UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DCD.C. 20549
FORM 10-Q/A
(Amendment No.1)10-Q
(MARK ONE)
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☒ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2019 | |
OR | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT |
For the transition period from ______________ to ______________ |
Commission file number: 001-51554001-34294
GREENBOX POS LLC
(Exact(Exact name of small business issuer as specified in its charter)
Nevada | 22-3962936 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) |
8880 Rio San Diego Dr, Suite 102
| 92108 | |
| (Zip Code) |
Issuer's(619)-631-8261
(Registrant’s telephone number: (213)625-1200number, including area code)
ASAP Expo, Inc.N/A
(Former Namename or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of Registrant)the Act:
Title of each class | Trading symbol(s) | Name of exchange on which registered | ||
None | None | None |
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer | Smaller reporting company ☒ |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares outstanding of the issuer'sissuer’s classes of common equity, as of September 4, 2018, 158,890,363April 1, 2020, was 176,202,055 Shares of Common Stock (One Class)
EXPLANATORY NOTE
As disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on February 21, 2019, on February 19, 2019, the sole officers and directors, Ben Errez and Fredi Nisan (the “Management”) of GreenBox POS (f/k/a GreenBox POS LLC) (the “Company”), concluded that the following previously filed financial statements of the Company should not be relied upon: (1) the Company’s unaudited financial statements for the quarterly period ended June 30, 2018, contained in the Company’s Quarterly Report on Form 10-Q, originally filed with the Securities and Exchange Commission (the “Commission”) on September 6, 2018, as amended on September 10, 2018 (collectively, the “Original Q2 Report”); and (2) the Company’s unaudited financial statements for the quarterly period ended September 30, 2018, contained in the Company’s Quarterly Report on Form 10-Q, originally filed with the Commission on November 21, 2018 (the “Q3 Report”).
As previously disclosed in Note 4 to the financial statements in each of the Original Q2 Report and the Q3 Report, the Company formerly had a revolving line of credit totaling $1,800,000 with Frank Yuan, the Company’s former CEO and Jerome Yuan, the son of Frank Yuan.
As previously disclosed in Note 8 to the financial statements in each of the Original Q2 Report and the Q3 Report, on April 12, 2018, Frank Yuan converted $144,445 of the line of credit to 144,445,000 shares of the Company’s common stock at a price of $0.001 per share.
The Company, as disclosed in Note 8 in each of the Original Q2 Report and the Q3 Report, calculated that the total fair value of the 144,445,000 shares of common stock was $5,777,800. This resulted in a loss on the settlement of debt in the amount of $5,633,355.
On December 26, 2018, information came to the attention of the Company’s management that led it to investigate whether the Company’s calculation of the total fair value of the 144,445,000 conversion shares was wrong. On February 19, 2019, Management concluded that the price per share of the conversion shares should have been valued using the conversion price of $0.001 and not the April 12, 2018 market price of $0.04.
We are therefore filing this amended 10-Q (“Amended 10-Q”) to the Original Q2 Report, to restate our financial statements and revise related disclosures (including, without limitation, those contained under Item 1, Financial Statements, and Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations), contained in the Original Q2 Report to reflect the correct loss on the settlement of debt.
The amendment to the Q3 Report is being filed concurrently with this Amended 10-Q.
Specifically, this Amended 10-Q is being filed in order to restate:
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As several parts of the Original Q2 Report are amended and/or restated by this Amended 10-Q, for convenience, we have repeated the entire text of the Original Q2 Report, as amended and/or restated by this Amended 10-Q. Readers should therefore read and rely on this Amended 10-Q in lieu of the Original Q2 Report.
Except as amended and/or restated by this Amended 10-Q, no other information included in the Original Q2 Report is being amended or updated by this Amended 10-Q. This Amended 10-Q continues to describe the conditions as of the date of the Original Q2 Report and, except as contained therein, we have not updated or modified the disclosures contained in the Original Q2 Report. Accordingly, this Amended 10-Q should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original Q2 Report, including any amendment to those filings.
TABLE OF CONTENTSCONTENTS
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PART I Consolidated Financial Information |
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Item 1. | 3 | |
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Condensed Consolidated Statements of Stockholders’ Deficit for the Nine Months Ended September 30, 2019 and 2018 (unaudited) | 5 | |
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| Notes to (unaudited) Condensed Consolidated Financial Statements |
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Item 2. |
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Item 3. |
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PART II Other Information |
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Item 1. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIALFINANCIAL STATEMENTS
GREENBOX POS LLC
BALANCE SHEETS
(Unaudited)
June 30, | December 31, | |||||||
2018 | 2017 | |||||||
(Restated) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash of discontinued operations | $ | - | $ | 90,282 | ||||
Due from affiliated companies of discontinued operations | - | 20,881 | ||||||
Total current assets of discontinued operations | - | 111,163 | ||||||
Furniture and equipment of discontinued operations, net | - | 78,763 | ||||||
Total Assets of Discontinued Operations | $ | - | $ | 189,926 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses of discontinued operations | $ | - | $ | 342,924 | ||||
Accrued officer expenses of discontinued operations | - | 42,000 | ||||||
Auto loan of discontinued operations, current | - | 4,003 | ||||||
Income tax payable of discontinued operations | 259,717 | 84,684 | ||||||
Line of credit, officers of discontinued operations | - | 212,140 | ||||||
Total Current Liabilities of Discontinued Operations | 259,717 | 685,751 | ||||||
Long-Term Liabilities | ||||||||
Auto loan of discontinued operations, noncurrent | - | 16,261 | ||||||
Equipment loan of discontinued operations, noncurrent | - | 12,299 | ||||||
Total Long-Term Liabilities of Discontinued Operations | 259,717 | 714,311 | ||||||
Total Liabilities | ||||||||
Stockholders’ Deficit | ||||||||
Preferred stock, 5,000,000 shares authorized; zero shares issued and outstanding | - | - | ||||||
Common stock, $0.001 par value, 495,000,000 shares authorized, 158,890,363 and 14,445,363 shares issued and outstanding at June 30, 2018 and December 31, 2017 | 158,890 | 14,445 | ||||||
Additional paid-in capital | (801,161 | ) | (902,272 | ) | ||||
Retained earnings | 382,554 | 363,442 | ||||||
Total Stockholders’ Deficit | (259,717 | ) | (524,385 | ) | ||||
Total Liabilities and Stockholders’ Deficit | $ | - | $ | 189,926 |
The accompanying notes are an integral part of these condensed unaudited financial statements.
GREENBOX POS LLC
CONDENSED STATEMENTS OF OPERATIONSCONSOLIDATED
(UNAUDITED)BALANCE SHEETS
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(Restated) | (Restated) | |||||||||||||||
Revenue | $ | - | $ | - | $ | - | $ | - | ||||||||
Cost of Sales | ||||||||||||||||
Gross Profit | - | - | - | - | ||||||||||||
Operating Expenses: | ||||||||||||||||
Net (loss) income from continuing operations | $ | - | $ | - | $ | - | $ | - | ||||||||
Net (loss) income from discontinued operations, net of income taxes | (106,360 | ) | 43,555 | 19,112 | 33,758 | |||||||||||
Net income (loss) | $ | (106,360 | ) | $ | 43,555 | $ | 19,112 | $ | 33,758 | |||||||
Net income (loss) per common share | ||||||||||||||||
Income from continuing operations per basic and diluted common share | $ | - | $ | - | $ | - | $ | - | ||||||||
Income from discontinued operations per basic and diluted common share | (0.00 | ) | 0.00 | 0.00 | 0.00 | |||||||||||
Basic and diluted | $ | (0.00 | ) | $ | 0.00 | $ | 0.00 | $ | 0.00 | |||||||
Weighted average common shares outstanding | ||||||||||||||||
Basic and diluted | 139,842,671 | 14,445,363 | 77,490,418 | 14,445,363 |
(Unaudited) | (Restated) | |||||||
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | - | $ | 45,854 | ||||
Restricted cash | 254,616 | 239,124 | ||||||
Accounts receivable, net of allowance for bad debt of $5,627,692 and $0, respectively | 3,860,774 | 49,998 | ||||||
Cash due from gateways, net | 13,193,333 | 630,699 | ||||||
Prepaid and other current assets | 42,151 | 37,232 | ||||||
Total current assets | 17,350,874 | 1,002,907 | ||||||
Non-current Assets: | ||||||||
Property and equipment, net | 25,347 | 30,715 | ||||||
Operating lease right-of-use assets, net | 256,242 | - | ||||||
Total non-current assets | 281,589 | 30,715 | ||||||
Total assets | $ | 17,632,463 | $ | 1,033,622 | ||||
Current Liabilities: | ||||||||
Accounts payable | $ | 230,070 | $ | 127,029 | ||||
Other current liabilities | 2,792 | 9,401 | ||||||
Accrued interest | 90,114 | 29,871 | ||||||
Payment processing liabilities, net | 17,544,081 | 865,086 | ||||||
Convertible debt | 807,500 | 846,500 | ||||||
Derivative liability | 763,952 | - | ||||||
Current portion of operating lease liabilities | 26,489 | - | ||||||
Total current liabilities | 19,464,998 | 1,877,887 | ||||||
Operating lease liabilities, less current portion | 234,045 | - | ||||||
Long-term debt | - | 75,000 | ||||||
Total liabilities | 19,699,043 | 1,952,887 | ||||||
Commitments and contingencies | ||||||||
Stockholders' Equity: | ||||||||
Common stock, par value $0.001, 495,000,000 shares authorized, shares issued and outstanding of 169,558,055 and 166,390,363, respectively | 169,558 | 166,390 | ||||||
Common stock - issuable | 1,000 | 1,000 | ||||||
Additional paid-in capital | 1,179,272 | 945,940 | ||||||
Accumulated deficit | (3,416,410 | ) | (2,032,595 | ) | ||||
Total stockholders' equity | (2,066,580 | ) | (919,265 | ) | ||||
Total liabilities and stockholder's equity | $ | 17,632,463 | $ | 1,033,622 |
The accompanying notes are an integral part of these condensed unaudited financial statements.
GREENBOX POS LLC
CONDCONDENSED ENSEDCONSOLIDATED STATEMENTS OF CASH FLOWSOPERATIONS
(UNAUDITED)
Six Months Ended | ||||||||
June 30, | ||||||||
2018 | 2017 | |||||||
(Restated) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net Income (loss) from continuing operations | $ | $ | ||||||
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities: | ||||||||
Accretion of discount on convertible note payable | ||||||||
Amortization of debt issuance costs included in interest expense | ||||||||
Changes in operating assets and liabilities | ||||||||
Interest receivable from affiliated company | ||||||||
Income tax payable | 119,184 | 38,147 | ||||||
Net cash provided by (used in) operating activities - continuing operations | 119,184 | 38,147 | ||||||
Net cash provided by (used in) operating activities - discontinued operations | 84,058 | 28,680 | ||||||
Net cash provided by operating activities | 203,242 | 66,827 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Payment for note receivable in anticipation of merger | ||||||||
Net cash provided by (used in) investing activities - continuing operations | ||||||||
Net cash provided by (used in) investing activities - discontinued operations | (135,431 | ) | (59,346 | ) | ||||
Net cash provided by (used in) investing activities | (135,431 | ) | (59,346 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from borrowings on convertible note payable | ||||||||
Payments of loan origination fees | ||||||||
Net cash provided by (used in) financing activities – continuing operations | - | - | ||||||
Net cash provided by (used in) financing activities – discontinued operations | (158,093 | ) | (40,042 | ) | ||||
Net cash provided by (used in) financing activities | (158,093 | ) | (40,042 | ) | ||||
Net increase (decrease) in cash | (90,282 | ) | (32,561 | ) | ||||
Cash, beginning of period | 90,282 | 32,761 | ||||||
Cash, end of period | $ | - | $ | 200 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period | ||||||||
Interest | $ | - | $ | 439 | ||||
Income taxes | $ | - | $ | 800 | ||||
Non-cash investing and financing activities | ||||||||
Discount on convertible debt | ||||||||
Vehicle purchased through auto loan | $ | - | $ | 22,789 | ||||
Conversion of Line of credit, officers to shares of common stock | $ | 144,445 | $ | - |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenue | $ | 14,793,117 | $ | 191,010 | $ | 19,070,861 | $ | 305,935 | ||||||||
Cost of revenue | 6,834,198 | 232,251 | 10,602,555 | 250,173 | ||||||||||||
Gross profit | 7,958,919 | (41,241 | ) | 8,468,306 | 55,762 | |||||||||||
Operating expenses: | ||||||||||||||||
Advertising and marketing | 10,319 | 30,652 | 35,928 | 135,757 | ||||||||||||
Research and development | 381,112 | 124,897 | 1,085,298 | 287,919 | ||||||||||||
Cash due from gateway reserve expense | 5,665,031 | - | 5,665,031 | - | ||||||||||||
Payroll and payroll taxes | 420,074 | 140,137 | 967,121 | 178,116 | ||||||||||||
Professional fees | 281,659 | 168,067 | 588,677 | 515,419 | ||||||||||||
General and administrative | 176,120 | 53,220 | 375,373 | 232,777 | ||||||||||||
Depreciation and amortization | 4,897 | 1,937 | 11,352 | 4,431 | ||||||||||||
Total operating expenses | 6,939,212 | 518,910 | 8,728,780 | 1,354,419 | ||||||||||||
Income (loss) from operations | 1,019,707 | (560,151 | ) | (260,474 | ) | (1,298,657 | ) | |||||||||
Other income (expense): | ||||||||||||||||
Interest expense - debt discount | - | - | (188,273 | ) | - | |||||||||||
Interest (expense) income | 3,837 | (7,082 | ) | (171,116 | ) | (92,930 | ) | |||||||||
Derivative expense | - | - | (634,766 | ) | - | |||||||||||
Changes in fair value of derivative liability | 236,184 | - | (129,186 | ) | - | |||||||||||
Asset impairment | - | - | - | (75,000 | ) | |||||||||||
Total other expense, net | 240,021 | (7,082 | ) | (1,123,341 | ) | (167,930 | ) | |||||||||
Income (loss) before provision for income taxes | 1,259,728 | (567,233 | ) | (1,383,815 | ) | (1,466,587 | ) | |||||||||
Income tax provision | - | - | - | - | ||||||||||||
Net income (loss) | $ | 1,259,728 | $ | (567,233 | ) | $ | (1,383,815 | ) | $ | (1,466,587 | ) | |||||
Earnings (loss) per share: | ||||||||||||||||
Basic and diluted | $ | 0.01 | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.02 | ) | |||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic and diluted | 168,492,966 | 158,890,363 | 167,136,344 | 88,662,960 |
The accompanying notes are an integral part of these condensed unaudited financial statements.
