# RTB Digital, Inc.: Form 10-Q for the period ended Sep 30, 2021

- Company: [RTB Digital, Inc.](/companies/rtb.md) (CIK 1419275)
- Form: 10-Q
- Filed: 2021-11-15
- Accepted by EDGAR: Nov 15, 2021, 17:08 ET
- Period: 2021-09-30
- Accession: 0001185185-21-001675
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1419275/000118518521001675/greenbox20210930_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1419275/000118518521001675/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2021-07-01 to 2021-09-30 | $8.0m | us-gaap:Revenues |
| Revenue | 9 months, 2021-01-01 to 2021-09-30 | $19.2m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2021-07-01 to 2021-09-30 | $2.4m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2021-01-01 to 2021-09-30 | $5.3m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2021-07-01 to 2021-09-30 | $5.6m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2021-01-01 to 2021-09-30 | $13.8m | us-gaap:GrossProfit |
| Research and development | 3 months, 2021-07-01 to 2021-09-30 | $1.0m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2021-01-01 to 2021-09-30 | $2.5m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2021-07-01 to 2021-09-30 | −$2.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2021-01-01 to 2021-09-30 | −$12.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2021-07-01 to 2021-09-30 | $3.3m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2021-01-01 to 2021-09-30 | $3.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2021-07-01 to 2021-09-30 | −$6.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2021-01-01 to 2021-09-30 | −$19.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2021-07-01 to 2021-09-30 | −$0.14 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted EPS | 9 months, 2021-01-01 to 2021-09-30 | −$0.49 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 9 months, 2021-01-01 to 2021-09-30 | −$14.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2021-01-01 to 2021-09-30 | $97.8k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2021-01-01 to 2021-09-30 | $4.2m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2021-09-30 | $29.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2021-09-30 | $52.6m | us-gaap:AssetsCurrent |
| Total assets | at 2021-09-30 | $69.1m | us-gaap:Assets |
| Current liabilities | at 2021-09-30 | $11.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2021-09-30 | $12.6m | us-gaap:Liabilities |
| Long-term debt | at 2021-09-30 | $645.1k | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2021-09-30 | $56.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 23,743 characters.

### Disclaimer Regarding Forward Looking Statements

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

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

**Overview – Organization and Name Changes**

***Organization –*** GreenBox POS (the “Company” 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.”

### Name Changes

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

### Underwritten Public Offering and Nasdaq Listing

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

### Management Discussion and Analysis

Q4/2020 signified the return of operations in full scale for the Company, with processing volumes in December of 2020 increasing to $84M. The trend continues into Q3/2021, with monthly average processing volumes increasing to over $100M. During Q4/2020 the Company completed two capital raises – in October and in December of 2020, primarily directed towards the acceleration of the development and deployment of the Company’s newest technology, code name Gen3 (Generation 3, following its initial technology release in January 2019 – Gen1, and in April 2020 - Gen2). Two of the Company’s top executives, Chairman Mr. Errez and CEO Mr. Nisan, personally participated in the December 2020 raise. Gen3 technology is material to the Company plans and business performance and is projected to impact the industry as a whole, in particular with the launch of the GreenBox Smart Contract Token technology, which was initially released in end of Q2/2021. Throughout 2020 the Company continued to increase its investment in research and development, improving its acquiring platform and enabling safer, faster and significantly more scalable services. These technology improvements allow for major new capabilities, including Real Time Payments (RTP), a very sought-after payment feature. This change also reduces the Company COGS, trend that continues to be observed in Gen3 increased business efficiencies. Gen3 is an improved platform is performing better than its predecessor platform and increase total volumes while increasing profit margins and operating sustainability is observed and expected to persist through 2021. The Company returned to ramping up commercial large-scale operations, on-boarding large number of clients, and increasing the Company operational bandwidth to accommodate the needs of its clients. Q3/2021 continued to execute on these management directives. Covid-19 pandemic appears to have little impact on the Company’s business, and the rate of increase in operational figures observed is expected to remain unimpacted for rest of 2021.

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

| KPI | Description |
| --- | --- |
| **Annual Transactional Processing Volume (ATPV)** | The Company plans to process $1.85B in FY 2021, including previously increased processing volumes projections from $600M to $1.85B, and including the expected processing of the acquired ChargeSavvy portfolio, projected to add another $450M. The Company’s Book of Business exceeds the processing goals for the year. |
| **Annual Gross Profit Margin (AGPM)** | This index matches the Company goals and remains at levels supporting the Company’s financial projections. |
| **Annual Gross Profit (AGP)** | At the targeted Annual Transactional Processing Volume goal and targeted Annual Gross Profit Margin, projected Annual Gross Profit is $16-20M for FY2021. |

In order to process the targeted ATPV goal, $1.85B, the Company must be able to process over $100M/month in a consistent fashion, as business performance in Q2 and Q3 2021 demonstrated. The Company estimates the deployment for its Smart Contract Token technology in Q4/2021 will further improving on volumes and efficiencies.

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

Based on the above and the current traction in Q2 and Q3/21, the Company is comfortable with its volume and gross revenues projections. The Company owns all the IP rights for operations in its space: tokenizer, gateway, ledger manager and blockchain substrate. Other, supporting patents, such as fraud proofing, on-boarding accelerators, and an all new blockchain implementation, are pending.

With the visibility that management has into the Company’s operations in Q3/2021 and the Company’s uplisting to NASDAQ in Feb/2021, the current plan is to grow the Company organically to the size and value afforded by the senior exchange.

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

### RESULTS OF OPERATIONS

### Three Months Ended September 30, 2021 (Unaudited) Compared to Three Months September 30, 2020 (Unaudited):

|  | Three Months Ended September 30, 2021 Amount | % of Revenue | 2020 Amount | % of Revenue | Changes Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $8,045,469 | 100.0% | $3,056,271 | 100.0% | $4,989,198 | 163.2% |
| Cost of revenue | 2,420,748 | 30.1% | 1,845,295 | 60.4% | 575,453 | 31.2% |
| **Gross profit** | 5,624,721 | 69.9% | 1,210,976 | 39.6% | 4,413,745 | 364.5% |
| **Operating expenses:** |  |  |  |  |  |  |
| Advertising and marketing | 37,179 | 0.5% | 59,099 | 1.9% | (21,920) | -37.1% |
| Research and development | 1,043,385 | 13.0% | 243,923 | 8.0% | 799,462 | 327.8% |
| General and administrative | 784,158 | 9.7% | 366,734 | 12.0% | 417,424 | 113.8% |
| Payroll and payroll taxes | 1,250,451 | 15.5% | 436,216 | 14.3% | 814,235 | 186.7% |
| Professional fees | 789,772 | 9.8% | 344,641 | 11.3% | 445,131 | 129.2% |
| Stock compensation for employees | 3,777,572 | 47.0% | - | 0.0% | 3,777,572 | n/a |
| Stock compensation for services | 238,238 | 3.0% | - | 0.0% | 238,238 | n/a |
| Depreciation and amortization | 457,633 | 5.7% | 5,764 | 0.2% | 451,869 | 7839.5% |
| **Total operating expenses** | 8,378,388 | 104.1% | 1,456,377 | 47.7% | 6,922,011 | 475.3% |
| **Income (Loss) from operations** | (2,753,667) | -34.2% | (245,401) | -8.0% | (2,508,266) | 1022.1% |
| **Other Income (Expense):** |  |  |  |  |  |  |
| Interest expense | (4,736) | -0.1% | (48,931) | -1.6% | 44,195 | -90.3% |
| Interest expense - debt discount | - | 0.0% | (83,500) | -2.7% | 83,500 | -100.0% |
| Derivative expense | - | 0.0% | (925,576) | -30.3% | 925,576 | -100.0% |
| Changes in fair value of derivative liability | - | 0.0% | 819,366 | 26.8% | (819,366) | -100.0% |
| Gain from extinguishment of convertible debt | - | 0.0% | - | 0.0% | - | n/a |
| Merchant liability settlement | - | 0.0% | - | 0.0% | - | n/a |
| Other income or expense | (37,497) | -0.5% | (5,768) | -0.2% | (31,729) | 550.1% |
| Total other income (expense) | (42,233) | -0.5% | (244,409) | -8.0% | 202,176 | -82.7% |
| Income (Loss) before provision for income taxes | (2,795,900) | -34.8% | (489,810) | -16.0% | (2,306,090) | 470.8% |
| Provision for income taxes | 3,253,855 | 40.4% | - | 0.0% | 3,253,855 | 0.0% |
| **Net income (loss)** | **$(6,049,755)** | **-75.2%** | **$(489,810)** | **-16.0%** | **$(5,559,945)** | **1135.1%** |

### Gross Revenue

Gross revenue increased by $4,989,198 or 163.2%, to $8,045,469 for the three months ended September 30, 2021, from $3,056,271 for the three months ended September 30, 2020. The change in net revenue reflected the following:

- Continued work on technology launch of new platforms in late 2020 which was fully effective in the three months ended September 30, 2021.
- Increase in processing volume in the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

### Cost of Revenue

Cost of revenue increased by $575,453 or 31.2%, to $2,420,748 for the three months ended September 30, 2021, from $1,845,295 for the three months ended September 30, 2020. Payment processing consists of various processing fees paid to Gateways, as well as commission payments to the Independent Sales Organizations (“ISO”) responsible for establishing and maintaining merchant relationships, from which the processing transactions ensue. Cost of revenues increased due to the following:

- Increased volume, resulting in higher processing fees paid to Gateways and commission payments to ISOs

### Operating Expenses

Operating expenses increased by $6,922,011, or 475.3%, to $8,378,388 for the three months ended September 30, 2021, from $1,456,377 for the three months ended September 30, 2020. The increase was due primarily to stock comp expense in Q3 2021 as well as higher general administrative expenses and the following:

- Increased R&D investment towards the completion and launch of the new technologies (Crypto and FOREX platforms, and advanced transactional routing technology).
- Stock compensation expense for employees and services
- Increased payroll expense from workforce expansion and hiring
- Professional fees related to legal and audits.

### Non-Operating Income, net

Non-operating income increased by $202,176, or -82.7%, to ($42,233) for the three months ended September 30, 2021, from ($244,409) for the three months ended September 30, 2020. We incurred a gain from changes in fair value of derivative liability of $819,366 and incurred derivative expense of $925,576 for the three months ended September 30, 2020.

### Provision for Income Taxes

We estimate our annual effective income tax rate to be -27.47% for calendar 2021, which is different from the U.S. federal statutory rate, primarily due to a significant amount of non-deductible stock compensation. The effective tax rate of -20.25% for the third quarter of calendar 2021 was different from the estimate annual effective tax rate of -24.47% primarily due to change in valuation allowance.

### Nine Months Ended September 30, 2021 (Unaudited) Compared to Nine Months September 30, 2020 (Unaudited):

|  | Nine Months Ended September 30, 2021 Amount | % of Revenue | 2020 Amount | % of Revenue | Changes Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $19,174,089 | 100.0% | $5,536,335 | 100.0% | $13,637,754 | 246.3% |
| Cost of revenue | 5,337,999 | 27.8% | 3,504,283 | 63.3% | 1,833,716 | 52.3% |
| **Gross profit** | 13,836,090 | 72.2% | 2,032,052 | 36.7% | 11,804,038 | 580.9% |
| **Operating expenses:** |  |  |  |  |  |  |
| Advertising and marketing | 84,509 | 0.4% | 86,368 | 1.6% | (1,859) | -2.2% |
| Research and development | 2,504,976 | 13.1% | 798,157 | 14.4% | 1,706,819 | 213.8% |
| Payroll and payroll taxes | 2,871,581 | 15.0% | 1,279,174 | 23.1% | 1,592,407 | 124.5% |
| Professional fees | 2,114,996 | 11.0% | 852,234 | 15.4% | 1,262,762 | 148.2% |
| General and administrative | 1,648,383 | 8.6% | 613,156 | 11.1% | 1,035,227 | 168.8% |
| Stock compensation for employees | 5,867,072 | 30.6% | - | 0.0% | 5,867,072 | n/a |
| Stock compensation for services | 10,418,996 | 54.3% | - | 0.0% | 10,418,996 | n/a |
| Depreciation and amortization | 477,886 | 2.5% | 16,856 | 0.3% | 461,030 | 2735.1% |
| **Total operating expenses** | 25,988,399 | 135.5% | 3,645,945 | 65.9% | 22,342,454 | 612.8% |
| **Loss from operations** | (12,152,309) | -63.4% | (1,613,893) | -29.2% | (10,538,416) | 653.0% |
| **Other Income (Expense):** |  |  |  |  |  |  |
| Interest expense | (598,994) | -3.1% | (372,553) | -6.7% | (226,441) | 60.8% |
| Interest expense - debt discount | (2,993,408) | -15.6% | (121,918) | -2.2% | (2,871,490) | 2355.3% |
| Derivative expense | - | 0.0% | (925,576) | -16.7% | 925,576 | -100.0% |
| Changes in fair value of derivative liability | - | 0.0% | (383,769) | -6.9% | 383,769 | -100.0% |
| Gain from extinguishment of convertible debt | - | 0.0% | 2,630,795 | 47.5% | (2,630,795) | -100.0% |
| Merchant liability settlement | (364,124) | -1.9% | - | 0.0% | (364,124) | n/a |
| Other income or expense | (56,057) | -0.3% | (2,434) | 0.0% | (53,623) | 2203.1% |
| Total other income (expense) | (4,012,583) | -20.9% | 824,545 | 14.9% | (4,837,128) | -586.6% |
| Loss before provision for income taxes | (16,164,892) | -84.3% | (789,348) | -14.3% | (15,375,544) | 1947.9% |
| Provision for income taxes | 3,253,855 | 17.0% | - | 0.0% | 3,253,855 | 0.0% |
| **Net loss** | **$(19,418,747)** | **-101.3%** | **$(789,348)** | **-14.3%** | **$(18,629,399)** | **2360.1%** |

25

### Gross Revenue

Gross revenue increased by $13,637,754, or 246.3%, to $19,174,089 for the nine months ended September 30, 2021, from $5,536,335 for the nine months ended September 30, 2020. The change in net sales reflected the following:

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

### Cost of Revenue

Cost of revenue increased by $1,833,716, or 52.3%, to $5,337,999 for the nine months ended September 30, 2021, from $3,504,283 for the nine months ended September 30, 2020. Payment processing consists of various processing fees paid to Gateways, as well as commission payments to the Independent Sales Organizations (“ISO”) responsible for establishing and maintaining merchant relationships, from which the processing transactions ensue. Cost of revenues increased due to the following:

- Increased volume, resulting in higher processing fees paid to Gateways and commission payments to ISOs

### Operating Expenses

Operating expenses increased by $22,342,454, or 612.8%, to $25,988,399 for the nine months ended September 30, 2021, from $3,645,945 for the nine months ended September 30, 2020. The increase was due primarily to stock comp expense in 2021 as well as higher general administrative expenses and the following:

- Increased R&D investment towards the completion and launch of the new technologies (Crypto and FOREX platforms, and advanced transactional routing technology).
- Settlement of legal disputes and associated payments.
- Stock compensation expense for employees and services
- Increased payroll expense from workforce expansion and hiring
- Professional fees related to legal and audits.

### Non-Operating Expenses

We incurred interest expense related to various debt in the amount of $598,994 and debt discount of $2,993,408 for the nine months ended September 30, 2021. We incurred a loss from changes in fair value of derivative liability of $383,769, a loss from derivative expense of $925,576, and gain from extinguishment of convertible debt of $2,630,795 for the nine months ended September 30, 2020.

### Provision for Income Taxes

We estimate our annual effective income tax rate to be -27.47% for calendar 2021, which is different from the U.S. federal statutory rate, primarily due to a significant amount of non-deductible stock compensation. The effective tax rate of -20.25% for the third quarter of calendar 2021 was different from the estimate annual effective tax rate of -24.47% primarily due to change in valuation allowance.

### LIQUIDITY AND CAPITAL RESOURCES

Our principal liquidity requirements are for working capital and capital expenditures. We fund our liquidity requirements primarily through cash on hand and cash flows from operations. We ended September 30, 2021 with $29,707,254 of cash, cash equivalents, and restricted cash compared with $1,832,735 as of December 31, 2020.

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

|  | Nine Months Ended September 30, 2021 | 2020 |
| --- | ---: | ---: |
| Net cash provided by (used in) operating activities | $(14,034,039) | $(130,505) |
| Net cash provided by (used in) investing activities | (2,597,818) | (12,332) |
| Net cash provided by (used in) financing activities | 43,015,308 | (495,439) |
| Cash acquired from acquisition of Northeast & ChargeSavvy | 1,491,068 | - |
| **Net increase (decrease) in cash, cash equivalents, and restricted cash** | **$27,874,519** | **$(638,276)** |

***Operating Activities –*** For the nine months ended September 30, 2021 and 2020, net cash provided by (used in) operating activities was ($14,034,039) and ($130,505) respectively. The cash used in operating activities was primarily due to net loss and timing of settlement of assets and liabilities including stock compensation expenses.

***Investing Activities –*** Cash used in investing activities primarily consisted of the acquisition purchase of Northeast for the nine months ended September 30, 2021.

***Financing Activities –*** Net cash provided by financing activities primarily consisted of proceeds from the Offering of $45,805,491 for the nine months ended September 30, 2021.

### CRITICAL ACCOUNTING POLICIES

Our critical accounting estimates are included in our significant accounting policies as described in Note 2 of the consolidated financial statements of this Form 10-Q. Those consolidated financial statements were prepared in accordance with GAAP. Critical accounting estimates are those that we believe are most important to the portrayal of our financial condition and results of operations. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense. Our estimates are evaluated on an ongoing basis and drawn from historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. Actual results may differ from our estimates. Management believes that the following accounting policies reflect the more significant judgments and estimates we use in preparing our consolidated financial statements.

### Revenue Recognition

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

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

## Controls and procedures

As filed, 3,183 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 September 30, 2021, 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.

Filed Nov 15, 2021.
Source: SEC EDGAR, the filing index for accession 0001185185-21-001675. Last ingested by Listed: Nov 15, 2026, 00:09 ET. No prices; not investment advice.