UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from ___________ to __________
Commission file number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
(Address of principal executive offices) (Zip code)
(
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each Class | Trading Symbol | Name of each exchange on which registered |
| The |
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: shares as of May 5, 2025.
PAYSIGN, INC.
FORM 10-Q REPORT
INDEX
| 2 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
PAYSIGN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, (Unaudited) | December 31, (Audited) | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Other receivables | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Fixed assets, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Operating lease right-of-use asset | ||||||||
| Deferred tax asset, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Operating lease liability, current portion | ||||||||
| Other liabilities, current portion | ||||||||
| Customer card funding | ||||||||
| Total current liabilities | ||||||||
| Operating lease liability, long-term portion | ||||||||
| Other liabilities, long-term portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 9) | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock: $ par value; shares authorized; issued and outstanding | ||||||||
| Common stock; $ par value; shares authorized, and issued at March 31, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock at cost, and shares, respectively | ( | ) | ( | ) | ||||
| Retained earnings | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 3 |
PAYSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenues | ||||||||
| Plasma industry | $ | $ | ||||||
| Pharma industry | ||||||||
| Other | ||||||||
| Total revenues | ||||||||
| Cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Selling, general and administrative | ||||||||
| Depreciation and amortization | ||||||||
| Total operating expenses | ||||||||
| Income (loss) from operations | ( | ) | ||||||
| Other income | ||||||||
| Interest income, net | ||||||||
| Income before income tax provision | ||||||||
| Income tax provision | ||||||||
| Net income | $ | $ | ||||||
| Income per share | ||||||||
| Basic | $ | $ | ||||||
| Diluted | $ | $ | ||||||
| Weighted average common shares | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 4 |
PAYSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
| Common Stock | Additional Paid-in | Treasury Stock | Retained | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Capital | Shares | Amount | Earnings | Equity | ||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| Stock issued upon vesting of restricted stock | ( | ) | – | |||||||||||||||||||||||||
| Stock-based compensation | – | – | ||||||||||||||||||||||||||
| Repurchase of common stock | – | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Issuance of stock in business combination | – | – | ||||||||||||||||||||||||||
| Net income | – | – | ||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| Common Stock | Additional Paid-in | Treasury Stock | Retained | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Capital | Shares | Amount | Earnings | Equity | ||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| Stock issued upon vesting of restricted stock | ( | ) | – | |||||||||||||||||||||||||
| Stock-based compensation | – | – | ||||||||||||||||||||||||||
| Net income | – | – | ||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 5 |
PAYSIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Stock-based compensation expense | ||||||||
| Depreciation and amortization | ||||||||
| Noncash lease expense | ||||||||
| Deferred income taxes, net | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Other receivables | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ||||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Customer card funding | ( | ) | ||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Capitalization of internally developed software | ( | ) | ( | ) | ||||
| Purchase of intangible assets | ( | ) | ( | ) | ||||
| Net assets acquired in business combination | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Repurchase of common stock | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Net change in cash and restricted cash | ( | ) | ||||||
| Cash and restricted cash, beginning of period | ||||||||
| Cash and restricted cash, end of period | $ | $ | ||||||
| Cash and restricted cash reconciliation: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash and restricted cash | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Non-cash assets acquired in business combination | $ | $ | ||||||
| Non-cash liabilities incurred in business combination | $ | ( | ) | $ | ||||
| Cash paid for taxes | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 6 |
PAYSIGN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT POLICIES
The foregoing unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these financial statements do not include all of the disclosures required by GAAP for complete financial statements. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included on Form 10-K for the year ended December 31, 2024. In the opinion of management, the unaudited interim condensed consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.
The preparation of financial statements in accordance with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company’s financial position and results of operations.
Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.
About Paysign, Inc.
Paysign, Inc. (the “Company,” “Paysign,” “we” or “our”) was incorporated on August 24, 1995, and trades under the symbol PAYS on The Nasdaq Stock Market LLC. Paysign is a provider of prepaid card programs, comprehensive patient affordability offerings, digital banking services and integrated payment processing designed for businesses, consumers and government institutions. Headquartered in Nevada, the company creates customized, innovative payment solutions for clients across all industries, including pharmaceutical, healthcare, hospitality and retail.
Principles of Consolidation – The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated.
