Repay Holdings Corp 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Index to the Financial Statements Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248) 57 Consolidated Balance Sheets as of D ecember 31, 2021 and 2020 61 Consolidated Statements of Operations for the years ended December 31, 2021 and 2020, and the periods ended December 31, 2019 and July 10, 2019 62 Consolidated Statements of Comprehensive Income for the years ended December 31, 2021 and 2020, and the periods ended December 31, 2019 and July 10, 2019 63 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020, the periods ended December 31, 2019 and July 10, 2019 64 Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020, and the periods ended December 31, 2019 and July 10, 2019 65 Notes to Consolidated Financial Statements 67 56 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Repay Holdings Corporation Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Repay Holdings Corporation (a Delaware corporation) and subsidiaries (the “Company” or “Successor”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows of the Successor and Hawk Parent Holdings LLC (“Predecessor”) for the years ended December 31, 2021 and 2020 (Successor), and the periods from July 11, 2019 to December 31, 2019 (Successor) and January 1, 2019 to July 10, 2019 (Predecessor), and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years ended December 31, 2021 and 2020 (Successor), and the periods from July 11, 2019 to December 31, 2019 (Successor) and January 1, 2019 to July 10, 2019 (Predecessor), in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 1, 2022 expressed an unqualified opinion. Basis for opinion These financial statements are the responsibility of the Company’s and Predecessor’s management. Our responsibility is to express an opinion on the Company’s and Predecessor’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits 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 audits 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 audits 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 audits provide a reasonable basis for our opinion. Critical audit matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the 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. Revenue Recognition As described further in Note 2 to the consolidated financial statements, the Company ’s revenue primarily consists of transaction-based fees from payment processing services that are made up of a significant volume of low-dollar transactions, sourced from multiple systems, platforms, and applications. The processing of such transactions and recording of revenue is system-driven and based on contractual terms with merchants, financial institutions, payment networks, and other parties. Because of the nature of the payment processing services, the Company relies on automated systems and third parties to process and record its revenue transactions. The principal consideration for our determination that the complexity of revenue recognition is a critical audit matter is the increased extent of effort and involvement of professionals with specialized skills in information technology (IT) to identify, test, and evaluate the Company’s systems and automated controls. 57 Our audit procedures relating to revenue recognized during the year ended December 31, 2021 included the following, among others: • With the assistance of our IT professionals, we: o Identified the significant systems used to process revenue transactions and tested the general IT controls over each of these systems, including testing of user access controls, change management controls, and IT operations controls. o Tested system interface controls and automated controls within the relevant revenue streams, as well as the controls designed to ensure the accuracy and completeness of revenue. • We tested internal controls within the relevant revenue business processes, including those in place to reconcile the various reports extracted from the IT systems to the Company’s general ledger. • For a sample of revenue transactions, we tested selected transactions by agreeing the inputs to the calculation of revenue recognized to source documents, including merchant contracts and processor reports and testing the mathematical accuracy of the recorded revenue. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2018. Atlanta, Georgia March 1, 2022 58 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Repay Holdings Corporation Opinion on internal control over financial reporting We have audited the internal control over financial reporting of Repay Holdings Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2021, and our report dated March 1, 2022 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of BT Intermediate, LLC (“BillingTree”), Kontrol LLC (“Kontrol”) and Payix Holdings Incorporated (“Payix”), wholly-owned subsidiaries, which constituted 4.0 percent of total assets (excluding goodwill and intangible assets related to the acquisitions which are a part of the Company’s existing control environment) and 15.2 percent of revenues of the related consolidated financial statement amounts as of and for the year ended December 31, 2021. As indicated in Management’s Report, BillingTree, Kontrol and Payix were each acquired during 2021. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of BillingTree, Kontrol and Payix. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 59 /s/ GRANT THORNTON LLP Atlanta, Georgia March 1, 2022 60 REPAY HOLDINGS CORPORATION Consolidated Balance Sheets December 31, 2021 December 31, 2020 Assets Cash and cash equivalents $ 50,048,657 $ 91,129,888 Accounts receivable 33,235,745 21,310,724 Prepaid expenses and other 12,427,032 6,925,115 Total current assets 95,711,434 119,365,727 Property, plant and equipment, net 3,801,199 1,628,439 Restricted cash 26,291,269 15,374,846 Intangible assets, net 577,693,902 369,227,138 Goodwill 824,081,632 458,970,255 Operating lease right-of-use assets, net 10,499,751 10,074,506 Deferred tax assets 145,259,883 135,337,229 Other assets 2,499,996 — Total noncurrent assets 1,590,127,632 990,612,413 Total assets $ 1,685,839,066 $ 1,109,978,140 Liabilities Accounts payable $ 20,082,651 $ 11,879,638 Related party payable 17,394,125 15,811,597 Accrued expenses 26,819,083 19,216,258 Current maturities of long-term debt — 6,760,650 Current operating lease liabilities 1,990,416 1,527,224 Current tax receivable agreement 24,495,556 10,240,310 Other current liabilities 1,565,931 — Total current liabilities 92,347,762 65,435,677 Long-term debt, net of current maturities 448,484,696 249,952,746 Noncurrent operating lease liabilities 9,090,867 8,836,655 Tax receivable agreement, net of current portion 221,332,863 218,987,795 Other liabilities 1,547,087 10,583,196 Total noncurrent liabilities 680,455,513 488,360,392 Total liabilities $ 772,803,275 $ 553,796,069 Commitments and contingencies (Note 12) Stockholders' equity Class A common stock, $ 0.0001 par value; 2,000,000,000 shares authorized, and 88,502,621 and 71,244,682 issued and outstanding as of December 31, 2021 and 2020, respectively 8,850 7,125 Class V common stock, $ 0.0001 par value; 1,000 shares authorized and 100 shares issued and outstanding as of December 31, 2021 and 2020 — — Additional paid-in capital 1,100,012,082 691,675,072 Accumulated other comprehensive loss ( 2,205 ) ( 6,436,763 ) Accumulated deficit ( 226,015,886 ) ( 175,931,713 ) Total Repay stockholders' equity 874,002,841 509,313,721 Non-controlling interests 39,032,950 46,868,350 Total equity $ 913,035,791 $ 556,182,071 Total liabilities and equity $ 1,685,839,066 $ 1,109,978,140 See accompanying notes to consolidated financial statements. 61 REPAY HOLDINGS CORPORATION Consolidated Statements of Operations Year Ended December 31, 2021 Year Ended December 31, 2020 From July 11, 2019 to December 31, 2019 From January 1, 2019 to July 10, 2019 (Successor) (Predecessor) Revenue $ 219,258,038 $ 155,035,943 $ 57,560,470 $ 47,042,917 Operating Expenses Costs of services 55,483,804 41,447,056 15,656,730 10,216,079 Selling, general and administrative 120,052,895 87,301,814 45,758,335 51,201,322 Depreciation and amortization 89,691,707 60,806,659 23,756,888 6,222,917 Change in fair value of contingent consideration 5,845,626 ( 2,510,000 ) — — Impairment loss 2,180,000 — — — Total operating expenses 273,254,032 187,045,529 85,171,953 67,640,318 Loss from operations ( 53,995,994 ) ( 32,009,586 ) ( 27,611,483 ) ( 20,597,401 ) Other (expense) income Interest expense ( 3,679,116 ) ( 14,445,000 ) ( 5,921,893 ) ( 3,145,167 ) Loss on extinguishment of debt ( 5,940,600 ) — — — Change in fair value of warrant liabilities — ( 70,827,214 ) ( 15,258,497 ) — Change in fair value of tax receivable liability ( 14,109,063 ) ( 12,439,485 ) ( 1,638,465 ) — Other income (expense) 96,505 ( 2,985 ) ( 1,379,824 ) 38 Other loss ( 9,099,451 ) — — — Total other expense ( 32,731,725 ) ( 97,714,684 ) ( 24,198,679 ) ( 3,145,129 ) Loss before income tax benefit ( 86,727,719 ) ( 129,724,270 ) ( 51,810,162 ) ( 23,742,530 ) Income tax benefit 30,691,156 12,358,025 4,990,989 — Net loss $( 56,036,563 ) $( 117,366,245 ) $( 46,819,173 ) $( 23,742,530 ) Less: Net loss attributable to non-controlling interests ( 5,952,390 ) ( 11,769,683 ) ( 15,271,043 ) — Net loss attributable to the Company $( 50,084,173 ) $( 105,596,562 ) $( 31,548,130 ) $( 23,742,530 ) Loss per Class A share attributable to the Company: Basic and diluted $( 0.60 ) $( 2.02 ) $( 0.88 ) Weighted-average shares outstanding: Basic and diluted 83,318,189 52,180,911 35,731,220 See accompanying notes to consolidated financial statements. 62 REPAY HOLDINGS CORPORATION Consolidated Statements of Comprehensive Income Year Ended December 31, 2021 Year Ended December 31, 2020 From July 11, 2019 to December 31, 2019 From January 1, 2019 to July 10, 2019 (Successor) (Predecessor) Net loss $( 56,036,563 ) $( 117,366,245 ) $( 46,819,173 ) $( 23,742,530 ) Other comprehensive (loss) income, before tax Change in fair value of cash flow hedges — ( 9,867,782 ) 555,449 — Reclassification of net unrealized loss on cash flow hedges to other loss 9,317,244 — — — Foreign currency translation adjustments ( 3,020 ) — — — Total other comprehensive (loss) income, before tax 9,314,224 ( 9,867,782 ) 555,449 — Income tax related to items of other comprehensive income: Tax benefit (expense) on change in fair value of cash flow hedges — 1,672,742 ( 54,303 ) — Tax expense on reclassification of net unrealized loss on cash flow hedges to other loss ( 1,672,742 ) — — — Tax benefit on foreign currency translation adjustments 815 — — — Total income tax benefit (expense) on related to items of other comprehensive income ( 1,671,927 ) 1,672,742 ( 54,303 ) — Total other comprehensive (loss) income, net of tax 7,642,297 ( 8,195,040 ) 501,146 — Total comprehensive loss $( 48,394,266 ) $( 125,561,285 ) $( 46,318,027 ) $( 23,742,530 ) Less: Comprehensive loss attributable to non-controlling interests ( 4,744,651 ) ( 14,668,288 ) ( 15,027,371 ) — Comprehensive loss attributable to the Company $( 43,649,616 ) $( 110,892,997 ) $( 31,290,656 ) $( 23,742,530 ) See accompanying notes to consolidated financial statements. 63 REPAY HOLDINGS CORPORATION Consolidated Statements of Changes in Equity Total Equity (Predecessor) Balance at December 31, 2018 $ 109,078,357 Net loss ( 23,742,530 ) Contributions by members — Stock based compensation 908,978 Distribution to members ( 6,904,991 ) Balance at July 10, 2019 $ 79,339,814 Repay Stockholders Class A Common Stock Class V Common Stock Additional Paid-In Accumulated Accumulated Other Comprehensive Non-controlling Total Shares Amount Shares Amount Capital Deficit Income (Loss) Interests Equity Balance at July 11, 2019 33,430,259 $ 3,343 100 $ — $ 290,408,807 $( 37,588,827 ) $ — $ 221,375,364 $ 474,198,687 Release of Founder Shares 2,965,000 297 — ( 297 ) — — — — Release of share awards vested under Incentive Plan 1,135,291 113 — ( 113 ) — — — — Treasury shares repurchased — — — ( 4,507,544 ) ( 4,507,544 ) Stock-based compensation — — 22,013,286 — — — 22,013,286 Warrant exercise 18 — — 207 — — — 207 Tax distribution from Hawk Parent — — — — — — ( 185,957 ) ( 185,957 ) Reclassification to warrant liabilities — — — ( 24,359,228 ) ( 1,198,194 ) — — ( 25,557,422 ) Net loss — — — — ( 31,548,130 ) — ( 15,271,043 ) ( 46,819,173 ) Other comprehensive income — — — — — 313,397 243,671 557,068 Balance at December 31, 2019 37,530,568 $ 3,753 100 $ — $ 283,555,118 $( 70,335,151 ) $ 313,397 $ 206,162,035 $ 419,699,152 Issuance of new shares 23,564,816 2,356 — 514,451,331 — ( 99,022 ) ( 4,454,472 ) 509,900,193 Exchange of Post-Merger Repay Units 1,606,647 161 — 10,065,244 — ( 228,090 ) ( 9,837,154 ) 161 Redemption of Post-Merger Repay Units — — — ( 311,736,352 ) — ( 2,614,996 ) ( 120,944,910 ) ( 435,296,258 ) Release of share awards vested under Incentive Plan 516,398 52 — ( 52 ) — — — — Treasury shares repurchased — — ( 1,431,172 ) — 376 16,064 ( 1,414,732 ) Stock-based compensation — — — 20,489,298 — ( 15,759 ) ( 1,027,739 ) 19,445,800 Warrant exercise 8,026,253 803 — 92,178,915 — ( 124,570 ) ( 5,255,431 ) 86,799,717 Tax distribution from Hawk Parent — — — — — — ( 1,496,213 ) ( 1,496,213 ) Valuation allowance on Ceiling Rule DTA — — — ( 27,540,391 ) — 2,794 — ( 27,537,597 ) Reclassification to warrant liabilities — — — 111,643,133 — — — 111,643,133 Net loss — — — — ( 105,596,562 ) — ( 11,769,683 ) ( 117,366,245 ) Other comprehensive loss — — — — — ( 3,670,893 ) ( 4,524,147 ) ( 8,195,040 ) Balance at December 31, 2020 71,244,682 $ 7,125 100 $ — $ 691,675,072 $( 175,931,713 ) $( 6,436,763 ) $ 46,868,350 $ 556,182,071 Issuance of new shares 16,295,802 1,629 — 371,048,331 — — ( 701,599 ) 370,348,361 Exchange of Post-Merger Repay Units 407,584 41 — ( 166,450 ) — — ( 2,331,486 ) ( 2,497,895 ) Release of share awards vested under Incentive Plan 554,553 55 — ( 55 ) — — — — Treasury shares repurchased — — ( 4,074,937 ) — — 33,014 ( 4,041,923 ) Stock-based compensation — — — 22,339,602 — — ( 28,351 ) 22,311,251 Tax distribution from Hawk Parent — — — — — — ( 62,327 ) ( 62,327 ) Valuation allowance on Ceiling Rule DTA — — — 19,190,519 — — — 19,190,519 Net loss — — — — ( 50,084,173 ) — ( 5,952,390 ) ( 56,036,563 ) Other comprehensive income — — — — — 6,434,558 1,207,739 7,642,297 Balance at December 31, 2021 88,502,621 $ 8,850 100 $ — $ 1,100,012,082 $( 226,015,886 ) $( 2,205 ) $ 39,032,950 $ 913,035,791 See accompanying notes to consolidated financial statements. 