What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-23 compared with 2022-03-17 · 627 added, 668 removed, 914 unchanged (59% of the section changed)

1 unchanged sentence

Index to Consolidated Financial Statements

Report s of Independent Registered Public Accounting Firms

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021

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Nature of Business and Significant Accounting Policies

Settlement Assets and Customer Account Balances and Related Obligations

Disposal of Business

Settlement Assets and Customer/Subscriber Account Balances and Related Obligations

Notes Receivable

Goodwill and Other Intangible Assets

Property, Equipment and Software

Goodwill and Other Intangible Assets

Accounts Payable and Accrued Expenses

1 unchanged sentence

Redeemable Senior Preferred Stock and Warrants

Commitments and Contingencies

Related Party Transactions

Stockholders' Deficit

1 unchanged sentence

Employee Benefit Plans

Related Party Transactions

Commitments and Contingencies

Segment Information

1 unchanged sentence

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of Priority Technology Holdings, Inc.

To the Stockholders and the Board of Directors of Priority Technology Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Priority Technology Holdings, Inc.

("the Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders' deficit and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with U.S.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in stockholders' deficit and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Business Combinations

Description of the Matter As described in Note 3 to the consolidated financial statements, the Company completed its acquisitions of Finxera Holdings, Inc.

and C&H Financial Services, Inc.

during the year ended December 31, 2021 for total consideration of $407 million and $39.7 million, respectively.

The acquisitions were accounted for as business combinations.

The Company's accounting for these acquisitions included determining the fair value of the intangible assets acquired, which primarily included referral partner relationships, customer relationships, acquired technology, and merchant portfolios.

Auditing the Company's accounting for the acquisitions was complex due to the significant estimation required by management to determine the fair values of the acquired intangible assets of $211.4 million for Finxera Holdings, Inc.

and $25.4 million for C&H Financial Services, Inc.

The significant estimation was primarily due to the sensitivity of the respective fair values to the significant underlying assumptions, including estimated future cash flows or income, discount rate and royalty rate assumptions, as applicable to the individual intangible assets acquired.

These assumptions relate to the future performance of the acquired businesses, are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit To test the fair value of the acquired intangible assets, our audit procedures included, among others, evaluating the Company's use of valuation methodologies, evaluating the significant assumptions, and evaluating the completeness and accuracy of underlying data supporting the significant assumptions.

We involved our valuation specialists to assist with our evaluation of the methodologies used by the Company and significant assumptions used in the valuation of the intangible assets acquired.

For example, we compared the significant assumptions to current industry, market and economic trends, as well as historical results of the acquired businesses.

We performed sensitivity analyses of the significant assumptions to evaluate the change in the fair value resulting from changes in the assumptions.

We also evaluated the appropriateness of the Company’s disclosures included in Note 3 in relation to these acquisition matters.

Accrued Residual Commissions and Residual Commission Expense s

Description of the Matter Accrued residual commissions recorded by the Company and included on the Consolidated Balance Sheet were $35.9 million at December 31, 2022, and residual commission expenses included within costs of services on the Consolidated Statement of Operations were $383.5 million for the year ended December 31, 2022.

As discussed in Note 1 of the consolidated financial statements, the Company accrues and pays commission expense for certain customer services and other services provided by its independent sales organizations (ISOs).

Commissions are based on a percentage of the net revenues generated from the Company’s merchant customers, and these percentages vary based on the program type and transaction volume of each merchant.

Auditing residual commissions was complex due to the non-standard nature of the pricing terms within the ISO contracts, the volume of contracts, the volume of transactions processed each month, and the degree of auditor judgment needed to design the nature and extent of audit procedures to obtain sufficient audit evidence.

How We Addressed the Matter in Our Audit To test accrued residual commissions and residual commission expenses, our audit procedures included, among others, testing the completeness and accuracy of the underlying data supporting the commission calculations and the accuracy of the calculations.

We selected a sample of monthly ISO payments and, for each sample item, we compared the pricing terms included in the calculation to the respective ISO contract or other source documents, recalculated the related expense and accrual, and agreed the commission payment to evidence of cash disbursement.

Additionally, for these monthly ISO payments, we selected a sample of merchant customers, obtained their monthly processing statements, which were generated by the Company’s third-party processors, and agreed the monthly payment volumes to the commission calculations.

/s/ Ernst & Young LLP

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March 23, 2023

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Priority Technology Holdings, Inc.

and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations, changes in stockholders' deficit and cash flows of Priority Technology Holdings, Inc.

and Subsidiaries (the "Company") for the year ended December 31, 2019, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the Company's results of operations and cash flows for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ RSM US LLP

We served as the Company's auditor from November 20, 2014 to June 5, 2020.

Atlanta, Georgia

March 30, 2020 (except for Note 20 as to which the date is March 17, 2022)

Priority Technology Holdings, Inc.

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Current portion of notes receivable, net of allowances of $ 0 and $ 0 , respectively

Settlement assets and customer account balances 479,471 753

Settlement assets and customer/subscriber account balances 532,018 479,471

Total current assets 652,470 603,132

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Current portion of long-term debt 6,200 6,200

Settlement and customer account obligations 500,291 72,878

Settlement and customer/subscriber account obligations 533,340 500,291

Total current liabilities 630,001 583,567

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Other noncurrent liabilities 11,643 18,349

Total noncurrent liabilities 622,454 367,545

Total liabilities 1,240,570 1,206,021

Commitments and contingencies ( Note 18 )

Redeemable senior preferred stock:

Redeemable senior preferred stock, net of discounts and issuance costs:

Redeemable senior preferred stock, $ 0.001 par value per share;

250,000 shares authorized;

225,000 issued and outstanding at December 31, 2021;

none authorized, issued or outstanding at December 31, 2020

225,000 issued and outstanding at December 31, 2022 and December 31, 2021

235,579 210,158

Stockholders' deficit:

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and 76,044,629 and 76,739,896 shares outstanding at December 31, 2022 and December 31, 2021, respectively.

Additional paid-in capital 39,835 5,769

Treasury stock at cost, 2,341,056 and 720,416 shares at December 31, 2022 and December 31, 2021, respectively

( 11,559 ) ( 4,091 )

Additional paid-in capital 9,650 39,835

Accumulated deficit ( 102,208 ) ( 100,058 )

Total stockholders' deficit attributable to stockholders of PRTH ( 104,041 ) ( 64,237 )

Non-controlling interest 1,255 —

Total stockholders' deficit ( 102,786 ) ( 64,237 )

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Operating expenses

Costs of services 359,885 277,374 252,569

Costs of services (excludes depreciation and amortization) 436,753 359,885 277,374

Salary and employee benefits 65,077 43,818 39,507

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Operating income 56,165 33,093 20,861

Other (expenses) income

Other (expense) income

Interest expense ( 53,554 ) ( 36,485 ) ( 44,839 )

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Other income, net 589 202 596

Total other (expenses) income, net ( 36,962 ) 61,097 ( 39,943 )

(Loss) income before income taxes ( 3,869 ) 81,958 ( 32,759 )

Income tax (benefit) expense ( 5,258 ) 10,899 830

Net income (loss) 1,389 71,059 ( 33,589 )

Total other (expense) income, net ( 52,965 ) ( 36,962 ) 61,097

Income (loss) before income taxes 3,200 ( 3,869 ) 81,958

Income tax expense (benefit) 5,350 ( 5,258 ) 10,899

Net (loss) income ( 2,150 ) 1,389 71,059

Dividends and accretion attributable to redeemable senior preferred stockholders ( 36,880 ) ( 18,009 ) —

NCI preferred unit redemptions, net of deferred tax benefit — ( 8,021 ) —

Net income attributable to redeemable and redeemed NCIs — ( 45,398 ) —

Net income attributable to NCIs — — ( 45,398 )

Net (loss) income attributable to common stockholders $ ( 39,030 ) $ ( 24,641 ) $ 25,661

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Shares $ Shares $

December 31, 2018 67,038 $ 67 — $ — $ — $ ( 94,085 ) $ ( 94,018 ) $ — $ ( 94,018 )

Equity-classified stock-based compensation — — — — 3,652 — 3,652 — 3,652

Vesting of stock-based compensation 54 1 — — ( 1 ) — — — —

Warrant redemptions 420 — — — — — — — —

Share repurchases ( 451 ) — 451 ( 2,388 ) — — ( 2,388 ) — ( 2,388 )

Net (loss) income attributable to common stockholders — — — — — ( 33,589 ) ( 33,589 ) — ( 33,589 )

Issuance of NCI in subsidiary — — — — — — — 5,654 5,654

December 31, 2019 67,061 $ 68 451 $ ( 2,388 ) $ 3,651 $ ( 127,674 ) $ ( 126,343 ) $ 5,654 $ ( 120,689 )

January 1, 2020 67,061 $ 68 451 $ ( 2,388 ) $ 3,651 $ ( 127,674 ) $ ( 126,343 ) $ 5,654 $ ( 120,689 )

Equity-classified stock-based compensation — — — — 2,118 — 2,118 — 2,118

Vesting of stock-based compensation 330 — — — — — — — —

Net income (loss) attributable to common stockholders — — — — — 25,661 25,661 — 25,661

Redemption of NCI in subsidiary — — — — — — — ( 5,654 ) ( 5,654 )

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Earnings distributed to redeemable and redeemed NCIs — — — — — — — ( 45,398 ) ( 45,398 )

Net income — — — — — 25,661 25,661 — 25,661

December 31, 2020 67,391 $ 68 451 $ ( 2,388 ) $ 5,769 $ ( 102,013 ) $ ( 98,564 ) $ — $ ( 98,564 )

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Fair value of common shares issued for NCI redemption 1,428 2 — — 9,962 — 9,964 — 9,964

Share repurchases and shares withheld for taxes ( 269 ) — 269 ( 1,703 ) — ( 1,703 ) — ( 1,703 )

Share repurchases and shares withheld of taxes ( 269 ) 269 ( 1,703 ) — ( 1,703 ) — ( 1,703 )

Warrants issued — — — — 11,357 — 11,357 — 11,357

Dividends on redeemable senior preferred stock — — — — ( 16,164 ) — ( 16,164 ) — ( 16,164 )

Accretion of unamortized issuance costs for redeemable senior preferred stock — — — — ( 1,845 ) — ( 1,845 ) — ( 1,845 )

Change in estimate of tax basis differences — — — — — 566 566 — 566

Net income — — — — — 1,389 1,389 — 1,389

December 31, 2021 76,740 $ 77 720 $ ( 4,091 ) $ 39,835 $ ( 100,058 ) $ ( 64,237 ) $ — $ ( 64,237 )

Priority Technology Holdings, Inc .

Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interests

(in thousands)

Common Stock Treasury

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Shares $ Shares $

Warrants issued — — — — 11,357 — 11,357 — 11,357

Equity-classified stock-based compensation — — — — 6,695 — 6,695 — 6,695

Vesting of stock-based compensation 925 1 — — — — 1 — 1

Issuance of profit interests in wholly-owned subsidiaries — — — — — — — 1,255 1,255

Exercise of stock options — — — — — — — — —

Share repurchases ( 1,621 ) ( 2 ) 1,621 ( 7,468 ) — — ( 7,470 ) — ( 7,470 )

Dividends on redeemable senior preferred stock — — — — ( 33,594 ) — ( 33,594 ) — ( 33,594 )

Accretion of redeemable senior preferred stock — — — — ( 1,845 ) — ( 1,845 ) — ( 1,845 )

Change in estimate of tax basis differences — — — — — 566 566 — 566

Net income (loss) — — — — — 1,389 1,389 — 1,389

Accretion of unamortized issuance costs for redeemable senior preferred stock — — — — ( 3,286 ) — ( 3,286 ) — ( 3,286 )

Net loss — — — — — ( 2,150 ) ( 2,150 ) — ( 2,150 )

December 31, 2022 76,044 $ 76 2,341 $ ( 11,559 ) $ 9,650 $ ( 102,208 ) $ ( 104,041 ) $ 1,255 $ ( 102,786 )

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Cash flows from operating activities:

Net income (loss) $ 1,389 $ 71,059 $ ( 33,589 )

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

Net (loss) income $ ( 2,150 ) $ 1,389 $ 71,059

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

Gain and transaction costs recognized on sale of business and investment — ( 7,643 ) ( 112,622 )

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Write-off of deferred loan costs and discount — 2,580 1,523

Deferred income tax (benefit) provision ( 2,559 ) 2,960 765

Change in fair value of contingent consideration — ( 360 ) ( 620 )

Payment-in-kind interest ( 23,715 ) 8,573 5,126

Deferred income tax ( 8,183 ) ( 2,559 ) 2,960

Change in contingent consideration 2,059 — ( 360 )

PIK interest (paid) — ( 23,715 ) 8,573

Impairment charges for intangible asset — — 1,753

Other non-cash items, net 74 462 444

Change in operating assets and liabilities (net of acquisitions and sale of business and investment):

Change in operating assets and liabilities:

Accounts receivable ( 19,580 ) ( 16,694 ) ( 5,160 )

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Notes receivable loan funding ( 4,662 ) — —

Acquisitions of intangible assets ( 49,463 ) ( 5,559 ) ( 82,945 )

Acquisitions of assets and other investing activities ( 7,983 ) ( 49,463 ) ( 5,559 )

Net cash (used in) provided by investing activities ( 36,503 ) ( 451,033 ) 166,396

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Proceeds from issuance of long-term debt, net of issue discount — 607,318 —

Debt issuance and modification costs (paid) refunded ( 9,073 ) ( 2,749 ) 83

Debt issuance and modification costs paid — ( 9,073 ) ( 2,749 )

Repayments of long-term debt ( 6,200 ) ( 361,425 ) ( 110,507 )

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Dividends paid to redeemable senior preferred stockholders ( 11,459 ) ( 7,460 ) —

Profit distributions to redeemable NCIs of subsidiaries — ( 815 ) ( 45,398 )

Proceeds from exercise of stock options — 1,196 —

Priority Technology Holdings, Inc .

Consolidated Statements of Cash Flows

(in thousands)

Years Ended December 31,

2022 2021 2020

Profit distributions to redeemable non-controlling interests of subsidiaries ( 815 ) ( 45,398 ) —

Proceeds from exercise of stock options 1,196 — —

Settlement and customer accounts obligations, net 417,627 34,870 27,284

Net cash provided by (used in) financing activities 871,629 ( 140,943 ) 102,301

Settlement and customer/subscriber accounts obligations, net 43,143 417,627 34,870

Payment of contingent consideration ( 7,014 ) — —

Net cash (used in) provided by financing activities 8,502 871,629 ( 140,943 )

Net change in cash and cash equivalents, and restricted cash:

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Cash and cash equivalents, and restricted cash equivalents at end of period $ 560,610 $ 518,093 $ 88,120

Reconciliation of cash and cash equivalents, and restricted cash:

Cash and cash equivalents $ 18,454 $ 20,300 $ 9,241

Restricted cash 10,582 28,859 78,879

Cash and cash equivalents included in settlement assets and customer/subscriber account balances (see Note 5 )

531,574 468,934 —

Total cash and cash equivalents, and restricted cash $ 560,610 $ 518,093 $ 88,120

Supplemental cash flow information:

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Non-cash investing and financing activities:

Payment-in-kind interest added to principal of debt obligations $ — $ 8,573 $ 5,126

PIK added to principal of debt obligation $ — $ — $ 8,573

Payment of accrued contingent consideration for asset acquisition from offset of account receivable $ — $ — $ 1,686

Accruals for asset acquisition contingent consideration $ 3,000 $ 8,332 $ 2,133

Cash portion of dividend payable and ticking fee for redeemable senior preferred stock $ ( 5,341 ) $ — $ —

Accruals for future contingent payments $ 6,079 $ 3,000 $ 8,332

Issuance of NCI $ 1,255 $ — $ —

Notes receivable from sellers used as partial consideration for acquisitions $ — $ 3,499 $ —

Purchases of property, equipment and software through accounts payable $ — $ — $ 23

Intangible assets acquired by issuing non-controlling interest in subsidiary $ — $ — $ 5,654

Forfeiture of liability-classified award $ 325 $ — $ —

Change in ESPP liability $ 143 $ — $ —

Non-cash additions to other noncurrent assets for right-of-use operating leases $ 1,722 $ 234 $ —

Reconciliation of cash and cash equivalents, and restricted cash:

Cash and cash equivalents $ 20,300 $ 9,241 $ 3,234

Restricted cash 28,859 78,879 47,231

Customer account balances (see Note 5 )

Total cash and cash equivalents, and restricted cash $ 518,093 $ 88,120 $ 50,465

See Notes to Consolidated Financial Statements

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Nature of Business and Significant Accounting Policies

Headquartered in Alpharetta, GA, Priority Technology Holdings, Inc.

and subsidiaries (together, the "Company") began operations in 2005 with a mission to build a merchant-inspired payments platform that would advance the goals of its customers and partners.

Headquartered in Alpharetta, GA, the Company began operations in 2005 with a mission to build a merchant-inspired payments platform that would advance the goals of its customers and partners.

Our approach leverages a single platform to collect, store and send money that operates at scale.

Our technology supports high-value payments products complimented by our personalized support.

We are a leading provider to businesses, enterprises and distribution partners such as retail independent sales organizations ("ISOs"), financial institutions ("FIs"), wholesale ISOs and independent software vendors ("ISVs").

We are a leading provider to businesses, enterprises and distribution partners such as retail ISOs, FIs, wholesale ISOs and ISVs.

The Company operates from a purpose-built business platform that includes tailored customer service offerings and bespoke technology development, allowing the Company to provide end-to-end solutions for payment and payment-adjacent needs.

The Company provides:

• Small and medium-size business clients ("SMBs") payments processing solutions for business-to-consumer ("B2C") transactions through ISOs, FIs, ISVs and other referral partners.

• SMB payments processing solutions for B2C transactions through ISOs, FIs, ISVs and other referral partners.

Our proprietary MX platform for B2C payments provides merchants a fully customizable suite of business management solutions.

• Business-to-business ("B2B") payments solutions such as automated vendor payments and professionally curated managed services to industry leading FIs and networks.

• B2B payments solutions such as automated vendor payments and professionally curated managed services to industry leading FIs and networks.

Our proprietary B2B CPX platform was developed to be a best-in-class solution for buyer/supplier payment enablement.

• Institutional services (also known as Managed Services) solutions that provide audience-specific programs for institutional partners and other third parties looking to leverage the Company's professionally trained and managed call center teams for customer onboarding, assistance and support, including marketing and direct-sales resources.

• Enterprise payments solutions for ISVs and other third parties that allow them to leverage the Company's core payments engine via robust application program interfaces ("API") resources and high-utility embeddable code.

• Consulting and development solutions focused on the increasing demand for integrated payments solutions for transitioning to the digital economy.

• Enterprise payments solutions for ISVs and other third parties that allow them to leverage the Company's core payments engine via robust API resources and high-utility embeddable code and consulting and development solutions focused on the increasing demand for integrated payments solutions for transitioning to the digital economy.

The Company provides its services through three reportable segments:

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and 3) Enterprise Payments.

For additional information about our reportable segments, see Note 20, Segment Information .

For additional information about our reportable segments, see Note 20 .

Segment Information .

To provide many of its services, the Company enters into agreements with payment processors which in turn have agreements with multiple card associations.

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The Company's sponsorship agreements allow the capture and processing of electronic data in a format to allow such data to flow through networks for clearing and fund settlement of merchant transactions.

Emerging Growth Company Status

Prior to December 31, 2021, the Company was an emerging growth company ("EGC"), as defined in the Jumpstart Our Business Startups Act of 2012 ("JOBS Act"), and elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies until the Company is no longer an EGC, including using the extended transition period for complying with new or revised accounting standards.

On December 31, 2021, we ceased to qualify as an EGC and have adopted any new standards that we are now required to adopt.

The Company offers money transmission services in 46 U.S.

states and two U.S.

Basis of Presentation and Consolidation

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The Company generally utilizes the equity method of accounting when it has an ownership interest of between 20% and 50% in an entity, provided the Company is able to exercise significant influence over the investee's operations.

NCI represents the equity interest not owned by the Company and are recorded for consolidated entities in which the Company owns less than 100% of the interests.

Changes in the Company's ownership interest while the Company retains its controlling interest are accounted for as equity transactions, and upon loss of control, retained ownership interests are remeasured at fair value, with any gain or loss recognized in earnings.

For 2022, there was no income or loss attributable to NCI in accordance with the applicable operating agreements.

Use of Estimates

The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the U.S.

The preparation of Consolidated Financial Statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reported period.

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and 3) other considerations deemed to be applicable to the specific situation.

Based on our assessment of these indicators, we have concluded that the promise to our customers to provide payment services is distinct from the services provided by the card issuing financial institutions and payment networks in connection with payment transactions.

We do not have the ability to direct the use of and obtain substantially all of the benefits of the services provided by the card issuing financial institutions and payment networks before those services are transferred to our customer, and on that basis, we do not control those services prior to being transferred to our customer.

As a result, we present our revenues net of the interchange fees retained by the card issuing financial institutions and the fees charged by the payment networks.

Based on our assessment of these indicators, we have concluded that the promise to our customers to provide payment services is distinct from the services provided by the card issuing FIs and payment networks in connection with payment transactions.

We do not have the ability to direct the use of and obtain substantially all of the benefits of the services provided by the card issuing FIs and payment networks before those services are transferred to our customer, and on that basis, we do not control those services prior to being transferred to our customer.

As a result, we present our revenues net of the interchange fees retained by the card issuing FIs and the fees charged by the payment networks.

SMB Payments – The Company's SMB Payments segment enables the Company's customers to accept card, electronic and digital-based payments at the point of sale by providing a suite of services including authorization, settlement and funding, customer support and help-desk functions, chargeback resolution, payment security, consolidated billing and statements, and online reporting.

The Company's SMB Payments segment enables the Company's customers to accept card, electronic and digital-based payments at the point of sale by providing a suite of services including authorization, settlement and funding, customer support and help-desk functions, chargeback resolution, payment security, consolidated billing and statements, and online reporting.

Typically, revenues generated from these transactions are based on a variable percentage of the dollar amount of each transaction, and in some instances, additional fees (e.g., statement fees, annual fees and monthly minimum fees, fees for handling chargebacks, gateway fees and fees for other miscellaneous services) are charged for each transaction.

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Revenues are generally earned on a per-transaction basis and are recognized by the Company net of certain third-party costs for interchange fees, assessments to the payment networks, credit card associations fees, sponsor bank fees and rebates to customers.

For outsourcing services, revenue is recognized to the extent of billable rates times hours worked and other reimbursable costs incurred.

For outsourced services, revenue is recognized to the extent of billable rates multiplied times hours worked and other reimbursable costs incurred.

For performance obligations associated with outsourced services that are satisfied over time, the Company applies the permitted practical expedient known as the "right to invoice practical expedient" that allows the Company to recognize revenue in the amount of consideration to which the Company has the right to invoice when that amount corresponds directly to the value transferred to the customer.

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The Company recognizes monthly subscription fees as recurring maintenance fees each month during the term of the client's enrollment.

Revenue from transaction-based fees is recognized upon constructive receipt of transaction fees for payments to creditors issued ACH payments, paper checks or wire transfers.

These fees are transferred to the Company from the client account balances, which may be maintained by the Company in money transmission license trust accounts or by partner banks.

Revenue from transaction-based fees is recognized upon constructive receipt of transaction fees for payments to creditors issued via ACH payments, paper checks or wire transfers.

These fees are transferred to the Company from the customer account balances, which may be maintained by the Company in money transmission license trust accounts or by partner banks.

• Interest revenue :

Interest revenue is derived from certain client cash deposit balances maintained in interest bearing accounts with select partner banks.

• Customer relationship management ("CRM") and consulting fees :

Interest revenue is derived from certain customer balances maintained in interest bearing accounts with select partner banks.

• CRM and consulting fees :

CRM license fees are recognized on a monthly basis and consulting fees are recognized when services are performed.

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Transaction Price Allocated to Future Performance Obligations

Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, ("ASC 606") requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations.

ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations.

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

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The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.

Cost of Services

Costs of merchant card fees primarily consist of residual payments to agents and ISOs and other third-party costs directly attributable to payment processing.

The residual payments represent commissions paid to agents and ISOs based upon a percentage of the net revenues generated from merchant transactions.

Costs of outsourced services and other revenue consist of salaries directly related to outsourced services revenue, the cost of equipment (point of sale terminals) sold, and third-party fees and commissions related to the Company's ACH processing activities.

Contracts with Customers and Contract Costs

The Company accrues and pays commission expense based on variable merchant payment volumes and for certain customer service and other services provided by its ISOs.

Since commissions expenses are accrued and paid to ISOs on a monthly basis after the merchant enters into a new or renewed contract, these are not deemed to be a cost to acquire a new contract but they are reported within costs of services on our Consolidated Statements of Operations.

Since commission expenses are accrued and paid to ISOs on a monthly basis after the merchant enters into a new or renewed contract, these are not deemed to be a cost to acquire a new contract but they are reported within costs of services on our Consolidated Statements of Operations.

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

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Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents includes highly liquid instruments with an original maturity of three months or less, and cash held at FIs that is owned by the Company.

Restricted cash is held by the Company in FIs for the purpose of in-process customer settlements or reserves held per contact terms.

Cash and cash equivalents includes highly liquid instruments with an original maturity of three months or less, and cash owned by the Company that is held in financial institutions.

Restricted cash is held by the Company in financial institutions for the purpose of in-process customer settlements or reserves held per contact terms.

Accounts Receivable

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Amounts due from sponsor banks are typically paid within 30 days following the end of each month.

Notes Receivable

Notes receivable are primarily comprised of notes receivable from ISOs and related parties, and under the terms of the agreements the Company preserves the right to hold back residual payments due to the ISOs and to apply such residuals against future payments due to the Company.

Notes Receivable and Not e 17.

Related Parties

Allowance for Doubtful Accounts Receivable and Notes Receivable

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Recoveries of accounts receivable and notes receivable previously written off, if any, are recognized when received.

The allowance for doubtful accounts was $ 0.6 million at December 31, 2021 and 2020.

As of December 31, 2021, there was no allowance for doubtful notes receivable.

The allowance for doubtful notes receivable was $ 0.5 million at December 31, 2020.

The allowance for doubtful accounts was $ 1.1 million and $ 0.6 million at December 31, 2022 and 2021, respectively.

As of December 31, 2022 and 2021, there was no allowance for doubtful notes receivable.

Notes Receivable .

Customer Deposits and Advance Payments

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At the time of retirements, sales or other dispositions of property and equipment, the original cost and related accumulated depreciation are removed from the respective accounts and the gains or losses are presented as a component of income or loss from operations.

Property, equipment and software Estimated Useful Life

Furniture and fixtures 5 - 10 years

Equipment 3 - 8 years

Computer software 2 - 5 years

Leasehold improvements 3 - 10 years

Property, Equipment and Software .

Costs Incurred to Develop Software for Internal Use

Costs incurred to develop computer software for internal use are capitalized once:

1) the preliminary project stage is completed;

2) management authorizes and commits to funding a specific software project;

and 3) it is probable that the project will be completed and the software will be used to perform the function intended.

Costs incurred prior to meeting the qualifications are expensed as incurred.

Capitalization of costs ceases when the project is substantially complete and ready for its intended use.

Post-implementation costs related to the internal-use computer software, are expensed as incurred.

Internal-use software development costs are amortized using the straight-line method over the estimated useful life of the software, which generally ranges from three to five years .

Costs incurred to develop or obtain internal-use software and implementation costs are accounted for in accordance with ASC 350-40, Internal-Use Software .

The Company uses an agile development methodology in which feature-by-feature updates are made to its software.

The costs incurred in the preliminary stages of development are expensed as incurred.

Once an application has reached the development stage, internal and external costs incurred to develop internal-use software are capitalized and amortized using the straight-line method over the estimated useful life of the software, which generally range from two to five years .

Maintenance costs including those in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software that result in added functionality, in which case such costs are capitalized and amortized using the straight-line method over the estimated useful life of the software.

Software development costs may become impaired in situations where development efforts are abandoned due to the viability of the planned project becoming doubtful or due to technological obsolescence of the planned software product.

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For the years ended December 31, 2022, 2021 and 2020, the Company capitalized software development costs of $ 16.8 million, $ 7.8 million and $ 7.1 million, respectively.

As of December 31, 2021 and 2020, capitalized software development costs, net of accumulated amortization, totaled $ 18.3 million and $ 16.4 million, respectively, and are included in property, equipment and software, net on the Consolidated Balance Sheets.

As of December 31, 2022 and 2021, capitalized software development costs, net of cumulated amortization, totaled $ 28.1 million and $ 18.3 million, respectively, and are included in property, equipment and software, net on the Consolidated Balance Sheets.

Amortization expense for capitalized software development costs for the years ended December 31, 2022, 2021 and 2020 was $ 6.9 million, $ 5.9 million and $ 5.3 million, respectively, and are included in depreciation and amortization on the Consolidated Statements of Operations.

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The portion of any unpaid purchase price that is contingent on future activities is not initially recorded by the Company on the date of acquisition.

Rather, the Company

recognizes contingent consideration when it becomes probable and estimable.

Rather, the Company recognizes contingent consideration when it becomes probable and estimable.

All of the Company's intangible assets, except goodwill and money transmission licenses, have finite lives and are subject to amortization.

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Trade Names and Non-compete Agreements Acquired trade names and non-compete agreements 5 – 12 years

Money Transmission Licenses acquired licenses to collect, store and send money in the U.S.

and Puerto Rico indefinite

Money Transmission Licenses Acquired licenses to collect, store and send money in 46 U.S.

states and two U.S.

Impairment of Long-lived Assets

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For the year ended December 31, 2020, the Company recognized an impairment charge of $ 1.8 million for a residual buyout intangible asset.

See Note 8, Goodwill and Other Intangible Assets .

Goodwill and Other Intangible Assets .

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

If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that implied fair value of the goodwill within the reporting unit is less than its carrying value.

See Note 8, Goodwill and Other Intangible Assets .

The Company adopted Accounting Standards Update ("ASU") 2016-02, Leases and its related interpretations, codified as ASC 842 ("ASC 842"), as of January 1, 2021, applying the optional transition approach available whereby the new lease standard is applied at the adoption date recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, if applicable, and prior periods are not restated.

Upon adoption the Company recorded right-of-use ("ROU") assets of approximately $ 7.4 million and related operating lease obligations of approximately $ 8.4 million.

Goodwill and Other Intangible Assets .

The Company adopted ASU 2016-02, Leases and its related interpretations, codified as ASC 842, as of January 1, 2021, applying the optional transition approach available whereby the new lease standard is applied at the adoption date recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, if applicable, and prior periods are not restated.

Upon adoption the Company recorded ROU Assets of approximately $ 7.4 million and related operating lease obligations of approximately $ 8.4 million.

There was no impact to the opening balance of retained earnings.

Under ASC 842

The Company evaluates lease and service arrangements at lease inception to determine if a lease is or contains a lease.

The Company evaluates lease and service arrangements at lease inception to determine if the arrangement is a lease or contains a lease.

Lease arrangements are evaluated at their commencement date to determine classification as operating or finance.

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Leasehold improvements are generally amortized on a straight-line basis over the useful life of the improvement or the term of the lease, whichever is shorter.

Settlement Assets and Customer Account Balances and Related Obligations

Settlement assets and customer account balances and the related obligations recognized on the Company's Consolidated Balance Sheets represent intermediary balances arising in the Company's settlement process for merchants and other customers.

See Note 5, Settlement Assets and Customer Account Balances and Related Obligations .

Settlement Assets and Customer/Subscriber Account Balances and Related Obligations

Settlement assets and customer/subscriber account balances and the related obligations recognized on the Company's Consolidated Balance Sheets represent intermediary balances arising in the Company's settlement process for merchants and other customers.

Settlement Assets and Customer/Subscriber Account Balances and Related Obligations .

Debt Issuance and Modification Costs

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Goodwill represents the excess of the purchase price over the fair value of the net assets acquired.

The fair values of the assets acquired and liabilities assumed are determined based upon the valuation of the acquired business and involves making significant estimates and assumptions based on facts and circumstances that existed as of the acquisition date.

The fair values of the assets acquired and liabilities assumed are determined

based upon the valuation of the acquired business and involves making significant estimates and assumptions based on facts and circumstances that existed as of the acquisition date.

The Company uses a measurement period following the acquisition date to gather information that existed as of the acquisition date that is needed to determine the fair value of the assets acquired and liabilities assumed.

The measurement period ends once all information is obtained, but no later than one year from the acquisition date.

Contingent Consideration

Contingent consideration related to the Company's business combinations are estimated based on the present value of a weighted payout probability at the measurement date using a Monte Carlo simulation model.

This valuation falls within Level 3 on the fair value hierarchy.

The current portion of contingent consideration is included in accounts payable and accrued expenses on the Company's Consolidated Balance Sheets and the noncurrent portion of contingent consideration is included in other noncurrent liabilities on the Company's Consolidated Balance Sheets.

For asset acquisitions that do not meet the definition of a business, the portion of the unpaid purchase price that is contingent on future activities is not recorded by the Company on the date of acquisition, but when it becomes probable and can be estimated.

Non-controlling Interests

The Company previously issued non-voting profit-sharing interests in three of its subsidiaries that were formed in 2019 or 2018 to acquire the operating assets of certain businesses, which were deemed to be NCIs.

As of December 31, 2021, the Company's NCIs have all been fully redeemed.

See Note 3, Acquisitions and Note 6, Disposal of Business for more details related to the redemptions in 2021 and 2020.

To estimate the initial fair value of a profit-sharing interest, the Company utilized future cash flow scenarios with a focus on those cash flow scenarios that could result in future distributions to the NCIs.

Profits or losses are attributed to an NCI based on the hypothetical-liquidation-at-book-value method that utilizes the terms of the profit-sharing agreement between the Company and the NCIs.

Based on the LLC agreements for these three subsidiaries, in certain instances the NCIs are entitled to certain earnings of the respective subsidiary.

Prior to 2020, no earnings were attributable to any NCIs.

All material earnings attributable to the NCIs for the year ended December 31, 2020 were simultaneously distributed to the NCIs.

The Company issued non-voting incentive units in three of its subsidiaries during 2022 to acquire the operating assets of certain businesses (see Note 2.

Acquisitions ).

The Company is the majority owner of these subsidiaries and therefore the incentive units are deemed to be NCI.

To estimate the initial fair value of the incentive units, the Company utilizes future cash flow scenarios with focus on those cash flow scenarios which could result in future distributions to the NCIs.

In subsequent periods, income or loss will be attributed to an NCI based on the hypothetical liquidation at book value method utilizing the terms of the operating agreement between the Company and the NCI.

As the majority owner, the Company has call rights on the incentive units issued to the NCIs.

These call rights can only be executed under certain circumstances and execution is always optional at the Company's discretion.

The call rights do not meet the definition of a free-standing financial instrument or derivative, thus no separate accounting is required for these call rights.

Accrued Residual Commissions

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Stock-based compensation expense is recognized over the requisite service period and is reflected in salary and employee benefits expense on the Company's Consolidated Statements of Operations.

Awards generally vest over two or three years and may not vest evenly over the vesting period.

Awards generally vest over three or four years and may not vest evenly over the vesting period.

The effects of forfeitures are recognized as they occur.

The Company measures a liability award under a stock-based payment arrangement based on the award's fair value remeasured at each reporting date until the date of settlement.

All shares issued

from option exercises or vesting of RSU awards are original issuance shares and any shares withheld for taxes are repurchased by the Company.

The Company measures a liability award under a stock-based compensation payment arrangement based on the award's fair value remeasured at each reporting date until the date of settlement.

Compensation cost for each period until settlement is based on the change (or a portion of the change, depending on the percentage of the requisite service that has been rendered at the reporting date) in the fair value of the instrument for each reporting period.

Stock options

Under the Company's 2018 Equity Incentive Plan, the Company determines the fair value of stock options using the Black-Scholes option pricing model, which requires the use of the following subjective assumptions:

Under the Company's 2018 Plan, the Company determines the fair value of stock options using the Black-Scholes option pricing model, which requires the use of the following subjective assumptions:

Expected volatility – Measure of the amount by which a stock price has fluctuated or is expected to fluctuate.

Due to the relatively short amount of time that the Company's Common Stock (Nasdaq:

PRTH) has traded on a public market, the Company uses volatility data for the common stocks of a peer group of comparable public companies.

PRTH) has traded on a public market, the Company uses volatility data for the Common Stock of a peer group of comparable public companies.

An increase in the expected volatility will increase the fair value of the stock option and related compensation expense.

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Expected term – Period of time over which the stock options granted are expected to remain outstanding.

As a newly public company, the Company lacks sufficient exercise information for its stock option plan.

Accordingly, the Company uses a method permitted by the Securities and Exchange Commission ("SEC") whereby the expected term is estimated to be the mid-point between the vesting dates and the expiration dates of the stock option grants.

In 2018, when the Company's outstanding stock options were granted, the Company lacked sufficient exercise information for its stock option plan since it was a newly public company.

Accordingly, the Company used a method permitted by the SEC whereby the expected term was estimated to be the mid-point between the vesting dates and the expiration dates of the stock option grants.

An increase in the expected term will increase the fair value of the stock option and the related compensation expense.

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Time-based restricted stock awards

The fair value of time-based restricted stock awards is determined based on the quoted closing price of the Company's common stock on the date of grant and is recognized as compensation expense over the vesting term of the awards.

The fair value of time-based restricted stock awards is determined based on the quoted closing price of the Company's Common Stock on the business day prior to the grant date and is recognized as compensation expense over the vesting term of the awards.

Performance-based restricted stock awards

The Company accounts for its performance-based restricted stock awards based on the quoted closing price of the Company's common stock on the date of grant, adjusted for any market-based vesting criteria, and records stock-based compensation expense over the vesting term of the awards based on the probability that the performance criteria will be achieved.

The Company accounts for its performance-based restricted stock awards based on the quoted closing price of the Company's Common Stock on the business day prior to the grant date, adjusted for any market-based vesting criteria, and records stock-based compensation expense over the vesting term of the awards based on the probability that the performance criteria will be achieved.

The performance goals may be work-related goals for the individual recipient and/or based on certain corporate performance goals.

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Additionally, if performance goals are set or reset on an annual basis, compensation cost is recognized in any reporting period only for performance-based restricted stock awards in which the performance goals have been established and communicated to the award recipient.

Employee Stock Purchase Program

The 2021 Employee Stock Purchase plan authorizes the issuance of shares of the Company’s Common Stock pursuant to purchase rights granted to employees.

The fair value of purchase rights issued under the Employee Stock purchase Plan is estimated using the Black-Scholes option pricing model.

The model requires management to make a number of assumptions, including the fair value of the Company’s Common Stock, expected volatility, expected term, risk-free interest rate, and expected dividends.

The Company records the resulting compensation expense in the Consolidated Statements of Operations over each three-month offering period.

Stock-based Compensation .

Repurchased Stock

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The equity accounts that were originally credited for the original share issuance, Common Stock and additional paid-in capital, remain intact.

See Note 16, Stockholders' Deficit .

Stockholders' Deficit .

If the treasury shares are ever reissued in the future, proceeds in excess of repurchased cost will be credited to additional paid-in capital.

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Earnings (Loss) per Share

Basic earnings (loss) per share ("EPS") is computed by dividing net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities.

Basic EPS is computed by dividing net income (loss) available to Common Stockholders by the weighted-average number of shares of Common Stock outstanding during the period, excluding the effects of any potentially dilutive securities.

Diluted EPS gives effect to the potential dilution, if any, that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock, using the more dilutive of the two-class method or if-converted method.

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If there is a net loss in any period, basic and diluted EPS are computed in the same manner.

Stockholders' Deficit .

The Company accounts for income taxes under the asset and liability method.

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A valuation allowance is recognized if it is more likely than not that some portion or all of a deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings.

The Financial Accounting Standards Board, or FASB, Staff has provided additional guidance to address the accounting for the effects of the provisions related to the taxation of Global Intangible Low-Tax Income noting that companies should make an accounting policy election to recognize deferred taxes for temporary basis differences expected to reverse in future years or to include the tax expense in the year it is incurred.

The Company has made a policy election to recognize such taxes as current period expenses when incurred.

The Company recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be sustained upon examination based solely on its technical merits.

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Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon effective settlement.

This is determined on a cumulative

probability basis.

This is determined on a cumulative probability basis.

The full impact of any change in recognition or measurement is reflected in the period in which such change occurs.

The Company recognized interest and penalties associated with uncertain tax positions as a component of income tax expense.

Income Taxes.

Fair Value Measurements

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Foreign exchange translation and transaction gains and losses were not material for the periods presented and are included in the Consolidated Statements of Operations.

Concentration of Risk

A substantial portion of the Company's revenues and receivables are attributable to merchants.

For the years ended December 31, 2022, 2021 and 2020, no individual 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 reseller 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" period.

For the years ended December 31, 2022, 2021 and 2020, merchants referred by one ISO organization with merchant portability rights generated revenue within the Company's SMB Payments reportable segment that represented approximately 21 %, 22 % and 21 %, respectively, of the Company's consolidated revenues.

The Company's settlement assets and customer /subscriber account balances of $ 532.0 million includes cash and cash equivalents of $ 516.1 million related to customer account balances which are maintained in FDIC insured accounts with certain FIs.

A majority of the Company's cash and restricted cash (including subscriber account balances) is held in certain FIs, substantially all of which is in excess of FDIC limits.

The Company does not believe it is exposed to any signi f icant credit risk from these transactions.

Recently Adopted Accounting Standards

As an EGC, the Company made an election under Section 107(b)(1) of the JOBS Act to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards and has been following requirements applicable to the private companies for adopting new and updated accounting standards.

On December 31, 2021, the Company ceased to qualify as an EGC, and accordingly adopted new accounting standards when applicable for non-EGC, smaller reporting company filers.

Leases (ASC 842)

In February 2016, the FASB issued ASU 2016-02, Leases , codified as ASC 842.

Under this new guidance, lessees are required to recognize for all leases (with the exception of short-term leases):

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 ROU asset which will represent the lessee's right to use, or control the use of, a specified asset for the lease term.

On December 31, 2021, we ceased to qualify as an EGC, and therefore, we adopted ASC 842 and its related interpretations as of January 1, 2021.

In the adoption of ASC 842, the Company

used the optional transition approach available under ASU 2018-11, Leases.

Under the optional transition approach, which the new lease standard is applied at the adoption date recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, if applicable, and prior periods are not restated.

The Company elected to adopt the package of practical expedients pursuant to which it has not reassessed:

1) whether existing or expired contracts contain a lease;

2) lease classification for existing or expired leases;

or 3) the accounting for initial direct costs that were previously capitalized.

The Company has also elected the practical expedients available under the standard and has made accounting policy elections to:

1) exclude short-term leases from the balance sheets;

and 2) not separate lease and non-lease components.

The Company did not elect the practical expedient to use hindsight in determining lease terms for existing leases and when assessing existing ROU assets for impairment.

Upon adoption we recognized approximately $ 7.4 million for ROU assets and approximately $ 8.4 million for the related operating lease obligations.

There was no impact to the opening balance of retained earnings.

The Company does not expect the new accounting standard to have a material effect on future financial results.

Implementation Costs Incurred in Cloud Computing Arrangements

In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2015-15"), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

The Company adopted ASU 2018-15 on January 1, 2021, electing to apply the amendments prospectively to all implementation costs incurred after adoption.

The adoption of this ASU did not impact the Company's Consolidated Financial Statements, as there were no implementation costs incurred for hosting arrangements that are service contracts during 2021.

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which is intended to enhance and simplify various aspects of the accounting for income taxes.

The amendments in this update remove certain exceptions to the general principles in ASC 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

ASU 2019-12 also clarifies and amends existing guidance to improve consistency in the application of the accounting for franchise taxes, enacted changes in tax laws or rates and transactions that result in a step-up in the tax basis of goodwill.

The adoption of ASU 2019-12 on January 1, 2021 did not have a material effect on our Consolidated Financial Statements.

Goodwill Impairment Testing (ASU 2017-04)

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment ("ASU 2017-04").

ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill (i.e., step 2 of the current goodwill impairment test) to measure a goodwill impairment charge.

Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (i.e., measure the charge based on the current step 1).

Any impairment charge will be limited to the amount of goodwill allocated to an impacted reporting unit.

ASU 2017-04 will not change the current guidance for completing Step 1 of the goodwill impairment test, and an entity will still be able to perform the current optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1.

The Company adopted ASU 2017-04 on January 1, 2021, and there was no impact to the Company's Consolidated Financial Statements.

Business Combinations

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires entities to recognize and measure contract assets and liabilities acquired in a business combination in accordance with ASC 606, as if the acquirer had originated the contracts.

Generally this will result in the acquirer recognizing and measuring the acquired contract assets and liabilities consistent with the manner by which they were recognized and measured by the acquiree.

This update is effective for public companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted, including in an interim period.

If this update is adopted early in an interim period, it must be applied retrospectively to all business combinations that occurred since the beginning of the fiscal year.

The Company elected to early adopt ASU 2021-08 in the second quarter of 2022.

The adoption of this ASU did not have a material impact on the 2022 acquisitions.

Recently Issued Accounting Standards Pending Adoption

The following standards are pending adoption and will likely apply to the Company in future periods based on the Company's current business activities.

Reference Rate Reform

accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financial Rate.

If certain criteria are met, entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform.

An entity that makes this election would not have to remeasure the contract at the modification date or reassess a previous accounting determination.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), Scope ("ASU 2021-01"), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

These updates can be adopted at any time before December 31, 2022.

The Company is currently evaluating the potential impact that ASU 2021-01 may have on the Consolidated Financial Statements.

Credit Losses

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments ("ASU 2016-13").

This new guidance will change how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments.

ASU 2016-13 will replace the current "incurred loss" model with an "expected loss" model.

This new guidance changes how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments.

ASU 2016-13 replaces the current "incurred loss" model with an "expected loss" model.

Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been "incurred").

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The "incurred loss" model considers past events and current conditions, while the "expected loss" model includes expectations for the future which have yet to occur.

The standard will require entities to record a cumulative-effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective.

The Company is currently evaluating the potential impact that this update may have on the timing of recognizing future provisions for expected losses on the Company's accounts receivable and notes receivable.

Since the Company is a smaller reporting company, the Company must adopt this new standard no later than the beginning of 2023 for annual and interim reporting periods.

Business Combinations

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"), which requires entities to recognize and measure contract assets and liabilities acquired in a business combination in accordance with ASC 606, as if the acquirer had originated the contracts.

This update is effective for the Company on January 1, 2023, including interim periods within those fiscal years.

The impact that ASU 2021-08 may have on the Company's Consolidated Financial Statements will depend on the circumstances of any business combination that may occur after adoption.

Concentration of Risk

A substantial portion of the Company's revenues and receivables are attributable to merchants.

For the years ended December 31, 2021, 2020 and 2019, no individual 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.

For the years ended December 31, 2021, 2020 and 2019, merchants referred by one ISO organization with merchant portability rights generated revenue within the Company's SMB Payments reportable segment that represented approximately 22 %, 21 % and 18 %, respectively, of the Company's consolidated revenues.

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

The Company does not believe it is exposed to any significant credit risk from these transactions.

Reclassifications

Certain prior year amounts in these Consolidated Financial Statements have been reclassified to conform to the current year presentation, with no net effect on the Company's operating income, income (loss) before income tax expense (benefit), net income (loss), stockholders' deficit.

We reclassified certain cash flows related to settlement assets and customer account balances and the related obligations from net cash provided by operating activities to net cash provided by (used in) financing activities within the Consolidated Statements of Cash Flows.

Prior period amounts have been reclassified to conform to the current period presentation.

These changes have no impact on our previously reported consolidated net income, financial position or net increase in cash and cash equivalents.

The current period presentation classifies all changes in settlement and customer account balance obligations on our Consolidated Statements of Cash Flows as net cash provided by (used in) financing activities.

The current period presentation provides a more meaningful representation of the cash flows related to the movement of settlement assets and customer account balances due to the restrictions on and use of those funds.

The following tables present the effects of the changes on the presentation of these cash flows to the previously reported consolidated statements of cash flows:

(in thousands) Years Ended December 31,

Net cash provided by operating activities:

Historically reported $ 47,072 $ 39,364

Adjustment ( 34,870 ) ( 27,284 )

Reclassified 12,202 12,080

Net cash (used in) provided by financing activities:

Historically reported ( 175,813 ) 75,017

Adjustment 34,870 27,284

Reclassified $ ( 140,943 ) $ 102,301

The Company adopted ASC 842 and its related interpretations effective January 1, 2021, using the optional transition approach available under ASU 2018-11, Leases , under which the new lease standard is applied at the adoption date recognizing a cumulative-effect adjustment to the opening balance of retained earnings, if applicable, in the period of adoption and prior periods are not restated.

The Company's leases consist primarily of real estate leases for office space, which are classified as operating leases.

Lease expense for the Company's operating leases is recognized on a straight-line basis over the term of the lease.

The Company did not have any finance leases at January 1, 2021 or December 31, 2021.

As of December 31, 2021, ROU assets and lease liabilities consisted of the following:

(in thousands, except weighted-average data) Financial Statement Classification December 31, 2021

Operating Lease ROU Assets:

Operating lease ROU assets Other noncurrent assets $ 6,262

Operating Lease Obligations:

Operating lease obligations - current Accounts payable and accrued expenses $ 1,723

Operating lease obligations - noncurrent Other noncurrent liabilities 5,596

Total operating lease obligations $ 7,319

Weighted-average remaining lease term, in years 4.9

Weighted-average discount rate 6.88 %

The Components of lease expense for the year ended December 31, 2021 were as follows:

(in thousands) Financial Statement Classification Year Ended

December 31, 2021

Operating lease expense (1)

Selling, general and administrative $ 1,841

(1) Excludes short-term lease expense which was immaterial for the year ended December 31, 2021.

Cash paid for amounts included in the measurement of lease liabilities was as follows:

(in thousands) Financial Statement Classification Year Ended

December 31, 2021

Operating cash flows from operating leases Operating activities $ 1,803

Lease Commitments

Future minimum lease payments for the Company's real estate operating leases at December 31, 2021 were as follows:

(in thousands)

Year Ending December 31, Amount Due

Thereafter 958

Total future minimum lease payments 8,646

Amount representing interest ( 1,327 )

Total future minimum lease payments, net of interest $ 7,319

As of December 31, 2021, the Company had not committed to any additional future obligations for leases that have not yet commenced.

Future minimum lease commitments under non-cancelable operating leases with initial or remaining terms in excess of one year were as follows at December 31, 2020:

The standard requires entities to record a cumulative-effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective.

Since the Company is an SRC, the Company will adopt ASU 2016-13 effective January 1, 2023 and does not expect to have a material impact on its Consolidated Financial Statements

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the LIBOR and other interbank offered rates to alternative reference rates, such as the SOFR.

If certain criteria are met, entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform.

An entity that makes this election would not have to remeasure the contract at the modification date or reassess a previous accounting determination.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), Scope ASU 2021-01, which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848, amended ASU 2020-04, deferring the sunset date of Topic 848 to December 31, 2024.

The Company will adopt Topic 848 when relevant contracts are modified upon transition to alternative reference rates.

The Company does not expect the adoption of Topic 848 to have a material impact on the Company's Consolidated Financial Statements.

Ovvi Acquisition

On November 18, 2022, the Company completed its acquisition of certain assets and assumption of a certain liability of Ovvi, LLC, under an asset purchase agreement through its wholly-owned subsidiary, Priority Ovvi, LLC ("Ovvi").

The acquisition was accounted for as a business combination using the acquisition method of accounting.

Prior to this acquisition, the business operated as a SaaS proprietary platform for the restaurant, hospitality and retail industries by providing complete all-in-one point of sale software and hardware systems, comprehensive ancillary services including fraud detection and mitigation, and processing services for various types of cards including credit cards, debit cards, private label cards and prepaid cards.

