Usio, Inc. 10-Q

Item 1. Financial Statements. USIO, INC. CONSOLIDATED BALANCE SHEETS June 30, 2026 December 31, 2025 (Unaudited) Assets Current assets: Cash and cash equivalents $ 6,385,966 $ 7,434,051 Settlement processing assets 72,172,358 74,180,475 Prepaid card load assets 16,945,868 27,623,728 Customer deposits 2,355,284 2,281,220 Merchant reserves 4,568,537 4,795,537 Accounts receivable, net 6,525,621 5,274,586 Inventory 392,108 461,675 Prepaid expenses and other 1,824,140 1,359,382 Total current assets 111,169,882 123,410,654 Property and equipment, net 4,654,545 4,157,393 Other assets: Intangibles, net 9,759 9,759 Operating lease right-of-use assets, net 3,185,438 2,423,231 Other assets 362,949 362,949 Deferred tax asset, net 4,404,425 4,526,228 Total other assets 7,962,571 7,322,167 Total assets $ 123,786,998 $ 134,890,214 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 967,359 $ 880,590 Accrued expenses 3,371,039 3,326,445 Operating lease liabilities, current portion 750,013 639,805 Equipment loan, current portion 343,339 289,317 Settlement processing obligations 72,172,358 74,180,475 Prepaid card load obligations 16,945,868 27,623,728 Customer deposits 2,355,284 2,281,220 Merchant reserve obligations 4,568,537 4,795,537 Total current liabilities 101,473,797 114,017,117 Non-current liabilities: Operating lease liabilities, net of current portion 2,610,444 1,885,983 Equipment loan, net of current portion 910,310 1,074,711 Total liabilities 104,994,551 116,977,811 Commitments and contingencies (Note 11) Stockholders’ equity: Preferred stock, $ 0.01 par value, 10,000,000 shares authorized; - 0 - shares outstanding at June 30, 2026 (unaudited) and December 31, 2025 — — Common stock, $ 0.001 par value, 200,000,000 shares authorized; 32,607,392 and 31,562,178 issued, and 28,513,915 and 27,729,704 outstanding at June 30, 2026 (unaudited) and December 31, 2025, respectively 32,607 31,562 Additional paid-in capital 104,007,118 102,363,590 Treasury stock, at cost; 4,093,477 and 3,832,474 shares at June 30, 2026 (unaudited) and December 31, 2025, respectively ( 7,208,113 ) ( 6,837,181 ) Deferred compensation ( 7,896,753 ) ( 7,100,573 ) Accumulated deficit ( 70,142,412 ) ( 70,544,995 ) Total stockholders’ equity 18,792,447 17,912,403 Total liabilities and stockholders’ equity $ 123,786,998 $ 134,890,214 See the accompanying notes to the interim consolidated financial statements. 3 Table of Contents USIO, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenues $ 23,678,636 $ 19,960,990 $ 49,144,410 $ 41,970,040 Cost of services 17,952,649 14,820,921 38,281,540 32,020,828 Gross profit 5,725,987 5,140,069 10,862,870 9,949,212 Selling, general and administrative expenses: Stock-based compensation 482,508 434,255 811,792 844,317 SG&A 4,580,548 4,638,185 8,936,690 8,781,080 Depreciation and amortization 286,018 464,599 511,763 960,369 Total selling, general and administrative 5,349,074 5,537,039 10,260,245 10,585,766 Operating income (loss) 376,913 ( 396,970 ) 602,625 ( 636,554 ) Other income (expense): Interest income 96,198 110,908 187,689 189,919 Interest expense ( 22,934 ) ( 11,735 ) ( 45,760 ) ( 23,578 ) Other income, net 73,264 99,173 141,929 166,341 Income (loss) before income taxes 450,177 ( 297,797 ) 744,554 ( 470,213 ) Federal income tax expense 54,719 — 121,803 — State income tax expense 115,378 68,857 220,168 131,411 Income tax expense 170,097 68,857 341,971 131,411 Net income (loss) $ 280,080 $ ( 366,654 ) $ 402,583 $ ( 601,624 ) Basic income (loss) per common share: $ 0.01 $ ( 0.01 ) $ 0.01 $ ( 0.02 ) Diluted income (loss) per common share: $ 0.01 $ ( 0.01 ) $ 0.01 $ ( 0.02 ) Weighted average common shares outstanding Basic 27,819,834 26,456,411 27,764,064 26,577,052 Diluted 27,819,834 26,456,411 27,764,064 26,577,052 See the accompanying notes to the interim consolidated financial statements. 4 Table of Contents USIO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30, 2026 2025 Operating activities: Net income (loss) $ 402,583 $ ( 601,624 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 511,763 960,369 Deferred federal income tax 121,803 — Employee stock-based compensation 811,792 844,317 Allowance for expected credit losses ( 223,096 ) — Reserve for processing losses ( 155,100 ) ( 171,525 ) Changes in current assets and current liabilities: Accounts receivable ( 1,027,939 ) 162,045 Accounts receivable, tax credit — 1,494,612 Prepaid expenses and other ( 464,758 ) ( 520,027 ) Operating lease right-of-use assets 444,063 310,086 Inventory 69,567 23,339 Accounts payable and accrued expenses 286,463 ( 1,255,292 ) Operating lease liabilities ( 371,601 ) ( 310,483 ) Merchant reserves ( 227,000 ) 105,000 Customer deposits 74,064 69,509 Net cash provided by operating activities 252,604 1,110,326 Investing activities: Purchases of property and equipment ( 532,124 ) ( 73,925 ) Capitalized labor for internal use software ( 476,791 ) ( 673,242 ) Net cash used in investing activities ( 1,008,915 ) ( 747,167 ) Financing activities: Payments on equipment loan, net ( 110,379 ) ( 72,328 ) Proceeds from issuance of common stock 36,601 41,496 Purchases of treasury stock ( 370,932 ) ( 708,298 ) Assets held for customers ( 