Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | May 07, 2021 | |
Cover [Abstract] | ||
Entity Registrant Name | Paysign, Inc. | |
Entity Central Index Key | 0001496443 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2021 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 50,786,932 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 | |
Entity Emerging Growth | true | |
Entity Small Business | true | |
Entity Ex Transition Period | false | |
Entity File Number | 001-38623 | |
State of Incorporation | NV | |
Interactive data current? | Yes | |
Entity Shell Company | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Current assets | ||
Cash | $ 6,559,678 | $ 7,829,453 |
Restricted Cash | 58,773,488 | 48,100,951 |
Accounts Receivable | 635,576 | 654,859 |
Prepaid expenses and other current assets | 1,947,984 | 1,375,364 |
Total current assets | 67,916,726 | 57,960,627 |
Fixed assets, net | 1,841,910 | 1,849,164 |
Intangible assets, net | 3,722,642 | 3,699,033 |
Operating lease right-of-use asset | 4,218,978 | 4,324,682 |
Total assets | 77,700,256 | 67,833,506 |
Current liabilities | ||
Accounts payable and accrued liabilities | 2,311,685 | 2,162,256 |
Operating lease, current portion | 325,470 | 320,636 |
Customer card funding | 58,773,488 | 48,100,951 |
Total current liabilities | 61,410,643 | 50,583,843 |
Operating lease liability, long term portion | 3,930,395 | 4,013,598 |
Total liabilities | 65,341,038 | 54,597,441 |
Commitments and contingencies (Note 8) | ||
Stockholders' equity | ||
Preferred stock: $0.001 par value; 25,000,000 shares authorized; none issued and outstanding | 0 | 0 |
Common stock; $0.001 par value; 150,000,000 shares authorized, 50,750,882 and 50,251,607 issued at March 31, 2021 and December 31, 2020, respectively | 50,751 | 50,252 |
Additional paid-in capital | 15,135,071 | 14,388,890 |
Treasury stock at cost, 303,450 shares | (150,000) | (150,000) |
Retained earnings (accumulated deficit) | (2,676,604) | (1,053,077) |
Total stockholders' equity | 12,359,218 | 13,236,065 |
Total liabilities and stockholders' equity | $ 77,700,256 | $ 67,833,506 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2021 | Dec. 31, 2020 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.001 | $ .001 |
Common stock, shares authorized | 150,000,000 | 150,000,000 |
Common stock, shares issued | 50,750,882 | 50,251,607 |
Treasury stock shares | 303,450 | 303,450 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 25,000,000 | 25,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Total revenues | $ 6,279,428 | $ 10,576,473 |
Cost of revenues | 3,447,622 | 4,855,520 |
Gross profit | 2,831,806 | 5,720,953 |
Operating expenses | ||
Selling, general and administrative | 3,864,986 | 3,827,324 |
Depreciation and amortization | 595,848 | 502,376 |
Total operating expenses | 4,460,834 | 4,329,700 |
Income (loss) from operations | (1,629,028) | 1,391,253 |
Other income | ||
Interest income | 7,101 | 62,161 |
Income (loss) before income tax provision (benefit) | (1,621,927) | 1,453,414 |
Income tax provision (benefit) | 1,600 | (87,551) |
Net income (loss) | $ (1,623,527) | $ 1,540,965 |
Net income (loss) per share | ||
Basic | $ (0.03) | $ 0.03 |
Diluted | $ (0.03) | $ 0.03 |
Weighted average common shares | ||
Basic | 50,351,971 | 48,713,163 |
Diluted | 50,351,971 | 54,688,066 |
Plasma Industry [Member] | ||
Total revenues | $ 5,383,151 | $ 7,343,410 |
Pharma industry [Member] | ||
Total revenues | 882,830 | 3,020,377 |
Other [Member] | ||
Total revenues | $ 13,447 | $ 212,686 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) | Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Deficit | Noncontrolling Interest [Member] | Total |
Beginning balance, shares at Dec. 31, 2019 | 48,577,712 | |||||
Beginning balance, value at Dec. 31, 2019 | $ 48,578 | $ 11,577,539 | $ (150,000) | $ 8,088,485 | $ (263,087) | $ 19,301,515 |
Issuance of stock for previously vested stock-based compensation, shares | 428,558 | |||||
Issuance of stock for previously vested stock-based compensation, value | $ 428 | (428) | ||||
Exercise of stock options, shares | 10,000 | |||||
Exercise of stock options, value | $ 10 | 23,990 | 24,000 | |||
Stock-based compensation | 724,183 | 724,183 | ||||
Dissolution of Paysign, Ltd. Subsidiary | (263,087) | 263,087 | ||||
Net loss | 1,540,965 | 1,540,965 | ||||
Ending balance, shares at Mar. 31, 2020 | 49,016,270 | |||||
Ending balance, value at Mar. 31, 2020 | $ 49,016 | 12,062,197 | (150,000) | 9,629,450 | 21,590,663 | |
Beginning balance, shares at Dec. 31, 2020 | 50,251,607 | |||||
Beginning balance, value at Dec. 31, 2020 | $ 50,252 | 14,388,890 | (150,000) | (1,053,077) | 13,236,065 | |
Issuance of stock for previously vested stock-based compensation, shares | 466,689 | |||||
