What changed in this filing

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Item 1A. Risk Factors

2022-03-17 compared with 2021-03-30 · 150 added, 90 removed, 226 unchanged (52% of the section changed)

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RISKS RELATED TO OUR BUSINESS

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

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.

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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.

Our efforts to expand our product portfolio and market reach, including through acquisitions, may not succeed and may reduce our revenue growth and we may not achieve or maintain profitability.

We acquired the assets of Information Management Solutions, LLC, a 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 institution on December 15, 2020.

We also continue to invest in our established business lines and new markets, such as our payment facilitation, prepaid card business, or cryptocurrencies.

While we have grown the proportion of revenue from these newer products and services and we intend to continue to broaden the scope of products and services we offer, we may not be successful in maintaining or growing our current revenue streams or deriving any significant new revenue streams from these products and services.

Failure to successfully broaden the scope of products and services that are attractive may inhibit our growth and harm our business.

Furthermore, we expect to continue to expand our markets in the future, and we may have limited or no experience in such newer markets.

We cannot assure you that any of our products or services will be widely accepted in any market or that they will continue to grow in revenue.

Our offerings may present new and difficult technological, operational, regulatory, risks, and other challenges, and if we experience service disruptions, failures, or other issues, our business may be materially and adversely affected.

Our expansion into newer markets may not lead to growth and may require significant management time and attention, and we may not be able to recoup our investments in a timely manner or at all.

If any of this were to occur, it could damage our reputation, limit our growth, and materially and adversely affect our business.

We may need additional financing in the future.

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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.

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.

This acquisition increased our ability to grow new revenue streams and allows us 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.

If our security applications are not adequate to address changing market conditions and customer concerns, we may incur significant losses and be unable to sell our services.

If our security applications are breached by cyberattacks or are not adequate to address changing market conditions and customer concerns, we may incur significant losses and be unable to sell our services.

Unauthorized parties have attempted, and we expect that they will continue to attempt, to gain access to our systems or facilities through various means, including, but not limited to, hacking into our systems or facilities or those of our customers, partners, or vendors, and attempting to fraudulently induce users of our systems, including employees and customers, into disclosing user names, passwords, payment information, or other sensitive information used to gain access to such systems or facilities.

This information may in turn be used to access our customers’

personal or proprietary information and payment data that are stored on or accessible through our information technology systems and those of third parties with whom we partner.

Numerous and evolving cybersecurity threats, including advanced and persisting cyberattacks, cyberextortion, distributed denial-of-service attacks, ransomware, spear phishing and social engineering schemes, the introduction of computer viruses or other malware, and the physical destruction of all or portions of our information technology and infrastructure and those of third parties with whom we partner could compromise the confidentiality, availability, and integrity of the data in our systems.

We may experience in the future, breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities, or other irregularities.

Any cyberattacks or data security breaches affecting our information technology or infrastructure or of our customers, partners, or vendors could have negative effects.

For example, on December 25, 2021, we detected a ransomware attack that accessed and encrypted a small portion of our information technology systems.

The unauthorized access included the download of non-payment processing related data files from our externally hosted Office 365 environment which is separate from our payment processing environment.

Throughout the incident, we remained operational.

Promptly upon the detection of the event, we launched an investigation, notified law enforcement and our insurance carrier, and engaged legal counsel, computer forensic firms and other incident response professionals.

We also implemented a series of containment and remediation measures to address this situation and reinforce the security of our information technology systems. At this time, we restored our systems and resumed normal operations to the extent they were impaired due to the incident.

We are continuing to assess all actions that we will take to improve our existing systems.

This cyber event had no material impact on the business, and no cardholder, or payments related data was compromised.

Our direct losses associated with the cyber incident and its response will largely be covered by our cybersecurity insurance, except for a deductible.

Based on the information currently available to us, we do not believe that the December 2021 ransomware attack will have a material impact on our business, results of operations or financial condition, but no assurances can be given as we continue to assess the full impact from the incident, including costs, expenses and insurance coverage.

Our use of applications designed for premium data security and integrity to process electronic transactions may not be sufficient to address changing market conditions or the security and privacy concerns of existing and potential customers.

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We may also be subject to fines and penalties from the credit card associations or regulatory agencies in the event of the loss of confidential account information.

Our insurance policies may not be adequate to compensate us for the potential costs and other losses arising from cybersecurity-related disruptions, failures, attacks or breaches.

In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all.

Further, adverse publicity raising concerns about the safety or privacy of electronic transactions, or widely reported breaches of our or another provider's security, have the potential to undermine consumer confidence in the technology and could have a materially adverse effect on our business.

Unauthorized disclosure of cardholder data, whether through breach of our computer systems or otherwise, could expose us to liability and protracted and costly litigation.

We collect and store personal identifiable information about our cardholders, including names, addresses, social security numbers, driver’s license numbers and account numbers, and maintain a database of cardholder data relating to specific transactions, including account numbers, in order to process transactions and prevent fraud.

As a result, we are required to comply with the privacy provisions of the Gramm-Leach-Bliley Act, various other federal and state privacy statutes and regulations, and the Payment Card Industry Data Security Standard, each of which is subject to change at any time.

Compliance with these requirements is often difficult and costly, and our failure, or our distributors’

failure, to comply may result in significant fines or civil penalties, regulatory enforcement action, liability to our issuing banks and termination of our agreements with one or more of our issuing banks, each of which could have a material adverse effect on our financial position and/or operations.

In addition, a significant breach could result in our Company being prohibited from processing transactions for any of the relevant card associations or network organizations, including Visa, Mastercard, American Express, Discover or regional debit networks, which would also have a significant material adverse impact on our financial position and/or operations.

Furthermore, if our computer systems are breached by unauthorized users, we may be subject to liability, including claims for unauthorized purchases with misappropriated bank card information, impersonation or similar fraud claims.

We could also be subject to liability for claims relating to misuse of personal information, such as unauthorized marketing purposes, or failure to comply with laws governing notification of such breaches.

These claims also could result in protracted and costly litigation.

In addition, we could be subject to penalties or sanctions from the relevant card associations or network organizations.

If our efforts to protect the security of information about our customers, cardholders and vendors are unsuccessful, we may face additional costly government enforcement actions and private litigation, and our sales and reputation could suffer.

An important component of our business involves the receipt and storage of information about our cardholders and banking information.

We have multiple programs and processes in place to detect and respond to data security incidents;

however, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventive measures.

In addition, hardware, software, or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security.

Unauthorized parties may also attempt to gain access to our systems or facilities, or those of third parties with whom we do business, through fraud, trickery, or other forms of deceiving our vendors, contractors, and employees.

If we, our customers, or our vendors experience significant data security breaches or fail to detect and appropriately respond to significant data security breaches, we could be exposed to government enforcement actions and private litigation.

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.

Business interruptions or systems failures may impair the availability of our websites, applications, products or services, or otherwise harm our business.

Our systems and operations and those of our service providers and partners have experienced from time to time, and may experience in the future, business interruptions or degradation because of distributed denial-of-service and other cyberattacks, insider threats, hardware and software defects or malfunctions, human error, earthquakes, hurricanes, floods, fires, and other natural disasters, public health crises (including pandemics), power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses or other malware, or other events.

A catastrophic event that results in a disruption or failure of our systems or operations could result in significant losses and require substantial recovery time and significant expenditures to resume or maintain operations, which could have a material adverse impact on our business, financial condition, and results of operations.

Additionally, some of our systems, including those of companies we have acquired, are not fully redundant, and our disaster recovery planning may not be sufficient for all possible outcomes or events.

As a provider of payments solutions, we are subject to heightened scrutiny by regulators that may require specific business continuity, resiliency and disaster recovery plans, and rigorous testing of such plans, which may be costly and time-consuming to implement, and may divert our resources from other business priorities.

We have experienced, and expect to continue to experience, system failures, cyberattacks, unplanned outages, and other events or conditions from time to time that have and may interrupt the availability, or reduce or adversely affect the speed or functionality, of our products and services.

These events could result in future losses of revenue.

A prolonged interruption in the availability or reduction in the availability, speed, or functionality of our products and services could materially harm our business.

Frequent or persistent interruptions in our services could permanently harm our relationship with our customers and partners and our reputation.

Moreover, if any system failure or similar event results in damage to our customers or their business partners, they could seek significant compensation or contractual penalties from us for their losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address, and could have other consequences described in this “Risk Factors”

section under the caption “If our security applications are breached by cyberattacks or are not adequate to address changing market conditions and customer concerns, we may incur significant losses and be unable to sell our services.”

We have undertaken and continue to undertake certain system upgrades and re-platforming efforts designed to improve the availability, reliability, resiliency, and speed of our platform.

These efforts are costly and time-consuming, involve significant technical risk, and may divert our resources from new features and products, and there can be no guarantee that these efforts will be effective.

Frequent or persistent site interruptions could lead to regulatory scrutiny, significant fines and penalties, and mandatory and costly changes to our business practices, and ultimately could cause us to lose existing licenses that we need to operate or prevent or delay us from obtaining additional licenses that may be required for our business.

We also rely on facilities, components, applications, and services supplied by third parties, including data center facilities and cloud data storage and processing services.

From time to time, we have experienced interruptions in the provision of such facilities and services provided by these third parties.

If these third parties experience operational interference or disruptions (including a cybersecurity incident), breach their agreements with us, or fail to perform their obligations and meet our expectations, our operations could be disrupted or otherwise negatively affected, which could result in customer dissatisfaction, regulatory scrutiny, and damage to our reputation and brands, and materially and adversely affect our business.

While we maintain insurance policies intended to offset the financial impact we may experience from these risks, our coverage may be insufficient to compensate us for all losses caused by interruptions in our service as a result of systems failures and similar events.

In addition, any failure to successfully implement new information systems and technologies, or improvements or upgrades to existing information systems and technologies in a timely manner could have an adverse impact on our business, internal controls (including internal controls over financial reporting), results of operations, and financial condition.

If cryptocurrency 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.

Further, the rapidly evolving regulatory landscape with respect to cryptocurrency may subject us to inquiries or investigations from regulators and governmental authorities, require us to make product changes, restrict or discontinue product offerings, and implement additional and potentially costly controls.

If we become subject to and fail to comply with regulations, requirements, prohibitions or other obligations applicable to us, we could face regulatory or other enforcement actions and potential fines and other consequences.

If our software fails, and we need to repair or replace it, or we become subject to warranty claims, our costs could increase.

Our software products could contain errors or “bugs”

that could adversely affect the performance of services or damage a user’s data.

We attempt to limit our potential liability for warranty claims through technical audits and limitation-of-liability provisions in our customer agreements;

however, these measures may not be effective in limiting our exposure to warranty claims.

We have not experienced a significant increase in software errors or warranty claims.

Despite the existence of various security precautions, our computer infrastructure may also be vulnerable to viruses or similar disruptive problems caused by our customers or third parties gaining access to our processing system.

We depend on the efficient and uninterrupted operation of our computer network systems, software, data center and telecommunications networks, as well as the systems and services of third parties.

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.

To the extent we outsource our disaster recovery, we are at risk of the vendor’s unresponsiveness in the event of breakdowns in our systems.

If we do not adapt to rapid technological change, our business may fail.

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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, Metropolitan Commercial Bank and TransPecos 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, 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.

An Originating Depository Financial Institution is a participating financial institution that must abide by the provisions of the ACH Operating Rules and Guidelines.

Through our relationships with Fifth Third Bank, Metropolitan Commercial Bank, NABC and Evolve Bank & Trust, we process payment transactions on behalf of our customers and their consumers by submitting payment instructions in a prescribed ACH format.

We pay volume-based fees to Metropolitan Commercial Bank, Fifth Third Bank, Evolve Bank & Trust and NABC for debit and credit transactions processed each month, and pay fees for other transactions such as returns and notices of change to bank accounts.

Through our relationships with Fifth Third Bank, Metropolitan Commercial Bank, and NABC, we process payment transactions on behalf of our customers and their consumers by submitting payment instructions in a prescribed ACH format.

We pay volume-based fees to Metropolitan Commercial Bank, Fifth Third Bank, and NABC for debit and credit transactions processed each month, and pay fees for other transactions such as returns and notices of change to bank accounts.

These fees are part of our agreed-upon cost structures with the banks.

If the Federal Reserve rules were to introduce restrictions or modify access to the Automated Clearing House, our business could be materially adversely affected.

Further, if either, two or all four of Fifth Third Bank, Metropolitan Commercial Bank, Evolve Bank & Trust and NABC were to cancel our respective contract with the bank, our business could be materially affected.

Further, if either, two or all four of Fifth Third Bank, Metropolitan Commercial Bank, and NABC were to cancel our respective contract with the bank, our business could be materially affected.

At this time, we believe we could find and enter into additional agreements with other bank sponsors on similar contractual terms, but no assurances can be made.

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If our third-party processing provider, TriSource Solutions, Card Connect or Global Payments, or our bank sponsors, Central Bank of St.

Louis, Wells Fargo Bank or Evolve Bank & Trust fail to comply with the applicable requirements of the Visa, Mastercard, and Discover card associations, Visa, Mastercard or Discover could suspend or terminate the registration of our third-party processing provider.

Louis, Wells Fargo Bank, CBW Bank or Evolve Bank & Trust fail to comply with the applicable requirements of the Visa, Mastercard, and Discover card associations, Visa, Mastercard or Discover could suspend or terminate the registration of our third-party processing provider.

Also, our contracts with both of these third parties are subject to cancellation upon limited notice by either party.

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Additionally, changing our bank sponsor could adversely affect our relationship with our merchants if the new sponsor provides inferior service or charges higher costs.

We may not be able to obtain and maintain sufficient insurance coverage.

We insure against a majority of business risks, including liability for cyber incidents, and for director and officer liability.

D&O and cyber insurance especially are becoming increasingly challenging to purchase and maintain due to market factors.

Premiums and deductibles have been increasing, sometimes dramatically, and some insurers are cutting back on the number of companies they insure, causing the supply of insurance to lag behind demand.

As a result of these factors, we may not be able to maintain such insurance on acceptable terms or be able to secure coverage and the coverage of our existing insurance may not be sufficient to offset existing or future claims.

A successful claim against us with respect to uninsured liabilities or in excess of insurance coverage could have a material adverse effect on our business, financial condition, and results of operations.

We have incurred substantial losses in the past and may incur additional losses in the future.

We reported a net loss of $2.9 million and $5.1 million for the years ended December 31, 2020 and December 31, 2019, respectively.

Including these results, we have an accumulated deficit of $65.1 million at December 31, 2020.

We reported a net loss of $0.3 million and $2.9 million for the years ended December 31, 2021 and December 31, 2020, respectively.

Including these results, we have an accumulated deficit of $65.4 million at December 31, 2021.

Our future operating results are not certain and we may incur future operating losses.

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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.

We have recorded significant deferred tax assets, and we might never realize their full value, which would result in a charge against our earnings.

As of December 31, 2021, we had deferred tax assets of $1.5 million.

Realization of our deferred tax assets is dependent upon our generating sufficient taxable income in future years to realize the tax benefit from those assets.

Deferred tax assets are reviewed at least annually for realizability.

A charge against our earnings would result if, based on the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized beyond our existing valuation allowance.

This could be caused by, among other things, deterioration in performance, adverse market conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of or affect the solutions sold by our business and a variety of other factors. 

If a deferred tax asset net of our valuation allowance was determined to be not realizable in a future period, the charge to earnings would be recognized as an expense in our results of operations in the period the determination is made.

Additionally, if we are unable to utilize our deferred tax assets, our cash flow available to fund operations could be adversely affected.

Depending on future circumstances, it is possible that we might never realize the full value of our deferred tax assets.

Any future impairment charges related to a significant portion of our deferred tax assets would have an adverse effect on our financial condition and results of operations.

Our prepaid card revenues from the sale of services to merchants that accept Mastercard cards are dependent upon our continued Mastercard registration and financial institution sponsorship and, in some cases, continued participation in certain payment networks.

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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.

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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.

Market conditions could negatively impact our business, results of operations, cash flows and financial condition.

The market in which we operate is affected by a number of factors that are largely beyond our control but can nonetheless have a potentially significant, negative impact on us.

These factors include, among other things:

changes in interest rates and credit spreads;

the availability of credit, including the price, terms, and conditions under which it can be obtained;

slower growth or recession or reduced consumer spending;

the impact of COVID-19 generally and on the economy and the capital markets, including the measures taken by governmental authorities to address it;

the actual and perceived state of the economy and public capital markets generally;

amendments or repeals of legislation, or changes in regulations or regulatory interpretations thereof, and transitions of government, including uncertainty regarding any of the foregoing;

the rise of international conflicts.

Changes in these factors are difficult to predict, and a change in one factor could affect other factors, which could result in adverse effects to our business, results of operations, financial condition, and cash flows.

We are subject to extensive and complex federal and state regulation and new regulations and/or changes to existing regulations could adversely affect our business.

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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.

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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.

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Effective September 27, 2011, the Financial Crimes Enforcement Network of the U.S.

