Operating Expenses

Operating expenses increased by $6,922,011, or 475.3%, to $8,378,388 for the three months ended September 30, 2021, from $1,456,377 for the three months ended September 30, 2020. The increase was due primarily to stock comp expense in Q3 2021 as well as 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).

	●	Stock compensation expense for employees and services
	●	Increased payroll expense from workforce expansion and hiring

●

Professional fees related to legal and audits.

Non-Operating Income, net

Non-operating income increased by $202,176, or -82.7%, to ($42,233) for the three months ended September 30, 2021, from ($244,409) for the three months ended September 30, 2020. We incurred a gain from changes in fair value of derivative liability of $819,366 and incurred derivative expense of $925,576 for the three months ended September 30, 2020.

Provision for Income Taxes

We estimate our annual effective income tax rate to be -27.47% for calendar 2021, which is different from the U.S. federal statutory rate, primarily due to a significant amount of non-deductible stock compensation. The effective tax rate of -20.25% for the third quarter of calendar 2021 was different from the estimate annual effective tax rate of -24.47% primarily due to change in valuation allowance.

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Nine Months Ended September 30, 2021 (Unaudited) Compared to Nine Months September 30, 2020 (Unaudited):

	Nine Months Ended September 30,
	2021						2020						Changes
				% of						% of
	Amount			Revenue			Amount			Revenue			Amount			%

Revenue	$	19,174,089			100.0	%	$	5,536,335			100.0	%	$	13,637,754			246.3	%
Cost of revenue		5,337,999			27.8	%		3,504,283			63.3	%		1,833,716			52.3	%
Gross profit		13,836,090			72.2	%		2,032,052			36.7	%		11,804,038			580.9	%

Operating expenses:
Advertising and marketing		84,509			0.4	%		86,368			1.6	%		(1,859	)		-2.2	%
Research and development		2,504,976			13.1	%		798,157			14.4	%		1,706,819			213.8	%
Payroll and payroll taxes		2,871,581			15.0	%		1,279,174			23.1	%		1,592,407			124.5	%
Professional fees		2,114,996			11.0	%		852,234			15.4	%		1,262,762			148.2	%
General and administrative		1,648,383			8.6	%		613,156			11.1	%		1,035,227			168.8	%
Stock compensation for employees		5,867,072			30.6	%		-			0.0	%		5,867,072			n/a
Stock compensation for services		10,418,996			54.3	%		-			0.0	%		10,418,996			n/a
Depreciation and amortization		477,886			2.5	%		16,856			0.3	%		461,030			2735.1	%
Total operating expenses		25,988,399			135.5	%		3,645,945			65.9	%		22,342,454			612.8	%

Loss from operations		(12,152,309	)		-63.4	%		(1,613,893	)		-29.2	%		(10,538,416	)		653.0	%

Other Income (Expense):
Interest expense		(598,994	)		-3.1	%		(372,553	)		-6.7	%		(226,441	)		60.8	%
Interest expense - debt discount		(2,993,408	)		-15.6	%		(121,918	)		-2.2	%		(2,871,490	)		2355.3	%
Derivative expense		-			0.0	%		(925,576	)		-16.7	%		925,576			-100.0	%
Changes in fair value of derivative liability		-			0.0	%		(383,769	)		-6.9	%		383,769			-100.0	%
Gain from extinguishment of convertible debt		-			0.0	%		2,630,795			47.5	%		(2,630,795	)		-100.0	%
Merchant liability settlement		(364,124	)		-1.9	%		-			0.0	%		(364,124	)		n/a
Other income or expense		(56,057	)		-0.3	%		(2,434	)		0.0	%		(53,623	)		2203.1	%
Total other income (expense)		(4,012,583	)		-20.9	%		824,545			14.9	%		(4,837,128	)		-586.6	%

Loss before provision for income taxes		(16,164,892	)		-84.3	%		(789,348	)		-14.3	%		(15,375,544	)		1947.9	%

Provision for income taxes		3,253,855			17.0	%		-			0.0	%		3,253,855			0.0	%

Net loss	$	(19,418,747	)		-101.3	%	$	(789,348	)		-14.3	%	$	(18,629,399	)		2360.1	%

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Gross Revenue

Gross revenue increased by $13,637,754, or 246.3%, to $19,174,089 for the nine months ended September 30, 2021, from $5,536,335 for the nine months ended September 30, 2020. 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 2020 exceeding the first three months combined.

●

Increase in processing volume.

Cost of Revenue

Cost of revenue increased by $1,833,716, or 52.3%, to $5,337,999 for the nine months ended September 30, 2021, from $3,504,283 for the nine months ended September 30, 2020. 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. Cost of revenues increased due to the following:

●

Increased volume, resulting in higher processing fees paid to Gateways and commission payments to ISOs

Operating Expenses

Operating expenses increased by $22,342,454, or 612.8%, to $25,988,399 for the nine months ended September 30, 2021, from $3,645,945 for the nine months ended September 30, 2020. The increase was due primarily to stock comp expense in 2021 as well as 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
	●	Increased payroll expense from workforce expansion and hiring

●

Professional fees related to legal and audits.

Non-Operating Expenses

We incurred interest expense related to various debt in the amount of $598,994 and debt discount of $2,993,408 for the nine months ended September 30, 2021. We incurred a loss from changes in fair value of derivative liability of $383,769, a loss from derivative expense of $925,576, and gain from extinguishment of convertible debt of $2,630,795 for the nine months ended September 30, 2020.

Provision for Income Taxes

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 and cash flows from operations. We ended September 30, 2021 with $29,707,254 of cash, cash equivalents, and restricted cash compared with $1,832,735 as of December 31, 2020.

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

	Nine Months Ended September 30,
	2021			2020

Net cash provided by (used in) operating activities	$	(14,034,039	)	$	(130,505	)
Net cash provided by (used in) investing activities		(2,597,818	)		(12,332	)
Net cash provided by (used in) financing activities		43,015,308			(495,439	)

Cash acquired from acquisition of Northeast & ChargeSavvy		1,491,068			-
Net increase (decrease) in cash, cash equivalents, and restricted cash	$	27,874,519		$	(638,276	)

Operating Activities – For the nine months ended September 30, 2021 and 2020, net cash provided by (used in) operating activities was ($14,034,039) and ($130,505) respectively. The cash used in operating activities was primarily due to net loss and timing of settlement of assets and liabilities including stock compensation expenses.

Investing Activities – Cash used in investing activities primarily consisted of the acquisition purchase of Northeast for the nine months ended September 30, 2021.

Financing Activities – Net cash provided by financing activities primarily consisted of proceeds from the Offering of $45,805,491 for the nine months ended September 30, 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 policies reflect the more significant judgments and estimates we use in preparing our consolidated financial statements.

Revenue Recognition

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ITEM 4. 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 September 30, 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:

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.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information called for by this item is incorporated herein by reference to Note 13 Commitments and Contingencies under the heading “Legal Proceedings” included in Part I, Item 1, Financial Statements (unaudited) — Notes to Unaudited Condensed Consolidated Financial Statements.

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

Issuances

During the nine-month period ended September 30, 2021, the Company issued the following unregistered shares not previously reported in a Current Report on Form 8-K or a quarterly report on Form 10-Q. The shares were issued in reliance on the exemptions from registration under the Securities Act in Section 4(a)(2) of the Securities Act and/or Regulation D thereunder.

The Company issued 2,125,665 shares in total. Of this amount, 999,996 shares were issued for a total investment of approximately $135,000, 932,732 were issued for services, 136,688 shares were issued as part of an asset purchase where the counterparty was a family member of an employee of the Company, and 56,429 shares were issued as payment of interest.

Share Repurchases

Under the Share Repurchase Program, the Company is authorized to repurchase shares through open market purchases, privately-negotiated transactions, accelerated share repurchases or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The repurchases have no time limit and may be suspended or discontinued completely at any time. The specific timing and amount of repurchases will vary based on available capital resources and other financial and operational performance, market conditions, securities law limitations, and other factors. The repurchases will be made using the Company’s cash resources.

The Company made the following purchases of its equity securities during May 2021 through September 2021, inclusive.

Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs
May 13, 2021 to May 31, 2021	70,000	$9.89	70,000
June 1, 2021 to June 30, 2021	20,000	$11.62	20,000
July 1, 2021 to July 31, 2021	2,500	$10.55	2,500
August 1, 2021 to August 31, 2021	167,500	$8.06	167,500
September 1, 2021 to September 30, 2021	40,000	$9.50	40,000
Total	300,000		300,000	$

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

Table of Contents

ITEM 6. EXHIBITS

10.1	Membership Interest Purchase Agreement by and between GreenBox POS, Sky Financial and Intelligence LLC, HigherGround Capital LLC, Jeff Nickel and Charge Savvy LLC, dated July 9, 2021 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on July 19, 2021)
10.2	Share Purchase Agreement by and between GreenBox POS, and certain individuals named therein, dated September 3, 2021 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on September 20, 2021)
10.3	April 2021 Sublease Agreement with regard to 3131 Camino del Rio North, Suite 1400, San Diego, CA 92108
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	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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

Table of Contents

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: November 15, 2021	By:	/s/ Fredi Nisan
		Fredi Nisan Chief Executive Officer (Principal Executive Officer)

Date: November 15, 2021

By:

/s/ Benjamin Chung

Benjamin Chung

Chief Financial Officer (Principal Financial Officer)

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SUBLESSOR:		SUBLESSEE:

By:		By:

Name:		Name:	Vanessa Luna

Title:	CEO	Title:	COO

Date:	4/2/2021	Date:	4/2/2021



By:

Name:

Title:	Secretary

Date:	4/2/2021

1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 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;


By:	/s/ Fredi Nisan
Name:	Fredi Nisan
Title:	Chief Executive Officer (Principal Executive Officer)


By:	/s/ Benjamin Chung
Name:	Benjamin Chung
Title:	Chief Financial Officer (Principal Financial Officer)