Segment Reporting – The Company operates as one business, a vertically integrated provider of prepaid card products and processing services. The Company’s chief operating decision maker (“CODM”), who is the Company’s chief executive officer, utilizes a consolidated approach to assess the performance of and allocate resources to the business. Accordingly, management has concluded that the Company consists of a single operating segment and single reportable segment for accounting and financial reporting purposes.
The CODM regularly assesses the performance of the single operating and reporting segment based on consolidated net income. The CODM reviews expenses at a level consistent with those reported in the Company’s consolidated statements of income. All significant expense categories are reflected in the consolidated statements of income. The measure of segment assets is reflected in the consolidated statements of financial condition as total assets.
| 7 |
Use of Estimates – The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and (iii) the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents – The Company
considers all highly liquid investments purchased with an original maturity of three months or less at the time of purchase to be cash
equivalents for the purposes of the statement of cash flows. The Company had
Restricted Cash – At March 31, 2025 and December 31, 2024, restricted cash consisted of funds held specifically for our card product and pharma programs that are contractually restricted to use. The Company includes changes in restricted cash balances with cash and cash equivalents when reconciling the beginning and ending total amounts in our condensed consolidated statements of cash flows.
Reimbursement
Receivables – As of March 31, 2025 and December 31, 2024, accounts receivable included $
Concentrations of Credit Risk – Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and
restricted cash. The Company maintains its cash and cash equivalents and restricted cash in various bank accounts primarily with one financial
institution in the United States which at times, may exceed federally insured limits. If this financial institution were to be placed
into receivership, we may be unable to access the cash we have on deposit. If we are unable to access our cash and cash equivalents as
needed, our financial position and ability to operate our business could be adversely affected. The Company has not experienced, nor does
it anticipate, any losses with respect to such accounts. At March 31, 2025 and December 31, 2024, the Company had approximately $
As of March 31, 2025, the Company also had a concentration
of accounts receivable risk, as one pharma patient affordability program customer individually represented
Business Combinations – The Company accounts for business combinations using the acquisition method. As of the acquisition date, the acquirer recognizes, separately from goodwill, the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. Goodwill is initially measured at cost, being the excess of the cost of acquisition over the fair value of the net identifiable assets acquired and liabilities assumed. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. If the cost of acquisition is lower than the fair value of the net identifiable assets, the difference is recognized in profit. Acquisition costs are expensed as incurred.
| 8 |
Fixed Assets – Fixed assets are stated
at cost less accumulated depreciation. Depreciation is principally recorded using the straight-line method over the estimated useful life
of the asset, which is generally
The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.
Intangible Assets – For intangible assets, the Company recognizes an impairment loss if the carrying amount of the intangible asset is not recoverable and exceeds its fair value. The carrying amount of the intangible asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset.
Intangible assets with an indefinite-life are
not amortized. Intangible assets with a finite life are amortized on a straight-line basis over its estimated useful life, which is
generally
Goodwill – Our methodology for allocating the purchase price relating to purchase acquisitions is determined through established valuation techniques. Goodwill represents a residual value as of the acquisition date, which in most cases results in measuring goodwill as an excess of the purchase consideration transferred plus the fair value of any noncontrolling interest in the acquired company over the fair value of net assets acquired, including contingent consideration. We perform goodwill impairment tests on an annual basis in the fourth fiscal quarter and between annual tests in certain circumstances. The assessment of fair value for goodwill and purchased intangible assets is based on factors that market participants would use in an orderly transaction in accordance with the new accounting guidance for the fair value measurement of non-financial assets.
The goodwill recorded in the Consolidated Balance
Sheets as of March 31, 2025 and December 31, 2024 was $
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
| 9 |
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 March 31, 2025 and December 31, 2024, customer card funding represents funds loaded or available to be loaded on cards for the Company’s card product programs, or funds available to cover reimbursement claims for the Company’s patient affordability 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 and interchange fees. Revenues from pharma card programs are generated through card program management fees, transaction claim 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 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 program sponsors and are generally recognized when earned on a monthly basis and are typically due pursuant to the contract terms. The Company uses the output method to recognize card program management fee revenue at the amount of consideration to which an entity has a right to invoice. The performance obligation is satisfied when the services are transferred to the customer which the Company determined to be monthly, as the customer simultaneously receives and consumes the benefit from the Company’s performance. Interchange fees are earned when customer-issued cards are processed through card payment networks as the nature of our promise to the customer is that we stand ready to process transactions at the customer’s requests on a daily basis over the contract term. Since the timing and quantity of transactions to be processed by us are not determinable, we view interchange fees to comprise an obligation to stand ready to process as many transactions as the customer requests. Accordingly, the promise to stand ready is accounted for as a single series performance obligation. The Company uses the right to invoice practical expedient and recognizes interchange fee revenue concurrent with the processing of card transactions. Interchange fees are settled in accordance with the card payment network terms and conditions, which is typically within a few days.
The 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 $
| 10 |
The Company utilizes the remote method of revenue
recognition for settlement income whereby the unspent card balances will be recognized as revenue at the expiration of the cards or the
respective card program. The Company records all revenue on a gross basis since it is the primary obligor and establishes the price in
the contract arrangement with its customers. The Company is currently under no obligation 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. 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 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.
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. These requirements had no material impact on our financial statements.
Accounting Standards Update ("ASU") 2024-03 - In November 2024, the Financing Accounting Standards Board ("FASB") issued ASU 2024-03, "Disaggregation of Income Statement Expenses," which requires disclosure in the notes to financial statements of specified information about certain costs and expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2026. Early adoption is permitted. The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date of this update or retrospectively to any or all prior periods presented in the financial statements. We are evaluating the potential effects of ASU 2024-03 on our consolidated financial statements and related disclosures.
| 11 |
2. ACQUISITION
On March 19, 2025, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Gamma Innovation LLC, a Pennsylvania limited liability company (“Gamma”), Beta Software and Technologies LLC, a Delaware limited liability company, and Michael Ngo, an individual, pursuant to which we acquired substantially all the assets of Gamma Innovation LLC. (“Gamma”). Gamma is a software and services company focusing on the blood and plasma collection industry that developed innovative solutions targeting donor engagement, retention and management. The Gamma acquisition aligns with our technology and market presence by offering additional engagement, compensation and resource management solutions across our core markets. The new technologies acquired consist of the following solutions: (i) a donor engagement application designed to reduce plasma labor costs and donor fees while improving donor retention; (ii) a customer resource management platform designed to reduce unnecessary expenses and improve donor engagement, marketing effectiveness and retention; and (iii) a donor management solution designed to improve plasma donation center efficiency by reducing operational costs and optimizing donor compensation. Due to the recent acquisition date, the valuations of both the earn-out contingent consideration and identifiable intangible assets acquired were not complete at the time of this filing, and provisional amounts for consideration transferred and the fair values of assets acquired have been presented. Management continues to refine the preliminary valuation of certain assets acquired and liabilities incurred, and may adjust the allocation in subsequent periods. Additionally, tax considerations have not yet been finalized. The final valuation will be completed within the one-year measurement period following the acquisition date.
Total preliminary purchase consideration was
$
| Cash paid upfront (1) | $ | |||
| Present value of future cash paid (1) | ||||
| Equity consideration (2) | ||||
| Earn-out contingent consideration (3) | ||||
| Total consideration | $ |
| (1) | |
| (2) | |
| (3) |
We have accounted for the Gamma acquisition as a business combination, which generally requires that we recognize the assets acquired and liabilities assumed at fair value as of the acquisition date. The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total provisional purchase consideration, were as follows:
| Identifiable intangible assets | $ | |||
| Total identifiable net assets | ||||
| Goodwill | ||||
| Total assets acquired | $ |
During the three months ended March 31, 2025 there were no measurement-period adjustments.
Goodwill arising from the acquisition was attributable
to expected growth opportunities of the acquired technology, potential synergies from combining the acquired business into our existing
business, and an assembled workforce. We expect that approximately $
| 12 |
The following table reflects the estimated acquisition date fair values of the identified intangible assets of Gamma and their respective weighted-average preliminary estimated amortization periods:
| Estimated Fair Value | Weighted Avg. Estimated Amortization (years) | |||||
| Contract related intangible assets | $ | |||||
| Acquired technologies | ||||||
| Total identifiable intangible assets | $ | |||||
The historical revenue and earnings of Gamma were
not material for the purpose of presenting pro forma information. In addition, transaction costs in the amount of $
3. FIXED ASSETS, NET
Fixed assets consist of the following:
| March 31, 2025 | December 31, 2024 | |||||||
| Equipment | $ | $ | ||||||
| Software | ||||||||
| Furniture and fixtures | ||||||||
| Website costs | ||||||||
| Leasehold improvements | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Fixed assets, net | $ | $ | ||||||
Depreciation expense for the three months ended March
31, 2025 and 2024 was $
4. INTANGIBLE ASSETS, NET
Intangible assets consist of the following:
March 31, 2025 | December 31, 2024 | |||||||
| Patents and trademarks | $ | $ | ||||||
| Platform | ||||||||
| Customer lists and contracts | ||||||||
| Licenses | ||||||||
| Hosting implementation | ||||||||
| Contract assets | ||||||||
| Non-compete agreement | ||||||||
| Acquired tech | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
Intangible assets are amortized
over their useful lives ranging from periods of
| 13 |
5. LEASE
The Company entered into an operating lease for office
space which became effective in June 2020. The lease term is
Operating lease cost included in selling, general
and administrative expenses was $
The following is the lease maturity analysis of our operating lease as of March 31, 2025:
| Year ending December 31, | ||||
| 2025 (excluding the three months ended March 31, 2025) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 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 | $ | |||
6. 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 included in customer card funding liability on the condensed consolidated balance sheet.
The opening and closing balances of the Company's liabilities are as follows:
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Beginning balance | $ | $ | ||||||
| (Decrease) Increase, net | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
The amount of revenue recognized during the three
months ended March 31, 2025 and 2024 that was included in the opening contract liability for prepaid cards was $
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7. COMMON STOCK
At March 31, 2025, 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. There were shares of preferred stock outstanding.
Stock-based compensation expense related to Company grants for the three months ended March 31, 2025 and 2024 was $ and $, respectively.
2025 Transactions – During the three months ended March 31, 2025, the Company issued shares of common stock for vested stock awards and the exercise of stock options. No stock options were exercised.
The Company also granted restricted stock awards during the three months ended March 31, 2025. For the stock awards granted, the weighted average grant date fair value was $ and vest over a period of .
2024 Transactions – During the three months ended March 31, 2024, the Company issued shares of common stock for vested stock awards and the exercise of stock options. No stock options were exercised.
The Company also granted restricted stock awards during the three months ended March 31, 2024. For the stock awards granted, the weighted average grant date fair value was $ 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 months ended March 31, 2025 and 2024:
| 2025 | 2024 | |||||||
| Numerator: | ||||||||
| Net income | $ | $ | ||||||
| Denominator: | ||||||||
| Weighted average common shares: | ||||||||
| Denominator for basic calculation | ||||||||
| Weighted average effects of potentially diluted common stock: | ||||||||
| Stock options (calculated under treasury method) | ||||||||
| Unvested restricted stock awards | ||||||||
| Denominator for fully diluted calculation | $ | $ | ||||||
| Net income per common share: | ||||||||
| Basic | $ | $ | ||||||
| Fully diluted | $ | $ | ||||||
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9. COMMITMENTS AND CONTINGENCIES
Pending or Threatened Litigation –From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
The Company has been named as a defendant in
three 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 and 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. On July 26, 2024, the parties in Blanchette submitted a Joint Status Report which suggested a proposed briefing schedule on a motion to dismiss, but that schedule was not ruled upon by the Court.
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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 January 23, 2025, the parties in Jeewa filed a stipulation to relate the case to the Toczek, Gray, and Blanchette actions, which is currently pending before the Court.
On October 4, 2024, the parties to the four stockholder derivative actions agreed in principle to a proposed settlement of all pending claims asserted in Plaintiffs’ actions. On December 6, 2024, Plaintiffs filed a Motion for Preliminary Approval of Derivative Settlement. On May 6, 2025, the Court granted the parties’ request to relate the actions and assigned all four cases to the judge presiding over the Jeewa action. The Motion for Preliminary Approval of Derivative Settlement is currently pending before that judge.
10. INCOME TAX
The following table summarizes the Company’s income tax expense and effective tax rates for the three months ended March 31, 2025 and March 31, 2024:
| 2025 | 2024 | |||||||
| Income before income taxes | $ | $ | ||||||
| Income tax expense | ||||||||
| Effective tax rate | ||||||||
The effective tax rates for the three months ended March 31, 2025 and March 31, 2024 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 ended March 31, 2025 varies from the three months ended March 31, 2024 primarily as a result of tax benefits related to our stock-based compensation.
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 March 31, 2025 and December 31, 2024, 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, 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 focus of our marketing efforts on corporate incentive and expense prepaid card products in various market verticals; our plan for 2025 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 2025 and through the first quarter of 2027, will be sufficient to sustain our operations for the next twenty-four 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, 2024 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.
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. 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.
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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. Following the acquisition of Gamma, we are now allocating some of our marketing efforts to selling our donor engagement application and customer resource management product into our existing markets.
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 and application 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.
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In 2025, 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 March 31, 2025 to the Three Months Ended March 31, 2024
The following table summarizes our consolidated financial results for the three months ended March 31, 2025 in comparison to the three months ended March 31, 2024:
Three Months Ended March 31, (Unaudited) | Variance | |||||||||||||||
| 2025 | 2024 | $ | % | |||||||||||||
| Revenues | ||||||||||||||||
| Plasma industry | $ | 9,409,880 | $ | 10,368,034 | $ | (958,154 | ) | (9.2% | ) | |||||||
| Pharma industry | 8,618,653 | 2,388,644 | 6,230,009 | 260.8% | ||||||||||||
| Other | 569,616 | 433,396 | 136,220 | 31.4% | ||||||||||||
| Total revenues | 18,598,149 | 13,190,074 | 5,408,075 | 41.0% | ||||||||||||
| Cost of revenues | 6,907,321 | 6,250,823 | 656,498 | 10.5% | ||||||||||||
| Gross profit | 11,690,828 | 6,939,251 | 4,751,577 | 68.5% | ||||||||||||
| Gross margin % | 62.9% | 52.6% | ||||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative | 7,400,759 | 5,911,198 | 1,489,561 | 25.2% | ||||||||||||
| Depreciation and amortization | 1,801,003 | 1,286,405 | 514,598 | 40.0% | ||||||||||||
| Total operating expenses | 9,201,762 | 7,197,603 | 2,004,159 | 27.8% | ||||||||||||
| Income (loss) from operations | $ | 2,489,066 | $ | (258,352 | ) | $ | 2,747,418 | NM | ||||||||
| Other income | $ | 762,198 | $ | 731,344 | $ | 30,854 | 4.2% | |||||||||
| Net income | $ | 2,586,100 | $ | 309,096 | $ | 2,277,004 | 736.7% | |||||||||
| Net margin % | 13.9% | 2.3% | ||||||||||||||
The increase in total revenues of $5,408,075 for the three months ended March 31, 2025 compared to the same period in the prior year consisted primarily of a $958,154 decrease in plasma revenue, a $6,230,009 increase in pharma revenue, and a $136,220 increase in other revenue. The decrease in plasma revenue was primarily due to a decline in plasma donations and dollars loaded to cards as plasma inventory levels have normalized, which has reduced our average monthly revenue per center as compared to the same period in the prior year. The increase in pharma revenue was primarily due to the financial benefit of 33 net patient affordability programs launched throughout 2024 and subsequent full year impact in the first quarter of 2025, the launch of 14 net patient affordability programs in the first quarter of 2025, and a corresponding increase in monthly management fees, setup fees, claim processing fees, and other billable services such as dynamic business rules and call center support. The number of claims processed increased over 160% in the first quarter of 2025 compared to the same period in the prior year. 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 three months ended March 31, 2025 increased $656,498 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 $379,000 associated primarily with the growth in our pharma patient affordability programs, wage inflation pressures, a tight labor market, and increased benefit costs; (ii) increased third-party program management fees of approximately $366,000 associated with our pharma patient affordability programs; and (iii) increased sales commission expense of approximately $255,000 related to the increase in overall revenue for programs in which we pay commission expenses. These increases were offset predominantly by decreased usage of our card programs and related fees of approximately $124,000 in network fees, approximately $114,000 of rebate costs, a decline in postage of approximately $64,000 and a decline in other costs of approximately $42,000.
Gross profit for the three months ended March 31, 2025 increased $4,751,577 compared to the same period in the prior year, resulting primarily from the launch of an additional 14 net programs in the first quarter, a full year financial benefit of programs launched in 2024, and a corresponding increase in setup fees, monthly management fees, claim processing fees, and other billable fees associated with our patient affordability programs. Gross profit also benefited from our 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. The increase in gross profit was offset by increased costs from third-party service providers, sales commission expense, customer service costs and fraud expenses mentioned above, primarily driven by the overall growth in our business. The increase in gross margin resulted primarily from a greater contribution of total revenue from our pharma patient affordability business which has higher gross profit margins than our other businesses.
