usio20260331

usio20260331_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 March 31, 2026

☐ 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 May 11, 2026, the number of outstanding shares of the registrant's common stock was 27,595,994.

Table of Contents

USIO, INC.

INDEX

		Page
PART I – FINANCIAL INFORMATION		3

Item 1.	Financial Statements (Unaudited).	3

	Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025	3

	Consolidated Statements of Operations for the Three Months ended March 31, 2026 and 2025	4

	Consolidated Statements of Cash Flows for the Three Months ended March 31, 2026 and 2025	5

	Consolidated Statements of Stockholders' Equity for the Three Months ended March 31, 2026 and 2025	7

	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	29

Item 4.	Controls and Procedures.	29

PART II – OTHER INFORMATION		30

Item 1.	Legal Proceedings.	30

Item 1A.	Risk Factors.	31

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

Item 3.	Defaults Upon Senior Securities.	31

Item 4.	Mine Safety Disclosures (Not applicable).	31

Item 5.	Other Information.	31

Item 6.	Exhibits.	32

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

USIO, INC.

CONSOLIDATED BALANCE SHEETS

	*March 31, 2026*			*December 31, 2025*
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	7,728,795		$	7,434,051
Settlement processing assets		69,522,444			74,180,475
Prepaid card load assets		15,466,828			27,623,728
Customer deposits		2,239,829			2,281,220
Accounts receivable, net		5,418,653			5,274,586
Inventory		392,873			461,675
Prepaid expenses and other		1,903,690			1,359,382
Merchant reserves		4,617,537			4,795,537
Total current assets		107,290,649			123,410,654

Property and equipment, net		4,545,252			4,157,393

Other assets:
Intangibles, net		9,759			9,759
Deferred tax asset, net		4,459,144			4,526,228
Operating lease right-of-use assets		3,524,650			2,423,231
Other assets		362,949			362,949
Total other assets		8,356,502			7,322,167

Total assets	$	120,192,403		$	134,890,214

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,275,061		$	880,590
Accrued expenses		4,052,640			3,326,445
Operating lease liabilities, current portion		756,708			639,805
Equipment loan, current portion		337,544			289,317
Settlement processing obligations		69,522,444			74,180,475
Prepaid card load obligations		15,466,828			27,623,728
Customer deposits		2,239,829			2,281,220
Merchant reserve obligations		4,617,537			4,795,537
Total current liabilities		98,268,591			114,017,117

Non-current liabilities:
Equipment loan, net of current portion		987,996			1,074,711
Operating lease liabilities, net of current portion		2,790,905			1,885,983
Total liabilities		102,047,492			116,977,811

Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at March 31, 2026 (unaudited) and December 31, 2025		—			—
Common stock, $0.001 par value, 200,000,000 shares authorized; 31,667,305 and 31,562,178 issued, and 27,672,168 and 27,729,704 outstanding at March 31, 2026 (unaudited) and December 31, 2025, respectively		31,667			31,562
Additional paid-in capital		102,455,703			102,363,590
Treasury stock, at cost; 3,995,137 and 3,832,474 shares at March 31, 2026 (unaudited) and December 31, 2025, respectively		(7,070,640	)		(6,837,181	)
Deferred compensation		(6,849,327	)		(7,100,573	)
Accumulated deficit		(70,422,492	)		(70,544,995	)
Total stockholders’ equity		18,144,911			17,912,403

Total liabilities and stockholders’ equity	$	120,192,403		$	134,890,214

See the accompanying notes to the interim consolidated financial statements.

Table of Contents

USIO, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	*Three Months Ended March 31,*
	*2026*			*2025*

Revenues	$	25,465,774		$	22,009,050
Cost of services		20,328,891			17,199,907
Gross profit		5,136,883			4,809,143

Selling, general and administrative expenses:
Stock-based compensation		329,284			410,062
SG&A		4,356,142			4,142,895
Depreciation and amortization		225,745			495,770
Total selling, general and administrative		4,911,171			5,048,727

Operating income (loss)		225,712			(239,584	)

Other income (expense):
Interest income		91,491			79,011
Interest expense		(22,826	)		(11,843	)
Other income, net		68,665			67,168

Income (loss) before income taxes		294,377			(172,416	)

Federal income tax expense		67,084			—
State income tax expense		104,790			62,554
Income tax expense		171,874			62,554

Net income (loss)	$	122,503		$	(234,970	)

Basic income (loss) per common share:	$	0.00		$	(0.01	)
Diluted income (loss) per common share:	$	0.00		$	(0.01	)
Weighted average common shares outstanding
Basic		27,748,037			26,615,947
Diluted		27,748,037			26,615,947

See the accompanying notes to the interim consolidated financial statements.

Table of Contents

USIO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	*Three Months Ended March 31,*
	*2026*			*2025*
Operating activities:
Net income (loss)	$	122,503		$	(234,970	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and Amortization		225,745			495,770
Deferred federal income tax		67,084			—
Employee stock-based compensation		329,284			410,062
Reserve for processing losses		18,000			355,595
Changes in current assets and current liabilities:
Accounts receivable		(144,067	)		484,023
Accounts receivable, tax credit		—			1,494,612
Prepaid expenses and other		(544,308	)		(143,539	)
Operating lease right-of-use assets		104,851			153,237
Inventory		68,802			55,303
Accounts payable and accrued expenses		1,102,666			(1,558,994	)
Operating lease liabilities		(184,445	)		(160,253	)
Merchant reserves		(178,000	)		35,000
Customer deposits		(41,391	)		(11,636	)
Net cash provided by operating activities		946,724			1,374,210

Investing activities:
Purchases of property and equipment		(398,072	)		(22,604	)
Capitalized labor for internal use software		(215,532	)		(290,650	)
Net cash used in investing activities		(613,604	)		(313,254	)

Financing activities:
Payments on equipment loan		(38,488	)		(36,110	)
Proceeds from issuance of common stock		14,180			11,515
Purchases of treasury stock		(233,459	)		(351,640	)
Assets held for customers		(16,814,931	)		3,953,121
Net cash provided by (used in) financing activities		(17,072,698	)		3,576,886

Change in cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves		(16,739,578	)		4,637,842
Cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves, beginning of period		116,315,011			87,618,491

Cash, Cash Equivalents, Settlement Processing Assets, Prepaid Card Load Assets, Customer Deposits and Merchant Reserves, End of Period	$	99,575,433		$	92,256,333

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	22,826		$	11,843
Income taxes		—			—
Non-cash investing and financing activities:
Right of use assets obtained in exchange for operating lease liabilities		1,206,270			—

The reconciliation of cash and cash equivalents to cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves is as follows for each period presented:

	*Three Months Ended March 31,*
	*2026*		*2025*

Beginning cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves:
Cash and cash equivalents	$	7,434,051	$	8,056,891
Settlement processing assets		74,180,475		47,104,006
Prepaid card load assets		27,623,728		25,648,688
Customer deposits		2,281,220		1,918,805
Merchant reserves		4,795,537		4,890,101
Total	$	116,315,011	$	87,618,491

Ending cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves:
Cash and cash equivalents	$	7,728,795	$	8,718,247
Settlement processing assets		69,522,444		62,151,877
Prepaid card load assets		15,466,828		14,553,939
Customer deposits		2,239,829		1,907,169
Merchant reserves		4,617,537		4,925,101
Total	$	99,575,433	$	92,256,333

See the accompanying notes to the 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, 2025		31,562,178	$	31,562		$	102,363,590	$	(6,837,181	)	$	(7,100,573	)	$	(70,544,995	)	$	17,912,403

Issuance of common stock under equity incentive plan		94,700		95			77,943		—			—			—			78,038
Issuance of common stock under employee stock purchase plan		10,427		10			14,170		—			—			—			14,180
Deferred compensation amortization		—		—			—		—			251,246			—			251,246
Purchase of treasury stock, at cost		—		—			—		(233,459	)		—			—			(233,459	)
Net income for the period		—		—			—		—			—			122,503			122,503

Balance at March 31, 2026		31,667,305	$	31,667		$	102,455,703	$	(7,070,640	)	$	(6,849,327	)	$	(70,422,492	)	$	18,144,911

Balance at December 31, 2024		29,902,415	$	198,317		$	99,676,457	$	(5,770,592	)	$	(6,914,563	)	$	(68,032,656	)	$	19,156,963

Adjustment to par value of common stock		—		(168,415	)		168,415		—			—			—			—
Issuance of common stock under equity incentive plan		128,053		128			136,276		—			—			—			136,404
Issuance of common stock under employee stock purchase plan		7,887		8			11,507		—			—			—			11,515
Deferred compensation amortization		—		—			—		—			273,658			—			273,658
Purchase of treasury stock, at cost		—		—			—		(351,640	)		—			—			(351,640	)
Net loss for the period		—		—			—		—			—			(234,970	)		(234,970	)

Balance at March 31, 2025		30,038,355	$	30,038		$	99,992,655	$	(6,122,232	)	$	(6,640,905	)	$	(68,267,626	)	$	18,991,930

See the accompanying notes to the interim consolidated financial statements.

Table of Contents

USIO, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation

The accompanying unaudited interim consolidated financial statements of Usio, Inc. and its subsidiaries (collectively, the “Company” or "Usio") have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission" or the "SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles ("GAAP") have been omitted pursuant to such rules and regulations. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to present fairly the Company's financial position, results of operations and cash flows for such periods. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2025, as filed with the Commission on March 18, 2026 (the "2025 Annual Report"). Results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim periods or the full fiscal year. References in this quarterly report to "the quarter" or the "first quarter" mean the three month period ended March 31, 2026 or 2025, as applicable, unless otherwise noted.

Use of Estimates: The preparation of financial statements in conformity with GAAP 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents: Cash and cash equivalents includes cash and other money market instruments. The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents.

Settlement Processing Assets and Obligations: Settlement processing assets and obligations represent intermediary balances arising in our settlement process for merchants. The Company earns interest on these underlying processing assets, which is recognized as revenue in the Automated Clearing House ("ACH") and complementary services business line.

Prepaid Card Load Assets: The Company maintains pre-funding accounts for its customers to facilitate prepaid card loads as initiated by our customer. These prepaid card load assets are carried on the Company's balance sheet with a corresponding liability. The Company earns interest on these prepaid card load assets and obligations, which is recognized as revenue in the prepaid card services business line.

Customer Deposits: The Company holds customer deposits primarily for postage expenses to ensure the Company is not out of pocket for amounts billed daily by the United States Postal Service. These customer deposits are carried on the Company's balance sheet with a corresponding liability. The Company earns interest on these customer deposits, which is recognized as revenue in the Output Solutions business line.

Merchant Reserves: The Company has merchant reserve requirements associated with ACH transactions. The merchant reserve assets are carried on the Company's balance sheet with a corresponding liability. Merchant Reserves are set for each merchant. Funds are collected from each merchant and held as collateral to minimize contingent liabilities associated with any losses that may occur under the merchant agreement. While this cash is not restricted in its use, the Company believes that designating this cash to collateralize Merchant Reserves strengthens its fiduciary standing with the Company's member sponsors and is in accordance with the guidelines set by the card networks. The Company earns interest on these merchant reserves, which is recognized as revenue in our ACH and complementary services business line.

Table of Contents

Accounts Receivable/Allowance for Estimated Credit Losses: Accounts receivable are reported as outstanding principal net of an allowance for estimated credit losses of $404,132 at March 31, 2026 and December 31, 2025.

The Company maintains an allowance for estimated credit losses representing estimated losses expected to result from the inability or failure of its customers to make required payments. The Company determines the allowance based on an account-by-account review, taking into consideration such factors as the age of the outstanding balance, historical pattern of collections and financial condition of the customer. Past losses incurred by the Company due to credit losses have been within its estimates. If the financial condition of its customers deteriorates, resulting in an impairment of their ability to make contractual payments, additional allowances might be required. Estimates for credit losses are variable based on the volume of transactions processed and could increase or decrease accordingly. The Company normally does not charge interest on accounts receivable.

Inventory: Inventory is stated at the lower of cost or net realizable value. At March 31, 2026 and December 31, 2025, inventory consisted primarily of printing and paper supplies used for Usio Output Solutions, Inc., or Output Solutions.

Property and Equipment: Property and equipment are stated at cost. Depreciation and amortization are computed on a straight-line method over the estimated useful lives of the related assets, ranging from three to ten years. Leasehold improvements are amortized over the lesser of the estimated useful lives or remaining lease period. Expenditures for maintenance and repairs are charged to expense as incurred.

Accounting for Internal Use Software: The Company capitalizes the costs associated with software being developed or obtained for internal use until both the preliminary project stage is substantially completed and it is probable that computer software being developed will be completed and placed in service. Capitalized costs include only (i) external direct costs of materials and services consumed in developing or obtaining internal-use software, (ii) payroll and other related costs for employees who are directly associated with and who devote time to the internal-use software project, and (iii) interest costs incurred, when material, while developing internal-use software. The Company ceases capitalization of such costs no later than the point at which the project is substantially complete and ready for its intended purpose. During the three months ended March 31, 2026 and 2025, the Company capitalized software costs of $215,532 and $290,650, respectively.

Concentration of Credit Risk: Financial instruments that potentially expose the Company to credit risk consist of cash and cash equivalents, and accounts receivable. The Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation, or FDIC, which is $250,000. Accounts receivable potentially subject the Company to concentrations of credit risk. The Company’s customer base operates in a variety of industries and is geographically dispersed. The Company closely monitors extensions of credit. Estimated credit losses have been recorded in the consolidated financial statements. Recent credit losses have been within management's expectations. No single customer accounted for more than 10% of revenues in 2026 or 2025.

Valuation and Impairment of Long-Lived and Intangible Assets: The Company assesses the impairment of long-lived and intangible assets at least annually, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important, which could trigger an impairment review, include the following: significant underperformance relative to historical or projected future cash flows; significant changes in the manner of use of the assets or the strategy of the overall business; and significant negative industry trends. When management determines that the carrying value of long-lived and intangible assets may not be recoverable, an impairment loss is recognized, which is measured as the excess of the assets’ carrying value over the estimated fair value (with the estimated fair value determined based upon the estimated future cash inflows attributable to the asset, less estimated future cash outflows). No impairment losses were recorded in 2025 or during the three months ended March 31, 2026. Management is not aware of any impairment charges that may currently be required; however, the Company cannot predict the occurrence of events that might adversely affect the reported values in the future.

Fair Value Measurements: The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

• Level 1 inputs - unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date;

• Level 2 inputs - other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability; and

• Level 3 inputs - unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

Cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term borrowings are reflected in the accompanying consolidated financial statements at cost, which approximates fair value because of the short-term maturity of these instruments.

Reserve for Processing Losses: If, due to insolvency or bankruptcy of one of the Company’s merchant customers, or for any other reason, the Company is not able to collect amounts from its credit card, ACH or prepaid customers that have been properly "charged back" by the customer, or if a prepaid cardholder incurs a negative balance, the Company must bear the credit risk for the full amount of the transaction. The Company may require cash deposits and other types of collateral from certain merchants to minimize any such risks. In addition, the Company utilizes multiple systems and procedures to manage merchant risk. ACH, prepaid and credit card merchant processing loss reserves are primarily determined by performing a historical analysis of the Company’s loss experience, considering other factors that could affect that experience in the future, such as the types of transactions processed and nature of the merchant relationship with its consumers and the Company’s relationship with the Company’s prepaid card holders. This reserve amount is subject to the risk that actual losses may be greater than the Company’s estimates. Estimates for processing losses are variable based on the volume of transactions processed and could increase or decrease accordingly. At March 31, 2026 and December 31, 2025, the Company’s reserve for processing losses was $802,937 and $784,937, respectively, which is recorded on the Company's balance sheet as an accrued expense, and in the statement of cash flows as a change in accrued expenses.

Revenue Recognition: Revenue consists primarily of fees generated through the electronic processing of payment transactions and related services. Revenue is recognized during the period in which the transactions are processed or when the related services are performed. The Company complies with Accounting Standards Codification ("ASC") 606-10 and reports revenues at gross as a principal versus net as an agent. Although some of the Company's processing agreements vary with respect to specific credit risks, the Company has determined for each agreement it is acting in the principal role. Merchants may be charged for these processing services at a bundled rate based on a percentage of the dollar amount of each transaction and, in some instances, additional fees are charged for each transaction. Certain merchant customers are charged a flat fee per transaction, while others may also be charged miscellaneous fees, including fees for chargebacks or returns, monthly minimums, and other miscellaneous services. Revenues derived from electronic processing of credit, debit, and prepaid card transactions that are authorized and captured through third-party networks are reported gross of amounts paid to sponsor banks as well as interchange and assessments paid to credit card associations. Certain card distributors remit payment of fees earned 45 days after the end of the processing period. Prepaid card distributors have payment terms of 30 days following the end of the month. Sales taxes billed are reported directly as a liability to the taxing authority and are not included in revenue. Output Solutions provides bill preparation, presentment and mailing services. Revenue from Output Solutions is recognized when the related services are performed for printing and delivered to USPS for postage. We also earn revenues from interest and fees earned on certain assets underlying customer balances. Interest earned on assets directly related to our core business line operations are recorded in the revenue source underlying the associated customer balances. Customer balances held on which the Company earns interest revenues include balances from our ACH and complementary services, prepaid card services, and Output Solutions business lines.

The following table presents the Company's consolidated revenues by source:

	Three Months Ended March 31,
	2026		2025

ACH and complementary services	$	6,293,066	$	5,044,517
Credit card		9,710,324		7,878,694
Prepaid card services		2,373,201		2,907,451
Output Solutions		6,805,314		5,732,867
Interest - ACH and complementary services		122,201		224,129
Interest - Prepaid card services		118,029		182,661
Interest - Output Solutions		43,639		38,731
Total revenue	$	25,465,774	$	22,009,050

Legal Proceedings: The Company may be involved in legal matters arising in the ordinary course of business from time to time. Litigation is subject to inherent uncertainties, and an adverse result in the legal proceedings disclosed in this quarterly report or other matters that may arise from time to time may harm our business.

Accounting for Income Taxes: Our annual tax rate is based on our income, statutory tax rates, and available tax planning opportunities. Tax laws are complex and subject to different interpretations by the taxpayer and respective government taxing authority. Significant judgement is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties. We review our tax positions yearly and adjust the balances as new information becomes available.

Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings, and available tax planning strategies. These rely heavily on estimates that are based on a number of factors, including historical data, and business forecasts. To the extent deferred tax assets are not expected to be realized, we record a valuation allowance.

We recognize and measure uncertain tax positions in accordance with GAAP, pursuant to which we only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities.

As with all businesses, the Company’s tax returns are subject to periodic examination. The Company’s federal returns for the past four years remain open to examination. The Company is subject to the Texas franchise tax. Management is not aware of any tax positions that would have a significant impact on its financial position.

Recently Adopted and Recently Issued But Not Yet Adopted Accounting Pronouncements: Accounting standards that have been issued or proposed by the Financial Accounting Standards Board ("FASB"), the U.S. Securities and Exchange Commission ("SEC") or other standard setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company's consolidated financial statements upon adoption.

In October 2023, FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532, Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all other entities, the amendments will be effective two years later. The Company is evaluating the effect that ASU 2023-06 will have on its financial statements and related disclosures.

In January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. ASU 2025-01 clarifies the effective date for ASU 2024-03 (Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures), ensuring public business entities adopt it initially in annual reporting periods (not interim) for non-calendar year-end entities. ASU 2024-03 requires disclosure on an annual and interim basis, in the notes to the financial statements, of disaggregated information about specific categories underlying certain income statement expense line items. The effective dates of ASU 2025-01 align with ASU 2024-03: annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures, but does not expect adoption of this new standard to be material.

In May 2025, the FASB issued ASU No. 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity (“ASU 2025-03”). ASU 2025-03 changes how companies determine the accounting acquirer in certain business combinations involving variable interest entities. The new guidance requires considering the factors used for other acquisition transactions to assess which party is the accounting acquirer. ASU 2025-03 is effective for the Company’s annual reporting periods beginning on January 1, 2027. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures, but does not expect adoption of this new standard to be material.

In May 2025, the FASB issued ASU No. 2025-04, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts With Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer (“ASU 2025-04”). ASU 2025-04 revises the definition of a performance condition, eliminates the forfeiture policy election for service conditions, and clarifies that the variable consideration constraint in ASC Topic 606 does not apply to share-based consideration payable to customers. The new guidance requires entities to consistently account for share-based awards granted to customers by clarifying the treatment of vesting conditions and ensuring alignment with ASC Topic 606 and ASC Topic 718: Compensation—Stock Compensation. ASU 2025-04 is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures, but does not expect adoption of this new standard to be material.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”), which provides a practical expedient for estimating expected credit losses for current accounts receivable and current contract assets. ASU 2025-05 will be effective for annual periods beginning after December 15, 2025, and interim periods within those annual reporting periods and should be applied prospectively. We adopted this guidance effective January 1, 2026 on a prospective basis. Our financial statements were not materially impacted upon adoption.

In September 2025, the 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. The Company is currently evaluating the potential effects of ASU 2025-06 on our consolidated financial statements and related disclosures but does not expect adoption of this new standard to be material.

In December 2025, the FASB issued ASU No. 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. ASU 2025-10 establishes the accounting for a government grant received by a business entity, including guidance for (1) a grant related to an asset and (2) a grant related to income. The ASU is effective for annual periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures, but does not expect adoption of this new standard to be material.

In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements”. The amendments are intended to improve the clarity and navigability of interim reporting requirements within Topic 270 by clarifying when interim reporting guidance applies, enhancing the organization of required interim disclosures, and specifying the form and content of interim financial statements. The guidance responds to stakeholder feedback that existing interim reporting requirements were difficult to navigate because of the historical origins and accumulated amendments within Topic 270. ASU 2025-11 adds a disclosure principle requiring entities to disclose events that occur after the end of the most recent annual reporting period that have a material impact on the entity. The amendments also introduce a comprehensive list of required interim disclosures drawn from various Codification topics and clarify the presentation requirements for interim financial statements, including condensed financial statements and accompanying footnotes. Importantly, the ASU does not change the fundamental nature of interim reporting nor expand or reduce existing disclosure requirements; rather, it improves clarity and consistency across entities that issue interim financial statements in accordance with generally accepted accounting principles. ASU 2025-11 is effective for the Company for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied either prospectively or retrospectively. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures, but does not expect adoption of this new standard to be material.

Table of Contents

Note 2. Leases

The Company leases facilities and office equipment under various operating leases, which generally are expected to be renewed or replaced by other leases. For each of the three months ended March 31, 2026 and 2025, operating lease expenses totaled $190,901 and $150,688, respectively.

Note 3. Accrued Expenses

Accrued expenses consisted of the following balances:

	*March 31, 2026*		*December 31, 2025*

Accrued commissions	$	1,248,750	$	837,193
Reserve for processing losses		802,937		784,937
Other accrued expenses		1,125,029		1,254,205
Accrued taxes		576,782		326,586
Accrued salaries		299,142		123,524
Total accrued expenses	$	4,052,640	$	3,326,445

Note 4. Loans

Equipment Loans

On October 1, 2023, the Company entered into a debt arrangement to finance $811,819 for the purchase of an Output Solutions folder and inserter. The loan is for a period of 66 months with a maturity date of April 5, 2029 and annual interest of 6.75%. Monthly principal and interest payments are required in the amount of $16,017, with monthly interest only payments in the amount of $4,744 required for the first six months of the loan term. Total interest and principal payments on this folder and inserter equipment loan were $47,953 for each of the three months ended March 31, 2026 and 2025.

On September 19, 2025, the Company entered into a debt arrangement to finance $1,017,954 for the purchase of an Output Solutions printer. The loan is for a period of 66 months with a maturity date of March 19, 2031 and annual interest of 6.75%. Monthly principal and interest payments are required in the amount of $20,088, with monthly interest only payments in the amount of $5,758 required for the first six months of the loan term beginning in October 2025. As of March 31, 2026, $791,742 in proceeds have been drawn from the loan and presented on the Company's balance sheet with the remaining commitment of $226,212 still available. Total payments on the printer loan during the three months ended March 31, 2026 were $13,361.

As of March 31, 2026, the Company maintains an undrawn line of credit and an outstanding letter of credit, both of which were established in connection with a bond required for the Company's appeal of the court’s decision in a prior lawsuit that has since been settled in the Company's favor.

Line of Credit

The Company has an unsecured revolving line of credit with a maximum borrowing capacity of $475,000. The facility was established on May 29, 2024 and matures on June 5, 2026. As of March 31, 2026, no amounts had been drawn under this line of credit since its origination. This line of credit was secured to support the bond requirement in a lawsuit appeal that has since been settled but remains fully available.

Letter of Credit

The Company has an irrevocable letter of credit in the amount of $474,229, issued on June 3, 2024, with a maturity date of June 3, 2026. This letter of credit was obtained as part of the bonding requirement for a lawsuit appeal that has since been settled and has not been drawn upon since its issuance.

These credit facilities were arranged to comply with legal requirements related to the Company’s appeal and provide additional liquidity resources if needed. Management continues to monitor its financial position and believes that existing cash balances, along with these credit facilities, are sufficient to meet operational needs and legal obligations.

As a result of the lawsuit settlement, the Company will not renew the line of credit or letter of credit upon their maturity. There are no ongoing costs associated with the maintenance of either of these credit facilities.

Future principal payments on current debt arrangements are as follows at March 31, 2026:

Year ending December 31,

	Amount Due
2026 (remainder of the year)	$	250,829
2027		355,195
2028		379,981
2029		276,389
2030		63,146
Total payments	$	1,325,540

Note 5. Stockholders' Equity

Stock Warrants: On December 15, 2020, the Company issued warrants to purchase 945,599 shares of the Company's common stock with an initial exercise price of $4.23 per share, subject to adjustment as provided in the warrant agreement governing the warrants, to Information Management Solutions, LLC ("IMS"), which were issued in connection with our acquisition of substantially all of the assets of IMS in December 2020. IMS's warrants became fully vested on December 15, 2023. Each warrant is exercisable for a period of five years beginning on the date it vested. At the time of issuance, these warrants were valued using the Black-Scholes option pricing model. Assumptions used were as follows: (i) the fair value of the underlying stock was $0.58 per share; (ii) the risk-free interest rate was 0.09%; (iii) the contractual life was 5 years; (iv) the dividend yield was 0%; and (v) the volatility was 59.9%. The fair value of the warrants at the time of issuance amounted to $552,283 and was recorded as an increase in the customer list asset and a corresponding amount to additional paid in capital. The amortization of these warrants, which is included in the total amortization expense of the customer list intangible asset, totaled $0 and $27,615 in the three months ended March 31, 2026 and 2025, re

SEC Form 10-Q filed by Usio Inc.