Department of the Treasury, or FinCEN, issued a final rule regarding the applicability of the Bank Secrecy Act’s anti-money laundering provisions to prepaid products and other matters related to the regulation of money services businesses.

This rule created additional obligations for entities, including our distributors, engaged in the provision and sale of certain prepaid products, including our prepaid debit cards, such as the obligation for sellers of prepaid debit cards to obtain identification information from the purchaser at the point-of-sale.

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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.

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 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.

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.

Unauthorized disclosure of cardholder data, whether through breach of our computer systems or otherwise, could expose us to liability and protracted and costly litigation.

Compliance with these requirements is often difficult and costly, and our failure, or our distributors’ failure, to comply may result in significant fines or civil penalties, regulatory enforcement action, liability to our issuing banks and termination of our agreements with one or more of our issuing banks, each of which could have a material adverse effect on our financial position and/or operations.

These claims also could result in protracted and costly litigation.

In addition, we could be subject to penalties or sanctions from the relevant card associations or network organizations.

An important component of our business involves the receipt and storage of information about our cardholders and banking information.

We have multiple programs and processes in place to detect and respond to data security incidents;

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.

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.

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Hoch, which could have an adverse effect on our cash position and on our financial results.

Pursuant to our respective employment agreements, as amended, with Michael Long, Chairman, and Louis Hoch, President, Chief Executive Officer, and Chief Operating Officer, in the event of change in control, termination without cause, or non-renewal of the employment agreement, we will be liable for separation payments, equaling an amount of (a) 2.95 times the respective base salary and bonus payments, plus (b) a pro rata portion of the respective annual bonus based on the number of days elapsed in the year prior, plus (c) 2.0 times the respective base salary for non-competition, and (d) continuing other benefits.

Pursuant to our respective employment agreements, as amended, with Michael Long, Chairman, and Louis Hoch, President, Chief Executive Officer, and Chief Operating Officer, in the event of change in control, termination without cause, termination by employee, or non-renewal of the employment agreement, we will be liable for separation payments, equaling an amount of (a) 2.95 times the respective base salary and bonus payments, plus (b) a pro rata portion of the respective annual bonus based on the number of days elapsed in the year prior, plus (c) 2.0 times the respective base salary for non-competition, and (d) continuing other benefits.

We estimate the cash disbursements over time to be $1.5 to $3.0 million each for the respective agreements with Mr.

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Unpaid and unearned bonus compensation or bonus deferred compensation is forfeited.

No deferred compensation will be due as long as we and/or an insurance company continues to pay executive’s base salary, minus any monthly base salary already paid to the executive prior to his death pursuant to the executive’s disability, to the executive’s estate for a period of up to 36 months.

If these continuing payments cease before 36 months, we will have to pay the executive’s estate the deferred compensation minus any base salary payments within 30 days of the cessation.

We estimate the cash disbursements over time to be approximately $1.0 million each for the respective agreements with Mr.

If these continuing payments cease before 36 months, we will have to pay the executive’s estate the deferred compensation minus any base salary payments within 30 days of the cessation.

We estimate the cash disbursements over time to be approximately $0.75 and $1.7 million each for the respective agreements with Mr.

Further, all stock options issued to the executive and all restricted stock granted to executive shall continue on their established vesting schedule.

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Further, all stock options issued to the executive and all restricted stock granted to executive shall continue on their established vesting schedule.

No further compensation will be due for compliance with the agreements’ non-compete, non-solicitation and disparagement clauses.

No further compensation will be due for compliance with the agreements’

non-compete, non-solicitation and disparagement clauses.

Depending on when such an event might occur, it could have a substantial adverse effect on our operating capital and cash on hand.

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Hoch in February 2007 and update his agreement as changes are required.

The terms of the agreement prohibit the executive from competing with us for a period of two years from the executive’s date of termination.

Our business may not be successful if, for any reason, Mr.

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Failure to retain or attract key personnel and skill sets could have a material adverse effect on our business, financial condition and results of operations.

If our software fails, and we need to repair or replace it, or we become subject to warranty claims, our costs could increase.

Our software products could contain errors or “bugs” that could adversely affect the performance of services or damage a user’s data.

We attempt to limit our potential liability for warranty claims through technical audits and limitation-of-liability provisions in our customer agreements;

however, these measures may not be effective in limiting our exposure to warranty claims.

We have not experienced a significant increase in software errors or warranty claims.

