What changed in this filing

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Item 1. Financial Statements

2022-08-09 compared with 2022-05-10 · 251 added, 267 removed, 955 unchanged (35% of the section changed)

3 unchanged sentences

(In thousands, except share amounts)

March 31, September 30,

June 30, September 30,

Current assets

29 unchanged sentences

Preferred stock, par value $ 0.0001 per share, 10,000,000 shares authorized;

0 shares issued and outstanding as of March 31, 2022 and September 30, 2021

0 shares issued and outstanding as of June 30, 2022 and September 30, 2021

Class A common stock, par value $ 0.0001 per share, 150,000,000 shares authorized;

22,133,682 and 22,026,098 shares issued and outstanding as of March 31, 2022 and September 30, 2021, respectively

22,252,640 and 22,026,098 shares issued and outstanding as of June 30, 2022 and September 30, 2021, respectively

Class B common stock, par value $ 0.0001 per share, 40,000,000 shares authorized;

10,174,142 and 10,229,142 shares issued and outstanding as of March 31, 2022 and September 30, 2021, respectively

10,118,142 and 10,229,142 shares issued and outstanding as of June 30, 2022 and September 30, 2021, respectively

Additional paid-in capital 226,269 211,237

8 unchanged sentences

(In thousands, except share and per share amounts)

Three months ended March 31, Six months ended March 31,

Three months ended June 30, Nine months ended June 30,

2022 2021 (1)

7 unchanged sentences

Total operating expenses 83,284 63,964 242,275 157,586

(Loss) income from operations ( 6,177 ) 1,199 ( 6,932 ) 196

Loss from operations ( 2,731 ) ( 835 ) ( 9,663 ) ( 639 )

Interest expense, net 3,767 2,704 10,298 7,092

1 unchanged sentence

Total other expenses 3,767 2,704 10,298 4,739

(Loss) income before income taxes ( 9,554 ) 1,194 ( 13,463 ) ( 1,838 )

Provision for (benefit from) income taxes 884 ( 136 ) 656 ( 146 )

Net (loss) income ( 10,438 ) 1,330 ( 14,119 ) ( 1,692 )

Net (loss) income attributable to non-controlling interest ( 3,065 ) 27 ( 4,218 ) ( 997 )

Net (loss) income attributable to i3 Verticals, Inc.

Loss before income taxes ( 6,498 ) ( 3,539 ) ( 19,961 ) ( 5,378 )

(Benefit from) provision for income taxes ( 1,810 ) 662 ( 1,154 ) 516

Net loss ( 4,688 ) ( 4,201 ) ( 18,807 ) ( 5,894 )

Net loss attributable to non-controlling interest ( 960 ) ( 921 ) ( 5,178 ) ( 1,918 )

Net loss attributable to i3 Verticals, Inc.

$ ( 3,728 ) $ ( 3,280 ) $ ( 13,629 ) $ ( 3,976 )

Net (loss) income per share attributable to Class A common stockholders:

Net loss per share attributable to Class A common stockholders:

Basic $ ( 0.17 ) $ ( 0.15 ) $ ( 0.62 ) $ ( 0.19 )

27 unchanged sentences

Balance at March 31, 2022 22,133,682 2 10,174,142 1 220,201 ( 16,381 ) 83,672 287,495

Equity-based compensation — — — — 6,799 — — 6,799

Net loss — — — — — ( 3,728 ) ( 960 ) ( 4,688 )

Redemption of common units in i3 Verticals, LLC 56,000 — ( 56,000 ) — 460 — ( 460 ) —

Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — 748 — — 748

Exercise of equity-based awards 62,958 — — — 138 — — 138

Allocation of equity to non-controlling interests — — — — ( 2,077 ) — 2,077 —

Balance at June 30, 2022 22,252,640 $ 2 10,118,142 $ 1 $ 226,269 $ ( 20,109 ) $ 84,329 $ 290,492

See Notes to the Interim Condensed Consolidated Financial Statements

20 unchanged sentences

Balance at March 31, 2021 21,919,300 2 10,229,142 1 203,631 ( 2,718 ) 82,656 283,572

Equity-based compensation — — — — 5,111 — — 5,111

Net loss — — — — — ( 3,280 ) ( 921 ) ( 4,201 )

Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis — — — — 28 — — 28

Exercise of equity-based awards 40,759 — — — 287 — — 287

Allocation of equity to non-controlling interests — — — — ( 1,597 ) — 1,597 —

Balance at June 30, 2021 21,960,059 $ 2 10,229,142 $ 1 $ 207,460 $ ( 5,998 ) $ 83,332 $ 284,797

__________________________

5 unchanged sentences

(In thousands)

Six months ended March 31,

Nine months ended June 30,

2022 2021 (1)(2)

1 unchanged sentence

Net loss $ ( 18,807 ) $ ( 5,894 )

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

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

Depreciation and amortization 21,823 17,938

3 unchanged sentences

Amortization of capitalized customer acquisition costs 532 386

Loss on disposal of assets — —

Unrealized gain on investment — ( 2,353 )

Provision for (benefit from) income taxes 656 ( 146 )

(Benefit from) provision for income taxes ( 1,154 ) 517

Non-cash lease expense 3,684 2,328

16 unchanged sentences

Expenditures for capitalized software ( 7,199 ) ( 4,483 )

Purchases of merchant portfolios and residual buyouts — ( 1,500 )

Acquisitions of businesses, net of cash and restricted cash acquired ( 100,715 ) ( 142,486 )

Acquisition of other intangibles ( 11 ) ( 104 )

Loans to third parties ( 30 ) —

Net cash used in investing activities ( 109,350 ) ( 149,937 )

3 unchanged sentences

(In thousands)

Six months ended March 31,

Nine months ended June 30,

2022 2021 (1)(2)

13 unchanged sentences

__________________________

The prior period amounts included in the statement of cash flows have been updated to correct settlement assets as restricted cash, which were previously reported as cash flows used in operating activities.

These adjustments reflect an increase in prior year cash flows provided by operating activities of $ 6,056 and a corresponding increase in cash, cash equivalents, and restricted cash at the end of the period.

These adjustments reflect a decrease in prior year cash flows provided by operating activities of $ 2,046 and a decrease of $ 7,009 in cash outflows for acquisitions of businesses, net of cash and restricted cash acquired within cash flows used in investing activities, resulting in a combined increase of $ 4,963 in cash, cash equivalents, and restricted cash at the end of the period.

Effective October 1, 2020, the Company's financial statements are presented in accordance with ASU 2021-08, Accounting Standards Codification Topic 805, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

20 unchanged sentences

The Company was formed for the purpose of completing an initial public offering (“IPO”) of its Class A common stock and other related transactions in order to carry on the business of i3 Verticals, LLC and its subsidiaries.

i3 Verticals, LLC was founded in 2012 and delivers seamlessly integrated software and payment solutions to small- and medium-sized businesses (“SMBs”) and organizations in strategic vertical markets.

i3 Verticals, LLC was founded in 2012 and delivers seamlessly integrated software and payment solutions to customers in strategic vertical markets.

The Company’s headquarters are located in Nashville, Tennessee, with operations throughout the United States.

14 unchanged sentences

Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for fair presentation of the unaudited condensed consolidated financial statements of the Company and its subsidiaries as of March 31, 2022 and for the three and six months ended March 31, 2022 and 2021.

The results of operations for the three and six months ended March 31, 2022 and 2021 are not necessarily indicative of the operating results for the full year.

In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for fair presentation of the unaudited condensed consolidated financial statements of the Company and its subsidiaries as of June 30, 2022 and for the three and nine months ended June 30, 2022 and 2021.

The results of operations for the three and nine months ended June 30, 2022 and 2021 are not necessarily indicative of the operating results for the full year.

It is recommended that these interim condensed consolidated financial statements be read in conjunction with the Company's consolidated financial statements and related footnotes for the years ended September 30, 2021 and 2020, included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2021.

2 unchanged sentences

All significant intercompany accounts and transactions have been eliminated in consolidation.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Restricted Cash

Restricted cash represents funds held-on-deposit with processing banks pursuant to agreements to cover potential merchant losses.

Restricted cash represents funds held in escrow related to acquisitions or held-on-deposit with processing banks pursuant to agreements to cover potential merchant losses.

It is presented as long-term assets on the accompanying condensed consolidated balance sheets since the related agreements extend beyond the next twelve months.

Following the adoption of Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows:

Restricted Cash (Topic 230), the Company includes restricted cash along with the cash and cash equivalents balance for presentation in the consolidated statements of cash flows.

Settlement Assets and Obligations

Settlement assets and obligations result when funds are temporarily held or owed by the Company on behalf of merchants, consumers, schools, and other institutions.

Timing differences, interchange expense, merchant reserves and exceptional items cause differences between the amount received from the card networks and the amount funded to counterparties.

Timing differences, interchange expenses, merchant reserves and exceptional items cause differences between the amount received from the card networks and the amount funded to counterparties.

These balances arising in the settlement process are reflected as settlement assets and obligations on the accompanying consolidated balance sheets.

With the exception of merchant

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

reserves, settlement assets or settlement obligations are generally collected and paid within one to four days.

Settlement assets and settlement obligations were both $ 7,272 and $ 4,768 as of March 31, 2022 and September 30, 2021, respectively.

Inventories consist of point-of-sale equipment to be sold to clients and are stated at the lower of cost, determined on a weighted average or specific basis, or net realizable value.

Inventories were $ 3,909 and $ 2,220 at March 31, 2022 and September 30, 2021, respectively, and are included within prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.

With the exception of merchant reserves, settlement assets or settlement obligations are generally collected and paid within one to four days.

Settlement assets and settlement obligations were both $ 6,365 as of June 30, 2022 and $ 4,768 as of September 30, 2021, respectively.

Inventories consist of point-of-sale equipment to be sold to customers and are stated at the lower of cost, determined on a weighted average or specific basis, or net realizable value.

Inventories were $ 4,087 and $ 2,220 at June 30, 2022 and September 30, 2021, respectively, and are included within prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.

Business acquisitions have been recorded using the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), and, accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair value as of the date of acquisition.

8 unchanged sentences

The operating results of an acquisition are included in the Company’s condensed consolidated statements of operations from the date of such acquisition.

Acquisitions completed during the six months ended March 31, 2022 contributed $ 16,687 and $ 2,922 of revenue and net income, respectively, to the Company's condensed consolidated statements of operations for the six months then ended.

Acquisitions completed during the nine months ended June 30, 2022 contributed $ 26,049 and $ 3,567 of revenue and net income, respectively, to the Company's condensed consolidated statements of operations for the nine months then ended.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The Company adopted ASU 2016-02, Leases, (“ASC 842”) on October 1, 2020, using the optional modified retrospective method under which the prior period financial statements were not restated for the new guidance.

6 unchanged sentences

The Company accounts for all components in a lease arrangement as a single combined lease component.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Operating lease cost is recognized on a straight-line basis over the lease term.

6 unchanged sentences

The Company adopted ASC 606 on October 1, 2019, using the modified retrospective method and applying the standard to all contracts not completed on the date of adoption.

The Company's revenue for the six months ended March 31, 2022 and 2021 is derived from the following sources:

The Company's revenue for the nine months ended June 30, 2022 and 2021 is derived from the following sources:

• Software and related services — Includes sales of software as a service, transaction-based fees, ongoing software maintenance and support, software licenses and other professional services related to our software offerings

5 unchanged sentences

The Company generates sales of one-time software licenses, which is functional intellectual property.

Revenue from functional intellectual property is recognized at a point in time, when delivered to the client.

Revenue from functional intellectual property is recognized at a point in time, when delivered to the customer.

The Company also offers access to its software under software-as-a-service (“SaaS”) arrangements, which represent services arrangements.

Revenue from SaaS arrangements is recognized over time, over the term of the agreement.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Discount fees represent a percentage of the dollar amount of each credit or debit transaction processed or a specified per transaction amount, depending on the card type.

The Company frequently enters into agreements with clients under which the client engages the Company to provide both payment authorization services and transaction settlement services for all of the cardholder transactions of the client, regardless of which issuing bank and card network to which the transaction relates.

The Company’s core performance obligations are to stand ready to provide continuous access to the Company’s payment authorization services and transaction settlement services in order to be able to process as many transactions as its clients require on a daily basis over the contract term.

The Company frequently enters into agreements with customers under which the customer engages the Company to provide both payment authorization services and transaction settlement services for all of the cardholder transactions of the customer, regardless of which issuing bank and card network to which the transaction relates.

The Company’s core performance obligations are to stand ready to provide continuous access to the Company’s payment authorization services and transaction settlement services in order to be able to process as many transactions as its customers require on a daily basis over the contract term.

These services are stand ready obligations, as the timing and quantity of transactions to be processed is not determinable.

Under a stand-ready obligation, the Company’s performance obligation is defined by each time increment rather than by the underlying activities satisfied over time based on days elapsed.

Because the service of standing ready is substantially the same each day and has the same pattern of transfer to the client, the Company has determined that its stand-ready performance obligation comprises a series of distinct days of service.

Because the service of standing ready is substantially the same each day and has the same pattern of transfer to the customer, the Company has determined that its stand-ready performance obligation comprises a series of distinct days of service.

Discount fees are recognized each day based on the volume or transaction count at the time the merchants’ transactions are processed.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The Company follows the requirements of ASC 606-10-55 Revenue from Contracts with Customers—Principal versus Agent Considerations , which states that the determination of whether a company should recognize revenue based on the gross amount billed to a client or the net amount retained is a matter of judgment that depends on the facts and circumstances of the arrangement.

The Company follows the requirements of ASC 606-10-55 Revenue from Contracts with Customers—Principal versus Agent Considerations , which states that the determination of whether a company should recognize revenue based on the gross amount billed to a customer or the net amount retained is a matter of judgment that depends on the facts and circumstances of the arrangement.

The determination of gross versus net recognition of revenue requires judgment that depends on whether the Company controls the good or service before it is transferred to the merchant or whether the Company is acting as an agent of a third party.

8 unchanged sentences

Revenues derived from service fees are recognized at the time the services are performed and there are no further performance obligations.

Revenue from fixed transactions, which principally relate to the sale of equipment, is recognized upon transfer of ownership and delivery to the client, after which there are no further performance obligations.

Revenue from fixed transactions, which principally relate to the sale of equipment, is recognized upon transfer of ownership and delivery to the customer, after which there are no further performance obligations.

Arrangements may contain multiple performance obligations, such as payment authorization services, transaction settlement services, hardware, software products, maintenance, and professional installation and training services.

1 unchanged sentence

The selling price for a deliverable is based on standalone selling price, if available, the adjusted market assessment approach, estimated cost plus margin approach, or residual approach.

The Company establishes estimated selling price, based on the judgment of the Company's management, considering internal factors such as margin objectives, pricing practices and controls, client segment pricing strategies and the product life cycle.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

the product life cycle.

In arrangements with multiple performance obligations, the Company determines allocation of the transaction price at inception of the arrangement and uses the standalone selling prices for the majority of the Company's revenue recognition.

2 unchanged sentences

The Company’s professional services, including training, installation, and repair services are recognized as revenue as these services are performed.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The tables below present a disaggregation of the Company's revenue from contracts with clients by product by segment.

The tables below present a disaggregation of the Company's revenue from contracts with customers by product by segment.

Refer to Note 14 for discussion of the Company's segments.

3 unchanged sentences

• Other — Includes sales of equipment, non-software related professional services and other revenues.

For the Three Months Ended March 31, 2022

For the Three Months Ended June 30, 2022

Merchant Services Proprietary Software and Payments Other Total

3 unchanged sentences

Total revenue $ 32,714 $ 47,839 $ — $ 80,553

For the Three Months Ended March 31, 2021 (1)

For the Three Months Ended June 30, 2021 (1)

Merchant Services Proprietary Software and Payments Other Total

9 unchanged sentences

(in thousands, except unit, share and per share amounts)

For the Six Months Ended March 31, 2022

For the Nine Months Ended June 30, 2022

Merchant Services Proprietary Software and Payments Other Total

3 unchanged sentences

Total revenue $ 91,071 $ 141,575 $ ( 34 ) $ 232,612

For the Six Months Ended March 31, 2021 (1)

For the Nine Months Ended June 30, 2021 (1)

Merchant Services Proprietary Software and Payments Other Total

6 unchanged sentences

See Note 2 to the interim consolidated financial statements for a description of the recently adopted accounting pronouncement and the impacts of adoption on the condensed consolidated statements of operations.

The tables below present a disaggregation of the Company's revenue from contracts with clients by timing of transfer of goods or services by segment.

The tables below present a disaggregation of the Company's revenue from contracts with customers by timing of transfer of goods or services by segment.

The Company's revenue included in each category are defined as follows:

1 unchanged sentence

• Revenue earned at a point in time — Includes fixed service fees, software licenses sold as functional intellectual property, professional services and other equipment.

For the Three Months Ended March 31, 2022

For the Three Months Ended June 30, 2022

Merchant Services Proprietary Software and Payments Other Total

5 unchanged sentences

(in thousands, except unit, share and per share amounts)

For the Three Months Ended March 31, 2021 (1)

For the Three Months Ended June 30, 2021 (1)

Merchant Services Proprietary Software and Payments Other Total

5 unchanged sentences

For the Six Months Ended March 31, 2022

For the Nine Months Ended June 30, 2022

Merchant Services Proprietary Software and Payments Other Total

2 unchanged sentences

Total revenue $ 91,071 $ 141,575 $ ( 34 ) $ 232,612

For the Six Months Ended March 31, 2021 (1)

For the Nine Months Ended June 30, 2021 (1)

Merchant Services Proprietary Software and Payments Other Total

9 unchanged sentences

Unbilled amounts associated with these services are presented as accounts receivable as the Company has an unconditional right to payment for services performed.

As of March 31, 2022 and September 30, 2021, the Company’s contract assets from contracts with customers was $ 6,080 and $ 1,505 , respectively.

As of June 30, 2022 and September 30, 2021, the Company’s contract assets from contracts with customers was $ 6,137 and $ 1,505 , respectively.

Contract Liabilities

Deferred revenue represents amounts billed to clients by the Company for services contracts.

Deferred revenue represents amounts billed to customers by the Company for services contracts.

Payment is typically collected at the start of the contract term.

2 unchanged sentences

Deferred revenue that is expected to be recognized as revenue within one year is recorded as short-term deferred revenue and the remaining portion is recorded as other long-term liabilities in the condensed consolidated balance sheets.

The terms for most of the Company's contracts with a deferred revenue component are one year.

