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Acquisitions | 12 Months Ended
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Sep. 30, 2019
Business Combinations [Abstract] |
Acquisitions | ACQUISITIONS During the years ended September 30, 2019, 2018 and 2017 the Company acquired the following intangible assets and businesses: Residual Buyouts From time to time, the Company acquires future commission streams from sales agents in exchange for an upfront cash payment. This results in an increase in overall gross processing volume to the Company. The residual buyouts are treated as asset acquisitions, resulting in recording a residual buyout intangible asset at cost on the date of acquisition. These assets are amortized using a method of amortization that reflects the pattern in which the economic benefits of the intangible asset are expected to be utilized over their estimated useful lives. During the years ended September 30, 2019, 2018 and 2017, the Company purchased $3,585, $1,567 and $476, respectively, in residual buyouts using a combination of cash on hand and borrowings on the Company's revolving credit facility. The acquired residual buyout intangible assets have weighted average estimated amortization periods of seven and two years, respectively. Merchant Relationships Portfolio Purchase Effective March 31, 2017, the Company acquired a payment portfolio in an asset acquisition. The acquisition was completed to expand the Company’s merchant base. Total purchase consideration was $1,156, including $56 in acquisition-related costs, which was funded using a combination of cash on hand and long-term debt. The purchase consideration of the acquired assets was allocated based on the relative fair values to the merchant relationships intangible asset. The acquired merchant relationships intangible asset has an estimated amortization period of fifteen years. Referral Agreements From time to time, the Company enters into referral agreements with agent banks or other organizations (“referral partner”). Under these agreements, the referral partner exclusively refers its customers to the Company for credit card processing services. Total consideration paid for these agreements in the years ended September 30, 2019 and 2018 was $0 and $815, respectively, all of which was settled with cash on hand. Because the Company pays an up-front fee to compensate the referral partner, the amount is treated as an asset acquisition in which the Company has acquired an intangible stream of referrals. This asset is amortized over a straight-line period. The weighted-average amortization period for all intangibles acquired is five years. 2017 Business Combinations During the year ended September 30, 2017, the Company completed the acquisitions of three businesses, including Fairway Payments, LLC, and two additional unrelated businesses which were considered individually immaterial but collectively material. Fairway Payments, LLC Effective August 1, 2017, the Company acquired certain assets and assumed certain liabilities of Fairway Payments, LLC (“Fairway”), a privately-held company engaged in business similar to the Company. The acquisition was completed to add independent software vendor distribution partners, to increase the Company's presence in the healthcare and non-profit verticals and to provide another vendor for the Company's payment processing services. Net purchase consideration was $39,275, which includes $275 of common units issued to the seller and cash payment which was funded using proceeds from the issuance of long-term debt and from proceeds from the issuance of Class A units in i3 Verticals, LLC. The goodwill associated with the acquisition is not deductible for tax purposes. The acquired relationships contracts intangible asset has an estimated amortization period of fifteen years. The non-compete agreement and trade name have an amortization period of three years. The weighted-average amortization period for all intangibles acquired is fifteen years. Acquisition-related costs for Fairway were $284 and were expensed as incurred. Fairway had a defined benefit pension plan (“Fairway Defined Benefit Plan”). The Fairway Defined Benefit Plan was frozen as of the date of acquisition and, per the terms of the agreement, the funding obligation of the plan is the sole responsibility of the selling party. Accordingly, the Company has not recorded a liability for the Fairway Defined Benefit Plan. Other 2017 Business Combinations The Company completed the acquisitions of other businesses to expand the Company’s merchant base and to provide additional service to the Company’s customers. Total purchase consideration for the other acquisitions was $6,396, including $5,175 in cash and revolving credit facility proceeds and $1,221 of contingent cash consideration. The goodwill associated with the acquisitions of the other businesses is tax-deductible. The weighted-average amortization period for all intangibles acquired is fifteen years. Acquisition-related costs for the other businesses amounted to approximately $184 and were expensed as incurred. Certain provisions in the purchase agreement for one of the two other businesses provided for additional consideration of up to $4,700, in the aggregate, to be paid based upon the achievement of specified financial performance targets, as defined in the purchase agreement, through December 2019. The Company determined the acquisition date fair value of the liability for the contingent consideration based on a discounted cash flow analysis. In each subsequent reporting period, the Company reassesses its current estimates of performance relative to the targets and adjusts the contingent liability to its fair value through earnings. See additional disclosures in Note 11. Summary of 2017 Business Combinations The fair values assigned to certain assets and liabilities assumed, as of the acquisition dates, during the year ended September 30, 2017 were as follows:
| Fairway |  | Other |  | Total
Accounts receivable | $ | — |  |  | $ | 30 |  |  | $ | 30 |
Inventories | — |  |  | 15 |  |  | 15 |
Prepaid expenses and other current assets | 226 |  |  | — |  |  | 226 |
Property and equipment | 5 |  |  | 57 |  |  | 62 |
Acquired merchant relationships | 19,200 |  |  | 2,160 |  |  | 21,360 |
Non-compete agreements | 40 |  |  | 40 |  |  | 80 |
Trade name | 500 |  |  | — |  |  | 500 |
Goodwill | 19,309 |  |  | 4,152 |  |  | 23,461 |
Total assets acquired | 39,280 |  |  |  | 6,454 |  |  |  | 45,734 |
Deferred rent | 5 |  |  |  | — |  |  |  | 5 |
Deferred revenue, current | — |  |  |  | 58 |  |  |  | 58 |
Net assets acquired | $ | 39,275 |  |  |  | $ | 6,396 |  |  |  | $ | 45,671 |
2018 Business Combinations During the year ended September 30, 2018, the Company completed the acquisitions of businesses, including San Diego Cash Register Company, Inc., and additional unrelated businesses which were considered individually immaterial but collectively material. Purchase of San Diego Cash Register Company, Inc. On October 31, 2017, the Company closed an agreement to purchase all of the outstanding stock of San Diego Cash Register Company, Inc. (“SDCR, Inc.”). The acquisition was completed to expand the Company's revenue within the integrated POS market. Total purchase consideration was $20,834, which includes $104 of common units in i3 Verticals, LLC issued to the seller. The acquisition was funded using $20,000 in proceeds from the issuance of long-term debt from the 2017 Senior Secured Credit Facility (as defined in Note 9) and $730 of contingent cash consideration. The goodwill associated with the acquisition is not deductible for tax purposes. The acquired merchant relationships intangible asset has an estimated amortization period of twelve years. The non-compete agreement and trade name have amortization periods of two and five years, respectively. The weighted-average amortization period for all intangibles acquired is eleven years. Acquisition-related costs for SDCR, Inc. were $293 and were expensed as incurred. Certain provisions in the purchase agreement provide for additional consideration of up to $2,400, in the aggregate, to be paid based upon the achievement of specified financial performance targets, as defined in the purchase agreement, through October 2019. The Company determined the acquisition date fair value of the liability for the contingent consideration based on a discounted cash flow analysis. In each subsequent reporting period the Company reassesses its current estimates of performance relative to the targets and adjusts the contingent liability to its fair value through earnings. See additional disclosures in Note 11. Other 2018 Business Combinations The Company completed the acquisitions of the other businesses to expand the Company's merchant base. Total purchase consideration for the other acquisitions was $15,604, including $13,700 in cash and revolving credit facility proceeds, $550 of restricted Class A common stock and $1,354 of contingent cash consideration. The goodwill associated with the acquisitions of the other businesses is deductible for tax purposes. The acquired merchant relationships intangible assets have estimated amortization periods of between twelve and 15 years. The exclusivity agreement acquired has an estimated amortization period of ten years. The non-compete agreements and trade name have weighted-average amortization periods of five years. The weighted-average amortization period for all intangibles acquired is twelve years. Acquisition-related costs for the other businesses amounted to approximately $233 and were expensed as incurred. Certain provisions in the purchase agreements for the other businesses provide for additional consideration of up to $11,800, in the aggregate, to be paid based upon the achievement of specified financial performance targets, as defined in the purchase agreements, through no later than January 2020. The Company determined the acquisition date fair values of the liabilities for the contingent consideration based on discounted cash flow analyses. In each subsequent reporting period, the Company will reassess its current estimates of performance relative to the targets and adjust the contingent liabilities to their fair values through earnings. See additional disclosures in Note 11. Summary of 2018 Business Combinations The fair values assigned to certain assets and liabilities assumed, as of the acquisition dates, during the year ended September 30, 2018 were as follows:
| SDCR, Inc. |  | Other |  | Total
Cash and cash equivalents | $ | 1,338 |  |  | $ | — |  |  | $ | 1,338 |
Accounts receivable | 1,008 |  |  | — |  |  | 1,008 |
Settlement assets | — |  |  |  | 350 |  |  |  | 350 |
Related party receivable | 773 |  |  | — |  |  | 773 |
Inventories | 1,318 |  |  | — |  |  | 1,318 |
Prepaid expenses and other current assets | 1,176 |  |  | 8 |  |  | 1,184 |
Property and equipment | 69 |  |  | 58 |  |  | 127 |
Capitalized software | — |  |  | 200 |  |  | 200 |
Acquired merchant relationships | 5,500 |  |  | 5,100 |  |  | 10,600 |
Exclusivity Agreements | — |  |  |  | 100 |  |  |  | 100 |
Non-compete agreements | 40 |  |  | 1,440 |  |  | 1,480 |
Trade name | 1,340 |  |  |  | 200 |  |  |  | 1,540 |
Goodwill | 16,523 |  |  | 8,914 |  |  | 25,437 |
Other assets | — |  |  | 4 |  |  | 4 |
Total assets acquired | 29,085 |  |  | 16,374 |  |  | 45,459 |
Accounts payable | 1,342 |  |  |  | — |  |  |  | 1,342 |
Accrued expenses and other current liabilities | 3,123 |  |  |  | 431 |  |  |  | 3,554 |
Settlement obligations | — |  |  |  | 350 |  |  |  | 350 |
Deferred revenue, current | 2,029 |  |  |  | 190 |  |  |  | 2,219 |
Other long-term liabilities | 1,757 |  |  |  | — |  |  |  | 1,757 |
Net assets acquired | $ | 20,834 |  |  |  | $ | 15,403 |  |  |  | $ | 36,237 |
2019 Business Combinations During the year ended September 30, 2019, the Company completed the acquisitions of unrelated businesses, including Pace Payment Systems, Inc. Purchase of Pace Payment Systems, Inc. On May 31, 2019, i3-Holdings Sub, Inc. acquired all of the stock of Pace Payment Systems, Inc. (“Pace”) via a reverse triangular merger involving Pace and a special acquisition subsidiary of i3-Holdings Sub, Inc. The Company acquired Pace to expand its software offerings, primarily in the public sector and education verticals. The total purchase consideration was $56,053, including $52,492 in cash consideration, funded by proceeds from the Company's revolving credit facility, $3,336 of contingent consideration and $225 of restricted shares of Class A common stock in i3 Verticals. Certain of the purchase price allocations assigned for this acquisition are preliminary. The goodwill associated with the acquisition is not deductible for tax purposes. The acquired merchant relationships intangible asset has an estimated amortization period of fifteen years. The non-compete agreement and trade name have estimated amortization periods of three and five years, respectively. The weighted-average estimated amortization period of all intangibles acquired is fifteen years. The acquired capitalized software has an estimated amortization period of seven years. The acquisition also included deferred tax assets related to net operating losses and Section 163(j) carryforwards and deferred tax liabilities related to intangibles, which are presented as a total net deferred tax asset as of September 30, 2019. Acquisition-related costs for Pace amounted to approximately $444 and were expensed as incurred. Certain provisions in the merger agreement provide for additional consideration of up to $20,000 in the aggregate, to be paid based upon achievement of specified financial performance targets, as defined in the purchase agreement, in the 24 months from January 1, 2020 through December 31, 2021. The Company determined the acquisition date fair value of the liability for the contingent consideration based on a discounted cash flow analysis. In each subsequent reporting period, the Company will reassess the current estimates of performance relative to the targets and adjust the contingent liability to its fair value through earnings. See additional disclosures in Note 11. Other 2019 Business Combinations The Company completed the acquisitions of other businesses to expand the Company’s software offerings in the public sector vertical market, provide technology that enhances the Company’s Burton Platform and expand the Company's merchant base. Total purchase consideration was $98,770, including $89,074 in revolving credit facility proceeds and $9,696 of contingent consideration. Certain of the purchase price allocations assigned for these acquisitions are preliminary. For some of these business acquired, the goodwill associated with the acquisitions is deductible for tax purposes, and goodwill associated with the acquisitions of others of the businesses is not deductible for tax purposes. The acquired merchant relationships intangible assets have estimated amortization periods of between thirteen and twenty years. The non-compete agreement and trade names have weighted-average amortization periods of three and five years, respectively. The weighted-average amortization period for all intangibles acquired is sixteen years. The acquired capitalized software has an estimated amortization period of six years. Acquisition-related costs for these businesses amounted to approximately $1,179 and were expensed as incurred. Certain provisions in the purchase agreements provide for additional consideration of up to $34,900, in the aggregate, to be paid based upon the achievement of specified financial performance targets, as defined in the purchase agreements, through no later than September 2021. The Company determined the acquisition date fair values of the liabilities for the contingent consideration based on probability forecasts and discounted cash flow analyses. In each subsequent reporting period, the Company will reassess its current estimates of performance relative to the targets and adjust the contingent liabilities to their fair values through earnings. See additional disclosures in Note 11. Summary of 2019 Business Combinations The fair values assigned to certain assets and liabilities assumed, as of the acquisition dates, during the year ended September 30, 2019 were as follows:
| Pace |  | Other |  | Total
Cash and cash equivalents | $ | 108 |  |  | $ | 4,453 |  |  | $ | 4,561 |
Accounts receivable | 545 |  |  | 4,732 |  |  | 5,277 |
Settlement assets | — |  |  | 18 |  |  | 18 |
Related party receivable | — |  |  | — |  |  | — |
Inventories | 45 |  |  | 61 |  |  | 106 |
Prepaid expenses and other current assets | 59 |  |  | 505 |  |  | 564 |
Property and equipment | 527 |  |  | 1,929 |  |  | 2,456 |
Capitalized software | 3,400 |  |  | 9,440 |  |  | 12,840 |
Acquired merchant relationships | 13,400 |  |  | 34,480 |  |  | 47,880 |
Exclusivity Agreements | — |  |  | — |  |  | — |
Non-compete agreements | 60 |  |  | 150 |  |  | 210 |
Trade name | 500 |  |  | 1,540 |  |  | 2,040 |
Goodwill | 36,522 |  |  | 47,777 |  |  | 84,299 |
Other assets | 1,689 |  |  | 2 |  |  | 1,691 |
Total assets acquired | 56,855 |  |  | 105,087 |  |  | 161,942 |
Accounts payable | 722 |  |  | 369 |  |  | 1,091 |
Accrued expenses and other current liabilities | 56 |  |  | 2,108 |  |  | 2,164 |
Settlement obligations | — |  |  | 18 |  |  | 18 |
Deferred revenue, current | 24 |  |  | 2,698 |  |  | 2,722 |
Other long-term liabilities | — |  |  | 1,124 |  |  | 1,124 |
Net assets acquired | $ | 56,053 |  |  | $ | 98,770 |  |  | $ | 154,823 |
Pro Forma Results of Operations for 2019 Business Combinations The following unaudited supplemental pro forma results of operations have been prepared as though each of the acquired businesses in the year ended September 30, 2019 had occurred on October 1, 2017. Pro forma adjustments were made to reflect the impact of depreciation and amortization, changes to executive compensation and the revised debt load, all in accordance with ASC 805. This supplemental pro forma information does not purport to be indicative of the results of operations that would have been attained had the acquisitions been made on these dates, or of results of operations that may occur in the future.
| Year ended September 30, |  |
| 2019 |  | 2018
Revenue | $ | 418,815 |  |  | $ | 394,373 |
Net income (loss) | $ | (4,483) |  |  | $ | (16,166) |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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