UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)
☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended ~~June 30, 2021~~March 31, 2022

OR

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

Commission file number: 001-34294

GREENBOX POS

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

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

3131 Camino Del Rio North, Suite 1400

San Diego, CA

92108

(Address of principal executive offices)

(Zip Code)

(619)-631-8261

(Registrant’s telephone number, including area code)

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

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	GBOX	The Nasdaq Stock Market LLC (Nasdaq Capital Market)

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

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

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

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

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

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

Number of shares outstanding of the issuer’s classes of common equity, as of ~~August 6, 2021~~May 9, 2022 was ~~43,343,091~~41,418,402 Shares of Common Stock (One Class)

TABLE OF CONTENTS

		Page
PART I Consolidated Financial Information

Item 1.	~~Unaudited Condensed Consolidated~~ Financial Statements (unaudited)	3
	~~Unaudited~~ Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	3
	~~Unaudited~~ Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021	4
	~~Unaudited~~ Condensed Consolidated Statements of Stockholders’ ~~Deficit~~Equity for the Three Months Ended March 31, 2022 and 2021	5
	~~Unaudited~~ Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021	7
	Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis ~~or Plan~~of Financial Condition and Results of Operations	1923
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures	2527

PART II Other Information

Item 1.	Legal Proceedings	2628
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2628
Item 3.	Defaults Upon Senior Securities	2628
Item 4.	Mine Safety Disclosures	2628
Item 5.	Other Information	2628
Item 6.	Exhibits	2629
Signatures		2730

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

GREENBOX POS

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	June 30,			December 31,
	2021			2020			*March 31,*			*December 31,*
							*2022*			*2021*
ASSETS

Current Assets:
Cash and cash equivalents	$	29,796,748		$	0		$	27,594,032		$	89,559,695
Restricted cash		0			1,832,735			462			-
Accounts receivable, net of allowance for bad debt of $0 and $0, respectively		75,444			10,000
Accounts receivable from fines and penalties from merchants, 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		15,759,069			7,303,949
Accounts receivable, net of allowance for bad debt of $54,795 and $54,795, respectively								468,591			481,668
Inventory, net of inventory reserve of $3,127 and $3,127, respectively								217,107			286,360
Cash due from gateways, net of allowance of $3,904,952 and $3,904,952, respectively								20,807,373			18,941,761
Prepaid and other current assets		2,028,552			70,130			35,263,038			6,420,696
Total current assets		50,449,043			12,006,044			84,350,603			115,690,180

Non-current Assets:
Property and equipment, net		113,836			57,264			1,708,194			1,674,884
Other assets		180,636			81,636			172,350			190,636
Goodwill		2,305,394			0			6,048,034			6,048,034
Intangible Assets, net		257,748			0			25,267,371			7,578,935
Operating lease right-of-use assets, net		832,636			117,795			1,361,730			1,490,159
Total non-current assets		3,690,250			256,695			34,557,679			16,982,648

Total assets	$	54,139,293		$	12,262,739		$	118,908,282		$	132,672,828

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable	$	520,478		$	210,094		$	1,069,136		$	871,037
Other current liabilities		135,991			68,138			609,723			501,167
Accrued interest								1,775,620			1,226,287
Payment processing liabilities, net		4,295,519			10,199,956			5,390,413			4,997,807
Note payable, payroll protection plan loan		272,713			272,713
Convertible debt, net of debt discount of $0 and $2,993,408, respectively		0			856,592
Derivative liability								26,435,000			18,735,000
Current portion of operating lease liabilities		431,487			120,110			549,668			495,134

Total current liabilities		5,656,188			11,727,603			35,829,560			26,826,432
Long term liabilities		149,900			149,900
Long-term debt								649,900			649,900
Convertible debt, net of debt discount of $35,824,000 and $41,344,822, respectively								58,176,000			58,655,178
Operating lease liabilities, less current portion		401,744			0			891,680			1,035,895

Total liabilities		6,207,832			11,877,503			95,547,140			87,167,405

Commitments and contingencies

Stockholders' Equity:
Common stock, par value $0.001, 82,500,000 shares authorized, shares issued and outstanding of 42,236,219 and 30,710,646, respectively		42,327			30,711
Common stock, par value $0.001, 82,500,000 shares authorized, shares issued and outstanding of 43,289,572 and 43,546,647, respectively								42,574			42,831
Common stock issuable, par value $0.001, 500,000 and 0 shares issuable, respectively								541			-
Additional paid-in capital		73,916,018			12,079,074			90,982,614			88,574,469
Accumulated deficit		(25,093,541	)		(11,724,549	)		(59,494,048	)		(38,178,061	)
Less: Treasury stock, at cost; 90,000 and 0 shares, respectively		(933,343	)		0
Less: Treasury stock, at cost; 1,398,586 and 714,831, respectively								(8,170,539	)		(4,933,816	)
Total stockholders' equity		47,931,461			385,236			23,361,142			45,505,423

Total liabilities and stockholder's equity	$	54,139,293		$	12,262,739
Total liabilities and stockholders' equity							$	118,908,282		$	132,672,828

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

Table of Contents

GREENBOX POS

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021

Revenue	$	6,379,179		$	2,292,859		$	11,128,620		$	2,480,064
Net revenue													$	4,895,526		$	4,749,441
Cost of revenue		1,323,480			1,411,683			2,917,251			1,658,988			2,563,830			1,593,771

Gross profit		5,055,699			881,176			8,211,369			821,076			2,331,696			3,155,670

Operating expenses:
Advertising and marketing		22,605			15,384			47,330			27,269			140,966			24,725
Research and development		808,210			267,686			1,461,591			554,234			1,938,133			653,381
General and administrative		298,030			101,523			864,225			234,292			1,792,184			566,195
Payroll and payroll taxes		1,061,929			428,758			1,621,130			842,958			2,383,397			559,201
Professional fees		867,472			293,622			1,325,224			507,593			1,504,561			457,752
Stock compensation for employees		1,291,887			12,130			2,089,500			12,130			166,800			797,613
Stock compensation for services		726,933			0			10,180,758			0			126,414			9,453,825
Depreciation and amortization		14,244			5,716			20,253			11,092			454,341			6,009
Total operating expenses		5,091,310			1,124,819			17,610,011			2,189,568			8,506,796			12,518,701

Income (Loss) from operations		(35,611	)		(243,643	)		(9,398,642	)		(1,368,492	)		(6,175,100	)		(9,363,031	)

Other income (expense):
Interest expense		0			(30,659	)		(594,258	)		(319,249	)		(1,889,485	)		(594,258	)
Interest expense - debt discount		0			(8,342	)		(2,993,408	)		(38,418	)		(5,520,822	)		(2,993,408	)
Derivative expense		0			(4,373	)		0			(4,373	)
Changes in fair value of derivative liability		0			2,619,250			0			(1,203,135	)		(7,700,000	)		-
Gain from extinguishment of convertible debt		0			2,612,246			0			2,630,795
Merchant liability settlement		0			0			(364,124	)		0			-			(364,124	)
Other income or expense		(3,949	)		(2,177	)		(18,560	)		3,334			49,316			(14,611	)
Total other expense, net		(3,949	)		5,185,945			(3,970,350	)		1,068,954
Total other income (expense), net														(15,060,991	)		(3,966,401	)

Income (Loss) before provision for income taxes		(39,560	)		4,942,302			(13,368,992	)		(299,538	)
Loss before provision for income taxes														(21,236,091	)		(13,329,432	)

Income tax provision		0			0			0			0			79,896			-

Net income (loss)	$	(39,560	)	$	4,942,302		$	(13,368,992	)	$	(299,538	)
Net loss													$	(21,315,987	)	$	(13,329,432	)


Earnings (loss) per share:
Net loss per share:
Basic and diluted	$	(0.00	)	$	0.17		$	(0.43	)	$	(0.01	)	$	(0.51	)	$	(0.38	)

Weighted average number of common shares outstanding:
Basic and diluted		31,078,605			28,983,034			31,208,102			29,492,180			42,110,890			34,917,106

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

Table of Contents

GREENBOX POS

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

(UNAUDITED)

Common Stock

Treasury Stock

Additional Paid-In

Accumulated

Total Stockholders' Equity

Shares

Amount

To be Issued

Amount

at Cost

Capital

Deficit

(Deficit)

Balance at March 31, 2021
40,917,331 $ 40,918 - $ - $ - $ 71,898,401 $ (25,053,981 ) $ 46,885,338

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

Common stock issued for services
206,259 206 - - - 726,933 - 727,139

Common stock issued for non-cash stock option exercise
30,780 31 - - - (31 ) - -

Treasury stock
(90,000 ) - - - (933,343 ) - - (933,343 )

Stock compensation expense
- - - - - 1,291,887 - 1,291,887

Net loss
- - - - - - (39,560 ) (39,560 )

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

	Common Stock												Treasury Stock						Additional Paid-In			Accumulated			Total Stockholders' Equity
	Shares			Amount			Issuable			Amount			Shares			At Cost			Capital			Deficit			(Deficit)

Balance at December 31, 2021		43,546,647		$	42,831			-		$	-			(714,831	)	$	(4,933,816	)	$	88,574,469		$	(38,178,061	)	$	45,505,423

Common stock issued for services		30,508			31			8,905			8			-			-			126,375			-			126,414

Common stock issued to shareholder		33,333			33			-			-			-			-			(33	)		-			-

Common stock issued for stock options exercised		12,417			12			-			-			-			-			5,203			-			5,215

Common stock contributed and cancelled from shareholder		(333,333	)		(333	)		-			-			-			-			333			-			-

Common stock issuable - Acquisition of Sky assets		-			-			500,000			500			-			-			2,109,500			-			2,110,000

Common stock shares contributed by shareholder		-			-			(500,000	)		(500	)		-			-			500			-			-

Common stock shares issuable to shareholder		-			-			533,333			533			-			-			(533	)		-			-

Treasury Stock		-			-			-			-			(683,755	)		(3,236,723	)		-			-			(3,236,723	)

Stock compensation expense		-			-			-			-			-			-			166,800			-			166,800

Net loss		-			-			-			-			-			-			-			(21,315,987	)		(21,315,987	)

Balance at March 31, 2022		43,289,572		$	42,574			542,238		$	541			(1,398,586	)	$	(8,170,539	)	$	90,982,614		$	(59,494,048	)	$	23,361,142

Common Stock

Treasury Stock

Additional Paid-In

Accumulated

Total Stockholders' Equity

Shares

Amount

To be Issued

Amount

at Cost

Capital

Deficit

(Deficit)

Balance at March 31, 2020
29,320,322 $ 29,320 - $ - $ - $ 1,440,190 $ (11,959,009
)
$ (10,489,499
)

Common stocks issued from conversion of convertible debt
854,701 855 - - - 99,145 - 100,000

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

Net income
- - - - - - 4,942,302 4,942,302

Balance at June 30, 2020
30,191,690 $ 30,192 - $ - $ - $ 1,547,318 $ (7,016,707
)
$ (5,439,197
)

Table of Contents

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

Balance at December 31, 2020		30,710,645	$	30,711		-	$	-			$	12,079,074		$	(11,724,549	)	$	385,236

Common stock issued for exercise of warrant		1,777,778		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

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

~~Table of Contents~~

~~GREENBOX POS~~

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

Common Stock Treasury Stock Additional Paid-In Accumulated Total Stockholders' Equity

Shares

Amount

To be Issued

Amount
at Cost
Capital

Deficit

(Deficit)

Balance at December 31, 2020
30,710,645 $ 30,711 - $ - $ - $ 12,079,074 $ (11,724,549 ) $ 385,236

Common stock issued for exercise of warrant
1,777,778 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
990,118 990 - - - 10,179,974 - 10,180,964

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

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

Common stock issued for stock options exercised
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

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

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
- - - - - 2,089,500 - 2,089,500

Purchases of treasury stock
(90,000 ) - - - (933,343 ) - - (933,343 )

Net loss
- - - - - - (13,368,992 ) (13,368,992 )

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

Common Stock Treasury Stock Additional Paid-In Accumulated Total Stockholders' Equity

Shares

Amount

To be Issued

Amount
at Cost
Capital

Deficit

(Deficit)

Balance at December 31, 2019
28,310,489 $ 28,310 115,854 $ 116 $ - $ 1,321,404 $ (6,717,169
)
$ (5,367,339
)

Shares issuable adjustment
- - (115,854
)
(116
)
- 116 - -

Common stock issued from conversion of convertible debt
1,854,701 1,855 - - - 213,695 - 215,550

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

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

Net loss
- - - - - - (299,538
)
(299,538
)

Balance at June 30, 2020
30,191,690 $ 30,192 - $ - $ - $ 1,547,318 $ (7,016,707
)
$ (5,439,197
)

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

Table of Contents

GREENBOX POS

~~UNUAUDITED~~ UNAUDITED CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENT OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30,						*Three Months Ended March 31,*
	2021			2020			2022			2021

Cash flows from operating activities:
Net loss	$	(13,368,992	)	$	(299,538	)	$	(21,315,987	)	$	(13,329,432	)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation expense		13,338			11,092			454,341			6,010
Amortization expense		6,915			0
Noncash lease expense		(1,720	)		(839	)		38,748			(1,135	)
Stock compensation expense		2,089,500			12,130			166,800			797,613
Common stocks issued for professional fees		10,180,758			0			126,414			9,453,825
Stock compensation issued for interest		594,258			0			-			594,355
Interest expense - debt discount		2,993,408			38,418			5,520,822			2,993,408
Derivative expense		0			4,373
Gain (loss) on extinguishment of debt		0			(2,630,795	)
Changes in fair value of derivative liability		0			1,203,135			7,700,000			-
Changes in assets and liabilities:											-
Other receivable, net		(65,444	)		47,714			13,077			-
Inventory								69,253			-
Prepaid and other current assets		(1,958,422	)		(33,341	)		(31,742	)		(2,382,623	)
Cash due from gateways, net		(8,455,120	)		3,502,426			(1,865,612	)		(4,544,760	)
Other assets		(99,000	)		0			18,286			-
Accounts payable		239,131			(33,597	)		198,100			(32,056	)
Other current liabilities		67,853			14,354			108,556			30,857
Accrued interest		0			(290,021	)		549,333			-
Payment processing liabilities, net		(5,904,437	)		(1,077,551	)		392,606			(4,844,841	)
Net cash provided by (used in) operating activities		(13,667,974	)		467,960			(7,857,005	)		(11,258,779	)

Cash flows from investing activities:
Purchases of property and equipment		(68,411	)		(10,244	)		(66,088	)		(11,108	)
Cash provided for acquisition		(2,500,000	)		0
Cash provided for Transact Europe Acquisition								(28,810,600	)		-
Cash provided for Sky asset acquisition								(16,000,000	)		-
Net cash used in investing activities		(2,568,411	)		(10,244	)		(44,876,688	)		(11,108	)

Cash flows from financing activities:
Treasury stock repurchase		(933,343	)		0			(3,236,723	)		-
Proceeds from stock option exercises		2,250			0			5,215			2,250
Repayments on convertible debt		0			(445,000	)		(6,000,000	)		-
Borrowings from notes payable		0			744,480
Principal payments on notes payable		0			(823,074	)
Proceeds from exercise of warrant		3,520,000			0			-			3,520,000
Repurchase of common stock from stockholder		(4,194,000	)		0			-			(4,194,000	)
Proceeds from issuance of common stock		45,805,491			0			-			45,805,491
Net cash provided by (used in) financing activities		44,200,398			(523,594	)		(9,231,508	)		45,133,741

Net increase in cash, cash equivalents, and restricted cash		27,964,013			(65,878	)		(61,965,201	)		33,863,854

Cash, cash equivalents, and restricted cash – beginning of period		1,832,735			763,110			89,559,695			1,832,735

Cash, cash equivalents, and restricted cash – end of period	$	29,796,748		$	697,232		$	27,594,494		$	35,696,589

Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	0		$	525,270		$	4,891,392		$	-
Income taxes	$	800		$	800		$	-		$	-


Non-cash financing activities:
Non-cash financing and investing activities:
Convertible debt conversion to common stock	$	3,850,000		$	137,500		$	-		$	3,850,000
Interest accrual from convertible debt converted to common stock	$	0		$	78,050		$	-		$	58,050
Short-term notes payable converted to common stock	$	-		$	-
Share issuable for assets purchased from Sky Financial							$	2,110,000		$	-

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

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~~financial technology company ~~formed with the intent of developing, marketing~~that develops, markets, and ~~selling~~sells innovative blockchain-based payment solutions, which ~~the Company believes will cause favorable disruption in~~we believe offer significant improvements for the payment solutions marketplace. The Company’s core focus is to develop and monetize disruptive blockchain-based applications, integrated within an end-to-end suite of financial products, capable of supporting a multitude of industries. The Company’s proprietary, blockchain-based systems are designed to facilitate, record and store a virtually limitless volume of tokenized assets, representing cash or data, on a secured, immutable blockchain-based ledger.

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

~~For accounting and reporting purposes,~~On May 3, 2018, PubCo ~~deemed the~~formally changed its name to GreenBox ~~Acquisition a “Reverse Acquisition” with PrivCo designated the “accounting acquirer” and PubCo designated the “accounting acquiree.”~~POS LLC, then subsequently changed its name to GreenBox POS on December 13, 2018.

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

~~Name Change~~On July 13, 2021 (the "Closing Date”), GreenBox POS entered into and closed on a Membership Interest Purchase Agreement (the "Purchase Agreement”) with Charge Savvy LLC, an Illinois limited liability company ("Charge Savvy”), and Charge Savvy’s three members (collectively, the "Sellers”). One of the Sellers, Ken Haller, was an employee of the Company on the Closing Date. As a result of the Purchase Agreement, the Company purchased all of Charge Savvy’s issued and outstanding membership interests from the Sellers and Charge Savvy became a wholly owned subsidiary of the Company. Although the Purchase Agreement is dated July 9th, it was entered into and closed on July 13th.The purchase price under the Purchase Agreement for the all- stock transaction consisted of 1,000,000 shares of the Company’s common stock, par value $0.001 per share (the "Common Stock”) being issued and delivered to Sellers in proportion to the Sellers’ share of their membership interests in Charge Savvy. The share price at issuance was $12.14. Charge Savvy is a global Fintech company that specializes on developing software and providing payment processing and point of sale services to the merchant services industry. Charge Savvy also owns an approximately 64,000 square foot office building located in Chicago, Illinois where it is headquartered.

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~~March 31, 2022, the ~~context otherwise requires, all references to “the~~ Company~~” “we,” “our”, “us”~~ completed the acquisition of Transact Europe Holdings OOD. Transact Europe EAD (TEU) is an EU regulated electronic money institution headquartered in Sofia Bulgaria. TEU is a Principal Level Member of Visa, a Worldwide Member of MasterCard, and ~~“PubCo” refer to GreenBox POS. Unless~~a Principal Member of China UnionPay. In addition, TEU is part of the ~~context otherwise requires, all references to “PrivCo” or~~direct SEPA program. With a global footprint, proprietary payment gateway and technology platforms, TEU offers a comprehensive portfolio of services, and decades of industry experience. TEU provides complete payment solutions by offering acquiring, issuing of prepaid cards and agent banking, serving hundreds of clients. The Company paid approximately $28.8 million (€26.0 million) in total consideration for the ~~“Private Company” refer to GreenBox POS LLC, a limited liability company, formed in the state of Washington.~~purchase.

Basis of Presentation and Consolidation

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

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Unaudited Interim Financial Information

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

~~Table of Contents~~

~~GREENBOX POS~~

~~NOTES TO UNAUDITED~~~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(continued)~~2021.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

~~COVID-19 considerations~~Use of Estimates

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

Cash Due from Gateways and Payment Processing Liabilities

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

In 2022 and 2021 the Company utilized several gateways. The gateways have strict guidelines pertaining to scheduling of the release of funds to merchants based on several criteria, such as return and chargeback history, associated risk for the specific business vertical, average transaction amount and so on. In order to mitigate processing risks, these policies determine reserve requirements and payment in arrears strategy. While reserve and payment in arrears restrictions are in effect for a merchant payout, the Company records gateway debt against these amounts until released.

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

Research and Development Costs

Research and development costs, which are expensed as incurred, are primarily comprised of costs and expenses for salaries and benefits for research and development personnel, outsourced contract services, and supplies and materials costs.

Revenue Recognition

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

The Company’s primary revenue source is generated from payment processing services. Payment processing services revenue is based on a percentage of each transaction’s value and/or upon fixed amounts specified per each transaction or service and is recognized as such transactions or services are performed, at a point in time.

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Fair Value of Financial Instruments

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

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

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

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

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

The Company did not have any Level 1 and Level 2 fair value measurement. The Company had the following Level 3 fair value measurement:

	Fair Value at March 31, 2022

Customer Relationship	$	25,196,976
Business intellectual properties	$	2,611,088
Derivative Liability	26,435,000

	Fair Value at December 31, 2021

Customer Relationship	$	5,820,195
Business Technology/IP	$	2,611,088
Derivative liability	$	18,735,000

Goodwill and Other Intangible Assets

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

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

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

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever management believes that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. To the extent that the carrying value is determined to be unrecoverable, an impairment loss is recognized through a charge to expense. As of March 31, 2022, the Company does not believe that impairment indicators are present, and accordingly, based on this assessment, no further impairment analysis was performed.

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Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net of operating loss carry forwards and credits, by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. As of March 31, 2022, we have no material unrecognized tax benefits, and we expect no material unrecognized tax benefits for the next 12 months.

Earnings Per Share

A basic earnings per share is computed by dividing net income to common stockholders by the weighted average number of shares outstanding for the year. Dilutive earnings per share include the effect of any potentially dilutive debt or equity under the treasury stock method, if including such instruments is dilutive. The Company’s diluted earnings/loss per share is the same as the basic earnings/loss per share for the three months ended March 31, 2022 and 2021, as there are no potential shares outstanding other than options that would have a dilutive effect.

