What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-30 compared with 2020-03-30 · 222 added, 142 removed, 437 unchanged (45% of the section changed)

29 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

/s/ Akin, Doherty, Klein & Feuge, P.C.

Akin, Doherty, Klein & Feuge, P.C.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Intangible Assets – Customer Lists

Description of the Matter

As of December 31, 2020, the Company had intangible assets relating to acquired customer lists which are recorded at their cost basis net of accumulated amortization.

On at least an annual basis, the company performs an analysis of the carrying value of these customer lists to evaluate the assets for impairment.

The customer list is amortized over a five-year term and no impairment has been recognized on the customer list portfolios since their acquisition.

We identified the customer list valuation as a critical audit matter because of the significant estimates and forward-looking assumptions used which could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit

To test the fair value of the Company's customer list intangible assets, our audit procedures included, among others, evaluating the Company's valuation model, evaluating the method and significant assumptions used, and testing the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

We also evaluated whether the key factors considered in the evaluation were consistent with evidence obtained in other areas of the audit.

Deferred Tax Assets – Valuation Allowance

Description of the Matter

The Company recognizes deferred tax assets to the extent that it is expected that these assets are more likely than not to be realized.

The Company evaluates the realizability of the deferred tax assets, and to the extent that the Company estimates that it is more likely than not that a benefit will not be realized, the carrying amount of the deferred tax assets is reduced with a valuation allowance.

We identified the valuation of deferred tax assets as a critical audit matter because of the significant judgments made by management in projecting future taxable income.

How We Addressed the Matter in Our Audit

Our audit procedures related to projected future taxable income and the determination of whether it is more likely than not that the deferred tax assets will be realized included the evaluation of the reasonableness of management’s projected future taxable income.

We compared the estimates to historical earnings and evaluated the inputs and assumptions used by management for developing future forecasts.

/s/ ADKF, P.C.

San Antonio, Texas

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Prepaid card load assets

Customer deposits

Prepaid expenses and other

Note receivable, net

Current assets before merchant reserves

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Prepaid card load obligations

Customer deposits

Deferred revenues

4 unchanged sentences

Operating lease liabilities, non-current portion

Deferred rent

Total liabilities

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Interest income

PPP Loan forgiveness

Other income (expense)

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CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

Additional Paid - In Capital

Treasury Stock

Deferred Compensation

Accumulated Deficit

Total Stockholders' Equity

Stockholders'

Balance at December 31, 2018

Issuance of common stock, restricted

Issuance of common stock, public offering

Issuance of common stock, employees, restricted

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Balance at December 31, 2019

Issuance of common stock, public offering

Issuance of common stock, employees, restricted

Issuance of common stock under equity incentive plan

Reversal of deferred compensation amortization that did not vest

Warrant compensation cost

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

7 unchanged sentences

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:

Provision for loss on note receivable

1 unchanged sentence

Amortization of warrant costs

Issuance of stock to consultant

Changes in operating assets and liabilities:

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Merchant reserves

Customer deposits

Deferred revenue

Deferred rent

Net cash (used) by operating activities

Net cash provided (used) by operating activities

Investing Activities

Purchases of property and equipment

Repayment of note receivable

Purchase of Information Management Solutions, LLC (IMS)

Net cash (used) by investing activities

Financing Activities

Proceeds from PPP Loan Program

Forgiveness of PPP Loan

Proceeds from public offering, net of expenses

Proceeds from private offering

Purchases of treasury stock

Net cash (used) provided by financing activities

Change in cash, cash equivalents and merchant reserves

Cash, cash equivalents, prepaid card loads and merchant reserves, beginning of year

Cash, Cash Equivalents, Prepaid Card Load Assets and Merchant Reserves, End of Year

Net cash provided by financing activities

Change in cash, cash equivalents, prepaid card loads, customer deposits and merchant reserves

Cash, cash equivalents, prepaid card loads, customer deposits and merchant reserves, beginning of year

Cash, Cash Equivalents, Prepaid Card Load Assets, Customer Deposits and Merchant Reserves, End of Year

Supplemental disclosures of cash flow information

1 unchanged sentence

Non-cash transactions:

Issuance of stock warrants in exchange for purchase of IMS

Issuance of deferred stock compensation

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Usio, Inc., along with its subsidiaries, FiCentive, Inc., a Nevada corporation, and Zbill, Inc., a Nevada corporation, provides integrated electronic payment services, including credit and debit card-based processing services and transaction processing via the Automated Clearing House, or ACH network to billers and retailers.

Also, the company has an additional wholly-owned subsidiary, PDS Acquisition Corp, which its purpose is to integrate future acquisitions under the Usio, Inc.

family of companies.

The company also has an additional wholly-owned subsidiary, Usio Output Solutions, Inc., which is the entity for the Output Solutions operations.

In addition, the Company operates various product websites, such as www.akimbocard.com , www.payfacinabox.com , and www.singularpayments.com .

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Sales taxes billed are reported directly as a liability to the taxing authority and are not included in revenue.

Usio Output Solutions, Inc.

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.

Year Ended December 31,

ACH and complementary service revenue

Credit card revenue

Prepaid card services revenue

Output solutions revenue

Total Revenue

Deferred Revenues:

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Prepaid Card Load Assets:

The Company maintains pre-funding accounts for our customers to facilitate prepaid card loads as initiated by our customer.

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 balance sheet with a corresponding liability.

Customer Deposits:

The Company holds customer deposits primarily for postage expenses to ensure the Company is not out of pocket for amounts billed daily by the United States Postal Service.

These customer deposits are carried on the Company's balance sheet with a corresponding liability.

Merchant Reserves:

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While this cash is not 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 reconciliation of cash and cash equivalents to cash, cash equivalents, prepaid card load assets and merchant reserves is as follows for each period presented:

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

December 31, 2020

December 31, 2019

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

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

Cash and cash equivalents

Prepaid card load assets

Customer deposits

Merchant reserves

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

Ending cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves:

Cash and cash equivalents

Prepaid card load assets

Customer deposits

Merchant reserves

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Past losses incurred by the Company due to bad debts have been within its expectations.

If the financial condition of our customers deteriorate, resulting in an impairment of their ability to make contractual payments, additional allowances might be required.

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 bad debt losses are variable based on the volume of transactions processed and could increase or decrease accordingly.

The Company normally does not charge interest on accounts receivable.

Inventory is stated at the lower of cost or net realizable value.

At December 31, 2020, inventory consisted primarily of printing and paper supplies used for Output solutions.

Property and Equipment:

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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 FDIC, which is $250,000.

receivables potentially subject the Company to concentrations of credit risk.

Accounts receivables potentially subject the Company to concentrations of credit risk.

The Company’s customer base operates in a variety of industries and is geographically dispersed.

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The 401(k) Plan allows for discretionary and matching contributions by the Company.

In 2019 , the Company

matched 100% of employee contributions up to 3% and 50% of the employee contribution over 3% with a maximum employer contribution of 5% .

In 2020 , the Company matched 100% of employee contributions up to 3% and 50% of the employee contribution over 3% with a maximum employer contribution of 5%.

The Company made matching contributions of $152,835 and $126,436 in 2020 and 2019 , respectively.

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Recently Adopted Accounting Pronouncements:

In May 2014, the Financial Accounting Standards Board, or FASB, issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and a subsequent amendment to the standard in March 2016 , ASU 2016-08, Revenue from Contracts with Customers, Principal versus Agent Consideration (Reporting Revenue Gross versus Net).

The original standard provides guidance on recognizing revenue, including a five-step model to determine when revenue recognition is appropriate.

The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The amendment to the standard clarified implementation guidance on principal versus agent considerations.

Adoption of the new standards was effective for reporting periods beginning after December 15, 2017, with early adoption not permitted.

The Company has adopted the provisions of this new standard beginning January 1, 2018.

The Company functions as the merchant of record and has primary responsibility for providing end-to-end payment processing services for its clients.

The customers of the Company contract with the Company for all credit card processing services:

including transaction authorization, settlement, dispute resolution, security and risk management solutions, reporting and other value-added services.

As such, the Company is the primary obligor in these transactions and is solely responsible for all processing costs, including interchange fees.

Further, the Company sets prices as it deems reasonable for each merchant.

The gross fees the Company collects are intended to cover the interchange, assessments and other processing fees and include the Company's margin on transactions processed.

For these reasons, the Company is the principal obligor in the contractual relationship with its customers and therefore, the Company records its revenues, including interchange and assessments on a gross basis.

The Company's existing revenue recognition process remains intact, and the Company will continue to record revenues at the gross amount billed due to the Company's primary responsibility for providing end-to-end payment processing services for its clients.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash, which requires that the reconciliation of the beginning of period and end of period amounts shown in the statement of cash flows include restricted cash and restricted cash equivalents.

If restricted cash is presented separately from cash and cash equivalents on the balance sheet, companies are required to reconcile the amounts presented on the statement of cash flows to the amounts on the balance sheet.

This guidance was required to be applied retrospectively and was effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.

As required, the Company applied the provisions of ASU 2016-18 as of January 1, 2018.

As a result, the change in restricted cash has been included in the change in cash, cash equivalents, prepaid card load assets and merchant reserves.

Operating Leases Right-of use Assets and Operating Lease Liabilities:

In February 2016, the FASB issued , "Leases (Topic 842)." This update requires that a lessee recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term.

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As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The operating lease

ROU asset also includes any lease payments made and excludes lease incentives.

The operating lease ROU asset also includes any lease payments made and excludes lease incentives.

The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option.

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The adoption of the new standard did not result in a change to the previously presented financial statements.

New Accounting Pronouncements :

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2016-13, Financial Instruments - Credit Losses (Topic 326), to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

To achieve this objective, the amendments in Topic 326 replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

Topic 326 is effective for fiscal years beginning after December 25, 2022, including interim periods within those fiscal years for smaller reporting companies.

The Company does not expect the adoption of the amendments in ASU 2016-13 to have a significant effect on its financial position and the results of its operations when such amendment is adopted.

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 Balance Sheet for the year ended December 31, 2018 to identify prepaid card load assets totaling $535,479 , previously reported in cash and cash equivalents, and the related prepaid card load obligations previously reported in accrued expenses.

This change in classification does not affect previously reported total assets and liabilities in the Consolidated Balance Sheet, results of operations in the Consolidated Income Statement, and cash activities in the Consolidated Statement of Cash Flows for the year ended December 31, 2018.

Acquisition of Information Management Solutions, LLC.

On December 15, 2020, the Company entered into an asset purchase agreement to purchase substantially all the assets of Information Management Solutions, LLC ("IMS"), 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.

The total purchase price consideration consisted of a cash payment of $5,907,408 at closing and warrant considerations valued at $552,283.

The warrants were comprised of 945,599 unregistered warrants to purchase shares of common stock of Usio, Inc., or 945,599 shares of common stock, $0.001 par value per share, with an exercise price of $4.23 per share.

The final number of warrants was determined by dividing $2,000,000 by the 5-day weighted average closing price for the four trading days preceding the closing date and the closing day, or $2.115 per share.

The exercise price of the warrants was determined by multiplying the 5-day weighted average closing price by the number 2.

The warrants vest in three equal installments on the first, second and third anniversary of the closing date and have a term of five years from vest.

The purchase price was allocated to the net assets acquired based upon their estimated fair values as follows:

Estimated Fair

Estimated Useful

Life (in years)

Accounts receivable

Prepaid expenses

Customer list

Total Cash Consideration

Customer list

Total Warrant Consideration

Total Purchase Price

The 2020 consolidated statement of operations includes 1 month of IMS operations, which is approximately $1.2 million of revenue and $0.6 million of gross profit.

Unaudited Pro Forma Information

The Company estimates that the revenues and net income for the periods below that would have been reported if the IMS acquisition would have taken place on the first day of the Company's 2019 calendar year would be as follows and includes pro-forma adjustments to normalize results in line with future operating performance:

Income per share:

Amounts set forth above are not necessarily indicative of the results that would have been obtained had the IMS acquisition had taken place on the first day of the Company's 2019 calendar year or of the results that may be achieved by the combined enterprise in the future.

Note Receivable

Under a loan and security agreement dated February 2, 2016, the Company loaned the principal amount of $200,000 to C2Go, Inc.

C2Go Note Receivable

Under a loan and security agreement dated February 2, 2016, we loaned the principal amount of $200,000 to C2Go, Inc.

with an interest rate of 10% per annum for a term of 18 months.

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C2Go defaulted under the note by failing to repay the loan plus interest on August 2, 2017.

On December 7, 2017, the Company entered into a note purchase and settlement agreement with C2Go and Mercury Investment Partners LLC.

Pursuant to the note purchase and settlement agreement, Mercury Investment Partners agreed to purchase the note and the rights secured by the security agreement with all rights and obligations and to pay to a sum of $200,000 in three installments.

The first installment of $50,000 was paid on December 7, 2017.

The second installment of $50,000 was due on April 30, 2018, and the remaining amount of $100,000 was due on October 31, 2018.

In return, the Company agreed to waive all interest due and payable under the terms of the C2Go loan.

Mercury Investment Partners has not paid the amount due April 30, 2018 or the amount due on October 31, 2018.

The Company issued a letter of default.

The Company agreed to extend the due date of the $50,000 payment due April 30, 2018 to May 16, 2018.

$5,000 of the $50,000 due was received on July 5, 2018.

On or about August 14, 2018, a notice of default was sent to Mercury Investment Partners.

Mercury Investment Partners did not respond to the letter or make payment in full to the Company.

On September 4, 2018, the Company filed suit against Mercury Investment Partners in Bexar County District Court.

The default judgment against Mercury Investment Partners was granted on December 21, 2018.

The Company retained the services of legal counsel to represent the Company in collecting on the judgment.

Counsel has domesticated the Texas judgment and the Company was issued a lien on a property owned by Mercury that is valued over $1.0 million by the court.

The Company is unsure if any equity exists which would allow the Company to potentially recover the funds owed.

On or about June 7, 2019, Mercury Investment Partners was served a subpoena to produce certain documents on July 3, 2019 in Colorado.

A representative of Mercury Investment Partners did not appear in court on the assigned date and time.

Subsequently, Mercury placed the property up for sale though Mercury is aware the Company has a valid lien in place on the property.

There are no assurances that the Company will be able to recover the remaining $145,000 principal and there are no assurances there will be any assets for the Company to recover from its lien on all the assets of C2Go if payment in full of the obligation is not made.

The loss reserve on the note receivable as of December 31, 2019 and 2018 , respectively was $145,000 and $36,250 reflecting a "more likely than not" recognition threshold.

On December 7, 2017, we entered into a note purchase and settlement agreement with C2Go and Mercury Investment Partners LLC.

There are no assurances that we will be able to recover the remaining $145,000 principal and there are no assurances there will be any assets for us to recover from its lien on all the assets of C2Go if payment in full of the obligation is not made.

The loss reserve on the note receivable as of December 31, 2020 and 2019 , was $145,000 reflecting a "more likely than not" recognition threshold.

Property and Equipment

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Acquisition (2015)

On December 22, 2014, the Company acquired substantially all of the assets of Akimbo Financial, Inc.

The intangibles acquired in the acquisition consist of the customer list and contracts at cost of $396,824 (net of accumulated amortization of $396,824 ) and goodwill of $9,759 .

On December 22, 2014, we acquired substantially all of the assets of Akimbo Financial, Inc.

The intangibles acquired in the acquisition consist of the customer list and contracts at cost of $396,824 (net of accumulated amortization of $396,824 at December 31, 2020) and goodwill of $9,759.

The intangible asset was fully amortized as of December 31, 2017.

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Singular Payments, LLC Acquisition (2017)

On September 1, 2017, the Company acquired all of the membership interest of Singular Payments, LLC.

The intangibles acquired in such acquisition consist of customer list assets of $5,000,000 at cost (net of accumulated amortization of $2,333,333 ).

On September 1, 2017, we acquired all of the membership interest of Singular Payments, LLC.

The intangibles acquired in such acquisition consist of customer list assets of $5,000,000 at cost (net of accumulated amortization of $3,333,333 at December 31, 2020).

The fair value of the customer list was calculated using the net present value of the projected gross profit to be generated by the customer list over 60 months beginning in September 2017 and ending in August 2022.

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Annual amortization expense will be $1,000,000 per year through the year 2021 and $666,667 in the year 2022.

Information Management Solutions, LLC Acquisition (2020)

On December 15, 2020, we acquired substantially all of assets of Information Management Solutions, LLC.

The intangibles acquired in such acquisition consist of customer list assets of $4,359,335 at cost.

The fair value of the customer list was calculated using the net present value of the projected gross profit to be generated by the customer list over 60 months beginning in January 2021 and ending in December 2025.

Annual amortization expense will be $871,867 per year through the year 2025.

Valuation Accounts

Valuation and allowance accounts included the following at December 31:

Net Charged to

Net Write-Off

Balance End of

Allowance for doubtful accounts

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Reserve for processing losses

The Company received funding under the Paycheck Protection Program (PPP) as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), administered by the U.S.

Small Business Administration.

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 ten months of the loan.

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

Small Business Administration under the CARES Act.

The Company used the proceeds for payroll costs and other permitted expenses.

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 was approved in full by the U.S.

Small Business Administration on December 14, 2020 and is accounted for as income in 2020 under FASB ASC 470.

Accrued Expenses

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Operating Leases

The Company leases approximately 6,000 to 10,535 square feet of office space for its San Antonio, TX executive offices and operations.

The Company leases approximately 10,535 square feet of office space for its San Antonio, TX executive offices and operations.

Rental expense under the operating lease was $136,713 and $199,702 for the years ended December 31, 2020 and 2019 , respectively.

The lease expires on July 31, 2024.

Previously, the Company leased approximately 7,200 square feet of office space for its San Antonio, TX executive offices and operations.

Rental expense under the operating lease was $88,096 for the year ended December 31, 2018 .

The lease expired on April 30, 2018.

The Company leases approximately 3,794 square feet of office space for its Nashville, Tennessee sales offices and operations.

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The lease expires on April 30, 2023.

Previously, the Company assumed ongoing obligations of the Singular Payments' leased space in Nashville, TN and St.

Augustine, FL to house their sales offices and operations.

Rental expense under the operating leases was $15,018 for the year ended December 31, 2018.

The Company assumed a lease in San Antonio, Texas as a part of the Information Management Solutions, LLC acquisition for its Output Solutions employees and warehouse operations.

The lease has a remaining life of 45 months and expires on September 30, 2024.

The space leased is 22,400 square feet.

Annual rents during the lease term range from $123,554 to $133,703.

On January 1, 2021, the Company entered into a lease in Austin, Texas commencing on January 1, 2021 for its Austin technology organization.

The lease is for a period of 25 months and expires on January 31, 2023.

The space leased is 1,890 square feet.

Annual rents during the lease term is $55,755.

On March 15, 2021, the Company entered into a lease amendment to the existing lease in San Antonio, Texas commencing April 1, 2021 and expiring on September 30, 2024 running concurrently with the existing lease.

The incremental space leased is 2,734 square feet.

The incremental annual rent during the lease term ranges from $56,047 to $60,148.

The Company also leased select computer equipment for a period of 36 months beginning in May, 2016.

The lease expired in April, 2019.

Additionally, the Company has various copier equipment with leases that have not expired.

Rental expense under the operating lease was $12,729 and $25,000 for the years ended December 31, 2020 and 2019 , respectively.

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During the year ended December 31, 2020 and 2019 , the Company purchased $9,885.72 and $13,831, respectively, of corporate imprinted sportswear, promotional items and caps from Angry Pug Sportswear.

Louis Hoch, our President and Chief Executive Officer is a 50% owner of Angry Pug Sportswear.

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

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

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

Louis Hoch, our President and Chief Executive Officer, is also a minority owner in Lush Rooftop.

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

Louis Hoch, President and Chief Executive Officer, was an owner in Lush Rooftop.

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

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

Miguel Chapa, a member of our Board of Directors, is an owner in BLVD Bar and Lounge.

Louis Hoch, our President and Chief Executive Officer, is also an owner in BLVD Bar and Lounge.

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

Louis Hoch, President and Chief Executive Officer, was also an owner in BLVD Bar and Lounge.

In May 2020, Mr.

Chapa and Mr.

Hoch sold all their interests in BLVD.

Officers and Directors

On January 8, 2018 and January 9, 2018, the Company repurchased 397,845 shares of common stock for $956,128 in a series of private transaction at the closing prices on January 8, 2018 and January 9, 2018 from officers, employees and director's to cover the respective employees', officers' and directors' share of taxes for shares that vested on that day, as approved by the Audit Committee and the Board of Directors on the same day, with the respective officers and directors recusing themselves.

In particular, the Company repurchased the following shares from Named Executive Officers and directors:

Michael Long (Chairman of the Board):

158,476 shares valued at $2.40 per share or total of $380,342 ;

Louis Hoch (President and Chief Executive Officer):

158,476 shares valued at $2.40 per share or total of $380,342 ;

Tom Jewell (Chief Financial Officer):

13,060 shares valued at $2.50 per share or total of $32,650 .

On January 6, 2019, the Company repurchased 11,860 shares for $21,822 in a private transaction at the closing price on January 6, 2019 from employees to cover the respective employee's share of taxes for shares that vested on that day for Tom Jewell, Chief Financial Officer.

On January 6, 2020, the Company repurchased 11,860 shares of common stock for $20,636 at the closing price on January 6, 2020 from Tom Jewell, the Company's Chief Financial Officer to cover taxes.

On January 6, 2021, the Company repurchased 11,860 shares for $38,545 in a private transaction at the closing price on January 6, 2021 of $3.25 per share from Tom Jewell, the Company's Chief Financial Officer, to cover his share of taxes.

The Company granted 1,444,000 shares of common stock with a 10-year vesting period and 103,000 restricted stock units (RSUs) with a 3-year vesting period to employees and Directors as a performance bonus on April 1, 2020 at an issue price of $1.08 per share.

Executive officers and Directors included in the grant were Louis Hoch (300,000 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, the Company 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 at the closing price of $1.5779 on October 15, 2020 from Mr.

Hoch to cover withholding taxes due.

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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The reconciliation of federal income tax computed at the U.S.

federal statutory tax rates to total income tax expense is as follows for the years ended December 31:

federal statutory tax rates to total income tax expense is as follows for the years ended

Income tax (benefit) at 21%

1 unchanged sentence

Permanent and other differences

Deferred tax impact of enacted tax rate and law changes

Alternative minimum tax and state taxes

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The number of shares of common stock reserved for issuance under the 2015 Equity Incentive Plan will automatically increase, with no further action by the stockholders, on the first business day of each fiscal year during the term of the 2015 Equity Incentive Plan, beginning January 1, 2016, in an amount equal to 5% of the issued and outstanding shares of common stock on the last day of the immediately preceding year, or such lesser amount if so determined by the Board or the Plan Administrator.

During 2019 , the Company granted 175,000 restricted shares of stock to an employee as new-hire bonuses.

During 2020 , the Company granted 1,634,000 shares of stock to several employees as incentive compensation or new-hire bonuses.

During 2020 , the Company issued 332,267 restricted stock units to employees as a new hire bonus and directors.

Treasury Stock :

The Company also purchased 33,529 shares of common stock with a value of $71,906 to cover the employee's share of tax liabilities related to the vesting of restricted stock units.

The Company also purchased 121,867 shares of common stock with a value of $227,766 to cover the employee's share of tax liabilities related to the vesting of commons stock and restricted stock units.

Stock Awards :

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Weighted Average

Exercise Price

Weighted Average

Remaining Life

Aggregate Intrinsic

Exercise Price

Remaining Life

Outstanding, December 31, 2019

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The reduction of revenues recorded for the year ended December 31, 2020 and 2019 was $35,943 and $35,940, 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.

On February 5, 2021, the Company issued 19,795 shares of common stock to University FanCards, LLC in a cashless exercise at $5.88 per common share in exchange for 30,000 warrants exercised by FanCards, LLC.

On December 15, 2020, the Company issued to Information Management Solutions, LLC warrants to purchase 945,599 unregistered warrants to purchase shares of Usio, Inc.

or 945,599 shares of our common stock, $0.001 par value per share, with an exercise price of $4.23.

The 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;

(ii) the risk-free interest rate is 0.09%;

(iii) the contractual life is 5 years;

(iv) the dividend yield of 0%;

and (v) the volatility is 59.9%.

The fair value of the warrants amounted to $552,283 and will be recorded as an increase in the customer list asset and have a term of five years from time of vest.

Net (Loss) per Share

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Legal Proceedings