usio20210930

usio20210930_10q.htm

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, 2021

☐ 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:000-30152

USIO, INC.

(Exact name of registrant as specified in its charter)

Nevada		98-0190072
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



3611 Paesanos Parkway, Suite 300, San Antonio, TX		78231
(Address of principal executive offices)		(Zip Code)

(210) 249-4100

(Registrant’s telephone number, including area code)

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

Title of each class	Trading symbol(s)	Name on each exchange on which registered
Common stock, par value $0.001 per share	USIO	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 Act). ☐ Yes ☒ No

As of November 8, 2021, the number of outstanding shares of the registrant's common stock was 24,973,775.

USIO, INC.

INDEX

		Page
PART I – FINANCIAL INFORMATION		1

Item 1.	Financial Statements (Unaudited).	1

	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	1

	Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2021 and 2020	2

	Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2021 and 2020	3

	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months ended September 30, 2021 and 2020	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	11

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	14

Item 4.	Controls and Procedures.	14

PART II – OTHER INFORMATION		15

Item 1.	Legal Proceedings.	15

Item 1A.	Risk Factors.	15

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	16

Item 3.	Defaults Upon Senior Securities.	16

Item 4.	Mine Safety Disclosures (Not applicable).	16

Item 5.	Other Information.	16

Item 6.	Exhibits.	17

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

USIO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2021			December 31, 2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	5,939,834		$	5,011,132
Accounts receivable, net		4,187,253			2,863,638
Settlement processing assets		36,492,916			43,558,442
Prepaid card load assets		15,084,868			7,610,242
Customer deposits		1,505,324			1,305,296
Inventory		221,675			176,466
Prepaid expenses and other		247,046			301,755
Current assets before merchant reserves		63,678,916			60,826,971
Merchant reserves		7,261,153			8,265,555
Total current assets		70,940,069			69,092,526

Property and equipment, net		3,625,050			3,105,926

Other assets:
Intangibles, net		4,631,861			6,035,761
Deferred tax asset, net		1,394,000			1,394,000
Operating lease right-of-use assets		2,921,129			2,671,266
Other assets		345,078			368,078
Total other assets		9,292,068			10,469,105

Total assets	$	83,857,187		$	82,667,557

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,334,579		$	851,349
Accrued expenses		1,746,226			1,463,944
Operating lease liabilities, current portion		494,983			346,913
Equipment loan, current portion		54,217			—
Settlement processing obligations		36,492,916			43,558,442
Prepaid card load obligations		15,084,868			7,610,242
Customer deposits		1,505,324			1,305,296
Deferred revenues		30,882			66,572
Current liabilities before merchant reserve obligations		56,743,995			55,202,758
Merchant reserve obligations		7,261,153			8,265,555
Total current liabilities		64,005,148			63,468,313

Non-current liabilities:
Equipment loan, non-current portion		85,333			—
Operating lease liabilities, non-current portion		2,606,709			2,495,883
Total liabilities		66,697,190			65,964,196

Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at September 30, 2021 (unaudited) and December 31, 2020, respectively		—			—
Common stock, $0.001 par value, 200,000,000 shares authorized; 26,289,288 and 26,260,776 issued, and 24,962,750 and 24,974,995 outstanding at September 30, 2021 (unaudited) and December 31, 2020, respectively		194,746			194,692
Additional paid-in capital		89,702,612			89,659,433
Treasury stock, at cost; 1,326,538 and 1,285,781 shares at September 30, 2021 (unaudited) and December 31, 2020, respectively		(2,364,071	)		(2,165,721	)
Deferred compensation		(4,954,584	)		(5,926,872	)
Accumulated deficit		(65,418,706	)		(65,058,171	)
Total stockholders’ equity		17,159,997			16,703,361

Total liabilities and stockholders’ equity	$	83,857,187		$	82,667,557

See the accompanying notes to the condensed interim consolidated financial statements.

Table of Contents

USIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020

Revenues	$	15,821,070		$	8,137,077		$	44,515,761		$	22,869,309
Cost of services		11,787,439			6,414,807			33,447,448			17,933,089
Gross profit		4,033,631			1,722,270			11,068,313			4,936,220

Selling, general and administrative:
Stock-based compensation		343,567			267,223			988,567			903,326
Other SG&A expenses		2,844,205			1,976,191			8,349,452			5,955,221
Depreciation and amortization		634,912			390,216			1,884,268			1,160,255
Total selling, general and administrative expenses		3,822,684			2,633,630			11,222,287			8,018,802

Operating income (loss)		210,947			(911,360	)		(153,974	)		(3,082,582	)

Other income and (expense):
Interest income		1,767			10,157			6,403			22,800
Other income (expense)		(1,480	)		186			(2,964	)		912
Other income and (expense), net		287			10,343			3,439			23,712

Income (loss) before income taxes		211,234			(901,017	)		(150,535	)		(3,058,870	)
Income tax expense		70,000			35,000			210,000			325

Net income (loss)	$	141,234		$	(936,017	)	$	(360,535	)	$	(3,059,195	)

Basic income (loss) per common share:	$	0.01		$	(0.06	)	$	(0.02	)	$	(0.22	)
Diluted income (loss) per common share:	$	0.01		$	(0.06	)	$	(0.02	)	$	(0.22	)
Weighted average common shares outstanding
Basic		20,033,515			15,474,171			19,986,279			13,924,803
Diluted		24,935,517			15,474,171			19,986,279			13,924,803

See the accompanying notes to the condensed interim consolidated financial statements.

Table of Contents

USIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	*Nine Months Ended September 30,*
	*2021*			*2020*
Operating activities:
Net (loss)	$	(360,535	)	$	(3,059,195	)
Adjustments to reconcile net (loss) to net cash provided by operating activities:
Depreciation		480,368			410,254
Amortization		1,403,900			750,001
Bad debt		87,190			—
Non-cash stock-based compensation		988,567			903,326
Amortization of warrant costs		26,955			26,958
Changes in current assets and current liabilities:
Accounts receivable		(1,410,805	)		54,631
Prepaid expenses and other		54,709			(1,534	)
Operating lease right-of-use assets		(249,863	)		172,166
Other assets		23,000			(18,363	)
Inventory		(45,209	)		—
Accounts payable and accrued expenses		765,512			(71,309	)
Operating lease liabilities		258,896			(168,458	)
Prepaid card load obligations		7,474,626			7,378,146
Merchant reserves		(1,004,402	)		(1,782,500	)
Customer deposits		200,028			—
Deferred revenue		(35,690	)		(39,705	)
Net cash provided by operating activities		8,657,247			4,554,418

Investing activities:
Purchases of property and equipment		(999,493	)		(582,347	)
Net cash (used) by investing activities		(999,493	)		(582,347	)

Financing activities:
Proceeds from PPP Loan Program		—			813,500
Proceeds from public offering, net of expenses		—			7,257,925
Proceeds from private offering		—			3,000,000
Proceeds from equipment loan		165,996			—
Payments on equipment loan		(26,446	)		—
Purchases of treasury stock		(198,350	)		(180,311	)
Net cash (used) provided by financing activities		(58,800	)		10,891,114

Change in cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves		7,598,954			14,863,185
Cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves, beginning of period		22,192,225			12,682,918

Cash, Cash Equivalents, Prepaid Card Load Assets, Customer Deposits and Merchant Reserves, End of Period	$	29,791,179		$	27,546,103

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	2,964		$	—
Income taxes		92,850			93,525
Non-cash transactions:
Issuance of deferred stock compensation		—			1,559,520

See accompanying notes to the condensed interim consolidated financial statements.

Table of Contents

USIO, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

	*Common Stock*						*Additional Paid- In*			*Treasury*			*Deferred*			*Accumulated*			*Total Stockholders'*
	*Shares*			*Amount*			*Capital*			*Stock*			*Compensation*			*Deficit*			*Equity*

Balance at December 31, 2020		26,260,776		$	194,692		$	89,659,433		$	(2,165,721	)	$	(5,926,872	)	$	(65,058,171	)	$	16,703,361

Issuance of common stock under equity incentive plan		51,000			51			120,484			—			—			—			120,535
Warrant compensation costs		—			—			8,985			—			—			—			8,985
Cashless warrant exercise		19,795			19			(19	)		—			—			—			—
Reversal of deferred compensation amortization that did not vest		(17,111	)		(17	)		(48,599	)		—			5,994			—			(42,622	)
Deferred compensation amortization		—			—			—			—			249,801			—			249,801
Purchase of treasury stock costs		—			—			—			(49,454	)		—			—			(49,454	)
Net (loss) for the period		—			—			—			—			—			(720,252	)		(720,252	)

Balance at March 31, 2021		26,314,460		$	194,745		$	89,740,284		$	(2,215,175	)	$	(5,671,077	)	$	(65,778,423	)	$	16,270,354

Issuance of common stock under equity incentive plan		61,556			61			150,481			—			—			—			150,542
Warrant compensation costs		—			—			8,985			—			—			—			8,985
Reversal of deferred compensation amortization that did not vest		(115,000	)		(115	)		(237,085	)		—			158,096			—			(79,104	)
Deferred compensation amortization		—			—			—			—			245,847			—			245,847
Purchase of treasury stock costs		—			—			—			(29,810	)		—			—			(29,810	)
Net income for the period		—			—			—			—			—			218,483			218,483

Balance at June 30, 2021		26,261,016		$	194,691		$	89,662,665		$	(2,244,985	)	$	(5,267,134	)	$	(65,559,940	)	$	16,785,297

Issuance of common stock under equity incentive plan		49,322			76			108,146			—			20,785			—			129,007
Warrant compensation costs		—			—			8,985			—			—			—			8,985
Cashless warrant exercise		19,950			20			(20	)		—			—			—			—
Reversal of deferred compensation amortization that did not vest		(41,000	)		(41	)		(77,164	)		—			52,434			—			(24,771	)
Deferred compensation amortization		—			—			—			—			239,331			—			239,331
Purchase of treasury stock costs		—			—			—			(119,086	)		—			—			(119,086	)
Net income for the period		—			—			—			—			—			141,234			141,234

Balance at September 30, 2021		26,289,288		$	194,746		$	89,702,612		$	(2,364,071	)	$	(4,954,584	)	$	(65,418,706	)	$	17,159,997

Balance at December 31, 2019		18,224,577		$	186,656		$	77,055,273		$	(1,885,452	)	$	(5,636,154	)	$	(62,151,988	)	$	7,568,335

Issuance of common stock under equity incentive plan		51,000			51			59,440			—			—			—			59,491
Warrant compensation costs		—			—			8,985			—			—			—			8,985
Deferred compensation amortization		—			—			—			—			228,219			—			228,219
Purchase of treasury stock costs		—			—			—			(26,629	)		—			—			(26,629	)
Net (loss) for the period		—			—			—			—			—			(835,009	)		(835,009	)

Balance at March 31, 2020		18,275,577		$	186,707		$	77,123,698

SEC Form 10-Q filed by Usio, Inc.