What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-05-12 · 199 added, 224 removed, 406 unchanged (51% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

March 31, December 31,

June 30, December 31,

Current assets

26 unchanged sentences

Redeemable Convertible Preferred Stock

Redeemable convertible preferred stock, $ 0.001 par, 72,799,602 shares authorized and 72,225,916 and 72,225,916 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

443,540 443,263

Redeemable convertible preferred stock, $ 0.001 par, 0 and 72,799,602 shares authorized and 0 and 72,225,916 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Stockholders’ Equity (Deficit)

Common stock, $ 0.001 par, 101,671,156 shares authorized and 6,755,179 and 4,909,529 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

Preferred stock, $ 0.001 par, 10,000,000 and 0 shares authorized and 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Common stock, $ 0.001 par, 500,000,000 and 101,671,156 shares authorized and 87,186,730 and 4,909,529 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 640,456 —

6 unchanged sentences

(In thousands, except share and per share data)

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

2021 2020 2021 2020

Revenues $ 36,701 26,666 $ 69,963 49,876

29 unchanged sentences

(In thousands, except share data)

Three months ended June 30, 2021

Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (Deficit)

Shares Amount Shares Amount

Balance January 1, 2021

Balance March 31, 2021

72,225,916 $ 443,540 6,755,179 $ 7 $ 3,974 $ ( 277,910 ) $ ( 273,929 )

1 unchanged sentence

Exercised stock options — — 1,305,635 1 2,105 — 2,106

Payment of Series B Dividend upon initial public offering — ( 4,969 ) — — — — —

Issuance of common stock upon initial public offering, net of underwriting discounts and commissions — — 6,900,000 7 192,803 — 192,810

Conversion of redeemable convertible preferred stock to common stock upon initial public offering ( 72,225,916 ) ( 438,571 ) 72,225,916 72 438,498 — 438,570

Conversion of redeemable convertible preferred stock warrants to common stock warrants upon initial public offering — — — — 5,727 — 5,727

Costs in connection with initial public offering ( 5,674 ) ( 5,674 )

Net loss — — — — — ( 11,375 ) ( 11,375 )

Balance June 30, 2021

— $ — 87,186,730 $ 87 $ 640,456 $ ( 289,285 ) $ 351,258

Three months ended June 30, 2020

Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (Deficit)

Shares Amount Shares Amount

Balance March 31, 2020

54,290,383 $ 210,310 4,609,315 $ 5 $ 569 $ ( 205,985 ) $ ( 205,411 )

Issuance of redeemable convertible preferred stock, net of issuance costs 2,929,754 38,948 — — — — —

Stock-based compensation — — — — 450 — 450

Preferred Series E Tranche Liability — — — — ( 892 ) — ( 892 )

Exercised stock options — — 41,859 — 46 — 46

Cumulative dividends and adjustments to redeemable convertible preferred stock — 277 — — ( 173 ) ( 104 ) ( 277 )

Net loss — — — — — ( 7,267 ) ( 7,267 )

Balance June 30, 2020

57,220,137 $ 249,535 4,651,174 $ 5 $ — $ ( 213,356 ) $ ( 213,351 )

The above financial statements should be read in conjunction with the Notes to the Unaudited Condensed Consolidated Financial Statements.

ALKAMI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE

PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share data)

Six months ended June 30, 2021

Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (Deficit)

Shares Amount Shares Amount

Balance December 31, 2020

72,225,916 $ 443,263 4,909,529 $ 5 $ — $ ( 263,528 ) $ ( 263,523 )

Stock-based compensation — — — — 4,441 — 4,441

Exercised stock options — — 3,370,202 3 4,932 — 4,935

Payment of Series B Dividend upon initial public offering — ( 4,969 ) — — — — —

Cumulative dividends and adjustments to redeemable convertible preferred stock — 277 — — ( 277 ) — ( 277 )

Issuance of common stock upon initial public offering, net of underwriting discounts and commissions — — 6,900,000 7 192,803 — 192,810

Conversion of redeemable convertible preferred stock to common stock upon initial public offering ( 72,225,916 ) ( 438,571 ) 72,225,916 72 438,498 — 438,570

Conversion of redeemable convertible preferred stock warrants to common stock warrants upon initial public offering — — — — — 5,727 — 5,727

Costs in connection with initial public offering ( 5,674 ) ( 5,674 )

Repurchase of common stock — — ( 218,917 ) — 6 ( 3,503 ) ( 3,497 )

Net loss — — — — — ( 22,254 ) ( 22,254 )

Balance March 31, 2021

Balance June 30, 2021

— $ — 87,186,730 $ 87 $ 640,456 $ ( 289,285 ) $ 351,258

Six months ended June 30, 2020

Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (Deficit)

Shares Amount Shares Amount

Balance January 1, 2020

Balance December 31, 2019

54,290,383 $ 210,033 4,537,955 $ 5 $ 335 $ ( 195,730 ) $ ( 195,390 )

Issuance of redeemable convertible preferred stock, net of issuance costs 2,929,754 38,948 — — — — —

Stock-based compensation — — — — 909 — 909

Preferred Series E Tranche Liability — — — — ( 892 ) — ( 892 )

Exercised stock options — — 113,219 — 98 — 98

1 unchanged sentence

Net loss — — — — — ( 17,522 ) ( 17,522 )

Balance March 31, 2020

Balance June 30, 2020

57,220,137 $ 249,535 4,651,174 $ 5 $ — $ ( 213,356 ) $ ( 213,351 )

3 unchanged sentences

(In thousands)

Three months ended March 31,

Six months ended June 30,

Cash flows from operating activities:

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Borrowings on line of credit — 13,000

Payments on line of credit — ( 13,000 )

Proceeds from stock option exercises 4,935 98

Proceeds on sales of preferred stock, net of issuance costs — 24,879

Deferred IPO issuance costs paid ( 3,857 ) —

1 unchanged sentence

Repurchase of common stock ( 3,497 ) —

Net cash (used in) provided by financing activities

Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts and commissions 192,810 —

Payment of Series B dividend ( 4,969 ) —

Net cash provided by financing activities

185,422 24,966

Net decrease in cash and cash equivalents

Net increase in cash and cash equivalents and restricted cash

171,688 3,567

5 unchanged sentences

ALKAMI TECHNOLOGY, INC.

Notes to the Condensed Consolidated Financial Statements

Notes to the Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share data)

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On April 13, 2021, the Company's registration statement relating to the initial public offering ("IPO") of its common stock was declared effective by the Securities and Exchange Commission ("SEC").

In connection with the IPO, the Company issued and sold 6,900,000 shares of common stock (including 900,000 shares issued pursuant to the exercise in full of the underwriters' option to purchase additional shares) at a public offering price of $ 30.00 per share for net proceeds of $ 192.8 million, after deducting underwriters' discounts and commissions (excluding other IPO costs as of April 13, 2021).

Prior to the IPO, deferred offering costs, which consist of legal, accounting, consulting and other direct fees and costs relating to the IPO, were capitalized in prepaid expenses and other current assets.

Expected expenses incurred by the Company for the IPO were approximately $ 5.2 million as of the effectiveness of the registration statement and will be recorded against stockholders’ equity.

