Usio, Inc. 10-Q

usio20220930_10q.htm   Table of Contents   UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549   FORM 10-Q   ☒   QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 or ☐   TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________.   Commission File Number: 000-30152   USIO, INC. (Exact name of registrant as specified in its charter)   Nevada   98-0190072 (State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)         3611 Paesanos Parkway, Suite 300 , San Antonio , TX   78231 (Address of principal executive offices)   (Zip Code) ( 210 ) 249-4100 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act:   Title of each class Trading symbol(s) Name on each exchange on which registered Common stock, par value $0.001 per share USIO The Nasdaq Stock Market LLC   Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes  ☐ No   Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes  ☐ No   Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.   Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒   Emerging Growth company ☐   If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐   Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  ☐ Yes ☒ No   As of November 8, 2022, the number of outstanding shares of the registrant's common stock was 25,324,198 .     Table of Contents       USIO, INC. INDEX       Page PART I – FINANCIAL INFORMATION 1       Item 1. Financial Statements (Unaudited). 1         Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 1         Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2022 and 2021 2         Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2022 and 2021 3         Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months ended September 30, 2022 and 2021 4         Notes to Condensed Consolidated Financial Statements 5       Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 9       Item 3. Quantitative and Qualitative Disclosures About Market Risk. 13       Item 4. Controls and Procedures. 13       PART II – OTHER INFORMATION 14       Item 1. Legal Proceedings. 14       Item 1A. Risk Factors. 14       Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 15       Item 3. Defaults Upon Senior Securities. 15       Item 4. Mine Safety Disclosures (Not applicable). 15       Item 5. Other Information. 15       Item 6. Exhibits. 16     Table of Contents     PART I – FINANCIAL INFORMATION Item 1. Financial Statements.   USIO, INC. CONDENSED CONSOLIDATED BALANCE SHEETS       September 30, 2022     December 31, 2021       (Unaudited)           Assets                 Current assets:                 Cash and cash equivalents   $ 4,613,123     $ 7,255,321   Accounts receivable, net     3,569,082       4,979,493   Settlement processing assets     49,697,691       63,824,646   Prepaid card load assets     15,318,411       36,590,893   Customer deposits     1,585,586       1,364,193   Inventory     420,432       434,532   Prepaid expenses and other     545,435       426,963   Current assets before merchant reserves     75,749,760       114,876,041   Merchant reserves     5,654,729       6,381,153   Total current assets     81,404,489       121,257,194                     Property and equipment, net     3,407,021       3,607,157                     Other assets:                 Intangibles, net     2,843,327       4,163,894   Deferred tax asset, net     1,504,000       1,504,000   Operating lease right-of-use assets     2,932,812       2,802,113   Other assets     355,357       345,357   Total other assets     7,635,496       8,815,364                     Total assets   $ 92,447,006     $ 133,679,715                     Liabilities and stockholders’ equity                 Current liabilities:                 Accounts payable   $ 612,189     $ 1,400,100   Accrued expenses     2,371,178       2,325,665   Operating lease liabilities, current portion     537,034       504,027   Equipment loan, current portion     56,429       54,760   Settlement processing obligations     49,697,691       63,824,646   Prepaid card load obligations     15,318,411       36,590,893   Customer deposits     1,585,586       1,364,193   Deferred revenues     —       17,647   Current liabilities before merchant reserve obligations     70,178,518       106,081,931   Merchant reserve obligations     5,654,729       6,381,153   Total current liabilities     75,833,247       112,463,084                     Non-current liabilities:                 Equipment loan, non-current portion     28,893       71,434   Operating lease liabilities, non-current portion     2,581,645       2,476,291   Total liabilities     78,443,785       115,010,809                     Stockholders’ equity:                 Preferred stock, $ 0.01 par value, 10,000,000 shares authorized; - 0 - shares outstanding at September 30, 2022 (unaudited) and December 31, 2021, respectively     —       —   Common stock, $ 0.001 par value, 200,000,000 shares authorized; 26,966,300 and 26,807,145 issued, and 25,263,333 and 25,473,453 outstanding at September 30, 2022 (unaudited) and December 31, 2021, respectively     195,391       195,235   Additional paid-in capital     93,811,189       93,100,129   Treasury stock, at cost; 1,702,967 and 1,333,692 shares at September 30, 2022 (unaudited) and December 31, 2021, respectively     ( 3,299,099 )     ( 2,404,458 ) Deferred compensation     ( 5,992,070 )     ( 6,842,195 ) Accumulated deficit     ( 70,712,190 )     ( 65,379,805 ) Total stockholders’ equity     14,003,221       18,668,906                     Total liabilities and stockholders’ equity   $ 92,447,006     $ 133,679,715     See the accompanying notes to the condensed interim consolidated financial statements.     1 Table of Contents     USIO, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)       Three Months Ended September 30,     Nine Months Ended September 30,       2022     2021     2022     2021                                     Revenues   $ 16,395,760     $ 15,821,070     $ 50,722,789     $ 44,515,761   Cost of services     13,261,240       11,787,439       40,819,236       33,447,448   Gross profit     3,134,520       4,033,631       9,903,553       11,068,313                                     Selling, general and administrative:                                 Stock-based compensation     515,992       343,567       1,540,375       988,567   Other SG&A expenses     3,679,484       2,844,205       11,323,326       8,349,452   Depreciation and amortization     640,599       634,912       2,163,468       1,884,268   Total selling, general and administrative expenses     4,836,075       3,822,684       15,027,169       11,222,287                                     Operating income (loss)     ( 1,701,555 )     210,947       ( 5,123,616 )     ( 153,974 )                                   Other income and (expense):                                 Interest income     2,728       1,767       4,475       6,403   Interest expense     ( 943 )     ( 1,480 )     ( 3,244 )     ( 2,964 ) Other income and (expense), net     1,785       287       1,231       3,439                                     Income (Loss) before income taxes     ( 1,699,770 )     211,234       ( 5,122,385 )     ( 150,535 ) Income tax expense     70,000       70,000       210,000       210,000                                     Net income (Loss)   $ ( 1,769,770 )   $ 141,234     $ ( 5,332,385 )   $ ( 360,535 )                                   Income (Loss) Per Share                                 Basic income (loss) per common share:   $ ( 0.09 )   $ 0.01     $ ( 0.26 )   $ ( 0.02 ) Diluted income (loss) per common share:   $ ( 0.09 )   $ 0.01     $ ( 0.26 )   $ ( 0.02 ) Weighted average common shares outstanding                                 Basic     20,371,654       20,033,515       20,322,934       19,986,279   Diluted     20,371,654       24,935,517       20,322,934       19,986,279     See the accompanying notes to the condensed interim consolidated financial statements.      2 Table of Contents     USIO, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)       Nine Months Ended September 30,       2022     2021   Operating activities:                 Net (loss)   $ ( 5,332,385 )   $ ( 360,535 ) Adjustments to reconcile net (loss) to net cash provided (used) by operating activities:                 Depreciation     842,901       480,368   Amortization     1,320,567       1,403,900   Bad debt     —       87,190   Stock-based compensation     1,540,375       988,567   Amortization of warrant costs     20,965       26,955   Changes in current assets and current liabilities:                 Accounts receivable     1,410,411       ( 1,410,805 ) Prepaid expenses and other     ( 118,472 )     54,709   Operating lease right-of-use assets     ( 130,699 )     ( 249,863 ) Other assets     ( 10,000 )     23,000   Inventory     14,100       ( 45,209 ) Accounts payable and accrued expenses     ( 742,398 )     765,512   Operating lease liabilities     138,361       258,896   Prepaid card load obligations     ( 21,272,482 )     7,474,626   Merchant reserves     ( 726,424 )     ( 1,004,402 ) Customer deposits     221,393       200,028   Deferred revenue     ( 17,647 )     ( 35,690 ) Net cash provided (used) by operating activities     ( 22,841,434 )     8,657,247                     Investing activities:                 Purchases of property and equipment     ( 642,764 )     ( 999,493 ) Net cash (used) by investing activities     ( 642,764 )     ( 999,493 )                   Financing activities:                 Proceeds from equipment loan     —       165,996   Payments on equipment loan     ( 40,872 )     ( 26,446 ) Purchases of treasury stock     ( 894,641 )     ( 198,350 ) Net cash (used) by financing activities     ( 935,513 )     ( 58,800 )                   Change in cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves     ( 24,419,711 )     7,598,954   Cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves, beginning of period     51,591,560       22,192,225                     Cash, Cash Equivalents, Prepaid Card Load Assets, Customer Deposits and Merchant Reserves, End of Period   $ 27,171,849     $ 29,791,179                     Supplemental disclosure of cash flow information:                 Cash paid during the period for:                 Interest   $ 3,244     $ 2,964   Income taxes     —       92,850   Non-cash transactions:                 Issuance of deferred stock compensation     166,330       —     See accompanying notes to the condensed interim consolidated financial statements.   3 Table of Contents     USIO, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)       Common Stock     Additional Paid- In     Treasury     Deferred     Accumulated     Total Stockholders'       Shares     Amount     Capital     Stock     Compensation     Deficit     Equity                                                             Balance at December 31, 2021     26,807,145     $ 195,235     $ 93,100,129     $ ( 2,404,458 )   $ ( 6,842,195 )   $ ( 65,379,805 )   $ 18,668,906                                                             Issuance of common stock under equity incentive plan     61,600       62       267,856       —       ( 12,330 )     —       255,588   Warrant compensation costs     —       —       8,985       —       —       —       8,985   Deferred compensation amortization     —       —       —       —       295,092       —       295,092   Purchase of treasury stock costs     —       —       —       ( 66,494 )     —       —       ( 66,494 ) Net (loss) for the period     —       —       —       —       —       ( 1,622,270 )     ( 1,622,270 )                                                           Balance at March 31, 2022     26,868,745     $ 195,297     $ 93,376,970     $ ( 2,470,952 )   $ ( 6,559,433 )   $ ( 67,002,075 )   $ 17,539,807                                                             Issuance of common stock under equity incentive plan     54,233       52       258,636       —       —       —       258,687   Warrant compensation costs     —       —       8,985       —       —       —       8,985   Reversal of deferred compensation amortization that did not vest     ( 85,000 )     ( 85 )     ( 176,465 )     —       97,621       —       ( 78,929 ) Deferred compensation amortization     —       —       —       —       293,942       —       293,942   Purchase of treasury stock costs     —       —       —       ( 480,095 )     —       —       ( 480,095 ) Net (loss) for the period     —       —       —       —       —       ( 1,940,345 )     ( 1,940,345 )                                                           Balance at June 30, 2022     26,837,978     $ 195,264     $ 93,468,126     $ ( 2,951,047 )   $ ( 6,167,870 )   $ ( 68,942,420 )   $ 15,602,052                                                             Issuance of common stock under equity incentive plan     163,322       162       406,083       —       ( 154,000 )     —       252,245   Warrant compensation costs     —       —       2,995       —       —       —       2,995   Reversal of deferred compensation amortization that did not vest     ( 35,000 )     ( 35 )     ( 66,015 )     —       37,837       —       ( 28,213 ) Deferred compensation amortization     —       —       —       —       291,963       —       291,963   Purchase of treasury stock costs     —       —       —       ( 348,052 )     —       —       ( 348,052 ) Net (loss) for the period     —       —       —       —       —       ( 1,769,770 )     ( 1,769,770 )                                                           Balance at September 30, 2022     26,966,300     $ 195,391     $ 93,811,189     $ ( 3,299,099 )   $ ( 5,992,070 )   $ ( 70,712,190 )   $ 14,003,221                                                             Balance at December 31, 2020     26,260,776     $ 194,692     $ 89,659,433     $ ( 2,165,721 )   $ ( 5,926,872 )   $ ( 65,058,171 )   $ 16,703,361                                                             Issuance of common stock under equity incentive plan     51,000       51       120,484       —       —       —       120,535   Warrant compensation costs     —       —       8,985       —       —       —       8,985   Cashless warrant exercise     19,795       19       ( 19 )     —       —       —       —   Reversal of deferred compensation amortization that did not vest     ( 17,111 )     ( 17 )     ( 48,599 )     —       5,994       —       ( 42,622 ) Deferred compensation amortization     —       —       —       —       249,801       —       249,801   Purchase of treasury stock costs     —       —       —       ( 49,454 )     —       —       ( 49,454 ) Net (loss) for the period     —       —       —       —       —       ( 720,252 )     ( 720,252 )                                                           Balance at March 31, 2021     26,314,460     $ 194,745     $ 89,740,284     $ ( 2,215,175 )   $ ( 5,671,077 )   $ ( 65,778,423 )   $ 16,270,354                                                             Issuance of common stock under equity incentive plan     61,556       61       150,481       —       —       —       150,542   Warrant compensation costs     —       —       8,985       —       —       —       8,985   Reversal of deferred compensation amortization that did not vest     ( 115,000 )     ( 115 )     ( 237,085 )     —       158,096       —       ( 79,104 ) Deferred compensation amortization     —       —       —       —       245,847       —       245,847   Purchase of treasury stock costs     —       —       —       ( 29,810 )     —       —       ( 29,810 ) Net income for the period     —       —       —       —       —       218,483       218,483                                                             Balance at June 30, 2021     26,261,016     $ 194,691     $ 89,662,665     $ ( 2,244,985 )   $ ( 5,267,134 )   $ ( 65,559,940 )   $ 16,785,297                                                             Issuance of common stock under equity incentive plan     49,322       76       108,146       —       20,785       —       129,007   Warrant compensation cost     —       —       8,985       —       —       —       8,985   Cashless warrant exercise     19,950       20       ( 20 )     —       —       —       —   Reversal of deferred compensation amortization that did not vest     ( 41,000 )     ( 41 )     ( 77,164 )     —       52,434       —       ( 24,771 ) Deferred compensation amortization     —       —       —       —       239,331       —       239,331   Purchase of treasury stock     —       —       —       ( 119,086 )     —       —       ( 119,086 ) Net income for the period     —       —       —       —       —       141,234       141,234                                                             Balance at September 30, 2021     26,289,288     $ 194,746     $ 89,702,612     $ ( 2,364,071 )   $ ( 4,954,584 )   $ ( 65,418,706 )   $ 17,159,997     The accompanying notes are an integral part of these consolidated financial statements.   4 Table of Contents   USIO, INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)     Note 1. Basis of Presentation   The accompanying unaudited interim condensed consolidated financial statements of Usio, Inc. and its subsidiaries (the “Company”) have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been omitted pursuant to such rules and regulations. In the opinion of management, the accompanying interim condensed consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to present fairly the Company's financial position, results of operations and cash flows for such periods. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's annual report on Form 10 -K for the year ended December  31, 2021, as filed with the Securities and Exchange Commission on March 17, 2022. Results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim periods or the full fiscal year. References in this quarterly report to "the quarter" or the "third quarter" mean the three month period ended September 30, 2022 or 2021 , as the case may be.   Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.   Revenue Recognition: Revenue consists primarily of fees generated through the electronic processing of payment transactions and related services. Revenue is recognized during the period in which the transactions are processed or when the related services are performed. The Company complies with ASC  606 - 10  and reports revenues at gross as a principal versus net as an agent. Although some of the Company's processing agreements vary with respect to specific credit risks, the Company has determined that for each agreement it is acting in the principal role. Revenues derived from electronic processing of credit, debit, and prepaid card transactions that are authorized and captured through  third -party networks are reported as gross of amounts paid to sponsor banks as well as interchange and assessments paid to credit card associations. Merchants processing credit, debit, prepaid card, and ACH transactions may  be charged for these services at a bundled rate based on a percentage of the dollar amount of each transaction and, in some instances, additional fees are charged for each transaction. Certain merchant customers may  also be charged miscellaneous fees, including fees for chargebacks or returns, monthly minimums, and other miscellaneous services. Certain card distributors remit payment of fees earned  45  days after the end of the processing period. Prepaid card distributors have payment terms of  30  days following the end of the month. Sales taxes billed are reported directly as a liability to the taxing authority and are  not  included in revenue.  Our wholly-owned subsidiary, Usio Output Solutions, Inc., or Output Solutions, provides bill preparation, presentment and mailing services. Revenue from Output Solutions is recognized when the related services are performed for printing and delivered to the United States Postal Service, or USPS, for postage.   The following table presents the Company's revenues by source:       Three Months Ended September 30,     Nine Months Ended September 30,       2022     2021     2022     2021                                     ACH and complementary service revenue   $ 3,242,794     $ 3,733,453     $ 10,985,722     $ 10,813,806   Credit card revenue     6,842,065       6,509,344       20,495,984       18,791,129   Prepaid card services revenue     1,576,871       2,004,657       5,733,428       3,968,764   Output solutions revenue     4,734,030       3,573,616       13,507,655       10,942,062   Total revenue   $ 16,395,760     $ 15,821,070     $ 50,722,789     $ 44,515,761     Deferred Revenues: The Company records deferred revenues as a liability when it receives payments in advance of transferring control of promised goods or services to a customer. The advance consideration received from a customer is deferred until the Company provides the customer that product or service. The deferred revenues totaled $ 0  and $ 17,647  at September 30, 2022 and December 31, 2021 , respectively.   Cash and Cash Equivalents: Cash and cash equivalents includes cash and other money market instruments. The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents.   Settlement Processing Assets and Obligations: Settlement processing assets and obligations represent intermediary balances arising in our settlement process for merchants.   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 USPS. These customer deposits are carried on the Company's balance sheet with a corresponding liability.   Merchant Reserves: The Company has merchant reserve requirements associated with Automated Clearing House, or ACH, transactions. The merchant reserve assets are carried on the Company's balance sheet with a corresponding liability. Merchant Reserves are set for each merchant and funds are collected and held as collateral to minimize contingent liabilities associated with any losses that may occur. While this cash is not restricted in its use, the Company believes that designating this cash to collateralize Merchant Reserves strengthens its standing with the Company's member sponsors and is in accordance with the guidelines set by the card networks.   Prepaid Card Load Assets: The Company maintains pre-funding accounts for its customers to facilitate prepaid card loads as initiated by the customer. These prepaid card load assets are carried on the Company's balance sheet with a corresponding liability.   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:       Three Months Ended September 30,     Nine Months Ended September 30,       2022     2021     2022     2021                                     Beginning cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves:                                 Cash and cash equivalents   $ 5,102,061     $ 5,614,702     $ 7,255,321     $ 5,011,132   Prepaid card load assets     15,104,808       9,157,519       36,590,893       7,610,242   Customer deposits     1,471,214       1,410,607       1,364,193       1,305,296   Merchant reserves     6,815,073       8,101,153       6,381,153       8,265,555   Total   $ 28,493,156     $ 24,283,981     $ 51,591,560     $ 22,192,225                                     Ending cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves:                                 Cash and cash equivalents   $ 4,613,123     $ 5,939,834     $ 4,613,123     $ 5,939,834   Prepaid card load assets     15,318,411       15,084,868       15,318,411       15,084,868   Customer deposits     1,585,586       1,505,324       1,585,586       1,505,324   Merchant reserves     5,654,729       7,261,153       5,654,729       7,261,153   Total   $ 27,171,849     $ 29,791,179     $ 27,171,849     $ 29,791,179     Allowance for Estimated Losses: The Company maintains an allowance for estimated doubtful accounts receivable resulting from the inability or failure of the Company’s customers to make required payments. The Company determines the allowance for estimated doubtful accounts receivable losses based on an account-by-account review, taking into consideration such factors as the age of the outstanding balance, historical pattern of collections, and financial condition of the customer. During the  nine months ended September 30, 2022  and the year ended  December 31, 2021 , losses incurred by the Company due to bad debts were within its expectations. If the financial conditions of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make contractual payments, additional losses may be incurred in future periods. Estimates for doubtful account losses are variable based on the volume of transactions processed and could increase or decrease accordingly. The allowance for estimated doubtful accounts was $ 319,000  at September 30, 2022 and December 31, 2021 .   Inventory : Inventory is stated at the lower of cost or net realizable value. At September 30, 2022  and December 31, 2021, inventory consisted primarily of printing and paper supplies used for Output Solutions.   Accounting for Internal Use Software: The Company capitalizes the costs associated with software being developed or obtained for internal use when both the preliminary project stage is completed, and it is probable that computer software being developed will be completed and placed-in service. Capitalized costs include only (i) external direct costs of materials and services consumed in developing or obtaining internal-use software, (ii) payroll and other related costs for employees who are directly associated with and who devote time to the internal-use software project, and (iii) interest costs incurred, when material, while developing internal-use software. The Company ceases capitalization of such costs no later than the point at which the project is substantially complete and ready for its intended purpose. During the nine  months ended September 30, 2022 and September 30, 2021 , the Company capitalized $ 438,128  and $ 561,177 , respectively.   Valuation of Long-Lived and Intangible Assets: The Company assesses the impairment of long-lived and intangible assets at least annually, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important, which could trigger an impairment review, include the following: significant under performance relative to historical or projected future cash flows; significant changes in the manner of use of the assets or the strategy of the overall business; and significant negative industry trends. When management determines that the carrying value of long-lived and intangible assets may not be recoverable, impairment is measured as the excess of the assets’ carrying value over the estimated fair value. No impairment losses were recorded in 2021  or during the  nine months ended September 30, 2022 . Management is not aware of any impairment changes that may currently be required; however, the Company cannot predict the occurrence of events that might adversely affect the reported values in the future.   Reserve for Processing Losses:  If, due to insolvency or bankruptcy of one of the Company’s merchant customers, or for any other reason, the Company is not able to collect amounts from its credit card, ACH or prepaid customers that have been properly "charged back" by the customer, or if a prepaid cardholder incurs a negative balance, the Company must bear the credit risk for the full amount of the transaction. The Company may require cash deposits and other types of collateral from certain merchants to minimize any such risks. In addition, the Company utilizes multiple systems and procedures to manage merchant risk. ACH, prepaid and credit card merchant processing loss reserves are primarily determined by performing a historical analysis of the Company’s loss experience, considering other factors that could affect that experience in the future, such as the types of transactions processed and nature of the merchant relationship with its consumers and the Company’s relationship with the Company’s prepaid card holders. This reserve amount is subject to the risk that actual losses may be greater than the Company’s estimates. The Company has not incurred any significant processing losses to date. Estimates for processing losses are variable based on the volume of transactions processed and could increase or decrease accordingly. At September 30, 2022 and December 31, 2021 , the Company’s reserve for processing losses was $ 722,494  and $ 623,494  respectively.   Legal Proceedings: The Company may be involved in legal matters arising in the ordinary course of business from time to time. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is or could become involved in litigation will not have a material adverse effect on its business, financial condition or results of operations.   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 15, 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.   5 Table of Contents     Note 2.  Leases   The Company leases facilities and office equipment under various operating leases, which generally are expected to be renewed or replaced by other leases. For each of the three months ended September 30, 2022  and 2021 , operating lease expenses totaled $ 152,401  and $ 117,689 , respectively.     Note 3. Accrued Expenses   Accrued expenses consisted of the following balances:       September 30, 2022     December 31, 2021                     Accrued commissions   $ 969,056     $ 879,120   Reserve for processing losses     722,494       623,494   Other accrued expenses     286,794       226,888   Accrued taxes     258,766       298,168   Accrued salaries     134,068       297,995   Total accrued expenses   $ 2,371,178     $ 2,325,665       Note 4. Equipment Loan   On March 20, 2021, the Company entered into a debt arrangement to finance $ 165,996 for the purchase of an Output Solutions sorter. The loan is for a period of 36 months with a maturity date of March 20, 2024 and annual interest of 3.95 %. Monthly principal and interest payments are required in the amount of $ 4,902 . Payments for the  three and nine months ended September 30, 2022 were $ 13,762 and $ 40,872 , respectively.     Note 5. Stockholders' Equity   Stock Warrants : On August 21, 2018, the Company issued University FanCards, LLC a warrant to purchase 150,000 shares of the Company's common stock which were subject to the following vesting schedule: (i)  30,000 warrants vested upon the date on which the first financial transaction was processed, which occurred on October 5, 2018; and (ii)  120,000 warrants vested annually over 4 years in 30,000 warrant increments beginning on July 31, 2019 and ending on July 31, 2022. The exercise price for the initial 30,000 warrants was $ 1.80 per share. The exercise price for the remaining 120,000 warrants was the lesser of $ 2.00 per share or one hundred and twenty percent ( 120 %) of the market price of the Company's common stock on the vesting date of the warrant. At the time of issuance, 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 $ 0.94 for the 30,000 warrants and $ 0.90 for the 120,000 warrants; (ii) the risk-free interest rate is 2.77%; (iii) the contractual life is 5 years; (iv) the dividend yield is 0%; and (v) the volatility is 64.6 %. The fair value of the warrants was $ 135,764 which will be amortized over the life of the warrants as a reduction of revenues. The reduction of revenues recorded for the nine months ended September 30, 2022 and 2021 was $ 20,965 and $ 26,955 respectively.   On August 12, 2020, the Company issued 27,051 shares of our common stock to University FanCards, LLC in a cashless exercise at $ 3.46 per share in exchange for 60,000 warrants exercised by FanCards, LLC.   On February 5, 2021, the Company issued 19,795  shares of our common stock to University FanCards, LLC in a cashless exercise at $ 5.88  per share in exchange for 30,000 warrants exercised by FanCards, LLC.   On September 1, 2021, the Company issued 19,950  shares of our common stock to University FanCards, LLC in a cashless exercise at $ 5.97 per share in exchange for 30,000 warrants exercised by FanCards, LLC.   On December  15, 2020, the Company issued warrants to purchase 945,599  shares of the Company's common stock with an exercise price of $ 4.23 per share to Information Management Solutions, LLC. The Management Solutions' warrants vest annually over 3 years in three equal tranches beginning on December 15, 2021  and become fully vested on December 15, 2023. At the time of issuance, these 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.   Note 6. Net (Loss) Per Share   Basic (loss) per share (EPS) was computed by dividing net (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted EPS differs from basic EPS due to the assumed conversion of potentially dilutive awards and options that were outstanding during the period. The following is a reconciliation of the numerators and the denominators of the basic and diluted per share computations for net (loss) for the  three and nine months ended September 30, 2022 and September 30, 2021 .       Three Months Ended September 30,     Nine Months Ended September 30,       2022     2021     2022     2021   Numerator:                                 Numerator for basic and diluted income (loss) per share, net income (loss) available to common shareholders   $ ( 1,769,770 )   $ 141,234     $ ( 5,332,385 )   $ ( 360,535 ) Denominator:                                 Denominator for basic income (loss) per share, weighted average shares outstanding     20,371,654       20,033,515       20,322,934       19,986,279   Effect of dilutive securities     —       4,902,002       —       —   Denominator for diluted earnings per share, adjust weighted average shares and assumed conversion     20,371,654       24,935,517       20,322,934       19,986,279   Basic income (loss) per common share   $ ( 0.09 )   $ 0.01     $ ( 0.26 )   $ ( 0.02 ) Diluted income (loss) per common share and common share equivalent   $ ( 0.09 )   $ 0.01     $ ( 0.26 )   $ ( 0.02 )   The awards and options to purchase shares of common stock that were outstanding at September 30, 2022 and September 30, 2021 that were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive, are as follows:       Nine Months Ended September 30,       2022     2021   Anti-dilutive awards and options     5,224,902       4,902,002     6 Table of Contents     Note 7. Income Taxes   Deferred tax assets and liabilities are recorded based on the difference between financial reporting and tax basis of assets and liabilities and are measured by the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Deferred tax assets are computed with the presumption that they will be realizable in future periods when taxable income is generated. Predicting the ability to realize these assets in future periods requires judgment by management. U.S. generally accepted accounting principles prescribe a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. Income tax benefits that meet the “more likely than not” recognition threshold are recognized.   The Company has recognized a net deferred tax asset of approximately $ 1.5 million and has recorded a valuation allowance of approximately $ 5.2  million against the other deferred tax assets. The Company reviews the assessment of the deferred tax asset and valuation allowance on an annual basis or more often when events indicate that a change to the valuation allowance may be warranted.   At  December 31, 2021 , the Company had available net operating loss carryforwards of approximately $ 29.5 million. Net operating loss carryforwards prior to 2017 are available to offset taxable income of future periods and expire 20 years after the loss was generated.    Net operating loss carryforwards totaling $ 10.7 million expired in  2021. The schedule below outlines when the Company's pre- 2017  net operating losses were generated and the year they  may  expire.   Tax Year End   NOL     Expiration   2002   $ 9,109,774       2022   2004     1,621,096       2024   2005     1,788,157       2025   2006     1,350,961       2026   2007     1,740,724       2027   2008     918,960       2028   2009     835,322       2029   2010     429,827       2030   2013     504,862       2033   2016     474,465       2036   2017     1,267,336       2037   Total   $ 20,041,484             Effective for tax years ending in 2018, net operating losses can be carried forward to future years indefinitely. Net operating losses generated in  2018  and later total $ 9,413,692 . The below table outlines our net operating losses generated in  2018  and after.   Tax Year End   NOL   2018   $ 4,410,916   2019     2,730,461   2020     2,272,315   Total   $ 9,413,692   Total loss carryforwards   $ 29,455,176     Management is not aware of any tax positions that would have a significant impact on the Company’s financial position.     Note 8. Related Party Transactions   Louis Hoch   During the nine months ended September 30, 2022 and the year ended December 31, 2021 , the Company purchased a total of $ 22,478 and $ 4,009 , respectively, of corporate imprinted sportswear and caps from Angry Pug Sportswear. Louis Hoch, the Company’s Chairman of the Board, President, and Chief Executive Officer, is a 50 % owner of Angry Pug Sportswear.   Directors and Officers   On  January 6, 2022 ,  the Company repurchased  11,361  shares for $ 47,930  in a private transaction at the closing price on  January 6, 2022  of $ 4.21  per share from Tom Jewell, the Company's Chief Financial Officer, to cover his share of taxes in the vesting of stock compensation issued via a  3 -year RSU.   On January 6, 2021, the Company repurchased 11,860 shares of common stock at a closing price of $ 3.25 per share from Tom Jewell, the Company's Chief Financial Officer to cover his share of taxes in the vesting of stock compensation issued via a  3 -year RSU.   The Company granted  319,900  shares of restricted common stock with a  10 -year vesting period and  141,900  restricted stock units (RSUs) with a  3 -year vesting period to employees and Directors as a performance bonus on  November 18, 2021  at an issue price of $ 6.39  per share. Executive officers and Directors included in the  10 -year restricted stock grant were Louis Hoch ( 100,000  shares), Tom Jewell ( 50,000  shares), Greg Carter ( 30,000  shares) and Houston Frost ( 25,000  shares). Executive officers and Directors included in the RSU grant were Louis Hoch ( 30,000  shares), Tom Jewell ( 21,000  shares), Greg Carter ( 9,000  shares) Houston Frost ( 6,000  shares), Blaise Bender ( 12,000  RSUs), Brad Rollins ( 12,000  RSUs) and Ernesto Beyer ( 12,000  RSUs).   On April 1, 2021, the Company granted 1,444,000 shares of restricted 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 at an issue price of $ 1.08 per share. Executive officers and Directors included in the grants were Louis Hoch ( 300,000 shares), Tom Jewell ( 200,000 shares), Blaise Bender ( 10,000 RSUs) and Brad Rollins ( 30,000 RSUs).   7 Table of Contents     Note 9. COVID- 19   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.   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,  the Company's 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 continues to recover to pre-COVID levels.  The Company recorded an increase in revenues in its prepaid business line, as it was able to work in conjunction with major cities across the U.S. to use its prepaid debit cards to facilitate the transfer of money via its 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.    Since 2020, the Company has experienced some difficulty in recruiting and retaining certain categories of employees due to limited labor availability.  The Company continues to monitor labor availability and is taking necessary steps to retain employees and recruit employees to fill open positions.   Due to the COVID- 19  pandemic and global economic challenges, 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. While these efforts have been successful thus far, if the Company cannot continue to acquire sufficient inventory stock, the successful completion, margins, and growth of Output Solutions  may  be impacted.   The impacts and recovery from the COVID- 19  pandemic are still a work in process.  To date, the Company has 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, the Company will continue to monitor the overall impact on its operations and take necessary steps to ensure the safety of its employees and the well-being of its customers.   Note 10. Subsequent Events   Following the close of the quarter ended  September 30, 2022  the Company has bought 135,578  incremental shares of stock on the open-market as part of its stock buyback program in the amount of $ 232,611 .    8 Table of Contents     Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.   FORWARD-LOOKING STATEMENTS DISCLAIMER   This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. If used in this report, the words "anticipate," "believe," "estimate," "intend," and other words or phrases of similar import are intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in our annual report on Form 10-K and other reports we file with the Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made. We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.   This discussion and analysis should be read in conjunction with the unaudited interim condensed consolidated financial statements and the notes thereto included in this report, and our annual report on Form 10-K for the fiscal year ended December 31, 2021, filed on March 17, 2022, including the audited consolidated financial statements and the notes contained therein.   Name Change   Effective on June 26, 2019, we changed our corporate name from Payment Data Systems, Inc. to Usio, Inc.   Overview   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.   In addition, we offer customizable prepaid cards which companies use for expense management, incentives, refunds, claims and disbursements, as well as unique forms of compensation such as per diem payments, government disbursements, and similar payments. 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. Our 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. In our over 20-year history, we have created a loyal customer base that relies on us for our convenient, secure, innovative and adaptive services and technology, and we have built long-standing and valuable relationships with premier banking institutions such as Fifth-Third Bank, Sunrise Bank, and Wells Fargo Bank.   Our strategy is to drive growth through a leveraged, one to many, distribution model in the software development marketplace. Following the completion of the Singular Payments acquisition, we launched our payment facilitation, PayFac, platform called "PayFac-in-a-Box" in late 2018 targeting partnership opportunities with app and software developers in bill-centric verticals, such as legal, healthcare, property management, utilities and insurance. The PayFac-in-a-Box platform 'integration layer' offers a simple integration experience for technology companies who are looking to monetize payments within an existing base of downstream clients. The added value of offering our integration partners access to credit card, debit card, ACH and prepaid card issuance capabilities through a single vendor partner relationship in face-to-face, mobile and virtual payment acceptance environments provides a true single channel commerce experience through an application programming interface, API.   With the acquisition of the assets of Information Management Solutions, LLC, or IMS, 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 our wholly-owned subsidiary, Usio Output Solutions, Inc., or Output Solutions.  This product offering provides an outsourced solution for document design, print and electronic delivery to potential customers and entities looking to reduce postage costs and increase efficiencies.   Summary of Results   We believe that our success will continue to depend in large part on our ability to (a) grow revenues, (b) manage our operating expenses, (c) add quality customers to our client base, (d) meet evolving customer requirements, (e) adapt to technological changes in an emerging market, and (f) assimilate current and future acquisitions of companies and customer portfolios. We will continue to invest in our sales force and technology platforms to drive revenue growth. In particular, we are focused on growing our ACH merchants, adding new software integrators, growing our electronic bill presentment, document composition, document decomposition, printing and mailing services business while providing incremental services to existing merchants. In addition to our near-term growth opportunities, we are focused on leveraging and optimizing the infrastructure of the organization allowing expansion of our payment processing and mail and printing capabilities without significantly increasing our operating costs.   We believe that the number of credit card transactions processed, ACH transaction counts, prepaid card volumes and total card volumes are the most critical measures to gauge the state of our business. During the third quarter of 2022, the number of credit card transactions processed by us increased by 41% versus the third quarter of 2021.  The volume of credit card dollars processed during the third quarter of 2022 increased by 7% compared to the same time period in 2021. Both the number of credit card transactions and dollars processed by us during the three months ended September 30, 2022 were the highest in our history.  The continued growth in credit card metrics was primarily attributable to our PayFac strategy to drive increased penetration across multiple industries including healthcare and legal.    ACH (eCheck) transaction counts during the third quarter of 2022 decreased by 4% compared to the third quarter of 2021. Returned check transactions processed during the third quarter of 2022 increased by 72% compared to the third quarter of 2021.  Electronic check dollars processed during the third quarter of 2022 decreased by 36% compared to the third quarter of 2021. The decreases in eCheck transactions and electronic check dollar volumes processed were primarily attributable to significantly higher cryptocurrency activity levels in the prior year period versus the current year period. Increases in returned check transactions were primarily attributable to the continued recovery of the consumer lending market following its decline due to COVID-19.   Prepaid card load volumes processed during the third quarter of 2022 decreased by 41% compared to the third quarter of 2021. Prepaid card transaction counts processed during the third quarter of 2022 increased by 5% compared to the third quarter of 2021. Prepaid card purchase volume during the third quarter of 2022 decreased by 26% compared to the third quarter of 2021. This decrease occurred primarily due to the continued wind down of government assistance programs including organizations such as New York City Economic Development Corporation, City of Houston, Harris County, TX, Open Society International (City of Baltimore), and Greater Washington Community Foundation (Washington DC) with their vaccine incentive and cash disbursement programs.  We continue to support numerous guaranteed income programs including the Arlington Community Foundation, E.A.T (Equity and Transformation) Chicago, and Hudson UP, the City of Denver's Basic Income Project.   Total dollar volumes processed across all business lines in the third quarter of 2022 were $2.4 billion compared to $2.7 billion processed in the third quarter of 2021 primarily as a result of the decrease in cryptocurrency activity and the winding down of COVID-19 government assistance programs.   Critical Accounting Policies   Our management’s discussion and analysis of our financial condition and results of operations is based upon our interim condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to the reported amounts of revenues and expenses, bad debt, investments, intangible assets, income taxes, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions or conditions. We consider the accounting policies described in Note 1 to the Notes to the Interim Condensed Consolidated Financial Statements 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 Interim Condensed Consolidated Financial Statements, Note 1, Basis of Presentation.   9 Table of Contents   Key Business Metric - Non-GAAP Financial Measures   This filing includes non-GAAP financial measures, EBITDA and adjusted EBITDA, as defined in Regulation G of the Securities and Exchange Act of 1934, as amended. The Company reports its financial results in compliance with GAAP, but believes that also discussing non-GAAP financial measures provides investors with financial measures it uses in the management of its business. The Company defines EBITDA as operating income (loss), before interest, taxes, depreciation and amortization of intangibles. The Company defines adjusted EBITDA as EBITDA, as defined above, plus non-cash stock option costs and certain non-recurring items, such as costs related to acquisitions. These measures may not be comparable to similarly titled measures reported by other companies. Management uses EBITDA and adjusted EBITDA as indicators of the Company's operating performance and ability to fund acquisitions, capital expenditures and other investments and, in the absence of refinancing options, to repay debt obligations.   Management believes EBITDA and adjusted EBITDA are helpful to investors in evaluating the Company's operating performance because non-cash costs and other items that management believes are not indicative of its results of operations are excluded. EBITDA and adjusted EBITDA are supplemental non-GAAP measures, which have limitations as an analytical tool. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Non-GAAP financial measures do not reflect a comprehensive system of accounting, may differ from GAAP measures with the same names, and may differ from non-GAAP financial measures with the same or similar names that are used by other companies.    We reported an adjusted EBITDA loss of  $0.5 million for the quarter ended September 30, 2022, as compared to an adjusted EBITDA of $1.2 for the same period in the prior year. The increase in adjusted EBITDA loss in the current quarter was attributable to increases in SG&A combined with reduced profit margins.   We reported an adjusted EBITDA loss of  $1.4 million for the nine months ended September 30, 2022, as compared to an adjusted EBITDA of $2.7 million for the same period in the prior year. The increase in adjusted EBITDA loss in the current year was attributable to increases in SG&A combined with reduced profit margins.   The following table is a reconciliation of Net Income to EBITDA for the three and nine months ended September 30, 2022 and 2021.       Three Months Ended September 30,     Nine Months Ended September 30,       2022     2021     2022     2021                                     Reconciliation from Operating income (Loss) to Adjusted EBITDA:                                 Operating income (Loss)   $ (1,701,555 )   $ 210,947     $ (5,123,616 )   $ (153,974 ) Depreciation and amortization     640,599       634,912       2,163,468       1,884,268   EBITDA     (1,060,956 )     845,859       (2,960,148 )     1,730,294   Non-cash stock-based compensation expense, net     515,992       343,567       1,540,375       988,567   Adjusted EBITDA   $ (544,964 )   $ 1,189,426     $ (1,419,773 )   $ 2,718,861                                                                       Calculation of Adjusted EBITDA margins:                                 Revenues   $ 16,395,760     $ 15,821,070     $ 50,722,789     $ 44,515,761   Adjusted EBITDA     (544,964 )     1,189,426       (1,419,773 )     2,718,861   Adjusted EBITDA margins     (3.3 )%     7.5 %     (2.8 )%     6.1 %   10 Table of Contents   Results of Operations   Revenues   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 and the program management and processing of prepaid debit cards. With the acquisition of the assets of IMS in December 2020, we now offer additional services relating to electronic bill presentment, document composition, document decomposition and printing and mailing services through our wholly-owned Output Solutions subsidiary.       Three Months Ended September 30,       2022     2021     $ Change     % Change                                     ACH and complementary service revenue   $ 3,242,794     $ 3,733,453     $ (490,659 )     (13 )% Credit card revenue     6,842,065       6,509,344       332,721       5 % Prepaid card services revenue     1,576,871       2,004,657       (427,786 )     (21 )% Output solutions revenue     4,734,030       3,573,616       1,160,414       32 % Total Revenue   $ 16,395,760     $ 15,821,070     $ 574,690       4 %       Nine Months Ended September 30,       2022     2021     $ Change     % Change                                     ACH and complementary service revenue   $ 10,985,722     $ 10,813,806     $ 171,916       2 % Credit card revenue     20,495,984       18,791,129       1,704,855       9 % Prepaid card services revenue     5,733,428       3,968,764       1,764,664       44 % Output solutions revenue     13,507,655       10,942,062       2,565,593       23 % Total Revenue   $ 50,722,789     $ 44,515,761     $ 6,207,028       14 %   Revenues for the quarter ended September 30, 2022 increased by 4% to $16.4 million, as compared to $15.8 million for the quarter ended September 30, 2021 due to continued traction and growth in our PayFac and Output Solutions lines of business, despite declines in both our Prepaid, and ACH and complimentary services business sectors. These declines were a result of  our ACH business achieving a record 2021 quarter when cryptocurrency activity was substantially higher as compared with the same period in 2022, along with the wind down of COVID-19 relief programs which were at their peak in the third and fourth quarter of 2021.   Revenues for the nine months ended September 30, 2022 increased by 14% to $50.7 million, as compared to $44.5 million for the nine months ended September 30, 2021 primarily as a result of continued growth in our prepaid card services category, and strong performance from our wholly-owned Output Solutions subsidiary.   Cost of Services   Cost of services includes the cost of personnel dedicated to the creation and maintenance of connections to third-party payment processors and the fees paid to such third-party providers for electronic payment processing services. Through our contractual relationships with our payment processors and sponsoring banks, we process ACH and debit, credit or prepaid card transactions on behalf of our customers and their consumers. 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 service fees also include fees paid to referral agents and partners.   Cost of services increased by $1.5 million, or 13%, to $13.3 million for the quarter ended September 30, 2022, as compared to $11.8 million for the same period in the prior year.    Cost of services increased by $7.4 million, or 22%, to $40.8 million for the nine months ended September 30, 2022, as compared to $33.4 million for the same period in the prior year.    Increases in cost of services in both the three and nine months ended September 30, 2022 as compared to the same periods a year ago were due to proportionally greater revenue growth in lower margin business lines.   11 Table of Contents   Gross Profit   Gross profit is the net profit existing after the cost of services.   Gross profits decreased by 22% to $3.1 million for the quarter ended September 30, 2022, as compared to $4.0 million for the same period in the prior year. Similarly, the gross margin percentage was 19.1% for the quarter ended September 30, 2022 as compared to 25.5% in the prior year period. The decrease in gross profits and margin percentage in the quarter ended September 30, 2022, as compared to the same period during the prior year, was primarily attributable to increased revenue contribution from business lines with lower profit margins, as well as decreased ACH and complementary service revenues, a higher margin business.   Gross profits decreased by 11% to $9.9 million for the nine months ended September 30, 2022, as compared to $11.1 million for the same period in the prior year. Similarly, the gross margin percentage was 19.5% for the nine months ended September 30, 2022 as compared to 24.9% in the prior year period. The decrease in gross profits and margin percentage in the nine months ended September 30, 2022, as compared to the prior year was primarily attributable to increased revenue contribution from business lines with lower profit margins.   Stock-based Compensation   Stock-based compensation expenses were $0.5 million for the quarter ended September 30, 2022 as compared to $0.3 million for the quarter ended September 30, 2021, an increase of 50.2% due to incremental stock compensation from new hires, along with the Company's 10-year and 3-year stock vesting for performance compensation entered into on November 18, 2021.    Stock-based compensation expenses were $1.5 million for the nine months ended September 30, 2022 as compared to $1.0 million for the nine months ended September 30, 2021, an increase of 55.8% due to incremental stock compensation from new hires, along with the Company's 10-year and 3-year stock vesting for performance compensation entered into on November 18, 2021.    Other Selling, General and Administrative Expenses   Other selling, general and administrative expenses (other SG&A) were $3.7 million for the quarter ended September 30, 2022 as compared to $2.8 million in the prior year, a 29% increase. The increase in other SG&A for the quarter ended September 30, 2022 reflects continued investments in our ACH, PayFac, Prepaid and Output Solutions business lines, a substantial portion of which represents an investment in strengthening our infrastructure to support our current growth. These investments include preparation for increased service requirements for growing card holders in our prepaid line of business, security and IT infrastructure, as well as staffing and employee retention.    Other selling, general and administrative expenses (other SG&A) were $11.3 million for the nine months ended September 30, 2022 as compared to $8.3 million in the prior year, a 36% increase. The increase in other SG&A for the nine months ended September 30, 2022 reflects continued investments in our ACH, PayFac, Prepaid and Output Solutions business lines, a substantial portion of which represents an investment in strengthening our infrastructure to support our current growth. These investments include preparation for increased service requirements for growing card holders in our prepaid line of business, security and IT infrastructure, as well as staffing and employee retention.   Depreciation and Amortization     Depreciation and amortization expense consist of the reduction in value of our tangible and intangible assets over their useful life. These assets include property, plant, and equipment, along with intangible assets acquired through acquisition, or developed as internal use software.   Depreciation and amortization totaled $0.6 million and $0.6 million for the quarters ended September 30, 2022 and September 30, 2021, respectively. Depreciation and amortization expense was flat in the quarter due to the completed amortization of intangible assets in the third quarter, reducing overall depreciation and amortization expenses to the same levels they were in the same period a year ago.    Depreciation and amortization totaled $2.2 million and $1.9 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. This change was due primarily to the overall increase in intangible assets being amortized versus the same period a year ago.    Other Income (Expense)   Other income and expense, net was $1,785 for the quarter ended September 30, 2022 compared to $287 for the quarter ended September 30, 2021. Lower interest-bearing merchant reserves and lower interest rates drove the lower interest income as well as interest expense associated with our equipment loan.   Other income and expense, net was $1,231 for the nine months ended September 30, 2022 compared to $3,439 for the nine months ended September 30, 2021. Lower interest-bearing merchant reserves and lower interest rates drove the lower interest income as well as interest expense associated with our equipment loan.   Net Income (Loss)   We reported a net loss of $1.8 million for the quarter ended September 30, 2022, as compared to a net income of $0.1 million for the same period in the prior year. The increase in net loss in the current quarter was attributable to increases in SG&A combined with reduced profit margins.   We reported a net loss of $5.3 million for the nine months ended September 30, 2022, as compared to a net loss of $0.4 million for the same period in the prior year. The increase in net loss in the current quarter was attributable to increases in SG&A combined with reduced profit margins.   We may incur future operating losses. To maintain, grow and sustain profitability, we must, among other things, continue to incrementally grow and maintain our customer base, sell our ACH, credit card, prepaid product offerings and output solutions offerings to existing and new customers, implement successful marketing strategies, maintain and upgrade our technology and transaction-processing systems, provide superior customer service, respond to competitive developments, attract, retain and motivate personnel, and respond to unforeseen industry developments among other factors.   Liquidity and Capital Resources   Our primary sources of liquidity are available cash and cash equivalents and cash flows provided by operations. As of September 30, 2022, we had cash and cash equivalents of  $4.6 million. For the nine months ended September 30, 2022, cash used in operations was $22.8 million. We expect available cash and cash equivalents and internally generated funds to be sufficient to support working capital needs, capital expenditures (including acquisitions), and our debt service obligations. In addition, we may also receive proceeds, if an opportunity presents itself,  from the sale of assets and/or the sale of debt or equity securities, although we may not be able to complete such a sale or any such financing on terms acceptable to us, if at all. We believe we have sufficient liquidity to operate for at least the next 12 months from the date of filing this report.   We reported a net loss of $1.8 million for the quarter ended September 30, 2022. At September 30, 2022, we had an accumulated deficit of $70.7 million. Additionally, we had working capital of $5.6 million and $8.8 million at September 30, 2022 and December 31, 2021, respectively.   Cash Flows   Net cash used by operating activities, including merchant reserve funds, prepaid card load assets, customer deposits and net operating lease assets for the nine months ended September 30, 2022 was $22.8 million, as compared to net cash provided by operating activities of $8.7 million for the nine months ended September 30, 2021. Excluding merchant reserves, prepaid card load assets, customer deposits and lease right of use assets and liabilities, our cash used by operating activities was $1.1 million and cash provided by operating activities was $2.0 for the nine months ended September 30, 2022 and September 30, 2021, respectively. We continue to invest resources and infrastructure in our business to achieve scale across all business lines.   Net cash used by investing activities was $642,764 and $999,493 for the nine months ended September 30, 2022 and September 30, 2021, respectively. The primary drivers of our investing activities were capital expenditures associated with capitalized software development costs and other capital investments associated with growing our business lines and associated employee counts. The decrease in cash used by investing activities was primarily attributable to the reduced amount of fixed asset purchases relative to the same period a year ago.   Net cash used by financing activities for the nine months ended September 30, 2022 was $935,513 and net cash used by financing activities for the nine months ended September 30, 2021 was $58,800, respectively. The increase in cash used by financing activities was due to the Company's stock buyback program, and increased quantity of treasury stock purchased in 2022. The 2021 cash used by financing activities included the net proceeds from our equipment loan offset by treasury stock transactions.    12 Table of Contents   Material Trends and Uncertainties   Please refer to Note 9 of our financial statements included in this report that describe certain risks in connection with the Covid-19 pandemic.   Off-Balance Sheet Arrangements   We currently 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.   Item 3. 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.   Item 4. CONTROLS AND PROCEDURES.   Evaluation of Disclosure Controls and Procedures   Our management evaluated, with the participation of our Chief Executive and Chief Financial Officers, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report on Form 10-Q. Based on that evaluation, our Chief Executive and Chief Financial Officers concluded that our disclosure controls and procedures as of September 30, 2022 were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive and Chief Financial Officers, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our evaluation of disclosure controls and procedures included an evaluation of certain components of our internal control over financial reporting. Management’s assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance that the control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met.   Changes in Internal Control over Financial Reporting   There was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.   13 Table of Contents   PART II – OTHER INFORMATION   Item 1. Legal Proceedings.   KDHM, LLC   On September 1, 2021, KDHM, LLC sued PDS Acquisition Corp, now known as Usio Output Solutions, Inc., claiming a breach of the asset purchase agreement executed by the parties on December 14, 2020. The lawsuit alleges that due to a mistake, accident, or inadvertence, certain customer deposits in the amount of $317,000 were improperly transferred to us.   We believe that plaintiff's claims in the lawsuit have no merit and contradict the express terms of the asset purchase agreement. As a result of this post sale dispute, we discovered that KDHM, LLC, and its principals, made certain misrepresentations and breached the terms of the asset purchase agreement.    On September 28, 2021, we filed an answer generally denying plaintiff’s allegations. On October 5, 2021, we filed a counterclaim and third-party petition. Therein, we allege that neither KDHM nor its principals disclosed that KDHM was not accounting for the customer deposits in accordance with Generally Accepted Accounting Principles.  Yet, KDHM, and third-party defendants its principals Henry Minten and Thomas Dowe, affirmatively represented and warranted in section 3.1(e) of the agreement that “[t]Annual Financial Statements and the Interim Financial Statements have been prepared from the books and records of Seller in accordance with GAAP applied on a consistent basis.”    We also discovered that KDHM by and through its principals failed to disclose that $305,000 in additional customer deposits existed and these deposits were not conveyed to us as required by the agreement.  KDHM, Minten and Dowe provided us with fraudulent and misleading profit and loss statements that did not disclose these additional customer deposits.  KDHM and the defendants do not dispute that these additional customer deposits exist and that they were purchased by Usio.  However, despite a written representation that these funds would be returned, KDHM and its principal have held these funds hostage.  Section 2.1(b)(x) of the agreement provides that the purchased assets includes “All of Seller’s deposits from its customer, including without limitation, those customer deposits listed on Schedule 2.1(b)(xi) of the Disclosure Schedules.”  Finally, we discovered that KDHM did not provide us with all customer lists, which are identified as purchased asset under the agreement.  We demanded the missing customer lists, but they have yet to be provided to us per the agreement.   In our counterclaims and third-party petition, we assert causes of action for fraud, breach of contract and conversion.  At this time, the parties have not engaged in any written discovery or depositions and no trial date has been set.   We consider the risk of loss as remote related to this lawsuit.   Aside from the proceedings described above, we may be involved in legal matters arising in the ordinary course of business from time to time. While we believe that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which we are or could become involved in litigation will not have a material adverse effect on our business, financial condition or results of operations.   Item 1A. RISK FACTORS.   There have been no material changes from risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 17, 2022.   14 Table of Contents   Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.   Recent Sales of Unregistered Securities   We did not issue unregistered securities during the quarter ended September 30, 2022.   Purchases of Equity Securities by the Issuer and Affiliated Purchasers   On November 2, 2016, we announced that our Board of Directors authorized the repurchase of up to $1 million of our common shares from time to time on the open market, in block transactions, or in privately negotiated transactions. On January 9, 2018, the Board of Directors added an additional $2 million to the buyback plan. The program began on November 16, 2016 and ended on September 29, 2019. At September 29, 2019 when the program ended, $1,374,049 was available under the repurchase plan. On November 7, 2019, the Board of Directors approved the renewal of the share buy-back program. The Board approved a limit of $1,420,000 which was rolled over from the prior buy-back program with a three-year duration. On May 13, 2022, the Board of Directors authorized a renewal of the buy-back program, with a limit up to $4 million of the Company's common stock with a three year duration. The new buyback program terminates on the earliest of May 15, 2025, the date the funds are exhausted, or the date the Board of Directors, at its sole discretion, terminates or suspends the program. The program is used for the purchase of stock from employees and directors, and for open-market purchases through a broker. During the three months ended September 30, 2022, we made the following stock repurchases:   Period   (a) Total number of shares (or units) purchased     (b) Average price paid per share (or unit)     (c) Total number of shares (or units) purchased as part of publicly announced plans or programs     (d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs                                     July 1 - July 31, 2022     69,925     $ 2.32       1,267,466     $ 3,352,324   August 1 - August 31, 2022     73,667     $ 2.16       1,341,133     $ 3,194,312   September 1 - September 30, 2022     12,776     $ 1.34       1,353,909     $ 3,177,280   Total     156,368                     $ 3,177,280     Item 3. Defaults Upon Senior Securities.   None.   Item 4. MINE SAFETY DISCLOSURES.   Not applicable.   Item 5. OTHER INFORMATION.   None.   15 Table of Contents   Item 6. Exhibits.   Exhibit     Number   Description       3.1   Amended and Restated Articles of Incorporation (included as exhibit 3.1 to the Form 10-KSB filed March 31, 2006, and incorporated herein by reference).       3.2   Amendment to Restated Articles of Incorporation (included as exhibit A to the Schedule 14C filed April 18, 2007, and incorporated herein by reference).       3.3   Certificate of Change Filed Pursuant to NRS 78.209 (included as exhibit 3.1 to the Form 8-K filed July 23, 2015, and incorporated herein by reference).       3.4   Articles of Amendment of Restated Articles of Incorporation of Usio, Inc., as amended, effective June 26, 2019 (included as exhibit 3.1 to the Form 8-K filed July 1, 2019, and incorporated herein by reference).       3.5   Amended and Restated By-laws (included as exhibit 3.2 to the Form 10-KSB filed March 31, 2006, and incorporated herein by reference).       3.6   Amendment to the Amended and Restated By-laws (included as exhibit A to Schedule 14C filed April 18, 2007, and incorporated herein by reference).       10.1   Employment Agreement between the Company and Michael R. Long, dated February 27, 2007 (included as exhibit 10.1 to the Form 8-K filed March 2, 2007, and incorporated herein by reference).       10.2   Employment Agreement between the Company and Louis A. Hoch, dated February 27, 2007 (included as exhibit 10.2 to the Form 8-K filed March 2, 2007, and incorporated herein by reference).       10.3   First Amendment to Employment Agreement between the Company and Michael R. Long, dated November 12, 2009 (included as exhibit 10.15 to the Form 10-Q filed November 16, 2009, and incorporated herein by reference).       10.4   First Amendment to Employment Agreement between the Company and Louis A. Hoch, dated November 12, 2009 (included as exhibit 10.16 to the Form 10-Q filed November 16, 2009, and incorporated herein by reference).       10.5   Second Amendment to Employment Agreement between the Company and Michael R. Long, dated April 12, 2010 (included as exhibit 10.16 to the Form 10-K filed April 15, 2010, and incorporated herein by reference).       10.6   Second Amendment to Employment Agreement between the Company and Louis A. Hoch, dated April 12, 2010 (included as exhibit 10.17 to the Form 10-K filed April 15, 2010, and incorporated herein by reference).       10.7   Bank Sponsorship Agreement between the Company and University National Bank, dated August 29, 2011 (included as exhibit 10.18 to the Form 10-K filed April 3, 2012, and incorporated herein by reference).       10.8   Third Amendment to Employment Agreement between the Company and Michael R. Long, dated January 14, 2011 (included as exhibit 10.19 to the Form 10-K filed April 3, 2012, and incorporated herein by reference).       