What changed in this filing

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Item 1. Financial Statements

2023-11-08 compared with 2023-08-14 · 158 added, 351 removed, 661 unchanged (44% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2023

September 30, 2023

December 31, 2022

92 unchanged sentences

Preferred stock, $ 0.01 par value, 10,000,000 shares authorized;

- 0 - shares outstanding at June 30, 2023 (unaudited) and December 31, 2022, respectively

- 0 - shares outstanding at September 30, 2023 (unaudited) and December 31, 2022, respectively

Common stock, $ 0.001 par value, 200,000,000 shares authorized;

28,462,606 and 27,044,900 issued, and 26,362,870 and 25,097,963 outstanding at June 30, 2023 (unaudited) and December 31, 2022, respectively

28,506,406 and 27,044,900 issued, and 26,377,589 and 25,097,963 outstanding at September 30, 2023 (unaudited) and December 31, 2022, respectively

196,932  

4 unchanged sentences

Treasury stock, at cost;

2,099,736 and 1,946,937 shares at June 30, 2023 (unaudited) and December 31, 2022, respectively

2,128,537 and 1,946,937 shares at September 30, 2023 (unaudited) and December 31, 2022, respectively

( 3,974,156 )  

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

$ 21,261,706  

$ 16,215,686  

$ 42,707,950  

$ 34,327,029  

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of services

16,250,988  

12,955,782  

32,795,417  

27,557,996  

5,010,718  

3,259,904  

9,912,533  

6,769,033  

Selling, general and administrative:

Stock-based compensation

577,869  

473,701  

1,082,443  

1,024,383  

Other SG&A expenses

3,854,022  

3,848,696  

7,727,241  

7,643,842  

Depreciation and amortization

522,999  

807,934  

1,041,028  

1,522,869  

Total selling, general and administrative expenses

4,954,890  

5,130,331  

9,850,712  

10,191,094  

Operating income (loss)

55,828  

( 1,870,427 )  

61,821  

( 3,422,061 )

Operating (loss)

Other income and (expense):

Interest income

218,844  

311,772  

Interest expense

( 533 )  

( 1,084 )  

( 1,195 )  

Other income and (expense), net

218,311  

310,577  

Income (Loss) before income taxes

274,139  

( 1,870,345 )  

372,398  

( 3,422,615 )

(Loss) before income taxes

Income tax expense

69,098  

70,000  

152,524  

140,000  

Net Income (Loss)

$ 205,041  

$ ( 1,940,345 )  

$ 219,874  

$ ( 3,562,615 )

Income (Loss) Per Share

Basic income (loss) per common share:

$ 0.01  

$ ( 0.10 )  

$ 0.01  

Diluted income (loss) per common share:

$ 0.01  

$ ( 0.10 )  

$ 0.01  

(Loss) Per Share

Basic (loss) per common share:

Diluted (loss) per common share:

Weighted average common shares outstanding

20,128,429  

20,316,572  

20,125,440  

20,298,573  

26,413,329  

20,316,572  

26,410,340  

20,298,573  

See the accompanying notes to the condensed interim consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities:

Net income (loss)

$ ( 501,039 )  

$ ( 5,332,385 )

Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:

Adjustments to reconcile net (loss) to net cash provided (used) by operating activities:

905,701  

2 unchanged sentences

1,320,567  

Stock-based compensation

Employee stock-based compensation

1,644,658  

1,540,375  

Vendor stock-based compensation

32,600  

Amortization of warrant costs

20,965  

Non-cash revenue from returned common stock

Non-cash revenue from return of treasury stock

( 156,162 )  

8 unchanged sentences

106,516  

14,100  

Accounts payable and accrued expenses

8 unchanged sentences

427,044  

433,920  

Customer deposits

24,376  

221,393  

Deferred revenue

28 unchanged sentences

312,158  

Non-cash financing activities:

Non-cash financing activity:

Issuance of deferred stock compensation

6 unchanged sentences

Balance at December 31, 2022

27,044,900  

$ 195,471  

$ 94,048,603  

$ ( 3,749,027 )  

$ ( 5,697,900 )  

$ ( 70,863,049 )  

$ 13,934,098  

Issuance of common stock under equity incentive plan

1,421,250  

2,638,529  

( 2,444,054 )  

195,896  

Deferred compensation amortization

308,676  

Purchase of treasury stock costs

( 8,529 )  

Net income for the period

14,833  

Balance at March 31, 2023

28,466,150  

$ 196,892  

$ 96,687,132  

$ ( 3,757,556 )  

$ ( 7,833,278 )  

$ ( 70,848,216 )  

$ 14,444,974  

Issuance of common stock under equity incentive plan

111,456  

354,199  

( 34,452 )  

319,858  

Reversal of deferred compensation amortization that did not vest

( 115,000 )  

( 115 )  

( 188,088 )  

103,091  

Deferred compensation amortization

343,123  

Purchase of treasury stock costs

( 10,507 )  

Non-cash return of common stock

( 156,162 )  

Non-cash return of treasury stock

Net income for the period

205,041  

Balance at June 30, 2023

28,462,606  

$ 196,888  

$ 96,853,243  

$ ( 3,924,225 )  

$ ( 7,421,516 )  

$ ( 70,643,175 )  

$ 15,061,215  

Issuance of common stock under equity incentive plan

Deferred compensation amortization

Purchase of treasury stock costs

Net (loss) for the period

Balance at September 30, 2023

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  

267,856  

( 12,330 )  

255,588  

Warrant compensation costs

Deferred compensation amortization

295,092  

Purchase of treasury stock costs

( 66,494 )  

Net (loss) for the period

( 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  

258,636  

258,688  

Warrant compensation costs

Reversal of deferred compensation amortization that did not vest

( 85,000 )  

( 85 )  

( 176,465 )  

97,621  

Deferred compensation amortization

293,942  

Purchase of treasury stock costs

( 480,095 )  

Net (loss) for the period

( 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 )  

$ 15,602,053  

Issuance of common stock under equity incentive plan

Warrant compensation cost

Reversal of deferred compensation amortization that did not vest

Deferred compensation amortization

Purchase of treasury stock

Net (loss) for the period

Balance at September 30, 2022

The accompanying notes are an integral part of these consolidated financial statements.

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not  necessarily indicative of results that 

be expected for any other interim periods or the full fiscal year. References in this quarterly report to "the quarter" or the "second quarter" mean the 

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 

June 30, 2023 

September 30, 2023 

2022, as the case may be and unless otherwise noted.

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The following table presents the Company's consolidated revenues by source:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

ACH and complementary service revenue

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These prepaid card load assets are carried on the Company's balance sheet with a corresponding liability.

As the prepaid business line continues to expand, card load assets will rise as funds are sent from clients to the Company.

As clients begin to load cash onto cards, the balance of both the prepaid card asset and corresponding liability decrease.

As these balances decrease, the Company recognizes processing revenue and cardholder fees.

Customer Deposits:

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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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

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

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During the 

six months ended June 30, 2023 and the year ended 

nine months ended September 30, 2023 and the year ended 

December 31, 2022, there were 

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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 June 30, 2023 and December 31, 2022 .

The allowance for estimated doubtful accounts was $ 319,000  at September 30, 2023 and December 31, 2022 .

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

At June 30, 2023  and December 31, 2022, inventory consisted primarily of printing and paper supplies used for Output Solutions.

At September 30, 2023  and December 31, 2022, inventory consisted primarily of printing and paper supplies used for Output Solutions.

Accounting for Internal Use Software:

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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 six  months ended June 30, 2023 and June 30, 2022 , the Company capitalized software costs of $ 378,197 and $ 246,210 , respectively.

During the nine  months ended September 30, 2023 and September 30, 2022 , the Company capitalized software costs of $ 513,593 and $ 438,128 , respectively.

Valuation of Long-Lived and Intangible Assets:

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No impairment losses were recorded in 2022  or during the 

six months ended June 30, 2023 .

nine months ended September 30, 2023 .

Management is not aware of any impairment changes that may currently be required;

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Estimates for processing losses are variable based on the volume of transactions processed and could increase or decrease accordingly.

At June 30, 2023 and December 31, 2022 , the Company’s reserve for processing losses was $ 769,789  and $ 755,494 , respectively.

At September 30, 2023 and December 31, 2022 , the Company’s reserve for processing losses was $ 793,528  and $ 755,494 , respectively.

Legal Proceedings:

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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 June 30, 2023  and 2022 , operating lease expenses totaled $ 257,038  and $ 239,105 , respectively.

For each of the three months ended September 30, 2023  and 2022 , operating lease expenses totaled $ 132,574  and $ 152,401 , respectively.

Accrued Expenses

Accrued expenses consisted of the following balances:

June 30, 2023

September 30, 2023

December 31, 2022

Accrued commissions

$ 2,391,712  

$ 1,479,580  

Reserve for processing losses

769,789  

755,494  

Other accrued expenses

139,764  

821,167  

Accrued taxes

160,610  

320,854  

Accrued salaries

340,979  

344,013  

Total accrued expenses

$ 3,802,854  

$ 3,721,108  

Equipment Loan

3 unchanged sentences

Principal payments for the three months ended 

June 30, 2023  and 

2022 were $ 14,171  and $ 13,622 , respectively.

September 30, 2023  and 

2022 were $ 14,312 and $ 13,762 , respectively, and are reflected on the Company's Condensed Consolidated Statement of Cash Flows.

Stockholders' Equity

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The fair value of the warrants was $ 135,764 , which was amortized over the life of the warrants as a reduction of revenues.

The reduction of revenues as a result of this amortization recorded for the six months ended June 30, 2023 and 2022 was $ 0 and $ 17,970 , respectively.

The reduction of revenues as a result of this amortization recorded for the nine months ended September 30, 2023 and 2022 was $ 0 and $ 20,965 , respectively.

On July 31, 2022, the remaining, unvested warrants expired, and the Company is no longer recording a reduction of revenues associated with the amortization of their fair value.

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 ("Management Solutions"). The Management Solutions' warrants vest annually over 3 years in three equal tranches beginning on December 15, 2021 

and a term of five years in three equal tranches beginning on December 15, 2021 

and become fully vested on December 15, 2023.

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

The amortization of these warrants, which is included in the total amortization expense of the customer list intangible asset, totaled $ 55,228 in the six months ended 

June 30, 2023 and 2022 .

Net Income (Loss) Per Share

Basic income (loss) per share (EPS) was computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.

The amortization of these warrants, which is included in the total amortization expense of the customer list intangible asset, totaled $ 82,842 in the nine months ended 

September 30, 2023 and 2022 .

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 income (loss) for the 

three and six months ended June 30, 2023 and June 30, 2022 .

Three Months Ended June 30,

Six Months Ended June 30,

Numerator for basic and diluted income (loss) per share, net income (loss) available to common shareholders

$ 205,041  

$ ( 1,940,345 )  

$ 219,874  

$ ( 3,562,615 )

Denominator for basic income (loss) per share, weighted average shares outstanding

20,128,429  

20,316,572  

20,125,440  

20,298,573  

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, 2023 and September 30, 2022 .

Three Months Ended September 30,

Nine Months Ended September 30,

Numerator for basic and diluted (loss) per share, net (loss) available to common shareholders

Denominator for basic (loss) per share, weighted average shares outstanding

Effect of dilutive securities

6,284,900  

Denominator for diluted earnings per share, adjust weighted average shares and assumed conversion

26,413,329  

20,316,572  

26,410,340  

20,298,573  

Basic income (loss) per common share

$ 0.01  

$ ( 0.10 )  

$ 0.01  

Diluted income (loss) per common share and common share equivalent

$ 0.01  

$ ( 0.10 )  

$ 0.01  

The awards and options to purchase shares of common stock that were outstanding at June 30, 2023 and June 30, 2022 that were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive, are as follows:

Six Months Ended June 30,

Basic (loss) per common share

Diluted (loss) per common share and common share equivalent

The awards and options to purchase shares of common stock that were outstanding at September 30, 2023 and September 30, 2022 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,

Anti-dilutive awards and options

5,159,902  

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.

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December 31, 2022 , the Company had available net operating loss carryforwards of approximately $ 23.9 million.

Net operating loss carryforwards generated during or 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 generated after 2017 do not expire.

Net operating loss carryforwards totaling $ 9.1 million expired in 

The schedule below outlines when the Company's net operating losses for 2017 and prior years were generated and the year they 

1,621,096  

1,788,157  

1,350,961  

1,740,724  

918,960  

835,322  

429,827  

504,862  

474,465  

1,267,336  

$ 10,931,710  

Management is not aware of any tax positions that would have a significant impact on the Company’s financial position.

Related Party Transactions

During the six months ended June 30, 2023 and 

June 30, 2022 , the Company purchased a total of $ 18,148 and $ 19,929 , respectively, of corporate imprinted sportswear, promotional items, and caps from Angry Pug Sportswear.

During the nine months ended September 30, 2023 and 

September 30, 2022 , the Company purchased a total of $ 3,483 and $ 22,478 , respectively, of corporate imprinted sportswear, promotional items, and caps from Angry Pug Sportswear.

Louis Hoch, the Company’s Chairman of the Board, President, Chief Executive Officer and Chief Operating Officer, is a 50 % owner of Angry Pug Sportswear.

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Under the terms of this agreement, Mr.

Carter will receive an annual salary of 

Carter receives an annual salary of 

$250,000,  Override/Commissions of 

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273,000 RSUs with a 

3 -year vesting period to employees and Directors as a performance bonus at an issue price of $ 1.75  per share.

three -year vesting period to employees and Directors as a performance bonus at an issue price of $ 1.75  per share.

Executive officers and Directors included in the 

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Executive officers included in the RSU grant were Louis Hoch ( 33,000  RSUs), Tom Jewell ( 21,000  RSUs), Greg Carter ( 12,000  RSUs) and Houston Frost ( 12,000  RSUs).

On March 16, 2023, the Company granted 

69,000  RSUs with a 

3 -year vesting period to Directors as a performance bonus at an issue price of $ 1.60 per share.

On March 16, 2023, the Company granted an additional 69,000  RSUs with a 

three -year vesting period to Directors as a performance bonus at an issue price of $ 1.60 per share.

Directors included in the RSU grant were Blaise Bender ( 21,000  RSUs), Brad Rollins ( 21,000  RSUs), Ernesto Beyer ( 21,000  RSUs) and Michelle Miller ( 6,000  RSUs).

The COVID- 19  pandemic has had and continues to have 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.

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.

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 reopened, 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. 

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 

The impacts and recovery from the COVID- 19  pandemic are still a work in process. To date, we do 

not  believe that the Company has been adversely impacted to the same 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.

Subsequent Events

On July 12, 2023, the Company convened its 2023 annual meeting of stockholders at which stockholders approved the proposed 2023 Employee Stock Purchase Plan, or ESPP, which gives certain employees of the Company (including certain employees of subsidiaries) an opportunity to purchase shares of the Company's common stock through the ESPP.

The offering of the securities was registered under the Securities Act of 1933, as amended, through the filing of a registration statement on Form S- 8 with the Commission on July 24, 2023.

On October 1, 2023, the Company entered into a debt arrangement to finance $ 811,819 for the purchase of an Output Solutions folder and inserter.

The loan is for a period of 66 months with a maturity date of April 5, 2029 and annual interest of 6.75 %.

Monthly principal and interest payments are required in the amount of $ 16,017 .

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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

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.

In addition, we offer customizable prepaid cards which businesses 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.

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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.

In addition to our near-term growth opportunities, we are focused on leveraging and optimizing the infrastructure of our business allowing expansion of our payment processing and mail and printing capabilities without significantly increasing our operating costs.

Total company revenues continue to grow, and net new client implementations and onboards occur regularly due to our ability to address the needs of our market.

We believe that the number of credit card transactions processed, ACH transaction counts, prepaid card volumes and total dollar volumes are the most critical measures to gauge the state of our business.

During the second quarter of 2023, the number of credit card transactions processed by us increased by 15% versus the second quarter of 2022. The volume of credit card dollars processed during the second quarter of 2023 increased by 2% compared to the same time period in 2022.

During the third quarter of 2023, the number of credit card transactions processed by us increased by 2% versus the third quarter of 2022. The volume of credit card dollars processed during the third quarter of 2023 increased by 5% compared to the same time period in 2022.

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 second quarter of 2023 decreased by 31% compared to the second quarter of 2022.

Returned check transactions processed during the second quarter of 2023 decreased by 17% compared to the second quarter of 2022. Electronic check dollars processed during the second quarter of 2023 decreased by 55% compared to the second quarter of 2022.

The decreases in eCheck transactions, returns, and electronic check dollar volumes processed were primarily attributable to our withdrawal from the cryptocurrency space following the filing for bankruptcy protection by Voyager Digital on July 6, 2022 and the subsequent decline in processing and revenues in our ACH and complementary services revenue line of business.

Prepaid card load volumes processed during the second quarter of 2023 increased by 48% compared to the second quarter of 2022.

Prepaid card transaction counts processed during the second quarter of 2023 decreased by 9% compared to the second quarter of 2022.

Prepaid card purchase volume during the second quarter of 2023 increased by 51% compared to the second quarter of 2022. This increase occurred primarily due to the continued traction, and implementation of new guaranteed income and government assistance programs, and expansion in the corporate expense and healthcare markets.

Total dollar volumes processed across all business lines in the second quarter of 2023 were $1.3 billion compared to $2.4 billion processed in the second quarter of 2022, with such decrease primarily a result of the decrease in cryptocurrency activity and the winding down of COVID-19 government assistance programs.

ACH (eCheck) transaction counts during the third quarter of 2023 decreased by 21% compared to the third quarter of 2022.

Returned check transactions processed during the third quarter of 2023 decreased by 31% compared to the third quarter of 2022. Electronic check dollars processed during the third quarter of 2023 decreased by 11% compared to the third quarter of 2022.

The decreases in eCheck transactions, returns, and electronic check dollar volumes processed were primarily attributable to a softer market for our customers, resulting in less ACH traffic.

Prepaid card load volumes processed during the third quarter of 2023 increased by 239% compared to the third quarter of 2022.

Prepaid card transaction counts processed during the third quarter of 2023 increased by 23% compared to the third quarter of 2022.

Prepaid card purchase volume during the third quarter of 2023 increased by 152% compared to the third quarter of 2022. This increase occurred primarily due to the continued traction with, and implementation of, guaranteed income and government assistance programs alongside expansion in the corporate expense and healthcare markets.

Total dollar volumes processed across all business lines in the third quarter of 2023 were $1.4 billion compared to $1.4 billion processed in the third quarter of 2022, flat over the prior year quarter.

Material Trends and Uncertainties

On July 6, 2022, our largest cryptocurrency customer, Voyager Digital, filed for bankruptcy protection and the cryptocurrency landscape encountered significant distress during 2022. Due to this bankruptcy, we lost a significant customer, and have pulled out of the cryptocurrency space, resulting in a meaningful loss of revenue and downturn in our ACH and complementary services business segment, which contributed substantial gross profit to the Company in previous periods.

Our lost revenue in the ACH and complementary services business was approximately $3 million in 2022 and $1 million in the quarter ended June 30, 2023.

Our lost revenue in the ACH and complementary services business was approximately $3 million in third and fourth quarter of 2022 and $2 million in the first and second quarter of 2023.

We continue to closely monitor the cryptocurrency environment, and the unique risks associated with cryptocurrencies, including technological, legal, and regulatory risks along with the potentially significant revenue opportunities associated with re-entering the market and offering our services.

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On May 13, 2022, our Board of Directors authorized a renewal of the Company's stock buyback program (the "buyback program"), with a repurchase limit equal to $4 million of the Company's common stock and a three year duration.

As of December 31, 2022, the Company had repurchased $1.3 million of stock as part of the buyback program, of which $1.1 million is subject to the IRA's 1% excise tax. Should the Company continue the repurchase of its securities on the open market, and the IRA remain in effect, we may be subject to this tax in 2023 and future years.

As of June 30, 2023, the Company had repurchased $19,036 of stock as part of the buyback program, which may become subject to the IRA's 1% excise tax if the Company meets or exceeds the IRA's 1% excise tax repurchase minimum of $1 million in stock buy backs.

The COVID-19 pandemic has had and continues to have 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. Economic uncertainties, including those related to COVID-19, 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's offices were ordered closed in connection with curbing the spread of the pandemic. As these offices reopened, these businesses quickly recovered and returned to levels higher than pre-COVID.

In addition, non-bank consumer lending merchants were adversely affected by COVID relief payments made during the pandemic and a pause placed on the collection of past due amounts. The level of activity for consumer lending merchants continues to recover to pre-COVID levels. The Company has recorded an increase in revenues in its prepaid business line since 2021, as it was able to work in conjunction with major cities across the U.S.

While the general activity of COVID-related disbursement programs has largely declined, we currently recognize revenues associated with these programs and expect to continue recognizing such revenues through the remainder of 2023 and the start of 2024.

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, existing revenues, 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.

