usio20191231

10-K 1 usio20191231_10k.htm FORM 10-K usio20191231_10k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

☒	ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020.

☐ TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ________

Commission File No. 000-30152

USIO, INC.

(Exact name of registrant as specified in its charter)

Nevada	98-0190072
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3611 Paesanos Parkway, Suite 300, San Antonio, TX	78231
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (210) 249-4100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name on each exchange on which registered
Common stock, par value $0.001 per share	USIO	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐Yes ☒] No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging Growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes [X] No

The aggregate market value of the voting stock held by non-affiliates of the registrant on June 30, 2020, was $20,800,000 based on 10,661,703 shares of the registrant’s common stock held by non-affiliates on June 30, 2020 at the closing price of $1.95 per share as reported on the Nasdaq Capital Market. For purposes of this computation, all officers, directors and 10% beneficial owners of the registrant are deemed to be affiliates.

As of March 18, 2021, the number of outstanding shares of the registrant's common stock was 25,030,668.

		Page
PART I
Item 1.	Business.	4
Item 1A.	Risk Factors.	12
Item 2.	Properties.	22
Item 3.	Legal Proceedings.	22
Item 4.	Mine Safety Disclosures (Not applicable).	22
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	23
Item 6.	Selected Financial Data.	24
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	24
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk.	29
Item 8.	Financial Statements and Supplementary Data.	30
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.	49
Item 9A	Controls and Procedures.	49
Item 9B.	Other Information.	49
PART III
Item 10.	Directors, Executive Officers and Corporate Governance.	50
Item 11.	Executive Compensation.	50
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	50
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	50
Item 14.	Principal Accounting Fees and Services.	50
PART IV
Item 15.	Exhibits, Financial Statement Schedules.	51
Item 16.	Form 10-K Summary.	56
	Signatures.	56

	Three Months Ended December 31,
	2020		2019		$ Change		% Change

ACH and complementary service revenue	$	2,391,256	$	2,314,021	$	77,235		3.3	%
Credit card revenue		4,806,053		4,534,265		271,788		6.0	%
Prepaid card services revenue		1,025,168		519,106		506,062		97.5	%
Output solutions revenue		1,160,037		—		1,160,037		100.0	%
Total Revenue	$	9,382,514	$	7,367,392	$	2,015,122		27.4	%

	Year Ended December 31,
	2020		2019		$ Change			% Change

ACH and complementary service revenue	$	8,471,705	$	9,343,974	$	(872,269	)		(9.3	)%
Credit card revenue		19,453,501		17,329,322		2,124,179			12.3	%
Prepaid card services revenue		3,166,580		1,527,239		1,639,341			107.3	%
Output solutions revenue		1,160,037		—		1,160,037			100.0	%
Total Revenue	$	32,251,823	$	28,200,535	$	4,051,288			14.4	%

Report of Independent Registered Public Accounting Firm	31
Consolidated Balance Sheets as of December 31, 2020 and 2019	33
Consolidated Statements of Operations for the years ended December 31, 2020 and 2019	34
Consolidated Statement of Changes in Stockholders’ Equity for the years ended December 31, 2020 and 2019	35
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019	36
Notes to Consolidated Financial Statements	37

	December 31, 2020			December 31, 2019

ASSETS
Cash and cash equivalents	$	5,011,132		$	2,137,580
Accounts receivable, net		2,863,638			1,274,001
Settlement processing assets		43,558,442			38,906,780
Prepaid card load assets		7,610,242			528,434
Customer deposits		1,305,296			—
Inventory		176,466			—
Prepaid expenses and other		301,755			183,575
Current assets before merchant reserves		60,826,971			43,030,370
Merchant reserves		8,265,555			10,016,904
Total current assets		69,092,526			53,047,274

Property and equipment, net		3,105,926			1,557,521

Other assets:
Intangibles, net		6,035,761			2,676,427
Deferred tax asset		1,394,000			1,394,000
Operating lease right-of-use assets		2,671,266			2,480,902
Other assets		368,078			404,055
Total other assets		10,469,105			6,955,384

Total Assets	$	82,667,557		$	61,560,179

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	851,349		$	419,849
Accrued expenses		1,463,944			1,360,551
Operating lease liabilities, current portion		346,913			356,184
Settlement processing obligations		43,558,442			38,906,780
Prepaid card load obligations		7,610,242			528,434
Customer deposits		1,305,296			—
Deferred revenues		66,572			123,529
Current liabilities before merchant reserve obligations		55,202,758			41,695,327
Merchant reserve obligations		8,265,555			10,016,904
Total current liabilities		63,468,313			51,712,231

Non-current liabilities:
Operating lease liabilities, non-current portion		2,495,883			2,279,613
Total liabilities		65,964,196			53,991,844

Stockholders' Equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares issued and outstanding in 2020 and 2019		—			—

Common stock, $0.001 par value, 200,000,000 shares authorized; 26,260,776 and 18,224,577 issued and 24,974,995 and 17,104,998 outstanding in 2020 and 2019 (see Note 12)		194,692			186,656
Additional paid-in capital		89,659,433			77,055,273
Treasury stock, at cost; 1,285,781 and 1,119,579 shares in 2020 and 2019 (see Note 12)		(2,165,721	)		(1,885,452	)
Deferred compensation		(5,926,872	)		(5,636,154	)
Accumulated deficit		(65,058,171	)		(62,151,988	)
Total stockholders' equity		16,703,361			7,568,335

Total Liabilities and Stockholders' Equity	$	82,667,557		$	61,560,179

	December 31, 2020			December 31, 2019

Revenues	$	32,251,823		$	28,200,535
Cost of services		24,875,930			22,251,325
Gross profit		7,375,893			5,949,210

Selling, general and administrative:
Stock-based compensation		1,475,328			1,292,419
Other expenses		8,139,219			7,697,267
Depreciation and Amortization		1,518,214			2,022,520
Total operating expenses		11,132,761			11,012,206

Operating (loss)		(3,756,868	)		(5,062,996	)

Other income:
Interest income		59,392			81,790
PPP Loan forgiveness		813,500			—
Other income (expense)		902			(32,653	)
Other income and (expense), net		873,794			49,137

(Loss) before income taxes		(2,883,074	)		(5,013,859	)
Income taxes		23,109			101,888

Net (Loss)	$	(2,906,183	)	$	(5,115,747	)

(Loss) Per Share
Basic (loss) per common share:	$	(0.19	)	$	(0.39	)
Diluted (loss) per common share:	$	(0.19	)	$	(0.39	)
Weighted average common shares outstanding (see Note 12)
Basic		15,428,798			12,958,067
Diluted		15,428,798			12,958,067

							Additional												Total
	Common Stock						Paid - In			Treasury			Deferred			Accumulated			Stockholders'
	Shares			Amount			Capital			Stock			Compensation			Deficit			Equity


Balance at December 31, 2018		17,129,680		$	185,561		$	74,568,627		$	(1,813,546	)	$	(6,270,675	)	$	(57,036,241	)	$	9,633,726

Issuance of common stock, public offering		769,230			769			1,793,136			—			—			—			1,793,905
Issuance of common stock, employees, restricted		175,000			175			272,825			—			(273,000	)		—			—
Issuance of common stock under equity incentive plan		156,667			157			397,999			—			—			—			398,156
Reversal of deferred compensation amortization that did not vest		(6,000	)		(6	)		(13,254	)		—			13,260			—			—
Warrant compensation cost		—			—			35,940			—			—			—			35,940

SEC Form 10-K filed by Usio, Inc.