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

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

Delaware									82-3410369
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)
201 King of Prussia Road, Suite 350
Wayne, Pennsylvania									19087
(Address of Principal Executive)									(Zip-Code)

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

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  ☒

			Page
Part I - Financial Information			2
Item 1. Unaudited Consolidated Financial Statements			2
Consolidated Balance Sheets at September 30, 2022 and December 31, 2021			2
Consolidated Statements of Income (Loss) for the Three and Nine Months Ended September 30, 2022 and 2021			3
Consolidated Statements of Changes in Shareholders' Equity for the Three and Nine Months Ended September 30, 2022 and 2021			4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021			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			32
Item 4. Controls and Procedures			32
Part II - Other Information			32
Item 1A. Risk Factors			33
Item 6. Exhibits			33
Signatures			34

			September 30, 2022						December 31, 2021
ASSETS
Cash and cash equivalents			$	26,433					$	25,704
Accounts receivable, net allowance for doubtful accounts of $149 and $79			8,614						9,194
Prepaid expenses and other assets			6,951						2,099
Total current assets			41,998						36,997
Premises and equipment, net			575						346
Developed software, net			24,025						28,593
Goodwill			5,259						5,259
Other intangibles, net			4,509						4,749
Other assets			—						398
Total assets			$	76,366					$	76,342
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities			$	10,503					$	6,947
Taxes payable			—						1,807
Current portion of operating lease liabilities			—						416
Deferred revenue, current			11,262						15,387
Total current liabilities			21,765						24,557
Non-current liabilities:
Deferred revenue, non-current			2						190
Liability for private warrants			3,997						13,614
Total liabilities			$	25,764					$	38,361
Commitments and contingencies (Note 8)
Shareholders’ equity:
Preferred stock: Par value $0.0001 per share; 10,000,000 shares authorized, none issued or outstanding at both September 30, 2022 and December 31, 2021			$	—					$	—
Common stock: Par value $0.0001 per share; 1 billion shares authorized; 12,238,447 shares issued and outstanding at September 30, 2022; 12,193,378 shares issued and outstanding at December 31, 2021			1						1
Additional paid-in capital			69,901						60,686
Accumulated deficit			(19,300)						(22,706)
Total shareholders’ equity			$	50,602					$	37,981
Total liabilities and shareholders’ equity			$	76,366					$	76,342

						Three Months Ended September 30,												Nine Months Ended September 30,
						2022						2021						2022						2021
Operating revenues:
Interchange and card revenue						$	5,325					$	6,529					$	17,283					$	21,530
Servicing fees from Partner Bank						10,163						11,823						37,650						31,774
Account fees						2,110						2,569						6,872						7,847
University fees						1,357						1,474						4,406						4,129
Other revenue						903						446						1,702						4,164
Total operating revenues						19,858						22,841						67,913						69,444
Operating expenses:
Technology, communication, and processing						7,731						5,082						21,944						21,903
Salaries and employee benefits						10,773						9,137						30,656						27,253
Professional services						2,454						3,496						7,225						7,359
Provision for operating losses						1,564						1,067						5,006						3,797
Occupancy						160						192						875						866
Customer related supplies						225						828						676						1,475
Advertising and promotion						242						176						461						492
Merger and acquisition related						—						—						290						—
Other expense						989						614						2,467						1,537
Total operating expenses						24,138						20,592						69,600						64,682
Income (loss) from operations						(4,280)						2,249						(1,687)						4,762
Non-operating expenses:
Gain (loss) on fair value of private warrant liability						(1,369)						6,042						6,916						17,989
Interest expense						—						—						—						(96)
Income (loss) before income tax expense (benefit)						(5,649)						8,291						5,229						22,655
Income tax expense (benefit)						(729)						1,167						1,823						4,262
Net income (loss)						$	(4,920)					$	7,124					$	3,406					$	18,393
Weighted average number of shares outstanding - basic						11,938						11,900						11,944						11,834
Weighted average number of shares outstanding - diluted						11,938						11,904						12,215						12,359
Net income (loss) per share - basic						$	(0.41)					$	0.60					$	0.29					$	1.55
Net income (loss) per share - diluted						$	(0.41)					$	0.60					$	0.28					$	0.03

						Common Stock
						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
Share-based compensation expense						52,569						—						2,919						—						2,919
Conversion of private warrants to public warrants						—						—						725						—						725
Tax paid on behalf of employees related to net settlement of share-based awards						—						—						(225)						—						(225)
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

						Common Stock
						Shares of Common Stock Outstanding						Common Stock						Additional Paid-in Capital						Accumulated Deficit						Total
Balance at December 31, 2020						6,123,432						$	1					$	64,017					$	(39,749)					$	24,269
Net income						—						—						—						16,059						16,059
Valuation of private warrants						—						—						(30,839)						—						(30,839)
Recapitalization transaction						4,759,911						—						16,148						—						16,148
Issuance of common stock as compensation						1,317,035						—						2,323						—						2,323
Share-based compensation expense						—						—						811						—						811
Balance at March 31, 2021						12,200,378						$	1					$	52,460					$	(23,690)					$	28,771
Net loss						—						—						—						(4,790)						(4,790)
Share-based compensation expense						—						—						2,389						—						2,389
Balance at June 30, 2021						12,200,378						$	1					$	54,849					$	(28,480)					$	26,370
Net income						—						—						—						7,124						7,124
Share-based compensation expense						6,000						—						2,462						—						2,462
Balance at September 30, 2021						12,206,378						$	1					$	57,311					$	(21,356)					$	35,956

(amounts in thousands)

						Nine Months Ended September 30,
						2022						2021
Cash Flows from Operating Activities:
Net income						$	3,406					$	18,393
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment						239						147
Loss on disposal of premises and equipment						38						—
Amortization of developed software						8,581						8,467
Amortization of other intangible assets						240						240
Amortization of leased assets						398						644
Provision for bad debt						70						103
Share-based compensation expense						8,715						8,019
Gain on fair value of private warrant liability						(6,916)						(17,989)
Changes in operating assets and liabilities:
Accounts receivable, net						510						96
Prepaid expenses and other current assets						(4,851)						295
Other assets						—						(366)
Accounts payable and accrued liabilities						3,556						(375)
Taxes payable						(1,807)						1,103
Operating lease liabilities						(416)						(535)
Deferred revenue						(4,313)						3,840
Net Cash provided by Operating Activities						7,450						22,082
Cash Flows from Investing Activities:
Development of internal use software						(4,013)						(501)
Purchases of premises and equipment						(506)						(51)
Net Cash used in Investing Activities						(4,519)						(552)
Cash Flows from Financing Activities:
Repayments of borrowings from Partner Bank						—						(21,000)
Recapitalization transaction						—						16,888
Repurchase of private warrants						(1,977)						—
Payments related to net settlement of share-based compensation awards						(225)						—
Net Cash used in Financing Activities						(2,202)						(4,112)
Net Increase in Cash and Cash Equivalents						729						17,418
Cash and Cash Equivalents – Beginning						25,704						2,989
Cash and Cash Equivalents – Ending						$	26,433					$	20,407
Supplementary Cash Flow Information:
Income taxes paid, net of refunds						$	7,704					$	3,124
Interest paid						$	—					$	178
Noncash Operating, Investing, and Financing Activities:
Shares issued to settle Megalith accounts payable in connection with Recapitalization transaction						$	—					$	740

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 15, 2022 including consideration of the effect of the First Amendment to Deposit Processing Services Agreement (the “DPSA Amendment”) entered into between the Company and Customers Bank on November 8, 2022, see Note 15 - Subsequent Events for additional information, and believes there is 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 not less than $5 million even with the anticipated termination of the DPSA Amendment not later than June 30, 2023.

In preparation of the Company’s interim unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2022, the Company identified that its reserve for losses resulting from fraud or theft-based transactions that have generally been disputed by BMTX serviced deposit account holders and a related receivable were previously presented on a net basis as a component of Other assets. The Company reviewed this presentation and concluded that these amounts are better presented on a gross basis including the reserve for losses as a component of Accounts payable and accrued liabilities and including the receivable for any billable reimbursements from our Partner Bank as a component of Accounts receivable, net.

In addition, the MasterCard quarterly fee assessment was reclassified from Accounts payable and accrued liabilities to Accounts receivable, net to better present the fee assessment balance.

Finally, the Company identified certain prepaid taxes that were previously included as a component of Other Assets. The Company reviewed this presentation and concluded that these amounts are better presented as a component of Prepaid expenses and other current assets due to their short-term nature.

The effect of these immaterial adjustments has increased Accounts receivable, net by $33 thousand and Accounts payable and accrued liabilities by $86 thousand, decreased Other assets by $439 thousand, and increased Prepaid expenses and other current assets by $320 thousand at December 31, 2021.

In preparation of the Company’s interim unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2022, the Company identified certain expenses that were previously included as a component of Customer related supplies and Occupancy that are better presented as a component of Technology, communication, and processing.

In addition, the Company identified card replacement fees reimbursed from a BaaS partner were recognized as a component of Account fees when only the margin of those fees should have been recognized as revenue and the reimbursable expense should have been recognized as a component of Customer related supplies.

•Decreased revenue from Account fees by $59 thousand and $108 thousand, respectively,

•Decreased revenue from Other revenue by $31 thousand and $119 thousand, respectively,

•Decreased expenses from Customer related supplies by $189 thousand and $203 thousand, respectively,

•Increased expenses from Technology, communication, and processing by $189 thousand and $28 thousand, respectively, and

•Decreased expenses from Occupancy by $90 thousand and $52 thousand, respectively.

The impact of these adjustments had no effect on Net income (loss) from operations.

ASU 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. This ASU is effective beginning as of its date of effectiveness, March 12, 2020. The guidance is temporary and can be applied through December 31, 2022. The guidance has not impacted the consolidated financial statements to date. The Company will continue to monitor the impact of the ASU on our consolidated financial statements in the future.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity.

This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted earnings per share when an instrument may be settled in cash or shares.

Accounts receivable, net primarily relate to billings for deposit processing services to our Partner 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.

(amounts in thousands)						Beginning Balance			Additions			Reductions			Ending Balance
Allowance for doubtful accounts
Nine months ended September 30, 2022						$	79		$	137		$	(67)		$	149
Twelve months ended December 31, 2021						$	—		$	171		$	(92)		$	79

(amounts in thousands)						Expected Useful Life						September 30, 2022						December 31, 2021
Leasehold improvements						5 years						$	—					$	28
Furniture, fixtures and equipment						10 years						135						243
IT equipment						3 to 5 years						1,383						1,813
												1,518						2,084
Accumulated depreciation												(943)						(1,738)
Total												$	575					$	346

Depreciation is recorded in Occupancy expense on the unaudited Consolidated Statements of Income (Loss). For the three and nine months ended September 30, 2022, BMTX recorded depreciation expense of $0.1 million and $0.3 million, respectively. For the three and nine months ended September 30, 2021, BMTX recorded depreciation expense of less than $0.1 million and $0.1 million, respectively.

(amounts in thousands)						Expected Useful Life						September 30, 2022						December 31, 2021
Higher One Disbursement business developed software						10 years						$	27,400					$	27,400
Internally developed software						3 to 7 years						41,885						41,683
Work-in-process												2,533						421
												71,818						69,504
Accumulated amortization												(47,793)						(40,911)
Total												$	24,025					$	28,593

Amortization is recorded in Technology, communication and processing expense on the unaudited Consolidated Statements of Income (Loss). BMTX recorded amortization expense of $2.8 million and $8.6 million for the three and nine months ended September 30, 2022, respectively. BMTX recorded amortization expense of $2.8 million and $8.5 million for the three and nine months ended September 30, 2021, respectively.

Goodwill represents the excess of the purchase price over the identifiable net assets of businesses acquired through business combinations accounted for under the acquisition method. Other intangibles, net represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights. We have one intangible asset which is being amortized on a straight-line basis over twenty years.

Goodwill is reviewed for impairment annually as of October 31 and between annual tests when events and circumstances indicate that impairment may have occurred. There was no goodwill impairment for the three and nine months ended September 30, 2022 and 2021.

Other intangibles, net includes assets subject to amortization that are reviewed for impairment under FASB ASC 360, Property, Plant and Equipment. There was no impairment for Other intangibles, net for the three and nine months ended September 30, 2022 and 2021.

The components of Other intangibles, net as of September 30, 2022 and December 31, 2021 were as follows:

(amounts in thousands)						Expected Useful Life						September 30, 2022						December 31, 2021
Customer relationships – universities						20 years						$	6,402					$	6,402
Accumulated amortization												(1,893)						(1,653)
Total												$	4,509					$	4,749

Amortization is recorded in Other expense on the unaudited Consolidated Statements of Income (Loss). BMTX recorded amortization expense of $0.1 million and $0.2 million for the three and nine months ended September 30, 2022, respectively. BMTX recorded amortization expense of $0.1 million and $0.2 million for the three and nine months ended September 30, 2021, respectively.

The customer relationships - universities will be amortized in future periods as follows:

Remainder of 2022						$	80
2023						320
2024						320
2025						320
2026						320
After 2026						3,149
Total						$	4,509

At September 30, 2022, BMTX leased one office under an operating lease with an original 5-year lease term with options to renew the lease or extend the term annually or with mutual agreement. The original lease included variable lease payments that are based on an index or rate, such as an annual increase in operating expenses over the initial lease year’s expenses. Variable lease payments were not included in the lease liability or right-of-use (“ROU”) asset and were recognized in the period in which the obligations for those payments were incurred. BMTX’s operating lease agreement did not contain any material residual value guarantees or material restrictive covenants. As BMTX’s operating lease did not provide an implicit rate, BMTX utilized the incremental borrowing rate of Customers Bank, its former parent, based on the information available at the adoption of FASB ASC 842, Leases when determining the present value of lease payments.

The following table summarizes operating lease ROU assets and operating lease liabilities and their corresponding classification on the Company’s Consolidated Balance Sheets:

(amounts in thousands)						Classification						September 30, 2022						December 31, 2021
Assets:
Operating lease ROU assets						Other assets						$	—					$	398
Liabilities:
Operating lease liabilities						Operating lease liabilities						$	—					$	416

Operating lease expenses are recorded in Occupancy on the Consolidated Statements of Income (Loss). BMTX recorded lease expense of less than $0.1 million and $0.4 million for the three and nine months ended September 30, 2022, respectively. BMTX recorded lease expense of $0.2 million and $0.5 million for the three and nine months ended September 30, 2021, respectively.

Cash paid pursuant to operating lease liabilities totaled $0.1 million and $0.4 million for the three and nine months ended September 30, 2022, respectively. Cash paid pursuant to operating lease liabilities totaled $0.2 million and $0.5 million for the three and nine months ended September 30, 2021, respectively. These cash payments are reported as cash flows used in operating activities in the unaudited Consolidated Statements of Cash Flows.

The Consolidated Statements of Changes in Shareholders’ Equity reflect the reverse recapitalization and merger with Megalith as of January 4, 2021. Since BMTX was determined to be the accounting acquirer in the transaction, all periods prior to the consummation of the transaction reflect the balances and activity of BMTX (other than shares which were retroactively restated in connection with the transaction).

In connection with its January 4, 2021 divestiture of the Company, Customers Bank, the Company’s former parent, granted 1,317,035 of the merger consideration shares of the Company it received to certain employees and executives of the Company. The share-based compensation award is subject to vesting conditions, including a required service condition from award recipients through January 3, 2023. The grant date fair value of the award, totaling $19.6 million, is recorded as share-based compensation expense in the Company’s Consolidated Statements of Income (Loss) on a straight-line basis over the two year post-grant vesting period, net of any actual forfeitures. The shares awarded are restricted until fully vested. The holders of restricted shares may elect to surrender a portion of their shares on the vesting date to cover their income tax obligations. During the three and nine months ended September 30, 2022, 88,889 of the shares awarded were fully vested as a result of the occurrence of certain conditions other than required service.

			Number of Awards						Weighted-Average Grant-Date Fair Value Per Award
Balance as of December 31, 2021			1,283,535						$	14.87
Granted			—						$	—
Vested			(88,889)						$	14.87
Forfeited			(26,500)						$	14.87
Balance as of September 30, 2022			1,168,146						$	14.87

In addition, and in connection with the January 4, 2021 divestiture of the Company, Customers Bank accelerated the vesting for existing restricted stock units and stock options previously granted to certain employees of the Company. The share-based compensation expense, net of forfeitures, associated with the accelerated vesting totaling $0.8 million was incurred during the three months ended March 31, 2021 and was recorded as a component of Salaries and employee benefits expense. No such transactions exist for the three and nine months ended September 30, 2022.

The aggregate number of shares of common stock that may be issued pursuant to stock awards under the Equity Incentive Plan will not, and currently does not, exceed 10% of the issued and outstanding shares of our common stock. Grants were made under the Equity Incentive Plan for the three and nine months ended September 30, 2022 as described within Restricted Stock Units below.

For the three and nine months ended September 30, 2022, the share-based compensation expense related to RSU awards totaled $0.3 million and $1.7 million, respectively. For the three and nine months ended September 30, 2021, the share-based compensation expense related to RSU awards totaled less than $0.1 million and $0.1 million, respectively. Share-based compensation expense is recorded in Salaries and employee benefits in the unaudited Consolidated Statement of Income (Loss).

			Number of RSUs						Weighted-Average Grant-Date Fair Value Per RSU
Balance as of December 31, 2021			704,600						$	8.96
Granted			81,790						$	6.79
Vested			(90,075)						$	9.02
Forfeited			(12,000)						$	9.18
Balance as of September 30, 2022			684,315						$	8.88

In accordance with FASB ASC Topic 480, Distinguishing Liabilities from Equity, the private warrants are accounted for as liabilities and are marked-to-market each reporting period with the change in fair value recognized in earnings. In general, under the mark-to-market accounting model, as our stock price increases, the private warrant liability increases, and we recognize additional expense in our Consolidated Statements of Income (Loss) – with the opposite when our stock price declines. Accordingly, the periodic revaluation of the private warrants could result in significant volatility in our reported earnings.

Opening Balance Sheet Impact: As of the date of our merger with Megalith on January 4, 2021, the $30.8 million fair value of the private warrants was recorded as a warrant liability on our Consolidated Balance Sheets in Liability for private warrants with a corresponding offset to Additional paid-in-capital within equity. The fair value of the private warrants was estimated using a modified version of the Black-Scholes option pricing formula. We assumed a term for the private warrants equal to the contractual term from the merger date, and then discounted the resulting value to the valuation date. Among the key inputs and assumptions used in the pricing formula at January 4, 2021: a term of 5.0 years; volatility of 20%; a dividend yield of zero; an underlying stock price of $14.76; a risk free interest rate of 0.38%; and a closing price of the public warrants of $2.50 per share.

Income Statement Impact: Subsequent to the close of the merger, any change in fair value of the private warrants is recognized in our Consolidated Statements of Income (Loss) below operating profit as Gain (loss) on fair value of private warrant liability with a corresponding amount recognized in the Liability for private warrants on our Consolidated Balance Sheets. For the three and nine months ended September 30, 2022, we recognized a loss of $1.4 million and a gain of $6.9 million, respectively, related to the revaluation of the private warrants. For the three and nine months ended September 30, 2021, we recognized gains of $6.0 million and $18.0 million, respectively, related to the revaluation of the private warrants.

Balance Sheet Impact: The private warrant liability is presented in the account Liability for private warrants in the long-term liabilities section of our Consolidated Balance Sheets. As noted above, the change in fair value of the underlying private warrants results in a corresponding change in the balance of the warrant liability on our Consolidated Balance Sheets. When warrants are exercised, the fair value of the liability is reclassified to Additional paid-in capital within equity. Cash received for the exercise of warrants is reflected in Cash and cash equivalents with a corresponding offset recorded in Common stock and Additional paid-in capital within equity.

Shareholders’ Equity Impact: The impact to Additional paid-in-capital as of the opening balance sheet is described above. Exercises of private warrants results in a reduction of the Liability for private warrants on the Consolidated Balance Sheets with a corresponding increase to Common Stock and Additional paid-in-capital.

In accordance with FASB ASC Topic 480, Distinguishing Liabilities from Equity, the public warrants are treated as equity instruments under U.S. GAAP. The public warrants are not marked-to-market each reporting period, thus there is no impact to earnings. Exercises of the public warrants are recorded as cash is received and are recorded in Cash and cash equivalents with a corresponding offset recorded in Common stock and Additional paid-in-capital within equity. Cash proceeds from public warrant exercises totaled less than $0.1 million and zero, respectively, during the nine months ended September 30, 2022 and 2021.

