usio20240630

usio20240630_10q.htm

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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 June 30, 2024

☐ 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 August 12, 2024, the number of outstanding shares of the registrant's common stock was 27,361,329.

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USIO, INC.

INDEX

		Page
PART I – FINANCIAL INFORMATION		1

Item 1.	Financial Statements (Unaudited).	1

	Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	1

	Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2024 and 2023	2

	Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2024 and 2023	3

	Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months ended June 30, 2024 and 2023	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	10

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	16

Item 4.	Controls and Procedures.	16

PART II – OTHER INFORMATION		17

Item 1.	Legal Proceedings.	17

Item 1A.	Risk Factors.	18

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	18

Item 3.	Defaults Upon Senior Securities.	18

Item 4.	Mine Safety Disclosures (Not applicable).	18

Item 5.	Other Information.	18

Item 6.	Exhibits.	19

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

USIO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	*June 30, 2024*			*December 31, 2023*
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	7,498,256		$	7,155,687
Accounts receivable, net		5,494,539			5,564,138
Settlement processing assets		51,122,984			44,899,603
Prepaid card load assets		28,056,918			31,578,973
Customer deposits		1,808,006			1,865,731
Inventory		407,013			422,808
Prepaid expenses and other		819,163			444,071
Current assets before merchant reserves		95,206,879			91,931,011
Merchant reserves		4,851,839			5,310,095
Total current assets		100,058,718			97,241,106

Property and equipment, net		3,427,109			3,660,092

Other assets:
Intangibles, net		1,317,370			1,753,333
Deferred tax asset, net		1,504,000			1,504,000
Operating lease right-of-use assets		2,184,415			2,420,782
Other assets		340,285			355,357
Total other assets		5,346,070			6,033,472

Total assets	$	108,831,897		$	106,934,670

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	968,217		$	1,031,141
Accrued expenses		3,214,518			3,801,278
Operating lease liabilities, current portion		442,668			633,616
Equipment loan, current portion		192,206			107,270
Settlement processing obligations		51,122,984			44,899,603
Prepaid card load obligations		28,056,918			31,578,973
Customer deposits		1,808,006			1,865,731
Current liabilities before merchant reserve obligations		85,805,517			83,917,612
Merchant reserve obligations		4,851,839			5,310,095
Total current liabilities		90,657,356			89,227,707

Non-current liabilities:
Equipment loan, net of current portion		597,176			718,980
Operating lease liabilities, net of current portion		1,863,147			1,919,144
Total liabilities		93,117,679			91,865,831

Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at June 30, 2024 (unaudited) and December 31, 2023, respectively		—			—
Common stock, $0.001 par value, 200,000,000 shares authorized; 29,764,435 and 28,671,606 issued, and 27,331,969 and 26,332,523 outstanding at June 30, 2024 (unaudited) and December 31, 2023, respectively		198,179			197,087
Additional paid-in capital		99,222,467			97,479,830
Treasury stock, at cost; 2,432,466 and 2,339,083 shares at June 30, 2024 (unaudited) and December 31, 2023, respectively		(4,511,919	)		(4,362,150	)
Deferred compensation		(7,681,660	)		(6,907,775	)
Accumulated deficit		(71,512,849	)		(71,338,153	)
Total stockholders’ equity		15,714,218			15,068,839

Total liabilities and stockholders’ equity	$	108,831,897		$	106,934,670

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

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USIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023

Revenues	$	20,079,888		$	21,436,572		$	41,050,274		$	42,952,842
Cost of services		15,280,074			16,250,988			31,396,765			32,795,417
Gross profit		4,799,814			5,185,584			9,653,509			10,157,425

Selling, general and administrative expenses:
Stock-based compensation		460,061			577,869			959,334			1,082,443
Other SG&A		4,000,845			3,854,022			8,061,070			7,727,241
Depreciation and amortization		547,849			522,999			1,124,003			1,041,028
Total selling, general and administrative		5,008,755			4,954,890			10,144,407			9,850,712

Operating income (loss)		(208,941	)		230,694			(490,898	)		306,713

Other income and (expense):
Interest income		107,270			43,978			222,624			66,880
Other income		261,413			—			261,413			—
Interest expense		(14,250	)		(533	)		(27,835	)		(1,195	)
Other income, net		354,433			43,445			456,202			65,685

Income (loss) before income tax expense		145,492			274,139			(34,696	)		372,398
Income tax expense		70,000			69,098			140,000			152,524

Net income (loss)	$	75,492		$	205,041		$	(174,696	)	$	219,874

Basic income (loss) per common share:	$	0.00		$	0.01		$	(0.01	)	$	0.01
Diluted income (loss) per common share:	$	0.00		$	0.01		$	(0.01	)	$	0.01
Weighted average common shares outstanding
Basic		26,534,407			26,413,329			26,454,848			26,410,340
Diluted		26,534,407			26,413,329			26,454,848			26,410,340

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

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USIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	*Six Months Ended June 30,*
	*2024*			*2023*
Operating activities:
Net income (loss)	$	(174,696	)	$	219,874
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		688,039			605,095
Amortization		435,964			435,933
Employee stock-based compensation		959,334			1,082,443
Non-cash revenue from returned common stock		—			(156,162	)
Changes in current assets and current liabilities:
Accounts receivable		69,599			(850,132	)
Prepaid expenses and other		(375,092	)		(176,728	)
Operating lease right-of-use assets		236,367			114,956
Other assets		15,072			—
Inventory		15,795			25,185
Accounts payable and accrued expenses		(649,684	)		136,401
Operating lease liabilities		(246,945	)		(134,979	)
Prepaid card load obligations		(3,522,055	)		26,227,715
Merchant reserves		(458,256	)		231,539
Customer deposits		(57,725	)		9,070
Net cash provided by (used in) operating activities		(3,064,283	)		27,770,210

Investing activities:
Purchases of property and equipment		(455,057	)		(388,628	)
Net cash (used in) investing activities		(455,057	)		(388,628	)

Financing activities:
Payments on equipment loan		(36,868	)		(28,215	)
Proceeds from issuance of common stock		10,510			—
Purchases of treasury stock		(149,769	)		(19,036	)
Net cash (used in) financing activities		(176,127	)		(47,251	)

Change in cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves		(3,695,467	)		27,334,331
Cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves, beginning of period		45,910,486			32,343,501

Cash, Cash Equivalents, Prepaid Card Load Assets, Customer Deposits and Merchant Reserves, End of Period	$	42,215,019		$	59,677,832

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	27,835		$	1,195
Income taxes		—			312,158
Non-cash financing activity:
Issuance of deferred stock compensation		1,497,300			2,478,506

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

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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, 2023		28,671,606		$	197,087		$	97,479,830		$	(4,362,150	)	$	(6,907,775	)	$	(71,338,153	)	$	15,068,839

Issuance of common stock under equity incentive plan		107,600			107			153,118			—			—			—			153,225
Deferred compensation amortization		—			—			—			—			346,047			—			346,047
Purchase of treasury stock costs		—			—			—			(44,823	)		—			—			(44,823	)
Net (loss) for the period		—			—			—			—			—			(250,188	)		(250,188	)

Balance at March 31, 2024		28,779,206		$	197,194		$	97,632,948		$	(4,406,973	)	$	(6,561,728	)	$	(71,588,341	)	$	15,273,100

Issuance of common stock under equity incentive plan		994,049			994			1,610,320			—			(1,497,300	)		—			114,014
Issuance of common stock under employee stock purchase plan		6,180			6			10,504			—			—			—			10,510
Reversal of deferred compensation amortization that did not vest		(15,000	)		(15	)		(31,305	)		—			31,320			—			—
Deferred compensation amortization		—			—			—			—			346,048			—			346,048
Purchase of treasury stock costs		—			—			—			(104,946	)		—			—			(104,946	)
Net income for the period		—			—			—			—			—			75,492			75,492

Balance at June 30, 2024		29,764,435		$	198,179		$	99,222,467		$	(4,511,919	)	$	(7,681,660	)	$	(71,512,849	)	$	15,714,218

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

SEC Form 10-Q filed by Usio Inc.