Selling, general and administrative expenses for the three months ended March 31, 2025 increased $1,489,561 compared to the same period in the prior year and consisted primarily of an increase in (i) compensation and benefits of approximately $1,545,000 due to continued hiring to support the Company’s growth primarily from our pharma patient affordability business, a tight labor market, and increased benefit costs; (ii) technologies and telecom of approximately $333,000 primarily related to ongoing platform security investments; and (iii) merger and acquisition costs of approximately $108,000. This increase was offset by a decrease in outside professional services of approximately $128,000, an increase of $359,000 in the amount of capitalized platform development costs, and a decrease in other costs of approximately $9,000.
Depreciation and amortization expense for the three months ended March 31, 2025 increased $514,598 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 March 31, 2025, we recorded income from operations of $2,489,066 representing an improvement of $2,747,418 compared to a loss from operations of $258,352 during the same period in the prior year, related to the aforementioned factors.
Other income for the three months ended March 31, 2025 increased $30,854 primarily related to steady interest rates and the associated interest income received on higher average bank account balances at our sponsor bank.
At March 31, 2025, our income tax provision was $665,164, which was based on our net operating income adjusted for discrete items that occurred withing the quarter. The effective tax rate of 20.5% compared to 34.7% varies primarily as a result of tax benefits related to our stock-based compensation.
The net income for the three months ended March 31, 2025 was $2,586,100, an increase of $2,277,004 compared to the net income of $309,096 for the three months ended March 31, 2024. 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 our prepaid card programs. Our gross dollar volume loaded on cards was $407 million and $426 million for the three months ended March 31, 2025 and 2024, 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 (loss) conversion rates of gross dollar volume loaded on cards which are calculated by taking our total revenues, gross profit or net income (loss), respectively, as a numerator and dividing by the gross dollar volume loaded on cards as a denominator. As we derive a number of our financial results from cardholder fees, we utilize these metrics as an indication of the amount of money that is added to cards and will eventually be converted to revenues, gross profit and net income (loss). Our total revenue conversion rates for the three months ended March 31, 2025 and 2024 were 4.57% or 457 basis points (“bps”) and 3.09% or 309 bps, respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the three months ended March 31, 2025 and 2024 were 2.87% or 287 bps and 1.63% or 163 bps, respectively, of gross dollar volume loaded on cards. Our net income conversion rates for the three months ended March 31, 2025 and 2024 were 0.64% or 64 bps and 0.07% or 07 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, 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 March 31, | ||||||||
| 2025 | 2024 | |||||||
| Reconciliation of adjusted EBITDA to net income: | ||||||||
| Net income | $ | 2,586,100 | $ | 309,096 | ||||
| Income tax provision | 665,164 | 163,896 | ||||||
| Interest income, net | (762,198 | ) | (731,344 | ) | ||||
| Depreciation and amortization | 1,801,003 | 1,286,405 | ||||||
| EBITDA | 4,290,069 | 1,028,053 | ||||||
| Stock-based compensation | 672,318 | 663,951 | ||||||
| Adjusted EBITDA | $ | 4,962,387 | $ | 1,692,004 | ||||
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“EBITDA margin” is defined as earnings before interest, income taxes, depreciation and amortization expense as a percentage of the Company’s revenue and “Adjusted EBITDA margin” reflects the adjustment to EBITDA margin to exclude stock-based compensation expense as a percentage of revenue. A reconciliation of net income margin to Adjusted EBITDA margin is provided in the table below.
