Usio, Inc.

Note1. 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 Form10-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 arenot* necessarily indicative of results that* maybe expected for any other interim periods or the full fiscal year. References in this quarterly report to "the quarter" or the "second quarter" mean thethree* month period ended* June 30, 2026* or2025, 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 include cash and other money market instruments. The Company considers all highly liquid investments with an original maturity of90 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 consolidated 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 isnot out of pocket for amounts billed daily by the United States Postal Service. These customer deposits are carried on the Company's consolidated 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 consolidated 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 mayoccur under the merchant agreement. While this cash isnot 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.

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Accounts Receivable/Allowance for Estimated Credit Losses: Accounts receivable are reported as outstanding principal net of an allowance for estimated credit losses of $181,036 and $404,132 at* June 30, 2026* and* December 31, 2025*, respectively.

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 doesnot charge interest on accounts receivable.

Inventory: Inventory is stated at the lower of cost or net realizable value. At June 30, 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 toten 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 costsno later than the point at which the project is substantially complete and ready for its intended purpose. During thesix months ended* June 30, 2026and2025*, the Company capitalized software costs of $476,791 and $673,242, 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 than10% of revenues duringsix months ended* June 30, 2025* or thesix months ended* June 30, 2026*.

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 maynot* 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 during2025 or thesix months ended* June 30, 2026*. Management isnot 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 inone of the following levels:

• Level1 inputs - unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date;

• Level2 inputs - other than quoted prices included in Level1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability; and

• Level3 inputs - unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs arenot 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 ofone of the Company’s merchant customers, or for any other reason, the Company isnot 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* mayrequire 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 maybe 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, 2026* and* December 31, 2025*, the Company’s reserve for processing losses was $629,837 and $784,937, respectively, which is recorded on the Company's consolidated balance sheet as an accrued expense, and in the consolidated statements of cash flows as a change in the reserve for processing losses.

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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* maybe 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 mayalso 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 throughthird*-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 earned45 days after the end of the processing period. Prepaid card distributors have payment terms of30 days following the end of the month. Sales taxes billed are reported directly as a liability to the taxing authority and arenot 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 in 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:

Legal Proceedings:The Company maybe 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 legal proceedings or other matters that mayarise 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 arenot 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 thannot 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 pastfour years remain open to examination. The Company is subject to the Texas franchise tax. Management isnot 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 donot require adoption until a future date arenot expected to have a material impact on the Company's consolidated financial statements upon adoption.

In* October 2023,FASB issued Accounting Standards Update ("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 ReleaseNo.* 33-10532, Disclosure Update and Simplification that was issued in2018. 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 arenot 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 effectivetwo years later. The Company is evaluating the effect that ASU2023-06 will have on its consolidated financial statements and related disclosures.

In* January 2025,the FASB issued ASU2025*-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic220-40): Clarifying the Effective Date. ASU2025-01 clarifies the effective date for ASU2024-03 (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. ASU2024-03 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 ASU2025-01 align with ASU2024-03: within 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 consolidated financial statements and related disclosures, but doesnot* expect adoption of this new standard to be material.

In* May 2025,the FASB issued ASUNo.* 2025-03, Business Combinations (Topic805) and Consolidation (Topic810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity (“ASU2025-03”). ASU2025-03 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. ASU2025-03 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 consolidated financial statements and related disclosures, but doesnot* expect adoption of this new standard to be material.

In* May 2025,the FASB issued ASUNo.* 2025-04, Compensation – Stock Compensation (Topic718) and Revenue from Contracts With Customers (Topic606): Clarifications to Share-Based Consideration Payable to a Customer (“ASU2025-04”). ASU2025-04 revises the definition of a performance condition, eliminates the forfeiture policy election for service conditions, and clarifies that the variable consideration constraint in ASC Topic606 doesnot 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 Topic606 and ASC Topic718: Compensation—Stock Compensation. ASU2025-04 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 consolidated financial statements and related disclosures, but doesnot* expect adoption of this new standard to be material.

