What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-17 compared with 2021-03-30 · 110 added, 105 removed, 89 unchanged (71% of the section changed)

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This report contains forward-looking statements.

When used in this report, the words “anticipates,” “suggests,” “estimates,” “plans,” “projects,” “continue,” “ongoing,” “potential,” “expect,” “predict,” “believe,” “intend,” “may,” “will,” “should,” “could,” “would,” “proposal,” and similar expressions are intended to identify forward-looking statements.

When used in this report, the words “anticipates,”

“suggests,”

“estimates,”

“plans,”

“projects,”

“continue,”

“ongoing,”

“potential,”

“expect,”

“predict,”

“believe,”

“intend,”

“may,”

“will,”

“should,”

“could,”

“would,”

“proposal,”

and similar expressions are intended to identify forward-looking statements.

Actual results in future periods may differ materially from those expressed or implied in such forward-looking statements as a result of a number of factors, including, but not limited to, the risks discussed under the heading "Risk Factors" in this annual report on and elsewhere in this annual report on Form 10-K.

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We provide integrated payment processing services to merchants and businesses, including all types of Automated Clearing House, or ACH, processing, credit, prepaid card and debit card-based processing services and statement preparation, presentment and mailing services.

We offer customizable prepaid cards companies use for expense management, incentives, refunds, claims and disbursements, unique forms of compensation like per diems, and more.

We offer customizable prepaid cards companies use for expense management, incentives, refunds, claims and disbursements, unique forms of compensation like per diems, government disbursements, and more.

We also offer prepaid cards to consumers for use as a tool to stay on budget, manage allowances and share money with family and friends.

UsioCard platform supports Apple Pay®, Samsung Pay™ and Google Pay™.

UsioCard platform supports Apple Pay®, Samsung Pay™

and Google Pay™.

Our PIN-less debit product allows merchants to debit and credit accounts in real-time.

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Through our Akimbo Now technology we offer a comprehensive money disbursement platform that allows businesses to pay their contractors, employees, or other recipients by choosing between a prepaid debit Mastercard, real-time deposit to a checking account, traditional ACH, direct deposit or paper check.

With the acquisition of the assets of Information Management Solutions, LLC in December 2020, we now offer additional services relating to 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 reported a net loss of $2.9 million and $5.1 million for the years ended December 31, 2020 and December 31, 2019 , respectively.

We have an accumulated deficit of $65.1 million at December 31, 2020 .

In 2020 , we processed $3.34 billion for all payment types, which was down by 5.6% from the record prior year volume of $3.54 billion total dollars processed.

Total transactions processed were up 19% to a record 18.2 million.

ACH or electronic check transaction processing volumes for 2020 decreased by 12% compared to 2019 .

Returned check transactions decreased by 29% in 2020 compared to 2019 .

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.

We have an accumulated deficit of $65.4 million at December 31, 2021.

In 2021, we processed $9.5 billion for all payment types, which was up 184% from the prior year volume of $3.34 billion total dollars processed.

Total transactions processed were up 94% to a record 35.3 million. ACH or electronic check transaction processing volumes for 2021 increased by 93% compared to 2020.

Returned check transactions increased by 81% in 2021 compared to 2020.

Credit card dollars processed in 2021 increased by 42% compared to 2020 and credit card transactions processed for 2021 increased by 76% compared to 2020.

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Prepaid card load volume increased by 32% and transaction volume increased by 135%.

To regain and sustain profitability, we must, among other things, continue to grow our top line revenues, grow and maintain our customer base, enhance and continue to refine existing and new successful marketing strategies, continue to maintain and upgrade our technology and transaction processing systems, provide superior customer service, respond to competitive developments, attract, retain and motivate qualified personnel, and respond to unforeseen industry developments and other factors.

To become and sustain profitability, we must, among other things, continue to grow our top line revenues, grow and maintain our customer base, enhance and continue to refine existing and new successful marketing strategies, continue to maintain and upgrade our technology and transaction processing systems, provide superior customer service, respond to competitive developments, attract, retain and motivate qualified personnel, and respond to unforeseen industry developments and other factors.

We believe that our success will depend in large part on our ability to (a) aggressively drive top line growth, (b) add talented sales people, (c) add quality customers, (d) meet evolving customer requirements, (e) adapt to technological changes in an ever changing market, (f) be opportunistic in identifying and acquiring portfolios that expand or complement our existing customer base and (g) effectively manage our operating expenses as we aggressively scale the business.

Our near-term objectives will be focused on aggressively driving top line growth and identifying and acquiring portfolios that complement and support our growth strategy.

