##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM
10-Q/A
 (Amendment
No. 1)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2006
 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
(State or other jurisdiction of
incorporation or organization)
    
    62-1847043
(I.R.S. Employer
Identification No.)40 Burton Hills Boulevard,
Suite 415Nashville, Tennessee
(Address of principal executive offices)
    
    37215
(Zip Code)
 Registrants telephone number, including area code (615) 665-1858
 þ o
  o o þ
 o þ
  Title of each class
    
    Shares Outstanding at July 31, 2006(Common stock, $0.01 par value)
    
    100




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TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONExplanatory Note
    Purpose of this Amendment on Form 10-Q/AItem 1
    
    Financial StatementsConsolidated Balance Sheets as of June 30, 2006 (successor, unaudited) and December 31, 2005 (predecessor)
    
    
    3Unaudited Consolidated Statements of Operations  May 11, 2006 through June 30, 2006 (successor); April 1, 2006
through May 10, 2006 (predecessor); January 1, 2006 through May 10, 2006 (predecessor); three and six
months ended June 30, 2005 (predecessor)
    
    
    4Unaudited Consolidated Statements of Cash Flows  January 1, 2006 through May 10, 2006 (predecessor);
May 11, 2006 through June 30, 2006 (successor); Six months ended June 30, 2005 (predecessor)
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6PART II  OTHER INFORMATIONItem 6
    
    Exhibits
    
    
    26SIGNATURES
    
    
    
    
    27EXHIBITS
    
    
    
    
    27CERTIFICATIONSEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE CFO




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EXPLANATORY NOTE




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Part 1.
 
 Item 1. Financial Statements
 iPAYMENT, INC.
 
 CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2006
    
    
    2005Successor
    
    
    Predecessor(Unaudited)
    
    
    (Note 1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    189
    
    
    $
    1,023Accounts receivable, net of allowance for doubtful accounts of $220 and $508 at
June 30, 2006 and December 31, 2005, respectively
    
    
    20,778
    
    
    
    22,718Prepaid expenses and other current assets
    
    
    2,934
    
    
    
    2,549Total current assets
    
    
    23,901
    
    
    
    26,290Restricted cash
    
    
    1,094
    
    
    
    3,090Property and equipment, net
    
    
    3,485
    
    
    
    2,907Intangible assets, net of accumulated amortization of $5,490 and $65,199
at June 30, 2006 and December 31, 2005, respectively.
    
    
    246,653
    
    
    
    192,343Goodwill, net
    
    
    488,205
    
    
    
    105,178Deferred tax asset, net
    
    
    
    
    
    
    5,757Other assets, net
    
    
    19,684
    
    
    
    5,416Total assets
    
    $
    783,022
    
    
    $
    340,981LIABILITIES and STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    4,400
    
    
    $
    1,697Income taxes payable
    
    
    
    
    
    
    4,697Accrued liabilities and other
    
    
    17,729
    
    
    
    24,575Current portion of long-term debt
    
    
    5,241
    
    
    
    Total current liabilities
    
    
    27,370
    
    
    
    30,969Minority interest in (deficit) equity of consolidated subsidiaries
    
    
    (360
    )
    
    
    431Deferred tax liabilities
    
    
    16,373
    
    
    
    Long-term debt
    
    
    718,508
    
    
    
    100,228Total liabilities
    
    
    761,891
    
    
    
    131,628Commitments and contingenciesStockholders equityPreferred stock, $0.01 par value; 17,422,800 shares authorized, no shares
issued or outstanding at June 30, 2006, and December 31, 2005
    
    
    
    
    
    
    Common stock, $0.01 par value; 1,000 shares authorized, 100 shares issued
and outstanding at June 30, 2006; 180,000,000 shares authorized,
17,725,181 shares issued and outstanding at December 31, 2005
    
    
    19,602
    
    
    
    155,870Deferred compensation
    
    
    
    
    
    
    (3,413
    )Accumulated other comprehensive income
    
    
    1,403
    
    
    
    Retained earnings
    
    
    126
    
    
    
    56,896Total stockholders equity
    
    
    21,131
    
    
    
    209,353Total liabilities and stockholders equity
    
    $
    783,022
    
    
    $
    340,981
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iPAYMENT, INC.
 
 CONSOLIDATED STATEMENTS of OPERATIONS
 Period from
    
    
    Three
    
    
    Period from
    
    
    SixMay 11
    
    
    April 1
    
    
    Months
    
    
    May 11
    
    
    January 1
    
    
    Monthsthrough
    
    
    through
    
    
    Ended
    
    
    through
    
    
    through
    
    
    EndedJune 30,
    
    
    May 10,
    
    
    June 30,
    
    
    June 30,
    
    
    May 10,
    
    
    June 30,2006
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2006
    
    
    2005Successor
    
    
    Predecessor
    
    
    Predecessor
    
    
    Successor
    
    
    Predecessor
    
    
    PredecessorRevenues
    
    $
    107,549
    
    
    $
    81,613
    
    
    $
    181,138
    
    
    $
    107,549
    
    
    $
    252,514
    
    
    $
    344,501Operating expenses:Interchange
    
    
    62,389
    
    
    
    47,346
    
    
    
    106,031
    
    
    
    62,389
    
    
    
    145,459
    
    
    
    203,452Other costs of services
    
    
    32,424
    
    
    
    24,656
    
    
    
    55,091
    
    
    
    32,424
    
    
    
    78,006
    
    
    
    103,866Selling, general and administrative
    
    
    2,322
    
    
    
    8,800
    
    
    
    4,676
    
    
    
    2,322
    
    
    
    13,420
    
    
    
    8,200Total operating expenses
    
    
    97,135
    
    
    
    80,802
    
    
    
    165,798
    
    
    
    97,135
    
    
    
    236,885
    
    
    
    315,518Income from operations
    
    
    10,414
    
    
    
    811
    
    
    
    15,340
    
    
    
    10,414
    
    
    
    15,629
    
    
    
    28,983Other expense:Interest expense
    
    
    8,602
    
    
    
    3,380
    
    
    
    2,281
    
    
    
    8,602
    
    
    
    5,229
    
    
    
    4,578Other expense
    
    
    1,956
    
    
    
    5,850
    
    
    
    496
    
    
    
    1,956
    
    
    
    6,729
    
    
    
    577(Loss) Income before income taxes and minority
interest in losses of consolidated subsidiary
    
    
    (144
    )
    
    
    (8,419
    )
    
    
    12,563
    
    
    
    (144
    )
    
    
    3,671
    
    
    
    23,828Income tax (benefit) provision
    
    
    (77
    )
    
    
    (1,475
    )
    
    
    4,900
    
    
    
    (77
    )
    
    
    3,343
    
    
    
    9,293Minority interest in losses
of consolidated subsidiary
    
    
    193
    
    
    
    173
    
    
    
    66
    
    
    
    193
    
    
    
    522
    
    
    
    66Net income (loss)
    
    $
    126
    
    
    $
    (6,771
    )
    
    $
    7,729
    
    
    $
    126
    
    
    $
    850
    
    
    $
    14,601
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iPAYMENT, INC.
 
 CONSOLIDATED STATEMENTS of CASH FLOWS
 Period fromMay 11
    
    
    January 1
    
    
    Six Monthsthrough
    
    
    through
    
    
    EndedJune 30,
    
    
    May 10
    
    
    June 30,2006
    
    
    2006
    
    
    2005Successor
    
    
    Predecessor
    
    
    PredecessorCash flows from operating activitiesNet income
    
    $
    126
    
    
    $
    850
    
    
    $
    14,601Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    2,378
    
    
    
    17,279
    
    
    
    20,272Stock-based compensation
    
    
    3,253
    
    
    
    4,466
    
    
    
    Noncash interest expense
    
    
    49
    
    
    
    2,958
    
    
    
    495Changes in assets and liabilities, excluding effects of acquisitions:Accounts receivable
    
    
    (11,548
    )
    
    
    13,488
    
    
    
    (3,399
    )Prepaid expenses and other current assets
    
    
    70
    
    
    
    (461
    )
    
    
    (2,668
    )Other assets
    
    
    7,584
    
    
    
    (6,017
    )
    
    
    (4,368
    )Accounts payable and income taxes payable
    
    
    2,612
    
    
    
    (4,444
    )
    
    
    5,718Accrued liabilities and other
    
    
    (16,679
    )
    
    
    20,322
    
    
    
    3,632Net cash (used in) provided by operating activities
    
    
    (12,155
    )
    
    
    48,441
    
    
    
    34,283Cash flows from investing activitiesChange in restricted cash
    
    
    946
    
    
    
    1,050
    
    
    
    770Expenditures for property and equipment
    
    
    (490
    )
    
    
    (587
    )
    
    
    (810
    )Acquisitions of businesses, portfolios and other intangibles, net of cash acquired
    
    
    (287
    )
    
    
    (524
    )
    
    
    (18,712
    )Payments related to businesses previously acquired
    
    
    (3,000
    )
    
    
    (11,500
    )
    
    
    Net cash used in investing activities
    
    
    (2,831
    )
    
    
    (11,561
    )
    
    
    (18,752
    )Cash flows from financing activitiesNet repayments (borrowings) on line of credit
    
    
    7,500
    
    
    
    (100,000
    )
    
    
    (16,000
    )Proceeds received in exchange for ownership interest in Successor company
    
    
    3,378
    
    
    
    
    
    
    
    Repayments of debt
    
    
    (1,303
    )
    
    
    (28
    )
    
    
    Proceeds from issuance of debt, net of finance costs
    
    
    (120
    )
    
    
    701,165
    
    
    
    Repurchase of common stock
    
    
    (633,702
    )
    
    
    
    
    
    
    Proceeds from issuance of common stock
    
    
    
    
    
    
    382
    
    
    
    1,930Net cash (used in) provided by financing activities
    
    
    (624,247
    )
    
    
    601,519
    
    
    
    (14,070
    )Net (decrease) increase in cash and cash equivalents
    
    
    (639,233
    )
    
    
    638,399
    
    
    
    1,461Cash and cash equivalents, beginning of period
    
    
    639,422
    
    
    
    1,023
    
    
    
    888Cash and cash equivalents, end of period
    
    $
    189
    
    
    $
    639,422
    
    
    $
    2,349Supplemental disclosure of cash flow information:Cash paid during the period for income taxes
    
    $
    107
    
    
    $
    4,866
    
    
    $
    5,478Cash paid during the period for interest
    
    $
    5,284
    
    
    $
    2,663
    
    
    $
    3,512Supplemental schedule of non-cash activities:Accrual of deferred payments for acquisitions of businesses
    
    $
    
    
    
    $
    
    
    
    $
    9,500Restricted stock issued to employees
    
    $
    
    
    
    $
    
    
    
    $
    3,625Non-cash increases in assets from acquisitions:Intangible assets
    
    $
    72,419
    
    
    $
    
    
    
    $
    Goodwill
    
    $
    356,756
    
    
    $
    
    
    
    $
    
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iPAYMENT, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 (1) Organization and Business and Basis of Presentation
 Organization and Business
     Basis of Presentation
   Use of Estimates
  Page 6 of 28




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iPAYMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Share-based Compensation
 Share-Based Payment, Accounting for Share-based Compensation
     Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2005
    
    
    2005Net income, as reported
    
    $
    7,729
    
    
    $
    14,601Deduct: Total stock-based employee compensation expense
determined under fair-value-based method, net of tax
    
    
    (590
    )
    
    
    (1,165
    )Pro forma net income
    
    $
    7,139
    
    
    $
    13,436
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iPAYMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  Derivative Financial Instruments
   Accounting for Derivative Instruments and Hedging Activities
 (2) Going Private and Financing Transactions
  3 4
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iPAYMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  Basis in Leverage Buyout Transactions Allocating Basis to Individual Assets and Liabilities within
the Scope of Issue 88-16
 Goodwill and Other Intangible Assets
  Three months ended
    
    Six months endedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Gross revenues
    
    $
    189,162
    
    
    $
    181,138
    
    
    $
    360,063
    
    
    $
    344,501Income from operations
    
    
    18,251
    
    
    
    15,556
    
    
    
    33,964
    
    
    
    29,354Interest
expense
    
    
    15,685
    
    
    
    15,685
    
    
    
    31,370
    
    
    
    31,370Net income
    
    
    1,896
    
    
    
    (13
    )
    
    
    1,977
    
    
    
    (1,213
    )
   (3) Acquisitions
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iPAYMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Other Acquisitions
  (4) Long-Term Debt
  Accounting for Derivative Instruments and Hedging
Activities
 3 4
  (5) Segment Information and Geographical Information
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iPAYMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 (6) Income Taxes
 Accounting for Income
Taxes
  (7) Commitments and Contingencies
 Litigation
 Thomas Zito v. Leasecomm Corporation, E-Commerce Exchange, Inc., etc. et al , United
States District Court, Southern District of New York, Case No. 02CV8074.
    Venus L. Franklin and Sandra Lindsey v. Leasecomm Corporation and E-Commerce Exchange,
Inc ., Cambridge District Court, Commonwealth of Massachusetts, Civil Action No. 04-338.
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iPAYMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   Howard Ehrenberg, Chapter 7 Trustee for the Estate of ITSV, Inc., v. CREDITCARDS.COM, INC. , a California corporation, IPAYMENT, INC., et al., U.S. B.C. Case No. LA 02-31259-EC, Adversary Case
No. 04-2214VZ.
  France Vacations, Inc., etc. v. Citibank, etc., and iPayment, Inc. et al ., Los Angeles
County Superior Court, State of California, Case No. BC327932.
    Robert Aguilard, et al., on behalf of themselves and all persons similarly situated v.
E-Commerce Exchange, Inc . , A-1 Leasing LLC, and Duvera Billing Services Civil Action No.
05CC02794  State of California, Superior Court of Orange County.
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iPAYMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   Fogazzo Wood Fired Ovens and Barbecues, LLC v. iPayment, Inc . Los Angeles County Superior
Court, State of California, Case No. BC342878
    In re iPayment, Inc. Shareholders Litigation , Chancery Court for Davidson County, 20th
Judicial District, State of Tennessee, Lead Case No. 05-1250-I
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iPAYMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   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)
    Other
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iPAYMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 (8) Significant Developments and Subsequent Events
 In re iPayment, Inc.
Shareholders Litigation
 3 4
  Page 15 of 28




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PART II  OTHER INFORMATION
 
 Item 6. Exhibits
 Page 26 of 28




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SIGNATURES
  iPayment, Inc.Date:
September 28, 2006
    
    By: /s/ Gregrory S. DailyGregory S. DailyChief Executive Officer(Principal Executive Officer)Date:
September 28, 2006
    
    By: /s/ Clay M. WhitsonClay M. WhitsonChief Financial Officer(Principal Financial and Accounting Officer)
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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 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.
 Page 28 of 28