BMTX recognizes operating revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers.

						Three Months Ended September 30,												Nine Months Ended September 30,
(amounts in thousands)						2022						2021						2022						2021
Revenues:
Revenue recognized at point in time:
Interchange and card revenue						$	5,325					$	6,529					$	17,283					$	21,530
Servicing fees from Partner Bank						10,163						11,823						37,650						31,774
Account fees						2,110						2,569						6,872						7,847
University fees - disbursement activity						175						380						932						918
Other						903						446						1,702						4,164
Total revenue recognized at point in time						18,676						21,747						64,439						66,233
Revenue recognized over time:
University fees - subscriptions						1,182						1,094						3,474						3,211
Total revenue recognized over time						1,182						1,094						3,474						3,211
Total revenues						$	19,858					$	22,841					$	67,913					$	69,444

Deferred revenue consists of payments received from customers, most significantly from our Partner Bank, prior to the performance of services. Deferred revenue is recognized over the service period on a straight-line basis or when the contractual performance obligation has been satisfied. The Company classifies deferred revenue on the Consolidated Balance Sheets in Deferred revenue, current and Deferred revenue, non-current based upon the expected timing of revenue recognition.

(amounts in thousands)						September 30, 2022						December 31, 2021
Deferred revenue (current and non-current)						$	11,264					$	15,577

The Company had $2.0 million of unbilled receivables, or amounts recognized as revenue for which invoices have not yet been issued, as of September 30, 2022, and $2.1 million as of December 31, 2021. Unbilled receivables are reported in Accounts receivable, net on the Consolidated Balance Sheets.

						Three Months Ended September 30,												Nine Months Ended September 30,
(amounts in thousands, except per share data)						2022						2021						2022						2021
Net income (loss) available to common shareholders - used in calculating basic EPS						$	(4,920)					$	7,124					$	3,406					$	18,393
Adjustment for private warrant liability1						—						—						—						17,989
Net income (loss) - used in calculating diluted EPS						$	(4,920)					$	7,124					$	3,406					$	404
Weighted-average common shares outstanding – basic						11,938						11,900						11,944						11,834
Weighted-average common shares outstanding – diluted						11,938						11,904						12,215						12,359
Net income (loss) per common share - basic						$	(0.41)					$	0.60					$	0.29					$	1.55
Net income (loss) per common share - diluted						$	(0.41)					$	0.60					$	0.28					$	0.03

1 Diluted earnings per share for the nine months ended September 30, 2021 is calculated based on adjusted net income of $0.4 million due to the elimination of the revaluation gain on the private warrant liability.

						Three Months Ended September 30,												Nine Months Ended September 30,
(amounts in thousands)						2022						2021						2022						2021
Weighted average shares used in computing net income (loss) per common share, basic						11,938						11,900						11,944						11,834
Add:
Public warrants						—						—						—						372
Private warrants						—						—						—						152
Service-based RSUs						—						4						271						1
Weighted average shares used in computing net income (loss) per common share, diluted						11,938						11,904						12,215						12,359

						Three Months Ended September 30,												Nine Months Ended September 30,
(amounts in thousands)						2022						2021						2022						2021
Performance shares						300						300						300						300
Public warrants						17,227						16,929						17,227						—
Private warrants						5,476						6,946						5,476						—
Performance based and market-condition RSUs						348						348						348						348
Service-based RSUs						343						—						72						—
Total						23,694						24,523						23,423						648

BMTX uses fair value measurements to determine and disclose the fair value of its financial instruments. FASB’s ASC 825, Financial Instruments, requires disclosure of the estimated fair value of an entity’s assets and liabilities considered to be financial instruments. For fair value disclosure purposes, BMTX utilized the fair value measurement criteria under FASB ASC 820, Fair Value Measurements (“ASC 820”).

Level 1:			Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2:			Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.
Level 3:			Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

Cash and cash equivalents reported on the Consolidated Balance Sheets consists of non-interest bearing demand deposits, for which carrying value approximates fair value.

																		Fair Value Measurements at September 30, 2022
(amounts in thousands)						Carrying Amount						Estimated Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents						$	26,433					$	26,433					$	26,433					$	—					$	—
Accounts receivable, net						8,614						8,614						8,614						—						—
Liabilities:
Liability for private warrants						$	3,997					$	3,997					$	—					$	—					$	3,997

																		Fair Value Measurements at December 31, 2021
(amounts in thousands)						Carrying Amount						Estimated Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents						$	25,704					$	25,704					$	25,704					$	—					$	—
Accounts receivable, net						9,194						9,194						9,194						—						—
Liabilities:
Liability for private warrants						$	13,614					$	13,614					$	—					$	—					$	13,614

As disclosed in Note 7- Borrowings from Partner Bank, our Partner Bank previously provided the Company with lines of credit, all of which have been terminated as of December 31, 2021.

On November 8, 2022, the Company and Customers Bank entered into the First Amendment to Deposit Processing Services Agreement (the “DPSA Amendment”) to extend the Deposit Servicing Agreement termination date to the earlier of the Company’s successful completion of the transfer of the Company’s serviced deposits to a new sponsor bank or June 30, 2023. See Note 15 - Subsequent Events for additional information.

The Transition Services Agreement included a provision for providing the Company with assistance in the establishment and administration of a 401(k) plan for the benefit of Company employees. Effective April 9, 2021, the Customers Bank 401(k) plan became a multi-employer plan, as defined by the U.S. Department of Labor in accordance with the Employee Retirement Income Security Act of 1974, covering both the full-time employees of Customers Bank and the Company. The Company provides a matching contribution equal to 50% of the first 6% of the contributions made by its eligible participating employees. The Company’s employer contributions to the 401(k) plan for the benefit of its employees for the three months ended September 30, 2022 and 2021 were $0.2 million, and $0.1 million, respectively. For the nine months ended September 30, 2022 and 2021, the Company’s employer contributions totaled $0.6 million and $0.5 million, respectively. These contributions are recorded in Salaries and employee benefits in the Consolidated Statements of Income (Loss).

On November 29, 2021, the Company entered into an agreement with our Partner Bank which terminated the $10.0 million letter of credit and gave the Company the right to any shares that were forfeited as part of the January 4, 2021 Share-Based Compensation Award. During the three and nine months ended September 30, 2022, respectively, 6,500 and 26,500 forfeited shares were reacquired by the Company from our Partner Bank.

On April 20, 2022, the Company entered into a Special Limited Agency Agreement with our Partner Bank that provides for marketing assistance from the Company for originating consumer installment loans funded by Customers Bank. In consideration for this marketing assistance, the Company receives certain fees specified within the Special Limited Agency Agreement which are recorded as a component of Other Revenue within the Consolidated Statements of Income (Loss). During the three and nine months ended September 30, 2022, less than $0.1 million of revenue has been realized under the Special Limited Agency Agreement.

Positions with our Partner Bank are presented on our Consolidated Balance Sheets in Accounts receivable, net, Deferred revenue, current, and Accounts payable and accrued liabilities. The Accounts receivable balances related to our Partner Bank as of September 30, 2022 and December 31, 2021 were $1.8 million and $5.5 million, respectively. The Deferred revenue balances related to our Partner Bank as of September 30, 2022 and December 31, 2021 were $7.8 million and $12.7 million, respectively. The Accounts payable and accrued liabilities balances related to our Partner Bank as of September 30, 2022 and December 31, 2021 were $0.9 million and $0.4 million, respectively.

The Company recognized $17.3 million and $60.9 million in revenues from our Partner Bank for the three and nine months ended September 30, 2022, respectively. Of these amounts, $4.3 million and $13.8 million are paid directly by MasterCard or individual account holders to the Company for the three and nine months ended September 30, 2022, respectively. The Company recognized $20.6 million and $60.0 million in revenues from our Partner Bank for the three and nine months ended September 30, 2021, respectively. Of these amounts, $5.2 million and $14.7 million are paid directly by MasterCard or individual account holders to the Company for the three and nine months ended September 30, 2021, respectively. These amounts are included in the Consolidated Statements of Income (Loss).

The Company recognized zero and less than $0.1 million of expenses from our Partner Bank for the three and nine months ended September 30, 2022, respectively. The Company recognized less than $0.1 million and $0.2 million of expenses from our Partner Bank for the three and nine months ended September 30, 2021, respectively. These amounts are included in the Consolidated Statements of Income (Loss).

•negative economic and political conditions that adversely affect the general economy, the job market, consumer confidence, the financial condition of our borrowers and consumer spending habits, which may affect, among other things, our revenues and provision for operating losses;

•COVID-19’s continuing effects on the economic and business environments in which we operate;

•strategic, market, operational, liquidity and interest rate risks associated with our business;

•our concentration of credit risk and any potential deterioration in the financial quality of our partner bank;

•the risks of expansion into new product markets;

•risks with respect to recent, pending, or potential future mergers or acquisitions, including our ability to successfully obtain regulatory, and when required, shareholder approval and thereafter, to complete acquisitions and successfully integrate or expand businesses and operations that we acquire;

•our ability to attract and retain key employees;

•competition from financial institutions and other financial service providers, including non-bank financial technology providers, and our ability to attract customers from other financial institutions;

•losses due to fraudulent and negligent conduct of our customers, third party service providers, or employees;

•cybersecurity risks and the vulnerability of our network and the systems of parties with whom we contract, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss, and other security breaches that could adversely affect our business and financial performance or reputation;

•our reliance on third parties to provide key components of our business infrastructure and services required to operate our business;

•the risk that we may be required to make substantial expenditures to keep pace with regulatory initiatives and the rapid technological changes in the financial services market;

•the availability of and access to capital;

•legislative, regulatory, or accounting changes that may adversely affect us;

•adverse results (including judgments, costs, fines, reputational harm, inability to obtain necessary approvals, and/or other negative effects) from current or future litigation, regulatory proceedings, examinations, investigations, or similar matters, or developments related thereto;

•failure to maintain an effective system of disclosure controls and internal control over financial reporting and fully remediate the previously identified material weaknesses in our internal control over financial reporting;

•any event or development that would cause us to conclude that there was impairment of any asset, including intangible assets, such as goodwill; and

•other risks and uncertainties disclosed in documents filed or furnished by us with or to the SEC, any of which could cause actual results to differ materially from future results expressed, implied, or otherwise anticipated by such forward-looking statements.

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.

As a result of the merger transaction, BankMobile used proceeds from the recapitalization transaction to pay down its $15.6 million outstanding loan from Customers Bank, its former parent, received $1.3 million of cash, net of transaction costs, and issued an additional 6,076,946 shares of common stock.

•Debit card POS spend (higher education and new business). Spend represents the dollar amount that our customers spend on their debit cards through a signature or PIN network. Spend is a key performance indicator, as the Company earns a small percentage of every dollar spent as interchange income and spend is the primary driver of our card revenues.

•Serviced deposits (ending and average; higher education and new business). Serviced deposits represent the dollar amount of deposits that are in customer accounts serviced by our Company. Our deposit servicing fee is based on a contractual arrangement with our Partner Bank and the average balance of serviced deposits is the primary driver of our deposit servicing fees. Average deposits have the strongest correlation to current period serviced deposits, but ending deposits provide information at a point in time and serve as the starting point for the following period.

•Higher education retention. Retention is a key measure of our value proposition with higher education customers. We measure retention in terms of Signed Student Enrollments (“SSEs”), which represents the number of students enrolled at higher education institutions. Retention is calculated by subtracting lost SSEs from starting SSEs and taking that amount as a percentage of the starting SSEs.

•Higher education financial aid refund disbursement. Represents the dollar amount of all funds that we process for a college or university partner, whether it is distributed by ACH, check, or into a BankMobile Vibe account. This is a measure of the business we process for our higher education partners in exchange for their subscription and other fees, as well as a measure of the potential that we have the opportunity to capture into our serviced accounts.

•Higher education organic deposits. Organic deposits represent the dollar total of all deposits made into a higher education BankMobile Vibe account except for funds processed through a college or university partner. Because this includes funds that the account holder adds to the account and excludes the funds processed through the higher education institution, it is viewed as a strong indicator of traction with the customer.

For information regarding our critical accounting policies and estimates, please refer to our Annual Report on 10-K for the fiscal year ended December 31, 2021. There have been no material changes to the critical accounting policies and estimates previously disclosed in that report.

The FASB has issued accounting standards that have not yet become effective and that may impact BMTX’s interim unaudited consolidated financial statements or its disclosures in future periods. Note 2 — Basis of Presentation and Significant Accounting Policies provides information regarding those accounting standards.

The following discussion of our results of operations should be read in conjunction with our interim unaudited consolidated financial statements, including the accompanying notes.

						Three Months Ended September 30,												Change						% Change
(dollars in thousands, except per share data)						2022						2021
Operating revenues						$	19,858					$	22,841					$	(2,983)					(13)		%
Operating expenses						24,138						20,592						3,546						17		%
Income (loss) from operations						(4,280)						2,249						(6,529)						NM
Gain (loss) on fair value of private warrant liability						(1,369)						6,042						(7,411)						(123)		%
Interest expense						—						—						—						—		%
Income (loss) before income tax expense (benefit)						(5,649)						8,291						(13,940)						NM
Income tax expense (benefit)						(729)						1,167						(1,896)						NM
Net income (loss)						$	(4,920)					$	7,124					$	(12,044)					NM
Basic earnings (loss) per share						$	(0.41)					$	0.60					$	(1.01)					NM
Diluted earnings (loss) per share						$	(0.41)					$	0.60					$	(1.01)					NM

NM refers to changes greater than 150%.

For the three months ended September 30, 2022, net income decreased $12.0 million, which included a $7.4 million decrease in the gain (loss) on fair value of the private warrant liability as compared to the three months ended September 30, 2021. Income (loss) from operations for the three months ended September 30, 2022 decreased $6.5 million as compared to the three months ended September 30, 2021. Operating revenues decreased by $3.0 million or 13% and operating expenses increased by $3.5 million or 17%. Changes in quarterly operating revenues and expenses are discussed in greater detail below. Basic and diluted earnings (loss) per share, which decreased to $(0.41), are both driven by the impact of the total net loss in the current year on the earnings (loss) per share calculations.

						Nine Months Ended September 30,												Change						% Change
(dollars in thousands, except per share data)						2022						2021
Operating revenues						$	67,913					$	69,444					$	(1,531)					(2)		%
Operating expenses						69,600						64,682						4,918						8		%
Income (loss) from operations						(1,687)						4,762						(6,449)						(135)		%
Gain on fair value of private warrant liability						6,916						17,989						(11,073)						(62)		%
Interest expense						—						(96)						96						(100)		%
Income before income tax expense						5,229						22,655						(17,426)						(77)		%
Income tax expense						1,823						4,262						(2,439)						(57)		%
Net income						$	3,406					$	18,393					$	(14,987)					(81)		%
Basic earnings per share						$	0.29					$	1.55					$	(1.26)					(81)		%
Diluted earnings per share						$	0.28					$	0.03					$	0.25					NM

NM refers to changes greater than 150%.

For the nine months ended September 30, 2022, net income decreased $15.0 million, which included a $11.1 million decrease in the gain on fair value of the private warrant liability as compared to the nine months ended September 30, 2021. Income (loss) from operations for the nine months ended September 30, 2022 decreased $6.4 million as compared to the nine months ended September 30, 2021. Operating revenues decreased by $1.5 million or 2% and operating expenses increased by $4.9 million or 8%. Changes in year to date operating revenues and expenses are discussed in greater detail below.

						Three Months Ended September 30,																		% Change
(dollars in thousands)						2022						2021						Change
Revenues:
Interchange and card revenue						$	5,325					$	6,529					$	(1,204)					(18)		%
Servicing fees from Partner Bank						10,163						11,823						(1,660)						(14)		%
Account fees						2,110						2,569						(459)						(18)		%
University fees						1,357						1,474						(117)						(8)		%
Other revenue						903						446						457						102		%
Total operating revenues						$	19,858					$	22,841					$	(2,983)					(13)		%

Total revenues decreased $3.0 million, or 13%, in the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. This decrease is primarily attributable to a $1.7 million or 14% decrease in Servicing fees from Partner Bank, a $1.2 million or 18% decrease in Interchange and card revenue which was primarily driven by a 15% reduction in spend volume in the Higher Education business, a $0.5 million, or 18%, decrease in Account fees, and a $0.1 million, or 8%, decrease in University fees. The decrease in Servicing fees from Partner Bank is due to a 5% decrease in average serviced deposit balances; $1.6 billion for the three months ended September 30, 2022 as compared to $1.7 billion for the three months ended September 30, 2021; and an approximate $1.0 million increase in interest paid to serviced deposit account holders for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. These decreases were partially offset by a $0.5 million, or 102%, increase in Other revenue due to an increase in development projects for our BaaS partners which vary based on project status, contracts, and milestones.

						Nine Months Ended September 30,																		% Change
(dollars in thousands)						2022						2021						Change
Revenues:
Interchange and card revenue						$	17,283					$	21,530					$	(4,247)					(20)		%
Servicing fees from Partner Bank						37,650						31,774						5,876						18		%
Account fees						6,872						7,847						(975)						(12)		%
University fees						4,406						4,129						277						7		%
Other revenue						1,702						4,164						(2,462)						(59)		%
Total operating revenues						$	67,913					$	69,444					$	(1,531)					(2)		%

Total revenues decreased $1.5 million, or 2%, in the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. This decrease is primarily attributable a $4.2 million, or 20%, decrease in Interchange and card revenue driven primarily by lower spend volume as well as a $1.0 million, or 12%, decrease in Account fees, and a $2.5 million decrease in Other revenue due to a reduction in development projects for our BaaS partners which vary based on project status, contracts, and milestones. These decreases were partially offset by a $5.9 million, or 18%, increase in Servicing fees from Partner Bank. The increase is primarily due to an increase in average serviced deposit balances for the period which increased approximately 24% to $1.9 billion for the nine months ended September 30, 2022 as compared to $1.5 billion for the nine months ended September 30, 2021.

						Three Months Ended September 30,																		% Change
(dollars in thousands)						2022						2021						Change
Technology, communication, and processing						$	7,731					$	5,082					$	2,649					52		%
Salaries and employee benefits						10,773						9,137						1,636						18		%
Professional services						2,454						3,496						(1,042)						(30)		%
Provision for operating losses						1,564						1,067						497						47		%
Occupancy						160						192						(32)						(17)		%
Customer related supplies						225						828						(603)						(73)		%
Advertising and promotion						242						176						66						38		%
Merger and acquisition related						—						—						—						100		%
Other expense						989						614						375						61		%
Total operating expenses						$	24,138					$	20,592					$	3,546					17		%

For the three months ended September 30, 2022, operating expenses increased $3.5 million, or 17%, as compared to the three months ended September 30, 2021. The increase is primarily attributable to a $2.6 million increase in Technology, communication, and processing, a $1.6 million increase in Salaries and employee benefits, a $0.5 million increase in Provision for operating losses, and a $0.4 million increase in Other expense. These increases were partially offset by a $1.0 million decrease in Professional services and a $0.6 million decrease in Customer related supplies.

The increase in Technology, communication, and processing is related to the negotiation of a service agreement with a service provider during the prior year, which included retroactive pricing benefits and a one-time credit reducing the quarterly expense in the three month period ended September 30, 2021 as compared to September 30, 2022 by approximately $2.5 million. The increase in Salaries and employee benefits is driven by an increase in average headcount, annual merit raises, and the vesting of equity awards granted in September 2021. The increase in Provision for operating losses is driven by adverse losses experienced in the serviced deposit accounts. The increase in Other expense is driven primarily by increased insurance expenses and employee travel expenses as compared to the prior year. The decrease in Professional services is driven by reduced audit, consulting, and other professional services spend and internalization of previously outsourced personnel in the current year. The decrease in Customer related supplies is driven by reduced consumption of customer related supplies and vendor credits provided and utilized in the current year under the new service agreement negotiated in the prior year.

						Nine Months Ended September 30,																		% Change
(dollars in thousands)						2022						2021						Change
Technology, communication, and processing						$	21,944					$	21,903					$	41					—		%
Salaries and employee benefits						30,656						27,253						3,403						12		%
Professional services						7,225						7,359						(134)						(2)		%
Provision for operating losses						5,006						3,797						1,209						32		%
Occupancy						875						866						9						1		%
Customer related supplies						676						1,475						(799)						(54)		%
Advertising and promotion						461						492						(31)						(6)		%
Merger and acquisition related						290						—						290						100		%
Other expense						2,467						1,537						930						61		%
Total operating expenses						$	69,600					$	64,682					$	4,918					8		%