In addition, effective upon the closing of the IPO, the Company's certificate of incorporation was amended and restated such that the total number of shares of common stock authorized to be issued was increased to 500,000,000 shares and the total number of shares of preferred stock authorized to be issued was reduced to 10,000,000 shares.

Immediately prior to the effectiveness of the Company’s registration statement:

• the Company’s outstanding shares of redeemable convertible preferred stock converted into an aggregate of 72,225,916 shares of common stock;

• all of the Company’s outstanding warrants exercisable for shares of redeemable convertible preferred stock converted into warrants exercisable for 212,408 shares of common stock (warrants are currently classified as liabilities and marked to market at the end of each reporting period, the warrants will be classified as equity immediately prior to the effectiveness of the Company’s registration statement);

• the Company reserved 12,131,846 shares of common stock for issuance pursuant to future awards under the Company’s 2021 Incentive Award Plan;

• the Company granted restricted stock units covering 192,000 shares of common stock;

• the Company granted options to purchase 101,775 shares of common stock at an exercise price equal to $ 30.00 , the IPO price set forth on the final prospectus (the “Prospectus”) filed with the SEC on April 15, 2021 pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended;

• the Company reserved 2,205,790 shares of common stock for future issuance under the ESPP.

With the proceeds of the IPO, the Company paid in full accumulated dividends on our previously outstanding shares of Series B redeemable convertible preferred stock, which totaled approximately $ 5.0 million.

In connection with its IPO, the Company issued and sold 6,900,000 shares of common stock (including 900,000 shares issued pursuant to the exercise in full of the underwriters' option to purchase additional shares) at a public offering price of $ 30.00 per share for net proceeds of $ 192.8 million, after deducting underwriters' discounts and commissions (excluding other IPO costs).

Prior to the Company’s IPO, deferred offering costs, which consist of legal, accounting, consulting and other direct fees and costs relating to its IPO, were capitalized in prepaid expenses and other current assets.

Upon consummation of the Company’s IPO, these costs were offset against the proceeds from its IPO and recorded in additional paid-in capital.

In addition, in connection with its IPO, the Company's certificate of incorporation was amended and restated such that the total number of shares of common stock authorized to be issued was increased to 500,000,000 shares and the total number of shares of preferred stock authorized to be issued was reduced to 10,000,000 shares.

Immediately prior to the effectiveness of the Company’s registration statement, the Company’s outstanding shares of redeemable convertible preferred stock converted into an aggregate of 72,225,916 shares of common stock.

With the proceeds of its IPO, the Company paid in full accumulated dividends on its previously outstanding shares of Series B redeemable convertible preferred stock, which totaled approximately $ 5.0 million.

All of the Company’s outstanding warrants exercisable for shares of redeemable convertible preferred stock converted into warrants exercisable for 212,408 shares of common stock and were classified as equity immediately prior to the effectiveness of the Company’s registration statement.

Summary of Significant Accounting Policies

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Certain information and disclosures normally included in the notes to the annual consolidated financial statements prepared in accordance with GAAP have been omitted from these interim unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2021.

Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2020, which are included in the final prospectus (the “Prospectus”) for the Company’s IPO filed with the SEC on April 15, 2021 pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended.

Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2021.

The Company has no sources of other comprehensive income, and accordingly, net loss presented each period is the same as comprehensive loss.

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Actual results could differ from those estimates.

Significant estimates and assumptions include determining the timing and amount of revenue recognition, recoverability and amortization period related to costs to obtain and fulfill contracts, valuation of the Company’s stock options, and warrants.

Fair Value of Financial Instruments

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Warrant liabilities are valued using the Black-Scholes option pricing method and are presented at estimated fair value at the end of the reporting period.

The assumptions used in preparing the Black-Scholes option pricing calculation include weighted average grant date fair value, volatility, risk-free interest rate, dividends, weighted average expected life in years and estimated forfeiture.

Changes in the fair value of warrant liabilities are recognized as a gain or loss within non-operating income (expense).

In connection with the Company’s IPO, warrants converted from a liability instrument to an equity instrument resulting in a reduction of the warrant liability to $ 0 .

The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

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The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period.

The following table summarizes the Company’s financial assets measured at fair value as of March 31, 2021 and December 31, 2020 and indicates the fair value hierarchy of the valuation:

The following table summarizes the Company’s financial assets measured at fair value as of June 30, 2021 and December 31, 2020 and indicates the fair value hierarchy of the valuation:

Fair Value at Reporting Date Using

(In thousands) March 31, 2021 Level 1 Level 2 Level 3

(In thousands) June 30, 2021 Level 1 Level 2 Level 3

Money Market Accounts $ 34,587 $ 34,587 $ — $ —

Total Assets $ 34,587 $ 34,587 $ — $ —

Warrant Liabilities $ ( 4,336 ) $ — $ — $ ( 4,336 )

Total Liabilities $ ( 4,336 ) $ — $ — $ ( 4,336 )

Fair Value at Reporting Date Using

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Total Liabilities $ ( 2,692 ) $ — $ — $ ( 2,692 )

The reconciliations of the beginning and ending balances during the three months ended March 31, 2021 for Level 3 assets and liabilities are as follows (in thousands):

The reconciliations of the beginning and ending balances during the six months ended June 30, 2021 for Level 3 assets and liabilities are as follows (in thousands):

Asset and liability categories Beginning Level 3 Fair Value at January 1, 2021

Fair value adjustment Ending Level 3 Fair Value at March 31, 2021

Fair value adjustment Adjustment for conversion to equity accounting treatment upon IPO

Ending Level 3 Fair Value at June 30, 2021

Warrant Liabilities $ ( 2,692 ) $ ( 3,035 ) $ 5,727 $ —

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The Company defines restricted cash as cash that is legally restricted as to withdrawal or usage.

The amount included in restricted cash on the Condensed Consolidated Balance Sheet at March 31, 2021 and December 31, 2020 represents the additional cash proceeds in deposit with an escrow agent for satisfaction of contingent consideration related to the acquisition of ACH Alert, LLC (“ACH Alert”).

The amounts included in restricted cash on the condensed consolidated balance sheets at June 30, 2021 and December 31, 2020 represent the additional cash proceeds in deposit with an escrow agent for satisfaction of contingent consideration related to the acquisition of ACH Alert, LLC (“ACH Alert”).

See Note 3 for further information.

March 31, December 31,

June 30, December 31,

(in thousands) 2021 2020

1 unchanged sentence

Restricted cash included in Other assets 4,874 4,873

Total cash and cash equivalents and restricted cash shown in statements of cash flows $ 166,948 $ 171,663

Total cash and cash equivalents and restricted cash $ 343,351 $ 171,663

Capitalized Software Development Costs

Software development costs relate primarily to software coding, systems interfaces, and testing of the Company’s proprietary systems and are accounted for in accordance with ASC 350-40, Internal Use Software.

Internal software development costs are capitalized from the time the internal use software is in the application development stage until the software is ready for use.

Internal software development costs are capitalized from the time the

internal use software is in the application development stage until the software is ready for use.

Business analysis, system evaluation, and software maintenance costs are expensed as incurred.

The capitalized software development costs are reported in property and equipment, net in the condensed consolidated balance sheets.

The Company had $ 0.2 million in capitalized internal software development costs as of March 31, 2021 and no ne as of December 31, 2020.

The Company had $ 0.6 million in capitalized internal software development costs as of June 30, 2021 and no ne as of December 31, 2020.

