Disclosure Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q includes forward looking statements ("Forward Looking Statements"). All statements other than statements of historical fact included in this report are Forward Looking Statements. In the normal course of its business, the Company, in an effort to help keep its shareholders and the public informed about the Company's operations, may from time-to-time issue certain statements, either in writing or orally, that contains or may contain Forward-Looking Statements. Although the Company believes that the expectations reflected in such Forward Looking Statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of such plans or strategies, past and possible future, of acquisitions and projected or anticipated benefits from acquisitions made by or to be made by the Company, or projections involving anticipated revenues, earnings, levels of capital expenditures or other aspects of operating results. All phases of the Company operations are subject to a number of uncertainties, risks and other influences, many of which are outside the control of the Company and any one of which, or a combination of which, could materially affect the results of the Company's proposed operations and whether Forward Looking Statements made by the Company ultimately prove to be accurate. Such important factors ("Important Factors") and other factors could cause actual results to differ materially from the Company's expectations are disclosed in this report. All prior and subsequent written and oral Forward Looking Statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Important Factors described below that could cause actual results to differ materially from the Company's expectations as set forth in any Forward Looking Statement made by or on behalf of the Company.
The Company divides prepaid cards into two general categories: corporate and consumer reloadable, and non-reloadable cards.
Reloadable Cards: These types of cards are generally incentive, payroll or considered general purpose reloadable ("GPR") cards. Payroll cards are issued to an employee by an employer to receive the direct deposit of their payroll. GPR cards can also be issued to a consumer at a retail location or mailed to a consumer after completing an on-line application. GPR cards can be reloaded multiple times with a consumer's payroll, government benefit, a federal or state tax refund or through cash reload networks located at retail locations. Reloadable cards are generally open loop cards as described below.
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 gift or incentive cards. These cards may be open loop or closed loop. Normally these types of cards are used for purchase of goods or services at retail locations and cannot be used to receive cash.
These prepaid cards may be open loop, closed loop or semi-closed loop. Open loop cards can be used to receive cash at ATM locations or purchase goods or services by PIN or signature at retail locations. These cards can be used virtually anywhere that VisaŽ or MasterCardŽ is accepted. Closed loop cards can only be used at a specific merchant. Semi-closed loop cards can be used at several merchants such as a shopping mall.
The prepaid card market is one of the fastest growing segments of the payments industry in the U.S. According to
We have developed prepaid card programs for healthcare reimbursement payments, pharmaceutical assistance, corporate and incentive rewards and expense reimbursement cards. We plan to expand our product offering to include payroll cards, general purpose re-loadable cards and travel cards. Our cards are offered to end users through our relationships with bank issuers.
Our products and services are aimed at capitalizing on the growing demand for stored value and reloadable ATM/prepaid card financial products in a variety of market niches. Our PaySignŽ platform is scalable and customizable, delivering cost benefits and revenue building opportunities to partners. We manage all aspects of the debit card lifecycle, from managing the card design and approval processes with banking partners and card associations, to production, packaging, distribution, and personalization. We also oversee inventory and security controls, renewals, lost and stolen card management and replacement.
During the first quarter of 2013 we launched our proprietary payment platform, the PaySignŽ platform. We expect to continue our practice of investing an appropriate level of resources to maintain, enhance and extend the functionality of our proprietary systems and existing software applications, to develop new and innovative software applications and systems in response to the needs of our customers, and to enhance the capabilities surrounding our infrastructure. In addition, we intend to offer products and services that are compatible with new and emerging delivery channels.
As part of our platform expansion development process, we evaluate current and emerging technology 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
Having built the foundation of our business with innovative prepaid debit card solutions targeting the healthcare reimbursement, pharmaceutical marketing and prescription drug sampling markets, we are currently focused on expanding our product line to other high growth market verticals in the corporate incentive prepaid debit card space.
In the past, we limited our sales activities and focused on extensive development and building of infrastructure and processes in order to scale the business successfully. This includes the addition of key personnel in sales and marketing, the development of the PaySignŽ platform, and the design and development of a fully Integrated Interactive Voice Response (IVR) system and in house call center that was taken live in the first quarter of 2013. During the quarter ended
As we continue to build the infrastructure and processes to be able to scale the business successfully, the company has begun to see positive results from these efforts. The company expects to launch several large scale corporate incentive prepaid card programs for new customers in the third quarter of 2014. The company will continue to devote resources to sales and marketing activities in order to increase its presence in the markets it currently competes and to enter new, high growth markets in the future. This includes the development of a new corporate website, attending and presenting at industry specific conferences and trade shows and adding sales and marketing personnel.
We sell our products directly to customers in the U.S. but may work with a small number of resellers and third parties in international markets to identify, sell and support targeted opportunities. We have also identified large scale opportunities in the
In order to expand into new markets, we will need to invest in technology improvements, sales and marketing expenses, and regulatory compliance costs. We are considering raising capital to enable us to diversify into new markets. If we do not raise new capital, we believe that we will still be able to expand into new markets using internally generated funds, but our expansion will not be as rapid.
The Company added an additional bank partner to our newest processing platform and launched new programs with this bank in early 2013. We will work with various banks to distribute prepaid cards to consumers throughout the U.S.
Results of Operations
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Gross profit for the three months ended
Selling, general and administrative expenses for the three months ended
The increase in selling, general and administrative expenses was primarily due to investments in staffing, infrastructure and processes relating to the development of several large scale corporate incentive prepaid debit card programs developed for new customers. These programs are expected to launch in the third quarter of 2014. The increase can also be attributed to expansion of our in-house customer service center.
In the three months ended
Other income (expense) for the three months ended
Our net income (loss) for the three months ended
Six Months ended
Revenues for the six months ended
Cost of revenues for the six months ended
Gross profit for the six months ended
Selling, general and administrative expenses for the six months ended
The increase in selling, general and administrative expenses was primarily due to investments in staffing, infrastructure and processes relating to several large scale corporate incentive prepaid debit card programs developed for new customers. These programs are expected to commence in the third quarter of 2014. The increase can also be attributed to expansion of our in-house customer service center.
In the six months ended
Other income (expense) for the six months ended
Our net income (loss) for the six months ended
Liquidity and Sources of Capital
The following table sets forth the major sources and uses of cash for the six months ended
Six months ended
June 30, 20142013
Net cash provided by (used) in operating activities
61,547 - Net (decrease) increase in unrestricted cash and cash equivalents (340,359 ) (1,007,277 )
Comparison of six months ended
During the six months ended
Operating activities used
Investing activities used
Financing activities provided
Sources of Financing
We believe that our available cash on hand at
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Critical Accounting Estimates
Our significant accounting policies are described in Note 1 of Notes to Financial Statements. At this time, we are not required to make any material estimates and assumptions that affect the reported amounts and related disclosures of assets, liabilities, revenue, and expenses.
Any estimates we make will be 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.