10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2020

or

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

For the transition period from ________ to ________.

Commission File Number: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)

(210) 249-4100

(Registrant’s telephone number, including area code)

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

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 is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

As of August 10, 2020, the number of outstanding shares of the registrant's common stock was 20,364,146.

USIO, INC.

INDEX

		Page
PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements (Unaudited).	1
	Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	1
	Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2020 and 2019	2
	Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2020 and 2019	3
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months ended June 30, 2020 and 2019	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	13
Item 4.	Controls and Procedures.	14
PART II – OTHER INFORMATION		14
Item 1.	Legal Proceedings.	14
Item 1A.	Risk Factors.	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	15
Item 3.	Defaults Upon Senior Securities.	15
Item 4.	Mine Safety Disclosures (Not applicable).	15
Item 5.	Other Information.	15
Item 6.	Exhibits.	16

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

USIO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2020			December 31, 2019
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,793,252		$	2,137,580
Accounts receivable, net		1,124,207			1,274,001
Settlement processing assets		27,002,450			38,906,780
Prepaid card load assets		19,281,293			528,434
Prepaid expenses and other		187,614			183,575
Current assets before merchant reserves		49,388,816			43,030,370
Merchant reserves		8,430,339			10,016,904
Total current assets		57,819,155			53,047,274
Property and equipment, net		1,624,269			1,557,521
Other assets:
Intangibles, net		2,176,426			2,676,427
Deferred tax asset		1,394,000			1,394,000
Operating lease right-of-use assets		2,366,775			2,480,902
Other assets		428,623			404,055
Total other assets		6,365,824			6,955,384
Total assets	$	65,809,248		$	61,560,179
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	262,363		$	419,849
Accrued expenses		1,378,289			1,360,551
Operating lease liabilities, current portion		233,738			356,184
Settlement processing obligations		27,002,450			38,906,780
Prepaid card load obligations		19,281,293			528,434
Deferred revenues		97,059			123,529
PPP Loan payable, current portion		383,738			—
Current liabilities before merchant reserve obligations		48,638,930			41,695,327
Merchant reserve obligations		8,430,339			10,016,904
Total current liabilities		57,069,269			51,712,231
Non-current liabilities:
PPP Loan payable, non-current portion		429,762			—
Operating lease liabilities, non-current portion		2,291,334			2,279,613
Total liabilities		59,790,365			53,991,844
Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at June 30, 2020 (unaudited) and December 31, 2019, respectively		—			—
Common stock, $0.001 par value, 200,000,000 shares authorized; 19,776,121 and 18,224,577 issued, and 18,595,358 and 17,104,998 outstanding at June 30, 2020 (unaudited) and December 31, 2019, respectively		188,207			186,656
Additional paid-in capital		78,773,990			77,055,273
Treasury stock, at cost; 1,180,763 and 1,119,579 shares at June 30, 2020 (unaudited) and December 31, 2019, respectively		(1,967,900	)		(1,885,452	)
Deferred compensation		(6,700,248	)		(5,636,154	)
Accumulated deficit		(64,275,166	)		(62,151,988	)
Total stockholders’ equity		6,018,883			7,568,335
Total liabilities and stockholders’ equity	$	65,809,248		$	61,560,179

See the accompanying notes to the condensed interim consolidated financial statements.

1

USIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenues	$	6,960,553		$	7,157,379		$	14,732,232		$	13,745,411
Cost of services		5,674,887			5,591,534			11,518,282			10,843,835
Gross profit		1,285,666			1,565,845			3,213,950			2,901,576
Selling, general and administrative:
Stock-based compensation		348,393			356,103			636,103			639,511
Other SG&A expenses		1,856,924			1,970,555			3,979,030			3,632,294
Depreciation and amortization		382,244			496,994			770,039			983,542
Total selling, general and administrative expenses		2,587,561			2,823,652			5,385,172			5,255,347
Operating (loss)		(1,301,895	)		(1,257,807	)		(2,171,222	)		(2,353,771	)
Other income and (expense):
Interest income		1,487			22,620			12,643			45,694
Other income (expense)		38			(424	)		726			(423	)
Other income and (expense), net		1,525			22,196			13,369			45,271
(Loss) before income taxes		(1,300,370	)		(1,235,611	)		(2,157,853	)		(2,308,500	)
Income tax expense (benefit)		(12,201	)		40,000			(34,675	)		40,000
Net (loss)	$	(1,288,169	)	$	(1,275,611	)	$	(2,123,178	)	$	(2,348,500	)
Basic (loss) per common share:	$	(0.10	)	$	(0.10	)	$	(0.16	)	$	(0.18	)
Diluted (loss) per common share:	$	(0.10	)	$	(0.10	)	$	(0.16	)	$	(0.18	)
Weighted average common shares outstanding
Basic		13,173,009			13,041,799			13,150,119			12,831,828
Diluted		13,173,009			13,041,799			13,150,119			12,831,828

See the accompanying notes to the condensed interim consolidated financial statements.

2

USIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30,
	2020			2019
Operating activities:
Net (loss)	$	(2,123,178	)	$	(2,348,500	)
Adjustments to reconcile net (loss) to net cash (used) by operating activities:
Depreciation		270,038			483,542
Amortization		500,001			500,000
Non-cash stock-based compensation		636,103			639,511
Amortization of warrant costs		17,973			17,970
Changes in current assets and current liabilities:
Accounts receivable		149,794			(354,550	)
Prepaid expenses and other		(4,039	)		(99,853	)
Operating lease right-of-use assets		114,127			(2,614,006	)
Other assets		(24,568	)		(6,023	)
Accounts payable and accrued expenses		(139,748	)		31,156
Operating lease liabilities		(110,725	)		2,766,034
Prepaid card load obligations		18,752,859			105,616
Merchant reserves		(1,586,565	)		(1,570,912	)
Deferred revenue		(26,470	)		130,000
Deferred rent		—			(79,748	)
Net cash provided (used) by operating activities		16,425,602			(2,399,763	)
Investing activities:
Purchases of property and equipment		(334,688	)		(333,205	)
Net cash (used) by investing activities		(334,688	)		(333,205	)
Financing activities:
Proceeds from PPP Loan Program		813,500			—
Proceeds from public offering, net of expenses		—			1,793,905
Purchases of treasury stock		(82,448	)		(50,515	)
Net cash provided by financing activities		731,052			1,743,390
Change in cash, cash equivalents, prepaid card load assets and merchant reserves		16,821,966			(989,578	)
Cash, cash equivalents, prepaid card load assets and merchant reserves, beginning of period		12,682,918			15,340,980
Cash, Cash Equivalents, Prepaid Card Load Assets and Merchant Reserves, End of Period	$	29,504,884		$	14,351,402
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	—		$	—
Income taxes		—			72,081
Non-cash transactions:
Issuance of deferred stock compensation		1,559,520			—

See accompanying notes to the condensed interim consolidated financial statements.

3

USIO, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

	Common Stock						Additional Paid- In			Treasury			Deferred			Accumulated			Total Stockholders'
	Shares			Amount			Capital			Stock			Compensation			Deficit			Equity
Balance at December 31, 2019		18,224,577		$	186,656		$	77,055,273		$	(1,885,452	)	$	(5,636,154	)	$	(62,151,988	)	$	7,568,335
Issuance of common stock under equity incentive plan		51,000			51			59,440			—			—			—			59,491
Warrant compensation costs		—			—			8,985			—			—			—			8,985
Deferred compensation amortization		—			—			—			—			228,219			—			228,219
Purchase of treasury stock		—			—			—			(26,629	)		—			—			(26,629	)
Net (loss) for the period		—			—			—			—			—			(835,009	)		(835,009	)
Balance at March 31, 2020		18,275,577		$	186,707		$	77,123,698		$	(1,912,081	)	$	(5,407,935	)	$	(62,986,997	)	$	7,003,392
Issuance of common stock under equity incentive plan		1,500,544			1,500			1,641,304			—			(1,559,520	)		—			83,284
Warrant compensation costs		—			—			8,988			—			—			—			8,988
Deferred compensation amortization		—			—			—			—			267,207			—			267,207
Purchase of treasury stock		—			—			—			(55,819	)		—			—			(55,819	)
Net (loss) for the period		—			—			—			—			—			(1,288,169	)		(1,288,169	)
Balance at June 30, 2020		19,776,121		$	188,207		$	78,773,990		$	(1,967,900	)	$	(6,700,248	)	$	(64,275,166	)	$	6,018,883
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 under equity incentive plan		62,222			62			58,551			—			—			—			58,613
Warrant compensation cost		—			—			8,985			—			—			—			8,985
Deferred compensation amortization		—			—			—			—			224,795			—			224,795
Purchase of treasury stock		—			—			—			(21,822	)		—			—			(21,822	)
Net (loss) for the period		—			—			—			—			—			(1,072,889	)		(1,072,889	)
Balance at March 31, 2019		17,961,132		$	186,392		$	76,429,299		$	(1,835,368	)	$	(6,045,880	)	$	(58,109,130	)	$	10,625,313
Issuance of common stock under equity incentive plan		53,445			53			133,462			—			—			—			133,515
Warrant compensation cost		—			—			8,985			—			—			—			8,985
Deferred compensation amortization		—			—			—			—			222,585			—			222,585
Reversal of deferred stock compensation that did not vest		(6,000	)		(6	)		(13,254	)		—			13,260			—			—
Purchase of treasury stock		—			—			—			(28,693	)		—			—			(28,693	)
Net (loss) for the period		—			—			—			—			—			(1,275,611	)		(1,275,611	)
Balance at June 30, 2019		18,008,577		$	186,439		$	76,558,492		$	(1,864,061	)	$	(5,810,035	)	$	(59,384,741	)	$	9,686,094

The accompanying notes are an integral part of these consolidated financial statements.

4

USIO, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements of Usio, Inc. and its subsidiaries (the “Company”) have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been omitted pursuant to such rules and regulations. In the opinion of management, the accompanying interim condensed consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to present fairly the Company's financial position, results of operations and cash flows for such periods. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on March 30, 2020. Results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim periods or the full fiscal year.

Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition: Revenue consists primarily of fees generated through the electronic processing of payment transactions and related services. Revenue is recognized during the period in which the transactions are processed or when the related services are performed. The Company complies with ASC 606-10 and reports revenues at gross as a principal versus net as an agent. Although some of the Company's processing agreements vary with respect to specific credit risks, the Company has determined for each agreement it is acting in the principal role. Merchants may be charged for these processing services at a bundled rate based on a percentage of the dollar amount of each transaction and, in some instances, additional fees are charged for each transaction. Certain merchant customers are charged a flat fee per transaction, while others may also be charged miscellaneous fees, including fees for chargebacks or returns, monthly minimums, and other miscellaneous services. Revenues derived from electronic processing of credit, debit, and prepaid card transactions that are authorized and captured through third-party networks are reported gross of amounts paid to sponsor banks as well as interchange and assessments paid to credit card associations. Sales taxes billed are reported directly as a liability to the taxing authority and are not included in revenue.

The following table presents the Company's payment processing service revenues by source:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
ACH and complementary service revenue	$	1,779,245	$	2,358,425	$	4,016,991	$	4,716,211
Credit card revenue		4,588,199		4,423,463		9,570,857		8,327,869
Prepaid card services revenue		593,109		375,491		1,144,384		701,331
Total revenue	$	6,960,553	$	7,157,379	$	14,732,232	$	13,745,411

Deferred Revenues: The Company records deferred revenues when it receives payments in advance of transferring control of promised goods or services to a customer. The advance consideration received from a customer is deferred until the Company provides the customer that product or service. The deferred revenues totaled $97,059 and $123,529 at June 30, 2020 and December 31, 2019, respectively.

Cash and Cash Equivalents: Cash and cash equivalents includes cash and other money market instruments. The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents.

Merchant Reserves: The Company has merchant reserve requirements associated with Automated Clearing House ("ACH") transactions. The merchant reserve assets are carried on the Company's balance sheet with a corresponding liability. Merchant Reserves are set for each merchant. Funds are collected from each merchant and held as collateral to minimize contingent liabilities associated with any losses that may occur under the merchant agreement. While this cash is not restricted in its use, the Company believes that designating this cash to collateralize Merchant Reserves strengthens our fiduciary standing with the Company's member sponsors and is in accordance with the guidelines set by the card networks.

5

Prepaid Card Load Assets: The Company maintains pre-funding accounts for its customers to facilitate prepaid card loads as initiated by the customer. These prepaid card load assets are carried on the Company's balance sheet with a corresponding liability.

The reconciliation of cash and cash equivalents to cash, cash equivalents, prepaid card load assets and merchant reserves is as follows for each period presented:

	Six Months Ended June 30,
	2020		2019
Beginning cash, cash equivalents, prepaid card load assets and merchant reserves:
Cash and cash equivalents	$	2,137,580	$	2,159,698
Prepaid card load assets		528,434		535,479
Merchant reserves		10,016,904		12,645,803
Total	$	12,682,918	$	15,340,980
Ending cash, cash equivalents, prepaid card load assets and merchant reserves:
Cash and cash equivalents	$	1,793,252	$	2,635,416
Prepaid card load assets		19,281,293		641,095
Merchant reserves		8,430,339		11,074,891
Total	$	29,504,884	$	14,351,402

Allowance for Estimated Losses: The Company maintains an allowance for estimated doubtful accounts receivable resulting from the inability or failure of the Company’s customers to make required payments. The Company determines the allowance for estimated doubtful accounts receivable losses based on an account-by-account review, taking into consideration such factors as the age of the outstanding balance, historical pattern of collections and financial condition of the customer. Past losses incurred by the Company due to bad debts have been within its expectations. If the financial conditions of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make contractual payments, additional allowances might be required. Estimates for doubtful account losses are variable based on the volume of transactions processed and could increase or decrease accordingly. The allowance for estimated doubtful accounts was $186,067 and $123,165 at June 30, 2020 and December 31, 2019, respectively.

