美国
证券交易委员会
华盛顿特区 20549
表格
截至2024年6月30日季度结束
或
在从___________到___________的过渡期间
委员会文件编号
（依凭章程所载的完整登记名称）
| (成立地或组织其他管辖区) | (国税局雇主身份识别号码) |
（主要行政办公室地址）（邮政编码）
(
(注册人的电话号码，包括区号)
不适用
（以前的名字、以前的地址和以前的财政年度，如果自上次报告以来发生了变化）
根据《证券法》第12(b)条注册的证券：
| 每个类别的标题 | 交易符号 | 每个注册交易所的名称 |
| The |
请勾选符号，指示登记人
(1)在过去12个月内是否提交了1934年证券交易法第13或15(d)条要求提交的所有报告
(或对于登记人被要求提交该等报告的较短期间)，以及(2)是否负担了这些报告要求
在过去90天内。
请以勾选方式指出，是否在过去12个月内（或对于需提交此类档案的较短期间），申报人已按照Regulation S-t（本章节§232.405）第405条规定要求提交每份互动资料档案。
勾选一下，以标记登记人是否为大型加速以及不是大型加速滤器、不是加速滤器、不是非加速滤器、不是小型报告公司或是新兴成长公司。请见交易所行为第1202条中的「大型加速滤器」、「加速滤器」、「小型报告公司」和「新兴成长公司」的定义。
| 大型加速提交人 ☐ | 加速提交人 ☐ |
| 较小的报告公司 | |
| 新兴成长型公司 |
如果是新兴成长型企业，请打勾表示如果登记公司选择不使用根据《交易所法》第13(a)条提供的任何新的或修订的财务会计准则的延长过渡期。
请用勾选符号表示公司是否为空壳公司（如《交易所法规120亿2条》所定义）。是 ☐ 否
请指明截至最近合理日期时，发行人各类普通股的流通股数： 截至2024年10月31日，流通股数为。
PAYSIGN, INC.
第10Q报告
指数
| 第一部分. 财务资讯 | |
| 项目1. 财务报表 | 3 |
| 项目2. 管理层对财务状况和营运结果的讨论与分析。 | 16 |
| 项目3.有关市场风险的定量和质量披露 | 24 |
| 第四项。控制和程序 | 24 |
| 第二部分。其他资讯 | |
| 项目1. 法律诉讼 | 25 |
| 第1A项。风险因素 | 26 |
| 第 2 项。未注册的股票发行和款项使用 | 26 |
| 项目5。其他信息。 | 27 |
| 项目6. 附件 | 27 |
| 签名 | 28 |
| 2 |
第一部分. 财务资讯
第1项。基本报表。
PAYSIGN, INC.
简明综合资产负债表
九月三十日， (未经审计) | 12月31日, （已经接受审计） | |||||||
| 资产 | ||||||||
| 流动资产合计 | ||||||||
| 现金 | $ | $ | ||||||
| 受限现金 | ||||||||
| 应收帐款，净额 | ||||||||
| 其他应收款 | ||||||||
| 预付费用及其他流动资产 | ||||||||
| 流动资产总额 | ||||||||
| 固定资产，扣除累计折旧和摊销 | ||||||||
| 无形资产，扣除累计摊销 | ||||||||
| 经营租赁权使用资产 | ||||||||
| 递延税资产，净额 | ||||||||
| 总资产 | $ | $ | ||||||
| 负债及股东权益 | ||||||||
| 流动负债 | ||||||||
| 应付帐款及应计负债 | $ | $ | ||||||
| 营运租赁负债，流动部分 | ||||||||
| 客户卡资金 | ||||||||
| 流动负债总额 | ||||||||
| 营运租赁负债，长期部分 | ||||||||
| 总负债 | ||||||||
| 承诺事项和或附带条件（注8） | ||||||||
| 股东权益 | ||||||||
| 优先股：$ 面值； 授权的股份； 已发行及流通的股份 | ||||||||
| 普通股; $ 面值； 授权股份数， 和 分别于2024年9月30日和2023年12月31日发行 | ||||||||
| 资本公积额额外增资 | ||||||||
| 按成本核算的库藏股。 和 股，分别为 | ( | ) | ( | ) | ||||
| 保留盈余 | ||||||||
| 股东权益总额 | ||||||||
| 负债和股东权益总额 | $ | $ | ||||||
参见未经审核的简明综合财务报表附注。
| 3 |
付款标志股份有限公司
综合综合综合损益表
(未经审核)
| 三个月结束 九月三十日, | 九个月结束 九月三十日， | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| 收入 | ||||||||||||||||
| 血浆行业板块 | $ | $ | $ | $ | ||||||||||||
| 制药行业板块 | ||||||||||||||||
| 其他 | ||||||||||||||||
| 总营业收入 | ||||||||||||||||
| 营收成本 | ||||||||||||||||
| 毛利润 | ||||||||||||||||
| 营运费用 | ||||||||||||||||
| 销售、一般及行政 | ||||||||||||||||
| 折旧及摊销 | ||||||||||||||||
| 营业费用总额 | ||||||||||||||||
| 营业收入（亏损） | ( | ) | ||||||||||||||
| 其他收入 | ||||||||||||||||
| 利息收益，净额 | ||||||||||||||||
| 净利润税前 | ||||||||||||||||
| 所得税准备金 | ||||||||||||||||
| 净利润 | $ | $ | $ | $ | ||||||||||||
| 每股净利润 | ||||||||||||||||
| 基本 | $ | $ | $ | $ | ||||||||||||
| 摊薄 | $ | $ | $ | $ | ||||||||||||
| Weighted average common shares | ||||||||||||||||
| 基本 | ||||||||||||||||
| 摊薄 | ||||||||||||||||
参见未经审核的简明综合财务报表附注。
| 4 |
PAYSIGN, INC.
