##### 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 June 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 August 14, 2009(Common stock, $0.01 par value)
    
    100




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##### 



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




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Part 1.
 
 Item 1. Financial Statements
 iPAYMENT, INC.


CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)
    
    
    (Audited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,032
    
    
    $
    3,589Accounts receivable, net of allowance for doubtful accounts of $1,434 and $998 at
June 30, 2009 and December 31, 2008, respectively
    
    
    24,456
    
    
    
    25,693Prepaid expenses and other current assets
    
    
    1,764
    
    
    
    2,286Investment in merchant advances, net of allowance for doubtful accounts of $3,336
and $3,822 at June 30, 2009 and December 31, 2008, respectively
    
    
    680
    
    
    
    4,460Deferred tax assets
    
    
    2,725
    
    
    
    3,442Total current assets
    
    
    30,657
    
    
    
    39,470Restricted cash
    
    
    1,036
    
    
    
    999Property and equipment, net
    
    
    4,268
    
    
    
    4,714Intangible assets and other, net of accumulated amortization of $118,283 and $95,286
at June 30, 2009 and December 31, 2008, respectively.
    
    
    156,328
    
    
    
    176,548Goodwill
    
    
    528,190
    
    
    
    527,912Deferred tax asset
    
    
    3,959
    
    
    
    4,991Other assets, net
    
    
    12,339
    
    
    
    14,230Total assets
    
    $
    736,777
    
    
    $
    768,864LIABILITIES and STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,047
    
    
    $
    2,012Income taxes payable
    
    
    904
    
    
    
    7,941Accrued liabilities and other
    
    
    19,858
    
    
    
    22,366Current portion of long-term debt
    
    
    
    
    
    
    17,347Total current liabilities
    
    
    23,809
    
    
    
    49,666Long-term debt
    
    
    660,444
    
    
    
    669,979Other liabilities
    
    
    17,602
    
    
    
    21,627Total liabilities
    
    
    701,855
    
    
    
    741,272Commitments and contingencies (Note 8)Stockholders equityCommon stock, $0.01 par value; 1,000 shares authorized, 100 shares issued and
outstanding at June 30, 2009, and December 31, 2008, respectively
    
    
    20,055
    
    
    
    20,055Accumulated other comprehensive loss, net of tax benefits of $6,631 and $8,178 at
June 30, 2009, and December 31, 2008, respectively.
    
    
    (9,946
    )
    
    
    (12,268
    )Retained earnings
    
    
    22,834
    
    
    
    18,818Total iPayment, Inc. stockholders equity
    
    
    32,943
    
    
    
    26,605Noncontrolling interest
    
    
    1,979
    
    
    
    987Total equity
    
    
    34,922
    
    
    
    27,592Total liabilities and equity
    
    $
    736,777
    
    
    $
    768,864
  3




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iPAYMENT, INC.


CONSOLIDATED INCOME STATEMENTS
 Three
    
    
    Three
    
    
    Six
    
    
    SixMonths
    
    
    Months
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Revenues
    
    $
    190,745
    
    
    $
    212,580
    
    
    $
    360,798
    
    
    $
    398,035Operating expenses:Interchange
    
    
    103,575
    
    
    
    121,855
    
    
    
    200,485
    
    
    
    230,236Other costs of services
    
    
    60,774
    
    
    
    62,055
    
    
    
    116,317
    
    
    
    117,828Selling, general and administrative
    
    
    4,940
    
    
    
    4,915
    
    
    
    9,757
    
    
    
    9,733Total operating expenses
    
    
    169,289
    
    
    
    188,825
    
    
    
    326,559
    
    
    
    357,797Income from operations
    
    
    21,456
    
    
    
    23,755
    
    
    
    34,239
    
    
    
    40,238Other expense:Interest expense, net
    
    
    11,694
    
    
    
    14,474
    
    
    
    23,350
    
    
    
    28,786Other expense (income), net
    
    
    1,072
    
    
    
    (117
    )
    
    
    1,090
    
    
    
    (115
    )Income before income taxes
    
    
    8,690
    
    
    
    9,398
    
    
    
    9,799
    
    
    
    11,567Income tax provision
    
    
    3,709
    
    
    
    3,626
    
    
    
    3,594
    
    
    
    4,464Net income
    
    
    4,981
    
    
    
    5,772
    
    
    
    6,205
    
    
    
    7,103Less: Net income attributable to
noncontrolling interests
    
    
    (758
    )
    
    
    
    
    
    
    (2,192
    )
    
    
    Net income attributable to iPayment, Inc.
    
    $
    4,223
    
    
    $
    5,772
    
    
    $
    4,013
    
    
    $
    7,103
  4




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iPAYMENT, INC.


CONSOLIDATED STATEMENTS of CASH FLOWS
 Six Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)Cash flows from operating activitiesNet income
    
    $
    6,205
    
    
    $
    7,103Adjustments to reconcile net income to net cash provided by operating activitiesDepreciation and amortization
    
    
    24,121
    
    
    
    17,551Noncash interest expense and other
    
    
    1,292
    
    
    
    1,166Changes in assets and liabilities, excluding effects of acquisitions:Accounts receivable
    
    
    1,237
    
    
    
    (1,257
    )Prepaid expenses and other current assets
    
    
    522
    
    
    
    289Other assets
    
    
    (154
    )
    
    
    (67
    )Accounts payable and income taxes payable
    
    
    (6,002
    )
    
    
    (6,778
    )Accrued liabilities and other
    
    
    (260
    )
    
    
    (2,055
    )Net cash provided by operating activities
    
    
    26,961
    
    
    
    15,952Cash flows from investing activitiesChange in restricted cash
    
    
    (37
    )
    
    
    (32
    )Expenditures for property and equipment
    
    
    (628
    )
    
    
    (904
    )Investment in merchant advances, net
    
    
    3,780
    
    
    
    (10,282
    )Acquisitions of businesses & portfolios, net of cash acquired, and payments
related to businesses previously acquired
    
    
    (2,456
    )
    
    
    (22,000
    )Payments for prepaid residual expenses
    
    
    (1,977
    )
    
    
    (3,560
    )Net cash used in investing activities
    
    
    (1,318
    )
    
    
    (36,778
    )Cash flows from financing activitiesNet borrowings on line of credit
    
    
    
    
    
    
    26,250Repayments of debt
    
    
    (27,000
    )
    
    
    (5,451
    )Distributions to noncontrolling interest in equity of consolidated subsidiary
    
    
    (1,200
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (28,200
    )
    
    
    20,799Net decrease in cash and cash equivalents
    
    
    (2,557
    )
    
    
    (27
    )Cash and cash equivalents, beginning of period
    
    
    3,589
    
    
    
    33Cash and cash equivalents, end of period
    
    $
    1,032
    
    
    $
    6Supplemental disclosure of cash flow information:Cash paid during the period for income taxes
    
    $
    10,289
    
    
    $
    7,468Cash paid during the period for interest
    
    $
    22,334
    
    
    $
    27,289Supplemental schedule of non-cash activities:Accrual of deferred payments for acquisitions of businesses with a
corresponding increase in goodwill
    
    $
    278
    
    
    $
    
  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
  Other Costs of Services
  6




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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
  Amortization of Intangible Assets
  7




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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 Leases.
 Payments for Prepaid Residual Expenses
  8




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(4) Long-Term Debt
  Accounting for Derivative Instruments and Hedging Activities
  
    
    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).
  
    
    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
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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 Accounting for Uncertainty in Income Taxes  an Interpretation
of FASB Statement No. 109
  Noncontrolling Interests in Consolidated
Financial Statements
    10




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(7) Comprehensive Income (Loss)
   (8) Commitments and Contingencies
 Litigation
 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, et al , Civil Action
No. 05CC02794  State of California, Superior Court of Orange County.
  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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ex parte
  Equal Employment Opportunity Commission, Plaintiff, v. iPayment, Inc., and NPMG Acquisition
Sub, LLC, a Delaware corporation, United States District Court for the District of Arizona,
Case No.: CV 08-1790-PHX-SRB
   12




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Other  Merrick Bank
   (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
 13




