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GreenBox POS (GBOX)

Filed: 13 Mar 19, 12:36pm

 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 


 

FORM 10-Q/A

(Amendment No.1)

 


 

 

(MARK ONE)

☒     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934      

For the quarterly period ended September 30, 2018

 

OR

 

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT      

For the transition period from ______________ to ______________

 

Commission file number: 001-51554

 

GREENBOX POS LLC

(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)

 

2305 Historic Decatur Rd #100, San Diego, CA

92106

 (Address of principal executive offices)

 (Zip Code)

 

Issuer's telephone number: (619 ) 930-5500

 

ASAP Expo, Inc.

(Former Name of Registrant)

 

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 ☐ (Do not check if a smaller reporting company)

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 November 20, 2018, 158,890,363 Shares of Common Stock (One Class)

 

 

 

EXPLANATORY NOTE

 

As disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on February 21, 2019, on February 19, 2019, the sole officers and directors, Ben Errez and Fredi Nisan (the “Management”) of GreenBox POS (f/k/a GreenBox POS LLC) (the “Company”), concluded that the following previously filed financial statements of the Company should not be relied upon: (1) the Company’s unaudited financial statements for the quarterly period ended June 30, 2018, contained in the Company’s Quarterly Report on Form 10-Q, originally filed with the Securities and Exchange Commission (the “Commission”) on September 6, 2018, as amended on September 10, 2018 (collectively, the “Q2 Report”); and (2) the Company’s unaudited financial statements for the quarterly period ended September 30, 2018, contained in the Company’s Quarterly Report on Form 10-Q, originally filed with the Commission on November 21, 2018 (the “Original Q3 Report”).

 

As previously disclosed in Note 4 to the financial statements in each of the Q2 Report and the Original Q3 Report, the Company formerly had a revolving line of credit totaling $1,800,000 with Frank Yuan, the Company’s former CEO and Jerome Yuan, the son of Frank Yuan.

 

As previously disclosed in Note 8 to the financial statements in each of the Q2 Report and the Original Q3 Report, on April 12, 2018, Frank Yuan converted $144,445 of the line of credit to 144,445,000 shares of the Company’s common stock at a price of $0.001 per share.

 

The Company, as disclosed in Note 8 in each of the Q2 Report and the Original Q3 Report, calculated that the total fair value of the 144,445,000 shares of common stock was $5,777,800. This resulted in a loss on the settlement of debt in the amount of $5,633,355.

 

On December 26, 2018, information came to the attention of the Company’s management that led it to investigate whether the Company’s calculation of the total fair value of the 144,445,000 conversion shares was wrong. On February 19, 2019, Management concluded that the price per share of the conversion shares should have been valued using the conversion price of $0.001 and not the April 12, 2018 market price of $0.04.

 

We are therefore filing this amended 10-Q (“Amended 10-Q”) to the Original Q3 Report, to restate our financial statements and revise related disclosures (including, without limitation, those contained under Item 1, Financial Statements, and Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations), contained in the Original Q3 Report to reflect the correct loss on the settlement of debt.

 

The amendment to the Q2 Report is being filed concurrently with this Amended 10-Q.

 

Specifically, this Amended 10-Q is being filed in order to restate:

 

 

Our balance sheets as of September 30, 2018 by recording additional paid-in-capital of $5,532,244 such that the restated additional paid-in capital is now ($664,930) and retained earnings increased by $5,532,244 such that retained earnings are now $336,828. 

 

 

Our statements of operations for the three months and nine months ended September 30, 2018. As a result of the restatement, our consolidated net loss for the three months and nine months ended September 30, 2018 decreased by $nil and $5,568,528, respectively.

 

As several parts of the Original 10-Q are amended and/or restated by this Amended 10-Q, for convenience, we have repeated the entire text of the Original 10-Q, as amended and/or restated by this Amended 10-Q. Readers should therefore read and rely on this Amended 10-Q in lieu of the Original 10-Q.

 

Except as amended and/or restated by this Amended 10-Q, no other information included in the Original 10-Q is being amended or updated by this Amended 10-Q. This Amended 10-Q continues to describe the conditions as of the date of the Original 10-Q and, except as contained therein, we have not updated or modified the disclosures contained in the Original 10-Q. Accordingly, this Amended 10-Q should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original 10-Q, including any amendment to those filings.

 

 

 

TABLE OF CONTENTS

  

 

Page

 

 

PART I Financial Information

 

 

 

 

Item 1.

Condensed Financial Statements

3

 

Condensed Balance Sheets as of September 30, 2018 and December 31, 2017 (unaudited)

3

 

Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2018 and 2017 (unaudited)

4

 

Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017 (unaudited)

5

 

Notes to (unaudited) Condensed Financial Statements

6

 

 

 

Item 2.

Management's Discussion and Analysis

15

Item 3.

Controls and Procedures

17

 

PART II Other Information

 

 

 

 

Item 1.

Legal Proceedings

18

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

18

Item 3.

Defaults Upon Senior Securities

18

Item 4.

Mine Safety Disclosures

18

Item 5.

Other Information

18

Item 6.

Exhibits

18

Signatures

19

 

 

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

GREENBOX POS LLC

BALANCE SHEETS

(Unaudited)

 

  

September 30,

  

December 31,

 
  

2018

  

2017

 
  

(Restated)

     

ASSETS

        

Current assets

        

Note receivable from affiliated company – in anticipation of merger

 $250,000     

Interest receivable from affiliated company

  2,731     

Current assets of discontinued operations

      111,163 

    Total current assets

  252,731   111,163 
         

Furniture and equipment of discontinued operations, net

  -   78,763 
         

Total assets

 $252,731  $189,926 
         

LIABILITIES AND STOCKHOLDERS’ DEFICIT

        

Current liabilities

        

Accrued interest payable

 $27,478     

Convertible note payable, net of unamortized discount of $115,704 and $0

and unamortized loan origination costs of $3,523 and $0 at September 30, 2018

and December 31, 2018, respectively

  134,748     

Current Liabilities of Discontinued Operations

  259,717   685,751 

    Total current liabilities

  421,943   685,751 
         

Long-Term Liabilities

        

Long-term liabilities of discontinued operations

  -   28,560 
         

Total liabilities

  421,943   714,311 
         

Stockholders’ Deficit

        

Preferred stock, $0.01 par value, 5,000,000 shares authorized; zero shares issued and outstanding

  -   - 

Common stock, $0.001 par value, 495,000,000 shares authorized, 158,890,363 and 14,445,363 shares issued and outstanding at September 30, 2018 and December 31, 2017

  158,890   14,445 

Additional paid-in capital

  (664,930)  (902,272)

Accumulated deficit

  336,828   363,442 

Total Stockholders’ Deficit

  (169,212)  (524,385)

Total Liabilities and Stockholders’ Deficit

 $252,731  $189,926 

 

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

 

 

GREENBOX POS LLC

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2018

  

2017

  

2018

  

2017

 
  

(Restated)

      

(Restated)

     

Operating Expenses:

                
                 

Other income (expense)

                

Interest income

  2,731       2,731     

Interest expense (including amortization of debt discount of $20,527 and $20,527 respectively

  (24,791)      (48,457)    
                 

Net (loss) income from continuing operations

 $(22,060) $-  $(45,726) $- 
                 

Net (loss) income from discontinued operations, net of income taxes

  -   22,155   19,112   55,913 
                 

Net income (loss)

 $(22,060) $22,155  $(26,614) $55,913 
                 

Net income (loss) per common share

                

Continuing operations

 $(0.00) $-  $(0.00) $- 

Discontinued operations

  (0.00)  0.00   (0.00)  0.00 
  $(0.00) $0.00  $(0.00) $0.00 
                 

Weighted average common shares outstanding

                

Basic and diluted

  158,890,363   14,445,363   104,921,901   14,445,363 

 

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

 

 

GREENBOX POS LLC

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED) 

 

  

Nine Months Ended

 
  

September 30,

 
  

2018

  

2017

 
  

(Restated)

     

CASH FLOWS FROM OPERATING ACTIVITIES

        

Net Income (loss) from continuing operations

 $(45,726)    

Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:

        

Accretion of discount on convertible note payable

  20,527     

Amortization of debt issuance costs included in interest expense

  452     

Changes in operating assets and liabilities

        

Interest receivable from affiliated company

  (2,731)    

Accrued interest payable

  27,478     

Net cash provided by (used in) operating activities - continuing operations

  -   - 

Net cash provided by (used in) operating activities - discontinued operations

  92,464   194,177 

Net cash provided by operating activities

  92,464   194,177 
         

CASH FLOWS FROM INVESTING ACTIVITIES

        

Payment for note receivable in anticipation of merger

  (250,000)  - 

Net cash provided by (used in) investing activities - continuing operations

  (250,000)  - 

Net cash provided by (used in) investing activities - discontinued operations

  (77,492)  2,093 

Net cash provided by (used in) investing activities

  (327,492)  2,093 
         

CASH FLOWS FROM FINANCING ACTIVITIES

        

Proceeds from borrowings on convertible note payable

  253,000   - 

Payments of loan origination fees

  (3,000)  - 

Net cash provided by (used in) financing activities – continuing operations

  250,000   - 

Net cash provided by (used in) financing activities – discontinued operations

  (14,972)  (191,449)

Net cash provided by (used in) financing activities

  235,028   (191,449)
         

Net increase (decrease) in cash

  -   4,821 

Cash, beginning of period

  -   32,761 

Cash, end of period

 $-  $37,582 
         

Supplemental disclosures of cash flow information:

        

Cash paid during the period

        

Interest

 $-  $751 

Income taxes

 $-  $800 
         

Non-cash investing and financing activities

        

Discount on convertible debt

 $136,231  $- 

Vehicle purchased through auto loan

 $-  $22,789 

Conversion of Line of credit, officers to shares of common stock

 $144,445  $- 

 

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

 

 

 

GREENBOX POS LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

ORGANIZATION

 

GreenBox POS LLC ("  GreenBox" or the "Company") was originally incorporated on April 10, 2007 under the laws of the State of Nevada as ASAP Expo, Inc. Prior to July 2011, the investment banking services division was the core business of ASAP Expo. ASAP Expo helped small and medium sized businesses raise funds and promote business through capital markets. In July 2011, ASAP Expo transitioned its core business to providing real estate advisory services from investment banking advisory services for Chinese companies and high net worth individuals.

 

On March 23, 2018, Frank Yuan, the controlling shareholder of ASAP Expo, Inc., entered into a stock purchase agreement whereby it sold 144,445,000 shares of ASAP Expo Inc.'s common stock to   GreenBox POS LLC, representing 90% of ASAP Expo, Inc.'s issued and outstanding shares of common stock. Pursuant to this transaction, on April 12, 2018, ASAP Expo, Inc. entered into an asset purchase agreement whereby it assigned the entirety of its assets to ASAP Property Holdings, Inc. in consideration of assumption of the entirety of its liabilities.

 

 The transaction contemplated in the March 23rd stock purchase agreement was closed on May 3, 2018, and a change of control of ASAP Expo, Inc. was effected. Thereafter, the Company changed its name to “GreenBox POS LLC.”

 

Since April 12, 2018, the Company’s operations have consisting of providing management and business development services.

 

BASIS OF PRESENTATION

 

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

 

Unaudited Interim Financial Information

 

These unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been made. Operating results for the three and nine months ended September 30, 2018 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, 2017 are derived from the audited financial statements and related notes for the year ended December 31, 2017 ("2017 Annual Financial Statements"), included in the Company's 2017 Annual Report on Form 10-K. These unaudited interim condensed financial statements should be read in conjunction with the 2017 Annual Financial Statements.

 

BASIS OF PRESENTATION

 

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

 

CASH AND CASH EQUIVALENTS

 

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 $0 as of September 30, 2018 and December 31, 2017, respectively.

 

 

 

FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The Company's financial instruments consist of accrued liabilities, notes receivable and amounts and due from an affiliated company. The fair value of these financial instruments approximate their carrying amounts reported in the balance sheets due to the short term maturity of these instruments.

 

Fair Value Measurements

 

ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value which focuses on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

 

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

CONVERTIBLE PROMISSORY NOTE

 

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

 

USE OF ESTIMATES

 

The preparation of financial statements in conformity with U.S. 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.

 

GOING CONCERN

 

As of September 30, 2018, the Company had no cash and a negative working capital of $145,546. As of September 30, 2018, the Company has not yet generated any revenues, and has incurred cumulative net losses of $26,614. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

 

These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company's future operations. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. 

 

REVENUE RECOGNITION

 

Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, which 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 Securities and Exchange Commission. Management believes the Company's revenue recognition policies conform to ASC 606.

 

 

 

As of September 30, 2018, the Company has not generated any revenues from continuing operations.

 

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.

 

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.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

In July 2017, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivatives and Hedging (Topic 815) ("ASU 2017-11"). ASU 2017-11 changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. The amendments require entities that present earnings per share ("EPS") in accordance with Topic 260 to recognize the effect of the down round feature when triggered with the effect treated as a dividend and as a reduction of income available to common shareholders in basic EPS. The new standard is effective for nonpublic business entities fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. The new standard is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this accounting standard update.

 

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation: Scope of Modification Accounting, which provides clarity and guidance around which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The standard is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual reporting periods. The adoption of this guidance will have no impact on our financial statements as the Company currently does not offer share-based payment.

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. 

 

 

Note 2 - Restatement

 

This financial statements for the quarter ended September 30, 2018 have been restated to reflect adjustment made to recognition of loss on settlement of debt that came to management's attention after the financial statements for the quarter ended September 30, 2018 were initially filed.

 

On April 12, 2018, Frank Yuan converted $144,445 of the line of credit to 144,445,000 shares of the Company’s common stock at the price of $0.001 per share. The total fair value of the conversion feature was originally valued at $5,777,800, based on common shares equivalent of 144,445,000 shares of common stock at the current trading price. This resulted in a loss on the settlement of debt in the amount of $5,633,355. The loss was recognized immediately and was first reflected in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, which was filed on September 6, 2018.

 

It came to the management’s attention that the initial valuation approach was not appropriate. The Company was thinly traded with minimal trading activities, and Frank Yuan was the sole shareholder of the Company on the conversion date. ASC 820 defined fair value as, “The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The same shares were subsequently sold for $250,000 to a third party on May 3, 2018. The management believes the $250,000 reflects the fair value of the Company common shares on conversion date due to the proximate time period between the conversion date and the stock sale date.

 

Therefore the Company recorded a loss on the conversion of $105,555 which represented the difference between the principal balance of $144,445 and $250,000.

 

The impact of those restatements on the September 30, 2018 unaudited financial statements is reflected in the following table:

 

              

Weighted

 
  

September 30, 2018

  

average

 
  

As Originally

          

shares

 
  

Reported

  

Adjustments

  

Restated

  

outstanding

 

Balance Sheet

                

Additional paid-in capital

 $4,867,314  $(5,532,244) $(664,930)    

Retained earnings

 $(5,171,750) $5,508,578  $336,828     

Stockholders' equity

 $(145,546) $(23,666) $(169,212)    
                 

Condensed Statement of Operations - for the three months ended

                

Net (loss) income from discontinued operations, net of income taxes

  -   -   -     

Net income (loss)

 $(22,060) $-  $(22,060)    

Basic and diluted income (loss) per share

 $(0.00) $-  $(0.00)  158,890,363 

 Basic and diluted income (loss) per share - discontinued operations

  -       -     
                 

Condensed Statement of Operations - for the nine months ended

                

Net (loss) income from discontinued operations, net of income taxes

 $(5,573,082) $5,592,194  $19,112     

Net income (loss)

 $(5,595,142) $5,568,528  $(26,614)    

Basic and diluted income (loss) per share

 $(0.05)     $(0.00)  104,921,901 

 Basic and diluted income (loss) per share - discontinued operations

  (0.05)      0.00     

 

 

NOTE 3 - DISCONTINUED OPERATIONS (RESTATED)

 

On April 12, 2018, ASAP Property Holdings Inc. ("Holdings") entered into an Asset Purchase Agreement (the "Purchase Agreement") with the Company, to acquire all the assets and all liabilities of the Company (the "Acquired Assets").  On April 12, 2018, the Company completed the sale of its Acquired Assets in an asset purchase transaction (the "Transaction") pursuant to the terms and conditions of the Purchase Agreement.

 

As a result of the consummation of the Purchase Agreement, on April 12, 2018, in consideration for the Acquired Assets, Holdings paid the Company $0 in cash and assumed $234,605 of liabilities in excess of assets. 

 

The allocation of the purchase price of the assets acquired and liabilities assumed based on their fair values was as follows:

 

Cash

 $77,292 

Petty Cash

  200 

Other Receivables

  30,790 

Accounts Receivable from Affiliates

  156,312 

Fixed Assets

  - 

Accounts Payable

  (218,195

)

Payroll & Payroll Tax

  (68,801

)

Accrued Expenses

  (91,224

)

Accrued Interest - Solar Equipment

  (262

)

Other Accrued Interest

  (35,432

)

Auto Loan

  (4,034

)

Promissory Note

  (54,048

)

Auto Loan

  (14,905

)

Equipment Loan - Solar Equipment

  (12,298

)

Total

 $(234,605

)

 

Income from discontinued operations during the three and nine months ended September 30, 2018 are $nil and $19,112 respectively.

 

Holdings agreed to assume responsibility for and fulfill the tax obligations of the Company. Holdings agrees to indemnify and hold harmless the Company for any liability, costs, and/or fees incurred due to Holdings' failure to fulfill such obligations. Accrued income taxes of $259,717 are recorded as Income tax of discontinued operations payable on the balance sheets.

 

The Transaction has resulted in the removal of the previous operations of the Company. Since April 12, 2018, the Company’s operations have consisted of providing management and business development services.

 

 

 

Below is a reconciliation of the major classes of line items constituting profit (loss) on discontinued operations related to the operations that were removed as a result of the Transaction with Holdings that are disclosed in Statements of Operations for the three and nine months ended September 30, 2018 and 2017.

 

  

Three Months Ended September 30

  

Nine Months Ended September 30

 
  

2018

  

2017

  

2018

  

2017

 
  

(Restated)

      

(Restated)

     

Revenues

                

Consulting fees

 $-  $288,160  $428,334  $1,117,960 

Management Fee

  -   18,000   255,161   61,200 

Total revenues

  -   306,160   683,495   1,179,160 
                 

Cost of Sales

                

Consulting expense

  -   42,400   120,500   436,100 

Total cost of sales

  -   42,400   120,500   436,100 
                 

Gross Profit

  -   263,760   562,995   743,060 
                 

Operating expenses:

                

General and administrative

  -   212,255   422,929   604,797 

Total operating expenses

  -   212,255   422,929   604,797 
                 

Income from discontinued operations

  -   51,505   140,066   138,263 
                 

Other Income (Expense)

                

Net gain on asset purchase agreement

  -   -   159,848   - 

Gain on sale of fixed assets

  -   -   -   5,277 

Loss on settlement of debt

  -   -   (41,161)  - 

Interest expense

  -   (7,407)  (3,695)  (26,737)

Total other income (expense, net)

  -   (7,407)  114,992   (21,460)
                 

Income before income taxes

  -   44,098   255,058   116,803 

Income taxes provision

  -   21,943   235,946   60,890 
                 

Net (loss) Income from Discontinued Operations

 $-  $22,155  $19,112  $55,913 

 

 

 

The following table summarizes the operating and investing cash flows of discontinued operations related to the operations that were removed as a result of the Transaction with Holdings for the nine months ended September 30, 2018 and 2017.

 

  

Nine Months Ended September 30,

 
  

2018

  

2017

 
  

(Restated)

     

Operating Activities:

        

Net Income (loss) from discontinued operations

 $19,112  $55,913 

Adjustments to reconcile net income from discontinued operations

to net cash provided by operating activities:

        

Depreciation expense

  4,004   8,085 

Gain on sale of fixed assets

  -   (5,277)

Assets distributed in asset purchase agreement, net

  (159,848)  - 

Loss on settlement of debt

  41,161   - 

Changes in operating assets and liabilities

        

Accounts receivable

  -   - 

Due from affiliates

  (135,431)  - 

Prepaid expenses and other current assets

  (30,790)  - 

Accounts payable and accrued expenses

  28,991   75,366 

Income tax payable

  234,983   60,090 
         

Net cash provided by (used in) operating activities

  2,182   194,177 
         

Investing Activities:

        

Cash disbursed in conjunction with asset purchase agreement

  (77,492)  - 

Acquisitions of furniture and equipment

  -   (7,240)

Payment from affiliated company

  -   9,333 
         

Net cash used in investing activities

  (77,492)  2,093 
         

Financing Activities:

        

Payments on auto loan

  (1,324)  (2,766)

Bank overdraft

  -     

Proceeds from borrowings on note payable from officers

  -   324,508 

Repayments of borrowings on note payable form officers

  (13,648)  (513,191)
         

Net cash provided by (used in) financing activities

  (14,972)  (191,449)
         

Net increase (decrease) in cash

  (90,282)  4,821 
         

Cash, beginning of period

  90,282   32,761 
         

Cash, end of period

 $-  $37,582 
         

Supplemental disclosures of cash flow information:

        

Cash paid during the period

        

Interest

 $-  $751 

Income taxes

 $-  $800 
         

Non-cash investing and financing activities

        

Vehicle purchased through auto loan

 $-  $22,789 

Conversion of Line of credit, officers to shares of common stock

 $144,445  $- 

 

 

 

 

NOTE 4 - FIXED ASSETS

 

Equipment consists of the following:

 

  

September 30,

  

December 31,

 
  

2018

  

2017

 

Fixed assets of discontinued operations, net

 $-  $78,763 
         
   -   78,763 

Less: Accumulated Depreciation

  -   - 
  $-   78,763 

 

NOTE 5 - RELATED PARTY TRANSACTIONS

 

At September 30, 2018 and December 31, 2017, GreenBox was owed $250,000 and $20,881 from affiliated companies in which GreenBox's officers are also owners and officers.  

 

The Company had a revolving line of credit totaling $1,800,000 with Frank Yuan, CEO and Jerome Yuan, his son. The line of credit bore interest at 6% per annum and was due upon demand, as amended.  On December 31, 2014, the convertible note was amended to waive the right of conversion and was to be used as a line of credit. On April 12, 2018, Frank Yuan converted $144,445 of the line of credit to 144,445,000 shares. During the nine months ended September 30, 2018 and 2017, the Company incurred interest expense totaling $3,333 and $25,964 in connection with the Line. The balance of the credit line as of September 30, 2018 was $0 and the accrued interest on the line of credit was $0. The balance of the credit line as of December 31, 2017 was $212,140 and the accrued interest was $32,100.

 

The son of the Company's officer ("Son") received salary from the Company for work performed. During nine months ended September 30, 2018 and 2017, the Son received salary of $0 and $120,000, respectively.

 

On April 12, 2018, the Company entered into an asset purchase agreement whereby it assigned the entirety of its assets to ASAP Property Holdings, Inc., an affiliated entity owned and operated by Frank Yuan, in consideration of assumption of the entirety of its liabilities.

 

On August 7, 2018, in anticipation of a merger, the Company entered into a Promissory Note with GreenBox POS, LLC, a Washington Limited Liability Company (the "Washington LLC"), whereby the Washington LLC received $250,000 to be used to facilitate business operations in anticipation of transferring such operations from the Washington LLC to the Company and promised to pay the Company $250,000 plus interest at maturity (the "Note Receivable"). The Washington LLC is an affiliated company. The Note Receivable bears interest at a rate of 7.25% per annum and matures on February 28, 2019. As of September 30, 2018, the balance of the Note Receivable was $250,000 and the balance of interest receivable was $2,731. This is a related party loan from the Company to the Washington LLC in anticipation of the merger between the two entities.

 

On September 20, 2018, the Company and the Washington LLC entered into a Definitive Material Agreement pursuant to which the Company will be assigned any and all assets related to the Washington LLC's blockchain gateway and payment system business, point of sale system business, delivery business, kiosk business (collectively, the "Business"), and all intellectual property thereto owned by the Seller in consideration of assuming any and all liabilities incident to the operation of the Business that have been incurred in the normal course of business. The transfer has not been effected as of this date as the Company is currently accounting for the transaction.

 

NOTE 6 - AUTO LOAN

 

In April 2017, the Company traded-in its old vehicle for a new vehicle with a financing agreement of $4,868 down and 2.39% interest, which was purchased in conjunction with the Transaction. As of September 30, 2018, there are no minimum payments or obligations due by the Company under the auto loan.

 

NOTE 7 - EQUIPMENT LOAN

 

In September 2015, the Company installed a solar system on its leased office for $17,570 with a 30-year loan at 5.49% interest. Each payment date, the Company will pay at least the "Total Amount Due" that is displayed on the monthly bill. The Total Amount Due will be the sum of all past due amounts plus the "Current Monthly Payment" that will be displayed on the monthly bill. Current Monthly Payments will be calculated as follows: the amount of kWh produced for the preceding month by the system; multiplied by the applicable agreed Equivalent Rate per kWh. The "Equivalent Rate per kWh" is based upon 5 factors: 1) the loan balance (which includes any accrued interest); 2) the Loan Term; 3) the applicable APR; 4) the expected production of the system; and 5) 2.50 % kWh annual rate escalator. The expected production of the system is an estimate, the actual payments could be higher or lower depending on the actual production from the system. If there is a remaining balance at the end of the loan term, the outstanding balance can be refinanced for an additional 12 months or for a term that is required by law. The equipment loan was acquired by Holdings in the Transaction. As of September 30, 2018, there are no estimated future Current Monthly Payments owed by the Company.

 

 

 

NOTE 8 - CONVERTIBLE NOTES PAYABLE

 

On August 6, 2018, the Company issued a convertible preferred note for $253,000 (the "August 6th Note"). The August 6th Note incurs interest at 10% per year and the outstanding principal and accrued interest are due on August 6, 2019, the maturity date. The August 6th Note includes a conversion feature where, beginning 180 days after the issuance date, the lender may convert all or a portion of the outstanding principal and accrued interest balance into shares of the Company's common stock determined by dividing the conversion amount by the conversion price. During the first 180 days, the Company is allowed to prepay the August 6th Note and all accrued interest in full by paying an increasing prepayment percentage, which starts at 110% of the outstanding principal and interest and increasing by 5% every 30 days (110% from 0-30 days, 115% from 31-60 days, 120% from 61-90 days, 125% from 91-120, 130% from 121-150 days, and 135% from 151-180 days). After this period, the Company is no longer allowed to prepay the August 6th Note and the conversion feature becomes active. The conversion price is determined by multiplying the market value of the Company's common stock, as defined, by 65%. This represents a beneficial conversion feature that is not a derivative but must have its value recorded as a discount on the related August 6th Note. The value of the conversion feature was calculated using the intrinsic value method, whereby the amount of the discount was calculated as the difference between the conversion price and the market price of the underlying stock at the date of issuance multiplied by the number of shares issuable. The Company recognized a debt discount of $136,231 on the convertible promissory August 6th Note related to the beneficial conversion feature upon issuance, which is being amortized to interest expense over the one-year term of the August 6th Note. 

 

The Company paid $3,000 as loan origination fees on August 6, 2018 in obtaining the loan. The loan origination fee was recorded as deferred financing cost against the loan balance. For the three and nine months ended September 30, 2018, approximately $452 and $452 in deferred financing cost was amortized, respectively.

 

As of September 30, 2018, the principal balance of the August 6th Note was $253,000, the unamortized debt discount was $115,704, the unamortized deferred financing costs were $2,548 and accrued interest on the August 6th Note was $3,812. During the period ended September 30, 2018, the Company recognized $24,791 in interest expense related to the August 6th Note.

 

NOTE 9 - SHAREHOLDERS' DEFICIT (RESTATED)

 

Common Stock

 

On July 29, 2017, the Board of Directors of the Company approved to increase the authorized shares of the Company to 500,000,000 (the "Increase"), with 495,000,000 shares being Common Stock and 5,000,000 shares being preferred stock, subject to Stockholder approval. The Majority Stockholder approved the Increase by written consent in lieu of a meeting on July 29, 2017. 

 

On April 12, 2018, Frank Yuan converted $144,445 of the line of credit to 144,445,000 shares of the Company's common stock at a price of $0.001 per share. The total fair value of the conversion feature was originally valued at $5,777,800, based on common shares equivalent of 144,445,000 shares of common stock at the then trading price. This resulted in a loss on the settlement of debt in the amount of $5,633,355. The loss was recognized immediately and was first reflected in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, which was filed on September 6, 2018.

 

It came to the management’s attention that the initial valuation approach was not appropriate. The Company was thinly traded with minimal trading activities, and Frank Yuan was the sole shareholder of the Company on the conversion date. ASC 820 defined fair value as, “The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The same shares were subsequently sold for $250,000 to a third party on May 3, 2018. The management believes the $250,000 reflects the fair value of the Company common shares on conversion date due to the proximate time period between the conversion date and the stock sale date.

 

Therefore the Company recorded a loss on the conversion of $105,555 which represented the difference between the principal balance of $144,445 and $250,000.

 

At September 30, 2018 and December 31, 2017, the Company had 158,890,363 and 14,445,363 common shares, respectively, issued and outstanding at par value $0.001 per share.  At September 30, 2018 and December 31, 2017, the Company had 158,890,363 and 14,445,363 common shares, respectively, issued and outstanding at par value $0.001 per share.

 

NOTE 10 - SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events through the date the financial statements were issued.

 

On October 1, 2018, the Company issued a promissory note convertible into equity, pursuant to the above-referenced August 6th Note with gross proceeds of $53,000. The note bears interest at a rate of 10% per annum until the same becomes due and payable, whether pursuant to the one-year term or upon acceleration or prepayment.

 

 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

 

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the audited financial statements and the related notes thereto included in the annual report for the period ended December 31, 2017. The annual report for the period ended December 31, 2017 contains certain forward-looking statements and the Company's future operating results could differ materially from those discussed herein. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments.

 

OVERVIEW

 

GreenBox POS LLC ("  GreenBox" or "The Company" or "Our" or "We") efforts prior to April 12, 2018 were focused on our mission to be the bridge between China and the Western world.   GreenBox is a holding company that assisted Chinese institutional and high net worth individuals with acquisition advisory and asset management of U.S. hotels.

 

Our investors included AVIC International USA, Junson Capital, Urban Commons, Sky Harbor Management, Shenzhen New World, American Curvet, and USA Heritage.

 

From August 2010 until April 12,2018, our group provided consulting services regarding purchasing 20 hotels primarily in California, Florida, Colorado, Connecticut, Georgia and Michigan. Hotel brands include Marriott, Hilton, Westin, Doubletree by Hilton, Four Points by Sheraton, and Holiday Inn.

 

As shown in the accompanying financial statements and as discussed in Note 3, all assets and liabilities of the Company were acquired on April 12, 2018 by person who was previously a related party to the Company. As a result, the previous operations of the Company have been removed.

 

On March 23, 2018, Frank Yuan, the controlling shareholder of the Company, entered into a stock purchase agreement whereby it sold 144,445,000 shares of the Company’s common stock to GreenBox POS LLC, representing 90% of the Company’s issued and outstanding shares of common stock. Pursuant to this transaction, on April 12, 2018, the Company entered into an asset purchase agreement whereby it assigned the entirety of its assets to ASAP Property Holdings, Inc. in consideration of assumption of the entirety of its liabilities.

 

The transaction contemplated in the March 23rd stock purchase agreement was closed on May 3, 2018, and a change of control of the Company was effected. Thereafter, the Company changed its name to "GreenBox POS LLC."

 

Since April 12, 2018, the Company’s operations have consisted of providing management and business development services. 

 

On August 7, 2018, in anticipation of a merger, the Company entered into a Promissory Note with GreenBox POS, LLC, a Washington Limited Liability Company (the “Washington LLC”), whereby the Washington LLC received $250,000 to be used to facilitate business operations in anticipation of transferring such operations from the Washington LLC to the Company and promised to pay the Company $250,000 plus interest at maturity (the "Note Receivable"). The Washington LLC is an affiliated company. The Note Receivable bears interest at a rate of 7.25% per annum and matures on February 28, 2019. As of September 30, 2018, the balance of the Note Receivable was $250,000 and the balance of interest receivable was $2,731. This is a related party loan from the Company to the Washington LLC in anticipation of the merger between the two entities.

 

On September 20, 2018, the Company and the Washington LLC entered into a definitive material agreement pursuant to which the Company will be assigned any and all assets related to the Washington LLC's blockchain gateway and payment system business, point of sale system business, delivery business, kiosk business (collectively, the "Business"), and all intellectual property thereto owned by the Seller in consideration of assuming any and all liabilities incident to the operation of the Business that have been incurred in the normal course of business. The transfer has not been effected as of this date as the Company is currently accounting for the transaction.

 

RESULTS OF OPERATIONS

 

Net Income

 

The Company recorded a net loss of $22,060 for the three months ended September 30, 2018 as compared to a net income of $22,155 for the same period last year. The decrease in net income was mainly due to the cessation of the previous operations of the Company after consummation of the Transaction on April 12, 2018 and costs related to the execution of a convertible note payable in August 2018, which was partially offset by Other Income resulting from interest income earned on a note receivable from an affiliated company.

 

The Company recorded a net loss of $26,614 for the nine months ended September 30, 2018 as compared to a net income of $55,913 for the same period last year. The decrease in net income was mainly due to a loss on settlement of debt and the cessation of the previous operations of the Company after consummation of the Transaction on April 12, 2018.

 

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

After the consummation of the transaction embodied in the definitive material agreement dated September 20, 2018, the Company will have assumed substantially all of the assets and operations of the Washington LLC. The transfer has not been effected as of this date as the Company is currently accounting for the transaction.

 

Liquidity and Capital Resources

 

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

 

  

As of September 30, 2018

  

As of December 31, 2017

 

Current assets

 $252,731  $- 

Current liabilities

  421,943   - 

Working capital

 $(169,212) $- 

 

The following table shows cash flows for the periods presented:

 

  

Nine Months Ended September 30,

 
  

2018

  

2017

 

Net cash provided by (used in) operating activities

 $92,464  $194,177 

Net cash provided by (used in) investing activities

  (327,492

)

  2,093 

Net cash provided by (used in) financing activities

  235,028   (191,449

)

Net increase (decrease) in cash

 $-  $4,821 

 

Operating Activities

 

For the nine months ended September 30, 2018, net cash provided by operating activities was $92,464, which was primarily due to a net loss of $22,060 from continuing operations, adjusted by non-cash related expenses of amortization of the discount on the Company's convertible note payable of $20,527, amortization of debt issuance costs of $452, increases in accrued interest expense of $3,812 and discontinued operations of $92,464, offset by an increase in accrued interest receivable from an affiliated company of $2,731. 

