424B3: Prospectus filed pursuant to Rule 424(b)(3)
Published on August 16, 2021
FILED PURSUANT TO RULE 424(B)(3) |
|
(TO PROSPECTUS DATED MAY 28, 2021) |
FILE NUMBER 333-256299 |
651,902,688 COMMON SHARES
5,000,000 WARRANTS
This prospectus supplement supplements the prospectus dated May 28, 2021 (the “Prospectus”), which forms a part of our registration statement on Form F-1 (No. 333-256299). This prospectus supplement is being filed to update and supplement the information in the Prospectus with the information contained in our report on Form 6-K, filed with the Securities and Exchange Commission (the “Commission”) on August 16, 2021 (the “Report”). Accordingly, we have attached the Report to this prospectus supplement.
The Prospectus and this prospectus supplement relate to the issuance by Paysafe Limited, an exempted limited company incorporated under the laws of Bermuda (the “Company”), of up to an aggregate of 48,901,025 common shares, par value $0.001 per share, of the Company (the “Company Common Shares”) that may be issued upon the exercise of 48,901,025 warrants (the “Public Warrants”) originally issued in connection with the initial public offering of FTAC (as defined in the Prospectus). The Prospectus and this prospectus supplement also relate to the offer and sale from time to time by the selling securityholders named in the Prospectus, including their donees, pledgees, transferees or their successors, of up to: (i) 603,001,663 Company Common Shares (which includes up to 5,000,000 Company Common Shares issuable upon the exercise of the warrants originally issued in a private placement in connection with the Business Combination (as defined in the Prospectus) and up to 20,893,780 Company Common Shares that may be issued upon exercise of the exchange privilege attached to certain limited liability company units of Paysafe Bermuda Holdings LLC originally issued in a private placement in connection with the Business Combination) and (ii) 5,000,000 Company Warrants.
Our Company Common Shares and Company Warrants are listed on the New York Stock Exchange (the “NYSE”) under the symbols “PSFE” and “PSFE.WS,” respectively. The last reported sale price of our Company Common Shares and Company Warrants on August 12, 2021 was $10.88 per share and $2.85 per warrant.
This prospectus supplement should be read in conjunction with the Prospectus, which is to be delivered with this prospectus supplement. This prospectus supplement is qualified by reference to the Prospectus, except to the extent that the information in this prospectus supplement updates and supersedes the information contained in the Prospectus.
This prospectus supplement is not complete without, and may not be delivered or utilized except in connection with, the Prospectus.
Investing in our Company Common Shares involves a high degree of risk. See the section entitled “Risk Factors” beginning on page 8 of the Prospectus to read about factors you should consider before buying our securities.
Neither the Securities and Exchange Commission nor any state securities commission or any other regulatory body including (without limitation) the Bermuda Monetary Authority has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus supplement is August 16, 2021.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2021
(Commission File No. 001-40302)
PAYSAFE LIMITED
(Exact name of registrant as specified in its charter)
Not Applicable
(Translation of registrant’s name into English)
Paysafe Limited
Victoria Place
31 Victoria Street
Hamilton H10, Bermuda
(Address of Principal Executive Offices) (Zip Code)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☒ |
Form 40-F ☐ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (1):
Yes ☐ |
No ☒ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (7):
Yes ☐ |
No ☒ |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
Paysa |
|
|
PAYSAFE LIMITED |
|
|
|
|
|
|
|
|
By: |
/s/ Ismail Dawood |
|
Name: |
Ismail Dawood |
|
Title: |
Chief Financial Officer |
Date: August 16, 2021
TABLE OF CONTENTS
1. |
Unaudited Condensed Consolidated Interim Financial Statements – June 30, 2021 |
|
F-1 |
|
|
|
|
2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
1 |
|
|
|
|
3. |
|
19 |
Paysafe Limited
Unaudited Financial Statements |
Page No.
|
F-2 |
|
|
|
Consolidated Statement of Financial Position as of June 30, 2021 and December 31, 2020 |
F-3 |
|
|
F-4 |
|
|
|
Unaudited Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2021 and 2020 |
F-5 |
|
|
F-7 |
F-1
Paysafe Limited
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME / (LOSS)
(U.S. dollars in thousands, except per share data)
|
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Revenue |
|
$ |
384,343 |
|
|
$ |
341,034 |
|
|
$ |
761,767 |
|
|
$ |
700,699 |
|
Cost of services (excluding depreciation and amortization) |
|
|
155,778 |
|
|
|
126,245 |
|
|
|
306,815 |
|
|
|
255,633 |
|
Selling, general and administrative |
|
|
113,037 |
|
|
|
104,414 |
|
|
|
307,035 |
|
|
|
221,921 |
|
Depreciation and amortization |
|
|
70,114 |
|
|
|
67,492 |
|
|
|
135,576 |
|
|
|
136,991 |
|
Impairment expense on intangible assets |
|
|
1,357 |
|
|
|
5,038 |
|
|
|
1,935 |
|
|
|
79,403 |
|
Restructuring and other costs |
|
|
4,518 |
|
|
|
4,359 |
|
|
|
7,488 |
|
|
|
10,006 |
|
(Gain) / loss on disposal of subsidiary and other assets, net |
|
|
(28 |
) |
|
|
— |
|
|
|
(28 |
) |
|
|
261 |
|
Operating income / (loss) |
|
|
39,567 |
|
|
|
33,486 |
|
|
|
2,946 |
|
|
|
(3,516 |
) |
Other income / (expense), net |
|
|
46,558 |
|
|
|
(9,498 |
) |
|
|
79,083 |
|
|
|
(24,578 |
) |
Interest expense, net |
|
|
(62,650 |
) |
|
|
(42,531 |
) |
|
|
(125,019 |
) |
|
|
(80,754 |
) |
Income / (loss) before taxes |
|
|
23,475 |
|
|
|
(18,543 |
) |
|
|
(42,990 |
) |
|
|
(108,848 |
) |
Income tax expense / (benefit) |
|
|
16,690 |
|
|
|
(2,714 |
) |
|
|
10,754 |
|
|
|
(23,768 |
) |
Net income / (loss) |
|
$ |
6,785 |
|
|
$ |
(15,829 |
) |
|
$ |
(53,744 |
) |
|
$ |
(85,080 |
) |
Less: net income attributable to non-controlling interest |
|
|
188 |
|
|
|
72 |
|
|
|
306 |
|
|
|
113 |
|
Net income / (loss) attributable to the Company |
|
$ |
6,597 |
|
|
$ |
(15,901 |
) |
|
$ |
(54,050 |
) |
|
$ |
(85,193 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income / (loss) per share attributable to the Company – basic |
|
$ |
0.01 |
|
|
$ |
(0.13 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.68 |
) |
Net income / (loss) per share attributable to the Company – diluted |
|
$ |
(0.04 |
) |
|
$ |
(0.13 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.68 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income / (loss) |
|
$ |
6,785 |
|
|
$ |
(15,829 |
) |
|
$ |
(53,744 |
) |
|
$ |
(85,080 |
) |
Other comprehensive income / (loss), net of tax of $0: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) / Loss on foreign currency translation |
|
|
(12,956 |
) |
|
|
4,601 |
|
|
|
(4,458 |
) |
|
|
15,642 |
|
Total comprehensive income / (loss) |
|
$ |
19,741 |
|
|
$ |
(20,430 |
) |
|
$ |
(49,286 |
) |
|
$ |
(100,722 |
) |
Less: comprehensive income attributable to non-controlling interest |
|
|
188 |
|
|
|
72 |
|
|
|
306 |
|
|
|
113 |
|
Total comprehensive income / (loss) attributable to the Company |
|
$ |
19,553 |
|
|
$ |
(20,502 |
) |
|
$ |
(49,592 |
) |
|
$ |
(100,835 |
) |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-2
Paysafe Limited
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(U.S. dollars in thousands, except share data)
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||
Assets |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
247,801 |
|
|
$ |
387,616 |
|
Customer accounts and other restricted cash, net of allowance for credit losses of $4,428 and $4,096, respectively |
|
|
1,249,268 |
|
|
|
1,376,236 |
|
Accounts receivable, net of allowance for credit losses of $12,102 and $25,035, respectively |
|
|
129,708 |
|
|
|
117,410 |
|
Settlement receivables, net of allowance credit losses of $4,571 and $5,859, respectively |
|
|
170,890 |
|
|
|
223,083 |
|
Prepaid expenses and other current assets |
|
|
72,780 |
|
|
|
63,252 |
|
Related party receivables - current |
|
|
6,733 |
|
|
|
6,271 |
|
Contingent consideration receivable - current |
|
|
2,964 |
|
|
|
26,668 |
|
Total current assets |
|
|
1,880,144 |
|
|
|
2,200,536 |
|
Deferred tax assets |
|
|
17,390 |
|
|
|
17,669 |
|
Property, plant and equipment, net |
|
|
14,431 |
|
|
|
18,691 |
|
Operating lease right-of-use assets |
|
|
35,574 |
|
|
|
40,187 |
|
Intangible assets, net |
|
|
1,461,324 |
|
|
|
1,524,817 |
|
Goodwill |
|
|
3,483,539 |
|
|
|
3,481,816 |
|
Contingent consideration receivable – non-current |
|
|
— |
|
|
|
125,107 |
|
Other assets – noncurrent |
|
|
1,859 |
|
|
|
508 |
|
Total non-current assets |
|
|
5,014,117 |
|
|
|
5,208,795 |
|
Total assets |
|
$ |
6,894,261 |
|
|
$ |
7,409,331 |
|
|
|
|
|
|
|
|
|
|
Liabilities and equity |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable and other liabilities |
|
$ |
211,433 |
|
|
$ |
231,724 |
|
Short-term debt |
|
|
6,280 |
|
|
|
15,400 |
|
Funds payable and amounts due to customers |
|
|
1,404,975 |
|
|
|
1,552,187 |
|
Operating lease liabilities - current |
|
|
8,635 |
|
|
|
8,969 |
|
Income taxes payable |
|
|
7,355 |
|
|
|
8,161 |
|
Contingent consideration payable - current |
|
|
10,495 |
|
|
|
5,820 |
|
Derivative financial liabilities, current |
|
|
16,506 |
|
|
|
2,651 |
|
Total current liabilities |
|
|
1,665,679 |
|
|
|
1,824,912 |
|
Non-current debt |
|
|
2,114,909 |
|
|
|
3,246,871 |
|
Related party payables – non-current |
|
|
— |
|
|
|
195,228 |
|
Operating lease liabilities – non-current |
|
|
30,489 |
|
|
|
34,540 |
|
Deferred tax liabilities |
|
|
121,352 |
|
|
|
122,519 |
|
Warrant liabilities |
|
|
194,044 |
|
|
|
— |
|
Derivative financial liabilities - non-current |
|
|
— |
|
|
|
47,547 |
|
Liability for share-based compensation |
|
|
12,152 |
|
|
|
— |
|
Contingent consideration payable – non-current |
|
|
4,142 |
|
|
|
3,742 |
|
Other liabilities - non-current |
|
|
969 |
|
|
|
969 |
|
Total non-current liabilities |
|
|
2,478,057 |
|
|
|
3,651,416 |
|
Total liabilities |
|
|
4,143,736 |
|
|
|
5,476,328 |
|
Commitments and contingent liabilities |
|
|
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
|
|
|
Common shares - $0.001 par value; 20,000,000,000 shares authorized and 723,712,382 shares issued and outstanding as of June 30, 2021 Share capital - $0.01 par value; 125,157,540 shares authorized, issued and outstanding as of December 31, 2020 |
|
|
723 |
|
|
|
1,252 |
|
Additional paid in capital / Share premium |
|
|
2,929,962 |
|
|
|
2,188,706 |
|
Accumulated deficit |
|
|
(319,884 |
) |
|
|
(265,834 |
) |
Accumulated other comprehensive income / (loss) |
|
|
2,039 |
|
|
|
(2,419 |
) |
Shareholders' equity in the Company |
|
|
2,612,840 |
|
|
|
1,921,705 |
|
Non-controlling interest |
|
|
137,685 |
|
|
|
11,298 |
|
Total shareholders' equity |
|
|
2,750,525 |
|
|
|
1,933,003 |
|
Total liabilities and shareholders' equity |
|
$ |
6,894,261 |
|
|
$ |
7,409,331 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
Paysafe Limited
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(U.S. dollars in thousands)
|
|
Common shares |
|
|
Additional paid in capital |
|
|
Accumulated deficit |
|
|
Accumulated other comprehensive income / (loss) |
|
|
Shareholders' equity in the Company |
|
|
Non- controlling interest |
|
|
Total Shareholders' equity |
|
|||||||
January 1, 2021 |
|
$ |
1,252 |
|
|
$ |
2,188,706 |
|
|
$ |
(265,834 |
) |
|
$ |
(2,419 |
) |
|
$ |
1,921,705 |
|
|
$ |
11,298 |
|
|
$ |
1,933,003 |
|
Net (loss) / income |
|
|
- |
|
|
|
- |
|
|
|
(60,647 |
) |
|
|
- |
|
|
|
(60,647 |
) |
|
|
118 |
|
|
|
(60,529 |
) |
Loss on foreign currency translation, net of tax of $0 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(8,498 |
) |
|
|
(8,498 |
) |
|
|
- |
|
|
|
(8,498 |
) |
Contributions from non-controlling interest holders (see Note 17) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
26,000 |
|
|
|
26,000 |
|
Capital injection in Legacy Paysafe (See Note 17) |
|
|
2 |
|
|
|
10,692 |
|
|
|
- |
|
|
|
- |
|
|
|
10,694 |
|
|
|
- |
|
|
|
10,694 |
|
Shared based compensation, net of tax of $0 |
|
|
- |
|
|
|
67,718 |
|
|
|
- |
|
|
|
- |
|
|
|
67,718 |
|
|
|
- |
|
|
|
67,718 |
|
Share issuance, net of transaction expenses (See Note 2) |
|
|
200 |
|
|
|
1,848,078 |
|
|
|
- |
|
|
|
- |
|
|
|
1,848,278 |
|
|
|
- |
|
|
|
1,848,278 |
|
Capital reorganization (See Note 2) |
|
|
(921 |
) |
|
|
(2,447,879 |
) |
|
|
- |
|
|
|
- |
|
|
|
(2,448,800 |
) |
|
|
- |
|
|
|
(2,448,800 |
) |
Merger recapitalization (See Note 2) |
|
|
190 |
|
|
|
1,258,401 |
|
|
|
- |
|
|
|
- |
|
|
|
1,258,591 |
|
|
|
100,081 |
|
|
|
1,358,672 |
|
March 31, 2021 |
|
$ |
723 |
|
|
$ |
2,925,716 |
|
|
$ |
(326,481 |
) |
|
$ |
(10,917 |
) |
|
$ |
2,589,041 |
|
|
$ |
137,497 |
|
|
$ |
2,726,538 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
6,597 |
|
|
|
|
|
|
|
6,597 |
|
|
|
188 |
|
|
|
6,785 |
|
Gain on foreign currency translation, net of tax of $0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,956 |
|
|
|
12,956 |
|
|
|
|
|
|
|
12,956 |
|
Shared based compensation, net of tax of $0 |
|
|
|
|
|
|
4,246 |
|
|
|
|
|
|
|
|
|
|
|
4,246 |
|
|
|
|
|
|
|
4,246 |
|
June 30, 2021 |
|
$ |
723 |
|
|
$ |
2,929,962 |
|
|
$ |
(319,884 |
) |
|
$ |
2,039 |
|
|
$ |
2,612,840 |
|
|
$ |
137,685 |
|
|
$ |
2,750,525 |
|
|
|
Share capital |
|
|
Share premium |
|
|
Accumulated deficit |
|
|
Accumulated other comprehensive loss |
|
|
Shareholders' equity in the Company |
|
|
Non- controlling interest |
|
|
Total Shareholders' equity |
|
|||||||
January 1, 2020 |
|
$ |
1,252 |
|
|
$ |
2,188,706 |
|
|
$ |
(131,610 |
) |
|
$ |
(602 |
) |
|
$ |
2,057,746 |
|
|
$ |
5,961 |
|
|
$ |
2,063,707 |
|
Net (loss) / income |
|
|
- |
|
|
|
- |
|
|
|
(69,292 |
) |
|
|
- |
|
|
|
(69,292 |
) |
|
|
41 |
|
|
|
(69,251 |
) |
Cumulative adjustment for adoption of credit loss accounting standard, net of tax |
|
|
- |
|
|
|
- |
|
|
|
(7,509 |
) |
|
|
- |
|
|
|
(7,509 |
) |
|
|
- |
|
|
|
(7,509 |
) |
Loss on foreign currency translation, net of tax of $0 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(11,041 |
) |
|
|
(11,041 |
) |
|
|
- |
|
|
|
(11,041 |
) |
March 31, 2020 |
|
$ |
1,252 |
|
|
$ |
2,188,706 |
|
|
$ |
(208,411 |
) |
|
$ |
(11,643 |
) |
|
$ |
1,969,904 |
|
|
$ |
6,002 |
|
|
$ |
1,975,906 |
|
Net (loss) / income |
|
|
- |
|
|
|
- |
|
|
|
(15,901 |
) |
|
|
- |
|
|
|
(15,901 |
) |
|
|
72 |
|
|
|
(15,829 |
) |
Loss on foreign currency translation, net of tax of $0 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,601 |
) |
|
|
(4,601 |
) |
|
|
- |
|
|
|
(4,601 |
) |
Contributions from noncontrolling interest |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,336 |
|
|
|
5,336 |
|
June 30, 2020 |
|
$ |
1,252 |
|
|
$ |
2,188,706 |
|
|
$ |
(224,312 |
) |
|
$ |
(16,244 |
) |
|
$ |
1,949,402 |
|
|
$ |
11,410 |
|
|
$ |
1,960,812 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-4
Paysafe Limited
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(U.S. dollars in thousands)
|
|
Six months ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(53,744 |
) |
|
$ |
(85,080 |
) |
Adjustments for non-cash items: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
135,576 |
|
|
|
136,991 |
|
Unrealized foreign exchange loss / (gain) |
|
|
2,245 |
|
|
|
(10,255 |
) |
Deferred tax expense / (benefit) |
|
|
4,714 |
|
|
|
(24,547 |
) |
Interest expense / (income), net |
|
|
69,155 |
|
|
|
22,908 |
|
Share based compensation |
|
|
84,117 |
|
|
|
— |
|
Other (income) / expense, net |
|
|
(75,901 |
) |
|
|
10,459 |
|
Impairment expense on intangible assets |
|
|
1,935 |
|
|
|
79,403 |
|
Allowance for credit losses and other |
|
|
9,600 |
|
|
|
27,897 |
|
(Gain) / loss on disposal of subsidiary and other assets, net |
|
|
(28 |
) |
|
|
261 |
|
Non-cash lease expense |
|
|
4,909 |
|
|
|
5,085 |
|
Movements in working capital: |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
(21,342 |
) |
|
|
(29,457 |
) |
Prepaid expenses, other current assets, and related party receivables |
|
|
(9,282 |
) |
|
|
4,048 |
|
Settlement receivables, net |
|
|
44,113 |
|
|
|
33,155 |
|
Accounts payable, other liabilities, and related party payables |
|
|
(21,139 |
) |
|
|
(19,065 |
) |
Funds payable and amounts due to customers |
|
|
(116,268 |
) |
|
|
(15,073 |
) |
Income tax payable |
|
|
(17,650 |
) |
|
|
(1,688 |
) |
Net cash flows from operating activities |
|
|
41,010 |
|
|
|
135,042 |
|
Cash flows in investing activities |
|
|
|
|
|
|
|
|
Purchase of property, plant & equipment |
|
|
(1,169 |
) |
|
|
(1,722 |
) |
Purchase of merchant portfolios |
|
|
(36,703 |
) |
|
|
(3,241 |
) |
Purchase of other intangible assets |
|
|
(37,452 |
) |
|
|
(28,034 |
) |
Net cash outflow on acquisition of subsidiary |
|
|
(23,531 |
) |
|
|
— |
|
Net cash flows used in investing activities |
|
|
(98,855 |
) |
|
|
(32,997 |
) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Net cash inflow from reorganization and recapitalization |
|
|
1,167,874 |
|
|
|
— |
|
Payment of equity issuance costs |
|
|
(149,496 |
) |
|
|
— |
|
Proceeds from loans and borrowings |
|
|
2,112,816 |
|
|
|
235,435 |
|
Repayments of loans and borrowings |
|
|
(3,267,269 |
) |
|
|
(95,059 |
) |
Payment of debt issuance costs |
|
|
(1,068 |
) |
|
|
— |
|
Payments under derivative financial instruments, net |
|
|
(31,515 |
) |
|
|
(2,617 |
) |
Cash outflow on foreign exchange forward contract |
|
|
(6,504 |
) |
|
|
— |
|
Proceeds under line of credit |
|
|
300,000 |
|
|
|
205,867 |
|
Repayments under line of credit |
|
|
(300,000 |
) |
|
|
(185,230 |
) |
Contingent consideration received |
|
|
7,942 |
|
|
|
— |
|
Contingent consideration paid |
|
|
(1,002 |
) |
|
|
(748 |
) |
Net cash flows (used in) / provided by financing activities |
|
|
(168,222 |
) |
|
|
157,648 |
|
Effect of foreign exchange rate changes |
|
|
(40,716 |
) |
|
|
2,638 |
|
(Decrease) / increase in cash and cash equivalents, including customer accounts and other restricted cash during the period |
|
$ |
(266,783 |
) |
|
$ |
262,331 |
|
Less: Net decrease in cash and cash equivalents classified within current assets held for sale |
|
$ |
— |
|
|
$ |
(1,422 |
) |
Net (decrease) / increase in cash and cash equivalents, including customer accounts and other restricted cash during the year |
|
$ |
(266,783 |
) |
|
$ |
260,909 |
|
Cash and cash equivalents, including customer accounts and other restricted cash at beginning of the period (1) |
|
|
1,763,852 |
|
|
|
1,382,361 |
|
Cash and cash equivalents at end of the period, including customer accounts and other restricted cash |
|
$ |
1,497,069 |
|
|
$ |
1,643,270 |
|
(1) |
Cash and cash equivalents, including customer accounts and other restricted cash, as of January 1, 2020 decreased by $2,788 as a result of the cumulative-effect adjustment to Customer accounts and other restricted cash for the adoption of the ASC 326 Financial Instruments - Credit Losses (See Note 8). |
|
|
Six months ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Supplemental cash flow disclosures: |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
55,864 |
|
|
$ |
57,846 |
|
Cash (received) / paid for Income taxes, net |
|
$ |
23,690 |
|
|
$ |
(2,467 |
) |
F-5
The table below reconciles cash, cash equivalents, customer accounts and other restricted cash as reported in the unaudited condensed consolidated statement of financial position to the total of the same amounts shown in the unaudited condensed consolidated statement of cash flows:
|
|
Six months ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Cash and cash equivalents |
|
$ |
247,801 |
|
|
$ |
502,560 |
|
Customer accounts and other restricted cash, net |
|
|
1,249,268 |
|
|
|
1,140,710 |
|
Total cash and cash equivalents, including customer accounts and other restricted cash, net |
|
$ |
1,497,069 |
|
|
$ |
1,643,270 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-6
Paysafe Limited
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share data)
|
1. |
Basis of presentation and summary of significant accounting policies |
Description of the Business and Basis of Presentation
In these unaudited condensed consolidated financial statements and related notes, Paysafe Limited,and its consolidated subsidiaries are referred to collectively as “Paysafe,” “‘we,” “us,” and “the Company” unless the context requires otherwise. Paysafe is a leading global provider of end-to-end payment solutions. Our core purpose is to enable businesses and consumers to connect and transact seamlessly through our payment platforms.
The Company provides payment solutions through three primary lines of business, that represent our reporting segments: Integrated Processing, Digital Wallet and eCash Solutions. Our Integrated Processing business is focused on card not present and card present solutions for small to medium size business merchants. The Digital Wallet business provides wallet based online payment solutions through our Skrill and NETELLER brands; and our eCash Solutions business enables consumers to use cash to facilitate online purchases through our paysafecard prepaid vouchers. With over 20 years of online payment experience, the Company connects businesses and consumers across 70 payment types in over 40 currencies around the world. The Company provides these payment solutions in the following principal verticals; e-commerce, on-line gambling, and on-line gaming; the principal markets being in North America and Europe.
Paysafe Limited was originally incorporated as an exempted limited company under the laws of Bermuda on November 23, 2020 for purposes of acquiring Foley Trasimene Acquisition Corp. II (“FTAC”). FTAC was originally incorporated in the State of Delaware on July 15, 2020 as a special purpose acquisition company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar transaction with one or more businesses. FTAC completed its Initial Public Offering (“IPO”) in August 2020.
On December 7, 2020, Paysafe Limited, FTAC, Merger Sub Inc., (a Delaware corporation and direct, wholly owned subsidiary of Paysafe Limited, herein referred to as “Merger Sub”), Paysafe Bermuda Holding LLC (a Bermuda exempted limited liability company and direct, wholly owned subsidiary of Paysafe Limited, herein referred to as “LLC”), Pi Jersey Holdco 1.5 Limited (a private limited company incorporated under the laws of Jersey, Channel Islands on November 17, 2017, herein referred to as “Legacy Paysafe” or “Accounting Predecessor”), and Paysafe Group Holdings Limited (a private limited company incorporated under the laws of England and Wales, herein referred to as “PGHL”), entered into a definitive agreement and plan of merger which was consummated on March 30, 2021. This is further discussed in Note 2 under Reorganization and Recapitalization (the “Transaction”). In connection with the Transaction, the Company’s common shares and warrants were listed on the New York Stock Exchange under the symbols PSFE and PSFE.WS, respectively.
Prior to the Transaction, Legacy Paysafe was a direct, wholly owned subsidiary of Paysafe Group Holdings Limited and was primarily owned by funds advised by affiliates of CVC Capital Partners (such funds collectively, “CVC”) and The Blackstone Group Inc. (“Blackstone”). This ownership was through the ultimate parent entity, Pi Jersey Topco Limited (“Topco” or the “Ultimate Parent”), who directly wholly owns PGHL. As a result of the Transaction, Legacy Paysafe is a wholly owned subsidiary of the Company. Subsequent to the Transaction, PGHL, CVC and Blackstone retain ownership in the Company but do not have a controlling interest.
As of June 30, 2020, the assets and liabilities of Payolution GmbH (“Paylater”), a wholly owned subsidiary within the Integrated Processing Solutions segment, were classified as held for sale. As of June 30, 2020, the assets and liabilities held for sale were being marketed for sale and it was the Company’s intention to complete the sales of these assets within twelve months. The disposition of this subsidiary occurred in October 2020 and did not qualify for discontinued operations as it did not represent a major line of business within the Company.
The accompanying unaudited condensed consolidated financial statements for the three and six months ended June 30, 2021 include the accounts of the Company, and its subsidiaries, based upon information of Paysafe Limited after giving effect to the transaction with FTAC completed on March 30, 2021. The comparative financial information for the three and six months ended June 30, 2020 and for the year ended December 31, 2020 is based upon information of Pi Jersey Holdco 1.5 Limited, prior to giving effect to the Transaction. Prior to the Transaction, Paysafe Limited had no material operations, assets or liabilities.
All intercompany transactions have been eliminated in consolidation. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of the Company’s financial position, results of operations and cash flows have been included. Operating results for the six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any other interim period.
These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020 on Form 20-F filed on April 1, 2021.
F-7
In March 2020, an outbreak of a novel strain of the coronavirus (referred to as COVID-19) occurred and developed such that on March 11, 2020, the World Health Organization has characterized the outbreak as a pandemic. As a result of the COVID-19 pandemic, we experienced slowed growth or decline in new demand for our products and services and lower demand from our existing merchants, which contributed, in part, to intangible impairments and an increase in expected credit losses in the prior year. The Company continues to revise and update the carrying values of its assets or liabilities based on estimates, judgments and circumstances it is aware of, particularly, the expected impact of COVID-19. While the COVID-19 pandemic continues to have ongoing global effects, for the three and six months ended June 30, 2021, there have been no material impacts on our estimates, but facts and circumstances could change and impact our estimates and affect our results of operations in future periods.
Disaggregation of Revenue
The Company provides payment solutions through three primary lines of business: Integrated Processing, Digital Wallet and eCash Solutions. For each primary source of revenue within these business lines, the Company’s main performance obligation is to stand ready to provide payment services to merchants and consumers. As a result of the concentration of revenue streams within each of the primary lines of business, the Company does not disaggregate revenue below this level. These revenue streams align with our segments and the resulting segment disclosures (See Note 16).
We do not have any contract balances associated with our contracts with customers as of June 30, 2021 and December 31, 2020. The Company has applied the practical expedient to exclude disclosure of remaining performance obligations as the Company's contracts typically have a term of one year or less.
Significant accounting policies
There have been no material changes in our significant accounting policies during the six months ended June 30, 2021, except as described in Note 2 as it relates to the accounting for the Warrants. A detailed discussion of our significant accounting policies is included within the audited consolidated financial statements for the year ended December 31, 2020 on Form 20-F filed on April 1, 2021.
Recent Accounting Pronouncements
Income Taxes
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The amendments in this ASU are intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments are also intended to improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company adopted this new guidance on January 1, 2021 which did not have a material effect on our condensed consolidated financial statements.
Accounting Standards Issued but not yet Adopted
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference London Inter-bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022 for which an entity has elected certain optional expedients and which are retained through the end of the hedging relationship. The amendments in this update also include a general principle that permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. If elected, the optional expedients for contract modifications must be applied consistently for all eligible contracts or eligible transactions within the relevant ASC Topic or Industry Subtopic that contains the guidance that otherwise would be required to be applied. The amendments in this update were effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022.
In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which clarified the scope of ASU 2020-04 indicating that certain optional expedients and exceptions included in ASU 2020-04 are applicable to derivative instruments affected by the market-wide change in interest rates used for discounting, margining, or contract price alignment. We have not yet adopted this new guidance and are currently evaluating the effect on our consolidated financial statements.
Convertible Debt Instruments
In August 2020, the FASB issued ASU No. 2020-06 Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. This update reduces the number of accounting models for convertible debt instruments resulting in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments
F-8
that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in-capital. In addition, this update also makes targeted changes to the disclosures for convertible instruments and earnings-per-share guidance. This guidance may be adopted through either a modified retrospective or fully retrospective method of transition and will take effect for public companies with fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, and must be adopted as of the beginning of the Company's fiscal year. The Company will adopt this new guidance effective January 1, 2022. This new guidance is not expected to have an effect on our consolidated financial statements.
2. Transactions
International Card Services, LLC (“ICS”) Acquisition
In March 2021, the Company completed the acquisition of ICS with the goal of furthering the expansion of Integrated Processing in the United States as well as obtaining new merchants. Our preliminary estimate of the purchase price, including earnouts is $27,327, comprised of cash consideration of $23,505 and an additional contingent earnout to be paid in future periods based on the achievement of earnings targets. The operating results of the acquisition have been included in the Company’s consolidated financial statements since the date of the acquisition. This acquisition was accounted for as a business combination which was not material to the Company’s consolidated financial statements.
Reorganization and Recapitalization (the “Transaction”)
On December 7, 2020, Paysafe Limited, FTAC, Merger Sub, Paysafe Bermuda Holding LLC, Legacy Paysafe and PGHL entered into a definitive agreement and plan of merger to effectuate the Transaction which was completed on March 30, 2021. In order to effectuate the Transaction, PGHL created a newly formed wholly owned entity, Paysafe Limited, which acquired all of the shares of the Accounting Predecessor on March 30, 2021. Immediately following the acquisition of the Accounting Predecessor’s shares, Paysafe Limited merged with FTAC, which was effectuated through a merger between Merger Sub and FTAC. Merger Sub is a newly formed wholly owned subsidiary of Paysafe Limited. FTAC survived the merger. The Accounting Predecessor and FTAC are indirect wholly owned subsidiaries of Paysafe Limited following the Transaction. Prior to the Transaction, Paysafe Limited had no material operations, assets or liabilities.
The acquisition of the Accounting Predecessor was accounted for as a capital reorganization whereby Paysafe Limited was the successor to Pi Jersey 1.5 Holdco Limited. The capital reorganization was immediately followed by the merger with FTAC. As FTAC was not recognized as a business under GAAP given it consisted primarily of cash held in a trust account, the merger was treated as a recapitalization. Under this method of accounting, the ongoing financial statements of Paysafe Limited reflect the net assets of the Accounting Predecessor and FTAC at historical cost, with no additional goodwill recognized.
The Accounting Predecessor was determined to be the accounting acquirer based on evaluation of the following facts and circumstances: (i) the Accounting Predecessor’s shareholder group has the largest portion of relative voting rights in Paysafe Limited; (ii) the Accounting Predecessor was significantly larger than FTAC by total assets and total cash and cash equivalents; (iii) the senior management team of the Accounting Predecessor are continuing to serve in such positions with substantially similar responsibilities and duties at Paysafe Limited following consummation of the Transaction; and (iv) the purpose and intent of the Transaction was to create an operating public company, with management continuing to use the Paysafe platform to grow the business.
In connection with the Transaction, Paysafe Limited, PGHL and FTAC entered into subscription agreements with certain investors (the “PIPE Investors”). Simultaneously with the consummation of the Transaction, Paysafe Limited issued to the PIPE Investors 200,000,000 shares of common stock at a price of $10.00 per share for aggregate gross proceeds of $2,000,000. The Company incurred direct and incremental costs of approximately $151,722 related to the Transaction, consisting primarily of advisory, banking, printing, legal, and accounting fees, which were recorded to “Additional paid-in capital” as a reduction of these share issuance proceeds (collectively “Share issuances, net of proceeds”).
Paysafe Limited acquired from PGHL all of the Accounting Predecessor’s shares in exchange for cash consideration of $2,448,799 and share consideration of 333,419,924 common shares (“Capital reorganization”).
The FTAC merger was completed by: (i) Paysafe Bermuda Holdings LLC issuing 20,893,780 LLC membership equity interests (“LLC Units”) in exchange for the FTAC Founder’s FTAC Class C shares outstanding immediately prior to the Transaction; (ii) Paysafe Limited issuing 190,292,458 common shares in exchange for the FTAC’s shareholders shares outstanding immediately prior to the Transaction; and (iii) Paysafe Limited assuming the FTAC’s warrants outstanding immediately prior to the Transaction, consisting of 48,901,025 public warrants (the “Public Warrants”) and 5,000,000 private warrants (the “Private Warrants”), which were modified to entitle the holder to acquire, on the same terms, Company common shares instead of FTAC common stock (the “Warrants”) (collectively, “Merger recapitalization”).
The cash flows related to these activities have been classified as “Net cash inflow from recapitalization and reorganization” within financing activities of the consolidated statement of cash flows, consisting of cash outflows related to the cash consideration for the
F-9
Pi Jersey acquisition of $2,448,799 and payment of transaction costs of $133,422, offset by the $1,616,673 in net proceeds from the merger with FTAC and $2,000,000 in proceeds from the share issuance.
Non-controlling interest
The LLC units contain an exchange right which entitles the FTAC Founder to exchange its LLC Units for, at the option of the LLC, cash or shares of Paysafe Limited (the “Exchange right”). The Exchange Right cannot be exercised until 12 months after the Transaction. Thereafter, it can be exercised at any time up until the fifth year following the close of the Transaction; at which time the LLC Units would be mandatorily exchangeable into cash or shares at the LLC’s option. The Exchange Right is considered embedded in the LLC Units, which represent an equity host contract, as it cannot be exercised separately from the LLC units. As the Exchange Right can be settled by the Company in its own shares, it is considered clearly and closely related to the LLC Units, and therefore is not considered an embedded derivative to be accounted for separately. The LLC Units are accounted for as permanent equity and presented as non-controlling interest, as they are held by the FTAC Founder and entitle it to participate in tax distributions.
On initial recognition the non-controlling interest was recorded at the value of the FTAC Class C shares that the LLC received in exchange for the LLC Units it issued to the FTAC Founder. Immediately prior to the Transaction, the FTAC Founder held FTAC warrants that were exchanged for the FTAC Class C shares. As such, the value of the FTAC Class C shares was based on the value of such warrants, which was calculated based on the publicly listed trading price of the Warrants (NYSE: PSFE.WS) at the Transaction date. Subsequently, the non-controlling interest amount varies based on the LLC’s tax distributions attributable to the FTAC Founder.
Warrants
The Warrants represent the right to purchase one share of the Company’s common shares at a price of $11.50 per share. The Warrants will become exercisable on August 21, 2021 and will expire on the fifth anniversary of the Transaction, or upon an earlier redemption. The Warrants are accounted for as derivative liabilities under ASC 815-40 as they are freestanding instruments with provisions that preclude them from being indexed to the Company’s stock.
The Warrants were initially recorded at fair value on the closing date of the Transaction (March 30, 2021) based on the public warrants listed trading price (NYSE: PSFE.WS) and are subsequently remeasured at the balance sheet date with the changes in fair value recognized within “Other income / expense, net” within the consolidated statement of comprehensive income / (loss) (See Note 15). The publicly quoted price of the Public Warrants is used for valuing the Private Warrants on the basis that they cannot be transferred without losing their private warrant features, the only exit market in which they would be sold would be the public market and it is not likely that a market participant would pay a price different to that observed for the Public Warrants.
As of June 30, 2021 the Private Warrants, valued at $18,000, were held by a related party.
Share based compensation
Certain employee equity-based awards issued by the Accounting Predecessor included performance conditions that vested upon a qualifying Exit Event (defined as an IPO whereby Blackstone and CVC retain less than 50% of the B ordinary shares they held immediately prior to the IPO through one or multiple transactions, winding-up or completion of a sale), which was not deemed probable in prior periods. These awards vested in connection with the completion of the Transaction, resulting in the full recognition of share-based compensation for the six months ended June 30, 2021, which is included in “Selling, general and administrative” on the consolidated statements of comprehensive loss.
In addition, these awards were modified in conjunction with the Transaction. Their settlement terms changed such that instead of Topco’s A ordinary shares and B ordinary shares, the awardees received Paysafe Limited common shares as well as Topco’s shares. The modification resulted in a change in the classification of the modified awards, with the Topco shares being accounted for as a liability-classified share-based payment award under ASC 718 as they will be settled in cash. The corresponding liability was measured at fair value at the modification date (i.e. the Transaction date), and subsequently it will be remeasured at fair value at each reporting date, with changes in its value reported as share-based compensation expense. The awards settled in Paysafe Limited common shares continue to be accounted for as equity-based awards.
For the six months ended June 30, 2021, the Company recognized $84,117 of share-based compensation, of which $71,630 related to these awards that vested upon completion of the Transaction and $7,030 related to their modification and remeasurement. The majority of the remaining share-based compensation relates to restricted stock units granted on June 1, 2021. For the three months ended June 30, 2021, the Company recognized $3,276 of share-based compensation, which mainly relates to the restricted stock units (see Note 12).
At June 30, 2021, a liability for share-based compensation of $12,152 was recognized, with $5,123 reclassified from “Additional paid in capital” and the remainder expensed in the current period. This liability has been classified as a non-current liability within the consolidated statement of financial position.
F-10
In connection with the Transaction, certain third-party debt was settled in cash. The Company repaid $416,700 and €204,500 under the USD First Lien Term Loan and EUR First Lien Term Loan, respectively, and fully repaid the second lien term loan facility which consisted of a $250,000 USD Facility (“USD Second Lien Term Loan”) and a €212,459 EUR Facility (“EUR Second Lien Term Loan”). Both debt repayments occurred contemporaneously with the closing of the Transaction. As a result, the Company expensed capitalized debt fees of $21,724, which are included in “Interest expense, net” on the consolidated statements of comprehensive loss. Refer to Note 7 for further information on all debt transactions.
Preference Shares
We have authorized 2,000,000,000 shares in the Company that have not yet been issued, the rights and restrictions attached to which are not defined by the Company bylaws. Pursuant to the Company bylaws, preference shares may be issued by the Company from time to time, and the Company Board is authorized (without any requirement for further shareholder action) to determine the rights, preferences, powers, qualifications, limitations and restrictions attached to those shares.
|
3. |
Net income / (loss) per share attributable to the Company |
The following table sets forth the computation of the Company’s basic and diluted net income / (loss) per share attributable to the Company. The weighted average shares calculation for three and six months ended June 30, 2021, reflects the outstanding common shares of Paysafe Ltd from the closing date of the Transaction. For the three and six months ended June 30, 2020, the historical outstanding shares of the Accounting Predecessor have not been retroactively adjusted given the Transaction has been accounted for as a reorganization and recapitalization (See Note 2).
The Company uses the treasury stock method of calculating diluted net income / (loss) per share attributable to the Company. For the three months ended June 30, 2021, we included the dilutive effect of the warrants and excluded all potentially dilutive restricted stock units and LLC units in calculating diluted net income / (loss) per share attributable to the Company as the effect was antidilutive. For the six months ended June 30, 2021, we excluded all potentially dilutive warrants, restricted stock units and LLC units in calculating diluted net income / (loss) per share attributable to the Company as the effect was antidilutive due to net losses incurred for the period.
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For the three months ended June 30, |
|
|
For the six months ended June 30, |
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|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
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Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income / (loss) attributable to the Company - basic |
$ |
6,597 |
|
|
$ |
(15,901 |
) |
|
$ |
(54,050 |
) |
|
$ |
(85,193 |
) |
Net income / (loss) attributable to the Company - diluted (1) |
$ |
(32,751 |
) |
|
$ |
(15,901 |
) |
|
$ |
(54,050 |
) |
|
$ |
(85,193 |
) |
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares – basic |
|
723,712,382 |
|
|
|
125,157,540 |
|
|
|
723,712,382 |
|
|
|
125,157,540 |
|
Weighted average shares – diluted (2) |
|
728,026,983 |
|
|
|
125,157,540 |
|
|
|
723,712,382 |
|
|
|
125,157,540 |
|
Net income / (loss) per share attributable to the Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.01 |
|