10.9   Third Amendment to Employment Agreement between the Company and Louis A. Hoch, dated January 14, 2011 (included as exhibit 10.20 to the Form 10-K filed April 3, 2012, and incorporated herein by reference).       10.10   Fourth Amendment to Employment Agreement between the Company and Michael R. Long, dated July 2, 2012 (included as exhibit 10.18 to the Form 10-Q filed August 20, 2012, and incorporated herein by reference).       10.11   Fourth Amendment to Employment Agreement between the Company and Louis A. Hoch, dated July 2, 2012 (included as exhibit 10.19 to the Form 10-Q filed August 20, 2012, and incorporated herein by reference).   10.12   Asset Purchase Agreement, dated December 22, 2014, by and between Akimbo Financial, Inc. and Payment Data Systems, Inc. (included as exhibit 10.1 to the Form 8-K filed December 24, 2014, and incorporated herein by reference).       10.13   Bank Sponsorship Agreement between the Company and Metropolitan Commercial Bank, dated December 11, 2014 (included as exhibit 10.26 to the Form 10-K filed March 30, 2015, and incorporated herein by reference).   16 Table of Contents         10.14   Fifth Amendment to Employment Agreement between the Company and Michael R. Long, dated August 3, 2016 (included as exhibit 10.1 to the Form 8-K filed August 9, 2016, and incorporated herein by reference).       10.15   Fifth Amendment to Employment Agreement between the Company and Louis A. Hoch, dated August 3, 2016 (included as exhibit 10.2 to the Form 8-K filed August 9, 2016, and incorporated herein by reference).   10.16   Sixth Amendment to Employment Agreement between the Company and Michael R. Long, dated September 8, 2016 (included as exhibit 10.1 to the Form 8-K filed September 14, 2016, and incorporated herein by reference).       10.17   Sixth Amendment to Employment Agreement between the Company and Louis A. Hoch, dated September 8, 2016 (included as exhibit 10.2 to the Form 8-K filed September 14, 2016, and incorporated herein by reference).       10.18   Employment agreement between Tom Jewell and Payment Data Systems, Inc., dated January 6, 2017 (included as exhibit 10.1 to the Form 8-K filed January 6, 2017, and incorporated herein by reference).       10.19   Independent Director Agreement, dated May 5, 2017, by and between Payment Data Systems, Inc. and Brad Rollins (included as exhibit 10.1 to the Form 8-K, filed May 11, 2017, and incorporated herein by reference).       10.20†   Membership Interest Purchase Agreement, dated September 1, 2017, by and among Payment Data Systems, Inc., Singular Payments, LLC and Vaden Landers (included as exhibit 10.1 to the Form 8-K, filed September 8, 2017, and incorporated herein by reference).   10.21   First Amendment to Employment Agreement, dated November 27, 2017, by and between Payment Data Systems, Inc. and Tom Jewell (included as exhibit 10.1 to the Form 8-K, filed November 28, 2017, and incorporated herein by reference).       10.22   Lease Agreement dated February 9, 2018 between Payment Data Systems, Inc. and Blauners Paesanos Parkway LP (included as exhibit 10.43 to the Form 10-K, filed March 30, 2018, and incorporated herein by reference).       10.23   Lease Agreement between Payment Data Systems, Inc. and RP Circle 1 Building, LLC dated December 11, 2017 (included as exhibit 10.44 to the Form 10-K, filed March 30, 2018, and incorporated herein by reference).       10.24   Second Amendment to Employment Agreement between the Company and Tom Jewell, dated November 28, 2018 (included as exhibit 10.1 go the Form 8-K filed November 28, 2018, and incorporated herein by reference).       10.25   Independent Director Agreement dated April 1, 2019, by and between Payment Data Systems, Inc. and Blaise Bender (included as exhibit 10.2 to the Form 8-K filed April 3, 2019, and incorporated herein by reference).       10.26+   Securities Purchase Agreement between Usio, Inc. and Topline Capital Partners, L.P. dated July 1, 2020 (included as exhibit 10.1 to the Form 8-K filed on July 6, 2020, and incorporated herein by reference).       10.27   2015 Equity Incentive Plan (included as Appendix B to the Definitive Proxy Statement filed June 5, 2015, and incorporated herein by reference).       10.28   Warrant Agreement between the Company and University FanCards, LLC dated August 21, 2018 (included as exhibit 10.41 to the Form 10-Q filed on November 12, 2020, and incorporated herein by reference).       10.29   Independent Director Agreement dated August 29, 2020, by and between the Company and Ernesto Beyer (included as exhibit 10.1 to the Form 8-K filed on August 31, 2020, and incorporated herein by reference).       10.30   Underwriting Agreement between the Company and Ladenburg Thalmann & Co., Inc. as representative, dated September 23, 2020 (included as exhibit 1.1 to the Form 8-K filed on September 25, 2020, and incorporated herein by reference).       10.31   Third Amendment to the Employment Agreement between the Company and Tom Jewell, effective October 12, 2020 (included as exhibit 10.1 to the Form 8-K filed on October 28, 2020, and incorporated herein by reference).       10.32+   Asset Purchase Agreement between the Company and Information Management Solutions, LLC dated December 15, 2020 (included as exhibit 10.2 to the Form 8-K filed on December 18, 2020, and incorporated herein by reference).       10.33+   Warrant Agreement between the Company and Information Management Solutions, LLC dated December 15, 2020 (included as exhibit 10.2 to the Form 8-K filed on December 18, 2020, and incorporated herein by reference).   17 Table of Contents   10.34   Lease agreement between Information Management Systems, LLC and Industrial Properties Corp. dated June 16, 2011 (included as exhibit 10.40 to the Form 10-K filed on March 30, 2021, and incorporated herein by reference).       10.35   First amendment to lease between Information Management Systems, LLC and Industrial Properties Corp. dated April 4, 2013 (included as exhibit 10.41 to the Form 10-K filed on March 30, 2021, and incorporated herein by reference).       10.36   Second amendment to lease between Information Management Systems, LLC and Industrial Properties Corp. dated March 5, 2018 (included as exhibit 10.42 to the Form 10-K filed on March 30, 2021, and incorporated herein by reference).       10.37   Third amendment to lease between the Company as successor to Information Management Systems, LLC and ICON IPC TX Property Owner Pool 6 West/Southwest, LLC, dated December 22, 2020 (included as exhibit 10.43 to the Form 10-K filed on March 30, 2021, and incorporated herein by reference).   10.38   Lease agreement between the Company and Smartyfi, LLC for Austin offices dated January 1, 2021 (included as exhibit 10.44 to the Form 10-K filed on March 30, 2021, and incorporated herein by reference).       10.39   First amendment to lease between the Company and Paesanos Office Building, LLC for San Antonio offices dated March 15, 2021 (included as exhibit 10.45 to the Form 10-K filed on March 30, 2021, and incorporated herein by reference).       10.40   Seventh Amendment to Employment Agreement between Usio, Inc. and Louis A. Hoch, dated April 18, 2021 (included as exhibit 10.1 to the Form 8-K filed on April 21, 2021, and incorporated herein by reference).       10.41   Fourth Amendment to Employment Agreement between Usio, Inc. and Tom Jewell, dated April 18, 2021 (included as exhibit 10.2 to the Form 8-K filed on April 21, 2021, and incorporated herein by reference).       10.42   Second Amendment to lease between the Company and Paesanos Office Building, LLC for San Antonio offices, dated October 19,2021 (included as exhibit 10.43 to the Form 10-Q filed on November 10, 2021, and incorporated herein by reference.       10.43   Securities Purchase Agreement between the Company and Voyager Digital Holdings, Inc. dated November 19, 2021 (included as exhibit 10.1 to the Form 8-K filed on November 23, 2021, and incorporated herein by reference).       10.44   Fifth Amendment to the Employment Agreement between the Company and Tom Jewell, dated November 22, 2021 (included as exhibit 10.2 to the Form 8-K filed on November 23, 2021, and incorporated herein by reference).       10.45   Independent Director Agreement dated June 16, 2022, by and between the Company and Michelle Miller (Included as exhibit 10.1 to the Form 8-K filed on June 22, 2022, and incorporated herein by reference).       10.46   Eighth Amendment to Employment Agreement between Usio, Inc. and Louis A. Hoch, dated June 29, 2022 (included as exhibit 10.1 to the Form 8-K filed on July 6, 2022, and incorporated herein by reference).       14.1   Code of Ethics (included as exhibit 14.1 to the Form 10-K filed March 30, 2004, and incorporated herein by reference).       16.1   Letter from Ernst and Young LLP to the Securities and Exchange Commission dated February 10, 2004 (included as exhibit 16 to the Form 8-K filed February 11, 2004, and incorporated herein by reference).       31.1   Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).       31.2   Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).       32.1   Certification of the Chief Executive Officer and the /Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).       101.INS   Inline XBRL Instance Document (filed herewith).   101.SCH   Inline XBRL Taxonomy Extension Schema Document (filed herewith).       101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).       101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).       101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith).       101.PRE   Inline XBRL Taxonomy Presentation Linkbase Document (filed herewith).       104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)       †   Confidential treatment has been granted for portions of this agreement. +   The schedules to the exhibit have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K.  The Company will furnish copies of any such schedules to the SEC upon request. *   Filed herewith.   Copies of above exhibits not contained herein are available to any stockholder, upon written request to: Chief Financial Officer, Usio, Inc., 3611 Paesanos Parkway, Suite 300, San Antonio, TX 78231.   18 Table of Contents   SIGNATURES   Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.     USIO, INC             Date: November 9, 2022 By: /s/ Louis A. Hoch     Louis A. Hoch     Chief Executive Officer     (Principal Executive Officer)         Date: November 9, 2022 By: /s/ Tom Jewell     Tom Jewell     Chief Financial Officer     (Principal Accounting Officer)       19