# Priority Technology Holdings, Inc.: Form 10-Q for the period ended Jun 30, 2019

- Company: [Priority Technology Holdings, Inc.](/companies/prth.md) (CIK 1653558)
- Form: 10-Q
- Filed: 2019-08-14
- Accepted by EDGAR: Aug 14, 2019, 16:35 ET
- Period: 2019-06-30
- Accession: 0001628280-19-010770
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1653558/000162828019010770/prioritytechnology-630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1653558/000162828019010770/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2019-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2019-04-01 to 2019-06-30 | $107.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2019-01-01 to 2019-06-30 | $207.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 3 months, 2019-04-01 to 2019-06-30 | $7.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2019-01-01 to 2019-06-30 | $14.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2019-04-01 to 2019-06-30 | $2.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2019-01-01 to 2019-06-30 | $3.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2019-04-01 to 2019-06-30 | $10.8m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2019-01-01 to 2019-06-30 | $20.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2019-04-01 to 2019-06-30 | $5.9m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2019-01-01 to 2019-06-30 | $4.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2019-04-01 to 2019-06-30 | −$14.1m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2019-01-01 to 2019-06-30 | −$20.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2019-04-01 to 2019-06-30 | −$0.21 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted EPS | 6 months, 2019-01-01 to 2019-06-30 | −$0.31 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 6 months, 2019-01-01 to 2019-06-30 | $3.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2019-01-01 to 2019-06-30 | $5.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2019-01-01 to 2019-06-30 | $0 | us-gaap:PaymentsOfDividends |
| Share repurchases | 6 months, 2019-01-01 to 2019-06-30 | $2.4m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2019-06-30 | $5.5m | us-gaap:Cash |
| Current assets | at 2019-06-30 | $82.9m | us-gaap:AssetsCurrent |
| Total assets | at 2019-06-30 | $460.3m | us-gaap:Assets |
| Current liabilities | at 2019-06-30 | $80.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2019-06-30 | $560.9m | us-gaap:Liabilities |
| Long-term debt | at 2019-06-30 | $472.5m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2019-06-30 | $4.0m | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2019-06-30 | $14.0m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2019-06-30 | −$106.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 47,966 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes for the years ended December 31, 2018, 2017 and 2016 and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in the Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 29, 2019 (the "Annual Report").*

### Cautionary Note Regarding Forward-Looking Statements

Some of the statements made in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements include, but are not limited to, statements regarding our or our management's expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, such as statements about our future financial performance, including any underlying assumptions, are forward- looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "future," "goal," "intend," "likely," "may," "might," "plan," "possible," "potential," "predict," "project," "seek," "should," "would," "will," "approximately," "shall" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

- competition in the payment processing industry;
- the use of distribution partners;
- any unauthorized disclosures of merchant or cardholder data, whether through breach of our computer systems, computer viruses, or otherwise;
- any breakdowns in our processing systems;
- government regulation, including regulation of consumer information;
- the use of third-party vendors;
- any changes in card association and debit network fees or products;
- any failure to comply with the rules established by payment networks or standards established by third-party processor;
- any proposed acquisitions or any risks associated with completed acquisitions; and
- other risks and uncertainties set forth in the "Item 1A - Risk Factors" included in the Annual Report.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. You should not place undue reliance on these forward-looking statements in deciding whether to invest in our securities. We cannot assure you that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause our actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Forward-looking statements speak only as of the date they were made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

### Terms Used in this Quarterly Report on Form 10-Q

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to the terms "Company," "we," "us" and "our" refer to Priority Technology Holdings, Inc. and its consolidated subsidiaries.

### Results of Operations

This section includes a summary of our results of operations for the periods presented followed by a detailed discussion of our results for the quarter ended June 30, 2019 (or second quarter of 2019) compared to the quarter ended June 30, 2018 (or second quarter of 2018), and the six-month period ended June 30, 2019 (or first half of 2019) compared to the six-month period ended June 30, 2018 (or first half of 2018). We have derived this data, except key indicators for merchant bankcard processing dollar values and transaction volumes, from our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in the Annual Report.

Our revenue for the quarter and six months ended June 30, 2019 has been negatively affected by the closure of high-margin accounts with certain subscription-billing e-commerce merchants. The closure of merchants in this channel was due to industry-wide changes for enhanced card association compliance. This revenue, which is entirely within our Consumer Payments reportable segment, was $1.7 million and $14.4 million for the quarters ended June 30, 2019 and June 30, 2018, respectively, and $5.6 million and $46.0 million for the first six months of 2019 and 2018, respectively. Our income from operations associated with these merchants was $0.7 million and $4.2 million for the quarters ended June 30, 2019 and June 30, 2018, respectively, and $2.3 million and $14.2 million for the first six months of 2019 and 2018, respectively.

In addition to the impact of the closures of certain merchants described above, our income from operations for the quarter and six months ended June 30, 2019 has been negatively affected by certain expenses largely associated with our July 25, 2018 business combination (the "Business Combination"), conversion to a public company, certain legal matters, and in the second quarter of 2019, expenses associated with temporary transition services from YapStone related to the March 2019 asset acquisition. These expenses were approximately $1.6 million and $3.4 million for the quarters ended June 30, 2019 and June 30, 2018, respectively, and $2.8 million and $6.8 million for the first six months of 2019 and 2018, respectively.

### Quarter Ended June 30, 2019 compared to Quarter Ended June 30, 2018

*(dollars in thousands)*

| REVENUE: | Quarter Ended June 30, 2019 | 2018 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Merchant card fees | $99,145 | $96,736 | $2,409 | 2.5% |
| Outsourced services and other | 8,280 | 8,026 | 254 | 3.2% |
| **Total revenue** | 107,425 | 104,762 | 2,663 | 2.5% |
| **OPERATING EXPENSES:** |  |  |  |  |
| Costs of merchant card fees | 72,609 | 75,587 | (2,978) | (3.9)% |
| Costs of outsourced services and other | 4,677 | 4,667 | 10 | 0.2% |
| Salary and employee benefits | 10,356 | 9,442 | 914 | 9.7% |
| Depreciation and amortization | 9,761 | 4,013 | 5,748 | 143.2% |
| Selling, general and administrative | 7,586 | 7,848 | (262) | (3.3)% |
| Total operating expenses | 104,989 | 101,557 | 3,432 | 3.4% |
| **Income from operations** | 2,436 | 3,205 | (769) | (24.0)% |
| **OTHER INCOME (EXPENSES):** |  |  |  |  |
| Interest expense | (10,776) | (7,630) | (3,146) | 41.2% |
| Other, net | 138 | (1,203) | 1,341 | (111.5)% |
| Total other expenses, net | (10,638) | (8,833) | (1,805) | 20.4% |
| **Loss before income taxes** | (8,202) | (5,628) | (2,574) | 45.7% |
| Income tax expense | 5,928 | — | 5,928 | nm |
| **Net loss** | $(14,130) | $(5,628) | $(8,502) | 151.1% |

- 31 -

### Six Months Ended June 30, 2019 compared to Six Months Ended June 30, 2018

*(dollars in thousands)*

| REVENUE: | Six Months Ended June 30, 2019 | 2018 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Merchant card fees | $190,974 | $204,746 | $(13,772) | (6.7)% |
| Outsourced services and other | 16,428 | 15,612 | 816 | 5.2% |
| **Total revenue** | 207,402 | 220,358 | (12,956) | (5.9)% |
| **OPERATING EXPENSES:** |  |  |  |  |
| Costs of merchant card fees | 140,480 | 158,400 | (17,920) | (11.3)% |
| Costs of outsourced services and other | 9,243 | 9,043 | 200 | 2.2% |
| Salary and employee benefits | 21,255 | 18,414 | 2,841 | 15.4% |
| Depreciation and amortization | 18,686 | 7,780 | 10,906 | 140.2% |
| Selling, general and administrative | 14,336 | 15,638 | (1,302) | (8.3)% |
| Total operating expenses | 204,000 | 209,275 | (5,275) | (2.5)% |
| **Income from operations** | 3,402 | 11,083 | (7,681) | (69.3)% |
| **OTHER INCOME (EXPENSES):** |  |  |  |  |
| Interest expense | (20,139) | (14,559) | (5,580) | 38.3% |
| Other, net | 365 | (5,329) | 5,694 | nm |
| Total other expenses, net | (19,774) | (19,888) | 114 | (0.6)% |
| **Loss before income taxes** | (16,372) | (8,805) | (7,567) | 85.9% |
| Income tax expense | 4,204 | — | 4,204 | nm |
| **Net loss** | $(20,576) | $(8,805) | $(11,771) | 133.7% |

- 32 -

The following table shows our reportable segments' financial performance data and selected performance measures for the second quarter of 2019 compared to the second quarter of 2018:

*(in thousands)*

| Consumer Payments: | Quarter Ended June 30, 2019 | 2018 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $92,249 | $97,732 | $(5,483) | (5.6)% |
| Operating expenses | 84,886 | 87,386 | (2,500) | (2.9)% |
| Income from operations | $7,363 | $10,346 | $(2,983) | (28.8)% |
| Operating margin | 8.0% | 10.6% |  |  |
| Depreciation and amortization | $8,105 | $3,646 | $4,459 | 122.3% |
| Key Indicators: |  |  |  |  |
| Merchant bankcard processing dollar value | $10,774,149 | $9,820,496 | $953,653 | 9.7% |
| Merchant bankcard transaction volume | 130,146 | 120,020 | 10,126 | 8.4% |
| **Commercial Payments:** |  |  |  |  |
| Revenue | $7,099 | $6,883 | $216 | 3.1% |
| Operating expenses | 7,381 | 7,260 | 121 | 1.7% |
| Loss from operations | $(282) | $(377) | $95 | (25.2)% |
| Operating margin | (4.0)% | (5.5)% |  |  |
| Depreciation and amortization | $81 | $144 | $(63) | (43.8)% |
| Key Indicators: |  |  |  |  |
| Merchant bankcard processing dollar value | $74,528 | $61,867 | $12,661 | 20.5% |
| Merchant bankcard transaction volume | 29 | 30 | (1) | (3.3)% |
| **Integrated Partners:** |  |  |  |  |
| Revenues | $8,077 | $147 | $7,930 | nm |
| Operating expenses | 7,505 | 349 | 7,156 | nm |
| Income (loss) from operations | $572 | $(202) | $774 | nm |
| Operating margin | 7.1% | (137.4)% |  |  |
| Depreciation and amortization | $1,096 | $— | $1,096 | nm |
| Key Indicators: |  |  |  |  |
| Merchant bankcard processing dollar value | $106,162 | $— | $106,162 | nm |
| Merchant bankcard transaction volume | 363 | — | $363 | nm |
| **Income from operations of reportable segments** | $7,653 | $9,767 | $(2,114) | (21.6)% |
| Less: Corporate expenses | (5,217) | (6,562) | 1,345 | (20.5)% |
| **Consolidated income from operations** | $2,436 | $3,205 | $(769) | (24.0)% |
| Corporate depreciation and amortization | $479 | $223 | $256 | 114.8% |
| Key indicators: |  |  |  |  |
| Merchant bankcard processing dollar value | $10,954,839 | $9,882,363 | $1,072,476 | 10.9% |
| Merchant bankcard transaction volume | 130,538 | 120,050 | 10,488 | 8.7% |

- 33 -

The following table shows our reportable segments' financial performance data and selected performance measures for the first half of 2019 compared to the first half of 2018:

*(in thousands)*

| Consumer Payments: | Six Months Ended June 30, 2019 | 2018 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $182,071 | $206,713 | $(24,642) | (11.9)% |
| Operating expenses | 166,989 | 181,152 | (14,163) | (7.8)% |
| Income from operations | $15,082 | $25,561 | $(10,479) | (41.0)% |
| Operating margin | 8.3% | 12.4% |  |  |
| Depreciation and amortization | $15,913 | $7,082 | $8,831 | 124.7% |
| Key Indicators: |  |  |  |  |
| Merchant bankcard processing dollar value | $20,984,904 | $18,904,723 | $2,080,181 | 11.0% |
| Merchant bankcard transaction volume | 251,030 | 230,425 | 20,605 | 8.9% |
| **Commercial Payments:** |  |  |  |  |
| Revenue | $14,075 | $13,498 | $577 | 4.3% |
| Operating expenses | 14,808 | 14,202 | 606 | 4.3% |
| Loss from operations | $(733) | $(704) | $(29) | 4.1% |
| Operating margin | (5.2)% | (5.2)% |  |  |
| Depreciation and amortization | $179 | $284 | $(105) | (37.0)% |
| Key Indicators: |  |  |  |  |
| Merchant bankcard processing dollar value | $144,426 | $117,403 | $27,023 | 23.0% |
| Merchant bankcard transaction volume | 58 | 56 | 2 | 3.6% |
| **Integrated Partners:** |  |  |  |  |
| Revenues | $11,256 | $147 | $11,109 | nm |
| Operating expenses | 10,917 | 349 | 10,568 | nm |
| Income (loss) from operations | $339 | $(202) | $541 | nm |
| Operating margin | 3.0% | (137.4)% |  |  |
| Depreciation and amortization | $1,787 | $— | $1,787 | nm |
| Key Indicators: |  |  |  |  |
| Merchant bankcard processing dollar value | $140,147 | $— | $140,147 | nm |
| Merchant bankcard transaction volume | 492 | — | 492 | nm |
| **Income from operations of reportable segments** | $14,688 | $24,655 | $(9,967) | (40.4)% |
| Less: Corporate expenses | (11,286) | (13,572) | 2,286 | (16.8)% |
| **Consolidated income from operations** | $3,402 | $11,083 | $(7,681) | (69.3)% |
| Corporate depreciation and amortization | $807 | $414 | $393 | 94.9% |
| Key indicators: |  |  |  |  |
| Merchant bankcard processing dollar value | $21,269,477 | $19,022,126 | $2,247,351 | 11.8% |
| Merchant bankcard transaction volume | 251,580 | 230,481 | 21,099 | 9.2% |

- 34 -

### Revenue

#### Second Quarter of 2019 compared to Second Quarter of 2018

For the second quarter of 2019, our consolidated revenue increased by $2.7 million, or 2.5%, from the second quarter of 2018 to $107.4 million. This increase was driven by a $7.9 million increase in revenue from our Integrated Partners segment, driven by the YapStone, Inc. ("YapStone") asset acquisition that occurred in March 2019. This increase in revenue for Integrated Partners was partially offset by a $5.5 million decrease, or 5.6%, in revenue in our Consumer Payments segment. Revenue in our Commercial Payments segment increased by $0.2 million, or 3.1%. Consolidated merchant bankcard processing dollar value and merchant bankcard transactions increased 10.9% and 8.7%, respectively.

The decrease in second quarter of 2019 revenue in our Consumer Payments segment was due to a decrease of $12.7 million from certain subscription-billing e-commerce merchants. Excluding this impact, revenue grew $7.2 million, or 8.7%, driven by growth in bankcard processing dollar value and merchant bankcard transactions of 9.7% and 8.4%, respectively. The higher merchant bankcard processing dollar value and transaction volume for the second quarter of 2019 were mainly due to the continuation of strong consumer spending trends in 2019 and positive net onboarding of new merchants. Additionally, the average dollar amount per bankcard transaction (calculated by dividing bankcard processing volume by the associated number of transactions processed) of $82.79 increased 1.2% for the second quarter of 2019 from $81.82 for the second quarter of 2018.

Commercial Payments revenue for the second quarter of 2019 increased by $0.2 million, or 3.1%. Revenue from CPX accounts payable automated solutions of $1.8 million in the second quarter of 2019 increased 58.5% compared to the 2018 second quarter. Revenue from curated managed services programs of $5.3 million in the second quarter of 2019 declined by $0.5 million compared with the 2018 second quarter. The managed services decline was largely driven by lower incentive revenue in the second quarter of 2019.

Revenue in our Integrated Partners reportable segment, previously aggregated with our Commercial Payments reportable segment, was $8.1 million for the second quarter of 2019. A substantial portion of this segment's activities started after second quarter of 2018 through several business and asset acquisitions. Priority Real Estate Technology ("PRET") comprised $7.6 million of this reportable segment’s revenue in the second quarter of 2019. PRET is comprised primarily of the assets acquired from YapStone in March 2019 and the net assets acquired from RadPad Holdings, Inc. in July 2018. Revenue from Priority PayRight Health Solutions and Priority Hospitality Technology, which commenced operations in April 2018 and February 2019, respectively, comprised the remainder of this reportable segment’s revenue.

#### First Half of 2019 compared to First Half of 2018

For the first half of 2019, our consolidated revenue declined by $13.0 million, or 5.9%, from $220.4 million to $207.4 million. This decline reflects a decrease of $24.6 million in our Consumer Payments segment, partially offset by increases in our Integrated Partners segment and Commercial Payments segment of $11.1 million and $0.6 million, respectively. Consolidated merchant bankcard processing dollar value and merchant bankcard transactions increased 11.8% and 9.2%, respectively.

The decrease in the first half of 2019 revenue in our Consumer Payments segment was due to a decrease of $40.5 million from certain subscription-billing e-commerce merchants. Excluding this impact, revenue grew by $15.8 million, or 9.8%, driven by growth in bankcard processing dollar value and merchant bankcard transactions of 11.0% and 8.9%, respectively. The higher merchant bankcard processing dollar value and transaction volume for the first half of 2019 were mainly due to the continuation of strong consumer spending trends in 2019 and positive net onboarding of new merchants. Additionally, the average dollar amount per bankcard transaction (calculated by dividing bankcard processing volume by the associated number of transactions processed) of $83.60 increased 1.9% for the first half of 2019 from $82.04 for the first half of 2018.

Commercial Payments segment revenue for the first half of 2019 increased by $0.6 million, or 4.3%, compared to the first half of 2018. This growth was driven by our CPX accounts payable automated solutions services, which grew $1.2 million, or 57.2%. Revenue from our curated managed services programs declined by $0.6 million compared to the first half of 2018, driven by lower incentive revenue in the first half of 2019.

Revenue in our Integrated Partners reportable segment, previously aggregated with our Commercial Payments reportable segment, was $11.3 million for the first half of 2019. A substantial portion of this segment's activities started after the second quarter of 2018 through several business and asset acquisitions. Priority Real Estate Technology comprised $10.3 million of this reportable segment’s revenue in the first half of 2019. PRET is comprised primarily of the assets acquired from YapStone in March 2019 and the net assets acquired from RadPad Holdings, Inc. in July 2018. Revenue from Priority PayRight Health Solutions and Priority Hospitality Technology, which commenced operations in April 2018 and February 2019, respectively, comprised the remainder of this reportable segment’s revenue.

### Operating expenses

#### Second Quarter of 2019 compared to Second Quarter of 2018

Our consolidated operating expenses increased $3.4 million, or 3.4%, from $101.6 million for the second quarter of 2018 to $105.0 million for the second quarter of 2019. This overall increase was driven by a $5.7 million increase in depreciation and amortization expense related primarily to acquired merchant portfolios and intangible assets related to business combinations and asset acquisitions made after the second quarter of 2018, and internally developed software related to the MX Connect and CPX platforms. This increase was partially offset by a $3.0 million, or 3.9%, decrease in the cost of merchant fees. This decrease in cost of merchant fees was related to the corresponding decrease in revenue from our Consumer Payments segment and by lower costs attributable to the acquisitions of residual portfolio commission rights, partially offset by growth in processing volume. Costs of merchant card fees, as a percentage of merchant card fee revenue, dropped by 490 basis points for second quarter of 2019 compared to the second quarter of 2018.

Our consolidated selling, general, and administrative ("SG&A") expenses decreased overall by $0.3 million, or 3.3%, for the second quarter of 2019 compared to the second quarter of 2018, driven by a $2.6 million decrease in certain expenses in Corporate largely associated with our 2018 Business Combination, conversion to a public company, and certain legal matters. This decrease was partially offset by $0.7 million of expenses for temporary transition services related to integration of the March 2019 acquisition of the YapStone assets.

Consolidated salary and employee benefits increased $0.9 million, or 9.7%, for the second quarter of 2019 compared to the second quarter of 2018. This increase was related to additional headcount in corporate and operations functions and from business acquisitions made after the second quarter of 2018, plus an increase of $0.4 million in non-cash equity-based compensation for the second quarter of 2019.

#### First Half of 2019 compared to First Half of 2018

Our consolidated operating expenses decreased $5.3 million, or 2.5%, from $209.3 million for the first half of 2018 to $204.0 million for the first half of 2019. This overall decrease was primarily the result of a $17.9 million, 11.3%, decrease in the cost of merchant fees related to the corresponding decrease in merchant card fees revenue and by lower costs attributable to the acquisitions of residual portfolio commission rights. Costs of merchant card fees, as a percentage of merchant card fee revenue, dropped by 380 basis points for first half of 2019 compared to the first half of 2018. This overall decrease for the first half of 2019 was partially offset by a $10.9 million increase in depreciation and amortization expense for acquired merchant portfolios and intangible assets related to business combinations and asset acquisitions made after the first half of 2018, and by internally developed software related to the MX Connect and CPX platforms.

Our consolidated SG&A expenses decreased by $1.3 million, or 8.3%, for the first half of 2019 compared to the first half of 2018, driven by a $4.7 million decrease in certain expenses in Corporate largely associated with our 2018 Business Combination, conversion to a public company, and certain legal matters. This decrease was partially offset by $0.7 million of expenses for temporary transition services related to integration of the March 2019 acquisition of the YapStone assets.

Consolidated salary and employee benefits increased by $2.8 million, or 15.4%, for the first half of 2019 compared to the first half of 2018. This increase was related to additional headcount in corporate and operations functions and from business acquisitions made after the first half of 2018, plus an increase of $1.4 million in non-cash equity-based compensation for the first half of 2019.

### Income from operations

#### Second Quarter of 2019 compared to Second Quarter of 2018

Consolidated income from operations decreased $0.8 million, or 24.0%, for the second quarter of 2019 compared to the second quarter of 2018. Our consolidated operating margin for the second quarter of 2019 was 2.3% compared to 3.1% for the second quarter of 2018. This margin decrease was driven by the loss of certain subscription-billing e-commerce merchants and the increases in operating expenses as previously discussed.

Our Consumer Payments reportable segment contributed $7.4 million in income from operations for the second quarter of 2019, a decrease of $3.0 million, or 28.8%, from $10.3 million for the second quarter of 2018. This decrease largely reflected the loss of certain subscription-billing e-commerce merchants, which contributed $0.7 million and $4.2 million of income from operations in second quarters of 2019 and 2018, respectively, partially offset by income resulting from the growth in merchant bankcard processing dollar value and transaction volume. The decrease in this segment's income from operations was also impacted by an increase of $4.5 million in depreciation and amortization expense for merchant portfolios acquired primarily after the second quarter of 2018.

Our Commercial Payments reportable segment incurred a $0.3 million loss from operations for the second quarter of 2019, similar to the $0.4 million loss from operations for the second quarter of 2018.

Our Integrated Partners reportable segment, previously aggregated with our Commercial Payments reportable segment, contributed $0.6 million in income from operations for the second quarter of 2019 compared to a loss from operations of $0.2 million in the second quarter of 2018. The growth in 2019 is largely attributable to the YapStone assets acquired in late first quarter of 2019. Operating results for second quarter included depreciation and amortization expense of $1.1 million primarily related to the YapStone assets acquired. Other operating expenses in the second quarter of 2019 included $0.7 million for transition services related to the acquired YapStone assets.

Corporate expenses were 5.2 million for the second quarter of 2019, a decrease of $1.3 million from expenses of $6.6 million for the second quarter of 2018. Included in these amounts are certain expenses largely related to the Business Combination, conversion to a public company, and certain legal matters of $0.8 million and $3.4 million for the second quarters of 2019 and 2018, respectively. This decrease was partially offset by increases in accounting and tax services and other SG&A expenses.

#### First Half of 2019 compared to First Half of 2018

Consolidated income from operations decreased by $7.7 million, or 69.3%, from $11.1 million for the first half of 2018 to $3.4 million for the first half of 2019. Our consolidated operating margin for the first half of 2019 was 1.6% compared to 5.0% for the first half of 2018. This overall margin decrease was driven by the loss of certain subscription-billing e-commerce merchant, partially offset by the overall decrease in consolidated operating expenses, as previously discussed.

Our Consumer Payments reportable segment contributed $15.1 million in income from operations for the first half of 2019, a decrease of $10.5 million, or 41.0%, from the $25.6 million for the first half of 2018. This decrease largely reflected the loss of certain subscription-billing e-commerce merchants, which contributed $2.3 million and $14.2 of income from operations in first half of 2019 and 2018, respectively, partially offset by income resulting from the growth in merchant bankcard processing dollar value and transaction volume. The decrease in this segment's income from operations was also impacted by an increase of $8.8 million in depreciation and amortization expense for merchant portfolios acquired primarily after the first half of 2018.

Our Commercial Payments reportable segment incurred a loss from operations of approximately $0.7 million for both the first half of 2019 and 2018.

Our Integrated Partners reportable segment, previously aggregated with our Commercial Payments reportable segment, contributed $0.3 million in income from operations for the first half of 2019 compared to a loss of $0.2 million in the first half of 2018. The growth in 2019 is largely attributable to the YapStone assets acquired in late first quarter of 2019. Operating results for first half of 2019 included depreciation and amortization expense of $1.8 million primarily related to the YapStone assets acquired. Other operating expenses in the second quarter of 2019 included $0.7 million for transition services related to the acquired YapStone assets.

Corporate expenses were $11.3 million for the first half of 2019, a decrease of $2.3 million from expenses of $13.6 million for the first half of 2018. Included in these amounts are certain expenses largely related to the Business Combination, conversion to a public company, and certain legal matters of $2.0 million and $6.8 million for the first half of 2019 and 2018, respectively. This decrease was partially offset by increases in accounting and tax services and other SG&A expenses.

### Interest expense

Interest expense, which includes the amortization of deferred debt issuance costs and discount, increased by $3.1 million, or 41.2%, to $10.8 million in the second quarter of 2019 from $7.6 million in the second quarter of 2018. For the first of half of 2019, interest expense increase by $5.6 million, or 38.3%, to $20.1 million from $14.6 million from the first half of 2018. These increases in 2019 were primarily due to higher outstanding borrowings in 2019 driven by acquisition financing.

### Other, net

Other, net resulted in income of $0.1 million in the second quarter of 2019 compared to an expense of $1.2 million for the second quarter of 2018. Second quarter of 2018 included a $0.8 charge related to the Company's share of losses in a former equity-method investee and a $0.6 million of expense primarily related to write off of loan costs related to extinguished debt.

Other, net resulted in income of $0.4 million in the first half of 2019 compared to an expense of $5.3 million for the first half of 2018. The first half of 2018 included a charge of $3.5 related to the change in fair value of the former Goldman Sachs warrant, a $0.9 charge related to the Company's share of loss and impairment in a former equity-method investee, and a $0.5 million expense to write off loan costs related to extinguished debt.

### Income taxes

We assess all available positive and negative evidence to estimate whether sufficient taxable income will be generated in the future to permit use of the existing deferred tax assets. ASC 740, *Income Taxes* ("ASC 740"), requires that all sources of future taxable income be considered in making this determination. The Tax Cuts and Jobs Act of 2017 amended section 163(j) of the Internal Revenue Code Section 163(j), as amended, limits the business interest deduction to 30% of adjusted taxable income (ATI). For taxable years through 2021, the calculation of ATI closely aligns with earnings before interest, taxes, depreciation and amortization (EBITDA). Commencing in 2022, the ATI limitation more closely aligns with earnings before interest and taxes (EBIT), without adjusting for depreciation and amortization. Any business interest in excess of the annual limitation is carried forward indefinitely.

With respect to recording a deferred tax benefit for the carryforward of business interest, GAAP applies a "more likely than not" threshold for assessing recoverability. On the basis of our assessment, as of June 30, 2019, we increased our valuation allowance by $7.9 million for our business interest carryover comprised of (i) a discrete provision of $2.7 million associated with our 2018 business interest deferred tax asset and (ii) a provision of $5.2 million associated with our 2019 excess business interest, which is reflected in the 2019 effective tax rate. This $7.9 million provision is included in income tax expense on our unaudited condensed consolidated statements of operations for the quarter and six months ended June 30, 2019.

We will continue to evaluate the realizability of the net deferred tax asset on a quarterly basis and, as a result, the valuation allowance may change in future periods.

We compute our interim period income tax expense (benefit) by using a forecasted estimated annual effective tax rate ("EAETR") and adjust for any discrete items arising during the interim period. The EAETR for 2019 of 9.4% includes income tax benefit on pre-tax losses, offset by a tax provision related to establishment of a valuation allowance for deferred income tax on the 2019 portion of the Section 163(j) limitation.

Prior to July 25, 2018, substantially all of our operations were conducted through pass-through entities for income tax purposes, and as such we had no material income tax accounting reflected in our financial statements for financial reporting purposes since substantially all taxable income and deductions were "passed through" to our unconsolidated owners. Effective July 25, 2018, we became a "C Corp" in connection with our Business Combination and recapitalization events. Accordingly, effective July 25, 2018, our financial statements reflect the accounting for income taxes. Our financial statements for the quarter and six months ended June 30, 2018 reflect unaudited pro-forma income tax disclosure amounts to illustrate the income tax effects had we been subject to federal and state income taxes then.

### Certain Non-GAAP Measures

We periodically review the following key non-GAAP measures to evaluate our business and trends, measure our performance, prepare financial projections and make strategic decisions.

Consolidated EBITDA, which represents consolidated earnings (loss) before interest, income tax, and depreciation and amortization, is reconciled to net loss calculated under GAAP.

Consolidated Adjusted EBITDA starts with Consolidated EBITDA and further adjusts for certain non-cash, non-recurring or non-core expenses including: 1) non-cash equity-based compensation; 2) debt modification and extinguishment costs and warrant fair value changes; 3) certain legal expenses; 4) certain professional, accounting and consulting fees; and 5) temporary transition services related to acquisitions.

In addition, the financial covenants under the debt agreements of the Company's subsidiaries (the "Borrowers") and our Earnout Incentive Plan pursuant to the Business Combination are based on a non-GAAP measure referred to as Consolidated Earnout Adjusted EBITDA. The calculation of Consolidated Earnout Adjusted EBITDA starts with Consolidated Adjusted EBITDA and further adjusts for the pro-forma impact of acquisitions and residual streams and run rate adjustments for certain contracted savings on an annualized basis, other consulting and professional fees, and other tax expenses and other adjustments, which are not included as adjustments to Consolidated Adjusted EBITDA.

We believe these non-GAAP measures illustrate the underlying financial and business trends relating to our results of operations and comparability between current and prior periods. We also use these non-GAAP measures to establish and monitor operational goals.

These non-GAAP measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute or superior to, the other measures of financial performance prepared in accordance with GAAP. Using only the non-GAAP financial measures, particularly Consolidated Adjusted EBITDA, to analyze our performance would have material limitations because their calculations are based on subjective determination regarding the nature and classification of events and circumstances that investors may find significant. We compensate for these limitations by presenting both the GAAP and non-GAAP measures of our operating results. Although other companies may report measures entitled "Adjusted EBITDA" or similar in nature, numerous methods may exist for calculating a company's Adjusted EBITDA or similar measures. As a result, the methods we use to calculate Consolidated Adjusted EBITDA may differ from the methods used by other companies to calculate their non-GAAP measures.

The non-GAAP reconciliations of Consolidated EBITDA, Consolidated Adjusted EBITDA, and Consolidated Earnout Adjusted EBITDA to consolidated net loss, the most directly comparable financial measures calculated and presented in accordance with GAAP, are shown in the table below:

*(in thousands)*

|  | Quarter Ended June 30, 2019 | 2018 | Six Months Ended June 30, 2019 | 2018 |
| --- | ---: | ---: | ---: | ---: |
| **Consolidated net loss (GAAP)** | $(14,130) | $(5,628) | $(20,576) | $(8,805) |
| Add: Interest expense (1) | 10,776 | 7,630 | 20,139 | 14,559 |
| Add: Depreciation and amortization | 9,761 | 4,013 | 18,686 | 7,780 |
| Add: Income tax expense | 5,928 | — | 4,204 | — |
| **Consolidated EBITDA (non-GAAP)** | **12,335** | **6,015** | **22,453** | **13,534** |
| Further adjusted by: |  |  |  |  |
| Add: Non-cash equity-based compensation | 1,023 | 607 | 2,183 | 795 |
| Add: Debt modification/extinguishment costs and warrant fair value changes | — | 590 | — | 4,853 |
| Add: Certain legal expenses (2) | 371 | 2,006 | 885 | 3,182 |
| Add: Professional, accounting and consulting fees (3) | 459 | 1,427 | 1,130 | 3,581 |
| Add: Transition services for acquisition (4) | 747 | — | 747 | — |
| **Consolidated Adjusted EBITDA (non-GAAP)** | **14,935** | **10,645** | **$27,398** | **$25,945** |
| Further adjusted by: |  |  |  |  |
| Add: Pro-forma impact of acquisitions (5) | 45 | 2,014 | 3,175 | 4,353 |
| Add: Other professional and consulting fees | 357 | 225 | 752 | 624 |
| Add: Contracted revenue and savings | — | 302 | — | 698 |
| Add: Other tax expenses and other adjustments | 5 | 1,026 | (164) | 1,229 |
| **Consolidated Earnout Adjusted EBITDA (non-GAAP) (6)** | **$15,342** | **$14,212** | **$31,161** | **$32,849** |

(1) Interest expense includes amortization of debt issuance costs and issue discounts.

(2) Legal expenses related to business and asset acquisition activity and settlement negotiation and other litigation expenses, as well as legal settlements.

(3) Primarily transaction-related, capital markets and accounting advisory services.

(4) Temporary transition services from YapStone related to the integration of the March 2019 asset acquisition.

(5) Each reporting period's year-to-date amounts are updated to reflect the pro forma impact of acquisitions as though they had taken place on January 1 of the year in which the acquisition occurred.

(6) Reflects definition in debt agreements entered into in connection with the January 2017 debt financing. Subsequent to the Business Combination, the Earnout Adjusted EBITDA of the Borrowers under the credit agreements excludes expenses of the Company's consolidated parent entity, which is neither a borrower nor a guarantor under the credit agreements. Earnout Adjusted EBITDA of the Borrowers was approximately $18.9 million and $38.4 million for the quarter and six months ended June 30, 2019, respectively.

### Financial Condition

Compared to our consolidated balance sheet as of December 31, 2018, the following key changes have occurred as of June 30, 2019.

#### Cash

Cash decreased by $10.1 million. For an explanation of the key drivers of this change, see the subsequent section, *Liquidity and Capital Resources.*

#### Intangible Assets

Intangible assets increased during the first half of 2019 by $71.2 million due to asset acquisitions, partially offset by amortization. For additional information, see Note 2, *Acquisitions and Contributions of Assets*, to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

#### Long-Term Debt

Long-term debt, excluding amounts outstanding under the revolving credit facility, increased by a net $70.7 million during the first half of 2019. This increase was driven by borrowings to acquire certain intangible assets. See Note 7, *Long-Term Debt*, to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on credit facilities, available credit, and covenants.

#### Stockholders' Deficit

The deficit equity position attributable to the stockholders of the Company increased by $20.8 million, from a deficit of $85.5 million at December 31, 2018 to a deficit of $106.3 million at June 30, 2019. The primary driver of this change was the net loss of $20.6 million for the first half of 2019 and repurchased common stock at cost of $2.4 million, partially offset by a $2.2 million credit to additional paid-in capital for equity-based compensation. See Note 11, *Equity Reconciliation*, to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

### Liquidity and Capital Resources

Liquidity and capital resource management is a process focused on providing the funding we need to meet our short-term and long-term cash and working capital needs. We have used our funding sources to build our merchant portfolio, technology solutions, and to make acquisitions with the expectation that such investments will generate cash flows sufficient to cover our working capital needs and other anticipated needs, including for our acquisition strategy. We anticipate that cash on hand, funds generated from operations and available borrowings under our revolving credit agreement are sufficient to meet our working capital requirements for at least the next twelve months.

Our principal uses of cash are to fund business operations, administrative costs, and debt service.

Our working capital, defined as current assets less current liabilities, was $2.5 million at June 30, 2019 and $21.1 million at December 31, 2018. As of June 30, 2019, we had cash totaling $5.5 million compared to $15.6 million at December 31, 2018. These balances do not include restricted cash, which reflects cash accounts holding customer settlement funds of $21.7 million at June 30, 2019 and $18.2 million at December 31, 2018.

At June 30, 2019, we had availability of approximately $11.0 million under our revolving credit facility.

The following tables and narrative reflect our changes in cash flows for the comparative quarterly periods.

*(dollars in thousands)*

| Net cash provided by (used in): | Six Months Ended June 30, 2019 | 2018 |
| --- | ---: | ---: |
| Operating activities | $3,720 | $14,920 |
| Investing activities | (89,776) | (14,258) |
| Financing activities | 79,437 | (14,980) |
| Net decrease in cash and restricted cash | $(6,619) | $(14,318) |

#### Cash Provided By Operating Activities

Net cash provided by operating activities in the first half of 2019 was $3.7 million compared to net cash provided of $14.9 million for the first half of 2018. The $11.2 million decrease for the first half of 2019 was principally the result of changes in working capital related to accounts receivable and account payable during 2019 and an increase in cash interest payments of $4.7 million.

#### Cash Used In Investing Activities

Net cash used in investing activities was $89.8 million and $14.3 million for the first half of 2019 and 2018, respectively. Cash used in investing activities for the first half of 2019 included $17.4 million used to acquire merchant portfolios and $63.8 million used to acquire certain assets from YapStone. Cash used to acquire property, equipment, and software amounted to $5.4 million and $5.7 million for the first half of 2019 and 2018, respectively.

#### Cash Provided By (Used In) Financing Activities

Net cash provided by financing activities was $79.4 million for the first half of 2019 compared to net cash used in financing activities of $15.0 million in the first half of 2018. The amount for the first half of 2019 included a $69.7 million, net of issue discount, delayed draw under the credit facility under the senior credit agreement with a syndicate of lenders (the "Senior Credit Agreement") that was used to acquire certain assets from YapStone. Additionally, a $14.0 million draw under the revolving credit feature of our Senior Credit Agreement was used to partially fund a portfolio acquisition. Cash flow used in financing activities for the first half of 2018 was primarily driven by equity redemptions and distributions totaling $80.4 million, partially offset by proceeds from the issuance of long-term debt of $67.1 million. The equity redemptions and distributions involved Priority Holdings, LLC before the Company's recapitalization on July 25, 2018.

### Off-Balance Sheet Arrangements

See Note 9, *Commitments and Contingencies*, to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information about contingent consideration related to asset acquisitions.

See Note 10, *Related Party and Other Transactions*, to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on a loan commitment made by us to another entity.

We have not entered into any other transactions with third parties or unconsolidated entities whereby we have financial guarantees, subordinated retained interest, derivative instruments, or other contingent arrangements that expose us to material continuing risks, contingent liabilities or other obligations.

### Commitments and Contractual Obligations

There have been no significant changes to our contractual obligations and commitments compared to those disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations of Priority" included in the Annual Report, except for additional borrowings under our existing Senior Credit Agreement consisting of $70.0 million of term debt and $14.0 million under our revolving credit facility. For an updated schedule of debt repayments, see Note 7, *Long-Term Debt*, to the unaudited condensed consolidated financial statements contained in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

### Related Party Transactions

See Note 2, *Acquisitions and Contributions of Assets*, to the unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

### Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim periods, which often require the judgment of management in the selection and application of certain accounting principles and methods. Our critical accounting policies and estimates are discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report. There have been no material changes to these critical accounting policies and estimates as of June 30, 2019.

### Effect of New Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standards setting bodies that may affect our current and/or future financial statements. See Note 1, *Nature of Business and Basis of Presentation*, to our unaudited condensed consolidated financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recently issued accounting pronouncements not yet adopted.

## Market risk

As filed, 916 characters.

#### Interest rate risk

The credit facility under the Senior Credit Agreement bears interest at a rate based on LIBOR plus a fixed margin that changes periodically. As of June 30, 2019, the Company's subsidiaries that are borrowers or guarantors had $390.8 million in outstanding borrowings under the senior credit facility. The applicable LIBOR rate stood at 2.41% at June 30, 2019 and the fixed margin stood at 5%, for an interest rate of 7.41%.

A hypothetical 1.0% increase or decrease in the applicable LIBOR rate on the outstanding indebtedness under the senior secured credit facility for the first half of 2019 would have increased or decreased interest expense by approximately $1.9 million. Per annum, a 1% hypothetical increase or decrease in the applicable LIBOR on this debt rate would increase annual interest expense by approximately $3.9 million.

We currently do not hedge against interest rate risk.

## Controls and procedures

As filed, 4,583 characters.

### Evaluation of Disclosure Controls and Procedures

The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective at a reasonable assurance level because of the material weaknesses in internal control over financial reporting described below, which are in the process of being remediated.

Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives. The Company's management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures can prevent all possible errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. There are inherent limitations in all control systems, including the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of one or more persons. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and, while our disclosure controls and procedures are designed to be effective under circumstances where they should reasonably be expected to operate effectively, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in any control system, misstatements due to possible errors or fraud may occur and not be detected.

### Changes in Internal Control over Financial Reporting

As disclosed in Item 9A in the Annual Report, we previously identified material weaknesses in internal control over financial reporting related to (1) lack of sufficient accounting and financial reporting resources and (2) deficiencies in certain aspects of our financial statement review and close processes. In order to continue to remediate the material weaknesses described above, during the quarter ended June 30, 2019, we undertook or were engaged in the following measures or activities to address the material weaknesses in internal control over financial reporting:

- recruiting and hiring additional qualified financial reporting personnel;
- utilizing outside consultants to assist us with certain financial accounting and reporting matters; and
- implementing additional policies and procedures to enhance internal control and provide timely reconciliation and review of the Company's accounting policies and procedures.

As we continue to evaluate and improve our internal control over financial reporting, additional measures to remediate the material weaknesses or modifications to certain of the remediation procedures described above may be necessary.

Management is committed to improving our internal control processes and meets with the Audit Committee on a regular basis to monitor the status of remediation activities. Management believes that the measures described above should remediate the material weakness identified and strengthen our internal control over financial reporting.

Except as set forth above, we have identified no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed Aug 14, 2019.
Source: SEC EDGAR, the filing index for accession 0001628280-19-010770. Last ingested by Listed: Nov 15, 2026, 00:36 ET. No prices; not investment advice.