bmtx-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, 2023


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 001-38633

BM Technologies, Inc.

(Exact name of registrant as specified in its charter)


Delaware									82-3410369
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

201 King of Prussia Road, Suite 650
Wayne, Pennsylvania									19087
(Address of Principal Executive)									(Zip-Code)

(877) 327-9515

Registrant's telephone number, including area code

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	BMTX	NYSE American LLC
Warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50 per share	BMTX-WT	NYSE American LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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, non-accelerated filer, and emerging growth company in Rule 12b-2 of the Exchange Act.

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. Yes ☐ No ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The registrant had issued and outstanding 11,869,925 shares of common stock, par value $0.0001 per share, as of November 20, 2023.

Table of Contents


			Page
Part I - Financial Information			2
Item 1. Unaudited Consolidated Financial Statements			2
Consolidated Balance Sheets at September 30, 2023 and December 31, 2022			2
Consolidated Statements of (Loss) Income for the Three and Nine Months Ended September 30, 2023 and 2022			3
Consolidated Statements of Changes in Shareholders' Equity for the Nine Months Ended September 30, 2023 and 2022			4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022			5
Notes to Unaudited Consolidated Financial Statements			6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosures About Market Risk			30
Item 4. Controls and Procedures			30

Part II - Other Information			31
Item 1A. Risk Factors			31
Item 5. Other Information			31
Item 6. Exhibits			32

Signatures			33

Part I - Financial Information

ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

BM TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS — UNAUDITED

(amounts in thousands, except share and per share data)


	September 30, 2023		December 31, 2022
ASSETS
Cash and cash equivalents	$	8,802	$	21,108
Accounts receivable, net allowance for doubtful accounts of $655 and $305	8,511		8,260
Prepaid expenses and other assets	6,088		9,076
Total current assets	23,401		38,444
Premises and equipment, net	534		508
Developed software, net	17,668		22,324
Goodwill	5,259		5,259
Other intangibles, net	4,189		4,429
Other assets	—		72
Total assets	$	51,051	$	71,036
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	12,513	$	12,684
Deferred revenue	3,440		6,647
Total current liabilities	15,953		19,331
Non-current liabilities:

Liability for private warrants	378		2,847
Other non-current liabilities	480		—
Total liabilities	$	16,811	$	22,178
Commitments and contingencies (Note 7)
Shareholders’ equity:
Preferred stock: Par value $0.0001 per share; 10,000,000 shares authorized, none issued or outstanding at both September 30, 2023 and December 31, 2022	$	—	$	—
Common stock: Par value $0.0001 per share; 1 billion shares authorized; 11,869,925 shares issued and outstanding at September 30, 2023; 12,240,237 shares issued and outstanding at December 31, 2022	1		1
Additional paid-in capital	71,092		72,342
Accumulated deficit	(36,853)		(23,485)
Total shareholders’ equity	$	34,240	$	48,858
Total liabilities and shareholders’ equity	$	51,051	$	71,036

See accompanying notes to the unaudited consolidated financial statements.

BM TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF (LOSS) INCOME — UNAUDITED

(amounts in thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating revenues:
Interchange and card revenue	$	2,652	$	5,325	$	7,535	$	17,283
Servicing fees	8,658		10,163		22,990		37,650
Account fees	1,931		2,110		5,981		6,872
University fees	1,412		1,357		4,291		4,406
Other revenue	88		903		415		1,702
Total operating revenues	14,741		19,858		41,212		67,913
Operating expenses:
Technology, communication, and processing	8,186		7,731		21,768		21,944
Salaries and employee benefits	4,773		10,773		17,337		30,656
Professional services	2,948		2,454		7,926		7,225
Provision for operating losses	2,138		1,564		5,628		5,006
Occupancy	9		160		33		875
Customer related supplies	227		225		677		676
Advertising and promotion	128		242		371		461
Restructuring, merger, and acquisition related expenses	—		—		993		290
Other expense	717		989		2,280		2,467
Total operating expenses	19,126		24,138		57,013		69,600
Loss from operations	(4,385)		(4,280)		(15,801)		(1,687)
Non-operating income and expense:
Gain (loss) on fair value of private warrant liability	433		(1,369)		2,449		6,916
(Loss) income before income tax expense	(3,952)		(5,649)		(13,352)		5,229
Income tax (benefit) expense	—		(729)		16		1,823
Net (loss) income	$	(3,952)	$	(4,920)	$	(13,368)	$	3,406

Weighted average number of shares outstanding - basic	11,570		11,940		11,567		11,944
Weighted average number of shares outstanding - diluted	11,570		11,940		11,567		12,215

Basic (loss) earnings per common share	$	(0.34)	$	(0.41)	$	(1.16)	$	0.29
Diluted (loss) earnings per common share	$	(0.34)	$	(0.41)	$	(1.16)	$	0.28

See accompanying notes to the unaudited consolidated financial statements.

BM TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY — UNAUDITED

For the Three and Nine Months Ended September 30, 2023 and 2022

(amounts in thousands, except share data)


	Common Stock
	Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Accumulated Deficit		Total
Balance at December 31, 2022	12,240,237	$	1	$	72,342	$	(23,485)	$	48,858
Net loss	—	—		—		(4,960)		(4,960)
Conversion of private warrants to public warrants	—	—		20		—		20
Tax paid on behalf of employees related to net settlement of share-based awards	(473,874)	—		(2,429)		—		(2,429)
Share-based compensation expense	95,147	—		447		—		447
Balance at March 31, 2023	11,861,510	$	1	$	70,380	$	(28,445)	$	41,936
Net loss	—	—		—		(4,456)		(4,456)

Tax paid on behalf of employees related to net settlement of share-based awards	(1,765)	—		(5)		—		(5)
Share-based compensation expense	6,600	—		568		—		568
Balance at June 30, 2023	11,866,345	$	1	$	70,943	$	(32,901)	$	38,043
Net loss	—	—		—		(3,952)		(3,952)

Tax paid on behalf of employees related to net settlement of share-based awards	(1,253)	—		(4)		—		(4)
Share-based compensation expense	4,833	—		153				153
Balance at September 30, 2023	11,869,925	$	1	$	71,092	$	(36,853)	$	34,240


	Common Stock
(amounts in thousands, except share data)	Shares of Common Stock Outstanding	Common Stock		Additional Paid-in Capital		Accumulated Deficit		Total
Balance at December 31, 2021	12,193,378	$	1	$	60,686	$	(22,706)	$	37,981
Net income	—	—		—		3,964		3,964
Conversion of private warrants to public warrants	—	—		725		—		725
Tax paid on behalf of employees related to net settlement of share-based awards	(37,506)	—		(225)		—		(225)
Share-based compensation expense	90,075	—		$	2,919	—		2,919
Balance at March 31, 2022	12,245,947	$	1	$	64,105	$	(18,742)	$	45,364
Net income	—	$	—	$	—	$	4,362	4,362
Share-based compensation expense	(7,000)	$	—	$	3,053	$	—	3,053
Balance at June 30, 2022	12,238,947	$	1	$	67,158	$	(14,380)	$	52,779
Net loss	—	$	—	$	—	$	(4,920)	(4,920)
Issuance of common stock as compensation	6,000	$	—	$	37	$	—	37
Share-based compensation expense	(6,500)	$	—	$	2,706	$	—	2,706
Balance at September 30, 2022	12,238,447	$	1	$	69,901	$	(19,300)	$	50,602

See accompanying notes to the unaudited consolidated financial statements.

BM TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

(amounts in thousands)


	Nine Months Ended September 30,
	2023		2022
Cash Flows from Operating Activities:
Net (loss) income	$	(13,368)	$	3,406
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation of premises and equipment	198		239
Loss on disposal of premises and equipment	—		38
Amortization of developed software	9,250		8,581
Amortization of other intangible assets	240		240
Amortization of leased assets	—		398
Provision for bad debt	350		70
Share-based compensation expense	1,534		8,715
Gain on fair value of private warrant liability	(2,449)		(6,916)
Changes in operating assets and liabilities:
Accounts receivable	(601)		510
Prepaid expenses and other current assets	2,988		(4,851)
Other assets	72		—
Accounts payable and accrued liabilities	(537)		3,556
Taxes payable	—		(1,807)
Operating lease liabilities	—		(416)
Deferred revenue	(3,207)		(4,313)

Net Cash (used in) provided by Operating Activities	(5,530)		7,450
Cash Flows from Investing Activities:
Development of internal use software	(4,114)		(4,013)
Purchases of premises and equipment	(224)		(506)
Net Cash used in Investing Activities	(4,338)		(4,519)
Cash Flows from Financing Activities:
Repurchase of private warrants	—		(1,977)
Payments related to net settlement of share-based compensation awards	(2,438)		(225)
Net Cash used in Financing Activities	(2,438)		(2,202)
Net (Decrease) Increase in Cash and Cash Equivalents	(12,306)		729
Cash and Cash Equivalents – Beginning	21,108		25,704
Cash and Cash Equivalents – Ending	$	8,802	$	26,433

Supplementary Cash Flow Information:
Income taxes (refunded) paid, net	$	(4,323)	$	7,704
Noncash Operating, Investing, and Financing Activities:
Conversion of private warrants to public warrants	$	20	$	—
Contingent liability for acquired software	$	480	$	—

See accompanying notes to the unaudited consolidated financial statements.

BM TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF THE BUSINESS

BM Technologies, Inc. (“BMTX” or the “Company”) (formerly known as BankMobile) provides state-of-the-art high-tech digital banking and disbursement services to consumers and students nationwide through a full service fintech banking platform, accessible to customers anywhere and anytime through digital channels.

BankMobile Technologies, Inc. (“BankMobile”) was incorporated in May 2016 as a wholly-owned subsidiary of Customers Bank. On August 6, 2020, the Company entered into an Agreement and Plan of Merger, by and among Megalith Financial Acquisition Corporation, a special purpose acquisition company (“Megalith”), incorporated in Delaware in November 2017, MFAC Merger Sub Inc., a wholly-owned subsidiary of Megalith, BankMobile Technologies, Inc., and Customers Bank, the sole stockholder of BankMobile. On January 4, 2021, BankMobile became an independent company after the completion of a divestiture transaction and was rebranded BM Technologies, Inc.

BMTX facilitates deposits and banking services between a customer and our current partner bank, Customers Bank, a Pennsylvania state-chartered bank, which is a related party and is a Federal Deposit Insurance Corporation (“FDIC”) insured bank. BMTX’s business model leverages partners’ existing customer bases to achieve high volume, low-cost customer acquisition in its Higher Education Disbursement, Banking-as-a-Service (“BaaS”), and niche Direct to Consumer (“D2C”) banking businesses. BMTX has four primary revenue sources: interchange and card revenue, servicing fees, account fees, and university fees. The majority of revenues are driven by customer activity (deposits, spend, transactions, etc.) and may be paid or passed through by Customers Bank, universities, or paid directly by customers.

Customers Bank currently holds the FDIC insured deposits that BMTX sources and services and is the issuing bank on BMTX’s debit cards. Customers Bank pays the Company a servicing fee for the deposits generated and passes through interchange income earned from transactions on debit cards.

On November 7, 2022, the Company and Customers Bank amended the Deposit Processing Services Agreement (the “DPSA Amendment”). The DPSA Amendment, among other things, will facilitate the transfer of the Company’s serviced deposits to a new partner bank and extends the termination date of the Deposit Processing Services Agreement until the earlier of: (i) entry into a definitive agreement with a new partner bank to transfer the Company’s serviced deposits to such partner bank and the successful completion of such transfer; or (ii) June 30, 2023.

On March 22, 2023, the Company and Customers Bank entered into a second amendment to the Deposit Processing Services Agreement (the “DPSA Second Amendment”) for the Higher Education serviced deposit accounts. The DPSA Second Amendment, among other things, extends the termination date of the Deposit Processing Services Agreement until the earlier of (i) the transfer of the Company’s Higher Education serviced deposits to a Durbin-exempt partner bank; or (ii) June 30, 2024; and revises the fee structure of the Deposit Processing Services Agreement.

Also on March 22, 2023, the Company and Customers Bank entered into a new agreement for the current BaaS serviced deposit accounts (the “2023 Deposit Servicing Agreement”), under which, effective March 31, 2023, the Company will perform, on behalf of Customers Bank, Customer Bank’s services, duties, and obligations by and between Customers Bank and T-Mobile USA, Inc. that are not required to be provided by an FDIC insured financial institution.

On August 18, 2023, the Company and Customers Bank entered into a third amendment to the Deposit Processing Services Agreement (the “DPSA Third Amendment”) for the Higher Education serviced deposit accounts. The DPSA Third Amendment extends the termination date of the Deposit Processing Services Agreement until the earlier of (i) the transfer of the Company’s Higher Education serviced deposits to a Durbin-exempt partner bank; or (ii) April 15, 2025.

On March 16, 2023, the Company entered into a Deposit Servicing Agreement (the “FCB Deposit Servicing Agreement”) with a new partner bank, First Carolina Bank, a North Carolina chartered, non-member community bank (“FCB”), which provides that FCB will establish and maintain deposit accounts and other banking services in connection with customized products and services offered by the Company to its Higher Education institution clients, and the Company will provide certain other related services in connection with the accounts.

On August 20, 2023, the Company and FCB entered into an amendment to the FCB Deposit Servicing Agreement (the “FCB DPSA First Amendment”). The FCB DPSA First Amendment, among other things, (i) extends the initial term from four years to five years after the effective date, (ii) provides that FCB will work with the Company and Customers Bank on the timely transfer of existing student depositor accounts on or before the effective date, and as agreed to by the parties, and (iii) amends the effective date to be the date on which FCB takes on deposits from the existing student depositor accounts.

The FCB Deposit Servicing Agreement and Amendment thereof may be terminated early by either party upon material breach, by either party upon notice that the continuation of the Depositor Program violates Applicable Law or Network Rules (as defined in the FCB Deposit Servicing Agreement); by FCB if a regulatory authority determined that the performance of its obligations under the FCB Deposit Servicing Agreement was not consistent with safe and sound banking practices; by either party upon the other party commencing or being subject to certain bankruptcy proceedings; and by the Company should it experience a change in control on or after March 16, 2026. The Company continues to actively work on the transfer of its Higher Education customer deposits from Customers Bank to FCB with transfer expected to occur during December 2023.

BMTX is not a bank, does not hold a bank charter, and does not provide banking services, and as a result, it is not subject to direct banking regulation, except as a service provider to our partner banks. BMTX is also subject to the regulations of the Department of Education (“ED”), due to its student disbursements business, and is periodically examined by it. BMTX’s contracts with most of its Higher Education institution clients require it to comply with numerous laws and regulations, including, where applicable, regulations promulgated by the ED regarding the handling of student financial aid funds received by institutions on behalf of their students under Title IV of the Higher Education Act of 1965; the Family Educational Rights and Privacy Act of 1995; the Electronic Fund Transfer Act and Regulation E; the USA PATRIOT Act and related anti-money laundering requirements; and certain federal rules regarding safeguarding personal information, including rules implementing the privacy provisions of the Gramm-Leach-Bliley Act. Other products and services offered by BMTX may also be subject to other federal and state laws and regulations.

NOTE 2 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These interim unaudited consolidated financial statements have been prepared in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). Any reference to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). Certain information and footnote disclosures normally included in the annual consolidated financial statements have been omitted from these interim unaudited consolidated financial statements as permitted by U.S. GAAP and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). These interim unaudited consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of Management, necessary to present a fair statement of the financial position and the results of operations and cash flows of BMTX for the interim periods presented.

The preparation of interim unaudited consolidated financial statements in conformity with U.S. GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the interim unaudited consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include going concern assessment, valuation of deferred tax assets, valuation of private warrants, and goodwill and intangible asset impairment analysis. Actual results could differ from those estimates.

FASB ASC 205-40, Presentation of Financial Statements - Going Concern, requires Management to assess an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. In each reporting period, including interim periods, an entity is required to assess conditions known and reasonably knowable as of the financial statement issuance date to determine whether it is probable an entity will not meet its financial obligations within one year from the financial statement issuance date.

Management has performed this required assessment as of November 20, 2023, and believes there are sufficient funds available to support its ongoing business operations and continue as a going concern for at least the next 12 months with projected liquidity of $11.1 million at November 20, 2024.

Management’s assessment is subject to known and unknown risks, uncertainties, assumptions, and changes in circumstances, many of which are beyond our control including the impact of the macroeconomic environment, and that are difficult to predict as to timing, extent, likelihood, and degree of occurrence, and that could cause actual results to differ from estimates and forecasts, potentially materially.

Based upon the results of Management’s assessment, these interim unaudited consolidated financial statements have been prepared on a going concern basis. The interim unaudited consolidated financial statements do not include any adjustments that could result from the outcome of the aforementioned risks and uncertainties.

Significant Accounting Policies

These interim unaudited consolidated financial statements should be read in conjunction with the 2022 audited consolidated financial statements and related notes of BMTX, which describe BMTX’s significant accounting policies. There have been no material changes to BMTX’s significant accounting policies during the nine months ended September 30, 2023 except as noted below.

Insurance Premium Finance Obligations

The Company includes the obligation for its insurance premium financing in Accounts payable and accrued liabilities on the interim unaudited Consolidated Balance Sheets. At September 30, 2023, the Company had two premium finance arrangements outstanding with balances totaling $0.3 million, average remaining installment payment terms of 2.5 months, and a weighted average annualized finance charge of 4.95%.

401(k) Plan

On January 3, 2023, the Company implemented the BM Technologies, Inc. 401(k) Plan (the “401(k) Plan”) for the benefit of BMTX’s eligible employees. The 401(k) Plan permits eligible employees to make voluntary contributions, up to a maximum of $63.5 thousand per year, subject to certain limitations. The Company offers a matching contribution equal to 50% of an eligible employee’s deferral election up to 3% of their annual salary. The Company records its contributions to the 401(k) Plan in Salaries and employee benefits on the unaudited Consolidated Statements of (Loss) Income. The Company’s employer contribution to the 401(k) Plan for the three and nine months ended September 30, 2023 totaled $0.1 million and $0.5 million, respectively.

Accounting Standards Update

As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised ASUs applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use the extended transition period under the JOBS Act.

From time to time, new accounting pronouncements are issued by the FASB that are adopted by BMTX as of the required effective dates. During the nine months ended September 30, 2023 there were no ASUs adopted by the Company that were considered material and there were no ASUs issued prior to September 30, 2023, which were not yet effective, considered relevant or material to the Company’s financial statements taken as a whole.

NOTE 3 — ACCOUNTS RECEIVABLE

Accounts receivable, net primarily relate to billings for deposit processing services to Customers Bank, MasterCard incentive income, uncollected university subscription and disbursement services fees, and receivables from our BaaS partners, and are recorded at face amounts less an allowance for doubtful accounts. Management evaluates accounts receivable and establishes the allowance for doubtful accounts based on historical experience, analysis of past due accounts, and other current available information.

Accounts receivable deemed to be uncollectible are individually identified and are charged-off against the allowance for doubtful accounts. The allowance for doubtful accounts was $0.7 million at September 30, 2023 and $0.3 million at December 31, 2022.


(amounts in thousands)	Beginning Balance		Additions		Reductions		Ending Balance
Allowance for doubtful accounts
Nine months ended September 30, 2023	$	305	$	1,001	$	(651)	$	655
Twelve months ended December 31, 2022	$	79	$	381	$	(155)	$	305

NOTE 4 — PREMISES AND EQUIPMENT AND DEVELOPED SOFTWARE

Premises and Equipment

The components of premises and equipment were as follows:


(amounts in thousands)	Expected Useful Life	September 30, 2023		December 31, 2022

IT equipment	3 to 5 years	$	862	$	1,377

Accumulated depreciation		(328)		(869)
Total		$	534	$	508

BMTX recorded depreciation expense of less than $0.1 million and $0.2 million for the three and nine months ended September 30, 2023, respectively, as a component of Technology, communication, and processing expense on the unaudited Consolidated Statements of (Loss) Income and less than $0.1 million and $0.3 million for the three and nine months ended September 30, 2022, respectively, as a component of Occupancy expense on the unaudited Consolidated Statements of (Loss) Income.

BMTX recorded no impairment expense during the three and nine months ended September 30, 2023 and 2022.

Developed Software

The components of developed software were as follows:

(amounts in thousands)

Expected Useful Life

September 30,
2023

December 31,
2022

Higher One Disbursement business developed software

10 years

27,400

Internally developed software

3 to 7 years

SEC Form 10-Q filed by BM Technologies Inc.