What changed in this filing

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Item 1. Financial Statements

2020-11-12 compared with 2020-08-14 · 74 added, 46 removed, 306 unchanged (28% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2020

September 30, 2020

December 31, 2019

32 unchanged sentences

Preferred stock, $0.01 par value, 10,000,000 shares authorized;

-0- shares outstanding at June 30, 2020 (unaudited) and December 31, 2019, respectively

-0- shares outstanding at September 30, 2020 (unaudited) and December 31, 2019, respectively

Common stock, $0.001 par value, 200,000,000 shares authorized;

19,776,121 and 18,224,577 issued, and 18,595,358 and 17,104,998 outstanding at June 30, 2020 (unaudited) and December 31, 2019, respectively

25,887,785 and 18,224,577 issued, and 24,665,486 and 17,104,998 outstanding at September 30, 2020 (unaudited) and December 31, 2019, respectively

Additional paid-in capital

Treasury stock, at cost;

1,180,763 and 1,119,579 shares at June 30, 2020 (unaudited) and December 31, 2019, respectively

1,222,299 and 1,119,579 shares at September 30, 2020 (unaudited) and December 31, 2019, respectively

Deferred compensation

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of services

10 unchanged sentences

(Loss) before income taxes

Income tax expense (benefit)

Income tax expense

Basic (loss) per common share:

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities:

Adjustments to reconcile net (loss) to net cash (used) by operating activities:

Adjustments to reconcile net (loss) to net cash provided / (used) by operating activities:

Non-cash stock-based compensation

17 unchanged sentences

Proceeds from public offering, net of expenses

Proceeds from private offering

Purchases of treasury stock

24 unchanged sentences

Balance at June 30, 2020

Issuance of common stock under equity incentive plan

Warrant compensation costs

Cashless warrant exercise

Reversal of deferred compensation amortization that did not vest

Issuance of common stock, public offering

Issuance of common stock, private offering

Deferred compensation amortization

Purchase of treasury stock

Net (loss) for the period

Balance at September 30, 2020

Balance at December 31, 2018

13 unchanged sentences

Balance at June 30, 2019

Issuance of common stock under equity incentive plan

Warrant compensation cost

Deferred compensation amortization

Reversal of deferred stock compensation that did not vest

Purchase of treasury stock

Net (loss) for the period

Balance at September 30, 2019

The accompanying notes are an integral part of these consolidated financial statements.

21 unchanged sentences

The following table presents the Company's payment processing service revenues by source:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

ACH and complementary service revenue

5 unchanged sentences

The advance consideration received from a customer is deferred until the Company provides the customer that product or service.

The deferred revenues totaled $97,059 and $123,529 at June 30, 2020 and December 31, 2019 , respectively.

The deferred revenues totaled $83,824 and $123,529 at September 30, 2020 and December 31, 2019 , respectively.

Cash and Cash Equivalents:

11 unchanged sentences

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

Six Months Ended June 30,

Nine Months Ended September 30,

Beginning cash, cash equivalents, prepaid card load assets and merchant reserves:

12 unchanged sentences

Estimates for doubtful account losses are variable based on the volume of transactions processed and could increase or decrease accordingly.

The allowance for estimated doubtful accounts was $186,067 and $123,165 at June 30, 2020 and December 31, 2019 , respectively.

The allowance for estimated doubtful accounts was $236,891 and $123,165 at September 30, 2020 and December 31, 2019 , respectively.

Accounting for Internal Use Software:

2 unchanged sentences

The Company ceases capitalization of such costs no later than the point at which the project is substantially complete and ready for its intended purpose.

In the six months ended June 30, 2020 and June 30, 2019 , the Company capitalized $313,983 and $238,248 , respectively.

In the three months ended September 30, 2020 and September 30, 2019 , the Company capitalized $178,311 and $147,459 , respectively.

Valuation of Long-Lived and Intangible Assets:

5 unchanged sentences

When management determines that the carrying value of long-lived and intangible assets may not be recoverable, impairment is measured as the excess of the assets’ carrying value over the estimated fair value.

No impairment losses were recorded in 2019 or during the six months ended June 30, 2020 .

No impairment losses were recorded in 2019 or during the nine months ended September 30, 2020 .

Management is not aware of any impairment changes that may currently be required;

8 unchanged sentences

Estimates for processing losses are variable based on the volume of transactions processed and could increase or decrease accordingly.

At June 30, 2020 and December 31, 2019 , the Company’s reserve for processing losses was $490,893 and $506,153 respectively.

At September 30, 2020 and December 31, 2019 , the Company’s reserve for processing losses was $491,659 and $506,153 respectively.

