NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements of Usio, Inc. and its subsidiaries (the “Company”) have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been omitted pursuant to such rules and regulations. In the opinion of management, the accompanying interim condensed consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to present fairly the Company's financial position, results of operations and cash flows for such periods. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on March 30, 2021. Results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim periods or the full fiscal year.
Use of Estimates: The preparation of financial statements in conformity with U.S. 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition: Revenue consists primarily of fees generated through the electronic processing of payment transactions and related services and bill preparation, presentment and mailing services. Revenue is recognized during the period in which the transactions are processed or when the related services are performed. The Company complies with ASC 606-10 and reports revenues at gross as a principal versus net as an agent. Although some of the Company's processing agreements vary with respect to specific credit risks, the Company has determined for each agreement it is acting in the principal role. Merchants may be charged for these processing services at a bundled rate based on a percentage of the dollar amount of each transaction and, in some instances, additional fees are charged for each transaction. Certain merchant customers are charged a flat fee per transaction, while others may also be charged miscellaneous fees, including fees for chargebacks or returns, monthly minimums, and other miscellaneous services. Revenues derived from electronic processing of credit, debit, and prepaid card transactions that are authorized and captured through third-party networks are reported gross of amounts paid to sponsor banks as well as interchange and assessments paid to credit card associations. Certain card distributors remit payment of fees earned 45 days after the end of the processing period. Prepaid card distributors have payment terms of 30 days following the end of the month. Sales taxes billed are reported directly as a liability to the taxing authority and are not included in revenue. Usio Output Solutions, Inc. provides bill preparation, presentment and mailing services. Revenue from Output solutions is recognized when the related services are performed for printing and delivered to USPS for postage.
The following table presents the Company's revenues by source:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACH and complementary service revenue
|
|
$
|
4,001,897
|
|
|
$
|
1,779,245
|
|
|
$
|
7,080,353
|
|
|
$
|
4,016,991
|
|
Credit card revenue
|
|
|
6,558,076
|
|
|
|
4,588,199
|
|
|
|
12,281,785
|
|
|
|
9,570,857
|
|
Prepaid card services revenue
|
|
|
1,077,531
|
|
|
|
593,109
|
|
|
|
1,964,107
|
|
|
|
1,144,384
|
|
Output solutions revenue
|
|
|
3,595,637
|
|
|
|
—
|
|
|
|
7,368,446
|
|
|
|
—
|
|
Total revenue
|
|
$
|
15,233,141
|
|
|
$
|
6,960,553
|
|
|
$
|
28,694,691
|
|
|
$
|
14,732,232
|
|
Deferred Revenues: The Company records deferred revenues when it receives payments in advance of transferring control of promised goods or services to a customer. The advance consideration received from a customer is deferred until the Company provides the customer that product or service. The deferred revenues totaled $44,118 and $66,572 at June 30, 2021 and December 31, 2020, respectively.
Cash and Cash Equivalents: Cash and cash equivalents includes cash and other money market instruments. The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents.
Settlement Processing Assets and Obligations: Settlement processing assets and obligations represent intermediary balances arising in our settlement process for merchants.
Customer Deposits: The Company holds customer deposits primarily for postage expenses to ensure the Company is not out of pocket for amounts billed daily by the United States Postal Service. These customer deposits are carried on the Company's balance sheet with a corresponding liability.
Merchant Reserves: The Company has merchant reserve requirements associated with Automated Clearing House ("ACH") transactions. The merchant reserve assets are carried on the Company's balance sheet with a corresponding liability. Merchant Reserves are set for each merchant. Funds are collected from each merchant and held as collateral to minimize contingent liabilities associated with any losses that may occur under the merchant agreement. While this cash is not restricted in its use, the Company believes that designating this cash to collateralize Merchant Reserves strengthens its fiduciary standing with the Company's member sponsors and is in accordance with the guidelines set by the card networks.
Prepaid Card Load Assets: The Company maintains pre-funding accounts for its customers to facilitate prepaid card loads as initiated by the customer. These prepaid card load assets are carried on the Company's balance sheet with a corresponding liability.
