UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

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

For the quarterquarterly period ended September 30, 2017

2021


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

For the transition period from                    to

Priority Technology Holdings, Inc.
Commission file number:001-37872

prth-20210930_g1.jpg
(Exact name of registrant as specified in its charter)
M I ACQUISITIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)Delaware47-4257046
Delaware47-4257046
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2001 Westside Parkway
Suite 155
Alpharetta,GA30004
(Address of principal executive offices, including zip code)
(800)935-5964
(Registrant's phone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)



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

c/o Magna Management LLC

40 Wall Street, 58th Floor

New York, NY 10005

Title of each classTrading SymbolName of each exchange on which registered
Common stock, par value $0.001PRTHNasdaq Global Market

(Address of principal executive offices)

(347) 491-4240

(Issuer’s telephone number)

Check


Indicate by check mark whether the issuerregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).   Yes       No  

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

Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
(Do not check if smaller reporting company)Emerging growth companyEmerging 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  

As of November 13, 2017, 7,058,7439, 2021, a total of 77,249,080 shares of common stock, par value $0.001 per share, were issued and 76,635,141 shares were outstanding.


M I ACQUISITIONS, INC.

FORM





Priority Technology Holdings, Inc.
Quarterly Report on Form 10-Q FOR THE QUARTER ENDED SEPTEMBER
September 30, 2017

TABLE OF CONTENTS

Page
Part I.Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets1
Condensed Statements of Operations2
Condensed Statements of Cash Flows3
Notes to Unaudited Condensed Financial Statements4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations12
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk13
Item 4. Controls and Procedures14
Part II.Other Information15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds15
Item 6. Exhibits15
Signatures16

2021


Table of Contents
Page


PART I –I. FINANCIAL STATEMENTS

INFORMATION

Item 1. Financial Statements (Unaudited)

M I Acquisitions,

Priority Technology Holdings, Inc.

Unaudited Condensed Consolidated Balance Sheets

  September 30, 2017  December 31, 2016 
  (unaudited)     
Assets        
Current Assets:        
Cash and cash equivalents $479,382  $362,535 
Prepaid expenses and other current assets  35,322   56,241 
Total current assets  514,704   418,776 
         
Cash and cash equivalents held in trust  54,948,047   54,731,828 
Total Assets $55,462,751  $55,150,604 
         
Liabilities and Stockholders’ Equity        
         
Current Liabilities:        
Accounts payable and accrued expenses $474,677  $111,011 
Accounts payable - related party  60,000    
Offering costs payable  11,616   11,616 
Note payable  27,500   27,500 
Total Current Liabilities  573,793   150,127 
         
Deferred underwriting fee payable  1,062,022   1,062,022 
         
Total Liabilities  1,635,815   1,212,149 
         
Commitments        
         
Common stock subject to possible conversion (4,718,573 and 4,748,033 shares at conversion value as of September 30, 2017 and December 31, 2016)  48,826,934   48,938,449 
         
Stockholders’ Equity:        
Preferred stock, $0.001 par value; 1,000,000 authorized none issued and outstanding      
Common stock, $0.001 par value; 30,000,000 shares authorized; 2,340,170 and 2,310,710 shares issued and outstanding (excluding 4,718,573 and 4,748,033 shares subject to possible conversion) at September 30, 2017 and December 31, 2016, respectively  2,340   2,311 
Additional paid in capital  5,227,402   5,115,916 
Accumulated deficit  (229,740)  (118,221)
Total Stockholders’ Equity  5,000,002   5,000,006 
         
Total Liabilities and Stockholders’ Equity $55,462,751  $55,150,604 

The accompanying notes are an integral part

(in thousands, except share data)
September 30, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents$16,974 $9,241 
Restricted cash17,258 78,879 
Accounts receivable, net of allowances of $479 and $574, respectively52,651 41,321 
Prepaid expenses and other current assets13,331 3,500 
Current portion of notes receivable, net of allowances of $467 and $467, respectively152 2,190 
Settlement assets and customer account balances480,315 753 
Total current assets580,681 135,884 
Notes receivable, less current portion3,977 5,527 
Property, equipment and software, net24,915 22,875 
Goodwill372,702 106,832 
Intangible assets, net346,695 98,057 
Deferred income taxes, net3,462 46,697 
Other non-current assets2,752 1,957 
Total assets$1,335,184 $417,829 
Liabilities, Redeemable Senior Preferred Stock and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued expenses$42,103 $29,821 
Accrued residual commissions27,984 23,824 
Customer deposits and advance payments3,597 2,883 
Current portion of long-term debt6,200 19,442 
Settlement and customer account obligations489,326 72,878 
Total current liabilities569,210 148,848 
Long-term debt, net of current portion, discounts and debt issuance costs619,957 357,873 
Other non-current liabilities14,111 9,672 
Total non-current liabilities634,068 367,545 
Total liabilities1,203,278 516,393 
Commitments and contingencies (Note 12)00
Redeemable senior preferred stock:
Redeemable senior preferred stock - $0.001 par value per share; 250,000 shares authorized; 225,000 issued and outstanding at September 30, 2021; none authorized, issued or outstanding at December 31, 2020205,318 — 
Stockholders' deficit:
Preferred stock - $0.001 par value per share; 100,000,000 shares authorized; none issued or outstanding at September 30, 2021 and December 31, 2020— — 
Common stock - $0.001 par value per share; 1,000,000,000 shares authorized; 77,185,920 shares issued at September 30, 2021 and 67,842,204 shares issued at December 31, 2020; 76,571,981 shares outstanding at September 30, 2021 and 67,390,980 shares outstanding at December 31, 202077 68 
Additional paid-in capital44,640 5,769 
Treasury stock at cost, 613,939 shares at September 30, 2021 and 451,224 shares at December 31, 2020(3,411)(2,388)
Accumulated deficit(114,718)(102,013)
Total stockholders' deficit(73,412)(98,564)
Total liabilities, redeemable senior preferred stock and stockholders' deficit$1,335,184 $417,829 

See Notes to Unaudited Condensed Consolidated Financial Statements
- 1 -



Priority Technology Holdings, Inc.

M I Acquisitions, Inc.

Unaudited Condensed Consolidated Statements of Operations

(unaudited)

  For the Three Months  For the Three Months  For the Nine Months  For the Nine Months 
  Ended  Ended  Ended  Ended 
  September 30, 2017  September 30, 2016  September 30, 2017  September 30, 2016 
             
EXPENSES                
Administration fee - related party $30,000  $5,667  $90,000  $5,667 
Operating costs  367,033   61,360   714,534   68,624 
                 
TOTAL EXPENSES  397,033   67,027   804,534   74,291 
                 
OTHER INCOME                
  Extinguishment of debt     27,500      27,500 
  Settlement income  427,701      427,701    
  Interest income  121,682   3,145   265,314   3,145 
                 
TOTAL OTHER INCOME  549,383   30,645   693,015   30,645 
                 
Net income (loss)  152,350   (36,382)  (111,519)  (43,646)
                 
Net income (loss) per shares of common stock – basic and diluted $0.02  $0.01  $(0.14) $0.00 
                 
Weighted average shares of common stock outstanding – basic and diluted  2,344,454   1,363,737   2,327,754   1,288,329 

The accompanying notes are an integral part

(in thousands, except per share amounts)

Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenues$132,542 $108,962 $370,853 $298,251 
Operating expenses
Costs of services92,833 74,971 264,527 203,733 
Salary and employee benefits11,909 10,010 31,808 29,695 
Depreciation and amortization12,330 10,251 32,123 30,886 
Selling, general and administrative7,220 6,688 22,213 19,305 
Total operating expenses124,292 101,920 350,671 283,619 
Operating income8,250 7,042 20,182 14,632 
Other (expenses) income
Interest expense(8,155)(13,471)(24,608)(35,454)
Debt extinguishment and modification costs— (1,523)(8,322)(1,899)
Gain on sale of business— 107,239 — 107,239 
Other income, net146 190 92 414 
Total other (expenses) income, net(8,009)92,435 (32,838)70,300 
Income (loss) before income taxes241 99,477 (12,656)84,932 
Income tax expense790 13,737 49 12,919 
Net (loss) income(549)85,740 (12,705)72,013 
Dividends and accretion attributable to redeemable senior preferred stockholders(5,813)— (9,724)— 
Non-controlling interest preferred unit redemptions— — (10,777)— 
Less net income attributable to redeemable non-controlling interests and redeemed non-controlling interests— (45,348)— (45,348)
Net (loss) income attributable to common stockholders$(6,362)$40,392 $(33,206)$26,665 
(Loss) earnings per common share:
Basic$(0.09)$0.60 $(0.48)$0.40 
Diluted$(0.09)$0.60 $(0.48)$0.40 
Weighted-average common shares outstanding:
Basic71,979 67,167 69,689 67,114 
Diluted71,979 67,286 69,689 67,131 

See Notes to Unaudited Condensed Consolidated Financial Statements
- 2 -



Priority Technology Holdings, Inc.

M I Acquisitions, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(unaudited)

  For the Nine Months  For the Nine Months 
  Ended  Ended 
  September 30, 2017  September 30, 2016 
       
Cash Flows From Operating Activities:        
Net loss $(111,519) $(43,646)
Gain on extinguishment of debt      (27,500)
Interest earned on cash and securities held in Trust Account  (265,314)   
Adjustments to reconcile net loss to net cash used in operating activities:        
Accrued interest income     (3,145)
Formation and organization costs paid by related parties     2,537 
Changes in operating assets and liabilities:        
Prepaid expenses  20,919    
Accounts payable and accrued expenses  363,666   67,027 
Accounts payable - related party  60,000    
Net Cash Provided By (Used In) Operating Activities  67,752   (4,727)
         
Cash Flows From Investing Activities:        
Interest released from Trust Account  71,702    
Cash deposited into Trust Account  (22,607)  (51,500,000)
Net Cash Provided By (Used In) Investing Activities  49,095   (51,500,000)
         
Cash Flows From Financing Activities:        
    Proceeds from public offering, net of offering costs     48,194,567 
    Proceeds from insider units     4,025,000 
    Payments of related party notes     (131,720)
    Proceeds from related party advances     55,201 
    Payments of related party advances     (54,230)
    Payments of offering costs     (80,040)
    Net Cash Provided By Financing Activities     52,008,778 
         
Net change in cash and cash equivalents  116,847   504,051 
         
Cash and cash equivalents at beginning of period  362,535   5,000 
         
Cash and cash equivalents at end of period $479,382  $509,051 
         
Supplemental disclosure of non-cash financing activities:        
Reclassification of deferred offering costs to equity $  $258,997 
Payment of deferred offering costs by issuance of notes and related party notes $  $15,000 
Common stock subject to possible conversion $111,515  $45,870,695 
Deferred Underwriting commission $  $1,000,000 

The accompanying notes are an integral part

(in thousands)
Nine Months Ended September 30,
20212020
Cash flows from operating activities:
Net (loss) income$(12,705)$72,013 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Gain and transaction costs recognized on sale of business— (111,611)
Depreciation and amortization of assets32,123 30,886 
Stock-based compensation2,349 1,627 
Amortization of debt issuance costs and discounts1,607 1,798 
Write-off of deferred loan costs and discount2,580 1,523 
Deferred income tax provision (benefit)(160)6,695 
Payment-in-kind interest(23,715)6,643 
Impairment charge for intangible asset— 980 
Other non-cash items, net(39)211 
Change in operating assets and liabilities (net of acquisitions):
Accounts receivable(10,847)(3,962)
Prepaid expenses and other current assets(1,947)(296)
Income taxes (receivable) payable(1,541)6,026 
Notes receivable(190)(398)
Accounts payable and other accrued liabilities9,192 287 
Customer deposits and advance payments713 (1,479)
Other assets and liabilities, net13 (512)
Net cash (used in) provided by operating activities(2,567)10,431 
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired(407,129)— 
Proceeds from sale of business— 179,416 
Additions to property, equipment and software(7,530)(6,011)
Acquisitions of intangible assets(48,219)(4,415)
Net cash (used in) provided by investing activities(462,878)168,990 
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net of issue discount607,318 — 
Debt issuance and modification costs paid(9,073)(2,749)
Repayments of long-term debt(359,875)(109,505)
Borrowings under revolving credit facility30,000 7,000 
Repayments under revolving credit facility— (7,505)
Proceeds from issuance of senior preferred equity, net of issue discount219,062 — 
Senior preferred equity issuance fees and costs(8,098)— 
Redemption of redeemable non-controlling interest of subsidiary— (5,654)
Repurchases of common stock(1,023)— 
Dividends paid to redeemable senior preferred stockholders(4,015)— 
Profit distributions to redeemable non-controlling interests of subsidiaries(814)(45,348)
Proceeds from exercise of stock options1,190 — 
Settlement and customer accounts obligations, net396,338 (7,295)
Net cash provided by (used in) financing activities871,010 (171,056)
Net change in cash and cash equivalents, and restricted cash:
Net increase in cash and cash equivalents, and restricted cash405,565 8,365 
Cash and cash equivalents, and restricted cash at beginning of period88,120 50,465 
Cash and cash equivalents, and restricted cash at end of period$493,685 $58,830 
- 3 -



Supplemental cash flow information:
Cash paid for interest$17,043 $26,828 
Non-cash investing and financing activities:
Payment-in-kind interest added to principal of debt obligations$— $6,643 
Payment of accrued contingent consideration for asset acquisition from offset of account receivable$— $1,686 
Accruals for asset acquisition contingent consideration$6,833 $— 
Notes receivable from sellers used as partial consideration for acquisitions$3,499 $— 
Reconciliation of cash and cash equivalents, and restricted cash:
Cash and cash equivalents$16,974 $21,695 
Restricted cash17,258 37,135 
Customer accounts balances459,453 — 
Total cash and cash equivalents, and restricted cash$493,685 $58,830 

M I Acquisitions, Inc.

See Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 — Organization, Plan

- 4 -



Priority Technology Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements


1.    Basis of Presentation and Significant Accounting Policies
Business, OperationsConsolidation and Going Concern Consideration

M I Acquisitions,Presentation

Priority Technology Holdings, Inc. (the “Company”) was incorporated in Delawareand its consolidated subsidiaries are referred to herein collectively as "Priority," "PRTH," the "Company," "we," "our" or "us," unless the context requires otherwise. Priority is a provider of merchant acquiring, integrated payment software, licensed money transmitter services and commercial payment solutions.
The Company operates on April 23, 2015 as a blank check company whose objective is to acquire, through a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, one or more businesses or entities (a “Business Combination”). The Company’s efforts to identify a prospective target business will not be limited to any particular industry or geographic region, although the Company intends to focus its searchcalendar year ending each December 31 and on target businesses operating in the technology, media and telecommunications industries.

Atfour calendar quarters ending on March 31, June 30, September 30 2017, the Company hadand December 31 of each year. Results of operations reported for interim periods are not yet commenced any operations.For the nine months ended September 30, 2017, the Company’s activity has been limited to the evaluationnecessarily indicative of business combination candidates, and the Company will not be generating any operating revenues until the closing and completion of an initial business combination.

The registration statementresults for the Company’s initial public offering was declared effective on September 13, 2016. The Company consummated a public offering of 5,000,000 units (“Units”) on September 19, 2016 (the “Offering”), generating gross proceeds of $50,000,000 and net proceeds of $47,981,581 after deducting $2,018,419 of transaction costs. In addition,entire year.

These Unaudited Condensed Consolidated Financial Statements include the Company generated gross proceeds of $4,025,000 from the private placement of 402,500 units (the “Private Placement”) to certain initial stockholders (“Initial Stockholders”) of the Company. The Units sold pursuant to the Offering and the Private Placement were sold at an offering price of $10.00 per Unit.  The Company also incurred additional issuance costs totaling $1,169,032, of which the deferred underwriting fee of $1,062,022 was unpaid as of September 30, 2017.

The underwriters exercised the over-allotment option in part and, on October 14, 2016, the underwriters purchased 310,109 Over-allotment Option Units, which were sold at an offering price of $10.00 per Unit, generating gross proceeds of $3,101,090 and net proceeds of $3,008,057 after deducting $93,033 of transaction costs. On October 14, 2016, simultaneously with the sale of the over-allotment Units, the Company consummated the private sale of an additional 18,607 private Units to one of the initial stockholders, generating gross proceeds of $186,070.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Offering and Private Placement, although substantially all of the net proceeds are intended to be generally applied toward consummating a Business Combination. The Company’s Units, common stock and warrants are listed on the Nasdaq Capital Market (“NASDAQ”). Pursuant to the NASDAQ listing rules, the Company’s initial Business Combination must be with a target business or businesses whose collective fair market value is at least equal to 80% of the balance in the trust account at the time of the execution of a definitive agreement for such Business Combination, although this may entail simultaneous acquisitions of several target businesses. There is no assurance that the Company will be able to effect a Business Combination successfully.

Following the closing of the Offering and the Private Placement (including the partial exercise of the over-allotment option) an amount of $54,694,127 (or $10.30 per share sold to the public in the Offering included in the Units (“Public Shares”)) from the sale of the Units and Private Units is being held in a trust account (“Trust Account”) at J.P. Morgan Chase Bank maintained by American Stock Transfer & Trust Company, acting as trustee, and may be invested in money market funds meeting the applicable conditions of Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended, and that invest solely in U.S. treasuries or United States bonds, treasuries or notes having a maturity of 180 days or less. The funds in the Trust Account may not be released until the earlier of (i) the consummation of the Company’s initial Business Combination and (ii) the Company’s failure to consummate a Business Combination within the prescribed time. The remaining net proceeds (not held in the Trust Account) may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. However, the interest earned on the Trust Account balance may be released to the Company to pay the Company’s tax obligations. Placing funds in the Trust Account may not protect those funds from third party claims against the Company. Although the Company will seek to have all vendors, service providers, prospective target businesses or other entities it engages, execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there is no guarantee that such persons will execute such agreements. The Company’s insiders will agree to be liable under certain circumstances to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities that are owed money by the Company for service rendered, contracted for or products sold to the Company. However, they may not be able to satisfy those obligations should they arise. With these exceptions, expenses incurred by the Company may be paid prior to a Business Combination only from the net proceeds of the Proposed Public Offering not held in the Trust Account; provided, however, that in order to meet its working capital needs following the consummation of the Proposed Public Offering, the Company’s Initial Stockholders, officers and directors or their affiliates may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of the Company’s initial Business Combination, without interest, or, at the lender’s discretion, up to $200,000 of the notes may be converted upon consummation of the Company’s Business Combination into additional Private Units at a price of $10.00 per Unit. If the Company does not complete a Business Combination, the loans would not be repaid.


The Company will either seek stockholder approval of any Business Combination at a meeting called for such purpose at which stockholders may seek to convert their shares into their pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid, or provide stockholders with the opportunity to sell their shares to the Company by means of a tender offer for an amount equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid. The Company will proceed with a Business Combination only if it will have net tangible assets of at least $5,000,001 upon consummation of the Business Combination and, solely if stockholder approval is sought, a majority of the outstanding common sharesaccounts of the Company voted are votedincluding those of its majority-owned subsidiaries, and all material intercompany balances and transactions have been eliminated in favor of the Business Combination. Notwithstanding the foregoing, a public stockholder, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking conversion rights with respect to 20% or more of the common shares sold in the Offering. Accordingly, all shares purchased by a holder in excess of 20% of the shares sold in the Offering will not be converted to cash.

In connection with any stockholder vote required to approve any Business Combination, the Initial Stockholders agreed (i) to vote any of their respective shares, including the common shares sold to the Initial Stockholders in connection with the organization of the Company (the “Initial Shares”), common shares included in the Private Units sold in the Private Placement, and any common shares which were initially issued in connection with the Offering, whether acquired in or after the effective date of the Offering, in favor of the initial Business Combination and (ii) not to convert such respective shares into a pro rata portion of the Trust Account or seek to sell their shares in connection with any tender offer the Company engages in.

Pursuant to the Company’s amended and restated Certificate of Incorporation if the Company is unable to complete its initial Business Combination within 18 months from the date of the Offering, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining holders of common stock and the Company’s board of directors, dissolve and liquidate. However, if the Company anticipates that it may not be able to consummate its initial Business Combination within 18 months, the Company may extend the period of time to consummate a Business Combination up to three times, each by an additional month (for a total of up to 21 months to complete a Business Combination). Pursuant to the terms of the Company’s amended and restated articles of incorporation and the trust agreement entered into between the Company and American Stock Transfer & Trust Company, in order to extend the time available for the Company to consummate its initial Business Combination, the Company’s insiders or their affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the trust account $132,753 ($0.025 per unit), up to an aggregate of $398,259, or $0.075 per unit, on or prior to the date of the applicable deadline, for each one month extension. In the event that the Company receives notice from its insiders five days prior to the applicable deadline of their intent to effect an extension, the Company intends to issue a press release announcing such intention at least three days prior to the applicable deadline. In addition, the Company intends to issue a press release the day after the applicable deadline announcing whether or not the funds had been timely deposited. The Company’s insiders and their affiliates or designees are not obligated to fund the trust account to extend the time for the Company to complete its initial Business Combination. To the extent that some, but not all, of the Company’s insiders, decide to extend the period of time to consummate the initial Business Combination, such insiders (or their affiliates or designees) may deposit the entire $398,259. If the Company is unable to consummate an initial Business Combination and is forced to redeem 100% of the outstanding public shares for a pro rata portion of the funds held in the Trust Account, each holder will receive a pro rata portion of the amount then in the Trust Account less income and franchise tax obligations. Holders of warrants will receive no proceeds in connection with the liquidation. The Initial Stockholders and the holders of Private Units will not participate in any redemption distribution with respect to their initial shares and Private Units, including the common stock included in the Private Units.