Our near-term objectives will be focused on aggressively driving top line growth and identifying and acquiring portfolios and or companies that complement and support our growth strategy.

We will continuously assess the ability of our employees and other resources to achieve our targeted growth and continuously enhance our technology platform to drive our competitive advantage.

Critical Accounting Policies

Our management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles.

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Actual results could differ from these estimates under different assumptions or conditions.

We consider the following accounting policies to be critical because the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change or because the impact of the estimates and assumptions on financial condition or operating performance is material.

We consider these accounting policies to be critical because the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change or because the impact of the estimates and assumptions on financial condition or operating performance is material.

For a summary of critical accounting policies, please refer to the Notes to Consolidated Financial Statements, Note 1.

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Results of Operations

Our revenues are principally derived from providing integrated electronic payment services to merchants and businesses, including credit and debit card-based processing services and transaction processing via the Automated Clearing House, or ACH, network, the program management and processing of prepaid debit cards.

Our revenues are principally derived from providing integrated electronic payment services to merchants and businesses, including credit and debit card-based processing services and transaction processing via the Automated Clearing House, or ACH, network, the program management and processing of prepaid debit cards.

With the acquisition of the assets of Information Management Solutions, LLC in December 2020, we now offer additional output solution services relating to 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.

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Total Revenue

Total revenues for 2020 increased by 14.4% to $32.3 million from $28.2 million in 2019 .

The key drivers of the revenue growth were gains in our Prepaid business line associated with multiple contracts with major cities in the U.S.

facilitating disbursements to individuals and families in need of financial assistance and, growth in our PayFac business line.

2020 also included one month of financial results from our acquisition of Information Management Solutions which we re-branded as Usio Output Solutions.

Our ACH and complementary service revenues were down primarily as a result of the COVID pandemic and the adverse impact on our non-bank consumer lending business offset by gains in our PINless debit product.

Total revenues for 2021 increased by 92% to $61.9 million from $32.3 million in 2020.

Key drivers of the revenue growth include our ACH and complementary service revenues, as a result of strong relationships with cryptocurrency brokers and fintech micro-lending. This growth was bolstered by gains in our Payfac business line due to continued traction with ISVs, and our Prepaid business line associated with sustained, and growing relationships with major cities in the U.S.

facilitating disbursements to individuals and families in need of financial assistance.

2021 also marked the first full year of revenue from the Output Solutions line of business, acquired in December 2020.

Operating Expenses

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We pay volume-based fees for debit, credit, ACH and prepaid transactions initiated through these processors or sponsoring banks, and pay fees for other transactions such as returns, notices of change to bank accounts and file transmission.

Cost of services expense was $24.9 million and $22.3 million for 2020 and 2019 , respectively.

Cost of services expenses increased by $2.6 million, or 11.8% , in 2020 as compared to 2019 primarily due to increased transaction costs associated with our revenue growth.

Cost of services expense was $46.3 million and $24.9 million for 2021 and 2020, respectively.

Cost of services expenses increased by $21.4 million, or 86%, in 2021 as compared to 2020 primarily due to increased transaction costs associated with our revenue growth.

Gross profit is the net profit after deducting the cost of services.

Gross profits were $7.4 million and $5.9 million for 2020 and 2019 , respectively.

Gross profit increased by $1.4 million, or 24.0% , in 2020 as compared to 2019 .

The key drivers of the profit growth were incremental profits associated with revenue growth in our Prepaid, Credit Card and Output Solutions portfolios.

Gross profits were $15.6 million and $7.4 million for 2021 and 2020, respectively.

Gross profit increased by $8.3 million, or 112%, in 2021 as compared to 2020.

The key drivers of the profit growth were incremental profits associated with revenue growth in our ACH, Output Solutions, Prepaid, and Credit Card portfolios.

Stock-based Compensation

Stock-based compensation expense increased by $0.2 million in 2020 to $1.5 million from $1.3 million in 2019 .

The increase in stock-based compensation was a result of the stock grants during 2019 and 2020.

Our stock-based compensation expenses for 2020 and 2019 represented the amortization of deferred compensation expenses related to incentive stock grants to employees, officers and directors.

Stock-based compensation expense remained flat at $1.5 million in 2021 and 2020. Our stock-based compensation expenses for 2021 and 2020 represented the amortization of deferred compensation expenses related to incentive stock grants to employees, officers and directors.

Other Selling, General and Administrative Expenses

Other selling, general and administrative expenses increased to $8.1 million in 2020 from $7.7 million in 2019 .

The increase of $0.4 million, or 5.7% represented continued investments in people and related expenses associated primarily with our support of payment facilitation and prepaid growth initiatives.

Other selling, general and administrative expenses increased to $11.7 million in 2021 from $8.1 million in 2020.

The increase of $3.5 million, or 43% represented continued investments in people and related expenses associated primarily with our support of payment facilitation and prepaid growth initiatives.

Depreciation and Amortization

Depreciation and amortization expense decreased to $1.5 million in 2020 as compared to $2.0 million in 2019 .

The decrease of $0.5 million, or 24.9% , was primarily attributable to the full depreciation in 2019 of certain assets.

Depreciation and amortization expense increased to $2.6 million in 2021 as compared to $1.5 million in 2020.

The increase of $1.1 million, or 74%, was primarily attributable to the depreciation of the Output Solutions acquisition.

Interest income decreased to $7,643 in 2021 from $59,392 in 2020 due to lower interest-bearing cash balances.

Other income (expense) was $902 for 2020 , as compared to expense of $32,653 for 2019 .

Other income and expense included $813,500 of incremental income associated with the forgiveness of our U.S.

Small Business Administration Payroll Protection Plan (PPP) loan in December, 2020.

Income tax expense was $23,109 in 2020 and $101,888 in 2019 .

Other income (expense) was $279 for 2021, as compared to expense of $902 for 2020. 

Income tax expense was $279,861 in 2021 and $23,109 in 2020.

Federal income tax benefit in 2021 was $110,000, and $94,948 in 2020.

The income tax expense represents amounts incurred under the Texas margin tax and Tennessee franchise tax offset by refunds of federal taxes paid.

Net income tax expense reported was $169,861 in 2021, and $23,109 in 2020.

Net Income (Loss)

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.

The reduction in net loss was primarily related to our increased gross profits generated plus forgiveness of our PPP loan.

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.

The reduction in net loss was primarily related to our increased gross profits generated by our growing lines of business.

Liquidity and Capital Resources

At December 31, 2020 , we had $5.0 million of cash and cash equivalents, as compared to $2.1 million of cash and cash equivalents at December 31, 2019 .

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

Additionally, we reported working capital of $5.6 million and $1.3 million at December 31, 2020 and 2019 , respectively.

We 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.

At December 31, 2021, we had $7.3 million of cash and cash equivalents, as compared to $5.0 million of cash and cash equivalents 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 2020, respectively. 

Additionally, we reported working capital of $8.8 million and $5.6 million at December 31, 2021 and 2020, respectively.

On November 19, 2021, Voyager Digital purchased 142,857 unregistered shares of common stock at an offering price of $7.00 per share in a private offering.

The gross proceeds to us from the private offering were $1,000,000.

In 2020 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, we received total proceeds of $813,500 bearing interest at a rate of 1% per annum with a maturity date of April 15, 2022.

Under the terms of the Note, we 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.

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We 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.

Our loan forgiveness was approved in full by the U.S.

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. Our loan forgiveness was approved in full by the U.S.

Small Business Administration on December 14, 2020.

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

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

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

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

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

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

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

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

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

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

The proceeds were used for general corporate purposes and working capital.

Net cash provided by operating activities totaled $ 6.3 million for 2020 as compared to net cash used by operating activities of $ 3.7 million in 2019 .

After adjusting for the impact of operating lease right-of-use assets, operating lease liabilities, prepaid card load obligations and merchant reserves included in the statement of cash flows, net cash used by operating activities was $ 0.4 million and $ 1.3 million for the year ended December 31, 2020 and 2019 , respectively.

The increase in net cash generated by operating activities in 2020 was primarily attributable to increases in our Prepaid card loads and customer deposits acquired with our 2020 acquisition of Information Management Solutions, LLC.

Net cash used by investing activities was $ 6.8 million for 2020 and $ 0.6 million in 2019 .

The increase in investing activities includes the cash payment to Information Managements Solutions, LLC of $5.9 million associated with our acquisition and capitalization of internal-use software projects and other capital expenditures.

Net cash provided from financing activities for 2020 was $ 10.0 million compared to cash from financing activities of $ 1.7 million for 2019 .

The cash provided by financing activities were as a result of:

The $10.0 million of proceeds from financing activities included $813,500 from PPP Loan proceeds, gross proceeds of $3.0 million from a private offering with Topline Capital Partners, LP and net proceeds of $7.4 million from Ladenburg, Thalmann & Company, Inc.

from a public offering (per below) and net of Forgiveness of the PPP Loan in the amount of $813,500 and Treasury stock purchases of $280,269.

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

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

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

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

Net cash provided by operating activities totaled $29.8 million for 2021 as compared to net cash provided by operating activities of $6.3 million in 2020.

After adjusting for the impact of operating lease right-of-use assets, operating lease liabilities, prepaid card load obligations and merchant reserves included in the statement of cash flows, net cash generated by operating activities was $2.6 million for the year ended December 31, 2021 and net cash used by operating activities $0.4 million for the year ended December 31, 2020.

The increase in net cash generated by operating activities in 2021 was primarily attributable to increases in our Prepaid card load obligations and lack of incremental customer deposits in our Output Solutions business.

Net cash used by investing activities was $1.3 million for 2021 and $6.8 million in 2020.

The decrease in investing activities is due to 2020's inclusion of a cash payment to Information Managements Solutions, LLC for $5.9 million associated with our acquisition and capitalization of internal-use software projects and other capital expenditures.

Net cash provided from financing activities for 2021 was $0.9 million compared to cash from financing activities of $10.0 million for 2020.

The 2021 cash provided by financing activities was the result of:

On November 19, 2021, Voyager Digital purchased 142,857 unregistered shares of common stock at an offering price of $7.00 per share in a private offering.

The gross proceeds to us from the private offering were $1,000,000.

On March 20, 2021, the Company entered into a debt arrangement to finance $165,996 for the purchase of an Output Solutions sorter.

Net Proceeds from the equipment loan totaled $126,194 to the Company.

A decrease in cash provided by financing activities includes treasury stock purchases of $238,737.

The 2020 cash provided by financing activities was the result of: 

$10.0 million of proceeds from financing activities included $813,500 from PPP Loan proceeds, gross proceeds of $3.0 million from a private offering with Topline Capital Partners, LP and net proceeds of $7.4 million from Ladenburg, Thalmann & Company, Inc.

from a public offering and net of forgiveness of the PPP Loan in the amount of $813,500 and treasury stock purchases of $280,269.

We 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, we received total proceeds of $813,500 bearing interest at a rate of 1% per annum with a maturity date of April 15, 2022.

Under the terms of the Note, we 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.

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Small Business Administration under the CARES Act.

We 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.

Our loan forgiveness was approved in full by the U.S.

We used the proceeds for payroll costs and other permitted expenses.

Small Business Administration on December 14, 2020.

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

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

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

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

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

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

Overall, our cash position improved significantly as a result of financing activities completed in 2020.

The 2019 cash provided by financing activities was the result of a public offering which raised $1.8 million in net proceeds.

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

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

We used the funds for general corporate purposes and working capital.

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

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

A decrease in cash provided by financing activities includes treasury stock purchases of $280,269.

Material Trends and Uncertainties

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.

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.

The government has 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 doctors offices, dental offices, veterinarian offices and non-bank consumer lending accounts 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 did receive 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.

With 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 customers.

We continue to monitor the impact of the COVID-19 pandemic closely.

During 2020 and 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.  

In April and May of 2020, our business was adversely affected as doctor's offices, dental offices, veterinarian offices and non-bank consumer lending accounts 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 a pause placed on past due amounts owed. 

 The level of activity for consumer lending merchants has somewhat returned to pre-COVID levels. 

We received an increase in revenues 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 efforts have included the disbursement of funds to encourage vaccinations. 

The Company has recently experienced some difficulty in recruiting and retaining certain categories of employees due to limited resource availability. 

The Company continues to monitor resource availability and is taking necessary steps to retain employees and recruit employees to fill open positions.

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.

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

To date, we have not been adversely impacted in the magnitude that other payment processors were, 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.

On August 21, 2018, we issued to University Fancards, LLC warrants to purchase 150,000 shares of our common stock.

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The exercise price for the remaining 120,000 warrants will be the lesser of $2.00 per share or 120% of the market price of our common stock on the vesting date of the warrant.

On August 12, 2020, we 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 August 12, 2020, we 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, we 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, we issued to Information Management Solutions, LLC warrants to purchase 945,599 shares of our common stock, $0.001 par value per share, with an exercise price of $4.23 per share.

On September 1, 2021, the Company issued 19,950 shares of common stock to University FanCards, LLC in a cashless exercise at $5.97 per common share in exchange for 30,000 warrants exercised by FanCards, LLC.

On December 15, 2020, we issued to Information Management Solutions, LLC warrants to purchase 945,599 shares of our common stock, $0.001 par value per share, with an exercise price of $4.23 per share. 

The warrants were valued using the Black-Scholes option pricing model.

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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.

Loan and Security Agreement with C2Go, Inc.

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.

The loan was secured by a first lien on all assets of C2Go.

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

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.

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

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

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 7. Management’s Discussion and Analysis