##### 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, 2007
 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)
 Registrants telephone number, including area code (615) 665-1858
 þ o
  o o þ
 o þ
  Title of each class
    
    Shares Outstanding at September 30, 2007(Common stock, $0.01 par value)
    
    100




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##### 



PagePART I  FINANCIAL INFORMATIONItem 1
    
    Financial StatementsConsolidated Balance Sheets as of September 30, 2007 (Successor, Unaudited) and December
31, 2006 (Successor)
    
    
    3Unaudited Consolidated Statements of Operations for the three and nine months ended
September 30, 2007; three months ended September 30, 2006 (Successor); May 11, 2006 through
September 30, 2006 (Successor); January 1, 2006 through May 10, 2006 (Predecessor)
    
    
    4Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30,
2007; period from January 1, 2006 through May 10, 2006 (Predecessor); period from May 11,
2006 through September 30, 2006 (Successor)
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
    
    
    14Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4
    
    Controls and Procedures
    
    
    22PART II  OTHER INFORMATIONItem 1
    
    Legal Proceedings
    
    
    23Item 1A
    
    Risk Factors
    
    
    23Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3
    
    Defaults Upon Senior Securities
    
    
    23Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    23Item 5
    
    Other Information
    
    
    23Item 6
    
    Exhibits and Reports on Form 8-K
    
    
    23SIGNATURES
    
    
    24EXHIBITS
    
    
    25EX-31.1 Section 302 Certification of the CEOEX-31.2 Section 302 Certification of the CFOEX-32.1 Section 906 Certification of the CFOEX-32.2 Section 906 Certification of the CFO
  2




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##### Table of Contents



Part 1.
 
 Item 1. Financial Statements
 iPAYMENT, INC.
 
 CONSOLIDATED BALANCE SHEETS
  September 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)
    
    
    (Audited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    101
    
    
    $
    96Accounts receivable, net of allowance for doubtful accounts of $659 and $275 at
September 30, 2007 and December 31, 2006, respectively
    
    
    23,132
    
    
    
    23,050Prepaid expenses and other current assets
    
    
    2,690
    
    
    
    2,685Total current assets
    
    
    25,923
    
    
    
    25,831Restricted cash
    
    
    1,529
    
    
    
    1,036Property and equipment, net
    
    
    3,746
    
    
    
    3,925Intangible assets and other, net of accumulated amortization of $50,913 and $24,769
at September 30, 2007 and December 31, 2006, respectively.
    
    
    201,665
    
    
    
    226,776Goodwill
    
    
    509,683
    
    
    
    506,078Other assets, net
    
    
    18,335
    
    
    
    19,780Total assets
    
    $
    760,881
    
    
    $
    783,426LIABILITIES and STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,763
    
    
    $
    5,933Income taxes payable
    
    
    4,574
    
    
    
    508Accrued liabilities and other
    
    
    21,804
    
    
    
    24,968Current portion of long-term debt
    
    
    5,242
    
    
    
    5,241Total current liabilities
    
    
    35,383
    
    
    
    36,650Minority interest in equity of consolidated subsidiaries
    
    
    
    
    
    
    155Deferred tax liabilities
    
    
    7,185
    
    
    
    14,331Long-term debt
    
    
    692,046
    
    
    
    709,415Other liabilities
    
    
    7,690
    
    
    
    5,985Total liabilities
    
    
    742,304
    
    
    
    766,536Commitments and contingencies (Note 6)Stockholders equityCommon stock, $0.01 par value; 1,000 shares authorized, 100 shares issued and
outstanding at September 30, 2007, and December 31, 2006
    
    
    20,055
    
    
    
    20,055Accumulated other comprehensive loss, net of tax benefits of $2,380 and $1,517 at
September 30, 2007, and December 31, 2006, respectively.
    
    
    (3,571
    )
    
    
    (2,275
    )Retained earnings (deficit)
    
    
    2,093
    
    
    
    (890
    )Total stockholders equity
    
    
    18,577
    
    
    
    16,890Total liabilities and stockholders equity
    
    $
    760,881
    
    
    $
    783,426
  3




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iPAYMENT, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
  Three
    
    
    Three
    
    
    Nine
    
    
    Period fromMonths
    
    
    Months
    
    
    Months
    
    
    May 11
    
    
    January 1Ended
    
    
    Ended
    
    
    Ended
    
    
    through
    
    
    throughSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    May 10,2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2006(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Successor
    
