UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~September~~June 30, ~~2022~~2023


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 001-38633

BM Technologies, Inc.

(Exact name of registrant as specified in its charter)


Delaware									82-3410369
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

201 King of Prussia Road, Suite ~~350~~650
Wayne, Pennsylvania									19087
(Address of Principal Executive)									(Zip-Code)

(877) 327-9515

Registrant's telephone number, including area code

(Former name, former address, and former fiscal year, 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	BMTX	NYSE American LLC
Warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50 per share	BMTX-WT	NYSE American LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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. Yes ☐ No ☒

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

The registrant had issued and outstanding ~~12,238,447~~11,870,295 shares of common stock, par value $0.0001 per share, as of ~~November 14, 2022.~~August 21, 2023.

Table of Contents


			Page
Part I - Financial Information			2
Item 1. Unaudited Consolidated Financial Statements			2
Consolidated Balance Sheets at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022			2
Consolidated Statements of (Loss) Income ~~(Loss)~~ for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022			3
Consolidated Statements of Changes in Shareholders' Equity for the~~Three and Nine~~ Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022			4
Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022			5
Notes to Unaudited Consolidated Financial Statements			6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosures About Market Risk			3230
Item 4. Controls and Procedures			3230

Part II - Other Information			3231
Item 1A. Risk Factors			3331
Item 5. Other Information			31
Item 6. Exhibits			3332

Signatures			3433

Part I - Financial Information

ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

BM TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS — UNAUDITED

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


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	26,433	$	25,704	Cash and cash equivalents	$	11,524	$	21,108
Accounts receivable, net allowance for doubtful accounts of $149 and $79		8,614		9,194
Accounts receivable, net allowance for doubtful accounts of $562 and $305						Accounts receivable, net allowance for doubtful accounts of $562 and $305	7,083		8,260
Prepaid expenses and other assets	Prepaid expenses and other assets	6,951		2,099		Prepaid expenses and other assets	10,742		9,076
Total current assets	Total current assets	41,998		36,997		Total current assets	29,349		38,444
Premises and equipment, net	Premises and equipment, net	575		346		Premises and equipment, net	531		508
Developed software, net	Developed software, net	24,025		28,593		Developed software, net	19,759		22,324
Goodwill	Goodwill	5,259		5,259		Goodwill	5,259		5,259
Other intangibles, net	Other intangibles, net	4,509		4,749		Other intangibles, net	4,269		4,429
Other assets	Other assets	—		398		Other assets	—		72
Total assets	Total assets	$	76,366	$	76,342	Total assets	$	59,167	$	71,036
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:	Liabilities:					Liabilities:
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	10,503	$	6,947	Accounts payable and accrued liabilities	$	11,624	$	12,684
Taxes payable		—		1,807
Current portion of operating lease liabilities		—		416
Deferred revenue, current		11,262		15,387
Deferred revenue						Deferred revenue	8,209		6,647
Total current liabilities	Total current liabilities	21,765		24,557		Total current liabilities	19,833		19,331
Non-current liabilities:	Non-current liabilities:					Non-current liabilities:
Deferred revenue, non-current		2		190

Liability for private warrants	Liability for private warrants	3,997		13,614		Liability for private warrants	811		2,847
Other non-current liabilities						Other non-current liabilities	480		—
Total liabilities	Total liabilities	$	25,764	$	38,361	Total liabilities	$	21,124	$	22,178
Commitments and contingencies (Note 8)
Commitments and contingencies (Note 7)						Commitments and contingencies (Note 7)
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred stock: Par value $0.0001 per share; 10,000,000 shares authorized, none issued or outstanding at both September 30, 2022 and December 31, 2021		$	—	$	—
Common stock: Par value $0.0001 per share; 1 billion shares authorized; 12,238,447 shares issued and outstanding at September 30, 2022; 12,193,378 shares issued and outstanding at December 31, 2021		1		1
Preferred stock: Par value $0.0001 per share; 10,000,000 shares authorized, none issued or outstanding at both June 30, 2023 and December 31, 2022						Preferred stock: Par value $0.0001 per share; 10,000,000 shares authorized, none issued or outstanding at both June 30, 2023 and December 31, 2022	$	—	$	—
Common stock: Par value $0.0001 per share; 1 billion shares authorized; 11,866,345 shares issued and outstanding at June 30, 2023; 12,240,237 shares issued and outstanding at December 31, 2022						Common stock: Par value $0.0001 per share; 1 billion shares authorized; 11,866,345 shares issued and outstanding at June 30, 2023; 12,240,237 shares issued and outstanding at December 31, 2022	1		1
Additional paid-in capital	Additional paid-in capital	69,901		60,686		Additional paid-in capital	70,943		72,342
Accumulated deficit	Accumulated deficit	(19,300)		(22,706)		Accumulated deficit	(32,901)		(23,485)
Total shareholders’ equity	Total shareholders’ equity	$	50,602	$	37,981	Total shareholders’ equity	$	38,043	$	48,858
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	76,366	$	76,342	Total liabilities and shareholders’ equity	$	59,167	$	71,036

See accompanying notes to the unaudited consolidated financial statements.

BM TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF (LOSS) INCOME ~~(LOSS)~~ — UNAUDITED

(amounts in thousands, except per share data)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Operating revenues:	Operating revenues:									Operating revenues:
Interchange and card revenue	Interchange and card revenue	$	5,325	$	6,529	$	17,283	$	21,530	Interchange and card revenue	$	1,804	$	5,315	$	4,883	$	11,958
Servicing fees from Partner Bank		10,163		11,823		37,650		31,774
Servicing fees										Servicing fees	7,700		13,295		14,332		27,487
Account fees	Account fees	2,110		2,569		6,872		7,847		Account fees	1,910		2,207		4,050		4,762
University fees	University fees	1,357		1,474		4,406		4,129		University fees	1,373		1,446		2,879		3,049
Other revenue	Other revenue	903		446		1,702		4,164		Other revenue	200		745		327		799
Total operating revenues	Total operating revenues	19,858		22,841		67,913		69,444		Total operating revenues	12,987		23,008		26,471		48,055
Operating expenses:	Operating expenses:									Operating expenses:
Technology, communication, and processing	Technology, communication, and processing	7,731		5,082		21,944		21,903		Technology, communication, and processing	6,364		7,297		13,582		14,215
Salaries and employee benefits	Salaries and employee benefits	10,773		9,137		30,656		27,253		Salaries and employee benefits	6,139		10,440		12,564		19,922
Professional services	Professional services	2,454		3,496		7,225		7,359		Professional services	2,338		2,420		4,978		4,792
Provision for operating losses	Provision for operating losses	1,564		1,067		5,006		3,797		Provision for operating losses	1,813		1,839		3,490		3,441
Occupancy	Occupancy	160		192		875		866		Occupancy	10		368		24		675
Customer related supplies	Customer related supplies	225		828		676		1,475		Customer related supplies	222		221		450		451
Advertising and promotion	Advertising and promotion	242		176		461		492		Advertising and promotion	125		84		243		197
Merger and acquisition related		—		—		290		—
Restructuring, merger, and acquisition related expenses										Restructuring, merger, and acquisition related expenses	274		1		993		290
Other expense	Other expense	989		614		2,467		1,537		Other expense	743		707		1,563		1,478
Total operating expenses	Total operating expenses	24,138		20,592		69,600		64,682		Total operating expenses	18,028		23,377		37,887		45,461
Income (loss) from operations		(4,280)		2,249		(1,687)		4,762
Non-operating expenses:
Gain (loss) on fair value of private warrant liability		(1,369)		6,042		6,916		17,989
Interest expense		—		—		—		(96)
Income (loss) before income tax expense (benefit)		(5,649)		8,291		5,229		22,655
Income tax expense (benefit)		(729)		1,167		1,823		4,262
Net income (loss)		$	(4,920)	$	7,124	$	3,406	$	18,393
(Loss) income from operations										(Loss) income from operations	(5,041)		(369)		(11,416)		2,594
Non-operating income and expense:										Non-operating income and expense:
Gain on fair value of private warrant liability										Gain on fair value of private warrant liability	595		5,640		2,016		8,284
(Loss) income before income tax expense										(Loss) income before income tax expense	(4,446)		5,271		(9,400)		10,878
Income tax expense										Income tax expense	10		909		16		2,552
Net (loss) income										Net (loss) income	$	(4,456)	$	4,362	$	(9,416)	$	8,326

Weighted average number of shares outstanding - basic	Weighted average number of shares outstanding - basic	11,938		11,900		11,944		11,834		Weighted average number of shares outstanding - basic	11,563		11,944		11,566		11,947
Weighted average number of shares outstanding - diluted	Weighted average number of shares outstanding - diluted	11,938		11,904		12,215		12,359		Weighted average number of shares outstanding - diluted	11,563		12,600		11,566		12,585

Net income (loss) per share - basic		$	(0.41)	$	0.60	$	0.29	$	1.55
Net income (loss) per share - diluted		$	(0.41)	$	0.60	$	0.28	$	0.03
Basic (loss) earnings per common share										Basic (loss) earnings per common share	$	(0.39)	$	0.37	$	(0.81)	$	0.70
Diluted (loss) earnings per common share										Diluted (loss) earnings per common share	$	(0.39)	$	0.35	$	(0.81)	$	0.66

See accompanying notes to the unaudited consolidated financial statements.

BM TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY — UNAUDITED

For the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

(amounts in thousands, except share data)

Common Stock
Shares of Common Stock Outstanding Common Stock Additional Paid in Capital Accumulated Deficit Total
Balance at December 31, 2021 12,193,378 $ 1 $ 60,686 $ (22,706) $ 37,981
Net income — — — 3,964 3,964
Share-based compensation expense 52,569 — 2,919 — 2,919
Conversion of private warrants to public warrants — — 725 — 725
Tax paid on behalf of employees related to net settlement of share-based awards — — (225) — (225)
Balance at March 31, 2022 12,245,947 $ 1 $ 64,105 $ (18,742) $ 45,364
Net income — — — 4,362 4,362
Share-based compensation expense (7,000) — 3,053 — 3,053
Balance at June 30, 2022 12,238,947 $ 1 $ 67,158 $ (14,380) $ 52,779
Net loss — — — (4,920) (4,920)
Issuance of common stock as compensation 6,000 — 37 — 37
Share-based compensation expense (6,500) — 2,706 — 2,706
Balance at September 30, 2022 12,238,447 $ 1 $ 69,901 $ (19,300) $ 50,602


	Common Stock
	Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Accumulated Deficit		Total
Balance at December 31, 2022	12,240,237	$	1	$	72,342	$	(23,485)	$	48,858
Net loss	—	—		—		(4,960)		(4,960)
Conversion of private warrants to public warrants	—	—		20		—		20
Tax paid on behalf of employees related to net settlement of share-based awards	(473,874)	—		(2,429)		—		(2,429)
Share-based compensation expense	95,147	—		447		—		447
Balance at March 31, 2023	11,861,510	$	1	$	70,380	$	(28,445)	$	41,936
Net loss	—	—		—		(4,456)		(4,456)

Tax paid on behalf of employees related to net settlement of share-based awards	(1,765)	—		(5)		—		(5)
Share-based compensation expense	6,600	—		568		—		568
Balance at June 30, 2023	11,866,345	$	1	$	70,943	$	(32,901)	$	38,043

Common Stock
Shares of Common Stock Outstanding Common Stock Additional Paid-in Capital Accumulated Deficit Total
Balance at December 31, 2020 6,123,432 $ 1 $ 64,017 $ (39,749) $ 24,269
Net income — — — 16,059 16,059
Valuation of private warrants — — (30,839) — (30,839)
Recapitalization transaction 4,759,911 — 16,148 — 16,148
Issuance of common stock as compensation 1,317,035 — 2,323 — 2,323
Share-based compensation expense — — 811 — 811
Balance at March 31, 2021 12,200,378 $ 1 $ 52,460 $ (23,690) $ 28,771
Net loss — — — (4,790) (4,790)
Share-based compensation expense — — 2,389 — 2,389
Balance at June 30, 2021 12,200,378 $ 1 $ 54,849 $ (28,480) $ 26,370
Net income — — — 7,124 7,124
Share-based compensation expense 6,000 — 2,462 — 2,462
Balance at September 30, 2021 12,206,378 $ 1 $ 57,311 $ (21,356) $ 35,956


	Common Stock
	Shares of Common Stock Outstanding	Common Stock		Additional Paid-in Capital		Accumulated Deficit		Total
Balance at December 31, 2021	12,193,378	$	1	$	60,686	$	(22,706)	$	37,981
Net income	—	—		—		3,964		3,964
Conversion of private warrants to public warrants	—	—		725		—		725
Tax paid on behalf of employees related to net settlement of share-based awards	(37,506)	—		(225)		—		(225)
Share-based compensation expense	90,075	—		2,919		—		2,919
Balance, March 31, 2022	12,245,947	$	1	$	64,105	$	(18,742)	$	45,364
Net income	—	—		—		4,362		4,362
Share-based compensation expense	(7,000)	—		3,053		—		3,053
Balance at June 30, 2022	12,238,947	$	1	$	67,158	$	(14,380)	$	52,779

See accompanying notes to the unaudited consolidated financial statements.

BM TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

(amounts in thousands)


		Nine Months Ended September 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:					Cash Flows from Operating Activities:
Net income		$	3,406	$	18,393
Adjustments to reconcile net income to net cash provided by operating activities:
Net (loss) income						Net (loss) income	$	(9,416)	$	8,326
Adjustments to reconcile net (loss) income to net cash provided by operating activities:						Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation of premises and equipment	Depreciation of premises and equipment	239		147		Depreciation of premises and equipment	128		123
Loss on disposal of premises and equipment	Loss on disposal of premises and equipment	38		—		Loss on disposal of premises and equipment	—		38
Amortization of developed software	Amortization of developed software	8,581		8,467		Amortization of developed software	5,980		5,781
Amortization of other intangible assets	Amortization of other intangible assets	240		240		Amortization of other intangible assets	160		160
Amortization of leased assets	Amortization of leased assets	398		644		Amortization of leased assets	—		345
Provision for bad debt	Provision for bad debt	70		103		Provision for bad debt	257		(43)
Share-based compensation expense	Share-based compensation expense	8,715		8,019		Share-based compensation expense	1,358		5,972
Gain on fair value of private warrant liability	Gain on fair value of private warrant liability	(6,916)		(17,989)		Gain on fair value of private warrant liability	(2,016)		(8,284)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable, net		510		96
Accounts receivable						Accounts receivable	920		2,156
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(4,851)		295		Prepaid expenses and other current assets	(1,666)		(1,528)
Other assets	Other assets	—		(366)		Other assets	72		—
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	3,556		(375)		Accounts payable and accrued liabilities	(1,403)		1,734
Taxes payable	Taxes payable	(1,807)		1,103		Taxes payable	—		(1,807)
Operating lease liabilities	Operating lease liabilities	(416)		(535)		Operating lease liabilities	—		(360)
Deferred revenue	Deferred revenue	(4,313)		3,840		Deferred revenue	1,562		(190)
Net Cash provided by Operating Activities		7,450		22,082

Net Cash (used in) provided by Operating Activities						Net Cash (used in) provided by Operating Activities	(4,064)		12,423
Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:
Development of internal use software	Development of internal use software	(4,013)		(501)		Development of internal use software	(2,935)		(3,185)
Purchases of premises and equipment	Purchases of premises and equipment	(506)		(51)		Purchases of premises and equipment	(151)		(256)
Net Cash used in Investing Activities	Net Cash used in Investing Activities	(4,519)		(552)		Net Cash used in Investing Activities	(3,086)		(3,441)
Cash Flows from Financing Activities:	Cash Flows from Financing Activities:					Cash Flows from Financing Activities:
Repayments of borrowings from Partner Bank		—		(21,000)
Recapitalization transaction		—		16,888
Repurchase of private warrants	Repurchase of private warrants	(1,977)		—		Repurchase of private warrants	—		(1,977)
Payments related to net settlement of share-based compensation awards	Payments related to net settlement of share-based compensation awards	(225)		—		Payments related to net settlement of share-based compensation awards	(2,434)		(225)
Net Cash used in Financing Activities	Net Cash used in Financing Activities	(2,202)		(4,112)		Net Cash used in Financing Activities	(2,434)		(2,202)
Net Increase in Cash and Cash Equivalents		729		17,418
Net (Decrease) Increase in Cash and Cash Equivalents						Net (Decrease) Increase in Cash and Cash Equivalents	(9,584)		6,780
Cash and Cash Equivalents – Beginning	Cash and Cash Equivalents – Beginning	25,704		2,989		Cash and Cash Equivalents – Beginning	21,108		25,704
Cash and Cash Equivalents – Ending	Cash and Cash Equivalents – Ending	$	26,433	$	20,407	Cash and Cash Equivalents – Ending	$	11,524	$	32,484

Supplementary Cash Flow Information:	Supplementary Cash Flow Information:					Supplementary Cash Flow Information:
Income taxes paid, net of refunds	Income taxes paid, net of refunds	$	7,704	$	3,124	Income taxes paid, net of refunds	$	27	$	2,350
Interest paid		$	—	$	178
Noncash Operating, Investing, and Financing Activities:	Noncash Operating, Investing, and Financing Activities:					Noncash Operating, Investing, and Financing Activities:
Shares issued to settle Megalith accounts payable in connection with Recapitalization transaction		$	—	$	740
Conversion of private warrants to public warrants						Conversion of private warrants to public warrants	$	20	$	725
Contingent liability for acquired software						Contingent liability for acquired software	$	480	$	—

See accompanying notes to the unaudited consolidated financial statements.

BM TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF THE BUSINESS

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

BankMobile Technologies, Inc. (“BankMobile”) was incorporated in May 2016 as a wholly-owned subsidiary of Customers Bank. On August 6, 2020, the Company entered into an Agreement and Plan of Merger, by and among Megalith Financial Acquisition Corporation, a special purpose acquisition company (“Megalith”), incorporated in Delaware in November 2017, MFAC Merger Sub Inc., a wholly-owned subsidiary of Megalith, BankMobile Technologies, Inc., and Customers Bank, the sole stockholder of BankMobile. On January 4, 2021, BankMobile became an independent company after the completion of a divestiture transaction and was rebranded BM Technologies, Inc.

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

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

~~BMTX’s Partner Bank~~currently holds the FDIC insured deposits that BMTX sources and services and is the issuing bank on BMTX’s debit cards. ~~BMTX’s Partner~~Customers Bank pays the Company a ~~deposit~~ servicing fee for the deposits generated and passes through interchange income earned from transactions on debit ~~transactions.~~cards.

On November 7, 2022, the Company and Customers Bank amended the Deposit Processing Services Agreement (the “DPSA Amendment”). The DPSA Amendment, among other things, will facilitate the transfer of the Company’s serviced deposits to a new partner bank and extends the termination date of the Deposit Processing Services Agreement until the earlier of: (i) entry into a definitive agreement with a new partner bank to transfer the Company’s serviced deposits to such partner bank and the successful completion of such transfer; or (ii) June 30, 2023.

On March 22, 2023, the Company and Customers Bank entered into a second amendment to the Deposit Processing Services Agreement (the “DPSA Second Amendment”) for the Higher Education serviced deposit accounts. The DPSA Second Amendment, among other things, extends the termination date of the Deposit Processing Services Agreement until the earlier of (i) the transfer of the Company’s Higher Education serviced deposits to a Durbin-exempt partner bank; or (ii) June 30, 2024; and revises the fee structure of the Deposit Processing Services Agreement. See Note 15 - Subsequent Events for additional information for this agreement.

Also on March 22, 2023, the Company and Customers Bank entered into a new agreement for the current BaaS serviced deposit accounts (the “2023 Deposit Servicing Agreement”), under which, effective March 31, 2023, the Company will perform, on behalf of Customers Bank, Customer Bank’s services, duties, and obligations by and between Customers Bank and T-Mobile USA, Inc. that are not required to be provided by an FDIC insured financial institution.

On March 16, 2023, the Company entered into a Deposit Servicing Agreement (the “FCB Deposit Servicing Agreement”) with a new partner bank, First Carolina Bank, a North Carolina chartered, non-member community bank (“FCB”), which provides that FCB will establish and maintain deposit accounts and other banking services in connection with customized products and services offered by the Company to its Higher Education institution clients, and the Company will provide certain other related services in connection with the accounts.

The initial term of the FCB Deposit Servicing Agreement is for four years, is subject to certain closing conditions, and will automatically renew for additional two-year terms unless either party gives written notice of non-renewal at least 120 days prior to the expiration of the then-current term. The FCB Deposit Servicing Agreement may be terminated early by either party upon material breach, by either party upon notice that the continuation of the Depositor Program violates Applicable Law or Network Rules (as defined in the FCB Deposit Servicing Agreement); by FCB if a regulatory authority determined that the performance of its obligations under the FCB Deposit Servicing Agreement was not consistent with safe and sound banking practices; by either party upon the other party commencing or being subject to certain bankruptcy proceedings; by the Company should it experience a change in control on or after March 16, 2026; and by either party should regulatory approvals not be obtained on or before July 15, 2023. The Company continues to actively work on the transfer of its Higher Education customer deposits from Customers Bank to FCB; however, as of the date of this report, the regulatory review process is continuing, and the transfer has not yet occurred. See Note 15 - Subsequent Events for additional information for this agreement.

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

NOTE 2 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These interim unaudited consolidated financial statements have been prepared in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). Any reference to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification ~~("ASC"~~(“ASC”) and Accounting Standards Update ~~("ASU"~~(“ASU”) of the Financial Accounting Standards Board ~~("FASB"~~(“FASB”). Certain information and footnote disclosures normally included in the annual consolidated financial statements have been omitted from these interim unaudited consolidated financial statements as permitted by U.S. GAAP and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). These interim unaudited consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of ~~management,~~Management, necessary to present a fair statement of the financial position and the results of operations and cash flows of BMTX for the interim periods presented.

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

ASC 205-40, Presentation of Financial Statements - Going Concern, requires ~~management~~Management to assess an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. In each reporting period, including interim periods, an entity is required to assess conditions known and reasonably knowable as of the financial statement issuance date to determine whether it is probable an entity will not meet its financial obligations within one year from the financial statement issuance date.

Management has performed this required assessment as of ~~November 15, 2022~~August 21, 2023 including consideration of the effect of the ~~First~~DPSA Third Amendment, ~~to Deposit Processing Services Agreement (the “DPSA Amendment”) entered into between the Company and Customers Bank on November 8, 2022,~~ see Note 15 - Subsequent Events for additional information, and the 2023 Deposit Servicing Agreement with Customers Bank, and believes there is sufficient funds available to support its ongoing business operations and continue as a going concern for at least the next 12 months with projected liquidity of ~~not less than $5~~$13.0 million ~~even with the anticipated termination of the DPSA Amendment not later than June 30, 2023.~~at August 21, 2024.

Management’s assessment is subject to known and unknown risks, uncertainties, assumptions, and changes in circumstances, many of which are beyond our control including the impact of the macroeconomic environment, and that are difficult to predict as to timing, extent, likelihood, and degree of occurrence, and that could cause actual results to differ from estimates and forecasts, potentially materially. Continued increases in interest rates by the Federal Reserve Bank will cause management to consider raising interest rates on certain of its serviced deposit accounts thereby reducing yields on such deposits, negatively impacting projected profitability and cash flow.

The Company is actively evaluating multiple strategic alternatives to the DPSA Amendment including internalizing services upon closing of the previously announced merger with First Sound Bank or negotiating a new deposit servicing agreement with new potential bank partners. Failure to timely execute upon one or more of these strategic alternatives prior to the second quarter of 2023 could cast substantial doubt upon the Company’s ability to meet its financial obligations thereafter without additional liquidity and capital resources.

Based upon the results of Management’s assessment, these interim unaudited consolidated financial statements have been prepared on a going concern basis. The interim unaudited consolidated financial statements do not include any adjustments that could result from the outcome of the aforementioned risks and uncertainties.

~~Prior Period Adjustments~~

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

~~Balance Sheet Adjustments~~

In preparation of the Company’s interim unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2022, the Company identified that its reserve for losses resulting from fraud or theft-based transactions that have generally been disputed by BMTX serviced deposit account holders and a related receivable were previously presented on a net basis as a component of ~~Other assets. The Company reviewed this presentation and concluded that these amounts are better presented on a gross basis including the reserve for losses as a component of~~ ~~Accounts payable and accrued liabilities~~ ~~and including the receivable for any billable reimbursements from our Partner Bank as a component of~~ ~~Accounts receivable, net~~.

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

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

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

~~Statement of Income (Loss) Adjustments~~

In preparation of the Company’s interim unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2022, the Company identified certain expenses that were previously included as a component of ~~Customer related supplies~~ ~~and~~ ~~Occupancy~~ ~~that are better presented as a component of~~ ~~Technology, communication, and processing~~.

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

~~The effect of these immaterial adjustments for the three months and nine months ended September 30, 2021:~~

•~~Decreased revenue from~~ ~~Account fees~~ ~~by $59 thousand and $108 thousand, respectively,~~

•~~Decreased revenue from~~ ~~Other revenue~~ ~~by $31 thousand and $119 thousand, respectively,~~

•~~Decreased expenses from~~ ~~Customer related supplies~~ ~~by $189 thousand and $203 thousand, respectively,~~

•~~Increased expenses from~~ ~~Technology, communication, and processing~~ ~~by $189 thousand and $28 thousand, respectively, and~~

•~~Decreased expenses from~~ ~~Occupancy~~ ~~by $90 thousand and $52 thousand, respectively.~~

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

Significant Accounting Policies

These interim unaudited consolidated financial statements should be read in conjunction with the ~~2021~~2022 audited consolidated financial statements and related notes of BMTX, which describe BMTX’s significant accounting policies. There have been no material changes to BMTX’s significant accounting policies during the ~~nine~~six months ended ~~September~~June 30, ~~2022. Certain information~~2023 except as noted below.

Insurance Premium Finance Obligations

The Company includes the obligation for its insurance premium financing in Accounts payable and ~~footnote disclosures normally included in~~accrued liabilities on the ~~annual consolidated financial statements have been omitted from these~~ interim unaudited ~~consolidated financial statements as permitted by U.S. GAAP~~Consolidated Balance Sheets. At June 30, 2023, the Company had two premium finance arrangements outstanding with balances totaling $0.7 million, average remaining installment payment terms of 5.5 months, and ~~pursuant~~a weighted average annualized finance charge of 4.95%.

401(k) Plan

On January 3, 2023, the Company implemented the BM Technologies, Inc. 401(k) Plan (the “401(k) Plan”) for the benefit of BMTX’s eligible employees. The 401(k) Plan permits eligible employees to make voluntary contributions, up to a maximum of $63.5 thousand per year, subject to certain limitations. The Company offers a matching contribution equal to 50% of an eligible employee’s deferral election up to 3% of their annual salary. The Company records its contributions to the ~~rules~~401(k) Plan in Salaries and ~~regulations~~employee benefits on the unaudited Consolidated Statements of (Loss) Income. The Company’s employer contribution to the ~~U.S. Securities~~401(k) Plan for the three and ~~Exchange Commission (the “SEC”).~~six months ended June 30, 2023 totaled $0.1 million and $0.3 million, respectively.

Accounting Standards Update

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

~~Accounting Pronouncements Issued but Not Yet Adopted~~

From time to time, new accounting pronouncements are issued by the FASB that are adopted by BMTX as of the required effective dates. ~~The following paragraphs related~~During the six months ended June 30, 2023 there were no ASUs adopted by the Company that were considered material and there were no ASUs issued prior to new pronouncements should be read in conjunction with Significant Accounting Policies of the notes to the audited consolidated financial statements included in our 2021 Form 10-K. Unless otherwise discussed, management believes the impact of any recently issued standards, including those issued butJune 30, 2023, which were not yet effective, ~~will not have a~~considered relevant or material ~~impact on~~to the Company’s ~~consolidated~~ financial statements taken as a whole.

~~ASU 2020-04 -~~ ~~Reference Rate Reform (Topic 848)~~: ~~Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~ provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. This ASU is effective beginning as of its date of effectiveness, March 12, 2020. The guidance is temporary and can be applied through December 31, 2022. The guidance has not impacted the consolidated financial statements to date. The Company will continue to monitor the impact of the ASU on our consolidated financial statements in the future.

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

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

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

NOTE 3 — ACCOUNTS RECEIVABLE

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

Accounts receivable deemed to be uncollectible are individually identified and are charged-off against the allowance for doubtful accounts. The allowance for doubtful accounts was ~~$0.1~~$0.6 million at ~~September~~June 30, ~~2022~~2023 and ~~$0.1~~$0.3 million at December 31, ~~2021.~~2022.

(amounts in thousands) Beginning Balance Additions Reductions Ending Balance
Allowance for doubtful accounts
Nine months ended September 30, 2022 $ 79 $ 137 $ (67) $ 149
Twelve months ended December 31, 2021 $ — $ 171 $ (92) $ 79


(amounts in thousands)	Beginning Balance		Additions		Reductions		Ending Balance
Allowance for doubtful accounts
Six months ended June 30, 2023	$	305	$	432	$	(175)	$	562
Twelve months ended December 31, 2022	$	79	$	381	$	(155)	$	305

NOTE 4 — PREMISES AND EQUIPMENT AND DEVELOPED SOFTWARE

Premises and Equipment

The components of premises and equipment were as follows:


(amounts in thousands)	(amounts in thousands)	Expected Useful Life	September 30, 2022		December 31, 2021		(amounts in thousands)	Expected Useful Life	June 30, 2023		December 31, 2022
Leasehold improvements		5 years	$	—	$	28
Furniture, fixtures and equipment		10 years	135		243

IT equipment	IT equipment	3 to 5 years	1,383		1,813		IT equipment	3 to 5 years	$	789	$	1,377
			1,518		2,084
Accumulated depreciation	Accumulated depreciation		(943)		(1,738)		Accumulated depreciation		(258)		(869)
Total	Total		$	575	$	346	Total		$	531	$	508

~~Depreciation is recorded in~~ ~~Occupancy~~ ~~expense on the unaudited~~ ~~Consolidated Statements of Income (Loss). For the three and nine months ended September 30, 2022, BMTX recorded depreciation expense of $0.1 million and $0.3 million, respectively. For the three and nine months ended September 30, 2021,~~ BMTX recorded depreciation expense of less than $0.1 million and $0.1 million ~~respectively.~~for the three and six months ended June 30, 2023, respectively, as a component of Technology, communication, and processing expense on the unaudited Consolidated Statements of (Loss) Income and less than $0.1 million and $0.1 million for the three and six months ended June 30, 2022, respectively, as a component of Occupancy expense on the unaudited Consolidated Statements of (Loss) Income.

BMTX recorded no impairment expense during the three and six months ended June 30, 2023 and 2022.

Developed Software

The components of developed software were as follows:


(amounts in thousands)	(amounts in thousands)	Expected Useful Life	September 30, 2022		December 31, 2021		(amounts in thousands)	Expected Useful Life	June 30, 2023		December 31, 2022
Higher One Disbursement business developed software	Higher One Disbursement business developed software	10 years	$	27,400	$	27,400	Higher One Disbursement business developed software	10 years	$	27,400	$	27,400
Internally developed software	Internally developed software	3 to 7 years	41,885		41,683		Internally developed software	3 to 7 years	44,299		42,504
Work-in-process	Work-in-process		2,533		421		Work-in-process		4,697		3,077
			71,818		69,504				76,396		72,981
Accumulated amortization	Accumulated amortization		(47,793)		(40,911)		Accumulated amortization		(56,637)		(50,657)
Total	Total		$	24,025	$	28,593	Total		$	19,759	$	22,324

Amortization is recorded in Technology, communication, and processing expense on the unaudited Consolidated Statements of (Loss) Income ~~(Loss)~~. BMTX recorded amortization expense of ~~$2.8~~$3.0 million and ~~$8.6~~$6.0 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively. BMTX recorded amortization expense of ~~$2.8~~$2.9 million and ~~$8.5~~$5.8 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively.

BMTX recorded no impairment expense during the three and six months ended June 30, 2023 and 2022.

NOTE 5 — GOODWILL AND OTHER INTANGIBLES

Goodwill represents the excess of the purchase price over the identifiable net assets of businesses acquired through business combinations accounted for under the acquisition method. Goodwill is reviewed for impairment annually as of October 31 and between annual tests when events and circumstances indicate that impairment may have occurred. There was no goodwill impairment for the three and six months ended June 30, 2023 and 2022.

Other intangibles, net represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights. We have one intangible asset which is being amortized on a straight-line basis over twenty years.

~~Goodwill~~

The components of ~~is reviewed for impairment annually~~Other intangibles, net as of ~~October~~June 30, 2023 and December 31, ~~and between annual tests when events and circumstances indicate that impairment may have occurred. There was no goodwill impairment for the three and nine months ended September 30,~~ 2022 ~~and 2021.~~were as follows:


(amounts in thousands)	Expected Useful Life	June 30, 2023		December 31, 2022
Customer relationships – universities	20 years	$	6,402	$	6,402
Accumulated amortization		(2,133)		(1,973)
Total		$	4,269	$	4,429

Other intangibles, net, includes assets subject to amortization that are reviewed for impairment under FASB ASC 360, Property, Plant and Equipment. ~~There was no impairment for~~ ~~Other intangibles, net~~ ~~for the three and nine months ended September 30, 2022 and 2021.~~

~~The components of~~ ~~Other intangibles, net~~ ~~as of September 30, 2022 and December 31, 2021 were as follows:~~

(amounts in thousands) Expected Useful Life September 30,
2022 December 31,
2021
Customer relationships – universities 20 years $ 6,402 $ 6,402
Accumulated amortization (1,893) (1,653)
Total $ 4,509 $ 4,749

Amortization is recorded in Other expense on the unaudited Consolidated Statements of (Loss) Income ~~(Loss)~~. BMTX recorded amortization expense of $0.1 million and $0.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively. BMTX recorded amortization expense of $0.1 million and $0.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively.

The customer relationships - universities will be amortized in future periods as follows:


Remainder of 2022		$	80
2023		320
Remainder of 2023				Remainder of 2023	$	160
2024	2024	320		2024	320
2025	2025	320		2025	320
2026	2026	320		2026	320
After 2026		3,149
2027				2027	320
After 2027				After 2027	2,829
Total	Total	$	4,509	Total	$	4,269

There was no impairment for Other intangibles, net, for the three and six months ended June 30, 2023 and 2022.

NOTE 6 — LEASES

At January 1, 2022, BMTX leased two offices under operating leases. On March 31, 2022, one of the two office leases matured, and we exited our New Haven, CT office facility. On September 30, 2022, ~~BMTX leased one~~the second office under an operating lease with an original 5-year lease term with options to renew the lease or extend the term annually or with mutual agreement. The original lease included variable lease payments that are based on an index or rate, such as an annual increase in operating expenses over the initial lease year’s expenses. Variable lease payments were not included in the lease liability or right-of-use (“ROU”) asset and were recognized in the period in which the obligations for those payments were incurred. BMTX’s operating lease agreement did not contain any material residual value guarantees or material restrictive covenants. As BMTX’s operating lease did not provide an implicit rate, BMTX utilized the incremental borrowing rate of Customers Bank, its former parent, based on the information available at the adoption of FASB ASC 842, ~~Leases~~ ~~when determining the present value of lease payments.~~

~~The original~~ lease matured ~~on September 30, 2022. Effective~~at our Wayne, PA office. On October 1, 2022, the Company entered into a 3-month short-term lease extension for this office under substantially identical terms and conditions as the original lease. At December 31, 2022, the 3-month short-term lease extension expired and was not renewed. The Company’s corporate headquarters is currently operating under a month-to-month short-term lease.

~~The following table summarizes~~At June 30, 2023 and December 31, 2022, the Company had no operating lease ~~ROU~~right-of-use assets and operating lease liabilities ~~and their corresponding classification on the Company’s~~ outstanding.

~~Consolidated Balance Sheets~~:

~~(amounts in thousands)~~

~~Classification~~

September 30,
2022

December 31,
2021

~~Assets:~~

~~Operating lease ROU assets~~

~~Other assets~~

—

~~398~~

~~Liabilities:~~

~~Operating lease liabilities~~

—

~~416~~

Operating lease expenses are recorded in Occupancy on the unaudited Consolidated Statements of ~~Income~~ (Loss). Income. BMTX recorded lease expense of less than $0.1 million and ~~$0.4~~$0.1 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively. BMTX recorded lease expense of $0.2 million and ~~$0.5~~$0.4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively.

Cash paid pursuant to operating lease liabilities totaled ~~$0.1 million and $0.4 million~~zero for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively. Cash paid pursuant to operating lease liabilities totaled $0.2 million and ~~$0.5~~$0.4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively. These cash payments are reported as a component of cash flows ~~used in~~(used in) provided by operating activities inon the unaudited Consolidated Statements of Cash Flows.

NOTE 7 ~~— BORROWINGS FROM PARTNER BANK~~

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

~~NOTE 8~~ — COMMITMENTS AND CONTINGENCIES

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated. Management does not believe there are any such matters that will have a material effect on the interim unaudited ~~interim~~ consolidated financial statements that are not currently accrued for. However, in light of the uncertainties inherent in these matters, it is possible that the ultimate resolution may have a material adverse effect on BMTX’s results of operations for a particular period, and future changes in circumstances or additional information could result in accruals or resolution in excess of established accruals, which could adversely affect BMTX’s results of operations, potentially materially.

1110

On June 5, 2023, the Company entered into an agreement to purchase certain software technology assets from a third-party. Purchase consideration consists of a payment of less than $0.1 million at closing and potential future contingent consideration of $0.5 million over the next three years if the technology is successfully and continuously deployed by the Company. The $0.5 million of contingent consideration is reported in Other non-current liabilities on the unaudited Consolidated Balance Sheets.

NOTE 98 — SHAREHOLDERS’ EQUITY AND PRIVATE WARRANT LIABILITY

~~The~~ ~~Consolidated Statements of Changes in Shareholders’ Equity~~ reflect the reverse recapitalization and merger with Megalith as of January 4, 2021. Since BMTX was determined to be the accounting acquirer in the transaction, all periods prior to the consummation of the transaction reflect the balances and activity of BMTX (other than shares which were retroactively restated in connection with the transaction).

Common Stock

The Company is authorized to issue 1,000,000,000 shares of common stock, par value ~~$0.0001~~0.0001 per share. At ~~September~~June 30, ~~2022,~~2023, there w~~ere 12,238,447~~were 11,866,345 shares ofof common stock issued and outstanding, which includes the 300,000 performance shares discussed below. At December 31, ~~2021~~2022 there were ~~12,193,378~~12,240,237 shares of common stock issued and ~~outstanding.~~outstanding which includes the 300,000 performance shares discussed below.

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

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s ~~board~~Board of ~~directors.~~Directors. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, there were no shares of preferred stock issued or outstanding.

Performance Shares

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

Dividend Policy

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

January 4, 2021 Share-Based Compensation Award

In connection with its January 4, 2021 divestiture of the Company, Customers Bank, the Company’s former parent, granted 1,317,035 of the merger consideration shares of the Company it received to certain employees and executives of the Company. The share-based compensation award iswas subject to vesting conditions, including a required service condition from award recipients through January 3, 2023. The grant date fair value of the award, totaling $19.6 million, iswas recorded as share-based compensation expense inon the ~~Company’s~~unaudited Consolidated Statements of (Loss) Income ~~(Loss)~~ on a straight-line basis over the ~~two year~~two-year post-grant vesting period, net of any actual forfeitures. The shares awarded ~~are~~were restricted until fully vested. The holders of restricted shares ~~may elect~~were provided an option to surrender a portion of their shares on the vesting date to cover their income tax obligations. ~~During the three and nine months ended September 30, 2022, 88,889~~On January 3, 2023, all restricted shares, net of ~~the shares awarded were fully vested as a result of the occurrence of certain conditions other than required service.~~prior forfeitures, vested.

The change in unvested shares under the January 4, 2021 Share-Based Compensation Award is shown below:

Number of
Awards Weighted-Average
Grant-Date Fair
Value Per Award
Balance as of December 31, 2021 1,283,535 $ 14.87
Granted — $ —
Vested (88,889) $ 14.87
Forfeited (26,500) $ 14.87
Balance as of September 30, 2022 1,168,146 $ 14.87


	Number of Awards	Weighted-Average Grant-Date Fair Value Per Award
Balance as of December 31, 2022	1,168,146	$	14.87
Vested	(749,854)	$	14.87
Net settlement of share-based awards for taxes	(418,292)	$	14.87
Balance as of June 30, 2023	—	$	—

~~For the three and nine months ended September 30, 2022, the~~BMTX recorded share-based compensation expense related to these awards ~~totaled $2.4~~of zero and less than $0.1 million ~~and $6.9 million, respectively. For~~for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021, the~~2023, respectively. BMTX recorded share-based compensation expense related to these awards ~~totaled $2.4~~of $2.3 million and ~~$7.1~~$4.5 million ~~respectively.~~

In addition, and in connection with the January 4, 2021 divestiture of the Company, Customers Bank accelerated the vesting for existing restricted stock units and stock options previously granted to certain employees of the Company. The share-based compensation expense, net of forfeitures, associated with the accelerated vesting totaling $0.8 million was incurred during the three months ended March 31, 2021 and was recorded as a component of ~~Salaries and employee benefits~~ ~~expense. No such transactions exist~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2022, respectively.

Equity Incentive Plan

Our 2020 Equity Incentive Plan (the “Equity Incentive Plan”) provides for the grant of incentive stock options, or ISOs, nonstatutory stock options, or NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, and other forms of equity compensation, or collectively, stock awards, all of which may be granted to employees, including officers, non-employee directors, and consultants of both the Company and its affiliates. Additionally, the Equity Incentive Plan provides for the grant of performance cash awards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to non-employee directors and consultants.

On June 20, 2023, an amendment to the Equity Incentive Plan was approved by the Company’s stockholders. The ~~aggregate~~amendment increased the total number of shares of common stock ~~that may be issued pursuant to stock awards~~authorized under the Equity Incentive Plan ~~will not, and currently does not, exceed 10%~~by 1,279,963, from 1,220,037 (the number of shares authorized under the ~~issued and outstanding shares of our common stock.~~ original 2020 Equity Incentive Plan) to 2,500,000.

Grants were made under the Equity Incentive Plan ~~for~~during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as described within Restricted Stock Units and Performance - Based Restricted Stock Units below.

Restricted Stock Units

Restricted Stock Units (“RSUs”)

~~On September 30, 2021,~~ granted under the ~~Company granted 695,000 RSUs to certain executives split equally between service-based and performance-based awards.~~Equity Incentive Plan generally vest in three or four equal installments on each anniversary of the grant date. The RSUs that have been granted ~~to these executives will vest over~~ ~~three~~ ~~to five years~~are all paid in stock upon ~~achievement~~vesting, and are thus classified as equity awards, which are measured using the grant date fair value of ~~certain service-based, performance-based,~~BMTX common stock and ~~market conditions. The vesting commencement date was January 4, 2021.~~are not remeasured at the end of each reporting period. We recognize ~~the~~ compensation cost starting from the grant date ~~in accordance with ASC 718-10-55-108.~~

In addition to the executive RSU awards granted on September 30, 2021, the Company periodically grants individual awards with service-based vesting. During the nine months ended September 30, 2022 and 2021, the Company granted 81,790 and 12,600 service-based RSU awards under the Equity Incentive Plan, respectively.

~~For service-based RSUs, we recognize the share-based compensation cost~~ on a straight-line basis over the required vesting period in accordance with ASC 718. We account for forfeitures as they occur and reverse any previously recognized compensation expense related to forfeited awards.

Performance - Based Restricted Stock Units

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

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

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

The change in unvested RSUs and PBRSUs awarded is shown below:


	Restricted Stock Units			Performance-Based Restricted Stock Units
	Number of RSUs	Weighted-Average Grant-Date Fair Value Per RSU		Number of RSUs	Weighted-Average Grant-Date Fair Value Per RSU
Balance as of December 31, 2022	324,790	$	8.84	335,000	$	7.09
Granted	564,530	$	3.40	455,000	$	2.94
Vested	(101,747)	$	8.79	—	$	—
Forfeited	(44,184)	$	8.30	(45,000)	$	7.09
Balance as of June 30, 2023	743,389	$	4.75	745,000	$	4.56

For the three and ~~nine~~six months ended ~~September~~June 30, 2023, the share-based compensation expense related to the RSU awards totaled $0.6 millionand$0.9 million, respectively. For the three and six months ended June 30, 2022, the share-based compensation expense related to the RSU awards totaled ~~$0.3~~$0.5 millionand$0.9 million, respectively.

For the three and ~~$1.7~~six months ended June 30, 2023, the share-based compensation expense related to the PBRSU awards totaled $0.2 millionand$0.4 million, respectively. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the share-based compensation expense related to ~~RSU~~the PBRSU awards totaled ~~less than $0.1~~$0.3 millionand ~~$0.1~~$0.5 million, respectively. ~~Share-based compensation expense is recorded in~~ ~~Salaries and employee benefits~~ ~~in the unaudited~~ ~~Consolidated Statement of Income (Loss).~~

~~The change in unvested RSUs awarded is shown below:~~

Number of RSUs Weighted-Average Grant-Date Fair Value Per RSU
Balance as of December 31, 2021 704,600 $ 8.96
Granted 81,790 $ 6.79
Vested (90,075) $ 9.02
Forfeited (12,000) $ 9.18
Balance as of September 30, 2022 684,315 $ 8.88

Employee Stock Purchase Plan (“ESPP”)

The Company has an ESPP (the “BM Technologies Inc. 2021 Employee Stock Purchase Plan”) which has an effective date of May 1, 2021. The purpose of the ESPP is to provide eligible employees with an incentive to advance the interests of the Company and its Subsidiaries, by affording them an opportunity to purchase stock of the Company at a favorable price. As of ~~September~~June 30, ~~2022,~~2023, there ~~are~~have been no shares purchased on behalf of employees under the ESPP, as the program has not yet been made available for employee participation.

Warrants

At ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, there were 22,703,004 ~~and 23,874,667~~ warrants to purchase our common stock outstanding. The warrant totals for each period-end consist of ~~17,227,189~~17,294,044 and ~~16,928,889~~17,227,289 public warrants and ~~5,475,815~~5,408,960 and ~~6,945,778~~5,475,815 private warrants as of ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Each whole warrant entitles the registered holder to purchase one whole share of common stock at a price of $11.50 per share. The warrants will expire five years after the completion of the merger with Megalith (January 4, 2026) or earlier upon redemption or liquidation; the Company has redemption rights if our common stock trades above $24.00 for 20 out of 30 days. The private warrants are identical to the public warrants except that the private warrants are non-redeemable and exercisable on a cashless basis so long as they are held by the sponsor and certain other original holders.

~~As of September~~Through June 30, ~~2022,~~2023, 1,600 of the Company’s outstanding public warrants have been exercised and 1,169,903 of the private warrants have been repurchased by the Company from related parties at $1.69 per warrant. ~~In addition,~~

During the three and six months ended June 30, 2023, zero and 66,855 of the private warrants have been reclassified to public warrants based upon a sale of the private warrants by the original holders which resulted in a modification of terms that effect classification as ~~of September~~public warrants, respectively. There were no warrants exercised in the three and six months ended June 30, 2023.

During the three and six month period ended June 30, 2022, zero and 300,000 of the private warrants have been reclassified to public warrants based upon a sale of the private warrants by the original holders which resulted in a modification of terms that effect classification as public ~~warrants. In~~warrants, respectively. There were 100 warrants exercised in the three and ~~nine~~six months ended ~~September~~June 30, 2022, there were 0 and 100 public warrants exercised, respectively. During the comparative three and nine month period ended September 30, 2021 there were no repurchases, exercises, or reclassifications related to the private or public warrants.2022.

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

Private Warrants

In accordance with FASB ASC Topic 480, Distinguishing Liabilities from Equity, the private warrants are accounted for as liabilities and are marked-to-market each reporting period with the change in fair value recognized in earnings. In general, under the mark-to-market accounting model, as our stock price increases, the private warrant liability increases, and we recognize additional expense ~~in our~~on the unaudited Consolidated Statements of (Loss) Income ~~(Loss)~~ – with the opposite when our stock price declines. Accordingly, the periodic revaluation of the private warrants could result in significant volatility in our reported earnings.

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

Income Statement Impact: Subsequent to the close of the merger, any change in fair value of the private warrants is recognized ~~in our~~on the unaudited Consolidated Statements of (Loss) Income ~~(Loss)~~ below operating profit as Gain ~~(loss)~~ on fair value of private warrant liability with a corresponding amount recognized in the Liability for private warrants on ~~our~~the unaudited Consolidated Balance Sheets. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we ~~recognized a loss of $1.4 million and~~recorded a gain of ~~$6.9~~$0.6 million and $2.0 million, respectively, ~~related to~~resulting from the revaluation of the private warrants. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we ~~recognized gains~~recorded a gain of ~~$6.0~~$5.6 million and ~~$18.0~~$8.3 million, respectively, ~~related to~~resulting from the revaluation of the private warrants.

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

Cash Flow Impact: The impact of the change in fair value of the private warrants has no impact on our cash flows as it is a noncash adjustment. Cash received for the exercise of warrants is recorded in cash flows from financing activities. Cash paid for the repurchase of warrants is recorded in cash flows from financing activities. During the ~~nine~~six months ended ~~September~~June 30, 2022, the Company repurchased private warrants from related parties for cash consideration totaling $2.0 million. No such transactions occurred ~~for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2023.

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

Public Warrants

In accordance with FASB ASC Topic 480, Distinguishing Liabilities from Equity, the public warrants are treated as equity instruments under U.S. GAAP. The public warrants are not marked-to-market each reporting period, thus there is no impact to earnings. Exercises of the public warrants are recorded as cash is received and are recorded in Cash and cash equivalents with a corresponding offset recorded in Common stock and Additional ~~paid-in-capital~~paid in-capital within equity. ~~Cash proceeds from public warrant exercises totaled less than $0.1 million~~During the three and ~~zero, respectively, during the nine~~six months ended ~~September~~June 30, 2023, there were no exercises of public warrants. During the three and six months ended June 30, 2022, ~~and 2021.~~there were 100 exercises of public warrants.

1514

NOTE 109 — REVENUES

Revenues

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

The following table presents BMTX’s revenues disaggregated by nature of the revenue stream and the pattern or timing of revenue recognition for the three and ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021.~~respectively. The Company has one reportable segment, and all revenues are earned in the U.S.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(amounts in thousands)	(amounts in thousands)	2022		2021		2022		2021		(amounts in thousands)	2023		2022		2023		2022
Revenues:	Revenues:									Revenues:
Revenue recognized at point in time:	Revenue recognized at point in time:									Revenue recognized at point in time:
Interchange and card revenue	Interchange and card revenue	$	5,325	$	6,529	$	17,283	$	21,530	Interchange and card revenue	$	1,804	$	5,315	$	4,883	$	11,958
Servicing fees from Partner Bank		10,163		11,823		37,650		31,774
Servicing fees										Servicing fees	7,700		13,295		14,332		27,487
Account fees	Account fees	2,110		2,569		6,872		7,847		Account fees	1,910		2,207		4,050		4,762
University fees - disbursement activity	University fees - disbursement activity	175		380		932		918		University fees - disbursement activity	172		281		432		757
Other		903		446		1,702		4,164
Other revenue										Other revenue	57		745		96		799
Total revenue recognized at point in time	Total revenue recognized at point in time	18,676		21,747		64,439		66,233		Total revenue recognized at point in time	11,643		21,843		23,793		45,763
Revenue recognized over time:	Revenue recognized over time:									Revenue recognized over time:
University fees - subscriptions	University fees - subscriptions	1,182		1,094		3,474		3,211		University fees - subscriptions	1,201		1,165		2,447		2,292
Other revenue - maintenance and support										Other revenue - maintenance and support	143		—		231		—
Total revenue recognized over time	Total revenue recognized over time	1,182		1,094		3,474		3,211		Total revenue recognized over time	1,344		1,165		2,678		2,292
Total revenues	Total revenues	$	19,858	$	22,841	$	67,913	$	69,444	Total revenues	$	12,987	$	23,008	$	26,471	$	48,055

Deferred Revenue

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

The deferred revenue ~~balances were~~balance as ~~follows:~~

(amounts in thousands) September 30,
2022 December 31,
2021
Deferred revenue (current and non-current) $ 11,264 $ 15,577
of June 30, 2023 and December 31, 2022 was $8.2 million and $6.6 million, respectively.

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company recognized revenue of approximately ~~$15.4~~$5.9 million included in deferred revenue at the beginning of the period. During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company recognized revenue of approximately ~~$11.5~~$15.0 million included in deferred revenue at the beginning of the period.

Unbilled receivables

The Company had ~~$2.0~~$1.9 million of unbilled receivables, or amounts recognized as revenue for which invoices have not yet been issued, as of ~~September~~June 30, ~~2022,~~2023, and ~~$2.1~~$1.5 million as of December 31, ~~2021.~~2022. Unbilled receivables are reported in Accounts receivable, net on the unaudited Consolidated Balance Sheets.

NOTE 1110 — INCOME TAXES

The Company’s effective tax rate was ~~12.9%~~(0.2)% and ~~34.9%~~(0.2)% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively. The Company’s effective tax rate was ~~14.1%~~17.2% and ~~18.8%~~23.5% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively. The effective tax rate differs from the Company’s marginal tax rate of 27.3% due to the non-taxable fair value adjustments related to the non-compensatory private warrant liability being recorded through earnings, offset by changes to the valuation allowance established against deferred tax assets.

The deferred tax asset at ~~September~~June 30, 2023 and 2022 ~~and 2021~~ was ~~$30.5~~$29.6 million and ~~$27.5~~$30.4 million, respectively. ~~These balances~~The balance consisted mainly of Section 197 ~~intangibles.~~intangibles for both periods. These Section 197 intangibles resulted from a step-up in tax basis of the assets acquired from BankMobile Technologies, Inc., which for U.S. GAAP purposes, were not recorded at fair value. The deferred tax asset balance at June 30, 2023 also includes net operating loss carryforwards for federal and state purposes.

A full valuation allowance has been recorded against the deferred tax asset balance for all periods presented. ~~The Company has no net operating loss or other carryforward deferred tax assets.~~ A valuation allowance is recognized when it is more likely than not, that all, or a portion of, the deferred tax asset will be realized based on the weight of the available positive and negative evidence. Management determined the verifiable negative evidence from the three years of cumulative losses outweighs any available positive evidence as of ~~September~~June 30, ~~2022,~~2023, but will continue to evaluate this determination each quarterly period going forward.

NOTE 1211 — (LOSS) EARNINGS ~~(LOSS)~~ PER COMMON SHARE

The following are the components and results of operations and (loss) earnings ~~(loss)~~ per common share calculations for the periods presented:

Three Months Ended
September 30, Nine Months Ended
September 30,
(amounts in thousands, except per share data) 2022 2021 2022 2021
Net income (loss) available to common shareholders - used in calculating basic EPS $ (4,920) $ 7,124 $ 3,406 $ 18,393
Adjustment for private warrant liability1
— — — 17,989
Net income (loss) - used in calculating diluted EPS $ (4,920) $ 7,124 $ 3,406 $ 404
Weighted-average common shares outstanding – basic 11,938 11,900 11,944 11,834
Weighted-average common shares outstanding – diluted 11,938 11,904 12,215 12,359
Net income (loss) per common share - basic $ (0.41) $ 0.60 $ 0.29 $ 1.55
Net income (loss) per common share - diluted $ (0.41) $ 0.60 $ 0.28 $ 0.03

1 Diluted earnings per share for the nine months ended September 30, 2021 is calculated based on adjusted net income of $0.4 million due to the elimination of the revaluation gain on the private warrant liability.


	Three Months Ended June 30,				Six Months Ended June 30,
(amounts in thousands, except per common share data)	2023		2022		2023		2022
Net (loss) income available to common shareholders	$	(4,456)	$	4,362	$	(9,416)	$	8,326

Net (loss) income used for EPS	$	(4,456)	$	4,362	$	(9,416)	$	8,326
Weighted-average number of common shares outstanding – basic	11,563		11,944		11,566		11,947
Weighted-average number of common shares outstanding – diluted	11,563		12,600		11,566		12,585
Basic (loss) earnings per common share	$	(0.39)	$	0.37	$	(0.81)	$	0.70
Diluted (loss) earnings per common share	$	(0.39)	$	0.35	$	(0.81)	$	0.66

The following table presents the reconciliation from basic to diluted weighted average shares outstanding used in the calculation of basic and diluted (loss) earnings per common share:

Three Months Ended
September 30, Nine Months Ended
September 30,
(amounts in thousands) 2022 2021 2022 2021
Weighted average shares used in computing net income (loss) per common share, basic 11,938 11,900 11,944 11,834
Add:
Public warrants — — — 372
Private warrants — — — 152
Service-based RSUs — 4 271 1
Weighted average shares used in computing net income (loss) per common share, diluted 11,938 11,904 12,215 12,359


	Three Months Ended June 30,		Six Months Ended June 30,
(amounts in thousands)	2023	2022	2023	2022
Weighted-average number of common shares outstanding – basic	11,563	11,944	11,566	11,947
Add:


Service-based RSUs	—	656	—	638
Weighted-average number of common shares outstanding – diluted	11,563	12,600	11,566	12,585

For basic (loss) earnings per common share, the performance shares are subject to forfeiture, and they are considered share-indexed instruments and not outstanding shares until they are vested. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the vesting criteria has not been met and they are not included.

1716

For the three and ~~nine~~six months ended ~~September~~June 30, 2023, our performance shares, public warrants, and private warrants were excluded from the computation of diluted weighted average shares outstanding as the necessary conditions had not been achieved for the performance shares and the average stock price for the period was below the strike price for the warrants. The performance shares are only considered in the calculation for diluted (loss) earnings per common share if they are dilutive in nature. The performance shares are only dilutive when the average share price is greater than the strike price and when positive net income is reported. During the three and six months ended June 30, 2023, the average share price was below the strike price and these shares were not included in the diluted (loss) earnings per common share calculations. For the three and six months ended June 30, 2023, our performance-based RSUs were excluded because the vesting is contingent upon the satisfaction of certain conditions which had not been achieved as of June 30, 2023. For the three and six months ended June 30, 2023, our service-based RSUs were excluded as the effect would be antidilutive.

For the three and six months ended June 30, 2022, our performance shares, public warrants, and private warrants were excluded from the computation of diluted weighted average shares outstanding as the necessary conditions had not been achieved for the performance shares and the average stock price for the period was below the strike price for the warrants. The performance shares are only considered in the calculation for diluted (loss) earnings per common share if they are dilutive in nature. The performance shares are only dilutive when the average share price is greater than the strike price and when positive net income is reported. During the three and ~~nine~~six months ended ~~September~~June 30, 2022, the average share price was below the strike price and these shares were not included in the diluted (loss) earnings per common share calculations. For the three and ~~nine~~six months ended ~~September~~June 30, 2022, our performance based and market condition RSUs were also excluded because the vesting is contingent upon the satisfaction of certain conditions which had not been achieved as of September 30, 2022. For the three and nine months ended September 30, 2022, 343 and 72, respectively, of our service-based RSUs were also excluded as the effect would be anti-dilutive.

For the three and nine months ended September 30, 2021, our performance shares were excluded from the computation of diluted weighted average shares outstanding as the necessary conditions had not been achieved. For the three months ended September 30, 2021, our public warrants and private warrants were excluded as the net loss for the period would make their inclusion anti-dilutive in nature. For the nine months ended September 30, 2021, our public warrants and private warrants were included as the average stock price for the period was above the strike price for the warrants. For the three and nine months ended September 30, 2021, our performance based and market conditionperformance-based RSUs were excluded because the vesting is contingent upon the satisfaction of certain conditions which had not been achieved as of ~~September~~June 30, 2021 For the three and nine months ended September 30, 2021, there were 4 and 1, respectively of service-based RSUs vested which were included in the computation of diluted weighted average shares outstanding.2022.

The following table presents the potentially dilutive shares that were excluded from the computation of diluted ~~net income~~ (loss) earnings per ~~share of~~ common ~~stock:~~share:


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended June 30,		Six Months Ended June 30,
(amounts in thousands)	(amounts in thousands)	2022	2021	2022	2021	(amounts in thousands)	2023	2022	2023	2022
Performance shares	Performance shares	300	300	300	300	Performance shares	300	300	300	300
Public warrants	Public warrants	17,227	16,929	17,227	—	Public warrants	17,294	17,227	17,294	17,227
Private warrants	Private warrants	5,476	6,946	5,476	—	Private warrants	5,409	5,476	5,409	5,476
Performance based and market-condition RSUs		348	348	348	348
Performance-based RSUs						Performance-based RSUs	745	348	745	348
Service-based RSUs	Service-based RSUs	343	—	72	—	Service-based RSUs	743	—	743	—
Total	Total	23,694	24,523	23,423	648	Total	24,491	23,351	24,491	23,351

NOTE 1312 — DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

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

In accordance with ASC 820, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for BMTX’s financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The fair value guidance provides a consistent definition of fair value, focusing on an exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

The fair value guidance also establishes a fair value hierarchy and describes the following three levels used to classify fair value measurements:


Level 1:			Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2:			Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3:			Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following methods and assumptions were used to estimate the fair value of BMTX’s financial instruments as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

Cash and cash equivalents

Cash and cash equivalents reported on the unaudited Consolidated Balance Sheets consists of non-interest bearing demand deposits, for which carrying value approximates fair value.

Accounts receivable, net

The carrying amount of accounts receivable approximates fair value because of the short-term nature of these items.

Liability for Private Warrants

The fair value of the private warrants was estimated using a modified version of the binomial lattice model incorporating the Cox-Ross-Rubenstein methodology at ~~September~~June 30, ~~2022~~2023 and ~~a modified version of the Black-Scholes option pricing model for European calls~~ at December 31, ~~2021.~~2022. We assumed a term for the private warrants equal to the contractual term from the date of the merger with Megalith and then discounted the resulting value to the valuation date.

Among the key inputs and assumptions used in the pricing formula at ~~September~~June 30, ~~2022~~2023 were the following: a term of ~~3.25~~2.52 years; volatility of ~~34%~~54%; a dividend yield of zero; an underlying stock price of ~~$6.69;~~$2.98; a risk free interest rate of ~~4.18%~~4.62%; and a closing price of the public warrants of ~~$0.72~~$0.15 per share. ~~The~~

Among the key inputs and assumptions used in the pricing formula at December 31, 2022 were the following: a term of 3.01 years; volatility of 43%; a dividend yield of zero; an underlying stock price of $5.21; a risk free interest rate of 4.17%; and a closing price of the public warrants of $0.52 per share.

At June 30, 2023 and December 31, 2022, the warrant liability is classified as a Level 3 fair value based upon the lowest level of input that is significant to the fair value measurement.

1918

The estimated fair value of BMTX’s financial instruments at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows:


						Fair Value Measurements at September 30, 2022											Fair Value Measurements at June 30, 2023
(amounts in thousands)	(amounts in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(amounts in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:											Assets:
Cash and cash equivalents	Cash and cash equivalents	$	26,433	$	26,433	$	26,433	$	—	$	—	Cash and cash equivalents	$	11,524	$	11,524	$	11,524	$	—	$	—
Accounts receivable, net	Accounts receivable, net	8,614		8,614		8,614		—		—		Accounts receivable, net	7,083		7,083		7,083		—		—
Liabilities:	Liabilities:											Liabilities:
Liability for private warrants	Liability for private warrants	$	3,997	$	3,997	$	—	$	—	$	3,997	Liability for private warrants	$	811	$	811	$	—	$	—	$	811


						Fair Value Measurements at December 31, 2021											Fair Value Measurements at December 31, 2022
(amounts in thousands)	(amounts in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(amounts in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:											Assets:
Cash and cash equivalents	Cash and cash equivalents	$	25,704	$	25,704	$	25,704	$	—	$	—	Cash and cash equivalents	$	21,108	$	21,108	$	21,108	$	—	$	—
Accounts receivable, net	Accounts receivable, net	9,194		9,194		9,194		—		—		Accounts receivable, net	8,260		8,260		8,260		—		—
Liabilities:	Liabilities:											Liabilities:
Liability for private warrants	Liability for private warrants	$	13,614	$	13,614	$	—	$	—	$	13,614	Liability for private warrants	$	2,847	$	2,847	$	—	$	—	$	2,847

NOTE 1413 — ~~RELATIONSHIP WITH OUR PARTNER BANK~~RELATED PARTY TRANSACTIONS

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

Cash management

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

~~Debt financing~~

~~As disclosed in~~ ~~Note 7- Borrowings from Partner Bank, our Partner Bank previously provided the Company with lines of credit, all of which have been terminated as of December 31, 2021.~~

Servicing fees and interchange income ~~from Partner Bank~~

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

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

On November 8,7, 2022, the Company and Customers Bank entered into the ~~First~~DPSA Amendment ~~to Deposit Processing Services Agreement (the “DPSA Amendment”)~~ to extend the Deposit ~~Servicing~~Processing Services Agreement termination date to the earlier of the Company’s successful completion of the transfer of the Company’s serviced deposits to a new ~~sponsor~~partner bank or June 30, 2023. The DPSA Amendment also removes Customers Bank’s obligation to pay the Company the difference between the Durbin-exempt and Durbin-regulated interchange revenues. The other terms of the Deposit Processing Services Agreement remain in effect through the new termination date.

On March 22, 2023, we signed the DPSA Second Amendment. The DPSA Second Amendment, among other things, extends the termination date of the Deposit Processing Services Agreement until the earlier of (i) the transfer of the Company’s serviced deposits to a Durbin-exempt partner bank; or (ii) June 30, 2024; and revises the fee structure of the Deposit Processing Services Agreement. The other terms of the Deposit Processing Services Agreement, as amended by the DPSA Amendment, remain in effect through the new termination date. See Note 15 - Subsequent Events for additional ~~information.~~information for this agreement.

On March 22, 2023, the Company and Customers Bank entered into the 2023 Deposit Servicing Agreement, under which, effective March 31, 2023, the Company will perform, on behalf of Customers Bank, Customer Bank’s services, duties, and obligations under the Private Label Banking Program Agreement (the “PLBPA”) by and between Customers Bank and T-Mobile USA, Inc. that are not required by Applicable Law (as defined in the 2023 Deposit Servicing Agreement) to be provided by an FDIC insured financial institution. The obligations of the Company and Customers Bank under the 2023 Deposit Servicing Agreement are similar to those under the Deposit Processing Services Agreement; provided, however, that (i) as of March 31, 2023, the 2023 Deposit Servicing Agreement and not the Deposit Processing Services Agreement shall govern the terms, conditions, roles, responsibilities, duties, and obligations of the Company and Customers Bank with respect to the PLBPA and the Depositor Accounts (as defined in the 2023 Deposit Servicing Agreement); (ii) the Deposit Processing Services Agreement is amended to the extent necessary or advisable to effect the same, including, without limitation, such that “Depositor” under the Deposit Processing Services Agreement shall not include any T-Mobile Customer (as defined in the PLBPA); and (iii) there is a different fee structure under the 2023 Deposit Servicing Agreement from that set forth in the Deposit Processing Services Agreement. The initial term of the 2023 Deposit Servicing Agreement continues until February 24, 2025, and will automatically renew for additional one-year terms unless either party gives written notice of non-renewal at least 180 days prior to the expiration of the then-current term. The 2023 Deposit Servicing Agreement may be terminated early by either party upon material breach, upon notice of an uncured objection from a regulatory authority, or by the Company upon 120 days’ written notice upon the satisfaction of certain conditions.

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

Transition Services Agreement

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

The Transition Services Agreement included a provision for providing the Company with assistance in the establishment and administration of a 401(k) plan for the benefit of Company employees. ~~Effective April 9, 2021, the~~The Customers Bank 401(k) plan ~~became~~is a multi-employer plan, as defined by the U.S. Department of Labor in accordance with the Employee Retirement Income Security Act of 1974, ~~covering~~and through December 31, 2022, the Customers Bank 401(k) covered both the full-time employees of Customers Bank and the Company. The Company ~~provides a matching contribution equal to 50% of the first 6% of the contributions made by~~records its ~~eligible participating employees. The Company’s employer~~ contributions to the Customers Bank 401(k) plan for the benefit of its employees for the three months ended September 30, 2022 and 2021 were $0.2 million, and $0.1 million, respectively. For the nine months ended September 30, 2022 and 2021, the Company’s employer contributions totaled $0.6 million and $0.5 million, respectively. These contributions are recordedPlan in Salaries and employee benefits inon the unaudited Consolidated Statements of (Loss) Income ~~(Loss)~~. The Company’s employer contribution to the Customers Bank 401(k) Plan for the three and six months ended June 30, 2022 totaled $0.2 million and $0.4 million, respectively.

Other

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

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

On November 29, 2021, the Company entered into an agreement with our Partner Bank which terminated the $10.0 million letter of credit and gave the Company the right to any shares that were forfeited as part of the ~~January 4, 2021 Share-Based Compensation Award.~~ ~~During the three and nine months ended September 30, 2022, respectively, 6,500 and 26,500 forfeited shares were reacquired by the Company from our Partner Bank.~~

Both the President and Executive Chairman of the Board of ~~our Partner~~Customers Bank are immediate family members of the Company’s CEO, and together with their spouses, own less than 5.0% of the Company’s outstanding common stock at ~~September~~June 30, ~~2022.~~2023.

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

On April 20, 2022, the Company entered into a Special Limited Agency Agreement (“SLA”) with ~~our Partner~~Customers Bank that provides for marketing assistance from the Company for ~~originating~~the referral of consumer installment loans funded by Customers Bank. In consideration for this marketing assistance, the Company receives certain fees specified within the ~~Special Limited Agency Agreement~~SLA which are recorded as a component of Other ~~Revenue~~ ~~within the~~revenue on the unaudited Consolidated Statements of (Loss) Income ~~(Loss)~~. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022, less than $0.1 million of~~2023, no revenue ~~has been~~was realized under the ~~Special Limited Agency Agreement.~~SLA. The SLA was terminated on May 16, 2023.

Positions with ~~our Partner~~Customers Bank are presented on ~~our~~the unaudited Consolidated Balance Sheets in Accounts receivable, net, Deferred revenue, ~~current,~~ and Accounts payable and accrued liabilities. The Accounts receivable balances related to ~~our Partner~~Customers Bank as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were ~~$1.8~~$0.3 million and ~~$5.5~~$1.4 million,, respectively. The Deferred revenue balances related to ~~our Partner~~Customers Bank as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were ~~$7.8~~$5.9 million and ~~$12.7~~$3.8 million,, respectively. The Accounts payable and accrued liabilities balances related to ~~our Partner~~Customers Bank as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were ~~$0.9~~zero and $3.8 million, ~~and~~ ~~$0.4 million~~, respectively.

The Company recognized ~~$17.3~~$11.1 million and ~~$60.9~~$22.6 million in revenues from ~~our Partner~~Customers Bank for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~,2023, respectively. Of these amounts, ~~$4.3~~$4.4 million and ~~$13.8~~$9.9 million are paid directly by MasterCard or individual account holders to the Company for the three and ~~nine~~six months ended June 30, 2023, respectively. These amounts are presented on the unaudited ~~September 30, 2022~~Consolidated Statements of (Loss) Income ~~, respectively.~~ in Total operating revenue.

The Company recognized ~~$20.6~~$20.5 million and ~~$60.0~~$43.6 million in revenues from ~~our Partner~~Customers Bank for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~,2022, respectively. Of these amounts, ~~$5.2~~$5.5 million and ~~$14.7~~$11.9 million are paid directly by MasterCard or individual account holders to the Company for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~,2022, respectively. These amounts are ~~included in~~ presented on the unaudited Consolidated Statements of (Loss) Income ~~(Loss)~~in Total operating revenue.

The Company recognized zero expenses from Customers Bank for the three and six months ended June 30, 2023, respectively.

The Company recognized zero and less than $0.1 million of expenses from ~~our Partner~~Customers Bank for the three and ~~nine~~ six months ended ~~September~~June 30, 2022,~~, respectively. The Company recognized less than~~ ~~$0.1 million~~ ~~and~~ ~~$0.2 million~~ ~~of expenses from our Partner Bank for the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2021~~, respectively. These amounts are ~~included in~~ presented on the unaudited Consolidated Statements of (Loss) Income ~~(Loss)~~in Total operating expenses.

NOTE 14 — RESTRUCTURING ACTIVITIES

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

Included within the PEP is a targeted reduction of the Company’s 2023 employee workforce of approximately 25% as compared to its headcount at December 31, 2022. This workforce reduction is in addition to targeted spend reduction and service provider rationalization.

The Company completed a workforce reduction of 61 employees during the six months ended June 30, 2023. The Company’s workforce reduction expenses, consisting of severance and other termination benefits for the three and six months ended June 30, 2023, totaled $0.3 million and $1.1 million, respectively, and are recorded in Restructuring, merger, and acquisition related expenses on the unaudited Consolidated Statements of (Loss) Income. $0.4 million of these expenses were incurred but not paid at June 30, 2023 and are included in Accounts payable and accrued liabilities on the unaudited Consolidated Balance Sheets.

NOTE 15 — SUBSEQUENT EVENTS

On ~~November 8, 2022,~~August 18, 2023, the Company and Customers Bank entered into a third amendment to the ~~First Amendment to~~ Deposit Processing Services Agreement (the “DPSA Third Amendment”). for the Higher Education serviced deposit accounts. The DPSA Third Amendment ~~among other things, will facilitate the transfer of the Company’s serviced deposits to a new sponsor bank and~~ extends the termination date of the Deposit ~~Servicing~~Processing Services Agreement until the earlier ~~of:~~of (i) ~~entry into a definitive agreement with a new sponsor bank to~~the transfer of the Company’s Higher Education serviced deposits to ~~such sponsor bank and the successful completion of such transfer;~~a Durbin-exempt partner bank; or (ii) ~~six months from December 31, 2022. The Amendment also removes Customers Bank’s obligation to pay~~April 15, 2025.

On August 20, 2023, the Company and FCB entered into an amendment to the ~~difference between the Durbin exempt and Durbin regulated interchange revenues. The other terms of the~~FCB Deposit Servicing Agreement ~~remain in effect through~~(the “FCB DPSA First Amendment”). The FCB DPSA First Amendment, among other things, (i) extends the ~~new termination date.~~initial term from four years to five years after the effective date, (ii) provides that FCB will work with the Company and Customers Bank on the timely transfer of existing student depositor accounts on or before the effective date, and as agreed to by the parties, and (iii) amends the effective date to be the date on which FCB takes on deposits from the existing student depositor accounts.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~The purpose of this~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to ~~facilitate an understanding~~provide a reader of ~~significant factors influencing~~our financial statements with a narrative from the ~~quarterly operating results,~~perspective of our Management on our financial condition, results of operations, liquidity, and ~~cash flows of BM Technologies, Inc. (“BMTX”). Additionally, this MD&A conveys our expectations of the potential impact of known trends, events, or uncertainties~~certain other factors that may ~~impact~~affect our future results. ~~You~~The following discussion and analysis should be read ~~this discussion~~ in conjunction with our interim unaudited consolidated financial statements and the related notes included in Item 1 “Unaudited Consolidated Financial Statements” of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. Historical results and percentage relationships are not necessarily indicative of operating results for future periods. Unless the context otherwise requires, for purposes of this Management’s Discussion and Analysis, references to the “Company,” “we,” ~~“us”,~~ and “our” refer to the business and operations of BM Technologies, Inc. (“BMTX”) and its subsidiaries.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, ~~contains~~including, without limitation, statements under the heading Management’s Discussion and Analysis of Financial Condition and Results of Operations, includes forward-looking statements within the meaning of Section 27A of the ~~Private~~ Securities ~~Litigation Reform~~ Act of ~~1995.~~1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements ~~are neither statements of historical or current fact nor are they assurances of future performance and~~ generally, but not always, can be identified by the use of forward-looking terminology, ~~such as~~including the words “believes”, “estimates”, “anticipates”, “expects”, “intends”, “plans”, “may”, “will”, ~~“could”, “should”~~“potential”, “projects”, ~~“plans”~~“predicts”, ~~“goal”, “targets”, “potential”, “estimates”, “pro forma”, “seeks”, “intends”~~“continue”, or ~~“anticipates”~~“should”, or, similar expressions. Forward-looking statements include discussions of strategy, financial projections (including our statements regarding cash flow projections and funding of ongoing operations), guidance and estimates (includingin each case, their ~~underlying assumptions), statements regarding plans, objectives, expectations,~~negative or ~~consequences of various transactions~~other variations or events (including the expected completion date or benefits of the First Sound Bank transaction), and statements about our future performance, operations, products, and services, and should be viewed with caution.comparable terminology.

~~Because~~These forward-looking statements ~~relate~~reflect our current views with respect to, among other things, statements relating to the Company’s assets, business, cash flows, condition (financial or otherwise), credit quality, financial performance, liquidity, short and long-term performance goals, prospects, results of operations, strategic initiatives, the benefits, cost, and synergies of completed acquisitions or dispositions, and the timing, benefits, costs, and synergies of future ~~they~~acquisitions, dispositions, and other growth opportunities. There can be no assurance that actual results will not materially differ from expectations. These statements are ~~subject~~based on Management’s current expectations, but actual results may differ materially due to ~~known and unknown~~various factors.These forward-looking statements involve a number of risks, uncertainties ~~assumptions, and changes in circumstances, many~~(some of which are beyond our ~~control,~~control), and other assumptions that ~~are difficult to predict as to timing, extent, likelihood, and degree of occurrence, and that could~~may cause actual results or performance to ~~differ~~be materially different from ~~the results~~those expressed or implied ~~or anticipated~~ by ~~the~~these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, but are not limited to the following:

•negative economic and political conditions that adversely affect the general economy, the job market, consumer confidence, the financial condition of our borrowers and consumer spending habits, which may affect, among other things, our revenues and provision for operating losses;

•~~COVID-19’s continuing effects on the economic and business environments in which we operate;~~

•strategic, market, operational, liquidity and interest rate risks associated with our business;

•our concentration of credit risk and any potential deterioration in the financial quality of our partner bank;

•the risks of expansion into new product markets;

•risks with respect to recent, pending, or potential future mergers or acquisitions, including our ability to successfully obtain regulatory, and when required, shareholder approval and thereafter, to complete acquisitions and successfully integrate or expand businesses and operations that we acquire;

•our ability to attract and retain key employees;

•competition from financial institutions and other financial service providers, including non-bank financial technology providers, and our ability to attract customers from other financial institutions;

•losses due to fraudulent and negligent conduct of our customers, third party service providers, or employees;

•cybersecurity risks and the vulnerability of our network and the systems of parties with whom we contract, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss, and other security breaches that could adversely affect our business and financial performance or reputation;

•our reliance on third parties to provide key components of our business infrastructure and services required to operate our business;

•the risk that we may be required to make substantial expenditures to keep pace with regulatory initiatives and the rapid technological changes in the financial services market;

•the availability of and access to capital;

•legislative, regulatory, or accounting changes that may adversely affect us;

•adverse results (including judgments, costs, fines, reputational harm, inability to obtain necessary approvals, and/or other negative effects) from current or future litigation, regulatory proceedings, examinations, investigations, or similar matters, or developments related thereto;

•failure to maintain an effective system of disclosure controls and ~~internal control over financial reporting and fully remediate the previously identified material weaknesses in our~~ internal control over financial reporting;

•any event or development that would cause us to conclude that there was impairment of any asset, including intangible assets, such as goodwill; and

•other risks and uncertainties disclosed in documents filed or furnished by us with or to the SEC, any of which could cause actual results to differ materially from future results expressed, implied, or otherwise anticipated by such forward-looking statements.

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We caution readers that the foregoing list of factors is not exclusive, is not necessarily in order of importance, and readers should not place undue reliance on forward-looking statements. Additional factors that may cause actual results to differ materially from those contemplated by any forward-looking statements may also be found in our ~~2021~~2022 Annual Report on Form 10-K (including the “Risk Factor” section of that report), Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the SEC and available at the SEC’s website at http://www.sec.gov. We do not intend to and, except as required by law, hereby disclaim any obligation to update or revise any forward-looking statement contained in this Quarterly Report on Form 10-Q, which speaks only as of the date of its filing with the SEC, whether as a result of new information, future events, or otherwise.

BUSINESS OVERVIEW

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

On November 15, 2021, the Company announced the signing of a definitive agreement to merge with First Sound Bank (“FSB”), a Seattle, Washington-based community business bank. BMTX will pay up to $7.22 in cash for each share of FSB common stock, or approximately $23 million in aggregate consideration, subject to certain closing conditions and adjustments as outlined in the definitive agreement. The combined company, expected to be named BMTX Bank, will be a fintech-based bank focused on serving customers digitally nationwide, supported by its community banking division that is expected to continue serving the greater Seattle market. Although an application was submitted to approve the merger, we now plan to resubmit that application in order to respond to questions posed by regulators. No action will be taken by regulators until the application is resubmitted. We are currently targeting the resubmission of the application within the next 60 days. In addition to regulatory approvals, the transaction remains subject to other customary closing conditions and is now targeted to close in the first half of 2023. Closing after December 31, 2022 will require an amendment to extend the termination date of the agreement. Although we currently believe that all parties intend to proceed with the transaction, and discussions are underway to extend the termination date, it has not been extended at this time and no assurances can be given whether, or for how long, the termination date will be extended.

During the quarter ended June 30, 2022, the Company achieved a key milestone with the execution of agreements to provide technology to a new BaaS partner. This new BaaS partner has global operations and tens of millions of U.S. customers. BMTX was awarded this relationship through a competitive RFP process, underscoring the competitiveness of our BaaS offering in the marketplace. With the addition of this new partner, the Company will have expanded its roster of large well-known brand-name partners. This relationship may become even more valuable if the Company is able to vertically integrate this new partnership with the addition of a banking charter. To protect this partner’s launch strategy, the Company will not identify the partner by name until commercial launch, which is expected to occur in early 2023, but the Company began development work with this partner during the quarter ended June 30, 2022, continued development work during the quarter ended September 30, 2022, and expects to complete additional development work through the remainder of 2022. Although this partnership could be of significant future benefit to the Company, there can be no assurances that this relationship will be expanded to other products or services, including those that would be possible with the potential addition of a bank charter.

~~Merger with Megalith Financial Acquisition Corp~~

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

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

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

~~COVID-19~~

In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization. The spread of COVID-19 created a global public health crisis that resulted in unprecedented uncertainty, economic volatility, and disruption in financial markets and in governmental, commercial, and consumer activity in the United States and globally, including the markets that BMTX serves. In response to the pandemic, we enabled nearly all our employees to work remotely and limited business travel. We are a “Remote First” company and most of our employees have no assigned work location or regular in-office work requirement.

With the initial outbreak of COVID-19 in 2020, the Company experienced an initial decline in revenues as compared to the pre-COVID-19 period. On March 27, 2020, the “Coronavirus Aid, Relief, and Economic Security (“CARES”) Act” was signed into law and contained substantial tax and spending provisions intended to address the impact of the COVID-19 pandemic and stimulate the economy, including cash payments to taxpayers, increased unemployment benefits, and to support higher education through the Higher Education Emergency Relief Fund (“HEERF”). This stimulus resulted in increased serviced deposit balances, debit card spend, and revenues, a trend that continued into 2021; however, growth has slowed in 2022 as compared to the accelerated growth rate we experienced during early 2021.

~~BUSINESS MEASUREMENTS~~

~~We believe that the following business measurements are important performance indicators for our business:~~

•~~Debit card POS spend (higher education and new business).~~ Spend represents the dollar amount that our customers spend on their debit cards through a signature or PIN network. Spend is a key performance indicator, as the Company earns a small percentage of every dollar spent as interchange income and spend is the primary driver of our card revenues.

•~~Serviced deposits (ending and average; higher education and new business).~~ Serviced deposits represent the dollar amount of deposits that are in customer accounts serviced by our Company. Our deposit servicing fee is based on a contractual arrangement with our Partner Bank and the average balance of serviced deposits is the primary driver of our deposit servicing fees. Average deposits have the strongest correlation to current period serviced deposits, but ending deposits provide information at a point in time and serve as the starting point for the following period.

•~~Higher education retention.~~ Retention is a key measure of our value proposition with higher education customers. We measure retention in terms of Signed Student Enrollments (“SSEs”), which represents the number of students enrolled at higher education institutions. Retention is calculated by subtracting lost SSEs from starting SSEs and taking that amount as a percentage of the starting SSEs.

•~~Higher education financial aid refund disbursement.~~ Represents the dollar amount of all funds that we process for a college or university partner, whether it is distributed by ACH, check, or into a BankMobile Vibe account. This is a measure of the business we process for our higher education partners in exchange for their subscription and other fees, as well as a measure of the potential that we have the opportunity to capture into our serviced accounts.

•~~Higher education organic deposits.~~ Organic deposits represent the dollar total of all deposits made into a higher education BankMobile Vibe account except for funds processed through a college or university partner. Because this includes funds that the account holder adds to the account and excludes the funds processed through the higher education institution, it is viewed as a strong indicator of traction with the customer.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

For information regarding our critical accounting policies and estimates, please refer to our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022. There have been no material changes to the critical accounting policies and estimates previously disclosed in that report.

NEW ACCOUNTING PRONOUNCEMENTS

From time to time, new accounting pronouncements are issued by the FASB ~~has~~that are adopted by BMTX as of the required effective dates. During the six months ended June 30, 2023 there were no ASUs adopted by the Company that were considered material and there were no ASUs issued ~~accounting standards that have~~prior to June 30, 2023, which were not yet ~~become~~ effective, ~~and that may impact BMTX’s interim unaudited consolidated~~considered relevant or material to the Company’s financial statements ~~or its disclosures in future periods.~~ taken as a whole.

~~Note 2 — Basis of Presentation and Significant Accounting Policies~~ ~~provides information regarding those accounting standards.~~

RESULTS OF OPERATIONS

The following discussion of our results of operations should be read in conjunction with our interim unaudited consolidated financial statements, including the accompanying notes.

The following summarized tables set forth our operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:

Three Months Ended
September 30, Change %
Change
(dollars in thousands, except per share data) 2022 2021
Operating revenues $ 19,858 $ 22,841 $ (2,983) (13) %
Operating expenses 24,138 20,592 3,546 17 %
Income (loss) from operations (4,280) 2,249 (6,529) NM
Gain (loss) on fair value of private warrant liability (1,369) 6,042 (7,411) (123) %
Interest expense — — — — %
Income (loss) before income tax expense (benefit) (5,649) 8,291 (13,940) NM
Income tax expense (benefit) (729) 1,167 (1,896) NM
Net income (loss) $ (4,920) $ 7,124 $ (12,044) NM
Basic earnings (loss) per share $ (0.41) $ 0.60 $ (1.01) NM
Diluted earnings (loss) per share $ (0.41) $ 0.60 $ (1.01) NM


	Three Months Ended June 30,				Change		% Change
(dollars in thousands, except per common share data)	2023		2022
Operating revenues	$	12,987	$	23,008	$	(10,021)	(44)	%
Operating expenses	18,028		23,377		(5,349)		(23)	%
(Loss) income from operations	(5,041)		(369)		(4,672)		NM
Gain on fair value of private warrant liability	595		5,640		(5,045)		(89)	%
(Loss) income before income tax expense	(4,446)		5,271		(9,717)		NM
Income tax expense	10		909		(899)		(99)	%
Net (loss) income	$	(4,456)	$	4,362	$	(8,818)	NM

Basic (loss) earnings per common share	$	(0.39)	$	0.37	$	(0.76)	NM
Diluted (loss) earnings per common share	$	(0.39)	$	0.35	$	(0.74)	NM

NM refers to changes greater than 150%.

For the three months ended ~~September~~June 30, ~~2022, net~~2023, Net income decreased $12.0 million, which included a $7.4 million decrease in the gain (loss) on fair value of the private warrant liability as compared to the three months ended September 30, 2021. Income (loss) from operations for the three months ended September 30, 2022 decreased $6.5$8.8 million as compared to the three months ended ~~September~~June 30, ~~2021.~~ 2022, resulting in a Net loss of $4.5 million, which included a $5.0 million decrease in the Gain on fair value of private warrant liability as compared to the three months ended June 30, 2022. Loss from operations for the three months ended June 30, 2023 increased by $4.7 million as compared to the three months ended June 30, 2022. Operating revenues decreased by ~~$3.0~~$10.0 million, or ~~13%~~44%, and ~~operating~~Operating expenses ~~increased~~ decreased by ~~$3.5~~$5.3 million, or ~~17%~~23%. Changes in ~~quarterly~~ operating revenues and expenses are discussed in greater detail below. Basic and diluted (loss) earnings ~~(loss)~~ per common share, which decreased to ~~$(0.41)~~$(0.39), are both driven by the impact of the total net loss in the current ~~year on the earnings (loss) per share calculations.~~

year.

Nine Months Ended
September 30, Change %
Change
(dollars in thousands, except per share data) 2022 2021
Operating revenues $ 67,913 $ 69,444 $ (1,531) (2) %
Operating expenses 69,600 64,682 4,918 8 %
Income (loss) from operations (1,687) 4,762 (6,449) (135) %
Gain on fair value of private warrant liability 6,916 17,989 (11,073) (62) %
Interest expense — (96) 96 (100) %
Income before income tax expense 5,229 22,655 (17,426) (77) %
Income tax expense 1,823 4,262 (2,439) (57) %
Net income $ 3,406 $ 18,393 $ (14,987) (81) %
Basic earnings per share $ 0.29 $ 1.55 $ (1.26) (81) %
Diluted earnings per share $ 0.28 $ 0.03 $ 0.25 NM


	Six Months Ended June 30,				Change		% Change
(dollars in thousands, except per common share data)	2023		2022
Operating revenues	$	26,471	$	48,055	$	(21,584)	(45)	%
Operating expenses	37,887		45,461		(7,574)		(17)	%
(Loss) income from operations	(11,416)		2,594		(14,010)		NM
Gain on fair value of private warrant liability	2,016		8,284		(6,268)		(76)	%
(Loss) income before income tax expense	(9,400)		10,878		(20,278)		NM
Income tax expense	16		2,552		(2,536)		(99)	%
Net (loss) income	$	(9,416)	$	8,326	$	(17,742)	NM

Basic (loss) earnings per common share	$	(0.81)	$	0.70	$	(1.51)	NM
Diluted (loss) earnings per common share	$	(0.81)	$	0.66	$	(1.47)	NM

NM refers to changes greater than 150%.

For the ~~nine~~six months ended ~~September~~June 30, ~~2022, net~~2023, Net income decreased $15.0 million, which included a $11.1 million decrease in the gain on fair value of the private warrant liability as compared to the nine months ended September 30, 2021. Income (loss) from operations for the nine months ended September 30, 2022 decreased $6.4$17.7 million as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~ 2022, resulting in a Net loss of $9.4 million, which included a $6.3 million decrease in the Gain on fair value of private warrant liability as compared to the six months ended June 30, 2022. Income from operations for the six months ended June 30, 2023 decreased $14.0 million, as compared to the six months ended June 30, 2022, resulting in a Loss from operations of $11.4 million. Operating revenues decreased by ~~$1.5~~$21.6 million, or 2%45%, and ~~operating~~Operating expenses ~~increased~~ decreased by ~~$4.9~~$7.6 million, or 8%17%. Changes in ~~year to date~~ operating revenues and expenses are discussed in greater detail below. Basic and diluted (loss) earnings per common share, which decreased to $(0.81), are both driven by the impact of the total net loss in the current year.

Operating Revenues


	Three Months Ended June 30,						% Change
(dollars in thousands)	2023		2022		Change
Interchange and card revenue	$	1,804	$	5,315	$	(3,511)	(66)	%
Servicing fees	7,700		13,295		(5,595)		(42)	%
Account fees	1,910		2,207		(297)		(13)	%
University fees	1,373		1,446		(73)		(5)	%
Other revenue	200		745		(545)		(73)	%
Total operating revenues	$	12,987	$	23,008	$	(10,021)	(44)	%

Total Operating revenues decreased $10.0 million, or 44%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. This decrease is primarily attributable to a $5.6 million, or 42%, decrease in Servicing fees, driven primarily by a 53% reduction in average total deposits, offset in part by higher deposit yields under the new deposit processing services agreements, and a $3.5 million, or 66%, decrease in Interchange and card revenue driven primarily by the loss of Durbin-exempt rates as well as slightly lower overall spend.


	Six Months Ended June 30,						% Change
(dollars in thousands)	2023		2022		Change
Interchange and card revenue	$	4,883	$	11,958	$	(7,075)	(59)	%
Servicing fees	14,332		27,487		(13,155)		(48)	%
Account fees	4,050		4,762		(712)		(15)	%
University fees	2,879		3,049		(170)		(6)	%
Other revenue	327		799		(472)		(59)	%
Total operating revenues	$	26,471	$	48,055	$	(21,584)	(45)	%

Total Operating revenues decreased $21.6 million, or 45%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. This decrease is primarily attributable to a $13.2 million, or 48%, decrease in Servicing fees, driven primarily by a 49% reduction in average total deposits, offset in part by higher deposit yields during the second quarter of 2023 under the new deposit processing services agreements, and a $7.1 million, or 59%, decrease in Interchange and card revenue driven primarily by the loss of Durbin-exempt rates as well as slightly lower overall spend.

~~Basic and diluted earnings per share, which decreased and increased~~Operating Expenses


	Three Months Ended June 30,						% Change
(dollars in thousands)	2023		2022		Change
Technology, communication, and processing	$	6,364	$	7,297	$	(933)	(13)	%
Salaries and employee benefits	6,139		10,440		(4,301)		(41)	%
Professional services	2,338		2,420		(82)		(3)	%
Provision for operating losses	1,813		1,839		(26)		(1)	%
Occupancy	10		368		(358)		(97)	%
Customer related supplies	222		221		1		—	%
Advertising and promotion	125		84		41		49	%
Restructuring, merger, and acquisition related expenses	274		1		273		NM
Other expense	743		707		36		5	%
Total operating expenses	$	18,028	$	23,377	$	(5,349)	(23)	%

NM refers to $0.29 and $0.28, respectively, are both driven primarily by the impact of the private warrant adjustments on the earnings per share calculations. During the nine months ended September 30, 2022, the average common stock share price was below the warrant strike price, and as a result, the warrants are not considered dilutive. During the nine months ended September 30, 2021, the average common stock share price waschanges greater than ~~the warrant strike price resulting in the warrants being considered dilutive.~~

~~Operating Revenues~~

Three Months Ended
September 30, %
Change
(dollars in thousands) 2022 2021 Change
Revenues:
Interchange and card revenue $ 5,325 $ 6,529 $ (1,204) (18) %
Servicing fees from Partner Bank 10,163 11,823 (1,660) (14) %
Account fees 2,110 2,569 (459) (18) %
University fees 1,357 1,474 (117) (8) %
Other revenue 903 446 457 102 %
Total operating revenues $ 19,858 $ 22,841 $ (2,983) (13) %
150%.

Total ~~revenues~~Operating expenses decreased ~~$3.0~~$5.3 million, or ~~13%~~23%, in the three months ended ~~September~~June 30, ~~2022~~2023 as compared to the three months ended ~~September~~June 30, ~~2021.~~2022. This decrease is primarily attributable to a ~~$1.7~~$4.3 million, or ~~14% decrease in~~ ~~Servicing fees from Partner Bank,~~ ~~a $1.2 million or 18% decrease in~~ ~~Interchange and card revenue~~ ~~which was primarily driven by a 15% reduction in spend volume in the Higher Education business, a $0.5 million, or 18%~~41%, decrease in ~~Account fees,~~Salaries and employee benefits, driven primarily by a $2.3 million reduction in share-based compensation expenses due to the full vesting of the January 4, 2021 Share-Based Compensation Award, and a ~~$0.1~~$2.0 million reduction driven primarily by the effect of the PEP initiatives. In addition, there was a $0.9 million, or 8%13%, decrease Technology, communication, and processing driven primarily by cost savings from the PEP and higher capitalization of internally developed software expenses and a $0.4 million, or 97%, decrease in ~~University fees. The decrease in~~ ~~Servicing fees from Partner Bank~~ Occupancyis due to ~~a 5% decrease~~physical office closures in ~~average serviced deposit balances; $1.6 billion for~~2023.These decreases were offset in part by $0.3 million of Restructuring, merger, and acquisition related expenses incurred in order to execute the ~~three~~PEP cost savings initiatives.


	Six Months Ended June 30,						% Change
(dollars in thousands)	2023		2022		Change
Technology, communication, and processing	$	13,582	$	14,215	$	(633)	(4)	%
Salaries and employee benefits	12,564		19,922		(7,358)		(37)	%
Professional services	4,978		4,792		186		4	%
Provision for operating losses	3,490		3,441		49		1	%
Occupancy	24		675		(651)		(96)	%
Customer related supplies	450		451		(1)		—	%
Advertising and promotion	243		197		46		23	%
Restructuring, merger, and acquisition related expenses	993		290		703		NM
Other expense	1,563		1,478		85		6	%
Total operating expenses	$	37,887	$	45,461	$	(7,574)	(17)	%

NM refers to changes greater than 150%.

Total Operating expenses decreased $7.6 million, or 17%, in the six months ended ~~September~~June 30, 2022 as compared to $1.7 billion for the three months ended September 30, 2021; and an approximate $1.0 million increase in interest paid to serviced deposit account holders for the three months ended September 30, 20222023 as compared to the ~~three~~six months ended ~~September~~June 30, ~~2021. These decreases were partially offset by a $0.5 million, or 102%, increase in~~ ~~Other revenue~~ ~~due to an increase in development projects for our BaaS partners which vary based on project status, contracts, and milestones.~~

Nine Months Ended
September 30, %
Change
(dollars in thousands) 2022 2021 Change
Revenues:
Interchange and card revenue $ 17,283 $ 21,530 $ (4,247) (20) %
Servicing fees from Partner Bank 37,650 31,774 5,876 18 %
Account fees 6,872 7,847 (975) (12) %
University fees 4,406 4,129 277 7 %
Other revenue 1,702 4,164 (2,462) (59) %
Total operating revenues $ 67,913 $ 69,444 $ (1,531) (2) %

~~Total revenues decreased $1.5 million, or 2%, in the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021.~~2022. This decrease is primarily attributable to a ~~$4.2~~$7.4 million, or ~~20%~~37%, decrease in ~~Interchange~~Salaries and ~~card revenue~~employee benefits, driven primarily by ~~lower spend volume as well as~~ a ~~$1.0~~$4.5 million reduction in share-based compensation expenses due to the full vesting of the January 4, 2021 Share-Based Compensation Award, and a $2.9 million reduction driven primarily by the effect of the PEP initiatives. In addition, there was a $0.6 million, or ~~12%~~4%, decrease Technology, communication, and processing driven primarily by cost savings from the PEP and higher capitalization of internally developed software expenses and a $0.7 million, or 96%, decrease in ~~Account fees~~Occupancy~~, and a $2.5 million decrease in~~ ~~Other revenue~~ due to ~~a reduction~~physical office closures in ~~development projects for our BaaS partners which vary based on project status, contracts, and milestones.~~2023. These decreases were ~~partially~~ offset in part by ~~a $5.9~~$0.7 million ~~or 18%, increase~~of increased Restructuring, merger, and acquisition related expenses incurred in ~~Servicing fees from Partner Bank. The increase is primarily due~~order to ~~an increase in average serviced deposit balances for~~execute the ~~period which increased approximately 24% to $1.9 billion for the nine months ended September 30, 2022 as compared to $1.5 billion for the nine months ended September 30, 2021.~~

PEP cost savings initiatives.

~~Operating Expenses~~

Three Months Ended
September 30, %
Change
(dollars in thousands) 2022 2021 Change
Technology, communication, and processing $ 7,731 $ 5,082 $ 2,649 52 %
Salaries and employee benefits 10,773 9,137 1,636 18 %
Professional services 2,454 3,496 (1,042) (30) %
Provision for operating losses 1,564 1,067 497 47 %
Occupancy 160 192 (32) (17) %
Customer related supplies 225 828 (603) (73) %
Advertising and promotion 242 176 66 38 %
Merger and acquisition related — — — 100 %
Other expense 989 614 375 61 %
Total operating expenses $ 24,138 $ 20,592 $ 3,546 17 %

For the three months ended September 30, 2022, operating expenses increased $3.5 million, or 17%, as compared to the three months ended September 30, 2021. The increase is primarily attributable to a $2.6 million increase in ~~Technology, communication, and processing,~~ ~~a $1.6 million increase in~~ ~~Salaries and employee benefits,~~ ~~a $0.5 million increase in~~ ~~Provision for operating losses,~~ ~~and a $0.4 million increase in~~ ~~Other expense.~~ ~~These increases were partially offset by a $1.0 million decrease in~~ ~~Professional services~~ ~~and a $0.6 million decrease in~~ ~~Customer related supplies~~.

~~The increase in~~ ~~Technology, communication, and processing~~ is related to the negotiation of a service agreement with a service provider during the prior year, which included retroactive pricing benefits and a one-time credit reducing the quarterly expense in the three month period ended September 30, 2021 as compared to September 30, 2022 by approximately $2.5 million. The increase in ~~Salaries and employee benefits~~ ~~is driven by an increase in average headcount, annual merit raises, and the vesting of equity awards granted in September 2021. The increase in~~ ~~Provision for operating losses~~ ~~is driven by adverse losses experienced in the serviced deposit accounts. The increase in~~ ~~Other expense~~ ~~is driven primarily by increased insurance expenses and employee travel expenses as compared to the prior year. The decrease in~~ ~~Professional services~~ ~~is driven by reduced audit, consulting, and other professional services spend and internalization of previously outsourced personnel in the current year. The decrease in~~ ~~Customer related supplies~~ ~~is driven by reduced consumption of customer related supplies and vendor credits provided and utilized in the current year under the new service agreement negotiated in the prior year.~~

Nine Months Ended
September 30, %
Change
(dollars in thousands) 2022 2021 Change
Technology, communication, and processing $ 21,944 $ 21,903 $ 41 — %
Salaries and employee benefits 30,656 27,253 3,403 12 %
Professional services 7,225 7,359 (134) (2) %
Provision for operating losses 5,006 3,797 1,209 32 %
Occupancy 875 866 9 1 %
Customer related supplies 676 1,475 (799) (54) %
Advertising and promotion 461 492 (31) (6) %
Merger and acquisition related 290 — 290 100 %
Other expense 2,467 1,537 930 61 %
Total operating expenses $ 69,600 $ 64,682 $ 4,918 8 %

For the nine months ended September 30, 2022, operating expenses increased $4.9 million, or 8%, as compared to the nine months ended September 30, 2021. The increase is primarily attributable to a $3.4 million increase in ~~Salaries and employee benefits,~~ ~~a $1.2 million increase in~~ ~~Provision for operating losses, anda $0.9 million increase in~~ ~~Other expense. These increases were partially offset by a $0.8 million decrease in~~ ~~Customer related supplies~~.

~~The increase in~~ ~~Salaries and employee benefits~~ ~~is driven by an increase in average headcount, annual merit raises, and the vesting of equity awards granted in September 2021. The increase in~~ ~~Provision for operating losses~~ ~~is driven by adverse losses experienced in serviced deposit accounts. The increase in~~ ~~Other expense~~ ~~is driven primarily by increased insurance expenses, employee travel expenses, and the timing of certain taxes and fees as compared to the prior year. The decrease in~~ ~~Customer related supplies~~ ~~is driven by reduced consumption of customer related supplies and vendor credits provided and utilized in the current year under the new service agreement negotiated in the prior year.~~

Income Tax Expense

The Company’s effective tax rate was ~~12.9%~~(0.2)% and ~~14.1%~~(0.2)% for the three and six months ended ~~September~~June 30, ~~2022 and 2021,~~2023, respectively. The Company’s effective tax rate was ~~34.9%~~17.2% and ~~18.8%~~23.5% for the ~~nine~~three and six months ended ~~September~~June 30, 2022, ~~and 2021,~~ respectively. The ~~effective tax rate differs from~~Company was in a taxable loss position for the ~~Company’s marginal tax rate of 27.3% due to~~three and six months ended June 30, 2023 and was in a taxable income position for the non-taxable fair value adjustments related to the non-compensatory private warrant liability being recorded through earnings, offset by changes to the valuation allowance established against deferred tax assets.three and six months ended June 30, 2022.

LIQUIDITY AND CAPITAL RESOURCES

Our Cash and cash equivalents consist of non-interest bearing, highly-liquid demand deposits. We had ~~$26.4~~$11.5 million of Cash and cash equivalents at ~~September~~June 30, ~~2022~~2023 as compared to ~~$25.7~~$21.1 million of Cash and cash equivalents at December 31, ~~2021.~~2022.

We ~~currently~~ finance our operations through cash flows provided primarily by operating activities. We ~~continue to project positive operating cash flows for the 2022 fiscal year and we~~ intend to fund our ongoing operating activities with our existing cash and expected cash flows from future operations. However, should additional liquidity be necessary, the Company could consider equity or debt financing, but there are no assurances that additional capital would be available or on terms that are acceptable to us.

Management has performed this required assessment as of ~~November 15, 2022~~August 21, 2023 including consideration of the effect of the ~~First~~DPSA Third Amendment, ~~to Deposit Processing Services Agreement (the “DPSA Amendment”) entered into between the Company and Customers Bank on November 8, 2022,~~ see Note 15 - Subsequent Events for additional information, and the 2023 Deposit Servicing Agreement with Customers Bank and believes there is sufficient funds available to support its ongoing business operations and continue as a going concern for at least the next 12 months with projected liquidity of ~~not less than $5~~$13.0 million ~~even with the anticipated termination of the DPSA Amendment not later than June 30, 2023.~~at August 21, 2024.

The table below summarizes our cash flows for the periods indicated:


		Nine Months Ended September 30,						% Change			Six Months Ended June 30,						% Change
(dollars in thousands)	(dollars in thousands)	2022		2021		Change				(dollars in thousands)	2023		2022		Change
Net cash provided by operating activities		$	7,450	$	22,082	$	(14,632)	(66)	%
Net cash (used in) provided by operating activities										Net cash (used in) provided by operating activities	$	(4,064)	$	12,423	$	(16,487)	(133)	%
Net cash used in investing activities	Net cash used in investing activities	(4,519)		(552)		(3,967)		NM		Net cash used in investing activities	(3,086)		(3,441)		355		(10)	%
Net cash used in financing activities	Net cash used in financing activities	(2,202)		(4,112)		1,910		(46)	%	Net cash used in financing activities	(2,434)		(2,202)		(232)		11	%
Net increase in cash and cash equivalents		$	729	$	17,418	$	(16,689)	(96)	%
Net decrease in cash and cash equivalents										Net decrease in cash and cash equivalents	$	(9,584)	$	6,780	$	(16,364)	NM

NM refers to changes greater than 150%.

Cash flows used in operating activities

Cash used in operating activities was $4.1 million in the six months ended June 30, 2023 which is a $16.5 million net decrease in cash provided by operating activities

~~Cash provided by operating activities was $7.5 million in the nine months ended September 30, 2022 which is a $14.6 million decrease~~ as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021.The~~2022. The decrease in net cash provided by operating activities is driven primarily by ~~$8.2~~a $16.0 million ~~reduced sources~~decrease in cash Net income, a $1.2 million decreased source of cash from ~~Deferred Revenue,~~Accounts receivable ~~$4.8~~, and a $3.1 million increased use of cash for ~~Prepaid expenses~~Accounts payable and ~~other assets~~accrued liabilities, ~~, and $2.9~~offset in part by a $1.8 million ~~increased~~decreased use of cash for Taxes payable,a $1.6 million increased source of cash from Deferred revenue, and a $0.4 million decreased use of cash for Operating lease liabilities.

Cash flows used in investing activities

Cash used in investing activities ~~increased $4.0~~decreased $0.4 million in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, primarily due to ~~increased~~decreased capitalization of development costs related to internal use ~~software.~~software and decreased purchases of equipment.

Cash flows used in financing activities

Cash used in financing activities ~~decreased $1.9~~increased $0.2 million in the six months ended June 30, 2023 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, primarily due to larger tax payments related to the net settlement of share-based compensation awards versus the private warrant repurchase transaction during the ~~current period versus the recapitalization transaction and payoff of borrowings in the~~ prior period.

ITEM 3. QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Credit Risk

We are exposed to various economic risks in the normal course of business ~~such as~~including concentration of credit risk. Potential concentration of credit risk consists primarily of accounts receivable from ~~our Partner~~Customers Bank, BaaS partners, MasterCard, and ~~higher education~~Higher Education institution clients. Historically, we have not experienced any material losses related to these balances and believe that there is minimal risk of expected future losses. However, there can be no assurance that there will not be losses on these balances.

At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021, our Partner~~2022, Customers Bank accounted for ~~21%~~4% and ~~61%~~17% of our total Accounts receivable, net, respectively. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, a BaaS partner accounted for ~~25%~~59% and ~~13%~~60% of our total Accounts receivable, net, respectively. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021, a second BaaS partner accounted for 28% and 0% of our total~~ ~~Accounts receivable, net,~~ ~~respectively. At September 30,~~ 2022, ~~and December 31, 2021, Universities accounted for 18% and 9% of our total~~ ~~Accounts receivable, net, respectively. At September 30, 2022 and December 31, 2021,~~ MasterCard accounted for 8%21% and ~~17%~~10% of our total Accounts receivable, net, respectively.

Financial instruments that potentially subject the Company to credit risk consist principally of cash held in the Company's operating account. Cash is maintained in accounts with ~~our Partner~~Customers Bank, which, at times may exceed the FDIC coverage limit of $250,000. At ~~September~~June 30, ~~2022~~,2023, the Company has not experienced losses on these cash accounts and ~~management~~Management believes, based upon the quality of ~~our Partner~~Customers Bank, that the credit risk with regard to these deposits is not significant.

ITEM 4. CONTROLS AND PROCEDURES

~~(a)~~ Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our Management, including our Chief Executive Officer, Co-Chief Executive Officer, and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of ~~management,~~Management, including our Chief Executive Officer, ~~(our principal executive officer)~~Co-Chief Executive Officer, and our Chief Financial Officer, ~~(our principal financial officer),~~ we conducted an evaluation of the effectiveness of our disclosure controls and procedures ~~as defined in Exchange Act Rule 13a-15(e), as of September 30, 2022.~~

We identified material weaknesses in our internal control over financial reporting, as described in Part II, Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2021, which were not fully remedied as of September 30, 2022. A material weakness is a deficiency or combination of deficiencies, in internal control over financial reporting,(as such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. Accordingly, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

~~(b) Changes in Internal Control Over Financial Reporting~~

~~Except as set forth in the following sentences, no change in our internal control over financial reporting (as that~~ term is defined in Exchange Act Rule ~~13a-15(f)~~13a-15(e)) ~~occurred~~, as of June 30, 2023. Based on this evaluation, the Company’s Chief Executive Officer, Co-Chief Executive Officer, and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of that date.

Changes in Internal Control over Financial Reporting

In the ordinary course of business, we routinely review our system of internal control over financial reporting and make changes to our systems and processes that are intended to ensure an effective internal control environment. Certain internal control deficiencies were identified during the ~~fiscal~~second quarter ~~ended September 30, 2022~~of 2023, that upon assessment, did not rise to the level of a material weakness. Management is actively engaged in the implementation of remediation plans to address the controls contributing to these control deficiencies. There were no changes in the Company’s internal control over financial reporting during the second quarter of 2023 that have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

As of December 31, 2021, we had concluded that our internal control over financial reporting was not effective. During 2022, we have been implementing and will continue to implement changes that are both organizational and process-focused to improve the control environment of the Company.

As of September 30, 2022, and as a result of these changes, substantial progress has been made to remediate the previously identified material weaknesses in our internal control over financial reporting. These weaknesses will not be considered fully remediated, however, until the applicable controls operate for a sufficient period-of-time, and Management has concluded, through testing, that these controls are operating effectively. There is no assurance that additional remediation steps will not be necessary. We expect that the remediation of these material weakness will be fully implemented and validated as of December 31, 2022.

~~These remedial measures were considered changes to our internal control environment which had a material effect on internal control over financial reporting.~~

3230

PART II - OTHER INFORMATION

ITEM 1A. RISK FACTORS

Except as ~~follows,~~set forth in the following sentences, there have been no material changes to the Risk Factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K ~~as amended,~~ for the year ended December 31, ~~2021: The risk factor entitled “We face~~2022. In our Annual Report on Form 10-K, we reported that a ~~number~~recent decision of ~~risks relating~~the Delaware Court of Chancery had created uncertainty regarding the validity of our Amended Charter and whether the vote to approve the Amended Charter met the requirements under Section 242(b)(2) of the Delaware General Corporation Law (the “DGCL”), resulting in potential uncertainty with respect to our ~~announced plan~~capitalization that could have had a material adverse effect on our operations, including our ability to ~~merge~~complete financing transactions, until the underlying issues were definitively resolved. On April 7, 2023, we filed a petition (the “Petition”) in the Delaware Court of Chancery under Section 205 of the DGCL to seek validation of the Company’s Amended Charter effective upon our merger with Megalith Financial Acquisition Corporation, a special purpose acquisition company, on January 4, 2021. On April 24, 2023, the Petition was granted, and all shares of capital stock of the Company issued in reliance of the effectiveness of our Amended Charter were validated and declared effective as of the date and time of the original issuance of such shares. Accordingly, that risk no longer exists.

ITEM 5. OTHER INFORMATION

DPSA Third Amendment

Reference is made to: (i) the description of “Deposit Servicing Agreement” set forth in Item 1.01 of the Current Report on Form 8-K of BM Technologies, Inc. (the “Company”) dated January 4, 2021 and filed with the Securities and Exchange Commission (“SEC”) on January 8, 2021 (the “2021 Form 8-K”); (ii) the Deposit Processing Services Agreement dated as of January 4, 2021 between the Company and Customers Bank (the “DPSA”) filed as Exhibit 10.3 to the 2021 Form 8-K; (iii) Item 1.01 of the Company’s Current Report on Form 8-K dated November 8, 2022 and filed that same date with the SEC (the “2022 Form 8-K”); (iv) the First ~~Sound Bank” is amended~~Amendment to ~~add~~ the ~~following: “The merger agreement~~DPSA dated November 7, 2022 (the “First Amendment”) filed as Exhibit 10.1 to the 2022 Form 8-K; (v) Item 1.01 of the Company’s Current Report on Form 8-K/A dated March 16, 2023 and filed with ~~First Sound Bank may be terminated (in which case~~ the ~~merger would not occur) if~~SEC on March 22, 2023; and (vi) the ~~transaction has not been consummated~~Second Amendment to the DPSA dated March 22, 2023 (the “Second Amendment”) filed as Exhibit 10.1 to the Company’s Quarterly Report on ~~or prior to~~Form 10-Q for the quarter ended March 31, 2023 filed with the SEC on May 22, 2023.

Items (i) through (vi) above are hereby incorporated by this reference. The DPSA originally had a term that expired on December 31, 2022. ~~We target the transaction to close in the first half of 2023; however, without an extension of~~The First Amendment, among other things, extended the termination date of the ~~merger agreement could terminate”~~DPSA for six months. The Second Amendment, among other things, extended the termination date of the DPSA until the earlier of: (i) the transfer of the Company’s serviced deposits to a Durbin Exempt (as such term is defined in the DPSA) sponsor bank; or (ii) June 30, 2024. On August 18, 2023, the Company and Customers Bank entered into the Third Amendment to the DPSA (the “Third Amendment”) that, among other things, extends the termination date of the DPSA until the earlier of: (i) the transfer of the Company’s serviced deposits to a Durbin Exempt (as such term is defined in the DPSA) sponsor bank; or (ii) April 15, 2025.

The foregoing summary of the Third Amendment does not purport to be complete and is qualified in its entirety by reference to Amendment No. 3, a copy of which will be filed with the SEC as an exhibit not later than with the filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023.

FCB Deposit Servicing Agreement Amendment

Reference is made to: (i) the description of “2023 FCB Deposit Servicing Agreement” set forth in Item 1.01 of the Current Report on Form 8-K/A of the Company dated March 16, 2023 and filed with the SEC on March 22, 2023 (the “2023 Form 8-K/A”); and (ii) the Deposit Processing Services Agreement dated as of March 16, 2023 between the Company and First Carolina Bank (“FCB”) (the “FCB – DPSA”) filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 filed with the SEC on May 22, 2023.

Items (i) and (ii) above are hereby incorporated by this reference. On August 20, 2023, the Company and FCB entered into the First Amendment to the FCB – DPSA (the “FCB First Amendment”) that, among other things: (i) extends the Initial Term from four years until five years after the Effective Date; (ii) provides that FCB will work with the Company and Customers Bank on the timely transfer of Existing Student Depositor Accounts “on or before the Effective Date and as agreed to by the parties” rather than “prior to May 1, 2023, subject to receipt of all Requisite Regulatory Approvals” and (iii) amends “Effective Date” to be the date on which FCB takes on Deposits from the Existing Student Depositor Accounts “pursuant to section 8.1”, which is “as agreed to by the parties”.

The foregoing summary of the FCB First Amendment does not purport to be complete and is qualified in its entirety by reference to the FCB First Amendment, a copy of which will be filed with the SEC as an exhibit not later than with the filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023.

ITEM 6. EXHIBITS

See exhibit index below for a list of the documents filed or furnished as part of this Quarterly Report on Form 10-Q:


Exhibit No.						Description
3.1						Second Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to the Company’s Form 8-K, filed with the SEC on January 8, 2021).
3.2						Amended and Restated Bylaws of the Company (incorporated by reference to the Company’s Form 8-K, filed with the SEC on January 8, 2021).
~~10.1~~10.1+						First Amendment to the ~~Deposit Processing Services Agreement, dated November 7, 2022,~~ by ~~and between the Company and Customers Bank.(incorporated~~BM Technologies 2020 Equity Incentive Plan (incorporated by reference to Exhibit 4.4 to the ~~Company’s~~Company's Registration Statement on Form ~~8-K,~~S-8, filed ~~with~~wit h the SEC on June 30, 2023 ~~November~~ ~~8, 202~~2 ).
31.1						Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).*
31.2						Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).*
31.3						Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).*
32						Certification under 18 U.S.C. 1350.*
101						Interactive data files for BM Technologies, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022,~~2023, formatted in Inline XBRL: (i) the Consolidated Balance Sheets (unaudited); (ii) the Consolidated Statements of (Loss) Income ~~(Loss)~~ (unaudited); (iii) the Consolidated Statements of Changes in Shareholders’ Equity (unaudited); (iv) the Consolidated Statements of Cash Flows (unaudited); and (v) the Notes to Unaudited Consolidated Financial Statements.*
104						The cover page from BM Technologies, Inc.’s Quarterly Report on Form 10-Q for the Quarter ended ~~September~~June 30, ~~2022~~2023 (formatted in Inline XBRL and included in Exhibit 101).*
* Filed or furnished herewith
† Schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Registration S-K. The registrant hereby agrees to furnish a copy of any omitted schedules to the Commission upon request.
+ Indicates a management or compensatory plan.

3332

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of ~~1933, as amended, BM Technologies, Inc.~~1934, the Registrant has duly caused this ~~Quarterly Report on Form 10-Q~~report to be signed on its behalf by the undersigned, thereunto duly ~~authorized, in the City of Wayne, Commonwealth of Pennsylvania, on the 15th day of November, 2022.~~authorized.


August 21, 2023	BM Technologies, Inc.
	(Registrant)

	By:	/s/ Luvleen Sidhu
	Name:	Luvleen Sidhu
	Title:	Chief Executive Officer ~~(Principal~~
		(Principal Executive Officer)

August 21, 2023

BM Technologies, Inc.

(Registrant)

By:

/s/ ~~Robert Ramsey~~Rajinder Singh

Name:

Rajinder Singh

Title:

Co-Chief Executive Officer

~~Robert Ramsey~~(Principal Executive Officer)

August 21, 2023

BM Technologies, Inc.

(Registrant)

By:

/s/ James Dullinger

Name:

James Dullinger

Title:

Chief Financial Officer ~~(Principal~~

(Principal Financial and Accounting Officer)

3433


	Number of Awards	Weighted-Average Grant-Date Fair Value Per Award
Balance as of December 31, 2021	1,283,535	$	14.87
Granted	—	$	—
Vested	(88,889)	$	14.87
Forfeited	(26,500)	$	14.87
Balance as of September 30, 2022	1,168,146	$	14.87