SEC Filing | International Money Express

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Filed pursuant to Rule 424(b)(3)

Registration No. 333-226948

PROSPECTUS SUPPLEMENT NO. 1

(To the Prospectus dated October 25, 2018)

International Money Express, Inc.

8,959,999 Shares of Common Stock

This Prospectus Supplement No. 1 (this “Supplement No. 1”) forms and is part of the prospectus of International Money Express, Inc. (the “Company”), dated October 25, 2018 (the “Prospectus”). This Supplement No. 1 supplements, modifies or supersedes certain information contained in the Prospectus. Any statement in the Prospectus that is modified or superseded is not deemed to constitute a part of the Prospectus, except as modified or superseded by this Supplement No. 1. Except to the extent that the information in this Supplement No. 1 modifies or supersedes the information contained in the Prospectus, this Supplement No. 1 should be read, and will be delivered, with the Prospectus. This Prospectus Supplement No. 1 is not complete without, and may not be utilized except in connection with, the Prospectus.

This Prospectus Supplement is being filed solely to update and supplement the information in the Prospectus with (1) the information contained in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 filed with the Securities and Exchange Commission (“SEC”) on November 13, 2018 and (2) solely the portion of the text of the Form 8-K that is treated as “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, in the Company’s Current Report on Form 8-K (the “Form 8-K”), which was filed with the SEC on November 8, 2018. Such portion of the text of the Form 8-K is attached hereto.

Investing in our common stock involves a high degree of risk. Before making an investment decision, please read “Risk Factors” on page 9 of the Prospectus.

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this Supplement No. 1 (or the Prospectus including any supplements or amendments thereto) is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is November 14, 2018.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018 OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to __________

Commission File No. 001-37986

INTERNATIONAL MONEY EXPRESS, INC.

(Exact name of registrant as specified in its charter)

Delaware		47-4219082
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

9480 South Dixie Highway Miami, Florida		33156
(Address of Principal Executive Offices)		(Zip Code)

(305) 671-8000

(Registrant’s telephone number, including area code)

FINTECH ACQUISITION CORP. II, 2929 Arch Street, Suite 1703, Philadelphia, PA 19104

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	☐ Large accelerated filer	☐ Accelerated filer
	☒ Non-accelerated filer	☐ Smaller reporting company
		☒ 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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of November 9, 2018, there were 36,182,783 shares of the registrant’s common stock, $0.0001 par value per share, outstanding. The registrant has no other class of common stock outstanding.

INTERNATIONAL MONEY EXPRESS, INC.

INDEX TO FINANCIAL STATEMENTS

		Page

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

PART 1 - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1

	Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017	1

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended September 30, 2018 and 2017 and Nine Months Ended September 30, 2018, Successor Company Period from February 1, 2017 to September 30, 2017 and Predecessor Company Period from January 1, 2017 to January 31, 2017	2

	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2018	3

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018, Successor Company Period from February 1, 2017 to September 30, 2017 and Predecessor Company Period from January 1, 2017 to January 31, 2017	4

	Notes to Condensed Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33

Item 4.	Controls and Procedures	34

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3.	Defaults Upon Senior Securities	35

Item 4.	Mine Safety Disclosures	35

Item 5.	Other Information	35

Item 6.	Exhibits	35

SIGNATURES		37

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements contained in this Quarterly Report on Form 10-Q that reflect our current views with respect to future events and financial performance, business strategies, expectations for our business and the business of the Company and any other statements of a future or forward-looking nature, constitute “forward-looking statements” for the purposes of federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would,” “will,” “approximately,” “shall” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report on Form 10-Q may include, for example, the future financial performance of the Company.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. We cannot assure you that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Some factors that could cause actual results to differ include, but are not limited to:

the ability to maintain the listing of our common stock on Nasdaq;

the ability to recognize the anticipated benefits of the Merger, which may be affected by, among other things, competition, and the ability of the combined business to grow and manage growth profitably;

changes in applicable laws or regulations;

the possibility that we may be adversely affected by other economic, business and/or competitive factors;

factors relating to our business, operations and financial performance, including:

competition in the markets in which we operate;

our ability to maintain agent relationships on terms consistent with those currently in place;

our ability to maintain banking relationships necessary for us to conduct our business;

credit risks from our agents and the financial institutions with which we do business;

bank failures, sustained financial illiquidity, or illiquidity at our clearing, cash management or custodial financial institutions;

new technology or competitors that disrupt the current ecosystem;

cyber-attacks or disruptions to our information technology, computer network systems and data centers;

our success in developing and introducing new products, services and infrastructure;

customer confidence in our brand and in consumer money transfers generally;

our ability to maintain compliance with the regulatory requirements of the jurisdictions in which we operate or plan to operate;

international political factors or implementation of tariffs, border taxes or restrictions on remittances or transfers of money out of the United States;

changes in tax laws and unfavorable outcomes of tax positions we take;

political instability, currency restrictions and devaluation in countries in which we operate or plan to operate;

weakness in U.S. or international economic conditions;

change or disruption in international migration patterns;

our ability to protect our brand and intellectual property rights;

our ability to retain key personnel;

changes in foreign exchange rates could impact consumer remittance activity; and

other economic, business and/or competitive factors, risks and uncertainties, including those described in the section entitled “Risk Factors” in the prospectus, dated October 25, 2018, filed pursuant to Rule 424(b)(3), as may be updated by the other documents that we file with the Securities and Exchange Commission.

We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Index

PART 1 – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	Successor Company
	September 30, 2018			December 31, 2017
ASSETS
Current assets:
Cash	$	82,490,398		$	59,155,618
Accounts receivable, net of allowance of $340,178 and $307,562, respectively		80,923,807			51,374,377
Prepaid wires		5,119,778			7,675,491
Other prepaid expenses and current assets		3,472,124			900,386
Total current assets		172,006,107			119,105,872

Property and equipment, net		9,525,295			8,490,794
Goodwill		36,259,666			36,259,666
Intangible assets, net		39,389,769			48,741,032
Deferred tax asset, net		-			1,748,854
Other assets		639,119			1,706,693
Total assets	$	257,819,956		$	216,052,911

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt, net	$	4,078,627		$	3,913,436
Accounts payable		14,060,179			8,919,796
Wire transfers and money orders payable		78,152,404			48,276,649
Accrued and other		14,018,061			11,514,449
Total current liabilities		110,309,271			72,624,330

Long term liabilities:
Deferred tax liability, net		5,157,019			-
Debt, net		104,423,502			107,526,462
Total long term liabilities		109,580,521			107,526,462

Commitments and contingencies, see Note 11

Stockholders' equity:
Common stock $0.0001 par value; 200,000,000 shares authorized, 36,182,783 and 17,227,682 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively		3,619			1,723
Additional paid-in capital		60,203,431			46,076,220
Accumulated deficit		(22,281,866	)		(10,173,453	)
Accumulated other comprehensive income (loss)		4,980			(2,371	)
Total stockholders' equity		37,930,164			35,902,119
Total liabilities and stockholders' equity	$	257,819,956		$	216,052,911

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Index

INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

	Successor Company												Predecessor Company
	Three Months Ended September 30,						Nine Months Ended September 30, 2018			Period from February 1, 2017 to September 30, 2017			Period from January 1, 2017 to January 31, 2017


	2018			2017
	(Unaudited)
Revenues:
Wire transfer and money order fees	$	61,331,837		$	47,642,153		$	168,554,175		$	119,226,787		$	11,876,919
Foreign exchange		10,697,168			8,413,051			29,013,221			21,690,233			2,449,709
Other income		479,461			338,090			1,276,494			854,102			98,715
Total revenues		72,508,466			56,393,294			198,843,890			141,771,122			14,425,343

Operating expenses:
Service charges from agents and banks		48,305,007			37,846,027			132,564,938			94,607,887			9,440,774
Salaries and benefits		10,959,507			5,983,784			24,632,910			16,395,185			4,530,308
Other selling, general and administrative expenses		5,206,932			4,163,419			13,390,449			10,400,190			1,063,379
Transaction costs		6,304,972			-			10,319,283			6,212,602			3,917,188
Depreciation and amortization		4,142,139			4,553,042			11,749,513			12,056,986			381,746
Total operating expenses		74,918,557			52,546,272			192,657,093			139,672,850			19,333,395

Operating (loss) income		(2,410,091	)		3,847,022			6,186,797			2,098,272			(4,908,052	)

Interest expense		3,433,731			4,612,430			10,109,664			8,107,258			613,742

Loss before income taxes		(5,843,822	)		(765,408	)		(3,922,867	)		(6,008,986	)		(5,521,794	)

Income tax provision (benefit)		7,569,174			(191,727	)		8,185,546			1,052,479			(2,203,373	)

Net loss		(13,412,996	)		(573,681	)		(12,108,413	)		(7,061,465	)		(3,318,421	)

Other comprehensive income (loss)		22,452			3,859			7,351			18,990			(2,453	)

Comprehensive loss	$	(13,390,544	)	$	(569,822	)	$	(12,101,062	)	$	(7,042,475	)	$	(3,320,874	)

Loss per common share:
Basic and diluted	$	(0.43	)	$	(0.03	)	$	(0.55	)	$	(0.41	)

Weighted-average common shares outstanding:
Basic and diluted		30,975,338			17,227,682			21,827,082			17,227,682

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Index

INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Stock				Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
	Common Stock
	Shares		Amount
Balance, December 31, 2017		17,227,682	$	1,723	$	46,076,220	$	(10,173,453	)	$	(2,371	)	$	35,902,119
Net equity infusion from reverse recapitalization		18,955,101		1,896		8,961,625		-			-			8,963,521
Share-based compensation		-		-		5,165,586		-			-			5,165,586
Adjustment from foreign currency translation, net		-		-		-		-			7,351			7,351
Net loss		-		-		-		(12,108,413	)		-			(12,108,413	)
Balance, September 30, 2018		36,182,783	$	3,619	$	60,203,431	$	(22,281,866	)	$	4,980		$	37,930,164

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Index

INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Successor Company						Predecessor Company
	Nine Months Ended September 30, 2018			Period from February 1, 2017 to September 30, 2017			Period from January 1, 2017 to January 31, 2017



	(Unaudited)
Cash flows from operating activities:
Net loss	$	(12,108,413	)	$	(7,061,465	)	$	(3,318,421	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		11,749,513			12,056,986			381,746
Share-based compensation		5,165,586			1,534,655			2,916,324
Provision for bad debts		743,285			813,641			83,695
Debt origination costs amortization		699,731			125,053			39,298
Deferred taxes		6,905,873			903,181			(2,214,351	)
Loss on disposal of property and equipment		151,724			86,351			13,472
Total adjustments		25,415,712			15,519,867			1,220,184
Changes in operating assets and liabilities:
Accounts receivable		(30,285,672	)		(26,826,448	)		3,612,332
Prepaid wires		2,784,622			(2,402,576	)		7,848,641
Other prepaid expenses and assets		(1,427,760	)		(1,706,487	)		70,927
Wire transfers and money orders payables		29,639,809			13,100,915			(1,884,922	)
Accounts payable and accrued other		16,497,269			(1,458,882	)		1,103,326
Net cash provided by (used in) operating activities		30,515,567			(10,835,076	)		8,652,067

Cash flows from investing activities:
Purchases of property and equipment		(3,575,065	)		(3,095,230	)		(249,382	)
Net cash used in acquisition		-			(923,654	)		-
Net cash used in investing activities		(3,575,065	)		(4,018,884	)		(249,382	)

Cash flows from financing activities:
Borrowings under term loan		-			102,000,000			-
Proceeds from reverse recapitalization		101,663,573			-			-
Cash consideration to Intermex shareholders		(101,658,947	)		-			-
Borrowings (Repayments) under revolving loan, net		-			12,000,000			(2,000,000	)
Repayment of term loan		(3,637,500	)		(75,000,000	)		-
Debt origination costs		-			(4,682,830	)		-
Common dividend distributions		-			(20,000,000	)		-
Net cash (used in) provided by financing activities		(3,632,874	)		14,317,170			(2,000,000	)

Effect of exchange rate changes on cash		27,152			405,922			(15,196	)

Net increase (decrease) in cash and restricted cash		23,334,780			(130,868	)		6,387,489

Cash and restricted cash, beginning of the period		59,795,280			44,628,247			38,240,758