To the extent the Company is unable to consummate a business combination, the Company will pay the costs of liquidation from the remaining assets outside of the trust account. If such funds are insufficient, the insiders have agreed to pay the funds necessary to complete such liquidation (currently anticipated to be no more than $15,000) and have agreed not to seek repayment of such expenses.

Going Concern

The accompanying condensed financial statementsconsolidation. These Unaudited Condensed Consolidated Financial Statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As of September 30, 2017, the Company had $479,382 in cash and cash equivalents held outside Trust Account, $265,314 in interest income available from the Company’s investments in the Trust Account to pay its franchise and income tax obligations, and a working capital deficit of $59,089. Further, the Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. The Company’s plans to raise capital or to consummate the initial Business Combination may not be successful.  These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

Based on the foregoing, the Company may have insufficient funds available to operate its business through the earlier of consummation of a Business Combination or March 19, 2018 (if an extension is not completed).  Following the initial Business Combination, if cash on hand is insufficient, the Company may need to obtain additional financing in order to meet its obligations.  The Company cannot be certain that additional funding will be available on acceptable terms, or at all.


The accompanying condensed financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. 

Note 2 — Significantaccordance with Generally Accepted Accounting Policies

Basis of presentation

The accompanying unaudited condensed financial statements are presented in conformity with accounting principles generally acceptedPrinciples in the United States of America (“U.S. GAAP”("GAAP") andfor interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”("SEC") for interim. The Condensed Consolidated Balance Sheet as of December 31, 2020 was derived from the audited financial information andstatements included in the instructions toCompany's Annual Report on Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. The Company has evaluated subsequent events through the issuance of this Form 10-Q. Operating results for the quarter ended September 30, 2017 are not necessarily indicative of the results that may be expected10-K for the year ended December 31, 2017 or any future2020 but does not include all disclosures required by GAAP for annual financial statements.

In the opinion of the Company's management, all known adjustments necessary for a fair presentation of the Unaudited Condensed Consolidated Financial Statements for interim period. The accompanying unaudited condensed financial statementsperiods have been made. These adjustments consist of normal recurring accruals and estimates that affect the carrying amounts of assets and liabilities. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s financial statementsConsolidated Financial Statements and notes thereto included in the Company’sCompany's Annual Report on Form 10-K filed withfor the Securities and Exchange Commission on March 13, 2017.

Emerging Growth Company

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statement with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.

Marketable securities held in Trust Account

The amounts held in the Trust Account represent substantially all of the proceeds of the Initial Public Offering and are classified as restricted assets since such amounts can only be used by the Company in connection with the consummation of a Business Combination. Except with respect to interest earned on the funds held in the Trust Account that may be released to pay income or other tax obligations, the proceeds will not be released from the Trust Account until the earlier of the completion of a Business Combination or the redemption of 100% of the outstanding public shares if we have not completed a Business Combination in the required time period. As of September 30, 2017, marketable securities held in the Trust Account consisted of $54,948,047 in United States Treasury Bills with an original maturity of six months or less. During the nine monthsyear ended September 30, 2017, the Company withdrew interest income totaling $71,702 to be utilized for payment of tax obligations. Of this amount, $22,607 was returned to the Company for overpayment of its tax obligations and deposited into the Trust Account.

Fair value of financial instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet, primarily due to their short-term nature.

December 31, 2020.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosuredisclosures of contingent assets and liabilities at the date of the financial statements.statements, as well as the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates.

ConcentrationIn particular, the continued magnitude, duration and effects of credit risk

Financial instruments that potentially subjectthe COVID-19 pandemic are difficult to predict, and the ultimate effect could result in future charges related to the recoverability of assets, including financial assets, long-lived assets, goodwill and other losses.

Status as an Emerging Growth Company
The Company is an Emerging Growth Company ("EGC"), as defined in the Jumpstart Our Business Startups Act of 2012. The Company may remain an EGC until December 31, 2021. However, if the Company's non-convertible debt issued within a rolling three-year period exceeds $1.0 billion, the Company would cease to concentrationbe an EGC immediately, or if its revenues for any fiscal year exceed $1.07 billion, the Company would cease to be an EGC as of credit risk consistthe beginning of cash accounts in a financial institution which, at times may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believesfollowing year. As an EGC, the Company is not exposedrequired to significant riskscomply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Additionally, the Company may continue to elect to delay the adoption of any new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As such, the Company's financial statements may not be comparable to companies that comply with public company effective dates.
Foreign Currency
The Company's reporting currency is the U.S. dollar. Assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the current exchange rate on such accounts. 

the last day of the reporting period. Revenues and expenses are translated using the

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Net Income (Loss) Per Common Share

The Company complies



average exchange rate in effect during the reporting period. Foreign exchange translation and transaction gains and losses were not material for the periods presented and are included in the Unaudited Condensed Consolidated Statements of Operations.

Comparability of Reporting Periods
Certain prior period amounts in these Unaudited Condensed Consolidated Financial Statements have been reclassified to conform to the current period presentation, with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” Netno net effect on operating income, income (loss) per common sharebefore income taxes, net (loss) income, stockholders' deficit, or cash flows from operations, investing or financing activities for any period presented.
Recently Adopted Accounting Standards
Simplifying the Accounting for Income Taxes
In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, Simplifying the Accounting for Income Taxes, which is computed by dividing netintended to enhance and simplify various aspects of the accounting for income (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the period, plus,taxes. The amendments in this update remove certain exceptions to the extent dilutive, the incremental number of shares of common stock to settle warrants, as calculated using the treasury stock method. An aggregate of 4,718,573 shares of common stock subject to possible redemption at September 30, 2017, have been excluded from the calculation of basic loss per ordinary share since such shares, if redeemed, only participategeneral principles in their pro rata share of the trust earnings. At September 30, 2016, weighted average shares were reduced for the effect of an aggregate of 187,500 shares of common stock that were subject to forfeiture if the over-allotment option is not exercised by the underwriters. At September 30, 2017, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company under the treasury stock method. As a result, diluted loss per common share is the same as basic loss per common share for the period.

Reconciliation of net income (loss) per common share

The Company’s net income is adjusted for the portion of income that is attributable to common stock subject to redemption, as these shares only participate in the income of the Trust Account and not the losses of the Company. Accordingly, basic and diluted loss per common share is calculated as follows:

  Three Months
Ended
September 30,
  

Three Months Ended

September 30,

 
  2017  2016 
Net income (loss) $152,350  $(36,382)
Less: Income attributable to common shares subject to redemption  (108,127)  47,084 
Adjusted net income (loss) $44,223  $10,702 
         
Weighted average shares outstanding, basic and diluted  2,344,454   1,363,737 
         
Basic and diluted net income (loss) per common share $0.02  $0.01 

  Nine Months
Ended
September 30,
  

Nine Months Ended

September 30,

 
  2017  2016 
Net loss $(111,519) $(43,646)
Less: Income attributable to common shares subject to redemption  (210,500)  47,084 
Adjusted net income (loss) $(322,019) $3,438 
         
Weighted average shares outstanding, basic and diluted  2,327,754   1,288,329 
         
Basic and diluted net loss per common share $(0.14) $0.00 

Common stock subject to possible conversion

The Company accounts for its common stock subject to possible conversion in accordance with the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity”.   Common stock subject to mandatory conversion is classified as a liability instrument and is measured at fair value. Conditionally convertible common stock (including common shares that feature conversion rights that are either within the control of the holder or subject to conversion upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain conversion rights that are considered by the Company to be outside of the Company’s control and subjectAccounting Standards Codification ("ASC") Topic 740 related to the occurrence of uncertain future events. Accordingly,approach for intra-period tax allocation, the common stock subject to possible conversion is presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheet.


Income Taxes

The Company accountsmethodology for calculating income taxes under ASC 740 “Income Taxes”. ASC 740 requiresin an interim period and the recognition of deferred tax assets and liabilities for bothoutside basis differences. ASU 2019-12 also clarifies and amends existing guidance to improve consistency in the expected impactapplication of differences between the financial statementaccounting for franchise taxes, enacted changes in tax laws or rates and transactions that result in a step-up in the tax basis of assetsgoodwill. The adoption of ASU 2019-12 on January 1, 2021 did not have a material effect on our Unaudited Condensed Consolidated Financial Statements.

Recently Issued Accounting Standards Pending Adoption
The following standards are pending adoption and liabilities andwill likely apply to the Company in future periods based on the Company's current business activities.
Implementation Costs Incurred in Cloud Computing Arrangements
In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). As an EGC, this update is effective for the expected future tax benefit toCompany's annual reporting period beginning January 1, 2021, and will be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

ASC 740 also clarifies the accountingeffective for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods disclosurebeginning in 2022. The amendments are applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption, and transition. Thethe Company is requiredhas not yet made a determination to file income tax returns inuse the United States (federal) and in various state and local jurisdictions.retrospective or prospective adoption method. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. Since the Company was incorporated on April 23, 2015, the evaluation was performed for the 2015 and 2016 tax year. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position.

The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense. There were no amounts accrued for penalties or interest as of or during the period from January 1, 2017 through September 30, 2017. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

Related Parties

The Company follows subtopic ASC 850-10 for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20, the related parties include: (a.) affiliatescurrent operations of the Company, (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); (b.) entities for which investments in their equity securities would be required, absent the electionadoption of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; (c.) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d.) principal owners of the Company; (e.) management of the Company; (f.) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g.) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statementsthis update is not required in those statements. The disclosures shall include: (a.) the nature of the relationship(s) involved; (b.) a description of the transactions, including transactionsexpected to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c.) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d.) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. 

Settlement Income

During the three and nine months ended September 30, 2017, the Company received $427,701 from an entity with which the Company was negotiating a business combination pursuant to a Letter of Intent originally executed in February 2017. During quarter ended June 30, 2017, the Letter of Intent expired.  The amount received was approximately the amount of the expenses the Company incurred in pursuing that business combination transaction.

Subsequent Events

The Company’s management reviewed all material events that have occurred after the balance sheet date through the date which these financial statements were issued.

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanyingCompany's results of operations, financial statements.

position or cash flows.

Leases

Note 3 — Initial Public Offering

On September 19,

In February 2016, the Company sold 5,000,000 Units atFASB issued new lease accounting guidance in ASU 2016-02, Leases, which has been codified in ASC 842, Leases ("ASC 842"). The FASB subsequently issued several ASUs in 2017, 2018, 2019 and 2020 that include various amendments, improvements and changes to the effective dates of ASU 2016-02. Under this new guidance, lessees will be required to recognize the following for substantially all leases: i) a pricelease liability equal to the lessee's obligation to make lease payments arising from a lease, measured on a discounted basis and ii) a right-of-use ("ROU") asset which will represent the lessee's right to use, or control the use of, $10.00 per Unit generating gross proceeds of $50,000,000 and net proceeds of $47,981,581 after deducting $2,018,419 of transaction costs. In addition,a specified asset for the lease term. As an EGC, this standard is effective for the Company grantedon January 1, 2022. The Company is currently evaluating this standard and anticipates that the Underwriteradoption of ASC 842 will require the optionCompany to purchaserecognize non-current assets and liabilities for ROU assets and operating lease liabilities on its balance sheet, but it is not expected to have a material effect on the Company's results of operations or cash flows.
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Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financial Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contract at the modification date or reassess a previous accounting determination. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), Scope, which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. These updates can be adopted at any time before December 31, 2022. The Company is currently evaluating the potential impact that this ASU may have on the Consolidated Financial Statements.
Credit Losses
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This new guidance will change how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments. ASU 2016-13 will replace the current "incurred loss" model with an additional 750,000 Units solely"expected loss" model. Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to cover over allotments, if any, pursuantbelieve that a loss is probable (i.e., that it has been "incurred"). Under the "expected loss" model, a loss (or allowance) is recognized upon initial recognition of the asset that reflects all future events that leads to a 45-day over-allotment option grantedloss being realized, regardless of whether it is probable that the future event will occur. The "incurred loss" model considers past events and current conditions, while the "expected loss" model includes expectations for the future which have yet to occur. The standard will require entities to record a cumulative-effect adjustment to the Underwriter.balance sheet as of the beginning of the first reporting period in which the guidance is effective. The underwriters exercisedCompany is currently evaluating the over-allotment option in part and, on October 14, 2016, the underwriters purchased 310,109 Over-allotment Option Units, which were sold at an offering price of $10.00 per Unit, generating gross proceeds of $3,101,090 and net proceeds of $3,008,057 after deducting $93,033 of transaction costs.

Each Unit consists of one share of common stock in the Company, and one Warrant (“Warrant”). Each Warrant entitles the holder to purchase one share of common stock at a price of $11.50 per share commencingpotential impact that this update may have on the latertiming of 30 days after the Company’s completion of its initial Business Combination or September 14, 2017, and expiring five years from the completion of the Company’s initial Business Combination. The Company may redeem the Warrants at a price of $0.01 per Warrant upon 30 days’ notice, only in the event that the last sale price of the common shares is at least $16.00 per sharerecognizing future provisions for any 20 trading days within a 30-trading day period (“30-Day Trading Period”) endingexpected losses on the third day prior to the date on which notice of redemption is given, provided there is a current registration statement in effect with respect to the common shares underlying such Warrants during the 30 day redemption period. If the Company redeems the Warrants as described above, management will have the option to require all holders that wish to exercise Warrants to do so on a “cashless basis.” In accordance with the warrant agreement relating to the Warrants to be soldCompany's accounts receivable and issued in the Offeringnotes receivable. Since the Company is only requireda Smaller Reporting Company ("SRC"), the Company must adopt this new standard no later than the beginning of 2023 for annual and interim reporting periods.

Goodwill Impairment Testing
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which will eliminate the requirement to use its best efforts to maintaincalculate the effectivenessimplied fair value of goodwill (i.e., Step 2 of the registration statement coveringcurrent goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the Warrants. If a registration statement is not effective within 90 days following the consummationexcess of a Business Combination, Warrant holders may, until such time as there isreporting unit's carrying amount over its fair value (i.e., measure the charge based on Step 1 of the current goodwill impairment test). Any impairment charge will be limited to the amount of goodwill allocated to an effective registration statementimpacted reporting unit. This update will not change the current guidance for completing Step 1 of the goodwill impairment test, and during any period whenan entity will still be able to perform the current optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. Upon adoption, the update will be applied prospectively. Since the Company shallis a SRC, the Company must adopt this new standard no later than the beginning of 2023 for annual and interim reporting periods. The impact that this update may have failedon the Company's financial condition or results of operations will depend on the circumstances of any goodwill impairment event that may occur after adoption.
Business Combinations
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to maintain anrecognize and measure contract assets and liabilities acquired in a business combination in accordance with ASC 606, as if the acquirer had originated the contracts. Generally this will result in the acquirer recognizing and measuring the acquired contract assets and liabilities consistent with how they had been recognized and measured by the acquiree. This update is effective registration statement, exercise Warrantsfor the Company on January 1, 2023, including interim periods within those fiscal years. The impact that this ASU may have on the Company's Consolidated Financial Statements will depend on the circumstances of any business combination that may occur after adoption.
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2.    Acquisitions
Finxera Acquisition
On September 17, 2021 (the "Closing Date"), the Company completed its acquisition of 100% of the equity interests of Finxera Holdings, Inc. ("Finxera"). Finxera is a provider of deposit account management and licensed money transmitter services in the United States. The acquisition will allow the Company to offer clients turn-key merchant services, payment facilitation, card issuing, automated payables, virtual banking, e-wallet tools, risk management, underwriting and compliance on a cashless basis pursuantsingle platform.

The preliminary purchase price is $407.0 million and is subject to an available exemption from registration under the Securities Act of 1933, as amended. In the event that a registration statement is not effective at the time of exercise or no exemption is available for a cashless exercise, the holder of such Warrant shall not be entitled to exercise such Warrant for cashcustomary adjustments including final purchase accounting and in no event (whether in the case of a registration statement being effective or otherwise) will the Company be required to net cash settle the Warrant exercise. If an initial Business Combination is not consummated, the Warrants will expire and will be worthless.

Note 4 — Private Units

Simultaneouslyworking capital adjustments. The transaction was funded with the Offering,Company's cash on hand, proceeds from the Initial Shareholdersissuance of the Company purchased an aggregateredeemable senior preferred stock and debt, and the issuance of 421,107 Private Units at $10.00 per Private Unit (for an aggregate purchase price of $4,211,070) from the Company. All of the proceeds received from these purchases were placed in the Trust Account.

The Private Units are identical to the Units sold in the Offering except the Warrants included in the Private Units will be non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the initial purchasers or their permitted transferees. Additionally, the holders of the Private Units have agreed (A) to vote the shares underlying their Private Units in favor of any proposed Business Combination, (B) not to propose, or vote in favor of, an amendment to the Company’s amended and restated certificate of incorporation with respect to the Company’s pre-Business Combination activities prior to the consummation of such a Business Combination unless the Company provides dissenting Public Stockholders with the opportunity to convert their public shares in connection with any such vote, (C) not to convert any shares underlying the Private Units into the right to receive cash from the Trust Account in connection with a stockholder vote to approve an initial Business Combination or a vote to amend the provisions of the Company’s amended and restated certificate of incorporation relating to shareholders’ rights or pre-Business Combination activity or sell theircommon equity shares to the Company in connection withsellers.


The acquisition was accounted for as a tender offerbusiness combination using the Company engages inacquisition method of accounting, under which the assets acquired and (D) that the shares underlying the Private Units shall not participate in any liquidating distribution upon winding up if a Business Combination is not consummated. The purchasers have also agreed not to transfer, assign or sell anyliabilities assumed were recognized at their fair values as of the Private Units or underlying securities (except toClosing Date, with the same permitted transferees as the insider shares and provided the transferees agree to the same terms and restrictions as the permitted transfereesexcess of the insider shares must agree to, each as described above) until the completionfair value of an initial Business Combination.

Note 5 — Notes Payable

On July 1, 2015, the Company issued a $55,000 principal amount unsecured promissory note. The note was non-interest bearing and was payable on the consummation of the Offering. On September 26, 2016, the Company amended the agreement with lender and outstanding balance was amended to $27,500. The note is now due upon completion of an initial business combination. Due to the short-term nature of the note,consideration transferred over the fair value of the note approximates the carrying amount.

Note 6 — Commitments

Underwriting Agreement

net assets acquired recognized as goodwill. The Company entered into an agreement with the underwritersfair values of the Offering (“Underwriting Agreement”). The Underwriting Agreement required the Company to pay an underwriting discount of 3.0%assets acquired and liabilities assumed as of the gross proceedsClosing Date were estimated by management based on the valuation of the Offering as an underwriting discountFinxera business using the discounted cash flow method and incur a deferred underwriting discount of upother factors specific to 2.0% for an aggregate underwriting discount of 5.0% of the gross proceeds of the Offering, in each case ascertain assets and liabilities. The preliminary purchase price allocation is set forth in the Underwriting Agreement. The Company will pay the deferred underwriting fee at the closing of the Business Combination. The underwriters also purchased an interest in M SPAC Holdings I LLC, an entity controlled by the Company’s insiders, which entitles ittable below and is expected to a beneficial interest in 63,184 insider shares.


The Underwriting Agreement granted Chardan Capital Markets, LLC a right of first refusal, for a period of thirty-six monthsbe finalized as soon as practicable, but no later than one year from the closing of the Offering, to act as lead investment banker, lead book-runner, and/or lead placement agent with 33% of the economics or 25% if three investment banks are involved in the transaction, for any public or private equity and debt offerings during such period.

The Underwriting Agreement will provide that the Company will pay Chardan Capital Markets, LLC a warrant solicitation fee of five percent (5%) of the exercise price of each public warrant exercised during the period commencing on the later of 12 months from the closing of the Proposed Public Offering or 30 days after the completion of the Company’s initial business combination including warrants acquired by security holders in the open market. The warrant solicitation fee will be payable in cash. There is no limitation on the maximum warrant solicitation fee payable to Chardan Capital Markets, LLC except to the extent it is limited by the number of warrants outstanding.

Purchase Option

The Company sold to the underwriters, for $100, a unit purchase option to purchase up to a total of 300,000 units exercisable at $12.00 per unit (or an aggregate exercise price of $3,600,000) commencing on the later of the consummation of a Business Combination and six months from September 13, 2016. The unit purchase option expires five years from September 13, 2016. The units issuable upon exercise of this option are identical to the Units being offered in the Offering. The Company has agreed to grant to the holders of the unit purchase option, demand and “piggy back” registration rights for periods of five and seven years, respectively, from September 13, 2016, including securities directly and indirectly issuable upon exercise of the unit purchase option. 

The Company accounts for the fair value of the unit purchase option, inclusive of the receipt of a $100 cash payment, as an expense of the Offering resulting in a charge directly to stockholders’ equity. The Company estimates that the fair value of this unit purchase option was approximately $2,695,000 (or $8.98 per unit) using a Black-Scholes option-pricing model. Closing Date.


(in thousands)
Consideration:
Cash$379,220 
Equity instruments(1)
34,388 
Less: cash and restricted cash acquired(6,598)
Total purchase consideration, net of cash and restricted cash acquired$407,010 
Recognized amounts of assets acquired and liabilities assumed:
Accounts receivable$385 
Prepaid expenses and other current assets5,963 
Current portion of notes receivable784 
Settlement assets and customer account balances498,811 
Property, equipment and software, net411 
Goodwill252,062 
Intangible assets, net(2)
202,890 
Other non-current assets955 
Accounts payable and accrued expenses(7,837)
Settlement and customer account obligations(498,811)
Deferred income taxes, net(43,395)
Other non-current liabilities(5,208)
Total purchase consideration$407,010 

(1)The fair value of the unit purchase option7,551,354 shares of PRTH common stock that were issued was determined based on their market price at the time of closing adjusted for an appropriate liquidity discount due to be grantedtrading restrictions under Securities Rule 144.
(2)The intangible assets acquired consist of $148.4 million for referral partner relationships, $36.0 million for technology, $16.4 million for customer relationships and $2.1 million for money transmitter licenses.

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Goodwill of $252.1 million arising from the acquisition primarily consists of the expected synergies and other benefits from combining operations. Approximately $10.4 million of the goodwill attributable to the placement agentacquisition is estimated as of the date of grant using the following assumptions: (1) expected volatility of 149%, (2) risk-free interest rate of 1.22% and (3) expected life of five years. The unit purchase option may be exercised for cash or on a “cashless” basis, at the holder’s option (except in the case of a forced cashless exercise upon the Company’s redemption of the Warrants, as described in Note 3), such that the holder may use the appreciated value of the unit purchase option (the difference between the exercise prices of the unit purchase option and the underlying Warrants and the market price of the Units and underlying common stock) to exercise the unit purchase option without the payment of any cash. The Company will have no obligation to net cash settle the exercise of the unit purchase option or the Warrants underlying the unit purchase option. The holder of the unit purchase option will not be entitled to exercise the unit purchase option or the Warrants underlying the unit purchase option unless a registration statement covering the securities underlying the unit purchase option is effective or an exemption from registration is available. If the holder is unable to exercise the unit purchase option or underlying Warrants, the unit purchase option or Warrants, as applicable, will expire worthless. 

Registration Rights

The Initial Stockholders are entitled to registration rights with respect to their initial shares and the purchasers of the Private Units will be entitled to registration rights with respect to the Private Units (and underlying securities), pursuant to an agreement signed on September 13, 2016. The holders of the majority of the initial shares are entitled to demand that the Company register these shares at any time commencing three months prior to the first anniversary of the consummation of a Business Combination. The holders of the Private Units (or underlying securities) are entitled to demand that the Company register these securities at any time after the Company consummates a Business Combination. In addition, the holders have certain “piggy-back” registration rights on registration statements filed after the Company’s consummation of a Business Combination.

Administrative Service Fee

The Company, commencing on September 13, 2016, has agreed to pay an affiliate of the Company’s executive officers a monthly fee of $10,000 for general and administrative services due on the first of each month. During the three months ended September 30, 2017 and 2016, the Company incurred administrative fees of $30,000 and $5,667, respectively. During the nine months ended September 30, 2017 and 2016, the Company incurred administrative fees of $90,000 and $5,667, respectively.

In April 2017, the Company and its Sponsor have agreed to defer payment of the monthly administrative service fee until a future date which has yet to be determined by the Sponsor.

Note 7 — Stockholder’s Equity

Preferred Stock

The Company is authorized to issue 1,000,000 preferred shares with a par value of $0.001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors.


As of September 30, 2017, there are no preferred shares issued or outstanding.

Common Stock

Amended and Restated Certificate of Incorporation

The Company’s Certificate of Incorporation was amended in connection with the Offering to reduce the Company’s authorized shares of common stock from 50,000,000 to 30,000,000.

The Company is authorized to issue 30,000,000 shares of common stock with a par value of $0.001 per share.

On April 23, 2015, 1,437,500 shares of the Company’s common stock were sold to the Initial Stockholders at a price of approximately $0.02 per share for an aggregate of $25,000. This number includes an aggregate of up to 187,500 shares that are subject to forfeiture if the over-allotment option is not exercised by the underwriters. All of these shares will be placed in escrow until (1) with respect to 50% of the shares, the earlier of six months after the date of the consummation of an initial Business Combination and the date on which the closing price of the Company’s common stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after the Company’s initial business combination and (2) with respect to the remaining 50% of the insider shares, six months after the date of the consummation of an initial Business Combination, or earlier, in either case, if, subsequent to an initial Business Combination, the Company consummates a liquidation, merger, share exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares for cash, securities or other property. On November 11, 2016, 109,973 Founders’ shares were forfeited and cancelled.

As of September 30, 2017 and December 31, 2016, there were 2,340,170 and 2,310,710 common shares issued and outstanding, which excludes 4,718,573 and 4,748,033 shares subject to possible conversion, respectively. 

The Company’s insiders have agreed (A) to vote their insider shares, private shares and any public shares acquired in or after the Offering in favor of any proposed Business Combination, (B) not to propose, or vote in favor of, an amendment to the Company’s certificate of incorporation that would affect the substance or timing of its obligation to redeem 100% of its public shares if it does not complete its initial business combination within 18 months from the closing of the Offering (or 21 months, as applicable), unless the Company provides its public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its franchise and income taxes, divided by the number of then outstanding public shares, (C) not to convert any shares (including the insider shares and private shares) into the right to receive cash from the Trust Account in connection with a stockholder vote to approve the Company’s proposed initial Business Combination (or sell any shares they hold to the Company in a tender offer in connection with a proposed initial Business Combination) or a vote to amend the provisions of the Company’s certificate of incorporation relating to the substance or timing of its obligation to redeem 100% of the Company’s public shares if it does not complete its initial business combination within 18 months from the closing of the Offering (or 21 months, as applicable) and (D) that the insider shares and private shares shall not be entitled to be redeemed for a pro rata portion of the funds held in the Trust Account if a Business Combination is not consummated.  


Item 2. Management’s Discussion and Analysis.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.  References to “we”, “us”, “our” or the “Company” are to M I Acquisitions Inc., except where the context requires otherwise.  The following discussion should be read in conjunction with our condensed financial statements and related notes thereto included elsewhere in this report.

Overview

We were formed on April 23, 2015 for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more target businesses. Our efforts to identify a prospective target business will not be limited to any particular industry or geographic region, although we intend to focus on target businesses operating in the technology, media and telecommunications industries. We intend to utilize cash derived from the proceeds of our public offering in effecting our initial business combination.

We presently have no revenue, have had losses since inception from incurring formation costs and have had no operations other than the active solicitation of a target business with which to complete a business combination. We have relied upon the sale of our securities and loans from our officers and directors to fund our operations.

On September 19, 2016, we consummated our initial public offering (the “Offering”) of 5,000,000 units (the “Units”). Each Unit consists of one share of common stock (“Common Stock”), and one warrant (“Public Warrant”) to purchase one share of Common Stock at an exercise price of $11.50 per share. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $50,000,000. We granted the underwriters a 45-day option to purchase up to 750,000 additional Units to cover over-allotments, if any. Simultaneously with the consummation of the Offering, we consummated the private placement (“Private Placement”) of 402,500 units (the “Private Units”) at a price of $10.00 per Private Unit, generating total proceeds of $4,025,000. The underwriters exercised the over-allotment option in part and, on October 14, 2016, the underwriters purchased 310,109 over-allotment option Units, which were sold at an offering price of $10.00 per Unit, generating gross proceeds of $3,101,090. On October 14, 2016, simultaneously with the sale of the Over-Allotment Units, we consummated the private sale of an additional 18,607 Private Units to one of the initial stockholders, generating gross proceeds of $186,070. The remainder of the over-allotment option expired unexercised.

As of November 13, 2017, a total of $54,990,849 was held in the trust account established for the benefit of the Company’s public shareholders, which includes approximately $296,726 in interest income available from the Company’s investments in the Trust Account to pay its income tax obligations.

Our management has broad discretion with respect to the specific application of the net proceeds of the initial public offering and the private placement, although substantially all of the net proceeds are intended to be applied generally towards consummating a business combination.

Results of Operations

Our entire activity from inception up to September 19, 2016 was in preparation for the Offering. Since the Offering, our activity has been limited to the evaluation of business combination candidates, and we will not be generating any operating revenues until the closing and completion of our initial business combination. We expect to generate small amounts of non-operating income in the form of interest income on cash and cash equivalents. Interest income is not expected to be significant in viewdeductible for income tax purposes. The goodwill was allocated 100% to the Company's Integrated Partners reportable segment.


The Company's Unaudited Condensed Consolidated Financial Statements include the operating results of current low interest rates on risk-free investments (treasury securities). We expect to incur increased expensesFinxera from the Closing Date through September 30, 2021, which are reported as a resultpart of being a public company (for legal, financial reporting, accountingthe Integrated Partners reportable segment. Revenues and auditing compliance), as well as for due diligence expenses. Our expenses have increased substantially since closing the Offering. 

operating income from Finxera during this period were $3.0 million and $1.0 million, respectively.


For the three and nine months ended September 30, 2017,2021 we incurred $0.6 million and $9.2 million, respectively, in acquisition related costs, which primarily consisted of consulting, legal, accounting and valuation expenses. These expenses were recorded in selling, general and administrative expenses in the Company's Unaudited Condensed Consolidated Statements of Operations.

The following unaudited pro forma financial information presents results as if the acquisition occurred on January 1, 2020. The historical consolidated financial information of the Company and Finxera has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the transaction and are factually supportable. Acquisition related costs of $38.8 million and $1.0 million for the nine months ended September 30, 2021 and the nine months ended September 30, 2020, respectively, are excluded from the pro forma information. The unaudited pro forma results do not reflect events that have occurred or may occur after the transaction, including the impact of any synergies expected to result from the acquisition. Accordingly, the unaudited pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transaction occurred on January 1, 2020, nor is it necessarily an indication of future operating results.

(in thousands, except per share amounts)Nine Months Ended September 30,
20212020
Revenues$420,499 $352,526 
Operating income$58,290 $37,381 

Other Acquisitions
Based on their purchase prices and pre-acquisition operating results and assets, none of the other businesses acquired by the Company in 2021, as described below, met the materiality requirements for pro forma disclosures individually or collectively.
Wholesale Payments, Inc.
On April 28, 2021, a subsidiary of the Company completed its acquisition of certain residual portfolio rights for a purchase price of $42.4 million and $24.8 million of post-closing payments and earn-out payments based on meeting certain attrition thresholds over a three-year period from the date of acquisition. The transaction did not meet the definition of a business, therefore it was accounted for as an asset acquisition under which the cost of the acquisition was allocated to the acquired assets based on relative fair values. As of September 30, 2021, the sellers earned $3.8 million of the $24.8 million, which was paid during the third quarter of 2021, increasing the total purchase price recorded at September 30, 2021 to $46.2 million, which was recorded to residual buyout intangible assets with a seven-year useful life amortized on a straight-line basis. As this is an asset acquisition, additional purchase price is accounted for when payment to the seller becomes probable and is added to the carrying value of the asset. The seller's note payable to the Company of $3.0 million and an advance of $2.0 million outstanding at the time of the purchase was netted against the initial purchase price, resulting in cash of $41.2 million being paid by the Company to the seller, which was funded from cash proceeds from the issuance of the redeemable senior preferred stock and cash on hand.
C&H Financial Services, Inc.
On June 25, 2021, a subsidiary of the Company acquired certain assets and assumed certain related liabilities under an asset purchase agreement. The acquisition was accounted for as a business combination using the acquisition method of accounting. Prior to this acquisition, the business was an Independent Sales Organization ("ISO") partner of the Company where it developed expertise in software-integrated payment services, as well as marketing programs for specific verticals such as automotive and youth sports. This business is reported within the Company's Consumer Payments reportable segment. The initial purchase price for the net assets was $35.0 million in cash and a total purchase price of not more than $60.0 million
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including post-closing payments and earn-out payments based on certain gross profit and revenue achievements over a three-year period from the date of acquisition. The acquisition date fair value of the contingent consideration was $4.7 million, which increased the total purchase price to $39.7 million. The seller's note payable to the Company of $0.5 million at the time of purchase was netted against the initial purchase price, resulting in cash of $34.5 million being paid by the Company to the seller, which was funded from a $30.0 million draw down of the revolving credit facility under the Credit Agreement held by the Company and $4.5 million cash on hand. The purchase price was allocated to merchant portfolio intangible assets with a ten-year useful life amortized on a straight-line basis, fixed assets and other current assets, and goodwill. Transaction costs were not material and were expensed. The preliminary purchase price allocation is set forth in the table below and is expected to be finalized as soon as practicable, but no later than one year from the acquisition date.
(in thousands)
Accounts receivable$214 
Prepaid expenses and other current assets209 
Property, equipment and software, net and other current assets283 
Goodwill13,808 
Intangible assets, net25,400 
Other non-current liabilities(214)
Total purchase price$39,700 
The goodwill for the Wholesale Payments, Inc. asset acquisition and the C&H Financial Services, Inc. business combination is deductible by the Company for income and net losstax purposes.
3.    Revenues
For all periods presented, substantially all of $152,350 and $(111,519), respectively. Duringthe Company's revenues from services were recognized over time. Revenues earned from the sales of payment equipment were typically recognized at a point in time.
The following table presents a disaggregation of the Company's consolidated revenues by type, followed by a description of the relationship of these types of revenues to the Company's reportable segments, for the three and nine months ended September 30, 2021 and September 30, 2020:
(in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenue Type
Merchant card fees$122,175 $102,481 $348,244 $277,253 
Outsourced services and other services8,651 5,387 17,854 18,143 
Equipment1,716 1,094 4,755 2,855 
Total revenues$132,542 $108,962 $370,853 $298,251 
Revenues earned in these disaggregated categories consists of the following:
Merchant card fees - revenues related to discount rates and interchange fees earned from payment services provided by the Company's Consumer Payments, Commercial Payments and Integrated Partners segments.
Outsourced services and other services - business process outsourcing services and revenues from Automated Clearing House (ACH) services, services provided to certain business customers of American Express and auxiliary services provided by our Commercial Payments segment. The Integrated Partners segment includes revenues from licensed money transmitter services.
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Equipment - revenues from sales of point-of-sale equipment and other payment-processing equipment sold to customers in the Company's Consumer Payments segment.
Transaction Price Allocated to Future Performance Obligations
ASC 606, Revenue from Contracts with Customers ("ASC 606"), requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations. However, as allowed by ASC 606, the Company has elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. The Company's most significant performance obligations consist of variable consideration under a stand-ready series of distinct days of service. Such variable consideration meets the specified criteria for the disclosure exclusion. Therefore, the majority of the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied is variable consideration that is not required for this disclosure. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.
Contract Assets and Contract Liabilities
A contract with a customer creates legal rights and obligations. As the Company performs under customer contracts, its right to consideration that is unconditional is considered to be accounts receivable. If the Company's right to consideration for such performance is contingent upon a future event or satisfaction of additional performance obligations, the amount of revenues recognized in excess of the amount billed to the customer is recognized as a contract asset. Contract liabilities represent consideration received from customers in excess of revenues recognized. Material contract assets and liabilities are presented net at the individual contract level in the Company's Unaudited Condensed Consolidated Balance Sheets and are classified as current or non-current based on the nature of the underlying contractual rights and obligations.
Supplemental balance sheet information related to contracts from customers as of September 30, 2021 and December 31, 2020 was as follows:
(in thousands)Consolidated Balance Sheet LocationSeptember 30, 2021December 31, 2020
Contract liabilities, net (current)Customer deposits and advance payments$1,494$1,494
Substantially all of these balances are recognized as revenue within twelve months.
Net contract assets were not material for any period presented.
Impairment losses recognized on receivables or contract assets arising from the Company's contracts with customers were not material for the three and nine months ended September 30, 2021 and September 30, 2020.
4.    Settlement Assets and Customer Account Balances and Related Obligations
Consumer Payments Segment
In the Company's Consumer Payments reportable segment, funds settlement refers to the process of transferring funds for sales and credits between card issuers and merchants. The standards of the card networks requires possession of funds during the settlement process to be with a member bank which controls the clearing transactions. Since settlement funds are required to be in the possession of a member bank until the merchant is funded, these funds are not assets of the Company and the associated obligations related to these funds are not liabilities of the Company. Therefore, neither is recognized in the Company's Consolidated Balance Sheets. Member banks held merchant funds of $113.8 million and $103.8 million at September 30, 2021 and December 31, 2020, respectively.
Exception items include items such as customer chargeback amounts received from merchants and other losses. Under agreements between the Company and its merchant customers, the merchants assume liability for such chargebacks and losses. If the Company is ultimately unable to collect amounts from the merchants for any charges or losses due to merchant fraud, insolvency, bankruptcy or any other reason, it may be liable for these charges. In order to mitigate the risk of such liability, the Company may (1) require certain merchants to establish and maintain reserves designed to protect the Company from such
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charges or losses under its risk-based underwriting policy and (2) engage with certain ISOs in partner programs in which the ISOs assume liability for these charges or losses. A merchant reserve account is funded by the merchant and held by the member bank during the term of the merchant agreement. Unused merchant reserves are returned to the merchant after termination of the merchant agreement or in certain instances upon a reassessment of risks during the term of the merchant agreement.
Exception items that become the liability of the Company are recorded as merchant losses, a component of costs of services in the Consolidated Statements of Operations. Exception items that the Company is still attempting to collect from the merchants through the funds settlement process or merchant reserves are recognized as settlement assets in the Company's Consolidated Balance Sheets, with an offsetting reserve for those amounts the Company estimates it will not be able to recover. Expenses for merchant losses for the three and nine months ended September 30, 2021 were $0.6 million and $1.6 million, respectively. Expenses for merchant losses for the three and nine months ended September 30, 2020 were $1.5 million and $3.6 million, respectively.
Commercial Payments Segment
In the Company's Commercial Payments segment, the Company earns revenues from certain of its services by processing transactions for financial institutions and other business customers. Customers transfer funds to the Company, which are held in either company-owned bank accounts controlled by the Company or bank-owned For the Benefit Of ("FBO") accounts controlled by the banks, until such time as the transactions are settled with the customer payees. Amounts due to customer payees that are held by the Company in Company-owned bank accounts are included in restricted cash. Amounts due to customer payees that are held in bank-owned FBO accounts are not assets of the Company and the associated obligations related to these funds are not liabilities of the Company; therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets. Bank-owned FBO accounts held funds of $86.7 million at September 30, 2021, which was the result of a transfer of customer restricted cash from Company-owned bank accounts to bank-owned FBO accounts due to a change in our business practice for certain types of customer deposits and cash advance payments. Company-owned bank accounts held $8.3 million at September 30, 2021 and $72.9 million at December 31, 2020; which are included within restricted cash and settlement obligations in the Company's Unaudited Condensed Consolidated Balance Sheets.
Integrated Partners Segment
In the Company's Integrated Partners segment, revenue is derived primarily from enrollment fees, monthly subscription fees, transaction-based fees and licensed money transmitter services fees. As part of its licensed money transmitter services, the Company accepts deposits from consumers and subscribers which are held in bank accounts maintained by the Company on behalf of consumers and subscribers. After accepting deposits, the Company is allowed to invest available balances in these accounts in certain permitted investments, and the return on such investments contributes to the Company's net cash inflows. These balances are payable on demand and therefore, the Company recorded these balances and related obligations as current assets and current liabilities. The nature of these balances are cash and cash equivalents but they are not available for day-to-day operations of the Company. Therefore, the Company has classified these balances as settlement assets and customer account balances and the related obligations as settlement and customer account obligations in the Company's Unaudited Condensed Consolidated Balance Sheets.

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The Company's settlement assets and customer account balances and settlement and customer account obligations at September 30, 2021 and December 31, 2020 were as follows:
(in thousands)September 30, 2021December 31, 2020
Settlement Assets:
Card settlements due from merchants, net of estimated losses$862 $753 
Customer Account Balances:
Cash and cash equivalents459,453 — 
Time deposits20,000 — 
Total settlement assets and customer account balances$480,315 $753 
Settlement and Customer Account Obligations:
Customer account obligations$479,453 $— 
Due to customer payees9,873 72,878 
Total settlement and customer account obligations$489,326 $72,878 
5.    Disposal of Business
On September 1, 2020, Priority Real Estate Technology LLC ("PRET"), a majority-owned and consolidated subsidiary of the Company, entered into an asset purchase agreement (the "Sale Agreement") with MRI Payments LLC and MRI Software LLC (together, "MRI" or the buyer) to sell certain assets and certain associated obligations of the real estate services business. The sale was completed on September 22, 2020 after receiving regulatory approval, resulting in a gain of $107.2 million as follows:
(in thousands)
Gross cash consideration from buyer$180,000 
Less: working capital adjustment paid in cash(584)
Net proceeds from buyer179,416 
Transaction costs incurred(5,383)
Assets sold:
Intangible assets(62,158)
Other assets sold, net of obligations assumed(716)
Goodwill assigned to business sale(2,683)
Other intangible assets(1,237)
Pre-tax gain on sale of business$107,239
PRET is a limited liability company and is a pass-through entity for income tax purposes. Income tax expenses associated with the gain attributable to the stockholders of the Company were estimated to be approximately $12.3 million.
Allocation of net proceeds, after transaction costs, to the PRET members included return of each member's invested capital in PRET and excess proceeds were distributed in accordance with the distribution provisions of the PRET LLC governing agreement. The Company's invested capital amounted to $71.8 million, which included the assets sold, goodwill and other intangible assets. The non-controlling interest's ("NCI") invested capital was $5.7 million. Approximately $51.4 million and $45.1 million of the excess proceeds were distributed to the Company and the NCI, respectively. The initial allocation of net proceeds remained subject to final adjustment with the PRET members at December 31, 2020. During the first quarter of 2021, it was determined that an additional $0.5 million of the excess proceeds was due to the NCI, which was included in other expenses, net in the Unaudited Condensed Consolidated Statement of Operations.
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Pro Forma Information
The following pro forma information is provided for the business (the RentPayment component) that was sold under the Sale Agreement, excluding the gain recognized on the sale transaction:
(in thousands)Three Months Ended September 30,Nine Months Ended September 30,
20202020
Revenues$3,883 $12,118 
Operating income(1)
$307 $1,805 
Net income(2)
$259 $1,765 
Net income attributable to the stockholders of Priority Technology Holdings, Inc.(3)
$259 $1,765 
Income per common share for stockholders of Priority Technology Holdings, Inc. - Basic and Diluted(3)
$— $0.03 
(1)Historical financial results are not being reported as discontinued operations.
(2)Pro forma income tax expense is based on the following consolidated effective tax rates of Priority Technology Holdings, Inc.: 15.5% for the three months ended September 30, 2020; 2.2% for the nine months ended September 30, 2020. These rates exclude the effect of the $107.2 million gain on the sale recognized during the nine months ended September 30, 2020.
(3)Prior to the September 2020 sale transaction that resulted in the gain on the sale, no earnings or losses of the PRET LLC were attributable to the NCIs of PRET.
6.    Goodwill and Other Intangible Assets
Goodwill
The Company records goodwill when an acquisition is made and the purchase price is greater than the fair value assigned to the underlying separately-identifiable tangible and intangible assets acquired and the liabilities assumed. The Company's goodwill relates to the following reporting units at September 30, 2021 and December 31, 2020.
(in thousands)September 30, 2021December 31, 2020
Consumer Payments$120,640 $106,832 
Integrated Partners252,062 — 
Total$372,702 $106,832 
The following table summarizes the changes in the carrying value of goodwill for the periods ended September 30, 2021 and December 31, 2020:
(in thousands)Amount
Balance at December 31, 2020$106,832 
Changes in the value of goodwill— 
Balance at March 31, 2021106,832 
C&H Financial Services, Inc. acquisition17,246 
Balance at June 30, 2021124,078 
Measurement period adjustment from C&H Financial Services, Inc. acquisition(3,438)
Finxera acquisition252,062 
Balance at September 30, 2021$372,702
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The Company considered the market conditions for triggering events including those generated by the COVID-19 pandemic and concluded that there were no indicators of impairment of the Company's goodwill for the three and nine months ended September 30, 2021.
The Company tests goodwill for impairment on an annual basis, or when events occur or circumstances indicate the fair value of a reporting unit may be below its carrying value. The Company will continue to monitor triggering events including the economic impact of COVID-19 on its ongoing assessment of goodwill. The Company expects to perform its next annual goodwill impairment test during the fourth quarter of 2021 using market data and a discounted cash flow analysis. The Company concluded there was no impairment as of September 30, 2021 or December 31, 2020. As such, there was no accumulated impairment loss as of September 30, 2021 and December 31, 2020.
Other Intangible Assets
As of September 30, 2021 and December 31, 2020, intangible assets consisted of the following:
September 30, 2021Weighted Average Useful Life (Years)
(in thousands)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Other intangible assets:
Merchant portfolios$76,016 $(27,817)$48,199 4.0
Customer relationships91,866 (67,609)24,257 8.4
Residual buyouts(1)
125,840 (51,160)74,680 6.4
Non-compete agreements(2)
3,390 (3,390)— 0.0
Trade names2,870 (1,830)1,040 11.6
Technology(2)
50,390 (14,164)36,226 9.8
ISO and referral partner relationships168,800 (8,597)160,203 13.8
Money transmitter licenses(3)
2,090 — 2,090 
 Total gross carrying value$521,262 $(174,567)$346,695 
(1)Additions to Residual buyouts were offset by certain assets that became fully amortized in 2021, but are still in service.
(2)Certain assets in the group became fully amortized in 2021, but are still in service.
(3)These assets have an indefinite useful life.
December 31, 2020Weighted Average Useful Life (Years)
(in thousands)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Other intangible assets:
Merchant portfolios$55,816 $(19,471)$36,345 5.5
Customer relationships40,740 (30,267)10,473 11.0
Residual buyouts114,359 (72,659)41,700 6.8
Non-compete agreements3,390 (3,390)— 3.0
Trade names2,870 (1,651)1,219 11.6
Technology14,390 (13,951)439 6.1
ISO relationships15,200 (7,319)7,881 23.7
 Total gross carrying value$246,765 $(148,708)$98,057 
Amortization expense for finite-lived intangible assets was $10.2 million and $25.9 million for the three and nine months ended September 30, 2021, respectively, and $8.3 million and $25.2 million for the three and nine months ended September 30, 2020,
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respectively. Amortization expense for future periods could differ due to new intangible asset acquisitions, changes in useful lives of existing intangible assets and other relevant events or circumstances.
The Company tests intangible assets for impairment when events occur or circumstances indicate that the fair value of an intangible asset or group of intangible assets may be impaired. In the Company's Consumer Payments segment, a residual buyout intangible asset with a net carrying value of $2.2 million was deemed to be impaired at December 31, 2020. The fair value of this intangible asset was estimated to be approximately $0.5 million, resulting in the recognition of an impairment charge of $1.8 million. This impairment was the result of diminished cash flows generated by the merchant portfolio.
The Company also considered the market conditions generated by the COVID-19 pandemic and concluded that there were no additional impairment indicators present at September 30, 2021.
7.    Property, Equipment and Software
Property, equipment and software as of September 30, 2021 and December 31, 2020 consisted of the following:
(in thousands)September 30, 2021December 31, 2020
Furniture and fixtures$2,883 $2,795 
Equipment12,275 10,216 
Computer software50,307 44,320 
Leasehold improvements6,360 6,250 
Property, equipment and software71,825 63,581 
Less: accumulated depreciation(46,910)(40,706)
Property, equipment and software, net$24,915 $22,875 
Computer software represents purchased software and internally developed back office and merchant interfacing systems used to assist with the reporting of merchant processing transactions and other related information.
Depreciation expense for property, equipment and software totaled $2.2 million and $6.3 million for the three and nine months ended September 30, 2021, respectively, and $2.0 million and $5.7 million for the three and nine months ended September 30, 2020, respectively.
8.    Accounts Payable and Accrued Expenses
The components of accounts payable and accrued expenses that exceeded five percent of total current liabilities at either September 30, 2021 or December 31, 2020 consisted of the following:
(in thousands)September 30, 2021December 31, 2020
Accrued expenses18,752 14,451 
Accrued card network fees9,775 8,041 
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9.    Debt Obligations
Outstanding debt obligations as of September 30, 2021 and December 31, 2020 consisted of the following:
(in thousands)September 30, 2021December 31, 2020
Credit and Guaranty Agreement:
Term facility - matures April 27, 2027, interest rate of 6.75% at September 30, 2021$618,450 $— 
Revolving credit facility - $40.0 million line, matures April 27, 2026, interest rate of 5.75% at September 30, 202130,000 — 
Senior Credit Agreement:
Term facility - Original maturity at January 3, 2023, interest rate of 7.50% at December 31, 2020— 279,417 
Term Loan - Subordinated, original maturity at July 3, 2023, interest rate of 12.50% at December 31, 2020— 102,623 
Total debt obligations648,450 382,040 
Less: current portion of long-term debt(6,200)(19,442)
Less: unamortized debt discounts and deferred financing costs(22,293)(4,725)
Long-term debt, net$619,957 $357,873 
Credit and Guaranty Agreement
On September 17, 2021, Priority Holdings LLC ("Holdings"), which is a direct wholly-owned subsidiary of the Company, and certain direct and indirect subsidiaries of Holdings (together with Holdings, collectively, the "Loan Parties"), entered into an agreement with Truist Bank ("Truist") and the lenders party thereto, to amend the Credit and Guaranty Agreement dated as of April 27, 2021 (the "Credit Agreement") to increase the amount of the delayed draw term loan facility under the Credit Agreement by $30.0 million. The additional delayed draw term loans are part of the same class of term loans made pursuant to the original commitments under the Credit Agreement. See Note 2, Acquisitions for additional information related to the Finxera acquisition.
On April 27, 2021, the Loan Parties, entered into the Credit Agreement with Truist and the lenders party thereto, pursuant to which Holdings has access to senior credit facilities in an aggregate principal amount of $630.0 million which are secured by substantially all of the assets of the Loan Parties and by the equity interests of Holdings.
The credit facilities under the Credit Agreement are comprised of (i) a senior secured first lien term loan facility in an aggregate principal amount of $300.0 million (the "Initial Term Loan"), the proceeds of which were used to fund the refinancing described below, (ii) a senior secured revolving credit facility in an aggregate amount not to exceed $40.0 million outstanding at any time (the "Revolving Credit Facility") and (iii) a senior secured first lien delayed draw term loan facility in an aggregate principal amount of $290.0 million (the "Delayed Draw Term Loan"), the proceeds of which may be used to fund the Company's acquisition of Finxera.
Outstanding borrowings under the Credit Agreement accrue interest using either a base rate (as defined therein) or a LIBOR rate plus an applicable margin per year, as provided in the Credit Agreement, which includes a LIBOR rate floor of 1.00% per year. Accrued interest is payable on each interest payment date (as defined in the Credit Agreement). The revolving credit facility incurs an unused commitment fee on any undrawn amount of the $40.0 million credit line in an amount equal to 0.5% per year of the unused portion. Under the terms of the Credit Agreement, the future applicable interest rate margins may vary based on the Loan Parties Total Net Leverage Ratio in addition to future changes in the underlying market rates for LIBOR and the rate used for base-rate borrowing.
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Use of Proceeds
Holdings and certain other Loan Parties have previously entered into (i) the Senior Credit Agreement and (ii) the Term Loan Agreement, both of which are described below. The proceeds from the sale of the Securities (refer to Note 10, Redeemable Senior Preferred Stock and Warrants) and from the Initial Term Loan were used to refinance the Senior Credit Agreement and the Term Loan Agreement and all outstanding obligations thereunder were repaid in full (or in the case of outstanding undrawn letters of credit, deemed issued under the Credit Agreement), and all commitments and guaranties in connection therewith have been terminated or released (the "Refinancing").
Prepayments
Under the Credit Agreement, prepayments of outstanding principal may be made in permitted increments with a 1.00% penalty for certain prepayments made in connection with repricing transactions. Such premium will be based on the principal amount that is prepaid, subject to the terms of the credit agreements.
Acceleration
The outstanding amount of any loans and any other amounts owed under the Credit Agreement may, after the occurrence of an Event of Default (as defined in the Credit Agreement), at the option of Truist, be declared immediately due and payable. Events of Default include, without limitation, the failure of the Loan Parties to pay principal, premium or interest when due under the Credit Agreement, or the failure by the Loan Parties to perform or comply with any term or covenant in the Credit Agreement, in each case, subject to any applicable cure periods provided therein.
Covenants
The Credit Agreement contains representations and warranties, financial and collateral requirements, mandatory payment events, events of default and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the Loan Parties to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates) and to enter into certain leases.
If the aggregate principal amount of outstanding revolving loans and letters of credit under the Credit Agreement exceeds 35% of the total revolving facility thereunder, the Loan Parties are required to comply with certain restrictions on its Total Net Leverage Ratio, which is defined in the Credit Agreement as the ratio of consolidated total debt of the Loan Parties to the Loan Parties Consolidated Adjusted EBITDA (as defined in the Credit Agreement). If applicable, the maximum permitted Total Net Leverage Ratio is (i) 6.50:1.00 at each fiscal quarter ended September 30, 2021 through June 30, 2022, (ii) 6.00:1.00 at each fiscal quarter ended September 30, 2022 through June 30, 2023 and (iii) 5.50:1.00 at each fiscal quarter ended September 30, 2023 and each fiscal quarter thereafter.
Senior Credit Agreement
Outstanding borrowings under the Credit and Guaranty Agreement, dated as of January 3, 2017 weand subsequently amended, with Truist (the "Senior Credit Agreement"), accrued interest using either a base rate (as defined) or a LIBOR rate plus an applicable margin, or percentage per year, as provided in the amended credit agreement. For the term loan facility of our Senior Credit Agreement, the Sixth Amendment, which was executed on March 18, 2020, provided for a LIBOR "floor" of 1.00% per year. Accrued interest was payable monthly. The revolving credit facility incurred $367,033a commitment fee on any undrawn amount of the $25.0 million credit line, which equated to 0.50% per year for the unused portion. The outstanding obligations under the Senior Credit Agreement at the time of the Refinancing were $274.6 million.
Term Loan Agreement
Outstanding borrowings under the Credit and $714,534,Guaranty Agreement, dated as of January 3, 2017 and subsequently amended, with Goldman Sachs Specialty Lending Group, L.P. (the "Term Loan Agreement") accrued interest at 5.0%, plus an applicable margin, or percentage per year, as indicated in the amended credit agreement. Accrued interest was payable quarterly at 5.0%
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per year, and the accrued interest attributable to the applicable margin was capitalized as payment-in-kind ("PIK") interest each quarter. The outstanding obligations under the Term Loan Agreement at the time of the Refinancing were $105.1 million, which consisted of the principal amount borrowed under the Term Loan Agreement of $80.0 million plus accumulated PIK interest of $25.1 million.
Contractual Maturities
Based on terms and conditions existing at September 30, 2021, future minimum principal payments for long-term debt are as follows:
Principal Due
(in thousands)Credit Agreement
Twelve-month period ending September 30,Term LoanRevolverTotal
2022$6,200 $— $6,200 
20236,200 — 6,200 
20246,200 — 6,200 
20256,200 — 6,200 
20266,200 30,000 36,200 
Beyond five years587,450 — 587,450 
Total$618,450 $30,000 $648,450 
Additionally, the Company may be obligated to make certain additional mandatory prepayments after the end of each year based on excess cash flow, as defined in the Credit Agreement.
Interest Expense and Amortization of Deferred Loan Costs and Discounts
Interest expense, including fees for undrawn amounts under the revolving credit facility and the delayed draw term loan facility, as well as amortization of deferred financing costs and debt discounts, was $8.2 million and $24.6 million for the three and nine months ended September 30, 2021, respectively, and $13.5 million and $35.5 million for the three and nine months ended September 30, 2020, respectively. Interest expense included amortization of generaldeferred financing costs and administrativedebt discounts of $2.1 million and $3.3 million for the three and nine months ended September 30, 2021, respectively, and $0.7 million and $1.8 million for the three and nine months ended September 30, 2020, respectively.
Deferred Loan Costs and Discounts, and Debt Extinguishment and Modification Expenses
Refinancing: The Initial Term Loan under the Credit Agreement was issued in April 2021 at a discount of $6.4 million, while the Delayed Draw Term Loan was issued in September 2021 at a discount of $6.3 million. Additionally, the Company incurred approximately $6.4 million of costs for the Refinancing, in April 2021 and $9.9 million of costs for the Delayed Draw Term Loan, including $3.5 million of ticking fees (debt commitment fees) prior to the drawdown of the funds in September 2021. Approximately $6.1 million of the remaining fees incurred for the Delayed Draw Term Loan were paid during the initial Refinancing and were deferred and included in other non-current assets on the Company's Unaudited Condensed Consolidated Balance Sheet at June 30, 2021. The costs for the Delayed Draw Term Loan were amortized over the delayed commitment access period until September 2021, at which time the unamortized balance of the deferred costs was removed from other non-current assets and recorded as a reduction of the carrying amount of the debt obligation and is being amortized over the remaining term of the debt.
The Company determined that the issuance of the Initial Term Loan under the Refinancing in April 2021 was partially an extinguishment and a modification, and therefore, recognized debt extinguishment and modification costs of $8.3 million in April 2021, which included a portion of the Refinancing fees and the write-off of previously deferred fees under the prior credit agreements. These costs are reported within other expenses, net on the Company's Unaudited Condensed Consolidated Statements of Operations.
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Senior Credit Agreement: For the Sixth Amendment, executed in the first quarter of 2020, $2.7 million of lender fees were deferred and $30,000added to then-existing unamortized loan costs and $90,000, respectively,discount. Approximately $0.4 million of administrativesuch costs were expensed in connection with the Sixth Amendment during the first quarter of 2020.
10.    Redeemable Senior Preferred Stock and Warrants
Redeemable Senior Preferred Stock
On April 27, 2021, the Company entered into an agreement pursuant to which it issued 150,000 shares of redeemable senior preferred stock, par value $0.001 per share, and a detachable warrant to purchase 1,803,841 shares of the Company's common stock for gross proceeds of $150.0 million, less a $5.0 million discount and $5.5 million of issuance costs.

The agreement also provided the Company the option to issue an additional 50,000 shares of redeemable senior preferred stock upon the closing of the Finxera acquisition for $50.0 million, less a $0.6 million discount and within 18 months after the issuance of those shares, the Company was provided the option to issue an additional 50,000 shares at a purchase price of $50.0 million, less a $0.6 million discount, subject to the satisfaction of certain customary closing conditions.

The redeemable senior preferred stock ranks senior to the Company's common stock, equal with any other class of the Company's stock designated as being ranked on a parity basis with the redeemable senior preferred stock and junior to any other class of the Company's stock, including preferred stock, that is designated as being ranked senior to the redeemable senior preferred stock, with respect to the payment and distribution of dividends, the purchase or redemption of the Company's stock and the liquidation, winding up of and distribution of assets of the Company.

The redeemable senior preferred stock does not meet the definition of a liability pursuant to ASC 480, Distinguishing Liabilities from Equity, as it is redeemable upon the occurrence of events that are not solely within the Company's control. Therefore, the Company classified the redeemable senior preferred stock as temporary equity and is accreting the carrying amount to its full redemption amount from the date of issuance to the earliest redemption date using the effective interest method.

Of the total net proceeds of $139.5 million, $131.4 million was allocated to the redeemable senior preferred stock, $11.4 million was allocated to additional paid-in capital for the warrants and $3.3 million was allocated to non-current assets for the committed financing put right.

On September 17, 2021 the Company issued an additional 75,000 shares of redeemable senior preferred stock for $75.0 million, less a $0.9 million discount, $0.7 million of ticking fees and $1.9 million of issuance costs. Upon issuance of these additional shares, the $3.3 million that was previously allocated to non-current assets for the committed financing put right was reclassified to the redeemable senior preferred stock.

The following table provides a reconciliation of the beginning and ending carrying amounts of the redeemable senior preferred stock for the periods presented:

(in thousands)SharesAmount
January 1, 2021— $— 
Proceeds from issuance of redeemable senior preferred stock, net of discount and issuance costs150 131,426 
Unpaid dividend on redeemable senior preferred stock— 1,838 
Accretion of discounts and issuance cost— 498 
June 30, 2021150 $133,762 
Proceeds from issuance of redeemable senior preferred stock, net of discount and issuance costs75 68,183 
Unpaid dividend on redeemable senior preferred stock— 2,846 
Accretion of discounts and issuance cost— 527 
September 30, 2021225 $205,318 
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The dividend rate for the redeemable senior preferred stock is equal to the three-month LIBOR rate (minimum of 1%) plus an applicable margin of 12% (capped at 22.50%)per year, with a required quarterly payment of 5% plus the three-month LIBOR rate per year. In the event of non-compliance with the cash payment requirement, the dividend rate shall increase by 2% per year. In the event of the occurrence an event of default, including the failure to make any required payment related to the redeemable senior preferred stock (e.g., payment of dividends or payments with respect to redemption or prepayments) within five business days of being due, or certain other conditions of default or breach as outlined in the agreement that are not remedied within thirty days of becoming aware of such default, the dividend rate shall increase by 3% per year for the period of continuance of the default. The dividend rate shall increase by 5% per year if the Company fails to obtain the required stockholder approval for a forced sale transaction triggered by investors within 120 days of approval of the sale transaction by the Sale Demand Special Committee and will continue to increase by an additional 5% for each subsequent 30 calendar day period until such sale is approved by all required stockholders. The following table provides a summary of the dividends for the periods presented:
(in thousands)Three Months Ended September 30,Nine Months Ended September 30,
20212021
Dividends paid in cash$2,440 $4,015 
Accumulated dividends accrued as part of the carrying value of redeemable senior preferred stock2,846 4,684 
Dividends declared at the rate of 13% per year$5,286 $8,699 
The redeemable senior preferred shares have no stated maturity and will remain outstanding indefinitely until redeemed or otherwise repurchased by the Company. Outstanding shares of redeemable senior preferred stock can be redeemed at the option of the Company for cash in whole or in part at the following redemption price:
Redemption DateRedemption Price
Prior to April 27, 2023100% of liquidation preference (i.e., $1,000 per share) plus any accrued and unpaid dividends and the Make-Whole amount (i.e., present value of additional 2% of the liquidation preference plus any accrued and unpaid dividends thereon through the redemption date plus 102% of the amount of dividends that will accrue from the redemption date through April 27, 2023)
April 27, 2023 - April 26, 2024102% of the sum of the (a) outstanding liquidation preference plus (b) any accrued and unpaid dividends through and including the applicable redemption date
April 27, 2024 and thereafter100% of the sum of the (a) outstanding liquidation preference plus (b) any accrued and unpaid dividends through and including the applicable redemption date
Upon the occurrence of a change in control or a liquidation event, the Company will redeem all of the outstanding redeemable senior preferred shares for cash at the applicable redemption price described above.

The holders of the redeemable senior preferred stock may request the Company to pursue a sale transaction for the purpose of redeeming the redeemable senior preferred stock from and after the earliest of (i) October 27, 2028, (ii) 30 days after the redeemable senior preferred stockholders provide written notice to the Company of a failure by the Company to take steps within its control to prevent the Company's common stock from no longer being listed and (iii) the date that is 90 days following the Company's failure to consummate a mandatory redemption of the redeemable senior preferred stock upon the occurrence of a change in control or liquidation event.

Warrants
On April 27, 2021 the Company issued warrants to purchase up to 1,803,841 shares of the Company's common stock, par value $0.001 per share, at an exercise price of $0.001. The exercise price and the number of shares issuable upon exercise of the warrants are subject to certain adjustments from time to time on the terms outlined in the warrants. In connection with the
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issuance of the warrants, the Company entered into an agreement pursuant to which it agreed to provide certain registration rights with respect to the common shares issuable upon exercise of the warrants. Under this agreement the holders of the related shares of common stock were granted (i) piggyback rights to be included in certain underwritten offerings of common stock and (ii) the right to demand a shelf registration of the shares of common stock issued upon exercise of the warrants. As of September 30, 2021, none of the warrants have been exercised. The warrants are considered to be equity contracts indexed in the Company's own shares and therefore were recorded at their inception date relative fair value and are included in additional paid-in capital on the Company's Unaudited Condensed Consolidated Balance Sheet.

The Company used the proceeds from the April 2021 sale of the redeemable senior preferred stock to fund the Refinancing (see Note 9, Debt Obligations), to partially fund the Wholesale Payments, Inc. and C&H Financial Services, Inc. acquisitions in the second quarter of 2021 (see Note 2, Acquisitions) and to pay certain fees and expenses relating to the Refinancing and the offering of the redeemable senior preferred stock and warrants. The Company used the proceeds from the September 2021 sale of additional shares of redeemable senior preferred stock to fund the Finxera acquisition (see Note 2, Acquisitions).

11.    Income Taxes
The Company's effective income tax rate (benefit) for the three and nine months ended September 30, 2021 was 327.8% and (0.4)%, respectively. Our effective income tax rate for the three months ended September 30, 2021 differed from the U.S. statutory rate primarily as a result of changes to our valuation allowance for interest limited under section 163(j) of the Internal Revenue Code.
The Company's effective income tax rate (benefit) for the three and nine months ended September 30, 2020 was 13.8% and 15.2%, respectively. Our effective income tax rate for the three months ended September 30, 2020 differed from the U.S. statutory rate primarily as a result of changes to our valuation allowance for interest limited under section 163(j) of the Internal Revenue Code and related favorable interest limitation provisions of the Coronavirus Aid, Relief and Economic Security Act ("CARES Act").
Valuation Allowance for Deferred Income Tax Assets
The Company considers all available positive and negative evidence to determine whether sufficient taxable income will be generated in the future to permit realization of the existing deferred tax assets. In accordance with the provisions of ASC 740, Income Taxes, the Company is required to provide a valuation allowance against deferred income tax assets when it is "more likely than not" that some portion or all of the deferred tax assets will not be realized.
Based on management's assessment, as of the third quarter of 2021, the Company continues to record a full valuation allowance against non-deductible interest expense. The Company will continue to evaluate the realizability of the net deferred tax asset on a quarterly basis and, as a result, the valuation allowance may change in future periods.
12.    Commitments and Contingencies
Minimum Annual Commitments with Third-Party Processors
The Company has multi-year agreements with third parties to provide certain payment processing services to the Company. The Company pays processing fees under these agreements that are based on the volume and dollar amounts of processed payment transactions. Some of these agreements have minimum annual requirements for processing volumes. Based on existing contracts in place at September 30, 2021, the Company is committed to pay minimum processing fees under these agreements of approximately $14.8 million in 2021 and $7.8 million in both 2022 and 2023.
Commitment to Lend
See Note 13, Related Party Transactions, for information on a loan commitment extended by the Company to another entity.
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Contingent Consideration for Acquisitions
For asset acquisitions that do not meet the definition of a business, the portion of the unpaid purchase price that is contingent on future activities is not initially recorded by the acquirer on the date of acquisition. Rather, the acquirer generally recognizes contingent consideration when it becomes probable and estimable.
On March 15, 2019, a subsidiary of the Company paid $15.2 million cash to acquire certain residual portfolio rights. This asset acquisition became part of the Company's Consumer Payments reportable segment. The initial purchase price is subject to an increase of up to $6.4 million in accordance with the terms of the agreement between the Company and the sellers. As of September 30, 2021, $4.3 million of the $6.4 million total contingent consideration has been paid to the seller, while the remaining $2.1 million will be payable in the first quarter of 2022 if certain criteria are achieved.
See Note 2, Acquisitions, for information about contingent consideration related to acquisitions consummated in 2021.
Legal Proceedings
The Company is involved in certain legal proceedings and claims which arise in the ordinary course of business. In the opinion of the Company, and based on consultations with inside and outside counsel, the results of any of these matters, individually and in the aggregate, are not expected to have a material effect on the Company's results of operations, financial condition or cash flows. As more information becomes available, and the Company determines that an unfavorable outcome is probable on a claim and that the amount of probable loss that the Company will incur on that claim is reasonably estimable, the Company will record an accrued expense for the claim in question. If and when the Company records such an accrual, it could be material and could adversely impact the Company's results of operations, financial condition and cash flows.
Concentration of Risks
The Company's revenue is substantially derived from processing Visa and MasterCard bankcard transactions. Because the Company is not a member bank, in order to process these bankcard transactions, the Company maintains sponsorship agreements with member banks which require, among other things, that the Company abide by the by-laws and regulations of the card associations.
A majority of the Company's cash and restricted cash is held in certain financial institutions, substantially all of which is in excess of federal deposit insurance corporation limits. The Company does not believe it is exposed to any significant credit risk from these transactions.
13.    Related Party Transactions
Commitment to Lend and Warrant to Acquire
During 2019, the Company, through one of its wholly-owned subsidiaries, executed an interest-bearing loan and commitment agreement with another entity. The Company has loaned the entity a total of $3.5 million at September 30, 2021 and December 31, 2020, with a commitment to loan up to a total of $10.0 million based on certain growth metrics of the entity and continued compliance by the entity with the terms and covenants of the agreement. The Company's commitment to make additional advances under the loan agreement is dependent upon such advances not conflicting with covenants or restrictions under any of the Company's debt or other applicable agreements. Amounts loaned to this entity by the Company are secured by substantially all of the assets of the entity and by a personal guarantee. The note receivable has an interest rate of 12.0% per year and is repayable in full in May 2024. The Company also received a warrant to purchase a non-controlling interest in this entity's equity at a fixed amount. The loan agreement also gives the Company certain rights to purchase some or all of this entity's equity in the future, at the entity's then-current fair value. The fair values of the warrant, loan commitment and purchase right were not material at inception. The Company monitors any circumstances that may alter this assessment.
Equity-Method Investment
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During the first quarter of 2020, the Company wrote off its $0.2 million carrying value in an equity-method investment. This loss is reported as a component of other expenses, net on the Company's Unaudited Condensed Consolidated Statement of Operations.
PHOT Preferred Unit Redemption - Distribution to Non-Controlling Interests
In February 2019, Priority Hospitality Technology, LLC ("PHOT"), a subsidiary of the Company, received a contribution of substantially all of the operating assets of eTab, LLC ("eTab") and CUMULUS POS, LLC ("Cumulus") under asset contribution agreements. PHOT is a part of the Company's Integrated Partners reportable segment. No material liabilities were assumed by PHOT. These contributed assets were composed substantially of technology-related assets. Prior to these transactions, eTab was 80.0% owned by the Company's Chairman and Chief Executive Officer ("CEO"). No cash consideration was paid to the contributors of the eTab or Cumulus assets on the date of the transactions. As consideration for these contributed assets, the contributors were issued redeemable non-controlling preferred equity interests ("redeemable NCIs") in PHOT. Under these redeemable NCIs, the contributors were eligible to receive up to $4.5 million of profits earned by PHOT, plus a preferred yield (6.0% per year) on any undistributed preferred equity interest ("Total Preferred Equity Interest"). Once the Total Preferred Equity Interest is distributed to the holders, the redeemable NCIs cease to exist. The Company's CEO initially owned 83.3% of the redeemable NCIs, which ownership interest was subsequently reduced to 35.3% through the CEO's disposition of interests to others.
At the time of contribution, the Company determined that the contributor's carrying values of the eTab and Cumulus net assets (as a common control transaction under GAAP) were not material. Under the guidance for a common control transaction, the contribution of the eTab and Cumulus net assets did not result in a change of entity or the receipt of a business, therefore the Company's financial statements for prior periods were not adjusted to reflect the historical results attributable to the eTab net assets. For the period from February 1, 2019 through October 31, 2020, a total of $0.3 million of PHOT's earnings were attributable to the redeemable NCIs of PHOT, and this same amount was distributed in cash to the redeemable NCIs during the same period.
In November 2020, the Company agreed with the contributors to an exchange of shares of common stock of the Company, or cash, for the remaining undistributed Total Preferred Equity Interests of $4.8 million. An exchange valuation for the Company's common stock was established as of November 12, 2020 at the prior 20-day volume weighted average price of $2.78 per share. The exchange was contingent upon receiving approval of the Company's lenders; therefore, the binding exchange agreements were not entered into until after lender approval was received in April 2021 in connection with the Refinancing.
In May 2021, the Company entered into exchange agreements and completed the exchange of 1,428,358 shares of common stock and $0.8 million of cash for the Total Preferred Equity Interests. The CEO received 605,623 shares of common stock of the Company in exchange for his 35.3% interest, and the Company's Executive Vice President of M&A and Corporate Development received 413,081 shares of common stock of the Company in exchange for her 24.1% interest. Subsequent to establishing the common stock valuation in November 2020 and the date of exchange in May 2021, the Company's common stock price appreciated to $7.75 per share. The Company's financial statements for the nine months ended September 30, 2021 reflect this exchange as a distribution to NCIs at an appreciated common stock value of $6.975 per share, which incorporates a 10% liquidity discount of $0.775 per share due to trading restrictions under Securities Rule 144. Therefore, the total distribution amounted to $10.8 million, comprised of $10.0 million of common stock and $0.8 million of cash.
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14.    Reconciliation of Stockholders' Deficit and Non-controlling Interests
The following tables provide a reconciliation of the beginning and ending carrying amounts of stockholders' deficit and equity attributable to NCIs:
Additional Paid-In CapitalAccumulated (Deficit)Total
Common Stock
Treasury Stock(1)
(in thousands)SharesAmountSharesAmount
January 1, 202167,391 $68 451 $(2,388)$5,769 $(102,013)$(98,564)
Equity-classified stock-based compensation— — — — 558 — 558 
Vesting of stock-based compensation159 — — — — — — 
Liability-classified stock-based compensation converted to equity-classified— — — — 313 — 313 
Exercise of stock options90 — — — 617 — 617 
Net loss— — — — — (2,679)(2,679)
March 31, 202167,640 $68 451 $(2,388)$7,257 $(104,692)$(99,755)
Equity-classified stock-based compensation— — — — 821 — 821 
Vesting of stock-based compensation12 — — — — — — 
Exercise of stock options30 — — — 204 — 204 
Dividends on redeemable senior preferred stock— — — — (3,413)— (3,413)
Fair value of warrants issued— — — — 11,357 — 11,357 
Accretion of redeemable senior preferred stock discount— — — (498)— (498)
Fair value of PHOT preferred units redemption— — — — (10,777)— (10,777)
Fair value of common shares issued for PHOT redemption1,428 9,962 — 9,964 
Net loss— — — — — (9,477)(9,477)
June 30, 202169,110 $70 451 $(2,388)$14,913 $(114,169)$(101,574)
Equity-classified stock-based compensation— — — — 790 — 790 
Vesting of stock-based compensation20 — — — — — — 
Issuance of acquisition common stock7,551 — — 34,381 — 34,388 
Exercise of stock options53 — — — 369 — 369 
Share repurchases(163)— 163 (1,023)— — (1,023)
Dividends on redeemable senior preferred stock— — — — (5,286)— (5,286)
Accretion of redeemable senior preferred stock discount— — — — (527)— (527)
Net income (loss)— — — — — (549)(549)
September 30, 202176,571 $77 614 $(3,411)$44,640 $(114,718)$(73,412)

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(in thousands)Additional Paid-In CapitalAccumulated (Deficit)Total Priority Technology Holdings, Inc. Stockholders' (Deficit)
NCI(2)
Common Stock
Treasury Stock(1)
SharesAmountSharesAmount
January 1, 202067,061 $68 451 $(2,388)$3,651 $(127,674)$(126,343)$5,654 
Equity-classified stock-based compensation— — — — 338 — 338 — 
Net loss— — — — — (5,869)(5,869)— 
March 31, 202067,061 $68 451 $(2,388)$3,989 $(133,543)$(131,874)$5,654 
Equity-classified stock compensation— — — — 580 — 580 — 
Net loss— — — — — (7,858)(7,858)— 
June 30, 202067,061 $68 451 $(2,388)$4,569 $(141,401)$(139,152)$5,654 
Equity-based stock compensation— — — — 499 — 499 — 
Net income— — — — — — — 45,348 
Redemption of non-controlling interest— — — — — — — (5,654)
Distributions to non-controlling interests— — — — — 40,392 40,392 (45,348)
September 30, 202067,061 $68 451 $(2,388)$5,068 $(101,009)$(98,261)$ 
(1)At cost
(2)Prior to the third quarter of 2020, this balance was related party. to the acquisition of certain assets from YapStone, Inc. by the Company's PRET subsidiary during 2019. As part of the consideration for the assets acquired from YapStone, Inc. by PRET, YapStone, Inc. was issued a NCI in PRET with an initial estimated fair value and carrying value of $5.7 million. For all reporting periods since PRET's inception through June 30, 2020, no earnings or losses were attributable to the NCIs of PRET. During the three months ended September 30, 2020, a gain on a sale of assets from PRET resulted in the attribution of a total of $45.1 million to the NCIs of PRET. This amount was also distributed in a final redemption of the NCIs' interests in PRET during the three months ended September 30, 2020.

Share Repurchase Program
In August 2021, Priority's Board of Directors authorized a $10.0 million share repurchase program (the "2021 Share Repurchase Program"). Under this program the Company was authorized to purchase up to one million shares of its common stock through open market transactions, unsolicited or solicited privately negotiated transactions, or otherwise in accordance with all applicable securities laws and regulations. The 2021 Share Repurchase Program expires on August 17, 2022 and may be discontinued at any time. The Company terminated the 2021 Share Repurchase Program effective as of the close of business on September 23, 2021.
15.    Stock-based Compensation
Stock-based compensation expense is included in salary and employee benefits in the accompanying Unaudited Condensed Consolidated Statements of Operations. The Company recognizes the effects of forfeitures on compensation expense as the forfeitures occur.
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Expense recognized under the 2018 Equity Incentive Plan during the periods presented was as follows:
(in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Equity-classified stock compensation expense$790 $499 $2,169 $1,417 
Liability-classified stock compensation expense(1)
145 102 180 210 
Total stock compensation expense$935 $601 $2,349 $1,627 
(1)Liability-classified stock compensation under the 2018 Equity Incentive Plan where the service inception date preceded the future grant-date.
In March 2021, the Company converted a $313 thousand liability-classified stock compensation accrual for restricted stock units under the 2018 Equity Incentive Plan, whereby the service inception date preceded the future grant-date, to an equity-classified award when the restricted stock units were granted.
Income tax benefit for the stock-based compensation was not material for the three and nine months ended September 30, 2021 and September 30, 2020.
Employee Stock Purchase Plan
On April 16, 2021, the Priority Technology Holdings, Inc. 2021 Employee Stock Purchase Plan ("2021 Stock Purchase Plan") was authorized by the Company's Board of Directors. The maximum number of shares available for purchase under the plan is 200,000 shares. Shares issued under the plan may be authorized but unissued or reacquired shares of common stock. All employees of the Company who work more than 20 hours per week and have been employed by the Company for at least 30 days may participate in the 2021 Stock Purchase Plan.
Under the 2021 Stock Purchase Plan, participants are offered, on the first day of the offering period, the option to purchase shares of Common Stock at a discount on the last day of the offering period. The offering period shall be for a period of three months, and we anticipate the first offering period will begin during the first quarter of 2022. The plan provides eligible employees the opportunity to purchase shares of the Company's common stock on a quarterly basis through payroll deductions at a price equal to 95% of the lesser of the fair value on the first and last trading day of each quarter.
16.    Fair Value
Fair Value Measurements
As of September 30, 2021 and December 31, 2020, the Company no longer has any fair value estimates that are required to be remeasured at the end of each reporting period on a recurring basis.
Fair Value Disclosures
Notes Receivable
Notes receivable are carried at amortized cost. Substantially all of the Company's notes receivable are secured, and the Company provides for allowances when it believes that certain notes receivable may not be collectible. The carrying value of the Company's notes receivable, net approximates fair value and was approximately $4.1 million and $7.7 million, at September 30, 2021 and December 31, 2020, respectively. On the fair value hierarchy, Level 3 inputs are used to estimate the fair value of these notes receivable.
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Debt Obligations
Outstanding debt obligations (see Note 9, Debt Obligations) are reflected in the Company's Unaudited Condensed Consolidated Balance Sheets at carrying value since the Company did not elect to remeasure debt obligations at fair value at the end of each reporting period.
The fair value of the of the term loan facility under the Credit Agreement at September 30, 2021 was estimated to be approximately $618.5 million. The fair value of the term loan facility under the Senior Credit Agreement at December 31, 2020 was estimated to be approximately $278.0 million. The fair value of these notes at September 30, 2021 and December 31, 2020, with a notional value and carrying value (gross of deferred costs and discounts) of $618.5 million and $279.4 million, respectively, was estimated using binding and non-binding quoted prices in an active secondary market, which considersthe credit risk and market related conditions, and is within Level 3 of the fair value hierarchy.
The carrying values of the other long-term debt obligations approximate fair value due to mechanisms in the credit agreements that adjust the applicable interest rates and the lack of a market for these debt obligations.
17.    Segment Information
The Company has 3 reportable segments. The Consumer Payments operating segment and the Integrated Partners operating segments are each reported as separate reportable segments. The Commercial Payments and Institutional Services (sometimes referred to as Managed Services) operating segments are aggregated into 1 reportable segment, Commercial Payments.
Consumer Payments – represents consumer-related services and offerings including merchant acquiring and transaction processing services including the proprietary MX enterprise suite. Either through acquisition of merchant portfolios or through resellers, the Company becomes a party or enters into contracts with a merchant and a sponsor bank. Pursuant to the contracts, for each card transaction, the sponsor bank collects payment from the credit, debit or other payment card issuing bank, net of interchange fees due to the issuing bank, pays credit card association (e.g., Visa, MasterCard) assessments and pays the transaction fee due to the Company for the suite of processing and related services it provides to merchants, with the remainder going to the merchant.
Commercial Payments – represents services provided to certain enterprise customers, including providing an outsourced sales force to those customers and accounts payable automation services to commercial customers.
Integrated Partners – represents payment adjacent services that are provided primarily to the health care, real estate and hospitality industries. In September 2020, the Company sold a substantial portion of the assets of this segment. On September 17, 2021, the Company completed the acquisition of Finxera which will operate as part of this segment. Finxera provides licensed money transmitter services in the United States.
Corporate includes costs of corporate functions and shared services not allocated to the reportable segments.
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Information on reportable segments and reconciliations to consolidated revenues and consolidated depreciation and amortization are as follows for the periods presented:
(in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenues:
Consumer Payments$124,027 $99,301 $352,045 $267,039 
Commercial Payments4,181 4,995 11,722 17,017 
Integrated Partners4,334 4,666 7,086 14,195 
Consolidated revenues$132,542 $108,962 $370,853 $298,251 
Depreciation and amortization:
Consumer Payments$10,971 $8,481 $29,847 $25,721 
Commercial Payments73 77 220 231 
Integrated Partners1,017 1,403 1,222 4,048 
Corporate269 290 834 886 
Consolidated depreciation and amortization$12,330 $10,251 $32,123 $30,886 
Operating income (loss)
Consumer Payments$14,656 $11,098 $42,467 $25,520 
Commercial Payments(29)169 (417)1,408 
Integrated Partners1,220 253 1,477 1,466 
Total operating income of reportable segments$15,847 $11,520 $43,527 $28,394 
A reconciliation of total operating income of reportable segments to net (loss) income is provided in the following table:
(in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Total operating income of reportable segments$15,847 $11,520 $43,527 $28,394 
Corporate(7,597)(4,478)(23,345)(13,762)
Interest expense(8,155)(13,471)(24,608)(35,454)
Debt modification and extinguishment costs— (1,523)(8,322)(1,899)
Gain on sale of business— 107,239 — 107,239 
Other income (expenses), net146 190 92 414 
Income tax expense(790)(13,737)(49)(12,919)
Net (loss) income(549)85,740 (12,705)72,013 
Substantially all revenue is generated in the United States.
For the three and nine months ended September 30, 2017, these expenses2021 and September 30, 2020, no individual merchant customer accounted for 10% or more of the Company's consolidated revenues. Most of the Company's merchant customers were offsetreferred to the Company by an ISO or other income totaling $549,383referral partners. If the Company's agreement with an ISO allows the ISO to have merchant portability rights, the ISO can potentially move the underlying merchant relationships to another merchant acquirer upon notice to the Company and $693,015. respectively.completion of a "wind down" period. For the three months ended September 30, 2017, other income was comprised2021 and September 30, 2020, merchants referred by one ISO organization with potential merchant portability rights generated revenue within the
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Company's Consumer Payments reportable segment that represented approximately 23.4% and settlement income of $427,701, which we received from an entity that decided that it no longer wished to engage in a transaction with us. The settlement income received was approximately the amount21.4%, respectively, of the expenses we incurred pursuingCompany's consolidated revenues.
18.     (Loss) Earnings per Common Share
The following tables set forth the computation of the Company's basic and diluted loss per common share:
(in thousands, except per share amounts)Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Basic and diluted loss per common share:
Numerator:
Net (loss) income$(549)$85,740 $(12,705)$72,013 
Less: Dividends and accretion attributable to redeemable senior preferred stockholders(5,813)— (9,724)— 
Less: Non-controlling interest preferred unit redemptions— — (10,777)— 
Less: Earnings attributable to non-controlling interests (45,348)— (45,348)
Net (loss) income attributable to common stockholders$(6,362)$40,392 $(33,206)$26,665 
Basic:
Weighted-average common shares outstanding(1)
71,979 67,167 69,689 67,114 
Basic (loss) earnings per common share$(0.09)$0.60 $(0.48)$0.40 
Diluted:
Weighted-average common shares outstanding(1)
71,979 67,167 69,689 67,114 
Effect of potentially dilutive common stock equivalents— 119 — 17 
Diluted weighted average common shares outstanding71,979 67,286 69,689 67,131 
Diluted (loss) earnings per common share$(0.09)$0.60 $(0.48)$0.40 
(1)The weighted-average common stock shares outstanding include the 1.8 million warrants issued in the second quarter of 2021 (refer to Note 10, Redeemable Senior Preferred Stock and Warrants).
Potentially anti-dilutive securities that transaction. For the nine months ended September 30, 2017, other income was comprised of interest income of $265,314 and settlement income of $427,701.


Forwere excluded from loss per common share for the three and nine months ended September 30, 2016,2021 and September 30, 2020 that could be dilutive in future periods were as follows:

(in thousands)Common Stock Equivalents at
September 30, 2021September 30, 2020
Outstanding warrants on common stock(1)
3,557 3,557 
Outstanding options and warrants issued to adviser(1)
600 600 
Restricted stock awards(2)
1,202 127 
Liability-classified restricted stock units135 238 
Outstanding stock option awards(2)
1,232 1,593 
Total6,726 6,115 
(1)Issued by M.I. Acquisitions, Inc. prior to July 25, 2018.
(2)Granted under the 2018 Equity Incentive Plan.
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Item 2. 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 our audited Consolidated Financial Statements and related notes for the years ended December 31, 2020, 2019 and 2018 and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in the Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 31, 2021 (the "Annual Report").
Cautionary Note Regarding Forward-Looking Statements 
Some of the statements made in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements include, but are not limited to, statements regarding our or our management's expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, such as statements about our future financial performance, including any underlying assumptions, are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "future," "goal," "intend," "likely," "may," "might," "plan," "possible," "potential," "predict," "project," "seek," "should," "would," "will," "approximately," "shall" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about: 
the impact of the COVID-19 pandemic;
competition in the payment processing industry;
the use of distribution partners;
any unauthorized disclosures of merchant or cardholder data, whether through breach of our computer systems, computer viruses, or otherwise;
any breakdowns in our processing systems;
government regulation, including regulation of consumer information;
the use of third-party vendors;
any changes in card association and debit network fees or products;
any failure to comply with the rules established by payment networks or standards established by third-party processors;
any proposed acquisitions or any risks associated with completed acquisitions; and
other risks and uncertainties set forth in the "Item 1A - Risk Factors" included in this Quarterly Report or our Annual Report.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. 
The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. You should not place undue reliance on these forward-looking statements in deciding whether to invest in our securities. We cannot assure you that future developments affecting us will be those that we hadhave anticipated. These forward-looking statements involve a net lossnumber of $36,382risks, uncertainties (some of which are beyond our control) or other assumptions that may cause our actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties
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materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.
In addition, statements that "we believe" and $43,646, respectively. Duringsimilar statements reflect our beliefs and opinions on the threerelevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and ninewhile we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
You should read this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. 
Forward-looking statements speak only as of the date they were made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Terms Used in this Quarterly Report on Form 10-Q
As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to the terms "Company," "we," "us" and "our" refer to Priority Technology Holdings, Inc. and its consolidated subsidiaries.

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Results of Operations
This section includes a discussion and analysis of our results of operations for the three months ended September 30, 2016, we incurred $61,3602021 (or third quarter 2021) compared to the three months ended September 30, 2020 (or third quarter 2020), and $68,624, respectively, of general and administrative expenses and $5,667 and $5,667, respectively, of administrative fees paid to a related party. For the nine months ended September 30, 2016, other income was comprised of interest income of $30,645.

Liquidity and Capital Resources

As of September 30, 2017, we had cash outside our trust account of $479,382.  

Our liquidity needs have been satisfied2021 (or 2021 period) compared to date through the Offering, the receipt of $25,000 from the sale of the insider shares and loans from insiders and a related party and an unrelated party in an aggregate amount of $186,720. During the nine months ended September 30, 2017, we withdrew interest income totaling $71,7022020 (or 2020 period). We have derived this data, except key indicators for merchant bankcard processing dollar values and transaction volumes, from our Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q and our audited Consolidated Financial Statements included in our latest Annual Report on Form 10-K.


Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020
(dollars in thousands)Three Months Ended September 30,
20212020Change% Change
Revenue$132,542 $108,962 $23,580 21.6 %
Operating expenses
Costs of services92,833 74,971 17,862 23.8 %
Salary and employee benefits11,909 10,010 1,899 19.0 %
Depreciation and amortization12,330 10,251 2,079 20.3 %
Selling, general and administrative7,220 6,688 532 8.0 %
Total operating expenses124,292 101,920 22,372 22.0 %
Operating income8,250 7,042 1,208 17.2 %
Other (expenses) income
Interest expense(8,155)(13,471)5,316 (39.5)%
Debt extinguishment and modification costs— (1,523)1,523 (100.0)%
Gain on sale of business— 107,239 (107,239)(100.0)%
Other income, net146 190 (44)(23.2)%
Total other (expenses) income, net(8,009)92,435 (100,444)(108.7)%
Income before income taxes241 99,477 (99,236)(99.8)%
Income tax expense790 13,737 (12,947)(94.2)%
Net (loss) income$(549)$85,740 $(86,289)(100.6)%

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Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020
(dollars in thousands)Nine Months Ended September 30,
20212020Change% Change
Revenue$370,853 $298,251 $72,602 24.3 %
Operating expenses
Costs of services264,527 203,733 60,794 29.8 %
Salary and employee benefits31,808 29,695 2,113 7.1 %
Depreciation and amortization32,123 30,886 1,237 4.0 %
Selling, general and administrative22,213 19,305 2,908 15.1 %
Total operating expenses350,671 283,619 67,052 23.6 %
Operating income20,182 14,632 5,550 37.9 %
Other (expenses) income
Interest expense(24,608)(35,454)10,846 (30.6)%
Debt extinguishment and modification costs(8,322)(1,899)(6,423)338.2 %
Gain on sale of business— 107,239 (107,239)(100.0)%
Other income, net92 414 (322)(77.8)%
Total other (expenses) income, net(32,838)70,300 (103,138)(146.7)%
(Loss) income before income taxes(12,656)84,932 (97,588)(114.9)%
Income tax expense49 12,919 (12,870)(99.6)%
Net (loss) income$(12,705)$72,013 $(84,718)(117.6)%













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The following table shows our reportable segments' financial performance data and selected performance measures for the three months ended September 30, 2021 compared to the three months ended September 30, 2020:

(in thousands)Three Months Ended September 30,
20212020Change% Change
Consumer Payments:
Revenues$124,027$99,301$24,72624.9 %
Operating expenses109,37188,20321,16824.0 %
Operating income$14,656$11,098$3,55832.1 %
Operating margin11.8%11.2%
Depreciation and amortization$10,971$8,481$2,49029.4 %
Key Indicators:
Merchant bankcard processing dollar value$13,817,001$11,235,068$2,581,93323.0 %
Merchant bankcard transaction volume151,524122,62328,90123.6 %
Commercial Payments:
Revenues$4,181$4,995$(814)(16.3)%
Operating expenses4,2104,826(616)(12.8)%
Operating (loss) income$(29)$169$(198)(117.2)%
Operating margin(0.7)%3.4%
Depreciation and amortization$73$77$(4)(5.2)%
Key Indicators:
Merchant bankcard processing dollar value$86,855$58,304$28,55149.0 %
Merchant bankcard transaction volume54$24$30125.0 %
Integrated Partners:
Revenues$4,334$4,666$(332)(7.1)%
Operating expenses3,1144,413(1,299)(29.4)%
Operating income$1,220$253$967382.2 %
Operating margin28.1%5.4%
Depreciation and amortization$1,017$1,403$(386)(27.5)%
Key Indicators:
Merchant bankcard processing dollar value$13,832$105,537$(91,705)(86.9)%
Merchant bankcard transaction volume160371(211)(56.9)%
Operating income of reportable segments$15,847$11,520$4,32737.6 %
Less: Corporate expense(7,597)(4,478)(3,119)(69.7)%
Consolidated operating income$8,250$7,042$1,20817.2 %
Corporate depreciation and amortization$269$290$(21)(7.2)%
Key indicators:
Merchant bankcard processing dollar value$13,917,688$11,398,909$2,518,77922.1 %
Merchant bankcard transaction volume151,738123,01828,72023.3 %




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The following table shows our reportable segments' financial performance data and selected performance measures for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020:

(in thousands)Nine Months Ended September 30,
20212020Change% Change
Consumer Payments:
Revenues$352,045 $267,039 $85,006 31.8 %
Operating expenses309,578 241,519 68,059 28.2 %
Operating income$42,467 $25,520 $16,947 66.4 %
Operating margin12.1 %9.6 %
Depreciation and amortization$29,847 $25,721 $4,126 16.0 %
Key Indicators:
Merchant bankcard processing dollar value$39,564,898 $30,632,724 $8,932,174 29.2 %
Merchant bankcard transaction volume429,610 334,896 94,714 28.3 %
Commercial Payments:
Revenues$11,722 $17,017 $(5,295)(31.1)%
Operating expenses12,139 15,609 (3,470)(22.2)%
Operating income (loss)$(417)$1,408 $(1,825)(129.6)%
Operating margin(3.6)%8.3 %
Depreciation and amortization$220 $231 $(11)(4.8)%
Key Indicators:
Merchant bankcard processing dollar value$225,373 $195,229 $30,144 15.4 %
Merchant bankcard transaction volume140 70 70 100.0 %
Integrated Partners:
Revenues$7,086 $14,195 $(7,109)(50.1)%
Operating expenses5,609 12,729 (7,120)(55.9)%
Operating income$1,477 $1,466 $11 0.8 %
Operating margin20.8 %10.3 %
Depreciation and amortization$1,222 $4,048 $(2,826)(69.8)%
Key Indicators:
Merchant bankcard processing dollar value$38,256 $352,144 $(313,888)(89.1)%
Merchant bankcard transaction volume390 1,207 (817)(67.7)%
Operating income of reportable segments$43,527 $28,394 $15,133 53.3 %
Less: Corporate expense(23,345)(13,762)(9,583)(69.6)%
Consolidated operating income$20,182 $14,632 $5,550 37.9 %
Corporate depreciation and amortization$834 $886 $(52)(5.9)%
Key indicators:
Merchant bankcard processing dollar value$39,828,527 $31,180,097 $8,648,430 27.7 %
Merchant bankcard transaction volume430,140 336,173 93,967 28.0 %




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Impact of COVID-19 on Results and Trends
The outbreak of COVID-19 in the United States, which was declared a pandemic by the World Health Organization on March 11, 2020, adversely affected commercial activity and contributed to a significant decline in economic activity in 2020, particularly in the second quarter of 2020.
Starting in mid-March 2020 through April 2020, COVID-19 had a significant negative effect on our results. This impact was evident in a decline in merchant bankcard volume and our revenues particularly during the period of restrictive shelter-in-place requirements instituted across the United States toward the end of March 2020 through April 2020. In May 2020, as shelter-in-place restrictions began to be utilizedlifted and regional economies started to reopen, our processing volumes began to return, and revenue growth was supplemented by the acceleration of certain specialized product offerings and e-commerce payment transactions. This recovery momentum continued through the second half of 2020 and first nine months of 2021.
While there continues to be uncertainty regarding the future economic impacts of COVID-19 variants, our operating results reflect a significant recovery from the pandemic's negative effects during the first half of 2020. The pandemic's impact on the overall economy and on our comparative historical results and future results are beyond our ability to quantify predict or control.
Revenues 
Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020
Consolidated revenues
Our consolidated revenues in the third quarter of 2021 of $132.5 million increased by $23.6 million, or 21.6%, from revenues in the third quarter of 2020 of $109.0 million. Revenue growth of $24.7 million in our Consumer Payments segment was partially offset by revenue declines of $0.8 million and $0.3 million in our Commercial Payments and Integrated Partners segments, respectively.
Revenues in Consumer Payments segment
Consumer payments revenues in the third quarter 2021 of $124.0 million increased $24.7 million, or 24.9%, compared to revenues in the third quarter of 2020 of $99.3 million. This increase was driven by $30.0 million, or 33.3%, in revenue growth from our base merchant business, and was partially offset by a $5.3 million, or 58.0%, revenue decline from specialized e-commerce merchants.
Merchant bankcard volume in the third quarter of 2021 of $13.8 billion increased by $2.6 billion, or 23.0%, as compared with $11.2 billion in the third quarter of 2020. Merchant bankcard transactions of 151.5 million in the third quarter of 2021 increased by 23.6%, as compared with 122.6 million in the third quarter of 2020. Average ticket (calculated by dividing bankcard processing dollar value by the associated number of transactions processed) of $91.19 in the third quarter of 2021 decreased by 0.5%, as compared with $91.62 in the third quarter of 2020. The pandemic's influence on consumer behavior impacted the comparative volume, vertical industry mix and overall consumer spending trends.
Revenues in Commercial Payments segment
Commercial Payments revenues in the third quarter of 2021 of $4.2 million decreased by $0.8 million, or 16.3%, compared to revenues in the third quarter of 2020 of $5.0 million. Revenues in this segment are derived primarily from the accounts payable automated solutions business and from our curated managed services business.
Revenues from the accounts payable automated solutions business in the third quarter of 2021 of $1.6 million increased $0.1 million, or 3.9%, from $1.5 million in the third quarter of 2020. This increase was moderate due to increased volume from customers with lower yield. Revenues from our curated managed services business in the third quarter of 2021 of $2.6 million decreased by $0.9 million, or 25.7%, from revenues in the third quarter of 2020 of $3.5 million. This decrease was driven by a decline and curtailment in 2020 of a customer's merchant financing program in response to the COVID-19 related economic
- 37 -


conditions and subsequent changes in the customer's business model. However, this customer initiated a new supplier enablement program during the first quarter of 2021 which contributed $1.0 million of additional revenue in the third quarter of 2021.
Revenues in Integrated Partners segment
Integrated Partners revenues in the third quarter of 2021 of $4.3 million decreased by $0.3 million, or 7.1%, compared to revenues in the third quarter of 2020 of $4.7 million. PRET comprised $0.8 million and $4.1 million of this segment's revenues in the third quarter of 2021 and 2020, respectively. Through September 22, 2020, PRET was comprised of our RentPayment and Landlord Station businesses. RentPayment, which was sold on September 22, 2020, generated revenue of $3.9 million in the third quarter of 2020. Simultaneous with the sale of RentPayment, PRET entered into revenue-producing agreements with the buyer to provide ongoing technology support and payment processing services, which offers us an opportunity to expand this relationship and provide payment processing services to existing customers of the buyer. Revenues in the third quarter 2021 of $0.8 million from PRET's ongoing business increased $0.6 million, or 274.2%, compared with revenues of $0.2 million in the third quarter of 2020. Finxera Holdings, Inc. ("Finxera"), which was acquired on September 17, 2021, contributed $3.0 million to this segment’s revenues in the third quarter of 2021. Priority PayRight Health Solutions and PHOT contributed $0.6 million of this segment's revenues in the third quarter of 2021.
Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
Consolidated revenues
Our consolidated revenues in the first nine months of 2021 of $370.9 million increased by $72.6 million, or 24.3%, from revenues in the first nine months of 2020 of $298.3 million. Revenue growth of $85.0 million in our Consumer Payments segment was partially offset by revenue declines of $5.3 million and $7.1 million in our Commercial Payments and Integrated Partners segments, respectively.
Revenues in Consumer Payments segment
Consumer payments revenues in the first nine months of 2021 of $352.0 million increased $85.0 million, or 31.8%, compared to revenues in the first nine months of 2020 of $267.0 million. This increase was driven by $87.6 million, or 35.1%, revenue growth from our base merchant business, and a $2.6 million, or 14.9%, decrease in revenue from specialized e-commerce merchants.
Merchant bankcard volume in the first nine months of 2021 of $39.6 billion increased by $8.9 billion, or 29.2%, as compared with $30.6 billion in the first nine months of 2020. Merchant bankcard transactions of 429.6 million in the first nine months of 2021 increased by 28.3%, as compared with 334.9 million in the first nine months of 2020. Average ticket of $92.09 in the first nine months of 2021 increased 0.7%, as compared with $91.47 in first nine months of 2020.
Revenues in Commercial Payments segment
Commercial Payments revenues in the first nine months of 2021 of $11.7 million decreased by $5.3 million, or 31.1%, compared to revenues in the first nine months of 2020 of $17.0 million. Revenue in this segment is derived primarily from the accounts payable automated solutions business and from our curated managed services business.
Revenue from the accounts payable automated solutions business in the first nine months of 2021 of $4.9 million increased $0.4 million, or 8.9%, from $4.5 million in the first nine months of 2020. This increase was due to increased volume from customers with lower yield. Revenue from our curated managed services business in the first nine months of 2021 of $6.8 million decreased by $5.7 million, or 45.6%, from revenue in the first nine months 2020 of $12.5 million. This decrease was driven by a decline and curtailment in 2020 of a customer's merchant financing program in response to the COVID-19 related economic conditions and subsequent changes in the customer's business model. However, this customer initiated a new supplier enablement program during the first quarter 2021 which contributed $1.7 million of additional revenue in the first nine months of 2021.
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Revenues in Integrated Partners segment
Integrated Partners revenues in the first nine months of 2021 of $7.1 million, decreased by $7.1 million, or 50.1%, compared to revenues in the first nine months of 2020 of $14.2 million. PRET comprised $2.3 million and $12.6 million of this segment's revenues in the first nine months of 2021 and 2020, respectively. Through September 22, 2020, PRET was comprised of our RentPayment and our Landlord Station businesses. RentPayment, which was sold on September 22, 2020, generated revenue of $12.1 million in the first nine months of 2020. Simultaneous with the sale of RentPayment, PRET entered into revenue-producing agreements with the buyer to provide ongoing technology support and payment processing services, which offers us an opportunity to expand this relationship and provide payment processing services to existing customers of the buyer. Revenue in the first nine months of 2021 of $2.3 million from PRET's ongoing business increased $1.9 million, or 475.0%, compared with revenue of $0.4 million in the in the first nine months of 2020. Finxera, which was acquired on September 17, 2021, contributed $3.0 million to this segment’s revenue in the first nine months of 2021. Priority PayRight Health Solutions and PHOT contributed $1.8 million of this segment's revenue in the first nine months of 2021.
Consolidated Operating expenses 
Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020
Our consolidated operating expenses in the third quarter of 2021 of $124.3 million increased $22.4 million, or 22.0%, from consolidated operating expenses in the third quarter of 2020 of $101.9 million. This increase was driven by an increase in costs of services. Costs of services is the third quarter of 2021 of $92.8 million increased by $17.9 million or 23.8%, from costs of services in the third quarter of 2020 of $74.9 million due to higher revenues in the third quarter of 2021. Depreciation and amortization expense in the third quarter of 2021 of $12.3 million increased by $2.1 million, or 20.3%, from depreciation and amortization expense in the third quarter of 2020 of $10.3 million primarily due to amortization expense from intangible assets acquired during the period. Salary and employee benefits expense in the third quarter of 2021 of $11.9 million increased $1.9 million, or 19.0%, from salary and employee benefits expense in the third quarter of 2020 of $10.0 million, primarily attributable to an increase in the number of employees and contracted resources caused by the increased level of operations and acquisitions, as well as higher stock-based compensation expense. Selling, general and administrative ("SG&A") expense in the third quarter of 2021 of $7.2 million increased $0.5 million, or 8.0%, from SG&A expense in the third quarter of 2020 of $6.7 million, primarily attributable to acquisition and corporate financing activities, tax-related assessments, and slightly higher costs for travel, tradeshows and office-related expenses. During the third quarter of 2021, SG&A expense included $1.3 million of professional fees and expenses incurred in connection with the acquisition of Finxera, as well as certain litigation activities, and $0.6 million of tax-related assessments and acquisition-related transition services. During the third quarter of 2020, SG&A expense included $0.6 million of professional fees and expenses primarily incurred in connection with acquisition and litigation activities, $1.0 million of acquisition-related transition services in the Integrated Partners segment, and a $1.0 million write-down in the carrying value of an intangible asset in the Consumer Payments segment. These expenses were partially offset by a $0.8 million legal recovery settled in the third quarter of 2020.
Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
Our consolidated operating expenses in the first nine months of 2021 of $350.7 million increased $67.1 million, or 23.6%, from consolidated operating expenses in the first nine months of 2020 of $283.6 million. This increase was driven by higher costs of services. Costs of services in the first nine months 2021 of $264.5 million increased $60.8 million, or 29.8%, from costs of services in the first nine months 2020 of $203.7 million due to higher revenues in the first nine months of 2021. Depreciation and amortization expense in the first nine months of 2021 of $32.1 million increased by $1.2 million, or 4.0%, from depreciation and amortization expense in the first nine months of 2020 of $30.9 million due to amortization expense from intangible assets acquired during the period. Salary and employee benefits expense in the first nine months of 2021 of $31.8 million increased $2.1 million, or 7.1%, from salary and employee benefits expenses in the first nine months of 2020 of $29.7 million, primarily attributable to an increase in the number of employees and contracted resources caused by the increased level of operations, as well as higher stock-based compensation expense. SG&A expense in the first nine months of 2021 of $22.2 million increased $2.9 million, or 15.1%, from SG&A expense in the first nine months of 2020 of $19.3 million. During the first nine months of 2021, SG&A expense included $6.8 million of professional fees and expenses incurred in connection with the acquisition of Finxera, the April 2021 debt refinancing and issuance of preferred stock and other acquisition activities, as well as litigation activities, and $0.6 million of tax-related assessments and acquisition-related
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transition services. During the first nine months of 2020, Corporate SG&A expense included $1.5 million of professional fees and expenses primarily incurred in connection with acquisition and litigation activities, partially offset by $0.7 million of legal settlement recoveries. The Integrated Partners segment SG&A expense included $2.7 million of acquisition-related transition services, while the Consumer Payments segment expense included a $1.0 million write-down of the carrying value of an intangible asset.
Operating income (loss)
Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020
Consolidated operating income in the third quarter of 2021 of $8.3 million increased by $1.2 million, or 17.2%, from $7.0 million in the third quarter of 2020. This increase was the result of $5.7 million of higher revenues less costs of services partially offset by $1.9 million of higher salary and employee benefits expense, $0.5 million of higher SG&A expense and $2.1 million of higher depreciation and amortization expense.
Our Consumer Payments segment contributed $14.7 million in operating income for the third quarter of 2021, an increase of $3.6 million, or 32.1%, from $11.1 million in the third quarter of 2020. This increase was the result of $6.6 million higher revenues less costs of services and $0.8 million of lower SG&A expense being partially offset by $1.3 million of higher salary and employee benefits expense and $2.5 million of higher depreciation and amortization expense.
Our Commercial Payments segment had an operating income slightly below breakeven for the third quarter of 2021 compared to operating income of $0.2 million for the third quarter of 2020. This decline was primarily the result of $0.4 million of lower revenues less costs of services being partially offset by $0.2 million of lower other operating costs, primarily salaries and employee benefits.
Our Integrated Partners segment contributed operating income of $1.2 million for the third quarter of 2021, an increase of $1.0 million compared to $0.3 million of operating income for the third quarter of 2020. The increase was driven by the September 2021 acquisition of Finxera. Revenues less costs of services decreased by $0.5 million, which was more than offset by a decrease in SG&A of $1.1 million, and a decrease in depreciation and amortization expense of $0.4 million. SG&A in the third quarter of 2020 included $1.0 million of RentPayment acquisition-related transition services. The RentPayment business was sold in September, 2020.
Corporate expenses were $7.6 million for the third quarter of 2021, an increase of $3.1 million from expenses of $4.5 million for the third quarter of 2020. This increase was driven by an increase in professional fees, selling, general and administrative expenses, and salaries and employee benefits, as described above in the prior section for Consolidated Operating expenses.
Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
Consolidated operating income in the first nine months of 2021 of $20.2 million increased by $5.6 million, or 37.9%, from $14.6 million in the first nine months of 2020. This increase was the result of $11.8 million of higher revenues less costs of services being partially offset by $2.1 million of higher salary and employee benefits expense, $2.9 million of higher SG&A expense and $1.2 million of higher depreciation and amortization expense.
Our Consumer Payments segment contributed $42.5 million in operating income in the first nine months of 2021, an increase of $16.9 million, or 66.4%, from $25.5 million in the first nine months of 2020. This increase was the result of $21.6 million higher revenues less costs of services and $1.4 million of lower SG&A expense being partially offset by $1.9 million of higher salary and employee benefits expense and $4.1 million of higher depreciation and amortization due to an increase in intangible assets from acquisitions.
Our Commercial Payments segment had an operating loss of $0.4 million in the first nine months of 2021 compared to operating income of $1.4 million in the first nine months of 2020. This $1.8 million decline was the result of $2.3 million of lower revenues less costs of services, partially offset by $0.5 million of lower salary and employee benefits.
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Our Integrated Partners segment contributed operating income of $1.5 million in the first nine months of 2021, which is consistent with $1.5 million of operating income in the first nine months of 2020. The September 2021 acquisition of Finxera resulting in $1.0 million of operating profit, and PRET's ongoing operating profit increased $0.8 million for the first nine months of 2021, which was offset by the September 2020 sale of PRET's RentPayment business, which had operating profit of $1.8 million for the first nine months of 2020.
Corporate expenses were $23.3 million in the first nine months of 2021, an increase of $9.5 million from expenses of $13.8 million in the first nine months of 2020. This increase was driven by a $5.5 million increase in professional fees, a $2.1 million increase in selling, general and administrative expenses, and a $1.9 million increase in salaries and employee benefits, as described above in the prior section for Consolidated Operating expenses.
Interest expense
Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020
Interest expense in the third quarter of 2021 of $8.2 million decreased by $5.3 million, or 39.5%, from $13.5 million in the third quarter of 2020. This decline was primarily driven by lower rate of interest on the new loans secured by the Company on the refinancing of its credit facilities in April 2021. The new term and revolver loans carry an interest rate of 6.75% and 5.75%, respectively, as compared to the old term loans and subordinated term loans, which carried an interest rate of 7.5% and 12.5%, respectively. The outstanding debt during the third quarter 2020 was also higher as proceeds from the RentPayment sale in September 2020 were used to fund the senior debt principal repayment. Additionally, proceeds from the issuance of our redeemable senior preferred stock in April 2021 were used to repay the subordinated debt which carried a higher rate of interest.
Interest expense included cash interest, payment-in-kind interest and amortization of deferred financing costs and debt discounts. During the third quarter of 2021 and 2020, interest expense was comprised of:
(dollars in thousands)Three Months Ended September 30,
20212020
Cash$8,296 $9,589 
Payment-in-kind— 3,228 
Amortization and other(141)654 
$8,155 $13,471 
Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
Interest expense in the first nine months of 2021 of $24.6 million decreased by $10.9 million, or 30.6%, from $35.5 million in the first nine months of 2020. This decline was primarily driven by the factors described above for the three months ended September 30, 2021 compared to three months ended September 30, 2020.
Interest expense included cash interest, payment-in-kind interest and amortization of deferred financing costs and debt discounts. During the first nine months of 2021 and 2020, interest expense was comprised of:
(dollars in thousands)Nine Months Ended September 30,
20212020
Cash$17,250 $27,028 
Payment-in-kind2,512 6,643 
Amortization and other4,846 1,783 
$24,608 $35,454 
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Debt extinguishment and modification costs
Three and Nine Months Ended September 30, 2021 Compared to Three and Nine Months Ended September 30, 2020
During April 2021, the Company expensed unamortized deferred costs and discounts of $3.0 million associated with the retirement of our subordinated debt facility and refinancing of our senior debt facility and expensed $5.3 million of third-party costs incurred in connection with the refinancing. During September 2020 the Company expensed unamortized deferred costs and discount of $1.5 million associated with the $106.5 million principal prepayment for the term facility under our Senior Credit Facility. In the first quarter of 2020, the Company expensed $0.4 million of third-party costs incurred in connection with the amendment of our debt facilities.
Income taxes
We assess all available positive and negative evidence to estimate whether sufficient taxable income will be generated in the future to permit use of the existing deferred tax assets. ASC 740, Income Taxes, requires that all sources of future taxable income be considered in making this determination. The Tax Cuts and Jobs Act of 2017 amended section 163(j) of the Internal Revenue Code. Section 163(j), as amended, limits the business interest deduction to 30% of ATI. For taxable years through 2021, the calculation of Available Taxable Income ("ATI") closely aligns with EBITDA. Commencing in 2022, the ATI limitation more closely aligns with EBITDA, without adjusting for depreciation and amortization. Any business interest in excess of the annual limitation is carried forward indefinitely. In March 2020, the CARES Act was enacted, which among other provisions, provides for the increase of the 163(j) ATI limitation from 30% to 50% for tax years 2019 and 2020.
With respect to recording a deferred tax benefit for the carryforward of business interest expense, GAAP applies a "more likely than not" threshold for assessing recoverability. Based on management's assessment, as of the third quarter of 2021 the Company continues to record a full valuation allowance against non-deductible interest expense. The Company will continue to evaluate the realizability of the net deferred tax asset on a quarterly basis and, as a result, the valuation allowance may change in future periods.
We have historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full fiscal year to "ordinary" income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. We have used a discrete effective tax rate method to calculate taxes for the fiscal three month and nine month periods ended September 30, 2021. We determined that since small changes in estimated "ordinary" income would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate of the year to date tax provision for the fiscal three month and nine month periods ended September 30, 2021.
Financial Condition
The following discussion describes key changes that have occurred to our consolidated balance sheet at September 30, 2021 compared to December 31, 2020.
Total current assets of $580.7 million at September 30, 2021 increased by $444.8 million from $135.9 million at December 31, 2020 due primarily to the following factors:
Cash and cash equivalents
Unrestricted cash of $17.0 million at September 30, 2021 increased by $7.8 million from $9.2 million at December 31, 2020. The increase is largely attributable to net cash used in operating activities of $2.6 million, offset by the net impact of cash provided by (used in) investing and financing activities.
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Restricted cash
Restricted cash of $17.3 million decreased by $61.6 million in the first nine months 2021, largely attributable to the transfer of customer restricted cash from a Priority-owned account to a bank-owned FBO account resulting from a change in our business practice for certain types of customer deposits and cash advance payments.
Prepaid expenses and other current assets
Prepaid expenses and other current assets of $13.3 million increased by $9.8 million in the first nine months 2021, largely attributable to acquisition of Finxera.
Settlement assets and customer account balances
Settlement assets and customer account balances of $480.3 million increased by $479.5 million in the first nine months of 2021, largely attributable to the acquisition of Finxera for cash balances in client and subscriber accounts.
Accounts receivable, net of allowance for doubtful accounts
Accounts receivable, net of $52.7 million increased by $11.3 million in the first nine months of 2021, largely attributable to higher revenues.
Total assets of $1,335.2 million at September 30, 2021 increased by $917.4 million from $417.8 million at December 31, 2020 due primarily to the $444.8 million increase in current assets and the following increases in long-term assets:
Goodwill
Goodwill of $372.7 million increased by $265.9 million in the first nine months of 2021, resulting from the acquisition of C&H Financial Services, Inc.in June 2021 and the acquisition of Finxera in September 2021.
Intangible assets
Intangible assets, net of accumulated amortization, of $346.7 million increased by $248.6 million in the first nine months of 2021, resulting from acquisitions of $274.5 million, offset by amortization expense of $25.9 million.
Deferred taxes
The net deferred tax asset of $3.5 million decreased by $43.2 million in the first nine months of 2021, primarily resulting from a deferred tax liability recorded as part of the acquisition of Finxera in September 2021.
Total current liabilities of $569.2 million at September 30, 2021 increased by $420.4 million from $148.8 million at December 31, 2020 due primarily to the following factors:
Accounts payable and accrued expenses
Accounts payable and accrued expenses of $42.1 million increased by $12.3 million in the first nine months of 2021, as a result of the acquisition of Finxera and an increase in operations.
Settlement and customer account obligations
Settlement and customer account obligations of $489.3 million at September 30, 2021 increased by $416.4 million from $72.9 million at December 31, 2020 largely attributable to obligations related to customer account balances of $479.5 million from the Finxera acquisition offset by a decrease in customer restricted cash from a Priority-owned account to a bank-owned FBO account resulting from a change in our business practice for certain types of customer cash advance activities. The increase in customer account obligations is directly correlated with the increase in customer account balances.
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Current portion of long-term debt
Current portion of long-term debt of $6.2 million at September 30, 2021 decreased by $13.2 million from $19.4 million at December 31, 2020 due to the April 2021 debt refinancing, which resulted in an updated repayment schedule. The April 2021 debt refinancing is discussed below in the subsequent section for Liquidity and Capital Resources.
Total liabilities of $1,203.3 million at September 30, 2021 increased by $686.9 million from $516.4 million at December 31, 2020 due primarily to the $420.4 million increase in current liabilities and the following changes in long-term liabilities:
Long-term debt, net of current portion, discounts and debt issuance costs
Long-term debt of $620.0 million, including borrowings under the revolving credit facility of $30.0 million at September 30, 2021 increased by $262.1 million from $357.9 million at December 31, 2020 due largely to the April 2021 debt refinancing and additional borrowings for the funding of the Finxera and the C&H Financial Services, Inc. acquisitions.
Redeemable senior preferred stock
Redeemable senior preferred stock of $205.3 million at September 30, 2021 increased by $205.3 million due to the issuance and sale Redeemable Senior Preferred Stock. The issuance of redeemable senior preferred stock is discussed below in the subsequent section for Liquidity and Capital Resources.
The Company issued 150.0 million of redeemable senior preferred stock along with detachable Warrants to purchase up to 1,803,841 shares of the Company's common stock, par value $0.001 per share, at an exercise price $0.001 in April 2021. In September 2021, an additional $75.0 million of redeemable senior preferred stock was issued as part of the September 17, 2021 Finxera acquisition. The Company received a commitment from the investors to purchase up to an additional $25.0 million of redeemable senior preferred stock to provide financing for other permitted acquisitions. Proceeds from the issuance of the redeemable senior preferred stock of $211.0 million (net of discount of $5.9 million and issuance costs of $7.4 million) were allocated to the redeemable senior preferred stock $199.6 million and to the warrants $11.4 million.
Stockholders' deficit
Stockholders' deficit of $73.4 million at September 30, 2021 decreased by $25.2 million from a deficit of $98.6 million at December 31, 2020. Accumulated deficit of $114.7 million increased $12.7 million in the first nine months of 2021 due to the net loss of $12.7 million for nine months ended September 30, 2021.
Additional paid-in capital of $44.6 million increased by $38.8 million in the first nine months of 2021. The increase was primarily driven by a $34.4 million in proceeds from the issuance of 7,551,354 common shares from the Finxera merger, $11.4 million from the issuance of detachable warrants, $10.0 million from the issuance of common stock in redemptions of non-controlling interest preferred units, $2.2 million from stock-based compensation and $1.2 million from stock option exercises. These increases were offset by a decrease of $10.8 million related to non-controlling interest preferred unit redemptions and a decrease of $9.7 million for dividends to redeemable senior preferred stockholders, including $1.0 million of discount accretion. The preferred unit redemption is discussed below in PHOT Preferred Unit Redemption – Distribution to Non-Controlling Interests.
Liquidity and Capital Resources
Liquidity and capital resource management is a process focused on providing the funding we need to meet our short-term and long-term cash and working capital needs. We have used our funding sources to build our merchant portfolio, technology solutions and to make acquisitions with the expectation that such investments will generate cash flows sufficient to cover our working capital needs and other anticipated needs, including our acquisition strategy. We anticipate that cash on hand, funds generated from operations and available borrowings under our revolving credit facility are sufficient to meet our working capital requirements for at least the next twelve months. This is based upon management's estimates and assumptions, including utilizing the most currently available information regarding the effects of the COVID-19 pandemic on our financial results.
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Actual future results could differ materially, as the magnitude, duration and effects of the COVID-19 pandemic are difficult to predict, and ultimately could negatively impact our liquidity and capital resources.
Our principal uses of cash are to fund business operations, administrative costs and debt service. 
Our working capital, defined as current assets less current liabilities, was $11.5 million at September 30, 2021 and $(13.0) million December 31, 2020, respectively. At September 30, 2021, we had $30.0 million outstanding under the $40.0 million revolving credit facility of our Senior Credit Agreement.
The following tables and narrative reflect our changes in cash flows for the comparative nine month periods ended September 30, 2021 and 2020:
(dollars in thousands)Nine Months Ended September 30,
 20212020
Net cash (used in) provided by:  
Operating activities$(2,567)$10,431 
Investing activities(462,878)168,990 
Financing activities871,010 (171,056)
Net increase in cash and cash equivalents, and restricted cash$405,565 $8,365 
Cash (Used In) Provided By Operating Activities
Net cash used in operating activities was $2.6 million in the first nine months of 2021 compared to net cash provided by operating activities of $10.4 million in the first nine months of 2020. The decrease is primarily driven by the payment of tax obligations. PIK interest and changes in operating assets and liabilities.
Cash (Used In) Provided by Investing Activities
Net cash used in investing activities was $462.9 million in the first nine months 2021 compared to net cash provided by investing activities of $169.0 million in the first nine months of 2020. Cash used to acquire intangible portfolio assets amounted to $48.2 million in the first nine months of 2021 compared to $4.4 million in the first nine months of 2020. Cash used to acquire businesses in the first nine months of 2021 amounted to $407.1 million. Cash used to acquire property, equipment and software amounted to $7.5 million in the first nine months of 2021 and $6.0 million in the first half of 2020. 
Cash Provided By (Used In) Financing Activities
Net cash provided by financing activities was $871.0 million in the first nine months compared to net cash used in financing activities of $171.1 million in the first nine months of 2020. In the first nine months of 2021, total debt principal repayments were $359.9 million; proceeds from the issuance of long-term debt, net of deferred discounts and debt issuance costs, were $598.2 million; proceeds from borrowings under the revolving credit facility were $30.0 million; proceeds from issuance of senior preferred equity, net of discounts and issuance costs, were $211.0 million cash portion of dividend paid to redeemable senior preferred stockholder was $4.0 million; cash portion of preferred unit redemption to non-controlling interests was $0.8 million, proceeds from exercise of stock options was $1.2 million and the Company repurchased 162,715 shares of its common stock at a cost of $1.0 million under its share repurchase program. In the first nine months of 2020, senior debt principal repayments of $109.5 million, debt modification costs of $2.7 million , $0.5 million of net repayments under the revolving credit facility, redemption of redeemable non-controlling interests of $5.7 million and profit distributions to non-controlling interests of $45.3 million. In the first nine months of 2021, cash provided by financing activities included balances in customer accounts of $396.3 million resulting from the acquisition of Finxera.
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Long-Term Debt at September 30, 2021
On April 27, 2021, the Company refinanced its previous credit facilities by entering into a new Credit and Guaranty Agreement ("the Credit Agreement"). The Credit Agreement, is comprised of a senior secured first lien term loan facility in an aggregate principal amount of $300.0 million (the "Initial Term Loan", or "Term Loan"), a senior secured revolving credit facility in an aggregate amount not to exceed $40.0 million outstanding at any time and a senior secured first lien delayed draw term loan facility in an aggregate principal amount of $290.0 million ("Delayed Draw Term Loan", or "Term Loan"), the proceeds of which may be used to fund the Company's acquisition of Finxera. The Term Loan's interest rate is LIBOR (1.0% floor) plus 5.75%, which is a 75 basis point reduction from LIBOR (1.0% floor) plus 6.5% under the prior senior indebtedness.
As of September 30, 2021, we had outstanding debt obligations, including current portion and net of unamortized debt discount of $626.2 million, compared to $377.3 million at December 31, 2020, resulting in an increase of $248.9 million. The debt balance at September 30, 2021 consisted of $596.2 million outstanding under the Term Loan and $30 million outstanding under the revolving credit facility. Minimum amortization of the Initial Term Loan are equal quarterly installments in aggregate annual amounts equal to 1.0% of original principal, with the balance paid upon maturity. The Term Loan matures in April 2027 and the revolving credit facility expires in April 2026.
The Credit Agreement contains representations and warranties, financial and collateral requirements, mandatory payment events, events of default and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the Loan Parties to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates) and to enter into certain leases.
If the aggregate principal amount of outstanding revolving loans and letters of credit under the Credit Agreement exceeds 35% of the total revolving facility thereunder, the Loan Parties are required to comply with certain restrictions on its Total Net Leverage Ratio, which is defined in the Credit Agreement as the ratio of consolidated total debt to the Consolidated Adjusted EBITDA (as defined in the Credit Agreement). If applicable, the maximum permitted Total Net Leverage Ratio is 6.50:1.00 at each fiscal quarter ended September 30, 2021 through June 30, 2022, 6.00:1.00 at each fiscal quarter ended September 30, 2022 through June 30, 2023 and 5.50:1.00 at each fiscal quarter ended September 30, 2023 each fiscal quarter thereafter.
As of September 30, 2021, we were in compliance with our financial covenants. Total Net Leverage Ratio, Consolidated Total Debt and Consolidated Adjusted EBITDA are defined in the Credit and Guaranty Agreement and are summarized below:
The Total Net Leverage Ratio means, at any date of determination, the ratio of Consolidated Total Debt for such date, to Consolidated Adjusted EBITDA.
Consolidated Total Debt is the aggregate principal amount of indebtedness minus the aggregate amount of unrestricted cash at the balance sheet date.
Consolidated Adjusted EBITDA is consolidated net income plus any applicable items determined in accordance with clauses (i)(b) through (i)(x) of the Consolidated Adjusted EBITDA definition, minus any applicable items determined in accordance with clauses (ii)(a) through (ii)(h) of the Consolidated Adjusted EBITDA.
Under the provisions of the agreement, calculation of Consolidated Adjusted EBITDA is determined on a last twelve months basis.
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Consolidated Adjusted EBITDA is a non-GAAP liquidity measure. For determining the Total Net Leverage Ratio at September 30, 2021, Consolidated Adjusted EBITDA was calculated as follows in accordance with the referenced clause definitions from the Credit and Guaranty Agreement executed on April 27, 2021:
(in thousands)Last Twelve Months Ended
September 30, 2021
Consolidated Net Income (GAAP)$(13,709)
Applicable Adjustments:
Interest expense (clause (i)(b))33,992 
Depreciation and amortization (clause (i)(d))42,012 
Income tax expense (clause (i)(c))(1,971)
Non-cash stock-based compensation (clause (i)(j))3,153 
Acquisition transition services (clause (i)(k))(50)
Debt extinguishment and modification expenses (clause (i)(h))8,322 
Impairment of intangible asset (clause (i)(f))773 
Provision for allowance for note receivable (clause (i)(f))467 
Change in fair value of contingent consideration for business combinations (clause (ii)(a))(360)
Certain legal fees and expenses (clause (i)(m))4,778 
Litigation settlement recoveries (clause (i)(k))
Professional, accounting and consulting fees (clause (i)(k))2,404 
Other professional and consulting fees (clause (i)(h))1,693 
Other adjustments (clause (i)(k))965 
Pro forma impact of disposal99 
Pro forma impact of acquisitions and transactions65,274 
Consolidated Adjusted EBITDA (non-GAAP)$147,845 
At September 30, 2021, the Total Net Leverage Ratio was 4.27:1.00, calculated as follows:
(in thousands, except ratio)September 30, 2021
Consolidated Total Debt:
Current portion of long-term debt$6,200 
Long-term debt, net of discounts and deferred financing costs619,957 
Unamortized debt discounts and deferred financing costs22,293 
648,450 
Less unrestricted cash(16,974)
Consolidated Net Debt$631,476 
Total Net Leverage Ratio4.27x
Redeemable Senior Preferred Stock.
On April 27, 2021, we entered into the Securities Purchase Agreement with credit funds managed by certain affiliates of Ares Management Corporation ("Investors"), pursuant to which we issued and sold 150,000 shares of Redeemable Senior Preferred Stock, par value $0.001 per share, at a purchase price of $150.0 million, or $1,000 per Redeemable Senior Preferred Share, less a $5.0 million discount and issued Warrants to purchase up to 1,803,841 shares of the Company's common stock, par value
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$0.001 per share, at an exercise price $0.001. The exercise price and the number of shares issuable upon exercise of the warrants are subject to certain adjustments from time to time on the terms outlined in the Warrants.
In addition we received $427,701 from a company with which we were negotiating a business combination after it decided that it no longer wished to engage in a transaction with us. The amount received was approximatelyon September 17, 2021 the amountCompany issued an additional 75,000 shares of Redeemable Senior Preferred Stock, upon the consummation of the Company's acquisition of Finxera for a purchase price of $75.0 million, or $100 per share, less a discount of $0.9 million. The Company may also issue and sell to the Investors up to an additional 25,000 shares of Redeemable Senior Preferred Stock, at a purchase price of $1,000 per share, less a discount of $0.3 million, within 18 months after September 17, 2021, upon the completion of a permitted acquisition and satisfaction of certain customary closing conditions.
Proceeds from the sale of the Redeemable Senior Preferred Stock were used to repay subordinated debt, pay certain fees and expenses relating to the debt refinancing and the Securities Purchase Agreement, fund an April 2021 asset acquisition and fund the Finxera acquisition in September 2021.
On April 27, 2021 the Company entered into a Registration Rights Agreement, by and among the Company and the Investors pursuant to which the Company agreed to provide certain registration rights with respect to the shares of Common Stock issuable upon exercise of the Warrants (the "Registrable Securities").
Under the Registration Rights Agreement, the holders of the Registrable Securities were granted piggyback rights to be included in certain underwritten offerings of Common Stock and the right to demand a shelf registration of Registrable Securities.
The Redeemable Senior Preferred Stock has a quarterly cumulative preferred dividend at LIBOR plus 12.0%, with a cash portion at the discretion of the Company at LIBOR (1.0% floor) plus 5.0% and accumulated portion at 7.0%. The dividend is subject to a 2.0% increase if the Company elects the cash portion to be added to accumulated. There are scheduled dividend rate increases after the fifth anniversary of issuance. In the first nine months of 2021, the Company's Board of Directors declared and authorized the second and third quarter 2021 dividends with a 6.0% cash portion of $1.6 million and $2.4 million, respectively, and a 7.0% accumulated portion of $1.8 million and $2.9 million respectively. The Company paid the dividend on June 30, 2021 and September 30, 2021. Additionally, the Company recorded $0.5 million of discount accretion.
Impact of COVID-19 Pandemic on Liquidity and Capital Resources
Our current assessment is that we incurredanticipate cash on hand, funds generated from operations and available borrowings under our revolving credit facility to be sufficient to meet our working capital requirements, and that we will remain in pursuing that transaction.

We intendcompliance with our debt covenants. However, the ongoing magnitude, duration and effects of the COVID-19 pandemic on our future results of operation, cash flows and financial condition are difficult to usepredict at this time, and our current assessment is subject to material revision.

Related Party Transactions
PHOTPreferred Unit Redemption - Distribution to Non-Controlling Interests
In February 2019, PHOT, a subsidiary of the Company, received a contribution of substantially all of the net proceedsoperating assets eTab and Cumulus under asset contribution agreements. PHOT is a part of the Offering, includingCompany's Integrated Partners reportable segment. No material liabilities were assumed by PHOT. These contributed assets were composed substantially of technology-related assets. Prior to these transactions, eTab was 80.0% owned by the funds heldCompany's CEO. No cash consideration was paid to the contributors of the eTab or Cumulus assets on the date of the transactions. As consideration for these contributed assets, the contributors were issued redeemable NCIs in PHOT. Under these redeemable NCIs, the trust account,contributors were eligible to receive up to $4.5 million of profits earned by PHOT, plus a preferred yield (6.0% per year) on any undistributed preferred equity interest ("Total Preferred Equity Interest"). Once the Total Preferred Equity Interest is distributed to the holders, the redeemable NCIs cease to exist. The Company's CEO initially owned 83.3% of the redeemable NCIs, which ownership interest was subsequently reduced to 35.3% through the CEO's disposition of interests to others.
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At the time of contribution, the Company determined that the contributor's carrying value of the eTab and Cumulus net assets (as a common control transaction under GAAP) were not material. Under the guidance for a common control transaction, the contribution of the eTab and Cumulus net assets did not result in a change of entity or the receipt of a business, therefore the Company's financial statements for prior periods were not adjusted to reflect the historical results attributable to the eTab net assets. For the period from February 1, 2019 through October 31, 2020, a total of $250,000 of PHOT's earnings were attributable to the NCIs of PHOT, and this same amount was distributed in cash to the NCIs during the same period.
In November 2020, the Company agreed with the contributors to an exchange of shares of common stock of the Company, or cash, for the remaining undistributed Total Preferred Equity Interests of $4.8 million. An exchange valuation for the Company's common stock was established as of November 12, 2020 at the prior 20-day volume weighted average price of $2.78 per share. The exchange was contingent upon receiving approval of the Company's lenders; therefore, the binding exchange agreements were not entered into until after lender approval was received in April 2021 in connection with our initial business combinationthe debt refinancing. The April 2021 debt refinancing is discussed above in the prior section for Liquidity and to pay our expenses relating thereto, including a deferred underwriting commission payable to Chardan Capital Markets, LLC in an amount equal to 2.0%Resources.
In May 2021, the Company entered into exchange agreements and completed the exchange of 1,428,358 shares of common stock and $814,219 of cash for the Total Preferred Equity Interests. The CEO received 605,623 shares of common stock of the Company in exchange for his 35.3% interest, and the Company's Executive Vice President of M&A and Corporate Development received 413,081 shares of common stock of the Company in exchange for her 24.1% interest. Subsequent to establishing the common stock valuation in November 2020 and the date of exchange in May 2021, the Company's common stock price appreciated to $7.75 per share. The Company's financial statements for the three months ended June 30, 2021 reflect this exchange as a distribution to non-controlling interests at an appreciated common stock value of $6.975 per share, which incorporates a 10% liquidity discount of $0.775 per share due to Rule 144 trading restrictions. Therefore, the total gross proceeds raised in the offering upon consummationdistribution amounted to $10.8 million, comprised of our initial business combination. To the extent that our capital$10.0 million of common stock is used in whole or in part as consideration to effect our initial business combination, the remaining proceeds held in the trust account as well asand $0.8 million of cash.
Off-Balance Sheet Arrangements 
We have not entered into any other net proceeds not expended will be used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuingtransactions with third parties or expanding the target business’ operations, for strategic acquisitions and for marketing, research and development of existingunconsolidated entities whereby we have financial guarantees, subordinated retained interest, derivative instruments, or new products. Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the completion of our initial business combination if the funds available to us outside of the trust account were insufficient to cover such expenses.

We anticipateother contingent arrangements that the amounts outside of our trust account will be insufficient to allowexpose us to operate until March 19, 2018 (if an extension is not completed)material continuing risks, contingent liabilities or other obligations.

Commitments and Contractual Obligations
Commitments
See Note 2. Acquisitionsand Note 12. We expectCommitments and Contingencies, to have to raise additional capital through loans or additional investments from our shareholders, officers, directors, or third parties to allow us to operate until March 19, 2018 (if an extension is not completed). NoneUnaudited Condensed Consolidated Financial Statements in Part I, Item 1 of the shareholders, officers or directors are under any obligation to advance funds to, or to invest in, our company. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital,this Quarterly Report on Form 10-Q for disclosure information about potential contingent payments that we may be required to take additional measuresmake in future periods that are not required to conserve liquidity, which could include, but not necessarily be limitedrecognized in our consolidated balance sheets as of September 30, 2021 or December 31, 2020.
Contractual Obligations
Except as described in the following,there have been no significant changes to curtailing operations, suspendingour contractual obligations compared to those disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations of Priority" included in the pursuitAnnual Report for the year ended December 31, 2020. Changes in the minimum annual spend commitments with third-party processor partners and contingent consideration for acquisitions are further described in Note 12.Commitments and Contingencies. For an updated schedule of our business plan,debt repayments under the Credit and reducing overhead expenses. We cannot provide any assurance that new financingGuaranty Agreement executed on April 27, 2021 and amended on September 17, 2021, see Note 9.Debt Obligations. Also, at December 31, 2020, the Company accrued approximately $6.2 million for the remaining cash consideration it estimates it will be availablerequired to uspay under an assignment of merchant portfolio rights agreement and related reseller agreement it executed with a third-party in October 2019. Payments are required to be made on commercially acceptable terms,a quarterly basis through September 30, 2022. The Company continues to review its estimate of the remaining consideration to be paid and will adjust its obligation accordingly if at all. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

Moreover, we may need to obtain additional financing either to consummate our initial business combination or because we become obligated to convert a significant number of our public shares upon consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, we would only consummate such financing simultaneously with the consummation of our initial business combination. Following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Off-Balance Sheet Arrangements

deemed necessary. As of September 30, 2017, we did2021, the only change in the amounts accrued was for the required payments made in 2021.

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Critical Accounting Policies and Estimates
Our Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles for interim periods, which often require the judgment of management in the selection and application of certain accounting principles and methods. Our critical accounting policies and estimates are discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our most recent Annual Report on Form 10-K. There have been no material changes to these critical accounting policies and estimates as of September 30, 2021.
Effect of New Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standards setting bodies that may affect our current and/or future financial statements. See Note 1.Basis of Presentation and Significant Accounting Policies, to our Unaudited Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recently issued accounting pronouncements not have any off-balance sheet arrangements.

yet adopted. 

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Item 3. Quantitative and Qualitative Disclosures aboutAbout Market Risk

As

For quantitative and qualitative disclosures about market risk, see Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," of September 30, 2017, we wereour Annual Report on Form 10-K for the year ended December 31, 2020. Our exposures to market risk have not subject to any market or interest rate risk. Following the consummation of the Offering, the net proceeds of the Offering, including amounts in the trust account, may only be invested in U.S. government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in US treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

changed materially since December 31, 2020.

Item 4. Controls and Procedures

Evaluation of

a) Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our

We maintain disclosure controls and procedures, as of the end of the fiscal quarter ended September 30, 2017, as such term is defined in Rules 13a-15(e) and 15d-15(e) underof the Securities Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective.

Disclosure controls and procedures areAct of 1934 (the "Exchange Act"), designed to ensureprovide reasonable assurance that information required to be disclosed by usthe Company in ourreports that it files or submits under the Exchange Act reports is recorded, processed, summarized andor reported within the time periods specified in the SEC’sSEC rules and forms,regulations and that such information is accumulated and communicated to our management, including our principal executive officer (CEO) and principalchief financial officer or persons performing similar functions,(CFO) and, as appropriate, to allow timely decisions regarding required disclosure.

disclosures.

Management, with the participation of the CEO and CFO, has evaluated the effectiveness of the Company's disclosure controls and procedures as of September 30, 2021. Based on that evaluation, the Company's CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of September 30, 2021.
b)  Changes in Internal Control over Financial Reporting

There waswere no changechanges in ourthe Company's internal control over financial reporting that occurred during the fiscalthird quarter of 2017 covered by this Quarterly Report on Form 10-Q2021 that hashave materially affected, or isare reasonably likely to materially affect, ourthe Company's internal control over financial reporting.


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PART II -II. OTHER INFORMATION

Item 1. Legal Proceedings
We are involved in certain legal proceedings and claims which occur in the normal course of our business. We are not currently a party to any legal proceedings that we believe would have a material adverse effect on our financial position, results of operations, or cash flows.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in our Annual Report under Part I, Item 1A "Risk Factors" because these risk factors may affect our operations and financial results.
The risks described in the Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities

On September 19, 2016, we consummated our initial public offering (the “Offering”)

The following table presents information with respect to purchases made by the Company of 5,000,000 units (the “Units”). Each Unit consists of one share ofits common stock (“Common Stock”), and one warrant (“Public Warrant”) to purchase oneduring the three months ended September 30, 2021 (shares are in whole units):
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(1)
July 1-31, 2021$— 
August 1-31, 202144,9115.79 44,911955,089
September 1-30, 2021117,804$6.48 117,8040
Total162,715 162,715 
(1)In August 2021, Priority's Board of Directors authorized a $10.0 million share of Common Stock at an exercise price of $11.50 per share. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $50,000,000. We grantedrepurchase program (the "2021 Share Repurchase Program"). Under this program the underwriters a 45-day option toCompany may purchase up to 750,000 additional Units to cover over-allotments, if any. Simultaneously1 million shares of its common stock through open market transactions, unsolicited or solicited privately negotiated transactions, or otherwise in accordance with the consummation of the Offering, we consummated the private placement (“Private Placement”) of 402,500 units (the “Private Units”) at a price of $10.00 per Private Unit, generating total proceeds of $4,025,000.all applicable securities laws and regulations. The underwriters exercised the over-allotment option in part and,2021 Share Repurchase Program expires on October 14, 2016, the underwriters purchased 310,109 over-allotment option Units, which were sold at an offering price of $10.00 per Unit, generating gross proceeds of $3,101,090. On October 14, 2016, simultaneously with the sale of the Over-Allotment Units, we consummated the private sale of an additional 18,607 Private Units to one of the initial stockholders, generating gross proceeds of $186,070. The remainder of the over-allotment option expired unexercised.

The Private Units are identical to the units sold in the Offering except the warrants included in the Private Units will be non-redeemableAugust 17, 2022 and may be exercised on a cashless basis, in each case so longdiscontinued at any time. The Company terminated the 2021 Share Repurchase Program effective as they continue to be held by the initial purchasers or their permitted transferees. The holders of the Private Units have agreed (A) to vote their private shares and any public shares acquired by them in favorclose of any proposed business combination, (B) not to propose, or vote in favoron September 23, 2021.

Item 3. Defaults Upon Senior Securities
N/A
Item 4. Mine Safety Disclosures
N/A
Item 5. Other Information
N/A

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Table of an amendment to our certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by March 13, 2018 (or June 13, 2018, as applicable), unless we provide our public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes, divided by the number of then outstanding public shares, (C) not to convert any shares (including the private shares) into the right to receive cash from the trust account in connection with a stockholder vote to approve our proposed initial business combination (or sell any shares they hold to us in a tender offer in connection with a proposed initial business combination) or a vote to amend the provisions of our certificate of incorporation relating to the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by March 13, 2018 (or June 13, 2018, as applicable) and (D) that the private shares shall not be entitled to be redeemed for a pro rata portion of the funds held in the trust account if a business combination is not consummated. Additionally, our insiders (and/or their designees) have agreed not to transfer, assign or sell any of the private units or underlying securities (except to the same permitted transferees as the insider shares and provided the transferees agree to the same terms and restrictions as the permitted transferees of the insider shares must agree to, each as described above) until the completion of our initial business combination.

As of October 14, 2016, a total of $54,694,127 of the net proceeds from the Offering and the Private Placement were in a trust account established for the benefit of the Company’s public shareholders.

We paid a total of $1,500,000 in underwriting discounts and commissions and $1,687,451 for other costs and expenses related to our formation and the IPO.

For a description of the use of the proceeds generated in our initial public offering, see Part I, Item 2 of this Form 10-Q. 

Contents

Item 6. Exhibits.

Exhibits
Exhibit No.Description
ExhibitDescription
*
*
**
101.INS*
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH
101.SCH*XBRL Taxonomy Extension Schema Document
101.CAL
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
101.LAB*XBRL Taxonomy Extension Label Linkbase Document
101.PRE
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document
104*Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


* Filed herewith
** Furnished herewith


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SIGNATURES

In accordance with



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrantRegistrant has duly caused this report to be signed on itstheir behalf by the undersigned, thereunto duly authorized.



                        Priority Technology Holdings, Inc.

M I ACQUISITIONS, INC.
November 15, 2021
By:
/s/ Joshua Sason
Joshua Sason
THOMAS C. PRIORE
Thomas C. Priore
Chief Executive Officer
and Chairman
(Principal executive officer)Executive Officer)
November 15, 2021By:
/s/ Marc Manuel
Marc Manuel
MICHAEL T. VOLLKOMMER
Michael T. Vollkommer
Chief Financial Officer
(Principal financial and accounting officer)Financial Officer)

Date: November 14, 2017

 16