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prth-20220630
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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 June 30, 2022

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to 
          Priority Technology Holdings, Inc.       
Commission file number: 001-37872
https://cdn.kscope.io/c459c7228b21667080feec0306511a13-prth-20220630_g1.jpg
Priority Technology Holdings, Inc.
(Exact name of registrant as specified in its charter)

Delaware47-4257046
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2001 Westside Parkway
Suite 155
Alpharetta,Georgia30004
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (800) 935-5961
Not applicable
(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 SymbolName of each exchange on which registered
Common stock, par value $0.001PRTHNasdaq Global 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       No  
 
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       No  
 
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 filerAccelerated filer
Non-accelerated filerSmaller 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  
 
As of August 4, 2022, the number of the registrant's common stock outstanding was 76,720,809.



Table of Contents


Page
i



Priority Technology Holdings, Inc.
Commonly Used or Defined Terms
TermDefinition
2018 Plan2018 Equity Incentive Plan
2021 Stock Purchase PlanPriority Technology Holdings, Inc. 2021 Employee Stock Purchase Plan
2022 Share Repurchase ProgramPriority Technology Holdings, Inc. 2022 Share Repurchase Program
APAccounts payable
ASCAccounting Standards Codification
ASUAccounting Standards Update
B2BBusiness-to-business
B2CBusiness-to-consumer
C&HC&H Financial Services, Inc.
CEOChief Executive Officer
CFOChief Financial Officer
Credit AgreementCredit and Guaranty Agreement with Truist Bank dated as of April 27, 2021
EAETR
Estimated annual effective tax rate
EBITDAEarnings before interest, taxes, depreciation and amortization
EGCEmerging Growth Company
ESPPEmployee Stock Purchase Plan
Exchange ActSecurities Exchange Act of 1934
FASBFinancial Accounting Standards Board
FBOFor the Benefit Of
FIFinancial Institution
FinxeraFinxera Holdings, Inc.
GAAPU.S. Generally Accepted Accounting Principles
ISOIndependent sales organization
ISVIndependent software vendor
JOBS ActJumpstart Our Business Startups Act of 2012
LIBORLondon Interbank Offered Rate
NCINon-controlling interests
PIKPayment-in-kind
PHOTPriority Hospitality Technology, LLC
SECSecurities and Exchange Commission
SMB
Small to medium-sized businesses
Term facility
$620.0 million senior secured term loan facility issued under the Credit Agreement (including $320.0 million delayed draw facility)
Total Net Leverage Ratio
the ratio of consolidated total debt to the Consolidated Adjusted EBITDA (as defined in the Credit Agreement)

ii


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Priority Technology Holdings, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share data)
June 30, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$22,162 $20,300 
Restricted cash11,717 28,859 
Accounts receivable, net of allowances of $1,026 and $555, respectively
70,437 58,423 
Prepaid expenses and other current assets18,200 15,807 
Current portion of notes receivable781 272 
Settlement assets and customer account balances504,132 479,471 
Total current assets627,429 603,132 
Notes receivable, less current portion2,049 105 
Property, equipment and software, net26,749 25,233 
Goodwill365,740 365,740 
Intangible assets, net316,964 340,211 
Deferred income taxes, net11,319 8,265 
Other noncurrent assets11,053 9,256 
Total assets$1,361,303 $1,351,942 
Liabilities, Redeemable Senior Preferred Stock and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued expenses$55,200 $42,523 
Accrued residual commissions34,513 29,532 
Customer deposits and advance payments1,065 5,021 
Current portion of long-term debt6,200 6,200 
Settlement and customer account obligations506,691 500,291 
Total current liabilities603,669 583,567 
Long-term debt, net of current portion, discounts and debt issuance costs602,224 604,105 
Other noncurrent liabilities15,533 18,349 
Total noncurrent liabilities617,757 622,454 
Total liabilities1,221,426 1,206,021 
Commitments and contingencies (Note 12)
Redeemable senior preferred stock, $0.001 par value; 250,000 shares authorized; 225,000 issued and outstanding at June 30, 2022 and December 31, 2021
220,031 210,158 
Stockholders' deficit:
Preferred stock, $0.001; 100,000,000 shares authorized; none issued or outstanding at June 30, 2022 and December 31, 2021
  
Common stock, $0.001 par value; 1,000,000,000 shares authorized; 77,746,109 and 77,460,312 shares issued at June 30, 2022 and December 31, 2021, respectively; and 76,568,499 and 76,739,896 shares outstanding at June 30, 2022 and December 31, 2021, respectively
78 77 
Additional paid-in capital26,042 39,835 
Treasury stock at cost, 1,177,610 and 720,416 shares at June 30, 2022 and December 31, 2021, respectively
(6,170)(4,091)
Accumulated deficit(100,104)(100,058)
Total stockholders' deficit(80,154)(64,237)
Total liabilities, redeemable senior preferred stock and stockholders' deficit$1,361,303 $1,351,942 
1


Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenues$166,430 $125,014 $319,669 $238,311 
Operating expenses
Cost of revenue110,749 89,831 212,229 171,694 
Salary and employee benefits15,770 10,351 31,847 19,899 
Depreciation and amortization17,505 10,723 34,858 19,793 
Selling, general and administrative9,346 6,704 16,849 14,993 
Total operating expenses153,370 117,609 295,783 226,379 
Operating income13,060 7,405 23,886 11,932 
Other (expense) income
Interest expense(12,335)(7,285)(23,870)(16,453)
Debt extinguishment and modification costs (8,322) (8,322)
Other income (expense), net29 215 80 (54)
Total other expense, net(12,306)(15,392)(23,790)(24,829)
Income (loss) before income taxes754 (7,987)96 (12,897)
Income tax expense (benefit)467 1,490 142 (741)
Net income (loss)287 (9,477)(46)(12,156)
Less: Dividends and accretion attributable to redeemable senior preferred stockholders(8,549)(3,911)(16,949)(3,911)
Less: NCI preferred unit redemptions (10,777) (10,777)
Net loss attributable to common stockholders$(8,262)$(24,165)$(16,995)$(26,844)
Loss per common share:
Basic and diluted$(0.11)$(0.35)$(0.22)$(0.39)
Weighted-average common shares outstanding:
Basic and diluted78,603 69,496 78,600 68,525 


2


Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Changes in Stockholders' Deficit
(in thousands)

Common
Stock
Treasury
Stock
Additional Paid-In CapitalAccumulated DeficitDeficit Attributable to Stockholders
Shares$Shares$
December 31, 202176,740 $77 720 $(4,091)$39,835 $(100,058)$(64,237)
Equity-classified stock-based compensation— — — — 1,558 — 1,558 
Vesting of stock-based compensation129 — — — — — — 
Share repurchases and shares withheld for taxes(27)1 27 (157)(1)— (157)
Dividends on redeemable senior preferred stock— — — — (7,595)— (7,595)
Accretion of redeemable senior preferred stock— — — — (805)— (805)
Net loss— — — — — (333)(333)
March 31, 202276,842 $78 747 $(4,248)$32,992 $(100,391)$(71,569)
Equity-classified stock-based compensation— — — — 1,542 — 1,542 
ESPP compensation and vesting of stock-based compensation157 — — — 57 — 57 
Share repurchases and shares withheld for taxes(431)— 431 (1,922)— — (1,922)
Dividends on redeemable senior preferred stock— — — — (7,732)— (7,732)
Accretion of redeemable senior preferred stock— — — — (817)— (817)
Net income— — — — — 287 287 
June 30, 202276,568 $78 1,178 $(6,170)$26,042 $(100,104)$(80,154)


3

Common
Stock
Treasury
Stock
Additional Paid-In CapitalAccumulated DeficitDeficit Attributable to Stockholders
Shares$Shares$
December 31, 202067,391 $68 451 $(2,388)$5,769 $(102,013)$(98,564)
Equity-classified stock-based compensation— — — — 558 — 558 
Vesting of stock-based compensation159 — — — — — — 
Liability-classified stock-based compensation converted to equity-classified— — — — 313 — 313 
Exercise of stock options90 — — — 617 — 617 
Net loss— — — — — (2,679)(2,679)
March 31, 202167,640 $68 451 $(2,388)$7,257 $(104,692)$(99,755)
Equity-classified stock-based compensation— — — — 821 — 821 
Vesting of stock-based compensation12 — — — — — — 
Exercise of stock options30 — — — 204 — 204 
Dividends on redeemable senior preferred stock— — — — (3,413)— (3,413)
Accretion of redeemable senior preferred stock— — — — (498)— (498)
Fair value of warrants issued— — — — 11,357 — 11,357 
Fair value of PHOT preferred units redemption— — — — (10,777)— (10,777)
Fair value of common shares issued for PHOT redemption1,428 2 — — 9,962 — 9,964 
Net loss— — — — — (9,477)(9,477)
June 30, 202169,110 $70 451 $(2,388)$14,913 $(114,169)$(101,574)




4


Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
Six Months Ended June 30,
20222021
Cash flows from operating activities:
Net loss$(46)$(12,156)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization of assets34,858 19,793 
Stock-based compensation3,100 1,414 
Amortization of debt issuance costs and discounts1,719 1,158 
Write-off of deferred loan costs and discount 3,006 
Deferred income tax benefit(3,053)(881)
PIK interest (23,715)
Other non-cash items, net (39)
Change in operating assets and liabilities:
Accounts receivable (12,015)(9,115)
Prepaid expenses and other current assets(4,445)(3,232)
Income taxes (receivable) payable(304)1,606 
Notes receivable297 198 
Accounts payable and other accrued liabilities14,792 10,490 
Customer deposits and advance payments(3,957)1,385 
Other assets and liabilities, net(612)307 
Net cash provided by (used in) operating activities30,334 (9,781)
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired (34,507)
Additions to property, equipment and software(6,011)(5,222)
Notes receivable loan funding(2,750) 
Acquisitions of intangible assets(3,724)(43,353)
Other investing activities(250) 
Net cash used in investing activities(12,735)(83,082)
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net of issue discount 293,619 
Debt issuance and modification costs paid (7,597)
Repayments of long-term debt(3,100)(358,325)
Borrowings under revolving credit facility12,000 30,000 
Repayments of borrowings under revolving credit facility(12,500) 
Proceeds from the issuance of redeemable senior preferred stock, net of discount 145,000 
Redeemable senior preferred stock issuance fees and costs (5,472)
Repurchases of common stock and shares withheld for taxes(2,079) 
Dividends paid to redeemable senior preferred stockholders(7,076)(1,575)
Settlement and customer accounts obligations, net15,180 (61,570)
Contingent consideration for business combinations and asset acquisitions(1,863) 
Other financing activities 6 
Net cash provided by financing activities562 34,086 
5

Six Months Ended June 30,
20222021
Net change in cash and cash equivalents, and restricted cash:
Net increase (decrease) in cash and cash equivalents, and restricted cash18,161 (58,777)
Cash and cash equivalents, and restricted cash at beginning of period518,093 88,120 
Cash and cash equivalents, and restricted cash equivalents at end of period$536,254 $29,343 
Supplemental cash flow information:
Cash paid for interest$21,362 $10,276 
Non-cash investing and financing activities:
PIK interest added to principal of debt obligations$ $2,512 
Accruals for future contingent payments$4,141 $3,797 
Notes receivable from sellers used as partial consideration for acquisitions$ $3,499 
Non-cash additions to other noncurrent assets for right-of-use operating leases$67 $ 
Reconciliation of cash and cash equivalents, and restricted cash:
Cash and cash equivalents$22,162 $11,111 
Restricted cash11,717 18,232 
Customer account balances (see Note 4)
502,375  
Total cash and cash equivalents, and restricted cash$536,254 $29,343 


6


Priority Technology Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements

1.    Nature of Business and Significant Accounting Policies
Business, Consolidation and Presentation
Priority Technology Holdings, Inc. and its consolidated subsidiaries are referred to herein collectively as "Priority," "PRTH," the "Company," "we," "our" or "us," unless the context requires otherwise. Priority is a provider of merchant acquiring, integrated payment software, licensed money transmission services and commercial payments solutions.
The Company operates on a calendar year ending each December 31 and on four calendar quarters ending on March 31, June 30, September 30 and December 31 of each year. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.
The accompanying Unaudited Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. These Unaudited Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information pursuant to the rules and regulations of the SEC. The Consolidated Balance Sheet as of December 31, 2021 was derived from the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 but does not include all disclosures required by GAAP for annual financial statements.
In the opinion of the Company's management, all known adjustments necessary for a fair presentation of the Unaudited Consolidated Financial Statements for interim periods have been made. These adjustments consist of normal recurring accruals and estimates that affect the carrying amounts of assets and liabilities. These Unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
Use of Estimates
The preparation of Unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Unaudited Consolidated Financial Statements and the reported amounts of revenues and expenses during the reported period. Actual results could materially differ from those estimates. In particular, the continued magnitude, duration and effects of the COVID-19 pandemic are difficult to predict, and the ultimate effect could result in future charges related to the recoverability of assets, including financial assets, long-lived assets, goodwill and other losses.
Foreign Currency
The Company's reporting currency is the U.S. dollar. Assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the current exchange rate on the last day of the reporting period. Revenues and expenses are translated using the average exchange rate in effect during the reporting period. Foreign exchange translation and transaction gains and losses were not material for the periods presented and are included in the Unaudited Consolidated Statements of Operations.

Comparability of Reporting Periods
Certain prior period amounts in these Unaudited Consolidated Financial Statements have been reclassified to conform to the current period presentation, with no net effect on the Company's operating income, income (loss) before income taxes, net income (loss) or stockholders' deficit for any period presented.
7

We reclassified certain cash flows related to settlement assets and customer account balances and the related obligations from net cash used in operating activities to net cash provided by financing activities within the Unaudited Consolidated Statements of Cash Flows. Prior period amounts have been reclassified to conform to the current period presentation. The current period presentation classifies all changes in settlement and customer account balance obligations on our Unaudited Consolidated Statements of Cash Flows as net cash provided by (used in) financing activities. The current period presentation provides a more meaningful representation of the cash flows related to the movement of settlement assets and customer account balances due to the restrictions on and use of those funds.
We also reclassified the amount representing previously deferred PIK interest that was paid in connection with our April 2021 refinancing from repayments of long-term debt within net cash provided by financing activities to PIK interest within net cash used in operating activities. The reclassification provides a more meaningful presentation of the repayment of interest within operating activities.
These changes have no impact on our previously reported financial position or net decrease in cash and cash equivalents.
The following tables present the effects of the changes on the presentation of these cash flows to the previously reported Unaudited Consolidated Statement of Cash Flows:
(in thousands)Six Months Ended June 30, 2021
Net cash (used in) provided by operating activities:
Historically reported$(45,124)
Adjustment related to PIK interest(26,227)
Adjustment related to settlement assets and customer account balances and the related obligations61,570 
Reclassified$(9,781)
Net cash provided by (used in) financing activities:
Historically reported$69,429 
Adjustment related to PIK interest26,227 
Adjustment related to settlement assets and customer account balances and the related obligations(61,570)
Reclassified$34,086 
Emerging Growth Company Status
Prior to December 31, 2021, the Company was an EGC, as defined in JOBS Act, and elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies until the Company is no longer an EGC, including using the extended transition period for complying with new or revised accounting standards. On December 31, 2021, we ceased to qualify as an EGC and have adopted any new standards that we are now required to adopt.
Recently Issued Accounting Standards Pending Adoption
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financial Rate. If certain criteria are met, entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform. An entity that makes this election would not have to remeasure the contract at the modification date or reassess a previous accounting determination. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. These updates can be adopted at any time before December 31, 2022. The Company's term facility and revolving credit facility bear interest at rates based on LIBOR, and the
8

dividend rate on the Company's redeemable senior preferred stock is also based on LIBOR. The Company is evaluating the potential impact these updates may have on its Unaudited Consolidated Financial Statements.
Credit Losses
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This new guidance will change how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments. ASU 2016-13 will replace the current "incurred loss" model with an "expected loss" model. Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been "incurred"). Under the "expected loss" model, a loss (or allowance) is recognized upon initial recognition of the asset that reflects all future events that leads to a loss being realized, regardless of whether it is probable that the future event will occur. The "incurred loss" model considers past events and current conditions, while the "expected loss" model includes expectations for the future which have yet to occur. The standard will require entities to record a cumulative-effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the potential impact that this update may have on the timing of recognizing future provisions for expected losses on the Company's accounts receivable and notes receivable. Since the Company is a smaller reporting company, the Company must adopt this new standard no later than the beginning of 2023 for annual and interim reporting periods.
Recently Adopted Accounting Standards
Business Combinations
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to recognize and measure contract assets and liabilities acquired in a business combination in accordance with ASC 606, as if the acquirer had originated the contracts. Generally this will result in the acquirer recognizing and measuring the acquired contract assets and liabilities consistent with the manner by which they were recognized and measured by the acquiree. This update is effective for public companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted, including in an interim period. If this update is adopted early in an interim period, it must be applied retrospectively to all business combinations that occurred since the beginning of the fiscal year. The Company elected to early adopt ASU 2021-08 in the second quarter of 2022. The Company has not acquired any businesses during 2022, therefore there was no impact on the Company's Unaudited Consolidated Financial Statements.
2.    Revenues
Disaggregation of Revenues
The following table presents a disaggregation of our consolidated revenues by type for the three and six months ended June 30, 2022 and 2021:
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2022202120222021
Revenue Type:
Merchant card fees$139,793 $118,367 $267,745 $226,069 
Outsourced services and other services6,887 4,825 13,984 9,203 
Money transmission services revenue17,183  33,466  
Equipment2,567 1,822 4,474 3,039 
Total revenues(1),(2)
$166,430 $125,014 $319,669 $238,311 
(1)Includes contracts with an original duration of one year or less and variable consideration under a stand-ready series of distinct days of service. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.
9

(2)Approximately $0.8 million and $1.4 million of interest income for the three and six months ended June 30, 2022, respectively, is included in outsourced services and other services revenue in the table above. Approximately $0.1 million and $0.2 million of interest income for the three and six months ended June 30, 2022, respectively, and $0.2 million and $0.4 million of interest income three and six months ended June 30, 2021, respectively, is included in other income, net on the Company's Unaudited Consolidated Statements of Operations and not reflected in the table above.
Deferred revenues were not material for the three and six months ended June 30, 2022 and 2021.
Contract Assets and Contract Liabilities
Material contract assets and liabilities are presented net at the individual contract level in the Unaudited Consolidated Balance Sheets and are classified as current or noncurrent based on the nature of the underlying contractual rights and obligations.
Supplemental balance sheet information related to contracts from customers as of June 30, 2022 and December 31, 2021 was as follows:
(in thousands)Consolidated Balance Sheet LocationJune 30, 2022December 31, 2021
Liabilities:
Contract liabilities, net (current)Customer deposits and advance payments$303 $1,280 
Substantially all of these balances are recognized as revenue within 12 months. Net contract assets were not material for any period presented.
Impairment losses recognized on receivables or contract assets arising from the Company's contracts with customers were not material for the three and six months ended June 30, 2022 and June 30, 2021.

3.    Acquisitions
Finxera Acquisition
On September 17, 2021, the Company completed its acquisition of 100% of the equity interests of Finxera. Finxera is a provider of deposit account management and licensed money transmission services in the U.S. The acquisition will allow the Company to offer clients turn-key merchant services, payment facilitation, card issuing, automated payables, virtual banking, e-wallet tools, risk management, underwriting and compliance on a single platform.
The transaction was funded with the Company's cash on hand, proceeds from the issuance of the redeemable senior preferred stock and debt, and the issuance of common equity shares to the sellers.
The acquisition was accounted for as a business combination using the acquisition method of accounting, under which the assets acquired and liabilities assumed were recognized at their fair values as of September 17, 2021, with the excess of the fair value of consideration transferred over the fair value of the net assets acquired recognized as goodwill. The fair values of the assets acquired and liabilities assumed as of September 17, 2021 were estimated by management based on the valuation of the Finxera business using the discounted cash flow method and other factors specific to certain assets and liabilities. The purchase price allocation is set forth in the table below.
10

(in thousands)
Consideration:
Cash$379,220 
Equity instruments(1)
34,388 
Less: cash and restricted cash acquired(6,598)
Total purchase consideration, net of cash and restricted cash acquired$407,010 
Recognized amounts of assets acquired and liabilities assumed:
Accounts receivable$385 
Prepaid expenses and other current assets5,198 
Current portion of notes receivable784 
Settlement assets and customer account balances498,811 
Property, equipment and software, net712 
Goodwill245,104 
Intangible assets, net(2)
211,400 
Other noncurrent assets955 
Accounts payable and accrued expenses(7,837)
Settlement and customer account obligations(498,811)
Deferred income taxes, net(44,311)
Other noncurrent liabilities(5,380)
Total purchase consideration$407,010 
(1)The fair value of the 7,551,354 shares of PRTH common stock that were issued was determined based on their market price at the time of closing adjusted for an appropriate liquidity discount due to trading restrictions under Securities Rule 144.
(2)The intangible assets acquired consist of $154.9 million for referral partner relationships, $34.3 million for technology, $20.1 million for customer relationships and $2.1 million for money transmission licenses.
Goodwill of $245.1 million arising from the acquisition primarily consists of the expected synergies and other benefits from combining operations. Approximately $8.7 million of the goodwill attributable to the acquisition is expected to be deductible for income tax purposes. The goodwill was allocated 100% to the Company's Enterprise Payments reportable segment.
In 2020, Finxera acquired two businesses for which the purchase price included contingent consideration valued at $6.1 million. The contingent consideration payable is comprised of earnout opportunities equal to 50% of certain revenues earned from the customers assumed in these acquisitions. The associated earnout opportunities are to be measured and paid every six months and expire at various dates through December 31, 2023. As of June 30, 2022, $0.4 million of contingent consideration has been paid. The remaining $5.8 million was accrued, of which $2.4 million and $3.4 million were included in accounts payable and accrued expenses and other noncurrent liabilities, respectively, on the Company's Unaudited Consolidated Balance Sheet as of June 30, 2022. The accretion of contingent consideration was $0.3 million for the three and six months ended June 30, 2022, which is included in interest expense on the Company's Unaudited Consolidated Statements of Operations.
Other Acquisitions
Wholesale Payments, Inc.
On April 28, 2021, a subsidiary of the Company completed its acquisition of certain residual portfolio rights for a purchase price of $42.4 million and $24.8 million of post-closing payments and earnout payments based on meeting certain attrition thresholds over a three-year period from the date of acquisition. The transaction did not meet the definition of a business, therefore it was accounted for as an asset acquisition under which the cost of the acquisition was allocated to the acquired assets based on relative fair values. As this is an asset acquisition, additional purchase price is accounted for when payment to the seller becomes probable and is added to the carrying value of the asset. The seller's note payable to the Company of $3.0 million and an advance of $2.0 million outstanding at the time of the purchase was netted against the initial purchase price, resulting in cash of $41.2 million being paid by the Company to the seller, which was funded from cash proceeds from the issuance of the redeemable senior preferred stock and cash on hand.
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As of June 30, 2022, the sellers earned $9.4 million of the $24.8 million, increasing the total purchase price recorded to $51.8 million, which was recorded to residual buyout intangible assets with a seven-year useful life amortized on a straight-line basis.
C&H
On June 25, 2021, a subsidiary of the Company acquired certain assets and assumed certain related liabilities of C&H under an asset purchase agreement. C&H was an ISO partner of the Company where it developed expertise in software-integrated payment services, as well as marketing programs for specific verticals such as automotive and youth sports. This business is reported within the Company's SMB Payments reportable segment. The initial purchase price for the net assets was $35.0 million in cash and a total purchase price of not more than $60.0 million including post-closing payments and earnout payments based on certain gross profit and revenue achievements over a three-year period from the date of acquisition. The acquisition date fair value of the contingent consideration was $4.7 million, which increased the total purchase price to $39.7 million. The seller's note payable to the Company of $0.5 million at the time of purchase was netted against the initial purchase price, resulting in cash of $34.5 million being paid by the Company to the seller, which was funded from a $30.0 million draw down of the revolving credit facility under the Credit Agreement held by the Company and $4.5 million cash on hand. Transaction costs were not material and were expensed. The purchase price allocation is set forth in the table below.
(in thousands)
Accounts receivable$214 
Prepaid expenses and other current assets209 
Property, equipment and software, net and other current assets287 
Goodwill13,804 
Intangible assets, net(1)
25,400 
Other noncurrent liabilities(214)
Total purchase price$39,700 
(1)The intangible assets acquired consist of $20.2 million for merchant portfolio intangible assets with a ten-year useful life and $5.2 million for ISO partner relationships with a twelve-year useful life.
As of June 30, 2022, the fair value of the C&H contingent consideration was $5.0 million, of which $3.0 million and $2.0 million were included in accounts payable and accrued expenses and other noncurrent liabilities, respectively, on the Company's Unaudited Consolidated Balance Sheet as of June 30, 2022. The accretion of contingent consideration was $0.3 million for the three and six months ended June 30, 2022, which is included in interest expense on the Company's Unaudited Consolidated Statements of Operations.
The goodwill for the C&H business combination is deductible by the Company for income tax purposes.

4.    Settlement Assets and Customer Account Balances and Related Obligations
SMB Payments Segment
In the Company's SMB Payments reportable segment, funds settlement refers to the process of transferring funds for sales and credits between card issuers and merchants. The standards of the card networks require possession of funds during the settlement process by a member bank which controls the clearing transactions. Since settlement funds are required to be in the possession of a member bank until the merchant is funded, these funds are not assets of the Company and the associated obligations related to these funds are not liabilities of the Company. Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets. Member banks held merchant funds of $115.5 million and $102.1 million at June 30, 2022 and December 31, 2021, respectively.
Exception items that become the liability of the Company are recorded as merchant losses, a component of cost of revenue in the Company's Unaudited Consolidated Statements of Operations. Exception items that the Company is still attempting to
12

collect from the merchants through the funds settlement process or merchant reserves are recognized as settlement assets and customer account balances in the Company's Unaudited Consolidated Balance Sheets, with an offsetting reserve for those amounts the Company estimates it will not be able to recover. Expenses for merchant losses for the three and six months ended June 30, 2022 were $1.0 million and $2.1 million, respectively. Expenses for merchant losses for the three and six months ended June 30, 2021 were $0.6 million and $1.0 million, respectively.
B2B Payments Segment
In the Company's B2B Payments segment, the Company earns revenues from certain of its services by processing transactions for FIs and other business customers. Customers transfer funds to the Company, which are held in either company-owned bank accounts controlled by the Company or bank-owned FBO accounts controlled by the banks, until such time as the transactions are settled with the customer payees. Amounts due to customer payees that are held by the Company in company-owned bank accounts are included in restricted cash. Amounts due to customer payees that are held in bank-owned FBO accounts are not assets of the Company, and the associated obligations related to these funds are not liabilities of the Company. Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets. Bank-owned FBO accounts held funds of $83.1 million and $45.5 million at June 30, 2022 and December 31, 2021, respectively. Company-owned bank accounts held $4.4 million and $21.4 million at June 30, 2022 and December 31, 2021, respectively, which are included in restricted cash and settlement and customer account obligations in the Company's Unaudited Consolidated Balance Sheets.
Enterprise Payments Segment
In the Company's Enterprise Payments segment, revenue is derived primarily from enrollment fees, monthly subscription fees and transaction-based fees from licensed money transmission services. As part of its licensed money transmission services, the Company accepts deposits from consumers and subscribers which are held in bank accounts maintained by the Company on behalf of consumers and subscribers. After accepting deposits, the Company is allowed to invest available balances in these accounts in certain permitted investments, and the return on such investments contributes to the Company's net cash inflows. These balances are payable on demand. As such, the Company recorded these balances and related obligations as current assets and current liabilities. The nature of these balances are cash and cash equivalents, but they are not available for day-to-day operations of the Company. Therefore, the Company has classified these balances as settlement assets and customer account balances and the related obligations as settlement and customer account obligations in the Company's Unaudited Consolidated Balance Sheets.

The Company's settlement assets and customer account balances and settlement and customer account obligations were as follows:
(in thousands)June 30, 2022December 31, 2021
Settlement Assets:
Card settlements due from merchants, net of estimated losses$1,757 $537 
Customer Account Balances:
Cash and cash equivalents502,375 468,934 
Time deposits 10,000 
Total settlement assets and customer account balances$504,132 $479,471 
Settlement and Customer Account Obligations:
Customer account obligations$502,375 $478,935 
Due to customer payees(1)
4,316 21,356 
Total settlement and customer account obligations$506,691 $500,291 
(1)The related assets are included in restricted cash on our Unaudited Consolidated Balance Sheets.
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5.    Goodwill and Other Intangible Assets
Goodwill
The Company's goodwill relates to the following reporting units as of June 30, 2022 and December 31, 2021:
(in thousands)June 30, 2022December 31, 2021
SMB Payments$120,636 $120,636 
Enterprise Payments245,104 245,104 
Total$365,740 $365,740 
As of June 30, 2022, the Company is not aware of any triggering events that have occurred since October 1, 2021.
Other Intangible Assets
At June 30, 2022 and December 31, 2021, other intangible assets consisted of the following:
(in thousands, except weighted-average data)June 30, 2022Weighted-average
Useful Life
Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Other intangible assets:
ISO and referral partner relationships$175,300 $(17,858)$157,442 14.9
Residual buyouts132,891 (66,032)66,859 6.2
Customer relationships95,566 (77,170)18,396 8.0
Merchant portfolios76,423 (37,004)39,419 7.0
Technology48,690 (16,803)31,887 9.9
Non-compete agreements3,390 (3,390) 0.0
Trade names2,870 (2,009)861 11.7
Money transmission licenses(1)
2,100 — 2,100 
Total $537,230 $(220,266)$316,964 9.9
(1)These assets have an indefinite useful life.
(in thousands, except weighted-average data)December 31, 2021Weighted-average
Useful Life
Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Other intangible assets:
ISO and referral partner relationships$175,300 $(11,679)$163,621 14.8
Residual buyouts(1)
126,225 (56,186)70,039 6.4
Customer relationships95,566 (70,883)24,683 8.1
Merchant portfolios76,016 (30,879)45,137 6.7
Technology(2)
48,690 (15,039)33,651 9.9
Non-compete agreements(2)
3,390 (3,390)