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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to _________

__________

Commission file number:number 001-38633


BM Technologies, Inc.

(Exact name of registrant as specified in its charter)

Delaware
Delaware82-3410369
(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer

Identification Number)

No.)

535 5th Ave, 29th Floor

New York, NY 10017

201 King of Prussia Road, Suite 650
Wayne, Pennsylvania
2206619087
(Address of principal executive offices)Principal Executive Offices)(Zip Code)
(877) 327-9515

Registrant’sRegistrant's telephone number, including area code: (212) 235-0430

code

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

Title of Each Class:each classTrading Symbol(s)Name of Each Exchangeeach exchange on Which Registered:which registered
Class A Common Stock par value $0.0001 per shareBMTXThe New York Stock ExchangeNYSE American LLC
Warrants, to purchaseeach whole warrant exercisable for one share of Class A Common StockThe New York Stock Exchange

Units, each consisting of one share of Class A Common Stock and one Warrant

at an exercise price of $11.50 per share.The New York Stock ExchangeBMTX-WTNYSE American LLC

Securities registered pursuant to Sectionsection 12(g) of the Act: None


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes No


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange

Act. Yes No


Indicate by check mark whether the registrantregistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 and post such

files). Yes     No  


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

Large accelerated filerAccelerated filerAccelerated filer
Non-accelerated filerSmaller 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. Yes

No  

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  Yes 

   No  

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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


AsThe aggregate market value of voting stock held by non-affiliates of the Registrant on June 30, 2020,2022, the last day of the registrant’s most recently completed second fiscal quarter, was approximately $51 million. This value is based on the aggregate market valueclosing price of $5.89 for shares of the Registrant’s Class A common stock outstanding, otheras reported by the New York Stock Exchange. Shares of common stock beneficially owned by each executive officer, director, and holder of more than shares held by10% of our common stock have been excluded in that such persons who may be deemed affiliatesto be affiliates. This determination of theaffiliate status is not necessarily a conclusive determination for other purposes.


The registrant computed by reference to the closing sales price for the Class A common stock on such date, was approximately $35.0 million.

As of March 29, 2021, there were 12,200,302had 11,861,510 shares of Common Stock,common stock, par value $0.0001 per share, issued and outstanding.

Documents Incorporated By Reference – None.

outstanding as of March 31, 2023.

Specified portions of the registrant’s definitive proxy statement relating to the registrant’s 2023 Annual Meeting of Stockholders (the “2023 Proxy Statement”), which is to be filed within 120 days after December 31, 2022, are incorporated by reference into Part III of this Annual Report on Form 10-K.
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TABLE OF CONTENTS

PAGE
PART I
Item 1.BusinessCautionary Note Regarding Forward-looking Statements1Page
3
Unresolved Staff Comments
1819
18
Legal Proceedings
1819
Mine Safety Disclosures
1819
Item 5.Market for Registrant’sRegistrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
1920
19
Management’s Management's Discussion and Analysis of Financial Condition and Results of Operations
1920
Quantitative and Qualitative Disclosures About Market Risk
2227
Consolidated Financial Statements and Supplementary Data
2229
Changes in and Disagreements withWith Accountants on Accounting and Financial DisclosureDisclosures 
2263
Controls and Procedures
2263
Other Information
2265
Directors, Executive Officers and Corporate Governance
2366
Executive Compensation
2866
Security Ownership of Certain Beneficial OwnersOwner and Management and Related Stockholder Matters
2966
Certain Relationships and Related Transactions, and Director Independence
3066
Principal Accounting Fees and Services
3167
Item 15. ExhibitsExhibits and Financial Statement Schedules
3268
Item 16.Form 10-K Summary
3468

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EXPLANATORY NOTE

On January 4, 2021 (the “Closing Date”), subsequent to the endTable of the fiscal year ended December 31, 2020, the fiscal year to which this Annual Report on Form 10-K relates, BM Technologies Inc. (f/k/a Megalith Financial Acquisition Corp.), a Delaware corporation (the “Company”), consummated its previously announced business combination (as defined below), pursuant to which the Company acquired BankMobile Technologies, Inc. (“BankMobile”) (such acquisition is referred to as the “business combination”). In connection with the closing of the business combination (the “Closing”), pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) between the Company, the Company, MFAC Merger Sub, Inc., a Pennsylvania corporation and wholly-owned subsidiary of the Company (“Merger Sub”), BankMobile, Customers Bank and Customers Bancorp Inc., Merger Sub merged with BankMobile, with Merger Sub surviving the merger as a wholly-owned subsidiary of the Company named BMTX, Inc., and in connection therewith the Company changed its name to BM Technologies, Inc.(the “Merger”).

Contents

Except as otherwise expressly provided herein, the information in this Annual Report on Form 10-K does not reflect the consummation of the business combination which, as discussed above, occurred subsequent to the period covered hereunder.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


This report, including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”Operations”, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 or the Exchange Act. These forward-looking(the “Exchange Act”). Forward-looking statements generally, but not always, can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,”“believes”, “estimates”, “anticipates”, “expects”, “intends”, “plans”, “may”, “will”, “potential”, “projects”, “predicts”, “continue”, or “should,”“should”, or, in each case, their negative or other variations or comparable terminology. These forward-looking statements reflect our current views with respect to, among other things, statements relating to the Company’s assets, business, cash flows, condition (financial or otherwise), credit quality, financial performance, liquidity, short and long-term performance goals, prospects, results of operations, strategic initiatives, the benefits, cost, and synergies of completed acquisitions or dispositions, and the timing, benefits, costs, and synergies of future acquisitions, dispositions, and other growth opportunities. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination and any other statements that are not statements of current or historical facts. These statements are based on management’s current expectations, but actual results may differ materially due to various factors, including, but not limited to:

factors.the benefits of our initial business combination;

our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;

the future financial performance of the combined company following the business combination;

failure to maintain the listing on, or the delisting of our securities from, NYSE American or an inability to have our securities listed on NYSE American or another national securities exchange following our initial business combination;

our public securities’ potential liquidity and trading;

the lack of a market for our securities;

our growth plans and opportunities; and

our financial performance.

The forward-looking statements contained in this report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control), and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties


Factors that could cause actual results to differ from those discussed in such forward-looking statements include, but are not limited to (1) difficulty attracting and retaining highly-effective employees; (2) our ability to successfully execute our business plan; (3) changes in consumer preferences, spending, and borrowing habits, and demand for our products and services; (4) general economic conditions, especially in the communities and markets in which we conduct our business; (5) market risk, including interest rate and liquidity risk; (6) operational risk, including cybersecurity risk and risk of fraud, data processing system failures, and network breaches; (7) increased competition, including competition from other bank and non-bank financial institutions; (8) changes in regulations, laws, taxes, government policies, monetary policies, and accounting policies; (9) regulatory enforcement actions and adverse legal actions; and (10) other economic, competitive, technological, operational, governmental, regulatory, and market factors affecting our operations, including, those factors summarized in the immediately following section titled “Summary of Principal Risk Factors”, which we encourage you to read.These risks and others described under the heading “Risk Factors.”Factors” may not be exhaustive. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws. These risks and others described under “Risk Factors” may not be exhaustive.


By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition, and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this report. In addition, even if our results or operations, financial condition, and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods.


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SUMMARY OF PRINCIPAL RISK FACTORS

PART I

References in this report to “the Company,” “BMTX,” “we,” “us”“us,” and “our” refer to Megalith Financial Acquisition Corporation prior to the Closing of the business combination and to BM Technologies, Inc., a Delaware corporation after the Closing of the business combination.corporation. References to our “management” or our “management team” refer to our officers and directors.


Below is a summary of the principal risk factors we face. Please read it carefully and refer to the more detailed descriptions of the risk factors in Item 1A, “Risk Factors.”

Risks Related to our Business and Industry
a.Dependence on key individuals;
b.Our limited operating history;
c.Our ability to identify, recruit, and retain skilled personnel;
d.Our ability to implement our strategy;
e.Our ability to successfully implement our Profit Enhancement Plan (the “PEP”);
f.Growth of adoption and retention rates;
g.Our ability to manage growth effectively;
h.Assumptions related to our growth strategy;
i.The partnership with Customers Bank and T-Mobile may expose us to additional risks;
j.The partnership and private label agreement with T-Mobile might not be renewed;
k.Dependence on our partner banks, including our announced plans to transition certain deposit relationships from our current partner bank, to a new partner bank;
l.Termination of, or changes to, the MasterCard association registration;
m.Our ability to expand our market reach and product portfolio;
n.Length and unpredictability of our sales cycle;
o.Competition;
p.The strength of our brand;
q.The risk of systems or product failures;
r.Demand for our products and services;
s.Changes in the demand or availability of student loans or financial aid;
t.Changes in government financial aid regime;
u.Exposure to global economic and other broader economic factors;
v.Data breaches, fraud, and cybersecurity issues;
w.Inability to protect or enforce our intellectual property;
x.Infringement of our intellectual property or allegations of infringement by us;
y.Our fees and charges;
z.Outsourcing critical operations;
aa.Ability to maintain an effective system of disclosure controls and internal control over financial reporting; and
ab.Our ability to integrate future acquisitions.

Risks Related to our Common Stock and Warrants
a.Whether an active, liquid trading market for our common stock is sustained;
b.Coverage by securities analysts;
c.Future sales of common stock;
d.Anti-takeover provisions under our charter and Delaware law;
e.Forum selection clauses under our charter and Delaware law;
f.A recent Delaware Court of Chancery Ruling has created potential uncertainty regarding the validity of our authorized shares of Common Stock;
g.Our ability to redeem unexpired warrants; and
h.Exercises of warrants increasing the number of shares eligible for future resale and dilution to stockholders.

Regulatory Risks
a.Changes in regulation related to interchange or methods of payments;
b.Regulations related to higher education and disbursements;
c.Regulation applicable to our partner banks, including Customers Bank, which is a related party of the Company; and
d.We are subject to the Family Educational Rights and Privacy Act (“FERPA”) and Gramm-Leach-Bliley Act (“GLBA”).

General Risk Factors
a.Adequacy of insurance;
b.The limited experience of our management team in managing a public company; and
c.Capitalized assets could become impaired.
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Part I
Item 1.Business
ITEM 1. BUSINESS

Company Overview

Overview


We are a blank checkfinancial technology (“fintech”) company that facilitates deposits and banking services between a customer and our partner bank, Customers Bank, which is a related party and is a Federal Deposit Insurance Corporation (“FDIC”) insured bank. We provide state-of-the-art high-tech digital banking and disbursement services to consumers and students nationwide through a full service fintech banking platform, accessible to customers anywhere and anytime through digital channels. Our fintech business model leverages Banking-as-a-Service (“BaaS”) partners’ and University partners’ existing customer bases to achieve high volume, low-cost customer acquisition in our Higher Education Disbursement, BaaS, and niche Direct to Consumer (“D2C") banking businesses.


We are not a bank, do not hold a bank charter, and do not provide banking services. Our partner bank, Customers Bank, is subject to regulation by the Pennsylvania Department of Banking and Securities and the Federal Reserve Bank, and is periodically examined by those regulatory authorities. We are subject to the regulations of the Department of Education (“ED”), due to our Disbursement business, and are periodically examined by them.

BankMobile Technologies, Inc. (“BankMobile”) was incorporated in May 2016 as a Delaware corporation in November 2017 and formed for the purposewholly-owned subsidiary of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this report as our initial business combination.

On August 28, 2018, the Company consummated its IPO of 15,000,000 units (the “Initial Units”). Each Unit consists of one share of Class A common stock of the Company, $0.0001 par value per share (“Class A Common Stock”), and one warrant of the Company (“Public Warrant”), with each warrant entitling the holder to purchase one share of Class A Common Stock at $11.50 per share. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $150,000,000. The Company granted the underwriters in the IPO a 45-day option to purchase up to 2,250,000 additional Units to cover over-allotments, if any (the “Over-Allotment Units”). On September 21, 2018, the underwriters exercised the option in part and purchased an aggregate of 1,928,889 Over-Allotment Units, which were sold at an offering price of $10.00 per Unit, generating gross proceeds of $19,288,890.

Simultaneously with the consummation of the IPO, the Company consummated the private placement (“Private Placement”) of an aggregate of 6,560,000 warrants (“Placement Warrants”) at a price of $1.00 per Placement Warrant, generating total proceeds of $6,560,000. On September 21, 2018, in connection with the sale of Over-Allotment Units, the Company consummated a private sale of an additional 385,778 Private Placement Warrants to the Sponsor, generating gross proceeds of $385,778.

A total of $170,981,779, (or $10.10 per Unit) comprised of $164,036,001 of the proceeds from the IPO (including the Over-Allotment Units) and $6,945,778 of the proceeds of the sale of the Private Placement Warrants, was placed in a U.S.-based trust account, maintained by Continental Stock Transfer & Trust Company, acting as trustee.

Our Units began trading on August 24, 2018 on the NYSE under the symbol MFAC.U. Commencing on September 21, 2018, the securities comprising the units began separate trading. The units, common stock, and warrants are trading on the NYSE under the symbols “MFAC.U,” “MFAC” and “MFAC.W,” respectively.

On May 26, 2020, our stockholders voted to amend the Investment Management Trust Agreement with Continental Stock Transfer & Trust Company (the “Transfer Agent”) to extend the date on which we would have to complete an initial business combination to August 28, 2020 (or November 30, 2020 if the Company had executed a definitive agreement for an initial business combination by August 28, 2020). In connection with the stockholder vote, stockholders redeemed 13,733,885 of the shares of our Class A common stock, leaving approximately $33,167,514.53 in our Trust Account.

Customers Bank. On August 6, 2020, the Company entered into an Agreement and Plan of Merger, (as amended, the “Merger Agreement”), by and among Megalith Financial Acquisition Corporation, a special purpose acquisition company (“Megalith”), incorporated in Delaware in November 2017, MFAC Merger Sub Inc., a Pennsylvania corporation and (“Merger Sub”) a wholly-owned subsidiary of Megalith, BankMobile Technologies, Inc., a Pennsylvania corporation (“BankMobile”) and Customers Bank, a Pennsylvania state chartered bank and the sole stockholder of BankMobile. The Merger Agreement was subsequently amended on November 2, 2020 and December 8, 2020 by the parties and Customers Bancorp, Inc., a Pennsylvania corporation.

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Subsequent Events

On January 4, 2021, BankMobile became an independent company after the Company consummated the business combination (as defined below), pursuant to which the Company acquired BankMobile (the acquisition is referred to herein as the “business combination”). In connection with the closingcompletion of the business combination (the “Closing”), pursuant to the Merger Agreement, Merger Sub merged witha divestiture transaction and into BankMobile, with Merger Sub surviving the merger as a direct, wholly-owned subsidiary of the Company, and in connection therewith the Company changed its name from Megalith Financial Acquisition Corporation towas rebranded BM Technologies, Inc. (the “Merger”).


In connection with the business combination, 500 shares of Class A common stock were redeemed at a per share price of approximately $10.42. Upon the Closing, the Company had 12,200,302 shares of common stock outstanding.

Further information regarding the business combination and the Company is set forth in (i) the Company’s definitive proxy statement filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 11, 2020 (the “Proxy Statement”) and (ii) the Company’s Current Report on Form 8-K filed with the SEC on January 8, 2021.

Except as otherwise expressly provided below, this report does not reflect the consummation of the business combination which, as discussed above, occurred subsequent to the period covered hereunder.

Emerging Growth Company Status


We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.


In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.


We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07$1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th,30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.



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Employees

and Human Capital Resources

As of December 31, 2020,2022, we had two (2) officers.employed approximately 275 full-time employees, all located in the United States, however technology has allowed us to expand our reach to include a larger demographic with more remote employees working outside of our physical locations and throughout the country. None of our officers or directorsthese employees are covered by a collective bargaining agreement. The Company provides its employees with comprehensive benefits, some of which are provided on a contributory basis, including medical and dental plans, a 401(k) savings plan with a company match component, and short-term and long-term disability coverage. Additional benefits offered include paid time off, life insurance, and employee assistance. The Company's compensation package is requireddesigned to commit his or her full timemaintain market competitive total rewards programs for all employees in order to our affairs prior to the completion of our initial business combinationattract and these individuals are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time they will devote in any time period will vary based on whether a target business has been selected for our initial business combination and the stage of the initial business combination process we are in. 

retain superior talent.

Available Information


We are required to file Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q with the U.S. Securities and Exchange Commission (the “SEC”) on a regular basis, and are required to disclose certain material events in a Current ReportAnnual Reports on Form 8-K.10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and proxy statements, as well as any amendments to those reports. The SEC also maintains an Internet website that contains reports, proxy, and information statements and other information regarding issuers that file electronically with the SEC. The SEC’s Internet website is located at http://www.sec.gov.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and amendments to those reports and statements filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are also accessible at no cost on our website after they are electronically filed with the SEC. Reference to our website does not constitute incorporation by reference of the information contained on the website and should not be considered part of this Report.
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Item 1A.Risk Factors
ITEM 1A. RISK FACTORS

You should carefully consider all of the risks described below, together with the other information contained in this report, including the financial statements, before making a decision to invest in our securities. If any of the following risks occur, our business, financial condition or operating results may be materially and adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.

In this section, “we,” “us,” and “our,” and “BMTX” refers to BankMobile Technologies, Inc. prior to the business combination, and to the consolidated Company following the business combination.

Company.

Risks Related to Our Business and Industry


We will be dependent on key individuals, and the loss of one or more of these key individuals could curtail our growth and adversely affect our prospects.


Our success will depend on our ability to retain key individuals and other management personnel. Members of our seniorexecutive management team, including Ms. Luvleen Sidhu, our Chief Executive Officer Robert Diegel,(“CEO”), Luvleen Sidhu, our Chief Operating Officer, Bob Ramsey,Co-CEO, Rajinder Singh, our President, Jamie Donahue, our Chief Financial Officer, James Dullinger, and Andrew Crawford, our Chief CommercialCustomer Officer, Warren Taylor, have been integral in building our digital banking platform and developing and growing our disbursementHigher Education Disbursement business and white label banking program.BaaS programs. In addition, several members of our seniorexecutive management team who had been employed by Higher One, Inc. prior to itsour acquisition by Customers Bancorp,of that business, have unique and valuable business experience, relationships, and knowledge of the higher education disbursement business. WeAlthough we have entered into employment agreements with Ms. Luvleen Sidhu, Mr. Diegel and Mr. Crawford. However, thecertain of these executives, their continued service of these individuals cannot be assured, and if we lose the services of any of these individuals, they would be difficult to replace, and Ourour business and development could be materially and adversely affected.


We have a limited history operating as a separate entity and noa limited history operating independently of Customers Bank, and our management team has limited experience managing us.


We are a relatively new legal entity and have a limited operating history and nolimited history operating independently of Customers Bank.Bank since our January 2021 divestiture. An integral portion of our business was acquired by Customers Bancorp from Higher One in June 2016, and our business had been operating primarily as a division of Customers Bank, and since September 2017, a wholly-owned subsidiary of Customers Bank. Additionally, in response to regulatory requirements and market pressures, we recently made significant changes to our business, including the types and amounts of fees we charge to our customers, resulting in a material shift from our historical revenues. Although we entered into a Transition Services Agreement with Customers Bancorp, thereThere may be additionalunanticipated risks and expenses that come from no longer operating as a division or wholly-owned subsidiary of a bank, such as increased compliance costs and licensing requirements. In addition, we have noa limited history of managing cash, liquidity, financial obligations, and resources, and other operational needs independent of Customers Bank. Because of our limited operating history, there are only limited historical results of operations for you to review and consider in evaluating our results of operations, and our prospects. We will be subject to the business risks and uncertainties associated with recently formed entities with limited operating history, including the risk that we will not achieve our strategic plan.

plan, which could have a material effect on our business, financial condition, and results of operations.

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Our success depends in part on our ability to identify, recruit, and retain skilled sales, management, and technical personnel.


Our future success depends upon our continued ability to identify, attract, hire, and retain highly qualified personnel, including skilled technical, management, product, technology, and sales and marketing personnel, all of whom are in high demand and are often subject to competing offers. Competition for qualified personnel in the technology industry is intense and there can be no assurance that we will be able to hire or retain a sufficient number of qualified personnel to meet our requirements, or that we will be able to do so at salary, benefit and other compensation costs that are acceptable. A loss of a substantial number of qualified employees, or an inability to attract, retain, and motivate additional highly skilled employees required for the expansion of our business, could have a material adverse effect on our business and growth prospects.


Our business and future success may suffer if we are unable to continue to successfully implement our strategy.


Our future success will depend, in part, on our ability to generate revenues by providing financial transaction services to higher education institutions and their students directly and through our referral partners, including TouchNet, and our ability to implement and grow our white labelBaaS and D2C banking and Workplace businesses, including the growth and implementation of T-Mobile MONEY and our Google partnership.MONEY. The market for these services has only recently developed and our viability and profitability is therefore unproven. Our business will be materially and adversely affected if we are unable to develop and market products and services that achieve and maintain market acceptance.



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Outsourcing disbursement services may not become as widespread in the higher education industry as anticipated, and our products and services may not achieve continued commercial success. In addition, higher education institutional clients could discontinue using our services and return to in-house disbursement and payment solutions. If outsourcing disbursement services does not become widespread, or if institutional clients return to their prior methods of disbursement, our growth prospects, business, financial condition, and results of operations could be materially and adversely affected.


Our strategic growth plan depends, in part, on our ability to enter into new agreements with higher education institutions and new white label partners.BaaS partners as well as to grow our D2C banking business. These contracts can generally be terminated by the client at will and, therefore, there can be no assurance that we will be able to maintain these clients or maintain agreements with clients on terms and conditions acceptable to us. In addition, we may not be able to continue to establish new relationships with higher education institutional clients or new white labelBaaS partners at our historical growth rate or at all. The termination of current client contracts or an inability to continue to attract new clients could have a material adverse effect on our business, financial condition, and results of operations.


Not only are establishing new client relationships and maintaining current ones critical to our business, they are also essential components of our strategy for maximizing student usage of our products and services and attracting new student customers as well as our graduate strategy. A reduction in enrollment, a failure to attract and maintain student customers, as well as any future demographic trends that reduce the number of higher education students, could materially and adversely affect our capability for both revenue and cash generation and, as a result, could have a material adverse effect on our business, financial condition, and results of operations.


Our strategic growth plan relies on our ability to increase customers’ debit card spending and attract them to our new products. If we are unable to increase debit card usage through product education, marketing, promotions, and technological improvements, or if debit card usage drops as a result of trends, market perception, or new or competing products, our growth prospects, financial condition, and results of operations could be materially and adversely affected.


Finally, an integral part of our growth strategy is our ability to expand our disbursements expertise into new markets and product offerings, including white label banking partnerships and credit products.BaaS partnerships. Our management team has only limited experience forming white label banking partnerships and running a credit products business.developing BaaS partnerships. If we are unable to develop a credit card programBaaS partnerships, or white label banking program, if we cannot gain market adoption of the credit products business or white label productsour BaaS partnerships due to competition, regulatory issues, or constraints, or otherwise, if large businesses pursue other alternatives to a white label bankingBaaS partnership, or if the market for white labelBaaS products and services is smaller than anticipated, our earnings and results of operations will be adversely affected, and we may not grow at our projected rates.


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Our profit enhancement plan may not be successful in improving our results of operations or financial condition.

On January 26, 2023, we announced a targeted Profit Enhancement Plan (the “PEP”) that we expect to deliver approximately $18 million in annualized cost reductions with approximately $15 million of savings expected in 2023. The PEP is intended to reduce operating costs, improve operating margins, improve operating cash flow, and continue advancing the Company’s ongoing commitment to profitable growth and continued innovation, and direct the Company’s resources toward its best opportunities. It may take longer than anticipated to generate the expected benefits from these changes and there can be no guarantee that these changes will result in improved operating results. If we are not successful in implementing these changes and executing the PEP in a timely and efficient manner, we may not realize the benefits we expect.

We may not be able to grow adoption and retention rates.


Our growth strategy and business projections contemplate a significant increase in adoption and retention rates for our products. A significant component of our growth strategy is dependent on our ability to have students of our higher educationHigher Education institution clients, and customers of our white label banking services,BaaS partners, including T-Mobile MONEY customers, and employees with our workplace banking partners, select our services and become long-term users of our products. Additionally, a significant component of our growth strategy is to successfully reach new customers via our D2C banking businesses. In particular, our growth strategy will depend on our ability to successfully cross-sell our core products and services to students after they leave college as well as growth in product usage from white labelBaaS and workplaceD2C banking customers. We may not be successful in implementing this strategy because these students and customers may believe that our products and services are unnecessary or unattractive. In addition to a sensitivity to adoption rates, we are also sensitive to retention rates. As students leave college or customers leave a white labelBaaS partner or change employers, we will face increasing competition from banks and other financial services providers.



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Our failure to attract and retain students employees, and other customers could have a material adverse effect on our prospects, business, financial condition, and results of operations. Our projections and models assume a significantIf we are unable to increase in bothour adoption and retention rates. If these rates, do not increase as projected, our growth, revenues, and results of operations may not meet our projections.

projections, which could have a material adverse effect on our prospects, business, financial condition, and results of operations.

Failure to manage future growth effectively could have a material adverse effect on our business, financial condition, and results of operations.


The continued rapid expansion and development of our business may place a significant strain upon our management, administrative, operational, and financial infrastructure. Our growth strategy contemplates further increasing the number of our higher educationHigher Education institutional clients and student banking customers.


The rate at which we have been able to establish relationships with our customers in the past, however, may not be indicative of the rate at which we will be able to establish additional customer relationships in the future. Further, our growth contemplates an increase in white label banking,BaaS business, including significant growth of T-Mobile MONEY, and the Google partnership, and new initiatives with additional white labelBaaS partners.

Our success will depend, in part, upon the ability of our executive officers to manage growth effectively. Our ability to grow will also depend on our ability to successfully hire, train, supervise, and manage new employees, obtain financing for capital needs, expand our systems effectively, allocate human resources optimally, assure regulatory compliance, and address any regulatory issues, maintain clear lines of communication between our operational functions and our finance and accounting functions, and manage the pressures on management, administrative, operational, and financial infrastructure. There can be no assurance that we will be able to accurately anticipate and respond to the changing demands we will face as we continue to expand our operations, or that we will be able to manage growth effectively or achieve further growth at all. If our business does not continue to grow, or if we fail to manage any future growth effectively, our business, financial condition, and results of operations could be materially and adversely affected.


Our growth strategy is based on assumptions, which may not be accurate; additionally, macro trends and key partner actions are not fully within our control.


Our growth strategy and business outlook are based on estimates our management believes to be reasonable, but there are many factors that may be outside of management’s control or may be difficult to predict. Some of these uncertainties include:

Our growth strategy is depending on adding additional white label partners. The timing, size, and partnership terms are not fully known today and could have a significant impact on our outlook and results of operations. Currently, T-Mobile is our only material white label partner.

Our current white label business is significantly dependent on our white label business with T-Mobile, and T-Mobile’s efforts to market the program and promote growth in accounts. If T-Mobile does not market the product as expected, or if there are changes in the economic relationship with T-Mobile or its investment appetite in the business, it could impact our financial projections and results of operations.

Workplace Banking is a new and relatively unproven strategy; our outlook is based on estimated penetration rates of large employers. Those employers may not market the product as effectively as projected or utilize our platform to the extent projected; other unknown factors in this new business, such as the rate of adoption, promotional costs, and costs of signing new employer partners, may cause results to materially differ from our estimates.

Macro industry trends may impact the amounts of student disbursements or the likelihood that students choose a BankMobile-serviced account. Department of Education regulation, industry competition, the rise of competing low-cost products, or other unknown shifts could impact the growth in the student business. The lasting impact of COVID-19 on the higher education industry is still largely unknown, but changes in enrollment at our client schools or changes in the amounts disbursed could negatively impact projections and results of operations.


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Our growth strategy is dependent on adding additional BaaS partners. The timing, size, and partnership terms of future BaaS partners are currently unknown and could have a significant impact on our outlook and results of operations. Currently, T-Mobile is our only material BaaS partner.

Our current BaaS business is significantly dependent on T-Mobile, and T-Mobile’s efforts to market the program and promote growth in accounts. If T-Mobile does not market the product as expected, or if there are changes in the economic relationship with T-Mobile or its investment appetite in the business, it could impact our financial projections and results of operations.

Macro industry trends may impact the amounts of student disbursements or the likelihood that students choose a BankMobile-serviced account. Department of Education (“ED”) regulation, industry competition, the rise of competing low-cost products, or other unknown shifts could impact the growth in the student business. Student revenue growth is dependent on our ability to charge the current level of fees, which could be negatively impacted by competition or changes in industry trends. Revenue growth is also dependent on interchange income rates, ATM visits, and other factors that may shift over time. Macro industry trends may also cause consumers to be more price-sensitive than they otherwise would be, which may impact our success in reaching new customers for our D2C banking business.


Student revenue growth is dependent on our ability to charge the current level of fees, which could be negatively impacted by competition or changes in industry trends. Revenue growth is also dependent on interchange income rates, ATM visits, and other factors that may shift over time.
Interest rates are unknown; higher rates of interest may reduce the relative attractiveness of the deposit products we service for our partner banks. Rising interest rates may reduce the servicing fees that are paid to us which could affect our margins.


Interest rates are unknown; higher rates of interest will increase the cost of our floating rate debt and may reduce the relative attractiveness of the deposit products we service for our partner banks. Interest rate changes may reduce the deposit servicing fee that is paid to us by our current partner bank or that we can charge to future partner banks.
Future bank partnerships will have individually negotiated terms; the economics of those partnerships may differ from the current arrangement.


Future bank partnerships will have individually negotiated terms; the economics of those partnerships may differ from the current arrangement. We have a commitment from our current bank partner through the end of 2022, but we may not be able to secure similar terms after that time.
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Our failure to meet our growth strategy, could materially impact our business, financial condition, and results of operations, regardless of whether the failure to meet our strategy is due to factors in our control, or decisions by key partners or other external parties.

The partnership with Customers Bank and T-Mobile may expose us to additional risks.


In February 2017, weCustomers Bank entered into a significant strategic partnership with T-Mobile for the development and roll-out of a mobile banking platform, referred to as T-Mobile MONEY, which was publicly announced in the third quarter of 2018. As the former digital banking division of Customers Bank, BMTX was utilized by Customers Bank to develop and maintain the T-Mobile MONEY mobile banking platform. The T-Mobile MONEY program was extended to the Sprint customers acquired by T-Mobile in August 2020.


T-Mobile MONEY represents the most significant white labelBaaS initiative undertaken by us to date. However, T-Mobile MONEY may not be as successful as currently expected for a variety of reasons, including customer adoption of the product, the level of marketing by T-Mobile, general economic conditions, competition and product alternatives, and other factors. If T-Mobile MONEY does not reach the anticipated activity levels andor if the deposit balances relating tosourced from T-Mobile MONEY customers are lower than expected,projected, it could adversely affect our business, financial condition, and results of operations.


We have, and will in the future, create new products in connection with the T-Mobile MONEY offering, many of which will be complex, with possible conditional requirements, options, and variations, along with changes to terms that necessitate additional disclosures or actions to comply with legal and regulatory requirements. The offerings through T-Mobile MONEY may be marketed similar to retail products, with a variety of ancillary offerings, such as rewards programs, further increasing the inherent compliance risk. While we will have final authority on the design of products, some components of the product life cycle may be managed by T-Mobile, such as promotions of the product by T-Mobile. Since we will not have direct control over all aspects of the product life cycle, the relationship involves significant third partythird-party relationship management requirements, indicating a significant level of inherent compliance risk.


Demographically, the T-Mobile MONEY product seeks to serve a broader and more diverse population than traditional banking. The white label financial productBaaS market is very competitive, requiring products, channels, and services to be recalibrated often to remain attractive to potential customers and white labelBaaS partners. As such, the level and maturity of new product approval processes, change management, and the robustnesslevel of strategic planning must be sophisticated enough to respond to competitive demands with timely and meaningful evaluation of compliance risk.


Our agreements with white-labelBaaS partners, such as T-Mobile, may expose us to additional compliance risk. For example, employees of the white labelBaaS partner may be incentivized to promote the white label productproducts under a discretionary compensation program to promote financial products to customers, thus increasing exposure to compliance risk. White-labelBaaS partnerships may also expose us to issues in connection with privacy-related regulations based on the partner receiving certain data regarding the accountholdersaccount holders and their use of the program, which may also be used for marketing purposes. Opt-out and notice may be required in connection with these disclosures.


SMSShort message service (“SMS”) text messaging will beis used extensively in carrying out service-related communications and possibly marketing-related communications as well. Since express consent is required for service-related communications to wireless subscribers, it will be critical to ensure that the language in disclosures and the account agreement indicate this consent. Moreover, the consumer must have the right to revoke all of these communications to their wireless numbers. Failure to comply with the Telephone Consumer Protection Act of 1991, enforced by the Federal Communications Commission (“FCCFCC”), could result in significant litigation risk and potential fines to T-Mobile and/or to us.


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The private label agreement with respect to T-Mobile MONEY agreement has been renewed for an additional term of three years and may only be renewed for an additional term of two years, but may be terminated by T-Mobile; T-Mobile’s failureT-Mobile with 30 days’ written notice to renew after the second term could have a material adverse effect on us.

Customers Bancorp, Inc.;

The private label agreementPrivate Label Banking Program Agreement (the “PLBPA”) that governs T-Mobile MONEY, is between Customers Bancorp, Inc. and T-Mobile. We do not contract directly with T-Mobile, that governs T-Mobile MONEY hasbut we are a beneficiary of the agreement through the Deposit Processing Services Agreement with Customers Bank. The PLBPA was entered into on February 2017 and had an initial term of three years. Recently, theThe term was extended an additional three years to February 2023. The renewal term may be renewed forOn February 22, 2023, the agreement between Customers Bancorp, Inc. and T-Mobile was extended an additional term of two years atto February 2025. Beginning February 24, 2023, T-Mobile may terminate the option of T-Mobile. We will have the optionagreement with 30 days written notice to terminate at each renewal of the agreement. T-Mobile has no obligation to renew the agreement.Customers Bancorp, Inc. T-Mobile’s failure to renewcontinue the agreement for the full term may have a material adverse effect on our business. Further, T-Mobile may also choose to renew the agreement in the future on terms that are different or less favorable to us, which would impact our business, financial condition, and results of operations.

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We face a number of risks relating to using a new partner bank, including our announced plans to transition certain deposit relationships from our current partner bank, to the new partner bank.
On November 7, 2022, the Company and Customers Bank amended the Deposit Processing Services Agreement dated January 4, 2021 (the “DPSA Amendment”) to extend the Deposit Processing Services Agreement termination date to the earlier of the Company’s successful completion of the transfer of the Company’s serviced deposits to a new partner bank or June 30, 2023.
On March 16, 2023, we entered into a Deposit Servicing Agreement (the “FCB Deposit Servicing Agreement”) with a new partner bank, First Carolina Bank, a North Carolina chartered, non-member community bank (“FCB”), which provides that FCB will establish and maintain deposit accounts and other banking services in connection with customized products and services offered by the Company to its Higher Education clients, and the Company will provide certain other related services in connection with the accounts.
Performance under the FCB Deposit Servicing Agreement will depend, in part, on our ability to successfully and efficiently transition the Higher Education Disbursement deposits and accounts from Customers Bank to FCB in a cost-effective manner that does not significantly disrupt our operations. There can be no assurance that we will be able to maintain and grow our business and operations during, and following, the transition. Transitioning and coordinating certain aspects involves complex operational and personnel-related challenges. The potential challenges, and resulting costs and delays, include failure to obtain regulatory approval for the transaction, unforeseen and unexpected expenses or liabilities related to the transition, a loss of customers, or inability to attract new customers. Additionally, the transition may place a significant burden on management and other internal resources, and could materially and adversely affect our business, financial condition, and results of operations.

In addition to successfully transitioning the Higher Education Disbursement deposits and accounts from Customers Bank to FCB, we face a number of risks due to our association with FCB that will continue after deposits and accounts have been transferred. These risks include, but are not limited to, reputational risks due to material data breaches or other cybersecurity incidents at FCB, reputational risk due to illegal or otherwise disreputable business activities that could cause our reputation to be harmed by association with FCB, FCB could lose its FDIC license, FCB could fail to maintain adequate risk management, and FCB could fail to maintain adequate regulatory capital potentially resulting in bankruptcy or insolvency. If any of the preceding items were to occur, whether caused by FCB, or by factors beyond its control, our business, financial condition, and results of operations could be adversely affected.

Termination of, or changes to, the MasterCard association registration could materially and adversely affect our business, financial condition, and results of operations.

The student checking account debit cards issued in connection with our disbursement business and the consumer checking account debit cards issued in connection with BaaS programs and D2C programs are subject to MasterCard association rules that could subject us to a variety of fines or penalties that may be levied by MasterCard for acts or omissions by us or businesses that work with us.

The termination of the card association registration held by us or any changes in card association or other network rules or standards, (including interpretation and implementation of existing rules or standards), to the extent that they increase the cost of doing business or limit our ability to provide products and services, could materially and adversely affect our business, financial condition, and results of operations.

To date on a historical pro forma basis, we have derived our revenue from a limited number of products and markets. Our efforts to expand our market reach and our service and product portfolioofferings may not succeed and may reduce revenue growth.


Our BaaS strategy entails facilitating deposits and banking services between a customer and an FDIC insured partner bank. While we will offer aour digital banking platform and disbursements services to our customers, the lending products and other services historically offered to non-enrolled students and other customers through our business have been limited. Many competitors offer a more diverse set of products and services to customers and operate in additional markets.


While we intend to eventually broaden the scope of products offered to customers with our banking partners through our Banking as a Service (“BaaS”) strategy and mobile banking product offerings, there can be no assurance that these efforts will be successful. Our failure to broaden the scope of the products we offer to potential customers may inhibit the growth of repeat business from customers and harm our operating results of operation.results. There also can be no guarantee that we will be successful with respect to our expansion through our mobile banking platform with new partners and into new markets, where we currently do not operate, which could also inhibit the growth of our business, financial condition, and results of operations.


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The length and unpredictability of the sales cycle for signing potential higher educationHigher Education institutional clients and white labelBaaS partners could delay new sales of our products and services, which could materially and adversely affect our business, financial condition, and results of operations.


The sales cycle between our business’ initial contact with potential higher educationHigher Education institutional clients, white labelBaaS partners, and large employers, and the signing of a contract with that client, partner, or employer can be lengthy, as the individual agreements need to be negotiated and partnerships customized. As a result of this lengthy sales cycle, our ability to forecast accurately the timing of revenues associated with new sales is limited. The sales cycle will vary widely due to significant uncertainties, over which we have little or no control, including:


the individual decision-making processes of each Higher Education institutional client, BaaS partner, or large employer, which typically include extensive and lengthy evaluations and will require spending substantial time, effort, and money educating each client and partner about the value of our products and services;
the individual decision-making processes of each higher education institutional client, white label partner or large employer, which typically include extensive and lengthy evaluations and will require spending substantial time, effort and money educating each client and partner about the value of our products and services;
the budgetary constraints and priorities and budget cycle of each Higher Education institutional client or partner;

the reluctance of higher education staff, BaaS partners, or large employers to change or modify existing processes and procedures; and
the budgetary constraints and priorities and budget cycle of each higher education institutional client or partner;
the amount of customization and negotiation required for any given collaboration.


the reluctance of higher education staff, white label partners or large employers to change or modify existing processes and procedures; and

the amount of customization and negotiation required for any given collaboration.

In addition, there is significant upfront time and expense required to develop relationships and there is no guarantee that a potential client will sign a contract with our business even after substantial time, effort, and money has been spent on the potential client. A delay in our ability or a failure to enter into new contracts with potential higher educationHigher Education institutional clients and BaaS partners could materially and adversely affect our business, financial condition, and results of operations.


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Our operating results may suffer because of substantial and increasing competition in the industries in which we do business.


The market for our products and services is competitive, continually evolving and, in some cases, subject to rapid technological change. Our disbursement services compete against all forms of payment, including paper-based transactions (principally cash and checks), electronic transactions such as wire transfers and Automated Clearing House (“ACHACH”) payments, and other electronic forms of payment, including card-based payment systems. Many competitors, including Blackboard, Heartland Payment Systems, and Nelnet, Inc., provide payment software, products, and services that compete with those usthat we and our bank partnerspartner banks, now and in the future, may offer. In addition, the banking products and services offered on our platform will also compete with banks that focus on the higher education market, including U.S. Bancorp and Wells Fargo & Company. Future competitors may begin to focus on higher education institutions in a manner similar to us. We also face significant competition for our white label bankingBaaS products and workplaceD2C banking services from other BaaS providers and digital consumer banking platforms such as Chime and Green Dot, as well as from traditional consumer banks. Many of our competitors will have substantially greater financial and other resources than we have, may in the future offer a wider range of products and services, and may use advertising and marketing strategies that achieve broader brand recognition or acceptance. In addition, competitors may develop new products, services, or technologies that render our products, services, or technologies obsolete or less marketable. If we are unable to compete effectively against our competitors, our business, financial condition, and results of operations will be materially and adversely affected.


We depend on a strong brand and a failure to maintain and develop that brand in a cost-effective manner may hurt our ability to expand our customer base.


Maintaining and developing the “BankMobile,” “BankMobile’s Student Banking” and “BankMobile’s Disbursements” brands, will bewhich we license to our bank partners, is critical to expanding and maintaining our base of higher educationHigher Education institution clients, students, and other accountholders. account holders.


We believe the importance of brand recognition will increase as competition in our market further intensifies. Maintaining and developing our brand will depend largely on our ability to continue to provide high-qualityhigh quality products and services at cost effective and competitive prices, as well as after-sale customer service. While we intend to continue investing in our brand, no assurance can be given as to the success of these investments. If we fail to maintain and enhance our brand, incur excessive expenses in this effort, or our reputation is otherwise tainted, including by association with the wider financial services industry or because of data security breaches or negative press, we may be unable to maintain loyalty among our existing customers or attract new customers, which could materially and adversely affect our business, financial condition, and results of operations.


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We may be liable to, customers or we may lose customers if, we provide poor service or if we experience systems or product failures, if any agreements that we maintain with colleges, universities, and white labelBaaS partners are terminated, or if other performance triggers or other performance conditions are triggered.


We are required to fulfill our contractual obligations with respect to our products and services and our high quality service to meet the expectations of customers. Failure to meet these expectations or fulfill our contractual obligations could cause us to lose customers and bear additional liability.


Because of the large amount of data we collect and manage, hardware failures and errors in our systems could result in data loss or corruption or cause the information that we collect to be incomplete or contain significant inaccuracies. For example, errors in our processing systems could delay disbursements or cause disbursements to be made in the wrong amounts or to the wrong person. Our systems may also experience service interruptions as a result of undetected errors or defects in software, fire, natural disasters, power loss, disruptions in long distance or local telecommunications access, fraud, terrorism, accident, or other similar reason, in which case we may experience delays in returning to full service, especially with regard to data centers and customer service call centers. If problems such as these occur, our customers may seek compensation, withhold payments, seek full or partial refunds, terminate their agreements, or initiate litigation or other dispute resolution procedures. In addition, we may be subject to claims made by third partiesthird-parties also affected by any of these problems.


In addition, our agreements with colleges, universities, white labelBaaS partners, and large employers contain and will contain certain termination rights, performance triggers, and other conditions which, if exercised or triggered, may result in penalties and/or early termination of such agreements, which could cause us to be liable to customers or lose customers, thereby materially impacting our business, financial condition, and results of operations.


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Demand for our banking products and other services may decline if we do not continue to innovate or respond to evolving technological changes.


We operate in a dynamic industry characterized by rapidly evolving technology and frequent product introductions. We rely on proprietary technology to pass on cost savings to customers and make our platform convenient for customers to access. In addition, we may increasingly rely on technological innovation as we introduce new products, expand current products into new markets, and operate a full-servicefull service digital banking platform. The process of developing new technologies and products is complex, and if we are unable to successfully innovate and continue to deliver a superior customer experience, customers’ demand for our banking products and other services may decrease and our growth and operations may be harmed.

This could materially impact our business, financial condition, and results of operations.

A change in the availability of student loans or financial aid, as well as budget constraints, could materially and adversely affect our financial performance by reducing demand for our services.


The higher education industry depends heavily upon the ability of students to obtain student loans and financial aid. As part of our contracts with higher education institutional clients that use our disbursements services, students’ financial aid and other refunds are sent to us for disbursement. The fees that we will charge most of our clients will be based on the number of financial aid disbursements made to students. In addition, our relationships with higher education institutional clients will provide us with a market for BankMobile Vibe accounts, from which we anticipate we will derive a significant proportion of our revenues. If the availability of student loans and financial aid were to decrease, the number of enrolled students could decrease, and our addressable market for student disbursement services would shrink. Future legislative and executive branch efforts to reduce the U.S. federal budget deficit or worsening economic conditions may require the government to severely curtail its financial aid spending, which could materially and adversely affect our business, financial condition, and results of operations. Changes in the availability and cost of student loans could also affect enrollment, in turn affecting our business, financial condition, and results of operations.



A change in regulations related to interchange or methods

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Future federal, state or network regulations could be changed in a way that could negatively affect our business. Additionally, with the advent of creative money movement systems that bypass card networks, a large future proportionate share of “spend” could leverage a less income producing method. In turn, these events could significantly reduce our interchange income from which we currently expect to derive a significant proportion of our revenues, which could adversely affect our financial condition and results of operations.

Our business depends on steady enrollment in traditional (on-campus) and non-traditional (online) institutions of higher education. The current COVID situation is creating uncertainty with individuals applying for the benefit of higher education.

The COVID-19 pandemic and associated response has put the higher education industry into a period of unprecedented disruption. Many physical campuses are closed or only partially available. Students are displaced and learning at a distance. There is uncertainty as to whether schools will open their physical campuses in some parts of the country, and for many, the upcoming semester may be postponed or cancelled. It is uncertain how quickly the U.S. education system, the economy and human behavior returns to business-as-usual, if at all. A sustained disruption in the higher education industry could affect the demand for disbursements and the number of higher education accounts and the use of such accounts, which could adversely affect our revenues, financial condition and results of operations.

Global economic and other conditions may adversely affect trends in consumer spending and demand for our products and services, which could materially and adversely affect our business, financial condition, and results of operations.

A decrease in consumer confidence due to the weakening of the global economy, or disruptions to on-campus schooling or consumer spending resulting from the COVID-19 pandemic, may cause decreased spending among our student and graduate customers and may decrease the use of account and card products and services. For example, interchange and card revenue for the three months ended September 30, 2020 decreased $2.5 million as compared to the three months ended September 30, 2019, and decreased $5.0 million for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019, primarily resulting from lower interchange rates given shifts in consumer purchase categories, merchants, and larger average transaction sizes, mainly due to COVID-19. Increases in college tuition alongside stagnation or reduction in available financial aid may also restrict spending among college students and the size of disbursements, reducing the use of our account and card products and services and the demand for our disbursement services. Weakening economic conditions, such as decreases in consumer spending, increased consumer credit defaults and bankruptcies, inflation and rising unemployment, may also adversely affect the demand for and use of our white label products and workplace banking platform and associated products, which could materially and adversely affect our business, financial condition, and results of operations.

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Our disbursement business depends in part on the current government financial aid regime that relies on the outsourcing of financial aid disbursements through higher education institutions.


In general, the U.S. federal government distributes financial aid to students through higher education institutions as intermediaries. Following the receipt of financial aid funds and the payment of tuition and other expenses, higher education institutions have typically processed refund disbursements to students by preparing and distributing paper checks. Our disbursements service provides higher education institutional clients with an electronic system for improving the administrative efficiency of this refund disbursement process. If the government, through legislation or regulatory action, restructured the existing financial aid regime in such a way that reduced or eliminated the intermediary role played by higher education financial institutions or limited or regulated the role played by service providers such as us, our business, financial condition, and results of operations and prospects for future growth could be materially and adversely affected.


BreachesGlobal economic and other conditions may adversely affect trends in consumer spending and demand for our products and services, which could materially and adversely affect our business, financial condition, and results of security measures,operations.


A decrease in consumer confidence due to the weakening of the global economy, may cause decreased spending among our student and graduate customers and may decrease the use of account and card products and services. Factors such as: increases in college tuition, stagnation, or reduction in available financial aid, and reductions in the size of disbursements, may restrict spending among college students, which would reduce the use of our account and debit card products and services. Weakening economic conditions, such as decreases in consumer spending, increased consumer credit defaults and bankruptcies, inflation, and rising unemployment, may also adversely affect the demand for and use of our BaaS products and D2C banking platform and associated products, which could materially and adversely affect our business, financial condition, and results of operations.

Data-breaches, unauthorized access to or disclosure of data relating to clients, fraudulent activity, and infrastructure failures could materially and adversely affect our reputation or harm our financial condition and results of operations.


We will have access to certain “personally identifiable” information of customers, including student contact information, identification numbers, and the amount of credit balances, which customers expect will be maintained confidentially. It is possible that hackers, customers, or employees acting unlawfully or contrary to our policies or other individuals, could improperly access our or our vendors’ systems and obtain or disclose data about customers. Further, because customer data may also be collected, stored, or processed by third-party vendors, it is possible that these vendors could intentionally or negligently disclose data about our clients or customers. Data breaches could also occur at our bank partners, higherpartner banks, Higher Education institution clients, white labelBaaS partners, andor large employer partners, which could negatively affect our reputation, relationships with end users, and expose us andcould harm the Company, our clients, andor our customers. Any such breaches or loss of data could negatively affect our business, growth prospects, financial condition, and results of operations.


We will rely to a large extent on sophisticated information technology systems, databases, and infrastructure, and will take reasonable steps to protect them. However, due to their size, complexity, content, and integration with or reliance on third-party systems, they are potentially vulnerable to breakdown, malicious intrusion, natural disaster, and random attack, all of which pose a risk that sensitive data may be exposed to unauthorized persons or to the public. A breach of our information systems could lead to fraudulent activity, including with respectbut not limited to, our cards, such as identity theft, losses on the part of banking customers, additional security costs, negative publicity, and damage to our reputation and brand.


In addition, our customers could be subject to scams that may result in the release of sufficient information concerning the customer or our accounts to allow others unauthorized access to our accounts or our systems (e.g., “phishing” and “smishing”). Claims for compensatory or other damages may be brought against us as a result of a breach of our systems or fraudulent activity. If we are unsuccessful in defending against any resulting claims, we may be forced to pay damages, which could materially and adversely affect our profitability.


In addition, a significant incident of fraud, or an increase in fraud levels generally involving our products, such as our cards, could result in reputational damage, which could reduce the use of our products and services. Such incidents of fraud could also lead to regulatory intervention, which could increase our compliance costs. Accordingly, account data breaches and related fraudulent activity could have a material adverse effect on our future growth prospects, business, financial condition, and results of operations.



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If we are unable to protect or enforce our intellectual property rights, we may lose a competitive advantage and incur significant expenses.


Our business will depend on certain registered and unregistered intellectual property rights and proprietary information. We will rely on a combination of patent, copyright, trademark, service mark and trade secret laws, as well as nondisclosure agreements and technical measures (such as the password protection and encryption of our data and systems) to protect our technology and intellectual property rights, including our proprietary software. Existing laws will afford only limited protection for our intellectual property rights. Intellectual property rights or registrations granted to us may provide an inadequate competitive advantage or be too narrow to protect our products and services. Similarly, there is no guarantee that our pending applications for intellectual property protection will result in registrations or issued patents or sufficiently protect our rights. The protections outlined above may not be sufficient to prevent unauthorized use, misappropriation or disclosure of our intellectual property or technology, and may not prevent competitors from copying, infringing, or misappropriating our products and services. We cannot be certain that others will not independently develop, design around, or otherwise acquire equivalent or superior technology or intellectual property rights. If we are unable to adequately protect our intellectual property rights, our business and growth prospects could be materially and adversely affected.


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One or more of the issued patents or pending patent applications relating to us may be categorized as so-called “business method” patents. The general validity of software patents and business method patents has been challenged in a number of jurisdictions, including the United States. Our patents may become less valuable or unenforceable if software or business methods are found to be a non-patentable subject matter or if additional requirements are imposed that our patents do not meet.


We also rely on numerous marks, trademarks, and service marks, including “BankMobile,” “BankMobile Vibe”Vibe,” and “BankMobile Disbursements.” In addition, we rely on certain affiliated brands licensed to us or our bank partners such as “T-Mobile Money” and any other brands that may be developed as part of our BaaS or D2C banking businesses. If the validity of these marks were challenged, our brand may be damaged or we may be required to face considerable expense defending or changing our marks.


We may incorporate open source software into our products. While the terms of many open source software licenses have not been interpreted by U.S. or foreign courts, such licenses could be construed in a manner that imposes conditions or restrictions on our ability to offer our products and services. In such event, we could be required to make theany open source code forutilized in certain of our proprietary software available to third parties, which may include competitors,third-parties, (including competitors), to seek licenses from third-parties, to re-engineer, or to discontinue the offering of our products or services, or we could become subject to other consequences, any of which could adversely affect our business, revenuesfinancial condition, and operating expenses.

results of operations.

We may be subject to claims that our services or solutions violate the patents or other intellectual property of others, which would be costly and time-consuming to defend. If our services and solutions are found to infringe the patents or other intellectual property rights of others, we may be required to change our business practices or pay significant costs and monetary penalties.


The services and solutions that we provide may infringe upon the patents or other intellectual property rights of others. The industry in which we operate is characterized by frequent claims of patent or other intellectual property infringement. We cannot be sure that our services and solutions, or the products of others that we use or offer to our clients, do not and will not infringe upon the patents or other intellectual property rights of third parties,third-parties, and we may have infringement claims asserted against us or our clients. If others claim that we have infringed upon their patents or other intellectual property rights, we could be liable for significant damages and incur significant legal fees and expenses. In addition, we have agreed to indemnify many of our clients against claims that theour services and solutions provided by us infringe upon the proprietary rights of others. In some instances, the potential amount of these indemnities may be greater than the revenues received from the client.


Regardless of merit, any such claims could be time-consuming, result in costly litigation, be resolved on unfavorable terms, damage our reputation, or require us to enter into royalty or licensing arrangements. Such results could limit our ability to provide a solution or service to clients and have a material adverse effect on our business, results of operations, or financial condition.



Termination

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Table of or changes to, the MasterCard association registration could materially and adversely affect our business, financial condition, and results of operations.

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The student checking account debit cards issued in connection with our disbursement business and the consumer checking account debit cards issued in connection with white label programs and workplace programs are subject to MasterCard association rules that could subject us to a variety of fines or penalties that may be levied by MasterCard for acts or omissions by us or businesses that work with us. The termination of the card association registration held by us or any changes in card association or other network rules or standards, including interpretation and implementation of existing rules or standards, that increase the cost of doing business or limit our ability to provide products and services and could materially and adversely affect our business, financial condition, and results of operations.

We capitalize certain development costs related to internal software development; this capitalized asset could become impaired if there are changes in our business model that impact the expected use of that software.

At September 30, 2020 our net carrying value of developed software was $45.4 million, which made up 53% of our consolidated assets. This amount reflects the capitalized cost, net of accumulated depreciation, of software that we developed internally as well as the remaining value of the acquired Higher One Disbursement business developed software. Changes in technology, our internal processes, or our business strategies or those of our partners could impact our ability to realize the value of our developed software, which could result in a write-down of the asset.

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We are subject to risks associated with our line of credit and the terms of our line of credit may contractually limit our ability to incur additional indebtedness.

We have a line of credit with Customers Bank to borrow a principal amount of up to $10 million, subject to collateral requirements. The line of credit imposes certain conditions that may limit our operations. Under the line of credit, we are generally restricted from incurring additional debt other than from Customers Bank. In addition, we are prohibited from making dividends or distributions to shareholders or acquiring any company. We are also required to apply 50% of any new capital raised by us toward reducing the principal of the Loan. These restrictions may restrict our operations or strategic options and adversely affect our business, financial conditions or prospects.

Availability of borrowings under the line of credit is linked to the valuation of the collateral pursuant to a borrowing base mechanism. As such, declines in the fair market value of our investments which are collateral to the line of credit may reduce availability under our line of credit.

Our line of credit matures January 4, 2022. After the loan’s maturity, there can be no guarantee that we will be able to obtain financing on similar terms or at all.

The fees that we will generate are subject to competitive pressures, and are subject to change, which may materially and adversely affect our revenue and profitability.


We will generate revenue from, among other sources, agreements with bank partnersour partner banks to share the banking services fees charged to our accountholders,account holders, interchange fees related to purchases made through our debit cards, deposit servicing fees from bank partners,our partner banks, and fees charged to our higher educationHigher Education institution clients.


We have a Deposit Processing Services Agreement in place with Customers Bank. The Deposit Processing Services Agreement was originally set to expire on December 31, 2022, and to automatically renew for an additional three year term unless either party elected not to renew. On November 7, 2022, the Company and Customers Bank entered into the DPSA Amendment. The DPSA Amendment, among other things, will facilitate the transfer of the Company’s serviced deposits to a new partner bank and extends the termination date of the Deposit Processing Services Agreement until the earlier of: (i) entry into a definitive agreement with a new partner bank to transfer the Company’s serviced deposits to such partner bank and the successful completion of such transfer; or (ii) June 30, 2023. The DPSA Amendment also removes Customers Bank’s obligation to pay the Company the difference between the Durbin exempt and Durbin regulated interchange revenues. The other terms of the Deposit Processing Services Agreement remain in effect through the new termination date.


On March 22, 2023, we signed a Second Amendment to the Deposit Processing Services Agreement (the “DPSA Second Amendment”). The DPSA Second Amendment, among other things, extends the termination date of the Deposit Processing Services Agreement until the earlier of (i) the transfer of the Company’s serviced deposits to a Durbin exempt sponsor bank; or (ii) June 30, 2024; and revises the fee structure of the Deposit Processing Services Agreement. The other terms of the Deposit Processing Services Agreement, as amended by the DPSA Amendment, remain in effect through the new termination date.
On March 22, 2023, the Company and Customers Bank entered into the 2023 Deposit Servicing Agreement, under which, effective March 31, 2023, the Company will perform, on behalf of Customers Bank, Customer Bank’s services, duties, and obligations under the PLBPA by and between Customers Bank and T-Mobile USA, Inc. that are not required by Applicable Law (as defined in the 2023 Deposit Servicing Agreement) to be provided by an FDIC insured financial institution.
As compensation under the 2023 Deposit Servicing Agreement, Customers Bank will retain any and all revenue generated from the funds held in the deposit accounts, and Customers Bank will pay the Company monthly servicing fees as set forth in the 2023 Deposit Servicing Agreement. In addition, the Company will have the right to retain all revenue generated by or from the Depositor Accounts (as defined in the 2023 Deposit Servicing Agreement), including, but not limited to, fees and all other miscellaneous revenues. The Company also shall retain all fees (including without limitation interchange fees), and charges generated by its ATMs and from its payment processing services. The Company will be solely liable for any and all fees, expenses, costs, reimbursements, and other amounts that are or may become due and payable under the PLBPA, including, without limitation, any Durbin-Exempt Interchange (as defined in the 2023 Deposit Servicing Agreement) fees payable to T-Mobile under the PLBPA. Customers Bank may set off any and all PLBPA amounts against any compensation payable to the Company under the 2023 Deposit Servicing Agreement.
In an increasingly price-conscious and competitive market, it is possible that to maintain our competitive position with higher education institutions, white labelBaaS partners, and large employers, we may have to decrease the fees charged for our services. Similarly, in order to maintain our competitive position with our partner banks, we may need to reduce depositthe servicing fees we charge to partner banks.charge. In order to maintain our competitive position with accountholders,account holders, we and our bank partnerspartner banks may need to reduce banking service fees charged to accountholders.

MasterCardaccount holders. Changes to the agreements and structures under which these fees and expenses are prescribed could reduce the interchange rates, which it unilaterally sets and adjusts from time to time, which would negatively affect the interchange revenue that we share with our partner banks. In addition, accountholders may modify their spending habits and increase their use of ACH relative to their use of debit cards, as ACH payments are generally free, which could reduce the interchange fees remitted to us. If our fees are reduced as described above,materially impact our business, financial condition, and results of operations and prospects for future growth could be materially and adversely affected.

operation.

We have agreements in place with our current banking partner, Customers Bank, including a Transition Services Agreement, Deposit Processing Services Agreement and a License Agreement. The Transition Services Agreement will expire January 4, 2022, and the Deposit Processing Services Agreement will expire on December 31, 2022, and will automatically renew for three year terms unless either party elects not to renew. If we are unable to enter into deposit servicing agreements with new partner banks on favorable terms or at all, it could affect our revenues, results of operations and financial condition. In addition, upon the expiration of the Deposit Processing Services Agreement, the amount of interchange revenues we may earn will be dependent on entering into agreements with qualifying partner banks. See “— Our bank partners are subject to extensive regulation as banks, which could limit or restrict our activities.

We outsource critical operations, which will expose us to risks related to our third-party vendors.


We have entered into contracts with third-party vendors to provide critical services, technology, and software used in our operations. These outsourcing partners include, among others:others, FIS, which provides back-end account and transaction data processing as well as web and application hosting services in secure data centers; MasterCard, which provides the payment network for our cards, as well as for certain other transactions; and Ubiquity Global Services, which provides customer care services.


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Accordingly, we depend, in part, on the services, technology, and software of these and other third-party service providers. In the event that these service providers fail to maintain adequate levels of support, do not provide high quality service, discontinue their lines of business, terminate our contractual arrangements, or cease or reduce operations, we may be required to pursue new third-party relationships, which could materially disrupt our operations and could divert management’s time and resources. We may also be unable to establish comparable new third-party relationships on as favorable terms or at all, which could materially and adversely affect our business, financial condition, and results of operations.


Even if we are able to obtain replacement technology, software, or services there may be a disruption or delay in our ability to operate our business or to provide products and services, and the replacement technology, software, or services might be more expensive than those we have currently. The process of transitioning services and data from one provider to another can be complicated, time consuming, and may lead to significant disruptions in our business. In addition, any failure by third-party service providers to maintain adequate internal controls could negatively affect our internal control over financial reporting, which could impact the preparation and quality of our financial statements.


Our ability to limit our liabilities by contract or through insurance may be ineffective or insufficient to cover future liabilities.

We will attempt to limit, by contract, our liability for damages arising from negligence, errors, mistakes or security breaches. Contractual limitations on liability, however, may not be enforceable or may otherwise not provide sufficient protection to us from liability for damages. We will maintain liability insurance coverage, including coverage for errors and omissions. It is possible, however, that claims could exceed the amount of applicable insurance coverage, if any, or that this coverage may not continue to be available on acceptable terms or in sufficient amounts. Even if these claims do not result in liability to us, investigating and defending against them could be expensive and time consuming and could divert management’s attention away from our operations. In addition, negative publicity caused by these events may delay market acceptance of our products and services, any of which could materially and adversely affect our reputation and business.

Failure to maintain an effective system of disclosure controls and internal control over financial reporting could affect our ability to produce timely and accurate financial statements or comply with applicable laws and regulations.


As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act. The Company is an emerging growth company and may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies. As an emerging growth company, the Company is not subject to Section 404(b) of the Sarbanes-Oxley Act of 2002, which would require managementthat our independent auditors review and attest as to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal controlscontrol over financial reporting. Although management will be required to disclose changes made in internal controls and procedures on a quarterly basis, we will not beManagement is required to make our firstan annual assessment of internal controls over financial reporting pursuant to Section 404 until404(a), including the later of (i) the year following our first annual report required to be filed with the SEC or (ii) the date we do not qualify as an emerging growth company. This assessment will need to include disclosure of any material weaknesses identified by management in internal control over financial reporting, as well as a statement that our independent registered public accounting firm has issued an opinion on the effectiveness of internal control over financial reporting, provided that the independent registered public accounting firm will not be required to attest to the effectiveness of internal control over financial reporting until the first annual report required to be filed with the Securities and Exchange Commission, or SEC, following the later of the date we are deemed to be an “accelerated filer” or a “large accelerated filer,” each as defined in the Exchange Act, or the date that we do not qualify as an emerging growth company, as defined in the JOBS Act.

For the three year period ended December 31, 2019, our management and our independent registered public accounting firm identified a material weakness in control over financial reporting, which we have subsequently remediated.reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of ourthe Company's annual or interim financial statements will not be prevented or detected on a timely basis. This material weakness related to the processing of a single vendor invoice that resulted


As described in a material adjustment to the 2019 financial statements. Management corrected the misstatement in our financial statementsPart II, Item 9A — Controls and has remediated the control deficiency that caused the error by performing an extensive review of the contractual amounts due from this significant vendor and by implementing an effective review control over the completeness and accuracy of accounts receivable.

If we identify futureProcedures, management identified material weaknesses in ourthe Company’s internal control over financial reporting for the 2021 fiscal year that were remediated during the fourth quarter of fiscal 2022. If we identify new material weaknesses in the future, or otherwise fail to maintain an effective system of internal controls, and procedures or meet the demands that will be placed upon us as a public company, including the applicable requirements of the Sarbanes-Oxley Act, we may not be unableable to accurately or timely report our financial resultscondition or report them within the timeframes required by law or stock exchange regulations. Failure to comply with Section 404 of the Sarbanes-Oxley Act, as applicable to us, could also potentially subject us to sanctions or investigations by the SEC or other regulatory authorities. If additional material weaknesses exist or are discovered in the future, and we are unable to remediate any such material weaknesses, our reputation, financial condition and operating results could suffer.

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We are subject to various regulations related to higher education and disbursements.

Third-Party Servicer.

Because we provide services to some higher education institutions that involve handling federal student financial aid funds, we are considered a “third-party servicer” under Title IV, which governs the administration of federal student financial aid programs. Those regulations require a third-party servicer annually to submit a compliance audit conducted by outside independent auditors that cover the servicer’s Title IV activities. Each year we are and will be required to submit a “Compliance Attestation Examination of the Title IV Student Financial Assistance Programs” audit to the United States Department of Education (“ED”), which includes a report by an independent audit firm. This yearly compliance audit submission to ED provides comfort to our higher education institution clients that we are in compliance with applicable third-party servicer regulations. We also provide and will provide this compliance audit report to clients upon request to help them fulfill their compliance audit obligations as Title IV participating institutions.

Under ED’s regulations, a third-party servicer that contracts with a Title IV institution acts in the nature of a fiduciary in the administration of Title IV programs. Among other requirements, the regulations provide that a third-party servicer is jointly and severally liable with its client institution for any liability to ED arising out of the servicer’s violation of Title IV or its implementing regulations, which could subject us to material fines related to acts or omissions of entities beyond our control. ED is also empowered to limit, suspend or terminate the violating servicer’s eligibility to act as a third-party servicer and to impose significant civil penalties on the violating servicer. We may enter into “Tier 1” arrangements with educational institutions, which are subject to more stringent regulations than certain other “Tier 2” or “non-covered” arrangements.

Additionally, on behalf of our higher education institution clients, we are required to comply with ED’s cash management regulations regarding payment of financial aid credit balances to students and providing bank accounts to students that may be used for receiving such payments. In the event ED concludes that we have violated Title IV or its implementing regulations and should be subject to one or more sanctions, our business and results of operations, which may adversely affect our business.


Any inability to successfully integrate our recent or future mergers and acquisitions could be materiallyhave a material adverse effect on us.

Mergers and adversely affected. There is limited enforcement and interpretive history of Title IV regulations.

Final rules relating to Title IV Cash Management were published in the Federal Register on October 30, 2015. The Final Rules include, among others, provisions related to (i) restrictions on the ability of higher education institutions and third-party servicers like us to market financial products to students including sending unsolicited debit cards to students, (ii) prohibitions on the assessment of certain types of account fees on student accountholders, and (iii) requirements related to ATM access for student accountholders that became effective as of July 1, 2016. These regulations alsoacquisitions typically require institutions to: offer students additional choices regarding how to receive their student aid funds (including prohibiting an institution from requiring students to open an account into which their credit balances must be deposited); provide a list of account options from which a student may choose to receive credit balance funds electronically, where each option is presented in a neutral manner and the student’s preexisting bank account is listed as the first and most prominent option with no account preselected; ensure electronic payments made to a student’s preexisting account are initiated in a manner as timely as, and no more onerous than, payments made to an account with the institution); include additional restrictions on the institution’s use of personally identifiable information; require that the termsintegration of the contractual arrangements between institutionsacquired companies’ sales and schools be publicly disclosed;marketing, operating, manufacturing, distribution, finance, and require that schools establishadministrative functions, as well as exposure to different legal and evaluate the contractual arrangements with institutionsregulatory regimes in light of the best financial interests of students. These regulations increase our compliance costs and could negatively affect our results of operations.

FERPA and GLBA.

Our higher education institution clients are subject to the Family Educational Rights and Privacy Act of 1995 (“FERPA”),jurisdictions in which provides, with certain exceptions, that an educational institution that receives any federal funding under a program administered by EDwe have not previously operated. We may not have a policy or practice of disclosing education records or “personally identifiable information” from education records, other than directory information, to third parties without the student’s or parent’s written consent. Our higher education institution clients disclose to us certain non-directory information concerning their students, including contact information, student identification numbers and the amount of students’ credit balances. We believe that our higher education institution clients are and will be able to disclose this information without the students’integrate successfully any business we acquire into our existing business, or their parents’ consent pursuantmay not be able to one or more exceptions under FERPA. However, if ED asserts that we do not fall into one of these exceptions or if future changes to legislation or regulations require student consent before our higher education institution clients can disclose this information, a sizable number of students may cease using our products and services, which could materially and adversely affect our business, financial condition, and results of operations.

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Additionally, as we are indirectly subject to FERPA, we cannot permit the transfer of any personally identifiable information to another party other thanso in a timely, efficient and cost-effective manner. Our inability to complete the integration of new businesses in a timely and orderly manner in whichcould increase costs and lower profits.


Acquisition or other integration-related issues could divert management’s attention and resources from our day-to-day operations, cause significant disruption to our businesses, and lead to substantial additional costs. Our inability to realize the anticipated benefits of a higher education institution may disclose it. In the event that we re-disclose student information in violation of this requirement, FERPA requires our clientsmerger or acquisition, or to suspend our access to any such information for a period of five years. Any such suspensionsuccessfully integrate acquired companies, as well as other transaction-related issues could have a material adverse effect on our business,businesses, financial condition, and results of operations.


We also are and will be subject to certain other federal rules regarding safeguarding personal information,In addition, possible future mergers, acquisitions, or dispositions may trigger a review by the U.S. Department of Justice, the FDIC, and/or the State Attorneys General under their respective regulatory authority, focusing on the effects on competition, including rules implementing the privacy provisionssize or structure of the Gramm-Leach-Bliley Actrelevant markets and the pro-competitive benefits of 1999,the transaction. Any delay, prohibition, or GLBA.

State Laws.

We may also become subject to similar state laws and regulations, including those that restrict higher education institutions from disclosing certain personally identifiable information of students. State attorneys general and other enforcement agencies may monitor our compliance with state and federal laws and regulations that affect our business, including those pertaining to higher education and banking, and conduct investigations of our business that are time consuming and expensive and could result in fines and penalties that have a material adverse effect on our business, financial condition, and results of operations.

Additionally, individual state legislatures may propose and enact new laws that will restrict or otherwise affect our ability to offer our products and services, which could have a material adverse effect on our business, financial condition, and results of operations.

In addition, regulations related to higher education change frequently, and new or additional regulations in the future may increase compliance costs, limit our business and prospects and adversely affect our results of operations.

Compliance with the various complex laws and regulations is costly and time consuming, and failure to comply could have a material adverse effect on our business. Additionally, increasedmodification required by regulatory requirements on our businesses may increase costs, which could materially and adversely affect our business, financial condition, and results of operations. If we do not devote sufficient resources to additional compliance personnel and systems commensurate with our anticipated growth, we could be subject to fines, regulatory scrutiny or adverse public reception to our products and services.

Our bank partners are subject to extensive regulation as banks, which could limit or restrict our activities.

Banking is a highly regulated industry and our bank partners will be subject to examination, supervision, and comprehensive regulation by various regulatory agencies. As a service provider, we will be required to comply with many of these regulations on behalf of our bank partners, which will be costly and restrict certain of our activities, including loans and interest rates charged and interest rates paid on deposits.

The laws and regulations applicable to the banking industry could change at any time, and we cannot predict the effects of these changes on our bank partners, and our own business and profitability. Because government regulation greatly affects the business and financial results of all commercial banks, our cost of complianceauthorities could adversely affect our abilitythe terms of a proposed merger or acquisition or could require us to operate profitably.

modify or abandon an otherwise attractive acquisition opportunity.


The Dodd-Frank Act Wall Street Reform and Consumer Protection Act, enacted in July 2010, which we refer to as the Dodd-Frank Act, instituted major changes to the banking and financial institutions regulatory regimes in light

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Table of the recent performance of and government intervention in the financial services sector. The “Durbin Amendment” of the Dodd-Frank Act limits the amount of interchange fees chargeable by a bank with over $10 billion in assets. Additional legislation and regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could significantly affect our revenues, business and operations in substantial and unpredictable ways. Further, regulators have significant discretion and power to prevent or remedy unsafe or unsound practices or violations of laws by banks in the performance of their supervisory and enforcement duties. The exercise of this regulatory discretion and power could have a negative impact on our bank partners, and by extension, a negative impact on us. Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputational damage, which could have a material adverse effect on our bank partners and on our own business, financial condition, and results of operations. Customers Bank, our current banking partner, is now over $10 billion in assets and subject to the Durbin Amendment, which could have an adverse effect on our business. Pursuant to the Deposit Processing Services Agreement between us and Customers Bank, Customers Bank will reimburse us for a portion of the interchange fee lost as a result of the effects of Customers Bank being subject to the Durbin Amendment. However, we may not be able to find another banking partner that is not subject to the Durbin Amendment in future or at all, or on terms that are attractive to us, and having a banking partner that is subject to the Durbin Amendment could reduce interchange revenue and negatively affect our prospects and results of operations.

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RiskRisks Related to our Common Stock and Warrants


We will incur increased costs as a result of becoming a public company.

As a public company, we have incurred and will continue to incur significant legal, accounting, insurance, and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with the Sarbanes-Oxley Act and related rules implemented by the SEC. The expenses incurred by public companies for reporting and corporate governance purposes generally have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. In estimating these costs, we took into account expenses related to insurance, legal, accounting, and compliance activities, as well as other expenses not currently incurred. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on our board committees, or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions, and other regulatory action and potentially civil litigation.

Our management team has limited experience in managing a public company and the business and financing activities of an organization of our size, which could impair our ability to comply with legal and regulatory requirements.

Our management team has had limited public company management experience or responsibilities, and has limited experience managing a business and related financing activities of our size. This could impair our ability to comply with various legal and regulatory requirements, such as public company compliance and filing required reports and other information required on a timely basis. It may be expensive to develop, implement and maintain programs and policies in an effective and timely manner that adequately respond to increased legal, regulatory compliance and reporting obligations imposed by such laws and regulations, and we may not have the resources to do so. Any failure to comply with such laws and regulations could lead to the imposition of fines and penalties and further result in the deterioration of our business.

An active, liquid trading market for our common stock may not develop.

be sustained.

There has not been a public sustained market for our common stock. We cannot predict the extent to which investor interest in our company will lead to the further development of aan active trading market on NYSE American or otherwise in the future or how active and liquid that market may become.American. If an active and liquid trading market doesis not develop,sustained, you may have difficulty selling any of our common stock. Among other things, in the absence of a liquid public trading market:


you may not be able to liquidate your investment in shares of common stock;
you may not be able to liquidate your investment in shares of common stock;
you may not be able to resell your shares of common stock at or above the price attributed to them in the business combination;

the market price of shares of common stock may experience significant price volatility; and
you may not be able to resell your shares of common stock at or above the price attributed to them in the business combination;
there may be less efficiency in carrying out your purchase and sale orders.


the market price of shares of common stock may experience significant price volatility; and

there may be less efficiency in carrying out your purchase and sale orders.

If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our common stock or if we lose analysts resulting in loss of research coverage or their evaluations of our stock are downgraded, the price of our common stock could decline.


The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. We do not currently have and may never obtainlimited research coverage by industry orand financial analysts. If no orHowever, the few analysts commencethat provide coverage of us could stop and the trading price of our stock could be negatively affected. Even if we do obtain analyst coverage, ifIf one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our common stock could decline. If one or more of these analysts cease to cover our common stock, we could lose visibility in the market for our stock, which in turn could cause our common stock price to decline.


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Substantial future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.


Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares. Certain shares of our common stock are freely tradable without restriction under the Securities Act, except for any shares of our common stock that may be held or acquired by our directors, executive officers, and other affiliates, as that term is defined in the Securities Act, which are restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available. Certain of our stockholders and members of our management have rights, subject to certain conditions, to require us to file registration statements covering shares of our common stock or to include shares in registration statements that we may file for ourselves or other stockholders. Any such sales, including sales of a substantial number of shares, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. We may also issue shares of our common stock or securities convertible into our common stock from time to time in connection with financings, acquisitions, investments, or otherwise. Any such issuance could result in ownership dilution to you as a stockholderstockholder. and cause the trading price of our common stock to decline.


Provisions in our charter and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our common stock and could entrench management.


Our amended and restated certificate of incorporation and bylaws contain provisions to limit the ability of others to acquire control of the Company or cause us to engage in change-of-control transactions, including, among other things:


provisions that authorize our board of directors, without action by our stockholders, to authorize by resolution the issuance of shares of preferred stock and to establish the number of shares to be included in such series, along with the preferential rights determined by our board of directors;
provisions that authorize our board of directors, without action by our stockholders, to authorize by resolution the issuance of shares of preferred stock and to establish the number of shares to be included in such series, along with the preferential rights determined by our board of directors; provided that, our board of directors may also, subject to the rights of the holders of preferred stock, authorize shares of preferred stock to be increased or decreased by the approval of the board of directors and the affirmative vote of the holders of a majority in voting power of the outstanding shares of capital stock of the corporation;

provided that, our board of directors may also, subject to the rights of the holders of preferred stock, authorize shares of preferred stock to be increased or decreased by the approval of the board of directors and the affirmative vote of the holders of a majority in voting power of the outstanding shares of capital stock of the corporation;
provisions that impose advance notice requirements, minimum shareholding periods and ownership thresholds, and other requirements and limitations on the ability of stockholders to propose matters for consideration at stockholder meetings; and

provisions that impose advance notice requirements, minimum shareholding periods, and ownership thresholds, and other requirements and limitations on the ability of stockholders to propose matters for consideration at stockholder meetings; and
a staggered board whereby our directors are divided into three classes, with each class subject to retirement and reelection once every three years on a rotating basis.
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a staggered board whereby our directors are divided into three classes, with each class subject to retirement and reelection once every three years on a rotating basis.

These provisions could have the effect of depriving stockholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third partiesthird-parties from seeking to obtain control of our business in a tender offer or similar transaction. With our staggered board of directors, at least two annual meetings of stockholders will generally be required in order to effect a change in a majority of our directors. Our staggered board of directors can discourage proxy contests for the election of directors and purchases of substantial blocks of our shares by making it more difficult for a potential acquirer to gain control of our board of directors in a relatively short period of time.


Our amended and restated certificate of incorporation will provide,provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, or stockholders.


Our amended and restated certificate of incorporation will require,requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers, and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation.


This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees, or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results, and financial condition.


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A recent Delaware Court of Chancery Ruling has created potential uncertainty regarding the validity of our authorized shares of Common Stock.

On January 4, 2021, BM Technologies consummated its business combination with Delaware Special Purpose Acquisition Company Megalith. Megalith obtained its shareholder approval on December 21, 2020 at a special meeting of stockholders, where the Megalith shareholders approved the proposals set forth in the definitive proxy statement filed with the SEC on December 11, 2020. At the December 21, 2020 meeting (the “Special Meeting”), a majority of the holders of then outstanding shares of our Class A common stock voted to approve our Second Amended and Restated Certificate of Incorporation, which, among other things, reclassified the Class A Common Stock and the Class B Common Stock as Common Stock, increased the authorized shares of our capital stock to 1,010,000,000 shares, consisting of 1,000,000,000 shares of Common Stock and 10,000,000 shares of “blank check” preferred stock, to 1,000,000 shares of common stock (the “Amended Charter”).

A recent decision of the Delaware Court of Chancery has created uncertainty regarding the validity of the Amended Charter and whether the vote to approve the Amended Charter met the requirements under Section 242(b)(2) of the Delaware General Corporation Law. We continue to believe that the vote to approve the Amended Charter was appropriate. To date, no stockholder has given us notice of any allegations that our shares are unauthorized. Even if the Amended Charter increasing the number of authorized shares was found to be defective, BM Technologies has not issued any shares in excess of the number authorized under the prior Megalith charter. However, the potential uncertainty with respect to our capitalization resulting from the Delaware Court of Chancery’s decision could have a material adverse effect on our operations, including our ability to complete financing transactions, until the underlying issues are definitively resolved.



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We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.


We will have the ability to redeem outstanding warrants (excluding any placement warrants held by our Sponsor or its permitted transferees) at any time after they become exercisable and prior to their expiration, at $0.01 per warrant, provided that the last reported sales price (or the closing bid price of our common stock in the event the shares of our common stock are not traded on any specific trading day) of our common stock equals or exceeds $24.00 per share for any 20 trading days within a 30 trading-day period ending on the third business day prior to the date we send proper notice of such redemption, provided that on the date it gives notice of redemption, and during the entire period thereafter until the time it redeems the warrants, we have an effective registration statement under the Securities Act covering the shares of our common stock issuable upon exercise of the warrants and a current prospectus relating to them is available.


If and when the warrants become redeemable by us, itwe may exercise itsour redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force a warrant holder:holder (i) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants, or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, will be substantially less than the market value of your warrants.


Our Warrants become exercisable upon effectiveness of a Registration Statement, which could increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.


OutstandingAs of December 31, 2022, there were warrants outstanding to purchase an aggregate of 24,195,77822,703,004 shares of our common stock become exercisable upon effectiveness of our resale Registration Statement filed on Form S-1 with the SEC.stock. These warrants consist of 17,250,00017,227,189 public warrants originally included in the units issued in Megalith’s IPO and 6,945,7785,475,815 private placement warrants. Each warrant entitles its holder to purchase one share of our common stock at an exercise price of $11.50 per share and will generally expire at 5:00 p.m., New York time, on January 4, 2026, or earlier upon redemption of our common stock. To the extent warrants are exercised, additional shares of our common stock will be issued, which will result in dilution to our then existing stockholders and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could depress the market price of our common stock.


Regulatory Risks

A change in regulations related to interchange or methods of payments could materially and adversely affect our financial performance.

Future federal, state, or network regulations could be changed in a way that could negatively affect our business. Additionally, with the advent of creative money movement systems that bypass card networks, a large future proportionate share of “spend” could leverage a less income producing method. In turn, these events could significantly reduce our interchange income from which we currently expect to derive a significant proportion of our revenues, which could adversely affect our financial condition and results of operations.

We are subject to various regulations related to higher education and disbursements.

Because we provide services to some higher education institutions that involve handling federal student financial aid funds, we are considered a “third-party servicer” under Title IV of the Higher Education Act of 1965, which governs the administration of federal student financial aid programs. Those regulations require a third-party servicer annually to submit a compliance audit conducted by outside independent auditors that cover the servicer’s Title IV activities. Each year we are required to submit a “Compliance Attestation Examination of the Title IV Student Financial Assistance Programs” audit to the ED, which includes a report by an independent audit firm. This yearly compliance audit submission to ED provides comfort to our Higher Education institution clients that we are in compliance with applicable third-party servicer regulations. We also provide and will provide this compliance audit report to clients upon request to help them fulfill their compliance audit obligations as Title IV participating institutions.


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Under ED’s regulations, a third-party servicer that contracts with a Title IV institution acts in the nature of a fiduciary in the administration of Title IV programs. Among other requirements, the regulations provide that a third-party servicer is jointly and severally liable with its client institution for any liability to ED arising out of the servicer’s violation of Title IV or its implementing regulations, which could subject us to material fines related to acts or omissions of entities beyond our control. ED is also empowered to limit, suspend, or terminate the violating servicer’s eligibility to act as a third-party servicer and to impose significant civil penalties on the violating servicer. We may enter into “Tier 1” arrangements with educational institutions, which are subject to more stringent regulations than certain other “Tier 2” or “non-covered” arrangements.

Additionally, on behalf of our Higher Education institution clients, we are required to comply with ED’s cash management regulations regarding payment of financial aid credit balances to students and providing bank accounts to students that may be used for receiving such payments. In the event ED concludes that we have violated Title IV or its implementing regulations and should be subject to one or more sanctions, our business and results of operations could be materially and adversely affected. There is limited enforcement and interpretive history of Title IV regulations.

Final rules relating to Title IV Cash Management were published in the Federal Register on October 30, 2015. The Final Rules include, among others, provisions related to (i) restrictions on the ability of higher education institutions and third-party servicers like us to market financial products to students including sending unsolicited debit cards to students, (ii) prohibitions on the assessment of certain types of account fees on student account holders, and (iii) requirements related to ATM access for student account holders that became effective as of July 1, 2016.

These regulations also require institutions to: offer students additional choices regarding how to receive their student aid funds (including prohibiting an institution from requiring students to open an account into which their credit balances must be deposited); provide a list of account options from which a student may choose to receive credit balance funds electronically, where each option is presented in a neutral manner and the student’s preexisting bank account is listed as the first and most prominent option with no account preselected; ensure electronic payments made to a student’s preexisting account are initiated in a manner as timely as, and no more onerous than, payments made to an account with the institution; include additional restrictions on the institution’s use of personally identifiable information; require that the terms of the contractual arrangements between institutions and schools be publicly disclosed; and require that schools establish and evaluate the contractual arrangements with institutions in light of the best financial interests of students. These regulations increase our compliance costs and could negatively affect our results of operations.

Our partner banks are subject to extensive regulation as a bank, which could limit or restrict our activities.

Banking is a highly regulated industry and our partner banks are subject to examination, supervision, and comprehensive regulation by various regulatory agencies. As a service provider, we will be required to comply with many of these regulations on behalf of our partner banks, which will be costly and restrict certain of our activities, including loans and interest rates charged, and interest rates paid on deposits.

The laws and regulations applicable to the banking industry could change at any time, and we cannot predict the effects of these changes on our partner banks, and our own business and profitability. Because government regulation greatly affects the business and financial results of all commercial banks, our cost of compliance could adversely affect our ability to operate profitably.

The Dodd-Frank Act Wall Street Reform and Consumer Protection Act, enacted in July 2010, which we refer to as the Dodd-Frank Act, instituted major changes to the banking and financial institutions regulatory regimes in light of the recent performance of and government intervention in the financial services sector. The “Durbin Amendment” of the Dodd-Frank Act limits the amount of interchange fees chargeable by a bank with over $10 billion in assets. Additional legislation and regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations, or policies, could significantly affect our revenues, business, and operations in substantial and unpredictable ways.

Further, regulators have significant discretion and power to prevent or remedy unsafe or unsound practices or violations of laws by banks in the performance of their supervisory and enforcement duties. The exercise of this regulatory discretion and power could have a negative impact on our partner banks, and by extension, a negative impact on us. Failure to comply with laws, regulations, or policies could result in sanctions by regulatory agencies, civil money penalties, and/or reputational damage, which could have a material adverse effect on our partner banks and on our own business, financial condition, and results of operations.


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We are subject to the Family Educational Rights and Privacy Act (“FERPA”) and Gramm-Leach-Bliley Act (“GLBA”)

Our Higher Education institution clients are subject to the Family Educational Rights and Privacy Act of 1995 (“FERPA”), which provides, with certain exceptions, that an educational institution that receives any federal funding under a program administered by ED may not have a policy or practice of disclosing education records or “personally identifiable information” from education records, other than directory information, to third-parties without the student’s or parent’s written consent. Our Higher Education institution clients disclose to us certain non-directory information concerning their students, including contact information, student identification numbers, and the amount of students’ credit balances. We believe that our Higher Education institution clients are and will be able to disclose this information without the students’ or their parents’ consent pursuant to one or more exceptions under FERPA. However, if ED asserts that we do not fall into one of these exceptions, or if future changes to legislation or regulations require student consent before our Higher Education institution clients can disclose this information, a sizable number of students may cease using our products and services, which could materially and adversely affect our business, financial condition, and results of operations.

Additionally, as we are indirectly subject to FERPA, we cannot permit the transfer of any personally identifiable information to another party other than in a manner in which a higher education institution may disclose it. In the event that we re-disclose student information in violation of this requirement, FERPA requires our clients to suspend our access to any such information for a period of five years. Any such suspension could have a material adverse effect on our business, financial condition, and results of operations.

We also are and will be subject to certain other federal rules regarding safeguarding personal information, including rules implementing the privacy provisions of the Gramm-Leach-Bliley Act of 1999, or GLBA State Laws. We may also become subject to similar state laws and regulations, including those that restrict higher education institutions from disclosing certain personally identifiable information of students. State attorneys general and other enforcement agencies may monitor our compliance with state and federal laws and regulations that affect our business, including those pertaining to higher education and banking, and conduct investigations of our business that are time consuming and expensive and could result in fines and penalties that have a material adverse effect on our business, financial condition, and results of operations.

Additionally, individual state legislatures may propose and enact new laws that will restrict or otherwise affect our ability to offer our products and services, which could have a material adverse effect on our business, financial condition, and results of operations.

In addition, regulations related to higher education change frequently, and new or additional regulations in the future may increase compliance costs, limit our business and prospects and adversely affect our results of operations.

Compliance with the various complex laws and regulations is costly and time consuming, and failure to comply could have a material adverse effect on our business. Additionally, increased regulatory requirements on our businesses may increase costs, which could materially and adversely affect our business, financial condition, and results of operations. If we do not devote sufficient resources to additional compliance personnel and systems commensurate with our anticipated growth, we could be subject to fines, regulatory scrutiny, or adverse public reception to our products and services.

General Risk Factors

Our ability to limit our liabilities by contract or through insurance may be ineffective or insufficient to cover future liabilities.

We will attempt to limit, by contract, our liability for damages arising from negligence, errors, mistakes, or security breaches. Contractual limitations on liability, however, may not be enforceable or may otherwise not provide sufficient protection to us from liability for damages. We will maintain liability insurance coverage, including coverage for errors and omissions. It is possible, however, that claims could exceed the amount of applicable insurance coverage, if any, or that this coverage may not continue to be available on acceptable terms or in sufficient amounts. Even if these claims do not result in liability to us, investigating and defending against them could be expensive and time consuming and could divert management’s attention away from our operations. In addition, negative publicity caused by these events may delay market acceptance of our products and services, any of which could materially and adversely affect our reputation and business.


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Our management team has limited experience in managing a public company and the business and financing activities of an organization of our size, which could impair our ability to comply with legal and regulatory requirements.

Our management team has had limited public company management experience or responsibilities, and has limited experience managing a business and related financing activities of our size. This could impair our ability to comply with various legal and regulatory requirements, such as public company compliance, and filing required reports and other required information on a timely basis. It may be expensive to develop, implement, and maintain programs and policies in an effective and timely manner that adequately respond to increased legal, regulatory compliance, and reporting obligations imposed by such laws and regulations, and we may not have the resources to do so. Any failure to comply with such laws and regulations could lead to the imposition of fines and penalties and further result in the deterioration of our business.

We capitalize certain development costs related to internal software development; this capitalized asset could become impaired if there are changes in our business model that impact the expected use of that software.

At December 31, 2022, the net carrying value of our developed software was $22.3 million, which made up a significant portion of our consolidated assets. This amount reflects the capitalized cost, net of accumulated amortization, of software that we developed internally as well as the remaining value of the acquired Higher One Disbursement business developed software. Changes in technology, our internal processes, or our business strategies or those of our partners could impact our ability to realize the value of our developed software, which could result in an impairment of the asset.

Item 1B.Unresolved Staff Comments
ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

None.

Item 2.Properties
ITEM 2. PROPERTIES


We currently maintain

Our corporate headquarters, which occupies approximately 134 square feet and houses our corporate officesexecutive and administrative operations under a short-term lease arrangement, is located at 201 King of Prussia Road, Suite 350,650, Wayne, PA 19087.PA. We considerbelieve that our facilities are sufficient to meet our current officeneeds and that suitable additional space combined with the other office space otherwisewill be available to our executive officers, adequate for our current operations.

as and when needed.

Item 3.Legal Proceedings
ITEM 3. LEGAL PROCEEDINGS

We may be involved from time to time in various legal and administrative proceedings and litigation arising in the ordinary course of business. We are not currently engaged in any legal proceedings that are expected to have a material effect on our financial position, cash flows, or results of operations.

To the knowledge of our management, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.

Item 4.Mine Safety Disclosures
ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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Part II

PART II

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock and warrants are each traded on the NYSE American Market under the symbols “BMTX,” “BMTX-WT”,“BMTX-WT,” respectively. Megalith’s units commenced public trading on August 24, 2018 under the symbol MFAC.U, and its Class A common stock and warrants commenced public trading under the symbols “MFAC” and “MFAC.W” on September 21, 2018, prior to the business combination.

Holders

Holders

On March 29, 2021,31, 2023, there were 502692 holders of record of our common stock and 1012 holders of record of our warrants.

Securities Authorized for Issuance Under Equity Compensation Plans.

None.

Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

ITEM 6. [RESERVED]
Item 6.Selected Financial Data

We are a smaller reporting company as defined in Rule 12b-2 under the Exchange Act. As a result, pursuant to Item 301(c) of Regulation S-K, we are not required to provide the information required by this Item.

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


References in this report (the “Annual Report”

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to “we,” “us” orprovide a reader of our financial statements with a narrative from the “Company” refer to Megalith Financial Acquisition Corp. References toperspective of our “management” ormanagement on our “management team” refer tofinancial condition, results of operations, liquidity, and certain other factors that may affect our officers and directors, and references to the “sponsor” refer to MFA Investor Holdings LLC.future results. The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the related notes included in Item 8 “Consolidated Financial Statements and Supplementary Data” of this Form 10-K.
BUSINESS OVERVIEW
BMTX provides state-of-the-art high-tech digital banking and disbursement services to consumers and students nationwide through a full service fintech banking platform, accessible to customers anywhere and anytime through digital channels.
BMTX facilitates deposits and banking services between a customer and our partner bank, Customers Bank, a Pennsylvania state-chartered bank, which is a related party and is a FDIC insured bank. BMTX’s business model leverages partners’ existing customer bases to achieve high volume, low-cost customer acquisition in its Higher Education Disbursement, BaaS, and D2C banking businesses. BMTX has four primary revenue sources: interchange and card revenue, servicing fees, account fees, and university fees. The majority of revenues are driven by customer activity (deposits, spend, transactions, etc.) and may be paid or passed through by Customers Bank, universities, or paid directly by customers.
BMTX is a Delaware corporation, originally incorporated as Megalith Financial Acquisition Corp in November 2017 and renamed BM Technologies, Inc. in January 2021 at the time of the merger between Megalith and BankMobile. Until January 4, 2021, BankMobile was a wholly-owned subsidiary of Customers Bank, a wholly-owned subsidiary of Customers Bancorp, Inc.
Customers Bank holds the FDIC insured deposits that BMTX sources and services and is the issuing bank on BMTX’s debit cards. Customers Bank pays the Company a servicing fee for the deposits generated and passes through interchange income earned from transactions on debit cards. On November 7, 2022, the Company and Customers Bank entered into the DPSA Amendment. The DPSA Amendment, among other things, will facilitate the transfer of the Company’s serviced deposits to a new partner bank and extends the termination date of the Deposit Processing Services Agreement until the earlier of: (i) entry into a definitive agreement with a new partner bank to transfer the Company’s serviced deposits to such partner bank and the successful completion of such transfer; or (ii) June 30, 2023.

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BMTX is not a bank, does not hold a bank charter, and does not provide banking services, and as a result, is not subject to direct banking regulation, except as a service provider to any partner banks. BMTX is also subject to the regulations of the ED, due to our student disbursements business, and is periodically examined by it. BMTX’s contracts with most of its Higher Education institution clients require it to comply with numerous laws and regulations, including, where applicable, regulations promulgated by the ED regarding the handling of student financial aid funds received by institutions on behalf of their students under Title IV of the Higher Education Act of 1965; the Family Educational Rights and Privacy Act of 1995; the Electronic Fund Transfer Act and Regulation E; the USA PATRIOT Act and related anti-money laundering requirements; and certain federal rules regarding safeguarding personal information, including rules implementing the privacy provisions of the Gramm-Leach-Bliley Act. Other products and services offered by BMTX may also be subject to other federal and state laws and regulations.

Seasonality
BMTX’s Higher Education serviced deposits fluctuate throughout the year due primarily to the inflow of funds typically disbursed at the start of a semester. Serviced deposit balances typically experience seasonal lows in December and July and experience seasonal highs in September and January when individual account balances are generally at their peak. Debit spend follows a similar seasonal trend, but may slightly lag increases in balances.
Merger with Megalith Financial Acquisition Corp

On January 4, 2021, BankMobile, Megalith, and MFAC Merger Sub Inc., consummated the transaction contemplated by the merger agreement entered into on August 6, 2020, as amended. In connection with the closing of the merger, Megalith changed its name to BM Technologies, Inc. Effective January 6, 2021, the Company’s units ceased trading, and the Company’s common stock and warrants began trading on the NYSE American under the symbols “BMTX” and “BMTX-WT,” respectively.

The merger was accounted for as a reverse recapitalization in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Under U.S. GAAP, BankMobile was treated as the “acquirer” company for financial reporting purposes, and as a result, the transaction was treated as the equivalent of BankMobile issuing stock for the net assets of Megalith, accompanied by a recapitalization. The excess of the fair value of the shares issued over the value of the net monetary assets of Megalith was recognized as an adjustment to shareholders’ equity. There was no goodwill or other intangible assets recorded in the merger.

As a result of the merger transaction, BankMobile used proceeds from the recapitalization transaction to pay down its $15.6 million outstanding loan from Customers Bank, its former parent, received $1.3 million of cash, net of transaction costs, and issued an additional 6,076,946 shares of common stock.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We have adopted various accounting policies that govern the application of U.S. GAAP and that are consistent with general practices within the fintech industry in the preparation of these financial statements. Our significant accounting policies are described in Note 2 - Basis of Presentation and Significant Accounting Policiesin the Notes to the Consolidated Financial Statements herein.

Certain accounting policies involve significant judgment and assumptions by us that have a material impact on the carrying value of certain assets. We consider these accounting policies to be critical accounting policies. An accounting estimate is considered to be critical if it meets both of the following criteria (i) the estimate requires assumptions about matters that are highly uncertain at the time of the accounting estimate is made, and (ii) different estimates reasonably could have been used, or changes in the estimate that are reasonably likely to occur from period to period, may have a material impact on the presentation of our financial condition, changes in financial condition, or results of operations. As of, and for the year ended December 31, 2022, we did not identify any critical accounting estimates.

The critical accounting policies that are both important to the portrayal of our financial condition and results of operations, and require complex, subjective judgments and are identified as critical accounting policies are share-based compensation, provision for operating losses, income taxes, goodwill and other intangibles, developed software, and accounting for public and private warrants.


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Share-Based Compensation Expense

The Company uses share-based compensation, including stock, restricted stock units, and performance stock units, to provide long-term performance incentives for its employees and directors. Share-based compensation is recognized on a straight-line basis over the requisite service period of the award based on the grant-date fair value for time-based awards. Compensation related to performance-based awards is recognized over the period the performance obligation is expected to be satisfied. For compensation related to performance-based awards with milestones, upon the grant date, and at each subsequent reporting period, we reassess whether it is probable that we will achieve each operational milestone, and if so, the period when we expect to achieve that operational milestone. For compensation related to performance-based awards with a market condition, we use a Monte Carlo simulation to determine the fair value of the award on the grant date, and recognize the share-based compensation expense over the derived service period. Forfeitures are recognized as they occur. Share-based compensation expense is included in Salaries and employee benefits. In addition, the holders of restricted shares may elect to surrender a portion of their shares on the vesting date to cover their income tax obligations.

Provision for Operating Losses

The provision for operating losses represents our payments for losses resulting from fraud or theft-based transactions that have generally been disputed by our serviced deposit account holders and Regulation E card claim losses incurred by us, as well as an estimated liability for such losses where such disputes have not been resolved as of the end of the reporting period. Fraud or theft-based related losses are recognized when both probable and estimable. Regulation E claims made up a vast majority of the losses. The remaining fraud or theft-based losses are mostly Check Fraud and ACH/Wire Fraud.

The main source of Regulation E losses is card holder claims of unauthorized use of their debit card. Drivers include, but are not limited to, transaction purchase volume, in person vs. online, macroeconomic conditions, changes in customer behavior, and regulatory changes. A customer has 60 days to dispute a charge. BMTX may decline the claim within 10 days or advance the funds to the account holder if the investigation is still pending. BMTX may continue to investigate transactions for 35 more days, before making its final decision. At conclusion of the investigation, the advance is reversed or is made permanent. BMTX’s loss includes closed disputes where the customer is entitled to keep the funds advanced, an expected loss on actual disputes that are pending investigation, which is based on historical experience, as well as an estimate of disputes not yet disputed. The estimated liability for disputes not yet disputed is created by applying historical rates of transactions disputed after the reporting period end date and applying that rate to actual debit card volume in the period. This estimate of future disputes is then adjusted for our estimate of the amount disputed that we expect to result in a loss, which is estimated based on our historical experience. Our estimation process is subject to risks and uncertainties, including that future performance may be different from our historical experience. Accordingly, our actual loss experience may not match expectations.

Fraud or theft-based related losses are recognized when realized or incurred. Drivers include, but are not limited to, efforts by organized or unorganized fraudsters to target an account, customer complicity, customer lack of proper password safeguarding or other preventative measures, onboarding approval procedures, changes in account funds availability, in person vs. online transactions, macroeconomic conditions, changes in customer behavior, and regulatory changes.

Income Taxes

BMTX accounts for income taxes under the liability method of accounting for income taxes. The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. BMTX determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.
In assessing the realizability of federal or state deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and prudent, feasible, and permissible as well as available tax planning strategies in making this assessment.


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A tax position is recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the term upon examination includes resolution of the related appeals or litigation process. A tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment.

Goodwill and Other Intangibles

Goodwill represents the excess of the purchase price over the identifiable net assets of businesses acquired through business combinations accounted for under the acquisition method. Other intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights. Intangible assets that have finite lives, such as university relationships, are subject to impairment testing. Intangible assets are amortized on a straight-line basis over twenty years.

Goodwill is reviewed for impairment annually as of October 31 and between annual tests when events and circumstances indicate that impairment may have occurred. The goodwill impairment charge represents the amount by which the reporting unit’s carrying amount exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. BMTX applies a qualitative assessment to determine if the Step 1 quantitative impairment test is necessary.

Other intangibles subject to amortization are reviewed for impairment under FASB ASC 360, Property, Plant and Equipment, which requires that a long-lived asset or asset group be tested for recoverability whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.

As part of its qualitative assessment, BMTX reviews regional and national trends in current and expected economic conditions. BMTX also considers its own historical performance, expectations of future performance, indicative deal values, and other trends specific to its industry.

Developed Software

Developed software includes internally developed software and developed software acquired in the Higher One Disbursement business acquisition. Internally developed software and related capitalized work-in-process costs relate to the development of digital banking platforms to connect BaaS banking customers to partner banks.

BMTX capitalizes certain internal and external costs incurred to develop internal-use software during the application development stage. BMTX also capitalizes the cost of specified upgrades and enhancements to internal-use software that result in additional functionality. Once a development project is substantially complete and the software is ready for its intended use, BMTX begins amortizing these costs on a straight-line basis over the internal-use software’s estimated useful life, which ranges from three to seven years.

The Higher One Disbursement business developed software is related to the disbursement business services to colleges and universities and delivering services to students. The Higher One Disbursement business developed software was recorded at the amount determined by a third-party valuation expert at acquisition date and was estimated based on expected revenue attributable to the software utilizing a discounted cash flow methodology, giving consideration to potential obsolescence. The estimated useful life of the Higher One Disbursement business developed software is 10 years.

The Company reviews the carrying value of developed software for impairment by measuring the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. If the Company determines that the carrying amount is impaired, the asset is written down to fair value. Fair value is determined based on discounted cash flows or management’s estimates, depending on the nature of the assets.


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Public & Private Warrants

The Company has Public and Private Warrants outstanding as a result of the merger transaction which occurred on January 4, 2021. Each whole warrant entitles the registered holder to purchase one whole share of common stock at a price of $11.50 a share. The warrants expire January 4, 2026, or earlier upon redemption or liquidation and the Company has redemption rights if our common stock trades above $24.00 for 20 out of 30 days. The Private Warrants are identical to the Public Warrants except that the Private Warrants are non-redeemable and exercisable on a cashless basis so long as they are held by the sponsor and certain others.

The Private Warrants and the Public Warrants are treated differently for accounting purposes. In accordance with FASB ASC Topic 480, Distinguishing Liabilities from Equity, thePrivate Warrants are accounted for as liabilities and will be marked-to-market each reporting period with the change recognized in earnings. In general, under the mark-to-market accounting model, as the Company’s stock price increases, the warrant liability increases, and the Company recognizes additional expense in its Consolidated Statements of Income (Loss) – the opposite when the stock price declines. Accordingly, the periodic revaluation of the Private Warrants could result in significant volatility in our reported earnings. The amounts recognized are a mark-to-market accounting determination and are non-cash.

In accordance with FASB ASC Topic 480, Distinguishing Liabilities from Equity, for accounting purposes the Public Warrants are treated as equity instruments. Accordingly, the Public Warrants are not marked-to-market each reporting period, thus there is no impact to earnings. Any future exercises of the Public Warrants will be recorded as cash received and recorded in Cash and cash equivalents, with a corresponding offset to Additional paid-in capital in equity.


NEW ACCOUNTING PRONOUNCEMENTS
The FASB has issued accounting standards that have not yet become effective and that may impact BMTX’s consolidated financial statements or its disclosures in future periods. Note 2 — Basis of Presentation and Significant Accounting Policies provides information regarding those accounting standards.
RESULTS OF OPERATIONS
The following discussion of our results of operations should be read in conjunction with our Consolidated Financial Statements, including the accompanying notes.

The following summarized tables set forth our operating results for the twelve months ended December 31, 2022 and December 31, 2021:
Twelve Months Ended
December 31,
%
Change
(dollars in thousands, except per share data)20222021Change
Operating revenues$83,597 $94,705 $(11,108)(12)%
Operating expenses92,853 89,039 3,814 %
(Loss) income from operations(9,256)5,666 (14,922)NM
Gain on fair value of private warrant liability8,066 17,225 (9,159)(53)%
Interest expense— (96)96 (100)%
(Loss) income before income tax (benefit) expense    (1,190)22,795 (23,985)(105)%
Income tax (benefit) expense(411)5,752 (6,163)(107)%
Net (loss) income$(779)$17,043 $(17,822)(105)%
Net (loss) income per share - basic$(0.07)$1.44 $(1.50)(105)%
Net (loss) income per share - diluted$(0.07)$1.43 $(1.49)(105)%
NM refers to changes greater than 150%.

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During the twelve months ended December 31, 2022, we incurred a net loss of $0.8 million which resulted from: an $11.1 million (or 12%) decrease in our operating revenues, an increase of $3.8 million (or 4%) in our operating expenses, and decreases of $9.2 million (or 53%) and $6.2 million (or 107%), respectively, in the gain on fair value of private warrant liability, which represents the change in the fair value of our liability for private warrants, and income tax (benefit) expense as compared to the twelve months ended December 31, 2021. The key drivers of changes in operating revenues, operating expenses,income tax (benefit) expense, and resulting net (loss) income are discussed in greater detail below.
Basic and diluted earnings (loss) per share, which decreased to $(0.07) and $(0.07), respectively, are both driven primarily by the impact of the private warrant adjustments on the earnings per share calculations in addition to the current year net loss. During the twelve months ended December 31, 2022, the average common stock share price was below the warrant strike price, and as a result, the warrants are not considered dilutive. During the twelve months ended December 31, 2021, the average common stock share price was greater than the warrant strike price resulting in the warrants being considered dilutive.
Operating Revenues
Twelve Months Ended
December 31,
%
Change
20222021
(dollars in thousands)Change
Revenues:
Interchange and card revenue$22,318 $28,078 $(5,760)(21)%
Servicing fees44,581 45,105 (524)(1)%
Account fees8,992 10,543 (1,551)(15)%
University fees5,734 5,693 41 %
Other revenue1,972 5,286 (3,314)(63)%
     Total operating revenues$83,597 $94,705 $(11,108)(12)%

For the twelve months ended December 31, 2022, operating revenues decreased $11.1 million, (or 12%) as compared to the twelve months ended December 31, 2021. This decrease is primarily attributable to a $5.8 million, (or 21%), decrease in Interchange and card revenue resulting primarily from lower spend volumes as well as a $3.3 million (or 63%) decrease in Other revenue due to a reduction in development projects for our BaaS partners which vary based on project status, contracts, and milestones. To a lesser extent, the decrease in operating revenues resulted from a decrease in Account fees of $1.6 million (or 15%) caused by lower total active accounts, and a decrease of $0.5 million (or 1%) in Servicing fees due to rising interest rates partially offset by increases in average serviced deposit account balances.
Operating Expenses
Twelve Months Ended
December 31,
%
Change
(dollars in thousands)20222021Change
Technology, communication, and processing$29,176 $29,338 $(162)(1)%
Salaries and employee benefits39,926 38,036 1,890 %
Professional services10,747 10,395 352 %
Provision for operating losses6,798 5,419 1,379 25 %
Occupancy1,022 949 73 %
Customer related supplies894 1,815 (921)(51)%
Advertising and promotion741 654 87 13 %
Merger and acquisition related expenses290 65 225 NM
Other expense3,259 2,368 891 38 %
   Total operating expenses$92,853 $89,039 $3,814 %
NM refers to changes greater than 150%.


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For the twelve months ended December 31, 2022, operating expenses increased $3.8 million, (or 4%), as compared to the twelve months ended December 31, 2021. The increase is primarily attributable to a $1.9 million, (or 5%), increase in Salaries and employee benefits driven primarily by increased employee costs resulting from an increase in average headcount, partially offset by increased capitalized labor. The increase was also due to a $1.4 million, (or 25%), increase in Provision for operating losses, driven by adverse loss experience in serviced deposit accounts, and a $0.9 million, (or 38%), increase in Other expense due primarily to increased insurance and employee travel expenses. These increases were partially offset by a $0.9 million, (or 51%), decrease in Customer related supplies, resulting from reduced consumption in card stock, mailers, and other customer supplies and vendor credits provided and utilized in the current year under the new service agreement negotiated in the prior year.

Income Tax (Benefit) Expense

The Company’s effective tax rate was a benefit of 34.6% and an expense of 25.2% for the twelve months ended December 31, 2022 and December 31, 2021, respectively.
The Company’s effective tax rate for the twelve months ended December 31, 2022 differs from the Company’s federal statutory rate of 21.0% primarily due to the non-taxable fair value adjustments related to the non-compensatory private warrant liability being recorded through earnings and available R&D tax credits, offset by nondeductible compensation related expense and the change in valuation allowance.
The Company’s effective tax rate for the twelve months ended December 31, 2021 differs from the Company’s federal statutory rate of 21.0% primarily due to the non-taxable fair value adjustments related to the non-compensatory private warrant liability being recorded through earnings as well as tax expense related to the estimated annual increase of the valuation allowance established against deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
Our Cash and cash equivalents consist of non-interest bearing, highly-liquid demand deposits. We had $21.1 million of Cash and cash equivalents at December 31, 2022 as compared to $25.7 million of Cash and cash equivalents at December 31, 2021.
We currently finance our operations through cash flows provided by operating activities. We intend to fund our ongoing operating activities with our existing cash and expected cash flows from operations. However, should additional liquidity be necessary, the Company could consider equity or debt financing, but there are no assurances that additional capital would be available or on terms that are acceptable to us.
ASC 205-40, Presentation of Financial Statements - Going Concern, requires management to assess an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. In each reporting period, including interim periods, an entity is required to assess conditions known and reasonably knowable as of the financial statement issuance date to determine whether it is probable an entity will not meet its financial obligations within one year from the financial statement issuance date.

Management has performed this required assessment as of March 31, 2023, including consideration of the effect of the DPSA Second Amendment and the notes thereto contained elsewhere2023 Deposit Servicing Agreement with Customers Bank, see Note 15 - Subsequent Events for additional information, and believes there is sufficient funds available to support its ongoing business operations and continue as a going concern for at least the next 12 months with projected liquidity of $21 million at March 31, 2024.

Management’s assessment is subject to known and unknown risks, uncertainties, assumptions, and changes in this Annual Report. This discussion contains forward-looking statements reflectingcircumstances, many of which are beyond our current expectations,control including the impact of the macroeconomic environment, and that are difficult to predict as to timing, extent, likelihood, and degree of occurrence, and that could cause actual results to differ from estimates and assumptions concerning events and financial trends that may affectforecasts, potentially materially.

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The table below summarizes our futurecash flows for the periods indicated:
Twelve Months Ended
December 31,
%
Change
20222021
(dollars in thousands)Change
Net cash provided by operating activities$3,480 $27,543 $(24,063)(87)%
Net cash used in investing activities(5,675)(733)(4,942)NM
Net cash used in financing activities(2,401)(4,095)1,694 (41)%
Net (decrease) increase in cash and cash equivalents$(4,596)$22,715 $(27,311)(120)%
NM refers to changes greater than 150%.
Cash Flows Provided by Operating Activities
Cash provided by operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussedactivities was $3.5 million in the sections entitled “Risk Factors” and “Forward-Looking Statements” appearing elsewhere in this Annual Report on Form 10-K.

Overview

We are a blank check company incorporated as a Delaware corporation in November 2017 and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this report as our initial business combination.

On August 28, 2018, the Company consummated its IPO of 15,000,000 units (the “Initial Units”). Each Unit consists of one share of Class A common stock of the Company, $0.0001 par value per share (“Class A Common Stock”), and one warrant of the Company (“Public Warrant”), with each warrant entitling the holder to purchase one share of Class A Common Stock at $11.50 per share. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $150,000,000. The Company granted the underwriters in the IPO a 45-day option to purchase up to 2,250,000 additional Units to cover over-allotments, if any (the “Over-Allotment Units”). On September 21, 2018, the underwriters exercised the option in part and purchased an aggregate of 1,928,889 Over-Allotment Units, which were sold at an offering price of $10.00 per Unit, generating gross proceeds of $19,288,890.

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Simultaneously with the consummation of the IPO, the Company consummated the private placement (“Private Placement”) of an aggregate of 6,560,000 warrants (“Placement Warrants”) at a price of $1.00 per Placement Warrant, generating total proceeds of $6,560,000. On September 21, 2018, in connection with the sale of Over-Allotment Units, the Company consummated a private sale of an additional 385,778 Private Placement Warrants to the Sponsor, generating gross proceeds of $385,778.

A total of $170,981,779, (or $10.10 per Unit) comprised of $164,036,001 of the proceeds from the IPO (including the Over-Allotment Units) and $6,945,778 of the proceeds of the sale of the Private Placement Warrants, was placed in a U.S.-based trust account, maintained by Continental Stock Transfer & Trust Company, acting as trustee.

Our Units began trading on August 24, 2018 on the NYSE under the symbol MFAC.U. Commencing on September 21, 2018, the securities comprising the units began separate trading. The units, common stock, and warrants are trading on the NYSE under the symbols “MFAC.U,” “MFAC” and “MFAC.W,” respectively.

On May 26, 2020, our stockholders voted to amend the Investment Management Trust Agreement with Continental Stock Transfer & Trust Company (the “Transfer Agent”) to extend the date on which we would have to complete an initial business combination to August 28, 2020 (or November 30, 2020 if the Company had executed a definitive agreement for an initial business combination by August 28, 2020). In connection with the stockholder vote, stockholders redeemed 13,733,885 of the shares of our Class A common stock, leaving approximately $33,167,514 in our Trust Account.

On August 6, 2020, the Company entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”), by and among Megalith, MFAC Merger Sub Inc., a Pennsylvania corporation and (“Merger Sub”) a wholly-owned subsidiary of Megalith, BankMobile Technologies, Inc., a Pennsylvania corporation (“BankMobile”) and Customers Bank, a Pennsylvania state chartered bank and the sole stockholder of BankMobile. The Merger Agreement was subsequently amended on November 2, 2020 and December 8, 2020 by the parties and Customers Bancorp, Inc., a Pennsylvania corporation.

Subsequent Events

On January 4, 2021, the Company consummated the business combination (as defined below), pursuant to which the Company acquired BankMobile (the acquisition is referred to herein as the “business combination”). In connection with the closing of the business combination (the “Closing”), pursuant to the Merger Agreement, Merger Sub merged with and into BankMobile, with Merger Sub surviving the merger as a direct, wholly-owned subsidiary of the Company, and in connection therewith the Company changed its name from Megalith Financial Acquisition Corporation to BM Technologies, Inc. (the “Merger”).

In connection with the business combination, 500 shares of Class A common stock were redeemed at a per share price of approximately $10.42. Upon the Closing, the Company had 12,200,302 shares of common stock outstanding.

Further information regarding the business combination and the Company is set forth in (i) the Company’s definitive proxy statement filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 11, 2020 (the “Proxy Statement”) and (ii) the Company’s Current Report on Form 8-K filed with the SEC on January 8, 2021.

Results of Operations

We have neither engaged in any operations nor generated any revenues through December 31, 2020. Our only activities from inception through December 31, 2020 were organizational activities, efforts relating to the Initial Public Offering, identifying a target company for a Business Combination and the acquisition of BankMobile. We generated non-operating income in the form of interest income on cash marketable securities held in the Trust Account.

For the yeartwelve months ended December 31, 2020, we had net (loss)2022 compared to cash provided of $(890,699) which consists of operating costs of $2,210,594 and a provision for income taxes of $297,748, offset by interest income on marketable securities held$27.5 million in the Trust Account of $1,405,514 and other income of $212,129.

For the yeartwelve months ended December 31, 2019, we had2021, a decrease of $24.1 million. The decrease in net incomecash provided by operating activities is driven primarily by a $11.8 million reduced source of $2,363,522 which consistscash from Deferred revenue, a $7.2 million increased use of operating costs of $799,387cash for Prepaid expenses and other assets, and a provision$7.1 million increased use of cash for income taxesAccounts payable.


Cash Flows Used in Investing Activities
Cash used in investing activities increased $4.9 million as compared to the twelve months ended December 31, 2021, primarily due to increased capitalization of $788,018, offset by interest income on marketable securities helddevelopment costs related to internal use software.
Cash Flows Used in Financing Activities
Cash used in financing activities decreased $1.7 million as compared to the twelve months ended December 31, 2021, primarily due to the private warrant repurchase transaction during the current period versus the recapitalization transaction and payoff of borrowings in the Trust Account of $3,950,927.

prior period.
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CONTRACTUAL OBLIGATIONS

Liquidity and Capital Resources

The completion ofDuring the Initial Public Offering and simultaneous Private Placement, inclusive of the underwriters’ exercise of their over-allotment option, generated gross proceeds to the Company of $170,981,779. Related transaction costs amounted to $10,521,211, consisting of $3,192,889 of underwriting fees, $6,771,556 of deferred underwriting commissions payable (which are held in the Trust Account) and $556,766 of other costs.

twelve months ended December 31, 2022, we terminated our remaining operating leases. As of December 31, 2020, $43,178 of cash was held outside of2022, the Trust Account and was available for working capital purposes, including paying business, legal and accounting due diligence costs on prospective acquisitions and continuing general and administrative expenses.

Following the Initial Public Offering and the exercise of the over-allotment option, a total of $170,981,778 was placed in the Trust Account and weCompany had $1,785,062 of cash held outside of the Trust Account, after payment of all costs related to the Initial Public Offering and the exercise of the over-allotment option.

no material contractual debt obligations.
Off-Balance Sheet Arrangements

Off-balance sheet financing arrangements

As of December 31, 2020 and 2019, we did not have obligations, assets or liabilities which would be considered off-balance sheet arrangements as defined in Item 303(a)(4)(ii). We are not a party to any transaction that creates relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Related Party

The Company paid an entity affiliated with the President a fee of approximately $16,667 per month until the consummation of the Business Combination. A bonus of $78,000 was paid out after the successful completion of the Initial Public Offering.

Contractual obligations

As of December 31, 2020,2022, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than the deferred underwriter commission discussed above, payment to an entity affiliated with the President a fee of approximately $16,667 per month until the consummation of the Business Combination, as well as a bonus of $78,000 which was paid out after the successful completion of the Initial Public Offering, and an agreement to pay the sponsor a monthly fee of $2,000 for office space, utilities and administrative support provided to the Company. We began incurring these fees on August 24, 2018 and continued to incur these fees monthly until through October 31, 2020 for the office space and November 15, 2020 for the fee to the entity affiliated with the President.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates.

off-balance sheet arrangements.
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ITEM 7A. QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Credit Risk


We are exposed to economic risks in the normal course of business primarily such as concentration of credit risk. Potential concentration of credit risk consists primarily of accounts receivable from Customers Bank, BaaS partners, MasterCard, and Higher Education institution clients. Historically, we have not experienced any material losses related to these balances and believe that there is minimal risk of expected future losses. However, there can be no assurance that there will not be losses on these balances.
Item 7A.Quantitative and Qualitative Disclosures about Market Risk

The net proceedsAt December 31, 2022 and December 31, 2021, Customers Bank accounted for 17% and 61% of our initial public offeringtotal Accounts receivable, net, respectively. At December 31, 2022 and December 31, 2021, a BaaS partner accounted for 60% and 13% of our total Accounts receivable, net, respectively. At December 31, 2022 and December 31, 2021, MasterCard accounted for 10% and 17% of our total Accounts receivable, net, respectively.



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Financial instruments that potentially subject the saleCompany to credit risk consist principally of the private placement warrantscash held in the trust account are investedCompany's operating account. Cash is maintained in money market funds meeting certain conditions under Rule 2a-7 underaccounts with Customers Bank, which, at times, may exceed the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term natureFDIC coverage limit of these investments, we believe there will be no associated material exposure to interest rate risk.

Item 8.Financial Statements and Supplementary Data

Reference is made to pages F-1 through F-19 comprising a portion of this Annual Report on Form 10-K.

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A.Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer (together, the “Certifying Officers”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Controls over Financial Reporting

 Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of$250,000. At December 31, 2020, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission for newly public companies (COSO). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2020.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth fiscal quarter of the year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.Other Information

None.

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PART III

Item 10.Directors, Executive Officers and Corporate Governance

Directors and Executive Officers

As of the date of this report, our directors and officers are as follows:

NameAgePosition
Luvleen Sidhu34Chief Executive Officer; Chairman of the Board
Robert Diegel58Chief Operating Officer
Robert Ramsey45Chief Financial Officer
Pankaj Dinodia36Director
Mike Gill69Director
Aaron Hodari34Director
Brent Hurley41Director
A.J. Dunklau38Director
Marcy Schwab49Director

Luvleen Sidhu has served as BankMobile’s Chief Executive Officer and Director since 2019. From February 2014 to present, Ms. Luvleen Sidhu served as Chief Strategy Officer and President of BankMobile, which she helped found. Ms. Luvleen Sidhu earned her MBA from the Wharton School of Business of the University of Pennsylvania and her bachelor’s degree from Harvard University. After graduating from Harvard and Wharton she was a management consultant at Booz & co. in their financial services practice. Ms. Luvleen Sidhu is a recognized leader in the industry and was named one of Crain’s New York Business 2020 40 Under 40 and a “Rising Star in Banking & Finance” in 2020. She was previously named Fintech Woman of the Year by Lendit Fintech for 2019. Before attending business school at Wharton, she was an analyst at Neuberger Berman and also worked as a director of corporate development at Customers Bank. While at the company, Ms. Luvleen Sidhu introduced several growth projects, including partnering with a New York City-based start-up to improve the banking experience through innovative technology. Ms. Luvleen Sidhu has been featured regularly in the media including on CNBC, Bloomberg Radio, Yahoo Finance, Fox News Radio and in The Wall Street Journal, Forbes.com, American Banker, Crain’s New York, FoxNews.com, among others.

Bob Ramsey serves as our Chief Financial Officer. From January 2019 to present, Mr. Ramsey served as Chief Financial Officer of BankMobile, during which period he had a dual role and also served as Customers Bancorp’s Director of Investor Relations. From 2017 to 2019, Mr. Ramsey served as Director of Strategic Planning and Investor Relations at Customers Bancorp. Prior to joining Customers Bancorp, Mr. Ramsey served as senior equity research analyst and other roles at FBR Capital Markets for 13 years, where he covered community banks, regional banks, super-regional banks, consumer finance and fintech companies. He previously worked at Wachovia Securities. Mr. Ramsey has his MBA from the College of William and Mary and his bachelor’s degree from Hampden Sydney College.

Robert J. Diegel serves as our Chief Operating Officer. Mr. Diegel became Chief Operating Officer in October 2017 and Director of BankMobile Technologies, Inc. in 2017. From April 2014, Mr. Diegel served in a variety of roles in Customers Bank and BankMobile. Those roles include Director of Banking Operations and Deputy Chief Administrative Officer. Prior to joining Customers Bank, Mr. Diegel served as Senior Vice President — Director of Operations and Cash Management at Firstrust Bank, where he worked from 1990 through 2014 and was a Board member of FIS’ Strategic Payment Counsel from 2009 through 2014. Mr. Diegel earned his Bachelor of Science in accounting from LaSalle University in Philadelphia before attending Georgetown University’s Stonier Graduate School with the American Bankers Association.

Pankaj Dinodia has served as our director since the Business Combination. Since June 2011, Mr. Dinodia has been Chief Executive Officer and founder of Dinodia Capital Advisors, a SEBI-registered financial advisory services firm based in New Delhi, which provides strategic and merger and acquisitions services and works closely with several family offices on global investments and asset allocation. Prior to that, Mr. Dinodia earned his MBA from the Harvard Business School. From July 2008 to July 2009, Mr. Dinodia worked for accounting firm S.R. Dinodia & Co., developing its M&A Advisory practice. From July 2007 to July 2008, Mr. Dinodia helped establish and run Goldman Sachs’ private equity business in India. Prior to that, Mr. Dinodia had served within the Investment Banking Division at Goldman Sachs in New York City since 2005, where he provided mergers and acquisition and investment advisory services to global banks, insurance and fintech companies. He has previously served as the Founder & President of the Wharton Alumni Delhi Chapter as well as on the Executive Board for the Harvard Business School Club of India. Mr. Dinodia graduated magna cum laude at the Wharton School, earning his BS Economics degree with a concentration in finance. He also earned his MBA at the Harvard Business School. We believe that Mr. Dinodia is qualified to serve as a member of the post-Business Combination company board of directors based on his experience in banking, investing and providing strategic advice and mergers and acquisitions advisory services, as well has his experience mentoring start-ups across industries, including those in fintech and consumer industries.

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Mike Gill has served as our director since the Business Combination. Mr. Gill is a retired attorney who worked as Managing Director Global Complex Contracting at Accenture LLP from 2003 to October 2016. At Accenture LLP, Mr. Gill headed up a team of over 160 attorneys worldwide, specializing in technology, digital, outsourcing, and systems integration transactions and helping to negotiate and close large and complex customer-facing contracts across the world, including in the financial services industry. Prior to working at Accenture, Mr. Gill practiced as a transactional attorney for over 25 years in Kansas City, Missouri specializing in professional services providers, including consultants, accountants, architects and attorneys. Mr. Gill also has experience in commercial litigation, including malpractice and securities law defense. Mr. Gill earned his BS in Business from University of Missouri and his JD from University of Missouri School of Law. We believe that Mr. Gill is qualified to serve as a member of the post-Business Combination company board of directors based on his legal experience, experience within the financial services industry and significant experience structuring and negotiating complex transactions both domestically and globally.

Aaron Hodari has served as our director since the Business Combination. Mr. Hodari, a CFP and CIMA, is a Managing Director of Schechter. Aaron Hodari works with high net worth individuals, families, business owners, and their advisors to bring them institutional quality investment management and advanced financial planning solutions. Aaron heads the firm’s branch of Private Capital, including deal sourcing, due diligence, deal structuring, and market opportunity identification. He’s also instrumental in the development of correlated and non-correlated investment alternatives, helping identify investment allocations and manager selection. He is a sought-after speaker regarding the tax advantages for hedge funds within Private Placement Life Insurance (PPLI) and Private Placement Variable Annuity (PPVA). Prior to joining Schechter, Aaron worked at BlackRock Financial Management, New York, NY in the Institutional Account Management group where he managed relationships with institutional investors including pension funds, foundations & endowments, and family offices. While there, he specialized in customized fixed-income solutions, commodities, and hedge funds. Aaron graduated from the University of Michigan, where he majored in economics and played lacrosse. He currently sits on the school’s Dean’s Young Alumni Council and he is a member of the CAIS Advisory Council. We believe that Mr. Hodari is qualified to serve as a member of the post-Business Combination company board of directors based on his financial and investment management expertise.

Brent Hurley has served as our director since the Business Combination. Since July 2016, Mr. Hurley has been a serial angel investor in various technology start-up companies and participated in multiple venture funds. Mr. Hurley has been a member of MFA Investor Holdings, the sponsor of MFAC, since 2018. From January 2015 to June 2016, Mr. Hurley was Chief Executive Officer and Co-founder of SayMore, a social network start-up company. From November 2011 to January 2015, Mr. Hurley served as Chief Financial Officer of MixBit, Inc. (previously AVOS Systems), a multinational consumer technology company backed by GV (formerly Google Ventures) and NEA. Prior to that, Mr. Hurley was a founding team member of YouTube for four years until its sale to Google, serving as Director of Finance and Operations from 2005 to 2007 and, following the sale to Google, Manager on the YouTube Strategic Partnerships Team. Prior to that, Mr. Hurley was a buyside securities trader and portfolio accountant at Fisher Investments. Mr. Hurley began his career as an intern at PayPal, Inc. when it had less than 25 employees. Mr. Hurley served on the board of directors of MixBit, a private company, from 2014 to 2018, and has served two 3-year terms on the Board of Trustees at Albright College, and one term on the Harvard Business School Alumni Board. Mr. Hurley earned his BS in Finance & Philosophy from Albright College and his MBA from Harvard Business School. We believe that Mr. Hurley is qualified to serve as a member of the post-Business Combination company board of directors based his extensive experience investing in and developing technology start-up companies and his finance and accounting experience.

A.J. Dunklau has served as our director since the Business Combination and until the Business Combination served as President of Megalith since its inception, and served Chief Executive Officer of Megalith since May 5, 2020. From 2011 through 2017, Mr. Dunklau was an executive at AGDATA, LP, a provider of payment facilitation, information services, and software, which was sold to Vista Equity Partners in 2014. From 2016 to 2017 Mr. Dunklau served as AGDATA’s Chief Strategy Officer and from 2014 to 2016 he served as its Head of Product Management. From 2012 to 2014, Mr. Dunklau served as AGDATA’s Executive Vice President and General Manager of Industry Platforms, and prior to that served as Director of Business Development. From 2005 to 2011, he worked as a management consultant at A.T. Kearney, where he consulted on global projects across a range of industries, including financial services. Mr. Dunklau received his Bachelors of Science in Business Administration from Washington University in St. Louis and an MBA from the Harvard Business School.

Marcy Schwab has served as our director since the Business Combination. Ms. Schwab is the President of Inspired Leadership, LLC, which she founded in 2012. Inspired Leadership, LLC provides consulting, leadership advisory, and executive coaching services to Fortune 500 companies, start-ups, federal, state and local agencies and not-for-profits. Ms. Schwab has also served as principal at thought LEADERS, LLC since 2016, and is a member at Forbes Coaches Counsel. From July 2019 to September 2020, Ms. Schwab served of chief of staff to the CEO of Reserve Trust Company part time, and served as Vice President of Retail Banking at Sallie Mae from 2010 to 2012. Ms. Schwab served in various roles at Capital One, including Senior Vice President, Consumer Segment Lending from 2008 to 2009, Vice President from 2007 to 2008, and Senior Business Director from 1998 to 2007. Ms. Schwab brings over 25 years of experience as a senior executive, consultant, facilitator, and leadership coach. Ms. Schwab earned an MBA from The Wharton School of Business and a Bachelor of Science in Engineering from the University of Pennsylvania. We believe that Ms. Schwab is qualified to serve as a member of the post-Business Combination company board of directors based on her experience as a senior leader at several consumer focused financial services companies.

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Board Composition

Our business affairs are managed under the direction of our Board. Our Board consists of seven members, at least a majority of whom qualify as independent within the meaning of the independent director guidelines of the NYSE American. Ms. Luvleen Sidhu and Mr. Hodari are not considered independent.

Our Board is divided into three staggered classes of directors. At each annual meeting of our stockholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then expiring, as follows:

the Class I directors will be Aaron Hodari and Pankaj Dinodia, and their terms will expire at the annual meeting of stockholders to be held in 2021;

the Class II directors will be A.J. Dunklau, Marcy Schwab, and Mike Gill, and their terms will expire at the annual meeting of stockholders to be held in 2022; and

the Class III directors will be Luvleen Sidhu and Brent Hurley, and their terms will expire at the annual meeting of stockholders to be held in 2023.

Our Charter provides that the Company Board will consist of one or more members, and the number of directors may be increased or decreased from time to time by a resolution of the Company Board. Each director’s term will continue until the election and qualification of his or her successor, or his or her earlier death, resignation, or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of directors. This classification of the Company Board may have the effect of delaying or preventing changes in control of the Company.

Each of the Company’s officers will serve at the discretion of the Company Board and will hold office until his or her successor is duly appointed and qualified or until his or her earlier resignation or removal. There are no family relationships among any of the persons expected to be directors or officers of the Company upon the consummation of the Business Combination. The Company Board has appointed Pankaj Dinodia as lead director to help management coordinate with the independent directors.

Director Independence

The Company’s Common Stock is listed on the NYSE American. Under the NYSE rules, independent directors must comprise a majority of a listed company’s board of directors. In addition, the NYSE rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be independent. Under the NYSE rules, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Audit committee members must also satisfy the additional independence criteria set forth in Rule 10A-3 under the Exchange Act and the rules of the NYSE. Compensation committee members must also satisfy the additional independence criteria set forth in Rule 10C-1 under the Exchange Act and the NYSE rules.

In order to be considered independent for purposes of Rule 10A-3 under the Exchange Act and under the rules of the NYSE, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the committee, the board of directors, or any other board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries.

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To be considered independent for purposes of Rule 10C-1 under the Exchange Act and under the rules of the NYSE, the board of directors must affirmatively determine that the member of the compensation committee is independent, including a consideration of all factors specifically relevant to determining whether the director has a relationship to the company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (i) the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the company to such director; and (ii) whether such director is affiliated with the company, a subsidiary of the company or an affiliate of a subsidiary of the company.

Our Board has undertaken a review of the independence of each director and considered whether each director of2022, the Company has a material relationship withnot experienced losses on these cash accounts and management believes, based upon the Company that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a resultquality of this review, we determined that Pankaj Dinodia, Mike Gill, Brent Hurley, A.J. Dunklau, and Marcy Schwab will be considered “independent directors” as defined under the listing requirements and rules of the NYSE and the applicable rules of the Exchange Act.

Board Leadership Structure

We believeCustomers Bank, that the structurecredit risk with regard to these deposits is not significant.



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Table of our Board and its committees will provide strong overall management of the Company.

Contents

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Committees of the Company Board

The Company Board has an audit committee, compensation committee and nominating and corporate governance committee. The composition and responsibilities of each of the committees of the Board of Directors is described below. Members serve on these committees until their resignation or until as otherwise determined by the Company Board.

Audit Committee

Each of the members of the Company’s audit committee satisfies the requirements for independence and financial literacy under the applicable rules and regulations of the SEC and rules of the NYSE. The Company also determines that Mr. Dunklau qualifies as an “audit committee financial expert” as defined in the SEC rules and satisfies the financial sophistication requirements of the NYSE. The Company’s audit committee is responsible for, among other things:


selecting a qualified firm to serve as the independent registered public accounting firm to audit the Company’s financial statements;

helping to ensure the independence and performance of the independent registered public accounting firm;

discussing the scope and results of the audit with the independent registered public accounting firm and reviewing, with management and the independent registered public accounting firm, the Company’s interim and year-end financial statements;

developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;

reviewing the Company’s policies on and oversees risk assessment and risk management, including enterprise risk management;

reviewing the adequacy and effectiveness of internal control policies and procedures and the Company’s disclosure controls and procedures; and

approving or, as required, pre-approving, all audit and all permissible non-audit services, other than de minimis non-audit services, to be performed by the independent registered public accounting firm.

The Company Board has adopted a written charter for the audit committee which is available on the Company’s website.

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Compensation Committee

Each of the members of the Company’s compensation committee meet the requirements for independence under the applicable rules and regulations of the SEC and rules of the NYSE. The Company’s compensation committee is responsible for, among other things:

reviewing, approving and determining the compensation of the Company’s officers and key employees;

reviewing, approving and determining compensation and benefits, including equity awards, to directors for service on the Company Board or any committee thereof;

administering the Company’s equity compensation plans;

reviewing, approving and making recommendations to the Company Board regarding incentive compensation and equity compensation plans; and

establishing and reviewing general policies relating to compensation and benefits of the Company’s employees.

The Company Board has adopted a written charter for the compensation committee which is available on the Company’s website.

Nominating and Corporate Governance Committee

Each of the members of the nominating and corporate governance committee meet the requirements for independence under the applicable rules and regulations of the SEC and rules of the NYSE. The nominating and corporate governance committee is responsible for, among other things:

identifying, evaluating and selecting, or making recommendations to the Company Board regarding, nominees for election to our Board and its committees;

evaluating the performance of our Board and of individual directors;

considering, and making recommendations to the Company Board regarding, the composition of our Board and its committees;

reviewing developments in corporate governance practices;

evaluating the adequacy of the corporate governance practices and reporting;

reviewing related person transactions; and

developing, and making recommendations to the Company Board regarding, corporate governance guidelines and matters.

Our Board has adopted a written charter for the nominating and corporate governance committee, which is available on our website.

Code of Conduct and Ethics

We have posted our Code of Conduct and Ethics and expect to post any amendments to or any waivers from a provision of our Code of Conduct and Ethics on our website, and also intend to disclose any amendments to or waivers of certain provisions of our Code of Conduct and Ethics in a Form 8-K.

Compensation Committee Interlocks and Insider Participation

None of the Company’s officers currently serves, and in the past year has not served, (i) as a member of the compensation committee or the board of directors of another entity, one of whose officers served on the Company’s compensation committee, or (ii) as a member of the compensation committee of another entity, one of whose officers served on the Company Board.

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Related Person Policy of the Company

The Company has adopted formal written policy providing that the Company’s officers, directors, nominees for election as directors, beneficial owners of more than 5% of any class of the Company’s capital stock, any member of the immediate family of any of the foregoing persons and any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest, are not permitted to enter into a related party transaction with the Company without the approval of the Company’s nominating and corporate governance committee, subject to the exceptions described below.

A related person transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which the Company and any related person are, were or will be participants in which the amount involves exceeds $120,000. Transactions involving compensation for services provided to the Company as an employee or director are not covered by this policy.

Under the policy, the Company will collect information that the Company deems reasonably necessary from each director, executive officer and, to the extent feasible, significant stockholder, to enable the Company to identify any existing or potential related-person transactions and to effectuate the terms of the policy. In addition, under the Code of Conduct, employees and directors have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest.

The policy will require that, in determining whether to approve, ratify or reject a related person transaction, our nominating and corporate governance committee, or other independent body of our Board, must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, the Company’s best interests and those of our stockholders, as our nominating and corporate governance committee, or other independent body of our Board, determines in the good faith exercise of its discretion.

Our nominating and corporate governance committee has determined that certain transactions will not require the approval of the nominating and corporate governance committee, including certain employment arrangements of officers, director compensation, transactions with another company at which a related party’s only relationship is as a director, non-executive employee or beneficial owner of less than 10% of that company’s outstanding capital stock, transactions where a related party’s interest arises solely from the ownership of our Common Stock and all holders of our Common Stock received the same benefit on a pro rata basis and transactions available to all employees generally.

Item 11.Executive Compensation

Compensation Discussion and Analysis

Prior to the consummation of the business combination, none of Megalith’s executive officers or directors received any cash compensation for services rendered to the Company. Commencing August 2018, we have agreed to pay an entity affiliated with our sponsor a total of $2,000 per month for office space, utilities and secretarial and administrative support. We pay an entity affiliated with our President a fee of approximately $16,667 per month following the consummation of our initial public offering until the earlier of the consummation of our initial business combination or our liquidation as well as a bonus of $78,000 upon successful completion of our initial public offering. On October 31, 2020 and November 15, 2020, the Company ceased making these monthly payments for office space and to an affiliate of the President, respectively. Other than such fees, no compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, were paid by us to our sponsor, officers and directors, or any affiliate of our sponsor or officers, prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). Our audit committee reviewed on a quarterly basis all payments that were made to our sponsor, officers or directors, or our or their affiliates. Any such payments prior to an initial business combination were made using funds held outside the trust account.

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Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth information regarding the beneficial ownership of our shares of common stock as of March 29, 2021 based on information obtained from the persons named below, with respect to the beneficial ownership of shares of our common stock, by:

each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;

each of our executive officers and directors that beneficially owns shares of our common stock; and

all our executive officers and directors as a group.

Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days.

In the table below, percentage ownership is based on 12,200,302 shares of Class A common stock outstanding as of March 29, 2021. The table below does not include the Class A Common Stock underlying the Placement Warrants held or to be held by the Company’s officers or Sponsor because these securities are not currently exercisable within sixty (60) days. This table also assumes that there are no issuances of equity securities under the 2020 Equity Incentive Plan.

Unless otherwise indicated, the Company believes that all persons named in the table have sole voting and investment power with respect to all shares of Common Stock beneficially owned by them. Unless otherwise noted, the business address of each of the following entities or individuals is 201 King of Prussia Road, Suite 350, Wayne, PA 19087.

Name and Address of Beneficial Owner(1) Number of
Shares
Beneficially
Owned
  % of Class 
Directors and Named Executive Officers        
Luvleen Sidhu(1)  809,248   6.64%
Pankaj Dinodia  0   * 
Mike Gill  0   * 
Aaron Hodari(2)  0   * 
Brent Hurley  10,322   * 
A.J. Dunklau  2,064   * 
Marcy Schwab  0   * 
Robert Ramsey(3)  57,805   * 
Robert Diegel(4)  97,612   * 
All executive officers and directors as a group (9 individuals)  977,051   8.01%
         
Greater than Five Percent Holders:        
MFA Investor Holdings LLC(5)  1,019,802   8.4%
Jay S. Sidhu(5)(6)  1,288,870   10.1%
Bhanu Choudhrie(5)(7)  1,121,345   9.2%
OxFORD Asset Management LLP(8)  971,487   8.0%
Schechter Private Capital Funds(9)  1,912,599   15.7%

*Less than 1%
(1)Includes 809,248 shares that Ms. Luvleen Sidhu was directed from CUBI in connection with a severance agreement she entered into with CUBI, which shares are subject to restrictions on transfer and clawback if Ms. Sidhu does not maintain her service to the Company.
(2)Mr. Hodari has indirect interest in the shares of common stock of the Company through his ownership of membership interests in Schechter Private Capital, LLC, but does not have voting or dispositive control over the shares and disclaims ownership of any of the shares of common stock of the Company held by Schechter Private Capital Fund I, LLC.

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(3)Includes 57,805 Merger Consideration Shares that Mr. Ramsey was directed from CUBI in connection with a severance agreement he entered into with CUBI, which shares are subject to restrictions on transfer and clawback if Mr. Ramsey does not maintain his service to the Company.
(4)Includes 96,339 Merger Consideration Shares that Mr. Diegel was directed from CUBI in connection with a severance agreement he entered into with CUBI, which shares are subject to restrictions on transfer and clawback if Mr. Diegel does not maintain his service to the Company.
(5)MFA Investor Holding LLC is the record holder of 1,019,802 of such shares. Jay S. Sidhu, and Bhanu Choudhrie are the managing members and have voting and investment discretion with respect to such shares. As such, they may be deemed to have beneficial ownership of the shares. Each such person disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly. Excludes 300,000 founders shares subject to vesting and forfeiture unless the stock price reaches $15 per share for 20 out of 30 days.
(6)Includes an estimated 209,068 merger consideration shares that Mr. Sidhu received as a CUBI Stockholder, based on Mr. Sidhu’s reported ownership in CUBI as of November 10, 2020.
(7)Includes an estimated 101,543 merger consideration shares that Mr. Choudhrie received as a CUBI Stockholder, based on Mr. Choudhrie’s reported ownership in CUBI as of December 17, 2020.
(8)According to a Schedule 13G filed with the SEC on February 13, 2020, OxFORD serves as investment adviser to OxAM Quant Fund Limited. The address of the principal business office of the reporting person is OxAM House, 6 George Street, Oxford, United Kingdom, OX1 2BW.
(9)According to a Form 3 filed with the SEC on February 3, 2021, includes 924,423 shares held by Schechter Private Capital Fund I, LLC – Series Q and 988,176 shares held by Schechter Private Capital Fund I, LLC – Series Q2. Schechter Private Capital Fund I, LLC is managed by Schechter Private Capital, LLC. Decisions regarding the voting or disposition of the shares held by the foregoing are made by the President of Schechter Private Capital, LLC, Marc Schechter. Mr. Hodari disclaims ownership of any of the shares of common stock of the Company held by Schechter Private Capital Fund I, LLC. The address of Schechter Private Capital Fund I, LLC-Series Q and Schechter Private Capital Fund I, LLC-Series Q2 is 251 Pierce Street, Birmingham, MI 48009.

Item 13.Certain Relationships and Related Transactions, and Director Independence

In November 2017, we issued an aggregate of 4,312,500 founder shares to our sponsor for an aggregate purchase price of $25,000 in cash, or approximately $0.006 per share. In September 2018, 80,278 founder shares were forfeited by our sponsor in connection with partial exercise of the underwriters’ over-allotment option. The founder shares (including the Class A common stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.

Our sponsor and Chardan Capital Markets, LLC (“Chardan”) purchased an aggregate of 6,560,000 private placement warrants at a price of $1.00 per warrant in a private placement that closed simultaneously with the closing of our initial public offering. 5,810,000 private placement warrants were purchased by our sponsor and 750,000 private placement warrants were purchased by Chardan. In connection with the underwriters’ partial exercise of over-allotment option, our sponsor purchased an additional 385,778 warrants. Our sponsor and Chardan are permitted to transfer the private placement warrants held by them to certain permitted transferees, including our and Chardan’s officers and directors and other persons or entities affiliated with or related to them, but the transferees receiving such securities will be subject to the same agreements with respect to such securities as the sponsor. Otherwise, these warrants will not, subject to certain limited exceptions, be transferable or salable until 30 days after the completion of our initial business combination. The private placement warrants are non-redeemable so long as they are held by our sponsor, Chardan or their permitted transferees. The private placement warrants may also be exercised by the sponsor, Chardan and their permitted transferees for cash or on a cashless basis. In addition, for as long as the private placement warrants are held by Chardan or its designees or affiliates, they may not be exercised after five years from the effective date of the registration statement filed in connection with our initial public offering. Otherwise, the private placement warrants have terms and provisions that are identical to those of the warrants being sold as part of the units in our initial public offering, including as to exercise price, exercisability and exercise period.

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Beginning August 2018, we have agreed to pay an entity affiliated with our sponsor, a total of $2,000 per month for office space, utilities and secretarial and administrative support. In October 2020, we ceased paying these monthly fees.

We have been paying Christopher & Waverly, Inc., an entity wholly owned by our President, a fee of approximately $16,667 per month following the consummation of our initial offering. These payments ceased in November 2020.. We also paid a bonus of $78,000 upon successful completion of our initial public offering. 

Other than the foregoing, no compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, were paid by us to our sponsor, officers and directors, or any affiliate of our sponsor or officers, prior to, or in connection with any services rendered in order to effectuate, the consummation of an initial business combination (regardless of the type of transaction that it is). However, these individuals were reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee reviewed on a quarterly basis all payments that were made to our sponsor, officers, directors or our or their affiliates and determined which expenses and the amount of expenses that was to be reimbursed.

Prior to the closing of our initial public offering, our sponsor has agreed to loan us up to $300,000 for a portion of the expenses of our initial public offering. These loans were non-interest bearing, unsecured and were due at the earlier of December 31, 2018 or the closing of our initial public offering. The Company fully repaid these amounts to the Sponsor in September 2018.

We have entered into a registration rights agreement with respect to the private placement warrants, the warrants issuable upon conversion of working capital loans (if any) and the shares of Class A common stock issuable upon exercise of the foregoing and upon conversion of the founder shares.

Item 14.Principal Accountant Fees and Services.

The following is a summary of fees paid or to be paid to WithumSmith+Brown, PC, or Withum, for services rendered.

Audit Fees. Audit fees consist of fees for professional services rendered for the audit of our year-end financial statements and services that are normally provided by Withum in connection with regulatory filings. The aggregate fees of Withum for professional services rendered for the audit of our annual financial statements, review of the financial information included in our Forms 10-Q for the respective periods and other required filings with the SEC for the fiscal years ended December 31, 2020 and 2019 totaled approximately $96,049 and $50,915, respectively.

Audit-Related Fees. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. During the fiscal years ended December 31, 2020 and 2019, we did not pay Withum any audit-related fees.

Tax Fees. We did not pay Withum for tax services, planning or advice for the years ended December 31, 2020 and 2019.

All Other Fees. We did not pay Withum for any other services for the years ended December 31, 2020 and 2019.

Pre-Approval Policy

Our audit committee was formed upon the consummation of our initial public offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).

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PART IV

Item 15.Exhibits, Financial Statements and Financial Statement Schedules

(a)The following documents are filed as part of this Report:

(1)Financial Statements

(2)Financial Statements Schedule

All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented in the financial statements and notes thereto in is Item 15 of Part IV below.

(3)Exhibits

We hereby file as part of this report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be obtained on the SEC website at www.sec.gov.

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BM Technologies, Inc.

(formerly known as Megalith Financial Acquisition Corp.)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page No.
Page No.
Report of Independent Registered Public Accounting Firm (KPMG, LLP; Philadelphia, PA; PCAOB ID#185)
F-2
Report of Independent Registered Public Accounting Firm (BDO USA, LLP; Philadelphia, PA; PCAOB ID#243)
Consolidated Balance Sheets at December 31, 2020 and 2019
F-3
Consolidated Statements of Operations for the years ended December 31, 2020 and 201Income (Loss)9
F-4
Consolidated Statements of Changes in Stockholders’Shareholders’ Equity for the years ended December 31, 2020 and 2019
F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019
F-6
Notes to the Consolidated Financial Statements
F-7 – F19
36

F-1
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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Report of Independent Registered Public Accounting Firm


To the StockholdersShareholders and the Board of Directors of

BM Technologies, Inc. (formerly known as Megalith Financial Acquisition Corp.)

:

Opinion on the Consolidated Financial statements

Statements

We have audited the accompanying consolidated balance sheetssheet of BM Technologies, Inc. (formerly known as Megalith Financial Acquisition Corp.)and subsidiaries (the “Company”)Company) as of December 31, 2020 and 2019,2022, the related consolidated statements of operations,income (loss), changes in stockholders’shareholders’ equity, and cash flows for each of the two years in the periodyear ended December 31, 2020,2022, and the related notes (collectively, referred to as the “financial statements”)consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2020 and 2019,2022, and the results of its consolidated operations and its consolidated cash flows for each of the two years in the periodyear ended December 31, 2020,2022, in conformity with U.S. generally accepted accounting principles.


Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ KPMG LLP
We have served as the Company's auditor since 2022.

Philadelphia, Pennsylvania
March 31, 2023
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors
BM Technologies, Inc.
Wayne, Pennsylvania

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of BM Technologies, Inc. (the “Company”) as of December 31, 2021, the related consolidated statements of income, changes in shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.


Basis for Opinion


These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our auditsaudit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our auditsaudit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.


Our auditsaudit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our auditsaudit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provideaudit provides a reasonable basis for our opinion.


/s/ WithumSmith+Brown, PC

BDO USA, LLP

We have served as the Company’sCompany's auditor since 2018.

from 2018 to May 10, 2022.

Philadelphia, Pennsylvania

New York, New York


March

May 10, 2022
31 2021



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F-2
BM TECHNOLOGIES, INC.

BM Technologies, Inc.

(formerly known as Megalith Financial Acquisition Corp.)

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share data)

December 31,
2022
December 31,
2021
ASSETS
Cash and cash equivalents$21,108 $25,704 
Accounts receivable, net allowance for doubtful accounts of $305 and $79 at December 31, 2022 and December 31, 2021, respectively.8,2609,194 
Prepaid expenses and other assets9,0762,099 
Total current assets38,44436,997 
Premises and equipment, net508346 
Developed software, net22,32428,593 
Goodwill5,2595,259 
Other intangibles, net4,4294,749 
Other assets72398 
Total assets$71,036 $76,342 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities$12,684 $6,947 
Taxes payable— 1,807 
Current portion of operating lease liabilities— 416 
Deferred revenue, current6,647 15,387 
Total current liabilities19,331 24,557 
Non-current liabilities:
Deferred revenue, non-current— 190 
Liability for private warrants2,847 13,614 
Total liabilities22,178 38,361 
Commitments and contingencies (Note 8)
Shareholders’ equity:
Preferred stock: Par value $0.0001 per share; 10,000,000 shares authorized, none issued or outstanding at both December 31, 2022 and December 31, 2021.$— $— 
Common stock: Par value $0.0001 per share; 1 billion shares authorized; 12,240,237 shares issued and outstanding at December 31, 2022; 12,193,378 shares issued and outstanding at December 31, 2021.
Additional paid-in capital72,342 60,686 
Accumulated deficit(23,485)(22,706)
   Total shareholders’ equity$48,858 $37,981 
   Total liabilities and shareholders’ equity$71,036 $76,342 

  December 31,
2020
  December 31,
2019
 
       
ASSETS
       
CURRENT ASSETS      
Cash $43,178  $482,665 
Prepaid expenses and other assets  40,672   37,571 
         
Total current assets  83,850   520,236 
         
OTHER ASSETS        
Marketable securities held in trust account  27,713,815   175,410,617 
Escrow for private placement  20,002,872   - 
         
Total other assets  47,716,687   175,410,617 
         
TOTAL ASSETS $47,800,537  $175,930,853 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
CURRENT LIABILITIES        
Accounts payable $1,656,199  $111,968 
Private placement received in advance  20,002,872   - 
Income taxes payable  -   572,160 
Franchise taxes payable  30,000   80,000 
Due to affiliates  45,000   - 
         
Total current liabilities  21,734,071   764,128 
         
LONG TERM LIABILITIES        
Deferred underwriting fee payable  6,771,556   6,771,556 
         
Total long term liabilities  6,771,556   6,771,556 
         
Total liabilities  28,505,627   7,535,684 
         
COMMITMENTS AND CONTINGENCIES        
Class A common stock subject to possible redemption, $0.0001 par value, 1,415,287 and 16,177,739 shares at redemption value of $10.10 per share at December 31, 2020 and December 31, 2019, respectively.  14,294,907   163,395,164 
         
STOCKHOLDERS’ EQUITY        
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding  -   - 
Class A Common Stock; $0.0001 par value; 100,000,000 shares authorized; 1,236,327 and 751,150 shares issued and outstanding (excluding 1,415,287 and 16,177,739 shares subject to possible redemption), as of December 31, 2020 and December 31, 2019, respectively  124   76 
Class B Common Stock; $0.0001 par value; 10,000,000 shares authorized; 4,232,222 shares issued and outstanding as of December 31, 2020 and December 31, 2019.  423   423 
Additional paid-in capital  3,233,443   2,342,794 
Retained earnings  1,766,013   2,656,712 
         
Total stockholders’ equity  5,000,003   5,000,005 
         
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $47,800,537  $175,930,853 

TheSee accompanying notes are an integral part of theseto the consolidated financial statements.

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BM TECHNOLOGIES, INC.

BM Technologies, Inc.

(formerly known as Megalith Financial Acquisition Corp.)

CONSOLIDATED STATEMENTS OF OPERATIONS

INCOME (LOSS)
(amounts in thousands, except per share data)
Twelve Months Ended
December 31,
20222021
Operating revenues:
Interchange and card revenue$22,318 $28,078 
Servicing fees44,581 45,105 
Account fees8,992 10,543 
University fees5,734 5,693 
Other revenue1,972 5,286 
   Total operating revenues83,597 94,705 
Operating expenses:
Technology, communication, and processing29,176 29,338 
Salaries and employee benefits39,926 38,036 
Professional services10,747 10,395 
Provision for operating losses6,798 5,419 
Occupancy1,022 949 
Customer related supplies894 1,815 
Advertising and promotion741 654 
Merger and acquisition related expenses290 65 
Other expense3,259 2,368 
   Total operating expenses92,853 89,039 
 (Loss) income from operations(9,256)5,666 
Non-operating income and expense:
Gain on fair value of private warrant liability8,066 17,225 
Interest expense— (96)
(Loss) income before income tax expense(1,190)22,795 
Income tax (benefit) expense(411)5,752 
   Net (loss) income$(779)$17,043 
Weighted average number of shares outstanding - basic11,942 11,851 
Weighted average number of shares outstanding - diluted11,942 11,939 
Net (loss) income per share - basic$(0.07)$1.44 
Net (loss) income per share - diluted$(0.07)$1.43 

  For the year ended  For the year ended 
  December 31,
2020
  December 31,
2019
 
       
OPERATING EXPENSES      
General and administrative $292,252  $155,854 
Legal and professional fees  1,532,958   219,533 
Franchise tax  200,000   200,000 
Support services - related party  185,384   224,000 
         
Total expenses  2,210,594   799,387 
         
OTHER INCOME        
Other income  212,129   - 
Interest income on investments held in Trust Account  1,405,514   3,950,927 
         
Total other income  1,617,643   3,950,927 
         
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES  (592,951)  3,151,540 
         
Income tax expense  297,748   788,018 
         
NET INCOME (LOSS) $(890,699) $2,363,522 
         
Weighted average shares outstanding of Class A common stock  8,655,806   16,928,889 
Basic and diluted net income per share, Class A $0.13  $0.18 
         
Weighted average shares outstanding of Class B common stock  4,232,222   4,232,222 
Basic and diluted net loss per share, Class B $(0.48) $(0.14)

TheSee accompanying notes are an integral part of theseto the consolidated financial statements.

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BM TECHNOLOGIES, INC.

BM Technologies, Inc.

(formerly known as Megalith Financial Acquisition Corp.)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’SHAREHOLDERS’ EQUITY

For the Twelve Months Ended December 31, 2022 and 2021

(amounts in thousands, except share data)


  Common stock  Additional  Retained  Total 
  Class A  Class B  paid-in  earnings  stockholder’s 
  Shares  Amount  Shares  Amount  capital     equity 
Balance, January 1, 2019  985,162  $99   4,232,222  $423  $4,706,292  $293,190  $5,000,004 
                             
Change in shares of Class A common stock subject to redemption  (234,012)  (23)  -   -   (2,363,498)  -   (2,363,521)
                             
Net income  -   -   -   -   -   2,363,522   2,363,522 
                             
Balance, December 31, 2019  751,150  $76   4,232,222  $423  $2,342,794  $2,656,712  $5,000,005 
                             
Change in shares of Class A common stock subject to redemption  14,762,452   1,475   -   -   149,099,294   -   149,100,769 
                             
Redemption of Class A common stock  (14,277,275)  (1,427)  -   -   (148,208,645)  -   (148,210,072)
                             
                             
Net loss  -   -   -   -   -   (890,699)  (890,699)
                             
Balance, December 31, 2020  1,236,327  $124   4,232,222  $423  $3,233,443  $1,766,013  $5,000,003 
Common Stock
Shares of
Common
Stock
Outstanding
Common
Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Balance at December 31, 20206,123,432 $$64,017 $(39,749)$24,269 
Net income— — — 17,043 17,043 
Valuation of private warrants— — (30,839)— (30,839)
Recapitalization transaction4,759,911 — 16,148 — 16,148 
Issuance of common stock as compensation1,308,535 — 9,518 — 9,518 
Issuance of common stock upon exercise of warrants1,500 — 17 — 17 
Share-based compensation expense— — 1,825 — 1,825 
Balance at December 31, 202112,193,378 $$60,686 $(22,706)$37,981 
Net loss— — — (779)(779)
Conversion of private warrants to public warrants— — — 724 — 724 
Issuance of common stock as compensation6,000 — — 37 — 37 
Tax paid on behalf of employees related to net settlement of share-based awards— — (425)— (425)
Issuance of common stock upon exercise of warrants100 — — 
Share-based compensation expense40,759 — — 11,319 — 11,319 
Balance at December 31, 202212,240,237 $1 $72,342 $(23,485)$48,858 


The



See accompanying notes are an integral part of theseto the consolidated financial statements.

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BM TECHNOLOGIES, INC.

BM Technologies, Inc.

(formerly known as Megalith Financial Acquisition Corp.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

Twelve Months Ended
December 31,
20222021
Cash Flows from Operating Activities:
Net (loss) income$(779)$17,043 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation of premises and equipment298 193 
Loss on disposal of premises and equipment38 — 
Amortization of developed software11,445 11,444 
Amortization of other intangible assets320 321 
Amortization of leased assets326 820 
Provision for bad debt226 79 
Impairment of software assets— 215 
Share-based compensation expense11,356 11,343 
Gain on fair value of private warrant liability(8,066)(17,225)
Changes in operating assets and liabilities:
Accounts receivable708 760 
Prepaid expenses and other current assets(6,976)249 
Other assets— (365)
Accounts payable and accrued liabilities5,737 (1,314)
Taxes payable(1,807)1,807 
Operating lease liabilities(416)(715)
Deferred revenue(8,930)2,888 
Net Cash provided by Operating Activities3,480 27,543 
Cash Flows from Investing Activities:
Development of internal use software(5,176)(595)
Purchases of premises and equipment(499)(138)
Net Cash used in Investing Activities(5,675)(733)
Cash Flows from Financing Activities:
Repayments of borrowings— (21,000)
Proceeds from recapitalization transaction— 16,888 
Proceeds from exercise of warrants17 
Repurchase of private warrants(1,977)— 
Payments related to net settlement of share-based compensation awards(425)— 
Net Cash used in Financing Activities(2,401)(4,095)
Net (Decrease) Increase in Cash and Cash Equivalents(4,596)22,715 
Cash and Cash Equivalents – Beginning25,704 2,989 
Cash and Cash Equivalents – Ending$21,108 $25,704 
Supplementary Cash Flow Information:
Income taxes paid, net of refunds8,123 4,224 
Interest paid— 178 
Noncash Operating, Investing and Financing Activities:
Shares issued to settle Megalith accounts payable in connection with recapitalization transaction— 740 

  For the year ended  For the year ended 
  December 31,
2020
  December 31,
2019
 
       
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income (loss) $(890,699) $2,363,522 
Adjustments to reconcile net income (loss) to net cash used in operating activities:        
Interest earned in Trust Account  (1,405,514)  (3,950,927)
Other income remitted directly to Trust Account  (212,129)  - 
Changes in operating assets and liabilities:        
Prepaid expenses and other assets  (3,101)  34,298 
Accounts payable  1,544,231   (146,591)
Income taxes payable  (572,160)  355,314 
Franchise taxes payable  (50,000)  (120,000)
         
Net cash flows used in operating activities  (1,589,372)  (1,464,384)
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Cash released from Trust Account for Class A common stock redemptions  148,155,560   - 
Cash moved to escrow from private placement received in advance  (20,002,872)  - 
Investment income released from Trust Account to pay taxes  1,104,885   754,104 
         
Net cash flows provided by financing activities  129,257,573   754,104 
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Cash used for Class A common stock redemptions  (148,155,560)  - 
Proceeds from private placement received in advance  20,002,872   - 
Proceeds from due to affiliates  45,000   - 
         
Net cash flows used in financing activities  (128,107,688)  - 
         
NET CHANGE IN CASH  (439,487)  (710,280)
         
CASH, BEGINNING OF YEAR  482,665   1,192,945 
         
CASH, END OF YEAR $43,178  $482,665 
         
Supplemental disclosure of noncash activities:        
Change in value of Class A common stock subject to possible redemption $(149,100,257) $2,363,521 
Supplemental cash flow disclosure:        
Income taxes paid $904,885  $432,704 

TheSee accompanying notes are an integral part of theseto the consolidated financial statements.

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BM TECHNOLOGIES, INC.

BM Technologies, Inc.

(formerly known as Megalith Financial Acquisition Corp.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NoteNOTE 1 — DESCRIPTION OF THE BUSINESS AND MERGER TRANSACTION

Description of Organization andthe Business Operations


BM Technologies, Inc. (“BMTX” or “the Company”) (formerly known as BankMobile) provides state-of-the-art high-tech digital banking and disbursement services to consumers and students nationwide through a full service fintech banking platform, accessible to customers anywhere and anytime through digital channels.

BMTX facilitates deposits and banking services between a customer and our partner bank, Customers Bank, a Pennsylvania state-chartered bank, which is a related party and is a Federal Deposit Insurance Corporation (“FDIC”) insured bank. BMTX’s business model leverages partners’ existing customer bases to achieve high volume, low-cost customer acquisition in its Higher Education Disbursement, Banking-as-a-Service (“BaaS”), and niche Direct to Consumer (“D2C”) banking businesses. BMTX has four primary revenue sources: interchange and card revenue, servicing fees, account fees, and university fees. The majority of revenues are driven by customer activity (deposits, spend, transactions, etc.) and may be paid or passed through by Customers Bank, universities, or paid directly by customers.

BMTX is a Delaware corporation, originally incorporated as Megalith in November 2017 and renamed BM Technologies, Inc. in January 2021 at the time of the merger between Megalith and BankMobile. Until January 4, 2021, BankMobile was a wholly-owned subsidiary of Customers Bank, a wholly-owned subsidiary of Customers Bancorp, Inc.

Customers Bank holds the FDIC insured deposits that BMTX sources and services and is the issuing bank on BMTX’s debit cards. Customers Bank pays the Company a servicing fee for the deposits generated and passes through interchange income earned from transactions on debit cards. On November 7, 2022, the Company and Customers Bank amended the Deposit Processing Services Agreement (the “DPSA Amendment”). The DPSA Amendment, among other things, will facilitate the transfer of the Company’s serviced deposits to a new partner bank and extends the termination date of the Deposit Processing Services Agreement until the earlier of: (i) entry into a definitive agreement with a new partner bank to transfer the Company’s serviced deposits to such partner bank and the successful completion of such transfer; or (ii) June 30, 2023.

BMTX is not a bank, does not hold a bank charter, and does not provide banking services, and as a result, it is not subject to direct banking regulation, except as a service provider to our partner bank. BMTX is also subject to the regulations of the Department of Education (“ED”), due to its student disbursements business, and is periodically examined by it. BMTX’s contracts with most of its Higher Education institution clients require it to comply with numerous laws and regulations, including, where applicable, regulations promulgated by the ED regarding the handling of student financial aid funds received by institutions on behalf of their students under Title IV of the Higher Education Act of 1965; the Family Educational Rights and Privacy Act of 1995; the Electronic Fund Transfer Act and Regulation E; the USA PATRIOT Act and related anti-money laundering requirements; and certain federal rules regarding safeguarding personal information, including rules implementing the privacy provisions of the Gramm-Leach-Bliley Act. Other products and services offered by BMTX may also be subject to other federal and state laws and regulations.
Seasonality

BMTX’s Higher Education serviced deposits fluctuate throughout the year due primarily to the inflow of funds typically disbursed at the start of a semester. Serviced deposit balances typically experience seasonal lows in December and July and experience seasonal highs in September and January when individual account balances are generally at their peak. Debit spend follows a similar seasonal trend, but may slightly lag increases in balances.

Merger with Megalith Financial Acquisition Corp.) (the “Company”) was incorporated in Delaware on November 13, 2017. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).

Corporation

Business Combination


On January 4, 2021, the Company it consummated the previously announced business combination (the “Closing”) contemplated the AgreementBankMobile, Megalith, and Plan of Merger, dated as of August 6, 2020 (as amended, the “Merger Agreement”), by and among the Company, MFAC Merger Sub Inc., a Pennsylvania corporation and an indirect wholly-owned subsidiary ofconsummated the Company (“Merger Sub”), BankMobile Technologies, Inc., a Pennsylvania corporation (“BankMobile”), Customers Bank, a Pennsylvania state chartered bank andtransaction contemplated by the sole stockholder of BankMobile (“Customers Bank”), and Customers Bancorp, Inc., a Pennsylvania corporation and the parent bank holding company for Customers Bank.

The “Company” refers to the combined company following the Merger, together with its subsidiaries, and to Megalith Financial Acquisition Corp. prior to the closing of the Merger. “MFAC” refers to the Company prior to the closing of the Merger and “BankMobile” refers to Bank Mobile Technologies, Inc., prior to the Merger

merger agreement entered into on August 6, 2020, as amended. In connection with the closing of the Merger (the “Closing”), MFACmerger, Megalith changed its name to BM Technologies, Inc.

Business Prior to the Business Combination

All activity through December 31, 2020 related to Effective January 6, 2021, Megalith’s units ceased trading, and the Company’s formationcommon stock and Initial Public Offering, which is described below,warrants began trading on the NYSE American under the symbols “BMTX” and since“BMTX-WT,” respectively.



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The merger was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under U.S. GAAP, BankMobile was treated as the offering,“acquirer” company for financial reporting purposes and as a result, the Merger.transaction was treated as the equivalent of BankMobile issuing stock for the net assets of Megalith, accompanied by a recapitalization. The Company did not generate any operating revenues through the completionexcess of the Business Combination. The Company did generate non-operating income in the form of interest income earned on investments from the proceeds derived from the Initial Public Offering. The registration statement for the Company’s initial public offering (“Initial Public Offering”) was declared effective on August 23, 2018. On August 28, 2018, the Company consummated the Initial Public Offering of 15,000,000 units (“Units”) with respect to the Class A Common Stock included in the Units being offered (the “Public Shares”) at $10.00 per Unit generating gross proceeds of $150,000,000, which is discussed in Note 3.

Simultaneously with the closingfair value of the Initial Public Offering,shares issued over the Company consummated the sale of 6,560,000 warrants (“Private Placement Warrants”) at a price of  $1.00 per Private Placement Warrant in a private placement to the Company’s sponsor, MFA Investor Holdings, LLC ($5,810,000) (the “Sponsor”) and Chardan Capital Markets, LLC ($750,000) (“Chardan”), generating gross proceeds of $6,560,000, which is described in Note 4.

Offering costs for the Initial Public Offering amounted to $10,521,211, consisting of $3,192,889 of underwriting fees, $6,771,556 of deferred underwriting fees payable (which are held in the Trust Account (defined below)) and $556,766 of other costs. As described in Note 5, the $6,771,556 deferred underwriting fee became payable upon completion of the Business Combination.

Following the closing of the Initial Public Offering on August 28, 2018, an amount of $151,500,000 ($10.10 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement Warrants was placed in a trust account (“Trust Account”) and was invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account, as described below.

F-7

On September 21, 2018, the Company consummated the closing of the sale of 1,928,889 additional Units upon receiving notice of the underwriter’s election to partially exercise its overallotment option (“Overallotment Units”), generating additional gross proceeds of $19,288,890 and incurring additional offering costs of $964,445 in underwriting fees which were partially deferred until the completion of the Company’s initial Business Combination. Simultaneously with the exercise of the overallotment, the Company consummated the Private Placement of an additional 385,778 Private Placement Warrants to the Sponsor, generating gross proceeds of $385,778.

Entry Into a Materially Definitive Agreement

On August 6, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, MFAC Merger Sub Inc., a Pennsylvania corporation and (“Merger Sub”) a wholly-owned subsidiary of the Company, BankMobile Technologies, Inc., a Pennsylvania corporation (“BankMobile”) and Customers Bank, a Pennsylvania state chartered bank and the sole stockholder of BankMobile (the “Stockholder”).

Pursuant to the Merger Agreement, at the closing of the transactions contemplated by the Merger Agreement (the “Closing”), BankMobile will merge with and into Merger Sub, with Merger Sub continuing as the surviving corporation (the “Surviving Corporation”).

The aggregate consideration to be paid pursuant to the Merger Agreement to the Stockholder will be an amount (the “Merger Consideration”) equal to: (i) $140,000,000 (the “Enterprise value”), minus (ii) $9,324,323 (“Sponsor Equity Adjustment”), plus (or minus, if negative) (iii) BankMobile’s net working capital less a target net working capital of $10,000,000, minus (iv) the aggregate amount of any outstanding indebtedness of BankMobile at Closing, and minus (v) the amount of any unpaid transaction expenses of BankMobile, the Company’s transaction expenses and other liabilities of the Company due and owing at the Closing.

The Merger Consideration will consist of cash and stock. The cash portion of the Merger Consideration (“Cash Consideration”) will be equal to (A) the amount of any proceeds of the PIPE Investment (described below under “Private Placement”); plus (B) an amount equal to one-half (1/2) of the difference between the (i) cash and cash equivalents of the Company, including any funds in the Trust Account after giving effect to the completion of the redemption of shares of the Company’s public stockholders (“Redemption”), less (ii) a cash reserve to be used for the benefit of the Surviving Corporation in the Merger, in the amount of $10,000,000 (such difference between clause (i) and (ii) which resulting amount if otherwise negative shall be equal to zero, being the “Remaining Trust Account Amount”); minus (C) the Company’s transaction expenses and other liabilities of the Company due and owing at the Closing; plus (D) the cash and cash equivalents of BankMobile; minus (E) BankMobile’s unpaid transaction expenses; minus (F) a cash reserve in the amount of $5,000,000. The stock portion of the Merger Consideration consists of a number of shares of the Company’s Class A common stock (the “Merger Consideration Shares”) with an aggregate value equal to (the “Merger Consideration Share Amount”) (a) the Merger Consideration, minus (b) the Cash Consideration, with the Stockholder receiving a number of shares of the Company Class A common stock equal to the Merger Consideration Share Amount, divided by $10.38 (the “Per Share Price”).

F-9

The Merger Consideration is subject to adjustment after the Closing based on confirmed amounts of the net working capital,monetary assets of Megalith was recognized as an adjustment to shareholders’ equity. There was no goodwill or other intangible assets recorded in the outstanding indebtednessmerger. Prior periods presented for comparative purposes represent the balances and activity of BankMobile and any unpaid transaction expenses of BankMobile, asBM Technologies, Inc. (other than shares which were retroactively restated in connection with the merger).

The following table provides a summary of the Closing Date. If the adjustment is a negative adjustment in favorsignificant sources and uses of the Company, the Stockholder will deliver to the Company a number of shares of Class A common stock of the Company with a value equal to the absolute value of the adjustment amount (with each share valued at the Per Share Price). If the adjustment is a positive adjustment in favor of BankMobile, the Company will issue to the Stockholder an additional number of shares of Class A common stock of the Company with a value equal to the adjustment amount (with each share valued at the Per Share Price). The Merger Consideration is also subject to reduction for the indemnification obligations of the Stockholder.

On November 2, 2020, the Company entered into a First Amendment to Agreement and Plan of Merger (the “First Amendment”) with the other parties to the Agreement and Plan of Merger, dated as of August 6, 2020 (the “Original Agreement”, and as amended, including by the First Amendment, the “Merger Agreement”), by and among, the Company, MFAC Merger Sub Inc., a Pennsylvania corporation and a wholly-owned subsidiary of the Company (“Merger Sub”), BankMobile, and Customers Bank, a Pennsylvania state chartered bank and the sole stockholder of BankMobile (“Customers Bank”), and with Customers Bancorp, a Pennsylvania corporation and the sole shareholder of Customers Bank (“Customers Bancorp”).

The Original Agreement provided that a portion of the consideration payable to Customers Bank in the Proposed Transaction was to be paid in shares (the “Merger Consideration Shares”) of the Company’s Class A common stock to Customers Bank. Pursuant to the First Amendment, the Original Agreement was amended to provide that (i) Customers Bancorp would become a party to the Merger Agreement, (ii) the Merger Consideration Shares will now be issued to the stockholders of Customers Bancorp, and (iii) Customers Bancorp may at its discretion, upon written notice to the Company, redirect or reallocate the distribution of the Merger Consideration Shares at any time priorcash related to the closing of the Proposed Transaction (the “Closing”)merger transaction:

(amounts in thousands)
Cash at Megalith$27,669 
Cash from PIPE (private investment in public entity) investors20,003 
Total sources of cash47,672 
Cash paid to underwriters and other transaction costs(3,987)
Cash paid to Customers Bank as consideration(23,125)
Cash from recapitalization transaction (A)20,560 
Cash used to pay down BMTX debt(8,834)
Cash received by BMTX and used to pay down debt(6,738)
Total cash used to pay down outstanding debt (B)(15,572)
Net cash received by BMTX from the reverse recapitalization transaction through March 31, 2021 (A+B)4,988 
90 day merger true-up, cash paid by BMTX in May 2021(3,672)
Final cash received by BMTX from the reverse recapitalization transaction through December 31, 2021$1,316 

The following table provides a reconciliation of the common shares related to other parties. Additionally, the Original Agreementmerger:

Shares held by legacy BankMobile shareholders - December 31, 20206,123,432 
Shares related to the recapitalization transaction - January 4, 20216,076,946 
   Total shares issued and outstanding - January 4, 202112,200,378 

BankMobile was amendeddetermined to provide that, subject to certain exceptions, there will be restrictionsthe accounting acquirer based on the sale or transferfollowing predominant factors:

Customers Bank stockholders had the largest portion of voting rights in the post-combination company;
The board of directors and senior management of the Merger Consideration Shares forpost-combination company are primarily composed of individuals associated with BankMobile;
BankMobile was the larger entity based on historical operating activity, assets, revenues, and employees at the time of the closing of the merger;
The ongoing operating activities of the post-combination company comprise those of BankMobile; and
BankMobile paid a periodpremium in the exchange of twelve months after the Closing, rather than for a periodequity interests.

NOTE 2 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of 180 days after the Closing as contemplated by the Lock-Up Agreement attachedPresentation

These consolidated financial statements have been prepared in conformity with U.S. GAAP. Any reference to applicable guidance is meant to refer to the Original Agreement.

Going Concernauthoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Liquidity

In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board's Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity's Ability to Continue as athe Financial Accounting Standards Board (“FASB”).



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ASC 205-40, Presentation of Financial Statements - Going Concern” the Company had until January 4, 2021, requires management to consummate one or more business combinations, meeting certain conditions, or else it would cease all operations except for the purpose of liquidating. The Company closed a qualified business combination on January 4, 2021. Management had initially determined that the mandatory liquidation, should a business combination not occur, and potential subsequent dissolution raised substantial doubt about the Company's ability to continue as a going concern. Given that the Company underwent the business combination on January 4, 2021, the conditions raising substantial doubt concerning the Company’sassess an entity’s ability to continue as a going concern have been alleviated.

within one year of the date the financial statements are issued. In each reporting period, including interim periods, an entity is required to assess conditions known and reasonably knowable as of the financial statement issuance date to determine whether it is probable an entity will not meet its financial obligations within one year from the financial statement issuance date.

F-10
Management has performed this required assessment as of March 31, 2023, including consideration of the effect of the Second Amendment to the Deposit Processing Services Agreement (the “DPSA Second Amendment”) and the 2023 Deposit Servicing Agreement with Customers Bank, see Note 15 - Subsequent Events for additional information, and believes there is sufficient funds available to support its ongoing business operations and continue as a going concern for at least the next 12 months with projected liquidity of $21 million at March 31, 2024.

Management’s assessment is subject to known and unknown risks, uncertainties, assumptions, and changes in circumstances, many of which are beyond our control including the impact of the macroeconomic environment, and that are difficult to predict as to timing, extent, likelihood, and degree of occurrence, and that could cause actual results to differ from estimates and forecasts, potentially materially.

Note 2 — SummaryBased upon the results of Significant Accounting Policies

Basis of Presentation

The accompanyingManagement’s assessment, these consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted inhave been prepared on a going concern basis. The consolidated financial statements do not include any adjustments that could result from the United States of America (“U.S. GAAP”) and pursuant to the rules and regulationsoutcome of the SEC.

aforementioned risks and uncertainties.

Principles of Consolidation


Consolidation Policy

The accompanying


These consolidated financial statements include the accounts of the Company and MFAC Merger Sub Inc., its wholly owned subsidiary.wholly-owned subsidiaries. All significant intercompany balancesaccounts and transactions have been eliminated in consolidation.

Reclassification


Use of Estimates

Certain amounts


These financial statements reflect all normal and recurring adjustments that are, in the prior period consolidated financial statements have been reclassifiedopinion of management, necessary to conform to the presentationpresent a fair statement of the current period consolidated financial statements. These reclassifications had no effect onposition and the previously reported net income.

Emerging Growth Company

The Company is an “emerging growth company” as defined in Section 102(b)(1)results of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison of the Company’s consolidated financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Cashoperations and cash equivalents

The Company considers all short-term investments with an original maturityflows of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of December 31, 2020 and 2019.

Redeemable Common Stock

As discussed in Note 1 – Description of Organization and Business Operations, all of the 16,928,889 shares held by public stockholders outstanding contained a redemption feature which allowsBMTX for the redemption of Class A common stock under the Company’s liquidation or tender offer and stockholder approval provisions. In accordance with Financial Accounting Standard Board (“FASB”) Topic ASC 480, “Distinguishing Liabilities from Equity,” (“ASC 480”) redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. On May 26, 2020, the Company’s stockholders approved an extension of the date by which the Company must consummate an initial business combination from May 28, 2020 to August 28, 2020 (or November 30, 2020 if the Company has executed a definitive agreement for an initial business combination by August 28, 2020, which was subsequently extended for two more months before the Merger closed on January 4, 2021). In connection with this extension, on June 3, 2020, 13,733,885 shares of Class A common stock were redeemed for an approximate total value of $142.6 million from the Trust Account. During December 2020 an additional 543,390 shares of Class A common stock were redeemed for an approximate total value of $5.6 million

The Company recognizes changes in redemption value immediately as they occur and will adjust the carrying value of the security at the end of each reporting period. Increases or decreases in the carrying number of redeemable shares of Class A common stock shall be affected by charges against additional paid in capital.

Accordingly, at December 31, 2020, 1,415,287 shares of the outstanding 2,651,614 shares of Class A common stock included in the units at the Public Offering were classified outside of permanent equity at approximately $10.10 per share. At December 31, 2019, 16,177,739 shares of Class A common stock included in the units at the Public Offering were classified outside of permanent equity at approximately $10.10 per share.

F-11

Offering Costs

Offering costs consist principally of legal, accounting, underwriting fees and other costs directly related to the Initial Public Offering. Offering costs amounting to $9,556,766 were charged to stockholders’ equity upon the completion of the Initial Public Offering and an additional $964,445 were charged to stockholders’ equity upon the underwriter’s partial exercise of the over-allotment.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Corporation coverage limits of $250,000. At December 31, 2020 and 2019, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such account.

Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature.

Net Income (Loss) Per Share

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income per share is computed by dividing net income applicable to common stockholders by the weighted average number of shares of common stock outstanding for the period. The Company has not considered the effect of the warrants sold in the Initial Public Offering and Private Placement to purchase an aggregate of 23,874,667 shares of Class A common stock in the calculation of diluted earnings per share, since their inclusion would be anti-dilutive under the treasury stock method.

The Company’s statements of operations includes a presentation of income per share for common stock subject to redemption in a manner similar to the two-class method of income per share. Net income per share, basic and diluted for Class A common stock is calculated by dividing the investment income earned on the Trust Account and Other Income of $1,617,643 and $3,950,927, net of applicable income and franchise taxes of $497,748 and $988,018 by the weighted average number of 8,655,806 and 16,928,889 shares of Class A common stock outstanding for the years ended December 31, 2020 and December 31, 2019, respectively. Net income (loss) per share, basic and diluted for Class B common stock is calculated by dividing the net income, less income attributable to Class A common stock, by the weighted average number of shares of Class B common stock outstanding for the period.

Use of Estimates

periods presented. The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, andthe disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.periods. Significant estimates include valuation of deferred tax assets, valuation of the private warrants, goodwill, and intangible asset impairment analysis. Actual results could differ from those estimates.

Income Taxes


Segment Reporting


The Company followsconducts its operations through a single operating segment and, therefore, one reportable segment. Operating segments are revenue-generating components of a company for which separate financial information is internally produced for regular use by the Chief Operating Decision Maker (“CODM”) to allocate resources and assess the performance of the business. Our CODM, Luvleen Sidhu, our Chief Executive Officer (“CEO”), uses a variety of measures to assess the performance of the business; however, detailed profitability information of the nature that could be used to allocate resources and assess the performance of the business are managed and reviewed for the Company as a whole.

Customer and Vendor Concentrations

At December 31, 2022 and December 31, 2021, Customers Bank accounted for 17% and 61% of our total Accounts receivable, net, respectively. At December 31, 2022 and December 31, 2021, a BaaS partner accounted for 60% and 13% of our total Accounts receivable, net, respectively. At December 31, 2022 and December 31, 2021, MasterCard accounted for 10% and 17% of our total Accounts receivable, net, respectively.

For the twelve months ended December 31, 2022 and 2021, Customers Bank, through a Deposit Processing Services Agreement and Amendment thereof, accounted for 89% and 87% of our Total operating revenues, respectively. See Note 14 – Related Party Transactionsfor additional information. Certain of these revenues are paid directly by MasterCard or individual account holders to the Company.

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For the twelve months ended December 31, 2022 and 2021, there is one vendor that accounted for 12% and 12% of our Total operating expenses, respectively.

Prior Period Adjustments

Certain prior period amounts have been adjusted to conform to the current period presentation.

Balance Sheet Adjustments

In preparation of the Company’s consolidated financial statements as of and for the twelve months ended December 31, 2022, the Company identified that its reserve for losses resulting from fraud or theft-based transactions that have generally been disputed by BMTX serviced deposit account holders and a related receivable were previously presented on a net basis as a component of Other assets. The Company reviewed this presentation and concluded that these amounts are better presented on a gross basis including the reserve for losses as a component of Accounts payable and accrued liabilities and including the receivable for any billable reimbursements from Customers Bank as a component of Accounts receivable, net.

In addition, the MasterCard quarterly fee assessment was reclassified from Accounts payable and accrued liabilities to Accounts receivable, net to better present the fee assessment balance.

Finally, the Company identified certain prepaid taxes that were previously included as a component of Other assets. The Company reviewed this presentation and concluded that these amounts are better presented as a component of Prepaid expenses and other current assets due to their short-term nature.

The effect of these immaterial adjustments has increased Accounts receivable, net by $33 thousand, increased Prepaid expenses and other current assets by $320 thousand, decreased Other assets by $439 thousand, and decreased Accounts payable and accrued liabilities by $86 thousand at December 31, 2021.

Statement of Income (Loss) Adjustments

In preparation of the Company’s consolidated financial statements as of and for the twelve months ended December 31, 2022, the Company identified certain expenses that were previously included as a component of Customer related supplies and Occupancy that are better presented as a component of Technology, communication, and processing.

In addition, the Company identified card replacement fees reimbursed from a BaaS partner were recognized as a component of Account fees and Other revenue when only the margin of those fees should have been recognized as revenue and the reimbursable expense should have been recognized as a component of Customer related supplies.

The effect of these immaterial adjustments for the twelve months ended December 31, 2021:

Decreased revenue from Account fees by $125 thousand,
Decreased revenue from Other revenue by $157 thousand,
Increased expenses from Technology, communication, and processing by $365 thousand,
Decreased expenses from Occupancy by $248 thousand, and
Decreased expenses from Customer related supplies by $399 thousand.

The impact of these adjustments had no effect on Net (loss) income.

Significant Accounting Policies

As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised ASUs applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use the extended transition period under the JOBS Act.

Business Combinations

Business combinations are accounted for by applying the acquisition method in accordance with FASB ASC 805, Business Combinations. Under the acquisition method, identifiable assets acquired and liabilities assumed are measured at their fair values as of the date of acquisition, and are recognized separately from goodwill. Results of operations of the acquired entity are included in the statement of income from the date of acquisition. BMTX recognizes goodwill when the acquisition price exceeds the estimated fair value of the net assets acquired.

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Cash and Cash Equivalents

Our cash is maintained at Customers Bank, with a large majority of our cash balances at December 31, 2022 exceeding the FDIC’s $250,000 insured limit per account. We have not experienced losses on cash balances exceeding the federally insured limits, but there can be no assurance that we will not experience such losses in the future.

Accounts Receivable

Accounts receivable primarily relate to billings for deposit processing services provided to Customers Bank in addition to reimbursements to be received from a BaaS partner, as described in collaborative arrangements below, MasterCard incentive income, and uncollected university subscription and disbursement services fees. These amounts are recorded at face amounts less an allowance for doubtful accounts. Management evaluates accounts receivable and establishes the allowance for doubtful accounts based on historical experience, analysis of past due accounts, and other current available information. Accounts receivable deemed to be uncollectible are individually identified and are charged-off against the allowance for doubtful accounts.

Premises and Equipment

Premises and equipment are recorded at cost less accumulated depreciation. Depreciation is charged to operations on a straight-line basis over the estimated useful lives of the assets or, in the case of leasehold improvements, the lease period, if shorter. Upon disposal or retirement of property and equipment, cost and related accumulated depreciation are removed from the accounts. Gains and losses from dispositions are credited or charged to operations. Expenditures for ordinary maintenance and repairs are charged to expense. Additions or betterments to property and equipment are capitalized at cost.

Developed Software

Developed software includes internally developed software and developed software acquired in the Higher One Disbursement business acquisition. Internally developed software and related capitalized work-in-process costs relate to the development of digital banking platforms to connect BaaS banking customers to partner banks.

BMTX capitalizes certain internal and external costs incurred to develop internal-use software during the application development stage. BMTX also capitalizes the cost of specified upgrades and enhancements to internal-use software that result in additional functionality. Once a development project is substantially complete and the software is ready for its intended use, BMTX begins amortizing these costs on a straight-line basis over the internal-use software’s estimated useful life, which range from three to seven years.

The Higher One Disbursement business developed software is related to the disbursement business services to colleges and universities and delivering services to students. The Higher One Disbursement business developed software was recorded at the amount determined by a third-party valuation expert at acquisition date and was estimated based on expected revenue attributable to the software utilizing a discounted cash flow methodology, giving consideration to potential obsolescence. The estimated useful life of the Higher One Disbursement business developed software is 10 years.

The Company reviews the carrying value of developed software for impairment by measuring the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. If the Company determines that the carrying amount is impaired, the asset is written down to fair value. Fair value is determined based on discounted cash flows or management’s estimates, depending on the nature of the assets. There was no impairment recognized for the twelve months ended December 31, 2022. There was $0.2 million of impairment recognized for the twelve months ended December 31, 2021.

Goodwill and Other Intangibles

Goodwill represents the excess of the purchase price over the identifiable net assets of businesses acquired through business combinations accounted for under the acquisition method.


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Goodwill is reviewed for impairment annually as of October 31 and between annual tests when events and circumstances indicate that impairment may have occurred. The goodwill impairment charge represents the amount by which the reporting unit’s carrying amount exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. BMTX applies a qualitative assessment to determine if the Step 1 quantitative impairment test is necessary.

Other intangible assets represent purchased assets that lack physical substance, but can be distinguished from goodwill because of contractual or other legal rights. Intangible assets that have finite lives, such as university relationships, are subject to impairment testing. Intangible assets are amortized on a straight-line basis over a period of twenty years.

Other intangibles subject to amortization are reviewed for impairment under FASB ASC 360, Property, Plant and Equipment, which requires that a long-lived asset or asset group be tested for recoverability whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.

As part of its qualitative assessment, BMTX reviewed regional and national trends in current and expected economic conditions. BMTX also considered its own historical performance, expectations of future performance, indicative deal values, and other trends specific to its industry. Based on its qualitative assessment, BMTX determined that there was no evidence of impairment of the balance of goodwill or other intangible assets. As of December 31, 2022 and 2021, Goodwill was $5.3 million and Other intangibles, net was $4.4 million and $4.7 million, respectively.

Leases

BMTX enters into lease agreements primarily for the use of office space, all which are classified as operating leases. At lease commencement date, BMTX recognizes right-of-use (“ROU”) assets and lease liabilities measured at the present value of lease payments over the lease term. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease expense for rental payments are recognized on a straight-line basis over the lease term and are included in Occupancy. In addition to rent, BMTX pays taxes and maintenance expenses, including an annual increase in operating expenses over the initial year’s expenses under certain leases as variable lease payments.

Deferred Revenue

Deferred revenue consists of payments received from customers, most significantly from Customers Bank, prior to the performance of services. Deferred revenue is recognized over the service period on a straight-line basis or when the contractual performance obligation has been satisfied. The Company classifies deferred revenue on the Consolidated Balance Sheets in Deferred revenue, current and Deferred revenue, non-current.

Public & Private Warrants

The Company has public and private warrants outstanding as a result of the merger transaction which occurred on January 4, 2021. Each warrant entitles the registered holder to purchase one whole share of common stock at a price of $11.50 a share. The warrants expire January 4, 2026, or earlier upon redemption or liquidation and the Company has redemption rights if our common stock trades above $24.00 for 20 out of 30 days. The private warrants are identical to the public warrants except that the private warrants are non-redeemable and exercisable on a cashless basis so long as they are held by the sponsor and certain others. The private warrants and the public warrants are treated differently for accounting purposes.

In accordance with FASB ASC Topic 480, Distinguishing Liabilities from Equity, theprivate warrants are accounted for as liabilities and will be marked-to-market each reporting period with the change recognized in earnings. In general, under the mark-to-market accounting model, as the Company’s stock price increases, the warrant liability increases, and the Company recognizes additional expense in its Consolidated Statements of Income (Loss) – the opposite when the stock price declines. Accordingly, the periodic revaluation of the private warrants could result in significant volatility in our reported earnings. For the twelve months ended December 31, 2022 and 2021, respectively, the Company recognized gains of $8.1 million and $17.2 million. The amounts recognized are a mark-to-market accounting determination and are non-cash.


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In accordance with FASB ASC Topic 480, Distinguishing Liabilities from Equity, the public warrants are treated as equity instruments. Accordingly, the public warrants are not marked-to-market each reporting period, thus there is no impact to earnings. Any future exercises of the public warrants will be recorded as cash received and recorded in Cash and cash equivalents, with a corresponding offset to Additional paid-in capital in equity.

Income Taxes

BMTX accounts for income taxes under the liability method of accounting for income taxes. The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognizedto be paid or refunded for the estimated futurecurrent period by applying the provisions of the enacted tax consequences attributablelaw to the taxable income or excess of deductions over revenues. BMTX determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the balance sheet carrying amountsbook and tax bases of existing assets and liabilities, and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a changechanges in tax rates isand laws are recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

F-12

FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts were accrued for the payment of interest and as of December 31, 2020 or 2019. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Current income taxes are based on the year’s income taxable for federal and state income tax reporting purposes. Total tax provision may differ from the statutory tax rates applied to income before provision for income taxes due principally to expenses charged which are not tax deductible.

they occur.

The total provision for income taxes is comprised of the following for the years ended:


  December 31,
2020
  December 31,
2019
 
Current expense $297,748  $788,018 
Deferred expense  (657,341)  (235,116)
Change in valuation allowance  657,341   235,116 
         
Total income tax expense $297,748  $788,018 

The net deferred tax assets and liabilities in the accompanying balance sheets included the following components:

  December 31,
2020
  December 31,
2019
 
Deferred tax assets $657,341  $235,116 
Deferred tax liabilities  -   - 
Valuation allowance for deferred tax assets  (657,341)  (235,116)
         
Net deferred tax assets $-  $- 

The deferred tax assets as of December 31, 2020 and 2019 were comprised of the tax effect of cumulative temporary differences as follows:

  December 31,
2020
  December 31,
2019
  
Capitalized expenses before business combination $657,341  $235,116 
Valuation allowance for deferred tax assets  (657,341)  (235,116)
         
Total $-  $- 

F-13

In assessing the realizationrealizability of federal or state deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax assets,liabilities, projected future taxable income and prudent, feasible and permissible as well as available tax planning strategies in making this assessment. After consideration


A tax position is recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the term upon examination includes resolution of the related appeals or litigation process. A tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment.

Loss Contingencies

In the ordinary course of business, the Company is regularly subject to various claims, suits, regulatory inquiries, and investigations. The Company records a liability for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable, and the loss can be reasonably estimated. Management has also identified certain other legal matters where they believe an unfavorable outcome is not probable and, therefore, no reserve is established. Although management currently believes that resolving claims against the Company, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the Company’s business, financial position, results of operations, or cash flows, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. The Company also evaluates other contingent matters, including income and non-income tax contingencies, to assess the likelihood of an unfavorable outcome and estimated extent of potential loss. It is possible that an unfavorable outcome of one or more of these lawsuits or other contingencies could have a material impact on the liquidity, results of operations, or financial condition of the information available, Management believesCompany.

Revenue Recognition

BMTX’s revenues from interchange and card revenue, servicing fees, account fees, and university fees are within the scope of FASB ASC 606, Revenue from Contracts with Customers. The Company recognizes revenue in accordance with ASC 606 when the performance obligations related to the transfer of services under the terms of a contract are satisfied. Some obligations are satisfied at a point in time while others are satisfied over a period of time. Revenue is recognized as the amount of consideration to which the Company expects to be entitled to in exchange for transferring services to a customer. The Company’s customer contracts do not contain terms that require significant uncertainty exists with respectjudgment to future realizationdetermine the variability impacting the transaction price. A performance obligation is deemed satisfied when the control over services is transferred to the customer. Control is transferred to a customer either at a point in time or over time. To determine when control is transferred at a point in time, the Company considers indicators, including but not limited to the right to payment, transfer of significant risk and rewards of ownership, and acceptance by the customer. When control is transferred over a period of time, the output method is used to measure progress for the transfer. The measure of progress used to assess completion of the deferred tax assetsperformance obligation is based on time over the period of service. We assess our revenue arrangements against specific criteria in order to determine if we are acting as principal or agent. The Company determined that it is the agent in contracts for interchange and has thereforecard revenue, and presents these revenues net of related expenses under ASC 606.
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Interchange and card revenue

Interchange fees are earned whenever debit cards serviced by BMTX are processed through card payment networks. Interchange fees are recognized concurrent with the processing of the card transaction. Card revenue includes foreign ATM fees and MasterCard incentive income. ATM fees are recognized when the fee is deducted from the serviced account; MasterCard incentive income is primarily tied to debit spend volume and is recognized concurrent with spend.

Servicing fees

BMTX sources and services deposit accounts for Customers Bank and in exchange is paid servicing fees. Servicing fees and terms are established by individually negotiated contractual agreements. A fixed rate is applied to the daily average deposit balances. In all periods, servicing fees are recognized monthly based on average daily balances.

Account fees

BMTX earns account fees on BMTX serviced deposit accounts for transaction-based, account maintenance services. Account maintenance fees, which relate primarily to monthly maintenance fees for BMTX serviced accounts that do not meet minimum deposit balance requirements, are earned on a full valuation allowance. monthly basis representing the period over which BMTX satisfies its performance obligation. Transaction-based fees, which include services such as wire transfer fees, card replacement, and cash deposit via Green Dot network fees, are recognized at the time the transaction is executed. Service charges on deposit accounts are withdrawn from the depositor’s account balance.

University fees

BMTX earns university fees from Higher Education clients in exchange for financial aid and other student refund disbursement services provided. BMTX facilitates the distribution of financial aid and other refunds to students, while simultaneously enhancing the ability of the higher education institutions to comply with the federal regulations applicable to financial aid transactions. For these services, Higher Education institution clients are charged an annual subscription fee and/or per-transaction fee (e.g., check issuance, new card, card replacement fees) for certain transactions. The annual subscription fee is recognized ratably over the period of service using the output method and the transaction fees are recognized when the transaction is completed. BMTX typically enters into long-term (generally three or five-year initial term) contracts with Higher Education institutions to provide these refund management disbursement services.

Advertising and Promotion

Advertising and promotion costs are expensed as incurred.

Collaborative Arrangements

In the normal course of business, BMTX may enter into collaborative arrangements primarily to develop and commercialize banking products to its partners’ customers. Collaborative arrangements are contractual agreements with third-parties that involve a joint operating activity where both BMTX and the collaborating BaaS partner are active participants in the activity and are exposed to the significant risks and rewards of the activity. Collaborative activities typically include research and development, technology, product development, marketing, and day-to-day operations of the banking product. These agreements create contractual rights and do not represent an entity in which we have an equity interest. BMTX accounts for its rights and obligations under the specific requirements of the contracts. These arrangements often require the sharing of revenue and expense. BMTX’s expenses incurred pursuant to these arrangements are reported net of any payments due to or amounts due from BMTX’s BaaS partners, which are recognized at the time the BaaS partner becomes obligated to pay.

For the two years in the periodtwelve months ended December 31, 2022 and 2021, respectively, BMTX recognized proceeds of $7.5 million and $15.7 million, respectively, from collaborative arrangements. These proceeds include $1.4 million, and $5.3 million, respectively, in revenues, primarily recorded in Other revenue and Interchange and card revenue on the Consolidated Statements of Income (Loss) and $6.1 million and $10.4 million, respectively, in expense reimbursements, primarily recorded in Salaries and employee benefits and Professional services on the Consolidated Statements of Income (Loss).


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Share-Based Compensation Expense

The Company uses share-based compensation, including stock, restricted stock units and performance stock units, to provide long-term performance incentives for its employees and directors. Share-based compensation is recognized on a straight-line basis over the requisite service period of the award based on their grant-date fair value for time-based awards. Compensation related to performance-based awards are recognized over the period the performance obligation is expected to be satisfied. Forfeitures are recognized as they occur. Share-based compensation expense is included in Salaries and employee benefits. In addition, the holders of restricted shares may elect to surrender a portion of their shares on the vesting date to cover their income tax obligations.

Provision for Operating Losses

The provision for operating losses represents BMTX’s payments for losses resulting from fraud or theft-based transactions that have generally been disputed by BMTX serviced deposit account holders, as well as an estimated cost for disputes that have not been resolved as of the end of the reporting period. The estimate is based on historical rates of loss on such transactions. The estimated exposure was $0.4 million and $0.2 million at December 31, 2022 and 2021 respectively; the changes period over period are presented within Provision for Operating Losses on the Consolidated Statements of Income (Loss).

Merger and Acquisition Related Expenses

In connection with previous unconsummated mergers, BMTX incurred $0.3 million and $0.1 million in merger and acquisition expenses for the twelve months ended December 31, 2022 and 2021 respectively. All merger related costs are included within Merger and acquisition related expenses on the Consolidated Statements of Income (Loss).

Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes.” The ASU reduces cost and complexity related to the accounting for income taxes by eliminating the need for an organization to analyze whether certain exceptions apply in a given period and improving financial statement preparers’ application of certain income tax-related guidance. This ASU is part of the FASB’s simplification initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted the standard on January 1, 2021. The adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Accounting Standards Issued but Not Yet Adopted

From time to time, new accounting pronouncements are issued by the FASB that are adopted by BMTX as of the required effective dates. ASUs not listed below were assessed and determined to be either not applicable or to not have a material impact on BMTX’s financial statements taken as a whole.

ASU 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and 2022-06 – Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. In March 2020, the valuation allowance was $657,341FASB issued ASU 2020-04 which provided optional expedients and $235,116, respectively.

exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met contained in topic 848. In December 2022, the FASB issued ASU 2022-06 which deferred the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The Company has determined that ASU 2020-04 and ASU 2022-06 will not have a material impact on its consolidated financial statements and related disclosure.

A reconciliation

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity.


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This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted earnings per share when an instrument may be settled in cash or shares.

As a smaller reporting company, ASU 2020-06 is effective for BMTX for fiscal years beginning after December 15, 2023. Entities should adopt the guidance as of the statutory federalbeginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact that ASU 2020-06 may have on its consolidated financial statements and related disclosures.

NOTE 3 — ACCOUNTS RECEIVABLE
Accounts receivable, net primarily relate to billings for deposit processing services to Customers Bank, MasterCard incentive income, tax rate (benefit)uncollected university subscription and disbursement services fees, and receivables from our BaaS partners, and are recorded at face amounts less an allowance for doubtful accounts. Management evaluates accounts receivable and establishes the allowance for doubtful accounts based on historical experience, analysis of past due accounts, and other current available information.

Accounts receivable deemed to be uncollectible are individually identified and are charged-off against the allowance for doubtful accounts. The allowance for doubtful accounts was $0.3 million at December 31, 2022 and $0.1 million at December 31, 2021.

(amounts in thousands)Beginning BalanceAdditionsReductionsEnding Balance
Allowance for doubtful accounts
Twelve months ended December 31, 2021$— $171 $(92)$79 
Twelve months ended December 31, 2022$79 $381 $(155)$305 


NOTE 4 — PREMISES AND EQUIPMENT AND DEVELOPED SOFTWARE

Premises and equipment

The components of premises and equipment were as follows:
(amounts in thousands)Expected Useful LifeDecember 31,
2022
December 31,
2021
Leasehold improvements5 years$— $28 
Furniture, fixtures, and equipment10 years135 243 
IT equipment3 to 5 years1,377 1,813 
1,512 2,084 
Accumulated depreciation(1,004)(1,738)
Total$508 $346 
Depreciation is recorded in Occupancy expense on the Consolidated Statements of Income (Loss). BMTX recorded depreciation expense of $0.3 million and $0.2 million, for the twelve months ended December 31, 2022 and 2021, respectively.


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Developed software
The components of developed software were as follows:
(amounts in thousands)Expected Useful LifeDecember 31,
2022
December 31,
2021
Higher One Disbursement business developed software10 years$27,400 $27,400 
Internally developed software3 to 7 years42,504 41,683 
Work-in-process3,077 421 
72,981 69,504 
Accumulated amortization(50,657)(40,911)
Total$22,324 $28,593 

Amortization is recorded in Technology, communication and processing expense on the Consolidated Statements of Income (Loss). BMTX recorded amortization expense of $11.4 million for the twelve months ended December 31, 2022 and 2021, respectively.

Impairment is reported in Technology, communication and processing expense on the Consolidated Statements of Income (Loss). BMTX recorded impairment expense of zero and $0.2 million for the twelve months ended December 31, 2022 and 2021, respectively.
NOTE 5 — GOODWILL AND OTHER INTANGIBLES
Goodwill represents the excess of the purchase price over the identifiable net assets of the businesses acquired through business combinations accounted for under the acquisition method. Other intangibles, net represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights. We have one intangible asset which is being amortized on a straight-line basis over twenty years.

Goodwill is reviewed for impairment annually as of October 31 and between annual tests when events and circumstances indicate that impairment may have occurred. There was no goodwill impairment for the twelve months ended December 31, 2022 and 2021.

Other intangibles, net includes assets subject to amortization that are reviewed for impairment under FASB ASC 360, Property, Plant and Equipment. There was no impairment for Other intangibles, net for the twelve months ended December 31, 2022 and 2021.

The components of Other intangibles, net as of December 31, 2022 and 2021 were as follows:
(amounts in thousands)Expected Useful LifeDecember 31,
2022
December 31,
2021
Customer relationships – universities20 years$6,402 $6,402 
Accumulated amortization(1,973)(1,653)
Total$4,429 $4,749 

Amortization is recorded in Other expense on the Consolidated Statements of Income (Loss). BMTX recorded amortization expense of $0.3 million for the twelve months ended December 31, 2022 and 2021, respectively.
The customer relationships - universities will be amortized in future periods as follows:
2023$320 
2024320 
2025320 
2026320 
After 20263,149 
Total$4,429 
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NOTE 6 — LEASES
At December 31, 2021, BMTX leased two offices under operating leases. On March 31, 2022, one of the two office leases matured and we exited our New Haven, CT office facility. On September 30, 2022, the second office lease matured at our Wayne, PA office. On October 1, 2022, the Company entered into a 3-month short-term lease extension for this office under substantially identical terms and conditions as the original lease. At December 31, 2022, the 3-month short-term lease extension expired and was not renewed.

The following table summarizes operating lease ROU assets and operating lease liabilities and their corresponding classification on the Company’s effective taxConsolidated Balance Sheets:
(amounts in thousands)ClassificationDecember 31,
2022
December 31,
2021
Assets:
Operating lease ROU assetsOther assets$— $398 
Liabilities:
Operating lease liabilitiesOperating lease liabilities$— $416 

Operating lease expenses are recorded in Occupancy on the Consolidated Statements of Income (Loss). BMTX recorded lease expense of $0.5 million and $1.0 million, for the twelve months ended December 31, 2022 and 2021, respectively.
Cash paid pursuant to operating lease liabilities totaled $0.4 million and $0.7 million for the twelve months ended December 31, 2022 and 2021. These cash payments are reported as a component of cash flows provided by operating activities in the Consolidated Statements of Cash Flows.
The following table summarizes the weighted average remaining lease term and discount rate is as follows:

for BMTX’s operating leases at December 31, 2022 and 2021:
December 31,
2022
December 31,
2021
Weighted average remaining lease term (years)
Operating leases0.0 years0.6 years
Weighted average discount rate
Operating leases— %1.0 %

  December 31,
2020
  December 31,
2019
 
Statutory federal income tax rate  21.0%  21.0%
State taxes, net of federal tax benefit  0.0%  0.0%
Valuation allowance  -71.2%  4.0%
Income tax provision expense (benefit)  -50.2%  25.0%

NOTE 7 — BORROWINGS FROM CUSTOMERS BANK
In 2021, BMTX had a $10.0 million line of credit with Customers Bank, which is a related party of the Company. The amount that may be borrowed was subject to a borrowing base limit based on a percentage of BMTX’s accounts receivable balance. The $10.0 million line of credit carried an interest rate equal to one-month LIBOR plus 375 bps. LIBOR means the One Month London Inter-Bank Offered Rate as published in the Money Section of the Wall Street Journal on the last U.S. business day of the month, but in no event shall the LIBOR rate used for the line of credit be less than 50 basis points. Interest was paid monthly in arrears with the principal due in its entirety at the maturity date per the original arrangement. Borrowed funds could have been repaid at any time without penalty. The line of credit was originally scheduled to mature on January 4, 2022. On November 30, 2021, BMTX and Customers Bank agreed to terminate the line of credit. There was zero balance outstanding under the line of credit as of December 31, 2022 and 2021.

Recent Accounting Pronouncements

NOTE 8 — COMMITMENTS AND CONTINGENCIES

The Company’s managementLoss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are any such matters that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, wouldwill have a material effect on the Company’s consolidated financial statements.

Note 3 — Initial Public Offeringstatements that are not currently accrued for. However, in light of the uncertainties inherent in these matters, it is possible that the ultimate resolution may have a material adverse effect on BMTX’s results of operations for a particular period, and Private Placement

future changes in circumstances or additional information could result in accruals or resolution in excess of established accruals, which could adversely affect BMTX’s results of operations, potentially materially.

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NOTE 9 — SHAREHOLDERS’ EQUITY AND PRIVATE WARRANT LIABILITY

The Consolidated Statements of Changes in Shareholders’ Equity reflect the reverse recapitalization and merger with Megalith as of January 4, 2021, as discussed in Note 1 - Description of the Business and Merger Transaction. Since BMTX was determined to be the Initial Public Offering, the Company sold 16,928,889 units at a price of $10.00 per Unit. Each Unit consists of one share of Class A Common Stock (such shares of Class A Common Stock includedaccounting acquirer in the Units being offered,transaction, all periods prior to the “Public Shares”), and one redeemable warrant (each, a “Public Warrant”). Each Public Warrant entitles the holder to purchase one share of Class A Common Stock at a price of $11.50 per share, subject to adjustment (see Note 6).

Note 4 — Related Party Transactions

Founder Shares

On November 13, 2017, the Sponsor purchased 4,312,500 shares (the “Founder Shares”) of the Company’s Class B Common Stock, par value $0.0001 (“Class B Common Stock”) for an aggregate price of $25,000. The Founder Shares converted into Class A common stock upon consummation of the Merger on a one-for-one basis.

The Founder Shares included up to 562,500transaction reflect the balances and activity of BMTX (other than shares subject to forfeiture to the extent that the 45-day over-allotment option was not exercised in full by the underwriters. Since the underwriters exercised the over-allotment option in part, the Sponsor forfeited 80,278 Founder Shares on September 21, 2018. The Founder Shares forfeited by the Sponsorwhich were cancelled by the Company.

The Initial Stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.

F-14

Private Placement Warrants

Concurrently with the closing of the Initial Public Offering, the Sponsor and Chardan purchased an aggregate of 6,560,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant (5,810,000 by the Sponsor and 750,000 by Chardan) for an aggregate purchase price of $6,560,000. Each whole Private Placement Warrant is exercisable for one whole share of Class A Common Stock at a price of $11.50 per share (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuances of equity or equity-linked securities). Concurrently with the underwriter’s partial exercise of the over-allotment, the Company consummated a private sale of an additional 385,778 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Unit generating gross proceeds of $385,778. The proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering and the underwriter’s partial exercise of the over-allotment are held in the Trust Account.

Registration Rights

The holders of Founder Shares, Private Placement Warrants and Warrants that may be issued upon conversion of working capital loans, if any, are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A Common Stock) pursuant to a registration rights agreement. These holders will be entitled to certain demand and “piggyback” registration rights.

The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of working capital loans, if any, are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A Common Stock) pursuant to a registration rights agreement dated August 23, 2018. These holders are entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurredretroactively restated in connection with the filing of any such registration statements.

transaction).

Related Party Loans


On November 27, 2017, the Sponsor had agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note, amended and restated on June 30, 2018 (the “Note”). This loan was non-interest bearing and payable on the earlier of December 31, 2018 or as soon as practical after the Initial Public Offering. The Company had drawn $2,000 on the Note as of December 31, 2017 and had borrowed an additional $105,500 in 2018. The Company fully repaid these amounts to the Sponsor in September 2018. 

Support Services

The Company presently occupies office space provided by an affiliate of the Sponsor. The affiliate has agreed that, until the Company consummates a Business Combination, it will make such office space, as well as certain administrative and support services, available to the Company, as may be required by the Company from time to time. The Company will pay the affiliate an aggregate of $2,000 per month for such office space, administrative and support services. The Company ceased paying for the office space in October 2020. For the years ending December 31, 2020 and 2019, the total support services costs were $20,000 and $24,000, respectively.

The Company will pay an entity affiliated with the President a fee of approximately $16,667 per month until the earlier of the consummation of the Business Combination or liquidation. A bonus of $78,000 was paid out after the successful completion of the Initial Public Offering. The Company ceased paying the President on approximately November 15, 2020. The total amount paid to this entity was $165,384 and $200,000 for the two years in the period ended December 31, 2020, respectively.

F-15

Note 5 — Commitments and Contingencies

Underwriting Agreement

The Company had granted the underwriters a 45-day option to purchase up to 2,250,000 additional Units to cover over-allotments at the Initial Public Offering price less the underwriting discounts and commissions. On September 21, 2018, the underwriters exercised a partial exercise of their overallotment option and purchased 1,928,889 units at a purchase price of $10.00 per unit.

The underwriters were paid a cash underwriting discount of $0.20 per unit, or approximately $3 million in the aggregate at the closing of the Initial Public Offering and $192,889 in conjunction with the underwriters’ partial exercise of its overallotment option. In addition, the underwriters are entitled to a deferred underwriting commissions of $0.40 per unit, or approximately $6 million in the aggregate from the closing of the Initial Public Offering and $771,556 from the underwriters’ partial exercise of its overallotment option will be payable to the underwriters. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

Note 6 — Stockholders’ Equity

Common Stock


Class A Common Stock

The Company is authorized to issue 100,000,0001,000,000,000 shares of Class A Common Stock with acommon stock, par value of $0.0001 per share. At December 31, 2020 and 2019,2022, there were 1,236,327 and 751,150 (excluding 1,415,287 and 16,177,73912,240,237 shares of Class A Common Stock subject to possible redemption) shares of Class A Common Stockcommon stock issued and outstanding, respectively.

which includes the 300,000 performance shares discussed below. At December 31, 2021, there were 12,193,378 shares of common stock issued and outstanding, which includes the 300,000 performance shares discussed below.

Class B Common

Each holder of common stock is entitled to one vote for each share of common stock held of record by such holder on all matters on which stockholders generally are entitled to vote. The holders of common stock do not have cumulative voting rights in the election of directors. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all stockholders present in person or represented by proxy, voting together as a single class.

Preferred Stock

The Company is authorized to issue 10,000,000 shares of Class B Common Stock with apreferred stock, par value of $0.0001 per share. Holders of Class B Common Stock are entitled to one vote for each share. As of December 31, 2020 and 2019, there were 4,232,222 shares of Class B Common Stock outstanding after giving effect to the forfeiture of 80,278 shares to the Company by the Sponsor for no consideration since the underwriters’ 45-day over-allotment option was not exercised in full, so that the Initial Stockholders collectively own 20% of the Company’s issued and outstanding Common Stock after the Initial Public Offering.

Holders of Class A Common Stock and Class B Common Stock will vote together as a single class on all other matters submitted to a vote of stockholders except as required by law.

The shares of Class B Common Stock were automatically converted into Class A common stock at the time of a Merger on a one-for-one basis.

F-16

Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stockshare, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s boardBoard of directors. AsDirectors. At December 31, 20202022 and 2019,2021, there were no shares of preferred stock issued or outstanding.


Private Placement

Performance Shares

The Company has 300,000 common shares, par value $0.0001 per share, issued and outstanding, that contain a restrictive legend, subject to release only if the vesting criteria are met before the seventh anniversary of the closing date of the merger with Megalith. If the vesting criteria are not met prior to the seventh anniversary of the closing date of the merger, the shares will be forfeited and cancelled. The vesting criteria are met when either (1) the volume weighted average price of the Company’s common stock on the principal exchange on which such securities are then listed or quoted shall have been at or above $15.00 for twenty (20) trading days (which need not be consecutive) over a thirty (30) trading day period; or (ii) the Company sells shares of its capital stock in a secondary offering for at least $15.00 per share, in each case subject to equitable adjustment for share splits, share dividends, reorganizations, combinations, recapitalizations, and similar transactions affecting the shares of the Company’s common stock after the merger, and possible reduction for certain dividends granted to the Company’s common stock, or (2) the Company undergoes certain change in control or sales transactions. None of the vesting criteria for the performance shares were met during the twelve months ended December 31, 2022 or 2021 and no expense has been recognized.

Dividend Policy

We have not paid any cash dividends on our common stock to date, and have no present intention to pay cash dividends in the future. The payment of cash dividends by the Company in the future will be dependent upon the Company’s revenues and earnings, capital requirements, and general financial condition. The payment of any dividends will be within the discretion of the Board of Directors of the Company.


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January 4, 2021 Share-Based Compensation Award

In connection with the proposed merger between Megalith and BankMobile (the “Merger”), Megalith entered into subscription agreements (the “Subscription Agreements”) with the investors named therein (the “PIPE Investors”), pursuant to whichits January 4, 2021 divestiture of the Company, agreed to issue and sell toCustomers Bank, the PIPE Investors approximately $20,000,000 of Class A common stock immediately prior to closing of the Merger (the “PIPE Investment”). The PIPE Investment is conditioned on the concurrent closingCompany’s former parent, granted 1,317,035 of the merger consideration shares of the Company it received to certain employees and executives of the Company. The share-based compensation award is subject to vesting conditions, including a required service condition from award recipients through January 3, 2023. The grant date fair value of the award, totaling $19.6 million, is recorded as share-based compensation expense in the Company’s Consolidated Statements of Income (Loss) on a straight-line basis over the two year post-grant vesting period, net of any actual forfeitures. The shares awarded are restricted until fully vested. The holders of restricted shares may elect to surrender a portion of their shares on the vesting date to cover their income tax obligations. During the twelve months ended December 31, 2022 and 2021, 88,889 and 0 of the shares awarded were fully vested as a result of the occurrence of certain conditions other customary closing conditions, as suchthan required service, respectively. During the twelve months ended December 31, 2022 and 2021, 26,500 and 33,500 shares were forfeited, respectively.

The change in unvested shares under the January 4, 2021 Share-Based Compensation Award is shown below:
Number of AwardsWeighted-Average Grant-Date Fair Value Per Award
Balance as of December 31, 2020$— $— 
Granted1,317,035 $14.87 
Vested— $— 
Forfeited(33,500)$14.87 
Balance as of December 31, 20211,283,535 $14.87 
Granted0$— 
Vested(88,889)$14.87 
Forfeited(26,500)$14.87 
Balance as of December 31, 20221,168,146 $14.87 

BMTX recorded share-based compensation expense related to these awards of $9.2 million and $9.5 million for the twelve months ended December 31, 2022 and 2021. As of December 31, 2022, unrecognized compensation expense related to the unvested portion related of these awards was approximately $0.1 million which is expected to be recognized in January 2023 when the awards fully vest.

In addition, and in connection with the January 4, 2021 divestiture of the Company, Customers Bank accelerated the vesting for existing restricted stock units and stock options previously granted to certain employees of the Company. The share-based compensation expense, net of forfeitures, associated with the accelerated vesting totaled $0.8 million for the twelve months ended December 31, 2021, and was recorded as a liability at December 31, 2020. The proceeds fromcomponent of Salaries and employee benefits on the PIPE Investment were placed in an escrow account and were used to fund a portionConsolidated Statements of the cash considerationIncome (Loss).

Equity Incentive Plan

Our 2020 Equity Incentive Plan (the “Equity Incentive Plan”) provides for the Merger on January 4, 2021.

In connection with the Private Placement, the Sponsor,grant of incentive stock options, or ISOs, nonstatutory stock options, or NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, and other forms of equity compensation, or collectively, stock awards, all which may be granted to employees, including officers, non-employee directors, and consultants of both the Company and a PIPE Investor entered into an agreement (“Agreementits affiliates. Additionally, the Equity Incentive Plan provides for the grant of performance cash awards. ISOs may be granted only to Transfer Sponsor Securities”),employees. All other awards may be granted to employees, including officers, and to non-employee directors and consultants.


The aggregate number of shares of common stock that may be issued pursuant to which the Sponsor will transfer 178,495 founder shares and 1,311,501 private placement warrants to the PIPE Investor, unless such transfer would trigger a warrant price adjustmentstock awards under the warrant agreement. After the Closing until the PIPE Investor, its affiliates or managed funds collectively hold less than 15%Equity Incentive Plan will not, and currently does not, exceed 10% of the issued and outstanding shares of our common stock. Grants were made under the Equity Incentive Plan for the twelve months ended December 31, 2022 and 2021 as described within Restricted Stock Units and Performance - Based Restricted Stock Units below as well as the grants of unrestricted shares to directors which vest immediately.


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Restricted Stock Units

Restricted Stock Units (“RSUs”) granted under the Equity Incentive Plan generally vest in three equal installments on each anniversary of the grant date. The RSUs that have been granted are all paid in stock upon vesting, and are thus classified as equity awards which are measured using the grant date fair value of BMTX common stock and are not remeasured at the end of each reporting period. We recognize compensation cost starting from the grant date on a straight-line basis over the required vesting period in accordance with ASC 718-10-55-108. We account for forfeitures as they occur and reverse any previously recognized compensation expense related to forfeited awards.

Performance - Based Restricted Stock Units

Performance - Based Restricted Stock Units (“PBRSUs”)granted under the Equity Incentive Plan currently vest upon the later of: a) the third year of employment following the grant date or b) the achievement of the specified performance goals within the fifth year of the grant date. As defined by the Equity Incentive Plan, the Compensation Committee of the Board of Directors determines the number of PBRSUs a participant earns based on the extent to which the corresponding performance goals have been achieved over the five-year performance cycle. The PBRSUs that have been granted are paid in stock upon vesting, and are thus classified as equity awards which are measured using the grant date fair value of BMTX common stock and are not remeasured at the end of each reporting period. We account for forfeitures as they occur and reverse any previously recognized compensation expense related to forfeited awards.

For performance-based RSUs with milestones, upon the grant date, and at each subsequent reporting period, we reassess whether it is probable that we will achieve each operational milestone, and if so, the period when we expect to achieve that operational milestone. If upon the grant date, we determine that achievement of an operational milestone is probable, we allocate the full share-based compensation expense over the period between the grant date and the expected vesting condition achievement date. If upon the grant date, achievement of the operational milestone is not probable, we do not recognize compensation expense. If after the grant date, we determine achievement of an operational milestone becomes probable, we will allocate the full share-based compensation expense over the period between the grant date and the expected vesting condition achievement date, and we will recognize a catch-up expense equal to the value of previously unrecognized expense from the grant date to the vesting condition achievement date.

For performance-based RSUs with a market condition, we used a Monte Carlo simulation to determine the fair value of the PBRSUs on the grant date, and recognize the share-based compensation expense over the derived service period.

The change in unvested RSUs and PBRSUs awarded is shown below:
Restricted Stock UnitsPerformance-Based Restricted Stock Units
Number of RSUsWeighted-Average Grant-Date Fair Value Per RSUNumber of RSUsWeighted-Average Grant-Date Fair Value Per RSU
Balance as of December 31, 20200$— 0$— 
Granted360,100 $8.99 347,500 $7.09 
Vested— $— — $— 
Forfeited(3,000)$9.44 — $— 
Balance as of December 31, 2021357,100 $8.99 347,500 $7.09 
Granted85,540 $7.87 — $— 
Vested(93,275)$9.10 — $— 
Forfeited(24,575)$9.79 (12,500)$7.09 
Balance as of December 31, 2022324,790 $8.84 335,000 $7.09 

For the twelve months ended December 31, 2022 and 2021, the share-based compensation expense related to the RSU awards totaled $1.0 millionand$0.8 million, respectively. At December 31, 2022, unrecognized compensation expense related to the unvested portion of the RSUs was approximately $1.9 million and is expected to be recognized over a term of 2.1 years.

For the twelve months ended December 31, 2022 and 2021, the share-based compensation expense related to the PBRSU awards totaled $1.0 millionand$0.2 million, respectively. At December 31, 2022, unrecognized compensation expense related to the unvested portion of the PBRSUs was approximately $1.1 million and is expected to be recognized over a term of 1.5 years.
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Directors Grants

The Company grants common shares to its Board of Directors on an annual basis. These shares vest immediately upon grant. During the twelve months ended December 31, 2022 and December 31, 2021 the Company granted 1,000 shares of common stock to each of its directors, for a total of 6,000 shares with share-based compensation expense of less than $0.1 million, respectively.

Employee Stock Purchase Plan (“ESPP”)

The Company has an ESPP (the “BM Technologies Inc. 2021 Employee Stock Purchase Plan”) which has an effective date of May 1, 2021. The purpose of the ESPP is to provide eligible employees with an incentive to advance the interests of the Company and its Subsidiaries, by affording them an opportunity to purchase stock of the Company.

Company at a favorable price. As of December 31, 2022, there have been no shares purchased on behalf of employees under the ESPP, as the program has not yet been made available for employee participation.

Warrants Public Warrants may only be exercised

At December 31, 2022 and 2021, respectively, there were 22,703,004 and 23,873,167 warrants to purchase our common stock outstanding. The warrant totals for each period-end consist of 17,227,189 and 16,927,389 public warrants and 5,475,815 and 6,945,778 private warrants, as of December 31, 2022 and 2021, respectively.

Each whole warrant entitles the registered holder to purchase one whole share of common stock at a whole numberprice of shares. No fractional$11.50 per share. The warrants will be issued upon separationexpire five years after the completion of the Units and only whole warrants will trade. The Public Warrants will expire on Januarymerger with Megalith (January 4, 20262026) or earlier upon redemption or liquidation.

Theliquidation; the Company will not be obligated to deliver any shares of Class Ahas redemption rights if our common stock pursuant to the exercisetrades above $24.00 for 20 out of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the30 days. The private warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available.

The Company agreed to as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, use its reasonable best efforts to file with the SEC, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its reasonable best efforts to qualify the shares under applicable blue sky laws to the extent an exemption is not available.

Redemptions of Warrants for Cash — The Company may redeem the Public Warrants:

in whole and not in part;

at a price of $0.01 per warrant;

upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and

if, and only if, the reported last sale price of the Company’s Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

F-17

Redemption of Warrants for Shares of Class A Common Stock — Commencing May 21, 2021, the Company may redeem the outstanding warrants (including both Public Warrants and Private Placement Warrants):

in whole and not in part;
at a price equal to a number of shares of Class A common stock to be determined, based on the redemption date and the fair market value of the Company’s Class A common stock;
upon a minimum of 30 days’ prior written notice of redemption; and
if, and only if, the last reported sale price of the Company’s Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

If the Company calls the Public Warrants for redemption for cash, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants.

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering,public warrants except that the Private Placement Warrantsprivate warrants are non-redeemable and the Class A common stock issuable upon the exercise of the Private Placement Warrants were not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Placement Warrants will be exercisable on a cashless basis and be non-redeemable for cash so long as they are held by the initial purchasers or their permitted transferees. Ifsponsor and certain other original holders.


As of December 31, 2022, 1,600 of the Private Placement Warrants are held by someone other thanCompany’s outstanding public warrants have been exercised and 1,169,963 of the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemableprivate warrants have been repurchased by the Company and exercisable by such holders onfrom related parties at $1.69 per warrant. During the same basis astwelve months ended December 31, 2022, 300,000 of the Public Warrants.

Note 7 — Trust Account and Fair Value Measurement

The Trust Account can be invested in U.S. government securities, withinprivate warrants have been reclassified to public warrants based upon a sale of the meaning set forth in the Investment Company Act, having a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selectedprivate warrants by the Company meetingoriginal holders which resulted in a modification of terms that effect classification as public warrants. During the conditions of Rule 2a-7 oftwelve months ended December 31, 2022, there were 100 public warrants exercised. During the Investment Company Act.

twelve months ended December 31, 2021, there were no repurchases, exercises, or reclassifications related to the private warrants and there were 1,500 public warrants exercised.

The private warrants and the public warrants are treated differently for accounting purposes, as follows:
Private Warrants

The Company’s amended


In accordance with FASB ASC Topic 480, Distinguishing Liabilities from Equity, theprivate warrants are accounted for as liabilities and restated certificate of incorporation provide that, other than the withdrawal of interest to pay income and franchise taxes and up to $100,000 of interest to pay dissolution expenses if any, none of the funds held in the Trust Account will be released until the earlier of: (i) the completion of the Business Combination; (ii) the redemption of Public Shares properly tendered in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete the Business Combination within the Combination Period or (iii) the redemption of 100% of the Public Shares if the Company is unable to complete a Business Combination within the Combination Period.

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value atmarked-to-market each reporting period and non-financial assets and liabilities that are re-measured and reported atwith the change in fair value at least annually.

recognized in earnings. In general, under the mark-to-market accounting model, as our stock price increases, the private warrant liability increases, and we recognize additional expense in our Consolidated Statements of Income (Loss) – with the opposite when our stock price declines. Accordingly, the periodic revaluation of the private warrants could result in significant volatility in our reported earnings.

F-18

Opening Balance Sheet Impact: As of the date of our merger with Megalith on January 4, 2021, the $30.8 million fair value of the private warrants was recorded as a warrant liability on our Consolidated Balance Sheets in Liability for private warrants with a corresponding offset to Additional paid-in capital within equity. The fair value of the Company’sprivate warrants was estimated using a modified version of the Black-Scholes option pricing formula. We assumed a term for the private warrants equal to the contractual term from the merger date and then discounted the resulting value to the valuation date. Among the key inputs and assumptions used in the pricing formula at January 4, 2021: a term of 5.0 years; volatility of 20%; a dividend yield of zero; an underlying stock price of $14.76; a risk free interest rate of 0.38%; and a closing price of the public warrants of $2.50 per share.



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Income Statement Impact: Subsequent to the close of the merger, any change in fair value of the private warrants is recognized in our Consolidated Statements of Income (Loss) below operating profit as Gain onfair value of private warrant liability with a corresponding amount recognized in the Liability for private warrants on our Consolidated Balance Sheets. For the twelve months ended December 31, 2022 and 2021, we recorded a gain of $8.1 million and $17.2 million resulting from the revaluation of the private warrants.

Balance Sheet Impact: The private warrant liability is presented in the account Liability for private warrants in the long-term liabilities section of our Consolidated Balance Sheets. As noted above, the change in fair value of the underlying private warrants results in a corresponding change in the balance of the warrant liability on our Consolidated Balance Sheets. When warrants are exercised, the fair value of the liability is reclassified to Additional paid-in capital within equity. Cash received for the exercise of warrants is reflected in Cash and cash equivalents with a corresponding offset recorded in Common Stock and Additional paid-in capital within equity.

Cash Flow Impact: The impact of the change in fair value of the private warrants has no impact on our cash flows as it is a noncash adjustment. Cash received for the exercise of warrants is recorded in cash flows from financing activities. Cash paid for the repurchase of warrants is recorded in cash flows from financing activities. During the twelve months ended December 31, 2022, the Company repurchased private warrants from related parties for cash consideration totaling $2.0 million. No such transactions occurred for the twelve months ended December 31, 2021.

Shareholders’ Equity Impact: The impact to Additional paid-in capital as of the opening balance sheet is described above. Exercises of private warrants results in a reduction of the Liability for private warrants on the Consolidated Balance Sheets with a corresponding increase to Common Stock and Additional paid-in capital.

Public Warrants

In accordance with FASB ASC Topic 480, Distinguishing Liabilities from Equity, the public warrants are treated as equity instruments under U.S. GAAP. The public warrants are not marked-to-market each reporting period, thus there is no impact to earnings. Exercises of the public warrants are recorded as cash is received and are recorded in Cash and cash equivalents, with a corresponding offset recorded in Common stock and Additional paid-in capital within equity. Cash proceeds from public warrant exercises totaled less than $0.1 million during the twelve months ended December 31, 2022 and 2021.

NOTE 10 — REVENUES

Revenues

BMTX recognizes operating revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers.

The following tables present BMTX’s revenues disaggregated by nature of the revenue stream and the pattern or timing of revenue recognition for the twelve months ended December 31, 2022 and 2021. The Company has one reportable segment and all revenues are earned in the U.S.
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Twelve Months Ended
December 31,
(amounts in thousands)20222021
Revenues:
Revenue recognized at point in time:
Interchange and card revenue$22,318 $28,078 
Servicing fees44,581 45,105 
Account fees8,992 10,543 
University fees - disbursement activity1,108 1,401 
Other revenue1,720 5,286 
   Total revenue recognized at point in time78,719 90,413 
Revenue recognized over time:
University fees - subscriptions4,626 4,292 
Other revenue - maintenance and support252 — 
   Total revenue recognized over time4,878 4,292 
Total revenues$83,597 $94,705 

Deferred Revenue

Deferred revenue consists of payments received from customers, most significantly from Customers Bank, prior to the performance of services. Deferred revenue is recognized over the service period on a straight-line basis or when the contractual performance obligation has been satisfied. The Company classifies deferred revenue on the Consolidated Balance Sheets in Deferred revenue, current and Deferred revenue, non-current based upon the expected timing of revenue recognition.

The deferred revenue balances were as follows:
December 31,
(amounts in thousands)20222021
Deferred revenue, (current and non-current)$6,647 $15,577 

During the twelve months ended December 31, 2022, the Company recognized revenue of approximately $15.4 million included in deferred revenue at the beginning of the period. During the twelve months ended December 31, 2021, the Company recognized revenue of approximately $12.5 million included in deferred revenue at the beginning of the period.

Unbilled receivables

The Company had $2.6 million of unbilled receivables, or amounts recognized as revenue for which invoices have not yet been issued, as of December 31, 2022, and $2.1 million as of December 31, 2021. Unbilled receivables are reported in Accounts receivable, net on the Consolidated Balance Sheets.


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NOTE 11 — INCOME TAXES

The components of income tax expense (benefit) were as follows:
Twelve Months Ended
December 31,
(amounts in thousands)20222021
Current (benefit) expense
      Federal$(423)$3,945 
      State12 1,807 
Total current (benefit) expense$(411)$5,752 
Deferred (benefit) expense
      Federal$(296)$(1,676)
      State(1,130)
      Change in valuation allowance288 2,806 
Total deferred (benefit) expense$ $ 
Total income tax (benefit) expense$(411)$5,752 

Effective tax rates differ from the federal statutory rate of 21% due to the following:
Twelve months ended December 31,
20222021
(amounts in thousands)Amount% of pretax lossAmount% of pretax income
 Federal income tax at statutory rate$(250)21.00 %$4,788 21.00 %
 State taxes, net of federal benefit(457)38.48 %216 0.95 %
 Change in fair value of warrant liabilities(1,694)142.51 %(3,617)(15.87)%
 Change in valuation allowance288 (24.23)%2,806 12.31 %
  Nondeductible compensation2,183 (183.64)%1,532 6.72 %
 Tax credits(545)45.86 %— — %
 Other64 (5.39)%27 0.13 %
Total$(411)34.59 %$5,752 25.24 %

At December 31, 2022 and 2021, the Company had no ASC 740-10 unrecognized tax benefits. The Company does not expect the total amount of unrecognized tax benefits to significantly increase within the next twelve months. The Company recognizes interest and penalties on unrecognized tax benefits in Other expense. The nondeductible compensation is related to compensation deductions for certain executives that is limited under IRC Section 162(m).

As of December 31, 2022, the Company had $0.3 million of federal net operating loss carryforward and $0.3 million of state net operating loss carryforwards. The federal net operating loss carryforward does not have an expiration date. The state operating loss carryforwards have differing expiration dates depending on the jurisdiction. As of December 31, 2021 there were zero loss or credit carryforwards.

Deferred income taxes reflect temporary differences in the recognition of revenue and expenses for tax reporting and financial statement purposes, principally because certain items are recognized in different periods for financial reporting and tax return purposes.


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The following represents the Company's deferred tax assets and liabilities reflects management’s estimateas of amountsDecember 31, 2022 and 2021:

(amounts in thousands)December 31, 2022December 31, 2021
Deferred tax assets:
 Deferred income$— $788 
 Section 197 Intangibles27,794 27,581 
    Nondeductible compensation2,005 1,521 
 Accrued bonuses162 125 
 Other385 24 
 Less: Valuation Allowance(29,950)(29,662)
 Total deferred tax assets$396 $377 
 Deferred tax liabilities
 Depreciation(340)(377)
Capitalized costs(56)— 
 Total deferred tax liabilities$(396)$(377)
 Net deferred tax asset (liability)$ $ 

Realization of deferred tax assets is dependent upon the generation of future taxable income or the existence of sufficient taxable income within the carry back period. A valuation allowance is provided when it is more likely than not that the Company would have received in connection with the salesome portion of the deferred tax assets will not be realized. In assessing the need for a valuation allowance, management considered the scheduled reversal of the deferred tax liabilities, the level of historical income, and the projected future taxable income over the periods in which the temporary difference comprising the deferred tax assets will be deductible. Based on its assessment, management determined that a full valuation allowance is necessary at December 31, 2022 and 2021. The deferred tax asset for the basis difference in the acquired assets and corresponding valuation allowance was recorded through equity.

The Company is subject to income tax examinations by federal, state, and local taxing authorities for tax periods ended after December 31, 2018.
NOTE 12 — EARNINGS (LOSS) PER SHARE
The following are the components and results of operations and earnings (loss) per common share calculations for the periods presented:
Twelve Months Ended
December 31,
(amounts in thousands, except share and per share data)20222021
Net (loss) income available to common shareholders$(779)$17,043 
Net (loss) income used for EPS$(779)$17,043 
Weighted-average number of common shares outstanding – basic11,94211,851
Weighted-average number of common shares outstanding – diluted11,94211,939
Basic (loss) earnings per common share$(0.07)$1.44 
Diluted (loss) earnings per common share$(0.07)$1.43 


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The following table presents the reconciliation from basic to diluted weighted average shares outstanding used in the calculation of basic and diluted earnings per share:
Twelve Months Ended
December 31,
(amounts in thousands)20222021
Weighted-average number of common shares outstanding – basic11,942 11,851 
Add:
Service-based RSUs— 88 
Weighted-average number of common shares outstanding – diluted11,942 11,939 

For basic earnings per share, the performance shares are subject to forfeiture and they are considered share-indexed instruments and not outstanding shares until they are vested. During the twelve months ended December 31, 2022 and 2021, the vesting criteria has not been met and they are not included.

For the twelve months ended December 31, 2022, our performance shares, public warrants, and private warrants were excluded from the computation of diluted weighted average shares outstanding as the necessary conditions had not been achieved for the performance shares and the average stock price for the period was below the strike price for the warrants. The performance shares are only considered in the calculation for diluted earnings per share if they are dilutive in nature. The performance shares are only dilutive when the average share price is greater than the strike price and when positive net income is reported. During the twelve months ended December 31, 2022, the average share price was below the strike price and these shares were not included in the diluted earnings per share calculations. For the twelve months ended December 31, 2022, our performance based and market condition RSUs were also excluded because the vesting is contingent upon the satisfaction of certain conditions which had not been achieved as of December 31, 2022. For the twelve months ended December 31, 2022, 309 of our service-based RSUs were also excluded as the effect would be antidilutive.

For the twelve months ended December 31, 2021, our performance shares, public warrants, and private warrants were excluded from the computation of diluted weighted average shares outstanding as the necessary conditions had not been achieved for the performance shares and the average stock price for the period was below the strike price for the warrants. The performance shares are only considered in the calculation for diluted earnings per share if they are dilutive in nature. The performance shares are only dilutive when the average share price is greater than the strike price and when positive net income is reported. During the twelve months ended December 31, 2021, the average share price was below the strike price and these shares were not included in the diluted earnings per share calculations. For the twelve months ended December 31, 2021, our performance based and market condition RSUs were also excluded because the vesting is contingent upon the satisfaction of certain conditions which had not been achieved as of December 31, 2021.

The following table presents the potentially dilutive shares that were excluded from the computation of diluted net income (loss) per share of common stock:
Twelve Months Ended
December 31,
(amounts in thousands)20222021
Performance based shares300 300 
Public warrants17,227 16,927 
Private warrants5,476 6,946 
Performance based and market-condition RSUs335 348 
Service-based RSUs309 — 
Total23,647 24,521 

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NOTE 13 — DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
BMTX uses fair value measurements to determine and disclose the fair value of its financial instruments. FASB’s ASC 825, Financial Instruments, requires disclosure of the estimated fair value of an entity’s assets and liabilities considered to be financial instruments. For fair value disclosure purposes, BMTX utilized the fair value measurement criteria under FASB ASC 820, Fair Value Measurements (“ASC 820”).

In accordance with ASC 820, the fair value of a financial instrument is the price that would be received to sell an asset or paid in connection with theto transfer of the liabilitiesa liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for BMTX’s financial instruments. In connection with measuringcases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of its assets and liabilities, the Company seeks to maximize the useinstrument.
The fair value guidance provides a consistent definition of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about howfair value, focusing on an exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants would price assetsat the measurement date under current market conditions. If there has been a significant decrease in the volume and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactionslevel of activity for the asset or liability, occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2: Observable inputs other than Level 1 inputs. Examplesa change in valuation technique or the use of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Level 3: Unobservable inputs based on our assessment ofmultiple valuation techniques may be appropriate. In such instances, determining the assumptions thatprice at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use in pricing the asset or liability.

of significant judgment. The following table presents information about the Company’s assets that are measured at fair value onis a recurring basis at December 31, 2020reasonable point within the range that is most representative of fair value under current market conditions.


The fair value guidance also establishes a fair value hierarchy and 2019, and indicatesdescribes the following three levels used to classify fair value measurements:
Level 1:Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2:Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.
Level 3:Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).
A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
The following methods and assumptions were used to estimate the fair value of BMTX’s financial instruments as of December 31, 2022 and 2021:
Cash and cash equivalents
Cash and cash equivalents reported on the Consolidated Balance Sheets consists of non-interest bearing demand deposits, for which carrying value approximates fair value.
Accounts receivable, net
The carrying amount of accounts receivable approximates fair value because of the short-term nature of these items.

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Liability for Private Warrants

The fair value of the private warrants was estimated using a modified version of the binomial lattice model incorporating the Cox-Ross-Rubenstein methodology at December 31, 2022 and a modified version of the Black-Scholes option pricing model for European calls at December 31, 2021. We assumed a term for the private warrants equal to the contractual term from the date of the merger with Megalith and then discounted the resulting value to the valuation date. Among the key inputs and assumptions used in the pricing formula at December 31, 2022 were the following: a term of 3.01 years; volatility of 43%; a dividend yield of zero; an underlying stock price of $5.21; a risk free interest rate of 4.17%; and a closing price of the public warrants of $0.52 per share. Among the key inputs and assumptions used in the pricing model at December 31, 2021 were the following: a term of 4 years; volatility of 35%; a dividend yield of zero; an underlying stock price of $9.21; a risk free interest rate of 1.11%; and a closing price of the public warrants of $1.87 per share. As of December 31, 2022 and 2021, the warrant liability is classified as a Level 3 fair value based upon the lowest level of input that is significant to the fair value measurement.

The estimated fair value of BMTX’s financial instruments at December 31, 2022 and December 31, 2021 were as follows:
Fair Value Measurements at December 31, 2022
(amounts in thousands)Carrying AmountEstimated Fair ValueQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents$21,108 $21,108 $21,108 $— $— 
Accounts receivable, net8,260 8,260 8,260 — — 
Liabilities:
Liability for private warrants$2,847 $2,847 $— $— $2,847 
Fair Value Measurements at December 31, 2021
(amounts in thousands)Carrying AmountEstimated Fair ValueQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents$25,704 $25,704 $25,704 $— $— 
Accounts receivable, net9,194 9,194 9,194 — — 
Liabilities:
Liability for private warrants$13,614 $13,614 $— $— $13,614 

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NOTE 14 — RELATED PARTY TRANSACTIONS

The Company has several relationships with Customers Bank, which is a related party of the Company. These relationships are described below.

Cash management

All the Company’s cash and cash equivalents are on deposit with Customers Bank.

Debt financing

As disclosed in Note 7- Borrowings from Customers Bank, Customers Bank previously provided the Company utilizedwith lines of credit, all which were terminated as of December 31, 2021.

Servicing fees and interchange income

On January 4, 2021, we entered into a Deposit Processing Services Agreement with Customers Bank, which provided that Customers Bank would establish and maintain deposit accounts and other banking services in connection with customized products and services offered by us, and we would provide certain other related services in connection with the accounts. Customers Bank retains any and all revenue generated from the funds held in the deposit accounts, and in exchange, pays us a 3% servicing fee based on average monthly deposit balances, subject to determinecertain contractual adjustments, and a monthly interchange fee equal to all debit card interchange revenues on the demand deposit accounts, plus the difference between Durbin exempt and Durbin regulated interchange revenue.

On June 29, 2022, the Company received written notice from Customers Bank that it did not intend to renew the Deposit Servicing Agreement with the Company. The 180-day notice was given in accordance with the terms of the Deposit Servicing Agreement, as a result of which, the Deposit Servicing Agreement would terminate effective December 31, 2022.

On November 7, 2022, the Company and Customers Bank entered into the DPSA Amendment to extend the Deposit Servicing Agreement termination date to the earlier of the Company’s successful completion of the transfer of the Company’s serviced deposits to a new partner bank or June 30, 2023. The DPSA Amendment also removes Customers Bank’s obligation to pay the Company the difference between the Durbin exempt and Durbin regulated interchange revenues. The other terms of the Deposit Servicing Agreement remain in effect through the new termination date.

On March 22, 2023, we signed the DPSA Second Amendment. The DPSA Second Amendment, among other things, extends the termination date of the Deposit Processing Services Agreement until the earlier of (i) the transfer of the Company’s serviced deposits to a Durbin exempt sponsor bank; or (ii) June 30, 2024; and revises the fee structure of the Deposit Processing Services Agreement. The other terms of the Deposit Processing Services Agreement, as amended by the DPSA Amendment, remain in effect through the new termination date.
On March 22, 2023, the Company and Customers Bank entered into the 2023 Deposit Servicing Agreement, under which, effective March 31, 2023, the Company will perform, on behalf of Customers Bank, Customer Bank’s services, duties, and obligations under the PLBPA by and between Customers Bank and T-Mobile USA, Inc. that are not required by Applicable Law (as defined in the 2023 Deposit Servicing Agreement) to be provided by an FDIC insured financial institution. The obligations of the Company and Customers Bank under the 2023 Deposit Servicing Agreement are similar to those under the Deposit Processing Services Agreement; provided, however, that (i) as of March 31, 2023, the 2023 Deposit Servicing Agreement and not the Deposit Processing Services Agreement shall govern the terms, conditions, roles, responsibilities, duties, and obligations of the Company and Customers Bank with respect to the PLBPA and the Depositor Accounts (as defined in the 2023 Deposit Servicing Agreement); (ii) the Deposit Processing Services Agreement is amended to the extent necessary or advisable to effect the same, including, without limitation, such fair value:

that “Depositor” under the Deposit Processing Services Agreement shall not include any T-Mobile Customer (as defined in the PLBPA); and (iii) there is a different fee structure under the 2023 Deposit Servicing Agreement from that set forth in the Deposit Processing Services Agreement. The initial term of the 2023 Deposit Servicing Agreement continues until February 24, 2025, and will automatically renew for additional one year terms unless either party gives written notice of non-renewal at least 180 days prior to the expiration of the then-current term. The 2023 Deposit Servicing Agreement may be terminated early by either party upon material breach, upon notice of an uncured objection from a regulatory authority, or by the Company upon 120 days’ written notice upon the satisfaction of certain conditions.
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Description  Level  December 31,
2020
  December 31,
2019
 
Assets:            
Marketable securities in Trust Account  1  $27,713,815  $175,410,617 

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Note 8 — Subsequent Events

As compensation under the 2023 Deposit Servicing Agreement, Customers Bank will retain any and all revenue generated from the funds held in the deposit accounts, and Customers Bank will pay the Company monthly servicing fees as set forth in the 2023 Deposit Servicing Agreement. In addition, the Company will have the right to retain all revenue generated by or from the Depositor Accounts (as defined in the 2023 Deposit Servicing Agreement), including, but not limited to, fees and all other miscellaneous revenues. The Company also shall retain all fees (including without limitation interchange fees), and charges generated by its ATMs and from its payment processing services. The Company will be solely liable for any and all fees, expenses, costs, reimbursements, and other amounts that are or may become due and payable under the PLBPA, including, without limitation, any Durbin-Exempt Interchange (as defined in the 2023 Deposit Servicing Agreement) fees payable to T-Mobile under the PLBPA. Customers Bank may set off any and all PLBPA Amounts against any compensation payable to the Company under the 2023 Deposit Servicing Agreement.


Transition Services Agreement

On January 4, 2021, we entered into a Transition Services Agreement with Customers Bank, pursuant to which each party agreed for a period of up to twelve months to provide certain transition services listed therein to the other party. A limited number of these transition services were subsequently extended through March 31, 2022. In consideration for the services, we paid Customers Bank a service fee of $12,500 per month, plus any expenses associated with the services.

The Transition Services Agreement included a provision for providing the Company with assistance in the establishment and administration of a 401(k) plan for the benefit of Company employees. Effective April 9, 2021, the Customers Bank 401(k) plan became a multi-employer plan, as defined by the U.S. Department of Labor in accordance with the Employee Retirement Income Security Act of 1974, covering both the full-time employees of Customers Bank and the Company. The Company provides a matching contribution equal to 50% of the first 6% of the contributions made by its eligible participating employees. The Company’s employer contributions to the 401(k) plan for the benefit of its employees for the twelve months ended December 31, 2022 and 2021 were $0.8 million and $0.7 million, respectively. These contributions are recorded in Salaries and employee benefits in the Consolidated Statements of Income (Loss).

Other

On January 4, 2021, the Company consummatedentered into a Software License Agreement with Customers Bank which provides it with a non-exclusive, non-transferable, royalty-free license to utilize our mobile banking technology for a period up to 10 years. The Software License Agreement is cancellable by Customers Bank at any time, without notice, and without penalty, and for any reason or no reason at all. To date, Customers Bank has not utilized the Company’s mobile banking technology and zero consideration has been paid or recognized under the Software License Agreement.

On January 4, 2021, the Company entered into a Non-Competition and Non-Solicitation Agreement with Customers Bank providing that Customers Bank will not, for a period of 4 years after the closing of the divestiture, directly or indirectly engage in the Company’s business combination (the “Closing”) contemplatedin the territory (both as defined in the Non-Competition Agreement), except for white label digital banking services with previously identified parties and passive investments of no more than 2% of a class of equity interests of a competitor that is publicly traded. Customers Bank also agreed not to directly or indirectly hire or solicit any employees of the Company.

On November 29, 2021, the Company entered into an agreement with Customers Bank which terminated the $10.0 million letter of credit and gave the Company the right to any shares that were forfeited as part of the January 4, 2021 Share-Based Compensation Award. During the twelve months ended December 31, 2022, 26,500 forfeited shares were reacquired by the Company from Customers Bank. During the twelve months ended December 31, 2021, 14,500 forfeited shares were reacquired by the Company from Customers Bank and 19,000 forfeited shares prior to the execution of the agreement were returned to Customers Bank.

Both the President and Executive Chairman of the Board of Customers Bank are immediate family members of the Company’s CEO, and together with their spouses own less than 5.0% of the Company’s outstanding common stock at December 31, 2022.

On March 1, 2022, the Company reached an agreement, with settlement on March 11, 2022, to reacquire 1,169,963 private warrants at a price of $1.69 per warrant, or a total cost of $2.0 million, from Ms. Sherry Sidhu and Mr. Samvir Sidhu, who are immediate family members of our CEO. The transaction price was established based on the range of market prices during the repurchase conversations and was approved by the Company’s Audit Committee.


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On April 20, 2022, the Company entered into a Special Limited Agency Agreement (“SLA”) with Customers Bank that provides for marketing assistance from the Company for originating consumer installment loans funded by Customers Bank. In consideration for this marketing assistance, the Company receives certain fees specified within the SLA which are recorded as a component of Other revenue within the Consolidated Statements of Income (Loss). During the twelve ended December 31, 2022, less than $0.1 million of revenue was realized under the SLA. The SLA expired on December 31, 2022.

Positions with Customers Bank are presented on our Consolidated Balance Sheets in Accounts receivable, net, Deferred revenue, current, and Accounts payable and accrued liabilities. The Accounts receivable balances related to Customers Bank as of December 31, 2022 and 2021 were $1.4 million and $5.5 million, respectively. The Deferred revenue balances related to Customers Bank as of December 31, 2022 and 2021 were $3.8 million and $12.7 million, respectively. The Accounts payable and accrued liabilities balances related to Customers Bank as of December 31, 2022 and 2021 were $3.8 million and $0.4 million, respectively.

The Company recognized $74.7 million and $82.3 million in revenues from Customers Bank for the twelve months ended December 31, 2022 and 2021, respectively. Of these amounts, $22.5 million and $26.1 million are paid directly by MasterCard or individual account holders to the Company for the twelve months ended December 31, 2022 and 2021, respectively. These amounts are presented on our Consolidated Statements of Income (loss) in Total operating revenues.

The Company recognized less than $0.1 million and $0.3 million of expenses from Customers Bank for the twelve months ended December 31, 2022 and 2021, respectively. These amounts are presented on our Consolidated Statements of Income (loss) in Total operating expenses.
NOTE 15 — SUBSEQUENT EVENTS

Profit Enhancement Plan (“PEP”)

On January 26, 2023, and in connection with our previously announced near-term strategy to focus on being an innovative, efficient, risk oriented fintech with a partner bank model, the Company committed to a targeted PEP that is intended to reduce operating costs, improve operating margins, improve operating cash flow, and continue advancing the Company’s ongoing commitment to profitable growth and continued innovation, and direct the Company’s resources toward its best opportunities.

Included within the PEP is a targeted reduction of the Company’s employee workforce of approximately 25% as compared to its headcount at December 31, 2022. This workforce reduction is in addition to targeted spend reduction and service provider rationalization. The Company expects the actions necessary to attain these cost reductions will be substantially completed by June 30, 2023. The Company estimates that it will incur $1.5 million to $3.0 million in charges in connection with the PEP, the majority of which were incurred in the first quarter of 2023.

Changes to Executive Management and Director

On January 23, 2023, Robert Diegel provided the Company with written notice that he was terminating his Employment Agreement with the Company effective as of March 9, 2023. Mr. Diegel was employed as the Company’s Chief Operating Officer.


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On January 26, 2023, the Company appointed Jamie Donahue, the Company’s Chief Technology Officer, to the position of President. In conjunction with the appointment, Mr. Donahue’s employment agreement dated September 15, 2021 (the “Donahue Employment Agreement”) was amended to a) substitute the title of “Chief Technology Officer” with “President” and b) increase Mr. Donahue’s annual base salary from $275,000 to $300,000. No other changes were made to the Donahue Employment Agreement. In addition, and in connection with Mr. Donahue’s appointment to President, the Company awarded Mr. Donahue 150,000 RSUs pursuant to its 2020 Equity Incentive Plan with a grant date of March 31, 2023.

Also on January 26, 2023, the Company transitioned Robert Ramsey, the Company’s Chief Financial Officer, to a new corporate development role. In conjunction with the transition, and effective February 7, 2023, the Company and Mr. Ramsey entered into a Severance Agreement and Plan of Merger, dated as of August 6, 2020 (as amended, the “MergerGeneral Release (the “Separation Agreement”), by providing, in addition to certain customary terms and amongconditions, that Mr. Ramsey’s employment with the Company MFAC Merger Sub Inc.,will end on March 31, 2023 (the “Separation Date”) and that, until the Separation Date, Mr. Ramsey will serve in the role of Head of Corporate Development for the Company and will receive his current base salary pro rata for such period. The Separation Agreement provides that upon satisfactory performance of the duties outlined through the Separation Date, Mr. Ramsey will receive severance related payments (net of applicable withholdings and deductions) totaling approximately $153 thousand as well as reimbursement of four weeks COBRA and payments for all earned and unused paid time off.

Also on January 26, 2023, the Company appointed James Dullinger, the Company’s Chief Accounting Officer, to the additional position of Chief Financial Officer. In conjunction with the appointment, the Company and Mr. Dullinger entered into an employment agreement (the “Dullinger Employment Agreement”) which provides for:

An annual base salary of not less than $275,000;
Potential for annual cash and equity incentive compensation in an amount, form, and at such time as provided in executive incentive plans as approved by the Board of Directors from time to time;
Severance compensation for up to one year’s compensation based upon then-current base salary, plus average annual performance bonus over the preceding three years, together with vesting of certain awards in the event of a Pennsylvania corporationtermination of Mr. Dullinger’s employment without cause or by Mr. Dullinger for good reason as those terms are defined in the Dullinger Employment Agreement;
Automatic vesting of all equity awards if employment is terminated by the Company without cause or by Mr. Dullinger for good reason; or if such termination occurs within 12 months of a change in control
Customary non-disclosure, non-compete, and non-disparagement provisions; and
A term of one (1) year commencing on January 26, 2023, and renewing automatically on each one (1) year anniversary for an indirect wholly-owned subsidiaryadditional term of one (1) year, unless either party delivers notice to the contrary to the other party at least sixty (60) days prior to such one (1) year anniversary.

In addition, and in connection with Mr. Dullinger’s appointment to Chief Financial Officer, the Company awarded Mr. Dullinger 60,000 RSUs pursuant to its 2020 Equity Incentive Plan with a grant date of March 31, 2023.

On January 27, 2023, the Board of Directors of the Company (“Merger Sub”), BankMobile Technologies, Inc.,appointed Rajinder Singh to serve as a Pennsylvania corporation (“BankMobile”Board member until the Company’s next annual meeting of shareholders. Mr. Singh was appointed to fill a vacancy on the Board of Directors that resulted from an increase in the size of the Board of Directors from seven to eight members. On March 24, 2023, and subsequent to Mr. Singh’s appointment to the Board of Directors, it was determined to appoint Mr. Singh the Company’s Co-CEO, and in connection with that appointment, Mr. Singh resigned his position on the Board of Directors and became a Board observer. Mr. Singh’s decision was not related to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

Concurrently, on March 24, 2023, the Company and Mr. Singh entered into an employment agreement (the “Singh Employment Agreement”), which provides for:

A 500,000 unit restricted stock equity award;
An annual base salary of $325,000;
Potential for annual cash and equity incentive compensation in an amount, form, and at such time as provided in executive incentive plans as approved by the Board of Directors from time to time;
Severance compensation for up to two year’s compensation based upon then-current base salary plus average annual performance bonus over the preceding three years, together with vesting of certain awards in the event of a termination of Mr. Singh’s employment without cause or by Mr. Singh for good reason as those terms are defined in the Singh Employment Agreement;
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Automatic vesting of all equity awards if employment is terminated by the Company without cause or by Mr. Singh for good reason; provided that only 50% of such equity awards shall vest if the employment is terminated by the Company without cause before December 31, 2023, or if such termination occurs within 12 months of a change in control that has occurred on or before March 24, 2024;
Customary non-disclosure, non-compete, and non-disparagement provisions; and
A term of two (2) years commencing on March 24, 2023, and renewing automatically on each two (2) year anniversary for an additional term of two (2) years, unless either party delivers notice to the contrary to the other party at least sixty (60) days prior to such two (2) year anniversary.

Deposit Servicing Agreement with First Carolina Bank
On March 16, 2023, we entered into the FCB Deposit Servicing Agreement with FCB, which provides that FCB will establish and maintain deposit accounts and other banking services in connection with customized products and services offered by the Company to its Higher Education clients, and the Company will provide certain other related services in connection with the accounts. The initial term of the FCB Deposit Servicing Agreement is for four years, is subject to regulatory approval, and will automatically renew for additional two year terms unless either party gives written notice of non-renewal at least 120 days prior to the expiration of the then-current term. The FCB Deposit Servicing Agreement may be terminated early by either party upon material breach, by either party upon notice that the continuation of the Depositor Program violates Applicable Law or Network Rules (as defined in the FCB Deposit Servicing Agreement); by FCB if a regulatory authority determined that the performance of its obligations under the FCB Deposit Servicing Agreement was not consistent with safe and sound banking practices; by either party upon the other party commencing or being subject to certain bankruptcy proceedings; by the Company should it experience a change in control on or after March 16, 2026; and by either party should the required regulatory approvals not be obtained on or before July 15, 2023.

Deposit Servicing Agreements with Customers Bank

On March 22, 2023, we signed the DPSA Second Amendment. The DPSA Second Amendment, among other things, extends the termination date of the Deposit Processing Services Agreement until the earlier of (i) the transfer of the Company’s serviced deposits to a Durbin exempt sponsor bank; or (ii) June 30, 2024; and revises the fee structure of the Deposit Processing Services Agreement. The other terms of the Deposit Processing Services Agreement, as amended by the DPSA Amendment, remain in effect through the new termination date.
On March 22, 2023, the Company and Customers Bank a Pennsylvania state chartered bankentered into the 2023 Deposit Servicing Agreement, under which, effective March 31, 2023, the Company will perform, on behalf of Customers Bank, Customer Bank’s services, duties, and obligations under the sole stockholder of BankMobile (“PLBPA by and between Customers Bank”),Bank and Customers Bancorp,T-Mobile USA, Inc., a Pennsylvania corporation and that are not required by Applicable Law (as defined in the parent bank holding company for Customers Bank.

As a result of the Closing and the transactions contemplated2023 Deposit Servicing Agreement) to be provided by the Merger Agreement, (i) BankMobile merged with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger as a wholly-owned indirect subsidiaryan FDIC insured financial institution. The obligations of the Company and Customers Bank under the 2023 Deposit Servicing Agreement are similar to those under the Deposit Processing Services Agreement; provided, however, that (i) as of March 31, 2023, the 2023 Deposit Servicing Agreement and not the Deposit Processing Services Agreement shall govern the terms, conditions, roles, responsibilities, duties, and obligations of the Company and Customers Bank with respect to the PLBPA and the Depositor Accounts (as defined in the 2023 Deposit Servicing Agreement); (ii) the Company’s name was changedDeposit Processing Services Agreement is amended to the extent necessary or advisable to effect the same, including, without limitation, such that “Depositor” under the Deposit Processing Services Agreement shall not include any T-Mobile Customer (as defined in the PLBPA); and (iii) there is a different fee structure under the 2023 Deposit Servicing Agreement from Megalith Financial Acquisition Corp.that set forth in the Deposit Processing Services Agreement. The initial term of the 2023 Deposit Servicing Agreement continues until February 24, 2025, and will automatically renew for additional one year terms unless either party gives written notice of non-renewal at least 180 days prior to BM Technologies, Inc.

the expiration of the then-current term. The 2023 Deposit Servicing Agreement may be terminated early by either party upon material breach, upon notice of an uncured objection from a regulatory authority, or by the Company upon 120 days’ written notice upon the satisfaction of certain conditions.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.

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ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our Management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Exchange Act Rule 13a-15(e)) as of December 31, 2022. Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of that date.

Management’s Annual Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)). The Company's internal control over financial reporting was designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, Management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements in accordance with U.S. GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of December 31, 2022, Management assessed the effectiveness of the Company's internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control-Integrated Framework,” issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission in 2013. Our evaluation included a review of the documentation of controls, evaluations of the design of the internal control system, and tests of the effectiveness of internal controls. Based on our assessment, Management determined that, as of December 31, 2022, the Company’s internal control over financial reporting was effective.

Remediation of Previously Reported Material Weaknesses

Management has completed the testing of design and operating effectiveness of the new and enhanced controls related to the previously reported material weaknesses. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Control Environment and Monitoring: Management developed a comprehensive plan to design and implement an effective system of internal control over financial reporting. The Company evaluated subsequent eventsremediated the material weaknesses through activities including, but not limited to, (a) more clearly defined Management and transactions that occurred afterBoard of Director oversight, structures, reporting lines, and responsibilities, (b) hiring of additional resources with requisite skills and experience, (c) ongoing evaluations to ascertain whether the balance sheet date upcomponents of internal control over financial reporting are present and functioning, and (d) enhancements to internal processes to evaluate and communicate internal control over financial reporting deficiencies in a timely manner to those parties responsible for taking corrective action.

Control Activities & Information and Communication: Management was actively engaged in the development of a comprehensive plan to address the material weaknesses in the design and documentation of the Company’s system of internal control over financial reporting including its selection and development of control activities, the documentation of what is expected, procedures to put policies in action, and maintaining relevant, quality information to support the functioning of internal control over financial reporting.

Management implemented key controls, including defining appropriate levels of precision, as remediation actions within (a) period-end financial reporting, (b) related party disclosures, (c) payroll and employee benefits, (d) share-based compensation (e) classification of contract assets, contract liabilities, receivables, and payables, and (f) trade accounts payable. The remediation actions for the ineffective information technology general controls included the periodic review of user access rights, segregation of duties, required policies and procedures, and validation of approval. The remediation actions for the ineffective complementary user entity controls included a process to evaluate the risks associated with key third-party service providers and identify any potential control gaps.


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In addition, Management added personnel to the dateaccounting function who have deeper technical accounting training and experience. Management utilized these personnel to perform a comprehensive review and enhancement of its internal accounting policies and procedures including accounting for related party disclosures, payroll and employee benefits, share-based compensation, classification of contract assets, contract liabilities, receivables, and payables, and trade accounts payable in accordance with U.S. generally accepted accounting principles.

Management believes that these actions have been fully implemented and have operated effectively for a sufficient period of time. As a result, we have concluded that our remediation efforts were successful and that the consolidated financial statementspreviously identified material weaknesses were available to be issued and determined thatremediated as of December 31, 2022.

Changes in Internal Control Over Financial Reporting

Other than the changes described above, there have been no other eventschanges in our internal control over financial reporting that occurred during the fourth quarter of the year ended December 31, 2022 that have occurredmaterially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to applicable rules that would require adjustmentspermit us to the disclosures of the consolidated financial statements. 

provide only Management's report in this annual report.
F-19

ITEM 9B. OTHER INFORMATION

Not Applicable.


ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not Applicable.
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Part III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The information required by this Item will be contained in, and is hereby incorporated by reference from, the 2023 Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The information required by this Item will be contained in the 2023 Proxy Statement under the heading “Executive Compensation” which is incorporated by reference herein.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNER AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item will be contained in the 2023 Proxy Statement under the heading “Security Ownership of Certain Beneficial Owners and Management” which is incorporated by reference herein.

Equity Compensation Plan Information

The following table provides information, as of December 31, 2022, with respect to shares of our common stock that may be issued, subject to certain vesting requirements, under existing and future awards under our 2020 Equity Incentive Plan. The following table also provides information, as of December 31, 2022, with respect to shares of our common stock that we may sell to our employees under our 2021 Employee Stock Purchase Plan.

ABC
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, Rights, and RSUs.Weighted-Average Exercise Price of Outstanding Options, Warrants, Rights, and RSUs.Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A))
Plan Category
Equity compensation plans approved by security holders
765,065(1)
N/A
954,972(2)
Equity compensation plans not approved by security holders— — — 
Total765,065 954,972 

(1) Represents RSU grants and annual common stock grants to our Board of Directors under our 2020 Equity Incentive Plan
(2) Represents 454,972 shares of common stock available for issuance under our 2020 Equity Incentive Plan and 500,000 shares of common stock available for issuance under our 2021 Employee Stock Purchase Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item will be contained in the 2023 Proxy Statement under the headings “Certain Relationships and Related Party Transactions” and “Corporate Governance-Director Independence” which are incorporated by reference herein.
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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item will be contained in the 2023 Proxy Statement under the heading “Appointment of Independent Registered Public Accounting Firm” which is incorporated by reference herein.


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Part IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

a.The following documents are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K:

1.Financial Statements. See Index to Financial Statements under Item 8 of this Annual Report on Form 10-K.

2.Financial Statement Schedules. All schedules have been omitted because the information required to be presented in them is notapplicable or is shown in the financial statements or related notes.

3.Exhibits. The exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index immediately preceding the signature pages to this Annual Report on 10-K, which is incorporated herein by this reference.

ITEM 16. FORM 10-K SUMMARY

None.

EXHIBIT INDEX

EXHIBIT INDEX

Exhibit No.Description
2.1†Exhibit No.Description
2.1†
2.2†
2.3†
3.1
3.2
4.1
4.2
10.1†4.3†
10.1†
10.2†
10.3†
10.4
10.5
10.510.6
10.610.7
10.7+10.8+
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10.9+
10.8+10.10+
10.9+10.12+
10.10+10.16Employment Agreement with Andrew Crawford, dated January 4, 2021 (incorporated by reference to the Company’s Form 8-K, filed with the SEC on January 8, 2021).
10.11+Employment Agreement with Warren Taylor, dated January 4, 2021 (incorporated by reference to the Company’s Form 8-K, filed with the SEC on January 8, 2021).

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10.12Form of Subscription Agreement between Megalith and the PIPE Investors named therein, dated August 5, 2020 (Incorporated by reference to Exhibit 10.5 of Megalith’s Form 8-K (File No. 001-38633), filed with the SEC on August 6, 2020).
10.13Letter Agreement, dated August 23, 2018, by and between Megalith, the initial security holders and the officers and directors of Megalith (incorporated by reference to Megalith’s Form 8-K, filed with the SEC on August 29, 2018).
10.14Registration Rights Agreement, dated August 23, 2018, by and among the Company and the initial security holders (incorporated by reference to Megalith’s Form 8-K, filed with the SEC on August 29, 2018)..
10.1510.17
10.18+
10.1610.19+
10.1710.20+
14.1Code of Ethics (incorporated by reference to Megalith’s Form S-1/A, filed with the SEC on August 16, 2018).
24.1Power of Attorney (included in the signature page to the registration statement).
31.1
31.2
31.3
32.1
32.2
32.3
101.INSXBRL Instance Document*
101.SCHXBRL Taxonomy Extension Schema*
101.CALXBRL Taxonomy Calculation Linkbase*
101.LABXBRL Taxonomy Label Linkbase*
101.PREXBRL Definition Linkbase Document*
101.DEFXBRL Definition Linkbase Document*

*104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
  * Filed herewith
**  † Schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Registration S-K. The registrant hereby agrees to
      furnish a copy of any omitted schedules to the Commission upon request.
Furnished herewith

Item 16.  + Indicates a management or compensatory plan.Form 10-K Summary

Not applicable.

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Table of Contents
SIGNATURES

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


March 31, 20212023BM Technologies, Inc.
(Registrant)
By:
By:/s/ Luvleen Sidhu
Name: Name:Luvleen Sidhu
Title:Title:Chief Executive Officer
(Principal Executive Officer)

March 31, 2023BM Technologies, Inc.
(Registrant)
By:/s/ Rajinder Singh
Name:Rajinder Singh
Title:Co-Chief Executive Officer
(Principal Executive Officer)


March 31, 2023BM Technologies, Inc.
(Registrant)
By:/s/ James Dullinger
Name:James Dullinger
Title:Chief Financial Officer
(Principal Financial and Accounting Officer)


























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Table of Contents





Pursuant to the requirements of the Securities Exchange Act of 1934, this Reportreport has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURESignaturesTITLETitleDATEDate
/s/ Luvleen SidhuChief Executive Officer and DirectorMarch 31, 20212023
Luvleen Sidhu(principal executive officer)Principal Executive Officer)
/s/ Rajinder SinghCo-Chief Executive OfficerMarch 31, 2023
Rajinder Singh(Principal Executive Officer)
/s/ Robert RamseyJames DullingerChief Financial OfficerMarch 31, 20212023
Robert RamseyJames Dullinger(principal financial officer) (Principal Financial and Accounting Officer)
/s/ Stephen BaranowskiJohn DolanChief Accounting OfficerDirectorMarch 31, 20212023
Stephen BaranowskiJohn Dolan(principal accounting officer)
/s/ Pankaj DinodiaMike GillDirectorMarch 31, 20212023
Pankaj DinodiaMike Gill
/s/ Aaron HodariDirectorMarch 31, 2023
Aaron Hodari
/s/ Brent HurleyDirectorMarch 31, 2023
Brent Hurley
/s/ A.J. DunklauDirectorMarch 31, 20212023
A.J. Dunklau
/s/ Brent HurleyDirectorMarch 31, 2021
Brent Hurley
/s/ Marcy SchwabDirectorMarch 31, 20212023
Marcy Schwab
/s/ Mike GillDirectorMarch 31, 2021
Mike Gill
/s/ Aaron HodariDirectorMarch 31, 2021
Aaron Hodari

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