# RTB Digital, Inc.: Form 10-Q for the period ended Sep 30, 2022

- Company: [RTB Digital, Inc.](/companies/rtb.md) (CIK 1419275)
- Form: 10-Q
- Filed: 2022-11-21
- Accepted by EDGAR: Nov 21, 2022, 16:13 ET
- Period: 2022-09-30
- Accession: 0001185185-22-001331
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1419275/000118518522001331/greenbox20220930_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1419275/000118518522001331/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-07-01 to 2022-09-30 | $10.6m | us-gaap:Revenues |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $22.5m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2022-07-01 to 2022-09-30 | $4.3m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2022-01-01 to 2022-09-30 | $11.0m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2022-07-01 to 2022-09-30 | $6.4m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-01-01 to 2022-09-30 | $11.5m | us-gaap:GrossProfit |
| Research and development | 3 months, 2022-07-01 to 2022-09-30 | $1.4m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2022-01-01 to 2022-09-30 | $5.3m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2022-07-01 to 2022-09-30 | −$3.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-01-01 to 2022-09-30 | −$18.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-07-01 to 2022-09-30 | $907.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-01-01 to 2022-09-30 | $662.5k | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | $34.8k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | $37.2k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | −$15.2m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | −$26.1m | us-gaap:NetIncomeLoss |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | −$11.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-01-01 to 2022-09-30 | $101.8k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2022-01-01 to 2022-09-30 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2022-09-30 | $11.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-09-30 | $68.4m | us-gaap:AssetsCurrent |
| Total assets | at 2022-09-30 | $122.4m | us-gaap:Assets |
| Current liabilities | at 2022-09-30 | $27.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-09-30 | $87.7m | us-gaap:Liabilities |
| Long-term debt | at 2022-09-30 | $637.0k | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-09-30 | $12.9k | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2022-09-30 | $12.9k | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2022-09-30 | $34.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 19,110 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

RYVYL Inc. 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, the Company 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 amongthe Company (the Buyer) and PrivCo (the Seller). On April 12, 2018, pursuant to the Verbal Agreement, the Company 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, the Company assumed PrivCo’s liabilities that had been incurred in the normal course of the GreenBox Business.

On May 3, 2018, the Company formally changed its name to GreenBox POS LLC, then subsequently changed its name to GreenBox POS on December 13, 2018. On October 10, 2022 GreenBox POS changed its name to RYVYL Inc.

### Management Discussion and Analysis

### RESULTS OF OPERATIONS

### Three Months Ended September 30, 2022 (Unaudited) Compared to Three Months September 30, 2021 (Unaudited):

|  | Three Months Ended September 30, 2022 Amount | % of Revenue | 2021 Amount | % of Revenue | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net revenue | $10,629,691 | 100.0% | $8,045,469 | 100.0% | $2,584,222 | 32.1% |
| Cost of revenue | 4,269,529 | 40.2% | 2.420.748 | 30.1% | 1,848,781 | 76.4% |
| **Gross profit** | 6,360,162 | 59.8% | 5,624,721 | 69.9% | 735,441 | 13.1% |
| **Operating expenses:** |  |  |  |  |  |  |
| Advertising and marketing | 438,523 | 4.1% | 37,179 | 0.5% | 401,344 | 1079.5% |
| Research and development | 1,442,038 | 13.6% | 1,043,385 | 13.0% | 398,653 | 38,2% |
| General and administrative | 1,186,123 | 11.2% | 784,158 | 9.7% | 401,965 | 51.3% |
| Payroll and payroll taxes | 2,384,544 | 22.4% | 1,250,451 | 15.5% | 1,134,093 | 90.7% |
| Professional fees | 1,031,867 | 9.7% | 789,772 | 9.8% | 242,095 | 30.7% |
| Stock compensation for employees | - | 0.0% | 3,777,572 | 47.0% | (3,777,572) | -100.0% |
| Stock grant expense | 508,313 | 4.8% | - | 0.0% | 508,313 | n/a |
| Stock compensation for services | 132,696 | 1.2% | 238,238 | 3.0% | (105,542) | -44.3% |
| Depreciation and amortization | 2,298,849 | 21.5% | 457,633 | 5.7% | 1,841,216 | 400.2% |
| **Total operating expenses** | 9,422,953 | 88.6% | 8,378,388 | 104.1% | 1,044,565 | 12.4% |
| **Loss from operations** | (3,062,791) | -28.7% | (2,753,667) | -34.2% | (309,124) | 10.9% |
| **Other Income (Expense):** |  |  |  |  |  |  |
| Interest expense | (1,906,962) | -17.9% | (4,736) | -0.1% | (1,902,226) | n/a |
| Interest expense - debt discount | (436,817) | -4.1% | - | 0.0% | (436,817) | n/a |
| Changes in fair value of derivative liability | (4,082,056) | -38.4% | - | 0.0% | (4,082,056) | n/a |
| Derecognition expense on conversion of convertible debt | (5,709,672) | -53.7% | - | 0.0% | (5,709,672) | n/a |
| Merchant liability settlement | - | 0.0% | - | 0.0% | - | n/a |
| Other income or expense | 62,806 | 0.6% | (37,497) | -0.5% | 100,303 | -267.5% |
| Total other income (expense) | (12,072,701) | -113.6% | (42,233) | -0.5% | (12,030,468) | 28485.9% |
| Income (Loss) before provision for income taxes | (15,135,492) | -142.4% | (2,795,900) | -34.8% | (12,339,592) | 441.3% |
| Provision for income taxes | 34,785 | 0.3% | 3,253,855 | 40.4% | (3,219,070) | -98.9% |
| **Net income (loss)** | **$(15,170,277)** | **-142.7%** | **$(6,049,755)** | **-75.2%** | **$(9,120,522)** | **150.8%** |

27

### Net Revenue

Net revenue increased by $2,584,222, or 32.1%, to $10,629,691 for the three months ended September 30, 2022 from $8,045,469 for the three months ended September 30, 2021. The change in net revenue includes $2.9 million of penalties and fees charged to merchant in accordance with our standard service agreement for transaction fraud and minimum activity fees along with an increase in processing volume compared to the same three month period in 2021offset by lower commissions from a processing partner.

### Cost of Revenue

Cost of revenue increased by $1,848,781, or 76.4%, to $4,269,529 for the three months ended September 30, 2022, from $2,420,748 for the three months ended September 30, 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 an increase in fees for ISOs.

### Operating Expenses

Operating expenses increased by $1,044,565, or 12.5%, to $9,422,953 for the three months ended September 30, 2022, from $8,378,388 for the three months ended September 30, 2021. The increase was due primarily to higher depreciation and amortization, and payroll and payroll taxes for the three months ended September 30, 2022, offset by decreases in stock compensation for employees.

### Other Income (Expense)

Other expense increased by $12,030,468 to $12,072,701 for the three months ended September 30, 2022, from $42,233 for the three months ended September 30, 2021. Interest expense increased significantly in the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 due to the $100,000,000 convertible note issued in November 2021. Amortization of the discount and the fair value of the derivative liability associated with the note were also contributing factors. Furthermore, the Company had changes in fair value of derivative liability expense of $4,082,056 for the three months ended September 30, 2022 and none in the previous year same quarter. The Company recorded derecognition expense on conversion of debt of $5,709,67 in the quarter ended September 30, 2022.

### Nine Months Ended September 30, 2022 (Unaudited) Compared to Nine Months September 30, 2021 (Unaudited):

|  | Nine Months Ended September 30, 2022 Amount | % of Revenue | 2021 Amount | % of Revenue | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net revenue | $22,490,824 | 100.0% | $19,174,089 | 100.0% | $3,316,735 | 17.3% |
| Cost of revenue | 10,976,255 | 48.8% | 5,337,999 | 27.8% | 5,638,256 | 105.6% |
| **Gross profit** | 11,514,569 | 51.2% | 13,836,090 | 72.2% | (2,321,521) | -16.8% |
| **Operating expenses:** |  |  |  |  |  |  |
| Advertising and marketing | 1,106,341 | 4.9% | 84,509 | 0.4% | 1,021,832 | 1209.1% |
| Research and development | 5,300,115 | 23.6% | 2,504,976 | 13.1% | 2,795,139 | 111.6% |
| General and administrative | 4,331,918 | 19.3% | 1,648,383 | 8.6% | 2,683,535 | 162.8% |
| Payroll and payroll taxes | 7,480,377 | 33.3% | 2,871,581 | 15.0% | 4,608,796 | 160.5% |
| Professional fees | 3,704,226 | 16.5% | 2,114,996 | 11.0% | 1,589,230 | 75.1% |
| Stock compensation for employees | 166,800 | 0.7% | 5,867,072 | 30.6% | (5,700,272) | -97.2% |
| Stock grant expense | 2,223,611 | 9.9% | - | 0.0% | 2,223,611 | n/a |
| Stock compensation for services | 338,348 | 1.5% | 10,418,996 | 54.3% | (10,080,648) | -96.8% |
| Depreciation and amortization | 4,879,798 | 21.7% | 477,886 | 2.5% | 4,401,912 | 919.1% |
| **Total operating expenses** | 29,531,534 | 131.3% | 25,988,399 | 135.5% | 3,543,135 | 13.6% |
| **Loss from operations** | (18,016,965) | -80.1% | (12,152,309) | -63.4% | (5,864,656) | 48.3% |
| **Other Income (Expense):** |  |  |  |  |  |  |
| Interest expense | (5,662,463) | -25.2% | (598,994) | -3.1% | (5,063,469) | 845.3% |
| Interest expense - debt discount | (11,539,803) | -62.3% | (2,993,408) | -15.6% | (8,546,395) | 285.5% |
| Changes in fair value of derivative liability | 14,591,938 | 64.9% | - | 0.0% | 14,591,938 | n/a |
| Derecognition expense on conversion of convertible debt | (5,709,672) | -25.4% | - | 0.0% | (5,709,672) | n/a |
| Merchant liability settlement | - | 0.0% | (364,124) | -1.9% | 364,124 | -100.0% |
| Other income or expense | 298,021 | 1.3% | (56,057) | -0.3% | 354,078 | -631.6% |
| Total other income (expense) | (8,021,979) | -35.7% | (4,012,583) | -20.9% | (4,009,396) | -631.6% |
| Loss before provision for income taxes | (26,038,944) | -115.8% | (16,164,892) | -84.3% | (9,874,052) | 61.1% |
| Provision for income taxes | 37,237 | 0.2% | 3,253,855 | 17.0% | (3,216,618) | -98.9% |
| **Net loss** | **$(26,6076,181)** | **-115.9%** | **$(19,418,747)** | **-101.3%** | **$(6,657,434)** | **34.3%** |

29

### Net Revenue

Net revenue increased by $3,316,735, or 17.3%, to $22,490,824 for the nine months ended September 30, 2022, from $19,174,089 for the nine months ended September 30, 2021. The change in net revenue reflected the following:

- Increase in processing volume in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.
- $2.9 million revenue in penalties and fees charged to merchants, in accordance with the company’s standard service agreement for transaction fraud and minimum activity fees.

### Cost of Revenue

Cost of revenue increased by $5,638,256 or 105.6%, to $10,976,255 for the nine months ended September 30, 2022, from $5,337,999 for the nine months ended September 30, 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 percentage decreased due to an increase in fees in ISO.

### Operating Expenses

Operating expenses increased by $3,543,135 or 13.6%, to $29,531,534 for the nine months ended September 30, 2022, from $25,988,399 for the nine months ended September 30, 2021. The increase was due primarily to depreciation and amortization, marketing expenses related to re-branding, software development, and payroll and payroll taxes for the nine months ended September 30, 2022, offset by decreases in stock compensation for employees and services.

### Other Income (Expense)

Other expense increased by $4,009,396 or 99.9%, to $8,021,979 for the nine months ended September 30, 2022, from $4,012,583 for the nine months ended September 30, 2021. Interest expense increased significantly in the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 due to the $100,000,000 convertible note issued in November 2021. Amortization of the discount associated with the note and derecognition expense on the conversion of convertible debt were contributing factors offset by the change in fair value of derivative liability of $14,591,938 for the nine months ended September 30, 2022 and none in the previous year same quarter.

### Provision for Income Taxes

The Company estimates our annual effective income tax rate to be 0.2% for calendar 2022, which is different from the U.S. federal statutory rate, primarily due to its full valuation position. The Company recorded approximately $37,237 of tax expense. As of September 30, 2022, we have no material unrecognized tax benefits, and the Company expects no change to unrecognized tax benefits within next 12 months.

### LIQUIDITY AND CAPITAL RESOURCES

The 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 cash needs. The Company believes current cash balances will be sufficient to cover our operating needs for the next twelve months. Our $85.5 million convertible note matures in November 2024. There are covenants associated with the note that accelerates the conversion of tranches of the note should certain targets be met.

The Company 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):

|  | Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: |
| Net cash provided by (used in) operating activities | $(11,444,065) | $(14,034,039) |
| Net cash provided by (used in) investing activities | (46,863,645) | (2,597,818) |
| Net cash provided by (used in) financing activities | (9,231,508) | 43,015,308 |
| Cash acquired from acquisition of Northeast & ChargeSavvy |  | 1,491,068 |
| Cash acquired from acquisition of Transact Europe | 18,676,860 | - |
| **Net increase (decrease) in cash, cash equivalents, and restricted cash** | **$(48,862,358)** | **$27,874,519** |

***Operating Activities –*** For the nine months ended September 30, 2022 and 2021, net cash provided by and used in operating activities was ($11,444,065) and ($14,034,039), 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 Europe and Sky Financials for the nine months ended September 30, 2022.

***Financing Activities –*** Net cash provided by financing activities primarily consisted of proceeds from our underwritten offering of $45,805,491 for the nine months ended September 30, 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 nine months ended September 30, 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, 1,397 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 September 30, 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 and nine months ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed Nov 21, 2022.
Source: SEC EDGAR, the filing index for accession 0001185185-22-001331. Last ingested by Listed: Nov 4, 2026, 18:58 ET. No prices; not investment advice.