usio20220930

usio20220930_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 September 30, 2022

☐ 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, 2022, the number of outstanding shares of the registrant's common stock was 25,324,198.

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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 September 30, 2022 and December 31, 2021	1

	Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2022 and 2021	2

	Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2022 and 2021	3

	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months ended September 30, 2022 and 2021	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.	13

Item 4.	Controls and Procedures.	13

PART II – OTHER INFORMATION		14

Item 1.	Legal Proceedings.	14

Item 1A.	Risk Factors.	14

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	15

Item 3.	Defaults Upon Senior Securities.	15

Item 4.	Mine Safety Disclosures (Not applicable).	15

Item 5.	Other Information.	15

Item 6.	Exhibits.	16

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

USIO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	*September 30, 2022*			*December 31, 2021*
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,613,123		$	7,255,321
Accounts receivable, net		3,569,082			4,979,493
Settlement processing assets		49,697,691			63,824,646
Prepaid card load assets		15,318,411			36,590,893
Customer deposits		1,585,586			1,364,193
Inventory		420,432			434,532
Prepaid expenses and other		545,435			426,963
Current assets before merchant reserves		75,749,760			114,876,041
Merchant reserves		5,654,729			6,381,153
Total current assets		81,404,489			121,257,194

Property and equipment, net		3,407,021			3,607,157

Other assets:
Intangibles, net		2,843,327			4,163,894
Deferred tax asset, net		1,504,000			1,504,000
Operating lease right-of-use assets		2,932,812			2,802,113
Other assets		355,357			345,357
Total other assets		7,635,496			8,815,364

Total assets	$	92,447,006		$	133,679,715

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	612,189		$	1,400,100
Accrued expenses		2,371,178			2,325,665
Operating lease liabilities, current portion		537,034			504,027
Equipment loan, current portion		56,429			54,760
Settlement processing obligations		49,697,691			63,824,646
Prepaid card load obligations		15,318,411			36,590,893
Customer deposits		1,585,586			1,364,193
Deferred revenues		—			17,647
Current liabilities before merchant reserve obligations		70,178,518			106,081,931
Merchant reserve obligations		5,654,729			6,381,153
Total current liabilities		75,833,247			112,463,084

Non-current liabilities:
Equipment loan, non-current portion		28,893			71,434
Operating lease liabilities, non-current portion		2,581,645			2,476,291
Total liabilities		78,443,785			115,010,809

Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at September 30, 2022 (unaudited) and December 31, 2021, respectively		—			—
Common stock, $0.001 par value, 200,000,000 shares authorized; 26,966,300 and 26,807,145 issued, and 25,263,333 and 25,473,453 outstanding at September 30, 2022 (unaudited) and December 31, 2021, respectively		195,391			195,235
Additional paid-in capital		93,811,189			93,100,129
Treasury stock, at cost; 1,702,967 and 1,333,692 shares at September 30, 2022 (unaudited) and December 31, 2021, respectively		(3,299,099	)		(2,404,458	)
Deferred compensation		(5,992,070	)		(6,842,195	)
Accumulated deficit		(70,712,190	)		(65,379,805	)
Total stockholders’ equity		14,003,221			18,668,906

Total liabilities and stockholders’ equity	$	92,447,006		$	133,679,715

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 September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021

Revenues	$	16,395,760		$	15,821,070		$	50,722,789		$	44,515,761
Cost of services		13,261,240			11,787,439			40,819,236			33,447,448
Gross profit		3,134,520			4,033,631			9,903,553			11,068,313

Selling, general and administrative:
Stock-based compensation		515,992			343,567			1,540,375			988,567
Other SG&A expenses		3,679,484			2,844,205			11,323,326			8,349,452
Depreciation and amortization		640,599			634,912			2,163,468			1,884,268
Total selling, general and administrative expenses		4,836,075			3,822,684			15,027,169			11,222,287

Operating income (loss)		(1,701,555	)		210,947			(5,123,616	)		(153,974	)

Other income and (expense):
Interest income		2,728			1,767			4,475			6,403
Interest expense		(943	)		(1,480	)		(3,244	)		(2,964	)
Other income and (expense), net		1,785			287			1,231			3,439

Income (Loss) before income taxes		(1,699,770	)		211,234			(5,122,385	)		(150,535	)
Income tax expense		70,000			70,000			210,000			210,000

Net income (Loss)	$	(1,769,770	)	$	141,234		$	(5,332,385	)	$	(360,535	)

Income (Loss) Per Share
Basic income (loss) per common share:	$	(0.09	)	$	0.01		$	(0.26	)	$	(0.02	)
Diluted income (loss) per common share:	$	(0.09	)	$	0.01		$	(0.26	)	$	(0.02	)
Weighted average common shares outstanding
Basic		20,371,654			20,033,515			20,322,934			19,986,279
Diluted		20,371,654			24,935,517			20,322,934			19,986,279

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

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USIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	*Nine Months Ended September 30,*
	*2022*			*2021*
Operating activities:
Net (loss)	$	(5,332,385	)	$	(360,535	)
Adjustments to reconcile net (loss) to net cash provided (used) by operating activities:
Depreciation		842,901			480,368
Amortization		1,320,567			1,403,900
Bad debt		—			87,190
Stock-based compensation		1,540,375			988,567
Amortization of warrant costs		20,965			26,955
Changes in current assets and current liabilities:
Accounts receivable		1,410,411			(1,410,805	)
Prepaid expenses and other		(118,472	)		54,709
Operating lease right-of-use assets		(130,699	)		(249,863	)
Other assets		(10,000	)		23,000
Inventory		14,100			(45,209	)
Accounts payable and accrued expenses		(742,398	)		765,512
Operating lease liabilities		138,361			258,896
Prepaid card load obligations		(21,272,482	)		7,474,626
Merchant reserves		(726,424	)		(1,004,402	)
Customer deposits		221,393			200,028
Deferred revenue		(17,647	)		(35,690	)
Net cash provided (used) by operating activities		(22,841,434	)		8,657,247

Investing activities:
Purchases of property and equipment		(642,764	)		(999,493	)
Net cash (used) by investing activities		(642,764	)		(999,493	)

Financing activities:
Proceeds from equipment loan		—			165,996
Payments on equipment loan		(40,872	)		(26,446	)
Purchases of treasury stock		(894,641	)		(198,350	)
Net cash (used) by financing activities		(935,513	)		(58,800	)

Change in cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves		(24,419,711	)		7,598,954
Cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves, beginning of period		51,591,560			22,192,225

Cash, Cash Equivalents, Prepaid Card Load Assets, Customer Deposits and Merchant Reserves, End of Period	$	27,171,849		$	29,791,179

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	3,244		$	2,964
Income taxes		—			92,850
Non-cash transactions:
Issuance of deferred stock compensation		166,330			—

See 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, 2021		26,807,145		$	195,235		$	93,100,129		$	(2,404,458	)	$	(6,842,195	)	$	(65,379,805	)	$	18,668,906

Issuance of common stock under equity incentive plan		61,600			62			267,856			—			(12,330	)		—			255,588
Warrant compensation costs		—			—			8,985			—			—			—			8,985
Deferred compensation amortization		—			—			—			—			295,092			—			295,092
Purchase of treasury stock costs		—			—			—			(66,494	)		—			—			(66,494	)
Net (loss) for the period		—			—			—			—			—			(1,622,270	)		(1,622,270	)

Balance at March 31, 2022		26,868,745		$	195,297		$	93,376,970		$	(2,470,952	)	$	(6,559,433	)	$	(67,002,075	)	$	17,539,807

Issuance of common stock under equity incentive plan		54,233			52			258,636			—			—			—			258,687
Warrant compensation costs		—			—			8,985			—			—			—			8,985
Reversal of deferred compensation amortization that did not vest		(85,000	)		(85	)		(176,465	)		—			97,621			—			(78,929	)
Deferred compensation amortization		—			—			—			—			293,942			—			293,942
Purchase of treasury stock costs		—			—			—			(480,095	)		—			—			(480,095	)
Net (loss) for the period		—			—			—			—			—			(1,940,345	)		(1,940,345	)

Balance at June 30, 2022		26,837,978		$	195,264		$	93,468,126		$	(2,951,047	)	$	(6,167,870	)	$	(68,942,420	)	$	15,602,052

Issuance of common stock under equity incentive plan		163,322			162			406,083			—			(154,000	)		—			252,245
Warrant compensation costs		—