Usio, Inc. (NASDAQ:USIO) Q3 2021 Earnings Conference Call November 11, 2021 11:00 AM ET Company Participants Joe Hassett – Investor Relations Louis Hoch – President and Chief Executive Officer Houston Frost – Senior Vice President-Prepaid Services Tom Jewell – Senior Vice President and Chief Financial Officer Conference Call Participants Gary Prestopino – Barrington Research Barry Sine – Spartan Capital Securities Jon Hickman – Ladenburg Michael Diana – Maxim Group Operator Good morning and welcome to the U ...

Table of Contents 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 September 30, 2021 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) (State or other jurisdicti ...

Usio, Inc. (NASDAQ:USIO) Q2 2021 Earnings Conference Call August 13, 2021 11:00 AM ET Corporate Participants Joseph Hassett - Investor Relations Louis Hoch - President and Chief Executive Officer Greg Carter - Senior Vice President, Payment Facilitation Tom Jewell - Senior Vice President and Chief Financial Officer Houston Frost - Senior Vice President, Prepaid Services ConferenceCall Participants Gary Prestopino - Barrington Research Barry Sine - Spartan Capital Securities Jon Hickman - Ladenburg Brian Kin ...

Table of Contents 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, 2021 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 oth ...

Usio, Inc. (NASDAQ:USIO) Q1 2021 Earnings Conference Call May 14, 2021 11:00 AM ET Company Participants Joseph Hassett - IR Louis Hoch - President and CEO Greg Carter - SVP, Payment Facilitation Tom Jewell - SVP and CFO Houston Frost - SVP, Prepaid Services Conference Call Participants Barry Sine - Spartan Capital Securities Gary Prestopino - Barrington Research Brian Kinstlinger - Alliance Global Partners Jon Hickman - Ladenburg Operator Good afternoon and welcome to Usio Earnings Conference Call for the F ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited condensed consolidated financial statements for Usio, Inc., including the balance sheets, statements of operations, cash flows, and stockholders' equity, along with detailed notes explaining accounting policies, significant transactions, and financial position changes for the quarter ended March 31, 2021 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | March 31, 2021 (Unaudited) | December 31, 2020 | Change | | :----------------------------- | :------------------- | :------------------ | :----- | | Total Assets | $86,902,551 | $82,667,557 | +5.1% | | Total Liabilities | $70,632,197 | $65,964,196 | +7.1% | | Total Stockholders' Equity | $16,270,354 | $16,703,361 | -2.6% | - Prepaid card load assets significantly increased from **$7.61 million** at December 31, 2020, to **$18.56 million** at March 31, 2021, with a corresponding increase in prepaid card load obligations[8](index=8&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | YoY Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | | Revenues | $13,461,550 | $7,771,679 | +73.2% | | Cost of services | $10,554,313 | $5,843,395 | +80.6% | | Gross profit | $2,907,237 | $1,928,284 | +50.8% | | Operating (loss) | $(702,719) | $(869,327) | -19.2% | | Net (loss) | $(720,252) | $(835,009) | -13.8% | | Basic (loss) per common share | $(0.04) | $(0.06) | -33.3% | - Output Solutions revenue, acquired in December 2020, contributed **$3.77 million** to total revenue in Q1 2021[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :----------------- | :-------------------------------- | :-------------------------------- | | Operating | $10,480,238 | $(1,654,473) | | Investing | $(274,467) | $(152,654) | | Financing | $116,542 | $(26,629) | - The significant increase in cash from operating activities was largely due to a **$10.95 million** increase in prepaid card load obligations[14](index=14&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) | Metric | December 31, 2020 | March 31, 2021 | Change | | :----------------------- | :---------------- | :--------------- | :----- | | Total Stockholders' Equity | $16,703,361 | $16,270,354 | -2.6% | - Net loss for the period was **$(720,252)**, contributing to the decrease in equity[15](index=15&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Basis of Presentation](index=8&type=section&id=Note%201.%20Basis%20of%20Presentation) - Revenue is primarily from electronic payment processing and bill preparation/mailing services, recognized gross as a principal[18](index=18&type=chunk) | Revenue Source | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :----------------------------- | :-------------------------------- | :-------------------------------- | | ACH and complementary service | $3,078,456 | $2,237,746 | | Credit card revenue | $5,723,709 | $4,982,658 | | Prepaid card services revenue | $886,576 | $551,275 | | Output solutions revenue | $3,772,809 | — | | Total revenue | $13,461,550 | $7,771,679 | - The company maintains merchant reserves and prepaid card load assets with corresponding liabilities on the balance sheet[22](index=22&type=chunk)[23](index=23&type=chunk) [Note 2. Acquisition of Information Management Solutions, LLC.](index=12&type=section&id=Note%202.