What changed in this filing

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Item 1. Financial Statements

2020-08-14 compared with 2020-05-13 · 198 added, 157 removed, 510 unchanged (41% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands)

March 31, 2020

(in thousands, except share data)

June 30, 2020

December 31, 2019

23 unchanged sentences

Total liabilities

Commitments and Contingencies (Notes 10 and 11)

Stockholders' deficit:

Preferred stock

Preferred stock - $0.001 par value per share;100,000,000 shares authorized;

zero issued or outstanding

Common stock - $0.001 par value per share;1,000,000,000 shares authorized;

67,565,359 and 67,512,167 shares issued, respectively;

67,114,135 and 67,060,943 shares outstanding, respectively

Additional paid-in capital

10 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

OPERATING EXPENSES:

7 unchanged sentences

Interest expense

Other (expense) income, net

Other income (expense), net

Total other expenses, net

Loss before income taxes

Income tax benefit

Income tax expense (benefit)

Loss per common share:

6 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Adjustment to reconcile net loss to net cash used in operating activities:

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

Depreciation and amortization of assets

Stock-based compensation

Equity-classified and liability-classified stock compensation

Amortization of debt issuance costs and discounts

2 unchanged sentences

Payment-in-kind interest

Other non-cash items

Other non-cash items, net

Change in operating assets and liabilities:

5 unchanged sentences

Customer deposits and advance payments

Other assets and liabilities

Net cash used in operating activities

Other assets and liabilities, net

Net cash provided by operating activities

Cash flows from investing activities:

1 unchanged sentence

Acquisitions of intangible assets

Note receivable loan funding

Other investing activity

5 unchanged sentences

Borrowings under revolving credit facility

Repayments under revolving credit facility

Repurchases of common stock

Net cash (used in) provided by financing activities

Net change in cash and restricted cash:

Net decrease in cash and restricted cash

Cash and restricted cash at beginning of year

Cash and restricted cash at March 31

Net increase (decrease) in cash and restricted cash

Cash and restricted cash at beginning of period

Cash and restricted cash at end of period

Supplemental cash flow information:

1 unchanged sentence

Non-cash investing and financing activities:

PIK interest added to principal of debt obligations

Payment of accrued contingent consideration for asset acquisition from offset of account receivable

Accrued purchases of property, equipment and software

Intangible assets acquired by issuing non-controlling interest in a subsidiary

9 unchanged sentences

and its consolidated subsidiaries are referred to herein collectively as "Priority," "PRTH," the "Company," "we," "our" or "us," unless the context requires otherwise.

Priority is provider of merchant acquiring, integrated payment software and commercial payment solutions.

Priority is a provider of merchant acquiring, integrated payment software and commercial payment solutions.

The Company operates on a calendar year ending each December 31 and on four calendar quarters ending on March 31, June 30, September 30, and December 31 of each year.

16 unchanged sentences

Additionally, as a smaller reporting company ("SRC") as defined by the SEC, the Company has the option to adopt certain new or revised accounting standards on a permitted delayed basis that is not available to other public companies not meeting the definition of a SRC.

Therefore, the Company's financial statements may not be comparable to other public companies.

Therefore, the Company's financial statements may not be comparable to other public companies that are not an EGC and/or SRC.

Comprehensive Income (Loss)

For the three-month periods ended March 31, 2020 and 2019 , the Company had no activities to report as components of other comprehensive income (loss).

For the three months and six months ended June 30, 2020 and June 30, 2019 , the Company had no activities to report as components of other comprehensive income (loss).

Therefore, no separate Statement of Comprehensive Income (Loss) was prepared for any reporting period as the Company's net loss from continuing operations comprises all of its comprehensive loss.

2 unchanged sentences

The Company adopted Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers , for the 2019 annual reporting period included in its Annual Report on Form 10-K for the year ended December 31, 2019 using the full retrospective transition method.

Accordingly, the unaudited condensed consolidated statement of operations for the three months ended March 31, 2019 presented herein has been recasted to retroactively reflect the provisions of ASC 606.

Accordingly, the unaudited condensed consolidated statement of operations for the three months and six months ended June 30, 2019 presented herein has been recasted to retroactively reflect the provisions of ASC 606.

The adoption of ASC 606 had no net effect on the Company's income from operations, loss before income taxes, net loss, consolidated balance sheet, or cash flows from operations, investing, or financing activities.

1 unchanged sentence

There have been no material changes to the Company's accounting policies as described in its most recent Annual Report on Form 10-K for the year ended December 31, 2019 .

The Company did not adopt any new accounting standards during the three months ended March 31, 2020, except for ASU 2018-13, as described below.

The Company did not adopt any new accounting standards during the three months and six months ended June 30, 2020 , except for ASU 2018-13, as described below.

Disclosures for Fair Value Measurements (ASU 2018-13)

2 unchanged sentences

Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13").

ASU 2018-13 eliminated, added, and modified certain disclosure requirements for fair value measurements as part of the FASB's disclosure framework project.

ASU 2018-13 eliminated, added, and modified certain disclosure requirements for fair value measurements as part of the Financial Accounting Standards Board's ("FASB") disclosure framework project.

Certain amendments must be applied prospectively while others are applied on a retrospective basis to all periods presented.

15 unchanged sentences

1) a lease liability equal to the lessee's obligation to make lease payments arising from a lease, measured on a discounted basis and 2) a right-of-use asset which will represent the lessee's right to use, or control the use of, a specified asset for the lease term.

As an EGC, this standard is effective for the Company's annual reporting period beginning in 2021 and interim reporting periods beginning first quarter of 2022.

The FASB has recently proposed delaying the effective date of ASC 842 for certain entities.

If the proposal becomes effective, the Company will be required to adopt ASC 842 for interim and annual periods beginning January 1, 2022 based on the current expectation for the expiration of the Company's EGC status.

The adoption of ASC 842 will require the Company to recognize non-current assets and liabilities for right-of-use assets and operating lease liabilities on its consolidated balance sheet, but it is not expected to have a material effect on the Company's results of operations or cash flows.

Based on the current expectation for the expiration of the Company's EGC status, the Company must adopt this standard no later than the beginning of 2022 for annual and interim reporting periods.

The adoption of ASC 842 will require the Company to recognize non-current assets and liabilities for right-of-use assets and operating lease liabilities on its consolidated balance sheet.

