Paysign PAYS Form 10-Q filing Q2 FY2026

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

See accompanying notes to unaudited condensed consolidated financial statements.

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See accompanying notes to unaudited condensed consolidated financial statements.

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See accompanying notes to unaudited condensed consolidated financial statements.

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See accompanying notes to unaudited condensed consolidated financial statements.

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PAYSIGN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 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, 2025. 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 and six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.

About Paysign, Inc.

Paysign, Inc. (the “Company,” “Paysign,” “we” or “our”) was incorporated on August 24, 1995, and trades under the symbol PAYS on The Nasdaq Stock Market LLC. Paysign is a provider of prepaid card programs, comprehensive patient affordability offerings, life science software technology solutions, digital banking services and integrated payment processing designed for businesses, consumers and government entities. Headquartered in Nevada, the Company creates customized, innovative payment solutions for clients across all industries, including pharmaceutical, healthcare, hospitality and retail.

Principles of Consolidation – The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated.

Subsequent Events – The Company discloses subsequent events that provide evidence about conditions that did not change the condensed consolidated financial statements at the balance sheet date but have a significant effect on the financial statements at the time of occurrence or on future operations of the Company. There have been no subsequent events since the balance sheet date.

Segment Reporting – The Company operates as one business, a vertically integrated provider of prepaid card products and processing services. The Company’s chief operating decision maker (“CODM”), who is the Company’s chief executive officer, utilizes a consolidated approach to assess the performance of and allocate resources to the business. Accordingly, management has concluded that the Company consists of a single operating segment and single reportable segment for accounting and financial reporting purposes.

The CODM regularly assesses the performance of the single operating and reporting segment based on consolidated net income. The CODM reviews expenses at a level consistent with those reported in the Company’s consolidated statements of operations. All significant expense categories are reflected in the consolidated statements of operations. The measure of segment assets is reflected in the consolidated balance sheets as total assets.

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Use of Estimates – The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and (iii) the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents – The Company considers all highly liquid investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents for the purposes of the statement of cash flows. The Company had no cash equivalents at June 30, 2026 and December 31, 2025, respectively.

Restricted Cash – At June 30, 2026 and December 31, 2025, restricted cash consisted of funds held specifically for our card product and pharma patient affordability programs that are contractually restricted to use. The Company includes changes in restricted cash balances with cash and cash equivalents when reconciling the beginning and ending total amounts in our condensed consolidated statements of cash flows.

Reimbursement Receivables – At June 30, 2026 and December 31, 2025, accounts receivable included $88,779,628 and $62,366,232, respectively, of customer reimbursement balances of pass-through claims, which are fully offset in accounts payable and accrued liabilities. Accounts receivable also include accruals and trade receivables for program management and processing fees that have terms pursuant to their related contracts.

The Company applied current accounting guidance to evaluate whether its accounts receivable balances were subject to credit losses. A combination of aging and loss-rate methodologies was used to estimate current expected credit losses. In developing this estimate, the Company considered a broad range of information, including historical loss experience adjusted for current conditions and expectations of future trends. The evaluation also incorporated qualitative and quantitative risk factors such as the age of receivable balances, expected timing of payment, contract terms and conditions, geographic risk and relevant industry or economic trends. Based on this assessment, the Company concluded that any potential credit loss estimate and related allowance would be immaterial and, therefore, no allowance was recorded.

Concentrations of Credit Risk – Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and restricted cash. The Company maintains its cash and cash equivalents and restricted cash in various bank accounts primarily with one financial institution in the United States, which at times may exceed federally insured limits. If this financial institution were to be placed into receivership, we may be unable to access the cash we have on deposit. If we are unable to access our cash and cash equivalents as needed, our financial position and ability to operate our business could be adversely affected. The Company has not experienced any losses, nor does it anticipate any losses with respect to such accounts. At June 30, 2026 and December 31, 2025, the Company had approximately $2,616,488 and $1,427,627, respectively, in excess of federally insured bank account limits. In February of 2024, the Company initiated a program with one of our financial institutions called deposit swapping, where the financial institution utilizes a third-party who is participating in reciprocal deposit networks. This program is an alternative way for our financial institution to offer us full Federal Deposit Insurance Corporation (“FDIC”) insurance on deposits over $250,000. Under this program, deposit networks divide uninsured deposits into smaller units and distribute these monies among participating banks in the network where the monies are fully FDIC insured.

As of June 30, 2026, the Company also had a concentration of accounts receivable risk, one pharma patient affordability customer individually represented 36% of our accounts receivable balance. One pharma patient affordability customer individually represented 31% of our accounts receivable balance on December 31, 2025. These accounts receivable balances relate to pass-through claim reimbursements that have been paid on behalf of the pharma program customers.

Business Combinations – The Company accounts for business combinations using the acquisition method. As of the acquisition date, the acquirer recognizes, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. Goodwill is initially measured at cost, being the excess of the cost of acquisition over the fair value of the net identifiable assets acquired and liabilities assumed. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. If the cost of acquisition is lower than the fair value of the net identifiable assets, the difference is recognized in profit. Acquisition costs are expensed as incurred.

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Fixed Assets – Fixed assets are stated at cost less accumulated depreciation. Depreciation is principally recorded using the straight-line method over the estimated useful life of the asset, which is generally 3 to 10 years. The cost of repairs and maintenance is charged to expense as incurred. Leasehold improvements are capitalized and depreciated over the shorter of the remaining lease term or the estimated useful life of the improvements. Expenditures for property betterments and renewals are capitalized. Upon the sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense).

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 – For intangible assets, the Company recognizes an impairment loss if the carrying amount of the intangible asset is not recoverable and exceeds its 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 an indefinite-life are not amortized. Intangible assets with a finite life are amortized on a straight-line basis over their estimated useful lives, which are generally 3 to 30 years.

Goodwill – Our methodology for allocating the purchase price relating to purchase acquisitions is determined through established valuation techniques. Goodwill represents a residual value as of the acquisition date, which in most cases results in measuring goodwill as an excess of the purchase consideration transferred plus the fair value of any noncontrolling interest in the acquired company over the fair value of net assets acquired, including contingent consideration. We perform goodwill impairment tests on an annual basis, evaluated at a single reporting unit in the fourth fiscal quarter and between annual tests in certain circumstances. The assessment of fair value for goodwill and purchased intangible assets is based on factors that market participants would use in an orderly transaction in accordance with the accounting guidance for the fair value measurement of non-financial assets.

As of June 30, 2026 and December 31, 2025, goodwill recorded in the condensed consolidated balance sheets totaled $4,487,637, reflecting no change during the three and six months ended June 30, 2026. This goodwill arose from the Company's acquisition of Gamma Innovation LLC on March 19, 2025 (see “Note 2 – ACQUISITION” in the notes to the accompanying condensed consolidated financial statements). The fair value of the Company's reporting unit is estimated using assumptions based on operating results, market conditions, industry trends, and other relevant factors. Changes in these estimates and assumptions could materially affect the determination of fair value and the assessment of goodwill impairment. For the three and six months ended June 30, 2026, management performed a qualitative assessment and concluded that it is more likely than not that goodwill was not impaired.

Internally Developed Software Costs – Computer software development costs are generally expensed as incurred. However, costs related to software developed for internal use, for resale, or for website development may be capitalized when they meet the criteria outlined below. These costs include compensation and related expenses, hardware and software costs and expenditures incurred in developing features and functionality.

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.

Costs incurred to develop software products for sale, lease or other marketing are expensed as incurred until technological feasibility is established. Once technological feasibility has been established, qualifying development costs are capitalized until the product is available for general release to customers. Capitalized costs are amortized using the straight-line method over a 10-year estimated useful life.

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Contract Assets – Incremental costs to obtain or fulfill a contract with a customer are capitalized. The Company determines the costs that are incremental by confirming the costs (i) are directly related to a customer’s contract, (ii) generate or enhance resources to fulfill contract performance obligations in the future, and (iii) are recoverable. Amortization is on a straight-line basis generally over three to five years, beginning when goods and services are transferred to the customer or group of customers.

Hosting Implementation – Costs to implement the cloud computing arrangements (the “hosting site”) are accounted for by following the same model as internally developed software costs. Costs that are incurred in the preliminary project and post implementation stages of hosting development are expensed when they are 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 when the hosting site is available for use.

Customer Card Funding – As of June 30, 2026 and December 31, 2025, customer card funding represents funds loaded or available to be loaded on cards for the Company’s card product programs, or funds available to cover reimbursement claims for the Company’s pharma patient affordability programs.

Fair Value of Financial Instruments – Under applicable accounting guidance, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company determines the fair values of our financial instruments based on the fair value hierarchy established under applicable accounting guidance which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following describes the three-level hierarchy:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities. We currently do not have any assets or liabilities in this category.

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. We currently do not have any assets or liabilities in this category.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the overall fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments for which the determination of fair value requires significant management judgment or estimation. The fair value for such assets and liabilities is generally determined using pricing models, market comparables, discounted cash flow methodologies or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability.

The Company's contingent consideration liability is measured at fair value on a recurring basis and is classified within Level 3 of the fair value hierarchy. Changes in fair value of contingent consideration are recorded in the consolidated statements of operations. The fair value is estimated using a Monte Carlo simulation model based on projected revenues, the Company's common stock price, and expected payout scenarios. Significant unobservable inputs include forecasted revenues, revenue volatility, probability of achieving performance targets, and a continuous risk-free discount rate.

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During the three and six months ended June 30, 2026, the Company recognized a $990,000 fair value adjustment, recorded as a reduction to selling, general and administrative expense in the condensed consolidated statements of operations, due to a decrease in the fair value of the contingent consideration liability, or earn-out, related to the March 19, 2025 acquisition of substantially all assets of Gamma Innovation LLC. The contingent consideration was classified as a Level 3 liability and was valued at each measurement date using a Monte Carlo simulation model. Significant unobservable inputs included management's projected revenue growth rate for the acquired technologies, a revenue volatility assumption, continuous revenue discount rate, and the Company's common stock price. As of June 30, 2026, management determined that the fair value of the contingent consideration liability was $0. This determination reflects actual revenue through June 30, 2026, which was materially below the level required to achieve the $20.0 million per-tranche revenue thresholds during the remaining earn-out period ending March 19, 2030.

On June 30, 2026, the Company and Gamma Innovation LLC entered into an agreement to terminate the contingent consideration “earn-out” and no further consideration is or will be payable to Gamma Innovation LLC. The termination did not result in any incremental gain or loss, as the liability had already been reduced to $0 in connection with the fair value determination described above. Concurrently with the termination of the contingent consideration, the Company entered into an agreement to grant restricted stock units to an employee who also is the principal owner of Gamma Innovation LLC, contingent upon stockholder approval of an increase in shares authorized under the 2023 Equity Incentive Plan. The Company intends to seek such approval at its next annual meeting, expected to be held on or before June 30, 2027. The Company has determined that no grant date has occurred under ASC 718, Compensation—Stock Compensation, and no compensation cost has been recognized as of June 30, 2026.

The opening and closing balances of the contingent consideration (earn-out) liability are as follows:

Earnings Per Share – Basic earnings per share exclude any dilutive effects of options, warrants and convertible securities. Basic earnings per share is computed using the weighted-average number of common shares outstanding during the applicable period. Diluted earnings per share is computed using the weighted-average number of common and common stock equivalent shares outstanding during the period using the treasury stock method. Common stock equivalent shares are excluded from the computation if their effect on the diluted earnings per share calculation is anti-dilutive.

Revenue and Expense Recognition – 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 programs are generated through card program management fees, transaction claims processing fees, interchange fees, customer support fees and other billable services. Other revenues are generated through cardholder fees, interchange fees, program management fees, load fees, settlement income and breakage. Life science software technology solution revenues, acquired through our Gamma Innovation LLC acquisition, are generated through subscriptions to its cloud-based software platform and related professional services.

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Plasma and pharma 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. Card program management fees and transaction claims processing fees include an obligation to our program sponsors and are generally recognized when earned on a monthly basis and are typically due pursuant to the contract terms. The Company uses the output method to recognize card program management fee revenue at the amount of consideration to which an entity has a right to invoice. The performance obligation is satisfied when the services are transferred to the customer which the Company determined to be monthly, as the customer simultaneously receives and consumes the benefit from the Company’s performance. 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 are 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 interchange fee revenue concurrent with the processing of card transactions. Interchange fees are settled in accordance with the card payment network terms and conditions, which is typically within a few days.

The portion of the dollar value of prepaid-stored value cards that consumers do not ultimately redeem are referred to as breakage. In certain card programs where we hold the cardholder funds and expect to be entitled to a breakage amount, we recognize revenue using estimated breakage rates ratably over the estimated card life; provided that a significant reversal of the amount of breakage revenue recognized is not probable, and record adjustments to such estimates when redemption is remote or we are legally defeased of the obligation, if applicable. For each program, we utilize a third party to estimate breakage rates based on historical redemption patterns, market-specific trends, escheatment rules and existing economic conditions. The Company accounts for breakage in accordance with Accounting Standards Update (“ASU”) 2016-04, Liabilities—Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Cards for the recognition of such revenue. Breakage revenue is recorded in other revenue on the consolidated statements of operations and was $75,632 and $187,678 for the three and six months ended June 30, 2026, respectively. Breakage revenue was $54,934 and $156,124 for the three and six months ended June 30, 2025, respectively.

The Company utilizes the remote method of revenue recognition for settlement income whereby the unspent card balances will be recognized as revenue at the expiration of the cards or the respective card 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 to refund any fees, and the Company does not currently have any obligations for disputed claim settlements. Settlement income was $0 for the three and six months ended June 30, 2026 and $0 for the three and six months ended June 30, 2025.

The Company recognizes revenue from subscription and hosting service arrangements, under which customers receive continuous access to Company-hosted data and software tools, together with related maintenance and support. These arrangements represent single performance obligations satisfied over time, as the services are substantially the same and are transferred to the customer using the same pattern over the applicable contract term. Revenue is recognized ratably over the respective service periods. These revenue streams were not material to the Company's condensed consolidated financial statements for the period presented.

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, fraud charges and sales and commission expense.

Operating Leases – The Company determines if a contract is or contains a leasing element at contract inception or the date in which a modification of an existing contract occurs. In order for a contract to be considered a lease, the contract must transfer the right to control the use of an identified asset for a period of time in exchange for consideration. Control is determined to have occurred if the lessee has the right to (i) obtain substantially all of the economic benefits from the use of the identified asset throughout the period of use and (ii) direct the use of the identified asset.

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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. Certain lease contracts include obligations to pay for other services, such as maintenance and repairs. We account for these other services as a non-lease component of the lease and they are not considered when accounting for the lease. 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 condensed consolidated statements of operations and presented as operating cash outflows within the condensed consolidated statements of cash flows.

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. The fair value of restricted stock awards is measured using the grant date trading price of our stock. The fair value of stock options is estimated at the grant date using the Black-Scholes option-pricing model, and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. We have elected to recognize compensation expense for all options with graded vesting on a straight-line basis over the vesting period of the entire option. 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.

Recently Adopted Accounting Pronouncement – In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes – Improvements to Income Tax Disclosures”, requiring enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024 on a prospective basis and retrospective application is permitted. We adopted ASU 2023-09 effective December 31, 2025 and applied it retrospectively to all periods presented in the financial statements. The adoption resulted in expanded disclosures of the components of the reconciliation between income tax expense and statutory expectations as well as expanded disclosures of income taxes paid. See "Note 11—INCOME TAX" for further information. Because the ASU affects disclosures only, the adoption did not affect the Company’s consolidated statements of operations or consolidated balance sheets.

In July 2025, the FASB issued ASU 2025-05, “Financial Instruments — Credit Losses (Topic 326) – Measurement of Credit Losses for Accounts Receivable and Contract Assets” (“ASU 2025-05”), which provides a practical expedient for estimating expected credit losses for current accounts receivable and current contract assets. ASU 2025-05 will be effective for annual periods beginning after December 15, 2025, and interim periods within those annual reporting periods and should be applied prospectively. The Company is currently evaluating the impact that this guidance will have on the Company's consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncement Not Yet Adopted – In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses,” which requires disclosure in the notes to financial statements of specified information about certain costs and expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2026. Early adoption is permitted. The amendments should be applied either prospectively to the financial statements issued for reporting periods after the effective date of this update or retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the potential effects of ASU 2024-03 on our consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025-06, "Targeted Improvements to the Accounting for Internal-Use Software," which simplifies the capitalization guidance by removing all references to software development project stages, so that the guidance is neutral to different software development methods. The amendments in this update are effective for annual periods beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either retrospectively or prospectively to software costs incurred after the adoption date or on a modified prospective basis. We are currently evaluating the potential effects of ASU 2025-06 on our consolidated financial statements and related disclosures.

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In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270) –Narrow-Scope Improvements”. The amendments are intended to improve the clarity and navigability of interim reporting requirements within Topic 270 by clarifying when interim reporting guidance applies, enhancing the organization of required interim disclosures and specifying the form and content of interim financial statements. The guidance responds to stakeholder feedback that existing interim reporting requirements were difficult to navigate because of the historical origins and accumulated amendments within Topic 270. ASU 2025-11 adds a disclosure principle requiring entities to disclose events that occur after the end of the most recent annual reporting period that have a material impact on the entity. The amendments also introduce a comprehensive list of required interim disclosures drawn from various codification topics and clarify the presentation requirements for interim financial statements, including condensed financial statements and accompanying footnotes. Importantly, the ASU does not change the fundamental nature of interim reporting nor expand or reduce existing disclosure requirements; rather, it improves clarity and consistency across entities that issue interim financial statements in accordance with GAAP. ASU 2025-11 is effective for the Company for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied either prospectively or retrospectively. The Company is currently evaluating the impact of ASU 2025-11 and does not expect the adoption to have a material effect on its consolidated financial statements.

2. ACQUISITION

On March 19, 2025, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Gamma Innovation LLC, a Pennsylvania limited liability company (“Gamma”), Beta Software and Technologies LLC, a Delaware limited liability company, and Michael Ngo, an individual, pursuant to which we acquired substantially all the assets of Gamma. Gamma is a software and services company focusing on the blood and plasma collection industry that developed innovative solutions targeting donor engagement, retention and management. The Gamma acquisition aligns with our technology and market presence by offering additional engagement, compensation and resource management solutions across our core markets. The new technologies acquired consist of the following solutions: (i) a donor engagement application designed to reduce plasma labor costs and donor fees while improving donor retention; (ii) a customer resource management platform designed to reduce unnecessary expenses and improve donor engagement, marketing effectiveness and retention; and (iii) a donor management solution designed to improve plasma donation center efficiency by reducing operational costs and optimizing donor compensation.

Total purchase consideration transferred or transferable was $15,558,637, which consisted of the following:

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We have accounted for the Gamma acquisition as a business combination, which generally requires that we recognize the assets acquired and liabilities assumed at fair value as of the acquisition date. The final estimated acquisition date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total final purchase consideration, were as follows:

During the second quarter of 2025, a measurement period adjustment of $2,200,000 related to the Gamma acquisition decreased the amount of earn-out contingent consideration from $3,190,000 to $990,000, which decreased the amounts attributable to acquired technology and goodwill. The updated amounts are reflected in the above purchase consideration and value of goodwill and identifiable intangible assets.

Goodwill arising from the acquisition was attributable to expected growth opportunities of the acquired technology, potential synergies from combining the acquired business into our existing business, and an assembled workforce. We expect that approximately $4,487,637 of the goodwill from this acquisition will be deductible for income tax purposes.

The estimated fair value of acquired technologies was $10,568,000. Total identifiable intangible assets, including the $503,000 non-compete agreement, were $11,071,000, all of which have finite lives. The fair value of the identifiable intangible assets has been estimated using the income approach by using the multi-period excess earnings method. Under this method, an intangible asset’s fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. The estimated fair value was developed by discounting future net cash flows to their present value at market-based rates of return. Such assumptions included forecasted revenues, cost of sales and operating expenses, technology obsolescence and weighted average cost of capital. The Company also utilized the cost replacement approach for certain immaterial intangible assets included within the acquired technology stack. The determination of the useful lives for acquired technologies is based upon various industry studies, historical acquisition experience and economic factors. The following table reflects the final estimated acquisition date fair values of the identified intangible assets of Gamma and their respective weighted-average estimated amortization periods:

During the fourth quarter of 2025, we revised the weighted-average useful life of acquired technology, reducing its amortization period from 15 years to 10 years. The updated amortization periods are reflected in the acquisition date fair values of identifiable intangible assets and their respective useful lives.

The historical revenue and earnings of Gamma were not material for purposes of presenting pro forma information. Transaction costs associated with this business combination were expensed as incurred and recorded in selling, general and administrative expense in the condensed consolidated statements of operations. These costs totaled $6 thousand and $21 thousand for the three months ended June 30, 2026 and 2025, respectively, and $6 thousand and $129 thousand for the six months ended June 30, 2026 and 2025, respectively.

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3. FIXED ASSETS, NET

Fixed assets consist of the following:

Depreciation expense for the three months ended June 30, 2026 and 2025 was $162,413 and $102,672, respectively. Depreciation expense for the six months ended June 30, 2026 and 2025 was $319,377 and $204,519, respectively.

4. INTANGIBLE ASSETS, NET

Intangible assets consist of the following:

Intangible assets are amortized over their useful lives ranging from periods of 3 to 30 years. Amortization expense for the three months ended June 30, 2026 and 2025 was $2,177,416 and $2,017,425, respectively. Amortization expense for the six months ended June 30, 2026 and 2025 was $4,656,608 and $3,716,581, respectively.

5. LEASE

The Company entered into an operating lease for office space which became effective in June 2020. 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 June 30, 2026, the remaining lease term was 3.9 years and the discount rate used was 6%.

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The Company entered into an operating lease for additional office space which became effective in September 2025. The lease term is 7.4 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 June 30, 2026, the remaining lease term was 6.6 years and the discount rate used was 8%.

Operating lease cost included in selling, general and administrative expenses was $395,394 and $760,454 for the three and six months ended June 30, 2026, respectively, including common area maintenance expenses of $72,358 and $147,865, respectively. Operating lease cost included in selling, general and administrative expenses was $189,425 and $378,851 for the three and six months ended June 30, 2025, respectively, including common area maintenance expenses of $33,832 and $70,664, respectively. Cash paid for operating leases was $524,220 and $291,704 for the six months ended June 30, 2026 and 2025, respectively.

Additional information related to the Company’s operating leases was as follows:

The following is the lease maturity analysis of our operating leases as of June 30, 2026:

6. CUSTOMER CARD FUNDING LIABILITY

The Company issues prepaid cards with various provisions for cardholder fees and expiration. The Company recognizes revenue from cardholder transactions and interchange fees when the related performance obligation has been satisfied. Unspent prepaid card balances are recognized as settlement income upon expiration of the applicable cards and the related card programs. Contract liabilities associated with prepaid cards consist of funds loaded on cards and client funds held for future card loading, until such amounts are spent by cardholders or otherwise recognized as revenue by the Company. These contract liabilities are included in customer card funding liability on the condensed consolidated balance sheets. Contract liabilities also include prefunded amounts used to pay pass-through reimbursement amounts in the Company’s patient affordability business.

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The opening and closing balances of the Company’s liabilities are as follows:

The amount of revenue recognized during the three months ended June 30, 2026 and 2025 that was included in the opening contract liability for prepaid cards was $3,463,162 and $2,727,566, respectively.

7. COMMON STOCK

At June 30, 2026, 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 57,902,271 shares of common stock issued and 56,442,582 shares of common stock outstanding. There were no shares of preferred stock outstanding.

Stock-based compensation expense related to Company restricted stock grants for the three and six months ended June 30, 2026 was $1,252,256 and $2,536,259, respectively. Stock-based compensation expense related to Company restricted stock grants for the three and six months ended June 30, 2025 was $954,400 and $1,626,718, respectively.

2026 Transactions – During the three and six months ended June 30, 2026, the Company issued 1,129,675 and 1,840,675 shares of common stock for vested stock awards, respectively. The Company received proceeds of $125,400 for the exercise of stock options.

The Company granted 540,000 restricted stock awards during the three and six months ended June 30, 2026; the weighted average grant date fair value was $6.01. The restricted stock awards granted vest over a period of one to five years.

2025 Transactions – During the three and six months ended June 30, 2025, the Company issued 263,414 and 987,414 shares of common stock, respectively, for vested stock awards and the exercise of stock options. The Company received proceeds of $591,534 from the exercise of stock options.

During the three months ended June 30, 2025, the Company also granted 2,951,000 restricted stock awards, of which 1,366,663 shares are subject to performance-based vesting and service requirements. For the stock awards granted, the weighted average grant date fair value was $2.33 and vest over a period of three years. Awards under performance conditions vest when the Company achieves specific defined earnings target and the employee provides service through each of the vesting periods. The Company expects it is probable that performance targets will be achieved. Compensation costs for performance awards would be reversed if the performance criteria are not met. The Company granted 5,976,000 restricted stock awards, of which 1,366,663 shares are subject to performance-based vesting and service requirements and 2,500,000 are part of the Gamma acquisition (see “Note 2. ACQUISITION” in the notes to the accompanying condensed consolidated financial statements) during the six months ended June 30, 2025; the weighted average grant date fair value was $2.36. The restricted stock awards granted vest over a period of three to five years.

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8. BASIC AND FULLY DILUTED NET INCOME (LOSS) PER COMMON SHARE

The following table sets forth the computation of basic and fully diluted net income per common share for the three and six months ended June 30, 2026 and 2025:

The following table sets forth the number of shares of unvested restricted stock excluded from the computation of diluted net income per common share because their effect would have been anti-dilutive for the periods presented:

9. COMMITMENTS AND CONTINGENCIES

Pending or Threatened Litigation – From time to time, we may become involved in various lawsuits and legal proceedings that 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. We are not currently a party to any pending or threatened legal proceedings that we believe could have a material adverse effect on our business or financial condition.

The Company entered into an agreement to grant restricted stock units to an employee who also is the principal owner of Gamma Innovation LLC (see “Note 1 – Fair Value of Financial Instruments” in the notes to the accompanying condensed consolidated financial statements).

10. RELATED PARTY

During the first quarter of 2025, the Company hired an employee who is also the principal owner of a technical consulting corporation engaged by the Company to provide technology, development, and support services to the Company and its customers. The Company recognized related party expenses of $170,860 and $331,693 for the three and six months ended June 30, 2026, respectively, and $79,000 for each of the three and six months ended June 30, 2025. These expenses are included in selling, general and administrative expense in the condensed consolidated statements of operations.

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11. INCOME TAX

The following table summarizes the Company’s income tax expense and effective tax rates for the three and six months ended June 30, 2026 and 2025:

The effective tax rates for the three months and six months ended June 30, 2026 and June 30, 2025 were based on the Company’s forecasted annualized effective tax rates and were adjusted for discrete items that occurred within the periods presented. The effective tax rate for the three months and six months ended June 30, 2026 varies from the three months and six months ended June 30, 2025 primarily as a result of tax benefits related to our stock-based compensation.

Under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) signed into law in 2020 and the subsequent extension of the CARES Act through September 30, 2021, the Company was eligible for a refundable employee retention credit subject to certain criteria. The Company has elected an accounting policy to recognize government assistance when it is probable that the Company is eligible to receive the assistance and present the credit as a reduction of the related expense. As of June 30, 2026 and December 31, 2025, the Company recorded $345,228 in other receivables on the condensed consolidated balance sheet related to U.S. Federal Government refunds.

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ITem 2. Management’s discussion and analysis of financial condition and results of operations.

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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 entities. 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. We market our prepaid card solutions under our Paysign® brand. As we are a payment processor and prepaid card program manager, we derive our revenue from all stages of the prepaid card lifecycle.

In addition to our payment solutions, we also offer life science technology solutions targeting blood and plasma collection organizations. These software solutions are marketed under the Apherion™ brand, and we derive our revenue from licensing, hosting, and professional service fees.

We operate on a powerful, high-availability payment solutions 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. 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.

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, demand deposit accounts accessible with a debit card and software solutions targeting blood and plasma collection organizations. 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, software license fees, breakage 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. Software license fees are recorded ratably over the license period. 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 and is recorded under other revenue on the condensed consolidated statements of operations. Settlement income is recorded at the expiration of the card or card program and relates primarily to our corporate incentive programs which is also recorded under other revenue on the condensed consolidated statements of operations.

The industry generally has two categories for our prepaid debit cards: (1) corporate and consumer reloadable cards and (2) non-reloadable cards.

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 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 online 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.

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. Typically, 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. 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. Restricted-loop cards can be used at several merchants, or a defined group of merchants, such as all merchants at a specific shopping mall.

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The prepaid card market in the United States has experienced significant growth in recent years due to consumers and merchants 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.

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 also oversee inventory and security controls, renewals, lost and stolen card management and replacement. 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.

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.

As part of our continuing platform expansion process, we evaluate current and emerging technologies for applicability to our existing and future software platform. To this end, we engage with various hardware and software vendors in evaluation of various infrastructure components. Where appropriate, we use third-party technology components in the development of our software applications and service offerings. 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.

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. 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. We may, at times, utilize independent contractors who make direct sales and are paid commissions and/or restricted stock awards. We market our Paysign premier product through existing communication channels to a targeted segment of our existing cardholders, as well as to a broad group of individuals, ranging from non-banked to fully banked consumers with a focus on long-term users of our product.

During the remainder of 2026, we plan to continue to invest additional funds in technology improvements, sales and marketing, cybersecurity, fraud, customer service and regulatory compliance. From time to time, we evaluate raising capital to enable us to diversify into new market verticals. If 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.

Results of Operations

Comparison of the Three Months Ended June 30, 2026 to the Three Months Ended June 30, 2025

The following table summarizes our condensed consolidated financial results for the three months ended June 30, 2026 in comparison to the three months ended June 30, 2025:

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The increase in total revenues of $9,173,718 for the three months ended June 30, 2026 compared to the same period in the prior year consisted primarily of a $2,296,616 increase in plasma revenue, a $6,895,227 increase in pharma revenue and a $18,125 decrease in other revenue. The increase in plasma revenue was primarily due to an increase in plasma donations and dollars loaded to cards as the market appears to have returned to normalized growth following elevated plasma inventory levels experienced throughout much of 2025, offset by the reduction of 46 net plasma centers during the prior twelve-month period as existing customers closed underperforming plasma centers and one customer sold their plasma centers to a company utilizing another payment provider. The increase in pharma revenue was primarily due to the financial benefit of 51 net pharma patient affordability programs launched during the prior twelve-month period, and a corresponding increase in monthly management fees, setup fees, claim processing fees and other billable services such as dynamic business rules and call center support. For the three months ended June 30, 2026 the number of claims processed increased approximately 54% compared to the same period in the prior year.

Cost of revenues for the three months ended June 30, 2026 increased $3,031,860 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 and postage costs, call center support, program implementation and sales and commission expense. The increase in cost of revenues consisted primarily of (i) increased call center support expense of approximately $784,000 associated primarily with the growth in our plasma and pharma patient affordability businesses, a new customer service contact center that opened in the fourth quarter of 2025, wage inflation pressures, a tight labor market and increased benefit costs; (ii) increased sales and commission expense of approximately $249,000 related to the increase in overall revenue for programs in which we pay commission expenses; and (iii) increased network and network related fees of approximately $2,241,000 associated with an increase in plasma donations and dollars loaded to cards and 51 net pharma patient affordability programs. These increases were offset by a decrease in plastics, collateral and postage of approximately $158,000 and other costs of approximately $85,000.

Gross profit for the three months ended June 30, 2026 increased $6,141,858 compared to the same period in the prior year resulting primarily from the launch of an additional 51 net pharma patient affordability programs during the prior twelve-month period, and a corresponding increase in setup fees, monthly management fees, claim processing fees and other billable fees. Gross profit also benefited from an increase in plasma donations and dollars loaded to cards over the prior twelve-month period, and corresponding revenue and beneficial impact of a variable cost structure, as many of the plasma transaction costs are variable in nature and are provided by third parties who charge us based on the number of active cards outstanding and transactions that occurred during the period. The increase in gross profit was offset by increased costs from network fees, third-party service providers, sales commission expense and customer service costs mentioned above, primarily driven by the overall growth in our business. The increase in gross margin resulted primarily from a greater contribution of total revenue from our pharma patient affordability business which has higher gross profit margins than our other businesses.

Selling, general and administrative expenses for the three months ended June 30, 2026 increased $348,817 compared to the same period in the prior year and consisted primarily of an increase in (i) compensation and benefits of approximately $573,000 due to continued hiring to support our growth, a tight labor market and increased benefit costs; (ii) stock-based compensation of approximately $298,000 related to the issuance of restricted stock units for new hires and employee retention; (iii) technologies and telecom expense of approximately $175,000 primarily related to ongoing platform security investments; (iv) general expenses of approximately $93,000 primarily related to rent, conferences, deliveries and employee education; (v) other expenses of approximately $186,000 primarily related to insurance and outside professional services associated with the company’s SOX 404(b) readiness; and (vi) a decrease in capitalized platform development costs of approximately $15,000. The rise in costs was offset by a one-time gain on the fair value of our contingent consideration (earn-out) of approximately $990,000 associated with the Gamma Innovation LLC (“Gamma”) acquisition that closed on March 19, 2025 (see “Note 1 – Fair Value of Financial Instruments” in the notes to the accompanying condensed consolidated financial statements).

Depreciation and amortization expense for the three months ended June 30, 2026 increased $219,732 compared to the same period in the prior year. The increase in depreciation and amortization expense was primarily due to the amortization of intangible assets from our Gamma acquisition, continued capitalization of new software development costs and equipment purchases related to continued enhancements to our processing platform and employment growth.

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For the three months ended June 30, 2026, we recorded income from operations of $7,010,916 representing an improvement of $5,573,309 compared to income from operations of $1,437,607 during the same period in the prior year related to the aforementioned factors.

Other income for the three months ended June 30, 2026 increased $289,043 primarily due to higher average bank account balances offset by the implied interest expense related to future cash payments for the Gamma acquisition of $100,523 and slightly lower interest rates.

At June 30, 2026, our income tax expense for federal, state and local taxes totaled $1,148,582, representing an effective tax rate of 14.5%. At June 30, 2025, our income tax provision was $655,006, representing an effective tax rate of 32.1%. Both rates were based on our net operating income adjusted for discrete items that occurred within the quarter and tax benefits related to our stock-based compensation. The significant driver in the discrete item adjustment primarily related to the increase in stock price at June 30, 2026 when compared to the same period in the prior year.

The net income for the three months ended June 30, 2026 was $6,756,537, an improvement of $5,368,776 compared to the net income of $1,387,761 for the three months ended June 30, 2025. The overall change in net income relates to the aforementioned factors.

Comparison of the Six Months Ended June 30, 2026 to the Six Months Ended June 30, 2025

The following table summarizes our condensed consolidated financial results for the six months ended June 30, 2026 in comparison to the six months ended June 30, 2025:

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The increase in total revenues of $18,613,993 for the six months ended June 30, 2026 compared to the same period in the prior year consisted primarily of a $4,635,347 increase in plasma revenue, a $13,956,026 increase in pharma revenue and a $22,620 increase in other revenue. The increase in plasma revenue was primarily due to an increase in plasma donations and dollars loaded to cards as the market appears to have returned to normalized growth following elevated plasma inventory levels experienced throughout much of 2025, offset by the reduction of 46 net plasma centers during the prior twelve-month period as existing customers closed underperforming plasma centers and one customer sold their plasma centers to a company utilizing another payment provider. The increase in pharma revenue was primarily due to the financial benefit of 51 net pharma patient affordability programs launched during the prior twelve-month period, and a corresponding increase in monthly management fees, setup fees, claim processing fees and other billable services such as dynamic business rules and call center support. For the six months ended June 30, 2026 the number of claims processed increased approximately 52% compared to the same period in the prior year.

Cost of revenues for the six months ended June 30, 2026 increased $5,944,018 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 and postage costs, call center support, program implementation and sales and commission expense. The increase in cost of revenues consisted primarily of (i) increased call center support expense of approximately $1,685,000 associated primarily with the growth in our plasma and pharma patient affordability businesses, a new customer service contact center that opened in the fourth quarter of 2025, wage inflation pressures, a tight labor market and increased benefit costs; (ii) increased sales and commission expense of approximately $515,000 related to the increase in overall revenue for programs in which we pay commission expenses; and (iii) increased network and network related fees of approximately $4,009,000 associated with an increase in plasma donations and dollars loaded to cards and the addition of 51 net pharma patient affordability programs. These increases were offset by a decrease in plastics, collateral and postage of approximately $156,000 and bad debt of approximately $109,000.

Gross profit for the six months ended June 30, 2026 increased $12,669,975 compared to the same period in the prior year resulting primarily from the launch of an additional 51 net pharma patient affordability programs during the prior twelve-month period, and a corresponding increase in setup fees, monthly management fees, claim processing fees and other billable fees. Gross profit also benefited from an increase in plasma donations and dollars loaded to cards over the prior twelve-month period, and corresponding revenue and beneficial impact of a variable cost structure, as many of the plasma transaction costs are variable in nature and are provided by third parties who charge us based on the number of active cards outstanding and transactions that occurred during the period. The increase in gross profit was offset by increased costs from network fees, third-party service providers, sales commission expense and customer service costs mentioned above, primarily driven by the overall growth in our business. The increase in gross margin resulted primarily from a greater contribution of total revenue from our pharma patient affordability business which has higher gross profit margins than our other businesses.

Selling, general and administrative expenses for the six months ended June 30, 2026 increased $1,862,712 compared to the same period in the prior year and consisted primarily of an increase in (i) compensation and benefits of approximately $753,000 due to continued hiring to support our growth, a tight labor market and increased benefit costs; (ii) stock-based compensation of approximately $910,000 related to the issuance of restricted stock units for new hires and employee retention; (iii) technologies and telecom expense of approximately $255,000 primarily related to ongoing platform security investments; (iv) general expenses of approximately $130,000 primarily related to rent, conferences, deliveries, merger and acquisition costs and employee education; (v) other expenses of approximately $256,000 primarily related to insurance and outside professional services associated with the company’s SOX 404(b) readiness; (vi) travel and entertainment of approximately $75,000; and (vii) a decrease in capitalized platform development costs of approximately $475,000. The rise in costs was offset by a one-time gain on the fair value of our contingent consideration (earn-out) of approximately $990,000 associated with the Gamma Innovation LLC (“Gamma”) acquisition that closed on March 19, 2025 (see “Note 1 – Fair Value of Financial Instruments” in the notes to the accompanying condensed consolidated financial statements).

Depreciation and amortization expense for the six months ended June 30, 2026 increased $1,054,885 compared to the same period in the prior year. The increase in depreciation and amortization expense was primarily due to the amortization of intangible assets from our Gamma acquisition, continued capitalization of new software development costs and equipment purchases related to continued enhancements to our processing platform and employment growth.

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For the six months ended June 30, 2026, we recorded income from operations of $13,679,051 representing an improvement of $9,752,378 compared to income from operations of $3,926,673 during the same period in the prior year related to the aforementioned factors.

Other income for the six months ended June 30, 2026 increased $327,708 primarily due to higher average bank account balances offset by the implied interest expense related to future cash payments for the Gamma acquisition of $237,407 and slightly lower interest rates.

At June 30, 2026, our income tax expense for federal, state and local taxes totaled $3,178,662, representing an effective tax rate of 20.7%. At June 30, 2025, our income tax provision was $1,320,170, representing an effective tax rate of 24.9%. Both rates were based on our net operating income adjusted for discrete items that occurred within the quarter and tax benefits related to our stock-based compensation. The significant driver in the discrete item adjustment primarily related to the increase in stock price at June 30, 2026 when compared to the same period in the prior year.

The net income for the six months ended June 30, 2026 was $12,195,455, an improvement of $8,221,594 compared to the net income of $3,973,861 for the six months ended June 30, 2025. The overall change in net income relates to the aforementioned factors.

Key Performance Indicators and Non-GAAP Measures

Management reviews several metrics to help us monitor the performance of and identify trends affecting our business. 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 our prepaid card programs. Our gross dollar volume loaded on cards was $546 million and $440 million for the three months ended June 30, 2026 and 2025, respectively. Our gross dollar volume loaded on cards was $1,071 million and $847 million for the six months ended June 30, 2026 and 2025, respectively. We use this metric to analyze the total amount of money moving into our prepaid card programs. The year over year increase reflects an increase in loads we are experiencing in our plasma programs as the market appears to have returned to normalized growth following elevated plasma inventory levels experienced throughout much of 2025, in addition to growth in our pharma patient affordability program and other prepaid programs.

Conversion Rates on Gross Dollar Volume Loaded on Cards: Represents revenues, gross profit or net income (loss) conversion rates of gross dollar volume loaded on cards which are calculated by taking our total revenues, gross profit or net income (loss), respectively, as a numerator and dividing by the gross dollar volume loaded on cards as a denominator. As we derive a number of our financial results from cardholder fees, we utilize these metrics as an indication of the amount of money that is added to cards and will eventually be converted to revenues, gross profit and net income (loss). Our total revenue conversion rates for the three months ended June 30, 2026 and 2025 were 5.17 % or 517 basis points (“bps”), and 4.34% or 434 basis points, respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the three months ended June 30, 2026 and 2025 were 3.28% or 328 bps, and 2.67% or 267 bps, respectively, of gross dollar volume loaded on cards. Our net income conversion rates for the three months ended June 30, 2026 and 2025 were 1.24% or 124 bps, and 0.32% or 32 bps, respectively, of gross dollar volume loaded on cards.

Our total revenue conversion rates for the six months ended June 30, 2026 and 2025 were 5.26% or 526 bps, and 4.45% or 445 bps, respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the six months ended June 30, 2026 and 2025 were 3.38% or 338 bps, and 2.77% or 277 bps, respectively, of gross dollar volume loaded on cards. Our net income conversion rates for the six months ended June 30, 2026 and 2025 were 1.14% or 114 bps, and 0.47% or 47 bps, respectively, of gross dollar volume loaded on cards.

Management also reviews key performance indicators, such as revenues, gross profit, operational expenses as a percentage of revenues, and cardholder participation. 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. This information can assist investors in assessing our financial performance and measuring our ability to generate capital for deployment and investment in new card programs. These adjusted metrics are consistent with how management views our business and are used to make financial, operating and planning decisions. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenue, operating income, net income, earnings per share (basic and diluted) or net cash from operating activities as determined in accordance with GAAP. 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:

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“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 and change in fair value of contingent consideration. A reconciliation of net income to Adjusted EBITDA is provided in the table below.

“EBITDA margin” is defined as earnings before interest, income taxes, depreciation and amortization expense as a percentage of the Company’s revenue and “Adjusted EBITDA margin” reflects the adjustment to EBITDA margin to exclude stock-based compensation expense and change in fair value of contingent consideration as a percentage of revenue. A reconciliation of net income margin to Adjusted EBITDA margin is provided in the table below.

Liquidity and Capital Resources

The following table sets forth the major sources and uses of cash:

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Comparison of Six Months Ended June 30, 2026 and 2025

During the six months ended June 30, 2026 and 2025, we financed our operations through internally generated funds.

Operating activities provided $20,081,074 of cash as of June 30, 2026, an increase of $22,473,350 compared to the same period in the prior year. This change in cash flow compared to the change in cash flow in the prior period is primarily due to net increases in operating assets and liabilities. The changes in accounts receivable, accounts payable, and customer card funding, a net increase of $14,390,693, are primarily related to the growth in our pharma patient affordability business and timing of pass-through 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. The increase in cash flow from operating activities was also attributed to an increase in net income and non-cash adjustments for depreciation and amortization, deferred income tax, stock-based compensation and lease expense; offset by an increase in gain in fair value of contingent consideration and prepaid expenses and other current assets.

We used net cash in investing activities during the six months ended June 30, 2026 and 2025 of $3,518,107 and $6,253,535, respectively. For the six months ended June 30, 2026, cash used for investing activities was primarily attributable to an increase in licenses, fixed assets and capitalization of internally developed software as we continue to invest in our technology platform. For the six months ended June 30, 2025, $4,253,535 in cash was used for investing activities primarily attributable to an increase in licenses, fixed assets and capitalization of internally developed software as we continue to invest in our technology platform. The remaining amount of $2,000,000 was used for the initial purchase consideration payment related to the Company’s Gamma acquisition.

For the six months ended June 30, 2026, financing activities resulted in a net cash outflow of $5,065,139, driven primarily by a $2,000,000 contract liability payment related to the Company’s acquisition of Gamma. The remainder reflects taxes paid in connection with the net settlement of vested equity awards, for which 524,981 shares of common stock were withheld at a weighted average price of $6.08 per share, offset by $125,400 in stock option proceeds. For the comparable prior-year period ended June 30, 2025, financing activities resulted in a net cash inflow of $215,748, attributable to $591,534 of stock option proceeds, offset by the repurchase of 100,000 shares of common stock at a weighted average price of $3.76 per share.

Our significant contractual cash requirements also include ongoing payments for lease liabilities and acquisition. For additional information regarding our cash commitments and contractual obligations, see “Note 2 – ACQUISITION” and “Note 5 – LEASE” in the notes to the accompanying condensed consolidated financial statements.

Sources of Liquidity

At June 30, 2026, our available cash on hand, excluding restricted cash was $27,372,858, an increase of $15,619,674 compared to the same period in the prior year, driven primarily by improvements in our operating results. We believe this cash position, together with our forecast for revenues and cash flows for the remainder of 2026 and through the second quarter of 2028, will be sufficient to sustain our operations for the next twenty-four months. In light of the recent bank failures, we continue to monitor the health and soundness of our bank relationships through publicly available information. Based on recent SEC filings, we have not discovered any issues that would cause us to alter our bank relationships.

Critical Accounting Policies and Estimates

Our significant accounting policies are described in Note 2 of the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Our estimates are based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects. Actual results may differ significantly from our estimates.

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Item 3. Quantitative and

Qualitative Disclosures about Market Risk.**

Because we are a smaller reporting company, we are not required to provide the information called for by this Item.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Disclosure controls and procedures means controls and other procedures that are designed to ensure that the information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to ensure that information required to be disclosed by us in those reports is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our chief executive officer and chief financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2026. Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of June 30, 2026, the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control over Financial Reporting

During the quarter ended June 30, 2026, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

**Item

1. Legal Proceedings.**

From time to time, we may become involved in various lawsuits and legal proceedings that 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. We are not currently a party to any pending or threatened legal proceedings that we believe could have a material adverse effect on our business or financial condition.

Item 1A. Risk Factors.

Because we are a smaller reporting company, we are not required to provide the information called for by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the quarter ended June 30, 2026, we did not issue shares of common stock that were not registered under the Securities Act of 1933.

Issuer Purchases of Equity Securities

The following table sets forth certain information relating to the purchases of our common stock by us and any affiliated purchasers within the meaning of Rule 10b-18(a)(3) under the Exchange Act during the three months ended June 30, 2026.

(1) On May 8, 2026, 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, over a 36-month period expiring May 7, 2029.

Item 5. Other Information.

During the quarter ended June 30, 2026, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408 of Regulation S-K).

Item 6. Exhibits.

* Filed herewith.

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