Recently Adopted Accounting Updates

In November 2021, the FASB issued ASU 2021-10 “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance,” which created FASB ASC Topic 832, Government Assistance (ASC 832). ASC 832 requires business entities to disclose information about certain government assistance they receive. The Company adopted this standard on January 1, 2022 and determined there was no material impact on the Company's condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers," which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, "Revenue from Contracts with Customers," as if the acquirer had originated the contracts. ASU 2021-08 is effective for fiscal years and interim reporting periods within those fiscal years beginning after December 15, 2022. The Company is currently evaluating the effect, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows and disclosures.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses”. The standard, including subsequently issued amendments (ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10 and ASU 2019-11), requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In November 2019, the FASB issued ASU No. 2019-10 to postpone the effective date of ASU No. 2016-13 for public business entities eligible to be smaller reporting companies defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact of this guidance on its consolidated financial statements.

3.	COVID-19 UPDATE

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

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

~~Use of Estimates~~

~~Cash Due from Gateways and Payment Processing Liabilities~~

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

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

~~Research and Development Costs~~

~~Table of Contents~~

~~GREENBOX POS~~

~~NOTES TO UNAUDITED~~~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(continued)~~

2.	~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

~~Revenue Recognition~~

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

~~Fair Value of Financial Instruments~~

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

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

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

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

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

Fair Value at May 21, 2021

Valuation Technique

Unobservable Input

Range

Customer Relationship
$ 264,663
Multiple-period excess earnings method

Discount rate
15.90 %

~~Goodwill and Other Intangible Assets~~

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

~~Table of Contents~~

~~GREENBOX POS~~

~~NOTES TO UNAUDITED~~~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(continued)~~

2.	~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~

~~Impairment of Long-Lived Assets~~

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

~~Income Taxes~~

~~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 six months ended June 30, 2021 and 2020, as there are no potential shares outstanding other than options that would have a dilutive effect.

~~Reverse Common Stock Split (1 for 6)~~

On February 17, 2021, the Company effected a reverse stock split of the Company’s shares of common stock outstanding and a proportional decrease of the Company’s authorized shares of common stock at a ratio of one-for-six (the “Stock Split”). Following the Stock Split, the Company has 82,500,000 shares of common stock authorized (the number of authorized shares of Preferred Stock remains 5,000,000). As a result, common shares information has been retrospectively restated accordingly in the financial statements as of and for the three and six months ended June 30, 2020.

~~Recently Adopted Accounting Updates~~

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

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

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~~GREENBOX POS~~

~~NOTES TO UNAUDITED~~~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(continued)~~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.The loan was forgiven on November 8, 2021.

2.4.	~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~

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

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

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

3.	~~ACQUISITION~~ACQUISITIONS

On ~~May 21, 2021,~~April 1, 2022, the Company acquired ~~all~~Transact Europe Holdings for approximately $28.8 million (€26.0 million) in cash. Transact Europe EAD (TEU), an EU regulated electronic money institution headquartered in Sofia, Bulgaria, boasts an array of licenses such as principal level membership of Visa, worldwide membership of MasterCard, and principal membership of China UnionPay. TEU is also part of the ~~outstanding stock~~direct SEPA (Single Euro Payments Area), a payment system enabling cashless payments across continental Europe. The Company paid approximately $28.8 million as of ~~Northeast Merchant Systems, Inc. (“Northeast”). Northeast~~March 31, 2022 but the transaction closed on April 1, 2022. As a result, the financial statements as of and for the three months ended March 31, 2022 does not include financial statements of TEU. The $28.8 million paid as of March 31, 2022 is ~~a merchant services company providing merchant credit card processing through their own Bank Identification Number (BIN) with~~included as prepaid and other current assets in the acquiring bank Merrick. This involves inside operations for new merchants that include sales assistance and applications processing, underwriting, and onboarding; inside operations for existing merchants include risk monitoring and customer service. Outside operations include: equipment service or replacement; sales calls and applications; site inspections and identity verification; security verification; and on-site customer service and technical support.

~~Preliminary Purchase Price Allocation~~balance sheets.

The ~~acquisition qualified as a business combination and was accounted for using~~following summarizes the ~~acquisition method. Accordingly, the total~~estimated fair value of consideration transferred of $2,500,000 for the acquisition was allocated to the net tangible, intangible and liabilities acquired using fair value estimates at the date of acquisition. The excess of the purchase price over the fair valuevalues of the net ~~tangible and intangible~~ assets acquired ~~was allocated to goodwill,~~ which is ~~taxable.~~recorded as of April 1, 2022:

Tangible assets (liabilities):
Net assets and liabilities	$	7,465,907


Intangible assets:
Customer relationships		1,266,781
Goodwill		20,077,912
		21,344,693

Total net assets acquired	$	28,810,600

On March 31, 2022, the Company acquired a portfolio of merchant accounts from Sky Financial & Intelligence for $18,110,000. The Company paid $16,000,000 of cash in March 2022 and is scheduled to issue 500,000 shares of restricted common stock for the transaction in May 2022.

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

Tangible assets (liabilities):

Net assets and liabilities
$ (70,057 )

Intangible assets:

Customer relationships
264,663
Goodwill
2,305,394
2,570,057

Total net assets acquired
$ 2,500,000

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

~~Table of Contents~~

~~GREENBOX POS~~

~~NOTES TO UNAUDITED~~��~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(continued)~~

Intangible assets:
Customer relationships		$	18,110,000

4.5.	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~~dollar-for-dollar basis, after which the merchant releases its goods or services to the consumer. These transfers take place instantaneously and seamlessly, allowing the transaction experience to seem like any other ordinary credit/debit card transaction to the consumer and merchant. While our blockchain ledger records transaction details instantaneously, the final cash settlement of each transaction can take days to weeks, depending upon contract terms between us and the gateways we use, between us and our ISOs, and between us and/or our ISOs and merchants who use our services. In the case where we have received transaction funds, but not yet paid a merchant or an ISO, we hold funds in either a trust account or as cash deemed restricted within our operating accounts. We record the total of such funds as Cash due from gateways, net – a Current Asset. Of these funds, we record the sum balance due to Merchants and ISOs as Payment processing liabilities, net – a Current Liability.

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5.6.	~~CONVERTIBLE NOTES PAYABLE~~PROPERTY AND EQUIPMENT

~~Convertible notes payable~~Property and equipment consisted of the following:

June 30,
2021

December 31,
2020

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

Total convertible notes payable
0 3,850,000
Debt discount
0 (2,993,408
)

Total convertible notes payable, net of debt discount
$ 0 $ 856,592

	March 31, 2022			December 31, 2021
Buildings, machinery and equipment	$	1,310,554		$	1,301,405
Computers		171,025			122,284
Furniture and fixtures		110,440			102,243
Improvements		140,300			140,300
Kiosks		6,472			6,472
Vehicles		9,812			9,812
Land		75,000			75,000
Total property and equipment		1,823,603			1,757,516
Less: accumulated depreciation		(115,409	)		(82,632	)
Net property and equipment	$	1,708,194		$	1,674,884

~~Kingswood Capital (Syndicate Convertible Note) - $3,850,000~~Depreciation expense was $32,777 and $6,009 for the three months ended March 31, 2022 and 2021, respectively.

GOODWILL

The Company tests goodwill during the fourth quarter of each year or more often if events or circumstances indicate there may be impairment. The Company only has one reporting unit. The Company performs its analysis in accordance with the provisions of FASB ASC Topic 350, Intangibles—Goodwill and Other (ASC 350). This guidance provides the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, based on a review of qualitative factors, it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company performs a goodwill impairment test by comparing the carrying value of its reporting unit to its fair value. The Company determines the estimated fair value of the reporting unit using a discounted cash flow analysis. The fair value of the reporting unit is the implied fair value of goodwill. In the event the reporting unit's carrying value exceeds its fair value, an impairment loss will be recognized. An impairment loss is measured by the difference between the carrying value of the reporting unit and its fair value.

~~On October 27, 2020,~~As of March 31, 2022, goodwill assets consisted of the Company issued a convertible promissory note for $3,850,000 to various lenders through its placement agent, Kingswood Capital (“Kingswood Note”), due July 27, 2021 (the “Maturity Date”) with conversion price to common stock of $1.98 per share. The Kingswood Note included an original issue discount of $350,000, netting the balance received by the Company from Kingswood Note at $3,500,000. The Company also provided warrant of 1,944,444 with a fixed exercise price to common stock of $1.98 per share under the Kingswood Note. The Company valued its warrant of 1,944,444 with fixed exercise price of $1.98 using Black-Scholes valuation method which amounted to $3,498,667 and recorded as a debt discount at the time of issuance of warrant. The convertible debt was converted in February 2021.following:

	March 31, 2022		December 31, 2021
Acquisition of Northeast	$	2,293,474	$	2,293,474
Acquisition of ChargeSavvy		3,754,560		3,754,560

Total goodwill	$	6,048,034	$	6,048,034

8.	INTANGIBLE ASSETS

As of March 31, 2022 intangible assets consists of the following:

		As of March 31, 2022							As of December 31, 2021
Intangible Assets	Amortization Period	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net

Customer relationships	3 to 5 years	$	23,930,195	$	(882,250	)	$	23,047,945	$	5,820,195	$	(591,239	)	$	5,228,956
Business technology/IP	5 years		2,611,088		(391,662	)		2,219,426		2,611,088		(261,109	)		2,349,979

Total intangible assets		$	26,541,283	$	(1,273,912	)	$	25,267,371	$	8,431,283	$	(852,348	)	$	7,578,935

Amortization expense was $421,564 and $6,009 for the three months ended March 31, 2022 and 2021, respectively.

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~~GREENBOX POS~~Estimated amortization expense for each of the years ending December 31 is as follows:

~~NOTES TO UNAUDITED~~~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(continued)~~

Year	Amount
2022 (remainder)	$	5,792,192
2023		7,722,924
2024		7,722,924
2025		3,195,423
2026		833,908
Total	$	25,267,371

6.9.	~~PAYROLL PROTECTION PROGRAM LOAN~~LONG-TERM DEBTS

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

	As of March 31, 2022		As of December 31, 2021

$149,900 Economic Injury Disaster Loan (EIDL), interest rate of 3.75%, due June 1, 2050	$	149,900	$	149,900
$500,000 EIDL, interest rate of 3.75%, due May 8, 2050		500,000		500,000

Total long-term debts		649,900		649,900
Less: current portion		-		-

Net long-term debts	$	649,900	$	649,900

SBA CARES Act Loans - $649,900

~~LONG-TERM DEBT~~

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

8.	~~STOCK OPTION AWARDS~~

~~The Company adopted~~On May 8, 2020, Charge Savvy executed the ~~2020 Incentive and Non-statutory Stock Option Plan (“2020 Plan”) in June 2020, which provided~~standard loan documents required 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 havesecuring a ~~term of ten years and generally vest and become exercisable at various times~~loan (the “EIDL Loan”) from the ~~option grant dates. The~~SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the TNB’s business. As of December 31, 2020, ~~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.loan payable, Emergency Injury Disaster Loan noted above is not in default.

~~The Company applies~~Pursuant to that certain Loan Authorization and Agreement (the “SBA Loan Agreement”), Charge Savvy borrowed an aggregate principal amount of the ~~provisions~~EIDL Loan of ~~ASC 718, “Compensation - Stock Compensation,” using a modified prospective application,~~$150,000, with proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75% per annum 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~~accrue only on funds actually advanced from the date of ~~grant was estimated using~~each advance. Installment payments, including principal and interest, are due monthly beginning May 8, 2021 (twelve months from the ~~Black-Scholes method based on the following weighted-average assumptions:~~

June 30, 2021

December 31, 2020

Risk-free interest rate
0.29
%
0.29
%
Expected term

5 years

5 years

Expected volatility
396.64
%
289.33% to 279.18
%
Expected dividend yield
0 0

~~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~~date of the ~~option award;~~SBA Loan) in the ~~expected term represents~~amount of $731. The balance of principal and interest is payable thirty years from the ~~weighted-average period~~date of ~~time that option awards granted are expected~~the SBA Loan. In connection therewith, the Company also received a $10,000 grant, which does not have to be ~~outstanding giving consideration to vesting schedules and historical participant exercise behavior;~~repaid. During the ~~expected volatility is based upon historical volatility~~year ended December 31, 2020, $10,000 was recorded in Economy injury disaster loan (EIDL) grant income in the Statements of Operations. On Aug 24, 2021, Charge Savvy was granted an increase in loan principal in the ~~Company’s common stock; and the expected dividend yield is based upon the Company’s dividend rate at the time fair value is measured and future expectations.~~

~~The Company recorded stock compensation expense~~amount of ~~$2,089,500 and $12,130 for the six months ended June 30, 2021 and 2020, respectively, and $1,291,887 and $12,130 for the three months ended June 30, 2021 and 2020, respectively.~~$350,000 on identical terms.

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~~GREENBOX POS~~

~~NOTES TO UNAUDITED~~~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

8.10.

~~STOCK OPTION AWARDS (continued)~~CONVERTIBLE DEBT

On November 3, 2021, the Company entered into convertible debt with the following terms:

●

Face value of the convertible debt of $100,000,000

●

Original issuance cost of 16% of the face value of the debt which amounted to $16,000,000

●

Interest at the rate of 8% per annum payable in cash quarterly in arrears on the first trading day of each calendar quarter on the outstanding balance. The interest rate of the Notes will automatically increase to 15% per annum upon the occurrence and continuance of an event of default.

●

Maturity date of November 2023.

●

Certain conversion features.

Convertible debt consisted of the following:

	As of March 31, 2022			As of December 31, 2021

Convertible debt balance	$	94,000,000		$	100,000,000

Debt discount:
Derivative liability		(21,580,000	)		(21,580,000	)
Original issue discount of 16%		(16,000,000	)		(16,000,000	)
Placement fees and issuance costs		(7,200,000	)		(7,200,000	)
Total debt discount		(44,780,000	)		(44,780,000	)
Accumulated accretion		8,956,000			3,435,178
Net debt discount after accretion		(35,824,000	)		(41,344,822	)

Convertible debt balance, net of debt discount	$	58,176,000		$	58,655,178

The Company recorded accretion expense as interest expense in the amount of $5,520,822 and $0 for the three months ended March 31, 2022 and 2021, respectively. The Company incurred interest expense of $1,889,485 and $0 for the three months ended March 31, 2022 and 2021, respectively.

Derivative liability

The Notes contain embedded derivatives representing the conversion features, redemption rights, and certain events of default. The Company determined that these embedded derivative required bifurcation and separate valuation.

The Company utilizes a binomial lattice model to value its bifurcated derivatives included in the Notes. ASC 815 does not permit an issuer to account separately for individual derivative terms and features embedded in hybrid financial instruments that require bifurcation and liability classification as derivative financial instruments. Rather, such terms and features must be combined together and fair valued as a single, compound embedded derivative. The Company selected a binomial lattice model to value the compound embedded derivative because it believes this technique is reflective of all significant assumptions that market participants would likely consider in negotiating the transfer of the Notes. Such assumptions include, among other inputs, stock price volatility, risk-free rates, credit risk assumptions, early redemption and conversion assumptions, and the potential for future adjustment of the conversion price due to triggering events. Additionally, there are other embedded features of the Notes requiring bifurcation, other than the conversion features, which had no value at December 31, 2021 due to management’s estimates of the likelihood of certain events, but that may have value in the future should those estimates change.

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A ~~summary~~continuity of derivative liability for the ~~status of our stock options~~three months ended March 31, 2022 is ~~presented below~~summarized as ~~of June 30, 2021:~~follows:

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
230,122 10.59
Exercised
(100,802
)
0.46
Forfeited or expired
(68,428
)
2.50

Outstanding at June 30, 2021
575,499 7.06 0.21 6,865,703

Exercisable as of June 30, 2021
446,295 5.37 0.21 5,324,299
Vested and expected to Vest as of June 30, 2021
547,834 6.80 0.21 6,535,660

	Total
Balance, December 31, 2021	$	18,735,000
Change in fair value		7,700,000
Balance, March 31, 2022	$	26,435,000

The Company sold and issued, in a registered direct offering, an 8% senior convertible note due November 3, 2023 in the aggregate original principal amount of $100 million (the “Note”). The Note had an original issue discount of sixteen percent (16%) resulting in gross proceeds of $84 million. The Note was sold pursuant to the terms of a Securities Purchase Agreement, dated November 2, 2021 (the “SPA”), between The Company and the investor in the Note (the “Investor”).

The Note was issued on November 8, 2021, pursuant to an indenture dated November 2, 2021 between the Company and Wilmington Savings Fund Society, FSB, as trustee (the “Base Indenture”), as supplemented by a first supplemental indenture thereto, dated November 2, 2021, relating to the Notes (the “First Supplemental Indenture” and, the Base Indenture as supplemented by the First Supplemental Indenture, the “First Indenture”). The terms of the Note include those provided in the First Indenture and those made part of the First Indenture by reference to the Trust Indenture Act.

Ranking

The Note is the senior unsecured obligations of the Company and not the financial obligations of our subsidiaries. Until such date as the principal amount of the Note is $5 million or less, all payments due under the Note will be senior to all other indebtedness of the Company and/or any of our subsidiaries.

Maturity Date

Unless earlier converted, or redeemed, the Note will mature on November 3, 2023, the second anniversary of their issuance date, which we refer to herein as the “Maturity Date”, subject to the right of the investors to extend the date:

(i) if an event of default under the Note has occurred and is continuing (or any event shall have occurred and be continuing that with the passage of time and the failure to cure would result in an event of default under the Note) and

(ii) for a period of 20 business days after the consummation of a fundamental transaction if certain events occur.

We are required to pay, on the Maturity Date, all outstanding principal, accrued and unpaid interest and accrued and unpaid late charges on such principal and interest, if any.

Interest

The Note bears interest at the rate of 8% per annum (a) shall commence accruing on the date of issuance, (b) shall be computed on the basis of a 360-day year and twelve 30-day months and (c) shall be payable in cash quarterly in arrears on the first trading day of each calendar quarter or otherwise in accordance with the terms of the Note. If a holder elects to convert or redeem all or any portion of a Note prior to the Maturity Date, all accrued and unpaid interest on the amount being converted or redeemed will also be payable. If we elect to redeem all or any portion of a Note prior to the Maturity Date, all accrued and unpaid interest on the amount being redeemed will also be payable. The interest rate of the Note will automatically increase to 15% per annum upon the occurrence and continuance of an event of default (See “-- Events of Default” below).

Late Charges

We are required to pay a late charge of 15% on any amount of principal or other amounts that are not paid when due.

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Conversion

Fixed Conversions at Option of Holder

The holder of the Note may convert all, or any part, of the outstanding principal and interest of the Note, at any time at such holder’s option, into shares of our common stock at an initial fixed conversion price, which is subject to:

●

proportional adjustment upon the occurrence of any stock split, stock dividend, stock combination and/or similar transactions; and

●

full-ratchet adjustment in connection a subsequent offering at a per share price less than the fixed conversion price then in effect.

On January 28, 2022, we and the Investor, entered into an Agreement and Waiver (the “Waiver”) with regard to the Note that has the following major provisions:

the Investor agreed to extend the “90 Day Eligibility Date” from February 3, 2022 to May 2, 2022 such that the Investor can no longer, if the closing price of the stock is less than $5.50, convert up to $30 million of the Note into shares of the Company’s common stock (with the conversion price being the lower of (i) the then in effect conversion price and (ii) the greater of (x) the Note’s $1.67 floor price or (y) 98% of the market price on the conversion date) (the “Alternate Optional Conversion Price”) prior to May 2, 2022;

allows us to acquire, for cancellation, $6 million in in aggregate principal amount of the Note for a purchase price of $6.9 million such that the new principal amount of the Note is $94 million;

lowers the initial fixed conversion price of the Note from $15 to $12; and

if the trading volume of our common stock on any individual trading day is over $5 million (the “Alternate Conversion Company Waiver Measuring Date”), allows the Investor an opportunity to convert up to $5 million of the Note into shares of our common stock from the Alternate Conversion Company Waiver Measuring Date through and including 7:00 PM ET on the immediately following trading day. The conversion price would be the lower of (i) the then in effect conversion price and (ii) the greater of (x) the Note’s $1.67 floor price or (y) 98% of the market price on the conversion date.

The Company paid the investor $6.0 million on January 31, 2022.

The foregoing description of the Waiver does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Waiver, a copy of which is attached hereto as Exhibit 10.1, and incorporated herein by reference.

1-Year Alternate Optional Conversion

At any time following the first anniversary of the issuance date of the Note, but only if the closing bid price of our common stock on the immediately prior trading day is less than $6.50, each holder of the Note shall have the option to convert, at such holder’s option, pro rata, up to $30 million of the principal amount of the Note (in $250,000 increments) at the Alternate Optional Conversion Price.

Alternate Event of Default Optional Conversion

If an event of default has occurred under the Note, each holder may alternatively elect to convert the Note (subject to an additional 15% redemption premium) at the “Alternate Event of Default Conversion Price” equal to the lesser of:

●

the fixed conversion price then in effect; and

the greater of:

●

the floor price; and

●

80% of the lowest volume weighted average price of our common stock during the five trading days immediately prior to such conversion.

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Beneficial Ownership Limitation

The Note may not be converted and shares of common stock may not be issued under the Note if, after giving effect to the conversion or issuance, the applicable holder of the Note (together with its affiliates, if any) would beneficially own in excess of 4.99% of the Company’s outstanding shares of common stock, which is referred to herein as the “Note Blocker”. The Note Blocker may be raised or lowered to any other percentage not in excess of 9.99% at the option of the applicable holder of Notes, except that any raise will only be effective upon 61-days’ prior notice to us.

Clarification to First Quarter Adjustment to Fixed Conversion Price

The Company wishes to clarify the possible first quarter adjustment to the Note’s initial fixed conversion price (which was originally $15 and is now, pursuant to the Waiver, $12).

If, during the fiscal quarter ending March 31, 2022, the Company (i) fails to process at least $750 million in transaction volume or (ii) has revenue that is less than $12 million, and, if the Note’s fixed conversion price then in effect is greater than the greater of (x) the Note’s $1.67 floor price floor and (y) 140% of the market price as of April 1, 2022 (the "Adjustment Measuring Price”) then, on April 1, 2022, the fixed conversion price will automatically adjust to the Adjustment Measuring Price.

Change of Control Redemption Right

In connection with a change of control of the Company, each holder may require us to redeem in cash all, or any portion, of the Notes at a 15% redemption premium to the greater of the face value, the equity value of our common stock underlying the Notes and the equity value of the change of control consideration payable to the holder of our common stock underlying the Notes.

The equity value of our common stock underlying the Notes is calculated using the greatest closing sale price of our common stock during the period immediately preceding the consummation or the public announcement of the change of control and ending the date the holder gives notice of such redemption.

The equity value of the change of control consideration payable to the holder of our common stock underlying the Notes is calculated using the aggregate cash consideration per share of our common stock to be paid to the holders of our common stock upon the change of control.

Events of Default

Under the terms of the first supplemental indenture, the events of default contained in the base indenture shall not apply to the Notes. Rather, the Notes contain standard and customary events of default including but not limited: (i) the suspension from trading or the failure to list our common stock within certain time periods; (ii) failure to make payments when due under the Notes; and (iii) bankruptcy or insolvency of the Company.

If an event of default occurs, each holder may require us to redeem all or any portion of the Notes (including all accrued and unpaid interest and late charges thereon), in cash, at a 15% redemption premium to the greater of the face value and the equity value of our common stock underlying the Notes

The equity value of our common stock underlying the Notes is calculated using the greatest closing sale price of our common stock on any trading day immediately preceding such event of default and the date we make the entire payment required.

Company Optional Redemption Rights

At any time no event of default exits, we may redeem all, but not less than all, the Notes outstanding in cash all, or any portion, of the Notes at a 5% redemption premium to the greater of the face value and the equity value of our common stock underlying the Notes.

The equity value of the Company’s common stock underlying the Notes is calculated using the greatest closing sale price of our common stock on any trading day during the period commencing on the date immediately preceding such date we notify the applicable holder of such redemption election and the date we make the entire payment required.

The foregoing description of the Note does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Note, a copy of which is attached hereto as Exhibit 4.1, and incorporated herein by reference.

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11.	STOCK OPTION AWARDS

The following table represents the employee stock option activity during the three months ended March 31, 2022 and 2021.

	Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value

Outstanding at December 31, 2020		477,430		$	3.53
Granted		-			-
Exercised		(68,725	)		0.07
Forfeited or Expired		(363	)		1.01
Outstanding at March 31, 2021		409,675		$	0.67	$	5,041,689
Exercisable at March 31, 2021		399,531		$	0.67	$	4,917,988
Vested and Expected to Vest at March 31, 2021		409,675		$	0.67	$	5,041,689

Outstanding at December 31, 2021		391,562		$	5.08
Granted		-			-
Exercised		(13,019	)		0.42
Forfeited or Expired		(322	)		12.10
Outstanding at March 31, 2022		378,221		$	5.21	$	-
Exercisable at March 31, 2022		378,221		$	5.21	$	-
Vested and Expected to Vest at March 31, 2022		378,221		$	5.21	$	-

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of ~~$11.93~~$12.98 and $4.35 as of ~~June 30,~~March 31, 2021 and 2022, respectively, which would have been received by the option holders had all option holders exercised their options as of that date. As of ~~June 30, 2021,~~March 31, 2022, there was no unrecognized compensation cost related to non-vested stock ~~options granted in the amount of $329,599.~~options.

9.	~~GOODWILL AND OTHER INTANGIBLE ASSETS~~

AsThe Company adopted the 2021 Restricted Stock Plan (“2021 Plan”) in November 2021, which provides for the grant of ~~June 31, 2021 goodwill~~restricted stock awards and ~~intangible assets consists~~performance stock awards to executive officers, non-employee directors and other key employees of the ~~following:~~Company. The 2021 Plan provides for up to 5.0 million shares of common stock. the 2020 Plan generally have a term of five years and generally vest and become exercisable at various times from the option grant dates. These award will have such vesting or other provisions as may be established by the Board of Directors at the time of each award.

June 30, 2021

Amortization Period

Cost

Accumulated Amortization

Net

Customer relationships
5 years
$ 264,663 $ 6,915 $ 257,748
Goodwill
$ 2,305,394 $ 0 $ 2,305,394

Total goodwill and intangibles
$ 2,563,142

~~Intangible assets with finite lives are amortized over~~The following table represents the ~~estimated periods benefitted on a straight- line basis. Amortization expense on intangible assets with finite lives for~~restricted stock award activity during the ~~period from May 21, 2021 (the acquisition date of Northeast) to June 30, 2021 was $6,915~~three months ended March 31, 2022 and is included in depreciation and amortization expense in the unaudited condensed consolidated statement of operations and comprehensive loss. Amortization expense related to intangible assets for each of the next five fiscal years and thereafter is expected as follows:2021.

Years Ending

December 31,

2021
$ 26,466
2022
52,932
2023
52,932
2024
52,932
2025
52,932
Thereafter
19,554
$ 257,748

	Non-vested Restricted Stock Awards			Weighted Average Grant Date Fair Value

Non-vested at January 1, 2021		-		$	-
Granted		-			-
Vested		-			-
Forfeited		-			-
Non-vested at March 31, 2021		-		$	-

Non-vested at January 1, 2022		-		$	-
Granted		39,413			3.24
Vested		(39,413	)		(3.24	)
Forfeited		-			-
Non-vested at March 31, 2022		-		$	-

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~~GREENBOX POS~~

~~NOTES TO UNAUDITED~~~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(continued)~~Total stock-based compensation expense recognized for the Company’s 2021 Plan was $126,414 and $0 for the three months ended March 31, 2022 and 2021, respectively.

~~10.~~12.

COMMON STOCK ~~REPURCHASE PROGRAM~~

~~On May 13, 2021,~~GreenBox POS LLC (“PrivCo”), a privately held company owned by Ben Errez, Chairman and Executive Vice President of the Company, ~~announced~~and Fredi Nisan, Chief Executive of the Company and a ~~plan to repurchase a portion~~member of its ~~outstanding~~Board of Directors, owns approximately 20,455,875 shares ~~not~~of the Company’s common stock. In November 2021, pursuant to ~~exceed~~ a ~~dollar maximum established by the Board. From May 13, 2021~~verbal agreement, PrivCo pledged to ~~June 30, 2021,~~ the Company ~~has repurchased~~1,000,000 shares of common stock in exchange of $5.59 million (based on the $5.59 closing price of the common stock on November 24, 2021) held in a ~~total~~trust account, classified as current assets. The purpose of ~~90,000~~the 1,000,000 common share pledge is to allow the Company, if necessary, to cancel up to 1 million of PrivCo’s shares ~~at an aggregate cost~~and issue them to new shareholders without increasing the Company’s shares outstanding. As shares get cancelled and issued to new shareholders, the Company would release the $5.59 per share value from the trust account to PrivCo. As part of ~~$933,343.~~the verbal agreement, the parties agreed that any shares cancelled and issued out of these 1 million shares will need to be later re-issued to PrivCo PrivCo will need to return the $5.59 per share amount paid to it. In February 2022, the Company cancelled 33,333 of PrivCo’s shares and issued them to a shareholder and the Company is expected to cancel 500,000 of PrivCo’s shares and issue them to Sky Financial & Intelligence in May 2022. As a result, the Company recorded 533,333 shares to be issued to PrivCo as of March 31, 2022. PrivCo received $186,331 as of March 31, 2022 (for the cancellation of 33,333 shares) and will receive a further $2.795 million when the 500,000 shares are cancelled.

~~11.~~13.

LEASES

The Company leases office space at three locations in California, Florida and Massachusetts. The Company had operating lease expense of $159,422 and $33,104 for the three months ended March 31, 2022 and 2021, respectively.

Future minimum lease payments for all leases as of March 31, 2022 are as follows:
Year	Amount
2022 (Remainder)	$	500,323
2023		463,532
2024		234,354
2025		241,373
2026		248,605
Thereafter		42,464
Total lease payments		1,730,651
Less: present value adjustment		(289,303	)
Present value of total lease liabilities		1,441,348
Less: current lease liabilities		(549,668	)
Long-term lease liabilities	$	891,680

Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the lease commencement date. As of March 31, 2022, the weighted average remaining lease term is 3.7 years and the weighted average discount rate used to determine the operating lease liabilities is 10.0%.

14.	RELATED PARTY TRANSACTIONS

~~The Company had~~● Kenneth Haller and the ~~following related party transactions:~~Haller Companies

●

~~Kenneth Haller and the Haller Companies~~

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

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

■

~~Sky Financial & Intelligence, LLC~~ – Haller owns 100% of Sky Financial & Intelligence LLC (“Sky”), a Wyoming limited liability company, and serves as its sole Managing Member. Sky is a strategic merchant services company that focuses on high risk merchants and international credit card processing solutions. In 2018, Sky was using GreenBox’s QuickCard payment system as its main payment processing infrastructure, through Sky’s relationship with MTrac. It was through this successful relationship, that we came to know Haller and the Haller Network. Realizing that the Haller Network and Haller’s unique skill set was highly complementary to our business objectives, we commenced discussions to retain Haller through his consulting firm, Sky, for a senior role, directly responsible for growing GreenBox’s operations. Subsequently, in November 2018, Haller was appointed as our Senior Vice President of Payment Systems, for a monthly consulting fee of $10,000, paid to Sky (“Haller Consulting Fee”).

■

Table of Contents

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

Sky Financial & Intelligence, LLC – Haller owns 100% of Sky Financial & Intelligence LLC (“Sky”), a Wyoming limited liability company, and serves as its sole Managing Member. Sky is a strategic merchant services company that focuses on high-risk merchants and international credit card processing solutions. In 2018, Sky was using GreenBox’s QuickCard payment system as its main payment processing infrastructure, through Sky’s relationship with MTrac. It was through this successful relationship, that we came to know Haller and the Haller Network. Realizing that the Haller Network and Haller’s unique skill set was highly complementary to our business objectives, we commenced discussions to retain Haller through his consulting firm, Sky, for a senior role, directly responsible for growing GreenBox’s operations. Subsequently, in November 2018, Haller was appointed as our Senior Vice President of Payment Systems, for a monthly consulting fee of $10,000, paid to Sky (“Haller Consulting Fee”).

The Company recognized net revenue of approximately $685,000 from outside third-party merchants through independent sales organization (ISO), Sky, for the three months ended March 31, 2022. The Company had accounts receivables of $6,540,027 from outside third-party merchants through Sky. Net revenue through Sky for the three months ended March 31, 2021 was approximately $2,591,000.

Charge Savvy, LLC – Sky owns 68.4% of Charge Savvy, LLC (“Charge Savvy”), an Illinois limited liability company. Haller serves as one of three Managing Members of Charge Savvy, along with Higher Ground Capital, LLC (owns 14%), and Jeff Nickel (owns 17.4%). As a result of the Purchase Agreement, the Company purchased all of Charge Savvy’s issued and outstanding membership interests and Charge Savvy became a wholly owned subsidiary of the Company. The purchase price under the Purchase Agreement for the all-stock transaction consisted of 1,000,000 shares of Common Stock being issued and delivered to the Sellers in proportion to the Sellers’ share of their membership interests in Charge Savvy. The share price at issuance was $12.14.

The Company did not pay any commissions to the related parties mentioned above for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~

~~Table of Contents~~

~~GREENBOX POS~~

~~NOTES TO UNAUDITED~~~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(continued)~~2021.

~~12.~~15.

COMMITMENTS AND CONTINGENCIES

Legal Proceedings

~~The Company has the following legal proceedings:~~

	●	*Corporate Performance Consulting, LLC (CPC) v. GreenBox POS* – On April 7, 2021, CPC filed a complaint against GreenBox in San Diego Superior Court. Plaintiff CPC alleges breach of contract, breach of implied covenant of good faith and fair dealing, goods and services rendered, negligent misrepresentation, violation of CA Business and Professions Code Section 17200, and unjust enrichment. The crux of CPC’s claim is that GreenBox failed to compensate for certain consulting and corporate advisory services. GreenBox believes the claims are without merit and intends to defend itself vigorously. On June 17, 2021, GreenBox filed a Cross-Complaint for breach of contract, breach of implied covenant of good faith and fair dealing, negligent misrepresentation, unjust enrichment, and rescission. The parties are now in the discovery ~~phase, with Plaintiff’s first responses due August 30, 2021. The Case Management Conference is scheduled for April 29, 2022.~~phase.

	●	*GreenBox POS v. A.M.P of Florida, Inc. (AMP)* –On March 9, 2021, GreenBox POS (mistakenly identified as ~~“GreenBox~~"GreenBox POS, LLC”) filed suit against AMP in U.S.D.C for the middle district of Florida alleging breach of oral contract, conversion, and civil theft. GreenBox filed suit in order to recover processed funds unlawfully withheld by AMP. The parties ~~are in preliminary settlement negotiations. Although it is premature to provide~~amicably resolved all differences and filed a ~~predicted outcome at this time, GreenBox is confident that this matter will be resolved well in advance~~Joint Stipulation of ~~the 2022 trial date.~~Voluntary Dismissal with Prejudice on January 31, 2022.

	●	*~~America 2030 Capital Limited and Bentley Rothschild Capital Limited~~* – On or about October 31, 2018, Nisan and Errez received constitutive notice, regarding arbitration against Nisan, Errez, PrivCo and possibly PubCo, from Bentley Rothschild Capital Limited ("Bentley") and America 2030 Capital Limited (“America 2030”), both located in Nevis, West Indies, and both claiming breach of contract by Nisan and Errez of Nisan and Errez’s respective individual Master Loan Agreements and seeking forfeiture of 266,667 PubCo shares that PrivCo had transferred, on or about August 1, 2018, from PrivCo’s Control Shares under the terms of the MLAs. As of June 30, 2020, both parties have abandoned the matter and no further action was required by either party.

	●	*The Good People Farms, LLC (TGPF)* – - TGPF initiated an arbitration in AAA on or about April 20, 2020 against ~~Greenbox~~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~~counterclaim for fraud –- intentional misrepresentation, breach of contract, breach of covenant of good faith and fair dealing, violation of California Business and Professions Code Section 17200, and accounting. ~~An arbitrator has been selected and the parties are awaiting the scheduling of the preliminary conference.~~ The arbitration iswas stayed pending further proceedings in the separate but related action filed by MTrac and Ms. Luna in San Diego Superior Court.

~~Operating Leases~~

~~The Company entered into the following operating facility leases:~~

●

~~Hyundai Rio Vista – On October 4, 2018,~~The arbitration has now commenced again upon the ~~Company entered into an operating facility lease~~state court's January 14, 2022 order denying MTrac's and Ms. Luna's motion for ~~its corporate office located in San Diego with 38 months term~~summary judgment and ~~with option~~granting of TGPF 's motion to ~~renew. The lease started~~compel arbitration as to MTrac only. TGPF intends to submit a new complaint on ~~October 4, 2018 and expires on October 3, 2021.~~or around May 23, 2022.

●

~~Camino Del Rio –~~Pure Health, et al. v. Worldpay LLC et al - On February 18, 2022, forty-three online marketer Plaintiffs filed suit in the Court of Common Pleas, Hamilton County, Ohio against Worldpay LLC (formerly Vantiv LLC), Fifth Third Bank, ChargeSavvy LLC, a wholly owned subsidiary of GreenBox POS, GreenBox POS, and ~~effective April 2021, the Company entered into an operating facility lease for its corporate office located in San Diego with monthly lease payments~~John Does 1 (Defendants) through 10, alleging breach of ~~$33,135 per month.~~contract, breach of implied covenant of good faith and fair dealing, conversion, and money had and received (constructive trust). Defendant GreenBox POS believes that Plaintiffs’ claims against it are without merit and plans to pursue all judicial remedies necessary to resolve this matter.

For operating leases, we calculated right of use assets and lease liabilities based on the present value of the remaining lease payments as of the date of adoption using the incremental borrowing rate. The Company has recorded operating lease right of use assets and operating lease liabilities of $832,636 and $833,231 respectively, as of June 30, 2021. The difference between the operating lease ROU asset and operating lease liabilities represents differences in the cash paid and straight-line lease expense recognized. The adoption of ASC 842 did not materially impact our results of operations, cash flows, or presentation thereof.

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~~GREENBOX POS~~

~~NOTES TO UNAUDITED~~~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(continued)~~

~~13.~~16.

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:

●

~~July 13, 2021 (Acquisition of Charge Savvy LLC)~~ – On ~~July 13, 2021 (the “Closing Date”),~~April 1, 2022, the Company ~~entered into~~completed the acquisition of Transact Europe Holdings OOD. Transact Europe EAD (TEU) is an EU regulated electronic money institution headquartered in Sofia Bulgaria. TEU is a Principal Level Member of Visa, a Worldwide Member of MasterCard, and ~~closed on~~ a ~~Membership Interest Purchase Agreement (the “Purchase Agreement”) with Charge Savvy~~Principal Member of China UnionPay. In addition, TEU is part of the direct SEPA program. With a global footprint, proprietary payment gateway and technology platforms, TEU offers a comprehensive portfolio of services, and decades of industry experience. TEU provides complete payment solutions by offering acquiring, issuing of prepaid cards and agent banking, serving hundreds of clients. The Company paid €26.0 million in total consideration for the purchase.

●

On May 1, 2022, the Company cancelled 1,898,586 common shares. Of this amount, 1,098,586 treasury shares related to share repurchases were cancelled. Another 500,000 shares that were cancelled were owned by GreenBox POS LLC ~~an Illinois limited liability company (“Charge Savvy”),~~ and ~~Charge Savvy’s three members (collectively,~~were cancelled to enable the ~~“Sellers”).~~Company to issue them Sky Financial as part of the asset purchase consideration. As a result, GreenBox POS LLC received $2.795 million out of the ~~Purchase Agreement, the Company purchased all of Charge Savvy’s issued and outstanding membership interests from the Sellers and Charge Savvy became a wholly owned subsidiary~~trust account. See Note 12 of the Company. Although the Purchase Agreement is dated July 9, 2021, it was entered into and closed on July 13, 2021. The purchase price under the Purchase Agreement for the all-stock transaction consisted on the Closing Date of 900,000 of 1,000,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) being issued and delivered to Sellers in proportionNotes to the ~~Sellers’ share of their membership interests in Charge Savvy; it being agreed~~Unaudited Condensed Consolidated Financial Statements. The other 300,000 shares that ~~the remaining 100,000~~were cancelled were treasury shares of Common Stock may or may not be issued to Sellers depending on certain conditions precedent to such further issuance (the “Holdback Shares”). The Holdback Shares may be issued and delivered to the Sellers after Closing upon the Company’s receipt of a Phase I Environmental Assessment Report that does not raise environmental issues of concern to the Company regarding certain real estatehad been owned by ~~Charge Savvy. Charge Savvy is a global Fintech company that specializes~~GreenBox POS LLC who agreed to cancel them in ~~developing software and providing payment processing and point of sale services to the merchant services industry. Charge Savvy also owns an approximately 61,000 square foot office building located~~December 2020. The actual share cancellation took place in ~~South Chicago Heights, Illinois where it is headquartered.~~

May 2022.

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

Disclaimer Regarding Forward Looking Statements

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

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

Overview – Organization and Name Changes

Organization –

GreenBox POS ~~(the “Company”~~is a financial technology company that develops, markets, and sells innovative blockchain-based payment solutions, which we believe offer significant improvements for 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 ~~“PubCo”)~~data, on a secured, immutable blockchain-based ledger.

The Company was formerly known as ASAP Expo, Inc (“ASAP”), ~~which~~and was incorporated in the state of Nevada on April 10, ~~2007 under the laws of the State of Nevada.~~2007. On January 4, 2020, ~~PrivCo~~PubCo and GreenBox POS LLC, a ~~Nevada corporation (“PubCo”~~Washington limited liability company ("PrivCo”), entered into an Asset Purchase Agreement (the "Agreement”), to memorialize a verbal agreement (the “Verbal Agreement”) entered into ~~the Agreement to memorialize the Verbal Agreement with~~on April 12, 2018, by and among PubCo (the Buyer) and PrivCo ~~which was formed on August 10, 2017~~ (the ~~seller)~~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~~"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.”Business.

~~Name Changes~~

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

~~Underwritten Public Offering and Nasdaq Listing~~

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

1923

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Management Discussion and Analysis

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

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

~~KPI~~	~~Description~~
~~Annual Transactional Processing Volume (ATPV)~~	The Company plans to process $1.85B in FY 2021, including previously increased processing volumes projections from $600M to $1.85B, and including the expected processing of the acquired ChargeSavvy portfolio, projected to add another $450M. The Company’s Book of Business exceeds the processing goals for the year.
~~Annual Gross Profit Margin (AGPM)~~	~~This index matches the Company goals and remains at levels supporting the Company’s financial projections.~~
~~Annual Gross Profit (AGP)~~	~~At the targeted Annual Transactional Processing Volume goal and targeted Annual Gross Profit Margin, projected Annual Gross Profit is $24-26M for FY2021.~~

In order to process the targeted ATPV goal, $1.85B, the Company must be able to process over $100M/month in a consistent fashion, as business performance in Q2/2021 demonstrated. The Company estimates the deployment for its Smart Contract Token technology in Q2/2021 will further improving on volumes and efficiencies.

~~KPI~~	~~Description~~
~~Average Monthly Transaction Count (AMTC)~~	~~The Company projects an AMTC of around 500,000~~
~~New Clients Backlog (NCB)~~	The Company will continue to invest in on-boarding technologies in order to expedite the process and reduce backlog. There are five client statuses: application, KYC, on-boarding, integration, processing. Current backlog of clients at application stage is greater than 2,000. Our goal is to bring the NCB down to 200.
~~Client Attrition~~	~~Current attrition rates are under 5%. Company goal is to reduce it further and keep it under 3%.~~

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

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

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

~~Table of Contents~~

RESULTS OF OPERATIONS

Three Months Ended ~~June 30, 2021~~March 31, 2022 (Unaudited) Compared to Three Months ~~June 30, 2020~~March 31, 2021 (Unaudited):

	Three Months Ended June 30,																		Three Months Ended March 31,
	2021						2020						Changes						2022						2021						Change
				% of						% of												% of						% of
	Amount			Revenue			Amount			Revenue			Amount			%			Amount			Revenue			Amount			Revenue			Amount			%

Revenue	$	6,379,179			100.0	%	$	2,292,859			100.0	%	$	4,086,320			178.2	%
Net revenue																			$	4,895,526			100.0	%	$	4,749,441			100.0	%	$	146,085			3.1	%
Cost of revenue		1,323,480			20.7	%		1,411,683			61.6	%		(88,203	)		-6.2	%		2,563,830			52.4	%		1,593,771			33.6	%		970,059			60.9	%
Gross profit		5,055,699			79.3	%		881,176			38.4	%		4,174,523			473.7	%		2,331,696			47.6	%		3,155,670			66.4	%		(823,974	)		-26.1	%

Operating expenses:
Advertising and marketing		22,605			0.4	%		15,384			0.7	%		7,221			46.9	%		140,966			2.9	%		24,725			0.5	%		116,241			470.1	%
Research and development		808,210			12.7	%		267,686			11.7	%		540,524			201.9	%		1,938,133			39.6	%		653,381			13.8	%		1,284,752			196.6	%
General and administrative		298,030			4.7	%		101,523			4.4	%		196,507			193.6	%		1,792,184			36.6	%		566,195			11.9	%		1,225,989			216.5	%
Payroll and payroll taxes		1,061,929			16.6	%		428,758			18.7	%		633,171			147.7	%		2,383,397			48.7	%		559,201			11.8	%		1,824,196			326.2	%
Professional fees		867,472			13.6	%		293,622			12.8	%		573,850			195.4	%		1,504,561			30.7	%		457,752			9.6	%		1,046,809			228.7	%
Stock compensation for employees		1,291,887			20.3	%		12,130			0.5	%		1,279,757			10550.4	%		166,800			3.4	%		797,613			16.8	%		(630,813	)		n/a
Stock compensation for services		726,933			11.4	%		-			0.0	%		726,933			n/a			126,414			2.6	%		9,453,825			199.1	%		(9,327,411	)		n/a
Depreciation and amortization		14,244			0.2	%		5,716			0.2	%		8,528			149.2	%		454,341			9.3	%		6,009			0.1	%		448,332			7461.0	%
Total operating expenses		5,091,310			79.8	%		1,124,819			49.0	%		3,966,491			352.6	%		8,506,796			173.8	%		12,518,701			263.6	%		(4,011,905	)		-32.0	%

Income (Loss) from operations		(35,611	)		-0.6	%		(243,643	)		-10.6	%		208,032			-85.4	%		(6,175,100	)		-126.1	%		(9,363,031	)		-197.1	%		3,187,931			-34.0	%

Other Income (Expense):
Interest expense		-			0.0	%		(30,659	)		-1.3	%		30,659			-100.0	%		(1,889,485	)		-38.6	%		(594,258	)		-12.5	%		(1,295,227	)		218.0	%
Interest expense - debt discount		-			0.0	%		(8,342	)		-0.4	%		8,342			-100.0	%		(5,520,822	)		-112.8	%		(2,993,408	)		-63.0	%		(2,527,414	)		84.4	%
Derivative expense		-			0.0	%		(4,373	)		-0.2	%		4,373			-100.0	%
Changes in fair value of derivative liability		-			0.0	%		2,619,250			114.2	%		(2,619,250	)		-100.0	%		(7,700,000	)		-157.3	%		-			0.0	%		(7,700,000	)		n/a
Gain from extinguishment of convertible debt		-			0.0	%		2,612,246			113.9	%		(2,612,246	)		-100.0	%
Merchant liability settlement		-			0.0	%		-			0.0	%		-			n/a			-			0.0	%		(364,124	)		-7.7	%		364,124			n/a
Other income or expense		(3,949	)		-0.1	%		(2,177	)		-0.1	%		(1,772	)		81.4	%		49,316			1.0	%		(14,611	)		-0.3	%		63,927			-437.5	%
Total other income (expense)		(3,949	)		-0.1	%		5,185,945			226.2	%		(5,189,894	)		-100.1	%		(15,060,991	)		-307.6	%		(3,966,401	)		-83.5	%		(11,094,590	)		279.7	%

Income (Loss) before provision for income taxes		(39,560	)		-0.6	%		4,942,302			215.6	%		(4,981,862	)		-100.8	%		(21,236,091	)		-433.8	%		(13,329,432	)		-280.7	%		(7,906,659	)		59.3	%

Provision for income taxes		-			0.0	%		-			0.0	%		-			0.0	%		79,896			1.6	%		-			0.0	%		79,896			0.0	%

Net income (loss)	$	(39,560	)		-0.6	%	$	4,942,302			215.6	%	$	(4,981,862	)		-100.8	%	$	(21,315,987	)		-435.4	%	$	(13,329,432	)		-280.7	%	$	(7,986,555	)		59.9	%

Table of Contents

Gross Revenue

Gross revenue increased by ~~$4,086,320,~~$146,085, or ~~178.2%~~3.1%, to ~~$6,379,179~~$4,895,526 for the three months ended ~~June 30, 2021,~~March 31, 2022, from ~~$2,292,859~~$4,749,441 for the three months ended ~~June 30, 2020.~~March 31, 2021. The change in net revenue reflected the following:

●

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

●

Increase in processing volume in the three months ended ~~June 30, 2021~~March 31, 2022 compared to the three months ended ~~June 30, 2020.~~

~~Cost of Revenue~~

Cost of revenue decreased by $88,203, or -6.2%, to $1,323,480 for the three months ended June 30, 2021, from $1,411,683 for the three months ended June 30, 2020. Payment processing consists of various processing fees paid to Gateways, as well as commission payments to the Independent Sales Organizations (“ISO”) responsible for establishing and maintaining merchant relationships, from which the processing transactions ensue. Cost of revenues decreased due to the following:

~~Table of Contents~~

●

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

●

~~Installation and integration of an advanced transactional routing technology.~~

●

~~Revocations of the license agreement with MTrac and moving operations in-house for better efficiency and higher margins.~~

●

~~Termination of service to problematic and low revenue producing clients.~~

●

~~Onboarding of higher profitability clients.~~

~~Operating Expenses~~

Operating expenses increased by $3,966,491, or 352.6%, to $5,091,310 for the three months ended June 30, 2021, from $1,124,819 for the three months ended June 30, 2020. The increase was due to higher general administrative expenses and the following:

●

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

●

~~Stock compensation expense for employees and services~~

●

~~Professional fees related to legal and audits.~~

~~Non-Operating Income, net~~

Non-operating income decreased by $5,189,894, or -100.1%, to ($3,949) for the three months ended June 30, 2021, from $5,185,945 for the three months ended June 30, 2020. We incurred a gain from changes in fair value of derivative liability of $2,619,250 and gain from extinguishment of convertible debt of $2,612,246 for the three months ended June 30, 2020.

~~Six Months Ended June 30, 2021 (Unaudited) Compared to Six Months June 30, 2020 (Unaudited):~~

Six Months Ended June 30,

2021

2020

Changes

% of % of

Amount

Revenue

Amount

Revenue

Amount

%

Revenue
$ 11,128,620 100.0
%
$ 2,480,064 100.0
%
$ 8,648,556 348.7
%
Cost of revenue
2,917,251 26.2
%
1,658,988 66.9
%
1,258,263 75.8
%
Gross profit
8,211,369 128.7
%
821,076 33.1
%
7,390,293 900.1
%

Operating expenses:

Advertising and marketing
47,330 0.4
%
27,269 1.1
%
20,061 73.6
%
Research and development
1,461,591 13.1
%
554,234 22.3
%
907,357 163.7
%
Payroll and payroll taxes
1,621,130 14.6
%
842,958 34.0
%
778,172 92.3
%
Professional fees
1,325,224 11.9
%
507,593 20.5
%
817,631 161.1
%
General and administrative
864,225 7.8
%
234,292 9.4
%
629,933 268.9
%
Stock compensation for employees
2,089,500 18.8
%
12,130 0.5
%
2,077,370 17125.9
%
Stock compensation for services
10,180,758 91.5
%
- 0.0
%
10,180,758 n/a
Depreciation and amortization
20,253 0.2
%
11,092 0.4
%
9,161 82.6
%
Total operating expenses
17,610,011 158.2
%
2,189,568 88.3
%
15,420,443 704.3
%

Loss from operations
(9,398,642
)
-84.5
%
(1,368,492
)
-55.2
%
(8,030,150
)
586.8
%
��
Other Income (Expense):

Interest expense
(594,258
)
-5.3
%
(319,249
)
-12.9
%
(275,009
)
86.1
%
Interest expense - debt discount
(2,993,408
)
-26.9
%
(38,418
)
-1.5
%
(2,954,990
)
7691.7
%
Derivative expense
- 0.0
%
(4,373
)
-0.2
%
4,373 -100.0
%
Changes in fair value of derivative liability
- 0.0
%
(1,203,135
)
-48.5
%
1,203,135 -100.0
%
Gain from extinguishment of convertible debt
�� - 0.0
%
2,630,795 106.1
%
(2,630,795
)
-100.0
%
Merchant liability settlement
(364,124
)
-3.3
%
- 0.0
%
(364,124
)
n/a
Other income or expense
(18,560
)
-0.2
%
3,334 0.1
%
(21,894
)
-656.7
%
Total other income (expense)
(3,970,350
)
-35.7
%
1,068,954 43.1
%
(5,039,304
)
-471.4
%

Loss before provision for income taxes
(13,368,992
)
-120.1
%
(299,538
)
-12.1
%
(13,069,454
)
4363.2
%

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

Net loss
$ (13,368,992
)
-120.1
%
$ (299,538
)
-12.1
%
$ (13,069,454
)
4363.2
%

~~Table of Contents~~

~~Gross Revenue~~

Gross revenue increased by $8,648,556, or 348.7%, to $11,128,620 for the six months June 30, 2021, from $2,480,064 for the six months ended June 30, 2020. The change in net sales reflected the following:

●

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

●

~~Increase in processing volume.~~31, 2021.

Cost of Revenue

Cost of revenue increased by ~~$1,258,263,~~$970,059, or ~~75.8%~~60.9%, to ~~$2,917,251~~$2,563,830 for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, from ~~$1,658,988~~$1,593,771 for the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. Payment processing consists of various processing fees paid to Gateways, as well as commission payments to the Independent Sales Organizations (“ISO”) responsible for establishing and maintaining merchant relationships, from which the processing transactions ensue. Cost of revenues increased due to the following:

●

~~Increase~~Increased volume, resulting in higher processing ~~volume which resulted in higher~~fees paid to Gateways and commission payments to ~~ISOs~~ISOs. The gross margin decreased due to increase in fees in ISO.

Operating Expenses

Operating expenses ~~increased~~decreased by ~~$15,420,443,~~$4,011,905, or ~~704.3%~~32.0%, to ~~$17,610,011~~$8,506,796 for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, from ~~$2,189,568~~$12,518,701 for the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. The ~~increase~~decrease was due primarily to ~~higher~~lower stock compensation expense for services and employees for the three months ended March 31, 2022, offset by increases in research and development, general and administrative, ~~expenses~~payroll and ~~the following:~~

●

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

●

~~Settlement of legal disputes and associated payments.~~

●

~~Stock compensation expense for employees and services~~

●

~~Professional fees related to legal and audits.~~

~~Non-Operating Expenses~~payroll taxes and professional fees as we continue to add staff and infrastructure related to our growth and being a publicly traded company.

~~We incurred interest~~Other Income (Expense)

Other expense ~~related~~increased by $11,094,590, or 279.7%, to ~~various debt~~($15,060,991) for the three months ended March 31, 2022, from ($3,966,401) for the three months ended March 31, 2021. Interest expense increased significantly in the ~~amount of $594,258 and debt discount of $2,993,408 for the six~~three months ended ~~June 30,~~March 31, 2022 as compared to the three months ended March 31, 2021 due to the $100,000,000 convertible note issued in November 2021. ~~We incurred a loss from~~Amortization of the discount, fees and the fair value of the derivative liability associated with the note were also contributing factors. Furthermore, the Company changes in fair value of derivative liability expense of ~~$1,203,135 and gain from extinguishment of convertible debt of $2,630,795~~$7,700,000 for the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2022 and none in the previous year same quarter.

Provision for Income Taxes

We estimate our annual effective income tax rate to be 22% for calendar 2022, which is different from the U.S. federal statutory rate, primarily due to a significant amount of non-deductible stock compensation. The effective tax rate of 22% for the first quarter of calendar 2022 was different from the estimate annual effective tax rate of 22%.

LIQUIDITY AND CAPITAL RESOURCES

Our ~~principal~~primary sources of liquidity ~~requirements~~have historically been derived from raising capital by issuing debt or common stock. Our cash flow from operations is not yet able to cover our cash needs. We believe our current cash balances will be sufficient to cover our operating needs for the next twelve months. Our $94 million convertible note matures November 2023. There are ~~for working~~covenants associated with the note that accelerates the conversion of tranches of the note should certain targets be met.

We may, in the future, seek to raise additional capital to fund growth, operations and other business activities, but such additional capital ~~expenditures. We fund our liquidity requirements primarily through cash~~may not be available to us on ~~hand and cash flows from operations. We ended June 30, 2021 with $29,796,748~~acceptable terms, on a timely basis, or at all.

Table of ~~cash, cash equivalents, and restricted cash compared with $1,832,735 as of December 31, 2020.~~

Contents

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

Six Months Ended June 30,

2021

2020

Net cash provided by (used in) operating activities
$ (13,667,974
)
$ 467,960
Net cash provided by (used in) investing activities
(2,568,411
)
(10,244
)
Net cash provided by (used in) financing activities
44,200,398 (523,594
)

Net increase (decrease) in cash, cash equivalents, and restricted cash
$ 27,964,013 $ (65,878
)

~~Table of Contents~~

	Three Months Ended March 31,
	2022			2021

Net cash provided by (used in) operating activities	$	(7,857,005	)	$	(11,258,779	)
Net cash provided by (used in) investing activities		(44,876,688	)		(11,108	)
Net cash provided by (used in) financing activities		(9,231,508	)		45,133,741
Net increase (decrease) in cash, cash equivalents, and restricted cash	$	(61,965,201	)	$	33,863,854

Operating Activities – For the ~~six~~three months ended ~~June~~March 30, ~~2021~~2022 and ~~2020,~~2021, net cash ~~provided by (used in)~~used in operating activities was ~~$(13,667,974)~~($7,857,005) and ~~$467,960,~~($11,258,779), respectively. The cash ~~provided by~~used in operating activities was primarily due to net loss and timing of settlement of assets and liabilities including stock compensation expenses.

Investing Activities – ~~Cash~~Net cash used in investing activities primarily consisted of ~~purchases of property and equipment and cash provided for~~the acquisition of ~~Northeast~~Transact Euro and Sky Financials for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022.

Financing Activities – ~~Net cash used in financing activities primarily consisted of payments of convertible debt and short-term notes payable debt for the six months ended June 30, 2020.~~ Net cash provided by financing activities primarily consisted of proceeds from the Offering of $45,805,491 for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2021 and net cash used in by financing activities primarily consisted of repurchases of common stock under treasury method of $3,236,723 and repayment of convertible debt of $6,000,000 for the three months ended March 31, 2022.

CRITICAL ACCOUNTING ~~POLICIES~~ESTIMATES

~~Our critical accounting estimates are included in our significant accounting policies as described in Note 2 of~~Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers outlines the ~~consolidated financial statements of this Form 10-Q. Those consolidated financial statements were prepared in accordance with GAAP. Critical accounting estimates are those~~basic criteria that ~~we believe are most important~~must be met 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,recognize revenue and ~~expense. Our estimates are evaluated on~~provide guidance for presentation of revenue and for disclosure related to revenue recognition policies.

The Company recognizes revenue when 1) it is realized or realizable and earned, 2) there is persuasive evidence of an ~~ongoing basis~~arrangement, 3) delivery and ~~drawn from historical experience, current trends~~performance has occurred, 4) there is a fixed or determinable sales price, and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. Actual results may differ from our estimates. Management believes that the following accounting policies reflect the more significant judgments and estimates we use in preparing our consolidated financial statements.5) collection is reasonably assured.

~~Revenue Recognition~~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 over the period of the licensing agreement.
	●	Equipment sales revenue is generated from the sale of POS products, which is recognized when goods are shipped. Revenue recognized from the sale of equipment was not material.

~~Revenue~~Cash Due from ~~Contracts with Customers~~”, ~~(“ASC 606”), contract assets or contract liabilities that arise from past performance but require a further performance before the obligation can be fully satisfied must be identified~~Gateways and ~~recorded on the balance sheet until respective settlements have been met.~~Payment Processing Liabilities

The Company’s primary ~~revenue~~ source ~~is generated from~~of revenues continues to be payment processing ~~services. Payment processing~~ services ~~revenue is~~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 2022 and 2021 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 arrears restrictions are in effect for a ~~percentage of each transaction’s value and/or upon fixed~~merchant payout, the Company records gateway debt against these amounts ~~specified per each transaction or service~~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 ~~is recognized as such transactions or services are performed, at a point in time.~~not yet distributed.

2426

Table of Contents

ITEM 4. CONTROLS AND PROCEDURES

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and ~~Executive Vice President, evaluated~~Chief Financial Officer, the effectiveness of our disclosure controls and procedures ~~pursuant to~~(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange ~~Act. In designing and evaluating~~Act of 1934) as of the ~~disclosure controls and procedures, management recognizes~~end of the period covered by this Quarterly Report on Form 10-Q. Based upon 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~~Chief Financial Officer has concluded that, as ~~a result~~ of ~~the material weaknesses described below, as of June 30, 2021,~~March 31, 2022, our disclosure controls and procedures ~~are not designed at a reasonable assurance level and are ineffective to provide reasonable assurance~~were effective in ensuring that information ~~we are~~ required to ~~disclose~~be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized, and reported within the time periods specified in ~~SEC~~the rules and forms of the SEC and ~~that such information is~~(ii) accumulated and communicated to our management, including our ~~Chief Executive Officer~~principal executive and ~~Executive Vice President,~~principal accounting officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. ~~The material weaknesses, which relate to~~

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that ~~were identified are:~~ occurred during the three months ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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.

2527

Table of Contents

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information called for by this item is incorporated herein by reference to Note 1215 Commitments and Contingencies under the heading “Legal Proceedings” included in Part I, Item 1, Financial Statements (unaudited) — Notes to Unaudited Condensed Consolidated Financial Statements.

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

~~There were no unregistered sales~~Share Repurchases

On January 6, 2022, GreenBox POS (the “Company”) announced that the Company’s Board of Directors approved an increase of $10,000,000 in its share repurchase program (the “Share Repurchase Program”), providing for the repurchase of a portion of the Company’s ~~equity~~outstanding common stock for up to $15,000,000. From May 13, 2021 to March 31, 2022, the Company has repurchased a total of 1,098,586 shares at an aggregate cost of $7,936,785.

Under the Share Repurchase Program, the Company is authorized to repurchase shares through open market purchases, privately-negotiated transactions, accelerated share repurchases or otherwise in accordance with applicable federal securities ~~during~~laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the ~~quarter ended June 30, 2021 that were not previously reported in a Current Report~~Securities Exchange Act of 1934, as amended. The repurchases have no time limit and may be suspended or discontinued completely at any time. The specific timing and amount of repurchases will vary based on ~~Form 8-K except as follows:~~available capital resources and other financial and operational performance, market conditions, securities law limitations, and other factors. The repurchases will be made using the Company’s cash on hand and cash from operations.

The Company ~~issued 100,000~~made the following purchases of its equity securities in the three months ended March 31, 2022. No shares ~~of common stock to executives of the Company~~were purchased in ~~June 2021.~~February and March 2022.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares the Many Yet Be Purchased Under the Program

January 2022		683,755	$	4.39		1,098,586	$	7,063,785

Total		683,755				1,098,586	$	7,063,785

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

Table of Contents

ITEM 6. EXHIBITS

4.1	Form of 8% Senior Convertible Note Due 2023 (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed by the Company on November 3, 2021)
10.1	Agreement and Waiver, dated January 28, 2022, between GreenBox POS and the Investor (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on January 31, 2022)
10.2	Amendment Agreement No. 1 to Share Purchase Agreement by and between GreenBox POS, and certain individuals named therein, made as of March 24, 2021 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on March 31, 2022)
10.3	Asset Purchase Agreement, signed March 31, 2022, between GreenBox POS and Sky Financial and Intelligence, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on April 6, 2022)
31.1	Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
31.2	Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
32.1*	Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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

2629

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: ~~August 12, 2021~~May 16, 2022	By:	/s/ Fredi Nisan
		Fredi Nisan Chief Executive Officer (Principal Executive Officer)

Date: ~~August 12, 2021~~May 16, 2022

By:

/s/ Benjamin Chung

Benjamin Chung

Chief Financial Officer (Principal Financial Officer)

2730

~~iso4217:USD xbrli:shares~~

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

Customer Relationship	$	264,663	Multiple-period excess earnings method	Discount rate		15.90	%

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


Intangible assets:
Customer relationships		264,663
Goodwill		2,305,394
		2,570,057

Total net assets acquired	$	2,500,000

	June 30, 2021		December 31, 2020

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

Total convertible notes payable		0		3,850,000
Debt discount		0		(2,993,408	)

Total convertible notes payable, net of debt discount	$	0	$	856,592

	June 30, 2021			December 31, 2020
Risk-free interest rate		0.29	%		0.29	%
Expected term	5 years			5 years
Expected volatility		396.64	%		289.33% to 279.18	%
Expected dividend yield		0			0

	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		230,122			10.59
Exercised		(100,802	)		0.46
Forfeited or expired		(68,428	)		2.50

Outstanding at June 30, 2021		575,499			7.06		0.21		6,865,703

Exercisable as of June 30, 2021		446,295			5.37		0.21		5,324,299
Vested and expected to Vest as of June 30, 2021		547,834			6.80		0.21		6,535,660

Years Ending
December 31,
2021	$	26,466
2022		52,932
2023		52,932
2024		52,932
2025		52,932
Thereafter		19,554
	$	257,748