Usio, Inc.

Previous wording

Since 1998, Usio has entered a number of market verticals within the payments industry in order to satisfy the growing payment needs of consumers and merchants across the United States. Beginning with our Electronic Bill Presentment and Payment, or EBPP, product that launched the Company, we entered into the electronic funds transfer space through the ACH network, developing ancillary and complementary products such as PINless debit in 2016, and Remotely Created Checks, or RCC, account validation, and account inquiry in 2019. These supplementary product options offer customers access to faster and more convenient payment options and tools to improve operating efficiencies. Further, our credit card payment offering was expanded in 2017 with the development of Payment Facilitation, or PayFac, that utilizes our unique technology that allows for instant enrollment of merchants and combined our suite of payment options into an integrated platform for merchants and customers to utilize.

Current wording

Since 1998, Usio has entered a number of market verticals within the payments industry in order to satisfy the growing payment needs of consumers and merchants across the United States. Beginning with our Electronic Bill Presentment and Payment, or EBPP, product that launched the Company, we entered into the electronic funds transfer space through the ACH network, developing ancillary and complementary products such as PINless debit in 2016, and Remotely Created Checks, or RCC, account validation, and account inquiry in 2019. These supplementary product options offer customers access to faster and more convenient payment options and tools to improve operating efficiencies. Further, our credit card payment offering was expanded in 2017 with the development of Payment Facilitation, or PayFac, that utilizes our unique technology that allows for instant enrollment of merchants and combined our suite of payment options into an integrated platform for merchants and customers to utilize. In the first half of 2025, we began, and completed, development of a new EBPP. This offering allows merchants to create and distribute bills to their customers that can be viewed, and paid, online through our platform and payment processing services.

Previous wording

Through our innovative Prepaid Debit Card platform, we offer a variety of prepaid card products such as reloadable, incentive, promotional and corporate card programs. Combined with Output Solutions' printing and mailing services, we can satisfy the diverse requirements of customer needs with physical and virtual document creation and distribution, including traditional paper checks. Our Consumer Choice product developed and debuted in 2022 that provides flexible ways to initiate a variety of payment distributions through a multitude of payment methods including physical prepaid and virtual cards, ACH, paper checks, real-time PINless debit and others. This offering allows us a superior opportunity to increase our cross-selling efforts through all of our payment methods.

Current wording

Through our innovative Prepaid Debit Card platform, we offer a variety of prepaid card products such as reloadable, incentive, promotional and corporate card programs. Combined with Output Solutions' printing and mailing services, we can satisfy the diverse requirements of customer needs with physical and virtual document creation and distribution, including traditional paper checks. Our Consumer Choice product, which was developed and debuted in 2022, provides flexible ways to initiate a variety of payment distributions through a multitude of payment methods, including physical prepaid and virtual cards, ACH, paper checks, real-time PINless debit and others. This offering provides us with a superior opportunity to increase our cross-selling efforts through all of our payment methods.

Previous wording

With the growing need for faster payment methods, we continue to invest in technology that can help us further expand our suite of payment technology. With the rise of Real Time Payments, or RTP, we began expansion into this market vertical in 2023, which serves as an alternative to ACH payments. As well, we continue to enhance our existing product offerings, with improvements in reporting, data management, fraud and risk monitoring, ease of access, and accelerations in client onboarding and implementation times. With our transition to a cloud-based platform, our speed, security, and scalability in payment processing is further expanded, allowing us to seamlessly grow as the market demands.

Current wording

With the growing need for faster payment methods, we continue to invest in technology that can help us further expand our suite of payment technology. With the rise of Real Time Payments, or RTP, we began expansion into this market vertical in 2023, which serves as an alternative to ACH payments. We also continue to enhance our existing product offerings, with improvements in reporting, data management, fraud and risk monitoring, ease of access, and accelerations in client onboarding and implementation times. With our transition to a cloud-based platform, our speed, security, and scalability in payment processing is further expanded, allowing us to seamlessly grow as the market demands.

Previous wording

The Company has recently adopted its "One Usio" strategy, designed to unify our brand, sales approach, and payments offerings. Through this strategy, we are developing enhanced client onboarding features, superior customer management, improved reporting and fraud monitoring, alongside a consolidated sales and marketing team to better cross-sell our various payment methods and ancillary services.

Current wording

The Company recently adopted its "One Usio" strategy, designed to unify our brand, sales approach, and payments offerings. Through this strategy, we are developing enhanced client onboarding features, superior customer management, improved reporting and fraud monitoring, alongside a consolidated sales and marketing team to better cross-sell our various payment methods and ancillary services.

Previous wording

Our payment acceptance services are delivered in a variety of forms and situations. For example, our capabilities allow merchants to convert a paper check to an e-check or receive card authorization at the point-of-sale, allow our merchants’ respective customer service representatives to take e-check or card payments from their consumers by telephone, and enable their consumers to make e-check or card payments directly through the use of a website or by calling an interactive voice response telephone system.

Current wording

Our payment acceptance services are delivered in a variety of forms and situations. For example, our capabilities allow merchants to convert a paper check to an e-check or receive card authorization at the point-of-sale, allow our merchants’ respective customer service representatives to take e-check or card payments from their consumers by telephone, and enable their consumers to make e-check or card payments directly through the use of a website or by calling an interactive voice response telephone system. Similarly, our PINless debit product allows merchants to debit and credit accounts in real-time utilizing the debit card networks.

Previous wording

Prepaid and Incentive Card Services. Through our December 2014 acquisition of the assets of Akimbo Financial, Inc., we added a highly talented technical staff of industry subject matter experts and an innovative cardholder service platform including cardholder web and mobile applications and launched what is now our UsioCard business. As a result of this acquisition, through our subsidiary, FiCentive, Inc., we offer customizable prepaid cards which customers use for expense management, incentives, refunds, claims and disbursements, as well as unique forms of compensation such as per diem payments, government disbursements, and similar payments. This comprehensive money disbursement platform allows businesses to pay their contractors, employees, or other recipients by choosing among a prepaid debit Mastercard, real-time deposit to a checking account, traditional ACH, direct deposit or paper check. These cardholder web and mobile applications have been fully integrated into FiCentive’s prepaid card core processor, and now support all program types and brands offered by FiCentive and its clients.

Current wording

Prepaid and Incentive Card Services. Through our December 2014 acquisition of the assets of Akimbo Financial, Inc., we added a highly talented technical staff of industry subject matter experts and an innovative cardholder service platform including cardholder web and mobile applications and launched what is now our UsioCard business. As a result of this acquisition, through our subsidiary, FiCentive, Inc., or FiCentive, we offer customizable prepaid cards which customers use for expense management, incentives, refunds, claims and disbursements, as well as unique forms of compensation such as per diem payments, government disbursements, and similar payments. This comprehensive money disbursement platform allows businesses to pay their contractors, employees, or other recipients by choosing among a prepaid debit Mastercard, real-time deposit to a checking account, traditional ACH, direct deposit or paper check. These cardholder web and mobile applications have been fully integrated into FiCentive’s prepaid card core processor, and now support all program types and brands offered by FiCentive and its clients.

Previous wording

Electronic Billing. On December 15, 2020, we entered into the business of electronic bill presentment, document composition, document decomposition and printing and mailing services serving hundreds of customers representing a wide range of industry verticals, including utilities and financial institutions through the acquisition of substantially all of the assets of IMS. This product offering provides an outsourced solution for document design, print, and electronic delivery to potential customers and entities looking to reduce postage costs and increase efficiencies. This acquisition increased our ability to grow new revenue streams and allowed us to reenter the electronic bill presentment and payment revenue stream. The success of this new business line depends on our ability to realize the anticipated growth opportunities; we cannot provide any assurance that we will be able to realize these opportunities.

Current wording

Electronic Billing. On December 15, 2020, we entered into the business of electronic bill presentment, document composition, document decomposition and printing and mailing services serving hundreds of customers representing a wide range of industry verticals, including utilities and financial institutions through the acquisition of substantially all of the assets of IMS. This product offering, through Output Solutions, provides an outsourced solution for document design, print, and electronic delivery to potential customers and entities looking to reduce postage costs and increase efficiencies. This acquisition increased our ability to grow new revenue streams and allowed us to reenter the electronic bill presentment and payment revenue stream. The success of this new business line depends on our ability to realize the anticipated growth opportunities; we cannot provide any assurance that we will be able to realize these opportunities.

Previous wording

We believe that our success will continue to depend in large part on our ability to (a) grow revenues, (b) manage our selling, general, and administrative expenses, (c) add quality customers to our client base, (d) meet evolving customer requirements, (e) adapt to technological changes in an emerging market, and (f) assimilate current and future acquisitions of companies and customer portfolios. We will continue to invest in our sales force and technology platforms to drive revenue growth. In particular, we are focused on growing our ACH merchants, adding new software integrators, growing our electronic bill presentment, document composition, document decomposition, printing and mailing services business while providing incremental services to existing merchants. In addition to our near-term growth opportunities, we are focused on leveraging and optimizing the infrastructure of our business allowing expansion of our payment processing and mail and printing capabilities without significantly increasing our operating costs. We continue to seek ways to grow revenue, and net new client implementations and onboards occur regularly due to our ability to address the needs of our market.

Current wording

We believe that our success will continue to depend in large part on our ability to (a) grow revenues, (b) manage our selling, general, and administrative expenses, (c) add quality customers to our client base, (d) meet evolving customer requirements, (e) adapt to technological changes in an emerging market, and (f) assimilate current and future acquisitions of companies and customer portfolios. We will continue to invest in our sales force and technology platforms to drive revenue growth. In particular, we are focused on growing our ACH merchants, adding new software integrators, and growing our electronic bill presentment, document composition, document decomposition, printing and mailing services business while providing incremental services to existing merchants. In addition to our near-term growth opportunities, we are focused on leveraging and optimizing the infrastructure of our business allowing expansion of our payment processing and mail and printing capabilities without significantly increasing our operating costs. We continue to seek ways to grow revenue, and net new client implementations and onboards occur regularly due to our ability to address the needs of our market.

Previous wording

Growing Revenues. Revenue growth remains a consistent focus for the Company, as we strive to achieve expanded scale, and establish a strong reputation within the financial technologies space. This growth assists us in maintaining our diversified offerings, and remain relevant by developing payment platforms that address the current needs of our marketplace. In the first quarter of 2025, our revenues increased 5% to $22.0 million, as compared to $21.0 million for the quarter ended March 31, 2024, due primarily to strong growth in our ACH and complimentary services line of business, helping to offset lower breakage revenues from our prepaid card line of business as the COVID incentive programs wound down during 2024.

Current wording

Growing Revenues. Revenue growth remains a consistent focus for the Company, as we strive to achieve expanded scale, and establish a strong reputation within the financial technologies space. This growth assists us in maintaining our diversified offerings and remaining relevant in the payments ecosystem by developing payment platforms that address the current needs of our marketplace. In the second quarter of 2025, our revenues decreased 1% to $20.0 million, as compared to $20.1 million for the quarter ended June 30, 2024, due primarily to declines in all but our ACH and complimentary services line of business. Declines in our credit card line of business were due primarily to the loss of a meaningful customer in our Payfac business during the second quarter, compounded by attrition in our legacy portfolios. However, net new customers from our pipeline have already been implemented and onboarded, which we believe will help offset and overcome this loss in future periods. The decrease in our prepaid card services revenues were due to declines from one our key prepaid card programs, as their business was impacted by the loss of key customers that made significant contributions to Usio revenues in 2024. Declines in Output Solutions were due to the absence of some one-time revenues that occurred in the second quarter of 2024. Additional declines in revenues came from lower interest revenues, as interest rates and interest bearing deposits declined versus the prior year period. These revenue declines were partially offset, however, by strong growth in our ACH and complementary services line of business, due to organic growth from existing customers, and net new client implementations and onboarding.

Previous wording

*Managing Other Selling, General and Administrative Expenses.*By appropriately managing our expenses (which are discussed under "- Results of Operations - Other Selling, General and Administrative Expenses" below), we believe we can achieve better economies of scale, and drive revenue growth. We believe that carefully evaluating our existing SG&A expenses, and balancing them against the need for client implementation and support, together with our technology staff driving product innovation, will guide our operational strategies while maintaining a focus on efficiencies and profitability. Other SG&A expenses in the quarter were relatively flat, at $4.1 million as compared to $4.1 million in the prior year quarter. As a result of improved expense management, alongside workforce efficiencies due to new equipment in our Output Solutions line of business, we anticipate year over year SG&A to remain relatively flat. For more information, see "-Results of Operations - Other Selling, General and Administrative Expenses" below.

Current wording

*Managing Selling, General and Administrative Expenses.*By appropriately managing our expenses (which are discussed under "- Results of Operations - Selling, General and Administrative Expenses" below), we believe we can achieve better economies of scale, and drive revenue growth. We believe that carefully evaluating our existing SG&A expenses, and balancing them against the need for client implementation and support, together with our technology staff driving product innovation, will guide our operational strategies while maintaining a focus on efficiencies and profitability. SG&A expenses were up in the quarter, at $4.6 million as compared to $4.0 million in the prior year quarter. The increase in SG&A expense was primarily due to some one-time expenses incurred during the quarter, related to insurance renewals, marketing and travel expenditures, professional fees, and other various one-time expense accruals. We believe all of the aforementioned expenses, and SG&A in general, will decline sequentially, combined with improved expense management, alongside workforce efficiencies due to new equipment in our Output Solutions line of business. Considering these cost saving initiatives we anticipate year over year SG&A to remain relatively flat. For more information, see "-Results of Operations - Selling, General and Administrative Expenses" below.

Previous wording

*Adding Quality Customers and Meeting Their Evolving Requirements.*The addition of new, and quality customers, represents one of our largest opportunities to grow revenues, and stay relevant in the marketplace. We believe a large and quality client base allows us to stay in touch with the broader needs of the changing payment landscape, while providing a reliable book of business to help fund current and future operations. Our focus on addressing customer needs has allowed us to maintain a consistent presence and build a strong reputation in niche markets such as the lending, legal, government, and healthcare fields amongst others.

Current wording

*Adding Quality Customers and Meeting Their Evolving Requirements.*The addition of new, quality customers, represents one of our largest opportunities to grow revenues and stay relevant in the payments ecosystem. We believe a large and quality client base allows us to stay in touch with the broader needs of the changing payment landscape, while providing a reliable book of business to help fund current and future operations. Our focus on addressing customer needs has allowed us to maintain a consistent presence and build a strong reputation in niche markets such as the lending, legal, government, and healthcare fields amongst others.

Previous wording

*Adapt to Technological Changes.*We maintain a committed focus on the ever changing technological landscape within the payments ecosystem. We believe by regularly attending payments focused conferences, webinars, and training sessions, alongside our consistent communication with customers and clients, enables us to be informed of the most current, and future, applications and evolutions of financial technologies. We believe that this allows us to implement new feature functionality to existing products, and introduce new payment methods. This has led to our evolution from being an EBPP provider at the Company's founding, to the diverse payment provider we are today, with offerings such as ACH processing, PINless debit, RTP, prepaid card issuance, and credit card processing, especially in the digital marketplace, to match the need for diversified payment options in an increasingly ecommerce driven world.

Current wording

*Adapt to Technological Changes.*We maintain a committed focus on the ever changing technological landscape within the payments ecosystem. We believe that regularly attending payments focused conferences, webinars, and training sessions, alongside our consistent communication with customers and clients, enables us to be informed of the most current, and future, applications and evolutions of financial technologies. We believe that this allows us to implement new feature functionality to existing products and introduce new payment methods. This has led to our evolution from being an EBPP provider at the Company's founding, to the diverse payment provider we are today, with offerings such as ACH processing, PINless debit, RTP, prepaid card issuance, and credit card processing, especially in the digital marketplace, to match the need for diversified payment options in an increasingly ecommerce driven world.

Previous wording

*Assimilating Current and Future Acquisitions.*Acquisitions have been a key element in our growth focused strategy, both to add net new customers, and enhance our suite of payment technologies. This is evident through our acquisition of Akimbo Financial, Inc., Singular Payments, and IMS, which allowed us to introduce new offerings such as prepaid card issuance, PayFac, and electronic bill presentment, all of which represent significant portions of our current revenues. The assimilation of those acquisitions were critical in both the retention of purchased assets, and their growth, through cross-selling, and implementation into our broader infrastructure that allows for increased diversity of offerings and support. We cannot assure you that we will be able to complete any acquisitions in the future.

Current wording

*Assimilating Current and Future Acquisitions.*Acquisitions have been a key element in our growth focused strategy, both to add net new customers, and enhance our suite of payment technologies. This is evident through our acquisitions of Akimbo Financial, Inc., Singular Payments, and IMS, which allowed us to introduce new offerings such as prepaid card issuance, PayFac, and electronic bill presentment, all of which represent significant portions of our current revenues. The assimilation of those acquisitions was critical in both the retention of purchased assets, and their growth, through cross-selling and implementation into our broader infrastructure that allows for increased diversity of offerings and support. We cannot assure you that we will be able to complete any acquisitions in the future.

Previous wording

In addition to the factors discussed above, we believe that processing volume and transaction counts are a vital measure which indicate our addition and implementation of net new customers, and growth from existing customers, which we believe correlate to both current and future revenues. The change in credit card processing volume, ACH transaction counts, and prepaid card purchase volume are the most direct metrics that drive revenues in their respective business lines, while prepaid card load volumes specifically, are an indicator of future revenue change within the prepaid card business line. While there are many components to the revenues of our business units that could impact revenue growth or decline, these processing metrics offer an indication to the current health of our overall company and success in our strategies to grow the business.

Current wording

In addition to the factors discussed above, we believe that processing volume and transaction counts are vital measures that indicate our addition and implementation of net new customers, and growth from existing customers, which we believe correlate to both current and future revenues. The change in credit card processing volume, ACH transaction counts, and prepaid card purchase volume are the most direct metrics that drive revenues in their respective business lines, while prepaid card load volumes specifically, are an indicator of future revenue change within the prepaid card business line. While there are many components to the revenues of our business units that could impact revenue growth or decline, these processing metrics offer an indication to the current health of our overall company and success in our strategies to grow the business.

Previous wording

During the first quarter of 2025, the number of credit card transactions processed by us increased by 65% versus the first quarter of 2024. The volume of credit card dollars processed during the first quarter of 2025 increased by 17% compared to the same time period in 2024. The continued growth in credit card metrics was primarily attributable to our PayFac strategy to drive increased penetration across multiple industries including healthcare and legal. The significant increases in transaction and processing volume growth were offset by the more competitive landscape in credit card processing, resulting in lower than expected revenue growth as the pricing rates for credit card processing are driven down by market competition. This was compounded by continued attrition in the legacy customer base, who were typically onboarded at higher prices, reducing the impact of the transaction count and processing volume growth we experienced.

Current wording

During the second quarter of 2025, the number of credit card transactions processed by us increased by 69% versus the second quarter of 2024. The volume of credit card dollars processed during the second quarter of 2025 increased by 9% compared to the same period in 2024. The continued growth in credit card metrics was primarily attributable to our PayFac strategy to drive increased penetration across multiple industries including healthcare and legal. The significant increases in transaction and processing volume growth were offset by the more competitive landscape in credit card processing, resulting in lower than expected revenue growth as the pricing rates for credit card processing were driven down by market competition. This was compounded by continued attrition in the legacy customer base, who were typically onboarded at higher prices, reducing the impact of the transaction count and processing volume growth we experienced.

Previous wording

ACH (eCheck) transaction counts during the first quarter of 2025 increased by 36% compared to the first quarter of 2024. Returned check transactions processed during the first quarter of 2025 increased by 24% compared to the first quarter of 2024. Electronic check dollars processed during the first quarter of 2025 increased by 42% compared to the first quarter of 2024. The increases in eCheck transactions, returns, and electronic check dollar volumes processed were primarily attributable to traction in our ACH sales efforts driving new merchant onboarding and processing, alongside organic growth from existing customers.

Current wording

ACH (eCheck) transaction counts during the second quarter of 2025 increased by 33% compared to the second quarter of 2024. Returned check transactions processed during the second quarter of 2025 increased by 32% compared to the second quarter of 2024. Electronic check dollars processed during the second quarter of 2025 increased by 19% compared to the second quarter of 2024. The increases in eCheck transactions, returns, and electronic check dollar volumes processed were primarily attributable to traction in our ACH sales efforts driving new merchant onboarding and processing, alongside organic growth from existing customers.

Previous wording

Prepaid card load volumes during the first quarter of 2025 decreased by 15% compared to the first quarter of 2024. Prepaid card transaction counts processed during the first quarter of 2025 increased by 5% compared to the first quarter of 2024. Prepaid card purchase volume during the first quarter of 2025 decreased by 8% compared to the first quarter of 2024. These declines were primarily due to the plateauing and processing reductions in the existing client base. These clients contributed significant load and purchase volumes in 2024 due to their rapid expansion after their onboarding and implementation as they built up their prepaid cardholder base. These declines were compounded by delays in the integration of net new client implementations to replace the load and processing volume experience in the first quarter of 2024. However, despite these declines, we believe revenues from our prepaid card line of business should start to better reflect our focus on growing programs with recurring revenues. We continue to invest time and resources in the development of additional net new customers and clients that are at various stages of the implementation process.

Current wording

Prepaid card load volumes during the second quarter of 2025 decreased by 51% compared to the second quarter of 2024. Prepaid card transaction counts processed during the second quarter of 2025 decreased by 37% compared to the second quarter of 2024. Prepaid card purchase volume during the second quarter of 2025 decreased by 23% compared to the second quarter of 2024. These declines were primarily due to processing reductions from one of our key clients, who lost their own downstream customers during the quarter. This client contributed significant card load, purchase volume, and purchase transactions during the prior year period. We continue to invest time and resources in the development of additional net new customers and clients that are at various stages of the implementation process.

Previous wording

Total dollar volumes processed across all business lines in the first quarter of 2025 were $2.0 billion compared to $1.5 billion processed in the first quarter of 2024, up 34% over the prior year quarter, attributable to processing volume growth in our credit card, and ACH and complementary services business lines, countering the decline of prepaid card processing volume.

Current wording

Total dollar volumes processed across all business lines in the second quarter of 2025 were $1.94 billion compared to $1.68 billion processed in the second quarter of 2024, up 15% over the prior year quarter, attributable to processing volume growth in our credit card, and ACH and complementary services business lines, countering the decline of prepaid card processing volume.

Previous wording

On August 16, 2022, President Biden signed the Inflation Reduction Act, or IRA, which implemented a 1% excise tax on certain corporate stock repurchases. On May 13, 2022, and again on March 24, 2025, our Board of Directors authorized a renewal of the Company's stock buyback program (the "buyback program"), with a repurchase limit equal to $4 million of the Company's common stock and a three-year duration. As of December 31, 2024, the Company had repurchased approximately $1.4 million of stock as part of the buyback program for which the Company may be required to pay approximately $14,000 in excise tax. Should the Company continue the repurchase of its securities on the open market, and the IRA remains in effect, we may be subject to this tax in 2025 and future years. During the three months ended March 31, 2025, the Company repurchased $351,640 of stock as part of the buyback program, which may become subject to the IRA's 1% excise tax if the Company meets or exceeds the IRA's 1% excise tax repurchase minimum of $1 million in stock buybacks.

Current wording

On August 16, 2022, President Biden signed the Inflation Reduction Act, or IRA, which implemented a 1% excise tax on certain corporate stock repurchases. On May 13, 2022, and again on March 24, 2025, our Board of Directors authorized a renewal of the Company's stock buyback program (the "buyback program"), with a repurchase limit equal to $4 million of the Company's common stock and a three-year duration. As of December 31, 2024, the Company had repurchased approximately $1.4 million of stock as part of the buyback program for which the Company may be required to pay approximately $14,000 in excise tax. Should the Company continue the repurchase of its securities on the open market, and the IRA remains in effect, we may be subject to this tax in 2025 and future years. During the six months ended June 30, 2025, the Company repurchased $708,298 of stock as part of the buyback program, which may become subject to the IRA's 1% excise tax if the Company meets or exceeds the IRA's 1% excise tax repurchase minimum of $1 million in stock buybacks.

Previous wording

As the Federal Reserve has worked to fight economic inflation, the federal funds rate has experienced rapid growth from the beginning of 2022 into the third quarter of 2023, and remained flat until September 2024 when the federal funds rate was lowered. This resulted in the Company's receiving more favorable interest rates on its current cash balances, amounting to $0.5 million in interest earnings in the three months ended March 31, 2025. Of this interest, $0.4 million was recognized as revenue in the respective business lines for which the cash balances are held, and $79,011 as interest income. In September 2024, the Federal Reserve lowered the federal funds rate 0.50%, followed by a further 0.25% decline in each of November and December 2024, which has resulted in lower interest earnings on our interest-bearing cash accounts. Should the Federal Reserve continue lowering the federal funds rate in the future, this incremental source of income would decline. We continue to work closely with our bank partners, to ensure we effectively manage our cash balances, and monitor the Federal Reserve's monetary policy decisions.

Current wording

As the Federal Reserve worked to fight economic inflation, the federal funds rate experienced rapid growth from the beginning of 2022 into the third quarter of 2023, and remained flat until September 2024 when the federal funds rate was lowered. This resulted in the Company's receiving more favorable interest rates on its current cash balances, amounting to $1.0 million in interest earnings in the six months ended June 30, 2025. Of this interest, $0.8 million was recognized as revenue in the respective business lines for which the cash balances are held, and $189,919 as interest income. In September 2024, the Federal Reserve lowered the federal funds rate by 0.50%, followed by a further 0.25% decline in each of November and December 2024, which has resulted in lower interest earnings on our interest-bearing cash accounts. Should the Federal Reserve continue lowering the federal funds rate in the future, this incremental source of income would decline. We continue to work closely with our bank partners, to ensure we effectively manage our cash balances, and monitor the Federal Reserve's monetary policy decisions.

Previous wording

During the first quarter of 2025, global economic activity continued to be impacted by inflation and ongoing geopolitical concerns including the Russia – Ukraine and Hamas – Isreal conflicts. Additionally, the uncertainty resulting from changes in international trade policies (including the potential for new or increased tariffs) created market volatility. While the economy in the U.S. remained resilient, concerns about the prospect of a recession in the future increased. In addition, markets have been focused on the timing and amount of policy interest rate cuts by central banks globally. Uncertainty and concerns about geopolitical risks, global central bank policies, inflation and trade policies, including tariffs, escalated over the course of the first quarter.

Current wording

During the first six months of 2025, global economic activity continued to be impacted by inflation and ongoing geopolitical concerns including the Russia – Ukraine and Hamas – Israel conflicts. Additionally, the uncertainty resulting from changes in international trade policies (including the potential for new or increased tariffs) created market volatility. While the economy in the U.S. remained resilient, concerns about the prospect of a recession in the future increased. In addition, markets have been focused on the timing and amount of policy interest rate cuts by central banks globally. Uncertainty and concerns about geopolitical risks, global central bank policies, inflation and trade policies, including tariffs, escalated over the course of the first six months of the year.

Previous wording

Our management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to the reported amounts of revenues and expenses, credit losses, investments, intangible assets, income taxes, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions or conditions. We consider these accounting policies to be critical because the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for such highly uncertain matters or due to the susceptibility of such matters to change or because the impact of the estimates and assumptions on financial condition or operating performance is material.

Current wording

Our management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to the reported amounts of revenues and expenses, credit losses, investments, intangible assets, income taxes, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions or conditions. We consider these accounting policies to be critical because the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for such highly uncertain matters or due to the susceptibility of such matters to change or because the impact of the estimates and assumptions on financial condition or operating performance is material.

Previous wording

For a summary of Critical Accounting Policies, please refer to the Notes to Interim Condensed Consolidated Financial Statements, Note 1, Basis of Presentation.

Current wording

For a summary of Critical Accounting Policies and Estimates, please refer to the Notes to Interim Condensed Consolidated Financial Statements, Note 1, Basis of Presentation.

Previous wording

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, 2025 and December 31, 2024, the Company’s reserve for processing losses was $541,521 and $897,116, respectively, and carried on the Company's balance sheet as an accrued expense, and in the statement of cash flows as a change in accrued expenses.

Current wording

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 June 30, 2025 and December 31, 2024, the Company’s reserve for processing losses was $725,591 and $897,116, respectively, and carried on the Company's balance sheet as an accrued expense, and in the statement of cash flows as a change in accrued expenses.

Previous wording

Accounts receivable are reported as outstanding principal net of an allowance for expected credit losses of $324,000 at March 31, 2025 and December 31, 2024.

Current wording

Accounts receivable are reported as outstanding principal net of an allowance for expected credit losses, which was $324,000 at June 30, 2025 and December 31, 2024.

Previous wording

We reported Adjusted EBITDA of $0.7 million for the quarter ended March 31, 2025, as compared to Adjusted EBITDA of $0.8 million for the same period in the prior year. The decrease in Adjusted EBITDA in the 2025 quarter was attributable to nominally decreased gross profits, and marginally increased SG&A expenses in the period. Adjusted EBITDA margins were 3.0% in the period, as compared to Adjusted EBITDA margins of 3.8% for the same period in the prior year. The decrease in Adjusted EBITDA margins was due primarily to lower interest revenues in the period, a high margin revenue source, which resulted in a reduction of gross profit percentage of revenue, and contributing reduced operating income, alongside marginally higher SG&A expenses versus the prior year period.

Current wording

We reported Adjusted EBITDA of $0.5 million for the quarter ended June 30, 2025, as compared to Adjusted EBITDA of $0.8 million for the same period in the prior year. The decrease in Adjusted EBITDA in the 2025 quarter was attributable to increased SG&A expenses in the period. Adjusted EBITDA margins were 2.5% in the quarter ended June 30, 2025, as compared to Adjusted EBITDA margins of 4.0% for the same period in the prior year. The decrease in Adjusted EBITDA margins was due primarily to higher SG&A expenses versus the prior year period, alongside lower interest revenues in the period, a high margin revenue source.

Previous wording

The following tables set forth reconciliations of Operating (Loss) to EBITDA; EBITDA to Adjusted EBITDA; and Revenues to Adjusted EBITDA margins for the three months ended March 31, 2025 and 2024.

Current wording

The following tables set forth reconciliations of Operating (Loss) to EBITDA; EBITDA to Adjusted EBITDA; and Revenues to Adjusted EBITDA margins for the three and six months ended June 30, 2025 and 2024.

Previous wording

Cost of services increased by $1.1 million, or 7%, to $17.2 million for the quarter ended March 31, 2025, as compared to $16.1 million for the same period in the prior year, due to increased revenues driving similar increases in our processing, banking and transactional expenses.

Current wording

Cost of services increased by $0.6 million, or 2%, to $32.0 million for the six months ended June 30, 2025, as compared to $31.4 million for the same period in the prior year, due to increased total revenues driving similar increases in our processing, banking and transactional expenses.

Previous wording

Gross profit decreased by 1% to $4.8 million for the quarter ended March 31, 2025, as compared to $4.9 million for the same period in the prior year. Gross profit percentage of revenue was 21.9% for the quarter ended March 31, 2025, down from 23.1% in the prior year period. The decrease in gross profit in the quarter ended March 31, 2025, as compared to the same period during the prior year, was primarily attributable to lower gross profit percentage of revenue. The decrease in gross profit percentage of revenue was primarily due to the decrease in interest revenues versus the prior year period. In addition, ACH and complementary services segment revenue growth was strongest in the slightly less profitable complementary services.

Current wording

Gross profit increased by 7% to $5.1 million for the quarter ended June 30, 2025, as compared to $4.8 million for the same period in the prior year. Gross profit percentage of revenue was 25.8% for the quarter ended June 30, 2025, up from 23.9% in the prior year period, an increase of approximately 1.85%, or 185 basis points. The increase in gross profit in the quarter ended June 30, 2025, as compared to the same period during the prior year, was primarily attributable to higher gross profit percentage of revenue. The increase in gross profit percentage of revenue was primarily due to the ACH and complementary services segment revenue growth, our highest margin business unit, while lower margin revenues from other business lines declined.

Previous wording

Stock-based compensation expenses were $0.4 million for the quarter ended March 31, 2025 as compared to $0.5 million for the quarter ended March 31, 2024, with minor decreases versus the prior year period due to completed amortization of previously issued stock based awards.

Current wording

Stock-based compensation expenses were $0.4 million for the quarter ended June 30, 2025 as compared to $0.5 million for the quarter ended June 30, 2024, due to completed amortization of previously issued stock based awards.

Previous wording

Depreciation and amortization expense consists of the reduction in value of our tangible and intangible assets over their useful life. These assets include property, plant, and equipment, along with intangible assets acquired through acquisition, or developed as internal use software.

Current wording

Depreciation and amortization expense consists of the reduction in value of our tangible and intangible assets over their useful life. These assets include property, plant, and equipment, along with intangible assets acquired through acquisitions, or developed as internal use software.

Previous wording

Depreciation and amortization expense totaled $0.5 million and $0.6 million for the quarters ended March 31, 2025 and 2024, respectively. The decrease in depreciation and amortization expense was due to the completed amortization of intangible assets, specifically related to capitalized labor for our internal use software, decreasing overall depreciation and amortization expense versus the same period a year ago.

Current wording

Depreciation and amortization expense totaled $1.0 million and $1.1 million for the six months ended June 30, 2025 and 2024, respectively. The decrease in depreciation and amortization expense was due to the completed amortization of intangible assets, specifically related to capitalized labor for our internal use software, decreasing overall depreciation and amortization expense versus the same period a year ago.

Previous wording

Other income, net was $0.1 million for the quarter ended March 31, 2025 compared to $0.1 million for the quarter ended March 31, 2024.

Current wording

Other income, net was $0.1 million for the quarter ended June 30, 2025 compared to $0.4 million for the quarter ended June 30, 2024. This decrease in the 2025 quarter compared to the corresponding 2024 quarter was driven primarily by the receipt of an employee retention tax credit issued under the CARES Act in the prior year period.

Previous wording

State income tax expense in the three months ended March 31, 2025 and 2024 was $62,554 and $70,000, respectively.

Current wording

State income tax expense in the three months ended June 30, 2025 and 2024 was $68,857 and $70,000, respectively.

Previous wording

We reported a net loss of $0.2 million for the quarter ended March 31, 2025, as compared to a net loss of $0.3 million for the same period in the prior year. The decrease in net loss was driven primarily by higher revenues, alongside lower stock-based compensation and depreciation and amortization expenses countering slightly lower gross profits and interest income.

Current wording

We reported a net loss of $0.6 million for the six months ended June 30, 2025, as compared to a net loss of $0.2 million for the same period in the prior year. The increase in net loss was driven primarily by increases in SG&A, alongside the receipt of an employee retention tax credit issued under the CARES Act in the prior year period.

Previous wording

Our primary sources of liquidity are available cash and cash equivalents and cash flows provided by operations. As of March 31, 2025, we had cash and cash equivalents of $8.7 million. For the three months ended March 31, 2025, cash provided by operations was $1.4 million. We expect available cash and cash equivalents and internally generated funds to be sufficient to support working capital needs, capital expenditures (including acquisitions), and our debt service obligations. We believe we have sufficient liquidity to operate for at least the next 12 months from the date of filing this report. Cash from operating activities is dependent on our net income (loss), less depreciation, amortization, credit losses, deferred federal income tax, non-cash stock-based compensation, the amortization of intangible assets, and net of the changes in our operating assets and liabilities. These assets and liabilities include our accounts receivable, prepaid expenses, operating lease right-of-use assets, inventory, other assets, accounts payable and accrued expenses, operating lease liabilities, merchant reserves, customer deposits, and deferred revenues.

Current wording

Our primary sources of liquidity are available cash and cash equivalents and cash flows provided by operations. As of June 30, 2025, we had cash and cash equivalents of $7.5 million. For the six months ended June 30, 2025, cash provided by operations was $1.1 million. We expect available cash and cash equivalents and internally generated funds to be sufficient to support working capital needs, capital expenditures (including acquisitions), and our debt service obligations. We believe we have sufficient liquidity to operate for at least the next 12 months from the date of filing this report. Cash from operating activities is dependent on our net income (loss), less depreciation, amortization, credit losses, deferred federal income tax, non-cash stock-based compensation, the amortization of intangible assets, and net of the changes in our operating assets and liabilities. These assets and liabilities include our accounts receivable, prepaid expenses, operating lease right-of-use assets, inventory, other assets, accounts payable and accrued expenses, operating lease liabilities, merchant reserves, customer deposits, and deferred revenues.

Previous wording

We reported a net loss of $0.2 million for the three months ended March 31, 2025 compared to a net loss of $0.3 million for the three months ended March 31, 2024. We had an accumulated deficit of $68.3 million and $68.0 million at March 31, 2025 and December 31, 2024, respectively. Additionally, we had working capital of $10.2 million and $10.2 million at March 31, 2025 and December 31, 2024, respectively.

Current wording

We reported a net loss of $0.6 million for the six months ended June 30, 2025 compared to a net loss of $0.2 million for the six months ended June 30, 2024. We had an accumulated deficit of $68.6 million and $68.0 million at June 30, 2025 and December 31, 2024, respectively. Additionally, we had working capital of $9.9 million and $10.2 million at June 30, 2025 and December 31, 2024, respectively.

Previous wording

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.

Current wording

These credit facilities were arranged to comply with legal requirements related to the Company’s lawsuit 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.

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2025 was $1.4 million, as compared to net cash provided by operating activities of $0.1 million for the three months ended March 31, 2024. The increase in cash provided by operating activities was due primarily to the larger decrease in accounts receivable, alongside improved net income, and reduced depreciation expense versus the same period last year. We continue to invest resources in the infrastructure of our business such as the retention, and acquisition of employees, sales-related travel, and marketing efforts to achieve scale across all business lines.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2025 was $1.1 million, as compared to net cash provided by operating activities of $0.5 million for the six months ended June 30, 2024. The increase in cash provided by operating activities was due primarily to the collection of a tax credit and reducing accounts receivable versus the same period last year. We continue to invest resources in the infrastructure of our business such as the retention, and acquisition of employees, sales-related travel, and marketing efforts to achieve scale across all business lines.

Previous wording

Net cash used in investing activities was $0.3 million for the three months ended March 31, 2025 as compared to cash used in investing activities of $0.2 million for the three months ended March 31, 2024. The primary driver of our investing activities was capital expenditures associated with capitalized software development costs and other capital investments associated with growing our business lines and associated employee counts. The increase in cash used in investing activities was primarily attributable to the increased amount of fixed asset purchases and capitalization of internal use software relative to the same period a year ago.

Current wording

Net cash used in investing activities was $0.7 million for the six months ended June 30, 2025 as compared to cash used in investing activities of $0.5 million for the six months ended June 30, 2024. The primary driver of our investing activities was capital expenditures associated with capitalized software development costs and other capital investments associated with growing our business lines and associated employee counts. The increase in cash used in investing activities was primarily attributable to the increased amount of fixed asset purchases and capitalization of internal use software relative to the same period a year ago.