Business Operations and Growth - The company serves multiple industry verticals with a cloud-based Fintech payment processing ecosystem, facilitating payment acceptance and funds disbursement [23]. - Since 1998, the company has expanded into various payment methods, including ACH, PINless debit, and Remotely Created Checks, enhancing customer access to faster payment options [24]. - The company introduced the Consumer Choice product in 2022, allowing flexible payment distributions through various methods, which enhances cross-selling opportunities [25]. - In 2023, the company began expanding into Real Time Payments (RTP) as an alternative to ACH payments, improving speed and scalability in payment processing [26]. - The company has invested in new equipment to enhance its electronic bill presentment and payment services, aiming to reduce costs and increase efficiency [36]. - The company increased its merchant accounts by 20%, reaching 7,549 customers as of December 31, 2024, up from 6,281 customers a year earlier [65]. - The company has invested in new equipment to enhance capacity and speed, including a new inserter and folder implemented in October 2023, with further enhancements expected throughout 2024 [55]. - The company has launched a "One Usio" strategy to integrate its various product offerings, aiming to provide a unified approach to meet customer needs [64]. - The company has enhanced its electronic billing services following the acquisition of IMS, expanding its capabilities in document management and high-volume printing [55]. - The company has completed four acquisitions since 2014 to expand its product offerings, including the acquisition of IMS for electronic bill presentment services [112]. Financial Performance - The company reported a net income of 3.3millionfortheyearendedDecember31,2024,butincurredanetlossof0.5 million for the year ended December 31, 2023, resulting in an accumulated deficit of 68.0millionasofDecember31,2024[126].−Thecompanyhasnetdeferredtaxassetsof4.7 million as of December 31, 2024, but realization of these assets is uncertain and could result in a charge against earnings if not realized [128]. - Fraud losses recorded by the company were 311,306in2024and573,281 in 2023, indicating a decline in fraudulent accounts due to improved security measures [144]. - The company estimates cash disbursements of 5.9millionforseparationpaymentsundertheemploymentagreementwithitsChairmanandCEO,LouisHoch,intheeventofachangeincontrolorterminationwithoutcause[137].−Thecompanymayneedtoraiseadditionalcapitaltosupportproductdevelopmentandmarketexpansion,withpotentialrelianceonpublicorprivateequityofferings,debtfinancing,orcorporatecollaborations[127].−Thecompanyisexposedtorisksfromreducedconsumerspending,whichcouldadverselyaffectrevenuesandearningsderivedfromprocessingconsumertransactions[143].−Thecompanyhasrecordedanaccumulateddeficitof68.0 million, indicating ongoing financial challenges and uncertainty in future operating results [126]. Regulatory and Compliance Risks - The company is subject to various federal, state, local, and foreign environmental, health, and safety laws, incurring costs to maintain compliance, although these costs have not been material to the company [86]. - The company is governed by the CARD Act and other regulations regarding gift cards, with potential violations leading to fines and suspension of gift card offerings, adversely impacting revenues [81]. - The company is subject to evolving data privacy laws, including the California Consumer Privacy Act (CCPA) and similar laws in other states, which could affect its operations [83]. - The company is under increasing pressure from partner banks to enhance anti-money laundering (AML) and Bank Secrecy Act (BSA) compliance due to regulatory scrutiny [84]. - The company is subject to various U.S. laws and regulations related to privacy, data protection, and information security, with potential for significant penalties for non-compliance [165]. - The California Consumer Privacy Act (CCPA) provides expanded privacy rights and could increase the risk of data breach litigation [168]. - Compliance with anti-money laundering laws and regulations, including the Bank Secrecy Act, is mandatory and could increase operational costs [174]. - The company must adhere to economic and trade sanctions programs administered by the Treasury Department's Office of Foreign Assets Control [175]. - The Financial Crimes Enforcement Network's rules regarding prepaid products impose additional compliance obligations that could increase costs [179]. Cybersecurity and Data Protection - The company faces risks related to cybersecurity threats, including ransomware attacks, which could compromise data integrity and lead to significant costs [96]. - A ransomware attack detected on December 25, 2021, resulted in unauthorized access to non-payment processing data, but the company remained operational and restored its systems without material impact on business [98]. - The company collects and stores personal identifiable information, requiring compliance with various privacy laws, with potential breaches leading to significant fines and operational impacts [100]. - The company has multiple programs in place to detect and respond to data security incidents, but evolving techniques used by unauthorized parties pose ongoing risks [102]. - The company has implemented a comprehensive cybersecurity risk management program, certified to conform to SOC 2 Type 2 and PCI standards as of 2024 [207]. - The CTO, with over 21 years of experience at the company, leads the cybersecurity organization and reports to the CEO and Risk and Cybersecurity Committee [210]. Market Trends and Competition - The electronic payment processing industry is expected to benefit from increased adoption of electronic payment methods by small businesses, driven by competitive pressures [46]. - Estimated retail e-commerce sales for 2024 are projected to reach 1,192.6billion,anincreaseofapproximately8.1165,817 and 157,682fortheyearsendedDecember31,2024and2023,respectively[212].−AnadditionalleaseamendmentinSanAntonioadded2,734squarefeet,withincrementalannualrentrangingfrom57,000 to 60,000,andrentalexpensesof49,653 and 48,113for2024and2023,respectively[213].−AfurtherleaseamendmentinSanAntonioadded6,628squarefeet,withannualrentrangingfrom144,000 to 156,000,andrentalexpensesof109,355 and 75,269for2024and2023,respectively[214].−TheCompanyleased3,794squarefeetinNashville,TN,withrentalexpensesof0 and 36,995for2024and2023,respectively,anddidnotrenewtheleaseuponexpiration[215].−AleaseassumedfromtheacquisitionofInformationManagementSolutions,LLCincludes22,400squarefeet,withannualrentsrangingfrom174,000 to 225,000,andrentalexpensesof135,489 and 117,836for2024and2023,respectively[216].−TheCompanyhasaleaseinAustin,TXfor1,890squarefeet,withrentalexpensesof83,610 and 79,467for2024and2023,respectively[217].−Totaloperatingleaseexpensewasapproximately660,000 and 674,000fortheyearsendedDecember31,2024and2023,respectively,with544,000 as fixed operating expense and 116,000asinterestexpensein2024[219].−Theweightedaverageremainingleasetermis3.49years,withaweightedaveragediscountrateof4.421.28 and $1.93 in 2024, indicating high volatility in the market [186]. - As of March 21, 2025, the company had 26,514,356 shares of Common Stock outstanding, with 4,748,457 shares held by affiliates [198]. - The company has not paid any cash dividends to date and does not anticipate issuing cash dividends in the foreseeable future [196]. - The company has reserved 5,000,000 shares of Common Stock under the 2015 Equity Incentive Plan, which automatically increases by 5% annually [190]. - The company has also reserved 2,500,000 shares under the 2023 Employee Stock Purchase Plan, with an automatic increase based on a percentage of outstanding shares [191]. - The company's directors and executive officers beneficially owned approximately 18% of the outstanding Common Stock as of March 21, 2025, allowing them substantial control over operations [199]. - The company has adopted measures that may make it more difficult for a third party to acquire control, including a classified board of directors [200].
Usio(USIO)2025-03-26 20:27