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What changed in Paysign, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Paysign, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+185 added−176 removedSource: 10-K (2024-03-27) vs 10-K (2023-03-22)

Top changes in Paysign, Inc.'s 2023 10-K

185 paragraphs added · 176 removed · 135 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

46 edited+6 added−8 removed77 unchanged
Biggest changeOur revenues include fees generated from cardholder fees, interchange, card program management fees, transaction claims processing fees, and settlement income. Revenue from cardholder fees, interchange, card program management fees, and transaction claims processing fees is recorded when the performance obligation is fulfilled. Settlement income is recorded at the expiration of the card program. What Are Prepaid Cards?
Biggest changeRevenue from cardholder fees, interchange, card program management fees, and transaction claims processing fees is recorded when the performance obligation is fulfilled. Breakage is recorded ratably over the estimated card life based on historical redemption patterns, market-specific trends, escheatment rules and existing economic conditions and relates solely to our open-loop gift card business which began at the end of 2022.
As a result, the information that we provide to our stockholders may be different from what you might receive from other public reporting companies in which you hold equity interests. 6 In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies.
As a result, the information that we provide to our stockholders may be different from what you might receive from other public reporting companies in which you hold equity interests. In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies.
These issues include utilization of debit-based products to combat copay accumulators and maximizers, currently one of the largest threats in the marketplace for pharmaceutical manufacturers. 4 Source Plasma Donor Payments Plasma derived therapies are lifesaving treatments used to treat various rare conditions.
These issues include utilization of debit-based products to combat copay accumulators and maximizers, currently one of the largest threats in the marketplace for pharmaceutical manufacturers. Source Plasma Donor Payments Plasma derived therapies are lifesaving treatments used to treat various rare conditions.
Complying with future regulation could be expensive or require us to change the way we operate our business. Money Transfer and Payment Instrument Licensing Regulations We are not currently subject to money transfer and payment instrument licensing regulations; however, we have plans to introduce products in the future that would be subject to such regulations.
Complying with future regulation could be expensive or require us to change the way we operate our business. 7 Money Transfer and Payment Instrument Licensing Regulations We are not currently subject to money transfer and payment instrument licensing regulations; however, we have plans to introduce products in the future that would be subject to such regulations.
In addition, we would be required to maintain "permissible investments" in an amount equivalent to all "outstanding payment obligations." 8 Escheatment Laws Unclaimed property laws of every U.S. state require that certain information be tracked on card programs.
In addition, we would be required to maintain "permissible investments" in an amount equivalent to all "outstanding payment obligations." Escheatment Laws Unclaimed property laws of every U.S. state require that certain information be tracked on card programs.
Bank Regulations All of the cards that we service are issued by a state-chartered bank. Thus, we are subject to the oversight of the regulators for, and certain laws applicable to, these card issuing banks.
Bank Regulations All of the cards that we service are issued by state-chartered banks. Thus, we are subject to the oversight of the regulators for, and certain laws applicable to, these card issuing banks.
The solution can be utilized either as a stand-alone web-based solution or integrated with existing donor management systems, giving plasma donation centers an increased level of flexibility. The Company entered the market in late 2011 and has seen significant growth in this market segment. Currently, the Company services approximately 40% of the plasma collection centers in the United States.
The solution can be utilized either as a stand-alone web-based solution or integrated with existing donor management systems, giving plasma donation centers an increased level of flexibility. The Company entered the market in late 2011 and has seen significant growth in this market segment. Currently, the Company services approximately 39% of the plasma collection centers in the United States.
The card networks set the standards with which we and the card issuing banks must comply. 9 Environmental Sustainability Climate-related events, including extreme weather events and natural disasters and their effect on critical infrastructure in the U.S. could have similar adverse effects on our operations, customers or third-party suppliers.
The card networks set the standards with which we and the card issuing banks must comply. 8 Environmental Sustainability Climate-related events, including extreme weather events and natural disasters and their effect on critical infrastructure in the U.S. could have similar adverse effects on our operations, customers or third-party suppliers.
We could also face potential negative ESG-related publicity in traditional media or social media if shareholders or other stakeholders determine that we have not adequately considered or addressed ESG matters. Shareholders are increasingly submitting proposals related to a variety of ESG issues to public companies, and we may receive such proposals in the future.
We could also face potential negative ESG-related publicity in traditional media or social media if stockholders or other stakeholders determine that we have not adequately considered or addressed ESG matters. Stockholders are increasingly submitting proposals related to a variety of ESG issues to public companies, and we may receive such proposals in the future.
If we are unable to properly protect the privacy and security of health information entrusted to us, we could be subject to substantial penalties, damages and injunctive relief. 10 In addition to HIPAA, numerous other state and federal laws govern the collection, dissemination, use, access to and confidentiality of individually identifiable health information and healthcare provider information.
If we are unable to properly protect the privacy and security of health information entrusted to us, we could be subject to substantial penalties, damages and injunctive relief. 9 In addition to HIPAA, numerous other state and federal laws govern the collection, dissemination, use, access to and confidentiality of individually identifiable health information and healthcare provider information.
We will remain an emerging growth company until the earliest to occur of: (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion; (ii) the last day of 2024; (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (referred to as the Exchange Act), which would occur if the market value of our common equity held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter; or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during any three-year period.
We will remain an emerging growth company until the earliest to occur of: (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion; (ii) the last day of 2024; (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange, which would occur if the market value of our common equity held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter; or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during any three-year period.
To provide these insights, Paysign has data scientist and a team of analytic professionals dedicated to these products and clients. Pharmacy Based Voucher and Copay Affordability Programs: Voucher and Copay programs have become an industry standard offering for pharmaceutical brands entering a market or seeking to increase market share.
To provide these insights, Paysign has data scientist and a team of analytic professionals dedicated to these products and clients. Pharmacy Based Voucher and Patient Affordability Programs: Voucher and patient affordability programs have become an industry standard offering for pharmaceutical brands entering a market or seeking to increase market share.
Furthermore, our shareholders, customers and other stakeholders have begun to consider how corporations are addressing environmental, social and governance ("ESG") issues. Government regulators, investors, customers and the general public are increasingly focused on ESG practices and disclosures, and views about ESG are diverse and rapidly changing.
Furthermore, our stockholders, customers and other stakeholders have begun to consider how corporations are addressing environmental, social and governance ("ESG") issues. Government regulators, investors, customers and the general public are increasingly focused on ESG practices and disclosures, and views about ESG are diverse and rapidly changing.
ITEM 1. BUSINESS. Overview Paysign, Inc. (the “Company,” “Paysign,” “we” or “our”), headquartered in Nevada, was incorporated on August 24, 1995, and trades under the symbol PAYS on The Nasdaq Stock Market LLC. Paysign is a vertically integrated provider of prepaid card products and processing services for corporate, consumer and government applications.
ITEM 1. BUSINESS. Overview Paysign, Inc. (the “Company,” “Paysign,” “we” or “our”), headquartered in Nevada, was incorporated on August 24, 1995, and trades under the symbol PAYS on The Nasdaq Stock Market LLC. We are a vertically integrated provider of prepaid card products and processing services for corporate, consumer and government applications.
Prepaid cards can either be open-loop, closed-loop, or restricted-loop. Open-loop, or network-branded, prepaid cards carry an acceptance mark of a national or international payment network such as Visa, Interlink, Plus, MasterCard, Maestro, Cirrus, Discover or Pulse and can be used anywhere that card brand is accepted.
Open-loop, or network-branded, prepaid cards carry an acceptance mark of a national or international payment network such as Visa, Interlink, Plus, MasterCard, Maestro, Cirrus, Discover or Pulse and can be used anywhere that card brand is accepted.
The Paysign brand encompasses all of our current and future prepaid product offerings, including but not limited to, corporate incentives, healthcare related payment solutions for clinical trials, donations and co-pay assistance, payroll, disbursement payments, corporate expense cards and solutions designed for the public sector as well as general purpose reloadable prepaid cards and prepaid gift cards.
The Paysign brand encompasses all of our current and future prepaid product offerings, including but not limited to, corporate incentives, healthcare related payment solutions for clinical trials, donations and patient affordability solutions, payroll, disbursement payments, corporate expense cards and solutions designed for the public sector as well as general purpose reloadable prepaid cards and prepaid gift cards.
Employees and Independent Contractors As of December 31, 2022, we had approximately one hundred ten employees and independent contractors. We have no collective bargaining agreements with our employees, and believe all independent contractor and employment agreement relationships are satisfactory.
Employees and Independent Contractors As of December 31, 2023, we had approximately one hundred twenty-three employees and independent contractors. We have no collective bargaining agreements with our employees, and believe all independent contractor and employment agreement relationships are satisfactory.
Currently, we believe that 39 U.S. jurisdictions would require us to obtain a license to operate a money transfer business. As a licensee, we would be subject to certain restrictions and requirements, including reporting, net worth and surety bonding requirements and requirements for regulatory approval of controlling stockholders, agent locations and consumer forms and disclosures.
Currently, we believe that nearly every state would require us to obtain a money transmitter license to operate a money transfer business. As a licensee, we would be subject to certain restrictions and requirements, including reporting, net worth and surety bonding requirements and requirements for regulatory approval of controlling stockholders, agent locations and consumer forms and disclosures.
To date, we have issued millions of prepaid cards under programs implemented for Fortune 500 companies, multinationals, as well as top pharmaceutical manufacturers, universities and social media companies. As of December 31, 2022, we had approximately 5.3 million cardholders participating in approximately 550 card programs.
To date, we have issued millions of prepaid cards under programs implemented for Fortune 500 companies, multinationals, as well as top pharmaceutical manufacturers, universities and social media companies. As of December 31, 2023, we had approximately 6.4 million cardholders participating in approximately 600 card programs.
Open-loop prepaid cards provide consumers, businesses and governments with the efficiency, security and flexibility of digital payments reducing costs associated with handling cash, checks and other paper-based payment processes, and provides the end user a payment product that is accessible and with global utility, convenient, safer than cash, can be used as a budgeting tool and contains protections against fraud and theft. 1 The prepaid market continues to experience significant growth due to consumers, corporations and governments embracing improved technology, greater convenience, more product choices and greater flexibility.
Open-loop prepaid cards provide consumers, businesses and governments with the efficiency, security and flexibility of digital payments reducing costs associated with handling cash, checks and other paper-based payment processes, and provides the end user a payment product that is accessible and with global utility, convenient, safer than cash, can be used as a budgeting tool and contains protections against fraud and theft.
Source plasma is the plasma collected from individual donors that serves as the raw material for the further manufacture into these life saving therapies. Historically, source plasma donation centers compensated their donors with cash or check. Over the past several years, plasma donation centers have migrated to a prepaid card solution for donor payments.
Source plasma is the plasma collected from individual donors that serves as the raw material for the further manufacture into these life saving therapies. In the past, source plasma donation centers compensated their donors with cash or check. Today, the predominant compensation means for donor payments is a prepaid card.