This business is reported within the Company's SMB Payments reportable segment.

The acquired business was valued for $ 6.3 million and the Company acquired a controlling interest for $ 5.0 million, the remaining $ 1.3 million was contributed by sellers for non-voting profit-sharing interest in Ovvi, creating NCI.

Ovvi also issued non-voting incentive units to the seller.

Transaction costs were not material and were expensed.

The non-voting incentive shares issued to the seller will be evaluated at each reporting period to determine whether or not profit or loss should be allocated based on the subsidiary's operating agreement.

The preliminary purchase price allocation is set forth in the table below and is expected to be finalized as soon as practicable, but no later than one year from the acquisition date.

(in thousands)

Year Ending December 31, Amount Due

Thereafter 2,388

Total $ 9,168

Total rent expense for the years ended December 31, 2020 and 2019 was $ 2.5 million and $ 2.0 million, respectively, which is included in selling, general and administrative expenses in the Company's Consolidated Statements of Operations.

Consideration:

Amount withheld for inventory (1)

Total purchase consideration, inclusive of amount withheld for inventory 5,026

Fair value of class B shares issued in Ovvi (3)

Total enterprise value of business acquired (3)

Recognized amounts of assets acquired and liabilities assumed:

Accounts receivable $ 110

Inventory 142

Property, equipment and software, net 20

Intangible assets (2)

Other non-current asset 152

Other non-current liability ( 153 )

Total enterprise value of business acquired (3)

(1) The inventory acquired is subject to a reduction for any portion up to the total amount withheld pending final determination of the inventory acquired.

(2) The intangible assets consist of $ 1.3 million for technology, $ 0.4 million for customer relationships and $ 0.3 million for trade name.

(3) The fair value determination for the Class B shares is subject to adjustment due to final determination as soon as practicable but no later than one year from the closing date.

This will affect the enterprise value of the business acquired.

Other Acquisition

The Company also completed another acquisition during 2022 for approximately $ 1.0 million, which was not material.

The acquisition did not meet the definition of a business, therefore it was accounted for as an asset acquisition under which the cost of acquisition was allocated to the technology asset acquired.

Finxera Acquisition

On September 17, 2021 (the "Closing Date"), the Company completed its acquisition of 100 % of the equity interests of Finxera Holdings, Inc.

On September 17, 2021, the Company completed its acquisition of 100 % of the equity interests of Finxera.

Finxera is a provider of deposit account management and licensed money transmission services in the U.S.

The acquisition will allow the Company to offer clients turn-key merchant services, payment facilitation, card issuing, automated payables, virtual banking, e-wallet tools, risk management, underwriting and compliance on a single platform.

The acquisition allows the Company to offer clients turn-key merchant services, payment facilitation, card issuing, automated payables, virtual banking, e-wallet tools, risk management, underwriting and compliance on a single platform.

The transaction was funded with the Company's cash on hand, proceeds from the issuance of the redeemable senior preferred stock and debt, and the issuance of common equity shares to the sellers.

The acquisition was accounted for as a business combination using the acquisition method of accounting, under which the assets acquired and liabilities assumed were recognized at their fair values as of the Closing Date, with the excess of the fair value of consideration transferred over the fair value of the net assets acquired recognized as goodwill.

The fair values of the assets acquired and liabilities assumed as of the Closing Date were estimated by management based on the valuation of the Finxera business using the discounted cash flow method and other factors specific to certain assets and liabilities.

The preliminary purchase price allocation is set forth in the table below and is expected to be finalized as soon as practicable, but no later than one year from the Closing Date.

The acquisition was accounted for as a business combination using the acquisition method of accounting, under which the assets acquired and liabilities assumed were recognized at their fair values as of the September 17, 2021, with the excess of the fair value of consideration transferred over the fair value of the net assets acquired recognized as goodwill.

The fair values of the assets acquired and liabilities assumed as of the September 17, 2021 were estimated by management based on the valuation of the Finxera business using the discounted cash flow method and other factors specific to certain assets and liabilities.

The final purchase price allocation is set forth in the table below.

(in thousands)

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Current portion of notes receivable 784

Settlement assets and customer account balances 498,811

Settlement assets and customer/subscriber account balances 498,811

Property, equipment and software, net 712

Goodwill 245,104

Intangible assets, net (3)

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Accounts payable and accrued expenses ( 7,837 )

Settlement and customer account obligations ( 498,811 )

Settlement and customer/subscriber account obligations ( 498,811 )

Deferred income taxes, net (2)

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(1) The fair value of the 7,551,354 shares of PRTH Common Stock that were issued was determined based on their market price at the time of closing adjusted for an appropriate liquidity discount due to trading restrictions under Securities Rule 144.

(2) During the year ended December 31, 2022, the Company recorded measurement period adjustments due to additional information received related to income taxes and deferred income taxes, net.

These measurement period adjustments resulted in an increase of $ 0.1 million in prepaid expenses and an increase of $ 0.3 million in other current assets and deferred income taxes, offset by a decrease in goodwill of $ 0.4 million.

(3) The intangible assets acquired consist of $ 154.9 million for referral partner relationships, $ 34.3 million for technology, $ 20.1 million for customer relationships and $ 2.1 million for money transmission licenses.

Goodwill of $ 245.1 million arising from the acquisition primarily consists of the expected synergies and other benefits from combining operations.

Approximately $ 8.7 million of the goodwill attributable to the acquisition is expected to be deductible for income tax purposes.

Goodwill attributable to the acquisition of $ 8.7 million was deductible for income tax purposes.

The goodwill was allocated 100 % to the Company's Enterprise Payments reportable segment.

In 2020, Finxera acquired two businesses for which the purchase price included contingent consideration valued at $ 6.1 million.

The contingent consideration payable is comprised of earnout opportunities equal to 50 % of certain revenues earned from the customers assumed in these acquisitions.

The contingent consideration payable is comprised of earnout opportunities equal to 25 % to 50 % of certain revenues earned from the customers assumed in these acquisitions.

The associated earnout opportunities are to be measured and paid every six months and expire at various dates through December 31, 2023.

As of December 31, 2021, $ 0.1 million of the $ 6.1 million of total contingent consideration has been paid to the sellers.

At December 31, 2021, there was $ 6.0 million accrued, of which $ 1.0 million and $ 5.0 million was included in accounts payable and accrued expenses and other noncurrent liabilities, respectively, on the Company's Consolidated Balance Sheet.

The Company's Consolidated Financial Statements include the operating results of Finxera from the Closing Date through December 31, 2021, which are reported as part of the Enterprise Payments reportable segment.

As of the year ended December 31, 2022, an adjustment of $ 1.2 million was recorded due to changes in the fair value of the contingent consideration (as selling, general and administrative expenses in the Company's Consolidated Statements of Operations) resulting in total contingent consideration of $ 7.3 million.

The accretion of contingent consideration was $ 0.6 million for the year ended December 31, 2022, which is included in interest expense on the Company's Consolidated Statement of Operations, increasing total liability to $ 7.9 million of which $ 1.8 million has been paid.

The remaining $ 6.1 million was accrued and was included in accounts payable on the Company's Consolidated Balance Sheet.

The Company's Consolidated Financial Statements for the year ended December 31, 2021 included the operating results of Finxera from the Closing Date through December 31, 2021, which were reported as part of the Enterprise Payments reportable segment.

Revenues and operating income from Finxera during this period were $ 19.4 million and $ 4.3 million, respectively.

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The unaudited pro forma results do not reflect events that have occurred or may occur after the transaction, including the impact of any synergies expected to result from the acquisition.

Accordingly, the unaudited pro forma financial information is not necessarily indicative

of the results of operations as they would have been had the transaction occurred on January 1, 2020, nor is it necessarily an indication of future operating results.

Accordingly, the unaudited pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transaction occurred on January 1, 2020, nor is it necessarily an indication of future operating results.

(in thousands, except per share amounts) Years Ended December 31,

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Operating income $ 21,619 $ 32,548

Other Acquisitions

Wholesale Payments, Inc .

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The transaction did not meet the definition of a business, therefore it was accounted for as an asset acquisition under which the cost of the acquisition was allocated to the acquired assets based on relative fair values.

As of December 31, 2021, the sellers earned $ 3.8 million of the $ 24.8 million, which was paid during the third quarter of 2021, increasing the total purchase price recorded at December 31, 2021 to $ 46.2 million, which was recorded to residual buyout intangible assets with a seven-year useful life amortized on a straight-line basis.

As this is an asset acquisition, additional purchase price is accounted for when payment to the seller becomes probable and is added to the carrying value of the asset.

The seller's note payable to the Company of $ 3.0 million and an advance of $ 2.0 million outstanding at the time of the purchase was netted against the initial purchase price, resulting in cash of $ 41.2 million being paid by the Company to the seller, which was funded from cash proceeds from the issuance of the redeemable senior preferred stock and cash on hand.

As an asset acquisition, additional purchase price is accounted for when payment to the seller becomes probable and is added to the carrying value of the asset.

The seller's note payable to the Company of $ 3.0 million and an advance of $ 2.0 million outstanding at the time of the purchase were netted against the initial purchase price, resulting in cash of $ 41.2 million being paid by the Company to the seller, which was funded from cash proceeds from the issuance of the redeemable senior preferred stock and cash on hand.

As of December 31, 2022, the sellers earned $ 8.9 million of the $ 24.8 million, increasing the total purchase price recorded at December 31, 2022 to $ 51.9 million, which was recorded to residual buyout intangible assets with a seven-year useful life

amortized on a straight-line basis.

The $ 8.9 million includes a fair value adjustment of $ 0.5 million in the third quarter of 2022, which reduced the total amount earned from $ 9.4 million to $ 8.9 million.

C&H Financial Services, Inc .

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The acquisition date fair value of the contingent consideration was $ 4.7 million, which increased the total purchase price to $ 39.7 million.

The seller's note payable to the Company of $ 0.5 million at the time of purchase was netted against the initial purchase price, resulting in cash of $ 34.5 million being paid by the Company to the seller, which was funded from a $ 30.0 million draw down of the revolving credit facility under the Credit and Guaranty Agreement held by the Company and $ 4.5 million cash on hand.

Transaction costs were not material and were expensed.

The preliminary purchase price allocation is set forth in the table below and is expected to be finalized as soon as practicable, but no later than one year from the acquisition date.

The purchase price allocation is set forth in the table below.

(in thousands)

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(1) The intangible assets acquired consist of $ 20.2 million for merchant portfolio intangible assets with a ten-year useful life and $ 5.2 million for ISO partner relationships with a twelve-year useful life.

The goodwill for the Wholesale Payments, Inc.

asset acquisition and the C&H Financial Services, Inc.

business combination is deductible by the Company for income tax purposes.

Based on their purchase prices and pre-acquisition operating results and assets, these two businesses acquired by the Company in 2021, as described above, did not meet the materiality requirements for pro forma disclosures individually or collectively.

YapStone, Inc.

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

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 ("NCI") in PRET issued to YapStone, Inc.

with a fair value that 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 the Company's Senior Credit Facility.

PRET is part of the Company's Enterprise Payments reportable segment.

During the third quarter of 2020, substantially all of the YapStone net assets were sold to a third party (see Note 6, Disposal of Business ).

Approximately $ 45.1 million of PRET's 2020 earnings through the disposal date, which were primarily composed of the gain recognized on the sale, were attributed and distributed in cash to the NCI during the third quarter of 2020 pursuant to the profit-sharing agreement between the Company and the NCI.

At the time of the sale, the NCI was also redeemed in cash for its $ 5.7 million interest in PRET.

For the year ended December 31, 2019, no earnings of PRET were allocated to the NCI.

Residual Portfolio Rights Acquired

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

Of the $ 15.2 million, $ 5.0 million was funded from the term loan under Senior Credit Agreement, $ 10.0 million was funded from the revolving credit facility under the Senior Credit Agreement, and cash on hand was used to fund the remaining amount.

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

The purchase price was subject to a potential increase of up to $ 6.4 million in accordance with the terms of the agreement between the Company and the sellers over a three-year period.

Additional purchase price is accounted for when payment to the seller becomes probable and is added to the carrying value of the asset and amortization expense is adjusted to reflect the new carrying value at the original purchase date.

The first period for determining contingent consideration ended in March 2020, and the Company paid the seller $ 2.1 million of additional cash consideration, partially offset by an amount owed to the Company by the seller.

In 2021, the Company paid the seller an additional $ 2.1 million for the second period for determining contingent consideration that ended in March 2021, which had been recorded as a contingent consideration liability at December 31, 2020.

T he remaining $ 2.1 million will be payable in the first quarter of 2022 if certain criteria are achieved.

Merchant Portfolio Rights and Reseller Agreement

In October 2019, the Company simultaneously entered into two agreements with another entity.

These two related agreements assign to the Company certain perpetual rights to a merchant portfolio and form a five -year reseller arrangement whereby the Company will offer and sell to its customer base certain online services to be fulfilled by the other entity.

No cash consideration was paid to, or received from, the other entity at execution of either agreement.

It was not initially determinable if the Company would have to pay any amount as consideration for the merchant portfolio rights due to the provisions of the related reseller agreement.

The Company does not anticipate any net losses under the two contracts.

Subsequent cash payments from the Company to the other entity for the merchant portfolio rights are determined based on a combination of:

1) the actual financial performance of the acquired merchant portfolio rights;

and 2) actual sales and variable wholesale costs for the online services sold by the Company under the reseller arrangement.

Prior to December 31, 2020, amounts paid to the other entity were accounted for as either standard costs of the services sold by the Company under the five -year reseller agreement or consideration for the merchant portfolio rights.

As of December 31, 2020, the Company determined it had accumulated the additional data and historical experience that it deems necessary in order to reasonably estimate an amount of cash that the Company believes it will ultimately have to transfer as remaining consideration for the merchant portfolio rights.

Accordingly, at December 31, 2021 and 2020 the Company had accrued approximately $ 2.4 million and $ 6.2 million of estimated remaining cash consideration and additional accumulated costs for the merchant portfolio, respectively.

At December 31, 2021 and 2020 the Company had recorded aggregate costs, including both actual costs and estimated remaining consideration, totaling $ 11.1 million.

Amortization expense was adjusted to reflect the new carrying value at the original purchase date.

As of December 31, 2021 and 2020, accumulated amortization was $ 5.0 million and $ 2.8 million, respectively.

The merchant portfolio has an estimated remaining life of 2.75 years at December 31, 2021.

The Company will continue to review its estimate of the remaining consideration to be funded and adjust the value of the intangible asset and accrual for its obligation accordingly.

As of December 31, 2022, the fair value of the C&H contingent consideration was $ 2.0 million, of which was included in other noncurrent liabilities on the Consolidated Balance Sheets as of December 31, 2022.

The accretion of contingent consideration was $ 0.3 million for the year ended December 31, 2022, which is included in interest expense on the Company's Consolidated Statement of Operations.

Disposal of Business

On September 1, 2020, PRET entered into an agreement to sell certain assets from PRET's real estate services business.

The buyer also agreed to assume certain obligations associated with the assets.

The assets covered by the agreement were PRET's RentPayment component.

The transaction was completed on September 22, 2020 after receiving regulatory approval.

Prior to execution of the agreement, the buyer was not a related party of PRET or the Company.

Proceeds received by PRET were $ 179.4 million, net of $ 0.6 million for a working capital adjustment.

The gain amounted to $ 107.2 million as follows:

(in thousands)

Gross cash consideration from buyer $ 180,000

Less working capital adjustment paid in cash ( 584 )

Net proceeds from buyer 179,416

Transaction costs incurred ( 5,383 )

Intangible assets ( 62,158 )

Other assets sold, net of obligations assumed ( 716 )

Goodwill assigned to business sale ( 2,683 )

Other intangible assets ( 1,237 )

Pre-tax gain on sale of business $ 107,239

PRET is a limited liability company and is a pass-through entity for income tax purposes.

Income tax expenses associated with the gain attributable to the stockholders of the Company were estimated to be approximately $ 12.3 million.

Allocation of net proceeds, after transaction costs, to the PRET members included return of each member's invested capital in PRET and excess proceeds were distributed in accordance with the distribution provisions of the PRET LLC governing agreement.

The Company's invested capital amounted to $ 71.8 million, which included the assets sold, goodwill and other intangible assets.

The NCI's invested capital was $ 5.7 million.

Approximately $ 51.4 million and $ 45.1 million of the excess proceeds were distributed to the Company and the NCI, respectively.

The initial allocation of net proceeds remained subject to final adjustment by the PRET members at December 31, 2020.

During the first quarter of 2021, it was determined that an additional $ 0.5 million of the excess proceeds was due to the NCI, which was included in other expenses, net on the Company's Consolidated Statement of Operations for the year ended December 31, 2021.

Continuing Operations

Based on historical financial results, the Company does not believe the sale of the RentPayment component represents a strategic shift.

The sale of the business was not reported as discontinued operations in its Consolidated Financial Statements for any reporting period.

The Company will continue to serve the rental property market through its ongoing PRET operations.

Disaggregation of Revenues

The following table presents a disaggregation of our consolidated revenues by type for the years ended December 31, 2021, 2020 and 2019:

The following table presents a disaggregation of our consolidated revenues by type:

Years Ended December 31,

2 unchanged sentences

Merchant card fees $ 553,037 $ 468,764 $ 377,346

Money transmission services 71,536 19,415 —

Outsourced services and other services 29,627 21,033 23,103

Money transmission services revenue 19,415 — —

Equipment 9,441 5,689 3,893

3 unchanged sentences

The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.

(2) Approximately $ 0.7 million, $ 0.8 million and $ 0.6 million of interest income for the years ended December 31, 2021, 2020 and 2019, respectively, is included in other income, net on the Company's Consolidated Statements of Operations and not reflected in the table above.

(2) Approximately $ 7.5 million and $ 0.7 million, of interest income for the years ended December 31, 2022 and 2021, respectively, is included in outsourced services and other services revenue in the table above.

The following table presents a disaggregation of our consolidated revenues by segment:

Year Ended December 31, 2022

(in thousands) Merchant Card Fees Money Transmission Services Outsourced and Other Services Equipment Total

SMB $ 549,646 $ — $ 3,150 $ 9,441 $ 562,237

B2B 3,391 — 15,499 — 18,890

Enterprise — 71,536 10,978 — 82,514

Total revenues $ 553,037 $ 71,536 $ 29,627 $ 9,441 $ 663,641

Year Ended December 31, 2021

(in thousands) Merchant Card Fees Money Transmission Services Outsourced and Other Services Equipment Total

SMB $ 466,819 $ — $ 3,122 $ 5,689 $ 475,630

B2B 1,945 — 15,193 — 17,138

Enterprise — 19,415 2,718 — 22,133

Total revenues $ 468,764 $ 19,415 $ 21,033 $ 5,689 $ 514,901

Year Ended December 31, 2020

(in thousands) Merchant Card Fees Money Transmission Services Outsourced and Other Services Equipment Total

SMB $ 364,163 $ — $ 2,465 $ 3,893 $ 370,521

B2B 1,795 — 19,127 — 20,922

Enterprise 11,388 — 1,511 — 12,899

Total revenues $ 377,346 $ — $ 23,103 $ 3,893 $ 404,342

Deferred revenues were not material for the years ended December 31, 2022, 2021 and 2020.

1 unchanged sentence

Material contract assets and liabilities are presented net at the individual contract level in the Consolidated Balance Sheets 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 December 31, 2021 and 2020 was as follows:

Supplemental balance sheet information related to contracts from customers was as follows:

(in thousands) Consolidated Balance Sheet Location December 31, 2022 December 31, 2021

1 unchanged sentence

Substantially all of these balances are recognized as revenue within 12 months.

Net contract liabilities were not material at December 31, 2022.

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 years ended December 31, 2022, 2021 or 2020.

Settlement Assets and Customer Account Balances and Related Obligations

Settlement Assets and Customer/Subscriber Account Balances and Related Obligations

SMB Payments Segment

13 unchanged sentences

Exception items that become the liability of the Company are recorded as merchant losses, a component of costs of services in the Consolidated Statements of Operations.

Exception items that the Company is still attempting to collect from the merchants through the funds settlement process or merchant reserves are recognized as settlement assets and customer account balances in the Company's Consolidated Balance Sheets, with an offsetting reserve for those amounts the Company estimates it will not be able to recover.

Exception items that the Company is still attempting to collect from the merchants through the funds settlement process or merchant reserves are recognized as settlement assets and customer/subscriber account balances in the Company's Consolidated Balance Sheets, with an offsetting reserve for those amounts the Company estimates it will not be able to recover.

Expenses for merchant losses for the years ended December 31, 2022, 2021 and 2020 were $ 4.4 million, $ 2.8 million and $ 4.1 million, respectively.

1 unchanged sentence

In the Company's B2B Payments segment, the Company earns revenues from certain of its services by processing transactions for FIs and other business customers.

Customers transfer funds to the Company, which are held in either company-owned bank accounts controlled by the Company or bank-owned For the Benefit Of ("FBO") accounts controlled by the banks, until such

time as the transactions are settled with the customer payees.

Customers transfer funds to the Company, which are held in either Company-owned bank accounts controlled by the Company or bank-owned FBO accounts controlled by the banks, until such time as the transactions are settled with the customer payees.

Amounts due to customer payees that are held by the Company in Company-owned bank accounts are included in restricted cash.

2 unchanged sentences

therefore, neither is recognized in the Company's Consolidated Balance Sheets.

Bank-owned FBO accounts held funds of $ 45.5 million at December 31, 2021.

Company-owned bank accounts held $ 21.4 million and $ 72.9 million at December 31, 2021 and 2020, respectively;

which are included in restricted cash and settlement obligations in the Company's Consolidated Balance Sheets.

Bank-owned FBO accounts held funds of $ 42.7 million and $ 45.5 million at December 31, 2022 and 2021, respectively.

Company-owned bank accounts held $ 4.1 million and $ 21.4 million at December 31, 2022 and 2021, respectively, which are included in restricted cash and settlement obligations in the Company's Consolidated Balance Sheets.

Enterprise Payments Segment

In the Company's Enterprise Payments segment, revenue is derived primarily from enrollment fees, monthly subscription fees, transaction-based fees and licensed money transmission services fees.

As part of its licensed money transmission services, the Company accepts deposits from consumers and subscribers which are held in bank accounts maintained by the Company on behalf of consumers and subscribers.

In the Company's Enterprise Payments segment, revenue is derived primarily from enrollment fees, monthly subscription fees, transaction-based fees and money transmission services fees.

As part of its licensed money transmission services, the Company accepts deposits from customers and subscribers which are held in bank accounts maintained by the Company on behalf of customers and subscribers.

After accepting deposits, the Company is allowed to invest available balances in these accounts in certain permitted investments, and the return on such investments contributes to the Company's net cash inflows.

2 unchanged sentences

The nature of these balances are cash and cash equivalents but they are not available for day-to-day operations of the Company.

Therefore, the Company has classified these balances as settlement assets and customer account balances and the related obligations as settlement and customer account obligations in the Company's Consolidated Balance Sheets.

The Company's settlement assets and customer account balances and settlement and customer account obligations were as follows:

Therefore, the Company has classified these balances as settlement assets and customer/subscriber account balances and the related obligations as settlement and customer/subscriber account obligations in the Company's Consolidated Balance Sheets.

In certain states, the Company accepts deposits under agency arrangement with member banks wherein accepted deposits remain under the control of the member banks.

Therefore, the Company does not record assets for the deposits accepted and liabilities for the associated obligation.

Agency owned accounts held $ 6.1 million and $ 3.2 million and at December 31, 2022 and 2021, respectively.

The Company's consolidated settlement assets and customer/subscriber account balances and settlement and customer/subscriber account obligations were as follows:

(in thousands) December 31, 2022 December 31, 2021

1 unchanged sentence

Card settlements due from merchants, net of estimated losses $ 444 $ 537

Customer Account Balances:

Customer/Subscriber Account Balances:

Cash and cash equivalents 531,574 468,934

Time deposits — 10,000

Total settlement assets and customer account balances $ 479,471 $ 753

Settlement and Customer Account Obligations:

Total settlement assets and customer/subscriber account balances $ 532,018 $ 479,471

Settlement and Customer/Subscriber Account Obligations:

Customer account obligations $ 516,086 $ 470,476

Subscriber account obligations

Due to customer payees (1)

21,356 72,878

Total settlement and customer account obligations $ 500,291 $ 72,878

Total settlement and customer/subscriber account obligations $ 533,340 $ 500,291

(1) The related assets are included in restricted cash on our Consolidated Balance Sheets.

Disposal of Business

On September 1, 2020, PRET entered into an agreement to sell certain assets from PRET's real estate services business.

The buyer also agreed to assume certain obligations associated with the assets.

The transaction was completed on September 22, 2020 after receiving regulatory approval.

Prior to execution of the agreement, the buyer was not a related party of PRET or the Company.

The assets subject to the agreement were substantially the same assets that PRET acquired in March 2019 from YapStone, Inc.

These assets constituted PRET's RentPayment component, which was part of the Enterprise Payments reporting unit, operating segment and reportable segment.

These assets consist of contracts with customers, an assembled workforce, technology-related assets, Internet domains, trade names and trademarks.

The buyer also assumed obligations under an in-place and off-balance-sheet operating lease for office space.

Since PRET's acquisition of these assets from YapStone, Inc.

in March 2019, PRET and the Company have made operational changes that resulted in these assets becoming a business as defined by the provisions of ASU 2017-01, Business Combinations (Topic 805):

Clarifying the Definition of a Business, before their sale .

Proceeds received by PRET were $ 179.4 million, net of $ 0.6 million for a working capital adjustment.

The gain amounted to $ 107.2 million as follows:

(in thousands)

Gross cash consideration from buyer $ 180,000

Less working capital adjustment paid in cash ( 584 )

Net proceeds from buyer 179,416

Transaction costs incurred ( 5,383 )

Intangible assets ( 62,158 )

Other assets sold, net of obligations assumed ( 716 )

Goodwill assigned to business sale ( 2,683 )

Other intangible assets ( 1,237 )

Pre-tax gain on sale of business $ 107,239

PRET is a limited liability company and is a pass-through entity for income tax purposes.

Income tax expenses associated with the gain attributable to the stockholders of the Company were estimated to be approximately $ 12.3 million.

The Company's invested capital amounted to $ 71.8 million, which included the assets sold, goodwill and other intangible assets.

The NCI's invested capital was $ 5.7 million.

Approximately $ 51.4 million and $ 45.1 million of the excess proceeds were distributed to the Company and the NCI, respectively.

The initial allocation of net proceeds remained subject to final adjustment by the PRET members at December 31, 2020.

As disclosed in Note 11, Debt Obligations , $ 106.5 million of cash received by the Company was used on September 25, 2020 to reduce the outstanding balance of the term loan facility under the Company's Senior Credit Facility.

Operating Lease Obligation

The buyer assumed an in-place operating lease in Dallas, Texas which was set to expire on November 1, 2024.

The Company had not adopted ASC 842 at the time of this transaction, therefore this lease obligation was not reflected in the Company's Consolidated Balance Sheet prior to the assumption by the buyer.

The Company was relieved of minimum lease payment obligations totaling $ 0.5 million for the remainder of the lease term in connection with this transaction.

Continuing Operations

Based on historical financial results, the Company does not believe the sale of the RentPayment component represents a strategic shift.

As such, the Company will not classify or report the business that was sold as discontinued operations in its Consolidated Financial Statements for any reporting period.

The Company will continue to serve the rental property market through its ongoing PRET operations.

Pro Forma Information

The following unaudited pro forma information is provided for the business (the RentPayment component) that was sold, excluding the gain recognized on the sale transaction:

Year Ended December 31,

(in thousands) 2020 2019

Revenues $ 12,042 $ 11,694

Operating income $ 1,825 $ 2,275

Net income (1)

$ 1,725 $ 2,218

Net income attributable to common stockholders (2)

$ 1,725 $ 2,218

Basic and diluted earnings per common share (2)

$ 0.03 $ 0.03

(1) Pro forma income tax expense was based on the following consolidated effective tax rates of Priority Technology Holdings, Inc.:

5.5 % and 2.5 % for the years ended December 31, 2020 and 2019, respectively.

These rates exclude the effect of the $ 107.2 million net gain on the sale recognized during the year ended December 31, 2020.

(2) Prior to the September 2020 sale transaction that resulted in the gain on the sale, no earnings or losses of the PRET LLC were attributable to the NCIs of PRET.

Notes Receivable

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The notes bear a weighted-average interest rate of 15.4 % and 13.8 % as of December 31, 2022 and 2021, respectively.

The notes receivable are comprised of notes receivable from ISOs.

The notes receivable are comprised of notes receivable from ISOs, and under the terms of the agreements the Company preserves the right to hold back residual payments due to the ISOs and to apply such residuals against future payments due to the Company.

Notes receivable from three other entities were fully repaid during 2021.

See Note 3, Acquisitions and Note 15, Related Party Transactions for more information about the repayments of these notes receivable.

Under the terms of the agreements with ISOs, the Company preserves the right to hold back residual payments due to the ISOs and to apply such residuals against future payments due to the Company.

The note receivable from another entity that was repaid during the fourth quarter of 2021 was secured by business assets and a personal guarantee.

In 2020, the Company recorded an allowance for doubtful notes receivable of $ 0.5 million on its Consolidated Balance Sheet, and recognized the related expense within selling, general and administrative expense on its Consolidated Statements of Operations and within other noncash items, net on its Consolidated Statements of Cash Flows for the year ended December 31, 2020.

In 2021, the Company determined the balance would not be collected and as such the allowance for doubtful notes receivable was written off.

As of December 31, 2021, the Company had no allowance for doubtful notes receivable.

As of December 31, 2021 approximately $ 0.3 million of the notes receivable balance is due in 2022 and approximately $ 0.1 million of the balance is due in 2023.

As of December 31, 2022, the principal payments for the Company's notes receivables are due as follows:

(in thousands)

Year Ending December 31,

Total $ 4,662

As of December 31, 2022 and 2021, the Company had no allowance for doubtful notes receivable.

Property, Equipment and Software

A summary of property, equipment and software, net was as follows:

(in thousands) December 31, 2022 December 31, 2021

Computer software $ 64,197 $ 50,799

Equipment 13,302 12,255

Leasehold improvements 6,990 6,467

Furniture and fixtures 2,909 2,819

Property, equipment and software 87,398 72,340

Accumulated depreciation ( 58,409 ) ( 49,023 )

Capital work in-progress 5,698 1,916

Property, equipment and software, net $ 34,687 $ 25,233

Years Ended December 31,

(in thousands) 2022 2021 2020

Depreciation expense $ 9,511 $ 8,460 $ 7,710

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.

Goodwill and Other Intangible Assets

The Company records goodwill upon acquisition of a business when the purchase price is greater than the fair value assigned to the underlying separately identifiable tangible and intangible assets acquired and the liabilities assumed.

The Company's goodwill relates to the following reporting units as of December 31, 2021 and 2020:

The Company's goodwill relates to the following reporting units:

(in thousands) December 31, 2022 December 31, 2021

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(in thousands) Amount

Balance at December 31, 2018 $ 109,515

Changes in the value of goodwill —

Balance at December 31, 2019 109,515

Disposal of Business ( See Note 6.

Disposal of Business )

Balance at December 31, 2020 106,832

Balance at January 1, 2021 106,832

C&H Financial Services, Inc.

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Balance at December 31, 2021

Final purchase price adjustment for Finxera ( 392 )

Ovvi acquisition 3,989

Balance at December 31, 2022

In connection with the acquisition of Finxera, $ 8.7 million of goodwill recorded was deductible for income tax purposes.

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Residual buyouts 132,325 ( 76,316 ) 56,009 6.6

126,225 ( 56,186 ) 70,039 6.4

Customer relationships 96,000 ( 83,298 ) 12,702 8.2

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Technology 50,963 ( 18,566 ) 32,397 8.4

48,690 ( 15,039 ) 33,651 9.9

Non-compete agreements 3,390 ( 3,390 ) — 0.0

3,390 ( 3,390 ) — 0.0

Trade names 3,183 ( 2,129 ) 1,054 11.6

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Total gross carrying value $ 539,684 $ ( 250,890 ) $ 288,794 9.7

(1) Additions to Residual buyouts were offset by certain assets that became fully amortized in 2021 but are still in service.

(2) Certain assets in the group became fully amortized in 2021 but are still in service.

(1) These assets have an indefinite useful life.

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Residual buyouts (1)

126,225 ( 56,186 ) 70,039 6.4

Customer relationships 95,566 ( 70,883 ) 24,683 8.1

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Technology (2)

48,690 ( 15,039 ) 33,651 9.9

Money transmission licenses (3)

2,100 — 2,100

Total gross carrying value $ 530,157 $ ( 189,946 ) $ 340,211 9.7

Amortization expense for intangible assets was $ 41.2 million, $ 33.1 million and $ 32.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

(1) Additions to residual buyouts were offset by certain assets that became fully amortized in 2021 but are still in service.

(2) Certain assets in the group became fully amortized in 2021 but are still in service.

(3) These assets have an indefinite useful life

Years Ended December 31,

(in thousands) 2022 2021 2020

Amortization expense $ 61,170 $ 41,237 $ 33,065

The estimated amortization expense of intangible assets as of December 31, 2022 for the next five years and thereafter is:

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Thereafter 111,806

Total $ 338,111

(1) Total will not agree to the intangible asset net book value due to intangible asset with indefinite useful life.

Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible asset acquisitions, changes in useful lives and other relevant events or circumstances.

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This impairment was the result of diminished cash flows generated by the merchant portfolio.

The Company also considered the market conditions generated by the COVID-19 pandemic and concluded that there were no additional impairment indicators present at December 31, 2021.

Property, Equipment and Software

A summary of property, equipment and software, net as of December 31, 2021 and 2020 was as follows:

(in thousands, except useful lives) December 31, 2021 December 31, 2020 Estimated Useful Life

Furniture and fixtures $ 2,819 $ 2,795 5 - 10 years

Equipment 12,255 10,216 3 - 8 years

Computer software 52,715 44,320 2 - 5 years

Leasehold improvements 6,467 6,250 3 - 10 years

Property, equipment and software 74,256 63,581

accumulated depreciation ( 49,023 ) ( 40,706 )

Property, equipment and software, net $ 25,233 $ 22,875

Depreciation expense totaled $ 8.5 million, $ 7.7 million and $ 6.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The Company also considered the market conditions and other factors and concluded that there were no additional impairment indicators present at December 31, 2022.

The Company's leases consist primarily of real estate leases for office space, which are classified as operating leases.

Lease expense for the Company's operating leases is recognized on a straight-line basis over the term of the lease.

The Company did not have any finance leases at December 31, 2022 and 2021.

As of December 31, 2022 and 2021, ROU Assets and lease liabilities consisted of the following:

(in thousands, except weighted-average data) Financial Statement Classification December 31, 2022 December 31, 2021

Operating Lease ROU Assets:

Operating lease ROU Assets Other noncurrent assets $ 4,593 $ 6,262

Operating Lease Obligations:

Operating lease obligations - current Accounts payable and accrued expenses $ 1,336 $ 1,723

Operating lease obligations - noncurrent Other noncurrent liabilities 4,110 5,596

Total operating lease obligations $ 5,446 $ 7,319

Weighted-average remaining lease term in years 4.4 4.9

Weighted-average discount rate 6.9 % 6.9 %

The Components of lease expense for the years ended December 31, 2022 and 2021 were as follows:

Years Ended December 31,

(in thousands) Financial Statement Classification 2022 2021

Operating lease expense (1)

Selling, general and administrative $ 1,984 $ 1,841

(1) Excludes short-term lease expense and sublease income, which was immaterial for the years ended December 31, 2022 and 2021.

Total rent expense for the year ended December 31, 2020 was $ 2.5 million, which is included in selling, general and administrative expenses in the Company's Consolidated Statements of Operations..

Cash paid for amounts included in the measurement of lease liabilities was as follows:

Years Ended December 31,

(in thousands) Financial Statement Classification 2022 2021

Operating cash flows from operating leases Operating activities $ 2,131 $ 1,803

Lease Commitments

Future minimum lease payments for the Company's real estate operating leases at December 31, 2022 were as follows:

(in thousands)

Year Ending December 31, Amount Due

Total future minimum lease payments 6,460

Amount representing interest ( 1,014 )

Total future minimum lease payments, net of interest $ 5,446

As of December 31, 2022, the Company had one lease that has not yet commenced.

The future obligation for this lease is not material.

Accounts Payable and Accrued Expenses

The components of accounts payable and accrued expenses that exceeded five percent of total current liabilities at either December 31, 2021 or December 31, 2020 consisted of the following:

The components of accounts payable and accrued expenses as of December 31, 2022 and 2021 consisted of the following:

(in thousands) December 31, 2022 December 31, 2021

Accrued expenses $ 17,742 $ 18,215

Accrued card network fees 14,243 10,239

Accrued compensation 7,287 5,861

Contingent consideration 6,079 3,000

Accounts payable 6,513 5,208

Total accounts payable and accrued expenses $ 51,864 $ 42,523

Debt Obligations

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(in thousands) December 31, 2022 December 31, 2021

Credit and Guaranty Agreement:

Term facility - matures April 27, 2027, interest rate of 6.75 % at December 31, 2021

Credit Agreement:

Term facility - matures April 27, 2027, interest rate of 9.82 % and 6.75 % at December 31, 2022 and 2021, respectively

$ 610,700 $ 616,900

Revolving credit facility - $ 40.0 million line, matures April 27, 2026, interest rate of 5.75 % at December 31, 2021

Senior Credit Agreement:

Term facility - Original maturity at January 3, 2023, interest rate of 7.50 % at December 31, 2020

Term Loan Agreement:

Term loan - subordinated, original maturity at July 3, 2023, interest rate of 12.50 % at December 31, 2020

Revolving credit facility - $ 40.0 million line, matures April 27, 2026, interest rate of 8.82 % and 5.75 % at December 31, 2022 and 2021, respectively

12,500 15,000

Total debt obligations 623,200 631,900

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(in thousands) Revolving Credit Facility

Year Ending December 31, Term Facility Total Principal Due

December 31, Term Facility Total Principal Due

2023 $ 6,200 $ — $ 6,200

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2027 585,900 — 585,900

After 2026 585,900 — 585,900

Total $ 610,700 $ 12,500 $ 623,200

Additionally, the Company may be obligated to make certain additional mandatory prepayments after the end of each year based on excess cash flow, as defined in the Credit and Guaranty Agreement.

Credit and Guaranty Agreement

On April 27, 2021, the Company entered into a Credit and Guaranty Agreement with Truist Bank ("Truist") (the "Credit Agreement") which provides for:

1) a $ 300.0 million senior secured term loan facility (the "initial term loan");

2) a $ 290.0 million senior secured delayed draw term loan facility (the "delayed draw term loan") (together, the "term facility");

and 3) a $ 40.0 million senior secured revolving credit facility.

Additionally, the Company may be obligated to make certain additional mandatory prepayments after the end of each year based on excess cash flow, as defined in the Credit Agreement.

Credit Agreement

On April 27, 2021, the Company entered into a Credit Agreement with Truist which provides for:

1) a $ 300.0 million Initial Term Loan;

2) a $ 290.0 million Delayed Draw Term Loan (together, the "term facility");

and 3) a $ 40.0 million senior secured

revolving credit facility.

The Credit Agreement was amended on September 17, 2021 to increase the amount of the Delayed Draw Term Loan facility by $ 30.0 million to $ 320.0 million.

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The Credit Agreement contains representations and warranties, financial and collateral requirements, mandatory payment events, events of default and affirmative and negative covenants, including covenants that restrict 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 outstanding amount of any loans and any other amounts owed under the Credit Agreement may, after the occurrence of an event of default, at the option of Truist, be declared immediately due and payable.

Events of default include the failure of the Company to make principal, premium or interest payment when due, or the failure by the Company to perform or comply with any term or covenant in the Credit Agreement.

If the aggregate principal amount of outstanding revolving loans and letters of credit under the Credit Agreement exceeds 35 % of the total revolving facility thereunder, the Company is required to comply with certain restrictions on its Total Net Leverage Ratio, which is defined as the ratio of consolidated total debt to Consolidated Adjusted EBITDA (as defined in the Credit Agreement).

The outstanding amount of any loans and any other amounts owed under the Credit Agreement may, after the occurrence of an event of default, at the option of Truist on behalf of lenders representing a majority of the commitments, be declared immediately due and payable.

If the aggregate principal amount of outstanding revolving loans and letters of credit under the Credit Agreement exceeds 35 % of the total revolving facility thereunder, the Company is required to comply with certain restrictions on its Total Net Leverage Ratio, which is defined as the ratio of consolidated total debt less unrestricted cash to consolidated adjusted EBITDA (as defined in the Credit Agreement).

If applicable, the maximum permitted Total Net Leverage Ratio is:

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and 3) 5.50 :1.00 at each quarter ended September 30, 2023 and thereafter.

As of December 31, 2021, the Company is in compliance with its debt covenants.

Proceeds from the initial term loan were used to partially fund the Refinancing described below.

As of December 31, 2022, the Company is in compliance with the covenants in the Credit Agreement and the Total Net Leverage Ratio was not applicable.

Proceeds from the Initial Term Loan were used to partially fund the refinancing of the Company's existing credit facilities as of April 27, 2021.

Proceeds from the Delayed Draw Term Loan were used to fund the Company's acquisition of Finxera.

See Note 3, Acquisitions for additional information related to the acquisition of Finxera.

Senior Credit Agreement and Term Loan Agreement

On January 3, 2017, the Company refinanced existing long-term debt whereby it entered into a credit agreement with a syndicate of lenders (the "Senior Credit Agreement") consisting of:

1) a $ 200.0 million term loan;

and 2) a $ 25.0 million revolving credit facility.

Also on January 3, 2017, the Company entered into a Credit and Guaranty Agreement (the "Term Loan Agreement") with Goldman Sachs Specialty Lending Group, L.P.

("Goldman Sachs") for an $ 80.0 million subordinated term loan, the proceeds of which were used to refinance the amounts previously outstanding with Goldman Sachs.

The Company determined that the 2017 debt refinancing should be accounted for as a debt extinguishment.

The Senior Credit Agreement and the Term Loan Agreement were amended on November 14, 2017 to allow for loan advances of less than $ 5.0 million and for certain liens on cash securing the Company's funding obligations under a new product involving a virtual credit card program.

This amendment did not affect any of the material terms, conditions or covenants of these agreements.

Additionally, the Senior Credit Agreement was amended in January 2018 and December 2018 to increase the term loan by $ 67.5 million and $ 130.0 million, respectively.

Two amendments were executed in 2019 that concerned

procedural changes to the quarterly and annual reporting for lenders and did not affect any of the material terms, conditions or covenants of the Senior Credit Agreement or the Term Loan Agreement.

In March 2020, a sixth amendment was made to the Senior Credit Agreement and Term Loan Agreement which included (among other updates):

1) changes to the Senior Credit Agreement to allow for certain amounts of interest to be treated as PIK interest and added to the outstanding borrowings balance (similar to what was already allowed by the Term Loan Agreement);

and 2) increases to the interest rate margins for these agreements incrementally of 1.00 % on June 16, 2020, and 0.50 % on each of the following dates;

2) August 15;

and 3) September 14, 2020 because the Company did not make a permitted accelerated principal payment of at least $ 100.0 million under the term loan facility of the Senior Credit Agreement on or before those dates.

The additional interest expense incurred by the Company due to the increases in the applicable margin for the revolving credit facility under the Senior Credit Agreement was paid in cash and such increases for the term facility of the Senior Credit Agreement and the Term Loan Agreement were accounted for as PIK interest.

On September 25, 2020, the Company made the $ 100.0 million principal prepayment plus an additional $ 6.5 million principal prepayment to reduce the outstanding indebtedness under the term loan facility of the Senior Credit Agreement.

This resulted in simultaneous reductions in the applicable interest rate margins under the Senior Credit Agreement and the Term Loan Agreement, which prospectively eliminated and reversed the applicable margin increases described in the preceding paragraph.

The Senior Credit Agreement and the Term Loan Agreement, as amended, contain representations and warranties, financial and collateral requirements, mandatory payment events, events of default, and affirmative and negative covenants, including covenants that restrict 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.

Under the terms of the Senior Credit Agreement and the Term Loan Agreement, the future applicable interest rate margins could vary based on the Company's Total Net Leverage Ratio in addition to future changes in the underlying market rates for LIBOR and the rate used for base-rate borrowings.

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

The Company was also required to comply with certain restrictions on its Total Net Leverage Ratio, which is defined as the ratio of consolidated total debt to Consolidated Adjusted EBITDA (as defined in the Senior Credit Agreement and Term Loan Agreement).

The maximum permitted Total Net Leverage Ratio was 7.75 :1.00 at December 31, 2020 and was 7.71 :1.00 at March 31, 2021.

Under the Senior Credit Agreement, prepayments of outstanding principal could be made in permitted increments with a 1.00 % penalty for certain prepayments.

Under the Term Loan Agreement, prepayment of outstanding principal was subject to a 4.00 % penalty for certain prepayments occurring prior to March 18, 2021 and 2.00 % for certain prepayments occurring between March 18, 2021 and March 18, 2022.

Outstanding borrowings under the Senior Credit Agreement accrued interest using either a base rate (as defined) or a LIBOR rate plus an applicable margin, or percentage per year.

For the term loan facility of our Senior Credit Agreement, the sixth amendment described above provided for a LIBOR "floor" of 1.00 % per year.

Accrued interest was payable monthly.

The revolving credit facility incurred a commitment fee on any undrawn amount, which equated to 0.50 % per year for the unused portion.

Outstanding borrowings under the Term Loan Agreement accrued interest at 5.00 %, plus an applicable margin, or percentage per year.

Accrued interest was payable quarterly at 5.00 % per year, and the accrued interest attributable to the applicable margin was capitalized as PIK interest each quarter.

The outstanding obligation under the Term Loan Agreement was $ 102.6 million at December 31, 2020, which consisted of $ 80.0 million in principal and $ 22.6 million of accumulated PIK interest.

For the year ended December 31, 2020, PIK interest under the Term Loan Agreement added $ 7.5 million to the principal amount outstanding under the Term Loan Agreement.

In connection with the April 2021 debt refinancing, the outstanding obligation of $ 274.6 million under the Senior Credit Agreement and the outstanding obligation of $ 105.1 million (which consisted of $ 80.0 million in principal and $ 25.1 million of accumulated PIK interest) under the Term Loan Agreement were repaid in full (or in the case of outstanding undrawn letters of credit, deemed issued under the Credit Agreement), and all commitments and guaranties in connection therewith have been terminated or released (the "Refinancing").

Acquisitions for additional information related to the acquisition of Finxera.

Interest Expense and Amortization of Deferred Loan Costs and Discounts

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Unamortized deferred financing costs and debt discount are included in long-term debt on the Company's Consolidated Balance Sheets.

Interest expense, including fees for undrawn amounts under the revolving credit facility and the delayed draw term loan facility of the Credit Agreement and the delayed principal draw under the Senior Credit Agreement, as well as amortization of deferred financing costs and debt discounts, was $ 36.5 million, $ 44.8 million and $ 40.7 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Twelve Months Ended December 31,

(in thousands) 2022 2021 2020

Interest expense (1)

$ 53,554 $ 36,485 $ 44,839

(1) Included in this amount is $ 0.9 million of interest expense related to the accretion of contingent considerations from acquisitions.

Interest expense included amortization of deferred financing costs and debt discounts of $ 3.5 million, $ 4.0 million and $ 2.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Deferred Loan Costs and Discounts, and Debt Extinguishment and Modification Expenses

In April 2021, the initial term loan under the Credit Agreement was issued at a discount of $ 6.4 million, while in September 2021, the delayed draw term loan was issued at a discount of $ 6.3 million.

Additionally, the Company incurred $ 6.4 million of costs for the Refinancing in April 2021 and $ 9.9 million of costs for the delayed draw term loan, including $ 3.5 million of ticking fees (debt commitment fees) prior to the drawdown of the funds in September 2021.

Approximately $ 6.1 million of the remaining fees incurred for the delayed draw term loan were paid during the initial Refinancing and were deferred and included in other noncurrent assets on the Company's Consolidated Balance Sheet at June 30, 2021.

In April 2021, the Initial Term Loan under the Credit Agreement was issued at a discount of $ 6.4 million.

The Company incurred $ 6.4 million of costs including $ 3.5 million of ticking fees (debt commitment fees) prior to the drawdown of the funds in September 2021.

In September 2021, the Delayed Draw Term Loan was issued at a discount of $ 6.3 million.

Additionally, the Company incurred $ 9.9 million of costs for the Delayed Draw Term Loan.

Approximately $ 6.1 million of the remaining fees incurred for the Delayed Draw Term Loan were paid in connection with the Initial Term Loan and were deferred in other noncurrent assets on the Company's Consolidated Balance Sheet at June 30, 2021.

The costs for the Delayed Draw Term Loan were amortized over the delayed commitment access period until September 2021, at which time the unamortized balance of the deferred costs was removed from other noncurrent assets and recorded as a reduction of the carrying amount of the debt obligation and are being amortized over the remaining term of the debt.

The Company determined that the issuance of the initial term loan as part of the April 2021 Refinancing was partially an extinguishment and a modification, and therefore, recognized debt extinguishment and modification costs of $ 8.3 million in April 2021, which included a portion of the Refinancing fees and the write off of previously deferred fees under the prior credit agreements.

The Company determined that the issuance of the Initial Term Loan as part of the April 2021 refinancing of an existing facility was partially an extinguishment and a modification, and therefore, recognized debt extinguishment and modification costs of $ 8.3 million in April 2021, which included a portion of the refinancing fees and the write off of previously deferred fees under the prior credit agreements.

These costs are reported within other expenses, net on the Company's Consolidated Statements of Operations.

Senior Credit Agreement and Term Loan Agreement:

At December 31, 2020, unamortized debt discounts and deferred financing costs were $ 4.7 million.

Prior to the April 2021 Refinancing, the Company recognized approximately $ 0.6 million of amortization expense related to debt discounts and deferred financing costs.

In connection with the Refinancing, $ 4.1 million was included as debt extinguishment and modification costs in the Company's Consolidated Statement of Operations for the year ended December 31, 2021.

Redeemable Senior Preferred Stock and Warrants

On April 27, 2021, the Company entered into an agreement pursuant to which it issued 150,000 shares of redeemable senior preferred stock, par value $ 0.001 per share, and a detachable warrant to purchase 1,803,841 shares of the Company's Common Stock, for gross proceeds of $ 150.0 million, less a $ 5.0 million discount and $ 5.5 million of issuance costs.

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

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

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

Redeemable Senior Preferred Stock

On September 17, 2021 the Company issued an additional 75,000 shares of redeemable senior preferred stock for $ 75.0 million, less a $ 0.9 million discount, $ 0.7 million of ticking fees and $ 1.9 million of issuance costs.

Upon issuance of these additional shares, the $ 3.3 million that was previously allocated to noncurrent assets for the committed financing put right was reclassified to the redeemable senior preferred stock.

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

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Therefore, the Company classified the redeemable senior preferred stock as temporary equity and is accreting the carrying amount to its full redemption amount from the date of issuance to the earliest redemption date using the effective interest method.

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

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December 31, 2021 225 $ 210,158

The dividend rate for the redeemable senior preferred stock is equal to the three-month LIBOR rate (minimum of 1.00 %) plus an applicable margin of 12.00 % (capped at 22.50 %) per year, with a required quarterly payment of 5.00 % plus the three-month LIBOR rate per year.

Proceeds from issuance of redeemable senior preferred stock, net of discount and issuance costs — —

Unpaid dividend on redeemable senior preferred stock — 16,794

Accretion of discounts and issuance cost — 3,286

Cash portion of dividend and ticking fee outstanding at the end of the year — 5,341

December 31, 2022 225 $ 235,579

The dividend rate for the redeemable senior preferred stock is equal to the three-month LIBOR rate (minimum of 1.00 %) plus an applicable margin of 12.00 % (capped at 22.50 %) per year, with a required quarterly cash dividend payment of 5.00 % plus the three-month LIBOR rate per year.

The dividend rate is subject to future increases if the Company doesn't comply with the cash payment requirements outlined in the agreement, which includes required payments of dividends, required payments related to redemption or required prepayments.

The dividend rate may also increase if the Company fails to obtain the required stockholder approval for a forced sale transaction triggered by investors or if an event of default as outlined in the agreement occurs.

The dividend rate as of December 31, 2022, and 2021 was 15.7 % and 13.0 % respectively.

The following table provides a summary of the dividends for the period presented:

(in thousands) Year Ended December 31, 2021

(in thousands) Year Ended

December 31, 2022 Year Ended December 31, 2021

Dividends paid in cash (1)

$ 16,800 $ 7,460

Accumulated dividends accrued as part of the carrying value of redeemable senior preferred stock 16,794 8,704

Dividends declared at the rate of 13.0 % per year

Dividends declared $ 33,594 $ 16,164

(1) Included in this amount is $ 5.3 million of dividends outstanding as of December 31, 2022

The following table presents cumulative dividends in arrears in aggregate and per-share:

(in thousands, except per share amounts) Year Ended

December 31, 2022 Year Ended December 31, 2021

Cumulative preferred dividends in arrears $ 25,497 $ 8,704

Redeemable senior preferred stock, outstanding 225 225

Cumulative preferred dividends in arrears, per share $ 113.3 $ 38.7

The redeemable senior preferred shares have no stated maturity and will remain outstanding indefinitely until redeemed or otherwise repurchased by the Company.

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and 3) the date that is 90 days following the Company's failure to consummate a mandatory redemption of the redeemable senior preferred stock upon the occurrence of a change in control or liquidation event.

The Company used the proceeds from the April 2021 sale of the redeemable senior preferred stock to partially fund the Refinancing (see Note 11, Debt Obligations ), to partially fund the Wholesale Payments, Inc.

The Company used the proceeds from the April 2021 sale of the redeemable senior preferred stock to partially fund the Refinancing (see Note 11.

Debt Obligations ), to partially fund the Wholesale Payments, Inc.

and C&H Financial Services, Inc.

acquisitions in the second quarter of 2021 (see Note 3, Acquisitions ) and to pay certain fees and expenses relating to the Refinancing and the offering of the redeemable senior preferred stock and warrants.

The Company used the proceeds from the September 2021 sale of additional shares of redeemable senior preferred stock to fund the Finxera acquisition (see Note 3, Acquisitions ).

acquisitions in the second quarter of 2021 (see Note 2.

Acquisitions ) and to pay certain fees and expenses relating to the Refinancing and the offering of the redeemable senior preferred stock and warrants.

The Company used the proceeds from the September 2021 sale of additional shares of redeemable senior preferred stock to fund the Finxera acquisition (see Note 2.

Acquisitions ).

On April 27, 2021 the Company issued warrants to purchase up to 1,803,841 shares of the Company's Common Stock, par value $ 0.001 per share, at an exercise price of $ 0.001 .

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The warrants are considered to be equity contracts indexed in the Company's own shares and therefore were recorded at their inception date relative fair value and are included in additional paid-in capital on the Company's Consolidated Balance Sheet.

Components of consolidated income tax (benefit) expense for the years ended December 31, 2021, December 31, 2020, and December 31, 2019 were as follows:

Components of consolidated income tax (benefit) expense for the years ended December 31, 2022, 2021, and 2020 were as follows:

(in thousands) For the Years Ended December 31,

2022 2021 2020

current income tax (benefit) expense

current income tax expense (benefit)

Federal $ 10,411 $ ( 2,321 ) $ 4,766

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Total deferred income tax (benefit) expense $ ( 7,956 ) $ ( 2,559 ) $ 2,960

Total income tax (benefit) expense $ ( 5,258 ) $ 10,899 $ 830

Total income tax expense (benefit) $ 5,350 $ ( 5,258 ) $ 10,899

The Company's consolidated effective income tax rate was 167.2 % for the year ended December 31, 2022, compared to a consolidated effective income tax rate of 135.9 % for the year ended December 31, 2021.

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1) an increase in the valuation allowance against certain business interest carryover deferred tax assets;

and 2) the finalization of prior estimates of certain intangible deferred tax liabilities resulting from the Finxera acquisition.

The effective rate for December 31, 2021 differed from the statutory federal rate of 21% primarily due to:

1) an increase in the valuation allowance against certain business interest carryover deferred tax assets;

2) non-deductible transaction costs incurred in the acquisition of Finxera;

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The effective rate for December 31, 2020 differed from the statutory federal rate of 21% primarily due to earnings attributable to noncontrolling interests and valuation allowance changes against certain business interest carryover deferred tax assets.

The effective rate for December 31, 2019 differed from the statutory federal rate of 21% primarily due to valuation allowance changes against certain business interest carryover deferred tax assets.

The following table provides a reconciliation of the consolidated income tax (benefit) expense at the statutory U.S.

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State and local income taxes, net 421 ( 372 ) 1,140

Foreign rate differential 142 — —

Excess tax benefits pursuant to ASU 2016-09 4 ( 339 ) ( 37 )

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Other, net ( 96 ) ( 538 ) 150

Income tax (benefit) expense $ ( 5,258 ) $ 10,899 $ 830

Income tax expense (benefit) $ 5,350 $ ( 5,258 ) $ 10,899

Deferred income taxes reflect the expected future tax consequences of temporary differences between the financial statement carrying amount of the Company's assets and liabilities, tax credits and their respective tax bases, and loss carry forwards.

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The assessment considers all available positive and negative evidence and is measured quarterly.

As of December 31, 2021 and December 31, 2020, the Company had a consolidated valuation allowance of approximately $ 10.8 million and $ 7.2 million, respectively, against certain deferred income tax assets related to business interest deduction carryovers and business combination costs that the Company believes are not more likely than not to be realized.

As of December 31, 2022 and 2021, the Company had a consolidated valuation allowance of approximately $ 15.5 million and $ 10.8 million, respectively, against certain deferred income tax assets related to business interest deduction carryovers and business combination costs that the Company believes are not more likely than not to be realized.

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.

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Balance as of December 31, 2022

As of December 31, 2022 and 2021, the balance of unrecognized tax benefits that, if recognized, affect our effective tax rate was $ 0.1 million and $ 0.1 million, respectively.

The Company continually evaluates the uncertain tax benefit associated with its uncertain tax positions.

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The Company has historically been impacted by the new interest deductibility rule under the Tax Act.

This rule disallows interest expense to the extent it exceeds 30% of adjusted taxable income ("ATI"), as defined.

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted, which among other provisions, provides for the increase of the 163(j) ATI limitation from 30% to 50% for tax years 2019 and 2020.

This rule disallows interest expense to the extent it exceeds 30% of ATI, as defined.

In March 2020, the CARES Act was enacted, which among other provisions, provides for the increase of the 163(j) ATI limitation from 30% to 50% for tax years 2019 and 2020.

As of December 31, 2022, the Company had interest deduction limitation carryforwards of $ 61.5 million.

Commitments and Contingencies

Minimum Annual Commitments with Third-party Processors

The Company has multi-year agreements with third parties to provide certain payment processing services to the Company.

The Company pays processing fees under these agreements that are based on the volume and dollar amounts of processed payment transactions.

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

Based on existing contracts in place at December 31, 2021, the Company is committed to pay minimum processing fees under these agreements of approximately $ 8.7 million in 2022 and $ 7.8 million in 2023.

Merchant Reserves

See Note 5, Settlement Assets and Customer Account Balances and Related Obligations , for information about merchant reserves.

Contingent Consideration

For asset acquisitions that do not meet the definition of a business, the portion of the unpaid purchase price that is contingent on future activities is not initially recorded by the acquirer on the date of acquisition.

Rather, the acquirer generally recognizes contingent consideration when it becomes probable and estimable.

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

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

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

As of December 31, 2021, $ 4.3 million of the $ 6.4 million total contingent consideration has been paid to the seller, while the remaining $ 2.1 million will be payable in the first quarter of 2022 if certain criteria are achieved.

See Note 3, Acquisitions , for information about contingent consideration related to acquisitions consummated in 2021 and 2019.

Legal Proceedings

The Company is involved in certain legal proceedings and claims which arise in the ordinary course of business.

In the opinion of the Company and based on consultations with inside and outside counsel, the results of any of these matters, individually and in the aggregate, are not expected to have a material effect on the Company's results of operations, financial condition or cash flows.

As more information becomes available, and the Company determines that an unfavorable outcome is probable on a claim and that the amount of probable loss that the Company will incur on that claim is reasonably estimable, the Company will record an accrued expense for the claim in question.

If and when the Company records such an accrual, it could be material and could adversely impact the Company's results of operations, financial condition and cash flows.

Related Party Transactions

PHOT Preferred Unit Redemption - Distribution to NCIs

In February 2019, PHOT, a subsidiary of the Company, received a contribution of substantially all of the operating assets of eTab and Cumulus under asset contribution agreements.

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

No material liabilities were assumed by PHOT.

These contributed assets were primarily composed of technology-related assets.

Prior to these transactions, eTab was 80.0 % owned by the Company's Chairman and Chief Executive Officer ("CEO").

No cash consideration was paid to the contributors of the eTab or Cumulus assets on the date of the transactions.

As consideration for these contributed assets, the contributors were issued redeemable non-controlling preferred equity interests ("redeemable NCIs") in PHOT.

Under these redeemable NCIs, the contributors were eligible to receive up to $ 4.5 million of profits earned by PHOT, plus a preferred yield ( 6.0 % per year) on any undistributed preferred equity interest ("Total Preferred Equity Interest").

Once the Total Preferred Equity Interest is distributed to the holders, the redeemable NCIs cease to exist.

The Company's CEO initially owned 83.3 % of the redeemable NCIs, which ownership interest was subsequently reduced to 35.3 % through the CEO's disposition of interests to others.

At the time of contribution, the Company determined that the contributor's carrying values of the eTab and Cumulus net assets (as a common control transaction under GAAP) were not material.

Under the guidance for a common control transaction, the contribution of the eTab and Cumulus net assets did not result in a change of entity or the receipt of a business, as such the Company's Consolidated Financial Statements for prior periods were not adjusted to reflect the historical results attributable to the eTab net assets.

For the period from February 1, 2019 through December 31, 2020, a total of $ 0.3 million of PHOT's earnings were attributable to the redeemable NCIs of PHOT, and this same amount was distributed in cash to the redeemable NCIs during the same period.

In November 2020, the Company agreed with the contributors to an exchange of shares of common stock of the Company, or cash, for the remaining undistributed Total Preferred Equity Interests of $ 4.8 million.

An exchange valuation for the Company's common stock was established as of November 12, 2020 at the prior 20 -day volume weighted average price of $ 2.78 per share.

The exchange was contingent upon receiving approval of the Company's lenders;

therefore, the binding exchange agreements were not entered into until after lender approval was received in April 2021 in connection with the Refinancing.

In May 2021, the Company entered into exchange agreements and completed the exchange of 1,428,358 shares of common stock and $ 0.8 million of cash for the Total Preferred Equity Interests.

The CEO received 605,623 shares of common stock of the Company in exchange for his 35.3 % interest, and the Company's Executive Vice President of M&A and Corporate Development received 413,081 shares of common stock of the Company in exchange for her 24.1 % interest.

Subsequent to establishing the common stock valuation in November 2020 and the date of exchange in May 2021, the Company's common stock price appreciated to $ 7.75 per share.

The Company's financial statements for the year ended December 31, 2021 reflect this exchange as a distribution to NCIs at an appreciated common stock value of $ 6.975 per share, which incorporates a 10 % liquidity discount of $ 0.775 per share due to trading restrictions under Securities Rule 144.

Therefore, the total distribution amounted to $ 10.8 million, comprised of $ 10.0 million of common stock and $ 0.8 million of cash.

In addition, the Company recorded a $ 2.8 million tax benefit related to an increase in the tax basis associated with the share exchange, for a net impact to equity of $ 8.0 million.

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 expenses, net on the Company's Consolidated Statement of Operations.

Commitment to Lend and Warrant to Acquire

During 2019, the Company, through one of its wholly-owned subsidiaries, executed an interest-bearing loan and commitment agreement with another entity to loan the entity up to $ 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.

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

The note receivable has an interest rate

of 12.0 % per year and is repayable in full in May 2024.

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

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

The fair values of the warrant, loan commitment and purchase right were not material at inception.

The Company loaned the entity a total of $ 3.5 million in 2019.

In December 2021, the entity was sold to a third party.

In connection with the sale, the Company's note receivable was fully repaid and the Company's warrants were cancelled in exchange for cash consideration.

The Company recognized a gain of $ 7.6 million in its Consolidated Statements of Operations for the year ended December 31, 2021 related to this transaction.

C ertain adjustments may be made in the future related to a potential earnout that is contingent on 2022 performance and the allocation of the net proceeds described above remain subject to final adjustments.

Any remaining payments made or received by the Company will be recorded in the period in which such amounts are finalized.

Stockholders' Deficit

In August 2021, Priority's Board of Directors authorized a $ 10.0 million share repurchase program (the "2021 Share Repurchase Program").

Under the 2021 Share Repurchase Program.

the Company was authorized to purchase up to 1.0 million shares of its common stock through open market transactions, unsolicited or solicited privately negotiated transactions, or otherwise in accordance with all applicable securities laws and regulations.

The 2021 Share Repurchase Program was set to expire on August 17, 2022 and it could be discontinued by the Company at any time.

The Company terminated the 2021 Share Repurchase Program effective as of the close of business on September 23, 2021.

During this period, the Company purchased a total of 162,715 shares of its common stock at an average price of $ 5.87 per share.

Total cash paid by the Company was approximately $ 1.0 million.

During the second quarter of 2019, the Company repurchased a total of 451,224 shares of its common stock at an average price of $ 5.29 per share.

Total cash paid by the Company was approximately $ 2.4 million.

The repurchases were authorized under a December 2018 resolution by the Company's Board of Directors, which expired during the second quarter of 2019.

Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of the Company's Common Stock possess all voting power for the election of members of the Company's Board of Directors and all other matters requiring stockholder action and will at all times vote together as one class on all matters submitted to a vote of the Company's stockholders.

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As of December 31, 2022, the Company has not issued any shares of preferred stock.

Share Repurchase Program

During the second quarter of 2022, PRTH's Board of Directors authorized a general share repurchase program under which the Company may purchase up to 2.0 million shares of its outstanding Common Stock for a total of up to $ 10.0 million.

terms of this plan, the Company may purchase shares through open market purchases, unsolicited or solicited privately negotiated transactions, or in another manner so long as it complies with applicable rules and regulations.

In August 2021, PRTH's Board of Directors authorized a $ 10.0 million 2021 share repurchase program.

Under the 2021 Share Repurchase Program.

the Company was authorized to purchase up to 1.0 million shares of its Common Stock through open market transactions, unsolicited or solicited privately negotiated transactions, or otherwise in accordance with all applicable securities laws and regulations.

The Company terminated the 2021 Share Repurchase Program effective as of the close of business on September 23, 2021.

For the years ended December 31, 2022 and 2021, share re-purchase activity under these programs was as follows:

Years Ended December 31,

in thousands, except share data, which is in whole units 2022 2021

Number of shares purchased (1)

1,309,374 162,715

Average price paid per share $ 4.42 $ 5.87

Total Investment (1)

$ 5,791 $ 1,023

(1) These amounts may differ from the repurchases of Common Stock amounts in the Consolidated Statements of Cash Flows due to shares withheld for taxes and unsettled share repurchases at the end of the quarter.

Warrants and Purchase Options

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These warrants expire on August 24, 2023.

Prior to July 25, 2018, a purchase option was sold to an underwriter by for consideration of $ 100 .

Prior to July 25, 2018, a purchase option was sold to an underwriter for consideration of $ 100 .

The purchase option, which survived the business combination, allow the holders to purchase up to a total of 300,000 units (each consisting of a share of Common Stock and a public warrant) exercisable at $ 12.00 per unit.

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Stock-based Compensation

For the years ended December 31, 2021, 2020 and 2019, stock-based compensation was as follows:

2018 Equity Incentive Plan

The 2018 Plan was approved by the Company's Board of Directors and shareholders in July 2018.

The 2018 Plan provided for the issuance of up to 6,685,696 of the Company's Common Stock, and these shares were registered on a Form S-8 during 2018.

Under the 2018 Plan, the Company's compensation committee may grant awards of non-qualified stock options, incentive stock options, SARs, restricted stock awards, RSUs, other stock-based awards (including cash bonus awards) or any combination of the foregoing.

Any current or prospective employees, officers, consultants or advisors that the Company's compensation committee (or, in the case of non-employee directors, the Company's Board of Directors) selects, from time to time, are eligible to receive awards under the 2018 Plan.

If any award granted under the 2018 Plan expires, terminates, or is canceled or forfeited without being settled or exercised, or if a SAR is settled in cash or otherwise without the issuance of shares, shares of the Company's Common Stock subject to such award will again be made available for future grants.

In addition, if any shares are surrendered or tendered to pay the exercise price of an award or to satisfy withholding taxes owed, such shares will again be available for grants under the 2018 Plan.

On March 17, 2022, the Company's Board of Directors unanimously approved an amendment to the 2018 Plan which was subsequently approved by our shareholders, to increase the number of shares authorized for issuance under the plan by 2,500,000 shares, resulting in 9,185,696 shares of the Company's Common Stock authorized for issuance under the plan.

These additional shares were registered on a Form S-8 in December 2022.

Stock-based compensation was as follows:

Years Ended December 31,

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2018 Equity Incentive Plan

Stock options compensation expense $ 327 $ 753 $ 2,003

Restricted stock units compensation expense 6,182 2,561 1,364

Stock options compensation expense $ 7 $ 327 $ 753

Liability-classified compensation expense — 325 313

2014 Management Incentive Plan — — 1,267

ESPP compensation expense 39 — —

Total $ 6,228 $ 3,213 $ 2,430

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No stock-based compensation has been capitalized.

2018 Equity Incentive Plan

The 2018 Equity Incentive Plan ("2018 Plan") was approved by the Company's Board of Directors and shareholders in July 2018.

The 2018 Plan provided for the issuance of up to 6,685,696 of the Company's common stock, and these shares were registered on a Form S-8 during 2018.

Under the 2018 Plan, the Company's compensation committee may grant awards of non-qualified stock options, incentive stock options, stock appreciation rights ("SAR"), restricted stock awards, restricted stock units ("RSU"), other stock-based awards (including cash bonus awards) or any combination of the foregoing.

If any award granted under the 2018 Plan expires, terminates, or is canceled or forfeited without being settled or exercised, or if a SAR is settled in cash or otherwise without the issuance of shares, shares of the Company's common stock subject to such award will again be made available for future grants.

In addition, if any shares are surrendered or tendered to pay the exercise price of an award or to satisfy withholding taxes owed, such shares will again be available for grants under the 2018 Plan.

A summary of the activity in stock units for the 2018 Plan that occurred during the years ended December 31, 2022, 2021 and 2020 is as follows:

Common stock available for issuance at December 31, 2018 4,446,239

Common Stock available for issuance at January 1, 2020 4,796,176

Stock options granted ( 15,000 )

Stock options forfeited 220,045

RSUs granted ( 1,031,740 )

RSU granted with performance goals that have not been determined ( 128,624 )

RSUs forfeited 21,277

Common Stock available for issuance at December 31, 2020

Stock options granted ( 15,000 )

Stock options forfeited 50,589

Stock options expired 53,870

RSUs granted ( 711,987 )

RSU granted with performance goals that have not been determined ( 128,624 )

RSUs forfeited 1,957

Shares withheld for taxes (1)

Common Stock available for issuance at December 31, 2021

New shares authorized for issuance 2,500,000

Stock options forfeited 221,733

Stock options expired 53,870

RSUs granted ( 3,223,949 )

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Common Stock available for issuance at December 31, 2022

(1) The number of shares surrendered to satisfy withholding taxes owed are subsequently added back to the shares available for grants under the 2018 Plan.

(1) The number of shares surrendered to satisfy withholding taxes owed are subsequently added back to the shares available for grant under the 2018 Plan.

Details about the time-based equity-classified stock options granted under the plan are as follows:

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Outstanding, December 31, 2021

Exercised ( 173,955 ) 6.88

1,227,625 $ 6.90

Forfeited ( 221,733 ) 6.95

Expired ( 53,870 ) 6.95

Outstanding, December 31, 2021 1,227,625 6.90 6.8 years $ 227

Exercisable at December 31, 2021 1,216,375 $ 6.94 6.8 years $ 175

Outstanding, December 31, 2022

1,005,892 6.88 5.7 years $ 42

Exercisable at December 31, 2022

998,392 $ 6.92 5.7 years $ 21

The weighted-average grant date fair value of options granted in 2020 was $ 1.99 .

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Service-based vesting:

Unvested at December 31, 2018 107,142 $ 7.00

Granted 36,657 $ 6.82

Vested ( 53,571 ) $ 7.00

Unvested at January 1, 2020 53,571 $ 7.00

892,142 $ 2.93

Forfeited ( 21,277 ) $ 2.35

Vested ( 328,035 ) $ 3.18

Unvested at December 31, 2020

596,401 $ 3.18

647,512 $ 6.63

Forfeited ( 1,957 ) $ 7.92

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879,250 $ 5.51

2,878,948 $ 6.14

Forfeited ( 353,196 ) $ 6.04

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Unvested at December 31, 2022

2,582,400 $ 5.70

Performance-based vesting:

Unvested at December 31, 2018 95,057 $ 10.52

Unvested at January 1, 2020 71,383 $ 10.52

139,598 $ 2.56

Forfeited ( 71,383 ) $ 10.52

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139,598 $ 2.56

Forfeited ( 71,383 ) $ 10.52

64,475 $ 6.90

Vested ( 104,620 ) $ 7.24

Unvested at December 31, 2021

99,453 $ 4.46

64,366 $ 5.00

Vested ( 64,366 ) $ 6.90

Unvested at December 31, 2022

(1) Includes 55,689 shares with an estimated fair value of $ 0.5 million and 212,768 shares with an estimated fair value of $ 0.4 million issued to non-employee members of the Company's Board of Directors in December 31, 2021 and 2020, respectively.

99,453 $ 3.24

(1) Includes 228,347 shares with an estimated fair value of $ 1.1 million, 55,689 shares with an estimated fair value of $ 0.5 million and 212,768 shares with an estimated fair value of $ 0.4 million issued to non-employees in December 31, 2022, 2021 and 2020, respectively.

(2) Includes only the portions of grants for which the performance goals have been determined and communicated to the grant recipient.

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In March 2020, the Company was authorized by the compensation committee of its Board of Directors to issue an RSU award to its Chairman and CEO if certain annual performance goals and achievement criteria were attained for 2020.

The award was accounted for as a liability-classified award.

The award was

accounted for as a liability-classified award.

In March 2021, the performance goals and achievement criteria were met and the award was converted to an equity-classified award.

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The Company has accrued $ 0.3 million in compensation expense for this liability-classified award, which is included in salary and employee benefit expenses in the Company's Consolidated Statement of Operations for the year ended December 31, 2021.

In the first quarter of 2022, the Company determined that the performance criteria was not met and this award was subsequently forfeited.

Employee Stock Purchase Plan

On April 16, 2021, the Priority Technology Holdings, Inc.

2021 Employee Stock Purchase Plan ("2021 Stock Purchase Plan") was authorized by the Company's Board of Directors.

The maximum number of shares available for purchase under the 2021 Stock Purchase Plan is 200,000 shares.

Shares issued under the 2021 Stock Purchase Plan may be authorized but unissued or reacquired shares of common stock.

On April 16, 2021, the 2021 Stock Purchase Plan was authorized by the Company's Board of Directors.

The maximum number of shares available for purchase under the 2021 Stock Purchase Plan is 200,000 shares.The shares issued under the 2021 Stock Purchase Plan may be authorized but unissued or reacquired shares of Common Stock.

All employees of the Company who work more than 20 hours per week and have been employed by the Company for at least 30 days may participate in the 2021 Stock Purchase Plan.

Under the 2021 Stock Purchase Plan, participants are offered, on the first day of the offering period, the option to purchase shares of Common Stock at a discount on the last day of the offering period.

The offering period shall be for a period of three months, and the first offering period begins during the first quarter of 2022.

The offering period shall be for a period of three months, and the first offering period began during the first quarter of 2022.

The 2021 Stock Purchase Plan provides eligible employees the opportunity to purchase shares of the Company's Common Stock on a quarterly basis through payroll deductions at a price equal to 95 % of the lesser of the fair value on the first and last trading day of each quarter.

2014 Management Incentive Plan

The Priority Holdings Management Incentive Plan (the "MIP") was established in 2014 to issue stock-based compensation awards to selected employees.

During the year ended December 31, 2019, the Company elected to accelerate vesting for all remaining unvested awards under the MIP, resulting in accelerated compensation expense.

Compensation expense under the MIP was approximately $ 1.3 million for the year ended December 31, 2019.

There is no unrecognized compensation cost for the MIP and no grants remain outstanding under this plan.

The compensation expense for the year ended December 31, 2022 was immaterial and is included in stock-based compensation expense.

Employee Benefit Plans

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Employees participating in the medical plan pay a portion of the costs for the insurance benefits.

Related Party Transactions

PHOT Preferred Unit Redemption - Distribution to NCIs

In February 2019, PHOT a subsidiary of the Company, received a contribution of substantially all of the operating assets of certain companies under an asset contribution agreement.

In November 2020, the Company agreed with the contributors to an exchange of shares of Common Stock of the Company, or cash, for the remaining undistributed Total Preferred Equity Interests of $ 4.8 million.

An exchange valuation for the Company's Common Stock was established as of November 12, 2020 at the prior 20 -day volume weighted average price of $ 2.78 per share.

The exchange was contingent upon receiving approval of the Company's lenders;

therefore, the binding exchange agreements were not entered into until after lender approval was received in April 2021 in connection with the Refinancing.

In May 2021, the Company entered into exchange agreements and completed the exchange of 1,428,358 shares of Common Stock and $ 0.8 million of cash for the Total Preferred Equity Interests.

The CEO received 605,623 shares of Common Stock of the Company in exchange for his 35.3 % interest, and the Company's Chief Operating Officer received 413,081 shares of Common Stock of the Company in exchange for her 24.1 % interest.

Subsequent to e stablishing the Common Stock valuation in

November 2020 and the date of exchange in May 2021, the Company's Common Stock price appreciated to $ 7.75 per share.

The Company's financial statements for the year ended December 31, 2021 reflect this exchange as a distribution to NCIs at an appreciated Common Stock value of $ 6.975 per share, which incorporates a 10 % liquidity discount of $ 0.775 per share due to trading restrictions under Securities Rule 144.

Therefore, the total distribution amounted to $ 10.8 million, comprised of $ 10.0 million of Common Stock and $ 0.8 million of cash.

In addition, the Company recorded a $ 2.8 million tax benefit related to an increase in the tax basis associated with the share exchange, for a net impact to equity of $ 8.0 million.

Commitment to Lend and Warrant to Acquire

During 2019, the Company, through one if its wholly-owned subsidiaries, executed an interest-bearing loan and commitment agreement with another entity to loan the entity up to $ 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.

In December 2021, the entity was sold to a third party.

In connection with the sale, the Company's note receivable was fully repaid and the Company's warrants were cancelled in exchange for cash consideration.

The Company recognized a gain of $ 7.6 million in its Consolidated Statements of Operations for the year ended December 31, 2021 related to this transaction.

Advance to Affiliate

During 2022, the Chairman and CEO, who is considered to be an affiliate of the Company, received an advance of incentive compensation of $ 1.2 million.

Subsequent to December 31, 2022, the advance was satisfied in full.

Commitments and Contingencies

Minimum Annual Commitments with Third-party Processors

The Company has multi-year agreements with third parties to provide certain payment processing services to the Company.

The Company pays processing fees under these agreements that are based on the volume and dollar amounts of processed payment transactions.

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

Based on existing contracts in place at December 31, 2022, the Company is committed to pay minimum processing fees under these agreements of approximately $ 15.7 million in 2023 and $ 17.0 million in 2024.

Annual Commitment with Vendor

Effective January 1, 2022, the Company entered into a three year business cooperation agreement with a vendor to resell its services.

Under the agreement, the Company purchased vendor services worth $ 0.7 million for the year ended December 31, 2022, and is committed to purchase vendor services worth $ 1.5 million in 2023 and $ 2.3 million in 2024.

Capital Commitments

The Company committed to capital contributions to fund the operations of certain subsidiaries totaling $ 22.0 million.

The Company is obligated to make the contributions within 10 business days of receiving notice for such contribution from the subsidiary.

As of December 31, 2022 , the Company contributed $ 6.9 million.

Merchant Reserves

Settlement Assets and Customer/Subscriber Account Balances and Related Obligations , for information about merchant reserves.

Contingent Consideration

Rather, the acquirer generally recognizes contingent consideration when it becomes probable and estimable.

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

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

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

As of December 31, 2021, the Company paid $ 4.0 million to the seller and the fair value of the contingent consideration was increased by $ 0.2 million.

On April 14, 2022, the Company amended the purchase agreement related to its acquisition of certain residual portfolio rights to provide for an additional earnout opportunity to be earned during the 12 months ending March 31, 2023.

As of December 31, 2022, the fair value of the contingent consideration was increased for $ 0.3 million and the Company paid $ 2.7 million.

As of December 31, 2022, it is not probable the seller will meet criteria for any future earnout opportunities.

Legal Proceedings

The Company is involved in certain legal proceedings and claims which arise in the ordinary course of business.

If and when the Company records such an accrual, it could be material and could adversely impact the Company's results of operations, financial condition and cash flows.

Concentration of Risks

The Company's revenue is substantially derived from processing Visa and Mastercard bankcard transactions.

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

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

The Company does not believe it is exposed to any significant credit risk from these transactions.

Fair Value Measurements

As of December 31, 2021 and 2020, the Company does not have any fair value estimates that are required to be remeasured at the end of each reporting period on a recurring basis.

Contingent consideration liabilities related to certain of the Company's acquisition is uncertain due to the utilization of unobservable inputs and management's judgement in determining the likelihood of achieving the earn-out criteria or the years ended December 31, 2022 and 2021.

These liabilities measured at fair value on a recurring basis consisted of the following:

Years Ended December 31,

(in thousands) Fair Value Hierarchy 2022 2021

Contingent consideration, current portion Level 3 $ 6,079 $ 4,006

Contingent consideration, noncurrent portion Level 3 2,000 6,680

Total contingent consideration $ 8,079 $ 10,686

During the year ended December 31, 2022, there were no transfers into, out of, or between levels of the fair value hierarchy.

The following table provides a reconciliation of the beginning and ending balance of the Company's contingent consideration for the years ended December 31, 2022 and 2021.

(in thousands) Contingent Consideration Liability

Balance at January 1, 2021 $ —

Contingent consideration related to the acquisitions 10,686

Balance at December 31, 2021

Accretion of discount on contingent consideration 864

Fair value adjustments 1,195

Payment of contingent consideration ( 4,666 )

Balance at December 31, 2022

Fair Value Disclosures

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Debt Obligations

Outstanding debt obligations (see Note 11, 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 of the term loan facility under the Credit Agreement at December 31, 2021 was estimated to be approximately $ 613.8 million.

The fair value of the term loan facility under the Senior Credit Agreement at December 31, 2020 was estimated to be approximately $ 278.0 million.

The fair value of these notes at December 31, 2021 and 2020, with a notional value and carrying value (gross of deferred costs and discounts) of $ 616.9 million and $ 279.4 million, respectively, was estimated using binding and non-binding quoted prices in an active secondary market, which considers the credit risk and market related conditions, and is within Level 3 of the fair value hierarchy.

Outstanding debt obligations (see Note 11.

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 of the term loan facility was estimated to be approximately $ 606.1 million and $ 613.8 million at December 31, 2022 and 2021, respectively, and was estimated using binding and non-binding quoted market prices in an active secondary market, which considers the credit risk and market related conditions, and is within Level 2 of the fair value hierarchy.

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

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More information about our three reportable segments:

• SMB Payments – provides full-service acquiring and payment-enabled solutions for B2C transactions, leveraging the Company's proprietary software platform, distributed through ISOs, direct sales and vertically focused ISV channels.

• B2B Payments – provides accounts payable automation solutions to corporations, software partners and FIs, including Citi, Mastercard and American Express.

• Enterprise Payments– provides embedded payment and banking solutions to enterprise customers that modernize legacy platforms and accelerate modern software partners looking to monetize payments.

• SMB Payments :

Provides full-service acquiring and payment-enabled solutions for B2C transactions, leveraging Priority's proprietary software platform, distributed through ISO, direct sales and vertically focused ISV channels.

• B2B Payments :

Provides market-leading AP automation solutions to corporations, software partners and industry leading FIs (including Citibank and Mastercard).

• Enterprise Payments :

Provides embedded payment and treasury solutions to enterprise customers to modernize legacy platforms and accelerate software partners' strategies to monetize payments.

Corporate includes costs of corporate functions and shared services not allocated to our reportable segments.

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Other income, net 589 202 596

Income tax benefit (expense) 5,258 ( 10,899 ) ( 830 )

Net income (loss) $ 1,389 $ 71,059 $ ( 33,589 )

Income tax (expense) benefit ( 5,350 ) 5,258 ( 10,899 )

Net (loss) income $ ( 2,150 ) $ 1,389 $ 71,059

(Loss) Earnings per Common Share

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2022 2021 2020

Net income (loss) $ 1,389 $ 71,059 ( 33,589 )

Net (loss) income $ ( 2,150 ) $ 1,389 71,059

Dividends and accretion attributable to redeemable senior preferred stockholders ( 36,880 ) ( 18,009 ) —

Non-controlling interest preferred unit redemptions ( 8,021 ) — —

Earnings attributable to non-controlling interests — ( 45,398 ) —

NCI preferred unit redemptions — ( 8,021 ) —

Earnings attributable to NCI — — ( 45,398 )

Net (loss) income attributable to common stockholders $ ( 39,030 ) $ ( 24,641 ) $ 25,661

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Restricted stock awards (3)

2,440 442 280

Liability-classified restricted stock units — 129 107

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Stockholders' Deficit .

(3) Granted under the 2018 Equity Incentive Plan.

(3) Granted under the 2018 Plan.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data