##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 000-50280
 
 iPayment, Inc.
 (Exact name of registrant as specified in its charter)
 www.ipaymentinc.com
 DELAWARE
    
    62-1847043(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)40 Burton Hills Boulevard, Suite 415Nashville, Tennessee
    
    37215(Address of principal executive offices)
    
    (Zip Code)
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Title of each class
    
    Shares Outstanding at November 13, 2009(Common stock, $0.01 par value)
    
    100




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##### 



PagePART I  FINANCIAL INFORMATIONItem 1
    
    Financial StatementsConsolidated Balance Sheets as of September 30, 2009 (Unaudited) and December 31, 2008
    
    
    3Unaudited Consolidated Income Statements for the three and nine months ended September 30,
2009 and 2008
    
    
    4Unaudited Consolidated Statements of Cash Flows for the three and nine months ended
September 30, 2009 and 2008
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
    
    
    15Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4
    
    Controls and Procedures
    
    
    24PART II  OTHER INFORMATIONItem 1
    
    Legal Proceedings
    
    
    25Item 1A
    
    Risk Factors
    
    
    25Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3
    
    Defaults Upon Senior Securities
    
    
    26Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    26Item 5
    
    Other Information
    
    
    26Item 6
    
    Exhibits and Reports on Form 8-K
    
    
    26SIGNATURES
    
    
    27EXHIBITS
    
    
    28EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



Part 1.
 
 Item 1. Financial Statements
 iPAYMENT, INC.
 
 CONSOLIDATED BALANCE SHEETS
  September 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)
    
    
    (Audited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    900
    
    
    $
    3,589Accounts receivable, net of allowance for doubtful accounts of $1,535 and
$998 at
September 30, 2009 and December 31, 2008, respectively
    
    
    23,947
    
    
    
    25,693Prepaid expenses and other current assets
    
    
    1,810
    
    
    
    2,286Investment in merchant advances, net of allowance for doubtful accounts of
$3,374
and $3,822 at September 30, 2009 and December 31, 2008, respectively
    
    
    311
    
    
    
    4,460Deferred tax assets
    
    
    3,442
    
    
    
    3,442Total current assets
    
    
    30,410
    
    
    
    39,470Restricted cash, net
    
    
    733
    
    
    
    999Property and equipment, net
    
    
    4,051
    
    
    
    4,714Intangible assets and other, net of accumulated amortization of $128,467 and $95,286
at September 30, 2009 and December 31, 2008, respectively
    
    
    147,993
    
    
    
    176,548Goodwill
    
    
    528,191
    
    
    
    527,912Deferred tax asset, net
    
    
    2,449
    
    
    
    4,991Other assets, net
    
    
    11,910
    
    
    
    14,230Total assets
    
    $
    725,737
    
    
    $
    768,864LIABILITIES and STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,385
    
    
    $
    2,012Income taxes payable
    
    
    2,589
    
    
    
    7,941Accrued liabilities and other
    
    
    21,686
    
    
    
    22,366Current portion of long-term debt
    
    
    
    
    
    
    17,347Total current liabilities
    
    
    26,660
    
    
    
    49,666Long-term debt
    
    
    643,731
    
    
    
    669,979Other liabilities
    
    
    16,287
    
    
    
    21,627Total liabilities
    
    
    686,678
    
    
    
    741,272Commitments and contingencies (Note 8)Stockholders equityCommon stock, $0.01 par value; 1,000 shares authorized, 100 shares issued and
outstanding at September 30, 2009, and December 31, 2008, respectively
    
    
    20,055
    
    
    
    20,055Accumulated other comprehensive loss, net of tax benefits of $6,075 and
$8,178 at
September 30, 2009, and December 31, 2008, respectively
    
    
    (9,113
    )
    
    
    (12,268
    )Retained earnings
    
    
    26,574
    
    
    
    18,818Total iPayment, Inc. stockholders equity
    
    
    37,516
    
    
    
    26,605Noncontrolling interest
    
    
    1,543
    
    
    
    987Total equity
    
    
    39,059
    
    
    
    27,592Total liabilities and equity
    
    $
    725,737
    
    
    $
    768,864
  3




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iPAYMENT, INC.
 
 CONSOLIDATED INCOME STATEMENTS
  Three
    
    
    Three
    
    
    Nine
    
    
    NineMonths
    
    
    Months
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Revenues
    
    $
    182,716
    
    
    $
    203,654
    
    
    $
    543,513
    
    
    $
    601,689Operating expenses:Interchange
    
    
    101,975
    
    
    
    116,188
    
    
    
    302,459
    
    
    
    346,424Other costs of services
    
    
    56,368
    
    
    
    61,449
    
    
    
    173,862
    
    
    
    179,277Selling, general and administrative
    
    
    4,928
    
    
    
    5,003
    
    
    
    13,505
    
    
    
    14,736Total operating expenses
    
    
    163,271
    
    
    
    182,640
    
    
    
    489,826
    
    
    
    540,437Income from operations
    
    
    19,445
    
    
    
    21,014
    
    
    
    53,687
    
    
    
    61,252Other expense:Interest expense, net
    
    
    11,559
    
    
    
    14,221
    
    
    
    34,909
    
    
    
    43,007Other expense (income), net
    
    
    308
    
    
    
    79
    
    
    
    1,398
    
    
    
    (36
    )Income before income taxes
    
    
    7,578
    
    
    
    6,714
    
    
    
    17,380
    
    
    
    18,281Income tax provision
    
    
    2,833
    
    
    
    2,666
    
    
    
    6,428
    
    
    
    7,130Net income
    
    
    4,745
    
    
    
    4,048
    
    
    
    10,952
    
    
    
    11,151Less: Net income attributable to
noncontrolling interests
    
    
    (1,004
    )
    
    
    (319
    )
    
    
    (3,196
    )
    
    
    (319
    )Net income attributable to iPayment, Inc.
    
    $
    3,741
    
    
    $
    3,729
    
    
    $
    7,756
    
    
    $
    10,832
  4




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iPAYMENT, INC.
 
 CONSOLIDATED STATEMENTS of CASH FLOWS
  Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)Cash flows from operating activitiesNet income
    
    $
    10,952
    
    
    $
    10,832Adjustments to reconcile net income to net cash provided by
operating activitiesDepreciation and amortization
    
    
    34,902
    
    
    
    27,216Noncash interest expense and other
    
    
    1,938
    
    
    
    1,784Changes in assets and liabilities, excluding effects of
acquisitions:Accounts receivable
    
    
    1,746
    
    
    
    955Prepaid expenses and other current assets
    
    
    476
    
    
    
    616Other assets
    
    
    104
    
    
    
    4Accounts payable and income taxes payable
    
    
    (4,979
    )
    
    
    (5,211
    )Accrued liabilities and other
    
    
    1,919
    
    
    
    1,759Net cash provided by operating activities
    
    
    47,058
    
    
    
    37,955Cash flows from investing activitiesChange in restricted cash
    
    
    (29
    )
    
    
    (29
    )Expenditures for property and equipment
    
    
    (969
    )
    
    
    (1,580
    )Investment in merchant advances, net
    
    
    4,149
    
    
    
    (10,329
    )Acquisitions of businesses & portfolios, net of cash acquired
    
    
    (338
    )
    
    
    (22,063
    )Payments related to businesses previously acquired
    
    
    (2,734
    )
    
    
    Payments for prepaid residual expenses
    
    
    (3,386
    )
    
    
    (4,060
    )Net cash used in investing activities
    
    
    (3,307
    )
    
    
    (38,061
    )Cash flows from financing activitiesNet borrowings on line of credit
    
    
    3,200
    
    
    
    6,800Repayments of debt
    
    
    (47,000
    )
    
    
    (6,722
    )Distributions to noncontrolling interest in equity of
consolidated subsidiary
    
    
    (2,640
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (46,440
    )
    
    
    78Net decrease in cash and cash equivalents
    
    
    (2,689
    )
    
    
    (28
    )Cash and cash equivalents, beginning of period
    
    
    3,589
    
    
    
    33Cash and cash equivalents, end of period
    
    $
    900
    
    
    $
    5Supplemental disclosure of cash flow information:Cash paid during the period for income taxes
    
    $
    11,538
    
    
    $
    9,099Cash paid during the period for interest
    
    $
    28,587
    
    
    $
    36,283Supplemental schedule of non-cash activities:Accrual of deferred payments for acquisitions of businesses
with a corresponding increase in goodwill
    
    $
    
    
    
    $
    2,456
  5




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Notes to Consolidated Financial Statements
 (1) Organization and Business and Basis of Presentation
 Organization and Business
    Basis of Presentation
   Use of Estimates
  Revenue Recognition
  6




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Other Costs of Services
  Financial Instruments
  
    
    Level 1: Observable quoted prices in active markets for identical assets and
liabilities.
    
    Level 2: Observable quoted prices for similar assets and liabilities in active
markets, quoted prices for identical or similar instruments in markets that are not
active, and model-based valuation techniques for which all significant assumptions are
observable in the market.
    
    Level 3: Model-based techniques that use at least one significant assumption not
observable in the market. These unobservable assumptions reflect estimates of
assumptions that market participants would use in pricing the asset or liability.
Valuation techniques include use of option pricing models, discounted cash-flow models
and similar techniques.
  Derivative Financial Instruments
   Accounting for Derivative Instruments and Hedging
Activities
 7




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Amortization of Intangible Assets
    Common Stock
  (2) Acquisitions
   (3) Investments
 Investments in Merchant Advances
 Accounting for Nonrefundable Fees and Costs
Associated with Originating or Acquiring Loans and Initial Direct
Costs of Lease
 8




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Payments for Prepaid Residual Expenses
  (4) Long-Term Debt
    
    
    Gregory S. Daily, our Chairman and Chief Executive Officer, Carl A. Grimstad, our
President, and certain other investors (collectively, the Permitted Holders) cease to
beneficially own equity interests in iPayment Holdings, Inc. (Holdings) representing
more than fifty percent of its voting equity interests;
    
    during any period of twelve consecutive months, a majority of Holdings Board of
Directors ceases to be composed of individuals who were members of Holdings Board of
Directors at the beginning of such period or who were elected or nominated by such
members or appointees of such members who constituted at least a majority of the Board
of Directors at the time of such election or nomination;
    
    Gregory S. Daily and certain trusts controlled by Mr. Daily cease to beneficially own
or control at least a majority of the equity interests in Holdings or any parent company beneficially owned by the Permitted
Holders; or
    
    a change of control occurs under the indenture governing our senior subordinated
notes (described below).
 9




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##### Table of Contents




    
    any person or group other than one or more of the Permitted Holders or a parent
company becomes the beneficial owner of (i) 35% or more of the voting power of our
voting stock and (ii) more of the voting power of our voting stock than that
beneficially owned by the Permitted Holders; or
    
    a majority of the members of our Board of Directors cease to be continuing
directors.
  3
 Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities
  (5) Segment Information and Geographical Information
  (6) Income Taxes
 Accounting for Income Taxes
  Noncontrolling Interests in Consolidated Financial
Statements
 10




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##### Table of Contents



(7) Comprehensive Income (Loss)
   (8) Commitments and Contingencies
 Litigation
 Bruns v. E-Commerce Exchange Inc., et al, Orange County Superior Court, State of California,
Case No. 00CC02450 (coordinated under the caption TCPA Cases, Los Angeles County Superior
Court, State of California, Case No. JCCO 43500)
  Sharyns Jewelers, LLC v. iPayment, Inc. ,iPayment of Valencia, Vericomm and JP Morgan Chase
Bank , General Court of Justice , Superior Court Division, County of Carteret, State of North
Carolina, File No.: 05-CVS-92 / and related case Judgment Recovery Group, LLC, as assignee of
Sharyns Jewelers, LLC, v. iPayment, Inc., iPayment of Valencia, Vericomm, and JP Morgan Chase
Bank, Superior Court of the State of California, County of Los Angeles, Case No.: PS 009919
  11




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Equal Employment Opportunity Commission, Plaintiff, v. iPayment, Inc. ,and NPMG Acquistion
Sub, LLC, a Delaware corporation, United States District Court for the District of Arizona,
Case No.: CV 08-1790-PHX-SRB
  Employment Development Department of the State of California, Notice of Assessment No. 00008
  Other  Merrick Bank
     12




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(9) Recent Accounting Pronouncements
 Fair Value Measurements Effective Date of FASB Statement No. 157,
 The Fair Value Option for Financial Assets and
Liabilities  Including an amendment of FASB Statement No. 115 ,
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements
 Disclosures about Derivative Instruments and
Hedging Activities
 Interim Disclosures about Fair
Value of Financial Instruments Disclosures about Fair Value
of Financial Instruments Interim Financial
Reporting Financial Instruments
 Subsequent Events
 Fair Value
Measurements and Disclosures (Topic 820)  Measuring Liabilities at Fair Value
 (10) Significant Developments
  13




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(11) Subsequent Events
    14




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
(MD&A)
 Forward-Looking Statements May Prove Inaccurate
  Executive Overview
   Critical Accounting Policies
  Accounting for Goodwill and Intangible Assets. Goodwill and
Other Intangible Assets
   15




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##### Table of Contents



Reserve for Merchant Losses
  Income Taxes. Accounting for Income Taxes
  Noncontrolling Interest.
 Consolidation of Variable Interest Entities
 16




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##### Table of Contents



Derivative Financial Instruments. Accounting for
Derivative Instruments and Hedging Activities
 Components of Revenues and Expenses
  Reporting Revenue Gross as a Principal Versus Net as
an Agent
    17




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Seasonality Trend
  Off-Balance Sheet Arrangements
  18




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##### Table of Contents



Results of Operations
 Three Months Ended September 30, 2009 (2009) Compared to Three Months Ended September 30, 2008 (2008)
 ChangeThree months ended
    
    
    % of Total
    
    
    Three months ended
    
    
    % of TotalSeptember 30, 2009
    
    
    Revenue
    
    
    September 30, 2008
    
    
    Revenue
    
    
    Amount
    
    
    %Revenues
    
    $
    182,716
    
    
    
    100.0
    %
    
    $
    203,654
    
    
    
    100.0
    %
    
    $
    (20,938
    )
    
    
    (10.3
    )Operating ExpensesInterchange
    
    
    101,975
    
    
    
    55.8
    
    
    
    116,188
    
    
    
    57.1
    
    
    
    (14,213
    )
    
    
    (12.2
    )Other costs of services
    
    
    56,368
    
    
    
    30.9
    
    
    
    61,449
    
    
    
    30.2
    
    
    
    (5,081
    )
    
    
    (8.3
    )Selling, general and administrative
    
    
    4,928
    
    
    
    2.7
    
    
    
    5,003
    
    
    
    2.5
    
    
    
    (75
    )
    
    
    (1.5
    )Total operating expenses
    
    
    163,271
    
    
    
    89.4
    
    
    
    182,640
    
    
    
    89.7
    
    
    
    (19,369
    )
    
    
    (10.6
    )Income from operations
    
    
    19,445
    
    
    
    10.6
    
    
    
    21,014
    
    
    
    10.3
    
    
    
    (1,569
    )
    
    
    (7.5
    )Other expensesInterest expenses, net
    
    
    11,559
    
    
    
    6.3
    
    
    
    14,221
    
    
    
    7.0
    
    
    
    (2,662
    )
    
    
    (18.7
    )Other expenses, net
    
    
    308
    
    
    
    0.3
    
    
    
    79
    
    
    
    0.0
    
    
    
    229
    
    
    
    289.9Total other expenses
    
    
    11,867
    
    
    
    6.5
    
    
    
    14,300
    
    
    
    7.0
    
    
    
    (2,433
    )
    
    
    (17.0
    )Income before income taxes
    
    
    7,578
    
    
    
    4.1
    
    
    
    6,714
    
    
    
    3.3
    
    
    
    864
    
    
    
    12.9Income tax provision
    
    
    2,833
    
    
    
    1.6
    
    
    
    2,666
    
    
    
    1.3
    
    
    
    167
    
    
    
    6.3Net Income
    
    
    4,745
    
    
    
    2.6
    
    
    
    4,048
    
    
    
    2.0
    
    
    
    697
    
    
    
    17.2Less: Net income attributable to noncontrolling interests
    
    
    (1,004
    )
    
    
    (0.5
    )
    
    
    (319
    )
    
    
    (0.2
    )
    
    
    (685
    )
    
    
    (214.73
    )Net income attributable to iPayment, Inc.
    
    $
    3,741
    
    
    
    2.0
    
    
    $
    3,729
    
    
    
    1.8
    
    
    $
    12
    
    
    
    0.3
 Revenues.
 Interchange Expenses
 Other Costs of Services.
 Selling, General and Administrative.
 Other Expenses.
 Income Tax
 Noncontrolling Interests.
 19




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Nine Months Ended September 30, 2009 (2009) Compared to Nine Months Ended September 30, 2008 (2008)
 ChangeNine months ended
    
    
    % of Total
    
    
    Nine months ended
    
    
    % of TotalSeptember 30, 2009
    
    
    Revenue
    
    
    September 30, 2008
    
    
    Revenue
    
    
    Amount
    
    
    %Revenues
    
    $
    543,513
    
    
    
    100.0
    %
    
    $
    601,689
    
    
    
    100.0
    %
    
    $
    (58,176
    )
    
    
    (9.7
    )Operating ExpensesInterchange
    
    
    302,459
    
    
    
    55.6
    
    
    
    346,424
    
    
    
    57.6
    
    
    
    (43,965
    )
    
    
    (12.7
    )Other costs of services
    
    
    173,862
    
    
    
    32.0
    
    
    
    179,277
    
    
    
    29.8
    
    
    
    (5,415
    )
    
    
    (3.0
    )Selling, general and administrative
    
    
    13,505
    
    
    
    2.5
    
    
    
    14,736
    
    
    
    2.4
    
    
    
    (1,231
    )
    
    
    (8.4
    )Total operating expenses
    
    
    489,826
    
    
    
    90.1
    
    
    
    540,437
    
    
    
    89.8
    
    
    
    (50,611
    )
    
    
    (9.4
    )Income from operations
    
    
    53,687
    
    
    
    9.9
    
    
    
    61,252
    
    
    
    10.2
    
    
    
    (7,565
    )
    
    
    (12.4
    )Other expensesInterest expenses, net
    
    
    34,909
    
    
    
    6.4
    
    
    
    43,007
    
    
    
    7.1
    
    
    
    (8,098
    )
    
    
    (18.8
    )Other expenses (income), net
    
    
    1,398
    
    
    
    0.4
    
    
    
    (36
    )
    
    
    (0.0
    )
    
    
    1,434
    
    
    
    (3,983.3
    )Total other expenses
    
    
    36,307
    
    
    
    6.7
    
    
    
    42,971
    
    
    
    7.1
    
    
    
    (6,664
    )
    
    
    (15.5
    )Income before income taxes
    
    
    17,380
    
    
    
    3.2
    
    
    
    18,281
    
    
    
    3.0
    
    
    
    (901
    )
    
    
    (4.9
    )Income tax provision
    
    
    6,428
    
    
    
    1.2
    
    
    
    7,130
    
    
    
    1.2
    
    
    
    (702
    )
    
    
    (9.8
    )Net Income
    
    
    10,952
    
    
    
    2.0
    
    
    
    11,151
    
    
    
    1.9
    
    
    
    (199
    )
    
    
    (1.8
    )Less: Net income attributable to noncontrolling interests
    
    
    (3,196
    )
    
    
    (0.6
    )
    
    
    (319
    )
    
    
    (0.1
    )
    
    
    (2,877
    )
    
    
    (901.88
    )Net income attributable to iPayment, Inc.
    
    $
    7,756
    
    
    
    1.4
    
    
    $
    10,832
    
    
    
    1.8
    
    
    $
    (3,076
    )
    
    
    (28.4
    )
 Revenues.
 Interchange Expenses
 Other Costs of Services.
 Selling, General and Administrative.
 Other Expenses.
 Income Tax
 20




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Noncontrolling Interests.
 Liquidity and Capital Resources
   Operating activities
   Investing activities
   21




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Financing activities
    Accounting for Derivative Instruments
and Hedging Activities
 3
 Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities
  22




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##### Table of Contents



Contractual Obligations
  Payments due by periodMore than 5Contractual Obligations
    
    Total
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    yearsSenior secured credit facility
    
    $
    447,638
    
    
    $
    
    
    
    
    
    
    
    
    447,638Senior subordinated notes
    
    
    194,500
    
    
    
    
    
    
    
    
    
    
    
    194,500
    
    
    
    Interest (1)
    
    
    144,948
    
    
    
    43,156
    
    
    
    63,941
    
    
    
    37,851
    
    
    
    Operating lease obligations
    
    
    11,212
    
    
    
    1,573
    
    
    
    2,644
    
    
    
    2,113
    
    
    
    4,882Purchase obligations (2)(3)
    
    
    12,133
    
    
    
    5,540
    
    
    
    6,593
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    810,431
    
    
    $
    50,269
    
    
    $
    73,178
    
    
    $
    682,102
    
    
    $
    4,882
 
 (1)
    
    Future interest obligations are calculated using current interest
rates on existing debt balances as of September 30, 2009, and
assume no principal reduction other than mandatory principal
repayments in accordance with the terms of the debt instruments as
described in Note 4 in our consolidated financial statements.(2)
    
    We are required to pay First Data an annual processing fee related
to our previously purchased FDMS Merchant Portfolio and the FDMS
Agent Bank Portfolio of at least $5.5 million in fiscal 2009, and
for each subsequent year through 2011 of at least 70% of the
amount of the processing fee paid during the immediately preceding
year. The minimum commitments for years after 2009, included in
the table above are based on the preceding year minimum amounts.
The actual minimum commitments for such years may vary based on
actual results in preceding years.(3)
    
    We have agreed to utilize First Data to process at least 75% of
our consolidated transaction sales volume in any calendar year
through 2011. The minimum commitments for such years are not
calculable as of September 30, 2009, and are excluded from this
table.  Effects of Inflation
  
 Item 3. Quantitative and Qualitative Disclosure about Market Risk
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##### Table of Contents



Item 4. Controls and Procedures
 Evaluation of disclosure controls and procedures
 Changes in internal control over financial reporting
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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  A change of control under our senior secured credit facility could cause a material adverse effect
on our liquidity, financial condition or results of operations.
  
    
    Gregory S. Daily, our Chairman and Chief Executive Officer, Carl A. Grimstad, our
President, and certain other investors (collectively, the Permitted Holders) cease to
beneficially own equity interests in iPayment Holdings, Inc. (Holdings) representing
more than fifty percent of its voting equity interests;
    
    during any period of twelve consecutive months, a majority of Holdings Board of
Directors ceases to be composed of individuals who were members of Holdings Board of
Directors at the beginning of such period or who were elected or nominated by such
members or appointees of such members who constituted at least a majority of the Board
of Directors at the time of such election or nomination;
    
    Gregory S. Daily and certain trusts controlled by Mr. Daily cease to beneficially own
or control at least a majority of the equity interests in Holdings or any parent company
beneficially owned by the Permitted Holders; or
    
    a change of control occurs under the indenture governing our senior subordinated
notes (described below).
    A change of control under the indenture governing our senior subordinated notes could cause a
material adverse effect on our liquidity, financial condition or results of operations.
  
    
    any person or group other than one or more of the Permitted Holders or a parent
company becomes the beneficial owner of (i) 35% or more of the voting power of our voting
stock and (ii) more of the voting power of our voting stock than that beneficially owned by
the Permitted Holders; or
    
    a majority of the members of our Board of Directors cease to be continuing directors;
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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits and Reports on Form 8-K
  26




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##### Table of Contents



SIGNATURES
  iPayment, Inc.Date: November 13, 2009
    By:
    /s/  Gregory S. DailyGregory S. DailyChief Executive Officer
(Principal Executive Officer)Date:  November 13, 2009
    By:
    /s/  Clay M. WhitsonClay M. WhitsonChief Financial Officer
(Principal Financial and Accounting Officer) 27




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    Certification of Chief Executive Officer pursuant to Securities Exchange Act
Rule 13a  14(a) (as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002), filed herewith.31.2
    
    Certification of Chief Financial Officer pursuant to Securities Exchange Act
Rule 13a  14(a) (as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002), filed herewith.32.1
    
    Certification of Chief Executive Officer pursuant to Securities Exchange Act
Rule 13a  14(a) and 18 U.S.C. 1350 (as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002), filed herewith.32.2
    
    Certification of Chief Financial Officer pursuant to Securities Exchange Act
Rule 13a  14(a) and 18 U.S.C. 1350 (as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002), filed herewith.
 28