Upbound Group, Inc 8-K/A, filed Feb 24, 2021

Upbound Group, Inc. (UPBD)

8-K/A 2021-02-24 For: 2021-02-17

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Added on April 10, 2026

About this 8-K/A

Upbound Group, Inc filed this 8-K/A on February 24, 2021, reporting on events of February 17, 2021.

Items reported

Item 9.01: Financial statements and exhibits

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☐			Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).
☐			Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12).
☐			Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)).
☐			Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)).


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	RCII	The Nasdaq Stock Market


Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.		☐


Exhibit No.						Description
23.1						Consent of Tanner LLC.
99.1						The audited consolidated financial statements of Acima as of December 31, 2019 , December 31, 2018 and December 31, 2017 , and for the years ended December 31, 2019 , December 31, 2018 and December 31, 2017 , the notes related thereto and the independent auditor’s report.
99.2						The unaudited condensed consolidated financial statements of Acima as of September 30, 2020 and September 30, 2019 and for the nine months ended September 30, 2020 and September 30, 2019, and the notes related thereto.
99.3						The unaudited pro forma condensed combined financial information of the Company and Acima as of September 30, 2020 and for the nine months ended September 30, 2020 and for the year ended December 31, 2019.
104						Cover Page Interactive Data File (formatted in Inline XBRL and included as Exhibit 101)


	As of December 31, 2019			As of December 31, 2018			As of December 31, 2017

Assets

Cash		$	20,549,626		$	12,140,271		$	7,970,279
Lease receivables, net		20,754,248			10,547,400			5,729,357
Leased assets, net		268,493,222			177,397,432			86,764,803
Intangible assets, net		10,031,075			7,350,588			5,391,695
Other assets, net		1,327,738			1,386,253			1,218,820

Total assets		$	321,155,909		$	208,821,944		$	107,074,954


Liabilities and Equity

Operating liabilities		$	4,661,525		$	3,124,823		$	3,484,488
Lease liabilities		12,412,079			8,075,061			3,400,419
Income tax distribution payable		5,900,000			1,600,000			800,000
Sales tax obligation, net		3,650,152			3,694,583			3,557,689
Senior debt		150,000,000			125,000,000			63,000,000
Senior debt deferred costs		(313,009)			(1,252,045)			—
Junior debt		2,500,000			5,000,000			9,765,000

Total liabilities		178,810,747			145,242,422			84,007,596

Commitments and contingencies

Equity		142,345,162			63,579,522			23,067,358

Total liabilities and equity		$	321,155,909		$	208,821,944		$	107,074,954


	For the Year Ended December 31, 2019			For the Year Ended December 31, 2018			For the Year Ended December 31, 2017


Lease portfolio revenues, net		$	866,456,698		$	488,377,005		$	217,676,502

Direct lease portfolio costs:
Depreciation of leased assets		669,076,377			389,014,022			164,480,927
Direct lease costs		28,157,142			19,764,252			10,101,455

Total direct lease portfolio costs		697,233,519			408,778,274			174,582,382

Gross profit from lease portfolio		169,223,179			79,598,731			43,094,120

Interest costs:
Senior debt facility		12,381,571			10,528,284			5,372,099
Junior debt		481,342			1,566,260			980,877

Total interest costs		12,862,913			12,094,544			6,352,976

Net profit from lease portfolio		156,360,266			67,504,187			36,741,144

Operating costs:
Payroll costs, net		23,348,588			17,214,744			11,531,934
Other operating costs		8,990,956			7,604,339			4,958,842
Equity-based compensation		719,824			422,674			398,532