12,685,977 ) 3,202,631 Net cash provided by (used in) financing activities ( 13,130,687 ) 2,463,501 Change in cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves ( 13,886,998 ) 2,826,660 Cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves, beginning of period 116,315,011 87,618,491 Cash, Cash Equivalents, Settlement Processing Assets, Prepaid Card Load Assets, Customer Deposits and Merchant Reserves, End of Period $ 102,428,013 $ 90,445,151 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 45,760 $ 23,578 Income taxes 450,000 438,000 Non-cash investing and financing activities: Issuance of deferred stock compensation $ 1,350,900 $ — Right-of-use assets obtained in exchange for operating lease liabilities 1,206,270 — 5 The reconciliation of cash and cash equivalents to cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves is as follows for each period presented: Six Months Ended June 30, 2026 2025 Beginning cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves: Cash and cash equivalents $ 7,434,051 $ 8,056,891 Settlement processing assets 74,180,475 47,104,006 Prepaid card load assets 27,623,728 25,648,688 Customer deposits 2,281,220 1,918,805 Merchant reserves 4,795,537 4,890,101 Total $ 116,315,011 $ 87,618,491 Ending cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves: Cash and cash equivalents $ 6,385,966 $ 7,506,411 Settlement processing assets 72,172,358 62,891,265 Prepaid card load assets 16,945,868 13,064,060 Customer deposits 2,355,284 1,988,314 Merchant reserves 4,568,537 4,995,101 Total $ 102,428,013 $ 90,445,151 See the accompanying notes to the interim consolidated financial statements. 6 Table of Contents USIO, INC. CONSOLIDATED STATEMENTS 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, 2025 31,562,178 $ 31,562 $ 102,363,590 $ ( 6,837,181 ) $ ( 7,100,573 ) $ ( 70,544,995 ) $ 17,912,403 Issuance of common stock under equity incentive plan 94,700 95 77,943 — — — 78,038 Issuance of common stock under employee stock purchase plan 10,427 10 14,170 — — — 14,180 Deferred compensation amortization — — — — 251,246 — 251,246 Purchase of treasury stock, at cost — — — ( 233,459 ) — — ( 233,459 ) Net income for the period — — — — — 122,503 122,503 Balance at March 31, 2026 31,667,305 $ 31,667 $ 102,455,703 $ ( 7,070,640 ) $ ( 6,849,327 ) $ ( 70,422,492 ) $ 18,144,911 Issuance of common stock under equity incentive plan 920,420 920 1,529,014 — ( 1,350,900 ) — 179,034 Issuance of common stock under employee stock purchase plan 19,667 20 22,401 — — — 22,421 Deferred compensation amortization — — — — 303,474 — 303,474 Purchase of treasury stock, at costs — — — ( 137,473 ) — — ( 137,473 ) Net income for the period — — — — — 280,080 280,080 Balance at June 30, 2026 32,607,392 $ 32,607 $ 104,007,118 $ ( 7,208,113 ) $ ( 7,896,753 ) $ ( 70,142,412 ) $ 18,792,447 Balance at December 31, 2024 29,902,415 $ 198,317 $ 99,676,457 $ ( 5,770,592 ) $ ( 6,914,563 ) $ ( 68,032,656 ) $ 19,156,963 Adjustment to par value of common stock — ( 168,415 ) 168,415 — — — — Issuance of common stock under equity incentive plan 128,053 128 136,276 — — — 136,404 Issuance of common stock under employee stock purchase plan 7,887 8 11,507 — — — 11,515 Deferred compensation amortization — — — — 273,658 — 273,658 Purchase of treasury stock, at cost — — — ( 351,640 ) — — ( 351,640 ) Net loss for the period — — — — — ( 234,970 ) ( 234,970 ) Balance at March 31, 2025 30,038,355 $ 30,038 $ 99,992,655 $ ( 6,122,232 ) $ ( 6,640,905 ) $ ( 68,267,626 ) $ 18,991,930 Issuance of common stock under equity incentive plan 176,622 177 160,420 — — — 160,597 Issuance of common stock under employee stock purchase plan 20,535 20 29,958 — — — 29,978 Deferred compensation amortization — — — — 273,658 — 273,658 Purchase of treasury stock, at costs — — — ( 356,658 ) — — ( 356,658 ) Net loss for the period — — — — — ( 366,654 ) ( 366,654 ) Balance at June 30, 2025 30,235,512 $ 30,235 $ 100,183,033 $ ( 6,478,890 ) $ ( 6,367,247 ) $ ( 68,634,280 ) $ 18,732,851 See the accompanying notes to the interim consolidated financial statements. 7 Table of Contents USIO, INC. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1. Basis of Presentation The accompanying unaudited interim consolidated financial statements of Usio, Inc. and its subsidiaries (collectively, the “Company” or "Usio") 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 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 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, 2025 , as filed with the Commission on March 18, 2026 ( the " 2025 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 "second quarter" mean the three month period ended June 30, 2026 or 2025 , as applicable, 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. Cash and Cash Equivalents: Cash and cash equivalents include 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. The Company earns interest on these underlying processing assets, which is recognized as revenue in the Automated Clearing House ("ACH") and complementary services business line. Prepaid Card Load Assets: The Company maintains pre-funding accounts for its customers to facilitate prepaid card loads as initiated by our customer. These prepaid card load assets are carried on the Company's consolidated balance sheet with a corresponding liability. The Company earns interest on these prepaid card load assets and obligations, which is recognized as revenue in the prepaid card services business line. 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 United States Postal Service. These customer deposits are carried on the Company's consolidated balance sheet with a corresponding liability. The Company earns interest on these customer deposits, which is recognized as revenue in the Output Solutions business line. Merchant Reserves: The Company has merchant reserve requirements associated with ACH transactions. The merchant reserve assets are carried on the Company's consolidated balance sheet with a corresponding liability. Merchant reserves are set for each merchant. Funds are collected from each merchant and held as collateral to minimize contingent liabilities associated with any losses that may occur under the merchant agreement. While this cash is not restricted in its use, the Company believes that designating this cash to collateralize merchant reserves strengthens its fiduciary standing with the Company's 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. 8 Table of Contents Accounts Receivable/Allowance for Estimated Credit Losses: Accounts receivable are reported as outstanding principal net of an allowance for estimated credit losses of $ 181,036 and $ 404,132 at June 30, 2026 and December 31, 2025 , respectively. The Company maintains an allowance for estimated credit losses representing estimated losses expected to result from the inability or failure of its 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. Past losses incurred by the Company due to credit losses have been within its estimates. If the financial condition of its customers deteriorates, resulting in an impairment of their ability to make contractual payments, additional allowances might be required. Estimates for credit losses are variable based on the volume of transactions processed and could increase or decrease accordingly. The Company normally does not charge interest on accounts receivable. Inventory : Inventory is stated at the lower of cost or net realizable value. At June 30, 2026 and December 31, 2025 , inventory consisted primarily of printing and paper supplies used for Usio Output Solutions, Inc., or Output Solutions. Property and Equipment: Property and equipment are stated at cost. Depreciation and amortization are computed on a straight-line method over the estimated useful lives of the related assets, ranging from three to ten years. Leasehold improvements are amortized over the lesser of the estimated useful lives or remaining lease period. Expenditures for maintenance and repairs are charged to expense as incurred. Accounting for Internal-Use Software: The Company capitalizes the costs associated with software being developed or obtained for internal use until both the preliminary project stage is substantially 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 six months ended June 30, 2026 and 2025 , the Company capitalized software costs of $ 476,791 and $ 673,242 , respectively. Concentration of Credit Risk: Financial instruments that potentially expose the Company to credit risk consist of cash and cash equivalents, and accounts receivable. The Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation, or FDIC, which is $250,000. Accounts receivable potentially subject the Company to concentrations of credit risk. The Company’s customer base operates in a variety of industries and is geographically dispersed. The Company closely monitors extensions of credit. Estimated credit losses have been recorded in the consolidated financial statements. Recent credit losses have been within management's expectations. No single customer accounted for more than 10% of revenues during six months ended June 30, 2025 or the six months ended June 30, 2026 . Valuation and Impairment 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, an impairment loss is recognized, which is measured as the excess of the assets’ carrying value over the estimated fair value (with the estimated fair value determined based upon the estimated future cash inflows attributable to the asset, less estimated future cash outflows). No impairment losses were recorded during 2025 or the six months ended June 30, 2026 . Management is not aware of any impairment charges that may currently be required; however, the Company cannot predict the occurrence of events that might adversely affect the reported values in the future. Fair Value Measurements: The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: • Level 1 inputs - unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date; • Level 2 inputs - other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability; and • Level 3 inputs - unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. Cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term borrowings are reflected in the accompanying consolidated financial statements at cost, which approximates fair value because of the short-term maturity of these instruments. 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 June 30, 2026 and December 31, 2025 , the Company’s reserve for processing losses was $ 629,837 and $ 784,937 , respectively, which is recorded on the Company's consolidated balance sheet as an accrued expense, and in the consolidated statements of cash flows as a change in the reserve for processing losses. 9 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 Accounting Standards Codification ("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 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. Output Solutions provides bill preparation, presentment and mailing services. Revenue from Output Solutions is recognized when the related services are performed for printing and delivered to USPS for postage. We also earn revenues from interest and fees earned on certain assets underlying customer balances. Interest earned on assets directly related to our core business line operations are recorded in the revenue source underlying the associated customer balances. Customer balances held in which the Company earns interest revenues include balances from our ACH and complementary services, prepaid card services, and Output Solutions business lines. The following table presents the Company's consolidated revenues by source: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 ACH and complementary services $ 6,308,281 $ 5,192,224 $ 12,601,347 $ 10,236,741 Credit card 8,997,174 7,045,030 18,707,498 14,923,724 Prepaid card services 2,453,774 2,726,410 4,826,975 5,633,861 Output Solutions 5,669,349 4,642,901 12,474,663 10,375,768 Interest - ACH and complementary services 90,876 176,518 213,077 400,647 Interest - Prepaid card services 112,502 134,823 230,531 317,484 Interest - Output Solutions 46,680 43,084 90,319 81,815 Total revenue $ 23,678,636 $ 19,960,990 $ 49,144,410 $ 41,970,040 Legal Proceedings: 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 legal proceedings or other matters that may arise from time to time may harm our business. Accounting for Income Taxes: Our annual tax rate is based on our income, statutory tax rates, and available tax planning opportunities. Tax laws are complex and subject to different interpretations by the taxpayer and respective government taxing authority. Significant judgement is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties. We review our tax positions yearly and adjust the balances as new information becomes available. Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings, and available tax planning strategies. These rely heavily on estimates that are based on a number of factors, including historical data, and business forecasts. To the extent deferred tax assets are not expected to be realized, we record a valuation allowance. We recognize and measure uncertain tax positions in accordance with GAAP, pursuant to which we only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities. As with all businesses, the Company’s tax returns are subject to periodic examination. The Company’s federal returns for the past four years remain open to examination. The Company is subject to the Texas franchise tax. Management is not aware of any tax positions that would have a significant impact on its financial position. Recently Adopted and Recently Issued But Not Yet Adopted Accounting Pronouncements : Accounting standards that have been issued or proposed by the Financial Accounting Standards Board ("FASB"), the U.S. Securities and Exchange Commission ("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. In October 2023, FASB issued Accounting Standards Update ("ASU") 2023 - 06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33 - 10532, Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S- X or Regulation S-K becomes effective, with early adoption prohibited. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S- X or Regulation S-K becomes effective, with early adoption prohibited. For all other entities, the amendments will be effective two years later. The Company is evaluating the effect that ASU 2023 - 06 will have on its consolidated financial statements and related disclosures. In January 2025, the FASB issued ASU 2025 - 01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Clarifying the Effective Date. ASU 2025 - 01 clarifies the effective date for ASU 2024 - 03 (Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures), ensuring public business entities adopt it initially in annual reporting periods ( not interim) for non-calendar year-end entities. ASU 2024 - 03 requires disclosure on an annual and interim basis, in the notes to the financial statements, of disaggregated information about specific categories underlying certain income statement expense line items. The effective dates of ASU 2025 - 01 align with ASU 2024 - 03: within annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The Company is currently evaluating the impact of adopting this new accounting guidance on its consolidated financial statements and related disclosures, but does not expect adoption of this new standard to be material. In May 2025, the FASB issued ASU No. 2025 - 03, Business Combinations (Topic 805 ) and Consolidation (Topic 810 ): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity (“ASU 2025 - 03” ). ASU 2025 - 03 changes how companies determine the accounting acquirer in certain business combinations involving variable interest entities. The new guidance requires considering the factors used for other acquisition transactions to assess which party is the accounting acquirer. ASU 2025 - 03 is effective for the Company’s annual reporting periods beginning on January 1, 2027. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its consolidated financial statements and related disclosures, but does not expect adoption of this new standard to be material. In May 2025, the FASB issued ASU No. 2025 - 04, Compensation – Stock Compensation (Topic 718 ) and Revenue from Contracts With Customers (Topic 606 ): Clarifications to Share-Based Consideration Payable to a Customer (“ASU 2025 - 04” ). ASU 2025 - 04 revises the definition of a performance condition, eliminates the forfeiture policy election for service conditions, and clarifies that the variable consideration constraint in ASC Topic 606 does not apply to share-based consideration payable to customers. The new guidance requires entities to consistently account for share-based awards granted to customers by clarifying the treatment of vesting conditions and ensuring alignment with ASC Topic 606 and ASC Topic 718: Compensation—Stock Compensation. ASU 2025 - 04 is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its consolidated financial statements and related disclosures, but does not expect adoption of this new standard to be material. In July 2025, the FASB issued ASU 2025 - 05, Financial Instruments — Credit Losses (Topic 326 ): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025 - 05” ), which provides a practical expedient for estimating expected credit losses for current accounts receivable and current contract assets. ASU 2025 - 05 will be effective for annual periods beginning after December 15, 2025, and interim periods within those annual reporting periods and should be applied prospectively. We adopted this guidance effective January 1, 2026 on a prospective basis. Our consolidated financial statements were not materially impacted upon adoption. In September 2025, the FASB issued ASU 2025 - 06, "Targeted Improvements to the Accounting for Internal-Use Software," which simplifies the capitalization guidance by removing all references to software development project stages, so that the guidance is neutral to different software development methods. The amendments in this update are effective for annual periods beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either retrospectively, prospectively to software costs incurred after the adoption date or on a modified prospective basis. The Company is currently evaluating the potential effects of ASU 2025 - 06 on our consolidated financial statements and related disclosures but does not expect adoption of this new standard to be material. In December 2025, the FASB issued ASU No. 2025 - 10, Government Grants (Topic 832 ): Accounting for Government Grants Received by Business Entities. ASU 2025 - 10 establishes the accounting for a government grant received by a business entity, including guidance for ( 1 ) a grant related to an asset and ( 2 ) a grant related to income. The ASU is effective for annual periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its consolidated financial statements and related disclosures, but does not expect adoption of this new standard to be material. In December 2025, the FASB issued ASU 2025 - 11, “Interim Reporting ( Topic 270 ): Narrow-Scope Improvements”. The amendments are intended to improve the clarity and navigability of interim reporting requirements within Topic 270 by clarifying when interim reporting guidance applies, enhancing the organization of required interim disclosures, and specifying the form and content of interim financial statements. The guidance responds to stakeholder feedback that existing interim reporting requirements were difficult to navigate because of the historical origins and accumulated amendments within Topic 270. ASU 2025 - 11 adds a disclosure principle requiring entities to disclose events that occur after the end of the most recent annual reporting period that have a material impact on the entity. The amendments also introduce a comprehensive list of required interim disclosures drawn from various Codification topics and clarify the presentation requirements for interim financial statements, including condensed financial statements and accompanying footnotes. Importantly, the ASU does not change the fundamental nature of interim reporting nor expand or reduce existing disclosure requirements; rather, it improves clarity and consistency across entities that issue interim financial statements in accordance with generally accepted accounting principles. ASU 2025 - 11 is effective for the Company for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied either prospectively or retrospectively. The Company is currently evaluating the impact of adopting this new accounting guidance on its consolidated financial statements and related disclosures, but does not expect adoption of this new standard to be material. 10 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 the three months ended June 30, 2026 and 2025 , operating lease expenses totaled $ 193,613 and $ 151,568 , respectively. For the six months ended June 30, 2026 and 2025 , operating lease expenses totaled $ 384,514 and $ 302,256 , respectively. Note 3. Accrued Expenses Accrued expenses consisted of the following balances: June 30, 2026 December 31, 2025 Accrued commissions $ 943,297 $ 837,193 Reserve for processing losses 629,837 784,937 Other accrued expenses 1,103,476 1,254,205 Accrued taxes 251,558 326,586 Accrued salaries 442,871 123,524 Total accrued expenses $ 3,371,039 $ 3,326,445 Note 4. Loans Equipment Loans 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 . Total interest and principal payments on this folder and inserter equipment loan were $ 50,188 and $ 47,953 for the three months ended June 30, 2026 and 2025 , respectively. Total interest and principal payments on this folder and inserter equipment loan were $ 98,141 and $ 95,906 for the six months ended June 30, 2026 and 2025 , respectively. On September 19, 2025 , the Company entered into a debt arrangement to finance $ 1,017,954 for the purchase of an Output Solutions printer. The loan is for a period of 66 months with a maturity date of March 19, 2031 and annual interest of 6.75 %. Monthly principal and interest payments are required in the amount of $ 20,088 . Through the end of 2025, only $ 791,742 in proceeds were drawn from the loan and reflected on the Company's consolidated balance sheets at December 31, 2025, with the remaining commitment of $ 226,212 still available as of June 30, 2026 . Total payments on the printer loan during the three months ended June 30, 2026 were $ 44,636 . Total payments on the printer loan during the six months ended June 30, 2026 were $ 57,997 . Future principal payments on current debt arrangements are as follows at June 30, 2026 : Year ending December 31, Amount Due 2026 (remainder of the year) $ 178,938 2027 355,195 2028 379,981 2029 276,389 2030 63,146 Total payments $ 1,253,649 11 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 ("IMS"), which were issued in connection with our acquisition of substantially all of the assets of IMS in December 2020. IMS's warrants became fully vested on December 15, 2023. Each warrant is exercisable for a period of five years beginning on the date it vested. 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 at the time of issuance 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 $ 0 and $ 27,615 in the three months ended June 30, 2026 and 2025 , respectively. The amortization of these warrants totaled $ 0 and $ 55,228 in the six months ended June 30, 2026 and 2025 , respectively. Note 6. 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. Diluted EPS differs from basic EPS due to the assumed conversion of potentially dilutive awards and options that were outstanding during the period. 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, 2026 and 2025 : Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Numerator: Numerator for basic and diluted income (loss) per share, net income (loss) available to common shareholders $ 280,080 $ ( 366,654 ) $ 402,583 $ ( 601,624 ) Denominator: Denominator for basic income (loss) per share, weighted average shares outstanding 27,819,834 26,456,411 27,764,064 26,577,052 Effect of dilutive securities — — — — Denominator for diluted earnings per share, adjusted for weighted average shares and assumed conversion 27,819,834 26,456,411 27,764,064 26,577,052 Basic income (loss) per common share $ 0.01 $ ( 0.01 ) $ 0.01 $ ( 0.02 ) Diluted income (loss) per common share and common share equivalent $ 0.01 $ ( 0.01 ) $ 0.01 $ ( 0.02 ) The warrants to purchase shares of common stock that were outstanding at June 30, 2026 and 2025 which were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive, were as follows: June 30, 2026 2025 Anti-dilutive warrants 945,599 945,599 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. At June 30, 2026 and December 31, 2025 , the Company had a deferred tax asset of approximately $ 4.4 million and $ 4.5 million, respectively, net of a valuation allowance of approximately $ 2.7 million. Management considered the realizability of this asset in light of historical operating results and forecasted results, and determined that it was more likely than not that the Company will have taxable income in the future sufficient to utilize the deferred tax asset. 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. If applicable, the Company will recognize interest expense and penalties related to uncertain tax positions in interest expense. As of June 30, 2026 , the Company had no accrued interest or penalties related to uncertain tax provisions. At June 30, 2026 , the Company had available net operating loss carryforwards ("NOLs") of approximately $ 21.6 million. NOLs generated during or prior to 2017 ("Pre- 2018 NOLs") are available to offset taxable income of future periods and expire 20 years after the loss was generated. NOLs generated after 2017 do not expire. Our ability to use our NOLs will be dependent on our ability to generate taxable income, and the Pre- 2018 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 generated 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. 12 The schedule below outlines when the Company's Pre- 2018 NOLs were generated and the year they may expire. Tax Year-End NOL Expiration 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 $ 7,522,457 As of June 30, 2026 , there were NOLs totaling approximately $ 14.0 million that have been generated since the beginning of 2018 that do not expire, and can be carried forward to future years to offset taxable income. The schedule below outlines when the Company's NOLs for 2018 and later years were generated. Tax Year-End NOL 2018 $ 4,410,916 2019 2,730,461 2020 2,272,315 2022 3,609,279 2025 1,013,889 Total $ 14,036,860 Total loss carryforwards $ 21,559,317 13 The tax provision for federal and state income tax is as follows for the six months ended June 30, 2026 and 2025 : Six Months Ended June 30, 2026 Six Months Ended June 30, 2025 Current provision: Federal $ — $ — State 220,168 131,411 220,168 131,411 Deferred provision: Federal income tax 121,803 — Income tax expense $ 341,971 $ 131,411 The reconciliation of federal income tax expense (benefit) computed at the U.S. federal statutory tax rates to total income tax expense (benefit) is as follows for the six months ended June 30, 2026 and 2025 : Six Months Ended June 30, 2026 Six Months Ended June 30, 2025 Amount Rate Amount Rate Income tax (benefit) at 21% $ 156,356 21.0 % $ ( 98,745 ) 21.0 % Change in valuation allowance — — % — — % Permanent and other differences ( 34,553 ) ( 4.6 )% 98,745 ( 21.0 )% State taxes 220,168 29.6 % 131,411 ( 27.9 )% Income tax expense $ 341,971 45.9 % $ 131,411 ( 27.9 )% 14 Note 8. Related Party Transactions During the six months ended June 30, 2026 and 2025 , the Company purchased a total of $ 18,959 and $ 4,756 , respectively, of corporate imprinted sportswear, promotional items, and caps from Angry Pug Sportswear LLC. The Company’s Chairman of the Board, President, Chief Executive Officer and Chief Operating Officer, is a 50 % owner of Angry Pug Sportswear LLC. Note 9. Stock-Based Compensation In the six months ended June 30, 2026 , we withheld 44,430 shares of our common stock for $ 70,033 in private transactions based on an average purchase price of $ 1.58 per share from officers, directors and employees to cover their share of taxes in connection with equity grants. In the six months ended June 30, 2025 , we withheld 123,817 shares of our common stock for $ 210,672 in private transactions based on an average purchase price of $ 1.70 per share from officers, directors and employees to cover their share of taxes in connection with equity grants. On June 11, 2026, the Company granted 790,000 shares of restricted common stock with a 10 -year vesting period and 411,000 restricted stock units ("RSUs") with a 3 -year vesting period to officers and employees as a performance bonus at an issue price of $ 1.71 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, officers and employees will receive issued shares of common stock. Executive officers included in the 10 -year restricted stock grant were Louis Hoch ( 300,000 shares), Michael White ( 50,000 shares), Greg Carter ( 50,000 shares), and Houston Frost ( 50,000 shares). Executive officers included in the RSU grant were Louis Hoch ( 21,000 RSUs), Michael White ( 15,000 RSUs), Greg Carter ( 15,000 RSUs), and Houston Frost ( 15,000 RSUs). On June 11, 2026, the Company granted 96,000 RSUs with a 3 -year vesting period to Non-employee Directors as a performance bonus at an issue price of $ 1.71 per share. Directors included in the RSU grant were Blaise Bender ( 24,000 RSUs), Brad Rollins ( 24,000 RSUs), Ernesto Beyer ( 24,000 RSUs) and Michelle Miller ( 24,000 RSUs). On August 21, 2025, the Company granted 920,000 shares of restricted common stock with a 10 -year vesting period and 457,800 RSUs with a 3 -year vesting period to officers and employees as a performance bonus at an issue price of $ 1.44 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, officers and employees will receive issued shares of common stock. Executive officers included in the 10 -year restricted stock grant were Louis Hoch ( 300,000 shares), Michael White ( 50,000 shares), Greg Carter ( 50,000 shares), and Houston Frost ( 50,000 shares). Executive officers included in the RSU grant were Louis Hoch ( 21,000 RSUs), Michael White ( 18,000 RSUs), Greg Carter ( 18,000 RSUs), and Houston Frost ( 18,000 RSUs). On August 21, 2025, the Company granted 84,000 RSUs with a 3 -year vesting period to Non-employee Directors as a performance bonus at an issue price of $ 1.44 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 ( 21,000 RSUs). 