Item 1. Financial Statements
PAYSIGN, INC.
Formerly known as, 3PEA INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2019 AND DECEMBER 31, 2018
|
|
March 31,
2019
(Unaudited)
|
|
|
December 31,
2018
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
5,211,161
|
|
|
$
|
5,615,073
|
|
Cash restricted
|
|
|
45,928,136
|
|
|
|
26,050,668
|
|
Accounts receivable
|
|
|
667,853
|
|
|
|
337,303
|
|
Prepaid expenses and other assets
|
|
|
1,066,357
|
|
|
|
1,175,241
|
|
Total current assets
|
|
|
52,873,507
|
|
|
|
33,178,285
|
|
|
|
|
|
|
|
|
|
|
Fixed assets, net
|
|
|
1,009,359
|
|
|
|
883,490
|
|
|
|
|
|
|
|
|
|
|
Intangible assets, net
|
|
|
2,215,718
|
|
|
|
2,115,933
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
56,098,584
|
|
|
$
|
36,177,708
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
579,052
|
|
|
$
|
1,327,497
|
|
Customer card funding
|
|
|
45,112,478
|
|
|
|
25,960,974
|
|
Total current liabilities
|
|
|
45,691,530
|
|
|
|
27,288,471
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
45,691,530
|
|
|
|
27,288,471
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
|
|
|
|
|
|
|
|
|
Common stock; $0.001 par value; 150,000,000 shares authorized, 46,731,912 and 46,440,765 issued and outstanding at March 31, 2019 and December 31, 2018, respectively
|
|
|
46,732
|
|
|
|
46,441
|
|
Additional paid-in capital
|
|
|
9,266,563
|
|
|
|
8,620,144
|
|
Treasury stock at cost, 303,450 shares
|
|
|
(150,000
|
)
|
|
|
(150,000
|
)
|
Retained earnings
|
|
|
1,451,253
|
|
|
|
579,582
|
|
Total Paysign, Inc.'s stockholders' equity
|
|
|
10,614,548
|
|
|
|
9,096,167
|
|
Noncontrolling interest
|
|
|
(207,494
|
)
|
|
|
(206,930
|
)
|
Total stockholders' equity
|
|
|
10,407,054
|
|
|
|
8,889,237
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
56,098,584
|
|
|
$
|
36,177,708
|
|
See accompanying notes to consolidated financial
statements.
PAYSIGN, INC.
Formerly known as, 3PEA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2019
AND 2018
(UNAUDITED)
|
|
For the three months ended
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Revenues
|
|
$
|
7,257,290
|
|
|
$
|
4,676,320
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues (excluding depreciation and amortization)
|
|
|
3,482,136
|
|
|
|
2,433,210
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
3,775,154
|
|
|
|
2,243,110
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
333,761
|
|
|
|
246,038
|
|
Selling, general and administrative
|
|
|
2,704,949
|
|
|
|
1,579,019
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
3,038,710
|
|
|
|
1,825,057
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
736,444
|
|
|
|
418,053
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Other (expense)
|
|
|
–
|
|
|
|
(28,000
|
)
|
Interest income
|
|
|
119,173
|
|
|
|
20,600
|
|
Total other income (expense)
|
|
|
119,173
|
|
|
|
(7,400
|
)
|
|
|
|
|
|
|
|
|
|
Income before income tax benefit and noncontrolling interest
|
|
|
855,617
|
|
|
|
410,653
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
|
|
|
(15,490
|
)
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Net income before noncontrolling interest
|
|
|
871,107
|
|
|
|
410,653
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the noncontrolling interest
|
|
|
564
|
|
|
|
1,895
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Paysign, Inc.
|
|
$
|
871,671
|
|
|
$
|
412,548
|
|
|
|
|
|
|
|
|
|
|
Net income per common share – basic
|
|
$
|
0.02
|
|
|
$
|
0.01
|
|
Net income per common share - fully diluted
|
|
$
|
0.02
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
|
|
46,961,079
|
|
|
|
44,990,765
|
|
Weighted average common shares outstanding - fully diluted
|
|
|
54,508,835
|
|
|
|
50,880,765
|
|
See accompanying notes to consolidated financial
statements.
PAYSIGN, INC.
Formerly known as, 3PEA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2019
|
|
Stockholders' Equity
Attributable to Paysign, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Treasury
|
|
|
|
|
|
Non-
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Stock
|
|
|
Retained
|
|
|
controlling
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Amount
|
|
|
Earnings
|
|
|
Interest
|
|
|
Equity
|
|
Balance, December 31, 2018
|
|
|
46,440,765
|
|
|
$
|
46,441
|
|
|
$
|
8,620,144
|
|
|
$
|
(150,000
|
)
|
|
$
|
579,582
|
|
|
$
|
(206,930
|
)
|
|
$
|
8,889,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock for previously vested stock based compensation
|
|
|
291,147
|
|
|
|
291
|
|
|
|
(291
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
–
|
|
|
|
–
|
|
|
|
646,710
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
646,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
871,671
|
|
|
|
(564
|
)
|
|
|
871,107
|
|
Balance, March 31, 2019
|
|
|
46,731,912
|
|
|
$
|
46,732
|
|
|
$
|
9,266,563
|
|
|
$
|
(150,000
|
)
|
|
$
|
1,451,253
|
|
|
$
|
(207,494
|
)
|
|
$
|
10,407,054
|
|
FOR THE THREE MONTHS ENDED MARCH 31, 2018
|
|
Stockholders' Equity
Attributable to Paysign, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Treasury
|
|
|
|
|
|
Non-
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Stock
|
|
|
Accumulated
|
|
|
controlling
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Amount
|
|
|
Deficit
|
|
|
Interest
|
|
|
Equity
|
|
Balance, December 31, 2017
|
|
|
43,670,765
|
|
|
$
|
43,671
|
|
|
$
|
7,155,970
|
|
|
$
|
(150,000
|
)
|
|
$
|
(2,008,472
|
)
|
|
$
|
(200,117
|
)
|
|
$
|
4,841,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
–
|
|
|
|
–
|
|
|
|
137,401
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
137,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
412,548
|
|
|
|
(1,895
|
)
|
|
|
410,653
|
|
Balance, March 31, 2018
|
|
|
43,670,765
|
|
|
$
|
43,671
|
|
|
$
|
7,293,371
|
|
|
$
|
(150,000
|
)
|
|
$
|
(1,595,924
|
)
|
|
$
|
(202,012
|
)
|
|
$
|
5,389,106
|
|
See accompanying notes to consolidated financial
statements.
PAYSIGN, INC.
Formerly known as, 3PEA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2019
AND 2018
(UNAUDITED)
|
|
For the three months ended
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income attributable to Paysign, Inc.
|
|
$
|
871,671
|
|
|
$
|
412,548
|
|
Adjustments to reconcile net income attributable to Paysign, Inc. to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Change in noncontrolling interest
|
|
|
(564
|
)
|
|
|
(1,895
|
)
|
Depreciation and amortization
|
|
|
333,761
|
|
|
|
246,038
|
|
Stock based compensation
|
|
|
646,710
|
|
|
|
137,401
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Change in accounts receivable
|
|
|
(330,548
|
)
|
|
|
823
|
|
Change in prepaid expenses and other current assets
|
|
|
108,884
|
|
|
|
(413,181
|
)
|
Change in accounts payable and accrued liabilities
|
|
|
(748,447
|
)
|
|
|
(607,123
|
)
|
Change in customer card funding
|
|
|
19,151,504
|
|
|
|
1,908,112
|
|
Net cash provided by operating activities
|
|
|
20,032,971
|
|
|
|
1,682,723
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of fixed assets
|
|
|
(195,460
|
)
|
|
|
(53,210
|
)
|
Change in intangible assets
|
|
|
(363,955
|
)
|
|
|
(299,323
|
)
|
Net cash used in investing activities
|
|
|
(559,415
|
)
|
|
|
(352,533
|
)
|
|
|
|
|
|
|
|
|
|
Net change in cash and restricted cash
|
|
|
19,473,556
|
|
|
|
1,330,190
|
|
Cash and restricted cash, beginning of period
|
|
|
31,665,741
|
|
|
|
17,164,757
|
|
|
|
|
|
|
|
|
|
|
Cash and restricted cash, end of period
|
|
$
|
51,139,297
|
|
|
$
|
18,494,947
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
–
|
|
|
$
|
–
|
|
Income taxes paid
|
|
$
|
–
|
|
|
$
|
–
|
|
See accompanying notes to consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.
BASIS OF PRESENTATION AND
SUMMARY OF SIGNIFICANT POLICIES
The foregoing unaudited interim financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and
Exchange Commission (“SEC”). Accordingly, these financial statements do not include all of the disclosures required
by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited
interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included
on Form 10-K for the year ended December 31, 2018. In the opinion of management, the unaudited interim financial statements furnished
herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for
the interim period presented.
The preparation of financial statements
in accordance GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts
of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumption are inherent
in the preparation of the Company’s financial statements; accordingly, it is possible that the actual results could differ
from these estimates and assumptions that could have a material effect on the reported amounts of the Company’s financial
position and results of operations.
Operating results for the three months
ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.
About Paysign, Inc.
On March 4, 2019, our board of directors
and stockholders holding a majority of our outstanding common stock agreed to amend our articles of incorporation to change our
name from 3PEA International, Inc. to Paysign, Inc. As a result, we amended our articles of incorporation on April 23, 2019 for
such name change. Additionally, we changed our trading symbol on the NASDAQ Capital Market to “PAYS”. Paysign, Inc.
(also referred as the “Company” and “Paysign”) is a vertically integrated provider of innovative prepaid
card products and processing services for corporate, consumer and government applications. Our payment solutions are utilized by
our corporate customers as a means to increase customer loyalty, increase patient adherence rate, reduce administration costs and
streamline operations. Public sector organizations can utilize our payment solutions to disburse public benefits or for internal
payments. The Company markets prepaid card solutions under our Paysign
®
brand. As we are a payment processor and
prepaid card program manager, we derive revenue from all stages of the prepaid card lifecycle. We provide a card processing platform
consisting of proprietary systems and innovative software applications based on the unique needs of our programs. We have extended
our processing business capabilities through its proprietary Paysign platform. We design and process prepaid programs that run
on the platform through which customers can define the services they wish to offer cardholders. Through the Paysign platform, we
provide a variety of services including transaction processing, cardholder enrollment, value loading, cardholder account management,
reporting, and customer service.
The Paysign brand offers prepaid card based
solutions or “card products” for corporate incentive rewards and corporate expense, per diem and travel payments, healthcare
reimbursement payments, pharmaceutical co-pay assistance, donor compensation and clinical trials. We plan plans to expand our product
offering to include payroll cards, general purpose re-loadable cards, and others. Our cards are offered to end users through our
relationships with bank issuers.
Our proprietary Paysign
®
platform was built on modern cross-platform architecture and designed to be highly flexible, scalable and customizable. The platform
allows us to significantly expand our operational capabilities by facilitating entry into new markets within the payments space
through its flexibility and ease of customization. The Paysign platform delivers cost benefits and revenue building opportunities
to our partners.
We manage all aspects of the debit card
lifecycle, from managing the card design and approval processes with partners and networks, to production, packaging, distribution,
and personalization. We oversee inventory and security controls, renewals, lost and stolen card management and replacement. We
deploy a fully staffed, in-house customer service department which utilizes bilingual customer service agents, Interactive Voice
Response (IVR), and two way short message service (SMS) messaging and text alerts.
Principles of consolidation
–
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances
and transactions have been eliminated.
Use of estimates
– The preparation
of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Cash restricted
– At March
31, 2019 and December 31, 2018, restricted cash consisted of funds held specifically for our card product programs that are contractually
restricted to use. Changes in cash restricted balances which represent customer deposits are included in operating activities in
our consolidated statements of cash flows.
Intangible assets
–
Internally
Developed Software Costs -
Computer software development costs are expensed as incurred, except for internal use software or
website development costs that qualify for capitalization as described below, and include compensation and related expenses, costs
of hardware and software, and costs incurred in developing features and functionality.
For computer software developed or obtained
for internal use, costs that are incurred in the preliminary project and post implementation stages of software development are
expensed as incurred. Costs incurred during the application and development stage are capitalized. Capitalized costs are amortized
using the straight-line method over a three-year estimated useful life, beginning in the period in which the software is available
for use.
For intangible assets, we recognize an
impairment loss if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of
the intangible asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from
the use of the asset.
Intangible assets with finite lives are
amortized on a straight-line basis over their estimated useful lives.
Earnings per share
– Basic
earnings per share exclude any dilutive effects of options, warrants and convertible securities. Basic earnings per common share
is computed using the weighted-average number of outstanding common stocks during the applicable period. Diluted earnings per
share reflects the potential dilution that could occur if securities or other contracts to be issued common stock were exercised
or converted into common stock or resulted in the issuance of common stock that are then shared in the earnings of the Company.
Common stock equivalent shares are excluded from the computation if their effect is antidilutive.
Revenue and expense recognition
(Adoption of ASC 606,
Revenue from Contracts with Customers
)
– In May 2014, the FASB issued ASU No.
2014-09,
Revenue from Contracts with Customers (ASC Topic 606),
guidance on recognizing revenue from contracts
with customers. The guidance outlines a single comprehensive model to use in accounting for revenue arising from contracts
with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core
principle of the model is that an entity recognizes revenue to portray the transfer of goods and services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The standard also expands disclosure requirements regarding revenue recognition. This guidance is effective for interim and
annual reporting periods beginning after December 15, 2017 and may be applied retrospectively to each prior period presented
or using a modified retrospective approach with the cumulative effect recognized as of the date of initial application. Early
adoption is permitted for interim and annual reporting periods beginning after December 15, 2016. We adopted this guidance as
of January 1, 2018 using the modified retrospective transition method. The adoption of the guidance did not have a material
impact on our financial condition and results of operations. The standard also requires new, expanded disclosures regarding
revenue recognition. Several ASU’s have been issued since the issuance of ASU 2014-09. These ASU’s, which modify
certain sections of ASU 2014-09 are intended to promote a more consistent interpretation ad application of the principles
outlined in the standard.
The Company recognizes revenue when goods
or services are transferred to customers in an amount that reflects the consideration which it expects to receive in exchange for
those goods or services. In determining when and how revenue is recognized from contracts with customers, the Company performs
the following five-step analysis: (i) identification of contract with customers; (ii) determination of performance obligations;
(iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations; and (v) recognition
of revenue when (or as) the Company satisfies each performance obligations.
The Company generates revenue through fees
generated from cardholder transactions, interchange and card program management fees. Revenue from cardholder transactions, interchange
and card program management fees is recorded when the performance obligation is fulfilled. The Company records all revenue on a
gross basis since it is the primary obligor and establishes the price in the contract arrangement with its customers. The Company
is currently under no obligation for refunding any fees or has any obligations for disputed claim settlements. Given the nature
of the Company’s services and contracts, it has no contract assets.
Stock-Based
Compensation
– Stock based compensation for non-employees is accounted for using the Equity-Based Payments to
Non-Employee Topic of the FASB ASC
,
which establishes standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities
in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be
settled by the issuance of those equity instruments. We determine the value of stock issued at the date of grant. We also
determine at the date of grant the value of stock at fair market value or the value of services rendered (based on contract
or otherwise) whichever is more readily determinable.
Stock based compensation for employees
is accounted for using the Stock Based Compensation Topic of the FASB ASC. We use the fair value method for equity instruments
granted to employees and will use the Black Scholes model for measuring the fair value of options, if issued. The stock based fair
value compensation is determined as of the date of the grant or the date at which the performance of the services is completed
(measurement date) and is recognized over the vesting periods.
New accounting pronouncements
-
In February 2016, the FASB issued ASU 2016-02,
Leases.