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Instruments Disclosures about Fair Value of Financial
Instruments Interim Financial Reporting Financial Instruments
 Subsequent Events
 (10) Significant Developments
   (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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Reserve for Merchant Losses
  Income Taxes. Accounting for Uncertainty in Income
Taxes  an Interpretation of FASB Statement No. 109
  Noncontrolling Interest.
 Consolidation of Variable Interest Entities
 Derivative Financial Instruments. Accounting for Derivative Instruments and Hedging Activities
 16




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Components of Revenues and Expenses
  Reporting Revenue Gross as a Principal Versus Net as
an Agent,
    Seasonality Trend
  17




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Off-Balance Sheet Arrangements
  18




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Results of Operations
 Three Months Ended June 30, 2009 (2009) Compared to Three Months Ended June 30, 2008 (2008)
 ChangeThree months ended
    
    
    % of Total
    
    
    Three months ended
    
    
    % of TotalJune 30, 2009
    
    
    Revenue
    
    
    June 30, 2008
    
    
    Revenue
    
    
    Amount
    
    
    %Revenues
    
    $
    190,745
    
    
    
    100.0
    %
    
    $
    212,580
    
    
    
    100.0
    %
    
    $
    (21,835
    )
    
    
    (10.3
    )Operating ExpensesInterchange
    
    
    103,575
    
    
    
    54.3
    
    
    
    121,855
    
    
    
    57.3
    
    
    
    (18,280
    )
    
    
    (15.0
    )Other costs of services
    
    
    60,774
    
    
    
    31.9
    
    
    
    62,055
    
    
    
    29.2
    
    
    
    (1,281
    )
    
    
    (2.1
    )Selling, general and
administrative
    
    
    4,940
    
    
    
    2.6
    
    
    
    4,915
    
    
    
    2.3
    
    
    
    25
    
    
    
    0.5Total operating expenses
    
    
    169,289
    
    
    
    88.8
    
    
    
    188,825
    
    
    
    88.8
    
    
    
    (19,536
    )
    
    
    (10.3
    )Income from operations
    
    
    21,456
    
    
    
    11.2
    
    
    
    23,755
    
    
    
    11.2
    
    
    
    (2,299
    )
    
    
    (9.7
    )Other expensesInterest expenses, net
    
    
    11,694
    
    
    
    6.1
    
    
    
    14,474
    
    
    
    6.8
    
    
    
    (2,780
    )
    
    
    (19.2
    )Other expenses (income), net
    
    
    1,072
    
    
    
    0.7
    
    
    
    (117
    )
    
    
    (0.1
    )
    
    
    1,189
    
    
    
    (1,016.2
    )Total other expense
    
    
    12,766
    
    
    
    6.7
    
    
    
    14,357
    
    
    
    6.8
    
    
    
    (1,591
    )
    
    
    (11.1
    )Income before income taxes
    
    
    8,690
    
    
    
    4.6
    
    
    
    9,398
    
    
    
    4.4
    
    
    
    (708
    )
    
    
    (7.5
    )Income tax provision
    
    
    3,709
    
    
    
    1.9
    
    
    
    3,626
    
    
    
    1.7
    
    
    
    83
    
    
    
    2.3Net Income
    
    
    4,981
    
    
    
    2.6
    
    
    
    5,772
    
    
    
    2.7
    
    
    
    (791
    )
    
    
    (13.7
    )Less: Net income attributable to
noncontrolling interests
    
    
    (758
    )
    
    
    (0.4
    )
    
    
    
    
    
    
    
    
    
    
    (758
    )
    
    
    (100.00
    )Net income attributable to iPayment, Inc.
    
    $
    4,223
    
    
    
    2.2
    
    
    $
    5,772
    
    
    
    2.7
    
    
    $
    (1,549
    )
    
    
    (26.8
    )
 Revenues.
 Interchange Expenses
 Other Costs of Services.
 Selling, General and Administrative.
 Other Expenses.
 Income Tax
 Noncontrolling Interests.
 19




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Six Months Ended June 30, 2009 (2009) Compared to Six Months Ended June 30, 2008 (2008)
 ChangeSix months ended
    
    
    % of Total
    
    
    Six months ended
    
    
    % of TotalJune 30, 2009
    
    
    Revenue
    
    
    June 30, 2008
    
    
    Revenue
    
    
    Amount
    
    
    %Revenues
    
    $
    360,798
    
    
    
    100.0
    %
    
    $
    398,035
    
    
    
    100.0
    %
    
    $
    (37,237
    )
    
    
    (9.4
    )Operating ExpensesInterchange
    
    
    200,485
    
    
    
    55.6
    
    
    
    230,236
    
    
    
    57.8
    
    
    
    (29,751
    )
    
    
    (12.9
    )Other costs of services
    
    
    116,317
    
    
    
    32.2
    
    
    
    117,828
    
    
    
    29.6
    
    
    
    (1,511
    )
    
    
    (1.3
    )Selling, general and
administrative
    
    
    9,757
    
    
    
    2.7
    
    
    
    9,733
    
    
    
    2.4
    
    
    
    24
    
    
    
    0.2Total operating expenses
    
    
    326,559
    
    
    
    90.5
    
    
    
    357,797
    
    
    
    89.9
    
    
    
    (31,238
    )
    
    
    (8.7
    )Income from operations
    
    
    34,239
    
    
    
    9.5
    
    
    
    40,238
    
    
    
    10.1
    
    
    
    (5,999
    )
    
    
    (14.9
    )Other expensesInterest expenses, net
    
    
    23,350
    
    
    
    6.5
    
    
    
    28,786
    
    
    
    7.2
    
    
    
    (5,436
    )
    
    
    (18.9
    )Other expenses (income), net
    
    
    1,090
    
    
    
    0.4
    
    
    
    (115
    )
    
    
    (0.0
    )
    
    
    1,205
    
    
    
    (1,047.8
    )Total other expenses
    
    
    24,440
    
    
    
    6.8
    
    
    
    28,671
    
    
    
    7.2
    
    
    
    (4,231
    )
    
    
    (14.8
    )Income before income taxes
    
    
    9,799
    
    
    
    2.7
    
    
    
    11,567
    
    
    
    2.9
    
    
    
    (1,768
    )
    
    
    (15.3
    )Income tax provision
    
    
    3,594
    
    
    
    1.0
    
    
    
    4,464
    
    
    
    1.1
    
    
    
    (870
    )
    
    
    (19.5
    )Net Income
    
    
    6,205
    
    
    
    1.7
    
    
    
    7,103
    
    
    
    1.8
    
    
    
    (898
    )
    
    
    (12.6
    )Less: Net income attributable to
noncontrolling interests
    
    
    (2,192
    )
    
    
    (0.6
    )
    
    
    
    
    
    
    
    
    
    
    (2,192
    )
    
    
    (100.00
    )Net income attributable to iPayment, Inc.
    
    $
    4,013
    
    
    
    1.1
    
    
    $
    7,103
    
    
    
    1.8
    
    
    $
    (3,090
    )
    
    
    (43.5
    )
 Revenues.
 Interchange Expenses
 Other Costs of Services.
 Selling, General and Administrative.
 Other Expenses.
 Income Tax
 Noncontrolling Interests.
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Liquidity and Capital Resources
   Operating activities
   Investing activities
   Financing activities
  21




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##### Table of Contents



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
    
    $
    467,637
    
    
    $
    
    
    
    
    3,863
    
    
    
    463,774Senior subordinated notes
    
    
    194,500
    
    
    
    
    
    
    
    
    
    
    
    194,500
    
    
    
    Interest (1)
    
    
    157,668
    
    
    
    43,605
    
    
    
    68,192
    
    
    
    45,871
    
    
    
    Operating lease obligations
    
    
    10,123
    
    
    
    1,304
    
    
    
    2,392
    
    
    
    1,744
    
    
    
    4,683Purchase obligations (2)(3)
    
    
    12,133
    
    
    
    5,540
    
    
    
    6,593
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    842,061
    
    
    $
    50,449
    
    
    $
    81,040
    
    
    $
    705,889
    
    
    $
    4,683
 
 (1)
    
    Future interest obligations are calculated using current interest
rates on existing debt balances as of June 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 June 30, 2009, and are excluded from this table.  Effects of Inflation
  
 Item 3. Quantitative and Qualitative Disclosure about Market Risk
    23




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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
 24




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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: August 14, 2009
    By:
    /s/  Gregory S. DailyGregory S. DailyChief Executive Officer
(Principal Executive Officer)Date: August 14, 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