# RTB Digital, Inc.: Form 10-Q for the period ended Mar 31, 2022

- Company: [RTB Digital, Inc.](/companies/rtb.md) (CIK 1419275)
- Form: 10-Q
- Filed: 2022-05-16
- Accepted by EDGAR: May 16, 2022, 17:17 ET
- Period: 2022-03-31
- Accession: 0001185185-22-000653
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1419275/000118518522000653/greenbox20220331_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1419275/000118518522000653/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-01-01 to 2022-03-31 | $4.9m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2022-01-01 to 2022-03-31 | $2.6m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2022-01-01 to 2022-03-31 | $2.3m | us-gaap:GrossProfit |
| Research and development | 3 months, 2022-01-01 to 2022-03-31 | $1.9m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | −$6.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-01-01 to 2022-03-31 | $1.9m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-01-01 to 2022-03-31 | $79.9k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | −$21.3m | us-gaap:NetIncomeLoss |
| Operating cash flow | 3 months, 2022-01-01 to 2022-03-31 | −$7.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-01-01 to 2022-03-31 | $66.1k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2022-01-01 to 2022-03-31 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2022-03-31 | $27.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-03-31 | $84.4m | us-gaap:AssetsCurrent |
| Total assets | at 2022-03-31 | $118.9m | us-gaap:Assets |
| Current liabilities | at 2022-03-31 | $35.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-03-31 | $95.5m | us-gaap:Liabilities |
| Long-term debt | at 2022-03-31 | $649.9k | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-03-31 | $0 | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2022-03-31 | $23.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 13,539 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.

**Overview – Organization and Name Changes**

### Organization

GreenBox POS is a financial technology company that develops, markets, and sells innovative blockchain-based payment solutions, which we believe offer significant improvements for the payment solutions marketplace. The Company’s core focus is to develop and monetize disruptive blockchain-based applications, integrated within an end-to-end suite of financial products, capable of supporting a multitude of industries. The Company’s proprietary, blockchain-based systems are designed to facilitate, record and store a virtually limitless volume of tokenized assets, representing cash or data, on a secured, immutable blockchain-based ledger.

The Company was formerly known as ASAP Expo, Inc (“ASAP”), and was incorporated in the state of Nevada on April 10, 2007. On January 4, 2020, PubCo and GreenBox POS LLC, a Washington limited liability company ("PrivCo”), entered into an Asset Purchase Agreement (the "Agreement”), to memorialize a verbal agreement (the “Verbal Agreement”) entered into on April 12, 2018, by and among PubCo (the Buyer) and PrivCo (the Seller). On April 12, 2018, pursuant to the Verbal Agreement, PubCo acquired PrivCo’s blockchain gateway and payment system business, point of sale system business, delivery business and kiosk business, bank and merchant accounts, as well as all intellectual property related thereto (the "GreenBox Business”). As consideration for the GreenBox Business, on April 12, 2018, PubCo assumed PrivCo’s liabilities that had been incurred in the normal course of the GreenBox Business.

On May 3, 2018, PubCo formally changed its name to GreenBox POS LLC, then subsequently changed its name to GreenBox POS on December 13, 2018.

### Management Discussion and Analysis

### RESULTS OF OPERATIONS

### Three Months Ended March 31, 2022 (Unaudited) Compared to Three Months March 31, 2021 (Unaudited):

|  | Three Months Ended March 31, 2022 Amount | % of Revenue | 2021 Amount | % of Revenue | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net revenue | $4,895,526 | 100.0% | $4,749,441 | 100.0% | $146,085 | 3.1% |
| Cost of revenue | 2,563,830 | 52.4% | 1,593,771 | 33.6% | 970,059 | 60.9% |
| **Gross profit** | 2,331,696 | 47.6% | 3,155,670 | 66.4% | (823,974) | -26.1% |
| **Operating expenses:** |  |  |  |  |  |  |
| Advertising and marketing | 140,966 | 2.9% | 24,725 | 0.5% | 116,241 | 470.1% |
| Research and development | 1,938,133 | 39.6% | 653,381 | 13.8% | 1,284,752 | 196.6% |
| General and administrative | 1,792,184 | 36.6% | 566,195 | 11.9% | 1,225,989 | 216.5% |
| Payroll and payroll taxes | 2,383,397 | 48.7% | 559,201 | 11.8% | 1,824,196 | 326.2% |
| Professional fees | 1,504,561 | 30.7% | 457,752 | 9.6% | 1,046,809 | 228.7% |
| Stock compensation for employees | 166,800 | 3.4% | 797,613 | 16.8% | (630,813) | n/a |
| Stock compensation for services | 126,414 | 2.6% | 9,453,825 | 199.1% | (9,327,411) | n/a |
| Depreciation and amortization | 454,341 | 9.3% | 6,009 | 0.1% | 448,332 | 7461.0% |
| **Total operating expenses** | 8,506,796 | 173.8% | 12,518,701 | 263.6% | (4,011,905) | -32.0% |
| **Income (Loss) from operations** | (6,175,100) | -126.1% | (9,363,031) | -197.1% | 3,187,931 | -34.0% |
| **Other Income (Expense):** |  |  |  |  |  |  |
| Interest expense | (1,889,485) | -38.6% | (594,258) | -12.5% | (1,295,227) | 218.0% |
| Interest expense - debt discount | (5,520,822) | -112.8% | (2,993,408) | -63.0% | (2,527,414) | 84.4% |
| Changes in fair value of derivative liability | (7,700,000) | -157.3% | - | 0.0% | (7,700,000) | n/a |
| Merchant liability settlement | - | 0.0% | (364,124) | -7.7% | 364,124 | n/a |
| Other income or expense | 49,316 | 1.0% | (14,611) | -0.3% | 63,927 | -437.5% |
| Total other income (expense) | (15,060,991) | -307.6% | (3,966,401) | -83.5% | (11,094,590) | 279.7% |
| Income (Loss) before provision for income taxes | (21,236,091) | -433.8% | (13,329,432) | -280.7% | (7,906,659) | 59.3% |
| Provision for income taxes | 79,896 | 1.6% | - | 0.0% | 79,896 | 0.0% |
| **Net income (loss)** | **$(21,315,987)** | **-435.4%** | **$(13,329,432)** | **-280.7%** | **$(7,986,555)** | **59.9%** |

24

### Gross Revenue

Gross revenue increased by $146,085, or 3.1%, to $4,895,526 for the three months ended March 31, 2022, from $4,749,441 for the three months ended March 31, 2021. The change in net revenue reflected the following:

- Continued work on technology launch of new platforms in late 2020 which was fully effective in the three months ended September 30, 2021.
- Increase in processing volume in the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

### Cost of Revenue

Cost of revenue increased by $970,059, or 60.9%, to $2,563,830 for the three months ended March 31, 2022, from $1,593,771 for the three months ended March 31, 2021. 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. Cost of revenues increased due to the following:

- Increased volume, resulting in higher processing fees paid to Gateways and commission payments to ISOs. The gross margin decreased due to increase in fees in ISO.

### Operating Expenses

Operating expenses decreased by $4,011,905, or 32.0%, to $8,506,796 for the three months ended March 31, 2022, from $12,518,701 for the three months ended March 31, 2021. The decrease was due primarily to lower stock compensation expense for services and employees for the three months ended March 31, 2022, offset by increases in research and development, general and administrative, payroll and payroll taxes and professional fees as we continue to add staff and infrastructure related to our growth and being a publicly traded company.

### Other Income (Expense)

Other expense increased by $11,094,590, or 279.7%, to ($15,060,991) for the three months ended March 31, 2022, from ($3,966,401) for the three months ended March 31, 2021. Interest expense increased significantly in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 due to the $100,000,000 convertible note issued in November 2021. Amortization of the discount, fees and the fair value of the derivative liability associated with the note were also contributing factors. Furthermore, the Company changes in fair value of derivative liability expense of $7,700,000 for the three months ended March 31, 2022 and none in the previous year same quarter.

### Provision for Income Taxes

We estimate our annual effective income tax rate to be 22% for calendar 2022, which is different from the U.S. federal statutory rate, primarily due to a significant amount of non-deductible stock compensation. The effective tax rate of 22% for the first quarter of calendar 2022 was different from the estimate annual effective tax rate of 22%.

### LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity have historically been derived from raising capital by issuing debt or common stock. Our cash flow from operations is not yet able to cover our cash needs. We believe our current cash balances will be sufficient to cover our operating needs for the next twelve months. Our $94 million convertible note matures November 2023. There are covenants associated with the note that accelerates the conversion of tranches of the note should certain targets be met.

We may, in the future, seek to raise additional capital to fund growth, operations and other business activities, but such additional capital may not be available to us on acceptable terms, on a timely basis, or at all.

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

|  | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Net cash provided by (used in) operating activities | $(7,857,005) | $(11,258,779) |
| Net cash provided by (used in) investing activities | (44,876,688) | (11,108) |
| Net cash provided by (used in) financing activities | (9,231,508) | 45,133,741 |
| **Net increase (decrease) in cash, cash equivalents, and restricted cash** | **$(61,965,201)** | $33,863,854 |

***Operating Activities –*** For the three months ended March 30, 2022 and 2021, net cash used in operating activities was ($7,857,005) and ($11,258,779), respectively. The cash used in operating activities was primarily due to net loss and timing of settlement of assets and liabilities including stock compensation expenses.

***Investing Activities –*** Net cash used in investing activities primarily consisted of the acquisition of Transact Euro and Sky Financials for the three months ended March 31, 2022.

***Financing Activities –*** Net cash provided by financing activities primarily consisted of proceeds from the Offering of $45,805,491 for the three months ended March 31, 2021 and net cash used in by financing activities primarily consisted of repurchases of common stock under treasury method of $3,236,723 and repayment of convertible debt of $6,000,000 for the three months ended March 31, 2022.

### CRITICAL ACCOUNTING ESTIMATES

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.

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 over the period of the licensing agreement.
- Equipment sales revenue is generated from the sale of POS products, which is recognized when goods are shipped. Revenue recognized from the sale of equipment was not material.

### Cash Due from Gateways and Payment Processing Liabilities

The Company’s primary source of revenues continues to be payment processing services for its merchant clients. When such merchant makes a sale, the process of receiving the payment card information, engaging the banks for transferring the proceeds to the merchant’s account via digital gateways, and recording the transaction on a blockchain ledger are the activities for which the Company gets to collect fees.

In 2022 and 2021 the Company utilized several gateways. The gateways have strict guidelines pertaining to scheduling of the release of funds to merchants based on several criteria, such as return and chargeback history, associated risk for the specific business vertical, average transaction amount and so on. In order to mitigate processing risks, these policies determine reserve requirements and payment in arear strategy. While reserve and payment in arrears restrictions are in effect for a merchant payout, the Company records gateway debt against these amounts until released.

Therefore, the total gateway balances reflected in the Company’s books represent the amount owed to the Company for processing – these are funds from transactions processed and not yet distributed.

## Controls and procedures

As filed, 1,380 characters.

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer has concluded that, as of March 31, 2022, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC and (ii) accumulated and communicated to our management, including our principal executive and principal accounting officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed May 16, 2022.
Source: SEC EDGAR, the filing index for accession 0001185185-22-000653. Last ingested by Listed: Nov 4, 2026, 18:58 ET. No prices; not investment advice.