# RTB Digital, Inc.: Form 10-K/A for the period ended Dec 31, 2018

- Company: [RTB Digital, Inc.](/companies/rtb.md) (CIK 1419275)
- Form: 10-K/A
- Filed: 2020-02-07
- Accepted by EDGAR: Feb 6, 2020, 21:24 ET
- Period: 2018-12-31
- Accession: 0001185185-20-000132
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1419275/000118518520000132/greenbox20181231_10ka.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1419275/000118518520000132/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2018-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 12 months, 2018-01-01 to 2018-12-31 | $910.8k | us-gaap:Revenues |
| Cost of revenue | 12 months, 2018-01-01 to 2018-12-31 | $670.5k | us-gaap:CostOfRevenue |
| Gross profit | 12 months, 2018-01-01 to 2018-12-31 | $240.3k | us-gaap:GrossProfit |
| Research and development | 12 months, 2018-01-01 to 2018-12-31 | $376.9k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 12 months, 2018-01-01 to 2018-12-31 | −$1.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 12 months, 2018-01-01 to 2018-12-31 | $30.1k | us-gaap:InterestExpense |
| Income tax | 12 months, 2018-01-01 to 2018-12-31 | $900 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 12 months, 2018-01-01 to 2018-12-31 | −$1.9m | us-gaap:NetIncomeLoss |
| Operating cash flow | 12 months, 2018-01-01 to 2018-12-31 | −$1.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 12 months, 2018-01-01 to 2018-12-31 | $31.3k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2018-12-31 | $45.9k | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2018-12-31 | $1.0m | us-gaap:AssetsCurrent |
| Total assets | at 2018-12-31 | $1.0m | us-gaap:Assets |
| Current liabilities | at 2018-12-31 | $1.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2018-12-31 | $2.0m | us-gaap:Liabilities |
| Long-term debt | at 2018-12-31 | $75.0k | us-gaap:LongTermDebtNoncurrent |
| Short-term borrowings | at 2018-12-31 | $846.5k | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2018-12-31 | −$919.3k | us-gaap:StockholdersEquity |

## Business

As filed, 9,494 characters.

### Organization

On January 4, 2020, PrivCo and GreenBox POS, a Nevada corporation 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 and PrivCo.

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.”*

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. Prior to the name changes, PubCo was known as ASAP Expo, Inc (“ASAP”). ASAP was incorporated April 10, 2007 under the laws of the State of Nevada (collectively, “PubCo”).

Our primary office is in San Diego, California. Our website is www.greenboxpos.com.

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.

### Significant Transactions

On March 23, 2018, the then controlling shareholder and then sole officer and sole director of PubCo, Frank Yuan, along with his wife, Vicky PMW Yuan (collectively, the “Yuans”), entered into a Purchase Agreement with PrivCo (the “Yuan SPA”).

Pursuant to the Yuan SPA, the Yuans agreed to sell 144,445,000 restricted shares of PubCo’s common stock, par value $0.001 per share (the “Common Stock”), to PrivCo for a consideration of $500,000: $250,000 in cash, paid at closing, and $250,000 in restricted shares of Common Stock (the “Shares Due”) to be issued within 30 days of the close of the Yuan SPA. Subsequently, on or about June 8, 2018, PrivCo paid the Shares Due, by transferring 609,756 restricted shares of Common Stock from the Control Block to the Yuan’s designees, Frank Yuan and his son, Jerome Yuan.

On or about March 29, 2018, Frank Yuan converted a portion of a line of credit that he had previously issued to PubCo, in exchange for 144,445,000 restricted shares of Common Stock, representing approximately 90% of PubCo’s issued and outstanding shares of Common Stock (the “Control Block”).

Pursuant to the Yuan SPA, on April 12, 2018, Frank Yuan caused the Control Block to be transferred to PrivCo.

On April 12, 2018, all business being conducted at that time by PubCo (the “ASAP Business”) was transferred from PubCo to ASAP Property Holdings Inc., a company owned and operated by Frank Yuan (“Holdings”). In consideration for the ASAP Business, Holdings assumed all liabilities related to the ASAP Business. On April 12, 2018, following the Yuan SPA being entered into and the ASAP Business being transferred to Holdings, Ben Errez (“Errez”) and Nisan (“Nisan”) became the sole acting officers and sole acting directors of PubCo.

On May 3, 2018, Frank Yuan formally resigned, and Errez and Nisan were formally appointed the sole officers and sole directors of PubCo.

On April 12, 2018, pursuant to the Verbal Agreement, PubCo acquired the GreenBox Business and assumed PrivCo’s liabilities per the terms of the Agreement. The value of the assets acquired on April 12, 2018 was $843,694, which excluded the Control Shares, which remain a PrivCo asset. The value of PrivCo’s assumed liabilities on April 12 was $589,078. The difference between assets and liabilities was $254,616, which PubCo booked as a “Gain on Bargain Purchase.” However, because we are using Reverse Acquisition accounting, PubCo subsequently recorded the gain as Paid in Capital.

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 or about 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 Acquisition took place on April 12, 2018.

### Reverse Acquisition Reporting Requirements

In accordance with SEC Financial Reporting Manual, Topic 12 - *Reverse Acquisitions and Reverse Recapitalizations*, Section 12200 - Reporting Issues, Sub-section 12210.2 - *Reverse Acquisition with a domestic registrant that is not a shell company*, PubCo is required to file two years of audited Financials for PrivCo. However, since PrivCo was formed in August 2017, only the period from August 2017 through December 31, 2018 was audited. PubCo is also required to file on a combined basis with PrivCo starting with PubCo’s 10-Q filing for the period ending June 30, 2018.

Given these considerations, PubCo:

a) Executed the Agreement memorializing the Verbal Agreement, and filed a Form 8-K on January 7, 2020 (the “January 8-K”) to disclose the Agreement and to file audited financials for PrivCo for the year ending December 31, 2017;

b) is restating PubCo’s 2018 financials, to include amended Form 10-Qs for the periods ending June 30 and September 30, and an amended Form 10-K for the year ending December 31, 2018; and

c) is proceeding to file Form 10-Qs for 2019, for the periods ended March 31, June 30 and September 30, and file Form 10-K for the year ending December 31, 2019; which we ideally wish to accomplish upon or prior to March 30, 2020.

### Our Business

GreenBox POS is a tech company formed with the intent of developing, marketing and selling innovative blockchain-based payment solutions, which we believe will cause favorable disruption in the payment solutions marketplace. Our 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. Our proprietary, blockchain-based ecosystem is designed to facilitate, record and store a virtually limitless volume of tokenized assets, representing cash or data, on a secured, immutable blockchain-based ledger.

We’ve been awarded five provisional patents for our technology, each directly related to our core business focus. Subsequently, we filed non-provisional patent application 16/212,627 on December 6, 2018, under which we claimed the benefit of the five provisional patents.

In March 2018, we formally announced DEL, PAY, QuickCard, POS and Loopz to an international audience, during a presentation at the Israel International Innovation Expo, in Tijuana, Mexico.

a) DEL is our Delivery App, which provides APIs to POS and PAY.

b) PAY is our Payment App, which provides financial APIs to all our other software components.

c) QuickCard is QuickCard Payment System, which is a comprehensive physical and virtual cash management system, including software that facilitates deposits, cash and e-wallet management.

d) POS Solutions is our complete end-to-end Point of Sale solution, comprising both software and hardware.

e) Loopz is Loopz Software Solution, which is a mobile delivery service operations management solution with automated dispatch functionality.

In March 2018, our QuickCard Payment System was comprised of PAY, proprietary kiosks and e-wallet management.

In June 2018, we commenced a soft launch of our system, onboarded our initial customers and began generating revenue.

In July 2018, we introduced TrustGateway, a new fraud prevention component for our QuickCard payment system.

Throughout the remainder of 2018, we continued to build, expand and improve our system, which allowed for an escalation in merchants using our system, as well as increasing revenues.

On or about October 4, 2018, we entered into a lease agreement with Hyundai Rio Vista, Inc. for our current office space at 8880 Rio San Diego Drive, Suite 102, San Diego, CA 92108.

## Risk factors

As filed, 192 characters.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and are not required to provide the information under this item.

## Properties

As filed, 2,170 characters.

We do not own any real estate or other physical properties material to our operations. We operate from leased space. Our executive offices are located within the Rio Vista Tower, at 8880 Rio San Diego Drive, Suite 102, San Diego, CA 92108, and our telephone number is (619) 631-8261.

In October 2017, we secured our first office in San Diego, California. During the first six months of 2018, we entered into additional, separate lease agreements for additional offices in San Diego. In October 2018, we executed a lease agreement with Hyundai Rio Vista, Inc. within the Rio Vista Tower, which we moved into on or about December 1, 2018. Our lease agreement with Hyundai Rio Vista is through January 15, 2022, with monthly rent starting at $10,648 and increasing to $11,636 over the period of the lease.

On or about February 20, 2018, we secured a virtual Canadian office, located at 885 West Georgia Street Suite 1500, Vancouver, British Columbia, V6C 3E8, under an Office Agreement with Regus Canada. Subsequently, on or around May 3, 2018 we added a physical office at the same location, on a month-to-month basis. We vacated the office in or about July 2019.

Monthly lease rates during 2018 are shown in the table below:

|  | Start Date | End Date | Monthly Rent |
| --- | --- | --- | ---: |
| Historic Decatur Road | Nov 1, 2017 | Oct 31, 2018 | $789 |
| Residential Lease (1) | Feb 23, 2018 | Feb 22, 2019 | 2,040 |
| Historic Decatur Road | Mar 1, 2018 | Oct 31, 2018 | 789 |
| Historic Decatur Road (2) | Mar 1, 2018 | Oct 31, 2022 | 696 |
| Virtual Office – Canada (3) | Mar 1, 2018 | Feb 28, 2019 | 278 |
| Historic Decatur Road | Apr 1, 2018 | Oct 31, 2018 | 1,102 |
| Canada Office (3) | May 3, 2018 | Month to Month | 1,372 |
| Rio Vista | Dec 1, 2018 | Jan 15, 2022 | $10,648 |

*(1) The Company leases residential space to house visiting consultants and prospective employees.*

*(2) In December, the Company paid an exit fee of $840 to end the lease earlier than scheduled.*

*(3) Canadian Leases are stated in Canadian Dollars but paid in US Dollars. Thus, the actual total expense for Canadian leases may vary from what is shown in the chart above.*

## Legal proceedings

As filed, 848 characters.

### 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 *America 2030 Capital Limited and Bentley Rothschild Capital Limited* below in *Item 13: Certain Relationships and Related Transactions*) and seeking forfeiture of 1,600,000 PubCo shares that PrivCo had transferred, on or about August 1, 2018, from PrivCo’s Control Shares under the terms of the MLAs. To date, only informal conversational proceedings have ensued.

## Management's discussion and analysis

As filed, 23,994 characters.

*This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management's current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of its management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.*

*Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors currently known to us could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that its assumptions are based upon reasonable data derived from and known about our business and operations and the business and operations of the Company. No assurances are made that actual results of operations or the results of our future activities will not differ materially from its assumptions. Factors that could cause differences include, but are not limited to, expected market demand for the Company's services, fluctuations in pricing for materials, and competition.*

### 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.

### RESULTS OF OPERATIONS

The following results are for the years ended December 31, 2018 and 2017.

### Tests and First Sales

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.

### Revenue

For the year ended December 31, 2018, we recognized $393,665 in revenue from activities related to payment processing, $67,143 in revenues from Equipment Sales and $450,000 in revenues from Licensing Fees. We did not generate revenue in 2017.

### 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 year ended December 31, 2018, our COGS associated with payment processing was $612,037, which included the absorption by us, of chargebacks, which was limited to 2018, as a promotional tool. We incurred approximately $58,502 in expenses in support of Equipment Sales. Our pricing for equipment sold is essentially a passthrough with minimal markup. Most orders are delivered directly to the customer, without any handling, storage or processing by us. As regards Licensing Revenue, we do not incur any direct costs of services or products, thus we did not record COGS for Licensing Revenue. For the year ended December 31, 2017, we did not record any COGS.

### Operating Expenses

Overall, operating expenses increased during 2018 as the Company ramped up operations. For the year ended December 31, 2018 and 2017, our general and administrative expense was $740,933 and $9,259 respectively; our legal and professional expenses, most of which were outsourced, were $767,867 and $83,621, respectively; and our R&D expense was $376,871 and $46,229, respectively.

### Non-Operating Expenses

For the year ended December 31, 2018 and 2017, we recorded non-operating expenses of $110,873 and $209, respectively, of which $30,067 and $0, respectively, were for interest, $6,608 and $209, respectively, were for depreciation, and $75,000 and $0, respectively, were for asset impairment.

### Net Income

The Company recorded a net loss of $1,893,276 for the year ended December 31, 2018, and a net loss of $139,319 for the year ended December 31, 2017. Management believes the net loss to be reasonable and proportional for a startup, which entered its second year of operations in August 2018, and became a publicly traded company, through a reverse acquisition in April 2018.

### SETTLEMENT PROCECESSING

Our proprietary blockchain-based technology serves as the settlement engine for all transactions within our ecosystem. Our 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 as of December 31, 2018.

| Settlement Processing Assets | December 31, 2018 |
| --- | ---: |
| Cash held for Settlements | $239,124 |
| Cash due from Gateways | 291,112 |
| Chargeback Allowances (1) | (134,638) |
| Reserves (2) | 474,224 |
| **Totals** | **$869,822** |
| **Settlement Processing Liabilities** |  |
| Settlement Liabilities to Merchants | $786,425 |
| Settlement Liabilities to ISOs | 107,342 |
| Refund Allowance (3) | (23,946) |
| **Totals** | **$869,822** |

*(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.*

### SHAREHOLDERS’ DEFICIT

### Common Stock

On July 29, 2017, the Board of Directors of the Company approved an increase to the authorized shares of the Company to 500,000,000, with 495,000,000 shares being Common Stock and 5,000,000 shares being preferred stock.

At December 31, 2018 and December 31, 2017, the Company had 166,390,363 and 14,445,363 shares, respectively, issued and outstanding at par value $0.001 per share.

### Paid in Capital

At December 31, 2018 and December 31, 2017, the Company’s Paid in Capital was $945,940 and $185,655, respectively.

### Retained Earnings

At December 31, 2018 and December 31, 2017, the Company’s Retained Earnings was $(2,032,595) and $139,319, respectively.

### Shareholders’ Deficit

As a sum of the above, the Company’s Equity at December 31, 2018 was a deficit of $912,265 and at December 31, 2017, a surplus of $60,781.

### LIQUIDITY AND CAPITAL RESOURCES

### Liquidity and Capital Resources

Our working capital for the periods presented is summarized as follows:

### Cash Requirements

We incurred a working capital deficit of $874,980 as of December 31, 2018. For December 31, 2017, our working capital was $54,712. 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:

|  | Year Ended December 31, 2018 | 2017 |
| --- | ---: | ---: |
| Net cash provided by (used in) operating activities | $(1,601,851) | $(110,469) |
| Net cash provided by (used in) investing activities | (31,254) | (6,278) |
| Net cash provided by (used in) financing activities | 1,834,730 | 200,100 |
| **Net increase (decrease) in cash** | **$201,624** | **$83,353** |

### Operating Activities

For the years ended December 31, 2018 and 2017, net cash used in operating activities was $1,601,851 and $110,469, respectively.

### Investing Activities

For the years ended December 31, 2018 and 2017, net cash used in investing activities was $31,254 and $6,278, respectively.

### Financing Activities

For the years ended December 31, 2018 and 2017, net provided by financing activities was $1,834,730 and $200,100, respectively.

### SIGNIFICANT ACCOUNTING POLICIES

### Basis of Presentation and Use of Estimates

The preparation of financial statements and related disclosures are prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States of America, which requires management to make judgments, assumptions and estimates that affect the amounts reported in our financial statements and the accompanying notes. The amounts of assets and liabilities reported on our balance sheet and the amounts of expenses reported for each of our fiscal periods are affected by estimates and assumptions. Actual results could differ from these estimates. The following accounting policies are significantly affected by judgments, assumptions and estimates used in the preparation of our financial statements.

### Going Concern

Our statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon our ability to identify prospects for capital procurement, and to obtain the necessary debt or equity financing needed to develop, sustain and grow our operations, until such time as we are able to generate sufficient cash flow from operation to support our operations, growth, research and development. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

### Principles of Consolidation

Pursuant to ASC 805-10-20, a business combination occurs when an acquirer obtains control of one or more businesses. A business is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs, or other economic benefits directly to investors or other owners, members, or participants. ASC 805-10-55-4 through 55-9 state that a business consists of (a) inputs, (b) processes applied to those inputs, and (c) resulting outputs that are used to generate revenues. For an acquired set of activities and assets to be a business, it must contain all of the inputs and processes necessary for it to continue to conduct normal operations after the acquired set is separated from the seller, including the ability to sustain a revenue stream by providing outputs to customers.

### Fixed Assets

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.

### 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. On or about January 18, 2018, we acquired QuickCitizen, a client interfacing charge card software platform, with certain properties deemed advantageous to products under development. After we acquired QuickCitizen, QuickCitizen’s code was integrated into QuickCard, our card processing technology, which itself has since been integrated into the backend processing engine of the products embodying our blockchain payment and e-wallet technology. Because we perceive the value from QuickCitizen as a component, rather than of standalone value, we fully impaired the value of this investment during 2018. For the year ended 2017, there was no impairment of long-lived assets.

### Inventory

Inventory, consists primarily of electronic kiosks, is stated at the lower of cost or net realizable value. Cost is determined by using the first in first out (“FIFO”) method. The Company carries minimal inventory as most orders for kiosks and POS systems are drop shipped directly to merchants or to ISOs for delivery to merchants.

### Financial Instruments

Pursuant to ASC 820, *Fair Value Measurements and Disclosures*, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

|  |  |
| --- | --- |
| Level 1 | Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities 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 for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
| Level 3 | Inputs to the valuation methodology are unobservable and significant to the fair value measurement. |

### Convertible Promissory Notes

The Company accounts for convertible promissory notes in accordance with ASC 470-20, *Debt with Conversion and Other Options*. The Company evaluates embedded conversion features within convertible debt to determine whether the embedded conversion feature should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in the Income Statement. If the conversion feature does not require recognition of a bifurcated derivative, the convertible debt instrument is evaluated for consideration of any beneficial conversion feature (“BCF”) requiring separate recognition. When the Company records a BCF, the intrinsic value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument with an offset to additional paid-in capital and amortized to interest expense over the life of the debt.

### Revenue Recognition

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

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

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

a) 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.

b) Licensing revenue is paid in advance and is recorded as unearned income, which is amortized monthly over the period of the licensing agreement.

c) Equipment revenue is generated from the sale of POS products, which is recognized when goods are shipped.

The Company’s financial instruments consist principally of cash and prepaid expenses. Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

### Leases

Lease for office space at our corporate headquarters is classified as an operating lease in accordance with ASC 840, *Leases*. Rent expense is recognized on a straight-line basis over the terms of the leases and, accordingly, we record the cumulative difference between cash rent payments and the recognition of rent expense as a deferred rent liability. When an operating lease includes lease incentives, such as a rent abatements or leasehold improvement allowances, or requires fixed escalations of the minimum lease payments, the aggregate rental expense, including such incentives or increases, is recognized on a straight-line basis over the term of the lease.

### 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.

### Income Taxes

Federal and state income taxes are computed at currently enacted tax rates less tax credits using the asset and liability method in accordance with ASC Topic 740, “*Income Taxes.”* Deferred taxes are adjusted both for items that do not have tax consequences and for the cumulative effect of any changes in tax rates from those previously used to determine deferred tax assets or liabilities. Tax provisions include amounts that are currently payable, changes in deferred tax assets and liabilities that arise because of temporary differences between the timing of when items of income and expense are recognized for financial reporting and income tax purposes, changes in the recognition of tax positions and any changes in the valuation allowance caused by a change in judgment about the realizability of the related deferred tax assets. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.

The Company uses a recognition threshold of more-likely-than-not and a measurement attribute on all tax positions taken or expected to be taken in a tax return in order to be recognized in the condensed consolidated financial statements. Once the recognition threshold is met, the tax position is then measured to determine the actual amount of benefit to recognize in the condensed consolidated financial statements.

### Earnings (Loss) Per Common 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.

### Comprehensive Loss

ASC 220, *Comprehensive Income*, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at December 31, 2018 and 2017, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

## Controls and procedures

As filed, 4,267 characters.

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

Based on management's evaluation, our Chief Executive Officer and Executive Vice President concluded that, as a result of the material weaknesses described below, as of December 31, 2018, our disclosure controls and procedures are not designed at a reasonable assurance level and are ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Executive Vice President, as appropriate, to allow timely decisions regarding required disclosure. The material weaknesses, which relate to internal control over financial reporting, that were identified are:

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

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

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

b) Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the year ended December 31, 2018 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

c) Management's report on internal control over financial reporting.

Our Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of December 31, 2018 for the reasons discussed above.

Filed Feb 7, 2020.
Source: SEC EDGAR, the filing index for accession 0001185185-20-000132. Last ingested by Listed: Nov 15, 2026, 00:09 ET. No prices; not investment advice.