64 REPAY HOLDINGS CORPORATION Consolidated Statements of Cash Flows Year Ended December 31, 2021 Year Ended December 31, 2020 From July 11, 2019 to December 31, 2019 From January 1, 2019 to July 10, 2019 (Successor) (Predecessor) Cash flows from operating activities Net loss $( 56,036,563 ) $( 117,366,245 ) $( 46,819,173 ) $( 23,742,530 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 89,691,707 60,806,659 23,756,888 6,222,917 Stock based compensation 22,311,251 19,445,800 22,013,287 908,978 Amortization of debt issuance costs 2,536,075 1,416,012 570,671 215,658 Loss on disposal of property and equipment 19,039 — — — Loss on extinguishment of debt 5,940,600 — — — Loss on sale of interest rate swaps 9,315,854 — — — Fair value change in warrant liability — 70,827,214 15,258,497 — Fair value change in tax receivable agreement liability 14,109,063 12,439,485 1,638,465 — Fair value change in other assets and liabilities 5,845,626 ( 2,509,840 ) — — Impairment loss 2,180,000 — — — Payments of contingent consideration in excess of acquisition date fair value ( 1,500,000 ) ( 4,070,549 ) — — Deferred tax benefit ( 30,727,924 ) ( 12,358,025 ) ( 4,990,989 ) — Change in accounts receivable ( 6,518,325 ) ( 2,890,762 ) 779,008 ( 4,614,620 ) Change in related party receivable — 563,084 ( 563,084 ) — Change in prepaid expenses and other ( 3,800,600 ) 541,639 ( 3,579,300 ) ( 73,533 ) Change in operating lease ROU assets 2,012,832 ( 10,074,506 ) — — Change in accounts payable 4,771,635 38,185 2,656,630 1,297,035 Change in related party payable 1,335,688 ( 309,669 ) 14,571,266 — Change in accrued expenses and other 637,056 370,343 ( 12,356,519 ) 28,136,310 Change in operating lease liabilities ( 1,322,592 ) 10,363,879 — — Change in other liabilities ( 7,470,178 ) 1,254,000 — — Net cash provided by operating activities 53,330,244 28,486,704 12,935,647 8,350,215 Cash flows from investing activities Purchases of property and equipment ( 2,862,903 ) ( 994,147 ) ( 498,513 ) ( 203,026 ) Purchases of intangible assets ( 20,642,675 ) ( 23,279,349 ) ( 3,375,751 ) ( 3,842,744 ) Purchases of equity investment ( 2,499,996 ) — — — Acquisition of Hawk Parent, net of cash and restricted cash acquired — — ( 242,599,551 ) — Acquisition of TriSource, net of cash and restricted cash acquired — — ( 59,160,005 ) — Acquisition of APS, net of cash and restricted cash acquired — ( 465,454 ) ( 29,450,022 ) — Acquisition of Ventanex, net of cash and restricted cash acquired — ( 35,460,153 ) — — Acquisition of cPayPlus, net of cash and restricted cash acquired — ( 7,694,632 ) — — Acquisition of CPS, net of cash and restricted cash acquired 10,779 ( 78,086,739 ) — — Acquisition of BillingTree, net of cash and restricted cash acquired ( 269,002,616 ) — — — Acquisition of Kontrol, net of cash and restricted cash acquired ( 7,439,373 ) — — — Acquisition of Payix, net of cash and restricted cash acquired ( 94,898,220 ) — — — Net cash used in investing activities ( 397,335,004 ) ( 145,980,474 ) ( 335,083,842 ) ( 4,045,770 ) Cash flows from financing activities Payment on line of credit — ( 10,000,000 ) 6,500,000 — Issuance of long-term debt 460,000,000 60,425,983 210,000,000 — Payments on long-term debt ( 262,653,996 ) ( 6,709,486 ) ( 90,862,500 ) ( 2,450,000 ) Public issuance of Class A Common Stock 142,098,364 509,900,193 135,000,000 — Repurchase of outstanding warrants — — ( 38,700,000 ) — Repurchase of treasury shares ( 4,041,923 ) ( 1,414,732 ) ( 4,507,544 ) — Issuance of warrants — — 207 — Exercise of warrants — 86,799,717 — — Transfer of cash from trust upon conversion of Thunder Bridge Class A ordinary shares — — 148,870,571 — Redemption of Post-Merger Repay Units — ( 435,296,258 ) — — Distributions to Members ( 62,327 ) ( 1,496,213 ) ( 185,957 ) ( 6,904,991 ) Payment of loan costs ( 14,051,380 ) ( 1,861,817 ) ( 6,065,465 ) — Payments of contingent consideration up to acquisition date fair value ( 7,448,786 ) ( 14,250,000 ) — — Net cash provided by (used in) financing activities 313,839,952 186,097,387 360,049,312 ( 9,354,991 ) Increase (decrease) in cash, cash equivalents and restricted cash ( 30,164,808 ) 68,603,617 37,901,117 ( 5,050,546 ) Cash, cash equivalents and restricted cash at beginning of period $ 106,504,734 $ 37,901,117 $ — $ 23,262,058 Cash, cash equivalents and restricted cash at end of period $ 76,339,926 $ 106,504,734 $ 37,901,117 $ 18,211,512 65 REPAY HOLDINGS CORPORATION Consolidated Statements of Cash Flows (Continued) Year Ended December 31, 2021 Year Ended December 31, 2020 From July 11, 2019 to December 31, 2019 From January 1, 2019 to July 10, 2019 (Successor) (Predecessor) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 1,143,040 $ 11,486,760 $ 5,351,222 $ 2,929,509 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Acquisition of Hawk Parent in exchange for Class A Common Stock $ — $ — $ 220,056,226 Acquisition of Hawk Parent in exchange for amounts payable under Tax Receivable Agreement $ — $ — $ 229,228,105 Acquisition of Hawk Parent in exchange for contingent consideration $ — $ — $ 12,300,000 Acquisition of TriSource in exchange for contingent consideration $ — $ 1,750,000 $ 2,250,000 Acquisition of APS in exchange for contingent consideration $ — $ 6,580,549 $ 12,000,000 Acquisition of Ventanex in exchange for contingent consideration $ — $ 4,800,000 Acquisition of cPayPlus in exchange for contingent consideration $ — $ 6,500,000 Acquisition of CPS in exchange for contingent consideration $ — $ 4,500,000 Acquisition of BillingTree in exchange for Class A Common Stock $ 228,250,000 $ — Acquisition of Kontrol in exchange for contingent consideration $ 500,000 $ — Acquisition of Payix in exchange for contingent consideration $ 2,850,000 See accompanying notes to consolidated financial statements. 66 REPAY HOLDINGS CORPORATION Notes to Consolidated Financial Statements 1 . Organizational Structure and Corporate Information Repay Holdings Corporation was incorporated as a Delaware corporation on July 11, 2019 in connection with the closing of a transaction (the “Business Combination”) pursuant to which Thunder Bridge Acquisition Ltd., a special purpose acquisition company organized under the laws of the Cayman Islands (“Thunder Bridge”), (a) domesticated into a Delaware corporation and changed its name to “Repay Holdings Corporation” and (b) consummated the merger of a wholly owned subsidiary of Thunder Bridge with and into Hawk Parent Holdings, LLC, a Delaware limited liability company (“Hawk Parent”). Throughout this section, unless otherwise noted or unless the context otherwise requires, the terms “we”, “us”, “Repay” and the “Company” and similar references refer (1) before the Business Combination, to Hawk Parent and its consolidated subsidiaries and (2) from and after the Business Combination, to Repay Holdings Corporation and its consolidated subsidiaries. Throughout this section, unless otherwise noted or unless the context otherwise requires, “Thunder Bridge” refers to Thunder Bridge Acquisition. Ltd. prior to the consummation of the Business Combination. Thunder Bridge issued public warrants and private placement warrants (collectively, the “Warrants”), which were outstanding and recorded on the Company’s consolidated financial statements at the time of the Business Combination. On July 27, 2020, the Company completed the redemption of all outstanding Warrants. The Company is headquartered in Atlanta, Georgia. The Company’s legacy business was founded as M & A Ventures, LLC, a Georgia limited liability company doing business as REPAY: Realtime Electronic Payments (“REPAY LLC”), in 2006 by current executives John Morris and Shaler Alias. Hawk Parent was formed in 2016 in connection with the acquisition of a majority interest in the successor entity of REPAY LLC and its subsidiaries by certain investment funds sponsored by, or affiliated with, Corsair Capital LLC (“Corsair”). On January 19, 2021, the Company completed an underwritten public offering (the “Equity Offering”) of 6,244,500 shares of its Class A common stock at a public offering price of $ 24.00 per share. 814,500 shares of such Class A common stock were sold in the Equity Offering in connection with the full exercise of the underwriters’ option to purchase additional shares of Class A common stock pursuant to the underwriting agreement. On January 19, 2021, the Company also completed an offering of $ 440.0 million in aggregate principal amount of 0.00 % Convertible Senior Notes due 2026 (the “2026 Notes”) in a private placement (the “Notes Offering”) to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. $ 40.0 million in aggregate principal amount of such 2026 Notes were sold in the Notes Offering in connection with the full exercise of the initial purchasers’ option to purchase such additional 2026 Notes pursuant to the purchase agreement. The Notes will mature on February 1, 2026 , unless earlier converted, repurchased or redeemed. On June 15, 2021, the Company acquired all of the equity interests of BT Intermediate, LLC (together with its subsidiaries, “BillingTree”) for approximately $ 505.8 million, consisting of approximately $ 277.5 million in cash from the Company’s balance sheet and approximately 10 million shares of newly issued Class A common stock, representing approximately 10 % of the voting power of the Company’s outstanding shares of common stock. On June 22, 2021, the Company acquired substantially all of the assets of Kontrol LLC (“Kontrol”) for up to $ 10.5 million, of which approximately $ 7.4 million was paid at closing. The acquisition was financed with cash on hand. On December 29, 2021, the Company acquired Payix Holdings Incorporated (together with its subsidiary, “Payix”) for up to $ 115.0 million, which includes $ 95.6 million paid at closing and up to $ 20.0 million in performance-based earnouts. The acquisition was financed with cash on hand and available revolver capacity. Business Overview The Company provides integrated payment processing solutions to industry-oriented markets in which businesses have specific transaction processing needs. The Company refers to these markets as “vertical markets” or “verticals.” The Company’s proprietary, integrated payment technology platform reduces the complexity of the electronic payments process for business. The Company charges its clients processing fees based on the volume of payment transactions processed and other transaction or service fees. The Company intends to continue to strategically target verticals where the Company believes its ability to tailor payment solutions to its clients’ needs, its deep knowledge of the Company’s vertical markets and 67 the embedded nature of its integrated payment solutions will drive strong growth by attracting new client s and fostering long-term client relationships. The Company provides payment processing solutions to clients primarily operating in the personal loans, automotive loans, receivables management, and business-to-business verticals. The Company’s payment processing solutions enable consumers and businesses in these verticals to make payments using electronic payment methods, rather than cash or check, which have historically been the primary methods of payment in these verticals. The Company believes that a growing number of consumers and businesses prefer the convenience and efficiency of paying with cards and other electronic methods and that the Company is poised to benefit from the significant growth opportunity of electronic payment processing as these verticals continue to shift from cash and check to electronic payments. The personal loans vertical is predominately characterized by installment loans, which are typically utilized by consumers to finance everyday expenses. The automotive loans vertical predominantly includes subprime automotive loans, automotive title loans and automotive buy-here-pay-here loans and also includes near-prime and prime automotive loans. The Company’s receivables management vertical relates to consumer loan collections, which typically enter the receivables management process due to delinquency on credit card bills or as a result of major life events, such as job loss or major medical issues. The business-to-business vertical relates to transactions occurring between a wide variety of enterprise clients, many of which operate in the manufacturing, wholesale, distribution, healthcare, and education industries. The Company’s go-to-market strategy combines direct sales with integrations with key software providers in its target verticals. The integration of the Company’s technology with key software providers in the verticals that the Company serves, including loan management systems, DMS, collection management systems, and enterprise resource planning software systems, allows the Company to embed its omni-channel payment processing technology into its clients’ critical workflow software and ensure seamless operation of the Company’s solutions within its clients’ enterprise management systems. The Company refers to these software providers as its “software integration partners.” This integration allows the Company’s sales force to readily access new client opportunities or respond to inbound leads because, in many cases, a business will prefer, or in some cases only consider, a payments provider that has already integrated or is able to integrate its solutions with the business’ primary enterprise management system. The Company has successfully integrated its technology solutions with numerous, widely-used enterprise management systems in the verticals that it serves, which makes its platform a more compelling choice for the businesses that use them. Moreover, the Company’s relationships with its partners help it to develop deep industry knowledge regarding trends in client needs. The Company’s integrated model fosters long-term relationships with its clients, which supports its volume retention rates that the Company believes are above industry averages. As of December 31, 2021, the Company maintained approximately 222 integrations with various software providers. In March 2020, the World Health Organization declared the outbreak of the COVID-19 virus a global pandemic. The ultimate impacts of the COVID-19 pandemic and related economic conditions on the Company’s results remain uncertain. The scope, duration and magnitude of the direct and indirect effects of the COVID-19 pandemic continue to evolve and in ways that are difficult to fully anticipate. At this time, the Company cannot reasonably estimate the full impact of the pandemic on the Company, given the uncertainty over the duration and severity of the economic crisis. As previously disclosed in Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as amended, the Company restated its previously issued consolidated financial statements for periods following the Business Combination through December 31, 2020 to make accounting corrections related to Warrant accounting. This Annual Report on Form 10-K reflects the restated consolidated financial statements as of December 31, 2020 and 2019, for the period from July 11, 2019 to December 31, 2019, for the year ended December 31, 2020 and the quarterly periods therein. 2. Basis of Presentation and Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Repay Holdings Corporation, the majority-owned Hawk Parent Holdings LLC and its wholly owned subsidiaries: Hawk Intermediate Holdings, LLC, Hawk Buyer Holdings, LLC, Repay Holdings, LLC, M&A Ventures, LLC, Repay Management Holdco Inc., Repay Management Services LLC, Sigma Acquisition, LLC, Wildcat Acquisition, LLC (“PaidSuite”), Marlin Acquirer, LLC (“Paymaxx”), REPAY International LLC, REPAY Canada Solutions ULC, TriSource Solutions (“TriSource”), LLC, Mesa Acquirer, LLC, CDT Technologies LTD, Viking GP Holdings, LLC, cPayPlus, LLC, CPS Payment Services, LLC, Media Payments, LLC, Custom Payment Systems, LLC, BT Intermediate, LLC, Electronic Payment Providers, LLC, Blue Cow Software, LLC, Hoot Payment Solutions, LLC, Internet Payment Exchange, LLC, Stratus Payment Solutions, LLC, Clear Payment Solutions, LLC, Harbor Acquisition LLC, and Payix Holdings Incorporated. All significant intercompany accounts and transactions have been eliminated in consolidation. 68 Basis of Financial Statement Presentation The accompanying consolidated financial statements of the Company were prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The Company uses the accrual basis of accounting whereby revenues are recognized when earned, usually upon the date services are rendered, and expenses are recognized at the date services are rendered or goods are received. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported consolidated statements of operations during the reporting period. Actual results could differ materially from those estimates. Segment Reporting Operating segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance for the organization. The Company’s chief decision maker is the Chief Executive Officer. The Company’s chief decision maker reviews consolidated operating results to make decisions about allocating resources and assessing performance for the entire Company. Accordingly, the Company has determined that it has one operating segment: Merchant services. There are no significant concentrations by state or geographical location, nor are there any significant individual client concentrations by balance. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, demand deposit accounts, and short‑term investments with original maturities of three months or less. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Restricted Cash Restricted cash consists of funds required to serve as security for services rendered by a service provider under a service provider agreement. Accounts Receivable Accounts receivable represent amounts due from clients and payment processors for services rendered. The Company has an established process for aging, provisioning and writing-off its uncollectible accounts receivable. Within this process the Company aggregates accounts receivable to the pools of receivables of similar risk characteristics. The allowance for credit losses on accounts receivables is estimated based on how long a receivable has been outstanding (e.g., under 30 days, 30–60 days, etc.). For accounts receivable outstanding more than 90 days, the Company evaluates and assesses whether the loss reserve percentage requires adjustment for reasonable and supportable forecast of relevant economic factors. As of December 31, 2021, the Company’s estimated credit losses on accounts receivable was immaterial. Concentration of Credit Risk The Company is highly diversified, and no single client represents greater than 10 % of the business on a volume or profit basis. Earnings per Share Basic earnings per share of Class A common stock is computed by dividing net loss attributable to the Company by the weighted average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net loss attributable to the Company, by the weighted average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive elements. The Predecessor’s LLC membership structure included several different types of LLC interests including ownership interests and profits interests. The Company analyzed the calculation of earnings per unit by using the two‑class method and determined that it resulted in values that would not be meaningful to the users of these consolidated financial statements. Therefore, the Predecessor’s earnings per share information has not been presented for any period. 69 Property and Equipment Property and equipment is carried at cost less accumulated depreciation and includes expenditures which substantially increase the useful lives of existing property and equipment. Maintenance, repairs, and minor renovations are charged to operations as incurred. When property and equipment is retired or otherwise disposed of, the related costs and accumulated depreciation are removed from their respective accounts, and any gain or loss on the disposition is credited or charged to operations. The Company provides for depreciation of property and equipment using the straight-line method designed to amortize costs over estimated useful lives as follows: Estimated Useful Life Furniture, fixtures, and office equipment 5 years Computers 3 years Leasehold improvements 5 years The Company evaluates the recoverability of property and equipment at least annually or whenever events or changes in circumstances indicate that the carrying amount of property and equipment may not be recoverable. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment, and actual results may differ from assumed and estimated amounts. If the carrying amount of property and equipment is determined not to be recoverable, a write-down to fair value is recorded. No impairments were recognized for the years ended December 31, 2021 and 2020. Intangible Assets Intangible assets consist of internal-use software development costs, purchased software, channel relationships, client relationships, certain key personnel non-compete agreements, and trade names. The Company capitalizes internal-use software development costs when the Company has completed the preliminary project stage, management authorizes the project, management commits to funding the project, it is probable the project will be completed and the project will be used to perform the function intended. The Company is amortizing internal-use software development costs and purchased software on the straight‑line method over a three-year estimated useful life, a ten-year estimated useful life for channel and client relationships, and an estimated useful life for non-compete agreements equal to the term of the agreement. Trade names are determined to have an indefinite useful life. The Company evaluates the recoverability of intangible assets at least annually or whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment, and actual results may differ from assumed and estimated amounts. During the year ended December 31, 2021, the Company recognized impairments of $ 2.2 million related to a trade names write-off, as the Company strategically phased out the trade names of several acquired business, which included TriSource, APS, Ventanex, cPayPlus and CPS. No indicators of impairment were identified for the year ended December 31, 2020. Goodwill Goodwill represents the excess of purchase price over tangible and intangible assets acquired less liabilities assumed arising from business combinations. Goodwill is generally allocated to reporting units based upon relative fair value (taking into consideration other factors such as synergies) when an acquired business is integrated into multiple reporting units. The Company’s reporting units are at the operating segment level or one level below the operating segment level for which discrete financial information is prepared and regularly reviewed by management. When a business within a reporting unit is disposed of, goodwill is allocated to the disposed business using the relative fair value method. Relative fair value is estimated using a discounted cash flow analysis. The Company performs a qualitative goodwill assessment at the reporting unit level at least annually, or more frequently as events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. Factors considered in the Company’s qualitative assessment include financial performance, financial forecasts, macroeconomic conditions, industry and market conditions, cost factors, market capitalization, carrying 70 value, and events affecting the reporting units. If, after considering all relevant events and circumstances, the Company determines it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then it is necessary to perform a quantitative impairment test. If the Company elects to bypass the qualitative analysis, or concludes from the Company’s qualitative analysis that it is more-likely - than-not that the fair value of a reporting unit is less than its carrying amount, a quantitative impairment test is performed by comparing the fair value of each reporting unit with its carrying amount. If the fair value is greater than the carrying amount, then the reporting unit’s goodwill is deemed not to be impaired. If the fair value is less than the carrying amount, an impairment loss is recognized for the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit. The Company determined that no impairment of goodwill existed as of the last testing date, December 31, 2021. Future impairment reviews may require write‑downs in the Company’s goodwill and could have a material adverse impact on the Company’s operating results for the periods in which such write‑downs occur. Revenue Repay provides integrated payment processing solutions to niche markets that have specific transaction processing needs; for example, personal loans, automotive loans, and receivables management. The Company contracts with its clients through contractual agreements that set forth the general terms and conditions of the service relationship, including rights of obligations of each party, line item pricing, payment terms and contract duration. Most of our revenues are derived from volume-based payment processing fees (“discount fees”) and other related fixed per transaction fees. Discount fees represent a percentage of the dollar amount of each credit or debit transaction processed and include fees relating to processing and services that we provide. As our clients process increased volumes of payments, our revenues increase as a result of the fees we charge for processing these payments. The Company’s performance obligation in its contracts with clients is the promise to stand-ready to provide front-end authorization and back-end settlement payment processing services ("processing services") for an unknown or unspecified quantity of transactions and the consideration received is contingent upon the client’s use (e.g., number of transactions submitted and processed) of the related processing services. Accordingly, the total transaction price is variable. These services are stand-ready obligations, as the timing and quantity of transactions to be processed is not determinable. Under a stand-ready obligation, the Company’s performance obligation is satisfied over time throughout the contract term rather than at a point in time. Because the service of standing ready to perform processing services is substantially the same each day and has the same pattern of transfer to the client, the Company has determined that its stand-ready performance obligation comprises a series of distinct days of service. Discount fees and other fixed per transaction fees are recognized each day using a time-elapsed output method based on the volume or transaction count at the time the clients’ transactions are processed. Revenues are also derived from transaction or service fees (e.g. chargebacks, gateway) as well as other miscellaneous service fees. These services are considered immaterial in the overall context of our contractual arrangements and, as such, do not represent distinct performance obligations. Instead, the fees associated with these services are bundled with the processing services performance obligation identified. The transaction price for such processing services is determined, based on the judgment of the Company’s management, considering factors such as margin objectives, pricing practices and controls, client segment pricing strategies, the product life cycle and the observable price of the service charged to similarly situated clients. The Company follows the requirements of ASC 606-10-55-36 through -40, Revenue from Contracts with Customers, Principal Agent Considerations , in determining the gross versus net revenue presentation for each performance obligation in the contract with a client. Revenue recorded by the Company in the capacity as a principal is reported on a gross basis equal to the full amount of consideration to which the Company expects in exchange for the good or service transferred. Revenue recorded with the Company acting in the capacity of an agent is reported on a net basis, exclusive of any consideration provided to the principal party in the transaction. The principal versus agent evaluation is matter of judgment that depends on the facts and circumstances of the arrangement and is dependent on whether the Company controls the good or service before it is transferred to the client or whether the Company is acting as an agent of a third party. This evaluation is performed separately for each performance obligation identified. When the Company acts as an agent, the fees collected from clients on behalf of the payment networks and card issuer is netted with the gross fees collected so that the net revenue is presented within Revenue in the Consolidated Statements of Operations. 71 Indirect relationships As a result of its past acquisitions, the Company has legacy relationships with Independent Sales Organizations (each an “ISO”), whereby the Company acts as the merchant acquirer for the ISO. The ISO maintains a direct relationship with the sponsor bank and the transaction processor, rather than the Company. Consequently, the Company recognizes revenue for these relationships net of the residual amount remitted to the ISO, based on the fact that the ISO is primarily responsible for providing the transaction processing services to the merchant. The Company is not focused on this sales model, and this relationship will represent an increasingly smaller portion of the business over time. Software Revenue As a result of the acquisition of BillingTree, the Company has acquired a software revenue stream. Software revenue is presented within Revenue in the Consolidated Statements of Operations. Software revenue consists of term license fees related to software products, and software maintenance and support (“PCS”). Clients typically enter into software contracts for contractual terms of three to twelve months. The term license and PCS are each distinct performance obligations. The total consideration in the contract is allocated based on management’s assessment of the relative standalone selling price for each performance obligation. The Company determines the standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price by making use of all reasonably available data such as market conditions, type of deliverable, information about the client, current and historical pricing practices and entity-specific factors such as labor hours and standard rates per labor hour. Revenue is recognized when the related performance obligations are satisfied. Revenue from the term license is recognized at a point in time, upon delivery to the client. Revenue from PCS is recognized over the term of the contract. When the Company receives an up-front deposit, the revenue is deferred until such a time that the term license or PCS is provided to the client. Deferred revenue is expected to be recognized as revenue within one year and is classified within Other current liabilities in the Consolidated Balance Sheets. Contract Costs The incremental costs of obtaining a contract are recognized as an asset if the cost is incremental to obtaining a contract, and whether the costs are recoverable from the client. If both criteria are not met, costs are expensed as incurred. If the amortization period of the capitalized commission cost asset is less than one year, the Company may elect a practical expedient per ASC 340-40-25-4 to expense commissions as incurred. The amortization period is consistent with the concept of useful life under other accounting guidance, which is defined as the period over which an asset is expected to contribute directly or indirectly to future cash flows. The Company currently incurs costs to obtain a contract through payments made to external referral partners. Commission payments are made to the external referral partner on a monthly basis based on a percentage of the profit on the contract, for as long as the client and the external referral partner have agreements with the Company. Any capitalized commission cost assets have an amortization period of one year or less, therefore the Company utilizes the practical expedient to expense commissions as incurred. Costs to fulfill contracts with clients either give rise to an asset or are expensed as incurred. If the cost is not already covered by other applicable accounting literature, fulfilment costs are capitalized to the extent they directly relate to a specific contract, are used to generate or enhance resources used in satisfying performance obligations and are expected to be recovered. The Company does not have any costs incurred to fulfill a contract. Practical Expedients The Company has utilized the portfolio approach practical expedient per ASC 606-10-10-4, which allows the application of ASC 606 to a portfolio of contracts with similar characteristics provided the accounting does not differ materially to application of ASC 606 to the individual contract. The Company has also utilized the practical expedient for immaterial goods and services per ASC 606-10-25-16A, which permits the Company not to recognize a promised good or service as a performance obligation if it is considered an immaterial promise in the context of the contract. 72 Transaction Costs The Company expenses all transactions costs associated with a business combination as incurred and such expenses are included in Selling, general, and administrative expenses in the Consolidated Statements of Operations. For the years ended December 31, 2021 and 2020, the Company incurred $ 9.3 million and $ 4.2 million transaction costs, respectively. For the period from July 11, 2019 to December 31, 2019, the Successor incurred $ 3.9 million of transaction costs for closed and pending transactions. The Predecessor incurred transaction costs of $ 16.2 million for the period from January 1, 2019 to July 10, 2019. Equity Units Awarded The Repay Holdings Corporation 2019 Omnibus Incentive Plan (the “Incentive Plan”) provides for the grant of various equity-based incentive awards to employees, directors, consultants and advisors to the Company. The types of equity-based awards that may be granted under the Incentive Plan include: stock options, stock appreciation rights (“SARs”), performance stock units (“PSUs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and other stock-based awards. As of December 31, 2021, there were 7,326,728 shares of Class A common stock reserved for issuance under the Incentive Plan. The Company accounts for stock-based compensation for employees and directors in accordance with ASC 718, Compensation (“ASC 718”). ASC 718 requires all share-based payments to employees to be recognized in the statement of operations based on their fair values. Under the provisions of ASC 718, stock-based compensation costs are measured at the grant date, based on the fair value of the award, and are recognized as expense over the employee’s requisite or derived service period. The Predecessor accounted for profit units awarded to management based on the fair value of the awards on the date of the grant and recognized compensation expense for those awards over the requisite service period. The profit interests granted under the profit unit plan of the Predecessor were estimated on the grant date using the Black‑Scholes option valuation model. The profits units were fully vested as of the Closing. PSUs, RSAs and RSUs granted under the Incentive Plan are measured based on the fair value of the awards on the date of the grant. Compensation expense is recognized for those awards over the requisite service period. Forfeitures are accounted for as they occur. Debt Issuance Costs The Company accounts for debt issuance costs according to the Financial Accounting Standards Board Accounting Standards Update 2015-03, Simplifying the Presentation of Debt Issuance Costs , to present debt issuance costs as a reduction of the carrying amount of the debt. Fair Value of Financial Instruments The Company accounts for fair value measurements in accordance with ASC 820, Fair Value Measurements and Disclosures , which defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or the price paid to transfer a liability as of the measurement date. A three-tier, fair-value reporting hierarchy exists for disclosure of fair value measurements based on the observability of the inputs to the valuation of financial assets and liabilities. The three levels are: • Level 1 — Quoted prices for identical instruments in active markets. • Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. • Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active exchange markets. The carrying value of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximated their fair values as of December 31, 2021, and 2020, because of the relatively short maturity dates on these instruments. The carrying amount of debt approximates fair value as of December 31, 2021 and 2020, because interest rates on these instruments approximate market interest rates. 73 Leases The Company adopted ASC 842, Leases, using a modified retrospective transition approach as of January 1, 2020 . The Company has elected to adopt the package of transition practical expedients and, therefore, 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 also elected the practical expedient to use hindsight for leases existing as of January 1, 2020. The Company evaluates each of its lease and service arrangements at inception to determine if the arrangement is, or contains, a lease and the appropriate classification of each identified lease. A lease exists if the Company obtains substantially all of the economic benefits of, and has the right to control the use of, an asset for a period of time. The Company has operating leases for real estate. Operating leases with an original lease term in excess of twelve months are included in Other assets and Other liabilities in the Consolidated Balance Sheets. Right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate to calculate the present value of lease payments. Lease terms consider options to extend or terminate based on the determination of whether such renewal or termination options are deemed reasonably certain. Lease agreements that contain non-lease components are generally accounted for as a single lease component. Operating lease costs are recorded in Selling, general and administrative in the Consolidated Statements of Operations based on the underlying asset. Variable costs, such as maintenance expenses, property and sales taxes, association dues and index-based rate increases, are expensed as they are incurred. Variable lease payments associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are presented as operating expenses in Selling, general and administrative in the Consolidated Statements of Operations. The Company has elected not to recognize ROU assets and lease liabilities for short-term leases of all applicable class of underlying assets that have a lease term of twelve months or less. The Company recognizes the lease payments associated with its short-term leases as an expense on a straight-line basis over the lease term. Variable lease payments associated with these leases are recognized and presented in the same manner as for all other Company leases. ROU assets for operating leases are periodically reduced by impairment losses. As of December 31, 2021, the Company has not encountered any impairment losses. The Company monitors for events or changes in circumstances that require a reassessment of a lease. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in gain or loss in the Consolidated Statements of Operations. Taxation Income taxes are provided for in accordance with ASC 740. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to net operating losses, tax credits, and temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period of the enactment date. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. The Company reports a liability or a reduction of deferred tax assets for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. When applicable, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. Noncontrolling Interest As of December 31, 2021, the Company held an 91.9 % interest in Hawk Parent. F or the year ended December 31, 2021, the noncontrolling interest in the net loss of subsidiaries was $ 6.0 million. As of December 31, 2020, the Company held an 89.8 % interest in Hawk Parent. For the year ended December 31, 2020, the noncontrolling interest in the net loss of subsidiaries was $ 11.8 million. As of July 11, 2019, the Company held a 55.9 % interest in Hawk Parent. For the period from July 11, 2019 to December 31, 2019, the noncontrolling interest in the net loss of subsidiaries was $ 15.3 million. 74 Contingent Consideration The Company estimates and records the acquisition date estimated fair value of contingent consideration as part of purchase price consideration for acquisitions. Additionally, each reporting period, the Company estimates changes in the fair value of contingent consideration, and any change in fair value is recognized in the Consolidated Statements of Operations. An increase in the contingent consideration expected to be paid will result in a charge to operations in the period that the anticipated fair value of contingent consideration increases, while a decrease in the earn-out expected to be paid will result in a credit to operations in the period that the anticipated fair value of contingent consideration decreases. The estimate of the fair value of contingent consideration requires subjective assumptions to be made of future operating results, discount rates, and probabilities assigned to various potential operating result scenarios. Recently Adopted Accounting Pronouncements Accounting for Income Taxes In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . ASU 2019-12 simplifies the accounting for income taxes, eliminates certain exceptions within Income Taxes (Topic 740) , and clarifies certain aspects of the current guidance to promote consistency among reporting entities, and is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. Most amendments within ASU 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company adopted ASU 2019-12 as of January 1, 2021, using a modified retrospective transition approach. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements or related disclosures. Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity, which made targeted improvements to an issuer’s accounting for convertible instruments under ASC Topic No. 470 Debt , and the derivative scope exception for contracts in an entity’s own equity under ASC Topic No. 815 Derivatives and Hedging . Specifically, ASU 2020-06 reduces the number of accounting models that exist under GAAP as well as the number of settlement conditions which will likely result in more convertible instruments being accounted for as a single unit of account, a reduction in the amount of interest expense recognized for convertible debt, and more embedded derivatives meeting the derivative scope exception. In addition, ASU 2020-06 amends ASC Topic No. 260 Earnings Per Share , which will result in more dilutive earnings per share results. ASU 2020-06 is effective for public companies beginning January 1, 2022, including interim periods within the fiscal years after the adoption date. Early adoption is also permitted beginning January 1, 2021, including interim periods within those fiscal years. The Company early adopted ASU 2020-06 as of January 1, 2021. The Company issued the 2026 Notes in January 2021, which resulted in recognition of $ 440.0 million in noncurrent long-term debt and $ 11.4 million in debt issuance costs. In determining the impact of the 2026 Notes on the Company’s diluted earnings per share calculations, the Company applies the if-converted method. For additional information and required disclosures related to 2026 Notes, see Note 10. Borrowings. Recently Issued Accounting Pronouncements not yet Adopted Business Combinations In August 2021, the FASB issued ASU No. 2021-08, “ Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU No. 2021-08”). ASU No. 2021-18 requires an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Revenue (Topic 606) , and is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. Amendments within ASU No. 2021-08 are required to be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company is currently in the process of evaluating the effects of ASU No. 2021-08 on its consolidated financial statements. 75 3. Revenue Disaggregation of Revenue The table below presents a disaggregation of revenue by direct and indirect relationships. Year Ended December 31, 2021 Year Ended December 31, 2020 From July 11, 2019 to December 31, 2019 From January 1, 2019 to July 10, 2019 (Successor) (Predecessor) Revenue Direct relationships $ 213,251,782 $ 152,247,190 $ 56,370,030 $ 45,693,961 Indirect relationships 6,006,256 2,788,753 1,190,440 1,348,956 Total Revenue $ 219,258,038 $ 155,035,943 $ 57,560,470 $ 47,042,917 4 . Earnings Per Share During the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, basic and diluted net loss per common share is the same since the inclusion of the assumed exchange of all Post-Merger Repay Units, unvested restricted share awards, Warrants and 2026 Notes would have been anti-dilutive. The following table summarizes net loss attributable to the Company and the weighted average basic and basic and diluted shares outstanding: Year Ended December 31, 2021 Year Ended December 31, 2020 From July 11, 2019 to December 31, 2019 Loss before income tax expense $( 86,727,719 ) $( 129,724,270 ) $( 51,810,162 ) Less: Net loss attributable to non-controlling interests ( 5,952,390 ) ( 11,769,683 ) ( 15,271,043 ) Income tax benefit 30,691,156 12,358,025 4,990,989 Net loss attributable to the Company $( 50,084,173 ) $( 105,596,562 ) $( 31,548,130 ) Weighted average shares of Class A common stock outstanding - basic and diluted 83,318,189 52,180,911 35,731,220 Loss per share of Class A common stock outstanding - basic and diluted $( 0.60 ) $( 2.02 ) $( 0.88 ) For the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, the following common stock equivalent shares were excluded from the computation of the diluted loss per share, since their inclusion would have been anti-dilutive: Year Ended December 31, 2021 Year Ended December 31, 2020 From July 11, 2019 to December 31, 2019 Post-Merger Repay Units exchangeable for Class A common stock 7,926,576 8,334,160 21,985,297 Earnout Post-Merger Repay Units exchangeable for Class A common stock — — 7,500,000 Dilutive warrants exercisable for Class A common stock — — 1,816,890 Unvested restricted share awards of Class A common stock 2,515,634 2,209,551 1,731,560 2026 Notes convertible for Class A common stock 13,095,238 — — Share equivalents excluded from earnings (loss) per share 23,537,448 10,543,711 33,033,747 76 Shares of the Company’s Class V common stock do not participate in the earnings or losses of the Company and, therefore, are not participating securities. As such, separate presentation of basic and diluted earnings per share of Class V common stock under the two-class method has not been presented. 5. Business Combinations Hawk Parent Holdings LLC Thunder Bridge and Hawk Parent entered into the Merger Agreement effective as of January 21, 2019 and announced consummation of the transactions contemplated by the Merger Agreement on July 11, 2019. Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the closing of the Business Combination, (a) Thunder Bridge effected the domestication to become a Delaware corporation and (b) a wholly-owned subsidiary of Thunder Bridge merged with and into Hawk Parent, with Hawk Parent continuing as the surviving entity and becoming a subsidiary of the Company (with Thunder Bridge receiving membership interests in Hawk Parent as the surviving entity and becoming the managing member of the surviving entity). At the effective time of the Business Combination, Thunder Bridge changed its corporate name to “Repay Holdings Corporation” and all outstanding securities of Hawk Parent converted into the right to receive the consideration specified in the Merger Agreement. Each member of Hawk Parent received in exchange for their limited liability interests (i) one share of Class V common stock of the Company and (ii) a pro rata share of (A) non-voting limited liability units of Hawk Parent as the surviving entity, referred to as Post-Merger Repay Units, (B) certain cash consideration, and (C) the contingent right to receive certain additional Post-Merger Repay Units issued as an earn-out under the Merger Agreement after the closing of the Business Combination (“Earnout Units”). Shares of Class A common stock of the Company will provide the holder with voting and economic rights with respect to the Company as a holder of common stock. Each share of Class V common stock of the Company entitles the holder to vote as a stockholder of the Company, with the number of votes equal to the number of Post-Merger Repay Units held by the holder but provides no economic rights to the holder. At any time after the six month anniversary of the closing of the Business Combination, pursuant to the terms of the Exchange Agreement, each holder of a Post-Merger Repay Unit will be entitled to exchange such unit for one share of Class A common stock of the Company. The amount of cash consideration paid to selling Hawk Parent members at the closing of the Business Combination was equal to the following: (i) the total cash and cash equivalents of Thunder Bridge (including funds in its trust account after the redemption of its public stockholders and the proceeds of any debt or equity financing), minus (ii) the amount of Thunder Bridge’s unpaid expenses and obligations, plus (iii) the cash and cash equivalents of Hawk Parent as of immediately prior to the effective time of the Business Combination (excluding restricted cash), minus (iv) the amount of unpaid transaction expenses of Hawk Parent as of the closing of the Business Combination, minus (v) the amount of the indebtedness and other debt-like items of Hawk Parent and its subsidiaries as of the closing of the Business Combination, minus (vi) the amount of change of control and similar payments payable to employees of Hawk Parent in connection with the Business Combination, minus (vii) an amount of cash reserves equal to $ 10,000,000 , minus (viii) a cash escrow of $ 150,000 , minus (ix) an amount equal to $ 2,000,000 to be held by a representative of the selling Hawk Parent members, minus (x) the cash payment required in connection with the Warrant Amendment, minus (xi) an amount required to be deposited on the balance sheet of Hawk Parent in connection with the Business Combination. Pursuant to a Tax Receivable Agreement (“Tax Receivable Agreement” or “TRA”) between the Company and the selling Hawk Parent members, the Company will pay to exchanging holders of Post-Merger Repay Units 100 % of the tax savings that the Company realizes as a result of increases in tax basis in the Company’s assets as a result of the exchange of the Post-Merger Repay Units for shares of Class A common stock pursuant to the Exchange Agreement between the Company and the Class A unit holders of Hawk Parent Holdings LLC, excluding the Company, dated as of July 11, 2019, and certain other tax attributes of Repay and tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA. Hawk Parent constitutes a business, with inputs, processes, and outputs. Accordingly, the Business Combination constitutes the acquisition of a business for purposes of ASC 805 and, due to the changes in control from the Business Combination, is accounted for using the acquisition method. Under the acquisition method, the acquisition date fair value of the gross consideration paid by Thunder Bridge to close the Business Combination was allocated to the assets acquired and the liabilities assumed based on their estimated fair values. 77 The following summarizes the purchase consideration paid to the selling members of Hawk Parent: Cash Consideration $ 260,811,062 Unit Consideration (1) 220,452,964 Contingent consideration (2) 12,300,000 Tax receivable agreement liability (3) 65,537,761 Net working capital adjustment ( 396,737 ) Total purchase price $ 558,705,050 (1) The Company issued 22,045,297 shares of Post-Merger Repay Units valued at $ 10.00 per share as of July 11, 2019. (2) Reflects the fair value of Earnout Units, the contingent consideration paid to the selling members of Hawk Parent, pursuant to the Merger Agreement. The Company reflected this as noncontrolling interests on its balance sheet. The Repay Unitholders received 7,500,000 Earnout Units based on the stock price of the Company. (3) Represents liability with an estimated fair value of $ 65.5 million as a result of the TRA. If all the Post-Merger Repay Units are ultimately exchanged, the liability will significantly increase based on a variety of factors present at the time of exchange including, but not limited to, the market price at the time of the exchange. I f the Company were to elect to terminate the Tax Receivable Agreement early, the Company would be required to make an immediate cash payment equal to the present value of the anticipated future tax benefits that are the subject of the Tax Receivable Agreement, which payment may be made significantly in advance of the actual realization, if any, of such future tax benefits. The Company recorded an allocation of the purchase price to Hawk Parent’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the July 11, 2019 closing date. The final purchase price allocation is as follows: Cash and cash equivalents $ 11,281,078 Accounts receivable 10,593,867 Prepaid expenses and other current assets 890,745 Total current assets 22,765,690 Property, plant and equipment, net 1,167,872 Restricted cash 6,930,434 Identifiable intangible assets 301,000,000 Total identifiable assets acquired 331,863,996 Accounts payable ( 4,206,413 ) Accrued expenses ( 8,831,363 ) Accrued employee payments ( 6,501,123 ) Other liabilities ( 16,864 ) Repay debt assumed ( 93,514,583 ) Net identifiable assets acquired 218,793,650 Goodwill 339,911,400 Total purchase price $ 558,705,050 The values allocated to identifiable intangible assets and their estimated useful lives are as follows: Fair Value Useful life Identifiable intangible assets (in millions) (in years) Non-compete agreements $ 3.0 2 Trade names 20.0 Indefinite Developed technology 65.0 3 Merchant relationships 210.0 10 Channel relationships 3.0 10 $ 301.0 Goodwill recognized of $ 339.9 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, of which $ 279.2 million is expected to be deductible for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. 78 TriSource On August 13, 2019, the Company acquired all of the ownership interests of TriSource. Under the terms of the securities purchase agreement, between Repay Holdings, LLC and the direct and indirect owners of TriSource, as of August 13, 2019, the aggregate consideration paid at closing by Repay was approximately $ 60.2 million in cash. In addition to the closing consideration, the TriSource purchase agreement contains a performance based earnout based on future results of the acquired business, which could result in an additional payment to the former owners of TriSource of up to $ 5.0 million. The TriSource acquisition was financed with a combination of cash on hand and committed borrowing capacity under the Company’s existing credit facility. The TriSource purchase agreement contains customary representations, warranties and covenants by the Company and the former owners of TriSource, as well as a customary post-closing adjustment provision relating to working capital and similar items. The following summarizes the purchase consideration paid to the selling members of TriSource: Cash Consideration $ 60,235,090 Contingent consideration (1) 2,250,000 Total purchase price $ 62,485,090 (1) Reflects the fair value of TriSource earnout payment, the contingent consideration to be paid to the selling members of TriSource, pursuant to the TriSource purchase agreement. The selling members of TriSource had the contingent earnout right to receive a payment of up to $ 5.0 million dependent upon the Gross Profit, as defined in the TriSource purchase agreement, for the period commencing on July 1, 2019 and ending on June 30, 2020. In October 2020, the Company paid the TriSource earnout payment of $ 4.0 million. The Company recorded an allocation of the purchase price to TriSource’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the August 13, 2019 closing date. The final purchase price allocation is as follows: Cash and cash equivalents $ 383,236 Accounts receivable 2,290,441 Prepaid expenses and other current assets 95,763 Total current assets 2,769,440 Property, plant and equipment, net 215,739 Restricted cash 509,019 Identifiable intangible assets 30,500,000 Total identifiable assets acquired 33,994,198 Accounts payable ( 1,621,252 ) Accrued expenses ( 756,117 ) Net identifiable assets acquired 31,616,829 Goodwill 30,868,261 Total purchase price $ 62,485,090 The values allocated to identifiable intangible assets and their estimated useful lives are as follows: Fair Value Useful life Identifiable intangible assets (in millions) (in years) Non-compete agreements $ 0.4 5 Trade names 0.7 Indefinite Developed technology 3.9 3 Merchant relationships 25.5 10 $ 30.5 Goodwill recognized of $ 30.9 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, of which $ 32.2 million is expected to be deductible for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of TriSource. 79 APS On October 14, 2019, the Company acquired substantially all of the assets of APS for $ 30.5 million in cash. In addition to the cash consideration, the APS selling equity holders may be entitled to a total of $ 30.0 million in three separate cash earnout payments, dependent on the achievement of certain growth targets. The following summarizes the purchase consideration paid to the selling members of APS: Cash consideration $ 30,465,454 Contingent consideration (1) 18,580,549 Total purchase price $ 49,046,003 (1) Reflects the fair value of APS earnout payment, the contingent consideration to be paid to the selling members of APS, pursuant to the APS purchase agreement. On April 6, 2020, the Company paid the first APS earnout payment of $ 14.3 million. As of December 31, 2020, the remaining APS earnout was adjusted to $ 0 , net of the first payment, which resulted in a $ 4.3 million adjustment included in the change in fair value of contingent consideration in the Consolidated Statements of Operations for the year ended December 31, 2020. The Company recorded an allocation of the purchase price to APS’ tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the October 11, 2019 closing date. The final purchase price allocation is as follows: Cash and cash equivalents $ — Accounts receivable 1,963,177 Prepaid expenses and other current assets 67,158 Total current assets 2,030,335 Property, plant and equipment, net 159,553 Restricted cash 549,978 Identifiable intangible assets 21,500,000 Total identifiable assets acquired 24,239,866 Accounts payable ( 1,101,706 ) Accrued expenses ( 19,018 ) Net identifiable assets acquired 23,119,142 Goodwill 25,926,861 Total purchase price $ 49,046,003 The values allocated to identifiable intangible assets and their estimated useful lives are as follows: Fair Value Useful life Identifiable intangible assets (in millions) (in years) Non-compete agreements $ 0.5 5 Trade names 0.5 Indefinite Merchant relationships 20.5 9 21.5 Goodwill recognized of $ 25.9 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, of which $ 21.7 million is expected to be deductible for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of APS. 80 Ventanex On February 10, 2020, the Company acquired all of the ownership interests of Ventanex. Under the terms of the securities purchase agreement between Repay Holdings, LLC and the direct and indirect owners of CDT Technologies, LTD. (“Ventanex Purchase Agreement”), the aggregate consideration paid at closing by the Company was approximately $ 36 .0 million in cash. In addition to the closing consideration, the Ventanex Purchase Agreement contains a performance-based earnout (the “Ventanex Earnout Payment”), which was based on future results of the acquired business and could result in an additional payment to the former owners of Ventanex of up to $ 14.0 million. The Ventanex acquisition was financed with a combination of cash on hand and committed borrowing capacity under the Company’s existing credit facility. The Ventanex Purchase Agreement contains customary representations, warranties and covenants by Repay and the former owners of Ventanex, as well as a customary post-closing adjustment provision relating to working capital and similar items. The following summarizes the purchase consideration paid to the selling members of Ventanex: Cash consideration $ 35,939,129 Contingent consideration (1) 4,800,000 Total purchase price $ 40,739,129 (1) Reflects the fair value of the Ventanex Earnout Payment, the contingent consideration to be paid to the selling members of Ventanex, pursuant to the Ventanex Purchase Agreement as of February 10, 2020. The selling partners of Ventanex will have the contingent earnout right to receive a payment of up to $ 14.0 million dependent upon the Gross Profit, as defined in the Ventanex Purchase Agreement, for the years ended December 31, 2020 and 2021. In February 2021, the Company paid the sellers of Ventanex $ 0.9 million, pursuant to the terms of the Ventanex Purchase Agreement. As of December 31, 2021, the fair value of Ventanex earnout was $ 12.7 million, which resulted in a $ 7.9 million adjustment included in the change in fair value of contingent consideration in the Consolidated Statements of Operations for the year ended December 31, 2021. The Company recorded an allocation of the purchase price to Ventanex’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the February 10, 2020 closing date. The purchase price allocation is as follows: Cash and cash equivalents $ 50,663 Accounts receivable 1,376,539 Prepaid expenses and other current assets 180,514 Total current assets 1,607,716 Property, plant and equipment, net 137,833 Restricted cash 428,313 Identifiable intangible assets 26,890,000 Total identifiable assets acquired 29,063,862 Accounts payable ( 152,035 ) Accrued expenses ( 373,159 ) Net identifiable assets acquired 28,538,668 Goodwill 12,200,461 Total purchase price $ 40,739,129 The values allocated to identifiable intangible assets and their estimated useful lives are as follows: Fair Value Useful life Identifiable intangible assets (in millions) (in years) Non-compete agreements $ 0.1 5 Trade names 0.4 Indefinite Developed technology 4.1 3 Merchant relationships 22.3 10 $ 26.9 Goodwill recognized of $ 12.2 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, of which $ 8.3 million is expected to be deductible 81 for tax purposes . Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of Ventanex. cPayPlus On July 23, 2020, the Company acquired all of the ownership interests of cPayPlus. Under the terms of the securities purchase agreement between Repay Holdings, LLC and the direct and indirect owners of cPayPlus (“cPayPlus Purchase Agreement”), the aggregate consideration paid at closing by the Company was approximately $ 8.0 million in cash. In addition to the closing consideration, the cPayPlus Purchase Agreement contains a performance-based earnout (the “cPayPlus Earnout Payment”), which was based on future results of the acquired business and could result in an additional payment to the former owners of cPayPlus of up to $ 8.0 million. The cPayPlus acquisition was financed with cash on hand. The cPayPlus Purchase Agreement contains customary representations, warranties and covenants by Repay and the former owners of cPayPlus, as well as a customary post-closing adjustment provision relating to working capital and similar items. The following summarizes the purchase consideration paid to the selling members of cPayPlus: Cash consideration $ 7,956,963 Contingent consideration (1) 6,500,000 Total purchase price $ 14,456,963 (1) Reflects the fair value of the cPayPlus Earnout Payment, the contingent consideration to be paid to the selling members of cPayPlus, pursuant to the cPayPlus Purchase Agreement as of July 23, 2020. The selling partners of cPayPlus will have the contingent earnout right to receive a payment of up to $ 8.0 million dependent upon the Gross Profit, as defined in the cPayPlus Purchase Agreement, in the third quarter of 2021. On September 17, 2021, the Company paid the cPayPlus Earnout Payment of $ 8.0 million. The Company recorded an allocation of the purchase price to cPayPlus’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the July 23, 2020 closing date. The purchase price allocation is as follows: Cash and cash equivalents $ 262,331 Accounts receivable 164,789 Prepaid expenses and other current assets 37,660 Total current assets 464,780 Property, plant and equipment, net 20,976 Identifiable intangible assets 7,720,000 Total identifiable assets acquired 8,205,756 Accounts payable ( 99,046 ) Accrued expenses ( 363,393 ) Net identifiable assets acquired 7,743,317 Goodwill 6,713,646 Total purchase price $ 14,456,963 The values allocated to identifiable intangible assets and their estimated useful lives are as follows: Fair Value Useful life Identifiable intangible assets (in millions) (in years) Non-compete agreements $ 0.1 5 Trade names 0.1 Indefinite Developed technology 6.7 3 Merchant relationships 0.8 10 $ 7.7 Goodwill recognized of $ 6.7 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, of which $ 8.2 million is expected to be deductible for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not 82 recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of cPayPlus. CPS On November 2, 2020, the Company acquired all of the ownership interests of CPS. Under the terms of the securities purchase agreement between Repay Holdings, LLC and the direct and indirect owners of CPS. (“CPS Purchase Agreement”), the aggregate consideration paid at closing by the Company was approximately $ 83.9 million in cash. In addition to the closing consideration, the CPS Purchase Agreement contains a performance-based earnout (the “CPS Earnout Payment”), which was based on future results of the acquired business and could result in an additional payment to the former owners of CPS of up to $ 15.0 million in two separate earnouts. The CPS acquisition was financed with cash on hand. The CPS Purchase Agreement contains customary representations, warranties and covenants by Repay and the former owners of CPS, as well as a customary post-closing adjustment provision relating to working capital and similar items. The following summarizes the purchase consideration paid to the selling members of CPS: Cash consideration $ 83,886,556 Contingent consideration (1) 4,500,000 Total purchase price $ 88,386,556 (1) Reflects the fair value of the CPS Earnout Payment, the contingent consideration to be paid to the selling members of CPS, pursuant to the CPS Purchase Agreement as of November 2, 2020. The selling partners of CPS will have the contingent earnout right to receive a payment of up to $ 15.0 million in two separate earnouts, dependent upon the Gross Profit, as defined in the CPS Purchase Agreement. As of December 31, 2021, the fair value of the CPS earnout was $ 0.6 million, which resulted in a ($ 3.9 ) million adjustment included in the change in fair value of contingent consideration in the Consolidated Statements of Operations for the year ended December 31, 2021. The Company recorded an allocation of the purchase price to CPS’ and MPI’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the November 2, 2020 closing date. The purchase price allocation is as follows: CPS MPI Cash and cash equivalents $ 1,667,066 $ 2,097,921 Accounts receivable 2,810,158 5,556,958 Prepaid expenses and other current assets 2,615,615 934,751 Total current assets 7,092,839 8,589,630 Property, plant and equipment, net 19,391 2,995 Restricted cash 407 35,318 Identifiable intangible assets 30,830,000 7,110,000 Total identifiable assets acquired 37,942,637 15,737,943 Accounts payable ( 2,004,371 ) ( 4,495,599 ) Accrued expenses ( 2,143,680 ) — Net identifiable assets acquired 33,794,586 11,242,344 Goodwill 40,747,939 2,601,687 Total purchase price $ 74,542,525 $ 13,844,031 The values allocated to identifiable intangible assets and their estimated useful lives are as follows: Fair Value (in millions) Useful life Identifiable intangible assets CPS MPI (in years) Non-compete agreements $ 0.1 $ 0.1 4 Trade names 0.5 0.1 Indefinite Developed technology 7.2 0.7 3 Merchant relationships 23.0 6.3 10 $ 30.8 $7.2 83 Goodwill recognized of $ 43.3 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, of which $ 38.8 million is expected to be deductible for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of CPS. BillingTree On June 15, 2021, the Company acquired BillingTree. Under the terms of the agreement and plan of merger between BT Intermediate, LLC, the Company, two newly formed subsidiaries of the Company and the owner of BT Intermediate, LLC (“BillingTree Merger Agreement”), the aggregate consideration paid at closing by the Company was approximately $ 505.8 million, consisting of approximately $ 277.5 million in cash and approximately 10 million shares of Class A common stock. The BillingTree Merger Agreement contains customary representations, warranties and covenants by Repay and the former owner of BillingTree, as well as a customary post-closing adjustment provision relating to working capital and similar items. The following summarizes the preliminary purchase consideration paid to the seller of BillingTree: Cash consideration $ 277,521,139 Class A common stock issued 228,250,000 Total purchase price $ 505,771,139 The Company recorded a preliminary allocation of the purchase price to BillingTree’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the June 15, 2021 closing date. The preliminary purchase price allocation is as follows: Cash and cash equivalents $ 8,243,570 Accounts receivable 3,623,894 Prepaid expenses and other current assets 1,601,854 Total current assets 13,469,318 Property, plant and equipment, net 541,244 Restricted cash 274,954 Other assets 1,782,489 Identifiable intangible assets 236,810,000 Total identifiable assets acquired 252,878,005 Accounts payable ( 2,552,251 ) Accrued expenses and other liabilities ( 6,982,919 ) Deferred tax liability ( 31,371,590 ) Net identifiable assets acquired 211,971,245 Goodwill 293,799,895 Total purchase price $ 505,771,140 The preliminary values allocated to identifiable intangible assets and their estimated useful lives are as follows: Fair Value Useful life Identifiable intangible assets (in millions) (in years) Non-compete agreements $ 0.3 2 Trade names 7.8 Indefinite Developed technology 26.2 3 Merchant relationships 202.5 10 $ 236.8 Goodwill recognized of $ 293.8 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, of which $ 47.7 million is expected to be deductible for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets 84 that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of BillingTree. BillingTree contributed $ 31.3 million to revenue and $( 0.0 ) million in net income to the Company’s Consolidated Statements of Operations, from June 15, 2021 through December 31, 2021. Kontrol On June 22, 2021, the Company acquired substantially all of the assets of Kontrol LLC (“Kontrol”). Under the terms of the asset purchase agreement between a newly formed subsidiary of Repay Holdings, LLC and the owner of Kontrol (“Kontrol Purchase Agreement”), the aggregate consideration to be paid by the Company was up to $ 10.5 million, of which $ 7.4 million was paid at closing. The Kontrol Purchase Agreement contains customary representations, warranties and covenants by Repay and the former owner of Kontrol, as well as a customary post-closing adjustment provision relating to working capital and similar items. The following summarizes the preliminary purchase consideration paid to the owner of Kontrol: Cash consideration $ 7,439,373 Contingent consideration (1) 500,000 Total purchase price $ 7,939,373 (1) Reflects the fair value of the Kontrol earnout payment, the contingent consideration to be paid to the selling members of Kontrol, pursuant to the Kontrol Purchase Agreement as of June 22, 2021. The selling partners of Kontrol will have the contingent earnout right to receive a payment of up to $ 3.0 million, dependent upon the Gross Profit, as defined in the Kontrol Purchase Agreement. As of December 31, 2021, the fair value of the Kontrol earnout was $ 0.9 million, which resulted in a $ 0.4 million adjustment included in the change in fair value of contingent consideration in the Consolidated Statements of Operations for the year ended December 31, 2021. The Company recorded a preliminary allocation of the purchase price to Kontrol’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the June 22, 2021 closing date. The preliminary purchase price allocation is as follows: Accounts receivable $ 67,510 Prepaid expenses and other current assets 5,572 Total current assets 73,082 Identifiable intangible assets 6,940,000 Total identifiable assets acquired 7,013,082 Accounts payable ( 664,932 ) Net identifiable assets acquired 6,348,150 Goodwill 1,591,223 Total purchase price $ 7,939,373 The preliminary values allocated to identifiable intangible assets and their estimated useful lives are as follows: Fair Value Useful life Identifiable intangible assets (in millions) (in years) Trade names $ 0.0 Indefinite Merchant relationships 6.9 8 $ 6.9 Goodwill of $ 1.6 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, of which $ 1.1 million on a gross basis is expected to be deductible for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of Kontrol. Kontrol contributed $ 1.7 million to revenue and $ 0.6 million in net income to the Company’s Consolidated Statements of Operations, from June 22, 2021 through December 31, 2021. 85 Payix On December 29, 2021, the Company acquired Payix. Under the terms of the merger agreement with Payix. (“Payix Purchase Agreement”), the aggregate consideration paid at closing by the Company was approximately $ 95.6 million in cash. In addition to the closing consideration, the Payix Purchase Agreement contains a performance-based earnout (the “Payix Earnout Payment”), which was based on future results of the acquired business and could result in an additional payment to the former owners of Payix of up to $ 20.0 million. The Payix acquisition was financed with cash on hand and available revolver capacity. The Payix Purchase Agreement contains customary representations, warranties and covenants by Repay and the former owners of Payix, as well as a customary post-closing adjustment provision relating to working capital and similar items. The following summarizes the preliminary purchase consideration paid to the sellers of Payix: Cash consideration $ 95,627,972 Contingent consideration (1) 2,850,000 Total purchase price $ 98,477,972 (1) Reflects the fair value of the Payix earnout payment, the contingent consideration to be paid to the former owners of Payix, pursuant to the Payix Purchase Agreement as of December 31, 2021. The former owners of Payix will have the contingent earnout right to receive a payment of up to $ 20.0 million, dependent upon the Gross Profit, as defined in the Payix Purchase Agreement. As of December 31, 2021, the fair value of the Payix earnout was $ 2.9 million. The Company recorded a preliminary allocation of the purchase price to Payix’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the December 29, 2021 closing date. The preliminary purchase price allocation is as follows: Cash and cash equivalents $ 702,575 Accounts receivable 1,715,292 Prepaid expenses and other current assets 93,891 Total current assets 2,511,758 Property, plant and equipment, net 83,449 Restricted cash 27,177 Other assets 655,588 Identifiable intangible assets 33,150,000 Total identifiable assets acquired 36,427,972 Accounts payable ( 214,195 ) Accrued expenses and other liabilities ( 2,022,846 ) Deferred tax liability ( 6,943,998 ) Net identifiable assets acquired 27,246,933 Goodwill 71,231,039 Total purchase price $ 98,477,972 The preliminary values allocated to identifiable intangible assets and their estimated useful lives are as follows: Fair Value Useful life Identifiable intangible assets (in millions) (in years) Trade names $ 0.3 Indefinite Developed technology 12.4 3 Merchant relationships 20.5 10 $ 33.2 Goodwill recognized of $ 71.2 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, no ne of which is expected to be deductible for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of Payix. 86 Payix contributed $ 0.1 million to revenue and $ ( 0.0 ) million in net income to the Company’s Consolidated Statements of Operations, from December 29, 2021 through December 31, 2021 . Measurement Period The preliminary purchase price allocations for the acquisitions of BillingTree, Kontrol, and Payix are based on initial estimates and provisional amounts. For the acquisitions completed during the year ended December 31, 2021, the Company continues to refine its inputs and estimates inherent in the valuation of intangible assets, deferred income taxes, realization of tangible assets and the accuracy and completeness of liabilities within the measurement period. Pro Forma Financial Information (Unaudited) The supplemental condensed consolidated results of the Company on an unaudited pro forma basis give effect to Ventanex, cPayPlus, CPS, BillingTree, Kontrol and Payix acquisitions as if the transactions had occurred on January 1, 2020. The unaudited pro forma information reflects adjustments for the issuance of the Company’s common stock, debt incurred in connection with the transactions, the impact of the fair value of intangible assets acquired and related amortization and other adjustments the Company believes are reasonable for the pro forma presentation. In addition, the pro forma earnings exclude acquisition-related costs. Pro Forma Year Ended December 31, 2021 Pro Forma Year Ended December 31, 2020 Revenue $ 257,014,219 $ 234,656,115 Net loss ( 54,626,915 ) ( 120,849,273 ) Net loss attributable to non-controlling interests ( 5,813,388 ) ( 12,792,802 ) Net loss attributable to the Company ( 48,813,527 ) ( 108,056,471 ) Loss per Class A share - basic and diluted $( 0.56 ) $( 1.74 ) 87 6 . Fair Value of Assets and Liabilities The following table summarizes, by level within the fair value hierarchy, the carrying amounts and estimated fair values of our assets and liabilities measured at fair value on a recurring or nonrecurring basis or disclosed, but not carried, at fair value in the Consolidated Balance Sheets as of the dates presented. There were no transfers into, out of, or between levels within the fair value hierarchy during any of the periods presented. Refer to Note 5, Note 9 and Note 10 for additional information on these assets and liabilities. December 31, 2021 Level 1 Level 2 Level 3 Total Assets: Other assets — 2,499,996 — 2,499,996 Total assets $ — $ 2,499,996 $ — $ 2,499,996 Liabilities: Contingent consideration $ — $ — $ 17,046,840 $ 17,046,840 Borrowings — 448,484,696 — 448,484,696 Tax receivable agreement — — 245,828,419 245,828,419 Total liabilities $ — $ 448,484,696 $ 262,875,259 $ 711,359,955 December 31, 2020 Level 1 Level 2 Level 3 Total Liabilities: Contingent consideration $ — $ — $ 15,800,000 $ 15,800,000 Borrowings — 256,713,396 — 256,713,396 Tax receivable agreement — — 229,228,105 229,228,105 Interest rate swap — 9,312,332 — 9,312,332 Total liabilities $ — $ 266,025,728 $ 245,028,105 $ 511,053,833 Other Assets Other assets contain a minority equity investment in a privately-held company. The Company elected a measurement alternative for measuring this investment, in which the carrying amount is adjusted based on any observable price changes in orderly transactions. The investment is classified as Level 2 as observable adjustments to value are infrequent and occur in an inactive market. Contingent Consideration Contingent consideration relates to potential payments that the Company may be required to make associated with acquisitions. The contingent consideration is recorded at fair value based on estimates of discounted future cash flows associated with the acquired businesses. To the extent that the valuation of these liabilities is based on inputs that are less observable or not observable in the market, the determination of fair value requires more judgment. Accordingly, the fair value of contingent consideration is classified within Level 3 of the fair value hierarchy, under ASC 820. The change in fair value is re-measured at each reporting period with the change in fair value being recognized in accordance with ASC 805, Business Combinations (“ASC 805”). The Company used a discount rate to determine the present value, based on a risk-free rate adjusted for a credit spread, of the contingent consideration in the simulation approach. A range of 3.4 % to 3.5 % and weighted average of 3.4 % was applied to the simulated contingent consideration payments, in order to determine the fair value. A significant increase or decrease in the discount rate could have resulted in a lower or higher balance, respectively, as of the measurement date. The following table provides a rollforward of the contingent consideration related to previous business acquisitions. Refer to Note 5 for more details. 88 Year Ended December 31, 2021 Year Ended December 31, 2020 From July 11, 2019 to December 31, 2019 From January 1, 2019 to July 10, 2019 (Successor) (Predecessor) Balance at beginning of period $ 15,800,000 $ 14,250,000 $ — $ 1,816,988 Measurement period adjustment — 6,580,549 — — Purchases 4,350,000 15,800,000 14,250,000 — Payments ( 8,948,786 ) ( 18,320,549 ) — ( 1,816,988 ) Valuation adjustment 5,845,626 ( 2,510,000 ) — — Balance at end of period $ 17,046,840 $ 15,800,000 $ 14,250,000 $ — Borrowings The carrying value of the Company’s 2026 Notes, revolving credit facility and term loan is net of unamortized debt discount and debt issuance costs. The carrying amount of the Company’s borrowings approximates fair value because interest rates on these instruments approximate market interest rates. The fair value of Company’s borrowings is classified within Level 2 of the fair value hierarchy, as the market interest rates are generally observable and do not contain a high level of subjectivity. See Note 10 for further discussion on borrowings. Tax Receivable Agreement Upon the completion of the Business Combination, the Company entered into the TRA with holders of Post-Merger Repay Units. As a result of the TRA, the Company established a liability in its consolidated financial statements. The TRA is recorded at fair value based on estimates of discounted future cash flows associated with the estimated payments to the Post-Merger Repay Unit holders. These inputs are not observable in the market; thus, the TRA is classified within Level 3 of the fair value hierarchy, under ASC 820. The change in fair value is re-measured at each reporting period with the change in fair value being recognized in accordance with ASC 805. The Company used a discount rate, also referred to as the early termination rate, to determine the present value, based on a risk-free rate plus a spread, pursuant to the TRA. A rate of 1.58 % was applied to the forecasted TRA payments as of December 31, 2021, in order to determine the fair value. A significant increase or decrease in the discount rate could have resulted in a lower or higher balance, respectively, as of the measurement date. The TRA balance increased as a result of exchanges of Post-Merger Repay Units for Class A common stock pursuant to the Exchange Agreement. In addition, the TRA balance increased $ 14.1 million through accretion expense and a valuation adjustment, related to a decrease in the discount rate, which was 1.34 %, as of December 31, 2020, and the finalization of the various components related to the 2020 exchanges of Post-Merger Repay Units. The following table provides a rollforward of the TRA related to the Business Combination and subsequent acquisition of Post-Merger Repay Units held by Corsair, pursuant to the Unit Purchase Agreements. See Note 15 for further discussion on the TRA. Year Ended December 31, 2021 Year Ended December 31, 2020 From July 11, 2019 to December 31, 2019 From January 1, 2019 to July 10, 2019 (Successor) (Predecessor) Balance at beginning of period $ 229,228,105 $ 67,176,226 $ — $ — Purchases 2,491,251 149,612,393 67,176,226 — Payments — — — — Accretion expense 5,065,507 2,955,148 — — Valuation adjustment 9,043,556 9,484,338 — — Balance at end of period $ 245,828,419 $ 229,228,105 $ 67,176,226 $ — 89 Interest Rate Swap In October 2019, the Company entered into a $ 140.0 million notional, fifty-seven month interest rate swap agreement, and in February 2020, the Company entered into a $ 30.0 million notional, sixty month interest rate swap agreement, then a revised notional amount of $ 65.0 million beginning on September 30, 2020. These interest rate swap agreements are to hedge changes in its cash flows attributable to interest rate risk on a combined $ 205.0 million of Company’s variable-rate term loan to a fixed-rate basis, thus reducing the impact of interest rate changes on future interest expense. These swaps involve the receipt of variable-rate amounts in exchange for fixed interest rate payments over the life of the agreement without an exchange of the underlying notional amount and was designated for accounting purposes as a cash flow hedge. The interest rate swap is carried at fair value on a recurring basis in the Consolidated Balance Sheets and is classified within Level 2 of the fair value hierarchy, as the inputs to the derivative pricing model are generally observable and do not contain a high level of subjectivity. The fair value was determined based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the valuation date. Both interest rate swaps were settled in January 2021, with $ 6.4 million, net of taxes of $ 1.7 million reclassified from Accumulated other comprehensive loss into Other loss in the Consolidated Statements of Operations for the year ended December 31, 2021. 7. Property and Equipment Property and equipment consisted of the following: December 31, December 31, 2021 2020 Furniture, fixtures, and office equipment $ 2,763,380 $ 1,112,702 Computers 3,408,336 1,733,672 Leasehold improvements 430,894 340,333 Total 6,602,610 3,186,707 Less: Accumulated depreciation and amortization 2,801,411 1,558,268 $ 3,801,199 $ 1,628,439 Depreciation expense for property and equipment was $ 1.3 million, $ 1.2 million and $ 0.4 million for the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, respectively. Depreciation expense was $ 0.2 million for the Predecessor period from January 1, 2019 to July 10, 2019. 8. Intangible Assets The Company holds definite and indefinite-lived intangible assets. As of December 31, 2021, the indefinite-lived intangible assets consist of five trade names, arising from the acquisitions of Hawk Parent, MPI, BillingTree, Kontrol, and Payix. As of December 31, 2020, the indefinite-lived intangible assets consist of six trade names, arising from the acquisitions of Hawk Parent, TriSource, APS, Ventanex, cPayPlus, and CPS. 90 Intangible assets consisted of the following: Gross Carrying Value Accumulated Amortization Net Carrying Value Weighted Average Useful Life (Years) Client relationships $ 539,850,000 $ 83,014,231 $ 456,835,769 8.40 Channel relationships 12,550,000 1,146,935 11,403,065 8.65 Software costs 163,957,560 83,162,612 80,794,948 1.48 Non-compete agreements 4,580,000 4,059,880 520,120 0.88 Trade name 28,140,000 — 28,140,000 — Balance as of December 31, 2021 $ 749,077,560 $ 171,383,658 $ 577,693,902 6.79 Client relationships $ 308,450,000 $ 39,920,578 $ 268,529,422 8.64 Channel relationships 12,550,000 191,936 12,358,064 9.65 Software costs 104,715,101 40,280,116 64,434,985 1.85 Non-compete agreements 4,270,000 2,595,333 1,674,667 1.52 Trade name 22,230,000 — 22,230,000 — Balance as of December 31, 2020 $ 452,215,101 $ 82,987,963 $ 369,227,138 6.94 The Company’s amortization expense for intangible assets was $ 88.4 million, $ 59.7 million and $ 23.3 million for the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, respectively. Amortization expense for intangible assets was $ 5.9 million for the Predecessor period from January 1, 2019 to July 10, 2019. The estimated amortization expense for the next five years and thereafter in the aggregate is as follows: Year Ending December 31, Estimated Future Amortization Expense 2022 $ 99,941,015 2023 81,630,840 2024 67,608,133 2025 55,288,759 2026 55,571,944 Thereafter 189,513,211 91 9. Goodwill The following table presents changes to goodwill for the years ended December 31, 2021, 2020 and 2019: Total Balance at December 31, 2018 (Predecessor) $ 119,529,202 Acquisitions — Dispositions — Impairment Loss — Balance at July 10, 2019 (Predecessor) $ 119,529,202 Balance at July 11, 2019 (Successor) $ 339,911,400 Acquisitions 49,749,119 Dispositions — Impairment Loss — Balance at December 31, 2019 (Successor) $ 389,660,519 Acquisitions 62,263,733 Dispositions — Impairment Loss — Measurement period adjustment 7,046,003 Balance at December 31, 2020 458,970,255 Acquisitions 366,622,156 Dispositions — Impairment Loss — Measurement period adjustment ( 10,779 ) Other ( 1,500,000 ) Balance at December 31, 2021 $ 824,081,632 During the year ended December 31, 2020, the Company recognized a $ 7.0 million measurement period adjustment in accordance with APS acquisition, of which $ 6.6 million was due to a valuation adjustment on contingent consideration. The Company has only one operating segment and, based on the criteria outlined in ASC 350, Intangibles – Goodwill and Other (“ASC 350”), only one reporting unit that needs to be tested for goodwill impairment. Accordingly, goodwill was reviewed for impairment at the consolidated entity level. The Company concluded that goodwill was no t impaired as of December 31, 2021. As of December 31, 2021 and 2020, there were no accumulated impairment losses on the Company’s goodwill. 10. Borrowings Predecessor Credit Agreement The Predecessor entered into a Revolving Credit and Term Loan Agreement (the “Predecessor Credit Agreement”), with SunTrust Bank and the other lenders party thereto on September 28, 2017, and amended December 15, 2017, which included a revolving loan component, the term loan and a delayed draw term loan. The Predecessor Credit Agreement was collateralized by substantially all assets of the Predecessor, based on the Predecessor Credit Agreement’s collateral documents, and it included restrictive qualitative and quantitative covenants, as defined in the Predecessor Credit Agreement. The Predecessor was in compliance with its restrictive covenants under the Predecessor Credit Agreement as of December 31, 2018. The Predecessor Credit Agreement provided for a maximum $ 10.0 million revolving loan at a variable interest rate. This facility was terminated upon the closing of the Business Combination and execution of the Successor Credit Agreement (defined below). At the closing of the Business Combination and December 31, 2018, the outstanding balance on the revolving loan was $ 3.5 million. This balance was settled upon the closing of the Business Combination. Interest expense on the line of credit totaled $ 0.1 million for the period from January 1, 2019 to July 10, 2019. Interest expense on the line of credit totaled $ 0.2 million for the year ended December 31, 2018. 92 Successor Credit Agreement The Company entered into a Revolving Credit and Term Loan Agreement (the “Successor Credit Agreement”) on July 11, 2019, with Truist Bank (formerly SunTrust Bank) and the other lenders party thereto, which provided a revolving credit facility (the “Revolving Credit Facility”), a term loan A (the “Term Loan”), and a delayed draw term loan at a variable interest rate ( 3.65 % as of December 31, 2020) (the “Delayed Draw Term Loan”). The Successor Credit Agreement provided for an aggregate revolving commitment of $ 20.0 million at a variable interest rate. On February 10, 2020, as part of the financing for the acquisition of Ventanex, Repay entered into an agreement with Truist Bank and other members of its existing bank group to amend and upsize its previous credit agreement from $ 230.0 million to $ 346.0 million. The Successor Credit Agreement was collateralized by substantially all of the Company’s assets, and included qualitative and quantitative covenants, as defined in the Successor Credit Agreement. The Successor Credit Agreement provided for a Term Loan of $ 256.0 million, a Delayed Draw Term Loan of $ 60.0 million, and a Revolving Credit Facility of $ 30.0 million. As of December 31, 2020, the Company had $ 14.4 million drawn against the Delayed Draw Term Loan and had $ 0.0 million drawn against the Revolving Credit Facility. On January 20, 2021, the Company used a portion of the proceeds from the 2026 Notes to prepay in full the entire amount of the outstanding Term Loans under the Successor Credit Agreement. The Company also terminated in full all outstanding Delayed Draw Term Loan commitments under such credit facilities. Amended Credit Agreement On February 3, 2021, the Company announced the closing of a new undrawn $ 125.0 million senior secured revolving credit facility through Truist Bank. The Amended Credit Agreement replaces the Company’s Successor Credit Agreement, which included an undrawn $ 30.0 million Revolving Credit Facility. On December 29, 2021, the Company increased its existing senior secured credit facilities by $ 60.0 million to a $ 185.0 million revolving credit facility pursuant to an amendment to the Amended Credit Agreement. The Company was in compliance with its restrictive covenants under the Amended Credit Agreement at December 31, 2021. As of December 31, 2021, the Company had $ 20.0 million drawn against the revolving credit facility at a variable interest rate of 2.25 % plus 1-month LIBOR due 2026. The Company paid $ 0.4 million and $ 0.2 million in fees related to unused commitments for the years ended December 31, 2021 and 2020, respectively. The Company’s interest expense on the line of credit totaled $ 0 , $ 0.1 million and $ 0.1 million for the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019 respectively . Convertible Senior Debt On January 19, 2021, the Company issued $ 440.0 million in aggregate principal amount of 0.00 % Convertible Senior Notes due 2026 in a private placement. The initial conversion rate of the 2026 Notes was 29.7619 shares of Class A common stock per $1,000 principal amount of 2026 Notes (equivalent to an initial conversion price of approximately $ 33.60 per share of Class A common stock). Upon conversion of the 2026 Notes, the Company may choose to pay or deliver cash, shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock. The 2026 Notes will mature on February 1, 2026 , unless earlier converted, repurchased or redeemed. Subject to Nasdaq requirements, the Company controls the conversion rights prior to November 3, 2025, unless a fundamental change or an event of default occurs. During the year ended December 31, 2021, the conversion contingencies of the 2026 Notes were not met, and the conversion terms of the 2026 Notes were not significantly changed. The shares issuable upon conversion of the 2026 Notes were excluded from the computation of the diluted loss per share, since their inclusion would have been anti-dilutive. 93 As of December 31, 2021 and 2020, total borrowings under the Successor Credit Agreement, Amended Credit Agreement, and 2026 Notes consisted of the following, respectively: December 31, 2021 December 31, 2020 Non-current indebtedness: Term Loan (1) $ — $ 262,653,996 Revolving Credit Facility (2) 20,000,000 — Convertible Senior Debt 440,000,000 — Total borrowings under credit facility 460,000,000 262,653,996 Less: Current maturities of long-term debt (3) — 6,760,650 Less: Long-term loan debt issuance cost (4) 11,515,304 5,940,600 Total non-current borrowings $ 448,484,696 $ 249,952,746 (1) The Term Loan bears interest at a variable rate, which was 3.65 % as of December 31, 2020. (2) The Revolving Credit Facility bears interest at a variable rate, which was 2.35 % as of December 31, 2021. (3) Pursuant to the terms of the Amended Credit Agreement, the Company was required to make quarterly principal payments equal to 0.625 % of the initial principal amount of the Term Loan and Delayed Draw Term Loan (collectively the “Term Loans”). (4) The Company incurred $ 2.5 million, $ 1.4 million and $ 0.6 million of interest expense for the amortization of deferred debt issuance costs for the years ended December 31, 2021 and 2020, and the period from July 11, 2020 to December 31, 2019, respectively. The Predecessor incurred $ 0.2 million for the period from January 1, 2019 to July 10, 2019. The Company incurred interest expense on the Term Loans of $ 11.5 million and $ 5.3 million for the year ended December 31, 2020 and the period from July 11, 2019 to December 31, 2019, respectively. The Predecessor incurred interest expense of $ 2.8 million and $ 5.5 million and $ 4.4 million for the period from January 1, 2019 to July 10, 2019. Following is a summary of principal maturities of the Term Loans outstanding as of December 31, 2021 for each of the next five years ending December 31 and in the aggregate: 2022 $ — 2023 — 2024 — 2025 — 2026 460,000,000 2027 — $ 460,000,000 11. Derivative Instruments The Company does not hold or use derivative instruments for trading purposes. Derivative Instruments Designated as Hedges Interest rate fluctuations expose the Company’s variable-rate term loan to changes in interest expense and cash flows. As part of its risk management strategy, the Company may use interest rate derivatives, such as interest rate swaps, to manage its exposure to interest rate movements. In October 2019, the Company entered into a $ 140.0 million notional, five-year interest rate swap agreement to hedge changes in cash flows attributable to interest rate risk on $ 140.0 million of its variable-rate term loan. This agreement involves the receipt of variable-rate amounts in exchange for fixed interest rate payments over the life of the agreement without an exchange of the underlying notional amount. This interest rate swap was designated for accounting purposes as a cash flow hedge. As such, changes in the interest rate swap’s fair value are deferred in accumulated other comprehensive income (loss) in the Consolidated Balance Sheets and are subsequently reclassified into interest expense in each period that a hedged interest payment is made on the Company’s variable-rate term loan. Pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense was $ 1.4 million and ($ 0.1 ) million for the year ended December 31, 2020 and 2019, respectively. 94 On February 21, 2020, the Company entered into a swap transaction with Regions Bank. On a quarterly basis, commencing on March 31, 2020 up to and including the termination date of February 10, 2025 , the Company will make fixed payments on a beginning notional amount of $ 30.0 million, then a revised notional amount of $ 65.0 million beginning on September 30, 2020. On a quarterly basis, commencing on February 21, 2020 up to and including the termination date of February 10, 2025, the counterparty will make floating rate payments based on the 3-month LIBOR on the beginning notional amount of $ 30.0 million, then a revised notional amount of $ 65.0 million beginning on September 30, 2020. Both interest rate swaps were settled in January 2021, with $ 6.4 million, net of taxes of $ 1.7 million reclassified from Accumulated other comprehensive loss into Other loss in the Consolidated Statements of Operations for the year ended December 31, 2021. 12. Commitments and Contingencies Legal Matters The Company is a party to various claims and lawsuits incidental to its business. In the Company’s opinion, the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, are not expected to have a material adverse effect on its financial position, liquidity, results of operations or cash flows. Leases The Company has commitments under operating leases for real estate leased from third parties under non-cancelable operating leases. The Company’s leases typically have lease terms between three years and ten years , with the longest lease term having an expiration date in 2029 . Most of these leases include one or more renewal options for six years or less , and certain leases also include lessee termination options . At lease commencement, the Company assesses whether it is reasonably certain to exercise a renewal option, or reasonably certain not to exercise a termination option, by considering various economic factors. Options that are reasonably certain of being exercised are factored into the determination of the lease term, and related payments are included in the calculation of the right-of-use asset and lease liability. The components of lease cost are presented in the following table: Year Ended December 31, 2021 Year Ended December 31, 2020 Components of total lease costs: Operating lease cost $ 2,370,643 $ 1,745,575 Short-term lease cost 100,607 48,150 Variable lease cost — — Total lease cost $ 2,471,250 $ 1,793,725 Amounts reported in the Consolidated Balance Sheets were as follows: December 31, 2021 December 31, 2020 Operating Leases: Right-of-use assets $ 10,499,751 $ 10,074,506 Lease liability, current 1,990,416 1,527,224 Lease liability, long-term 9,090,867 8,836,655 Total lease liabilities $ 11,081,283 $ 10,363,879 Weighted-average remaining lease term (in years) 5.2 6.2 Weighted-average discount rate (annualized) 4.3 % 4.6 % 95 Other information related to leases are as follows: Year Ended December 31, 2021 Year Ended December 31, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 2,168,767 $ 1,504,352 Right-of-use assets obtained in exchange for lease liabilities: Operating leases 2,438,075 11,430,120 The following table presents a maturity analysis of the Company’s operating leases liabilities as of December 31, 2021: 2022 $ 2,423,447 2023 2,481,751 2024 2,303,054 2025 2,124,094 2026 1,835,155 Thereafter 1,260,395 Total undiscounted lease payments 12,427,896 Less: Imputed interest 1,346,613 Total lease liabilities $ 11,081,283 13. Related Party Transactions Related party payables consisted of the following: December 31, December 31, 2021 2020 Ventanex accrued earnout liability $ 12,746,840 $ 4,800,000 cPayPlus accrued earnout liability — 6,500,000 CPS accrued earnout liability 600,000 4,500,000 Kontrol accrued earnout liability 850,000 — Payix accrued earnout liability 2,850,000 — Other payables to related parties 347,285 11,597 $ 17,394,125 $ 15,811,597 The Company incurred transaction costs on behalf of related parties of $ 8.2 million, $ 3.1 million and $ 1.3 million for the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, respectively. These costs consist of retention bonuses and other compensation to employees, associated with the costs resulting from the integration of new businesses. The Predecessor incurred transaction costs on behalf of related parties of $ 6.8 million for the period from January 1, 2019 to July 10, 2019. The Company held receivables from related parties of $ 0.3 million and $ 0.1 million as of December 31, 2021 and 2020, respectively. These amounts were due from employees, related to tax withholding on vesting of equity compensation. See Note 14. Share based compensation for more detail on these restricted share awards. The Company owed $ 17.4 million and $ 15.8 million to related parties, in the form of contingent consideration payable to the sellers of Ventanex, CPS, BillingTree, Kontrol and Payix, who were employees of REPAY, as of December 31, 2021 and 2020, respectively. Further, the Company owed employees $ 0.0 million and $ 0.0 million for amounts paid on behalf of the Company as of December 31, 2021 and 2020, respectively. 96 14. Share Based Compensation Omnibus Incentive Plan At the Shareholders Meeting, Thunder Bridge shareholders considered and approved the Incentive Plan which resulted in the reservation of 7,326,728 shares of common stock for issuance thereunder. The Incentive Plan became effective immediately upon the closing of the Business Combination. Under this plan, the Company currently has three types of share-based compensation awards outstanding: PSUs, RSAs and RSUs. PSU The grant date fair value of a PSU, which is based on quoted market value of the Company’s Class A common stock on the grant date and the number of shares expected to be earned according to the level of achievement of performance measures, is recognized on a straight-line basis over the applicable performance or service period. The performance or service period for awards granted generally range from one to three years. RSA and RSU RSAs and RSUs vest in equal annual installments over a three-year period. Restricted shares cannot be sold or transferred until they have vested. The grant date fair value of RSAs and RSUs, which is based on the quoted market value of the Company’s Class A common stock on the grant date, is recognized as share-based compensation expense on a straight-line basis over the vesting period. The following table summarized share-based compensation expense and the related income tax benefit recognized for the Company’s share-based compensation awards: Year Ended December 31, From July 11, 2019 to ($ in millions) 2021 2020 December 31, 2019 Share-based compensation expense $ 22.3 $ 19.4 $ 22.0 Income tax benefit 3.4 0.5 1.1 Activity for the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019 were as follows: Class A Common Stock Weighted Average Grant Date Fair Value Unvested at July 11, 2019 — $ — Granted 3,275,229 12.07 Forfeited (1) 321,263 11.81 Vested 1,135,291 11.68 Unvested at December 31, 2019 1,818,675 12.39 Granted 1,389,063 18.40 Forfeited (1) (2) 80,794 13.40 Vested 603,513 12.10 Unvested at December 31, 2020 2,523,431 15.71 Granted 994,287 22.68 Forfeited (1) (2) 418,330 16.46 Vested 583,754 15.63 Unvested at December 31, 2021 2,515,634 $ 18.30 (1) Upon vesting, award-holders elected to sell shares to the Company in order to satisfy the associated tax obligations. The awards are not deemed outstanding; further, these forfeited shares are added back to the amount of shares available for grant under the Incentive Plan. (2) The forfeited shares include employee terminations during the years ended December 31, 2021 and 2020; further, these forfeited shares are added back to the amount of shares available for grant under the Incentive Plan. 97 Unrecognized compensation expense related to unvested PSUs, RSAs and RSUs was $ 22.7 million as of December 31, 2021, which is expected to be recognized as expense over the weighted-average period of 2.45 years. Unrecognized compensation expense related to unvested PSUs, RSAs, and RSUs was $ 23.7 million as of December 31, 2020, which is expected to be recognized as expense over the weighted-average period of 2.61 years. Unrecognized compensation expense related to unvested RSAs, RSUs and PSUs was $ 17.5 million as of December 31, 2019, which is expected to be recognized as expense over the weighted-average period of 2.26 years. Original Equity Incentives As a result of the change in ownership of Hawk Parent, 9,171 previously unvested profit interest units of the Predecessor with a weighted average grant date fair value of $ 180.87 were automatically vested, upon the closing of the Business Combination. A summary of the changes in non-vested units outstanding for the period from January 1, 2019 to July 10, 2019 is presented below: Units Weighted average fair value per unit Non-vested units at January 1, 2019 9,460 $ 182.83 Activity during the period: Granted — — Vested ( 9,460 ) ( 182.83 ) Non-vested units at July 10, 2019 — $ — During the period from January 1, 2019 to July 10, 2019, the Predecessor incurred $ 0.9 million of share-based compensation expense, respectively, included in Selling, general and administrative costs in the Consolidated Statements of Operations. 15. Taxation Repay Holdings Corporation is taxed as a corporation and is subject to paying corporate federal, state and local taxes on the income allocated to it from Hawk Parent, based upon Repay Holding Corporation’s economic interest held in Hawk Parent, as well as any stand-alone income or loss it generates. Hawk Parent is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Hawk Parent is not subject to U.S. federal and certain state and local income taxes. Hawk Parent’s members, including Repay Holdings Corporation, are liable for federal, state and local income taxes based on their allocable share of Hawk Parent’s pass-through taxable income. The components of loss before income taxes are as follows: Year Ended December 31, 2021 Year Ended December 31, 2020 July 11, 2019 to December 31, 2019 January 1, 2019 to July 10, 2019 (Successor) (Predecessor) Domestic $( 87,352,396 ) $( 129,267,523 ) $( 51,540,441 ) $( 23,668,078 ) Foreign 624,677 ( 456,747 ) ( 269,721 ) ( 74,452 ) Loss before income tax benefit $( 86,727,719 ) $( 129,724,270 ) $( 51,810,162 ) $( 23,742,530 ) 98 The Company recorded a provision for income tax as follows: Year Ended December 31, 2021 Year Ended December 31, 2020 July 11, 2019 to December 31, 2019 January 1, 2019 to July 10, 2019 (Successor) (Predecessor) Current expense Federal $ 34,401 $ — $ — $ — State 2,367 — — — Foreign — — — — Total current expense $ 36,768 $ — $ — $ — Deferred expense Federal $( 18,113,316 ) $( 10,523,778 ) $( 4,343,013 ) $ — State ( 12,799,753 ) ( 1,708,969 ) ( 575,152 ) — Foreign 185,145 ( 125,278 ) ( 72,824 ) — Total deferred benefit ( 30,727,924 ) ( 12,358,025 ) ( 4,990,989 ) — Income tax benefit $( 30,691,156 ) $( 12,358,025 ) $( 4,990,989 ) $ — A reconciliation of the United States statutory income tax rate to the Company’s effective income tax rate is as follows for the years indicated: Year Ended December 31, 2021 Year Ended December 31, 2020 July 11, 2019 to December 31, 2019 January 1, 2019 to July 10, 2019 (Successor) (Predecessor) Federal income tax expense 21.0 % 21.0 % 21.0 % 0.0 % State taxes, net of federal benefit 5.2 % 1.3 % 1.1 % 0.0 % Income attributable to noncontrolling interest ( 1.4 %) ( 1.8 %) ( 6.1 %) 0.0 % Excess tax benefit related to share-based compensation 0.6 % 0.4 % 0.4 % 0.0 % Change in fair value of warrant liabilities 0.0 % ( 11.5 %) ( 6.2 %) 0.0 % State rate change impact on deferred taxes 9.5 % 0.0 % 0.0 % 0.0 % Other, net 0.5 % 0.1 % ( 0.6 %) 0.0 % Total deferred benefit 35.4 % 9.5 % 9.6 % 0.0 % The Company’s effective tax rate was 35.4 %, 9.5 % and 9.6 % for the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, respectively. The comparison of the Company’s effective tax rate to the U.S. statutory tax rate of 21 % was primarily influenced by the fact that the Company is not liable for the income taxes on the portion of Hawk Parent’s earnings that are attributable to noncontrolling interests. Further, the comparison is reflective of the effect of remeasuring net deferred tax assets for state tax rate changes. The results for the Predecessor do not reflect income tax expense because, prior to the closing of the Business Combination, the consolidated Hawk Parent was treated as a partnership for U.S. federal and most applicable state and local income tax purposes and was not subject to corporate tax. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Details of the Company's deferred tax assets and liabilities are as follows: 99 December 31, 2021 December 31, 2020 Deferred tax assets Tax Credits $ 1,547,569 $ 522,081 Section 163(j) Limitation Carryover 26,800 250,095 Acquisition Costs 348,158 352,291 Federal Net Operating Losses 25,283,737 8,834,924 State Net Operating Losses 4,907,835 1,264,059 Foreign Net Operating Losses 16,556 202,517 Other Assets 6,794,593 2,997,426 Partnership basis tax differences 130,440,236 154,253,345 Total deferred tax asset 169,365,484 168,676,738 Valuation allowance ( 16,393,745 ) ( 33,339,509 ) Total deferred tax asset, net of valuation allowance 152,971,739 135,337,229 Deferred tax liabilities Other Intangibles - Payix ( 7,711,856 ) — Total deferred tax liabilities ( 7,711,856 ) — Net deferred tax assets $ 145,259,883 $ 135,337,229 As a result of the equity offering by the Company, BillingTree acquisition, finalization of 2020 income tax returns and Post-Merger Repay Unit exchanges during the year ended December 31, 2021, the Company recognized a reduction of the deferred tax asset (“DTA”) and offsetting deferred tax liability (“DTL”) in the amount of $ 19.2 million, compared to an increase of $ 27.5 million as a result of equity offerings by the Company, warrant exercises and Post-Merger Repay unit exchanges during the year ended December 31, 2020, to account for the portion of the Company’s outside basis in the partnership interest that it will not recover through tax deductions, a ceiling rule limitation arising under Internal Revenue Code (the “Code”) sec. 704(c). As the ceiling rule causes taxable income allocations to be in excess of 704(b) book allocations the DTL will unwind, leaving only the DTA, which may only be recovered through the sale of the partnership interest in Hawk Parent. The Company has concluded, based on the weight of all positive and negative evidence, that all of the DTA associated with the ceiling rule limitation is not likely to be realized as of December 31, 2021. As such, a 100 % valuation allowance was recognized. As of December 31, 2021, the Company had net tax effected federal and state (net of federal benefit) net operating losses (“NOLs”) of $ 30.2 million, of which approximately $ 25.8 million have an indefinite life. NOLs of approximately $ 4.4 million will begin to expire in 2030 . As of December 31, 2021, the Company had federal and state tax credit carryforwards of $ 1.1 million and $ 0.4 million, respectively, which will begin to expire in 2037 and 2034 , respectively. The Company believes as of December 31, 2021, based on the weight of all positive and negative evidence, it is more likely than not that the results of future operations will generate sufficient taxable income to realize the NOLs and tax credits and, as such, no valuation allowance was recorded. No uncertain tax positions existed as of December 31, 2021. Tax Receivable Agreement Liability Pursuant to our election under Section 754 of the Code, we expect to obtain an increase in our share of the tax basis in the net assets of Hawk Parent when Post-Merger Repay Units are redeemed or exchanged for Class A common stock of Repay Holdings Corporation. The Company intends to treat any redemptions and exchanges of Post-Merger Repay Units as direct purchases for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that the Company would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets. On July 11, 2019, the Company entered into a TRA that provides for the payment by the Company of 100 % of the amount of any tax benefits realized, or in some cases are deemed to realize, as a result of (i) increases in our share of the tax basis in the net assets of Hawk Parent resulting from any redemptions or exchanges of Post-Merger Repay Units and from our acquisition of the equity of the selling Hawk Parent members, (ii) tax basis increases attributable to payments made under the TRA, and (iii) deductions attributable to imputed interest pursuant to the TRA (the "TRA Payments"). The TRA Payments are not conditioned upon any continued ownership interest in Hawk Parent or Repay. The rights of each party under the TRA other than the Company are assignable. The timing and amount of aggregate payments due under the TRA 100 may vary based on a number of factors, including the timing and amount of taxable income generated by the Company each year, as well as the tax rate then applicable, among other factors. As of December 31, 2021, the Company had a liability of $ 245.8 million related to its projected obligations under the TRA, which is captioned as the tax receivable agreement liability in the Company’s Consolidated Balance Sheets. The increase in the TRA liability for the year ended December 31, 2021, was primarily a result of the change in the Early Termination Rate, as defined in the TRA, selling members of Hawk Parent exchanging 407,584 Post-Merger Repay Units during the year ended December 31, 2021 in accordance with the Exchange Agreement, the finalization of the various components related to the 2020 exchanges of Post-Merger Repay Units, and the impact of the remeasurement of the state tax rate. This resulted in an increase to the Company’s share of the tax basis in the net assets of Hawk Parent. 16. Subsequent Events Management has evaluated subsequent events and their potential effects on these consolidated financial statements. Based upon the review, management did not identify any subsequent events that would have required adjustment or disclosure in the financial statements. 101 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.