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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 001-38532
i3 Verticals, Inc.
(Exact name of registrant as specified in its charter)
Delaware82-4052852
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
40 Burton Hills Blvd., Suite 415
Nashville, TN
37215
(Address of principal executive offices)(Zip Code)
(615) 465-4487
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.0001 Par ValueIIIVNasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  x  No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No  x
As of February 8, 2022, there were 22,068,275 outstanding shares of Class A common stock, $0.0001 par value per share, and 10,214,142 outstanding shares of Class B common stock, $0.0001 par value per share.



TABLE OF CONTENTS
Page

2


PART I. - FINANCIAL INFORMATION
Item 1.    Financial Statements

3

i3 Verticals, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)

December 31,September 30,
20212021
(unaudited)
Assets
Current assets
Cash and cash equivalents$3,371 $3,641 
Accounts receivable, net39,794 38,500 
Settlement assets8,034 4,768 
Prepaid expenses and other current assets15,614 11,214 
Total current assets66,813 58,123 
Property and equipment, net5,705 5,902 
Restricted cash15,306 9,522 
Capitalized software, net50,783 41,371 
Goodwill349,597 292,243 
Intangible assets, net207,739 171,706 
Deferred tax asset50,647 49,992 
Operating lease right-of-use assets20,369 14,479 
Other assets9,477 8,462 
Total assets$776,436 $651,800 
Liabilities and equity
Liabilities
Current liabilities
Accounts payable$8,264 $7,865 
Accrued expenses and other current liabilities93,695 50,815 
Settlement obligations8,034 4,768 
Deferred revenue35,321 29,862 
Current portion of operating lease liabilities4,471 3,201 
Total current liabilities149,785 96,511 
Long-term debt, less current portion and debt issuance costs, net257,130 200,605 
Long-term tax receivable agreement obligations39,204 39,122 
Operating lease liabilities, less current portion16,587 11,960 
Other long-term liabilities20,677 14,011 
Total liabilities483,383 362,209 
Commitments and contingencies (see Note 12)
Stockholders' equity
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized; 0 shares issued and outstanding as of December 31, 2021 and September 30, 2021
  
Class A common stock, par value $0.0001 per share, 150,000,000 shares authorized; 22,064,317 and 22,026,098 shares issued and outstanding as of December 31, 2021 and September 30, 2021, respectively
2 2 
Class B common stock, par value $0.0001 per share, 40,000,000 shares authorized; 10,214,142 and 10,229,142 shares issued and outstanding as of December 31, 2021 and September 30, 2021, respectively
1 1 
Additional paid-in capital216,604 211,237 
Accumulated deficit(9,008)(6,480)
Total stockholders' equity207,599 204,760 
Non-controlling interest85,454 84,831 
Total equity293,053 289,591 
Total liabilities and equity$776,436 $651,800 

See Notes to the Interim Condensed Consolidated Financial Statements
4

i3 Verticals, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share and per share amounts)

Three months ended December 31,
2021
2020(1)
Revenue$73,939 $44,621 
Operating expenses
Other costs of services16,510 13,666 
Selling, general and administrative46,387 24,962 
Depreciation and amortization6,870 5,092 
Change in fair value of contingent consideration4,927 1,904 
Total operating expenses74,694 45,624 
Loss from operations(755)(1,003)
Interest expense, net3,154 2,029 
Loss before income taxes(3,909)(3,032)
Benefit from income taxes(228)(10)
Net loss(3,681)(3,022)
Net loss attributable to non-controlling interest(1,153)(1,024)
Net loss attributable to i3 Verticals, Inc.$(2,528)$(1,998)
Net loss per share attributable to Class A common stockholders:
Basic$(0.11)$(0.10)
Diluted$(0.11)$(0.10)
Weighted average shares of Class A common stock outstanding:
Basic22,042,801 19,129,056 
Diluted22,042,801 19,129,056 
__________________________
1.Effective October 1, 2020, the Company's financial statements are presented in accordance with ASU 2021-08, Accounting Standards Codification Topic 805, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. See Note 2 to the interim consolidated financial statements for a description of the recently adopted accounting pronouncement and the impacts of adoption on the condensed consolidated statements of operations.

See Notes to the Interim Condensed Consolidated Financial Statements
5

i3 Verticals, Inc.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
(In thousands, except share amounts)
Class A Common StockClass B Common StockAdditional Paid-In CapitalRetained Earnings (Deficit)Non-Controlling InterestTotal Equity
SharesAmountSharesAmount
Balance at September 30, 202122,026,098 $2 10,229,142 $1 $211,237 $(6,480)$84,831 $289,591 
Equity-based compensation— — — — 6,624 — — 6,624 
Net loss— — — — — (2,528)(1,153)(3,681)
Redemption of common units in i3 Verticals, LLC15,000  (15,000) 123 — (123) 
Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis— — — — 345 — — 345 
Exercise of equity-based awards23,219  — — 174 — — 174 
Allocation of equity to non-controlling interests— — — — (1,899)— 1,899  
Balance at December 31, 202122,064,317 $2 10,214,142 $1 $216,604 $(9,008)$85,454 $293,053 

See Notes to the Interim Condensed Consolidated Financial Statements
6

i3 Verticals, Inc.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) (CONTINUED)
(In thousands, except share amounts)
Class A Common StockClass B Common StockAdditional Paid-In CapitalRetained Earnings (Deficit)Non-Controlling Interest
Total Equity(1)
SharesAmountSharesAmount
Balance at September 30, 202018,864,143 $2 11,900,621 $1 $157,598 $(2,023)$84,590 $240,168 
Equity-based compensation— — — — 3,441 — — 3,441 
Net loss— — — — — (1,998)(1,024)(3,022)
Redemption of common units in i3 Verticals, LLC1,019,609 — (1,019,609)— 7,185 — (7,185) 
Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis— — — — 1,162 — — 1,162 
Exercise of equity-based awards121,019 — — — 688 — — 688 
Allocation of equity to non-controlling interests— — — — (1,008)— 1,008  
Balance at December 31, 202020,004,771 $2 10,881,012 $1 $169,066 $(4,021)$77,389 $242,437 
__________________________
1.Effective October 1, 2020, the Company's financial statements are presented in accordance with ASU 2021-08, Accounting Standards Codification Topic 805, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. See Note 2 to the interim consolidated financial statements for a description of the recently adopted accounting pronouncement and the impacts of adoption on the condensed consolidated statement of changes in equity.

See Notes to the Interim Condensed Consolidated Financial Statements
7

i3 Verticals, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)


Three months ended December 31,
2021
2020(1)(2)
Cash flows from operating activities:
Net loss$(3,681)$(3,022)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization6,870 5,092 
Equity-based compensation6,624 3,441 
Provision for doubtful accounts116 62 
Amortization of debt discount and issuance costs1,416 1,332 
Amortization of capitalized customer acquisition costs167 119 
Loss on disposal of assets  
Unrealized gain on investment  
Benefit from deferred income taxes(228)(10)
Non-cash lease expense1,205 694 
Increase in non-cash contingent consideration expense from original estimate
4,927 1,904 
Changes in operating assets:
Accounts receivable(628)(1,094)
Prepaid expenses and other current assets(4,541)(1,976)
Other assets(877)(1,298)
Changes in operating liabilities:
Accounts payable419 2,503 
Accrued expenses and other current liabilities6,818 (3,496)
Settlement obligations2,581 84 
Deferred revenue5,439 6,563 
Operating lease liabilities(1,180)(782)
Other long-term liabilities1 6,037 
Contingent consideration paid in excess of original estimates(3,538)(4,115)
Net cash provided by operating activities21,910 12,038 
Cash flows from investing activities:
Expenditures for property and equipment(384)(549)
Expenditures for capitalized software(1,958)(1,166)
Acquisitions of businesses, net of cash and restricted cash acquired(60,000)(59,595)
Acquisition of other intangibles(11)(19)
Net cash used in investing activities(62,353)(61,329)

See Notes to the Interim Condensed Consolidated Financial Statements
8

i3 Verticals, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
(In thousands)

Three months ended December 31,
2021
2020(1)(2)
Cash flows from financing activities:
Proceeds from revolving credit facility105,009 88,255 
Payments on revolving credit facility(49,900)(38,948)
Cash paid for contingent consideration(6,217)(1,736)
Proceeds from stock option exercises174 851 
Payments for employee's tax withholdings from net settled stock option exercises157 (200)
Net cash provided by financing activities49,223 48,222 
Net increase in cash, cash equivalents and restricted cash8,780 (1,069)
Cash, cash equivalents and restricted cash at beginning of period17,931 20,601 
Cash, cash equivalents and restricted cash at end of period$26,711 $19,532 
Supplemental disclosure of cash flow information:
Cash paid for interest$1,367 $420 
Cash paid for income taxes$556 $ 
__________________________
1.The prior period amounts included in the statement of cash flows have been updated to correct settlement assets as restricted cash, which were previously reported as cash flows used in operating activities. These adjustments reflect an increase in prior year cash flows provided by operating activities of $84 and a corresponding increase in cash, cash equivalents, and restricted cash at the end of the period.
2.Effective October 1, 2020, the Company's financial statements are presented in accordance with ASU 2021-08, Accounting Standards Codification Topic 805, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. See Note 2 to the interim consolidated financial statements for a description of the recently adopted accounting pronouncement and the impacts of adoption on the condensed consolidated statements of cash flows.
The following tables provide reconciliations of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to that shown in the condensed consolidated statements of cash flows:
September 30,
20212020
Beginning balance
Cash and cash equivalents$3,641 $15,568 
Settlement assets4,768  
Restricted cash9,522 5,033 
Total cash, cash equivalents, and restricted cash$17,931 $20,601 
December 31,
20212020
Ending balance
Cash and cash equivalents$3,371 $10,879 
Settlement assets8,034 84 
Restricted cash15,306 8,569 
Total cash, cash equivalents, and restricted cash$26,711 $19,532 
See Notes to the Interim Condensed Consolidated Financial Statements
9


i3 VERTICALS, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except unit, share and per share amounts)

1. ORGANIZATION AND OPERATIONS
i3 Verticals, Inc. (the “Company”) was formed as a Delaware corporation on January 17, 2018. The Company was formed for the purpose of completing an initial public offering (“IPO”) of its Class A common stock and other related transactions in order to carry on the business of i3 Verticals, LLC and its subsidiaries. i3 Verticals, LLC was founded in 2012 and delivers seamlessly integrated payment and software solutions to small- and medium-sized businesses (“SMBs”) and organizations in strategic vertical markets. The Company’s headquarters are located in Nashville, Tennessee, with operations throughout the United States. Unless the context otherwise requires, references to “we,” “us,” “our,” “i3 Verticals” and the “Company” refer to i3 Verticals, Inc. and its subsidiaries, including i3 Verticals, LLC.
Reorganization Transactions
In connection with the IPO, the Company completed the following transactions (the “Reorganization Transactions”):
i3 Verticals, LLC amended and restated its existing limited liability company agreement to, among other things, (1) convert all existing Class A units, common units (including common units issued upon the exercise of existing warrants) and Class P units of ownership interest in i3 Verticals, LLC into either Class A voting common units of i3 Verticals, LLC (such holders of Class A voting common units referred to herein as the “Continuing Equity Owners”) or Class B non-voting common units of i3 Verticals, LLC (such holders of Class B non-voting common units referred to herein as the “Former Equity Owners”), and (2) appoint i3 Verticals, Inc. as the sole managing member of i3 Verticals, LLC upon its acquisition of Common Units in connection with the IPO;
the Company amended and restated its certificate of incorporation to provide for, among other things, Class A common stock and Class B common stock;
i3 Verticals, LLC and the Company consummated a merger among i3 Verticals, LLC, i3 Verticals, Inc. and a newly formed wholly-owned subsidiary of i3 Verticals, Inc. (“MergerSub”) whereby: (1) MergerSub merged with and into i3 Verticals, LLC, with i3 Verticals, LLC as the surviving entity; (2) Class A voting common units converted into newly issued Common Units in i3 Verticals, LLC together with an equal number of shares of Class B common stock of i3 Verticals, Inc., and (3) Class B non-voting common units converted into Class A common stock of i3 Verticals, Inc. based on a conversion ratio that provided an equitable adjustment to reflect the full value of the Class B non-voting common units; and
the Company issued shares of its Class A common stock pursuant to a voluntary private conversion of certain subordinated notes by certain related and unrelated creditors of i3 Verticals, LLC.
Following the completion of the IPO and Reorganization Transactions, the Company became a holding company and the principal asset that it owns are the Common Units in i3 Verticals, LLC. i3 Verticals, Inc. operates and controls all of i3 Verticals, LLC's operations and, through i3 Verticals, LLC and its subsidiaries, conducts i3 Verticals, LLC's business. i3 Verticals, Inc. has a majority economic interest in i3 Verticals, LLC.
i3 Verticals, Inc. is the sole managing member of i3 Verticals, LLC and as a result, consolidates the financial results of i3 Verticals, LLC and reports a non-controlling interest representing the Common Units of i3 Verticals, LLC held by the Continuing Equity Owners.

10


i3 VERTICALS, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except unit, share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the reporting and disclosure rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for fair presentation of the unaudited condensed consolidated financial statements of the Company and its subsidiaries as of December 31, 2021 and for the three months ended December 31, 2021 and 2020. The results of operations for the three months ended December 31, 2021 and 2020 are not necessarily indicative of the operating results for the full year. It is recommended that these interim condensed consolidated financial statements be read in conjunction with the Company's consolidated financial statements and related footnotes for the years ended September 30, 2021 and 2020, included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2021.
Principles of Consolidation
These interim condensed consolidated financial statements include the accounts of the Company and its subsidiary companies. All significant intercompany accounts and transactions have been eliminated in consolidation.
Restricted Cash
Restricted cash represents funds held-on-deposit with processing banks pursuant to agreements to cover potential merchant losses. It is presented as long-term assets on the accompanying condensed consolidated balance sheets since the related agreements extend beyond the next twelve months.
Settlement Assets and Obligations
Settlement assets and obligations result when funds are temporarily held or owed by the Company on behalf of merchants, consumers, schools, and other institutions. Timing differences, interchange expense, merchant reserves and exceptional items cause differences between the amount received from the card networks and the amount funded to counterparties. These balances arising in the settlement process are reflected as settlement assets and obligations on the accompanying consolidated balance sheets. With the exception of merchant reserves, settlement assets or settlement obligations are generally collected and paid within one to four days. As of December 31, 2021, settlement assets and settlement obligations were both $8,034. As of September 30, 2021, the Company had $4,768 of settlement assets and settlement obligations.
Inventories
Inventories consist of point-of-sale equipment to be sold to clients and are stated at the lower of cost, determined on a weighted average or specific basis, or net realizable value. Inventories were $3,071 and $2,220 at December 31, 2021 and September 30, 2021, respectively, and are included within prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.
Acquisitions
Business acquisitions have been recorded using the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), and, accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair value as of the date of acquisition. Where relevant, the fair value of contingent consideration included in an acquisition is calculated using a Monte Carlo simulation. The fair value of merchant relationships and non-compete assets acquired is identified using the Income Approach. The fair values of trade names and internally-developed software acquired are identified using the Relief from Royalty
11


i3 VERTICALS, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except unit, share and per share amounts)
Method. The fair value of deferred revenue is identified using the Adjusted Fulfillment Cost Method. After the purchase price has been allocated, goodwill is recorded to the extent the total consideration paid for the acquisition, including the acquisition date fair value of contingent consideration, if any, exceeds the sum of the fair values of the separately identifiable acquired assets and assumed liabilities. Acquisition costs for business combinations are expensed when incurred and recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.
Acquisitions not meeting the accounting criteria to be accounted for as a business combination are accounted for as an asset acquisition. An asset acquisition is recorded at its purchase price, inclusive of acquisition costs, which is allocated among the acquired assets and assumed liabilities based upon their relative fair values at the date of acquisition.
The operating results of an acquisition are included in the Company’s condensed consolidated statements of operations from the date of such acquisition. Acquisitions completed during the three months ended December 31, 2021 contributed $7,555 and $805 of revenue and net income, respectively, to the Company's condensed consolidated statements of operations for the three months then ended.
Leases
The Company adopted ASU 2016-02, Leases, (“ASC 842”) on October 1, 2020, using the optional modified retrospective method under which the prior period financial statements were not restated for the new guidance. The Company elected the accounting policy practical expedients for all classes of underlying assets to (i) combine associated lease and non-lease components in a lease arrangement as a combined lease component and (ii) exclude recording short-term leases as right-of-use assets on the condensed consolidated balance sheets.
At contract inception the Company determines whether an arrangement is, or contains a lease, and for each identified lease, evaluates the classification as operating or financing. Leased assets and obligations are recognized at the lease commencement date based on the present value of fixed lease payments to be made over the term of the lease. Renewal and termination options are factored into determination of the lease term only if the option is reasonably certain to be exercised. The Company’s leases do not provide a readily determinable implicit interest rate and the Company uses its incremental borrowing rate to measure the lease liability and corresponding right-of-use asset. The incremental borrowing rate is a fully collateralized rate that considers the Company’s credit rating, market conditions and the term of the lease. The Company accounts for all components in a lease arrangement as a single combined lease component.
Operating lease cost is recognized on a straight-line basis over the lease term. Total lease costs include variable lease costs, which are primarily comprised of the consumer price index adjustments and other changes based on rates, such as costs of insurance and property taxes. Variable payments are expensed in the period incurred and not included in the measurement of lease assets and obligations.
Revenue Recognition and Deferred Revenue
Revenue is recognized as each performance obligation is satisfied, in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The Company accrues for rights of refund, processing errors or penalties, or other related allowances based on historical experience. The Company utilized the portfolio approach practical expedient within ASC 606-10-10-4 Revenue from Contracts with Customers—Objectives and the significant financing component practical expedient within ASC 606-10-32-18 Revenue from Contracts with Customers—The Existence of a Significant Financing Component in the Contract in performing the analysis. The Company adopted ASC 606 on October 1, 2019, using the modified retrospective method and applying the standard to all contracts not completed on the date of adoption.
12


i3 VERTICALS, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except unit, share and per share amounts)
The Company's revenue for the three months ended December 31, 2021 and 2020 is derived from the following sources:
Software and related services — Includes sales of software as a service, transaction-based fees, ongoing software maintenance and support, software licenses and other professional services related to our software offerings
Payments Includes volume-based payment processing fees (“discount fees”), gateway fees and other related fixed transaction or service fees
Other — Includes sales of equipment, non-software related professional services and other revenues
Revenues from sales of the Company’s software are recognized when the related performance obligations are satisfied. Sales of software licenses are categorized into one of two categories of intellectual property in accordance with ASC 606, functional or symbolic. The key distinction is whether the license represents a right to use (functional) or a right to access (symbolic) intellectual property. The Company generates sales of one-time software licenses, which is functional intellectual property. Revenue from functional intellectual property is recognized at a point in time, when delivered to the client. The Company also offers access to its software under software-as-a-service (“SaaS”) arrangements, which represent services arrangements. Revenue from SaaS arrangements is recognized over time, over the term of the agreement.
Discount fees represent a percentage of the dollar amount of each credit or debit transaction processed or a specified per transaction amount, depending on the card type. The Company frequently enters into agreements with clients under which the client engages the Company to provide both payment authorization services and transaction settlement services for all of the cardholder transactions of the client, regardless of which issuing bank and card network to which the transaction relates. The Company’s core performance obligations are to stand ready to provide continuous access to the Company’s payment authorization services and transaction settlement services in order to be able to process as many transactions as its clients require on a daily basis over the contract term. These services are stand ready obligations, as the timing and quantity of transactions to be processed is not determinable. Under a stand-ready obligation, the Company’s performance obligation is defined by each time increment rather than by the underlying activities satisfied over time based on days elapsed. Because the service of standing ready is substantially the same each day and has the same pattern of transfer to the client, the Company has determined that its stand-ready performance obligation comprises a series of distinct days of service. Discount fees are recognized each day based on the volume or transaction count at the time the merchants’ transactions are processed.
The Company follows the requirements of ASC 606-10-55 Revenue from Contracts with Customers—Principal versus Agent Considerations, which states that the determination of whether a company should recognize revenue based on the gross amount billed to a client or the net amount retained is a matter of judgment that depends on the facts and circumstances of the arrangement. The determination of gross versus net recognition of revenue requires judgment that depends on whether the Company controls the good or service before it is transferred to the merchant or whether the Company is acting as an agent of a third party. The assessment is provided separately for each performance obligation identified. Under its agreements, the Company incurs interchange and network pass-through charges from the third-party card issuers and card networks, respectively, related to the provision of payment authorization services. The Company has determined that it is acting as an agent with respect to these payment authorization services, based on the following factors: (1) the Company has no discretion over which card issuing bank will be used to process a transaction and is unable to direct the activity of the merchant to another card issuing bank, and (2) interchange and card network rates are pre-established by the card issuers or card networks, and the Company has no latitude in determining these fees. Therefore, revenue allocated to the payment authorization performance obligation is presented net of interchange and card network fees paid to the card issuing banks and card networks, respectively.
13


i3 VERTICALS, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except unit, share and per share amounts)
With regards to the Company's discount fees, generally, where the Company has control over merchant pricing, merchant portability, credit risk and ultimate responsibility for the merchant relationship, revenues are reported at the time of sale equal to the full amount of the discount charged to the merchant, less interchange and network fees. Revenues generated from merchant portfolios where the Company does not have control over merchant pricing, liability for merchant losses or credit risk or rights of portability are reported net of interchange and network fees as well as third-party processing costs directly attributable to processing and bank sponsorship costs.
Revenues are also derived from a variety of fixed transaction or service fees, including authorization fees, convenience fees, statement fees, annual fees, gateway fees, which are charged for accessing our payment and software solutions, and fees for other miscellaneous services, such as handling chargebacks. Revenues derived from service fees are recognized at the time the services are performed and there are no further performance obligations. Revenue from fixed transactions, which principally relate to the sale of equipment, is recognized upon transfer of ownership and delivery to the client, after which there are no further performance obligations.
Arrangements may contain multiple performance obligations, such as payment authorization services, transaction settlement services, hardware, software products, maintenance, and professional installation and training services. Revenues are allocated to each performance obligation based on the standalone selling price of each good or service. The selling price for a deliverable is based on standalone selling price, if available, the adjusted market assessment approach, estimated cost plus margin approach, or residual approach. The Company establishes estimated selling price, based on the judgment of the Company's management, considering internal factors such as margin objectives, pricing practices and controls, client segment pricing strategies and the product life cycle. In arrangements with multiple performance obligations, the Company determines allocation of the transaction price at inception of the arrangement and uses the standalone selling prices for the majority of the Company's revenue recognition.
Revenues from sales of the Companys combined hardware and software element are recognized when each performance obligation has been satisfied which has been determined to be upon the delivery of the product. Revenues derived from service fees are recognized at the time the services are performed and there are no further performance obligations. The Company’s professional services, including training, installation, and repair services are recognized as revenue as these services are performed.
14


i3 VERTICALS, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except unit, share and per share amounts)
The tables below present a disaggregation of the Company's revenue from contracts with clients by product by segment. Refer to Note 14 for discussion of the Company's segments. The Company's products are defined as follows:
Software and related services — Includes sales of SaaS, transaction-based fees, ongoing software maintenance and support, software licenses and other professional services related to our software offerings.
Payments Includes discount fees, gateway fees and other related fixed transaction or service fees.
Other — Includes sales of equipment, non-software related professional services and other revenues.
For the Three Months Ended December 31, 2021
Merchant ServicesProprietary Software and PaymentsOtherTotal
Software and related services revenue$2,962 $33,384 $(8)$36,338 
Payments revenue24,304 9,166 (4)33,466 
Other revenue1,911 2,224  4,135 
Total revenue$29,177 $44,774 $(12)$73,939 
For the Three Months Ended December 31, 2020
Merchant ServicesProprietary Software and PaymentsOtherTotal
Software and related services revenue$2,929 $13,856 $ $16,785 
Payments revenue20,541 5,497 (426)25,612 
Other revenue1,591 640 (7)2,224 
Total revenue$25,061 $19,993 $(433)$44,621 

The tables below present a disaggregation of the Company's revenue from contracts with clients by timing of transfer of goods or services by segment. The Company's revenue included in each category are defined as follows:
Revenue transferred over time Includes discount fees, gateway fees, sales of SaaS and ongoing support contract revenue.
Revenue transferred at a point in time — Includes fixed service fees, software licenses sold as functional intellectual property, professional services and other equipment.
For the Three Months Ended December 31, 2021
Merchant ServicesProprietary Software and PaymentsOtherTotal
Revenue earned over time$22,734 $31,288 $(8)$54,014 
Revenue earned at a point in time6,443 13,486 (4)19,925 
Total revenue$29,177 $44,774 $(12)$73,939 
15


i3 VERTICALS, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except unit, share and per share amounts)
For the Three Months Ended December 31, 2020
Merchant ServicesProprietary Software and PaymentsOtherTotal
Revenue earned over time$18,102 $14,937 $(388)$32,651 
Revenue earned at a point in time6,959 5,056 (45)11,970 
Total revenue$25,061 $19,993 $(433)$44,621 

Contract Assets
The Company bills for certain software and related services sales and fixed fee professional services upon pre-determined milestones in the contracts. Therefore, the Company may have contract assets other than trade accounts receivable for performance obligations that are partially completed, which would typically represent consulting services provided before a milestone is completed in a contract. Unbilled amounts associated with these services are presented as accounts receivable as the Company has an unconditional right to payment for services performed.
As of December 31, 2021 and September 30, 2021, the Company’s contract assets from contracts with customers was $4,030 and $1,505, respectively.
Contract Liabilities
Deferred revenue represents amounts billed to clients by the Company for services contracts. Payment is typically collected at the start of the contract term. The initial prepaid contract agreement balance is deferred. The balance is then recognized as the services are provided over the contract term. Deferred revenue that is expected to be recognized as revenue within one year is recorded as short-term deferred revenue and the remaining portion is recorded as other long-term liabilities in the condensed consolidated balance sheets. The terms for most of the Company's contracts with a deferred revenue component are one year. Substantially all of the Company's deferred revenue is anticipated to be recognized within the next year.
The following tables present the changes in deferred revenue as of and for the three months ended December 31, 2021 and 2020, respectively:
Balance at September 30, 2021
$30,024 
Deferral of revenue21,032 
Recognition of unearned revenue(15,735)
Balance at December 31, 2021
$35,321 
Balance at September 30, 2020
$11,054 
Deferral of revenue22,142 
Recognition of unearned revenue(7,541)
Balance at December 31, 2020
$25,655 

Costs to Obtain and Fulfill a Contract
The Company capitalizes incremental costs to obtain new contracts and contract renewals and amortizes these costs on a straight-line basis as an expense over the benefit period, which is generally the contract term, unless a commensurate payment is not expected at renewal. As of December 31, 2021 and 2020 the Company had $4,087 and $3,356, respectively, of capitalized contract costs, which relates to commissions paid to employees and agents as well as other incentives given to customers to obtain new sales, included within “Other
16


i3 VERTICALS, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except unit, share and per share amounts)
assets" on the condensed consolidated balance sheets. The Company recorded expense related to these costs of $167 and $119 for the three months ended December 31, 2021, and 2020 respectively.
The Company expenses sales commissions as incurred for the Company's sales commission plans that are paid on recurring monthly revenues, portfolios of existing clients, or have a substantive stay requirement prior to payment.
Other Cost of Services
Other costs of services include third-party processing costs directly attributable to processing and bank sponsorship costs, which may not be based on a percentage of volume. These costs also include related costs such as residual payments to sales groups, which are based on a percentage of the net revenues generated from merchant referrals. In certain merchant processing bank relationships the Company is liable for chargebacks against a merchant equal to the volume of the transaction. Losses resulting from chargebacks against a merchant are included in other cost of services on the accompanying condensed consolidated statement of operations. The Company evaluates its risk for such transactions and estimates its potential loss from chargebacks based primarily on historical experience and other relevant factors. The reserve for merchant losses is included within accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets. The cost of equipment sold is also included in other cost of services. Other costs of services are recognized at the time the associated revenue is earned.
The Company accounts for all governmental taxes associated with revenue transactions on a net basis.
Use of Estimates
The preparation of condensed consolidated 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, the value of purchase consideration paid and identifiable assets acquired and assumed in acquisitions, goodwill and intangible asset impairment review, determination of performance obligations for revenue recognition, loss reserves, assumptions used in the calculation of equity-based compensation and in the calculation of income taxes, and certain tax assets and liabilities as well as the related valuation allowances. Actual results could differ from those estimates.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The amendments in ASU No. 2016-13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The Company’s financial assets impacted by this ASU include primarily accounts receivable, settlement processing assets, and certain other receivables. The Company adopted this ASU on October 1, 2021. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in ASU No. 2021-08 address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination. The amendments in ASU No. 2021-08 require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. Upon adoption, an acquirer should account for the related revenue contracts of the acquiree as if it has originated the contracts.
For public business entities, the amendments in ASU No. 2021-08 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments in ASU No. 2021-08
17


i3 VERTICALS, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except unit, share and per share amounts)
should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption of the amendments is permitted. An entity that early adopts should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The Company has early adopted ASU No. 2021-08 effective October 1, 2020.
The adoption of ASU 2021-08 resulted in adjustments to the fair values assigned to goodwill and deferred revenue assumed as of the acquisition dates of acquisitions occurring during the year ended September 30, 2021, and an increase in revenue for the year ended September 30, 2021 due to recognition of revenue earned during the period for deferred revenue contracts acquired in business combinations. The following tables present the material impacts of adopting ASU 2021-08 on the Company's condensed consolidated balance sheets as of December 31, 2020:
As of December 31, 2020
Excluding impacts of adoption of ASU 2021-08AdjustmentPresentation with adoption of ASU 2021-08
Assets
Goodwill$219,912 $2,993 $222,905 
Deferred tax asset$44,966 $(303)$44,663 
Liabilities and equity
Liabilities
Current liabilities
Deferred revenue$23,868 $1,686 $25,554 
Stockholders' equity
Additional paid-in-capital$169,097 $(31)$169,066 
Accumulated deficit$(4,595)$574 $(4,021)
Non-controlling interest$76,928 $461 $77,389 
18


i3 VERTICALS, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except unit, share and per share amounts)
The following tables present the material impacts of adoption of ASU 2021-08 on the Company's condensed consolidated statements of operations for the three months ended December 31, 2020:
Three months ended December 31, 2020
Excluding impacts of adoption of ASU 2021-08AdjustmentPresentation with adoption of ASU 2021-08
Revenue$43,313 $1,308 $44,621 
Benefit from income taxes$(219)$209 $(10)
Net loss$(4,121)$1,099 $(3,022)
Net loss attributable to non-controlling interest$(1,549)$525 $(1,024)
Net loss attributable to i3 Verticals, Inc.$(2,572)$574 $(1,998)
Net loss per share attributable to Class A common stockholders:
Basic$(0.13)$0.03 $(0.10)
Diluted$(0.13)$0.03 $(0.10)
The following tables present the material impacts of adoption of ASU 2021-08 on the Company's condensed consolidated statement of changes in equity for the three months ended December 31, 2020:
Three months ended December 31, 2020
Excluding impacts of adoption of ASU 2021-08AdjustmentPresentation with adoption of ASU 2021-08
Net loss$(4,121)$1,099 $(3,022)
Establishment of liabilities under a tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis$1,257 $(95)$1,162 
Balance at December 31, 2020$241,433 $1,004 $242,437 
The following tables present the material impacts of adoption of ASU 2021-08 on the Company's condensed consolidated statements of cash flows for the three months ended December 31, 2020:
Three months ended December 31, 2020
Excluding impacts of adoption of ASU 2021-08AdjustmentPresentation with adoption of ASU 2021-08
Cash flows from operating activities:
Net loss$(4,121)$1,099 $(3,022)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Benefit from deferred income taxes$(219)$209 $(10)
Changes in operating liabilities:
Deferred revenue$7,870 $(1,307)$6,563 
Other long-term liabilities$6,038 $(1)$6,037 
Recently Issued Accounting Pronouncements Not Yet Adopted
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)—Accounting For Convertible Instruments and Contracts in an Entity's Own Equity (“ASU 2020-06”). ASU 2020-06 simplifies accounting for convertible instruments by removing major separation models required under current
19


i3 VERTICALS, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except unit, share and per share amounts)
GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. ASU 2020-06 also simplifies the diluted net income per share calculation in certain areas. The amendments in ASU 2020-06 are effective for public business entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. As the Company is an emerging growth company and has elected to use the extended transition period of such companies, the Company will not be required to adopt ASU 2020-06 until October 1, 2022. The Company is currently evaluating the impact of the adoption of this principle on the Company’s consolidated financial statements.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The amendments in ASU No. 2021-04 provides guidance to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this ASU No. 2021-04 are effective for all entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, including interim periods within those fiscal years. As a result, the Company will not be required to adopt ASU 2021-04 until October 1, 2022. The Company is currently evaluating the impact of the adoption of this principle on the Company’s condensed consolidated financial statements.

3. ACQUISITIONS
During the three months ended December 31, 2021 and 2020 the Company acquired the following intangible assets and businesses:
Business Combinations during the three months ended December 31, 2021
During the three months ended December 31, 2021, the Company completed the acquisition of two businesses to expand the Company’s software offerings in the public sector and healthcare vertical markets. Certain of the purchase price allocations assigned for these acquisitions are considered preliminary as of December 31, 2021.
Total purchase consideration was $100,481, including $95,000 in cash consideration, funded by proceeds from the Company's revolving credit facility, and $5,481 of contingent consideration.
The goodwill associated with one of the two acquisitions is deductible for tax purposes. The acquired merchant relationships intangible assets have estimated amortization periods of between nine and nineteen years. The non-compete agreement and trade names have estimated amortization periods of five years. The weighted-average amortization period for all intangibles acquired is fourteen years. The acquired capitalized software has a weighted-average amortization period of seven years.
Acquisition-related costs for these businesses amounted to approximately $228 and were expensed as incurred.
Certain provisions in the purchase agreements provide for additional consideration of up to $18,000, in the aggregate, to be paid based upon the achievement of specified financial performance targets, as defined in the purchase agreements, through no later than December 2023. The Company determined the acquisition date fair values of the liabilities for the contingent consideration based on probability forecasts and discounted cash flow analyses. In each subsequent reporting period, the Company will reassess its current estimates of performance
20


i3 VERTICALS, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except unit, share and per share amounts)
relative to the targets and adjust the contingent liabilities to their fair values through earnings. See additional disclosures in Note 10.
Summary of Business Combinations during the three months ended December 31, 2021
The fair values assigned to certain assets and liabilities assumed, as of the acquisition dates, were as follows:
Total
Accounts receivable$223 
Settlement assets685 
Prepaid expenses and other current assets44 
Property and equipment181 
Capitalized software9,500 
Acquired merchant relationships38,700 
Non-compete agreements 
Trade name1,500 
Goodwill57,354 
Operating lease right-of-use assets263 
Other assets22 
Total assets acquired108,472 
Accounts Payable 
Accrued expenses and other current liabilities75 
Settlement obligations685 
Deferred revenue, current 
Current portion of operating lease liabilities82 
Operating lease liabilities, less current portion181 
Other long-term liabilities6,968 
Net assets acquired$100,481 
Pro Forma Results of Operations for Business Combinations during the three months ended December 31, 2021
The following unaudited supplemental pro forma results of operations have been prepared as though each of the acquired businesses in the three months ended December 31, 2021 had occurred on October 1, 2020. Pro forma adjustments were made to reflect the impact of depreciation and amortization, changes to executive compensation and the increased debt, all in accordance with ASC 805. This supplemental pro forma information does not purport to be indicative of the results of operations that would have been attained had the acquisitions been made on these dates, or of results of operations that may occur in the future.
Three months ended December 31,
20212020
Revenue$76,416 $54,134 
Net loss$(7,029)$(4,912)
Business Combinations during the year ended September 30, 2021
During the year ended September 30, 2021, the Company completed the acquisitions of eight unrelated businesses, including Business Information Systems, Inc., ImageSoft Inc., and six other collectively material businesses.
21


i3 VERTICALS, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except unit, share and per share amounts)
Purchase of Business Information Systems, Inc.
On February 1, 2021, the Company completed the acquisition of substantially all of the assets of Business Information Systems, GP, a Tennessee general partnership and Business Information Systems, Inc., a Tennessee corporation (collectively “BIS”) to expand its software offerings, primarily in the Public Sector vertical. BIS is within the Proprietary Software & Payments segment. Total purchase consideration was $95,495, including $52,500 in cash on hand and proceeds from the Company's revolving credit facility, 1,202,914 shares of the Company's Class A Common Stock (valued at $35,245), and $7,750 in contingent consideration.
The goodwill associated with the acquisition is deductible for tax purposes. The acquired merchant relationships intangible asset has an estimated amortization period of nineteen years. The non-compete agreement and trade name have estimated amortization periods of three and five years, respectively. The weighted-average estimated amortization period of all intangibles acquired is nineteen years. The acquired capitalized software has an estimated amortization period of ten years.
Acquisition-related costs for BIS amounted to approximately $374 and were expensed as incurred.
Certain provisions in the merger agreement provide for additional consideration of up to $16,000 in the aggregate, to be paid based upon achievement of specified financial performance targets, as defined in the purchase agreement, in the 24 months from February 1, 2021 through January 31, 2023. The Company determined the acquisition date fair value of the liability for the contingent consideration based on a probability forecast and discounted cash flow analysis. In each subsequent reporting period, the Company will reassess the current estimates of performance relative to the targets and adjust the contingent liability to its fair value through earnings. See additional disclosures in Note 10.
Purchase of ImageSoft, Inc.
On November 17, 2020, the Company completed the acquisition of substantially all of the assets of ImageSoft, Inc. (“ImageSoft”) to expand its software offerings, primarily in the Public Sector vertical. ImageSoft, is within the Proprietary Software & Payments segment. Total purchase consideration was $46,300, including $40,000 in cash consideration, funded by proceeds from the Company's revolving credit facility, and $6,300 in contingent consideration.
The goodwill associated with the acquisition is deductible for tax purposes. The acquired merchant relationships intangible asset has an estimated amortization period of twenty years. The non-compete agreement and trade name have estimated amortization periods of three and five years, respectively. The weighted-average estimated amortization period of all intangibles acquired is nineteen years. The acquired capitalized software has an estimated amortization period of seven years.
Acquisition-related costs for ImageSoft amounted to approximately $403 and were expensed as incurred.
Certain provisions in the merger agreement provide for additional consideration of up to $20,000 in the aggregate, to be paid based upon achievement of specified financial performance targets, as defined in the purchase agreement, in the 24 months from May 1, 2021 through April 30, 2023. The Company determined the acquisition date fair value of the liability for the contingent consideration based on a probability forecast and discounted cash flow analysis. In each subsequent reporting period, the Company will reassess the current estimates of performance relative to the targets and adjust the contingent liability to its fair value through earnings. See additional disclosures in Note 10.
Other Business Combinations
From October 1, 2020 to September 30, 2021, the Company completed the acquisitions of six other businesses to expand the Company’s software offerings in the public sector and Healthcare vertical markets and to add proprietary technology that will augment the Company’s existing platform across several verticals. Five of these businesses are within the Proprietary Software & Payments segment and one is within the Merchant
22


i3 VERTICALS, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except unit, share and per share amounts)
Services segment. Total purchase consideration was $65,527, including $57,000 in cash consideration, funded by proceeds from the Company's revolving credit facility, and $8,527 of contingent consideration.
For each of these businesses acquired, the goodwill associated with the acquisition is deductible for tax purposes. The acquired merchant relationships intangible assets have estimated amortization periods of between ten and twenty-five years. The non-compete agreement and trade names have estimated amortization periods of four years. The weighted-average amortization period for all intangibles acquired is sixteen years. The acquired capitalized software has a weighted-average amortization period of seven years.
Acquisition-related costs for these businesses amounted to approximately $1,101 and were expensed as incurred.
Certain provisions in the purchase agreements provide for additional consideration of up to $50,200, in the aggregate, to be paid based upon the achievement of specified financial performance targets, as defined in the purchase agreements, through no later than June 2023. The Company determined the acquisition date fair values of the liabilities for the contingent consideration based on probability forecasts and discounted cash flow analyses. In each subsequent reporting period, the Company will reassess its current estimates of performance relative to the targets and adjust the contingent liabilities to their fair values through earnings. See additional disclosures in Note 10.
23


i3 VERTICALS, Inc.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except unit, share and per share amounts)
Summary of Business Combinations during the year ended September 30, 2021
The fair values assigned to certain assets and liabilities assumed, as of the acquisition dates, during the year ended September 30, 2021 were as follows:
BISImageSoft, Inc.OtherTotal
Accounts receivable$1,567 $4,997 $3,216 $9,780 
Settlement assets6,889 120  7,009 
Inventories458  161 619 
Prepaid expenses and other current assets10 2,897 2,024 4,931 
Property and equipment206 433 312 951 
Capitalized software15,200 5,200 4,100 24,500 
Acquired merchant relationships32,300 16,300 24,040 72,640 
Non-compete agreements100 610 390 1,100 
Trade name700 1,100 840