Total operating costs		33,059,368			25,241,757			16,889,308

Net income		$	123,300,898		$	42,262,430		$	19,851,836


1.Nature of Business and Summary of Significant Accounting Policies						Nature of Business Acima Credit, LLC was organized as a limited liability company in the State of Utah on March 8, 2013 (Inception). Until January 2017, Acima Credit, LLC was named Simple RTO, LLC and did business as Simple Finance. Acima Holdings, LLC was organized as a limited liability company in the State of Utah on April 20, 2018 and owns 100% of Acima Credit, LLC, and the former ownership group of Acima Credit, LLC was effectively transferred to Acima Holdings, LLC. Acima Solutions, LLC was organized as a limited liability company in the State of Utah on December 28, 2018 and is also 100% owned by Acima Holdings, LLC.
						We are required to present consolidated financial statements that include the accounts of Acima Holdings, LLC, Acima Credit, LLC, and Acima Solutions, LLC (collectively, the Company). All material intercompany accounts and transactions are eliminated in consolidation. Acima Holdings, LLC and Acima Solutions, LLC had essentially no activity since their inception in 2018 and through December 31, 2019.
						Headquartered in Salt Lake City, Utah, Acima Credit, LLC offers a lease/purchase program in 46 states to customers of retail stores and merchants as an alternative to traditional financing. Leased assets consist primarily of home furniture, mattresses, appliances, and automobile tires. Under the lease program, lessees enter into a lease agreement, typically with the following basic terms and conditions: •Periodic payments in fixed amounts •Lease-to-own term typically approximately twelve months •Same-as-cash purchase option within 90 days •Discounted purchase option (65% of unpaid obligation) •Cancelable anytime
						Use of Estimates Management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The allowance for uncollectable receivables and the reserve for impaired leased assets are significant estimates.
						Management estimates the allowance for uncollectable receivables and the reserve for impaired leased assets using statistical methods based on historical payment behaviors, collection trends, and underwriting characteristics. We have long used these methods to underwrite and monitor our lease portfolio and we believe them to be reliable for purposes of determining the necessary allowance and reserve.
						For accounts with a regularly scheduled billing that is delinquent by 120 days or more, the related receivables are either charged off as uncollectable or reduced to zero net of the allowance, and the related leased asset is either fully depreciated or reduced to zero net of the reserve.
						The provision for uncollectable receivables addressed in Note 2 consists of the net change in the allowance for uncollectable receivables and the amount of all lease receivables charged off during the period. The provision for unrecoverable leased assets addressed in Note 3 consists of the net change in the reserve for impaired leased assets, which acts to temporarily accelerate depreciation.
						Concentrations of Credit Risk The Company is exposed to the credit risk associated with its leases. If the Company’s customers quit making payments as contractually provided in their lease arrangements, the related lease receivables may not be collectable, and the related net leased assets may not be recoverable. The Company is also exposed to the credit risk associated with its cash balances that either are not insured or that exceed Federally insured limits.


1.Nature of Business and Summary of Significant Accounting Policies Continued						Lease Portfolio Income Recognition Lease portfolio revenues consist of revenues earned from the lease or sale of leased assets. Revenues from the lease of leased assets is earned on a straight-line basis over the term of the lease, commencing once the lessee signs the lease agreement and receives the leased asset and the Company funds the lease, and ending when final payment is made. Revenues from the sale of leased assets (purchase option) is recognized upon receipt of the proceeds from sale.
						Scheduled lease payments are considered receivable when billed. Lease payments received in excess of amounts billed are recognized as lessee deposits. For leases where lease revenues earned exceed the amounts billed, the excess is recognized as unbilled revenues earned. For leases where amounts billed exceed the lease revenues earned, the excess is recognized as unearned revenues billed.
						The lease receivables line item in the consolidated balance sheets consists of billed and uncollected lease payments, unbilled revenues earned, and unearned revenues billed, less the allowance for uncollectable receivables. The lease liabilities line item in the consolidated balance sheets consists of lessee deposits, and sales taxes collected and held for remittance.
						Servicing fees (e.g., late fees and insufficient-fund fees) and other lease income are recognized upon receipt.
						Leased Assets Leased assets are recorded at cost less accumulated depreciation and the reserve for impairment. Leased assets are depreciated on a straight-line basis over the term of the lease (generally twelve months). When leased assets are sold (purchase option) or the related accounts are settled or charged off, the remaining net cost is fully depreciated.
						Direct Lease Costs Direct lease costs consist of commissions and sales wages directly related to successful lease originations, plus the portion of processing, audit, and credit reporting costs spent on successful lease originations. Direct lease costs are capitalized with leased assets and amortized in a pattern that mirrors the depreciation of leased assets.
						Intangible Assets Intangible assets consist predominantly of the cost of developing internal-use software systems used to manage the Company’s lease operations. The cost of development deemed capitalizable under US generally accepted accounting principles (US GAAP) is capitalized in monthly tranches, and each month’s tranche is amortized on a straight-line basis over five years, which is the estimated average useful life of new systems development before it is superseded by new development. The internal-use software systems are evaluated for impairment. Impairment loss is recognized if the net carrying amount of an internal-use software system exceeds the undiscounted sum of cash flows expected to result from its use and disposition. As of December 31, 2019, no impairment has been recognized.
						Fair Value of Financial Instruments Our financial instruments include cash, receivables, payables, senior debt, and junior debt. The carrying amounts of cash, receivables, and payables approximate fair value because of the short maturities of these instruments. The interest rates on the senior debt are variable and so the carrying value approximates fair value. The junior debt is due on demand and so the carrying amount approximates fair value.
						Income Taxes As a limited liability company, taxable income or loss from the Company is allocated to its members. Therefore, no provision or liability for income taxes has been included in the financial statements.