We depend on the efficient and uninterrupted operation of our computer network systems, software, data center and telecommunications networks, as well as the systems and services of third parties.

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

To the extent we outsource our disaster recovery, we are at risk of the vendor’s unresponsiveness in the event of breakdowns in our systems.

If we fail to consistently source inventory for our Output Solutions line of business, our financial condition and results of operations may be adversely affected.

Due to the COVID-19 pandemic, supply chain issues have resulted in a reduced supply, and growing demand of paper and paper products utilized in our Output Solutions line of business. Sourcing inventory remains a key challenge to execute jobs and projects with existing and new customers.

If we cannot continue to acquire sufficient inventory stock, the successful completion, margins, and growth of the Output Solutions may be impacted.

Risks associated with reduced levels of consumer spending could adversely affect our revenues and earnings.

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

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.

We recorded fraud losses of $136,608 and $116,613, respectively, in 2021 and 2020.

We experienced an increase in fraudulent accounts in 2021 as a result of massively expanding prepaid growth.

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.

Although we generally decline authorization attempts for amounts that exceed the available balance in a prepaid cardholders account, the application of the card association networks’ rules and regulations, the timing of the settlement of transactions and the assessment of subscription, maintenance or other fees can, among other things, result in overdrawn card accounts.

As of December 31, 2020 , our prepaid cardholders’ overdrawn account balances totaled $17,604.

Although we generally decline authorization attempts for amounts that exceed the available balance in a prepaid cardholders account, the application of the card association networks’

rules and regulations, the timing of the settlement of transactions and the assessment of subscription, maintenance or other fees can, among other things, result in overdrawn card accounts.

As of December 31, 2021, our prepaid cardholders’

overdrawn account balances totaled $56,922.

Although we maintain reserves for fraud and other losses, our exposure to these types of risks may exceed our reserve levels for a variety of reasons, including our failure to predict the actual recovery rate, failure to effectively manage risk and failure to prevent fraud.

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As a result, our business may not grow and regain profitability.

If we do not manage our growth, then we may not be able to regain or sustain profitability.

In order to manage our growth successfully, we will have to continue to improve our operational, management and financial systems and expand our work force.

A significant increase in our customer base may necessitate the hiring of a significant number of additional personnel, qualified candidates for which, at the time needed, may be in short supply.

In addition, the expansion and adaptation of our computer and administrative infrastructure will require substantial operational, management and financial resources.

Although we believe that our current infrastructure is adequate to meet the needs of our customers in the foreseeable future, we may not be able to expand and adapt our infrastructure to meet additional demand on a timely basis, at a commercially reasonable cost, or at all.

If our management is unable to manage growth effectively, hire needed personnel, expand and adapt our computer infrastructure and improve our operational, management, and financial systems and controls, we may not regain profitability.

If we do not manage our credit risks related to our merchant accounts, we may incur significant losses.

We rely on the Federal Reserve’s Automated Clearing House system for electronic fund transfers and the Visa, Mastercard and Discover associations for settlement of payments by credit or debit card on behalf of our merchant customers.

In our use of these established payment clearance systems, we generally bear the credit risks arising from returned transactions caused by insufficient funds, stop payment orders, closed accounts, frozen accounts, unauthorized use, disputes, customer charge backs, theft or fraud.

Consequently, we assume the credit risk of merchant disputes, fraud, insolvency or bankruptcy in the event we attempt to recover funds related to such transactions from our customers.

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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, NABC and TransPecos Bank, 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, 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.

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The trading price of our common stock could be subject to wide fluctuations in response to, among other things, quarterly variations in operating and financial results, announcements of technological innovations or new products by our competitors or us, changes in prices of our products and services or our competitors' products and services, changes in product mix, or changes in our revenue and revenue growth rates.

“Penny stock” rules may make buying or selling our securities difficult which may make our stock less liquid and make it harder for investors to buy and sell our shares.

Trading in our securities is subject to the SEC’s “penny stock” rules, and it is anticipated that trading in our securities will continue to be subject to the penny stock rules for the foreseeable future.

“Penny stock”

rules may make buying or selling our securities difficult which may make our stock less liquid and make it harder for investors to buy and sell our shares.

Trading in our securities is subject to the SEC’s “penny stock”

rules, and it is anticipated that trading in our securities will continue to be subject to the penny stock rules for the foreseeable future.

The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions.

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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