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 ~~September~~ ~~30, 2020~~March 31, 2021

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
	For the transition period from ______________ to ______________

Commission file number: 001-34294

GREENBOX POS

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

Nevada	22-3962936
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)

~~8880~~3131 Camino Del Rio ~~San Diego Dr,~~North, Suite ~~102~~1400

San~~San~~ Diego, CA

92108

(Address of principal executive offices)

~~(Zip~~(Zip Code)

(619)-631-8261

(Registrant’s telephone number, including area code)

~~N/A~~8880 RIO SAN DIEGO DR., SUITE 102, SAN DIEGO, CA, 92108

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

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

Title of each class

Trading ~~symbol(s)~~

Symbol(s)

Name of each exchange on

which registered

~~None~~Common Stock, $0.001 par value

GBOX

~~None~~

~~None~~The Nasdaq Stock Market LLC (Nasdaq Capital Market)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

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

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

Number of shares outstanding of the issuer’s classes of common equity, as of ~~November 9, 2020~~May 12, 2021 was ~~181,050,238~~41,905,571 Shares of Common Stock (One Class)

TABLE OF CONTENTS

		Page
PART IConsolidated Financial Information

Item 1.	Condensed Consolidated Financial Statements ~~(Unaudited)~~	3
	Condensed Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020	3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020 (unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Deficit for the Three Months Ended March 31, 2021 and 2020 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (unaudited)	76
	Notes to (unaudited) Condensed Consolidated Financial Statements	87

Item 2.	Management’s Discussion and Analysis or Plan of Operation	2819
Item 3.	Controls and Procedures	3424

PART II Other Information

Item 1.	Legal Proceedings	3525
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3525
Item 3.	Defaults Upon Senior Securities	3525
Item 4.	Mine Safety Disclosures	3525
Item 5.	Other Information	3525
Item 6.	Exhibits	3525
Signatures		3626

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GREENBOX POS

CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	September 30,			December 31,			*March 31,*			*December 31,*
	2020			2019			*2021*			*2020*

ASSETS

Current Assets:
Cash and cash equivalents	$	-		$	-		$	35,696,589		$	-
Restricted cash		124,834			763,110			-			1,832,735
Accounts receivable, net of allowance for bad debt of $0 and $0, respectively		10,000			70,257
Accounts receivables from fines and penalties from merchants, net of allowance for bad debt of $6,665,031		2,789,230			2,776,687
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		5,680,356			8,426,844			11,848,709			7,303,949
Prepaid and other current assets		59,766			24,888			2,452,753			70,130
Total current assets		8,664,186			12,061,786			52,797,281			12,006,044

Non-current Assets:
Property and equipment, net		62,555			66,491			62,362			57,264
Operating lease right-of-use assets, net								87,837			117,795
Other assets		87,174			17,174			81,636			81,636
Operating lease right-of-use assets, net		146,984			229,639
Total non-current assets		296,713			313,304			231,835			256,695

Total assets	$	8,960,899		$	12,375,090		$	53,029,116		$	12,262,739


LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable	$	725,558		$	504,505		$	178,038		$	210,094
Other current liabilities		47,207			15,100			98,995			68,138
Accrued interest		87,560			368,071
Payment processing liabilities, net		12,624,082			14,021,892			5,355,115			10,199,956
Short-term notes payable, net of debt discount of $39,000 and $32,418, respectively		731,232			741,253
Convertible debt, net of debt discount of $133,500 and $0, respectively		44,500			807,500
Derivative liability		284,210			1,050,063
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		30,314			113,935			89,017			120,110

Total current liabilities		14,574,663			17,622,319			5,993,878			11,727,603
Operating lease liabilities, less current portion		120,110			120,110
Long-term debt								149,900			149,900

Total liabilities		14,694,773			17,742,429			6,143,778			11,877,503

Commitments and contingencies

Stockholders' Equity:
Common stock, par value $0.001, 495,000,000 shares authorized, shares issued and outstanding of 181,6550,138 and 169,862,933, respectively		181,650			169,863
Common stock - issuable		-			695
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		1,590,993			1,179,272			71,898,401			12,079,074
Accumulated deficit		(7,506,517	)		(6,717,169	)		(25,053,981	)		(11,724,549	)
Total stockholders' equity		(5,733,874	)		(5,367,339	)		46,885,338			385,236

Total liabilities and stockholder's equity	$	8,960,899		$	12,375,090		$	53,029,116		$	12,262,739

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

Table of Contents

GREENBOX POS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended September 30,					Nine Months Ended September 30,						*Three Months Ended March 31,*
	2020			2019		2020			2019			*2021*			*2020*

Revenue	$	3,056,271		$	14,793,117	$	5,536,335		$	19,070,861

Net revenue												$	4,749,441		$	187,205
Cost of revenue		1,845,295			6,834,198		3,504,283			10,602,555			1,593,771			247,305

Gross profit		1,210,976			7,958,919		2,032,052			8,468,306
Gross profit (loss)													3,155,670			(60,100	)

Operating expenses:
Advertising and marketing		59,099			10,319		86,368			35,928			24,725			11,885
Research and development		243,923			381,112		798,157			1,085,298			653,381			286,548
Cash due from gateway reserve expense		-			5,665,031		-			5,665,031
General and administrative		366,734			176,120		613,156			375,373
Payroll and payroll taxes		436,216			420,074		1,279,174			967,121			559,201			402,462
Professional fees		344,641			281,659		852,234			588,677			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		5,764			4,897		16,856			11,352			6,009			5,376
Total operating expenses		1,456,377			6,939,212		3,645,945			8,728,780			12,518,701			1,064,749

Loss from operations		(245,401	)		1,019,707		(1,613,893	)		(260,474	)		(9,363,031	)		(1,124,849	)

Other income (expense):
Interest expense - debt discount													(2,993,408	)		(30,076	)
Interest expense		(48,931	)		3,837		(372,553	)		(171,193	)		(594,258	)		(288,590	)
Interest expense - debt discount		(83,500	)		-		(121,918	)		(188,273	)
Derivative expense		(925,576	)		-		(925,576	)		(634,689	)
Changes in fair value of derivative liability		819,366			236,184		(383,769	)		(129,186	)		-			(3,822,385	)
Gain from extinguishment of convertible debt		-			-		2,630,795			-
Merchant liability settlement													(364,124	)		-
Merchant fines and penalty income													-			24,060
Other income or expense		(5,768	)		-		(2,434	)		-			(14,611	)		-
Total other expense, net		(244,409	)		240,021		824,545			(1,123,341	)		(3,966,401	)		(4,116,991	)

Loss before provision for income taxes		(489,810	)		1,259,728		(789,348	)		(1,383,815	)		(13,329,432	)		(5,241,840	)

Income tax provision		-			-		-			-			-			-

Net loss	$	(489,810	)	$	1,259,728	$	(789,348	)	$	(1,383,815	)	$	(13,329,432	)	$	(5,241,840	)


Earnings (loss) per share:
Basic and diluted	$	(0.00	)	$	0.01	$	(0.00	)	$	(0.01	)	$	(0.38	)	$	(0.18	)

Weighted average number of common shares outstanding:
Basic and diluted		176,930,358			168,492,966		176,930,358			167,136,344			34,917,106			28,993,402

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

Table of Contents

GREENBOX POS

CONDENSED CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’~~STOCKHOLDERS’ DEFICIT

(UNAUDITED)

Common Stock

Additional Paid-In

Accumulated

Total Stockholders' Equity

Shares

Amount

To be Issued

Amount

Capital

Deficit

(Deficit)

Balance at June 30, 2020
181,150,138 $ 181,150 - $ - $ 1,396,360 $ (7,016,707 ) $ (5,439,197 )

Common stock issued for stock options exercised
500,000 500 - - 32,000 - 32,500

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

Common stock repurchased from common stock issued
(6,000,000 ) (6,000 ) - - (804,000 ) - (810,000 )

Common stock issued upon conversion of note payable
6,000,000 6,000 - - 804,000 - 810,000

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

Balance at September 30, 2020
181,650,138 $ 181,650 - $ - $ 1,590,993 $ (7,506,517 ) $ (5,733,874 )

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 June 30, 2019
167,250,363 $ 167,250 3,307,692 $ 3,308 $ 1,179,272 $ (4,676,138 ) (3,326,308 )

Shares issued from conversion of convertible debt
2,307,692 2,308 (2,307,692 ) (2,308 ) - - -

Net loss
- - - - - 1,259,728 1,259,728

Balance at September 30, 2019
169,558,055 $ 169,558 1,000,000 $ 1,000 $ 1,179,272 $ (3,416,410 ) $ (2,066,580 )
5
~~Table of Contents~~
~~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, 2019
169,862,933 $ 169,863 695,122 $ 695.00 $ 1,179,272 $ (6,717,169 ) $ (5,367,339 )

Shares issuable adjustment
- - (695,122 ) $ (695 ) 695 - -

Common stocks issued from conversion of convertible debt
11,128,205 11,128 - - 204,422 - 215,550

Common stocks issued for professional fees
59,000 59 - - 4,071 - 4,130

Common stocks - issued donation
100,000 100 - - 7,900 - 8,000

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

Common stock issued for stock options exercised
500,000 500 - - 32,000 - 32,500

Common stock repurchased from common stock issued
(6,000,000 ) (6,000 ) - - (804,000 ) - (810,000 )

Common stock issued upon conversion of note payable
6,000,000 6,000 - - 804,000 - 810,000

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

Balance at September 30, 2020
181,650,138 $ 181,650 $ - $ - $ 1,590,993 $ (7,506,517 ) $ (5,733,874 )

Common Stock

Additional Paid-In

Accumulated

Total Stockholders' Equity

Shares

Amount

To be Issued

Amount

Capital

Deficit

(Deficit)

Balance at December 31, 2018
166,390,363 $ 166,390 1,000,000 $ 1,000 $ 945,940 $ (2,032,595 ) (919,265 )

Common stock issuable under convertible debt
- - 25,000 4,500 - - 4,500

Warrants issuable under convertible debt
- - 125,000 - 55,311 - 55,311

Common stock and warrants issuable forfeited
- - (150,000 ) (4,500 ) (55,311 ) - (59,811 )

Share issued to employees and vendor
860,000 860 - - 85,640 - 86,500

Shares issuable from conversion of convertible debt
- - 2,307,692 2,308 147,692 - 150,000

Shares issued from conversion of convertible debt
2,307,692 2,308 (2,307,692 ) (2,308 ) - - -

Net loss
- - - - - (1,383,815 ) (1,383,815 )

Balance at September 30, 2019
169,558,055 $ 169,558 1,000,000 $ 1,000 $ 1,179,272 $ (3,416,410 ) $ (2,066,580 )

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.

6
5
Table of Contents

GREENBOX POS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

Nine Months Ended September 30,

Three Months Ended March 31,

2020

2019

2021

2020

Cash flows from operating activities:

Net loss
$ (789,348
)
$ (1,383,815
)
$ (13,329,432 ) $ (5,241,840 )

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

Depreciation expense
16,856 11,352 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
(966
)
4,292 (1,135 ) 4,406
Stock compensation expense
162,633 85,640
Common stocks issued for professional fees
4,130 -
Common stocks - issued donation
8,000 -
Proceeds from exercise of stock options
32,500 -
Interest expense - debt discount
121,918 188,273
Derivative expense
925,576 634,766
Gain (loss) on extinguishment of debt
(2,630,795
)
-
Changes in fair value of derivative liability
383,769 129,186
Changes in assets and liabilities:

Other receivable, net
47,714 (3,810,776 )
Accounts receivable
- 37,205
Prepaid and other current assets
(34,878
)
(4,919 ) (2,382,623 ) (42,614 )
Cash due from gateways, net
3,124,085 (12,562,634
)
(4,544,760 ) 5,024,520
Other assets
(70,000
)
-
Accounts payable
220,465 79,768 (32,056 ) (6,271 )
Other current liabilities
32,107 (6,609
)
30,857 (15,100 )
Accrued interest
(286,461
)
20,243 - 7,135
Payment processing liabilities, net
(1,397,810
)
16,678,995 (4,844,841 ) (3,361,564 )
Net cash provided by (used in) operating activities
(130,505
)
64,622 (11,258,779 ) 267,844

Cash flows from investing activities:

Purchases of property and equipment
(12,332
)
(5,984
)
(11,108 ) (12,564 )
Net cash used in investing activities
(12,332
)
(5,984
)
(11,108 ) (12,564 )

Cash flows from financing activities:

Borrowings from convertible debt
178,000 482,500
Repayments on convertible debt
(670,000
)
(496,500
)
- (270,000 )
Borrowings from notes payable
1,954,480 -
Principal payments on notes payable
(1,147,919
)
-
Repayment on long-term debt
- (75,000
)
Repurchase of common stocks outstanding
(810,000
)
-
Net cash used in financing activities
(495,439
)
(89,000
)
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 in cash, cash equivalents, and restricted cash
(638,276
)
(30,362
)
Net increase (decrease) in cash, cash equivalents, and restricted cash
33,863,854 (456,631 )

Cash, cash equivalents, and restricted cash – beginning of period
763,110 284,978 1,832,735 763,110

Cash, cash equivalents, and restricted cash – end of period
$ 124,834 $ 254,616 $ 35,696,589 $ 306,479

Supplemental disclosures of cash flow information

Cash paid during the period for:

Interest
$ 575,014 $ 110,873 $ - $ 339,505
Income taxes
$ 800 $ 800 $ - $ 800

Non-cash financing activities:

Convertible debt conversion to common stock
$ 137,500 $ (150,000
)
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
$ 78,050 $ - $ - $ 58,050
Short-term notes payable converted to common stock
$ 810,000 $ -

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

7
6
Table of Contents

GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Organization

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

The Company was formerly known as ~~GreenBox POS,~~ASAP Expo, Inc (“ASAP”), which was incorporated April 10, 2007 under the laws of the State of Nevada. On January 4, 2020, PubCo and GreenBox POS LLC, a Washington limited liability company (“PrivCo”), entered into an Asset Purchase Agreement (the “Agreement”), to memorialize a verbal agreement (the “Verbal Agreement”) entered into on April 12, 2018, by and among PubCo (the buyer) and PrivCo, which was formed on August 10, 2017 (the seller). On April 12, 2018, pursuant to the Verbal Agreement, PubCo acquired PrivCo’s blockchain gateway and payment system business, point of sale system business, delivery business and kiosk business, ~~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~~(the “GreenBox Acquisition”).

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

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

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

These unaudited interim financial statements have been prepared in accordance with GAAP for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been made. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, ~~2020.~~2021.

The balance sheets and certain comparative information as of December 31, ~~2019~~2020 are derived from the audited financial statements and related notes for the year ended December 31, ~~2019~~2020 (“~~2019~~2020 Annual Financial Statements”), included in the Company’s ~~2019~~2020 Annual Report on Form 10-K. These unaudited interim financial statements should be read in conjunction with the ~~2019~~2020 Annual Financial Statements.

~~Basis of Presentation and Consolidation~~
~~The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.~~
The financial statements include the combined accounts of PubCo and PrivCo. All amounts are presented in U.S. Dollars unless otherwise stated. The accompanying financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”).
8
~~Table of Contents~~
~~GREENBOX POS~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~
1.
~~DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (continued)~~
~~Going Concern~~
As of September 30, 2020, the Company had cash and cash equivalents of $0, has incurred a net loss of $789,348 for the nine months ended September 30, 2020, and has accumulated a deficit of $7,506,517. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Additionally, as the GreenBox ecosystem grows, substantially larger volumes of working capital financing will be required to support our platform’s growth.
The Company intends to raise additional capital through private placements of debt and equity securities, but there can be no assurance that these funds will be available on terms acceptable to the Company, or will be sufficient to enable the Company to fully complete its development activities or sustain operations. If the Company is unable to raise sufficient additional funds, we will have to develop and implement a plan to further extend payables, reduce overhead or scale back our business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.
Accordingly, the accompanying financial statements have been prepared in conformity with GAAP, which contemplate our continuation as a going concern, and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.
Use of Estimates

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

7
Table of Contents
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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~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.

September 30, 2020

December 31, 2019

Cash and cash equivalents
$ - $ -
Restricted cash
124,834 763,110

Total cash, cash equivalents, and restricted cash shown in the statements of cash flows
$ 124,834 $ 763,110
9
~~Table of Contents~~

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

~~GREENBOX POS~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~
2.
~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~
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 ~~2019~~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 ~~$59,099~~$24,725 and ~~$10,319~~$11,885 for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $86,368 and $35,928 for the nine months ended September 30, 2020 and 2019,~~ 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 ~~$243,923~~$653,381 and ~~$381,112~~$286,548 for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $798,157 and $1,085,298 for the nine months ended September 30, 2020 and 2019,~~ respectively.

8
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GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition

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

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

●
Payment processing revenue is based on a percentage of each transaction’s value and/or upon fixed amounts specified per each transaction or service and is recognized as such transactions or services are performed.
●
Licensing revenue is paid in advance and is recorded as unearned income, which is amortized monthly over the period of the licensing agreement.
●
Equipment revenue is generated from the sale of POS products, which is recognized when goods are shipped.

10
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~~GREENBOX POS~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~
2.
~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~
~~Accounts Receivables from Fines and Fees from Merchants~~
The fines and penalties charged to the Company’s merchants is a normal course of business and historically, the Company has had more than 90% collections success rate.   These fees and penalties represent certain chargebacks which are at fault by the Company’s merchants and are imposed as the merchant agreement between the Company and the merchant. The Company has legal rights under the merchant agreement to claim the chargeback. These chargebacks, fees, and fines are earned and delivered because the Company has been “chargebacked” by the Gateways and the Company has legal rights under the agreement to claim this against the merchants.
At the end of Q3 2019, GreenBox received constructive notice of potential violations of its Terms of Service by a merchant, The Good People Farms (“TGPF”).   An ongoing audit and investigation of this account resulted in the discovery of a number of violations GreenBox believes TGPF is responsible for, including but not limited to violations of VISA, Mastercard, and American Express’s rules.
This investigation is ongoing, but initial results indicate that excessively high chargeback percentages are connected with fraudulent activity and / or transaction laundering. These issues lead to the implementation of aggressive bank reserves, stunting GreenBox’s ability to conduct business and contributed to undetermined consequential damages. GreenBox promptly terminated the merchant account and placed all processed funds on reserve.
Although the investigation is ongoing, GreenBox estimates that the total amount of fees, fines, and chargebacks are currently $9,441,718. The Company has provided for an allowance for bad debt of $6,665,031 on the gross balance of $9,441,718 bringing to net balance of $2,776,687 which is included as accounts receivables from fines and penalties from merchants. To date, GreenBox has successfully recouped $840,739.33 (collected in 2019). The Company may assess $100,000 per fraudulent transactions but the Company used $5,000 per transaction to calculate the fees and fines.
~~The Company recorded net balance of $2,776,687 as other income in the statements of operations for the year ended December 31, 2019.~~
Accounts Receivable and Allowance for Bad Debt

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

Property and Equipment

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

11
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~~GREENBOX POS~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~
2.
~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~
Fair Value of Financial Instruments

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

Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

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

~~The table below describes the Company’s valuation~~
9
Table of ~~financial instruments using guidance from ASC 820-10:~~Contents
GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)

September 30, 2020

Level 1

Level 2

Level 3

Derivative liability
$ - $ - $ 284,210
December 31, 2019

Level 1

Level 2

Level 3

Derivative liability
$ - $ - $ 1,050,063
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.

12
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~~GREENBOX POS~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~
2.
~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~
Earnings Per Share

A basic earnings per share is computed by dividing net income to common stockholders by the weighted average number of shares outstanding for the year. Dilutive earnings per share include the effect of any potentially dilutive debt or equity under the treasury stock method, if including such instruments is dilutive. The Company’s diluted earnings/loss per share is the same as the basic earnings/loss per share for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ as there are no potential shares outstanding that would have a dilutive effect.

~~Leases~~
~~Prior to January 1, 2019, the Company accounted~~Reverse Common Stock Split (1 for leases under Accounting Standards Codification (ASC) 840, Accounting for Leases. Effective from January 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases6)

On February ~~25, 2016,~~17, 2021, the ~~FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842), to increase transparency~~Company effected a reverse stock split of the Company’s shares of common stock outstanding and ~~comparability among organizations by recognizing lease assets~~a proportional decrease of the Company’s authorized shares of common stock at a ratio of one-for-six (the “Stock Split”). Following the Stock Split, the Company has 82,500,000 shares of common stock authorized (the number of authorized shares of Preferred Stock remains 5,000,000). As a result, common shares information has been retrospectively restated accordingly in the financial statements as of and ~~lease liabilities on~~for the balance sheet and disclosing key information about leasing transactions. ASC 842 requires that lessees recognize right of use assets and lease liabilities calculated based on the present value of lease payments for all lease agreements with terms that are greater than twelve months.three months ended March 31, 2020.

ASC 842 distinguishes leases as either a finance lease or an operating lease that affects how the leases are measured and presented in the statement of operations and statement of cash flows. ASC 842 supersedes nearly all existing lease accounting guidance under GAAP issued by the FinancialRecently Adopted Accounting ~~Standards Board (“FASB”) including ASC Topic 840, Leases.~~
~~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 IBR as of that date.~~
~~Recently Issued Accounting~~ Updates

In ~~February 2016,~~August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires lessees to recognize on the balance sheet assets and liabilities for leases with lease terms of more than 12 months. Consistent with prior GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend primarily on its classification as a finance or operating lease. However, unlike prior GAAP—which required only finance (formerly capital) leases to be recognized on the balance sheet—the new ASU requires both types of leases to be recognized on the balance sheet. The ASU took effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. This standard can be applied at the beginning of the earliest period presented using the modified retrospective approach, which includes certain practical expedients that an entity may elect to apply, including an election to use certain transition relief. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which make improvements to Accounting Standards Codification (“ASC”) 842 and allow entities to not restate comparative periods in transition to ASC 842 and instead report the comparative periods under ASC 840.
The adoption of ASC 842 resulted in recording an adjustment to operating lease right of use assets and operating lease liabilities of liabilities of $307,531 and $309,677, respectively as of March 31, 2019. The difference between the operating lease ROU assets and operating lease liabilities at transition represented 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.
~~In August 2018, the FASB issued ASU~~ No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ~~The~~This standard removes, modifies, and adds certain disclosure requirements for fair value ~~measurements. This pronouncement~~measurements, and is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. ~~While the~~The Company ~~is currently in the process of evaluating the effects of this standard on the consolidated financial statements, the Company plans to adopt~~adopted ASU No. 2018-13 in the first quarter of fiscal 2020, coinciding with the standard’s effective date, and ~~expects~~ the adoption did not have any impact ~~from this standard~~ to ~~be immaterial.~~the Company’s financial statements.
13
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~~GREENBOX POS~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~
2.
~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~

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

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

3.
SETTLEMENT PROCESSING

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

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

~~The table below shows the status of transaction settlements:~~

September 30, 2020

December 31, 2019

Settlement Processing Assets:

Cash held for settlements
$ 124,834 $ 763,110
Cash due from gateways
2,377,909 3,073,183
Amount due from gateways and merchants – hold and fees
6,818,892 4,831,938
Reserves (2)
3,302,447 5,353,661
Total before allowance for uncollectable
12,624,082 14,021,892
Allowance for uncollectable – hold and fees
(6,818,892 ) (4,831,938 )
Cash held for settlement
(124,834 ) (763,110 )
Total – settlement processing assets
$ 5,680,356 $ 8,426,844

Settlement Processing Liabilities:

Settlement liabilities to merchants
12,624,082 14,021,892
Totals
$ 12,624,082 $ 14,021,892
14
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Table of Contents

GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)

4.3.
~~CASH DUE FROM GATEWAYS~~SETTLEMENT PROCESSING (continued)

~~Cash due from gateways consisted~~The table below shows the status of ~~the following:~~transaction settlements:

September 30, 2020

December 31, 2019

Cash due from Gateways
$ 2,377,909 $ 3,073,183
Amount due from gateways and merchants – hold and fees
6,818,892 4,824,223
Reserves (2)
3,302,447 5,353,661

Total cash due from gateways
12,499,248 13,251,067
Chargeback Allowances (1)
- -
Allowance of uncollectable – hold and fees
(6,818,892 ) (4,824,223 )

Total cash due from gateways, net
$ 5,680,356 $ 8,426,844

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) During 2018, the Company absorbed all chargeback costs as a cost of services provided – essentially a sales promotion tool to onboard customers in 2018. The Chargeback Allowance shown in the table above reflects our estimate of potential chargebacks that are likely to be realized in 2019, which are connected to sales transactions that occurred in 2018. The allowance decreases the amount that GreenBox is owed from the Gateways we use in our proprietary ecosystem. In 2019, the actual dollar amount of chargebacks will be reconciled with our allowance.
~~(2)~~ 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.

5.4.
PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

September 30, 2020

December 31, 2019

March 31,
2021

December 31,
2020

Computers
$ 48,289 $ 38,938 $ 59,991 $ 48,883
Furniture
40,320 37,339
Furniture and fixtures
40,320 40,320
Kiosks
6,472 12,750 6,472 6,473
Vehicles
4,578 4,578 4,578 4,578

Total property and equipment
99,659 93,605 111,361 100,254
Less: Accumulated depreciation
(37,104 ) (27,114 )
Less accumulated depreciation
(48,999 ) (42,990 )

Total property and equipment, net
$ 62,555 $ 66,491 $ 62,362 $ 57,264

Depreciation expense was ~~$5,764~~$6,010 and ~~$4,897~~$5,376 for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $16,856 and $11,352 for the nine months ended September 30, 2020 and 2019,~~ respectively.

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GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)

6.
~~PAYMENT PROCESSING LIABILITIES, NET~~
~~Payment processing liabilities consisted of the following:~~

September 30, 2020

December 31, 2019

Settlement liabilities to merchants
$ 12,624,082 $ 14,021,892
Settlement liabilities to ISOs
- -

Total processing liabilities
12,624,082 14,021,892
Refund allowances
- -

Total payment processing liabilities
$ 12,624,082 $ 14,021,892
The Refund Allowance shown in the table above reflects our estimate of potential refunds that may be realized in 2019, which are connected to sales transactions that occurred in 2018. The allowance decreases the amount that GreenBox owes to Merchants using our proprietary ecosystem. In 2019, the actual dollar amount of refunds with be reconciled with our allowance.
7.5.
CONVERTIBLE NOTES PAYABLE

Convertible notes payable consisted of the following:

September 30, 2020

December 31, 2019

March 11, 2019 ($500,000) – 8% one-time interest charge with outstanding principal and interest due October 6, 2019.
$ - $ 500,000
November 26, 2018 ($200,000) – 12% interest per annum with outstanding principal and interest due November 26, 2019.
- 200,000
March 15, 2018 ($300,00) – 12% interest per annum with outstanding principal and interest due March 15, 2019.
- 107,500
June 22, 2020 ($178,000) – 8% interest per annum with outstanding principal and interest due June 22, 2021
178,000 -

Total convertible notes payable
178,000 807,500
Debt discount
(133,500 ) -

Total convertible notes payable
$ 44,500 $ 807,500

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

~~Vista~~Kingswood Capital ~~Investments, LLC~~(Syndicate Convertible Note) - ~~$500,000 (original received $375k)~~$3,850,000

On ~~March 11, 2019, PubCo~~October 27, 2020, the Company issued a convertible promissory note for ~~$500,000~~$3,850,000 to ~~Vista~~various lenders through its placement agent, Kingswood Capital ~~Investments, LLC~~ (“~~Vista”) (the “Vista~~Kingswood Note”), due ~~October 6, 2019~~July 27, 2021 (the “Maturity Date”). with conversion price to common stock of $1.98 per share. The ~~Vista Note incurred a onetime interest charge of 8%, which was recorded at issuance, and was due upon repayment of the Vista Note. The Vista~~Kingswood Note included an original issue discount of ~~$125,000,~~$350,000, netting the balance received by ~~PubCo~~the Company from ~~Vista~~Kingswood Note at ~~$375,000.~~$3,500,000. The ~~Vista transaction included commitment fees, which took the form~~Company also provided warrant of ~~an obligation by PubCo~~1,944,444 with a fixed exercise price to issue Vista 25,0000 shares and a four-year warrant to purchase 125,000 shares (the “Commitment Shares”) which are only provided in the event of default. Upon the occurrence of an event of default, as defined in the Vista Note, the conversion price shall become equal to a 65% of the lowest traded price for the Company’s 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 the 25 consecutive trading days preceding the notice of conversion and the balance due shall be multiplied by 130% (the “Default Provision”). The Vista Note’s principal and interest were due to be paid October 6, 2019.
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~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~February 2021.

7.6.
~~CONVERTIBLE NOTES~~NOTE PAYABLE, ~~(continued)~~PAYROLL PROTECTION PLAN LOAN
~~The Company and Vista amended the convertible debt agreement as follows:~~
●
~~First Amendment~~ – On or about October 16, 2019, the parties amended the Vista Note to extend the Maturity Date to November 6, 2019, reduce the principal and interest due to $464,625 and cancel the Commitment Shares.
●
~~Second Amendment~~ – On or about December 11, 2019, the parties agreed to a second amendment of the Vista Note, which extended the Maturity Date to January 15, 2020, required the Company to make a one-time payment of $10,000, changed the principal and interest balance due to $487,858, and waived Vista’s default rights through January 15, 2020. On January 22, 2020, Vista issued a default notice to the Company, which included an increase in the balance due to $634,213.
●
~~Third Amendment~~ – On or about January 28, 2020, the parties agreed upon a third amendment to the Vista Note, which extended the Maturity Date to February 29, 2020, reduced the principal and interest due to $482,856 and required the Company to make a one-time $20,000 payment on or before January 29, 2020, of which $5,000 is to be applied to principal due. All other terms of the note remain in full force and effect.
On April 21, 2020, Vista converted $100,000 of convertible debt by receiving 5,128,205 common shares. On June 15, 2020, the Company and Vista entered into a settlement agreement, whereby, the Company will pay $225,000 on June 19, 2020 and $225,000 on July 19, 2020 and issuing 5,128,205 common shares to settle all of the outstanding balance including accrued interest. The Company has provided payment on those dates to fully settle the balance accordingly.
~~RB Cap – $200,000~~
On November 26, 2018, PubCo issued a convertible promissory note for $200,000 to RB Cap (the “RB Cap $200K Note”). The note incurs interest at 12% per year and the outstanding principal and accrued interest are due November 26, 2019. RB Cap may elect to convert the note at any time from six months from the date of issuance at a fixed price per share of $4.50. This note became part of a claim/counter claim suit with RB Capital. The Company paid the loan with full settlement during the quarter ended March 31, 2020. As part of the payment settlement for all RB Cap convertible notes, the Company collectively provided 6,000,000 common shares.
~~RB Cap – $300,000~~
On or about March 15, 2018, PrivCo issued a twelve-month, $300,000 convertible promissory note to RB Capital Partners (“RB Cap”), with an interest rate of 12% per annum (“RB Cap 300K Note”). The note’s convertibility feature commenced six months after the note’s issuance, at a conversion rate of $0.001 per share of the Company’s common stock. Under the terms of the Agreement which memorialized the Verbal Agreement, we assumed the note, however, PrivCo agreed to pay $185,000 of the principal balance due on this note. On or about June 8, 2018, PrivCo transferred 440,476 restricted shares of Common Stock from the Control Block, with a market value of $185,000, to a purported designee of RB Cap, as a payment of principal of the note. Subsequently, RB Cap disputed the reduction in principal and subsequently, and we, along with PrivCo, disputed whether these shares should have been issued by PrivCo, and sought their return. On or about October 23, 2018, we issued 7,500,000 newly issued, restricted shares of our stock to RB Cap, in repayment of $7,500 of the RB Cap $300,000 Note. Subsequently, we disputed whether these shares should have been issued to RB Cap. As of December 31, 2018, our recorded principal balance for the note was $107,500 and accrued interest on the note was $15,880. On or about March 13, 2019, we issued a final cash payment towards the RB Cap 300K Note of approximately $126,092 (the “Payoff Funds”). However, RB Cap contested the amount of the Payoff Funds. The Company paid the loan of $50,000 during the quarter ended March 31, 2020 and settled the rest of the outstanding balance including interest with shares issuances. As part of the payment settlement for all RB Cap convertible notes, the Company collectively provided 6,000,000 common shares.
~~Power Lending – $178,000~~
On June 22, 2020 (funded in July 2020), PubCo issued a convertible promissory note for $178,000 to Power Lending. The note incurs interest at 8% per year and the outstanding principal and accrued interest are due June 22, 2021. Power Lending may elect to convert the note at any time from the date issuance at a fixed price per share of $0.01.
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~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~
8.
~~SHORT-TERM NOTES PAYABLE~~
~~Short-term notes payable consisted of the following:~~

September 30, 2020

December 31, 2019

December 10, 2019 ($260,000) – Total interest charge of $106,000 with daily installments (5 days per week) of $4,073 for four months totaling $366,000.
$ - $ 213,671
December 9, 2019 ($200,000) – Total interest charge of $40,000 with 15 weekly installments of $16,000 totaling $240,000.
- 160,000
November 12, 2019 ($400,000) – Total interest charge of $196,000 with daily installments (5 days per week) of $5,960 for four months totaling $596,000.
- 400,000

June 3, 2020 ($300,000) – Total weekly payment of $13,714 for total of 28 payments.
94,286 -
June 9, 2020 ($150,000) – Monthly payment of $731 after 12 months with maturity date of June 1, 2050 with interest rate at 3.75% per annum.
149,900 -
April 29, 2020 ($272,713) – Paycheck protection program (“PPP”) loan provided by SBA under CARES Act with interest rate at 1.00% per annum with maturity date of April 29, 2022.
272,713 -

July 10, 2020 ($400,000) – Total weekly payment of $17,867 (includes principal and interest) for total of 30 payments with imputed interest of 25%.
253,333 -

Total short-term notes payable
$ 770,232 773,671

Debt discount
(39,000 ) (32,418 )

Total short-term notes payable, net of debt discount
$ 731,232 $ 741,253
~~Fox Capital Group, Inc. - $260,000~~
On or about December 5, 2019, PubCo entered into a Secured Merchant Agreement with Fox Capital Group, Inc. (“Fox”). Under the terms of the Secured Merchant Agreement, the Company agreed to sell Fox $366,000 of future incoming cashflow from the GreenBox Business, to be delivered to Fox in daily installments of $4,073, for $260,000, from which $26,000 in fees was deducted, providing the Company with net cash of $234,000. For accounting purposes, the Company recorded this transaction as a loan of $260,000, with interest of $106,000, which will be repaid over the following four months. Both Nisan and Errez, individually, signed personal guarantees for this Secured Merchant Agreement. The amount was fully paid and settled as of September 30, 2020.
~~Complete Business Solutions Group, Inc. - $200,000~~
On or about December 9, 2019, PubCo entered into an Agreement for the Purchase and Sale of Future Receivables (the “Purchase and Sale Agreement”) with Complete Business Solutions Group Inc, (“CBSG”). Under the terms of the Purchase and Sale Agreement, we agreed to sell CBSG $240,000 of future incoming cashflow from the GreenBox Business, to be delivered to CBSG in weekly installments of $16,000, for $200,000, from which $35 in fees was deducted, providing us with net cash of $199,965. For accounting purposes, we recorded this transaction as a loan of $200,000, with interest of $40,000, which will be repaid over the following four months. Both Nisan and Errez, individually, signed personal guarantees for this Purchase and Sale Agreement. The amount was fully paid and settled as of September 30, 2020.
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~~(continued)~~
8.
~~SHORT-TERM NOTES PAYABLE (continued)~~
~~West Coast Business Capital, LLC - $400,000~~
On or about November 12, 2019, the Company entered into a Purchase Agreement with West Coast Business Capital, LLC (“West Coast”). Under the terms of the Purchase Agreement, the Company agreed to sell West Coast $596,000 of future incoming cashflow from the GreenBox Business, to be delivered to West Coast in daily installments of $5,960, for $400,000, from which $16,000 in fees was deducted, providing the Company with net cash of $384,000. For accounting purposes, the Company recorded this transaction as a loan of $400,000, with interest of $196,000, which will be repaid over the following four months. Both Nisan and Errez, individually, signed personal guarantees for this Purchase Agreement.
~~Itria Ventures - $300,000~~
On June 3, 2020, the Company entered into a loan agreement with Itria Ventures in the amount of $300,000. The loan requires weekly payment of $13,714 for total of 28 payments until fully paid. The loan bears 4.09% interest per annum. Both Nisan and Errez, individually, signed personal guarantees for this Purchase Agreement.
~~SBA CARES Act Loan~~ ~~- $~~~~150,000~~
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.
~~Preferred Bank - Paycheck Protection Program – CARES Act~~ ~~- $~~~~272,713~~

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.

~~West Coast Business Capital, LLC - $400,000~~
7.
LONG-TERM DEBT

On ~~or about July 10,~~June 9, 2020, the Company entered into a ~~Purchase Agreement~~loan agreement with ~~West Coast Business Capital, LLC (“West Coast”). Under~~SBA under CARES Act in the ~~terms~~amount of ~~the Purchase Agreement, the Company agreed to sell West Coast $536,000~~$150,000. The loan requires monthly payment of ~~future incoming cashflow from the GreenBox Business, to be delivered to West Coast in weekly installments~~$731 after 12 months with maturity date of ~~$17,867 (includes principal and interest) for 30 weeks, which includes imputed~~June 1, 2050 with interest ~~of 25%~~rate at 3.75% per annum. Both Nisan and Errez, individually, signed personal guarantees for this Purchase Agreement.

9.
~~DERIVATIVE LIABILITY~~
~~Derivative liability consisted of the following:~~

September 30, 2020

December 31, 2019

Beneficial conversion feature – convertible debt
$ 284,210 $ 1,050,063

Total derivative liability
$ 284,210 $ 1,050,063
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(continued)

9.
~~DERIVATIVE LIABILITY (continued)~~
On March 11, 2019, PubCo issued a convertible promissory note for $500,000 to Vista Capital Investments, LLC (“Vista”) (the “Vista Note”), due October 6, 2019 (the “Maturity Date”). The Vista Note incurred a onetime interest charge of 8%, which was recorded at issuance, and was due upon payback of the Vista Note. The Vista Note included an original issue discount of $125,000, netting the balance received by PubCo from Vista at $375,000. The Vista transaction included commitment fees, which took the form of an obligation by PubCo to issue Vista 25,0000 shares and a four-year warrant to purchase 125,000 shares (the “Commitment Shares”) which are only provided in the event of default. Upon the occurrence of an event of default, as defined in the Vista Note, the conversion price shall become equal to a 65% of the lowest traded price for the Company’s common stock in the 25 consecutive trading days preceding the notice of conversion and the balance due shall be multiplied by 130% (the “Default Provision”).
On June 22, 2020, PubCo issued a convertible promissory note for $178,000 to Power Up Lending (“Power Note”), due June 22, 2021 (the “Maturity Date”). The Power Note provides for interest charge of 8% per annum and is due upon payback of the Power Note. The Power Note can be converted with the conversion price of 65% of the 5 days lowest traded price for the Company’s common stock in the 10 consecutive trading days preceding the notice of conversion.
Derivative financial instruments, as defined in ASC 815, “Accounting for Derivative Financial Instruments and Hedging Activities”, consist of financial instruments or other contracts that contain a notional amount and one or more underlying (e.g. interest rate, security price or other variable), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. Further, derivative financial instruments are initially, and subsequently, measured at fair value and recorded as liabilities or, in rare instances, assets.
The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option and warrants at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. As a result of entering into warrant agreements, for which such instruments contained a variable conversion feature with no floor, the Company has adopted a sequencing policy in accordance with ASC 815-40-35-12 whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors.
Based on ASC 815, the Company determined that the convertible debt contained embedded derivatives and valued the derivative using the Black-Scholes method. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates (such as volatility, estimated life and interest rates) that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of our common stock, which has a high-historical volatility. Since derivative financial instruments are initially and subsequently carried at fair values, the Company’s operating results will reflect the volatility in these estimate and assumption changes.
The Company performs valuation of derivative instruments at the end of each reporting period. The fair value of derivative instruments is recorded and shown separately under current liabilities as these instruments can be converted anytime. Changes in fair value are recorded in the consolidated statement of income under other income (expenses).
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~~(continued)~~
~~10.~~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 ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~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 and Nine Months Ended
September 30,

Three Months Ended March 31,

2020

2019

2021

2020

Book income at statutory rate
21.00 % 21.00 % 21.00 % 21.00 %
Others
0 % -0.80 % - -
Change in Valuation Allowance
-21.00 % -20.14 %
Change in valuation allowance
-21.00 % -21.00 %

Effective income tax rate
0 % 0.06 % 0.00 % 0.00 %

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

September 30, 2020

December 31, 2019

March 31,
2021

December 31,
2020

Deferred tax assets (liabilities):

Charitable contributions
$ - $ -
Unearned revenue
- -
Net operating loss carryforward
$ 2,135,000 $ 1,066,726
Depreciation
- - - -
Net operating loss carryforward
777,000 498,888

Others
- -
Total deferred tax assets, net
777,000 498,888 2,135,000 1,066,726
Valuation allowance
(777,000 ) (498,888 ) (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 ~~September 30, 2020,~~March 31, 2021, the Company had federal and California net operating loss carryforwards of approximately ~~$3.7~~$6.2 million. The federal and California net operating loss carryforwards will expire at various dates from ~~2026~~2027 through ~~2028;~~2029; however, ~~$3.7~~$6.2 million of the Federal operating loss does not expire and will be carried forward indefinitely.

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~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 ~~2016~~2017 and after, and state and local income tax returns are open for years ~~2015~~2016 and after.

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(continued)

~~12.~~9.
STOCK OPTION AWARDS
The Company adopted the 2020 Incentive and Non-statutory Stock Option Plan (“2020 Plan”) in June 2020, which provided for the grant of incentive stock options and nonqualified stock options to our employees and directors. The 2020 Plan provides for up to 3.3 million shares of Common Stock. Options granted under the 2020 Plan generally have a term of ten years and generally vest and become exercisable at various times from the option grant dates. The 2020 Plan provide for the grant of incentive stock options, non-qualified stock options and restricted stock to our employees, directors and independent contractors. These options will have such vesting or other provisions as may be established by the Board of Directors at the time of each grant.
The Company applies the provisions of ASC 718, “Compensation - Stock Compensation,” using a modified prospective application, and the Black-Scholes model to value stock options. Under this application, the Company records compensation expense for all awards granted. Compensation costs will be recognized over the period that an employee provides service in exchange for the award.
The fair value of each share option award on the date of grant was estimated using the Black-Scholes method based on the following weighted-average assumptions:

March 31, 2021

December 31, 2020

Risk-free interest rate
0.29 % 0.29
%
Expected term

5 years

5 years

Expected volatility
229.49 % 289.33% to 279.18
%
Expected dividend yield
- -
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected term of the option award; the expected term represents the weighted-average period of time that option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; and the expected dividend yield is based upon the Company’s dividend rate at the time fair value is measured and future expectations.
The Company recorded $797,613 and $4,130 compensation expenses recorded under this method for the three months ended March 31, 2021 and 2020, respectively.
A summary of the status of our stock options is presented below as of March 31, 2021:

Shares

Weighted-
Average
Exercise
Price

Weighted-
Average
Remaining
Contractual
Life
(In Years)

Aggregate
Intrinsic
Value

Outstanding at December 31, 2020
514,607 $ 2.30 0.00 3,365,527

Granted
100,000 7.63 0.00
Exercised
(44,832 ) 2.50 0.00
Forfeited or expired
(68,428
)
2.50 0.00

Outstanding at March 31, 2021
496,782 4.80 0.00 7,018,853

Exercisable as of March 31, 2021
496,782 4.81 0.00 6,954,941
Vested and Expected to Vest as of March 31, 2021
496,782 4.81 0.00 6,954,941
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $14.00 as of March 31, 2021, which would have been received by the option holders had all option holders exercised their options as of that date. As of March 31, 2021, there was unrecognized compensation cost related to non-vested stock options granted in the amount of $25,717.
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(continued)
10.
RELATED PARTY TRANSACTIONS

The Company had the following related party transactions:

●
~~Related Party Employees~~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 ~~Employee Entity:~~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.
~~Dan Nusinovich~~ – The Company hired Dan Nusinovich on or about February 19, 2018 as the Company’s Development and Testing Manager. Dan is the brother of Fredi Nisan, our CEO and Director. Subsequently, the Company entered into a Referral Commission Agreement with Dan in November 2018, which expired November 2019, under which Dan is to receive 10% for new business resulting from his direct introductions. To date, no new business has been generated by Dan, thus Dan has not been paid under the Referral Agreement. On or about June 18, 2019, the Company issued 160,000 restricted shares to Dan, who was one of nine employees to receive a performance bonus in stock on this day. The shares were fully vested upon issuance and worth $16,000 at closing, on the day of issuance. The Company currently pays Dan approximately $96,000 per year.
~~Liron Nusinovich~~ – The Company hired Liron Nusinovich on or about July 16, 2018 as our Risk Analyst. Liron is the brother of Fredi Nisan, our CEO and Director. On or about June 18, 2019, the Company issued 110,000 restricted shares to Liron, who was one of nine employees to receive a performance bonus in stock on this day. The shares were fully vested upon issuance and worth $11,000 at closing, on the day of issuance. The Company currently pays Liron approximately $92,000 per year.
~~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.
●
~~Related Party Entities:~~
~~IPX Referral Payments, LLC –~~ Pouya Moghavem, an employee since August 1, 2018, owns 25% of IPX Referral Payments, LLC (“IPX”). In addition to the $5,000 monthly salary we pay Moghavem, the Company entered into a Referral Agreement with IPX wherein the Company agreed to compensate IPX for referrals, which subsequently become the Company’s customer. For the three months ended March 31, 2019 and 2018, IPX did not earn any commissions. Additionally, in or about October 2018, IPX provided GreenBox with a merchant trust account in Mexico through Affinitas Bank, one of the Gateways that process payment transactions on the Company’s behalf. The Company did not pay IPX for this service, however, IPX reported that Affinitas paid IPX approximately $1,830.
~~America 2030 Capital Limited and Bentley Rothschild Capital Limited~~ – On or about July 30, 2018, Nisan and Errez, the sole officers and directors of PubCo, and the majority owners of PrivCo, each entered into a separate Master Loan Agreement (each an "MLA"): Errez with America 2030 Capital Limited (“America 2030”) and Nisan with Bentley Rothschild Capital Limited ("Bentley"), a company affiliated with America 2030, both located in Nevis, West Indies. Each MLA was for a $5,700,000 loan, at 5.85% interest, maturing in ten years. Per the MLA’s terms, Nisan and Errez caused PrivCo to transfer 1,600,000 PubCo shares, valued at $2,144,000 at close of trading on the day of issuance, as "Transferred Collateral" from the Control Block (not a new issuance by PubCo) to Bentley (although both contracts acknowledge receipt of 1.6 million shares, there was only one transference of 1.6 million shares not two). The transfer occurred on or about August 1, 2018. To date, there has been no funding under either of the MLAs. Subsequently, both Nisan and Errez received constitutive notice, regarding arbitration of an alleged breach of their respective MLAs. As of March 31, 2020, both parties have abandoned the matter and no further action was required by either party.
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~~(continued)~~
~~12.~~
~~RELATED PARTY TRANSACTIONS (continued)~~
●
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. ~~We also do business directly with Cultivate LLC, through a three-party agreement, which includes us, MTrac and Cultivate.~~

The following are certain transactions between the Company and the Haller Companies:
o
~~MTrac Agreement~~ – On or about May 4, 2018, Sky entered into a two year, Associate/Referral Agreement-E-Commerce with MTrac, wherein Sky agreed to promote MTrac’s solution payment platform (which is based on the GreenBox platform) and related services; to provide new sales, sales leads, introductions to merchants and ISOs, and other potential customers of MTrac’s services, for which Sky receives ongoing commissions from all credit card transactions processed as a result of new business generated by Sky for MTrac. Most services provided under this contract are executed by Sky’s majority owned subsidiary, Charge Savvy, LLC (see Charge Savvy, LLC below). The agreement noted MTrac’s license of GreenBox’s payment processing technology and contained terms whereby Sky could (but was not required to) refer certain customers to MTrac in exchange for various referral fees. Sky never referred customers to MTrac, and therefore, did not collect, and is not collecting, any referral fees from MTrac.

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 (see Sky - MTrac Agreement above).~~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). ~~We accrued and/or paid Haller $55,365 in the quarter ending December 31, 2018, which included $30,000 in consulting fees and $23,365 in travel and relocation expense reimbursement.~~ 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.

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~~GREENBOX POS~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~
~~12.~~■
~~RELATED PARTY TRANSACTIONS (continued)~~
●
~~Kenneth Haller and the Haller Companies (continued)~~
§
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%). It is through Charge Savvy, that the Haller Network is most visible as part of our operations, as Charge Savvy is the ISO through which revenue generated from Haller Network Agents is processed, under a contract between Sky and MTrac, who in turn, has a contract with us. The three managing members of Charge Savvy own the same percentages of Cultivate, ~~(see below),~~ as they do Charge Savvy.
§
~~Cultivate, LLC~~ – Sky owns 68.4% of Cultivate, LLC (“Cultivate”), an Illinois limited liability company, and serves as one of three Managing Members, along with Higher Ground Capital, LLC (owns 14%), and Jeff Nickel (owns 17.4%). When Cultivate was first formed, On January 25, 2021, the Company issued a press release announcing it was the licensor of certain proprietary point of sale software, retail point of sale operations, and complementary support of Cultivate’s software and related hardware for on-site credit and debit card processing. Subsequently, Cultivate the entity became exclusively a software provider, ceasing all service and support operations. Eventually certain beneficial aspects of the Cultivate software functionality were integrated into QuickCard, then upgraded and replaced with certain updates. On or about May 4, 2018, Cultivatehad entered into a ~~two year, Associate/Referral Agreement-E-Commerce~~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 ~~MTrac, wherein Cultivate agreed~~$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 ~~promote MTrac’s solution payment platform~~the negotiation and ~~related services; to provide new sales, leads, merchants, ISO Agents,~~signing of definitive transaction documents, the completion of an audit of Charge Savvy’s financial statements, and other potential customers of MTrac services, for which Cultivate receives ongoing commissions from all credit card transactions processed as a result of new business generated by Cultivate for MTrac, who in turn has a contract with us. The Associate/Referral Agreement-E-Commerce between Cultivate and MTrac noted MTrac’s license of GreenBox’s payment processing technology, and contained terms whereby Cultivate could (but was not required to) refer certain customers to MTrac in exchange for various referral fees. Cultivate never referred customers to MTrac, and therefore, did not collect, and is not collecting, any referral fees from MTrac.
customary closing conditions.
■
o
~~Haller Commissions~~ – Under a verbal agreement in Spring 2018, we offered Haller commissions on any referrals that resulted in new business for the Company (“Haller Commissions”). Under this agreement, Haller introduced us to three merchants who became three of the first merchants to use our system. Under the verbal agreement, we paid Haller commissions from transactions processed by these three merchants, summing to approximately $210 in June 2018, $8,396 in July 2018 and $321 in August 2018. In or about September 2018, we commenced discussions with Haller to join our management team and discontinued paying Haller commissions related to these three merchants.
o
~~GreenBox, Cultivate and MTrac Agreement~~ – On or about December 17, 2018, PubCo entered into a 5-year exclusive three-party license agreement with MTrac and Cultivate (see Section E. MTrac above). The three Managing Members of Cultivate and Charge Savvy, owning the same percentages in each entity, subsequently decided to collect all revenue through Charge Savvy instead of Cultivate.
o
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.
24
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GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)

~~12.~~
~~RELATED PARTY TRANSACTIONS (continued)~~
●
~~Kenneth Haller and the Haller Companies (continued)~~
o
~~Verbal Agreement~~ – As part of Haller’s remuneration, the Company and Haller have a verbal agreement for Haller to be issued approximately 14 to 18 million shares of the Company’s stock. . As of June 30, 2020, the Haller agreement concluded with Mr. Kenneth Haller receiving 17M shares of GRBX common stock. This was completed by the LLC (PrivCo) transferring these shares from its own book entry account with the transfer agent (VStock) to Haller’s book.
~~The Company did not pay any commissions to Charge Savvy or Cultivate for the three and nine months ended September 30, 2020 and 2019.~~
13.11.
COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company has the following legal proceedings:

●
~~MTrac, Global Payout, Inc. and Cultivate Technologies, LLC~~ – On November 25, 2019, five companies (the “Plaintiffs”) filed a complaint against us, MTrac, Global Payout, Inc. and Cultivate Technologies, LLC in the Superior Court of the State of California. The Plaintiffs filed suit to recover processed funds and processing fees alleged to be withheld illegally. This was dismissed by both parties as of September 30, 2020.
●
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 ~~(see Note 7 – Related Party Transactions above)~~ and seeking forfeiture of ~~1,600,000~~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.

●
~~RB Capital Partners, Inc.~~DCSM et al v. Greenbox POS – On ~~April 24,~~November 25, 2019, ~~RB Cap and related parties~~four companies (the ~~“RB Cap Parties”~~“Plaintiffs”) filed a complaint ~~in the San Diego Superior Court~~ against ~~PrivCo, PubCo, Ben Errez~~GreenBox POS, LLC, GreenBox POS, Global Payout, Inc., MTrac Tech Corporation and ~~Fredi Nisan~~Cultivate Technologies, LLC (collectively the ~~“GreenBox Parties”~~“Defendants”)~~; and on October 1, 2019, the RB Cap Parties filed an amended complaint against the GreenBox Parties alleging claims of fraud, breach of fiduciary duty, breach of contract and other, related claims~~ in the Superior Court ~~for~~of the State of ~~California, County of San Diego.~~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 ~~Parties~~is to pay $3.8M by March 15, 2021. On December 14, 2020 Plaintiffs filed a ~~cross-complaint~~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 ~~RB Capital Parties, alleging claims~~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, ~~tortious interference,~~breach of covenant of good faith and ~~other, related claims. On or about December 15, 2019,~~fair dealing, violation of California Business and Professions Code Section 17200, and accounting. An arbitrator has been selected and the ~~GreenBox Parties and RB Cap Parties resolved to negotiate a settlement and agreed in principal to settlements terms. The documentation~~parties are awaiting the scheduling of the ~~settlement terms was underway as of February 3, 2020. This was dismissed by both parties on February 27, 2020.~~
●
~~Dahan~~ ~~– Yoram Dahan, Melissa Dahan, Forty8 Ltd., and Trustees of the Melissa H. Dahan Living Trust (collectively, “the Dahan Parties”) were also named by RB Capital~~preliminary conference. The arbitration is stayed pending further proceedings in the ~~suit listed~~separate but related action filed by MTrac in the previous paragraph. On October 31, 2019, the GreenBox Parties filed a cross-complaint against the Dahan Parties, alleging claims of fraud, securities fraud, misrepresentation, promissory estoppel, and other related claims, in theSan Diego Superior Court for the State of California, County of San Diego. On or about December 15, 2019, the GreenBox Parties and the Dahan Parties resolved to negotiate a settlement and agreed in principal to settlements terms. The documentation of the settlement terms was underway as of February 3, 2020. This was dismissed by both parties on February 27, 2020.
25
~~Table of Contents~~
~~GREENBOX POS~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(continued)~~
13.
~~COMMITMENTS AND CONTINGENCIES~~ ~~(continued)~~
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 ~~$146,984~~$87,837 and ~~$150,424~~$89,017 respectively, as of ~~September 30, 2020.~~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.

~~In accordance with ASC 842, the components of lease expense were as follows:~~

Three months ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Amortization of right-of-use assets, net of liability amortization
$ 115 $ 1,073 $ 344 $ (3,219 )
Operating lease expense
32,904 31,945 98,711 102,273

Total lease expense
$ 33,018 $ 33,018 $ 99,054 $ 99,054
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GREENBOX POS
NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)

~~14.~~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:

~~October 27, 2020 (Convertible Debentures)~~ – On October 27, 2020, GreenBox POS (the “Company”) consummated the initial closing of a private placement offering (the “Offering”) whereby pursuant to the Securities Purchase Agreements (the “Purchase Agreements”) entered into by the Company with thirteen (13) accredited investors (the “Investors”), the Company issued certain Convertible Debentures for an aggregate purchase price of $3,019,550 (each a “Debenture”, collectively, the “Debentures”) and five (5) year warrants (the “Warrants”) to purchase shares of the Company’s common stock, par value $0.001 per share (“Common Stock”). The second closing occurred on October 28, 2020 for an aggregate purchase price of $480,450 for a total purchase price of $3,500,000. The total principal of the Debentures is $3,850,000.
~~These Convertible Debentures were used to pay-off the following loans outstanding:~~
●
~~Itria Venture - $123,428 (includes interest)~~
●
~~Power Up Lending - $228,059 (includes interest)~~
●
~~West Coast Business Capital -$285,862 (includes interest)~~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.

The Debentures include a 10% original issuance discount, carry an interest rate of 10% per annum and mature on July 27, 2021 (the “Maturity Date”). The Debentures contain a voluntary conversion mechanism whereby the holders may convert, in whole or in part, the outstanding balance of the Debentures into shares of the Common Stock at a conversion price of $0.33 per share, subject to adjustment as provided therein. Additionally, the Debentures contain a mandatory conversion mechanism whereby any principal and accrued interest on the Debentures converts into shares of the Company’s Common Stock on the date in which the Company’s Common Stock is listed for trading on a senior national exchange. The mandatory conversion mechanism shall take effect only if (i) the shares of Common Stock underlying the Debentures are registered on an effective registration statement, (ii) the average closing bid price of the Common Stock over the preceding 5 Trading Days is above $0.80 per share and (iii) the average trading volume of Common Stock over the preceding 5 Trading Days is at least $200,000. The mandatory conversion mechanism contains a conversion price of $0.33 per share, subject to adjustment as provided therein. The Debentures contain customary events of default (each an “Event of Default”). If an Event of Default occurs, interest under the Debentures will accrue at a rate of eighteen percent (18%) per annum and the outstanding principal amount of the Debentures, plus accrued but unpaid interest, liquidated damages and other amounts owing with respect to the Debentures will become, at the Debenture holder’s election, immediately due and payable in cash.
Pursuant to the Purchase Agreements, each investor received a Warrant in an amount equal to 100% of the shares of Common Stock initially issuable to each Investor pursuant to such Investor’s Debenture. The Warrants contain an exercise price of $0.33 per share, subject to adjustment as provided therein. In connection with the closing of the Offering, Warrants were issued to purchase an aggregate of 11,666,666 shares of Common Stock.

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ITEM2. ~~MANAGEMENT’S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

Disclaimer Regarding Forward Looking Statements

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

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

Overview – Organization and New Name
Organization – GreenBox POS (the “Company” or “PubCo”) was formerly known as ASAP Expo, Inc (“ASAP”), which was incorporated April 10, 2007 under the laws of the State of Nevada. On January 4, 2020, PrivCo and GreenBox POS, a Nevada corporation (“PubCo”) entered into the Agreement to memorialize the Verbal Agreement with PrivCo which was formed on August 10, 2017 (the seller). On April 12, 2018, pursuant to the Verbal Agreement, PubCo acquired PrivCo’s blockchain gateway and payment system business, point of sale system business, delivery business and kiosk business, and bank and merchant accounts, as well as all intellectual property related thereto (the “GreenBox Business”). As consideration for the GreenBox Business, on April 12, 2018, PubCo assumed PrivCo’s liabilities that had been incurred in the normal course of the GreenBox Business (collectively, the “GreenBox Acquisition”). For accounting and reporting purposes, PubCo deemed the GreenBox Acquisition a “Reverse Acquisition” with PrivCo designated the “accounting acquirer” and PubCo designated the “accounting acquiree.”
New Name –On May 3, 2018, PubCo formally changed its name to GreenBox POS LLC, then subsequently changed its name to GreenBox POS on December 13, 2018.
Underwritten Public Offering and Nasdaq Listing
On February 16, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Kingswood, as representative of the underwriters listed therein (the “Underwriters”), pursuant to which the Company agreed to sell to the Underwriters in a firm commitment underwritten public offering (the “Offering”) an aggregate of 4,150,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a public offering price of $10.50 per share. In addition, the Underwriters were granted an over-allotment option (the “Over-allotment Option”) for a period of 45 days to purchase up to an additional 622,500 shares of Common Stock. The Common Stock began trading on the Nasdaq Capital Market under the symbol GBOX on February 17, 2021. The gross proceeds from the Offering were approximately $50.11 million as the representative of the Underwriters exercised in full its over-allotment option, before deducting underwriting discounts and commissions and other offering expenses. Pursuant to the Underwriting Agreement, the Company also granted Kingswood a right of first refusal, for a period of 12 months from the commencement of the Offering, to act as sole investment banker, sole book-runner, and/or sole placement agent, at Kingswood’s sole discretion, for each and every future public and private equity, equity-linked or debt offering, including all equity linked financings undertaken during such period by the Company, or any of the Company’s successors or subsidiaries.
Management Discussion and Analysis

This MD&A section pertaining to the period prior to Q1/2021 was prepared by the management of GreenBox POS (OTC: GRBX) (“GreenBox”, “GRBX”, the “Company”); the parts of this section pertaining to Q1/2021 and beyond were prepared by the management of GreenBox POS (NASDAQ: GBOX), in conjunction with the discussion the financial activity disclosed from the perspectives of on-going ~~Q3/20~~Q1/2021 and plans and projections for the remainder of ~~2020.~~2021.

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~~Q1/20~~
Q4/2020 signified the return of operations in full scale for the ~~Company. In~~Company, with processing volumes in December of 2020 increasing to $84M. The trend continues into Q1/2021, with monthly average processing volumes increasing to over $100M. During Q4/2020 the Company completed two capital raises – in October and in December of 2020, primarily directed towards the acceleration of the development and deployment of the Company’s newest technology, code name Gen3 (Generation 3, following its initial technology release in January 2019 – Gen1, and ~~Q1/~~in April 2020 - Gen2). Two of the Company’s top executives, Chairman Mr. Errez and CEO Mr. Nisan, personally participated in the December 2020 raise. Gen3 technology is material to the Company plans and business performance and is projected to impact the industry as a whole, in particular with the launch of the GreenBox Smart Contract Token technology, scheduled to be released in Q2/2021. Throughout 2020 the Company continued to ~~invest~~increase its investment in research and development, improving its acquiring platform and enabling safer, faster and significantly more scalable services. These technology improvements allow for major new capabilities, including Real Time Payments (RTP), a very sought-after payment feature. This change also reduces the Company ~~COGS. Although the Company saw a decrease~~COGS, trend that continues to be observed in ~~operations in Q4/2019, and was essentially flat for Q1/2020, the~~Gen3 increased business efficiencies. Gen3 is an improved platform is performing better than its predecessor platform and increase total volumes while increasing profit margins and operating sustainability is observed and expected to persist through ~~2020.~~2021. The Company returned to ramping up commercial large-scale operations, on-boarding large number of clients, and increasing the Company operational bandwidth to accommodate the needs of its clients. Q1/~~2020~~2021 continued to execute on these management directives.
~~Q2/20 also symbolized~~ Covid-19 pandemic appears to have little impact on the ~~transition into large scale operations with increased capacity of the payment processing platform,~~Company’s business, and with the addition of two new platforms, Crypto payouts and FOREX, allowing the Company to expand licensed operations in Europe and beyond. It is anticipated that European operation will match and could exceed USA operational volume for the Company. While Covid-19 virus impacted of the rate of increase in operational figures ~~was~~ observed ~~in Q2/2020, Q3/2020 figures are as~~is expected ~~and the projections~~to remain unimpacted for ~~the~~ rest of ~~the year remain unchanged.~~2021.

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

KPI
Description
Annual Transactional Processing Volume (ATPV)
The Company plans to process $1.65B in FY 2021, including previously increased processing volumes projections from $600M to $1.2B, and including the expected processing of the acquired ChargeSavvy portfolio, projected to add another $450M. The Company’s Book of Business exceeds the processing goals for the year.
Annual Gross Profit Margin (AGPM)
This index matches the Company goals and remains at levels supporting the Company’s financial projections.
Annual Gross Profit (AGP)
At the targeted Annual Transactional Processing Volume goal and targeted Annual Gross Profit Margin, projected Annual Gross Profit is $24-26M for FY2021.
Annual EBITDA
The Company objective is to stay with EBITDA at around 3% of Total Transactional Volume. At the targeted Annual Transactional Processing Volume goal, the Annual EBITDA equals $26M.
In order to process the targeted ATPV goal, ~~$1B,~~$1.65B, the Company must be able to process ~~close to $90M/~~over $100M/month ~~or $3M/day,~~ in a consistent ~~fashion.~~fashion, as business performance in Q1/2021 demonstrated. The Company ~~needed to invest~~estimates the target deployment timeframe for its Smart Contract Token technology in Q2/2021, further ~~in its core technologies to reach this capacity, a task now completed. The Company now has~~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 ~~required bandwidth~~above and technical capabilities to achieve this goal. The Company projects it will process transactions in volumes greater than $1M/day within Q1/2021 and will ramp up the targeted Average Daily Volumes in Q1/2021. We believe the current ~~operational bandwidth for~~traction in Q2/21, the Company is ~~virtually unlimited. Covid-19 will push the ATPV forward, likely by a quarter or two, but the projected figures for daily processing are still anticipated to materialize during 2021.~~
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 ~~Q4/2020 the Company plans on uplisting to a senior exchange within the next 18 months and, at this time,~~Q2/2021 and the Company ~~does not plan on an artificial stock price increase, such as a reverse split. The~~uplisting to NASDAQ in Feb/2021, the current plan is to grow the ~~company~~Company organically to the size and value ~~required~~afforded by the senior exchange.
The ~~company has filed~~ATPV, Profitability and other major KPIs remain sensitive to ~~reserve a NASDAQ ticker – GBOX.~~regulatory changes and global and national economic trends. These will impact and influence the Company’s product line, its potential mergers and acquisitions targets, its joint ventures and the Company’s technology emphasis.

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RESULTS OF OPERATIONS

Three Months Ended ~~September 30, 2020~~March 31, 2021 (Unaudited) Compared to Three Months Ended ~~September 30, 2019~~March 31, 2020 (Unaudited):

Three Months Ended September 30,

Three Months Ended March 31,

2020

2019

Changes

2021

2020

Changes

% of

% of

% of

% of

Amount

Revenue

Amount

Revenue

Amount

%

Amount

Revenue

Amount

Revenue

Amount

%

Revenue
$ 3,056,271 100.0 % $ 14,793,117 100.0 % $ (11,736,846 ) -79.3 %
Net revenue
$ 4,749,441 100.0 % $ 187,205 100.0 % $ 4,562,236 2437.0 %
Cost of revenue
1,845,295 60.4 % 6,834,198 46.2 % (4,988,903 ) -73.0 % 1,593,771 33.6 % 247,305 132.1 % 1,346,466 544.5 %
Gross profit
1,210,976 39.6 % 7,958,919 53.8 % (6,747,943 ) -84.8 %
Gross profit (loss)
3,155,670 66.4 % (60,100 ) -32.1 % 3,215,770 -5350.7 %

Operating expenses:

Advertising and marketing
59,099 1.9 % 10,319 0.1 % 48,780 472.7 % 24,725 0.5 % 11,885 6.3 % 12,840 108.0 %
Research and development
243,923 8.0 % 381,112 2.6 % (137,189 ) -36.0 % 653,381 13.8 % 286,548 153.1 % 366,833 128.0 %
Cash due from gateway reserve expense
- 0.0 % 5,665,031 38.3 % (5,665,031 ) -100.0 %
General and administrative
436,216 14.3 % 176,120 1.2 % 260,096 147.7 %
Payroll and payroll taxes
344,641 11.3 % 420,074 2.8 % (75,433 ) -18.0 % 559,201 11.8 % 402,462 215.0 % 156,739 38.9 %
Professional fees
366,734 12.0 % 281,659 1.9 % 85,075 30.2 % 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
5,764 0.2 % 4,897 0.0 % 867 17.7 % 6,009 0.1 % 5,376 2.9 % 633 11.8 %
Total operating expenses
1,456,377 47.7 % 6,939,212 46.9 % (5,482,835 ) -79.0 % 12,518,701 263.6 % 1,064,749 568.8 % 11,453,952 1075.7 %

Loss from operations
(245,401 ) -8.0 % 1,019,707 6.9 % (1,265,108 ) -124.1 % (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
(48,931 ) -1.6 % 3,837 0.0 % (52,768 ) -1375.2 % (594,258 ) -12.5 % (288,590 ) -154.2 % (305,668 ) 0.0 %
Interest expense - debt discount
(83,500 ) -2.7 % - 0.0 % (83,500 ) n/a
Derivative expense
(925,576 ) -30.3 % - 0.0 % (925,576 ) n/a
Changes in fair value of derivative liability
819,366 26.8 % 236,184 1.6 % 583,182 246.9 % - 0.0 % (3,822,385 ) -2041.8 % 3,822,385 -100.0 %
Gain from extinguishment of convertible debt
- 0.0 % - 0.0 % -
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
(5,768 ) -0.2 % - 0.0 % (5,768 ) n/a (14,611 ) -0.3 % - 0.0 % (14,611 )

Total other income (expense)
(244,409 ) -8.0 % 240,021 1.6 % (484,430 ) -201.8 % (3,966,401 ) -83.5 % (4,116,991 ) -2199.2 % 150,590 -3.7 %

Loss before provision for income taxes
(489,810 ) -16.0 % 1,259,728 8.5 % (1,749,538 ) -138.9 % (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 % - 0.0 % - 0.0 % - 0.0 %

Net loss
$ (489,810 ) -16.0 % $ 1,259,728 8.5 % $ (1,749,538 ) -138.9 % $ (13,329,432 ) -280.7 % $ (5,241,840 ) -2800.1 % $ (8,087,592 ) 154.3 %

Net Revenue

~~Revenue decreased~~Net revenue increased by ~~$11,736,846~~$4,562,236, or ~~79.3%~~2437.0%, to ~~$3,056,271~~$4,749,441 in the ~~third~~first quarter of fiscal ~~2020~~2021 from ~~$14,793,117~~$187,205 in the ~~third~~first quarter ~~previous~~last year. The ~~decrease~~change in net sales reflected the following: Q3 revenues reflects an ecosystem exit from ChargeSavvy, one of the Independent Sales Organizations (ISO). That volume is now transferred to an alternative ISO and processing gateway. In addition, the company placed a high priority towards completion of compliance and integration with Fiserv, one of its largest accounts, and pushed to expedite the development and future release of its third-generation technology, code name Gen3. The Company raised capital in October to support these two directions specifically.
●
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.

29
21
Table of Contents

Cost of Revenue

Cost of revenue ~~decreased~~increased by ~~$4,988,903,~~$1,346,466, or ~~73.0%~~544.5%, to ~~$1,845,295~~$1,593,771 in the ~~third~~first quarter of fiscal ~~2020~~2021 from ~~$6,834,198~~$247,305 in the ~~third~~first quarter last year. Payment processing consists of various processing fees paid to Gateways, as well as commission payments to the Independent Sales Organizations (“ISO”) responsible for establishing and maintaining merchant relationships, from which the processing transactions ensue. Most orders are delivered directly to the customer, without any handling, storage or processing by us. Q3/20 shows a reduction in COR as a result of increased processing efficiency and decreased cost to scale. Upcoming release of the Company’s next generation technology, Gen3, is further designed to impact the Company’s Cost of ~~Revenues and is projected~~revenues decreased due to ~~materially increase~~ the ~~Company’s operating margins significantly and positively.~~following:
●
Increased automation by installation of two new platforms, FOREX and Crypto, that are much more streamlined and less demand for manual work.
●
Installation and integration of an advance transactional routing technology.
●
Revocations of the license agreement with MTrac and moving operations inhouse for better efficiency and higher margins.
●
Termination of service to problematic and low revenue producing clients.
●
Onboarding of higher profitability clients.

Operating Expenses

Operating expenses ~~decreased~~increased by ~~$5,482,835,~~$11,453,952, or ~~79.0%~~1075.7%, to ~~$1,456,377~~$12,518,701 in the ~~third~~first quarter of fiscal ~~2020~~2021 from ~~$6,939,212~~$1,064,749 in the ~~third~~first quarter last year. The ~~decrease~~increase was ~~primarily~~ due to ~~decease in research~~higher general administrative expenses and ~~development of $137,189, cash due from gateway reserve expense of $5,665,031 in third quarter of prior year, and off-set by increase in payroll and professional fees.~~the following:
●
Increased R&D investment towards the completion and launch of the new technologies (Crypto and FOREX platforms, and advanced transactional routing technology).
●
Settlement of legal disputes and associated payments.
●
Stock compensation expense for employees and services
●
Professional fees related to legal and audits.

Non-Operating Expenses

We incurred interest expense related to various debt in the amount of ~~$132,431~~$2,993,408 and ~~$391,431~~$ for the three months ended ~~September 30,~~March 31, 2021 and 2020, and 2019, respectively. We incurred a gain from changes in fair value of derivative liability of $819,366 and $236,184 for the three months ended September 30, 2020 and 2019, respectively, and derivative expense of $925,576 for the three months ended September 30, 2020.
30
~~Table of Contents~~
~~Nine Months Ended September 30, 2020 (Unaudited) Compared to Nine Months Ended September 30, 2019 (Unaudited):~~

Nine Months Ended September 30,

2020

2019

Changes

% of

% of

Amount

Revenue

Amount

Revenue

Amount

%

Revenue
$ 5,536,335 100.0 % $ 19,070,861 100.0 % $ (13,534,526 ) -71.0 %
Cost of revenue
3,504,283 114.7 % 10,602,555 55.6 % (7,098,272 ) -66.9 %
Gross profit
2,032,052 66.5 % 8,468,306 44.4 % (6,436,254 ) -76.0 %

Operating expenses:

Advertising and marketing
86,368 2.8 % 35,928 0.2 % 50,440 140.4 %
Research and development
798,157 26.1 % 1,085,298 5.7 % (287,141 ) -26.5 %
Cash due from gateway reserve expense
- 0.0 % 5,665,031 29.7 % (5,665,031 ) -100.0 %
Payroll and payroll taxes
1,279,174 41.9 % 967,121 5.1 % 312,053 32.3 %
Professional fees
852,234 27.9 % 588,677 3.1 % 263,557 44.8 %
General and administrative
613,156 20.1 % 375,373 2.0 % 237,783 63.3 %
Depreciation and amortization
16,856 0.6 % 11,352 0.1 % 5,504 48.5 %
Total operating expenses
3,645,945 119.3 % 8,728,780 45.8 % (5,082,835 ) -58.2 %

Loss from operations
(1,613,893 ) -52.8 % (260,474 ) -1.4 % (1,353,419 ) 519.6 %

Other Income (Expense):

Interest expense
(372,553 ) -12.2 % (171,193 ) -0.9 % (201,360 ) 117.6 %
Interest expense - debt discount
(121,918 ) -4.0 % (188,273 ) -1.0 % 66,355 -35.2 %
Derivative expense
(925,576 ) -30.3 % (634,689 ) -3.3 % (290,887 ) 45.8 %
Changes in fair value of derivative liability
(383,769 ) -12.6 % (129,186 ) -0.7 % (254,583 ) 197.1 %
Gain from extinguishment of convertible debt
2,630,795 86.1 % - 0.0 % 2,630,795
Other income or expense
(2,434 ) -0.1 % - 0.0 % (2,434 ) n/a
Total other income (expense)
824,545 27.0 % (1,123,341 ) -5.9 % 1,947,886 -173.4 %

Loss before provision for income taxes
(789,348 ) -25.8 % (1,383,815 ) -7.3 % 594,467 -43.0 %

Provision for income taxes
- 0.0 % - 0.0 % - 0.0 %

Net loss
$ (789,348 ) -25.8 % $ (1,383,815 ) -7.3 % $ 594,467 -43.0 %
~~Revenue~~
Revenue decreased by $13,534,526 or 71.0%, to $5,536,335 in the nine months ended September 30, 2020 from $19,070,861 in the nine months ended September 30, 2019. The change in net sales reflected the following: Q3 2019 revenues area reflects the ramp up to operations following the upgrade and rerelease of the Company’s processing platform and the release of the two new platforms, Crypto payouts platform and FOREX platform. In Q1 2020, operations slowed significantly due to the processing platform limitations. As such, Q1 2020 is better compared to Q12019 in terms of operations following a product launch. Q3 2020 revenues reflects an ecosystem exit from ChargeSavvy, one of the Independent Sales Organizations (ISO). That volume is now transferred to an alternative ISO and processing gateway. In addition, the company placed a high priority towards completion of compliance and integration with Fiserv, one of its largest accounts, and pushed to expedite the development and future release of its third-generation technology, code name Gen3. The Company raised capital in October to support these two directions specifically.
31
~~Table of Contents~~
~~Cost of Revenue~~
Cost of revenue decreased by $7,098,272, or 66.9%, to $3,504,283 in the nine months ended September 30, 2020 from $10,602,555 in the nine months ended September 30, 2019. Payment processing consists of various processing fees paid to Gateways, as well as commission payments to the Independent Sales Organizations (“ISO”) responsible for establishing and maintaining merchant relationships, from which the processing transactions ensue. Most orders are delivered directly to the customer, without any handling, storage or processing by us. Q3/20 shows a reduction in COR as a result of increased processing efficiency and decreased cost to scale. Upcoming release of the Company’s next generation technology, Gen3, is further designed to impact the Company’s Cost of Revenues and is projected to materially increase the Company’s operating margins significantly and positively.
~~Operating Expenses~~
Operating expenses decreased by $5,082,835, or 58.2%, to $3,645,945 in the nine months ended September 30, 2020 from $8,728,780 in the nine months ended September 30, 2019. The decrease was due to decrease from research and development and cash due from gateway reserve expense and off-set by increase in payroll and professional fees.
~~Non-Operating Expenses~~
~~We incurred interest expense related to various debt in the amount of $494,471 and $359,466 for the nine months ended September 30, 2020 and 2019,~~ respectively. We incurred a loss from changes in fair value of derivative liability of ~~$383,769~~$3,822,385 for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and ~~derivative expense of $925,576~~none for ~~the nine~~three months ended ~~September 30, 2020. We incurred gain from extinguishment of convertible debt of $2,630,795 for the nine months ended September 30, 2020.~~March 31, 2021.
32
~~Table of Contents~~

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 ~~September 30, 2020~~March 31, 2021 with ~~$124,834~~$35,696,589 of cash, cash equivalents, and restricted cash compared with ~~$763,110~~$1,832,735 as of December 31, ~~2019.~~2020.

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

Nine Months Ended September 30,

Three Months Ended March 31,

2020

2019

2021

2020

Net cash provided by (used in) operating activities
$ (130,505 ) $ 1,841,605 $ (11,258,779 ) $ 267,844
Net cash provided by (used in) investing activities
(12,332 ) (41,634 ) (11,108
)
(12,564
)
Net cash provided by (used in) financing activities
(495,439 ) (89,000 ) 45,133,741 (711,911
)

Net increase (decrease) in cash, cash equivalents, and restricted cash
$ (638,276 ) $ 1,710,971 $ 33,863,854 $ (456,631
)
22
Table of Contents

Operating Activities –For the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ net cash provided by (used in) operating activities was ~~$130,505~~$(11,258,779) and ~~$1,841,605,~~$267,844, respectively. The cash provided by operating activities was primarily due to timing of settlement of assets and liabilities ~~and net loss.~~including stock compensation expenses.

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

Financing Activities – Net cash ~~provided by or~~ used in financing activities primarily consisted of payments of convertible debt and short-term notes payable debt for the ~~nine~~three months ended ~~September 30, 2020 and borrowings and payments~~March 31, 2020. Net cash provided by financing activities primarily consisted of ~~convertible debt~~proceeds from the Offering of $45,805,491 for the three months ended ~~September 30, 2019.~~March 31, 2021.

CRITICAL ACCOUNTING POLICIES

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

Revenue Recognition

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

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

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

●
Payment processing revenue is based on a percentage of each transaction’s value and/or upon fixed amounts specified per each transaction or service and is recognized as such transactions or services are performed.
●
Licensing revenue is paid in advance and is recorded as unearned income, which is amortized monthly over the period of the licensing agreement.
●
Equipment revenue is generated from the sale of POS products, which is recognized when goods are shipped.

33
23
Table of Contents

ITEM 3. CONTROLS AND PROCEDURES
~~Disclosure Controls and Procedures~~

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

Based on management's evaluation, our Chief Executive Officer and Executive Vice President concluded that, as a result of the material weaknesses described below, as of ~~September 30, 2020,~~March 31, 2021, our disclosure controls and procedures are not designed at a reasonable assurance level and are ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Executive Vice President, as appropriate, to allow timely decisions regarding required disclosure. The material weaknesses, which relate to internal control over financial reporting, that were identified are:

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

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

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

~~Changes in Internal Control~~
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
34
24
Table of Contents

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Management currently is not aware of any legal matters or pending litigation that would have a significant effect on the Company’s financial statements as of ~~September 30, 2020.~~March 31, 2021.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

~~10.1~~
3.1
~~Paycheck Protection Program Note, dated April 29, 2020, issued~~Certificate of Change Pursuant to ~~Preferred Bank.~~NRS 78.209, filed with the Nevada Secretary of State on February 16, 2021 (Incorporated by Reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 17, 2021.)
~~10.2~~
10.1+
~~U.S. Small Business Administration Note (Secured Disaster Loans), dated June 2, 2020 issued~~Form of Board of Directors Agreement entered into on February 16, 2021, by and between the Company and each of Ms. Baer and Messrs. Caragol and Laniado (Incorporated by Reference to Exhibit 10.1 to the ~~Small Business Administration.~~Company’s Current Report on Form 8-K filed with the SEC on February 19, 2021).
31.1
Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
31.2
Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
32.1*
Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document

+ Management compensatory plan or contract.
* In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

35
25
Table of Contents

SIGNATURES

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

GREENBOX POS
(Registrant)
Date: ~~November 16, 2020~~May 13, 2021
By:
/s/ Fredi Nisan
Fredi Nisan
Chief Executive Officer (Principal Executive Officer)

Date: ~~November 16, 2020~~May 13, 2021
By:
/s/ ~~Ben Errez~~Benjamin Chung
~~Ben Errez~~Benjamin Chung
~~Chairman of the Board and Executive Vice~~
~~President~~Chief Financial Officer (Principal Financial Officer and
Principal Accounting Office)

3626

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

Balance at June 30, 2020		181,150,138		$	181,150			-	$	-	$	1,396,360		$	(7,016,707	)	$	(5,439,197	)

Common stock issued for stock options exercised		500,000			500			-		-		32,000			-			32,500

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

Common stock repurchased from common stock issued		(6,000,000	)		(6,000	)		-		-		(804,000	)		-			(810,000	)

Common stock issued upon conversion of note payable		6,000,000			6,000			-		-		804,000			-			810,000

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

Balance at September 30, 2020		181,650,138		$	181,650			-	$	-	$	1,590,993		$	(7,506,517	)	$	(5,733,874	)

	September 30, 2020		December 31, 2019

Cash and cash equivalents	$	-	$	-
Restricted cash		124,834		763,110

Total cash, cash equivalents, and restricted cash shown in the statements of cash flows	$	124,834	$	763,110

	*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

September 30, 2020	Level 1		Level 2		Level 3

Derivative liability	$	-	$	-	$	284,210

December 31, 2019	Level 1		Level 2		Level 3

Derivative liability	$	-	$	-	$	1,050,063

	September 30, 2020			December 31, 2019
Settlement Processing Assets:
Cash held for settlements	$	124,834		$	763,110
Cash due from gateways		2,377,909			3,073,183
Amount due from gateways and merchants – hold and fees		6,818,892			4,831,938
Reserves (2)		3,302,447			5,353,661
Total before allowance for uncollectable		12,624,082			14,021,892
Allowance for uncollectable – hold and fees		(6,818,892	)		(4,831,938	)
Cash held for settlement		(124,834	)		(763,110	)
Total – settlement processing assets	$	5,680,356		$	8,426,844

Settlement Processing Liabilities:
Settlement liabilities to merchants		12,624,082			14,021,892
Totals	$	12,624,082		$	14,021,892

	September 30, 2020			December 31, 2019

Cash due from Gateways	$	2,377,909		$	3,073,183
Amount due from gateways and merchants – hold and fees		6,818,892			4,824,223
Reserves (2)		3,302,447			5,353,661

Total cash due from gateways		12,499,248			13,251,067
Chargeback Allowances (1)		-			-
Allowance of uncollectable – hold and fees		(6,818,892	)		(4,824,223	)

Total cash due from gateways, net	$	5,680,356		$	8,426,844

	September 30, 2020			December 31, 2019

March 11, 2019 ($500,000) – 8% one-time interest charge with outstanding principal and interest due October 6, 2019.	$	-		$	500,000
November 26, 2018 ($200,000) – 12% interest per annum with outstanding principal and interest due November 26, 2019.		-			200,000
March 15, 2018 ($300,00) – 12% interest per annum with outstanding principal and interest due March 15, 2019.		-			107,500
June 22, 2020 ($178,000) – 8% interest per annum with outstanding principal and interest due June 22, 2021		178,000			-

Total convertible notes payable		178,000			807,500
Debt discount		(133,500	)		-

Total convertible notes payable	$	44,500		$	807,500

	*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

	September 30, 2020			December 31, 2019

December 10, 2019 ($260,000) – Total interest charge of $106,000 with daily installments (5 days per week) of $4,073 for four months totaling $366,000.	$	-		$	213,671
December 9, 2019 ($200,000) – Total interest charge of $40,000 with 15 weekly installments of $16,000 totaling $240,000.		-			160,000
November 12, 2019 ($400,000) – Total interest charge of $196,000 with daily installments (5 days per week) of $5,960 for four months totaling $596,000.		-			400,000

June 3, 2020 ($300,000) – Total weekly payment of $13,714 for total of 28 payments.		94,286			-
June 9, 2020 ($150,000) – Monthly payment of $731 after 12 months with maturity date of June 1, 2050 with interest rate at 3.75% per annum.		149,900			-
April 29, 2020 ($272,713) – Paycheck protection program (“PPP”) loan provided by SBA under CARES Act with interest rate at 1.00% per annum with maturity date of April 29, 2022.		272,713			-

July 10, 2020 ($400,000) – Total weekly payment of $17,867 (includes principal and interest) for total of 30 payments with imputed interest of 25%.		253,333			-

Total short-term notes payable	$	770,232			773,671

Debt discount		(39,000	)		(32,418	)

Total short-term notes payable, net of debt discount	$	731,232		$	741,253

	September 30, 2020		December 31, 2019

Beneficial conversion feature – convertible debt	$	284,210	$	1,050,063

Total derivative liability	$	284,210	$	1,050,063

	Three and Nine Months Ended September 30,						*Three Months Ended March 31,*
	2020			2019			*2021*			*2020*

Book income at statutory rate		21.00	%		21.00	%		21.00	%		21.00	%
Others		0	%		-0.80	%		-			-
Change in Valuation Allowance		-21.00	%		-20.14	%
Change in valuation allowance								-21.00	%		-21.00	%

Effective income tax rate		0	%		0.06	%		0.00	%		0.00	%

	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		-			-

	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


	■	o	~~Haller Commissions~~ – Under a verbal agreement in Spring 2018, we offered Haller commissions on any referrals that resulted in new business for the Company (“Haller Commissions”). Under this agreement, Haller introduced us to three merchants who became three of the first merchants to use our system. Under the verbal agreement, we paid Haller commissions from transactions processed by these three merchants, summing to approximately $210 in June 2018, $8,396 in July 2018 and $321 in August 2018. In or about September 2018, we commenced discussions with Haller to join our management team and discontinued paying Haller commissions related to these three merchants.


	●	~~RB Capital Partners, Inc.~~DCSM et al v. Greenbox POS – On ~~April 24,~~November 25, 2019, ~~RB Cap and related parties~~four companies (the ~~“RB Cap Parties”~~“Plaintiffs”) filed a complaint ~~in the San Diego Superior Court~~ against ~~PrivCo, PubCo, Ben Errez~~GreenBox POS, LLC, GreenBox POS, Global Payout, Inc., MTrac Tech Corporation and ~~Fredi Nisan~~Cultivate Technologies, LLC (collectively the ~~“GreenBox Parties”~~“Defendants”)~~; and on October 1, 2019, the RB Cap Parties filed an amended complaint against the GreenBox Parties alleging claims of fraud, breach of fiduciary duty, breach of contract and other, related claims~~ in the Superior Court ~~for~~of the State of ~~California, County of San Diego.~~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 ~~Parties~~is to pay $3.8M by March 15, 2021. On December 14, 2020 Plaintiffs filed a ~~cross-complaint~~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 ~~RB Capital Parties, alleging claims~~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, ~~tortious interference,~~breach of covenant of good faith and ~~other, related claims. On or about December 15, 2019,~~fair dealing, violation of California Business and Professions Code Section 17200, and accounting. An arbitrator has been selected and the ~~GreenBox Parties and RB Cap Parties resolved to negotiate a settlement and agreed in principal to settlements terms. The documentation~~parties are awaiting the scheduling of the ~~settlement terms was underway as of February 3, 2020. This was dismissed by both parties on February 27, 2020.~~

	Three months ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

Amortization of right-of-use assets, net of liability amortization	$	115	$	1,073	$	344	$	(3,219	)
Operating lease expense		32,904		31,945		98,711		102,273

Total lease expense	$	33,018	$	33,018	$	99,054	$	99,054

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.

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%.

	Three Months Ended September 30,																	Three Months Ended March 31,
	2020						2019					Changes						2021						2020						Changes
				% of					% of												% of						% of
	Amount			Revenue			Amount		Revenue			Amount			%			Amount			Revenue			Amount			Revenue			Amount			%

Revenue	$	3,056,271			100.0	%	$	14,793,117		100.0	%	$	(11,736,846	)		-79.3	%
Net revenue																		$	4,749,441			100.0	%	$	187,205			100.0	%	$	4,562,236			2437.0	%
Cost of revenue		1,845,295			60.4	%		6,834,198		46.2	%		(4,988,903	)		-73.0	%		1,593,771			33.6	%		247,305			132.1	%		1,346,466			544.5	%
Gross profit		1,210,976			39.6	%		7,958,919		53.8	%		(6,747,943	)		-84.8	%
Gross profit (loss)																			3,155,670			66.4	%		(60,100	)		-32.1	%		3,215,770			-5350.7	%

Operating expenses:
Advertising and marketing		59,099			1.9	%		10,319		0.1	%		48,780			472.7	%		24,725			0.5	%		11,885			6.3	%		12,840			108.0	%
Research and development		243,923			8.0	%		381,112		2.6	%		(137,189	)		-36.0	%		653,381			13.8	%		286,548			153.1	%		366,833			128.0	%
Cash due from gateway reserve expense		-			0.0	%		5,665,031		38.3	%		(5,665,031	)		-100.0	%
General and administrative		436,216			14.3	%		176,120		1.2	%		260,096			147.7	%
Payroll and payroll taxes		344,641			11.3	%		420,074		2.8	%		(75,433	)		-18.0	%		559,201			11.8	%		402,462			215.0	%		156,739			38.9	%
Professional fees		366,734			12.0	%		281,659		1.9	%		85,075			30.2	%		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		5,764			0.2	%		4,897		0.0	%		867			17.7	%		6,009			0.1	%		5,376			2.9	%		633			11.8	%
Total operating expenses		1,456,377			47.7	%		6,939,212		46.9	%		(5,482,835	)		-79.0	%		12,518,701			263.6	%		1,064,749			568.8	%		11,453,952			1075.7	%

Loss from operations		(245,401	)		-8.0	%		1,019,707		6.9	%		(1,265,108	)		-124.1	%		(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		(48,931	)		-1.6	%		3,837		0.0	%		(52,768	)		-1375.2	%		(594,258	)		-12.5	%		(288,590	)		-154.2	%		(305,668	)		0.0	%
Interest expense - debt discount		(83,500	)		-2.7	%		-		0.0	%		(83,500	)		n/a
Derivative expense		(925,576	)		-30.3	%		-		0.0	%		(925,576	)		n/a
Changes in fair value of derivative liability		819,366			26.8	%		236,184		1.6	%		583,182			246.9	%		-			0.0	%		(3,822,385	)		-2041.8	%		3,822,385			-100.0	%
Gain from extinguishment of convertible debt		-			0.0	%		-		0.0	%		-
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		(5,768	)		-0.2	%		-		0.0	%		(5,768	)		n/a			(14,611	)		-0.3	%		-			0.0	%		(14,611	)
Total other income (expense)		(244,409	)		-8.0	%		240,021		1.6	%		(484,430	)		-201.8	%		(3,966,401	)		-83.5	%		(4,116,991	)		-2199.2	%		150,590			-3.7	%

Loss before provision for income taxes		(489,810	)		-16.0	%		1,259,728		8.5	%		(1,749,538	)		-138.9	%		(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	%		-			0.0	%		-			0.0	%		-			0.0	%

Net loss	$	(489,810	)		-16.0	%	$	1,259,728		8.5	%	$	(1,749,538	)		-138.9	%	$	(13,329,432	)		-280.7	%	$	(5,241,840	)		-2800.1	%	$	(8,087,592	)		154.3	%

	Nine Months Ended September 30,						Three Months Ended March 31,
	2020			2019			2021			2020

Net cash provided by (used in) operating activities	$	(130,505	)	$	1,841,605		$	(11,258,779	)	$	267,844
Net cash provided by (used in) investing activities		(12,332	)		(41,634	)		(11,108	)		(12,564	)
Net cash provided by (used in) financing activities		(495,439	)		(89,000	)		45,133,741			(711,911	)

Net increase (decrease) in cash, cash equivalents, and restricted cash	$	(638,276	)	$	1,710,971		$	33,863,854		$	(456,631	)

~~10.1~~ 3.1	~~Paycheck Protection Program Note, dated April 29, 2020, issued~~Certificate of Change Pursuant to ~~Preferred Bank.~~NRS 78.209, filed with the Nevada Secretary of State on February 16, 2021 (Incorporated by Reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 17, 2021.)
~~10.2~~ 10.1+	~~U.S. Small Business Administration Note (Secured Disaster Loans), dated June 2, 2020 issued~~Form of Board of Directors Agreement entered into on February 16, 2021, by and between the Company and each of Ms. Baer and Messrs. Caragol and Laniado (Incorporated by Reference to Exhibit 10.1 to the ~~Small Business Administration.~~Company’s Current Report on Form 8-K filed with the SEC on February 19, 2021).
31.1	Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
31.2	Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
32.1*	Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

	GREENBOX POS (Registrant)

Date: ~~November 16, 2020~~May 13, 2021	By:	/s/ Fredi Nisan
		Fredi Nisan Chief Executive Officer (Principal Executive Officer)