Cash and restricted cash, end of the period	$	83,130,060		$	44,497,379		$	44,628,247

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Index

INTERNATIONAL MONEY EXPRESS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

	Successor Company				Predecessor Company
	Nine Months Ended September 30, 2018		Period from February 1, 2017 to September 30, 2017		Period from January 1, 2017 to January 31, 2017



	(Unaudited)
Supplemental disclosure of cash flow information:
Cash paid for interest	$	9,409,516	$	8,556,649	$	658,888
Cash paid for income taxes		1,494,900		400,000		-

Supplemental disclosure of non-cash financing activity:
Agent business acquired in exchange for receivables		-		639,688		-
Intermex transaction accruals settled by acquisition proceeds		9,062,769		-		-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Index

INTERNATIONAL MONEY EXPRESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - BUSINESS AND ACCOUNTING POLICIES

On July 26, 2018 (the “Closing Date”), International Money Express, Inc. (formerly FinTech Acquisition Corp. II) consummated the previously announced transaction (the “Merger”) by and among FinTech Acquisition Corp. II, a Delaware corporation (“FinTech”), FinTech II Merger Sub Inc., a wholly-owned subsidiary of FinTech (“Merger Sub 1”), FinTech II Merger Sub 2 LLC, a wholly-owned subsidiary of FinTech (“Merger Sub 2”), Intermex Holdings II, Inc. (“Intermex”) and SPC Intermex Representative LLC (“SPC Intermex”)(See Note 2). As a result of the Merger, the separate corporate existence of Intermex ceased and Merger Sub 2 (which changed its name to International Money Express Sub 2, LLC in connection with the closing of the Merger) continued as the surviving entity. In connection with the closing of the Merger, FinTech changed its name to International Money Express, Inc. (the “Company”). Unless the context below otherwise provides, the “Company” refers to the combined company following the Merger and, together with their respective subsidiaries, “FinTech” refers to the registrant prior to the closing of the Merger and “Intermex” refers to Intermex Holdings II, Inc. prior to the closing of Merger.

The condensed consolidated financial statements of the Company include Intermex, its wholly-owned indirect subsidiary, Intermex Wire Transfer, LLC (“LLC”), Intermex Wire Transfers de Guatemala, S.A. (“Guatemala”) - 99.8% owned by LLC, Intermex Wire Transfer de Mexico, S.A. and Intermex Transfers de Mexico, S.A. (“Mexico”) - 98% owned by LLC, Intermex Wire Transfer Corp. - 100% owned by LLC and Intermex Wire Transfer II, LLC - 100% owned by LLC.

The Merger has been accounted for as a reverse recapitalization where FinTech was treated as the “acquired” company for financial reporting purposes. This determination was primarily based on the facts that following the Merger, the former stockholders of Intermex control the majority of the voting rights in respect of the board of directors of the Company, Intermex comprising the ongoing operations of the Company and Intermex’s senior management comprising the senior management of the Company. Accordingly, the Merger is treated as the equivalent of Intermex issuing stock for the net assets of FinTech, accompanied by a recapitalization. The net assets of FinTech are stated at historical cost, with no goodwill or other intangible assets resulting from the Merger. The consolidated assets, liabilities and results of operations prior to the Closing Date of the Merger are those of Intermex, and FinTech’s assets, liabilities and results of operations are consolidated with Intermex beginning on the Closing Date. The shares and corresponding capital amounts included in common stock and additional paid-in capital, pre-merger, have been retroactively restated as shares reflecting the exchange ratio in the Merger for all Successor periods. The historical financial information and operating results of FinTech prior to the Merger have not been separately presented in these consolidated financial statements as they were not significant or meaningful.

Stella Point Capital, LLC (“Stella Point”) acquired a majority interest in Intermex on February 1, 2017 as discussed in further detail in Note 2. In connection with the acquisition of Intermex by Stella Point, the Company applied “push-down” accounting and the assets and liabilities were adjusted to fair value on the closing date of the transaction, February 1, 2017. As a result, the Company's condensed consolidated financial statement presentation distinguishes between a predecessor period ("Predecessor") for periods prior to the transaction, and a successor period ("Successor"), for periods subsequent to the transaction.

The Company operates as a money transmitter, primarily between the United States of America (“U.S.”) and Mexico, Guatemala and other countries in Latin America through a network of authorized agents located in various unaffiliated retail establishments throughout the U.S.

Index

INTERNATIONAL MONEY EXPRESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

All significant inter-company balances and transactions have been eliminated from the condensed consolidated financial statements. The condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain reclassifications have been made to prior-year amounts in the consolidated statements of operations and comprehensive loss to conform to current-year reporting classifications. Principally, certain employee benefits that were classified as other selling, general and administrative expenses are now presented within salaries and benefits. The reclassifications had no impact on operating (loss) income or net loss.

The Company’s interim condensed consolidated financial statements and related notes are unaudited. In the opinion of management, all adjustments (including normal recurring adjustments) and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim financial statements are not necessarily indicative of the results that may be reported for the entire year. Certain information and footnote disclosures required by GAAP have been condensed or omitted. These interim financial statements should be read in conjunction with the consolidated financial statements and related notes of Intermex Holdings, Inc. (“Holdings”) for the fiscal year ended December 31, 2017 (“Audited Financial Statements”) disclosed in the prospectus, dated October 25, 2018, filed pursuant to Rule 424(b)(3), starting on page F-14. Holdings is an indirect wholly owned subsidiary of the Company and has no operations of its own, other than its ownership of its subsidiaries.

Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued amended guidance, Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents in the condensed consolidated statements of cash flows. The Company adopted this guidance in the first quarter of 2018 using a retrospective transition method for each period presented. Cash and restricted cash included $639,662 of restricted cash for all beginning and ending periods presented in the condensed consolidated statements of cash flows, which is included in other prepaid expenses and current assets, and other assets in the Company’s condensed consolidated balance sheets at September 30, 2018 and December 31, 2017, respectively. The restricted cash was deposited with a U.S. bank as cash collateral for an irrevocable stand-by letter of credit issued as collateral for the operating lease of the Company’s headquarters. This lease was renegotiated in April 2018, and accordingly, the letter of credit is no longer required; the Company expects to collect these funds in the fourth quarter of 2018.

The FASB issued guidance, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company adopted this guidance in the first quarter of 2018 and the impact of this adoption did not have a material impact on the Company’s condensed consolidated financial statements.

The FASB issued guidance, Revenue from Contracts with Customers, which amended the existing accounting standards for revenue recognition. The new guidance establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. This guidance is required to be adopted by the Company in the first quarter of 2019 and can be applied using either a retrospective or a modified retrospective approach. Based on our assessment of the new standard, we have determined the vast majority of our revenues include only one performance obligation, which is to collect the consumer's money and make funds available for payment, generally on the same day, to a designated recipient in the currency requested. Accordingly, management believes this standard will not have a material impact on the Company’s financial statements and expects to adopt this standard using the modified retrospective approach, with the cumulative effect of adoption, if any, included in accumulated deficit as of January 1, 2019. However, management is continuing to assess the requirements of the new revenue guidance, including enhanced disclosures and reporting requirements.

Index

INTERNATIONAL MONEY EXPRESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The FASB issued amended guidance, Business Combinations - Clarifying the Definition of a Business, which assists entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance is required to be adopted by the Company in the first quarter of 2019 on a prospective basis, and the Company does not believe it will have a material impact on the consolidated financial statements.

The FASB issued guidance, Leases, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous U.S. GAAP. The guidance requires that a lessee recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. This guidance is required to be adopted by the Company in the first quarter of 2020 and must be applied using a modified retrospective approach. The Company is currently evaluating the impact this guidance will have on the consolidated financial statements.

The FASB issued amended guidance, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments, which clarifies how certain cash receipts and cash payments are presented and classified in the consolidated statements of cash flows. The amendments are aimed at reducing the existing diversity in practice. This guidance is required to be adopted by the Company in the first quarter of 2019 and must be applied using a retrospective approach for each period presented. The adoption of this guidance is not expected to have a material impact on the consolidated financial statements.

The FASB issued amended guidance, Intangibles – Goodwill and other (Topic 350): Simplifying the Test for Goodwill Impairment. The amended standard simplifies how an entity tests goodwill by eliminating Step 2 of the goodwill impairment test related to measuring an impairment charge. Instead, impairment will be recorded for the amount that the carrying amount of a reporting unit exceeds its fair value. This new guidance is effective for the Company beginning in in the first quarter of 2021. The adoption of this guidance is not expected to have a material impact on the consolidated financial statements.

The FASB issued guidance, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, regarding the measurement of credit losses for certain financial instruments. The new standard replaces the incurred loss model with a current expected credit loss (“CECL”) model. The CECL model is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. The Company currently is required to adopt the new standard in the first quarter of 2021. The Company is currently evaluating the impact this guidance will have on the consolidated financial statements.

NOTE 2 – FINTECH MERGER AND STELLA POINT ACQUISITION

FinTech Merger

As discussed in Note 1, on July 26, 2018, Intermex and FinTech consummated the Merger, which has been accounted for as a reverse recapitalization. Immediately prior to the Merger, FinTech’s shareholders exercised their right to redeem certain of their outstanding shares for cash, resulting in the redemption of 4,938,232 shares of FinTech for gross redemption payments of $49,808,935. Subsequent to this redemption, there were 18,955,101 outstanding shares. The aggregate consideration paid in the Merger by FinTech to the Intermex shareholders consisted of approximately (i) $102.0 million in cash and (ii) 17.2 million shares of FinTech common stock. In accounting for the reverse recapitalization, the net cash proceeds received from FinTech amounted to $4,626 as shown in the table below:

Index

INTERNATIONAL MONEY EXPRESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Cash balance available to Intermex prior to the consummation of the Merger	$	110,726,342
Less:
Intermex Merger costs paid from acquisition proceeds at closing		(9,062,769	)
Cash consideration to Intermex shareholders		(101,658,947	)
Net cash proceeds from reverse recapitalization	$	4,626

Cash balance available to Intermex prior to the consummation of the Merger	$	110,726,342
Less:
Cash consideration to Intermex shareholders		(101,658,947	)
Other FinTech assets acquired and liabilities assumed in the Merger:
Prepaid expenses		76,478
Accrued liabilities		(180,352	)
Net equity infusion from FinTech	$	8,963,521

Cash consideration to Intermex shareholders includes the payout of all vested Incentive Units issued to employees of the Company as discussed in Note 8.

After the completion of the Merger on July 26, 2018, there were 36,182,783 shares of International Money Express, Inc. common stock outstanding, warrants to purchase 8,959,999 shares of common stock and 3,371,389 shares reserved for issuance under the International Money Express, Inc. 2018 Omnibus Equity Compensation Plan (See Note 8).

Acquisition by Stella Point

On February 1, 2016, Intermex and its majority owner at the time, Lindsay Goldberg LLC, entered into an agreement with Stella Point, acquirer, for the sale of Intermex. This acquisition was accounted for as a business combination and became effective on February 1, 2017 for a transaction price of $52,000,000 in cash, plus $12,410,000 of rollover equity from certain existing management holders, the assumption of approximately $78,000,000 of Intermex’s outstanding debt and an additional funding of $5,000,000 of Intermex debt. There was no contingent consideration in the transaction. As a result, Stella Point acquired 80.7% of the voting equity interest in Intermex and other minority stockholders acquired the remaining interest, none individually greater than 10%. The purchase price in excess of the fair value of acquired assets was accounted for as goodwill, as discussed further below.

Index

INTERNATIONAL MONEY EXPRESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Net Assets Acquired

The acquisition method for a business combination requires that the assets acquired and liabilities assumed be recognized at their allocated fair values as of the February 1, 2017 acquisition date, which is summarized below:

	Successor Company
Cash	$	43,064,931
Accounts receivables		24,031,575
Prepaid and other current assets		3,712,848
Property and equipment		6,328,146
Other assets		1,345,562
Total tangible assets acquired		78,483,062
Intangible assets acquired		62,660,000
Deferred tax asset, net		2,118,801
Less: Liabilities assumed		(115,111,529	)
Net assets		28,150,334

Goodwill		36,259,666
Total purchase price	$	64,410,000

The intangible assets acquired consist primarily of a trade name, agent relationships and developed technology. The excess of the purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, which is attributable to the workforce and reputation of Intermex. The accounting for this business combination has been completed, therefore the measurement period is closed. Goodwill was not deductible for income tax purposes.

Transaction Costs

Direct costs related to the Merger and Stella Point acquisition were expensed as incurred and included as “transaction costs” in the condensed consolidated statements of operations and comprehensive loss. Transaction costs in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2018 amounted to $6,304,972 and $10,319,283, respectively, and related specifically to the Merger, while expenses of $6,212,602 for the Successor period from February 1, 2017 through September 30, 2017 and $3,917,188 for the Predecessor period from January 1, 2017 through January 31, 2017 relate to the Stella Point acquisition. Transaction costs include all internal and external costs directly related to the Merger and Stella Point acquisition, consisting primarily of legal, consulting, accounting, advisory and financing fees and certain incentive bonuses directly related to the Merger and Stella Point acquisition.

NOTE 3 – GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and the majority of the other intangible assets on the condensed consolidated balance sheets of the Company were recognized upon the acquisition by Stella Point (see Note 2). Agent relationships, trade name and developed technology are all amortized over 15 years using an accelerated method that correlates with the projected realization of the benefit. Other intangibles primarily relate to the acquisition of certain agent locations, which are amortized straight line over 10 years. The determination of our other intangible fair values includes several assumptions that are subject to various risks and uncertainties. Management believes it has made reasonable estimates and judgments concerning these risks and uncertainties. A change in the conditions, circumstances or strategy of the Company may result in a need to recognize an impairment charge.

Index

INTERNATIONAL MONEY EXPRESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the changes in goodwill and other intangible assets:

	Successor Company
	Goodwill		Other Intangibles
Balance at December 31, 2017	$	36,259,666	$	48,741,032
Amortization expense		-		(9,351,263	)
Balance at September 30, 2018	$	36,259,666	$	39,389,769

NOTE 4 – ACCRUED AND OTHER LIABILITIES

Accrued and other liabilities consisted of the following:

	Successor Company
	September 30, 2018		December 31, 2017
Payables to agents	$	8,302,004	$	6,875,416
Accrued compensation		1,542,822		1,092,460
Accrued bank charges		884,069		897,404
Accrued loyalty program rebates		840,039		164,581
Accrued audit and accounting fees		603,322		233,592
Accrued legal fees		680,000		1,644,470
Accrued taxes		694,871		318,792
Other		470,934		287,734
	$	14,018,061	$	11,514,449

NOTE 5 – DEBT

Debt consisted of the following:

	Successor Company
	September 30, 2018			December 31, 2017

Revolving credit facility	$	20,000,000		$	20,000,000
Term loan		92,150,000			95,787,500
		112,150,000			115,787,500
Less: Current portion of long term debt ⁽¹⁾		(4,078,627	)		(3,913,436	)
Less: Debt origination costs		(3,647,871	)		(4,347,602	)
	$	104,423,502		$	107,526,462

⁽¹⁾	Current portion of long-term debt is net of debt origination costs of $771,373 at September 30, 2018 and $936,564 at December 31, 2017.

On August 23, 2017, Intermex entered into a Financing Agreement (the “Financing Agreement”) with MC Credit Partners to refinance its debt. The Financing Agreement includes a revolving credit facility that provides for funding of up to $20 million in the aggregate and a term loan in an aggregate principal amount of $97 million (together the “Senior Secured Credit Facility”). Interest on the term loan and revolving credit facility is determined by reference to either LIBOR or a “base rate”, in each case plus an applicable margin of 9% per annum for LIBOR loans or 8% per annum for base rate loans. The principal amount of the term loan must be repaid in consecutive quarterly installments on the last business day of each March, June, September and December commencing in December 2017. The Company must repay an amount equal to 1.25% of the original amount borrowed for each quarterly payment from December 31, 2017 through September 30, 2019 and 2.50% of the original amount borrowed for each quarterly payment from December 31, 2019 and thereafter.

Index

INTERNATIONAL MONEY EXPRESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On December 19, 2017, the Financing Agreement was amended to allow for the change of control of Intermex pursuant to the Merger. Upon closing of the Merger, the Company was required to pay $1.5 million in fees to MC Credit Partners, which were expensed as transaction costs in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2018 and funded by the proceeds received in the Merger.

On November 7, 2018, the Company entered into a new financing agreement (the “Credit Agreement”) with, among others, certain of its domestic subsidiaries as borrowers, certain other domestic subsidiaries and a group of banking institutions. The Credit Agreement provides for a $35 million revolving credit facility, a $90 million term loan facility and an up to $30 million incremental facility. The Credit Agreement also provides for the issuance of letters of credit, which would reduce availability under the revolving credit facility. The proceeds of the loans were used to repay existing indebtedness, for working capital purposes and to pay fees and expenses in connection with the transaction. The maturity date of the Credit Agreement is November 7, 2023.

Interest on the term loan facility and revolving credit facility is determined by reference to either LIBOR or a “base rate”, in each case plus an applicable margin of 4.50% per annum for LIBOR loans or 3.50% per annum for base rate loans. The Company is also required to pay a fee on the unused portion of the revolving credit facility equal to 0.35% per annum.

The principal amount of the term loan facility must be repaid in consecutive quarterly installments of 5% in year 1, 7.5% in years 2 and 3, 10% in years 4 and 5, in each case on the last day of each quarter, commencing in March 2019 with a final payment at maturity. The loans under the Credit Agreement may be prepaid at any time without payment or penalty.

The obligations under the Credit Agreement are guaranteed by the Company and certain domestic subsidiaries of the Company and secured by liens substantially all of the assets of the loan parties, subject to certain exclusions and limitations.

Upon execution of the Credit Agreement, the Company incurred a prepayment penalty of approximately $2.0 million, which will be recognized as interest expense in the fourth quarter 2018 in the condensed consolidated statements of operations and comprehensive loss. In addition, the Company wrote off approximately $3.7 million of debt origination costs related to the Senior Secured Credit Facility as interest expense during the fourth quarter of 2018.