Capitalized software development costs are amortized using the straight-line method over the estimated useful life of the software, generally three to five years from when the asset is placed in service.

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Generally, contract assets arise as a result of reallocating revenues when discounts are weighted more heavily in the early years of a multi-year contract or the client contract has substantive minimum fees that escalate over the term of the contract.

Contract assets totaled $ 0.8 million and $ 0.8 million as of March 31, 2021 and December 31, 2020, respectively, which are included in other assets in the accompanying condensed consolidated balance sheets.

Contract liabilities are comprised of billings or payments received from the Company’s clients in advance of performance under the contract and are represented in deferred revenues in the consolidated balance sheets.

Contract assets totaled $ 0.9 million and $ 0.8 million as of June 30, 2021 and December 31, 2020, respectively, which are included in other assets in the accompanying condensed consolidated balance sheets.

Stock-Based Compensation

Stock Options

Stock options are accounted for using the grant date fair value method.

1 unchanged sentence

Determining the fair value of stock-based awards at the grant date requires significant judgement.

The determination of the grant date fair value of stock-based awards using the Black-Scholes option-pricing model is affected, for periods prior to the Company’s IPO, by the Company’s estimated common stock fair value as well as other subjective assumptions including the volatility, risk-free interest rate, dividends, weighted average expected life and estimated forfeiture rate.

The assumptions used in the Company’s option-pricing model represent management’s best estimates.

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Given the absence of an active market for the Company’s shares of common stock prior to its IPO, the fair value of the shares of common stock underlying the Company’s stock options was determined by the Company’s board of directors (the “Board”).

The Board intends all options to be exercisable at the fair value of its shares of common stock on the grant date.

Such estimates will not be necessary in future periods because the underlying shares began trading after the IPO.

The assumptions used in the valuation models were based on future expectations and management judgment.

The Company used three methods to determine fair value of its common stock as follows:

• Discounted Cash Flow Method :

the value of the business is estimated on the basis of forecasted cash flows, discounted to present value using an appropriate risk-adjusted discount rate.

• Guideline Public Company Method :

the value of the business is estimated through the application of multiples observed for public companies engaged in businesses and/or industries that are considered comparable to the Company.

• Recent Transactions Method :

the value of the business is estimated through the application of multiples observed for M&A transactions

involving target companies engaged in businesses and/or industries that are considered comparable to the Company.

To allocate the aggregate equity value of the Company to the various equity interests present, the Company has historically (until September 2020) utilized the Option Pricing Method (“OPM”).

The OPM values each equity class by creating a series of call options on the equity value, with exercise prices based on the liquidation preferences and conversion terms.

Beginning in September 2020, the Company began applying the hybrid method, which combines elements of the OPM and the probability-weighted expected return method (“PWERM”) to determine the value of its shares of common stock.

The Company made this change as greater clarity developed regarding a possible IPO or other liquidity event.

Under the PWERM, the value of the Company’s shares of common stock is estimated based on the analysis of future values for the enterprise assuming various possible future events, such as an IPO.

The future value was discounted to its present value using an appropriate risk-adjusted rate based on the Company’s stage of development.

Additionally, the Company applied a discount for lack of marketability.

The allocation to each share class is based upon the Black-Scholes options pricing model.

Under the hybrid method, the per share values calculated under each exit scenario are probability-weighted to determine the fair value of its shares of common stock.

• Volatility:

As the Company does not have trading history for its common stock, the selected volatility used is representative of expected future volatility.

• Preliminary Offering Price and Options Granted Subsequent to December 31, 2020.

During February 2021, the Company granted stock options to purchase shares of its common stock.

The Company established the fair value of these grants based on a straight-line interpolation from its December 31, 2020 valuation and the mid-point of its initial price range in order to determine the appropriate stock-based compensation expense for financial reporting purposes.

• Initial Public Offering Price and Options Granted Subsequent to April 13, 2021 .

The Company’s stock became actively traded upon the completion of its IPO in April 2021.

For grants issued upon or subsequent to its IPO the Company establishes fair value based on the Company’s stock price.

As the Company does not have the necessary trading history for its common stock the selected volatility used is representative of expected future volatility.

The Company bases expected future volatility on the historical and implied volatility of comparable publicly traded companies over a similar expected term.

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Treasury zero-coupon issue with a term that closely approximates the expected life of the option grant at the date nearest the option grant date.

The Company has never declared or paid any cash dividends and does not presently intend to pay cash dividends in the foreseeable future, other than the aggregate accumulated dividends payable to holders of the Company’s Series B redeemable convertible preferred stock.

The Company has never declared or paid any cash dividends and does not presently intend to pay cash dividends in the foreseeable future, other than the aggregate accumulated dividends paid to holders of the Company’s Series B redeemable convertible preferred stock upon the effectiveness of the Company’s IPO.

As a result, the Company used a dividends assumption of zero.

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To determine the expected term, the Company applies the simplified approach in which the expected term of an award is presumed to be the mid-point between the vesting date and the expiration date of the award.

• Estimated Forfeiture Rate .

In addition to assumptions used in the Black-Scholes option-pricing model, the Company estimates a forfeiture rate to calculate the stock-based compensation expense for its option awards.

The Company’s forfeiture rate is based on an analysis of its actual forfeitures.

The Company will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors.

Preliminary Offering Price and Options Granted Subsequent to December 31, 2020.

During February 2021, the Company granted stock options to purchase shares of its common stock.

In light of the difference between the fair value for a share of the Company’s common stock used for stock options granted in February 2021 and the initial price range of the Company’s IPO, the Company established the fair value of these grants based on a straight-line interpolation from its December 31, 2020 valuation and the mid-point of its initial price range in order to determine the appropriate stock-based compensation expense for financial reporting purposes.

Restricted Stock Units

Restricted stock units (“RSUs”) issued upon and subsequent to the Company’s IPO vest upon the satisfaction of a time-based condition only.

These RSUs are generally earned over a service period of three to four years and the compensation expense related to these awards is based on the grant date fair value of the RSUs and is recognized on a ratable basis over the applicable service period.

Employee Stock Purchase Plan

The Company’s 2021 Employee Stock Purchase Plan (the “ESPP”) permits employees to purchase the Company's common stock through payroll deductions during six month offerings.

The offering periods begin each May 15 and November 15, or such other period determined by the compensation committee.

In accordance with the guidance in ASC 718-50 - Compensation - Stock Compensation, the ability to purchase shares of the Company’s common stock for 85% of the lower of the price on the first day of the offering period or the last day of the offering period (i.e.

the purchase date) represents an option and, therefore, the ESPP is a compensatory plan.

Accordingly, stock-based compensation expense is determined based on the grant-date fair value as estimated by applying the Black-Scholes option-pricing model and is recognized over the withholding period.

Concentrations of Credit Risk

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Management believes that its contract acceptance, billing, and collection policies are adequate to minimize potential credit risk.

No client represented more than 10% of revenue for the three months ended March 31, 2021 and 2020.

As of March 31, 2021 and December 31, 2020, no client represented more than 10% of accounts receivable.

No client represented more than 10% of revenue for the three and six months ended June 30, 2021 and 2020.

As of June 30, 2021 and December 31, 2020, no client represented more than 10% of accounts receivable.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02, “Leases (Topic 842),” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the consolidated balance sheets and disclosing key information about leasing arrangements.

2016-02, “Leases (Topic 842),” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the condensed consolidated balance sheets and disclosing key information about leasing arrangements.

The standard is effective for non-public entities for fiscal years beginning after December 15, 2020, and interim periods for the fiscal year beginning after December 15, 2021, and early application is permitted.

The Company anticipates that the adoption of Topic 842 will impact its consolidated balance sheets as most of its operating lease commitments will be subject to the new standard and recognized as right-of-use assets and corresponding operating lease liabilities upon the adoption of ASU 2016-02.

The Company anticipates that the adoption of Topic 842 will impact its condensed consolidated balance sheets as most of its operating lease commitments will be subject to the new standard and recognized as right-of-use assets and corresponding operating lease liabilities upon the adoption of ASU 2016-02.

The Company expects to adopt the standard in fiscal year 2021 using the modified retrospective transition approach and interim periods beginning 2022.

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A term loan of $ 25.0 million (“Term Loan”) was borrowed on October 16, 2020 to partially fund the acquisition of ACH Alert (see Note 8).

The ACH Alert acquisition also involved $ 4.9 million of additional cash consideration that the Company placed on deposit with an escrow agent to be paid upon the continued employment of one of the owners of ACH Alert, of which $ 2.5 million is to be paid in October 2021 and

$ 2.4 million is to be paid in October 2022.

Since the payouts are contingent upon the continued and future employment of the former owner, these amounts have been excluded from the purchase price.

The Company has classified the amounts held in escrow as restricted cash on the condensed consolidated balance sheets and is accruing the estimated payouts over the requisite service period as a component of general and administrative expense on the condensed consolidated statements of operations.

For the three months ended March 31, 2021, the Company recognized compensation expense of $ 0.6 million related to this agreement.

For the three and six months ended June 30, 2021, the Company recognized compensation expense of $ 0.6 million and $ 1.2 million, respectively, related to this agreement.

The Company’s preliminary fair value estimates and assumptions to measure the assets acquired and liabilities assumed were subject to change as the Company obtained additional information during the measurement period.

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Net assets acquired $ 25,073 $ 326 $ 25,399

As of March 31, 2021, the allocation of the purchase price for ACH Alert has been finalized.

As of March 31, 2021, the allocation of the purchase price for ACH Alert was finalized.

The table below outlines the purchased identifiable intangible assets:

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This goodwill is expected to be deductible for tax purposes.

No material transaction costs are included within the consolidated statements of operations for the three months ended March 31, 2021 and 2020.

No material transaction costs are included within the condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020.

Property and Equipment, Net

Depreciation expense was $ 0.6 million and $ 0.6 million for the three months ended March 31, 2021 and 2020, respectively.

(in thousands) Useful Life March 31, 2021 December 31, 2020

Depreciation expense was $ 0.6 million and $ 1.2 million for the three and six months ended June 30, 2021, respectively, and $ 0.7 million and $ 1.3 million for the three and six months ended June 30, 2020, respectively.

(in thousands) Useful Life June 30, 2021 December 31, 2020

Software 1 to 3 years

$ 1,366 $ 722

Computers and equipment 3 years 4,277 3,821

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Revenue and Deferred Costs

The Company derives primarily all of its revenues from SaaS subscription services charged for the use of its digital banking solutions.

The Company derives primarily all of its revenues from software-as-a-service (“SaaS”) subscription services charged for the use of its digital banking solutions.

Revenues are recognized net of the most likely amount of sales credits and allowances and presented net of sales and usage-based taxes collected from clients on behalf of governmental authorities.

SaaS subscription services are generally recognized as revenue over the term of the contract as a

series of distinct SaaS services bundled into a single performance obligation.

SaaS subscription services are generally recognized as revenue over the term of the contract as a series of distinct SaaS services bundled into a single performance obligation.

Clients are typically charged a one-time, upfront implementation fee and recurring annual and monthly access fees for the use of the Company’s digital banking solution.

Implementation and integration of the digital banking platform is complex, and the Company has determined that the one-time, upfront services are not distinct.

In determining whether implementation services are distinct from subscription services, the Company considered various factors including the significant level of integration, interdependency, and interrelation between the implementation and subscription service, as well as the inability of the clients’ personnel or other service providers to perform significant portions of the services.

clients’ personnel or other service providers to perform significant portions of the services.

As a result, the Company defers any arrangement fees for implementation services and recognizes such amounts over time on a ratable basis as one performance obligation with the underlying subscription revenue commencing when the client goes live on the platform, which corresponds with the date the client obtains access to the Company’s digital banking solution and begins to benefit from the service.

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In limited circumstances when a contract calls for certain discounting to be triggered by volumes above contracted minimums, the Company is required to estimate these volumes in order to calculate revenue recognition in line with the standard’s allocation objectives.

The following table disaggregates the Company's revenue by major source for the three months ended March 31, 2021 and 2020:

Three months ended March 31,

The following table disaggregates the Company's revenue by major source for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30,

Six months ended June 30,

(in thousands) 2021 2020 2021 2020

3 unchanged sentences

Total revenues $ 36,701 $ 26,666 $ 69,963 $ 49,876

The Company recognized approximately $ 1.7 million of revenue during the three months ended March 31, 2021, and $ 1.8 million during the three months ended March 31, 2020, respectively, which was recognized from deferred revenues in the accompanying condensed consolidated balance sheets as of the beginning of each reporting period.

For those contracts which were wholly or partially unsatisfied as of March 31, 2021, minimum contracted subscription revenues to be recognized in future periods total approximately $ 521.8 million.

The Company recognized approximately $ 2.0 million and $ 3.7 million of revenue during the three and six months ended June 30, 2021, respectively, and $ 2.7 million and $ 4.5 million during the three and six months ended June 30, 2020, respectively, which was recognized from deferred revenues in the accompanying condensed consolidated balance sheets as of the beginning of each reporting period.

For those contracts that were wholly or partially unsatisfied as of June 30, 2021, minimum contracted subscription revenues to be recognized in future periods total approximately $ 536.0 million.

The Company expects to recognize approximately 45 % of this amount as subscription services are transferred to customers over the next 24 months, an additional 34 % in the next 25 to 48 months, and the balance thereafter.

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Deferred Cost Recognition

The Company capitalized $ 0.3 million and $ 0.3 million in deferred commissions costs during the three months ended March 31, 2021 and March 31, 2020, respectively, and recognized $ 0.5 million and $ 0.3 million of amortization during the three months ended March 31, 2021 and 2020, respectively.

The Company capitalized $ 0.2 million and $ 0.5 million in deferred commissions costs during the three and six months ended June 30, 2021, respectively and $ 0.5 million and $ 0.8 million for the three and six months ended June 30, 2020, respectively, and recognized $ 0.5 million and $ 1.0 million of amortization during the three and six months ended June 30, 2021, respectively, and $ 0.4 million and $ 0.7 million for the three and six months ended June 30, 2020, respectively.

Amortization expense is included in sales and marketing expenses in the accompanying statements of operations.

Deferred commissions are included in deferred implementation costs in the accompanying consolidated balance sheets in the amount of $ 8.8 million and $ 9.0 million as of March 31, 2021 and December 31, 2020, respectively.

The Company capitalized implementation costs of $ 1.3 million and $ 1.2 million during the three months ended March 31, 2021 and March 31, 2020, respectively, and recognized amortization of $ 0.6 million and $ 0.4 million during the three months ended March 31, 2021 and 2020, respectively.

Amortization expense is included in cost of revenues in the accompanying consolidated statements of operations.

Deferred cost assets are reviewed for impairment annually or more frequently if circumstances indicate there may be an impairment.

No impairment loss was recognized in relation to these capitalized costs for the three months ended March 31, 2021 and 2020.

Deferred commissions are included in deferred implementation costs in the accompanying condensed consolidated balance sheets in the amount of $ 8.5 million and $ 9.0 million as of June 30, 2021 and December 31, 2020, respectively.

The Company capitalized implementation costs of $ 1.3 million and $ 2.7 million during the three and six months ended June 30, 2021, respectively, and $ 1.0 million and $ 2.2 million for the three and six months ended June 30, 2020, respectively, and recognized amortization of $ 0.7 million and $ 1.2 million during the three and six months ended June 30, 2021, respectively, and $ 0.5 million and $ 1.0 million for the three and six months ended June 30, 2020, respectively.

Amortization expense is included in cost of revenues in the accompanying condensed consolidated statements of operations.

The Company periodically reviews the carrying amount of deferred costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit.

No impairment loss was recognized in relation to these capitalized costs for the three and six months ended June 30, 2021 and 2020.

Accounts Receivable

Accounts receivable includes the following amounts at March 31, 2021 and December 31, 2020:

March 31, December 31,

Accounts receivable includes the following amounts at June 30, 2021 and December 31, 2020:

June 30, December 31,

(in thousands) 2021 2020

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Accrued Liabilities

Accrued liabilities consisted of the following at March 31, 2021 and December 31, 2020:

March 31, December 31,

Accrued liabilities consisted of the following at June 30, 2021 and December 31, 2020:

June 30, December 31,

(in thousands) 2021 2020

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A Term Loan of $ 25.0 million was borrowed on the closing date of the Credit Agreement.

The proceeds of the Term Loan were used to fund the acquisition of ACH Alert which closed on October 4, 2020.

The proceeds from the Term Loan were used to fund the acquisition of ACH Alert which closed on October 4, 2020.

• Accordion Feature:

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The applicable margin for LIBOR rate loans ranges , based on an applicable recurring revenue leverage ratio, from 3.00 % to 3.50 % per annum, and the applicable margin for base rate loans ranges from 2.00 to 2.50 % per annum.

The Company’s minimum interest rate applied to term debt was 4.00 % as of March 31, 2021.

The Company’s minimum interest rate applied to term debt was 4.00 % as of June 30, 2021.

The Company is required to pay a commitment fee of 0.30 % per annum on the undrawn portion available under the Revolving Facility, and variable fees on outstanding letters of credit.

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The Credit Agreement contains customary affirmative and negative covenants, as well as (i) an annual recurring revenue growth covenant requiring the loan parties to have recurring revenues in any four consecutive fiscal quarter period in an amount that is 10 % greater than the recurring revenues for the corresponding four consecutive quarter period in the previous year and (ii) a liquidity (defined as the aggregate amount of cash in bank accounts subject to a control agreement plus availability under the Revolving Facility) covenant, requiring the loan parties to have liquidity, tested on the last day of each calendar month, of $ 10.0 million or more.

The Credit Agreement also contains customary events of default, which if

they occur, could result in the termination of commitments under the Credit Agreement, the declaration that all outstanding loans are immediately due and payable in whole or in part, and the requirement to maintain cash collateral deposits in respect of outstanding letters of credit.

The Company was in compliance with all covenants as of March 31, 2021.

The Credit Agreement also contains customary events of default, which if they occur, could result in the termination of commitments under the Credit Agreement, the declaration that all outstanding loans are immediately due and payable in whole or in part, and the requirement to maintain cash collateral deposits in respect of outstanding letters of credit.

The Company was in compliance with all covenants as of June 30, 2021.

Long-term Debt

The following table summarizes long-term debt obligations as of March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021 December 31, 2020

The following table summarizes long-term debt obligations as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021 December 31, 2020

Term Debt $ 25,000 $ 25,000

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Long-term portion $ 23,967 $ 24,566

Maturities of long-term debt outstanding as of March 31, 2021, are summarized as follows (in thousands):

Total $ 25,000

In conjunction with financing arrangements with prior lenders, the Company issued warrants for the purchase of shares of the Company’s redeemable convertible preferred stock.

The following tables summarize warrants outstanding as of March 31, 2021 and December 31, 2020 (in thousands, except share and per share data) and issuance price:

Shares Issuance Date Issuance price per share Expiration date March 31, 2021 December 31, 2020

Warrant Series A 40,000 12/10/12 $ 1.00 12/10/22 $ 938 $ 618

Warrant Series B 46,875 7/2/14 $ 1.60 7/7/26 1,024 657

Warrant Series B 15,000 9/9/14 $ 1.60 9/9/24 328 210

Warrant Series C 46,875 7/7/16 $ 3.65 7/7/26 928 566

Warrant Series C 34,246 7/21/17 $ 3.65 7/20/27 678 414

Warrant Series E 29,412 6/27/19 $ 8.50 6/26/29 440 227

Maturities of long-term debt outstanding as of June 30, 2021, are summarized as follows (in thousands):

Total $ 25,000

The warrants were subject to the same anti-dilution provisions to which the respective series of redeemable convertible preferred stock was subject.

The outstanding warrants automatically converted into warrants to purchase common stock in connection with the closing of the Company’s IPO.

Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)

As of March 31, 2021 and December 31, 2020, the Company was authorized to issue seven classes of stock:

common stock, Series A redeemable convertible preferred stock, Series B redeemable convertible preferred stock, Series C redeemable convertible preferred stock, Series D redeemable convertible preferred stock, Series E redeemable convertible preferred stock and Series F redeemable convertible preferred stock.

On September 23, 2020, the Board authorized an increase in the number of authorized shares of common stock to 101,671,156 shares and authorized an increase in the number of authorized shares of preferred stock to 72,799,602 shares.

All of the outstanding series of redeemable convertible preferred stock converted to common stock upon the IPO.

In connection with its IPO, the Company's certificate of incorporation was amended and restated such that the total number of shares of common stock authorized to be issued was increased to 500,000,000 shares and the total number of shares of preferred stock authorized to be issued was reduced to 10,000,000 shares.

Repurchase of Common Stock

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As the Company had the right of first refusal for the sale of these shares, the Company repurchased the shares for $ 3.5 million from the former employees at the price offered.

All classes of stock are entitled to vote.

During the three months ended March 31, 2021, Series A through F redeemable convertible preferred stockholders had the right to one vote for each share of common stock into which such holder’s respective shares of redeemable convertible preferred stock could then be converted.

As of March 31, 2021 and December 31, 2020, Series A, Series C, Series D, Series E and Series F redeemable convertible preferred stockholders were entitled to an 8 % preferred dividend, when, as and if declared by the Board.

Series A, Series C, Series D, Series E and Series F preferred dividends are not cumulative.

Series B redeemable convertible preferred stockholders were entitled to an 8 % preferred return upon redemption or liquidation.

