PaySign (PAYS) 10-Q 14 May 18 2018 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	May 02, 2018
Document And Entity Information
Entity Registrant Name	3PEA INTERNATIONAL, INC.
Entity Central Index Key	1,496,443
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		43,670,765
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2,018

CONSOLIDATED BALANCE SHEETS (Un

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Current assets
Cash	$ 2,170,391	$ 2,748,313
Cash Restricted	16,324,556	14,416,444
Accounts Receivable	164,700	165,523
Prepaid Expenses and other assets	986,970	572,789
Total current assets	19,646,617	17,903,069
Fixed assets, net	854,925	854,402
Deposits	4,551	5,551
Intangible assets, net	1,745,529	1,639,557
Total assets	22,251,622	20,402,579
Current liabilities
Accounts payable and accrued liabilities	537,960	1,145,083
Customer card funding	16,324,556	14,416,444
Total current liabilities	16,862,516	15,561,527
Total liabilities	16,862,516	15,561,527
Stockholders' equity
Common stock; $0.001 par value; 150,000,000 shares authorized, 43,670,765 and 43,670,765 issued and outstanding at March 31, 2018 and December 31, 2017, respectively	43,671	43,671
Additional paid-in capital	7,293,371	7,155,970
Treasury stock at cost, 303,450 shares	(150,000)	(150,000)
Accumulated deficit	(1,595,924)	(2,008,472)
Total 3Pea International, Inc.'s stockholders' equity	5,591,118	5,041,169
Noncontrolling interest	(202,012)	(200,117)
Total stockholders' equity	5,389,106	4,841,052
Total liabilities and stockholders' equity	$ 22,251,622	$ 20,402,579

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Common stock par value (in Dollars per share)	$ .001	$ 0.001
Common stock shares authorized	150,000,000	150,000,000
Common stock shares issued	43,670,765	43,670,765
Common stock shares outstanding	43,670,765	43,670,765
Treasury stock shares	303,450	303,450

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Statement [Abstract]
Revenues	$ 4,676,320	$ 3,200,895
Cost of revenues (excluding depreciation and amortization)	2,433,210	1,833,549
Gross profit	2,243,110	1,367,346
Operating expenses
Depreciation and amortization	246,038	215,267
Selling, general and administrative	1,579,019	814,277
Total operating expenses	1,825,057	1,029,544
Income from operations	418,053	337,802
Other income (expense)
Other income (expense)	(7,400)	20,096
Total other income (expense)	(7,400)	20,096
Income before provision for income taxes and noncontrolling interest	410,653	357,898
Provision for income taxes	0	3,000
Net income before noncontrolling interest	410,653	354,898
Net loss attributable to the noncontrolling interest	1,895	14,496
Net income attributable to 3Pea International, Inc.	$ 412,548	$ 369,394
Net income per common share - basic	$ 0.01	$ 0.01
Net income per common share - fully diluted	$ 0.01	$ 0.01
Weighted average common shares outstanding - basic	43,670,765	43,185,765
Weighted average common shares outstanding - fully diluted	45,654,876	44,159,996

CONSOLIDATED STATEMENT OF STOCK

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited) - 3 months ended Mar. 31, 2018 - USD ($)	Common Stock	Additional Paid-In Capital	Treasury Stock	Accumulated Deficit	Noncontrolling Interest	Total
Beginning balance, shares at Dec. 31, 2017	43,670,765
Beginning balance, value at Dec. 31, 2017	$ 43,671	$ 7,155,970	$ (150,000)	$ (2,008,472)	$ (200,117)	$ 4,841,052
Stock-based compensation		137,401				137,401
Net income (loss)				412,548	(1,895)	410,653
Ending balance, shares at Mar. 31, 2018	43,670,765
Ending balance, value at Mar. 31, 2018	$ 43,671	$ 7,293,371	$ (15,000)	$ (1,595,924)	$ (202,012)	$ 5,389,106

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities:
Net income attritubutable to 3Pea International Inc.	$ 412,548	$ 369,394
Adjustments to reconcile net income to net cash provided by operating activities:
Change in noncontrolling interest	(1,895)	(14,496)
Depreciation and amortization	246,038	215,267
Stock based compensation	137,401	52,001
Changes in operating assets and liabilities:
Change in accounts receivable	823	3,655
Change in prepaid expenses and other current assets	(414,181)	(59,642)
Change in deposits	1,000	1,000
Change in accounts payable and accrued liabilities	(607,123)	(114,558)
Change in customer card funding	1,908,112	1,272,290
Change in legal settlement payable	0	(254,900)
Net cash provided by operating activities	1,682,723	1,470,011
Cash flows from investing activities:
Purchase of fixed assets	(53,210)	(50,408)
Intangible assets	(299,323)	(193,691)
Net cash used in investing activities	(352,533)	(244,099)
Cash flows from financing activities:
Payments on notes payable	0	(152,060)
Net cash used in financing activities	0	(152,060)
Net change in cash and restricted cash	1,330,190	1,073,852
Cash and restricted cash, beginning of period	17,164,757	11,634,448
Cash and restricted cash, end of period	18,494,947	12,708,300
Non-cash financing activities:
Interest paid	0	15,040
Income taxes paid	$ 0	$ 3,000

1. BASIS OF PRESENTATION AND SU

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT POLICIES	3 Months Ended
	Mar. 31, 2018
Accounting Policies [Abstract]
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT POLICIES	1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT POLICIES The foregoing unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included on Form 10-K for the year ended December 31, 2017. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented. The preparation of financial statements in accordance GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumption are inherent in the preparation of the Company’s financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company’s financial position and results of operations. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. About 3PEA International, Inc. 3PEA International, Inc. is a vertically integrated provider of innovative prepaid card programs and processing services for corporate, consumer and government applications. Our payment solutions are utilized by our customers as a means to increase customer loyalty, reduce administration costs and streamline operations. Public sector organizations can utilize our solutions to disburse public benefits or for internal payments. We market our prepaid debit card solutions under our PaySign ® We have developed prepaid card programs for healthcare reimbursement payments, pharmaceutical co-pay assistance, donor compensation and corporate incentive and rewards. We plan to expand our product offering to include payroll cards, general purpose re-loadable cards, travel cards, and expense reimbursement and per diem cards. Our cards are offered to end users through our relationships with bank issuers. Our proprietary PaySign ® We manage all aspects of the debit card lifecycle, from managing the card design and approval processes with partners and associations, to production, packaging, distribution, and personalization. We also oversee inventory and security controls, renewals, lost and stolen card management and replacement. We deploy a fully staffed, in-house customer service department which utilizes bi-lingual customer service agents, Interactive Voice Response (IVR), SMS alerts and two way SMS messaging. Principles of consolidation Use of estimates Cash restricted and Customer Card Funding Intangible assets Internally Developed Software Costs - For computer software developed or obtained for internal use, costs that are incurred in the preliminary project and post implementation stages of software development are expensed as incurred. Costs incurred during the application and development stage are capitalized. Capitalized costs are amortized using the straight-line method over a three-year estimated useful life, beginning in the period in which the software is available for use. For intangible assets, we recognize an impairment loss if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of the intangible asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Revenue and expense recognition (Adoption of ASC 606, Revenue from Contracts with Customers ) In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contacts with Customers (ASC Topic 606), 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. In determining when and how revenue is recognized from contracts with customers, the Company performs the following five-step analysis: (i) identification of contract with customers; (ii) determination of performance obligations; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligations. The Company generates revenue through fees generated from cardholder transactions and interchange. Revenue from cardholder transactions and interchange is recorded when the performance obligation is fulfilled. 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. The Company is currently under no obligation for refunding any fees or has any obligations for disputed claim settlements. Given the nature of the Company’s services and contracts, it has no contract assets. Earnings (loss) per share

2. FIXED ASSETS

2. FIXED ASSETS	3 Months Ended
	Mar. 31, 2018
Property, Plant and Equipment [Abstract]
FIXED ASSETS	2. FIXED ASSETS Fixed assets consist of the following: March 31, December 31, Equipment $ 1,432,387 $ 1,387,589 Software 124,531 123,913 Furniture and fixtures 132,868 126,174 Website Costs 25,467 25,467 Leasehold improvements 51,694 50,999 1,766,947 1,714,142 Less: accumulated depreciation 912,022 859,740 Fixed assets, net $ 854,925 $ 854,402

3. INTANGIBLE ASSETS

3. INTANGIBLE ASSETS	3 Months Ended
	Mar. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
INTANGIBLE ASSETS	3. INTANGIBLE ASSETS Intangible assets consist of the following: March 31, December 31, Patents and trademarks $ 35,903 $ 34,771 Platform 3,107,076 2,808,886 Kiosk 64,802 64,802 Licenses 393,958 393,958 3,601,739 3,302,417 Less: accumulated amortization 1,856,210 1,662,860 Intangible assets, net $ 1,745,529 $ 1,639,557 Intangible assets are amortized over their useful lives ranging from periods of 3 to 5 years.

4. COMMON STOCK

4. COMMON STOCK	3 Months Ended
	Mar. 31, 2018
Equity [Abstract]
COMMON STOCK	4. COMMON STOCK At March 31, 2018, the Company's authorized capital stock was 150,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share. As of that date, the Company had outstanding 43,670,765 shares of common stock, and no shares of preferred stock. During the three months ended March 31, 2018 and 2017, the Company did not issue any shares. Stock and Warrant Grants: In January 2018, the Company granted 500,000 shares of restricted common stock to an employee of the Company with a fair market value of $335,000 or $0.67 per share. The 500,000 shares have an annual vesting period of five years with the first vesting period occurring on December 31, 2018. The amount vested and expensed of this grant for the three months ended March 31, 2018 totaled $16,749. As of March 31, 2018, none of the shares have been issued. In January 2018, the Company granted 500,000 shares of restricted common stock to an employee of the Company with a fair market value of $349,900 or $0.6998 per share. The 500,000 shares have an annual vesting period of five years with the first vesting period occurring on December 31, 2018. The amount vested and expensed of this grant for the three months ended March 31, 2018 totaled $17,494. As of March 31, 2018, none of the shares have been issued. In January 2018, the Company granted 490,000 shares of restricted common stock to an employee of the Company with a fair market value of $362,600 or $0.74 per share. 90,000 shares will vest on December 31, 2018 and the remaining 400,000 shares have an annual vesting period of four years with the first vesting period occurring on December 31, 2019. The amount vested and expensed of this grant for the three months ended March 31, 2018 totaled $16,650. As of March 31, 2018, none of the shares have been issued. In January 2018, the Company granted 150,000 shares of restricted common stock to an employee of the Company with a fair market value of $110,850. The 150,000 shares have an annual vesting period of five years with the first vesting period occurring on December 31, 2018. The amount vested and expensed of this grant for the three months ended March 31, 2018 totaled $5,543. As of March 31, 2018, none of the shares have been issued. In January 2018, the Company granted 100,000 shares of restricted common stock to an employee of the Company with a fair market value of $71,000, or $0.71 per share. The 100,000 shares have an annual vesting period of one year to be fully vested on December 31, 2018. The amount vested and expensed of this grant for the three months ended March 31, 2018 totaled $17,750. As of March 31, 2018, none of the shares have been issued. In July 2017 the Company granted 200,000 shares of restricted common stock to an employee of the Company with a total fair value of $84,400 or $0.422 per share which these shares have been issued. Concurrently, the Company also granted the employee four equal tranches of 200,000 restricted common shares, each valued at $84,400 which will vest in equal amounts over a four year period on the last day of each quarter, commencing December 31, 2017. None of the shares subject to vesting restrictions have been issued. In November 2016, the Company granted a total of 5,000,000 shares to certain officers and directors of the Company with a total value of $787,950 or $0.15759 per share (including a 15% discount to fair market value due to these shares being restricted and lacking market liquidity). The 5,000,000 shares have a quarterly vesting period of five years with the first vesting period occurring on December 31, 2016. The amount vested and expensed for the three months ended March 31, 2018 and 2017 was $39,397 and $39,397 respectively As of March 31, 2018, none of the shares have been issued. In November 2016, the Company granted 210,000 shares to a consultant. The shares were valued at $33,094 or $0.15759 per share (including a 15% discount to fair market value due to these shares being restricted and lacking market liquidity). The 210,000 shares have a quarterly vesting period of three years with the first vesting period occurring on December 31, 2016. The amount vested and expensed for the three months ended March 31, 2018 and 2017 was $2,758 and $2,758 respectively. As of March 31, 2018, none of the shares have been issued In March 2015, the Company granted 200,000 shares of common stock along with 200,000 warrants to a consultant. The shares were valued at $30,600 or $0.16 per share (including a 15% discount to fair market value due to these shares being restricted and lacking market liquidity). The warrants were valued at $34,611, using the Black-Scholes options pricing model under the following assumptions: stock price at issuance of $0.18 per share; exercise price of $0.50, 3.5 year life; discount rate of 2.00%; and volatility rate of 245%. The 200,000 shares and 200,000 warrants granted have a vesting period of six months of which one month were fully vested as of March 31, 2016. As of March 31, 2018, the 200,000 shares have been issued and the warrants for 200,000 shares were granted.

5. SUBSEQUENT EVENTS

5. SUBSEQUENT EVENTS	3 Months Ended
	Mar. 31, 2018
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	5. SUBSEQUENT EVENTS On April 13, 2018, the Company appointed Quinn Williams to its board of directors as an independent director. In connection with his appointment, the Company issued Mr. Williams 200,000 shares of restricted common stock which vests over a four-year period from the date of his appointment. On May 3, 2018, the Company appointed Dennis Triplett to its board of directors as an independent director. In connection with his appointment, the Company issued Mr. Triplett 200,000 shares of restricted common stock which vests over a four-year period from the date of his appointment. On May 3, 2018, the Company appointed Dan R. Henry to its board of directors as an independent director. In connection with his appointment, the Company issued Mr. Henry options to purchase 1,500,000 shares common stock exercisable for five years at $1.34 per share, which vest over a four-year period from the date of his appointment.

1. BASIS OF PRESENTATION AND 12

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT POLICIES (Policies)	3 Months Ended
	Mar. 31, 2018
Accounting Policies [Abstract]
Principles of consolidation	Principles of consolidation
Use of estimates	Use of estimates
Cash restricted and Customer Card funding	Cash restricted and Customer Card Funding
Intangible assets	Intangible assets Internally Developed Software Costs - For computer software developed or obtained for internal use, costs that are incurred in the preliminary project and post implementation stages of software development are expensed as incurred. Costs incurred during the application and development stage are capitalized. Capitalized costs are amortized using the straight-line method over a three-year estimated useful life, beginning in the period in which the software is available for use. For intangible assets, we recognize an impairment loss if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of the intangible asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives.
Revenue and expense recognition	Revenue and expense recognition (Adoption of ASC 606, Revenue from Contracts with Customers ) In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contacts with Customers (ASC Topic 606), 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. In determining when and how revenue is recognized from contracts with customers, the Company performs the following five-step analysis: (i) identification of contract with customers; (ii) determination of performance obligations; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligations. The Company generates revenue through fees generated from cardholder transactions and interchange. Revenue from cardholder transactions and interchange is recorded when the performance obligation is fulfilled. 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. The Company is currently under no obligation for refunding any fees or has any obligations for disputed claim settlements. Given the nature of the Company’s services and contracts, it has no contract assets.
Earnings (loss) per share	Earnings (loss) per share

2. FIXED ASSETS (Tables)

2. FIXED ASSETS (Tables)	3 Months Ended
	Mar. 31, 2018
Property, Plant and Equipment [Abstract]
Fixed assets	March 31, December 31, Equipment $ 1,432,387 $ 1,387,589 Software 124,531 123,913 Furniture and fixtures 132,868 126,174 Website Costs 25,467 25,467 Leasehold improvements 51,694 50,999 1,766,947 1,714,142 Less: accumulated depreciation 912,022 859,740 Fixed assets, net $ 854,925 $ 854,402

3. INTANGIBLE ASSETS (Tables)

3. INTANGIBLE ASSETS (Tables)	3 Months Ended
	Mar. 31, 2018
LIABILITIES AND STOCKHOLDERS' DEFICIT
Intangible Assets	March 31, December 31, Patents and trademarks $ 35,903 $ 34,771 Platform 3,107,076 2,808,886 Kiosk 64,802 64,802 Licenses 393,958 393,958 3,601,739 3,302,417 Less: accumulated amortization 1,856,210 1,662,860 Intangible assets, net $ 1,745,529 $ 1,639,557

2. FIXED ASSETS (Details)

2. FIXED ASSETS (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Fixed Assets Gross	$ 1,766,947	$ 1,714,142
Less: accumulated depreciation	(912,022)	(859,740)
Fixed assets, net	854,925	854,402
Equipment [Member]
Fixed Assets Gross	1,432,387	1,387,589
Software [Member]
Fixed Assets Gross	124,531	123,913
Furniture and Fixtures [Member]
Fixed Assets Gross	132,868	126,174
Website Costs [Member]
Fixed Assets Gross	25,467	25,467
Leasehold Improvements [Member]
Fixed Assets Gross	$ 51,694	$ 50,999

3. INTANGIBLE ASSETS (Details)

3. INTANGIBLE ASSETS (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Intangible assets gross	$ 3,601,739	$ 3,302,417
Less: accumulated amortization	(1,856,210)	(1,662,860)
Intangible assets, net	1,745,529	1,639,557
Patents and Trademarks [Member]
Intangible assets gross	35,903	34,771
Platform [Member]
Intangible assets gross	3,107,076	2,808,886
Kiosk Development [Member]
Intangible assets gross	64,802	64,802
Licenses [Member]
Intangible assets gross	$ 393,958	$ 393,958

3. INTANGIBLE ASSETS (Details N

3. INTANGIBLE ASSETS (Details Narrative)	3 Months Ended
	Mar. 31, 2018
Minimum [Member]
Intangible assets useful lives	3 years
Maximum [Member]
Intangible assets useful lives	5 years

4. COMMON STOCK (Details Narrat

4. COMMON STOCK (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Authorized capital stock	150,000,000	150,000,000
Authorized capital stock par value	$ .001	$ 0.001
Common stock outstanding	43,670,765	43,670,765
Stock issued new, shares	0
Restricted Stock [Member] | Employee [Member]
Restricted stock granted, shares	500,000
Restricted stock grant, value	$ 335,000
Restricted stock fair value per share	$ 0.67
Vesting period	5 years
Restricted stock vested, value	$ 16,749
Restricted stock issued	0
Restricted Stock [Member] | Employee [Member]
Restricted stock granted, shares	500,000
Restricted stock grant, value	$ 349,000
Restricted stock fair value per share	$ 0.6998
Vesting period	5 years
Restricted stock vested, value	$ 17,494
Restricted stock issued	0
Restricted Stock [Member] | Employee [Member]
Restricted stock granted, shares	490,000
Restricted stock grant, value	$ 362,600
Restricted stock fair value per share	$ 0.74
Vesting period	90,000 shares will vest on December 31, 2018 and the remaining 400,000 shares have an annual vesting period of four years with the first vesting period occurring on December 31, 2019.
Restricted stock vested, value	$ 16,650
Restricted stock issued	0
Restricted Stock [Member] | Employee [Member]
Restricted stock granted, shares	150,000
Restricted stock grant, value	$ 110,850
Vesting period	5 years
Restricted stock vested, value	$ 5,543
Restricted stock issued	0
Restricted Stock [Member] | Employee [Member]
Restricted stock granted, shares	100,000
Restricted stock grant, value	$ 71,000
Restricted stock fair value per share	$ 0.71
Vesting period	1 year
Restricted stock vested, value	$ 17,750
Restricted stock issued	0