 

For the nine months ended September 30, 2017, net cash provided by operating activities of discontinued operations was $194,177. This was primarily due to a net income of discontinued operations of $55,913, adjusted by non-cash related expenses of depreciation of discontinued operations of $8,085 and non-cash capital gain of discontinued operations of $5,277, then increased by favorable changes in working capital of discontinued operations of $135,457. The favorable changes in working capital resulted from an increase in accounts payable and accrued expenses of discontinued operations of $75,366 and income tax payable of discontinued operations of $60,090.

 

Investing activities

 

For the nine months ended September 30, 2018, net cash used in investing activities was $327,492, resulting from a payment for note receivable in anticipation of merger for $250,000 and discontinued operations of $77,492.

  

For the nine months ended September 30, 2017, net cash provided by investing activities was $2,093. This was primarily due to payment from affiliated company of 9,333, offset by acquisitions of property and equipment of $7,240.

 

Financing activities

 

For the nine months ended September 30, 2018, net cash provided by financing activities was $235,028, which resulted from the issuance of a convertible note payable $253,000, offset by payments for loan origination fees of $3,000, and cash flows related to discontinued operations of $14,972.

 

For the nine months ended September 30, 2017, net cash used in financing activities was $191,449 which was mainly due to net repayment to note payable from officers of $188,683 and payments on auto loan of $2,766.

 

 

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 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 Securities and Exchange Commission. Management believes the Company's revenue recognition policies conform to ASC 606.

 

Income Taxes

 

The Company accounts for income taxes under ASC 740, Income Taxes. Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Management provides a valuation allowance for significant deferred tax assets when it is more likely than not that such asset will not be recovered.

 

ITEM 3. CONTROLS AND PROCEDURES

 

Our management evaluated, with the participation of our Chief Executive Officer and Executive Vice President, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are not effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and (ii) is accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls and procedures include components of our internal control over financial reporting and, as such, are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Management's assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance that the control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met (see the section below in this Item 3 entitled Limitations on the Effectiveness of Internal Controls).

 

Changes in Internal Controls Over Financial Reporting

 

There have been no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended) that occurred during the period covered by this Report, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Limitations on the Effectiveness of Internal Controls

 

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Executive Vice President concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

  

 

 

PART II - OTHER INFORMATION

 

ITEM 1. 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 September 30, 2018.

 

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

 

On August 6, 2018, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd. ("Power Up") with respect to the issuance of a promissory note convertible into equity issued on the same date with gross proceeds of $253,000 (the "August 6th Note"). The August 6th Note shall bear interest at a rate of 10% per annum until the same becomes due and payable, whether pursuant to the one-year term or upon acceleration or prepayment. Power Up may elect to convert the August 6th Note at any time from 180 days from the date of issuance at a variable price of per share equal to 65% of the average of the 3 lowest trading prices in the 10 days prior to such conversion. The August 6th Note carries a pre-payment penalty if such note is paid off in 30, 60, 90, 120, 150, or 180 days following the issue date. The pre-payment penalty is based on the then outstanding principal at the time of pay off plus accrued and unpaid interest multiplied by 110%, 115%, 120%, 125%, 130%, 135% respectively.

 

Pursuant to the Securities Purchase Agreement, Power Up was granted an option to invest up to $1,500,000 (inclusive of the amount provided pursuant to the August 6th Note) for 12 months from the date of the Securities Purchase Agreement under the terms and conditions of the Securities Purchase Agreement.

 

The issuance of the Note, and the issuance of the shares of the Company's Common Stock upon conversion of the Note in connection with the financing are exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the "Act"), in reliance upon exemptions from the registration requirements of the Act in transactions not involving a public offering, including, but not limited to the exemption provided pursuant to Rule 506(b) of Regulation D, as promulgated by the Securities and Exchange Commission under the Act for offers and sales of restricted securities in a private, non-public transaction to accredited investors, as defined in Rule 501 of Regulation D

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

31.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. *

31.2

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. *

32.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. +

32.2

Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act. +

XBRL Instance Document*

XBRL Taxonomy Extension Schema Document*

XBRL Taxonomy Extension Calculation Linkbase Document*

XBRL Taxonomy Extension Definition Linkbase Document*

XBRL Taxonomy Extension Label Linkbase Document*

XBRL Taxonomy Extension Presentation Linkbase Document*

 

* Filed herewith.

 

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

 

 

 

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 LLC

(Registrant)

 

 

 

 

 

 

 

 

 

Date: March 13, 2019

By:

/s/ Fredi Nisan

 

 

 

Fredi Nisan

 

 

 

Chief Executive Officer

(Principal Executive Officer)

 

 

 

 

 

 

 

 

 

 

By:

/s/ Ben Errez

 

 

 

Ben Errez

 

 

 

Executive Vice President

(Principal Financial Officer)

 

 

 

 

 

 

 

 

 

 

 

 

19