As of December 31, 2022, the Company had repurchased $1.3 million of stock as part of the buyback program, of which $1.1 million is subject to the IRA's 1% excise tax. Should the Company continue the repurchase of its securities on the open market, and the IRA remains in effect, we may be subject to this tax in 2023 and future years.

As of September 30, 2023 the Company had repurchased $69,589 of stock as part of the buyback program, which may become subject to the IRA's 1% excise tax if the Company meets or exceeds the IRA's 1% excise tax repurchase minimum of $1 million in stock buy backs.

As the Federal Reserve works to fight economic inflation, the federal funds rate has experienced rapid growth in the past twelve months.

This has resulted in the Company receiving more favorable interest rates on it's current cash balances, amounting to $512,089 in interest income in the three months ending September 30, 2023, and $823,861 in the nine months ended September 30, 2023.

Should the Federal Reserve begin lowering the federal funds rate in the future, this incremental source of income would decline.

We continue to work closely with our bank partners, to ensure we effectively manage our cash balances, and monitor the Federal Reserves monetary policy decisions.

Critical Accounting Policies and Estimates

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In the quarter ended March 31, 2023, we incurred $833,485 in merchant processing losses as a result of fraudulent activity and identity fraud from multiple merchants, of which $755,494 was taken from our reserve for processing losses.

This loss has been included in our results of operations for the nine months ended September 30, 2023.

We do not expect similar processing losses in the immediate future.

however, in the second quarter of 2023, we replenished our reserve for processing losses by the amount of $383,000, for a total balance of $769,789 as of June 30, 2023, to be used if future losses are incurred.

Currently, our reserve for processing losses is $793,528 as of September 30, 2023, to be used if future losses are incurred.

The allowances are maintained at a level we deem appropriate to adequately provide for current expected losses at the balance sheet date.

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Further, we provide incentive payments to consumers and merchants.

Evaluating whether these incentives are a payment to a customer, or consideration payable on behalf of a customer, requires judgment.

Evaluating whether these incentives are a payment to a customer, or consideration payable on behalf of a customer, requires judgment by management.

Incentives determined to be made to a customer, or payable on behalf of a customer, are recorded as a reduction to gross revenue.

Changes in judgments with respect to these assumptions and estimates could impact the amount of revenue recognized.

Key Business Metric - Non-GAAP Financial Measures

Key Business Metrics - Non-GAAP Financial Measures

This filing includes the following non-GAAP financial measures as defined in Regulation G of the Securities Exchange Act of 1934, as amended (the "Exchange Act"): EBITDA, adjusted EBITDA, adjusted EBITDA margins and adjusted operating cash flows.

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The Company defines adjusted operating cash flow as net cash provided (used) by operating activities, less changes in prepaid card load obligations, customer deposits, merchant reserves and net operating lease assets and obligations.

Operating lease right-of-use assets, operating lease liabilities, prepaid card load obligations, customer deposits and merchant reserves are deducted from operating cash flow, as these metrics do not serve in providing a clear picture of the true operational cash used or provided in a given time period.

Operating lease right-of-use assets, operating lease liabilities, prepaid card load obligations, customer deposits and merchant reserves are deducted from operating cash flow, as management believes that these metrics do not serve in providing a clear picture of the true operational cash used or provided in a given time period.

These measures may not be comparable to similarly titled measures reported by other companies.

Management uses EBITDA, adjusted EBITDA, adjusted EBITDA margins and adjusted operating cash flows 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, adjusted EBITDA, adjusted EBITDA margins and adjusted operating cash flows 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. 

We reported adjusted EBITDA of $1.2 million for the quarter ended June 30, 2023, as compared to an adjusted EBITDA loss of $0.6 for the same period in the prior year.

The increase in adjusted EBITDA in the 2023 quarter was attributable to minimal increases in SG&A combined with strong revenue growth and increased profit margins.

The following tables set forth reconciliations of Operating income (loss) to EBITDA;

Management uses EBITDA, adjusted EBITDA, adjusted EBITDA margins and adjusted operating cash flows as key 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 also believes that EBITDA, adjusted EBITDA, adjusted EBITDA margins and adjusted operating cash flows 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. 

We reported an adjusted EBITDA loss of $0.1 million for the quarter ended September 30, 2023, as compared to an adjusted EBITDA loss of $0.5 million for the same period in the prior year.

The increase in adjusted EBITDA in the 2023 quarter was attributable to strong revenue growth and increased profit margins versus the prior year period.

The following tables set forth reconciliations of Operating Income (Loss) to EBITDA;

EBITDA to Adjusted EBITDA;

and Revenues to Adjusted EBITDA margins for the three months ended June 30, 2023 and 2022.

Three Months Ended June 30,

Six Months Ended June 30,

Reconciliation from Operating income (Loss) to Adjusted EBITDA:

Operating income (Loss)

and Revenues to Adjusted EBITDA margins for the three months ended September 30, 2023 and 2022.

Three Months Ended September 30,

Nine Months Ended September 30,

Reconciliation from Operating (Loss) to Adjusted EBITDA:

Operating (Loss)

Depreciation and amortization

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Adjusted EBITDA margins

We reported cash provided by adjusted operating cash flows of $1.3 million for the six months ended June 30, 2023 (after adjusting for the impact of operating lease right-of-use assets, operating lease liabilities, prepaid card load obligations, customer deposits, and merchant reserves), as compared to $1.2 million used in the six months ended June 30, 2022.