%20Acquisition%20of%20Information%20Management%20Solutions%2C%20LLC.) - Acquisition of IMS on December 15, 2020, for **$5,907,408** cash and **$552,283** in warrants[31](index=31&type=chunk) - IMS contributed approximately **$1.2 million** in revenue and **$0.6 million** in gross profit in December 2020[33](index=33&type=chunk) [Note 3. Leases](index=13&type=section&id=Note%203.%20Leases) | Lease Expense | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------ | :-------------------------------- | :-------------------------------- | | Operating | $104,131 | $68,086 | - Total lease liabilities as of March 31, 2021, are **$2,921,744**[35](index=35&type=chunk) [Note 4. Accrued Expenses](index=13&type=section&id=Note%204.%20Accrued%20Expenses) | Accrued Expense Category | March 31, 2021 | December 31, 2020 | | :----------------------- | :------------- | :---------------- | | Accrued commissions | $623,662 | $373,154 | | Reserve for merchant losses | $548,199 | $515,199 | | Accrued salaries | $360,154 | $217,816 | | Total accrued expenses | $1,971,192 | $1,463,944 | [Note 5. Equipment Loan](index=13&type=section&id=Note%205.%20Equipment%20Loan) - Secured a **$165,996** equipment loan on March 20, 2021, at **3.95%** interest for 36 months[37](index=37&type=chunk) [Note 6. Stockholders' Equity](index=13&type=section&id=Note%206.%20Stockholders%27%20Equity) - Issued **945,599** warrants to Information Management Solutions, LLC on December 15, 2020, with an exercise price of **$4.23**, valued at **$552,283**[40](index=40&type=chunk) - Granted **1,444,000** shares of common stock and **103,000** restricted stock units (RSUs) to employees and directors on April 1, 2020[41](index=41&type=chunk) - Raised **$3.0 million** gross proceeds from a private offering of **1,796,407** shares on July 1, 2020, and **$7.4 million** net proceeds from a public offering of **4,705,883** shares on September 25, 2020[42](index=42&type=chunk)[43](index=43&type=chunk) [Note 7. Net (Loss) Per Share](index=15&type=section&id=Note%207.%20Net%20%28Loss%29%20Per%20Share) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net (loss) available to common shareholders | $(720,252) | $(835,009) | | Basic (loss) per common share | $(0.04) | $(0.06) | | Diluted (loss) per common share | $(0.04) | $(0.06) | | Weighted average common shares outstanding (Basic/Diluted) | 19,931,935 | 13,127,229 | [Note 8. Income Taxes](index=16&type=section&id=Note%208.%20Income%20Taxes) - Recognized a deferred tax asset of approximately **$1.4 million** and a valuation allowance of **$7.5 million**[49](index=49&type=chunk) - Net operating loss carryforwards of approximately **$39.4 million** available at December 31, 2020, with some expiring in 2021 and others carrying forward indefinitely[50](index=50&type=chunk) [Note 9. Related Party Transactions](index=16&type=section&id=Note%209.%20Related%20Party%20Transactions) - Repurchased **11,860** shares of common stock from CFO Tom Jewell on January 6, 2021, for **$38,545** to cover taxes[53](index=53&type=chunk)[118](index=118&type=chunk) - CEO Louis Hoch's company, Angry Pug Sportswear, had no purchases from the company in Q1 2021, down from **$9,886** in 2020[52](index=52&type=chunk) [Note 10. COVID-19](index=16&type=section&id=Note%2010.%20COVID-19) - Doctor, dental, and veterinarian offices quickly recovered to pre-COVID levels, while consumer lending merchants remain below pre-COVID activity[58](index=58&type=chunk)[59](index=59&type=chunk)[103](index=103&type=chunk) - Prepaid business revenues increased due to partnerships with cities for government assistance programs using prepaid debit cards[59](index=59&type=chunk)[103](index=103&type=chunk) [Note 11. Legal Proceedings](index=17&type=section&id=Note%2011.%20Legal%20Proceedings) - Lawsuit and arbitration initiated against former Chief Revenue Officer Vaden Landers on January 19, 2021, for violating non-compete obligations[61](index=61&type=chunk)[110](index=110&type=chunk) [Note 12. Subsequent Events](index=18&type=section&id=Note%2012.