Paysign Inc

Previous wording

This Quarterly Report on Form 10-Q includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (“Forward-Looking Statements”). All statements other than statements of historical fact included in this report are Forward-Looking Statements. These Forward-Looking Statements are based on our current expectations, assumptions, estimates and projections about our business and our industry. Words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “propose,” “may,” and other similar expressions identify Forward-Looking statements. In the normal course of our business, we, in an effort to help keep our stockholders and the public informed about our operations, may from time-to-time issue certain statements, either in writing or orally, that contain, or may contain, Forward-Looking Statements. Although we believe that the expectations reflected in such Forward-Looking Statements are reasonable, we can give no assurance that such expectations will prove to have been correct. In addition, any statements that refer to expectations, projections, estimates, forecasts, or other characterizations of future events or circumstances are Forward-Looking Statements. These Forward-Looking Statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the Forward-Looking Statements. Such important factors (“Important Factors”) and other factors are disclosed in this report, including those factors discussed in “Part II - Item 1A. Risk Factors.” All prior and subsequent written and oral Forward-Looking Statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Important Factors described below that could cause actual results to differ materially from our expectations as set forth in any Forward-Looking Statement made by or on behalf of us. You are cautioned not to place undue reliance on these Forward-Looking Statements, which relate only to events as of the date on which the statements are made. We undertake no obligation to publicly revise these Forward-Looking Statements to reflect events or circumstances that arise after the date hereof. You should refer to and carefully review the information in future documents we file with the Securities and Exchange Commission.

Current wording

This Quarterly Report on Form 10-Q includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (“Forward-Looking Statements”). All statements other than statements of historical fact included in this report are Forward-Looking Statements. These Forward-Looking Statements are based on our current expectations, assumptions, estimates and projections about our business and our industry. Words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “propose,” “may,” and other similar expressions identify Forward-Looking Statements. Specific forward-looking statements made herein include our belief that we do not anticipate any losses with respect to accounts with balances exceeding federally insured limits; our expected lease obligations for subsequent years; our belief that our platform can be seamlessly integrated with our clients’ systems; our belief that our distinctive positioning allows us to provide end-to end technologies that securely manage transaction processing, cardholder enrollment, value loading, account management, data and analytics, and customer service; our belief that our architecture is known for its cross-platform compatibility, flexibility, and scalability – allowing our clients and partners to leverage these advantages for cost savings and revenue opportunities; our expectation that in the future we will expand our product into other prepaid card offerings such as travel cards and expense reimbursement cards; our focus of our marketing efforts on corporate incentive and expense prepaid card products in various market verticals; our plan for 2024 to continue to invest additional funds in technology improvements, sales and marketing, cybersecurity, fraud, customer service, and regulatory compliance; our belief that from time to time we evaluate raising capital to enable us to diversify into new market verticals; our belief that if we do not raise new capital, that we will still be able to support our existing business and expand into new vertical markets using internally generated funds; our belief that the following measures are the primary indicators of our quarterly and annual revenues: gross dollar volume on loaded cards and conversion rates on gross dollar volume loaded on cards; our belief that the following are also key performance indicators: revenues, gross profit, operational expenses as a percent of revenues, cardholder participation, and EBITDA; and our belief that our available cash on hand, excluding restricted cash, along with our forecast for revenues and cash flows for the remainder of 2024 and through the third quarter of 2026, will be sufficient to sustain our operations for the next 24 months. In the normal course of our business, we, in an effort to help keep our stockholders and the public informed about our operations, may from time-to-time…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Non-Reloadable Cards: These are generally one-time use cards that are only active until the funds initially loaded to the card are spent. These types of cards are generally used as gift or incentive cards. Normally these types of cards are used for the purchase of goods or services at retail locations and cannot be used to receive cash.

Current wording

Non-Reloadable Cards: These are generally one-time use cards that are only active until the funds initially loaded to the card are spent. These types of cards are generally used as gift or incentive cards. Typically, these types of cards are used for the purchase of goods or services at retail locations and cannot be used to receive cash.

Previous wording

The prepaid card market in the U.S. has experienced significant growth in recent years due to consumers and merchants embracing improved technology, greater convenience, more product choices and greater flexibility. Prepaid cards have also proven to be an attractive alternative to traditional bank accounts for certain segments of the population, particularly those without, or who could not qualify for, a checking or savings account.

Current wording

The prepaid card market in the United States has experienced significant growth in recent years due to consumers and merchants embracing improved technology, greater convenience, more product choices and greater flexibility. Prepaid cards have also proven to be an attractive alternative to traditional bank accounts for certain segments of the population, particularly those without, or who could not qualify for, a checking or savings account.

Previous wording

The increase in total revenues of $3,290,548 for the three months ended June 30, 2024 compared to the same period in the prior year consisted primarily of a $1,258,801 increase in plasma revenue, a $1,945,665 increase in pharma revenue, and a $86,082 increase in other revenue. The increase in plasma revenue was primarily due to the addition of 35 new plasma centers since June 30, 2023 and rise in the number of donations at existing plasma centers, and, consequently, dollars loaded to cards, cardholder fees, and interchange, as there continues to be an increase in demand for plasma driven by global increases in plasma protein therapies. The increase in pharma revenue was primarily due to the launch of 30 net new pharma patient affordability programs since June 30, 2023 and the subsequent growth in monthly management and setup fees, claim processing fees, and other billable services such as call center support. The increase in other revenue was primarily due to the growth and usage in the number of cardholders of our payroll, retail, and corporate incentive programs.

Current wording

The increase in total revenues of $2,856,106 for the three months ended September 30, 2024 compared to the same period in the prior year consisted primarily of a $377,822 increase in plasma revenue, a $2,248,618 increase in pharma revenue, and a $229,666 increase in other revenue. The increase in plasma revenue was primarily due to the addition of 16 net new plasma centers since September 30, 2023 and rise in the number of donations at existing plasma centers, and, consequently, dollars loaded to cards, cardholder fees, and interchange, as there continues to be an increase in demand for plasma driven by global increases in plasma protein therapies. The increase in pharma revenue was primarily due to the launch of 32 net new pharma patient affordability programs since September 30, 2023 and the subsequent growth in monthly management and setup fees, claim processing fees, and other billable services such as call center support. The increase in other revenue was primarily due to the growth and usage in the number of cardholders of our payroll, retail, and corporate incentive programs.

Previous wording

Cost of revenues for the six months ended June 30, 2024 increased $2,475,727 compared to the same period in the prior year. Cost of revenues is comprised of transaction processing fees, data connectivity and data center expenses, network fees, bank fees, card production and postage costs, customer service, program management, application integration setup, fraud charges, and sales and commission expense. Cost of revenues increased during the second quarter primarily due to increases in cardholder usage activity and associated network expenses such as interchange and ATM costs, network expenses and sales commissions related to the growth in our pharma patient affordability business, fraud charges, postage, and customer service expenses associated with wage inflation pressures and the overall growth in our business, offset by a decline in plastics and collateral.

Current wording

Cost of revenues for the three months ended September 30, 2024 increased $714,910 compared to the same period in the prior year. Cost of revenues is comprised of transaction processing fees, data connectivity and data center expenses, network fees, bank fees, card production and postage costs, customer service, program management, application integration setup, and sales and commission expense. The increase in cost of revenues consisted primarily of (i) increased customer care expense of approximately $293,000 associated with the growth in our business, wage inflation pressures, a tight labor market, and increased benefit costs; (ii) increased third-party program management of approximately $173,000 associated with our pharma revenue; (iii) increased sales commission expense of approximately $175,000 related to the increase in overall revenue for programs in which we pay commission expenses; (iv) increased fraud charges of approximately $123,000; and (v) and increased network fees of approximately $34,000, which was driven predominantly by increased ATM network usage associated with growth in our card programs and increases in transaction fees related to inflationary pressures. These increases were offset by a decline in postage of approximately $42,000 and a decline in plastics and collateral of approximately $36,000.

Previous wording

Gross profit for the three months ended June 30, 2024 increased $1,970,023 compared to the same period in the prior year, resulting primarily from the increase in plasma revenue and the beneficial impact of a variable cost structure, as many of the plasma transaction costs are variable in nature and are provided by third-parties who charge us based on the number of active cards outstanding and transactions that occurred during the period. Gross profit also benefited from the growth in our pharma patient affordability business. The increase in gross profit was offset by price increases from many of our third-party service providers, and an increase in customer service expenses mentioned above. The increase in gross margin resulted from the aforementioned factors.

Current wording

Gross profit for the three months ended September 30, 2024 increased $2,141,196 compared to the same period in the prior year, resulting primarily from the increase in plasma revenue and the beneficial impact of a variable cost structure, as many of the plasma transaction costs are variable in nature and are provided by third-parties who charge us based on the number of active cards outstanding and transactions that occurred during the period. Gross profit also benefited from the growth in our pharma patient affordability business. The increase in gross profit was offset by price increases from many of our third-party service providers, and an increase in customer service and fraud expenses mentioned above. The increase in gross margin resulted from the aforementioned factors.

Previous wording

Selling, general and administrative expenses for the three months ended June 30, 2024 increased $715,839 compared to the same period in the prior year and consisted primarily of an increase in (i) compensation and benefits of approximately $1,301,000 due to continued hiring to support the Company’s growth, a tight labor market, and increased benefit costs; (ii) technologies and telecom of approximately $372,000 primarily related to ongoing platform security investments; and (iii) all other operating expenses of approximately $12,000. This increase was offset by a decrease in stock compensation of approximately $160,000, a decrease in outside professional services of approximately $162,000, and an increase of $647,000 in the amount of capitalized platform development costs.

Current wording

Selling, general and administrative expenses for the three months ended September 30, 2024 increased $1,521,335 compared to the same period in the prior year and consisted primarily of an increase in (i) compensation and benefits of approximately $1,821,000 due to continued hiring to support the Company’s growth, a tight labor market, and increased benefit costs; (ii) technologies and telecom of approximately $279,000 primarily related to ongoing platform security investments; and (iii) all other operating expenses of approximately $16,000. This increase was offset by a decrease in stock compensation of approximately $136,000 and an increase of $459,000 in the amount of capitalized platform development costs.

Previous wording

Depreciation and amortization expense for the three months ended June 30, 2024 increased $481,621 compared to the same period in the prior year. The increase in depreciation and amortization expense was primarily due to continued capitalization of new software development costs and equipment purchases related to continued enhancements to our processing platform and employment growth.

Current wording

Depreciation and amortization expense for the three months ended September 30, 2024 increased $520,444 compared to the same period in the prior year. The increase in depreciation and amortization expense was primarily due to continued capitalization of new software development costs and equipment purchases related to continued enhancements to our processing platform and employment growth.

Previous wording

For the three months ended June 30, 2024, we recorded income from operations of $125,677 representing an improvement of $772,563 compared to loss from operations of $646,886 during the same period in the prior year, related to the aforementioned factors.

Current wording

For the three months ended September 30, 2024, we recorded income from operations of $689,849 representing an improvement of $99,417 compared to income from operations of $590,432 during the same period in the prior year, related to the aforementioned factors.

Previous wording

Other income for the three months ended June 30, 2024 increased $212,490 primarily related to an increase in interest rates and the associated interest income received on higher average bank account balances at our sponsor bank.

Current wording

Other income for the three months ended September 30, 2024 increased $185,391 primarily related to an increase in interest rates and the associated interest income received on higher average bank account balances at our sponsor bank.

Previous wording

At June 30, 2024, our income tax expense was $241,932, which equates to an effective tax rate of 25.8%primarily as a result of tax benefits related to our stock-based compensation and changes to the Company’s valuation allowance recorded on its net deferred tax assets. We recorded an income tax expense of $58,137 for the three months ended June 30, 2023, which equates to an effective tax rate of (126.3%) primarily as a result of state taxes, a pretax loss, and full valuation on our deferred tax asset.

Current wording

At September 30, 2024, our income tax expense was $53,727, which equates to an effective tax rate of 3.6%primarily as a result of tax benefits related to our stock-based compensation and changes to the Company’s valuation allowance recorded on its net deferred tax assets. We recorded an income tax expense of $105,152 for the three months ended September 30, 2023, which equates to an effective tax rate of 8.7% primarily as a result of the full valuation on our deferred tax assets in both the current and prior period and the tax benefit related to our stock-based compensation.

Previous wording

The net income for the three months ended June 30, 2024 was $697,102, an improvement of $801,258 compared to the net loss of $104,156 for the three months ended June 30, 2023. The overall change in net income relates to the aforementioned factors.

Current wording

The net income for the three months ended September 30, 2024 was $1,436,837, an improvement of $336,233 compared to the net income of $1,100,604 for the three months ended September 30, 2023. The overall change in net income relates to the aforementioned factors.

Previous wording

Comparison of the Six Months Ended June 30, 2024 to the Six Months Ended June 30, 2023

Current wording

Comparison of the Nine Months Ended September 30, 2024 to the Nine Months Ended September 30, 2023

Previous wording

The following table summarizes our consolidated financial results for the six months ended June 30, 2024 in comparison to the six months ended June 30, 2023:

Current wording

The following table summarizes our consolidated financial results for the nine months ended September 30, 2024 in comparison to the nine months ended September 30, 2023:

Previous wording

The increase in total revenues of $6,337,332 for the six months ended June 30, 2024 compared to the same period in the prior year consisted primarily of a $2,266,768 increase in plasma revenue, a $3,744,747 increase in pharma revenue, and a $325,817 increase in other revenue. The increase in plasma revenue was primarily due to the addition of 35 new plasma centers since June 30, 2023 and rise in the number of donations at existing plasma centers, and, consequently, dollars loaded to cards, cardholder fees, and interchange, as there continues to be an increase in demand for plasma driven by global increases in plasma protein therapies. The increase in pharma revenue was primarily due to the launch of 30 net new pharma patient affordability programs since June 30, 2023 and the subsequent growth in monthly management and setup fees, claim processing fees, and other billable services such as call center support. The increase in other revenue was primarily due to the growth and usage in the number of cardholders of our payroll, retail, and corporate incentive programs.

Current wording

The increase in total revenues of $9,193,438 for the nine months ended September 30, 2024 compared to the same period in the prior year consisted primarily of a $2,644,590 increase in plasma revenue, a $5,993,365 increase in pharma revenue, and a $555,483 increase in other revenue. The increase in plasma revenue was primarily due to the addition of 16 net new plasma centers since September 30, 2023 and rise in the number of donations at existing plasma centers, and, consequently, dollars loaded to cards, cardholder fees, and interchange, as there continues to be an increase in demand for plasma driven by global increases in plasma protein therapies. The increase in pharma revenue was primarily due to the launch of 32 net new pharma patient affordability programs since September 30, 2023 and the subsequent growth in monthly management and setup fees, claim processing fees, and other billable services such as call center support. The increase in other revenue was primarily due to the growth and usage in the number of cardholders of our payroll, retail, and corporate incentive programs.

Previous wording

Cost of revenues for the three months ended June 30, 2024 increased $1,320,525 compared to the same period in the prior year. Cost of revenues is comprised of transaction processing fees, data connectivity and data center expenses, network fees, bank fees, card production and postage costs, customer service, program management, application integration setup, fraud charges, and sales and commission expense. Cost of revenues increased during the second quarter primarily due to increases in cardholder usage activity and associated network expenses, such as interchange and ATM costs, network expenses and sales commissions related to the growth in our pharma patient affordability business, fraud charges, postage, and customer service expenses associated with wage inflation pressures and the overall growth in our business, offset by a decline in plastics and collateral.

Current wording

Cost of revenues for the nine months ended September 30, 2024 increased $3,190,637 compared to the same period in the prior year. Cost of revenues is comprised of transaction processing fees, data connectivity and data center expenses, network fees, bank fees, card production and postage costs, customer service, program management, application integration setup, and sales and commission expense. The increase in cost of revenues consisted primarily of (i) increased network fees of approximately $1,413,000, which was driven predominantly by increased ATM network usage associated with growth in our card programs and increases in transaction fees related to inflationary pressures; (ii) increased sales commission expense of approximately $510,000 related to the increase in overall revenue for programs in which we pay commission expenses; (iii) increased customer care expense of approximately $637,000 associated with the growth in our business, wage inflation pressures, a tight labor market, and increased benefit costs; (iv) increased fraud charges of approximately $407,000; and (v) and increased third-party program management of approximately $409,000 related to the growth in our pharma patient affordability business. These increases were offset by a decline in plastics and collateral of approximately $161,000.

Previous wording

Gross profit for the six months ended June 30, 2024 increased $3,861,605 compared to the same period in the prior year resulting primarily from the increase in plasma revenue and the beneficial impact of a variable cost structure, as many of the plasma transaction costs are variable in nature and are provided by third parties who charge us based on the number of active cards outstanding and transactions that occurred during the period. Gross profit also benefited from the growth in our pharma patient affordability business. The increase in gross profit was offset by price increases from many of our third-party service providers, and an increase in customer service expenses mentioned above. The increase in gross margin resulted from the aforementioned factors.

Current wording

Gross profit for the nine months ended September 30, 2024 increased $6,002,801 compared to the same period in the prior year resulting primarily from the increase in plasma revenue and the beneficial impact of a variable cost structure, as many of the plasma transaction costs are variable in nature and are provided by third parties who charge us based on the number of active cards outstanding and transactions that occurred during the period. Gross profit also benefited from the growth in our pharma patient affordability business. The increase in gross profit was offset by price increases from many of our third-party service providers and an increase in customer service and fraud expenses mentioned above. The increase in gross margin resulted from the aforementioned factors.

Previous wording

Selling, general and administrative expenses for the six months ended June 30, 2024 increased $1,681,587 compared to the same period in the prior year and consisted primarily of an increase in (i) compensation and benefits of approximately $2,191,000 due to continued hiring to support the Company’s growth, a tight labor market, and increased benefit costs; (ii) technologies and telecom expense of approximately $684,000 primarily related to ongoing platform security investments; and (iii) all other operating expenses of approximately $38,000. This increase was offset by a decrease in non-IT professional audit and legal services of approximately $251,000, a decrease in stock compensation of approximately $115,000 and an $865,000 increase in the amount of capitalized platform development costs.

Current wording

Selling, general and administrative expenses for the nine months ended September 30, 2024 increased $3,202,922 compared to the same period in the prior year and consisted primarily of an increase in (i) compensation and benefits of approximately $4,012,000 due to continued hiring to support the Company’s growth, a tight labor market, and increased benefit costs; (ii) technologies and telecom expense of approximately $963,000 primarily related to ongoing platform security investments; and (iii) all other operating expenses of approximately $77,000. This increase was offset by a decrease in non-IT professional audit and legal services of approximately $274,000, a decrease in stock compensation of approximately $251,000 and a $1,325,000 increase in the amount of capitalized platform development costs.

Previous wording

Depreciation and amortization expense for the six months ended June 30, 2024 increased $923,010 compared to the same period in the prior year. The increase in depreciation and amortization expense was primarily due to continued capitalization of new software development costs and equipment purchases related to continued enhancements to our processing platform and employment growth.

Current wording

Depreciation and amortization expense for the nine months ended September 30, 2024 increased $1,443,454 compared to the same period in the prior year. The increase in depreciation and amortization expense was primarily due to continued capitalization of new software development costs and equipment purchases related to continued enhancements to our processing platform and employment growth.

Previous wording

For the six months ended June 30, 2024, we recorded a loss from operations of $132,675 representing an improvement of $1,257,008 compared to loss from operations of $1,389,683 during the same period in the prior year related to the aforementioned factors.

Current wording

For the nine months ended September 30, 2024, we recorded income from operations of $557,174 representing an improvement of $1,356,425 compared to loss from operations of $799,251 during the same period in the prior year related to the aforementioned factors.

Previous wording

Other income for the six months ended June 30, 2024 increased $359,637 primarily related to an increase in interest rates and the associated interest income received on higher average bank account balances at our sponsor bank.

Current wording

Other income for the nine months ended September 30, 2024 increased $545,028 primarily related to an increase in interest rates and the associated interest income received on higher average bank account balances at our sponsor bank.

Previous wording

At June 30, 2024, our income tax expense was $405,828, which equates to an effective tax rate of 28.7%primarily as a result of tax benefits related to our stock-based compensation and changes to the Company’s valuation allowance recorded on its net deferred tax assets. We recorded an income tax expense of $59,667 for the six months ended June 30, 2023, which equates to an effective tax rate of (29.2%) primarily as a result of state taxes, a pretax loss, and full valuation on our deferred tax asset.

Current wording

At September 30, 2024, our income tax expense was $459,555, which equates to an effective tax rate of 15.8%primarily as a result of tax benefits related to our stock-based compensation and changes to the Company’s valuation allowance recorded on its net deferred tax assets. We recorded an income tax expense of $164,819 for the nine months ended September 30, 2023, which equates to an effective tax rate of 16.5% primarily as a result ofthe full valuation on our deferred tax assets in both the current and prior period and the tax benefit related to our stock-based compensation.

Previous wording

The net income for the six months ended June 30, 2024 was $1,006,198, an improvement of $1,270,484 compared to the net loss of $264,286 for the six months ended June 30, 2023. The overall change in net income relates to the aforementioned factors.

Current wording

The net income for the nine months ended September 30, 2024 was $2,443,035, an improvement of $1,606,717 compared to the net income of $836,318 for the nine months ended September 30, 2023. The overall change in net income relates to the aforementioned factors.

Previous wording

Gross Dollar Volume Loaded on Cards: Represents the total dollar volume of funds loaded to all of our prepaid card programs. Our gross dollar volume loaded on cards was $456 million and $405 million for the three months ended June 30, 2024 and 2023, respectively. Our gross dollar volume loaded on cards was $882 million and $783 million for the six months ended June 30, 2024 and 2023, respectively. We use this metric to analyze the total amount of money moving into our prepaid card programs.

Current wording

Gross Dollar Volume Loaded on Cards: Represents the total dollar volume of funds loaded to all of our prepaid card programs. Our gross dollar volume loaded on cards was $456 million and $448 million for the three months ended September 30, 2024 and 2023, respectively. Our gross dollar volume loaded on cards was $1,339 million and $1,232 million for the nine months ended September 30, 2024 and 2023, respectively. We use this metric to analyze the total amount of money moving into our prepaid card programs.

Previous wording

Conversion Rates on Gross Dollar Volume Loaded on Cards: Represents revenues, gross profit or net income (loss) conversion rates of gross dollar volume loaded on cards which are calculated by taking our total revenues, gross profit or net income (loss), respectively, as a numerator and dividing by the gross dollar volume loaded on cards as a denominator. As we derive a number of our financial results from cardholder fees, we utilize these metrics as an indication of the amount of money that is added to cards and will eventually be converted to revenues, gross profit and net income (loss). Our total revenue conversion rates for the three months ended June 30, 2024 and 2023 were 3.14% or 314 basis points (“bps”), and 2.73% or 273 bps, respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the three months ended June 30, 2024 and 2023 were 1.66% or 166 bps, and 1.39% or 139 bps, respectively, of gross dollar volume loaded on cards. Our net income (loss) conversion rates for the three months ended June 30, 2024 and 2023 were 0.14% or 14 bps, and (0.03)% or (3) bps, respectively, of gross dollar volume loaded on cards. Our total revenue conversion rates for the six months ended June 30, 2024 and 2023 were 3.12% or 312 basis points bps, and 2.70% or 270 bps, respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the six months ended June 30, 2024 and 2023 were 1.65% or 165 bps, and 1.36% or 136 bps, respectively, of gross dollar volume loaded on cards. Our net income (loss) conversion rates for the six months ended June 30, 2024 and 2023 were 0.11% or 11 bps, and (0.03)% or (3) bps, respectively, of gross dollar volume loaded on cards.

Current wording

Conversion Rates on Gross Dollar Volume Loaded on Cards: Represents revenues, gross profit or net income conversion rates of gross dollar volume loaded on cards which are calculated by taking our total revenues, gross profit or net income, respectively, as a numerator and dividing by the gross dollar volume loaded on cards as a denominator. As we derive a number of our financial results from cardholder fees, we utilize these metrics as an indication of the amount of money that is added to cards and will eventually be converted to revenues, gross profit and net income. Our total revenue conversion rates for the three months ended September 30, 2024 and 2023 were 3.34% or 334 basis points (“bps”), and 2.77% or 277 bps, respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the three months ended September 30, 2024 and 2023 were 1.86% or 186 bps, and 1.41% or 141 bps, respectively, of gross dollar volume loaded on cards. Our net income conversion rates for the three months ended September 30, 2024 and 2023 were 0.31% or 31 bps, and 0.25% or 25 bps, respectively, of gross dollar volume loaded on cards. Our total revenue conversion rates for the nine months ended September 30, 2024 and 2023 were 3.20% or 320 basis points bps, and 2.73% or 273 bps, respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the nine months ended September 30, 2024 and 2023 were 1.72% or 172 bps, and 1.38% or 138 bps, respectively, of gross dollar volume loaded on cards. Our net income conversion rates for the nine months ended September 30, 2024 and 2023 were 0.18% or 18 bps, and 0.07% or 7 bps, respectively, of gross dollar volume loaded on cards.

Previous wording

Management also reviews key performance indicators, such as revenues, gross profit, operational expenses as a percent of revenues, and cardholder participation. In addition, we consider certain non-GAAP (or “adjusted”) measures to be useful to management and investors evaluating our operating performance for the periods presented and provide a financial tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment and investment in new card programs. These adjusted metrics are consistent with how management views our business and are used to make financial, operating and planning decisions. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income (loss), earnings (loss) per share (basic and diluted) or net cash from operating activities as determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators:

Current wording

Management also reviews key performance indicators, such as revenues, gross profit, operational expenses as a percent of revenues, and cardholder participation. In addition, we consider certain non-GAAP (or “adjusted”) measures to be useful to management and investors evaluating our operating performance for the periods presented and provide a financial tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment and investment in new card programs. These adjusted metrics are consistent with how management views our business and are used to make financial, operating and planning decisions. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income, earnings per share (basic and diluted) or net cash from operating activities as determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators:

Previous wording

“EBITDA” is defined as earnings before interest, income taxes, depreciation and amortization expense and “Adjusted EBITDA” reflects the adjustment to EBITDA to exclude stock-based compensation expense. A reconciliation of net income (loss) to Adjusted EBITDA is provided in the table below.

Current wording

“EBITDA” is defined as earnings before interest, income taxes, depreciation and amortization expense and “Adjusted EBITDA” reflects the adjustment to EBITDA to exclude stock-based compensation expense. A reconciliation of net income to Adjusted EBITDA is provided in the table below.

Previous wording

During the six months ended June 30, 2024 and 2023, we financed our operations through internally generated funds.

Current wording

During the nine months ended September 30, 2024 and 2023, we financed our operations through internally generated funds.

Previous wording

Operating activities provided $28,796,693 of cash as of June 30, 2024, an increase of $28,645,345 compared to the same period last year. This change in cash flow is primarily due to increases in operating assets and liabilities. The changes in accounts receivable, accounts payable, and customer card funding are primarily related to the growth in our pharma patient affordability business and timing of payments as we are invoiced by third-party service providers at the end of the period and are due monies from our pharma patient affordability customers to cover these third-party payables. The increase in cash flows from operating activities was also impacted by net income and non-cash adjustments for depreciation and amortization, deferred income taxes, stock-based compensation, and lease expenses.

Current wording

Operating activities provided $8,633,922 of cash as of September 30, 2024, an increase of $4,453,858 compared to the same period last year. This change in cash flow is primarily due to increases in operating assets and liabilities. The changes in accounts receivable, accounts payable, and customer card funding are primarily related to the growth in our pharma patient affordability business and timing of payments as we are invoiced by third-party service providers at the end of the period and are due monies from our pharma patient affordability customers to cover these third-party payables. The increase in cash flows from operating activities was also impacted by net income and non-cash adjustments for depreciation and amortization, deferred income taxes, stock-based compensation, and lease expenses.

Previous wording

We used net cash in investing activities during the six months ended June 30, 2024 and 2023 of $4,640,045 and $3,044,110, respectively. Cash used for investing activities was primarily attributed to an increase in the capitalization of internally developed software as we continue to invest in our technology platform.

Current wording

We used net cash in investing activities during the nine months ended September 30, 2024 and 2023 of $7,087,867 and $4,999,986, respectively. Cash used for investing activities was primarily attributed to an increase in the capitalization of internally developed software as we continue to invest in our technology platform.

Previous wording

Finance activities provided cash of $24,000 during the six months ended June 30, 2024, related to the proceeds received for the exercise of stock options. Financing activities during the six months ended June 30,2023 used $968,067 in cash, attributable to the repurchase of 319,558 shares of the Company’s common stock at a weighted average price of $3.06 per share offset by proceeds received of $9,600 for the exercise of stock options.

Current wording

Finance activities during the nine months ended September 30, 2024 used $331,695 in cash, attributable to the repurchase of 100,000 shares of the Company’s common stock at a weighted average price of $3.60 per share offset by proceeds received of $28,800 for the exercise of stock options. Financing activities during the nine months ended September 30, 2023 used $1,118,284 in cash, attributable to the repurchase of 394,558 shares of the Company’s common stock at a weighted average price of $2.86 per share offset by proceeds received of $9,600 for the exercise of stock options.

Previous wording

Our significant contractual cash requirements also include ongoing payments for lease liabilities. For additional information regarding our cash commitments and contractual obligations, see “Note 5 – LEASE” in the notes to the accompanying consolidated financial statements.

Current wording

Our significant contractual cash requirements also include ongoing payments for lease liabilities. For additional information regarding our cash commitments and contractual obligations, see “Note 4 – LEASE” in the notes to the accompanying condensed consolidated financial statements.

Previous wording

Unrestricted cash was $31,290,865 as of June 30, 2024, an increase of $23,620,188 compared to the same period in the prior year. The increase resulted primarily from the improvement in our operating results and payment timing on passthrough claim reimbursement receivables and related payables associated with our patient affordability business, in the amount of $22,708,655. We believe that our available cash on hand, excluding restricted cash, at June 30, 2024 of $31,290,865, along with our forecast for revenues and cash flows for the remainder of 2024 and through the second quarter of 2026, will be sufficient to sustain our operations for the next twenty-four months. In light of the elevated interest rates and increased refinancing risks related to commercial real estate holdings on bank balance sheets, we continue to monitor the health and soundness of our bank relationships through publicly available information. Based on recent SEC filings, we have not discovered any issues that would cause us to alter our bank relationships.

Current wording

Unrestricted cash was $10,293,207 as of September 30, 2024, an increase of $356,580 compared to the same period in the prior year. The increase resulted primarily from the improvement in our operating results. We believe that our available cash on hand, excluding restricted cash, at September 30, 2024 of $10,293,207, along with our forecast for revenues and cash flows for the remainder of 2024 and through the third quarter of 2026, will be sufficient to sustain our operations for the next 24 months. In light of the elevated interest rates and increased refinancing risks related to commercial real estate holdings on bank balance sheets, we continue to monitor the health and soundness of our bank relationships through publicly available information. Based on recent SEC filings, we have not discovered any issues that would cause us to alter our bank relationships.