Accounting for Internal Use Software: The Company capitalizes the costs associated with software being developed or obtained for internal use when both the preliminary project stage is completed, and it is probable that computer software being developed will be completed and placed-in service. Capitalized costs include only (i) external direct costs of materials and services consumed in developing or obtaining internal-use software, (ii) payroll and other related costs for employees who are directly associated with and who devote time to the internal-use software project, and (iii) interest costs incurred, when material, while developing internal-use software. The Company ceases capitalization of such costs no later than the point at which the project is substantially complete and ready for its intended purpose. In the six months ended June 30, 2020 and June 30, 2019, the Company capitalized $313,983 and $238,248, respectively.

Valuation of Long-Lived and Intangible Assets: The Company assesses the impairment of long-lived and intangible assets at least annually, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important, which could trigger an impairment review, include the following: significant under performance relative to historical or projected future cash flows; significant changes in the manner of use of the assets or the strategy of the overall business; and significant negative industry trends. When management determines that the carrying value of long-lived and intangible assets may not be recoverable, impairment is measured as the excess of the assets’ carrying value over the estimated fair value. No impairment losses were recorded in 2019 or during the six months ended June 30, 2020. Management is not aware of any impairment changes that may currently be required; however, the Company cannot predict the occurrence of events that might adversely affect the reported values in the future.

6

Reserve for Processing Losses: If, due to insolvency or bankruptcy of one of the Company’s merchant customers, or for any other reason, the Company is not able to collect amounts from its credit card, ACH or prepaid customers that have been properly "charged back" by the customer, or if a prepaid cardholder incurs a negative balance, the Company must bear the credit risk for the full amount of the transaction. The Company may require cash deposits and other types of collateral from certain merchants to minimize any such risks. In addition, the Company utilizes multiple systems and procedures to manage merchant risk. ACH, prepaid and credit card merchant processing loss reserves are primarily determined by performing a historical analysis of the Company’s loss experience, considering other factors that could affect that experience in the future, such as the types of transactions processed and nature of the merchant relationship with its consumers and the Company’s relationship with the Company’s prepaid card holders. This reserve amount is subject to the risk that actual losses may be greater than the Company’s estimates. The Company has not incurred any significant processing losses to date. Estimates for processing losses are variable based on the volume of transactions processed and could increase or decrease accordingly. At June 30, 2020 and December 31, 2019, the Company’s reserve for processing losses was $490,893 and $506,153 respectively.

Recently Adopted Accounting Pronouncements: In February 2016, the FASB issued, "Leases (Topic 842)." This update requires that a lessee recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with initial terms of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and liabilities. Similar to previous guidance, the update continues to differentiate between finance leases and operating leases, however this distinction now primarily relates to differences in the manner of expense recognition over time and in the classification of lease payments in the statement of cash flows. The updated guidance leaves the accounting for leases by lessors largely unchanged from existing GAAP. The guidance became effective for the Company on January 1, 2019. As a lessee, this standard primarily impacted the Company's accounting for leased facilities and office equipment, for which the Company recognized right of use assets of $2,688,412 and a corresponding lease liability of $2,775,259 on the Company's consolidated balance sheet on January 1, 2019.

The Company adopted these provisions on January 1, 2019 using the optional transition method that permits the Company to apply the new disclosure requirements in 2019 and continue to present comparative period information as required under FASB ASC Topic 840, "Leases." The Company did not have a cumulative-effect adjustment to the opening balance of retained earnings at the date of adoption. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed it to exclude leases with an initial term of 12 months or less from the right-of-use assets and liabilities. Adoption of the standards had no impact on the Company's results of operations or liquidity.

If the Company determines that an arrangement is or contains a lease, the Company recognizes a right-of-use (ROU) asset and lease liability at the commencement date of the lease. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expenses for lease payments are recognized on a straight-line basis over the lease term.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation which expands the scope of current guidance to include all share-based payment arrangements related to the acquisition of goods or services from both non-employees and employees. The guidance is effective for the Company for all fiscal years beginning after December 15, 2018. The Company adopted the new standard on January 1, 2019. The adoption of the new standard did not result in a change to the previously presented financial statements.

Accounting standards that have been issued or proposed by the FASB, the SEC or other standard setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

Reclassification of Prior Year Presentation: Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations. A reclassification has been made to the Consolidated Statement of Cash Flows for the six months ended June 30, 2019 to identify the change in prepaid card load obligations previously reported in accrued expenses. This change in classification does not affect previously reported results of operations in the Consolidated Income Statement, and cash activities in the Consolidated Statement of Cash Flows for the six months ended June 30, 2019.

7

Note 2.  Leases

The Company leases facilities and office equipment under various operating leases, which generally are expected to be renewed or replaced by other leases. For the quarter ended June 30, 2020 and 2019, operating lease expenses totaled $61,049 and $62,326, respectively.  For the six months ended June 30, 2020 and 2019, operating lease expenses totaled $128,693 and $117,012, respectively.

Operating lease liabilities as of June 30, 2020 will require the following payments:

2020 (six months)	$	172,409
2021		343,423
2022		351,334
2023		357,695
2024		356,250
Thereafter		1,469,679
Total minimum lease payments		3,050,790
Less imputed interest		(525,718	)
Total lease liabilities	$	2,525,072

Note 3. Accrued Expenses

Accrued expenses consisted of the following balances:

	June 30, 2020		December 31, 2019
Accrued commissions	$	381,652	$	530,908
Reserve for merchant losses		490,893		506,153
Other accrued expenses		214,824		92,385
Accrued taxes		160,605		99,850
Accrued salaries		130,315		131,255
Total accrued expenses	$	1,378,289	$	1,360,551

Note 4. PPP Loan Payable

The Company received funding under the Paycheck Protection Program (PPP) as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), administered by the U.S. Small Business Administration. Under the terms of the Note, the Company received total proceeds of $813,500 bearing interest at a rate of 1% per annum with a maturity date of April 15, 2022. In addition, principal and interest payments will be deferred for the first six months of the loan. The loan is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. The Company used the proceeds for payroll costs and other permitted expenses. Under the terms of the PPP, the principal may be forgiven if the loan proceeds are used for qualifying expenses as described in the CARES act, such as payroll costs, benefits, rent and utilities. The Company's loan forgiveness documentation is in the process of being filed with the Small Business Administration.  The determination of how much of the loan, if any, may be subject to forgiveness will be determined by the Small Business Administration.

Note 5. Stockholders' Equity

Stock Warrants: On August 21, 2018, the Company issued University Fancards, LLC a warrant to purchase 150,000 shares of the Company's common stock. 30,000 warrants vested immediately upon the date on which the first financial transaction was processed on a card account issued under the prepaid agreement, which occurred on October 5, 2018. 120,000 warrants will vest annually over 4 years in 30,000 warrant increments beginning on July 31, 2019 and becoming fully vested on July 31, 2022. The exercise price for the 30,000 warrants that vested immediately on October 5, 2018 was $1.80 per share. The exercise price for the remaining 120,000 warrants will be the lesser of $2.00 per share or one hundred and twenty percent (120%) of the market price of the Company's common stock on the vesting date of the warrant. The warrants were valued using the Black-Scholes option pricing model. Assumptions used were as follows: (i) the fair value of the underlying stock was $0.94 for the 30,000 warrants and $0.90 for the 120,000 warrants; (ii) the risk-free interest rate is 2.77%; (iii) the contractual life is 5 years; (iv) the dividend yield is 0%; and (v) the volatility is 64.6%. The fair value of the warrants was $135,764 which will be amortized over the life of the warrants as a reduction of revenues. The reduction of revenues recorded for the six months ended June 30, 2020 and 2019 was $17,973 and $17,970, respectively.

On August 12, 2020, the Company issued 27,051 shares of common stock to University FanCards, LLC in a cashless exercise at $3.46 per common share in exchange for 60,000 warrants exercised.

On February 14, 2019, the Company entered into a placement agency agreement with Maxim Group LLC for the issuance and sale of an aggregate of 769,230 shares of common stock at an offering price of $2.60 per share in a public offering. The Company agreed to pay Maxim a cash fee of equal to 6% of the aggregate gross proceeds raised in the offering as well as legal fees and expenses of up to $40,000. The net proceeds to the Company from the public offering were $1.8 million, after deducting the offering expenses and fees payable by the Company.

On April 1, 2020, the Company granted 1,444,000 shares of common stock with a 10-year vesting period and 103,000 restricted stock units (RSUs) with a 3-year vesting period to employees and Directors as a performance bonus at an issue price of $1.08 per share. Executive officers and Directors included in the grant were Louis Hoch (300,000 shares), Vaden Landers (150,000 shares), Tom Jewell (200,000 shares), Blaise Bender (10,000 RSUs), Brad Rollins (30,000 RSUs) and Miguel Chapa (30,000 RSUs).

On July 1, 2020, Topline Capital Partners, LP purchased 1,796,407 unregistered shares of common stock at an offering price of $1.67 per share in a private offering. The gross proceeds to the Company from the private offering were $3.0 million.

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Note 6. Net (Loss) Per Share

Basic (loss) per share (EPS) was computed by dividing net (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted EPS differs from basic EPS due to the assumed conversion of potentially dilutive awards and options that were outstanding during the period. The following is a reconciliation of the numerators and the denominators of the basic and diluted per share computations for net (loss) for the three and six months ended June 30, 2020 and June 30, 2019.

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Numerator:
Numerator for basic and diluted (loss) per share, net (loss) available to common shareholders	$	(1,288,169	)	$	(1,275,611	)	$	(2,123,178	)	$	(2,348,500	)
Denominator:
Denominator for basic (loss) per share, weighted average shares outstanding		13,173,009			13,041,799			13,150,119			12,831,828
Effect of dilutive securities		—			—			—			—
Denominator for diluted earnings per share, adjust weighted average shares and assumed conversion		13,173,009			13,041,799			13,150,119			12,831,828
Basic (loss) per common share	$	(0.10	)	$	(0.10	)	$	(0.16	)	$	(0.18	)
Diluted (loss) per common share and common share equivalent	$	(0.10	)	$	(0.10	)	$	(0.16	)	$	(0.18	)

The awards and options to purchase shares of common stock that were outstanding at June 30, 2020 and June 30, 2019 that were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive, are as follows:

	Six Months Ended June 30,
	2020		2019
Anti-dilutive awards and options		5,467,780		3,874,139

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Note 7. Income Taxes

Deferred tax assets and liabilities are recorded based on the difference between financial reporting and tax basis of assets and liabilities, and are measured by the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Deferred tax assets are computed with the presumption that they will be realizable in future periods when taxable income is generated. Predicting the ability to realize these assets in future periods requires judgment by management. U.S. generally accepted accounting principles prescribe a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. Income tax benefits that meet the “more likely than not” recognition threshold should be recognized.

The Company has recognized a deferred tax asset of approximately $1.4 million and has recorded a valuation allowance of approximately $10.0 million against the other deferred tax assets. The Company reviews the assessment of the deferred tax asset and valuation allowance on an annual basis or more often when events indicate that a change to the valuation allowance may be warranted.

At December 31, 2019, the Company had available net operating loss carryforwards of approximately $48.2 million. Net operating loss carryforwards prior to 2017 are available to offset taxable income of future periods and begin to expire in 2021. Effective for tax years ending in 2018, net operating losses can be carried forward to future years indefinitely. Approximately $0.1 million of the total net operating loss carryforward is subject to an IRS Section 382 limitation from 1999.

Management is not aware of any tax positions that would have a significant impact on the Company’s financial position.

Note 8. Related Party Transactions

Louis Hoch

During the six months ended June 30, 2020 and the year ended December 31, 2019, the Company purchased a total of $0 and $13,831, respectively, of corporate imprinted sportswear and caps from Angry Pug Sportswear. Louis Hoch, the Company’s President and Chief Executive Officer, is a 50% owner of Angry Pug Sportswear.

Miguel Chapa and Louis Hoch

During the six months ended June 30, 2020 and the year ended December 31, 2019, the Company received $0 and $6,665, respectively, in revenue from Lush Rooftop. Miguel Chapa, a member of our Board of Directors, was an owner of Lush Rooftop. Louis Hoch, the Company’s President and Chief Executive Officer, was also a minority owner of Lush Rooftop. The relationship ended in September, 2019 when the business was sold.

During the six months ended June 30, 2020 and the year ended December 31, 2019, the Company received $3,219 and $24,363, respectively, in revenue from BLVD Bar and Lounge. Miguel Chapa, a member of the Company's Board of Directors, is an owner in BLVD Bar and Lounge. Louis Hoch, the Company’s President and Chief Executive Officer, is also an owner of BLVD Bar and Lounge. In May, 2020, both Mr. Chapa and Mr. Hoch sold all their interests in BLVD.  The Company retained the card processing business.

Directors and Officers

On January 6, 2020, the Company repurchased 11,860 shares of common stock at a closing price of $1.74 per share from Tom Jewell, the Company's Chief Financial Officer to cover taxes due.

On January 6, 2019, the Company repurchased 11,860 shares of common stock at a closing price of $1.84 per share from Tom Jewell, the Company's Chief Financial Officer to cover taxes due.

The Company granted 1,444,000 shares of common stock with a 10-year vesting period and 103,000 restricted stock units (RSUs) with a 3-year vesting period to employees and Directors as a performance bonus on April 1, 2020 at an issue price of $1.08 per share. Executive officers and Directors included in the grant were Louis Hoch (300,000 shares), Vaden Landers (150,000 shares), Tom Jewell (200,000 shares), Blaise Bender (10,000 RSUs), Brad Rollins (30,000 RSUs) and Miguel Chapa (30,000 RSUs).

Note 9. Legal Proceedings

The Company may be involved in legal matters arising in the ordinary course of business from time to time. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is or could become involved in litigation will not have a material adverse effect on its business, financial condition or results of operations.