1.Nature of Business and Summary of Significant Accounting Policies Continued						Sales Tax In jurisdictions that require sales tax to be levied on lease payments received from the lessee, sales tax collected from the lessee is recognized as a liability until remitted, and no sales tax expense is recognized. In jurisdictions that require sales tax to be levied on the purchase of leased assets, sales tax has been capitalized as part of the cost of the leased assets.
						Prior to March 1, 2017, sales tax was paid on the purchase of leased assets in all jurisdictions. For any lease executed prior to March 1, 2017 in jurisdictions that instead require sales tax to be levied on lease payments received from the lessee, the Company did not charge the lessee sales tax on lease payments, but has instead chosen to recognize a sales tax obligation, resulting in the recognition of expense.
						Reclassifications Certain reclassifications were made to the 2017 and 2018 financial statements to conform to the presentation in the 2019 financial statements.
						Subsequent Events The Company has evaluated, for potential accounting and disclosure, events and transactions occurring after December 31, 2019 through January 14, 2021, the date these consolidated financial statements were available to be issued.
2. Lease Receivables						Lease receivables consist of the following:


	As of December 31, 2019			As of December 31, 2018			As of December 31, 2017


Billed lease receivables		$	42,344,307		$	26,685,812		$	11,147,104
Unbilled revenues earned		16,006,720			7,886,268			3,490,460
Unearned revenues billed		(4,890,503)			(2,863,192)			(1,359,279)
Allowance for uncollectability		(32,706,276)			(21,161,488)			(7,548,928)

Lease receivables, net		$	20,754,248		$	10,547,400		$	5,729,357


						The provisions for uncollectable receivables totaling $130,272,481, $78,433,305, and $32,804,629 for the years ended December 31, 2019, 2018, and 2017, respectively, were netted against lease portfolio revenues. Lease receivables charged off totaled $118,727,693, $64,820,745, and $31,631,051 for the years ended December 31, 2019, 2018, and 2017, respectively.


						The reserve for impairment is temporarily provided against unrecoverable leased assets until the leased asset becomes recoverable or fully depreciates. The provisions for unrecoverable leased assets totaling $6,990,407, $9,909,039, and $541,704 for the years ended December 31, 2019, 2018, and 2017, respectively, were added to the depreciation of leased assets.
						Direct lease costs consist of the capitalized cost of sales commissions and rebates; sales, processing, and underwriting wages; and consumer credit information. Direct lease costs totaling $17,451,113, $13,736,211, and $7,310,512 were capitalized in the years ended December 31, 2019, 2018, and 2017, respectively.
4. Intangible Assets						Intangible assets consist of the following:


						Internal-use software systems consist of the capitalized cost of employed software developers. Development costs totaling $5,262,263, $3,750,074, and $4,018,269 were capitalized in the years ended December 31, 2019, 2018, and 2017, respectively.
5. Lease Liabilities						Lease liabilities consist of the following:


						*The senior debt is secured by the Company’s leases, its assets, and the members’ ownership in the Company. The senior debt is senior in priority to the junior debt. The Company is in compliance with its senior debt covenants.
						**Eligible receivables are defined as the sum of the cost of all leased assets originated in the trailing 12 months multiplied by 127.5%, minus the sum of all lease payments received related to the leased assets originated in the trailing 12 months, subject to certain concentration limits.
						Junior debt consists of the following:


6. Borrowings Continued						***All junior debt is unsecured and subordinated to the senior debt. In the event any payment is made on junior debt, the Company must remain in good standing with the senior debt (no event of default).
						As of December 31, 2019, total borrowings come due as follows:


	As of December 31, 2019			As of December 31, 2018			As of December 31, 2017


Leased assets		$	442,537,281		$	297,432,595		$	140,191,659
Accumulated depreciation		(157,427,451)			(109,119,678)			(50,007,613)
Reserve for impairment		(23,220,598)			(16,230,192)			(6,321,152)
		261,889,232			172,082,725			83,862,894

Direct lease costs		17,451,113			13,736,211			7,310,512
Accumulated amortization		(10,847,123)			(8,421,504)			(4,408,603)
		6,603,990			5,314,707			2,901,909

Leased assets, net		$	268,493,222		$	177,397,432		$	86,764,803


7. Contingencies						In the ordinary course of the Company’s operations, the Company may be subject to contingent losses as a result of claims or assessments. As of December 31, 2019, management believes no known asserted claim or assessment will have a significant effect on the financial position or operations of the Company. It is too early to determine whether any unasserted claim or assessment will have a significant effect on the financial position or operations of the Company.
8. Equity and Equity based Compensation						The Company’s equity consists of Class A and Class B Units. There is no meaningful difference between the two classes of equity, in terms of preferences or otherwise, except that Class A Units represent capital interests and Class B Units represent profits interests. Class A Units were issued to founders and investors, and Class B Units were issued to certain key employees. As of December 31, 2019, Class A and Class B Units totaled 197,336,578 and the Company was authorized to issue additional Class B Units totaling 2,263,422.
						Equity transactions consist of the following (in units):


	For the Year Ended December 31, 2019		For the Year Ended December 31, 2018		For the Year Ended December 31, 2017

Class A Units:
Number of units		178,236,600		178,236,600		178,236,600

Class B Units:
Beginning number of units		20,099,978		14,839,978		13,512,200
Issuances as incentives		650,000		5,360,000		1,550,000
Forfeitures of unvested		(895,834)		(100,000)		(222,222)
Redemptions		(754,166)		—		—
Ending number of units		19,099,978		20,099,978		14,839,978

Total number of units		197,336,578		198,336,578		193,076,578


Junior debt due on demand	$	2,500,000
Senior debt due April 26, 2021	150,000,000

	$	152,500,000


						As of December 31, 2019, the number of vested Class B Units totaled 16,481,367 with an estimated intrinsic value totaling $78 million.
						Equity-based compensation totaled $719,824, $422,674, and $398,532 for the years ended December 31, 2019, 2018, and 2017, respectively. Unrecognized compensation totaling $875,902 from Class B Units outstanding as of December 31, 2019 (and not forfeited as of February 28, 2020) shall be recognized as follows: $507,005 in 2020, $310,611 in 2021, and $58,287 in 2022.


8. Equity and Equity based Compensation Continued						Class B Units held no intrinsic value on the dates they were individually issued as incentives. However, US GAAP requires that profits interests be valued at fair value, and that the fair value be recognized as compensation on a straight-line basis over the period from the issue date through completion of vesting. Class B Units issued in 2017 were valued at $111,899 in total and vest over 36 months. Class B Units issued in 2018 were valued at $1,847,106 in total and vest over 36 months. Class B Units issued in 2019 were valued at $468,704 in total and vest over 36 months.
						The Class B Units issued in 2019, 2018, and 2017 were valued using the Black-Scholes option pricing model, which model is meant to estimate the price the recipients could have received if they sold their profits interests on the date they were issued. The significant inputs for the Black-Scholes option pricing model include (1) the expected volatility of the equity underlying the instrument, (2) the expected life of the instrument, (3) the risk-free interest rate, and (4) the fair value of the Company’s Class B units as of the date issued.
						Management estimated the expected volatility of the Company’s equity (underlying the profits interests), ranging from 43.78% to 46.87%, by applying the actual volatility of certain public companies who do business in the lease-to-own and subprime lending industries. Management estimated the expected life of the instrument to be 2 to 3 years. Management estimated the risk-free interest rate, ranging from 1.47% to 2.60%, by applying the actual interest rate of two-year to three-year constant maturities near the date the profits interests were issued.
9. Premises Rent						On February 7, 2020, the Company entered into a lease agreement to rent premises in Draper, Utah for a period of 66 months. On January 21, 2016, the Company entered into a lease arrangement (later amended for additional space) to rent premises in Sandy, Utah for a period of 45 months. Minimum rents come due after December 31, 2019 as follows:


	Sandy			Draper

In the years ending December 31:
2020		$	184,582		$	687,405
2021		—			2,131,866
2022		—			2,195,821
2023		—			2,261,688
2024		—			2,329,529
2025		—			1,994,595

		$	184,582		$	11,600,904


						In February 2016, the Financial Accounting Standards Board issued its new lease accounting guidance in ASU No. 2016-02, Leases (Topic 842). Starting in 2021, this guidance will require the Company to recognize its obligation to make future premises lease payments as a liability, and to recognize its right to use the leased premises as an asset, in the consolidated balance sheets. Currently, no premises lease liability or premises right-of-use asset is presented in the consolidated balance sheets.
						Amortization of the premises right-of-use asset shall be patterned such that, when combined with Interest accrued on the premises lease liability, the combined lease cost behaves as a single lease cost recognized on a straight-line basis over the term of the lease. Currently, premises rent is already recognized on a straight-line basis over the term of the lease.
10. Subsequent Event						On December 20, 2020, the Company entered into a definitive agreement to be acquired by Rent-A-Center (NASDAQ: RCII). Total consideration consists of $1.273 billion in cash and approximately 10.8 million shares of Rent-A-Center common stock valued at $377 million at the time of signing. Regulatory approval is required before the acquisition is closed. Regulatory approval remains outstanding as of January 14, 2021, the date these consolidated financial statements were available to be issued.


	As of September 30, 2020			As of September 30, 2019

Assets

Cash		$	25,407,652		$	18,036,364
Lease receivables, net		19,635,267			17,000,142
Leased assets, net		315,430,446			240,563,099
Intangible assets, net		10,966,109			9,399,536
Other assets, net		2,886,965			1,407,934

Total assets		$	374,326,439		$	286,407,075


Liabilities and Equity

Operating liabilities		$	3,685,042		$	3,747,885
Lease liabilities		17,696,549			12,252,003
Income tax distribution payable		49,900,000			3,300,000
Sales tax obligation, net		3,654,967			3,654,707
Senior debt		150,000,000			125,000,000
Senior debt deferred costs		—			(547,768)
Junior debt		2,500,000			2,500,000

Total liabilities		227,436,558			149,906,827

Commitments and contingencies

Equity		146,889,881			136,500,248

Total liabilities and equity		$	374,326,439		$	286,407,075


	For the Nine Months Ended September 30, 2020			For the Nine Months Ended September 30, 2019


Lease portfolio revenues, net		$	914,111,811		$	618,927,960

Direct lease portfolio costs:
Depreciation of leased assets		692,572,458			476,450,131
Direct lease costs		25,392,503			20,383,006

Total direct lease portfolio costs		717,964,961			496,833,137

Gross profit from lease portfolio		196,146,850			122,094,823

Interest costs:
Senior debt		8,861,293			9,537,909
Junior debt		259,863			391,205

Total interest costs		9,121,156			9,929,114

Net profit from lease portfolio		187,025,694			112,165,709

Operating costs:
Payroll costs, net		21,323,426			16,763,095
Other operating costs		8,494,532			6,326,754
Equity-based compensation		995,007			532,232

Total operating costs		30,812,965			23,622,081

Net income		$	156,212,729		$	88,543,628


	For the Nine Months Ended September 30, 2020			For the Nine Months Ended September 30, 2019


Beginning equity		$	142,345,162		$	63,579,522

Equity-based compensation		995,007			532,232

Redemption of equity		(3,235,272)			(62,500)

Distributions		(149,427,745)			(16,092,634)

Net income		156,212,729			88,543,628

Ending equity		$	146,889,881		$	136,500,248


	For the Nine Months Ended September 30, 2020			For the Nine Months Ended September 30, 2019

Cash flows from operating activities:
Net income		$	156,212,729		$	88,543,628
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Net change in leased assets:
Purchases of leased assets		(739,365,488)			(538,859,690)
Depreciation of leased assets		692,572,458			476,450,131
Capitalized direct lease costs, net		(144,194)			(756,108)
		(46,937,224)			(63,165,667)
Other amortization:
Amortization of intangible assets		2,473,279			1,853,493
Deferred costs on debt		313,009			704,277
Equity-based compensation		995,007			532,232
		3,781,295			3,090,002
Net changes in other operating accounts:
Lease receivables		1,118,981			(6,452,742)
Other assets		(1,559,227)			(21,681)
Operating liabilities		(976,483)			623,062
Lease liabilities		5,284,470			4,176,942
Sales tax obligation		4,815			(39,876)
		3,872,556			(1,714,295)

Net cash provided by (used in) operating activities		116,929,356			26,753,668

Cash flows from investing activities:
Investment in intangible assets		(3,408,313)			(3,902,441)

Cash flows from financing activities:
Net change in junior debt		—			(2,500,000)
Redemption of equity		(3,235,272)			(62,500)
Distributions		(105,427,745)			(14,392,634)

Net cash provided by (used in) financing activities		(108,663,017)			(16,955,134)

Net change in cash		4,858,026			5,896,093

Beginning cash		20,549,626			12,140,271

Ending cash		$	25,407,652		$	18,036,364


Supplementary information:
Cash paid for interest		$	9,121,156		$	9,929,114


1.Nature of Business and Summary of Significant Accounting Policies						Nature of Business Acima Credit, LLC was organized as a limited liability company in the State of Utah on March 8, 2013 (Inception). Until January 2017, Acima Credit, LLC was named Simple RTO, LLC and did business as Simple Finance. Acima Holdings, LLC was organized as a limited liability company in the State of Utah on April 20, 2018 and owns 100% of Acima Credit, LLC, and the former ownership group of Acima Credit, LLC was effectively transferred to Acima Holdings, LLC. Acima Solutions, LLC was organized as a limited liability company in the State of Utah on December 28, 2018 and is also 100% owned by Acima Holdings, LLC.
						Our consolidated financial statements include the accounts of Acima Holdings, LLC, Acima Credit, LLC, and Acima Solutions, LLC (collectively, the Company). All material intercompany accounts and transactions are eliminated in consolidation. Acima Credit, LLC has historically held all lease activity and continues to hold all merchant point-of-sale lease activity. Acima Solutions, LLC took over all merchant ecommerce lease activity in 2020. Acima Holdings, LLC has essentially no activity.
						Headquartered in Salt Lake City, Utah, Acima Credit, LLC offers a lease/purchase program in 46 states to customers of retail stores and merchants as an alternative to traditional financing. Leased assets consist primarily of home furniture, mattresses, appliances, and automobile tires. Under the lease program, lessees enter into a lease agreement, typically with the following basic terms and conditions: •Periodic payments in fixed amounts •Lease-to-own term typically approximately twelve months •Same-as-cash purchase option within 90 days •Discounted purchase option (65% of unpaid obligation) •Cancelable anytime
						Use of Estimates Management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The allowance for uncollectable receivables and the reserve for impaired leased assets are significant estimates.
						Management estimates the allowance for uncollectable receivables and the reserve for impaired leased assets using statistical methods based on historical payment behaviors, collection trends, and underwriting characteristics. We have long used these methods to underwrite and monitor our lease portfolio and we believe them to be reliable for purposes of determining the necessary allowance and reserve.
						For accounts with a regularly scheduled billing that is delinquent by 120 days or more, the related receivables are either charged off as uncollectable or reduced to zero net of the allowance, and the related leased asset is either fully depreciated or reduced to zero net of the reserve.
						The provision for uncollectable receivables addressed in Note 2 consists of the net change in the allowance for uncollectable receivables and the amount of all lease receivables charged off during the period. The provision for unrecoverable leased assets addressed in Note 3 consists of the net change in the reserve for impaired leased assets, which acts to temporarily accelerate depreciation.
						Concentrations of Credit Risk The Company is exposed to the credit risk associated with its leases. If the Company’s customers quit making payments as contractually provided in their lease arrangements, the related lease receivables may not be collectable, and the related net leased assets may not be recoverable. The Company is also exposed to the credit risk associated with its cash balances that either are not insured or that exceed Federally insured limits.


1.Nature of Business and Summary of Significant Accounting Policies						Income Taxes As a limited liability company, taxable income or loss from the Company is allocated to its members. Therefore, no provision or liability for income taxes has been included in the financial statements.
Continued						Sales Tax In jurisdictions that require sales tax to be levied on lease payments received from the lessee, sales tax collected from the lessee is recognized as a liability until remitted, and no sales tax expense is recognized. In jurisdictions that require sales tax to be levied on the purchase of leased assets, sales tax has been capitalized as part of the cost of the leased assets.
						Prior to March 1, 2017, sales tax was paid on the purchase of leased assets in all jurisdictions. For any lease executed prior to March 1, 2017 in jurisdictions that instead require sales tax to be levied on lease payments received from the lessee, the Company did not charge the lessee sales tax on lease payments, but has instead chosen to recognize a sales tax obligation, resulting in the recognition of expense.
						Subsequent Events The Company has evaluated, for potential accounting and disclosure, events and transactions occurring after September 30, 2020 through January 14, 2021, the date these consolidated financial statements were available to be issued.
2. Lease Receivables						Lease receivables consist of the following:


	As of September 30, 2020			As of September 30, 2019


Internal-use software systems		$	19,426,467		$	14,658,332
Accumulated amortization		(8,460,358)			(5,258,796)

Intangible assets, net		$	10,966,109		$	9,399,536


	As of September 30, 2020			As of September 30, 2019


Customer deposits held		$	12,672,248		$	7,654,841
Sales tax collected and payable		5,024,301			4,597,162

Lease liabilities		$	17,696,549		$	12,252,003


	As of September 30, 2020			As of September 30, 2019


Senior Debt * Comvest debt facility, borrowings limited to 69% of eligible receivables** limited to $150 million, interest paid monthly at LIBOR plus 6%, principal and unpaid interest is due April 26, 2021		$	150,000,000		$	125,000,000

Senior debt deferred costs		—			(547,768)

Net senior debt		$	150,000,000		$	124,452,232


	As of September 30, 2020			As of September 30, 2019


Junior Debt *** Notes payable to the CEO (and principal owner) with principal due on demand: Interest at 15% paid monthly		$	2,000,000		$	2,000,000

Interest at 10% paid monthly		500,000			500,000

Total junior debt		$	2,500,000		$	2,500,000


						***All junior debt is unsecured and subordinated to the senior debt. In the event any payment is made on junior debt, the Company must remain in good standing with the senior debt (no event of default).
						As of September 30, 2020, total borrowings come due as follows:


7. Contingencies						In the ordinary course of the Company’s operations, the Company may be subject to contingent losses as a result of claims or assessments. As of September 30, 2020, management believes no known asserted claim or assessment will have a significant effect on the financial position or operations of the Company. It is too early to determine whether any unasserted claim or assessment will have a significant effect on the financial position or operations of the Company.
8. Equity and Equity-Based Compensation						The Company’s equity consists of Class A and Class B Units. There is no meaningful difference between the two classes of equity, in terms of preferences or otherwise, except that Class A Units represent capital interests and Class B Units represent profits interests. Class A Units were issued to founders and investors, and Class B Units were issued to certain key employees. As of September 30, 2020, Class A and Class B Units totaled 198,804,633 and the Company was authorized to issue additional Class B Units totaling 1,195,367.


8. Equity and Equity-Based Compensation Continued						Equity transactions consist of the following (in units):


	As of and For the Nine Months Ended September 30, 2020		As of and For the Nine Months Ended September 30, 2019

Class A Units:
Number of units		178,236,600		178,236,600

Class B Units:
Beginning number of units		19,099,978		20,099,978
Issuances as incentives		4,230,000		650,000
Forfeitures of unvested		(734,167)		(104,167)
Redemptions		(2,027,778)		(45,833)
Ending number of units		20,568,033		20,599,978

Total number of units		198,804,633		198,836,578


						Equity-based compensation totaled $995,007 and $532,232 for the nine months ended September 30, 2020 and 2019, respectively.
9. Premises Rent						On February 7, 2020, the Company entered into a lease agreement to rent premises in Draper, Utah for a period of 66 months. Minimum rents come due after September 30, 2020 as follows: