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What changed in RYVYL Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of RYVYL Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+230 added−197 removedSource: 10-K (2024-03-26) vs 10-K (2023-04-17)

Top changes in RYVYL Inc.'s 2023 10-K

230 paragraphs added · 197 removed · 100 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

53 edited+38 added−14 removed10 unchanged
Biggest changeConsisting of $12.2 million in cash and $2.4 million of shares of company stock. 1- Year Alternate Optional Conversion At any time following the first anniversary of the issuance date of the Note, but only if the closing bid price of our common stock on the immediately prior trading day is less than $6.50, each holder of the Note shall have the option to convert, at such holder’s option, pro rata, up to $30 million of the principal amount of the Note (in $250,000 increments) at the Alternate Optional Conversion Price.
Biggest changeAs part of the First Exchange Agreement, the Company agreed to allow for the conversion of up to an additional $9.0 million of principal (together with any accrued and unpaid interest thereon) of the Note at a conversion price equal to 97.5% of the lower of (x) the then in effect conversion price and (y) the lowest volume weighted average price of our Common Stock during the five trading days immediately prior to such conversion. 1- Year Alternate Optional Conversion At any time following the first anniversary of the issuance date of the Note, but only if the closing bid price of our Common Stock on the immediately prior trading day is less than $6.50, each holder of the Note shall have the option to convert, at such holder’s option, pro rata, up to $30 million of the principal amount of the Note (in $250,000 increments) at the “alternate optional conversion price, which is equal to the lower of (i) the then in effect conversion price and (ii) the greater of (x) the Note’s $1.67 floor price or (y) 98% of the market price on the conversion date.
If a holder elects to convert or redeem all or any portion of a Note prior to the Maturity Date, all accrued and unpaid interest on the amount being converted or redeemed will also be payable.
If the holder elects to convert or redeem all or any portion of a Note prior to the Maturity Date, all accrued and unpaid interest on the amount being converted or redeemed will also be payable.
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.
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. and was incorporated in the State of Nevada on April 10, 2007.
Using our Gateway technology, we seek authorization and settlement for each transaction from Gateways to the issuing bank responsible for the credit/debit card used in the transaction. When the Gateway settles the transaction, our Gateway technology composes a chain of blockchain instructions to our ledger manager system.
Using our blockchain ledger technology, we seek authorization and settlement for each transaction from Gateways to the issuing bank responsible for the credit/debit card and ACH used in the transaction. When the Gateway settles the transaction, our Gateway technology composes a chain of blockchain instructions to our ledger manager system.
The Note Blocker may be raised or lowered to any other percentage not in excess of 9.99% at the option of the applicable holder of Notes, except that any raise will only be effective upon 61-days’ prior notice to us.
The Note Blocker may be raised or lowered to any other percentage not in excess of 9.99% at the option of the applicable holder of the Note, except that any raise will only be effective upon 61-days’ prior notice to us.
These transfers take place instantaneously and seamlessly, allowing the transaction experience to seem like any other ordinary credit/debit card transaction to the consumer and merchant.
These transfers take place instantaneously and seamlessly, allowing the transaction experience to seem like any other ordinary credit or debit card transaction to the consumer and merchant.
Change of Control Redemption Right In connection with a change of control of the Company, each holder may require us to redeem in cash all, or any portion, of the Notes at a 15% redemption premium to the greater of the face value, the equity value of our common stock underlying the Notes and the equity value of the change of control consideration payable to the holder of our common stock underlying the Notes.
Change of Control Redemption Right In connection with a change of control of the Company, each holder may require us to redeem in cash all, or any portion, of the Note at a 15% redemption premium to the greater of the face value, the equity value of our Common Stock underlying the Note and the equity value of the change of control consideration payable to the holder of our Common Stock underlying the Note.
This allows for the token to be usable for instant purchases, which we believe is an advantage for the merchants. These purchases, in turn, generate processing volume for us. We believe our Gen3 stabilized platform will be a top choice for banks, e-commerce, and consumers.
This allows for the token to be usable for instant purchases, which we believe is an advantage for the merchants. These purchases, in turn, generate processing volume for us. We believe our platform will be a top choice for banks, e-commerce, and consumers.
The equity value of our common stock underlying the Notes is calculated using the greatest closing sale price of our common stock during the period immediately preceding the consummation or the public announcement of the change of control and ending the date the holder gives notice of such redemption.
The equity value of our Common Stock underlying the Note is calculated using the greatest closing sale price of our Common Stock during the period immediately preceding the consummation or the public announcement of the change of control and ending the date the holder gives notice of such redemption.
With a global footprint, proprietary payment gateway, and technology platforms, TEU offers a comprehensive portfolio of services and decades of industry experience. TEU provides complete payment solutions by offering acquiring, issuing of prepaid cards and agent banking, serving hundreds of clients. The Company paid approximately $28.8 million (€26.0 million) in total consideration for the purchase.
RYVYL EU provides complete payment solutions by offering acquiring, issuing of prepaid cards and agent banking, serving hundreds of clients. With a global footprint, proprietary payment gateway, and technology platforms, RYVYL EU offers a comprehensive portfolio of services and decades of industry experience. The Company paid approximately $28.8 million (€26.0 million) in total consideration for the purchase.
Unlike general blockchain-based systems, we use proprietary, private ledger technology to verify every transaction conducted within our ecosystem. The verification of transaction data comes from trusted partners, all of whom have been extensively vetted by us. We facilitate all financial elements of our closed-loop ecosystem and we act as the administrator for all related accounts.
Unlike general blockchain-based systems, we use proprietary, private ledger technology to verify every transaction conducted within our ecosystem. The verification of transaction data comes from trusted partners, all of whom we have extensively vetted. We facilitate all financial elements of our closed-loop ecosystem and act as the administrator for all related accounts.
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.
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.
Rather, the Notes contain standard and customary events of default including but not limited: (i) the suspension from trading or the failure to list our common stock within certain time periods; (ii) failure to make payments when due under the Notes; and (iii) bankruptcy or insolvency of the Company.
Rather, the Note contains standard and customary events of default including but not limited: (i) the suspension from trading or the failure to list our Common Stock within certain time periods; (ii) failure to make payments when due under the Note; and (iii) bankruptcy or insolvency of the Company.
Maturity Date Unless earlier converted, or redeemed, the Note will become due and payable on November 5, 2024, the second anniversary of their issuance date, which we refer to herein as the “Maturity Date”, subject to the right of the investors to extend the date: (i) if an event of default under the Note has occurred and is continuing (or any event shall have occurred and be continuing that with the passage of time and the failure to cure would result in an event of default under the Note) and (ii) for a period of 20 business days after the consummation of a fundamental transaction if certain events occur.
Maturity Date Under its original terms, unless earlier converted, or redeemed, the Note was to mature on November 3, 2023, the second anniversary of their issuance date, which we refer to herein as the “Maturity Date”, subject to the right of the investors to extend the date: (i) if an event of default under the Note has occurred and is continuing (or any event shall have occurred and be continuing that with the passage of time and the failure to cure would result in an event of default under the Note) and (ii) for a period of 20 business days after the consummation of a fundamental transaction if certain events occur.
The share price at issuance was $12.14. Charge Savvy is a Fintech company specializing in developing software and providing payment processing and point-of-sale services to the merchant services industry. Charge Savvy also owns an approximately 64,000 square foot office building located in Chicago, Illinois, where it is headquartered.
Charge Savvy is a fintech company specializing in developing software and providing payment processing and point-of-sale (“POS”) services to the merchant services industry. Charge Savvy also owned an approximately 64,000 square foot office building located in Chicago, Illinois, where it is headquartered.
As a stablecoin platform, it is also the only type of blockchain payment processing platform that the Office of the Comptroller of the Currency has authorized for use by banks in a similar fashion to ACH, Wire, and Swift.
It is also the only type of blockchain payment processing platform that the Office of the Comptroller of the Currency has authorized for use by banks in a similar fashion to ACH, Wire, and Swift. Because of Secure Token Technology, it is also very good as a custodial vehicle.
Recent Developments Issuance of Note and Entry into Waiver We sold and issued, in a registered direct offering, an 8% senior convertible note, originally due November 3, 2023, and subsequently extended to November 5, 2024, in the aggregate original principal amount of $100 million (the “Note”).
Issuance of Convertible Note On November 8, 2021, we sold and issued, in a registered direct offering, an 8% Senior convertible note, originally due November 3, 2023, and subsequently extended to April 5, 2025, in the aggregate original principal amount of $100 million (the “Note”).
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 January 4, 2020, PubCo and PrivCo entered into an Asset Purchase 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).
The Note was issued on November 8, 2021, pursuant to an indenture dated November 2, 2021 between us and Wilmington Savings Fund Society, FSB, as trustee (the “Base Indenture”), as supplemented by a first supplemental indenture thereto, dated November 2, 2021, relating to the Notes (the “First Supplemental Indenture” and, the Base Indenture as supplemented by the First Supplemental Indenture, the “First Indenture”).
The Note was sold pursuant to the terms of a Securities Purchase Agreement, dated November 2, 2021, between us and the investor in the Note (the “Investor”). 9 Table of Contents The Note was issued on November 8, 2021, pursuant to an indenture dated November 2, 2021 between us and Wilmington Savings Fund Society, FSB, as trustee (the “Base Indenture”), as supplemented by a first supplemental indenture thereto, dated November 2, 2021, relating to the Notes (the “First Supplemental Indenture” and the Base Indenture as supplemented by the First Supplemental Indenture, the “First Indenture”).
Dollar, supported by our blockchain technology. coyni offers custodial assurance by utilizing our stablecoin and unique blockchain technology in a closed-loop ecosystem, allowing for flexibility. c) POS Solutions is our complete end-to-end Point of Sale solution, comprising both software and hardware. Our proprietary blockchain-based technology serves as the settlement engine for all transactions within our ecosystem.
The Coyni Platform offers custodial assurance by utilizing unique blockchain technology in a closed-loop ecosystem, allowing for transparency, security, and flexibility. c) ChargeSavvy is our complete end-to-end POS solution, comprising both software and hardware for the restaurant and hospitality industry. Our proprietary blockchain-based technology serves as the settlement engine for all transactions within our ecosystem.
Secure tokens are used where users need an immediate transaction, in a safe, private, and secure environment, and where traditional banks may not work effectively, like cross-border transactions or in under-banked verticals. 7 Table of Contents We generate revenue from payment processing services, licensing fees and equipment sales. ● Payment processing revenue can come from merchant services, banking services, issuing, foreign exchange (FX), and ACH programs.
Secure tokens are used where users need an immediate transaction, in a safe, private, and secure environment, and where traditional banks may not work effectively, like cross-border transactions or in under-banked verticals. 6 Table of Contents We generate revenue from payment processing services, licensing fees and equipment sales. ● Our main source of revenue is payment processing.
We have three main products that are utilized by our customers: a) QuickCard Payment System is a comprehensive physical and virtual payment card processing management system, including software that facilitates on and off ramp e-wallet management. b) The Coyni Platform features a digital currency that is backed on a 1:1 ratio to the U.S.
We have three main products that are utilized by our customers: a) QuickCard Payment System is a comprehensive physical and virtual payment card processing management system, including software that facilitates off-ramp e-wallet management and fraud prevention. b) The Coyni Platform features a digital token supported by our blockchain technology.
We believe our Gen3 stabilized platform, in its stabilized end-to-end deployment, is the obvious tool of choice, without any meaningful competition, for both transactional and custodial roles of currency, and will appeal to various stakeholders: consumers, merchants, banks, and regulators. The Company has a Payment Facilitator License.
We believe our platform is the obvious tool of choice, without any meaningful competition, for both transactional and custodial roles of currency, and will appeal to various stakeholders: consumers, merchants, banks, and regulators.
On March 31, 2022, the Company acquired a portfolio of merchant accounts from Sky Financial & Intelligence for $18,110,000. The Company paid $16,000,000 of cash in March 2022 and issued 500,000 shares of restricted common stock for the transaction in May 2022. On April 1, 2022, the Company completed the acquisition of Transact Europe Holdings OOD.
On March 31, 2022, the Company acquired a portfolio of merchant accounts from Sky Financial & Intelligence LLC, a Wyoming limited liability company (“Sky Financial”) for $18,110,000. The Company paid $16,000,000 of cash in March 2022 and issued 500,000 shares of restricted common stock for the transaction on May 12, 2022.
If an event of default occurs, each holder may require us to redeem all or any portion of the Notes (including all accrued and unpaid interest and late charges thereon), in cash, at a 15% redemption premium to the greater of the face value and the equity value of our common stock underlying the Notes The equity value of our common stock underlying the Notes is calculated using the greatest closing sale price of our common stock on any trading day immediately preceding such event of default and the date we make the entire payment required.
If an event of default occurs, each holder may require us to redeem all or any portion of the Note (including all accrued and unpaid interest and late charges thereon), in cash, at a 15% redemption premium to the greater of the face value and the equity value of our Common Stock underlying the Note.
We believe Gen3 Platform is the most advanced technology released in the space to date. The latest installment of our technology, Gen3 features the following new properties: 8 Table of Contents 1. Payment token & e-wallet platform; 2. Banking as a service platform; 3. Stablecoin platform support; 4. Dynamic business APIs.
We believe the RYVYL Platform is the most advanced technology released in the space to date. The latest installment of our technology, features the following new properties: 1. Payment token and e-wallet platform; 2. Banking as a service platform; 3. Mobile POS software for retail; 4. Dynamic business Application Programming Interfaces or APIs; 5. RYVYL Blockchain as a service.
On October 13, 2022 GreenBox POS changed its name to RYVYL Inc. On May 21, 2021, the Company acquired all of the outstanding stock of Northeast Merchant Systems, Inc. (“Northeast”) in a transaction treated as a business combination.
On October 13, 2022, GreenBox POS changed its name to “RYVYL Inc.” On May 21, 2021, the Company acquired all of the outstanding stock of Northeast Merchant Systems, Inc. (“Northeast”) in a transaction treated as a business combination. Northeast is a merchant services company providing merchant credit card processing through its own Bank Identification Number with the acquiring bank, Merrick.
The terms of the Note include those provided in the First Indenture and those made part of the First Indenture by reference to the Trust Indenture Act. Ranking The Note is the senior unsecured obligations of the Company and not the financial obligations of our subsidiaries.
The terms of the Note include those provided in the First Indenture and those made part of the First Indenture by reference to the Trust Indenture Act.
The issuance of tokens is accomplished when we load a virtual wallet with a token, which then transfers credits to the merchant’s wallet on a dollar for dollar basis, after which the merchant releases its goods or services to the consumer.
These tokens are purchased or granted directly from the merchant's terminals or mobile app, and are immediately available for transactions. The issuance of tokens is accomplished when the Company loads a virtual wallet with a token, which then transfers credits to the merchant’s wallet on a dollar-for-dollar basis, after which the merchant releases its goods or services to the consumer.
We have launched a new kind of media to the mix: Secure Token Technology, called coyni, in the third quarter of 2022. This token is not minted nor mined, but rather it is the equivalent of a contract (an asset class called Smart Contract).
We believe our holistic end-to-end capabilities minimize user pain points in onboarding, transactions and offboarding. In 2022, we launched a new kind of media to the mix: Secure Token Technology, called Coyni. This token is neither minted nor mined, but rather it is the equivalent of a contract (an asset class called Smart Contract).
The principal purposes of our short-term incentive and long-term equity incentive plan are to attract, retain and reward personnel to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.
The principal purposes of our short-term incentive and long-term equity incentive plan are to attract, retain and reward personnel to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives. 8 Table of Contents Recent Developments In February 2024, the Company transitioned its QuickCard product in North America away from terminal-based to app-based processing.
It is highly secure, since the asset and its value are not held together in a closed-loop ecosystem; 3. It is deletable – the token can be cancelled; 4. It is reversible (undo-able), allowing for chargebacks in the case of a bad transaction. This allows the token to be kept alive for another transaction by the same user; 5.
It is deletable – the token can be cancelled; 4. It is reversible (undo-able), allowing for chargebacks in the case of a bad transaction. This allows the token to be kept alive for another transaction by the same user; 5. It is attached to our transactional infrastructure.
As such, Secure Token Technology has many advantages over all other coins and token, and deliver on the features most sought after in the crypto and legacy payment space. 1. It enables near real time funds visibility and faster settlement than traditional banking options; 2.
As such, Secure Token Technology has many advantages over tokens, and delivers on the features most sought after in the crypto payment space. 1. It enables near real time funds visibility and faster settlement than traditional banking options; 2. It is highly secure, since the asset and its value are not held together in a closed-loop ecosystem; 3.
Alternate Event of Default Optional Conversion If an event of default has occurred under the Note, each holder may alternatively elect to convert the Note (subject to an additional 15% redemption premium) at the “Alternate Event of Default Conversion Price” equal to the lesser of: ● the fixed conversion price then in effect; and the greater of: ● the floor price; and ● 80% of the lowest volume weighted average price of our common stock during the five trading days immediately prior to such conversion. 11 Table of Contents Beneficial Ownership Limitation The Note may not be converted and shares of common stock may not be issued under the Note if, after giving effect to the conversion or issuance, the applicable holder of the Note (together with its affiliates, if any) would beneficially own in excess of 4.99% of our outstanding shares of common stock, which we refer to herein as the “Note Blocker”.
Alternate Event of Default Optional Conversion If an event of default has occurred under the Note, each holder may alternatively elect to convert the Note (subject to an additional 15% redemption premium) at the “Alternate Event of Default Conversion Price” equal to the lesser of: ● the fixed conversion price then in effect; and the greater of: ● the floor price; and ● 80% of the lowest volume weighted average price of our Common Stock during the five trading days immediately prior to such conversion.
Although the Purchase Agreement is dated July 9th, it was entered into and closed on July 13th.The purchase price under the Purchase Agreement for the all-stock transaction consisted of 1,000,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) being issued and delivered to Sellers in proportion to the Sellers’ share of their membership interests in Charge Savvy.
The purchase price under the Purchase Agreement for the all-stock transaction consisted of 1,000,000 shares of the Company’s Common Stock being issued and delivered to Sellers in proportion to the Sellers’ share of their membership interests in Charge Savvy. The share price at issuance was $12.14.
Outside operations include: equipment service or replacement; sales calls and applications, site inspections and identity verification; security verification; and on-site customer service and technical support.
This involves inside operations for new merchants that include sales assistance and applications processing, underwriting, and onboarding and inside operations for existing merchants include risk monitoring and customer service. Outside operations include equipment service or replacement; sales calls and applications; site inspections and identity verification; security verification; and on-site customer service and technical support.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.
None of our employees are subject to collective bargaining agreements. We consider our relationship with our employees to be satisfactory. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.
When a merchant makes a sale, the process of receiving the payment card information, engaging its banks to transfer the proceeds to the merchant’s account via digital gateways, and recording the transaction on a blockchain ledger are the activities for which we get to collect fees. ● 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.
We collect fees for all these activities. ● 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.
Conversion Fixed Conversions at Option of Holder The holder of the Note may convert all, or any part, of the outstanding principal and interest of the Note, at any time at such holder’s option, into shares of our common stock at an initial fixed conversion price, which is subject to: ● proportional adjustment upon the occurrence of any stock split, stock dividend, stock combination and/or similar transactions; and ● full-ratchet adjustment in connection a subsequent offering at a per share price less than the fixed conversion price then in effect.
Conversion Fixed Conversions at Option of Holder The holder of the Note may convert all, or any part, of the outstanding principal and interest of the Note, at any time at such holder’s option, into shares of our Common Stock at an initial fixed conversion price, which is subject to: ● proportional adjustment upon the occurrence of any stock split, stock dividend, stock combination and/or similar transactions; and ● full-ratchet adjustment in connection a subsequent offering at a per share price less than the fixed conversion price then in effect. 11 Table of Contents Pursuant to the original terms of the Note, since during the fiscal quarter ending March 31, 2022, the Company (i) failed to process at least $750 million in transaction volume or (ii) had revenue that was less than $12 million, the Note’s fixed conversion price then in effect exceeded the greater of (x) the Note's $1.67 floor and (y) 140% of the market price as of April 1, 2022 (the “Adjustment Measuring Price”), on April 1, 2022, the fixed conversion price automatically adjusted to the Adjustment Measuring Price.
The equity value of the change of control consideration payable to the holder of our common stock underlying the Notes is calculated using the aggregate cash consideration per share of our common stock to be paid to the holders of our common stock upon the change of control.
The equity value of the change of control consideration payable to the holder of our Common Stock underlying the Note is calculated using the aggregate cash consideration and aggregate cash value of any non-cash consideration per share of our Common Stock to be paid to the holders of our Common Stock upon the change of control. 12 Table of Contents Events of Default Under the terms of the First Supplemental Indenture, the events of default contained in the Base Indenture shall not apply to the Note.
We record the sum balance of these funds due to Merchants and ISOs as Settlement Liabilities to Merchants and Settlement Liabilities to ISOs, respectively. Our primary revenue drivers in fiscal year 2022 were primarily the continuing growth of our merchant acquiring business utilizing our QuickCard System and geographic expansion in the European / UK markets and in American Samoa.
Concurrently, we record a portion of the cash due from gateways as revenue and the remaining balance, which is due to merchants and ISOs, as payment processing liabilities, net – a current liability. 7 Table of Contents Our primary revenue drivers in fiscal year 2023 were the continuing growth of our merchant acquiring business utilizing our QuickCard System and geographic expansion in the European market and in American Samoa.
The Note had an original issue discount of sixteen percent (16%) resulting in gross proceeds to us of $84 million. The Note was sold pursuant to the terms of a Securities Purchase Agreement, dated November 2, 2021 (the “SPA”), between us and the investor in the Note (the “Investor”).
The Note had an original issue discount of sixteen percent (16%) resulting in gross proceeds to us of $84 million.
Our telephone number is (619) 631-8261. The address of our website www.ryvyl.com. The inclusion of our website address in this Annual Report on Form 10-K does not include or incorporate by reference the information on our website into this Annual Report.
The inclusion of our web address in this Report does not include or incorporate by reference the information on our website into this Report. 13 Table of Contents
The license is necessary for us to facilitate card payments for our clients to process Visa , MasterCard, AmEx, and Discover Card purchases. Competition Although we believe there is currently no other company in the payment facilitator industry using, as we are, blockchain infrastructure, notable companies in the payment facilitator industry include PayPal, Stripe, and Square.
Competition Although we believe there is currently no other company in the payment facilitator industry using, as we are, blockchain infrastructure, notable companies in the payment facilitator industry include PayPal, Stripe, and Square. With respect to banking services and corporate payouts, our competition includes conventional banking services, neobanks, and solution providers such as Wise.
(iii) We are required to pay, on the Maturity Date, all outstanding principal, accrued and unpaid interest and accrued and unpaid late charges on such principal and interest, if any. The Company has the option to extinguish the Note should certain aspects of events leading to a potential spin-off and follow-up dividend materialize.
We are required to pay, on the Maturity Date, all outstanding principal, accrued and unpaid interest and accrued and unpaid late charges on such principal and interest, if any.
Customers We currently process transactions for approximately 2,000 business customers in North America, Europe, UK, and Asia and in over twenty-five (25) industries, including, but not limited to, FX, retail, and e-commerce sectors.
Customers We currently process transactions for approximately 2,300 business customers in North America, Europe and Asia, and in over 25 industries, including, but not limited to, FX, retail, and e-commerce sectors. We do not rely on any one customer for more than 5% of our processing volume or revenue. Employees and Human Capital We currently have approximately 99 full-time employees.
When consumers use credit/debit cards to pay for transactions with merchants who use our ecosystem, the transaction starts with the consumer purchasing tokens from us. The tokens are purchased or granted directly from the merchant's terminals or mobile app, or from our website and are immediately available for transactions.
When consumers use credit or debit cards to pay for transactions with merchants who use our ecosystem, the transaction starts with the consumer purchasing tokens from the Company. Tokens in this context are used represent and track the value or number of credits the consumer has received in the blockchain.
The interest rate of the Note will automatically increase to 15% per annum upon the occurrence and continuance of an event of default (See “-- Events of Default” below). 10 Table of Contents Late Charges We are required to pay a late charge of 15% on any amount of principal or other amounts that are not paid when due.
The interest rate of the Note will automatically increase to 15% per annum upon the occurrence and continuance of an event of default (See —“ Events of Default ” below).
The stablecoin space is comprised of Circle USDC and digital currency experiments by central banks, including initiatives like FedNow and digital banking. That said, in the business verticals we operate in, our solution package presents a compelling offering of cost effectiveness, faster settlement, greater privacy, and system security.
In the domain of international remittance and FX, there are key players such as Western Union, MoneyGram, and Currency Cloud. That said, in the business verticals we operate in, our solution package presents a compelling offering of cost effectiveness, faster settlement, greater privacy, and system security.
Transact Europe EAD (TEU) is an EU regulated electronic money institution headquartered in Sofia Bulgaria. TEU is a Principal Level Member of Visa, a Worldwide Member of MasterCard, and a Principal Member of China UnionPay. In addition, TEU is part of the direct SEPA program.
RYVYL EU is a Principal Level member of Visa, a worldwide member of MasterCard, and a principal member of China UnionPay. In addition, RYVYL EU is part of the direct Single Euro Payments Area (“SEPA”) program, a payment system enabling cashless payments across continental Europe.
Company Optional Redemption Rights At any time no event of default exits, we may redeem all, but not less than all, the Notes outstanding in cash all, or any portion, of the Notes at a 5% redemption premium to the greater of the face value and the equity value of our common stock underlying the Notes The equity value of our common stock underlying the Notes is calculated using the greatest closing sale price of our common stock on any trading day during the period commencing on the date immediately preceding such date we notify the applicable holder of such redemption election and the date we make the entire payment required. 12 Table of Contents Corporate Information Our principal executive offices are located at 3131 Camino Del Rio North, Suite 1400, San Diego, CA 92108.
Company Optional Redemption Rights At any time no event of default exits, we may redeem all, but not less than all, the Note outstanding in cash all, or any portion, of the Note at a 5% redemption premium to the greater of the face value and the equity value of our Common Stock underlying the Note.
It 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. This is our primary source of revenue.
We generate revenue through various activities such as merchant services, banking services, card issuing, foreign exchange (“FX”), and Automated Clearing House (“ACH”) programs. We charge a percentage of each transaction's value and/or a fixed amount specified per each transaction or service. This revenue is recognized as soon as the respective transaction or service is performed.
On August 16, 2022, the Company and the Holder agreed to (i) a forbearance of the Maturity Date of the Original Note from November 5, 2023 to November 5, 2024 (to the extent such repayment obligation arises solely as a result of the occurrence of the Maturity Date and not with respect to any other Event of Default or redemption right in the Original Note or pursuant to the Indenture), (ii) subject to the satisfaction of certain equity conditions, require the Holder to voluntarily convert certain interest payments when due under the Original Note, and (iii) in accordance with Section 7(g) of the Original Note, to reduce the Conversion Price of up to $4.5 million of Principal under the Original Note. the Forbearance shall not limit any other redemption rights of the Holder set forth in the Original Note or the Indenture, including, but not limited to the extent arising upon the occurrence of any other Event of Default.
As part of the Second Exchange Agreement, the Investor also agreed to forbear from requiring the repayment of the Note (to the extent such repayment obligation arises solely as a result of the occurrence of the maturity date and not with respect to any event of default or redemption rights in the Note or pursuant to the Indenture (as such term is defined in the Second Exchange Agreement)) during the period commencing on November 5, 2024 through, and including, April 5, 2025; and to extend the waiver of payment of interest under the Note through July 1, 2024.
Removed
Northeast is a merchant services company providing merchant credit card processing through their own Bank Identification Number (BIN) with the acquiring bank Merrick. This involves inside operations for new merchants that include sales assistance and applications processing, underwriting, and onboarding; inside operations for existing merchants include risk monitoring and customer service.
Added
On April 1, 2022, the Company completed the acquisition of Transact Europe Holdings OOD (“Transact Europe Holdings”). Transact Europe Holdings is the holding company of Transact Europe EAD (“TEU”). TEU formally changed its name to RYVYL EU on December 16, 2022. RYVYL EU is a European Union (“EU”) regulated electronic money institution headquartered in Sofia, Bulgaria.
Removed
In the case where we have received transaction funds but not yet paid a merchant or an ISO, we hold funds in either a trust account or as cash deemed restricted within our operating accounts. We record the total of such funds as Cash held for Settlements – this is a current asset.
Added
When a merchant makes a sale, we receive payment card information, engage banks to transfer the proceeds to the merchant's account via digital gateways and record the transaction on our blockchain ledger.
Removed
We believe Gen3’s holistic end-to-end capabilities minimize user pain points in onboarding, transactions and offboarding. In addition, Gen3 is the transactional foundation for the new Secure Token Technology described below. Currency has two primary roles: it can be transactional, or it can be custodial (reserve). US dollars play both roles.
Added
In the case where the Gateways have not yet remitted funds to us pertaining to transactions already processed, we record those amounts as cash due from gateways, net – a current asset.
Removed
There are several disadvantages encapsulated within the existing cryptocurrency architectures available today. A decentralized approach makes the crypto assets available for viewing from anywhere and at any time, but they are extremely volatile, hackable, slow to settle, and have no intrinsic value.
Added
This transition coincided with a change in our banking partner that was prompted by recent changes in the compliance environment and banking regulations. The unforeseen abrupt nature of the transition and slow initial adoption of the app-based product has led to a significant decline in processing volume in North America.
Removed
For the most part, they have a lot of transaction friction, in both time to settlement and transactional or conversion costs. As such, we believe these are not assets suitable as transactional currency and are questionable as custodial currency.
Added
This in turn has adversely affected revenue in the North America segment and, as a result, management anticipates consolidated revenue for the first quarter of 2024 will be down sequentially by approximately 30 percent overall, which is primarily attributable to this product transition. See Note 17, Subsequent Events , for additional information.
Removed
Centralized deployments can be stable (commonly called stablecoin), and are better as custodial media; however, none is attached to a transactional ecosystem, and exchange fees are still high. The USDC, a coin that is a USD digital equivalent, is an example of that.
Added
The temporary decline in revenue described above has adversely impacted the Company’s liquidity in its North America segment in the short term.
Removed
It is attached to a regulated custodial account that is audited and verified on a near real-time basis. The custodian will be a regulated bank. And the custodial account will be continuously audited to ensure it has a large enough cash balance to back all tokens in circulation; and 6. It is attached to our transactional infrastructure.
Added
As a result, management has determined that its cash and cash equivalents in the North America segment as of December 31, 2023, will not be sufficient to fund the segment’s operations and capital needs for the next 12 months from the issuance of this Report.
Removed
Because Secure Token Technology is attached to the value of the US dollar, it is also very good as a custodial vehicle, fitting the needs of low-risk yield seekers, such as pension funds and retirement accounts.
Added
Management’s intended plan over the next twelve months to address the temporary liquidity shortfall in the North America segment includes, but is not limited to, the following: ● acceleration of the Company’s business development efforts to drive volumes in diversified business verticals; ● the implementation of cost control measures to more effectively manage spending in the North America segment and right sizing the organization, where appropriate; ● repatriation of offshore profits from the Company’s European subsidiaries, whose continued accelerated growth and generation of positive cash flow have already provided, and will continue to provide, an immediate and viable short-term source of capital during this product transition; and ● a capital raise, which the Company intends to negotiate and consummate in the immediate term.
Removed
With respect to banking services and corporate payouts, our competition includes conventional banking services, neobanks, and solution providers such as Wise. In the domain of international remittance and foreign exchange, there are key players such as Western Union, MoneyGram, and Currency Cloud.
Added
Management has assessed that its intended plan is appropriate and sufficient to address the liquidity shortfall in its North America segment.
Removed
We do not rely on any one customer for more than 5% of our processing volume or revenue. 9 Table of Contents Employees and Human Capital We currently have approximately 110 full-time employees. None of our employees are subject to collective bargaining agreements. We consider our relationship with our employees to be satisfactory.
Added
However, there can be no guarantee that we will be successful in implementing our plan or in acquiring additional funding, that our projections of our future capital needs will prove accurate, or that any additional funding will be sufficient to continue our operations in the North America segment.
Removed
On January 28, 2022, we, and the Investor, entered into an Agreement and Waiver (the “Waiver”) with regard to the Note that has the following major provisions: (a) the Investor agreed to extend the “90 Day Eligibility Date,” as defined, from February 3, 2022 to May 2, 2022 such that the Investor can no longer, if the closing price of the stock is less than $5.50, convert up to $30 million of the Note into shares of the Company’s common stock (with the conversion price being the lower of (i) the then in effect conversion price and (ii) the greater of (x) the Note’s $1.67 floor price or (y) 98% of the market price on the conversion date) (the “Alternate Optional Conversion Price”) prior to May 2, 2022; (b) allows us to acquire, for cancellation, $6 million in in aggregate principal amount of the Note for a purchase price of $6.9 million such that the new principal amount of the Note is $94 million; (c) lowers the initial fixed conversion price of the Note from $15 to $12; and (d) if the trading volume of our common stock on any individual trading day is over $5 million (the “Alternate Conversion Company Waiver Measuring Date”), allows the Investor an opportunity to convert up to $5 million of the Note into shares of our common stock from the Alternate Conversion Company Waiver Measuring Date through and including 7:00 PM ET on the immediately following trading day.
Added
Refer to the “Going Concern” subsection within Note 2, Summary of Significant Accounting Policies , for additional information. Logicquest Technology, Inc.
Removed
The conversion price would be the lower of (i) the then in effect conversion price and (ii) the greater of (x) the Note’s $1.67 floor price or (y) 98% of the market price on the conversion date. The Company paid the investor $6.0 million, $5.0 million and $3.6 million in the first three quarters of 2022, respectively.
Added
In April 2023, we executed a purchase agreement for 99.4 million shares of restricted common stock of Logicquest Technology, Inc., a Nevada corporation (“Logicquest”) representing ownership of 99.1% of Logicquest, 48 shares of Series C Convertible Non-Redeemable Preferred Stock of Logicquest, and 10 shares of Series D Convertible Non-Redeemable Preferred Stock of Logicquest, in exchange for an aggregate purchase price of $225,000.
Removed
Clarification to First Quarter Adjustment to Fixed Conversion Price If, during the fiscal quarter ending March 31, 2022, we (i) fail to process at least $750 million in transaction volume or (ii) have revenue that is less than $12 million, and, if the Note’s fixed conversion price then in effect is greater than the greater of (x) the Note’s $1.67 floor price floor and (y) 140% of the market price as of April 1, 2022 (the “Adjustment Measuring Price”) then, on April 1, 2022, the fixed conversion price will automatically adjust to the Adjustment Measuring Price.
Added
Logicquest was a shell company (as defined in Rule 12b-2 of the Exchange Act) quoted on the Over-the-Counter Pink Open Market under the symbol “LOGQ” and is required to file reports and other information with the SEC pursuant to the Exchange Act.
Removed
Events of Default Under the terms of the first supplemental indenture, the events of default contained in the base indenture shall not apply to the Notes.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

27 edited+54 added−9 removed56 unchanged
Biggest changeThe difficulties of combining the operations of the companies include, among others: ● the diversion of management’s attention to integration matters; ● difficulties in achieving anticipated cost savings, synergies, business opportunities, and growth prospects from the combination; ● potential challenges in obtaining requisite government regulator approvals; 14 Table of Contents ● difficulties in the integration of operations and systems; and ● conforming standards, controls, procedures, accounting and other policies, business cultures, and compensation structures between the two companies.
Biggest changeThe difficulties of combining the operations of the companies include, among others: ● the diversion of management’s attention to integration matters; ● difficulties in achieving anticipated cost savings, synergies, business opportunities, and growth prospects from the combination; ● potential challenges in obtaining requisite government regulatory approvals; ● difficulties in the integration of operations and systems; and ● conforming standards, controls, procedures, accounting and other policies, business cultures, and compensation structures between the two companies. 18 Table of Contents We cannot be certain that the products and offerings of companies we may acquire, or acquire an interest in, will achieve or maintain popularity with consumers in the future or that any such acquired companies or investments will allow us to market our products more effectively, develop our competencies or to grow our business.
Any such charges could significantly harm our business, financial condition, results of operations, and the price of our securities. 13 Table of Contents The restatement of our historical financial statements has consumed a significant amount of our time and resources and may continue to do so.
Any such charges could significantly harm our business, financial condition, results of operations, and the price of our securities. 16 Table of Contents The restatement of our historical financial statements has consumed a significant amount of our time and resources and may continue to do so.
Any future inquiries from the SEC or The Nasdaq Stock Market as a result of the restatement of our historical financial statements will, regardless of the outcome, likely consume a significant amount of our resources in addition to those resources already consumed in connection with the restatement itself.
Any future inquiries from the SEC or Nasdaq as a result of the restatement of our historical financial statements will, regardless of the outcome, likely consume a significant amount of our resources in addition to those resources already consumed in connection with the restatement itself.
Although we have now completed the restatement, we cannot guarantee that we will have no further inquiries from the SEC or The Nasdaq Stock Market regarding our restated consolidated financial statements or matters relating thereto.
Although we have now completed the restatement, we cannot guarantee that we will have no further inquiries from the SEC or The Nasdaq Stock Market LLC (“Nasdaq”) regarding our restated consolidated financial statements or matters relating thereto.
Systems and control failures, security breaches and/or inadvertent disclosure of user data could result in government and legal exposure, seriously harm our business, and impair our ability to attract and retain customers. 16 Table of Contents We may experience cyber-attacks and other attempts to gain unauthorized access to our systems.
Systems and control failures, security breaches and/or inadvertent disclosure of user data could result in government and legal exposure, seriously harm our business, and impair our ability to attract and retain customers. We may experience cyber-attacks and other attempts to gain unauthorized access to our systems.
Litigation may be necessary to defend against such claims, which could result in substantial costs and be a distraction to management and which may have a material adverse effect on us, even if we are successful in defending such claims. We also rely in our business on trade secrets, know-how and other proprietary information.
Litigation may be necessary to defend against such claims, which could result in substantial costs and be a distraction to management and which may have a material adverse effect on us, even if we are successful in defending such claims. 20 Table of Contents We also rely in our business on trade secrets, know-how and other proprietary information.
We cannot be certain that the key talented individuals at these companies would continue to work for us after the acquisition or that they would develop popular and profitable products, entertainment or services in the future.
We cannot be certain that the key talented individuals at these companies will continue to work for us after the acquisition or that they will develop popular and profitable products or services in the future.
Introduction of new technology may result in higher costs to us than that of the technology replaced. That increase in costs, which may continue indefinitely or until increased demand and greater availability in the sources of the new technology drive down its cost, could adversely affect our results of operations.
That increase in costs, which may continue indefinitely or until increased demand and greater availability in the sources of the new technology drive down its cost, could adversely affect our results of operations.
As a strategic response to changes in the competitive environment, we may from time to time make certain decisions concerning expenditures, pricing, service, or marketing that could have a material and adverse effect on our business, results of operations, and financial condition.
As a strategic response to changes in the competitive environment, we may from time to time make certain decisions concerning expenditures, pricing, service, or marketing that could have a material and adverse effect on our business, results of operations, and financial condition. Due to the foregoing factors, our quarterly revenues and operating results are difficult to forecast.
Attacks and security issues could also compromise trade secrets and other sensitive information, harming our business. As a result, we may suffer significant legal or financial exposure, which could harm our business, financial condition, and operating results. A prolonged economic downturn could adversely affect our business. Uncertain global economic conditions could adversely affect our business.
Attacks and security issues could also compromise trade secrets and other sensitive information, harming our business. As a result, we may suffer significant legal or financial exposure, which could harm our business, financial condition, and operating results.
Our executive officers, directors, and principal shareholders maintain the ability to control substantially all matters submitted to shareholders for approval. As of December 31, 2022, our executive officers, directors, and shareholders who owned more than 5% of our outstanding Common Stock, in the aggregate, beneficially owned 18,935,101 shares of Common Stock representing approximately 38% of our outstanding capital stock.
Our executive officers, directors, and principal shareholders maintain the ability to control substantially all matters submitted to shareholders for approval. As of December 31, 2023, our executive officers, directors, and shareholders who owned more than 5% of our outstanding Common Stock, in the aggregate, beneficially owned 2,229,819 shares of Common Stock representing approximately 36% of our outstanding capital stock.
We are subject to the following factors that may negatively affect our operating results: ● our ability to upgrade and develop our systems and infrastructure to accommodate growth; ● our ability to attract and retain key personnel in a timely and cost-effective manner; ● technical difficulties; ● the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations, and infrastructure; ● our ability to identify and enter into relationships with appropriate and qualified third-party providers for necessary development and manufacturing services; ● regulation by federal, state, or local governments; ● banking industry turmoil and headwinds in the digital asset space; ● general economic conditions, as well as economic conditions specific to the entertainment, theme park, party items, arts and crafts, and packaging industries; and ● various risks related to health epidemics, pandemics and similar outbreaks, such as the coronavirus disease 2019 (“COVID-19”) pandemic, which may have material adverse effects on our business, financial position, results of operations and/or cash flows.
We are subject to the following factors that may negatively affect our operating results: ● our ability to upgrade and develop our systems and infrastructure to accommodate growth; ● our ability to attract and retain key personnel in a timely and cost-effective manner; ● technical difficulties; ● the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations, and infrastructure; ● our ability to identify and enter into relationships with appropriate and qualified third-party providers for necessary development and manufacturing services; ● regulation by federal, state, or local governments; ● banking industry turmoil and headwinds in the digital asset space; and ● general economic conditions, as well as economic conditions specific to the entertainment, theme park, party items, arts and crafts, and packaging industries.
As described herein, we have restated our consolidated financial statements for the periods discussed herein. The restatement process was highly time and resource-intensive and involved substantial attention from management, as well as significant legal and accounting costs.
As further described in Note 3 to the consolidated financial statements, we have restated our consolidated financial statements for the therein. The restatement process was highly time and resource-intensive and involved substantial attention from management, as well as significant legal and accounting costs.
Risks Related to Our Company The loss of key personnel or the inability of replacements to quickly and successfully perform in their new roles could adversely affect our business.
An investment in our securities involves a high degree of risk. Risks Related to Our Business and Industry The loss of key personnel or the inability of replacements to quickly and successfully perform in their new roles could adversely affect our business.
In addition, because patent applications can take many years to issue, there may be applications now pending of which we are unaware, which later may result in issued patents that our products may infringe.
Whether a product infringes a patent involves complex legal and factual issues, the determination of which is often uncertain. In addition, because patent applications can take many years to issue, there may be applications now pending of which we are unaware, which later may result in issued patents that our products may infringe.
We are increasingly dependent on information technology, and potential cyberattacks, security problems, or other disruption and expanding social media vehicles present new risks. We rely on information technology networks and systems, including the internet, to process, transmit, and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, billing, and operating data.
We rely on information technology networks and systems, including the internet, to process, transmit, and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, billing, and operating data.
Our financial statements may be materially affected if our estimates prove to be inaccurate as a result of our limited experience in making critical accounting estimates. Financial statements prepared in accordance with GAAP require the use of estimates, judgments, and assumptions that affect the reported amounts. Actual results may differ materially from these estimates under different assumptions or conditions.
Financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) require the use of estimates, judgments, and assumptions that affect the reported amounts. Actual results may differ materially from these estimates under different assumptions or conditions.
Further, in the normal course of our business, we collect, store and transmit proprietary and confidential information regarding our customers, employees, and others, including personally identifiable information.
Any significant breakdown, invasion, destruction, interruption, or leakage of information from our systems could harm our business. 19 Table of Contents Further, in the normal course of our business, we collect, store and transmit proprietary and confidential information regarding our customers, employees, and others, including personally identifiable information.
Most of our consultants are employed by or have consulting agreements with third parties and any inventions discovered by such individuals generally will not become our property.
Most of our consultants are employed by or have consulting agreements with third parties and any inventions discovered by such individuals generally will not become our property. There is a risk that other parties may breach confidentiality agreements or that our trade secrets become known or independently discovered by competitors, which could adversely affect us.
Our competitive advantage is due in part to our ability to develop and introduce new products in a timely manner at favorable margins. The uncertainties associated with developing and introducing new products, such as market demand and costs of development and production, may impede the successful development and introduction of new products on a consistent basis.
The uncertainties associated with developing and introducing new products, such as market demand and costs of development and production, may impede the successful development and introduction of new products on a consistent basis. Introduction of new technology may result in higher costs to us than that of the technology replaced.
In some cases, it will be difficult to anticipate or immediately detect such incidents and the damage they cause. Any significant breakdown, invasion, destruction, interruption, or leakage of information from our systems could harm our business.
In some cases, it will be difficult to anticipate or immediately detect such incidents and the damage they cause.
Moreover, the ultimate success and profitability of the new products may depend on our ability to resolve technical and technological challenges in a timely and cost-effective manner. Our investments in productive capacity and commitments to fund advertising and product promotions in connection with these new products could erode profits if those expectations are not met.
Moreover, the ultimate success and profitability of the new products may depend on our ability to resolve technical and technological challenges in a timely and cost-effective manner.
Any failure, or perceived failure, by us to adhere to our public statements, comply fully with developing interpretations of ESG laws and regulations, or meet evolving and varied stakeholder expectations and standards could harm our business, reputation, financial condition, and operating results. Item 1B. Unresolved Staff Comments Not applicable.
Any failure, or perceived failure, by us to adhere to our public statements, comply fully with developing interpretations of ESG laws and regulations, or meet evolving and varied stakeholder expectations and standards could harm our business, reputation, financial condition, and operating results. 15 Table of Contents Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions, have and could in the future, adversely affect our business, financial condition, results of operations, or prospects.
Due to the foregoing factors, our quarterly revenues and operating results are difficult to forecast. 15 Table of Contents Low demand for new products and the inability to develop and introduce new products at favorable margins could adversely impact our performance and prospects for future growth.
Low demand for new products and the inability to develop and introduce new products at favorable margins could adversely impact our performance and prospects for future growth. Our competitive advantage is due in part to our ability to develop and introduce new products in a timely manner at favorable margins.
We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition, and results of operations. Third-party claims of infringement against us could adversely affect our ability to market our products and require us to redesign our products or seek licenses from third parties.
We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition, and results of operations. It may be illegal now, or in the future, to participate in blockchains or utilize similar digital assets in one or more countries, the ruling of which would adversely affect us.
We are susceptible to intellectual property lawsuits that could cause us to incur substantial costs, pay substantial damages, or prohibit us from distributing our products. Whether a product infringes a patent involves complex legal and factual issues, the determination of which is often uncertain.
Third-party claims of infringement against us could adversely affect our ability to market our products and require us to redesign our products or seek licenses from third parties. We are susceptible to intellectual property lawsuits that could cause us to incur substantial costs, pay substantial damages, or prohibit us from distributing our products.
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. We may require additional financing to sustain or grow our operations. Our growth will be dependent on our ability to access additional equity and debt capital.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.
Removed
Item 1A. Risk Factors An investment in our Common Stock involves a high degree of risk. Investing in shares of our Common Stock involves risks.
Added
Item 1A. Risk Factors The following describes material risks, uncertainties, and other factors that could have a material effect on us and our operations.
Removed
Before making a decision to invest in shares of our Common Stock, you should carefully consider the risks that are described in this section and in the other information that we file from time to time with the SEC. You should also read the sections entitled “ Cautionary Note Regarding Forward-Looking Statements ” .
Added
The risks described below may not be the only risks we face, as our business and operations may also be subject to risks that we do not yet know of, or that we currently believe are immaterial.
Removed
Additional risks not presently known or that we currently deem immaterial could also materially and adversely affect us. You should consult your own financial and legal advisors as to the risks entailed by an investment in shares of our Common Stock and the suitability of investing in our shares in light of your particular circumstances.
Added
If any of the events or circumstances described below actually occur, our business, financial condition, results of operations or cash flow could be materially and adversely affected and the trading price of our common stock could decline. The following risk factors should be read in conjunction with the other information contained herein, including the financial statements and the related notes.
Removed
If any of the risks contained in this Annual Report on Form 10-K develop into actual events, our assets, business, cash flows, condition (financial or otherwise), credit quality, financial performance, liquidity, long-term performance goals, prospects, and/or results of operations could be materially and adversely affected, the trading price of our Common Stock could decline and you may lose all or part of your investment.
Added
Our investments in productive capacity and commitments to fund advertising and product promotions in connection with these new products could erode profits if those expectations are not met. 14 Table of Contents A prolonged economic downturn could adversely affect our business. Uncertain global economic conditions could adversely affect our business.
Removed
As a result of the material weaknesses described below, as of December 31, 2022, 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 to the SEC 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, as appropriate, to allow timely decisions regarding required disclosure.
Added
The funds in our accounts are held in banks or other financial institutions. Our funds held in non-interest bearing and interest-bearing accounts would exceed any applicable Federal Deposit Insurance Corporation (“FDIC”) insurance limits.
Removed
The material weaknesses, which relate to internal control over financial reporting, that were identified are that we did not have sufficient personnel in our accounting and financial reporting functions to achieve an adequate segregation of duties to provide for adequate reviewing of the financial statements.
Added
Should events, including limited liquidity, defaults, non-performance or other adverse developments occur with respect to the banks or other financial institutions that hold our funds, or that affect financial institutions or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, our liquidity may be adversely affected.
Removed
Moreover, part of our business strategy may involve the use of debt financing to increase potential revenues. Our inability in the future to obtain additional equity capital or a corporate credit facility on attractive terms, or at all, could adversely impact our ability to execute our business strategy, which could adversely affect our growth prospects and future shareholder returns.
Added
For example, on March 10, 2023, the FDIC announced that Silicon Valley Bank had been closed by the California Department of Financial Protection and Innovation.
Removed
We cannot be certain that the products and offerings of companies we may acquire, or acquire an interest in, will achieve or maintain popularity with consumers in the future or that any such acquired companies or investments will allow us to more effectively market our products, develop our competencies or to grow our business.
Added
Although we did not have any funds in Silicon Valley Bank or other institutions that have been closed, we cannot guarantee that the banks or other financial institutions that hold our funds will not experience similar issues. Our business is dependent on our strategic banking relationships to process our electronic transactions.
Removed
There is a risk that other parties may breach confidentiality agreements or that our trade secrets become known or independently discovered by competitors, which could adversely affect us. 17 Table of Contents It may be illegal now, or in the future, to participate in blockchains or utilize similar digital assets in one or more countries, the ruling of which would adversely affect us.
Added
If we are unable to secure or retain a banking partner due to market conditions in the financial services industry, our financial condition will be materially affected.
Added
In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on terms favorable to us could have material adverse impacts on our liquidity, our business, financial condition or results of operations, and our prospects.
Added
Our business is dependent on our strategic banking relationships to process our electronic transaction. Our business and our relationships with banking partners has been and may in the future, be adversely impacted by these developments in ways that we cannot predict at this time.
Added
There may be additional risks that we have not yet identified, and we cannot guarantee that we will be able to avoid negative consequences directly or indirectly from any failure of one or more banks or other financial institutions. In February 2024, the Company transitioned its QuickCard product in North America away from terminal-based to app-based processing.
Added
This transition coincided with a change in our banking partner that was prompted by recent changes in the compliance environment and banking regulations. The unforeseen abrupt nature of the transition and slow initial adoption of the app-based product has led to a significant decline in processing volume in North America.
Added
This in turn has adversely affected revenue in the North America segment and, as a result, management anticipates consolidated revenue for the first quarter of 2024 will be down sequentially by approximately 30 percent overall, which is primarily attributable to this product transition. See Note 17, Subsequent Events, for additional information.
Added
As a result of the developments described above, the Company’s liquidity in its North America segment has been adversely impacted in the short term. In direct response, management has devised a plan, which it has assessed as appropriate and sufficient to address the liquidity shortfall in the North America segment.
Added
Refer to the “Going Concern” subsection within Note 2, Summary of Significant Accounting Policies, for details of management’s intended plan and further assessment. Risks Related to Our Financial Position and Need for Capital Our financial statements may be materially affected if our estimates prove to be inaccurate as a result of our limited experience in making critical accounting estimates.
Added
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and Nasdaq rules and regulations. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
Added
Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent fraud.
Added
We must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting in this Report, as required by Section 404 of the Sarbanes-Oxley Act (“Section 404”).
Added
This requires significant management efforts and requires us to incur substantial professional fees and internal costs to expand our accounting and finance functions. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations.
Added
In addition, any testing by us, as and when required, conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, as and when required, may reveal deficiencies in our internal controls over financial reporting that are deemed to be significant deficiencies or material weaknesses, including the material weakness described below, or that may require prospective or retroactive changes to our financial statements, or may identify other areas for further attention or improvement.
Added
Furthermore, we cannot be certain that our efforts will be sufficient to remediate or prevent future material weaknesses or significant deficiencies from occurring. We have identified control deficiencies in the design and implementation of our internal control over financial reporting that constituted a material weakness.
Added
Any failure to implement and maintain effective internal control over financial reporting could adversely affect the results of the period including management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that are filed with the SEC.
Added
Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our stock.
Added
The material weakness that was identified, which relates to internal control over financial reporting, is as follows: ● Currently, management does not have a complete process in place to fully reconcile the transactions between its operating system (a Company-developed platform) and its general ledger system, at the individual transaction level.
Added
This deficiency hampers the Company’s ability to timely and accurately identify differences that may require adjustment to its consolidated financial statements.
Added
As described in Item 9A of Part II of this Report, management is in the process of remediating the deficiency described above and intends to take any additional actions as may be deemed appropriate to further strengthen the Company’s internal control over financial reporting.
Added
However, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Added
In the future, we may identify additional material weaknesses that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements.
Added
If we fail to remediate such material weaknesses or if we otherwise fail to establish and maintain effective control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected. 17 Table of Contents We may require additional financing to sustain or grow our operations.
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Raising additional capital may cause dilution to our existing stockholders and investors, restrict our operations or require us to relinquish rights to our products and/or product candidates on unfavorable terms to us. We may seek additional capital through a variety of means, including through private and public equity offerings and debt financings, collaborations, strategic alliances, and marketing or licensing arrangements.
Added
To the extent that we raise additional capital through the sale of equity or convertible debt securities, or through the issuance of shares under other types of contracts, or upon the exercise or conversion of outstanding options, warrants, convertible debt or other similar securities, the ownership interests of our stockholders will be diluted, and the terms of such financings may include liquidation or other preferences, anti-dilution rights, conversion and exercise price adjustments and other provisions that adversely affect the rights of our stockholders, including rights, preferences and privileges that are senior to those of our holders of Common Stock in terms of the payment of dividends or in the event of a liquidation.
Added
In addition, debt financing, if available, could include covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital expenditures, entering into licensing arrangements, or declaring dividends and may require us to grant security interests in our assets.
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If we raise additional funds through collaborations, strategic alliances, or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, product or product candidates or grant licenses on terms that may not be favorable to us.
Added
If we are unable to raise additional funds through equity or debt financing when needed, we may need to curtail or cease our operations. Our growth will be dependent on our ability to access additional equity and debt capital.
Added
We may seek additional capital through a variety of means, including through private and public equity offerings and debt financings, collaborations, and strategic alliances.
Added
To the extent that we raise additional capital through the sale of equity or convertible debt securities, or through the issuance of shares under other types of contracts, or upon the exercise or conversion of outstanding options, warrants, convertible debt or other similar securities, the ownership interests of our stockholders will be diluted, and the terms of such financings may include liquidation or other preferences, anti-dilution rights, conversion and exercise price adjustments and other provisions that adversely affect the rights of our stockholders, including rights, preferences, and privileges that are senior to those of our holders of Common Stock in terms of the payment of dividends or in the event of a liquidation.
Added
In addition, debt financing, if available, could include covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require us to grant security interests in our assets.
Added
If we raise additional funds through collaborations, strategic alliances, or marketing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, products, and services. If we are unable to raise additional funds through equity or debt financing when needed, we may need to curtail or cease our operations.
Added
Risks Related to Cybersecurity, Information Technology, and Intellectual Property We are increasingly dependent on information technology, and potential cyberattacks, security problems, or other disruption and expanding social media vehicles present new risks.
Added
Risks Related to Owning Our Common Stock We are subject to increased costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance initiatives.
Added
As a public company, we incur significant legal, accounting, and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements.
Added
The Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and Nasdaq to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices.
Added
Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas, such as “say on pay” and proxy access.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We primarily operate from leased space. Our executive offices are located at 3131 Camino del Rio North, Suite 1400, San Diego, CA. We also lease office space in various locations for our subsidiaries. In July 2021 we acquired a multi-tenant industrial building as part of the ChargeSavvy LLC transaction.
Biggest changeItem 2. Properties We lease office space at four locations in the United States (California, Illinois, Massachusetts, and Florida) and one location in the EU (Sofia, Bulgaria). Our executive offices are located at 3131 Camino del Rio North, Suite 1400, San Diego, CA.
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This building consists of approximately 64,000 square feet and was assigned a value of $1,360,000 in the application of purchase accounting. 18 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings We are from time to time subject to claims and litigation arising in the ordinary course of business. We intend to defend vigorously against any future claims and litigation. This is a summary of our current outstanding litigation: ● Corporate Performance Consulting, LLC (CPC) v.
Added
Item 3. Legal Proceedings We are currently a party to, and may in the future be involved in, various litigation matters and legal claims. Refer to Note 15, Commitments and Contingencies, within Notes to the Consolidated Financial Statements for further information. Item 4. Mine Safety Disclosures Not applicable. 22 Table of Contents PART II
Removed
GreenBox POS : On April 7, 2021, CPC filed a complaint against RYVYL Inc. in San Diego Superior Court. Plaintiff CPC alleges breach of contract, breach of implied covenant of good faith and fair dealing, goods and services rendered, negligent misrepresentation, violation of CA Business and Professions Code Section 17200, and unjust enrichment.
Removed
The crux of CPC’s claim is that RYVYL Inc. failed to compensate for certain consulting and corporate advisory services. RYVYL Inc. believes the claims are without merit and intends to defend itself vigorously.
Removed
On June 17, 2021 RYVYL Inc. filed a Cross-Complaint for breach of contract, breach of implied covenant of good faith and fair dealing, negligent misrepresentation, unjust enrichment, and rescission. The parties attended mediation on December 15, 2022 and subsequently entered into a confidential settlement agreement.
Removed
The parties have executed a request for dismissal with prejudice to be filed with the Court. ● The Good People Farms, LLC (TGPF) : TGPF initiated an arbitration in AAA on or about April 20, 2020 against RYVYL Inc., Fredi Nisan, Ben Errez, MTrac Tech., Vanessa Luna, and Jason LeBlanc. The matter was placed in abeyance for some time.
Removed
On January 15, 2021 RYVYL Inc. filed a counter-claim for fraud - intentional misrepresentation, breach of contract, breach of covenant of good faith and fair dealing, violation of California Business and Professions Code Section 17200, and accounting. The arbitration was stayed pending further proceedings in the separate but related action filed by MTrac and Ms.
Removed
Luna in San Diego Superior Court. The arbitration re-commenced upon the state court's January 14, 2022 order denying MTrac's and Ms. Luna's motion for summary judgment and granting of The Good People Farm's motion to compel arbitration as to MTrac only.
Removed
TGPF submitted a new statement of claim of June 21, 2022; the individual named as respondents in the original arbitration demand have been removed. Final arbitration hearings are set for April 18-21, 2023. ● Pure Health, et al. v.
Removed
Worldpay LLC et. al. : On February 18, 2022 forty-three online marketer Plaintiffs filed suit in the Court of Common Pleas, Hamilton County, Ohio against Worldpay LLC (formerly Vantiv LLC), Fifth Third Bank, ChargeSavvy LLC, a wholly owned subsidiary of RYVYL Inc., RYVYL Inc., and John Does 1 (Defendants) through 10, alleging breach of contract, breach of implied covenant of good faith and fair dealing, conversion, and money had and received (constructive trust).
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Defendant RYVYL Inc. believes that Plaintiffs’ claims against it are without merit and plans to pursue all judicial remedies necessary to resolve this matter.
Removed
The parties have settled the matter and executed a request for dismissal with prejudice to be filed with the Court. ● On April 27, 2022, Paul Levine (“Levine”), former Chief Executive Officer of Coyni, Inc., wholly-owned subsidiary of RYVYL Inc., filed a charge with The Occupational Safety and Health Administration (“OSHA”) against respondents Coyni and RYVYL Inc.
Removed
Levine alleges retaliation in violation of the Sarbanes-Oxley Act of 2022, as amended, 18 U.S.C. §1514A (“SOX”). The OSHA claim was withdrawn on or around April 3, 2023. ● On November 8, 2022, RYVYL Inc. filed a complaint against its former COO, Luna Consultant Group, LLC and John Does 1 through 50 in San Diego Superior Court.
Removed
RYVYL is alleging misappropriation of trade secrets, breach of fiduciary duty, and conversion among other causes of action. The parties are currently in the discovery phase. ● On November 10, 2022, Vanessa Luna, former COO of RYVYL Inc., filed a complaint against RYVYL and Fredi Nisan.
Removed
Luna alleges breach of contract, unjust enrichment, promissory estoppel, harassment, retaliation and wrong termination, and fraud among other claims. Luna is seeking damages including compensatory damages, unpaid wages (past and future), loss of wages and benefits (past and future), expectation damages, and other damages to be proven at trial. The Company denies all allegations. Investigation is ongoing.
Removed
As the Company cannot predict the outcome of the matter the probability of an outcome cannot be determined. The Company intends to vigorously defend against all claims.
Removed
The parties are currently in the discovery phase. 19 Table of Contents ● On December 12, 2022, Jacqueline Dollar (aka Jacqueline Reynolds), former CMO of RYVYL Inc. filed a complaint against RYVYL Inc. fka GreenBox POS, Inc., Fredi Nisan, and DOES 1-20 alleging sex discrimination in violation of FEHA, failure to prevent discrimination in violation of FEHA, IIED, NIED, and negligent supervision/negligent retention.
Removed
Ms. Dollar is seeking an unspecified amount of damages related to, among other things, payment of past and future lost wages, stock issuances, bonuses and benefits, compensatory damages, and general, economic, non-economic, and special damages. As the Company cannot predict the outcome of the matter the probability of an outcome cannot be determined.
Removed
The Company intends to vigorously defend against all claims. ● On February 1, 2023 a purported class action lawsuit titled Cullen V.
Removed
RYVYL Inc. fka GreenBox POS, Inc., et al., Case No. 3:23-cv-00185-GPC-AGS, was filed in the United States District Court for the Southern District of California against the company and certain of our current and former directors and officers (the “Defendants”).
Removed
The complaint was filed on behalf of persons who purchased or otherwise acquired the Company’s publicly traded securities between January 29, 2021 and January 20, 2023, (the “Class Action”).
Removed
The complaint generally alleges that the Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making false and misleading statements regarding the Company’s financial performance and prospects. The action includes claims for damages, including interest, and an award of reasonable costs and attorneys’ fees and expert fees to the putative class.
Removed
As the Company cannot predict the outcome of the matter the probability of an outcome cannot be determined. The Company intends to vigorously defend against all claims.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeTotal Number of Average Price Paid Total Number of Shares Purchased as Part of Publicly Announced Plans or Approximate Dollar Value of Shares that May Yet Be Purchased Under the Period Shares Purchased per Share Programs Programs November 1 to 30, 2021 1,000,000 $ 5.59 July 1 to 31, 2022 1,000,000 $ 0.82 Total 3,098,586 $ 653,215 Recent Issuance of Unregistered Securities We had no sales of unregistered securities in 2022 that have not been previously disclosed in a Current Report on Form 8-K or Quarterly Report on Form 10-Q other than following: We issued 850,833 unregistered shares in total for the year ended December 31, 2022.
Biggest changePeriod Total Number of Shares Purchased Average Price per Share Paid Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs January 1 to December 31, 2022 268,376 $ 39.40 268,376 $ 653,215 Total 268,376 268,376 653,215 23 Table of Contents Recent Issuance of Unregistered Securities We had no sales of unregistered securities in 2023 that have not been previously disclosed in a Current Report on Form 8-K or Quarterly Report on Form 10-Q other than following: We issued a total of 4,890 unregistered shares of common stock for the year ended December 31, 2023.The shares were issued to (former) directors of the Board as compensation.
Dividends There have been no cash dividends declared on our common stock, and we do not anticipate paying cash dividends in the foreseeable future. Dividends are declared at the sole discretion of our Board of Directors.
Dividends There have been no cash dividends declared on our Common Stock, and we do not anticipate paying cash dividends in the foreseeable future. Dividends are declared at the sole discretion of our Board.
The specific timing and amount of repurchases will vary based on available capital resources and other financial and operational performance, market conditions, securities law limitations, and other factors. The repurchases will be made using the Company’s cash resources.
The specific timing and amount of repurchases will vary based on available capital resources and other financial and operational performance, market conditions, securities law limitations, and other factors. The repurchases will be made using our cash resources.
Under the Share Repurchase Program, the Company is authorized to repurchase shares through open market purchases, privately-negotiated transactions, accelerated share repurchases or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The repurchases may be suspended or discontinued completely at any time.
Under the Share Repurchase Program, we are authorized to repurchase shares through open market purchases, privately-negotiated transactions, accelerated share repurchases or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Exchange Act. The repurchases may be suspended or discontinued completely at any time.
From May 13, 2021 to December 31, 2022, the Company repurchased a total of 3,098,586 shares at an aggregate cost of $14,346,785. These amounts include two related party transactions in which the Company repurchased 2 million shares of common stock held by PrivCo. See Item 13.
For the year ended December 31, 2022, we repurchased 268,376 shares at an aggregate cost of $9.7 million. These repurchases include two related party transactions in which we repurchased 200,000 shares of common stock held by PrivCo, as further described in Item 13 of this Report.
The Company’s ticker was changed to RVYL on October 24, 2022. Holders As of December 31, 2022, there were 49,727,355 shares of Common Stock outstanding held by approximately 296 holders of record (not including an indeterminate number of beneficial holders of stock held in street name).
Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Common Stock is traded on The Nasdaq Capital Market under the symbol “RVYL.” Holders As of March 25, 2024, there were 5,995,972 shares of Common Stock outstanding held by approximately 220 holders of record (not including an indeterminate number of beneficial holders of stock held in street name).
Removed
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The Company’s ticker was changed to GBOX following an uplisting to NASDAQ on February 17, 2021. Amended and restated Articles were files for a company name change to RYVYL Inc.
Added
Securities Authorized for Issuance under Equity Compensation Plans The Company maintains four stock-based compensation plans: the 2020 Incentive and Non-statutory Stock Option Plan (“2020 Plan”); the 2021 Incentive and Non-statutory Stock Option Plan (“2021 Plan”); the 2021 Restricted Stock Plan (“2021 RS Plan”); and the 2023 Equity Incentive Plan (“2023 Plan”).
Removed
Securities Authorized for Issuance under Equity Compensation Plans The following table sets forth information as of December 31, 2022 with respect to our compensation plans under which equity securities may be issued.
Added
The 2023 Plan serves as the successor to the 2020 Plan, the 2021 Plan, and the 2021 RS Plan. The 2023 Plan became effective as of November 2, 2023. Outstanding awards under the 2020 Plan, the 2021 Plan, and the 2021 RS Plan continue to be subject to the terms and conditions of those respective plans.
Removed
Number of Securities Remaining Available for Future Issuance Number of Securities under Equity to be Issued upon Weighted-Average Compensation Plans Exercise of Exercise Price of (Excluding Securities Outstanding Options, Warrants and Rights Outstanding Options, Warrants and Rights Reflected in Column (a)) (a) (b) (c) Equity compensation plans approved by security holders: 2020 Incentive and Non-statutory Stock Option Plan 263,525 $ 4.22 2,547,260 2021 Incentive and Non-statutory Stock Option Plan 56,102 $ 6.69 4,970,802 2021 Restricted Stock Plan - - 3,337,422 Equity compensation plans not approved by security holders - - - Total 319,627 $ 4.65 10,855,484 21 Table of Contents Issuer Repurchases of Common Stock On January 6, 2022, the Company announced that the Board approved an increase of $10,000,000 in its share repurchase program (the “Share Repurchase Program”), providing for the repurchase of a portion of the Company’s outstanding common stock for up to $15,000,000.
Added
Since November 2, 2023, no additional awards have been nor will be granted in the future, under the 2020 Plan, the 2021 Plan, and the 2021 RS Plan. As of December 31, 2023, the total number of shares available for future issuance under the 2023 Plan is 79,953.
Removed
Of this amount, 300,833 were issued for services, 500,000 shares were issued as part of an asset purchase, and 50,000 were issued to an employee as compensation.
Added
Issuer Repurchases of Common Stock On January 6, 2022, we announced that the Board approved an increase of $10 million in its share repurchase program (the “Share Repurchase Program”), providing for the repurchase of a portion of our outstanding Common Stock for up to $15 million. We did not repurchase any shares during the year ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeRESULTS OF OPERATIONS The following results are for the years ended December 31, 2022 and 2021 (dollars in thousands, except per share data): Year Ended December 31, 2022 2021 Change (as restated) Amount Percent Net Revenue $ 32,909 $ 26,305 $ 6,605 25 % Cost of revenue 16,787 10,070 6,717 67 % Gross profit 16,123 16,235 (112 ) -1 % Operating expenses: Advertising and marketing 1,337 134 1,203 897 % Research and development 6,276 3,870 2,406 62 % General and administrative 6,603 16,879 (10,276 ) -61 % Payroll and payroll taxes 10,547 4,503 6,045 134 % Professional fees 5,312 3,133 2,179 70 % Stock compensation for employees 167 3,704 (3,537 ) -95 % Stock grant expense 2,306 - 2,306 NM Stock compensation for services 496 12,306 (11,810 ) -96 % Depreciation and amortization 20,917 913 20,004 NM Total operating expenses 53,961 45,441 8,520 19 % Income (Loss) from operations (37,838 ) (29,206 ) (8,632 ) 30 % Other income (expense): Interest expense (8,169 ) (1,932 ) (6,237 ) 323 % Interest expense - debt discount (15,100 ) (2,993 ) (12,107 ) 404 % Derivative expense - (3,435 ) 3,435 -100 % Changes in fair value of derivative liability 16,857 2,845 14,012 493 % Derecognition expense on conversion of convertible debt (5,710 ) - (5,710 ) NM Merchant liability settlement - (364 ) 364 NM Merchant fines and penalty income (402 ) 402 (804 ) NM Other income or expense 1,117 (586 ) 1,704 NM Total other income (expense), net (11,406 ) (6,064 ) (5,342 ) 88 % Loss before provision for income taxes (49,244 ) (35,270 ) (13,974 ) 40 % Income tax provision (9 ) 5 (14 ) NM Net loss $ (49,236 ) $ (35,275 ) $ (13,961 ) 40 % Net loss per share: Basic and diluted $ (1.08 ) $ (0.87 ) Weighted average number of common shares outstanding: Basic and diluted 45,571,991 40,708,304 23 Table of Contents The Company has organized its operations into two segments, beginning in 2022: North America and International.
Biggest changeManagement ’ s Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS The following results are for the years ended December 31, 2023 and 2022 (dollars in thousands, except per share data): Year Ended December 31, 2023 2022 Change % of % of Amount Revenue Amount Revenue Amount % Revenue $ 65,869 100.0 % $ 32,909 100.0 % $ 32,960 100.2 % Cost of revenue 40,157 61.0 % 16,786 51.0 % 23,372 139.2 % Gross profit 25,712 39.0 % 16,123 49.0 % 9,589 59.5 % Operating expenses: Advertising and marketing 80 0.1 % 1,337 4.1 % (1,257 ) -94.0 % Research and development 5,757 8.7 % 6,276 19.1 % (519 ) -8.3 % General and administrative 8,678 13.2 % 6,603 20.1 % 2,075 31.4 % Payroll and payroll taxes 12,017 18.2 % 10,547 32.1 % 1,470 13.9 % Professional fees 7,076 10.7 % 5,312 16.1 % 1,764 33.2 % Stock compensation expense 1,853 2.8 % 2,969 9.0 % (1,116 ) -37.6 % Depreciation and amortization 2,553 3.9 % 20,917 63.6 % (18,364 ) -87.8 % Total operating expenses 38,014 57.7 % 53,961 81.9 % (15,947 ) -29.6 % Loss from operations (12,302 ) -18.7 % (37,838 ) -57.4 % 25,536 -67.5 % Other income (expense): Interest expense (3,340 ) -5.1 % (8,169 ) -24.8 % 4,829 -59.1 % Accretion of debt discount (13,134 ) -19.9 % (13,980 ) -42.5 % 845 -6.0 % Derecognition expense on conversion of convertible debt (25,035 ) -38.0 % (5,709 ) -17.3 % (19,326 ) 338.5 % Changes in fair value of derivative liability 6,544 9.9 % 16,857 51.2 % (10,313 ) -61.2 % Legal settlement expense (4,142 ) -6.3 % - 0.0 % (4,142 ) n/a Gain on sale of property and equipment 1,069 1.6 % - 0.0 % 1,069 n/a Other expense (2,472 ) -3.8 % (405 ) -1.2 % (2,067 ) 510.0 % Total other income (expense) (40,511 ) -61.5 % (11,406 ) -17.3 % (29,104 ) 255.2 % Loss before provision for income taxes (52,812 ) -80.2 % (49,244 ) -74.8 % (3,568 ) 7.2 % Provision for income taxes 289 0.4 % (8 ) 0.0 % 296 n/a Net loss $ (53,101 ) -80.6 % $ (49,236 ) -74.7 % $ (3,866 ) 7.9 % 25 Table of Contents The Company has organized its operations into two reportable segments: North America and International.
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.
When a 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.
The increase in cash used for investing activities was primarily due to the $28.8 million paid for Transact Europe Holdings, and, as more fully described elsewhere in this report, consideration paid in connection with an agreement to acquire certain assets from Sky Financial & Intelligence.
Cash used in investing activities was $46.4 million for the year ended December 31, 2022, primarily due to $28.8 million paid to acquire Transact Europe Holdings, and, as more fully described elsewhere in this report, consideration paid in connection with an agreement to acquire the Sky Financial portfolio.
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. To mitigate processing risks, these policies determine reserve requirements and payment in arear strategy.
The gateways have strict guidelines pertaining to the scheduling of the release of funds to merchants based on several criteria that include, but are not limited to, return and chargeback history, associated risk for the specific business vertical, average transaction amount, etc.
Operating Expenses Operating expenses increased by $8.5 million, or 19.0%, to $54.0 million for the year ended December 31, 2022 from $45.4 million in the prior year.
Non-Operating Expenses Non-operating expenses increased by $29.1 million, or 255.2%, to $40.5 million for the year ended December 31, 2023 from $11.4 million in the prior year.
The increase was primarily due to an increase in processing volume from $1.95 billion for the year ended December 31, 2021 to $3.58 billion for the year ended December 31, 2022.
The increase in revenue was primarily driven by significant growth in processing volume, which increased from $1.719 billion for the year ended December 31, 2022 to $3.14 billion for the year ended December 31, 2023.
Cost of Revenue Cost of revenue increased by $6.7 million, or 67%, to $16.8 million for the year ended December 31, 2022 from $9.4 million in the prior year.
In the North America segment, cost of revenue increased by $15.5 million, or 108.8%, compared to the year ended December 31, 2022. In the International segment, cost of revenue increased by $7.9 million, or 309.2%, compared to the year ended December 31, 2022.
The following table presents our revenue, inter-segment revenue and operating expenses by segment (in thousands): Year Ended December 31, Net revenue 2022 2021 North America $ 28,613 $ 26,304 International 4,296 - $ 32,909 $ 26,304 Net Revenue Net revenue increased by $6.6 million or 25%, to $32.9 million in the current year from $26.3 million in the previous year.
The following table provides a summary of our revenue by operating segment (dollars in thousands): Year Ended December 31, Revenue 2023 2022 $ Change % Change North America $ 48,938 $ 28,613 $ 20,325 71 % International 16,931 4,296 12,635 294 % Total revenue $ 65,869 $ 32,909 $ 32,960 100 % Revenue Revenue increased by $33.0 million, or 100%, to $65.9 million in the current year from $32.9 million in the previous year.
Payment processing consists of various processing fees paid to gateways and banks, as well as commission payments to the ISOs 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.
Cost of revenue consists of various processing fees paid to gateways and banks, as well as commission payments to the ISOs responsible for establishing and maintaining merchant relationships, and the cost associated with banking-as-a-service offering.
The Company recorded a gain from the changes in the fair value of derivative liability of $2.8 million for the year ended December 31,2021 and a gain related to derecognition on conversion of convertible debt $16.9 million for the year ended December 31, 2022.
Additionally, changes in fair value of derivative liability for the year ended December 31, 2023, decreased by $10.3 million, or 61.2%, compared to the year ended December 31, 2022.
Errez and Nisan represent that they have the intent and the ability to make additional equity investments above the market price into the Company on terms to be agreed to with the Board. 26 Table of Contents Cash Flow The following table shows cash flows for the periods presented: Years Ended December 31, 2022 2021 Net cash used in operating activities $ (9,343,959 ) $ (27,165,885 ) Net cash provided by (used in) investing activities (47,648,671 ) (2,658,858 ) Net cash provided by financing activities (10,048,781 ) 116,060,635 Net cash acquired from acquisitions 16,719,204 1,491,068 Foreign currency translation adjustment 1,596,234 - Net increase (decrease) in cash, cash equivalents, and restricted cash $ (48,725,973 ) $ 87,726,960 Operating Activities – For the years ended December 31, 2022 and 2021, net cash used in operating activities was $9,343,959 and $27,191,885, respectively.
See Note 17, Subsequent Events , for additional information. 27 Table of Contents Cash Flow The following table shows cash flows for the periods presented (dollars in thousands): Years Ended December 31, 2023 2022 Net cash provided by (used in) operating activities $ 33,161 $ (9,344 ) Net cash provided by (used in) investing activities 2,287 (46,409 ) Net cash used in financing activities (3,008 ) (10,049 ) Net cash acquired from acquisitions - 16,719 Foreign currency translation adjustment 44 357 Net increase (decrease) in cash, cash equivalents, and restricted cash $ 32,484 $ (48,726 ) Operating Activities – For the year ended December 31, 2023, net cash provided by operating activities was $33.2 million, compared to net cash used in operating activities of $9.3 million for the year ended December 31, 2022.
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.
While reserve and payment in arrears restrictions are in effect for a merchant payout, the Company records the reserved amounts against cash due from the gateways until released. 28 Table of Contents RECENT DEVELOPMENTS In February 2024, the Company transitioned its QuickCard product in North America away from terminal-based to app-based processing.
Non-Operating Expenses Excluding expense related to amortization of debt discount, the Company incurred interest expense of $8.2 million and $1.9 million for the years ended December 31, 2022, and 2021, respectively. This increase was primarily due to the increase in average outstanding debt due to the issuance of the $100 million convertible notes in November 2021.
The decrease in cash usage from operating activities was primarily due to adjustments for non-cash expenses primarily related to the restructuring of our convertible note ($31.6 million), depreciation expense ($2.6 million), and stock-based compensation ($1.9 million).
Removed
Management ’ s Discussion and Analysis of Financial Condition and Results of Operations RESTATEMENT As discussed in the Explanatory Note and Note 3 to the Consolidated Financial Statements: “Restatement of Consolidated Financial Statements” in this Form 10-K, we are amending and restating our audited consolidated financial statements and related disclosures for the year ended December 31, 2021 presented in this Form 10-K along with our unaudited consolidated financial statements and related disclosures for the quarters ended March 31, 2021, June 30, 2021, September 30, 2021, March 31, 2022, June 30, 2022 and September 30, 2022.
Added
These segments represent the components of the Company for which separate financial information is available that is utilized on a regular basis by the Chief Operating Decision Maker (“CODM”) to assess segment performance, set strategic goals, and allocate the Company's resources.
Removed
The following discussion and analysis of our financial condition and results of operations incorporates the restated amounts. For this reason, the data set forth in this section may not be comparable to discussion and data in our previously filed Annual Report on Form 10-K for the year ended December 31, 2021.
Added
In the North America segment, revenue increased by $20.3 million, or 71.0%, compared to the year ended December 31, 2022. In the International segment, revenue increased by $12.6 million, or 294.1%, compared to the year ended December 31, 2022.
Removed
These segments reflect the way the Company evaluates its business performance and manages its operations. In 2021, the Company operated in one segment – North America.
Added
The increase in processing volume is primarily attributable to the continued expansion of our ISO and partnership network and growth in our global payment processing businesses, banking-as-a-service offering, and American Samoa. Cost of Revenue Cost of revenue increased by $23.4 million, or 139.2%, to $40.2 million for the year ended December 31, 2023 from $16.8 million in the previous year.
Removed
The increase in processing volume was due to a number of factors, including: growth of our customer/merchant base as the result of expanded sales and marketing efforts; the expansion and growth of our advanced blockchain ledger-based payment solutions product offering, combined with an expanding ISO and partnership network; our expansion into the banking as a service (BaaS) and FX business using our acquired capabilities in the EU market; our business growth in American Samoa; and our strategic acquisition strategy.
Added
The increase in cost of revenue is primarily attributable to the increase in transaction volume, which resulted in higher processing fees paid to gateways and commission payments to ISOs, in both North America and International segments.
Removed
During 2022, the Company suspended its reporting of revenue from the Sky Financial portfolio in accordance with the US GAAP accounting and business prudency. The net revenue growth from all the other payment processing and BaaS businesses more than offset the shortfall from the Sky Financial revenue recognition suspension.
Added
Operating Expenses Operating expenses decreased by $15.9 million, or 29.6%, to $38.0 million for the year ended December 31, 2023 from $54.0 million in the prior year. The decrease was primarily driven by the following: ● Advertising and marketing expenses for the year ended December 31, 2023, decreased by $1.3 million, or 94.0%, compared to December 31, 2022.
Removed
The Company’s processing volume, excluding the Sky Financial portfolio, increased from $323 million in 2021 to $1.68 billion in 2022. The yearly net revenue without the Sky Financial business increased by $19.8 million or 150%, to $32.9 million in the current year from $13.1 million in the prior year.
Added
During 2022, the Company incurred higher marketing costs in connection with its rebranding from Greenbox POS to RYVYL and the development of its new corporate website.
Removed
The increase in cost of revenue was primarily due to the increase in transaction volume and the cost associated with the BaaS and FX business.
Added
The Company’s 2023 growth was primarily achieved through its expanding ISO and agent network and direct sales efforts while controlling external marketing efforts. ● General and administrative expenses for the year ended December 31, 2023, increased by $2.1 million, or 31.4%, compared to December 31, 2022, primarily due to non-recurring credit losses related to non-continuing legacy accounts and an increase in expenses related to the full year impact of our European subsidiary acquired in mid-2022. ● Payroll and payroll taxes for the year ended December 31, 2023, increased $1.5 million, or 13.9%, compared to December 31, 2022, primarily due to increased headcount in our acquired European subsidiary to support its growth and expansion strategy. ● Professional fees for the year ended December 31, 2023, increased $1.8 million, or 33.2%, compared to December 31, 2022, primarily due to higher accounting, consulting, and legal fees associated with the Company’s restatement of prior period consolidated financial statements. 26 Table of Contents ● Stock compensation expense for the year ended December 31, 2023, decreased $1.1 million, or 37.6%, compared to December 31, 2022, primarily due to a lower stock price associated with grants issued in 2023. ● Depreciation and amortization for the year ended December 31, 2023, decreased $18.4 million, or 87.8%, compared to December 31, 2022, primarily due to the $18.1 million write-off of the contracted acquisition of the Sky Financial portfolio during 2022.
Removed
Cost of revenue increased as a percentage of revenue from 38.3% for the year ended December 31, 2021 to 51.0% for the year ended December 31, 2022 as a result of a higher cost to revenue ratio for the BaaS and FX business; the suspension of reporting revenue from the Sky Financial Portfolio.
Added
This increase was primarily due to the following: ● Excluding accretion expense associated with the Company’s convertible note, interest expense for the year ended December 31, 2023, decreased by $4.8 million, or 59.1%, compared to the year ended December 31, 2022.
Removed
The increase was primarily due to the following: ● Increase in research and development expenses by $2.4 million due to expenditures on the coyni platform development and v1 pilot that led to a successful v2 system go-live in the second half of the year; ● Increase in marketing expenses by $1.2 million to establish our new master brand RYVYL and develop our new corporate web site; ● Depreciation and amortization expenses increased by $20.0 million, including goodwill and intangible impairment charges of $18.1 million related primarily to the Sky Financial portfolio. ● Depreciation and amortization expenses included a charge of $13.5 million related to the contracted acquisition of the Sky Financial portfolio.
Added
The decrease is due to the Company’s restructuring of the convertible note during 2023, which included a waiver for interest on the convertible note through June 30, 2024. ● Derecognition expense on conversion of convertible debt for the year ended December 31, 2023, increased by $19.3 million, or 338.5%, compared to the year ended December 31, 2022.
Removed
With this charge, the Company has written off the book value of the consideration paid of $18.1 million due to the uncertainty of gaining access to the contracted for merchant accounts and ISO list. 24 Table of Contents ● Increase in payroll and payroll taxes due to increased headcount and professional fees though offset by decreases in general and administrative expenses; ● Decrease in stock compensation for services by $11.8 million to reward key vendors for services rendered and to conserve cash; ● Decrease in stock-based compensation to employees by $3.5 million partially offset by increase in stock grant expense.
Added
The increase in derecognition expense and the decrease in changes in fair value of the derivative liability were both due to the Company’s restructuring of its convertible note, which resulted in a significant reduction of the outstanding principal balance as of December 31, 2023.
Removed
Interest expense from the amortization of debt discount increased to $15.1 million from $3.0 million for the years ended December 31, 2022, and 2021, respectively. This increase was primarily due to the timing of amortization related the $16.0 million discount on to the $100 million convertible note issued in November 2021.
Added
See Note 9, Long-Term Debt, Net , for additional information. ● Legal settlement expense for the year ended December 31, 2023, increased by $4.1 million, compared to December 31, 2022, due to non-recurring legal settlements during the year. ● Gain on sale of property and equipment for the year ended December 31, 2023, increased by $1.1 million, compared to December 31, 2022, due to the sale of a building owned by the Company’s subsidiary, Charge Savvy. ● Other expense for the year ended December 31, 2023, increased $2.1 million, compared to December 31, 2022, primarily due to the carryover effects of the Company’s restatement of prior period consolidated financial statements.
Removed
Debt discount amortization during 2021 was for less than two months, compared with a full year in 2022. Derivative expense from convertible debt decreased from $3.4 million in 2021 to zero in 2022.
Added
LIQUIDITY AND CAPITAL RESOURCES The Company’s consolidated working capital at December 31, 2023 was $4.3 million, which included cash and cash equivalents of $12.2 million and restricted cash of $61.1 million. Historically, the Company has financed its operations with proceeds from cash from operations, the sales of equity securities, and its $100 million convertible note.
Removed
See Non-GAAP Measures below in this section for a discussion of the limitations of Adjusted EBITDA (a non-GAAP measure) and a reconciliation of Adjusted EBITDA from net loss, the most directly comparable GAAP measure, for the years ended December 31, 2022, and 2021.
Added
Our material liquidity needs principally relate to working capital requirements and research and development expenditures.
Removed
Adjusted EBITDA Adjusted EBITDA is a non-GAAP measure that represents our net loss before interest expense, amortization of debt discount, income tax expense, depreciation and amortization, stock-based compensation expense, acquisition-related expense and legal costs and settlement fees incurred in connection with non-ordinary course litigation and other disputes.
Added
Due to the product transition described in Note 17, Subsequent Events, which has adversely impacted the Company’s liquidity in the short term, we believe that our cash and cash equivalents as of December 31, 2023 are not sufficient to fund the North America segment’s operations and capital needs for the next 12 months from the issuance of this Report.
Removed
We exclude these items in calculating Adjusted EBITDA because we believe that the exclusion of these items will provide for more meaningful information about our financial performance, and do not consider the excluded items to be part of our ongoing results of operations.
Added
Our ability to fund working capital and other expenditures in the North America segment will depend on our ability to generate cash from operating activities from our two operating segments, which is subject to our future operating success, further repatriation of offshore profits from our European subsidiaries, short-term borrowings in the U.S., and a capital raise, which the Company intends to consummate in the near term.
Removed
We do not consider these items to be indicative of our core operating performance. 2022 2021 Net loss $ (49,235,698 ) (35,274,906 ) Interest expense, excluding amortization of debt discount 8,168,784 1,931,713 Amortization of debt discount 15,100,047 2,993,408 Income tax (benefit) expense (8,703 ) 4,906 Depreciation and amortization 20,916,868 912,677 EBITDA (5,058,702 ) (29,432,202 ) Other non-cash adjustments Changes in fair value of derivative liability (16,857,086 ) (2,845,000 ) Derecognition expense on conversion of convertible debt 5,709,672 - Stock compensation for employees 166,800 3,704,008 Stock grant expenses 2,305,650 - Stock compensation for services 496,497 12,306,365 Adjusted EBITDA $ (13,237,169 ) $ (16,266,829 ) Loss from operations $ (37,838,224 ) $ (29,206,094 ) 25 Table of Contents NON-GAAP MEASURES GAAP requires that operating expenses include the amortization of acquired intangible assets, which principally include acquired customer relationships and developed technology.
Added
The Company has signed an engagement letter with an investment bank and plans to raise capital as needed. However, there can be no guarantee that it will be available on a timely basis or on favorable terms and is subject to factors beyond our control, including general economic, political, and financial market conditions.
Removed
We exclude amortization of intangibles from Adjusted EBITDA because we do not consider amortization expense when we evaluate our ongoing business operations, nor do we factor amortization expense into our evaluation of potential acquisitions, or our measurement of the performance of those acquisitions.
Added
Our ability to successfully address the short-term liquidity shortfall in the North America segment is contingent on management’s intended plan over the next twelve months to improve the segment’s liquidity and working capital requirements. Management has determined that its intended plan is appropriate and sufficient to address the liquidity shortfall.
Removed
We believe that the exclusion of amortization expense enables the comparison of our performance to other companies in our industry as other companies may be more or less acquisitive than us and therefore, amortization expense may vary significantly by company based on their acquisition history.
Added
However, there can be no guarantee that we will be successful in implementing our plan or in acquiring additional funding, that our projections of our future capital needs will prove accurate, or that any additional funding will be sufficient to continue our operations in the North America segment.
Removed
Although we exclude amortization of acquired intangible assets from Adjusted EBITDA, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation. We record depreciation primarily for investments in property and equipment.
Added
Cash flow from operating activities was also impacted by increases in payment processing liabilities, other current liabilities, cash due from gateways, net, and prepaid and other current assets.
Removed
We exclude depreciation in calculating Adjusted EBITDA because we do not consider depreciation when we evaluate our ongoing business operations. We exclude stock-based compensation expense and other forms of equity incentives primarily awarded to employees because they are non-cash charges that we do not consider when assessing the operating performance of our business.
Added
Investing Activities – For the year ended December 31, 2023, net cash provided by investing activities was $2.3 million, primarily due to the proceeds from the sale of a building owned by the Company’s subsidiary, Charge Savvy.
Removed
Additionally, the determination of stock-based compensation expense can be calculated using various methodologies and is dependent upon subjective assumptions and other factors that vary on a company-by-company basis. Therefore, we believe that excluding stock-based compensation expense from Adjusted EBITDA improves the comparability of our results to the results of other companies in our industry.
Added
Financing Activities – For the year ended December 31, 2023, net cash used in financing activities was $3.0 million, primarily due to a repayment of principal on our convertible note in connection with the restructuring of that note during the year.
Removed
Included in operating expenses are incremental costs directly related to business and asset acquisitions as well as changes in the fair value of contingent consideration liabilities, when applicable.
Added
Cash used in financing activities was $10.0 million for the year ended December 31, 2022, primarily due to repayments of our convertible note and repurchases of the Company’s treasury stock. CRITICAL ACCOUNTING ESTIMATES We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the U.S. (“GAAP”).
Removed
We exclude acquisition-related expense from Adjusted EBITDA because we believe that the exclusion of this expense allows us to better provide meaningful information about our operating performance, facilitates comparisons to our historical operating results, improves the comparability of our results to the results of other companies in our industry, and ultimately, we believe helps investors better understand the acquisition-related expense and the effects of the transaction on our results of operations.
Added
GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Removed
We exclude non-ordinary course litigation expense because we do not consider legal costs and settlement fees incurred in litigation and litigation-related matters of non-ordinary course lawsuits and other disputes to be indicative of our core operating performance. We do not adjust for ordinary course legal expenses.
Added
We base our estimates on historical experience, anticipated future trends, and other assumptions we believe to be reasonable under the circumstances. Because these estimates require significant judgment, our actual results may differ materially from our estimates. Cash Due from Gateways The Company generates the majority of its revenue from payment processing services provided to its merchant clients.
Removed
Adjusted EBITDA is a key measure that our management uses to understand and evaluate our core operating performance and trends to generate future operating plans, to make strategic decisions regarding the allocation of capital, and to make investments in initiatives that are focused on cultivating new markets for our solutions.
Added
To mitigate potential credit losses associated with these risks, these gateway policies determine reserve requirements and a payment in arrears strategy.
Removed
In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis and, in the case of exclusion of acquisition-related adjustments and certain historical legal expenses, excludes items that we do not consider to be indicative of our core operating performance.
Added
This transition coincided with a change in our banking partner that was prompted by recent changes in the compliance environment and banking regulations. The unforeseen abrupt nature of the transition and slow initial adoption of the app-based product has led to a significant decline in processing volume in North America.
Removed
Adjusted EBITDA is not a measure calculated in accordance with GAAP and should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
Added
This in turn has adversely affected revenue in the North America segment and, as a result, management anticipates consolidated revenue for the first quarter of 2024 will be down sequentially by approximately 30 percent overall, which is primarily attributable to this product transition. See Note 17, Subsequent Events , for additional information.
Removed
LIQUIDITY AND CAPITAL RESOURCES Our working capital for the periods presented is summarized as follows: 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.
Added
The temporary decline in revenue described above has adversely impacted the Company’s liquidity in its North America segment in the short term.
Removed
We believe our current cash balances will be sufficient to cover our operating needs for the next twelve months. Our $100 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.
Added
As a result, management has determined that its cash and cash equivalents in the North America segment as of December 31, 2023, will not be sufficient to fund the segment’s operations and capital needs for the next 12 months from the issuance of this Report.
Removed
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. In order to provide assurance that the Company will be able to maintain adequate liquidity for the foreseeable future, Messrs.
Added
Management’s intended plan over the next twelve months to address the temporary liquidity shortfall in the North America segment includes, but is not limited to, the following: ● acceleration of the Company’s business development efforts to drive volumes in diversified business verticals; ● the implementation of cost control measures to more effectively manage spending in the North America segment and right sizing the organization, where appropriate; ● repatriation of offshore profits from the Company’s European subsidiaries, whose continued accelerated growth and generation of positive cash flow have already provided, and will continue to provide, an immediate and viable short-term source of capital during this product transition; and ● a capital raise, which the Company intends to negotiate and consummate in the immediate term.
Removed
The decrease in cash usage from operating activities was primarily due to the increase accounts payable, other current liabilities, accrued interest and payment processing liabilities. Investing Activities – For the years ended December 31, 2022 and 2021, net cash used in investing activities was $47,648,671 and $2,658,858, respectively.
Added
Management has assessed that its intended plan is appropriate and sufficient to address the liquidity shortfall in its North America segment.
Removed
Financing Activities – For the years ended December 31, 2022 and 2021, net provided (used) by financing activities was $(10,048,781) and $116,060,635, respectively, primarily due to borrowings and repayments of long-term and short-term borrowings, convertible debt, proceeds from issuances of common stock, and repurchase of the company's common stock and treasury stock.
Added
However, there can be no guarantee that we will be successful in implementing our plan or in acquiring additional funding, that our projections of our future capital needs will prove accurate, or that any additional funding will be sufficient to continue our operations in the North America segment.
Removed
A convertible note in the amount of $100,000,000 was issued November 5, 2021. The note had an original issue discount of 16% and costs of $7,174,000 associated with issuing the debt, resulting in net proceeds of $76,826,000. The convertible note has a term of 2 years and has an interest rate of 8%.
Added
Refer to the “Going Concern” subsection within Note 2, Summary of Significant Accounting Policies , for additional information.
Removed
Up to 69,461,078 shares of common stock are issuable from time to time upon conversion of the convertible note, including shares that may be issued as payment for interest due on the convertible note.

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