Business Context and Reporting Period
This Form 8-K was filed by i3 Verticals, Inc. on June 3, 2021, reporting events that occurred on June 2, 2021. The Company is an emerging growth company incorporated in Delaware, with its Class A Common Stock trading on the Nasdaq Global Select Market under the symbol IIIV.
Key Financial Metrics
The filing does not provide current revenue, profit, cash flow, margin, debt, or liquidity metrics. The only financial figure disclosed relates to a historical transaction: the Company acquired the subsidiary i3-Software & Services, LLC ("S&S") in 2018 for an aggregate purchase price of $17 million, including upfront cash and contingent consideration.
Material Changes and Events
The primary event reported is the filing of a Petition on June 2, 2021, in the 19th Judicial District Court, Parish of East Baton Rouge, Louisiana. The plaintiffs include the State of Louisiana and various law enforcement districts. The lawsuit targets S&S, the Company, and the former owner of S&S. The claims allege inadequacies in the Company's cybersecurity practices regarding a third-party remote access software product used to serve Louisiana law enforcement districts.
Guidance, Risks, and Contingencies
- Litigation Damages: The Petition seeks $15 million in network remediation costs, return of purchase prices, potential additional remediation expenses, notification costs related to an alleged data breach, and reasonable attorneys' fees.
- Regulatory Investigation: The Company is aware of a related investigation by the U.S. Department of Justice (DOJ) focused on unauthorized access to S&S customers' internal networks, potentially enabled by the third-party software. The Company has cooperated fully with document subpoenas and employee interviews.
- Management Outlook: Management believes these matters will not have a material adverse effect on the business or financial condition individually or in the aggregate. However, the Company cannot assure that these matters will not materially affect results of operations in the period they are resolved.
Investor Verification Checklist
- Verify the specific scope of the alleged data breach and the number of affected law enforcement districts.
- Monitor the status of the DOJ investigation and any potential regulatory penalties.
- Assess the potential financial impact of the $15 million remediation claim and associated legal fees.
- Review the Company's cybersecurity protocols and third-party vendor risk management practices.
- Track any future disclosures regarding the outcome of the litigation or the DOJ investigation.