This update requires lessees to recognize at the lease commencement
date a lease liability which is the lessee’s obligation to make lease payments arising from a lease, measured on a discounted
basis, and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified
asset for the lease term. Lessees will no longer be provided with a source of off-balance sheet financing. This update is effective
for financial statements issued for annual periods beginning after December 15, 2018, including interim periods within those fiscal
years. Early adoption is permitted. Lessees and lessors must apply a modified retrospective transition approach for leases existing
at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified
retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period
presented. Applying a full retrospective approach is not allowed. There was no material impact of this adoption on the Company’s
consolidated financial position, results of operations and cash flows.
We adopted the guidance in ASU 2018-07,
Compensation
- Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting,
on January 1, 2019. This
ASU expands the scope to make the guidance for share-based payment awards to nonemployees consistent with the guidance for share-based
payment awards to employees. The adoption of ASU 2018-07 did not have a material impact on the consolidated financial statements.
2.
FIXED ASSETS
Fixed assets consist of the following:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
Equipment
|
|
$
|
1,721,713
|
|
|
$
|
1,586,954
|
|
Software
|
|
|
199,947
|
|
|
|
165,274
|
|
Furniture and fixtures
|
|
|
147,229
|
|
|
|
140,209
|
|
Website Costs
|
|
|
44,475
|
|
|
|
25,467
|
|
Leasehold improvements
|
|
|
52,894
|
|
|
|
52,894
|
|
|
|
|
2,166,258
|
|
|
|
1,970,798
|
|
Less: accumulated depreciation
|
|
|
1,156,899
|
|
|
|
1,087,308
|
|
Fixed assets, net
|
|
$
|
1,009,359
|
|
|
$
|
883,490
|
|
3.
INTANGIBLE ASSETS
Intangible assets consist of the following:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
Patents and trademarks
|
|
$
|
36,073
|
|
|
$
|
36,073
|
|
Platform
|
|
|
4,421,723
|
|
|
|
4,105,780
|
|
Kiosk
|
|
|
64,802
|
|
|
|
64,802
|
|
Licenses
|
|
|
481,697
|
|
|
|
433,685
|
|
|
|
|
5,004,295
|
|
|
|
4,640,340
|
|
Less: accumulated amortization
|
|
|
2,788,577
|
|
|
|
2,524,407
|
|
Intangible assets, net
|
|
$
|
2,215,718
|
|
|
$
|
2,115,933
|
|
Intangible assets are amortized over their
useful lives ranging from periods of 3 to 5 years.
4.
COMMON STOCK
At March 31, 2019, the Company's authorized
capital stock was 150,000,000 shares of common stock, par value $0.001 per share, and 25,000,000 shares of preferred stock, par
value $0.001 per share. As of that date, the Company had outstanding 46,731,912 shares of common stock, and no shares of preferred
stock.
2019 Transactions:
During the three
months ended March 31, 2019, the Company issued shares of common stock as follows:
In February 2019, the Company issued a
total of 291,147 shares of common stock to three individuals for restricted stock awards previously granted, earned and vested.
2018 Transactions:
During the three
months ended March 31, 2018, the Company did not issue any shares of common stock.
Stock and Warrant Grants:
In October 2018, we granted to several
employees of Paysign a total of 1,050,000 shares of common stock. These shares were valued at $3,405,000 or average price per share
of $3.24. The 1,050,000 shares have an annual vesting period of five years with the first vesting period occurring on October 2019.
The amount expensed related to this grant for the three months ended March 31, 2019 totaled $170,360. As of March 31, 2019, none
of the shares have vested and/or been issued.
On August 7, 2018, we granted an employee
of Paysign options to purchase 500,000 shares of common stock exercisable for five years at $3.39 per share, which vest annually
over a five-year period from the date of hire. The options were valued at $1,315,011 using the Black-Scholes options pricing model
under the following assumptions: stock price at issuance of $3.39 per share; exercise price of $3.39; 5 year life; discount rate
of 2.95%; and volatility rate of 263%. The amount expensed of this grant for the three months ended March 31, 2019 totaled $65,750.
As of March 31, 2019 none of the options have vested or been exercised.
On July 18, 2018, we granted stock options
for various employees of Paysign to purchase 750,000 shares of common stock exercisable for five years with an exercise price of
$2.40 per share, which vest annually over a five-year period, as long as they remain employed with Paysign, beginning July 18,
2018. The options were valued at $1,397,777 using the Black-Scholes options pricing model under the following assumptions: stock
price at issuance of $2.40 per share; exercise price of $2.40; 5 year life; discount rate of 2.88%; and volatility rate of 235%.
The amount expensed related to this grant for the three months ended March 31, 2019 totaled $65,920. As of March 31, 2019, none
of the options have vested or been exercised and total of 48,642 options have been forfeited due to employee terminations.
In July 2018, we granted 130,000 shares
to a consultant. The shares were valued at $338,000 or $2.60 per share. The 130,000 shares will be expensed over the contract period
of one year. The value earned and expensed for the three months ended March 31, 2019 was $84,500. As of March 31, 2019, the full
130,000 shares have been issued and the unearned portion totaling $108,910 has been recorded as contra equity and included in additional
paid-in capital.
On May 3, 2018, we appointed Dan R. Henry
to our board of directors as an independent director. In connection with his appointment, we issued Mr. Henry options to purchase
1,500,000 shares common stock exercisable over five years with an exercise price of $1.34 per share, which vest over a four-year
period from the date of his appointment. The options were valued at $1,574,691 using the Black-Scholes options pricing model under
the following assumptions: stock price at issuance of $1.34 per share; exercise price of $1.34; 5 year life; discount rate of 2.94%;
and volatility rate of 238%. The amount expensed related to this grant for the three months ended March 31, 2019 totaled $98,345.
As of March 31, 2019, none of the options have vested or been exercised.
On May 3, 2018, we appointed Dennis Triplett
to our board of directors as an independent director. In connection with his appointment, we granted Mr. Triplett 200,000 shares
of restricted common stock which vest over a four-year period from the date of his appointment. The shares have a fair market value
of $268,000 or $1.34 per share. The amount vested and expensed of this grant for the three months ended March 31, 2019 totaled
$16,745. As of March 31, 2019 none of the shares have vested or been issued.
On April 13, 2018, we appointed Quinn Williams to our board
of directors as an independent director. In connection with his appointment, we granted Mr. Williams 200,000 shares of restricted
common stock which vest over a four-year period from the date of his appointment. The shares have a fair market value of $320,000
or $1.60 per share. The amount vested and expensed of this grant for the three months ended March 31, 2019 totaled $20,000. As
of March 31, 2019, none of the shares have vested or been issued.
On March 29, 2018, we appointed Bruce A.
Mina to our board of directors as an independent director. In connection with his appointment, we granted Mr. Mina 200,000 shares
of restricted common stock which vest over a four-year period from the date of his appointment. The shares have a fair market value
of $234,000 or $1.17 per share. The amount vested and expensed of this grant for the three months ended March 31, 2019 totaled
$14,625. As of March 31, 2019, 50,000 shares have vested but none have been issued.
In January 2018, we granted 300,000 shares
of restricted common stock to a consultant of Paysign with a fair market value of $213,000, or $0.71 per share. The 300,000 shares
have an annual vesting period of three years with the first vesting period occurring on December 31, 2018. The amount vested and
expensed of this grant for the three months ended March 31, 2019 and 2018 totaled $17,750 and $17,494. As of March 31, 2019, 100,000
shares have vested and been issued.
In December 2017, the Company granted 990,000
shares of restricted common stock to certain employees of Paysign with a fair market value of $698,000 with a range of $0.67 to
$0.74 per share. The 990,000 shares have an annual vesting period of five years with the first vesting period. The amount vested
and expensed of this grant for the three months ended March 31, 2019 and 2018 totaled $33,400 and $33,400, respectively. As of
March 31, 2019, 190,000 shares have vested and been issued.
In September 2017, we granted 200,000 shares
of restricted common stock to an officer of Paysign with a fair market value of $84,400 or $0.42 per share. These shares have been
issued. Concurrently, the Company also granted the employee four equal tranches of 200,000 restricted common shares, each valued
at $84,400 which will vest in equal amounts over a four year period with the first vesting period occurring on July 2018. The amount
vested and expensed of this grant for the three months ended March 31, 2019 and 2018 totaled $21,100 and $21,100, respectively.
As of March 31, 2019, 200,000 shares have vested and been issued.
In November 2016, we granted a total of
5,000,000 shares to certain officers and directors of Paysign with a total value of $787,950 or $0.15759 per share (including a
15% discount of fair market value due to these shares being restricted and lacking market liquidity). The 5,000,000 shares have
a quarterly vesting period of five years with the first vesting period occurring on December 31, 2016. The value vested and expensed
for the three months ended March 31, 2019 and 2018 was $35,457 and $39,398 respectively. As of March 31, 2019, 2,225,000 shares
have vested of which 2,000,000 shares have been issued. As of March 31, 2019, our obligation to issue 300,000 of the unissued shares
has lapsed as a result of a grantee’s retirement.
In November 2016, we granted 210,000 shares
to a consultant. The shares were valued at $33,094 or $0.15759 per share (including a 15% discount of fair market value due to
these shares being restricted and lacking market liquidity). The 210,000 shares have a quarterly vesting period of three years
with the first vesting period occurring on December 31, 2016. The value vested for the three months ended March 31, 2019 and 2018
was $2,758 and $2,758, respectively. As of March 31, 2019, 140,000 shares have been issued.
5.
BASIC
AND FULLY DILUTED NET INCOME PER COMMON SHARE
The following table sets forth the computation
of basic and fully diluted net income per common share for the three months ended March 31, 2019 and 2018:
|
|
2019
|
|
|
2018
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income attributable to Paysign, Inc.
|
|
$
|
871,671
|
|
|
$
|
412,548
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common shares:
|
|
|
|
|
|
|
|
|
Denominator for basic calculation
|
|
|
46,961,079
|
|
|
|
43,670,765
|
|
Weighted average effects of potentially diluted common stock:
|
|
|
|
|
|
|
|
|
Stock options (calculated under treasury method)
|
|
|
2,027,756
|
|
|
|
–
|
|
Unvested restricted stock grants
|
|
|
5,520,000
|
|
|
|
1,984,111
|
|
Denominator for fully diluted calculation
|
|
|
54,508,835
|
|
|
|
45,654,876
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.02
|
|
|
$
|
0.01
|
|
Fully diluted
|
|
$
|
0.02
|
|
|
$
|
0.01
|
|
6.
SUBSEQUENT EVENTS
As discussed in Note 1, we amended our
articles of incorporation on April 23, 2019 for such name change. Additionally, we changed our trading symbol on the NASDAQ Capital
Market to “PAYS”.
In April 2019, the Company issued 500,000
shares of common stock to several employees for shares previously earned and vested.
The Company has completed an evaluation
of all subsequent events through the issuance date of these financial statements and concluded that no other subsequent events
occurred that required recognition to the financial statements or disclosures in the Notes to Consolidated Financial Statements
or Cash Flows.
Item 2. Management’s
discussion and analysis of financial condition and results of operations.
Disclosure Regarding Forward Looking
Statements
This Quarterly Report on Form 10-Q includes
forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (“Forward Looking Statements”). All statements other than statements of
historical fact included in this report are Forward Looking Statements. In the normal course of our business, we, in an effort
to help keep our shareholders and the public informed about our operations, may from time-to-time issue certain statements, either
in writing or orally, that contains or may contain Forward-Looking Statements. Although we believe that the expectations reflected
in such Forward-Looking Statements are reasonable, we can give no assurance that such expectations will prove to have been correct.
Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of
such plans or strategies, past and possible future, of acquisitions and projected or anticipated benefits from acquisitions made
by or to be made by us, or projections involving anticipated revenues, earnings, levels of capital expenditures or other aspects
of operating results. All phases of our operations are subject to a number of uncertainties, risks and other influences, many of
which are outside of our control and any one of which, or a combination of which, could materially affect the results of our proposed
operations and whether Forward Looking Statements made by us ultimately prove to be accurate. Such important factors (“Important
Factors”) and other factors could cause actual results to differ materially from our expectations are disclosed in this report,
including those factors discussed in “Item 1A. Risk Factors.” All prior and subsequent written and oral Forward
Looking Statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Important
Factors described below that could cause actual results to differ materially from our expectations as set forth in any Forward
Looking Statement made by or on behalf of us.
Overview
On March 4, 2019, our board of directors
and stockholders holding a majority of our outstanding common stock agreed to amend our articles of incorporation to change our
name from 3PEA International, Inc. to Paysign, Inc. As a result, we amended our articles of incorporation on April 23, 2019 for
such name change. Additionally, we changed our trading symbol on the NASDAQ Capital Market to “PAYS”.
We are a vertically integrated provider
of innovative prepaid card products and processing services for corporate, consumer and government applications. Our payment solutions
are utilized by our corporate customers as a means to increase customer loyalty, increase patient adherence rates, reduce administration
costs and streamline operations. Public sector organizations can utilize our payment solutions to disburse public benefits or for
internal payments. We market our prepaid card solutions under our Paysign brand. As we are a payment processor and prepaid card
program manager, we derive our revenue from all stages of the prepaid card lifecycle. We provide a card processing platform consisting
of proprietary systems and innovative software applications based on the unique needs of our clients. We have extended our processing
business capabilities through our proprietary Paysign platform. Through the Paysign platform, we provide a variety of services
including transaction processing, cardholder enrollment, value loading, cardholder account management, reporting, and customer
service.
The Paysign platform was built on modern
cross-platform architecture and designed to be highly flexible, scalable and customizable. The platform has allowed us to significantly
expand its operational capabilities by facilitating our entry into new markets within the payments space through its flexibility
and ease of customization. The Paysign platform delivers cost benefits and revenue building opportunities to our partners.
We have developed prepaid card programs
for corporate incentive and rewards including, but not limited to, consumer rebates and rewards, donor compensation, healthcare
reimbursement payments and pharmaceutical payment assistance. We are expanding our product offerings to include additional corporate
incentive products, payroll cards, demand deposit accounts accessible with a debit card, travel cards, and expense reimbursement
cards. Our cards are sponsored by our issuing bank partners.
Our revenues include fees from program
set-up; customization and development; data processing and report generation; card production and fulfillment; transaction fees
and interchange derived from card usage; inactivity fees; card replacement fees program management fees and program administration
fees. We provide an in-house customer service center which includes live bi-lingual phone operators staffed 24/7/365, for incoming
calls. We also provide in house Interactive Voice Response and two-way SMS messaging platforms.
We divide prepaid cards into two general
categories: corporate and consumer reloadable, and non-reloadable cards.
Reloadable Cards: These types of cards
are generally incentive, payroll or considered general purpose reloadable (“GPR”) cards. Payroll cards are issued to
an employee by an employer to receive the direct deposit of their payroll. GPR cards can also be issued to a consumer at a retail
location or mailed to a consumer after completing an on-line application. GPR cards can be reloaded multiple times with a consumer’s
payroll, government benefit, a federal or state tax refund or through cash reload networks located at retail locations. Reloadable
cards are generally open loop cards as described below.
Non-Reloadable Cards: These are generally
one-time use cards that are only active until the funds initially loaded to the card are spent. These types of cards are gift or
incentive cards. These cards may be open loop or closed loop. Normally these types of cards are used for purchase of goods or services
at retail locations and cannot be used to receive cash.
These prepaid cards may be open loop, closed
loop or semi-closed loop. Open loop cards can be used to receive cash at ATM locations or purchase goods or services by PIN or
signature at retail locations. These cards can be used virtually anywhere that the network brand (Visa, MasterCard, Discover, etc.)
is accepted. Closed loop cards can only be used at a specific merchant. Semi-closed loop cards can be used at several merchants
such as a shopping mall.
The prepaid card market is one of the fastest
growing segments of the payments industry in the U.S. This market has experienced significant growth in recent years due to consumers
and merchants embracing improved technology, greater convenience, more product choices and greater flexibility. Prepaid cards have
also proven to be an attractive alternative to traditional bank accounts for certain segments of the population, particularly those
without, or who could not qualify for, a checking or savings account.
We have developed prepaid card products
for healthcare reimbursement payments, pharmaceutical assistance, donor compensation, corporate and incentive rewards and expense
reimbursement cards. We plan to expand our product offering to include payroll cards, general purpose re-loadable cards and travel
cards. Our cards are offered to end users through our relationships with bank issuers.
Our products and services are aimed at
capitalizing on the growing demand for stored value and reloadable ATM/prepaid card financial products in a variety of market niches.
Our proprietary platform is scalable and customizable, delivering cost benefits and revenue building opportunities to partners.
We manage all aspects of the debit card lifecycle, from managing the card design and approval processes with banking partners and
card networks, to production, packaging, distribution, and personalization. We also oversee inventory and security controls, renewals,
lost and stolen card management and replacement.
Currently, we are focusing our marketing
efforts on corporate incentive and expense prepaid card products, in various market verticals including but not limited to general
corporate expense, healthcare related markets including co-pay assistance, clinical trials and donor compensation, loyalty rewards
and incentive cards.
As part of our continuing platform expansion
process, we evaluate current and emerging technologies for applicability to our existing and future software platform. To this
end, we engage with various hardware and software vendors in evaluation of various infrastructure components. Where appropriate,
we use third-party technology components in the development of our software applications and service offerings. Third-party software
may be used for highly specialized business functions, which we may not be able to develop internally within time and budget constraints.
Our principal target markets for processing services include prepaid card issuers, retail and private-label issuers, small third-party
processors, and small and mid-size financial institutions in the United States and in emerging international markets.
We have devoted more extensive resources
to sales and marketing activities as we have added essential personnel to our marketing and sales team. We sell our products directly
to customers in the U.S. but may work with a small number of resellers and third parties in international markets to identify,
sell and support targeted opportunities. We have also identified opportunities in the European Union and are pursuing those opportunities.
During 2019, we will continue to invest
additional funds in technology improvements, sales and marketing, customer service, and regulatory compliance. We are considering
raising capital to enable us to diversify into new market verticals. If we do not raise new capital, we believe that we will still
be able to expand into new markets using internally generated funds, but our expansion will not be as rapid.
Key Performance Indicators and Non-GAAP Measures
Management reviews a number of metrics
to help us monitor the performance of and identify trends affecting our business. We believe the following measures are the primary
indicators of our quarterly and annual revenues:
Gross Dollar Volume Loaded on Cards –
Represents the total dollar volume of funds loaded to all of our prepaid card programs. Our gross dollar volume was $191 million
and $127 million for the three months ended March 31, 2019 and 2018, respectively. We use this metric to analyze the total amount
of money moving into our prepaid card programs.
Conversion Rate on Gross Dollar Volume
Loaded on Cards – Comprised of revenue, gross profit and net profit conversion rates of gross dollar volume loaded on cards.
Our revenue conversion rate for the three months ended March 31, 2019 and 2018 were 3.79% or 379 basis points (“bps”),
and 368% or 368 bps, respectively, of gross dollar volume loaded on cards. Our gross profit conversion rate for the three months
ended March 31, 2019 and 2018 were 1.97% or 197 bps, and 1.77% or 177 bps, respectively, of gross dollar volume loaded on cards.
Our net profit conversion rate for the three months ended March 31, 2019 and 2018 were 0.46% or 46 bps, and 0.32% or 32 bps, respectively,
of gross dollar volume loaded on cards.
In addition, management reviews key performance
indicators, such as revenue, gross profits, operational expense as a percent of revenues, and cardholder participation. In addition,
we consider certain non-GAAP (or "adjusted") measures to be useful to management and investors evaluating our operating
performance for the periods presented, and provide a tool for evaluating our ongoing operations, liquidity and management of assets.
This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment
and investment in new card programs. These adjusted metrics are consistent with how management views our business and are used
to make financial, operating and planning decisions. These metrics, however, are not measures of financial performance under GAAP
and should not be considered a substitute for revenue, operating income, net income, earnings per share (basic and diluted) or
net cash from operating activities as determined in accordance with GAAP. We consider the following non-GAAP measures, which may
not be comparable to similarly titled measures reported by other companies, to be key performance indicators:
“EBITDA” defined as earnings
before interest, taxes, depreciation and amortization expense and "Adjusted EBITDA" reflects the adjustment to EBITDA
to exclude stock-based compensation.
|
|
Three Months Ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Reconciliation of adjusted EBITDA to net income:
|
|
|
|
|
|
|
Net income attributable to Paysign, Inc.
|
|
$
|
871,671
|
|
|
$
|
412,548
|
|
Income tax benefit
|
|
|
(15,490
|
)
|
|
|
–
|
|
Interest income
|
|
|
(119,173
|
)
|
|
|
(20,600
|
)
|
Depreciation and amortization
|
|
|
333,761
|
|
|
|
246,038
|
|
EBITDA
|
|
|
1,070,769
|
|
|
|
637,986
|
|
Stock-based compensation
|
|
|
646,710
|
|
|
|
137,401
|
|
Adjusted EBITDA
|
|
$
|
1,717,479
|
|
|
$
|
775,387
|
|
Results of Operations
Three Months ended March 31, 2019 and
2018
Revenues for the three months ended March
31, 2019 were $7,257,290, an increase of $2,580,970 compared to the same period in the prior year, when revenues were $4,676,320.
The increase in revenue approximating 55% was primarily due to an increase in the number of new corporate incentive prepaid card
products and growth within our existing corporate incentive prepaid card products. We believe we will continue to experience equal
or better revenue growth rate for the rest of 2019 as a result of growth in our existing and the expected addition of new card
products in various market verticals.
Cost of revenues (excluding depreciation
and amortization) for the three months ended March 31, 2019 were $3,482,136, an increase of $1,048,926 compared to the same period
in the prior year, when cost of revenues were $2,433,210. Cost of revenues constituted approximately 48% and 52% of total revenues
in 2019 and 2018, respectively. Cost of revenues is comprised of transaction processing fees, data connectivity and data center
expenses, network fees, bank fees, card production costs, customer service and program management expenses, application integration
setup, and sales and commission expense. Our cost of revenues (excluding depreciation and amortization) as a percentage of revenues
decreased due to improved network interchange margins and a favorable client mix. We believe our cost of revenues as a percentage
of revenue will continue to decrease during 2019 as our revenues increase.
Gross profit for the three months ended
March 31, 2019 was $3,775,154, an increase of $1,532,044 compared to the same period in the prior year, when gross profit was $2,243,110.
Our overall gross margins were 52% and 48% during the fiscal years 2019 and 2018 which was consistent with our overall expectation
and an improvement of 405 bps resulting from favorable client industry mix. We believe gross margin will further improve during
2019 as we continue to expand our Pharmaceutical business.
Depreciation and amortization for the three
months ended March 31, 2019 were $333,761, an increase of $87,723 compared to the same period in the prior year, when depreciation
and amortization were $246,038. The increase in depreciation and amortization was primarily due to continued capitalized enhancements
to our platform which we expect to continue.
Selling, general and administrative expenses
(“SG&A”) for the three months ended March 31, 2019 were, $2,704,949 an increase of $1,125,930 compared to the same
period in the prior year, when selling, general and administrative expenses were $1,579,019. The increase in SG&A was primarily
due to the continued ramp up of our investment in infrastructure, increased staffing, and increased stock based compensation as
inducement grants. The increase in SG&A compared to the quarter ending 2018 was $77,749, resulting in a slower rate of increase.
In the three months ended March 31, 2019,
we recorded operating income of $736,444 as compared to operating income of $418,053 in the three months ended March 31, 2018,
an increase of $318,391 or 76%.
Our income tax benefit for the three months
March 31, 2019 was $(15,490), as compared to $-0- for the three months ended March 31, 2018, a decrease of $15,490.
Other income (expense) including interest
for the three months ended March 31, 2019 was $119,173, as compared to other income (expense) of $(7,400) in three months ended
March 31, 2018, which represents an increase in net other income (expense) of $126,573. We anticipate our other income to continue
to increase during 2019 as result of interest earned from our increasing cash balances.
Our net income attributable to Paysign,
Inc. for the three months ended March 31, 2019 was $871,671 as compared to net income of $412,548 in the three months ended March
31, 2018, which represents an increase in net income of $459,123 or 111%. The overall change in net income is attributable to the
aforementioned factors.
Liquidity and Sources of Capital
The following table sets forth the major
sources and uses of cash for the three months ended March 31, 2019 and 2018:
|
|
Three months ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Net cash provided by operating activities
|
|
$
|
20,032,971
|
|
|
$
|
1,682,723
|
|
Net cash used in investing activities
|
|
|
(559,415
|
)
|
|
|
(352,533
|
)
|
Net increase in cash and restricted cash
|
|
$
|
19,473,556
|
|
|
$
|
1,330,190
|
|
Comparison of three months ended March
31, 2019 and 2018
During the three months ended March 31,
2019 and 2018, we financed our operations primarily through internally generated funds.
Operating activities provided $20,032,971
of cash in the three months ended March 31, 2019, as compared to $1,682,723 of cash provided by the same period in the prior year.
Excluding the change in restricted cash, net cash provided by operating activities was $881,467 in the three months ended March
31, 2019, as compared to $(225,389) in the three months ended March 31, 2018, an improvement of $1,106,855. In 2019, $19,151,504
of cash was provided by change in customer card funding. Major non-cash items that affected our cash flow from operations in the
three months ended March 31, 2019 were non-cash charges of $333,761 for depreciation and amortization, and stock-based compensation
of $646,710. Our operating assets and liabilities, excluding customer card funding, used $970,111 of cash in the three months ended
March 31, 2019, most of which resulted from a decrease in accounts payable and accrued expenses of $(748,447), and an increase
in accounts receivable of $(330,548). Major non-cash items that affected our cash flow from operations in the three months ended
March 31, 2018 were non-cash charges of $246,038 for depreciation and amortization, and stock-based compensation of $137,401. Our
operating assets and liabilities in the three months ended March 31, 2018, excluding customer card funding, used $1,019,481 of
cash, most of which resulted from a decrease in accounts payable of $(607,123) and an increase in prepaid expenses, accounts receivable
and other assets of $(413,181).
Investing activities used $(559,415) of
cash in 2019, as compared to $(352,533) of cash used in 2018, most of which related to the enhancement of the processing platform
used in our business.
Sources of Financing
We believe that our available cash on hand,
excluding restricted cash, at March 31, 2019 of $5,211,161, combined with revenues and operating earnings anticipated for the remainder
of 2019 will be sufficient to sustain our operations for the next twelve months.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements
that are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Critical Accounting Estimates
Our significant accounting policies are
described in Note 1 of Notes to Financial Statements. At this time, we are not required to make any material estimates and assumptions
that affect the reported amounts and related disclosures of assets, liabilities, revenue, and expenses.
Any estimates we make will be based on
our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects.
Actual results may differ significantly from our estimates.