The Company is still evaluating the potential effects that the adoption of ASC 842 may have on its results of operations.

ASC 842 will also require additional footnote disclosures to the Company's consolidated financial statements.

10 unchanged sentences

The Company is currently evaluating the potential impact that ASU 2016-13 may have on the timing of recognizing future provisions for expected losses on the Company's accounts receivable.

As a Smaller Reporting Company (as defined by the SEC), the Company must adopt this new standard no later than the beginning of 2023.

Since the Company was a SRC on November 15, 2019 , the Company must adopt this new standard no later than the beginning of 2023 for annual and interim reporting periods.

Goodwill Impairment Testing (ASU 2017-04)

7 unchanged sentences

Upon adoption, the ASU will be applied prospectively.

As an EGC, this ASU will be effective for annual and interim impairment tests performed in periods beginning in 2022.

Since the Company was a SRC on November 15, 2019 , the Company must adopt this new standard no later than the beginning of 2023 for annual and interim reporting periods.

The impact that ASU 2017-04 may have on the Company's financial condition or results of operations will depend on the circumstances of any goodwill impairment event that may occur after adoption.

28 unchanged sentences

Revenues and commissions earned from the sales of payment equipment were typically recognized at a point in time.

The following table presents a disaggregation of the Company's consolidated revenues by type, and the relationships to the Company's reportable segments, for the three months ended March 31, 2020 and 2019:

(in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Merchant card fees

Outsourced services

Other services

Outsourced services and other services

Total revenues

The Company's revenues by type are earned in the Company's reportable segments as follows:

merchant card fees primarily in Consumer Payments;

outsourced services revenues primarily in Commercial Payments;

other services revenues in Commercial Payments and Integrated Partners;

and equipment revenues in Consumer Payments.

Revenues earned in these disaggregated categories consist of following:

Merchant card fees - revenues related to discount rates and interchange fees earned from payment services provided by the Company's Consumer Payments, Commercial Payments, and Integrated Partners segments.

Outsourced services and other services - business process outsourcing services provided by our Commercial Payments segment primarily to certain business customers of American Express, auxiliary services provided primarily to customers in the Company's Integrated Partners segment, and revenue from automated clearing house ("ACH") services.

Equipment - revenues from sales of point-of-sale equipment and other payment-processing equipment sold to customers in the Company's Consumer Payments segment.

Transaction Price Allocated to Future Performance Obligations

1 unchanged sentence

However, as allowed by ASC 606, the Company has elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria.

As described above, the Company’s most significant performance obligations consist of variable consideration under a stand-ready series of distinct days of service.

The Company’s most significant performance obligations consist of variable consideration under a stand-ready series of distinct days of service.

Such variable consideration meets the specified criteria for the disclosure exclusion.

4 unchanged sentences

Fulfillment costs, as defined by ASC 340-40, typically benefit only the period (typically a month in duration) in which they are incurred and therefore are expensed in the period incurred (i.e., not capitalized) unless they meet criteria to be capitalized under other accounting guidance.

The Company pays commissions to most of its ISOs, and for certain ISOs the Company also pays (through a higher commission rate) them to provide customer service and other services directly to our merchant customers.

The Company pays commissions to most of its independent sales organizations ("ISOs"), and for certain ISOs the Company also pays (through a higher commission rate) them to provide customer service and other services directly to our merchant customers.

The ISO is typically an independent contractor or agent of the Company.

1 unchanged sentence

Since payments to ISOs are dependent substantially on variable merchant payment volumes generated after the merchant enters into a new or renewed contract, these payments to ISOs are not deemed to be a cost to acquire a new contract since the ISO payments are based on factors that will arise subsequent to the event of obtaining a new or renewed contract.

Also, payments to ISOs pertain only to a specific month’s activity.

Also, payments to ISOs pertain

only to a specific month’s activity.

For payments made, or due, to an ISO, the expenses are reported within income from operations on our statements of operations.

7 unchanged sentences

Material contract assets and liabilities are presented net at the individual contract level in the consolidated balance sheet and are classified as current or noncurrent based on the nature of the underlying contractual rights and obligations.

Supplemental balance sheet information related to contracts from customers as of March 31, 2020 and December 31, 2019 was as follows:

Supplemental balance sheet information related to contracts from customers as of June 30, 2020 and December 31, 2019 was as follows:

(in thousands)

Consolidated Balance Sheet Location

March 31, 2020

June 30, 2020

December 31, 2019

1 unchanged sentence

Customer deposits and advance payments

The balance for the contract liabilities was approximately $ 1,738,000 and $ 1,776,000 at March 31, 2019 and January 1, 2019, respectively.

The balance for the contract liabilities was $ 1,738,000 , $ 1,738,000 , and $ 1,776,000 at June 30, March 31, and January 1, 2019, respectively.

The changes in the balances during the three months and six months ended June 30, 2020 and June 30, 2019 were due to the timing of advance payments received from the customer.

Substantially all of these balances are recognized as revenue within twelve months.

The changes in the balances during the three months ended March 31, 2020 and 2019 were due to the timing of advance payments received from the customer.

Net contract assets were not material for any period presented.

Impairment losses recognized on receivables or contract assets arising from the Company's contracts with customers were not material for the three months ended March 31, 2020 and 2019.

ASSET ACQUISITIONS

Impairment losses recognized on receivables or contract assets arising from the Company's contracts with customers were not material for the three months and six months ended June 30, 2020 and June 30, 2019 .

NON-CONTROLLING INTERESTS

In March 2019, the Company, through one of its subsidiaries, Priority Real Estate Technology, LLC ("PRET"), acquired certain assets and assumed certain related liabilities (the "YapStone net assets") from YapStone, Inc.

("YapStone") under an asset purchase and contribution agreement.

The purchase price for the YapStone net assets was $ 65.0 million in cash plus a non-controlling interest in PRET.

The fair value of the non-controlling interest was estimated to be approximately $ 5.7 million .

The purchase price for the YapStone net assets was $ 65.0 million in cash plus a non-controlling interest ("NCI") in PRET.

The fair value of the NCI was estimated to be approximately $ 5.7 million .

The total purchase price was assigned to customer relationships, except for $ 1.0 million and $ 1.2 million which were assigned to a software license agreement and a services agreement, respectively.

The $ 65.0 million of cash was funded from a draw down of the Senior Credit Facility on a delayed basis as provided for and pursuant to the third amendment thereto executed in December 2018.

During the three months ended March 31, 2020 and 2019, no earnings of PRET were allocated to the non-controlling interest pursuant to the profit-sharing agreement between the Company and the non-controlling interest.

During the three months and six months ended June 30, 2020 and June 30, 2019 , no earnings of PRET were attributable to the NCI pursuant to the profit-sharing agreement between the Company and the NCI.

See Note 10, Commitments and Contingencies , for information about merchant portfolios acquired in 2019 that included contingent purchase prices.

9 unchanged sentences

Therefore, neither is recognized in the Company’s consolidated balance sheets.

Member banks held merchant funds of approximately $ 71.7 million and $ 79.8 million at March 31, 2020 and December 31, 2019, respectively.

Member banks held merchant funds of $ 85.5 million and $ 79.8 million at June 30, 2020 and December 31, 2019 , respectively.

Exception items include items such as customer chargeback amounts received from merchants and other losses.

10 unchanged sentences

The Company recognizes these cash balances within restricted cash and settlement obligations in its consolidated balance sheets.

The Company's settlement assets and obligations at March 31, 2020 and December 31, 2019 were as follows:

The Company's settlement assets and obligations at June 30, 2020 and December 31, 2019 were as follows:

(in thousands)

March 31, 2020

June 30, 2020

December 31, 2019

12 unchanged sentences

(in thousands)

March 31, 2020

June 30, 2020

December 31, 2019

1 unchanged sentence

Integrated Partners

There were no changes in the carrying amount of goodwill for the three months ended March 31, 2020 .

The Company considered the declining market conditions generated by the COVID-19 pandemic for the three months and six months ended June 30, 2020 and concluded that there were no changes in the carrying amount of goodwill.

The Company tests goodwill for impairment for each of its reporting units on an annual basis, or when events occur or circumstances indicate the fair value of a reporting unit may be below its carrying value.

The Company will continue to monitor the economic impact of COVID-19 on its ongoing assessment of goodwill.

The Company expects to perform its next annual goodwill impairment test as of November 30, 2020 using market data and discounted cash flow analysis.

The Company concluded there was no impairment as of March 31, 2020 or December 31, 2019 .

As such, there was no accumulated impairment loss as of March 31, 2020 and December 31, 2019 .

The Company concluded there was no impairment as of June 30, 2020 or December 31, 2019 .

As such, there was no accumulated impairment loss as of June 30, 2020 and December 31, 2019 .

The Company's intangible assets include acquired merchant portfolios, customer relationships, ISO relationships, trade names, technology, non-compete agreements, and residual buyouts.

As of March 31, 2020 and December 31, 2019 , intangible assets consisted of the following:

As of June 30, 2020 and December 31, 2019 , intangible assets consisted of the following:

(in thousands)

March 31, 2020

June 30, 2020

December 31, 2019

15 unchanged sentences

See Note 10 , Commitments and Contingencies, for information about a merchant portfolio with a contingent purchase price.

Amortization expense for finite-lived intangible assets was approximately $ 8.5 million and $ 7.5 million for the three months ended March 31, 2020 and 2019, respectively.

Amortization expense for finite-lived intangible assets was $ 8.4 million and $ 16.9 million for the three months and six months ended June 30, 2020 , respectively, and $ 8.2 million and $ 15.6 million for the three months and six months ended June 30, 2019 , respectively.

Amortization expense for future periods could differ due to new intangible asset acquisitions, changes in useful lives of existing intangible assets, and other relevant events or circumstances.

The Company tests intangible assets for impairment when events occur or circumstances indicate that the fair value of an intangible asset or group of intangible assets may be impaired.

The Company concluded there were no impairments as of March 31, 2020 or December 31, 2019 .

As such, there was no accumulated impairment loss as of March 31, 2020 and December 31, 2019 .

The Company considered the declining market conditions generated by the COVID-19 pandemic and concluded that there was no change at June 30, 2020 from the conclusion at December 31, 2019 that no intangible assets were impaired.

As such, there was no accumulated impairment loss as of June 30, 2020 and December 31, 2019 .

The Company will continue to monitor the economic impact of COVID-19 on its ongoing assessment of intangible assets.

PROPERTY, EQUIPMENT AND SOFTWARE

1 unchanged sentence

Computer software represents purchased software and internally developed back office and merchant interfacing systems used to assist the reporting of merchant processing transactions and other related information.

A summary of property, equipment, and software as of March 31, 2020 and December 31, 2019 follows:

A summary of property, equipment, and software as of June 30, 2020 and December 31, 2019 follows:

(in thousands)

March 31, 2020

June 30, 2020

December 31, 2019

4 unchanged sentences

Property, equipment, and software, net

Depreciation expense for property, equipment, and software totaled $ 1.8 million and $ 1.4 million for the three months ended March 31, 2020 and 2019, respectively.

Purchases of property, equipment and software accrued in accounts payable were not material for any period presented.

Depreciation expense for property, equipment, and software totaled $ 1.9 million and $ 3.7 million for the three months and six months ended June 30, 2020 , respectively, and $ 1.6 million and $ 3.0 million for the three months and six months ended June 30, 2019 , respectively.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The Company accrues for certain expenses that have been incurred and not paid, which are classified within accounts payable and accrued expenses in the accompanying consolidated balance sheets.

The components of accounts payable and accrued expenses that exceeded five percent of total current liabilities at either March 31, 2020 or December 31, 2019 consisted of the following:

The components of accounts payable and accrued expenses that exceeded five percent of total current liabilities at either June 30, 2020 or December 31, 2019 consisted of the following:

(in thousands)

March 31, 2020

June 30, 2020

December 31, 2019

2 unchanged sentences

DEBT OBLIGATIONS

Outstanding debt obligations as of March 31, 2020 and December 31, 2019 consisted of the following:

Outstanding debt obligations as of June 30, 2020 and December 31, 2019 consisted of the following:

(in thousands)

March 31, 2020

June 30, 2020

December 31, 2019

Senior Credit Agreement - Bears interest at LIBOR plus 6.5% and 5.0% at March 31, 2020 and December 31, 2019, respectively (rate of 8.11% at March 31, 2020 and 6.71% at December 31, 2019):

Term facility - Matures January 3, 2023

Revolving credit facility - $25.0 million line, matures January 22, 2022

Term Loan - Subordinated, matures July 3, 2023 and bears interest at 5.0% plus an applicable margin (rate of 12.5% and 10.5% at March 31, 2020 and December 31, 2019, respectively)

Senior Credit Agreement:

Term facility - Matures January 3, 2023 and bears interest at LIBOR (with a LIBOR "floor" of 1.0% at June 30, 2020) plus 7.5% and 5.0% at June 30, 2020 and December 31, 2019, respectively (rate of 8.5% at June 30, 2020 and 6.71% at December 31, 2019, respectively)

Revolving credit facility - $25.0 million line, matures January 22, 2022, and bears interest at LIBOR plus 7.5% and 5.0% at June 30, 2020 and December 31, 2019, respectively (rate of 7.68% at June 30, 2020 and 6.71% at December 31, 2019, respectively)

Term Loan - Subordinated, matures July 3, 2023 and bears interest at 5.0% plus an applicable margin (rate of 13.5% and 10.5% at June 30, 2020 and December 31, 2019, respectively)

Total debt obligations

3 unchanged sentences

Substantially all of the Company's assets are pledged as collateral under the credit agreements.

The Company's parent entity, Priority Technology Holdings, Inc., is neither a borrower nor a guarantor of the credit agreements.

The Company is neither a borrower nor a guarantor of the credit agreements.

The Company's subsidiaries that are borrowers or guarantors under the credit agreements are referred to as the "Borrowers."

5 unchanged sentences

Additionally, the Senior Credit Agreement continues to provide a $ 25.0 million revolving credit facility, which includes accommodation for any outstanding letters of credit and a $ 5.0 million swing line facility.

At March 31, 2020 and December 31, 2019, approximately $ 10.0 million and $ 13.5 million, respectively, was available under the revolving credit facility.

Undrawn commitments for letters of credit under the revolving credit facility were not material at March 31, 2020 and December 31, 2019.

At June 30, 2020 and December 31, 2019 , approximately $ 10.5 million and $ 13.5 million, respectively, was available under the revolving credit facility.

Undrawn commitments for letters of credit under the revolving credit facility were not material at June 30, 2020 and December 31, 2019 .

Senior Credit Agreement

Outstanding borrowings under the term loan facility of the Senior Credit Agreement accrue interest using either a base rate (as defined) or a LIBOR rate plus an applicable margin, or percentage per annum, as provided in the amended credit agreement.

Outstanding borrowings under the Senior Credit Agreement accrue interest using either a base rate (as defined) or a LIBOR rate plus an applicable margin, or percentage per annum, as provided in the amended credit agreement.

For the term loan portion of the Senior Credit Facility, the Sixth Amendment provides for a LIBOR "floor" of 1.0 % per annum.

Accrued interest is payable quarterly.

3 unchanged sentences

Accrued interest is payable quarterly at 5.0 % per annum, and the accrued interest attributable to the applicable margin is capitalized as payment-in-kind ("PIK") interest each quarter.

Potential Changes in Future Applicable Interest Rate Margins

Changes and Potential Future Changes in Applicable Interest Rate Margins

Under the terms of the Senior Credit Agreement and the GS Credit Agreement, the future applicable interest rate margins may vary based on the Borrowers' future Total Net Leverage Ratio (as defined) in addition to future changes in the underlying market rates for LIBOR and the rate used for base-rate borrowings.

Additionally, the future interest rate margins will increase 1.0 % if the Borrowers do not make a permitted accelerated principal payment of at least $ 100 million under the term loan facility of the Senior Credit Agreement on or before June 16, 2020, with additional 50 basis-point increases in the applicable margins every successive 30 days through October 14, 2020 if the permitted accelerated principal payment of at least $ 100 million does not occur, up to a total interest rate margin increase of 3.0 % .

Any increase in the interest rate margin will not be applicable at any time after the Borrowers have made the accelerated payment of at least $ 100 million , other than with proceeds of indebtedness.

Should these increases in the applicable interest rate margins occur, all or a portion of such additional interest rates, at the option of the Borrowers, may be payable in kind.

The Company is pursuing the ability to make the accelerated payment by raising cash through various means.

On June 16, 2020, the interest rate margins for the Senior Credit Agreement and the GS Credit Agreement increased 1.0 % because the Borrowers did not make a permitted accelerated principal payment of at least $ 100 million under the term loan facility of the Senior Credit Agreement on or before that date as described in the Sixth Amendment (the " $ 100 million principal prepayment").

Additionally, on July 18, 2020 the interest rate margins increased an additional 50 basis points on the Senior Credit Agreement and the GS Credit Agreement from the interest rate margins applicable at June 30, 2020 because the Borrowers did not make the $ 100 million principal prepayment by that date.

After July 18, 2020, additional 50 basis-point increases in the applicable margins will occur every successive 30 days through October 14, 2020 if the $ 100 million principal prepayment does not occur, up to a total interest rate margin increase of an additional 2.0 % subsequent to June 30, 2020 .

Any increase in the interest rate margin will not be applicable at any time after the Borrowers have made a principal prepayment of at least $ 100 million , other than with proceeds of indebtedness.

When any increases in the applicable interest rate margins occur, all or a portion of such additional interest rates, at the option of the Borrowers, may be payable in kind.

For the additional interest expense of $ 0.2 million incurred during the second quarter of 2020 that resulted from the interest rate margin increases on June 16, 2020 for the Senior Credit Agreement and the GS Credit Agreement, the Borrowers elected to treat this additional interest as PIK interest.

The Company is pursuing the ability to make the accelerated principal prepayment by raising cash through various means.

The Senior Credit Agreement and the GS Credit Agreement also have incremental margins that would apply to the future applicable interest rates if the Borrowers are deemed to be in violation of the terms of the credit agreement.

Contractual Maturities

Based on terms and conditions existing at March 31, 2020, future minimum principal payments for long-term debt are as follows:

Based on terms and conditions existing at June 30, 2020 , future minimum principal payments for long-term debt are as follows:

(in thousands)

2 unchanged sentences

GS Credit Agreement

Twelve-month period ending March 31,

Twelve-month period ending June 30,

2021 (current)

6 unchanged sentences

The principal amount borrowed and still outstanding under the GS Credit Agreement was $ 80.0 million .

Included in the outstanding principal balance at March 31, 2020 and December 31, 2019 was accumulated PIK interest of approximately $ 16.5 million and $ 15.1 million , respectively.

For the three months ended March 31, 2020 and March 31, 2019, PIK interest under the GS Credit Agreement added $ 1.4 million and $ 1.2 million, respectively, to the principal amount of the subordinated debt.

For the three months ended March 31, 2020 and 2019, interest expense, including fees for undrawn amounts under the revolving credit facility and amortization of deferred financing costs and debt discounts, was $ 10.3 million and $ 9.4 million , respectively.

Interest expense for the three months ended March 31, 2019 also included a $ 0.4 million fee for the $ 70.0 million delayed principal draw under December 2018 amendment to the Senior Credit Agreement, which occurred during the first quarter of 2019.

For the Sixth Amendment, approximately $ 2.7 million of lender fees were capitalized and, along with existing unamortized loan costs and discount of approximately $ 5.6 million, continue to be amortized as a component of interest expense on the Company's statements of operations.

Interest expense related to amortization of deferred financing costs and debt discounts was approximately $ 0.5 million and $ 0.4 million for the three months ended March 31, 2020 and 2019, respectively.

As a result of the Sixth Amendment, the effective interest rates, which includes the amortization of capitalized deferred financing costs and debt discounts, are 8.87 % and 12.91 % for the term debt under the Senior Credit Agreement and the GS Credit Agreement, respectively, and are subject to future changes in the applicable interest rate margins as previously described.

Approximately $ 0.4 million of third-party costs were expensed in connection with the Sixth Amendment.

Included in the outstanding principal balance at June 30, 2020 and December 31, 2019 was accumulated PIK interest of $ 18.4 million and $ 15.1 million , respectively.

The principal amount of the GS Credit Agreement increased for PIK interest by $ 1.9 million and $ 3.3 million for the three months and six months ended June 30, 2020 , respectively.

For the three months and six months ended June 30, 2019 , PIK interest added $ 1.3 million and $ 2.5 million , respectively, to the principal of the GS Credit Agreement.

Interest expense, including fees for undrawn amounts under the revolving credit facility and amortization of deferred financing costs and debt discounts, was $ 11.7 million and $ 22.0 million for the three months and six months ended June 30, 2020 , respectively, and $ 10.8 million and $ 20.1 million for the three months and six months ended June 30, 2019 , respectively.

Interest expense for the six months ended June 30, 2019 also included a $ 0.4 million fee for the $ 70.0 million delayed principal draw under December 2018 amendment to the Senior Credit Agreement, which occurred during the first quarter of 2019.

For the Sixth Amendment, $ 2.7 million of lender fees were capitalized in first quarter of 2020 and, along with existing unamortized loan costs and discount of $ 5.6 million, continue to be amortized as a component of interest expense on the Company's statements of operations.

Interest expense related to amortization of deferred financing costs and debt discounts was $ 0.7 million and $ 1.1 million for the three months and six months ended June 30, 2020 , respectively, and $ 0.4 million and $ 0.8 million for the three months and six months ended June 30, 2019 , respectively.

The effective interest rates, which includes PIK interest and amortization of deferred financing costs and debt discounts, for the term debt under the Senior Credit Agreement and the GS Credit Agreement were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Senior Credit Agreement

GS Credit Agreement

Debt modification costs that are not eligible for deferral and subsequent amortization as interest expense are reported on the Company's consolidated statement of operations as a component of other income (expense), net.

Approximately $ 0.4 million of such costs were expensed in connection with the Sixth Amendment during the first quarter of 2020.

The Senior Credit Agreement and the GS Credit Agreement, as amended, contain representations and warranties, financial and collateral requirements, mandatory payment events, events of default, and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the Company's subsidiaries to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates), and to enter into certain leases.

The Company is also required to comply with certain restrictions on its Total Net Leverage Ratio, which is defined in the credit agreements as the ratio of consolidated total debt of the Borrowers to the Company's consolidated adjusted EBITDA (as defined in the Senior Credit Agreement and GS Credit Agreement).

The maximum permitted Total Net Leverage Ratio was 8.00 :1.00 at March 31, 2020.

As of March 31, 2020, the Company remained in compliance with the covenants.

The maximum permitted Total Net Leverage Ratio was 7.75 :1.00 at June 30, 2020 .

As of June 30, 2020 , the Company remained in compliance with the covenants.

Income Tax Benefit

The Company's benefit for federal and state income taxes was as follows:

The Company's expense (benefit) for federal and state income taxes was as follows:

(in thousands)

Three Months Ended

Current income tax benefit

Three Months Ended June 30,

Six Months Ended June 30,

Current income tax expense (benefit)

Deferred income tax benefit

1 unchanged sentence

Adjustment for DTA valuation allowance - discrete item

Total income tax benefit

Total income tax expense (benefit)

DTA = Deferred income tax asset

The Company's effective income tax rate for the three months ended March 31, 2020 and 2019 was 17.4 % and 21.1 % , respectively.

The Company's effective income tax rate (benefit) for the three months and six months ended June 30, 2020 was ( 5.6 )% and 5.6 % , respectively, and was ( 72.3 )% and ( 25.7 )% for the three months and six months ended June 30, 2019 , respectively.

Valuation Allowance for Deferred Income Tax Assets

8 unchanged sentences

With respect to recording a deferred tax benefit for the carryforward of business interest expense, the Company is required to apply the "more likely than not" threshold for assessing recoverability.

Based on management’s assessment, the Company recorded an increase in the valuation allowance in the three months ended March 31, 2020 of $ 0.5 million for the business interest expense carryover comprised of (i) a discrete valuation allowance benefit of $ 1.5 million associated with the 2019 business interest deferred tax asset as a result of the CARES Act and (ii) a provision for the valuation allowance of $ 2.0 million associated with the 2020 excess business interest.

Based on management’s assessment, the Company recorded an increase in the valuation allowance in the three months and six months ended June 30, 2020 of $ 2.2 million and $ 2.6 million , respectively, for the business interest expense carryover comprised of (i) a discrete benefit of $ 1.5 million for the six months ended June 30, 2020 , which was recognized during the first quarter of 2020, associated with the 2019 business interest deferred tax asset as a result of the CARES Act and (ii) a provision of $ 2.2 million and $ 4.1 million for the three months and six months ended June 30, 2020 , respectively, associated with the 2020 excess business interest.

For the three months and six months ended June 30, 2019 , the Company recorded a valuation allowance of $ 7.9 million for the business interest carryover comprised of (i) a discrete provision of $ 2.7 million associated with the 2018 business interest deferred tax asset and (ii) a provision of $ 5.2 million associated with the 2019 excess business interest.

This $ 7.9 million provision was

included in income tax expense in the Company’s unaudited condensed consolidated statements of operations for the three months and six months ended June 30, 2019 .

The provisions for and adjustments to the valuation allowance are a component of income tax expense (benefit) in the Company's unaudited condensed consolidated statements of operations.

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The Company recognizes the tax effects of uncertain tax positions only if such positions are more likely than not to be sustained based solely upon its technical merits at the reporting date.

The Company refers to the difference between the tax benefit recognized in its financial statements and the tax benefit claimed in the income tax return as an "unrecognized tax benefit." As of March 31, 2020, the net amount of our unrecognized tax benefits was not material.

The Company refers to the difference between the tax benefit recognized in its financial statements and the tax benefit claimed in the income tax return as an "unrecognized tax benefit." As of June 30, 2020 , the net amount of our unrecognized tax benefits was not material.

The Company is subject to U.S.

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Some of these agreements have minimum annual requirements for processing volumes.

As of March 31, 2020, the Company is committed to pay minimum processing fees under these agreements of approximately $ 14.0 million through the end of 2021.

As of June 30, 2020 and December 31, 2019 , the Company is committed to pay minimum processing fees under these agreements of $ 14.0 million through the end of 2021.

Commitment to Lend

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1) the actual financial performance of the acquired merchant portfolio rights and 2) actual sales and variable wholesale costs for the on-line services sold by the Company under the reseller arrangement.

Amounts subsequently paid to the other entity are accounted for as either 1) standard costs of the services sold by the Company under the 5-year reseller agreement or 2) consideration for the merchant portfolio rights.

Amounts subsequently paid to the other entity are accounted for as either 1) standard costs of the services sold by the Company under the 5 -year reseller agreement or 2) consideration

for the merchant portfolio rights.

Amounts paid that are accounted for as consideration for the merchant portfolio rights are capitalized and amortized over the estimated useful life of the merchant portfolio rights.

As of March 31, 2020 and December 31, 2019, approximately $ 2.1 million and $ 1.1 million , respectively, was capitalized as cost for the merchant portfolio.

As of June 30, 2020 and December 31, 2019, $ 2.9 million and $ 1.1 million , respectively, was capitalized as cost for the merchant portfolio.

The capitalized cost, which is in our Consumer Payments reportable segment, is being amortized using an accelerated method.

2 unchanged sentences

On March 15, 2019 , a subsidiary of the Company paid $ 15.2 million cash to acquire certain residual portfolio rights.

This acquisition became part of the Company's Consumer Payments reportable segment.

This asset acquisition became part of the Company's Consumer Payments reportable segment.

Of the $ 15.2 million , $ 5.0 million was funded from a delayed draw down of the Senior Credit Facility.

Additionally, a $ 10.0 million draw was made against the revolving credit facility under the Senior Credit Facility and cash on hand was used to fund the remaining amount.

The purchase price may be subject to an increase of up to $ 6.4 million in accordance with the terms of the agreement between the Company and the sellers.

Additional purchase price is accounted for when payment to the seller becomes probable and is added to the carrying value of the asset.

The Company estimates that $ 2.1 million of the contingent consideration is owed to the seller at March 31, 2020.

The initial purchase price is subject to an increase of up to $ 6.4 million in accordance with the terms of the agreement between the Company and the sellers.

As of June 30, 2020 , an additional $ 2.1 million of the $ 6.4 million total contingent consideration has been paid to the seller.

Additional purchase price is accounted for when payment to the seller becomes probable and is added to the amortizable carrying value of the asset.

During the three months ended June 30, 2020 , the Company and the seller amended the agreement to provide the Company with additional guaranteed returns from the acquired residual portfolio rights, and the additional consideration from the Company to the seller of $ 0.8 million was added to the amortizable carrying value of the asset.

Contingent Consideration for Business Combinations

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The Company's revenue is substantially derived from processing Visa and MasterCard bank card transactions.

Because the Company is not a member bank, in order to process these bank card transactions, the Company maintains sponsorship agreements

with member banks which require, among other things, that the Company abide by the by-laws and regulations of the card associations.

Because the Company is not a member bank, in order to process these bank card transactions, the Company maintains sponsorship agreements with member banks which require, among other things, that the Company abide by the by-laws and regulations of the card associations.

A majority of the Company's cash and restricted cash is held in certain financial institutions, substantially all of which is in excess of federal deposit insurance corporation limits.

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On May 22, 2019, the Company, through one of its wholly-owned subsidiaries, executed an interest-bearing loan and commitment agreement with another entity.

The Company has loaned the entity a total of $ 3.5 million at March 31, 2020 and December 31, 2019, with a commitment to loan up to a total of $ 10.0 million based on certain growth metrics of the entity and continued compliance by the entity with the terms and covenants of the agreement.

The Company's commitment to make additional advances under the loan agreement is dependent upon such advances not conflicting with covenants or restrictions under any of the Company's debt or other applicable agreements.

The Company has loaned the entity a total of $ 3.5 million at June 30, 2020 and December 31, 2019 , with a commitment to loan up to a total of $ 10.0 million based on certain growth metrics of the entity and continued compliance by the entity with the terms and covenants of the agreement.

The Company's commitment to make additional advances under the loan agreement is dependent upon such advances not conflicting with covenants or restrictions under any of the Company's

debt or other applicable agreements.

Amounts loaned to this entity by the Company are secured by substantially all of the assets of the entity and by a personal guarantee.

The note receivable has an interest rate of 12.0 % per annum and is repayable in full in May 2024.

The Company recognized interest income of $ 0.1 million during the three months ended March 31, 2020.

The Company also received a warrant to purchase a non-controlling interest in this entity's equity at a fixed amount.

The Company recognized interest income of $ 56,000 and $ 110,000 during the three months and six months ended June 30, 2020 , respectively.

Interest income for the comparable periods in 2019 was not material.

The Company also received a warrant to purchase a NCI in this entity's equity at a fixed amount.

The loan agreement also gives the Company certain rights to purchase some or all of this entity's equity in the future, at the entity's then-current fair value.

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PHOT is a part of the Company's Integrated Partners reportable segment.

Pursuant to the limited liability company agreement of PHOT, any material future earnings generated by the eTab and Cumulus assets that are attributable to the holders of the preferred equity interests will be reported by the Company as a form of non-controlling interests classified as mezzanine equity on the Company's consolidated balance sheet until $ 4.5 million and the preferred yield have been distributed to the holders of the preferred equity interests.

Subsequent changes, if material, in the value of the NCI will be reported as an equity transaction between the Company's consolidated retained earnings (accumulated deficit) and any carrying value of the non-controlling interests in mezzanine equity.

Such amounts were not material to the Company's results of operations, financial position, or cash flows for the period covering February 1, 2019 (date the assets were contributed to the Company) through March 31, 2020, and therefore no recognition of the NCI has been reflected in the Company's unaudited condensed consolidated financial statements.

Pursuant to the limited liability company agreement of PHOT, any material undistributed earnings generated by the eTab and Cumulus assets that are attributable to the holders of the preferred equity interests are reported by the Company as a form of NCI classified as mezzanine equity on the Company's consolidated balance sheet until $ 4.5 million and the preferred yield have been distributed to the holders of the preferred equity interests.

Subsequent changes in the value of the NCI will be reported as an equity transaction between the Company's consolidated retained earnings (accumulated deficit) and any carrying value of the NCI in mezzanine equity.

Such amounts were not material to the Company's results of operations, financial position, or cash flows for the period covering February 1, 2019 (date the assets were contributed to the Company) through June 30, 2020 , and therefore no recognition of the NCI has been reflected in the Company's consolidated financial statements.

Equity-Method Investment

During the three months ended March 31, 2020, the Company wrote off its $ 0.2 million carrying value in an equity-method investment.

During the first quarter of 2020, the Company wrote off its $ 0.2 million carrying value in an equity-method investment.

This loss is reported as a component of Other (expense) income, net on the Company's unaudited condensed consolidated statement of operations.

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The Company is authorized to issue 100,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the board of directors.

As of March 31, 2020 and December 31, 2019, the Company has not issued any shares of preferred stock.

The following tables provide a reconciliation of the beginning and ending carrying amounts for the periods presented for the components of the deficit attributable to stockholders of the Company and equity attributable to non-controlling interest:

As of June 30, 2020 and December 31, 2019 , the Company has not issued any shares of preferred stock.

(in thousands)

3 unchanged sentences

Stockholders' (Deficit)

Non-Controlling Interest (c)

Preferred Stock

1 unchanged sentence

January 1, 2020

Stock-based compensation

Equity-classified stock compensation

March 31, 2020

Equity-classified stock compensation

June 30, 2020

January 1, 2019

Stock-based compensation

Equity-classified stock compensation

Warrant redemptions (b)

Issuance of non-controlling interest (c)

Issuance of NCI (c)

March 31, 2019

Equity-classified stock compensation

Repurchases of common stock

June 30, 2019

(b) Par value of the common shares issued in connection with the warrant exchange rounds to less than one thousand dollars.

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See Note 3, Asset Acquisitions .

During the three months ended March 31, 2020 and 2019, no earnings or losses were attributable to the non-controlling interest.

STOCK -BASED COMPENSATION PLANS

by the Company's subsidiary PRET during 2019.

As part of the consideration for the assets acquired from YapStone, Inc.

by PRET, YapStone, Inc.

was issued a NCI in PRET with an initial estimated fair value and carrying value of $ 5,654,000 .

See Note 3, Non-Controlling Interests .

For all reporting periods since PRET's inception, including the three months and six months ended June 30, 2020 and June 30, 2019 , no earnings or losses were attributable to the NCI of PRET based on the terms of the LLC agreement of PRET, as amended.

STOCK-BASED COMPENSATION

Stock-based compensation expense is included in Salary and employee benefits in the accompanying unaudited condensed consolidated statements of operations.

The Company recognizes the effects of forfeitures on compensation expense as the forfeitures occur.

Expense recognized by plan was as follows:

Expense recognized for equity-classified stock compensation by plan was as follows:

(in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

2018 Equity Incentive Plan

2014 Management Incentive Plan

Income tax benefit for stock-based compensation was not material for the three months ended March 31, 2020 and 2019.

In addition, the Company recognized compensation expense of $ 108,000 during the three months and six months ended June 30, 2020 related to liability-classified stock compensation under the 2018 Equity Incentive Plan whereby the service inception date preceded the future grant-date.

Income tax benefit for stock-based compensation was not material for the three months and six months ended June 30, 2020 and June 30, 2019 .

Fair Value Measurements

The estimated fair value of remaining contingent consideration related to the Priority Payment Systems Tech Partners ("PPS Tech") and Priority Payment Systems Northeast ("PPS Northeast") business combinations were each based on a weighted payout probability for the contingent consideration at the original measurement date and each subsequent remeasurement date, which fall within Level 3 on the fair value hierarchy since these recurring fair value measurements are based on significant unobservable inputs.

Both of these business combinations consummated during the third quarter of 2018.

For PPS Tech and PPS Northeast, the probabilities used to estimate the payout probability of the contingent considerations ranged between 15 % and 35 % and between 5 % and 80 % , respectively.

For PPS Tech and PPS Northeast, the estimated weighted average probability for payment of the contingent consideration was 21 % and 70 % , respectively, at March 31, 2020 and December 31, 2019, and 26 % and 70 % , respectively, at March 31, 2019.

The estimated fair value of remaining contingent consideration related to two business combinations were each based on a weighted payout probability for the contingent consideration at the original measurement date and each subsequent remeasurement date, which fall within Level 3 on the fair value hierarchy since these recurring fair value measurements are based on significant unobservable inputs.

The probabilities used to estimate the payout probability of the contingent consideration for the two business combinations ranged between 15 % and 35 % for one and between 5 % and 80 % for the other.

The estimated weighted-average probability for payment of the contingent consideration was 21 % for one and 70 % for the other at June 30, 2020 and December 31, 2019, and 26 % and 70 % , respectively, at June 30, 2019 .

These weighted average probabilities are based on present value of estimated projections for financial metrics for the remaining earnout periods.

At March 31, 2020, the remaining maximum amounts of contingent consideration for the PPS Tech and the PPS Northeast business combinations were $ 500,000 and $ 250,000 , respectively, and the measured fair values were $ 170,000 and $ 190,000 , respectively.

These fair value amounts did not change during the three months ended March 31, 2020 and 2019.

There were no transfers among the fair value levels during the three months ended March 31, 2020 and March 31, 2019.

At June 30, 2020 , the remaining maximum amounts of contingent consideration for these two business combinations were $ 500,000 for one and $ 250,000 for the other, and the measured fair values were $ 170,000 and $ 190,000 , respectively.

These fair value estimates did not change during the three months and six months ended June 30, 2020 and June 30, 2019 .

There were no transfers among the fair value levels during the three months and six months ended June 30, 2020 and June 30, 2019 .

There were no unrealized gains or losses included in other comprehensive income for any reporting period, therefore there were no changes in unrealized gains and losses for any reporting period included in other comprehensive income for recurring Level 3 fair value measurements.

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Substantially all of the Company's notes receivable are secured, and the Company believes that all of its notes receivable are collectible.

The fair value of the Company's notes receivable at March 31, 2020 and December 31, 2019 was approximately $ 6.6 million and $ 5.7 million , respectively.

The fair value of the Company's notes receivable at June 30, 2020 and December 31, 2019 was approximately $ 6.6 million and $ 5.7 million , respectively.

On the fair value hierarchy, Level 3 inputs are used to estimate the fair value of these notes receivable.

1 unchanged sentence

The Borrower's outstanding debt obligations (see Note 8, Debt Obligations ) are reflected in the Company's consolidated balance sheets at carrying value since the Company did not elect to remeasure debt obligations to fair value at the end of each reporting period.

The fair value of the term loan facility under the Borrowers' Senior Credit Agreement at March 31, 2020 was approximately $ 327.7 million.

The fair value of these notes with a notional value and carrying value (gross of deferred costs and discounts) of $ 387.8 million was estimated using binding and non-binding quoted prices in an active secondary market, which considers the Borrowers' credit risk and market related conditions, and is within Level 3 of the fair value hierarchy.

The carrying values of the Borrowers' other long-term debt obligations approximate fair value due to mechanisms in the credit agreements that adjust the applicable interest rates and the lack of an active market for these notes.

The fair value of the term loan facility under the Borrowers' Senior Credit Agreement at June 30, 2020 and December 31, 2019 was estimated to be approximately $ 341 million and $ 381 million , respectively.

The fair value of these notes with a notional value and carrying value (gross of deferred costs and discounts) of $ 387.0 million and $ 388.8 million, respectively, was estimated using binding and non-binding quoted prices in an active secondary market, which considers the Borrowers' credit risk and market related conditions, and is within Level 3 of the fair value hierarchy.

SEGMENT INFORMATION

The Company has three reportable segments that are reviewed by the Company's chief operating decision maker ("CODM"), who is the Company's Chief Executive Officer and Chairman.

At June 30, 2020 , the Company has three reportable segments that are reviewed by the Company's chief operating decision maker ("CODM"), who is the Company's Chief Executive Officer and Chairman.

The Consumer Payments operating segment and the Integrated Partners operating segments are each reported as separate reportable segments.

11 unchanged sentences

(in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Consumer Payments

12 unchanged sentences

Consolidated depreciation and amortization

A reconciliation of total income from operations of reportable segments to the Company's net loss is provided in the following table:

A reconciliation of total income (loss) from operations of reportable segments to the net loss is provided in the following table:

(in thousands)

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

Total income from operations of reportable segments

Interest expense

(Less) plus other, net

Income tax benefit

Plus (less) other, net

Income tax (expense) benefit

Substantially all revenue is generated in the United States.

For the three months ended March 31, 2020 and 2019 , no one merchant customer accounted for 10% or more of the Company's consolidated revenues.

For the three months and six months ended June 30, 2020 and June 30, 2019 , no one merchant customer accounted for 10% or more of the Company's consolidated revenues.

Most of the Company's merchant customers were referred to the Company by an ISO or other referral partners.

If the Company's agreement with an ISO allows the ISO to have merchant portability rights, the ISO can move the underlying merchant relationships to another merchant acquirer upon notice to the Company and completion of a "wind down"

For the three months ended March 31, 2020 and 2019, merchants referred by one ISO organization with merchant portability rights generated revenue within the Company's Consumer Payments reportable segment that represented approximately 20 % and 18 % , respectively, of the Company's consolidated revenues.

If the Company's agreement with an ISO allows the ISO to have merchant portability rights, the ISO can potentially move the underlying merchant relationships to another merchant acquirer upon notice to the Company and completion of a "wind down" period.

Merchants referred by one ISO organization with potential merchant portability rights generated revenue within the Company's Consumer Payments reportable segment that represented approximately 21.4 % and 20.7 %

of the Company's consolidated revenues for the three months and six months ended June 30, 2020 , respectively, and 17.6 % and 17.6 % for the three months and six months ended June 30, 2019 , respectively.

LOSS PER COMMON SHARE

The following tables set forth the computation of the Company's basic and diluted loss per common share:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands except per share amounts)

Basic and Diluted Loss Per Common Share:

Income (loss) attributable to non-controlling interests

Net loss attributable to common stockholders

Earnings attributable to NCI

Net loss attributable to common stockholders of Priority Technology Holdings, Inc.

Weighted-average shares outstanding

Basic and Diluted Loss Per Common Share

Potentially anti-dilutive securities that were excluded from earnings per share for the three months ended March 31, 2020 and 2019 that could be dilutive in future periods were as follows:

Potentially anti-dilutive securities that were excluded from earnings per share for the three months and six months ended June 30, 2020 and June 30, 2019 that could be dilutive in future periods were as follows:

(in thousands)

Common Stock Equivalents

March 31, 2020

March 31, 2019

Common Stock Equivalents at

June 30, 2020

June 30, 2019

Outstanding warrants on common stock

1 unchanged sentence

Outstanding stock option awards granted under the 2018 Equity Incentive Plan

Liability-based restricted stock units

Restricted stock units granted under the Earnout Incentive Plan

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