Business Context and Reporting Period
This Form 8-K, filed on June 3, 2019, reports on events occurring on May 31, 2019. I3 Verticals, Inc. (the "Company"), an emerging growth company, completed the acquisition of Pace Payment Systems, Inc. ("Pace") and its wholly owned subsidiary, Pace Payments, Inc. Pace operates in the payment processing sector, marketing and selling products and services including software, with a focus on integrated partnerships in public and education sectors.
Key Financial Metrics and Transaction Terms
The acquisition was executed via a Merger Agreement dated May 31, 2019. The financial terms of the transaction are as follows:
- Cash Consideration: $52.5 million paid at closing.
- Equity Consideration: $0.2 million in restricted shares of Class A Common Stock.
- Contingent Consideration: Up to $20.0 million in additional consideration for former Pace equity holders, subject to growth metrics related to Pace's financial performance from January 1, 2020, through December 31, 2021.
- Working Capital: Adjustments apply based on terms in the Merger Agreement.
The filing references audited financial statements for Pace for fiscal years ended December 31, 2018 and 2017, and unaudited statements for the three months ended March 31, 2019 and 2018, but does not provide specific revenue, profit, or cash flow figures within the text of this report.
Material Changes
The primary material change is the completion of the acquisition of Pace Payment Systems, Inc. Pace now survives the merger as a wholly owned subsidiary of i3-SDCR, Inc., a subsidiary of the Company. This transaction expands the Company's footprint in the payment processing market, specifically within public and education sectors.
Outlook, Risks, and Contingencies
Management Commentary and Outlook: The Company issued a press release on June 3, 2019, announcing the completion of the merger. Future financial performance is partially tied to the satisfaction of growth metrics for Pace over the 24-month period ending December 31, 2021, which could trigger up to $20.0 million in additional payments.
Risks and Contingencies: The filing includes standard disclaimers regarding the Merger Agreement. Representations and warranties are made solely for the benefit of the contracting parties and may not reflect the actual state of facts for investors. Information regarding the subject matter of these representations may change after the agreement date. The contingent consideration is subject to specific financial performance targets.
Investor Verification Checklist
- Review the full Merger Agreement (Exhibit 2.1) for detailed representations, warranties, and covenants.
- Examine the audited and unaudited financial statements of Pace (Exhibits 99.2 and 99.3) to assess historical performance.
- Analyze the unaudited pro forma combined financial information (Exhibit 99.4) to understand the immediate financial impact of the acquisition.
- Verify the specific growth metrics required to trigger the $20.0 million contingent consideration.
- Confirm the status of working capital adjustments post-closing.