What changed in this filing

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Item 1A. Risk Factors

2021-03-30 compared with 2020-03-30 · 47 added, 33 removed, 269 unchanged (23% of the section changed)

5 unchanged sentences

We could experience adverse financial effects due to strain on the global economic environment.

In December 2019, a novel strain of coronavirus, or SARS-CoV-2, emerged in China.

While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to several other countries and infections have been reported globally.

Several countries, U.S.

states, cities and communities have enacted emergency and shelter in place orders which severely limit the movement of people and goods, including shopping and dining.

These events and limitations can have an adverse effect on the global economy, reducing consumer and corporate spending upon which our revenue depends.

Since the future course and duration of the COVID-19 outbreak are unknown, we are currently unable to determine whether the outbreak will have a further negative effect on our results of operation in 2020.

The ongoing COVID-19 pandemic has 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.

At this time, certain states are reducing mandated operating restrictions and efforts are underway to provide vaccinations to as many people as possible.

During 2020 and early 2021 the government issued several rounds of COVID-19 relief and stimulus payments, and other programs to stimulate economic activity and facilitate an economic recovery.

Our business was initially adversely affected as doctor's offices, dental offices, veterinarian offices and non-bank consumer lending accounts which were ordered closed in connection with curbing the spread of the pandemic.

As these doctors, dental and veterinarian offices re-opened, these businesses quickly recovered and returned to levels higher than pre-COVID.

Consumer lending merchants were adversely affected by COVID relief payments made during the pandemic and the pause placed on past due amounts owed.

The level of activity for consumer lending merchants has not returned to pre-COVID levels.

We achieved a gain during COVID in our Prepaid business line, as we were able to work in conjunction with major cities across the U.S.

to use our prepaid debit cards to facilitate the transfer of money via our debit cards from city foundations to the local residents in need of financial assistance.

The impacts and recovery from the COVID-19 pandemic are still a work in process.

We were not impacted in the magnitude of other payment processors as our customer base had limited exposure to retail facing businesses.

Within that framework, we will continue to monitor the overall impact on our operations and take necessary steps to ensure the safety of our employees and the well-being of our customers.

Loss of key resellers could reduce our revenue growth.

1 unchanged sentence

If a reseller switches to another transaction processor, shuts down, becomes insolvent, or enters the processing business themselves, we may no longer receive new merchant referrals from the reseller, and we risk losing existing merchants that were originally enrolled by the reseller, all of which could negatively affect our revenues and earnings.

In early 2021, we lost one of our largest ACH customers because it is going out of business.

If we do not attract new customers or expand our relationships with other existing customers our revenues could be adversely affected.

We may need additional financing in the future.

9 unchanged sentences

Some of these amounts may be substantial which may impact our business and results of operations.

We may not realize the opportunities from our acquisition of Singular Payments, LLC.

On September 1, 2017, we acquired Singular Payments, LLC, a Florida limited liability company and credit card processor for a purchase price of $5 million.

Through Singular Payments, we acquired new customers and their sales force.

The former owner of Singular Payments, Vaden Landers, became our Chief Revenue Officer.

We bought an existing portfolio of customers with a significant revenue stream and a sales force with significant experience in the credit card industry.

This acquisition increased our ability to grow new revenue streams.

The success of the Singular Payments acquisition will continue to depend on our ability to realize the anticipated growth opportunities.

We may not realize the opportunities from our acquisition of Information Management Solutions, LLC.

On December 15, 2020, we entered into an asset purchase agreement to purchase substantially all the assets of Information Management Solutions, LLC, a Texas limited liability company in the business of electronic bill presentment, document composition, document decomposition and printing and mailing services serving hundreds of customers representing a wide range of industry verticals, including utilities and financial institutions.

Through the acquisition, we acquired new customers and their sales force.

We bought an existing portfolio of customers with a significant revenue stream.

This acquisition increased our ability to grow new revenue streams and allows the Company to reenter the electronic bill presentment and payment revenue stream.

The success of the IMS acquisition will continue to depend on our ability to realize the anticipated growth opportunities.

We cannot assure you that we will be able to realize the anticipated growth opportunities.

7 unchanged sentences

However, the market for our services is characterized by rapidly changing technology, evolving industry standards, emerging competition and frequent new and enhanced software, service and related product introductions.

In addition, the software market

is subject to rapid and substantial technological change.

In addition, the software market is subject to rapid and substantial technological change.

To remain successful, we must respond to new developments in hardware and semiconductor technology, operating systems, programming technology and computer capabilities.

5 unchanged sentences

We rely on our relationship with the Automated Clearing House network, and if the Federal Reserve rules were to change, our business could be adversely affected.

We have contractual relationships with Fifth Third Bank, North American Banking Company, or NABC, Evolve Bank & Trust and Metropolitan Commercial Bank, which are Originating Depository Financial Institutions, or ODFI, in the ACH network.

We have contractual relationships with Fifth Third Bank, North American Banking Company, or NABC, Evolve Bank & Trust, Metropolitan Commercial Bank and TransPecos Bank, which are Originating Depository Financial Institutions, or ODFI, in the ACH network.

The ACH network is a nationwide batch-oriented electronic funds transfer system that provides for the interbank clearing of electronic payments for participating financial institutions.

26 unchanged sentences

We believe that we have access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means.

If we are unable to secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve our cash in

amounts sufficient to sustain operations and meet our obligations.

If we are unable to secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve our cash in amounts sufficient to sustain operations and meet our obligations.

These measures could cause significant delays in our efforts to expand our product offerings and customer base in the United States, which are critical to the realization of our business plan and to future operations.

7 unchanged sentences

If we fail to comply with the applicable requirements of the respective card networks, they could seek to fine us, suspend us or terminate our registrations.

If our merchants or ISOs incur fines or penalties that we cannot collect from them, we could end up bearing the cost of fines or penalties.

In order to provide our transaction processing services, we are registered with Visa, Mastercard and Discover as service providers and transaction processors for member institutions and with other networks.

18 unchanged sentences

State and federal legislatures and regulatory authorities have become increasingly focused upon the regulation of the financial services industry and continue to adopt new legislation which could result in significant changes in the regulatory landscape for financial institutions, which could include our bank sponsors, and other financial services companies, such as our Company.

If our merchants or ISOs incur fines or penalties that we cannot collect from them, we could end up bearing the cost of fines or penalties.

As such, we are subject to card association and network rules that could subject us to a variety of fines or penalties that may be levied by the card networks for certain acts or omissions.

The rules of the card networks are set by their boards, which may be influenced by banks that own their stock and, in the case of Discover by the card’s issuers, and some of those banks and issuers are our competitors with respect to these processing services.

The termination of our registrations or our status as a service provider or transaction processor, or any changes in card association or other network rules or standards, including interpretation and implementation of the rules or standards, that increase the cost of doing business or limit our ability to provide transaction processing services to our customers, could have a material adverse effect on our business, operating results and financial condition.

If a merchant or one of our resellers fails to comply with the applicable requirements of the card associations and networks, it could be subject to a variety of fines or penalties that may be levied by the card associations or networks.

If we cannot collect such amounts from the applicable merchant or one of our resellers, we could end up bearing such fines or penalties, resulting in lower earnings for us.

If we fail to comply with complex and expanding consumer protection regulations, our business could be adversely affected.

2 unchanged sentences

The Prepaid Account Rule mandates, among other things, extensive pre-purchase and post-purchase disclosures, expanded electronic billing statements, adherence to certain overdraft regulations for prepaid accounts that permit negative balances, and public posting of account agreements and submission to the CFPB which will then publish them on its website.

On January 25, 2018, the CFPB extended the effective date of the Prepaid Account Rule from October 1, 2017 to April 1, 2019, subject to certain exceptions.

Also, on January 25, 2018, the CFPB announced certain changes to the Prepaid Account Rule, including allowing the error resolution and liability limitations protections to apply prospectively, after a consumer’s identity has been verified, and providing more flexibility to credit cards linked to digital wallets.

The Prepaid Account Rule took effect on April 1, 2019, subject to certain exceptions.

On January 25, 2018, the CFPB announced certain changes to the Prepaid Account Rule, including allowing the error resolution and liability limitations protections to apply prospectively, after a consumer’s identity has been verified, and providing more flexibility to credit cards linked to digital wallets.

On February 27, 2019, the CFPB also announced a streamline electronic submission system, or Collect, for prepaid account issuers to submit their prepaid account agreements, including fee information, to the CFPB.

15 unchanged sentences

The CCPA underwent multiple amendments prior to coming into effect and while enforcement actions may not be brought by the California attorney general until July 1, 2020 it remains unclear how various provisions of the CCPA will be interpreted and enforced.

Further, on November 3, 2020, the California voters passed the California Privacy Rights and Enforcement Act, or CPRA, which replaces the CCPA effective January 1, 2023.

The CPRA alters the scope of covered businesses, adds a new category of sensitive personal information and grants certain consumer rights, such as a right to opt out and a right to delete.

The effects of this legislation potentially are far-reaching, however, and may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to achieve compliance.

The CCPA imposes obligations that are new and burdensome, and we may face challenges in addressing their requirements and making necessary changes to our policies and practices and may incur significant expenses in an effort to do so.

The CCPA and the CPRA impose obligations that are new and burdensome, and we may face challenges in addressing their requirements and making necessary changes to our policies and practices and may incur significant expenses in an effort to do so.

Any failure, real or perceived, by us to comply with evolving regulatory requirements, interpretations, or orders, other local, state, federal, or international privacy, data protection, information security, or consumer protection-related laws and regulations, could cause our customers unease and materially and adversely affect our business.

16 unchanged sentences

In addition, our cardholders and customers could lose confidence in our ability to protect their information, which could cause them to discontinue using our services.

If crypto-currency rules and regulations increase or the interest in trading in cryptocurrencies subsides, our revenues could decrease.

Various governmental and regulatory bodies, including legislative and executive bodies, in the United States may adopt new laws and regulations, or new interpretations of existing laws and regulations may be issued by such bodies or the judiciary, which may adversely impact the development of the crypto economy as a whole or our customers who operate in the crypto economy.

Such legal and regulatory rules could have adverse effects on the crypto economy, in particular by changing how our customers operate their business, how their products and services are regulated, and what products or services they and or their competitors can offer, requiring changes to their compliance and risk mitigation measures, imposing new licensing requirements, or imposing a total ban on certain crypto asset transactions, as has occurred in certain jurisdictions in the past.

These regulatory concerns could affect our customers in the crypto industry coupled with a subsiding of interest or enthusiasm for the crypto industry could adversely impact our payment processing volumes and revenues.

We will be liable for separation payments in case of change in control, termination without cause, non-renewal of the agreement, death, or disability under the respective employment agreements with our Chairman, Mr.

38 unchanged sentences

Our systems and operations or those of our third-party providers could be exposed to damage or interruption from, among other things, fire, natural disaster, power loss, telecommunications failure, terrorist acts, war, unauthorized entry, human error, and computer viruses or other defects.

Defects in our systems or those of third parties, errors or delays in the processing of payment transactions, telecommunications failures or other difficulties could result in loss of revenue, loss of merchants, loss of merchant and cardholder data, harm to our business or reputation, exposure to fraud losses or other liabilities, negative publicity, additional operating and development costs, and/or

diversion of technical and other resources.

We perform the majority of our disaster recovery operations ourselves, though we utilize select third parties for some aspects of recovery.

20 unchanged sentences

No system or procedures established to detect and reduce the impact of fraud are entirely effective.

We recorded fraud losses of $147,362 and $28,879, respectively, in 2019 or 2018 .

We did experience a significant increase in fraud accounts in 2019.

We implemented an invite-only platform to reduce the ability of fraudsters to enroll on the platform and create accounts.

Although we actively devote efforts to effectively manage risk and prevent fraud, we could nevertheless experience an increase in fraud losses over our historical experience.

We recorded fraud losses of $116,613 and $147,362, respectively, in 2020 and 2019 .

We experienced a reduction in fraud accounts in 2020 as a result of implementing an invite-only platform to reduce the ability of fraudsters to enroll on the platform and create accounts.

Although we actively devote efforts to effectively manage risk and prevent fraud, we could nevertheless experience future increases in fraud losses over our historical experience.

Our prepaid cardholders can in some circumstances incur charges in excess of the funds available in their accounts and are liable for the resulting overdrawn account balance.

34 unchanged sentences

In our capacity as an agent for Sunrise Banks, N.A.

and Metropolitan Commercial Bank, the issuing banks for our prepaid card programs and in our

capacity as an agent for Fifth Third Bank, Evolve Bank & Trust, Metropolitan Commercial Bank and NACB, the sponsoring banks for our ACH services, we are required to comply with these rules.

and Metropolitan Commercial Bank, the issuing banks for our prepaid card programs and in our capacity as an agent for Fifth Third Bank, Evolve Bank & Trust, Metropolitan Commercial Bank, NABC and TransPecos Bank, the sponsoring banks for our ACH services, we are required to comply with these rules.

We are also required to implement a Customer Identification Program and establish an Anti-Money Laundering program and to report any suspected money laundering to the appropriate agencies.

36 unchanged sentences

The amount of dilution due to future equity-based compensation issued to our employees and other additional issuances could be substantial.

We have adopted certain measures that may make it more difficult for a third party to acquire control of our Company.

Our Board of Director members are classified into three classes of directors serving staggered three-year terms.

Such classification of the Board of Directors expands the time required to change the composition of the majority of directors and may discourage a proxy contest or other takeover bid for our company.

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-K

Item 1A. Risk Factors