PAYSIGN, INC. 10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to __________

Commission file number 001-38623

PAYSIGN, INC.

(Exact name of registrant as specified in its charter)

Nevada	95-4550154
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

2615 St. Rose Parkway,

Henderson, Nevada 89052

(Address of principal executive offices) (Zip code)

(702) 453-2221

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value per share	PAYS	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 55,042,888 shares as of November 6, 2025.

PAYSIGN, INC.

FORM 10-Q REPORT

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements	3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3. Quantitative and Qualitative Disclosures About Market Risk	29

Item 4. Controls and Procedures	29

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	30

Item 1A. Risk Factors	31

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 5. Other Information	32

Item 6. Exhibits	32

SIGNATURES	33

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

PAYSIGN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30, 2025 (Unaudited)			December 31, 2024 (Audited)
ASSETS
Current assets
Cash	$	7,529,047		$	10,766,982
Restricted cash		111,022,839			111,576,204
Accounts receivable, net		49,644,417			32,639,242
Other receivables		651,294			1,606,276
Prepaid expenses and other current assets		2,456,060			2,247,929
Total current assets		171,303,657			158,836,633

Fixed assets, net		1,451,605			1,157,975
Intangible assets, net		23,341,906			12,239,717
Goodwill		4,487,637			–
Operating lease right-of-use asset		5,935,797			2,792,922
Deferred tax asset, net		2,988,483			4,000,950

Total assets	$	209,509,085		$	179,028,197

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	39,441,663		$	34,330,217
Customer card funding		110,360,889			111,328,270
Operating lease liability, current portion		583,773			448,008
Other liabilities, current portion		1,728,852			–
Total current liabilities		152,115,177			146,106,495

Operating lease liability, long-term portion		5,495,452			2,480,070
Other liabilities, long-term portion		6,140,651			–

Total liabilities		163,751,280			148,586,565
Commitments and contingencies (Note 9)					–
Stockholders’ equity
Preferred stock: $0.001 par value; 25,000,000 shares authorized; none issued and outstanding		–			–
Common stock; $0.001 par value; 150,000,000 shares authorized, 55,977,596 and 54,358,382 issued at September 30, 2025 and December 31, 2024, respectively		55,978			54,358
Additional paid-in capital		34,133,548			24,632,205
Treasury stock at cost, 934,708 and 834,708 shares, respectively		(2,148,715	)		(1,772,929	)
Retained earnings		13,716,994			7,527,998
Total stockholders’ equity		45,757,805			30,441,632

Total liabilities and stockholders’ equity	$	209,509,085		$	179,028,197

See accompanying notes to unaudited condensed consolidated financial statements.

PAYSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Revenues
Plasma industry	$	12,860,478	$	11,439,534	$	33,014,282	$	33,080,830
Pharma industry		7,920,604		3,274,888		24,293,163		8,338,433
Other		815,396		542,009		1,965,535		1,358,841
Total revenues		21,596,478		15,256,431		59,272,980		42,778,104

Cost of revenues		9,446,089		6,783,117		23,676,598		19,779,776

Gross profit		12,150,389		8,473,314		35,596,382		22,998,328

Operating expenses
Selling, general and administrative		8,378,018		6,217,844		23,976,238		18,149,506
Depreciation and amortization		2,190,420		1,565,621		6,111,520		4,291,648
Total operating expenses		10,568,438		7,783,465		30,087,758		22,441,154

Income from operations		1,581,951		689,849		5,508,624		557,174

Other income
Interest income, net		663,666		800,715		2,031,024		2,345,416

Income before income tax provision		2,245,617		1,490,564		7,539,648		2,902,590
Income tax provision		30,482		53,727		1,350,652		459,555

Net income	$	2,215,135	$	1,436,837	$	6,188,996	$	2,443,035

Net income per share
Basic	$	0.04	$	0.03	$	0.11	$	0.05
Diluted	$	0.04	$	0.03	$	0.10	$	0.04

Weighted average common shares
Basic		54,797,527		53,450,613		54,205,002		53,102,454
Diluted		61,770,520		56,051,960		58,955,421		55,613,026

See accompanying notes to unaudited condensed consolidated financial statements.

PAYSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)


	Common Stock				Additional Paid-in			Treasury Stock						Retained		Total Stockholders’
	Shares		Amount		Capital			Shares			Amount			Earnings		Equity
Balance, December 31, 2024		54,358,382	$	54,358	$	24,632,205			(834,708	)	$	(1,772,929	)	$	7,527,998	$	30,441,632

Stock issued upon vesting of restricted stock		724,000		724		(724	)		–			–			–		–
Stock-based compensation		–		–		672,318			–			–			–		672,318
Repurchase of common stock		–		–		–			(100,000	)		(375,786	)		–		(375,786	)
Issuance of stock in business combination		–		–		5,950,000			–			–			–		5,950,000
Net income		–		–		–			–			–			2,586,100		2,586,100

Balance, March 31, 2025		55,082,382		55,082		31,253,799			(934,708	)		(2,148,715	)		10,114,098		39,274,264

Stock issued upon vesting of restricted stock		86,000		86		(86	)		–			–			–		–
Exercise of stock options		177,414		178		591,356			–			–			–		591,534
Stock-based compensation		–		–		954,400			–			–			–		954,400
Net income		–		–		–			–			–			1,387,761		1,387,761

Balance, June 30, 2025		55,345,796		55,346		32,799,469			(934,708	)		(2,148,715	)		11,501,859		42,207,959

Stock issued upon vesting of restricted stock		603,000		603		(603	)		–			–			–		–
Exercise of stock options		28,800		29		69,091			–			–			–		69,120
Stock-based compensation		–		–		1,265,591			–			–			–		1,265,591
Net income		–		–		–			–			–			2,215,135		2,215,135

Balance, September 30, 2025		55,977,596	$	55,978	$	34,133,548			(934,708	)	$	(2,148,715	)	$	13,716,994	$	45,757,805


	Common Stock				Additional Paid-in			Treasury Stock						Retained		Total Stockholders’
	Shares		Amount		Capital			Shares			Amount			Earnings		Equity
Balance, December 31, 2023		53,452,382	$	53,452	$	21,999,722			(698,008	)	$	(1,277,884	)	$	3,712,091	$	24,487,381

Stock issued upon vesting of restricted stock		214,000		214		(214	)		–			–			–		–
Stock-based compensation		–		–		663,951			–			–			–		663,951
Net income		–		–		–			–			–			309,096		309,096

Balance, March 31, 2024		53,666,382		53,666		22,663,459			(698,008	)		(1,277,884	)		4,021,187		25,460,428

Stock issued upon vesting of restricted stock		106,000		106		(106	)		–			–			–		–
Exercise of stock options		10,000		10		23,990			–			–			–		24,000
Stock-based compensation		–		–		670,138			–			–			–		670,138
Net income		–		–		–			–			–			697,102		697,102

Balance, June 30, 2024		53,782,382		53,782		23,357,481			(698,008	)		(1,277,884	)		4,718,289		26,851,668

Stock issued upon vesting of restricted stock		540,000		540		(540	)		–			–			–		–
Exercise of stock options		2,000		2		4,798			–			–			–		4,800
Stock-based compensation		–		–		573,499			–			–			–		573,499
Repurchase of common stock		–		–		–			(100,000	)		(360,495	)		–		(360,495	)
Net income		–		–		–			–			–			1,436,837		1,436,837

Balance, September 30, 2024		54,324,382	$	54,324	$	23,935,238			(798,008	)	$	(1,638,379	)	$	6,155,126	$	28,506,309

See accompanying notes to unaudited condensed consolidated financial statements.

PAYSIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine Months Ended September 30,
	2025			2024
Cash flows from operating activities:
Net income	$	6,188,996		$	2,443,035
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense		2,892,309			1,907,588
Depreciation and amortization		6,111,520			4,291,648
Noncash lease expense		385,529			314,414
Deferred income taxes, net		1,012,467			425,777

Changes in operating assets and liabilities:
Accounts receivable		(17,005,175	)		(16,574,530	)
Other receivables		954,982			(150,404	)
Prepaid expenses and other current assets		(208,131	)		(379,893	)
Accounts payable and accrued liabilities		5,372,312			8,832,156
Operating lease liability		(377,257	)		(285,610	)
Customer card funding		(967,381	)		7,809,741
Net cash provided by operating activities		4,360,171			8,633,922

Cash flows from investing activities:
Purchase of fixed assets		(618,469	)		(318,167	)
Capitalization of internally developed software		(5,734,468	)		(6,647,100	)
Purchase of intangible assets		(83,402	)		(122,600	)
Net assets acquired in business combination		(2,000,000	)		–
Net cash used in investing activities		(8,436,339	)		(7,087,867	)

Cash flows from financing activities:
Repurchase of common stock		(375,786	)		(360,495	)
Proceeds from exercise of options		660,654			28,800
Net cash provided by (used in) financing activities		284,868			(331,695	)

Net change in cash and restricted cash		(3,791,300	)		1,214,360
Cash and restricted cash, beginning of period		122,343,186			109,351,013

Cash and restricted cash, end of period	$	118,551,886		$	110,565,373

Cash and restricted cash reconciliation:
Cash	$	7,529,047		$	10,293,207
Restricted cash		111,022,839			100,272,166
Total cash and restricted cash	$	118,551,886		$	110,565,373

Supplemental cash flow information:

Non-cash assets acquired in business combination	$	13,558,637		$	–
Non-cash liabilities incurred in business combination	$	(7,608,637	)	$	–
Right-of-use assets obtained in exchange for new operating lease liabilities, net	$	3,528,404		$	–
Cash paid for taxes	$	389,991		$	107,264

See accompanying notes to unaudited condensed consolidated financial statements.

PAYSIGN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT POLICIES

The foregoing unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these financial statements do not include all the disclosures required by GAAP for complete financial statements. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included on Form 10-K for the year ended December 31, 2024. In the opinion of management, the unaudited interim condensed consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.

The preparation of financial statements in accordance with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company’s financial position and results of operations.

Operating results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.

About Paysign, Inc.

Paysign, Inc. (the “Company,” “Paysign,” “we” or “our”) was incorporated on August 24, 1995, and trades under the symbol PAYS on The Nasdaq Stock Market LLC. Paysign is a provider of prepaid card programs, comprehensive pharma patient affordability offerings, digital banking services and integrated payment processing designed for businesses, consumers and government institutions. Headquartered in Nevada, the Company creates customized, innovative payment solutions for clients across all industries, including pharmaceutical, healthcare, hospitality and retail.

Principles of Consolidation – The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated.

Subsequent Events – The Company discloses subsequent events that provide evidence about conditions that did not change the condensed consolidated financial statements at the balance sheet date but have a significant effect on the financial statements at the time of occurrence or on future operations of the Company. There have been no subsequent events since the balance sheet date.

Segment Reporting – The Company operates as one business, a vertically integrated provider of prepaid card products and processing services. The Company’s chief operating decision maker (“CODM”), who is the Company’s chief executive officer, utilizes a consolidated approach to assess the performance of and allocate resources to the business. Accordingly, management has concluded that the Company consists of a single operating segment and single reportable segment for accounting and financial reporting purposes.

The CODM regularly assesses the performance of the single operating and reporting segment based on consolidated net income. The CODM reviews expenses at a level consistent with those reported in the Company’s consolidated statements of income. All significant expense categories are reflected in the consolidated statements of income. The measure of segment assets is reflected in the consolidated statements of financial condition as total assets.

Use of Estimates – The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and (iii) the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents – The Company considers all highly liquid investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents for the purposes of the statement of cash flows. The Company had no cash equivalents at September 30, 2025 and December 31, 2024.

Restricted Cash – As of September 30, 2025 and December 31, 2024, restricted cash consisted of funds held specifically for our card product and pharma programs that are contractually restricted to use. The Company includes changes in restricted cash balances with cash and cash equivalents when reconciling the beginning and ending total amounts in our condensed consolidated statements of cash flows.

Reimbursement Receivables – As of September 30, 2025 and December 31, 2024, accounts receivable included $41,439,319 and $27,566,694, respectively, of customer reimbursement balances of pass-through claims, which are fully offset in accounts payable and accrued liabilities. Accounts receivable also include accruals and trade receivables for program management and processing fees that have terms pursuant to their related contracts.

Concentrations of Credit Risk – Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and restricted cash. The Company maintains its cash and cash equivalents and restricted cash in various bank accounts primarily with one financial institution in the United States which at times, may exceed federally insured limits. If this financial institution were to be placed into receivership, we may be unable to access the cash we have on deposit. If we are unable to access our cash and cash equivalents as needed, our financial position and ability to operate our business could be adversely affected. The Company has not experienced, nor does it anticipate, any losses with respect to such accounts. At September 30, 2025 and December 31, 2024, the Company had approximately $923,023 and $686,177 in excess of federally insured bank account limits, respectively. In February of 2024, the Company initiated a program with one of our financial institutions called deposit swapping, whereby the financial institution utilizes a third-party who is participating in reciprocal deposit networks. This program is an alternative way for our financial institution to offer us full Federal Deposit Insurance Corporation (“FDIC”) insurance on deposits over $250,000. Under this program, deposit networks divide uninsured deposits into smaller units and distribute these monies among participating banks in the network, where the monies are fully FDIC insured.

As of September 30, 2025, the Company also had a concentration of accounts receivable risk, as one pharma patient affordability program customer individually represented 14% of our accounts receivable balance. Two pharma patient affordability program customers individually represented 17% and 15% of our accounts receivable balance as of December 31, 2024. These accounts receivable balances relate to pass-through claim reimbursements that have been paid on behalf of the pharma program customers.

Business Combinations – The Company accounts for business combinations using the acquisition method. As of the acquisition date, the acquirer recognizes, separately from goodwill, the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. Goodwill is initially measured at cost, being the excess of the cost of acquisition over the fair value of the net identifiable assets acquired and liabilities assumed. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. If the cost of acquisition is lower than the fair value of the net identifiable assets, the difference is recognized in profit. Acquisition costs are expensed as incurred.

Fixed Assets – Fixed assets are stated at cost less accumulated depreciation. Depreciation is principally recorded using the straight-line method over the estimated useful life of the asset, which is generally 3 to 10 years. The cost of repairs and maintenance is charged to expense as incurred. Leasehold improvements are capitalized and depreciated over the shorter of the remaining lease term or the estimated useful life of the improvements. Expenditures for property betterments and renewals are capitalized. Upon the sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense).

The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.

Intangible Assets – For intangible assets, the Company recognizes an impairment loss if the carrying amount of the intangible asset is not recoverable and exceeds its fair value. The carrying amount of the intangible asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset.

Intangible assets with an indefinite-life are not amortized. Intangible assets with a finite life are amortized on a straight-line basis over their estimated useful lives, which are generally 3 to 15 years.

Goodwill – Our methodology for allocating the purchase price relating to purchase acquisitions is determined through established valuation techniques. Goodwill represents a residual value as of the acquisition date, which in most cases results in measuring goodwill as an excess of the purchase consideration transferred plus the fair value of any noncontrolling interest in the acquired company over the fair value of net assets acquired, including contingent consideration. We perform goodwill impairment tests on an annual basis in the fourth fiscal quarter and between annual tests in certain circumstances. The assessment of fair value for goodwill and purchased intangible assets is based on factors that market participants would use in an orderly transaction in accordance with the new accounting guidance for the fair value measurement of non-financial assets.

The goodwill recorded in the consolidated balance sheets as of September 30, 2025 and December 31, 2024 was $4,487,637 and $0, respectively. During the nine months ended September 30, 2025, the increase in goodwill was due to our acquisition of Gamma Innovation LLC on March 19, 2025 (see “Note 2- Acquisition” in the notes to the accompanying consolidated financial statements). The estimates used to calculate the fair value of our business from year to year are based on operating results, market conditions, changes in industry and other factors. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment. During the nine months ended September 30, 2025, there was no impairment of goodwill.

Internally Developed Software Costs – Computer software development costs are expensed as incurred, except for internal use software or website development costs that qualify for capitalization as described below, and include compensation and related expenses, costs of hardware and software, and costs incurred in developing features and functionality.

For computer software developed or obtained for internal use, costs that are incurred in the preliminary project and post implementation stages of software development are expensed as incurred. Costs incurred during the application and development stage are capitalized. Capitalized costs are amortized using the straight-line method over a three year estimated useful life, beginning in the period in which the software is available for use.

Contract Assets – Incremental costs to obtain or fulfill a contract with a customer are capitalized. The Company determines the costs that are incremental by confirming the costs (i) are directly related to a customer’s contract, (ii) generate or enhance resources to fulfill contract performance obligations in the future, and (iii) are recoverable. Amortization is on a straight-line basis generally over three to five years, beginning when goods and services are transferred to the customer or group of customers.

Hosting Implementation – Costs to implement the cloud computing arrangements (the “hosting site”) are accounted for by following the same model as internally developed software costs. Costs that are incurred in the preliminary project and post implementation stages of hosting development are expensed when they are incurred. Costs incurred during the application and development stage are capitalized. Capitalized costs are amortized using the straight-line method over a three year estimated useful life, beginning in the period when the hosting site is available for use.

Customer Card Funding – As of September 30, 2025 and December 31, 2024, customer card funding represents funds loaded or available to be loaded on cards for the Company’s card product programs, or funds available to cover reimbursement claims for the Company’s pharma patient affordability programs.

Earnings Per Share – Basic earnings per share exclude any dilutive effects of options, warrants and convertible securities. Basic earnings per share is computed using the weighted-average number of common shares outstanding during the applicable period. Diluted earnings per share is computed using the weighted-average number of common and common stock equivalent shares outstanding during the period using the treasury stock method. Common stock equivalent shares are excluded from the computation if their effect on the diluted earnings per share calculation is anti-dilutive.

Revenue and Expense Recognition – In determining when and how revenue is recognized from contracts with customers, the Company performs the following five-step analysis: (i) identification of contracts with customers; (ii) determination of performance obligations; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

The Company generates revenues from plasma card programs through fees generated from cardholders and interchange fees. Revenues from pharma card programs are generated through card program management fees, transaction claim processing fees, interchange fees, customer service fees, other billable service fees, and settlement income. Other revenues are generated through cardholder fees, interchange fees, program management fees, load fees and breakage.

Plasma and pharma program revenues include both fixed and variable components. Cardholder fees represent an obligation to the cardholder based on a per transaction basis and are recognized at a point in time when the performance obligation is fulfilled. Card program management fees and transaction claims processing fees include an obligation to our program sponsors and are generally recognized when earned on a monthly basis and are typically due pursuant to the contract terms. The Company uses the output method to recognize card program management fee revenue at the amount of consideration to which an entity has a right to invoice. The performance obligation is satisfied when the services are transferred to the customer which the Company determined to be monthly, as the customer simultaneously receives and consumes the benefit from the Company’s performance. Interchange fees are earned when customer-issued cards are processed through card payment networks as the nature of our promise to the customer is that we stand ready to process transactions at the customer’s requests on a daily basis over the contract term. Since the timing and quantity of transactions to be processed by us are not determinable, we view interchange fees to comprise an obligation to stand ready to process as many transactions as the customer requests. Accordingly, the promise to stand ready is accounted for as a single series performance obligation. The Company uses the right to invoice practical expedient and recognizes interchange fee revenue concurrent with the processing of card transactions. Interchange fees are settled in accordance with the card payment network terms and conditions, which is typically within a few days.

The portion of the dollar value of prepaid-stored value cards that consumers do not ultimately redeem are referred to as breakage. In certain card programs where we hold the cardholder funds and expect to be entitled to a breakage amount, we recognize revenue using estimated breakage rates ratably over the estimated card life; provided that a significant reversal of the amount of breakage revenue recognized is not probable, and record adjustments to such estimates when redemption is remote or we are legally defeased of the obligation, if applicable. For each program, we utilize a third party to estimate breakage rates based on historical redemption patterns, market-specific trends, escheatment rules and existing economic conditions. The Company accounts for breakage in accordance with Accounting Standards Update (“ASU”) 2016-04, Liabilities—Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Cards for the recognition of such revenue. Breakage revenue is recorded in other revenue on the consolidated statements of operations and was $254,543 and $410,667 for the three and nine months ended September 30, 2025, respectively. Breakage revenue is recorded in other revenue on the consolidated statements of operations and was $19,331 and $106,117 for the three and nine months ended September 30, 2024, respectively.

The Company utilizes the remote method of revenue recognition for settlement income whereby the unspent card balances will be recognized as revenue at the expiration of the cards or the respective card program. The Company records all revenue on a gross basis since it is the primary obligor and establishes the price in the contract arrangement with its customers. The Company is currently under no obligation to refund any fees, and the Company does not currently have any obligations for disputed claim settlements. Given the nature of the Company’s services and contracts, generally it has no contract assets as it pertains to services rendered but not invoiced. Settlement income was $0 for the three and nine months ended September 30, 2025 and 2024.

Cost of revenues is comprised of transaction processing fees, data connectivity and data center expenses, network fees, bank fees, card production and postage costs, customer service, program management, application integration setup, fraud charges, and sales and commission expense.

Operating Leases – The Company determines if a contract is or contains a leasing element at contract inception or the date in which a modification of an existing contract occurs. For a contract to be considered a lease, the contract must transfer the right to control the use of an identified asset for a period of time in exchange for consideration. Control is determined to have occurred if the lessee has the right to (i) obtain substantially all the economic benefits from the use of the identified asset throughout the period of use and (ii) direct the use of the identified asset.

In determining the present value of lease payments at lease commencement date, the Company utilizes its incremental borrowing rate based on the information available, unless the rate implicit in the lease is readily determinable. The liability for operating leases is based on the present value of future lease payments. Operating lease expenses are recorded as rent expense, which is included within selling, general and administrative expenses within the consolidated statements of operations and presented as operating cash outflows within the consolidated statements of cash flows.

Leases with an initial term of 12 months or less are not recorded on the balance sheet, with lease expense for these leases recognized on a straight-line basis over the lease term.

Stock-Based Compensation – The Company recognizes compensation expense for all restricted stock awards and stock options. The fair value of restricted stock awards is measured using the grant date trading price of our stock. The fair value of stock options is estimated at the grant date using the Black-Scholes option-pricing model, and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. We have elected to recognize compensation expense for all options with graded vesting on a straight-line basis over the vesting period of the entire option. The determination of fair value using the Black-Scholes pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility and the risk-free interest rate.

Recently Issued Accounting Pronouncement –

In September 2025, the Financial Accounting Standards Board ("FASB") issued ASU 2025-06, "Targeted Improvements to the Accounting for Internal-Use Software," which simplifies the capitalization guidance by removing all references to software development project stages, so that the guidance is neutral to different software development methods. The amendments in this update are effective for annual periods beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either retrospectively, prospectively to software costs incurred after the adoption date or on a modified prospective basis. We are currently evaluating the potential effects of ASU 2025-06 on our consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses,” which requires disclosure in the notes to financial statements of specified information about certain costs and expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2026. Early adoption is permitted. The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date of this update or retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the potential effects of ASU 2024-03 on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes – Improvements to Income Tax Disclosures”, requiring enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024 on a prospective basis and retrospective application is permitted. We are currently evaluating the potential impact of the adoption of ASU 2023-09 on our consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures”, which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in the ASU require, among other things, disclosure of significant segment expenses that are regularly provided to an entity’s chief operating decision maker (“CODM”) and a description of other segment items by reportable segment, as well as disclosure of the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Annual disclosures are required for fiscal years beginning after December 15, 2023 and interim disclosures are required for periods within fiscal years beginning after December 15, 2024. Retrospective application is required, and early adoption is permitted. The adoption of this ASU had no material impact on our financial statements.

2. ACQUISITION

On March 19, 2025, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Gamma Innovation LLC, a Pennsylvania limited liability company (“Gamma”), Beta Software and Technologies LLC, a Delaware limited liability company, and Michael Ngo, an individual, pursuant to which we acquired substantially all the assets of Gamma Innovation LLC. Gamma is a software and services company focusing on the blood and plasma collection industry that developed innovative solutions targeting donor engagement, retention and management. The Gamma acquisition aligns with our technology and market presence by offering additional engagement, compensation and resource management solutions across our core markets. The new technologies acquired consist of the following solutions: (i) a donor engagement application designed to reduce plasma labor costs and donor fees while improving donor retention; (ii) a customer resource management platform designed to reduce unnecessary expenses and improve donor engagement, marketing effectiveness and retention; and (iii) a donor management solution designed to improve plasma donation center efficiency by reducing operational costs and optimizing donor compensation. Due to the recent acquisition date, the valuations of both the earn-out contingent consideration and identifiable intangible assets acquired were not complete at the time of this filing, and provisional amounts for consideration transferred and the fair values of assets acquired have been presented. Management continues to refine the preliminary valuation of certain assets acquired and liabilities incurred, and may adjust the allocation in subsequent periods. Additionally, tax considerations have not yet been finalized. The final valuation will be completed within the one-year measurement period following the acquisition date.

Total preliminary purchase consideration was $15,558,637, which consisted of the following:

Schedule of purchase consideration
Cash paid upfront (1)	$	2,000,000
Present value of future cash paid (1)		6,618,637
Equity consideration (2)		5,950,000
Earn-out contingent consideration (3)		990,000
Total consideration	$	15,558,637

(1)

Pursuant to the Asset Purchase Agreement the cash purchase price paid was $10,000,000 to be paid in five equal tranches with the initial payment made on March 19, 2025 and four subsequent payments to be made on each subsequent annual anniversary of the initial payment. The fair value of this consideration was estimated based on the present value of the future payments. The average discount rate of 8% was based on the Company’s estimated cost of debt. The present value of future payments is recorded in other liabilities on the condensed consolidated balance sheets.

(2)

Pursuant to the Asset Purchase Agreement the stock consideration paid was 2,500,000 shares of restricted common stock that vest in five equal amounts beginning on March 31, 2025 and annually thereafter for the next four years. Fair value was estimated using the Company’s stock price of $2.38 on the valuation date. The stock consideration is recorded in the condensed consolidated statements of stockholders’ equity.

(3)

Pursuant to the Asset Purchase Agreement an additional earn-out stock consideration of 500,000 shares of our common stock, up to a total consideration of 2,500,000 shares of our common stock, may be paid upon the achievement of certain gross revenue performance targets for each trailing 12-month period beginning on March 20, 2025 and ending on March 19, 2030. The value of earn-out contingent consideration was computed using the Monte Carlo simulation. The contingent payable is recorded in other liabilities on the condensed consolidated balance sheets.

We have accounted for the Gamma acquisition as a business combination, which generally requires that we recognize the assets acquired and liabilities assumed at fair value as of the acquisition date. The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total provisional purchase consideration, were as follows:


Identifiable intangible assets	$	11,071,000
Total identifiable net assets		11,071,000
Goodwill		4,487,637
Total assets acquired	$	15,558,637

During the three months ended September 30, 2025, there was no measurement period adjustment related to the Gamma acquisition.

Goodwill arising from the acquisition was attributable to expected growth opportunities of the acquired technology, potential synergies from combining the acquired business into our existing business, and an assembled workforce. We expect that approximately $4,487,637 of the goodwill from this acquisition will be deductible for income tax purposes.

The following table reflects the estimated acquisition date fair values of the identified intangible assets of Gamma and their respective weighted-average preliminary estimated amortization periods:


	Estimated Fair Value		Weighted Avg. Estimated Amortization (years)
Contract related intangible assets	$	503,000		9
Acquired technologies		10,568,000		15
Total identifiable intangible assets	$	11,071,000

The historical revenue and earnings of Gamma were not material for the purpose of presenting pro forma information. In addition, transaction costs in the amount of $129 thousand associated with this business combination were not material, have been expensed as incurred and are recorded in selling, general & administration expense on the consolidated statements of operation.

3. FIXED ASSETS, NET

Fixed assets consist of the following:

Schedule of fixed assets
	September 30, 2025			December 31, 2024
Equipment	$	2,770,870		$	2,688,611
Software		624,057			487,364
Furniture and fixtures		772,508			762,144
Website costs		69,881			69,881
Leasehold improvements		334,905			236,904
		4,572,221			4,244,904
Less: accumulated depreciation		(3,120,616	)		(3,086,929	)
Fixed assets, net	$	1,451,605		$	1,157,975

Depreciation expense for the three months ended September 30, 2025 and 2024 was $120,320 and $91,401, respectively. Depreciation expense for the nine months ended September 30, 2025 and 2024 was $324,839 and $269,324, respectively.

4. INTANGIBLE ASSETS, NET

Intangible assets consist of the following:

Schedule of intangible assets
	September 30, 2025			December 31, 2024
Patents and trademarks	$	38,186		$	38,186
Platform		35,051,787			29,317,318
Customer lists and contracts		1,177,200			1,177,200
Licenses		237,576			216,901
Hosting implementation		43,400			43,400
Contract assets		340,326			277,600
Non-compete agreement		503,000			–
Acquired technologies		10,568,000			–
		47,959,475			31,070,605
Less: accumulated amortization		(24,617,569	)		(18,830,888	)
Intangible assets, net	$	23,341,906		$	12,239,717

Intangible assets are amortized over their useful lives ranging from periods of 3 to 15 years. Amortization expense for the three months ended September 30, 2025 and 2024 was $2,070,100 and $1,474,220, respectively. Amortization expense for the nine months ended September 30, 2025 and 2024 was $5,786,681 and $4,022,324, respectively.

5. LEASE

The Company entered into an operating lease for office space which became effective in June 2020. The lease term is 10 years from the effective date and allows for two optional extensions of five years each. The two optional extensions are not recognized as part of the right-of-use asset or lease liability since it is not reasonably certain that the Company will extend this lease. As of September 30, 2025, the remaining lease term was 4.9 years and the discount rate used was 6%.

The Company entered into an operating lease for additional office space which became effective in September 2025. The lease term is 7.4 years from the effective date and allows for two optional extensions of five years each. The two optional extensions are not recognized as part of the right-of-use asset or lease liability since it is not reasonably certain that the Company will extend this lease. As of September 30, 2025, the remaining lease term was 7.3 years and the discount rate used was 8%.

Operating lease cost included in selling, general and administrative expenses for the three months ended September 30, 2025 and 2024 was $267,053 and $190,603, respectively. Operating lease cost included in selling, general and administrative expenses for the nine months ended September 30, 2025 and 2024 was $645,904 and $568,642, respectively.

The following is the lease maturity analysis of our operating leases as of September 30, 2025:


Year ending December 31,
2025 (excluding the nine months ended September 30, 2025)	$	160,151
2026		1,156,518
2027		1,277,013
2028		1,296,105
2029		1,315,770
Thereafter		2,479,095
Total lease payments		7,684,652
Less: Imputed interest		(1,605,427	)
Present value of future lease payments		6,079,225
Less: current portion of lease liability		(583,773	)
Long-term portion of lease liability	$	5,495,452

6. CUSTOMER CARD FUNDING LIABILITY

The Company issues prepaid cards with various provisions for cardholder fees or expiration. Revenue generated from cardholder transactions and interchange fees are recognized when the Company’s performance obligation is fulfilled. Unspent balances left on prepaid cards are recognized as settlement income at the expiration of the cards and the card program. Contract liabilities related to prepaid cards represent funds on card and client funds held to be loaded to card before the amounts are ultimately spent by the cardholders or recognized as revenue by the Company. Contract liabilities related to prepaid cards are included in customer card funding liability on the condensed consolidated balance sheet.

The opening and closing balances of the Company’s liabilities are as follows:

Schedule of contract liabilities
	Nine Months Ended September 30,
	2025			2024
Beginning balance	$	111,328,270		$	92,282,124
(Decrease) Increase, net		(967,381	)		7,809,741
Ending balance	$	110,360,889		$	100,091,865

The amount of revenue recognized during the nine months ended September 30, 2025 and 2024 that was included in the opening contract liability for prepaid cards was $2,727,566 and $2,319,630, respectively.

7. COMMON STOCK

At September 30, 2025, the Company’s authorized capital stock was 150,000,000 shares of common stock, par value $0.001 per share, and 25,000,000 shares of preferred stock, par value $0.001 per share. On that date, the Company had 55,977,596 shares of common stock issued and 55,042,888 shares of common stock outstanding. There were no shares of preferred stock outstanding.

Stock-based compensation expense related to Company grants for the three and nine months ended September 30, 2025 was $1,265,591 and $2,892,309, respectively. Stock-based compensation expense related to Company grants for the three and nine months ended September 30, 2024 was $573,499 and $1,907,588, respectively.

2025 Transactions – During the three and nine months ended September 30, 2025, the Company issued 631,800 and 1,619,214 shares of common stock, respectively, for vested stock awards and the exercise of stock options. The Company received proceeds during the three and nine months ended September 30, 2025 of $69,120 and $660,654, respectively, for the exercise of stock options.

During the three months ended September 30, 2025, the Company granted 380,000 restricted stock awards; the weighted average grant date fair value was $5.54. The restricted stock awards granted vest over a period of one to five years. During the nine months ended September 30, 2025, the Company granted 6,356,000 restricted stock awards, of which 1,366,663 shares are subject to performance-based vesting and service requirements. For the stock awards granted, the weighted average grant date fair value was $2.55 and vest over a period of one to five years. Awards under performance conditions vest when the Company achieves specific defined earnings target and the employee provides service through each of the vesting periods. The Company expects it is probable that performance targets will be achieved. Compensation costs for performance awards would be reversed if the performance criteria are not met.

2024 Transactions – During the three and nine months ended September 30, 2024 the Company issued 542,000 and 872,000 shares of common stock, respectively, for vested stock awards and the exercise of stock options. The Company received proceeds during the three and nine months ended September 30, 2024 of $4,800 and $28,800, respectively, for the exercise of stock options.

During the three and nine months ended September 30, 2024 the Company repurchased 100,000 shares of its common stock at a cost of $360,495 or weighted average price of $3.60 per share.

The Company granted 140,000 restricted stock awards during the three months ended September 30, 2024; the weighted average grant date fair value was $4.30. The Company granted 620,000 restricted stock awards during the nine months ended September 30, 2024; the weighted average grant date fair value was $3.71. The restricted stock awards granted vest over a period of eight months to five years.

8. BASIC AND FULLY DILUTED NET INCOME (LOSS) PER COMMON SHARE

The following table sets forth the computation of basic and fully diluted net income per common share for the three and nine months ended September 30, 2025 and 2024:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Numerator:
Net income	$	2,215,135	$	1,436,837	$	6,188,996	$	2,443,035
Denominator:
Weighted average common shares:
Denominator for basic calculation		54,797,527		53,450,613		54,205,002		53,102,454
Weighted average effects of potentially diluted common stock:
Stock options (calculated using the treasury method)		1,272,519		1,089,063		1,055,507		991,804
Unvested restricted stock grants		5,700,474		1,512,284		3,694,912		1,518,768
Denominator for fully diluted calculation		61,770,520		56,051,960		58,955,421		55,613,026
Net income per common share:
Basic	$	0.04	$	0.03	$	0.11	$	0.05
Fully diluted	$	0.04	$	0.03	$	0.10	$	0.04

Anti-dilutive shares:
Stock options		–		–		–		–
Unvested restricted stock options		–		–		–		–

9. COMMITMENTS AND CONTINGENCIES

Pending or Threatened Litigation – From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

The Company has been named as a defendant in three securities class action complaints filed in the United States District Court for the District of Nevada: Yilan Shi v. Paysign, Inc. et al., filed on March 19, 2020 (“Shi”), Lorna Chase v. Paysign, Inc. et al., filed on March 25, 2020 (“Chase”), and Smith & Duvall v. Paysign, Inc. et al., filed on April 2, 2020 (collectively, the “Complaints” or “Securities Class Action”). Smith & Duvall v. Paysign, Inc. et al. was voluntarily dismissed on May 21, 2020. On May 18, 2020, the Shi plaintiffs and another entity called the Paysign Investor Group each filed a motion to consolidate the remaining Shi and Chase actions and to be appointed lead plaintiff. The Complaints are putative class actions filed on behalf of a class of persons who acquired the Company’s common stock from March 19, 2019 through March 31, 2020, inclusive. The Complaints generally allege that the Company, Mark R. Newcomer, and Mark Attinger violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and that Messrs. Newcomer and Attinger violated Section 20(a) of the Exchange Act, by making materially false or misleading statements, or failing to disclose material facts, regarding the Company’s internal control over financial reporting and its financial statements. The Complaints seek class action certification, compensatory damages, and attorney’s fees and costs. On December 2, 2020, the Court consolidated Shi and Chase as In re Paysign, Inc. Securities Litigation and appointed the Paysign Investor Group as lead plaintiff. On January 12, 2021, Plaintiffs filed an Amended Complaint in the consolidated action. Defendants filed a Motion to Dismiss the Amended Complaint on March 15, 2021. On February 9, 2023, the Court granted in part and denied in part Defendants’ Motion to Dismiss. On May 22, 2023, Defendants filed an Answer to the Amended Complaint. On December 15, 2023, the parties agreed in principle to a proposed settlement of the Securities Class Action and Plaintiffs filed a Consented Motion for Preliminary Approval of Settlement. On January 4, 2024, the Court preliminarily approved a settlement in the amount of $3,750,000, the entirety of which came from the Company’s directors-and-officers insurance policy, for the referenced class of purchasers, and scheduled a final approval hearing for April 17, 2024. On April 17, 2024, the Court conducted the final approval hearing and approved the settlement and, on April 18, 2024, issued an order and final judgment thereon.

The Company has also been named as a nominal defendant in four stockholder derivative actions currently pending in the United States District Court for the District of Nevada. The first-filed derivative action is entitled Andrzej Toczek, derivatively on behalf of Paysign, Inc. v. Mark R. Newcomer, et al. and was filed on September 17, 2020. This action alleges violations of Section 14(a) of the Exchange Act, breach of fiduciary duty, unjust enrichment, and waste, largely in connection with the failure to correct information technology controls over financial reporting alleged in the Securities Class Action, thereby causing the Company to face exposure in the Securities Class Action. The complaint also alleges insider trading violations against certain individual defendants. The second-filed derivative action is entitled John K. Gray, derivatively on behalf of Paysign, Inc. v. Mark Attinger, et al. and was filed on May 9, 2022. This action involves the same alleged conduct raised in the Toczek action and asserts claims for breach of fiduciary duty in connection with financial reporting, breach of fiduciary duty in connection with alleged insider trading against certain individual defendants, and unjust enrichment. On June 3, 2022, the Court approved a stipulation staying the action until the Court in the consolidated Securities Class Action issued a ruling on the Motion to Dismiss. On May 10, 2023, the Toczek and Gray actions were consolidated.

The Company has also been named as a nominal defendant in a third stockholder derivative action initially filed in state court in Clark County, Nevada, on October 2, 2023, entitled Simone Blanchette, derivatively on behalf of Paysign, Inc. v. Mark Newcomer, et al, which the defendants subsequently removed to federal district court in Nevada pursuant to a Notice of Removal filed on October 10, 2023. That complaint makes substantially the same allegations as made in the consolidated Toczek and Gray actions, and also contains a claim that the individual defendants violated Section 10(b) and Rule 10b-5 promulgated thereunder. On December 7, 2023, the parties requested that the action be stayed for sixty days due to the settlement negotiations in the consolidated Toczek and Gray actions, and the Court granted the sixty-day stay on December 11, 2023. Subsequently, the Court extended that deadline to March 29, 2024 and then to May 29, 2024 based upon the parties’ stipulations. On July 26, 2024, the parties in Blanchette submitted a Joint Status Report which suggested a proposed briefing schedule on a motion to dismiss, but that schedule was not ruled upon by the Court.

The Company has also been named as a nominal defendant in a fourth stockholder derivative action in the United States District Court for the District of Nevada, filed on December 27, 2023, entitled Mo Jeewa, derivatively on behalf of Paysign, Inc. v. Mark R. Newcomer, et al. That complaint makes substantially the same allegations as made in the consolidated Toczek and Gray actions and the Blanchette action discussed above, and alleges breach of fiduciary duty and unjust enrichment. On January 23, 2025, the parties in Jeewa filed a stipulation to relate the case to the Toczek, Gray, and Blanchette actions.

On October 4, 2024, the parties to the four stockholder derivative actions agreed in principle to a proposed settlement of all pending claims asserted in Plaintiffs’ actions. On December 6, 2024, Plaintiffs filed a Motion for Preliminary Approval of Derivative Settlement. On May 6, 2025, the Court granted the parties’ request to relate the actions and assigned all four cases to the judge presiding over the Jeewa action. On August 28, 2025, the Court issued a minute order granting the Motion for Preliminary Approval of Derivative Settlement and, on October 7, 2025, it entered a Scheduling Order and Preliminary Approval Order, effective nunc pro tunc as of September 4, 2025. On October 17, 2025, Plaintiffs filed a Motion for Final Approval of Derivative Settlement, which is scheduled to be heard by the Court on November 14, 2025.

10. INCOME TAX

The following table summarizes the Company’s income tax expense and effective tax rates for the three and nine months ended September 30, 2025 and September 30, 2024:

Schedule of effective tax rates
	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Income before income taxes	$	2,245,617	$	1,490,564	$	7,539,648	$	2,902,590
Income tax expense	$	30,482	$	53,727	$	1,350,652	$	459,555
Effective tax rate		1.36%		3.6%		17.91%		15.8%

The effective tax rate for the three months and nine months ended September 30, 2025 varies from the three months and nine months ended September 30, 2024 primarily as a result of improved book earnings and tax benefits related to our stock-based compensation.

On July 4, 2025, the One Big Beautiful Bill (“OBBB”) was signed into law. The provisions of the bill solidify numerous tax law changes originally enacted in the Tax Cuts and Jobs Act (“TCJA”) of 2017. The provisions of the OBBB are reflected in the Q3 2025 financial statements, which is the period the OBBB was enacted.

Under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) signed into law in 2020 and the subsequent extension of the CARES Act through September 30, 2021, the Company was eligible for a refundable employee retention credit subject to certain criteria. The Company has elected an accounting policy to recognize the government assistance when it is probable that the Company is eligible to receive the assistance and present the credit as a reduction of the related expense. As of September 30, 2025 and December 31, 2024, the Company recorded $96,992 and $1,129,164, respectively, in other receivables on the condensed consolidated balance sheet related to U.S. Federal Government refunds.

ITem 2. Management’s discussion and analysis of financial condition and results of operations.

Disclosure Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (“Forward-Looking Statements”). All statements other than statements of historical fact included in this report are Forward-Looking Statements. These Forward-Looking Statements are based on our current expectations, assumptions, estimates and projections about our business and our industry. Words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “propose,” “may,” and other similar expressions identify Forward-Looking statements. Specific forward-looking statements made herein include our belief that we do not anticipate any losses with respect to accounts with balances exceeding federally insured limits; our expected lease obligations for subsequent years; our belief that our platform can be seamlessly integrated with our clients’ systems; our belief that our distinctive positioning allows us to provide end-to end technologies that securely manage transaction processing, cardholder enrollment, value loading, account management, data and analytics, and customer service; our belief that our architecture is known for its cross-platform compatibility, flexibility, and scalability - allowing our clients and partners to leverage these advantages for cost savings and revenue opportunities; our focus of our marketing efforts on corporate incentive and expense prepaid card products in various market verticals; our plan for 2025 to continue to invest additional funds in technology improvements, sales and marketing, cybersecurity, fraud, customer service, and regulatory compliance; our belief that from time to time we evaluate raising capital to enable us to diversify into new market verticals; our belief that if we do not raise new capital, that we will still be able to support our existing business and expand into new vertical markets using internally generated funds; our belief that the following measures are the primary indicators of our quarterly and annual revenues: gross dollar volume on loaded cards and conversion rates on gross dollar volume loaded on cards; our belief that the following are also key performance indicators: revenues, gross profit, operational expenses as a percent of revenues, cardholder participation, and EBITDA; and our belief that our available cash on hand, excluding restricted cash, along with our forecast for revenues and cash flows for the remainder of 2025 and through the third quarter of 2027, will be sufficient to sustain our operations for the next twenty-four months. In the normal course of our business, we, in an effort to help keep our stockholders and the public informed about our operations, may from time-to-time issue certain statements, either in writing or orally, that contain, or may contain, Forward-Looking Statements. Although we believe that the expectations reflected in such Forward-Looking Statements are reasonable, we can give no assurance that such expectations will prove to have been correct. In addition, any statements that refer to expectations, projections, estimates, forecasts, or other characterizations of future events or circumstances are Forward-Looking Statements. These Forward-Looking Statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the Forward-Looking Statements. Such important factors (“Important Factors”) and other factors are disclosed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 and in other reports filed with the Securities and Exchange Commission (the “SEC”) from time to time. All prior and subsequent written and oral Forward-Looking Statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Important Factors described below that could cause actual results to differ materially from our expectations as set forth in any Forward-Looking Statement made by or on behalf of us. You are cautioned not to place undue reliance on these Forward-Looking Statements, which relate only to events as of the date on which the statements are made. We undertake no obligation to publicly revise these Forward-Looking Statements to reflect events or circumstances that arise after the date hereof. You should refer to and carefully review the information in future documents we file with the SEC.

Overview

Paysign, Inc. (the “Company,” “Paysign,” “we” or “our”), headquartered in Nevada, was incorporated on August 24, 1995, and trades under the symbol PAYS on The Nasdaq Stock Market LLC. We are a vertically integrated provider of prepaid card products and processing services for corporate, consumer and government applications. Our payment solutions are utilized by our corporate customers as a means to increase customer loyalty, increase patient adherence rates, reduce administration costs and streamline operations. Public sector organizations can utilize our payment solutions to disburse public benefits or for internal payments. We market our prepaid card solutions under our Paysign® brand. As we are a payment processor and prepaid card program manager, we derive our revenue from all stages of the prepaid card lifecycle.

We operate on a powerful, high-availability payments platform with cutting-edge fintech capabilities that can be seamlessly integrated with our clients’ systems. This distinctive positioning allows us to provide end-to-end technologies that securely manage transaction processing, cardholder enrollment, value loading, account management, data and analytics, and customer service. Our architecture is known for its cross-platform compatibility, flexibility, and scalability – allowing our clients and partners to leverage these advantages for cost savings and revenue opportunities.

Our suite of product offerings includes solutions for corporate rewards, prepaid gift cards, general purpose reloadable debit cards, employee incentives, consumer rebates, donor compensation, clinical trials, healthcare reimbursement payments and pharmaceutical payment assistance, and demand deposit accounts accessible with a debit card. Our cards are sponsored by our issuing bank partners.

Our revenues include fees generated from cardholder fees, interchange, card program management fees, transaction claims processing fees, customer service, other billable services, breakage, and settlement income. Revenue from cardholder fees, interchange, card program management fees, transaction claims processing fees, customer service fees, and other service fees is recorded when the performance obligation is fulfilled. Breakage is recorded ratably over the estimated card life based on historical redemption patterns, market-specific trends, escheatment rules, and existing economic conditions and relates solely to our open-loop gift card business which began at the end of 2022. Settlement income is recorded at the expiration of the card and card program.

We have two categories for our prepaid debit cards: (1) corporate and consumer reloadable cards, and (2) non-reloadable cards.

Reloadable Cards: These types of cards are generally classified as payroll or general purpose reloadable (“GPR”) cards. Payroll cards are issued by an employer to an employee to allow the employee to access payroll amounts that are deposited into an account linked to their card. GPR cards can also be issued to a consumer at a retail location or mailed to a consumer after completing an on-line application. GPR cards can be reloaded multiple times with a consumer’s payroll, government benefit, a federal or state tax refund or through cash reload networks located at retail locations. Reloadable cards are generally open-loop cards as described below.

Non-Reloadable Cards: These are generally one-time use cards that are only active until the funds initially loaded to the card are spent. These types of cards are generally used as gift or incentive cards. Typically, these types of cards are used for the purchase of goods or services at retail locations and cannot be used to receive cash.

Both reloadable and non-reloadable cards may be open-loop, closed-loop, or restricted-loop. Open-loop cards can be used to receive cash at ATM locations utilizing a customer’s primary identification number (“PIN”); or purchase goods or services by PIN or signature at retail locations virtually anywhere that the network brand (American Express, Discover, Mastercard, Visa, etc.) is accepted. Closed-loop cards can only be used at a specific merchant. Restricted-loop cards can be used at several merchants, or a defined group of merchants, such as all merchants at a specific shopping mall.

The prepaid card market in the United States has experienced significant growth in recent years due to consumers and merchants embracing improved technology, greater convenience, more product choices and greater flexibility. Prepaid cards have also proven to be an attractive alternative to traditional bank accounts for certain segments of the population, particularly those without, or who could not qualify for, a checking or savings account.

We manage all aspects of the prepaid card lifecycle, from managing the card design and approval processes with partners and networks, to production, packaging, distribution, and personalization. We also oversee inventory and security controls, renewals, lost and stolen card management, and replacement. We employ a 24/7/365 fully staffed, in-house customer service department which utilizes bilingual customer service representatives, Interactive Voice Response, and two-way short message service messaging and text alerts.

Currently, we are focusing our marketing efforts on corporate incentive and expense prepaid card products in various market verticals including but not limited to general corporate expense, healthcare related markets including pharma patient affordability solutions, clinical trials and donor compensation, loyalty rewards, incentive cards, and general disbursements. Following the acquisition of Gamma, we are now allocating some of our marketing efforts to selling our donor engagement application and customer resource management product into our existing markets.

As part of our continuing platform expansion process, we evaluate current and emerging technologies for applicability to our existing and future software platform. To this end, we engage with various hardware and software vendors in evaluation of various infrastructure components. Where appropriate, we use third-party technology components in the development of our software applications and service offerings. Third-party software may be used for highly specialized business functions, which we may not be able to develop internally within time and budget constraints. Our principal target markets for processing services include prepaid card issuers, retail and private-label issuers, small third-party processors, and small and mid-size financial institutions in the United States and Mexico.

We have devoted more extensive resources to sales and marketing activities as we have added essential personnel to our marketing, sales and support teams. We market our Paysign payment and application solutions through direct marketing by the Company’s sales team. Our primary market focus is on companies that require a streamlined payment solution for rewards, rebates, payment assistance, and other payments to their customers, employees, agents and others. To reach these markets, we focus our sales efforts on direct contact with our target market and attendance at various industry-specific conferences. We may, at times, utilize independent contractors who make direct sales and are paid commissions and/or restricted stock awards. We market our Paysign premier product through existing communication channels to a targeted segment of our existing cardholders, as well as to a broad group of individuals, ranging from non-banked to fully banked consumers with a focus on long term users of our product.

For the remainder of 2025, we plan to continue to invest additional funds in technology improvements, sales and marketing, cybersecurity, fraud, customer service, and regulatory compliance. From time to time, we evaluate raising capital to enable us to diversify into new market verticals. If we do not raise new capital, we believe that we will still be able to support our existing business and expand into new vertical markets using internally generated funds.

Results of Operations

Comparison of the Three Months Ended September 30, 2025 to the Three Months Ended September 30, 2024

The following table summarizes our consolidated financial results for the three months ended September 30, 2025 in comparison to the three months ended September 30, 2024:

	Three Months Ended September 30, (Unaudited)				Variance
	2025		2024		$			%
Revenues
Plasma industry	$	12,860,478	$	11,439,534	$	1,420,944			12.4%
Pharma industry		7,920,604		3,274,888		4,645,716			141.9%
Other		815,396		542,009		273,387			50.4%
Total revenues		21,596,478		15,256,431		6,340,047			41.6%
Cost of revenues		9,446,089		6,783,117		2,662,972			39.3%
Gross profit		12,150,389		8,473,314		3,677,075			43.4%
Gross margin %		56.3%		55.5%

Operating expenses
Selling, general and administrative		8,378,018		6,217,844		2,160,174			34.7%
Depreciation and amortization		2,190,420		1,565,621		624,799			39.9%
Total operating expenses		10,568,438		7,783,465		2,784,973			35.8%
Income from operations	$	1,581,951	$	689,849	$	892,102			129.3%

Other income	$	663,666	$	800,715	$	(137,049	)		(17.1%	)

Net income	$	2,215,135	$	1,436,837	$	778,298			54.2%
Net margin %		10.3%		9.4%

The increase in total revenues of $6,340,047 for the three months ended September 30, 2025 compared to the same period in the prior year consisted primarily of a $1,420,944 increase in plasma revenue, a $4,645,716 increase in pharma revenue, and a $273,387 increase in other revenue. The increase in plasma revenue was primarily due to the addition of 117 net plasma centers during the past 12 months offset by a decline in plasma donations and dollars loaded to cards as plasma inventory levels have normalized, which has reduced our average monthly revenue per center as compared to the same period in the prior year. The increase in pharma revenue was primarily due to the financial benefit of 39 net pharma patient affordability programs launched during the past 12 months, and a corresponding increase in monthly management fees, setup fees, claim processing fees, and other billable services such as dynamic business rules and call center support. The number of claims processed increased over 60% in the third quarter of 2025 compared to the same period in the prior year. The increase in other revenue was primarily due to the growth and usage in the number of cardholders of our payroll, retail, and corporate incentive programs.

Cost of revenues for the three months ended September 30, 2025 increased $2,662,972 compared to the same period in the prior year. Cost of revenues is comprised of transaction processing fees, data connectivity and data center expenses, network fees, bank fees, card production and postage costs, customer service, application integration setup, and sales and commission expense. The increase in cost of revenues consisted primarily of (i) increased variable costs of approximately $1,724,000 related to the addition of 117 net plasma centers; (ii) increased customer care expense of approximately $546,000 associated with the overall growth in our plasma and pharma patient affordability businesses, a new customer service contact center, wage inflation pressures, a tight labor market, and increased benefit costs; (iii) increased third-party program network fees of approximately $196,000 associated with our pharma patient affordability programs; (iv) increased sales commission expense of approximately $187,000 related to the increase in overall revenue for programs in which we pay commission expenses; and (v) other increased expenses connected to fraud of approximately $10,000.

Gross profit for the three months ended September 30, 2025 increased $3,677,075 compared to the same period in the prior year, resulting from the launch of an additional 39 net pharma patient affordability programs during the past 12 months, and a corresponding increase in setup fees, monthly management fees, claim processing fees, and other billable fees. Gross profit also benefited from the addition of 117 net plasma centers during the past 12 months, and corresponding revenue and beneficial impact of a variable cost structure, as many of the plasma transaction costs are variable in nature and are provided by third-parties who charge us based on the number of active cards outstanding and transactions that occurred during the period. The increase in gross profit was offset by increased costs from network fees, third-party service providers, sales commission expense and customer service costs mentioned above, primarily driven by the overall growth in our business. The increase in gross margin resulted primarily from a greater contribution of total revenue from our pharma patient affordability business which has higher gross profit margins than our other businesses.

Selling, general and administrative expenses for the three months ended September 30, 2025 increased $2,160,174 compared to the same period in the prior year and consisted primarily of an increase in (i) compensation and benefits of approximately $847,000 due to continued hiring to support our growth primarily from our pharma patient affordability business, a tight labor market, and increased benefit costs; (ii) stock-based compensation costs of approximately $692,000 related to the issuance of additional restricted stock units for new hires and employee retention; (iii) technologies and telecom of approximately $163,000 primarily related to ongoing platform security investments; (iv) travel and entertainment costs approximately of $54,000; (v) general expenses of approximately $94,000 primarily related to conferences, deliveries, and employee education; (vi) outside professional services of approximately $78,000 for audit, tax, and human resources; (vii) other expenses of approximately $3,000; and (viii) a $230,000 decrease in the amount of platform development costs that were capitalized.

Depreciation and amortization expense for the three months ended September 30, 2025 increased $624,799 compared to the same period in the prior year. The increase in depreciation and amortization expense was primarily due to the continued capitalization of new software development costs and equipment purchases related to continued enhancements to our processing platform and employment growth.

For the three months ended September 30, 2025, we recorded income from operations of $1,581,951 representing an improvement of $892,102 compared to income from operations of $689,849 during the same period in the prior year, related to the aforementioned factors.

Other income for the three months ended September 30, 2025 decreased $137,049 primarily related to the implied interest expense related to future cash payments for the Gamma acquisition of $131,694 and slightly lower interest rates.

At September 30, 2025, our income tax provision was $30,482, which equates to an effective tax rate of 1.4% primarily resulting from the impact of our net operating income adjusted for discrete items that occurred within the quarter. At September 30, 2024, our income tax expense was $53,727, which equates to an effective tax rate of 3.6% primarily resulting from tax benefits related to our stock-based compensation and changes to the Company’s valuation allowance recorded on its net deferred tax assets.

The net income for the three months ended September 30, 2025 was $2,215,135, an increase of $778,298 compared to the net income of $1,436,837 for the three months ended September 30, 2024. The overall change in net income relates to the aforementioned factors.

Comparison of the Nine Months Ended September 30, 2025 to the Nine Months Ended September 30, 2024

The following table summarizes our consolidated financial results for the nine months ended September 30, 2025 in comparison to the nine months ended September 30, 2024:

	Nine Months Ended September 30, (Unaudited)				Variance
	2025		2024		$			%
Revenues
Plasma industry	$	33,014,282	$	33,080,830	$	(66,548	)		(0.2%	)
Pharma industry		24,293,163		8,338,433		15,954,730			191.3%
Other		1,965,535		1,358,841		606,694			44.6%
Total revenues		59,272,980		42,778,104		16,494,876			38.6%
Cost of revenues		23,676,598		19,779,776		3,896,822			19.7%
Gross profit		35,596,382		22,998,328		12,598,054			54.8%
Gross margin %		60.1%		53.8%

Operating expenses
Selling, general and administrative		23,976,238		18,149,506		5,826,732			32.1%
Depreciation and amortization		6,111,520		4,291,648		1,819,872			42.4%
Total operating expenses		30,087,758		22,441,154		7,646,604			34.1%
Income from operations	$	5,508,624	$	557,174	$	4,951,450			888.7%

Other income	$	2,031,024	$	2,345,416	$	(314,392	)		(13.4%	)

Net income	$	6,188,996	$	2,443,035	$	3,745,961			153.3%
Net margin %		10.4%		5.7%

The increase in total revenues of $16,494,876 for the nine months ended September 30, 2025 compared to the same period in the prior year consisted primarily of a $66,548 decrease in plasma revenue, a $15,954,730 increase in pharma revenue, and a $606,694 increase in other revenue. The decrease in plasma revenue was primarily due to a decline in plasma donations and dollars loaded to cards as plasma inventory levels have normalized, which has reduced our average monthly revenue per center as compared to the same period in the prior year. This decline was offset by the addition of 117 net plasma centers during the past 12 months. The increase in pharma revenue was primarily due to the financial benefit of 39 net pharma patient affordability programs launched during the past 12 months, and a corresponding increase in monthly management fees, setup fees, claim processing fees, and other billable services such as dynamic business rules and call center support. For the nine months ending September 30, 2025 the number of claims processed increased over 90% compared to the same period in the prior year. The increase in other revenue was primarily due to the growth and usage in the number of cardholders of our payroll, retail, and corporate incentive programs.

Cost of revenues for the nine months ended September 30, 2025 increased $3,896,822 compared to the same period in the prior year. Cost of revenues is comprised of transaction processing fees, data connectivity and data center expenses, network fees, bank fees, card production and postage costs, customer service, application integration setup, and sales and commission expense. The increase in cost of revenues consisted primarily of (i) increased customer care expense of approximately $1,280,000 associated primarily with the growth in our plasma and pharma patient affordability businesses, a new customer service contact center, wage inflation pressures, a tight labor market, and increased benefit costs; (ii) increased sales and commission expense of approximately $654,000 related to the increase in overall revenue for programs in which we pay commission expenses; (iii) increased variable costs of approximately $997,000 related to the addition of 117 net plasma centers; (iv) increased third-party program network fees of approximately $777,000 associated with our pharma patient affordability programs; and (v) increased plastics, collateral and postage of approximately $226,000. These increases were offset by a decrease in other costs of approximately $37,000.

Gross profit for the nine months ended September 30, 2025 increased $12,598,054 compared to the same period in the prior year resulting primarily from the launch of an additional 39 net pharma patient affordability programs during the past 12 months, and a corresponding increase in setup fees, monthly management fees, claim processing fees, and other billable fees. Gross profit also benefited from the addition of 117 net plasma centers during the past 12 months, and corresponding revenue and beneficial impact of a variable cost structure, as many of the plasma transaction costs are variable in nature and are provided by third parties who charge us based on the number of active cards outstanding and transactions that occurred during the period. The increase in gross profit was offset by increased costs from network fees, third-party service providers, sales commission expense and customer service costs mentioned above, primarily driven by the overall growth in our business. The increase in gross margin resulted primarily from a greater contribution of total revenue from our pharma patient affordability business which has higher gross profit margins than our other businesses.

Selling, general and administrative expenses for the nine months ended September 30, 2025 increased $5,826,732 compared to the same period in the prior year and consisted primarily of an increase in (i) compensation and benefits of approximately $3,366,000 due to continued hiring to support our growth, a tight labor market, and increased benefit costs; (ii) stock-based compensation of approximately $985,000 related to the issuance of restricted stock units for new hires and employee retention; (iii) technologies and telecom expense of approximately $793,000 primarily related to ongoing platform security investments; (iv) general expenses of approximately $219,000 primarily related to conferences, deliveries, and employee education; (v) acquisition costs of approximately $129,000 associated with the Gamma asset purchase; (vi) travel and entertainment of approximately $129,000; and (vii) a decrease in capitalized platform development costs of approximately $240,000. The rise in costs was offset by a reduction in other operating expenses of approximately $35,000.

Depreciation and amortization expense for the nine months ended September 30, 2025 increased $1,819,872 compared to the same period in the prior year. The increase in depreciation and amortization expense was primarily due to continued capitalization of new software development costs and equipment purchases related to continued enhancements to our processing platform and employment growth.

For the nine months ended September 30, 2025, we recorded income from operations of $5,508,624 representing an improvement of $4,951,450 compared to income from operations of $557,174 during the same period in the prior year related to the aforementioned factors.

Other income for the nine months ended September 30, 2024 decreased $314,392 primarily related to the implied interest expense related to future cash payments for the Gamma acquisition of $260,866 and slightly lower interest rates.

At September 30, 2025, our income tax expense was $1,350,652, which equates to an effective tax rate of 17.9% primarily resulting from improved book earnings and tax benefits related to our stock-based compensation. At September 30, 2024, our income tax expense was $459,555, which equates to an effective tax rate of 15.8% primarily resulting from tax benefits related to our stock-based compensation and changes to the Company’s valuation allowance recorded on its net deferred tax assets.

The net income for the nine months ended September 30, 2025 was $6,188,996, an improvement of $3,745,961 compared to the net income of $2,443,035 for the nine months ended September 30, 2024. The overall change in net income relates to the aforementioned factors.

Key Performance Indicators and Non-GAAP Measures

Management reviews a number of metrics to help us monitor the performance of and identify trends affecting our business. We believe the following measures are the primary indicators of our quarterly and annual revenues:

Gross Dollar Volume Loaded on Cards: Represents the total dollar volume of funds loaded to all our prepaid card programs. Our gross dollar volume loaded on cards was $552 million and $456 million for the three months ended September 30, 2025 and 2024, respectively. Our gross dollar volume loaded on cards was $1.399 million and $1.339 million for the nine months ended September 30, 2025 and 2024, respectively. We use this metric to analyze the total amount of money moving into our prepaid card programs. The year over year increase reflects the number of new plasma centers added, the number of pharma patient affordability programs added, and growth in our other prepaid programs.

Conversion Rates on Gross Dollar Volume Loaded on Cards: Represents revenues, gross profit or net income (loss) conversion rates of gross dollar volume loaded on cards which are calculated by taking our total revenues, gross profit or net income (loss), respectively, as a numerator and dividing by the gross dollar volume loaded on cards as a denominator. As we derive a number of our financial results from cardholder fees, we utilize these metrics as an indication of the amount of money that is added to cards and will eventually be converted to revenues, gross profit and net income (loss). Our total revenue conversion rates for the three months ended September 30, 2025 and 2024 were 3.91% or 391 basis points (“bps”), and 3.34% or 334 basis points, respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the three months ended September 30, 2025 and 2024 were 2.20% or 220 bps, and 1.86% or 186 bps, respectively, of gross dollar volume loaded on cards. Our net income conversion rates for the three months ended September 30, 2025 and 2024 were 0.40% or 40 bps, and 0.31% or 31 bps, respectively, of gross dollar volume loaded on cards. Our total revenue conversion rates for the nine months ended September 30, 2025 and 2024 were 4.24% or424 bps, and 3.20% or 320 bps, respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the nine months ended September 30, 2025 and 2024 were 2.54% or 254 bps, and 1.72% or 172 bps, respectively, of gross dollar volume loaded on cards. Our net income conversion rates for the nine months ended September 30, 2025 and 2024 were 0.44% or 44 bps, and 0.18% or 18 bps, respectively, of gross dollar volume loaded on cards.

Management also reviews key performance indicators, such as revenues, gross profit, operational expenses as a percentage of revenues, and cardholder participation. In addition, we consider certain non-GAAP (or “adjusted”) measures to be useful to management and investors evaluating our operating performance for the periods presented and provide a financial tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment and investment in new card programs. These adjusted metrics are consistent with how management views our business and are used to make financial, operating and planning decisions. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income, earnings per share (basic and diluted) or net cash from operating activities as determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators:

“EBITDA” is defined as earnings before interest, income taxes, depreciation and amortization expense and “Adjusted EBITDA” reflects the adjustment to EBITDA to exclude stock-based compensation expense. A reconciliation of net income to Adjusted EBITDA is provided in the table below.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2025			2024			2025			2024
Reconciliation of Adjusted EBITDA to net income:
Net income	$	2,215,135		$	1,436,837		$	6,188,996		$	2,443,035
Income tax provision		30,482			53,727			1,350,652			459,555
Interest income, net		(663,666	)		(800,715	)		(2,031,024	)		(2,345,416	)
Depreciation and amortization		2,190,420			1,565,621			6,111,520			4,291,648
EBITDA		3,772,371			2,255,470			11,620,144			4,848,822
Stock-based compensation		1,265,591			573,499			2,892,309			1,907,588
Adjusted EBITDA	$	5,037,962		$	2,828,969		$	14,512,453		$	6,756,410

“EBITDA margin” is defined as earnings before interest, income taxes, depreciation and amortization expense as a percentage of the Company’s revenue and “Adjusted EBITDA margin” reflects the adjustment to EBITDA margin to exclude stock-based compensation expense as a percentage of revenue. A reconciliation of net income margin to Adjusted EBITDA margin is provided in the table below.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2025			2024			2025			2024
Reconciliation of adjusted EBITDA margin to net income margin:
Net income margin		10.3%			9.4%			10.4%			5.7%
Income tax provision		0.1%			0.4%			2.3%			1.1%
Interest income, net		(3.1%	)		(5.2%	)		(3.4%	)		(5.5%	)
Depreciation and amortization		10.1%			10.3%			10.3%			10.0%
EBITDA margin		17.5%			14.8%			19.6%			11.3%
Stock-based compensation		5.9%			3.8%			4.9%			4.5%
Adjusted EBITDA margin		23.3%			18.5%			24.5%			15.8%

Liquidity and Capital Resources

The following table sets forth the major sources and uses of cash:

	Nine Months Ended September 30, (Unaudited)
	2025			2024
Net cash provided by operating activities	$	4,360,171		$	8,633,922
Net cash used in investing activities		(8,436,339	)		(7,087,867	)
Net cash provided by (used in) financing activities		284,868			(331,695	)
Net (decrease) increase in cash and restricted cash	$	(3,791,300	)	$	1,214,360

Comparison of Nine Months Ended September 30, 2025 and 2024

During the nine months ended September 30, 2025 and 2024, we financed our operations through internally generated funds.

Operating activities provided $4,360,171 of cash as of September 30, 2025, a decrease of $4,273,751 compared to same period in the prior year. This change in cash flow compared to the change in cash flow in the prior period is primarily due to net decreases in operating assets and liabilities. The changes in accounts receivable, accounts payable, and customer card funding, a net decrease of $12,667,611, are primarily related to the growth in our pharma patient affordability business and timing of pass-through payments as we are invoiced by third-party service providers at the end of the period and are due monies from our pharma patient affordability customers to cover these third-party payables. The decrease in cash flows from operating activities was offset by an increase in net income, reduced prepaid expenses, collection of tax credits and non-cash adjustments for depreciation and amortization, deferred income tax, stock-based compensation, and lease expense.

We used net cash in investing activities during the nine months ended September 30, 2025 and 2024 of $8,436,339 and $7,087,867, respectively. For the nine months ended September 30, 2025, $6,436,339 of cash was used for investing activities primarily attributable to an increase in software licenses and capitalization of internally developed software as we continue to invest in our technology platform. The remaining amount of $2,000,000 was used for the Gamma acquisition that closed on March 19, 2025 (see “Note 2- ACQUISITION” in the notes to the accompanying consolidated financial statements). For the nine months ended September 30, 2024, $7,087,867 of cash was used for investing activities primarily attributable to an increase in software licenses and capitalization of internally developed software as we continue to invest in our technology platform.

Cash provided by financing activities of $284,868 for the nine months ended September 30, 2025 was primarily attributed to proceeds from the exercise of options of $660,654, partially offset by the repurchase of 100,000 shares of the Company’s common stock at a weighted average price of $3.76 per share. Finance activities during the nine months ended September 30, 2024 used $331,695 in cash, attributable to the repurchase of 100,000 shares of the Company’s common stock at a weighted average price of $3.60 per share offset by proceeds received of $28,800 for the exercise of stock options.

Our significant contractual cash requirements also include ongoing payments for lease liabilities and acquisition. For additional information regarding our cash commitments and contractual obligations, see “Note 2 – ACQUISITION” and “Note 5 – LEASE” in the notes to the accompanying consolidated financial statements.

Sources of Liquidity

Unrestricted cash was $7,529,047 as of September 30, 2025, a decrease of $2,764,160 compared to the same period in the prior year. The decrease resulted primarily in payment timing on passthrough claim reimbursement receivables and related payables associated with our patient affordability business in the amount of $9,364,030, offset from the improvement in our operating results. We believe that our available cash on hand, excluding restricted cash, at September 30, 2025 of $7,529,047, along with our forecast for revenues and cash flows for the remainder of 2025 and through the third quarter of 2027, will be sufficient to sustain our operations for the next twenty-four months. In light of the recent bank failures, we continue to monitor the health and soundness of our bank relationships through publicly available information. Based on recent SEC filings, we have not discovered any issues that would cause us to alter our bank relationships.

Critical Accounting Policies and Estimates

Our significant accounting policies are described in Note 2 of the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

Our estimates are based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects. Actual results may differ significantly from our estimates.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Because we are a smaller reporting company, we are not required to provide the information called for by this Item.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Disclosure controls and procedures means controls and other procedures that are designed to ensure that the information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to ensure that information required to be disclosed by us in those reports is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our chief executive officer and chief financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2025. Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of September 30, 2025, the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control over Financial Reporting

During the quarter ended September 30, 2025, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

Item 1A. Risk Factors.

Because we are a smaller reporting company, we are not required to provide the information called for by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the quarter ended September 30, 2025, we did not issue shares of common stock that were not registered under the Securities Act of 1933.

Issuer Purchases of Equity Securities

The following table sets forth certain information relating to the purchases of our common stock by us and any affiliated purchasers within the meaning of Rule 10b-18(a)(3) under the Exchange Act during the three months ended September 30, 2025.

Period

Total Number of Shares Purchased

Weighted Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

July 1, 2025 – July 31, 2025

–

3,001,285

August 1, 2025 – August 31, 2025

–

3,001,285

September 1, 2025 – September 30, 2025

–

3,001,285

Total

–

3,001,285

(1) On March 21, 2023, our Board authorized a stock repurchase program to repurchase up to $5 million of our common stock, subject to certain conditions, in the open market, in privately negotiated transactions, or by other means in compliance with Rule 10b-18 under the Exchange Act. The program is expected to be completed within 36 months from the commencement date. As of September 30, 2025, the Company had repurchased 631,258 shares of common stock for $1,998,715 at a weighted average price of $3.17 per share under this repurchase program.

Item 5. Other Information.

During the quarter ended September 30, 2025, below directors and officers of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408 of Regulation S-K).

On September 10, 2025, Robert Strobo, our General Counsel and Chief Legal Officer, adopted a Rule 10b5-1 trading plan, which plan is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. The plan expires on April 30, 2026 and provides for the purchase or sale of an aggregate of 20 thousand shares of common stock.

On September 10, 2025, Jeffery Baker, our Chief Financial Officer, adopted a Rule 10b5-1 trading plan, which plan is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. The plan expires on November 30, 2026 and provides for the purchase or sale of an aggregate of 35 thousand shares of common stock.

On September 12, 2025, Joan Herman, our Executive Vice President and Director, adopted a Rule 10b5-1 trading plan, which plan is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. The plan expires on November 30, 2026 and provides for the purchase or sale of an aggregate of 350 thousand shares of common stock.

On September 12, 2025, Mark Newcomer, our President and Chief Executive Officer, adopted a Rule 10b5-1 trading plan, which plan is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. The plan expires on December 15, 2026 and provides for the purchase or sale of an aggregate of 400 thousand shares of common stock.

Item 6. Exhibits.

31.1*	Rule 13a-14(a)/15d-14(a) Certifications
31.2*	Rule 13a-14(a)/15d-14(a) Certifications
32.1*	Section 1350 Certifications
32.2*	Section 1350 Certifications
101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted in iXBRL, and included in exhibit 101).

______________

*	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PAYSIGN, INC.


Date: November 13, 2025	/s/ Mark Newcomer
	By: Mark Newcomer, President and Chief Executive Officer (principal executive officer)


Date: November 13, 2025	/s/ Jeff Baker
	By: Jeff Baker, Chief Financial Officer (principal financial and accounting officer)

SEC Form 10-Q filed by Paysign Inc.