These products can be used to cover all or a portion of the patient’s financial responsibility. We continue to build out additional products as industry concerns continue to emerge presenting new business opportunities.
Our products are specifically designed to work within the established workflow of the specific healthcare provider. These products can be used to cover all or a portion of the patient’s financial responsibility. We continue to build out additional products as industry concerns continue to emerge presenting new business opportunities.
More recently, having built the necessary infrastructure and added essential staff, we have increased our focus and sales efforts on disbursement programs, corporate incentive and expense card programs, as well as retargeting the pharmaceutical industry with co-pay assistance, buy and bill and other prepaid programs designed to maximize patient enrollment, adherence and retention.
More recently, having built the necessary infrastructure and added essential staff, we have increased our focus and sales efforts on disbursement programs, corporate incentive and expense card programs, as well as retargeting the pharmaceutical industry with patient affordability solutions such as co-pay assistance, buy and bill and other prepaid programs designed to maximize patient enrollment, adherence and retention. 2 The Paysign ® Brand In order to leverage the capabilities of the Paysign platform and successfully expand our product offerings, we established the Paysign brand of prepaid cards and solutions.
We hire independent contractors on an as-needed basis, and we may retain additional employees and consultants during the next twelve months, including additional executive management personnel with substantial experience in business development. Available Information Our internet address is www.paysign.com. Information on our website does not constitute part of this Annual Report.
We hire independent contractors on an as-needed basis, and we may retain additional employees and consultants during the next twelve months, including additional patient affordability, information technology, product and project management, fraud, and customer care personnel to support our growing businesses. Available Information Our internet address is www.paysign.com. Information on our website does not constitute part of this Annual Report.
Our products and services are generally subject to federal, state and local laws and regulations, including: · anti-money laundering and anti-bribery laws; · money transfer and payment instrument licensing regulations; · escheatment laws; · privacy and information safeguard laws; · data and personal information protection; · bank regulations; · consumer protection laws; · tax; · environmental sustainability (including climate change); · false claims laws and other fraud and abuse restrictions; and · privacy and security standards under the Health Insurance Portability and Accountability Act (“HIPAA”) or other laws. 7 These laws are often evolving and sometimes ambiguous or inconsistent, and the extent to which they apply to us or the banks that issue our cards, our clients or our third-party service providers is at times unclear.
Our products and services are generally subject to federal, state and local laws and regulations, including: · anti-money laundering and anti-bribery laws; · money transfer and payment instrument licensing regulations; · escheatment laws; · privacy and information safeguard laws; · data and personal information protection; · bank regulations; 6 · consumer protection laws; · tax; · environmental sustainability (including climate change); · false claims laws and other fraud and abuse restrictions; and · privacy and security standards under the Health Insurance Portability and Accountability Act (“HIPAA”) or other laws.
We use a variety of proprietary and licensed standards-based technologies to implement our platforms, including those which provide for orchestration, interoperability and process control.
We use a variety of proprietary and licensed standards-based technologies to implement our platforms, including those which provide for orchestration, interoperability and process control. The platforms also integrate a data infrastructure to support both transaction processing and data warehousing for operational support and data analytics.
Other Services Customer Service Center In order to provide a full range of services to our customers, we offer a fully staffed, in-house Customer Service Center which is operational 24 hours a day, 7 days per week consisting of live bilingual customer care representatives.
The Company markets this product to a targeted portion of its existing cardholder base through existing communication points and to customers and employees of new clients. 4 Other Services Customer Service Center In order to provide a full range of services to our customers, we offer a fully staffed, in-house Customer Service Center which is operational 24 hours a day, 7 days per week consisting of live bilingual customer care representatives.
Highly fragmented segments currently include financial account processing, customer relationship management solutions, electronic funds transfer and prepaid solutions. Many of our existing and potential competitors have longer operating histories, greater financial strength and more recognized brands in the industry. These competitors may be able to attract customers more easily because of their financial resources and awareness in the market.
Certain segments of the financial services and healthcare industries tend to be highly fragmented, with numerous companies competing for market share. Highly fragmented segments currently include financial account processing, customer relationship management solutions, electronic funds transfer and prepaid solutions. Many of our existing and potential competitors have longer operating histories, greater financial strength and more recognized brands in the industry.
Our larger competitors can also devote substantially more resources to business development and may adopt more aggressive pricing policies. To compete with these companies, we rely primarily on direct marketing strategies including strategic marketing partners. Sales and Marketing We market our Paysign payment solutions through direct marketing by the Company’s sales team.
These competitors may be able to attract customers more easily because of their financial resources and awareness in the market. Our larger competitors can also devote substantially more resources to business development and may adopt more aggressive pricing policies. To compete with these companies, we rely primarily on direct marketing strategies including strategic marketing partners.
Prepaid cards have also proven to be an attractive alternative to traditional bank accounts for certain segments of the population, particularly those without, or who could not qualify for, a checking or savings account.
The prepaid market continues to experience significant growth due to consumers, corporations and governments embracing improved technology, greater convenience, more product choices and greater flexibility. Prepaid cards have also proven to be an attractive alternative to traditional bank accounts for certain segments of the population, particularly those without, or who could not qualify for, a checking or savings account.
These revenues can include fees from program set-up; customization and development; data processing and report generation; card production and fulfillment; transaction fees derived from card usage; inactivity fees; card replacement fees; program administration fees; and settlement income.
As an end-to-end payment processor and prepaid card program manager, we derive our revenue from all stages of the card lifecycle. These revenues can include fees from program set-up; customization and development; data processing and report generation; card production and fulfillment; transaction fees derived from card usage; inactivity fees; card replacement fees; program administration fees; breakage; and settlement income.
Our offerings also allow clients to directly manage more of their pharmacy benefits and include pharmacy claims adjudication, network and payment administration, client call center service and support, reporting, rebate management, as well as implementation, training and account management.
Our offerings also allow clients to directly manage more of their pharmacy benefits and include pharmacy claims adjudication, network and payment administration, client call center service and support, reporting, rebate management, as well as implementation, training and account management. 3 Patient Affordability Products and Services Paysign provides targeted products and services designed to address financial barriers related to patients starting and remaining on brand name and biosimilar drug therapies.
Markets and Major Customers We have no major customers and are not reliant on any individual card program. We manage multiple programs at any given time. As of December 31, 2022, we managed approximately 550 card programs with approximately 5.3 million participating cardholders.
Markets and Major Customers We have no major customers and are not reliant on any individual card program. We manage multiple programs at any given time.
Our primary market focus is on companies and municipalities that require a streamlined payment solution for rewards, rebates, payment assistance, and other payments to their customers, employees, agents and others. To reach these markets, we focus our sales efforts on direct contact with our target market and attendance at various industry specific conferences.
Sales and Marketing We market our Paysign payment solutions through direct marketing by the Company’s sales team. Our primary market focus is on companies and municipalities that require a streamlined payment solution for rewards, rebates, payment assistance, and other payments to their customers, employees, agents and others.
A prepaid card is a payment product that is pre-funded and not directly linked to an individual bank account. Prepaid cards are unlike debit cards that are attached to a personal or business checking account and draw funds from that linked account or a credit card that draws funds from a line of credit.
Prepaid cards are unlike debit cards that are attached to a personal or business checking account and draw funds from that linked account or a credit card that draws funds from a line of credit. Prepaid cards can either be open-loop, closed-loop, or restricted-loop.
Consumers, both banked and unbanked, use prepaid cards such as general purpose reloadable (“GPR”) cards, to conduct their day-to-day financial transactions such as paying bills, depositing checks, and receiving direct deposits.
Javelin predicts 8% annual growth from 2024 through 2027 with total open-loop loads projected to reach $836 billion by 2027. 1 Consumers, both banked and unbanked, use prepaid cards such as general purpose reloadable (“GPR”) cards, to conduct their day-to-day financial transactions such as paying bills, depositing checks, and receiving direct deposits.
Our clients can receive customized reports, track card usage and attach surveys to the activation process to gain market intelligence. · Speed to Market: Our clients can get rewards and incentives to the intended recipients in a much quicker manner than traditional methods using our corporate incentive card products. 3 Per Diem/ Corporate Expense Payments Per Diem, Corporate Expense and Business Travel Cards are reloadable prepaid card that allows businesses, non–profits and government agencies the ability to control employee spending while reducing administration costs by eliminating the need for traditional expense reports.
Our clients can receive customized reports, track card usage and attach surveys to the activation process to gain market intelligence. · Speed to Market: Our clients can get rewards and incentives to the intended recipients in a much quicker manner than traditional methods using our corporate incentive card products.
In 2022, we also expanded our product offerings into payroll cards, retail disbursement cards and gift card distribution. In the future, we expect to further expand our product offerings into other prepaid card offerings such as travel cards and expense reimbursement cards. Our cards are sponsored by our issuing bank partners.
In the future, we expect to further expand our product into other prepaid card offerings such as travel cards and expense reimbursement cards. Our cards are sponsored by our issuing bank partners. Our revenues include fees generated from cardholder fees, interchange, card program management fees, transaction claims processing fees, breakage, and settlement income.
We may, at times, utilize independent contractors who make direct sales and are paid on a commission basis only.
To reach these markets, we focus our sales efforts on direct contact with our target market and attendance at various industry specific conferences. We may, at times, utilize independent contractors who make direct sales and are paid on a commission basis only.
We have developed prepaid card programs for corporate incentive and rewards including, but not limited to, consumer rebates and rewards, donor compensation, clinical trials, healthcare reimbursement payments and pharmaceutical payment assistance. We have expanded our product offerings to include additional corporate incentive products and demand deposit accounts accessible with a debit card.
Our suite of product offerings includes solutions for corporate rewards, prepaid gift cards, general purpose reloadable debit cards, employee incentives, consumer rebates, donor compensation, clinical trials, healthcare reimbursement payments and pharmaceutical payment assistance, and demand deposit accounts accessible with a debit card.
Funds are provided by the sponsoring pharmaceutical company for use at retail pharmacies, specialty pharmacies, hospitals, doctors’ offices and clinics nationwide. Our pharmaceutical solutions provide payment claims processing and other administrative services for clients according to client benefit plan designs.
Our pharmaceutical solutions provide payment claims processing and other administrative services for clients according to client benefit plan designs.
We deploy a fully staffed, in-house customer service department which utilizes bilingual customer service representatives, interactive voice response (“IVR”), and two-way short message service (“SMS”) messaging and text alerts.
We employ a fully staffed, in-house customer service department which utilizes bilingual customer service representatives, interactive voice response (“IVR”), and two-way short message service (“SMS”) messaging and text alerts. As we do not have our own banking license to issue open-loop prepaid cards, our cards are offered to end users through our relationships with bank issuers.
We are currently focusing on marketing these card products to large corporations. Pharmaceutical Market Our Paysign solutions for the pharmaceutical industry are a specialized, adjudicated solution that pays all or a portion of a patient’s out-of-pocket costs associated with a prescription drug purchase.
Pharmaceutical Market Our Paysign solutions for the pharmaceutical industry are a specialized, adjudicated solution that pays all or a portion of a patient’s out-of-pocket costs associated with a prescription drug purchase. Funds are provided by the sponsoring pharmaceutical company for use at retail pharmacies, specialty pharmacies, hospitals, doctors’ offices and clinics nationwide.
We compete with a variety of companies in our markets and our competitors vary in size, scope and breadth of products and services offered. Certain segments of the financial services and healthcare industries tend to be highly fragmented, with numerous companies competing for market share.
Competition The markets for financial products and services, including prepaid cards and services related thereto, are intensely competitive. We compete with a variety of companies in our markets and our competitors vary in size, scope and breadth of products and services offered.
Implications of Being an Emerging Growth Company Paysign qualifies as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of reduced reporting requirements that are otherwise applicable to public companies.
An emerging growth company may take advantage of reduced reporting requirements that are otherwise applicable to public companies.
As we are a payment processor and prepaid card program manager, we derive our revenue from all stages of the prepaid card lifecycle. We provide a card processing platform consisting of proprietary systems and software applications based on the unique needs of our clients. We have extended our processing business capabilities through our proprietary Paysign platform.
As we are a payment processor and prepaid card program manager, we derive our revenue from all stages of the prepaid card lifecycle. We operate on a powerful, high-availability payments platform with cutting-edge fintech capabilities that can be seamlessly integrated with our clients’ systems.
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Through the Paysign platform, we provide a variety of services including transaction processing, cardholder enrollment, value loading, cardholder account management, reporting, and customer service. The Paysign platform was built on modern cross-platform architecture and designed to be highly flexible, scalable and customizable.
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This distinctive positioning allows us to provide end-to-end technologies that securely manage transaction processing, cardholder enrollment, value loading, account management, data and analytics, and customer service. Our architecture is known for its cross-platform compatibility, flexibility, and scalability – allowing our clients and partners to leverage these advantages for cost savings and revenue opportunities.
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The platform’s flexibility and ease of customization has allowed us to expand our operational capabilities by facilitating our entry into new markets within the payments space. The Paysign platform delivers cost benefits and revenue building opportunities to our partners.
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Settlement income is recorded at the expiration of the card program and relates solely to our pharma prepaid business which ended in 2022. What Are Prepaid Cards? A prepaid card is a payment product that is pre-funded and not directly linked to an individual bank account.
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The Mercator Advisory Group’s 2023 Prepaid Card Data Book , shows that “Open-loop growth appears to be more moderate when we look at 2020–2026, but this projection considers the impact of temporary unemployment surges in 2020, which proved to be an outlier.” Mercator forecasts open-loop prepaid card loads will have a compound annual growth rate of 5.0% from 2021 to 2026, when total loads are expected to reach $728 billion.
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Javelin Advisory Services 20 th Annual U.S. Open-Loop Prepaid Card Market Forecast, 2023-2027, shows that Open-loop prepaid growth in the short-term is strong and forecasted to remain strong in the long-term. This forecast is led by strong anticipated growth in the cash access market, the largest open-loop market.
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As we do not have our own banking license to issue open-loop prepaid cards, our cards are offered to end users through our relationships with bank issuers. 2 As an end-to-end payment processor and prepaid card program manager, we derive our revenue from all stages of the card lifecycle.
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Per Diem/ Corporate Expense Payments Per Diem, Corporate Expense and Business Travel Cards are reloadable prepaid card that allows businesses, non–profits and government agencies the ability to control employee spending while reducing administration costs by eliminating the need for traditional expense reports. We are currently focusing on marketing these card products to large corporations.
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The Paysign ® Brand In order to leverage the capabilities of the Paysign platform and successfully expand our product offerings, we established the Paysign brand of prepaid cards and solutions.
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As of December 31, 2023, we managed approximately 600 card programs with approximately 6.4 million participating cardholders. 5 Implications of Being an Emerging Growth Company Paysign qualifies as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.
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Patient Affordability Products and Services Paysign provides targeted products and services designed to address financial barriers related to patients starting and remaining on brand name and biosimilar drug therapies. Our products are specifically designed to work within the established workflow of the specific healthcare provider.
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These laws are often evolving and sometimes ambiguous or inconsistent, and the extent to which they apply to us or the banks that issue our cards, our clients or our third-party service providers is at times unclear.
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The Company markets this product to a targeted portion of its existing cardholder base through existing communication points and to customers and employees of new clients.
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The platforms also integrate a data infrastructure to support both transaction processing and data warehousing for operational support and data analytics. 5 Competition The markets for financial products and services, including prepaid cards and services related thereto, are intensely competitive.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

26 edited+7 added−11 removed74 unchanged
Biggest changeWe expect that the trading price for our common stock will be affected by any research or reports that securities analysts publish about us or our business. If one or more of the analysts who may elect to cover us or our business downgrade their evaluations of our common stock, the price of our common stock would likely decline.
Biggest changeIf securities analysts do not publish research or reports about our business or if they publish negative evaluations of our common stock, the trading price of our common stock could decline. We expect that the trading price for our common stock will be affected by any research or reports that securities analysts publish about us or our business.
If our operating revenue growth rates slow materially or decline, our business, operating results and financial condition could be adversely affected. We operate in a highly regulated environment, and failure by us or business partners to comply with applicable laws and regulations could have an adverse effect on our business, financial position and results of operations.
If our operating revenue growth rates slow materially or decline, our business, operating results and financial condition could be adversely affected. 10 We operate in a highly regulated environment, and failure by us or business partners to comply with applicable laws and regulations could have an adverse effect on our business, financial position and results of operations.
Our growth also depends on our ability to develop and market other prepaid card products that can utilize the Paysign platform. 11 As the prepaid financial services industry continues to develop, our competitors may be able to offer products and services that are, or that are perceived to be, substantially similar to or better than ours.
Our growth also depends on our ability to develop and market other prepaid card products that can utilize the Paysign platform. As the prepaid financial services industry continues to develop, our competitors may be able to offer products and services that are, or that are perceived to be, substantially similar to or better than ours.
As of the date of this filing, we had not received any notice or claim of infringement from any party. 15 The market for electronic commerce services is evolving and may not continue to develop or grow rapidly enough for us to maintain profitability.
As of the date of this filing, we had not received any notice or claim of infringement from any party. The market for electronic commerce services is evolving and may not continue to develop or grow rapidly enough for us to maintain profitability.
Our relationships with various banks is currently, and will be for the foreseeable future, a critical component of our ability to conduct our business and to maintain our revenue and expense structure, because we are currently unable to issue our own cards.
Our relationships with various banks are currently, and will be for the foreseeable future, a critical component of our ability to conduct our business and to maintain our revenue and expense structure, because we are currently unable to issue our own cards.
Fluctuations in our quarterly or annual results of operations may be due to a number of factors, including, but not limited to: · the timing and volume of purchases, use and reloads of our prepaid cards and related products and services; · the timing and success of new product or service introductions by us or our competitors; · seasonality in the purchase or use of our products and services; · reductions in the level of interchange rates that can be charged; · fluctuations in customer retention rates; · changes in the mix of products and services that we sell; · changes in the mix of retail distributors through which we sell our products and services; · the timing of commencement, renegotiation or termination of relationships with significant third party service providers; · changes in our or our competitors' pricing policies or sales terms; · the timing of commencement and termination of major advertising campaigns; · the timing of costs related to the development or acquisition of complementary businesses; · the timing of costs of any major litigation to which we are a party; · the amount and timing of operating costs related to the maintenance and expansion of our business, operations and infrastructure; · our ability to control costs, including third-party service provider costs; · volatility in the trading price of our common stock, which may lead to higher stock-based compensation expenses or fluctuations in the valuations of vesting equity; and · changes in the regulatory environment affecting the banking or electronic payments industries generally or prepaid financial services specifically. 19 ITEM 1B.
Fluctuations in our quarterly or annual results of operations may be due to a number of factors, including, but not limited to: · the timing and volume of purchases, use and reloads of our prepaid cards and related products and services; · the timing and success of new product or service introductions by us or our competitors; · seasonality in the purchase or use of our products and services; · reductions in the level of interchange rates that can be charged; · fluctuations in customer retention rates; 16 · changes in the mix of products and services that we sell; · changes in the mix of retail distributors through which we sell our products and services; · the timing of commencement, renegotiation or termination of relationships with significant third-party service providers; · changes in our or our competitors’ pricing policies or sales terms; · the timing of commencement and termination of major advertising campaigns; · the timing of costs related to the development or acquisition of complementary businesses; · the timing of costs of any major litigation to which we are a party; · the amount and timing of operating costs related to the maintenance and expansion of our business, operations and infrastructure; · our ability to control costs, including third-party service provider costs; · volatility in the trading price of our common stock, which may lead to higher stock-based compensation expenses or fluctuations in the valuations of vesting equity; and · changes in the regulatory environment affecting the banking or electronic payments industries generally or prepaid financial services specifically.
In addition, we may be unable to maintain adequate banking relationships or renew our agreements with the banks that currently issue our cards under terms at least as favorable to us as those existing before renewal. 14 We receive important services from third-party vendors, and replacing them could entail unexpected integration costs.
In addition, we may be unable to maintain adequate banking relationships or renew our agreements with the banks that currently issue our cards under terms at least as favorable to us as those existing before renewal. 12 We receive important services from third-party vendors, and replacing them could entail unexpected integration costs.
Our management and other personnel need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and make some activities more time-consuming and costly. In addition, two putative class action lawsuits were filed against us, which could require our management to devote significant time to defending.
Our management and other personnel need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and make some activities more time-consuming and costly. In addition, three putative class action lawsuits were filed against us, which could require our management to devote significant time to defending.
In addition, these stockholders, some of which have representatives sitting on our board of directors, could use their voting control to maintain our existing management and directors in office, delay or prevent changes of control of our company, or support or reject other management and board of director proposals that are subject to stockholder approval, such as amendments to our employee stock plans and approvals of significant financing transactions.
In addition, these stockholders, some of which have representatives sitting on our board of directors (the “Board”), could use their voting control to maintain our existing management and directors in office, delay or prevent changes of control of our company, or support or reject other management and Board proposals that are subject to stockholder approval, such as amendments to our employee stock plans and approvals of significant financing transactions.
Our ability to engage in loading and purchasing transactions could be adversely affected by the actions and failure of other institutions and companies, our card issuing banks and distributors that carry our prepaid card products. As such, we have exposure to many different industries and counterparties.
The soundness of other institutions and companies could adversely affect us. Our ability to engage in loading and purchasing transactions could be adversely affected by the actions and failure of other institutions and companies, our card issuing banks and distributors that carry our prepaid card products. As such, we have exposure to many different industries and counterparties.
Legal Proceedings” for additional information. 18 If we are not able to comply with the requirements of Sarbanes-Oxley Act, or if we or our independent registered public accounting firm identify additional deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC and other regulatory authorities.
If we are not able to comply with the requirements of Sarbanes-Oxley Act, or if we or our independent registered public accounting firm identify additional deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC and other regulatory authorities.
Our stock price could decline due to the large number of outstanding shares of our common stock eligible for future sale. We have 52,464,932 shares of common stock outstanding as of March 17, 2023, assuming no exercise of outstanding options or unvested restricted stock awards.
Our stock price could decline due to the large number of outstanding shares of our common stock eligible for future sale. We have 52,968,374 shares of common stock outstanding as of March 22, 2023, assuming no exercise of outstanding options or unvested restricted stock awards.
Deficiencies or weaknesses in our internal control over financial reporting that are not promptly identified and remediated may adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, decrease investor confidence in our Company, and reduce the value of our common stock.
Management is also responsible for reporting on the effectiveness of internal control over financial reporting. 11 Deficiencies or weaknesses in our internal control over financial reporting that are not promptly identified and remediated may adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, decrease investor confidence in our Company, and reduce the value of our common stock.
Management believes future growth in the electronic commerce market will be driven by the cost, convenience, ease of use and quality of products and services offered to consumers and businesses. In order to maintain our profitability, consumers and businesses must continue to adopt our products and services.
Management believes future growth in the electronic commerce market will be driven by the cost, convenience, ease of use and quality of products and services offered to consumers and businesses.
If we are sued in connection with any data security breach, we could be involved in protracted and costly litigation. If unsuccessful in defending that litigation, we might be forced to pay damages and/or change our business practices or pricing structure, any of which could have a material adverse effect on our operating revenues and profitability.
If unsuccessful in defending that litigation, we might be forced to pay damages and/or change our business practices or pricing structure, any of which could have a material adverse effect on our operating revenues and profitability.
The trading price of our common stock could be subject to wide fluctuations in response to, among other things, quarterly variations in operating and financial results, announcements of technological innovations or new products by our competitors or us, changes in prices of our products and services or our competitors’ products and services, changes in product mix, or changes in our revenue and revenue growth rates. 17 If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our common stock, the trading price of our common stock could decline.
The trading price of our common stock could be subject to wide fluctuations in response to, among other things, quarterly variations in operating and financial results, announcements of technological innovations or new products by our competitors or us, changes in prices of our products and services or our competitors’ products and services, changes in product mix, or changes in our revenue and revenue growth rates.
The market for our common stock is highly volatile. In 2022, our stock price fluctuated between $1.24 and $3.20.
The market for our common stock is highly volatile. In 2023, our stock price fluctuated between $1.69 and $3.98.
Regulation of the payments industry has increased significantly in recent years. A number of regulations impacting the credit card industry were recently implemented. Additional changes may require us to incur significant expenses to redevelop our products.
Regulation of the payments industry has increased significantly in recent years. Additional regulatory changes may require us to incur significant expenses to redevelop our products.
A security or privacy breach may: · cause our customers to lose confidence in our services; · deter consumers from using our services; · harm our reputation; · require that we expend significant additional resources related to our information security systems and could result in a disruption of our operations; · expose us to liability; · increase expenses related to remediation costs; and · decrease market acceptance of electronic commerce transactions and prepaid use. 13 Although management believes that we have utilized proven systems designed for robust data security and integrity in electronic transactions, our use of these applications may be insufficient to address changing technological or market conditions and the security and privacy concerns of existing and potential customers.
A security or privacy breach may: · cause our customers to lose confidence in our services; · deter consumers from using our services; · harm our reputation; · require that we expend significant additional resources related to our information security systems and could result in a disruption of our operations; · expose us to liability; · increase expenses related to remediation costs; and · decrease market acceptance of electronic commerce transactions and prepaid use.
The banks that issue our cards, our clients and our third-party service providers also may experience similar security breaches involving the receipt, transmission and storage of our confidential customer and other information.
The banks that issue our cards, our clients and our third-party service providers also may experience similar security breaches involving the receipt, transmission and storage of our confidential customer and other information. Improper access to our or these third parties’ systems or databases could result in the theft, publication, deletion or modification of confidential customer and other information.
If we do not respond to rapid technological change or changes in industry standards, our products and services could become obsolete and we could lose our customers. If competitors introduce new products and services, or if new industry standards and practices emerge, our existing product and service offerings, technology and systems may become obsolete.
If competitors introduce new products and services, or if new industry standards and practices emerge, our existing product and service offerings, technology and systems may become obsolete.
Concentration of ownership among our existing directors, executive officers and principal stockholders may prevent new investors from influencing significant corporate decisions. Our directors, executive officers, and holders of more than 5% of our total shares of common stock outstanding and their respective affiliates, in the aggregate, beneficially own, as of March 17, 2023, approximately 42% of our outstanding common stock.
Our directors, executive officers, and holders of more than 5% of our total shares of common stock outstanding and their respective affiliates, in the aggregate, beneficially own, as of March 22, 2023, approximately 52% of our outstanding common stock.
Improper access to our or these third parties' systems or databases could result in the theft, publication, deletion or modification of confidential customer and other information. 12 A data security breach of the systems on which sensitive cardholder data and account information are stored could lead to fraudulent activity involving our products and services, reputational damage and claims or regulatory actions against us.
A data security breach of the systems on which sensitive cardholder data and account information are stored could lead to fraudulent activity involving our products and services, reputational damage and claims or regulatory actions against us. If we are sued in connection with any data security breach, we could be involved in protracted and costly litigation.
We intend to retain any earnings to finance the operation and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. As a result, you will likely receive a return on your investment in our common stock only if the market price of our common stock increases.
We intend to retain any earnings to finance the operation and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future.
The measures we have taken, including the implementation of disaster recovery plans and redundant computer systems, may not be successful, and we may experience other problems unrelated to system failures.
The measures we have taken, including the implementation of disaster recovery plans and redundant computer systems, may not be successful, and we may experience other problems unrelated to system failures. We may also experience software defects, development delays and installation difficulties, any of which could harm our business and reputation and expose us to potential liability and increased operating expenses.
If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies and products or grant unfavorable license terms. We depend on key personnel and could be harmed by the loss of their services because of the limited number of qualified people in our industry.
If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies and products or grant unfavorable license terms. 14 Global and regional economic conditions could harm our business.
Removed
Management is also responsible for reporting on the effectiveness of internal control over financial reporting.
Added
Although management believes that we have utilized proven systems designed for robust data security and integrity in electronic transactions, our use of these applications may be insufficient to address changing technological or market conditions and the security and privacy concerns of existing and potential customers.
Removed
As a result of the COVID-19 pandemic, our business, financial condition, profitability, and cash flows have been, and are likely to continue to be, negatively impacted. The coronavirus (“COVID-19”) pandemic, which started in late 2019 and reached the United States in early 2020, continues to impact the economy of the United States and the rest of the world.
Added
In order to maintain our profitability, consumers and businesses must continue to adopt our products and services. 13 If we do not respond to rapid technological change or changes in industry standards, our products and services could become obsolete and we could lose our customers.
Removed
While the direct disruption appears to have abated due to the availability of vaccines and other factors, the ultimate duration and severity of the pandemic remain uncertain, particularly given the development of new variants that continue to spread, and the economic repercussions are still manifesting themselves.
Added
Adverse global and regional economic conditions such as turmoil affecting the banking system and financial markets, including, but not limited to, tightening in the credit markets, extreme volatility or distress in the financial markets (including the fixed income, credit, currency, equity, and commodity markets), higher unemployment, high consumer debt levels, recessionary or inflationary pressures, supply chain issues, reduced consumer confidence or economic activity, government fiscal and tax policies, U.S. and international trade relationships, agreements, treaties, tariffs and restrictive actions, the inability of a government to enact a budget in a fiscal year, government shutdowns, government austerity programs, and other negative financial news or macroeconomic developments could have a material adverse impact on the demand for our products and services, including a reduction in the volume and size of transactions on our payments platform.
Removed
The COVID-19 outbreak caused plasma center closures, and the stimulus packages signed into law during 2020 and 2021 reduced the incentive for individuals to donate plasma for supplementary income. Additionally, labor shortages at plasma donation centers and restrictions preventing Mexican nationals with tourist visas from being compensated for donating plasma, have further impacted donations.
Added
Additionally, an inability to access the capital markets when needed due to volatility or illiquidity in the markets or increased regulatory liquidity and capital requirements may strain our liquidity position. We depend on key personnel and could be harmed by the loss of their services because of the limited number of qualified people in our industry.
Removed
Those developments have had an adverse impact on the Company’s historical results of operations. On September 16, 2022, the United States District Court issued a preliminary injunction preventing the United States Customs and Border Protection from continuing to enforce its ban on plasma donations by Mexican nationals.
Added
If one or more of the analysts who may elect to cover us or our business downgrade their evaluations of our common stock, the price of our common stock would likely decline.
Removed
Since then, we have seen an increase in donation activity from Mexican nationals, in our plasma donation centers along the U.S.-Mexico border.
Added
As a result, you will likely receive a return on your investment in our common stock only if the market price of our common stock increases. 15 Concentration of ownership among our existing directors, executive officers and principal stockholders may prevent new investors from influencing significant corporate decisions.
Removed
Additionally, inflationary pressures for food, gasoline, rent, and other products and services appear to be driving individuals back into the plasma donation centers based upon the increase we experienced in the number of loads per average donation center in the second half of 2022 as compared to all preceding quarters in 2022 and 2021.
Added
See “Item 3. Legal Proceedings” for additional information.
Removed
While we remain cautiously optimistic and have seen improvements in donation activity and our operating results on an aggregated basis, we cannot foresee what potential issues may impact our operating results as new COVID-19 variants continue to evolve.
Removed
That being said, President Biden recently announced that the COVID-19 national emergency and public health emergency declarations will end on May 11, 2023, as most of the world has returned closer to normalcy.
Removed
Given the remaining uncertainty around the extent and timing of the potential future spread or mitigation of COVID-19 and variants, management cannot at this time estimate with reasonable accuracy COVID-19’s further impact on the Company’s results of operations, cash flows or financial condition.
Removed
We may also experience software defects, development delays and installation difficulties, any of which could harm our business and reputation and expose us to potential liability and increased operating expenses. 16 The soundness of other institutions and companies could adversely affect us.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES. We have an operating lease for office space at 2615 St. Rose Parkway, Henderson, Nevada 89052. The lease will expire in 2030 and allows for two optional extensions of 5 years each. Lease payments are approximately $58,000 per month. We believe that our properties are adequate and suitable for us to conduct business in the future.
Biggest changeITEM 2. PROPERTIES. We have an operating lease for office space at 2615 St. Rose Parkway, Henderson, Nevada 89052. The lease will expire in 2030 and allows for two optional extensions of 5 years each. Lease payments are approximately $60,000 per month. We believe that our properties are adequate and suitable for us to conduct business in the future.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeDefendants filed a Motion to Dismiss the Amended Complaint on March 15, 2021, which Plaintiffs opposed via an opposition brief filed on April 29, 2021, to which Defendants replied on June 1, 2021. On February 9, 2023, the Court granted in part and denied in part Defendants’ Motion to Dismiss.
Biggest changeOn February 9, 2023, the Court granted in part and denied in part Defendants’ Motion to Dismiss. On May 22, 2023, Defendants filed an Answer to the Amended Complaint. On December 15, 2023, the parties agreed in principle to a proposed settlement of the Securities Class Action and Plaintiffs filed a Consented Motion for Preliminary Approval of Settlement.
The Company has been named as a defendant in three complaints filed in the United States District Court for the District of Nevada: Yilan Shi v. Paysign, Inc. et. al., filed on March 19, 2020 (“Shi”), Lorna Chase v. Paysign, Inc. et. al., filed on March 25, 2020 (“Chase”), and Smith & Duvall v.
The Company has been named as a defendant in three securities class action complaints filed in the United States District Court for the District of Nevada: Yilan Shi v. Paysign, Inc. et al., filed on March 19, 2020 (“Shi”), Lorna Chase v. Paysign, Inc. et al., filed on March 25, 2020 (“Chase”), and Smith & Duvall v.
As of the date of this filing, Paysign cannot give any meaningful estimate of likely outcome or damages. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 20 PART II
As of the date of this filing, the Company cannot give any meaningful estimate of likely outcome or damages. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 20 PART II
On December 2, 2020, the Court consolidated Shi and Chase as In re Paysign, Inc. Securities Litigation and appointed the Paysign Investor Group as lead plaintiff. On January 12, 2021, Plaintiffs filed an Amended Complaint in the consolidated action.
On December 2, 2020, the Court consolidated Shi and Chase as In re Paysign, Inc. Securities Litigation and appointed the Paysign Investor Group as lead plaintiff. On January 12, 2021, Plaintiffs filed an Amended Complaint in the consolidated action. Defendants filed a Motion to Dismiss the Amended Complaint on March 15, 2021.
Mark Attinger, et al. and was filed on May 9, 2022. This action involves the same alleged conduct raised in the Toczek action and asserts claims for breach of fiduciary duty in connection with financial reporting, breach of fiduciary duty in connection with alleged insider trading against certain individual defendants, and unjust enrichment.
This action involves the same alleged conduct raised in the Toczek action and asserts claims for breach of fiduciary duty in connection with financial reporting, breach of fiduciary duty in connection with alleged insider trading against certain individual defendants, and unjust enrichment.
On June 3, 2022, the Court approved a stipulation staying the action until the Court in the consolidated Securities Class Action issues a ruling on the Motion to Dismiss. The Company anticipates filing motions to dismiss given the ruling on the Motion to Dismiss in the consolidated Securities Class Action.
On June 3, 2022, the Court approved a stipulation staying the action until the Court in the consolidated Securities Class Action issued a ruling on the Motion to Dismiss. On May 10, 2023, the Toczek and Gray actions were consolidated.
As of the date of this filing, Paysign cannot give any meaningful estimate of likely outcome or damages. The Company has also been named as a nominal defendant in two stockholder derivative actions in the United States District Court for the District of Nevada. The first derivative action is entitled Andrzej Toczek, derivatively on behalf of Paysign, Inc. v.
The Company has also been named as a nominal defendant in four stockholder derivative actions currently pending in the United States District Court for the District of Nevada. The first-filed derivative action is entitled Andrzej Toczek, derivatively on behalf of Paysign, Inc. v. Mark R. Newcomer, et al. and was filed on September 17, 2020.
The complaint also alleges insider trading violations against certain individual defendants. On December 16, 2020, the Court approved a stipulation staying the action until the Court in the consolidated Securities Class Action issues a ruling on the Motion to Dismiss. The second derivative action is entitled John K. Gray, derivatively on behalf of Paysign, Inc. v.
The complaint also alleges insider trading violations against certain individual defendants. The second-filed derivative action is entitled John K. Gray, derivatively on behalf of Paysign, Inc. v. Mark Attinger, et al. and was filed on May 9, 2022.
Removed
Mark R. Newcomer, et al. and was filed on September 17, 2020.
Added
On January 4, 2024, the Court preliminarily approved a settlement in the amount of $3,750,000, the entirety of which came from the Company’s directors-and-officers insurance policy, for the referenced class of purchasers, and scheduled a final approval hearing for April 17, 2024.
Added
The Company has also been named as a nominal defendant in a third stockholder derivative action initially filed in state court in Clark County, Nevada, on October 2, 2023, entitled Simone Blanchette, derivatively on behalf of Paysign, Inc. v.
Added
Mark Newcomer, et al, which the defendants subsequently removed to federal district court in Nevada pursuant to a Notice of Removal filed on October 10, 2023. That complaint makes substantially the same allegations as made in the consolidated Toczek and Gray actions, and also contains a claim that the individual defendants violated Section 10(b) and Rule 10b-5 promulgated thereunder.
Added
On December 7, 2023, the parties requested that the action be stayed for sixty days due to the settlement negotiations in the consolidated Toczek and Gray actions, and the Court granted the sixty-day stay on December 11, 2023.
Added
On January 29, 2024, the parties agreed to an additional sixty-day extension, to March 29, 2024, and the Court entered an Order thereon on February 2, 2024.
Added
On or before the end of that period, the parties are to provide the Court with an updated joint status report or inform the Court if the settlement of the consolidated derivative action does not proceed. 19 The Company has also been named as a nominal defendant in a fourth stockholder derivative action in the United States District Court for the District of Nevada, filed on December 27, 2023, entitled Mo Jeewa, derivatively on behalf of Paysign, Inc. v.
Added
Mark R. Newcomer, et al. That complaint makes substantially the same allegations as made in the consolidated Toczek and Gray actions and the Blanchette action discussed above, and alleges breach of fiduciary duty and unjust enrichment. If the derivative cases do not settle, it is the Company’s intention to file motions to dismiss.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table summarizes the low and high closing prices for our common stock for each of the calendar quarters of 2022 and 2021. 2022 2021 High Low High Low First Quarter $ 2.50 $ 1.80 $ 5.69 $ 3.80 Second Quarter 2.04 1.24 4.69 2.87 Third Quarter 3.20 1.53 3.72 2.34 Fourth Quarter 3.01 2.11 2.99 1.37 There were approximately 10,907 shareholders of record of the common stock as of December 31, 2022.
Biggest changeThe following table summarizes the low and high closing prices for our common stock for each of the calendar quarters of 2023 and 2022. 2023 2022 High Low High Low First Quarter $ 3.98 $ 2.48 $ 2.50 $ 1.80 Second Quarter 3.78 2.39 2.04 1.24 Third Quarter 2.47 1.78 3.20 1.53 Fourth Quarter 2.80 1.69 3.01 2.11 There were approximately 9,380 shareholders of record of the common stock as of December 31, 2023.
The shares were issued pursuant to an exemption from registration provided by Section 4(2) of the Securities Act of 1933. Dividend Policy We have not declared any cash dividends on our common stock during our fiscal years ended on December 31, 2022 or 2021.
The shares were issued pursuant to an exemption from registration provided by Section 4(2) of the Securities Act of 1933. Dividend Policy We have not declared any cash dividends on our common stock during our fiscal years ended on December 31, 2023 or 2022.
Our Board of Directors has made no determination to date to declare cash dividends during the foreseeable future, but is not likely to do so. There are no restrictions on our ability to pay dividends.
Our Board has made no determination to date to declare cash dividends during the foreseeable future, but is not likely to do so. There are no restrictions on our ability to pay dividends.
Removed
Purchases of Equity Securities by the Issuer and Affiliated Purchasers During the quarter ended December 31, 2022, we did not purchase any shares of our common stock. ITEM 6. [RESERVED]
Added
Purchases of Equity Securities by the Issuer and Affiliated Purchasers Share repurchases of our common stock for the three months ended December 31, 2023 were as follows: Period Total Number of Shares Purchased Weighted Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2023 – October 31, 2023 – – – $ 3,872,116 November 1, 2023 - November 30, 2023 – – – 3,872,116 December 1, 2023 - December 31, 2023 – – – 3,872,116 Total – – – $ 3,872,116 (1) On March 21, 2023, our Board authorized a stock repurchase program to repurchase up to $5 million of our common stock, subject to certain conditions, in the open market, in privately negotiated transactions, or by other means in compliance with Rule 10b-18 under the Exchange Act.
Added
The program is expected to be completed within 36 months from the commencement date. As of December 31, 2023 the Company repurchased 394,558 shares of common stock for $1,127,884 at a weighted average price of $2.86 per share. ITEM 6. [RESERVED]

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeITEM 6. [RESERVED] 21 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 21 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK 29 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 30 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 30 ITEM 9A. CONTROLS AND PROCEDURES 30
Biggest changeITEM 6. [RESERVED] 21 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 21 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 29 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 29 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 29 ITEM 9A. CONTROLS AND PROCEDURES 29 ITEM 9B.
Added
OTHER INFORMATION 30 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 30 PART III 31 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 31 ITEM 11. EXECUTIVE COMPENSATION 31 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 31 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 31 ITEM 14.
Added
PRINCIPAL ACCOUNTANT FEES AND SERVICES 31 PART IV 32 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 32 ITEM 16 FORM 10-K SUMMARY 33 SIGNATURES 34 Cautionary Note Regarding Forward Looking Statements This Annual Report on Form 10-K contains “forward-looking statements.” These forward-looking statements are based on our current expectations, assumptions, estimates and projections about our business and our industry.
Added
Words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “propose,” “may,” and other similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections, estimates, forecasts, or other characterizations of future events or circumstances are forward-looking statements.
Added
These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which relate only to events as of the date on which the statements are made.
Added
We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. You should refer to and carefully review the information in future documents we file with the Securities and Exchange Commission. i PART I

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

50 edited+23 added−20 removed37 unchanged
Biggest changeResults of Operations Fiscal Years Ended December 31, 2022 and 2021 The following table summarizes our consolidated financial results: Year ended December 31, Variance 2022 2021 $ % Revenues Plasma industry $ 34,737,640 $ 25,918,150 $ 8,819,490 34.0% Pharma industry 3,007,140 3,361,869 (354,729 ) (10.6% ) Other 288,887 184,830 104,057 56.3% Total revenues 38,033,667 29,464,849 8,568,818 29.1% Cost of revenues 17,079,069 14,753,042 2,326,027 15.8% Gross profit 20,954,598 14,711,807 6,242,791 42.4% Gross margin % 55.1% 49.9% Operating expenses Selling, general and administrative 17,700,651 14,953,322 2,747,329 18.4% Depreciation and amortization 2,909,612 2,497,918 411,694 16.5% Total operating expenses 20,610,263 17,451,240 3,159,023 18.1% Income (loss) from operations $ 344,335 $ (2,739,433 ) $ 3,083,768 N/M Net income (loss) $ 1,027,775 $ (2,721,334 ) $ 3,749,109 N/M Net margin % 2.7% (9.2% ) 24 The increase in total revenues of $8,568,818 for the year ended December 31, 2022 compared to the same period in the prior year consisted of a $8,819,490 increase in Plasma revenue, a reduction of $354,729 in Pharma revenue, and a $104,057 increase in Other revenue.
Biggest changeIf we do not raise new capital, we believe that we will still be able to support our existing business and expand into new vertical markets using internally generated funds. 2023 Year Milestones · Grew to approximately 6.4 million cardholders and approximately 600 card programs as of December 31, 2023. · Year over year revenue increased 24.3%. · Added 20 net new Plasma programs, launched 24 net new Pharma programs, and added 1 net new Other prepaid program. 23 Results of Operations Comparison of Year Ended December 31, 2023 to Year Ended December 31, 2022 The following table summarizes our consolidated financial results for year ended December 31, 2023 in comparison to year ended December 31, 2022: Year ended December 31, Variance 2023 2022 $ % Revenues Plasma industry $ 41,951,659 $ 34,737,640 $ 7,214,019 20.8% Pharma industry 4,051,037 3,007,140 1,043,897 34.7% Other 1,271,466 288,887 982,579 340.1% Total revenues 47,274,162 38,033,667 9,240,495 24.3% Cost of revenues 23,137,997 17,079,069 6,058,928 35.5% Gross profit 24,136,165 20,954,598 3,181,567 15.2% Gross margin % 51.1% 55.1% Operating expenses Selling, general and administrative 20,276,842 17,700,651 2,576,191 14.6% Depreciation and amortization 4,026,578 2,909,612 1,116,966 38.4% Total operating expenses 24,303,420 20,610,263 3,693,157 17.9% (Loss) income from operations $ (167,255 ) $ 344,335 $ (511,590 ) (148.6% ) Net income $ 6,458,727 $ 1,027,775 $ 5,430,952 528.4% Net margin % 13.7% 2.7% The increase in total revenues of $9,240,495 for the year ended December 31, 2023 compared to the same period in the prior year consisted primarily of a $7,214,019 increase in Plasma revenue, a $1,043,897 increase in Pharma revenue, and a $982,579 increase in Other revenue.
We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators: “EBITDA” is defined as earnings before interest, income taxes, depreciation and amortization expense and “Adjusted EBITDA” reflects the adjustment to EBITDA to exclude stock-based compensation expense.
We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators: 25 “EBITDA” is defined as earnings before interest, income taxes, depreciation and amortization expense and “Adjusted EBITDA” reflects the adjustment to EBITDA to exclude stock-based compensation expense.
The determination of fair value using the Black-Scholes pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility and the risk-free interest rate.
The determination of fair value using the Black-Scholes option pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility and the risk-free interest rate.
In addition, we consider certain non-GAAP (or “adjusted”) measures to be useful to management and investors evaluating our operating performance for the periods presented, and provide a tool for evaluating our ongoing operations, liquidity, and management of assets.
In addition, we consider certain non-GAAP (or “adjusted”) measures to be useful to management and investors evaluating our operating performance for the periods presented and provide a financial tool for evaluating our ongoing operations, liquidity and management of assets.
Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in “Risk Factors” included elsewhere in this Form 10-K. 21 Disclosure Regarding Forward-Looking Statements This Annual Report on Form 10-K includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“Forward-Looking Statements”).
Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in “Risk Factors” included elsewhere in this Form 10-K. 21 Disclosure Regarding Forward-Looking Statements This Annual Report on Form 10-K includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (“Forward-Looking Statements”).
In the future, we expect to further expand our product offerings into other prepaid card offerings such as travel cards and expense reimbursement cards. Our cards are sponsored by our issuing bank partners. 22 Our revenues include fees generated from cardholder fees, interchange, card program management fees, transaction claims processing fees, and settlement income.
In the future, we expect to further expand our product into other prepaid card offerings such as travel cards and expense reimbursement cards. Our cards are sponsored by our issuing bank partners. Our revenues include fees generated from cardholder fees, interchange, card program management fees, transaction claims processing fees, breakage, and settlement income.
These Forward-Looking Statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the Forward-Looking Statements. Such important factors (“Important Factors”) and other factors are disclosed in this report, including those factors discussed in “Part II - Item 1A.
These Forward-Looking Statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the Forward-Looking Statements. Such important factors (“Important Factors”) and other factors are disclosed in this report, including those factors discussed in “Part I - Item 1A.
Leases with an initial term of 12 months or less are not recorded on the balance sheet, with lease expense for these leases recognized on a straight-line basis over the lease term. Stock-Based Compensation – The Company recognizes compensation expense for all restricted stock awards and stock options.
Leases with an initial term of 12 months or less are not recorded on the balance sheet, with lease expenses for these leases recognized on a straight-line basis over the lease term. 28 Stock-Based Compensation – The Company recognizes compensation expense for all restricted stock awards and stock options.
These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenues, operating income, net income (loss), earnings (loss) per share (basic and diluted) or net cash from operating activities as determined in accordance with GAAP.
These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income (loss), earnings (loss) per share (basic and diluted) or net cash from operating activities as determined in accordance with GAAP.
In the normal course of our business, we, in an effort to help keep our shareholders and the public informed about our operations, may from time-to-time issue certain statements, either in writing or orally, that contain, or may contain, Forward-Looking Statements.
In the normal course of our business, we, in an effort to help keep our stockholders and the public informed about our operations, may from time-to-time issue certain statements, either in writing or orally, that contain, or may contain, Forward-Looking Statements.
A reconciliation of net income (loss) to Adjusted EBITDA is provided in the table below.
A reconciliation of net income to Adjusted EBITDA is provided in the table below.
We experienced large increases in accounts receivable and accounts payable primarily due to the launch of ten new Pharma programs during the year whereby Paysign invoices its customers for reimbursement to pharmacy networks, pharmacies, or individuals for their out-of-pocket costs and remits those funds to cover the accounts payable liability.
We experienced large increases in accounts receivable and accounts payable primarily due to the launch of 24 net new pharma programs during the year whereby Paysign invoices its customers for reimbursement to pharmacy networks, pharmacies, or individuals for their out-of-pocket costs and remits those funds to cover the accounts payable liability.
Paysign is a vertically integrated provider of prepaid card products and processing services for corporate, consumer and government applications. Our payment solutions are utilized by our corporate customers as a means to increase customer loyalty, increase patient adherence rates, reduce administration costs and streamline operations.
We are a vertically integrated provider of prepaid card products and processing services for corporate, consumer and government applications. Our payment solutions are utilized by our corporate customers as a means to increase customer loyalty, increase patient adherence rates, reduce administration costs and streamline operations.
In 2023, we plan to continue to invest additional funds in technology improvements, sales and marketing, customer service, and regulatory compliance. From time to time, we evaluate raising capital to enable us to diversify into new market verticals.
In 2024, we plan to continue to invest additional funds in technology improvements, sales and marketing, fraud, customer service, and regulatory compliance. From time to time, we evaluate raising capital to enable us to diversify into new market verticals.
The Company is currently under no obligation for refunding any fees, and the Company does not currently have any obligations for disputed claim settlements. Given the nature of the Company’s services and contracts, generally it has no contract assets.
The Company is currently under no obligation to refund any fees, and the Company does not currently have any obligations for disputed claim settlements. Given the nature of the Company’s services and contracts, generally it has no contract assets.
Both reloadable and non-reloadable cards may be open-loop, closed-loop, or restricted-loop. Open-loop cards can be used to receive cash at ATM locations by PIN; or purchase goods or services by PIN or signature at retail locations virtually anywhere that the network brand (American Express, Discover, Mastercard, Visa, etc.) is accepted. Closed-loop cards can only be used at a specific merchant.
Open-loop cards can be used to receive cash at ATM locations by PIN; or purchase goods or services by PIN or signature at retail locations virtually anywhere that the network brand (American Express, Discover, Mastercard, Visa, etc.) is accepted. Closed-loop cards can only be used at a specific merchant.
Currently, we are focusing our marketing efforts on corporate incentive and expense prepaid card products in various market verticals including but not limited to general corporate expense, healthcare related markets including co-pay assistance, clinical trials and donor compensation, loyalty rewards, and incentive cards.
Currently, we are focusing our marketing efforts on corporate incentive and expense prepaid card products in various market verticals including but not limited to general corporate expense, healthcare related markets including patient affordability solutions, clinical trials and donor compensation, loyalty rewards, and incentive cards.
We deploy a fully staffed, in-house customer service department which utilizes bilingual customer service representatives, Interactive Voice Response, and two-way short message service messaging and text alerts.
We employ a 24/7/365 fully staffed, in-house customer service department which utilizes bilingual customer service representatives, Interactive Voice Response, and two-way short message service messaging and text alerts.
We believe that our unrestricted cash on hand at December 31, 2022 of $9,708,238, along with anticipated revenues, operating profits and free cash flow anticipated for 2023 and 2024, will be sufficient to sustain our operations for the next twenty-one months.
We believe that our unrestricted cash on hand at December 31, 2023 of $16,994,705, along with anticipated revenues, operating profits and free cash flow anticipated for 2024 and 2025, will be sufficient to sustain our operations for the next twenty-one months.
We believe the following measures are the primary indicators of our quarterly and annual revenues: Gross Dollar Volume Loaded on Cards – Represents the total dollar volume of funds loaded to all of our card programs. Our gross dollar volume was $1.595 billion and $1.066 billion for the years ended December 31, 2022 and 2021, respectively.
We believe the following measures are the primary indicators of our quarterly and annual revenues: Gross Dollar Volume Loaded on Cards: Represents the total dollar volume of funds loaded to all of our prepaid card programs. Our gross dollar volume loaded on cards was $1,706 million and $1,595 million for the year ended December 31, 2023 and 2022, respectively.
Our revenue conversion rate for the years ended December 31, 2022 and 2021 were 2.38% or 238 basis points (“bps”), and 2.76% or 276 bps, respectively, of gross dollar volume loaded on cards.
Our total revenue conversion rates for the years ended December 31, 2023 and 2022 were 2.77% or 277 basis points (“bps”), and 2.38% or 238 bps, respectively, of gross dollar volume loaded on cards.
All statements other than statements of historical fact included in this report are Forward-Looking Statements. These Forward-Looking Statements are based on our current expectations, assumptions, estimates and projections about our business and our industry. Words such as "believe," "anticipate," "expect," "intend," "plan," “propose,” "may," and other similar expressions identify Forward-Looking statements.
All statements other than statements of historical fact included in this report are Forward-Looking Statements. These Forward-Looking Statements are based on our current expectations, assumptions, estimates and projections about our business and our industry. Words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “propose,” “may,” and other similar expressions identify Forward-Looking statements.
Revenue and Expense Recognition –The Company recognizes revenue when goods or services are transferred to customers in an amount that reflects the consideration which it expects to receive in exchange for those goods or services.
Income tax related interest and penalties, if applicable, are accrued within income tax expense. 27 Revenue and Expense Recognition –The Company recognizes revenue when goods or services are transferred to customers in an amount that reflects the consideration which it expects to receive in exchange for those goods or services.
The Company generates revenues from Plasma card programs through fees generated from cardholder fees and interchange fees. Revenues from Pharma card programs are generated through card program management fees, transaction claims processing fees, interchange fees, and settlement income. 28 Plasma and Pharma card program revenues include both fixed and variable components.
The Company generates revenues from plasma card programs through fees generated from cardholder fees and interchange fees. Revenues from pharma card programs are generated through card program management fees, transaction claims processing fees, interchange fees, and settlement income. Other revenues are generated through cardholder fees, interchange fees, program management fees, load fees and breakage.
Cardholder fees represent an obligation to the cardholder based on a per transaction basis and are recognized at a point in time when the performance obligation is fulfilled.
Plasma and pharma card program revenues include both fixed and variable components. Cardholder fees represent an obligation to the cardholder based on a per transaction basis and are recognized at a point in time when the performance obligation is fulfilled.
Our gross profit conversion rate for the years ended December 31, 2022 and 2021 were 1.31% or 131 bps, and 1.38% or 138 bps, respectively, of gross dollar volume loaded on cards.
Our total gross profit conversion rates for the year ended December 31, 2023 and 2022 were 1.41% or 141 bps, and 1.31% or 131 bps, respectively, of gross dollar volume loaded on cards.
The difference between the benefit recognized for a position and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit. Income tax related interest and penalties, if applicable, are accrued within income tax expense.
The difference between the benefit recognized for a position and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit.
Non-Reloadable Cards: These are generally one-time use cards that are only active until the funds initially loaded to the card are spent. These types of cards are generally used as gift or incentive cards. Normally these types of cards are used for the purchase of goods or services at retail locations and cannot be used to receive cash.
These types of cards are generally used as gift or incentive cards. Normally these types of cards are used for the purchase of goods or services at retail locations and cannot be used to receive cash. Both reloadable and non-reloadable cards may be open-loop, closed-loop, or restricted-loop.
Cost of revenues for the year ended December 31, 2022 increased $2,326,027 compared to the same period in the prior year. Cost of revenues is comprised of transaction processing fees, data connectivity and data center expenses, network fees, bank fees, card production costs, customer service, program management, application integration setup, and sales and commission expense.
Cost of revenues is comprised of transaction processing fees, data connectivity and data center expenses, network fees, bank fees, card production and postage costs, customer service, program management, application integration setup, and sales and commission expense.
Year ended December 31, 2022 2021 Reconciliation of adjusted EBITDA to net income (loss): Net income (loss) $ 1,027,775 $ (2,721,334 ) Income tax provision 107,477 10,198 Interest income, net (790,917 ) (28,297 ) Depreciation and amortization 2,909,612 2,497,918 EBITDA 3,253,947 (241,515 ) Stock-based compensation 2,277,717 2,280,931 Adjusted EBITDA $ 5,531,664 $ 2,039,416 Liquidity and Capital Resources The following table sets forth the major sources and uses of cash for our last two fiscal years ended December 31, 2022 and 2021: Year ended December 31, 2022 2021 Net cash provided by operating activities $ 25,317,964 $ 15,228,189 Net cash used in investing activities (4,091,683 ) (2,679,664 ) Net cash provided by financing activities – 192,141 Net increase in cash and restricted cash $ 21,226,281 $ 12,740,666 26 Comparison of Fiscal 2022 and 2021 In fiscal 2022 and 2021, we financed our operations through internally generated funds.
Year ended December 31, 2023 2022 Reconciliation of adjusted EBITDA to net income: Net income $ 6,458,727 $ 1,027,775 Income tax (benefit) provision (4,094,911 ) 107,477 Interest income, net (2,531,071 ) (790,917 ) Depreciation and amortization 4,026,578 2,909,612 EBITDA 3,859,323 3,253,947 Stock-based compensation 2,853,643 2,277,717 Adjusted EBITDA $ 6,712,966 $ 5,531,664 Liquidity and Capital Resources The following table sets forth the major sources and uses of cash for our last two fiscal years ended December 31, 2023 and 2022: Year ended December 31, 2023 2022 Net cash provided by operating activities $ 27,620,624 $ 25,317,964 Net cash used in investing activities (7,048,678 ) (4,091,683 ) Net cash used in financing activities (1,118,284 ) – Net increase in cash and restricted cash $ 19,453,662 $ 21,226,281 Comparison of Fiscal 2023 and 2022 During the years ended December 31, 2023 and 2022, we financed our operations through internally generated funds.
We market our Paysign payment solutions through direct marketing by the Company’s sales team. Our primary market focus is on companies that require a streamlined payment solution for rewards, rebates, payment assistance, and other payments to their customers, employees, agents and others.
Our primary market focus is on companies that require a streamlined payment solution for rewards, rebates, payment assistance, and other payments to their customers, employees, agents and others. To reach these markets, we focus our sales efforts on direct contact with our target market and attendance at various industry specific conferences.
GPR cards can also be issued to a consumer at a retail location or mailed to a consumer after completing an on-line application. GPR cards can be reloaded multiple times with a consumer’s payroll, government benefit, a federal or state tax refund or through cash reload networks located at retail locations. Reloadable cards are generally open-loop cards as described below.
GPR cards can be reloaded multiple times with a consumer’s payroll, government benefit, a federal or state tax refund or through cash reload networks located at retail locations. Reloadable cards are generally open-loop cards as described below. Non-Reloadable Cards: These are generally one-time use cards that are only active until the funds initially loaded to the card are spent.
The net profit for the year ended December 31, 2022 increased $3,749,109. The overall change in net income relates to the aforementioned factors. Key Metrics, Performance Indicators and Non-GAAP Measures Management reviews a number of metrics to help us monitor the performance of and identify trends affecting our business.
Key Metrics, Performance Indicators and Non-GAAP Measures Management reviews a number of metrics to help us monitor the performance of and identify trends affecting our business.
We have developed prepaid card programs for corporate incentive and rewards including, but not limited to, consumer rebates and rewards, donor compensation, clinical trials, healthcare reimbursement payments and pharmaceutical payment assistance. We have expanded our product offerings to include additional corporate incentive products and demand deposit accounts accessible with a debit card.
Our suite of product offerings includes solutions for corporate rewards, prepaid gift cards, general purpose reloadable debit cards, employee incentives, consumer rebates, donor compensation, clinical trials, healthcare reimbursement payments and pharmaceutical payment assistance, and demand deposit accounts accessible with a debit card.
To reach these markets, we focus our sales efforts on direct contact with our target market and attendance at various industry specific conferences. We may, at times, utilize independent contractors who make direct sales and are paid commissions and/or restricted stock awards.
We may, at times, utilize independent contractors who make direct sales and are paid commissions and/or restricted stock awards.
The increase of $18,905,199 in 2022 versus 2021 was predominately related to increases in funds on card, increased Plasma deposits, and new Plasma and Pharma customers, offset by declines from Pharma customers whose contracts terminated during the year.
Restricted cash of $92,356,308 are funds used for customer card funding with a corresponding offset under current liabilities. The increase of $12,167,195 in 2023 versus 2022 was predominately related to increases in funds on card, increased plasma deposits, and new plasma and pharma customers, offset by declines from a pharma customer whose contract terminated during the year.
Depreciation and amortization expense for the year ended December 31, 2022 increased $411,694 compared to the prior year. The increase in depreciation and amortization expense was primarily due to continued capitalization of new technologies and enhancements to our processing platform and infrastructure.
The increase in depreciation and amortization expense was primarily due to continued capitalization of new software development costs and equipment purchases related to continued enhancements to our processing platform.
Actual results could differ from those estimates. Our estimates will be based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects. Fixed Assets – Fixed assets are stated at cost less accumulated depreciation.
Actual results could differ from those estimates. Our estimates will be based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects. Intangible Assets – For intangible assets, the Company recognizes an impairment loss if the carrying amount of the intangible asset is not recoverable and exceeds fair value.
Our principal target markets for processing services include prepaid card issuers, retail and private-label issuers, small third-party processors, and small and mid-size financial institutions in the United States and Mexico. 23 We have devoted more extensive resources to sales and marketing activities as we have added essential personnel to our marketing and sales team.
Third-party software may be used for highly specialized business functions, which we may not be able to develop internally within time and budget constraints. Our principal target markets for processing services include prepaid card issuers, retail and private-label issuers, small third-party processors, and small and mid-size financial institutions in the United States and Mexico.
For the year ended December 31, 2022, we recorded income from operations of $344,335 an increase of $3,083,768 from the period ending December 31, 2021, related to the aforementioned factors.
For the year ended December 31, 2023, we recorded a loss from operations of $167,255 representing a decline of $511,590 compared to income from operations of $344,335 during the same period last year related to the aforementioned factors.
Reloadable Cards: These types of cards are generally classified as payroll or considered general purpose reloadable (“GPR”) cards. Payroll cards are issued by an employer to an employee in order to allow the employee to access payroll amounts that are deposited into an account linked to their card.
Payroll cards are issued by an employer to an employee in order to allow the employee to access payroll amounts that are deposited into an account linked to their card. GPR cards can also be issued to a consumer at a retail location or mailed to a consumer after completing an on-line application.
The Company utilizes the remote method of revenue recognition for settlement income whereby the unspent balances will be recognized as revenue at the expiration of the cards and the respective program. The Company records all revenue on a gross basis since it is the primary obligor and establishes the price in the contract arrangement with its customers.
Breakage revenue is recorded in other revenue on the consolidated statements of operations and was $74 thousand and $0 in fiscal year 2023 and fiscal year 2022, respectively. The Company utilizes the remote method of revenue recognition for settlement income whereby the unspent balances will be recognized as revenue at the expiration of the cards and the respective program.
Cost of revenues increased primarily due to the increase in our Plasma business as many of the costs associated with this business are variable in nature as they are provided by third-parties who charge us based on the number of transactions that occur during the period.
Gross profit for the year ended December 31, 2023 increased $3,181,567 compared to the same period in the prior year resulting primarily from the increase in Plasma revenue and the beneficial impact of a variable cost structure as many of the plasma transaction costs are variable in nature which are provided by third parties who charge us based on the number of active cards outstanding and the number of transactions that occurred during the period.
Our net profit conversion rate for the years ended December 31, 2022 and 2021 were 0.06% or 6 bps and (0.25%) or (25) bps, respectively, of gross dollar volume loaded on cards. The decline in the revenue conversion rate was primarily attributable to the renewal and restructuring of a referral agreement in Q1 2022.
Our net income conversion rates for the year ended December 31, 2023 and 2022 were 0.13% or 13 bps, and 0.06% or 6 bps, respectively, of gross dollar volume loaded on cards. Management also reviews key performance indicators, such as revenues, gross profit, operational expenses as a percent of revenues, and cardholder participation.
We use this metric to analyze the total amount of money moving into our card programs. 25 Conversion Rate on Gross Dollar Volume Loaded on Cards – Represents the percent of total gross dollar load volume onto our card programs that is converted into revenue, gross profit and net profit dollars.
We use this metric to analyze the total amount of money moving into our prepaid card programs.
Operating activities provided $25,317,964 of cash in 2022, an increase of $10,089,775 compared to 2021. The increase is primarily due to the increase in net income, depreciation and amortization, and increases in cash flows from changes in operating assets and liabilities.
Operating activities provided $27,620,624 of cash in 2023, an increase of $2,302,660 compared to 2022. This change in cash flow is primarily due to increases in operating assets and liabilities.
The increase is primarily attributable to an increase in the capitalization of internally developed software relative to the prior year as we continued to invest in new technologies and enhancements to our processing platform and infrastructure to support the growth of new customers and our existing business. No cash was provided or used by financing activities in 2022.
Cash used for investing activities was primarily attributed to an increase in the capitalization of internally developed software as we continue to invest in our technology platform.
Other income for the year ended December 31, 2022 increased $762,620 related to an increase in interest income resulting primarily from higher cash balances and increases in the federal funds rate throughout the year as the Federal Reserve has increased rates to combat inflation.
Other income for the year ended December 31, 2023, increased $1,740,154 primarily related to an increase in interest rates and the associated interest income received on higher average bank account balances at our sponsor bank.
Our cash provided by financing activities for 2021 related entirely to cash received from the exercise of stock options. Our significant contractual cash requirements also include ongoing payments for lease liabilities. For additional information regarding our cash commitments and contractual obligations, see "Note 5 – LEASE” in the notes to the accompanying consolidated financial statements.
For additional information regarding our cash commitments and contractual obligations, see “Note 5 – LEASE” in the notes to the accompanying consolidated financial statements. 26 Liquidity and Sources of Financing Unrestricted cash increased $7,286,467 to $16,994,705, due to the improvement in our operating results throughout 2023 and timing of payments and receivables related to our patient affordability business.
The large year-over-year changes in operating assets and liabilities related to accounts receivable, accounts payable and customer card funding are primarily due to the growth in our Plasma and Pharma programs and the timing of collections and payments of our Pharma programs whereby we collect money from pharmaceutical and HUB service companies and reimburse the pharmacy claims processor, healthcare providers and patients for their out-of-pocket drug costs.
The changes in accounts receivable, accounts payable, and customer card funding are primarily related to the growth in our pharma patient affordability business and timing of payments as we are invoiced by third-party service providers at the end of the period and are due monies from our pharma patient affordability customers to cover these third-party payables.
Removed
We provide a card processing platform consisting of proprietary systems and software applications based on the unique needs of our clients. We have extended our processing business capabilities through our proprietary Paysign platform. Through the Paysign platform, we provide a variety of services including transaction processing, cardholder enrollment, value loading, cardholder account management, reporting, and customer service.
Added
We operate on a powerful, high-availability payments platform with cutting-edge fintech capabilities that can be seamlessly integrated with our clients’ systems. This distinctive positioning allows us to provide end-to-end technologies that securely manage transaction processing, cardholder enrollment, value loading, account management, data and analytics, and customer service.
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The Paysign platform was built on modern cross-platform architecture and designed to be highly flexible, scalable and customizable. The platform’s flexibility and ease of customization has allowed us to expand our operational capabilities by facilitating our entry into new markets within the payments space. The Paysign platform delivers cost benefits and revenue building opportunities to our partners.
Added
Our architecture is known for its cross-platform compatibility, flexibility, and scalability – allowing our clients and partners to leverage these advantages for cost savings and revenue opportunities.
Removed
In the third quarter of 2022 we expanded our prepaid product offering to include payroll cards and in the fourth quarter of 2022 we expanded our prepaid product offering to include retail disbursements and prepaid gift cards.
Added
Revenue from cardholder fees, interchange, card program management fees, and transaction claims processing fees is recorded when the performance obligation is fulfilled. Breakage is recorded ratably over the estimated card life based on historical redemption patterns, market-specific trends, escheatment rules and existing economic conditions and relates solely to our open-loop gift card business which began at the end of 2022.
Removed
Revenue from cardholder fees, interchange, card program management fees, and transaction claims processing fees is recorded when the performance obligation is fulfilled. Settlement income is recorded at the expiration of the card program. We have two categories for our prepaid debit cards: (1) corporate and consumer reloadable cards, and (2) non-reloadable cards.
Added
Settlement income is recorded at the expiration of the card program and relates solely to our pharma prepaid business which ended in 2022.
Removed
Third-party software may be used for highly specialized business functions, which we may not be able to develop internally within time and budget constraints.
Added
We have two categories for our prepaid debit cards: (1) corporate and consumer reloadable cards, and (2) non-reloadable cards. 22 Reloadable Cards: These types of cards are generally classified as payroll or considered general purpose reloadable (“GPR”) cards.
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If we do not raise new capital, we believe that we will still be able to expand into new vertical markets using internally generated funds. 2022 Year Milestones · Grew to approximately 5.3 million cardholders and 550 card programs as of December 31, 2022. · Year over year revenue increased 29.1%. · Added 79 net new Plasma programs, launched 7 net new Pharma programs, and added 15 net new Other prepaid programs.
Added
We have devoted more extensive resources to sales and marketing activities as we have added essential personnel to our marketing, sales and support teams. We market our Paysign payment solutions through direct marketing by the Company’s sales team.
Removed
The increase in Plasma revenue was primarily due to an increase in plasma locations, plasma donations and dollars loaded to card as individuals looked for opportunities to supplement their income to combat inflationary pressures on gas, rent, and groceries and Mexican nationals were once again allowed to cross the border to donate plasma.
Added
The increase in Plasma revenue was primarily due to a rise in the number of plasma centers and donations, and, consequently, dollars loaded to cards, cardholder fees, and interchange, as there continues to be an increase in demand for plasma which has been driven by global increases in plasma protein therapies.
Removed
The reduction in Pharma revenue was primarily due to pharma prepaid contracts ending, offset by the growth and launch of new pharma copay programs. Of the $3,007,140 Pharma industry revenue recognized in 2022, Pharma prepaid accounted for $1,526,180 and Pharma copay accounted for $1,480,960. This compares to 2021 Pharma prepaid revenues of $2,749,531 and Pharma copay revenues of $612,338.
Added
The increase in Pharma revenue was primarily due to the launch of new pharma patient affordability programs. The increase in Other revenue was primarily due to the growth of our payroll, retail, and corporate incentive programs. Cost of revenues for the year ended December 31, 2023 increased $6,058,928 compared to the same period in the prior year.
Removed
In addition, year over year growth in our Pharma copay business contributed to higher costs as network and commission costs associated with this business are higher than our Pharma prepaid business. Gross profit for the year ended December 31, 2022 increased $6,242,791 compared to the prior year resulting primarily from the increase in revenue and cost of sales described above.
Added
Cost of revenues increased during 2023 primarily due to an increase in cardholder usage activity and associated network expenses such as interchange and ATM costs, an increase in plastics and collateral related to an increase in the number of unique card loads, an increase in network expenses and sales commissions related to the growth in our pharma patient affordability business, and an increase in customer service expenses associated with wage inflation pressures and the overall growth in our business, offset by a decline in postage.
Removed
The increase in gross margin to 55.1% versus 49.9% compared to the same period in the prior year resulted from operating leverage in our Plasma business, offset by the mix of products in our Pharma business as we transition from our higher margin prepaid business and related settlement income to our lower margin copay business, and the launch of Other prepaid programs in the month of December 2022 which have yet to have had time to mature.
Added
Gross profit also benefited from the growth in our pharma patient affordability business. The increase in gross profit was offset by the termination of our pharma prepaid business in 2022, price increases by many of our third-party service providers, and an increase in customer service expenses mentioned above.
Removed
Selling, general and administrative expenses for the year ended December 31, 2022 increased $2,747,329 or 18.4% compared to the prior year and consisted primarily of an increase in technologies and telecom of $975,000, staffing and compensation of $873,000, travel and entertainment of $170,000, rent and occupancy of $140,000, professional services of $100,000, insurance of $60,000, and other operating expenses of $430,000.
Added
The decrease in gross margin resulted from the aforementioned factors. 24 Selling, general and administrative expenses for the year ended December 31, 2023 increased $2,576,191 compared to the same period in the prior year and consisted primarily of an increase in (i) compensation and benefits of approximately $3,017,000 due to continued hiring to support the Company’s growth, a tight labor market and increased benefit costs, (ii) an increase in stock-based compensation expense of approximately $576,000, (iii) an increase in technologies and telecom of approximately $345,000, (iv) an increase in non-IT professional services of approximately $140,000, and (v) an increase in all other operating expenses of approximately $62,000.
Removed
The effective tax rate was 9.5% and (0.4%) for the years ended December 31, 2022 and 2021. The effective tax rates vary, primarily due to state and federal taxes due, offset by the use of net operating losses. The Company continues to have a full valuation allowance against its deferred tax assets as of December 31, 2022.
Added
This increase was offset by a $1,564,000 increase in the amount of capitalized platform development costs. Depreciation and amortization expense for the year ended December 31, 2023 increased $1,116,966 compared to the same period in the prior year.
Removed
The increase in the gross profit conversion rate was primarily attributable to operating leverage in our Plasma business, offset by the mix of products in our Pharma business as we transition from our higher margin prepaid business and related settlement income to our lower margin copay business, and the launch of Other prepaid programs in the month of December 2022 which have yet to have had time to mature.
Added
We recorded an income tax benefit of $4,094,911 for the year ended December 31, 2023, which equates to an effective tax rate of (173.2)%, primarily as a result of the release of our valuation allowance of $4,588,781 on our federal and state deferred tax assets. The valuation release offset tax expense of $493,870 on our pre-tax book income.
Removed
The increase in the net profit conversion rate was primarily attributable to improving operating results throughout 2022 as well as increased bank balances and interest rates which led to an increase in net interest income. Management also reviews key performance indicators, such as revenues, gross profits, operational expenses as a percent of revenues, and cardholder participation.
Added
We recorded an income tax expense of $107,477 for the year ended December 31, 2022, which equates to an effective tax rate of 9.5% primarily as a result of the full valuation on our deferred tax asset and timing differences for stock-based compensation during the period offset by current year tax credits and adjustments.
Removed
Investing activities used $4,091,683 of cash in 2022, as compared to $2,679,664 of cash in 2021.
Added
The net income for the year ended December 31, 2023 was $6,458,727, an improvement of $5,430,952 compared to the net income of $1,027,775 for the year ended December 31, 2022. The overall change in net income relates to the aforementioned factors.

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