Issuance of stock for previously vested stock-based compensation, value | $ 467 | (467) | ||||
Exercise of stock options, shares | 32,586 | |||||
Exercise of stock options, value | $ 32 | 110,434 | 110,466 | |||
Stock-based compensation | 636,214 | 636,214 | ||||
Net loss | (1,623,527) | (1,623,527) | ||||
Ending balance, shares at Mar. 31, 2021 | 50,750,882 | |||||
Ending balance, value at Mar. 31, 2021 | $ 50,751 | $ 15,135,071 | $ (150,000) | $ (2,676,604) | $ 12,359,218 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash flows from operating activities: | ||
Net income (loss) | $ (1,623,527) | $ 1,540,965 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation and amortization | 595,848 | 502,376 |
Stock-based compensation expense | 636,214 | 724,183 |
Amortization of lease right-of use asset | 177,465 | 0 |
Deferred income taxes | 0 | (75,902) |
Changes in operating assets and liabilities: | ||
Accounts receivable | 19,283 | (19,661) |
Prepaid expenses and other current assets | (572,620) | 32,525 |
Accounts payable and accrued liabilities | 142,291 | 475,442 |
Operating lease | (142,992) | 0 |
Customer card funding | 10,672,537 | 7,569,104 |
Net cash provided by operating activities | 9,904,499 | 10,749,032 |
Cash flows from investing activities: | ||
Purchase of fixed assets | (124,696) | (953,894) |
Capitalization of internally developed software | (473,996) | (485,102) |
Purchase of intangible assets | (13,511) | (57,127) |
Net cash used in investing activities | (612,203) | (1,496,123) |
Cash flows from financing activities: | ||
Proceeds from exercise of stock options | 110,466 | 24,000 |
Net cash provided by financing activities | 110,466 | 24,000 |
Net change in cash and restricted cash | 9,402,762 | 9,276,909 |
Cash and restricted cash, beginning of period | 55,930,404 | 45,572,305 |
Cash and restricted cash, end of period | 65,333,166 | 54,849,214 |
Supplemental cash flow information: | ||
Dissolution of noncontrolling interest | $ 0 | $ 263,087 |
RECONCILIATION OF CASH
RECONCILIATION OF CASH - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 | Mar. 31, 2020 | Dec. 31, 2019 |
Additional Cash Flow Elements and Supplemental Cash Flow Information [Abstract] | ||||
Cash | $ 6,559,678 | $ 7,829,453 | $ 9,424,385 | |
Restricted cash | 58,773,488 | 48,100,951 | 45,424,829 | |
Total cash and restricted cash | $ 65,333,166 | $ 55,930,404 | $ 54,849,214 | $ 45,572,305 |
1. BASIS OF PRESENTATION AND SU
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT POLICIES The foregoing unaudited interim condensed consolidated 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 GAAP for complete financial statements. These unaudited interim condensed consolidated 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, 2020. In the opinion of management, the unaudited interim condensed consolidated 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 with 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 assumptions 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, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. Impact of COVID-19 Pandemic The outbreak of a novel coronavirus and the incidence of the related disease (COVID-19) starting in late 2019 has continued, spreading throughout the United States and much of the world beginning in the first quarter of 2020. In March 2020, the World Health Organization declared the outbreak as a pandemic. While the disruption is currently expected to be temporary, there is uncertainty around the duration. The COVID-19 outbreak and the n have had and will continue to have an adverse effect on the Company's results of operations. Given the uncertainty around the extent and timing of the potential future spread or mitigation of COVID-19 and around the imposition or relaxation of protective measures, management cannot reasonably estimate the impact to the Company's future results of operations, cash flows, or financial condition. About Paysign, Inc. Paysign, Inc. (the “Company,” “Paysign,” or “we,” formerly known as 3PEA International, Inc.) 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. Public sector organizations can utilize our payment solutions to disburse public benefits or for internal payments. The Company markets prepaid card solutions under our Paysign ® We provide a card processing platform consisting of proprietary systems and software applications based on the unique needs of our programs. 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. We design and process prepaid programs that run on the platform through which customers can define the services they wish to offer cardholders. The Paysign brand offers prepaid card solutions or “card products” for corporate incentive and rewards including, but not limited to 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. We plan to further expand our product offerings into other prepaid card products such as payroll cards, travel cards, and expense reimbursement cards. Our cards are sponsored by our issuing bank partners. Our proprietary 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 prepaid payments space. The Paysign platform delivers cost benefits and revenue building opportunities to our partners. We manage all aspects of the prepaid card lifecycle, from managing the card design and approval processes with partners and networks, to production, packaging, distribution, and personalization. We 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 bilingual customer service agents, Interactive Voice Response (IVR), and two-way short message service (SMS) messaging and text alerts. Principles of Consolidation Use of Estimates Restricted Cash Fixed Assets The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability. Intangible Assets Intangible assets with a finite life is amortized on a straight-line basis over its estimated useful life. 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 3 to 5 year estimated useful life, beginning in the period in which the software is available for use. Earnings Per Share Revenue and Expense Recognition Revenue from Contracts 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 contracts 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 obligation. 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, interchange fees, and settlement income. Plasma and Pharma card program revenues include both fixed and variable components. Our cardholder fees represent an obligation to the cardholder based on a per transaction basis and recognized at a point in time when the performance obligation is fulfilled. Card program management fees include an obligation to our card program sponsors and are generally recognized when earned on a monthly basis pursuant to the contract terms which are generally multi-year contracts. Interchange fees are earned when customer-issued cards are processed through card payment networks as the nature of our promise to the customer is that we stand ready to process transactions at the customer’s requests on a daily basis over the contract term. Since the timing and quantity of transactions to be processed by us is not determinable, we view interchange fees to comprise an obligation to stand ready to process as many transactions as the customer requests. Accordingly, the promise to stand ready is accounted for as a single series performance obligation. The company uses the right to invoice practical expedient and recognizes revenue concurrent with the processing of card transactions. Prior to September 30, 2020, settlement income from Pharma programs was recognized and recorded, after giving consideration to any revenue constraints, ratably throughout the program lifecycle based on the Company’s estimate of the unspent balances to be remaining on the card at program expiration. During 2020, the Company observed substantially different performance indicators, current trends in the industry regarding program management by third parties, and new information available in dollar loads and spending patterns compared to historical experience. As a result, the Company changed its estimate of breakage for recognizing settlement income for Pharma programs resulting in the Company constraining revenue on all Pharma programs in accordance with applicable accounting guidance. Based on the change in facts and circumstances during 2020, the Company now 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. 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, it has no contract assets. 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. Operating leases In determining the present value of lease payments at lease commencement date, the Company utilizes its incremental borrowing rate based on the information available, unless the rate implicit in the lease is readily determinable. The liability for operating leases is based on the present value of future lease payments. Operating lease expenses are recorded as rent expense, which is included within selling, general and administrative expenses within the consolidated statements of operations and presented as operating cash outflows within the consolidated statements of cash flows. Stock-Based Compensation New Accounting Pronouncements Simplifying the Accounting for Income Taxes |
2. FIXED ASSETS, NET
2. FIXED ASSETS, NET | 3 Months Ended |
Mar. 31, 2021 | |
Property, Plant and Equipment [Abstract] | |
FIXED ASSETS, NET | 2. FIXED ASSETS, NET Fixed assets consist of the following: March 31, December 31, Equipment $ 1,981,603 $ 1,888,640 Software 200,282 200,282 Furniture and fixtures 757,662 752,212 Website costs 67,816 67,816 Leasehold improvements 229,772 203,488 3,237,135 3,112,438 Less: accumulated depreciation 1,395,225 1,263,274 Fixed assets, net $ 1,841,910 $ 1,849,164 Depreciation expense for the three months ended March 31, 2021 and 2020 was $131,950 and $92,328, respectively. |
3. INTANGIBLE ASSETS, NET
3. INTANGIBLE ASSETS, NET | 3 Months Ended |
Mar. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS, NET | 3. INTANGIBLE ASSETS, NET Intangible assets consist of the following: March 31, December 31, Platform $ 7,952,415 $ 7,478,419 Customer lists and contracts 1,177,200 1,177,200 Licenses 247,793 234,282 Trademarks 38,186 38,186 9,415,594 8,928,087 Less: accumulated amortization 5,692,952 5,229,054 Intangible assets, net $ 3,722,642 $ 3,699,033 Intangible assets are amortized over their useful life ranging from periods of 3 to 15 years. Amortization expense for the three months ended March 31, 2021 and 2020 was $463,897 and $410,048, respectively. |
4. LEASE
4. LEASE | 3 Months Ended |
Mar. 31, 2021 | |
Leases [Abstract] | |
LEASE | 4. LEASE The Company entered into an operating lease for an office space which became effective in June 2020 when the construction was complete and we were given access to occupy the space. The lease term is 10 years from the effective date and allows for two optional extensions of five years each. The two optional extensions are not recognized as part of the right-of-use asset or lease liability since it is not reasonably certain that the Company will extend this lease. As of March 31, 2021, the remaining lease term was 9.2 years and the discount rate was 6%. The lease for our previous office space was accounted for as a short-term lease. Operating lease cost included in selling, general and administrative expenses was $215,144 for the three months ended March 31, 2021. Short-term lease cost included in selling, general and administrative expense was $82,441 for the three months ended March 31, 2020. The following is the lease maturity analysis of our operating lease as of March 31, 2021: Twelve months ending March 31, 2022 $ 571,968 2023 571,968 2024 571,968 2025 571,968 2026 629,165 Thereafter 2,669,184 Total lease payments 5,586,221 Less: Imputed interest (1,330,356 ) Present value of future lease payments 4,255,865 Less: current portion of lease liability (325,470 ) Long-term portion of lease liability $ 3,930,395 |
5. CUSTOMER CARD FUNDING LIABIL
5. CUSTOMER CARD FUNDING LIABILITY | 3 Months Ended |
Mar. 31, 2021 | |
Revenue from Contract with Customer [Abstract] | |
CUSTOMER CARD FUNDING LIABILITY | 5. CUSTOMER CARD FUNDING LIABILITY The Company issues prepaid cards with various provisions for cardholder fees or expiration. Revenue generated from cardholder transactions and interchange fees are recognized when the Company’s performance obligation is fulfilled. Unspent balances left on Pharma cards are recognized as settlement income at the expiration of the cards and the program. Contract liabilities related to prepaid cards represent funds on card and client funds held to be loaded to card before the amounts are ultimately spent by the cardholders or recognized as revenue by the Company. Contract liabilities related to prepaid cards are reported as Customer card funding liability on the condensed consolidated balance sheet. The opening and closing balances of the Company's contract liabilities are as follows: Three Months Ended March 31, 2021 2020 Beginning balance $ 48,100,951 $ 32,723,227 Increase (decrease), net 10,672,537 7,569,104 Ending balance $ 58,773,488 $ 40,292,331 The amount of revenue recognized during the three months ended March 31, 2021 and 2020 that was included in the opening contract liability for prepaid cards was $1,023,055 and $844,514, respectively. |
6. COMMON STOCK
6. COMMON STOCK | 3 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
COMMON STOCK | 6. COMMON STOCK At March 31, 2021, the Company's authorized capital stock was 150,000,000 shares of common stock, par value $0.001 per share, and 25,000,000 shares of preferred stock, par value $0.001 per share. On that date, the Company had 50,750,882 shares of common stock issued and 50,447,432 shares of common stock outstanding, and no shares of preferred stock outstanding. Stock-based compensation expense related to Company grants for the three months ended March 31, 2021 was $636,214. Stock-based compensation expense for the three months ended March 31, 2020 was $724,183. 2021 Transactions: 2020 Transactions: |
7.BASIC AND FULLY DILUTED NET I
7.BASIC AND FULLY DILUTED NET INCOME (LOSS) PER COMMON SHARE | 3 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
BASIC AND FULLY DILUTED NET INCOME (LOSS) PER COMMON SHARE | 7. BASIC AND FULLY DILUTED NET INCOME (LOSS) PER COMMON SHARE The following table sets forth the computation of basic and fully diluted net income (loss) per common share for the three months ended March 31, 2021 and 2020: 2021 2020 Numerator: Net income (loss) $ (1,623,527 ) $ 1,540,965 Denominator: Weighted average common shares: Denominator for basic calculation 50,351,971 48,713,163 Weighted average effects of potentially diluted common stock: Stock options (calculated using the treasury method) – 1,824,903 Unvested restricted stock grants – 4,150,000 Denominator for fully diluted calculation 50,351,971 54,688,066 Net income (loss) per common share: Basic $ (0.03 ) $ 0.03 Fully diluted $ (0.03 ) $ 0.03 Due to the net loss for the three months ended March 31, 2021, the effect of all potential common share equivalents was anti-dilutive, and therefore, all such shares were excluded from the computation of diluted weighted average shares outstanding for the period. The amount of potential common share equivalents excluded were 2,241,014 for stock options and 1,975,000 for unvested restricted stock awards for the three months ended March 31, 2021. |
8. COMMITMENTS AND CONTINGENCIE
8. COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 8. COMMITMENTS AND CONTINGENCIES From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. 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. Paysign, Inc. et. al., filed on April 2, 2020 (collectively, the “Complaints” or “Securities Class Action”). Smith & Duvall v. Paysign, Inc. et al. was voluntarily dismissed on May 21, 2020. On May 18, 2020, the Shi plaintiffs and another entity called the Paysign Investor Group each filed a motion to consolidate the remaining Shi and Chase actions and to be appointed lead plaintiff. The Complaints are putative class actions filed on behalf of a class of persons who acquired the Company’s common stock from March 19, 2019 through March 31, 2020, inclusive. The Complaints generally allege that the Company, Mark R. Newcomer, and Mark Attinger violated Section 10(b) of the Exchange Act, and that Messrs. Newcomer and Attinger violated Section 20(a) of the Exchange Act, by making materially false or misleading statements, or failing to disclose material facts, regarding the Company’s internal control over financial reporting and its financial statements. The Complaints seek class action certification, compensatory damages, and attorney’s fees and costs. 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, which is expected to be fully briefed by June 1, 2021. 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 a stockholder derivative action in the United States District Court for the District of Nevada: Andrzej Toczek, derivatively on behalf of Paysign, Inc. v. Mark, R. Newcomer, et. al., filed on September 17, 2020. This action alleges violations of Section 14(a) of the Exchange Act, breach of fiduciary duty, unjust enrichment, and waste, largely in connection with the failure to correct information technology controls over financial reporting alleged in the Securities Class Action, thereby causing the Company to face exposure in the Securities Class Action. The derivative 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. As of the date of this filing, Paysign cannot give any meaningful estimate of likely outcome or damages. |
9. RELATED PARTY
9. RELATED PARTY | 3 Months Ended |
Mar. 31, 2021 | |
Related Party Transactions [Abstract] | |
RELATED PARTY | 9. RELATED PARTY A member of our Board of Directors is also a partner in a law firm that the Company engages for services to review regulatory filings and various legal matters. The Company incurred legal expense of $252,836 during the three months ended March 31, 2021, with the related party law firm. During the three months ended March 31, 2020 the Company incurred legal expense of $18,733 with the related party law firm. |
10. INCOME TAX BENEFIT
10. INCOME TAX BENEFIT | 3 Months Ended |
Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
INCOME TAX BENEFIT | 10. INCOME TAX BENEFIT The effective tax rate (income tax benefit as a percentage of income (loss) before income tax benefit) was (0.1%) for the three months ended March 31, 2021, as compared to (6.0%) for the three months ended March 31, 2020. The effective tax rates vary |
1. BASIS OF PRESENTATION AND _2
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Impact of COVID-19 Pandemic | Impact of COVID-19 Pandemic The outbreak of a novel coronavirus and the incidence of the related disease (COVID-19) starting in late 2019 has continued, spreading throughout the United States and much of the world beginning in the first quarter of 2020. In March 2020, the World Health Organization declared the outbreak as a pandemic. While the disruption is currently expected to be temporary, there is uncertainty around the duration. The COVID-19 outbreak and the n have had and will continue to have an adverse effect on the Company's results of operations. Given the uncertainty around the extent and timing of the potential future spread or mitigation of COVID-19 and around the imposition or relaxation of protective measures, management cannot reasonably estimate the impact to the Company's future results of operations, cash flows, or financial condition. |
Description of Business/About Paysign | About Paysign, Inc. Paysign, Inc. (the “Company,” “Paysign,” or “we,” formerly known as 3PEA International, Inc.) 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. Public sector organizations can utilize our payment solutions to disburse public benefits or for internal payments. The Company markets prepaid card solutions under our Paysign ® We provide a card processing platform consisting of proprietary systems and software applications based on the unique needs of our programs. 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. We design and process prepaid programs that run on the platform through which customers can define the services they wish to offer cardholders. The Paysign brand offers prepaid card solutions or “card products” for corporate incentive and rewards including, but not limited to 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. We plan to further expand our product offerings into other prepaid card products such as payroll cards, travel cards, and expense reimbursement cards. Our cards are sponsored by our issuing bank partners. Our proprietary 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 prepaid payments space. The Paysign platform delivers cost benefits and revenue building opportunities to our partners. We manage all aspects of the prepaid card lifecycle, from managing the card design and approval processes with partners and networks, to production, packaging, distribution, and personalization. We 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 bilingual customer service agents, Interactive Voice Response (IVR), and two-way short message service (SMS) messaging and text alerts. |
Principles of consolidation | Principles of Consolidation |
Use of estimates | Use of Estimates |
Restricted cash | Restricted Cash |
Fixed assets | Fixed Assets The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability. |
Intangible assets | Intangible Assets Intangible assets with a finite life is amortized on a straight-line basis over its estimated useful life. 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 3 to 5 year estimated useful life, beginning in the period in which the software is available for use. |
Earnings per share | Earnings Per Share |
Revenue and expense recognition | Revenue and Expense Recognition Revenue from Contracts 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 contracts 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 obligation. 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, interchange fees, and settlement income. Plasma and Pharma card program revenues include both fixed and variable components. Our cardholder fees represent an obligation to the cardholder based on a per transaction basis and recognized at a point in time when the performance obligation is fulfilled. Card program management fees include an obligation to our card program sponsors and are generally recognized when earned on a monthly basis pursuant to the contract terms which are generally multi-year contracts. Interchange fees are earned when customer-issued cards are processed through card payment networks as the nature of our promise to the customer is that we stand ready to process transactions at the customer’s requests on a daily basis over the contract term. Since the timing and quantity of transactions to be processed by us is not determinable, we view interchange fees to comprise an obligation to stand ready to process as many transactions as the customer requests. Accordingly, the promise to stand ready is accounted for as a single series performance obligation. The company uses the right to invoice practical expedient and recognizes revenue concurrent with the processing of card transactions. Prior to September 30, 2020, settlement income from Pharma programs was recognized and recorded, after giving consideration to any revenue constraints, ratably throughout the program lifecycle based on the Company’s estimate of the unspent balances to be remaining on the card at program expiration. During 2020, the Company observed substantially different performance indicators, current trends in the industry regarding program management by third parties, and new information available in dollar loads and spending patterns compared to historical experience. As a result, the Company changed its estimate of breakage for recognizing settlement income for Pharma programs resulting in the Company constraining revenue on all Pharma programs in accordance with applicable accounting guidance. Based on the change in facts and circumstances during 2020, the Company now 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. 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, it has no contract assets. 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. |
Operating leases | Operating leases In determining the present value of lease payments at lease commencement date, the Company utilizes its incremental borrowing rate based on the information available, unless the rate implicit in the lease is readily determinable. The liability for operating leases is based on the present value of future lease payments. Operating lease expenses are recorded as rent expense, which is included within selling, general and administrative expenses within the consolidated statements of operations and presented as operating cash outflows within the consolidated statements of cash flows. |
Stock-based compensation | Stock-Based Compensation |
New accounting pronouncements | New Accounting Pronouncements Simplifying the Accounting for Income Taxes |
2. FIXED ASSETS, NET (Tables)
2. FIXED ASSETS, NET (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Property, Plant and Equipment [Abstract] | |
Schedule of fixed assets | Fixed assets consist of the following: March 31, December 31, Equipment $ 1,981,603 $ 1,888,640 Software 200,282 200,282 Furniture and fixtures 757,662 752,212 Website costs 67,816 67,816 Leasehold improvements 229,772 203,488 3,237,135 3,112,438 Less: accumulated depreciation 1,395,225 1,263,274 Fixed assets, net $ 1,841,910 $ 1,849,164 |
3. INTANGIBLE ASSETS, NET (Tabl
3. INTANGIBLE ASSETS, NET (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |
Schedule of intangible assets | Intangible assets consist of the following: March 31, December 31, Platform $ 7,952,415 $ 7,478,419 Customer lists and contracts 1,177,200 1,177,200 Licenses 247,793 234,282 Trademarks 38,186 38,186 9,415,594 8,928,087 Less: accumulated amortization 5,692,952 5,229,054 Intangible assets, net $ 3,722,642 $ 3,699,033 |
4. LEASE (Tables)
4. LEASE (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Leases [Abstract] | |
Schedule of operating lease liabilities | The following is the lease maturity analysis of our operating lease as of March 31, 2021: Twelve months ending March 31, 2022 $ 571,968 2023 571,968 2024 571,968 2025 571,968 2026 629,165 Thereafter 2,669,184 Total lease payments 5,586,221 Less: Imputed interest (1,330,356 ) Present value of future lease payments 4,255,865 Less: current portion of lease liability (325,470 ) Long-term portion of lease liability $ 3,930,395 |
5. CUSTOMER CARD FUNDING LIAB_2
5. CUSTOMER CARD FUNDING LIABILITY (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of contract liabilities | The opening and closing balances of the Company's contract liabilities are as follows: Three Months Ended March 31, 2021 2020 Beginning balance $ 48,100,951 $ 32,723,227 Increase (decrease), net 10,672,537 7,569,104 Ending balance $ 58,773,488 $ 40,292,331 |
7. BASIC AND FULLY DILUTED NET
7. BASIC AND FULLY DILUTED NET INCOME PER COMMON SHARE (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
Computation of earnings per share | The following table sets forth the computation of basic and fully diluted net income (loss) per common share for the three months ended March 31, 2021 and 2020: 2021 2020 Numerator: Net income (loss) $ (1,623,527 ) $ 1,540,965 Denominator: Weighted average common shares: Denominator for basic calculation 50,351,971 48,713,163 Weighted average effects of potentially diluted common stock: Stock options (calculated using the treasury method) – 1,824,903 Unvested restricted stock grants – 4,150,000 Denominator for fully diluted calculation 50,351,971 54,688,066 Net income (loss) per common share: Basic $ (0.03 ) $ 0.03 Fully diluted $ (0.03 ) $ 0.03 |
1. BASIS OF PRESENTATION AND _3
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Estimated useful lives of fixed assets | 3 to 10 years |
2. FIXED ASSETS, NET (Details)
2. FIXED ASSETS, NET (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Fixed Assets Gross | $ 3,237,135 | $ 3,112,438 |
Less: accumulated depreciation | 1,395,225 | 1,263,274 |
Fixed assets, net | 1,841,910 | 1,849,164 |
Equipment [Member] | ||
Fixed Assets Gross | 1,981,603 | 1,888,640 |
Software [Member] | ||
Fixed Assets Gross | 200,282 | 200,282 |
Furniture and Fixtures [Member] | ||
Fixed Assets Gross | 757,662 | 752,212 |
Website Costs [Member] | ||
Fixed Assets Gross | 67,816 | 67,816 |
Leasehold Improvements [Member] | ||
Fixed Assets Gross | $ 229,772 | $ 203,488 |
2. FIXED ASSETS, NET (Details N
2. FIXED ASSETS, NET (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 131,950 | $ 92,328 |
3. INTANGIBLE ASSETS, NET (Deta
3. INTANGIBLE ASSETS, NET (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Intangible assets gross | $ 9,415,594 | $ 8,928,087 |
Less: accumulated amortization | 5,692,952 | 5,229,054 |
Intangible assets, net | 3,722,642 | 3,699,033 |
Platform [Member] | ||
Intangible assets gross | 7,952,415 | 7,478,419 |
Customer lists and contracts [Member] | ||
Intangible assets gross | 1,177,200 | 1,177,200 |
Licenses [Member] | ||
Intangible assets gross | 247,793 | 234,282 |
Trademarks [Member] | ||
Intangible assets gross | $ 38,186 | $ 38,186 |
3. INTANGIBLE ASSETS, NET (De_2
3. INTANGIBLE ASSETS, NET (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Amortization expense | $ 463,897 | $ 410,048 |
Minimum [Member] | ||
Intangible assets useful lives | 3 years | |
Maximum [Member] | ||
Intangible assets useful lives | 15 years |
4. LEASE (Details)
4. LEASE (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Leases [Abstract] | ||
2022 | $ 571,968 | |
2023 | 571,968 | |
2024 | 571,968 | |
2025 | 571,968 | |
2026 | 629,165 | |
Thereafter | 2,669,184 | |
Total lease payments | 5,586,221 | |
Less: Imputed interest | (1,330,356) | |
Present value of future lease payments | 4,255,865 | |
Less: current portion of lease liability | (325,470) | $ (320,636) |
Long-term portion of lease liability | $ 3,930,395 | $ 4,013,598 |
4. LEASE (Details Narrative)
4. LEASE (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Leases [Abstract] | ||
Lease term | 10 years | |
Lease term option to extend | Two optional extensions of five years each. | |
Remaining lease term | 9 years 2 months 12 days | |
Discount rate | 6.00% | |
Operating lease cost | $ 215,144 | |
Short-term lease cost | $ 82,441 |
5. CUSTOMER CARD FUNDING LIAB_3
5. CUSTOMER CARD FUNDING LIABILITY (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | ||
Contract liabilities, beginning balance | $ 48,100,951 | $ 32,723,227 |
Increase (decrease) in contract liabilities | 10,672,537 | 7,569,104 |
Contract liabilities, ending balance | $ 58,773,488 | $ 40,292,331 |
5. CUSTOMER CARD FUNDING LIAB_4
5. CUSTOMER CARD FUNDING LIABILITY (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | ||
Revenue recognized in current year previously included in contract liabilities | $ 1,023,055 | $ 844,514 |
6. COMMON STOCK (Details Narrat
6. COMMON STOCK (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Equity [Abstract] | |||
Common stock, shares authorized | 150,000,000 | 150,000,000 | |
Common stock, par value | $ 0.001 | $ .001 | |
Common stock, shares issued | 50,750,882 | 50,251,607 | |
Preferred stock, shares authorized | 25,000,000 | 25,000,000 | |
Preferred stock, par value | $ 0.001 | $ 0.001 | |
Preferred stock, shares outstanding | 0 | 0 | |
Stock based compensation expense | $ 636,214 | $ 724,183 | |
Options granted | 500,000 | ||
Fair value of options per share | $ 2.86 | ||
Option vesting period | 4 years | ||
Risk-free interest rate | 0.38% | ||
Expected volatility | 100.00% | ||
Dividend yield | 0.00% | ||
Weighted average expected life | 5 years | ||
Stock issued for vested stock awards and the exercise of stock options, shares | 499,275 | 438,558 | |
Proceeds from exercise of vested stock grants and exercise of options | $ 110,466 | $ 24,000 |
7. BASIC AND FULLY DILUTED NE_2
7. BASIC AND FULLY DILUTED NET INCOME PER COMMON SHARE (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Numerator: | ||
Net income (loss) | $ (1,623,527) | $ 1,540,965 |
Weighted average common shares: | ||
Denominator for basic calculation | 50,351,971 | 48,713,163 |
Weighted average effects of potentially diluted common stock: | ||
Stock options (calculated under treasury method) | 0 | 1,824,903 |
Unvested restricted stock grants | 0 | 4,150,000 |
Denominator for fully diluted calculation | 50,351,971 | 54,688,066 |
Basic | $ (0.03) | $ 0.03 |
Fully diluted | $ (0.03) | $ 0.03 |
7. BASIC AND FULLY DILUTED NE_3
7. BASIC AND FULLY DILUTED NET INCOME PER COMMON SHARE (Details Narrative) | 3 Months Ended |
Mar. 31, 2021shares | |
Stock Options [Member] | |
Potential common share equivalents excluded from computation | 2,241,014 |
Unvested Restricted Stock Awards [Member] | |
Potential common share equivalents excluded from computation | 1,975,000 |
9. RELATED PARTY (Details Narra
9. RELATED PARTY (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Related Party Transactions [Abstract] | ||
Legal fees paid to related party | $ 252,836 | $ 18,733 |
10. INCOME TAX BENEFIT (Details
10. INCOME TAX BENEFIT (Details Narrative) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Effective income tax rate | (0.10%) | (6.00%) |