GREENBOX POS |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT |
(UNAUDITED) |
Common Stock | Additional Paid-In | Accumulated | Total Stockholders' Equity | |||||||||||||||||||||||||
Shares | Amount | To be Issued | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
Balance at June 30, 2019 | 167,250,363 | $ | 167,250 | 3,307,692 | $ | 3,308 | $ | 1,179,272 | $ | (4,676,138 | ) | $ | (3,326,308 | ) | ||||||||||||||
Shares issued from conversion of convertible debt | 2,307,692 | 2,308 | (2,307,692 | ) | (2,308 | ) | - | - | - | |||||||||||||||||||
Net income | - | - | - | - | - | 1,259,728 | 1,259,728 | |||||||||||||||||||||
Balance at September 30, 2019 | 169,558,055 | $ | 169,558 | 1,000,000 | $ | 1,000 | $ | 1,179,272 | $ | (3,416,410 | ) | $ | (2,066,580 | ) |
Common Stock | Additional Paid-In | Accumulated | Total Stockholders' Equity | |||||||||||||||||||||||||
Shares | Amount | To be Issued | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
Balance at June 30, 2018 | 158,890,363 | $ | 158,890 | - | $ | - | $ | 796,940 | $ | (1,038,673 | ) | $ | (82,843 | ) | ||||||||||||||
Net loss | - | - | - | - | - | (567,233 | ) | (567,233 | ) | |||||||||||||||||||
Balance at September 30, 2018 | 158,890,363 | $ | 158,890 | - | $ | - | $ | 796,940 | $ | (1,605,906 | ) | $ | (650,076 | ) |
The accompanying notes are an integral part of these condensed unaudited financial statements.
GREENBOX POS LLC
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(UNAUDITED)
(continued)
Common Stock | Additional Paid-In | Accumulated | Total Stockholders' Equity | |||||||||||||||||||||||||
Shares | Amount | To be Issued | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
Balance at December 31, 2018 | 166,390,363 | $ | 166,390 | 1,000,000 | $ | 1,000 | $ | 945,940 | $ | (2,032,595 | ) | $ | (919,265 | ) | ||||||||||||||
Common stock issuable under convertible debt | - | - | 25,000 | 4,500 | - | - | 4,500 | |||||||||||||||||||||
Warrants issuable under convertible debt | - | - | 125,000 | - | 55,311 | - | 55,311 | |||||||||||||||||||||
Common stock and warrants issuable forfeited | - | - | (150,000 | ) | (4,500 | ) | (55,311 | ) | - | (59,811 | ) | |||||||||||||||||
Share issued to employees and vendor | 860,000 | 860 | - | - | 85,640 | - | 86,500 | |||||||||||||||||||||
Shares issuable from conversion of convertible debt | - | - | 2,307,692 | 2,308 | 147,692 | - | 150,000 | |||||||||||||||||||||
Shares issued from conversion of convertible debt | 2,307,692 | 2,308 | (2,307,692 | ) | (2,308 | ) | - | - | - | |||||||||||||||||||
Net loss | - | - | - | - | - | (1,383,815 | ) | (1,383,815 | ) | |||||||||||||||||||
Balance at September 30, 2019 | 169,558,055 | $ | 169,558 | 1,000,000 | $ | 1,000 | $ | 1,179,272 | $ | (3,416,410 | ) | $ | (2,066,580 | ) |
Common Stock | Additional Paid-In | Accumulated | Total Stockholders' Equity | |||||||||||||||||||||||||
Shares | Amount | To be Issued | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
Balance at December 31, 2017 | 14,445,363 | $ | 14,445 | - | $ | - | $ | 185,655 | $ | (139,319 | ) | $ | 60,781 | |||||||||||||||
Common stock issued | 144,445,000 | 144,445 | - | - | 611,285 | - | 755,730 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (1,466,587 | ) | (1,466,587 | ) | |||||||||||||||||||
Balance at September 30, 2018 | 158,890,363 | $ | 158,890 | - | $ | - | $ | 796,940 | $ | (1,605,906 | ) | $ | (650,076 | ) |
The accompanying notes are an integral part of these condensed unaudited financial statements.
GREENBOX POS |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(UNAUDITED) |
Nine Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (1,383,815 | ) | $ | (1,466,587 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation expense | 11,352 | 4,431 | ||||||
Interest expense - debt discount | 188,273 | - | ||||||
Stock compensation expense | 86,500 | - | ||||||
Derivative expense | 634,766 | - | ||||||
Changes in fair value of derivative liability | 129,186 | - | ||||||
Noncash lease expense | 4,292 | - | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (3,810,776 | ) | (139,940 | ) | ||||
Prepaid and other current assets | (4,919 | ) | (15,738 | ) | ||||
Cash due from gateways, net | (12,562,634 | ) | (132,104 | ) | ||||
Accounts payable | 79,768 | 93,146 | ||||||
Other current liabilities | (6,609 | ) | 10,603 | |||||
Accrued interest | 20,243 | 16,176 | ||||||
Payment processing liabilities, net | 16,678,995 | 132,943 | ||||||
Deferred income | - | 270,000 | ||||||
Net cash provided by (used in) operating activities | 64,622 | (1,227,070 | ) | |||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (5,984 | ) | (26,267 | ) | ||||
Net cash used in investing activities | (5,984 | ) | (26,267 | ) | ||||
Cash flows from financing activities: | ||||||||
Borrowings from convertible debt | 482,500 | 443,000 | ||||||
Repayments on convertible debt | (496,500 | ) | - | |||||
Repayment on long-term debt | (75,000 | ) | - | |||||
Proceeds from issuances of common stock | - | 755,730 | ||||||
Net cash provided by financing activities | (89,000 | ) | 1,198,730 | |||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | (30,362 | ) | (54,607 | ) | ||||
Cash, cash equivalents, and restricted cash – beginning of period | 284,978 | 83,353 | ||||||
Cash, cash equivalents, and restricted cash – end of period | $ | 254,616 | $ | 28,746 | ||||
Supplemental disclosures of cash flow information | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 110,873 | $ | 92,930 | ||||
Income taxes | $ | 800 | $ | 800 | ||||
Non-cash financing activities: | ||||||||
Convertible debt conversion to common stock | $ | (150,000 | ) | $ | - |
The accompanying notes are an integral part of these condensed unaudited financial statements.
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2018
1. | DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION |
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATIONOrganization
GreenBox POS LLC(the “Company” or “PubCo”) is a tech company formed with the intent of developing, marketing and selling innovative blockchain-based payment solutions, which the Company believes will cause favorable disruption in the payment solutions marketplace. The Company’s core focus is to develop and monetize disruptive blockchain-based applications, integrated within an end-to-end suite of financial products, capable of supporting a multitude of industries. The Company’s proprietary, blockchain-based systems are designed to facilitate, record and store a virtually limitless volume of tokenized assets, representing cash or data, on a secured, immutable blockchain-based ledger.
The Company was formerly known as GreenBox POS, Inc (“GreenBox” or the “Company”ASAP”), which was originally incorporated on April 10, 2007 under the laws of the State of NevadaNevada. On January 4, 2020, PubCo and GreenBox POS LLC, a Washington limited liability company (“PrivCo”), entered into an Asset Purchase Agreement (the “Agreement”), to memorialize a verbal agreement (the “Verbal Agreement”) entered into on April 12, 2018, by and among PubCo (the buyer) and PrivCo, which was formed on August 10, 2017 (the seller). On April 12, 2018, pursuant to the Verbal Agreement, PubCo acquired PrivCo’s blockchain gateway and payment system business, point of sale system business, delivery business and kiosk business, and bank and merchant accounts, as ASAP Expo, Inc. Prior to July 2011,well as all intellectual property related thereto (the “GreenBox Business”). As consideration for the investment banking services division wasGreenBox Business, on April 12, 2018, PubCo assumed PrivCo’s liabilities that had been incurred in the core businessnormal course of ASAP Expo. ASAP Expo helped smallthe GreenBox Business (collectively, the “GreenBox Acquisition”).
For accounting and medium sized businesses raise fundsreporting purposes, PubCo deemed the GreenBox Acquisition a “Reverse Acquisition” with PrivCo designated the “accounting acquirer” and promote business through capital markets. In July 2011, ASAP Expo transitioned its core business to providing real estate advisory services from investment banking advisory services for Chinese companies and high net worth individuals.PubCo designated the “accounting acquiree.”
Name Change
On March 23,May 3, 2018, Frank Yuan, the controlling shareholder of ASAP Expo, Inc., entered into a stock purchase agreement whereby it sold 144,445,000 shares of ASAP Expo Inc.'s common stockPubCo formally changed its name to GreenBox POS LLC, , representing 90% of ASAP Expo, Inc.'s issued and outstanding shares of common stock. Pursuant to this transaction, on April 12, 2018, ASAP Expo, Inc. entered into an asset purchase agreement whereby it assigned the entirety of its assets to ASAP Property Holdings, Inc. in consideration of assumption of the entirety of its liabilities.
The transaction contemplated in the March 23rd stock purchase agreement was closed on May 3, 2018, and a change of control of ASAP Expo, Inc. was effected. Thereafter, the Companythen subsequently changed its name to “GreenBoxGreenBox POS LLC.on December 13, 2018. Unless the context otherwise requires, all references to “the Company,” “we,” “our”, “us” and “PubCo” refer to GreenBox POS. Unless the context otherwise requires, all references to “PrivCo” or the “Private Company” refer to GreenBox POS LLC, a limited liability company, formed in the state of Washington.
Since April 12, 2018, the Company’s operations have consisted of providing management and business development services.Unaudited Interim Financial Information
BASIS OF PRESENTATION
The accompanyingThese unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
Unaudited Interim Financial Information
These unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”)GAAP for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been made. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2018.
The balance sheets and certain comparative information as of December 31, 20172018 are derived from the audited financial statements and related notes for the year ended December 31, 20172018 (“20172018 Annual Financial Statements”), included in the Company's 2017Company’s 2018 Annual Report on Form 10-K. These unaudited interim condensed financial statements should be read in conjunction with the 20172018 Annual Financial Statements.
CASH AND CASH EQUIVALENTSBasis of Presentation and Consolidation
Cash and cash equivalents consistThe accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of cash on hand, cash on deposit with banks, and highly liquid debt investments with a maturity of three months or less when purchased. The Company has cash equivalents of $0 and $90,282 as of June 30, 2018 and December 31, 2017, respectively.America.
GOING CONCERNThe financial statements include the combined accounts of PubCo and PrivCo. All amounts are presented in U.S. Dollars unless otherwise stated. The accompanying financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”).
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
1. | DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (continued) |
Going Concern
As shown in the accompanying financial statements and as discussed in Note 3, all assets and liabilities of September 30, 2019, the Company were acquired on April 12, 2018. Ashad cash, cash equivalents, and restricted cash of $254,616, has incurred a result,net loss of $1,383,815 for the previous operationsnine months ended September 30, 2019, and has accumulated a deficit of the Company have been removed, raising$3,416,410 as of September 30, 2019. These conditions raise substantial doubt about the Company'sCompany’s ability to continue as a going concern. TheseAdditionally, as the GreenBox ecosystem grows, substantially larger volumes of working capital financing will be required to support our platform’s growth.
The Company intends to raise additional capital through private placements of debt and equity securities, but there can be no assurance that these funds will be available on terms acceptable to the Company, or will be sufficient to enable the Company to fully complete its development activities or sustain operations. If the Company is unable to raise sufficient additional funds, we will have to develop and implement a plan to further extend payables, reduce overhead or scale back our business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.
Accordingly, the accompanying financial statements have been prepared in conformity with GAAP, which contemplate our continuation as a going concern, and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilitiesadjustment that might result from the outcome of this uncertainty.
Restatement
On April 12, 2018, pursuant to a verbal agreement (the “Verbal Agreement”), PubCo acquired PrivCo’s blockchain gateway and payment system business, point of sale system business, delivery business and kiosk business, and bank and merchant accounts, as well as all intellectual property related thereto (the “GreenBox Business”). As consideration for the GreenBox Business, on April 12, 2018, PubCo assumed PrivCo’s liabilities that had been incurred in the normal course of the GreenBox Business (collectively, the “GreenBox Acquisition”).
From April 12, 2018 through January 4, 2020 (the “In Between Period”), because there was ambiguity regarding the validity of the Verbal Agreement, PubCo filed required quarterly and annual reports with the Securities and Exchange Commission as if there had not been a Reverse Acquisition. During the In Between Period, PrivCo continued to operate as if it still owned the GreenBox Business, which included maintaining records of GreenBox Business financial transactions on PrivCo’s accounting software, and entering into contracts and agreements as PrivCo, while PubCo paid all expenses, including expenses related to PrivCo contracts entered into prior to April 12, 2018 and after April 12, 2018, as well as expenses incurred as a result of litigation resulting from disagreements between PrivCo and other parties. During the In Between Period, PubCo represented itself in press releases, as being the owner/operator of the GreenBox Business. Additionally, from April 12, 2018 through approximately December 31, 2018, PubCo and PrivCo shared control of PrivCo’s bank accounts, and on approximately January 1, 2019, PubCo assumed control of PrivCo’s bank accounts.
By virtue of the payment of PrivCo’s litigation expenses by PubCo, by virtue of PubCo representing itself in press releases, as being the owner/operator of the GreenBox Business, and by virtue of the shared control of PrivCo’s bank accounts starting on April 12, 2018, both PubCo and PrivCo concluded that the Verbal Agreement was valid and the GreenBox Business asset acquisition took place on April 12, 2018.
On January 4, 2020, PubCo and PrivCo entered into an Asset Purchase Agreement (the “Agreement”), to memorialize the Verbal Agreement. For accounting and reporting purposes, PubCo deemed the GreenBox Acquisition a “Reverse Acquisition” with PrivCo designated the “accounting acquirer” and PubCo designated the “accounting acquiree.”
Because PubCo previously filed quarterly and annual reports for 2018 with the Securities and Exchange Commission as if there had not been a Reverse Acquisition, PubCo was required to file amended Form 10-Qs for the periods ending June 30, 2018 and September 30, 2018, and an amended Form 10-K for the year ending December 31, 2018 (collectively the “Amended Reports”). These Amended Reports differ substantially from previously filed reports in that PubCo’s financials are presented on a combined basis with PrivCo. Additionally, the previous business operations of PubCo prior to April 12, 2018 are disregarded.
The Company therefore filed, on February 7, 2020, an amended 10-K (“Amended 10-K”) to the Company’s audited financial statements for the year ended December 31, 2018, contained in the Company’s Annual Report on Form 10-K, originally filed with the SEC on April 16, 2019 (the “2018 Report”) to restate the Company’s financial statements and revise related disclosures. As a substantial part of the Amended 10-K was amended and/or restated, the Company presented the entire text of the 2018 Report, as amended and/or restated by the Amended 10-K. Readers should therefore read and rely only on the Amended 10-K in lieu of the original 2018 Report.
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
FAIR VALUE OF FINANCIAL INSTRUMENTSUse of Estimates
The Company'spreparation of financial instrumentsstatements in conformity with the GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassification
Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations or cash flows.
Cash, Cash Equivalents and Restricted Cash
The Company’s cash, cash equivalent and Restricted cash represents the following:
● | Cash and cash equivalents consist of cash on hand, cash on deposit with banks, and highly liquid debt investments with a maturity of three months or less when purchased. The Company has cash equivalents of $0 and $45,854, excluding cash held for settlement liabilities, as of September 30, 2019 and December 31, 2018, respectively. |
● | Restricted Cash – The Company’s technology enables transactional blockchain ledger to instantly reflect all transactions details. The final cash settlement of each transaction is subject to the gateway policies. This final disposition takes days to weeks to complete in accordance with these policies. Each policy is an integral part of the transactional contracts between the Company, its Independent Sales Organizations (ISOs), its agents, and the merchant clients. While the ledger reflects a held balance for the merchant, in reserve or payment in arears, the Company holds funds in a trust account as cash deemed restricted. The Company’s books reflect such restricted cash as a restricted cash and trust accounts, and the sum balance due to merchants and ISOs as settlement liabilities. |
The following table provides a reconciliation of cash, prepaid expensescash equivalents, and other receivables, accounts payable, accrued liabilities and due to/from affiliated company. The fair valuerestricted cash reported within the statement of these financial instruments approximate their carryingposition that sum to the total of the same such amounts reportedshown in the balance sheets duestatement of cash flows.
September 30, 2019 | September 30, 2018 | |||||||
Cash and cash equivalents | $ | - | $ | 27,907 | ||||
Restricted cash | 254,616 | 839 | ||||||
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows | $ | 254,616 | $ | 28,746 |
Cash Due from Gateways and Payment Processing Liabilities
The Company’s primary source of revenues continues to be payment processing services for its merchant clients. When such merchant makes a sale, the process of receiving the payment card information, engaging the banks for transferring the proceeds to the short term maturity of these instruments.merchant’s account via digital gateways, and recording the transaction on a blockchain ledger are the activities for which the Company gets to collect fees.
Fair Value MeasurementsIn 2019 the Company utilized several gateways. The gateways have strict guidelines pertaining to scheduling of the release of funds to merchants based on several criteria, such as return and chargeback history, associated risk for the specific business vertical, average transaction amount and so on. In order to mitigate processing risks, these policies determine reserve requirements and payment in arear strategy. While reserve and payment in arear restrictions are in effect for a merchant payout, the Company records gateway debt against these amounts until released.
Therefore, the total gateway balances reflected in the Company’s books represent the amount owed to the Company for processing – these are funds from transactions processed and not yet distributed.
Advertising and Marketing Costs
Advertising and marketing costs are recorded as general and administrative expenses when they are incurred. Advertising and marketing expenses were $10,319 and $30,652 for the three months ended September 30, 2019 and 2018, respectively, and $35,928 and $135,757 for the nine months ended September 30, 2019 and 2018, respectively.
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Research and Development Costs
Research and development costs, which are expensed as incurred, are primarily comprised of costs and expenses for salaries and benefits for research and development personnel, outsourced contract services, and supplies and materials costs. Research and development expenses were $381,112 and $124,897 for the three months ended September 30, 2019 and 2018, respectively, and $1,085,298 and $287,919 for the nine months ended September 30, 2019 and 2018, respectively.
Revenue Recognition
Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers outlines the basic criteria that must be met to recognize revenue and provide guidance for presentation of revenue and for disclosure related to revenue recognition policies in financial statements filed with the Securities and Exchange Commission. Management believes the Company’s revenue recognition policies conform to ASC Topic 820, 606.
The Company recognizes revenue when 1) it is realized or realizable and earned, 2) there is persuasive evidence of an arrangement, 3) delivery and performance has occurred, 4) there is a fixed or determinable sales price, and 5) collection is reasonably assured.
The Company generates revenue from payment processing services, licensing fees and equipment sales.
● | Payment processing revenue is based on a percentage of each transaction’s value and/or upon fixed amounts specified per each transaction or service and is recognized as such transactions or services are performed. |
● | Licensing revenue is paid in advance and is recorded as unearned income, which is amortized monthly over the period of the licensing agreement. |
● | Equipment revenue is generated from the sale of POS products, which is recognized when goods are shipped. |
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed primarily using the straight-line method over the estimated useful lives of the assets, which range from three to eight years. Leasehold improvements are amortized over the shorter of the useful life of the related assets or the lease term. Expenditures for repairs and maintenance are charged to expense as incurred. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period.
Fair Value Measurementsof Financial Instruments
The Company utilizes ASC 820-10, Fair Value Measurement and Disclosures, defines fairDisclosure, for valuing financial assets and liabilities measured on a recurring basis. Fair value establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upondefined as the transparency of inputsexit price, or the amount that would be received to the valuation ofsell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The three levelsguidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are defined as follows:
Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilitiesinputs market participants would use in active markets.
Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable forvaluing the asset or liability either directly or indirectly, for substantially the full termand are developed based on market data obtained from sources independent of the financial instrument.Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:
Level 3 -1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to the valuation methodology are unobservable and significant to the fair value measurement.develop its own assumptions.
The Company'sCompany’s financial instruments consisted of cash, accounts payable and accrued liabilities, advances to due to or from affiliated companies, notes payable to officers. The estimated fair value of cash, accounts payable and accrued liabilities, due to or from affiliated companies, and notes payable approximates its carrying amount due to the short maturity of these instruments.
USE OF ESTIMATESThe table below describes the Company’s valuation of financial instruments using guidance from ASC 820-10:
September 30, 2019 | Level 1 | Level 2 | Level 3 | |||||||||
Derivative liability | $ | - | $ | 763,952 |
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Income Taxes
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimatesIncome taxes are accounted for under the asset and assumptions that affectliability method. Deferred income taxes are recognized for temporary differences between the reported amountstax basis of assets and liabilities and disclosuretheir reported amounts in the financial statements, net of contingentoperating loss carry forwards and credits, by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred tax assets will be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
Long-Lived Asset Impairments
The Company reviews long-lived assets, including property and equipment and intangible assets, for impairment when events or changes in business conditions indicate that their carrying value may not be recovered, and at least annually. The Company considers assets to be impaired and writes them down to estimated fair value if expected associated undiscounted cash flows are less than the carrying amounts. Fair value is the present value of the associated cash flows.
Earnings Per Share
A basic earnings per share is computed by dividing net income to common stockholders by the weighted average number of shares outstanding for the year. Dilutive earnings per share include the effect of any potentially dilutive debt or equity under the treasury stock method, if including such instruments is dilutive. The Company’s diluted earnings/loss per share is the same as the basic earnings/loss per share for the three and nine months ended September 30, 2019 and 2018, as there are no potential shares outstanding that would have a dilutive effect.
Leases
Prior to January 1, 2019, the Company accounted for leases under Accounting Standards Codification (ASC) 840, Accounting for Leases. Effective from January 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases
On February 25, 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. ASC 842 requires that lessees recognize right of use assets and lease liabilities calculated based on the present value of lease payments for all lease agreements with terms that are greater than twelve months.
ASC 842 distinguishes leases as either a finance lease or an operating lease that affects how the leases are measured and presented in the statement of operations and statement of cash flows. ASC 842 supersedes nearly all existing lease accounting guidance under GAAP issued by the Financial Accounting Standards Board (“FASB”) including ASC Topic 840, Leases.
For operating leases, we calculated right of use assets and lease liabilities based on the present value of the remaining lease payments as of the date of adoption using the IBR as of that date.
The adoption of ASC 842 resulted in recording an adjustment to operating lease right of use assets and operating lease liabilities of liabilities of $256,242 and $260,534, respectively as of September 30, 2019. The difference between the operating lease ROU assets and operating lease liabilities at transition represented tenant improvements, and indirect costs that was derecognized. The adoption of ASC 842 did not materially impact our results of operations, cash flows, or presentation thereof.
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Recently Adopted Accounting Updates
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires lessees to recognize on the balance sheet assets and liabilities for leases with lease terms of more than 12 months. Consistent with prior GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend primarily on its classification as a finance or operating lease. However, unlike prior GAAP—which required only finance (formerly capital) leases to be recognized on the balance sheet—the new ASU requires both types of leases to be recognized on the balance sheet. The ASU took effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. This standard can be applied at the datebeginning of the financial statementsearliest period presented using the modified retrospective approach, which includes certain practical expedients that an entity may elect to apply, including an election to use certain transition relief. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which make improvements to Accounting Standards Codification (“ASC”) 606, Revenuefrom Contracts with Customers, which outlines842 and allow entities to not restate comparative periods in transition to ASC 842 and instead report the basic criteriacomparative periods under ASC 840.
The adoption of ASC 842 resulted in recording an adjustment to operating lease right of use assets and operating lease liabilities of liabilities of $256,242 and $260,534, respectively as of September 30, 2019. The difference between the operating lease ROU assets and operating lease liabilities at transition represented tenant improvements, and indirect costs that must be metwas derecognized. The adoption of ASC 842 did not materially impact our results of operations, cash flows, or presentation thereof.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework—Changes to recognize revenuethe Disclosure Requirements for Fair Value Measurement. The standard removes, modifies, and provide guidanceadds certain disclosure requirements for presentation of revenuefair value measurements. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. While the Company is currently in the process of evaluating the effects of this standard on the consolidated financial statements, the Company plans to adopt ASU No. 2018-13 in the first quarter of fiscal 2020, coinciding with the standard’s effective date, and expects the impact from this standard to be immaterial.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company’s accounting for the service element of a hosting arrangement that is a service contract is not affected by the proposed amendments and will continue to be expensed as incurred in accordance with existing guidance. This standard does not expand on existing disclosure requirements except to require a description of the nature of hosting arrangements that are service contracts. This standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued. Entities can choose to adopt the new guidance prospectively or retrospectively. The Company plans to adopt the updated disclosure requirements of ASU No. 2018-15 prospectively in the first quarter of fiscal 2020, coinciding with the standard’s effective date, and expects the impact from this standard to be immaterial.
Other recently issued accounting updates are not expected to have a material impact on the Company’s Interim Financial Statements.
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
3. | REVERSE ACQUISITION |
On January 4, 2020, PubCo and PrivCo entered into the Agreement to memorialize the Verbal Agreement. On April 12, 2018, pursuant to the Verbal Agreement, PubCo acquired PrivCo’s blockchain gateway and payment system business, point of sale system business, delivery business and kiosk business, and bank and merchant accounts, as well as all intellectual property related thereto (the “GreenBox Business”). As consideration for the GreenBox Business, on April 12, 2018, PubCo assumed PrivCo’s liabilities that had been incurred in the normal course of the GreenBox Business (collectively, the “GreenBox Acquisition”).
For accounting and reporting purposes, PubCo deemed the GreenBox Acquisition a “Reverse Acquisition” with PrivCo designated the “accounting acquirer” and PubCo designated the “accounting acquiree.”
The value of the assets acquired and liabilities assumed was $843,694 and $589,078, respectively, on April 12, 208. Exclusions from the Agreement included shares in PubCo held by PrivCo, which remain a PrivCo asset, and $185,000 of a $300,000 convertible promissory note issued by PrivCo.
The following is the purchase price allocation on April 12, 2018:
April 12, 2018 | ||||
Cash and Cash Equivalents | $ | 752,393 | ||
Customer Accounts | 83 | |||
Inventory | 56,988 | |||
Security Deposits | 3,990 | |||
Fixed Assets, net | 17,697 | |||
Prepaid Expense | 12,543 | |||
Assets Acquired | 843,694 | |||
Total Consideration – Liabilities Assumed | 589,078 | |||
Gain on Bargain Purchase | $ | 254,616 |
This acquisition resulted in a “Gain on Bargain Purchase” for PubCo because the fair value of assets we acquired exceeded the total of the fair value of consideration we paid by $254,616. However, as we deemed the acquisition a Reverse Acquisition for accounting purposes, the $254,616 gain was rerecorded and presented as Paid in Capital within our Consolidated Balance Sheet on the date of acquisition. The operating results of the GreenBox Business for the period from April 12, 2018 going forward have been included in the Company’s Consolidated Statements of Operations. The Company did not incur a significant amount in transaction costs in connection with the acquisition, but any and all costs were expensed as incurred and are included within the Consolidated Statement of Operations.
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
4. | SETTLEMENT PROCESSING |
The Company’s proprietary blockchain-based technology serves as the settlement engine for all transactions within the Company’s ecosystem. The blockchain ledger provides a robust and secure platform to log immense volumes of immutable transactional records in real time. Generally speaking, blockchain is a distributed ledger that uses digitally encrypted keys to verify, secure and record details of each transaction conducted within an ecosystem. Unlike general blockchain-based systems, GreenBox uses proprietary, private ledger technology to verify every transaction conducted within the GreenBox ecosystem. The verification of transaction data comes from trusted partners, all of whom have been extensively vetted by us.
GreenBox facilitates all financial elements of our closed-loop ecosystem and we act as the administrator for all related accounts. Using our TrustGateway technology, we seek authorization and settlement for each transaction from Gateways to the issuing bank responsible for the credit/debit card used in the transaction. When the Gateway settles the transaction, our TrustGateway technology composes a chain of blockchain instructions to our ledger manager system.
When consumers use credit/debit cards to pay for transactions with merchants who use our ecosystem, the transaction starts with the consumer purchasing tokens from us. The issuance of tokens is accomplished when we load a virtual wallet with a token, which then transfers credits to the merchant’s wallet on a dollar for dollar basis, after which the merchant releases its goods or services to the consumer. These transfers take place instantaneously and seamlessly, allowing the transaction experience to seem like any other ordinary credit/debit card transaction to the consumer and merchant.
While our blockchain ledger records transaction details instantaneously, the final cash settlement of each transaction can take days to weeks, depending upon contract terms between us and the gateways we use, between us and our ISOs, and between us and/or our ISOs and merchants who use our services. In the case where we have received transaction funds, but not yet paid a merchant or an ISO, we hold funds in either a trust account or as cash deemed restricted within our operating accounts. We record the total of such funds as Cash held for Settlements – a Current Asset. Of these funds, we record the sum balance due to Merchants and ISOs as Settlement Liabilities to Merchants and Settlement Liabilities to ISOs, respectively.
The table below shows the status of transaction settlements:
September 30, 2019 | December 31, 2018 | |||||||
Settlement Processing Assets: | ||||||||
Cash held for settlements | $ | 254,616 | $ | 239,124 | ||||
Cash due from gateways | 5,570,480 | 291,112 | ||||||
Amount due from gateways and merchants – hold and fees | 4,096,132 | - | ||||||
Chargeback allowances (1) | - | (134,638 | ) | |||||
Reserves (2) | 7,622,853 | 474,224 | ||||||
Total before allowance for uncollectable | 17,544,081 | 869,822 | ||||||
Allowance for uncollectable – hold and fees | (4,350,748 | ) | - | |||||
Total – settlement processing assets | $ | 13,193,333 | $ | 869,822 | ||||
Settlement Processing Liabilities: | ||||||||
Settlement liabilities to merchants | 17,544,081 | 786,425 | ||||||
Settlement liabilities to ISOs | - | 107,342 | ||||||
Refund allowances (3) | - | (28,681 | ) | |||||
Totals | $ | 17,544,081 | $ | 865,086 |
(1) During 2018, the Company absorbed all chargeback costs as a cost of services provided – essentially a sales promotion tool to onboard customers in 2018. The Chargeback Allowance shown in the table above reflects our estimate of potential chargebacks that are likely to be realized in 2019, which are connected to sales transactions that occurred in 2018. The allowance decreases the amount that GreenBox is owed from the Gateways we use in our proprietary ecosystem. In 2019, the actual dollar amount of chargebacks will be reconciled with our allowance.
(2) Reserves are essentially an escrow fund that protects a gateway/card issuer from financial losses. In the Reserve, funds are held until chargeback time limits expire.
(3) The Refund Allowance shown in the table above reflects our estimate of potential refunds that may be realized in 2019, which are connected to sales transactions that occurred in 2018. The allowance decreases the amount that GreenBox owes to Merchants using our proprietary ecosystem. In 2019, the actual dollar amount of refunds with be reconciled with our allowance.
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
5. | CASH DUE FROM GATEWAYS |
Cash due from gateways consisted of the following:
September 30, 2019 | December 31, 2018 | |||||||
Cash due from Gateways | $ | 5,570,480 | $ | 291,112 | ||||
Amount due from gateways and merchants – hold and fees | 4,096,132 | - | ||||||
Reserves (2) | 7,622,853 | 474,224 | ||||||
Total cash due from gateways | 17,289,465 | 765,336 | ||||||
Chargeback Allowances (1) | - | (134,637 | ) | |||||
Allowance of uncollectable – hold and fees | (4,096,132 | ) | - | |||||
Total cash due from gateways, net | $ | 13,193,333 | $ | 630,699 |
(1) During 2018, the Company absorbed all chargeback costs as a cost of services provided – essentially a sales promotion tool to onboard customers in 2018. The Chargeback Allowance shown in the table above reflects our estimate of potential chargebacks that are likely to be realized in 2019, which are connected to sales transactions that occurred in 2018. The allowance decreases the amount that GreenBox is owed from the Gateways we use in our proprietary ecosystem. In 2019, the actual dollar amount of chargebacks will be reconciled with our allowance.
(2) Reserves are essentially an escrow fund that protects a gateway/card issuer from financial losses. In the Reserve, funds are held until chargeback time limits expire.
6. | PROPERTY AND EQUIPMENT |
Property and equipment consisted of the following:
September 30, 2019 | December 31, 2018 | |||||||
Computers | $ | 38,938 | $ | 15,285 | ||||
Furniture | - | 4,919 | ||||||
Kiosks | - | 12,750 | ||||||
Vehicles | 4,578 | 4,578 | ||||||
Total property and equipment | 43,516 | 37,532 | ||||||
Less: Accumulated depreciation | (18,169 | ) | (6,817 | ) | ||||
Total property and equipment, net | $ | 25,347 | $ | 30,715 |
Depreciation expense was $4,897 and $1,937 for the three months ended September 30, 2019 and 2018, respectively, and $11,352 and $4,431 for the nine months ended September 30, 2019 and 2018, respectively.
7. | PAYMENT PROCESSING LIABILITIES, NET |
Payment processing liabilities consisted of the following:
September 30, 2019 | December 31, 2018 | |||||||
Settlement liabilities to merchants | $ | 17,544,081 | $ | 786,425 | ||||
Settlement liabilities to ISOs | - | 107,342 | ||||||
Total processing liabilities | 17,544,081 | 893,767 | ||||||
Refund allowances | - | (28,681 | ) | |||||
Total payment processing liabilities | $ | 17,544,081 | $ | 865,086 |
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
7. | PAYMENT PROCESSING LIABILITIES, NET (continued) |
The Refund Allowance shown in the table above reflects our estimate of potential refunds that may be realized in 2019, which are connected to sales transactions that occurred in 2018. The allowance decreases the amount that GreenBox owes to Merchants using our proprietary ecosystem. In 2019, the actual dollar amount of refunds with be reconciled with our allowance.
8. | CONVERTIBLE NOTES PAYABLE |
Convertible notes payable consisted of the following:
September 30, 2019 | December 31, 2018 | |||||||
March 11, 2019 ($500,000) – 8% one-time interest charge with outstanding principal and interest due October 6, 2019. | $ | 500,000 | $ | - | ||||
December 27, 2018 ($150,000) – 12% interest per annum paid quarterly with outstanding principal and remaining interest due December 12, 2019. | - | 150,000 | ||||||
December 13, 2018 ($83,000) – 10% interest per annum with outstanding principal and interest due December 13, 2019. | - | 83,000 | ||||||
November 26, 2018 ($200,000) – 12% interest per annum with outstanding principal and interest due November 26, 2019. | 200,000 | 200,000 | ||||||
September 27, 2018 ($53,000) – 10% interest per annum with outstanding principal and interest due September 27, 2019. | - | 53,000 | ||||||
August 6, 2018 ($253,000) – 10% interest per annum with outstanding principal and interest due August 6, 2019. | - | 253,000 | ||||||
March 15, 2018 ($300,00) – 12% interest per annum with outstanding principal and interest due March 15, 2019. | 107,500 | 107,500 | ||||||
Total convertible notes payable | $ | 807,500 | $ | 846,500 |
Vista Capital Investments, LLC - $500,000 (original received $375k)
On March 11, 2019, PubCo issued a convertible promissory note for $500,000 to Vista Capital Investments, LLC (“Vista”) (the “Vista Note”), due October 6, 2019 (the “Maturity Date”). The Vista Note incurred a onetime interest charge of 8%, which was recorded at issuance, and was due upon repayment of the Vista Note. The Vista Note included an original issue discount of $125,000, netting the balance received by PubCo from Vista at $375,000. The Vista transaction included commitment fees, which took the form of an obligation by PubCo to issue Vista 25,0000 shares and a four-year warrant to purchase 125,000 shares (the “Commitment Shares”) which are only provided in the event of default. Upon the occurrence of an event of default, as defined in the Vista Note, the conversion price shall become equal to a 65% of the lowest traded price for the Company’s common stock in the 25 consecutive trading days preceding the notice of conversion and the balance due shall be multiplied by 130% (the “Default Provision”). The Vista Note’s principal and interest were due to be paid October 6, 2019.
The Company and Vista amended the convertible debt agreement as follows:
● | First Amendment – On or about October 16, 2019, the parties amended the Vista Note to extend the Maturity Date to November 6, 2019, reduce the principal and interest due to $464,625 and cancel the Commitment Shares. |
● | Second Amendment – On or about December 11, 2019, the parties agreed to a second amendment of the Vista Note, which extended the Maturity Date to January 15, 2020, required the Company to make a one-time payment of $10,000, changed the principal and interest balance due to $487,858, and waived Vista’s default rights through January 15, 2020. On January 22, 2020, Vista issued a default notice to the Company, which included an increase in the balance due to $634,213. |
● | Third Amendment – On or about January 28, 2020, the parties agreed upon a third amendment to the Vista Note, which extended the Maturity Date to February 29, 2020, reduced the principal and interest due to $482,856 and required the Company to make a one-time $20,000 payment on or before January 29, 2020, of which $5,000 is to be applied to principal due. All other terms of the note remain in full force and effect. |
The Vista Note has matured as of September 30, 2019. The Company has defaulted on the Vista Note and subsequently the Vista Note has not been extended. The Company is currently negotiating with Vista on extension of the Vista Note.
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
8. | CONVERTIBLE NOTES PAYABLE (continued) |
Saskatchewan Ltd – $150,000
On December 27, 2018, PubCo issued a convertible promissory note for $150,000 to Saskatchewan Ltd (“Sask”) (the “Sask Note”). The note incurs interest at 12% per year, paid quarterly, in advance. The outstanding principal and any remaining interest are due December 12, 2019. The note includes a conversion feature where, beginning six months after the issuance date, at which time the lender may convert all or a portion of the outstanding principal and any accrued interest balance into shares of PubCo’s common stock at a discounted rate of 50%. This note holder issued a notice of conversion to the Company on June 27, 2019 to convert the outstanding principal into 2,307,692 shares of the Company’s stock. The shares were subsequently issued to Sask on August 14, 2019.
Power Up Lending Ltd
On August 6, 2018, the Company entered into a Securities Purchase Agreement with Power Up Lending Up Ltd (“PULG”) under which PULG agreed to issue notes of up to $1,500,000 in aggregate over twelve months at the discretion of PULG (the “PULG SPA”). Under this agreement, the Company issued the following convertible notes:
● | PULG – $253,000 |
On August 6, 2018, the Company issued a convertible note for $253,000 to PULG, with a net $250,000 received by the Company. The note incurs interest at 10% per year and the outstanding principal and accrued interest are due August 6, 2019. The note includes a conversion feature where, beginning 180 days after the issuance date, at which time the lender may convert all or a portion of the outstanding principal and accrued interest balance into shares of the Company’s common stock at a discounted rate of 65%. The Company incurred $3,000 in financing fees associated with the loan. The Company paid this note on January 30, 2019, at which time it repaid the principal, accrued interest and an early repayment penalty of $93,333, which was recorded as interest expense.
● | PULG – $53,000 |
On September 27, 2018, the Company issued a convertible note for $53,000 to PULG, with a net $50,000 received by the Company. The note incurs interest at 10% per year and the outstanding principal and accrued interest are due September 27, 2019. The note includes a conversion feature where, beginning 180 days after the issuance date, at which time the lender may convert all or a portion of the outstanding principal and accrued interest balance into shares of the Company’s common stock at a discounted rate of 65%. The Company incurred $3,000 in financing fees associated with the loan. The Company paid this note on March 13, 2019, at which time it repaid the principal, accrued interest and an early repayment penalty of $19,378, which was recorded as interest expense.
● | PULG – $83,000 |
On December 13, 2018, PubCo issued a convertible note for $83,000 to PULG, with a net $80,000 received by PubCo. The note incurs interest at 10% per year and the outstanding principal and accrued interest are due December 13, 2019. The note includes a conversion feature where, beginning 180 days after the issuance date, at which time the lender may convert all or a portion of the outstanding principal and accrued interest balance into shares of the PubCo’s common stock at a discounted rate of 65%. PubCo incurred $3,000 in financing fees associated with the loan. The Company paid this note on March 13, 2019, at which time it repaid the principal, accrued interest and an early repayment penalty of $17,005, which was recorded as interest expense.
RB Cap – $200,000
On November 26, 2018, PubCo issued a convertible promissory note for $200,000 to RB Cap (the “RB Cap $200K Note”). The note incurs interest at 12% per year and the outstanding principal and accrued interest are due November 26, 2019. RB Cap may elect to convert the note at any time from six months from the date of issuance at a fixed price per share of $4.50. This note became part of a claim/counter claim suit with RB Capital (See Section C. Legal Matters below.)
RB Cap – $300,000
On or about March 15, 2018, PrivCo issued a twelve-month, $300,000 convertible promissory note to RB Capital Partners (“RB Cap”), with an interest rate of 12% per annum (“RB Cap 300K Note”). The note’s convertibility feature commenced six months after the note’s issuance, at a conversion rate of $0.001 per share of the Company’s common stock. Under the terms of the Agreement which memorialized the Verbal Agreement, we assumed the note, however, PrivCo agreed to pay $185,000 of the principal balance due on this note. On or about June 8, 2018, PrivCo transferred 440,476 restricted shares of Common Stock from the Control Block, with a market value of $185,000, to a purported designee of RB Cap, as a payment of principal of the note. Subsequently, RB Cap disputed the reduction in principal and subsequently, and we, along with PrivCo, disputed whether these shares should have been issued by PrivCo, and sought their return. On or about October 23, 2018, we issued 7,500,000 newly issued, restricted shares of our stock to RB Cap, in repayment of $7,500 of the RB Cap $300,000 Note. Subsequently, we disputed whether these shares should have been issued to RB Cap. As of December 31, 2018, our recorded principal balance for the note was $107,500 and accrued interest on the note was $15,880. On or about March 13, 2019, we issued a final cash payment towards the RB Cap 300K Note of approximately $126,092 (the “Payoff Funds”). However, RB Cap contested the amount of the Payoff Funds. (See Section C. Legal Matters below, under Note 12 – Subsequent Events)
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
9. | DERIVATIVE LIABILITY |
Derivative liability consisted of the following:
September 30, 2019 | December 31, 2018 | |||||||
Beneficial conversion feature – convertible debt | $ | 763,952 | $ | - | ||||
Total derivative liability | $ | 763,952 | $ | - |
On March 11, 2019, PubCo issued a convertible promissory note for $500,000 to Vista Capital Investments, LLC (“Vista”) (the “Vista Note”), due October 6, 2019 (the “Maturity Date”). The Vista Note incurred a onetime interest charge of 8%, which was recorded at issuance, and was due upon payback of the Vista Note. The Vista Note included an original issue discount of $125,000, netting the balance received by PubCo from Vista at $375,000. The Vista transaction included commitment fees, which took the form of an obligation by PubCo to issue Vista 25,0000 shares and a four-year warrant to purchase 125,000 shares (the “Commitment Shares”) which are only provided in the event of default. Upon the occurrence of an event of default, as defined in the Vista Note, the conversion price shall become equal to a 65% of the lowest traded price for the Company’s common stock in the 25 consecutive trading days preceding the notice of conversion and the balance due shall be multiplied by 130% (the “Default Provision”).
Derivative financial instruments, as defined in ASC 815, “Accounting for Derivative Financial Instruments and Hedging Activities”, consist of financial instruments or other contracts that contain a notional amount and one or more underlying (e.g. interest rate, security price or other variable), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. Further, derivative financial instruments are initially, and subsequently, measured at fair value and recorded as liabilities or, in rare instances, assets.
The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option and warrants at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. As a result of entering into warrant agreements, for which such instruments contained a variable conversion feature with no floor, the Company has adopted a sequencing policy in accordance with ASC 815-40-35-12 whereby all future instruments may be classified as a derivative liability with the exception of instruments related to revenue recognition policies in financial statements filed with Securities and Exchange Commission. Management believes the Company's revenue recognition policies conformshare-based compensation issued to ASC 606.employees or directors.
RevenuesBased on ASC 815, the Company determined that the convertible debt contained embedded derivatives and valued the derivative using the Black-Scholes method. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates (such as volatility, estimated life and interest rates) that may, and are mainly consulting fees. likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of our common stock, which has a high-historical volatility. Since derivative financial instruments are initially and subsequently carried at fair values, the Company’s operating results will reflect the volatility in these estimate and assumption changes.
The consulting fees are recognized when earned. Consulting fees from real estate advisory services that are subject to refundCompany performs valuation of derivative instruments at the end of each reporting period. The fair value of derivative instruments is recorded and shown separately under current liabilities as these instruments can be converted anytime. Changes in fair value are recorded as deferred revenue untilin the project is completed and the fees are no longer refundable.consolidated statement of income under other income (expenses).
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
10. | INCOME TAXES
|
The Company did not have income tax provision (benefit) due to net loss and deferred tax assets having a full valuation allowances as of and for the three and nine months ended September 30, 2019 and 2018.
The provision for income taxes differs from the amounts computed by applying the federal statutory tax rate of 21% to earnings before income taxes, as follows:
Three Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
Book income at statutory rate | 21.00 | % | 21.00 | % | ||||
Others | 0 | % | -0.80 | % | ||||
Change in Valuation Allowance | -21.00 | % | -20.14 | % | ||||
Effective income tax rate | 0 | % | 0.06 | % |
Nine Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
Book income at statutory rate | 21.00 | % | 21.00 | % | ||||
Others | 0 | % | -0.80 | % | ||||
Change in Valuation Allowance | -21.00 | % | -20.14 | % | ||||
Effective income tax rate | 0 | % | 0.06 | % |
Deferred tax assets and liabilities consist of the following tax-effected temporary differences:
September 30, 2019 | December 31, 2018 | |||||||
Deferred tax assets (liabilities): | ||||||||
Charitable contributions | $ | - | $ | (3,700 | ) | |||
Unearned revenue | - | (75,600 | ) | |||||
Depreciation | - | (26,300 | ) | |||||
Net operating loss carryforward | 498,888 | 612,800 | ||||||
Total deferred tax assets, net | 498,888 | 507,200 | ||||||
Valuation allowance | (498,888 | ) | (507,300 | ) | ||||
Net deferred tax assets (liabilities) | $ | - | $ | (100 | ) |
The Company uses the liability method of accounting for income taxes as set forth in ASC 740. Under the liability method, deferred taxes are determined based on differences between the financial statement and tax bases of assets and liabilities using enacted tax rates. As of September 30, 2019, the Company had federal and California net operating loss carryforwards of approximately $2.4 million. The federal and California net operating loss carryforwards will expire at various dates from 2026 through 2028; however, $2.4 million of the Federal operating loss does not expire and will be carried forward indefinitely.
As of September 30, 2019 and December 31, 2018, the Company maintained full valuation allowance for net operating loss carryforward deferred tax asset. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The amount of the deferred tax asset considered realizable, however, could be reduced if estimates of future taxable income are reduced.
The Company files a consolidated federal income tax return and files tax returns in various state and local jurisdictions. The statutes of limitations for its consolidated federal income tax returns are open for years 2016 and after, and state and local income tax returns are open for years 2015 and after.
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
| EQUITY TRANSACTIONS |
The Company issued the following common shares:
| On or about May 10, 2019, PubCo issued 10,000 shares to a non-affiliated legal consultant for services rendered. |
● | On or about June 18, 2019, PubCo issued a total of 850,000 shares to nine PubCo employees as performance bonuses. The shares were fully vested upon issuance and worth $0.10 per share, |
● | On or about August 14, 2019, PubCo issued 2,307,692 shares to |
● | On or about August 14, 2019, PubCo issued 1,085,000 shares to PrivCo, as repayment of shares |
o | On or
|
o | On or about January 4, 2019, PrivCo inadvertently transferred 50,000 restricted PubCo shares to a non-affiliated service provider to PubCo for services rendered to PubCo. |
o | On or about January 4, 2019, PrivCo inadvertently transferred 35,000 PubCo shares of to a non-affiliated service provider to PubCo for services rendered to PubCo. |
12. | RELATED PARTY TRANSACTIONS |
The Company had the following related party transactions:
● | Related Party Employees and Employee Entity: |
Dan Nusinovich – The Company hired Dan Nusinovich on or about February 19, 2018 as the Company’s Development and Testing Manager. Dan is the brother of Fredi Nisan, our CEO and Director. Subsequently, the Company entered into a Referral Commission Agreement with Dan in November 2018, which expired November 2019, under which Dan is to receive 10% for new business resulting from his direct introductions. To date, no new business has been generated by Dan, thus Dan has not been paid under the Referral Agreement. On or about June 18, 2019, the Company issued 160,000 restricted shares to Dan, who was one of nine employees to receive a performance bonus in stock on this day. The shares were fully vested upon issuance and worth $16,000 at closing, on the day of issuance. The Company currently pays Dan approximately $96,000 per year.
Liron Nusinovich – The Company hired Liron Nusinovich on or about July 16, 2018 as our Risk Analyst. Liron is the brother of Fredi Nisan, our CEO and Director. On or about June 18, 2019, the Company issued 110,000 restricted shares to Liron, who was one of nine employees to receive a performance bonus in stock on this day. The shares were fully vested upon issuance and worth $11,000 at closing, on the day of issuance. The Company currently pays Liron approximately $92,000 per year.
Pop N Pay, LLC – In addition to his employment with the Company, Dan Nusinovich owns 100% of Pop N Pay, LLC (“PNP”), a Delaware registered limited liability company, that he formed on August 20, 2018. During the late summer of 2018, when both market opportunity and demand necessitated opening additional bank accounts to support our payment processing products and services, we turned to PNP to open new accounts, as a trustee, on our behalf. For his assistance, Dan, through his ownership of PNP, received approximately $3,000 (in addition to Dan’s salary) in early 2019, for services rendered in the fourth quarter of 2018.
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
12. | RELATED PARTY TRANSACTIONS (continued) |
● | Related Party Entities: |
IPX Referral Payments, LLC – Pouya Moghavem, an employee since August 1, 2018, owns 25% of IPX Referral Payments, LLC (“IPX”). In addition to the $5,000 monthly salary we pay Moghavem, the Company entered into a Referral Agreement with IPX wherein the Company agreed to compensate IPX for referrals, which subsequently become the Company’s customer. For the three and nine months ended September 30, 2019 and 2018, IPX did not earn any commissions. Additionally, in or about October 2018, IPX provided GreenBox with a merchant trust account in Mexico through Affinitas Bank, one of the Gateways that process payment transactions on the Company’s behalf. The Company did not pay IPX for this service, however, IPX reported that Affinitas paid IPX approximately $1,830.
RB Capital – Because PrivCo agreed to sell RB Cap 4% of PrivCo in January 2018, which currently purportedly gives RB Cap a claim to approximately six million PubCo shares, RB Cap is deemed an affiliated Party. In March 2018, PrivCo issued a $300,000 convertible promissory note to RB Cap, the balance of which PubCo assumed when we acquired the GreenBox Business from PrivCo. On November 26, 2018, we issued a $200,000 convertible promissory to RB Cap. Subsequently, RB Cap and GreenBox disputed the implications of the share purchase and promissory notes. The implications of this ownership and RB Cap’s claim to PubCo shares are in dispute, which became the subject of a lawsuit with RB Cap (see Legal Matters under Subsequent Events). This was settled on February 27, 2020.
America 2030 Capital Limited and Bentley Rothschild Capital Limited – On or about July 30, 2018, Nisan and Errez, the sole officers and directors of PubCo, and the majority owners of PrivCo, each entered into a separate Master Loan Agreement (each an "MLA"): Errez with America 2030 Capital Limited (“America 2030”) and Nisan with Bentley Rothschild Capital Limited ("Bentley"), a company affiliated with America 2030, both located in Nevis, West Indies. Each MLA was for a $5,700,000 loan, at 5.85% interest, maturing in ten years. Per the MLA’s terms, Nisan and Errez caused PrivCo to transfer 1,600,000 PubCo shares, valued at $2,144,000 at close of trading on the day of issuance, as "Transferred Collateral" from the Control Block (not a new issuance by PubCo) to Bentley (although both contracts acknowledge receipt of 1.6 million shares, there was only was transference of 1.6 million shares). The transfer occurred on or about August 1, 2018. To date, there has been no funding under either of the MLAs. Subsequently, both Nisan and Errez received constitutive notice, regarding arbitration of an alleged breach of their respective MLAs. As of March 31, 2020, both parties have abandoned the matter and no further action was required by either party.
● | Kenneth Haller and the Haller Companies |
Kenneth Haller (“Haller”) became the Company’s Senior Vice President of Payment Systems in November 2018. The Company began working indirectly with Haller earlier in 2018, both individually and through our relationship with MTrac Tech Corporation (“MTrac”), which in turn has business relationships with Haller. Haller brings considerable advantages to the Company’s platform development and business development efforts and capabilities, including transactional business relations and a large network of agents, which the Company believes, are capable of processing $1 billion transactions annually (the “Haller Network”). The Haller Network is an amalgamation of the collective networks of Haller and three companies owned or majority-owned by Haller, which are Sky Financial & Intelligence, LLC (“Sky”), Charge Savvy, LLC, Cultivate, LLC (collectively, the “Haller Companies”), each of which has formalized business relationships with the Company, as well as with some of the Company’s partners, which the Company believes allows the Company to maximize and diversity the Company’s market penetration capabilities. Haller, through Sky, owns controlling interests in Charge Savvy, LLC and Cultivate, LLC, with whom we do business indirectly, through their respective business relationship with MTrac. We also do business directly with Cultivate LLC, through a three-party agreement, which includes us, MTrac and Cultivate.
The following are certain transactions between the Company and the Haller Companies:
o | MTrac Agreement – On or about May 4, 2018, Sky entered into a two year, Associate/Referral Agreement-E-Commerce with MTrac, wherein Sky agreed to promote MTrac’s solution payment platform (which is based on the GreenBox platform) and related services; to provide new sales, sales leads, introductions to merchants and ISOs, and other potential customers of MTrac’s services, for which Sky receives ongoing commissions from all credit card transactions processed as a result of new business generated by Sky for MTrac. Most services provided under this contract are executed by Sky’s majority owned subsidiary, Charge Savvy, LLC (see Charge Savvy, LLC below). The agreement noted MTrac’s license of GreenBox’s payment processing technology and contained terms whereby Sky could (but was not required to) refer certain customers to MTrac in exchange for various referral fees. Sky never referred customers to MTrac, and therefore, did not collect, and is not collecting, any referral fees from MTrac. |
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
12. | RELATED PARTY TRANSACTIONS (continued) |
● | Kenneth Haller and the Haller Companies (continued) |
o | Sky Financial & Intelligence, LLC – Haller owns 100% of Sky Financial & Intelligence LLC (“Sky”), a Wyoming limited liability company, and serves as its sole Managing Member. Sky is a strategic merchant services company that focuses on high risk merchants and international credit card processing solutions. In 2018, Sky was using GreenBox’s QuickCard payment system as its main payment processing infrastructure, through Sky’s relationship with MTrac (see Sky - MTrac Agreement above). It was through this successful relationship, that we came to know Haller and the Haller Network. Realizing that the Haller Network and Haller’s unique skill set was highly complementary to our business objectives, we commenced discussions to retain Haller through his consulting firm, Sky, for a senior role, directly responsible for growing GreenBox’s operations. Subsequently, in November 2018, Haller was appointed as our Senior Vice President of Payment Systems, for a monthly consulting fee of $10,000, paid to Sky (“Haller Consulting Fee”). This relationship was referenced in press releases as GreenBox’s “acquisition of Sky MIDs Technologies” (see Sky MIDs below). We accrued and/or paid Haller $55,365 in the quarter ending December 31, 2018, which included $30,000 in consulting fees and $23,365 in travel and relocation expense reimbursement. As our relationship with Haller / Sky is non-exclusive, Haller and the Haller Companies provide services to other companies, including those listed below. Any revenue generated by Haller and/or the Haller Companies through these other relationships is in addition to the Haller Consulting Fee. |
§ | Charge Savvy, LLC – Sky owns 68.4% of Charge Savvy, LLC (“Charge Savvy”), an Illinois limited liability company. Haller serves as one of three Managing Members of Charge Savvy, along with Higher Ground Capital, LLC (owns 14%), and Jeff Nickel (owns 17.4%). It is through Charge Savvy, that the Haller Network is most visible as part of our operations, as Charge Savvy is the ISO through which revenue generated from Haller Network Agents is processed, under a contract between Sky and MTrac, who in turn, has a contract with us. The three managing members of Charge Savvy own the same percentages of Cultivate (see below), as they do Charge Savvy. |
§ | Cultivate, LLC – Sky owns 68.4% of Cultivate, LLC (“Cultivate”), an Illinois limited liability company, and serves as one of three Managing Members, along with Higher Ground Capital, LLC (owns 14%), and Jeff Nickel (owns 17.4%). When Cultivate was first formed, it was the licensor of certain proprietary point of sale software, retail point of sale operations, and complementary support of Cultivate’s software and related hardware for on-site credit and debit card processing. Subsequently, Cultivate the entity became exclusively a software provider, ceasing all service and support operations. Eventually certain beneficial aspects of the |
o | Haller Commissions – Under a verbal agreement in Spring 2018, we offered Haller commissions on any referrals that resulted in new business for the Company (“Haller Commissions”). Under this agreement, Haller introduced us to three merchants who became three of the first merchants to use our system. Under the verbal agreement, we paid Haller commissions from transactions processed by these three merchants, summing to approximately $210 in June 2018, $8,396 in July 2018 and $321 in August 2018. In or about September 2018, we commenced discussions with Haller to join our management team and discontinued paying Haller commissions related to these three merchants. |
o | GreenBox, Cultivate and MTrac Agreement – On or about December 17, 2018, PubCo entered into a 5-year exclusive three-party license agreement with MTrac and Cultivate (see Section E. MTrac above). The three Managing Members of Cultivate and Charge Savvy, owning the same percentages in each entity, subsequently decided to collect all revenue through Charge Savvy instead of Cultivate. |
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
12. | RELATED PARTY TRANSACTIONS (continued) |
● | Kenneth Haller and the Haller Companies (continued) |
o | Sky Mids –Previous references in press releases issued by PubCo in or about August 2018 regarding a “Sky Mids Acquisition” are references to the non-exclusive working relationship between PrivCo (and subsequently, PubCo) and Sky / Haller. The designation “Sky MIDs” was a colloquial reference to Sky, based upon a Sky-owned and operated website, which is no longer in use. While an acquisition of Sky has not formally been executed, nor have we (nor subsequently, PubCo) executed a formal engagement with Haller nor Sky, previous statements regarding the nature of our relationship with Sky Mids, which include our beliefs in the advantages of this relationship, accurately represent the working relationship between the Company and Sky / Haller. |
o | Verbal Agreement – As part of Haller’s remuneration, the Company and Haller have a verbal agreement for Haller to be issued approximately 14 to 18 million shares of the Company’s |
The Company did not pay any commissions to Charge Savvy or Cultivate for the three and nine months ended September 30, 2019 and 2018.
13. | COMMITMENTS AND CONTINGENCIES |
Legal Proceedings
The Company has the legal proceedings:
● | MTrac, Global Payout, Inc. and Cultivate Technologies, LLC – On November 25, 2019, five companies (the “Plaintiffs”) filed a complaint against us, MTrac, Global Payout, Inc. and Cultivate Technologies, LLC in the Superior Court of the |
● | America 2030 Capital Limited and Bentley Rothschild Capital Limited – On or about October 31, 2018, Nisan and Errez received constitutive notice, regarding arbitration against Nisan, Errez, PrivCo and possibly PubCo, from Bentley Rothschild Capital Limited ("Bentley") and America 2030 Capital Limited (“America 2030”), both located in Nevis, West Indies, and both claiming breach of contract by Nisan and Errez of Nisan and Errez’s respective individual Master Loan Agreements (see Note 7 – Related Party Transactions above) and seeking forfeiture of 1,600,000 PubCo shares that PrivCo had transferred, on |
● | RB Capital Partners, Inc. – On April 24, 2019, RB Cap and related parties (the “RB Cap Parties”) filed a complaint in the San Diego Superior Court against PrivCo, PubCo, Ben Errez and Fredi Nisan (collectively, the “GreenBox Parties”); and on October 1, 2019, the RB Cap Parties filed an amended complaint against the GreenBox Parties alleging claims of |
● | Dahan – Yoram Dahan, Melissa Dahan, Forty8 Ltd., and Trustees of the Melissa H. Dahan Living Trust (collectively, “the Dahan Parties”) were also named by RB Capital in the |
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
| COMMITMENTS AND CONTINGENCIES (continued) |
Legal Proceedings (continued)
● | Withholding Suit – On November 25, 2019, five companies (the “Plaintiffs”) filed a complaint against us, Global Payout, Inc., MTrac Tech Corporation and Cultivate Technologies, LLC (collectively the “Defendants”) in the Superior Court of the State of California. Plaintiffs filed suit to recover processed funds and processing fees alleged to be withheld illegally (collectively, the “Withholding Suit”). Pursuant to a mandatory arbitration clause in the controlling agreement, the parties to the |
Operating Leases
The Company entered into the following operating facility lases:
● | Hyundai Rio Vista – On October 4, 2018, the Company entered into an operating facility lease for its corporate office located in San Diego with 38 months term and with option to renew. The lease started on |
The Company entered into an operating lease for corporate location on October 4, 2018. Rent expense paid under the lease agreements for the three months ended September 30, 2019 was $33,249 and for the nine months ended September 30, 2019 was $94,377.
For operating leases, we calculated right of use assets and lease liabilities based on the present value of the remaining lease payments as of the date of adoption using the incremental borrowing rate. The adoption of ASC 842 resulted in recording an adjustment to operating lease right of use asset and operating lease liabilities of $256,242 and $260,534, respectively, as of September 30, 2019. The difference between the operating lease ROU asset and operating lease liabilities at transition represented existing deferred rent expenses and tenant improvements, and indirect costs that was derecognized. The adoption of ASC 842 did not materially impact our results of operations, cash flows, or presentation thereof.
In accordance with ASC 842, the components of lease expense were as follows:
Three Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
Operating lease expense – Hyundai Rio Vista | $ | 1,073 | $ | - | ||||
Total lease expense | $ | 1,073 | $ | - |
Nine Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
Operating lease expense – Hyundai Rio Vista | $ | 4,292 | $ | - | ||||
Total lease expense | $ | 4,292 | $ | - |
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
| COMMITMENTS AND CONTINGENCIES (continued) |
In accordance with ASC 842, maturities and operating lease liabilities as of September 30, 2019 were as follows:
For the year ended | Hyundai Rio Vista, Inc. | |||
Undiscounted cash flows: | ||||
2019 | $ | 29,295 | ||
2020 | 110,948 | |||
2021 | 95,026 | |||
2022 | - | |||
2023 | - | |||
2024 | - | |||
Thereafter | - | |||
Total undiscounted cash flows | 235,269 | |||
Discounted cash flows: | ||||
Lease liabilities - current | 26,489 | |||
Lease liabilities - long-term | 234,045 | |||
Total discounted cash flows | 260,534 | |||
Difference between undiscounted and discounted cash flows | $ | 25,265 |
In accordance with ASC 842, future minimum lease payments as of September 30, 2019 were as follows:
For the year ended | Hyundai Rio Vista, Inc. | |||
2019 | $ | 32,904 | ||
2020 | 132,601 | |||
2021 | 124,944 | |||
2022 | - | |||
2023 | - | |||
Thereafter | - | |||
Total | $ | 290,449 |
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
| SUBSEQUENT EVENTS |
The Company follows the guidance in FASB ASC Topic 855, Subsequent Events (“ASC 855”), which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before the consolidated financial statements are issued or are available to be issued. ASC 855 sets forth (i) the period after the balance sheet date during which management of a reporting entity evaluates events or transactions that may occur for potential recognition or disclosure in the consolidated financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its consolidated financial statements, and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. Accordingly, the Company did not have any subsequent events that require disclosure other than the following:
Weighted | ||||||||||||||||
June 30, 2018 | average | |||||||||||||||
As Originally | shares | |||||||||||||||
Reported | Adjustments | Restated | outstanding | |||||||||||||
Balance Sheet | ||||||||||||||||
Additional paid-in capital | 4,731,083 | (5,532,244 | ) | (801,161 | ) | |||||||||||
Retained earnings | (5,149,690 | ) | 5,532,244 | 382,554 | ||||||||||||
Stockholders' equity | (259,717 | ) | - | (259,717 | ) | |||||||||||
Condensed Statement of Operations - for the three months ended | ||||||||||||||||
Net (loss) income from discontinued operations, net of income taxes | (5,638,604 | ) | 5,532,244 | (106,360 | ) | |||||||||||
Net income (loss) | (5,638,604 | ) | 5,532,244 | (106,360 | ) | |||||||||||
Basic and diluted income (loss) per share | (0.04 | ) | (0.00 | ) | 139,842,671 | |||||||||||
Basic and diluted income (loss) per share - discontinued operations | (0.04 | ) | (0.00 | ) | ||||||||||||
Condensed Statement of Operations - for the six months ended | ||||||||||||||||
Net (loss) income from discontinued operations, net of income taxes | (5,513,132 | ) | 5,532,244 | 19,112 | ||||||||||||
Net income (loss) | (5,513,132 | ) | 5,532,244 | 19,112 | ||||||||||||
Basic and diluted income (loss) per share | (0.07 | ) | 0.00 | 77,490,418 | ||||||||||||
Basic and diluted income (loss) per share - discontinued operations | (0.07 | ) | 0.00 |
● |
– On
|
● | Product Development, Launch and Sales – In 2019, we commenced a larger deployment of our blockchain-based, payment and ledger system, which we believe was |
● | Kenneth Haller and the Haller Companies / Affiliated Party Transactions – Kenneth Haller (“Haller”) became our Senior Vice President of Payment Systems, a key member of our management team, in November 2018. Haller brings considerable advantages to our platform’s development and our business development efforts and capabilities, including transactional business relations and a large network of agents, which we believe capable of processing $1 billion annually (the “Haller Network”). The Haller Network is an amalgamation of the |
● | Lawsuit – On November 25, 2019, five companies (the “Plaintiffs”) filed a complaint against us, Cultivate Technologies, LLC (a company 68.4% owned by Sky), Global Payout, Inc. and MTrac Tech Corporation in the Superior Court of the State of California. Plaintiffs filed suit to recover processed funds and processing fees alleged to be withheld illegally (see Withholding Suit in Section C. Legal Matters above). |
● | Issuance of Unregistered Securities – PubCo issued the following securities that were not registered under the Securities Act. Except where noted, all the securities stated below were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act. |
o | On |
GREENBOX POS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
14. | SUBSEQUENT EVENTS (continued) |
● | Purchase Agreements – The Company entered into the following purchase agreements: |
o | West Coast Business Capital, LLC – On or about November 12, 2019, PubCo entered into a |
o | Fox Capital Group, Inc. – On or about December 5, 2019, PubCo entered into a Secured Merchant Agreement with Fox Capital Group, Inc. (“Fox”). Under the terms of the |
o | Complete Business Solutions Group, Inc. – On or about December 9, 2019, PubCo entered into an
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Net Income
Disclaimer Regarding Forward Looking Statements
Our Management’s Discussion and Analysis or Plan of Operations contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.
Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.
Overview – Organization and New Name
Organization – GreenBox POS (the “Company” or “PubCo”) was formerly known as ASAP Expo, Inc (“ASAP”), which was incorporated April 10, 2007 under the laws of the State of Nevada. On January 4, 2020, PrivCo and GreenBox POS, a Nevada corporation (“PubCo”) entered into the Agreement to memorialize the Verbal Agreement with PrivCo which was formed on August 10, 2017 (the seller). On April 12, 2018, pursuant to the Verbal Agreement, PubCo acquired PrivCo’s blockchain gateway and payment system business, point of sale system business, delivery business and kiosk business, and bank and merchant accounts, as well as all intellectual property related thereto (the “GreenBox Business”). As consideration for the GreenBox Business, on April 12, 2018, PubCo assumed PrivCo’s liabilities that had been incurred in the normal course of the GreenBox Business (collectively, the “GreenBox Acquisition”). For accounting and reporting purposes, PubCo deemed the GreenBox Acquisition a “Reverse Acquisition” with PrivCo designated the “accounting acquirer” and PubCo designated the “accounting acquiree.”
New Name – On May 3, 2018, PubCo formally changed its name to GreenBox POS LLC, then subsequently changed its name to GreenBox POS on December 13, 2018.
Management Discussion and Analysis
This MD&A section was prepared by the management of GreenBox POS (OTC: GRBX) (“GreenBox”, “GRBX”, the “Company”), in conjunction with the fiscal year ended December 31, 2019 financial activities and as part of the 10-K disclosure. The intent of this section is to discuss the financial activity disclosed from the perspectives of on-going Q1/20 and plans and projections for the remainder of 2020.
Q1/20 signify the return of operations in full scale for the Company. In Q4/2019, the Company invested in research and development, improving its acquiring platform and enabling safer, faster and significantly more scalable services. These technology improvements allow for major new capabilities, including Real Time Payments (RTP), a very sought-after payment feature. This change also reduces the Company COGS. Although the Company saw a decrease in operations in Q4/2019, the improved platform is expected to perform better than its predecessor platform and increase total volumes while increasing profit margins and operating sustainability. The Company returned to ramping up commercial large-scale operations, on-boarding large number of clients, and increasing the Company operational bandwidth to accommodate the needs of its clients. Q1/2020 continues to execute on these management directives.
Management is focused on the following KPI (Key Performance Indices):
KPI | Description |
Annual Transactional Processing Volume (ATPV) | The Company |
Annual Gross Profit Margin (AGPM) | This index matches the |
Annual Gross Profit (AGP) | At the targeted Annual Transactional Processing Volume goal and targeted Annual Gross Profit Margin, projected Annual Gross Profit is $18-20M for FY2020. |
Annual EBITDA | The Company |
[Table 1]
In order to process the targeted ATPV goal, $1B, the Company must be able to process close to $90M/month, or $3M/day, in a consistent fashion. The Company needed to invest further in its core technologies to reach this capacity, a task now completed. The Company now has the required bandwidth and technical capabilities to achieve this goal. The Company projects it will process transactions in volumes greater than $1M/day within Q2/2020 and will ramp up the targeted Average Daily Volumes in Q4/2020. We believe the current operational bandwidth for the Company is virtually unlimited.
KPI | Description |
Average Monthly Transaction Count (AMTC) | The Company projects an AMTC of more than 500,000 |
New Clients Backlog (NCB) | The Company will continue to invest in on-boarding technologies in order to expedite the process and reduce backlog. There are five client statuses: application, KYC, on-boarding, integration, processing. Current backlog of clients at application stage is greater than 2,000. Our goal is to bring the NCB down to 200. |
Client Attrition | Current attrition rates are under 5%. Company goal is to reduce it further and keep it under 3%. |
[Table 2]
Based on the above and the current traction in Q1/20, the Company is comfortable projecting approximately $18-20M EBITDA in FY20.
The Company owns all the IP rights for operations in its space: tokenizer, gateway, ledger manager and blockchain substrate. Other, supporting patents, such as fraud proofing, on-boarding accelerators, and an all new blockchain implementation, are pending.
With the visibility into the Company’s operation management has at the end of Q1/2020 the Company plans on uplisting to a senior exchange by Q1 of FY21 and does not plan on an artificial stock price increase, such as a reverse split. The current plan is to grow the company organically to the size and value required by the exchange.
The ATPV, Profitability and other major KPIs remain sensitive to regulatory changes global and national economic trends. These will impact and influence the Company’s product line, its potential mergers and acquisitions targets, its joint ventures and the Company’s technology emphasis.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2019 (Unaudited) Compared to Three Months Ended September 30, 2019 (Unaudited):
Three Months Ended September 30, | ||||||||||||||||||||||||
2019 | 2018 | Changes | ||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||
Amount | Revenue | Amount | Revenue | Amount | % | |||||||||||||||||||
Revenue | 14,793,117 | 100.0 | % | $ | 191,010 | 100.0 | % | $ | 14,602,107 | 7644.7 | % | |||||||||||||
Cost of revenue | 6,834,198 | 35.8 | % | 232,251 | 121.6 | % | 6,601,947 | 2842.6 | % | |||||||||||||||
Gross profit | 7,958,919 | 41.7 | % | (41,241 | ) | -21.6 | % | 8,000,160 | -19398.6 | % | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Advertising and marketing | 10,319 | 0.1 | % | 30,652 | 16.0 | % | (20,333 | ) | -66.3 | % | ||||||||||||||
Research and development | 381,112 | 2.0 | % | 124,897 | 65.4 | % | 256,215 | 205.1 | % | |||||||||||||||
TGPF Bed Debt Reserve - 60% | 5,665,031 | 29.7 | % | - | 0.0 | % | 5,665,031 | 100.0 | % | |||||||||||||||
Payroll and payroll taxes | 420,074 | 2.2 | % | 140,137 | 73.4 | % | 279,937 | 199.8 | % | |||||||||||||||
Professional fees | 281,659 | 1.5 | % | 168,067 | 88.0 | % | 113,592 | 67.6 | % | |||||||||||||||
General and administrative | 176,120 | 0.9 | % | 53,220 | 27.9 | % | 122,900 | 230.9 | % | |||||||||||||||
Depreciation and amortization | 4,897 | 0.0 | % | 1,937 | 1.0 | % | 2,960 | 152.8 | % | |||||||||||||||
Total operating expenses | 6,939,212 | 36.4 | % | 518,910 | 271.7 | % | 6,420,302 | 1237.3 | % | |||||||||||||||
Income (loss) from operations | 1,019,707 | 5.3 | % | (560,151 | ) | -293.3 | % | 1,579,858 | -282.0 | % | ||||||||||||||
Other Income (Expense): | ||||||||||||||||||||||||
Interest (expense) income | 3,837 | 0.0 | % | (7,082 | ) | -3.7 | % | 10,919 | -154.2 | % | ||||||||||||||
Interest expense - Vista convertible note | - | 0.0 | % | - | 0.0 | % | - | 0.0 | % | |||||||||||||||
Derivative expense | - | 0.0 | % | - | 0.0 | % | - | 0.0 | % | |||||||||||||||
Changes in fair value of derivative liability | 236,184 | 1.2 | % | - | 0.0 | % | 236,184 | 0.0 | % | |||||||||||||||
Asset impairment | - | 0.0 | % | - | 0.0 | % | - | 0.0 | % | |||||||||||||||
Interest Income | - | 0.0 | % | - | 0.0 | % | - | 0.0 | % | |||||||||||||||
Total other income (expense) | 240,021 | 1.3 | % | (7,082 | ) | -3.7 | % | 247,103 | -3489.2 | % | ||||||||||||||
Income (loss) before provision for income taxes | 1,259,728 | 6.6 | % | (567,233 | ) | -297.0 | % | 1,826,961 | -322.1 | % | ||||||||||||||
Provision for income taxes | - | 0.0 | % | - | 0.0 | % | - | 0.0 | % | |||||||||||||||
Net income (loss) | $ | 1,259,728 | 6.6 | % | $ | (567,233 | ) | -297.0 | % | $ | 1,826,961 | -322.1 | % |
Revenue
For the three months ended September 30, 2019 and 2018, we recognized revenue of $14,793,117 and $191,010, respectively. Throughout 2018, we conducted numerous tests of our products and services, and began to sign up our initial customers. After a soft launch of the GreenBox Network during the last few days of June 2018, when we began processing transactions, we processed approximately $5,100,000 in completed transactions on behalf of merchants. We believe this accomplishment to be indicative of the validity of our proprietary blockchain-based systems, which are the foundation of the GreenBox Network, and indicative of our future potential.
Cost of Goods Sold
Our Cost of Goods Sold (“COGS”) for payment processing consists of various processing fees paid to Gateways, as well as commission payments to the Independent Sales Organizations (“ISO”) responsible for establishing and maintaining merchant relationships, from which the processing transactions ensue. For the three months ended September 30, 2019 and 2018, our COGS associated with payment processing was $6,834,198 and $232,251, respectively, in which included the absorption by us, of chargebacks, which was limited to 2018, as a promotional tool. As regards Licensing Revenue, we do not incur any direct costs of services or products, thus we did not record COGS for Licensing Revenue.
Operating Expenses
Overall, operating expenses increased during 2019 as the Company ramped up operations. For the three months ended September 30, 2019 and 2018, our general and administrative expense was $6,939,212 and $518,910, respectively, which was primarily due to our legal and professional expenses, most of which were outsourced, were $281,659 and $168,067, respectively; and our R&D expense was $381,112 and $124,897, respectively.
Non-Operating Expenses
For the three months ended September 30, 2019 and 2018, we recorded non-operating income (expense) of $240,021 and ($7,082), respectively, of which primarily represented $236,184 of changes in derivative liability for the three months ended September 30, 2019.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 2019 (Unaudited) Compared to Nine Months Ended September 30, 2018 (Unaudited):
Nine Months Ended September 30, | ||||||||||||||||||||||||
2019 | 2018 | Changes | ||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||
Amount | Revenue | Amount | Revenue | Amount | % | |||||||||||||||||||
Revenue | $ | 19,070,861 | 100.0 | % | $ | 305,935 | 100.0 | % | $ | 18,764,926 | 6133.6 | % | ||||||||||||
Cost of revenue | 10,602,555 | 55.6 | % | 250,173 | 81.8 | % | 10,352,382 | 4138.1 | % | |||||||||||||||
Gross profit | 8,468,306 | 44.4 | % | 55,762 | 18.2 | % | 8,412,544 | 15086.5 | % | |||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Advertising and marketing | 35,928 | 0.2 | % | 135,757 | 44.4 | % | (99,829 | ) | -73.5 | % | ||||||||||||||
Research and development | 1,085,298 | 5.7 | % | 287,919 | 94.1 | % | 797,379 | 276.9 | % | |||||||||||||||
Cash due from gateway reserve expense | 5,665,031 | 29.7 | % | - | 0.0 | % | 5,665,031 | 1000.0 | % | |||||||||||||||
Payroll and payroll taxes | 967,121 | 5.1 | % | 178,116 | 58.2 | % | 789,005 | 443.0 | % | |||||||||||||||
Professional fees | 588,677 | 3.1 | % | 515,419 | 168.5 | % | 73,258 | 14.2 | % | |||||||||||||||
General and administrative | 375,373 | 2.0 | % | 232,777 | 76.1 | % | 142,596 | 61.3 | % | |||||||||||||||
Depreciation and amortization | 11,352 | 0.1 | % | 4,431 | 1.4 | % | 6,921 | 156.2 | % | |||||||||||||||
Total operating expenses | 8,728,780 | 45.8 | % | 1,354,419 | 442.7 | % | 7,374,361 | 544.5 | % | |||||||||||||||
Loss from operations | (260,474 | ) | -1.4 | % | (1,298,657 | ) | -424.5 | % | 1,038,183 | -79.9 | % | |||||||||||||
Other Income (Expense): | ||||||||||||||||||||||||
Interest (expense) income | (171,116 | ) | -0.9 | % | (92,930 | ) | -30.4 | % | (78,186 | ) | 84.1 | % | ||||||||||||
Interest expense - debt discount | (188,273 | ) | -1.0 | % | - | 0.0 | % | (188,273 | ) | 0.0 | % | |||||||||||||
Derivative expense | (634,766 | ) | -3.3 | % | - | 0.0 | % | (634,766 | ) | 0.0 | % | |||||||||||||
Changes in fair value of derivative liability | (129,186 | ) | -0.7 | % | - | 0.0 | % | (129,186 | ) | -100.0 | % | |||||||||||||
Asset impairment | - | 0.0 | % | (75,000 | ) | -24.5 | % | 75,000 | -100.0 | % | ||||||||||||||
Interest Income | - | 0.0 | % | - | 0.0 | % | - | 0.0 | % | |||||||||||||||
Total other income (expense) | (1,123,341 | ) | -5.9 | % | (167,930 | ) | -54.9 | % | (955,411 | ) | 568.9 | % | ||||||||||||
Loss before provision for income taxes | (1,383,815 | ) | -7.3 | % | (1,466,587 | ) | -479.4 | % | 82,772 | -5.6 | % | |||||||||||||
Provision for income taxes | - | 0.0 | % | - | 0.0 | % | - | 0.0 | % | |||||||||||||||
Net loss | $ | (1,383,815 | ) | -7.3 | % | $ | (1,466,587 | ) | -479.4 | % | $ | 82,772 | -5.6 | % |
Revenue
For the nine months ended September 30, 2019 and 2018, we recognized revenue of $19,070,861 and $305,935, respectively. Throughout 2018, we conducted numerous tests of our products and services, and began to sign up our initial customers. After a soft launch of the GreenBox Network during the last few days of June 2018, when we began processing transactions, we processed approximately $5,100,000 in completed transactions on behalf of merchants. We believe this accomplishment to be indicative of the validity of our proprietary blockchain-based systems, which are the foundation of the GreenBox Network, and indicative of our future potential.
Cost of Goods Sold
Our Cost of Goods Sold (“COGS”) for payment processing consists of various processing fees paid to Gateways, as well as commission payments to the Independent Sales Organizations (“ISO”) responsible for establishing and maintaining merchant relationships, from which the processing transactions ensue. For the nine months ended September 30, 2019 and 2018, our COGS associated with payment processing was $10,602,557 and $250,173, respectively, which included the absorption by us, of chargebacks, which was limited to 2018, as a promotional tool. As regards Licensing Revenue, we do not incur any direct costs of services or products, thus we did not record COGS for Licensing Revenue.
Operating Expenses
Overall, operating expenses increased during 2018 as the Company ramped up operations. For the nine months ended September 30, 2019 and 2018, our general and administrative expense was $8,728,780 and $1,354,419, respectively; our legal and professional expenses, most of which were outsourced, were $588,677 and $515,419, respectively; and our R&D expense was $1,085,298 and $287,919, respectively.
Non-Operating Expenses
For the nine months ended September 30, 2019 and 2018, we recorded non-operating expenses of $1,123,341 and $167,930, respectively, of which $171,116 and $92,930, respectively, were for interest, $634,766 represented derivative expense for the nine months ended September 30, 2019. We also recorded $75,000 as asset impairment for the nine months ended September 30, 2018 as compared to a net income of $33,758 for the same period last year. The decrease in net income was mainly due to a loss on settlement of debt and the cessation of the previous operations of the Company after consummation of the Transaction on April 12, 2018.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the consummation of the Purchase Agreement, on April 12, 2018, in consideration for the Acquired Assets, Holdings paid the Company $0.00 in cash and assumed $235,605 of liabilities in excess of assets. The Transaction has resulted in the removal of the previous operations of the Company. Since April 12, 2018, the Company’s operations have consisted of providing management and business development services.
Liquidity and Capital Resources
Our working capital for the periods presented is summarized as follows:
As of June 30, 2018 | As of December 31, 2017 | |||||||
Current assets | $ | - | $ | - | ||||
Current liabilities | 175,033 | 84,684 | ||||||
Working capital | $ | (175,033 | ) | $ | (84,684 | ) |
Cash Requirements
We incurred a working capital deficit of $2,375,193 as of September 30, 2019. For December 31, 2018, our working capital was $874,980. Based on our revenues, operational expenses, cash on hand and future operational needs, we will need to continue procuring capital from external sources, which may include equity, debt or hybrid financing, in order to fund operations.
Cash Flow
The following table shows cash flows for the periods presented:
Nine Months Ended September 30, | ||||||||||||||||
Six Months Ended June 30, | 2019 | 2018 | ||||||||||||||
2018 | 2017 | |||||||||||||||
Net cash provided by (used in) operating activities | $ | 203,242 | $ | 66,827 | ) | $ | 64,622 | $ | (1,227,070 | ) | ||||||
Net cash provided by (used in) investing activities | (135,431 | ) | (59,346 | ) | (5,984 | ) | (26,267 | ) | ||||||||
Net cash provided by (used in) financing activities | (158,093 | ) | (40,042 | ) | (89,000 | ) | 1,198,730 | |||||||||
Net increase (decrease) in cash | $ | (90,282 | ) | $ | (32,561 | ) | $ | (30,362 | ) | $ | (54,607 | ) |
Operating Activities –
For the sixnine months ended JuneSeptember 30, 2019 and 2018, net cash provided by (used in) operating activities was $203,242, which resulted from discontinued operations.
For the six months ended June 30, 2017, net cash provided by operating activities was $66,827. This$64,622 and $(1,227,070), respectively, was primarily due to a net incomeloss and timing of $33,758, adjusted by non-cash related expensessettlement of depreciation of $5,092assets and non-cash capital gain of $5,277, then increased by favorable changes in working capital of $33,255. The favorable changes in working capital resulted from an increase in accounts payable and accrued expenses of $51,107 and income tax payable of $38,147, offset by an increase in prepaid expenses and deposit of $50,000 and accounts receivable of $6,000.liabilities.
Investing activitiesActivities
– For the sixnine months ended JuneSeptember 30, 2019 and 2018, net cash used in investing activities was $135,431.
For the six months ended June 30, 2017, net cash used in investing activities was $59,436. This was$(5,984) and $(26,267), respectively, primarily due to receivables from an affiliated company of $56,132 and acquisitionscash used for purchases of property and equipment of $3,214.equipment.
Financing activitiesActivities
– For the sixnine months ended JuneSeptember 30, 2019 and 2018, net cash used inprovided by financing activities was $158,093, which resulted from discontinued operations.
For the six months ended June 30, 2017, net cash used in financing activities was $40,042, which was mainly$(89,000) and $1,198,730, respectively, primarily due to net repayment to note payableborrowings and repayments of officersconvertible debt and proceeds from issuances of $97,665 and payments on auto loan of $1,786, offset by bank overdraft of $59,409.common stock.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported in the our financial statements and the accompanying notes. The amounts of assets and liabilities reported on our balance sheet and the amounts of revenues and expenses reported for each of our fiscal periods are affected by estimates and assumptions, which are used for, but not limited to, the accounting for revenue recognition, stock based compensation and the valuation of deferred taxes. Actual results could differ from these estimates. The following critical accounting policies are significantly affected by judgments, assumptions and estimates used in the preparation of the financial statements:
Revenue Recognition
Accounting Standards Codification (“ASC"ASC”) 606, “RevenueRevenue from Contracts with Customers"Customers outlines the basic criteria that must be met to recognize revenue and provide guidance for presentation of revenue and for disclosure related to revenue recognition policies in financial statements filed with the Securities and Exchange Commission. Management believes the Company'sCompany’s revenue recognition policies conform to ASC 606.
Revenues are mainly consulting fees. The Consulting fees are recognizedCompany recognizes revenue when earned. Consulting fees subject to refund are recorded as deferred revenue until the project1) it is completedrealized or realizable and the fees are no longer refundable.earned, 2) there is persuasive evidence of an arrangement, 3) delivery and performance has occurred, 4) there is a fixed or determinable sales price, and 5) collection is reasonably assured.
The Company generates revenue from payment processing services, licensing fees and equipment sales.
● | Payment processing revenue is based on a percentage of each transaction’s value and/or upon fixed amounts specified per each transaction or service and is recognized as such transactions or services are performed. |
● | Licensing revenue is paid in advance and is recorded as unearned income, which is amortized monthly over the period of the licensing agreement. |
● | Equipment revenue is generated from the sale of POS products, which is recognized when goods are shipped. |
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Management provides a valuation allowance for significant deferred tax assets when it is more likely than not that such asset will not be recovered.
ITEM 3. CONTROLSCONTROLS AND PROCEDURES
Our management, evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer,Executive Vice President, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined inpursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange ActAct. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of 1934, as amended) asachieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the endfact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of the period covered by this Report. possible controls and procedures relative to their costs.
Based on thismanagement's evaluation, our Chief Executive Officer and our Chief Financial OfficerExecutive Vice President concluded that, as a result of the material weaknesses described below, as of June 30, 2019, our disclosure controls and procedures are effectivenot designed at a reasonable assurance level and are ineffective to ensureprovide reasonable assurance that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission'sSEC rules and forms, and (ii)that such information is accumulated and communicated to our management, including our Chief Executive Officer and Executive Vice President, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls and procedures include components of ourThe material weaknesses, which relate to internal control over financial reporting, that were identified are:
a) | We did not have enough personnel in our accounting and financial reporting functions. As a result, we were not able to achieve adequate segregation of duties and were not able to provide for adequate reviewing of the financial statements. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis. |
Management believes that the hiring of additional personnel who have the technical expertise and knowledge with the non-routine or technical issues we have encountered in the past will result in both proper recording of these transactions and a much more knowledgeable finance department as such, are designeda whole. Due to the fact that our accounting staff consists of a Principal Financial Officer, a bookkeeper and external accounting consultants, additional personnel will also ensure the proper segregation of duties and provide reasonable assurance that such information is accumulatedmore checks and communicatedbalances within the department. Additional personnel will also provide the cross training needed to our management. Management's assessment ofsupport us if personnel turnover issues within the department occur. We believe this will eliminate or greatly decrease any control and procedure issues we may encounter in the future.
We will continue to monitor and evaluate the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance that the control system, no matter how well designeddisclosure controls and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met (see the section below in this Item 3 entitled Limitations on the Effectiveness of Internal Controls).
Changes in Internal Controls Over Financial Reporting
There have been no changes inprocedures and our internal controls over financial reporting (as defined in Rules 13a-15(f)on an ongoing basis and 15d-15(f) of the Securities Exchange Act of 1934,are committed to taking further action and implementing additional enhancements or improvements, as amended) that occurred during the period covered by this Report, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.necessary and as funds allow.
Limitations on the Effectiveness of Internal Controls
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
PART II - OTHER INFORMATION
ITEM 1. LEGALLEGAL PROCEEDINGS
Management currently is not aware of any legal matters or pending litigation that would have a significant effect on the Company'sCompany’s financial statements as of JuneSeptember 30, 2018.2019.
ITEM 2. UNREGISTEREDUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.On or about May 10, 2019, we issued 10,000 shares to a non-affiliated legal consultant for services rendered.
On or about June 18, 2019, we issued a total of 850,000 shares to nine employees as performance bonuses. The shares were fully vested upon issuance and worth $0.10 per share, at closing, on the day of issuance.
The offers, sales and issuances of the securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) in that the issuance of securities did not involve a public offering. The recipients of securities in each of these transactions did not acquire them with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions.
ITEM 3. DEFAULTSDEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINEMINE SAFETY DISCLOSURES
None.
ITEM 5. OTHEROTHER INFORMATION
None.
ITEM 6. EXHIBITSEXHIBITS
31.1 | |
31.2 | |
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32.2* | |
101.INS | XBRL Instance |
101.SCH | XBRL Taxonomy Extension Schema |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase |
101.DEF | XBRL Taxonomy Extension Definition Linkbase |
101.LAB | XBRL Taxonomy Extension Label Linkbase |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
* Filed herewith.
+ In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| GREENBOX POS (Registrant) |
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Date: | By: | /s/ Fredi Nisan |
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| Fredi Nisan Chief Executive Officer (Principal Executive Officer) | |
Date: April 9, 2020 | By: | /s/ Ben Errez |
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Chairman of the Board and Executive
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