# RTB Digital, Inc.: Form 10-Q for the period ended Sep 30, 2020

- Company: [RTB Digital, Inc.](/companies/rtb.md) (CIK 1419275)
- Form: 10-Q
- Filed: 2020-11-16
- Accepted by EDGAR: Nov 16, 2020, 16:39 ET
- Period: 2020-09-30
- Accession: 0001185185-20-001616
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1419275/000118518520001616/greenbox20200930_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1419275/000118518520001616/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2020-07-01 to 2020-09-30 | $3.1m | us-gaap:Revenues |
| Revenue | 9 months, 2020-01-01 to 2020-09-30 | $5.5m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2020-07-01 to 2020-09-30 | $1.8m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2020-01-01 to 2020-09-30 | $3.5m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2020-07-01 to 2020-09-30 | $1.2m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2020-01-01 to 2020-09-30 | $2.0m | us-gaap:GrossProfit |
| Research and development | 3 months, 2020-07-01 to 2020-09-30 | $243.9k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2020-01-01 to 2020-09-30 | $798.2k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2020-07-01 to 2020-09-30 | −$245.4k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2020-01-01 to 2020-09-30 | −$1.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2020-07-01 to 2020-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2020-01-01 to 2020-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2020-07-01 to 2020-09-30 | −$489.8k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2020-01-01 to 2020-09-30 | −$789.3k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2020-07-01 to 2020-09-30 | $0.00 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted EPS | 9 months, 2020-01-01 to 2020-09-30 | $0.00 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 9 months, 2020-01-01 to 2020-09-30 | −$130.5k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2020-01-01 to 2020-09-30 | $12.3k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2020-01-01 to 2020-09-30 | $810.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2020-09-30 | $0 | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2020-09-30 | $8.7m | us-gaap:AssetsCurrent |
| Total assets | at 2020-09-30 | $9.0m | us-gaap:Assets |
| Current liabilities | at 2020-09-30 | $14.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2020-09-30 | $14.7m | us-gaap:Liabilities |
| Short-term borrowings | at 2020-09-30 | $770.2k | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2020-09-30 | −$5.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 19,161 characters.

### Disclaimer Regarding Forward Looking Statements

Our Management’s Discussion and Analysis or Plan of Operations contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

### Management Discussion and Analysis

This MD&A section was prepared by the management of GreenBox POS (OTC: GRBX) (“GreenBox”, “GRBX”, the “Company”), in conjunction with the discussion the financial activity disclosed from the perspectives of on-going Q3/20 and plans and projections for the remainder of 2020.

Q1/20 signified the return of operations in full scale for the Company. In Q4/2019 and Q1/2020, the Company continued to invest in research and development, improving its acquiring platform and enabling safer, faster and significantly more scalable services. These technology improvements allow for major new capabilities, including Real Time Payments (RTP), a very sought-after payment feature. This change also reduces the Company COGS. Although the Company saw a decrease in operations in Q4/2019, and was essentially flat for Q1/2020, the improved platform is performing better than its predecessor platform and increase total volumes while increasing profit margins and operating sustainability is observed and expected to persist through 2020. The Company returned to ramping up commercial large-scale operations, on-boarding large number of clients, and increasing the Company operational bandwidth to accommodate the needs of its clients. Q1/2020 continued to execute on these management directives.

Q2/20 also symbolized the transition into large scale operations with increased capacity of the payment processing platform, and with the addition of two new platforms, Crypto payouts and FOREX, allowing the Company to expand licensed operations in Europe and beyond. It is anticipated that European operation will match and could exceed USA operational volume for the Company. While Covid-19 virus impacted of the rate of increase in operational figures was observed in Q2/2020, Q3/2020 figures are as expected, and the projections for the rest of the year remain unchanged.

#### Management is focused on the following KPI (Key Performance Indices):

In order to process the targeted ATPV goal, $1B, the Company must be able to process close to $90M/month, or $3M/day, in a consistent fashion. The Company needed to invest further in its core technologies to reach this capacity, a task now completed. The Company now has the required bandwidth and technical capabilities to achieve this goal. The Company projects it will process transactions in volumes greater than $1M/day within Q1/2021 and will ramp up the targeted Average Daily Volumes in Q1/2021. We believe the current operational bandwidth for the Company is virtually unlimited. Covid-19 will push the ATPV forward, likely by a quarter or two, but the projected figures for daily processing are still anticipated to materialize during 2021.

The Company owns all the IP rights for operations in its space: tokenizer, gateway, ledger manager and blockchain substrate. Other, supporting patents, such as fraud proofing, on-boarding accelerators, and an all new blockchain implementation, are pending.

With the visibility into the Company’s operation management has in Q4/2020 the Company plans on uplisting to a senior exchange within the next 18 months and, at this time, and the Company does not plan on an artificial stock price increase, such as a reverse split. The current plan is to grow the company organically to the size and value required by the exchange. The company has filed to reserve a NASDAQ ticker – GBOX.

### RESULTS OF OPERATIONS

Three Months Ended September 30, 2020 (Unaudited) Compared to Three Months Ended September 30, 2019 (Unaudited):

|  | Three Months Ended September 30, 2020 Amount | % of Revenue | 2019 Amount | % of Revenue | Changes Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $3,056,271 | 100.0% | $14,793,117 | 100.0% | $(11,736,846) | -79.3% |
| Cost of revenue | 1,845,295 | 60.4% | 6,834,198 | 46.2% | (4,988,903) | -73.0% |
| **Gross profit** | 1,210,976 | 39.6% | 7,958,919 | 53.8% | (6,747,943) | -84.8% |
| **Operating expenses:** |  |  |  |  |  |  |
| Advertising and marketing | 59,099 | 1.9% | 10,319 | 0.1% | 48,780 | 472.7% |
| Research and development | 243,923 | 8.0% | 381,112 | 2.6% | (137,189) | -36.0% |
| Cash due from gateway reserve expense | - | 0.0% | 5,665,031 | 38.3% | (5,665,031) | -100.0% |
| General and administrative | 436,216 | 14.3% | 176,120 | 1.2% | 260,096 | 147.7% |
| Payroll and payroll taxes | 344,641 | 11.3% | 420,074 | 2.8% | (75,433) | -18.0% |
| Professional fees | 366,734 | 12.0% | 281,659 | 1.9% | 85,075 | 30.2% |
| Depreciation and amortization | 5,764 | 0.2% | 4,897 | 0.0% | 867 | 17.7% |
| **Total operating expenses** | 1,456,377 | 47.7% | 6,939,212 | 46.9% | (5,482,835) | -79.0% |
| **Loss from operations** | (245,401) | -8.0% | 1,019,707 | 6.9% | (1,265,108) | -124.1% |
| **Other Income (Expense):** |  |  |  |  |  |  |
| Interest expense | (48,931) | -1.6% | 3,837 | 0.0% | (52,768) | -1375.2% |
| Interest expense - debt discount | (83,500) | -2.7% | - | 0.0% | (83,500) | n/a |
| Derivative expense | (925,576) | -30.3% | - | 0.0% | (925,576) | n/a |
| Changes in fair value of derivative liability | 819,366 | 26.8% | 236,184 | 1.6% | 583,182 | 246.9% |
| Gain from extinguishment of convertible debt | - | 0.0% | - | 0.0% | - |  |
| Other income or expense | (5,768) | -0.2% | - | 0.0% | (5,768) | n/a |
| Total other income (expense) | (244,409) | -8.0% | 240,021 | 1.6% | (484,430) | -201.8% |
| Loss before provision for income taxes | (489,810) | -16.0% | 1,259,728 | 8.5% | (1,749,538) | -138.9% |
| Provision for income taxes | - | 0.0% | - | 0.0% | - | 0.0% |
| **Net loss** | **$(489,810)** | **-16.0%** | **$1,259,728** | **8.5%** | **$(1,749,538)** | **-138.9%** |

### Revenue

Revenue decreased by $11,736,846 or 79.3%, to $3,056,271 in the third quarter of fiscal 2020 from $14,793,117 in the third quarter previous year. The decrease in net sales reflected the following: Q3 revenues reflects an ecosystem exit from ChargeSavvy, one of the Independent Sales Organizations (ISO). That volume is now transferred to an alternative ISO and processing gateway. In addition, the company placed a high priority towards completion of compliance and integration with Fiserv, one of its largest accounts, and pushed to expedite the development and future release of its third-generation technology, code name Gen3. The Company raised capital in October to support these two directions specifically.

### Cost of Revenue

Cost of revenue decreased by $4,988,903, or 73.0%, to $1,845,295 in the third quarter of fiscal 2020 from $6,834,198 in the third quarter last year. Payment processing consists of various processing fees paid to Gateways, as well as commission payments to the Independent Sales Organizations (“ISO”) responsible for establishing and maintaining merchant relationships, from which the processing transactions ensue. Most orders are delivered directly to the customer, without any handling, storage or processing by us. Q3/20 shows a reduction in COR as a result of increased processing efficiency and decreased cost to scale. Upcoming release of the Company’s next generation technology, Gen3, is further designed to impact the Company’s Cost of Revenues and is projected to materially increase the Company’s operating margins significantly and positively.

### Operating Expenses

Operating expenses decreased by $5,482,835, or 79.0%, to $1,456,377 in the third quarter of fiscal 2020 from $6,939,212 in the third quarter last year. The decrease was primarily due to decease in research and development of $137,189, cash due from gateway reserve expense of $5,665,031 in third quarter of prior year, and off-set by increase in payroll and professional fees.

### Non-Operating Expenses

We incurred interest expense related to various debt in the amount of $132,431 and $391,431 for the three months ended September 30, 2020 and 2019, respectively. We incurred a gain from changes in fair value of derivative liability of $819,366 and $236,184 for the three months ended September 30, 2020 and 2019, respectively, and derivative expense of $925,576 for the three months ended September 30, 2020.

Nine Months Ended September 30, 2020 (Unaudited) Compared to Nine Months Ended September 30, 2019 (Unaudited):

|  | Nine Months Ended September 30, 2020 Amount | % of Revenue | 2019 Amount | % of Revenue | Changes Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $5,536,335 | 100.0% | $19,070,861 | 100.0% | $(13,534,526) | -71.0% |
| Cost of revenue | 3,504,283 | 114.7% | 10,602,555 | 55.6% | (7,098,272) | -66.9% |
| **Gross profit** | 2,032,052 | 66.5% | 8,468,306 | 44.4% | (6,436,254) | -76.0% |
| **Operating expenses:** |  |  |  |  |  |  |
| Advertising and marketing | 86,368 | 2.8% | 35,928 | 0.2% | 50,440 | 140.4% |
| Research and development | 798,157 | 26.1% | 1,085,298 | 5.7% | (287,141) | -26.5% |
| Cash due from gateway reserve expense | - | 0.0% | 5,665,031 | 29.7% | (5,665,031) | -100.0% |
| Payroll and payroll taxes | 1,279,174 | 41.9% | 967,121 | 5.1% | 312,053 | 32.3% |
| Professional fees | 852,234 | 27.9% | 588,677 | 3.1% | 263,557 | 44.8% |
| General and administrative | 613,156 | 20.1% | 375,373 | 2.0% | 237,783 | 63.3% |
| Depreciation and amortization | 16,856 | 0.6% | 11,352 | 0.1% | 5,504 | 48.5% |
| **Total operating expenses** | 3,645,945 | 119.3% | 8,728,780 | 45.8% | (5,082,835) | -58.2% |
| **Loss from operations** | (1,613,893) | -52.8% | (260,474) | -1.4% | (1,353,419) | 519.6% |
| **Other Income (Expense):** |  |  |  |  |  |  |
| Interest expense | (372,553) | -12.2% | (171,193) | -0.9% | (201,360) | 117.6% |
| Interest expense - debt discount | (121,918) | -4.0% | (188,273) | -1.0% | 66,355 | -35.2% |
| Derivative expense | (925,576) | -30.3% | (634,689) | -3.3% | (290,887) | 45.8% |
| Changes in fair value of derivative liability | (383,769) | -12.6% | (129,186) | -0.7% | (254,583) | 197.1% |
| Gain from extinguishment of convertible debt | 2,630,795 | 86.1% | - | 0.0% | 2,630,795 |  |
| Other income or expense | (2,434) | -0.1% | - | 0.0% | (2,434) | n/a |
| Total other income (expense) | 824,545 | 27.0% | (1,123,341) | -5.9% | 1,947,886 | -173.4% |
| Loss before provision for income taxes | (789,348) | -25.8% | (1,383,815) | -7.3% | 594,467 | -43.0% |
| Provision for income taxes | - | 0.0% | - | 0.0% | - | 0.0% |
| **Net loss** | **$(789,348)** | **-25.8%** | **$(1,383,815)** | **-7.3%** | **$594,467** | **-43.0%** |

### Revenue

Revenue decreased by $13,534,526 or 71.0%, to $5,536,335 in the nine months ended September 30, 2020 from $19,070,861 in the nine months ended September 30, 2019. The change in net sales reflected the following: Q3 2019 revenues area reflects the ramp up to operations following the upgrade and rerelease of the Company’s processing platform and the release of the two new platforms, Crypto payouts platform and FOREX platform. In Q1 2020, operations slowed significantly due to the processing platform limitations. As such, Q1 2020 is better compared to Q12019 in terms of operations following a product launch. Q3 2020 revenues reflects an ecosystem exit from ChargeSavvy, one of the Independent Sales Organizations (ISO). That volume is now transferred to an alternative ISO and processing gateway. In addition, the company placed a high priority towards completion of compliance and integration with Fiserv, one of its largest accounts, and pushed to expedite the development and future release of its third-generation technology, code name Gen3. The Company raised capital in October to support these two directions specifically.

### Cost of Revenue

Cost of revenue decreased by $7,098,272, or 66.9%, to $3,504,283 in the nine months ended September 30, 2020 from $10,602,555 in the nine months ended September 30, 2019. Payment processing consists of various processing fees paid to Gateways, as well as commission payments to the Independent Sales Organizations (“ISO”) responsible for establishing and maintaining merchant relationships, from which the processing transactions ensue. Most orders are delivered directly to the customer, without any handling, storage or processing by us. Q3/20 shows a reduction in COR as a result of increased processing efficiency and decreased cost to scale. Upcoming release of the Company’s next generation technology, Gen3, is further designed to impact the Company’s Cost of Revenues and is projected to materially increase the Company’s operating margins significantly and positively.

### Operating Expenses

Operating expenses decreased by $5,082,835, or 58.2%, to $3,645,945 in the nine months ended September 30, 2020 from $8,728,780 in the nine months ended September 30, 2019. The decrease was due to decrease from research and development and cash due from gateway reserve expense and off-set by increase in payroll and professional fees.

### Non-Operating Expenses

We incurred interest expense related to various debt in the amount of $494,471 and $359,466 for the nine months ended September 30, 2020 and 2019, respectively. We incurred a loss from changes in fair value of derivative liability of $383,769 for the nine months ended September 30, 2020 and derivative expense of $925,576 for the nine months ended September 30, 2020. We incurred gain from extinguishment of convertible debt of $2,630,795 for the nine months ended September 30, 2020.

### LIQUIDITY AND CAPITAL RESOURCES

Our principal liquidity requirements are for working capital and capital expenditures. We fund our liquidity requirements primarily through cash on hand, cash flows from operations and borrowings from through debt. We ended September 30, 2020 with $124,834 of cash, cash equivalents, and restricted cash compared with $763,110 as of December 31, 2019.

The following table summarizes our cash flows from operating, investing and financing activities:

|  | Nine Months Ended September 30, 2020 | 2019 |
| --- | ---: | ---: |
| Net cash provided by (used in) operating activities | $(130,505) | $1,841,605 |
| Net cash provided by (used in) investing activities | (12,332) | (41,634) |
| Net cash provided by (used in) financing activities | (495,439) | (89,000) |
| **Net increase (decrease) in cash, cash equivalents, and restricted cash** | **$(638,276)** | **$1,710,971** |

***Operating Activities –*** For the nine months ended September 30, 2020 and 2019, net cash provided by operating activities was $130,505 and $1,841,605, respectively. The cash provided by operating activities was primarily due to timing of settlement of assets and liabilities and net loss.

***Investing Activities –*** Cash used in investing activities primarily consisted of purchases of property and equipment.

***Financing Activities –*** Net cash provided by or used in financing activities primarily consisted of payments of short-term notes payable debt for the nine months ended September 30, 2020 and borrowings and payments of convertible debt for the three months ended September 30, 2019.

### CRITICAL ACCOUNTING POLICIES

Our critical accounting estimates are included in our significant accounting policies as described in Note 2 of the consolidated financial statements of this Form 10-Q. Those consolidated financial statements were prepared in accordance with GAAP. Critical accounting estimates are those that we believe are most important to the portrayal of our financial condition and results of operations. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense. Our estimates are evaluated on an ongoing basis and drawn from historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. Actual results may differ from our estimates. Management believes that the following accounting estimates reflect the more significant judgments and estimates we use in preparing our consolidated financial statements.

### Revenue Recognition

Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers outlines the basic criteria that must be met to recognize revenue and provide guidance for presentation of revenue and for disclosure related to revenue recognition policies in financial statements filed with the Securities and Exchange Commission. Management believes the Company’s revenue recognition policies conform to ASC 606.

The Company recognizes revenue when 1) it is realized or realizable and earned, 2) there is persuasive evidence of an arrangement, 3) delivery and performance has occurred, 4) there is a fixed or determinable sales price, and 5) collection is reasonably assured.

The Company generates revenue from payment processing services, licensing fees and equipment sales.

- Payment processing revenue is based on a percentage of each transaction’s value and/or upon fixed amounts specified per each transaction or service and is recognized as such transactions or services are performed.
- Licensing revenue is paid in advance and is recorded as unearned income, which is amortized monthly over the period of the licensing agreement.
- Equipment revenue is generated from the sale of POS products, which is recognized when goods are shipped.

## Market risk

As filed, 3,604 characters.

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Executive Vice President (our Principal Financial Officer), evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on management's evaluation, our Chief Executive Officer and Executive Vice President concluded that, as a result of the material weaknesses described below, as of September 30, 2020, our disclosure controls and procedures are not designed at a reasonable assurance level and are ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Executive Vice President, as appropriate, to allow timely decisions regarding required disclosure. The material weaknesses, which relate to internal control over financial reporting, that were identified are:

a) We did not have enough personnel in our accounting and financial reporting functions. As a result, we were not able to achieve adequate segregation of duties and were not able to provide for adequate reviewing of the financial statements. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis.

Management believes that the hiring of additional personnel who have the technical expertise and knowledge with the non-routine or technical issues we have encountered in the past will result in both proper recording of these transactions and a much more knowledgeable finance department as a whole. Due to the fact that our accounting staff consists of a Principal Financial Officer, a bookkeeper and external accounting consultants, additional personnel will also ensure the proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support us if personnel turnover issues within the department occur. We believe this will eliminate or greatly decrease any control and procedure issues we may encounter in the future.

We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

Changes in Internal Control

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Filed Nov 16, 2020.
Source: SEC EDGAR, the filing index for accession 0001185185-20-001616. Last ingested by Listed: Nov 4, 2026, 18:58 ET. No prices; not investment advice.