In* July 2025,the FASB issued ASU2025*-05, Financial Instruments — Credit Losses (Topic326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU2025-05”), which provides a practical expedient for estimating expected credit losses for current accounts receivable and current contract assets. ASU2025-05 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, 2026on a prospective basis. Our consolidated financial statements werenot* materially impacted upon adoption.

In* September 2025,the FASB issued ASU2025*-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 ASU2025*-06 on our consolidated financial statements and related disclosures but doesnot expect adoption of this new standard to be material.

In* December 2025,the FASB issued ASUNo.* 2025-10, Government Grants (Topic832): Accounting for Government Grants Received by Business Entities. ASU2025-10 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 consolidated financial statements and related disclosures, but doesnot* expect adoption of this new standard to be material.

InDecember 2025, the FASB issuedASU 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements”. The amendments are intended to improve the clarity and navigability of interim reporting requirements withinTopic 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 withinTopic 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 doesnot 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 afterDecember 15, 2027. Early adoption is permitted, and the amendments* maybe applied either prospectively or retrospectively. The Company is currently evaluating the impact of adopting this new accounting guidance on its consolidated financial statements and related disclosures, but doesnot* expect adoption of this new standard to be material.

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Note2. 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 thethree months ended* June 30, 2026* and2025, operating lease expenses totaled $193,613 and $151,568, respectively. For thesix months ended* June 30, 2026* and2025, operating lease expenses totaled $384,514 and $302,256, respectively.

Note3. Accrued Expenses

Accrued expenses consisted of the following balances:

Note4. 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, 2029and annual interest of 6.75%. Monthly principal and interest payments are required in the amount of $16,017. Total interest and principal payments on this folder and inserter equipment loan were $50,188 and $47,953 for thethree* months ended* June 30, 2026and2025*, respectively. Total interest and principal payments on this folder and inserter equipment loan were $98,141 and $95,906 for thesix months ended* June 30, 2026and2025*, respectively.

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 of66 months with a maturity date of* March 19, 2031and annual interest of 6.75%. Monthly principal and interest payments are required in the amount of $20,088. Through the end of2025,* only $791,742 in proceeds were drawn from the loan and reflected on the Company's consolidated balance sheets at* December 31, 2025,with the remaining commitment of $226,212 still available as of June 30, 2026*. Total payments on the printer loan during thethree months ended* June 30, 2026* were $44,636. Total payments on the printer loan during thesix months ended* June 30, 2026* were $57,997.

Future principal payments on current debt arrangements are as follows at* June 30, 2026*:

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Note5. 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 offive 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 thethree* months ended* June 30, 2026and2025*, respectively. The amortization of these warrants totaled $0 and $55,228 in thesix months ended* June 30, 2026and2025*, respectively.

Note6. Net Income (Loss) Per Share

Basic income (loss) per share (EPS) was computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted EPS differs from basic EPS due to the assumed conversion of potentially dilutive awards and options that were outstanding during the period. Holders of unvested restricted stock awards have the right to receive nonforfeitable dividends on the same basis as common shares; therefore, unvested restricted stock is considered a participating security for the purpose of calculating EPS. The following is a reconciliation of the numerators and the denominators of the basic and diluted per share computations for net income (loss) for thethree andsix months ended* June 30, 2026* and2025:

The warrants to purchase shares of common stock that were outstanding at* June 30, 2026and2025* which werenot included in the computation of diluted earnings per share because the effect would have been anti-dilutive, were as follows:

Note7. Income Taxes

Deferred tax assets and liabilities are recorded based on the difference between financial reporting and tax basis of assets and liabilities and are measured by the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Deferred tax assets are computed with the presumption that they will be realizable in future periods when taxable income is generated. Predicting the ability to realize these assets in future periods requires judgment by management. GAAP prescribes a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. Income tax benefits that meet the “more likely thannot” recognition threshold are recognized.

At* June 30, 2026* and* December 31, 2025*, the Company had a deferred tax asset of approximately $4.4 million and $4.5 million, respectively, net of a valuation allowance of approximately $2.7 million. Management considered the realizability of this asset in light of historical operating results and forecasted results, and determined that it was more likely thannot that the Company will have taxable income in the future sufficient to utilize the deferred tax asset. The Company reviews the assessment of the deferred tax asset and valuation allowance on an annual basis or more often when events indicate that a change to the valuation allowance* maybe warranted. If applicable, the Company will recognize interest expense and penalties related to uncertain tax positions in interest expense. As of June 30, 2026*, the Company hadno accrued interest or penalties related to uncertain tax provisions.

At* June 30, 2026*, the Company had available net operating loss carryforwards ("NOLs") of approximately $21.6 million. NOLs generated during or prior to2017 ("Pre-2018 NOLs") are available to offset taxable income of future periods and expire20 years after the loss was generated. NOLs generated after2017 donot expire. Our ability to use our NOLs will be dependent on our ability to generate taxable income, and the Pre-2018 NOLs could expire before we generate sufficient taxable income.

Pursuant to Sections382 and383 of the Internal Revenue Code ("IRC"), federal and state tax laws impose significant restrictions on the utilization of net operating loss and other tax carryforwards in the event of a change in ownership of the Company. The Company doesnot expect IRC Sections382 and383 to significantly impact the utilization of its NOLs and other tax carryforwards. If we were to experience an "ownership change," as determined under Section382 of the IRC, our ability to offset taxable income arising after the ownership change with NOLs generated prior to the ownership change would be limited, possibly substantially. An ownership change would establish an annual limitation on the amount of our pre-change NOLs we could utilize to offset our taxable income in any future taxable year to an amount generally equal to the value of our stock immediately prior to the ownership change multiplied by the long-term tax-exempt rate. In general, an ownership change will occur if there is a cumulative increase in our ownership of more than50 percentage points byone or more*"5%* shareholders" (as defined in the IRC) at any time during a rollingthree-year period.

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The schedule below outlines when the Company's Pre-2018 NOLs were generated and the year they* may*expire.

As of* June 30, 2026*, there were NOLs totaling approximately $14.0 million that have been generated since the beginning of2018 that donot expire, and can be carried forward to future years to offset taxable income. The schedule below outlines when the Company's NOLs for2018 and later years were generated.

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The tax provision for federal and state income tax is as follows for thesix months ended* June 30, 2026and2025*:

The reconciliation of federal income tax expense (benefit) computed at the U.S. federal statutory tax rates to total income tax expense (benefit) is as follows for thesix months ended* June 30, 2026and2025*:

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Note8. Related Party Transactions

During thesix months ended* June 30, 2026and2025*, the Company purchased a total of $18,959 and $4,756, respectively, of corporate imprinted sportswear, promotional items, and caps from Angry Pug Sportswear LLC. The Company’s Chairman of the Board, President, Chief Executive Officer and Chief Operating Officer, is a 50% owner of Angry Pug Sportswear LLC.

Note9. Stock-Based Compensation

In thesix months ended* June 30, 2026*, we withheld 44,430 shares of our common stock for $70,033 in private transactions based on an average purchase price of $1.58 per share from officers, directors and employees to cover their share of taxes in connection with equity grants. In thesix months ended* June 30, 2025*, we withheld 123,817 shares of our common stock for $210,672 in private transactions based on an average purchase price of $1.70 per share from officers, directors and employees to cover their share of taxes in connection with equity grants.

On* June 11, 2026,*the Company granted 790,000 shares of restricted common stock with a 10-year vesting period and 411,000 restricted stock units ("RSUs") with a 3-year vesting period to officers and employees as a performance bonus at an issue price of $1.71 per share. RSUs vest in equal tranches over their 3-year vesting period, while 10-year grants are cliff vesting, and vest in full at the conclusion of their 10-year vesting period. Upon vesting, officers and employees will receive issued shares of common stock. Executive officers included in the 10-year restricted stock grant were Louis Hoch (300,000 shares), Michael White (50,000 shares), Greg Carter (50,000 shares), and Houston Frost (50,000 shares). Executive officers included in the RSU grant were Louis Hoch (21,000 RSUs), Michael White (15,000 RSUs), Greg Carter (15,000 RSUs), and Houston Frost (15,000 RSUs).

On* June 11, 2026,*the Company granted 96,000 RSUs with a 3-year vesting period to Non-employee Directors as a performance bonus at an issue price of $1.71 per share. Directors included in the RSU grant were Blaise Bender (24,000 RSUs), Brad Rollins (24,000 RSUs), Ernesto Beyer (24,000 RSUs) and Michelle Miller (24,000 RSUs).

On* August 21, 2025,*the Company granted 920,000 shares of restricted common stock with a 10-year vesting period and 457,800 RSUs with a 3-year vesting period to officers and employees as a performance bonus at an issue price of $1.44 per share. RSUs vest in equal tranches over their 3-year vesting period, while 10-year grants are cliff vesting, and vest in full at the conclusion of their 10-year vesting period. Upon vesting, officers and employees will receive issued shares of common stock. Executive officers included in the 10-year restricted stock grant were Louis Hoch (300,000 shares), Michael White (50,000 shares), Greg Carter (50,000 shares), and Houston Frost (50,000 shares). Executive officers included in the RSU grant were Louis Hoch (21,000 RSUs), Michael White (18,000 RSUs), Greg Carter (18,000 RSUs), and Houston Frost (18,000 RSUs).

On* August 21, 2025,*the Company granted 84,000 RSUs with a 3-year vesting period to Non-employee Directors as a performance bonus at an issue price of $1.44 per share. Directors included in the RSU grant were Blaise Bender (21,000 RSUs), Brad Rollins (21,000 RSUs), Ernesto Beyer (21,000 RSUs) and Michelle Miller (21,000 RSUs).

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Note10. Segment Reporting

Usio'sreportable operating segments are "Output Solutions" and "Merchant Services" and these segments have been selected based on management’s resource allocation and performance assessment in making decisions regarding the Company. Our chief operating decision maker ("CODM") is the Company’s chief executive officer. The CODM has ultimate authority and responsibility over resource allocation decisions and performance assessment.

Segment gross profit is the measure of segment profit and loss reviewed by the CODM and is used by the CODM to evaluate segment performance and make decisions about funding our operations and allocating resources.

The following is a description of the segments.

Output Solutions

The Output Solutions segment, which was created in connection with the acquisition of substantially all of the assets of IMS, offers 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. 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.

Merchant Services

The Merchant Services segment offers integrated electronic payment processing services to merchants and businesses, including credit and debit card-based processing services and electronic funds transfer via the ACH network. Additionally, as part of our Prepaid card-based processing services, we develop and manage a variety of Mastercard-branded prepaid card program types, including consumer reloadable, consumer gift, incentive, promotional, general and government disbursement and corporate expense cards.

The following tables set forth certain financial information with respect to Usio’s reportable segments for thethree months ended* June 30, 2026and2025*:

Note to tables:

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The following tables set forth certain financial information with respect to Usio’s reportable segments for thesix months ended* June 30, 2026and2025*:

Note to tables:

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The following tables reconcile total gross profit reported above to the income (loss) from operations reported in the consolidated statements of operations for thethree andsix months ended* June 30, 2026and2025*:

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Note11. Commitments and Contingencies

Legal Proceedings

The Company* maybecome involved in legal matters arising in the ordinary course of business from time to time. While we arenot* party to any legal proceedings as of the date of the filing of this report, we could become involved in litigation or other legal proceedings that* may*have a material adverse effect on our business, financial condition, or results of operations.

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