What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-01 compared with 2021-03-15 · 578 added, 366 removed, 604 unchanged (61% of the section changed)

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Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID 596 )

Management's Report on Internal Control Over Financial Reporting

Consolidated Balance Sheets

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders of

Board of Directors and Stockholders

Certara, Inc.

Opinion on the Financial Statements

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Certara, Inc.

and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Certara, Inc.

and Subsidiaries as of December 31, 2020 and 2019, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 1, 2022 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As disclosed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2021 due to the adoption of Financial Accounting Standards Board Accounting Standards Codification Topic 842, Leases.

Basis for Opinion

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Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Adoption of New Accounting Standard

As discussed in Note 2 to the consolidated financial statements, Certara, Inc.

and Subsidiaries adopted Accounting Standard Codification ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”), beginning January 1, 2019, using the modified retrospective method.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of intangible assets related to the acquisition of Pinnacle 21, LLC - developed technology, customer relationships and trademarks

As described in Note 5 to the consolidated financial statements, on October 1, 2021, the Company completed the acquisition of Pinnacle 21, LLC (“Pinnacle”) which resulted in $143.4 million of intangible assets being recorded.

Those intangible assets were comprised of developed technology of $103 million, customer relationships of $24.6 million and trademarks of $15.8 million.

Fair values of the developed technology were estimated by management using the multi-period excess earnings method, fair values of the customer relationship intangible assets were estimated using the distributor method and the trademarks intangible assets were estimated using the relief from royalty method.

Management’s determination of the fair value of the developed technology included significant assumptions related to future expected cash flows from the developed technology, obsolescence factors, contributory asset charges and discount rates.

Management’s determination of the fair value of the customer relationships acquired included significant assumptions related to revenue growth rates, estimated earnings, customer attrition and discount rates.

Significant judgment is exercised by management when determining the valuation of intangible assets related to the valuation of developed technology, customer relationships and trademark assets, which in turn led to a high degree of auditor judgment, in performing procedures relating to management’s significant assumptions related to the revenue growth rates, estimated earnings, contributory asset charges, customer attrition, royalty rates, obsolescence factors, and discount rates.

Also, the audit effort involved the use of professionals with valuation skill and knowledge.

Given these factors, the related audit effort in evaluating management’s judgments in determining the valuation of intangible assets acquired in the Pinnacle acquisition was challenging, subjective, and complex and required a high degree of auditor judgment.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the developed technology, customer relationships, and trademarks intangible assets.

These procedures also included, among others (i) reading the purchase agreement;

(ii) evaluating the appropriateness of the multi-period excess earnings, distributor and relief from royalty methods;

(iii) evaluating the reasonableness of management’s assumptions relating to the revenue growth rates, estimated earnings, contributory asset charges, customer attrition, royalty rates, obsolescence factors, and discount rates used in the methods;

and (iv) testing the completeness and accuracy of underlying data used in the methods.

Evaluating the assumptions related to the revenue growth rates and estimated earnings involved evaluating whether the assumptions were reasonable considering (i) the current and past performance of the reporting unit;

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with valuation skill and knowledge were used to assist in the evaluation of the Company’s multi-period excess earnings, distributor and relief from royalty methods as well as assumptions related to customer attrition, contributory asset charges, royalty rates, obsolescence factors, and discount rates.

Revenue recognition on the Company’s fixed price contract revenue

As described further in Note 2 to the consolidated financial statements, the Company performs professional services under fixed price contracts with the associated revenue recognized over time.

For fixed price revenue contracts recognized over time, management utilizes the input method to measure progress toward the complete satisfaction of the performance obligations based upon the hours incurred to date as a percentage of the total estimated hours.

We identified revenue recognition for fixed price contracts as a critical audit matter.

The principal consideration for our determination that revenue recognition for fixed price contracts was a critical audit matter is that the measure of progress towards completion utilizes assumptions for future hours to complete the performance obligations, and those assumptions have significant estimation uncertainty.

A significant change in the assumptions could affect both the profitability of the contract and the amount of revenue and profit recognized in an accounting period.

Also, there is a high volume of contracts and a high degree of judgment when evaluating the contracts.

Given these factors, the related audit effort in evaluating management’s judgments in determining the revenue recognition for fixed price contracts was challenging, subjective, and complex and required a high degree of auditor judgment.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to revenue recognition for fixed price contracts, including controls over management’s process for recognizing revenue over time.

In response to management’s assessment of its internal control over financial reporting, a change in our audit plan was required with an increase in audit effort.

Our procedures included, among others (i) for a sample of contracts, inquiring regarding the status of the project and obtaining an understanding for significant changes in budgeted to actual hours;

(ii) inspecting a sample of contracts to evaluate the existence of an enforceable right to payment for performance completed to date, and evaluating the progress towards completion of contracts based on hours incurred, and testing the appropriateness of the timing and amount of revenue recognized;

and (iii) evaluating management’s ability to estimate progress towards completion, we selected a sample of fixed price contracts completed during the year, and obtained the internal budget at inception and compared the budgeted hours at inception to the actual hours upon completion.

We also selected an additional sample of fixed price contracts completed during the year and compared the hours incurred during the current year to the hours that were estimated to be incurred at completion as of the prior year end.

In addition, we confirmed hours incurred per the contract management system directly with a sample of consultants working on the Company’s fixed price contracts.

/s/ CohnReznick LLP

We have served as the Company's auditor since 2019.

Tysons, Virginia

March 1, 2022

We have served as Certara, Inc.

and Subsidiaries’ auditor since October 2019.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Certara, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Certara, Inc.

and Subsidiaries (the “Company”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, because of the effect of the material weakness, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated March 1, 2022 expressed an unqualified opinion on those consolidated financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management’s assessment.

Information technology general controls (“ITGCs”) were not designed and implemented over a cloud-based software system that supports the Company’s project set-up and time submissions for services provided to the Company’s customers.

As a result, certain business process automated and manual controls were also considered ineffective because they relied on data and reports accumulated in such software system.

These control deficiencies were a result of:

information technology processes lacking adequate reviews and documentation to maintain effective controls related to access management, change management and complementary user-organization controls to those implemented at the Service Organization that hosts the software system.

The material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2021 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

The Company acquired Pinnacle 21, LLC (“Pinnacle”) on October 1, 2021.

Management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, Pinnacles’ internal control over financial reporting associated with 23% of total assets and 2% of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2021.

Our audit of internal control over financial reporting also excluded an evaluation of the internal control over financial reporting of Pinnacle.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ CohnReznick LLP

Tysons, Virginia

March 1, 2022

Management's Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as is defined in the Exchange Act.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP and includes those policies and procedures that:

(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that our receipts and expenditures are being made only in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Our management conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this evaluation, our management concluded that our internal control over financial reporting was not effective at December 31, 2021 because of the material weakness described below.

Based on the COSO criteria, management identified control deficiencies that constitute a material weakness.

A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is more than a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness was identified:

Material weakness related to Information Technology General Controls

We concluded that we did not have effective information technology general controls over a cloud-based software system that supports our project set-up and time submissions for services provided to our customers.

As a result, certain business process automated and manual controls were also considered ineffective because they relied on data and reports accumulated in such software system.

We believe these control deficiencies were a result of our information technology processes lacking adequate reviews and documentation to maintain effective controls related to access management, change management and complementary user-organization controls to those implemented at the Service Organization that hosts the software system.

The material weakness did not result in any identified misstatements.

and there were no changes to previously released financial results.

The Company’s independent registered public accounting firm, CohnReznick LLP, has issued an adverse opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, which appears in Item 8.

of this Annual Report on Form 10-K.

Management’s Plan to Remediate the Material Weakness

Management has outlined a remediation plan and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively.

Management remediation actions include:

(i) Implement a controlled process for the onboarding, offboarding, and access rights modifications in the application environment to ensure appropriate provisioning of rights on a least privileged basis;

(ii) Document the levels of privileged access roles with specific “allowed” capabilities warranting levels of access for specific roles;

(iii) Implement a quarterly log review by business owners to ensure that no privileged account access was provided and removed outside of documented service requests;

(iv) Implement a controlled process for application and system level changes in the application environment to ensure appropriate understanding of the changes on financial reporting;

and (v) Strengthen ownership and reporting through the IT Governance Process currently in place which will serve as the mechanism to monitor the remediation update.

We believe that these actions will remediate the material weakness.

The weakness will not be considered remediated, until the applicable controls operate for a sufficient period of time and management concludes, through testing, that these controls operate effectively.

We expect that the remediation of this material weakness will be completed by or before September 30, 2022.

/s/ WILLIAM F.

ANDREW SCHEMICK

Andrew Schemick

Chief Executive Officer

Chief Financial Officer

March 1, 2022

CERTARA, INC.

AND SUBSIDIARIES

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Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $132 and $185, respectively

Accounts receivable, net of allowance for credit losses of $ 262 and $ 132 , respectively

Restricted cash

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Property and equipment, net

Long-term deposits

Operating lease right-of-use assets

Intangible assets, net of accumulated amortization of $ 169,329 and $ 127,172 , respectively

Deferred income taxes

Liabilities and stockholders’ equity

Other long-term assets

Liabilities and stockholder’s equity

Current liabilities:

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Current portion of deferred revenue

Current portion of interest rate swap liability

Current portion of long-term debt

Current portion of capital lease obligations

Other current liabilities

Total current liabilities

Long-term liabilities:

Capital lease obligations, net of current portion

Deferred revenue, net of current portion

Deferred income taxes

Long-term portion of interest rate swap liability

Operating lease liabilities, net of current portion

Long-term debt, net of current portion and debt discount

Other long-term liabilities

Total liabilities

Commitments and contingencies

Stockholders' equity

Commitments and contingencies (Note 12)

Stockholder’s equity

Preferred shares, $ 0.01 par value, 50,000,000 and no shares authorized as of December 31, 2021 and 2020, respectively, no shares issued and outstanding as of December 31, 2021 and 2020, respectively

Common shares, $0.01 par value, 600,000,000 shares authorized, 152,979,479 and 132,407,786 shares issued and outstanding as of December 31, 2020 and 2019, respectively

Common shares, 0.01 par value, 600,000,000 shares authorized, 159,658,948 and 152,979,479 shares outstanding at December 31, 2021 and 2020, respectively

Additional paid-in capital

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Accumulated other comprehensive loss

Total stockholders’ equity

Total liabilities and stockholders’ equity

Treasury stock at cost, 1,100 and no shares at December 31, 2021 and 2020, respectively

Total stockholder’s equity

Total liabilities and stockholder’s equity

The accompanying notes are an integral part of the consolidated financial statements

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Income (loss) from operations

Other income (expenses):

Other expenses:

Interest expense

Miscellaneous, net

Total other income (expenses)

Total other expenses

Loss before income taxes

(Benefit from) provision for income taxes

Provision for (benefit) from income taxes

Other comprehensive income (loss)

Foreign currency translation adjustment, net of tax of $(277), $267, and $(1,437)

Change in fair value of interest rate swap, net of tax of $(384), $(520), and $0

Foreign currency translation adjustment, net of tax of $ 195 , $( 227 ), $ 267

Change in fair value of interest rate swap, net of tax of $( 16 ), $( 384 ), $( 520 )

Reclassification of fair value of interest rate swap, net of tax of $( 765 ), $ 0 , $ 0

Total other comprehensive income (loss)

Comprehensive loss

Net loss per common share – basic and diluted

Net loss per common shares — basic and diluted

Basic and diluted weighted average common shares outstanding

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PAID-IN CAPITAL

INCOME (LOSS)

Balance as of December 31, 2017

Equity compensation

Capital contributions

Repurchase of Parent Class B Units

Change in fair value of interest rate swap, net of tax

Foreign currency translation adjustment

Treasury Stock

Balance as of December 31, 2018

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Equity compensation

Repurchases of Parent Class B Units

Capital contributions

Repurchase of Parent Class B units

Capital contribution

Change in fair value of interest rate swap, net of tax

Foreign currency translation adjustment

Foreign currency translation adjustment, net of tax

Balance as of December 31, 2019

Equity compensation

Repurchases of Parent Class B Units

Capital contributions

Equity-based compensation awards

Repurchase of Parent Class B units

Capital contribution

Issuance of common stock upon initial public offering, net

Issuance of restricted stock

Change in fair value of interest rate swap, net of tax

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Balance as of December 31, 2020

Equity-based compensation awards

Restricted stock units withheld for tax liability

Issuance common stock from public offerings, net

Common shares issued in connection with Pinnacle acquisition

Restricted stock withheld for tax liability and in treasury

Change in fair value from interest rate swap, net of tax

Reclassification of fair value of interest rate swap, net of tax

Foreign currency translation adjustment, net of tax

Balance as of December 31, 2021

The accompanying notes are an integral part of the consolidated financial statements

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Amortization of debt issuance costs

(Recovery of) provision for doubtful accounts

(Recovery of) provision for credit losses

Loss on retirement of assets

Equity compensation expense

Equity-based compensation expense

Unrealized loss on derivative

Deferred income taxes

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Unit repurchase

Proceeds from issuance of common stock upon initial public offering, net of underwriters’ discounts and commissions

Proceeds from issuance of common stock, net of underwriters' discounts and commissions

Proceeds from borrowings on long-term debt

Payments on long-term debt and capital lease obligations

Payments on long-term debt and finance lease obligations

Proceeds from line of credit

Payments on financing component of interest rate swap

Payments on line of credit

Payments of deferred offering costs

Payment of deferred offering costs

Payment of debt issuance costs

Payment of contingent consideration obligations

Payment of taxes on shares and units withheld for employee taxes

Net cash provided by (used in) financing activities

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash

Net increase (decrease) in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash, at beginning of year

Cash, cash equivalents, and restricted cash, at end of year

Net (decrease) increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash, at beginning of period

Cash, cash equivalents, and restricted cash, at end of period

Supplemental disclosures of cash flow information

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Supplemental schedule of noncash investing and financing activities

Liabilities assumed in connection with business acquisition

Property and equipment controlled through new capital leases

Property and equipment controlled through capital lease obligations

Deferred offering costs, accrued but not paid

Operating right-of-use assets recognized upon adoption of ASC 842

Operating lease liability recognized upon adoption of ASC 842

Common shares issued in connections with the Pinnacle acquisition

The accompanying notes are an integral part of the consolidated financial statements

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Certara, Inc.

and its wholly-owned subsidiaries (together, the “Company”) deliver software products and technology-enabled services to customers to efficiently carry out and realize the full benefits of biosimulation in drug discovery, preclinincal and clinical research, regulatory submissions and market access.

The Company is a global leader in biosimulation, and the Company’s biosimulation software and technology-enabled services help optimize, streamline, or even waive certain clinical trials to accelerate programs, reduce costs, and increase the probability of success.

and its wholly-owned subsidiaries (together, the “Company”) deliver software products and technology-driven services to customers to efficiently carry out and realize the full benefits of biosimulation in drug discovery, preclinical and clinical research, regulatory submissions and market access.

The Company is a global leader in biosimulation, and the Company’s biosimulation software and technology-driven services help optimize, streamline, or even waive certain clinical trials to accelerate programs, reduce costs, and increase the probability of success.

The Company’s regulatory science and market access software and services are underpinned by technologies such as regulatory submissions software, natural language processing, and Bayesian analytics.

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to change the name of the Company to Certara, Inc.

The Company has operations in the United States, Canada, Spain, Luxembourg, Portugal, United Kingdom, Germany, France, Netherlands, Denmark, Switzerland, Italy, Poland, Japan, Philippines, India and Australia.

Summary of Significant Accounting Policies

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The preparation of consolidated financial statements in conformity with U.S.

generally accepted accounting principles (“U.S.

GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates include, among other estimates, the determination of fair values and useful lives of long-lived assets as well as intangible assets, goodwill, allowance for doubtful accounts receivable, recoverability of deferred tax assets, recognition of deferred revenue (including at the date of business combinations), value of interest rate swaps, determination of fair value of equity-based awards and assumptions used in testing for impairment of long-lived assets.

generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates include, among other estimates, assumptions used in the allocation of the transaction price to separate performance obligations, estimates towards the measure of progress of completion on fixed-price service contracts, the determination of fair values and useful lives of long-lived assets as well as intangible assets, goodwill, allowance for credit losses for accounts receivable, recoverability of deferred tax assets, recognition of deferred revenue, value of interest rate swaps, determination of fair value of equity-based awards and assumptions used in testing for impairment of long-lived assets.

Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements.

The Company is an Emerging Growth Company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

Under the JOBS Act, Emerging Growth Companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an Emerging Growth Company or (ii) it affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act.

As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

The adoption dates discussed below reflect this election.

(b) Recently Adopted Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848),” which contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

The Company adopted ASU 2020-04 upon issuance and elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients preserves the presentation of derivatives

consistent with past presentation.

The impact of adopting ASU 2020-04 did not have a material impact to the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract,” which included updated guidance on ASC 350-40 “Intangibles — Goodwill and Other — Internal-Use Software”.

The new guidance requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred.

The Company adopted ASU 2018-15 on January 1, 2020.

The impact of adopting ASU 2018-15 did not have a material impact to the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements (Topic 820)”, which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements.

The standard removes, modifies, and adds certain disclosure requirements.

The Company adopted ASU 2018-13 on January 1, 2020.

The impact of adopting ASU 2018-13 did not have a material impact to the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“Topic 606”).

Subsequent to the issuance of Topic 606, the FASB clarified the guidance through several ASUs, referred to as ASC 606.

This guidance represents a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which that company expects to be entitled to receive in exchange for those goods or services.

This update sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety.

On January 1, 2019, the Company adopted ASC 606, using the modified retrospective method, applied to all contracts not completed as of the date of adoption.

This method requires the cumulative effect of the adoption to be recognized as an adjustment to opening retained earnings or accumulated deficit in the period of adoption.

The effects of adopting ASC 606 were a decrease of $10,417, net of taxes of $3,325, to accumulated deficit as of January 1, 2019, for the cumulative effect on prior years of having adopted the new standard, a decrease in deferred revenues of $13,587, an increase in deferred taxes of $3,325, and a decrease in cumulative translation adjustment of $155.

These adjustments are a result of the upfront recognition of license revenues from term licenses.

Financial results for reporting periods beginning January 1, 2019 are presented under ASC 606, while prior period amounts were not adjusted and continue to be reported in accordance with the historical accounting guidance under ASC Topic 605.

In November 2016, the FASB issued ASU 2016-18 “Statement of Cash Flows (Topic 230):

Restricted Cash”.

ASU 2016-18 requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows.

As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows.

The ASU requires changes in the Company’s restricted cash to be classified as either operating activities, investing activities or financing activities in the Consolidated Statements of Cash Flows, depending on the nature of the activities that gave rise to the restriction.

The new standard is effective for annual reporting periods beginning after December 15, 2018.

Retrospective transition method is to be applied to each period presented.

The Company adopted ASU 2016-18 on January 1, 2019.

The adoption of ASU 2016-18 did not have a material impact to the Company’s consolidated financial statements.

In February 2018, the FASB issued ASU No.

2018-02, “Income Statement — Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”.

The amendments in this update allow a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for adjustments to the tax effect of items in AOCI, that were originally recognized in other comprehensive income, related to the new statutory rate prescribed in the Tax Cuts and Jobs Act (“TCJA”) enacted on December 22, 2017, which reduced the US federal corporate tax rate from 35% to 21%.

The amendments in this update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the US federal

corporate income tax rate in the TCJA is recognized.

The adoption of this standard on January 1, 2019 had no impact to the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU No.

2019-12, “Simplifying the Accounting for Income Taxes” which removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, the recognition of deferred tax liabilities for outside basis differences and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The Company will adopt ASU 2019-12 during the year beginning January 1, 2021 and is currently evaluating the impact of the new guidance on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases.” ASU 2016-02 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.

Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.

In its April 2020 meeting, FASB deferred the effective date for ASC 842 for private companies to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

The Company will adopt ASU 2016-02 during the year beginning January 1, 2022 and is currently evaluating the impact of adopting this guidance on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” (ASU 2016-13).

ASU 2016-13 changes the impairment model for most financial assets and certain other instruments.

For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses.

The guidance also requires increased disclosures.

Per ASU 2019-10 issued in November 2019, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for private companies.

Early adoption is permitted.

The Company will adopt ASU 2016-13 during the year beginning January 1, 2023 and is currently evaluating the impact of adopting this guidance on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles — Goodwill and Other (Topic 350):

Simplifying the Accounting for Goodwill Impairment”.

ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation.

A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

This standard will be effective for a private company (and thus, for those adopting exemption for Emerging Growth Companies) beginning in the first quarter of fiscal year 2022 and is required to be applied prospectively.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

The Company will adopt ASU 2017-04 during the year beginning January 1, 2022 and is currently evaluating the impact of adopting this guidance on its consolidated financial statements.

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, “Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which requires that at the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC Topic 606, “Revenue from Contracts with Customers” (“Topic 606”), as if it had originated the contracts.

Generally, this results in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements if the acquiree prepared financial statements in accordance with U.

For public business entities, the ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption of the ASU is permitted.

The Company early adopted ASU 2021-08 early and has carried over the contract assets and liabilities from the 2021 business acquisitions into the Company’s 2021 consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes"

which removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The Company adopted this guidance on January 1, 2021 on a prospective basis.

The adoption of this guidance did not have an impact on the Company's consolidated financial statements.

In January 2017, the FASB issued ASU No.

2017-04, “Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment”, which simplifies the subsequent measurement of goodwill and eliminated Step 2 test from goodwill impairment test.

Step 2 required an entity to perform procedures that determine the fair value of its reporting units at the impairment testing date of its assets and liabilities following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination.

Under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with it carrying amount.

The Company adopted the standard as of December 31, 2021.

The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments”, which amended the existing accounting standard for the measurement of credit losses.

The new standard primarily requires using the current expected credit losses approach to measure and recognize credit losses of financial assets held at amortization cost.

It replaces the existing incurred loss model with an expected loss model and requires using historical data and adjusting for current economic conditions, including reasonable and supportable forecasts to estimate credit losses to be expected.

The Company adopted the standard as of December 31, 2021.

The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which supersedes FASB Topic 840, “Leases (Topic 840)” and requires lessees to recognize most leases on the balance sheet with a corresponding right of use asset.

Leases will be classified as financing or operating which will drive the expense recognition pattern.

For lessees, the income statement presentation and expense recognition pattern for financing and operating leases is similar to the current model for capital and operating leases, respectively.

Companies may elect to exclude short-term leases.

The update also requires additional disclosures that will better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

The Company adopted the new standard as of January 1, 2021, due to its loss of emerging growth company (“EGC”) status, using the effective date transition method.

As permitted under the effective date transition method, financial information and disclosure for periods prior to the date of initial application was not updated.

An adjustment to opening accumulated deficit was not required in conjunction with the Company’s adoption.

The Company has elected not to reassess whether expired or existing contracts contain leases, nor did the Company reassess the classification of existing leases as of the adoption date.

The Company did not use hindsight in the assessment of lease terms as of the effective date.

For additional information, see Note 14 - Leases.

In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance”.

The ASU requires that entities increase disclosures about government assistance received relating to accounting policy, nature of the assistance, and the effect of the assistance on the financial statements.

The ASU is effective for annual periods beginning after December 15, 2021.

Early application of the ASU is permitted.

The Company is currently evaluating the impact of these amendments on its consolidated financial statements.

(d) Principles of Consolidation

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(e) Fair Value Measurements

The Company follows FASB ASC 820-10, “Fair Value Measurements,” which defines fair value, establishes a framework for measuring fair value in U.S.

The Company follows FASB ASC 820-10, “Fair Value Measurements” (“ASC 820-10”), which defines fair value, establishes a framework for measuring fair value in U.S.

GAAP, and requires certain disclosures about fair value measurements.

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Significant inputs to the derivative instrument valuation model for interest rate swaps are observable in active markets and are classified as Level 2 in the hierarchy.

(f) Cash, Cash Equivalents and Restricted Cash

(f) Cash and Cash Equivalents and Restricted Cash

Cash equivalents include highly-liquid investments with maturities of three months or less from the date purchased.

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The Company has never experienced losses related to these balances and believes it is not exposed to any significant credit risk on cash.

Restricted cash represents cash that is used as collateral to support an unsecured Company credit card program through a major bank and unexpended restricted grant funds.

Restricted cash represents cash that is reserved to support a financing program and unexpended restricted grant funds.

The restricted cash balance was $ 827 and $ 1,909 at December 31, 2021 and 2020, respectively.

As of December 31, 2020 and 2019, the carrying values reflected in the Consolidated Balance Sheets reasonably approximate the fair values for cash, cash equivalents and restricted cash due to the short-term maturity of these items.

As of December 31, 2021 and 2020, the carrying values reflected in the Consolidated Balance Sheets reasonably approximate the fair values of cash and cash equivalents and restricted cash due to the short-term maturity of these items.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the amounts presented in the consolidated statements of cash flows:

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Invoices are typically issued with net 30-days to net 90-days terms upon delivery of product or upon achievement of billable events for service-based contracts.

The carrying amount of accounts receivable is reduced by a valuation allowance, if necessary, which reflects management’s best estimate of the amounts that are doubtful.

This allowance is estimated based on management’s knowledge of its customers’ financial condition, credit history, and existing economic conditions.

Account balances are considered delinquent if payment is not received by the due date.

Accounts receivable are written off when deemed uncollectible.

Recovery of accounts receivable previously written off is recorded when received.

Interest is not charged on accounts receivable.

An allowance for doubtful accounts of $132 and $185 was provided in the accompanying consolidated financial statements as of December 31, 2020 and 2019, respectively.

Unbilled receivables relate to the Company’s rights to consideration for performance obligations satisfied but not billed at the reporting date on contracts.

Unbilled receivables are billed and transferred to customer accounts receivable when the rights become unconditional.

The carrying amount of accounts receivable is reduced by a valuation allowance.

The Company estimates the expected credit losses for trade receivables using historical loss data adjusted for current economic conditions, including reasonable and supportable forecasts to estimate relative size of credit losses to be expected under the CECL model.

The Company generally writes off a receivable or records a specific allowance for credit losses if the Company determines that the receivable is not collectible.

Allowances for credit losses of $ 262 and $ 132 were provided in the accompanying consolidated financial statements as of December 31, 2021 and 2020, respectively.

Trade receivables

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Other receivables

Allowances for credit losses

Accounts receivable, net

As of December 31, 2020 and 2019, the carrying values reflected in the Consolidated Balance Sheets reasonably approximate the fair values for accounts receivable due to the short-term maturity of these items.

The following is the allowance rollforward of credit losses for the Company’s accounts receivable as of December 31, 2021 and 2020.

Beginning balance

Provision for credit losses

Ending Balance

(h) Property and Equipment

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There was no impairment of property and equipment for the years ended December 31, 2021, 2020, and 2019.

(i) Software Development Costs

The Company determines if a contract contains a lease at contract inception and whether its classification as either an operating or finance lease at lease commencement.

The Company’s current portfolio includes operating leases of real estate and capital leases of equipment.

The Company records a lease liability, as of the lease commencement date, in an amount equal to the present value of future fixed payments over the lease term.

Options to extend or terminate a lease are considered in the lease term to the extent that the option is reasonably certain of exercise.

A right-of-use (“ROU”) asset is recorded in an amount equal to the corresponding lease liability adjusted for prepayments, initial directs costs and lease incentives, if applicable.

The Company has elected not to recognize ROU assets and lease liabilities for short-term leases of real estate with a lease term of 12 months or less.

The Company generally uses its incremental borrowing rate in determining the present value of future payments as the rate implicit in the lease is unknown.

The incremental borrowing rate represents the rate of interest that the Company would expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

Fixed lease payments on operating leases are recognized on a straight-line basis over the lease term, while variable payments are recognized in the period incurred.

Variable lease payments include real estate taxes and charges for other non-lease services due to lessors that are not dependent on an index or rate.

The Company’s real estate contracts may include fixed consideration attributable to both lease and non-lease components, including non-lease services provided by the lessor, which are accounted for as a single fixed minimum payment.

ROU assets under finance leases are depreciated in a manner similar to other property and equipment.

(j) Software Development Costs

Software development costs are accounted for in accordance with FASB ASC Subtopic 985-20 if the software is to be sold, leased or otherwise marketed, or by FASB ASC Subtopic 350-40 if the software is for internal use.

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If such events or changes in circumstances are present, an impairment loss would be recognized if the sum of the expected future net cash flows is less than the carrying amount of the asset.

An impairment loss would be

recorded for the excess of the carrying value of the asset over the estimated fair value.

An impairment loss would be recorded for the excess of the carrying value of the asset over the estimated fair value.

There was no impairment of software development costs for the years ended December 31, 2021, 2020, and 2019.

(j) Debt Issuance Costs

(k) Debt Issuance Costs

Debt issuance costs are capitalized and amortized over the term of the related debt using the effective interest rate method.

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The unamortized amount is included as an offset against long-term debt on the Consolidated Balance Sheets.

(k) Goodwill and Other Intangible Assets

Debt issuance costs related to line-of-credit arrangements are capitalized and are included in other long-term assets on the Consolidated Balance Sheets.

The capitalized costs are amortized ratably over the term of the line-of-credit arrangement.

The amortization costs are included in interest expense within the Consolidated Statements of Operations and Comprehensive Loss, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement.

(l) Goodwill and Other Intangible Assets

The Company has four reporting units – Software reporting unit (“Software”), SimCyp reporting unit (“SimCyp”), Integrated Drug Development reporting unit (“IDD”), and Regulatory Writing reporting unit (“Regulatory Writing”) which are within a single operating segment of the Company.

Goodwill is tested for impairment at the reporting unit level, which is one level below or the same as an operating segment.

When testing goodwill for impairment, the Company first performs a qualitative assessment to determine whether it is necessary to perform step one of a two-step annual goodwill impairment test for each reporting unit.

The Company is required to perform step one only if it concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying value.

Should this be the case, the first step of the two-step process is to identify whether a potential impairment exists by comparing the estimated fair values of the Company’s reporting units with their respective book values, including goodwill.

If the estimated fair value of the reporting unit exceeds book value, goodwill is considered not to be impaired, and no additional steps are necessary.

If, however, the fair value of the reporting unit is less than book value, then the second step is performed to determine if goodwill is impaired and to measure the amount of impairment loss, if any.

The amount of the impairment loss is the excess of the carrying amount of the goodwill over its implied fair value.

The estimate of implied fair value of goodwill is primarily based on an estimate of the discounted cash flows expected to result from that reporting unit but may require valuations of certain internally generated and unrecognized intangible assets such as the Company’s software, technology, patents and trademarks.

If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess.

For the years ended December 31, 2020, 2019, and 2018, the Company performed a quantitative assessment of goodwill and determined that it is not more-likely-than-not that the fair value of its reporting units is less than the carrying amount.

When testing goodwill for impairment, the Company performs a qualitative assessment to determine whether events or circumstances lead to a determination that it is more-likely-than-not that the fair values of the reporting units are less than their carrying amounts.

If the Company determines that it is not more-likely-than-not that the fair values of the reporting units are less than their carrying values, no further assessment is performed.

If the Company determines that it is more-likely-than-not that the fair values of the report units are less than carrying value, the Company proceed to perform a quantitative goodwill impairment test.

If the result of the quantitative test show that carrying amount of reporting unit exceeds its fair values, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

For the years ended December 31, 2021, 2020, and 2019, the Company performed quantitative assessments of goodwill.

The most recent assessment was performed on October 1, 2021.

The quantitative assessments resulted in no impairment as the estimated fair value of each reporting unit significantly exceeded its carrying value.

Accordingly, no impairment loss was recorded for the years ended December 31, 2021, 2020, and 2019.

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There were no impairment charges related to intangible assets for the years ended December 31, 2021, 2020, and 2019.

(l) Foreign Currency Translation

(m) Foreign Currency Translation

Generally, the functional currency of the Company’s international subsidiaries is the local currency of the country in which they operate.

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For transactions that are not denominated in the local functional currency, the Company remeasures monetary assets and liabilities at exchange rates in effect at the end of each reporting period.

Foreign currency transaction gains and losses are included net within comprehensive loss in the Consolidated Statements of Operations and Comprehensive Loss and resulted in foreign currency losses of $715, $431, and $23 for the years ended December 31, 2020, 2019, and 2018, respectively.

(m) Derivative Instruments

Foreign currency transaction gains and losses are included net within comprehensive gain or loss in the Consolidated Statements of Operations and Comprehensive Loss and resulted in foreign currency gain (losses) of $ 175 , $( 715 ), and $( 431 ) for the years ended December 31, 2021, 2020, and 2019, respectively.

(n) Derivative Instruments

In the normal course of business, the Company is subject to risk from adverse fluctuations in interest rates.

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To qualify for hedge accounting, the interest rate swaps must effectively reduce the risk exposure that they are designed to hedge.

In addition, at inception of a qualifying cash flow hedging relationship, the underlying transaction or transactions must be, and be expected to remain, probable of occurring in accordance with the related assertions.

addition, at inception of a qualifying cash flow hedging relationship, the underlying transaction or transactions must be, and be expected to remain, probable of occurring in accordance with the related assertions.

FASB ASC 815, “Derivatives and Hedging,” requires the Company to recognize all derivatives on the balance sheet at fair value.

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Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

As of December 31, 2019, the Company had one outstanding interest rate swap that was designated as a cash flow hedge of interest rate risk for a notional amount of $217,500 that fixed the interest rate at 1.8523%, noninclusive of the fixed credit spread.

This interest rate swap matured on November 30, 2020.

On May 22, 2019, the Company entered into a second interest rate swap agreement, which was effective on November 30, 2020.

This second interest rate swap was also designated as a cash flow hedge of interest rate risk for a notional amount of $230,000 that fixed the interest rate at 2.1284%, noninclusive of the fixed credit spread through May 31, 2022.

The Company recorded the fair value of its interest rate swaps in the amount of $3,671 and $2,152, as a derivative liability as of December 31, 2020 and 2019, respectively, in its Consolidated Balance Sheets.

The Company’s interest rate swaps qualify for hedge accounting.

The fair values of the interest rate swaps are recognized in the Consolidated Balance Sheets and the changes in the fair value of the derivatives are recognized in other comprehensive loss.

Subsequently, the gain or loss reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings.

The Company has an interest rate swap agreement that was designated as a cash flow hedge of interest rate risk for a notional amount of $ 230,000 that fixed the interest rate at 2.1284 %, non-inclusive of the fixed credit spread through May 31, 2022.

In the second quarter of 2021, the Company determined that the hedge had not been highly effective from April 2018 and did not qualify for hedge accounting.

As a result, the Company performed an analysis of the materiality of the out of period error correction in accordance with ASC 250, “Accounting Changes and Error Corrections”, both quantitively and qualitatively, and concluded that the error correction was immaterial to all periods.

The Company reclassified $ 3,033 of accumulated comprehensive loss to interest expense in the Consolidated Statements of Operations and Comprehensive Loss in the second quarter of 2021.

Changes in the fair value of the interest rate swap recognized in interest expense excluding the reclassification discussed previously for the year ended December 31, 2021 amounted to $ 638 .

On August 31, 2021, the Company entered an amendment to the interest rate swap agreement.

The amended interest rate swap agreement does not in its entirety meet the definition of a derivative instrument because of its off market fixed rate at inception and is deemed to be a hybrid instrument with a financing component and an embedded at-the-market derivative.

Such embedded derivative is bifurcated and accounted for separately.

At inception, the financing component of $ 1,966 was recorded as the amortized cost.

The embedded at-the-market derivative was designated and qualified as a cash flow hedge of interest rate risk for a notional amount of $ 230,000 that fixed the interest rate at 1.2757 %, non-inclusive of the fixed credit spread through May 31, 2022.

The fair value of the embedded at-the-market derivative is recognized in the Consolidated Balance Sheets and the changes in the fair value of the embedded at-the-market derivative is recognized in other comprehensive income(loss).

At December 31, 2021, the financing component is recorded as current portion of interest rate swap liability in the amount of $ 1,088 and is included in other current liabilities on the Consolidated Balance Sheet.

Due to an other-than-insignificant financing element on a portion of such hybrid instrument, the cash flows associated with this hybrid instrument are classified as financing activities in the Consolidated Statements of Cash Flows.

At December 31, 2021, the Company recorded the fair value of the embedded at-the-market derivative as current portion of interest rate swap assets in the amount of $ 57 in prepaid expenses and other current assets on the Consolidated Balance Sheet.

The following table sets forth the liabilities that were measured at fair value on a recurring and non-recurring basis by their levels in the fair value hierarchy at December 31, 2021:

Interest rate swap liability

Interest rate swap asset

The following table sets forth the liabilities that were measured at fair value on a recurring and non-recurring basis by their levels in the fair value hierarchy at December 31, 2020:

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The net amount of deferred gains (losses) related to derivative instruments designated as cash flow hedges that is expected to be reclassified from accumulated other comprehensive loss into interest expense over the next 12 months is insignificant.

(o) Warranty ‌

The Company includes an assurance commitment warranting the application software products will perform in accordance with written user documentation and the agreements negotiated with customers.

Since the Company does not customize its applications software, warranty costs are insignificant and expensed as incurred.

(o) Net Loss per Share

Basic net loss per common share is computed by dividing the net loss by the weighted-average number of shares outstanding during the reporting period, without consideration for potentially dilutive securities.

Diluted net loss per share is computed by dividing the net loss attributable to stockholders by the weighted-average number of shares and dilutive securities outstanding during the period.

(p) Income Taxes

(p) Earnings per Share

Basic earnings per common share is computed by dividing the net earnings by the weighted-average number of shares outstanding during the reporting period, without consideration for potentially dilutive securities.

Diluted earnings per share is computed by dividing the net earnings attributable to stockholders by the weighted-average number of shares and dilutive securities outstanding during the period.

(q) Income Taxes

The Company accounts for income taxes under the asset and liability method.

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The first step requires the Company to conclude that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination by a tax authority.

The second step requires the Company to measure the largest amount of benefit, determined on a cumulative probability basis, that is more likely than not to be realized upon ultimate settlement with the respective tax authority.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained.

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The Company's policy is to recognize interest and penalties related to income tax positions taken as a component of the provision for income taxes.

The Company recorded unrecognized tax benefits of $897 and $690 as of December 31, 2020 and 2019, respectively.

As of December 31, 2020 and 2019, there were no interest or penalties recorded.

The Company does not anticipate any significant changes to its uncertain tax positions during the next twelve months.

The audits of the federal income tax returns for the tax year ended December 31, 2016 and December 31, 2017 are closed.

The Internal Revenue Service can audit the NOLs generated in respective years in the years that the NOLs are utilized.

The Company has recorded unrecognized tax benefits of $ 1,059 and $ 897 as of December 31, 2021 and 2020, respectively.

As of and for the years ended December 31, 2021 and 2020, there were no interest or penalties recorded.

The Company does not anticipate any significant changes to its uncertain tax positions during the next 12 months.

federal income tax returns are generally subject to examination for a period of three years after the filing of the return.

However, the Internal Revenue Service can audit the NOLs generated in respective years in the years that the NOLs are utilized.

State income tax returns are generally subject to examination for a period of three to six years after the filing of the respective tax return.

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Foreign income tax returns are generally subject to examination based on the tax laws of the respective jurisdictions.

(q) Revenue Recognition ASC 606

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services.

(r) Revenue Recognition

The Company’s revenue consists of fees for perpetual and term licenses for the Company’s software products, post-contract customer support (referred to as maintenance), software as a service (“SaaS”) and professional services including training and other revenue.

For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation on a relative standalone selling price basis.

The delivery of a particular type of software and each of the user licenses would be one performance obligation.

However, any training, implementation, or support and maintenance promises as part of the software license agreement would be considered separate performance obligations, as those promises are distinct and separately identifiable from the software licenses.

The payment terms in these arrangements are sufficiently short such that there is no significant financing component to the transaction.

The Company typically recognizes license revenue at a point in time upon delivering the applicable license.

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The revenue related to software training and software implementation performance will be recognized at the completion of the service.

The following describes the nature of the Company’s primary types of revenues and the revenue recognition policies as they pertain to the types of transactions the Company enters into with its customers.

The following describes the accounting policies for multiple performance obligations and the nature of the Company’s primary types of revenues and the revenue recognition policies as they pertain to the types of transactions the Company enters into with its customers.

Arrangements with Multiple Performance Obligations

For contracts with multiple performance obligations, the Company determines if the products or services are distinct and allocates the consideration to each distinct performance obligation on a relative standalone selling price basis.

When products and services are not distinct, the Company determines an appropriate measure of progress based on the nature of its overall promise for the single performance obligation.

The delivery of a particular type of software and each of the user licenses would be one performance obligation.

The payment terms in these arrangements are sufficiently short such that there is no significant financing component to the transaction.

Software Licenses and Support

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Due to the quick nature of the performance obligation from start to finish and the immaterial amounts, the Company recognizes any software training or implementation revenue at the completion of the service.

Any unrecognized portion of amounts paid in advance for licenses and services is recorded as deferred revenue.

Any unrecognized portion of amounts paid in advance for licenses and services is recorded as

deferred revenue.

Certara’s software contracts do not typically include discounts, variable consideration, or options for future purchases that would not be similar to the original goods.

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Services and Other Revenues

Services primarily represent consulting services, which may be either strategic consulting services, reporting and analysis services, regulatory writing services, or any combination of the three.

The Company’s primary services offering includes consulting services, which may be either strategic consulting services, reporting and analysis services, regulatory writing services, or any combination of the three.

Strategic consulting services consists of consulting, training, and process redesign that enables customers to identify which uncertainties are greatest and matter most and then to design development programs, trial sequences, and individual trials in such a way that those trials systematically reduce the identified uncertainties in the most rapid and cost-effective manner possible.

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Services revenues are generally recognized over time as the services are performed.

Generally, these services are delivered to customers electronically.

Revenue from time-and-material contracts is recognized on an output basis as labor hours are delivered and/or direct expenses are incurred.

Revenues for fixed price services and prepaid are generally recognized over time applying input methods to estimate progress to completion.

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Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

The Company has contracts with customers that may have multiple performance obligations, including some or all of the following:

The Company has contracts with customers that may have

multiple performance obligations, including some or all of the following:

software licenses, maintenance, subscriptions, professional services and/or training.

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Invoiced amounts for non-cancelable services starting in future periods are included in contract assets and deferred revenue.

The portion of deferred revenue that will be recognized within twelve months is recorded as current deferred revenue, and the remaining portion is recorded as non-current deferred revenue in the Consolidated Balance Sheets.

The portion of deferred revenue that will be recognized within 12 months is recorded as current deferred revenue, and the remaining portion is recorded as non-current deferred revenue in the Consolidated Balance Sheets.

The unsatisfied performance obligation as of December 31, 2021 was approximately $ 91,943 .

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The Company has determined that sales commissions paid are an immaterial component of obtaining a customer’s contract and has elected to expense sales commissions when paid.

Revenue Recognition Pre ASC 606

The adoption of ASC 606 changed the way the Company recognizes revenue related to term and bundled license agreements.

Prior to ASC 606, the Company recognized software licenses and support revenue in accordance with FASB ASC 985, “Software.” Revenues from software license agreements are recognized when all of the following criteria are met as set forth in FASB ASC 985:

(1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the fee is fixed or determinable, and (4) collectability is probable.

A source of software license revenue is from term and bundled licenses that are time-based arrangements for one or multiple software products that are sold together with maintenance and support for the term of the license arrangement.

The Company does not have vendor specific objective evidence (“VSOE”) to determine fair value of the maintenance and support in term arrangements and, therefore, recognizes revenues from these bundled time-based licenses ratably over the license term, which typically ranges from one to three years.

The Company allocates revenues from perpetual software arrangements involving multiple elements to each element based on the relative fair values as determined by the VSOE for each element.

The Company limits its assessment of VSOE for each element to the price charged when the same element is sold separately.

The Company has analyzed all of the elements included in multiple-element arrangements and determined that the Company has sufficient VSOE to allocate revenues to maintenance and support, deployment, and training.

The Company sells training separately and has established VSOE on this basis.

VSOE for maintenance and support is determined based upon the renewal rates in contracts themselves, which is based on a fixed percentage of the current perpetual license list price.

Deployment services are charged based on standard hourly rates.

Accordingly, assuming all other revenue recognition criteria are met, revenues from perpetual licenses are recognized upon delivery of the software using the residual method in accordance with ASC 985 .

Software maintenance agreements provide for technical support and the right to unspecified enhancements and upgrades on a “when-and-if-available” basis.

Post-contract support (“PCS”) revenues on perpetual agreements are recognized ratably over the term of the support period (generally one year).

Deployment, training, and other service revenues are recognized as the related services are provided.

Any unrecognized portion of amounts paid in advance for licenses and services is recorded as deferred revenue.

For presentation in the Consolidated Statements of Operations and Comprehensive Loss, license revenues and PCS are combined as allowed under U.S.

GAAP due to the immaterial amount of revenues obtained from PCS when charged separately in comparison to the total of these two sources.

Sources and Timing of Revenue

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Service revenues earned over time

(r) Equity -based compensation

(s) Equity-Based Compensation

The Company measures equity-based compensation at fair value and recognizes the expense over the vesting period.

Compensation costs for our legacy Class B Units, issued by EQT Avatar Parent L.P.

(“EQT”), that vested based on continued service requirements and the restricted stock into which they were exchanged are recognized on a straight-line basis over the requisite service period.

Compensation costs for our legacy Class B Units, issued by EQT, that vested based on continued service requirements and the restricted stock into which they were exchanged are recognized on a straight-line basis over the requisite service period.

Compensation costs for our restricted stock units are recognized on a straight-line basis over the requisite service period.

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Forfeitures are recognized as they occur for all awards.

(s) Comprehensive (Loss) Income

(t) Comprehensive Income (Loss)

FASB ASC 220, “Comprehensive Income,” establishes standards for reporting of comprehensive income and its components (revenue, gains, and losses) in a full set of general-purpose financial statements.

FASB ASC 220 requires that all components of comprehensive income, including net income, be reported in a financial statement that is displayed with the same prominence as other financial statements.

Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.

Net loss and other comprehensive loss, including foreign currency translation adjustments, and changes in fair value of derivative instruments (interest rate swap agreements) designated as cash flow hedges, shall be reported to arrive at comprehensive loss.

Comprehensive loss is displayed in the Consolidated Statements of Operations and Comprehensive Loss.

The components of other comprehensive income (loss) consisted of foreign currency translation adjustments totaling $5,045, $433 and $(16,721), respectively, and change in fair value of interest rate swap, net of tax, totaling $(1,135), $(4,283), and $1,079 for the years ended December 31, 2020, 2019, and 2018, respectively.

(t) Reclassification

Certain amounts in the 2018 and 2019 consolidated financial statements have been reclassified to conform with the current year presentation.

Initial Public Offering

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.

Net income (loss) and other comprehensive income (loss), including foreign currency translation adjustments, and changes in fair value of derivative instruments (interest rate swap agreements) designated as cash flow hedges, shall be reported to arrive at comprehensive (loss).

Comprehensive income (loss) is displayed in the Consolidated Statements of Operations and Comprehensive Income (Loss).

The components of other comprehensive income (loss) consisted of foreign currency translation adjustments totaling $( 5,154 ), $ 5,045 and $ 433 , respectively, and the changes in fair value of interest rate swap (excluding $ 2,268 reclassification, net of tax), totaling $ 547 , $( 1,135 ), and $( 4,283 ) for the years ended December 31, 2021, 2020, and 2019, respectively.

(u) Reclassification

Certain previously reported amounts in the consolidated financial statements have been reclassified to conform to the current year presentation.

Since the first quarter of 2020, the COVID-19 pandemic has posed a significant threat to public health as well as the global and U.S.

The continued spread of variants of COVID-19 may adversely impact our business, financial condition or results of operations as a result of increased costs, negative impacts to our workforce, or a sustained economic downturn.

Although the economy has rebounded in many areas, the outlook for containing the outbreak is still highly uncertain.

Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on the global and US economy and our business.

Public Offerings

On December 15, 2020, the Company completed its initial public offering (“IPO”), pursuant to which the Company issued and sold 14,630,000 shares of common stock and certain selling stockholders, including former controlling shareholder, EQT, sold 18,783,250 shares of our common stock (representing the full exercise of the underwriters’ option to purchase additional shares), at a public offering price of $ 23.00 per share.

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The rights and obligations do not transfer without the written consent of the Company and the Institutional Investors.

On March 29, 2021, the Company completed an underwritten secondary public offering in which certain selling stockholders, including EQT, sold 11,500,000 shares of the Company’s common stock, including 1,500,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares.

The Company did no t offer any common stock in this transaction and did no t receive any proceeds from the sale of the shares of common stock by the selling stockholders.

The Company incurred costs of $ 1,100 , recorded in general and administrative expenses, in relation to the secondary public offering.

On September 13, 2021, the Company completed another public offering, at a price of $ 31.00 per share, pursuant to which the Company sold 4,500,000 shares of its common stock, and certain selling stockholders sold 18,500,000 shares of the Company’s common stock, including 3,000,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares.

The Company received net proceeds of $ 134,096 , after deducting underwriters' discounts and commissions.

In addition, $ 745 of legal, accounting and other offering costs incurred in connection with the sale of the Company's common stock in the public offering were capitalized and offset against the proceeds received.

On November 22, 2021, the Company completed another secondary public offering in which certain selling stockholders, including EQT, sold 10,000,000 shares of the Company’s common stock.

The Company did no t offer any common stock in this transaction and did no t receive any proceeds from the sale of the shares of common stock by the selling stockholders.

The Company incurred costs of $ 644 , recorded in general and administrative expenses, in relation to the secondary public offering.

Concentrations of Credit Risk

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As of December 31, 2021and 2020, no customer accounted for more than 10% of the Company’s accounts receivable.

As of December 31, 2020, 2019, and 2018, no customer accounted for more than 10% of the Company’s revenues.

For the years ended December 31, 2021, 2020, and 2019, no customer accounted for more than 10% of the Company’s revenues.

Business Combinations

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The results of operations have been included in the Company’s results of operations prospectively from the date of acquisition.

BaseCase provides SaaS in the Life Sciences industry.

This acquisition was made to combine its background in health economics with the Company’s background in Computer Science and exploit the gap in the market for health economics by accessing the software market in the life sciences industry.

The BaseCase acquisition was funded through proceeds of $25,000 received from an additional tranche of term debt and cash on hand.

The following table summarizes the estimates of the fair values of the assets acquired and liabilities assumed in the BaseCase acquisition as of the date of acquisition.

Accounts receivable

Prepaid expenses and other assets

Property and equipment

Separately identifiable intangible assets

Total identifiable assets acquired

Accounts payable

Accrued expenses

Deferred revenue

Deferred tax liability

Total liabilities assumed

Net identifiable assets acquired

Goodwill arising in the acquisition

Purchase price

The adjustments recorded to reflect the acquired assets at their estimated fair value and liabilities at their estimated fair value or the present value of amounts to be paid included:

$7,580 to record the estimated fair market value of the acquired intangible assets consisting of:

non-compete agreements $10;

non-contractual customer relationships $5,480;

acquired software $1,120 and tradename $970

Reduction in deferred revenues of $2,121

Other miscellaneous adjustments

The fair value of the intangible assets is based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements under FASB ASC 820-10.

The fair value of the non-contractual customer relationships was determined under the income approach, specifically the multi-period excess earnings method.

The fair value of the non-compete was determined using the income approach, specifically the comparative business valuation method.

The fair value of the tradename and acquired software was determined using the income approach, specifically the relief from royalty method.

In addition, goodwill of $21,260 was recorded to reflect the excess of the purchase price over the estimated fair value of the net identifiable assets acquired, which is not deductible for tax purposes.

The Company incurred $2,122 of acquisition costs related to this acquisition, which are included in operating expenses in the Consolidated Statement of Operations and Comprehensive Loss for the year ended December 31, 2018.

The Company also incurred costs for the issuance of debt, which was capitalized as a debt issuance costs as of the acquisition date in the amount of $313.

Analytica Laser

Analytica Laser employs cutting-edge quantitative methodologies and proprietary software to study and predict real-world outcomes for drug value assessment.

This acquisition was made so that the Company’s complementary approaches allow integration of Health Economics and Outcomes Research (“HEOR”) and real-world value assessments with Pharmacometrics data — delivering safety, efficacy and effectiveness insights and providing a unique market advantage for our customers.

The Analytica Laser acquisition was funded through proceeds of $40,000 received from an additional tranche of term debt and cash on hand.

The following table summarizes the estimates of the fair values of the assets acquired and liabilities assumed in the Analytica Laser acquisition as of the date of acquisition.

On March 2, 2021, the Company completed a transaction which qualified as a business combination for a total consideration of $ 2,667 .

The business combination was not material to our consolidated financial statements.

Based on the Company’s purchase price allocation, approximately $ 1,200 , $ 100 and $ 1,200 of the purchase price was assigned to customer relationships, non-compete agreements and goodwill, respectively.

Insight Medical Writing Limited

On June 7, 2021, the Company completed a transaction which qualified as a business combination for a total consideration of $ 15,197 .

The business combination was not material to our consolidated financial statements.

Based on the Company’s purchase price allocation, approximately $ 7,400 and $ 4,700 of the purchase price was assigned to customer relationships and goodwill, respectively.

Pinnacle 21, LLC

On October 1, 2021, the Company acquired 100 % of the equity of Pinnacle.

Pinnacle provides software and services for preparing clinical trial data for regulatory submission.

The acquisition executes on the Company’s strategy to invest in innovation to increase the use cases of biosimulation and grow adoption of Certara’s end-to-end platform.

The acquisition of Pinnacle was treated as a purchase in accordance with ASC 805, “Business Combinations”, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction.

The following table summarizes the fair value of the consideration paid as well as the fair values of the assets acquired and liabilities assumed as of the date of the acquisition:

Fair value of consideration:

Cash paid to sellers

Cash paid to others and escrow

Unregistered shares of Certara, Inc.

( 2,239,717 shares)

Total consideration

Assets acquired and liabilities assumed:

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other assets

Other current assets

Property and equipment

Separately identifiable intangible assets

Total identifiable assets acquired

Accounts payable

Accrued expenses

Deferred revenue

Deferred tax liability

Total liabilities assumed

Net identifiable assets acquired

Goodwill arising in the acquisition

Purchase price

The adjustments recorded to reflect the acquired assets at their estimated fair value and liabilities at their estimated fair value or the present value of amounts to be paid included:

$17,630 to record the estimated fair market value of the acquired intangible assets consisting of:

non-compete agreements $390 and non-contractual customer relationships $17,240

Reduction in deferred revenues of $135

Other miscellaneous adjustments

The fair value of the intangible assets is based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements under FASB ASC 820-10.

The fair value of the non-contractual customer relationships was determined under the income approach, specifically the multi-period excess earnings method.

The fair value of the non-compete was determined using the income approach, specifically the comparative business valuation method.

In addition, goodwill of $22,739 was recorded to reflect the excess of the purchase price over the estimated fair value of the net identifiable assets acquired, which is not deductible for tax purposes.

The Company incurred $1,728 of acquisition costs related to this acquisition, which are included in operating expenses in the Consolidated Statement of Operations and Comprehensive Loss for the year ended December 31, 2018.

The Company also incurred costs for the issuance of debt, which was capitalized as a debt issuance cost as of the acquisition date in the amount of $750.

Prepaid Expenses and Other Current Assets

Deferred tax assets

Identifiable intangible assets:

Acquired software

Customer relationships

Long-term deposits

Current liabilities

Current portion of deferred revenue

Net assets acquired

The fair value of the unregistered shares given as part of the purchase consideration was determined based on the market price of Certara stock on the closing date less a 7 % discount for lack of marketability.

The acquisition was structured as an asset acquisition for income tax purposes;

therefore, the Company’s tax basis in Pinnacle’s identifiable assets reflects the fair value of consideration paid.

However, the company did not recognize tax basis in certain liabilities assumed at the acquisition date;

resulting in deferred income taxes being recorded in purchase accounting.

The fair value of the intangible assets is based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements within the fair value measurement hierarchy.

The fair value of the customer relationships (Distributor method), trademarks (Relief from Royalty method) and developed technology (Multi-Period Excess Earnings Method) was determined under the income approach.

Goodwill of $ 180,947 was recorded to reflect the excess of the purchase price over the estimated fair value of the net identifiable assets acquired, which is generally deductible for income tax purposes.

The excess of the purchase prices over the fair values of the acquired business's net assets represent cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforces acquired, and has been allocated to goodwill.

The current purchase price allocation is preliminary.

The primary areas of the preliminary purchase price allocations that are not yet finalized relate to the fair value of certain tangible and intangible assets acquired and liabilities assumed, and residual goodwill.

The Company expects to continue to obtain information to assist in determining the fair values of the net assets acquired at the acquisition dates during the measurement periods.

Any adjustments to the preliminary purchase price allocation identified during the measurement period, which will not exceed one year from the acquisition date, will be accounted for prospectively.

The Company incurred $ 7,615 of transaction costs related to this acquisition, which are included in general and administrative expenses in the Consolidated Statement of Operations for the year ended December 31, 2021.

The results of operations of the acquired business and the fair value of the acquired assets and liabilities assumed are included in the Company’s consolidated financial statements with effect from the date of the acquisition.

The Company’s Consolidated Statement of Operations and Comprehensive Loss for the year ended December 31, 2021 includes revenues of $ 6,129 and a net income of $ 380 which includes the effects of purchase accounting adjustments, primarily changes in amortization of intangible assets.

Supplemental Pro Forma Information (unaudited)

The following unaudited pro forma combined financial information assumes that the acquisition of Pinnacle occurred on January 1, 2020.

For the year ended December 31

The unaudited pro forma combined results for the years ended December 31, 2021 and 2020 primarily include the following pro forma adjustments:

● Incremental amortization expense, net of tax, related to Pinnacle purchased intangible assets in an amount of $ 5,246 and $ 7,001 for the years ended December 31, 2021 and 2020, respectively.

● Incremental equity-based compensation expense, net of tax, related to replacement awards in an amount of $ 641 and $ 856 for the years ended December 31, 2021 and 2020, respectively.

Integrated Nonclinical Development Solutions, Inc.

On January 3, 2022, the Company completed the acquisition of Integrated Nonclinical Development Solutions, Inc.

(“INDS”), a company that provides the SEND Explorer® software and drug development consulting, for total consideration of $ 7,078 .

The Company will complete the initial accounting for the acquisition of INDS, including the allocation of purchase consideration, in the first quarter of 2022.

Prepaid Expenses and Other Current Assets and Other Supplemental Assets Information

Prepaid and other current assets consisted of the following:

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Income tax receivable

R&D tax credit receivable

Research and development tax credit receivable

Current portion of interest rate swap asset

Other current assets

Prepaid expenses and other current assets

Other long-term assets consisted of the following:

Long-term deposits

Deferred financing cost

Total other long-term assets

Property and Equipment

Property and equipment consisted of the following:

Computer equipment

Computer and office equipment

Purchased software for internal use

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RELATIONSHIPS

The Company has not recognized any impairment charges for the years ended December 31, 2020, 2019, and 2018.

The Company has no t recognized any impairment charges for the years ended December 31, 2021, 2020, and 2019.

A reconciliation of the change in the carrying value of goodwill is as follows:

Balance, December 31, 2019

Goodwill associated with 2020 business combinations

Foreign currency translation

Balance, December 31, 2020

ISB acquisition

Goodwill associated with 2021 business combinations

Foreign currency translation

Balance, December 31, 2021

Accrued Expenses

Accrued Expenses and Other Supplemental Liabilities Information

Accrued expenses consist of the following:

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Total accrued expenses

Other current liabilities consist of the following:

Current portion of interest rate swap liability

Current operating lease liabilities

Current finance lease liabilities

Total other current liabilities

Other long-term liabilities consist of the following:

Non-current portion of interest rate swap liability

Non-current finance lease liabilities

Total other long-term liabilities

Long-Term Debt and Revolving Line of Credit

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The Company also entered into a $ 20,000 revolving line of credit with lenders with a sub-commitment for issuance of letters of credit of $ 10,000 .

As of December 31, 2020 and 2019, available borrowings under the $20,000 revolving line of credit are reduced by a $120 standby letter of credit issued to a landlord in lieu of a security deposit.

This agreement is collateralized by substantially all U.S.

The Company and lenders entered into Amendment No.

1 to the Credit Agreement on January 25, 2018, where an additional tranche of $ 25,000 was added to the term loan.

The amortization schedule of the new tranche was made coterminous with the rest of the term loan.

There were no other changes to the terms of the Credit Agreement.

The Company and lenders entered into Amendment No.

2 to the Credit Agreement on April 3, 2018, where an additional tranche of $ 40,000 was added to the term loan.

The amortization schedule of the new tranche was made coterminous with the rest of the term loan.

There were no other changes to the terms of the Credit Agreement.

The Company and lenders entered into a third amended and restated loan agreement on June 17, 2021 (“Third Amendment”), which provides for, among other things, (i) the extension of the termination date applicable to the revolving credit commitments under the Credit Agreement to August 2025, (ii) the extension of the maturity date applicable to the term loans under the Credit Agreement to August 2026, and (iii) an increase of approximately $ 80,000 in commitments available under the revolving line of credit (resulting in an aggregate amount of commitments of $ 100,000 ).

The term loan under the Third Amendment has substantially the same terms as the existing term loans and revolving credit commitments.

The Credit Agreement is collateralized by substantially all U.S.

assets and stock pledges for the non-U.S.

subsidiaries and contain various financial and nonfinancial covenants.

The Company and lenders entered into a restated and amended loan agreement on January 25, 2018 where an additional tranche of $25,000 was added to the Credit Agreement with respect to the loan.

The amortization schedule of the new tranche was made coterminous with the rest of the agreement.

There were no other changes to the terms of the agreement.

The Company and lenders entered into a second restated and amended loan agreement on April 3, 2018 where an additional tranche of $40,000 was added to the Credit Agreement with respect to the loan.

The amortization schedule of the new tranche was made coterminous with the rest of the agreement.

There were no other changes to the terms of the agreement.

As of December 31, 2021 and 2020, available borrowings under the revolving lines of credits were $ 100,000 and $ 20,000 , respectively.

Available borrowings under the revolving lines of credits of $ 100,000 and $ 20,000 as of December 31, 2021 and 2020, respectively, were reduced by $ 239 and $ 120 standby letter of credit issued to a landlord in lieu of a security deposit.

The Company was in compliance with all covenants as of December 31, 2021 and 2020.

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Interest paid on the Credit Agreement with respect to the revolving line of credit amounted to $ 93 , $ 457 , and $ 174 for the years ended December 31, 2021, 2020, and 2019, respectively.

There was no accrued interest payable on the revolving line of credit as of December 31, 2020 and 2019.

There was $ 66 accrued interest payable and no accrued interest payable on the revolving line of credit at December 31, 2021 and 2020, respectively.

Effective August 14, 2017, the Company entered into an unsecured credit agreement with another lender for a $ 100,000 term loan (“Loan Agreement”).

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On July 15, 2020, the Company made a $ 20,000 prepayment on the loan, which reduced the amount outstanding to $ 80,000 .

On December 28, 2020, the Company repaid the $80,000 aggregate principal amount owed under the Loan Agreement, including $3,000 of accrued interest using a portion of the proceeds from the IPO.

On December 28, 2020, the Company repaid the remaining $ 80,000 aggregate principal amount owed under the Loan Agreement, including $ 3,000 of accrued interest using a portion of the proceeds from the IPO.

The Company's obligations under the Loan Agreement were discharged on that date.

Interest paid on the loan amounted to $ 0 , $ 11,449 , and $ 8,365 for the years ended December 31, 2021, 2020, and 2019, respectively.

Accrued interest payable on the loan amounting to $0 and $3,896 at December 31, 2020 and 2019, respectively, is included in accrued expenses.

Long-term debt consists of the following:

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The principal amount of long-term debt outstanding as of December 31, 2021, matures in the following years:

The variable interest term loan agreement dated August 14, 2017 requires the Company to make an annual mandatory prepayment as it relates to the Company’s Excess Cash Flow calculation.

For the year ended December 31, 2020, the Company was required to make a mandatory prepayment on the term loan of approximately $1,527 on or before April 30, 2021.

For the year ended December 31, 2019, the Company was required to make a mandatory repayment on the term loan of approximately $1,057 on or before April 29, 2020.

The prepayment is included in the current portion of long-term debt on the Consolidated Balance Sheets.

The Credit Agreement requires the Company to make an annual mandatory prepayment as it relates to the Company’s Excess Cash Flow calculation.

For the year ended December 31, 2021, and 2020, the Company was required to make a mandatory prepayment on the term loan of $ 0 , and $ 1,527 , respectively.

For the third credit agreement, the Company is required to make a quarterly principal payment of $ 755 on the term loan each quarter starting from the end of September 2021.

The fair values of the Company’s variable interest term loan and revolving line of credit are not significantly different than their carrying value because the interest rates on these instruments are subject to change with market interest rates.

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In addition, employees who reached the age of 50 during the calendar years 2021, 2020, and 2019 are eligible to make an additional catch up contribution of 6.0 %, subject to income limitations.

The Company matches employee contributions for a percentage of the employee’s deferral, limited to the first 6% of each employee’s compensation.

The Company also operates a Group Personal Pension plan covering all U.K.

The Company matches employee contributions for a percentage of the employee’s deferral, not to exceed the first 6 % of each employee’s compensation.

The Company also operates a Group Personal defined contribution plan covering all U.K.

Employees are auto enrolled in the plan who are at least 22 years of age and paid more than £ 10 a year, up to the State Pension Age.

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Employees may contribute to their personal pension account and then convert that account into income at retirement.

The Company contributes an additional 8% of salary for those employees who have registered for the plan.

In addition to the U.S.

pension plans, the Company also maintains immaterial defined pension plans in several other countries.

Total contributions made by the Company were $3,342, $2,864, and $2,304 for the years ended December 31, 2020, 2019, and 2018 respectively.

The Company contributes an additional 8 % of salary for those employees who have registered for the Plan, which exceeds their duties under U.K.

auto enrolment legislation.

