Paysign, Inc. (PAYS)

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; our belief that 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 every 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; 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 money transfer and payment instrument licensing
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; our anticipation that 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; our anticipation that if our operating revenue growth
rates slow materially or decline, our business, operating results and financial condition could be adversely affected; 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; our belief that 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 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 need to litigate to enforce or protect our intellectual property rights,
trade secrets and know-how or to determine their scope, validity or enforceability, which is expensive, may divert resources, and
may not be successful; we may be subject to costly litigation in the event our products and technology infringe upon another
party’s proprietary rights; we may 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; our belief that the measures we have taken to provide reliable service to our clients and cardholders,
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; we may raise capital in order to provide working capital for our expansion into other products and services using our
payments platform; we may experience difficulty integrating newly-hired personnel, which could adversely affect our operations; 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 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 2026 to continue to invest additional funds in technology improvements, sales
and marketing, cybersecurity, fraud, customer service, and regulatory compliance; our belief that gross dollar volume loaded on
cards and conversion rates on gross dollar volume loaded on cards are the primary indicators of our quarterly and annual revenues
our belief that our available cash on hand, excluding restricted cash, along with our forecast for revenues and cash flows for the
remainder of 2026 and through 2028, will be sufficient to sustain our operations for the next twenty-four 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 date; our expectation that we will be 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; and our expectation that IRC Sections
382 and 383 will not 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 des

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