# Paysign, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Paysign, Inc.](/companies/pays.md) (CIK 1496443)
- Form: 10-Q
- Filed: 2023-11-08
- Accepted by EDGAR: Nov 8, 2023, 12:56 ET
- Period: 2023-09-30
- Accession: 0001683168-23-007686
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1496443/000168316823007686/paysign_i10q-093023.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1496443/000168316823007686/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $12.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $33.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $6.1m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $16.6m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-07-01 to 2023-09-30 | $6.3m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $17.0m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $4.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $14.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $590.4k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$799.3k | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $105.2k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $164.8k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $1.1m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $836.3k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.02 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.02 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.02 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.02 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 53,484,674 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 54,286,492 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $4.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $218.1k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $1.1m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $9.9m | us-gaap:Cash |
| Current assets | at 2023-09-30 | $98.9m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $111.2m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $90.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $93.0m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $18.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 31,677 characters.

### Disclosure Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (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. In the normal course of our business, we, in an effort to help keep our shareholders and the public informed about our operations, may from time-to-time issue certain statements, either in writing or orally, that contain, or may contain, Forward-Looking Statements. Although we believe that the expectations reflected in such Forward-Looking Statements are reasonable, we can give no assurance that such expectations will prove to have been correct. In addition, any statements that refer to expectations, projections, estimates, forecasts, or other characterizations of future events or circumstances are Forward-Looking Statements. These Forward-Looking Statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the Forward-Looking Statements. Such important factors (“Important Factors”) and other factors are disclosed in this report, including those factors discussed in “Part II - Item 1A. Risk Factors.” All prior and subsequent written and oral Forward-Looking Statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Important Factors described below that could cause actual results to differ materially from our expectations as set forth in any Forward-Looking Statement made by or on behalf of us. You are cautioned not to place undue reliance on these Forward-Looking Statements, which relate only to events as of the date on which the statements are made. We undertake no obligation to publicly revise these Forward-Looking Statements to reflect events or circumstances that arise after the date hereof. You should refer to and carefully review the information in future documents we file with the Securities and Exchange Commission.

### Overview

Paysign, Inc. (the “Company,” “Paysign,” “we” or “our”), headquartered in Nevada, was incorporated on August 24, 1995, and trades under the symbol PAYS on The Nasdaq Stock Market LLC. 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.

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, and settlement income. Revenue from cardholder fees, interchange, card program management fees, and transaction claims processing fees is recorded when the performance obligation is fulfilled. Settlement income is recorded at the expiration of the card program and relates solely 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. Normally 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 U.S. has experienced significant growth in recent years due to consumers and merchants embracing improved technology, greater convenience, more product choices and greater flexibility. Prepaid cards have also proven to be an attractive alternative to traditional bank accounts for certain segments of the population, particularly those without, or who could not qualify for, a checking or savings account.

We manage all aspects of the prepaid card lifecycle, from managing the card design and approval processes with partners and networks, to production, packaging, distribution, and personalization. We also oversee inventory and security controls, renewals, lost and stolen card management, and replacement. We deploy a 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.

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.

For the remainder of 2023, we plan to continue to invest additional funds in technology improvements, sales and marketing, 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, 2023 to the Three Months Ended September 30, 2022

The following table summarizes our consolidated financial results for the three months ended September 30, 2023 in comparison to the three months ended September 30, 2022:

| Revenues | Three Months Ended September 30, (Unaudited) 2023 | 2022 | Variance $% |  |
| --- | ---: | ---: | ---: | ---: |
| Plasma industry | $11,061,712 | $9,829,811 | $1,231,901 | 12.5% |
| Pharma industry | 1,026,270 | 693,353 | 332,917 | 48.0% |
| Other | 312,343 | 73,264 | 239,079 | 326.3% |
| **Total revenues** | 12,400,325 | 10,596,428 | 1,803,897 | 17.0% |
| **Cost of revenues** | 6,068,207 | 4,847,780 | 1,220,427 | 25.2% |
| **Gross profit** | 6,332,118 | 5,748,648 | 583,470 | 10.1% |
| **Gross margin %** | 51.1% | 54.3% |  |  |
| **Operating expenses** |  |  |  |  |
| Selling, general and administrative | 4,696,509 | 4,386,757 | 309,752 | 7.1% |
| Depreciation and amortization | 1,045,177 | 738,883 | 306,294 | 41.5% |
| **Total operating expenses** | 5,741,686 | 5,125,640 | 616,046 | 12.0% |
| **Income from operations** | $590,432 | $623,008 | $(32,576) | (5.2%) |
| **Other income** | $615,324 | $265,284 | $350,040 | 131.9% |
| **Net Income** | $1,100,604 | $852,109 | $248,495 | 29.2% |
| **Net margin %** | 8.9% | 8.0% |  |  |

The increase in total revenues of $1,803,897 for the three months ended September 30, 2023 compared to the same period in the prior year consisted primarily of a $1,231,901 increase in Plasma revenue, a $332,917 increase in Pharma revenue, and a $239,079 increase in Other revenue. The increase in Plasma revenue was primarily due to an increase in the number of plasma centers and donations, and, consequently, dollars loaded to cards, cardholder fees, and interchange, as there continues to be an increase in demand for plasma driven by global increases of plasma protein therapies. The increase in Pharma revenue was primarily due to the launch of new pharma patient affordability programs. The increase in Other revenue was primarily due to the growth of our payroll program and launch of new retail and other prepaid card disbursement programs.

Cost of revenues for the three months ended September 30, 2023 increased $1,220,427 compared to the same period in the prior year. Cost of revenues is comprised of transaction processing fees, data connectivity and data center expenses, network fees, bank fees, card production and postage costs, customer service, program management, application integration setup, and sales and commission expense. Cost of revenues increased during the third quarter of 2023 primarily due to an increase in cardholder usage activity and associated network expenses such as interchange and ATM costs, an increase in plastics and collateral related to an increase in the number of unique card loads, an increase in network expenses and sales commissions related to the growth in our pharma patient affordability business, and an increase in customer service expenses associated with wage inflation pressures and the overall growth in our business, offset by a decline in postage.

Gross profit for the three months ended September 30, 2023 increased $583,470 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 which are provided by third parties who charge us based on the number of active cards outstanding and the number of 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 the termination of our pharma prepaid business in 2022, price increases by many of our third party service providers, and an increase in customer service expenses mentioned above. The decrease in gross margin resulted from the aforementioned factors.

Selling, general and administrative expenses (“SG&A”) for the three months ended September 30, 2023 increased $309,752 compared to the same period in the prior year and consisted primarily of an increase in compensation and benefits of approximately $385,000 due to continued hiring to support the Company’s growth, a tight labor market and increased benefit costs, an increase in stock based compensation expense of approximately $144,000, an increase in technologies and telecom of approximately $79,000, an increase in non-IT professional services of approximately $54,000, and an increase in travel and entertainment of approximately $42,000. This increase was offset by a $391,000 increase in the amount of capitalized platform development costs and a decrease in all other operating expenses of approximately $4,000.

Depreciation and amortization expense for the three months ended September 30, 2023 increased $306,294 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 the continued enhancements to our processing platform.

For the three months ended September 30, 2023, we recorded income from operations of $590,432 representing a decline of $32,576 compared to income from operations of $623,008 during the same period last year related to the aforementioned factors.

Other income for the three months ended September 30, 2023, increased $350,040 primarily related to an increase in interest rates and the associated interest income received on higher average bank account balances at our sponsor bank.

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. We recorded an income tax expense of $36,183 for the three months ended September 30, 2022, which equates to an effective tax rate of 4.1% primarily as a result of the full valuation on our deferred tax asset, the tax benefit related to our stock-based compensation expense and the pretax loss during the period.

The net income for the three months ended September 30, 2023 was $1,100,604, an improvement of $248,495 compared to the net income of $852,109 for the three months ended September 30, 2022. The overall change in net income relates to the aforementioned factors.

#### Comparison of the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022

The following table summarizes our consolidated financial results for the nine months ended September 30, 2023 in comparison to the nine months ended September 30, 2022:

| Revenues | Nine Months Ended September 30, (unaudited) 2023 | 2022 | Variance $% |  |
| --- | ---: | ---: | ---: | ---: |
| Plasma industry | $30,436,240 | $25,030,376 | $5,405,864 | 21.6% |
| Pharma industry | 2,345,068 | 2,273,232 | 71,836 | 3.2% |
| Other | 803,358 | 112,235 | 691,123 | 615.8% |
| **Total revenues** | 33,584,666 | 27,415,843 | 6,168,823 | 22.5% |
| **Cost of revenues** | 16,589,139 | 11,971,135 | 4,618,004 | 38.6% |
| **Gross profit** | 16,995,527 | 15,444,708 | 1,550,819 | 10.0% |
| **Gross margin %** | 50.6% | 56.3% |  |  |
| **Operating expenses** |  |  |  |  |
| Selling, general and administrative | 14,946,584 | 13,283,645 | 1,662,939 | 12.5% |
| Depreciation and amortization | 2,848,194 | 2,131,234 | 716,960 | 33.6% |
| **Total operating expenses** | 17,794,778 | 15,414,879 | 2,379,899 | 15.4% |
| **Income (loss) from operations** | $(799,251) | $29,829 | $(829,080) | (2779.4%) |
| **Other income** | $1,800,388 | $349,847 | $1,450,541 | 414.6% |
| **Net income** | $836,318 | $314,680 | $521,638 | 165.8% |
| **Net margin %** | 2.5% | 1.1% |  |  |

The increase in total revenues of $6,168,823 for the nine months ended September 30, 2023 compared to the same period in the prior year consisted primarily of a $5,405,864 increase in Plasma revenue, a $71,836 increase in Pharma revenue and a $691,123 increase in Other revenue. The increase in Plasma revenue was primarily due to an increase in the number of plasma centers and donations, and, consequently, dollars loaded to cards, cardholder fees, and interchange, as COVID-19 restrictions such as donation center closures, mobility restrictions and Federal government stimulus measures were relaxed compared to the prior year period. The increase in Pharma revenue was due to the launch of new pharma patient affordability programs and growth of existing pharma patient affordability programs. The increase in Other revenue was primarily driven by the launch of new payroll, retail, and other prepaid card disbursement programs.

Cost of revenues for the nine months ended September 30, 2023 increased $4,618,004 compared to the same period in the prior year. Cost of revenues is comprised of transaction processing fees, data connectivity and data center expenses, network fees, bank fees, card production and postage costs, customer service, program management, application integration setup, and sales and commission expense. Cost of revenues increased during the nine months of 2023 primarily due to the increase in cardholder usage activity and associated network expenses such as interchange and ATM costs, an increase in plastics, collateral and postage expenses related to new plasma donations and changes to collateral materials, the increase in network expenses related to our pharma patient affordability business, and the increase in customer service expenses associated with wage inflation pressures and the overall growth in our business, offset by a decline in sales commissions related to the restructuring of an agreement in the first quarter of 2022.

Gross profit for the nine months ended September 30, 2023 increased $1,550,819 compared to the same period in the prior year resulting from the increase in Plasma revenue, the restructuring of an agreement mentioned above, and the beneficial impact of a variable cost structure as many of the plasma transaction costs are provided by third parties who charge us based on the number of transactions that occurred during the period. The increase in gross profit was offset by the termination of our pharma prepaid business in 2022, price increases by many of our third party service providers, a new direct network connection with Mastercard, and an increase in customer service expenses mentioned above. The decrease in gross margin resulted from the aforementioned factors.

SG&A for the nine months ended September 30, 2023 increased $1,662,939 compared to the same period in the prior year and consisted primarily of an increase in compensation and benefits of approximately $2,072,000 due to continued hiring to support the Company’s growth, a tight labor market and increased benefit costs, an increase in stock based compensation expense of approximately $534,000, an increase in technologies and telecom of approximately $206,000, and an increase in non-IT outside professional services of approximately $171,000. This increase was offset by an increase of approximately $1,247,000 in capitalized platform development costs, a decrease in all other operating expenses of approximately $20,000, and an increase in the reclass of customer care expenses of approximately $53,000 into cost of revenues.

Depreciation and amortization expense for the nine months ended September 30, 2023 increased $716,960 compared to the same period in the prior year. The increase in depreciation and amortization expense was primarily due to continued capitalization of development costs and equipment purchases related to the continued enhancements to our processing platform.

For the nine months ended September 30, 2023 we recorded a loss from operations of $799,251 representing a decrease of $829,080 compared to the same period last year related to the aforementioned factors.

Other income for the nine months ended September 30, 2023 increased $1,450,541 related to an increase in interest rates and the associated interest income received on higher average bank account balances at our sponsor bank.

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. We recorded an income tax expense of $64,996 for the nine months ended September 30, 2022, which equates to an effective tax rate of 17.1% primarily as a result of the full valuation on our deferred tax asset, the tax benefit related to our stock-based compensation expense and the pretax loss during the period.

The net income for the nine months ended September 30, 2023 was $836,318, an improvement of $521,638 compared to the net income of $314,680 for the nine months ended September 30, 2022. The overall change in net income relates to the aforementioned factors.

### Key Performance Indicators and Non-GAAP Measures

Management reviews a number of metrics to help us monitor the performance of and identify trends affecting our business. We believe the following measures are the primary indicators of our quarterly and annual revenues:

Gross Dollar Volume Loaded on Cards: Represents the total dollar volume of funds loaded to all of our prepaid card programs. Our gross dollar volume loaded on cards was $448 million and $462 million for the three months ended September 30, 2023 and 2022, respectively. We use this metric to analyze the total amount of money moving into our prepaid card programs.

Conversion Rates on Gross Dollar Volume Loaded on Cards: Equals revenues, gross profit or net income conversion rates of gross dollar volume loaded on cards which are calculated by taking our total revenues, gross profit or net income, 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, 2023 and 2022 were 2.77% or 277 basis points (“bps”), and 2.29% or 229 bps, respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the three months ended September 30, 2023 and 2022 were 1.41% or 141 bps, and 1.24% or 124 bps, respectively, of gross dollar volume loaded on cards. Our net income conversion rates for the three months ended September 30, 2023 and 2022 were 0.25% or 25 bps, and 0.18% or 18 bps, respectively, of gross dollar volume loaded on cards.

Management also reviews key performance indicators, such as revenues, gross profit, operational expenses as a percent of revenues, and cardholder participation. In addition, we consider certain non-GAAP (or “adjusted”) measures to be useful to management and investors evaluating our operating performance for the periods presented, and provide a financial tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment and investment in new card programs. These adjusted metrics are consistent with how management views our business and are used to make financial, operating and planning decisions. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income (loss), earnings (loss) per share (basic and diluted) or net cash from operating activities as determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators:

“EBITDA” is defined as earnings before interest, income taxes, and depreciation and amortization expense and “Adjusted EBITDA” reflects the adjustment to EBITDA to exclude stock-based compensation expense. A reconciliation of net income to Adjusted EBITDA is provided in the table below.

| Reconciliation of Adjusted EBITDA to net income: | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| **Net income** | $1,100,604 | $852,109 | $836,318 | $314,680 |
| Income tax provision | 105,152 | 36,183 | 164,819 | 64,996 |
| Interest income, net | (615,324) | (265,284) | (1,800,388) | (349,847) |
| Depreciation and amortization | 1,045,177 | 738,883 | 2,848,194 | 2,131,234 |
| **EBITDA** | 1,635,609 | 1,361,891 | 2,048,943 | 2,161,063 |
| Stock-based compensation | 709,750 | 566,205 | 2,158,420 | 1,623,994 |
| **Adjusted EBITDA** | $2,345,359 | $1,928,096 | $4,207,363 | $3,785,057 |

### Liquidity and Capital Resources

The following table sets forth the major sources and uses of cash:

|  | Nine Months Ended September 30, (Unaudited) 2023 | 2022 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $4,180,064 | $30,954,307 |
| Net cash used in investing activities | (4,999,986) | (2,584,009) |
| Net cash used in financing activities | (1,118,284) | – |
| Net increase in cash and restricted cash | $(1,938,206) | $28,370,298 |

21

#### Comparison of Nine months Ended September 30, 2023 and 2022

During the nine months ended September 30, 2023 and 2022, we financed our operations through internally generated funds.

Cash provided by operating activities decreased $26,774,243 for the nine months ended September 30, 2023, as compared to the same period in the prior year. The decrease is primarily due to changes in cash flows from operating assets and liabilities, particularly decreases in customer card funding of $29,942,096 related to the termination of our plasma prepaid business and timing of customer deposits for plasma and pharma patient affordability programs and an increase in accounts receivable of $1,958,062. These cash flow decreases were partially offset by cash flow increases of $486,629 primarily related to the collection of employee retention credits in the current year, increase in accounts payable and accrued liabilities of $2,705,880, an improvement in net income from operations of $521,638, an increase in stock-based compensation of $534,426, and an increase in depreciation and amortization of $716,690. The changes in accounts receivable and accounts payable are primarily related to the growth in our pharma patient affordability business 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 amounts due at the end of the period.

Cash used in investing activities increased $2,415,977 for the nine months ended September 30, 2023 as compared to the same period in the prior year. The change between periods was primarily attributed to an increase in the capitalization of internally developed software as we continue to invest in our technology platform.

Cash used in financing activities increased $1,118,284 for the nine months ended September 30, 2023 as compared to the same period in the prior year. The change between periods was primarily attributed to the repurchase of 394,558 shares of the company’s common stock at a weighted average price of $2.86 per share.

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 consolidated financial statements.

### Sources of Liquidity

We believe that our available cash on hand, excluding restricted cash, at September 30, 2023 of $9,936,627, along with our forecast for revenues and cash flows for the remainder of 2023 and through the first quarter of 2025, will be sufficient to sustain our operations for the next eighteen months. In light of the recent bank failures, 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 relationships.

### 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, 2022.

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.

## Controls and procedures

As filed, 1,475 characters.

### 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 Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed by us in those reports is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our chief executive officer and chief financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2023. 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, 2023, 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, 2023, 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.

Filed Nov 8, 2023.
Source: SEC EDGAR, the filing index for accession 0001683168-23-007686. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.