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Note 10. Subsequent Events

On July 1, 2020, Topline Capital Partners, LP purchased 1,796,407 unregistered shares of common stock at an offering price of $1.67 per share in a private offering. The gross proceeds to the Company from the private offering were $3.0 million.

On August 12, 2020, the Company issued 27,051 shares of common stock to University FanCards, LLC in a cashless exercise at $3.46 per common share in exchange for 60,000 warrants exercised.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

FORWARD-LOOKING STATEMENTS DISCLAIMER

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. If used in this report, the words "anticipate," "believe," "estimate," "intend," and other words or phrases of similar import are intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in our annual report on Form 10-K and other reports we file with the Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made. We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.

This discussion and analysis should be read in conjunction with the unaudited interim condensed consolidated financial statements and the notes thereto included in this report, and our annual report on Form 10-K for the fiscal year ended December 31, 2019, filed on March 30, 2020, including the audited consolidated financial statements and the notes contained therein.

Name Change

Effective on June 26, 2019 we changed our corporate name from Payment Data Systems, Inc. to Usio, Inc.

Overview

We provide integrated electronic payment processing services to merchants and businesses, including all types of Automated Clearing House, or ACH processing, credit card, PINless debit, prepaid card and debit card-based processing services. Through Akimbo, under the domain name www.akimbocard.com, we offer MasterCard prepaid cards to consumers for use as a tool to stay on budget, to manage allowances, and to share money with family and friends. We have further developed our Akimbo platform to include Akimbo Now for businesses, Akimbo Gift for consumers and support for Apple Pay®, Android Pay™ and Samsung Pay™.

During the second quarter of 2020, the volume of credit card transactions processed increased by 26% versus the second quarter of 2019.  The amount of credit card dollars processed during the second quarter of 2020 increased by 2% compared to the same time period in 2019. Credit card transactions processed were the highest in our history and dollars processed were the second highest in the Company's history.  Both metrics were achieved despite widespread second quarter industry weakness related to COVID-19 impacts.  The continued growth in credit card metrics was primarily attributable to our card processing growth initiatives with the Integrated Payments (Payment Facilitation) segment due to increased penetration of multiple industries including healthcare and legal verticals.  We experienced an April decline of nearly $10 million of credit card processing volume in the Singular portfolio primarily attributable to mandated closures to dental practices in the portfolio. Revenues of these merchants increased in May and June 2010 and have returned to pre-COVID-19 revenue levels as these merchants have reopened.

ACH (eCheck) transaction volumes during the second quarter of 2020 decreased by 21% compared to the second quarter of 2019. Returned check transactions processed during the second quarter of 2020 decreased by 50% compared to the second quarter of 2019.  The decreases in eCheck transactions and returned check transactions were primarily attributable to lower volumes experienced by our consumer lending merchants as a result of COVID-19 impacts. We expect COVID-19 to continue to hamper growth in the Company's ACH business in the third quarter due to the increases in unemployment and the effects on the consumer credit ratings. The Company has a high degree of confidence the ACH business will recover once unemployment decreases and as consumer government assistance programs are curtailed.

Prepaid card load volume during the second quarter of 2020 increased by 64% compared to the second quarter of 2019. Prepaid card transaction volumes during the second quarter of 2020 increased by 47% compared to the second quarter of 2019. These increases occurred primarily due to the implementation and sales of newly created prepaid government assistance programs.

Total dollars processed for the second quarter of 2020 were $694 million compared to $876 million in the second quarter of 2019.

We reported a net loss of $1.3 million for the three months ended June 30, 2020 compared to a net loss of $1.3 million for the three months ended June 30, 2019. We reported a net loss of $2.1 million for the six months ended June 30, 2020 compared to a net loss of $2.3 million for the three months ended June 30, 2019.

We may incur future operating losses. To regain and sustain profitability, we must, among other things, incrementally grow and maintain our customer base, sell our ACH, credit card and prepaid product offerings to existing and new customers, implement successful marketing strategies, maintain and upgrade our technology and transaction-processing systems, provide superior customer service, respond to competitive developments, attract, retain and motivate personnel, and respond to unforeseen industry developments among other factors.

We believe that our success will depend in large part on our ability to (a) grow revenues, (b) manage our operating expenses, (c) add quality customers to our client base, (d) meet evolving customer requirements, (e) adapt to technological changes in an emerging market, and (f) assimilate current and future acquisitions of companies and customer portfolios. We continue to invest in our sales force to drive revenue growth. In particular, we are focused on growing our ACH merchants, adding new software integrators and providing incremental services to existing merchants. In addition to our near-term growth opportunities, we are focused on leveraging and optimizing the infrastructure of the organization allowing expansion of our payment processing capabilities without significantly increasing our operating costs.

Critical Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations is based upon our interim condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to the reported amounts of revenues and expenses, bad debt, investments, intangible assets, income taxes, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions or conditions. We consider the accounting policies described in Note 1 to the Notes to the Interim Condensed Consolidated Financial Statements to be critical because the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change or because the impact of the estimates and assumptions on financial condition or operating performance is material.

For a summary of Critical Accounting Policies, please refer to the Notes to Interim Condensed Consolidated Financial Statements, Note 1, Basis of Presentation.

Results of Operations

Revenues

Our revenues are principally derived from providing integrated electronic payment services to merchants and businesses, including credit and debit card-based processing services and transaction processing via the Automated Clearing House, or ACH, network and the program management and processing of prepaid debit cards.

	Three Months Ended June 30,
	2020		2019		$ Change			% Change
ACH and complementary service revenue	$	1,779,245	$	2,358,425	$	(579,180	)		(24.6	)%
Credit card revenue		4,588,199		4,423,463		164,736			3.7	%
Prepaid card services revenue		593,109		375,491		217,618			58.0	%
Total Revenue	$	6,960,553	$	7,157,379	$	(196,826	)		(2.7	)%

	Six Months Ended June 30,
	2020		2019		$ Change			% Change
ACH and complementary service revenue	$	4,016,991	$	4,716,211	$	(699,220	)		(14.8	)%
Credit card revenue		9,570,857		8,327,869		1,242,988			14.9	%
Prepaid card services revenue		1,144,384		701,331		443,053			63.2	%
Total Revenue	$	14,732,232	$	13,745,411	$	986,821			7.2	%

Revenues for the quarter ended June 30, 2020 decreased by 2.7% to $7.0 million, as compared to $7.2 million for the quarter ended June 30, 2019. The revenue decrease resulted primarily from declines in processing volumes by our consumer lending merchants offset by revenue growth in our growth initiative programs in the credit card and prepaid portfolios.  Revenues for the six months ended June 30, 2020 increased 7.2% to $14.7 million, as compared to $13.7 million for the six months ended June 30, 2019. The revenue increase resulted from growth in our credit card and prepaid growth initiative programs offset by declines in our ACH and return check processing volumes.

Cost of Services

Cost of services includes the cost of personnel dedicated to the creation and maintenance of connections to third-party payment processors and the fees paid to such third-party providers for electronic payment processing services. Through our contractual relationships with our payment processors and sponsoring banks, we process ACH and debit, credit or prepaid card transactions on behalf of our customers and their consumers. We pay volume-based fees for debit, credit, ACH and prepaid transactions initiated through these processors or sponsoring banks, and pay fees for other transactions such as returns, notices of change to bank accounts and file transmission. Cost of service fees also include fees paid to referral agents and partners.

Cost of services increased by 1% to $5.7 million for the quarter ended June 30, 2020, as compared to $5.6 million for the same period in the prior year. Cost of services increased by 6% to $11.5 million for the six months ended June 30, 2020, as compared to $10.8 million for the same period in the prior year. The increases in the quarter and six-month period ended June 30, 2020, as compared to the same period in the prior year, were primarily due to the increased credit card and prepaid transaction costs associated with higher revenues.

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Gross Profit

Gross profit is the net profit existing after the cost of services. Gross profits decreased by 18% to $1.3 million for the quarter ended June 30, 2020, as compared to $1.6 million for the same period in the prior year. The decrease in gross profit for the quarter ended June 30, 2020, as compared to the same period in the prior year, was primarily a result of lower ACH revenues and profits as a result of COVID-19 impacts on consumer lending merchants. Gross profits for the six months ended June 30, 2020 increased by 11% to $3.2 million as compared to $2.9 million for the same period in the prior year primarily as a result of strong revenue and gross profit growth in the quarter ended March 31, 2020. The increase in gross profit for the six months ended June 30, 2020, as compared to the same period in the prior year, was primarily driven by gains in profitability from our credit card and prepaid portfolios.

Stock-based Compensation

Stock-based compensation expenses were relatively unchanged at $348,393 and $356,103 for the quarters ended June 30, 2020 and 2019, respectively. Stock-based compensation expenses for the six months ended June 30, 2020 and 2019, were relatively unchanged at $636,103 and $639,511 respectively.

Other Selling, General and Administrative Expenses

Other selling, general and administrative expenses (SG&A) decreased by 6% to $1.9 million for the quarter ended June 30, 2020, as compared to $2.0 million for the same period in the prior year. The decrease in other selling, general and administrative expenses for the quarter ended June 30, 2020 was primarily attributable to lower travel and travel related expenses in 2020 related to COVID-19 travel restrictions coupled with lower one-time expenses.  Other SG&A expenses for the six months ended June 30, 2020 increased by 10% to $4.0 million compared to $3.6 for the six months ended June 30, 2019.  The increase was the result of a 27.7% increase in other SG&A expenses in the quarter ended March 31, 2020 versus the expenses in the quarter ended March 31, 2019 due to investments in the prepaid and PayFac growth initiatives.  

Depreciation and Amortization 

Depreciation and amortization totaled $0.4 million and $0.5 million for the quarters ended June 30, 2020 and June 30, 2019, respectively, and $0.8 million and $1.0 for the six months ended June 30, 2020 and June 30, 2019, respectively.

Other Income (Expense)

Other income was $1,525 for the quarter ended June 30, 2020 compared to other income of $22,196 for the quarter ended June 30, 2019.  For the six months ended June 30, 2020 and June 30, 2019, other income was $13,369 and $45,271, respectively.  Lower interest-bearing merchant reserves and lower interest rates drove the lower other income.

Net Loss

We reported a net loss of $1.3 million for the quarter ended June 30, 2020, as compared to a net loss of $1.3 million for the same period in the prior year. We reported a net loss of $2.1 million for the six months ended June 30, 2020, as compared to a net loss of $2.3 million for the same period in the prior year. 

Liquidity and Capital Resources

At June 30, 2020, we had $1.8 million of cash and cash equivalents, as compared to $2.1 million of cash and cash equivalents at December 31, 2019.

We received funding under the Paycheck Protection Program, or PPP, as part of the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, administered by the U.S. Small Business Administration. Under the terms of the Note, we received total proceeds of $813,500 bearing interest at a rate of 1% per annum with a maturity date of April 15, 2022. In addition, principal and interest payments will be deferred for the first six months of the loan. The loan is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. We used the proceeds for payroll costs and other permitted expenses. Under the terms of the PPP Loan, the principal may be forgiven if the loan proceeds are used for qualifying expenses as described in the CARES act, such as payroll costs, benefits, rent and utilities. The Company's loan forgiveness documentation is in the process of being filed with the Small Business Administration.  The determination of how much of the loan, if any, may be subject to forgiveness will be determined by the Small Business Administration.

On July 1, 2020, Topline Capital Partners, LP purchased 1,796,407 unregistered shares of common stock at an offering price of $1.67 per share in a private offering. The gross proceeds to us from the private offering were $3.0 million.

Cash Flows

We reported a net loss of $1.3 million for the quarter ended June 30, 2020 and a net loss of $2.1 million for the six months ended June 30, 2020. At June 30, 2020, we had an accumulated deficit of $64.3 million. Additionally, we had working capital of $0.7 million and $1.3 million at June 30, 2020 and December 31, 2019, respectively.

Net cash provided by operating activities, including merchant reserve funds, prepaid card load assets and net lease assets was $16.4 million and net cash used by operating activities of $2.4 million for the six months ended June 30, 2020 and June 30, 2019, respectively. Excluding merchant reserves, prepaid card load assets and lease right-of-use assets and liabilities, our cash used by operating activities was $0.7 million and $1.1 million for the six months ended June 30, 2020 and June 30, 2019, respectively. We continue to invest resources and infrastructure in our prepaid and PayFac integrated payments growth initiatives to achieve scale in these business lines.

Net cash used by investing activities was $334,688 and $333,205 for the six months ended June 30, 2020 and June 30, 2019, respectively. The primary drivers of the capital expenditures were development costs associated with internal use software capitalization.

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Net cash provided from financing activities for the six months ended June 30, 2020 and June 30, 2019 was $0.7 million and $1.7 million, respectively.  The 2020 cash provided from financing activities was as a result of the $813,500 proceeds from the PPP loan in April, 2020. The 2019 net cash provided by financing activities was a result of the February 2019 public offering which raised $1.8 million in net proceeds.

Material Trends and Uncertainties

In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization, and the outbreak has spread to all parts of the United States, including in the markets in which we operate. The COVID-19 outbreak has had a notable impact on general economic conditions, including but not limited to the temporary closures of many businesses, “shelter in place” and other governmental regulations, reduced consumer spending due to both job losses and other effects attributable to the COVID-19, and there are many unknowns.

As a result of the spread of COVID-19, economic uncertainties have arisen which could impact our operations. Any potential incremental financial impact is unknown at this time. While we have seen a large impact to our operations and results in the second quarter of 2020, we cannot determine the long-term impact on our business going forward. We experienced a decline in our ACH consumer lending business during the second quarter. We also experienced an April decline our Singular credit card portfolio primarily attributable to mandated closures to dental practices in the portfolio. Revenues from these merchants increased in May and June 2020 and have returned to pre-COVID-19 levels as these merchants have reopened. 

The COVID-19 pandemic has caused various business disruptions through mandated and voluntary closings. While the closures were temporary, there is considerable uncertainty whether new closures will occur in hot spot areas. We are implementing actions as prescribed by government health officials. All of our offices are currently open. We continue to monitor the impact of the COVID-19 outbreak closely.

We have limited exposure to retail, or face-to-face processing and our non-face-to-face processing can continue should we have to operate remotely.  We saw an increase in remote payment processing and our credit card processing.  We expect this trend to continue in the remainder of the year.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

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Item 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management evaluated, with the participation of our Chief Executive and Chief Financial Officers, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report on Form 10-Q. Based on that evaluation, our Chief Executive and Chief Financial Officers concluded that our disclosure controls and procedures as of June 30, 2020 were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive and Chief Financial Officers, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our evaluation of disclosure controls and procedures included an evaluation of certain components of our internal control over financial reporting. Management’s assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance that the control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We may be involved in legal matters arising in the ordinary course of business from time to time. While we believe that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which we are or could become involved in litigation will not have a material adverse effect on our business, financial condition or results of operations.

Item 1A. RISK FACTORS.

There have been no material changes from risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2019, as filed with the Securities and Exchange Commission on March 30, 2020.

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Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Recent Sales of Unregistered Securities

On July 1, 2020, we issued 1,796,407 unregistered shares of common stock at an offering price of $1.67 per share in a private offering to an accredited investor.

On August 12, 2020, the Company issued 27,051 shares of common stock to University FanCards, LLC in a cashless exercise at $3.46 per common share in exchange for 60,000 warrants exercised.

We relied on the Section 4(a)(2) exemption from securities registration under the federal securities laws for transactions not involving any public offering. No advertising or general solicitation was employed in offering the securities. The securities were issued to an accredited investor. The securities were offered for investment purposes only and not for the purpose of resale or distribution. The transfer thereof was appropriately restricted by us.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

On November 2, 2016, we announced that our Board of Directors authorized the repurchase of up to $1 million of our common shares from time to time on the open market, in block transactions, or in privately negotiated transactions. On January 9, 2018, the Board of Directors added an additional $2 million to the buyback plan. The program began on November 16, 2016 and ended on September 29, 2019. At September 29, 2019 when the program ended, $1,374,049 was available under the repurchase plan. On November 7, 2019, the Board of Directors approved the renewal of the share buy-back program. The Board approved a limit of $1,420,000 which was rolled over from the prior buyback program with a three-year duration. The new buyback program terminates on the earliest of September 30, 2022, the date the funds are exhausted, or the date the Board of Directors, at its sole discretion, terminates or suspends the program. The program is used for the purchase of stock from employees and directors, and for open-market purchases through a broker. During the three months ended June 30, 2020, we made the following stock repurchases:

Period	(a) Total number of shares (or units) purchased		(b) Average price paid per share (or unit)		(c) Total number of shares (or units) purchased as part of publicly announced plans or programs		(d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
April 1 - April 30, 2020		44,484	$	1.19		829,709	$	1,321,316
May 1 - May 31, 2020		445	$	1.82		830,154	$	1,320,507
June 1 - June 30, 2020		1,133	$	2.01		831,287	$	1,318,229
Total		46,062					$	1,318,229

On January 6, 2019, we repurchased 11,860 shares of common stock at a closing price on January 6, 2019 of $1.84 per share from Tom Jewell, our Chief Financial Officer to cover taxes due.

On January 6, 2020, we repurchased 11,860 shares of common stock at a closing price on January 6, 2020 of $1.74 per share from Tom Jewell, our Chief Financial Officer to cover taxes due.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. MINE SAFETY DISCLOSURES.

Not applicable.

Item 5. OTHER INFORMATION.

None.

15

Item 6. Exhibits.

Exhibit
Number	Description
3.1	Amended and Restated Articles of Incorporation (included as exhibit 3.1 to the Form 10-KSB filed March 31, 2006, and incorporated herein by reference).
3.2	Amendment to Restated Articles of Incorporation (included as exhibit A to the Schedule 14C filed April 18, 2007, and incorporated herein by reference).
3.3	Certificate of Change Filed Pursuant to NRS 78.209 (included as exhibit 3.1 to the Form 8-K filed July 23, 2015, and incorporated herein by reference).
3.4	Articles of Amendment of Restated Articles of Incorporation of Usio, Inc., as amended, effective June 26, 2019 (included as exhibit 3.1 to the Form 8-K filed July 1, 2019, and incorporated herein by reference).
3.5	Amended and Restated By-laws (included as exhibit 3.2 to the Form 10-KSB filed March 31, 2006, and incorporated herein by reference).
10.1	Employment Agreement between the Company and Michael R. Long, dated February 27, 2007 (included as exhibit 10.1 to the Form 8-K filed March 2, 2007, and incorporated herein by reference).
10.2	Employment Agreement between the Company and Louis A. Hoch, dated February 27, 2007 (included as exhibit 10.2 to the Form 8-K filed March 2, 2007, and incorporated herein by reference).
10.3	First Amendment to Employment Agreement between the Company and Michael R. Long, dated November 12, 2009 (included as exhibit 10.15 to the Form 10-Q filed November 16, 2009, and incorporated herein by reference).
10.4	First Amendment to Employment Agreement between the Company and Louis A. Hoch, dated November 12, 2009 (included as exhibit 10.16 to the Form 10-Q filed November 16, 2009, and incorporated herein by reference).
10.5	Second Amendment to Employment Agreement between the Company and Michael R. Long, dated April 12, 2010 (included as exhibit 10.16 to the Form 10-K filed April 15, 2010, and incorporated herein by reference).
10.6	Second Amendment to Employment Agreement between the Company and Louis A. Hoch, dated April 12, 2010 (included as exhibit 10.17 to the Form 10-K filed April 15, 2010, and incorporated herein by reference).
10.7	Bank Sponsorship Agreement between the Company and University National Bank, dated August 29, 2011 (included as exhibit 10.18 to the Form 10-K filed April 3, 2012, and incorporated herein by reference).
10.8	Third Amendment to Employment Agreement between the Company and Michael R. Long, dated January 14, 2011 (included as exhibit 10.19 to the Form 10-K filed April 3, 2012, and incorporated herein by reference).
10.9	Third Amendment to Employment Agreement between the Company and Louis A. Hoch, dated January 14, 2011 (included as exhibit 10.20 to the Form 10-K filed April 3, 2012, and incorporated herein by reference).
10.10	Fourth Amendment to Employment Agreement between the Company and Michael R. Long, dated July 2, 2012 (included as exhibit 10.18 to the Form 10-Q filed August 20, 2012, and incorporated herein by reference).
10.11	Fourth Amendment to Employment Agreement between the Company and Louis A. Hoch, dated July 2, 2012 (included as exhibit 10.19 to the Form 10-Q filed August 20, 2012, and incorporated herein by reference).

16

10.12	Asset Purchase Agreement, dated December 22, 2014, by and between Akimbo Financial, Inc. and Payment Data Systems, Inc. (included as exhibit 10.1 to the Form 8-K filed December 24, 2014, and incorporated herein by reference).
10.13	Bank Sponsorship Agreement between the Company and Metropolitan Commercial Bank, dated December 11, 2014 (included as exhibit 10.26 to the Form 10-K filed March 30, 2015, and incorporated herein by reference).
10.14	Independent Director Agreement, dated April 24, 2015, by and between Payment Data Systems, Inc. and Miguel A. Chapa (included as exhibit 10.29 to the Form 10-Q filed August 14, 2015, and incorporated herein by reference).
10.15	Fifth Amendment to Employment Agreement between the Company and Michael R. Long, dated August 3, 2016 (included as exhibit 10.1 to the Form 8-K filed August 9, 2016, and incorporated herein by reference).
10.16	Fifth Amendment to Employment Agreement between the Company and Louis A. Hoch, dated August 3, 2016 (included as exhibit 10.2 to the Form 8-K filed August 9, 2016, and incorporated herein by reference).
10.17	Sixth Amendment to Employment Agreement between the Company and Michael R. Long, dated September 8, 2016 (included as exhibit 10.1 to the Form 8-K filed September 14, 2016, and incorporated herein by reference).
10.18	Sixth Amendment to Employment Agreement between the Company and Louis A. Hoch, dated September 8, 2016 (included as exhibit 10.2 to the Form 8-K filed September 14, 2016, and incorporated herein by reference).
10.19	Employment agreement between Tom Jewell and Payment Data Systems, Inc., dated January 6, 2017 (included as exhibit 10.1 to the Form 8-K filed January 6, 2017, and incorporated herein by reference).
10.20	Line of Credit Promissory Note, dated March 7, 2017, by and between Singular Payments, LLC, as Borrower and Payment Data Systems, Inc., as Lender (included as exhibit 10.1 to the Form 8-K filed March 13, 2017, and incorporated herein by reference).
10.21	Security Agreement, dated March 7, 2017, by and between Singular Payments, LLC, as Debtor and Payment Data Systems, Inc., as Secured Party (included as exhibit 10.2 to the Form 8-K filed March 13, 2017, and incorporated herein by reference).
10.22	Membership Interest Pledge Agreement, dated March 7, 2017, by and between Vaden Landers as Pledgor and Payment Data Systems, Inc. (included as exhibit 10.3 to the Form 8-K filed March 13, 2017, and incorporated herein by reference).
10.23	Guaranty Agreement, dated March 7, 2017, by and between Vaden Landers as Guarantor and Payment Data Systems, Inc. (included as exhibit 10.4 to the Form 8-K filed March 13, 2017, and incorporated herein by reference).
10.24	Independent Director Agreement, dated May 5, 2017, by and between Payment Data Systems, Inc. and Brad Rollins (included as exhibit 10.1 to the Form 8-K, filed May 11, 2017, and incorporated herein by reference).
10.25	Amendment No. 1 to Line of Credit Promissory Note, dated June 6, 2017, by and between Payment Data Systems, Inc. and Singular Payments, LLC (included as exhibit 10.1 to the Form 8-K, filed June 8, 2017, and incorporated herein by reference).
10.26	First Amended and Restated Line of Credit Promissory Note, dated August 2, 2017, by and between Payment Data Systems, Inc. and Singular Payments, LLC (included as exhibit 10.1 to the Form 8-K, filed August 7, 2017, and incorporated herein by reference).
10.27†	Membership Interest Purchase Agreement, dated September 1, 2017, by and among Payment Data Systems, Inc., Singular Payments, LLC and Vaden Landers (included as exhibit 10.1 to the Form 8-K, filed September 8, 2017, and incorporated herein by reference).

17

10.28	Employment Agreement, dated September 1, 2017, by and between Payment Data Systems, Inc. and Vaden Landers (included as exhibit 10.2 to the Form 8-K, filed September 8, 2017, and incorporated herein by reference).
10.29	First Amendment to Employment Agreement, dated November 27, 2017, by and between Payment Data Systems, Inc. and Tom Jewell (included as exhibit 10.1 to the Form 8-K, filed November 28, 2017, and incorporated herein by reference).
10.30	Placement Agency Agreement, dated December 21, 2017, by and between Payment Data Systems, Inc. and Maxim Group, LLC (included as exhibit 10.1 to the Form 8-K, filed December 22, 2017, and incorporated herein by reference).
10.31	Share Purchase Agreement, dated December 21, 2017, by and among Payment Data Systems, Inc., CVI Investments, Inc., Hudson Bay Maser Fund Ltd., Special Situations Fund III QP, L.P., Special Situations Private Equity Fund, L.P. and Special Situations Cayman Fund, L.P. (included as exhibit 10.2 to the Form 8-K, filed December 22, 2017, and incorporated herein by reference).
10.32	Settlement Agreement, dated December 7, 2017, by and among C2Go. Inc., FiCentive, Inc. and Mercury Investment Partners LLC (included as exhibit 10.42 to the Form 10-K, filed March 30, 2018, and incorporated herein by reference).
10.33	Lease Agreement dated February 9, 2018 between Payment Data Systems, Inc. and Blauners Paesanos Parkway LP (included as exhibit 10.43 to the Form 10-K, filed March 30, 2018, and incorporated herein by reference).
10.34	Lease Agreement between Payment Data Systems, Inc. and RP Circle 1 Building, LLC dated December 11, 2017 (included as exhibit 10.44 to the Form 10-K, filed March 30, 2018, and incorporated herein by reference).
10.35	Second Amendment to Employment Agreement between the Company and Tom Jewell, dated November 28, 2018 (included as exhibit 10.1 go the Form 8-K filed November 28, 2018, and incorporated herein by reference).
10.36	Placement Agency Agreement between the Company and Maxim Group, LLC, dated February 12, 2019 (included as exhibit 10.1 to the Form 8-K filed February 13, 2019, and incorporated herein by reference).
10.37	Share Purchase Agreement among the Company, Sabby Healthcare Master Fund, Ltd. and Sabby Volatility Warrant Master Fund, Ltd., dated February 12, 2019 (included as exhibit 10.2 to the Form 8-K filed February 13, 2019, and incorporated herein by reference).
10.38	Independent Director Agreement dated April 1, 2019, by and between Payment Data Systems, Inc. and Blaise Bender (included as exhibit 10.2 to the Form 8-K filed April 3, 2019, and incorporated herein by reference).
10.39+	Securities Purchase Agreement between Usio, Inc. and Topline Capital Partners, L.P. dated July 1, 2020 (included as exhibit 10.1 to the Form 8-K filed on July 6, 2020, and incorporated herein by reference).
14.1	Code of Ethics (included as exhibit 14.1 to the Form 10-K filed March 30, 2004, and incorporated herein by reference).
16.1	Letter from Ernst and Young LLP to the Securities and Exchange Commission dated February 10, 2004 (included as exhibit 16 to the Form 8-K filed February 11, 2004, and incorporated herein by reference).
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1	Certification of the Chief Executive Officer and the /Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
101.INS	XBRL Instance Document (filed herewith).

18

101.SCH	XBRL Taxonomy Extension Schema Document (filed herewith).
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).
101.LAB	XBRL Taxonomy Extension Label Linkbase Document (filed herewith).
101.PRE	XBRL Taxonomy Presentation Linkbase Document (filed herewith).
†	Confidential treatment has been granted for portions of this agreement.
+	The schedules to the exhibit have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K.  The Company will furnish copies of any such schedules to the SEC upon request.

Copies of above exhibits not contained herein are available to any stockholder, upon written request to: Chief Financial Officer, Usio, Inc., 3611 Paesanos Parkway, Suite 300, San Antonio, TX 78231.

19

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.

	USIO, INC
Date: August 13, 2020	By:	/s/ Louis A. Hoch
		Louis A. Hoch
		Chief Executive Officer
		(Principal Executive Officer)
Date: August 13, 2020	By:	/s/ Tom Jewell
		Tom Jewell
		Chief Financial Officer
		(Principal Accounting Officer)

20

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, Louis A. Hoch, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Usio, Inc. for the quarter ended June 30, 2020;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. As the registrant’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. As the registrant’s certifying officer, I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2020
	By:	/s/ Louis A. Hoch
		Louis A. Hoch
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, Tom Jewell, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Usio, Inc. for the quarter ended June 30, 2020;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. As the registrant’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. As the registrant’s certifying officer, I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2020

By:	/s/ Tom Jewell
	Tom Jewell
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Usio, Inc., a Nevada corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 13, 2020
	By:	/s/ Louis A. Hoch
		Louis A. Hoch
		Chief Executive Officer
		(Principal Executive Officer)
Date: August 13, 2020
	By:	/s/ Tom Jewell
		Tom Jewell
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Aug. 10, 2020
Document Information [Line Items]
Entity Registrant Name	Usio, Inc.
Entity Central Index Key	0001088034
Trading Symbol	usio
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		20,364,146
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Jun. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false
Title of 12(b) Security	Common stock, par value $0.001 per share

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 1,793,252	$ 2,137,580
Accounts receivable, net	1,124,207	1,274,001
Settlement processing assets	27,002,450	38,906,780
Prepaid card load assets	19,281,293	528,434
Prepaid expenses and other	187,614	183,575
Current assets before merchant reserves	49,388,816	43,030,370
Merchant reserves	8,430,339	10,016,904
Total current assets	57,819,155	53,047,274
Property and equipment, net	1,624,269	1,557,521
Other assets:
Intangibles, net	2,176,426	2,676,427
Deferred tax asset	1,394,000	1,394,000
Operating lease right-of-use assets	2,366,775	2,480,902
Other assets	428,623	404,055
Total other assets	6,365,824	6,955,384
Total assets	65,809,248	61,560,179
Current liabilities:
Accounts payable	262,363	419,849
Accrued expenses	1,378,289	1,360,551
Operating lease liabilities, current portion	233,738	356,184
Settlement processing obligations	27,002,450	38,906,780
Prepaid card load obligations	19,281,293	528,434
Deferred revenues	97,059	123,529
PPP Loan payable, current portion	383,738
Current liabilities before merchant reserve obligations	48,638,930	41,695,327
Merchant reserve obligations	8,430,339	10,016,904
Total current liabilities	57,069,269	51,712,231
Non-current liabilities:
PPP Loan payable, non-current portion	429,762
Operating lease liabilities, non-current portion	2,291,334	2,279,613
Total liabilities	59,790,365	53,991,844
Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at June 30, 2020 (unaudited) and December 31, 2019, respectively
Common stock, $0.001 par value, 200,000,000 shares authorized; 19,776,121 and 18,224,577 issued, and 18,595,358 and 17,104,998 outstanding at June 30, 2020 (unaudited) and December 31, 2019, respectively	188,207	186,656
Additional paid-in capital	78,773,990	77,055,273
Treasury stock, at cost; 1,180,763 and 1,119,579 shares at June 30, 2020 (unaudited) and December 31, 2019, respectively	(1,967,900)	(1,885,452)
Deferred compensation	(6,700,248)	(5,636,154)
Accumulated deficit	(64,275,166)	(62,151,988)
Total stockholders’ equity	6,018,883	7,568,335
Total liabilities and stockholders’ equity	$ 65,809,248	$ 61,560,179

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized (in shares)	10,000,000	10,000,000
Preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	200,000,000	200,000,000
Common stock, issued (in shares)	19,776,121	18,224,577
Common stock, outstanding (in shares)	18,595,358	17,104,998
Treasury stock, shares (in shares)	1,180,763	1,119,579

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenues	$ 6,960,553	$ 7,157,379	$ 14,732,232	$ 13,745,411
Cost of services	5,674,887	5,591,534	11,518,282	10,843,835
Gross profit	1,285,666	1,565,845	3,213,950	2,901,576
Selling, general and administrative:
Stock-based compensation	348,393	356,103	636,103	639,511
Other SG&A expenses	1,856,924	1,970,555	3,979,030	3,632,294
Depreciation and amortization	382,244	496,994	770,039	983,542
Total selling, general and administrative expenses	2,587,561	2,823,652	5,385,172	5,255,347
Operating (loss)	(1,301,895)	(1,257,807)	(2,171,222)	(2,353,771)
Other income and (expense):
Interest income	1,487	22,620	12,643	45,694
Other income (expense)	38	(424)	726	(423)
Other income and (expense), net	1,525	22,196	13,369	45,271
(Loss) before income taxes	(1,300,370)	(1,235,611)	(2,157,853)	(2,308,500)
Income tax expense (benefit)	(12,201)	40,000	(34,675)	40,000
Net (loss)	$ (1,288,169)	$ (1,275,611)	$ (2,123,178)	$ (2,348,500)
Basic (loss) per common share: (in dollars per share)	$ (0.10)	$ (0.10)	$ (0.16)	$ (0.18)
Diluted (loss) per common share: (in dollars per share)	$ (0.10)	$ (0.10)	$ (0.16)	$ (0.18)
Weighted average common shares outstanding
Basic (in shares)	13,173,009	13,041,799	13,150,119	12,831,828
Diluted (in shares)	13,173,009	13,041,799	13,150,119	12,831,828

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Operating activities:
Net (loss)	$ (2,123,178)	$ (2,348,500)
Adjustments to reconcile net (loss) to net cash (used) by operating activities:
Depreciation	270,038	483,542
Amortization	500,001	500,000
Non-cash stock-based compensation	636,103	639,511
Amortization of warrant costs	17,973	17,970
Changes in current assets and current liabilities:
Accounts receivable	149,794	(354,550)
Prepaid expenses and other	(4,039)	(99,853)
Operating lease right-of-use assets	114,127	(2,614,006)
Other assets	(24,568)	(6,023)
Accounts payable and accrued expenses	(139,748)	31,156
Operating lease liabilities	(110,725)	2,766,034
Prepaid card load obligations	18,752,859	105,616
Merchant reserves	(1,586,565)	(1,570,912)
Deferred revenue	(26,470)	130,000
Deferred rent		(79,748)
Net cash provided (used) by operating activities	16,425,602	(2,399,763)
Investing activities:
Purchases of property and equipment	(334,688)	(333,205)
Net cash (used) by investing activities	(334,688)	(333,205)
Financing activities:
Proceeds from PPP Loan Program	813,500
Proceeds from public offering, net of expenses		1,793,905
Purchases of treasury stock	(82,448)	(50,515)
Net cash provided by financing activities	731,052	1,743,390
Change in cash, cash equivalents, prepaid card load assets and merchant reserves	16,821,966	(989,578)
Cash, cash equivalents, prepaid card load assets and merchant reserves, beginning of period	12,682,918	15,340,980
Cash, Cash Equivalents, Prepaid Card Load Assets and Merchant Reserves, End of Period	29,504,884	14,351,402
Supplemental disclosure of cash flow information:
Interest
Income taxes		72,081
Issuance of deferred stock compensation	$ 1,559,520

XML

Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Deferred Compensation, Share-based Payments [Member]	Retained Earnings [Member]	Total
Balance (in shares) at Dec. 31, 2018	17,129,680
Balance at Dec. 31, 2018	$ 185,561	$ 74,568,627	$ (1,813,546)	$ (6,270,675)	$ (57,036,241)	$ 9,633,726
Issuance of common stock under equity incentive plan (in shares)	62,222
Issuance of common stock under equity incentive plan	$ 62	58,551				58,613
Warrant compensation costs		8,985				8,985
Deferred compensation amortization				224,795		224,795
Purchase of treasury stock			(21,822)			(21,822)
Net (loss) for the period					(1,072,889)	(1,072,889)
Issuance of common stock, public offering (in shares)	769,230
Issuance of common stock, public offering	$ 769	1,793,136				1,793,905
Balance (in shares) at Mar. 31, 2019	17,961,132
Balance at Mar. 31, 2019	$ 186,392	76,429,299	(1,835,368)	(6,045,880)	(58,109,130)	10,625,313
Balance (in shares) at Dec. 31, 2018	17,129,680
Balance at Dec. 31, 2018	$ 185,561	74,568,627	(1,813,546)	(6,270,675)	(57,036,241)	9,633,726
Net (loss) for the period						(2,348,500)
Balance (in shares) at Jun. 30, 2019	18,008,577
Balance at Jun. 30, 2019	$ 186,439	76,558,492	(1,864,061)	(5,810,035)	(59,384,741)	9,686,094
Balance (in shares) at Mar. 31, 2019	17,961,132
Balance at Mar. 31, 2019	$ 186,392	76,429,299	(1,835,368)	(6,045,880)	(58,109,130)	10,625,313
Issuance of common stock under equity incentive plan (in shares)	53,445
Issuance of common stock under equity incentive plan	$ 53	133,462				133,515
Warrant compensation costs		8,985				8,985
Deferred compensation amortization				222,585		222,585
Purchase of treasury stock			(28,693)			(28,693)
Net (loss) for the period					(1,275,611)	(1,275,611)
Reversal of deferred stock compensation that did not vest (in shares)	(6,000)
Reversal of deferred stock compensation that did not vest	$ (6)	(13,254)		13,260
Balance (in shares) at Jun. 30, 2019	18,008,577
Balance at Jun. 30, 2019	$ 186,439	76,558,492	(1,864,061)	(5,810,035)	(59,384,741)	9,686,094
Balance (in shares) at Dec. 31, 2019	18,224,577
Balance at Dec. 31, 2019	$ 186,656	77,055,273	(1,885,452)	(5,636,154)	(62,151,988)	7,568,335
Issuance of common stock under equity incentive plan (in shares)	51,000
Issuance of common stock under equity incentive plan	$ 51	59,440				59,491
Warrant compensation costs		8,985				8,985
Deferred compensation amortization				228,219		228,219
Purchase of treasury stock			(26,629)			(26,629)
Net (loss) for the period					(835,009)	(835,009)
Balance (in shares) at Mar. 31, 2020	18,275,577
Balance at Mar. 31, 2020	$ 186,707	77,123,698	(1,912,081)	(5,407,935)	(62,986,997)	7,003,392
Balance (in shares) at Dec. 31, 2019	18,224,577
Balance at Dec. 31, 2019	$ 186,656	77,055,273	(1,885,452)	(5,636,154)	(62,151,988)	7,568,335
Net (loss) for the period						(2,123,178)
Balance (in shares) at Jun. 30, 2020	19,776,121
Balance at Jun. 30, 2020	$ 188,207	78,773,990	(1,967,900)	(6,700,248)	(64,275,166)	6,018,883
Balance (in shares) at Mar. 31, 2020	18,275,577
Balance at Mar. 31, 2020	$ 186,707	77,123,698	(1,912,081)	(5,407,935)	(62,986,997)	7,003,392
Issuance of common stock under equity incentive plan (in shares)	1,500,544
Issuance of common stock under equity incentive plan	$ 1,500	1,641,304		(1,559,520)		83,284
Warrant compensation costs		8,988				8,988
Deferred compensation amortization				267,207		267,207
Purchase of treasury stock			(55,819)			(55,819)
Net (loss) for the period					(1,288,169)	(1,288,169)
Balance (in shares) at Jun. 30, 2020	19,776,121
Balance at Jun. 30, 2020	$ 188,207	$ 78,773,990	$ (1,967,900)	$ (6,700,248)	$ (64,275,166)	$ 6,018,883

XML

Note 1 - Basis of Presentation

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Business Description and Accounting Policies [Text Block]

Note

1.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements of Usio, Inc. and its subsidiaries (the “Company”) have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been omitted pursuant to such rules and regulations. In the opinion of management, the accompanying interim condensed consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to present fairly the Company's financial position, results of operations and cash flows for such periods. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's annual report on Form

10

-K for the year ended

December 

31,

2019,

as filed with the Securities and Exchange Commission on

March 30, 2020.

Results of operations for interim periods are

not

necessarily indicative of results that

may

be expected for any other interim periods or the full fiscal year.

Use of Estimates:

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition:

Revenue consists primarily of fees generated through the electronic processing of payment transactions and related services. Revenue is recognized during the period in which the transactions are processed or when the related services are performed. The Company complies with ASC

606

-

10

and reports revenues at gross as a principal versus net as an agent. Although some of the Company's processing agreements vary with respect to specific credit risks, the Company has determined for each agreement it is acting in the principal role. Merchants

may

be charged for these processing services at a bundled rate based on a percentage of the dollar amount of each transaction and, in some instances, additional fees are charged for each transaction. Certain merchant customers are charged a flat fee per transaction, while others

may

also be charged miscellaneous fees, including fees for chargebacks or returns, monthly minimums, and other miscellaneous services. Revenues derived from electronic processing of credit, debit, and prepaid card transactions that are authorized and captured through

third

-party networks are reported gross of amounts paid to sponsor banks as well as interchange and assessments paid to credit card associations. Sales taxes billed are reported directly as a liability to the taxing authority and are

not

included in revenue.

The following table presents the Company's payment processing service revenues by source:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
ACH and complementary service revenue	$	1,779,245	$	2,358,425	$	4,016,991	$	4,716,211
Credit card revenue		4,588,199		4,423,463		9,570,857		8,327,869
Prepaid card services revenue		593,109		375,491		1,144,384		701,331
Total revenue	$	6,960,553	$	7,157,379	$	14,732,232	$	13,745,411

Deferred Revenues:

The Company records deferred revenues when it receives payments in advance of transferring control of promised goods or services to a customer. The advance consideration received from a customer is deferred until the Company provides the customer that product or service. The deferred revenues totaled

$97,059

 and

$123,529

 at

June 30, 2020

and

December 31, 2019

, respectively.

Cash and Cash Equivalents:

Cash and cash equivalents includes cash and other money market instruments. The Company considers all highly liquid investments with an original maturity of

90

days or less to be cash equivalents.

Merchant Reserves:

The Company has merchant reserve requirements associated with Automated Clearing House ("ACH") transactions. The merchant reserve assets are carried on the Company's balance sheet with a corresponding liability. Merchant Reserves are set for each merchant. Funds are collected from each merchant and held as collateral to minimize contingent liabilities associated with any losses that

may

occur under the merchant agreement. While this cash is

not

restricted in its use, the Company believes that designating this cash to collateralize Merchant Reserves strengthens our fiduciary standing with the Company's member sponsors and is in accordance with the guidelines set by the card networks.

Prepaid Card Load Assets:

The Company maintains pre-funding accounts for its customers to facilitate prepaid card loads as initiated by the customer. These prepaid card load assets are carried on the Company's balance sheet with a corresponding liability.

The reconciliation of cash and cash equivalents to cash, cash equivalents, prepaid card load assets and merchant reserves is as follows for each period presented:

	Six Months Ended June 30,
	2020		2019
Beginning cash, cash equivalents, prepaid card load assets and merchant reserves:
Cash and cash equivalents	$	2,137,580	$	2,159,698
Prepaid card load assets		528,434		535,479
Merchant reserves		10,016,904		12,645,803
Total	$	12,682,918	$	15,340,980
Ending cash, cash equivalents, prepaid card load assets and merchant reserves:
Cash and cash equivalents	$	1,793,252	$	2,635,416
Prepaid card load assets		19,281,293		641,095
Merchant reserves		8,430,339		11,074,891
Total	$	29,504,884	$	14,351,402

Allowance for Estimated Losses:

The Company maintains an allowance for estimated doubtful accounts receivable resulting from the inability or failure of the Company's customers to make required payments. The Company determines the allowance for estimated doubtful accounts receivable losses based on an account-by-account review, taking into consideration such factors as the age of the outstanding balance, historical pattern of collections and financial condition of the customer. Past losses incurred by the Company due to bad debts have been within its expectations. If the financial conditions of the Company's customers were to deteriorate, resulting in an impairment of their ability to make contractual payments, additional allowances might be required. Estimates for doubtful account losses are variable based on the volume of transactions processed and could increase or decrease accordingly. The allowance for estimated doubtful accounts was

$186,067

 and

$123,165

 at

June 30, 2020

and

December 31, 2019

, respectively.

Accounting for Internal Use Software:

The Company capitalizes the costs associated with software being developed or obtained for internal use when both the preliminary project stage is completed, and it is probable that computer software being developed will be completed and placed-in service. Capitalized costs include only (i) external direct costs of materials and services consumed in developing or obtaining internal-use software, (ii) payroll and other related costs for employees who are directly associated with and who devote time to the internal-use software project, and (iii) interest costs incurred, when material, while developing internal-use software. The Company ceases capitalization of such costs

no

later than the point at which the project is substantially complete and ready for its intended purpose. In the 

six

months ended

June 30, 2020

and

June 30, 2019

, the Company capitalized

$313,983

 and

$238,248

, respectively.

Valuation of Long-Lived and Intangible Assets:

The Company assesses the impairment of long-lived and intangible assets at least annually, and whenever events or changes in circumstances indicate that the carrying value

may

not

be recoverable. Factors considered important, which could trigger an impairment review, include the following: significant under performance relative to historical or projected future cash flows; significant changes in the manner of use of the assets or the strategy of the overall business; and significant negative industry trends. When management determines that the carrying value of long-lived and intangible assets

may

not

be recoverable, impairment is measured as the excess of the assets' carrying value over the estimated fair value.

No

impairment losses were recorded in

2019

or during the 

six

months ended

June 30, 2020

. Management is

not

aware of any impairment changes that

may

currently be required; however, the Company cannot predict the occurrence of events that might adversely affect the reported values in the future.

Reserve for Processing Losses:

If, due to insolvency or bankruptcy of

one

of the Company's merchant customers, or for any other reason, the Company is

not

able to collect amounts from its credit card, ACH or prepaid customers that have been properly "charged back" by the customer, or if a prepaid cardholder incurs a negative balance, the Company must bear the credit risk for the full amount of the transaction. The Company

may

require cash deposits and other types of collateral from certain merchants to minimize any such risks. In addition, the Company utilizes multiple systems and procedures to manage merchant risk. ACH, prepaid and credit card merchant processing loss reserves are primarily determined by performing a historical analysis of the Company's loss experience, considering other factors that could affect that experience in the future, such as the types of transactions processed and nature of the merchant relationship with its consumers and the Company's relationship with the Company's prepaid card holders. This reserve amount is subject to the risk that actual losses

may

be greater than the Company's estimates. The Company has

not

incurred any significant processing losses to date. Estimates for processing losses are variable based on the volume of transactions processed and could increase or decrease accordingly. At

June 30, 2020

and

December 31, 2019

, the Company's reserve for processing losses was

$490,893

 and

$506,153

 respectively.

Recently Adopted Accounting Pronouncements:

In

February 2016,

the FASB issued, "Leases (Topic

842

)."This update requires that a lessee recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with initial terms of

12

months or less, a lessee is permitted to make an accounting policy election by class of underlying asset

not

to recognize lease assets and liabilities. Similar to previous guidance, the update continues to differentiate between finance leases and operating leases, however this distinction now primarily relates to differences in the manner of expense recognition over time and in the classification of lease payments in the statement of cash flows. The updated guidance leaves the accounting for leases by lessors largely unchanged from existing GAAP. The guidance became effective for the Company on

January 1, 2019.

As a lessee, this standard primarily impacted the Company's accounting for leased facilities and office equipment, for which the Company recognized right of use assets of

$2,688,412

and a corresponding lease liability of

$2,775,259

on the Company's consolidated balance sheet on

January 1, 2019.

The Company adopted these provisions on

January 1, 2019

using the optional transition method that permits the Company to apply the new disclosure requirements in

2019

and continue to present comparative period information as required under FASB ASC Topic

840,

"Leases." The Company did

not

have a cumulative-effect adjustment to the opening balance of retained earnings at the date of adoption. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed it to exclude leases with an initial term of

12

months or less from the right-of-use assets and liabilities. Adoption of the standards had

no

impact on the Company's results of operations or liquidity.

If the Company determines that an arrangement is or contains a lease, the Company recognizes a right-of-use (ROU) asset and lease liability at the commencement date of the lease. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company's leases do

not

provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company's lease terms

may

include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expenses for lease payments are recognized on a straight-line basis over the lease term.

In

June 2018,

the FASB issued ASU

2018

-

07,

Compensation - Stock Compensation

which expands the scope of current guidance to include all share-based payment arrangements related to the acquisition of goods or services from both non-employees and employees. The guidance is effective for the Company for all fiscal years beginning after

December 15, 2018.

The Company adopted the new standard on

January 1, 2019.

The adoption of the new standard did

not

result in a change to the previously presented financial statements.

Accounting standards that have been issued or proposed by the FASB, the SEC or other standard setting bodies that do

not

require adoption until a future date are

not

expected to have a material impact on the consolidated financial statements upon adoption.

Reclassification of Prior Year Presentation:

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had

no

effect on the reported results of operations. A reclassification has been made to the Consolidated Statement of Cash Flows for the

six

months ended

June 30, 2019

to identify the change in prepaid card load obligations previously reported in accrued expenses. This change in classification does

not

affect previously reported results of operations in the Consolidated Income Statement, and cash activities in the Consolidated Statement of Cash Flows for the

six

months ended

June 30, 2019

.

XML

Note 2 - Leases

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

Note

2.

  Leases

The Company leases facilities and office equipment under various operating leases, which generally are expected to be renewed or replaced by other leases. For the quarter ended

June 30, 2020

 and

2019,

operating lease expenses totaled

$61,049

 and

$62,326

, respectively.  For the

six

months ended

June 30, 2020

 and

2019,

operating lease expenses totaled

$128,693

 and

$117,012

, respectively.

Operating lease liabilities as of

June 30, 2020

will require the following payments:

2020 (six months)	$	172,409
2021		343,423
2022		351,334
2023		357,695
2024		356,250
Thereafter		1,469,679
Total minimum lease payments		3,050,790
Less imputed interest		(525,718	)
Total lease liabilities	$	2,525,072

XML

Note 3 - Accrued Expenses

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block]

Note

3.

Accrued Expenses

Accrued expenses consisted of the following balances:

	June 30, 2020		December 31, 2019
Accrued commissions	$	381,652	$	530,908
Reserve for merchant losses		490,893		506,153
Other accrued expenses		214,824		92,385
Accrued taxes		160,605		99,850
Accrued salaries		130,315		131,255
Total accrued expenses	$	1,378,289	$	1,360,551

XML

Note 4 - PPP Loan Payable

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

4.

PPP Loan Payable

The Company received funding under the Paycheck Protection Program (PPP) as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), administered by the U.S. Small Business Administration. Under the terms of the Note, the Company received total proceeds of

$813,500

bearing interest at a rate of

1%

per annum with a maturity date of

April 15, 2022.

In addition, principal and interest payments will be deferred for the

first

six

months of the loan. The loan is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. The Company used the proceeds for payroll costs and other permitted expenses. Under the terms of the PPP, the principal

may

be forgiven if the loan proceeds are used for qualifying expenses as described in the CARES act, such as payroll costs, benefits, rent and utilities. The Company's loan forgiveness documentation is in the process of being filed with the Small Business Administration.  The determination of how much of the loan, if any,

may

be subject to forgiveness will be determined by the Small Business Administration.

XML

Note 5 - Stockholders' Equity

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

Note

5.

Stockholders' Equity

Stock Warrants

: On

August 21, 2018,

the Company issued University Fancards, LLC a warrant to purchase

150,000

shares of the Company's common stock.

30,000

warrants vested immediately upon the date on which the

first

financial transaction was processed on a card account issued under the prepaid agreement, which occurred on

October 5, 2018.

120,000

warrants will vest annually over

4

years in

30,000

warrant increments beginning on

July 31, 2019

and becoming fully vested on

July 31, 2022.

The exercise price for the

30,000

warrants that vested immediately on

October 5, 2018

was

$1.80

per share. The exercise price for the remaining

120,000

warrants will be the lesser of

$2.00

per share or

one hundred

and

twenty

percent (

120%

) of the market price of the Company's common stock on the vesting date of the warrant. The warrants were valued using the Black-Scholes option pricing model. Assumptions used were as follows: (i) the fair value of the underlying stock was

$0.94

for the

30,000

warrants and

$0.90

for the

120,000

warrants; (ii) the risk-free interest rate is

2.77%;

(iii) the contractual life is

5

years; (iv) the dividend yield is

0%;

and (v) the volatility is

64.6%.

The fair value of the warrants was

$135,764

which will be amortized over the life of the warrants as a reduction of revenues. The reduction of revenues recorded for the

six

months ended

June 30, 2020

and

2019

was

$17,973

 and

$17,970,

respectively.

On

August 12, 2020,

the Company issued

27,051

shares of common stock to University FanCards, LLC in a cashless exercise at

$3.46

per common share in exchange for

60,000

warrants exercised.

On

February 14, 2019,

the Company entered into a placement agency agreement with Maxim Group LLC for the issuance and sale of an aggregate of

769,230

shares of common stock at an offering price of

$2.60

per share in a public offering. The Company agreed to pay Maxim a cash fee of equal to

6%

of the aggregate gross proceeds raised in the offering as well as legal fees and expenses of up to

$40,000.

The net proceeds to the Company from the public offering were

$1.8

million, after deducting the offering expenses and fees payable by the Company.

On

April 1, 2020,

the Company granted

1,444,000

shares of common stock with a

10

-year vesting period and

103,000

restricted stock units (RSUs) with a

3

-year vesting period to employees and Directors as a performance bonus at an issue price of

$1.08

per share. Executive officers and Directors included in the grant were Louis Hoch (

300,000

shares), Vaden Landers (

150,000

shares), Tom Jewell (

200,000

shares), Blaise Bender (

10,000

RSUs), Brad Rollins (

30,000

RSUs) and Miguel Chapa (

30,000

RSUs).

On

July 1, 2020,

Topline Capital Partners, LP purchased

1,796,407

unregistered shares of common stock at an offering price of

$1.67

 per share in a private offering. The gross proceeds to the Company from the private offering were 

$3.0

 million.

XML

Note 6 - Net (Loss) Per Share

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Earnings Per Share [Text Block]

Note

6.

Net (Loss) Per Share

Basic (loss) per share (EPS) was computed by dividing net (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted EPS differs from basic EPS due to the assumed conversion of potentially dilutive awards and options that were outstanding during the period. The following is a reconciliation of the numerators and the denominators of the basic and diluted per share computations for net (loss) for the 

three

and

six

months ended

June 30, 2020

and

June 30, 2019

.

