What changed in this filing

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Item 1. Financial Statements

2024-11-06 compared with 2024-08-14 · 146 added, 136 removed, 407 unchanged (41% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2024

September 30, 2024

December 31, 2023

64 unchanged sentences

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

- 0 - shares outstanding at June 30, 2024 (unaudited) and December 31, 2023, respectively

- 0 - shares outstanding at September 30, 2024 (unaudited) and December 31, 2023, respectively

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

29,764,435 and 28,671,606 issued, and 27,331,969 and 26,332,523 outstanding at June 30, 2024 (unaudited) and December 31, 2023, respectively

29,811,487 and 28,671,606 issued, and 27,216,864 and 26,332,523 outstanding at September 30, 2024 (unaudited) and December 31, 2023, respectively

198,226 197,087

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Treasury stock, at cost;

2,432,466 and 2,339,083 shares at June 30, 2024 (unaudited) and December 31, 2023, respectively

2,594,623 and 2,339,083 shares at September 30, 2024 (unaudited) and December 31, 2023, respectively

( 4,755,916 ) ( 4,362,150 )

9 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

$ 20,079,888 $ 21,436,572 $ 41,050,274 $ 42,952,842

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of services

15,280,074 16,250,988 31,396,765 32,795,417

4,799,814 5,185,584 9,653,509 10,157,425

Selling, general and administrative expenses:

Stock-based compensation

460,061 577,869 959,334 1,082,443

4,000,845 3,854,022 8,061,070 7,727,241

Depreciation and amortization

547,849 522,999 1,124,003 1,041,028

Total selling, general and administrative

5,008,755 4,954,890 10,144,407 9,850,712

Operating income (loss)

( 208,941 ) 230,694 ( 490,898 ) 306,713

Operating (loss)

Other income and (expense):

Interest income

107,270 43,978 222,624 66,880

261,413 — 261,413 —

Interest expense

( 14,250 ) ( 533 ) ( 27,835 ) ( 1,195 )

Other income, net

354,433 43,445 456,202 65,685

Income (loss) before income tax expense

145,492 274,139 ( 34,696 ) 372,398

Income tax expense

70,000 69,098 140,000 152,524

(Loss) before income taxes

Federal income tax (benefit)

State income tax expense

Income tax expense (benefit)

Net income (loss)

$ 75,492 $ 205,041 $ ( 174,696 ) $ 219,874

Basic income (loss) per common share:

$ 0.00 $ 0.01 $ ( 0.01 ) $ 0.01

Diluted income (loss) per common share:

$ 0.00 $ 0.01 $ ( 0.01 ) $ 0.01

Weighted average common shares outstanding

26,534,407 26,413,329 26,454,848 26,410,340

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities:

4 unchanged sentences

653,960 653,900

Deferred federal income tax

( 3,186,053 ) —

Employee stock-based compensation

1,529,106 1,644,658

Vendor stock-based compensation

Non-cash revenue from returned common stock

42 unchanged sentences

$ 41,535 $ 1,588

Non-cash operating activities:

Right of use assets obtained in exchange for operating lease liabilities

Non-cash financing activity:

1 unchanged sentence

1,497,300 2,478,506

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:

September 30,

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

$ 45,910,486 $ 32,343,501

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

Cash and cash equivalents

$ 8,392,317 $ 7,396,285

Prepaid card load assets

22,065,567 58,839,602

Customer deposits

1,824,820 1,578,498

Merchant reserves

4,892,601 5,336,545

$ 37,175,305 $ 73,150,930

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

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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 — — — 153,225

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

Issuance of common stock under equity incentive plan

994,049 994 1,610,320 — ( 1,497,300 ) — 114,014

Issuance of common stock under employee stock purchase plan

6,180 6 10,504 — — — 10,510

Reversal of deferred compensation amortization that did not vest

( 15,000 ) ( 15 ) ( 31,305 ) — 31,320 — —

Deferred compensation amortization

— — — — 346,048 — 346,048

Purchase of treasury stock costs

— — — ( 104,946 ) — — ( 104,946 )

Net income for the period

— — — — — 75,492 75,492

Balance at June 30, 2024

29,764,435 $ 198,179 $ 99,222,467 $ ( 4,511,919 ) $ ( 7,681,660 ) $ ( 71,512,849 ) $ 15,714,218

Issuance of common stock under equity incentive plan

Issuance of common stock under employee stock purchase plan

Deferred compensation amortization

Purchase of treasury stock costs

Net income for the period

Balance at September 30, 2024

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

Issuance of common stock under equity incentive plan

111,456 111 354,199 — ( 34,452 ) — 319,858

Reversal of deferred compensation amortization that did not vest

( 115,000 ) ( 115 ) ( 188,088 ) — 103,091 — ( 85,112 )

Deferred compensation amortization

— — — — 343,123 — 343,123

Purchase of treasury stock costs

— — — ( 10,507 ) — — ( 10,507 )

Non-cash return of common stock

— — — ( 156,162 ) — — ( 156,162 )

Net income for the period

— — — — — 205,041 205,041

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

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

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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 "second quarter" mean the three month period ended June 30, 2024 or 2023, as the case may be and unless otherwise noted.

References in this quarterly report to "the quarter" or the "third quarter" mean the three month period ended September 30, 2024 or 2023, as the case may be and unless otherwise noted.

Use of Estimates:

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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 services

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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.

Merchant reserves are established 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 Company earns interest on these merchant reserves, which is recognized as revenue in our ACH and complementary services business line.

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,

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

Cash and cash equivalents

$ 7,053,812 $ 6,763,813 $ 7,155,687 $ 5,709,117

Prepaid card load assets

28,698,878 18,812,954 31,578,973 20,170,761

Customer deposits

1,808,263 1,575,075 1,865,731 1,554,122

Merchant reserves

5,322,095 4,744,615 5,310,095 4,909,501

$ 42,883,048 $ 31,896,457 $ 45,910,486 $ 32,343,501

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

Cash and cash equivalents

$ 7,498,256 $ 6,575,124 $ 7,498,256 $ 6,575,124

Prepaid card load assets

28,056,918 46,398,476 28,056,918 46,398,476

Customer deposits

1,808,006 1,563,192 1,808,006 1,563,192

Merchant reserves

4,851,839 5,141,040 4,851,839 5,141,040

$ 42,215,019 $ 59,677,832 $ 42,215,019 $ 59,677,832

Accounts Receivable/Allowance for Estimated Credit Losses:

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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 to conform with Accounting Standards Update (ASU) Topic 326 .

During the six months ended June 30, 2024 and the year ended December 31, 2023, there were no credit losses incurred.

During the nine months ended September 30, 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.

1 unchanged sentence

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 June 30, 2024 and December 31, 2023 .

The allowance for credit losses was $ 289,000 at September 30, 2024 and $319,000 at December 31, 2023 .and carried on the Company's balance sheet in accounts receivable, and in the statement of cash flows as a change in accounts receivable.

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

At June 30, 2024 and December 31, 2023 , inventory consisted primarily of printing and paper supplies used for Output Solutions.

At September 30, 2024 and December 31, 2023 , 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, 2024 and June 30, 2023 , the Company capitalized software costs of $ 353,316 and $ 378,197 , respectively.

During the nine months ended September 30, 2024 and September 30, 2023 , the Company capitalized software costs of $ 575,882 and $ 513,593 , respectively.

Valuation of Long-Lived and Intangible Assets:

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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 six months ended June 30, 2024 .

No impairment losses were recorded in 2023 or during the nine months ended September 30, 2024 .

Management is not aware of any impairment charges 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, 2024 and December 31, 2023 , the Company’s reserve for processing losses was $ 892,528 and $ 826,528 , respectively, carried on the Company's balance sheet as an accrued expense.

At September 30, 2024 and December 31, 2023 , the Company’s reserve for processing losses was $ 925,528 and $ 826,528 , respectively, and carried on the Company's balance sheet as an accrued expense, and in the statement of cash flows as a change in accrued expenses.

Legal Proceedings:

7 unchanged sentences

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, 2024 and 2023 , operating lease expenses totaled $ 133,973 and $ 146,415 , respectively.

For each of the six months ended June 30, 2024 and 2023 , operating lease expenses totaled $ 266,105 and $ 257,038 , respectively.

For each of the three months ended September 30, 2024 and 2023 , operating lease expenses totaled $ 135,123 and $ 132,574 , respectively.

For each of the nine months ended September 30, 2024 and 2023 , operating lease expenses totaled $ 401,228 and $ 407,358 , respectively.

Accrued Expenses

Accrued expenses consisted of the following balances:

June 30, 2024

September 30, 2024

December 31, 2023

Accrued commissions

$ 1,092,870 $ 2,433,353

Reserve for processing losses

892,528 826,528

Other accrued expenses

713,415 246,444

Accrued taxes

145,906 294,953

Accrued salaries

Total accrued expenses

$ 3,214,518 $ 3,801,278

Equipment Loan

2 unchanged sentences

Monthly principal and interest payments were required in the amount of $ 4,902 .

Principal payments for the three months ended June 30, 2024 and 2023 were $ 0 and $ 14,171 , respectively, and are reflected on the Company's Condensed Consolidated Statement of Cash Flows.

Principal payments for the six months ended June 30, 2024 and 2023 were $ 14,312 and $ 27,659 , respectively.

Principal payments for the three months ended September 30, 2024 and 2023 were $ 0 and $ 14,312 , respectively, and are reflected on the Company's Condensed Consolidated Statement of Cash Flows.

Principal payments for the nine months ended September 30, 2024 and 2023 were $ 14,312 and $ 42,528 , respectively.

This loan was paid in full on its maturity date.

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Monthly principal and interest payments are required in the amount of $ 16,017 , with interest only payments required for the first six months of the loan term.

Total interest and principal payments on this folder and inserter equipment loan were $ 36,687 for the three months ended June 30, 2024 .

Total interest and principal payments on this folder and inserter equipment loan were $ 50,168 for the six months ended June 30, 2024 .

Total interest and principal payments on this folder and inserter equipment loan were $ 47,953 for the three months ended September 30, 2024 .

Total interest and principal payments on this folder and inserter equipment loan were $ 98,121 for the nine months ended September 30, 2024 .

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.

IMS's warrants vest and become exercisable annually over three years in three equal tranches beginning on December 15, 2021 and became fully vested on December 15, 2023.

Each warrant is exercisable for a period of five years beginning on the date it vests.

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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 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 $ 27,615 and $ 55,228 in each of the three and six months ended June 30, 2024 and 2023 , respectively.

The amortization of these warrants, which is included in the total amortization expense of the customer list intangible asset, totaled $ 27,615 and $ 82,842 in each of the three and nine months ended September 30, 2024 and 2023 , respectively.

Net Income (Loss) Per Share

1 unchanged sentence

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;

Holders of 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 and six months ended June 30, 2024 and June 30, 2023 .

Three Months Ended June 30,

Six Months Ended June 30,

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 nine months ended September 30, 2024 and September 30, 2023 .

Three Months Ended September 30,

Nine Months Ended September 30,

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

$ 75,492 $ 205,041 $ ( 174,696 ) $ 219,874

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

26,534,407 26,413,329 26,454,848 26,410,340

Effect of dilutive securities

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

26,534,407 26,413,329 26,454,848 26,410,340

Basic income (loss) per common share

$ 0.00 $ 0.01 $ ( 0.01 ) $ 0.01

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

$ 0.00 $ 0.01 $ ( 0.01 ) $ 0.01

The awards and options to purchase shares of common stock that were outstanding at June 30, 2024 and June 30, 2023 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,

Anti-dilutive awards and options

945,599 945,599

The warrants to purchase shares of common stock that were outstanding at September 30, 2024 and September 30, 2023 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 warrants

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.

4 unchanged sentences

The Company has recognized a deferred tax asset of approximately $ 4.7 million recorded net of a valuation allowance of approximately $ 2.9 million.

Management considered the realizability of this asset in light of historical operating results and forecasted results, and determined that more likely than not that the Company will have taxable income in the future, and elected to decrease the valuation allowance by approximately $ 3.2 million during 2024.

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.

Significant components of the Company's deferred tax asset are as follows for the nine months ended September 30, 2024 and year ended December 31, 2023 .

September 30, 2024

December 31, 2023

Deferred tax assets:

Net operating loss carryforwards

$ 4,690,051 $ 4,686,000

Depreciation and amortization

1,137,000 1,137,000

Non-cash compensation

1,649,000 1,649,000

124,000 124,000

7,600,051 7,596,000

Valuation Allowance

( 2,909,998 ) ( 6,092,000 )

Deferred tax asset

$ 4,690,053 $ 1,504,000

The tax provision for federal and state income tax is as follows for the nine months ended September 30, 2024 and 2023 .

Nine Months Ended September 30, 2024

Nine Months Ended September 30, 2023

Current provision:

210,000 222,524

Deferred provision:

Federal income tax (benefit)

( 3,186,053 ) —

Income tax expense (benefit)

$ ( 2,976,053 ) $ 222,524

The reconciliation of federal income tax computed at the U.S.

federal statutory tax rates to total income tax expense is as follows for the nine months ended September 30, 2024 and year ended December 31, 2023 .

Nine Months Ended September 30, 2024

Nine Months Ended September 30, 2023

Income tax (benefit) at 21%

$ ( 62,891 ) $ ( 58,488 )

Change in valuation allowance

( 3,182,002 ) —

Permanent and other differences

58,840 58,488

210,000 222,524

Income tax expense (benefit)

$ ( 2,976,053 ) $ 222,524

At December 31, 2023 , the Company had available net operating loss carryforwards of approximately $ 22.3 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 ("NOLs") 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.

Our ability to use our NOLs during this period will be dependent on our ability to generate taxable income, and the NOLs could expire before we generate sufficient taxable income.

Pursuant to Sections 382 and 383 of the Internal Revenue Code ("IRC"), federal and state tax laws impose significant restrictions on the utilization of net operating loss and other tax carryforwards in the event of a change in ownership of the Company.

The Company does not expect IRC Sections 382 and 383 to significantly impact the utilization of its NOLs and other tax carryforwards.

If we were to experience an "ownership change," as determined under Section 382 of the IRC, our ability to offset taxable income arising after the ownership change with NOLs arising prior to the ownership change would be limited, possibly substantially.

An ownership change would establish an annual limitation on the amount of our pre-change NOLs we could utilize to offset our taxable income in any future taxable year to an amount generally equal to the value of our stock immediately prior to the ownership change multiplied by the long-term tax-exempt rate.

In general, an ownership change will occur if there is a cumulative increase in our ownership of more than 50 percentage points by one or more "5% shareholders" (as defined in the IRC) at any time during a rolling three -year period.

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

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1,267,336 2037

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

As of September 30, 2024 , there are NOLs totaling approximately $ 13.0 million that have been generated since 2017 that do not expire, and can be carried forward to future year to offset taxable income.

The schedule below outlines when the Company's net operating losses for 2018 and later years were generated.

Total loss carryforwards

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

Related Party Transactions

During the six months ended June 30, 2024 and June 30, 2023 , the Company purchased a total of $ 4,402 and $ 18,148 , respectively, of corporate imprinted sportswear, promotional items, and caps from Angry Pug Sportswear.

During the nine months ended September 30, 2024 and September 30, 2023 , the Company purchased a total of $ 9,747 and $ 18,148 , 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 June 21, 2024, the Company granted 966,000 shares of restricted common stock with a 10 -year vesting period and 277,200 restricted stock units ("RSUs") with a 3 -year vesting period to employees and Directors as a performance bonus at an issue price of $ 1.55 per share.

On June 21, 2024, the Company granted 966,000 shares of restricted common stock with a 10 -year vesting period and 277,200 restricted stock units ("RSUs") with a 3 -year vesting period to officers and employees as a performance bonus at an issue price of $ 1.55 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.

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Pursuant to the Separation Agreement, Mr.

Jewell will be paid installment payments equal to his current base salary until and including April 18, 2024.

Jewell was paid installment payments equal to his base salary at the time of his retirement 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.

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.

Jewell was permitted to retain any unvested Company stock options or other equity awards, which shall vest in accordance with the applicable schedules.

Jewell also received all employee benefits including, but not limited to, health, dental, vision and life insurances that he was receiving prior to his execution of the Separation Agreement until April 18, 2024.

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.

4 unchanged sentences

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

On February 8, 2023, the Company granted 1,403,000 shares of restricted common stock with a 10 -year vesting period and 273,000 RSUs with a 3 -year vesting period to officers and employees 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.

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As Usio executives, Kauder and Pioletti were afforded access to and contributed to the development of Usio’s trade secrets and other proprietary information not generally known by the public at large, including but not limited to, financial information, marketing plans, cost and operational/strategic plans, and sales presentations.

In May 2021, Kauder resigned from Usio followed by Pioletti in July of 2022.

Thereafter, Kauder and Pioletti formed Triple Pay Play, another payment processing company which competes with the same services as Usio.

In May 2021, Kauder resigned from Usio followed by Pioletti in July 2022.

Thereafter, Kauder and Pioletti formed Triple Pay Play, another payment processing company which directly competes with Usio.

Upon information and belief, Kauder and Pioletti were working to form Triple Pay Play while employed by Usio, during Usio business hours, and while using Usio resources and Usio property.