NOTE 6 - FAIR VALUE MEASUREMENTS

Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three- level fair value hierarchy that prioritizes the inputs used to measure fair value was established. There are three levels of inputs used to measure fair value. Level 1 relates to quoted market prices for identical assets or liabilities. Level 2 relates to observable inputs other than quoted prices included in Level 1. Level 3 relates to unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s non-financial assets measured at fair value on a nonrecurring basis include the goodwill and other intangibles derived on February 1, 2017 as a result of the Stella Point acquisition as disclosed in Note 2 and more fully disclosed in detail in Note 4 of the Audited Financial Statements.

Index

INTERNATIONAL MONEY EXPRESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company’s cash is representative of fair value as these balances are comprised of deposits available on demand. Accounts receivable, prepaid wires, accounts payable and wire transfers and money orders payable are representative of their fair values because of the short turnover of these items.

The Company’s financial instruments that are not measured at fair value on a recurring basis include its revolving credit facility and term loan. The estimated fair value of the term loan approximates book value as the debt bears a market interest rate that adjusts periodically. The estimated fair value of the revolving credit facility would approximate face value given the payment schedule and variable interest rate structure.

NOTE 7 - RELATED PARTY TRANSACTIONS

During the Successor periods prior to the Merger, Intermex paid a monthly management fee of $65,000, plus reimbursement of expenses, to a related party for management services, which is included in other selling, general and administrative expenses on the Company’s condensed consolidated statements of operations and comprehensive loss. During the Predecessor period from January 1, 2017 to January 31, 2017, all management fees were waived. There were no amounts payable to or receivable from related parties included in the condensed consolidated balance sheets at September 30, 2018 and December 30, 2017. Upon closing of the Merger on July 26, 2018 (See Note 2), the management fee agreement with the related party was terminated, and a one-time termination fee of $1.6 million was included as part of transaction costs in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2018.

NOTE 8 – STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

After the completion of the Merger on the Closing Date, there were 36,182,783 shares of International Money Express, Inc. common stock outstanding and outstanding warrants to purchase 8,959,999 shares of common stock. As of the Closing Date, the former stockholders of Intermex owned approximately 48.3% and the former stockholders of FinTech owned approximately 51.7% of the combined company’s outstanding common stock. At September 30, 2018, the Company was authorized to issue 200,000,000 shares of common stock and had 36,182,783 shares of common stock issued and outstanding at $0.0001 par value per common share.

Equity Warrants

Prior to the Merger, FinTech issued 8,749,999 public warrants (“Public Warrants”) and 210,000 private placement warrants (“Placement Warrants”)(combined are referred to as the “Warrants”). The Company assumed the FinTech equity warrants upon the change of control event. As a result of the Merger, the Warrants issued by FinTech are no longer exercisable for shares of FinTech common stock but instead are exercisable for common stock of the Company. All other features of the Warrants remain unchanged. There are no cash obligations for the Company pertaining to these Warrants, and they are recognized in equity upon any exercise.

Each whole Warrant entitles the holder to purchase one share of the Company's common stock at a price of $11.50 per share. The Warrants became exercisable 30 days after the completion of the Merger and expire five years after that date, or earlier upon redemption or liquidation.

The Company may call the Public Warrants for redemption, in whole and not in part, at a price of $0.01 per warrant upon not less than 30 days prior written notice of redemption to each warrant holder if the reported last sale price of the Company’s common stock equals or exceeds $24.00 per share for any 20 trading days within a 30-trading day period ended three business days before the Company sends the notice of redemption to the warrant holders. The Company cannot call the Placement Warrants as long as they are held by the original holders or transferred to certain permitted transferees established in the Warrant Agreement.

Index

INTERNATIONAL MONEY EXPRESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

International Money Express, Inc. 2018 Omnibus Equity Compensation Plan

In connection with the Merger, the stockholders of FinTech approved the International Money Express, Inc. 2018 Omnibus Equity Compensation Plan (the “2018 Plan”). There were 3,371,389 shares reserved for issuance under the 2018 Plan, of which stock options to purchase 2,771,719 shares of common stock and restricted stock units in respect of 21,189 shares of common stock were granted to employees and independent directors of the Company in connection with the completion of the transactions at the Closing Date.

The value of each option grant is estimated on the grant date using the Black-Scholes option pricing model. The option pricing model requires the input of highly subjective assumptions, including the grant date fair value of our common stock, expected volatility, expected forfeitures and risk-free interest rates. To determine the grant date fair value of the Company’s common stock, we use the closing market price of our common stock at the grant date. We also use an expected volatility based on the historical volatilities of a group of guideline companies and the "simplified" method for calculating the expected life of our stock options. We have elected to account for forfeitures as they occur. The risk-free interest rates are obtained from publicly available U.S. Treasury yield curve rates.

Share-based compensation is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period. The stock options issued under the 2018 Plan vest in four equal installments over four years. The Company recognized compensation expense for stock options of $395,250 for the three and nine months ended September 30, 2018, which is included in salaries and benefits in the condensed consolidated statements of operations and comprehensive loss. No stock options vested during the third quarter of 2018. The weighted-average grant date fair value for the stock options to purchase 2,771,719 shares of common stock granted on the Closing Date was $3.43 per share. As of September 30, 2018, there were 2,764,219 non-vested stock options and unrecognized compensation expense of approximately $9.1 million is expected to be recognized over a weighted-average period of 3.8 years.

A summary of the stock option activity during the nine months ended September 30, 2018 is presented below:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term


Outstanding at December 31, 2017		-			-		-
Granted		2,771,719			9.91
Exercised		-			-
Forfeited		(7,500	)		9.91
Expired		-			-
Outstanding at September 30, 2018		2,764,219			9.91		9.83

The restricted stock units issued under the 2018 Plan to the Company’s independent directors vest on the one-year anniversary from the grant date. The Company recognized compensation expense for restricted stock units of $35,000 for the three and nine months ended September 30, 2018, which is included in salaries and benefits in the condensed consolidated statements of operations and comprehensive loss. There were no forfeited or vested restricted stock units during the third quarter of 2018. As of September 30, 2018, there was $175,000 of unrecognized compensation expense for the restricted stock units. In addition to the grant of restricted stock units, each of the independent directors receives an annual cash retainer of $40,000 for services as a director.

Index

INTERNATIONAL MONEY EXPRESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Incentive Units

Interwire LLC, the former parent company of Intermex, issued Class B, C and D incentive units to employees of the Company (collectively “incentive units”). As these units were issued as compensation to the Company’s employees, the expense was recorded by the Company. In connection with the Merger, on the closing date, all unvested incentive units for Class B, C and D became fully vested and were immediately recognized as share-based compensation expense in the third quarter of 2018. Share-based compensation expense recognized related to these incentive units and included in salaries and benefits in the condensed consolidated statements of operations and comprehensive loss, amounted to $4,022,738 and $287,440 for the three months ended September 30, 2018 and 2017, respectively, $4,735,336 for the nine months ended September 30, 2018, and $1,534,655 for the Successor period from February 1, 2017 through September 30, 2017. The performance conditions related to the Class C and D units were not considered probable of being achieved prior to the Merger, and therefore, no compensation was recognized for all prior periods. Subsequent to this settlement, all incentive units ceased to exist. Share-based compensation of $2,916,324 for the Predecessor period from January 1, 2017 through January 31, 2017 primarily included the expense associated with stock options and restricted awards that vested due to the Stella acquisition.

During the Successor period from January 1, 2018 through September 30, 2018, the number of units and the weighted-average grant date fair value for the incentive units are as follows:

	Number of Class B Units			Weighted- Average Grant Date Fair Value		Number of Class C Units			Weighted- Average Grant Date Fair Value		Number of Class D Units			Weighted- Average Grant Date Fair Value
Outstanding at
December 31, 2017		7,472,000		$	0.4879		4,670,000		$	0.2080		4,670,000		$	0.1489
Granted		410,000		$	0.4948		205,000		$	0.2126		205,000		$	0.1535
Vested		(7,882,000	)	$	0.4883		(4,875,000	)	$	0.2082		(4,875,000	)	$	0.1491
September 30, 2018		-					-					-

NOTE 9 – LOSS PER SHARE

Basic (income) loss per share is calculated by dividing net income (loss) for period by the weighted average number of common shares outstanding for the period. In computing dilutive income (loss) per share, basic income (loss) per share is adjusted for the assumed issuance of all applicable potentially dilutive share-based awards, including common stock options, restricted stock and warrants.

Index

INTERNATIONAL MONEY EXPRESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Below are basic and diluted net loss per share for the periods indicated:

	Successor Company
							Nine Months Ended September 30, 2018			Period from February 1, 2017 to September 30, 2017
	Three Months Ended September 30,
	Three Months Ended September 30,
	2018			2017
	(Unaudited)
Net loss for basic and diluted loss per common shares		(13,412,996	)		(573,681	)		(12,108,413	)		(7,061,465	)

Shares:
Weighted-average common shares outstanding – basic and diluted		30,975,338			17,227,682			21,827,082			17,227,682

Net loss per common share - basic and diluted	$	(0.43	)	$	(0.03	)	$	(0.55	)	$	(0.41	)

The computation of diluted loss per share above excludes the effect of 1,587 and 531 restricted stock units for the three month and nine-month periods ending September 30, 2018, respectively, because the inclusion of these would be anti-dilutive.

NOTE 10 - INCOME TAXES

A reconciliation between the income tax provision (benefit) at the US statutory tax rate and the Company’s income tax provision (benefit) on the condensed consolidated statements of operations and comprehensive loss is below:

	Successor Company												Predecessor Company
	Successor Company												Predecessor Company
	Three Months Ended September 30,						Nine Months Ended September 30, 2018			Period from February 1, 2017 to September 30, 2017			Period from January 1, 2017 to January 31, 2017


	2018			2017
	(Unaudited)

Loss before income taxes	$	(5,843,822	)	$	(765,408	)	$	(3,922,867	)	$	(6,008,986	)	$	(5,521,794	)
US statutory tax rate		21	%		34	%		21	%		34	%		34	%
Income tax expense (benefit) at statutory rate		(1,227,203	)		(260,239	)		(823,802	)		(2,043,055	)		(1,877,410	)

State tax expense (benefit), net of federal		1,354,628			(19,203	)		1,470,870			(10,628	)		(278,657	)
Foreign tax rates different from US statutory rate		113,891			3,155			147,154			93,158			(45,631	)
Non-deductible expenses		7,411,475			153,319			7,483,530			3,081,763			409
Change in tax rate		-			(51,994	)		-			(51,994	)		-
Credits		(86,275	)		-			(94,864	)		-			-
Other		2,658			(16,765	)		2,658			(16,765	)		(2,084	)
Total tax provision (benefit)	$	7,569,174		$	(191,727	)	$	8,185,546		$	1,052,479		$	(2,203,373	)

Index

INTERNATIONAL MONEY EXPRESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Effective income tax rates for interim periods are based upon our current estimated annual rate. The Company’s effective income tax rate varies based upon an estimate of taxable earnings as well as on the mix of taxable earnings in the various states and countries in which we operate. Changes in the annual allocation and apportionment of the Company’s activity among these jurisdictions results in changes to the effective rate utilized to measure the Company’s deferred tax assets and liabilities.

As presented in the income tax reconciliation above, the tax provision (benefit) recognized on the condensed consolidated statements of operations and comprehensive loss was impacted by state taxes, non-deductible expenses such as share-based compensation expense, transaction costs and foreign tax rates applicable to the Company’s foreign subsidiaries that are higher or lower than the U.S. statutory rate.

On December 22, 2017, the U.S. enacted tax reform legislation known as H.R. 1, commonly referred to as the “Tax Cuts and Jobs Act” (the “Act”), resulting in significant modifications to existing law. Due to the timing of the Act and the complexity involved in applying the provisions of the Act, the Company made a reasonable estimate of the effects and recorded provisional amounts in the fourth quarter of 2017, which primarily included the impact of the remeasurement of the Company’s deferred tax balances to reflect the change in the corporate tax rate. As a result of the changes to tax laws and tax rates under the Act, the Company reduced its deferred tax asset as of December 31, 2017 by $656,000.

As the Company collects and prepares necessary data and interprets the Act and any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, the Company may make adjustments to the provisional amounts recorded in December 2017. Those adjustments may materially impact the provision for income taxes and effective tax rate in the period in which the adjustments are made. During the nine months ended September 30, 2018, there were no such adjustments made to the provisional amounts recorded in December 2017.

As of September 30, 2018, the Company did not have any amounts accrued for interest and penalties or recorded for uncertain tax positions.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Leases

The Company is a party to leases for office space and branch locations, several of which are on a month-to-month basis. Rent expense under all operating leases, included in other selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss, amounted to $491,212 and $440,511 for the three months ended September 30, 2018 and 2017, respectively, $1,418,350 for the nine months ended September 30, 2018, $1,155,440 for the Successor period from February 1, 2017 through September 30, 2017, and $135,636 for the Predecessor period from January 1, 2017 through January 31, 2017.

In April 2018, the Company renegotiated its corporate lease to extend the term through November 2025. At September 30, 2018 future minimum rental payments required under operating leases for the remainder of 2018 and thereafter are as follows for the Company:

Index

INTERNATIONAL MONEY EXPRESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2018	$	378,224
2019		1,263,467
2020		981,139
2021		846,364
2022		738,385
2023		753,692
Thereafter		1,438,239
	$	6,399,510

Litigation

The Company is subject to legal proceedings and claims that have arisen in the ordinary course of its business and have not been finally adjudicated. Although there can be no assurance as to the ultimate disposition of these matters, it is the opinion of the Company’s management, based upon the information available at this time, that the expected outcome of these matters, both individually or in the aggregate, will not have a material adverse effect on either the results of operations or financial condition of the Company.

Contingencies

The Company operates in 50 U.S. states and two territories. Money transmitters and their agents are under regulation by State and Federal laws. Violations may result in civil or criminal penalties or a prohibition from providing money transfer services in a particular jurisdiction. It is the opinion of the Company’s management, based on information available at this time, that the expected outcome of regulatory matters will not have a material adverse effect on either the results of operations or financial condition of the Company.

On August 28, 2018, the Company received a notice from the Staff of the Listing Qualifications Department (the "Staff") of The Nasdaq Stock Market LLC ("Nasdaq") indicating that, based upon the Company's non-compliance with the minimum number of round lot holders for the listing of its common stock and warrants on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rules 5550(a)(3) and 5515(a)(4), respectively, the Company's common stock and warrants may be subject to delisting from Nasdaq unless the Company timely requests a hearing before a Nasdaq Hearings Panel (the "Panel").

On October 29, 2018, the Company received a notice from Nasdaq (the “Nasdaq Notice”) informing the Company that it has met the listing requirements with respect to its common stock and that the Company’s common stock will continue to be listed and trade on The Nasdaq Capital Market under the symbol “IMXI.” Additionally, the Nasdaq Notice informed the Company that it had not demonstrated compliance with the warrant listing requirements. The Company has withdrawn its request for a hearing before the Panel with respect to the warrant listing requirements. Accordingly, the Nasdaq Notice informed the Company that the Panel had determined to delist the Company’s warrants and suspend the trading of the warrants from The Nasdaq Capital Market effective as of the open of business on October 31, 2018.

NOTE 12 – SUBSEQUENT EVENTS

The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date the condensed consolidated financial statements were issued. Except for the matters discussed in Notes 5 and 11, there were no other subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.

Index

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with our Condensed Consolidated Financial Statements and related Notes included in this Quarterly Report on Form 10-Q and our Audited Financial Statements and related Notes and MD&A included in our prospectus, dated October 25, 2018, filed pursuant to Rule 424(b)(3). This MD&A contains forward-looking statements that involve risks and uncertainties. Please see “Special Note Regarding Forward-Looking Statements” for additional factors relating to such statements, and see “Risk Factors” in our documents we have filed or furnished with the SEC for a discussion of certain risk factors applicable to our business, financial condition and results of operations. Past operating results are not necessarily indicative of operating results in any future periods.

Overview

We are a rapidly growing and leading money remittance services company focused on the U.S. to Latin America and the Caribbean (“LAC”) corridor, which includes Mexico, Central and South America and the Caribbean. We utilize our proprietary technology to deliver convenient, reliable and value-added services to our customers through a broad network of sending and paying agents. Our remittance services, which include a comprehensive suite of ancillary financial processing solutions and payment services, are available in 50 states, Washington D.C., and Puerto Rico, where customers can send money to beneficiaries in Mexico, Guatemala and 15 additional Latin American countries. Our services are accessible in person through our approximately 100,000 sending and paying agents and company-owned stores, as well as online and via Internet-enabled mobile devices.

Money remittance services are the primary source of our revenue. These services involve the movement of funds on behalf of an originating customer for receipt by a designated beneficiary at a designated receiving location. Our remittances to Latin America are generated in the United States by customers with roots in Latin American and Caribbean countries, many of whom do not have an existing relationship with a traditional full-service financial institution capable of providing the services we offer. We provide these customers with flexibility and convenience to help them meet their financial needs. Other consumers who use our services may have access to traditional banking services, but prefer to use our services based on reliability, convenience and value. We generate money remittance revenue from fees paid by our customers (i.e. the senders of funds), which we share with our sending agents in the United States and our paying agents in the destination country. Remittances paid in local currencies that are not pegged to the U.S. dollar also earn revenue through our daily management of currency exchange spreads.

Our money remittance services enable our customers to send and receive funds through our extensive network of locations in the United States that are primarily operated by third-party businesses, which we refer to as agents, and a small number of company-owned stores in the LAC corridor. In addition, our services are offered digitally through Intermexonline.com and via Internet-enabled mobile devices. We currently operate in the United States, Mexico, Guatemala and 15 additional countries. Since January 2015 through December 31, 2017 we have grown our agent network by more than 73%, and increased our remittance transactions volume by approximately 71%.

As a non-bank financial institution, we are regulated by the Department of Treasury, the Internal Revenue Service, FinCEN, the Consumer Financial Protection Bureau, the Department of Banking and Finance of the State of Florida and additionally by the various regulatory institutions of those states where we hold an operating license. We are duly registered as a Money Service Business (“MSB”) with FinCEN, the financial intelligence unit of the U.S. Department of the Treasury. We are also subject to a wide range of regulations in the United States and other countries, including anti-money laundering laws and regulations; financial services regulations; currency control regulations; anti-bribery law; money transfer and payment instrument licensing laws; escheatment laws; privacy, data protection and information security laws; and consumer disclosure and consumer protection laws.

Key Factors and Trends Affecting our Business

Various trends and other factors have affected and may continue to affect our business, financial condition and operating results, including: