Error Correction [Text Block] | 3. RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS During the preparation of this Annual Report, the Company determined that it had not appropriately accounted for certain historical transactions under US GAAP. In accordance with Staff Accounting Bulletin (“SAB”) 99, Materiality, and SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company evaluated the materiality of the errors from qualitative and quantitative perspectives, individually and in aggregate, and concluded that the errors were material to the Consolidated Statements of Operations for the quarters ending March 31, 2021, June 30, 2021, September 30, 2021, March 31, 2022, June 30, 2022, and September 30, 2022, and for the annual period ending December 31, 2021. Based on this evaluation, on January 13, 2023 the Audit Committee, with the concurrence of management, concluded that the Company’s previously issued financial statements for the periods above would need to be restated and could no longer be relied upon. The Company has restated the impacted financial statements for each of these periods, and presented the effects of the restatement adjustments to those statements below. The categories of misstatements and their impact on our previously issued consolidated financial statements are described in more detail below. Description of Misstatements The following include descriptions of the significant adjustments to the Company’s financial position and results of operations from the previously reported consolidated financial statements. Commissions Revenue Repurchases of Company Stock Gateway Bank Fees Charge-off of Accounts Receivable Merchant Liability Convertible Debt In addition, the Company has also recorded adjustments to make certain reclassifications on its balance sheet, to record the loss on extinguishment of debt, and to record fee income from merchants related to assessed fines and penalties. The effect of all restatement adjustments recorded by the Company on its previously issued financial statements are presented below. Description of Restatement Tables The following tables present the impact of the adjustments described above to our previously reported consolidated balance sheet as of December 31, 2021 and the consolidated statements of income, comprehensive income, changes in equity, and cash flows for the periods ended March 31, 2021, June 30, 2021, September 30, 2021, March 31, 2022, June 30, 2022 and September 30, 2022 (dollars in thousands): Balance Sheet (Unaudited) September 30, 2022 As previously reported Restatement impacts As restated Cash and cash equivalents $ 11,021 $ (4,074 ) $ 6,947 Restricted cash 26,607 4,009 30,616 Accounts receivable, net 790 - 790 Cash due from gateways, net 15,125 (8,896 ) 6,229 Prepaid and other current assets 14,568 (7,030 ) 7,537 Accounts payable 97 (116 ) (19 ) Other current liabilities, and accrued interest 1,416 1,717 3,133 Payment processing liabilities, net 22,593 2,320 24,913 Additional paid-in capital 99,618 781 100,399 Accumulated deficit (64,254 ) (19,502 ) (83,756 ) Shares to be returned - (888 ) (888 ) Treasury stock, at cost - (303 ) (303 ) Statement of Operations Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022 As previously reported Restatement impacts As restated As previously reported Restatement impacts As restated Revenue $ 10,630 - $ 10,630 $ 22,491 $ (685 ) $ 21,805 Cost of revenue 4,270 63 4,333 10,976 366 11,343 Interest expense (1,907 ) 105 (1,802 ) (5,662 ) (1,753 ) (7,415 ) Loss on settlement of debt - (2,395 ) (2,395 ) - (4,053 ) (4,053 ) Merchant fines and penalty income - (368 ) (368 ) - (286 ) (286 ) Loss before provision for income taxes (15,135 ) (714 ) (15,849 ) (26,039 ) (7,143 ) (33,182 ) Net loss (15,170 ) (714 ) (15,884 ) (26,076 ) (7,143 ) (33,219 ) Net loss per share: Basic and diluted $ (0.32 ) $ (0.02 ) $ (0.34 ) $ (0.59 ) $ (0.16 ) $ (0.75 ) Weighted average number of common shares outstanding: Basic and diluted 47,104,952 - 47,104,952 44,072,798 - 44,072,798 Statement of Changes in Stockholders' Equity (unaudited) Three Months Ended September 30, 2022 As Previously Reported Restatement Impacts As Restated Shares to be returned - (888 ) (888 ) Treasury stock, at cost - (303 ) (303 ) Additional paid in capital 99,618 781 100,399 Accumulated other comprehensive loss (708 ) 708 - Accumulated deficit (64,254 ) (19,502 ) (83,756 ) Total stockholders' equity 34,706 (19,203 ) 15,503 Statement of Changes in Cash Flows (unaudited) Nine Months Ended September 30, 2022 As Previously Reported Restatement Impacts As Restated Net loss $ (26,076 ) $ (7,143 ) $ (33,219 ) Loss on settlement of debt - 4,053 4,053 Prepaid and other current assets (1,903 ) 639 (1,265 ) Cash due from gateways, net 3,817 (3,837 ) (20 ) Accounts payable (728 ) 286 (442 ) Accrued interest (1,218 ) 1,753 535 Payment processing liabilities, net 2,562 5,005 7,566 Treasury stock purchases (3,237 ) (820 ) (4,057 ) Balance Sheet (Unaudited) June 30, 2022 As previously reported Restatement impacts As restated Cash and cash equivalents $ 29,099 $ (11,425 ) $ 17,674 Restricted cash 26,526 11,425 37,951 Accounts receivable, net 620 - 620 Cash due from gateways, net 14,271 (9,079 ) 5,192 Prepaid and other current assets 14,105 (6,275 ) 7,829 Accounts payable 1,348 (484 ) 864 Other current liabilities, and accrued interest 3,586 1,808 5,395 Payment processing liabilities, net 33,468 2,073 35,541 Convertible debt, net 59,408 (1,051 ) 58,358 Derivative liability 61 (61 ) - Additional paid-in capital 89,387 1,519 90,905 Accumulated deficit (49,084 ) (18,788 ) (67,872 ) Shares to be returned - (68 ) (68 ) Treasury stock, at cost - (303 ) (303 ) Statement of Operations Three Months Ended June 30, 2022 Six Months Ended June 30, 2022 As previously reported Restatement impacts As restated As previously reported Restatement impacts As restated Revenue $ 6,966 - $ 6,966 $ 11,861 $ (685 ) $ 11,176 Cost of revenue 4,143 87 4,230 6,707 303 7,010 Interest expense (1,866 ) 83 (1,783 ) (3,756 ) (1,858 ) (5,613 ) Loss on settlement of debt - (757 ) (757 ) - (1,657 ) (1,657 ) Changes in fair value of derivative liability 26,374 61 26,435 18,674 61 18,735 Merchant fines and penalty income - 37 37 - 82 82 Other income (expense) 186 2,345 2,531 235 (2,069 ) (1,834 ) Income (loss) before provision for income taxes 10,333 1,681 12,014 (10,903 ) (6,429 ) (17,333 ) Net income (loss) 10,410 1,681 12,091 (10,906 ) (6,429 ) (17,335 ) Net loss per share: Basic and diluted $ 0.24 $ 0.04 $ 0.28 $ (0.26 ) $ (0.15 ) $ (0.41 ) Weighted average number of common shares outstanding: Basic and diluted 42,977,461 - 42,977,461 42,541,262 - 42,541,262 Statement of Changes in Stockholders' Equity (unaudited) Three Months Ended June 30, 2022 As Previously Reported Restatement Impacts As Restated Shares to be returned - (68 ) (68 ) Treasury stock, at cost - (303 ) (303 ) Additional paid in capital 89,387 1,519 90,905 Accumulated other comprehensive loss (398 ) 398 - Accumulated deficit (49,084 ) (18,788 ) (67,872 ) Total stockholders' equity 39,949 (17,242 ) 22,707 Statement of Changes in Cash Flows (unaudited) Six Months Ended June 30, 2022 As Previously Reported Restatement Impacts As Restated Net loss $ (10,906 ) $ (6,429 ) $ (17,335 ) Accretion expense - 2,069 2,069 Loss on settlement of debt - 1,657 1,657 Changes in fair value of derivative liability (18,674 ) (61 ) (18,735 ) Prepaid and other current assets (1,011 ) (116 ) (1,128 ) Cash due from gateways, net 4,671 (3,653 ) 1,018 Accounts payable (2,187 ) (82 ) (2,269 ) Accrued interest 491 1,858 2,349 Payment processing liabilities, net 14,156 4,758 18,914 Balance Sheet March 31, 2022 As previously reported Restatement impacts As restated Cash and cash equivalents $ 27,594 $ (7,142 ) $ 20,452 Restricted cash - 227 228 Cash due from gateways, net 20,807 (8,853 ) 11,955 Prepaid and other current assets 35,263 (6,275 ) 28,988 Goodwill 6,048 500 6,548 Accounts payable 1,069 (447 ) 622 Other current liabilities, including accrued interest 2,385 2,441 4,826 Payment processing liabilities, net 5,390 2,430 7,820 Convertible debt, net 58,826 (1,601 ) 57,225 Additional paid-in capital 90,983 (512 ) 90,470 Accumulated deficit (59,494 ) (20,469 ) (79,963 ) Shares to be returned - (2,863 ) (2,863 ) Treasury stock, at cost (8,171 ) (303 ) (8,474 ) Statement of Operations Three Months Ended March 31, 2022 As previously reported Restatement impacts As restated Revenue $ 4,896 $ (685 ) $ 4,210 Cost of revenue 2,564 216 2,780 Interest expense (1,889 ) (1,941 ) (3,830 ) Loss on settlement of debt - (900 ) (900 ) Changes in fair value of derivative liability (7,700 ) - (7,700 ) Merchant fines and penalty income - 45 45 Other income (expense) 49 (4,414 ) (4,364 ) Loss before provision for income taxes (21,236 ) (8,111 ) (29,347 ) Net loss (21,316 ) (8,111 ) (29,427 ) Net loss per share: Basic and diluted $ (0.51 ) $ (0.19 ) $ (0.70 ) Weighted average number of common shares outstanding: Basic and diluted 42,110,890 - 42,110,890 Statement of Changes in Stockholders' Equity (unaudited) Three Months Ended March 31, 2022 As Previously Reported Restatement Impacts As Restated Shares to be returned - (2,863 ) (2,863 ) Treasury stock, at cost (8,171 ) (303 ) (8,474 ) Additional paid in capital 90,983 (512 ) 90,470 Accumulated deficit (59,494 ) (20,469 ) (79,963 ) Total stockholders' equity (deficit) 23,361 (3,166 ) (787 ) Statement of Changes in Cash Flows (unaudited) Three Months Ended March 31, 2022 As Previously Reported Restatement Impacts As Restated Net loss $ (21,316 ) $ (8,328 ) $ (29,644 ) Accretion expense - 4,414 4,414 Loss on settlement of debt - 900 900 Prepaid and other current assets (32 ) (116 ) (148 ) Cash due from gateways, net (1,866 ) (3,880 ) (5,745 ) Accounts payable 198 (45 ) 153 Accrued interest 549 1,941 2,490 Payment processing liabilities, net 393 5,115 5,507 Balance Sheet December 31, 2021 As previously reported Restatement impacts As restated Cash and cash equivalents $ 89,560 $ (514 ) $ 89,045 Restricted cash - 514 514 Accounts receivable, net 482 - 482 Cash due from gateways, net 18,942 (12,732 ) 6,209 Prepaid and other current assets 6,421 (6,392 ) 29 Goodwill 6,048 500 6,548 Accounts payable 871 (402 ) 469 Other current liabilities, and accrued interest 1,727 500 2,227 Payment processing liabilities, net 4,998 (2,685 ) 2,313 Additional paid-in capital 88,574 6,174 94,748 Accumulated deficit (38,178 ) (12,359 ) (50,537 ) Shares to be returned - (9,852 ) (9,852 ) Treasury stock, at cost (4,934 ) - (4,934 ) Statement of Changes in Cash Flows (unaudited) Year Ended December 31, 2021 As Previously Reported Restatement Impacts As Restated Net loss $ (26,454 ) $ (8,821 ) $ (35,275 ) Prepaid and other current assets (6,344 ) 6,392 48 Cash due from gateways, net (11,638 ) 9,675 (1,963 ) Accounts payable 443 (402 ) 41 Payment processing liabilities, net (8,535 ) (2,685 ) (11,220 ) Net cash used in operating activities (27,166 ) 4,158 (23,007 ) Treasury stock purchases (4,935 ) (9,852 ) (14,787 ) Repurchase of common stock from stockholder (5,694 ) 5,694 - Net cash provided by (used in) financing activities 116,061 (4,158 ) 111,902 Net increase in cash, cash equivalents, and restricted cash 93,421 (5,694 ) 87,727 Cash, cash equivalents, and restricted cash – end of period 95,254 (5,694 ) 89,560 Balance Sheet (Unaudited) September 30, 2021 As previously reported Restatement impacts As restated Cash and cash equivalents $ 29,707 $ (305 ) $ 29,403 Restricted cash - 305 305 Accounts receivable, net 229 - 229 Cash due from gateways, net 19,418 (6,540 ) 12,878 Accounts payable 802 (327 ) 475 Payment processing liabilities, net 273 (2,624 ) (2,351 ) Additional paid-in capital 90,291 4,674 94,965 Accumulated deficit (31,143 ) (4,069 ) (35,213 ) Shares to be returned - (4,194 ) (4,194 ) Treasury stock, at cost (2,680 ) - (2,680 ) Statement of Operations Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021 As previously reported Restatement impacts As restated As previously reported Restatement impacts As restated Cost of revenue $ 2,421 $ 335 $ 2,756 $ 5,338 $ 859 $ 6,197 Merchant fines and penalty income - 86 86 - 327 327 Loss before provision for income taxes (2,796 ) (249 ) (3,045 ) (16,165 ) (532 ) (16,697 ) Net loss (6,050 ) (249 ) (6,299 ) (19,419 ) (532 ) (19,951 ) Net loss per share: Basic and diluted $ (0.14 ) $ (0.01 ) $ (0.15 ) $ (0.49 ) $ (0.01 ) $ (0.50 ) Weighted average number of common shares outstanding: Basic and diluted 42,065,842 - 42,065,842 39,949,732 - 39,949,732 Statement of Changes in Stockholders' Equity (unaudited) Three Months Ended September 30, 2021 As Previously Reported Restatement Impacts As Restated Shares to be returned - (4,194 ) (4,194 ) Additional paid in capital 90,291 4,674 94,965 Accumulated deficit (31,143 ) (4,069 ) (35,213 ) Total stockholders' equity 56,511 605 52,921 Statement of Changes in Cash Flows (unaudited) Nine Months Ended September 30, 2021 As Previously Reported Restatement Impacts As Restated Net loss $ (19,419 ) $ (532 ) $ (19,951 ) Cash due from gateways, net (12,114 ) 3,483 (8,631 ) Accounts payable 370 (327 ) 44 Payment processing liabilities, net (6,898 ) (2,624 ) (9,522 ) Balance Sheet (Unaudited) June 30, 2021 As previously reported Restatement impacts As restated Cash and cash equivalents $ 29,797 $ (57 ) $ 29,740 Restricted cash - 57 57 Accounts receivable, net 75 - 75 Cash due from gateways, net 15,759 (6,267 ) 9,492 Accounts payable 520 (241 ) 280 Payment processing liabilities, net 4,296 (2,687 ) 1,609 Additional paid-in capital 73,916 4,674 78,590 Accumulated deficit (25,094 ) (3,820 ) (28,914 ) Shares to be returned - (4,194 ) (4,194 ) Treasury stock, at cost (933 ) - (933 ) Statement of Operations Three Months Ended June 30, 2021 Six Months Ended June 30, 2021 As previously reported Restatement impacts As restated As previously reported Restatement impacts As restated Cost of revenue $ 1,323 $ 370 $ 1,694 $ 2,917 $ 524 $ 3,441 Merchant fines and penalty income - 104 104 - 241 241 Loss before provision for income taxes (40 ) (266 ) (306 ) (13,369 ) (283 ) (13,652 ) Net loss (40 ) (266 ) (306 ) (13,369 ) (283 ) (13,652 ) Net loss per share: Basic and diluted $ (0.00 ) $ (0.01 ) $ (0.01 ) $ (0.43 ) $ (0.01 ) $ (0.44 ) Weighted average number of common shares outstanding: Basic and diluted 31,078,605 - 31,078,605 31,208,102 - 31,208,102 Statement of Changes in Stockholders' Equity (unaudited) Three Months Ended June 30, 2021 As Previously Reported Restatement Impacts As Restated Shares to be returned - (4,194 ) (4,194 ) Additional paid in capital 73,916 4,674 78,590 Accumulated deficit (25,094 ) (3,820 ) (28,914 ) Total stockholders' equity 47,931 854 44,591 Statement of Changes in Cash Flows (unaudited) Six Months Ended June 30, 2021 As Previously Reported Restatement Impacts As Restated Net loss $ (13,369 ) $ (283 ) $ (13,652 ) Cash due from gateways, net (8,455 ) 3,210 (5,245 ) Accounts payable 239 (241 ) (2 ) Payment processing liabilities, net (5,904 ) (2,687 ) (8,591 ) Balance Sheet (Unaudited) March 31, 2021 As previously reported Restatement impacts As restated Cash and cash equivalents $ 35,697 $ (101 ) $ 35,596 Restricted cash - 101 101 Accounts receivable, net 10 - 10 Cash due from gateways, net 11,849 (6,987 ) 4,862 Accounts payable 178 (136 ) 42 Payment processing liabilities, net 5,355 (3,776 ) 1,579 Additional paid-in capital 71,898 4,674 76,572 Accumulated deficit (25,054 ) (3,554 ) (28,608 ) Shares to be returned - (4,194 ) (4,194 ) Treasury stock, at cost - - - Statement of Operations Three Months Ended March 31, 2021 As previously reported Restatement impacts As restated Cost of revenue $ 1,594 $ 153 $ 1,747 Merchant fines and penalty income - 136 136 Other income (expense) (15 ) - (15 ) Loss before provision for income taxes (13,329 ) (17 ) (13,346 ) Net loss (13,329 ) (17 ) (13,346 ) Net loss per share: Basic and diluted $ (0.38 ) $ (0.00 ) $ (0.38 ) Weighted average number of common shares outstanding: Basic and diluted 34,917,106 - 34,917,106 Statement of Operations (Unaudited) Three Months Ended March 31, 2021 As previously reported Restatement impacts As restated Cost of revenue $ 1,594 $ 153 $ 1,747 General and administrative expenses 566 - 566 Interest expense (594 ) - (594 ) Loss on settlement of debt - - - Changes in fair value of derivative liability - - - Merchant fines and penalty income - 136 136 Other income (expense) (15 ) - (15 ) Loss before provision for income taxes (13,329 ) (17 ) (13,346 ) Net loss (13,329 ) (17 ) (13,346 ) Statement of Changes in Stockholders' Equity (unaudited) Three Months Ended March 31, 2021 As Previously Reported Restatement Impacts As Restated Shares to be returned - (4,194 ) (4,194 ) Additional paid in capital 71,898 4,674 76,572 Accumulated deficit (25,054 ) (3,554 ) (28,608 ) Total stockholders' equity 46,885 1,120 43,811 Statement of Changes in Cash Flows (unaudited) Three Months Ended March 31, 2021 As Previously Reported Restatement Impacts As Restated Net loss $ (13,329 ) $ (17 ) $ (13,346 ) Cash due from gateways, net (4,545 ) 3,929 (615 ) Accounts payable (32 ) (136 ) (169 ) Payment processing liabilities, net (4,845 ) (3,776 ) (8,621 ) |