Recently Adopted Accounting Pronouncements:

20 unchanged sentences

Accounting standards that have been issued or proposed by the FASB, the SEC or other standard setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

Reclassification of Prior Year Presentation:

Certain prior year amounts have been reclassified for consistency with the current period presentation.

These reclassifications had no effect on the reported results of operations.

A reclassification has been made to the Consolidated Statement of Cash Flows for the six months ended June 30, 2019 to identify the change in prepaid card load obligations previously reported in accrued expenses.

This change in classification does not affect previously reported results of operations in the Consolidated Income Statement, and cash activities in the Consolidated Statement of Cash Flows for the six months ended June 30, 2019 .

The Company leases facilities and office equipment under various operating leases, which generally are expected to be renewed or replaced by other leases.

For the quarter ended June 30, 2020 and 2019, operating lease expenses totaled $61,049 and $62,326 , respectively.

For the six months ended June 30, 2020 and 2019, operating lease expenses totaled $128,693 and $117,012 , respectively.

Operating lease liabilities as of June 30, 2020 will require the following payments:

2020 (six months)

For the quarter ended September 30, 2020 and 2019, operating lease expenses totaled $58,039 and $66,223 , respectively.

For the nine months ended September 30, 2020 and 2019, operating lease expenses totaled $186,731 and $183,225 , respectively.

Operating lease liabilities as of September 30, 2020 will require the following payments:

2020 (three months)

Total minimum lease payments

3 unchanged sentences

Accrued expenses consisted of the following balances:

June 30, 2020

September 30, 2020

December 31, 2019

9 unchanged sentences

Under the terms of the Note, the Company received total proceeds of $813,500 bearing interest at a rate of 1% per annum with a maturity date of April 15, 2022.

In addition, principal and interest payments will be deferred for the first six months of the loan.

In addition, principal and interest payments will be deferred for the first ten months of the loan.

The loan is subject to the terms and conditions applicable to loans administered by the U.S.

2 unchanged sentences

Under the terms of the PPP, the principal may be forgiven if the loan proceeds are used for qualifying expenses as described in the CARES act, such as payroll costs, benefits, rent and utilities.

The Company's loan forgiveness documentation is in the process of being filed with the Small Business Administration.

The Company's loan forgiveness documentation has been filed with the Small Business Administration.

The determination of how much of the loan, if any, may be subject to forgiveness will be determined by the Small Business Administration.

14 unchanged sentences

The fair value of the warrants was $135,764 which will be amortized over the life of the warrants as a reduction of revenues.

The reduction of revenues recorded for the six months ended June 30, 2020 and 2019 was $17,973 and $17,970, respectively.

On August 12, 2020, the Company issued 27,051 shares of common stock to University FanCards, LLC in a cashless exercise at $3.46 per common share in exchange for 60,000 warrants exercised.

The reduction of revenues recorded for the nine months ended September 30, 2020 and 2019 was $26,958 and $26,955 , respectively.

On August 12, 2020, the Company issued 27,051 shares of common stock to University FanCards, LLC in a cashless exercise at $3.46 per common share in exchange for 60,000 warrants exercised by FanCards, LLC.

Equity Transactions :

On February 14, 2019, the Company entered into a placement agency agreement with Maxim Group LLC for the issuance and sale of an aggregate of 769,230 shares of common stock at an offering price of $2.60 per share in a public offering.

The Company agreed to pay Maxim a cash fee of equal to 6% of the aggregate gross proceeds raised in the offering as well as legal fees and expenses of up to $40,000.

The Company agreed to pay Maxim a cash fee equal to 6% of the aggregate gross proceeds raised in the offering as well as legal fees and expenses of up to $40,000.

The net proceeds to the Company from the public offering were $1.8 million, after deducting the offering expenses and fees payable by the Company.

3 unchanged sentences

The gross proceeds to the Company from the private offering were $3.0 million.

On September 25, 2020, the Company entered into a placement agency agreement with Ladenburg Thalmann & Company Inc.

for the issuance and sale of an aggregate of 4,705,883 shares of common stock at an offering price of $1.70 per share in a public offering.

The Company agreed to pay Ladenburg a cash fee of equal to $0.12325 per share of common stock sold in the offering as well as legal fees and expenses of up to $100,000.

The net proceeds to the Company from the public offering were $7.4 million, after deducting the offering expenses and fees payable by the Company.

Net (Loss) Per Share

1 unchanged sentence

Diluted EPS differs from basic EPS due to the assumed conversion of potentially dilutive awards and options that were outstanding during the period.

The following is a reconciliation of the numerators and the denominators of the basic and diluted per share computations for net (loss) for the three and six months ended June 30, 2020 and June 30, 2019 .

Three Months Ended June 30,

Six Months Ended June 30,

The following is a reconciliation of the numerators and the denominators of the basic and diluted per share computations for net (loss) for the three and nine months ended September 30, 2020 and September 30, 2019 .

Three Months Ended September 30,

Nine Months Ended September 30,

Numerator for basic and diluted (loss) per share, net (loss) available to common shareholders

4 unchanged sentences

Diluted (loss) per common share and common share equivalent

The awards and options to purchase shares of common stock that were outstanding at June 30, 2020 and June 30, 2019 that were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive, are as follows:

Six Months Ended June 30,

The awards and options to purchase shares of common stock that were outstanding at September 30, 2020 and September 30, 2019 that were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive, are as follows:

Nine Months Ended September 30,

Anti-dilutive awards and options

12 unchanged sentences

Related Party Transactions

During the six months ended June 30, 2020 and the year ended December 31, 2019 , the Company purchased a total of $0 and $13,831, respectively, of corporate imprinted sportswear and caps from Angry Pug Sportswear.

During the nine months ended September 30, 2020 and the year ended December 31, 2019 , the Company purchased a total of $4,831 and $13,831, respectively, of corporate imprinted sportswear and caps from Angry Pug Sportswear.

Louis Hoch, the Company’s President and Chief Executive Officer, is a 50% owner of Angry Pug Sportswear.

Miguel Chapa and Louis Hoch

During the six months ended June 30, 2020 and the year ended December 31, 2019 , the Company received $0 and $6,665, respectively, in revenue from Lush Rooftop.

Miguel Chapa, a member of our Board of Directors, was an owner of Lush Rooftop.

During the nine months ended September 30, 2020 and the year ended December 31, 2019 , the Company received $0 and $6,665, respectively, in revenue from Lush Rooftop.

Miguel Chapa, a former member of our Board of Directors, was an owner of Lush Rooftop.

Louis Hoch, the Company’s President and Chief Executive Officer, was also a minority owner of Lush Rooftop.

The relationship ended in September, 2019 when the business was sold.

During the six months ended June 30, 2020 and the year ended December 31, 2019 , the Company received $3,219 and $24,363, respectively, in revenue from BLVD Bar and Lounge.

Miguel Chapa, a member of the Company's Board of Directors, is an owner in BLVD Bar and Lounge.

Louis Hoch, the Company’s President and Chief Executive Officer, is also an owner of BLVD Bar and Lounge.

During the nine months ended September 30, 2020 and the year ended December 31, 2019 , the Company received $3,219 and $24,363, respectively, in revenue from BLVD Bar and Lounge.

Miguel Chapa, a former member of the Company's Board of Directors, was an owner in BLVD Bar and Lounge.

Louis Hoch, the Company’s President and Chief Executive Officer, was also an owner of BLVD Bar and Lounge.

In May 2020, both Mr.

7 unchanged sentences

Executive officers and Directors included in the grant were Louis Hoch (300,000 shares), Vaden Landers (150,000 shares), Tom Jewell (200,000 shares), Blaise Bender (10,000 RSUs), Brad Rollins (30,000 RSUs) and Miguel Chapa (30,000 RSUs).

As approved by the Company's Compensation Committee, on November 1, 2020, we issued 136,891 shares of common stock to Mr.

Louis Hoch, the Company's Chief Executive Officer, valued at $216,000 at the closing price of $1.5779 per share from October 15, 2020 in satisfaction of the terms of the additional bonus of the employment agreement.

As part of the transaction, on November 1, 2020, the Company repurchased 54,756 shares from Mr.

Hoch to cover withholding taxes due.

In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization, and the outbreak has spread to all parts of the United States, including markets in which the Company operates.

The ongoing COVID-19 outbreaks have had a notable impact on general economic conditions, including but not limited to the temporary closures of many businesses, “shelter in place” and other governmental regulations, reduced consumer spending due to both job losses and other effects attributable to the COVID-19 pandemic.

There remain many uncertainties as a result of the pandemic.

As a result of the spread of COVID-19, economic uncertainties could continue to impact our operations.

Any potential incremental financial impact is unknown at this time.

Legal Proceedings

2 unchanged sentences

Subsequent Events

On July 1, 2020, Topline Capital Partners, LP purchased 1,796,407 unregistered shares of common stock at an offering price of $1.67 per share in a private offering.

The gross proceeds to the Company from the private offering were $3.0 million.

On August 12, 2020, the Company issued 27,051 shares of common stock to University FanCards, LLC in a cashless exercise at $3.46 per common share in exchange for 60,000 warrants exercised.

As approved by the Company's Compensation Committee, on November 1, 2020, the Company issued 136,891 shares of common stock to Mr.

As part of the transaction, on November 1, 2020, the Company repurchased 54,756 shares from Mr.

Hoch to cover withholding taxes due.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements