0001496443 false --12-31 2022 Q2
0001496443 2022-01-01 2022-06-30 0001496443 2022-08-05 0001496443
2022-06-30 0001496443 2021-12-31 0001496443 2022-04-01 2022-06-30
0001496443 2021-04-01 2021-06-30 0001496443 2021-01-01 2021-06-30
0001496443 PAYS:PlasmaIndustryMember 2022-04-01 2022-06-30
0001496443 PAYS:PlasmaIndustryMember 2021-04-01 2021-06-30
0001496443 PAYS:PlasmaIndustryMember 2022-01-01 2022-06-30
0001496443 PAYS:PlasmaIndustryMember 2021-01-01 2021-06-30
0001496443 PAYS:PharmaceuticalIndustryMember 2022-04-01 2022-06-30
0001496443 PAYS:PharmaceuticalIndustryMember 2021-04-01 2021-06-30
0001496443 PAYS:PharmaceuticalIndustryMember 2022-01-01 2022-06-30
0001496443 PAYS:PharmaceuticalIndustryMember 2021-01-01 2021-06-30
0001496443 PAYS:OtherRevenueMember 2022-04-01 2022-06-30 0001496443
PAYS:OtherRevenueMember 2021-04-01 2021-06-30 0001496443
PAYS:OtherRevenueMember 2022-01-01 2022-06-30 0001496443
PAYS:OtherRevenueMember 2021-01-01 2021-06-30 0001496443
us-gaap:CommonStockMember 2021-12-31 0001496443
us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001496443
us-gaap:TreasuryStockMember 2021-12-31 0001496443
us-gaap:RetainedEarningsMember 2021-12-31 0001496443
us-gaap:CommonStockMember 2022-03-31 0001496443
us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001496443
us-gaap:TreasuryStockMember 2022-03-31 0001496443
us-gaap:RetainedEarningsMember 2022-03-31 0001496443 2022-03-31
0001496443 us-gaap:CommonStockMember 2020-12-31 0001496443
us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001496443
us-gaap:TreasuryStockMember 2020-12-31 0001496443
us-gaap:RetainedEarningsMember 2020-12-31 0001496443 2020-12-31
0001496443 us-gaap:CommonStockMember 2021-03-31 0001496443
us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001496443
us-gaap:TreasuryStockMember 2021-03-31 0001496443
us-gaap:RetainedEarningsMember 2021-03-31 0001496443 2021-03-31
0001496443 us-gaap:CommonStockMember 2022-01-01 2022-03-31
0001496443 us-gaap:AdditionalPaidInCapitalMember 2022-01-01
2022-03-31 0001496443 us-gaap:TreasuryStockMember 2022-01-01
2022-03-31 0001496443 us-gaap:RetainedEarningsMember 2022-01-01
2022-03-31 0001496443 2022-01-01 2022-03-31 0001496443
us-gaap:CommonStockMember 2022-04-01 2022-06-30 0001496443
us-gaap:AdditionalPaidInCapitalMember 2022-04-01 2022-06-30
0001496443 us-gaap:TreasuryStockMember 2022-04-01 2022-06-30
0001496443 us-gaap:RetainedEarningsMember 2022-04-01 2022-06-30
0001496443 us-gaap:CommonStockMember 2021-01-01 2021-03-31
0001496443 us-gaap:AdditionalPaidInCapitalMember 2021-01-01
2021-03-31 0001496443 us-gaap:TreasuryStockMember 2021-01-01
2021-03-31 0001496443 us-gaap:RetainedEarningsMember 2021-01-01
2021-03-31 0001496443 2021-01-01 2021-03-31 0001496443
us-gaap:CommonStockMember 2021-04-01 2021-06-30 0001496443
us-gaap:AdditionalPaidInCapitalMember 2021-04-01 2021-06-30
0001496443 us-gaap:TreasuryStockMember 2021-04-01 2021-06-30
0001496443 us-gaap:RetainedEarningsMember 2021-04-01 2021-06-30
0001496443 us-gaap:CommonStockMember 2022-06-30 0001496443
us-gaap:AdditionalPaidInCapitalMember 2022-06-30 0001496443
us-gaap:TreasuryStockMember 2022-06-30 0001496443
us-gaap:RetainedEarningsMember 2022-06-30 0001496443
us-gaap:CommonStockMember 2021-06-30 0001496443
us-gaap:AdditionalPaidInCapitalMember 2021-06-30 0001496443
us-gaap:TreasuryStockMember 2021-06-30 0001496443
us-gaap:RetainedEarningsMember 2021-06-30 0001496443 2021-06-30
0001496443 PAYS:OtherReceivableMember 2022-06-30 0001496443
PAYS:OtherReceivableMember 2021-12-31 0001496443
us-gaap:AccountsReceivableMember
us-gaap:CustomerConcentrationRiskMember PAYS:OneCustomerMember
2022-01-01 2022-06-30 0001496443 us-gaap:AccountsReceivableMember
us-gaap:CustomerConcentrationRiskMember PAYS:AnotherCustomerMember
2022-01-01 2022-06-30 0001496443 us-gaap:AccountsReceivableMember
us-gaap:CustomerConcentrationRiskMember PAYS:OneCustomerMember
2021-01-01 2021-12-31 0001496443 us-gaap:AccountsReceivableMember
us-gaap:CustomerConcentrationRiskMember PAYS:AnotherCustomerMember
2021-01-01 2021-12-31 0001496443 PAYS:IntangibleAssetsMember
2022-01-01 2022-06-30 0001496443 PAYS:ComputerSoftwareMember
2022-01-01 2022-06-30 0001496443 us-gaap:EquipmentMember 2022-06-30
0001496443 us-gaap:EquipmentMember 2021-12-31 0001496443
us-gaap:SoftwareDevelopmentMember 2022-06-30 0001496443
us-gaap:SoftwareDevelopmentMember 2021-12-31 0001496443
us-gaap:FurnitureAndFixturesMember 2022-06-30 0001496443
us-gaap:FurnitureAndFixturesMember 2021-12-31 0001496443
PAYS:WebsiteCostsMember 2022-06-30 0001496443
PAYS:WebsiteCostsMember 2021-12-31 0001496443
us-gaap:LeaseholdImprovementsMember 2022-06-30 0001496443
us-gaap:LeaseholdImprovementsMember 2021-12-31 0001496443
us-gaap:TrademarksAndTradeNamesMember 2022-06-30 0001496443
us-gaap:TrademarksAndTradeNamesMember 2021-12-31 0001496443
PAYS:PlatformMember 2022-06-30 0001496443 PAYS:PlatformMember
2021-12-31 0001496443 PAYS:CustomerListsAndContractsMember
2022-06-30 0001496443 PAYS:CustomerListsAndContractsMember
2021-12-31 0001496443 PAYS:LicensesMember 2022-06-30 0001496443
PAYS:LicensesMember 2021-12-31 0001496443 PAYS:StockOptionsMember
2022-04-01 2022-06-30 0001496443 PAYS:StockOptionsMember 2022-01-01
2022-06-30 0001496443 PAYS:UnvestedRestrictedStockAwardsMember
2022-04-01 2022-06-30 0001496443
PAYS:UnvestedRestrictedStockAwardsMember 2022-01-01 2022-06-30
0001496443 PAYS:StockOptionsMember 2021-04-01 2021-06-30 0001496443
PAYS:StockOptionsMember 2021-01-01 2021-06-30 0001496443
PAYS:UnvestedRestrictedStockAwardsMember 2021-04-01 2021-06-30
0001496443 PAYS:UnvestedRestrictedStockAwardsMember 2021-01-01
2021-06-30 0001496443 PAYS:RelatedPartyLawFirmMember 2022-04-01
2022-06-30 0001496443 PAYS:RelatedPartyLawFirmMember 2022-01-01
2022-06-30 0001496443 PAYS:RelatedPartyLawFirmMember 2021-04-01
2021-06-30 0001496443 PAYS:RelatedPartyLawFirmMember 2021-01-01
2021-06-30 iso4217:USD xbrli:shares iso4217:USD xbrli:shares
xbrli:pure
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number
001-38623
PAYSIGN, INC.
(Exact name of registrant as specified in its charter)
Nevada |
95-4550154 |
(State
or other jurisdiction of incorporation or organization) |
(IRS
Employer Identification No.) |
2615 St. Rose Parkway,
Henderson,
Nevada
89052
(Address of principal executive offices)
(702)
453-2221
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Securities registered pursuant to Section 12(b) of the
Act:
Title
of each Class |
Trading
Symbol |
Name
of each exchange on which registered |
Common Stock, $0.001 par value per share |
PAYS |
The
Nasdaq Stock Market LLC
|
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
Large
accelerated Filer ☐ |
Accelerated
Filer ☐ |
Non-accelerated Filer ☒ |
Smaller
reporting company
☒ |
|
Emerging
growth company
☒ |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes
☐ No
☒
Indicate
the number of shares outstanding of each of the issuer’s classes of
common stock, as of the latest practicable date: 52,151,932
shares as of August 5, 2022.
PAYSIGN, INC.
FORM 10-Q REPORT
INDEX
PART I.
FINANCIAL INFORMATION
Item 1. Financial
Statements
PAYSIGN, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
June 30,
2022
(Unaudited)
|
|
|
December 31,
2021
(Audited)
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current
assets |
|
|
|
|
|
|
|
|
Cash |
|
$ |
6,527,476 |
|
|
$ |
7,387,156 |
|
Restricted
cash |
|
|
76,967,850 |
|
|
|
61,283,914 |
|
Accounts
receivable |
|
|
3,488,759 |
|
|
|
3,393,940 |
|
Other
receivables |
|
|
1,439,251 |
|
|
|
1,019,218 |
|
Prepaid
expenses and other current assets |
|
|
1,754,140 |
|
|
|
1,242,967 |
|
Total
current assets |
|
|
90,177,476 |
|
|
|
74,327,195 |
|
|
|
|
|
|
|
|
|
|
Fixed
assets, net |
|
|
1,410,947 |
|
|
|
1,642,981 |
|
Intangible
assets, net |
|
|
4,501,854 |
|
|
|
4,086,962 |
|
Operating
lease right-of-use asset |
|
|
3,806,793 |
|
|
|
3,993,655 |
|
|
|
|
|
|
|
|
|
|
Total
assets |
|
$ |
99,897,070 |
|
|
$ |
84,050,793 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities |
|
$ |
5,575,119 |
|
|
$ |
5,765,478 |
|
Operating
lease liability, current portion |
|
|
350,753 |
|
|
|
340,412 |
|
Customer
card funding |
|
|
76,967,850 |
|
|
|
61,283,914 |
|
Total
current liabilities |
|
|
82,893,722 |
|
|
|
67,389,804 |
|
|
|
|
|
|
|
|
|
|
Operating
lease liability, long term portion |
|
|
3,495,185 |
|
|
|
3,673,186 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities |
|
|
86,388,907 |
|
|
|
71,062,990 |
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 8) |
|
|
– |
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity |
|
|
|
|
|
|
|
|
Preferred
stock: $0.001 par value;
25,000,000
shares authorized; none
issued and outstanding |
|
|
– |
|
|
|
– |
|
Common
stock; $0.001 par value;
150,000,000
shares authorized, 52,323,382 and 52,095,382 issued at
June 30, 2022 and December 31, 2021, respectively |
|
|
52,323 |
|
|
|
52,095 |
|
Additional
paid-in capital |
|
|
17,917,680 |
|
|
|
16,860,119 |
|
Treasury
stock at cost, 303,450
shares |
|
|
(150,000 |
) |
|
|
(150,000 |
) |
Accumulated
deficit |
|
|
(4,311,840 |
) |
|
|
(3,774,411 |
) |
Total
stockholders' equity |
|
|
13,508,163 |
|
|
|
12,987,803 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity |
|
$ |
99,897,070 |
|
|
$ |
84,050,793 |
|
See accompanying notes to unaudited condensed consolidated
financial statements.
PAYSIGN, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
June 30, |
|
|
Six Months Ended
June 30,
|
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Plasma
industry |
|
$ |
7,806,201 |
|
|
$ |
5,947,313 |
|
|
$ |
15,200,565 |
|
|
$ |
11,330,464 |
|
Pharma
industry |
|
|
773,311 |
|
|
|
641,037 |
|
|
|
1,579,879 |
|
|
|
1,523,867 |
|
Other |
|
|
19,264 |
|
|
|
62,940 |
|
|
|
38,971 |
|
|
|
76,387 |
|
Total
revenues |
|
|
8,598,776 |
|
|
|
6,651,290 |
|
|
|
16,819,415 |
|
|
|
12,930,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenues |
|
|
3,900,965 |
|
|
|
3,498,723 |
|
|
|
7,123,355 |
|
|
|
6,946,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit |
|
|
4,697,811 |
|
|
|
3,152,567 |
|
|
|
9,696,060 |
|
|
|
5,984,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
4,255,976 |
|
|
|
3,474,562 |
|
|
|
8,896,888 |
|
|
|
7,339,548 |
|
Depreciation
and amortization |
|
|
713,180 |
|
|
|
614,182 |
|
|
|
1,392,351 |
|
|
|
1,210,030 |
|
Total
operating expenses |
|
|
4,969,156 |
|
|
|
4,088,744 |
|
|
|
10,289,239 |
|
|
|
8,549,578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations |
|
|
(271,345 |
) |
|
|
(936,177 |
) |
|
|
(593,179 |
) |
|
|
(2,565,205 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income, net |
|
|
70,227 |
|
|
|
5,010 |
|
|
|
84,563 |
|
|
|
12,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income tax provision |
|
|
(201,118 |
) |
|
|
(931,167 |
) |
|
|
(508,616 |
) |
|
|
(2,553,094 |
) |
Income
tax provision |
|
|
26,916 |
|
|
|
800 |
|
|
|
28,813 |
|
|
|
2,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(228,034 |
) |
|
$ |
(931,967 |
) |
|
$ |
(537,429 |
) |
|
$ |
(2,555,494 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.00 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.05 |
) |
Diluted |
|
$ |
(0.00 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
51,993,031 |
|
|
|
50,748,437 |
|
|
|
51,906,335 |
|
|
|
50,551,299 |
|
Diluted |
|
|
51,993,031 |
|
|
|
50,748,437 |
|
|
|
51,906,335 |
|
|
|
50,551,299 |
|
See accompanying notes to unaudited condensed consolidated
financial statements.
PAYSIGN, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock |
|
|
Additional
Paid-in |
|
|
Treasury
Stock |
|
|
Accumulated |
|
|
Total Stockholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Amount |
|
|
Deficit |
|
|
Equity |
|
Balance, December 31, 2021 |
|
|
52,095,382 |
|
|
$ |
52,095 |
|
|
$ |
16,860,119 |
|
|
$ |
(150,000 |
) |
|
$ |
(3,774,411 |
) |
|
$ |
12,987,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued upon vesting of restricted stock |
|
|
123,000 |
|
|
|
123 |
|
|
|
(123 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
Stock-based compensation |
|
|
– |
|
|
|
– |
|
|
|
569,502 |
|
|
|
– |
|
|
|
– |
|
|
|
569,502 |
|
Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(309,395 |
) |
|
|
(309,395 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2022 |
|
|
52,218,382 |
|
|
$ |
52,218 |
|
|
$ |
17,429,498 |
|
|
$ |
(150,000 |
) |
|
$ |
(4,083,806 |
) |
|
$ |
13,247,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued upon vesting of restricted stock |
|
|
105,000 |
|
|
|
105 |
|
|
|
(105 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
Stock-based compensation |
|
|
– |
|
|
|
– |
|
|
|
488,287 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
$ |
(228,034 |
) |
|
$ |
(228,034 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2022 |
|
|
52,323,382 |
|
|
$ |
52,323 |
|
|
$ |
17,917,680 |
|
|
$ |
(150,000 |
) |
|
$ |
(4,311,840 |
) |
|
$ |
13,508,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock |
|
|
Additional
Paid-in |
|
|
Treasury
Stock |
|
|
Accumulated |
|
|
Total Stockholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Amount |
|
|
Deficit |
|
|
Equity |
|
Balance, December 31, 2020 |
|
|
50,251,607 |
|
|
$ |
50,252 |
|
|
$ |
14,388,890 |
|
|
$ |
(150,000 |
) |
|
$ |
(1,053,077 |
) |
|
$ |
13,236,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued upon vesting of restricted stock |
|
|
466,689 |
|
|
|
467 |
|
|
|
(467 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
Exercise of stock options |
|
|
32,586 |
|
|
|
32 |
|
|
|
110,434 |
|
|
|
– |
|
|
|
– |
|
|
|
110,466 |
|
Stock-based compensation |
|
|
– |
|
|
|
– |
|
|
|
636,214 |
|
|
|
– |
|
|
|
– |
|
|
|
636,214 |
|
Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(1,623,527 |
) |
|
|
(1,623,527 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2021 |
|
|
50,750,882 |
|
|
|
50,751 |
|
|
|
15,135,071 |
|
|
|
(150,000 |
) |
|
|
(2,676,604 |
) |
|
|
12,359,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued upon vesting of restricted stock |
|
|
390,000 |
|
|
|
390 |
|
|
|
(390 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
Exercise of stock options |
|
|
2,500 |
|
|
|
2 |
|
|
|
9,673 |
|
|
|
– |
|
|
|
– |
|
|
|
9,675 |
|
Stock-based compensation |
|
|
– |
|
|
|
– |
|
|
|
540,921 |
|
|
|
– |
|
|
|
– |
|
|
|
540,921 |
|
Net loss |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(931,967 |
) |
|
|
(931,967 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2021 |
|
|
51,143,382 |
|
|
$ |
51,143 |
|
|
$ |
15,685,275 |
|
|
$ |
(150,000 |
) |
|
$ |
(3,608,571 |
) |
|
$ |
11,977,847 |
|
See accompanying notes to unaudited condensed consolidated
financial statements.
PAYSIGN, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, |
|
|
|
2022 |
|
|
2021 |
|
Cash flows from operating
activities: |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(537,429 |
) |
|
$ |
(2,555,494 |
) |
Adjustments to reconcile net loss to
net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Stock-based
compensation expense |
|
|
1,057,789 |
|
|
|
1,210,030 |
|
Depreciation and
amortization |
|
|
1,392,351 |
|
|
|
1,177,135 |
|
Noncash lease
expense |
|
|
186,862 |
|
|
|
211,407 |
|
Changes in operating assets and
liabilities: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
(94,819 |
) |
|
|
(293,095 |
) |
Other
receivable |
|
|
(420,033 |
) |
|
|
– |
|
Prepaid expenses
and other current assets |
|
|
(511,173 |
) |
|
|
(366,502 |
) |
Accounts payable
and accrued liabilities |
|
|
(190,359 |
) |
|
|
701,581 |
|
Operating lease
liability |
|
|
(167,660 |
) |
|
|
(157,920 |
) |
Customer card funding |
|
|
15,683,936 |
|
|
|
17,654,611 |
|
Net
cash provided by operating activities |
|
|
16,399,465 |
|
|
|
17,581,753 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
|
|
|
|
|
Purchase of fixed
assets |
|
|
(38,188 |
) |
|
|
(173,479 |
) |
Capitalization of
internally developed software |
|
|
(1,537,021 |
) |
|
|
(1,048,364 |
) |
Purchase of intangible assets |
|
|
– |
|
|
|
(39,713 |
) |
Net
cash used in investing activities |
|
|
(1,575,209 |
) |
|
|
(1,261,556 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
– |
|
|
|
120,141 |
|
Net
cash provided by financing activities |
|
|
– |
|
|
|
120,141 |
|
|
|
|
|
|
|
|
|
|
Net change in cash and restricted
cash |
|
|
14,824,256 |
|
|
|
16,440,338 |
|
Cash and
restricted cash, beginning of period |
|
|
68,671,070 |
|
|
|
55,930,404 |
|
|
|
|
|
|
|
|
|
|
Cash and
restricted cash, end of period |
|
$ |
83,495,326 |
|
|
$ |
72,370,742 |
|
|
|
|
|
|
|
|
|
|
Cash and restricted cash
reconciliation: |
|
|
|
|
|
|
|
|
Cash |
|
|
6,527,476 |
|
|
|
6,615,180 |
|
Restricted cash |
|
|
76,967,850 |
|
|
|
65,755,562 |
|
Total
cash and restricted cash |
|
$ |
83,495,326 |
|
|
$ |
72,370,742 |
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow
information: |
|
|
|
|
|
|
|
|
Non-cash financing activities |
|
|
|
|
|
|
|
|
Cash
paid for taxes |
|
$ |
8,700 |
|
|
$ |
2,400 |
|
Interest paid |
|
$ |
821 |
|
|
$ |
2,173 |
|
See accompanying notes to unaudited condensed consolidated
financial statements.
PAYSIGN, INC.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF
PRESENTATION AND SUMMARY OF SIGNIFICANT POLICIES
The foregoing unaudited interim condensed consolidated 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 GAAP for complete financial statements. These unaudited interim
condensed consolidated 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,
2021. In the opinion of management, the unaudited interim condensed
consolidated 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 with 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 assumptions 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 six months ended June 30, 2022 are not
necessarily indicative of the results that may be expected for the
year ending December 31, 2022.
Impact of COVID-19
Pandemic
The coronavirus (“COVID-19”) pandemic, which started in late 2019
and reached the United States in early 2020, continues to
significantly impact the economy of the United States and the rest
of the world. While the direct disruption appears to have
significantly mitigated due to the availability of vaccines and
other factors, the ultimate duration and severity of the pandemic
remain uncertain, particularly given the development of new
variants that continue to spread, and the economic repercussions
are still manifesting themselves. The COVID-19 outbreak caused
plasma center closures, and the stimulus packages signed into law
during 2020 and 2021 reduced the incentive for individuals to
donate plasma for supplementary income. Additionally, labor
shortages at plasma donation centers and restrictions preventing
Mexican nationals with tourist visas from being compensated for
donating plasma, have further impacted donations. Those
developments have had, and are expected to continue to have, an
adverse impact on the Company’s results of operations. Offsetting
those headwinds, inflationary pressures for food, gasoline, and
other products and services appear to be driving individuals back
into the plasma donation centers based upon the increase we
experienced in the number of loads per average donation center in
the second quarter of 2022 versus the first quarter of 2022. While
we remain cautiously optimistic and have seen improvements in our
operating results on an aggregated basis, we cannot foresee how
long it may take the Company to attain pre-pandemic operating
levels on a per plasma donation center basis. Given the uncertainty
around the extent and timing of the potential future spread or
mitigation of COVID-19 and variants and around the imposition or
relaxation of protective measures, management cannot at this time
estimate with reasonable accuracy COVID-19’s further impact on the
Company’s results of operations, cash flows or financial
condition.
Under the provisions of the Coronavirus Aid, Relief, and Economic
Security Act (the “CARES Act”) signed into law in 2020 and the
subsequent extension of the CARES Act through September 30, 2021,
the Company was eligible for a refundable employee retention credit
subject to certain criteria. The Company has elected an accounting
policy to recognize the government assistance when it is probable
that the Company is eligible to receive the assistance and present
the credit be as a reduction of the related expense. During the
quarter ended June 30, 2022 the Company filed for a refund and
recorded $459,755 related to the
employee retention credit. As of June 30, 2022 and December
31, 2021, the Company has $1,296,488 and $876,456,
respectively in other receivables on the condensed consolidated
balance sheet related to refunds.
About Paysign,
Inc.
Paysign,
Inc. (the “Company,” “Paysign,” “we” or “our”) was incorporated on
August 24, 1995, and trades under the symbol PAYS on The Nasdaq
Stock Market LLC. Paysign. is a provider of prepaid card programs,
comprehensive patient affordability offerings, digital banking
services and integrated payment processing
designed for businesses,
consumers and government institutions. Headquartered in Nevada, the
company creates customized, innovative payment solutions for
clients across all industries, including pharmaceutical,
healthcare, hospitality and retail.
Principles of
Consolidation – The condensed consolidated financial
statements include the accounts of the Company and its
subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Reclassifications
– In our cash flows statement, certain accounts related to the
lease accounting captions in the prior periods have been
reclassified to conform to the current period financial statement
presentations.
Use of
Estimates – The preparation of the condensed
consolidated financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect (i) the
reported amounts of assets and liabilities, (ii) the disclosure of
contingent assets and liabilities at the date of the condensed
consolidated financial statements and (iii) the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ from those estimates.
Cash and Cash
Equivalents – The Company considers all highly liquid
investments purchased with an original maturity of six months or
less at the time of purchase to be cash equivalents for the
purposes of the statement of cash flows. The Company had no cash equivalents at June
30, 2022 and December 31, 2021.
Restricted
Cash – At June 30, 2022 and December 31, 2021,
restricted cash consisted of funds held specifically for our card
product programs that are contractually restricted to use. The
Company includes changes in restricted cash balances with cash and
cash equivalents when reconciling the beginning and ending total
amounts in our condensed consolidated statements of cash flows.
Concentrations of
Credit Risk – Financial instruments that potentially
subject the Company to concentrations of credit risk consist
principally of cash and cash equivalents and restricted cash.
Paysign maintains its cash and cash equivalents and restricted cash
in various bank accounts that, at times, may exceed federally
insured limits. Paysign has not experienced, nor does it
anticipate, any losses with respect to such accounts. At June 30,
2022 and December 31, 2021, the Company had approximately
$37,047,586 and $31,828,826 in excess of federally
insured bank account limits, respectively.
The Company also has a concentration of accounts receivable risk at
June 30, 2022 as two Pharma program customers associated with our
Pharma copay programs each individually represent 51% and 11% of our accounts
receivable balance. Two Pharma program customers each individually
represented 52% and 17% of our accounts
receivable balance at December 31, 2021.
Fixed
Assets – Fixed assets are stated at cost less
accumulated depreciation. Depreciation is principally recorded on
the straight-line method over the estimated useful life of the
asset, which is generally
3 to 10 years. The cost of repairs and maintenance is
charged to expense as incurred. Leasehold improvements are
capitalized and depreciated over the shorter of the remaining lease
term or the estimated useful life of the improvements. Expenditures
for property betterments and renewals are capitalized. Upon sale or
other disposition of a depreciable asset, cost and accumulated
depreciation are removed from the accounts and any gain or loss is
reflected in other income (expense).
The Company periodically evaluates whether events and circumstances
have occurred that may warrant revision of the estimated useful
life of fixed assets or whether the remaining balance of fixed
assets should be evaluated for possible impairment. The Company
uses an estimate of the related undiscounted cash flows over the
remaining life of the fixed assets in measuring their
recoverability.
Intangible
Assets – For intangible assets, the Company
recognizes 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 a finite life are amortized on a straight-line basis
over its estimated useful life, which is generally
3 to 15 years.
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 3three year estimated useful life,
beginning in the period in which the software is available for
use.
Customer Card
Funding – At June 30, 2022 and December 31, 2021,
customer card funding represents funds loaded or available to be
loaded on cards for our prepaid card programs.
Earnings Per
Share – Basic earnings per share exclude any dilutive
effects of options, warrants and convertible securities. Basic
earnings per share is computed using the weighted-average number of
common shares outstanding during the applicable period. Diluted
earnings per share is computed using the weighted average number of
common and common stock equivalent shares outstanding during the
period, using the treasury stock method. Common stock equivalent
shares are excluded from the computation if their effect on the
diluted earnings per share calculation is anti-dilutive.
Revenue and Expense
Recognition – In determining when and how revenue is
recognized from contracts with customers, the Company performs the
following five-step analysis: (i) identification of contracts 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 obligation.
The Company generates revenues from Plasma card programs through
fees generated from cardholder fees and interchange fees. Revenues
from Pharma card programs are generated through card program
management fees, transaction claims processing fees, interchange
fees, and settlement income.
Plasma and Pharma card program revenues include both fixed and
variable components. Cardholder fees represent an obligation to the
cardholder based on a per transaction basis and are recognized at a
point in time when the performance obligation is fulfilled. Card
program management fees and transaction claims processing fees
include an obligation to our card program sponsors and are
generally recognized when earned on a monthly basis and are
typically due within 30 days pursuant to the contract terms which
are generally multi-year contracts. The Company uses the output
method to recognize card program management fee revenue at the
amount of consideration to which an entity has a right to invoice.
The performance obligation is satisfied when the services are
transferred to the customer which the Company determined to be
monthly, as the customer simultaneously receives and consumes the
benefit from the Company’s performance. Interchange fees are earned
when customer-issued cards are processed through card payment
networks as the nature of our promise to the customer is that we
stand ready to process transactions at the customer’s requests on a
daily basis over the contract term. Since the timing and quantity
of transactions to be processed by us are not determinable, we view
interchange fees to comprise an obligation to stand ready to
process as many transactions as the customer requests. Accordingly,
the promise to stand ready is accounted for as a single series
performance obligation. The Company uses the right to invoice
practical expedient and recognizes interchange fee revenue
concurrent with the processing of card transactions. Interchange
fees are settled in accordance with the card payment network terms
and conditions, which is typically within a few days.
The Company utilizes the remote method of revenue recognition for
settlement income whereby the unspent balances will be recognized
as revenue at the expiration of the cards and the respective
program. 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, and the Company does not
currently have any obligations for disputed claim settlements.
Given the nature of the Company’s services and contracts, it has no
contract assets.
Cost of revenues is comprised of transaction processing fees, data
connectivity and data center expenses, network fees, bank fees,
card production and postage costs, customer service, program
management, application integration setup, and sales and commission
expense.
Operating
leases – The Company determines if a contract is or
contains a leasing element at contract inception or the date in
which a modification of an existing contract occurs. In order for a
contract to be considered a lease, the contract must transfer the
right to control the use of an identified asset for a period of
time in exchange for consideration. Control is determined to have
occurred if the lessee has the right to (i) obtain substantially
all of the economic benefits from the use of the identified asset
throughout the period of use and (ii) direct the use of the
identified asset.
In determining the present value of lease payments at lease
commencement date, the Company utilizes its incremental borrowing
rate based on the information available, unless the rate implicit
in the lease is readily determinable. The liability for operating
leases is based on the present value of future lease payments.
Operating lease expenses are recorded as rent expense, which is
included within selling, general and administrative expenses within
the consolidated statements of operations and presented as
operating cash outflows within the consolidated statements of cash
flows.
Leases
with an initial term of 12 months or less are not recorded on the
balance sheet, with lease expense for these leases recognized on a
straight-line basis over the lease term.
Stock-Based
Compensation – The Company recognizes compensation
expense for all restricted stock awards and stock options. The fair
value of restricted stock awards is measured using the grant date
trading price of our stock. The fair value of stock options is
estimated at the grant date using the Black-Scholes option-pricing
model, and the portion that is ultimately expected to vest is
recognized as compensation cost over the requisite service period.
We have elected to recognize compensation expense for all options
with graded vesting on a straight-line basis over the vesting
period of the entire option. The determination of fair value using
the Black-Scholes pricing model is affected by our stock price as
well as assumptions regarding a number of complex and subjective
variables, including expected stock price volatility and the
risk-free interest rate.
Recently Issued
Accounting Pronouncements – In June 2016, the
Financial Accounting Standards Board (“FASB”) issued
ASU No. 2016-13, Financial Instruments–Credit Losses
(Topic 326): Measurement of Credit Losses on Financial
Instruments, which provides updated guidance on how an entity
should measure credit losses on all financial instruments carried
at amortized cost (including loans held for investment and
held-to-maturity debt securities, as well as trade receivables,
reinsurance recoverables, and receivables that relate to repurchase
agreements and securities lending agreements), a lessor’s net
investments in leases, and off-balance sheet credit exposures not
accounted for as insurance or as derivatives, including loan
commitments, standby letters of credit, and financial guarantees.
Subsequently, in November 2018 the FASB issued ASU No. 2018-19,
Codification Improvements to Topic 326, Financial
Instruments–Credit Losses, which clarified that receivables
arising from operating leases are not within the scope of Subtopic
326-20, but instead should be accounted for in accordance with
Topic 842, Leases. In March 2022 the FASB issued ASU No. 2022-02,
Financial Instruments—Credit Losses: Troubled Debt
Restructurings and Vintage Disclosures which clarified
accounting treatment required for trouble debt restructurings by
creditors and enhanced disclosures for write-offs. The new standard
and related amendments are effective for fiscal years beginning
after December 15, 2022, including interim periods within those
fiscal years. We are currently evaluating the impact of adopting
this guidance on our Financial Statements; however, we do not
expect it to have a material impact on the Company’s consolidated
financial statements.
In October 2021, the FASB issued ASU No. 2021-08, Business
Combinations (Topic 805): Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers. This ASU
requires contract assets and contract liabilities acquired in a
business combination to be recognized and measured by the acquirer
on the acquisition date in accordance with ASU No. 2016-10,
Revenue from Contracts with Customers (Topic 606). This
guidance is effective for the Company beginning on January 1, 2023
and is not expected to have a material impact on the Company’s
consolidated financial statements.
2. FIXED ASSETS,
NET
Fixed assets consist of the following:
Schedule of fixed assets |
|
|
|
|
|
|
|
|
June 30,
2022 |
|
|
December 31,
2021 |
|
Equipment |
|
$ |
2,098,522 |
|
|
$ |
2,067,834 |
|
Software |
|
|
323,355 |
|
|
|
315,855 |
|
Furniture and fixtures |
|
|
757,662 |
|
|
|
757,662 |
|
Website costs |
|
|
69,881 |
|
|
|
69,881 |
|
Leasehold
improvements |
|
|
229,772 |
|
|
|
229,772 |
|
|
|
|
3,479,192 |
|
|
|
3,441,004 |
|
Less: accumulated
depreciation |
|
|
2,068,245 |
|
|
|
1,798,023 |
|
Fixed assets,
net |
|
$ |
1,410,947 |
|
|
$ |
1,642,981 |
|
Depreciation expense for the three months ended June 30, 2022 and
2021 was $134,253 and $133,174, respectively.
Depreciation expense for the six months ended June 30, 2022 and
2021 was $270,222 and $265,125, respectively.
3. INTANGIBLE ASSETS,
NET
Intangible assets consist of the following:
Schedule of intangible assets |
|
|
|
|
|
|
|
|
June 30,
2022 |
|
|
December 31,
2021 |
|
Patents and
trademarks |
|
$ |
38,186 |
|
|
$ |
38,186 |
|
Platform |
|
|
11,391,538 |
|
|
|
9,853,823 |
|
Customer lists and contracts |
|
|
1,177,200 |
|
|
|
1,177,200 |
|
Licenses |
|
|
209,282 |
|
|
|
209,282 |
|
|
|
|
12,816,206 |
|
|
|
11,278,491 |
|
Less: accumulated
amortization |
|
|
8,314,352 |
|
|
|
7,191,529 |
|
Intangible
assets, net |
|
$ |
4,501,854 |
|
|
$ |
4,086,962 |
|
Intangible assets are amortized over their useful lives ranging
from periods of
3 to 15 years. Amortization expense for the three months
ended June 30, 2022 and 2021 was $578,927
and $481,008,
respectively. Amortization expense for the six months ended June
30, 2022 and 2021 was $1,122,129
and $944,905,
respectively.
4. LEASE
The Company entered into an operating lease for office space which
became effective in June 2020. The lease term is 10 years from the effective date and
allows for two optional extensions of five
years each. The two optional extensions are not recognized
as part of the right-of-use asset or lease liability since it is
not reasonably certain that the Company will extend this lease. As
of June 30, 2022, the remaining lease term was 7.9 years and the discount rate
was 6%.
Operating lease cost included in selling, general and
administrative expenses was $184,329 and $367,550 for the three and six
months ended June 30, 2022, respectively. Operating lease cost
included in selling, general and administrative expenses was
$209,056 and $424,200 for the three and six
months ended June 30, 2021, respectively.
The following is the lease maturity analysis of our operating lease
as of June 30, 2022:
Year ending December 31,
Schedule of operating lease liabilities |
|
|
|
2022 (excluding the six
months ended June 30, 2022) |
|
$ |
285,984 |
|
2023 |
|
|
571,968 |
|
2024 |
|
|
571,968 |
|
2025 |
|
|
612,006 |
|
2026 |
|
|
640,604 |
|
Thereafter |
|
|
2,188,731 |
|
Total lease payments |
|
|
4,871,261 |
|
Less: Imputed
interest |
|
|
(1,025,323 |
) |
Present value of future lease
payments |
|
|
3,845,938 |
|
Less: current
portion of lease liability |
|
|
(350,753 |
) |
Long-term
portion of lease liability |
|
$ |
3,495,185 |
|
5. CUSTOMER CARD
FUNDING LIABILITY
The
Company issues prepaid cards with various provisions for cardholder
fees or expiration. Revenue generated from cardholder transactions
and interchange fees are recognized when the Company’s performance
obligation is fulfilled. Unspent balances left on
Pharma cards are recognized
as settlement income at the expiration of the cards and the
program. Contract liabilities related to prepaid cards represent
funds on card and client funds held to be loaded to card before the
amounts are ultimately spent by the cardholders or recognized as
revenue by the Company. Contract liabilities related to prepaid
cards are reported as Customer card funding liability on the
condensed consolidated balance sheet.
The opening and closing balances of the Company's contract
liabilities are as follows:
Schedule of contract liabilities |
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2022 |
|
|
2021 |
|
Beginning balance |
|
$ |
61,283,914 |
|
|
$ |
48,100,951 |
|
Increase,
net |
|
|
15,683,936 |
|
|
|
17,654,611 |
|
Ending balance |
|
$ |
76,967,850 |
|
|
$ |
65,755,562 |
|
The amount of revenue recognized during the six months ended June
30, 2022 and 2021 that was included in the opening contract
liability for prepaid cards was $1,485,005
and $1,023,055,
respectively.
6. COMMON
STOCK
At June 30, 2022, 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. On that date, the Company had
52,323,382 shares of common stock issued and
52,019,932 shares of common stock outstanding, and no shares
of preferred stock outstanding.
Stock-based compensation expense related to Company grants for the
three and six months ended June 30, 2022 was $488,287
and $1,057,789,
respectively. Stock-based compensation expense for the three and
six months ended June 30, 2021 was $540,921
and $1,777,135,
respectively.
2022 Transactions: During the three and six months ended
June 30, 2022 the Company issued 105,000 and 228,000 shares,
respectively, of common stock for vested stock awards and the
exercise of stock options and received proceeds of $0 and
$0,
respectively.
2021 Transactions: During the three and six months ended
June 30, 2021 the Company issued
392,500 and
891,775 shares, respectively, of common stock for vested
stock awards and the exercise of stock options and received
proceeds of $9,675
and $120,141,
respectively.
7. BASIC AND FULLY
DILUTED NET LOSS PER COMMON SHARE
The following table sets forth the computation of basic and fully
diluted net loss per common share for the three and six months
ended June 30, 2022 and 2021:
Schedule of computation of earnings per
share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(228,034 |
) |
|
$ |
(931,967 |
) |
|
$ |
(537,429 |
) |
|
$ |
(2,555,494 |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for
basic calculation |
|
|
51,993,031 |
|
|
|
50,748,437 |
|
|
|
51,906,335 |
|
|
|
50,551,299 |
|
Weighted
average effects of potentially diluted common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options (calculated using the treasury method) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
Unvested restricted stock grants |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
Denominator for fully diluted calculation |
|
|
51,993,031 |
|
|
|
50,748,437 |
|
|
|
51,906,335 |
|
|
|
50,551,299 |
|
Net loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.00 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.05 |
) |
Fully
diluted |
|
$ |
(0.00 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.05 |
) |
Due to the net loss for the
three and six months ended June 30, 2022, the effect of all
potential common share equivalents was anti-dilutive, and
therefore, all such shares were excluded from the computation of
diluted weighted average shares outstanding for both periods. For
the three and six months ended June 30, 2022, the amount of
potential common share equivalents excluded were 1,884,400
for stock options and 1,064,000
for unvested restricted stock awards. Due to the net loss for the
three and six months ended June 30, 2021, the effect of all
potential common share equivalents was anti-dilutive, and
therefore, all such shares were excluded from the computation of
diluted weighted average shares outstanding for both periods. For
the three and six months ended June 30, 2021, the amount of
potential common share equivalents excluded were 1,997,350
for stock options and 1,868,000
for unvested restricted stock awards.
8.
COMMITMENTS AND
CONTINGENCIES
From time to time, we may become involved in various lawsuits and
legal proceedings which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise from time to
time that may harm our business.
The Company has been named as a defendant in three complaints filed
in the United States District Court for the District of Nevada:
Yilan Shi v. Paysign, Inc. et. al., filed on March 19, 2020
(“Shi”), Lorna Chase v. Paysign, Inc. et. al., filed on March 25,
2020 (“Chase”), and Smith & Duvall v. Paysign, Inc. et. al.,
filed on April 2, 2020 (collectively, the “Complaints” or
“Securities Class Action”). Smith & Duvall v. Paysign, Inc. et.
al. was voluntarily dismissed on May 21, 2020. On May 18, 2020, the
Shi plaintiffs and another entity called the Paysign Investor Group
each filed a motion to consolidate the remaining Shi and Chase
actions and to be appointed lead plaintiff. The Complaints are
putative class actions filed on behalf of a class of persons who
acquired the Company’s common stock from March 19, 2019
through March 31, 2020, inclusive. The Complaints generally allege
that the Company, Mark Newcomer, and Mark Attinger violated Section
10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”),
and that Messrs. Newcomer and Attinger violated Section 20(a) of
the Exchange Act, by making materially false or misleading
statements, or failing to disclose material facts, regarding the
Company’s internal control over financial reporting and its
financial statements. The Complaints seek class action
certification, compensatory damages, and attorney’s fees and costs.
On December 2, 2020, the Court consolidated Shi and Chase as In re
Paysign, Inc. Securities Litigation and appointed the Paysign
Investor Group as lead plaintiff. On January 12, 2021, Plaintiffs
filed an Amended Complaint in the consolidated action. Defendants
filed a Motion to Dismiss the Amended Complaint on March 15, 2021,
which Plaintiffs opposed via an opposition brief filed on April 29,
2021, to which Defendants replied on June 1, 2021. Thus, the motion
is now fully briefed. The Court has not set a hearing date on the
motion, or informed the parties whether it intends to entertain
oral argument or rule upon the papers filed. As of the date of this
filing, Paysign cannot give any meaningful estimate of likely
outcome or damages.
The Company has also been named as a nominal defendant in two
stockholder derivative actions in the United States District Court
for the District of Nevada. The first derivative action is entitled
Andrzej Toczek, derivatively on behalf of Paysign, Inc. v. Mark R.
Newcomer, et al. and was filed on September 17, 2020. This action
alleges violations of Section 14(a) of the Exchange Act, breach of
fiduciary duty, unjust enrichment, and waste, largely in connection
with the failure to correct information technology controls over
financial reporting alleged in the Securities Class Action, thereby
causing the Company to face exposure in the Securities Class
Action. The complaint also alleges insider trading violations
against certain individual defendants. On December 16, 2020, the
Court approved a stipulation staying the action until the Court in
the consolidated Securities Class Action issues a ruling on the
Motion to Dismiss. The second derivative action is entitled John K.
Gray, derivatively on behalf of Paysign, Inc. v. Mark Attinger, et
al. and was filed on May 9, 2022. This action involves the
same alleged conduct raised in the Toczek action and asserts claims
for breach of fiduciary duty in connection with financial
reporting, breach of fiduciary duty in connection with alleged
insider trading against certain individual defendants, and unjust
enrichment. On June 3, 2022, the Court approved a stipulation
staying the action until the Court in the consolidated Securities
Class Action issues a ruling on the Motion to Dismiss. As of the
date of this filing, Paysign cannot give any meaningful estimate of
likely outcome or damages.
9.
RELATED
PARTY
A member of our Board of Directors is also a partner in a law firm
that the Company engages for services to review regulatory filings
and for various other legal matters. The Company incurred legal
expense of $41,019
and $81,753
during the three and six months ended June 30, 2022,
respectively, with the related party law firm. During the three and
six months ended June 30, 2021 the Company incurred legal expense
of $390,172
and $410,884,
respectively, with the related party law firm.
10.
INCOME TAX
PROVISION
The effective tax rate (income tax provision as a percentage of
loss before income tax provision) was (13.4%) for the three
months ended June 30, 2022, as compared to (0.1%) for the three months
ended June 30, 2021. The effective tax rate was (5.7%) and (0.1%) for the six months
ended June 30, 2022 and 2021, respectively. The effective tax rates
vary, primarily as a result of the full valuation on our
deferred tax asset in the current year and the tax benefit related
to our stock-based compensation and a pretax loss in the prior year
period.
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. These Forward-Looking Statements
are based on our current expectations, assumptions, estimates and
projections about our business and our industry. Words such as
"believe," "anticipate," "expect," "intend," "plan," “propose,”
"may," and other similar expressions identify 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 contain, 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.
In addition, any statements that refer to expectations,
projections, estimates, forecasts, or other characterizations of
future events or circumstances are Forward-Looking Statements.
These Forward-Looking Statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from those reflected in the Forward-Looking Statements. Such
important factors (“Important Factors”) and other factors are
disclosed in this report, including those factors discussed in
“Part II - 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. You are cautioned not to place undue reliance on these
Forward-Looking Statements, which relate only to events as of the
date on which the statements are made. We undertake no obligation
to publicly revise these Forward-Looking Statements to reflect
events or circumstances that arise after the date hereof. You
should refer to and carefully review the information in future
documents we file with the Securities and Exchange Commission.
Overview
Paysign, Inc. (the “Company,” “Paysign,” “we” or “our”),
headquartered in Nevada, was incorporated on August 24, 1995, and
trades under the symbol PAYS on The Nasdaq Stock Market LLC.
Paysign is a vertically integrated provider of 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 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’s flexibility and ease of customization has allowed us to
expand our operational capabilities by facilitating our entry into
new markets within the payments space. 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, clinical trials, healthcare
reimbursement payments and pharmaceutical payment assistance. We
have expanded our product offerings to include additional corporate
incentive products and demand deposit accounts accessible with a
debit card. In the future, we expect to further expand our product
offerings into other prepaid card offerings such as payroll cards,
travel cards, and expense reimbursement cards. Our cards are
sponsored by our issuing bank partners.
Our revenues include fees generated from cardholder fees,
interchange, card program management fees, transaction claims
processing fees, and settlement income. Revenue from cardholder
fees, interchange, card program management fees, and transaction
claims processing fees is recorded when the performance obligation
is fulfilled. Settlement income is recorded at the expiration of
the card program.
We have two categories for our prepaid debit cards: (1) corporate
and consumer reloadable cards, and (2) non-reloadable cards.
Reloadable Cards: These types of cards are generally classified as
payroll or considered general purpose reloadable (“GPR”) cards.
Payroll cards are issued by an employer to an employee in order to
allow the employee to access payroll amounts that are deposited
into an account linked to their card. 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 generally used as gift or incentive
cards. Normally these types of cards are used for purchase of goods
or services at retail locations and cannot be used to receive
cash.
Both reloadable and non-reloadable cards may be open-loop,
closed-loop, or restricted-loop. Open-loop cards can be used to
receive cash at ATM locations by PIN; or purchase goods or services
by PIN or signature at retail locations virtually anywhere that the
network brand (American Express, Discover, MasterCard, Visa, etc.)
is accepted. Closed-loop cards can only be used at a specific
merchant. Restricted-loop cards can be used at several merchants,
or a defined group of merchants, such as all merchants at a
specific shopping mall.
The prepaid card market in the U.S. 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 manage all aspects of the prepaid card lifecycle, from managing
the card design and approval processes with partners and networks,
to production, packaging, distribution, and personalization. We
also 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 representatives, Interactive Voice Response, and
two-way short message service messaging and text alerts.
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 Mexico.
We have devoted more extensive resources to sales and marketing
activities as we have added essential personnel to our marketing
and sales team. We market our Paysign payment solutions through
direct marketing by the Company’s sales team. Our primary market
focus is on companies and municipalities that require a streamlined
payment solution for rewards, rebates, payment assistance, and
other payments to their customers, employees, agents and others. To
reach these markets, we focus our sales efforts on direct contact
with our target market and attendance at various industry specific
conferences. We may, at times, utilize independent contractors who
make direct sales and are paid on a commission basis only. We
market our Paysign Premier product through existing communication
channels to a targeted segment of our existing cardholders, as well
as to a broad group of individuals, ranging from non-banked to
fully banked consumers with a focus on long term users of our
product.
In 2022, we plan to continue to invest additional funds in
technology improvements, sales and marketing, fraud and disputes,
customer service, and regulatory compliance. From time to time, we
evaluate 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.
The coronavirus (“COVID-19”) pandemic, which started in late 2019
and reached the United States in early 2020, continues to
significantly impact the economy of the United States and the rest
of the world. While the direct disruption appears to have
significantly mitigated due to the availability of vaccines and
other factors, the ultimate duration and severity of the pandemic
remain uncertain, particularly given the development of new
variants that continue to spread, and the economic repercussions
are still manifesting themselves. The COVID-19 outbreak caused
plasma center closures, and the stimulus packages signed into law
during 2020 and 2021 reduced the incentive for individuals to
donate plasma for supplementary income. Additionally, labor
shortages at plasma donation centers and restrictions preventing
Mexican nationals with tourist visas from being compensated for
donating plasma, have further impacted donations. Those
developments have had, and are expected to continue to have, an
adverse impact on the Company’s results of operations. Offsetting
those headwinds, inflationary pressures for food, gasoline, and
other products and services appear to be driving individuals back
into the plasma donation centers based upon the increase we
experienced in the number of loads per average donation center in
the second quarter of 2022 versus the first quarter of 2022. While
we remain cautiously optimistic and have seen improvements in our
operating results on an aggregated basis, we cannot foresee how
long it may take the Company to attain pre-pandemic operating
levels on a per plasma donation center basis. Given the uncertainty
around the extent and timing of the potential future spread or
mitigation of COVID-19 and variants and around the imposition or
relaxation of protective measures, management cannot at this time
estimate with reasonable accuracy COVID-19’s further impact on the
Company’s results of operations, cash flows or financial
condition.
Results of Operations
Three Months Ended June 30, 2022 and 2021
The following table summarizes our consolidated financial
results:
|
|
Three Months Ended
June 30,
(unaudited)
|
|
|
Variance |
|
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Plasma
industry |
|
$ |
7,806,201 |
|
|
$ |
5,947,313 |
|
|
$ |
1,858,888 |
|
|
|
31.3% |
|
Pharma
industry |
|
|
773,311 |
|
|
|
641,037 |
|
|
|
132,274 |
|
|
|
20.6% |
|
Other |
|
|
19,264 |
|
|
|
62,940 |
|
|
|
(43,676 |
) |
|
|
(69.4% |
) |
Total
revenues |
|
|
8,598,776 |
|
|
|
6,651,290 |
|
|
|
1,947,486 |
|
|
|
29.3% |
|
Cost of
revenues |
|
|
3,900,965 |
|
|
|
3,498,723 |
|
|
|
402,242 |
|
|
|
11.5% |
|
Gross
profit |
|
|
4,697,811 |
|
|
|
3,152,567 |
|
|
|
1,545,244 |
|
|
|
49.0% |
|
Gross
margin % |
|
|
54.6% |
|
|
|
47.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general
and administrative |
|
|
4,255,976 |
|
|
|
3,474,562 |
|
|
|
781,414 |
|
|
|
22.5% |
|
Depreciation and amortization |
|
|
713,180 |
|
|
|
614,182 |
|
|
|
98,998 |
|
|
|
16,1% |
|
Total operating expenses |
|
|
4,969,156 |
|
|
|
4,088,744 |
|
|
|
880,412 |
|
|
|
21.5% |
|
Loss
from operations |
|
$ |
(271,345 |
) |
|
$ |
(936,177 |
) |
|
$ |
664,832 |
|
|
|
(71.0% |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(228,034 |
) |
|
$ |
(931,967 |
) |
|
$ |
703,933 |
|
|
|
(75.5% |
) |
Net
margin % |
|
|
(2.7% |
) |
|
|
(14.0% |
) |
|
|
|
|
|
|
|
|
The increase in total revenues of $1,947,486 for the three months
ended June 30, 2022 compared to the same period in the prior year
consisted primarily of a $1,858,888 increase in Plasma revenue and
a $132,274 increase in Pharma revenue, offset by a $43,676 decrease
in Other revenue. The increase in Plasma revenue was primarily due
to an increase in the number of plasma centers and donations, and,
consequently, dollars loaded to cards, cardholder fees, and
interchange, as COVID-19 restrictions such as donation center
closures, mobility restrictions and Federal government stimulus
measures were relaxed compared to the prior year period. The
increase in Pharma revenue was primarily due to the launch of new
Pharma copay programs offset by the end of a number of Pharma
prepaid programs. The decrease in Other revenue was primarily due
to the recognition of settlement income from a rewards program that
terminated in the second quarter of 2021.
Cost of revenues for the three months ended June 30, 2022 increased
$402,242 compared to the same period in the prior year. Cost of
revenues is comprised of transaction processing fees, data
connectivity and data center expenses, network fees, bank fees,
card production and postage costs, customer service, program
management, application integration setup, and sales and commission
expense. Cost of revenues increased during the second quarter of
2022 primarily due to the increase in cardholder usage activity,
the increase in plastics, collateral and postage related to upfront
costs associated with new openings and competitive conversion of 62
plasma donation centers, the increase in network expenses related
to our Pharma copay business, and the increase in customer service
expenses, offset by a decline in sales commissions related to the
restructuring of an agreement in the first quarter of 2022.
Gross profit for the three months ended June 30, 2022 increased
$1,545,244 compared to the same period in the prior year resulting
from the increase in Plasma revenue, the restructuring of an
agreement mentioned above, and the beneficial impact of a variable
cost structure as many of the Plasma transaction costs are variable
in nature which are provided by third parties who charge us based
on the number of transactions that occurred during the period. The
increase in gross profit was offset by the upfront costs associated
with the 62 new plasma donation centers that were added during the
quarter and the increase in customer service expenses relating to
the overall growth of our business. The increase in gross margin
resulted from the aforementioned factors.
Selling, general and administrative expenses (“SG&A”) for the
three months ended June 30, 2022 increased $781,414 or 22.5%
compared to the same period in the prior year and consisted
primarily of an increase in compensation and benefits of $890,000,
a decrease in stock-based compensation of $52,600, a decrease in
outside professional services for legal, tax, accounting and
consultants of $151,400, a decrease in insurance of $15,000, an
increase in technologies and telecom of $237,000, a decrease in
rent, utilities, and maintenance of $14,100, an increase in travel
and entertainment of $57,200, and an increase in other operating
expenses of $210,000. The remainder of the difference is primarily
related to an increase in capitalized software development
costs.
Depreciation and amortization expense for the three months ended
June 30, 2022 increased $98,998 compared to the same period in the
prior year. The increase in depreciation and amortization expense
was primarily due to continued capitalization of new software and
equipment, and continued enhancements to our platform.
For the three months ended June 30, 2022 we recorded a loss from
operations of $271,345 representing a net increase of $664,832
compared to the same period last year related to the aforementioned
factors.
Other income for the three months ended June 30, 2022 increased
$65,217 related to an increase in interest rates and the associated
interest income received on higher bank account balances at our
sponsor bank and lower interest expense related to the financing of
insurance premiums.
We recorded an income tax expense of $26,916 for the three months
ended June 30, 2022, which equates to an effective tax rate of
(13.4%) primarily as a result
of the full valuation on our deferred tax asset in both the current
and prior period and the tax benefit related to our stock-based
compensation and a pretax loss in the prior period. We recorded an
income tax expense of $800 for the three months ended June 30, 2021
due to estimated state tax payments.
The net loss for the three months ended June 30, 2022 was $228,034,
an improvement of $703,933 compared to the net loss of $931,967 for
the three months ended June 30, 2021. The overall change in net
loss relates to the aforementioned factors.
Six Months Ended June 30, 2022 and 2021
The following table summarizes our consolidated financial
results:
|
|
Six Months Ended
June 30,
(unaudited)
|
|
|
Variance |
|
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Plasma
industry |
|
$ |
15,200,565 |
|
|
$ |
11,330,464 |
|
|
$ |
3,870,101 |
|
|
|
34.2% |
|
Pharma
industry |
|
|
1,579,879 |
|
|
|
1,523,867 |
|
|
|
56,012 |
|
|
|
3.7% |
|
Other |
|
|
38,971 |
|
|
|
76,387 |
|
|
|
(37,416 |
) |
|
|
(49.0% |
) |
Total
revenues |
|
|
16,819,415 |
|
|
|
12,930,718 |
|
|
|
3,888,697 |
|
|
|
30.1% |
|
Cost of
revenues |
|
|
7,123,355 |
|
|
|
6,946,345 |
|
|
|
177,010 |
|
|
|
2.5% |
|
Gross
profit |
|
|
9,696,060 |
|
|
|
5,984,373 |
|
|
|
3,711,687 |
|
|
|
62.0% |
|
Gross
margin % |
|
|
57.6% |
|
|
|
46.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general
and administrative |
|
|
8,896,888 |
|
|
|
7,339,548 |
|
|
|
1,557,340 |
|
|
|
21.2% |
|
Depreciation and amortization |
|
|
1,392,351 |
|
|
|
1,210,030 |
|
|
|
182,321 |
|
|
|
15.1% |
|
Total operating expenses |
|
|
10,289,239 |
|
|
|
8,549,578 |
|
|
|
1,739,661 |
|
|
|
20.3% |
|
Loss
from operations |
|
$ |
(593,179 |
) |
|
$ |
(2,565,205 |
) |
|
$ |
1,972,026 |
|
|
|
(76.9% |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(537,429 |
) |
|
$ |
(2,555,494 |
) |
|
$ |
2,018,065 |
|
|
|
(79.0% |
) |
Net
margin % |
|
|
(3.2% |
) |
|
|
(19.8% |
) |
|
|
|
|
|
|
|
|
The increase in total revenues of $3,888,697 for the six months
ended June 30, 2022 compared to the same period in the prior year
consisted primarily of a $3,870,101 increase in Plasma revenue and
a $56,012 increase in Pharma revenue, offset by a $37,416 decrease
in Other revenue. The increase in Plasma revenue was primarily due
to an increase in the number of plasma centers and donations, and,
consequently, dollars loaded to cards, cardholder fees, and
interchange, as COVID-19 restrictions such as donation center
closures, mobility restrictions and Federal government stimulus
measures were relaxed compared to the prior year period. The
increase in Pharma revenue was primarily due to the launch of new
Pharma copay programs offset by the end of a number of Pharma
prepaid programs. The decrease in Other revenue was primarily
driven by the recognition of settlement income from a rewards
program that ended during the second quarter of 2021.
Cost of revenues for the six months ended June 30, 2022 increased
$177,010 compared to the same period in the prior year. Cost of
revenues is comprised of transaction processing fees, data
connectivity and data center expenses, network fees, bank fees,
card production and postage costs, customer service, program
management, application integration setup, and sales and commission
expense. Cost of revenues increased during the six months of 2022
primarily due to the increase in cardholder usage activity, the
increase in plastics, collateral and postage related to upfront
costs associated with the de novo opening or competitive conversion
of 71 plasma donation centers that we service, the increase in
network expenses related to our Pharma copay business, and the
increase in customer service expenses, offset by a decline in sales
commissions related to the restructuring of an agreement in the
first quarter of 2022.
Gross profit for the six months ended June 30, 2022 increased
$3,711,687 compared to the same period in the prior year resulting
from the increase in Plasma revenue, the restructuring of an
agreement mentioned above, and the beneficial impact of a variable
cost structure as many of the Plasma transaction costs are provided
by third parties who charge us based on the number of transactions
that occurred during the period, with a lower per-transaction cost
at larger numbers of transactions. The increase in Gross profit was
offset by the upfront costs associated with the 71 new plasma
donation centers that were added during the six month period and
the increase in customer service expenses relating to the overall
growth of our business. The increase in gross margin resulted from
the aforementioned factors.
SG&A for the six months ended June 30, 2022 increased
$1,557,340 or 21.2% compared to the same period in the prior year
and consisted primarily of an increase in compensation and benefits
of $1,294,200, a decrease in stock-based compensation of $119,300,
a decrease in outside professional services for legal, tax,
accounting and consultants of $245,800, an increase in legal
settlements of $354,000, an increase in insurance of $95,800, an
increase in technologies and telecom of $415,100, a decrease in
rent, utilities, and maintenance of $43,900, an increase in travel
and entertainment of $131,800, and an increase in other operating
expenses of $375,100. The remainder of the difference is primarily
related to an increase in capitalized software development
costs.
Depreciation and amortization expense for the six months ended June
30, 2022 increased $182,300 compared to the same period in the
prior year. The increase in depreciation and amortization expense
was primarily due to continued capitalization of new software and
equipment and continued enhancements to our platform.
For the six months ended June 30, 2022 we recorded a loss from
operations of $593,179 representing a net increase of $1,972,026
compared to the same period last year related to the aforementioned
factors.
Other income for the six months ended June 30, 2022 increased
$72,452 related to an increase in interest rates and the associated
interest income received on higher bank account balances at our
sponsor bank and lower interest expense related to the financing of
insurance premiums.
We recorded an income tax expense of $28,813 for the six months
ended June 30, 2022, which equates to an effective tax rate of
(5.7%) percent
primarily as a result of the full valuation on our deferred tax
asset in both the current and prior period and the tax benefit
related to our stock-based compensation and a pretax loss in the
prior period. We recorded an
income tax expense of $2,400 for the six months ended June
30, 2021 due to estimated
state tax payments.
The net loss for the six months ended June 30, 2022 was $537,429,
an improvement of $2,018,065 compared to the net loss of $2,555,494
for the six months ended June 30, 2021. The overall change in net
loss relates to the aforementioned factors.
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 loaded on cards was $376 million and
$267 million for the three months ended June 30, 2022 and
2021, respectively. That gross dollar volume was $699 million and
$546 million for the six months ended June 30, 2022 and 2021,
respectively. We use this metric to analyze the total amount of
money moving into our prepaid card programs.
Conversion Rates on Gross Dollar Volume Loaded on Cards – Equals
revenues, gross profit or net income conversion rates of gross
dollar volume loaded on cards which are calculated by taking our
total revenues, gross profit or net income (loss), respectively, as
a numerator and dividing by the gross dollar volume loaded on cards
as a denominator. As we derive a number of our financial results
from cardholder fees, we utilize these metrics as an indication of
the amount of money that is added to cards and will eventually be
converted to revenues, gross profit and net income. Our total
revenue conversion rates for the three months ended June 30, 2022
and 2021 were 2.29% or 229 basis points (“bps”), and 2.49% or 249
bps, respectively, of gross dollar volume loaded on cards. Our
total gross profit conversion rates for the three months ended June
30, 2022 and 2021 were 1.25% or 125 bps, and 1.18% or 118 bps,
respectively, of gross dollar volume loaded on cards. Our net
income conversion rates for the three months ended June 30, 2022
and 2021 were (0.06)% or (6) bps, and (0.35)% or (35) bps,
respectively, of gross dollar volume loaded on cards. Our total
revenue conversion rates for the six months ended June 30, 2022 and
2021 were 2.41% or 241 bps, and 2.37% or 237 bps, respectively, of
gross dollar volume loaded on cards. Our total gross profit
conversion rates for the six months ended June 30, 2022 and 2021
were 1.39% or 139 bps, and 1.10% or 110 bps, respectively, of gross
dollar volume loaded on cards. Our net income conversion rates for
the six months ended June 30, 2022 and 2021 were (0.08)% or (8)
bps, and (0.47)% or (47) bps, respectively, of gross dollar volume
loaded on cards.
Management also reviews key performance indicators, such as
revenues, gross profit, operational expenses 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 financial 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 (loss), earnings (loss) 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” is defined as earnings before interest, income taxes, and
depreciation and amortization expense and "Adjusted EBITDA"
reflects the adjustment to EBITDA to exclude stock-based
compensation expense. A reconciliation of net loss to Adjusted
EBITDA is provided in the table below.
|
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Reconciliation
of Adjusted EBITDA to net loss: |
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(228,034 |
) |
|
$ |
(931,967 |
) |
|
$ |
(537,429 |
) |
|
$ |
(2,555,494 |
) |
Income tax
provision |
|
|
26,916 |
|
|
|
800 |
|
|
|
28,813 |
|
|
|
2,400 |
|
Interest
income |
|
|
(70,227 |
) |
|
|
(5,010 |
) |
|
|
(84,563 |
) |
|
|
(12,111 |
) |
Depreciation and amortization |
|
|
713,180 |
|
|
|
614,182 |
|
|
|
1,392,351 |
|
|
|
1,210,030 |
|
EBITDA |
|
|
441,835 |
|
|
|
(321,995 |
) |
|
|
799,172 |
|
|
|
(1,355,175 |
) |
Stock-based compensation |
|
|
488,287 |
|
|
|
540,921 |
|
|
|
1,057,789 |
|
|
|
1,177,135 |
|
Adjusted EBITDA |
|
$ |
930,122 |
|
|
$ |
218,926 |
|
|
$ |
1,856,961 |
|
|
$ |
(178,040 |
) |
Liquidity and Capital Resources
The following table sets forth the major sources and uses of
cash:
|
|
Six Months Ended June 30,
(unaudited)
|
|
|
|
2022 |
|
|
2021 |
|
Net cash provided by
operating activities |
|
$ |
16,399,465 |
|
|
$ |
17,581,753 |
|
Net cash used in investing
activities |
|
|
(1,575,209 |
) |
|
|
(1,261,556 |
) |
Net cash provided
by financing activities |
|
|
– |
|
|
|
120,141 |
|
Net increase in
cash and restricted cash |
|
$ |
14,824,256 |
|
|
$ |
16,440,338 |
|
Comparison of Six Months Ended June 30, 2022 and 2021
During the six months ended June 30, 2022 and 2021, we financed our
operations through internally generated funds.
Cash provided by operating activities decreased $1,182,288 for the
six months ended June 30, 2022, as compared to the same period in
the prior year. The decrease is primarily due to changes in cash
flows from operating assets and liabilities, particularly decreases
in cash flows from other receivables of $420,033 related to
employee retention credits recorded in the current year, accounts
payable and accrued liabilities of $891,940 associated with the
timing of a payment due to a third-party service provider, and
customer card funding of $1,970,675 primarily related to the return
of restricted cash associated with the end of a number of Pharma
prepaid programs. These decreases were partially offset by an
improvement in net loss from operations of $2,018,065, a decrease
in cash flows from stock-based compensation of $119,346 and an
increase in cash flows from depreciation and amortization of
$182,321.
Cash used in investing activities increased $313,653 for the six
months ended June 30, 2022 as compared to the six months ended June
30, 2021. The change between periods was primarily attributed to an
increase in the capitalization of internally developed software as
we continue to invest in our technology platform.
Cash provided by financing activities was zero for the six months
ended June 30, 2022 as compared to cash provided by financing
activities of $120,141 for the six months ended June 30, 2021. Cash
provided by financing activities in the 2021 period consisted of
cash received from the exercise of employee stock options totaling
$120,141.
Sources of Liquidity
We believe that our available cash on hand, excluding restricted
cash, at June 30, 2022 of $6,527,476, along with our forecast for
revenues and cash flows for the remainder of the year and for 2023,
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 Policies and Estimates
Our significant accounting policies are described in Note 1 of the
Notes to Consolidated Financial Statements and our Annual Report on
Form 10-K for the fiscal year ended December 31, 2021.
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.
Our estimates are 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.
Item 3. Quantitative and
Qualitative Disclosures about Market Risk.
Because we are a smaller reporting company, we are not required to
provide the information called for by this Item.
Item 4. Controls and
Procedures.
Disclosure Controls and Procedures.
Disclosure controls and procedures means controls and other
procedures that are designed to ensure that the information we are
required to disclose in the reports that we file or submit under
the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms, and to ensure
that information required to be disclosed by us in those reports is
accumulated and communicated to our management, including our
principal executive and principal financial officers, or persons
performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. Our chief executive
officer and chief financial officer evaluated the effectiveness of
our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934)
as of June 30, 2022. Based on that evaluation, our chief executive
officer and chief financial officer have concluded that our
disclosure controls and procedures were effective as of June 30,
2022, the end of the period covered by this Quarterly Report on
Form 10-Q.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2022, there have been no changes
in our internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART II. OTHER
INFORMATION
Item 1. Legal
Proceedings.
From time to time, we may become involved in various lawsuits and
legal proceedings which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise from time to
time that may harm our business.
The Company has been named as a defendant in three complaints filed
in the United States District Court for the District of Nevada:
Yilan Shi v. Paysign, Inc. et. al., filed on March 19, 2020
(“Shi”), Lorna Chase v. Paysign, Inc. et. al., filed on
March 25, 2020 (“Chase”), and Smith & Duvall v.
Paysign, Inc. et. al., filed on April 2, 2020 (collectively, the
“Complaints” or “Securities Class Action”). Smith & Duvall v.
Paysign, Inc. et. al. was voluntarily dismissed on May 21, 2020. On
May 18, 2020, the Shi plaintiffs and another entity called the
Paysign Investor Group each filed a motion to consolidate the
remaining Shi and Chase actions and to be appointed lead plaintiff.
The Complaints are putative class actions filed on behalf of a
class of persons who acquired the Company’s common stock from March
19, 2019 through March 31, 2020, inclusive. The Complaints
generally allege that the Company, Mark R. Newcomer, and Mark
Attinger violated Section 10(b) of the Exchange Act, and that
Messrs. Newcomer and Attinger violated Section 20(a) of the
Exchange Act, by making materially false or misleading statements,
or failing to disclose material facts, regarding the Company’s
internal control over financial reporting and its financial
statements. The Complaints seek class action certification,
compensatory damages, and attorney’s fees and costs. On December 2,
2020, the Court consolidated Shi and Chase as In re Paysign, Inc.
Securities Litigation and appointed the Paysign Investor Group as
lead plaintiff. On January 12, 2021, Plaintiffs filed an Amended
Complaint in the consolidated action. Defendants filed a Motion to
Dismiss the Amended Complaint on March 15, 2021, which Plaintiffs
opposed via an opposition brief filed on April 29, 2021, to which
Defendants replied on June 1, 2021. Thus, the motion is now fully
briefed. The Court has not set a hearing date on the motion, or
informed the parties whether it intends to entertain oral argument
or rule upon the papers filed.
The Company has also been named as a nominal defendant in two
stockholder derivative actions in the United States District Court
for the District of Nevada. The first derivative action is entitled
Andrzej Toczek, derivatively on behalf of Paysign, Inc. v. Mark R.
Newcomer, et al. and was filed on September 17, 2020. This action
alleges violations of Section 14(a) of the Exchange Act, breach of
fiduciary duty, unjust enrichment, and waste, largely in connection
with the failure to correct information technology controls over
financial reporting alleged in the Securities Class Action, thereby
causing the Company to face exposure in the Securities Class
Action. The complaint also alleges insider trading violations
against certain individual defendants. On December 16, 2020, the
Court approved a stipulation staying the action until the Court in
the consolidated Securities Class Action issues a ruling on the
Motion to Dismiss. The second derivative action is entitled John K.
Gray, derivatively on behalf of Paysign, Inc. v. Mark Attinger, et
al. and was filed on May 9, 2022. This action involves the same
alleged conduct raised in the Toczek action and asserts claims for
breach of fiduciary duty in connection with financial reporting,
breach of fiduciary duty in connection with alleged insider trading
against certain individual defendants, and unjust enrichment. On
June 3, 2022, the Court approved a stipulation staying the action
until the Court in the consolidated Securities Class Action issues
a ruling on the Motion to Dismiss.
Item 1A. Risk
Factors.
Because we are a smaller reporting company, we are not required to
provide the information called for by this Item.
Item 2. Unregistered Sales
of Equity Securities and Use of Proceeds.
During the quarter ended June 30, 2022, we issued, pursuant to an
exemption from registration provided by Section 4(a)(2) of the
Securities Act of 1933, a total of 105,000 shares of common stock
for restricted stock awards previously earned and vested to certain
directors, consultants and employees.
Item 6.
Exhibits.
31.1 |
Rule 13a-14(a)/15d-14(a) Certifications |
31.2 |
Rule 13a-14(a)/15d-14(a) Certifications |
32.1 |
Section 1350 Certifications |
32.2 |
Section 1350 Certifications |
101.INS |
Inline
XBRL Instance Document (the instance document does not appear in
the Interactive Data File because its XBRL tags are embedded within
the Inline XBRL document) |
101.SCH |
Inline
XBRL Taxonomy Extension Schema Document |
101.CAL |
Inline
XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
Inline
XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
Inline
XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
Inline
XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
Cover
Page Interactive Data File (formatted in iXBRL, and included in
exhibit 101). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
|
PAYSIGN,
INC. |
|
|
|
|
Date:
August 10, 2022 |
/s/
Mark Newcomer |
|
By: Mark Newcomer, Chief Executive Officer
(principal executive officer)
|
|
|
|
|
Date:
August 10, 2022 |
/s/
Jeff Baker |
|
By: Jeff Baker, Chief Financial Officer
(principal financial and accounting officer)
|
Paysign (NASDAQ:PAYS)
Historical Stock Chart
From Jan 2023 to Feb 2023
Paysign (NASDAQ:PAYS)
Historical Stock Chart
From Feb 2022 to Feb 2023