The Series B preferred return is cumulative and totaled $ 7.9 million as of March 31, 2021.

This cumulative return is recorded in Redeemable Convertible Preferred Stock on the consolidated balance sheets.

Upon the IPO, the Series B redeemable convertible preferred stock was converted into common stock and the holders received a 5 % dividend on conversion, which totaled $ 5.0 million and was paid in cash.

Common stockholders are also entitled to dividends, when, as and if declared by the Board.

Declared and unpaid dividends for each series of redeemable convertible preferred stock were payable upon liquidation.

As of March 31, 2021 and December 31, 2020, holders of Series A, Series B, Series C, Series D, Series E and Series F redeemable convertible preferred stock were entitled to convert their shares into shares of common stock, at the option of the holder, at a 1-for-1 conversion rate based on a conversion price of $ 1.00 , $ 1.60 , $ 3.65 , $ 6.13 , $ 8.50 and $ 16.00 per share, respectively.

The respective conversion rates were subject to anti-dilution clauses if additional shares of common stock are issued at a price per share below the applicable conversion price.

As of March 31, 2021, no such anti-dilution events had occurred.

As of March 31, 2021 and December 31, 2020, upon a liquidation event, as defined by the Company’s certificate of incorporation, including any voluntary or involuntary liquidation, dissolution, winding up or deemed liquidation event, and prior to the payment of other equity holders, liquidation funds, if any, were required to be distributed to Series F redeemable convertible preferred stockholders (entitled to a liquidation preference equal to $ 16.00 per share plus declared and unpaid dividends), Series E redeemable convertible preferred stockholders (entitled to a liquidation preference equal to $ 8.50 per share plus declared and unpaid dividends) and Series D redeemable convertible preferred stockholders (entitled to a liquidation preference equal to $ 6.1278 per share), on a pari passu basis.

Thereafter, Series C redeemable convertible preferred stockholders were entitled to a liquidation preference equal to $ 3.65 per share, after the payment in full of the liquidation preference of Series F, Series E and Series D redeemable convertible preferred stock.

Thereafter, Series B redeemable convertible preferred stockholders were entitled to a liquidation preference, after the payment in full of the liquidation preference of the Series F, Series E, Series D and Series C redeemable convertible preferred stock, equal to $ 1.60 per share plus an accruing amount of 3 % per annum on the purchase price of Series B redeemable convertible preferred stock, plus all accrued (including the 5 % accruing dividend) but unpaid and any declared but unpaid dividends.

Thereafter, Series A redeemable convertible preferred stockholders were entitled to a liquidation preference, after the payment in full of the liquidation preference on all other redeemable convertible preferred stock, equal to $ 1.00 per share plus any declared, but unpaid dividends.

Remaining liquidation funds, if any, were then required to be distributed to both common and Series A redeemable convertible preferred stockholders equally, as if the Series A redeemable convertible preferred stock had been converted to common stock.

As of March 31, 2021 and December 31, 2020, holders of all classes of redeemable convertible preferred stock were entitled to require the Company to redeem preferred shares at any time on or after June 27, 2023.

Holders of Series A through C vote together with respect to the redemption of Series A, Series B and Series C redeemable convertible preferred stock, Series D and Series E vote together with respect to the redemption of Series D and Series E redeemable convertible preferred stock, and Series F had a separate right with respect to the redemption of Series F redeemable convertible preferred stock.

If at least a majority of any such group voted in favor of redemption, the Company was required to redeem one-third of the then-outstanding shares of the applicable group within each series for cash equal to the Liquidation Amount, as defined by each series (“Initial Redemption Date”).

The decision of any such group was not binding on any other group and any group’s decision to redeem is independent of any other group’s decision to redeem.

The Company would then be required to make additional payments on the one-year and two-year anniversary of the Initial Redemption Date.

In accordance with the SEC guidance on temporary equity, all redeemable convertible preferred stock is presented as mezzanine equity given the cash redemption right that is within the holder’s control.

As of March 31, 2021 and December 31, 2020, the preferred shares were not currently redeemable, but it was probable the instruments would become redeemable.

Therefore, the Company had elected to recognize changes in redemption value immediately as they occur, as a dividend, and adjust the carrying amount of the instrument such that the carrying value is greater than or equal to the redemption value at the end of each reporting period.

As of March 31, 2021 and December 31, 2020, the holders of redeemable convertible preferred stock had various rights and preferences as follows:

March 31, 2021 December 31, 2020

Authorized Shares

Outstanding Redemption/

Amounts Shares

Authorized Shares

Outstanding Redemption/

(in thousands, except for shares)

Series A Redeemable Convertible Preferred Stock 8,488,092 8,448,092 $ 8,448 8,488,092 8,448,092 $ 8,448

Series B Redeemable Convertible Preferred Stock 8,761,982 8,650,107 21,741 8,761,982 8,650,107 21,464

Series C Redeemable Convertible Preferred Stock 22,600,000 22,228,001 81,132 22,600,000 22,228,001 81,132

Series D Redeemable Convertible Preferred Stock 11,443,749 11,423,349 70,000 11,443,749 11,423,349 70,000

Series E Redeemable Convertible Preferred Stock 12,755,779 12,726,367 108,174 12,755,779 12,726,367 108,174

Series F Redeemable Convertible Preferred Stock 8,750,000 8,750,000 140,000 8,750,000 8,750,000 140,000

72,799,602 72,225,916 $ 429,495 72,799,602 72,225,916 $ 429,218

Redeemable Convertible Preferred Stock

As of December 31, 2020, the Company was authorized to issue seven classes of stock:

These preferred shares were classified as temporary equity within the Company’s consolidated balance sheet as of December 31, 2020.

Immediately prior to the effectiveness of the Company’s registration statement relating to its IPO, the Company’s outstanding shares of redeemable convertible preferred stock converted into an aggregate of 72,225,916 shares of common stock.

With the proceeds from its IPO, the Company paid in full accumulated dividends on its previously outstanding shares of Series B redeemable convertible preferred stock, which totaled approximately $ 5.0 million.

As of June 30, 2021, there was no preferred stock issued or outstanding.

In conjunction with financing arrangements with prior lenders, the Company issued warrants for the purchase of shares of the Company’s redeemable convertible preferred stock.

Equity Compensation

In 2011, the Board established a long-term incentive plan, the Company’s 2011 Long-Term Incentive Plan, as amended (the “2011 Plan”), under which shares of common stock are made available for grants to qualified consultants, directors, or employees of the Company.

The vesting of the common stock options is determined by the Company and may be immediately vested in whole, or in part, or all portions may not be vested until a specific date.

The exercise price of incentive stock options granted must be at least equal to 100% of the fair value of the Company’s common stock at the date of grant, as determined by the Board.

On February 25, 2021, the Board approved, subject to stockholder approval which, was obtained on March 23, 2021, the Company’s 2021 Employee Stock Purchase Plan (the “ESPP”), pursuant to which employees would be able to purchase shares of the Company’s common stock at a 15 % discount.

The Board provided for a share reserve with respect to the ESPP of 2 % of the total number of shares outstanding after the IPO.

On February 25, 2021, the Board approved, subject to stockholder approval which, was obtained on March 23, 2021, the ESPP, pursuant to which employees would be able to purchase shares of the Company’s common stock at a 15 % discount.

The Board provided for a share reserve with respect to the ESPP of 2 % of the total number of shares outstanding after the Company’s IPO.

The Board further provided that the share reserve will be refreshed by an evergreen provision of 1 % of the Company’s outstanding common stock at the end of the prior year, or such lesser amount as the Board or its Compensation Committee may determine.

The Company reserved 2,205,790 shares of common stock for future issuance under the ESPP.

On February 25, 2021, the Board approved, subject to stockholder approval, which was obtained on March 23, 2021, the Company’s 2021 Incentive Award Plan (the “2021 Plan”), pursuant to which incentive awards may be awarded to employees, directors and consultants.

The Board provided that the maximum number of shares of common stock (subject to stock splits, dividends, recapitalizations and the like) issuable under the 2021 Plan is equal to a number of shares equal to (i) 11.0 % of the shares of common stock outstanding immediately prior to the effectiveness of the IPO after giving effect to the number of shares being sold in the IPO (including shares subject to outstanding equity awards, and the 2021 share reserve and the ESPP share reserve (as described above)) and assuming no exercise of the underwriters’ option to purchase additional shares, plus (ii) an annual increase on the first day of each year beginning in 2022 and ending in 2031, equal to the lesser of:

(a) 5.0 % of the shares outstanding on the last day of the prior fiscal year or (b) such lesser amount as determined by the Board, plus (iii) any shares underlying awards outstanding under the 2011 Plan, as of immediately prior to the effectiveness of the IPO, that are thereafter forfeited, terminated, expired or repurchased for the original purchase price thereof, subject to certain statutory limits related to “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code.

The Board provided that the maximum number of shares of common stock (subject to stock splits, dividends, recapitalizations and the like) issuable under the 2021 Plan is equal to a number of shares equal to (i) 11.0 % of the shares of common stock outstanding immediately prior to the effectiveness of its IPO after giving effect to the number of shares being sold in its IPO (including shares subject to outstanding equity awards, and the 2021 share reserve and the ESPP share reserve (as described above)) and assuming no exercise of the underwriters’ option to purchase additional shares, plus (ii)

an annual increase on the first day of each year beginning in 2022 and ending in 2031, equal to the lesser of:

(a) 5.0 % of the shares outstanding on the last day of the prior fiscal year or (b) such lesser amount as determined by the Board, plus (iii) any shares underlying awards outstanding under the 2011 Long-Term Incentive Plan, as amended (the “2011 Plan”), as of immediately prior to the effectiveness of its IPO, that are thereafter forfeited, terminated, expired or repurchased for the original purchase price thereof, subject to certain statutory limits related to “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code.

The Company reserved 12,131,846 shares of common stock for issuance pursuant to future awards under the 2021 Plan.

Stock Options

On February 5, 2021 and February 10, 2021, following approval by the Board, the Company issued options to purchase an aggregate of 2.4 million shares of the Company’s common stock, with an exercise price of $ 15.46 per share on the grant date to employees under the 2011 Plan.

The stock option grants expire in ten years .

Of the stock options, 0.2 million vest 25 % after one year and then monthly prospectively for a three-year period with the remaining 2.2 million stock options vesting monthly over a four-year period in 48 equal monthly installments.

In order to determine the appropriate stock-based compensation expense for financial reporting purposes, the Company utilized a fair value per share of its common stock as of the date of the awards of $ 19.35 and $ 19.72 , respectively.

The grant date fair value of the stock options granted on February 5, 2021 and February 10, 2021 is approximately $ 20.0 million, which is expected to be recognized, net of estimated forfeitures, over a requisite service period of 4 years.

On February 25, 2021, following approval by the Board, the Company issued options to purchase an aggregate of 0.3 million shares of the Company’s common stock, with an exercise price of $ 18.62 per share on the grant date to employees under the 2011 Plan.

The stock option grants expire in ten years .

The stock options generally vest 25 % after one year and then monthly prospectively for a three-year period.

The grant date fair value of the stock options granted on February 25, 2021 is approximately $ 2.9 million, which is expected to be recognized, net of estimated forfeitures, over a requisite service period of generally 4 years.

The following table summarizes the weighted-average grant date value of options and the assumptions used to develop their fair value using the Black-Scholes option pricing model:

Volatility 37.0 %

Risk-free interest rate 0.7 %

Weighted average grant date fair value $ 8.47

Weighted average expected life in years 6.03

Estimated forfeiture rate 14.3 %

Fair value of common stock $ 19.35 -$ 20.80

The Black-Scholes option-pricing model requires the input of highly subjective assumptions.

The Company continues to assess the assumptions and methodologies used to calculate the established fair value of stock-based compensation.

Circumstances may change and additional data may become available over time, which could result in changes to these assumptions and methodologies, which could materially impact the fair value determinations.

The Company recorded $ 1.4 million and $ 0.5 million of stock-based compensation expense for the three months ended March 31, 2021 and March 31, 2020, respectively.

The amount of stock-based compensation capitalized as part of deferred implementation costs was insignificant for the three months ended March 31, 2021 and March 31, 2020.

Due to net operating losses, there was no tax expense or benefit recorded in connection with stock-based compensation expense.

During the six months ended June 30, 2021, the Company granted an aggregate of 2,811,098 stock options to purchase shares of its common stock to officers and employees pursuant to the 2011 Plan and 2021 Plan, with a weighted average exercise price of $ 19.92 per share.

The fair value of options granted was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions (i) expected term of 6.03 years, (ii) expected volatility of 36.9 %, (iii) risk-free interest rate 0 .7 % and (iv) expected dividend yield of 0 %.

Restricted Stock Units

In April 2021, the Company granted an aggregate of 213,500 RSUs to officers and employees pursuant to the 2021 Plan.

The RSUs vest and settle upon the satisfaction of a service condition.

The service condition for the awards is satisfied over generally three to four years .

Employee Stock Purchase Plan

The first offering period commenced on May 15, 2021, and as of June 30, 2021, no shares had yet been issued under the plan.

Stock-based compensation expense was included as follows:

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

(in thousands) 2021 2020 2021 2020

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Total stock-based compensation expenses $ 3,023 $ 450 $ 4,441 $ 909

The provision for income taxes in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020 was $ 0 .

The amount of stock-based compensation capitalized as part of deferred implementation costs was insignificant for the three and six months ended June 30, 2021 and June 30, 2020.

Due to net operating losses, there was no tax expense or benefit recorded in connection with stock-based compensation expense.

The provision for income taxes in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020 was $ 0 .

The effective tax rate differs from the statutory tax rate primarily due to the impact of the full valuation allowance against the Company’s deferred tax assets.

Earnings Per Share

Net loss attributable to common stockholders used in computing basic and diluted earnings per share (“EPS”) has been calculated as the net loss less Series B cumulative dividends and other adjustments to redeemable convertible preferred stock of $ 0.3 million for the three months ended March 31, 2021 and March 31, 2020.

During the three months ended March 31, 2021 and 2020, all of the Company’s outstanding series of redeemable convertible preferred stock were considered to be participating securities.

Net loss attributable to common stockholders used in computing basic and diluted earnings per share (“EPS”) has been calculated as the net loss less Series B cumulative dividends and other adjustments to redeemable convertible preferred stock of $ 0.3 million for both the three and six months ended June 30, 2021 and $ 0.3 million and $ 0.6 million for the three and six months ended June 30, 2020, respectively.

The holders of the Company’s redeemable convertible preferred stock did not have a contractual obligation to share in the Company’s losses;

therefore, no amount of total undistributed loss was allocated to redeemable convertible preferred stock.

Upon the consummation of its IPO, all preferred stock converted to common stock, and therefore the Company had no issued or outstanding preferred stock as of June 30, 2021.

Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

Because the Company has reported a net loss for the three months ended March 31, 2021 and 2020, the number of shares used to calculate diluted net loss per share attributable to common stockholders is the same as the number of shares used to calculate basic net loss per share attributable to common stockholders for the period presented because the potentially dilutive shares would have been antidilutive if included in the calculation.

The computation of basic and diluted EPS is as follows for the three months ended March 31, 2021 and 2020:

Three months ended March 31,

Because the Company has reported a net loss for the three and six months ended June 30, 2021 and 2020, the number of shares used to calculate diluted net loss per share attributable to common stockholders is the same as the number of shares used to calculate basic net loss per share attributable to common stockholders for the period presented because the potentially dilutive shares would have been antidilutive if included in the calculation.

The computation of basic and diluted EPS is as follows for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30,

Six months ended June 30,

(In thousands, except shares and per share amounts) 2021 2020 2021 2020

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Loss per common share - basic and diluted $ ( 0.15 ) $ ( 1.63 ) $ ( 0.56 ) $ ( 3.93 )

For the three months ended March 31, 2021 and 2020, the following potential shares of common stock were excluded from diluted EPS as the Company had a net loss in each period presented:

Three months ended March 31,

For the three and six months ended June 30, 2021 and 2020, the following potential shares of common stock were excluded from diluted EPS as the Company had a net loss in each period presented:

As of June 30,

Stock options 10,934,687 12,972,626

1 unchanged sentence

Warrants 212,408 212,408

Restricted stock units (RSUs) 213,500 —

Total anti-dilutive common share equivalents 11,360,595 70,405,171

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The Company leases office space under non-cancelable operating leases for its corporate headquarters in Plano, Texas pursuant to a ten-year lease agreement under which the Company leases approximately 125,000 square feet of office space with an initial term that expires on August 31, 2028, with the option to extend the lease for either two additional terms of five years each or one additional term of ten years .

Rent expense under operating leases was $ 1.1 million and $ 1.1 million for the three months ended March 31, 2021 and 2020, respectively.

Future minimum payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year at March 31, 2021 were as follows (in thousands):

Rent expense under operating leases was $ 1.2 million and $ 2.3 million for the three and six months ended June 30, 2021, respectively, and $ 1.2 million and $ 2.3 million for the three and six months ended June 30, 2020, respectively.

Future minimum payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year at June 30, 2021 were as follows (in thousands):

Operating Leases

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Deferred rent and tenant allowances are amortized and applied against rental expense over the lease term on a straight-line basis.

As of March 31, 2021 and December 31, 2020, the Company had deferred rent and tenant allowance balances as follows:

(in thousands) March 31, 2021 December 31, 2020

As of June 30, 2021 and December 31, 2020, the Company had deferred rent and tenant allowance balances as follows:

(in thousands) June 30, 2021 December 31, 2020

Deferred rent and tenant allowance $ 6,229 $ 6,463

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Related Party Transactions

For the three months ended March 31, 2021 and 2020, CU Cooperative Systems, Inc.

(“CU Cooperative”), an investor who is also a vendor, was paid fees of $ 1.0 million and $ 1.2 million, respectively, which relate to services resold to the Company’s clients.

As of March 31, 2021, the Company had no accounts payable balance due to CU Cooperative, and as of December 31, 2020, accounts payable included amounts due to CU Cooperative of $ 0.3 million.

CU Cooperative Systems, Inc.

(“CU Cooperative”), a stockholder of the Company who is also a vendor, was paid fees of $ 1.0 million and $ 2.1 million, for the three and six months ended June 30, 2021, respectively, and $ 1.1 million and $ 2.3 million for the three and six months ended June 30, 2020, respectively, which relate to services resold to the Company’s clients.

As of June 30, 2021, the Company had a $ 0.3 million payable balance due to CU Cooperative, and as of December 31, 2020, accounts payable included amounts due to CU Cooperative of $ 0.3 million.

Todd Clark, who has served as President and Chief Executive Officer of CU Cooperative since 2016, is a member of the Board and was designated to serve as a member of the Board by CU Cooperative.

CU Cooperative held 5 % or more of the Company’s capital stock as of December 31, 2020.

For the three months ended March 31, 2021, the Company employed a former owner of the acquired business ACH Alert.

For certain operating and lease payments made on the former owner’s behalf and lockbox cash receipts due to the Company, a receivable of $ 1.4 million from

the former owner in prepaid expenses and other current assets as of December 31, 2020.

We had no significant receivable balance from the former owner as of March 31, 2021.

For the three and six months ended June 30, 2021, the Company employed a former owner of the acquired business ACH Alert.

For certain operating and lease payments made on the former owner’s behalf and lockbox cash receipts due to the Company, a receivable of $ 1.4 million from the former owner was included in prepaid expenses and other current assets as of December 31, 2020.

The Company had no significant receivable balance from the former owner as of June 30, 2021.

Goodwill and Other Intangibles

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As part of the Company’s business planning cycle, the Company will perform an annual goodwill impairment test in the fourth quarter of the fiscal year beginning in 2021.

There were no indications of impairment of goodwill noted for the three months ended March 31, 2021.

Goodwill had a carrying value of $ 16.5 million and $ 16.2 million as of March 31, 2021 and December 31, 2020, respectively.

The Company recorded $ 0.3 million to goodwill during the three months ended March 31, 2021 due to a change in the purchase price allocation for ACH Alert as is appropriate during the measurement period.

There were no indications of impairment of goodwill noted for the three months ended June 30, 2021.

Goodwill had a carrying value of $ 16.5 million and $ 16.2 million as of June 30, 2021 and December 31, 2020, respectively.

The Company recorded $ 0.3 million to goodwill during the six months ended June 30, 2021 due to a change in the purchase price allocation for ACH Alert as is appropriate during the measurement period.

See Note 3 for additional information.

Total intangibles, net, consisted of the following as of March 31, 2021 and December 31, 2020:

As of March 31, 2021

Total intangibles, net, consisted of the following as of June 30, 2021 and December 31, 2020:

As of June 30, 2021

(In thousands) Carrying Value Accumulated Amortization Net Carrying Value

15 unchanged sentences

Total intangible assets $ 8,475 $ ( 209 ) $ 8,266

Amortization expense recognized on intangible assets was $ 0.2 million for the three months ended March 31, 2021.

The Company did not recognize amortization expense related to intangible assets for the three months ended March 31, 2020.

Amortization expense recognized on intangible assets was $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2021, respectively.

The Company did not recognize amortization expense related to intangible assets for the three and six months ended June 30, 2020.

The following table shows the estimated annual amortization expense of the definite-lived intangible assets for the next five years and thereafter (in thousands):

Thereafter 4,142

Subsequent Events

On April 13, 2021, the Company's registration statement relating to its IPO of its common stock was declared effective by the SEC.

See Note 1 for additional information.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements