10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549    

FORM 10-Q

(MARK ONE)
☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 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: 001-34294

GREENBOX POS

(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 San Diego, CA	92108
(Address of principal executive offices)	(Zip Code)

 (619)-631-8261

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of 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 ☒   

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☐ No ☒  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “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’s classes of common equity, as of April 1, 2020, was 176,202,055 Shares of Common Stock (One Class)

TABLE OF CONTENTS

		Page
PART I   Consolidated Financial Information
Item 1.	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018 (restated)	3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Deficit for the Six Months Ended June 30, 2019 and 2018 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018 (unaudited)	7
	Notes to (unaudited) Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis or Plan of Operation	29
Item 3.	Controls and Procedures	35
PART II  Other Information
Item 1.	Legal Proceedings	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	36
Signatures		37

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GREENBOX POS

CONDENSED CONSOLIDATED BALANCE SHEETS

	(Unaudited)			(Restated)
	June 30,			December 31,
	2019			2018
ASSETS
Current Assets:
Cash and cash equivalents	$	-		$	45,854
Restricted cash		1,995,949			239,124
Accounts receivable, net of allowance for bad debt of $0 and $0, respectively		49,998			49,998
Cash due from gateways, net		3,815,060			630,699
Prepaid and other current assets		2,122			37,232
Total current assets		5,863,129			1,002,907
Non-current Assets:
Property and equipment, net		65,893			30,715
Operating lease right-of-use assets, net		282,198			-
Total non-current assets		348,091			30,715
Total assets	$	6,211,220		$	1,033,622
Current Liabilities:
Accounts payable	$	110,388		$	127,029
Other current liabilities		24,757			9,401
Accrued interest		79,313			29,871
Payment processing liabilities, net		7,230,013			865,086
Convertible debt		807,500			846,500
Derivative liability		1,000,136			-
Current portion of operating lease liabilities		51,372			-
Total current liabilities		9,303,479			1,877,887
Operating lease liabilities, less current portion		234,045			-
Long-term debt		-			75,000
Total liabilities		9,537,524			1,952,887
Commitments and contingencies
Stockholders' Equity:
Common stock, par value $0.001, 495,000,000 shares authorized, shares issued and  outstanding of 167,250,363 and 166,390,363, respectively		167,250			166,390
Common stock - issuable		3,308			1,000
Additional paid-in capital		1,179,272			945,940
Accumulated deficit		(4,676,134	)		(2,032,595	)
Total stockholders' equity		(3,326,304	)		(919,265	)
Total liabilities and stockholder's equity	$	6,211,220		$	1,033,622

The accompanying notes are an integral part of these condensed unaudited financial statements.

3

GREENBOX POS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenue	$	3,309,747		$	114,925		$	4,277,745		$	114,925
Cost of revenue		3,042,022			17,922			3,768,355			17,922
Gross profit		267,725			97,003			509,390			97,003
Operating expenses:
Advertising and marketing		12,603			91,873			25,609			105,105
Research and development		600,264			105,202			704,186			163,022
Payroll and payroll taxes		309,719			32,381			547,047			37,979
Professional fees		127,473			142,014			307,018			347,352
General and administrative		119,699			129,593			199,252			179,557
Depreciation and amortization		3,615			1,631			6,455			2,494
Total operating expenses		1,173,373			502,694			1,789,567			835,509
Loss from operations		(905,648	)		(405,691	)		(1,280,177	)		(738,506	)
Other income (expense):
Interest expense		(24,738	)		(84,270	)		(174,953	)		(85,848	)
Interest expense - debt discount		-			-			(188,273	)		-
Derivative expense		-			-			(634,766	)		-
Changes in fair value of derivative liability		(412,158	)		-			(365,370	)		-
Asset impairment		-			-			-			(75,000	)
Total other expense, net		(436,896	)		(84,270	)		(1,363,362	)		(160,848	)
Loss before provision for income taxes		(1,342,544	)		(489,961	)		(2,643,539	)		(899,354	)
Income tax provision		-			-			-			-
Net loss	$	(1,342,544	)	$	(489,961	)	$	(2,643,539	)	$	(899,354	)
Earnings (loss) per share:
Basic and diluted	$	(0.01	)	$	(0.00	)	$	(0.02	)	$	(0.01	)
Weighted average number of common shares outstanding:
Basic and diluted		166,509,363			158,890,363			166,449,863			88,662,960

The accompanying notes are an integral part of these condensed unaudited financial statements.

4

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 March 31, 2019		166,390,363	$	166,390		1,150,000		$	5,500		$	1,001,251		$	(3,333,590	)		(2,160,449	)
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
Net loss		-		-		-			-			-			(1,342,544	)		(1,342,544	)
Balance at June 30, 2019		167,250,363	$	167,250		3,307,692		$	3,308		$	1,179,272		$	(4,676,134	)	$	(3,326,304	)

	Common Stock								Additional Paid-In		Accumulated			Total Stockholders' Equity
	Shares		Amount		To be Issued		Amount		Capital		Deficit			(Deficit)
Balance at March 31, 2018		158,890,363	$	158,890		-	$	-	$	792,324	$	(548,712	)		402,502
Common stock issued		-		-		-		-		4,616		-			4,616
Net loss		-		-		-		-		-		(489,961	)		(489,961	)
Balance at June 30, 2018		158,890,363	$	158,890		-	$	-	$	796,940	$	(1,038,673	)	$	(82,843	)

5

GREENBOX POS

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
Net loss		-		-		-			-			-			(2,643,539	)		(2,643,539	)
Balance at June 30, 2019		167,250,363	$	167,250		3,307,692		$	3,308		$	1,179,272		$	(4,676,134	)	$	(3,326,304	)

	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		-		-		-		-		-		(899,354	)		(899,354	)
Balance at June 30, 2018		158,890,363	$	158,890		-	$	-	$	796,940	$	(1,038,673	)	$	(82,843	)

The accompanying notes are an integral part of these condensed unaudited financial statements.

6

GREENBOX POS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(2,643,539	)	$	(899,354	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation expense		6,456			2,494
Noncash lease expense		3,219			-
Stock compensation expense		85,640			-
Interest expense - warrants issued under convertible debt		188,273			-
Derivative expense		634,766			-
Changes in fair value of derivative liability		365,370			-
Changes in assets and liabilities:
Other receivable, net		-			(96,243	)
Prepaid and other current assets		35,110			(55,219	)
Cash due from gateways, net		(3,184,361	)		(22,969	)
Accounts payable		(39,054	)		31,362
Other current liabilities		15,356			6,259
Accrued interest		9,442			11,588
Deferred revenue		-			360,000
Payment processing liabilities, net		6,364,927			21,403
Net cash provided by (used in) operating activities		1,841,605			(640,679	)
Cash flows from investing activities:
Purchases of property and equipment		(41,634	)		(23,676	)
Net cash used in investing activities		(41,634	)		(23,676	)
Cash flows from financing activities:
Borrowings from convertible debt		482,500			190,000
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 (used in) financing activities		(89,000	)		945,730
Net increase in cash, cash equivalents, and restricted cash		1,710,971			281,375
Cash, cash equivalents, and restricted cash – beginning of period		284,978			83,353
Cash, cash equivalents, and restricted cash – end of period	$	1,995,949		$	364,728
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	125,511		$	85,848
Income taxes	$	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.

7

GREENBOX POS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Organization

GreenBox POS (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 (“ASAP”), which was incorporated April 10, 2007 under the laws of the State of Nevada. 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 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 Change

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. 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.

Unaudited Interim Financial Information

These unaudited interim financial statements have been prepared in accordance with 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 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, 2018 are derived from the audited financial statements and related notes for the year ended December 31, 2018 (“2018 Annual Financial Statements”), included in the Company’s 2018 Annual Report on Form 10-K. These unaudited interim financial statements should be read in conjunction with the 2018 Annual Financial Statements.

Basis of Presentation and Consolidation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

The 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”).

8

GREENBOX POS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (continued)

Going Concern

As of June 30, 2019, the Company had cash and cash equivalents of $1,995,949, has incurred a net loss of $2,643,539 for the six months ended June 30, 2019, and has accumulated a deficit of $4,676,134. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Additionally, 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 adjustment 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.

9

GREENBOX POS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Use of Estimates

The preparation of financial statements 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 June 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, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.

	June 30, 2019		June 30, 2018
Cash and cash equivalents	$	-	$	364,728
Restricted cash		1,995,949		-
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows	$	1,995,949	$	364,728

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 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.

In 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 $12,603 and $91,873 for the three months ended June 30, 2019 and 2018, respectively, and $25,609 and $105,105 for the six months ended June 30, 2019 and 2018, respectively.

10

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 $600,264 and $105,202 for the three months ended June 30, 2019 and 2018, respectively, and $704,186 and $163,022 for the six months ended June 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 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 of Financial Instruments

The Company utilizes ASC 820-10, Fair Value Measurement and Disclosure, for valuing financial assets and liabilities measured on a recurring basis. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance 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 inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the 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 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 develop its own assumptions.

The Company’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.

The table below describes the Company’s valuation of financial instruments using guidance from ASC 820-10:

June 30, 2019	Level 1		Level 2		Level 3
Derivative liability	$	-	$	-	$	1,000,136

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net of operating 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 six months ended June 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 $282,198 and $285,417, respectively as of June 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.

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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 beginning of the earliest 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 ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which make improvements to Accounting Standards Codification (“ASC”) 842 and allow entities to not restate comparative periods in transition to ASC 842 and instead report the comparative 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 $282,198 and $285,417, respectively as of June 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.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The standard removes, modifies, and adds certain disclosure requirements for fair 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.

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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.

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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:

	June 30, 2019			December 31, 2018
Settlement Processing Assets:
Cash held for settlements	$	1,995,949		$	239,124
Cash due from gateways		460,882			291,112
Amount due from gateways and merchants – hold and fees		1,419,004			-
Chargeback allowances (1)		-			(134,638	)
Reserves (2)		3,354,178			474,224
Total before allowance for uncollectable		7,230,013			869,822
Allowance for uncollectable – hold and fees		(1,419,004	)		-
Total – settlement processing assets	$	5,811,009		$	869,822
Settlement Processing Liabilities:
Settlement liabilities to merchants		7,230,013			786,425
Settlement liabilities to ISOs		-			107,342
Refund allowances (3)		-			(28,681	)
Totals	$	7,230,013		$	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.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

5. CASH DUE FROM GATEWAYS

Cash due from gateways consisted of the following:

	June 30, 2019			December 31, 2018
Cash due from Gateways	$	460,882		$	291,112
Amount due from gateways and merchants – hold and fees		1,419,004			-
Reserves (2)		3,354,178			474,224
Total cash due from gateways		5,234,064			765,336
Chargeback Allowances (1)		-			(134,637	)
Allowance of uncollectable – hold and fees		(1,419,004	)		-
Total cash due from gateways, net	$	3,815,060		$	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:

	June 30, 2019			December 31, 2018
Computers and equipment	$	32,047		$	15,285
Furniture		29,791			4,919
Kiosks		12,750			12,750
Vehicles		4,578			4,578
Total property and equipment		79,166			37,532
Less: Accumulated depreciation		(13,273	)		(6,817	)
Total property and equipment, net	$	65,893		$	30,715

Depreciation expense was $6,456 and $2,494 for the six months ended June 30, 2019 and 2018, respectively, and $3,615 and $1,631 for the three months ended June 30, 2019 and 2018, respectively.

7. PAYMENT PROCESSING LIABILITIES, NET

Payment processing liabilities consisted of the following:

	June 30, 2019		December 31, 2018
Settlement liabilities to merchants	$	7,230,013	$	786,425
Settlement liabilities to ISOs		-		107,342
Total processing liabilities		7,230,013		893,767
Refund allowances		-		(28,681	)
Total payment processing liabilities	$	7,230,013	$	865,086

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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:

	June 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, net of debt discount	$	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 March 31, 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.

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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)

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

9. DERIVATIVE LIABILITY

Derivative liability consisted of the following:

	June 30, 2019		December 31, 2018
Beneficial conversion feature – convertible debt	$	1,000,136	$	-
Total derivative liability	$	1,000,136	$	-

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 share-based compensation issued to employees or directors.

Based 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 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 Company 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 in the consolidated statement of income under other income (expenses). 

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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 six months ended June 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 June 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	%

	Six Months Ended June 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:

	June 30, 2019			December 31, 2018
Deferred tax assets (liabilities):
Charitable contributions	$	-		$	(3,700	)
Unearned revenue		-			(75,600	)
Depreciation		-			(26,300	)
Net operating loss carryforward		763,430			612,800
Total deferred tax assets, net		763,430			507,200
Valuation allowance		(763,430	)		(507,300	)
Net deferred tax assets (liabilities)	$	0		$	(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 June 30, 2019, the Company had federal and California net operating loss carryforwards of approximately $3.6 million. The federal and California net operating loss carryforwards will expire at various dates from 2026 through 2028; however, $3.6 million of the Federal operating loss does not expire and will be carried forward indefinitely.

As of June 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.  

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

11. 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, at closing, on the day of issuance.

● On or about August 14, 2019, PubCo issued 2,307,692 shares to a lender, that chose to convert a $150,000 promissory note at a 50% discount into shares of PubCo.

● On or about August 14, 2019, PubCo issued 1,085,000 shares to PrivCo, as repayment of shares inadvertently transferred by PrivCo to third parties on behalf of PubCo as follows

o On or about December 27, 2018, PrivCo inadvertently transferred 1,000,000 restricted PubCo shares, with a market value of $150,000, which money was deposited into PrivCo’s bank accounts (control of which bank accounts were shared by PubCo and PrivCo from April 12, 2018 through approximately December 31, 2018).

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.

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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 six months ended June 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.

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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 Cultivate software functionality were integrated into QuickCard, then upgraded and replaced with certain updates. On or about May 4, 2018, Cultivate entered into a two year, Associate/Referral Agreement-E-Commerce with MTrac, wherein Cultivate agreed to promote MTrac’s solution payment platform and related services; to provide new sales, leads, merchants, ISO Agents, and other potential customers of MTrac services, for which Cultivate receives ongoing commissions from all credit card transactions processed as a result of new business generated by Cultivate for MTrac, who in turn has a contract with us. The Associate/Referral Agreement-E-Commerce between Cultivate and MTrac noted MTrac’s license of GreenBox’s payment processing technology, and contained terms whereby Cultivate could (but was not required to) refer certain customers to MTrac in exchange for various referral fees. Cultivate never referred customers to MTrac, and therefore, did not collect, and is not collecting, any referral fees from MTrac.

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.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued) 

12. RELATED PARTY TRANSACTIONS

● 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 stock. While a formalized remuneration agreement has not yet been executed as of February 3, 2020, the Company does not foresee the issuance to be dilutive, as PrivCo will likely surrender an equal number of shares to PubCo, as a means of compensating PubCo for the issuance.

The Company did not pay any commissions to Charge Savvy or Cultivate for the three and six months ended June 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 State of California. The Plaintiffs filed suit to recover processed funds and processing fees alleged to be withheld illegally. This was dismissed by both parties as of June 30, 2019.

● 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 or about August 1, 2018, from PrivCo’s Control Shares under the terms of the MLAs. To date, only informal conversational proceedings have ensued.

● 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 fraud, breach of fiduciary duty, breach of contract and other, related claims in the Superior Court for the State of California, County of San Diego. The GreenBox Parties filed a cross-complaint against the RB Capital Parties, alleging claims of fraud, breach of contract, tortious interference, and other, related claims. On or about December 15, 2019, the GreenBox Parties and RB Cap Parties resolved to negotiate a settlement and agreed in principal to settlements terms. The documentation of the settlement terms was underway as of February 3, 2020. This was dismissed by both parties on February 27, 2020.

● 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 suit listed in the previous paragraph. On October 31, 2019, the GreenBox Parties filed a cross-complaint against the Dahan Parties, alleging claims of fraud, securities fraud, misrepresentation, promissory estoppel, and other related claims, in the Superior Court for the State of California, County of San Diego. On or about December 15, 2019, the GreenBox Parties and the Dahan Parties resolved to negotiate a settlement and agreed in principal to settlements terms. The documentation of the settlement terms was underway as of February 3, 2020. This was dismissed by both parties on February 27, 2020.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued) 

13. 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 Withholding Suit have agreed to arbitrate their claims. We do not dispute the funds owed; however, we do believe it’s within our rights to hold the funds, per the terms of agreements signed by Plaintiffs. We disagree with any allegations of any wrongdoing and will aggressively defend ourselves against the Withholding Suit. Ideally, we will settle this claim in the near term. While the results of this matter cannot be predicted with certainty, especially at this early stage, we believe that losses, if any, resulting from resolution of this matter will not have a materially adverse effect on operations or cash flow. This was dismissed by both parties as of March 30, 2020.

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 October 4, 2018 and expires on October 3, 2021.

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 June 30, 2019 was $31,154 and for the six months ended June 30, 2019 was $61,128.

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 $282,198 and $285,417, respectively, as of June 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 June 30,
	2019		2018
Operating lease expense – Hyundai Rio Vista	$	1,073	$	-
Total lease expense	$	1,073	$	-

	Six Months Ended June 30,
	2019		2018
Operating lease expense – Hyundai Rio Vista	$	3,219	$	-
Total lease expense	$	3,219	$	-

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued) 

13. COMMITMENTS AND CONTINGENCIES (continued)

In accordance with ASC 842, maturities and operating lease liabilities as of June 30, 2019 were as follows:

Year ending	Hyundai Rio Vista, Inc.
Undiscounted cash flows:
2019	$	48,770
2020		110,948
2021		95,026
2022		-
2023		-
2024		-
Thereafter		-
Total undiscounted cash flows		254,744
Discounted cash flows:
Lease liabilities - current		51,372
Lease liabilities - long-term		234,045
Total discounted cash flows		285,417
Difference between undiscounted and discounted cash flows	$	30,673

In accordance with ASC 842, future minimum lease payments as of June 30, 2019 were as follows:

For the year ended	Hyundai Rio Vista, Inc.
2019	$	53,881
2020		132,601
2021		124,944
2022		-
2023		-
Thereafter		-
Total	$	311,426

26

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(continued)

14. 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:

● Formalizing the Reverse Acquisition – On January 4, 2020, PubCo and PrivCo entered into an Asset Purchase Agreement (the “Agreement”), to formalize and memorialize a verbal agreement (the “Verbal Agreement”) entered into on April 12, 2018, by and among PubCo and PrivCo. The Agreement was disclosed in a Form 8-K filed with the Securities and Exchange Commission on January 7, 2020.

● Product Development, Launch and Sales – In 2019, we commenced a larger deployment of our blockchain-based, payment and ledger system, which we believe was enthusiastically received. As we increased our Independent Sales Organizations (“ISO”) relationships, we were able to on-board clients at an increasing pace, resulting in increasing revenues. As client acquisitions accelerated, we experienced significant growth in payment processing volume through the third quarter of 2019. Servicing our quickly growing customer base required us to grow our “acquiring bandwidth” proportionally. Acquiring bandwidth is the technology nomenclature for the ability to push transactional volume to an accumulation account held by a commercial bank, sponsoring such activity for a company. We work with several acquiring banks, each of which provides this support to us, as well as setting support limits and/or transactional volume limits, for each account. Additionally, each account comes with policies for disbursements and reserves set by each sponsor bank, under which we operate. We then apply these policies, limits and reserve requirements to each of our client accounts. In some cases, we experienced challenging reserve policies from certain acquirers, which in turn created challenging situations for us. Where we couldn’t negotiate more favorable conditions with an acquirer, we formed relations with new acquirers, which better suited our needs. As we grew, it became apparent to us that market demand for our services could be substantial and that we would need to upgrade and reengineer certain technology modules of our acquiring engine. As a result, we scaled back our acquiring capabilities in the fourth quarter of 2019, which allowed us to focus on the technology upgrades. As anticipated, this shift in focus resulted in a reduction of revenues in the fourth quarter. However, we anticipate these upgrades will enable growth acceleration in 2020 and beyond.

● 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 collective networks of Haller and three companies owned or majority-owned by Haller: Sky Financial & Intelligence, LLC (“Sky”), Charge Savvy, LLC and Cultivate, LLC (collectively, the “Haller Companies”), each of which has formalized business relationships with us, as well as with some of our partners (for example, MTrac), which we believe allows us to maximize and diversify our market penetration capabilities. We pay Haller a monthly consulting fee, through Sky, a company 100% owned by Haller, of $10,000, which was subsequently increased to $16,667 per month commencing September 2019 (“Haller Consulting Fee”). In 2019, we paid Sky consulting fees of $30,000 in the quarter ending March 31, $30,000 in the quarter ending June 30, $36,667 in consulting fees in the quarter ending September 30, and $124,150 in the quarter ending December 31, which included $50,000 in consulting fees and $74,150 in expense reimbursement. In 2019, Sky facilitated $1,397,822 in payments (using our funds) on our behalf during the quarter ending September 30, and similarly $184,056 in the quarter ending December 31. During the quarters ending June 30 and September 30 of 2019, Charge Savvy, a company 68.4% owned by Sky, PubCo POS-related equipment totaling $22,450 and $16,000, respectively.

● 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 or about December 12, 2019, PubCo entered into an agreement to issue 600,000 restricted shares to a non-affiliated service provider as renumeration in lieu of cash fees, on a vesting schedule as follows: 200,000 shares vest upon each of the following milestones: the Company filing its Form 10-K for 2018, the Company filing its three interim Form 10-Qs for 2019, and the Company filing its Form 10-K for 2019.

27

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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 Purchase Agreement with West Coast Business Capital, LLC (“West Coast”). Under the terms of the Purchase Agreement, we agreed to sell West Coast $596,000 of future incoming cashflow from the GreenBox Business, to be delivered to West Coast in daily installments of $5,960, for $400,000, from which $16,000 in fees was deducted, providing us with net cash of $384,000. For accounting purposes, we recorded this transaction as a loan of $400,000, with interest of $196,000, which will be repaid over the following four months. Both Nisan and Errez, individually, signed personal guarantees for this Purchase Agreement.

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 Secured Merchant Agreement, we agreed to sell Fox $366,000 of future incoming cashflow from the GreenBox Business, to be delivered to Fox in daily installments of $4,073.33, for $260,000, from which $26,000 in fees was deducted, providing us with net cash of $234,000. For accounting purposes, we recorded this transaction as a loan of $260,000, with interest of $106,000, which will be repaid over the following four months. Both Nisan and Errez, individually, signed personal guarantees for this Secured Merchant Agreement.

o Complete Business Solutions Group, Inc. – On or about December 9, 2019, PubCo entered into an Agreement for the Purchase and Sale of Future Receivables (the “Purchase and Sale Agreement”) with Complete Business Solutions Group Inc, (“CBSG”). Under the terms of the Purchase and Sale Agreement, we agreed to sell CBSG $240,000 of future incoming cashflow from the GreenBox Business, to be delivered to CBSG in weekly installments of $16,000, for $200,000, from which $35 in fees was deducted, providing us with net cash of $19,965. For accounting purposes, we recorded this transaction as a loan of $200,000, with interest of $40,000, which will be repaid over the following four months. Both Nisan and Errez, individually, signed personal guarantees for this Purchase and Sale Agreement.

28

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

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.

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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 plans on processing an amount greater than $1B in FY2020. The Company’s Book of Business exceeds the processing goals for the year. By Q4/2020, the Company projects daily volumes to reach multimillion USD.
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 $18-20M for FY2020.
Annual EBITDA	The Company objective is to stay at or above 3% of Total Transactional Volume. At the targeted Annual Transactional Processing Volume goal, the Annual EBITDA equals $18-20M.

[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.

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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 June 30, 2019 (Unaudited) Compared to Three Months Ended June 30, 2019 (Unaudited):

	Three Months Ended June 30,
	2019						2018						Changes
				% of						% of
	Amount			Revenue			Amount			Revenue			Amount			%
Revenue	$	3,309,747			100.0	%	$	114,925			100.0	%	$	3,194,822			2779.9	%
Cost of revenue		3,042,022			91.9	%		17,922			15.6	%		3,024,100			16873.7	%
Gross profit		267,725			8.1	%		97,003			84.4	%		170,722			176.0	%
Operating expenses:
Advertising and marketing		12,603			0.4	%		91,873			79.9	%		(79,270	)		-86.3	%
Research and development		600,264			18.1	%		105,202			91.5	%		495,062			470.6	%
Payroll and payroll taxes		309,719			9.4	%		32,381			28.2	%		277,338			856.5	%
Professional fees		127,473			3.9	%		142,014			123.6	%		(14,541	)		-10.2	%
General and administrative		119,699			3.6	%		129,593			112.8	%		(9,894	)		-7.6	%
Depreciation and amortization		3,615			0.1	%		1,631			1.4	%		1,984			121.6	%
Total operating expenses		1,173,373			35.5	%		502,694			437.4	%		670,679			133.4	%
Loss from operations		(905,648	)		-27.4	%		(405,691	)		-353.0	%		(499,957	)		123.2	%
Other Income (Expense):
Interest expense		(24,738	)		-0.7	%		(84,270	)		-73.3	%		59,532			-70.6	%
Interest expense - debt discount		-			0.0	%		-			0.0	%		-			n/a
Derivative expense		-			0.0	%		-			0.0	%		-			n/a
Changes in fair value of derivative liability		(412,158	)		-12.5	%		-			0.0	%		(412,158	)		n/a
Asset impairment		-			0.0	%		-			0.0	%		-			n/a
Total other income (expense)		(436,896	)		-13.2	%		(84,270	)		-73.3	%		(352,626	)		418.4	%
Loss before provision for income taxes		(1,342,544	)		-40.6	%		(489,961	)		-426.3	%		(852,583	)		174.0	%
Provision for income taxes		-			0.0	%		-			0.0	%		-			0.0	%
Net loss	$	(1,342,544	)		-40.6	%	$	(489,961	)		-426.3	%	$	(852,583	)		174.0	%

Revenue

For the three months ended June 30, 2019 and 2018, we recognized revenue of $3,309,747 and $114,925, 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 June 30, 2019 and 2018, our COGS associated with payment processing was $3,042,022 and $17,922, 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.

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Operating Expenses

Overall, operating expenses increased during 2018 as the Company ramped up operations. For the three months ended June 30, 2019 and 2018, our general and administrative expense was $1,173,373 and $502,694, respectively, which was primarily due to our legal and professional expenses, most of which were outsourced, were $127,473 and $142,014, respectively; and our R&D expense was $600,264 and $105,202, respectively.

Non-Operating Expenses

For the three months ended June 30, 2019 and 2018, we recorded non-operating expenses of $436,896 and $84,270, respectively, of which primarily represented $412,158 of changes in derivative liability for the three months ended June 30, 2019.

RESULTS OF OPERATIONS

Six Months Ended June 30, 2019 (Unaudited) Compared to Six Months Ended June 30, 2018 (Unaudited):

	Six Months Ended June 30,
	2019						2018						Changes
				% of						% of
	Amount			Revenue			Amount			Revenue			Amount			%
Revenue	$	4,277,745			100.0	%	$	114,925			100.0	%	$	4,162,820			3622.2	%
Cost of revenue		3,768,355			113.9	%		17,922			15.6	%		3,750,433			20926.4	%
Gross profit		509,390			15.4	%		97,003			84.4	%		412,387			425.1	%
Operating expenses:
Advertising and marketing		25,609			0.8	%		105,105			91.5	%		(79,496	)		-75.6	%
Research and development		704,186			21.3	%		163,022			141.9	%		541,164			332.0	%
Payroll and payroll taxes		547,047			16.5	%		37,979			33.0	%		509,068			1340.4	%
Professional fees		307,018			9.3	%		347,352			302.2	%		(40,334	)		-11.6	%
General and administrative		199,252			6.0	%		179,557			156.2	%		19,695			11.0	%
Depreciation and amortization		6,455			0.2	%		2,494			2.2	%		3,961			158.8	%
Total operating expenses		1,789,567			54.1	%		835,509			727.0	%		954,058			114.2	%
Loss from operations		(1,280,177	)		-38.7	%		(738,506	)		-642.6	%		(541,671	)		73.3	%
Other Income (Expense):
Interest expense		(174,953	)		-5.3	%		(85,848	)		-74.7	%		(89,105	)		103.8	%
Interest expense - debt discount		(188,273	)		-5.7	%		-			0.0	%		(188,273	)		n/a
Derivative expense		(634,766	)		-19.2	%		-			0.0	%		(634,766	)		n/a
Changes in fair value of derivative liability		(365,370	)		-11.0	%		-			0.0	%		(365,370	)		n/a
Asset impairment		-			0.0	%		(75,000	)		-65.3	%		75,000			-100.0	%
Total other income (expense)		(1,363,362	)		-41.2	%		(160,848	)		-140.0	%		(1,202,514	)		747.6	%
Loss before provision for income taxes		(2,643,539	)		-79.9	%		(899,354	)		-782.6	%		(1,744,185	)		193.9	%
Provision for income taxes		-			0.0	%		-			0.0	%		-			0.0	%
Net loss	$	(2,643,539	)		-79.9	%	$	(899,354	)		-782.6	%	$	(1,744,185	)		193.9	%

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Revenue

For the six months ended June 30, 2019 and 2018, we recognized revenue of $4,277,745 and $114,925, 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 six months ended June 30, 2019 and 2018, our COGS associated with payment processing was $3,768,355 and $17,922, 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 six months ended June 30, 2019 and 2018, our general and administrative expense was $1,789,567 and $835,509, respectively; our legal and professional expenses, most of which were outsourced, were $307,018 and $347,352, respectively; and our R&D expense was $704,186 and $163,022, respectively.

Non-Operating Expenses

For the six months ended June 30, 2019 and 2018, we recorded non-operating expenses of $1,363,362 and $160,848, respectively, of which $174,953 and $85,848, respectively, were for interest, 634,766 represented derivative expense for the six months ended June 30, 2019. We also recorded $75,000 as asset impairment for the six months ended June 30, 2018.

LIQUIDITY AND CAPITAL RESOURCES

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

Cash Requirements

We incurred a working capital deficit of $3,440,350 as of June 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:

	Six Months Ended June 30,
	2019			2018
Net cash provided by (used in) operating activities	$	1,841,605		$	(640,679	)
Net cash provided by (used in) investing activities		(41,634	)		(23,676	)
Net cash provided by (used in) financing activities		(89,000	)		945,730
Net increase (decrease) in cash	$	(1,710,971	)	$	281,375

33

Operating Activities – For the six months ended June 30, 2019 and 2018, net cash provided by (used in) operating activities was $1,841,605 and $(640,679), respectively, primarily due to timing of changes in assets and liabilities.

Investing Activities – For the six months ended June 30, 2019 and 2018, net cash used in investing activities was $(41,634) and $(23,676), respectively, and was primarily due to purchases of property and equipment.

Financing Activities – For the six months ended June 30, 2019 and 2018, net cash provided by (used in) financing activities was $(89,000) and $945,730, respectively, primarily due to borrowings from convertible debt and proceeds from issuance of common stock with offset of repayments under convertible and long-term debt.

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”) 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.

● 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.

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ITEM 3. CONTROLS AND PROCEDURES

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 June 30, 2019, 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.

35

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Management currently is not aware of any legal matters or pending litigation that would have a significant effect on the Company’s financial statements as of June 30, 2019.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

31.1	Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
31.2	Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
32.1*	Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

36

SIGNATURES

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)
Date: April 9, 2020	By:	/s/ Fredi Nisan
		Fredi Nisan Chief Executive Officer (Principal Executive Officer)

Date: April 9, 2020	By:	/s/ Ben Errez
		Ben Errez Chairman of the Board and Executive Vice President (Principal Financial Officer and Principal Accounting Office)

37

EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act

 I, Fredi Nisan, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2019 of GreenBox POS;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ Fredi Nisan
	Fredi Nisan
	Chief Executive Officer (Principal Executive Officer)

Date: April 9, 2020

EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act

I, Ben Errez, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2019 of GreenBox POS;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ Ben Errez
	Ben Errez
	Executive Vice President (Principal Financial Officer)

Date: April 9, 2020 

EX-32.1

Exhibit 32.1

Certification of Principal Executive Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act

I, Fredi Nisan, the Principal Executive Officer of GreenBox POS (the “Company”), hereby certify that, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, to my knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2019 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Fredi Nisan
Name:	Fredi Nisan
Title:	Chief Executive Officer (Principal Executive Officer)

Date: April 9, 2020

EX-32.2

Exhibit 32.2

Certification of Principal Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act

I, Ben Errez, the Principal Financial Officer of GreenBox POS (the “Company”), hereby certify that, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, to my knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2019 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Ben Errez
Name:	Ben Errez
Title:	Executive Vice President (Principal Financial Officer)

Date: April 9, 2020

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DERIVATIVE LIABILITY (Tables)

6 Months Ended

Jun. 30, 2019

Disclosure Text Block [Abstract]

Schedule of Derivative Instruments [Table Text Block]

Derivative liability consisted of the following:

	June 30, 2019		December 31, 2018
Beneficial conversion feature – convertible debt	$	1,000,136	$	-
Total derivative liability	$	1,000,136	$	-

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CASH DUE FROM GATEWAYS (Tables)

6 Months Ended

Jun. 30, 2019

Disclosure Text Block Supplement [Abstract]

Schedule of Other Current Assets [Table Text Block]

Cash due from gateways consisted of the following:

	June 30, 2019			December 31, 2018
Cash due from Gateways	$	460,882		$	291,112
Amount due from gateways and merchants – hold and fees		1,419,004			-
Reserves (2)		3,354,178			474,224
Total cash due from gateways		5,234,064			765,336
Chargeback Allowances (1)		-			(134,637	)
Allowance of uncollectable – hold and fees		(1,419,004	)		-
Total cash due from gateways, net	$	3,815,060		$	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.

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Accounting Policies, by Policy (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements 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, Comparability Adjustment [Policy Text Block]

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 and Cash Equivalents, Policy [Policy Text Block]

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 June 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, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.

	June 30, 2019		June 30, 2018
Cash and cash equivalents	$	-	$	364,728
Restricted cash		1,995,949		-
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows	$	1,995,949	$	364,728

Receivable [Policy Text Block]

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 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.

In 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 Cost [Policy Text Block]

Advertising and Marketing Costs

Advertising and marketing costs are recorded as general and administrative expenses when they are incurred. Advertising and marketing expenses were $12,603 and $91,873 for the three months ended June 30, 2019 and 2018, respectively, and $25,609 and $105,105 for the six months ended June 30, 2019 and 2018, respectively.

Research and Development Expense, Policy [Policy Text Block]

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 $600,264 and $105,202 for the three months ended June 30, 2019 and 2018, respectively, and $704,186 and $163,022 for the six months ended June 30, 2019 and 2018, respectively

Revenue [Policy Text Block]

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.

● 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, Plant and Equipment, Policy [Policy Text Block]

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 Measurement, Policy [Policy Text Block]

Fair Value of Financial Instruments

The Company utilizes ASC 820-10, Fair Value Measurement and Disclosure, for valuing financial assets and liabilities measured on a recurring basis. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance 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 inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the 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 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 develop its own assumptions.

The Company’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.

The table below describes the Company’s valuation of financial instruments using guidance from ASC 820-10:

June 30, 2019	Level 1		Level 2		Level 3
Derivative liability	$	-	$	-	$	1,000,136

Income Tax, Policy [Policy Text Block]

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net of operating 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

Impairment or Disposal of Long-Lived Assets, Including Intangible Assets, Policy [Policy Text Block]

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, Policy [Policy Text Block]

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 six months ended June 30, 2019 and 2018, as there are no potential shares outstanding that would have a dilutive effect.

Lessee, Leases [Policy Text Block]

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 $282,198 and $285,417, respectively as of June 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.

New Accounting Pronouncements, Policy [Policy Text Block]

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 beginning of the earliest 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 ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which make improvements to Accounting Standards Codification (“ASC”) 842 and allow entities to not restate comparative periods in transition to ASC 842 and instead report the comparative 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 $282,198 and $285,417, respectively as of June 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.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The standard removes, modifies, and adds certain disclosure requirements for fair 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.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Use of Estimates

The preparation of financial statements 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 June 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, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.

	June 30, 2019		June 30, 2018
Cash and cash equivalents	$	-	$	364,728
Restricted cash		1,995,949		-
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows	$	1,995,949	$	364,728

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 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.

In 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 $12,603 and $91,873 for the three months ended June 30, 2019 and 2018, respectively, and $25,609 and $105,105 for the six months ended June 30, 2019 and 2018, respectively.

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 $600,264 and $105,202 for the three months ended June 30, 2019 and 2018, respectively, and $704,186 and $163,022 for the six months ended June 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 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 of Financial Instruments

The Company utilizes ASC 820-10, Fair Value Measurement and Disclosure, for valuing financial assets and liabilities measured on a recurring basis. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance 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 inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the 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 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 develop its own assumptions.

The Company’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.

The table below describes the Company’s valuation of financial instruments using guidance from ASC 820-10:

June 30, 2019	Level 1		Level 2		Level 3
Derivative liability	$	-	$	-	$	1,000,136

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net of operating 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 six months ended June 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 $282,198 and $285,417, respectively as of June 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.

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 beginning of the earliest 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 ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which make improvements to Accounting Standards Codification (“ASC”) 842 and allow entities to not restate comparative periods in transition to ASC 842 and instead report the comparative 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 $282,198 and $285,417, respectively as of June 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.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The standard removes, modifies, and adds certain disclosure requirements for fair 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.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenue	$ 3,309,747	$ 114,925	$ 4,277,745	$ 114,925
Cost of Goods Sold	3,042,022	17,922	3,768,355	17,922
Gross Profit	267,725	97,003	509,390	97,003
Operating expenses:
Advertising and marketing	12,603	91,873	25,609	105,105
Research and development	600,264	105,202	704,186	163,022
Payroll and payroll taxes	309,719	32,381	547,047	37,979
Professional fees	127,473	142,014	307,018	347,352
General and administrative	119,699	129,593	199,252	179,557
Depreciation and amortization	3,615	1,631	6,455	2,494
Total operating expenses	1,173,373	502,694	1,789,567	835,509
Loss from operations	(905,648)	(405,691)	(1,280,177)	(738,506)
Other income (expense):
Interest expense	(24,738)	(84,270)	(174,953)	(85,848)
Interest expense - debt discount	0	0	(188,273)	0
Derivative expense	0	0	(634,766)	0
Changes in fair value of derivative liability	(412,158)	0	(365,370)	0
Asset impairment	0	0	0	(75,000)
Total other expense, net	(436,896)	(84,270)	(1,363,362)	(160,848)
Loss before provision for income taxes	(1,342,544)	(489,961)	(2,643,539)	(899,354)
Income tax provision	0	0	0	0
Net Income (loss)	$ (1,342,544)	$ (489,961)	$ (2,643,539)	$ (899,354)
Earnings (loss) per share:
Basic and diluted (in Dollars per share)	$ (0.01)	$ 0.00	$ (0.02)	$ (0.01)
Weighted average number of common shares outstanding:
Basic and diluted (in Shares)	166,509,363	158,890,363	166,449,863	88,662,960

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PROPERTY AND EQUIPMENT (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Property, Plant and Equipment [Abstract]
Depreciation	$ 3,615	$ 1,631	$ 6,456	$ 2,494

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CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt - Convertible Debt [Member] - USD ($)	Jun. 30, 2019	Dec. 31, 2018
CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt [Line Items]
Convertible notes payable	$ 807,500	$ 846,500
Debt Date March 11, 2019 [Member]
CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt [Line Items]
Convertible notes payable	500,000	0
Debt Date December 27, 2018 [Member]
CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt [Line Items]
Convertible notes payable	0	150,000
Debt Date December 13, 2018 [Member]
CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt [Line Items]
Convertible notes payable	0	83,000
Debt Date November 26, 2018 [Member]
CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt [Line Items]
Convertible notes payable	200,000	200,000
Debt Date September 27, 2018 [Member]
CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt [Line Items]
Convertible notes payable	0	53,000
Debt Date August 6, 2018 [Member]
CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt [Line Items]
Convertible notes payable	0	253,000
Debt Date March 15, 2018 [Member]
CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt [Line Items]
Convertible notes payable	$ 107,500	$ 107,500

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INCOME TAXES (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Tax Disclosure [Abstract]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%	21.00%	21.00%	21.00%
Deferred Tax Assets, Operating Loss Carryforwards, State and Local	$ 3.6		$ 3.6
Deferred Tax Assets, Operating Loss Carryforwards, Not Subject to Expiration	$ 3.6		$ 3.6

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COMMITMENTS AND CONTINGENCIES (Details) - Lessee, Operating Lease, Liability, Maturity - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Undiscounted cash flows:
2019	$ 48,770
2020	110,948
2021	95,026
2022	0
2023	0
2024	0
Thereafter	0
Total undiscounted cash flows	254,744
Discounted cash flows:
Lease liabilities - current	51,372	$ 0
Lease liabilities - long-term	234,045	$ 0
Total discounted cash flows	285,417
Difference between undiscounted and discounted cash flows	$ 30,673

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EQUITY TRANSACTIONS (Details)						3 Months Ended	6 Months Ended
	Aug. 14, 2019 USD ($) shares	Jun. 18, 2019 $ / shares shares	May 10, 2019 shares	Jan. 04, 2019 shares	Dec. 27, 2018 USD ($) shares	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)
EQUITY TRANSACTIONS (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services			10,000
Shares Issued, Shares, Share-based Payment Arrangement, after Forfeiture		850,000
Number of Employees		9
Shares Issued, Price Per Share (in Dollars per share) | $ / shares		$ 0.10
Debt Conversion, Converted Instrument, Shares Issued	2,307,692
Debt Conversion, Original Debt, Amount (in Dollars) | $	$ 150,000						$ 150,000	$ 0
Debt Discount Rate on Shares	50.00%
Stock Issued During Period, Shares, New Issues	1,085,000				1,000,000
Stock Issued During Period, Value, New Issues (in Dollars) | $					$ 150,000	$ 4,616		$ 755,730
Stock Issued for Services #1 [Member]
EQUITY TRANSACTIONS (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services				50,000
Stock Issued for Services #2 [Member]
EQUITY TRANSACTIONS (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services				35,000

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INCOME TAXES (Tables)

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

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 June 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	%

	Six Months Ended June 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	%

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

Deferred tax assets and liabilities consist of the following tax-effected temporary differences:

	June 30, 2019			December 31, 2018
Deferred tax assets (liabilities):
Charitable contributions	$	-		$	(3,700	)
Unearned revenue		-			(75,600	)
Depreciation		-			(26,300	)
Net operating loss carryforward		763,430			612,800
Total deferred tax assets, net		763,430			507,200
Valuation allowance		(763,430	)		(507,300	)
Net deferred tax assets (liabilities)	$	0		$	(100	)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Cash and Cash Equivalents - USD ($)	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Schedule of Cash and Cash Equivalents [Abstract]
Cash and cash equivalents	$ 0	$ 45,854	$ 364,728
Restricted cash	1,995,949	239,124	0
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$ 1,995,949	$ 284,978	$ 364,728	$ 83,353

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SETTLEMENT PROCESSING (Details) - Schedule of Settlement Processing - USD ($)		Jun. 30, 2019	Dec. 31, 2018
Settlement Processing Assets:
Cash held for settlements		$ 1,995,949	$ 239,124
Cash due from gateways		460,882	291,112
Amount due from gateways and merchants – hold and fees		1,419,004	0
Chargeback allowances	[1]	0	(134,638)
Reserves	[2]	3,354,178	474,224
Total before allowance for uncollectable		7,230,013	869,822
Allowance for uncollectable – hold and fees		(1,419,004)	0
Total – settlement processing assets		5,811,009	869,822
Settlement Processing Liabilities:
Settlement liabilities		7,230,013	893,767
Refund allowances	[3]	0	(28,681)
Totals		7,230,013	865,086
Settlement liabilities to merchants [Member]
Settlement Processing Liabilities:
Settlement liabilities		7,230,013	786,425
Settlement liabilities to ISOs [Member]
Settlement Processing Liabilities:
Settlement liabilities		$ 0	$ 107,342

[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.

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EQUITY TRANSACTIONS

6 Months Ended

Jun. 30, 2019

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

11. 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, at closing, on the day of issuance.

● On or about August 14, 2019, PubCo issued 2,307,692 shares to a lender, that chose to convert a $150,000 promissory note at a 50% discount into shares of PubCo.

● On or about August 14, 2019, PubCo issued 1,085,000 shares to PrivCo, as repayment of shares inadvertently transferred by PrivCo to third parties on behalf of PubCo as follows

o On or about December 27, 2018, PrivCo inadvertently transferred 1,000,000 restricted PubCo shares, with a market value of $150,000, which money was deposited into PrivCo’s bank accounts (control of which bank accounts were shared by PubCo and PrivCo from April 12, 2018 through approximately December 31, 2018).

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.

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PAYMENT PROCESSING LIABILITIES, NET

6 Months Ended

Jun. 30, 2019

Other Liabilities and Financial Instruments Subject to Mandatory Redemption [Abstract]

Other Liabilities Disclosure [Text Block]

7. PAYMENT PROCESSING LIABILITIES, NET

Payment processing liabilities consisted of the following:

	June 30, 2019		December 31, 2018
Settlement liabilities to merchants	$	7,230,013	$	786,425
Settlement liabilities to ISOs		-		107,342
Total processing liabilities		7,230,013		893,767
Refund allowances		-		(28,681	)
Total payment processing liabilities	$	7,230,013	$	865,086

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.

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COMMITMENTS AND CONTINGENCIES (Details) - Lease, Cost - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Lease, Cost [Abstract]
Operating lease expense – Hyundai Rio Vista	$ 1,073	$ 0	$ 3,219	$ 0
Total lease expense	$ 1,073	$ 0	$ 3,219	$ 0

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INCOME TAXES (Details) - Schedule of Deferred Tax Assets and Liabilities - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Deferred tax assets (liabilities):
Charitable Contributions	$ 0	$ (3,700)
Unearned Revenue	0	(75,600)
Depreciation	0	(26,300)
Net Operating Loss Carryforward	763,430	612,800
Net deferred tax assets before valuation allowance	763,430	507,200
Valuation Allowance	(763,430)	(507,300)
Net deferred tax assets (liabilities)	$ 0	$ (100)

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CASH DUE FROM GATEWAYS (Details) - Schedule of Other Current Assets - USD ($)		Jun. 30, 2019	Dec. 31, 2018
Schedule of Other Current Assets [Abstract]
Cash due from Gateways		$ 460,882	$ 291,112
Amount due from gateways and merchants – hold and fees		1,419,004	0
Reserves	[1]	3,354,178	474,224
Total cash due from gateways		5,234,064	765,336
Chargeback Allowances (1)	[2]	0	(134,638)
Allowance of uncollectable – hold and fees	[2]	(1,419,004)	0
Total cash due from gateways, net		$ 3,815,060	$ 630,699

[1] 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.

[2] 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.

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COMMITMENTS AND CONTINGENCIES (Tables)

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Lease, Cost [Table Text Block]

In accordance with ASC 842, the components of lease expense were as follows:

	Three Months Ended June 30,
	2019		2018
Operating lease expense – Hyundai Rio Vista	$	1,073	$	-
Total lease expense	$	1,073	$	-

	Six Months Ended June 30,
	2019		2018
Operating lease expense – Hyundai Rio Vista	$	3,219	$	-
Total lease expense	$	3,219	$	-

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

In accordance with ASC 842, maturities and operating lease liabilities as of June 30, 2019 were as follows:

Year ending	Hyundai Rio Vista, Inc.
Undiscounted cash flows:
2019	$	48,770
2020		110,948
2021		95,026
2022		-
2023		-
2024		-
Thereafter		-
Total undiscounted cash flows		254,744
Discounted cash flows:
Lease liabilities - current		51,372
Lease liabilities - long-term		234,045
Total discounted cash flows		285,417
Difference between undiscounted and discounted cash flows	$	30,673

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

In accordance with ASC 842, future minimum lease payments as of June 30, 2019 were as follows:

For the year ended	Hyundai Rio Vista, Inc.
2019	$	53,881
2020		132,601
2021		124,944
2022		-
2023		-
Thereafter		-
Total	$	311,426

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Derivative Liabilities at Fair Value	Jun. 30, 2019 USD ($)
Fair Value, Inputs, Level 1 [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Derivative Liabilities at Fair Value [Line Items]
Derivative liability	$ 0
Fair Value, Inputs, Level 2 [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Derivative Liabilities at Fair Value [Line Items]
Derivative liability	0
Fair Value, Inputs, Level 3 [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Derivative Liabilities at Fair Value [Line Items]
Derivative liability	$ 1,000,136

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INCOME TAXES

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

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 six months ended June 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 June 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	%

	Six Months Ended June 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:

	June 30, 2019			December 31, 2018
Deferred tax assets (liabilities):
Charitable contributions	$	-		$	(3,700	)
Unearned revenue		-			(75,600	)
Depreciation		-			(26,300	)
Net operating loss carryforward		763,430			612,800
Total deferred tax assets, net		763,430			507,200
Valuation allowance		(763,430	)		(507,300	)
Net deferred tax assets (liabilities)	$	0		$	(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 June 30, 2019, the Company had federal and California net operating loss carryforwards of approximately $3.6 million. The federal and California net operating loss carryforwards will expire at various dates from 2026 through 2028; however, $3.6 million of the Federal operating loss does not expire and will be carried forward indefinitely.

As of June 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.  

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PROPERTY AND EQUIPMENT

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

6. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	June 30, 2019			December 31, 2018
Computers and equipment	$	32,047		$	15,285
Furniture		29,791			4,919
Kiosks		12,750			12,750
Vehicles		4,578			4,578
Total property and equipment		79,166			37,532
Less: Accumulated depreciation		(13,273	)		(6,817	)
Total property and equipment, net	$	65,893		$	30,715

Depreciation expense was $6,456 and $2,494 for the six months ended June 30, 2019 and 2018, respectively, and $3,615 and $1,631 for the three months ended June 30, 2019 and 2018, respectively.

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SETTLEMENT PROCESSING (Tables)

6 Months Ended

Jun. 30, 2019

Settlement Processing [Abstract]

Schedule of Settlement Processing [Table Text Block]

The table below shows the status of transaction settlements:

	June 30, 2019			December 31, 2018
Settlement Processing Assets:
Cash held for settlements	$	1,995,949		$	239,124
Cash due from gateways		460,882			291,112
Amount due from gateways and merchants – hold and fees		1,419,004			-
Chargeback allowances (1)		-			(134,638	)
Reserves (2)		3,354,178			474,224
Total before allowance for uncollectable		7,230,013			869,822
Allowance for uncollectable – hold and fees		(1,419,004	)		-
Total – settlement processing assets	$	5,811,009		$	869,822
Settlement Processing Liabilities:
Settlement liabilities to merchants		7,230,013			786,425
Settlement liabilities to ISOs		-			107,342
Refund allowances (3)		-			(28,681	)
Totals	$	7,230,013		$	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.

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events [Text Block]

14. 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:

● Formalizing the Reverse Acquisition – On January 4, 2020, PubCo and PrivCo entered into an Asset Purchase Agreement (the “Agreement”), to formalize and memorialize a verbal agreement (the “Verbal Agreement”) entered into on April 12, 2018, by and among PubCo and PrivCo. The Agreement was disclosed in a Form 8-K filed with the Securities and Exchange Commission on January 7, 2020.

● Product Development, Launch and Sales – In 2019, we commenced a larger deployment of our blockchain-based, payment and ledger system, which we believe was enthusiastically received. As we increased our Independent Sales Organizations (“ISO”) relationships, we were able to on-board clients at an increasing pace, resulting in increasing revenues. As client acquisitions accelerated, we experienced significant growth in payment processing volume through the third quarter of 2019. Servicing our quickly growing customer base required us to grow our “acquiring bandwidth” proportionally. Acquiring bandwidth is the technology nomenclature for the ability to push transactional volume to an accumulation account held by a commercial bank, sponsoring such activity for a company. We work with several acquiring banks, each of which provides this support to us, as well as setting support limits and/or transactional volume limits, for each account. Additionally, each account comes with policies for disbursements and reserves set by each sponsor bank, under which we operate. We then apply these policies, limits and reserve requirements to each of our client accounts. In some cases, we experienced challenging reserve policies from certain acquirers, which in turn created challenging situations for us. Where we couldn’t negotiate more favorable conditions with an acquirer, we formed relations with new acquirers, which better suited our needs. As we grew, it became apparent to us that market demand for our services could be substantial and that we would need to upgrade and reengineer certain technology modules of our acquiring engine. As a result, we scaled back our acquiring capabilities in the fourth quarter of 2019, which allowed us to focus on the technology upgrades. As anticipated, this shift in focus resulted in a reduction of revenues in the fourth quarter. However, we anticipate these upgrades will enable growth acceleration in 2020 and beyond.

● 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 collective networks of Haller and three companies owned or majority-owned by Haller: Sky Financial & Intelligence, LLC (“Sky”), Charge Savvy, LLC and Cultivate, LLC (collectively, the “Haller Companies”), each of which has formalized business relationships with us, as well as with some of our partners (for example, MTrac), which we believe allows us to maximize and diversify our market penetration capabilities. We pay Haller a monthly consulting fee, through Sky, a company 100% owned by Haller, of $10,000, which was subsequently increased to $16,667 per month commencing September 2019 (“Haller Consulting Fee”). In 2019, we paid Sky consulting fees of $30,000 in the quarter ending March 31, $30,000 in the quarter ending June 30, $36,667 in consulting fees in the quarter ending September 30, and $124,150 in the quarter ending December 31, which included $50,000 in consulting fees and $74,150 in expense reimbursement. In 2019, Sky facilitated $1,397,822 in payments (using our funds) on our behalf during the quarter ending September 30, and similarly $184,056 in the quarter ending December 31. During the quarters ending June 30 and September 30 of 2019, Charge Savvy, a company 68.4% owned by Sky, PubCo POS-related equipment totaling $22,450 and $16,000, respectively.

● 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 or about December 12, 2019, PubCo entered into an agreement to issue 600,000 restricted shares to a non-affiliated service provider as renumeration in lieu of cash fees, on a vesting schedule as follows: 200,000 shares vest upon each of the following milestones: the Company filing its Form 10-K for 2018, the Company filing its three interim Form 10-Qs for 2019, and the Company filing its Form 10-K for 2019.

● 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 Purchase Agreement with West Coast Business Capital, LLC (“West Coast”). Under the terms of the Purchase Agreement, we agreed to sell West Coast $596,000 of future incoming cashflow from the GreenBox Business, to be delivered to West Coast in daily installments of $5,960, for $400,000, from which $16,000 in fees was deducted, providing us with net cash of $384,000. For accounting purposes, we recorded this transaction as a loan of $400,000, with interest of $196,000, which will be repaid over the following four months. Both Nisan and Errez, individually, signed personal guarantees for this Purchase Agreement.

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 Secured Merchant Agreement, we agreed to sell Fox $366,000 of future incoming cashflow from the GreenBox Business, to be delivered to Fox in daily installments of $4,073.33, for $260,000, from which $26,000 in fees was deducted, providing us with net cash of $234,000. For accounting purposes, we recorded this transaction as a loan of $260,000, with interest of $106,000, which will be repaid over the following four months. Both Nisan and Errez, individually, signed personal guarantees for this Secured Merchant Agreement.

o Complete Business Solutions Group, Inc. – On or about December 9, 2019, PubCo entered into an Agreement for the Purchase and Sale of Future Receivables (the “Purchase and Sale Agreement”) with Complete Business Solutions Group Inc, (“CBSG”). Under the terms of the Purchase and Sale Agreement, we agreed to sell CBSG $240,000 of future incoming cashflow from the GreenBox Business, to be delivered to CBSG in weekly installments of $16,000, for $200,000, from which $35 in fees was deducted, providing us with net cash of $19,965. For accounting purposes, we recorded this transaction as a loan of $200,000, with interest of $40,000, which will be repaid over the following four months. Both Nisan and Errez, individually, signed personal guarantees for this Purchase and Sale Agreement.

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CONVERTIBLE NOTES PAYABLE (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Convertible Debt [Table Text Block]

Convertible notes payable consisted of the following:

	June 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, net of debt discount	$	807,500	$	846,500

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Apr. 01, 2020
Document Information Line Items
Entity Registrant Name	GreenBox POS, LLC
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		176,202,055
Amendment Flag	false
Entity Central Index Key	0001419275
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Document Quarterly Report	true
Entity Interactive Data Current	Yes

XML

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - USD ($)	Warrants Issuable Under Convertible Debt [Member] Common Stock to be Issued [Member]	Warrants Issuable Under Convertible Debt [Member] Additional Paid-in Capital [Member]	Warrants Issuable Under Convertible Debt [Member]	Common Stock [Member]	Common Stock to be Issued [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance at Dec. 31, 2017				$ 14,445		$ 185,655	$ (139,319)	$ 60,781
Balance (in Shares) at Dec. 31, 2017				14,445,363
Net loss							(899,354)	(899,354)
Common stock issued				$ 144,445		611,285		755,730
Common stock issued (in Shares)				144,445,000
Balance at Jun. 30, 2018				$ 158,890		796,940	(1,038,673)	(82,843)
Balance (in Shares) at Jun. 30, 2018				158,890,363
Balance at Mar. 31, 2018				$ 158,890		792,324	(548,712)	402,502
Balance (in Shares) at Mar. 31, 2018				158,890,363
Net loss							(489,961)	(489,961)
Common stock issued						4,616		4,616
Balance at Jun. 30, 2018				$ 158,890		796,940	(1,038,673)	(82,843)
Balance (in Shares) at Jun. 30, 2018				158,890,363
Balance at Dec. 31, 2018				$ 166,390	$ 1,000	945,940	(2,032,595)	$ (919,265)
Balance (in Shares) at Dec. 31, 2018				166,390,363	1,000,000			166,390,363
Issuable under convertible debt		$ 55,311	$ 55,311		$ 4,500			$ 4,500
Issuable under convertible debt (in Shares)	125,000				25,000
Common stock and warrants issuable forfeited					$ (4,500)	(55,311)		(59,811)
Common stock and warrants issuable forfeited (in Shares)					(150,000)
Share issued to employees and vendor				$ 860		85,640		86,500
Share issued to employees and vendor (in Shares)				860,000
Shares issuable from conversion of convertible debt					$ 2,308	147,692		150,000
Shares issuable from conversion of convertible debt (in Shares)					2,307,692
Net loss							(2,643,539)	(2,643,539)
Balance at Jun. 30, 2019				$ 167,250	$ 3,308	1,179,272	(4,676,134)	$ (3,326,304)
Balance (in Shares) at Jun. 30, 2019				167,250,363	3,307,692			167,250,363
Balance at Mar. 31, 2019				$ 166,390	$ 5,500	1,001,251	(3,333,590)	$ (2,160,449)
Balance (in Shares) at Mar. 31, 2019				166,390,363	1,150,000
Common stock and warrants issuable forfeited					$ (4,500)	(55,311)		(59,811)
Common stock and warrants issuable forfeited (in Shares)					(150,000)
Share issued to employees and vendor				$ 860		85,640		86,500
Share issued to employees and vendor (in Shares)				860,000
Shares issuable from conversion of convertible debt					$ 2,308	147,692		150,000
Shares issuable from conversion of convertible debt (in Shares)					2,307,692
Net loss							(1,342,544)	(1,342,544)
Balance at Jun. 30, 2019				$ 167,250	$ 3,308	$ 1,179,272	$ (4,676,134)	$ (3,326,304)
Balance (in Shares) at Jun. 30, 2019				167,250,363	3,307,692			167,250,363

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REVERSE ACQUISITION

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

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.

XML

INCOME TAXES (Details) - Schedule of Effective Income Tax Rate Reconciliation	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Schedule of Effective Income Tax Rate Reconciliation [Abstract]
Book income at statutory rate	21.00%	21.00%	21.00%	21.00%
Others	0.00%	(0.80%)	0.00%	(0.80%)
Change in Valuation Allowance	(21.00%)	(20.14%)	(21.00%)	(20.14%)
Effective income tax rate	0.00%	0.06%	0.00%	0.06%

XML

PROPERTY AND EQUIPMENT (Details) - Schedule of Equipment - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, gross	$ 79,166	$ 37,532
Less: Accumulated Depreciation	(13,273)	(6,817)
Total Fixed Assets (net)	65,893	30,715
Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, gross	32,047	15,285
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, gross	29,791	4,919
Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, gross	12,750	12,750
Automobiles [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, gross	$ 4,578	$ 4,578

XML

CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt (Parentheticals) - Convertible Debt [Member] - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Debt Date March 11, 2019 [Member]
CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt (Parentheticals) [Line Items]
Due	Oct. 06, 2019
Interest per annum	8.00%
Principal	$ 500,000
Date	Mar. 11, 2019
Debt Date December 27, 2018 [Member]
CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt (Parentheticals) [Line Items]
Due		Dec. 12, 2019
Interest per annum		12.00%
Principal		$ 150,000
Date		Dec. 27, 2018
Debt Date December 13, 2018 [Member]
CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt (Parentheticals) [Line Items]
Due		Dec. 13, 2019
Interest per annum		10.00%
Principal		$ 83,000
Date		Dec. 13, 2018
Debt Date November 26, 2018 [Member]
CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt (Parentheticals) [Line Items]
Due	Nov. 26, 2019	Nov. 26, 2019
Interest per annum	12.00%	12.00%
Principal	$ 200,000	$ 200,000
Date	Nov. 26, 2018	Nov. 26, 2018
Debt Date September 27, 2018 [Member]
CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt (Parentheticals) [Line Items]
Due		Sep. 27, 2019
Interest per annum		10.00%
Principal		$ 53,000
Date		Sep. 27, 2018
Debt Date August 6, 2018 [Member]
CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt (Parentheticals) [Line Items]
Due		Aug. 06, 2019
Interest per annum		10.00%
Principal		$ 253,000
Date		Aug. 06, 2018
Debt Date March 15, 2018 [Member]
CONVERTIBLE NOTES PAYABLE (Details) - Convertible Debt (Parentheticals) [Line Items]
Due	Mar. 15, 2019	Mar. 15, 2019
Interest per annum	12.00%	12.00%
Principal	$ 300,000	$ 300,000
Date	Mar. 15, 2018	Mar. 15, 2018

XML

COMMITMENTS AND CONTINGENCIES (Details) - Schedule of Future Minimum Rental Payments for Operating Leases	Jun. 30, 2019 USD ($)
Schedule of Future Minimum Rental Payments for Operating Leases [Abstract]
2019	$ 53,881
2020	132,601
2021	124,944
2022	0
2023	0
Thereafter	0
Total	$ 311,426

XML

RELATED PARTY TRANSACTIONS (Details) - USD ($)					1 Months Ended						3 Months Ended				6 Months Ended	12 Months Ended
	Jun. 18, 2019	Aug. 01, 2018	Jul. 30, 2018	Feb. 19, 2018	Nov. 30, 2018	Oct. 31, 2018	Aug. 31, 2018	Jul. 31, 2018	Jun. 30, 2018	Jan. 31, 2018	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2019	Dec. 31, 2019	Dec. 31, 2018	Nov. 26, 2018	Aug. 20, 2018
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Commission, Percentage				10.00%
Shares Issued, Shares, Share-based Payment Arrangement, after Forfeiture (in Shares)	850,000
Equity Method Investment, Ownership Percentage					100.00%
Debt Instrument, Face Amount			$ 5,700,000
Debt Instrument, Interest Rate, Stated Percentage			5.85%
Debt Instrument, Term			10 years
Debt Instrument, Collateral			1,600,000
Debt Instrument, Collateral Amount			$ 2,144,000
PrivCo [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Noncontrolling Interest, Ownership Percentage by Parent										4.00%
Monthly Consulting Fee [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction					$ 10,000
Development and Testing Manger [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Shares Issued, Shares, Share-based Payment Arrangement, after Forfeiture (in Shares)	160,000
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture	$ 16,000
Salary and Wage, NonOfficer, Excluding Cost of Good and Service Sold															$ 96,000
Risk Analyst [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Shares Issued, Shares, Share-based Payment Arrangement, after Forfeiture (in Shares)	110,000
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture	$ 11,000
Salary and Wage, NonOfficer, Excluding Cost of Good and Service Sold															$ 92,000
Affiliated Entity [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Equity Method Investment, Ownership Percentage																			100.00%
Related Party Transaction, Amounts of Transaction					55,365
Stock Issued During Period, Shares, Other (in Shares)										6,000,000
Debt Instrument, Face Amount										$ 300,000								$ 200,000
Affiliated Entity [Member] | Consulting Fees [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction					30,000	$ 1,830							$ 30,000	$ 30,000
Affiliated Entity [Member] | Travel and Relocation Expense Reimbursement [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction					$ 23,365
Affiliated Entity [Member] | Subsequent Event [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction											$ 124,150					$ 3,000
Affiliated Entity [Member] | Subsequent Event [Member] | Consulting Fees [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction											50,000	$ 36,667
Affiliated Entity [Member] | Subsequent Event [Member] | Travel and Relocation Expense Reimbursement [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction											$ 74,150
Employee [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Description of Transaction		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 six months ended June 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.
Officer [Member] | Haller Commissions [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction							$ 321	$ 8,396	$ 210
Management [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Other Commitments, Description																	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 stock. While a formalized remuneration agreement has not yet been executed as of February 3, 2020, the Company does not foresee the issuance to be dilutive, as PrivCo will likely surrender an equal number of shares to PubCo, as a means of compensating PubCo for the issuance.
Charge Savvy [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Description of Transaction																	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 [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Description of Transaction																	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 Cultivate software functionality were integrated into QuickCard, then upgraded and replaced with certain updates.

XML

RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

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.

● 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 six months ended June 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.

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 Cultivate software functionality were integrated into QuickCard, then upgraded and replaced with certain updates. On or about May 4, 2018, Cultivate entered into a two year, Associate/Referral Agreement-E-Commerce with MTrac, wherein Cultivate agreed to promote MTrac’s solution payment platform and related services; to provide new sales, leads, merchants, ISO Agents, and other potential customers of MTrac services, for which Cultivate receives ongoing commissions from all credit card transactions processed as a result of new business generated by Cultivate for MTrac, who in turn has a contract with us. The Associate/Referral Agreement-E-Commerce between Cultivate and MTrac noted MTrac’s license of GreenBox’s payment processing technology, and contained terms whereby Cultivate could (but was not required to) refer certain customers to MTrac in exchange for various referral fees. Cultivate never referred customers to MTrac, and therefore, did not collect, and is not collecting, any referral fees from MTrac.

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.

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 stock. While a formalized remuneration agreement has not yet been executed as of February 3, 2020, the Company does not foresee the issuance to be dilutive, as PrivCo will likely surrender an equal number of shares to PubCo, as a means of compensating PubCo for the issuance.

The Company did not pay any commissions to Charge Savvy or Cultivate for the three and six months ended June 30, 2019 and 2018.

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CONVERTIBLE NOTES PAYABLE

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

8. CONVERTIBLE NOTES PAYABLE

Convertible notes payable consisted of the following:

	June 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, net of debt discount	$	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 March 31, 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.

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)

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SETTLEMENT PROCESSING

6 Months Ended

Jun. 30, 2019

Settlement Processing [Abstract]

Settlement Processing [Text Block]

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:

	June 30, 2019			December 31, 2018
Settlement Processing Assets:
Cash held for settlements	$	1,995,949		$	239,124
Cash due from gateways		460,882			291,112
Amount due from gateways and merchants – hold and fees		1,419,004			-
Chargeback allowances (1)		-			(134,638	)
Reserves (2)		3,354,178			474,224
Total before allowance for uncollectable		7,230,013			869,822
Allowance for uncollectable – hold and fees		(1,419,004	)		-
Total – settlement processing assets	$	5,811,009		$	869,822
Settlement Processing Liabilities:
Settlement liabilities to merchants		7,230,013			786,425
Settlement liabilities to ISOs		-			107,342
Refund allowances (3)		-			(28,681	)
Totals	$	7,230,013		$	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.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Cash and Cash Equivalents, at Carrying Value	$ 0	$ 364,728	$ 0	$ 364,728	$ 45,854
Marketing and Advertising Expense	12,603	91,873	25,609	105,105
Research and Development Expense	600,264	$ 105,202	704,186	$ 163,022
Operating Lease, Right-of-Use Asset	282,198		282,198		$ 0
Operating Lease, Liability	$ 285,417		$ 285,417
Minimum [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Property, Plant and Equipment, Useful Life			3 years
Maximum [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Property, Plant and Equipment, Useful Life			8 years

XML

REVERSE ACQUISITION (Details) - Schedule of Business Acquisitions, by Acquisition - ASAP Property Holdings [Member]	Apr. 12, 2018 USD ($)
Business Acquisition [Line Items]
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

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PROPERTY AND EQUIPMENT (Tables)

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

Property and equipment consisted of the following:

	June 30, 2019			December 31, 2018
Computers and equipment	$	32,047		$	15,285
Furniture		29,791			4,919
Kiosks		12,750			12,750
Vehicles		4,578			4,578
Total property and equipment		79,166			37,532
Less: Accumulated depreciation		(13,273	)		(6,817	)
Total property and equipment, net	$	65,893		$	30,715

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Schedule of Cash and Cash Equivalents [Table Text Block]

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.

	June 30, 2019		June 30, 2018
Cash and cash equivalents	$	-	$	364,728
Restricted cash		1,995,949		-
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows	$	1,995,949	$	364,728

Schedule of Derivative Liabilities at Fair Value [Table Text Block]

The table below describes the Company’s valuation of financial instruments using guidance from ASC 820-10:

June 30, 2019	Level 1		Level 2		Level 3
Derivative liability	$	-	$	-	$	1,000,136

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CONVERTIBLE NOTES PAYABLE (Details) - USD ($)																6 Months Ended
	Jan. 28, 2020	Dec. 11, 2019	Oct. 16, 2019	Aug. 14, 2019	Jun. 27, 2019	Mar. 13, 2019	Mar. 11, 2019	Jan. 30, 2019	Dec. 27, 2018	Dec. 13, 2018	Nov. 26, 2018	Oct. 23, 2018	Sep. 27, 2018	Aug. 06, 2018	Jun. 08, 2018	Jun. 30, 2019	Jun. 30, 2018	Jan. 22, 2020	Dec. 31, 2018	Jul. 30, 2018	Apr. 12, 2018	Mar. 15, 2018
CONVERTIBLE NOTES PAYABLE (Details) [Line Items]
Debt Instrument, Face Amount																				$ 5,700,000
Debt Instrument, Interest Rate, Stated Percentage																				5.85%
Proceeds from Convertible Debt																$ 482,500	$ 190,000
Debt Discount Rate on Shares				50.00%
Debt Conversion, Converted Instrument, Shares Issued (in Shares)				2,307,692
Securities Purchase Agreement, Maximum														$ 1,500,000
Debt Conversion, Original Debt, Amount				$ 150,000												$ 150,000	$ 0
Convertible Debt [Member]
CONVERTIBLE NOTES PAYABLE (Details) [Line Items]
Debt Instrument, Face Amount																						$ 300,000
Debt Instrument, Interest Rate, Stated Percentage																						12.00%
Convertible Debt																			$ 107,500
Debt Conversion, Converted Instrument, Shares Issued (in Shares)												7,500,000			440,476
Debt Instrument, Convertible, Conversion Price (in Dollars per share)																						$ 0.001
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Long-term Debt																					$ 185,000
Debt Conversion, Original Debt, Amount												$ 7,500			$ 185,000
Interest Payable																			$ 15,880
Repayments of Notes Payable						$ 126,092
Vista $500K Note [Member]
CONVERTIBLE NOTES PAYABLE (Details) [Line Items]
Debt Instrument, Face Amount							$ 500,000
Debt Instrument, Maturity Date	Feb. 29, 2020	Jan. 15, 2020	Nov. 06, 2019				Oct. 06, 2019
Debt Instrument, Interest Rate, Stated Percentage							8.00%
Debt Instrument, Unamortized Discount							$ 125,000
Proceeds from Convertible Debt							$ 375,000
Stock Issued During Period, Shares, Other (in Shares)							25
Warrants and Rights Outstanding, Term							4 years
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)							125,000
Debt Instrument, Convertible, Terms of Conversion Feature							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”)
Convertible Debt	$ 482,856	$ 487,858	$ 464,625															$ 634,213
Debt Instrument, Periodic Payment	20,000	$ 10,000
Debt Instrument, Periodic Payment, Principal	$ 5,000
Saskatchewan Ltd $150K Note [Member]
CONVERTIBLE NOTES PAYABLE (Details) [Line Items]
Debt Instrument, Face Amount									$ 150,000
Debt Instrument, Interest Rate, Stated Percentage									12.00%
Debt Instrument, Convertible, Terms of Conversion Feature									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%.
Debt Discount Rate on Shares									50.00%
Debt Conversion, Converted Instrument, Shares Issued (in Shares)					2,307,692
PULG $235K Note [Member[
CONVERTIBLE NOTES PAYABLE (Details) [Line Items]
Debt Instrument, Face Amount														$ 253,000
Debt Instrument, Interest Rate, Stated Percentage														10.00%
Proceeds from Convertible Debt														$ 250,000
Debt Instrument, Convertible, Terms of Conversion Feature														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%.
Payments of Debt Issuance Costs														$ 3,000
Debt, Prepayment Penalty								$ 93,333
PULG $53K Note [Member]
CONVERTIBLE NOTES PAYABLE (Details) [Line Items]
Debt Instrument, Face Amount													$ 53,000
Debt Instrument, Interest Rate, Stated Percentage													10.00%
Proceeds from Convertible Debt													$ 50,000
Debt Instrument, Convertible, Terms of Conversion Feature													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%.
Payments of Debt Issuance Costs													$ 3,000
Debt, Prepayment Penalty						19,378
PULG $83K Note [Member]
CONVERTIBLE NOTES PAYABLE (Details) [Line Items]
Debt Instrument, Face Amount										$ 83,000
Debt Instrument, Interest Rate, Stated Percentage										10.00%
Proceeds from Convertible Debt										$ 80,000
Debt Instrument, Convertible, Terms of Conversion Feature													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%.
Payments of Debt Issuance Costs													$ 3,000
Debt, Prepayment Penalty						$ 17,005
RB Cap $200K Note [Member]
CONVERTIBLE NOTES PAYABLE (Details) [Line Items]
Debt Instrument, Face Amount											$ 200,000
Debt Instrument, Interest Rate, Stated Percentage											12.00%
Debt Instrument, Convertible, Terms of Conversion Feature											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.

XML

DERIVATIVE LIABILITY (Details) - Schedule of Derivative Instruments - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Schedule of Derivative Instruments [Abstract]
Beneficial conversion feature – convertible debt	$ 1,000,136	$ 0
Total derivative liability	$ 1,000,136	$ 0

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Accounts receivable, allowance for bad debt (in Dollars)	$ 0	$ 0
Common stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	495,000,000	495,000,000
Common stock, shares issued	167,250,363	166,390,363
Common stock, shares outstanding	167,250,363	166,390,363

XML

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Organization

GreenBox POS (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 (“ASAP”), which was incorporated April 10, 2007 under the laws of the State of Nevada. 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 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 Change

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. 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.

Unaudited Interim Financial Information

These unaudited interim financial statements have been prepared in accordance with 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 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, 2018 are derived from the audited financial statements and related notes for the year ended December 31, 2018 (“2018 Annual Financial Statements”), included in the Company’s 2018 Annual Report on Form 10-K. These unaudited interim financial statements should be read in conjunction with the 2018 Annual Financial Statements.

Basis of Presentation and Consolidation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

The 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”).

Going Concern

As of June 30, 2019, the Company had cash and cash equivalents of $1,995,949, has incurred a net loss of $2,643,539 for the six months ended June 30, 2019, and has accumulated a deficit of $4,676,134. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Additionally, 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 adjustment 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.

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PAYMENT PROCESSING LIABILITIES, NET (Tables)

6 Months Ended

Jun. 30, 2019

Other Liabilities and Financial Instruments Subject to Mandatory Redemption [Abstract]

Other Current Liabilities [Table Text Block]

Payment processing liabilities consisted of the following:

	June 30, 2019		December 31, 2018
Settlement liabilities to merchants	$	7,230,013	$	786,425
Settlement liabilities to ISOs		-		107,342
Total processing liabilities		7,230,013		893,767
Refund allowances		-		(28,681	)
Total payment processing liabilities	$	7,230,013	$	865,086

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REVERSE ACQUISITION (Tables)

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

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

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PAYMENT PROCESSING LIABILITIES, NET (Details) - Other Current Liabilities - USD ($)		Jun. 30, 2019	Dec. 31, 2018
PAYMENT PROCESSING LIABILITIES, NET (Details) - Other Current Liabilities [Line Items]
Settlement liabilities		$ 7,230,013	$ 893,767
Refund allowances	[1]	0	(28,681)
Total payment processing liabilities		7,230,013	865,086
Settlement liabilities to merchants [Member]
PAYMENT PROCESSING LIABILITIES, NET (Details) - Other Current Liabilities [Line Items]
Settlement liabilities		7,230,013	786,425
Settlement liabilities to ISOs [Member]
PAYMENT PROCESSING LIABILITIES, NET (Details) - Other Current Liabilities [Line Items]
Settlement liabilities		$ 0	$ 107,342

[1] 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.

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DERIVATIVE LIABILITY (Details) - Convertible Debt [Member]	Mar. 11, 2019 USD ($) shares
DERIVATIVE LIABILITY (Details) [Line Items]
Debt Instrument, Face Amount	$ 500,000
Debt Instrument, Maturity Date	Oct. 06, 2019
Debt Instrument, Interest Rate, Stated Percentage	8.00%
Debt Instrument, Unamortized Discount	$ 125,000
Proceeds from Convertible Debt	$ 375,000
Stock Issued During Period, Shares, Other (in Shares) | shares	25
Warrants and Rights Outstanding, Term	4 years
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares) | shares	125,000
Debt Instrument, Convertible, Terms of Conversion Feature	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”)

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Current Assets:
Cash and cash equivalents	$ 0	$ 45,854
Restricted cash	1,995,949	239,124
Accounts receivable, net of allowance for bad debt of $0 and $0, respectively	49,998	49,998
Cash due from gateways, net	3,815,060	630,699
Prepaid and other current assets	2,122	37,232
Total current assets	5,863,129	1,002,907
Non-current Assets:
Property and equipment, net	65,893	30,715
Operating lease right-of-use assets, net	282,198	0
Total non-current assets	348,091	30,715
Total assets	6,211,220	1,033,622
Current Liabilities:
Accounts payable	110,388	127,029
Other current liabilities	24,757	9,401
Accrued interest	79,313	29,871
Payment processing liabilities, net	7,230,013	865,086
Convertible debt	807,500	846,500
Derivative liability	1,000,136	0
Current portion of operating lease liabilities	51,372	0
Total current liabilities	9,303,479	1,877,887
Operating lease liabilities, less current portion	234,045	0
Long-term debt	0	75,000
Total liabilities	9,537,524	1,952,887
Commitments and contingencies
Stockholders' Equity:
Common stock, par value $0.001, 495,000,000 shares authorized, shares issued and outstanding of 167,250,363 and 166,390,363, respectively	167,250	166,390
Common stock - issuable	3,308	1,000
Additional paid-in capital	1,179,272	945,940
Accumulated deficit	(4,676,134)	(2,032,595)
Total stockholders' equity	(3,326,304)	(919,265)
Total liabilities and stockholder's equity	$ 6,211,220	$ 1,033,622

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net loss	$ (2,643,539)	$ (899,354)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation expense	6,456	2,494
Noncash lease expense	3,219	0
Stock compensation expense	85,640	0
Interest expense - warrants issued under convertible debt	188,273	0
Derivative expense	634,766	0
Changes in fair value of derivative liability	365,370	0
Changes in assets and liabilities:
Other receivable, net	0	(96,243)
Prepaid and other current assets	35,110	(55,219)
Cash due from gateways, net	(3,184,361)	(22,969)
Accounts payable	(39,054)	31,362
Other current liabilities	15,356	6,259
Accrued interest	9,442	11,588
Deferred revenue	0	360,000
Payment processing liabilities, net	6,364,927	21,403
Net cash provided by (used in) operating activities	1,841,605	(640,679)
Cash flows from investing activities:
Purchases of property and equipment	(41,634)	(23,676)
Net cash used in investing activities	(41,634)	(23,676)
Cash flows from financing activities:
Borrowings from convertible debt	482,500	190,000
Repayments on convertible debt	(496,500)	0
Repayment on long-term debt	(75,000)	0
Proceeds from issuances of common stock	0	755,730
Net cash provided by (used in) financing activities	(89,000)	945,730
Net increase in cash, cash equivalents, and restricted cash	1,710,971	281,375
Cash, cash equivalents, and restricted cash – beginning of period	284,978	83,353
Cash, cash equivalents, and restricted cash – end of period	1,995,949	364,728
Cash paid during the period for:
Interest	125,511	85,848
Income taxes	800	0
Non-cash financing activities:
Convertible debt conversion to common stock	$ (150,000)	$ 0

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SUBSEQUENT EVENTS (Details) - USD ($)							1 Months Ended		3 Months Ended				4 Months Ended		8 Months Ended	12 Months Ended
	Dec. 09, 2019	Dec. 05, 2019	Nov. 12, 2019	Aug. 14, 2019	May 10, 2019	Mar. 13, 2019	Nov. 30, 2018	Oct. 31, 2018	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2019	Dec. 31, 2018	Aug. 31, 2019	Dec. 31, 2019	Nov. 26, 2018	Jul. 30, 2018	Jan. 31, 2018
SUBSEQUENT EVENTS (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares)					10,000
Debt Instrument, Face Amount																		$ 5,700,000
Subsequent Event [Member]
SUBSEQUENT EVENTS (Details) [Line Items]
Stock Vesting Schedule, Description				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 or about December 12, 2019, PubCo entered into an agreement to issue 600,000 restricted shares to a non-affiliated service provider as renumeration in lieu of cash fees, on a vesting schedule as follows: 200,000 shares vest upon each of the following milestones: the Company filing its Form 10-K for 2018, the Company filing its three interim Form 10-Qs for 2019, and the Company filing its Form 10-K for 2019. ● 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 Purchase Agreement with West Coast Business Capital, LLC (“West Coast”). Under the terms of the Purchase Agreement, we agreed to sell West Coast $596,000 of future incoming cashflow from the GreenBox Business, to be delivered to West Coast in daily installments of $5,960, for $400,000, from which $16,000 in fees was deducted, providing us with net cash of $384,000. For accounting purposes, we recorded this transaction as a loan of $400,000, with interest of $196,000, which will be repaid over the following four months. Both Nisan and Errez, individually, signed personal guarantees for this Purchase Agreement. 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 Secured Merchant Agreement, we agreed to sell Fox $366,000 of future incoming cashflow from the GreenBox Business, to be delivered to Fox in daily installments of $4,073.33, for $260,000, from which $26,000 in fees was deducted, providing us with net cash of $234,000. For accounting purposes, we recorded this transaction as a loan of $260,000, with interest of $106,000, which will be repaid over the following four months. Both Nisan and Errez, individually, signed personal guarantees for this Secured Merchant Agreement. o Complete Business Solutions Group, Inc. – On or about December 9, 2019, PubCo entered into an Agreement for the Purchase and Sale of Future Receivables (the “Purchase and Sale Agreement”) with Complete Business Solutions Group Inc, (“CBSG”).
Stock Issued During Period, Shares, Issued for Services (in Shares)				600,000
West Coast Purchase Agreement [Member] | Subsequent Event [Member]
SUBSEQUENT EVENTS (Details) [Line Items]
Debt Instrument, Face Amount			$ 596,000
Debt Instrument, Frequency of Periodic Payment			daily
Debt Instrument, Periodic Payment			$ 5,960
Debt Instrument, Fee			$16,000
Proceeds from Sale and Collection of Finance Receivables			$ 384,000
Notes Payable			400,000
Interest Payable			$ 196,000
Fox Capital Group Secured Merchant Agreement [Member] | Subsequent Event [Member]
SUBSEQUENT EVENTS (Details) [Line Items]
Debt Instrument, Face Amount		$ 366,000
Debt Instrument, Frequency of Periodic Payment		daily
Debt Instrument, Periodic Payment		$ 4,073.33
Notes Payable		260,000
Interest Payable		106,000
Debt Instrument, Fee Amount		26,000
Proceeds from Collection of Finance Receivables		$ 234,000
Complete Business Solutions Sale of Future Receivables [Member] | Subsequent Event [Member]
SUBSEQUENT EVENTS (Details) [Line Items]
Debt Instrument, Face Amount	$ 240,000
Debt Instrument, Frequency of Periodic Payment	weekly
Debt Instrument, Periodic Payment	$ 16,000
Proceeds from Sale and Collection of Finance Receivables	19,965
Notes Payable	200,000
Interest Payable	40,000
Debt Instrument, Fee Amount	$ 35
Affiliated Entity [Member]
SUBSEQUENT EVENTS (Details) [Line Items]
Amount of Annual Processing Capable						$ 1,000,000,000
Related Party Transaction, Amounts of Transaction							$ 55,365
Debt Instrument, Face Amount																	$ 200,000		$ 300,000
Affiliated Entity [Member] | Consulting Fees [Member]
SUBSEQUENT EVENTS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction							30,000	$ 1,830			$ 30,000	$ 30,000
Affiliated Entity [Member] | Travel and Relocation Expense Reimbursement [Member]
SUBSEQUENT EVENTS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction							$ 23,365
Affiliated Entity [Member] | Subsequent Event [Member]
SUBSEQUENT EVENTS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction									$ 124,150							$ 3,000
Affiliated Entity [Member] | Subsequent Event [Member] | Consulting Fees [Member]
SUBSEQUENT EVENTS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction									50,000	$ 36,667
Affiliated Entity [Member] | Subsequent Event [Member] | Travel and Relocation Expense Reimbursement [Member]
SUBSEQUENT EVENTS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction									$ 74,150
Affiliated Entity [Member] | Monthly Consulting Fee [Member]
SUBSEQUENT EVENTS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction													$ 16,667		$ 10,000
Affiliated Entity [Member] | Amount of Facilitated Payments by Related Party [Member]
SUBSEQUENT EVENTS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction														$ 184,056
Affiliated Entity [Member] | Amount of Facilitated Payments by Related Party [Member] | Subsequent Event [Member]
SUBSEQUENT EVENTS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction																$ 1,397,822
Affiliated Entity [Member] | Purchase of Equipment [Member]
SUBSEQUENT EVENTS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction											$ 22,450
Affiliated Entity [Member] | Purchase of Equipment [Member] | Subsequent Event [Member]
SUBSEQUENT EVENTS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction										$ 16,000

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COMMITMENTS AND CONTINGENCIES (Details) - USD ($)		3 Months Ended	6 Months Ended
	Oct. 31, 2018	Jun. 30, 2019	Jun. 30, 2019	Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]
Loss Contingency, Damages Sought	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 or about August 1, 2018, from PrivCo’s Control Shares under the terms of the MLAs. To date, only informal conversational proceedings have ensued.
Operating Leases, Rent Expense		$ 31,154	$ 61,128
Operating Lease, Right-of-Use Asset		282,198	282,198	$ 0
Operating Lease, Liability		$ 285,417	$ 285,417

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DERIVATIVE LIABILITY

6 Months Ended

Jun. 30, 2019

Disclosure Text Block [Abstract]

Derivatives and Fair Value [Text Block]

9. DERIVATIVE LIABILITY

Derivative liability consisted of the following:

	June 30, 2019		December 31, 2018
Beneficial conversion feature – convertible debt	$	1,000,136	$	-
Total derivative liability	$	1,000,136	$	-

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 share-based compensation issued to employees or directors.

Based 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 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 Company 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 in the consolidated statement of income under other income (expenses). 

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CASH DUE FROM GATEWAYS

6 Months Ended

Jun. 30, 2019

Disclosure Text Block Supplement [Abstract]

Other Current Assets [Text Block]

5. CASH DUE FROM GATEWAYS

Cash due from gateways consisted of the following:

	June 30, 2019			December 31, 2018
Cash due from Gateways	$	460,882		$	291,112
Amount due from gateways and merchants – hold and fees		1,419,004			-
Reserves (2)		3,354,178			474,224
Total cash due from gateways		5,234,064			765,336
Chargeback Allowances (1)		-			(134,637	)
Allowance of uncollectable – hold and fees		(1,419,004	)		-
Total cash due from gateways, net	$	3,815,060		$	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.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

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 State of California. The Plaintiffs filed suit to recover processed funds and processing fees alleged to be withheld illegally. This was dismissed by both parties as of June 30, 2019.

● 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 or about August 1, 2018, from PrivCo’s Control Shares under the terms of the MLAs. To date, only informal conversational proceedings have ensued.

● 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 fraud, breach of fiduciary duty, breach of contract and other, related claims in the Superior Court for the State of California, County of San Diego. The GreenBox Parties filed a cross-complaint against the RB Capital Parties, alleging claims of fraud, breach of contract, tortious interference, and other, related claims. On or about December 15, 2019, the GreenBox Parties and RB Cap Parties resolved to negotiate a settlement and agreed in principal to settlements terms. The documentation of the settlement terms was underway as of February 3, 2020. This was dismissed by both parties on February 27, 2020.

● 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 suit listed in the previous paragraph. On October 31, 2019, the GreenBox Parties filed a cross-complaint against the Dahan Parties, alleging claims of fraud, securities fraud, misrepresentation, promissory estoppel, and other related claims, in the Superior Court for the State of California, County of San Diego. On or about December 15, 2019, the GreenBox Parties and the Dahan Parties resolved to negotiate a settlement and agreed in principal to settlements terms. The documentation of the settlement terms was underway as of February 3, 2020. This was dismissed by both parties on February 27, 2020.

● 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 Withholding Suit have agreed to arbitrate their claims. We do not dispute the funds owed; however, we do believe it’s within our rights to hold the funds, per the terms of agreements signed by Plaintiffs. We disagree with any allegations of any wrongdoing and will aggressively defend ourselves against the Withholding Suit. Ideally, we will settle this claim in the near term. While the results of this matter cannot be predicted with certainty, especially at this early stage, we believe that losses, if any, resulting from resolution of this matter will not have a materially adverse effect on operations or cash flow. This was dismissed by both parties as of March 30, 2020.

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 October 4, 2018 and expires on October 3, 2021.

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 June 30, 2019 was $31,154 and for the six months ended June 30, 2019 was $61,128.

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 $282,198 and $285,417, respectively, as of June 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 June 30,
	2019		2018
Operating lease expense – Hyundai Rio Vista	$	1,073	$	-
Total lease expense	$	1,073	$	-

	Six Months Ended June 30,
	2019		2018
Operating lease expense – Hyundai Rio Vista	$	3,219	$	-
Total lease expense	$	3,219	$	-

In accordance with ASC 842, maturities and operating lease liabilities as of June 30, 2019 were as follows:

Year ending	Hyundai Rio Vista, Inc.
Undiscounted cash flows:
2019	$	48,770
2020		110,948
2021		95,026
2022		-
2023		-
2024		-
Thereafter		-
Total undiscounted cash flows		254,744
Discounted cash flows:
Lease liabilities - current		51,372
Lease liabilities - long-term		234,045
Total discounted cash flows		285,417
Difference between undiscounted and discounted cash flows	$	30,673

In accordance with ASC 842, future minimum lease payments as of June 30, 2019 were as follows:

For the year ended	Hyundai Rio Vista, Inc.
2019	$	53,881
2020		132,601
2021		124,944
2022		-
2023		-
Thereafter		-
Total	$	311,426

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DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Accounting Policies [Abstract]
Restricted Cash, Current	$ 1,995,949		$ 1,995,949
Net Income (Loss) Attributable to Parent	(1,342,544)	$ (489,961)	(2,643,539)	$ (899,354)
Retained Earnings (Accumulated Deficit)	$ (4,676,134)		$ (4,676,134)		$ (2,032,595)

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REVERSE ACQUISITION (Details)	Apr. 12, 2018 USD ($)
PubCo [Member]
REVERSE ACQUISITION (Details) [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets	$ 843,694
PrivCo [Member]
REVERSE ACQUISITION (Details) [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets	589,078
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Long-term Debt	185,000
Debt Instrument, Face Amount	$ 300,000