%20Subsequent%20Events) - CEO Louis Hoch's annual base salary increased from **$350,000** to **$566,000**, effective April 18, 2021, with the cancellation of his **$216,000** annual bonus[67](index=67&type=chunk)[121](index=121&type=chunk) - CFO Tom Jewell's employment agreement term extended to two years, with an additional year's base salary payout upon change of control[68](index=68&type=chunk)[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides management's perspective on the company's financial performance and condition for the three months ended March 31, 2021, highlighting significant revenue growth driven by the IMS acquisition and organic expansion in payment processing, discussing changes in operating expenses, and detailing liquidity, capital resources, and the ongoing impact of the COVID-19 pandemic [Overview](index=18&type=section&id=Overview) - Company provides integrated electronic payment processing services (ACH, credit, PINless debit, prepaid card) and, post-IMS acquisition, electronic bill presentment and mailing[72](index=72&type=chunk) | Metric | Q1 2021 vs Q1 2020 | | :----------------------------- | :----------------- | | Credit card transactions processed | +108% | | Credit card dollars processed | +60% | | ACH (eCheck) transaction volumes | +37% | | Prepaid card load volume | +105% | | Prepaid card transaction volumes | +89% | | Total dollars processed | $1.870 billion vs $877 million | [Critical Accounting Policies](index=19&type=section&id=Critical%20Accounting%20Policies) - Financial statements require estimates and judgments affecting reported amounts of assets, liabilities, revenues, and expenses, particularly for revenue recognition, bad debt, investments, intangible assets, income taxes, and contingencies[78](index=78&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) [Revenues](index=20&type=section&id=Revenues) | Revenue Source | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :----------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | ACH and complementary service | $3,078,456 | $2,237,746 | $840,710 | 37.6% | | Credit card revenue | $5,723,709 | $4,982,658 | $741,051 | 14.9% | | Prepaid card services revenue | $886,576 | $551,275 | $335,301 | 60.8% | | Output solutions revenue | $3,772,809 | — | $3,772,809 | 100.0% | | Total Revenue | $13,461,550 | $7,771,679 | $5,689,871 | 73.2% | - Organic revenue growth was **24.6%** year-over-year, excluding Output Solutions[82](index=82&type=chunk) [Cost of Services](index=20&type=section&id=Cost%20of%20Services) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | % Change | | :-------------- | :-------------------------------- | :-------------------------------- | :------- | | Cost of services | $10,554,313 | $5,843,395 | +81% | [Gross Profit](index=21&type=section&id=Gross%20Profit) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | % Change | | :----------- | :-------------------------------- | :-------------------------------- | :------- | | Gross profit | $2,907,237 | $1,928,284 | +51% | [Stock-based Compensation](index=21&type=section&id=Stock-based%20Compensation) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------- | :-------------------------------- | :-------------------------------- | | Stock-based compensation | $327,715 | $287,710 | [Other Selling, General and Administrative Expenses](index=21&type=section&id=Other%20Selling%2C%20General%20and%20Administrative%20Expenses) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :----------------- | :-------------------------------- | :-------------------------------- | | Other SG&A expenses | $2,660,034 | $2,122,106 | [Depreciation and Amortization](index=21&type=section&id=Depreciation%20and%20Amortization) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Depreciation and amortization | $622,207 | $387,795 | [Other Income (Expense)](index=21&type=section&id=Other%20Income%20%28Expense%29) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------ | :-------------------------------- | :-------------------------------- | | Other income (expense), net | $2,467 | $11,844 | [Net Loss](index=21&type=section&id=Net%20Loss) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------- | :-------------------------------- | :-------------------------------- | | Net (loss) | $(720,252) | $(835,009) | - Company focuses on growing revenues, managing operating expenses, adding quality customers, meeting evolving requirements, adapting to technological changes, and assimilating acquisitions to achieve profitability[93](index=93&type=chunk) [Liquidity and Capital Resources](index=21&type=section&id=Liquidity%20and%20Capital%20Resources) | Metric | March 31, 2021 | December 31, 2020 | | :---------------------- | :------------- | :---------------- | | Cash and cash equivalents | $4.3 million | $5.0 million | - Raised **$3.0 million** gross from a private offering and **$7.4 million** net from a public offering in 2020[94](index=94&type=chunk)[95](index=95&type=chunk) [Cash Flows](index=22&type=section&id=Cash%20Flows) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :----------------- | :-------------------------------- | :-------------------------------- | | Operating | $10.5 million | $(1.7) million | | Investing | $(0.27) million | $(0.15) million | | Financing | $0.1 million | $(0.03) million | - Excluding merchant reserves, prepaid card load assets, customer deposits, and lease assets/liabilities, cash used by operating activities was **$0.6 million** in Q1 2021[97](index=97&type=chunk) [Material Trends and Uncertainties](index=23&type=section&id=Material%20Trends%20and%20Uncertainties) - COVID-19 led to initial adverse effects on doctor, dental, veterinarian offices, and non-bank consumer lending, with the former recovering and the latter still below pre-COVID levels[103](index=103&type=chunk) - Prepaid business revenues increased due to government assistance programs using prepaid debit cards for financial aid[103](index=103&type=chunk) [Off-Balance Sheet Arrangements](index=23&type=section&id=Off-Balance%20Sheet%20Arrangements) - No material off-balance sheet arrangements exist[105](index=105&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) As a smaller reporting company, Usio, Inc. is electing scaled disclosure reporting obligations and is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Usio, Inc. is exempt from providing quantitative and qualitative disclosures about market risk[106](index=106&type=chunk) [Item 4. Controls and Procedures.](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2021, and concluded they were effective in ensuring timely and accurate reporting, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were deemed effective as of March 31, 2021[108](index=108&type=chunk) - No material changes in internal control over financial reporting occurred during Q1 2021[109](index=109&type=chunk) [PART II – OTHER INFORMATION](index=24&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings.](index=24&type=section&id=Item%201.%20Legal%20Proceedings.) The company initiated a lawsuit and arbitration against its former Chief Revenue Officer, Vaden Landers, on January 19, 2021, alleging violations of his non-compete agreement, with Mr. Landers filing counterclaims which the company denies, and both proceedings are in their initial stages - Lawsuit and arbitration initiated against former Chief Revenue Officer Vaden Landers on January 19, 2021, for violating non-compete obligations[110](index=110&type=chunk) - Mr. Landers filed counterclaims, including for a declaratory judgment on non-compete unenforceability and breach of employment agreement, which the company denies[112](index=112&type=chunk) [Item 1A. Risk Factors.](index=24&type=section&id=Item%201A.%20Risk%20Factors.) There have been no material changes to the risk factors previously disclosed in the company's annual report on Form 10-K for the fiscal year ended December 31, 2020 - No material changes to risk factors since the Form 10-K filed on March 30, 2021[115](index=115&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=25&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) On February 5, 2021, the company issued 19,795 shares of common stock in a cashless exercise of warrants by University FanCards, LLC, and detailed its ongoing share buy-back program, under which 15,122 shares were repurchased during Q1 2021, including 11,860 shares from the CFO to cover taxes - Issued **19,795** shares of common stock to University FanCards, LLC in a cashless warrant exercise on February 5, 2021[116](index=116&type=chunk) | Period | Total shares purchased | Average price paid per share | Maximum dollar value remaining under program | | :------------------------- | :--------------------- | :--------------------------- | :------------------------------------------- | | January 1 - January 31, 2021 | 14,825 | $3.20 | $1,072,909 | | February 1 - March 1, 2021 | 297 | $6.58 | $1,070,955 | | Total | 15,122 | | $1,070,955 | [Item 3. Defaults Upon Senior Securities.](index=25&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) The company reported no defaults upon senior securities during the period - No defaults upon senior securities[119](index=119&type=chunk) [Item 4. Mine Safety Disclosures (Not applicable).](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosures%20%28Not%20applicable%29.) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[120](index=120&type=chunk) [Item 5. Other Information.](index=25&type=section&id=Item%205.%20Other%20Information.) Subsequent to the reporting period, on April 18, 2021, the Compensation Committee approved amendments to the employment agreements of CEO Louis Hoch and CFO Tom Jewell, increasing Mr. Hoch's annual base salary to $566,000, replacing his annual bonus, and extending Mr. Jewell's term to two years, with an additional year's base salary payout upon a change of control - CEO Louis Hoch's annual base salary increased from **$350,000** to **$566,000**, effective April 18, 2021, with the cancellation of his **$216,000** annual bonus[121](index=121&type=chunk) - CFO Tom Jewell's employment agreement term extended to two years, with an additional year's base salary payout upon change of control[122](index=122&type=chunk) [Item 6. Exhibits.](index=27&type=section&id=Item%206.%20Exhibits.) This section lists all exhibits filed with the Form 10-Q, including articles of incorporation, by-laws, employment agreements, bank sponsorship agreements, asset purchase agreements, warrant agreements, and certifications - Lists various corporate documents, employment agreements, and financial agreements filed as exhibits[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk)[129](index=129&type=chunk)[133](index=133&type=chunk)

Usio, Inc. (NASDAQ:USIO) Q4 2020 Earnings Conference Call March 30, 2021 11:00 AM ET Company Participants Joseph Hassett - IR Louis Hoch - President and CEO Greg Carter - SVP, Payment Facilitation Tom Jewell - SVP and CFO Houston Frost - SVP, Prepaid Services Conference Call Participants Barry Sine - Spartan Capital Securities LLC Gary Prestopino - Barrington Research Brian Kinstlinger - Alliance Global Partners * Operator Good day, and welcome to Usio Earnings Conference Call for the Fourth Quarter Ended D ...

PART I [Business](index=5&type=section&id=Item%201.%20Business) Usio, Inc. offers integrated electronic payment processing services, including ACH, credit, debit, and prepaid card solutions, expanded by strategic acquisitions - Usio provides a comprehensive suite of payment services, including ACH, credit/debit card processing, and customizable prepaid cards for corporate and consumer use[15](index=15&type=chunk) - In December 2020, Usio acquired Information Management Solutions (IMS), expanding its portfolio with electronic bill presentment and printing/mailing services[17](index=17&type=chunk)[24](index=24&type=chunk) - The company's 'PayFac-in-a-Box' platform enables software developers to monetize payments, offering various card and ACH issuance via a single API[20](index=20&type=chunk) Growth in U.S. Non-Cash Payments (2015-2018) | Payment Type | Metric | 2015 | 2018 | Growth | | :--- | :--- | :--- | :--- | :--- | | Core Non-Cash Payments | Number (billions) | 143.6 | 174.2 | +30.6 billion | | Core Non-Cash Payments | Value (trillions) | $86.79 | $97.04 | +$10.25 trillion | | ACH Payments | Annual Growth (Number) | - | - | 6.0% | | Card Payments | Annual Growth (Number) | - | - | 8.9% | | Prepaid Debit Cards | Annual Growth (Number) | - | - | 10.5% | - Merchant customer accounts grew by **30% in 2020**, from 3,830 at the end of 2019 to 4,984 at the end of 2020, demonstrating significant expansion[53](index=53&type=chunk) - No single customer accounted for more than **10% of revenues** in either 2020 or 2019, indicating a diversified customer base[54](index=54&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces business, industry, and stock-related risks, including COVID-19 impacts, regulatory changes, and stock volatility - The COVID-19 pandemic created economic uncertainty, initially affecting transaction volumes, though some segments recovered and the prepaid business benefited from relief fund disbursements[80](index=80&type=chunk)[82](index=82&type=chunk) - The company has a history of substantial losses, reporting a net loss of **$2.9 million** in 2020 and **$5.1 million** in 2019, with an accumulated deficit of **$65.1 million** as of December 31, 2020[95](index=95&type=chunk) - Usio's operations are highly dependent on relationships with third-party processors and sponsor banks to access ACH and card networks, posing service disruption risks if partners fail to comply with rules[93](index=93&type=chunk)[94](index=94&type=chunk) - The business is subject to extensive and complex regulations, including the Dodd-Frank Act, CARD Act, anti-money laundering laws, and consumer protection rules, which could increase compliance costs and operational risks[100](index=100&type=chunk)[101](index=101&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) - The company's common stock is volatile, with prices fluctuating **between $0.75 and $3.72** in 2020, and is subject to SEC 'penny stock' rules which can limit liquidity[144](index=144&type=chunk)[145](index=145&type=chunk) [Properties](index=31&type=section&id=Item%202.%20Properties) Usio, Inc. leases multiple office and operational spaces across San Antonio, Nashville, and Austin, with various lease expiration dates Leased Properties Overview | Location | Purpose | Lease Expiration | Square Footage | | :--- | :--- | :--- | :--- | | San Antonio, TX | Headquarters | July 2024 | 6,000 - 10,535 | | Nashville, TN | Sales Organization | April 2023 | 3,794 | | San Antonio, TX | Output Solutions | September 2024 | 22,400 | | Austin, TX | Technology Org. | January 2023 | 1,890 | | San Antonio, TX | HQ Expansion | September 2024 | 2,734 | [Legal Proceedings](index=31&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in legal matters, including a defaulted note receivable and a lawsuit against a former officer for non-compete violations - The company has a loss reserve of **$145,000** as of December 31, 2020, for a defaulted note receivable from C2Go, Inc., reflecting the unlikelihood of recovery[156](index=156&type=chunk) - In January 2021, Usio sued its former Chief Revenue Officer, Vaden Landers, for violating his non-compete obligations, with Mr. Landers filing counterclaims for damages exceeding $1,000,000[157](index=157&type=chunk)[158](index=158&type=chunk) [Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[162](index=162&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=33&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Usio's common stock trades on Nasdaq, with no dividends paid, and a share repurchase program in place - The company's common stock is listed on the Nasdaq Capital Market under the ticker symbol 'USIO'[164](index=164&type=chunk) - The company has never declared or paid dividends and has no plans to do so in the foreseeable future[166](index=166&type=chunk) - A share buyback program was renewed in November 2019, with **$1,120,409** available for repurchases as of December 31, 2020[173](index=173&type=chunk) [Selected Financial Data](index=34&type=section&id=Item%206.%20Selected%20Financial%20Data) As a smaller reporting company, Usio, Inc. is not required to provide selected financial data - The company is a smaller reporting company and is not required to provide selected financial data[176](index=176&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Usio's 2020 revenue grew 14.4% to $32.3 million, narrowing net loss to $2.9 million, and improving liquidity Revenue by Segment (FY 2020 vs. FY 2019) | Revenue Segment | 2020 | 2019 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | ACH and complementary service | $8,471,705 | $9,343,974 | $(872,269) | (9.3)% | | Credit card | $19,453,501 | $17,329,322 | $2,124,179 | 12.3% | | Prepaid card services | $3,166,580 | $1,527,239 | $1,639,341 | 107.3% | | Output solutions | $1,160,037 | $0 | $1,160,037 | 100.0% | | **Total Revenue** | **$32,251,823** | **$28,200,535** | **$4,051,288** | **14.4%** | Key Profitability Metrics (FY 2020 vs. FY 2019) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Gross Profit | $7.4 million | $5.9 million | | Net Loss | $(2.9) million | $(5.1) million | - The company's liquidity position improved significantly, with cash and cash equivalents increasing to $5.0 million at year-end 2020 from $2.1 million at year-end 2019[202](index=202&type=chunk) - Financing activities in 2020 provided **$10.0 million** in cash, primarily from a **$3.0 million** private offering and **$7.4 million** in net proceeds from a public offering[204](index=204&type=chunk)[205](index=205&type=chunk)[209](index=209&type=chunk) - The company received an **$813,500 PPP loan** which was fully forgiven in December 2020, contributing to other income[199](index=199&type=chunk)[203](index=203&type=chunk) - The COVID-19 pandemic had a mixed impact, adversely affecting consumer lending merchants but creating new opportunities in the prepaid business for disbursing financial assistance[218](index=218&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=43&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Usio, Inc. is not required to provide market risk disclosures - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[228](index=228&type=chunk) [Financial Statements and Supplementary Data](index=44&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Audited financial statements show total assets grew to $82.7 million, equity doubled, and net loss narrowed to $2.9 million - The independent auditor, ADKF, P.C., issued an **unqualified opinion** that the consolidated financial statements present fairly, in all material respects, the financial position of the company[232](index=232&type=chunk) - Critical audit matters identified were the valuation of intangible assets (customer lists) and the valuation allowance for deferred tax assets due to significant management judgments involved[236](index=236&type=chunk)[238](index=238&type=chunk)[240](index=240&type=chunk) Consolidated Balance Sheet Summary (as of Dec 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Total Assets | $82,667,557 | $61,560,179 | | Total Liabilities | $65,964,196 | $53,991,844 | | Total Stockholders' Equity | $16,703,361 | $7,568,335 | Consolidated Statement of Operations Summary (Year Ended Dec 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Revenues | $32,251,823 | $28,200,535 | | Gross Profit | $7,375,893 | $5,949,210 | | Net Loss | $(2,906,183) | $(5,115,747) | | Basic & Diluted Loss Per Share | $(0.19) | $(0.39) | - In December 2020, the company acquired Information Management Solutions, LLC (IMS) for **$5.9 million** in cash and warrants valued at **$552,283**, adding **$4.4 million** in customer list intangible assets[288](index=288&type=chunk)[290](index=290&type=chunk) - The company has net operating loss carryforwards of approximately **$39.4 million**, but a valuation allowance has been provided, reducing the net deferred tax asset to **$1.4 million** due to uncertainty of realization[277](index=277&type=chunk)[323](index=323&type=chunk) [Changes In and Disagreements with Accountants on Accounting and Financial Disclosure](index=69&type=section&id=Item%209.%20Changes%20In%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) No changes in or disagreements with accountants on accounting and financial disclosure were reported - None reported[353](index=353&type=chunk) [Controls and Procedures](index=69&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - Management concluded that as of December 31, 2020, the company's disclosure controls and procedures were **effective**[354](index=354&type=chunk) - Management concluded that as of December 31, 2020, the company's internal control over financial reporting was **effective**[355](index=355&type=chunk) [Other Information](index=70&type=section&id=Item%209B.%20Other%20Information) No other information is reported for this item - None[358](index=358&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=71&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the 2021 Proxy Statement[360](index=360&type=chunk) [Executive Compensation](index=71&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the 2021 Proxy Statement[365](index=365&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=71&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership and equity compensation plan details are incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the 2021 Proxy Statement[366](index=366&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=71&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Related party transactions and director independence information is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the 2021 Proxy Statement[367](index=367&type=chunk) [Principal Accounting Fees and Services](index=71&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Principal accounting fees and services information is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the 2021 Proxy Statement[368](index=368&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=72&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists consolidated financial statements and provides a comprehensive index of all exhibits filed with the Form 10-K - The consolidated financial statements are filed in Part II, Item 8 of the report[370](index=370&type=chunk) - All financial statement schedules have been omitted because they are not required or applicable[371](index=371&type=chunk) - A detailed list of exhibits is provided, including articles of incorporation, bylaws, employment agreements, acquisition agreements, and various certifications[373](index=373&type=chunk) [Form 10-K Summary](index=78&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K summary is provided - None[380](index=380&type=chunk)

Usio, Inc. (NASDAQ:USIO) Q3 2020 Earnings Conference Call November 13, 2020 11:00 AM ET Company Participants Joseph Hassett - IR Louis Hoch - President and CEO Greg Carter - SVP, Payment Facilitation Tom Jewell - SVP and CFO Houston Frost - SVP, Prepaid Services Conference Call Participants Gary Prestopino - Barrington Research Jon Hickman - Ladenburg Brian Kinstlinger - Alliance Global Partners Michael Diana - Maxim Group Operator Good morning, and welcome to Usio Earnings Conference Call for the Third Qua ...

Table of Contents 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 September 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 o ...