    
    Successor
    
    
    Successor
    
    
    Successor
    
    
    PredecessorRevenues
    
    $
    193,599
    
    
    $
    186,959
    
    
    $
    564,012
    
    
    $
    294,508
    
    
    $
    252,514Operating expenses:Interchange
    
    
    111,264
    
    
    
    109,584
    
    
    
    327,324
    
    
    
    171,973
    
    
    
    145,459Other costs of services
    
    
    57,105
    
    
    
    58,129
    
    
    
    171,278
    
    
    
    90,865
    
    
    
    76,994Selling, general and administrative
    
    
    4,688
    
    
    
    4,623
    
    
    
    13,798
    
    
    
    6,633
    
    
    
    14,432Total operating expenses
    
    
    173,057
    
    
    
    172,336
    
    
    
    512,400
    
    
    
    269,471
    
    
    
    236,885Income from operations
    
    
    20,542
    
    
    
    14,623
    
    
    
    51,612
    
    
    
    25,037
    
    
    
    15,629Other expense:Interest expense, net
    
    
    15,145
    
    
    
    15,711
    
    
    
    45,631
    
    
    
    24,313
    
    
    
    5,229Other (income) expense, net
    
    
    (360
    )
    
    
    161
    
    
    
    (250
    )
    
    
    2,116
    
    
    
    6,729Income (loss) before income taxes and minority interest in earnings of consolidated subsidiary
    
    
    5,757
    
    
    
    (1,249
    )
    
    
    6,231
    
    
    
    (1,392
    )
    
    
    3,671Income tax provision (benefit)
    
    
    2,371
    
    
    
    (161
    )
    
    
    3,375
    
    
    
    (236
    )
    
    
    3,343Minority interest in losses of consolidated subsidiaries
    
    
    
    
    
    
    358
    
    
    
    155
    
    
    
    551
    
    
    
    522Net income (loss)
    
    $
    3,386
    
    
    $
    (730
    )
    
    $
    3,011
    
    
    $
    (605
    )
    
    $
    850
  4




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iPAYMENT, INC.
 
 CONSOLIDATED STATEMENTS of CASH FLOWS
  Period fromNine Months
    
    
    May 11
    
    
    January 1Ended
    
    
    through
    
    
    throughSeptember 30,
    
    
    September 30,
    
    
    May 10,2007
    
    
    2006
    
    
    2006(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Successor
    
    
    Successor
    
    
    PredecessorCash flows from operating activitiesNet income
(loss)
    
    $
    3,011
    
    
    $
    (605
    )
    
    $
    850Adjustments to reconcile net income to net cash provided by operating activitiesDepreciation and amortization
    
    
    27,374
    
    
    
    15,855
    
    
    
    14,026Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    7,719Noncash interest expense
    
    
    1,936
    
    
    
    681
    
    
    
    2,958Changes in assets and liabilities, excluding effects of acquisitions:Accounts receivable
    
    
    (82
    )
    
    
    (10,916
    )
    
    
    13,488Prepaid expenses and other current assets
    
    
    (5
    )
    
    
    46
    
    
    
    (461
    )Other assets
    
    
    (7,210
    )
    
    
    7,258
    
    
    
    (6,017
    )Accounts payable and income taxes payable
    
    
    1,896
    
    
    
    23
    
    
    
    (4,444
    )Accrued liabilities and other
    
    
    1,366
    
    
    
    (10,723
    )
    
    
    20,322Net cash provided by operating activities
    
    
    28,286
    
    
    
    1,619
    
    
    
    48,441Cash flows from investing activitiesChange in restricted cash
    
    
    (493
    )
    
    
    990
    
    
    
    1,050Expenditures for property and equipment
    
    
    (827
    )
    
    
    (882
    )
    
    
    (587
    )Acquisitions of businesses, portfolios and other intangibles, net of cash acquired
    
    
    (561
    )
    
    
    (287
    )
    
    
    (524
    )Payments related to businesses previously acquired
    
    
    (8,772
    )
    
    
    (3,000
    )
    
    
    (11,500
    )Net cash used in investing activities
    
    
    (10,653
    )
    
    
    (3,179
    )
    
    
    (11,561
    )Cash flows from financing activitiesNet borrowings (repayments) on line of credit
    
    
    50
    
    
    
    
    
    
    
    (100,000
    )Proceeds received in exchange for ownership interest in Successor company
    
    
    
    
    
    
    3,378
    
    
    
    Repayments of debt
    
    
    (17,678
    )
    
    
    (2,610
    )
    
    
    (28
    )Proceeds from issuance of debt, net of finance costs
    
    
    
    
    
    
    (120
    )
    
    
    701,165Repurchase of common stock
    
    
    
    
    
    
    (633,702
    )
    
    
    Proceeds from issuance of common stock
    
    
    
    
    
    
    
    
    
    
    382Net cash (used in) provided by financing activities
    
    
    (17,628
    )
    
    
    (633,054
    )
    
    
    601,519Net (decrease) increase in cash and cash equivalents
    
    
    5
    
    
    
    (634,614
    )
    
    
    638,399Cash and cash equivalents, beginning of period
    
    
    96
    
    
    
    639,422
    
    
    
    1,023Cash and cash equivalents, end of period
    
    $
    101
    
    
    $
    4,808
    
    
    $
    639,422Supplemental disclosure of cash flow information:Cash paid during the period for income taxes
    
    $
    5,924
    
    
    $
    321
    
    
    $
    4,866Cash paid during the period for interest
    
    $
    39,183
    
    
    $
    15,311
    
    
    $
    2,663Supplemental schedule of non-cash activities:Accrual of deferred payments for acquisitions of businesses
    
    $
    
    
    
    $
    11,896
    
    
    $
    Non-cash increases in assets (liabilities):Intangible assets
    
    $
    
    
    
    $
    71,411
    
    
    $
    Goodwill
    
    $
    
    
    
    $
    357,764
    
    
    $
    
  5




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(1) Organization and Business and Basis of Presentation
 Organization and Business
    Basis of Presentation
   Use of Estimates
  Share-Based Compensation
 Share-Based Payment,
  6




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Derivative Financial Instruments
   Accounting for Derivative Instruments and Hedging Activities
 Amortization of Merchant Processing Portfolios
   7




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##### Table of Contents



Common Stock
  (2) Acquisitions
  Other Acquisitions
  (3) Long-Term Debt
  Accounting for
Derivative Instruments and Hedging Activities
 3 4
 8




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Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities
  (4) Segment Information and Geographical Information
  (5) Income Taxes
 Accounting for Uncertainty in Income Taxes  an
Interpretation of FASB Statement No. 109
     (6) 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 Civil Action No.
05CC02794  State of California, Superior Court of Orange County.
  9




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##### Table of Contents



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)
   NPMG Acquisition Sub / American Arbitration Association Demand for Arbitration , Case
Number: Re: 76 489 Y 00188 07 WYGI
    10




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##### Table of Contents



Colin Hill v. CardPayment Solutions, L.L.C. and Zachary Daniels , Circuit Court in and for
the Sixth Judicial Circuit, in and for Pinellas County, Florida, Case
No. 06-8669-CI-0792
   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 JUDGMENT RECOVERY GROUP, LLC, as assignee of Sharyns Jewelers, LLC, v.
IPAYMENT, INC., IPAYMENT OF VALENCIA, VERICOMM, and JPMORGAN CHASE BANK, SUPERIOR COURT OF THE
STATE OF CALIFORNIA, COUNTY OF LOS ANGELES, Case No.: PS 009919
    Other
       11




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##### Table of Contents



(7) Restructuring
 Accounting for Costs Associated with Exit or Disposal Activities,
 One-Time Termination Benefits.
 Contract Termination Costs.
 Other Associated Costs.
  Charged toJanuary 1,
    
    
    Costs or
    
    
    
    
    
    
    September 30,2007
    
    
    Expenses
    
    
    Deductions
    
    
    2007One-time termination benefits
    
    $
    
    
    
    $
    392
    
    
    $
    392
    (1)
    
    $
    0Contract termination costs
    
    
    
    
    
    
    245
    
    
    
    130
    (2)
    
    
    115Other associated costs
    
    
    
    
    
    
    273
    
    
    
    259
    (3)
    
    
    14$
    
    
    
    $
    911
    
    
    $
    781
    
    
    $
    130
 
 (1)
    
    Payments of one-time termination benefits(2)
    
    Payments of contract termination costs(3)
    
    Payments of other associated costs (8) Recent Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
LiabilitiesIncluding an amendment of FASB Statement No. 115
 12




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(9) Significant Developments
    13




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
(MD&A)
 Forward-Looking Statements May Prove Inaccurate
  Executive Overview
        14




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Critical Accounting Policies
  Accounting for Goodwill and Intangible Assets. Goodwill and Other Intangible Assets,
     Reserve for Merchant Losses
 15




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##### Table of Contents



Income Taxes. Accounting for Uncertainty in Income
Taxes  an Interpretation of FASB Statement No. 109
  Minority Interest.
 Consolidation of Variable Interest Entities
 Derivative Financial Instruments. Accounting for Derivative Instruments and Hedging Activities
 Merger Transaction. Business Combinations, Basis in Leveraged Buyout Transactions.
 Restructuring. Accounting for Costs Associated with Exit or Disposal
Activities
 Components of Revenues and Expenses
  16




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##### Table of Contents



Reporting Revenue Gross as a Principal Versus
Net as an Agent,
    Seasonality Trend
  Off-Balance Sheet Arrangements
  17




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##### Table of Contents



Results of Operations
 Three Months Ended September 30, 2007 (2007) Compared to Three Months Ended September 30, 2006
(2006)
 Three months ended
    
    
    % of Total
    
    
    Three months ended
    
    
    % of Total
    
    
    ChangeSeptember 30, 2007
    
    
    Revenue
    
    
    September 30, 2006
    
    
    Revenue
    
    
    Amount
    
    
    %Revenues
    
    $
    193,599
    
    
    
    100.0
    %
    
    $
    186,959
    
    
    
    100.0
    %
    
    $
    6,640
    
    
    
    3.6Operating ExpensesInterchange
    
    
    111,264
    
    
    
    57.5
    
    
    
    109,584
    
    
    
    58.6
    
    
    
    1,680
    
    
    
    1.5Other costs of services
    
    
    57,105
    
    
    
    29.5
    
    
    
    58,129
    
    
    
    31.1
    
    
    
    (1,024
    )
    
    
    (1.8
    )Selling, general and administrative
    
    
    4,688
    
    
    
    2.4
    
    
    
    4,623
    
    
    
    2.5
    
    
    
    65
    
    
    
    1.4Total operating expenses
    
    
    173,057
    
    
    
    89.4
    
    
    
    172,336
    
    
    
    92.2
    
    
    
    721
    
    
    
    0.4Income from operations
    
    
    20,542
    
    
    
    10.6
    
    
    
    14,623
    
    
    
    7.8
    
    
    
    5,919
    
    
    
    40.5Other expenseInterest expense, net
    
    
    15,145
    
    
    
    7.8
    
    
    
    15,711
    
    
    
    8.4
    
    
    
    (566
    )
    
    
    (3.6
    )Other (income) expense, net
    
    
    (360
    )
    
    
    (0.1
    )
    
    
    161
    
    
    
    0.1
    
    
    
    (521
    )
    
    
    (323.6
    )Total other expense
    
    
    14,785
    
    
    
    7.6
    
    
    
    15,872
    
    
    
    8.5
    
    
    
    (1,087
    )
    
    
    (6.8
    )Income (loss) before income taxes
    
    
    5,757
    
    
    
    3.0
    
    
    
    (1,249
    )
    
    
    (0.7
    )
    
    
    7,006
    
    
    
    (561.0
    )Income tax provision (benefit)
    
    
    2,371
    
    
    
    1.2
    
    
    
    (161
    )
    
    
    (0.1
    )
    
    
    2,532
    
    
    
    (1,572.7
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    358
    
    
    
    0.2
    
    
    
    (358
    )
    
    
    (100.00
    )Net income (loss)
    
    $
    3,386
    
    
    
    1.7
    
    
    $
    (730
    )
    
    
    (0.4
    )
    
    $
    4,116
    
    
    
    (563.9
    )
 Revenues.
 Interchange Expenses
 Other Costs of Services.
 Selling, General and Administrative.
 Other Expense.
 Income Tax
 Minority Interest.
 18




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Nine Months Ended September 30, 2007 (2007) Compared to Nine Months Ended September 30, 2006
(2006)
 Nine months ended
    
    
    % of Total
    
    
    Nine months ended
    
    
    % of Total
    
    
    ChangeSeptember 30, 2007
    
    
    Revenue
    
    
    September 30, 2006 (1)
    
    
    Revenue
    
    
    Amount
    
    
    %Revenues
    
    $
    564,012
    
    
    
    100.0
    %
    
    $
    547,022
    
    
    
    100.0
    %
    
    $
    16,990
    
    
    
    3.1Operating ExpensesInterchange
    
    
    327,324
    
    
    
    58.0
    
    
    
    317,432
    
    
    
    58.0
    
    
    
    9,892
    
    
    
    3.1Other costs of services
    
    
    171,278
    
    
    
    30.4
    
    
    
    167,860
    
    
    
    30.7
    
    
    
    3,418
    
    
    
    2.0Selling, general and administrative
    
    
    13,798
    
    
    
    2.4
    
    
    
    21,065
    
    
    
    3.9
    
    
    
    (7,267
    )
    
    
    (34.5
    )Total operating expenses
    
    
    512,400
    
    
    
    90.8
    
    
    
    506,357
    
    
    
    92.6
    
    
    
    6,043
    
    
    
    1.2Income from operations
    
    
    51,612
    
    
    
    9.2
    
    
    
    40,665
    
    
    
    7.4
    
    
    
    10,947
    
    
    
    26.9Other expenseInterest expense, net
    
    
    45,631
    
    
    
    8.1
    
    
    
    29,542
    
    
    
    5.4
    
    
    
    16,089
    
    
    
    54.5Other (income) expense, net
    
    
    (250
    )
    
    
    0.1
    
    
    
    8,845
    
    
    
    1.6
    
    
    
    (9,095
    )
    
    
    (102.8
    )Total other expense
    
    
    45,381
    
    
    
    8.0
    
    
    
    38,387
    
    
    
    7.0
    
    
    
    6,994
    
    
    
    18.2Income before income taxes
    
    
    6,231
    
    
    
    1.1
    
    
    
    2,278
    
    
    
    0.4
    
    
    
    3,953
    
    
    
    173.5Income tax provision
    
    
    3,375
    
    
    
    0.6
    
    
    
    3,106
    
    
    
    0.6
    
    
    
    269
    
    
    
    8.7Minority interest
    
    
    155
    
    
    NM
    
    
    1,073
    
    
    
    0.2
    
    
    
    (918
    )
    
    
    (85.55
    )Net income
    
    $
    3,011
    
    
    
    0.5
    
    
    $
    245
    
    
    
    0.0
    
    
    $
    2,766
    
    
    
    1,129.0
 
 NM = Not meaningful(1)
    
    Represents the Combined results of Predecessor for the period January 1 through May 10, 2006
and Successor for the period May 11 through September 30, 2006. Revenues.
 Interchange Expenses
 Other Costs of Services.
 Selling, General and Administrative.
 Other Expense.
 Income Tax
 Minority Interest.
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##### Table of Contents



Liquidity and Capital Resources
  Operating activities
   Investing activities
   Financing activities
    20




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##### Table of Contents



Accounting for
Derivative Instruments and Hedging Activities
 3 4
  Contractual Obligations
  Payments due by periodLess than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Contractual Obligations
    
    Total
    
    
    year
    
    
    1-3 years
    
    
    3-5 years
    
    
    yearsCredit facility
    
    $
    503,675
    
    
    $
    5,150
    
    
    $
    10,300
    
    
    $
    11,200
    
    
    $
    477,025Senior Notes
    
    
    195,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    195,750Interest (1)
    
    
    320,176
    
    
    
    54,859
    
    
    
    110,007
    
    
    
    107,316
    
    
    
    47,994Capital lease obligations
    
    
    166
    
    
    
    119
    
    
    
    47
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    3,209
    
    
    
    1,375
    
    
    
    1,739
    
    
    
    95
    
    
    
    Purchase obligations (2)(3)(4)
    
    
    32,456
    
    
    
    13,358
    
    
    
    13,065
    
    
    
    6,033
    
    
    
    Total contractual obligations
    
    $
    1,055,432
    
    
    $
    74,861
    
    
    $
    135,158
    
    
    $
    124,644
    
    
    $
    720,769
 
 (1)
    
    Future interest obligations are calculated using current interest
rates on existing debt balances as of September 30, 2007, and assume
no principal reduction other than mandatory principal repayments in
accordance with the terms of the debt instruments as described in
Note 3 in our consolidated financial statements.(2)
    
    Purchase obligations represent costs of contractually guaranteed
minimum processing volumes with certain of our third-party
transaction processors.(3)
    
    We are required to pay FDMS an annual processing fee related to the
FDMS Merchant Portfolio and the FDMS Agent Bank Portfolio of at
least $10.3 million in fiscal 2007, 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 21




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##### Table of Contents



commitments
for years after 2007, 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.(4)
    
    We have agreed to utilize FDMS 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, 2007, and are excluded from this table.  Effects of Inflation
  
 Item 3. Quantitative and Qualitative Disclosure about Market Risk
    
 Item 4. Controls and Procedures
 Evaluation of disclosure controls and procedures
 Changes in internal control over financial reporting
 22




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 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
  23




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##### Table of Contents



SIGNATURES
  iPayment, Inc.Date: November 12, 2007
    
    By: /s/ Gregrory S. DailyGregory S. DailyChief Executive Officer(Principal Executive Officer)Date: November 12, 2007
    
    By: /s/ Clay M. WhitsonClay M. WhitsonChief Financial Officer(Principal Financial and Accounting Officer)
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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 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.
 25