These adjustments to net cash provided (used) by operating activities do not include any recurring expense items which are included in the calculation of operating income (loss), and only include changes in our assets and liabilities accounts on the balance sheet. The Company believes non-GAAP adjusted operating cash flow to be a more accurate indicator of cash contributions that can be used to sustain current and future business operations. The increase in adjusted operating cash flows in the 2023 quarter compared to the 2022 quarter was primarily attributable to an increase the Company's net income, due to strong growth in revenue with improved profit margins, alongside relatively flat increases in SG&A.

The following table is a reconciliation of operating cash flow provided (used) to adjusted operating cash flow provided (used) for the six months ended June 30, 2023 and 2022.

Six Months Ended June 30,

The following table is a reconciliation of operating cash flow provided (used) to adjusted operating cash flow provided (used) for the nine months ended September 30, 2023 and 2022.

September 30, 2023

September 30, 2022

Reconciliation from net cash provided (used) by operating activities to Non-GAAP Adjusted Operating Cash Flow (used):

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Adjusted operating cash flows provided (used)

We reported cash provided by adjusted operating cash flows of $2.4 million for the nine months ended September 30, 2023 (after adjusting for the impact of operating lease right-of-use assets, operating lease liabilities, prepaid card load obligations, customer deposits, and merchant reserves), as compared to $1.1 million used in the nine months ended September 30, 2022.

These adjustments to net cash provided (used) by operating activities do not include any recurring expense items which are included in the calculation of operating income (loss), and only include changes in our assets and liabilities accounts on the balance sheet. The Company believes non-GAAP adjusted operating cash flow to be a more accurate indicator of cash contributions that can be used to sustain current and future business operations. The increase in adjusted operating cash flows in the 2023 quarter compared to the 2022 quarter was primarily attributable to a decrease the Company's net loss, due to strong growth in revenue with improved profit margins, alongside nominal increases in selling, general and administrative expense ("SG&A").

Use of Non-GAAP Financial Measures

EBITDA, adjusted EBITDA, adjusted EBITDA margins and adjusted operating cash flows should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. They are not measurements of our financial performance under GAAP and should not be considered as alternatives to revenue, net income, or cash provided (used) by operating activities, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses.

EBITDA, adjusted EBITDA, adjusted EBITDA margins and adjusted operating cash flows should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. They are not measurements of our financial performance under GAAP and should not be considered as alternatives to revenue, net income (loss), or cash provided (used) by operating activities, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses.

EBITDA, adjusted EBITDA, adjusted EBITDA margins and adjusted operating cash flows have limitations as analytical tools and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of our operating results as reported under GAAP.

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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 program management and processing of prepaid debit cards. With the acquisition of the assets of IMS in December 2020, we began to offer additional output solution services relating to electronic bill presentment, document composition, document decomposition and printing and mailing services serving hundreds of customers representing a wide range of industry verticals, including utilities and financial institutions.

Three Months Ended June 30,

Three Months Ended September 30,

ACH and complementary service revenue

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Total Revenue

Six Months Ended June 30,

Nine Months Ended September 30,

ACH and complementary service revenue

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Total Revenue

Consolidated revenue for the quarter ended June 30, 2023 increased by 31% to $21.3 million, as compared to $16.2 million for the quarter ended June 30, 2022, due to continued traction and growth in our prepaid card and Output Solutions lines of business, with modest growth in our ACH and credit card lines of business. 

Consolidated revenue for the six months ended June 30, 2022 increased by 24% to $42.7 million, as compared to $34.3 million for the six months ended June 30, 2022, primarily as a result of strong growth in our prepaid card and Output Solutions lines of business.

Consolidated revenue for the quarter ended September 30, 2023 increased by 25% to $20.5 million, as compared to $16.4 million for the quarter ended September 30, 2022 due to continued traction and growth in our prepaid card and Output Solutions lines of business, with modest growth in our ACH and credit card lines of business, as our Payfac strategy continues to be implemented, and ACH now compares more favorably to fiscal quarters following our exit from the crypto space in July of 2022, resulting in a return of positive quarterly growth metrics.

Consolidated revenue for the nine months ended September 30, 2022 increased by 25% to $63.2 million, as compared to $50.7 million for the nine months ended September 30, 2022 primarily as a result of strong growth in our prepaid card and Output Solutions lines of business as a result of new client implementation and the execution and expansion of existing customer contracts.

Declines in ACH revenues were primarily the result of the Company's withdrawal from the crypto market in July of 2022.

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Cost of service fees also include fees paid to referral agents and partners.

Cost of services increased by $3.3 million, or 25%, to $16.3 million for the quarter ended June 30, 2023, as compared to $13.0 million for the same period in the prior year, due to increased revenue growth. 

Cost of services increased by $5.2 million, or 19%, to $32.8 million for the six months ended June 30, 2023, as compared to $27.6 million for the same period in the prior year, due to increased revenue growth. 

Cost of services increased by $3.1 million, or 23%, to $16.3 million for the quarter ended September 30, 2023, as compared to $13.3 million for the same period in the prior year, due to increased revenue growth driving similar increases to our processing, banking and transactional expenses. 

Cost of services increased by $8.3 million, or 20%, to $49.1 million for the nine months ended September 30, 2023, as compared to $40.8 million for the same period in the prior year, due to increased revenue growth driving similar increases to our processing, banking and transactional expenses. 