The reconciliation of cash and cash equivalents to cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves is as follows for each period presented:
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Beginning cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,011,132
|
|
|
$
|
2,137,580
|
|
Prepaid card load assets
|
|
|
7,610,242
|
|
|
|
528,434
|
|
Customer deposits
|
|
|
1,305,296
|
|
|
|
—
|
|
Merchant reserves
|
|
|
8,265,555
|
|
|
|
10,016,904
|
|
Total
|
|
$
|
22,192,225
|
|
|
$
|
12,682,918
|
|
|
|
|
|
|
|
|
|
|
Ending cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,614,702
|
|
|
$
|
1,793,252
|
|
Prepaid card load assets
|
|
|
9,157,519
|
|
|
|
19,281,293
|
|
Customer deposits
|
|
|
1,410,607
|
|
|
|
—
|
|
Merchant reserves
|
|
|
8,101,153
|
|
|
|
8,430,339
|
|
Total
|
|
$
|
24,283,981
|
|
|
$
|
29,504,884
|
|
Allowance for Estimated Losses: The Company maintains an allowance for estimated doubtful accounts receivable resulting from the inability or failure of the Company’s customers to make required payments. The Company determines the allowance for estimated doubtful accounts receivable losses based on an account-by-account review, taking into consideration such factors as the age of the outstanding balance, historical pattern of collections and financial condition of the customer. Past losses incurred by the Company due to bad debts have been within its expectations. If the financial conditions of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make contractual payments, additional allowances might be required. Estimates for doubtful account losses are variable based on the volume of transactions processed and could increase or decrease accordingly. The allowance for estimated doubtful accounts was $260,712 and $205,522 at June 30, 2021 and December 31, 2020, respectively.
Inventory: Inventory is stated at the lower of cost or net realizable value. At March 31, 2021 and December 31, 2020, inventory consisted primarily of printing and paper supplies used for Output solutions.
Accounting for Internal Use Software: The Company capitalizes the costs associated with software being developed or obtained for internal use when both the preliminary project stage is completed, and it is probable that computer software being developed will be completed and placed-in service. Capitalized costs include only (i) external direct costs of materials and services consumed in developing or obtaining internal-use software, (ii) payroll and other related costs for employees who are directly associated with and who devote time to the internal-use software project, and (iii) interest costs incurred, when material, while developing internal-use software. The Company ceases capitalization of such costs no later than the point at which the project is substantially complete and ready for its intended purpose. In the six months ended June 30, 2021 and June 30, 2020, the Company capitalized $388,349 and $313,983, respectively.
Valuation of Long-Lived and Intangible Assets: The Company assesses the impairment of long-lived and intangible assets at least annually, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important, which could trigger an impairment review, include the following: significant under performance relative to historical or projected future cash flows; significant changes in the manner of use of the assets or the strategy of the overall business; and significant negative industry trends. When management determines that the carrying value of long-lived and intangible assets may not be recoverable, impairment is measured as the excess of the assets’ carrying value over the estimated fair value. No impairment losses were recorded in 2020 or during the six months ended June 30, 2021. Management is not aware of any impairment changes that may currently be required; however, the Company cannot predict the occurrence of events that might adversely affect the reported values in the future.
Reserve for Processing Losses: If, due to insolvency or bankruptcy of one of the Company’s merchant customers, or for any other reason, the Company is not able to collect amounts from its credit card, ACH or prepaid customers that have been properly "charged back" by the customer, or if a prepaid cardholder incurs a negative balance, the Company must bear the credit risk for the full amount of the transaction. The Company may require cash deposits and other types of collateral from certain merchants to minimize any such risks. In addition, the Company utilizes multiple systems and procedures to manage merchant risk. ACH, prepaid and credit card merchant processing loss reserves are primarily determined by performing a historical analysis of the Company’s loss experience, considering other factors that could affect that experience in the future, such as the types of transactions processed and nature of the merchant relationship with its consumers and the Company’s relationship with the Company’s prepaid card holders. This reserve amount is subject to the risk that actual losses may be greater than the Company’s estimates. The Company has not incurred any significant processing losses to date. Estimates for processing losses are variable based on the volume of transactions processed and could increase or decrease accordingly. At June 30, 2021 and December 31, 2020, the Company’s reserve for processing losses was $575,149 and $515,199 respectively.
Legal Proceedings: The Company may be involved in legal matters arising in the ordinary course of business from time to time. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is or could become involved in litigation will not have a material adverse effect on its business, financial condition or results of operations.
New Accounting Pronouncements: In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326), to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in Topic 326 replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Topic 326 is effective for fiscal years beginning after December 25, 2022, including interim periods within those fiscal years for smaller reporting companies. The Company does not expect the adoption of the amendments in ASU 2016-13 to have a significant effect on its financial position and the results of its operations when such amendment is adopted.
Accounting standards that have been issued or proposed by the FASB, the SEC or other standard setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.
Note 2. Acquisition of Information Management Solutions, LLC.
On December 15, 2020, the Company entered into an asset purchase agreement to purchase substantially all the assets of Information Management Solutions, LLC ("IMS"), a Texas limited liability company in the business of electronic bill presentment, document composition, document decomposition and printing and mailing services serving hundreds of customers representing a wide range of industry verticals, including utilities and financial institutions. The total purchase price consideration consisted of a cash payment of $5,907,408 at closing and warrant considerations valued at $552,283. The warrants were comprised of 945,599 unregistered warrants to purchase shares of common stock of the Company, or 945,599 shares of common stock, $0.001 par value per share, with an exercise price of $4.23 per share.
The final number of warrants was determined by dividing $2,000,000 by the 5-day weighted average closing price for the four trading days preceding the closing date and the closing day, or $2.115 per share. The exercise price of the warrants was determined by multiplying the 5-day weighted average closing price by the number 2. The warrants vest in three equal installments on the first, second and third anniversary of the closing date and have a term of five years from vest.
The purchase price was allocated to the net assets acquired based upon their estimated fair values as follows:
|
|
Estimated Fair
|
|
|
Estimated Useful
|
|
|
|
Value
|
|
|
Life (in years)
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
683,736
|
|
|
|
|
|
Inventory
|
|
|
168,138
|
|
|
|
|
|
Fixed assets
|
|
|
1,211,225
|
|
|
|
5
|
|
Prepaid expenses
|
|
|
29,849
|
|
|
|
|
|
Other assets
|
|
|
7,408
|
|
|
|
|
|
Customer list
|
|
|
3,807,052
|
|
|
|
5
|
|
Total Cash Consideration
|
|
$
|
5,907,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer list
|
|
$
|
552,283
|
|
|
|
|
|
Total Warrant Consideration
|
|
$
|
552,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Purchase Price
|
|
$
|
6,459,691
|
|
|
|
|
|
Unaudited Pro Forma Information
The unaudited proforma results including the effects of the IMS acquisition as if it had been consummated on January 1, 2019 were included in a Form 8-K/A filed on March 3, 2021 and summarized in the Form 10-K filed on March 30, 2021.
Note 3. Leases
The Company leases facilities and office equipment under various operating leases, which generally are expected to be renewed or replaced by other leases. For the quarters ended June 30, 2021 and 2020, operating lease expenses totaled $116,535 and $61,049, respectively. For the six months ended June 30, 2021 and 2020, operating lease expenses totaled $220,666 and $128,693, respectively.
Operating lease liabilities as of June 30, 2021 will require the following payments:
2021
|
|
$
|
306,708
|
|
2022
|
|
|
621,802
|
|
2023
|
|
|
554,916
|
|
2024
|
|
|
518,935
|
|
2025
|
|
|
414,138
|
|
Thereafter
|
|
|
1,331,219
|
|
Total minimum lease payments
|
|
|
3,747,718
|
|
Less imputed interest
|
|
|
(526,965
|
)
|
Total lease liabilities
|
|
$
|
3,220,753
|
|
Note 4. Accrued Expenses
Accrued expenses consisted of the following balances:
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
Accrued commissions
|
|
$
|
688,394
|
|
|
$
|
373,154
|
|
Reserve for merchant losses
|
|
|
575,149
|
|
|
|
515,199
|
|
Other accrued expenses
|
|
|
168,820
|
|
|
|
225,412
|
|
Accrued taxes
|
|
|
198,223
|
|
|
|
132,363
|
|
Accrued salaries
|
|
|
216,798
|
|
|
|
217,816
|
|
Total accrued expenses
|
|
$
|
1,847,384
|
|
|
$
|
1,463,944
|
|
Note 5. Equipment Loan
On March 20, 2021, the Company entered into a debt arrangement to finance $165,996 for the purchase of an Output Solutions sorter. The loan is for a period of 36 months with a maturity date of March 20, 2024. The repayment amount is for 36 months at $4,902 per month. Annual payments are $58,821. The financing is at an interest rate of 3.95%.
Note 6. Stockholders' Equity
Stock Warrants: On August 21, 2018, the Company issued University FanCards, LLC a warrant to purchase 150,000 shares of the Company's common stock. 30,000 warrants vested immediately upon the date on which the first financial transaction was processed on a card account issued under the prepaid agreement, which occurred on October 5, 2018. 120,000 warrants will vest annually over 4 years in 30,000 warrant increments beginning on July 31, 2019 and becoming fully vested on July 31, 2022. The exercise price for the 30,000 warrants that vested immediately on October 5, 2018 was $1.80 per share. The exercise price for the remaining 120,000 warrants will be the lesser of $2.00 per share or one hundred and twenty percent (120%) of the market price of the Company's common stock on the vesting date of the warrant. The warrants were valued using the Black-Scholes option pricing model. Assumptions used were as follows: (i) the fair value of the underlying stock was $0.94 for the 30,000 warrants and $0.90 for the 120,000 warrants; (ii) the risk-free interest rate is 2.77%; (iii) the contractual life is 5 years; (iv) the dividend yield is 0%; and (v) the volatility is 64.6%. The fair value of the warrants was $135,764 which will be amortized over the life of the warrants as a reduction of revenues. The reduction of revenues recorded for the six months ended June 30, 2021 and 2020 was $17,970.
On August 12, 2020, the Company issued 27,051 shares of common stock to University FanCards, LLC in a cashless exercise at $3.46 per common share in exchange for 60,000 warrants exercised by FanCards, LLC.
On February 5, 2021, the Company issued 19,795 shares of common stock to University FanCards, LLC in a cashless exercise at $5.88 per common share in exchange for 30,000 warrants exercised by FanCards, LLC.
On December 15, 2020, the Company issued to Information Management Solutions, LLC warrants to purchase 945,599 unregistered warrants to purchase shares of Usio, Inc. or 945,599 shares of common stock, $0.001 par value per share, with an exercise price of $4.23. The warrants were valued using the Black-Scholes option pricing model. Assumptions used were as follows: (i) the fair value of the underlying stock was $0.58; (ii) the risk-free interest rate is 0.09%; (iii) the contractual life is 5 years; (iv) the dividend yield of 0%; and (v) the volatility is 59.9%. The fair value of the warrants amounted to $552,283 and will be recorded as an increase in the customer list asset and have a term of five years from time of vest.
Equity Transactions: On April 1, 2020, the Company granted 1,444,000 shares of common stock with a 10-year vesting period and 103,000 restricted stock units (RSUs) with a 3-year vesting period to employees and Directors as a performance bonus at an issue price of $1.08 per share. Executive officers and Directors included in the grant were Louis Hoch (300,000 shares), Tom Jewell (200,000 shares), Blaise Bender (10,000 RSUs) and Brad Rollins (30,000 RSUs).
On July 1, 2020, Topline Capital Partners, LP purchased 1,796,407 unregistered shares of common stock at an offering price of $1.67 per share in a private offering. The gross proceeds to the Company from the private offering were $3.0 million.
On September 25, 2020, the Company entered into a placement agency agreement with Ladenburg Thalmann & Company Inc. for the issuance and sale of an aggregate of 4,705,883 shares of common stock at an offering price of $1.70 per share in a public offering. The Company agreed to pay Ladenburg a cash fee of equal to $0.12325 per share of common stock sold in the offering as well as legal fees and expenses of up to $100,000. The net proceeds to the Company from the public offering were $7.4 million, after deducting the offering expenses and fees payable by the Company.
Note 7. Net Income (Loss) Per Share
Basic income (loss) per share (EPS) was computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted EPS differs from basic EPS due to the assumed conversion of potentially dilutive awards and options that were outstanding during the period. The following is a reconciliation of the numerators and the denominators of the basic and diluted per share computations for net income (loss) for the three and six months ended June 30, 2021 and June 30, 2020.
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic and diluted income (loss) per share, net income (loss) available to common shareholders
|
|
$
|
218,483
|
|
|
$
|
(1,288,169
|
)
|
|
$
|
(501,769
|
)
|
|
$
|
(2,123,178
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic income (loss) per share, weighted average shares outstanding
|
|
|
19,993,387
|
|
|
|
13,173,009
|
|
|
|
19,962,661
|
|
|
|
13,150,119
|
|
Effect of dilutive securities
|
|
|
4,969,002
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Denominator for diluted earnings per share, adjust weighted average shares and assumed conversion
|
|
|
24,962,389
|
|
|
|
13,173,009
|
|
|
|
19,962,661
|
|
|
|
13,150,119
|
|
Basic income (loss) per common share
|
|
$
|
0.01
|
|
|
$
|
(0.10
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.16
|
)
|
Diluted income (loss) per common share and common share equivalent
|
|
$
|
0.01
|
|
|
$
|
(0.10
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.16
|
)
|
The awards and options to purchase shares of common stock that were outstanding at June 30, 2021 and June 30, 2020 that were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive, are as follows:
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Anti-dilutive awards and options
|
|
|
4,969,002
|
|
|
|
5,467,780
|
|
Note 8. Income Taxes
Deferred tax assets and liabilities are recorded based on the difference between financial reporting and tax basis of assets and liabilities and are measured by the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Deferred tax assets are computed with the presumption that they will be realizable in future periods when taxable income is generated. Predicting the ability to realize these assets in future periods requires judgment by management. U.S. generally accepted accounting principles prescribe a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. Income tax benefits that meet the “more likely than not” recognition threshold should be recognized.
The Company has recognized a deferred tax asset of approximately $1.4 million and has recorded a valuation allowance of approximately $7.5 million against the other deferred tax assets. The Company reviews the assessment of the deferred tax asset and valuation allowance on an annual basis or more often when events indicate that a change to the valuation allowance may be warranted.
At December 31, 2020, the Company had available net operating loss carryforwards of approximately $39.4 million. Net operating loss carryforwards prior to 2017 are available to offset taxable income of future periods and begin to expire in 2021. Effective for tax years ending in 2018, net operating losses can be carried forward to future years indefinitely. Approximately $0.5 million of the total net operating loss carryforward is subject to an IRS Section 382 limitation from 1999.
Management is not aware of any tax positions that would have a significant impact on the Company’s financial position.
Note 9. Related Party Transactions
Louis Hoch
During the six months ended June 30, 2021 and the year ended December 31, 2020, the Company purchased a total of $2,890 and $9,886, respectively, of corporate imprinted sportswear and caps from Angry Pug Sportswear. Louis Hoch, the Company’s President and Chief Executive Officer, is a 50% owner of Angry Pug Sportswear.
Directors and Officers
On January 6, 2021, the Company repurchased 11,860 shares of common stock at a closing price of $3.25 per share from Tom Jewell, the Company's Chief Financial Officer to cover taxes due.
On January 6, 2020, the Company repurchased 11,860 shares of common stock at a closing price of $1.74 per share from Tom Jewell, the Company's Chief Financial Officer to cover taxes due.
On April 1, 2021, the Company granted 1,444,000 shares of common stock with a 10-year vesting period and 103,000 restricted stock units (RSUs) with a 3-year vesting period to employees and Directors as a performance bonus at an issue price of $1.08 per share. Executive officers and Directors included in the grant were Louis Hoch (300,000 shares), Tom Jewell (200,000 shares), Blaise Bender (10,000 RSUs) and Brad Rollins (30,000 RSUs).
On November 1, 2020, as approved by the Company's Compensation Committee, the Company issued 136,891 shares of common stock to Mr. Louis Hoch, the Company's Chief Executive Officer, valued at $216,000 at the closing price of $1.5779 per share from October 15, 2020 in satisfaction of the terms of the additional bonus of his employment agreement. As part of the transaction, on November 1, 2020, the Company repurchased 54,756 shares from Mr. Hoch to cover withholding taxes due.
Note 10. COVID-19
The ongoing COVID-19 pandemic has had a notable impact on general economic conditions, including but not limited to the temporary closures of many businesses, “shelter in place” and other governmental regulations, reduced consumer spending due to both job losses and other effects attributable to the COVID-19 pandemic. There remain many uncertainties as a result of the pandemic. As a result of the spread of COVID-19, economic uncertainties could continue to impact our operations. Any potential incremental financial impact is unknown at this time.
At this time, certain states are considering reinstatement of select mandated operating restrictions and continued efforts are underway to provide vaccinations to as many people as possible. During 2020 and 2021, the government issued several rounds of COVID-19 relief and stimulus payments and other programs to stimulate economic activity and facilitate an economic recovery.
In April and May of 2020, our business was adversely affected as doctor's offices, dental offices, veterinarian offices and non-bank consumer lending accounts were ordered closed in connection with curbing the spread of the pandemic. As these doctors, dental and veterinarian offices re-opened, these businesses quickly recovered and returned to levels higher than pre-COVID. Consumer lending merchants were adversely affected by COVID relief payments made during the pandemic and a pause placed on past due amounts owed. The level of activity for consumer lending merchants has somewhat returned to pre-COVID levels. We received an increase in revenues in our prepaid business line, as we were able to work in conjunction with major cities across the U.S. to use our prepaid debit cards to facilitate the transfer of money via our debit cards from city foundations to the local residents in need of financial assistance. The efforts have included the disbursement of funds to encourage vaccinations.
The impacts and recovery from the COVID-19 pandemic are still a work in process. To date, we have not been adversely impacted in the magnitude that other payment processors were, as our customer base had limited exposure to retail facing businesses. Within that framework, we will continue to monitor the overall impact on our operations and take necessary steps to ensure the safety of our employees and the well-being of our customers.
Note 11. Subsequent Events
None.