Usio, Inc. 10-Q

Item 1. Financial Statements. USIO, INC. CONDENSED CONSOLIDATED BALANCE SHEETS March 31, 2024 December 31, 2023 (Unaudited) Assets Current assets: Cash and cash equivalents $ 7,053,812 $ 7,155,687 Accounts receivable, net 4,862,227 5,564,138 Settlement processing assets 41,030,860 44,899,603 Prepaid card load assets 28,698,878 31,578,973 Customer deposits 1,808,263 1,865,731 Inventory 429,577 422,808 Prepaid expenses and other 687,415 444,071 Current assets before merchant reserves 84,571,032 91,931,011 Merchant reserves 5,322,095 5,310,095 Total current assets 89,893,127 97,241,106 Property and equipment, net 3,478,654 3,660,092 Other assets: Intangibles, net 1,535,366 1,753,333 Deferred tax asset, net 1,504,000 1,504,000 Operating lease right-of-use assets 2,318,388 2,420,782 Other assets 335,357 355,357 Total other assets 5,693,111 6,033,472 Total assets $ 99,064,892 $ 106,934,670 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 896,293 $ 1,031,141 Accrued expenses 2,778,067 3,801,278 Operating lease liabilities, current portion 490,184 633,616 Equipment loan, current portion 180,906 107,270 Settlement processing obligations 41,030,860 44,899,603 Prepaid card load obligations 28,698,878 31,578,973 Customer deposits 1,808,263 1,865,731 Current liabilities before merchant reserve obligations 75,883,451 83,917,612 Merchant reserve obligations 5,322,095 5,310,095 Total current liabilities 81,205,546 89,227,707 Non-current liabilities: Equipment loan, net of current portion 630,913 718,980 Operating lease liabilities, net of current portion 1,955,333 1,919,144 Total liabilities 83,791,792 91,865,831 Commitments and contingencies Stockholders’ equity: Preferred stock, $ 0.01 par value, 10,000,000 shares authorized; - 0 - shares outstanding at March 31, 2024 (unaudited) and December 31, 2023, respectively — — Common stock, $ 0.001 par value, 200,000,000 shares authorized; 28,779,206 and 28,661,406 issued, and 26,412,259 and 26,332,523 outstanding at March 31, 2024 (unaudited) and December 31, 2023, respectively 197,194 197,087 Additional paid-in capital 97,632,948 97,479,830 Treasury stock, at cost; 2,366,947 and 2,339,083 shares at March 31, 2024 (unaudited) and December 31, 2023, respectively ( 4,406,973 ) ( 4,362,150 ) Deferred compensation ( 6,561,728 ) ( 6,907,775 ) Accumulated deficit ( 71,588,341 ) ( 71,338,153 ) Total stockholders’ equity 15,273,100 15,068,839 Total liabilities and stockholders’ equity $ 99,064,892 $ 106,934,670 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 March 31, 2024 2023 Revenues $ 20,321,615 $ 21,446,244 Cost of services 16,116,691 16,544,429 Gross profit 4,204,924 4,901,815 Selling, general and administrative expenses: Stock-based compensation 499,273 504,574 Other SG&A 4,060,225 3,873,219 Depreciation and amortization 576,154 518,029 Total selling, general and administrative 5,135,652 4,895,822 Operating income (loss) ( 930,728 ) 5,993 Other income and (expense): Interest income 764,125 92,928 Interest expense ( 13,585 ) ( 662 ) Other income, net 750,540 92,266 Income (Loss) before income tax expense ( 180,188 ) 98,259 Income tax expense 70,000 83,426 Net income (Loss) $ ( 250,188 ) $ 14,833 Income (Loss) Per Share Basic income (loss) per common share: $ ( 0.01 ) $ 0.00 Diluted income (loss) per common share: $ ( 0.01 ) $ 0.00 Weighted average common shares outstanding Basic - common stock 19,990,862 20,122,972 Basic - restricted stock awards 6,384,900 6,385,900 Weighted average shares used to compute basic earnings per share 26,375,762 26,508,872 Diluted 26,375,762 27,454,471 See the accompanying notes to the condensed interim consolidated financial statements. 2 Table of Contents USIO, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended March 31, 2024 2023 Operating activities: Net (loss) $ ( 250,188 ) $ 14,833 Adjustments to reconcile net income (loss) to net cash (used in) operating activities: Depreciation 358,187 300,061 Amortization 217,967 217,968 Employee stock-based compensation 499,273 504,574 Changes in current assets and current liabilities: Accounts receivable 701,911 ( 846,609 ) Prepaid expenses and other ( 243,344 ) ( 10,616 ) Operating lease right-of-use assets 102,394 ( 31,459 ) Other assets 20,000 ( 1 ) Inventory ( 6,769 ) 12,898 Accounts payable and accrued expenses ( 1,158,059 ) 1,128,251 Operating lease liabilities ( 107,243 ) 4,548 Prepaid card load obligations ( 2,880,095 ) ( 1,357,807 ) Merchant reserves 12,000 ( 164,886 ) Customer deposits ( 57,468 ) 20,953 Net cash (used in) operating activities ( 2,791,434 ) ( 207,292 ) Investing activities: Purchases of property and equipment ( 176,750 ) ( 217,735 ) Net cash (used in) investing activities ( 176,750 ) ( 217,735 ) Financing activities: Payments on equipment loan ( 14,431 ) ( 13,488 ) Purchases of treasury stock ( 44,823 ) ( 8,529 ) Net cash (used in) financing activities ( 59,254 ) ( 22,017 ) Change in cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves ( 3,027,438 ) ( 447,044 ) Cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves, beginning of period 45,910,486 32,343,501 Cash, Cash Equivalents, Prepaid Card Load Assets, Customer Deposits and Merchant Reserves, End of Period $ 42,883,048 $ 31,896,457 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 13,585 $ 662 Income taxes — 13,426 Non-cash financing activity: Issuance of deferred stock compensation — 2,444,054 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, 2023 28,671,606 $ 197,087 $ 97,479,830 $ ( 4,362,150 ) $ ( 6,907,775 ) $ ( 71,338,153 ) $ 15,068,839 Issuance of common stock under equity incentive plan 107,600 107 153,118 — — — 153,226 Deferred compensation amortization — — — — 346,047 — 346,047 Purchase of treasury stock costs — — — ( 44,823 ) — — ( 44,823 ) Net (loss) for the period — — — — — ( 250,188 ) ( 250,188 ) Balance at March 31, 2024 28,779,206 $ 197,194 $ 97,632,948 $ ( 4,406,973 ) $ ( 6,561,728 ) $ ( 71,588,341 ) $ 15,273,100 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 1,421 2,638,529 — ( 2,444,054 ) — 195,896 Deferred compensation amortization — — — — 308,676 — 308,676 Purchase of treasury stock costs — — — ( 8,529 ) — — ( 8,529 ) Net income for the period — — — — — 14,833 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 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 (collectively, the “Company”) have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission" or the "SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles ("GAAP") have been omitted pursuant to such rules and regulations. In the opinion of management, the accompanying unaudited 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, 2023, as filed with the Commission on March 27, 2024 ( the "2023 Annual Report"). 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 "first quarter" mean the three month period ended March 31, 2024 or 2023, as the case may be and unless otherwise noted. Use of Estimates: The preparation of financial statements in conformity with GAAP 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. Merchants may be charged for these processing 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 are charged a flat fee per transaction, while others may also be charged miscellaneous fees, including fees for chargebacks or returns, monthly minimums, and other miscellaneous services. Revenues derived from electronic processing of credit, debit, and prepaid card transactions that are authorized and captured through third -party networks are reported gross of amounts paid to sponsor banks as well as interchange and assessments paid to credit card associations. 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. Usio Output Solutions, Inc. ("Output Solutions"), a wholly-owned subsidiary of Usio, Inc., provides bill preparation, presentment and mailing services. Revenue from Output Solutions is recognized when the related services are performed for printing and delivered to USPS for postage. The following table presents the Company's consolidated revenues by source: Three Months Ended March 31, 2024 2023 ACH and complementary services $ 3,881,734 $ 3,340,722 Credit card 7,560,734 7,339,898 Prepaid card services 3,341,224 4,807,404 Output Solutions 5,537,923 5,958,220 Total revenue $ 20,321,615 $ 21,446,244 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. Prepaid Card Load Assets and Obligations: 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. As the prepaid business line continues to expand, card load assets will increase as funds are sent from customers to the Company. As customers 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: 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 the Company's standing with its member sponsors and is in accordance with the guidelines set by the card networks. The reconciliation of cash and cash equivalents to cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves is as follows for each period presented: Three Months Ended March 31, 2024 2023 Beginning cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves: Cash and cash equivalents $ 7,155,687 $ 5,709,117 Prepaid card load assets 31,578,973 20,170,761 Customer deposits 1,865,731 1,554,122 Merchant reserves 5,310,095 4,909,501 Total $ 45,910,486 $ 32,343,501 Ending cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves: Cash and cash equivalents $ 7,053,812 $ 6,763,813 Prepaid card load assets 28,698,878 18,812,954 Customer deposits 1,808,263 1,575,075 Merchant reserves 5,322,095 4,744,615 Total $ 42,883,048 $ 31,896,457 Accounts Receivable/Allowance for Estimated Credit Losses: The Company maintains an allowance for estimated credit losses resulting from the inability or failure of the Company’s customers to make required payments. The Company determines the allowance 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 three months ended March 31, 2024 and the year ended December 31, 2023, there were no credit losses incurred. In the past, losses incurred by the Company due to credit losses 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 credit losses are variable based on the volume of transactions processed and could increase or decrease accordingly. The allowance for credit losses was $ 319,000 at March 31, 2024 and December 31, 2023 . Inventory : Inventory is stated at the lower of cost or net realizable value. At March 31, 2024 and December 31, 2023 , 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 three months ended March 31, 2024 and March 31, 2023 , the Company capitalized software costs of $ 115,473 and $ 207,732 , 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 underperformance 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 2023 or during the three months ended March 31, 2024 . 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. Estimates for processing losses are variable based on the volume of transactions processed and could increase or decrease accordingly. At March 31, 2024 and December 31, 2023 , the Company’s reserve for processing losses was $ 859,528 and $ 826,528 , respectively, carried on the Company's balance sheet as an accrued expense. Legal Proceedings: In addition to the legal proceedings disclosed in this quarterly report, the Company may be involved in legal matters arising in the ordinary course of business from time to time. Litigation is subject to inherent uncertainties, and an adverse result in the legal proceedings disclosed in this quarterly report or other matters that may arise from time to time may harm our business. Recently Adopted Accounting Pronouncements : In June 2016 , the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016 - 13, Financial Instruments - Credit Losses (Topic 326 ), to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in Topic 326 replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Topic 326 is effective for fiscal years beginning after December 25, 2022 , including interim periods within those fiscal years for smaller reporting companies. We adopted this guidance effective January 1, 2023 on a prospective basis. Our financial statements were not materially impacted upon adoption. 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 Company's 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 March 31, 2024 and 2023 , operating lease expenses totaled $ 132,574 and $ 179,901 , respectively. Note 3. Accrued Expenses Accrued expenses consisted of the following balances: March 31, 2024 December 31, 2023 Accrued commissions $ 725,258 $ 2,433,353 Reserve for processing losses 859,528 826,528 Other accrued expenses 593,255 246,444 Accrued taxes 377,740 294,953 Accrued salaries 222,286 — Total accrued expenses $ 2,778,067 $ 3,801,278 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 was 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 were required in the amount of $ 4,902 . Principal payments for the three months ended March 31, 2024 and 2023 were $ 14,312 and $ 13,488 , respectively, and are reflected on the Company's Condensed Consolidated Statement of Cash Flows. This loan was paid in full on its maturity date. 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 , with interest only payments required for the first 6 months of the loan term. Total interest and principal payments on this folder and inserter equipment loan were $ 13,481 for the first quarter of 2024. Note 5. Stockholders' Equity Stock Warrants : On December 15, 2020, the Company issued warrants to purchase 945,599 shares of the Company's common stock with an initial exercise price of $ 4.23 per share, subject to adjustment as provided in the warrant agreement governing the warrants, to Information Management Solutions, LLC ("Management Solutions"). Management Solutions' warrants vest and become exercisable annually over three years in three equal tranches beginning on December 15, 2021 and become fully vested on December 15, 2023. Each warrant is exercisable for a period of five years beginning on the date it vests. 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 per share; (ii) the risk-free interest rate was 0.09%; (iii) the contractual life was 5 years; (iv) the dividend yield was 0%; and (v) the volatility was 59.9%. The fair value of the warrants amounted to $ 552,283 and was recorded as an increase in the customer list asset and a corresponding amount to additional paid in capital. The amortization of these warrants, which is included in the total amortization expense of the customer list intangible asset, totaled $ 27,614 in each of the three months ended March 31, 2024 and 2023 . Note 6. Net (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. Diluted EPS differs from basic EPS due to the assumed conversion of potentially dilutive awards and options that were outstanding during the period. Unvested restricted stock awards have the right to receive nonforfeitable dividends on the same basis as common shares; therefore, unvested restricted stock is considered a participating security for the purpose of calculating EPS. 