PAYSIGN, INC. 10-K

 false 2024 FY 0001496443

 2024-06-30

 2025-03-19

 2024-10-01

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 2025-02-15
 2025-02-18

 UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 Washington, D. C. 20549

 FORM 10-K

 (Mark One)

 ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended December 31, 2024

 TRANSITION PURSUANT TO UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from ________ to ________

 Commission File Number 001-38623

 (Exact name of registrant as specified in its charter)

 Nevada

 95-4550154

 (State or other jurisdiction of incorporation or organization)

 (I.R.S. Employer Identification No.)

 2615 St. Rose Parkway, Henderson, Nevada 89052

 (Address of principal executive offices) (Zip Code)

 Registrant's telephone number, including
area code: ( 702) 453-2221

 Securities registered pursuant to Section 12(b) of the Act:

 Title of
 each class

 Trading Symbol(s)

 Name of each
 exchange on which registered

 Common Stock, $0.001 par value per share

 PAYS

 The Nasdaq Stock Market LLC

 Securities registered under Section 12(g) of the
Exchange Act: None

 Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

 Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

 Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes No

 Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
 No

 Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions
of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging
growth company" in Rule 12b-2 of the Exchange Act.

 Large accelerated filer

 Accelerated filer

 Non-accelerated filer

 Smaller reporting company

 Emerging growth company

 If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.

 Indicate by check mark whether the registrant
has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262 (b)) by the registered public accounting firm that prepared or
issued its audit report.

 If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.

 Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's
executive officers during the relevant recovery period pursuant to §240.10D-1(b).

 Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes No

 State the aggregate market value of the voting
and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the
average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second
fiscal quarter: $ 114,359,582 based upon a market price of $4.33 per share.

 Indicate the number of shares outstanding of each
of the registrant's classes of common stock, as of the latest practicable date: 53,747,674 as of March 19, 2025.

 DOCUMENTS INCORPORATED BY REFERENCE

 Portions of the registrant's definitive
Proxy Statement for its 2025 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form
10-K where indicated. Such Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the registrant's
fiscal year ended December 31, 2024.

 ITEM 1

 BUSINESS

 ITEM 1A.

 RISK FACTORS

 ITEM 1B.

 UNRESOLVED STAFF COMMENTS

 ITEM 1C.

 CYBERSECURITY

 ITEM 2.

 PROPERTIES

 ITEM 3

 LEGAL PROCEEDINGS

 ITEM 4.

 MINE SAFETY DISCLOSURE

 ITEM 5.

 MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 ITEM 6.

 [RESERVED]

 ITEM 7.

 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 ITEM 7A.

 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 ITEM 8.

 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 ITEM 9.

 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 ITEM 9A.

 CONTROLS AND PROCEDURES

 ITEM 9B.

 OTHER INFORMATION

 ITEM 9C.

 DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 ITEM 10.

 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 ITEM 11.

 EXECUTIVE COMPENSATION

 ITEM 12.

 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 ITEM 13.

 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 ITEM 14.

 PRINCIPAL ACCOUNTANT FEES AND SERVICES

 ITEM 15.

 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 ITEM 16

 FORM 10-K SUMMARY

 SIGNATURES

 Cautionary Note Regarding Forward Looking Statements

 This Annual Report on Form 10-K contains "forward-looking
statements." These forward-looking statements are based on our current expectations, assumptions, estimates and projections about
our business and our industry. Words such as "believe," "anticipate," "expect," "intend,"
"plan," "propose," "may," and other similar expressions identify forward-looking statements. In addition,
any statements that refer to expectations, projections, estimates, forecasts, or other characterizations of future events or circumstances
are forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual
results to differ materially from those reflected in the forward-looking statements. You are cautioned not to place undue reliance on
these forward-looking statements, which relate only to events as of the date on which the statements are made. We undertake no obligation
to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. You should refer
to and carefully review the information in future documents we file with the Securities and Exchange Commission.

 i

 ITEM 1. BUSINESS.

 Overview

 Paysign, Inc. (the "Company," "Paysign,"
"we" or "our"), headquartered in Nevada, was incorporated on August 24, 1995, and trades under the symbol PAYS
on The Nasdaq Stock Market LLC. We are a vertically integrated provider of prepaid card products and processing services for corporate,
consumer and government applications. 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.

 We operate on a powerful, high-availability payments
platform with cutting-edge fintech capabilities that can be seamlessly integrated with our clients' systems. This distinctive positioning
allows us to provide end-to-end technologies that securely manage transaction processing, cardholder enrollment, value loading, account
management, data and analytics, and customer service. 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, and demand deposit accounts accessible with
a debit card. Our cards are sponsored by our issuing bank partners.

 Our revenues include fees generated from cardholder
fees, interchange, card program management fees, transaction claims processing fees, breakage, and settlement income. Revenue from cardholder
fees, interchange, card program management fees, and transaction claims processing fees is recorded when the performance obligation is
fulfilled. Breakage is recorded ratably over the estimated card life based on historical redemption patterns, market-specific trends,
escheatment rules and existing economic conditions and relates solely to our open-loop gift card business which began at the end of 2022.
Settlement income is recorded at the expiration of the card program and relates predominantly to our pharma prepaid business which ended
in 2022.

 What Are Prepaid Cards?

 A prepaid card is a payment product that is pre-funded
and not directly linked to an individual bank account. Prepaid cards are unlike debit cards that are attached to a personal or business
checking account and draw funds from that linked account or a credit card that draws funds from a line of credit.

 Prepaid cards can either be open-loop, closed-loop,
or restricted-loop. Open-loop, or network-branded, prepaid cards carry an acceptance mark of a national or international payment network
such as Visa, Interlink, Plus, MasterCard, Maestro, Cirrus, Discover or Pulse and can be used anywhere that card brand is accepted. Closed-loop
prepaid cards can only be used at a specific merchant whose name is typically branded on the card and are most likely not network branded.
Restricted-loop prepaid cards may carry a network brand and can be used only at a specific group of non-affiliated merchant locations
such as a shopping mall or a specific merchant category.

 Open-loop, and some restricted-loop, prepaid cards
are issued by a financial institution under a license of the payment network. Open-loop prepaid cards provide consumers, businesses and
governments with the efficiency, security and flexibility of digital payments reducing costs associated with handling cash, checks and
other paper-based payment processes, and provides the end user a payment product that is accessible and with global utility, convenient,
safer than cash, can be used as a budgeting tool and contains protections against fraud and theft.

 The prepaid market continues to experience significant
growth due to consumers, corporations and governments embracing improved technology, greater convenience, more product choices and greater
flexibility. Prepaid cards have also proven to be an attractive alternative to traditional bank accounts for certain segments of the population,
particularly those without, or who could not qualify for, a checking or savings account.

 Javelin Advisory Services 20 th Annual
U.S. Open-Loop Prepaid Card Market Forecast, 2023-2027, shows that open-loop prepaid growth in the short-term is strong and forecasted
to remain strong in the long-term. This forecast is led by strong anticipated growth in the cash access market, the largest open-loop
market. Javelin predicts 8% annual growth from 2024 through 2027 with total open-loop loads projected to reach $836 billion by 2027.

 Consumers, both banked and unbanked, use prepaid
cards such as general purpose reloadable ("GPR") cards, to conduct their day-to-day financial transactions such as paying
bills, depositing checks, and receiving direct deposits. According to the 2023 Federal Deposit Insurance Corporation (FDIC) National Survey
of Unbanked and Underbanked Households, 5.9 percent of all households were using general purpose reloadable prepaid cards in 2023. Use
of prepaid cards was much higher among unbanked households (21.6 percent) than among banked households (5.2 percent). Unbanked households,
an estimated 4.2 percent of U.S. households, were twice as likely to use prepaid cards or nonbank online payment services to conduct four
or more types of transactions compared with banked households.

 Common Examples of Prepaid Cards

 The prepaid card market is divided into three
macro categories based on who funds the card account. These categories are consumer-funded, corporate-funded and government-funded.

 Consumer-Funded Programs: The consumer
prepaid category consists of products such as GPR cards, gift cards, travel money cards, and remittance/peer-to-peer ("P2P")
cards.

 General Purpose Reloadable Cards: A
type of prepaid card typically purchased by a consumer for his/her personal use to pay for purchases, pay bills and/or access cash at
ATMs. GPR cards may be purchased online and in retail locations from a variety of providers. Funds may be loaded onto the card by direct
deposit of wages or benefits or at retail locations offering prepaid card reload services.

 Gift Cards: A non-reloadable
prepaid card that is purchased by a gift giver to be given to a gift recipient.

 Corporate-Funded Programs: The corporate
prepaid category consists of products such as employee/partner incentives, consumer incentives, payroll, employee benefits, healthcare,
corporate expense and business travel, insurance claim disbursement, etc.

 Government-Funded Programs: The government
prepaid category consists of products such as Social Security benefits, veterans' benefits, disability benefits, pensions, unemployment
benefits, worker's compensation, emergency disaster relief, and child support disbursements.

 Our Products and Services

 As a payment processor and prepaid card program
manager, our payment solutions are utilized by our customers as a means to increase customer loyalty, increase brand recognition, reward
customers, agents and employees while reducing administration costs and streamlining operations. 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 fully staffed, in-house customer service department which utilizes bilingual customer service representatives, interactive voice response
("IVR"), and two-way short message service ("SMS") messaging and text alerts. As we do not have our own banking
license to issue open-loop prepaid cards, our cards are offered to end users through our relationships with bank issuers.

 As an end-to-end payment processor and prepaid
card program manager, we derive our revenue from all stages of the card lifecycle. These revenues can include fees from program set-up;
customization and development; data processing and report generation; card production and fulfillment; transaction fees derived from card
usage; inactivity fees; card replacement fees; program administration fees; breakage; and settlement income.

 To date, we have issued millions of prepaid cards
under programs implemented for Fortune 500 companies, multinationals, as well as top pharmaceutical manufacturers, universities and social
media companies.

 As of December 31, 2024, we had approximately
7.3 million cardholders participating in approximately 600 card programs.

 In our early years of operations, we focused mainly
on providing co-pay assistance prepaid cards to the pharmaceutical industry. In 2011, we began marketing a corporate incentive prepaid
card-based payment solution targeting the plasma donation industry. More recently, having built the necessary infrastructure and added
essential staff, we have increased our focus and sales efforts on disbursement programs, corporate incentive and expense card programs,
as well as retargeting the pharmaceutical industry with patient affordability solutions such as co-pay assistance, buy and bill and other
prepaid programs designed to maximize patient enrollment, adherence and retention.

 The Paysign Brand

 In order to leverage the capabilities of the Paysign
platform and successfully expand our product offerings, we established the Paysign brand of prepaid cards and solutions. The Paysign brand
encompasses all of our current and future prepaid product offerings, including but not limited to, corporate incentives, healthcare related
payment solutions for clinical trials, donations and patient affordability solutions, payroll, disbursement payments, corporate expense
cards and solutions designed for the public sector as well as general purpose reloadable prepaid cards and prepaid gift cards. Paysign
is a registered trademark of the Company in the United States and other countries.

 Corporate Incentives

 Our Paysign corporate incentive cards offer businesses
a practical and contemporary way to reward and motivate existing and potential customers, employees, donors, patients, clinical trial
participants, sales professionals, agents and distributors. We develop incentive card programs, either traditional plastic or virtual,
that our customers use for a wide variety of applications, including but not limited to: consumer rebates for large purchases or frequent
buyers; trade incentives for third-party distributors; new product launches and commission based sales incentives; consumer promotions
such as automobile test drives; purchase incentives; loyalty rewards; compensation for the time and effort of donating; pharmaceutical
payment assistance; referral programs; event giveaways; and purchase incentives. The Paysign solution can be integrated into existing
payment management systems or act as a stand-alone solution. All Paysign cards are accepted anywhere Visa, Interlink, Plus, MasterCard,
Maestro, Cirrus, Discover and Pulse are accepted depending on the brands used on the card.

 Key benefits of our corporate incentive cards
are:

 Reduced costs: Operating and administrative costs associated with processing traditional paper checks are reduced.

 Co-Branding: Our clients can promote their brands as the card can include the corporate sponsor's logo. The card itself advertises the sponsor's brand.

 Customization: Our Paysign platform allows for easy customization of our corporate incentive card products. For example, our clients can select merchants or merchant categories which dictate where the card will be accepted. Our clients can receive customized reports, track card usage and attach surveys to the activation process to gain market intelligence.

 Speed to Market: Our clients can get rewards and incentives to the intended recipients in a much quicker manner than traditional methods using our corporate incentive card products.

 Per Diem/ Corporate Expense Payments

 Per Diem, Corporate Expense and Business Travel
Cards are reloadable prepaid cards that allows businesses, non–profits and government agencies the ability to control employee spending
while reducing administration costs by eliminating the need for traditional expense reports. We are currently focusing on marketing these
card products to large corporations.

 Pharmaceutical Market

 Our Paysign solutions for the pharmaceutical industry
are a specialized, adjudicated solution that pays all or a portion of a patient's out-of-pocket costs associated with a prescription
drug purchase. Funds are provided by the sponsoring pharmaceutical company for use at retail pharmacies, specialty pharmacies, hospitals,
doctors' offices and clinics nationwide.

 Our pharmaceutical solutions provide payment claims
processing and other administrative services for clients according to client benefit plan designs. Our offerings also allow clients to
directly manage more of their pharmacy benefits and include pharmacy claims adjudication, network and payment administration, client call
center service and support, reporting, rebate management, as well as implementation, training and account management.

 Patient Affordability Products and Services

 Paysign provides targeted products and services
designed to address financial barriers related to patients starting and remaining on brand name and biosimilar drug therapies. Our products
are specifically designed to work within the established workflow of the specific healthcare provider. These products can be used to cover
all or a portion of the patient's financial responsibility. We continue to build out additional products as industry concerns continue
to emerge presenting new business opportunities. A critical component of all patient affordability products is the ability of a pharmaceutical
manufacturer to access and visualize data related to the performance of their affordability program, patient and prescriber behavior,
and overall brand growth on a commercially insured patient basis. To provide these insights, Paysign has data scientists and a team of
analytic professionals dedicated to these products and clients.

 Pharmacy Based Voucher and Patient Affordability
Programs: Voucher and patient affordability programs have become an industry standard offering for pharmaceutical brands entering a market
or seeking to increase market share. These products are processed via the pharmacy transactional systems in accordance with established
standards. These products are the most common form of affordability programs and exist for almost every retail and specialty-based branded
pharmaceutical drug. Pharmacies process claims to one of Paysign's chosen processors who grow and maintain their own individual
contractual networks. Claims may be submitted in the primary or secondary payor position where our processor will adjudicate the claim
in accordance with business rules defined by each client.

 Medical Claims Based Affordability Programs: These
programs are similar to pharmacy-based products but utilize internal networks developed and maintained by Paysign. We are a direct processor
of these claims and conduct adjudication on an internal proprietary platform specifically designed to address the needs of our clients
and their unique business rules. Payments for processed claims are made directly to a healthcare provider using our virtual debit card
products. We differentiate ourselves with this specific product by offering accelerated adjudication and payments relative to our competition.
This results in providers having a stronger willingness to utilize our products versus our competitors.

 Debit Based Affordability Programs: We continue
to utilize physical and virtual debit cards to address highly specific industry concerns related to patient affordability. These issues
include utilization of debit-based products to combat copay accumulators and maximizers, currently one of the largest threats in the marketplace
for pharmaceutical manufacturers.

 Source Plasma Donor Payments

 Plasma derived therapies are lifesaving treatments
used to treat various rare conditions. Plasma based therapies are manufactured using human plasma, which is the yellow liquid portion
of whole blood that can be easily replaced by the body. Plasma makes up approximately 55% of whole blood and consists primarily of water
and proteins. Source plasma is the plasma collected from individual donors that serves as the raw material for the further manufacture
into these life saving therapies. In the past, source plasma donation centers compensated their donors with cash or check. Today, the
predominant compensation means for donor payments is a prepaid card.

 The Company offers a comprehensive customized
payment solution for source plasma collection centers under the Paysign brand. The solution consists of the Paysign Plasma Donor Compensation
Prepaid Card, the Paysign Partner Portal for administrators, and the Paysign Kiosk. The Company's plasma solution also provides
cardholders with a point-of-sale cash back rewards program, a pharmacy prescription discount card and a digital bank account which are
all used to assist plasma donation centers in their efforts to maximize the donor experience. The solution offers customized reporting
and provides a level of business analytics previously unavailable. The solution can be utilized either as a stand-alone web-based solution
or integrated with existing donor management systems, giving plasma donation centers an increased level of flexibility. The Company entered
the market in late 2011 and has seen significant growth in this market segment. Currently, the Company services approximately 39% of the
plasma collection centers in the United States.

 DDA Debit Cards—Paysign Premier

 Recently, providers of GPR card products, in response
to changes in the regulatory environment, have introduced new products similar to a GPR card but that act as true demand deposit accounts
accessible with a debit card ("DDA Debit Card"). These DDA Debit Cards offer many of the features and functionalities of a
traditional debit card associated with a standard bank account, including overdraft protection. The Company markets this product, branded
Paysign Premier Digital Bank Account, to a targeted portion of its existing cardholder base through existing communication points and
to customers and employees of new clients.

 Other Services

 Customer Service Center

 In order to provide a full range of services to
our customers, we offer a fully staffed, in-house Customer Service Center which is operational 24 hours a day, 7 days per week consisting
of live bilingual customer care representatives. The Paysign platform provides IVR, SMS alerts and two-way SMS messaging, allowing cardholders
to set alerts and check their balances and transaction history without the assistance of a live customer service operator. We believe
our in-house customer service center provides the highest quality customer service experience for our clients as training is performed
on-site by Paysign staff.