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

Gross profit increased by 54% to $5.0 million for the quarter ended June 30, 2023, as compared to $3.3 million for the same period in the prior year.

Similarly, gross margin percentage was 23.6% for the quarter ended June 30, 2023 as compared to 20.1% in the prior year period.

The increase in gross profit and gross margin percentage in the quarter ended June 30, 2023, as compared to the same period during the prior year, was primarily attributable to strong revenue growth and improved profitability metrics across all business lines, driven by more favorable pricing in the quarter.

Gross profit increased by 46% to $9.9 million for the six months ended June 30, 2023, as compared to $6.8 million for the same period in the prior year.

Similarly, gross margin percentage was 23.2% for the six months ended June 30, 2023 as compared to 19.7% in the prior year period.

The increase in gross profit and gross margin percentage in the six months ended June 30, 2023, as compared to the same period during the prior year, was primarily attributable to strong revenue growth and improved profitability metrics across all business lines, driven by more favorable pricing on the year.

Gross profit increased by 34% to $4.2 million for the quarter ended September 30, 2023, as compared to $3.1 million for the same period in the prior year.

Similarly, gross margin percentage of revenue was 20.4% for the quarter ended September 30, 2023 as compared to 19.1% in the prior year period.

The increase in gross profit and gross margin percentage in the quarter ended September 30, 2023, as compared to the same period during the prior year, was primarily attributable to strong revenue growth and improved gross profit metrics across all business lines, driven by more favorable pricing in the quarter.

Gross profit increased by 42% to $14.1 million for the nine months ended September 30, 2023, as compared to $9.9 million for the same period in the prior year.

Similarly, gross margin percentage was 22.3% for the nine months ended September 30, 2023 as compared to 19.5% in the prior year period.

The increase in gross profit and gross margin percentage in the nine months ended September 30, 2023, as compared to the same period during the prior year, was primarily attributable to strong revenue growth and improved gross profit metrics across all business lines, driven by more favorable pricing on the year.

Stock-based Compensation

Stock-based compensation expenses were $0.6 million for the quarter ended June 30, 2023 as compared to $0.5 million for the quarter ended June 30, 2022, an increase of 22.0% due to stock grants made to retain and attract employees.

Stock-based compensation expenses were $1.1 million for the six months ended June 30, 2023 as compared to $1.0 million for the six months ended June 30, 2022, a marginal increase of 5.7% due to stock grants made to retain and attract employees.

Stock-based compensation expenses were $0.6 million for the quarter ended September 30, 2023 as compared to $0.5 million for the quarter ended September 30, 2022, an increase of 15.3% due to stock grants made to retain and attract employees.

Stock-based compensation expenses were $1.7 million for the nine months ended September 30, 2023 as compared to $1.5 million for the nine months ended September 30, 2022, a marginal increase of 8.9% due to stock grants made to retain and attract employees.

Other Selling, General and Administrative Expenses

Other selling, general and administrative expenses (other SG&A) were $3.9 million for the quarter ended June 30, 2023 as compared to $3.8 million in the prior year quarter. The nominal increase in other SG&A for the quarter ended June 30, 2023 reflects a flattening of expenses and slowed investment in our business units as they achieve further scale.

Other selling, general and administrative expenses (other SG&A) were $7.7 million for the six months ended June 30, 2023 as compared to $7.6 million in the prior year six-month period, a 1% increase. The nominal increase in other SG&A for the six months ended June 30, 2022 reflects a flattening of expenses and slowed investment in our business units as they achieve further scale.

Other selling, general and administrative expenses, or other SG&A, were $4.3 million for the quarter ended September 30, 2023 as compared to $3.7 million in the prior year quarter. The increase in other SG&A for the quarter ended September 30, 2023 reflects the occurrence of some one-time expenses related to professional services and marketing initiatives alongside increased travel to sales-related events during the quarter.

Other SG&A expenses are expected to reduce in subsequent quarters.

Other selling, general and administrative expenses, or other SG&A, were $12.0 million for the nine months ended September 30, 2023 as compared to $11.3 million in the prior year nine-month period, a 6% increase. The increase in other SG&A for the nine months ended September 30, 2022 reflects the occurrence of some one-time expenses related to professional services and marketing initiatives alongside increased travel to sales-related events during the quarter ended September 30, 2023.

Other SG&A expenses are expected to reduce in subsequent quarters.

Depreciation and Amortization  

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These assets include property, plant, and equipment, along with intangible assets acquired through acquisition, or developed as internal use software.

Depreciation and amortization expense totaled $0.5 million and $0.8 million for the quarters ended June 30, 2023 and 2022, respectively.

Depreciation and amortization expense totaled $0.5 million and $0.6 million for the quarters ended September 30, 2023 and 2022, respectively.

The decrease in depreciation and amortization expense was due to the completed amortization of intangible assets, reducing overall depreciation and amortization expense versus the same period a year ago. 

Depreciation and amortization expense totaled $1.0 million and $1.5 million for the six months ended June 30, 2023 and 2022, respectively.

Depreciation and amortization expense totaled $1.6 million and $2.2 million for the nine months ended September 30, 2023 and 2022, respectively.

Other Income (Expense)

Other income (expense), net was $218,311 for the quarter ended June 30, 2023 compared to $82 for the quarter ended June 30, 2022.

Other income (expense), net was $561,696 for the quarter ended September 30, 2023 compared to $1,785 for the quarter ended September 30, 2022.

Higher interest-bearing merchant reserves and interest rates drove the increased interest income.

Other income (expense), net was $310,577 for the six months ended June 30, 2023 compared to $554 for the six months ended June 30, 2022.

Other income (expense), net was $872,273 for the nine months ended September 30, 2023 compared to $1,231 for the nine months ended September 30, 2022.

Higher interest-bearing merchant reserves and interest rates drove the increased interest income.

Net Income (Loss)

We reported net income of $0.2 million for the quarter ended June 30, 2023, as compared to a net loss of $1.9 million for the same period in the prior year. The increase in net income was attributable to increases in revenue combined with increased profit margins.

We reported net income of $0.2 million for the six months ended June 30, 2023, as compared to a net loss of $3.6 million for the same period in the prior year. The increase in net income was attributable to increases in revenue combined with increased profit margins.

We reported a net loss of $0.7 million for the quarter ended September 30, 2023, as compared to a net loss of $1.8 million for the same period in the prior year. The increase in net income was attributable to increases in revenue combined with increased profit margins.

We reported a net loss of $0.5 million for the nine months ended September 30, 2023, as compared to a net loss of $5.3 million for the same period in the prior year. The increase in net income was attributable to increases in revenue combined with increased 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.

To maintain, grow and achieve 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 June 30, 2023, we had cash and cash equivalents of $6.6 million.

For the six months ended June 30, 2023, cash provided by operations was $27.8 million.

As of September 30, 2023, we had cash and cash equivalents of $7.4 million.

For the nine months ended September 30, 2023, cash provided by operations was $41.5 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.

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These assets and liabilities include our accounts receivable, prepaid expenses, operating lease right-of-use assets, inventory, other assets, accounts payable and accrued expenses, operating lease liabilities, prepaid card load obligations, merchant reserves, customer deposits, and deferred revenues.

We reported net income of $0.2 million for the quarter ended June 30, 2023.

At June 30, 2023, we had an accumulated deficit of $70.6 million.

Additionally, we had working capital of $7.5 million and $5.8 million at June 30, 2023 and December 31, 2022, respectively.

We reported a net loss of $0.7 million for the quarter ended September 30, 2023.

At September 30, 2023, we had an accumulated deficit of $71.4 million.

Additionally, we had working capital of $7.5 million and $5.8 million at September 30, 2023 and December 31, 2022, respectively.

From time to time we have sold shares of our common stock in order to provide us liquidity.

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We cannot assure you that we will be able to sell shares of our equity securities on terms acceptable to us or at all in the future.

Net cash provided by operating activities, including merchant reserve funds, prepaid card load assets, customer deposits and net operating lease assets for the six months ended June 30, 2023 was $27.8 million, as compared to net cash used by operating activities of $22.1 million for the six months ended June 30, 2022.

Net cash provided 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, 2023 was $41.5 million, as compared to net cash used by operating activities of $22.8 million for the nine months ended September 30, 2022.

The increase in cash provided by operating activities was due to the increase in prepaid card load obligations versus the same period last year.

Excluding merchant reserves, prepaid card load assets, customer deposits and lease right of use assets and liabilities, our cash provided by operating activities was $1.3 million as compared to cash provided by operating activities of $1.2 million for the six months ended June 30, 2023 and 2022, respectively.

This increase in cash provided by operating activities was primarily attributable to an increase in the Company's net income, due to strong growth in revenue with improved profit margins, alongside relatively flat increases in SG&A. We continue to invest resources and infrastructure in our business to achieve scale across all business lines.

Net cash used by investing activities was $388,628 as compared to cash used by investing activities of $411,818 for the six months ended June 30, 2023 and 2022, respectively.

Excluding merchant reserves, prepaid card load assets, customer deposits and lease right of use assets and liabilities, our cash provided by operating activities was $2.4 million as compared to cash used by operating activities of $1.1 million for the nine months ended September 30, 2023 and 2022, respectively.

Operating lease right-of-use assets, operating lease liabilities, prepaid card load obligations, customer deposits and merchant reserves are deducted from operating cash flow, as management believes that these metrics do not serve in providing a clear picture of the true operational cash used or provided in a given time period.

The Company believes non-GAAP adjusted operating cash flow to be a more accurate indicator of cash contributions that can be used to sustain current and future business operations.

For more information relating to this Non-GAAP financial measure, including a reconciliation from net cash provided (used) by operating activities to Non-GAAP adjusted Operating Cash Flow (used), please see "Key Business Metrics - Non-GAAP Financial Measures" in this Report.

This increase in cash provided by operating activities was primarily attributable to a decrease in the Company's net loss, due to strong growth in revenue with improved profit margins, alongside nominal increases in SG&A. We continue to invest resources in the infrastructure of our business such as the retention, and acquisition of employees, sales-related travel, and marketing efforts to achieve scale across all business lines.

Net cash used by investing activities was $587,451 as compared to cash used by investing activities of $642,764 for the nine months ended September 30, 2023 and 2022, 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 six months ended June 30, 2023 was $47,251 and net cash used by financing activities for the six months ended June 30, 2022 was $573,699.

Net cash used by financing activities for the nine months ended September 30, 2023 was $111,494 and net cash used by financing activities for the nine months ended September 30, 2022 was $935,513.

The decrease in cash used by financing activities was due to the Company's stock buyback program and the increased quantity of treasury stock purchased in 2022.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements