RYVYL Inc

Previous wording

The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other disclosures made by us (such as in our other filings with the SEC or in our press releases) for other factors that may cause actual results to differ materially from those projected by us. For additional information regarding risk factors that could affect our results, see “Risk Factors” beginning on page 14 of our Annual Report on Form 10-K filed with the SEC on March 26, 2024 (the “2023 Annual Report”).

Current wording

The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other disclosures made by us (such as in our other filings with the SEC or in our press releases) for other factors that may cause actual results to differ materially from those projected by us. For additional information regarding risk factors that could affect our results, see “Risk Factors” beginning on page 14 of our 2023 Annual Report and “Risk Factors” on page 41 of this Report.

Previous wording

As previously disclosed, management’s plan to recover the loss of revenues resulting from this product transition included the acceleration of business development efforts to launch the new app-based product in existing and new business verticals. However, due to continuous changes in the regulatory environment and our previous banking relationships, during the second quarter, management determined that the app-based product may not be a viable long-term solution for certain niche high-risk business verticals and made the decision to terminate the rollout of the app-based product in those business verticals. To address this change, the Company recently introduced a licensing product for its payments processing platform, which will enable it to serve the same customer base in such verticals through a business partner with more suitable banking compliance capabilities. Due of this strategy shift as well as a reorganization of the Company’s business to better align with management’s revised strategy, which was executed during the second quarter, the recovery of the loss of revenues resulting from this product transition is now not expected to occur until early 2025.

Current wording

As previously disclosed, management’s plan to recover the loss of revenues resulting from this product transition included the acceleration of business development efforts to launch the new app-based product in existing and new business verticals. However, due to continuous changes in the regulatory environment and our previous banking relationships, during the second quarter of 2024, management determined that the app-based product may not be a viable long-term solution for certain niche high-risk business verticals and made the decision to terminate the rollout of the app-based product in those business verticals. To address this change, the Company recently introduced a licensing product for its payments processing platform, which will enable it to serve the same customer base in such verticals through a business partner with more suitable banking compliance capabilities. Revenues from the new licensing product are not expected to materialize until early 2025. Due of this strategy shift as well as a reorganization of the Company’s business to better align with management’s revised strategy, which was executed during the second quarter, the recovery of the loss of revenues resulting from this product transition is now not expected to occur until early 2025.

Previous wording

Management has assessed that its intended plan is appropriate and sufficient to address the liquidity shortfall in its North America segment. However, there can be no guarantee that we will be successful in implementing our plan, 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.

Current wording

Management has assessed that its intended plan described above, if successfully implemented, is appropriate and sufficient to address the liquidity shortfall in its North America segment and provide funds to cover operations for the next 12 months from the date of the issuance of this Report. However, there can be no guarantee that we will be successful in implementing our plan, 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.

Previous wording

Revenue decreased by $2.9 million, or 19.9%, to $11.9 million for the three months ended June 30, 2024, from $14.8 million for the three months ended June 30, 2023. In the North America segment, revenue decreased $8.1 million, or 73.1%, compared to the three months ended June 30, 2023. In the International segment, revenue increased $5.1 million, or 134.3%, compared to the three months ended June 30, 2023. The decrease in revenue was primarily driven by a decrease in processing volume in the North America segment, which decreased from $362 million in the quarter ended June 30, 2023, to $152.6 million in the quarter ended June 30, 2024, and was due to the previously disclosed product transition that began in February 2024. The decrease in revenue in North America was partially offset by an increase in revenue in the International segment that was primarily attributable to continued growth in processing volume, which increased from $317 million in the quarter ended June 30, 2023, to $902.1 million in the quarter ended June 30, 2024. The increase in processing volume in the International segment was driven by continued growth across multiple verticals, primarily, our Independent Sales Organizations (“ISO”) and partnership network, our global payments processing businesses, and banking-as-a-service offering.

Current wording

Revenue decreased by $4.9 million, or 27.9%, to $12.6 million for the three months ended September 30, 2024, from $17.5 million for the three months ended September 30, 2023. In the North America segment, revenue decreased $9.7 million, or 77.3%, compared to the three months ended September 30, 2023. In the International segment, revenue increased $4.8 million, or 95.8%, compared to the three months ended September 30, 2023. The decrease in revenue was primarily driven by a decrease in processing volume in the North America segment, which decreased from $341.0 million in the quarter ended September 30, 2023, to $170.6 million in the quarter ended September 30, 2024, and is attributable to the previously disclosed impact associated with the Company’s QuickCard product transition that began in February 2024. The decrease in revenue in North America was partially offset by an increase in revenue in the International segment that was primarily attributable to continued growth in processing volume, which increased from $517.0 million in the quarter ended September 30, 2023, to $952.3 million in the quarter ended September 30, 2024. The increase in processing volume in the International segment was driven by continued strong growth across multiple verticals, primarily, our Independent Sales Organizations (“ISO”) and partnership network, our global payments processing businesses, and banking-as-a-service offering.

Previous wording

Cost of revenue decreased by $1.6 million, or 18.0%, to $7.2 million for the three months ended June 30, 2024, from $8.7 million for the three months ended June 30, 2023. In the North America segment, cost of revenue decreased $4.5 million, or 71.0%, compared to the three months ended June 30, 2023. In the International segment, cost of revenue increased $2.9 million, or 124.5%, compared to the three months ended June 30, 2023. Cost of revenue primarily consists of various processing fees paid to gateways, as well as commission payments to the ISOs responsible for establishing and maintaining merchant relationships. The decrease in cost of revenue was primarily driven by the decrease in processing volumes in North America, as noted above, partially offset by an increase in processing volumes in the International segment.

Current wording

Cost of revenue decreased by $3.1 million, or 28.2%, to $7.7 million for the three months ended September 30, 2024, from $10.8 million for the three months ended September 30, 2023. In the North America segment, cost of revenue decreased $6.0 million, or 77.1%, compared to the three months ended September 30, 2023. In the International segment, cost of revenue increased $2.9 million, or 94.6%, compared to the three months ended September 30, 2023. Cost of revenue primarily consists of various processing fees paid to gateways, as well as commission payments to the ISOs responsible for establishing and maintaining merchant relationships. The decrease in cost of revenue was primarily driven by the decrease in processing volumes in North America, as noted above, partially offset by an increase in processing volumes in the International segment.

Previous wording

Operating expenses increased by $6.2 million, or 34.0%, to $24.6 million for the six months ended June 30, 2024, from $18.3 million for the six months ended June 30, 2023. The increase was primarily driven by a $6.7 million non-cash charge related to the write-off of goodwill in North America (see Note 2) and restructuring charges of $1.6 million related to the Company’s reorganization and restructuring of its business in North America, both recorded during the second quarter ended June 30, 2024, and primarily comprised of employee severance and termination benefits and a write-off of assets related to the Coyni brand. These increases were partially offset by a decrease in professional fees of $2.1 million due to lower accounting, consulting, and legal fees incurred in 2023 in connection with the Company’s restatement of prior period consolidated financial statements.

Current wording

Operating expenses decreased by $1.7 million, or 18.9%, to $7.3 million for the three months ended September 30, 2024, from $9.1 million for the three months ended September 30, 2023. The decrease was primarily driven by a decrease in research and development expenses of $0.5 million, as the Company began capitalizing a portion of these costs during the second quarter of 2024, and decreases in general and administrative expenses of $1.6 million and in professional fees of $0.2 million, both due to lower accounting, consulting, and legal fees incurred in 2023 in connection with the Company’s restatement of prior period consolidated financial statements.

Previous wording

Six Months Ended June 30, 2024 (Unaudited) Compared to Six Months June 30, 2023 (Unaudited):

Current wording

Nine Months Ended September 30, 2024 (Unaudited) Compared to Nine Months September 30, 2023 (Unaudited):

Previous wording

Revenue increased by $2.5 million, or 9.7%, to $28.7 million for the six months ended June 30, 2024, from $26.1 million for the six months ended June 30, 2023. In the North America segment, revenue decreased by $7.2 million, or 36.3%, compared to the six months ended June 30, 2023. In the International segment, revenue increased by $9.7 million, or 155.5%, compared to the six months ended June 30, 2023. The increase in revenue was due to the continued growth in processing volume in the International segment, which increased from $582 million in the six months ended June 30, 2023, to $1.7 billion in the six months ended June 30, 2024, and was driven by continued growth across multiple verticals, primarily, our ISO and partnership network, our global payments processing businesses, and banking-as-a-service offering. The increase in processing volume in the International segment was partially offset by a decrease in processing volume in the North America segment, which decreased from $663 million in the six months ended June 30, 2023, to $391.6 million in the six months ended June 30, 2024, and was due to the previously disclosed product transition that began in February 2024.

Current wording

Revenue decreased by $2.3 million, or 5.4%, to $41.3 million for the nine months ended September 30, 2024, from $43.6 million for the nine months ended September 30, 2023. In the North America segment, revenue decreased by $16.9 million, or 52.1%, compared to the nine months ended September 30, 2023. In the International segment, revenue increased by $14.5 million, or 128.5%, compared to the nine months ended September 30, 2023. The decrease in revenue was driven by a decrease in processing volume in the North America segment, which decreased from $1.0 billion in the nine months ended September 30, 2023, to $562 million in the nine months ended September 30, 2023, and is attributable to the previously disclosed impact associated with the Company’s QuickCard product transition that began in February 2024. The decrease in revenue in North America was partially offset by an increase in revenue in the International segment that was driven by continued growth in processing volume, which increased from $1.1 billion in the nine months ended September 30, 2023 to $2.6 billion in the nine months ended September 30, 2024. The increase in processing volume in the International segment was driven by continued strong growth across multiple verticals, primarily, our ISO and partnership network, our global payments processing businesses, and banking-as-a-service offering.

Previous wording

Cost of revenue increased by $2.0 million, or 13.4%, to $16.9 million for the six months ended June 30, 2024, from $14.9 million for the six months ended June 30, 2023. In the North America segment, cost of revenue decreased by $3.7 million, or 33.6%, compared to the six months ended June 30, 2023. In the International segment, cost of revenue increased by $5.7 million, or 150.7%, compared to the six months ended June 30, 2023. Cost of revenue primarily consists of various processing fees paid to gateways, as well as commission payments to the ISOs responsible for establishing and maintaining merchant relationships. The increase in cost of revenue was primarily driven by a decrease in processing volumes in North America, as noted above, which were more than offset by an increase in processing volumes in the International segment.

Current wording

Cost of revenue decreased by $1.1 million, or 4.1%, to $26.6 million for the nine months ended September 30, 2024, from $25.7 million for the nine months ended September 30, 2023. In the North America segment, cost of revenue decreased by $9.7 million, or 51.5%, compared to the nine months ended September 30, 2023. In the International segment, cost of revenue increased by $8.6 million, or 125.6%, compared to the nine months ended September 30, 2023. Cost of revenue primarily consists of various processing fees paid to gateways, as well as commission payments to the ISOs responsible for establishing and maintaining merchant relationships. The decrease in cost of revenue was primarily driven by a decrease in processing volumes in North America, as noted above, which were partially offset by an increase in processing volumes in the International segment.

Previous wording

Operating expenses increased by $6.0 million, or 62.0%, to $15.6 million for the three months ended June 30, 2024, from $9.6 million for the three months ended June 30, 2023. The increase was primarily driven by a $6.7 million non-cash charge related to the write-off of goodwill in North America (see Note 2) and restructuring charges of $1.6 million related to the Company’s reorganization and restructuring of its business in North America, both recorded during the second quarter ended June 30, 2024 and primarily comprised of employee severance and termination benefits and a write-off of assets related to the Coyni brand. These increases were partially offset by a decrease in research and development expenses of $0.4 million, a decrease in general and administrative expenses of $0.7 million, and a decrease in professional fees of $1.4 million due to lower accounting, consulting, and legal fees incurred in 2023 in connection with the Company’s restatement of prior period consolidated financial statements.

Current wording

Operating expenses increased by $4.5 million, or 16.5%, to $31.9 million for the nine months ended September 30, 2024, from $27.4 million for the nine months ended September 30, 2023. The increase was primarily due to a $6.7 million non-cash charge related to the write-off of goodwill in North America and restructuring charges of $1.6 million related to the Company’s reorganization and restructuring of its business in North America, both recorded during the second quarter of 2024. These increases were partially offset by a decrease in professional fees of $2.3 million due to lower accounting, consulting, and legal fees incurred in 2023 in connection with the Company’s restatement of prior period consolidated financial statements, and a decrease in research and development expenses of $1.4 million, as the Company began capitalizing a portion of these costs in the second quarter of 2024.

Previous wording

The Company’s consolidated working capital at June 30, 2024 was negative $0.2 million, which included cash and cash equivalents of $6.4 million and restricted cash of $68.8 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. Our material liquidity needs principally relate to working capital requirements and research and development expenditures.

Current wording

The Company’s consolidated working capital at September 30, 2024 was negative $4.2 million, which included cash and cash equivalents of $4.3 million and restricted cash of $87.2 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. Our material liquidity needs principally relate to working capital requirements and research and development expenditures.

Previous wording

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. 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.

Current wording

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, if successfully implemented, is appropriate and sufficient to address the liquidity shortfall in the North America segment and provide sufficient funds to cover operations for the next 12 months from the date of issuance of this Report. 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.

Previous wording

Operating Activities*** – For the six months ended June 30, 2024 and 2023, net cash provided by operating activities was $2.7 million and $23.1 million, ***respectively. The cash provided by operating activities was primarily due to timing of settlement of assets and liabilities.

Current wording

Operating Activities*** – For the nine months ended September 30, 2024 and 2023, net cash provided by operating activities was $19.1 million and $27.6 million, ***respectively. The cash provided by operating activities was primarily due to the timing of settlement of assets and liabilities.

Previous wording

Financing Activities*** ***– Net cash used by financing activities in the six-month period ended June 30, 2024 was $0.2 million. Net cash used in financing activities in the six-month period ended June 30, 2023 was negligible.

Current wording

Financing Activities*** ***– Net cash used by financing activities in the nine-month period ended September 30, 2024 was $0.2 million. Net cash used in financing activities in the nine-month period ended September 30, 2023 was negligible.