 The Paysign Communications Suite

 To help maximize the cardholder experience, cardholders
can access their card balances and transaction history, as well as other information as dictated by the program, such as an ATM locator,
a loyalty point counter, and geo-specific messaging through a number of touchpoints such as the Paysign kiosk, the Paysign Mobile App,
two-way SMS, text alerts and the Paysign cardholder web portal.

 Technology

 Our technology platform employs a standard enterprise
services bus in a service-oriented architecture, configured for 24/7/365 transaction processing and operations. We utilize two secure,
interconnected, environmentally-controlled data centers, with emergency power generation capabilities, and fully redundant capabilities,
and cloud hosting. We use a variety of proprietary and licensed standards-based technologies to implement our platforms, including those
which provide for orchestration, interoperability and process control. The platforms also integrate a data infrastructure to support both
transaction processing and data warehousing for operational support and data analytics.

 Competition

 The markets for financial products and services,
including prepaid cards and services related thereto, are intensely competitive. We compete with a variety of companies in our markets
and our competitors vary in size, scope and breadth of products and services offered. Certain segments of the financial services and healthcare
industries tend to be highly fragmented, with numerous companies competing for market share. Highly fragmented segments currently include
financial account processing, customer relationship management solutions, electronic funds transfer and prepaid solutions.

 Many of our existing and potential competitors
have longer operating histories, greater financial strength and more recognized brands in the industry. These competitors may be able
to attract customers more easily because of their financial resources and awareness in the market. Our larger competitors can also devote
substantially more resources to business development and may adopt more aggressive pricing policies. To compete with these companies,
we rely primarily on direct marketing strategies including strategic marketing partners.

 Sales and Marketing

 We market our Paysign payment solutions through
direct marketing by the Company's sales team. Our primary market focus is on companies 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 on a commission basis only.

 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.

 Markets and Major Customers

 We have no major customers and are not reliant
on any individual card program. We manage multiple card programs at any given time. As of December 31, 2024, we managed approximately
600 card programs with approximately 7.3 million participating cardholders.

 Regulations

 Introduction

 We operate in a highly regulated environment and
are subject to extensive regulation, supervision and examination. Applicable laws and regulations may change, and there is no assurance
that such changes will not adversely affect our business. Regulatory authorities have extensive discretion in connection with their supervisory
and enforcement activities, including but not limited to the imposition of restrictions on the operation of financial institutions we
may work with. Any change in such regulation and oversight, whether in the form of restrictions on activities, regulatory policy, regulations,
or legislation, including but not limited to changes in the regulations governing banks, could have a material impact on our operations.

 Our products and services are generally subject
to federal, state and local laws and regulations, including:

 anti-money laundering and anti-bribery laws;

 money transfer and payment instrument licensing regulations;

 escheatment laws;

 privacy and information safeguard laws;

 data and personal information protection;

 bank regulations;

 consumer protection laws;

 tax;

 environmental sustainability (including climate change);

 false claims laws and other fraud and abuse restrictions; and

 privacy and security standards under the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") or other laws.

 These laws are often evolving and sometimes ambiguous
or inconsistent, and the extent to which they apply to us or the banks that issue our cards, our clients or our third-party service providers
is at times unclear. Any failure to comply with applicable law — either by us or by the card issuing banks, our client or our
third-party service providers, over which we have limited legal and practical control — could result in restrictions on our
ability to provide our products and services, as well as the imposition of civil fines and criminal penalties and the suspension or revocation
of a license or registration required to sell our products and services. See "Risk Factors" for additional discussion regarding
the potential impacts of changes in laws and regulations to which we are subject and failure to comply with existing or future laws
and regulations.

 We continually monitor and enhance our compliance
program to stay current with the most recent legal and regulatory changes. We also continue to implement policies and programs and to
adapt our business practices and strategies to help us comply with current legal standards, as well as with new and changing legal requirements
affecting particular services or the conduct of our business generally.

 Anti-Money Laundering and Anti-Bribery Laws

 Our products and services are generally subject
to federal anti-money laundering laws, including the Bank Secrecy Act, as amended by the USA PATRIOT Act, and similar state laws. On an
ongoing basis, these laws require us, among other things, to:

 report large cash transactions and suspicious activity;

 screen transactions against the U.S. government's watch-lists, such as the watch-list maintained by the Office of Foreign Assets Control (OFAC);

 prevent the processing of transactions to or from certain countries, individuals, nationals and entities;

 identify the dollar amounts loaded or transferred at any one time or over specified periods of time, which requires the aggregation of information over multiple transactions;

 gather and, in certain circumstances, report customer information;

 comply with consumer disclosure requirements;

 comply with anti-corruption laws and regulations; and

 register or obtain licenses with state and federal agencies in the United States and seek registration of any retail distributors when necessary.

 Anti-money laundering regulations are constantly
evolving. We continuously monitor our compliance with anti-money laundering regulations and implement policies and procedures to make
our business practices flexible, so we can comply with the most current legal requirements. We cannot predict how these future regulations
might affect us. Complying with future regulation could be expensive or require us to change the way we operate our business.

 Money Transfer and Payment Instrument Licensing
Regulations

 We are not currently subject to money transfer
and payment instrument licensing regulations; however, we may introduce products in the future that would be subject to such regulations.
Currently, we believe that nearly every state would require us to obtain a money transmitter license to operate a money transfer
business. As a licensee, we would be subject to certain restrictions and requirements, including reporting, net worth and surety bonding
requirements and requirements for regulatory approval of controlling stockholders, agent locations and consumer forms and disclosures.
We would also be subject to inspection by the regulators in the jurisdictions in which we are licensed, many of which conduct regular
examinations. In addition, we would be required to maintain "permissible investments" in an amount equivalent to all "outstanding
payment obligations."

 Escheatment Laws

 Unclaimed property laws of every U.S. state
require that certain information be tracked on card programs. If customer funds are unclaimed at the end of an applicable statutory abandonment
period, the proceeds of the unclaimed property must be remitted to the appropriate state. Analysis of facts and circumstances of
each card program under state unclaimed property laws determines whether funds under such programs are escheatable.

 Privacy and Data Protection Regulation

 In the ordinary course of our business, we or
our third-party service providers collect certain types of data, which subjects us to certain privacy and information security laws in
the United States, including, for example, the Gramm-Leach-Bliley Act of 1999, and other laws or rules designed to regulate consumer information
and mitigate identity theft. We are also subject to privacy laws of various states. These state and federal laws impose obligations with
respect to the collection, processing, storage, disposal, use and disclosure of personal information, and require that financial institutions
have in place policies regarding information privacy and security. In addition, under federal and certain state financial privacy laws,
we must provide notice to consumers of our policies and practices for sharing nonpublic information with third parties, provide advance
notice of any changes to our policies and, with limited exceptions, give consumers the right to prevent use of their nonpublic personal
information and disclosure of it to unaffiliated third parties. Certain state laws may, in some circumstances, require us to notify affected
individuals of security breaches of computer databases that contain their personal information. These laws may also require us to notify
state law enforcement, regulators or consumer reporting agencies in the event of a data breach, as well as businesses and governmental
agencies that own data. In order to comply with the privacy and information safeguard laws, we have confidentiality/information security
standards and procedures in place for our business activities and with our third-party vendors and service providers. Privacy and information
security laws evolve regularly, requiring us to adjust our compliance program on an ongoing basis and presenting compliance challenges.

 Bank Regulations

 All of the cards that we service are issued by
state-chartered banks. Thus, we are subject to the oversight of the regulators for, and certain laws applicable to, these card issuing
banks. These banking laws require us, as a servicer to the banks that issue our cards, among other things, to undertake compliance actions
similar to those described under "Anti-Money Laundering Laws" above and to comply with the privacy regulations promulgated under
the Gramm-Leach-Bliley Act as discussed under "Privacy and Information Safeguard Laws" above.

 Consumer Protection Laws

 Certain products that we offer are subject to
additional state and federal consumer protection laws, including laws prohibiting unfair and deceptive practices, regulating electronic
fund transfers and protecting consumer nonpublic information. As such, we have developed appropriate procedures for compliance with these
consumer protection laws.

 Card Networks

 In order to provide our products and services,
we, as well as the banks that issue our cards, must be registered with Visa and/or MasterCard, as well as any other networks that we desire
to use, such as Interlink, Plus, Maestro, Cirrus, Discover and Pulse, and, as a result, are subject to card association rules that could
subject us to a variety of fines or penalties that may be levied by the card association or network for certain acts or omissions. The
banks that issue our cards are specifically registered as "members" of the card networks. The card networks set the standards
with which we and the card issuing banks must comply.

 Environmental Sustainability

 Climate-related events, including extreme weather
events and natural disasters and their effect on critical infrastructure in the U.S. could have similar adverse effects on our operations,
customers or third-party suppliers. Furthermore, our stockholders, customers and other stakeholders have begun to consider how corporations
are addressing environmental, social and governance ("ESG") issues. Government regulators, investors, customers and the general
public are increasingly focused on ESG practices and disclosures, and views about ESG are diverse and rapidly changing. These shifts in
investing priorities may result in adverse effects on the trading price of the Company's common stock if investors determine that
the Company has not made sufficient progress on ESG matters. Furthermore, developing and acting on initiatives within the scope of ESG,
and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming, and are subject
to evolving reporting standards and/or contractual obligations. We could also face potential negative ESG-related publicity in traditional
media or social media if stockholders or other stakeholders determine that we have not adequately considered or addressed ESG matters.
Stockholders are increasingly submitting proposals related to a variety of ESG issues to public companies, and we may receive such proposals
in the future. Such proposals may not be in the long-term interests of the Company or our stockholders and may divert management's
attention away from operational matters or create the impression that our practices are inadequate.

 False Claims Laws and Other Fraud and Abuse
Restrictions

 We provide claims processing and other transaction
services to pharmaceutical companies that relate to, or directly involve, the reimbursement of pharmaceutical costs covered by Medicare,
Medicaid, other federal healthcare programs and private payers. As a result of these aspects of our business, we may be subject to, or
contractually required to comply with, state and federal laws that govern various aspects of the submission of healthcare claims for reimbursement
and the receipt of payments for healthcare items or services. These laws generally prohibit an individual or entity from knowingly presenting
or causing to be presented claims for payment to Medicare, Medicaid or other third-party payers that are false or fraudulent. False or
fraudulent claims include, but are not limited to, billing for services not rendered, failing to refund known overpayments, misrepresenting
actual services rendered in order to obtain higher reimbursement, improper coding and billing for medically unnecessary goods and services.
Many of these laws provide significant civil and criminal penalties for noncompliance and can be enforced by private individuals through
"whistleblower" or qui tam actions. To avoid liability, providers and their contractors must, among other things, carefully
and accurately code, complete and submit claims for reimbursement.

 From time to time, participants in the healthcare
industry, including us, may be subject to actions under the federal False Claims Act or other fraud and abuse provisions. We cannot guarantee
that state and federal agencies will regard any billing errors we process as inadvertent or will not hold us responsible for any compliance
issues related to claims we handle on behalf of providers and payers. Although we believe our editing processes are consistent with applicable
reimbursement rules and industry practice, a court, enforcement agency or whistleblower could challenge these practices. We cannot predict
the impact of any enforcement actions under the various false claims and fraud and abuse laws applicable to our operations. Even an unsuccessful
challenge of our practices could cause adverse publicity and cause us to incur significant legal and related costs.

 Privacy and Security Standards under HIPAA
or Other Laws.

 HIPAA contains privacy regulations and security
regulations that apply to some of our operations. The privacy regulations extensively regulate the use and disclosure of individually
identifiable health information by entities subject to HIPAA. For example, the privacy regulations permit parties to use and disclose
individually identifiable health information for treatment and to process claims for payment, but other uses and disclosures, such as
marketing communications, require written authorization from the individual or must meet an exception specified under the privacy regulations.
The privacy regulations also provide patients with rights related to understanding and controlling how their health information is used
and disclosed. To the extent permitted by the privacy regulations from the American Recovery and Reinvestment Act, and our contracts with
our customers, we may use and disclose individually identifiable health information to perform our services and for other limited purposes,
such as creating de-identified information. Determining whether data has been sufficiently de-identified to comply with the privacy regulations
and our contractual obligations may require complex factual and statistical analyses and may be subject to interpretation. The security
regulations require certain entities to implement and maintain administrative, physical and technical safeguards to protect the security
of individually identifiable health information that is electronically transmitted or electronically stored. We have implemented and maintain
policies and processes to assist us in complying with the privacy regulations, the security regulations and our contractual obligations.
We cannot provide assurance regarding how these standards will be interpreted, enforced or applied to our operations. If we are unable
to properly protect the privacy and security of health information entrusted to us, we could be subject to substantial penalties, damages
and injunctive relief.

 In addition to HIPAA, numerous other state and
federal laws govern the collection, dissemination, use, access to and confidentiality of individually identifiable health information
and healthcare provider information. In addition, some states are considering new laws and regulations that further protect the confidentiality,
privacy and security of medical records or other types of medical information. In many cases, these state laws are not preempted by the
HIPAA privacy regulations and may be subject to interpretation by various courts and other governmental authorities. Further, the U.S. Congress
and a number of states have considered or are considering prohibitions or limitations on the disclosure of medical or other information
to individuals or entities located outside of the United States.

 Patents and Trademarks

 We protect our intellectual property rights through
a combination of trademark, patent, copyright, and trade secrets laws.

 In order to limit access to and disclosure of
our intellectual property and proprietary information, all of our employees and consultants have signed confidentiality and we enter into
nondisclosure agreements with third parties. We cannot provide assurance that the steps we have taken to protect our intellectual property
rights, however, will deter adequately infringement or misappropriation of those rights. Particularly given the international nature of
the Internet, the rate of growth of the Internet and the ease of registering new domain names, we may not be able to detect unauthorized
use of our intellectual property or proprietary information, or to take enforcement action.

 Employees and Independent Contractors

 As of December 31, 2024, we had approximately
one hundred seventy-three employees and independent contractors.

 We have no collective bargaining agreements with
our employees, and believe all independent contractor and employment agreement relationships are satisfactory. We hire independent contractors
on an as-needed basis, and we may retain additional employees and consultants during the next twelve months, including additional patient
affordability, information technology, product and project management, fraud, and customer care personnel to support our growing businesses.

 Available Information

 Our internet address is www.paysign.com. Information
on our website does not constitute part of this Annual Report.

 ITEM 1A. RISK FACTORS.

 An investment in our common stock involves
a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information
in this Form 10-K, including our consolidated financial statements and related notes. If any of the following risks actually occurs, our
business, financial condition, results of operations and future prospects could be materially and adversely affected. In that event, the
market price of our common stock could decline and you could lose part or all of your investment. All forward-looking statements made
by us or on our behalf are qualified by the risks described below.

 Risks Related to Our Business

 We may be unable to grow our business in future
periods, and if our revenue growth slows, or our revenues decline further, our business and financial conditions could be adversely affected.

 Our growth rates may decline in the future. There
can be no assurance that we will be able to grow our business in future periods. In the near term, our growth depends in significant part
on our ability, among other things, to enter new markets and to continue to attract new clients, and to retain our current clientele.
Our growth also depends on our ability to develop and market other prepaid card products that can utilize the Paysign platform.

 As the prepaid financial services industry continues
to develop, our competitors may be able to offer products and services that are, or that are perceived to be, substantially similar to
or better than ours. This may force us to compete on the basis of price and to expend significant marketing, product development and other
resources in order to remain competitive. Even if we are successful at increasing our operating revenues through our various initiatives
and strategies, we will experience an inevitable decline in growth rates as our operating revenues increase to higher levels and we may
also experience a decline in margins. If our operating revenue growth rates slow materially or decline, our business, operating results
and financial condition could be adversely affected.

 We operate in a highly regulated environment, and failure by us
or business partners to comply with applicable laws and regulations could have an adverse effect on our business, financial position and
results of operations.

 We operate in a highly regulated environment,
and failure by us or our business partners to comply with the laws and regulations to which we are subject could negatively impact our
business. We are subject to a wide range of federal and other state laws and regulations, which are described under "Business – Regulations"
above. In particular, our products and services are subject to an increasingly strict set of legal and regulatory requirements intended
to protect consumers and to help detect and prevent money laundering, terrorist financing and other illicit activities.

 Many of these laws and regulations are evolving,
unclear and inconsistent across various jurisdictions, and ensuring compliance with them is difficult and costly. For example, with increasing
frequency, federal and state regulators are holding businesses like ours to higher standards of training, monitoring and compliance, including
monitoring for possible violations of laws by the businesses that participate in our reload network. Failure by us or those businesses
to comply with the laws and regulations to which we are subject could result in fines, penalties or limitations on our ability to conduct
our business, or federal or state actions, any of which could significantly harm our reputation with consumers and other network participants,
banks that issue our cards and regulators, and could materially and adversely affect our business, operating results and financial condition.

 Changes in the laws, regulations, credit card association rules
or other industry standards affecting our business may impose costly compliance burdens and negatively impact our business.

 There may be changes in the laws, regulations,
card association rules or other industry standards that affect our operating environment in substantial and unpredictable ways. Changes
to statutes, regulations or industry standards, including interpretation and implementation of statutes, regulations or standards, could
increase the cost of doing business or affect the competitive balance. For example, more stringent anti-money laundering regulations could
require the collection and verification of more information from our customers, which could have a material adverse effect on our operations.
Regulation of the payments industry has increased significantly in recent years. Additional regulatory changes may require us to incur
significant expenses to redevelop our products. Also, failure to comply with laws, rules and regulations or standards to which we are
subject, including with respect to privacy and data use and security, could result in fines, sanctions or other penalties, which could
have a material adverse effect on our financial position and results of operations, as well as damage our reputation.

 A data security breach could expose us to liability and protracted
and costly litigation, and could adversely affect our reputation and operating results.

 We, the banks that issue our cards and our third-party
service providers receive, transmit and store confidential customer and other information in connection with our products and services.
The encryption software and the other technologies we and our partners use to provide security for storage, processing and transmission
of confidential customer and other information may not be effective to protect against data security breaches. The risk of unauthorized
circumvention of our security measures has been heightened by advances in computer capabilities and the increasing sophistication of hackers.
The banks that issue our cards, our clients and our third-party service providers also may experience similar security breaches involving
the receipt, transmission and storage of our confidential customer and other information. Improper access to our or these third parties'
systems or databases could result in the theft, publication, deletion or modification of confidential customer and other information.

 A data security breach of the systems on which
sensitive cardholder data and account information are stored could lead to fraudulent activity involving our products and services, reputational
damage and claims or regulatory actions against us. If we are sued in connection with any data security breach, we could be involved in
protracted and costly litigation. If unsuccessful in defending that litigation, we might be forced to pay damages and/or change our business
practices or pricing structure, any of which could have a material adverse effect on our operating revenues and profitability. We would
also likely have to pay (or indemnify the banks that issue our cards for) fines, penalties and/or other assessments imposed by card networks
as a result of any data security breach. Further, a significant data security breach could lead to additional regulation, which could
impose new and costly compliance obligations. In addition, a data security breach at one of the banks that issue our cards or our third-party
service providers could result in significant reputational harm to us and cause the use and acceptance of our cards to decline, either
of which could have a significant adverse impact on our operating results and future growth prospects.

 We may have deficiencies or weaknesses in our internal control over
financial reporting which could, if not remediated, adversely affect our ability to report our financial condition and results of operations
in a timely and accurate manner, decrease investor confidence in our Company, and reduce the value of our common stock.

 Our management is responsible for establishing
and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act
and based upon the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Management is also responsible for reporting on the effectiveness of internal control over financial reporting.

 Deficiencies or weaknesses in our internal control
over financial reporting that are not promptly identified and remediated may adversely affect our ability to report our financial condition
and results of operations in a timely and accurate manner, decrease investor confidence in our Company, and reduce the value of our common
stock. Although we believe we have taken appropriate actions to remediate previously reported control deficiencies that we have identified
and to strengthen our internal control over financial reporting, we cannot assure you that we will not discover other deficiencies or
weaknesses in the future.

 Security and privacy breaches of our electronic
transactions may damage customer relations and inhibit our growth.

 Any failures in our security and privacy measures
could have a material adverse effect on our business, financial condition and results of operations. Certain products we offer require
that we store personal information, including birth dates, addresses, bank account numbers, credit card information, social security numbers
and merchant account numbers. If we are unable to protect this information, or if consumers perceive that we are unable to protect this
information, our business and the growth of the electronic commerce market in general could be materially adversely affected. A security
or privacy breach may:

 cause our customers to lose confidence in our services;

 deter consumers from using our services;

 harm our reputation;

 require that we expend significant additional resources related to our information security systems and could result in a disruption of our operations;

 expose us to liability;

 increase expenses related to remediation costs; and

 decrease market acceptance of electronic commerce transactions and prepaid use.

 Although management believes that we have utilized
proven systems designed for robust data security and integrity in electronic transactions, our use of these applications may be insufficient
to address changing technological or market conditions and the security and privacy concerns of existing and potential customers.

 The industry in which we compete is highly
competitive, which could adversely affect our operating results and financial condition.

 We believe that our existing competitors have
longer operating histories, are substantially larger than we are, may already have or could develop substantially greater financial and
other resources than we have, may offer, develop or introduce a wider range of programs and services than we offer or may use more effective
advertising and marketing strategies than we do to achieve broader brand recognition, customer awareness and retail penetration. We may
also face price competition that results in decreases in the purchase and use of our products and services. To stay competitive, we may
have to increase the incentives that we offer to our marketing partners and decrease the prices of our products and services, which could
adversely affect our operating results.

 We rely on relationships with card issuing
banks to conduct our business, and our results of operations and financial position could be materially and adversely affected if we fail
to maintain these relationships or we maintain them under new terms that are less favorable to us.

 Our relationships with various banks are currently,
and will be for the foreseeable future, a critical component of our ability to conduct our business and to maintain our revenue and expense
structure, because we are currently unable to issue our own cards. If we lose or do not maintain existing banking relationships, we would
incur significant switching and other costs and expenses and we and users of our products and services could be significantly affected,
creating contingent liabilities for us. As a result, the failure to maintain adequate banking relationships could have a material adverse
effect on our business, results of operations and financial condition. Our agreement with the bank that issues our cards provide for cost
and expense allocations between the parties. Changes in the costs and expenses that we have to bear under these relationships could have
a material impact on our operating expenses. In addition, we may be unable to maintain adequate banking relationships or renew our agreements
with the banks that currently issue our cards under terms at least as favorable to us as those existing before renewal.

 We receive important services from third-party
vendors, and replacing them could entail unexpected integration costs.

 Some services relating to our business, including
network connectivity and gateway services are outsourced to third-party vendors. All of our vendors could be replaced with competitors
if our vendor terminated our contract or went out of business. However, in some cases replacing a vendor would entail one-time integration
costs to connect our systems to the successor's systems, and could result in less advantageous contract terms for the same service,
which could adversely affect our profitability.

 Changes in credit card association or other
network rules or standards set by Visa and MasterCard, or changes in card association and debit network fees or products or interchange
rates, could adversely affect our business, financial position and results of operations.

 We and the banks that issue our cards are subject
to Visa, Interlink, Plus, MasterCard, Maestro, Cirrus, Discover and Pulse association rules that could subject us to a variety of fines
or penalties that may be levied by the card networks for acts or omissions by us or businesses that work with us. The termination of the
card association registrations held by us or any of the banks that issue our cards or any changes in card association or other debit network
rules or standards, including interpretation and implementation of existing rules or standards, that increase the cost of doing business
or limit our ability to provide our products and services could have an adverse effect on our business, operating results and financial
condition. In addition, from time to time, card networks increase the organization and/or processing fees that they charge, which could
increase our operating expenses, reduce our profit margin and adversely affect our business, operating results and financial condition.

 For example, a portion of our operating revenues
is derived from interchange fees (i.e., transaction fees paid by the merchant). The amount of interchange revenues that we earn is highly
dependent on the interchange rates that the card networks set and adjust from time to time. Interchange rates for certain products and
certain issuing banks declined significantly as a result of the enactment of the Dodd-Frank Bill. If interchange rates decline further,
whether due to actions by the card networks or future legislation or regulation, we would likely need to change our fee structure to compensate
for lost interchange revenues. To the extent we increase the pricing of our products and services, we might find it more difficult to
acquire consumers and to maintain or grow card usage and customer retention. We also might have to discontinue certain products or services.
As a result, our operating revenues, operating results, prospects for future growth and overall business could be materially and adversely
affected.

 We may not be able to successfully manage our
intellectual property or may be subject to infringement claims.

 In the rapidly developing legal framework, we
rely on a combination of contractual rights and copyright, trademark and trade secret laws to establish and protect our proprietary technology.
Despite our efforts to protect our intellectual property, third parties may infringe or misappropriate our intellectual property or may
develop software or technology competitive to us. Our competitors may independently develop similar technology, duplicate our products
or services or design around our intellectual property rights. We may have to litigate to enforce and protect our intellectual property
rights, trade secrets and know-how or to determine their scope, validity or enforceability, which is expensive and could cause a diversion
of resources and may not prove successful. The loss of intellectual property protection or the inability to secure or enforce intellectual
property protection could harm our business and ability to compete.

 We may also be subject to costly litigation in
the event our products and technology infringe upon another party's proprietary rights. Third parties may have, or may eventually
be issued, patents that would be infringed by our products or technology. Any of these third parties could make a claim of infringement
against us with respect to our products or technology. We may also be subject to claims by third parties for breach of copyright, trademark
or license usage rights. Any such claims and any resulting litigation could subject us to significant liability for damages. An adverse
determination in any litigation of this type could require us to design around a third party's patent or to license alternative
technology from another party. In addition, litigation is time consuming and expensive to defend and could result in the diversion of
the time and attention of our management and employees. Any claim from third parties may result in limitations on our ability to use the
intellectual property subject to these claims. As of the date of this filing, we had not received any notice or claim of infringement
from any party.

 The market for electronic commerce services
is evolving and may not continue to develop or grow rapidly enough for us to maintain profitability.

 If the number of electronic commerce transactions
does not continue to grow or if consumers or businesses do not continue as projected to adopt our products and services, it could have
a material adverse effect on our business, financial condition and results of operations. Management believes future growth in the electronic
commerce market will be driven by the cost, convenience, ease of use and quality of products and services offered to consumers and businesses.
In order to maintain our profitability, consumers and businesses must continue to adopt our products and services.

 If we do not respond to rapid technological
change or changes in industry standards, our products and services could become obsolete and we could lose our customers.

 If competitors introduce new products and services,
or if new industry standards and practices emerge, our existing product and service offerings, technology and systems may become obsolete.
Further, if we fail to adopt or develop new technologies or to adapt our products and services to emerging industry standards, we may
lose current and future customers, which could have a material adverse effect on our business, financial condition and results of operations.
The electronic commerce industry is changing rapidly. To remain competitive, we must continue to enhance and improve the functionality
and features of our products, services and technologies.

 Our ability to adapt our existing products
and services to use artificial intelligence ("AI") could adversely impact our business.

 The legal and regulatory landscape surrounding
AI technologies is rapidly evolving and uncertain, including in the areas of consumer protection, intellectual property, cybersecurity,
and privacy and data protection. In addition, there is uncertainty around the validity and enforceability of intellectual property rights
related to the use, development, and deployment of AI-generated outputs. Compliance with new and emerging laws, regulations or industry
standards relating to AI in the U.S. and internationally, such as U.S. state regulations and the Artificial Intelligence Act in the EU,
may impose significant operational costs and may limit our ability to develop, deploy or use existing or future AI technologies. As a
result, our ability to adapt our existing products and services or develop future and new products and services using AI may be limited
or restricted, which could adversely impact our business.

 Acquisitions and the integration of new businesses
create risks and may affect operating results. Failure to successfully complete, manage or integrate strategic transactions can adversely
affect our business, financial condition and results of operations.

 We regularly review our businesses strategy and
evaluate potential acquisitions, joint ventures, divestitures, and other strategic transactions. The success of these transactions is
dependent upon, among other things, our ability to realize the full extent of the expected returns, benefits, cost savings or synergies
as a result of a transaction within the anticipated time frame, or at all. Acquisitions often involve additional or increased risks including,
for example:

 managing
the complex process of integrating the acquired company's employees, products and services, technology and other assets in an effort
to realize the projected value of the acquired company and the projected synergies of the acquisition;

 realizing
the anticipated financial benefits from these acquisitions and where necessary, improving controls of these acquired businesses (including
internal control over financial reporting and disclosure controls and procedures);

 retaining
existing customers and attracting new customers;

 integrating
personnel with diverse business backgrounds and organizational cultures;

 integrating
the acquired systems and technologies into our Company;

 complying
with regulatory requirements, including those particular to the industry and jurisdiction of the acquired business, and the need to improve
regulatory compliance systems and controls; and

 entering
new markets with the services of the acquired businesses.

 Changes in the Bank Secrecy Act and/or the
USA PATRIOT Act could impede our ability to circulate cards that can be easily loaded or issued.

 Our current compliance program and screening process
for the distribution and/or sale of prepaid card products is designed to comply with the Bank Secrecy Act ("BSA") and
the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the "USA
PATRIOT Act"). These regulations require financial institutions to obtain and confirm information related to their respective cardholders.
If the BSA and/or the USA PATRIOT Act or subsequent legislation increases the level of scrutiny that we must apply to our cardholders
and customers, it may be costly or impractical for us to continue to profitably issue and load cards for our customers.

 Internal processing errors could result in
our failing to appropriately reflect transactions in customer accounts.

 In the event of a system failure that goes undetected
for a substantial period of time, we could allow transactions on blocked accounts, confirm false authorizations, fail to deduct charges
from accounts or fail to detect systematic fraud or abuse. Errors or failures of this nature could adversely impact our operations, our
credibility and our financial standing.

 Our business is dependent on the efficient
and uninterrupted operation of computer network systems and data centers.

 Our ability to provide reliable service to our
clients and cardholders depends on the efficient and uninterrupted operation of our computer network systems and data centers as well
as those of our third-party service providers. Our business involves movement of large sums of money, processing of large numbers of transactions
and management of the data necessary to do both. Our success depends upon the efficient and error-free handling of the money. We rely
on the ability of our employees, systems and processes and those of the banks that issue our cards, our third-party service providers
to process and facilitate these transactions in an efficient, uninterrupted and error-free manner.

 In the event of a breakdown, a catastrophic event
(such as fire, natural disaster, power loss, telecommunications failure or physical break-in), a security breach or malicious attack,
an improper operation or any other event impacting our systems or processes, or those of our vendors, or an improper action by our employees,
agents or third-party vendors, we could suffer financial loss, loss of customers, regulatory sanctions and damage to our reputation. The
measures we have taken, including the implementation of disaster recovery plans and redundant computer systems, may not be successful,
and we may experience other problems unrelated to system failures. We may also experience software defects, development delays and installation
difficulties, any of which could harm our business and reputation and expose us to potential liability and increased operating expenses.

 The soundness of other institutions and companies
could adversely affect us.

 Our ability to engage in loading and purchasing
transactions could be adversely affected by the actions and failure of other institutions and companies, our card issuing banks and distributors
that carry our prepaid card products. As such, we have exposure to many different industries and counterparties. As a result, defaults
by, or even questions or rumors about, one or more of these institutions or companies could lead to losses or defaults by us or other
institutions. Losses related to these defaults or failures could materially and adversely affect our results of operations.

 Additional equity or debt financing may be
dilutive to existing stockholders or impose terms that are unfavorable to us or our existing stockholders.

 We may raise capital in order to provide working
capital for our expansion into other products and services using our payments platform. If we raise additional funds by issuing equity
securities, our stockholders will experience dilution. Debt financing, if available, may involve arrangements that include covenants limiting
or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable
to us or our current stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it
may be necessary to relinquish valuable rights to our technologies and products or grant unfavorable license terms.

 Global and regional economic conditions could
harm our business.

 Adverse global and regional economic conditions
such as turmoil affecting the banking system and financial markets, including, but not limited to, tightening in the credit markets, extreme
volatility or distress in the financial markets (including the fixed income, credit, currency, equity, and commodity markets), higher
unemployment, high consumer debt levels, recessionary or inflationary pressures, supply chain issues, reduced consumer confidence or economic
activity, government fiscal and tax policies, U.S. and international trade relationships, agreements, treaties, tariffs and restrictive
actions, the inability of a government to enact a budget in a fiscal year, government shutdowns, government austerity programs, and other
negative financial news or macroeconomic developments could have a material adverse impact on the demand for our products and services,
including a reduction in the volume and size of transactions on our payments platform. Additionally, an inability to access the capital
markets when needed due to volatility or illiquidity in the markets or increased regulatory liquidity and capital requirements may strain
our liquidity position. Such conditions may also expose us to fluctuations in foreign exchange rates or interest rates that could materially
and adversely affect our financial results.

 We depend on key personnel and could be harmed
by the loss of their services because of the limited number of qualified people in our industry.

 Because of our small size, we require the continued
service and performance of our management team, sales and technology employees, all of whom we consider to be key employees. Competition
for highly qualified employees in the financial services and healthcare industry is intense. Our success will depend to a significant
degree upon our ability to attract, train, and retain highly skilled directors, officers, management, business, financial, legal, marketing,
sales, and technical personnel and upon the continued contributions of such people. In addition, we may not be able to retain our current
key employees. The loss of the services of one or more of our key personnel and our failure to attract additional highly qualified personnel
could impair our ability to expand our operations and provide service to our customers.

 Our future success depends on our ability to
attract, develop, incentivize and retain key personnel.

 Our future success depends, to a significant extent,
on our ability to attract, develop, incentivize and retain key personnel, namely our management team and experienced sales, marketing
and program and technology personnel. We must motivate and retain existing personnel and also attract, source, hire, develop and retain
highly-qualified employees. We may experience difficulty fully integrating our newly-hired personnel, which may adversely affect our business.
Competition for qualified management, sales, marketing and program and technology personnel can be intense. Competitors have in the past
and may in the future attempt to recruit our top management and employees. If we fail to attract, integrate, incentivize and retain key
personnel, our ability to manage and grow our business could be harmed.

 Risks Related to Ownership of Our Common
Stock

 Our stock price is volatile and you may not
be able to sell your shares at a price higher than what was paid.

 The market for our common stock is highly volatile.
In 2024, our stock price fluctuated between $2.50 and $5.48. The trading price of our common stock could be subject to wide fluctuations
in response to, among other things, quarterly variations in operating and financial results, announcements of technological innovations
or new products by our competitors or us, changes in prices of our products and services or our competitors' products and services,
changes in product mix, or changes in our revenue and revenue growth rates.

 If securities analysts do not publish research
or reports about our business or if they publish negative evaluations of our common stock, the trading price of our common stock could
decline.

 We expect that the trading price for our common
stock will be affected by any research or reports that securities analysts publish about us or our business. If one or more of the analysts
who may elect to cover us or our business downgrade their evaluations of our common stock, the price of our common stock would likely
decline. If one or more of these analysts cease coverage of our company, we could lose visibility in the market for our common stock,
which in turn could cause our stock price to decline.

 We do not intend to pay dividends for the foreseeable
future.

 We have never declared or paid any cash dividends
on our capital stock. We intend to retain any earnings to finance the operation and expansion of our business, and we do not anticipate
paying any cash dividends in the foreseeable future. As a result, you will likely receive a return on your investment in our common stock
only if the market price of our common stock increases.

 Concentration of ownership among our existing
directors, executive officers and principal stockholders may prevent new investors from influencing significant corporate decisions.

 Our directors, executive officers, and holders
of more than 5% of our total shares of common stock outstanding and their respective affiliates, in the aggregate, beneficially own, as
of March 19, 2025, approximately 48% of our outstanding common stock. As a result, these stockholders will be able to exercise a controlling
influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions,
and will have significant influence over our management and policies for the foreseeable future. Some of these persons or entities may
have interests that are different from yours. For example, these stockholders may support proposals and actions with which you may disagree
or which are not in your interests. The concentration of ownership could delay or prevent a change in control of our company or otherwise
discourage a potential acquirer from attempting to obtain control of our company, which in turn could reduce the price of our common stock.
In addition, these stockholders, some of which have representatives sitting on our board of directors (the "Board"), could
use their voting control to maintain our existing management and directors in office, delay or prevent changes of control of our company,
or support or reject other management and Board proposals that are subject to stockholder approval, such as amendments to our employee
stock plans and approvals of significant financing transactions.

 Our stock price could decline due to the large
number of outstanding shares of our common stock eligible for future sale.

 We have 53,747,674 shares of common stock outstanding
as of March 19, 2025, assuming no exercise of outstanding options or unvested restricted stock awards. None of the shares of common stock
are subject to any lock-up agreements, and all are eligible for sale, subject to registration under the Securities Act and in some cases
to volume and other restrictions imposed by Rule 144. Sales of substantial amounts of our common stock in the public market, or even
the perception that these sales could occur, could cause the trading price of our common stock to decline. These sales could also make
it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate.

 We incur significant costs as a result of operating
as a public company. We may not have sufficient personnel for our financial reporting responsibilities, which may result in the untimely
close of our books and records and delays in the preparation of financial statements and related disclosures.

 As a registered public company, we have experienced
an increase in legal, accounting and other expenses. In addition, the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"),
as well as new rules subsequently implemented by the SEC, has imposed various requirements on public companies, including requiring changes
in corporate governance practices. Our management and other personnel need to devote a substantial amount of time to these compliance
initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and make some activities more
time-consuming and costly. In addition, three putative class action lawsuits were filed against us, which could require our management
to devote significant time to defending. See "Item 3. Legal Proceedings" for additional information.

 If we are not able to comply with the requirements
of Sarbanes-Oxley Act, or if we or our independent registered public accounting firm identify additional deficiencies in our internal
control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be
subject to sanctions or investigations by the SEC and other regulatory authorities.

 Our operating results may fluctuate in the
future, which could cause our stock price to decline.

 Our quarterly and annual results of operations
may fluctuate in the future as a result of a variety of factors, many of which are outside of our control. If our results of operations
fall below the expectations of investors or any securities analysts who follow our common stock, the trading price of our common stock
could decline substantially. Fluctuations in our quarterly or annual results of operations may be due to a number of factors, including,
but not limited to:

 the timing and volume of purchases, use and reloads of our prepaid cards and related products and services;

 the timing and success of new product or service introductions by us or our competitors;

 seasonality in the purchase or use of our products and services;

 reductions in the level of interchange rates that can be charged;

 fluctuations in customer retention rates;

 changes in the mix of products and services that we sell;

 changes in the mix of retail distributors through which we sell our products and services;

 the timing of commencement, renegotiation or termination of relationships with significant third-party service providers;

 changes in our or our competitors' pricing policies or sales terms;

 the timing of commencement and termination of major advertising campaigns;

 the timing of costs related to the development or acquisition of complementary businesses;

 the timing of costs of any major litigation to which we are a party;

 the amount and timing of operating costs related to the maintenance and expansion of our business, operations and infrastructure;

 our ability to control costs, including third-party service provider costs;

 volatility in the trading price of our common stock, which may lead to higher stock-based compensation expenses or fluctuations in the valuations of vesting equity; and

 changes in the regulatory environment affecting the banking or electronic payments industries generally or prepaid financial services specifically.

 ITEM 1B. UNRESOLVED STAFF
COMMENTS.

 None.

 ITEM 1C. CYBERSECURITY.

 Risk Management and Strategy

 Cyber criminals are becoming more sophisticated
and effective every day, and they are increasingly targeting software companies. All companies utilizing technology are subject to
threats of breaches of their cybersecurity programs. To mitigate the threat to our business, we take a comprehensive approach to cybersecurity
risk management and make securing the data customers and other stakeholders entrust to us a top priority. Our Board and our management
are actively involved in the oversight of our risk management program, of which cybersecurity represents an important component. As described
in more detail below, we have established policies, standards, processes and practices for assessing, identifying, and managing material
risks from cybersecurity threats. We have devoted financial and personnel resources to implement and maintain security measures to meet
regulatory requirements and customer expectations, and we intend to continue to make significant investments to maintain the security
of our data and cybersecurity infrastructure. There can be no guarantee that our policies and procedures will be properly followed in
every instance or that those policies and procedures will be effective. Although our Risk Factors include further detail about the material
cybersecurity risks we face, we believe that risks from prior cybersecurity threats, including as a result of any previous cybersecurity
incidents, have not materially affected our business to date. We can provide no assurance that there will not be incidents in the future
or that they will not materially affect us, including our business strategy, results of operations, or financial condition.

 Risk Management and Strategy

 We understand the critical importance of cybersecurity
in protecting our operations, customer data, and the integrity of our services. Our commitment to cybersecurity is unwavering, and we
adopt a serious, multi-layered approach to minimize the risks and potential impacts of cyber-attacks which has been integrated into our
overall risk management process. Our strategies are designed to ensure the resilience and security of our systems, safeguarding against
both internal and external vulnerabilities. We employ state-of-the-art technologies and practices to secure our systems. This includes
deploying advanced encryption, securing network infrastructure, and implementing robust access controls and authentication mechanisms.
While we can provide no assurance against unauthorized access and breaches, our information technology infrastructure is designed with
security at its core, with all data, whether at rest or in transit, being protected against unauthorized access and breaches.

 As part of our risk assessment framework, we have a Vendor Risk
Management Program to monitor cybersecurity risks posed by third-party vendors and service providers. This program includes:

 Vendor Onboarding and Due Diligence: New vendors undergo security assessments to evaluate their data
 protection measures, regulatory compliance, and cybersecurity policies.

 Ongoing Monitoring and Risk Assessments: We conduct periodic reviews of vendor security
 practices which may include security questionnaires, risk scoring, and audits for high-risk vendors.

 Contractual
Security Obligations: Vendor agreements include strict data security clauses, incident notification requirements, and audit rights.

 Incident
Reporting and Escalation: We have clear protocols for reporting vendor-related cybersecurity incidents, ensuring timely response
and mitigation.

 Partnerships and Collaboration

 We believe in the strength of collaboration in
combating cyber threats. We actively engage with cybersecurity communities, industry groups, and regulatory bodies to stay ahead of evolving
cyber risks. By sharing knowledge and best practices, we enhance our defenses and contribute to the broader effort of securing the digital
ecosystem. We maintain controls and procedures that are designed to ensure prompt escalation of certain cybersecurity incidents so that
decisions regarding public disclosure and reporting of such incidents can be made by management and the Board in a timely manner.

 Risk Assessment

 We continuously monitor our information technology
environment to detect and respond to threats in real-time. Our dedicated cybersecurity team uses sophisticated tools to track anomalies,
potential vulnerabilities, and ongoing attacks. This includes leveraging a best-in-class third-party 24/7/365 Security Operations Center.
This proactive surveillance allows us to address threats swiftly, mitigating any possible impact on our operations and clients. Semi-annually,
we leverage third-party independent consultants to perform penetration and segmentation testing of our internal and externally facing
environments. The results of the assessment are used to drive alignment on, and prioritization of, initiatives to enhance our security
controls, make recommendations to improve processes, and inform a broader risk assessment that is presented to our Board, Audit Committee,
and members of management.

 Technical Safeguards

 Cybersecurity is an ever-evolving field, and we
are committed to continuous improvement of our security practices. We regularly review and update our cybersecurity policies, procedures,
and technologies to address new challenges and adapt to the changing threat landscape.

 Incident Response and Recovery Planning

 Cybersecurity is a foundational element of our
operations. Our multi-layered approach—encompassing system security, vigilant monitoring, comprehensive training, and collaborative
engagement—demonstrates our dedication to protecting our company, our clients, and the financial ecosystem. We remain steadfast
in our commitment to maintaining the highest standards of cybersecurity resilience and response. We have established comprehensive incident
response and recovery plans and continue to regularly test and evaluate the effectiveness of those plans. Our incident response and recovery
plans address and guide our employees, management and the Board on our response to a cybersecurity incident.

 Education and Awareness

 Recognizing that human error can often be a weak
link in cybersecurity defenses, we are committed to regular and comprehensive training for all employees and executives. This includes
annual cybersecurity awareness sessions for our Board, ensuring that our highest levels of leadership are informed and vigilant about
the latest cybersecurity trends and threats. Our training programs are designed to foster a culture of security awareness, equipping our
team with the knowledge and tools needed to recognize and prevent cyber threats.

 Cybersecurity Threats

 We are not aware of any risks from cybersecurity
threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially
affect, our business strategy, results of operations, or financial condition.

 Governance

 Board Oversight

 Our Board, in coordination with the Audit Committee,
oversees our management of cybersecurity risk. They receive regular reports from management about the prevention, detection, mitigation,
and remediation of cybersecurity incidents, including material security risks and information security vulnerabilities. Our Audit Committee
directly oversees our cybersecurity program. The Audit Committee receives regular updates from management on cybersecurity risk resulting
from risk assessments, progress of risk reduction initiatives, external auditor feedback, control maturity assessments, and relevant internal
and industry cybersecurity incidents.

 Management's Role

 Our Chief Technology Officer, Information Security
Officer, and General Counsel have primary responsibility for assessing and managing material cybersecurity risks and are members of our
management's Information Technology Steering Committee (the "Security Committee"), which is a governing body that drives
alignment on security decisions across the Company. Such individuals have experience in various roles for public companies involving managing
information security, managing risk, implementing effective information and cybersecurity programs, and adhering to relevant compliance
requirements. The Security Committee meets at least quarterly to review security performance metrics, identify security risks, and assess
the status of approved security enhancements. The Security Committee also considers and makes recommendations on security policies and
procedures, security service requirements, and risk mitigation strategies. The Security Committee is responsible for a cybersecurity
risk report which is presented to the Board at each quarterly meeting, ensuring continuous oversight of cybersecurity
risks and mitigation efforts at the highest levels of governance

 ITEM 2. PROPERTIES.

 We have an operating lease for office space at
2615 St. Rose Parkway, Henderson, Nevada 89052. The lease will expire in 2030 and allows for two optional extensions of 5 years each.
Lease payments are approximately $60,000 per month.

 We believe that our properties are adequate and
suitable for us to conduct business in the future.

 ITEM 3. LEGAL PROCEEDINGS.

 From time to time, we may become involved in various
lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties,
and an adverse result in these or other matters may arise from time to time that may harm our business.

 The Company was named as a defendant in three
securities class action complaints filed in the United States District Court for the District of Nevada: Yilan Shi v. Paysign, Inc. et
al., filed on March 19, 2020 ("Shi"), Lorna Chase v. Paysign, Inc. et al., filed on March 25, 2020 ("Chase"),
and Smith & Duvall v. Paysign, Inc. et al., filed on April 2, 2020 (collectively, the "Complaints" or "Securities
Class Action"). Smith & Duvall v. Paysign, Inc. et al. was voluntarily dismissed on May 21, 2020. On May 18, 2020, the Shi plaintiffs
and another entity called the Paysign Investor Group each filed a motion to consolidate the remaining Shi and Chase actions and to be
appointed lead plaintiff. The Complaints are putative class actions filed on behalf of a class of persons who acquired the Company's
common stock from March 19, 2019 through March 31, 2020, inclusive. The Complaints generally allege that the Company, Mark R. Newcomer,
and Mark Attinger violated Section 10(b) of the Exchange Act, and that Messrs. Newcomer and Attinger violated Section 20(a) of the Exchange
Act, by making materially false or misleading statements, or failing to disclose material facts, regarding the Company's internal
control over financial reporting and its financial statements. The Complaints seek class action certification, compensatory damages, and
attorney's fees and costs. On December 2, 2020, the Court consolidated Shi and Chase as In re Paysign, Inc. Securities Litigation
and appointed the Paysign Investor Group as lead plaintiff. On January 12, 2021, Plaintiffs filed an Amended Complaint in the consolidated
action. Defendants filed a Motion to Dismiss the Amended Complaint on March 15, 2021. On February 9, 2023, the Court granted in part and
denied in part Defendants' Motion to Dismiss. On May 22, 2023, Defendants filed an Answer to the Amended Complaint. On December
15, 2023, the parties agreed in principle to a proposed settlement of the Securities Class Action and Plaintiffs filed a Consented Motion
for Preliminary Approval of Settlement. On January 4, 2024, the Court preliminarily approved a settlement in the amount of $3,750,000,
the entirety of which came from the Company's directors-and-officers insurance policy, for the referenced class of purchasers, and
scheduled a final approval hearing for April 17, 2024. On April 17, 2024, the Court conducted the final approval hearing and approved
the settlement and, on April 18, 2024, issued an order and final judgment thereon.

in four stockholder derivative actions currently pending in the United States District Court for the District of Nevada. The first-filed
derivative action is entitled Andrzej Toczek, derivatively on behalf of Paysign, Inc. v. Mark R. Newcomer, et al. and was filed on September
17, 2020. This action alleges violations of Section 14(a) of the Exchange Act, breach of fiduciary duty, unjust enrichment, and waste,
largely in connection with the failure to correct information technology controls over financial reporting alleged in the Securities Class
Action, thereby causing the Company to face exposure in the Securities Class Action. The complaint also alleges insider trading violations
against certain individual defendants. The second-filed derivative action is entitled John K. Gray, derivatively on behalf of Paysign,
Inc. v. Mark Attinger, et al. and was filed on May 9, 2022. This action involves the same alleged conduct raised in the Toczek action
and asserts claims for breach of fiduciary duty in connection with financial reporting, breach of fiduciary duty in connection with alleged
insider trading against certain individual defendants, and unjust enrichment. On June 3, 2022, the Court approved a stipulation staying
the action until the Court in the consolidated Securities Class Action issued a ruling on the Motion to Dismiss. On May 10, 2023, the
Toczek and Gray actions were consolidated.

in a third stockholder derivative action initially filed in state court in Clark County, Nevada, on October 2, 2023, entitled Simone Blanchette,
derivatively on behalf of Paysign, Inc. v. Mark Newcomer, et al, which the defendants subsequently removed to federal district court in
Nevada pursuant to a Notice of Removal filed on October 10, 2023. That complaint makes substantially the same allegations as made in the
consolidated Toczek and Gray actions, and also contains a claim that the individual defendants violated Section 10(b) and Rule 10b-5 promulgated
thereunder. On December 7, 2023, the parties requested that the action be stayed for sixty days due to the settlement negotiations in
the consolidated Toczek and Gray actions, and the Court granted the sixty-day stay on December 11, 2023. Subsequently, the Court extended
that deadline to March 29, 2024 and then to May 29, 2024 based upon the parties' stipulations. On July 26, 2024, the parties in
Blanchette submitted a Joint Status Report which suggested a proposed briefing schedule on a motion to dismiss, but that schedule was
not ruled upon by the Court.

in a fourth stockholder derivative action in the United States District Court for the District of Nevada, filed on December 27, 2023,
entitled Mo Jeewa, derivatively on behalf of Paysign, Inc. v. Mark R. Newcomer, et al. That complaint makes substantially the same allegations
as made in the consolidated Toczek and Gray actions and the Blanchette action discussed above, and alleges breach of fiduciary duty and
unjust enrichment. On January 23, 2025, the parties in Jeewa filed a stipulation to relate the case to the Toczek, Gray, and Blanchette
actions, which is currently pending before the Court.

 On October 4, 2024, the parties to the four stockholder derivative
actions agreed in principle to a proposed settlement of all pending claims asserted in the Toczek, Gray, Blanchette, and Jeewa actions.
On December 6, 2024, Plaintiffs in the Toczek and Gray actions filed a Motion for Preliminary Approval of Derivative Settlement, which
is currently pending before the Court.

 ITEM 4. MINE SAFETY
DISCLOSURES.

 Not applicable.

 ITEM
5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 Our common stock trades on the Nasdaq Capital
Market under the symbol "PAYS". The following table summarizes the low and high closing prices for our common stock for each
of the calendar quarters of 2024 and 2023.

 2024

 2023

 High

 Low

 High

 Low

 First Quarter

 $
 4.00

 $
 2.50

 $
 3.98

 $
 2.48

 Second Quarter

 5.02

 3.85

 3.78

 2.39

 Third Quarter

 5.48

 3.67

 2.47

 1.78

 Fourth Quarter

 4.08

 2.93

 2.80

 1.69

 There were approximately 8,915 shareholders of
record of the common stock as of December 31, 2024.

 The shares were issued pursuant to an exemption
from registration provided by Section 4(2) of the Securities Act of 1933.

 Dividend Policy

 We have not declared any cash dividends on our
common stock during our fiscal years ended on December 31, 2024 or 2023. Our Board has made no determination to date to declare cash
dividends during the foreseeable future, but is not likely to do so. There are no restrictions on our ability to pay dividends.

 Purchases of Equity Securities by the Issuer
and Affiliated Purchasers

 Share repurchases of our common stock for the three months ended December
31, 2024 were as follows:

 Period

 Total Number of Shares Purchased

 Weighted Average Price Paid Per Share

 Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)

 Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

 October 1, 2024 – October 31, 2024

 36,700

 $
 3.67

 –

 $
 3,377,071

 November 1, 2024 - November 30, 2024

 –

 –

 –

 3,377,071

 December 1, 2024 - December 31, 2024

 –

 –

 –

 3,377,071

 Total

 36,700

 $
 3.67

 –

 $
 3,377,071

 (1) On March 21, 2023, our Board authorized a
stock repurchase program to repurchase up to $5 million of our common stock, subject to certain conditions, in the open market, in privately
negotiated transactions, or by other means in compliance with Rule 10b-18 under the Exchange Act. The program is expected to be completed
within 36 months from the commencement date. As of December 31, 2024 the Company repurchased 531,258 shares of common stock for $1,622,929
at a weighted average price of $3.05 per share.

 On February 7, 2025, under our Board authorized
stock repurchase program, we closed on the repurchase of 100,000 shares of common stock for $375,786 at a weighted average price of $3.76
per share. After the purchase, the approximate dollar value of shares that may yet be purchased under the program is $3,001,285.

 ITEM 6. [RESERVED]

 ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION and RESULTS OF OPERATIONS.

 The following discussion and analysis of our
financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and related
notes included elsewhere in this Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties.
Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include,
but are not limited to, those identified below and those discussed in "Risk Factors" included elsewhere in this Form 10-K.

 Disclosure Regarding Forward-Looking
Statements

 This Annual Report on Form 10-K includes forward
looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") ("Forward-Looking Statements").
All statements other than statements of historical fact included in this report are Forward-Looking Statements. These Forward-Looking
Statements are based on our current expectations, assumptions, estimates and projections about our business and our industry. Words such
as "believe," "anticipate," "expect," "intend," "plan," "propose,"
"may," and other similar expressions identify Forward-Looking Statements. Specific forward-looking statements made herein
include: our belief that we cannot predict how future regulations might affect us; complying with future regulation could be expensive
or require us to change the way we operate our business; our belief that our in-house customer service center provides the highest customer
service experience for our clients as training is performed on-site by Paysign staff; we may utilize independent contractors who make
direct sales and are paid on a commission basis only; our belief that nearly ever state would require us to obtain a money transmitter
license to operate a money transfer business; our anticipation that we will not pay any cash dividends in the foreseeable future; our
intention to retain any earnings to finance the operation and expansion of our business; our intention to continue to make significant
investments to maintain the security of our data and cybersecurity infrastructure; our expectation that the trading price for our common
stock will be affected by any research or reports that securities analysts publish about us or our business; our belief that our editing
processes are consistent with applicable reimbursement rules and industry practice, a court, enforcement agency or whistleblower could
challenge these practices; our belief that all independent contractor and employment agreement relationships are satisfactory; our belief
that we have taken appropriate actions to remediate previously reported control deficiencies that we have identified and to strengthen
our internal control over financial reporting; our belief that we have utilized proven systems designed for robust data security and integrity
in electronic transactions, we may introduce products in the future that would be subject to such regulations; our belief that a data
security breach at one of the banks that issue our cards or our third-party service providers could result in significant reputational
harm to us and cause the use and acceptance of our cards to decline, either of which could have a significant adverse impact on our operating
results and future growth prospects; our belief that our existing competitors have longer operating histories, are substantially larger
than we are, may already have or could develop substantially greater financial and other resources than we have, may offer, develop or
introduce a wider range of programs and services than we offer or may use more effective advertising and marketing strategies than we
do to achieve broader brand recognition, customer awareness and retail penetration; our expectation that we may also face price competition
that results in decreases in the purchase and use of our products and services; our expectation that we may have to increase the incentives
that we offer to our marketing partners and decrease the prices of our products and services, which could adversely affect our operating
results; we may receive a stockholder proposal relating to a variety of ESG issues to public companies in the future; we may be subject
to, or contractually required to comply with, state and federal laws that govern various aspects of the submission of healthcare claims
for reimbursement and the receipt of payments for healthcare items or services; we may use and disclose individually identifiable health
information to perform our services and for other limited purposes, such as creating de-identified information; we may not be able to
detect unauthorized use of our intellectual property or proprietary information, or to take enforcement action; we may retain additional
employees and consultants during the next twelve months, including additional patient affordability, information technology, product and
project management, fraud, and customer care personnel to support our growing businesses; we may be unable to grow our business in future
periods, and if our revenue growth slows, or our revenues decline further, our business and financial conditions could be adversely affected;
we may experience a decline in margins; we may have deficiencies or weaknesses in our internal control over financial reporting which
could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate
manner, decrease investor confidence in our Company, and reduce the value of our common stock; we may face price competition that results
in decreases in the purchase and use of our products and services; we may have to increase the incentives that we offer to our marketing
partners and decrease the prices of our products and services, which could adversely affect our operating results; we may be unable to
maintain adequate banking relationships or renew our agreements with the banks that currently issue our cards under terms at least as
favorable to us as those existing before renewal; we may not be able to successfully manage our intellectual property or may be subject
to infringement claims; we may have to litigate to enforce and protect our intellectual property rights, trade secrets and know-how or
to determine their scope, validity or enforceability, which is expensive and could cause a diversion of resources and may not prove successful;
we may also be subject to costly litigation in the event our products and technology infringe upon another party's proprietary rights;
we may also be subject to claims by third parties for breach of copyright, trademark or license usage rights; we may lose current and
future customers, which could have a material adverse effect on our business, financial condition and results of operations. The electronic
commerce industry is changing rapidly; we may experience other problems unrelated to system failures; we may also experience software
defects, development delays and installation difficulties, any of which could harm our business and reputation and expose us to potential
liability and increased operating expenses; we may raise capital in order to provide working capital for our expansion into other products
and services using our payments platform; we may not be able to retain our current key employees; we may experience difficulty fully integrating
our newly-hired personnel, which may adversely affect our business; we may not have sufficient personnel for our financial reporting responsibilities,
which may result in the untimely close of our books and records and delays in the preparation of financial statements and related disclosures;
our belief that future growth in the electronic commerce market will be driven by the cost, convenience, ease of use and quality of products
and services offered to consumers and businesses; our belief that risks from prior cybersecurity threats, including as a result of any
previous cybersecurity incidents, have not materially affected our business to date; our belief that our properties are adequate and suitable
for us to conduct business in the future; our belief that if we do not raise new capital, we will still be able to support our existing
business and expand into new vertical markets using internally generated funds; our plan for 2025 to continue to invest additional funds
in technology improvements, sales and marketing, cybersecurity, fraud, customer service, and regulatory compliance; our belief that the
following measures are the primary indicators of our quarterly and annual revenues: gross dollar volume loaded on cards and conversion
rates on gross dollar volume loaded on cards; our belief that the following are also key performance indicators: revenues, gross profit,
operational expenses as a percent of revenues, cardholder participation, and EBITDA; our belief that our available cash on hand, excluding
restricted cash, along with our forecast for revenues and cash flows for 2025 and through 2027, will be sufficient to sustain our operations
for the next 24 months. our belief that we do not anticipate any losses with respect to accounts with balances exceeding federally insured
limits; our expectation that the repurchase program will be completed within 36 months from the commencement dated; our expectation that
we are entitled to a breakage amount in certain card programs where we hold the cardholder funds; our belief that our platform can be
seamlessly integrated with our clients' systems; we may become involved in various lawsuits and legal proceedings which arise in
the ordinary course of business; if a financial institution were to be placed into receivership, we may be unable to access the cash we
have on deposit; our belief that our 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 belief that 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 belief that if we do not raise new capital, then we will still be able to support
our existing business and expand into new vertical markets using internally generated funds; our expectation that IRC Sections 382 and
383 will significantly impact the utilization of its net operating losses and other tax carryforwards. In the normal course of our business,
we, in an effort to help keep our stockholders and the public informed about our operations, may from time-to-time issue certain statements,
either in writing or orally, that contain, or may contain, Forward-Looking Statements. Although we believe that the expectations reflected
in such Forward-Looking Statements are reasonable, we can give no assurance that such expectations will prove to have been correct. In
addition, any statements that refer to expectations, projections, estimates, forecasts, or other characterizations of future events or
circumstances are Forward-Looking Statements. These Forward-Looking Statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from those reflected in the Forward-Looking Statements. Such important factors ("Important
Factors") and other factors are disclosed in this report, including those factors discussed in "Part I - Item 1A.
Risk Factors" and in other reports filed with the Securities and Exchange Commission (the "SEC") from time to time.
All prior and subsequent written and oral Forward-Looking Statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the Important Factors described below that could cause actual results to differ materially from our expectations
as set forth in any Forward-Looking Statement made by or on behalf of us. You are cautioned not to place undue reliance on these Forward-Looking
Statements, which relate only to events as of the date on which the statements are made. We undertake no obligation to publicly revise
these Forward-Looking Statements to reflect events or circumstances that arise after the date hereof. You should refer to and carefully
review the information in future documents we file with the SEC.

 Overview

 Paysign, Inc. (the "Company," "Paysign,"
"we" or "our"), headquartered in Nevada, was incorporated on August 24, 1995, and trades under the symbol PAYS
on The Nasdaq Stock Market LLC. We are a vertically integrated provider of prepaid card products and processing services for corporate,
consumer and government applications. 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.

 We operate on a powerful, high-availability payments
platform with cutting-edge fintech capabilities that can be seamlessly integrated with our clients' systems. This distinctive positioning
allows us to provide end-to-end technologies that securely manage transaction processing, cardholder enrollment, value loading, account
management, data and analytics, and customer service. 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, and demand deposit accounts accessible with
a debit card. Our cards are sponsored by our issuing bank partners.

 Our revenues include fees generated from cardholder
fees, interchange, card program management fees, transaction claims processing fees, breakage, and settlement income. Revenue from cardholder
fees, interchange, card program management fees, and transaction claims processing fees is recorded when the performance obligation is
fulfilled. Breakage is recorded ratably over the estimated card life based on historical redemption patterns, market-specific trends,
escheatment rules, and existing economic conditions and relates solely to our open-loop gift card business which began at the end of 2022.
Settlement income is recorded at the expiration of the card or card program and relates predominantly to our pharma prepaid business which
ended in 2022.

 We have 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 in order to allow the employee to access payroll amounts that are deposited into an account linked to their card. GPR cards can
also be issued to a consumer at a retail location or mailed to a consumer after completing an on-line application. 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.

 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.

 In 2025, 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.

 2024 Year Milestones

 Grew to approximately 7.3 million cardholders and approximately 600 card programs as of December 31, 2024.

 Year over year revenue increased 23.5%.

 Added 16 net new plasma programs, launched 33 net new pharma programs, and added 1 net new other prepaid program.

 Results of Operations

 Comparison of Year Ended December 31, 2024
to Year Ended December 31, 2023

 The following table summarizes our consolidated
financial results for year ended December 31, 2024 in comparison to year ended December 31, 2023:

 Year ended December 31,

 Variance

 2024

 2023

 $

 %

 Revenues

 Plasma industry

 $
 43,879,508

 $
 41,951,659

 $
 1,927,849

 4.6%

 Pharma industry

 12,652,412

 4,051,037

 8,601,375

 212.3%

 Other

 1,852,632

 1,271,466

 581,166

 45.7%

 Total revenues

 58,384,552

 47,274,162

 11,110,390

 23.5%

 Cost of revenues

 26,187,218

 23,137,997

 3,049,221

 13.2%

 Gross profit

 32,197,334

 24,136,165

 8,061,169

 33.4%

 Gross margin %

 55.1%

 51.1%

 Operating expenses

 Selling, general and administrative

 25,180,840

 20,276,842

 4,903,998

 24.2%

 5,994,986

 4,026,578

 1,968,408

 48.9%

 Total operating expenses

 31,175,826

 24,303,420

 6,872,406

 28.3%

 Income (loss) from operations

 $
 1,021,508

 $
 (167,255
)

 $
 1,188,763

 NM

 Other income

 $
 3,116,689

 $
 2,531,071

 $
 585,618

 23.1%

 $
 322,290

 $
 (4,094,911
)

 $
 4,417,201

 NM

 $

 $

 $
 (2,642,820
)

 (40.9%
)

 Net margin %

 6.5%

 13.7%

 The increase in total revenues of $11,110,390
for the year ended December 31, 2024 compared to the same period in the prior year consisted primarily of a $1,927,849 increase in plasma
revenue, a $8,601,375 increase in pharma revenue, and a $581,166 increase in other revenue. The increase in plasma revenue was primarily
due to the addition of 16 net new plasma centers since December 31, 2023 and rise in the number of donations at existing plasma centers,
and, consequently, dollars loaded to cards, cardholder fees, and interchange, as there continues to be stable demand for plasma used in
plasma protein therapies. The increase in pharma revenue was primarily due a full year financial benefit of programs launched in 2023,
the launch of 33 net new pharma patient affordability programs since December 31, 2023 and the subsequent growth in monthly management
and setup fees, claim processing fees, and other billable services such as call center support. The number of claims processed increased
over 270% in 2024 compared to 2023. The increase in other revenue was primarily due to the growth and usage in the number of cardholders
of our payroll, retail, and corporate incentive programs.

 Cost of revenues for the year ended December 31,
2024 increased $3,049,221 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, customer service, program management,
application integration setup, and sales and commission expense. The increase in cost of revenues consisted primarily of (i) increased
network fees of approximately $1,026,000, which was driven predominantly by increased ATM network usage associated with growth in our
card programs and increases in transaction fees related to inflationary pressures; (ii) increased customer care expense of approximately
$838,000 associated primarily with the growth in our pharma patient affordability programs, wage inflation pressures, a tight labor market,
and increased benefit costs; (iii) increased third-party program management of approximately $651,000 associated with our pharma
patient affordability programs; (iv) increased sales commission expense of approximately $368,000 related to the increase in overall revenue
for programs in which we pay commission expenses; and (v) increased fraud charges of approximately $527,000. These increases were offset
by a decline in plastics and collateral of approximately $326,000 and a decline in other costs of approximately $35,000.

 Gross profit for the year ended December 31, 2024
increased $8,061,169 compared to the same period in the prior year, resulting primarily from the increase in the number of pharma patient
affordability programs, a full year financial benefit of programs launched in 2023, and a corresponding increase in setup fees, monthly
management fees, claim processing fees, and other billable fees associated with our patient affordability programs. Gross profit also
benefited from our plasma revenue and the 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 third-party service providers, sales commission
expense, customer service costs and fraud expenses 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 year ended December 31, 2024 increased $4,903,998 compared to the same period in the prior year and consisted primarily of an
increase in (i) compensation and benefits of approximately $5,388,000 due to continued hiring to support the Company's growth primarily
from our pharma patient affordability business, a tight labor market, and increased benefit costs; (ii) technologies and telecom of approximately
$1,320,000 primarily related to ongoing platform security investments; and (iii) travel and entertainment of approximately $207,000. This
increase was offset by a decrease in stock compensation of approximately $249,000, an increase of $1,738,000 in the amount of capitalized
platform development costs, and a decrease in other cost of approximately $23,000.

 Depreciation and amortization expense for the
year ended December 31, 2024 increased $1,968,408 compared to the same period in the prior year. The increase in depreciation and amortization
expense was primarily due to continued capitalization of new software development costs and equipment purchases related to continued enhancements
to our processing platform and employment growth.

 For the year ended December 31, 2024, we recorded
income from operations of $1,021,508 representing an improvement of $1,188,763 compared to a loss from operations of $167,255 during the
same period in the prior year, related to the aforementioned factors.

 Other income for the year ended December 31, 2024
increased $585,618 primarily related to steady interest rates and the associated interest income received on higher average bank account
balances at our sponsor bank.

 At December 31, 2024, our income tax provision
was $322,290, which equates to an effective tax rate of 7.8% primarily as a result of federal taxes
offset by net operating loss true-up on our state taxes, tax benefits related to our stock-based compensation and changes to the Company's
tax credits. We recorded an income tax benefit of $4,094,911 for the year ended December 31, 2023, which equates to an effective
tax rate of (173.2)%, primarily as a result of the release of our valuation allowance of $4,588,781 on our federal and state deferred
tax assets.

 The net income for the year ended December 31,
2024 was $3,815,907, a decline of $2,642,820 compared to the net income of $6,458,727 for the year ended December 31, 2023. The overall
change in net income relates to the aforementioned factors.

 Key Metrics, Performance Indicators and Non-GAAP
Measures

 Management reviews a number of metrics to help
us monitor the performance of and identify trends affecting our business. We believe the following measures are the primary indicators
of our quarterly and annual revenues:

 Gross Dollar Volume Loaded on Cards: Represents
the total dollar volume of funds loaded to all of our prepaid card programs. Our gross dollar volume loaded on cards was $1,783 million
and $1,706 million for the year ended December 31, 2024 and 2023, respectively. We use this metric to analyze the total amount of money
moving into our prepaid card programs.

 Conversion Rates on Gross Dollar Volume Loaded
on Cards: Represents revenues, gross profit or net income conversion rates of gross dollar volume loaded on cards which are calculated
by taking our total revenues, gross profit or net income, 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. Our total revenue
conversion rates for the years ended December 31, 2024 and 2023 were 3.27% or 327 basis points ("bps"), and 2.77% or 277 bps,
respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the year ended December 31, 2024 and
2023 were 1.81% or 181 bps, and 1.41% or 141 bps, respectively, of gross dollar volume loaded on cards. Our net income conversion rates
for the year ended December 31, 2024 and 2023 were 0.21% or 21 bps, and 0.38% or 38 bps, respectively, of gross dollar volume loaded on
cards.

 Management also reviews key performance indicators,
such as revenues, gross profit, operational expenses as a percent of revenues, and cardholder participation. 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 measures 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:

 "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. A reconciliation of net income to Adjusted EBITDA is provided in the table below.

 Year ended December 31,

 2024

 2023

 Reconciliation of adjusted EBITDA to net income:

 $

 $

 322,290

 (4,094,911
)

 Interest income, net

 (3,116,689
)

 (2,531,071
)

 5,994,986

 4,026,578

 EBITDA

 7,016,494

 3,859,323

 2,604,589

 2,853,643

 Adjusted EBITDA

 $
 9,621,083

 $
 6,712,966

 "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 as a percentage of revenue.
A reconciliation of net income margin to Adjusted EBITDA margin is provided in the table below.

 Year ended December 31,
 (As a percentage of revenue)

 2024

 2023

 Reconciliation of adjusted EBITDA margin to net income margin:

 Net income margin

 6.5%

 13.7%

 0.6%

 (8.7%
)

 Interest income, net

 (5.3%
)

 (5.4%
)

 10.3%

 8.5%

 EBITDA margin

 12.0%

 8.2%

 4.5%

 6.0%

 Adjusted EBITDA margin

 16.5%

 14.2%

 Liquidity and Capital Resources

 The following table sets forth the major sources
and uses of cash for our last two fiscal years ended December 31, 2024 and 2023:

 Year ended December 31,

 2024

 2023

 Net cash provided by operating activities

 $
 22,947,120

 $
 27,620,624

 Net cash used in investing activities

 (9,488,702
)

 (7,048,678
)

 Net cash used in financing activities

 (466,245
)

 (1,118,284
)

 Net increase in cash and restricted cash

 $
 12,992,173

 $
 19,453,662

 Comparison of Fiscal 2024 and 2023

 During the years ended December 31, 2024 and 2023,
we financed our operations through internally generated funds.

 Operating activities provided $22,947,120 of cash
in 2024, a decrease of $4,673,504 compared to 2023. This change in cash flow compared to the prior period is primarily due to net decreases
in operating assets and liabilities and net income. The changes in accounts receivable, accounts payable, and customer card funding are
primarily related to the growth in our pharma patient affordability business and timing of payments as we are invoiced by third-party
service providers at the end of the period and are due monies from our pharma patient affordability customers to cover these third-party
payables. Changes in net income in 2024 when compared to 2023 are also driven by a net decrease in our deferred tax asset valuation. The
decrease in cash flows from operating activities and net income was offset by non-cash adjustments for deferred income taxes, depreciation
and amortization, stock-based compensation, and lease expense.

 We used net cash in investing activities during
the years ended December 31, 2024 and 2023 of $9,488,702 and $7,048,678, respectively. Cash used for investing activities was primarily
attributed to an increase in the capitalization of internally developed software as we continue to invest in our technology platform.

 Cash used in financing
activities of $466,245 and $1,118,284 for the years ended December 31, 2024 and 2023, respectively, was primarily attributed to the repurchase
of 136,700 shares of the Company's common stock at a weighted average price of $3.62 per share during the year ended December 31,
2024 offset by proceeds received of $28,800 for the exercise of stock options. For the year ended December 31, 2023, the repurchase of
394,558 shares of the Company's common stock at a weighted average price of $2.86 per share offset by proceeds received of $9,600
for the exercise of stock options.

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

 Liquidity and Sources of Financing

 Unrestricted cash was $10,766,982 as of December
31, 2024, a decrease of $6,227,723 compared to the same period in the prior year. The decrease resulted primarily from payment timing
on pass-through claim reimbursement receivables and related payables associated with our patient affordability business, in the amount
of $7,018,053 offset by the improvement in our operating results. We believe that our available cash on hand, excluding restricted cash,
at December 31, 2024 of $10,766,982, along with our forecast for revenues and cash flows for 2025 and through 2027, will be sufficient
to sustain our operations for the next 24 months. In light of the elevated interest rates and increased refinancing risks related to commercial
real estate holdings on bank balance sheets, we continue to monitor the health and soundness of our bank relationships through publicly
available information. In particular, we are closely following FDIC publicly announced developments, but those developments have not caused
us to alter our bank relationships in any material respect at this time.

 Critical Accounting Policies and Estimates

 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 will be based on our experience
and our interpretation of economic, political, regulatory, and other factors that affect our business prospects.

 Intangible Assets – For intangible
assets, the Company recognizes an impairment loss if the carrying amount of the intangible asset is not recoverable and exceeds fair value.
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 a finite life are amortized
on a straight-line basis over its estimated useful life, which is generally 3 to 15 years.

 Internally Developed Software Costs –
 Computer software development costs are expensed as incurred, except for internal use software or website development costs that qualify
for capitalization as described below, and include compensation and related expenses, costs of hardware and software, and costs 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, as the Platform asset. 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.

 Income Taxes – Income tax expense
is comprised of current and deferred income tax expense. Current income tax expense approximates taxes to be paid or refunded for the
current period. Deferred income tax expense results from the changes in deferred tax assets and liabilities during the periods. These
gross deferred tax assets and liabilities represent decreases or increases in taxes expected to be paid in the future because of future
reversals of temporary differences between the basis of assets and liabilities as measured by tax laws and their basis as reported in
our consolidated financial statements. We also recognize deferred tax assets for tax attributes such as net operating loss carryforwards
and tax credit carryforwards. We record valuation allowances to reduce deferred tax assets to the amounts we conclude are more likely-than-not
to be realized in the foreseeable future. While the Company has considered future taxable income and ongoing prudent and feasible tax
strategies in assessing the need for the valuation allowance, if these estimates and assumptions change in the future, the Company may
be required to adjust its valuation allowance.

 Income tax benefits are recognized and measured
based upon a two-step model: 1) a tax position must be more likely-than-not to be sustained based solely on its technical merits in order
to be recognized, and 2) the benefit is measured as the largest dollar amount of that position that is more likely-than-not to be sustained
upon settlement. The difference between the benefit recognized for a position and the tax benefit claimed on a tax return is referred
to as an unrecognized tax benefit. Income tax related interest and penalties, if applicable, are accrued within income tax expense.

 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 card programs are generated through card
program management fees, transaction claims processing fees, interchange fees, and settlement income. Other revenues are generated through
cardholder fees, interchange fees, program management fees, load fees and breakage.

 Plasma and pharma card program revenues include
both fixed and variable components. Cardholder fees represent an obligation to the cardholder based on a per transaction basis and are
recognized at a point in time when the performance obligation is fulfilled. Card program management fees and transaction claims processing
fees include an obligation to our card program sponsors and are generally recognized when earned on a monthly basis and are typically
due within 30 days pursuant to the contract terms which are generally multi-year contracts. 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.

 The Company utilizes the remote method of revenue
recognition for settlement income whereby the unspent balances will be recognized as revenue at the expiration of the cards or the respective
card program. This has primarily been associated with the pharma prepaid business which ended in 2022. 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

 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.

 In determining the present value of lease payments
at lease commencement date, the Company utilizes its incremental borrowing rate based on the information available, unless the rate implicit
in the lease is readily determinable. The liability for operating leases is based on the present value of future lease payments. Operating
lease expenses are recorded as rent expense, which is included within selling, general and administrative expenses within the consolidated
statements of operations and presented as operating cash outflows within the consolidated statements of cash flows.

 Leases with an initial term of 12 months or less
are not recorded on the balance sheet, with lease expenses for these leases recognized on a straight-line basis over the lease term.

 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 option pricing model is affected by our stock price
as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility and the risk-free
interest rate.

 ITEM
7A. 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.

 The financial statements required by Article 8
of Regulation S-X are attached hereto as Exhibit A.

 ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 During the two fiscal years ended December 31,
2024 and 2023, we did not file any Current Report on Form 8-K reporting any change in accountants in which there was a reported disagreement
on any matter of accounting principles or practices, financial statement disclosures or auditing scope or procedure.

 ITEM 9A. CONTROLS AND PROCEDURES.

 Management's Report on Internal Control
over Financial Reporting and Remediation Initiatives

 Disclosure Controls and Procedures

 We have evaluated, under the supervision of our
chief executive officer and chief financial officer and with the participation of other members of management, the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of December
31, 2024. 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 Securities Exchange Act of 1934 is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange Commission'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 Securities Exchange Act of 1934) as of December 31, 2024. Based on that evaluation, our chief
executive officer and chief financial officer concluded that, as of the evaluation date, such controls and procedures were effective.

 Management's Annual Report on Internal
Control Over Financial Reporting

 Our management is responsible for establishing
and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over
financial reporting. As defined by the Securities and Exchange Commission, internal control over financial reporting is a process designed
by, or under the supervision of our principal executive officer and principal financial officer and implemented by our Board, management
and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial
statements in accordance with U.S. generally accepted accounting principles.

 Our internal control over financial reporting
includes those policies and procedures that:

 pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and

 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements

 Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

 As of December 31, 2024, we conducted an evaluation,
under the supervision and with the participation of our chief executive officer (our principal executive officer), our chief information
officer and our chief financial officer (also our principal financial and accounting officer) of the effectiveness of our internal control
over financial reporting based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Management's assessment included an evaluation of the design of our internal
control over financial reporting and testing of the operational effectiveness of those controls.

 Based upon this assessment, management concluded
that our internal control over financial reporting was effective as of December 31, 2024.

 This annual report is not required and does not
include an attestation report of our registered public accounting firm regarding internal control over financial reporting as of December
31, 2024.

 Changes in Internal Control over Financial
Reporting

 There have been no changes in our internal control
over financial reporting during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

 ITEM 9B. OTHER INFORMATION.

 During the quarter ended December 31, 2024, 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 9C. DISCLOSURE REGARDING
FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

 Not applicable.

 PART
III

 ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS and CORPORATE GOVERNANCE.

by reference to our proxy statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the year

 ITEM 11. EXECUTIVE COMPENSATION.

by reference to our proxy statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the year

 ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

by reference to our proxy statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the year

 ITEM 13. CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

by reference to our proxy statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the year

 ITEM 14. PRINCIPAL ACCOUNTANT
FEES AND SERVICES.

by reference to our proxy statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the year

 PART
IV

 ITEM 15. EXHIBITS and FINANCIAL
STATEMENT SCHEDULES.

 (a)

 The following documents are filed as a part of the report:

 (1) All
financial statements: Audited financial statements of Paysign, Inc. as of December 31, 2024 and 2023, and for the years ended December
31, 2024 and 2023, including balance sheets, statements of income, statements of cash flows, and statements of changes in stockholders'
equity required to be filed hereunder are listed in Exhibit A.

 (2) Those
financial statement schedules required to be filed by Item 8 of this form, and by paragraph (b) below: None.

 (3) Those
exhibits required by Item 601 of Regulation S-K (Section 229.601 of this chapter) and by paragraph (b) below. Identify in the list each
management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 15(b) of this
report: See below.

 (b)

 Exhibits.

 Exhibit

Number

 Description of Exhibits

 3.1

 Amended and Restated Articles of Incorporation dated April 23, 2019 (1)

 3.2

 Amended and Restated Bylaws (2)

 4.2

 Description of Paysign, Inc.'s Securities (3)

 10.1

 Share Exchange Agreement between 3PEA International, Inc. and WOW Technologies, Inc. (4)

 10.2

 Form of Restricted Stock Award (5)

 10.3

 2018 Incentive Compensation Plan (6)

 10.4

 Form of Incentive Stock Option Agreement (7)

 10.5

 Form of Non-Qualified Stock Option Agreement (8)

 10.6

 Form of Restricted Stock Agreement (9)

 10.7

 Non-Qualified Stock Option Agreement for Dan Henry (10)

 10.8

 Form of Restricted Stock Award under 2018 Incentive Compensation Plan (11)

 10.9

 Form of Restricted Stock Award (12)

 10.10

 Stock Repurchase Agreement, dated March 23, 2023, by and between Paysign, Inc. and Daniel H. Spence (13)

 10.11

 Paysign, Inc. 2023 Equity Incentive Plan (14)

 Code of Ethics (15)

 19.1*

 Paysign, Inc. Insider Trading Policies and Procedures

 Subsidiaries of Registrant (16)

 23.1*

 Consent of Moss Adams LLP

 31.1*

 Rule 13a-14(a)/15d-14(a) Certifications

 31.2*

 Rule 13a-14(a)/15d-14(a) Certifications

 32.1*

 Section 1350 Certifications

 32.2*

 Section 1350 Certifications

 97.1*

 Paysign, Inc. Policy Relating to Recovery of Erroneously Awarded Compensation

 101.INS

 101.SCH

 101.CAL

 101.LAB

 101.PRE

 101.DEF

 Cover Page Interactive Data File

 * Filed herewith.

 (1)

 Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on September 9, 2019 (File Number 001-38623).

 (2)

 Incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed on March 15, 2024 (File Number 000-38623).

 (3)

 Incorporated by reference to Exhibit 4.2 to our Annual Report on Form 10-K filed on April 3, 2020 (File Number 001-38623).

 (4)

 Incorporated by reference to Exhibit 10.1 to our Registration Statement on Form 10 filed on September 16, 2010 (File Number 000-54123).

 (5)

 Incorporated by reference to Exhibit 4.1 to our Form S-8 filed on March 29, 2019 (File Number 333-230634).

 (6)

 Incorporated by reference to Exhibit 4.1 to our Form S-8 filed on March 29, 2019 (File Number 333-230632).

 (7)

 Incorporated by reference to Exhibit 4.2 to our Form S-8 filed on March 29, 2019 (File Number 333-230632).

 (8)

 Incorporated by reference to Exhibit 4.3 to our Form S-8 filed on March 29, 2019 (File Number 333-230632).

 (9)

 Incorporated by reference to Exhibit 4.4 to our Form S-8 filed on March 29, 2019 (File Number 333-230632).

 (10)

 Incorporated by reference to Exhibit 4.3 to our Form S-8 filed on August 22, 2019 (File Number 333-233400).

 (11)

 Incorporated by reference to Exhibit 4.1 to our Form 10-Q filed on August 7, 2019 (File Number 333-230632).

 (12)

 Incorporated by reference to Exhibit 4.2 to our Form 10-Q filed on August 7, 2019 (File Number 001-38623).

 (13)

 Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on March 28, 2023 (File Number 001-38623).

 (14)

 Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on May 9, 2023 (File Number 001-38623).

 (15)

 Incorporated by reference to Exhibit 14.1 to our Annual Report on Form 10-K filed on April 3, 2020 (File Number 001-38623).

 (16)

 Incorporated by reference to Exhibit 21 to our Annual Report on Form 10-K filed on March 26, 2021 (File Number 001-38623).

 (c)

 Other Financial Statement Schedules: None.

 ITEM 16. Form 10-k summary

 Not applicable.

 SIGNATURES

 Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

 By:

 /s/ Mark Newcomer

 Mark Newcomer, President and Chief Executive Officer

 Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

 /s/ Mark Newcomer

 Mark Newcomer, President, Chief Executive Officer, Director and Chairman (Principal Executive Officer)

 /s/ Jeff Baker

 Jeff Baker, Chief Financial Officer

 (Principal Financial Officer and Principal Accounting
 Officer)

 /s/ Joan Herman

 Joan Herman, Executive Vice President and Director

 /s/ Dan Henry

 Dan Henry, Director

 /s/ Matthew Lanford

 Matthew Lanford, Director

 /s/ Bruce Mina

 Bruce Mina, Director

 /s/ Jeffrey B. Newman

 Jeffrey B. Newman, Director

 /s/ Dennis Triplett

 Dennis Triplett, Director

 EXHIBIT A

 CONSOLIDATED FINANCIAL STATEMENTS

 AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2024
AND 2023

 WITH AUDIT REPORTS OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRMS

 PAGE

 Report of Independent Registered Public Accounting Firm (Moss Adams LLP; Dallas, TX; PCAOB ID # 659)

 Consolidated Balance Sheets as of December 31, 2024 and 2023

 Consolidated Statements of Operations for the years ended December 31, 2024 and 2023

 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2024 and 2023

 Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023

 Notes to Consolidated Financial Statements

 F- 1

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

 To the Shareholders and the Board of Directors of

Paysign, Inc.

 Opinion on the Financial Statements

 We have audited the accompanying consolidated balance sheets of Paysign,
Inc. (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders' equity,
and cash flows for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements").
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 2024 and 2023, and the consolidated results of its operations and its cash flows for the years then ended,
in conformity with accounting principles generally accepted in the United States of America.

 Basis for Opinion

 These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based
on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.

 Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 /s/ Moss Adams LLP

 Dallas, Texas

 March 26, 2025

 We have served as the Company's auditor
since 2022.

 F- 2

 CONSOLIDATED BALANCE SHEETS

 DECEMBER 31, 2024 AND 2023

 2024

 2023

 ASSETS

 Current assets

 Cash

 $
 10,766,982

 $
 16,994,705

 Restricted cash

 111,576,204

 92,356,308

 Accounts receivable, net

 32,639,242

 16,222,341

 Other receivables

 1,606,276

 1,585,983

 Prepaid expenses and other current assets

 2,247,929

 2,020,781

 Total current assets

 158,836,633

 129,180,118

 Fixed assets, net

 1,157,975

 1,089,649

 Intangible assets, net

 12,239,717

 8,814,327

 Operating lease right-of-use asset

 2,792,922

 3,215,025

 Deferred tax asset, net

 4,000,950

 4,299,730

 Total assets

 $
 179,028,197

 $
 146,598,849

 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities

 Accounts payable and accrued liabilities

 $
 34,330,217

 $
 26,517,567

 Operating lease liability, current portion

 448,008

 383,699

 Customer card funding

 111,328,270

 92,282,124

 Total current liabilities

 146,106,495

 119,183,390

 Operating lease liability, long-term portion

 2,480,070

 2,928,078

 Total liabilities

 148,586,565

 122,111,468

 Commitments and contingencies (Note 9)

 –

 –

 Stockholders' equity

 Preferred stock: $ 0.001 par value; 25,000,000 shares authorized; none issued and outstanding

 –

 –

 Common stock; $ 0.001 par value; 150,000,000 shares authorized, 54,358,382 and 53,452,382 issued at December 31, 2024 and 2023, respectively

 54,358

 53,452

 Additional paid-in capital

 24,632,205

 21,999,722

 Treasury stock at cost, 834,708 shares and 698,008 shares, respectively

 ( 1,772,929
)

 ( 1,277,884
)

 Retained earnings

 7,527,998

 3,712,091

 Total stockholders' equity

 30,441,632

 24,487,381

 Total liabilities and stockholders' equity

 $
 179,028,197

 $
 146,598,849

 See accompanying notes to consolidated financial
statements.

 F- 3

 CONSOLIDATED STATEMENTS OF OPERATIONS

 FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

 Year ended

 2024

 2023

 Revenues

 Plasma industry

 $
 43,879,508

 $
 41,951,659

 Pharma industry

 12,652,412

 4,051,037

 Other

 1,852,632

 1,271,466

 Total revenues

 58,384,552

 47,274,162

 Cost of revenues

 26,187,218

 23,137,997

 Gross profit

 32,197,334

 24,136,165

 Operating expenses

 Selling, general and administrative

 25,180,840

 20,276,842

 5,994,986

 4,026,578

 Total operating expenses

 31,175,826

 24,303,420

 Income (loss) from operations

 1,021,508

 ( 167,255
)

 Other income

 Interest income, net

 3,116,689

 2,531,071

 Income before income tax provision (benefit)

 4,138,197

 2,363,816

 322,290

 ( 4,094,911
)

 $

 $

 Income per share

 Basic

 $
 0.07

 $
 0.12

 Diluted

 $
 0.07

 $
 0.12

 Weighted average common shares

 Basic

 53,207,555

 52,487,840

 Diluted

 55,588,459

 54,162,485

 See accompanying notes to consolidated financial
statements.

 F- 4

 CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY

 FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

 Common Stock

 Additional
 Paid-in

 Treasury Stock

 Retained

 Total Stockholders'

 Amount

 Capital

 Amount

 Earnings

 Equity

 Balance, December 31, 2022

 52,650,382

 $
 52,650

 $
 19,137,281

 ( 303,450
)

 $
 ( 150,000
)

 $
 ( 2,746,636
)

 $
 16,293,295

 Stock issued upon vesting of restricted stock

 798,000

 ( 798
)

 –

 –

 –

 –

 Exercise of stock options

 4,000

 9,596

 –

 –

 –

 9,600

 –

 –

 2,853,643

 –

 –

 –

 2,853,643

 Repurchase of common stock

 –

 –

 –

 ( 394,558
)

 ( 1,127,884
)

 –

 ( 1,127,884
)

 –

 –

 –

 –

 –

 Balance, December 31, 2023

 53,452,382

 53,452

 21,999,722

 ( 698,008
)

 ( 1,277,884
)

 3,712,091

 24,487,381

 Stock issued upon vesting of restricted stock

 894,000

 ( 894
)

 –

 –

 –

 –

 Exercise of stock options

 12,000

 28,788

 –

 –

 –

 28,800

 –

 –

 2,604,589

 –

 –

 –

 2,604,589

 Repurchase of common stock

 –

 –

 –

 ( 136,700
)

 ( 495,045
)

 –

 ( 495,045
)

 –

 –

 –

 –

 –

 Balance, December 31, 2024

 54,358,382

 $
 54,358

 $
 24,632,205

 ( 834,708
)

 $
 ( 1,772,929
)

 $
 7,527,998

 $
 30,441,632

 See accompanying notes to consolidated financial
statements.

 F- 5

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

 Year ended

 2024

 2023

 Cash flows from operating activities:

 $

 $

 Adjustments to reconcile net income to net cash provided by operating activities:

 Stock-based compensation expense

 2,604,589

 2,853,643

 5,994,986

 4,026,578

 Noncash lease expense

 422,103

 399,813

 Gain on disposal of assets

 –

 ( 4,862
)

 Deferred income taxes, net

 298,780

 ( 4,299,730
)

 Changes in operating assets and liabilities:

 Accounts receivable

 ( 16,416,901
)

 ( 11,541,350
)

 Other receivables

 ( 20,293
)

 ( 146,732
)

 Prepaid expenses and other current assets

 ( 227,148
)

 ( 320,973
)

 Accounts payable and accrued liabilities

 7,812,650

 18,463,907

 Operating lease liability

 ( 383,699
)

 ( 361,408
)

 Customer card funding

 19,046,146

 12,093,011

 Net cash provided by operating activities

 22,947,120

 27,620,624

 Cash flows from investing activities:

 Purchase of fixed assets

 ( 434,901
)

 ( 262,556
)

 Capitalization of internally developed software

 ( 8,926,201
)

 ( 6,786,122
)

 Purchase of intangible assets

 ( 127,600
)

 –

 Net cash used in investing activities

 ( 9,488,702
)

 ( 7,048,678
)

 Cash flows from financing activities:

 Proceeds from exercise of stock options

 28,800

 9,600

 Repurchase of common stock

 ( 495,045
)

 ( 1,127,884
)

 Net cash used in financing activities

 ( 466,245
)

 ( 1,118,284
)

 Net change in cash and restricted cash

 12,992,173

 19,453,662

 Cash and restricted cash, beginning of period

 109,351,013

 89,897,351

 Cash and restricted cash, end of period

 $
 122,343,186

 $
 109,351,013

 Cash and restricted cash reconciliation:

 Cash

 $
 10,766,982

 $
 16,994,705

 Restricted cash

 111,576,204

 92,356,308

 Total cash and restricted cash

 $
 122,343,186

 $
 109,351,013

 Supplemental cash flow information:

 Non-cash financing activities

 Interest paid

 $
 –

 $
 –

 Cash paid for taxes

 $
 136,631

 $
 207,945

 See accompanying notes to consolidated financial
statements.

 F- 6

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 1. DESCRIPTION
OF BUSINESS AND HISTORY

 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, digital banking services and integrated
payment processing designed for businesses, consumers and government institutions. Headquartered in Nevada, the Company creates customized,
innovative payment solutions for clients across all industries, including pharmaceutical, healthcare, hospitality and retail.

 2. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

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

 Year End – The Company's year-end
is December 31.

 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 income. All significant expense categories are reflected in the consolidated
statements of income. The measure of segment assets is reflected in the consolidated statements of financial condition as total assets.

 Use of Estimates – The preparation
of consolidated financial statements in conformity with generally accepted accounting principles 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 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 December 31, 2024 and 2023.

 Restricted Cash – At December 31,
2024 and 2023, 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 consolidated statements of cash flows.

 Reimbursement Receivables – At December
31, 2024 and 2023, accounts receivable included $ 27,566,694 and $ 14,111,655, 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.

 F- 7

 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, nor does
it anticipate any losses with respect to such accounts. At December 31, 2024 and 2023, the Company had approximately $ 686,177 and $ 59,958,918,
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 December 31, 2024, the Company also has
a concentration of accounts receivable risk, as two pharma patient affordability program customers each individually represent 17 % and
 15 % of our accounts receivable balance. Two pharma patient affordability program customers each individually represented 30 % and 12 % of
our accounts receivable balance on December 31, 2023.

 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 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 a finite life are amortized
on a straight-line basis over its estimated useful life, which is generally 3 to 15 years.

 Internally Developed Software Costs –
 Computer software development costs are expensed as incurred, except for internal use software or website development costs that qualify
for capitalization as described below, and include compensation and related expenses, costs of hardware and software, and costs 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.

 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.

 F- 8

 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 December
31, 2024 and 2023, customer card funding represents funds loaded or available to be loaded on cards for the Company's card product
programs, as well as the prefunding of reimbursement claims for 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.

 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. We currently
do not have any assets or liabilities in this category.

 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.

 Income Taxes – Income tax expense
is comprised of current and deferred income tax expense. Current income tax expense approximates taxes to be paid or refunded for the
current period. Deferred income tax expense results from the changes in deferred tax assets and liabilities during the periods. These
gross deferred tax assets and liabilities represent decreases or increases in taxes expected to be paid in the future because of future
reversals of temporary differences between the basis of assets and liabilities as measured by tax laws and their basis as reported in
our consolidated financial statements. The Company also recognizes deferred tax assets for tax attributes such as net operating loss carryforwards
and tax credit carryforwards. Valuation allowances are recorded to reduce deferred tax assets to the amounts we conclude are more likely-than-not
to be realized in the foreseeable future. While the Company has considered future taxable income and ongoing prudent and feasible tax
strategies in assessing the need for the valuation allowance, if these estimates and assumptions change in the future, the Company may
be required to adjust its valuation allowance.

 F- 9

 The Company recognizes and measures its unrecognized
tax benefits in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")
No. 740, Income Taxes. Under that guidance, management recognizes uncertain tax positions that are "more likely than not"
to be sustained if the relevant tax authority were to audit the position with full knowledge of all the relevant facts and other information,
including the technical merits of those positions. For those tax positions that meet this threshold, we measure the amount of tax benefit
based on the largest amount of tax benefit that has a greater than 50% chance of being realized in a final settlement with the relevant
authority. The measurement of unrecognized tax benefits is adjusted when new information is available or when an event occurs that requires
a change. Income tax related interest and penalties, if applicable, are accrued within income tax expense.

 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 card programs are generated through card
program management fees, transaction claims processing fees, interchange fees, and settlement income. Other revenues are generated through
cardholder fees, interchange fees, program management fees, load fees and breakage.

 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 $ 242 thousand and $ 74 thousand in
fiscal 2024 and fiscal 2023, respectively.

 F- 10

 The Company utilizes the remote method of revenue
recognition for settlement income whereby the unspent balances will be recognized as revenue at the expiration of the cards or the respective
card program. This has primarily been associated with the pharma prepaid business which ended in 2022. 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.
Given the nature of the Company's services and contracts, generally it has no contract assets. Settlement income was $ 30 thousand
and $ 29 thousand in fiscal 2024 and 2023, respectively.

 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.

 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, we account
for these other services as a non-lease component of the lease and 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 consolidated statements of operations and presented as operating cash outflows
within the 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.

 Advertising Costs – Advertising costs
incurred in the normal course of operations are expensed as incurred. During the years ended December 31, 2024 and 2023, the Company expensed
$ 484,566 and $ 470,936, respectively, included in selling, general and administrative expense.

 Recently Issued Accounting Pronouncement –
In December 2023, the FASB issued 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 are currently evaluating the impact of the adoption of this standard.

 F- 11

 In November 2023, the FASB issued ASU 2023-07,
"Improvements to Reportable Segment Disclosures", which expands reportable segment disclosure requirements, primarily through
enhanced disclosures about significant segment expenses. The amendments in the ASU require, among other things, disclosure of significant
segment expenses that are regularly provided to an entity's chief operating decision maker ("CODM") and a description of other
segment items by reportable segment, as well as disclosure of the title and position of the CODM, and an explanation of how the CODM uses
the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Annual disclosures
are required for fiscal years beginning after December 15, 2023 and interim disclosures are required for periods within fiscal years beginning
after December 15, 2024. Retrospective application is required, and early adoption is permitted. The updated guidance, as adopted, did
not have a material impact on the Company's financial statement disclosures considering that the Company has a single reportable segment.

 3. FIXED ASSETS, NET

 Fixed assets consist of the following:

 Schedule of fixed assets

 2024

 2023

 Equipment

 $
 2,688,611

 $
 2,399,243

 Software

 487,364

 345,057

 Furniture and fixtures

 762,144

 757,662

 Website costs

 69,881

 69,881

 Leasehold improvements

 236,904

 236,904

 4,244,904

 3,808,747

 Less: accumulated depreciation

 ( 3,086,929
)

 ( 2,719,098
)

 Fixed assets, net

 $
 1,157,975

 $
 1,089,649

 Depreciation expense for the years ended December
31, 2024 and 2023 was $ 366,575 and $ 428,199, respectively.

 4. INTANGIBLE ASSETS, NET

 Intangible assets consist of the following:

 Schedule of intangible assets

 2024

 2023

 Patents and trademarks

 $
 38,186

 $
 38,186

 Platform

 29,317,318

 20,391,118

 Customer lists and contracts

 1,177,200

 1,177,200

 Licenses

 216,901

 216,901

 Hosting implementation

 43,400

 43,400

 Contract assets

 277,600

 150,000

 31,070,605

 22,016,805

 Less: accumulated amortization

 ( 18,830,888
)

 ( 13,202,478
)

 Intangible assets, net

 $
 12,239,717

 $
 8,814,327

 F- 12

 Amortization expense for the years ended December
31, 2024 and 2023 was $ 5,628,411 and $ 3,598,379, respectively.

 Estimated future amortization expense is as follows:

 Schedule of intangible assets future amortization expense

 2025

 $
 6,121,219

 2026

 4,398,468

 2027

 1,661,346

 2028

 8,986

 2029

 8,986

 Thereafter

 40,712

 Total amortization expense

 $
 12,239,717

 5. LEASE

 The Company entered into an operating lease for
an 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 December 31, 2024, the remaining lease term was 5.4 years and the discount
rate was 6 %.

 Operating lease cost included in selling, general
and administrative expenses was $ 758,068 and $ 757,435 for the years ended December 31, 2024 and 2023, respectively. Cash paid for operating
lease was $ 571,968 and $ 571,968 for the years ended December 31, 2024 and 2023, respectively.

 The following is the lease maturity analysis of our operating lease
as of December 31, 2024:

 Twelve months ending December 31,

 Schedule of lease maturity analysis of operating lease

 2025

 $
 612,006

 2026

 640,604

 2027

 640,604

 2028

 640,604

 2029

 640,604

 Thereafter

 266,918

 Total lease payments

 3,441,340

 Less: imputed interest

 ( 513,262
)

 Present value of future lease payments

 2,928,078

 Less: current portion of lease liability

 ( 448,008
)

 Long-term portion of lease liability

 $
 2,480,070

 F- 13

 6. CUSTOMER CARD FUNDING LIABILITY

 The Company issues prepaid cards with various
provisions for cardholder fees or expiration. Revenue generated from cardholder transactions and interchange fees are recognized when
the Company's performance obligation is fulfilled. Unspent balances left on pharma cards are recognized as settlement income at
the expiration of the cards and the program. Client prefunded amounts for patient affordability programs are amounts that will be used
to fund pass-through cost for reimbursement claims. Contract liabilities related to prepaid cards, client funds held to be loaded to cards
before the amounts are ultimately spent by the cardholders or recognized as revenue by the Company, and patient affordability client prefunded
amounts represent funds on card. Contract liabilities related to prepaid cards and patient affordability prefunded amounts are reported
as customer card funding liability on the condensed consolidated balance sheet.

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

 Schedule of contract liabilities

 Year Ended

 2024

 2023

 Beginning balance

 $
 92,282,124

 $
 80,189,113

 Increase, net

 19,046,146

 12,093,011

 Ending balance

 $
 111,328,270

 $
 92,282,124

 The amount of revenue recognized during the years
ended December 31, 2024 and 2023 that was included in the opening liability for prepaid cards was $ 2,319,630 and $ 2,020,224, respectively.
Customer card funding liability for the years ended December 31, 2024 and 2023 included patient affordability prefunded amounts of $ 19,715,620
and $ 15,690,834, respectively.

 7. COMMON STOCK

 At December 31, 2024, 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 issued 54,358,382 shares of common stock and 53,523,674 shares of common stock outstanding,
and no shares of preferred stock outstanding.

 In 2019, the Company's stockholders approved
the 3Pea International, Inc. 2018 Incentive Compensation Plan (the "2018 Plan"), which was approved by the Board on July
18, 2018. The 2018 Plan permitted the Company to issue awards or options to the officers, directors, employees, consultants and other
persons who provided services to our Company or any related entity. Pursuant to the 2018 Plan, 5,000,000 shares of the Company's
common stock were reserved for issuance. Any awards or options that were not settled in shares of common stock were not counted against
the limit. Stock options granted under the 2018 Plan generally vested over four or five years and expired in 10 years. Stock awards previously
granted under the 2018 Plan generally vested or will vest over four or five years. In general, if an employee is terminated, any unvested
options or awards as of the date of termination will be forfeited.

 F- 14

 In 2023, the Company's stockholders approved
the Paysign Inc. Equity Incentive Compensation Plan (the "2023 Plan"), which was adopted by the Board on March 17, 2023. The
2023 Plan permits the Company to issue awards or options to the officers, directors, employees, consultants and other persons who provide
services to our Company or any related entity. Pursuant to the 2023 Plan, 5,000,000 shares of the Company's common stock are reserved
for issuance. Any awards or options that are not settled in shares of common stock are not counted against the limit. Stock options granted
under the 2023 Plan generally vest over four or five years and expire in 10 years. Stock awards granted under the 2023 Plan generally
vest over four or five years. In general, if an employee is terminated, any unvested options or awards as of the date of termination will
be forfeited. As of December 31, 2024, there were 4,335,000 shares available for future grants under the 2023 Plan.

 The Company issues new shares of common stock upon exercise of stock
options or vesting stock awards.

 Stock-based compensation expense related to Company
grants for the years ended December 31, 2024 and 2023 was $ 2,604,589 and $ 2,853,643, respectively, and is included in selling, general
and administrative expense. As of December 31, 2024, the Company's unrecognized stock-based compensation expense related to stock
options and stock awards was $ 0 and $ 5,602,432, respectively, which are expected to be recognized over a weighted-average period of 0
years for stock options and 2.80 years for stock awards. As of December 31, 2023, the Company's unrecognized stock-based compensation
expense related to stock options and stock awards was $ 37,290 and $ 6,176,942, respectively, which are expected to be recognized over a
weighted-average period of 0.23 years for stock options and 3.10 years for stock awards.

 2024 Transactions – During the year
ended December 31, 2024, the Company issued 906,000 shares of common stock for vested stock awards and the exercise of stock options.
The Company received proceeds of $ 28,800 for the exercise of stock options.

 During the year ended December 31, 2024, the Company
repurchased 136,700 shares of its common stock at a cost of $ 495,045 or a weighted average price of $ 3.62 per share, respectively.

 The Company also granted 645,000 restricted stock
awards during the year ended December 31, 2024. For the stock awards granted, the weighted average grant date fair value was $ 3.74 and
vest over a period of eight months to five years.

 2023 Transactions – During the year
ended December 31, 2023, the Company issued 802,000 shares of common stock for vested stock awards and the exercise of stock options.
The Company received proceeds of $ 9,600 for the exercise of stock options.

 During the year ended December 31, 2023, the Company
repurchased 394,558 shares of its common stock at a cost of $ 1,127,884 or a weighted average price of $ 2.86 per share, respectively.

 The Company also granted 670,000 restricted stock
awards during the year ended December 31, 2023. For the stock awards granted, the weighted average grant date fair value was $ 2.91 and
vest over a period of two months to five years.

 F- 15

 Stock Options

 A summary of stock options activity for the years ended December 31,
2024 and 2023 is presented as follows:

 Schedule of option activity

 Weighted-

 Weighted-

 Average

 Average

 Remaining

 Aggregate

 Exercise

 Contractual

 Intrinsic

 Price

 Term (Years)

 Value

 Outstanding at December 31, 2022

 1,839,500

 $
 1.81

 –

 –

 Exercised

 ( 4,000
)

 2.40

 Forfeited/expired

 ( 28,500
)

 2.92

 Outstanding at December 31, 2023

 1,807,000

 $
 1.80

 4.61

 $
 2,061,800

 –

 –

 Exercised

 ( 12,000
)

 2.40

 Forfeited/expired

 –

 –

 Outstanding at December 31, 2024

 1,795,000

 $
 1.79

 3.61

 $
 2,401,300

 Exercisable at December 31, 2024

 1,795,000

 $
 1.79

 3.61

 $
 2,401,300

 A summary of unvested options activity for the years ended December
31, 2024 and 2023 was as follows:

 Schedule of unvested option activity

 Weighted-

 Average

 Grant Date

 Fair Value

 Unvested at December 31, 2022

 178,400

 $
 3.39

 –

 –

 Forfeited/expired

 ( 5,500
)

 3.07

 Vested

 ( 115,400
)

 3.16

 Unvested at December 31, 2023

 57,500

 3.87

 –

 –

 Forfeited/expired

 –

 –

 Vested

 ( 57,500
)

 3.87

 Unvested at December 31, 2024

 –

 $
 –

 The weighted average grant date fair value of
options granted and the total intrinsic value of options exercised for the years ended December 31, 2024 and 2023 is as follows:

 Schedule of weighted average grant date fair value and intrinsic value of options exercised

 2024

 2023

 Weighted average grant date fair value of options granted

 $
 –

 $
 –

 Intrinsic value of options exercised

 $
 28,220

 $
 3,120

 F- 16

 The Company uses the Black-Scholes option pricing
model to estimate the fair value and compensation cost associated with employee stock options, which requires the consideration of historical
employee exercise behavior, the volatility of the Company's stock price, the weighted-average risk-free interest rate and the weighted-average
expected life of the options. Forfeitures are included when they are incurred. Any changes in these assumptions may materially affect
the estimated fair value of the share-based award. There were no options granted during the years ended December 31, 2024 and 2023.

 Stock Awards

 A summary of stock awards activity for the years ended December 31,
2024 and 2023 was as follows:

 Schedule of stock awards activity

 Weighted-

 Average Grant

 Date Fair Value

 Outstanding at December 31, 2022

 3,219,000

 $
 2.48

 670,000

 2.91

 Forfeited

 ( 34,000
)

 2.86

 Vested

 ( 773,000
)

 2.85

 Outstanding at December 31, 2023

 3,082,000

 2.48

 645,000

 3.74

 Forfeited

 ( 84,000
)

 4.99

 Vested

 ( 894,000
)

 2.85

 Outstanding at December 31, 2024

 2,749,000

 $
 2.58

 8. BASIC AND FULLY DILUTED NET INCOME PER COMMON
SHARE

 The following table sets forth the computation of basic and fully diluted
net income per common share for the years ended December 31, 2024 and 2023:

 Schedule of computation of earnings per share

 2024

 2023

 Numerator:

 $

 $

 Denominator:

 Weighted average common shares:

 Denominator for basic calculation

 53,207,555

 52,487,840

 Weighted average effects of potentially diluted common stock:

 Stock options (calculated under treasury method)

 966,385

 694,884

 Unvested restricted stock awards

 1,414,519

 979,761

 Denominator for fully diluted calculation

 $
 55,588,459

 $
 54,162,485

 Net income per common share:

 Basic

 $
 0.07

 $
 0.12

 Fully diluted

 $
 0.07

 $
 0.12

 F- 17

 9. COMMITMENTS AND CONTINGENCIES

 Pending or Threatened Litigation –From
time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However,
litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may
harm our business.

 The Company was named as a defendant in three
securities class action complaints filed in the United States District Court for the District of Nevada: Yilan Shi v. Paysign, Inc. et
al., filed on March 19, 2020 ("Shi"), Lorna Chase v. Paysign, Inc. et al., filed on March 25, 2020 ("Chase"),
and Smith & Duvall v. Paysign, Inc. et al., filed on April 2, 2020 (collectively, the "Complaints" or "Securities
Class Action"). Smith & Duvall v. Paysign, Inc. et al. was voluntarily dismissed on May 21, 2020. On May 18, 2020, the Shi plaintiffs
and another entity called the Paysign Investor Group each filed a motion to consolidate the remaining Shi and Chase actions and to be
appointed lead plaintiff. The Complaints are putative class actions filed on behalf of a class of persons who acquired the Company's
common stock from March 19, 2019 through March 31, 2020, inclusive. The Complaints generally allege that the Company, Mark R. Newcomer,
and Mark Attinger violated Section 10(b) of the Exchange Act, and that Messrs. Newcomer and Attinger violated Section 20(a) of the Exchange
Act, by making materially false or misleading statements, or failing to disclose material facts, regarding the Company's internal
control over financial reporting and its financial statements. The Complaints seek class action certification, compensatory damages, and
attorney's fees and costs. On December 2, 2020, the Court consolidated Shi and Chase as In re Paysign, Inc. Securities Litigation
and appointed the Paysign Investor Group as lead plaintiff. On January 12, 2021, Plaintiffs filed an Amended Complaint in the consolidated
action. Defendants filed a Motion to Dismiss the Amended Complaint on March 15, 2021. On February 9, 2023, the Court granted in part and
denied in part Defendants' Motion to Dismiss. On May 22, 2023, Defendants filed an Answer to the Amended Complaint. On December
15, 2023, the parties agreed in principle to a proposed settlement of the Securities Class Action and Plaintiffs filed a Consented Motion
for Preliminary Approval of Settlement. On January 4, 2024, the Court preliminarily approved a settlement in the amount of $ 3,750,000,
the entirety of which came from the Company's directors-and-officers insurance policy, for the referenced class of purchasers, and
scheduled a final approval hearing for April 17, 2024. On April 17, 2024, the Court conducted the final approval hearing and approved
the settlement and, on April 18, 2024, issued an order and final judgment thereon.

in four stockholder derivative actions currently pending in the United States District Court for the District of Nevada. The first-filed
derivative action is entitled Andrzej Toczek, derivatively on behalf of Paysign, Inc. v. Mark R. Newcomer, et al. and was filed on September
17, 2020. This action alleges violations of Section 14(a) of the Exchange Act, breach of fiduciary duty, unjust enrichment, and waste,
largely in connection with the failure to correct information technology controls over financial reporting alleged in the Securities Class
Action, thereby causing the Company to face exposure in the Securities Class Action. The complaint also alleges insider trading violations
against certain individual defendants. The second-filed derivative action is entitled John K. Gray, derivatively on behalf of Paysign,
Inc. v. Mark Attinger, et al. and was filed on May 9, 2022. This action involves the same alleged conduct raised in the Toczek action
and asserts claims for breach of fiduciary duty in connection with financial reporting, breach of fiduciary duty in connection with alleged
insider trading against certain individual defendants, and unjust enrichment. On June 3, 2022, the Court approved a stipulation staying
the action until the Court in the consolidated Securities Class Action issued a ruling on the Motion to Dismiss. On May 10, 2023, the
Toczek and Gray actions were consolidated.

in a third stockholder derivative action initially filed in state court in Clark County, Nevada, on October 2, 2023, entitled Simone Blanchette,
derivatively on behalf of Paysign, Inc. v. Mark Newcomer, et al, which the defendants subsequently removed to federal district court in
Nevada pursuant to a Notice of Removal filed on October 10, 2023. That complaint makes substantially the same allegations as made in the
consolidated Toczek and Gray actions, and also contains a claim that the individual defendants violated Section 10(b) and Rule 10b-5 promulgated
thereunder. On December 7, 2023, the parties requested that the action be stayed for sixty days due to the settlement negotiations in
the consolidated Toczek and Gray actions, and the Court granted the sixty-day stay on December 11, 2023. Subsequently, the Court extended
that deadline to March 29, 2024 and then to May 29, 2024 based upon the parties' stipulations. On July 26, 2024, the parties in
Blanchette submitted a Joint Status Report which suggested a proposed briefing schedule on a motion to dismiss, but that schedule was
not ruled upon by the Court.

 F- 18

in a fourth stockholder derivative action in the United States District Court for the District of Nevada, filed on December 27, 2023,
entitled Mo Jeewa, derivatively on behalf of Paysign, Inc. v. Mark R. Newcomer, et al. That complaint makes substantially the same allegations
as made in the consolidated Toczek and Gray actions and the Blanchette action discussed above, and alleges breach of fiduciary duty and
unjust enrichment. On January 23, 2025, the parties in Jeewa filed a stipulation to relate the case to the Toczek, Gray, and Blanchette
actions, which is currently pending before the Court.

 On October 4, 2024, the parties to the four stockholder derivative
actions agreed in principle to a proposed settlement of all pending claims asserted in the Toczek, Gray, Blanchette, and Jeewa actions.
On December 6, 2024, Plaintiffs in the Toczek and Gray actions filed a Motion for Preliminary Approval of Derivative Settlement, which
is currently pending before the Court.

 10. RETIREMENT PLAN

 The Company has a defined contribution 401(k)
plan that covers all employees who meet certain age and length of service requirements and allows an employer contribution of up to 50%
of the first 3% of each participating employee's eligible compensation contributed to the plan and 50% of the next two percent of
each participating employee's eligible compensation. Participants are 100% vested in these matching contributions when they are
made. Eligible employees may elect to defer pre-tax contributions regulated under Section 401(k) of the Internal Revenue Code. Employer
matching expenses were $ 337,702 and $ 273,507 for the years ended December 31, 2024 and 2023, respectively.

 11. INCOME TAXES

 The income tax benefit provision on the statements
of operations was comprised of the following for the years ended December 31:

 Schedule of components of income tax expense

 2024

 2023

 Current:

 Federal

 $
 60,245

 $
 60,864

 State

 ( 36,735
)

 143,955

 Current income tax provision

 23,510

 204,819

 Deferred:

 Federal

 409,091

 ( 4,002,660
)

 State

 ( 110,311
)

 ( 297,070
)

 Deferred income tax provision (benefit)

 298,780

 ( 4,299,730
)

 $
 322,290

 $
 ( 4,094,911
)

 F- 19

 For the years ended December 31, 2024 and 2023, the reconciliation
of the federal statutory tax rate to the benefit rate for income taxes is as follows:

 Schedule of effective income tax rate reconciliation

 2024

 2023

 Federal taxes at U.S. statutory rate

 21.0 %

 21.0 %

 ( 7.8
)

 4.9

 IRC Section 162(m) limitation

 7.1

 4.4

 Tax credits

 ( 9.6
)

 ( 9.2
)

 Other permanent differences

 0.7

 0.8

 State taxes

 1.8

 2.5

 Change in state rate

 –

 ( 0.1
)

 Foreign taxes

 ( 0.2
)

 ( 0.5
)

 Return-to-provision adjustments

 ( 4.8
)

 ( 5.9
)

 State NOL True-up

 ( 3.5
)

 –

 Valuation allowance release

 –

 ( 194.1
)

 Change in valuation allowance

 0.2

 0.5

 Change in carryovers and tax attributes

 2.9

 2.5

 Effective tax rate

 7.8 %

 ( 173.2
)%

 Deferred tax assets and liabilities are comprised of the following
at December 31:

 Schedule of deferred tax assets and liabilities

 2024

 2023

 Deferred tax assets:

 Net operating loss carryforward

 $
 1,476,121

 $
 2,581,783

 Operating lease obligation

 693,128

 783,978

 936,983

 928,455

 Tax credits

 762,079

 506,285

 Intangible assets

 869,419

 361,210

 Other

 73,832

 112,847

 Deferred tax assets, gross

 4,811,562

 5,274,558

 Deferred tax liabilities:

 Intangible assets

 –

 –

 Fixed assets

 ( 130,082
)

 ( 104,609
)

 Right-of-use assets

 ( 661,134
)

 ( 761,073
)

 Deferred tax liabilities

 ( 791,216
)

 ( 865,682
)

 Less valuation allowance

 ( 19,396
)

 ( 109,146
)

 Deferred tax asset, net

 $
 4,000,950

 $
 4,299,730

 F- 20

 As of December 31, 2024, the Company has gross
Federal net operating loss carryforwards of $ 7.1 million, gross state net operating loss carryforwards of $ 3.7 million, and gross Mexico
net operating loss carryforwards of approximately $ 65,000. The Company's Federal net operating losses can be carried forward indefinitely.
The Company's state net operating losses have 15 year to indefinite carryforward periods and begin to expire in 2035. The Company's Mexico
net operating losses have 10 year carryforward periods and begin to expire in 2032.

 Pursuant to Sections 382 and 383 of the Internal
Revenue Code ("IRC"), Federal and state tax laws impose significant restrictions on the utilization of net operating loss and
other tax carryforwards in the event of a change in ownership of the Company. The Company does not expect IRC Sections 382 and 383 to
significantly impact the utilization of its net operating losses and other tax carryforwards.

 Deferred taxes arise from temporary differences
in the recognition of certain expenses for tax and financial reporting purposes. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The
Company continues to maintain a valuation allowance on its Mexico net operating losses. The Company's valuation allowance represents the
amount of tax benefits that are likely to not be realized. The net change in the valuation allowance from December 31, 2023 was approximately
$ 8,000.

 A reconciliation of the beginning and ending amount of unrecognized
tax benefits is as follows:

 Schedule of unrecognized tax benefits

 Balance as of December 31, 2022

 $
 378,814

 Additions for current year

 43,587

 Additions for prior year

 19,785

 Subtractions for current year

 –

 Balance as of December 31, 2023

 442,186

 Additions for current year

 79,484

 Additions for prior year

 35,896

 Subtractions for current year

 –

 Balance as of December 31, 2024

 $
 557,566

 As of December 31, 2024 and 2023, the Company
has no accrual for interest and penalties related to its unrecognized tax benefits. The balance of the unrecognized tax benefits as of
December 31, 2024 are included in the deferred tax asset, net. Included in the balance of unrecognized tax benefits at December 31, 2024
is $ 557,566 of tax benefits that, if recognized would impact the effective tax rate. There are no positions for which it is reasonably
possible that the uncertain tax benefit will significantly increase or decrease within twelve months. The Company files income tax returns
in the United States and various state jurisdictions. Beginning in 2022, the Company also files income tax returns in Mexico. With the
exception of tax attributes created in prior years that may potentially be adjusted, the federal statute of limitations remains open for
the 2020 tax year to present, the state statutes of limitations remain open for the 2020 tax year to present, and the foreign statute
of limitations remains open for the 2022 tax year to present.

 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 (ERTC) subject to certain criteria. The Company
has elected an accounting policy to recognize the 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. During the years ended December 31, 2024 and 2023, the Company
recorded $ 0 and $ 292,430, respectively, related to the employee retention credit included as a reduction of payroll expense within selling,
general and administrative expenses in the consolidated statements of operations. As of December 31, 2024 and 2023 the Company has filed
for refunds and recorded $ 1,129,164 in other receivables on the consolidated balance sheet. On February 18, 2025, Paysign received payment
from the Internal Revenue Service for our 2021 Q2 ERTC of $560,569 reducing our ERTC receivable to $568,595.

 12. SUBSEQUENT EVENTS

 The Company discloses subsequent events that provide
evidence about conditions that did not change the 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.

 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 of the assets of Gamma. Pursuant to the terms of the Asset Purchase Agreement, the cash purchase price will be paid
in five equal tranches with the initial payment made on March 19, 2025 and the subsequent payments to be made on each subsequent annual
anniversary of the initial payment. In addition, we issued to Gamma, 2,500,000 shares of our restricted common stock that will vest over
a period of four years. We also agreed to issue to Gamma an additional 500,000 shares of our common stock, up to a total consideration
of 2,500,000 shares of our common stock, upon the achievement of certain gross revenue performance targets for each trailing 12-month
period beginning on March 20, 2025 and ending on March 19, 2030. The Asset Purchase Agreement contains other provisions, covenants, representations,
and warranties that are typical in transactions of this size, type, and complexity. Due to the recent acquisition date, the purchase
accounting for Gamma was not final at the time of this filing, and a preliminary allocation of consideration exchanged to the estimated
fair values of assets acquired and liabilities assumed was not complete. The final valuation will be completed within the one-year measurement
period following the acquisition date.

 F- 22