股东权益的简明综合报表
(未经审核)
| 普通股 | 额外 已付资本 | 库藏股 | 保留 | 股东总计 | ||||||||||||||||||||||||
| 股份 | 金额 | 资本 | 股份 | 金额 | 盈余 | 权益 | ||||||||||||||||||||||
| 2023年12月31日结余 | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| 根据限制性股票解禁而发行的股票 | ( | ) | – | |||||||||||||||||||||||||
| 基于股票的薪酬 | – | – | ||||||||||||||||||||||||||
| 净利润 | – | – | ||||||||||||||||||||||||||
| 2024年3月31日结存 | ( | ) | ( | ) | ||||||||||||||||||||||||
| 受限股份归属时发放的股票 | ( | ) | – | |||||||||||||||||||||||||
| 行使股票期权 | – | |||||||||||||||||||||||||||
| 基于股票的薪酬 | – | – | ||||||||||||||||||||||||||
| 净利润 | – | – | ||||||||||||||||||||||||||
| 2024年6月30日资产负债表 | ( | ) | ( | ) | ||||||||||||||||||||||||
| 受限股份归属时发放的股票 | ( | ) | – | |||||||||||||||||||||||||
| 行使股票期权 | – | |||||||||||||||||||||||||||
| 基于股票的薪酬 | – | – | ||||||||||||||||||||||||||
| 回购普通股 | – | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| 净利润 | – | – | ||||||||||||||||||||||||||
| 截至2024年9月30日的余额 | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| 普通股 | 额外 已付资本 | 库藏股 | 累积的 | 股东总计 | ||||||||||||||||||||||||
| 股份 | 金额 | 资本 | 股份 | 金额 | 赤字 | 权益 | ||||||||||||||||||||||
| 2022年12月31日的结存 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
| 股票发行于受限股解约时 | ( | ) | – | |||||||||||||||||||||||||
| 基于股票的薪酬 | – | – | ||||||||||||||||||||||||||
| 回购普通股 | – | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| 净亏损 | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| 2023年3月31日结余 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| 股票根据限制性股票解除后发行 | ( | ) | – | |||||||||||||||||||||||||
| 行使股票期权 | – | |||||||||||||||||||||||||||
| 基于股票的薪酬 | – | – | ||||||||||||||||||||||||||
| 回购普通股 | – | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| 净亏损 | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| 2023年6月30日结余 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| 股票发行于限制股解除时 | ( | ) | – | |||||||||||||||||||||||||
| 基于股票的薪酬 | – | – | ||||||||||||||||||||||||||
| 回购普通股 | – | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| 净利润 | – | – | ||||||||||||||||||||||||||
| 2023年9月30日的余额 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
参见未经审核的简明综合财务报表附注。
| 5 |
PAYSIGN, INC.
简明财务报表现金流量表
(未经审核)
| Nine Months Ended 九月三十日, | ||||||||
| 2024 | 2023 | |||||||
| 经营活动现金流量： | ||||||||
| 净利润 | $ | $ | ||||||
| 调整净利润以达经营活动所提供之净现金流量： | ||||||||
| 处置资产的收益 | ( | ) | ||||||
| 股份报酬支出 | ||||||||
| 折旧及摊销 | ||||||||
| 租约不现金化费用 | ||||||||
| 递延所得税，净额 | ||||||||
| 营运资产和负债的变化： | ||||||||
| 应收账款 | ( | ) | ( | ) | ||||
| 其他应收款 | ( | ) | ||||||
| 预付费用及其他流动资产 | ( | ) | ( | ) | ||||
| 应付帐款及应计负债 | ||||||||
| 营业租赁负债 | ( | ) | ( | ) | ||||
| 客户卡资金 | ( | ) | ||||||
| 经营活动产生的净现金流量 | ||||||||
| 投资活动之现金流量: | ||||||||
| 固定资产之购买 | ( | ) | ( | ) | ||||
| 内部开发软体的资本化 | ( | ) | ( | ) | ||||
| 购置无形资产 | ( | ) | ||||||
| 投资活动中使用的净现金 | ( | ) | ( | ) | ||||
| 来自筹资活动的现金流量: | ||||||||
| 期权行使所得款项 | ||||||||
| 回购普通股 | ( | ) | ( | ) | ||||
| 筹集资金的净现金流量 | ( | ) | ( | ) | ||||
| 现金及限制性现金净变动 | ( | ) | ||||||
| 现金和受限现金，期初 | ||||||||
| 期末的现金及受限现金 | $ | $ | ||||||
| 现金及受限现金的调节： | ||||||||
| 现金 | $ | $ | ||||||
| 受限现金 | ||||||||
| 总现金和受限现金资产 | $ | $ | ||||||
| 补充现金流量信息： | ||||||||
| 非现金筹资活动 | ||||||||
| 支付的税金现金 | $ | $ | ||||||
请参阅未经审核简合并的附注 财务报表。
| 6 |
PAYSIGN, INC.
基本报表附注
(未经审核)
1. 目前的呈现基础及重要政策摘要
上述未经审核的临时简明综合 基本报表是根据美国通用会计原则（"GAAP"） 针对临时财务信息及美国证券交易委员会（"SEC"）颁布的10-Q表格及S-X条例的指示编制的。因此，这些基本报表并不包含GAAP对完整 基本报表所要求的所有披露内容。这些未经审核的临时简明综合基本报表应与截至2023年12月31日的10-K表格中包含的经审核的 基本报表及其附注一同阅读。在管理层看来， 此处提供的未经审核的临时简明综合基本报表包括所有调整，所有调整均为正常的 周期性性质，对于公平陈述所呈现的临时期间的结果是必要的。
根据通用会计原则编制基本报表需要使用影响资产和负债金额报告、揭示于基本报表发布日期已知存在的条件资产和负债，以及报告期间内收入和费用金额的估计和假设。对于这些估计和假设的不确定性是编制公司财务报表时固有的，因此，实际结果可能与这些估计和假设有所不同，可能对公司财务状况和营运业绩的报告金额产生重大影响。
截至2024年9月30日的三个月和九个月的经营结果，并不一定能够反映截至2024年12月31日预期的结果。
关于Paysign, Inc.
Paysign, Inc.（「公司」、「Paysign」 「我们」或「我们的」）成立于1995年8月24日，并在纳斯达克证券市场以标的PAYS进行交易。 Paysign是一家提供预付卡计划、全面的患者负担能力方案、数位银行服务和为企业、消费者及政府机构设计的整合支付处理的供应商。公司总部位于内华达州，为各行各业的客户创造定制化、创新的支付解决方案，包括药品、医疗保健、酒店和零售行业。
合并原则 – 此 简洁的合并基本报表包括本公司及其子公司的帐目。所有重要的内部公司余额 和交易均已被消除。
板块报告 - 公司作为一个业务运营，是预付卡产品和处理服务的垂直整合供应商。 公司的首席营运决策者（"CODM"），即公司的首席执行官，采用综合方法来评估业务的成效并分配资源。 因此，管理层认为公司由单一营运部门和单一可报告部门组成，以供会计和财务报告之用。
估计的使用 根据GAAP的要求，准备合规的简明综合财务报表需要管理层做出影响（i）资产和负债金额的估计和假设，（ii）在简明综合财务报表日期披露条件资产和负债，以及（iii）报告期间内营业收入和费用金额的估计。 实际结果可能与这些估计有所不同。
| 7 |
现金及约当现金 – 公司认为所有购买时原始到期日不超过三个月的高流动性投资，在购买时被视为现金及现金等价物，用于现金流量表陈述的目的。公司持有
受限现金 －截至2024年9月30日， 2023年12月31日，受限制现金包括专门为我们的卡产品和药品计划所持有的基金，这些基金是根据规范要求或合同限制使用的。公司在对我们的简明综合现金流量表的期初和期末总金额进行调节时，将受限制现金余额的变动与现金及现金等价物一起列入。
报销
应收账款 截至2024年9月30日和2023年12月31日，应收账款包括$
信用风险集中度 ─潜在使公司面临信用风险集中的金融工具主要包括现金及现金等价物和限制性现金。公司将其现金及现金等价物和限制性现金主要存放在美国的各家银行账户中，其中有时可能超出联邦保险金额的上限。如果这家金融机构被接管，我们可能无法取得我们存款中的现金。如果我们无法按需取得我们的现金及现金等价物，我们的财务状况和业务运作能力可能会受到不利影响。截至2024年9月30日和2023年12月31日，公司分别超出联邦保险银行账户限额。2024年2月，公司与其中一家金融机构启动了一项名为存款互换的计划，金融机构利用参与互换存款网络的第三方。这个计划是我们的金融机构为我们提供完全的联邦存款保险公司（FDIC）对超过25万美元存款的替代方式。根据这个计划，存款网络将未经保险的存款分成小单位，并将这些款项分配给网络中的参与银行，其中这些款项完全受FDIC保险保护。
截至2024年9月30日，公司还存在应收帐款风险集中。与我们的医疗病患可负担方案相关的两个药物计划客户分别代表我们应收帐款余额的
固定资产 固定资产以成本减除累计折旧列示。折旧主要采用直线法记录，依据资产的预估使用寿命而定，通常为
公司定期评估是否发生可能需要修订固定资产预估使用寿命的事件和情况，或者是否应该评估固定资产的剩余余额是否可能存在损 impairment。公司在衡量固定资产的可回收性时，使用相关未折现现金流的估计值。
无形资产 – 对于无形资产，若无形资产的帐面价值不可收回且超过其公允价值，则公司承认减值损失。若无形资产的帐面价值超过预期因使用该资产而产生的未折现现金流总和，则视为不可收回。
具有有限寿命的无形资产按照每项资产预计使用寿命的直线基础进行摊销，通常
| 8 |
Internally Developed Software Costs – Computer software development costs are expensed as incurred, except for internal use software or website development costs that qualify for capitalization as described below, and include compensation and related expenses, costs of hardware and software, and costs incurred in developing features and functionality.
For computer software developed or obtained for internal use, costs that are incurred in the preliminary project and post implementation stages of software development are expensed as incurred. Costs incurred during the application and development stage are capitalized. Capitalized costs are amortized using the straight-line method over a three year estimated useful life, beginning in the period in which the software is available for use.
Contract Assets – Incremental
costs to obtain or fulfill a contract with a customer are capitalized. The Company determines the costs that are incremental by confirming
the costs (i) are directly related to a customer’s contract, (ii) generate or enhance resources to fulfill contract performance
obligations in the future, and (iii) are recoverable. Amortization is on a straight-line basis generally over
Hosting Implementation –
Costs to implement the cloud computing arrangements (the “hosting site”) are accounted for by following the same model as
internally developed software costs. Costs that are incurred in the preliminary project and post implementation stages of hosting development
are expensed when they are incurred. Costs incurred during the application and development stage are capitalized. Capitalized costs are
amortized using the straight-line method over a
Customer Card Funding – As of September 30, 2024 and December 31, 2023, customer card funding represents funds loaded or available to be loaded on cards for the Company’s card product programs.
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. Other revenues are generated through cardholder fees, interchange fees, program management fees, load fees and breakage.
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.
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The portion of the dollar value of prepaid-stored
value cards that consumers do not ultimately redeem are referred to as breakage. In certain card programs where we hold the cardholder
funds and expect to be entitled to a breakage amount, we recognize revenue using estimated breakage rates ratably over the estimated card
life; provided that a significant reversal of the amount of breakage revenue recognized is not probable, and record adjustments to such
estimates when redemption is remote or we are legally defeased of the obligation, if applicable. For each program, we utilize a third
party to estimate breakage rates based on historical redemption patterns, market-specific trends, escheatment rules and existing economic
conditions. The Company accounts for breakage in accordance with Accounting Standards Update (“ASU”) 2016-04, Liabilities—Extinguishment
of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Cards for the recognition of such revenue.
Breakage revenue is recorded in other revenue on the consolidated statements of operations and was $
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 or the respective
card program. This has primarily been associated with the pharma prepaid business which ended in 2022. 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 to refund 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, generally it has no contract assets. Settlement income was $
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, fraud charges, 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 Pronouncement – In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Income Taxes – Improvements to Income Tax Disclosures”, requiring enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024 on a prospective basis and retrospective application is permitted. We are currently evaluating the impact of the adoption of this standard.
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In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures”, which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in the ASU require, among other things, disclosure of significant segment expenses that are regularly provided to an entity's chief operating decision maker (“CODM”) and a description of other segment items by reportable segment, as well as disclosure of the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Annual disclosures are required for fiscal years beginning after December 15, 2023 and interim disclosures are required for periods within fiscal years beginning after December 15, 2024. Retrospective application is required, and early adoption is permitted. The Company is currently evaluating the effect the updated guidance will have on the Company's financial statement disclosures as the Company has a single reportable segment.
2. FIXED ASSETS, NET
Fixed assets consisted of the following:
| September 30, 2024 | December 31, 2023 | |||||||
| Equipment | $ | $ | ||||||
| Software | ||||||||
| Furniture and fixtures | ||||||||
| Website costs | ||||||||
| Leasehold improvements | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Fixed assets, net | $ | $ | ||||||
Depreciation expense for the three months ended
September 30, 2024 and 2023 was $
3. INTANGIBLE ASSETS, NET
Intangible assets consisted of the following:
September 30, 2024 | December 31, 2023 | |||||||
| Patents and trademarks | $ | $ | ||||||
| Platform | ||||||||
| Customer lists and contracts | ||||||||
| Licenses | ||||||||
| Hosting implementation | ||||||||
| Contract assets | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
Intangible assets are
amortized over their useful lives ranging from periods of
| 11 |
4. LEASE
The Company entered into an operating lease for
an office space which became effective in June 2020. The lease term is
Operating lease cost included in selling, general
and administrative expenses for the three months ended September 30, 2024 and 2023 was $
The following is the lease maturity analysis of our operating lease as of September 30, 2024:
Year ending December 31,
| 2024 (excluding the nine months ended September 30, 2024) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: Imputed interest | ( | ) | ||
| Present value of future lease payments | ||||
| Less: current portion of lease liability | ( | ) | ||
| Long-term portion of lease liability | $ | |||
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 card 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 liabilities were as follows:
Nine months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Beginning balance | $ | $ | ||||||
| Increase (decrease), net | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
The amount of revenue recognized during the nine
months ended September 30, 2024 and 2023 that was included in the opening contract liability for prepaid cards was $
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6. COMMON STOCK
At September 30, 2024, the Company's authorized capital stock was shares of common stock, par value $ per share, and shares of preferred stock, par value $ per share. On that date, the Company had shares of common stock issued and shares of common stock outstanding, and shares of preferred stock outstanding.
Stock-based compensation expense related to Company grants for the three months ended September 30, 2024 and 2023 was $ and $, respectively. Stock-based compensation expense related to Company grants for the nine months ended September 30, 2024 and 2023 was $ and $, respectively.
2024 Transactions – During the three and nine months ended September 30, 2024, the Company issued and shares of common stock, respectively, for vested stock awards and the exercise of stock options. The Company received proceeds during the three and nine months ended September 30, 2024 of $ and $, respectively, for the exercise of stock options.
During the three and
nine months ended September 30, 2024 the Company repurchased shares of its common stock at a cost of $
The Company granted restricted stock awards during the three months ended September 30, 2024; the weighted average grant date fair value was $. The Company granted restricted stock awards during the nine months ended September 30, 2024; the weighted average grant date fair value was $. The restricted stock awards granted vest over a period of .
2023 Transactions
– During the three and nine months ended September 30, 2023, the Company issued and shares of common stock, respectively,
for vested stock awards and the exercise of stock options. The Company received proceeds of $
During the three and
nine months ended September 30, 2023 the Company repurchased and shares of its common stock at a cost of $
The Company also granted and restricted stock awards, respectively, during the three and nine months ended September 30, 2023. The stock awards granted, have a weighted average grant date fair value of $ and vest over a period of .
The following table sets forth the computation of basic and fully diluted net income per common share for the three and nine months ended September 30, 2024 and 2023:
| Three Months Ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Weighted average common shares: | ||||||||||||||||
| Denominator for basic calculation | ||||||||||||||||
| Weighted average effects of potentially diluted common stock: | ||||||||||||||||
| Stock options (calculated using the treasury method) | ||||||||||||||||
| Unvested restricted stock grants | ||||||||||||||||
| Denominator for fully diluted calculation | ||||||||||||||||
| Net income per common share: | ||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||
| Fully diluted | $ | $ | $ | $ | ||||||||||||
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8. COMMITMENTS AND CONTINGENCIES
From time to time, we may become involved in various lawsuits and legal proceedings that 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
securities class action 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 Securities Exchange Act of 1934, as amended (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. On February 9, 2023, the Court granted in part and denied in part Defendants’ Motion to Dismiss. On May 22, 2023,
Defendants filed an Answer to the Amended Complaint. On December 15, 2023, the parties agreed in principle to a proposed settlement of
the Securities Class Action and Plaintiffs filed a Consented Motion for Preliminary Approval of Settlement. On January 4, 2024, the Court
preliminarily approved a settlement in the amount of $
The Company has also been named as a nominal defendant in four stockholder derivative actions currently pending in the United States District Court for the District of Nevada. The first-filed 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. The second-filed 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 issued a ruling on the Motion to Dismiss. On May 10, 2023, the Toczek and Gray actions were consolidated.
The Company has also been named as a nominal defendant in a third stockholder derivative action initially filed in state court in Clark County, Nevada, on October 2, 2023, entitled Simone Blanchette, derivatively on behalf of Paysign, Inc. v. Mark Newcomer, et al, which the defendants subsequently removed to federal district court in Nevada pursuant to a Notice of Removal filed on October 10, 2023. That complaint makes substantially the same allegations as made in the consolidated Toczek and Gray actions, and also contains a claim that the individual defendants violated Section 10(b) and Rule 10b-5 promulgated thereunder. On December 7, 2023, the parties requested that the action be stayed for sixty days due to the settlement negotiations in the consolidated Toczek and Gray actions, and the Court granted the sixty-day stay on December 11, 2023. Subsequently, the Court extended that deadline to March 29, 2024 and then to May 29, 2024 based upon the parties’ stipulations.
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The Company has also been named as a nominal defendant in a fourth stockholder derivative action in the United States District Court for the District of Nevada, filed on December 27, 2023, entitled Mo Jeewa, derivatively on behalf of Paysign, Inc. v. Mark R. Newcomer, et al. That complaint makes substantially the same allegations as made in the consolidated Toczek and Gray actions and the Blanchette action discussed above, and alleges breach of fiduciary duty and unjust enrichment.
On October 4, 2024, the parties to the four shareholder derivative actions agreed to a mediator’s proposal to settle all four actions. The parties are currently in the process of documenting that settlement and intend to submit the proposed settlement to the district court for approval pursuant to Rule 23.1 of the Federal Rules of Civil Procedure.
The four shareholder derivative actions settled
by the Company agree to certain corporate therapeutics and the payment of a total of $
9. INCOME TAX
The effective tax rates for the three months and nine months ended September 30, 2024 and September 30, 2023 were based on the Company’s forecasted annualized effective tax rates and were adjusted for discrete items that occurred within the periods presented. The effective tax rate for the three months and nine months ended September 30, 2024 varies from the three months and nine months ended September 30, 2023 primarily as a result of tax benefits related to the Company’s stock-based compensation and changes to the Company’s valuation allowance recorded on its net deferred tax assets.
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 as a reduction of the related expense. As of September 30, 2024 and December 31, 2023, the Company recorded $
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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 (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (“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. Specific forward-looking statements made herein include our belief that we do not anticipate any losses with respect to accounts with balances exceeding federally insured limits; our expected lease obligations for subsequent years; our belief that our platform can be seamlessly integrated with our clients’ systems; our belief that our distinctive positioning allows us to provide end-to end technologies that securely manage transaction processing, cardholder enrollment, value loading, account management, data and analytics, and customer service; our belief that our architecture is known for its cross-platform compatibility, flexibility, and scalability – allowing our clients and partners to leverage these advantages for cost savings and revenue opportunities; our expectation that in the future we will expand our product into other prepaid card offerings such as travel cards and expense reimbursement cards; our focus of our marketing efforts on corporate incentive and expense prepaid card products in various market verticals; our plan for 2024 to continue to invest additional funds in technology improvements, sales and marketing, cybersecurity, fraud, customer service, and regulatory compliance; our belief that from time to time we evaluate raising capital to enable us to diversify into new market verticals; our belief that if we do not raise new capital, that we will still be able to support our existing business and expand into new vertical markets using internally generated funds; our belief that the following measures are the primary indicators of our quarterly and annual revenues: gross dollar volume on loaded cards and conversion rates on gross dollar volume loaded on cards; our belief that the following are also key performance indicators: revenues, gross profit, operational expenses as a percent of revenues, cardholder participation, and EBITDA; and our belief that our available cash on hand, excluding restricted cash, along with our forecast for revenues and cash flows for the remainder of 2024 and through the third quarter of 2026, will be sufficient to sustain our operations for the next 24 months. In the normal course of our business, we, in an effort to help keep our stockholders 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 under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and in other reports filed with the Securities and Exchange Commission (the “SEC”) from time to time. 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 SEC.
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. We are 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.
| 16 |
We operate on a powerful, high-availability payments platform with cutting-edge fintech capabilities that can be seamlessly integrated with our clients’ systems. This distinctive positioning allows us to provide end-to-end technologies that securely manage transaction processing, cardholder enrollment, value loading, account management, data and analytics, and customer service. Our architecture is known for its cross-platform compatibility, flexibility, and scalability – allowing our clients and partners to leverage these advantages for cost savings and revenue opportunities.
Our suite of product offerings includes solutions for corporate rewards, prepaid gift cards, general purpose reloadable debit cards, employee incentives, consumer rebates, donor compensation, clinical trials, healthcare reimbursement payments and pharmaceutical payment assistance, and demand deposit accounts accessible with a debit card. In the future, we expect to further expand our product into other prepaid card offerings such as 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, breakage, 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. Breakage is recorded ratably over the estimated card life based on historical redemption patterns, market-specific trends, escheatment rules, and existing economic conditions and relates solely to our open-loop gift card business which began at the end of 2022. Settlement income is recorded at the expiration of the card or card program and relates primarily to our pharma prepaid business which ended in 2022.
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. Typically, these types of cards are used for the 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 United States 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 employ a 24/7/365 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 patient affordability solutions, clinical trials and donor compensation, loyalty rewards, and incentive cards.
| 17 |
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, sales and support teams. We market our Paysign payment solutions through direct marketing by the Company’s sales team. Our primary market focus is on companies 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 commissions and/or restricted stock awards. 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 2024, we plan to continue to invest additional funds in technology improvements, sales and marketing, cybersecurity, fraud, 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 support our existing business and expand into new vertical markets using internally generated funds.
Results of Operations
Comparison of the Three Months Ended September 30, 2024 to the Three Months Ended September 30, 2023
The following table summarizes our consolidated financial results for the three months ended September 30, 2024 in comparison to the three months ended September 30, 2023:
Three Months Ended September 30, (Unaudited) | Variance | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| Revenues | ||||||||||||||||
| Plasma industry | $ | 11,439,534 | $ | 11,061,712 | $ | 377,822 | 3.4% | |||||||||
| Pharma industry | 3,274,888 | 1,026,270 | 2,248,618 | 219.1% | ||||||||||||
| Other | 542,009 | 312,343 | 229,666 | 73.5% | ||||||||||||
| Total revenues | 15,256,431 | 12,400,325 | 2,856,106 | 23.0% | ||||||||||||
| Cost of revenues | 6,783,117 | 6,068,207 | 714,910 | 11.8% | ||||||||||||
| Gross profit | 8,473,314 | 6,332,118 | 2,141,196 | 33.8% | ||||||||||||
| Gross margin % | 55.5% | 51.1% | ||||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative | 6,217,844 | 4,696,509 | 1,521,335 | 32.4% | ||||||||||||
| Depreciation and amortization | 1,565,621 | 1,045,177 | 520,444 | 49.8% | ||||||||||||
| Total operating expenses | 7,783,465 | 5,741,686 | 2,041,779 | 35.6% | ||||||||||||
| Income from operations | $ | 689,849 | $ | 590,432 | $ | 99,417 | 16.8% | |||||||||
| Other income | $ | 800,715 | $ | 615,324 | $ | 185,391 | 30.1% | |||||||||
| Net income | $ | 1,436,837 | $ | 1,100,604 | $ | 336,233 | 30.5% | |||||||||
| Net margin % | 9.42% | 8.9% | ||||||||||||||
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The increase in total revenues of $2,856,106 for the three months ended September 30, 2024 compared to the same period in the prior year consisted primarily of a $377,822 increase in plasma revenue, a $2,248,618 increase in pharma revenue, and a $229,666 increase in other revenue. The increase in plasma revenue was primarily due to the addition of 16 net new plasma centers since September 30, 2023 and rise in the number of donations at existing plasma centers, and, consequently, dollars loaded to cards, cardholder fees, and interchange, as there continues to be an increase in demand for plasma driven by global increases in plasma protein therapies. The increase in pharma revenue was primarily due to the launch of 32 net new pharma patient affordability programs since September 30, 2023 and the subsequent growth in monthly management and setup fees, claim processing fees, and other billable services such as call center support. The increase in other revenue was primarily due to the growth and usage in the number of cardholders of our payroll, retail, and corporate incentive programs.
Cost of revenues for the three months ended September 30, 2024 increased $714,910 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. The increase in cost of revenues consisted primarily of (i) increased customer care expense of approximately $293,000 associated with the growth in our business, wage inflation pressures, a tight labor market, and increased benefit costs; (ii) increased third-party program management of approximately $173,000 associated with our pharma revenue; (iii) increased sales commission expense of approximately $175,000 related to the increase in overall revenue for programs in which we pay commission expenses; (iv) increased fraud charges of approximately $123,000; and (v) and increased network fees of approximately $34,000, which was driven predominantly by increased ATM network usage associated with growth in our card programs and increases in transaction fees related to inflationary pressures. These increases were offset by a decline in postage of approximately $42,000 and a decline in plastics and collateral of approximately $36,000.
Gross profit for the three months ended September 30, 2024 increased $2,141,196 compared to the same period in the prior year, resulting primarily from the increase in plasma revenue and the beneficial impact of a variable cost structure, as many of the plasma transaction costs are variable in nature and are provided by third-parties who charge us based on the number of active cards outstanding and transactions that occurred during the period. Gross profit also benefited from the growth in our pharma patient affordability business. The increase in gross profit was offset by price increases from many of our third-party service providers, and an increase in customer service and fraud expenses mentioned above. The increase in gross margin resulted from the aforementioned factors.
Selling, general and administrative expenses for the three months ended September 30, 2024 increased $1,521,335 compared to the same period in the prior year and consisted primarily of an increase in (i) compensation and benefits of approximately $1,821,000 due to continued hiring to support the Company’s growth, a tight labor market, and increased benefit costs; (ii) technologies and telecom of approximately $279,000 primarily related to ongoing platform security investments; and (iii) all other operating expenses of approximately $16,000. This increase was offset by a decrease in stock compensation of approximately $136,000 and an increase of $459,000 in the amount of capitalized platform development costs.
Depreciation and amortization expense for the three months ended September 30, 2024 increased $520,444 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 development costs and equipment purchases related to continued enhancements to our processing platform and employment growth.
For the three months ended September 30, 2024, we recorded income from operations of $689,849 representing an improvement of $99,417 compared to income from operations of $590,432 during the same period in the prior year, related to the aforementioned factors.
Other income for the three months ended September 30, 2024 increased $185,391 primarily related to an increase in interest rates and the associated interest income received on higher average bank account balances at our sponsor bank.
At September 30, 2024, our income tax expense was $53,727, which equates to an effective tax rate of 3.6% primarily as a result of tax benefits related to our stock-based compensation and changes to the Company’s valuation allowance recorded on its net deferred tax assets. We recorded an income tax expense of $105,152 for the three months ended September 30, 2023, which equates to an effective tax rate of 8.7% primarily as a result of the full valuation on our deferred tax assets in both the current and prior period and the tax benefit related to our stock-based compensation.
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The net income for the three months ended September 30, 2024 was $1,436,837, an improvement of $336,233 compared to the net income of $1,100,604 for the three months ended September 30, 2023. The overall change in net income relates to the aforementioned factors.
Comparison of the Nine Months Ended September 30, 2024 to the Nine Months Ended September 30, 2023
The following table summarizes our consolidated financial results for the nine months ended September 30, 2024 in comparison to the nine months ended September 30, 2023:
Nine months ended September 30, (Unaudited) | Variance | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| Revenues | ||||||||||||||||
| Plasma industry | $ | 33,080,830 | $ | 30,436,240 | $ | 2,644,590 | 8.7% | |||||||||
| Pharma industry | 8,338,433 | 2,345,068 | 5,993,365 | 255.6% | ||||||||||||
| Other | 1,358,841 | 803,358 | 555,483 | 69.1% | ||||||||||||
| Total revenues | 42,778,104 | 33,584,666 | 9,193,438 | 27.4% | ||||||||||||
| Cost of revenues | 19,779,776 | 16,589,139 | 3,190,637 | 19.2% | ||||||||||||
| Gross profit | 22,998,328 | 16,995,527 | 6,002,801 | 35.3% | ||||||||||||
| Gross margin % | 53.8% | 50.6% | ||||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative | 18,149,506 | 14,946,584 | 3,202,922 | 21.4% | ||||||||||||
| Depreciation and amortization | 4,291,648 | 2,848,194 | 1,443,454 | 50.7% | ||||||||||||
| Total operating expenses | 22,441,154 | 17,794,778 | 4,646,376 | 26.1% | ||||||||||||
| Income (loss) from operations | $ | 557,174 | $ | (799,251 | ) | $ | 1,356,425 | NM | ||||||||
| Other income | $ | 2,345,416 | $ | 1,800,388 | $ | 545,028 | 30.3% | |||||||||
| Net income | $ | 2,443,035 | $ | 836,318 | $ | 1,606,717 | 192.1% | |||||||||
| Net margin % | 5.7% | 2.5% | ||||||||||||||
The increase in total revenues of $9,193,438 for the nine months ended September 30, 2024 compared to the same period in the prior year consisted primarily of a $2,644,590 increase in plasma revenue, a $5,993,365 increase in pharma revenue, and a $555,483 increase in other revenue. The increase in plasma revenue was primarily due to the addition of 16 net new plasma centers since September 30, 2023 and rise in the number of donations at existing plasma centers, and, consequently, dollars loaded to cards, cardholder fees, and interchange, as there continues to be an increase in demand for plasma driven by global increases in plasma protein therapies. The increase in pharma revenue was primarily due to the launch of 32 net new pharma patient affordability programs since September 30, 2023 and the subsequent growth in monthly management and setup fees, claim processing fees, and other billable services such as call center support. The increase in other revenue was primarily due to the growth and usage in the number of cardholders of our payroll, retail, and corporate incentive programs.
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Cost of revenues for the nine months ended September 30, 2024 increased $3,190,637 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. The increase in cost of revenues consisted primarily of (i) increased network fees of approximately $1,413,000, which was driven predominantly by increased ATM network usage associated with growth in our card programs and increases in transaction fees related to inflationary pressures; (ii) increased sales commission expense of approximately $510,000 related to the increase in overall revenue for programs in which we pay commission expenses; (iii) increased customer care expense of approximately $637,000 associated with the growth in our business, wage inflation pressures, a tight labor market, and increased benefit costs; (iv) increased fraud charges of approximately $407,000; and (v) and increased third-party program management of approximately $409,000 related to the growth in our pharma patient affordability business. These increases were offset by a decline in plastics and collateral of approximately $161,000.
Gross profit for the nine months ended September 30, 2024 increased $6,002,801 compared to the same period in the prior year resulting primarily from the increase in plasma revenue and the beneficial impact of a variable cost structure, as many of the plasma transaction costs are variable in nature and are provided by third parties who charge us based on the number of active cards outstanding and transactions that occurred during the period. Gross profit also benefited from the growth in our pharma patient affordability business. The increase in gross profit was offset by price increases from many of our third-party service providers and an increase in customer service and fraud expenses mentioned above. The increase in gross margin resulted from the aforementioned factors.
Selling, general and administrative expenses for the nine months ended September 30, 2024 increased $3,202,922 compared to the same period in the prior year and consisted primarily of an increase in (i) compensation and benefits of approximately $4,012,000 due to continued hiring to support the Company’s growth, a tight labor market, and increased benefit costs; (ii) technologies and telecom expense of approximately $963,000 primarily related to ongoing platform security investments; and (iii) all other operating expenses of approximately $77,000. This increase was offset by a decrease in non-IT professional audit and legal services of approximately $274,000, a decrease in stock compensation of approximately $251,000 and a $1,325,000 increase in the amount of capitalized platform development costs.
Depreciation and amortization expense for the nine months ended September 30, 2024 increased $1,443,454 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 development costs and equipment purchases related to continued enhancements to our processing platform and employment growth.
For the nine months ended September 30, 2024, we recorded income from operations of $557,174 representing an improvement of $1,356,425 compared to loss from operations of $799,251 during the same period in the prior year related to the aforementioned factors.
Other income for the nine months ended September 30, 2024 increased $545,028 primarily related to an increase in interest rates and the associated interest income received on higher average bank account balances at our sponsor bank.
At September 30, 2024, our income tax expense was $459,555, which equates to an effective tax rate of 15.8% primarily as a result of tax benefits related to our stock-based compensation and changes to the Company’s valuation allowance recorded on its net deferred tax assets. We recorded an income tax expense of $164,819 for the nine months ended September 30, 2023, which equates to an effective tax rate of 16.5% primarily as a result of the full valuation on our deferred tax assets in both the current and prior period and the tax benefit related to our stock-based compensation.
The net income for the nine months ended September 30, 2024 was $2,443,035, an improvement of $1,606,717 compared to the net income of $836,318 for the nine months ended September 30, 2023. The overall change in net income relates to the aforementioned factors.
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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 $456 million and $448 million for the three months ended September 30, 2024 and 2023, respectively. Our gross dollar volume loaded on cards was $1,339 million and $1,232 million for the nine months ended September 30, 2024 and 2023, 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: Represents 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, 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 September 30, 2024 and 2023 were 3.34% or 334 basis points (“bps”), and 2.77% or 277 bps, respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the three months ended September 30, 2024 and 2023 were 1.86% or 186 bps, and 1.41% or 141 bps, respectively, of gross dollar volume loaded on cards. Our net income conversion rates for the three months ended September 30, 2024 and 2023 were 0.31% or 31 bps, and 0.25% or 25 bps, respectively, of gross dollar volume loaded on cards. Our total revenue conversion rates for the nine months ended September 30, 2024 and 2023 were 3.20% or 320 basis points bps, and 2.73% or 273 bps, respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the nine months ended September 30, 2024 and 2023 were 1.72% or 172 bps, and 1.38% or 138 bps, respectively, of gross dollar volume loaded on cards. Our net income conversion rates for the nine months ended September 30, 2024 and 2023 were 0.18% or 18 bps, and 0.07% or 7 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, earnings per share (basic and diluted) or net cash from operating activities as determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators:
“EBITDA” is defined as earnings before interest, income taxes, depreciation and amortization expense and “Adjusted EBITDA” reflects the adjustment to EBITDA to exclude stock-based compensation expense. A reconciliation of net income to Adjusted EBITDA is provided in the table below.
| Three Months Ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Reconciliation of Adjusted EBITDA to net income: | ||||||||||||||||
| Net income | $ | 1,436,837 | $ | 1,100,604 | $ | 2,443,035 | $ | 836,318 | ||||||||
| Income tax provision | 53,727 | 105,152 | 459,555 | 164,819 | ||||||||||||
| Interest income, net | (800,715 | ) | (615,324 | ) | (2,345,416 | ) | (1,800,388 | ) | ||||||||
| Depreciation and amortization | 1,565,621 | 1,045,177 | 4,291,648 | 2,848,194 | ||||||||||||
| EBITDA | 2,255,470 | 1,635,609 | 4,848,822 | 2,048,943 | ||||||||||||
| Stock-based compensation | 573,499 | 709,750 | 1,907,588 | 2,158,420 | ||||||||||||
| Adjusted EBITDA | $ | 2,828,969 | $ | 2,345,359 | $ | 6,756,410 | $ | 4,207,363 | ||||||||
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Liquidity and Capital Resources
Capital Resources
The following table sets forth the major sources and uses of cash:
Nine months ended September 30, (Unaudited) | ||||||||
| 2024 | 2023 | |||||||
| Net cash provided by operating activities | $ | 8,633,922 | $ | 4,180,064 | ||||
| Net cash used in investing activities | (7,087,867 | ) | (4,999,986 | ) | ||||
| Net cash used in financing activities | (331,695 | ) | (1,118,284 | ) | ||||
| Net increase (decrease) in cash and restricted cash | $ | 1,214,360 | $ | (1,938,206 | ) | |||
Comparison of Nine Months Ended September 30, 2024 and 2023
During the nine months ended September 30, 2024 and 2023, we financed our operations through internally generated funds.
Operating activities provided $8,633,922 of cash as of September 30, 2024, an increase of $4,453,858 compared to the same period last year. This change in cash flow is primarily due to increases in operating assets and liabilities. The changes in accounts receivable, accounts payable, and customer card funding are primarily related to the growth in our pharma patient affordability business and timing of payments as we are invoiced by third-party service providers at the end of the period and are due monies from our pharma patient affordability customers to cover these third-party payables. The increase in cash flows from operating activities was also impacted by net income and non-cash adjustments for depreciation and amortization, deferred income taxes, stock-based compensation, and lease expenses.
We used net cash in investing activities during the nine months ended September 30, 2024 and 2023 of $7,087,867 and $4,999,986, respectively. Cash used for investing activities was primarily attributed to an increase in the capitalization of internally developed software as we continue to invest in our technology platform.
Finance activities during the nine months ended September 30, 2024 used $331,695 in cash, attributable to the repurchase of 100,000 shares of the Company’s common stock at a weighted average price of $3.60 per share offset by proceeds received of $28,800 for the exercise of stock options. Financing activities during the nine months ended September 30, 2023 used $1,118,284 in cash, attributable to the repurchase of 394,558 shares of the Company’s common stock at a weighted average price of $2.86 per share offset by proceeds received of $9,600 for the exercise of stock options.
Our significant contractual cash requirements also include ongoing payments for lease liabilities. For additional information regarding our cash commitments and contractual obligations, see “Note 4 – LEASE” in the notes to the accompanying condensed consolidated financial statements.
Sources of Liquidity
Unrestricted cash was $10,293,207 as of September 30, 2024, an increase of $356,580 compared to the same period in the prior year. The increase resulted primarily from the improvement in our operating results. We believe that our available cash on hand, excluding restricted cash, at September 30, 2024 of $10,293,207, along with our forecast for revenues and cash flows for the remainder of 2024 and through the third quarter of 2026, will be sufficient to sustain our operations for the next 24 months. In light of the elevated interest rates and increased refinancing risks related to commercial real estate holdings on bank balance sheets, we continue to monitor the health and soundness of our bank relationships through publicly available information. Based on recent SEC filings, we have not discovered any issues that would cause us to alter our bank relationships.
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Critical Accounting Policies and Estimates
Our significant accounting policies are described in Note 2 of the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
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 Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’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 Exchange Act) as of September 30, 2024. Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of September 30, 2024, 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 September 30, 2024, 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.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in various lawsuits and legal proceedings that 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 securities class action 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 Securities Exchange Act of 1934, as amended (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. On February 9, 2023, the Court granted in part and denied in part Defendants’ Motion to Dismiss. On May 22, 2023, Defendants filed an Answer to the Amended Complaint. On December 15, 2023, the parties agreed in principle to a proposed settlement of the Securities Class Action and Plaintiffs filed a Consented Motion for Preliminary Approval of Settlement. On January 4, 2024, the Court preliminarily approved a settlement in the amount of $3,750,000, the entirety of which came from the Company’s directors-and-officers insurance policy, for the referenced class of purchasers, and scheduled a final approval hearing for April 17, 2024. On April 17, 2024, the Court conducted the final approval hearing and approved the settlement and, on April 18, 2024, issued an order and final judgment thereon.
The Company has also been named as a nominal defendant in four stockholder derivative actions currently pending in the United States District Court for the District of Nevada. The first-filed 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. The second-filed 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 issued a ruling on the Motion to Dismiss. On May 10, 2023, the Toczek and Gray actions were consolidated.
The Company has also been named as a nominal defendant in a third stockholder derivative action initially filed in state court in Clark County, Nevada, on October 2, 2023, entitled Simone Blanchette, derivatively on behalf of Paysign, Inc. v. Mark Newcomer, et al, which the defendants subsequently removed to federal district court in Nevada pursuant to a Notice of Removal filed on October 10, 2023. That complaint makes substantially the same allegations as made in the consolidated Toczek and Gray actions, and also contains a claim that the individual defendants violated Section 10(b) and Rule 10b-5 promulgated thereunder. On December 7, 2023, the parties requested that the action be stayed for sixty days due to the settlement negotiations in the consolidated Toczek and Gray actions, and the Court granted the sixty-day stay on December 11, 2023. Subsequently, the Court extended that deadline to March 29, 2024 and then to May 29, 2024 based upon the parties’ stipulations.
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The Company has also been named as a nominal defendant in a fourth stockholder derivative action in the United States District Court for the District of Nevada, filed on December 27, 2023, entitled Mo Jeewa, derivatively on behalf of Paysign, Inc. v. Mark R. Newcomer, et al. That complaint makes substantially the same allegations as made in the consolidated Toczek and Gray actions and the Blanchette action discussed above, and alleges breach of fiduciary duty and unjust enrichment.
On October 4, 2024, the parties to the four shareholder derivative actions agreed to a mediator’s proposal to settle all four actions. The parties are currently in the process of documenting that settlement and intend to submit the proposed settlement to the district court for approval pursuant to Rule 23.1 of the Federal Rules of Civil Procedure.
The four shareholder derivative actions settled by the Company agree to certain corporate therapeutics and the payment of a total of $607,500 in attorneys’ fees split among counsel in all four of the existing derivative actions, which will be paid by the Company’s insurer.
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.
Issuer Purchases of Equity Securities
The following table sets forth certain information relating to the purchases of our common stock by us and any affiliated purchasers within the meaning of Rule 10b-18(a)(3) under the Exchange Act during the three months ended September 30, 2024.
| Period | Total Number of Shares Purchased | Weighted Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||
| July 1, 2024 – July 31, 2024 | – | – | – | $ | 3,872,116 | |||||||||||
| August 1, 2024 – August 31, 2024 | – | – | – | 3,872,116 | ||||||||||||
| September 1, 2024 – September 30, 2024 | 100,000 | 3.60 | 100,000 | 3,511,621 | ||||||||||||
| Total | 100,000 | 3.60 | 100,000 | $ | 3,511,621 | |||||||||||
(1) On March 21, 2023, our Board authorized a stock repurchase program to repurchase up to $5 million of our common stock, subject to certain conditions, in the open market, in privately negotiated transactions, or by other means in compliance with Rule 10b-18 under the Exchange Act. The program is expected to be completed within 36 months from the commencement date. As of September 30, 2024, the Company repurchased 494,558 shares of common stock for $1,488,379 at a weighted average price of $3.01 per share.
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Item 5. Other Information.
During the quarter ended September
30, 2024, no director or officer of the Company, other than Mark Newcomer,
On
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). |
______________
| * | Filed/ furnished herewith, as applicable. |
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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: November 6, 2024 | /s/ Mark Newcomer |
|
By: Mark Newcomer, President and Chief Executive Officer (Principal Executive Officer) | |
| Date: November 6, 2024 | /s/ Jeff Baker |
|
By: Jeff Baker, Chief Financial Officer (Principal Financial and Accounting Officer) |
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