15 Note 10. Segment Reporting Usio's reportable operating segments are "Output Solutions" and "Merchant Services" and these segments have been selected based on management’s resource allocation and performance assessment in making decisions regarding the Company. Our chief operating decision maker ("CODM") is the Company’s chief executive officer. The CODM has ultimate authority and responsibility over resource allocation decisions and performance assessment. Segment gross profit is the measure of segment profit and loss reviewed by the CODM and is used by the CODM to evaluate segment performance and make decisions about funding our operations and allocating resources. The following is a description of the segments. Output Solutions The Output Solutions segment, which was created in connection with the acquisition of substantially all of the assets of IMS, offers 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. Output Solutions, provides an outsourced solution for document design, print, and electronic delivery to potential customers and entities looking to reduce postage costs and increase efficiencies. Merchant Services The Merchant Services segment offers integrated electronic payment processing services to merchants and businesses, including credit and debit card-based processing services and electronic funds transfer via the ACH network. Additionally, as part of our Prepaid card-based processing services, we develop and manage a variety of Mastercard-branded prepaid card program types, including consumer reloadable, consumer gift, incentive, promotional, general and government disbursement and corporate expense cards. The following tables set forth certain financial information with respect to Usio’s reportable segments for the three months ended June 30, 2026 and 2025 : For the Three Months Ended June 30, 2026 Output Solutions Merchant Services Total Revenues $ 5,716,029 $ 17,962,607 $ 23,678,636 Cost of services Processing expense — 13,335,991 13,335,991 Services expense 783,939 — 783,939 Postage expense 3,832,719 — 3,832,719 Cost of services 4,616,658 13,335,991 17,952,649 Gross profit $ 1,099,371 $ 4,626,616 $ 5,725,987 Depreciation and amortization $ 36,789 $ 249,229 $ 286,018 Capital expenditures $ 38,607 $ 95,445 $ 134,052 Identifiable assets 1 $ 4,742,853 $ 10,024,618 $ 14,767,471 For the Three Months Ended June 30, 2025 Output Solutions Merchant Services Total Revenues $ 4,685,985 $ 15,275,005 $ 19,960,990 Cost of services Processing expense — 10,974,067 10,974,067 Services expense 567,727 — 567,727 Postage expense 3,279,127 — 3,279,127 Cost of services 3,846,854 10,974,067 14,820,921 Gross profit $ 839,131 $ 4,300,938 $ 5,140,069 Depreciation and amortization $ 235,547 $ 229,052 $ 464,599 Capital expenditures $ 61,859 $ 1,731 $ 63,590 Identifiable assets 1 $ 3,816,153 $ 8,046,699 $ 11,862,852 Note to tables: ( 1 ) Identifiable assets is calculated by summing the balances of accounts receivable, net; inventory; property and equipment, net; operating lease right-of-use lease assets; and intangibles, net. 16 The following tables set forth certain financial information with respect to Usio’s reportable segments for the six months ended June 30, 2026 and 2025 : For the Six Months Ended June 30, 2026 Output Solutions Merchant Services Total Revenues $ 12,564,982 $ 36,579,428 $ 49,144,410 Cost of services Processing expense — 28,074,400 28,074,400 Services expense 1,542,154 — 1,542,154 Postage expense 8,664,986 — 8,664,986 Cost of services 10,207,140 28,074,400 38,281,540 Gross profit $ 2,357,842 $ 8,505,028 $ 10,862,870 Depreciation and amortization $ 45,452 $ 466,311 $ 511,763 Capital expenditures $ 386,591 $ 145,533 $ 532,124 Identifiable assets 1 $ 4,742,853 $ 10,024,618 $ 14,767,471 For the Six Months Ended June 30, 2025 Output Solutions Merchant Services Total Revenues $ 10,457,583 $ 31,512,457 $ 41,970,040 Cost of services Processing expense — 23,648,164 23,648,164 Services expense 1,699,602 — 1,699,602 Postage expense 6,673,062 — 6,673,062 Cost of services 8,372,664 23,648,164 32,020,828 Gross profit $ 2,084,919 $ 7,864,293 $ 9,949,212 Depreciation and amortization $ 478,175 $ 482,194 $ 960,369 Capital expenditures $ 61,859 $ 12,066 $ 73,925 Identifiable assets 1 $ 3,816,153 $ 8,046,699 $ 11,862,852 Note to tables: ( 1 ) Identifiable assets is calculated by summing the balances of accounts receivable, net; inventory; property and equipment, net; operating lease right-of-use lease assets; and intangibles, net. 17 The following tables reconcile total gross profit reported above to the income (loss) from operations reported in the consolidated statements of operations for the three and six months ended June 30, 2026 and 2025 : Three Months Ended June 30, 2026 2025 Total Gross Profit $ 5,725,987 $ 5,140,069 Stock-based compensation ( 482,508 ) ( 434,255 ) SG&A ( 4,580,548 ) ( 4,638,185 ) Depreciation and amortization ( 286,018 ) ( 464,599 ) Operating income (loss) $ 376,913 $ ( 396,970 ) Six Months Ended June 30, 2026 2025 Total Gross Profit $ 10,862,870 $ 9,949,212 Stock-based compensation ( 811,792 ) ( 844,317 ) SG&A ( 8,936,690 ) ( 8,781,080 ) Depreciation and amortization ( 511,763 ) ( 960,369 ) Operating income (loss) $ 602,625 $ ( 636,554 ) 18 Note 11. Commitments and Contingencies Legal Proceedings The Company may become involved in legal matters arising in the ordinary course of business from time to time. While we are not party to any legal proceedings as of the date of the filing of this report, we could become involved in litigation or other legal proceedings that may have a material adverse effect on our business, financial condition, or results of operations. 19 Table of Contents