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 months ended March 31, 2024 and March 31, 2023 . Three Months Ended March 31, 2024 2023 Numerator: Numerator for basic and diluted income (loss) per share, net (loss) available to common shareholders $ ( 250,188 ) $ 14,833 Denominator: Common stock 19,990,862 20,122,972 Restricted stock awards 6,384,900 6,385,900 Denominator for basic income (loss) per share, weighted average shares outstanding 26,375,762 26,508,872 Effect of dilutive securities — 945,599 Denominator for diluted earnings per share, adjusted for weighted average shares and assumed conversion 26,375,762 27,454,471 Basic income (loss) per common share $ ( 0.01 ) $ 0.00 Diluted income (loss) per common share and common share equivalent $ ( 0.01 ) $ 0.00 The awards and options to purchase shares of common stock that were outstanding at March 31, 2024 and March 31, 2023 that were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive, are as follows: Three Months Ended March 31, 2024 2023 Anti-dilutive awards and options 945,599 945,599 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. GAAP prescribes 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 deferred tax asset of approximately $ 1.5 million recorded net of a valuation allowance of approximately $ 6.1 million. 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, 2023 , the Company had available net operating loss carryforwards of approximately $ 23.3 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. The schedule below outlines when the Company's net operating losses for 2017 and prior years were generated and the year they may expire. Tax Year End NOL Expiration 2005 $ 1,768,851 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 $ 9,291,308 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 three months ended March 31, 2024 and March 31, 2023 , the Company purchased a total of $ 0 and $ 1,835 , 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. Directors and Officers On February 24, 2024, we repurchased 2,075 shares of our common stock for $ 3,258 in a private transaction based on the $ 1.57 per share closing price on February 24, 2024 from Tom Jewell, the Company's former Chief Financial Officer, to cover his share of taxes in connection with equity grants. On February 24, 2024, we repurchased 4,911 shares of our common stock for $ 7,710 in a private transaction based on the $ 1.57 per share closing price on February 24, 2024 from Louis Hoch, the Company's Chairman, President, Chief Executive Officer and Chief Operating Officer, to cover his share of taxes in connection with equity grants. On November 18, 2023, we repurchased 2,619 shares of our common stock for $ 4,452 in a private transaction based on the $ 1.70 per share closing price on November 18, 2023 from Tom Jewell, the Company's former Chief Financial Officer, to cover his share of taxes in connection with equity grants. On November 18, 2023, we repurchased 3,927 shares of our common stock for $ 6,675 in a private transaction based on the $ 1.70 per share closing price on November 18, 2023 from Louis Hoch, the Company's Chairman, President, Chief Executive Officer and Chief Operating Officer, to cover his share of taxes in connection with equity grants. Effective on February 17, 2023, the Company entered into an employment agreement with Greg Carter, the Company’s Executive Vice President, Payment Acceptance. Under the terms of this agreement, Mr. Carter will receive an annual salary of $250,000, Override/Commissions of 10 % of the actual cash commissions paid to salespersons under direct management of Mr. Carter, to be paid quarterly, and the payment of a one -time signing bonus of $ 40,000 . On February 8, 2023, the Company granted 1,403,000 shares of restricted common stock with a 10 -year vesting period and 273,000 restricted stock units ("RSUs") with a 3 -year vesting period to employees and Directors as a performance bonus at an issue price of $ 1.75 per share. RSUs vest in equal tranches over their 3 -year vesting period, while 10 -year grants are cliff vesting, and vest in full at the conclusion of their 10 -year vesting period. Upon vesting, employees and Directors will receive issued shares. Executive officers and Directors included in the 10 -year restricted stock grant were Louis Hoch ( 330,000 shares), Tom Jewell ( 200,000 shares), Greg Carter ( 100,000 shares) and Houston Frost ( 100,000 shares). 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. 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). On November 30, 2023, Tom Jewell, the Senior Vice President, Chief Financial Officer, and principal financial and accounting officer of the Company, notified the Company of his intention to retire. On December 11, 2023, Mr. Jewell entered into a Separation and Mutual Release of Claims Agreement (“Separation Agreement”) with the Company. Pursuant to the Separation Agreement, Mr. Jewell will be paid installment payments equal to his current base salary until and including April 18, 2024. Additionally, Mr. Jewell will be permitted to retain any unvested Company stock options or other equity awards, which shall vest in accordance with the applicable schedules. Mr. Jewell will also receive all employee benefits including, but not limited to, health, dental, vision and life insurances that he was receiving prior to his execution of the Agreement until April 18, 2024. 7 Table of Contents