Year ended March, (As a percentage of revenue) | ||||||||
| 2025 | 2024 | |||||||
| Reconciliation of adjusted EBITDA margin to net income margin: | ||||||||
| Net income margin | 13.9% | 2.3% | ||||||
| Income tax provision | 3.6% | 1.2% | ||||||
| Interest income, net | (4.1% | ) | (5.5% | ) | ||||
| Depreciation and amortization | 9.7% | 9.8% | ||||||
| EBITDA margin | 23.1% | 7.8% | ||||||
| Stock-based compensation | 3.6% | 5.0% | ||||||
| Adjusted EBITDA margin | 26.7% | 12.8% | ||||||
Liquidity and Capital Resources
The following table sets forth the major sources and uses of cash:
Three Months Ended March 31, (Unaudited) | ||||||||
| 2025 | 2024 | |||||||
| Net cash (used in) provided by operating activities | $ | (6,033,177 | ) | $ | 8,244,499 | |||
| Net cash used in investing activities | (4,443,855 | ) | (2,273,081 | ) | ||||
| Net cash used in financing activities | (375,786 | ) | – | |||||
| Net increase in cash and restricted cash | $ | (10,852,818 | ) | $ | 5,971,418 | |||
Comparison of Three Months Ended March 31, 2025 and 2024
During the three months ended March 31, 2025 and 2024, we financed our operations through internally generated funds.
Operating activities used $6,033,177 of cash in the first quarter of 2025, a decrease of $14,277,676 compared to same period in the prior year. This change in cash flow compared to the prior period is primarily due to net decreases 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 decrease in cash flows from operating activities was offset by an increase in net income, reduced prepaid expenses, collection of tax credits and non-cash adjustments for depreciation and amortization, deferred income tax, stock-based compensation, and lease expense.
We used net cash in investing activities during the three months ended March 31, 2025 and 2024 of $4,443,855 and $2,273,081, respectively. For the three months ended March 31, 2025, $2,443,855 of the cash was used for investing activities primarily attributable to an increase in the capitalization of internally developed software as we continue to invest in our technology platform. The remaining amount of $2,000,000 was used for the Gamma acquisition that closed on March 19, 2025, see “Note 2- Acquisition” in the notes to the accompanying consolidated financial statements.
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Cash used in financing activities of $375,786 for the three months ended March 31, 2025 was primarily attributed to the repurchase of 100,000 shares of the Company’s common stock at a weighted average price of $3.76 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 5 – 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 March 31, 2025 of $6,847,021, along with our forecast for revenues and cash flows for the remainder of 2025 and through the first quarter of 2027, will be sufficient to sustain our operations for the next twenty-four 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 bank 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, 2024.
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 March 31, 2025. Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of March 31, 2025, 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 March 31, 2025, 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 Security and 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. On July 26, 2024, the parties in Blanchette submitted a Joint Status Report which suggested a proposed briefing schedule on a motion to dismiss, but that schedule was not ruled upon by the Court.
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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 January 23, 2025, the parties in Jeewa filed a stipulation to relate the case to the Toczek, Gray, and Blanchette actions, which is currently pending before the Court.
On October 4, 2024, the parties to the four stockholder derivative actions agreed in principle to a proposed settlement of all pending claims asserted in Plaintiffs’ actions. On December 6, 2024, Plaintiffs filed a Motion for Preliminary Approval of Derivative Settlement. On May 6, 2025, the Court granted the parties’ request to relate the actions and assigned all four cases to the judge presiding over the Jeewa action. The Motion for Preliminary Approval of Derivative Settlement is currently pending before that judge.
Item 1A. Risk Factors.
Because we are a smaller reporting company, we are not required to provide the information called for by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the quarter ended March 31, 2025, we issued, pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, a total of 500,000 shares of common stock issued in connection with the purchase agreement with Gamma Innovations LLC, see “Note 2- Acquisition” in the notes to the accompanying consolidated financial statements.
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 March 31, 2025.
| 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 | ||||||||||||
| January 1, 2025 – January 31, 2025 | – | – | – | $ | 3,377,071 | |||||||||||
| February 1, 2025 – February 28, 2025 | 100,000 | 3.76 | – | 3,001,285 | ||||||||||||
| March 1, 2025 – March 31, 2025 | – | – | – | 3,001,285 | ||||||||||||
| Total | – | – | – | $ | 3,001,285 | |||||||||||
(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 March 31, 2025, the Company repurchased 631,258 shares of common stock for $1,998,715 at a weighted average price of $3.17 per share.
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Item 5. Other Information.
During the quarter ended March 31, 2025, no director
or officer of the Company
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 herewith. |
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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: May 9, 2025 | /s/ Mark Newcomer |
|
By: Mark Newcomer, President and Chief Executive Officer (principal executive officer) | |
| Date: May 9, 2025 | /s/ Jeff Baker |
|
By: Jeff Baker, Chief Financial Officer (principal financial and accounting officer) |
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