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Numerator:
Numerator for basic and diluted (loss) per share, net (loss) available to common shareholders	$	(1,288,169	)	$	(1,275,611	)	$	(2,123,178	)	$	(2,348,500	)
Denominator:
Denominator for basic (loss) per share, weighted average shares outstanding		13,173,009			13,041,799			13,150,119			12,831,828
Effect of dilutive securities		—			—			—			—
Denominator for diluted earnings per share, adjust weighted average shares and assumed conversion		13,173,009			13,041,799			13,150,119			12,831,828
Basic (loss) per common share	$	(0.10	)	$	(0.10	)	$	(0.16	)	$	(0.18	)
Diluted (loss) per common share and common share equivalent	$	(0.10	)	$	(0.10	)	$	(0.16	)	$	(0.18	)

The awards and options to purchase shares of common stock that were outstanding at

June 30, 2020

and

June 30, 2019

that were

not

included in the computation of diluted earnings per share because the effect would have been anti-dilutive, are as follows:

	Six Months Ended June 30,
	2020		2019
Anti-dilutive awards and options		5,467,780		3,874,139

XML

Note 7 - Income Taxes

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

7.

Income Taxes

Deferred tax assets and liabilities are recorded based on the difference between financial reporting and tax basis of assets and liabilities, and are measured by the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Deferred tax assets are computed with the presumption that they will be realizable in future periods when taxable income is generated. Predicting the ability to realize these assets in future periods requires judgment by management. U.S. generally accepted accounting principles prescribe a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. Income tax benefits that meet the “more likely than

not”

recognition threshold should be recognized.

The Company has recognized a deferred tax asset of approximately

$1.4

million and has recorded a valuation allowance of approximately

$10.0

million against the other deferred tax assets. The Company reviews the assessment of the deferred tax asset and valuation allowance on an annual basis or more often when events indicate that a change to the valuation allowance

may

be warranted.

At 

December 31, 2019

, the Company had available net operating loss carryforwards of approximately

$48.2

million. Net operating loss carryforwards prior to

2017

are available to offset taxable income of future periods and begin to expire in

2021.

Effective for tax years ending in

2018,

net operating losses can be carried forward to future years indefinitely. Approximately

$0.1

million of the total net operating loss carryforward is subject to an IRS Section

382

limitation from

1999.

Management is

not

aware of any tax positions that would have a significant impact on the Company's financial position.

XML

Note 8 - Related Party Transactions

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

Note

8.

Related Party Transactions

Louis Hoch

During the

six

months ended

June 30, 2020

and the year ended

December 31, 2019

, the Company purchased a total of

$0

and

$13,831,

respectively, of corporate imprinted sportswear and caps from Angry Pug Sportswear. Louis Hoch, the Company's President and Chief Executive Officer, is a

50%

owner of Angry Pug Sportswear.

Miguel Chapa and Louis Hoch

During the

six

months ended

June 30, 2020

and the year ended

December 31, 2019

, the Company received

$0

and

$6,665,

respectively, in revenue from Lush Rooftop. Miguel Chapa, a member of our Board of Directors, was an owner of Lush Rooftop. Louis Hoch, the Company's President and Chief Executive Officer, was also a minority owner of Lush Rooftop. The relationship ended in

September, 2019

when the business was sold.

During the

six

months ended

June 30, 2020

and the year ended

December 31, 2019

, the Company received

$3,219

and

$24,363,

respectively, in revenue from BLVD Bar and Lounge. Miguel Chapa, a member of the Company's Board of Directors, is an owner in BLVD Bar and Lounge. Louis Hoch, the Company's President and Chief Executive Officer, is also an owner of BLVD Bar and Lounge. In

May, 2020,

both Mr. Chapa and Mr. Hoch sold all their interests in BLVD.  The Company retained the card processing business.

Directors and Officers

On

January 6, 2020,

the Company repurchased

11,860

shares of common stock at a closing price of

$1.74

per share from Tom Jewell, the Company's Chief Financial Officer to cover taxes due.

On

January 6, 2019,

the Company repurchased

11,860

shares of common stock at a closing price of

$1.84

per share from Tom Jewell, the Company's Chief Financial Officer to cover taxes due.

The Company granted

1,444,000

shares of common stock with a

10

-year vesting period and

103,000

restricted stock units (RSUs) with a

3

-year vesting period to employees and Directors as a performance bonus on

April 1, 2020

at an issue price of

$1.08

per share. Executive officers and Directors included in the grant were Louis Hoch (

300,000

shares), Vaden Landers (

150,000

shares), Tom Jewell (

200,000

shares), Blaise Bender (

10,000

RSUs), Brad Rollins (

30,000

RSUs) and Miguel Chapa (

30,000

RSUs).

XML

Note 9 - Legal Proceedings

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Legal Matters and Contingencies [Text Block]

Note

9.

Legal Proceedings

The Company

may

be involved in legal matters arising in the ordinary course of business from time to time. While the Company believes that such matters are currently

not

material, there can be

no

assurance that matters arising in the ordinary course of business for which the Company is or could become involved in litigation will

not

have a material adverse effect on its business, financial condition or results of operations.

XML

Note 10 - Subsequent Events

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Subsequent Events [Text Block]

Note

10.

Subsequent Events

On

July 1, 2020,

Topline Capital Partners, LP purchased

1,796,407

unregistered shares of common stock at an offering price of

$1.67

 per share in a private offering. The gross proceeds to the Company from the private offering were 

$3.0

 million.

On

August 12, 2020,

the Company issued

27,051

shares of common stock to University FanCards, LLC in a cashless exercise at

$3.46

per common share in exchange for

60,000

warrants exercised.

XML

Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Use of Estimates:

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue from Contract with Customer [Policy Text Block]

Revenue Recognition:

Revenue consists primarily of fees generated through the electronic processing of payment transactions and related services. Revenue is recognized during the period in which the transactions are processed or when the related services are performed. The Company complies with ASC

606

-

10

and reports revenues at gross as a principal versus net as an agent. Although some of the Company's processing agreements vary with respect to specific credit risks, the Company has determined for each agreement it is acting in the principal role. Merchants

may

be charged for these processing services at a bundled rate based on a percentage of the dollar amount of each transaction and, in some instances, additional fees are charged for each transaction. Certain merchant customers are charged a flat fee per transaction, while others

may

also be charged miscellaneous fees, including fees for chargebacks or returns, monthly minimums, and other miscellaneous services. Revenues derived from electronic processing of credit, debit, and prepaid card transactions that are authorized and captured through

third

-party networks are reported gross of amounts paid to sponsor banks as well as interchange and assessments paid to credit card associations. Sales taxes billed are reported directly as a liability to the taxing authority and are

not

included in revenue.

The following table presents the Company's payment processing service revenues by source:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
ACH and complementary service revenue	$	1,779,245	$	2,358,425	$	4,016,991	$	4,716,211
Credit card revenue		4,588,199		4,423,463		9,570,857		8,327,869
Prepaid card services revenue		593,109		375,491		1,144,384		701,331
Total revenue	$	6,960,553	$	7,157,379	$	14,732,232	$	13,745,411

Deferred Revenues:

The Company records deferred revenues when it receives payments in advance of transferring control of promised goods or services to a customer. The advance consideration received from a customer is deferred until the Company provides the customer that product or service. The deferred revenues totaled

$97,059

 and

$123,529

 at

June 30, 2020

and

December 31, 2019

, respectively.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents:

Cash and cash equivalents includes cash and other money market instruments. The Company considers all highly liquid investments with an original maturity of

90

days or less to be cash equivalents.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Merchant Reserves:

The Company has merchant reserve requirements associated with Automated Clearing House ("ACH") transactions. The merchant reserve assets are carried on the Company's balance sheet with a corresponding liability. Merchant Reserves are set for each merchant. Funds are collected from each merchant and held as collateral to minimize contingent liabilities associated with any losses that

may

occur under the merchant agreement. While this cash is

not

restricted in its use, the Company believes that designating this cash to collateralize Merchant Reserves strengthens our fiduciary standing with the Company's member sponsors and is in accordance with the guidelines set by the card networks.

Prepaid Card Load Assets, Policy [Policy Text Block]

Prepaid Card Load Assets:

The Company maintains pre-funding accounts for its customers to facilitate prepaid card loads as initiated by the customer. These prepaid card load assets are carried on the Company's balance sheet with a corresponding liability.

The reconciliation of cash and cash equivalents to cash, cash equivalents, prepaid card load assets and merchant reserves is as follows for each period presented:

	Six Months Ended June 30,
	2020		2019
Beginning cash, cash equivalents, prepaid card load assets and merchant reserves:
Cash and cash equivalents	$	2,137,580	$	2,159,698
Prepaid card load assets		528,434		535,479
Merchant reserves		10,016,904		12,645,803
Total	$	12,682,918	$	15,340,980
Ending cash, cash equivalents, prepaid card load assets and merchant reserves:
Cash and cash equivalents	$	1,793,252	$	2,635,416
Prepaid card load assets		19,281,293		641,095
Merchant reserves		8,430,339		11,074,891
Total	$	29,504,884	$	14,351,402

Receivable [Policy Text Block]

Allowance for Estimated Losses:

The Company maintains an allowance for estimated doubtful accounts receivable resulting from the inability or failure of the Company's customers to make required payments. The Company determines the allowance for estimated doubtful accounts receivable losses based on an account-by-account review, taking into consideration such factors as the age of the outstanding balance, historical pattern of collections and financial condition of the customer. Past losses incurred by the Company due to bad debts have been within its expectations. If the financial conditions of the Company's customers were to deteriorate, resulting in an impairment of their ability to make contractual payments, additional allowances might be required. Estimates for doubtful account losses are variable based on the volume of transactions processed and could increase or decrease accordingly. The allowance for estimated doubtful accounts was

$186,067

 and

$123,165

 at

June 30, 2020

and

December 31, 2019

, respectively.

Internal Use Software, Policy [Policy Text Block]

Accounting for Internal Use Software:

The Company capitalizes the costs associated with software being developed or obtained for internal use when both the preliminary project stage is completed, and it is probable that computer software being developed will be completed and placed-in service. Capitalized costs include only (i) external direct costs of materials and services consumed in developing or obtaining internal-use software, (ii) payroll and other related costs for employees who are directly associated with and who devote time to the internal-use software project, and (iii) interest costs incurred, when material, while developing internal-use software. The Company ceases capitalization of such costs

no

later than the point at which the project is substantially complete and ready for its intended purpose. In the 

six

months ended

June 30, 2020

and

June 30, 2019

, the Company capitalized

$313,983

 and

$238,248

, respectively.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Valuation of Long-Lived and Intangible Assets:

The Company assesses the impairment of long-lived and intangible assets at least annually, and whenever events or changes in circumstances indicate that the carrying value

may

not

be recoverable. Factors considered important, which could trigger an impairment review, include the following: significant under performance relative to historical or projected future cash flows; significant changes in the manner of use of the assets or the strategy of the overall business; and significant negative industry trends. When management determines that the carrying value of long-lived and intangible assets

may

not

be recoverable, impairment is measured as the excess of the assets' carrying value over the estimated fair value.

No

impairment losses were recorded in

2019

or during the 

six

months ended

June 30, 2020

. Management is

not

aware of any impairment changes that

may

currently be required; however, the Company cannot predict the occurrence of events that might adversely affect the reported values in the future.

Contingent Liability Reserve Estimate, Policy [Policy Text Block]

Reserve for Processing Losses:

If, due to insolvency or bankruptcy of

one

of the Company's merchant customers, or for any other reason, the Company is

not

able to collect amounts from its credit card, ACH or prepaid customers that have been properly "charged back" by the customer, or if a prepaid cardholder incurs a negative balance, the Company must bear the credit risk for the full amount of the transaction. The Company

may

require cash deposits and other types of collateral from certain merchants to minimize any such risks. In addition, the Company utilizes multiple systems and procedures to manage merchant risk. ACH, prepaid and credit card merchant processing loss reserves are primarily determined by performing a historical analysis of the Company's loss experience, considering other factors that could affect that experience in the future, such as the types of transactions processed and nature of the merchant relationship with its consumers and the Company's relationship with the Company's prepaid card holders. This reserve amount is subject to the risk that actual losses

may

be greater than the Company's estimates. The Company has

not

incurred any significant processing losses to date. Estimates for processing losses are variable based on the volume of transactions processed and could increase or decrease accordingly. At

June 30, 2020

and

December 31, 2019

, the Company's reserve for processing losses was

$490,893

 and

$506,153

 respectively.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Pronouncements:

In

February 2016,

the FASB issued, "Leases (Topic

842

)."This update requires that a lessee recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with initial terms of

12

months or less, a lessee is permitted to make an accounting policy election by class of underlying asset

not

to recognize lease assets and liabilities. Similar to previous guidance, the update continues to differentiate between finance leases and operating leases, however this distinction now primarily relates to differences in the manner of expense recognition over time and in the classification of lease payments in the statement of cash flows. The updated guidance leaves the accounting for leases by lessors largely unchanged from existing GAAP. The guidance became effective for the Company on

January 1, 2019.

As a lessee, this standard primarily impacted the Company's accounting for leased facilities and office equipment, for which the Company recognized right of use assets of

$2,688,412

and a corresponding lease liability of

$2,775,259

on the Company's consolidated balance sheet on

January 1, 2019.

The Company adopted these provisions on

January 1, 2019

using the optional transition method that permits the Company to apply the new disclosure requirements in

2019

and continue to present comparative period information as required under FASB ASC Topic

840,

"Leases." The Company did

not

have a cumulative-effect adjustment to the opening balance of retained earnings at the date of adoption. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed it to exclude leases with an initial term of

12

months or less from the right-of-use assets and liabilities. Adoption of the standards had

no

impact on the Company's results of operations or liquidity.

If the Company determines that an arrangement is or contains a lease, the Company recognizes a right-of-use (ROU) asset and lease liability at the commencement date of the lease. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company's leases do

not

provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company's lease terms

may

include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expenses for lease payments are recognized on a straight-line basis over the lease term.

In

June 2018,

the FASB issued ASU

2018

-

07,

Compensation - Stock Compensation

which expands the scope of current guidance to include all share-based payment arrangements related to the acquisition of goods or services from both non-employees and employees. The guidance is effective for the Company for all fiscal years beginning after

December 15, 2018.

The Company adopted the new standard on

January 1, 2019.

The adoption of the new standard did

not

result in a change to the previously presented financial statements.

Accounting standards that have been issued or proposed by the FASB, the SEC or other standard setting bodies that do

not

require adoption until a future date are

not

expected to have a material impact on the consolidated financial statements upon adoption.

Reclassification, Comparability Adjustment [Policy Text Block]

Reclassification of Prior Year Presentation:

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had

no

effect on the reported results of operations. A reclassification has been made to the Consolidated Statement of Cash Flows for the

six

months ended

June 30, 2019

to identify the change in prepaid card load obligations previously reported in accrued expenses. This change in classification does

not

affect previously reported results of operations in the Consolidated Income Statement, and cash activities in the Consolidated Statement of Cash Flows for the

six

months ended

June 30, 2019

.

XML

Note 1 - Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
ACH and complementary service revenue	$	1,779,245	$	2,358,425	$	4,016,991	$	4,716,211
Credit card revenue		4,588,199		4,423,463		9,570,857		8,327,869
Prepaid card services revenue		593,109		375,491		1,144,384		701,331
Total revenue	$	6,960,553	$	7,157,379	$	14,732,232	$	13,745,411

Schedule of Cash and Cash Equivalents [Table Text Block]

	Six Months Ended June 30,
	2020		2019
Beginning cash, cash equivalents, prepaid card load assets and merchant reserves:
Cash and cash equivalents	$	2,137,580	$	2,159,698
Prepaid card load assets		528,434		535,479
Merchant reserves		10,016,904		12,645,803
Total	$	12,682,918	$	15,340,980
Ending cash, cash equivalents, prepaid card load assets and merchant reserves:
Cash and cash equivalents	$	1,793,252	$	2,635,416
Prepaid card load assets		19,281,293		641,095
Merchant reserves		8,430,339		11,074,891
Total	$	29,504,884	$	14,351,402

XML

Note 2 - Leases (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

2020 (six months)	$	172,409
2021		343,423
2022		351,334
2023		357,695
2024		356,250
Thereafter		1,469,679
Total minimum lease payments		3,050,790
Less imputed interest		(525,718	)
Total lease liabilities	$	2,525,072

XML

Note 3 - Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Accounts Payable and Accrued Liabilities [Table Text Block]

	June 30, 2020		December 31, 2019
Accrued commissions	$	381,652	$	530,908
Reserve for merchant losses		490,893		506,153
Other accrued expenses		214,824		92,385
Accrued taxes		160,605		99,850
Accrued salaries		130,315		131,255
Total accrued expenses	$	1,378,289	$	1,360,551

XML

Note 6 - Net (Loss) Per Share (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Numerator:
Numerator for basic and diluted (loss) per share, net (loss) available to common shareholders	$	(1,288,169	)	$	(1,275,611	)	$	(2,123,178	)	$	(2,348,500	)
Denominator:
Denominator for basic (loss) per share, weighted average shares outstanding		13,173,009			13,041,799			13,150,119			12,831,828
Effect of dilutive securities		—			—			—			—
Denominator for diluted earnings per share, adjust weighted average shares and assumed conversion		13,173,009			13,041,799			13,150,119			12,831,828
Basic (loss) per common share	$	(0.10	)	$	(0.10	)	$	(0.16	)	$	(0.18	)
Diluted (loss) per common share and common share equivalent	$	(0.10	)	$	(0.10	)	$	(0.16	)	$	(0.18	)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	Six Months Ended June 30,
	2020		2019
Anti-dilutive awards and options		5,467,780		3,874,139

XML

Note 1 - Basis of Presentation (Details Textual) - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019	Jan. 01, 2019
Contract with Customer, Liability, Current	$ 97,059		$ 123,529
Accounts Receivable, Allowance for Credit Loss, Current	186,067		123,165
Capitalized Computer Software, Additions	313,983	$ 238,248
Asset Impairment Charges, Total	0		0
SEC Schedule, 12-09, Valuation Allowances and Reserves, Amount, Ending Balance	490,893	$ 506,153	506,153
Operating Lease, Right-of-Use Asset	2,366,775		$ 2,480,902	$ 2,688,412
Operating Lease, Liability, Total	$ 2,525,072			$ 2,775,259

XML

Note 1 - Basis of Presentation - Schedule of Disaggregation of Revenue (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenues	$ 6,960,553	$ 7,157,379	$ 14,732,232	$ 13,745,411
ACH and Complementary Service Revenue [Member]
Revenues	1,779,245	2,358,425	4,016,991	4,716,211
Credit Card Revenue [Member]
Revenues	4,588,199	4,423,463	9,570,857	8,327,869
Prepaid Card Services Revenue [Member]
Revenues	$ 593,109	$ 375,491	$ 1,144,384	$ 701,331

XML

Note 1 - Basis of Presentation - Reconciliation of Cash and Cash Equivalents to Cash, Cash Equivalents and Merchant Reserves (Details) - USD ($)	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019
Cash and cash equivalents	$ 2,137,580	$ 2,635,416	$ 2,159,698
Prepaid card load assets	528,434	641,095	535,479
Merchant reserves	10,016,904	11,074,891	12,645,803
Cash, cash equivalents, prepaid card load assets and merchant reserves, beginning of period	12,682,918	14,351,402	15,340,980
Cash and cash equivalents	1,793,252	2,137,580	2,635,416
Prepaid card load assets	19,281,293	528,434	641,095
Merchant reserves	8,430,339	10,016,904	11,074,891
Cash, Cash Equivalents, Prepaid Card Load Assets and Merchant Reserves, End of Period	$ 29,504,884	$ 12,682,918	$ 14,351,402

XML

Note 2 - Leases (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Operating Lease, Expense	$ 61,049	$ 62,326	$ 128,693	$ 117,012

XML

Note 2 - Leases - Maturity of Lease Liabilities (Details) - USD ($)	Jun. 30, 2020	Jan. 01, 2019
2020 (six months)	$ 172,409
2021	343,423
2022	351,334
2023	357,695
2024	356,250
Thereafter	1,469,679
Total minimum lease payments	3,050,790
Less imputed interest	(525,718)
Total lease liabilities	$ 2,525,072	$ 2,775,259

XML

Note 3 - Accrued Expenses - Summary of Accrued Expenses (Details) - USD ($)	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019
Accrued commissions	$ 381,652		$ 530,908
Reserve for merchant losses	490,893	$ 506,153	506,153
Other accrued expenses	214,824		92,385
Accrued taxes	160,605		99,850
Accrued salaries	130,315		131,255
Total accrued expenses	$ 1,378,289	$ 1,360,551	$ 1,360,551

XML

Note 4 - PPP Loan Payable (Details Textual) - USD ($)		6 Months Ended
	Apr. 14, 2020	Jun. 30, 2020	Jun. 30, 2019
Proceeds from Issuance of Long-term Debt, Total		$ 813,500
Paycheck Protection Program CARES Act [Member]
Proceeds from Issuance of Long-term Debt, Total	$ 813,500

XML

Note 5 - Stockholders' Equity (Details Textual)						6 Months Ended
	Aug. 12, 2020 $ / shares shares	Jul. 01, 2020 USD ($) $ / shares shares	Apr. 01, 2020 $ / shares shares	Feb. 14, 2019 USD ($) $ / shares shares	Oct. 05, 2018 $ / shares shares	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Aug. 21, 2018 USD ($) $ / shares shares
Shares Issued, Price Per Share (in dollars per share) | $ / shares			$ 1.08
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)			1,444,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)			10 years
Performance Shares [Member] | President and Chief Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)			300,000
Performance Shares [Member] | Chief Revenue Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)			150,000
Performance Shares [Member] | Chief Financial Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)			200,000
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)			103,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)			3 years
Restricted Stock Units (RSUs) [Member] | Director One [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)			10,000
Restricted Stock Units (RSUs) [Member] | Director Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)			30,000
Restricted Stock Units (RSUs) [Member] | Director Three [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)			30,000
Public Stock Offering [Member]
Sale of Stock, Number of Shares Issued in Transaction (in shares)				769,230
Sale of Stock, Price Per Share (in dollars per share) | $ / shares				$ 2.60
Sale of Stock, Cash Fee, Percentage of Aggregate Gross Proceeds				6.00%
Sale of Stock, Consideration Received on Transaction | $				$ 1,800,000
Public Stock Offering [Member] | Maximum [Member]
Payments of Stock Issuance Costs | $				$ 40,000
Subsequent Event [Member] | Private Placement [Member]
Shares Issued, Price Per Share (in dollars per share) | $ / shares		$ 1.67
Stock Issued During Period, Shares, New Issues (in shares)		1,796,407
Proceeds from Issuance of Private Placement | $		$ 3,000,000
Measurement Input, Risk Free Interest Rate [Member]
Warrants and Rights Outstanding, Measurement Input								0.0277
Measurement Input, Expected Term [Member]
Warrants and Rights Outstanding, Measurement Input								5
Measurement Input, Expected Dividend Rate [Member]
Warrants and Rights Outstanding, Measurement Input								0
Measurement Input, Price Volatility [Member]
Warrants and Rights Outstanding, Measurement Input								0.646
Common Stock Warrants [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)								150,000
Warrants and Rights Outstanding | $								$ 135,764
Warrants and Rights Outstanding, Reduction of Revenue During Period | $						$ 17,973	$ 17,970
Common Stock Warrants [Member] | Subsequent Event [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares	$ 3.46
Stock Issued During Period, Shares, Warrants Exercised (in shares)	27,051
Class of Warrant or Right, Number of Warrants Exercised (in shares)	60,000
Common Stock Warrants, Tranche One [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)								30,000
Class of Warrant or Right, Vested During Period (in shares)					30,000
Class of Warrant or Right, Vested During Period, Exercise Price (in dollars per share) | $ / shares					$ 1.80
Common Stock Warrants, Tranche One [Member] | Measurement Input, Share Price [Member]
Warrants and Rights Outstanding, Measurement Input								0.94
Common Stock Warrants, Tranche Two [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)								120,000
Warrants and Rights Outstanding, Term (Year)								4 years
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares								$ 2
Class of Warrant or Right, Exercise Price of Warrants or Rights, Maximum Percentage of Market Price of Common Stock								120.00%
Common Stock Warrants, Tranche Two [Member] | Measurement Input, Share Price [Member]
Warrants and Rights Outstanding, Measurement Input								0.9

XML

Note 6 - Net (Loss) Per Share - Earnings Per Share Reconciliation (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Numerator:
Numerator for basic and diluted (loss) per share, net (loss) available to common shareholders	$ (1,288,169)	$ (1,275,611)	$ (2,123,178)	$ (2,348,500)
Denominator:
Denominator for basic (loss) per share, weighted average shares outstanding (in shares)	13,173,009	13,041,799	13,150,119	12,831,828
Effect of dilutive securities (in shares)
Denominator for diluted earnings per share, adjust weighted average shares and assumed conversion (in shares)	13,173,009	13,041,799	13,150,119	12,831,828
Basic (loss) per common share (in dollars per share)	$ (0.10)	$ (0.10)	$ (0.16)	$ (0.18)
Diluted (loss) per common share and common share equivalent (in dollars per share)	$ (0.10)	$ (0.10)	$ (0.16)	$ (0.18)

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Note 6 - Net (Loss) Per Share - Anti-dilutive Securities (Details) - shares	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Anti-dilutive awards and options (in shares)	5,467,780	3,874,139

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Note 7 - Income Taxes (Details Textual) - USD ($) $ in Millions	Jun. 30, 2020	Dec. 31, 2019
Deferred Tax Assets, Net of Valuation Allowance, Total	$ 1.4
Deferred Tax Assets, Valuation Allowance, Total	$ 10.0
Operating Loss Carryforwards, Total		$ 48.2
Operating Loss Carryforwards, Limitations on Use Amount		$ 0.1

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Note 8 - Related Party Transactions (Details Textual) - USD ($)				3 Months Ended		6 Months Ended		12 Months Ended
	Apr. 01, 2020	Jan. 06, 2020	Jan. 06, 2019	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Revenue from Contract with Customer, Excluding Assessed Tax, Total				$ 6,960,553	$ 7,157,379	$ 14,732,232	$ 13,745,411
Shares Issued, Price Per Share (in dollars per share)	$ 1.08
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)	1,444,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)	10 years
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)	103,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)	3 years
Angry Pug Sportswear [Member]
Related Party Transaction, Purchases from Related Party						$ 0		$ 13,831
Louis Hoch [Member] | Angry Pug Sportswear [Member]
Ownership Percentage						50.00%
Lush Rooftop [Member]
Revenue from Contract with Customer, Excluding Assessed Tax, Total						$ 0		6,665
BLVD Bar and Lounge [Member]
Revenue from Contract with Customer, Excluding Assessed Tax, Total						$ 3,219		$ 24,363
Chief Financial Officer [Member]
Treasury Stock, Shares, Acquired (in shares)		11,860	11,860
Treasury Stock Acquired, Average Cost Per Share (in dollars per share)		$ 1.74	$ 1.84
Chief Financial Officer [Member] | Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)	200,000
President and Chief Executive Officer [Member] | Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)	300,000
Chief Revenue Officer [Member] | Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)	150,000
Director One [Member] | Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)	10,000
Director Two [Member] | Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)	30,000
Director Three [Member] | Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)	30,000

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Note 10 - Subsequent Events (Details Textual) - USD ($)	Aug. 12, 2020	Jul. 01, 2020	Apr. 01, 2020
Shares Issued, Price Per Share (in dollars per share)			$ 1.08
Subsequent Event [Member] | Common Stock Warrants [Member]
Stock Issued During Period, Shares, Warrants Exercised (in shares)	27,051
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)	$ 3.46
Class of Warrant or Right, Number of Warrants Exercised (in shares)	60,000
Private Placement [Member] | Subsequent Event [Member]
Stock Issued During Period, Shares, New Issues (in shares)		1,796,407
Shares Issued, Price Per Share (in dollars per share)		$ 1.67
Proceeds from Issuance of Private Placement		$ 3,000,000