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The motion was granted.

Subsequently, in February of 2024, Usio refiled its case in Tennessee, where Kauder, Pioletti, and Triple Pay Play reside.

Subsequently, in February 2024, Usio refiled its case in Tennessee, where Kauder, Pioletti, and Triple Pay Play reside.

On May 3, 2024, Kauder, Pioletti and Triple Pay Play filed a Motion to Dismiss Usio’s Complaint;

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On November 13, 2023, GBC filed lawsuit against Usio, alleging violations of the National Automated Clearing House Association (NACHA) rules in the State of Rhode Island Kent Superior Court.

In early March of 2024, Usio filed a Motion to Dismiss for improper venue and failure to state a claim.

In early March 2024, Usio filed a Motion to Dismiss for improper venue and failure to state a claim.

On May 20, 2024, Usio’s Motion to Dismiss was heard in the State of Rhode Island Kent Superior Court.

2 unchanged sentences

The lawsuit alleges that due to a mistake, accident, or inadvertence, certain customer deposits in the amount of $ 317,000 were improperly transferred to us.

We believe that plaintiff's claims contradict the express terms of the asset purchase agreement, and we intend to continue to vigorously defend this matter.

As a result of this post-sale dispute, we subsequently discovered that KDHM, LLC and its principals made certain misrepresentations and breached the terms of the asset purchase agreement.

On September 28, 2021, we filed an answer generally denying the plaintiff’s allegations.

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KDHM and third -party defendants, its principals Henry Minten and Thomas Dowe, affirmatively represented and warranted in section 3.1 (e) of the asset purchase agreement that “[t]he Annual Financial Statements and the Interim Financial Statements have been prepared from the books and records of Seller in accordance with GAAP applied on a consistent basis.”

We also discovered that KDHM by and through its principals failed to disclose that $ 305,000 in additional customer deposits existed and that these deposits were not conveyed to us as required by the asset purchase agreement.

KDHM, Minten and Dowe provided us with fraudulent and misleading financial statements that did not disclose these additional customer deposits.

We subsequently discovered that KDHM by and through its principals failed to disclose that $ 305,000 in additional customer deposits existed and that these deposits were not conveyed to us as required by the asset purchase agreement.

We believe that KDHM, Minten and Dowe provided us with fraudulent and misleading financial statements that did not disclose these additional customer deposits.

KDHM and the defendants do not dispute that these additional customer deposits existed and that they were purchased by Usio.

However, despite a written representation that these funds would be returned, KDHM and its principals have held these funds hostage.

Section 2.1 (b)( x ) of the asset purchase agreement provides that the purchased assets include “All of Seller’s deposits from its customer, including without limitation, those customer deposits listed on Schedule 2.1 (b)(xi) of the Disclosure Schedules.” Finally, we discovered that KDHM did not provide us with all customer lists, which are identified as purchased assets under the agreement.

In our counterclaims and third -party petition, we have asserted causes of action for fraud, breach of contract and conversion.

On August 18, 2023, the judge granted a summary motion entitling KDHM to deposits for customer accounts that were printed and mailed prior to the acquisition, and Usio Output Solutions, Inc.

was entitled to deposits for accounts that were not yet printed and printed but not yet mailed prior to the acquisition.

Section 2.1 (b)( x ) of the asset purchase agreement provides that the purchased assets include “All of Seller’s deposits from its customers, including without limitation, those customer deposits listed on Schedule 2.1 (b)(xi) of the Disclosure Schedules.” Finally, we discovered that KDHM did not provide us with all customer lists, which are identified as purchased assets under the agreement.

On August 18, 2023, the judge granted a summary motion entitling KDHM to deposits for customer accounts that were printed and mailed prior to the acquisition, and Output Solutions was entitled to deposits for accounts that were not yet printed and printed but not yet mailed prior to the acquisition.

Usio has requested a reconsideration of the motion, as it does not consider that deposits are only owed to KDHM if they were earned and offset against accounts receivable.

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On July 12, 2024, we filed an appeal on the lower court's decision, which is pending review.

We believe that plaintiff's claims contradict the express terms of the asset purchase agreement, and we intend to vigorously defend this matter.

As a result of this post-sale dispute, we subsequently discovered that KDHM, LLC and its principals made certain misrepresentations and breached the terms of the asset purchase agreement.

We have not recorded a contingency in relation to this case, as we consider the risk of lose remote as related to this lawsuit.

Other proceedings

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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