usio20230828

usio20230828_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, 2023

☐ 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 6, 2023, the number of outstanding shares of the registrant's common stock was 26,307,286.

Table of Contents

USIO, INC.

INDEX

		Page
PART I – FINANCIAL INFORMATION		1

Item 1.	Financial Statements (Unaudited).	1

	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	1

	Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2023 and 2022	2

	Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2023 and 2022	3

	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months ended September 30, 2023 and 2022	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	9

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	15

Item 4.	Controls and Procedures.	15

PART II – OTHER INFORMATION		16

Item 1.	Legal Proceedings.	16

Item 1A.	Risk Factors.	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	17

Item 3.	Defaults Upon Senior Securities.	17

Item 4.	Mine Safety Disclosures (Not applicable).	17

Item 5.	Other Information.	17

Item 6.	Exhibits.	18

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

USIO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	*September 30, 2023*			*December 31, 2022*
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	7,396,285		$	5,709,117
Accounts receivable, net		5,203,618			4,371,640
Settlement processing assets		41,765,059			49,737,068
Prepaid card load assets		58,839,602			20,170,761
Customer deposits		1,578,498			1,554,122
Inventory		400,839			507,355
Prepaid expenses and other		740,208			450,389
Current assets before merchant reserves		115,924,109			82,500,452
Merchant reserves		5,336,545			4,909,501
Total current assets		121,260,654			87,409,953

Property and equipment, net		2,904,564			3,222,816

Other assets:
Intangibles, net		1,971,460			2,625,360
Deferred tax asset, net		1,504,000			1,504,000
Operating lease right-of-use assets		2,551,443			2,795,483
Other assets		355,357			355,357
Total other assets		6,382,260			7,280,200

Total assets	$	130,547,478		$	97,912,969

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,274,681		$	858,622
Accrued expenses		4,150,298			3,721,108
Operating lease liabilities, current portion		795,928			617,319
Equipment loan, current portion		28,896			56,429
Settlement processing obligations		41,765,059			49,737,068
Prepaid card load obligations		58,839,602			20,170,761
Customer deposits		1,578,498			1,554,122
Current liabilities before merchant reserve obligations		108,432,962			76,715,429
Merchant reserve obligations		5,336,545			4,909,501
Total current liabilities		113,769,507			81,624,930

Non-current liabilities:
Equipment loan, non-current portion		—			14,994
Operating lease liabilities, non-current portion		1,892,785			2,338,947
Total liabilities		115,662,292			83,978,871

Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at September 30, 2023 (unaudited) and December 31, 2022, respectively		—			—
Common stock, $0.001 par value, 200,000,000 shares authorized; 28,506,406 and 27,044,900 issued, and 26,377,589 and 25,097,963 outstanding at September 30, 2023 (unaudited) and December 31, 2022, respectively		196,932			195,471
Additional paid-in capital		97,105,455			94,048,603
Treasury stock, at cost; 2,128,537 and 1,946,937 shares at September 30, 2023 (unaudited) and December 31, 2022, respectively		(3,974,156	)		(3,749,027	)
Deferred compensation		(7,078,957	)		(5,697,900	)
Accumulated deficit		(71,364,088	)		(70,863,049	)
Total stockholders’ equity		14,885,186			13,934,098

Total liabilities and stockholders’ equity	$	130,547,478		$	97,912,969

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,
	2023			2022			2023			2022

Revenues	$	20,520,441		$	16,395,760		$	63,228,391		$	50,722,789
Cost of services		16,325,793			13,261,240			49,121,210			40,819,236
Gross profit		4,194,648			3,134,520			14,107,181			9,903,553

Selling, general and administrative:
Stock-based compensation		594,815			515,992			1,677,258			1,540,375
Other SG&A expenses		4,293,869			3,679,484			12,021,110			11,323,326
Depreciation and amortization		518,573			640,599			1,559,601			2,163,468
Total selling, general and administrative expenses		5,407,257			4,836,075			15,257,969			15,027,169

Operating (loss)		(1,212,609	)		(1,701,555	)		(1,150,788	)		(5,123,616	)

Other income and (expense):
Interest income		512,089			2,728			823,861			4,475
Other income		50,000			—			50,000			—
Interest expense		(393	)		(943	)		(1,588	)		(3,244	)
Other income and (expense), net		561,696			1,785			872,273			1,231

(Loss) before income taxes		(650,913	)		(1,699,770	)		(278,515	)		(5,122,385	)
Income tax expense		70,000			70,000			222,524			210,000

Net (Loss)	$	(720,913	)	$	(1,769,770	)	$	(501,039	)	$	(5,332,385	)

(Loss) Per Share
Basic (loss) per common share:	$	(0.04	)	$	(0.09	)	$	(0.02	)	$	(0.26	)
Diluted (loss) per common share:	$	(0.04	)	$	(0.09	)	$	(0.02	)	$	(0.26	)
Weighted average common shares outstanding
Basic		20,098,244			20,371,654			20,101,686			20,322,934
Diluted		20,098,244			20,371,654			20,101,686			20,322,934

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,*
	*2023*			*2022*
Operating activities:
Net (loss)	$	(501,039	)	$	(5,332,385	)
Adjustments to reconcile net (loss) to net cash provided (used) by operating activities:
Depreciation		905,701			842,901
Amortization		653,900			1,320,567
Employee stock-based compensation		1,644,658			1,540,375
Vendor stock-based compensation		32,600			—
Amortization of warrant costs		—			20,965
Non-cash revenue from return of treasury stock		(156,162	)		—
Changes in current assets and current liabilities:
Accounts receivable		(831,978	)		1,410,411
Prepaid expenses and other		(289,819	)		(118,472	)
Operating lease right-of-use assets		244,040			(130,699	)
Other assets		—			(10,000	)
Inventory		106,516			14,100
Accounts payable and accrued expenses		845,249			(742,398	)
Operating lease liabilities		(267,553	)		138,361
Prepaid card load obligations		38,668,841			(21,272,482	)
Merchant reserves		427,044			(726,424	)
Customer deposits		24,376			221,393
Deferred revenue		—			(17,647	)
Net cash provided (used) by operating activities		41,506,374			(22,841,434	)

Investing activities:
Purchases of property and equipment		(587,451	)		(642,764	)
Net cash (used) by investing activities		(587,451	)		(642,764	)

Financing activities:
Payments on equipment loan		(42,527	)		(40,872	)
Purchases of treasury stock		(68,967	)		(894,641	)
Net cash (used) by financing activities		(111,494	)		(935,513	)

Change in cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves		40,807,429			(24,419,711	)
Cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves, beginning of period		32,343,501			51,591,560

Cash, Cash Equivalents, Prepaid Card Load Assets, Customer Deposits and Merchant Reserves, End of Period	$	73,150,930		$	27,171,849

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	1,588		$	3,244
Income taxes		312,158			—
Non-cash financing activity:
Issuance of deferred stock compensation		2,478,506			166,330

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, 2022		27,044,900		$	195,471		$	94,048,603		$	(3,749,027	)	$	(5,697,900	)	$	(70,863,049	)	$	13,934,098

Issuance of common stock under equity incentive plan		1,421,250			1,421			2,638,529			—			(2,444,054	)		—			195,896
Deferred compensation amortization		—			—			—			—			308,676			—			308,676
Purchase of treasury stock costs		—			—			—			(8,529	)		—			—			(8,529	)
Net income for the period		—			—			—			—			—			14,833			14,833

Balance at March 31, 2023		28,466,150		$	196,892		$	96,687,132		$	(3,757,556	)	$	(7,833,278	)	$	(70,848,216	)	$	14,444,974

Issuance of common stock under equity incentive plan		111,456			111			354,199			—			(34,452	)		—			319,858
Reversal of deferred compensation amortization that did not vest		(115,000	)		(115	)		(188,088	)		—			103,091			—			(85,112	)
Deferred compensation amortization		—			—			—			—			343,123			—			343,123
Purchase of treasury stock costs		—			—			—			(10,507	)		—			—			(10,507	)
Non-cash return of treasury stock		—			—			—			(156,162	)		—			—			(156,162	)
Net income for the period		—			—			—			—			—			205,041			205,041

Balance at June 30, 2023		28,462,606		$	196,888		$	96,853,243		$	(3,924,225	)	$	(7,421,516	)	$	(70,643,175	)	$	15,061,215

Issuance of common stock under equity incentive plan		43,800			44			252,212			—			—			—			252,256
Deferred compensation amortization		—			—			—			—			342,559			—			342,559
Purchase of treasury stock costs		—			—			—			(49,931	)		—			—			(49,931	)
Net (loss) for the period		—			—			—			—			—			(720,913	)		(720,913	)

Balance at September 30, 2023		28,506,406		$	196,932		$	97,105,455		$	(3,974,156	)	$	(7,078,957	)	$	(71,364,088	)	$	14,885,186

Balance at December 31, 2021		26,807,145		$	195,235		$	93,100,129		$	(2,404,458	)	$	(6,842,195	)	$	(65,379,805	)

SEC Form 10-Q filed by Usio Inc.