Substantially all of the Company's deferred revenue is anticipated to be recognized within the next year.

The terms for

i3 VERTICALS, Inc.

1 unchanged sentence

(in thousands, except unit, share and per share amounts)

The following tables present the changes in deferred revenue as of and for the six months ended March 31, 2022 and 2021, respectively:

most of the Company's contracts with a deferred revenue component are one year.

Substantially all of the Company's deferred revenue is anticipated to be recognized within the next year.

The following tables present the changes in deferred revenue as of and for the nine months ended June 30, 2022 and 2021, respectively:

Balance at September 30, 2021

5 unchanged sentences

Balance at March 31, 2022 30,334

Deferral of revenue 8,131

Recognition of unearned revenue ( 15,742 )

Balance at June 30, 2022 $ 22,723

Balance at September 30, 2020

5 unchanged sentences

Balance at March 31, 2021 23,629

Deferral of revenue 11,565

Recognition of unearned revenue ( 14,087 )

Balance at June 30, 2021 $ 21,107

Costs to Obtain and Fulfill a Contract

The Company capitalizes incremental costs to obtain new contracts and contract renewals and amortizes these costs on a straight-line basis as an expense over the benefit period, which is generally the contract term, unless a commensurate payment is not expected at renewal.

As of March 31, 2022 and September 30, 2021 the Company had $ 4,149 and $ 3,851 , respectively, of capitalized contract costs, which relates to commissions paid to employees and agents as well as other incentives given to customers to obtain new sales, included within “Other assets" on the condensed consolidated balance sheets.

The Company recorded expense related to these costs of $ 178 and $ 345 for the three and six months ended March 31, 2022, respectively and $ 129 and $ 248 for the three and six months ended March 31, 2021.

The Company expenses sales commissions as incurred for the Company's sales commission plans that are paid on recurring monthly revenues, portfolios of existing clients, or have a substantive stay requirement prior to payment.

As of June 30, 2022 and September 30, 2021 the Company had $ 4,227 and $ 3,851 , respectively, of capitalized contract costs, which relates to commissions paid to employees and agents as well as other incentives given to customers to obtain new sales, included within “Other assets" on the condensed consolidated balance sheets.

The Company recorded expense related to these costs of $ 187 and $ 532 for the three and nine months ended June 30, 2022, respectively and $ 138 and $ 386 for the three and nine months ended June 30, 2021.

The Company expenses sales commissions as incurred for the Company's sales commission plans that are paid on recurring monthly revenues, portfolios of existing customers, or have a substantive stay requirement prior to payment.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Other Cost of Services

8 unchanged sentences

The Company accounts for all governmental taxes associated with revenue transactions on a net basis.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Use of Estimates

30 unchanged sentences

The adoption of ASU 2021-08 resulted in adjustments to the fair values assigned to goodwill and deferred revenue assumed as of the acquisition dates of acquisitions occurring during the year ended September 30, 2021, and an increase in revenue for the year ended September 30, 2021 due to recognition of revenue earned during the period for deferred revenue contracts acquired in business combinations.

The following tables present the material impacts of adopting ASU 2021-08 on the Company's condensed consolidated balance sheets as of March 31, 2021:

As of March 31, 2021

The following tables present the material impacts of adopting ASU 2021-08 on the Company's condensed consolidated balance sheets as of June 30, 2021:

As of June 30, 2021

Excluding impacts of adoption of ASU 2021-08 Adjustment Presentation with adoption of ASU 2021-08

12 unchanged sentences

(in thousands, except unit, share and per share amounts)

The following tables present the material impacts of adoption of ASU 2021-08 on the Company's condensed consolidated statements of operations for the three and six months ended March 31, 2021:

Three months ended March 31, 2021

The following tables present the material impacts of adoption of ASU 2021-08 on the Company's condensed consolidated statements of operations for the three and nine months ended June 30, 2021:

Three months ended June 30, 2021

Excluding impacts of adoption of ASU 2021-08 Adjustment Presentation with adoption of ASU 2021-08

1 unchanged sentence

Benefit from income taxes $ ( 110 ) $ 772 $ 662

Net (loss) income $ ( 53 ) $ 1,383 $ 1,330

Net (loss) income attributable to non-controlling interest $ ( 493 ) $ 520 $ 27

Net income attributable to i3 Verticals, Inc.

Net loss $ ( 4,594 ) $ 393 $ ( 4,201 )

Net loss attributable to non-controlling interest $ ( 1,286 ) $ 365 $ ( 921 )

Net loss attributable to i3 Verticals, Inc.

$ ( 3,308 ) $ 28 $ ( 3,280 )

Net income per share attributable to Class A common stockholders:

Net loss per share attributable to Class A common stockholders:

Basic $ ( 0.15 ) $ 0.00 $ ( 0.15 )

Diluted $ ( 0.15 ) $ 0.00 $ ( 0.15 )

Six months ended March 31, 2021

Nine months ended June 30, 2021

Excluding impacts of adoption of ASU 2021-08 Adjustment Presentation with adoption of ASU 2021-08

8 unchanged sentences

Diluted $ ( 0.26 ) $ 0.07 $ ( 0.19 )

The following tables present the material impacts of adoption of ASU 2021-08 on the Company's condensed consolidated statement of changes in equity for the three months ended March 31, 2021:

Three months ended March 31, 2021

The following tables present the material impacts of adoption of ASU 2021-08 on the Company's condensed consolidated statement of changes in equity for the three months ended June 30, 2021:

Three months ended June 30, 2021

Excluding impacts of adoption of ASU 2021-08 Adjustment Presentation with adoption of ASU 2021-08

Net (loss) income $ ( 53 ) 1,383 1,330

Net loss $ ( 4,594 ) 393 ( 4,201 )

Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis $ ( 141 ) 169 28

Balance at March 31, 2021 $ 281,465 $ 2,107 $ 283,572

Balance at June 30, 2021 $ 282,128 $ 2,669 $ 284,797

i3 VERTICALS, Inc.

1 unchanged sentence

(in thousands, except unit, share and per share amounts)

The following tables present the material impacts of adoption of ASU 2021-08 on the Company's condensed consolidated statements of cash flows for the six months ended March 31, 2021:

Six months ended March 31, 2021

The following tables present the material impacts of adoption of ASU 2021-08 on the Company's condensed consolidated statements of cash flows for the nine months ended June 30, 2021:

Nine months ended June 30, 2021

Excluding impacts of adoption of ASU 2021-08 Adjustment Presentation with adoption of ASU 2021-08

2 unchanged sentences

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

Benefit from deferred income taxes $ ( 306 ) $ 160 $ ( 146 )

(Benefit from) provision for deferred income taxes $ ( 416 ) $ 933 $ 517

Changes in operating liabilities:

15 unchanged sentences

The amendments in ASU No.

2021-04 provides guidance to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange.

2021-04 provide guidance to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange.

The amendments in this ASU No.

5 unchanged sentences

(in thousands, except unit, share and per share amounts)

During the six months ended March 31, 2022 and 2021, the Company acquired the following intangible assets and businesses:

Business Combinations during the six months ended March 31, 2022

During the six months ended March 31, 2022, the Company completed the acquisition of two businesses to expand the Company’s software offerings in the public sector and healthcare vertical markets.

Certain of the purchase price allocations assigned for these acquisitions are considered preliminary as of March 31, 2022.

During the nine months ended June 30, 2022 and 2021, the Company acquired the following intangible assets and businesses:

Business Combinations during the nine months ended June 30, 2022

During the nine months ended June 30, 2022, the Company completed the acquisition of three businesses to expand the Company’s software offerings in the Public Sector and Healthcare vertical markets.

Certain of the purchase price allocations assigned for these acquisitions are considered preliminary as of June 30, 2022.

Total purchase consideration was $ 107,681 , including $ 101,400 in cash consideration, funded by proceeds from the Company's revolving credit facility, and $ 6,281 of contingent consideration.

The goodwill associated with one of the two acquisitions is deductible for tax purposes.

The acquired merchant relationships intangible assets have estimated amortization periods of between nine and nineteen years .

The non-compete agreement and trade names have estimated amortization periods of five years .

The weighted-average amortization period for all intangibles acquired is fourteen years .

The acquired capitalized software has a weighted-average amortization period of seven years .

The acquired merchant relationships intangible assets have estimated amortization periods of between ten and nineteen years .

The trade names have estimated weighted-average amortization periods of four years .

The weighted-average amortization period for all intangibles acquired is fifteen years .

The acquired capitalized software have amortization periods of seven years .

Acquisition-related costs for these businesses amounted to approximately $ 601 and were expensed as incurred.

Certain provisions in the purchase agreements provide for additional consideration of up to $ 18,000 , in the aggregate, to be paid based upon the achievement of specified financial performance targets, as defined in the purchase agreements, through no later than December 2023.

Certain provisions in the purchase agreements provide for additional consideration of up to $ 23,000 , in the aggregate, to be paid based upon the achievement of specified financial performance targets, as defined in the purchase agreements, through no later than September 2024.

The Company determined the acquisition date fair values of the liabilities for the contingent consideration based on probability forecasts and discounted cash flow analyses.

4 unchanged sentences

(in thousands, except unit, share and per share amounts)

Summary of Business Combinations during the six months ended March 31, 2022

Summary of Business Combinations during the nine months ended June 30, 2022

The fair values assigned to certain assets and liabilities assumed, as of the acquisition dates, were as follows:

12 unchanged sentences

Settlement obligations 685

Deferred revenue, current 30

Current portion of operating lease liabilities 82

2 unchanged sentences

Net assets acquired $ 107,681

Pro Forma Results of Operations for Business Combinations during the six months ended March 31, 2022

The following unaudited supplemental pro forma results of operations have been prepared as though each of the acquired businesses in the six months ended March 31, 2022 had occurred on October 1, 2020.

Pro Forma Results of Operations for Business Combinations during the nine months ended June 30, 2022

The following unaudited supplemental pro forma results of operations have been prepared as though each of the acquired businesses in the nine months ended June 30, 2022 had occurred on October 1, 2020.

Pro forma adjustments were made to reflect the impact of depreciation and amortization, changes to executive compensation and the increased debt, all in accordance with ASC 805.

This supplemental pro forma information does not purport to be indicative of the results of operations that would have been attained had the acquisitions been made on these dates, or of results of operations that may occur in the future.

Six months ended March 31,

Nine months ended June 30,

Revenue $ 236,390 $ 187,512

81 unchanged sentences

PREPAID EXPENSES AND OTHER CURRENT ASSETS

A summary of the Company's prepaid expenses and other current assets as of March 31, 2022 and September 30, 2021 is as follows:

March 31, September 30,

A summary of the Company's prepaid expenses and other current assets as of June 30, 2022 and September 30, 2021 is as follows:

June 30, September 30,

Inventory $ 4,087 $ 2,220

8 unchanged sentences

$ 119,086 $ 173,157 $ — $ 292,243

Goodwill attributable to preliminary purchase price adjustments and acquisitions during the six months ended March 31, 2022 — 57,211 — 57,211

Balance at March 31, 2022 $ 119,086 $ 230,368 $ — $ 349,454

Intangible assets consisted of the following as of March 31, 2022:

Goodwill attributable to preliminary purchase price adjustments and acquisitions during the nine months ended June 30, 2022 — 61,639 — 61,639

Balance at June 30, 2022 $ 119,086 $ 234,796 $ — $ 353,882

Intangible assets consisted of the following as of June 30, 2022:

Cost Accumulated

11 unchanged sentences

Total identifiable intangible assets $ 284,487 $ ( 84,033 ) $ 200,454

Amortization expense for intangible assets amounted to $ 8,774 and $ 7,112 during the three and six months ended March 31, 2022, and 2021 respectively.

Amortization expense for intangible assets amounted to $ 13,303 and $ 11,786 during the three and nine months ended June 30, 2022, and 2021 respectively.

i3 VERTICALS, Inc.

1 unchanged sentence

(in thousands, except unit, share and per share amounts)

Based on net carrying amounts at March 31, 2022, the Company's estimate of future amortization expense for intangible assets are presented in the table below for fiscal years ending September 30:

2022 (six months remaining) $ 9,117

Based on net carrying amounts at June 30, 2022, the Company's estimate of future amortization expense for intangible assets are presented in the table below for fiscal years ending September 30:

2022 (three months remaining) $ 4,588

Thereafter 128,970

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

A summary of the Company's accrued expenses and other current liabilities as of March 31, 2022 and September 30, 2021 is as follows is as follows:

March 31, September 30,

A summary of the Company's accrued expenses and other current liabilities as of June 30, 2022 and September 30, 2021 is as follows is as follows:

June 30, September 30,

Accrued wages, bonuses, commissions and vacation $ 8,731 $ 6,649

7 unchanged sentences

LONG-TERM DEBT, NET

A summary of long-term debt, net as of March 31, 2022 and September 30, 2021 is as follows:

March 31, September 30,

A summary of long-term debt, net as of June 30, 2022 and September 30, 2021 is as follows:

June 30, September 30,

Maturity 2022 2021

14 unchanged sentences

Bank National Association, as trustee.

Prior to August 15, 2024, the Exchangeable Notes are exchangeable only upon satisfaction of certain conditions and during certain periods described in the Indenture, and thereafter, the Exchangeable Notes are exchangeable at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

The Exchangeable Notes are exchangeable on the terms set forth in the Indenture into cash, shares of Class A common stock, or a combination thereof, at i3 Verticals, LLC’s election.

The exchange rate is initially 24.4666 shares of Class A common stock per $1,000 principal amount of Exchangeable Notes (equivalent to an initial exchange price of approximately $ 40.87 per share of Class A common stock).

The exchange rate is subject to adjustment in certain circumstances.

In addition, following certain corporate events that occur prior to the maturity date or i3 Verticals, LLC’s delivery of a notice of redemption, i3 Verticals, LLC will increase, in certain circumstances, the exchange rate for a holder who elects to exchange its Exchangeable Notes in connection with such a corporate event or notice of redemption, as the case may be.

If the Company or i3 Verticals, LLC undergoes a fundamental change, holders may require i3 Verticals, LLC to repurchase all or part of their Exchangeable Notes at a repurchase price equal to 100 % of the principal amount of the Exchangeable Notes to be repurchased, plus accrued and unpaid interest to, but not including, the fundamental change repurchase date.

As of March 31, 2022, none of the conditions permitting the holders of the Exchangeable Notes to early convert have been met.

i3 Verticals, LLC may not redeem the Exchangeable Notes prior to February 20, 2023.

On or after February 20, 2023, and prior to the 47th scheduled trading day immediately preceding the maturity date, if the last reported sale price per share of Class A common stock has been at least 130 % of the exchange price for the Exchangeable Notes for at least 20 trading days (whether or not consecutive), i3 Verticals, LLC may redeem all or any portion of the Exchangeable Notes at a cash redemption price equal to 100 % of the principal amount of the Exchangeable Notes to be redeemed plus accrued and unpaid interest on such note to, but not including, the redemption date.

The Exchangeable Notes are general senior unsecured obligations of i3 Verticals, LLC.

The guarantee is the Company’s senior unsecured obligation and rank senior in right of payment to all of i3 Verticals, LLC’s and the Company’s future indebtedness that is expressly subordinated in right of payment to the Exchangeable Notes or the guarantee, as applicable.

The Exchangeable Notes and the guarantee rank equally in right of payment with all of i3 Verticals, LLC’s and the Company’s existing and future unsecured indebtedness that is not so expressly subordinated in the right of payment to the Exchangeable Notes or the guarantee, as applicable.

The Exchangeable Notes and the guarantee are effectively subordinated to any of the Companies’ existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness (including obligations under the credit agreement governing the Senior Secured Credit Facility, defined below).

The Exchangeable Notes and the guarantee will be structurally subordinated to all indebtedness and other liabilities and obligations (including the debt and trade payables) of the Company’s subsidiaries, other than i3 Verticals, LLC.

In accounting for the issuance of the Exchangeable Notes, the Company separated the Exchangeable Notes into liability and equity components.

The carrying amount of the liability component before the allocation of any transaction costs was calculated by measuring the fair value of a similar liability that does not have an associated exchangeable feature.

The carrying amount of the equity component (before the allocation of any transaction costs), representing the conversion option, which does not require separate accounting as a derivative as it meets

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

a scope exception for certain contracts involving an entity's own equity, was determined by deducting the fair value of the liability component from the par value of the Exchangeable Notes.

The difference between the principal amount of the Exchangeable Notes and the liability component represents the debt discount, which is recorded as a direct deduction from the related debt liability in the consolidated balance sheet and accreted over the period from the date of issuance to the contractual maturity date, resulting in the recognition of non-cash interest expense.

The equity component of the Exchangeable Notes of approximately $ 28,662 is included in additional paid-in capital in the consolidated balance sheet and is not remeasured as long as it continues to meet the conditions for equity classification.

Transaction costs were allocated to the liability and equity components in the same proportion as the allocation of the proceeds.

Transaction costs attributable to the liability component were recorded as debt issuance costs in the consolidated balance sheet and are amortized to interest expense using the effective interest method over the term of the Exchangeable Notes, and transaction costs attributable to the equity component were netted with the equity component in stockholders' equity.

The Company incurred third-party issuance costs totaling $ 5,238 , in connection with the issuance of the Exchangeable Notes.

The Company capitalized $ 4,150 of debt issuance costs in connection with the Exchangeable Notes and allocated $ 1,088 of the third-party issuance costs to equity.

Non-cash interest expense, including amortization of debt issuance costs, related to the Exchangeable Notes for the three and six months ended March 31, 2022 was $ 164 , and $ 323 , and $ 145 and $ 285 for the three and six months ended March 31, 2021, respectively.

The Company also wrote off a portion of the debt issuance costs in connection with the repurchase transactions in April and September 2020, as described below.

Total unamortized debt issuance costs related to the Exchangeable Notes were $ 2,282 as of March 31, 2022.

The estimated fair value of the Exchangeable Notes was $ 110,822 as of March 31, 2022.

As of June 30, 2022, the aggregate principal amount outstanding of the Exchangeable Notes was $ 117,000 .

For a discussion of the terms of the Exchangeable Notes, refer to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021.

Non-cash interest expense, including amortization of debt issuance costs, related to the Exchangeable Notes for the three and nine months ended June 30, 2022 was $ 169 , and $ 492 , and $ 149 and $ 434 for the three and nine months ended June 30, 2021, respectively.

Total unamortized debt issuance costs related to the Exchangeable Notes were $ 2,113 as of June 30, 2022.

The estimated fair value of the Exchangeable Notes was $ 107,453 as of June 30, 2022.

The estimated fair value of the Exchangeable Notes was determined through consideration of quoted market prices for similar instruments.

The fair value is classified as Level 2, as defined in Note 10.

The Company can choose to purchase its Exchangeable Notes on the open market.

In April and September 2020, the Company paid $ 17,414 in aggregate to repurchase $ 21,000 in aggregate principal amount of the Exchangeable Notes and to repay approximately $ 24 in accrued interest on the repurchased portion of the Exchangeable Notes.

The Company recorded a loss on retirement of debt of $ 2,297 due to the carrying value exceeding the fair value of the repurchased portion of the Exchangeable Notes at the dates of repurchases.

The Company wrote off $ 592 of debt issuance costs in connection with the repurchase transactions.

Exchangeable Note Hedge Transactions

8 unchanged sentences

The premiums paid for the Note Hedge Transactions have been included as a net reduction to additional paid-in capital within stockholders' equity.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Warrant Transactions

2 unchanged sentences

The Warrants will expire over a period beginning on May 15, 2025.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The Warrants are separate transactions, entered into by the Company with the Counterparties, and are not part of the terms of the Exchangeable Notes.

8 unchanged sentences

The Senior Secured Credit Facility consists of a $ 275,000 revolving credit facility, together with an option to increase the revolving credit facility and/or obtain incremental term loans in an additional principal amount of up to $ 50,000 in the aggregate (subject to the receipt of additional commitments for any such incremental loan amounts).

The Senior Secured Credit Facility accrues interest at the London Inter Bank Offered Rate ("LIBOR") (based upon an interest period of one, two, three or six months or, under some circumstances, up to twelve months) plus an applicable margin of 2.25 % to 3.25 % ( 3.25 % as of March 31, 2022), or the base rate (defined as the highest of (x) the Bank of America prime rate, (y) the federal funds rate plus 0.50 % and (z) LIBOR plus 1.00 %), plus an applicable margin of 0.25 % to 1.25 % ( 1.25 % as of March 31, 2022), in each case depending upon the consolidated total leverage ratio, as defined in the agreement.

The Senior Secured Credit Facility accrues interest at the London Inter Bank Offered Rate ("LIBOR") (based upon an interest period of one, two, three or six months or, under some circumstances, up to twelve months) plus an applicable margin of 2.25 % to 3.25 % ( 3.25 % as of June 30, 2022), or the base rate (defined as the highest of (x) the Bank of America prime rate, (y) the federal funds rate plus 0.50 % and (z) LIBOR plus 1.00 %), plus an applicable margin of 0.25 % to 1.25 % ( 1.25 % as of June 30, 2022), in each case depending upon the consolidated total leverage ratio, as defined in the agreement.

Interest is payable at the end of the selected interest period, but no less frequently than quarterly.

Additionally, the Senior Secured Credit Facility requires the Company to pay unused commitment fees of 0.15 % to 0.30 % ( 0.30 % as of March 31, 2022) on any undrawn amounts under the revolving credit facility and letter of credit fees of up to 3.25 % on the maximum amount available to be drawn under each letter of credit issued under the agreement.

Additionally, the Senior Secured Credit Facility requires the Company to pay unused commitment fees of 0.15 % to 0.30 % ( 0.30 % as of June 30, 2022) on any undrawn amounts under the revolving credit facility and letter of credit fees of up to 3.25 % on the maximum amount available to be drawn under each letter of credit issued under the agreement.

The maturity date of the Senior Secured Credit Facility is May 9, 2024.

1 unchanged sentence

(i) a minimum consolidated interest coverage ratio of 3.00 to 1.00, (ii) a maximum total leverage ratio of 5.00 to 1.00, provided, that for each of the four fiscal quarters immediately following a qualified acquisition (each a “Leverage Increase Period”), the required ratio set forth above may be increased by up to 0.25 , subject to certain limitations and (iii) a maximum consolidated senior secured leverage ratio of 3.25 to 1.00, provided, that for each Leverage Increase Period, the consolidated senior leverage ratio may be increased by up to 0.25 , subject to certain limitations.

As of March 31, 2022, the Company was in compliance with these covenants, and there was $ 86,676 available for borrowing under the revolving credit facility, subject to the financial covenants.

As of June 30, 2022, the Company was in compliance with these covenants, and there was $ 67,594 available for borrowing under the revolving credit facility, subject to the financial covenants.

The Senior Secured Credit Facility is secured by substantially all assets of the Company.

4 unchanged sentences

and certain non-financial covenants pertaining to the activities of the Company during the period covered.

The Company was in compliance with such covenants as of

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

March 31, 2022.

The Company was in compliance with such covenants as of June 30, 2022.

In addition, the Senior Secured Credit Facility restricts the Company's ability to make dividends or other distributions to the holders of the Company's equity.

3 unchanged sentences

All other forms of dividends or distributions are prohibited under the Senior Secured Credit Facility.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

Debt Issuance Costs

The Company incurred no debt issuance costs during the three and six months ended March 31, 2022 and 2021.

The Company incurred no debt issuance costs during the three and nine months ended June 30, 2022 and 2021.

The Company's debt issuance costs are being amortized over the related term of the debt using the straight-line method, which is not materially different than the effective interest rate method, and are presented net against long-term debt in the condensed consolidated balance sheets.

The amortization of deferred debt issuance costs is included in interest expense and amounted to approximately $ 259 and $ 513 during the three and six months ended March 31, 2022, respectively and $ 240 and $ 475 during the three and six months ended March 31, 2021, respectively.

The amortization of deferred debt issuance costs is included in interest expense and amounted to approximately $ 263 and $ 776 during the three and nine months ended June 30, 2022, respectively and $ 244 and $ 719 during the three and nine months ended June 30, 2021, respectively.

i3 Verticals, Inc.

6 unchanged sentences

Each quarter, the Company updates its estimate of the annual effective tax rate, and if the Company’s estimated tax rate changes, it makes a cumulative adjustment in that period.

The Company’s provision for income taxes was a provision of $ 884 and $ 656 for the three and six months ended March 31, 2022, respectively and a benefit of $ 136 and $ 146 during the three and six months ended March 31, 2021, respectively.

The Company’s provision for income taxes was a benefit of $ 1,810 and $ 1,154 for the three and nine months ended June 30, 2022, respectively and a provision of $ 662 and $ 516 during the three and nine months ended June 30, 2021, respectively.

Tax Receivable Agreement

3 unchanged sentences

If a Continuing Equity Owner transfers Common Units but does not assign to the transferee of such units its rights under the Tax Receivable Agreement, such Continuing Equity Owner generally will continue to be entitled to receive payments under the Tax Receivable Agreement arising in respect of a subsequent exchange of such Common Units.

In general, the Continuing Equity Owners’ rights under the Tax Receivable Agreement may not be assigned, sold, pledged or otherwise alienated to any person, other than certain permitted transferees, without (a) the Company's prior written consent, which should not be unreasonably withheld, conditioned or delayed, and (b) such persons becoming a party to the Tax Receivable Agreement and agreeing to succeed to the applicable Continuing Equity Owner’s interest therein.

The Company expects to benefit from the remaining 15 % of the tax benefits, if any, that the Company may realize.

During the nine months ended June 30, 2022, the Company acquired an aggregate of 111,000 Common Units in i3 Verticals, LLC in connection with the redemption of Common Units from the Continuing Equity Owners, which resulted in an increase in the tax basis of our investment in i3 Verticals, LLC subject to the provisions of the Tax Receivable Agreement.

As a result of the exchange, during the nine months ended June 30, 2022, the Company recognized an increase to its net deferred tax assets in the amount of $ 875 , and corresponding Tax

i3 VERTICALS, Inc.

1 unchanged sentence

(in thousands, except unit, share and per share amounts)

general, the Continuing Equity Owners’ rights under the Tax Receivable Agreement may not be assigned, sold, pledged or otherwise alienated to any person, other than certain permitted transferees, without (a) the Company's prior written consent, which should not be unreasonably withheld, conditioned or delayed, and (b) such persons becoming a party to the Tax Receivable Agreement and agreeing to succeed to the applicable Continuing Equity Owner’s interest therein.

The Company expects to benefit from the remaining 15 % of the tax benefits, if any, that the Company may realize.

During the six months ended March 31, 2022, the Company acquired an aggregate of 55,000 Common Units in i3 Verticals, LLC in connection with the redemption of Common Units from the Continuing Equity Owners, which resulted in an increase in the tax basis of our investment in i3 Verticals, LLC subject to the provisions of the Tax Receivable Agreement.

As a result of the exchange, during the six months ended March 31, 2022, the Company recognized an increase to its net deferred tax assets in the amount of $ 436 , and corresponding Tax Receivable Agreement liabilities of $ 370 , representing 85 % of the tax benefits due to the Continuing Equity Owners.

The deferred tax asset and corresponding Tax Receivable Agreement liability balances were $ 40,817 and $ 39,493 , respectively, as of March 31, 2022.

Payments to the Continuing Equity Owners related to exchanges through March 31, 2022 will range from $ 0 to $ 3,200 per year and are expected to be paid over the next 26 years.

The amounts recorded as of March 31, 2022, approximate the current estimate of expected tax savings and are subject to change after the filing of the Company’s U.S.

Receivable Agreement liabilities of $ 744 , representing 85 % of the tax benefits due to the Continuing Equity Owners.

The deferred tax asset and corresponding Tax Receivable Agreement liability balances were $ 40,617 and $ 39,866 , respectively, as of June 30, 2022.

Payments to the Continuing Equity Owners related to exchanges through June 30, 2022 will range from $ 0 to $ 3,225 per year and are expected to be paid over the next 28 years.

The amounts recorded as of June 30, 2022, approximate the current estimate of expected tax savings and are subject to change after the filing of the Company’s U.S.

federal and state income tax returns.

2 unchanged sentences

At contract inception, the Company determines whether an arrangement is or contains a lease, and for each identified lease, evaluates the classification as operating or financing.

The Company had no finance leases as of March 31, 2022.

The Company had no finance leases as of June 30, 2022.

Leased assets and obligations are recognized at the lease commencement date based on the present value of fixed lease payments to be made over the term of the lease.

Renewal and termination options are factored into determination of the lease term only if the option is reasonably certain to be exercised.

The weighted-average remaining lease term at March 31, 2022 and 2021 was five and six years , respectively.

The Company had no significant short-term leases during the three and six months ended March 31, 2022 and 2021.

The weighted-average remaining lease term at June 30, 2022 and 2021 was five and six years , respectively.

The Company had no significant short-term leases during the three and nine months ended June 30, 2022 and 2021.

The Company’s leases do not provide a readily determinable implicit interest rate and the Company uses its incremental borrowing rate to measure the lease liability and corresponding right-of-use asset.

The incremental borrowing rates were determined based on a portfolio approach considering the Company’s current secured borrowing rate adjusted for market conditions and the length of the lease term.

The weighted-average discount rate used in the measurement of our lease liabilities was 7.1 % and 7.0 % as of March 31, 2022 and 2021, respectively.

The weighted-average discount rate used in the measurement of our lease liabilities was 7.6 % and 7.3 % as of June 30, 2022 and 2021, respectively.

Operating lease cost is recognized on a straight-line basis over the lease term.

Operating lease costs for the three and six months ended March 31, 2022 were $ 1,455 and $ 2,946 , respectively, which are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

Operating lease costs for the three and six months ended March 31, 2021 were $ 1,046 and $ 1,900 , respectively.

Total operating lease costs for the three and six months ended March 31, 2022 include variable lease costs of approximately $ 6 and $ 44 , respectively, which are primarily comprised of costs of maintenance and utilities and changes in rates, and are determined based on the actual costs incurred during the period.

Operating lease costs for the three and nine months ended June 30, 2022 were $ 1,469 and $ 4,415 , respectively, which are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

Operating lease costs for the three and nine months ended June 30, 2021 were $ 1,164 and $ 3,064 , respectively.

Total operating lease costs for the three and nine months ended June 30, 2022 include variable lease costs of approximately $ 14 and $ 58 , respectively, which are primarily comprised of costs of maintenance and utilities and changes in rates, and are determined based on the actual costs incurred during the period.

Variable payments are expensed in the period incurred and not included in the measurement of lease assets and liabilities.

Total operating lease costs for the three and six months ended March 31, 2021 were $ 3 and $ 4 , respectively.

Total operating lease costs for the three and nine months ended June 30, 2021 were $ 1 and $ 5 , respectively.

Short-term rent expense for the three and nine months ended June 30, 2022 was $ 51 and $ 144 , respectively, and are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

Short term rent expense for the three and nine months ended June 30, 2021 was $ 410 and $ 540 , respectively.

i3 VERTICALS, Inc.

1 unchanged sentence

(in thousands, except unit, share and per share amounts)

Short-term rent expense for the three and six months ended March 31, 2022 was $ 46 and $ 93 , respectively, and are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

Short term rent expense for the three and six months ended March 31, 2021 was $ 72 and $ 130 , respectively.

As of March 31, 2022, maturities of lease liabilities are as follows:

As of June 30, 2022, maturities of lease liabilities are as follows:

Years ending September 30:

2022 (six months remaining) $ 2,946

2022 (three months remaining) $ 1,457

Thereafter 3,532

15 unchanged sentences

Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active exchange markets.

The carrying value of the Company’s financial instruments, including cash and cash equivalents, restricted cash, settlement assets and obligations, accounts receivable, other assets, accounts payable, and accrued expenses, approximated their fair values as of March 31, 2022 and 2021, because of the relatively short maturity dates on these instruments.

The carrying amount of debt approximates fair value as of March 31, 2022 and 2021, because interest rates on these instruments approximate market interest rates.

The carrying value of the Company’s financial instruments, including cash and cash equivalents, restricted cash, settlement assets and obligations, accounts receivable, other assets, accounts payable, and accrued expenses, approximated their fair values as of June 30, 2022 and 2021, because of the relatively short maturity dates on these instruments.

The carrying amount of debt approximates fair value as of June 30, 2022 and 2021, because interest rates on these instruments approximate market interest rates.

i3 VERTICALS, Inc.

8 unchanged sentences

Contingent consideration paid ( 28,783 )

Balance at March 31, 2022 $ 47,940

Balance at June 30, 2022 $ 38,411

Accrued Contingent Consideration

3 unchanged sentences

Contingent consideration paid ( 6,522 )

Balance at March 31, 2021 $ 28,059

Balance at June 30, 2021 $ 34,750

The fair value of contingent consideration obligations includes inputs not observable in the market and thus represents a Level 3 measurement.

6 unchanged sentences

The Company develops the projected future financial results based on an analysis of historical results, market conditions, and the expected impact of anticipated changes in the Company's overall business and/or product strategies.

Approximately $ 39,037 and $ 25,768 of contingent consideration was recorded in accrued expenses and other current liabilities as of March 31, 2022 and September 30, 2021, respectively.

Approximately $ 8,903 and $ 10,461 of contingent consideration was recorded in other long-term liabilities as of March 31, 2022 and September 30, 2021, respectively.

Approximately $ 27,327 and $ 25,768 of contingent consideration was recorded in accrued expenses and other current liabilities as of June 30, 2022 and September 30, 2021, respectively.

Approximately $ 11,084 and $ 10,461 of contingent consideration was recorded in other long-term liabilities as of June 30, 2022 and September 30, 2021, respectively.

Disclosure of Fair Values

1 unchanged sentence

The Company estimates the fair value of the Exchangeable Notes through consideration of quoted market prices of similar instruments, classified as Level 2 as described above.

The estimated fair value of the Exchangeable Notes was $ 110,822 as of March 31, 2022.

The estimated fair value of the Exchangeable Notes was $ 107,453 as of June 30, 2022.

i3 VERTICALS, Inc.

2 unchanged sentences

EQUITY-BASED COMPENSATION

A summary of equity-based compensation expense recognized during the three and six months ended March 31, 2022 and 2021 is as follows:

Three months ended March 31, Six months ended March 31,

A summary of equity-based compensation expense recognized during the three and nine months ended June 30, 2022 and 2021 is as follows:

Three months ended June 30, Nine months ended June 30,

2022 2021 2022 2021

3 unchanged sentences

Amounts are included in general and administrative expense on the condensed consolidated statements of operations.

Income tax benefits of $ 68 and $ 95 were recognized during the three and six months ended March 31, 2022, respectively, and $ 277 and $ 482 during the three and six months ended March 31, 2021.

Income tax benefits of $ 169 and $ 264 were recognized during the three and nine months ended June 30, 2022, respectively, and $ 102 and $ 584 during the three and nine months ended June 30, 2021.

In May 2018, the Company adopted the 2018 Equity Incentive Plan (the “2018 Plan”) under which the Company may grant up to 3,500,000 stock options and other equity-based awards to employees, directors and officers.

The number of shares of Class A common stock available for issuance under the 2018 Plan includes an annual increase on the first day of each year, beginning with the 2019 calendar year, equal to 4.0 % of the outstanding shares of all classes of the Company's common stock as of the last day of the immediately preceding calendar year, unless the Company’s board of directors determines prior to the last trading day of December of the immediately preceding calendar year that the increase shall be less than 4.0 %.

As of March 31, 2022, there were 939,068 equity awards available for grant under the 2018 Plan.

As of June 30, 2022, equity awards with respect to 1,020,402 shares of the Company's Class A common stock were available for grant under the 2018 Plan.

In September 2020, the Company adopted the 2020 Acquisition Equity Incentive Plan (the “2020 Inducement Plan”) under which the Company may grant up to 1,500,000 stock options and other equity-based awards to individuals that were not previously employees of the Company or its subsidiaries in connection with acquisitions, as a material inducement to the individual's entry into employment with the Company or its subsidiaries within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.

In May 2021, the Company amended the 2020 Inducement Plan to increase the number of shares of the Company's Class A common stock available for issuance from 1,500,000 to 3,000,000 shares.

As of March 31, 2022, there were 938,597 equity awards available for grant under the 2020 Inducement Plan.

As of June 30, 2022, equity awards with respect to 973,994 shares of the Company's Class A common stock were available for grant under the 2020 Inducement Plan.

Share-based compensation expense includes the estimated effects of forfeitures, which will be adjusted over the requisite service period to the extent actual forfeitures differ or are expected to differ from such estimates.

1 unchanged sentence

The Company has issued stock option awards under the 2018 Plan and the 2020 Inducement Plan.

The fair value of the stock option awards during the six months ended March 31, 2022 and during the year ended September 30, 2021 was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions:

March 31, 2022 September 30, 2021

The fair value of the stock option awards during the nine months ended June 30, 2022 and during the year ended September 30, 2021 was determined on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions:

June 30, 2022 September 30, 2021

Expected volatility (1)

13 unchanged sentences

(in thousands, except unit, share and per share amounts)

A summary of stock option activity for the six months ended March 31, 2022 is as follows:

A summary of stock option activity for the nine months ended June 30, 2022 is as follows:

Stock Options Weighted Average Exercise Price

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Forfeited ( 552,800 ) 30.06

Outstanding at March 31, 2022 8,472,030 $ 25.05

Exercisable at March 31, 2022 4,064,893 $ 22.23

The weighted-average grant date fair value of stock options granted during the six months ended March 31, 2022 was $ 12.87 .

As of March 31, 2022, total unrecognized compensation expense related to unvested stock options, including an estimate for pre-vesting forfeitures, was $ 44,436 , which is expected to be recognized over a weighted-average period of two years .

The total fair value of stock options that vested during the three and six months ended March 31, 2022 was $ 11,167 and $ 16,108 , respectively.

Outstanding at June 30, 2022 8,288,616 $ 25.09

Exercisable at June 30, 2022 4,362,585 $ 22.97

The weighted-average grant date fair value of stock options granted during the nine months ended June 30, 2022 was $ 12.89 .

As of June 30, 2022, total unrecognized compensation expense related to unvested stock options, including an estimate for pre-vesting forfeitures, was $ 38,178 , which is expected to be recognized over a weighted-average period of two years .

The total fair value of stock options that vested during the three and nine months ended June 30, 2022 was $ 6,339 and $ 22,447 , respectively.

Restricted Stock Units

The Company has issued Class A common stock in the form of restricted stock units ("RSUs") under the 2018 Plan.

A summary of activity related to restricted stock units for the six months ended March 31, 2022 is as follows:

A summary of activity related to restricted stock units for the nine months ended June 30, 2022 is as follows:

Restricted Stock Units Weighted Average Grant Date Fair Value

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Forfeited ( 13,001 ) 26.53

Outstanding at March 31, 2022 257,426 $ 26.52

The weighted-average grant date fair value of restricted stock units granted during the six months ended March 31, 2022 was $ 26.52 .

As of March 31, 2022, total unrecognized compensation expense related to unvested RSUs, including an estimate for pre-vesting forfeitures, was $ 5,612 , which is expected to be recognized over a weighted average period of four years .

As of March 31, 2022, there were no RSUs vested.

Outstanding at June 30, 2022 265,425 $ 26.59

As of June 30, 2022, total unrecognized compensation expense related to unvested RSUs, including an estimate for pre-vesting forfeitures, was $ 5,499 , which is expected to be recognized over a weighted average period of four years .

No RSUs vested during the nine months ended June 30, 2022.

COMMITMENTS AND CONTINGENCIES

The Company utilizes office space and equipment under operating leases.

Rent expense under these leases amounted to $ 1,520 and $ 4,559 during the three and nine months ended June 30, 2022, respectively and $ 1,201

i3 VERTICALS, Inc.

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(in thousands, except unit, share and per share amounts)

COMMITMENTS AND CONTINGENCIES

The Company utilizes office space and equipment under operating leases.

Rent expense under these leases amounted to $ 1,501 and $ 3,039 during the three and six months ended March 31, 2022, respectively and $ 1,118 and $ 2,030 during the three and six months ended March 31, 2021, respectively.

and $ 3,231 during the three and nine months ended June 30, 2021, respectively.

Refer to Note 9 for further discussion and a table of the future minimum payments under these leases.

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If the Company submits a number of transactions that is lower than the minimum, it is required to pay to the processor the fees the processor would have received if the Company had submitted the required minimum number of transactions.

As of March 31, 2022, such minimum fee commitments were as follows:

As of June 30, 2022, such minimum fee commitments were as follows:

Years ending September 30:

2022 (six months remaining) $ 1,840

2022 (three months remaining) $ 1,090

Total $ 5,805

Third Party Sales Organization Buyout Agreement

The Company has conditionally committed to a future buyout of the third party's business at the earlier of (a) the 60th day following the date upon which the founder of the third party sales organization dies or becomes disabled or (b) the 60th day following July 1, 2023.

The Company has conditionally committed to a future buyout of a third party's business at the earlier of (a) the 60th day following the date upon which the founder of the third party sales organization dies or becomes disabled or (b) the 60th day following July 1, 2023.

The buyout amount is dependent on certain financial metrics but is capped at $ 29,000 , which would be net of repayment of secured loans.

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However, the Company in some instances may be unable to estimate an amount of possible loss or range of loss based on the significant uncertainties involved in, or the preliminary nature of, the matter, and in these instances the Company will disclose the nature of the contingency and describe why the Company is unable to determine an estimate of possible loss or range of loss.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

The Company is involved in ordinary course legal proceedings, which include all claims, lawsuits, investigations and proceedings, including unasserted claims, which are probable of being asserted, arising in the ordinary course of business.

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After taking into consideration the evaluation of such legal matters by the Company's legal counsel, the Company's management believes at this time such matters will not have a material impact on the Company's consolidated balance sheet, results of operations or cash flows.

i3 VERTICALS, Inc.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except unit, share and per share amounts)

S&S Litigation

On June 2, 2021, the State of Louisiana, Division of Administration (the “State”) and a putative class of Louisiana law enforcement districts filed a Petition (as amended on October 4, 2021, the “Petition”), in the 19th Judicial District Court for the Parish of East Baton Rouge against i3-Software & Services, LLC (“S&S”), a subsidiary of the Company located in Shreveport, Louisiana, the Company, i3 Verticals, LLC, the current leader of the S&S business, the former leader of the S&S business, and 1120 South Pointe Properties, LLC (“South Pointe”), the former owner of the assets of the S&S business.

The Petition was amended on October 4, 2021 to add a putative class of Louisiana sheriffs (the “Sheriffs”) and subsequently removed to the United States District Court for the Middle District of Louisiana (the “Amended Petition”).

Plaintiffs moved to remand the action to state court on November 5, 2021, which motion remains pending.

On June 2, 2021, the State of Louisiana, Division of Administration (the “State”) and a putative class of Louisiana law enforcement districts filed a petition (the “Petition”) in the 19th Judicial District Court for the Parish of East Baton Rouge against i3-Software & Services, LLC (“S&S”), a subsidiary of the Company located in Shreveport, Louisiana, the Company, i3 Verticals, LLC, the current leader of the S&S business, the former leader of the S&S business, and 1120 South Pointe Properties, LLC (“South Pointe”), the former owner of the assets of the S&S business.

See State of Louisiana, by and through its Division of Administration, East Baton Rouge Parish Law Enforcement District, by and through the duly elected East Baton Rouge Parish Sheriff, Sid J.

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and Scott Carrington.

The Petition was amended on October 4, 2021 (the “Amended Petition”) to add a putative class of Louisiana sheriffs (the “Sheriffs”) and subsequently removed to the United States District Court for the Middle District of Louisiana.

The Amended Petition seeks monetary damages for the cost of network remediation of $ 15,000 purportedly spent by the State and $ 7,000 purportedly spent by the Sheriffs, return of purchase prices, potential additional expenses related to remediation and any obligation to notify parties of an alleged data breach as and if required by applicable law, and reasonable attorneys’ fees.

The claimed damages relate to a third-party remote access software product used in connection with services provided by S&S to certain Louisiana Parish law enforcement districts and alleged inadequacies in the Company’s cybersecurity practices.

Plaintiffs moved to remand the action to state court on November 5, 2021, and the motion was referred to a magistrate to make a report and recommendation to the district court judge.

On July 5, 2022 the magistrate recommended that the matter be remanded to state court.

On July 19, 2022 the Company and all other defendants filed objections to the recommendation.

On August 3, 2022, the Plaintiffs filed a response to those objections.

The district court judge will decide whether the case remains in federal court after reviewing the objections and Plaintiffs response to the objections.

The assets of the S&S business were acquired from South Pointe by the Company in 2018 for and aggregate purchase price of $ 17,000 , including upfront cash consideration and contingent consideration, and provides software and payments services within the Company’s Public Sector vertical to local government agencies almost exclusively in Louisiana.

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See Note 8 for further information.

As of March 31, 2022, the total amount due under the Tax Receivable Agreement was $ 39,493 .

The Company determines its operating segments based on ASC 280, Segment Reporting , how the chief operating decision making group monitors and manages the performance of the business and the level at which financial information is reviewed.

As of June 30, 2022, the total amount due under the Tax Receivable Agreement was $ 39,866 .

The Company determines its operating segments based on ASC 280, Segment Reporting , in alignment with how the chief operating decision making group monitors and manages the performance of the business as well as the level at which financial information is reviewed.

The Company’s operating segments are strategic business units that offer different products and services.

The Company's core business is delivering seamlessly integrated payment and software solutions to SMBs and organizations in strategic vertical markets.

The Company's core business is delivering seamlessly integrated payment and software solutions customers in strategic vertical markets.

This is accomplished through the Merchant Services and Proprietary Software and Payments segments.

The Merchant Services segment provides comprehensive payment solutions to businesses and organizations.

The Merchant Services segment includes third-party integrated payment solutions as well as merchant of record payment services across the Company's strategic vertical markets.

The Proprietary Software and Payments segment delivers solutions, including embedded payments, to the Company's clients through proprietary software.

The Merchant Services segment provides comprehensive payment solutions.

The Merchant Services segment includes third-party integrated payment solutions as well as traditional merchant processing services across the Company's strategic vertical markets.

The Proprietary Software and Payments segment delivers solutions, including embedded payments, to the Company's customers through proprietary software.

Payments are delivered through both the payment facilitator model and the traditional merchant processing model.

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Processing margin is equal to revenue less other cost of services plus residuals expense, which are a component of other cost of services.

The following is a summary of reportable segment operating performance for the three and six months ended March 31, 2022 and 2021.

As of and for the Three Months Ended March 31, 2022

The following is a summary of reportable segment operating performance for the three and nine months ended June 30, 2022 and 2021.

As of and for the Three Months Ended June 30, 2022

Merchant Services Proprietary Software and Payments Other Total

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Goodwill $ 119,086 $ 234,796 $ — $ 353,882

As of and for the Six Months Ended March 31, 2022

As of and for the Nine Months Ended June 30, 2022

Merchant Services Proprietary Software and Payments Other Total

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(in thousands, except unit, share and per share amounts)

As of and for the Three months ended March 31, 2021 (1)

As of and for the Three months ended June 30, 2021 (1)

Merchant Services Proprietary Software and Payments Other Total

7 unchanged sentences

Change in fair value of contingent consideration ( 3,609 )

Income from operations

Loss from operations

Total assets $ 209,989 $ 377,416 $ 60,846 $ 648,251

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See Note 2 to the interim consolidated financial statements for a description of the recently adopted accounting pronouncement.

As of and for the Six Months Ended March 31, 2021 (1)

As of and for the Nine Months Ended June 30, 2021 (1)

Merchant Services Proprietary Software and Payments Other Total

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Change in fair value of contingent consideration ( 5,835 )

Income from operations

Loss from operations

Total assets $ 209,989 $ 377,416 $ 60,846 $ 648,251

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As such, future redemptions or direct exchanges of Common Units of i3 Verticals, LLC by the Continuing Equity Owners will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in capital when i3 Verticals, LLC has positive or negative net assets, respectively.

As of March 31, 2022, i3 Verticals, Inc.

As of June 30, 2022, i3 Verticals, Inc.

owned 22,252,640 of i3 Verticals, LLC's Common Units, representing a 68.7 % economic ownership interest in i3 Verticals, LLC.

The following table summarizes the impact on equity due to changes in the Company's ownership interest in i3 Verticals, LLC:

Six months ended March 31,

Nine months ended June 30,

Net loss attributable to non-controlling interest

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Allocation of equity to non-controlling interests 5,594 12,374

Net transfers to (from) non-controlling interests 3,059 ( 937 )

Change from net loss attributable to non-controlling interests and transfers to (from) non-controlling interests $ ( 1,159 ) $ ( 1,934 )

Net transfers to non-controlling interests 4,676 660

Change from net loss attributable to non-controlling interests and transfers from non-controlling interests $ ( 502 ) $ ( 1,258 )

__________________________

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(in thousands, except unit, share and per share amounts)

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock for the three and six months ended March 31, 2022 and 2021:

Three months ended March 31, Six months ended March 31,

2022 2021 (1)

Basic (2) net (loss) income per share:

Net (loss) income

$ ( 10,438 ) $ 1,330 $ ( 14,119 ) $ ( 1,692 )

Net (loss) income attributable to non-controlling interests

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock for the three and nine months ended June 30, 2022 and 2021:

Three months ended June 30, Nine months ended June 30,

2022 2021 (1)

Net (loss) income attributable to Class A common stockholders

2022 2021 (1)

Weighted average shares of Class A common stock outstanding

Basic (2) and diluted (3) net loss per share:

$ ( 4,688 ) $ ( 4,201 ) $ ( 18,807 ) $ ( 5,894 )

Basic net (loss) income per share

Net loss attributable to non-controlling interests

( 960 ) ( 921 ) ( 5,178 ) ( 1,918 )

Dilutive net income per share:

Net income (loss) attributable to Class A common stockholders $ 1,303 $ ( 695 )

Reallocation of net income (loss) assuming conversion of common units (3)(4)

Net income (loss) attributable to Class A common stockholders - diluted

Net loss attributable to Class A common stockholders

$ ( 3,728 ) $ ( 3,280 ) $ ( 13,629 ) $ ( 3,976 )

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22,229,787 21,926,225 22,116,172 20,658,700

Weighted average effect of dilutive securities (2)(3)

12,464,258 11,212,739

Weighted average shares of Class A common stock outstanding - diluted

Basic and diluted net loss per share

$ ( 0.17 ) $ ( 0.15 ) $ ( 0.62 ) $ ( 0.19 )

Diluted net income (loss) per share $ 0.04 $ ( 0.05 )

__________________________

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See Note 2 to the interim consolidated financial statements for a description of the recently adopted accounting pronouncement.

Excludes 4,925 and 11,974 restricted Class A common stock units for the three and six months ended March 31, 2021, respectively.

For the three and six months ended March 31, 2022, all potentially dilutive securities were anti-dilutive, so diluted net loss per share was equivalent to basic net loss per share.

Excludes 2,949 and 8,965 restricted Class A common stock units for the three and nine months ended June 30, 2021, respectively.

For the three and nine months ended June 30, 2022, all potentially dilutive securities were anti-dilutive, so diluted net loss per share was equivalent to basic net loss per share.

The following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted net loss per share of Class A common stock:

10,210,142 and 10,216,615 shares of weighted average Class B common stock for the three and six months ended March 31, 2022, respectively, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive,

4,667,581 and 5,388,813 stock options for the three and six months ended March 31, 2022, respectively, were excluded because the exercise price of these stock options exceeded the average market price of our Class A common stock during the period (“out-of-the-money”) and the effect of including them would have been anti-dilutive,

522,355 and 613,913 shares for the three and six months ended March 31, 2022, respectively, resulting from estimated stock option exercises and restricted stock units vesting as calculated by the treasury stock method were excluded because of the effect of including them would have been anti dilutive.

10,131,878 and 10,188,369 shares of weighted average Class B common stock for the three and nine months ended June 30, 2022, respectively, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive,

4,547,783 and 5,201,394 stock options for the three and nine months ended June 30, 2022, respectively, were excluded because the exercise price of these stock options exceeded the average market price of our Class A common stock during the period (“out-of-the-money”) and the effect of including them would have been anti-dilutive, and

716,276 and 724,484 shares for the three and nine months ended June 30, 2022, respectively, resulting from estimated stock option exercises and restricted stock units vesting as calculated by the treasury stock method were excluded because of the effect of including them would have been anti-dilutive.

i3 VERTICALS, Inc.

1 unchanged sentence

(in thousands, except unit, share and per share amounts)

For the three and six months ended March 31, 2021, the following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted net loss per share of Class A common stock:

1,760,997 and 2,506,997 stock options for the three and six months ended March 31, 2021, respectively, were excluded because the exercise price of these stock options exceeded the average market price of our Class A common stock during the period (“out-of-the-money”) and the effect of including them would have been anti-dilutive, and

1,449,216 shares for the six months ended March 31, 2021 resulting from estimated stock option exercises as calculated by the treasury stock method, and 11,974 restricted Class A common units for the six months ended March 31, 2021, were excluded because the effect of including them would have been anti-dilutive.

For the three and nine months ended June 30, 2021, all potentially dilutive securities were anti-dilutive, so diluted net loss per share was equivalent to basic net loss per share.

The following securities were excluded from the weighted average effect of dilutive securities in the computation of diluted net loss per share of Class A common stock:

10,229,142 and 10,884,874 shares of weighted average Class B common stock for the three and nine months ended June 30, 2021, respectively, along with the reallocation of net income assuming conversion of these shares, were excluded because the effect would have been anti-dilutive,

2,100,833 and 2,419,305 stock options for the three and nine months ended June 30, 2021, respectively, were excluded because the exercise price of these stock options exceeded the average market price of our Class A common stock during the period (“out-of-the-money”) and the effect of including them would have been anti-dilutive, and

1,678,774 and 1,531,722 shares for the three and nine months ended June 30, 2021, respectively, resulting from estimated stock option exercises as calculated by the treasury stock method, and 2,949 and 8,965 restricted Class A common units for the three and nine months ended June 30, 2021, were excluded because the effect of including them would have been anti-dilutive.

Since the Company expects to settle the principal amount of its outstanding Exchangeable Notes in cash and any excess in cash or shares of the Company's Class A common stock, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable.

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SIGNIFICANT NON-CASH TRANSACTIONS

The Company engaged in the following significant non-cash investing and financing activities during the six months ended March 31, 2022 and 2021:

Six months ended March 31,

The Company engaged in the following significant non-cash investing and financing activities during the nine months ended June 30, 2022 and 2021:

Nine months ended June 30,

Class A common stock issued as part of acquisition's purchase consideration (Note 3) $ — $ 35,245

1 unchanged sentence

Right-of-use assets obtained in exchange for operating lease obligations $ 7,720 $ 16,745

SUBSEQUENT EVENTS

Recent Acquisitions

Subsequent to March 31, 2022, the Company completed the acquisition of a businesses that further strengthens the Company's focus in its healthcare vertical.Total purchase consideration, which includes cash funded by proceeds from our revolving line of credit, and contingent consideration, is still being valued but is expected to be less than $ 10.0 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements