UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE) | |
☒ | QUARTERLYREPORTUNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly periodended | |
OR | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT |
For the transition period from ______________ to ______________ |
Commission file number: 001-51554001-34294
ASAP EXPO, INC.GREENBOX POS
(Exact name of small business issuer as specified in its charter)
Nevada | 22-3962936 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) |
3131 Camino Del Rio North, Suite 1400
|
|
(Address of principal executive offices) | (Zip Code) |
(619)-631-8261
(Registrant’s telephone number: number, including area code)
(213) 625-12008880 RIO SAN DIEGO DR., SUITE 102, SAN DIEGO, CA, 92108
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.001 par value | GBOX | The Nasdaq Stock Market LLC (Nasdaq Capital Market) |
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 ☐
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 the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer,” “smaller reporting company,” and "smaller reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer | Smaller reporting company ☒ |
Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o ☐ No ☒
Number of shares outstanding of the issuer'sissuer’s classes of common equity, as of November 14, 2017, 14,445,363May 12, 2021 was 41,905,571 Shares of Common Stock (One Class)
Page | ||
PART IConsolidated Financial Information | ||
Item 1. | 3 | |
3 | ||
4 | ||
5 | ||
6 | ||
7 | ||
Item 2. | 19 | |
Item 3. | 24 | |
PART II Other Information | ||
Item 1. | 25 | |
Item 2. | 25 | |
Item 3. | 25 | |
Item 4. | 25 | |
Item 5. | 25 | |
Item 6. | 25 | |
26 |
PART I - FINANCIAL INFORMATION
ASAP EXPO, INC. | ||||||||
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash | $ | 37,582 | $ | 32,761 | ||||
Due from affiliated companies | 20,275 | 29,608 | ||||||
Total Current Assets | 57,857 | 62,369 | ||||||
Furniture and equipment, net | 81,765 | 60,675 | ||||||
Total Assets | $ | 139,622 | $ | 123,044 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued expenses | $ | 145,323 | $ | 69,957 | ||||
Auto loan, current | 3,979 | 4,905 | ||||||
Income tax payable | 96,424 | 36,334 | ||||||
Total Current Liabilities | 245,726 | 111,196 | ||||||
Long-Term Liabilities | ||||||||
Auto loan, noncurrent | 17,271 | 2,453 | ||||||
Equipment loan, noncurrent | 12,299 | 12,299 | ||||||
Note payable, officers | 422,269 | 610,952 | ||||||
Total Long-Term Liabilities | 451,839 | 625,704 | ||||||
Total Liabilities | 697,565 | 736,900 | ||||||
Stockholders' Deficit | ||||||||
Preferred stock, 5,000,000 shares authorized; zero shares issued and outstanding | - | - | ||||||
Common stock, $.001 par value, 495,000,000 shares authorized, 14,445,363 and 14,445,363 shares issued and outstanding at September 30, 2017 and December 31, 2016 | 14,445 | 14,445 | ||||||
Additional paid in capital | (902,272 | ) | (902,272 | ) | ||||
Retained earnings | 329,884 | 273,971 | ||||||
Total Stockholders' Deficit | (557,943 | ) | (613,856 | ) | ||||
Total Liabilities and Stockholders' Deficit | $ | 139,622 | $ | 123,044 |
GREENBOX POS
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 35,696,589 | $ | - | ||||
Restricted cash | - | 1,832,735 | ||||||
Accounts receivable, net | 10,000 | 10,000 | ||||||
Accounts receivables from fines and fees from merchant, net of allowance for bad debt of $6,665,031 and $6,665,031, respectively. | 2,789,230 | 2,789,230 | ||||||
Cash due from gateways, net | 11,848,709 | 7,303,949 | ||||||
Prepaid and other current assets | 2,452,753 | 70,130 | ||||||
Total current assets | 52,797,281 | 12,006,044 | ||||||
Non-current Assets: | ||||||||
Property and equipment, net | 62,362 | 57,264 | ||||||
Operating lease right-of-use assets, net | 87,837 | 117,795 | ||||||
Other assets | 81,636 | 81,636 | ||||||
Total non-current assets | 231,835 | 256,695 | ||||||
Total assets | $ | 53,029,116 | $ | 12,262,739 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 178,038 | $ | 210,094 | ||||
Other current liabilities | 98,995 | 68,138 | ||||||
Payment processing liabilities, net | 5,355,115 | 10,199,956 | ||||||
Note payable, payroll protection plan loan | 272,713 | 272,713 | ||||||
Convertible debt, net of debt discount of $0 and $2,993,408, respectively | - | 856,592 | ||||||
Current portion of operating lease liabilities | 89,017 | 120,110 | ||||||
Total current liabilities | 5,993,878 | 11,727,603 | ||||||
Long-term debt | 149,900 | 149,900 | ||||||
Total liabilities | 6,143,778 | 11,877,503 | ||||||
Commitments and contingencies | ||||||||
Stockholders' Equity: | ||||||||
Common stock, par value $0.001, 82,500,000 shares authorized, shares issued and outstanding of 40,917,331 and 30,710,646, respectively | 40,918 | 30,711 | ||||||
Additional paid-in capital | 71,898,401 | 12,079,074 | ||||||
Accumulated deficit | (25,053,981 | ) | (11,724,549 | ) | ||||
Total stockholders' equity | 46,885,338 | 385,236 | ||||||
Total liabilities and stockholder's equity | $ | 53,029,116 | $ | 12,262,739 |
The accompanying notes are an integral part of these condensed unaudited financial statements.
ASAP EXPO, INC. | ||||||||||||||||
(UNAUDITED) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Consulting fees | $ | 288,160 | $ | 198,500 | $ | 1,117,960 | $ | 1,168,022 | ||||||||
Management Fee | 18,000 | - | 61,200 | - | ||||||||||||
Total revenues | 306,160 | 198,500 | 1,179,160 | 1,168,022 | ||||||||||||
Cost of Sales | ||||||||||||||||
Consulting expense | 42,400 | 64,000 | 436,100 | 679,797 | ||||||||||||
Total cost of sales | 42,400 | 64,000 | 436,100 | 679,797 | ||||||||||||
Gross Profit | 263,760 | 134,500 | 743,060 | 488,225 | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 212,255 | 251,946 | 604,797 | 610,909 | ||||||||||||
Total operating expenses | 212,255 | 251,946 | 604,797 | 610,909 | ||||||||||||
Income from operations | 51,505 | (117,446 | ) | 138,263 | (122,684 | ) | ||||||||||
Other Income (Expense) | ||||||||||||||||
Other income | - | - | - | 15,000 | ||||||||||||
Capital gain | - | - | 5,277 | - | ||||||||||||
Interest expense | (7,407 | ) | (5,870 | ) | (26,737 | ) | (16,049 | ) | ||||||||
Total other income (expense), net | (7,407 | ) | (5,870 | ) | (21,460 | ) | (1,049 | ) | ||||||||
Income before income taxes | 44,098 | (123,316 | ) | 116,803 | (123,733 | ) | ||||||||||
Income taxes provision | 21,943 | 551 | 60,890 | (111 | ) | |||||||||||
Net (loss) Income | $ | 22,155 | $ | (123,867 | ) | $ | 55,913 | $ | (123,622 | ) | ||||||
Net income (loss) per common share Basic and diluted | $ | 0.00 | $ | (0.01 | ) | $ | 0.00 | $ | 0.01 | |||||||
Weighted average common shares outstanding Basic and diluted | 14,445,363 | 14,445,363 | 14,445,363 | 14,445,363 |
GREENBOX POS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Net revenue | $ | 4,749,441 | $ | 187,205 | ||||
Cost of revenue | 1,593,771 | 247,305 | ||||||
Gross profit (loss) | 3,155,670 | (60,100 | ) | |||||
Operating expenses: | ||||||||
Advertising and marketing | 24,725 | 11,885 | ||||||
Research and development | 653,381 | 286,548 | ||||||
Payroll and payroll taxes | 559,201 | 402,462 | ||||||
Professional fees | 457,752 | 212,298 | ||||||
General and administrative | 566,195 | 142,050 | ||||||
Stock compensation for employees | 797,613 | 4,130 | ||||||
Stock compensation for services | 9,453,825 | - | ||||||
Depreciation and amortization | 6,009 | 5,376 | ||||||
Total operating expenses | 12,518,701 | 1,064,749 | ||||||
Loss from operations | (9,363,031 | ) | (1,124,849 | ) | ||||
Other income (expense): | ||||||||
Interest expense - debt discount | (2,993,408 | ) | (30,076 | ) | ||||
Interest expense | (594,258 | ) | (288,590 | ) | ||||
Changes in fair value of derivative liability | - | (3,822,385 | ) | |||||
Merchant liability settlement | (364,124 | ) | - | |||||
Merchant fines and penalty income | - | 24,060 | ||||||
Other income or expense | (14,611 | ) | - | |||||
Total other expense, net | (3,966,401 | ) | (4,116,991 | ) | ||||
Loss before provision for income taxes | (13,329,432 | ) | (5,241,840 | ) | ||||
Income tax provision | - | - | ||||||
Net loss | $ | (13,329,432 | ) | $ | (5,241,840 | ) | ||
Earnings (loss) per share: | ||||||||
Basic and diluted | $ | (0.38 | ) | $ | (0.18 | ) | ||
Weighted average number of common shares outstanding: | ||||||||
Basic and diluted | 34,917,106 | 28,993,402 |
The accompanying notes are an integral part of these condensed unaudited financial statements.
ASAP EXPO, INC. | ||||||||
(UNAUDITED) | ||||||||
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Operating Activities: | ||||||||
Net Income (loss) | $ | 55,913 | $ | (123,622 | ) | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation expense | 8,085 | 7,734 | ||||||
Capital gain | (5,277 | ) | - | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts payable and accrued expenses | 75,366 | (28,176 | ) | |||||
Income tax payable | 60,090 | (55,255 | ) | |||||
Net cash provided by (used in) operating activities | 194,177 | (199,319 | ) | |||||
Investing Activities: | ||||||||
Acquisitions of property and equipment | (7,240 | ) | (3,655 | ) | ||||
Payment from affiliated company | 9,333 | 40,170 | ||||||
Net cash provided by (used in) investing activities | 2,093 | 36,515 | ||||||
Financing Activities: | ||||||||
Payments on auto loan | (2,766 | ) | (4,088 | ) | ||||
Payments on equipment loan | - | (5,271 | ) | |||||
Advance from (Repayment to) affiliated company | - | 40,487 | ||||||
Proceeds from borrowings on note payable from officers | 324,508 | 140,000 | ||||||
Repayments of borrowings on note payable from officers | (513,191 | ) | (20,000 | ) | ||||
Net cash provided by (used in) financing activities | (191,449 | ) | 151,128 | |||||
Net increase (decrease) in cash | 4,821 | (11,676 | ) | |||||
Cash, beginning of period | 32,761 | 46,672 | ||||||
Cash, end of period | $ | 37,582 | $ | 34,996 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period | ||||||||
Interest | $ | 751 | $ | 369 | ||||
Income taxes | $ | 800 | $ | 55,144 | ||||
Non-cash investing and financing activities: | ||||||||
Vehicle purchased through auto loan | $ | 22,789 | $ | 17,570 |
GREENBOX POS
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(UNAUDITED)
Common Stock | Additional Paid-In | Accumulated | Total Stockholders' Equity | |||||||||||||||||||||||||
Shares | Amount | To be Issued | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
Balance at December 31, 2020 | 30,710,645 | $ | 30,711 | - | $ | - | $ | 12,079,074 | $ | (11,724,549 | ) | $ | 385,236 | |||||||||||||||
Common stock issued for exercise of warrant | 1,777,778 | 1,778 | - | - | 3,518,222 | - | 3,520,000 | |||||||||||||||||||||
Common stock issued for conversion of convertible debt | 1,944,444 | 1,944 | - | - | 3,848,056 | - | 3,850,000 | |||||||||||||||||||||
Common shares issued for restricted shares to executive | 83,333 | 83 | - | - | (83 | ) | - | - | ||||||||||||||||||||
Common stock issued for services | 783,859 | 784 | - | - | 9,453,041 | - | 9,453,825 | |||||||||||||||||||||
Common stock issued for interest for convertible debt | 96,664 | 97 | - | - | 594,258 | - | 594,355 | |||||||||||||||||||||
Common stock issued for non-cash stock option exercise | 39,332 | 39 | - | - | (39 | ) | - | - | ||||||||||||||||||||
Common stock issued for stock options exercised | 5,500 | 6 | - | - | 2,244 | - | 2,250 | |||||||||||||||||||||
Issuances of common stock, net of issuance costs of $4,305,758 | 4,772,500 | 4,773 | - | - | 45,800,718 | - | 45,805,491 | |||||||||||||||||||||
Payment for previous common stock repurchased under treasury method | - | - | - | - | (4,194,000 | ) | - | (4,194,000 | ) | |||||||||||||||||||
Issuances of common stock from previous unregistered shares | 703,276 | 703 | - | - | (703 | ) | - | - | ||||||||||||||||||||
Stock compensation expense | - | - | - | - | 797,613 | - | 797,613 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (13,329,432 | ) | (13,329,432 | ) | |||||||||||||||||||
Balance at March 31, 2021 | 40,917,331 | $ | 40,918 | - | $ | - | $ | 71,898,401 | $ | (25,053,981 | ) | $ | 46,885,338 |
Common Stock | Additional Paid-In | Accumulated | Total Stockholders' Equity | |||||||||||||||||||||||||
Shares | Amount | To be Issued | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
Balance at December 31, 2019 | 28,310,489 | $ | 28,310 | 115,854 | $ | 116 | $ | 1,321,404 | $ | (6,717,169 | ) | $ | (5,367,339 | ) | ||||||||||||||
Shares issuable adjustment | - | - | (115,854 | ) | (116 | ) | 116 | - | - | |||||||||||||||||||
Common stocks issued for settlement of convertible notes | 1,000,000 | 1,000 | - | - | 114,550 | - | 115,550 | |||||||||||||||||||||
Common stock issued for professional fees | 9,833 | 10 | - | - | 4,120 | - | 4,130 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (5,241,840 | ) | (5,241,840 | ) | |||||||||||||||||||
Balance at March 31, 2020 | 29,320,322 | $ | 29,320 | - | $ | - | $ | 1,440,190 | $ | (11,959,009 | ) | $ | (10,489,499 | ) |
The accompanying notes are an integral part of these condensed unaudited financial statements.
GREENBOX POS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (13,329,432 | ) | $ | (5,241,840 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation expense | 6,010 | 5,376 | ||||||
Interest expense - debt discount | 2,993,408 | 30,076 | ||||||
Stock compensation expense for employees | 797,613 | 4,130 | ||||||
Stock compensation expense for services | 9,453,825 | - | ||||||
Shares issued for interest | 594,355 | - | ||||||
Changes in fair value of derivative liability | - | 3,822,385 | ||||||
Noncash lease expense | (1,135 | ) | 4,406 | |||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | - | 37,205 | ||||||
Prepaid and other current assets | (2,382,623 | ) | (42,614 | ) | ||||
Cash due from gateways, net | (4,544,760 | ) | 5,024,520 | |||||
Accounts payable | (32,056 | ) | (6,271 | ) | ||||
Other current liabilities | 30,857 | (15,100 | ) | |||||
Accrued interest | - | 7,135 | ||||||
Payment processing liabilities, net | (4,844,841 | ) | (3,361,564 | ) | ||||
Net cash provided by (used in) operating activities | (11,258,779 | ) | 267,844 | |||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (11,108 | ) | (12,564 | ) | ||||
Net cash used in investing activities | (11,108 | ) | (12,564 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayments on convertible debt | - | (270,000 | ) | |||||
Borrowings from short-term notes payable | - | (441,911 | ) | |||||
Proceeds from stock option exercises | 2,250 | - | ||||||
Proceeds from exercise of warrant | 3,520,000 | - | ||||||
Repurchase of common stock from stockholder | (4,194,000 | ) | - | |||||
Proceeds from issuances of common stock | 45,805,491 | - | ||||||
Net cash provided by financing activities | 45,133,741 | (711,911 | ) | |||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | 33,863,854 | (456,631 | ) | |||||
Cash, cash equivalents, and restricted cash – beginning of period | 1,832,735 | 763,110 | ||||||
Cash, cash equivalents, and restricted cash – end of period | $ | 35,696,589 | $ | 306,479 | ||||
Supplemental disclosures of cash flow information | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | - | $ | 339,505 | ||||
Income taxes | $ | - | $ | 800 | ||||
Disclosures of non-cash activities under investing activities: | ||||||||
Convertible debt converted to common stock | $ | 3,850,000 | $ | 57,500 | ||||
Interest accrual from convertible debt converted to common stock | $ | - | $ | 58,050 |
The accompanying notes are an integral part of these condensed unaudited financial statements.
1. | DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION |
Organization
GreenBox POS (the “Company” or “PubCo”) is a tech company formed with the intent of developing, marketing and selling innovative blockchain-based payment solutions, which the Company believes will cause favorable disruption in the payment solutions marketplace. The Company’s core focus is to develop and monetize disruptive blockchain-based applications, integrated within an end-to-end suite of financial products, capable of supporting a multitude of industries. The Company’s proprietary, blockchain-based systems are designed to facilitate, record and store a virtually limitless volume of tokenized assets, representing cash or data, on a secured, immutable blockchain-based ledger.
The Company was formerly known as ASAP Expo, Inc. ("ASAP Expo" or the "Company"Inc (“ASAP”) d.b.a. ASAP International Holdings,, which was incorporated on April 10, 2007 under the laws of the State of Nevada.
For accounting and management.
Name Change
On May 3, 2018, PubCo formally changed its name to July 2011,GreenBox POS LLC, then subsequently changed its name to GreenBox POS on December 13, 2018. Unless the investment banking services division wascontext otherwise requires, all references to “the Company,” “we,” “our”, “us” and “PubCo” refer to GreenBox POS. Unless the core businesscontext otherwise requires, all references to “PrivCo” or the “Private Company” refer to GreenBox POS LLC, a limited liability company, formed in the state of ASAP Expo. ASAP Expo helped smallWashington.
Basis of Presentation and medium sized businesses raise fundsConsolidation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The financial statements include the combined accounts of PubCo and promote business through capital markets.
Unaudited Interim Financial Information
These unaudited interim financial statements have been prepared in accordance with GAAP for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been made. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2017.
The balance sheets and certain comparative information as of December 31, 20162020 are derived from the audited financial statements and related notes for the year ended December 31, 2016 ("20162020 (“2020 Annual Financial Statements"Statements”), included in the Company's 2016Company’s 2020 Annual Report on Form 10-K. These unaudited interim financial statements should be read in conjunction with the 20162020 Annual Financial Statements.
Use of America.
The preparation of financial statements in conformity with the GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
1. | DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (continued) |
Cash, Cash Equivalents and Restricted Cash
The Company’s cash, cash equivalent and Restricted cash represents the following:
● | Cash and cash equivalents consist of cash on hand, cash on deposit with banks, and highly liquid debt investments with a maturity of three months or less when purchased. The Company has cash equivalents of $0 and $0, excluding cash held for settlement liabilities, as of March 31, 2021 and December 31, 2020, respectively. |
● | Restricted Cash – The Company’s technology enables transactional blockchain ledger to instantly reflect all transactions details. The final cash settlement of each transaction is subject to the gateway policies. This final disposition takes days to weeks to complete in accordance with these policies. Each policy is an integral part of the transactional contracts between the Company, its Independent Sales Organizations (ISOs), its agents, and the merchant clients. While the ledger reflects a held balance for the merchant, in reserve or payment in arears, the Company holds funds in a trust account as cash deemed restricted. The Company’s books reflect such restricted cash as a restricted cash and trust accounts, and the sum balance due to merchants and ISOs as settlement liabilities. |
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.
March 31, 2021 | December 31, 2020 | |||||||
Cash and cash equivalents | $ | 35,696,589 | $ | - | ||||
Restricted cash | - | 1,832,735 | ||||||
Total cash, cash equivalents, and restricted cash | $ | 35,696,589 | $ | 1,832,735 |
Cash Due from Gateways and Payment Processing Liabilities
The Company’s primary source of revenues continues to be payment processing services for its merchant clients. When such merchant makes a sale, the process of receiving the payment card information, engaging the banks for transferring the proceeds to the merchant’s account via digital gateways, and recording the transaction on a blockchain ledger are the activities for which the Company gets to collect fees.
In 2021 and 2020 the Company utilized several gateways. The gateways have strict guidelines pertaining to scheduling of the release of funds to merchants based on several criteria, such as return and chargeback history, associated risk for the specific business vertical, average transaction amount and so on. In order to mitigate processing risks, these policies determine reserve requirements and payment in arear strategy. While reserve and payment in arear restrictions are in effect for a merchant payout, the Company records gateway debt against these amounts until released.
Therefore, the total gateway balances reflected in the Company’s books represent the amount owed to the Company for processing – these are funds from transactions processed and not yet distributed.
Advertising and Marketing Costs
Advertising and marketing costs are recorded as general and administrative expenses when they are incurred. Advertising and marketing expenses were $24,725 and $11,885 for the three months ended March 31, 2021 and 2020, respectively.
Research and Development Costs
Research and development costs, which are expensed as incurred, are primarily comprised of costs and expenses for salaries and benefits for research and development personnel, outsourced contract services, and supplies and materials costs. Research and development expenses were $653,381 and $286,548 for the three months ended March 31, 2021 and 2020, respectively.
GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Revenue Recognition
Accounting Standards Codification ("ASC"(“ASC”) 605, 606, Revenue Recognition whichfrom Contracts with Customers outlines the basic criteria that must be met to recognize revenue and provide guidance for presentation of revenue and for disclosure related to revenue recognition policies in financial statements filed with the Securities and Exchange Commission. Management believes the Company'sCompany’s revenue recognition policies conform to ASC 605.
The Company recognizes revenue when 1) it is realized or realizable and earned, 2) there is persuasive evidence of an arrangement, 3) delivery and performance has occurred, 4) there is a fixed or determinable sales price, and 5) collection is reasonably assured.
The Company generates revenue from payment processing services, licensing fees and equipment sales.
● | Payment processing revenue is based on a percentage of each transaction’s value and/or upon fixed amounts specified per each transaction or service and is recognized as such transactions or services are performed. |
● | Licensing revenue is paid in advance and is recorded as unearned income, which is amortized monthly over the period of the licensing agreement. |
● | Equipment revenue is generated from the sale of POS products, which is recognized when goods are shipped. |
Accounts Receivable and Allowance for Bad Debt
The Company maintains an allowance for doubtful accounts for estimated losses from the inability of customers to make required payments. The allowance for doubtful accounts is evaluated periodically based on the aging of accounts receivable, the financial condition of customers and their payment history, historical write-off experience and other assumptions, such as current assessment of economic conditions.
Property and Equipment
Property and equipment are mainly consulting fees. stated at cost. Depreciation is computed primarily using the straight-line method over the estimated useful lives of the assets, which range from three to eight years. Leasehold improvements are amortized over the shorter of the useful life of the related assets or the lease term. Expenditures for repairs and maintenance are charged to expense as incurred. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period.
Fair Value of Financial Instruments
The consulting feesCompany utilizes ASC 820-10, Fair Value Measurement and Disclosure, for valuing financial assets and liabilities measured on a recurring basis. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are recognized when earned. Consulting feesinputs market participants would use in valuing the asset or liability and are developed based on market data obtained from real estate advisory servicessources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:
Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are subjectobservable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to refund are recorded as deferred revenue untildevelop its own assumptions.
The Company’s financial instruments consisted of cash, accounts payable and accrued liabilities, advances to due to or from affiliated companies, notes payable to officers. The estimated fair value of cash, accounts payable and accrued liabilities, due to or from affiliated companies, and notes payable approximates its carrying amount due to the project is completed and the fees are no longer refundable.short maturity of these instruments.
GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net of operating loss carry forwards and credits, by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred tax assets will be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
Long-Lived Asset Impairments
The Company reviews long-lived assets, including property and equipment and intangible assets, for impairment when events or changes in business conditions indicate that their carrying value may not be recovered, and at least annually. The Company considers assets to be impaired and writes them down to estimated fair value if expected associated undiscounted cash flows are less than the carrying amounts. Fair value is the present value of the associated cash flows.
Earnings Per Share
A basic earnings per share is computed by dividing net income to common stockholders by the weighted average number of shares outstanding for the year. Dilutive earnings per share include the effect of any potentially dilutive debt or equity under the treasury stock method, if including such instruments is dilutive. The Company'sCompany’s diluted earnings/loss per share is the same as the basic earnings/loss per share for the three and nine months ended September 30, 2017March 31, 2021 and 2016,2020, as there are no potential shares outstanding that would have a dilutive effect.
Reverse Common Stock Split (1 for 6)
On February 17, 2021, the Company effected a reverse stock split of the following:
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
Furniture & Fixtures | $ | 35,812 | $ | 35,159 | ||||
Office Equipment | 10,509 | 6,740 | ||||||
Automobile | 27,657 | 24,527 | ||||||
Leasehold Improvements | 24,527 | 21,710 | ||||||
98,505 | 88,136 | |||||||
Less: Accumulated depreciation | (16,740 | ) | (27,461 | ) | ||||
$ | 81,765 | $ | 60,675 |
Recently Adopted Accounting Updates
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This standard removes, modifies, and 2016, consulting fees from affiliates was $278,525adds certain disclosure requirements for fair value measurements, and $198,500, respectively.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a revolving lineCloud Computing Arrangement That Is a Service Contract. This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company’s accounting for the service element of credit totaling $1,800,000 with Frank Yuan and certain members of his family. The line of credit bears interest at 6% per annum starting October 1, 2010, 10% prior to October 1, 2010 anda hosting arrangement that is due upon demand, as amended. On December 31, 2014,a service contract is not affected by the convertible note was amended to waive the right of conversionproposed amendments and will continue to be usedexpensed as incurred in accordance with existing guidance. This standard does not expand on existing disclosure requirements except to require a linedescription of credit. During the nine months ended September 30, 2017nature of hosting arrangements that are service contracts. This standard is effective for fiscal years, and 2016,for interim periods within those fiscal years, beginning after December 15, 2019, and can be adopted either prospectively or retrospectively. Accordingly, the Company incurred interest expense totaling $25,964 and $15,515adopted the updated disclosure requirements of ASU No. 2018-15 prospectively in connectionthe first quarter of fiscal 2020, coinciding with the Line. The balance ofstandard’s effective date, and the note payable as of September 30, 2017 was $422,269. The balance of the note payable as of December 31, 2016 was $610,952 including accrued interest of $312,750 which was transferredadoption did not have any impact to the principal at December 31, 2016.
GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740, Income Taxes, while also clarifying and amending existing guidance, including interim-period accounting for enacted changes in tax law. This standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted ASU No. 2019-12 in the first quarter of fiscal 2020 and the adoption did not have any impact to the Company’s financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard provides optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this standard apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The amendments in this standard are elective and are effective upon issuance for all entities. The Company is leasing office spaceevaluating the expedients and exceptions provided by the amendments in this standard to determine their impact.
Other recently issued accounting updates are not expected to have a material impact on the Company’s Interim Financial Statements.
3. | SETTLEMENT PROCESSING |
The Company’s proprietary blockchain-based technology serves as the settlement engine for all transactions within the Company’s ecosystem. The blockchain ledger provides a robust and secure platform to log immense volumes of immutable transactional records in real time. Generally speaking, blockchain is a distributed ledger that uses digitally encrypted keys to verify, secure and record details of each transaction conducted within an ecosystem. Unlike general blockchain-based systems, GreenBox uses proprietary, private ledger technology to verify every transaction conducted within the GreenBox ecosystem. The verification of transaction data comes from its officer undertrusted partners, all of whom have been extensively vetted by us. GreenBox facilitates all financial elements of our closed-loop ecosystem and we act as the administrator for all related accounts. Using our TrustGateway technology, we seek authorization and settlement for each transaction from Gateways to the issuing bank responsible for the credit/debit card used in the transaction. When the Gateway settles the transaction, our TrustGateway technology composes a month by month basis.chain of blockchain instructions to our ledger manager system.
When consumers use credit/debit cards to pay for transactions with merchants who use our ecosystem, the transaction starts with the consumer purchasing tokens from us. The lease provides for monthly lease paymentsissuance of $3,500.
For the Year Ended December 31: | ||||
2017 | $ | 658 | ||
2018 | 3,995 | |||
2019 | 4,091 | |||
2020 | 4,190 | |||
2021 | 4,291 | |||
2022 | 4,025 | |||
Less Current Portion | 3,979 | |||
Long Term Portion | $ | 17,271 |
For the Year Ended December 31: | ||||
2017 | $ | 690 | ||
2018 | 704 | |||
2019 | 717 | |||
2020 | 732 | |||
2021 | 746 | |||
Thereafter | 23,119 |
GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
3. | SETTLEMENT PROCESSING (continued) |
The table below shows the status of transaction settlements:
March 31, 2021 | December 31, 2020 | |||||||
Settlement Processing Assets: | ||||||||
Cash held for settlements | $ | 100,532 | $ | 1,832,735 | ||||
Cash due from gateways | 7,532,137 | 1,922,669 | ||||||
Amounts due from gateways and merchants – hold and fees | 6,493,594 | 1,063,272 | ||||||
Reserves (1) | 4,316,572 | 5,381,281 | ||||||
Total before allowance for uncollectable | 18,442,835 | 10,199,957 | ||||||
Allowance for uncollectable – hold and fees | (6,594,126 | ) | (2,896,008 | ) | ||||
Total settlement processing assets – cash due from gateways | $ | 11,848,709 | $ | 7,303,949 | ||||
Settlement Processing Liabilities: | ||||||||
Settlement liabilities to merchants | $ | 5,355,115 | $ | 10,199,956 | ||||
Settlement liabilities to independent sales organizations (ISO) | - | - | ||||||
Refund allowances | - | - | ||||||
Total settlement processing liabilities | $ | 5,355,115 | $ | 10,199,956 |
(1) Reserves are essentially an escrow fund that protects a gateway/card issuer from financial losses. In the Reserve, funds are held until chargeback time limits expire.
4. | PROPERTY AND EQUIPMENT |
Property and equipment consisted of the following:
March 31, 2021 | December 31, 2020 | |||||||
Computers | $ | 59,991 | $ | 48,883 | ||||
Furniture and fixtures | 40,320 | 40,320 | ||||||
Kiosks | 6,472 | 6,473 | ||||||
Vehicles | 4,578 | 4,578 | ||||||
Total property and equipment | 111,361 | 100,254 | ||||||
Less accumulated depreciation | (48,999 | ) | (42,990 | ) | ||||
Total property and equipment, net | $ | 62,362 | $ | 57,264 |
Depreciation expense was $6,010 and $5,376 for the three months ended March 31, 2021 and 2020, respectively.
GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
5. | CONVERTIBLE NOTES PAYABLE |
Convertible notes payable consisted of the following:
March 31, 2021 | December 31, 2020 | |||||||
October 27, 2020 ($3,850,000) – 10% one-time interest charge with outstanding principal and interest due July 27, 2021. | $ | - | $ | 3,850,000 | ||||
Total convertible notes payable | - | 3,850,000 | ||||||
Debt discount | - | (2,993,408 | ) | |||||
Total convertible notes payable, net of debt discount | $ | - | $ | 856,592 |
Kingswood Capital (Syndicate Convertible Note) - $3,850,000
On October 27, 2020, the Company issued a convertible promissory note for $3,850,000 to various lenders through its placement agent, Kingswood Capital (“Kingswood Note”), due July 27, 2021 (the “Maturity Date”) with conversion price to common stock of $1.98 per share. The Kingswood Note included an original issue discount of $350,000, netting the balance received by the Company from Kingswood Note at $3,500,000. The Company also provided warrant of 1,944,444 with a fixed exercise price to common stock of $1.98 per share under the Kingswood Note. The Company valued its warrant of 1,944,444 with fixed exercise price of $1.98 using Black-Scholes valuation method which amounted to $3,498,667 and recorded as a debt discount at the time of issuance of warrant. The convertible debt was converted in February 2021.
6. | NOTE PAYABLE, PAYROLL PROTECTION PLAN LOAN |
On April 29, 2020, the Company entered into a loan agreement with Preferred Bank under Paycheck Protection Program administered by SBA in the amount of $272,713. Under this loan program, the loan may be forgiven if utilized for specific purpose specified under the CARES Act and PPP guideline. The loan bears interest of 1.00% per annum and matures on April 29, 2022.
7. | LONG-TERM DEBT |
On June 9, 2020, the Company entered into a loan agreement with SBA under CARES Act in the amount of $150,000. The loan requires monthly payment of $731 after 12 months with maturity date of June 1, 2050 with interest rate at 3.75% per annum. Both Nisan and Errez, individually, signed personal guarantees for this Purchase Agreement.
GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
8. | INCOME TAXES |
The Company did not have income tax provision (benefit) due to net loss and deferred tax assets having a full valuation allowances as of and for the three months ended March 31, 2021 and 2020.
The provision for income taxes differs from the amounts computed by applying the federal statutory tax rate of 21% to earnings before income taxes, as follows:
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Book income at statutory rate | 21.00 | % | 21.00 | % | ||||
Others | - | - | ||||||
Change in valuation allowance | -21.00 | % | -21.00 | % | ||||
Effective income tax rate | 0.00 | % | 0.00 | % |
Deferred tax assets and liabilities consist of the following tax-effected temporary differences:
March 31, 2021 | December 31, 2020 | |||||||
Deferred tax assets (liabilities): | ||||||||
Net operating loss carryforward | $ | 2,135,000 | $ | 1,066,726 | ||||
Depreciation | - | - | ||||||
Others | - | - | ||||||
Total deferred tax assets, net | 2,135,000 | 1,066,726 | ||||||
Valuation allowance | (2,135,000 | ) | (1,066,726 | ) | ||||
Net deferred tax assets (liabilities) | $ | - | $ | - |
The Company uses the liability method of accounting for income taxes as set forth in ASC 740. Under the liability method, deferred taxes are determined based on differences between the financial statement and tax bases of assets and liabilities using enacted tax rates. As of March 31, 2021, the Company had federal and California net operating loss carryforwards of approximately $6.2 million. The federal and California net operating loss carryforwards will expire at various dates from 2027 through 2029; however, $6.2 million of the Federal operating loss does not expire and will be carried forward indefinitely.
As of March 31, 2021 and December 31, 2020, the Company maintained full valuation allowance for net operating loss carryforward deferred tax asset. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The amount of the deferred tax asset considered realizable, however, could be reduced if estimates of future taxable income are reduced.
The Company files a consolidated federal income tax return and files tax returns in various state and local jurisdictions. The statutes of limitations for its consolidated federal income tax returns are open for years 2017 and after, and state and local income tax returns are open for years 2016 and after.
GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
9. | STOCK OPTION AWARDS |
The Company adopted the 2020 Incentive and Non-statutory Stock Option Plan (“2020 Plan”) in June 2020, which provided for the grant of incentive stock options and nonqualified stock options to our employees and directors. The 2020 Plan provides for up to 3.3 million shares of Common Stock
The Company applies the provisions of ASC 718, “Compensation - Stock Compensation,” using a modified prospective application, and the Black-Scholes model to value stock options. Under this application, the Company records compensation expense for all awards granted. Compensation costs will be recognized over the period that an employee provides service in exchange for the award.
The fair value of each share option award on the date of grant was estimated using the Black-Scholes method based on the following weighted-average assumptions:
March 31, 2021 | December 31, 2020 | |||||||
Risk-free interest rate | 0.29 | % | 0.29 | % | ||||
Expected term | 5 years | 5 years | ||||||
Expected volatility | 229.49 | % | 289.33% to 279.18 | % | ||||
Expected dividend yield | - | - |
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected term of the Company approvedoption award; the expected term represents the weighted-average period of time that option awards granted are expected to increasebe outstanding giving consideration to vesting schedules and historical participant exercise behavior; the authorized sharesexpected volatility is based upon historical volatility of the Company’s common stock; and the expected dividend yield is based upon the Company’s dividend rate at the time fair value is measured and future expectations.
The Company to 500,000,000 (the "Increase"), with 495,000,000 shares being Common Stockrecorded $797,613 and 5,000,000 shares being preferred stock, subject to Stockholder approval. The Majority Stockholder approved$4,130 compensation expenses recorded under this method for the Increase by written consent in lieu of a meeting on July 29, 2017. The increased number of authorized shares were retroactively presented on balance sheets.
A summary of the Company's consulting fee income, twostatus of our stock options is presented below as of March 31, 2021:
Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (In Years) | Aggregate Intrinsic Value | |||||||||||||
Outstanding at December 31, 2020 | 514,607 | $ | 2.30 | 0.00 | 3,365,527 | |||||||||||
Granted | 100,000 | 7.63 | 0.00 | |||||||||||||
Exercised | (44,832 | ) | 2.50 | 0.00 | ||||||||||||
Forfeited or expired | (68,428 | ) | 2.50 | 0.00 | ||||||||||||
Outstanding at March 31, 2021 | 496,782 | 4.80 | 0.00 | 7,018,853 | ||||||||||||
Exercisable as of March 31, 2021 | 496,782 | 4.81 | 0.00 | 6,954,941 | ||||||||||||
Vested and Expected to Vest as of March 31, 2021 | 496,782 | 4.81 | 0.00 | 6,954,941 |
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $14.00 as of March 31, 2021, which are affiliateswould have been received by the option holders had all option holders exercised their options as of that date. As of March 31, 2021, there was unrecognized compensation cost related to non-vested stock options granted in the Company. For the nine months ended September 30, 2016, three customers accounted for 86% (38%, 34% and 14%)amount of the Company's consulting fee income, two of which are affiliates of the Company. The loss of any of these customers could have a material adverse effect on the Company's financial position and results of operations.
GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
10. | RELATED PARTY TRANSACTIONS |
The Company had the following related party transactions:
● | Pop N Pay, LLC – In addition to his employment with the Company, Dan Nusinovich owns 100% of Pop N Pay, LLC (“PNP”), a Delaware registered limited liability company, that he formed on August 20, 2018. During the late summer of 2018, when both market opportunity and demand necessitated opening additional bank accounts to support our payment processing products and services, we turned to PNP to open new accounts, as a trustee, on our behalf. For his assistance, Dan, through his ownership of PNP, received approximately $3,000 (in addition to Dan’s salary) in early 2019, for services rendered in the fourth quarter of 2018. PNP was legally closed as of March 31, 2021. | |
● | Kenneth Haller and the Haller Companies Kenneth Haller (“Haller”) became the Company’s Senior Vice President of Payment Systems in November 2018. The Company began working indirectly with Haller earlier in 2018, both individually and through our relationship with MTrac Tech Corporation (“MTrac”), which in turn has business relationships with Haller. Haller brings considerable advantages to the Company’s platform development and business development efforts and capabilities, including transactional business relations and a large network of agents, which the Company believes, are capable of processing $1 billion transactions annually (the “Haller Network”). The Haller Network is an amalgamation of the collective networks of Haller and three companies owned or majority-owned by Haller, which are Sky Financial & Intelligence, LLC (“Sky”), Charge Savvy, LLC, Cultivate, LLC (collectively, the “Haller Companies”), each of which has formalized business relationships with the Company, as well as with some of the Company’s partners, which the Company believes allows the Company to maximize and diversity the Company’s market penetration capabilities. Haller, through Sky, owns controlling interests in Charge Savvy, LLC and Cultivate, LLC, with whom we do business indirectly, through their respective business relationship with MTrac. The following are certain transactions between the Company and the Haller Companies: |
o | Sky Financial & Intelligence, LLC – Haller owns 100% of Sky Financial & Intelligence LLC (“Sky”), a Wyoming limited liability company, and serves as its sole Managing Member. Sky is a strategic merchant services company that focuses on high risk merchants and international credit card processing solutions. In 2018, Sky was using GreenBox’s QuickCard payment system as its main payment processing infrastructure, through Sky’s relationship with MTrac. It was through this successful relationship, that we came to know Haller and the Haller Network. Realizing that the Haller Network and Haller’s unique skill set was highly complementary to our business objectives, we commenced discussions to retain Haller through his consulting firm, Sky, for a senior role, directly responsible for growing GreenBox’s operations. Subsequently, in November 2018, Haller was appointed as our Senior Vice President of Payment Systems, for a monthly consulting fee of $10,000, paid to Sky (“Haller Consulting Fee”). This relationship was referenced in press releases as GreenBox’s “acquisition of Sky MIDs Technologies” (see Sky MIDs below). As our relationship with Haller / Sky is non-exclusive, Haller and the Haller Companies provide services to other companies, including those listed below. Any revenue generated by Haller and/or the Haller Companies through these other relationships is in addition to the Haller Consulting Fee. |
■ | Charge Savvy, LLC – Sky owns 68.4% of Charge Savvy, LLC (“Charge Savvy”), an Illinois limited liability company. Haller serves as one of three Managing Members of Charge Savvy, along with Higher Ground Capital, LLC (owns 14%), and Jeff Nickel (owns 17.4%). The three managing members of Charge Savvy own the same percentages of Cultivate, as they do Charge Savvy. On January 25, 2021, the Company issued a press release announcing it had entered into a non-binding Memorandum of Understanding to acquire Charge Savvy, for total consideration of up to $52 million in restricted shares of the Company’s common stock with $31 million of that all-shares amount due upon closing. Charge Savvy was, until August 2020, one of the largest ISOs that we utilized in our ecosystem. The transaction assumes a per share price of $12.00. The all-stock transaction is subject to the negotiation and signing of definitive transaction documents, the completion of an audit of Charge Savvy’s financial statements, and customary closing conditions. | |
■ | Sky Mids –Previous references in press releases issued by PubCo in or about August 2018 regarding a “Sky Mids Acquisition” are references to the non-exclusive working relationship between PrivCo (and subsequently, PubCo) and Sky / Haller. The designation “Sky MIDs” was a colloquial reference to Sky, based upon a Sky-owned and operated website, which is no longer in use. While an acquisition of Sky has not formally been executed, nor have we (nor subsequently, PubCo) executed a formal engagement with Haller nor Sky, previous statements regarding the nature of our relationship with Sky Mids, which include our beliefs in the advantages of this relationship, accurately represent the working relationship between the Company and Sky / Haller. |
The Company did not pay any commissions to the related parties mentioned above for the three months ended March 31, 2021 and 2020.
GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
11. | COMMITMENTS AND CONTINGENCIES |
Legal Proceedings
The Company has the following legal proceedings:
● | America 2030 Capital Limited and Bentley Rothschild Capital Limited – On or about October 31, 2018, Nisan and Errez received constitutive notice, regarding arbitration against Nisan, Errez, PrivCo and possibly PubCo, from Bentley Rothschild Capital Limited ("Bentley") and America 2030 Capital Limited (“America 2030”), both located in Nevis, West Indies, and both claiming breach of contract by Nisan and Errez of Nisan and Errez’s respective individual Master Loan Agreements and seeking forfeiture of 266,667 PubCo shares that PrivCo had transferred, on or about August 1, 2018, from PrivCo’s Control Shares under the terms of the MLAs. As of March 31, 2020, both parties have abandoned the matter and no further action was required by either party. | |
● | DCSM et al v. Greenbox POS – On November 25, 2019, four companies (the “Plaintiffs”) filed a complaint against GreenBox POS, LLC, GreenBox POS, Global Payout, Inc., MTrac Tech Corporation and Cultivate Technologies, LLC (collectively the “Defendants”) in the Superior Court of the State of California. Plaintiffs filed suit to recover processed funds and processing fees alleged to be withheld illegally (collectively, the “Withholding Suit”). The parties discussed arbitration and Plaintiffs later dismissed the case with prejudice. Plaintiffs refiled on February 28, 2020. The parties attended mediation on November 12, 2020, came to an agreement, and subsequently executed a Settlement Agreement and Release on or around November 23, 2020, whereby GreenBox is to pay $3.8M by March 15, 2021. On December 14, 2020 Plaintiffs filed a Request for Dismissal with prejudice. The Company settled in the amount of $3.8M and was paid in February 2021. The Company had payment processing liability in the amount of $3.4M which was off-set against $3.8M payment and recorded loss on merchant liability settlement in the amount of approximately $360,000 which was recorded in other expense in the unaudited condensed consolidated statements of operations for the three months ended March 31, 2021. The Court has now dismissed the case. | |
● | The Good People Farms, LLC (TGPF) – TGPF initiated an arbitration in AAA on or about April 20, 2020 against Greenbox POS, Fredi Nisan, Ben Errez, MTrac Tech., Vanessa Luna, and Jason LeBlanc. The matter was placed in abeyance for some time. On January 15, 2021 GreenBox filed a counter-claim for fraud – intentional misrepresentation, breach of contract, breach of covenant of good faith and fair dealing, violation of California Business and Professions Code Section 17200, and accounting. An arbitrator has been selected and the parties are awaiting the scheduling of the preliminary conference. The arbitration is stayed pending further proceedings in the separate but related action filed by MTrac in San Diego Superior Court. |
Operating Leases
The Company entered into the following operating facility lases:
● | Hyundai Rio Vista – On October 4, 2018, the Company entered into an operating facility lease for its corporate office located in San Diego with 38 months term and with option to renew. The lease started on October 4, 2018 and expires on October 3, 2021 |
The Company entered into an operating lease for corporate location on October 4, 2018. Rent expense paid under the lease agreements for the three months ended March 31, 2021 and 2020 was $33,104 and $22,390, respectively.
For operating leases, we calculated right of use assets and lease liabilities based on the present value of the remaining lease payments as of the date of adoption using the incremental borrowing rate. The adoption of ASC 842 resulted in recording an adjustment to operating lease right of use asset and operating lease liabilities of $87,837 and $89,017 respectively, as of March 31, 2021. The difference between the operating lease ROU asset and operating lease liabilities at transition represented existing deferred rent expenses and tenant improvements, and indirect costs that was derecognized. The adoption of ASC 842 did not materially impact our results of operations, cash flows, or presentation thereof.
GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
12. | SUBSEQUENT EVENTS |
The Company follows the guidance in FASB ASC Topic 855, Subsequent Events (“ASC 855”), which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before the consolidated financial statements are issued or are available to be issued. ASC 855 sets forth (i) the period after the balance sheet date during which management of a reporting entity evaluates events or transactions that may occur for potential recognition or disclosure in the consolidated financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its consolidated financial statements, and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. Accordingly, the Company did not have any subsequent events that require disclosure other than the following:
● | April 2021 (Facility Lease) – In April 2021, the Company entered into a facility lease agreement for corporate office effective May 1, 2021 with lease expiring in June 2023 and monthly lease payment of $33,000. |
ITEM2. Disclaimer Regarding Forward Looking Statements Our Management’s Discussion and Analysis or Plan of Operations contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission. Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects. Overview – Organization and New Name Organization – GreenBox POS (the “Company” or “PubCo”) was formerly known as ASAP Expo, Inc (“ASAP”), which was incorporated April 10, 2007 under the laws of the State of Nevada. On January 4, 2020, PrivCo and GreenBox POS, a Nevada corporation (“PubCo”) entered into the Agreement to memorialize the Verbal Agreement with PrivCo which was formed on August 10, 2017 (the seller). On April 12, 2018, pursuant to the Verbal Agreement, PubCo acquired PrivCo’s blockchain gateway and payment system business, point of sale system business, delivery business and kiosk business, and bank and merchant accounts, as well as all intellectual property related thereto (the “GreenBox Business”). As consideration for the GreenBox Business, on April 12, 2018, PubCo assumed PrivCo’s liabilities that had been incurred in the normal course of the GreenBox Business (collectively, the “GreenBox Acquisition”). For accounting and reporting purposes, PubCo deemed the GreenBox Acquisition a “Reverse Acquisition” with PrivCo designated the “accounting acquirer” and PubCo designated the “accounting acquiree.” New Name –On May 3, 2018, PubCo formally changed its name to GreenBox POS LLC, then subsequently changed its name to GreenBox POS on December 13, 2018. Underwritten Public Offering and Nasdaq Listing On February 16, 2021, the Company Management Discussion and Analysis This MD&A section pertaining to the period prior to Q1/2021 was prepared by the management of GreenBox POS (OTC: GRBX) (“GreenBox”, “GRBX”, the “Company”); the parts of this section pertaining to Q1/2021 and beyond were prepared by the management of GreenBox POS (NASDAQ: GBOX), in conjunction with the MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONSThe following discussionshould be readentered into an underwriting agreement (the “Underwriting Agreement”) with Kingswood, as representative of the underwriters listed therein (the “Underwriters”), pursuant to which the Company agreed to sell to the Underwriters in a firm commitment underwritten public offering (the “Offering”) an aggregate of 4,150,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a public offering price of $10.50 per share. In addition, the Underwriters were granted an over-allotment option (the “Over-allotment Option”) for a period of 45 days to purchase up to an additional 622,500 shares of Common Stock. The Common Stock began trading on the Nasdaq Capital Market under the symbol GBOX on February 17, 2021. The gross proceeds from the Offering were approximately $50.11 million as the representative of the Underwriters exercised in full its over-allotment option, before deducting underwriting discounts and commissions and other offering expenses. Pursuant to the Underwriting Agreement, the Company also granted Kingswood a right of first refusal, for a period of 12 months from the commencement of the Offering, to act as sole investment banker, sole book-runner, and/or sole placement agent, at Kingswood’s sole discretion, for each and every future public and private equity, equity-linked or debt offering, including all equity linked financings undertaken during such period by the Company, or any of the Company’s successors or subsidiaries.auditeddiscussion the financial statementsactivity disclosed from the perspectives of on-going Q1/2021 and the related notes thereto included elsewhere in this annual reportplans and projections for the period ended December 31, 2016. This annual report contains certain forward-looking statements and the Company's future operating results could differ materially from those discussed herein. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievementsremainder of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments.OVERVIEWASAP Expo ("ASAP" or "The Company" or "Our" or "We") mission is to be the bridge between China and the Western world. ASAP is a holding company that assists Chinese institutional and high net worth individuals with acquisition advisory and asset management of U.S. hotels.Our investors include AVIC International USA, Junson Capital, Urban Commons, Sky Harbor Management, Shenzhen New World, American Curvet, and USA Heritage.From August 2010 until now, our group has provided consulting services regarding purchasing 20 hotels primarily in California, Florida, Colorado, Connecticut, Georgia and Michigan. Hotel brands include Marriott, Hilton, Westin, Doubletree by Hilton, Four Points by Sheraton, and Holiday Inn. We are one of the most active hotel buyers in the market.ASAP believes we will continue this growth for the next couple of years, taking advantage of current below replacement cost assets with reasonable cap rates and value-add opportunities in the current U.S. hotel market.RESULTS OF OPERATIONSRevenuesSince the Company's primary business is based upon potential transactions in real estate, the Company is subject to variance in revenues due to investors sentiment towards real estate.Substantially all of our revenues are in the form of consulting fees collected from our clients, usually negotiated on a transaction-by-transaction basis. The company's consulting fees primarily consist of revenue derived from transaction commission received from acquisition advisory. The company earns the consulting fees by sourcing the deal, underwriting financials, coordinating due diligence on all contracts, recommending lenders, hiring third party property management companies, and negotiating franchise agreements. Another revenue source for the company includes asset management fees, which consist of supervision of daily, weekly, and monthly operating results of the hotel, review of capital expenditure requests, communication with lenders, negotiating personal and real property tax assessments, and most importantly, oversight on brand relations.The Company's clients include concentration of two to three main clients. Our concentration of clients does provide a risk for revenue growth. The Company has established strong relationships with our clients. Our business and client relationships, and our culture and philosophy are firmly centered on putting the clients' interests first. We have been building strong reputation in the hospitality industry which is bringing several new potential clients. We expect to have steady revenue stream from our 3 major clients while building new client base for future revenue growth. We believe that our product offerings, asset management services, client diversification, expertise in a property types and national platform have the potential to create a sustainable revenue stream within the U.S. commercial real estate sector.During the three and nine months ended September 30, 2017, the Company earned consulting fee of $288,160 and $1,117,960 including $278,525 and $579,525 from affiliated companies, respectively, as compared to consulting fee of $198,500 and $1,168,022 for the same periods last year of which $198,500 and $719,572 were from affiliated companies. During the three and nine months ended September 30, 2017, the Company also earned management fee of $18,000 and $61,200, respectively from a new hotel client. The higher consulting fee in the third quarter of 2017 was mainly because the company received a larger amount consulting fee for certain consulting works in the third quarter of 2017. The decrease in consulting fee in the first nine months of 2017 was mainly because the Company closed one big hotel acquisition deal in the second quarter of 2016 and certain consulting fee decreased in 2017.
Q4/2020 signified the return of Sales
Management is focused on the following KPI (Key Performance Indices):
KPI | Description |
Annual Transactional Processing Volume (ATPV) | The Company plans to process $1.65B in FY 2021, including previously increased processing volumes projections from $600M to $1.2B, and including the expected processing of the acquired ChargeSavvy portfolio, projected to add another $450M. The Company’s Book of Business exceeds the processing goals for the year. |
Annual Gross Profit Margin (AGPM) | This index matches the Company goals and remains at levels supporting the Company’s financial projections. |
Annual Gross Profit (AGP) | At the targeted Annual Transactional Processing Volume goal and targeted Annual Gross Profit Margin, projected Annual Gross Profit is $24-26M for FY2021. |
Annual EBITDA | The Company objective is to stay with EBITDA at around 3% of Total Transactional Volume. At the targeted Annual Transactional Processing Volume goal, the Annual EBITDA equals $26M. |
In order to process the targeted ATPV goal, $1.65B, the Company must be able to process over $100M/month in a consistent fashion, as business performance in Q1/2021 demonstrated. The Company estimates the target deployment timeframe for its Smart Contract Token technology in Q2/2021, further improving on volumes and efficiencies.
KPI | Description |
Average Monthly Transaction Count (AMTC) | The Company projects an AMTC of around 500,000 |
New Clients Backlog (NCB) | The Company will continue to invest in on-boarding technologies in order to expedite the process and reduce backlog. There are five client statuses: application, KYC, on-boarding, integration, processing. Current backlog of clients at application stage is greater than 2,000. Our goal is to bring the NCB down to 200. |
Client Attrition | Current attrition rates are under 5%. Company goal is to reduce it further and keep it under 3%. |
Based on the above and the current traction in Q2/21, the Company is comfortable with its volumes, gross revenues and EBITDA projections. The Company owns all the IP rights for operations in its space: tokenizer, gateway, ledger manager and blockchain substrate. Other, supporting patents, such as fraud proofing, on-boarding accelerators, and an all new blockchain implementation, are pending.
With the visibility into the Company’s operation management has in Q2/2021 and the Company uplisting to NASDAQ in Feb/2021, the current plan is to grow the Company organically to the size and value afforded by the senior exchange.
The ATPV, Profitability and other services that facilitatemajor KPIs remain sensitive to regulatory changes and global and national economic trends. These will impact and influence the closingCompany’s product line, its potential mergers and acquisitions targets, its joint ventures and the Company’s technology emphasis.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2021 (Unaudited) Compared to Three Months Ended March 31, 2020 (Unaudited):
Three Months Ended March 31, | ||||||||||||||||||||||||
2021 | 2020 | Changes | ||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||
Amount | Revenue | Amount | Revenue | Amount | % | |||||||||||||||||||
Net revenue | $ | 4,749,441 | 100.0 | % | $ | 187,205 | 100.0 | % | $ | 4,562,236 | 2437.0 | % | ||||||||||||
Cost of revenue | 1,593,771 | 33.6 | % | 247,305 | 132.1 | % | 1,346,466 | 544.5 | % | |||||||||||||||
Gross profit (loss) | 3,155,670 | 66.4 | % | (60,100 | ) | -32.1 | % | 3,215,770 | -5350.7 | % | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Advertising and marketing | 24,725 | 0.5 | % | 11,885 | 6.3 | % | 12,840 | 108.0 | % | |||||||||||||||
Research and development | 653,381 | 13.8 | % | 286,548 | 153.1 | % | 366,833 | 128.0 | % | |||||||||||||||
Payroll and payroll taxes | 559,201 | 11.8 | % | 402,462 | 215.0 | % | 156,739 | 38.9 | % | |||||||||||||||
Professional fees | 457,752 | 9.6 | % | 212,298 | 113.4 | % | 245,454 | 115.6 | % | |||||||||||||||
General and administrative | 566,195 | 11.9 | % | 142,050 | 75.9 | % | 424,145 | 298.6 | % | |||||||||||||||
Stock compensation for employees | 797,613 | 16.8 | % | 4,130 | 2.2 | % | 793,483 | 19212.7 | % | |||||||||||||||
Stock compensation for services | 9,453,825 | 199.1 | % | - | 0.0 | % | 9,453,825 |
| ||||||||||||||||
Depreciation and amortization | 6,009 | 0.1 | % | 5,376 | 2.9 | % | 633 | 11.8 | % | |||||||||||||||
Total operating expenses | 12,518,701 | 263.6 | % | 1,064,749 | 568.8 | % | 11,453,952 | 1075.7 | % | |||||||||||||||
Loss from operations | (9,363,031 | ) | -197.1 | % | (1,124,849 | ) | -600.9 | % | (8,238,182 | ) | 732.4 | % | ||||||||||||
Other Income (Expense): | ||||||||||||||||||||||||
Interest expense - debt discount | (2,993,408 | ) | -63.0 | % | (30,076 | ) | -16.1 | % | (2,963,332 | ) | 9852.8 | % | ||||||||||||
Interest expense | (594,258 | ) | -12.5 | % | (288,590 | ) | -154.2 | % | (305,668 | ) | 0.0 | % | ||||||||||||
Changes in fair value of derivative liability | - | 0.0 | % | (3,822,385 | ) | -2041.8 | % | 3,822,385 | -100.0 | % | ||||||||||||||
Merchant liability settlement | (364,124 | ) | -7.7 | % | - | 0.0 | % | (364,124 | ) | -100.0 | % | |||||||||||||
Merchant fines and penalty income | - | 0.0 | % | 24,060 | 12.9 | % | (24,060 | ) | -100.0 | % | ||||||||||||||
Other income or expense | (14,611 | ) | -0.3 | % | - | 0.0 | % | (14,611 | ) |
| ||||||||||||||
Total other income (expense) | (3,966,401 | ) | -83.5 | % | (4,116,991 | ) | -2199.2 | % | 150,590 | -3.7 | % | |||||||||||||
Loss before provision for income taxes | (13,329,432 | ) | -280.7 | % | (5,241,840 | ) | -2800.1 | % | (8,087,592 | ) | 154.3 | % | ||||||||||||
Provision for income taxes | - | 0.0 | % | - | 0.0 | % | - | 0.0 | % | |||||||||||||||
Net loss | $ | (13,329,432 | ) | -280.7 | % | $ | (5,241,840 | ) | -2800.1 | % | $ | (8,087,592 | ) | 154.3 | % |
Net Revenue
Net revenue increased by $4,562,236, or 2437.0%, to $4,749,441 in the first quarter of sales consisting mainly consulting expense, is primarilyfiscal 2021 from $187,205 in the result of the commissions and other incentive compensation incurred directly related to acquisition advisory services. Therefore, the fluctuation in revenue will directly impact the cost of sales.
● | Continued work on technology launch of new platforms, including Crypto, FOREX and transactional routing. Onboarding of existing merchants and new clients resumed in March\2020, with volume of revenues in April exceeding the first three months combined. |
● | Covid-19 impact on certain client business verticals and shift between focus categories. |
● | Higher volume transaction processing. |
Cost of Revenue
Cost of revenue increased by $1,346,466, or 544.5%, to $1,593,771 in the thirdfirst quarter andof fiscal 2021 from $247,305 in the first nine monthsquarter last year. Payment processing consists of 2017 were mainlyvarious processing fees paid to Gateways, as well as commission payments to the Independent Sales Organizations (“ISO”) responsible for establishing and maintaining merchant relationships, from which the processing transactions ensue. Most orders are delivered directly to the customer, without any handling, storage or processing by us. Cost of revenues decreased due to the closingfollowing:
● | Increased automation by installation of two new platforms, FOREX and Crypto, that are much more streamlined and less demand for manual work. |
● | Installation and integration of an advance transactional routing technology. |
● | Revocations of the license agreement with MTrac and moving operations inhouse for better efficiency and higher margins. |
● | Termination of service to problematic and low revenue producing clients. |
● | Onboarding of higher profitability clients. |
Operating Expenses
Operating expenses increased by $11,453,952, or 1075.7%, to $12,518,701 in the first quarter of one big hotel acquisition dealfiscal 2021 from $1,064,749 in 2016 mentioned above and certain consulting expensethe first quarter last year. The increase was no longer needed as a hotel project finished in 2017.
● | Increased R&D investment towards the completion and launch of the new technologies (Crypto and FOREX platforms, and advanced transactional routing technology). |
● | Settlement of legal disputes and associated payments. |
● | Stock compensation expense for employees and services |
● | Professional fees related to legal and audits. |
Non-Operating Expenses
We incurred interest expense related to various debt in the amount of $2,993,408 and $ for the three months ended March 31, 2021 and 2020, respectively. We incurred a loss from changes in fair value of derivative liability of $3,822,385 for the three months ended March 31, 2020 and none for three months ended March 31, 2021.
LIQUIDITY AND CAPITAL RESOURCES
Our principal liquidity requirements are for working capital and capital expenditures. We fund our liquidity requirements primarily through cash on hand, cash flows from operations and borrowings from through debt. We ended March 31, 2021 with $35,696,589 of cash, cash equivalents, and restricted cash compared with $1,832,735 as of December 31, 2020.
The following table summarizes our cash flows from operating, investing and financing activities:
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Net cash provided by (used in) operating activities | $ | (11,258,779 | ) | $ | 267,844 | |||
Net cash provided by (used in) investing activities | (11,108 | ) | (12,564 | ) | ||||
Net cash provided by (used in) financing activities | 45,133,741 | (711,911 | ) | |||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | 33,863,854 | $ | (456,631 | ) |
Operating Activities –For the three months ended September 30, 2017, G&A expenses decreasedMarch 31, 2021 and 2020, net cash provided by $39,691 or 15.8% to $212,255 compared to $251,946 for the same period last year.(used in) operating activities was $(11,258,779) and $267,844, respectively. The decrease in the third quarter of 2017 was mainly due to lower marketing expense, partly offset by higher payroll expense as one highly paid manager back on payroll during the second quarter of 2017, higher professional fee, higher staff travel expense and a new auto lease,
As of September 30, 2017 ($) | As of December 31, 2016 ($) | |||||||
Current assets | $ | 57,857 | $ | 62,369 | ||||
Current liabilities | 245,726 | 111,196 | ||||||
Working capital | $ | (187,869 | ) | $ | (48,827 | ) |
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Net cash provided by (used in) operating activities | $ | 194,177 | $ | (199,319 | ) | |||
Net cash provided by (used in) investing activities | 2,093 | 36,515 | ||||||
Net cash provided by (used in) financing activities | (191,449 | ) | 151,128 | |||||
Net increase (decrease) in cash | $ | 4,821 | $ | (11,676 | ) |
Investing Activities – Cash used in operating activities was $199,319. This was primarily due to a net loss of $123,622, adjusted by non-cash related expenses of depreciation of $7,734, then decreased by unfavorable changes in working capital of $83,431. The unfavorable changes in working capital resulted from a decrease in accounts payable and accrued expenses of $28,176 and decrease in income tax payable of $55,255.
Financing activities
CRITICAL ACCOUNTING POLICIES
Our critical accounting estimates are included in our significant accounting policies as described in Note 2 of the consolidated financial statements of this Form 10-Q. Those consolidated financial statements were prepared in accordance with GAAP. Critical accounting estimates are those that we believe are most important to the portrayal of our financial condition and results of operations. The preparation of our consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires managementus to make judgments, assumptionsestimates and estimatesjudgments that affect the amounts reported in the our financial statements and the accompanying notes. The amounts of assets, liabilities, revenue and liabilities reportedexpense. Our estimates are evaluated on an ongoing basis and drawn from historical experience, current trends and other factors that management believes to be relevant at the time our balance sheet and the amounts of revenues and expenses reported for each of our fiscal periodsconsolidated financial statements are affected by estimates and assumptions, which are used for, but not limited to, the accounting for revenue recognition, stock based compensation and the valuation of deferred taxes.prepared. Actual results couldmay differ from theseour estimates. TheManagement believes that the following critical accounting policies are significantly affected byestimates reflect the more significant judgments assumptions and estimates usedwe use in the preparation of thepreparing our consolidated financial statements:
Revenue Recognition
Accounting Standards Codification ("ASC"(“ASC”) 605, "Revenue Recognition"606, Revenue from Contracts with Customers outlines the basic criteria that must be met to recognize revenue and provide guidance for presentation of revenue and for disclosure related to revenue recognition policies in financial statements filed with the Securities and Exchange Commission. Management believes the Company'sCompany’s revenue recognition policies conform to ASC 605.
The Company accounts for income taxes under ASC 740, "Income Taxes." Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts 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. Management provides a valuation allowance for significant deferred tax assetsrecognizes revenue when 1) it is more likely than not that such asset will not be recovered.
The Company generates revenue from payment processing services, licensing fees and equipment sales.
● | Payment processing revenue is based on a percentage of each transaction’s value and/or upon fixed amounts specified per each transaction or service and is recognized as such transactions or services are performed. |
● | Licensing revenue is paid in advance and is recorded as unearned income, which is amortized monthly over the period of the licensing agreement. |
● | Equipment revenue is generated from the sale of POS products, which is recognized when goods are shipped. |
Our management, evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer,Executive Vice President, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined inpursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange ActAct. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of 1934, as amended) asachieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the endfact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of the period covered by this Report. possible controls and procedures relative to their costs.
Based on thismanagement's evaluation, our Chief Executive Officer and our Chief Financial OfficerExecutive Vice President concluded that, as a result of the material weaknesses described below, as of March 31, 2021, our disclosure controls and procedures are effectivenot designed at a reasonable assurance level and are ineffective to ensureprovide reasonable assurance that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission'sSEC rules and forms, and (ii)that such information is accumulated and communicated to our management, including our Chief Executive Officer and Executive Vice President, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls and procedures include components of ourThe material weaknesses, which relate to internal control over financial reporting, that were identified are:
a) | We did not have enough personnel in our accounting and financial reporting functions. As a result, we were not able to achieve adequate segregation of duties and were not able to provide for adequate reviewing of the financial statements. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis. |
Management believes that the hiring of additional personnel who have the technical expertise and knowledge with the non-routine or technical issues we have encountered in the past will result in both proper recording of these transactions and a much more knowledgeable finance department as such, are designeda whole. Due to the fact that our accounting staff consists of a Principal Financial Officer, a bookkeeper and external accounting consultants, additional personnel will also ensure the proper segregation of duties and provide reasonable assurance that such information is accumulatedmore checks and communicatedbalances within the department. Additional personnel will also provide the cross training needed to our management. Management's assessment ofsupport us if personnel turnover issues within the department occur. We believe this will eliminate or greatly decrease any control and procedure issues we may encounter in the future.
We will continue to monitor and evaluate the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance that the control system, no matter how well designeddisclosure controls and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met (see the section below in this Item 3 entitled Limitations on the Effectiveness of Internal Controls).
PART II - OTHER INFORMATION
Management currently is not aware of any legal matters or pending litigation that would have a significant effect on the Company'sCompany’s financial statements as of September 30, 2017.
None.
None.
None.
None.
3.1 | |
10.1+ | |
31.1 | |
31.2 | |
32.1* | |
32.2* | |
101.INS | XBRL Instance |
101.SCH | XBRL Taxonomy Extension Schema |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase |
101.DEF | XBRL Taxonomy Extension Definition Linkbase |
101.LAB | XBRL Taxonomy Extension Label Linkbase |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
+ Management compensatory plan or contract.
* Furnished electronicallyIn accordance with this filing
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GREENBOX POS (Registrant) | ||||
Date: | By: | /s/ | ||
Fredi Nisan Chief Executive Officer | (Principal Executive Officer) | |||
Date: May 13, 2021 | By: | /s/ Benjamin Chung | |
Benjamin Chung Chief Financial Officer (Principal Financial Officer and Principal Accounting Office) |