Good afternoon, ladies and gentlemen and welcome to the GreenBox POS Fourth Quarter and Full Year 2021 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following management remarks, the conference will be open for questions.

The earnings press release accompanying this conference call was issued at the close of the market today. The annual report, which includes the company’s results of operations for the year ended December 31, 2021 was filed with the SEC today. On our call today is GreenBox POS’ Chairman, Ben Errez and Chief Financial Officer, Ben Chung.

I’d like to remind everyone that statements made on today’s call and webcast, including those regarding future financial results and industry prospects are forward-looking and maybe subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call.

Please refer to the company’s regulatory filings for a list of associated risks. The replay of this call and webcast will be available for the next 90 days on the company’s website under the Events section. At this time, I would like to turn the conference over to Ben Errez, the company’s Chairman. Ben, the floor is yours..

Hello, everyone and thank you for joining us today for our fourth quarter and full year 2021 financial results call. 2021 was the record setting year for GreenBox.

We continue to rapidly expand our payment processing footprint and processed approximately $2 billion in transaction volume, which makes it about 10x the processing volume of fiscal year 2020. As we’ve discussed previously, processing volume is currently our primary KPI and business focal point.

It is indicative of the scalability of our technology, our market share growth, our ability to remain compliant and our investment in good quality people, technology, development, infrastructure and acquisitions.

We also achieved record company revenues during 2021 of $26.3 million, representing tremendous growth of over 209% when compared to 2020 full year revenue. As a reminder, our generation through technology was deployed at the onset of 2021 in January of last year.

To achieve impressive scale so quickly with no major setback is a demonstration of the quality and capabilities of our talented team and technology. With that, I’d like to walk through some key operational highlights and provide updates on several of our core objectives that we have been diligently working on towards.

Acquisitions are a vital part of our growth strategy. They allow us to purchase merchant portfolios, adding processing volume to our platform and provide a way to obtain key licensing assets, both domestically and globally that enable us to branch out and service more verticals and geographic locations.

In 2021, we announced three such acquisitions, including Northeast Merchant Services, ChargeSavvy and Transact Europe. The first two acquisitions have been completed and successfully integrated with the GreenBox operations.

As an indication of their success, just six months after integration ChargeSavvy recorded the best quarter in its 90 year history as a result of improved technology and efficiencies. Regarding Transact Europe, after a lengthy review process, I’m excited to report that after receiving final approval from the Bank of Bulgaria, we proceed with closing.

Transact Europe or TEU is an incredibly important purchase for us given that it opens doors for us globally for expansions both in Europe and as a stepping stone into markets in Asia Pacific regions. It gives credibility to GreenBox, further establishing us as a premier global fintech.

GreenBox and TEU are a natural complement to each other with TEU licenses and infrastructure combined with our suite of customized payment solutions and technology. We believe there is a powerful synergy that we can capitalize on, drive Coyni adoption, and ultimately achieve significant revenue and earnings.

An 8-K filing was just made based on the amendment to the purchase agreement regarding the purchase price of the acquisition, which was reduced to €26 million from the original €30 million. While not completed just yet, we are confident this will cross the finish line in the next couple of days.

So we can announce that this transaction is in completion mode. Earlier this year, GreenBox launched a vast new payment vertical by offering bulk ACH processing abilities to merchants. ACH market is a lucrative opportunity for us as it offers merchants a low cost execution alternative to more expensive debit and credit cards.

Since our launch of this initiative, we’ve already booked commitments in excess of $50 million per month and driving. This is a profitable multimillion dollar revenue stream for GreenBox, which we expect will continue to grow over time.

Establishing strategic partnerships with leading tech forward financial companies is also an integral part of our growth strategy. We recently announced such a partnership with Cross River Bank, a very well respected financial technology infrastructure company, following a very thorough evaluation process by then of GreenBox.

And I would like to take this opportunity to congratulate Cross River for raising $620 million last week. We entered into a licensing partnership as the initial step towards the first of its kind banking-as-a-service initiative.

This is a truly massive opportunity for us that significantly expands the potential universe of clients that GreenBox can service, while allowing us to offer existing merchants accounts, more services, including banking solutions.

The Cross River partnership single handedly closes the gap towards GreenBox becoming a vertically integrated end-to-end financial technology solution. While in the early innings of this partnership, we expect great things from it. And over time, believe it’ll lead to a substantial revenue generation for us.

Through 2021 and into the New Year, we continue to strengthen the composition of our management team. Recently, we welcome Min Wei as our new Chief Operating Officer. Min has extensive background in operational efficiencies and growing technology companies, particularly on a global basis, which is critical for us given our expansion plans.

Min Wei will be available at the end of this call as well as Ben and I for Q&A. Given these aspirations, we set out to find the right marketing and branding leader and we found that perfect fit with the appointment of Jacqueline Reynolds as Chief Marketing Officer.

There are decades of experience leadings, some of the most highly coveted brands Jacqueline is respected as a world class global marketer.

She’s also spearheading our recently announced transformational global initiative to raise the GreenBox brand awareness with the appointment of an award-winning advertising agency INNOCEAN as our advertising and branding agency of record.

In January, we once again demonstrated our commitment to our shareholders and confidence in our ability to execute on the growth opportunity in front of us with approval of an accelerated share repurchase program of up to $10 million.

Our commitment to defend our stock is unwavering, and we will continue to utilize this strategy when we feel it is prudent. Additional details regarding this stock purchase plan can be found in our 10-K filing. Last, but certainly not least, let’s talk about Coyni, our stablecoin and digital payment platform.

All of the aforementioned items, I’ve discussed lay the foundation for us to drive adoption for Coyni. After a much internal discussion, we believe the most effective path for us initially at least, is to deploy and grow the business under the GreenBox umbrella.

There are several key advantages that we can leverage such as compliance, sales and more effectively execute on its growth. The Coyni app has gone through a vigorous beta testing as well as three auditors at the stations. And we plan to make the Coyni app available on the app store in a few weeks, perhaps by the end of April.

We remain 100% committed to rewarding our loyal shareholders from the success of Coyni and our acquisitions by way of a dividend in the same parameters as we have discussed before. And now I’ll turn the call over to our Chief Financial Officer, Ben Chung to walk through our financial results. Ben, the floor is yours..

Thank you, Ben. I will limit my portion to key results of our financials. A full breakdown is available in our 10-K filing and in the press release that will be distributed after market closes today. Please note that I’ll be referring to adjusted EBITDA and other non-GAAP measures.

And for the calculation of adjusted EBITDA for other non-GAAP measures, please refer to the MD&A, which is available in our 10-K filing, which you can find on our website under SEC Filings. Our 2021 total net revenue increased by $17.8 million or 208.6% to $26.3 million from $8.5 million for the full year 2020.

The increase was primarily due to an increase in processing volume from 2022 – I’m sorry, $20.2 million for the year ended December 31, 2020, and $1.95 billion for the year ended December 31, 2021.

The increase in processing volume was due to a number of factors, including growth of our customer merchant base as a result of expanded sales and marketing efforts, an increase in average merchant transaction volume as a result of greater strategic focus on larger merchants, the expansion and growth of our advanced blockchain ledger-based payment solutions, product offerings combined with an expanding ISO and partnership network and our strategic acquisition strategy.

2021 gross profit was $16.9 million or 64% of net revenue, an increase of 357% compared to $3.7 million in the prior or 43% of net revenue. Our margins increased significantly due to increased processing efficiency, greater utilization of lower cost gateways and decreased cost of scale – cost to scale.

I would like now to discuss our operating expenses. We categorize our operating expenses into two categories, normal operating expense and non-cash operating expenses.

Normal operating expenses include marketing, research and development, payroll, professional fees and general expenses, while non-cash operating expenses include stock compensation expenses for employees and for services, including depreciation.

Our normal operating expense was $20.8 million and $5.7 million for full year 2021 and 2020 respectively, an increase of $15.1 million, primarily due to an increase in general and administrative expenses related to bad debt expense, but also related to our heavy investment in research and development to improve our technology and headcount to support operations and sales growth.

Our non-cash operating expenses primarily relate to stock compensation expense for employees and services. Our stock compensation expenses for services are non-recurring charges, which will not recur going forward. We ended 2021 with a loss from operations of $20.8 million compared to a loss of $5.0 million in the same year prior year.

If our non-cash operating expenses such as bad debt, stock compensation expense for employees and services and depreciation are added back, we had net income from operations of $3.1 million for 2021 and a net loss of $5.1 million for the same period prior year. I will now like to go to our other expense category.

Our total other expense for full year 2021 were approximately $5.7 million compared to other income of $0.1 million in the prior year.

Our other expenses consisted of interest expense related to debt discount of $2.9 million, interest expense of $1.9 million, derivative expense of $3.4 million offset by changes in fair valley of derivative liability of $2.8 million, a merchant liability settlement gain of $0.4 million and other income of $0.2 million.

The company sustained a net loss in 2021 of $26.5 million or $0.65 per basic and diluted share compared to a net loss of $5.0 million or $0.17 per basic and diluted share during 2020.

The increase in net loss was primarily due to bad debt write-offs, increase in operating expenses from our heavy investment in growth related to such areas as research and development, sales and marketing, staff, cost associated with due diligence for acquisitions, stock-based compensation for services as well as increase in general and administrative expenses.

Adjusted net income, a non-GAAP finance measure for 2021 was $3.1 million of net income. You can find a reconciliation in our earnings press release. Our cash flows from operating activities adjusted was negative $6.9 million for the 12 months ended December 31, 2021.

GreenBox continues to be in a financially healthy position with a strong cash balance of $89.6 million as of December 31, 2021 following the recent $100 million convertible financing, which allows us the flexibility to aggressively pursue our growth initiatives. I’ll now turn the call back to Ben Errez for some final remarks prior to our Q&A..

Thanks Ben. On a final note, we fully acknowledge the performance metrics hurdles for Q1 as specified in the convertible note agreement so-called $100 million note, and the ramifications of such. Based on the performance we have seen in Q1 we are confident that this conversion trigger will not come into play.

Our revenues far exceed the requirements of these triggers. While much work remains to be done to accomplish our ambitious agenda we have made tremendous progress in relatively short period of time. As your Chairman, you have my unwavering commitment to the many initiatives that we have set out to achieve.

We have invested heavily in good people, built a robust and scalable infrastructure, developed innovative payment technology and added world class marketing. We’re well positioned for growth over the course of the next several years and to deliver long-term sustainable value for shareholders.

I’d like to thank each of you for listening to today’s call and for your interest in GreenBox. We’re truly grateful for your ongoing support. With that I’d like to turn it back to the operator to begin the question-and-answer session.

Operator?.

Thank you, Ben. [Operator Instructions].

Thank your operator. I will just mention again that Min Wei our new Chief Operating Officer is available for questions as well. And I will wait for the first question..

Our first question is from Ben Piggott with EF Hutton. Please go ahead..

Ben, just maybe a little bit more color on the thought process around internal on the onset versus [Audio Dip]..

I’m sorry, Ben. You’re pretty garbled.

Would you repeat your question?.

Yes.

Just, can you hear me better now?.

I think so..

Just a little bit more color on the thought process of keeping Coyni internal under the GreenBox umbrella versus spinning out, what would be great?.

Yes. Thanks for the question, Ben. So Coyni is an infrastructure and it’s a major play for GreenBox. Coyni started its life initially as a manifestation of the smart contract technology that GreenBox had in its infrastructure beginning in 2019.

Later on it was formed again as a wholly owned subsidiary and this is now we’re talking about the middle of last year. With the anticipation of it becoming a standalone IPO opportunity for the company. So a few things happened since, number one, obviously capital markets are vastly different now than they were last year.

Second, opportunities that the company has in terms of acquisitions, international portfolios, licensing opportunities, onshore in Europe and Asia Pacific region and other developments make Coyni a very, very powerful add-on to this infrastructure. It makes sense for us to merge these capabilities first within GreenBox and its new acquisition.

Launches through our global expansion plans and then do a spinoff perhaps when capital markets regain foothold. At the same time, as I said in the call we remain committed to the dividend rewards for our shareholders as we were before.

So the fact that the Coyni launch as a separate entity may be delayed and may take even different shape at the end of the day. The reward commitment remains unchanged. I hope that answers your question..

That’s helpful. Thank you..

You’re welcome..

Our next question is from Howard Halpern with Taglich Brothers. Please go ahead..

Good afternoon guys..

Hey Howard..

Hi. Curious about the potential for that new lined ACH bulk processing.

You say you have commitment?.

Yes..

Has volume started yet and revenue flowing, or when do you expect that to begin to kick in?.

We have already booked these volumes on our backlog. So what happens now is that we are in the process of on-boarding all of this activity. On-boarding takes a little bit of time. ACH business is slightly different. I see this as a process that will take maybe four weeks or so, but this performance is imminent.

We know that it’s there, it’s committed, technology has already been integrated to allow for that, this is now a launch – in launch procedure..

Okay.

And that source of revenue, is that going to be additive to what you – that $4 billion in transaction revenue for this year or is that part of that forecast?.

I guess it’s a little bit of both. The onset committed volume is higher than we budgeted, so you’ll see some bump through the overall project. But some of it was already budgeted in the $4 billion to $6 billion volume range for next year..

Okay. And....

Sorry for this year..

For this, yes, for this year now. And now with Transact, it’s going to close soon.

You still need another one or two acquisitions to get to that $4 billion – the minimum of that $4 billion, or are you pretty much on track with the blocking and tackling?.

Yes. So we are on track with the current acquisition map and although not fully committed to another acquisition, yet we definitely see that as something that we would like to execute in a big way during 2022. We don’t have further details that we can share at this point, but they do expect a big move on that front from us.

Perhaps one that will require shareholder approval to you investors, this means something in terms of the size of it..

Okay. And in turn, this is more on a fourth quarter question. The gross margin came down a little bit.

Was there something in the cost of sales because it dropped compared to the first three quarters? And should we look at going forward, I’ll turn back to what you had scene in the first three quarters of 2021?.

I’m going to let the Ben tackle this first and then I’ll add my own comments..

Okay..

Yes. Can you repeat that one more time? I think your message somehow going in and....

Okay. That Q4 gross margin seemed to dip compared to the first three quarters.

I don’t know if there was a onetime item in the cost of sales, but are we looking for a return back to what we’ve seen in the first three quarters of 2021 into 2022?.

Yes.

When you’re saying gross profit, are you at the – it was the offered margin or gross margin?.

Gross margin, it was 43, I think you said versus 56. And in the prior three quarters you were above – you were in the 60s towards 70 actually in gross margin..

Yes. I don’t think I gave out the Q4 gross margin..

Yes. And that was in the press release it said....

Okay. Yes..

Yes. Gross profit was $3 million versus $1.7, 43 versus 56..

Got it, got it. Yes. So the margin change is based on the timing of the ISO settlements based on the revenue that we recognize in the period, and so in Q4, we on-boarded more ISOs and so we processed more commission payments or to the ISOs in Q4..

Okay. So it’s a timing, it’s more of a timing issue than anything else..

That’s correct. And then I think Ben Errez had alluded that we’re trying to utilize our blockchain technology Gen 3 more effectively, and we’re – we were growing our own sales-force so that means that we’ll have less ISOs to deal with. And so we’ll have much higher margin as we go along..

Okay.

And just one final question what’s the status of getting, you know, American Samoa up and running?.

So first let me just add a comment on your previous question, then I’ll get to American Samoa..

Okay..

So Ben is right. And this is something that I wanted to get to during this Q&A. Timing of revenue clearly impacts our financials and accruals. So, you can expect a pretty flat, trends on a operating margin, even though the nature of the business doesn’t change.

We add a lot of volume, it’s very difficult to add volume and maintain profit margins, so that will have tendency to reduce margins. But on the flip side, this is mitigated through technology advancements and the move to native hosting of that business. Ben alluded to that by saying move to blockchain.

But essentially it means move to the native ledger that the company owns 100%. So every volume that moves there, automatically increased inefficiency and balances out the tendency to lose points when you go to much larger volumes..

Okay..

The second part of your question with regards to American Samoa. So we project full impact of the GreenBox technology on American Samoa towards the fourth quarter of this year. Right now we have technology already launched there.

We have merchants that are being served over there through GreenBox later on Coyni will be integrated into the financial infrastructure of the island leading to a complete coverage of the entire financial and economic infrastructure of the island through GreenBox technology. This is amazing developments of the company.

We put a lot of emphasis and resources in getting this done, right. We have our own officers assigned to launching this project with full commitment. They don’t have anything else that they do. These are very, very high level executives with the company and in charge of launching this project to the maximum efficiency.

This to me is one of the most exciting features of the, of GreenBox and its financial performance..

Okay. Thanks guys. Keep up the good work..

Thanks, Howard. Appreciate it..

[Operator Instructions] Our next question is from Chris Sakai with Singular Research. Please go ahead..

Hi. Ben E and Ben C..

Hi, Chris..

I just had a question; I guess on, I know you’re saying the Transact Europe is going to close soon.

Can you provide any color as to, I mean the, how the revenue share is coming, how much revenue is currently coming from Transact Europe?.

So Transact Europe first of all, on the status itself I already stated that we are in the closing phases of this transaction. We are already wired our funds to Escrow. The approval for the acquisition is on hand. There’s nothing further for us to perform in this acquisition except for the closing itself.

And as we speak closing procedures are taking place in Europe. Our own Fredi Nisan, our CEO will be traveling in the next few weeks to Bulgaria and firsthand experience with the control of the company. And it’s a workforce, procedures, technology and I expect a big numbers to come out of this transaction, materially impacting GreenBox bottom line.

In terms of a volume Transact Europe is an acquisition that for us was basically a composition of two objectives. The first one is its set of the licenses and commercial linkages to the economic infrastructure in Europe, greatly or positioned in a great way for us to take advantage of our technology.

And especially in our future expansion into Asia Pacific, APAC region is critical for the company. It’s critical for the entire payment world. It is predicted that APAC will be responsible for more than half of all payments, transactions around the world by 2024. And clearly we need to have a foothold in that region.

So the primary objective in Transact Europe, probably responsible for more than 80% of the value was to get control over this licensing and relationship capabilities that they have. The volume is a secondary or the existing volume, I should say, a secondary to the rationale behind this acquisition.

So I think they do about $20 million per month, which is a minor amount for us. It doesn’t impact our revenues in any significant way at this point but we believe that Transact Europe within the next few quarters, perhaps within the year will reach volumes that parallel and exceed what we do today with the ChargeSavvy, for example.

And ChargeSavvy is in the $500 million a year range, as we speak. So I think that’s these two objectives with the addition of the ability of the company to negotiate down the price by €4 million is a very good acquisition for the company.

We’re very happy with it, looking forward to completing it and beginning executing on it, perhaps as soon as next week. The transaction itself is scheduled to close today, but they may be delayed by a few days pending international wires and currency exchanges and things like that. But we’re very excited about this opportunity and thanks, Chris..

Okay, great. I know you mentioned some bigger acquisition in 2022. Can you, I know there’s, and I know there’s some talk about, or I guess partnerships with GreenBox and or Coyni.

Can you talk about any sort of comments on any future partnerships that you may have?.

Well, Coyni is a technology that is 100% owned by GreenBox. So Coyni has one role and that is to be accretive to the GreenBox bottom line and shareholder value. So from time to time, even though it may change focus but it would change focus.

It would do such thing only to improve its bottom line contributions to the company and its value as an asset to the company, which impacts in turn shareholder value. So, I spoke before about integrating Coyni with other opportunities.

The first one of which is Transact Europe, Coyni makes Transact Europe process cross border international funds instantly. No one else has that capability. Coyni has an immediate value and not derivative value actually based on cash. No one else has that. Coyni has the ability to do all of that with the option of being reversible.

Again, no one else has that. So we’re very excited to continue and execute on the Coyni mission with the same overall objective and that is to continue and contribute to the company and its shareholders..

Okay. Thanks. And I know you mentioned, so there’s, you’ve got what, $96 million or $90 million of cash minus what the 26 were Transact.

Any comments there, as far as, I mean, you mentioned one acquisition, is there possibly two in there for the year?.

Hi Chris, I can’t say anything about that. But thanks for the question and yes, you can expect more. Both the one currently being executed and those plan I can’t really divulge any further information as it would be Material Nonpublic Information, MNPI but do expected to hear from us very, very soon about such activity, both small and very large..

Okay.

And lastly, I mean, how many shares have been repurchased, in this new $10 million plan?.

So I believe that information is in the 10-K, but I can tell you that so far we bought back approximately 1.4 million shares and we intend to continue and purchase so long that we perceived the value of the price of the stock to be unfairly stated that aside, please notice that they are 10-K also include what’s called a 10b5-1 provision where we specify the buyback plans.

And from here on after in fact starting tomorrow, this will be executed automatically as all 10b5 programs do. So do expect that..

Okay.

And then I think someone asked this before, but for your projections of $4 billion to $5 billion in processing volume, is that, does that include this acquisition that you’re talking about in the future, or is that only with what we have now?.

Yes, we, we haven’t yet amended our models and we couldn’t do that before the acquisitions are completed but we will rework the models and perhaps provide amended projections in the near future. Now that this transaction is essentially closed, we have an opportunity to do that..

Okay, great. Thanks Ben..

Thanks, Chris. I also wanted to thank you specifically for being one of our early adopters, testers on our Coyni application. I look forward to your feedback and remarks, and I believe that this is great. Yes. I hope question. We have, yes. Sorry, Chris, go ahead..

Oh, I’m just would say I hope to try it definitely. And be excited to try it..

Thank you. So operator, I believe this is the end of the Q&A..

Yes, that was the last question, sir. Yes..

Okay. So at this time this concludes our Q&A session. I would like to thank all of you for joining our earning conference call today. We look forward to continue and update you on our ongoing progress and growth.

If we were unable to answer any of your questions, please reach out to us either via MZ Group, who you all know or IR firm or directly to me most of you have my email address of the company. And I try to answer all questions directly. Thank you all at this time..

This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day..