Total 401(k) contributions made by the Company were $ 4,138 , $ 3,342 , and $ 2,864 for the years ended December 31, 2021, 2020, and 2019 respectively.

Commitments and Contingencies

The Company leases certain office facilities and equipment under non-cancelable operating and capital leases with remaining terms from one to eight years.

The gross amounts of assets under capital leases were $1,501 and $663 at December 31, 2020 and 2019, respectively.

The total accumulated amortization associated with equipment under capital leases was approximately $946 and $659 at December 31, 2020 and 2019, respectively.

The related amortization expense is included in depreciation expense.

Rent expense under the operating leases was $6,534, $6,377, and $5,587 for the years ended December 31, 2020, 2019, and 2018, respectively.

Non-cancelable future minimum lease commitments as of December 31, 2020 are:

Year ending December 31,

Non-cancelable future minimum lease payments

Less amount representing interest

Net non-cancelable future minimum lease payments

Legal proceedings

The Company does not have any pending or threatened litigation which, individually or in the aggregate, would have a material adverse effect on the consolidated financial statements as of December 31, 2021.

Assurance-type warranty

The Company includes an assurance commitment warranting the application software products will perform in accordance with written user documentation and the agreements negotiated with customers.

Since the Company does not customize its applications software, warranty costs are insignificant and expensed as incurred.

For information related to commitments for future minimum lease payments, please see Note 14 – Lease.

Equity-Based Compensation

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In addition to the performance conditions above, the Chief Executive Officer’s (“CEO”) performance-based Class B Units also vested if the aggregate value attributable to an IPO equaled or exceeded an amount equivalent to the return on investment performance targets.

The Class B Units were in a secondary position to the Class A units in EQT, in that in any event in which the EQT equity was valued and paid out, holders of the Class B Units would only be paid if an amount at least equal to the applicable participation threshold was first allocated to all of the outstanding classes of units under EQT’s limited

partnership agreement.

In addition, EQT had the right, but not the obligation, to repurchase units at fair value upon certain events, such as a termination of employment.

During the years ended December 31, 2020 and 2019, EQT repurchased 87,930 and 241,601 Class B Units at their intrinsic value of $ 1,079 and $ 703 respectively.

These repurchases were funded through dividends paid by the Company to EQT.

These repurchases were funded through

dividends paid by the Company to EQT.

These Class B Units do not have a maximum contractual life, and as such, these Class B Units do not expire.

The fair value of the Time-based Units that vested solely upon continued employment was measured at the grant date and was recognized as cost over the employee’s requisite service period, which was generally 5 years.

The expense related to the vesting of the Time-based Units was recorded on the Company’s books because the Company directly benefited from the services provided by Class B Unit holders.

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Pricing model

Black-Scholes

Expected dividend yield

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Weighted-Average

EXERCISE PRICE PER

Weighted-Average

Exercise Price

Outstanding, as of December 31, 2019

( 6,328,151 )

Outstanding, December 31, 2020

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Of those Class B Units that were vested and exercisable at December 31, 2019, the weighted-average distribution threshold was $ 10.16 .

The weighted-average grant date fair value per unit was $3.53 and $3.30 as of December 31, 2019 and 2018, respectively.

The aggregate intrinsic value of Class B Units outstanding, vested and exercisable at December 31, 2019 and 2018 was $38,440 and $5,499, respectively.

The weighted-average grant date fair value per unit was $ 3.53 as of December 31, 2019.

The aggregate intrinsic value of Class B Units outstanding, vested and exercisable at December 31, 2019 was $ 38,440 .

There were no Class B Units outstanding as of December 31, 2020.

The total fair value of Class B Units vested and exercisable during 2019 and 2018 was $1,872 and $1,509, respectively.

Equity-based compensation expense related to the Time-based Units was $2,776, $1,691, and $1,711 for the years ended December 31, 2020, 2019, and 2018, respectively.

The total fair value of Class B Units vested and exercisable during 2019 was $ 1,872 .

Equity-based compensation expense related to the Time-based Units was $ 2,776 and $ 1,691 for the years ended December 31, 2020 and 2019.

The Performance-based Units were not probable of vesting prior to the exchange of Class B Units for common shares, as described below;

1 unchanged sentence

As of December 31, 2020, there were no unrecognized compensation costs related to the Units as they had been exchanged for restricted stock as discussed below.

Effective as of December 10, 2020 (the “Exchange Date”), all vested Class B Units were exchanged by EQT for shares of common stock of the Company held by EQT, and unvested Class B Units were exchanged for shares of restricted common stock of the Company.

stock of the Company.

On the Exchange Date, holders of unvested Time-based and Performance-based Units elected to either (1) exchange their unvested Class B Units with shares of restricted common stock of the Company that maintained the same vesting conditions (both time-based and performance-based) of such unvested Class B Units or (2) exchange their unvested Class B Units (both Time-based and Performance-based Units) with shares of restricted common stock of the Company that would be subject only to the same time-vesting conditions of such unvested Time-based Units, based on the original grant date.

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As detailed above, unvested Class B Units were exchanged for restricted stock of the Company.

Share based compensation for the restricted stock exchanged for the time-based Class B Units is recognized on a straight-line basis over the requisite service period of the award, which is generally 5 years.

Share-based compensation for the restricted stock exchanged for the performance-based Class B Units is recognized using the accelerated attribution approach.

A summary of the restricted stock is shown below:

A summary of the restricted stock in 2021 is shown below:

WEIGHTED-AVERAGE

Non-vested restricted stock as of December 31, 2020

( 1,957,054 )

Non-vested restricted stock as of December 31, 2021

The Company was not authorized and did not issue any restricted stock in 2018 or 2019.

Equity-based compensation expense related to the restricted stock exchanged for performance-based Class B Units was $57,421 for the year ended December 31, 2020.

At December 31, 2020, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the accelerated attribution approach was $25,838, which is expected to be recognized over a weighted-average period of 29 months.

Equity-based compensation expense related to the restricted stock exchanged for time-based Class B Units was $167 for the year ended December 31, 2020.

At December 31, 2020, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the straight-line attribution approach was $9,599, which is expected to be recognized over a weighted-average period of 43 months.

The Company granted 87,127 replacement shares of restricted stock in 2021 in connection with the Pinnacle business acquisition under which equity-based awards are outstanding.

The fair value of the per share of restricted stock issued in 2021 was measured using grant date fair market value adjusted lack of marketability for these shares.

Total grant date fair value was $ 2,762 .

The restricted stock issued in 2021 generally have a three year vesting period except for one holder whose shares vests equally on a monthly basis for 2 years .

The Company exchanged 5,941,693 shares discussed in previous section in 2020 and was no t authorized and did no t issue any restricted stock in 2019.

Equity-based compensation expenses related to the restricted stock exchanged for performance-based Class B units were $ 12,349 and $ 57,421 for the years ended December 31, 2021 and 2020, respectively.

At December 31, 2021, the total unrecognized equity-based compensation expenses related to outstanding restricted stock recognized using the accelerated attribution approach was $ 11,638 .

The unrecognized compensation expense for the category at December 31, 2021 is expected to be recognized over a weighted-average period of 24.6 months.

Equity-based compensation expenses related to the time-based restricted stock were $ 3,104 and $ 167 for the years ended December 31, 2021 and 2020, respectively.

At December 31, 2021, the total unrecognized equity-based compensation expenses related to outstanding restricted stock recognized using the straight-line attribution approach were $ 6,394 .

The unrecognized compensation expense for the category at December 31, 2021 is expected to be recognized over a weighted-average period of 33.2 months.

Equity-based employee compensation expense related to the time-based restricted stock for the Pinnacle acquisition was $ 292 for the year ended December 31, 2021.

At December 31, 2021, the total unrecognized equity-based compensation expenses related to outstanding restricted stock recognized using the straight-line attribution approach was $ 2,470 .

The unrecognized compensation expense for the category at December 31, 2021 is expected to be recognized over a weighted-average period of 26.7 months.

2020 Incentive Plan

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The maximum number of shares of common stock granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such non-employee director during the fiscal year, may not exceed $ 1,000,000 in total value, except for certain awards made to a non-executive chair of our board of directors.

At December 31, 2021, there was 19,898,104 shares reserved for future issuance.

The plan share reserve will be increased on the first day of each fiscal year beginning with the 2021 fiscal year and ending after the tenth anniversary of the effective date in an amount equal to the lesser of (i) the positive difference, if any, between (x) 4.0 % of the outstanding common stock on the last day of the immediately preceding fiscal year and (y) the plan share reserve on the last day of the immediately preceding fiscal year and (ii) a lower number of shares of our common stock as determined by our board of directors.

1 unchanged sentence

Restricted stock units (“RSUs”) represent the right to receive shares of the Company’s common stock at a specified date in the future.

In December 2020, the Company granted 30,228 RSUs under the 2020 Incentive Plan that vest over a six-month period.

During year ended December 2021, the Company granted 1,347,265 RSUs under the 2020 Incentive Plan that generally vest over an average three-year period.

The fair value of the RSUs is based on the fair value of the underlying shares on the date of grant.

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Non-vested RSUs as of December 31, 2021

Equity-based compensation expense related to the RSUs was $81 for the year ended December 31, 2020.

Equity-based compensation expense related to the RSUs was $ 8,257 and $ 81 for the years ended December 31, 2021 and 2020, respectively.

At December 31, 2021, the total unrecognized equity-based compensation expense related to outstanding RSUs was $ 29,914 , which is expected to be recognized over a weighted-average period of 28.5 months.

Performance Restricted Stock Units

Performance stock units (“PSUs”) are issued under the 2020 Incentive Plan and represent the right to receive shares of the Company’s common stock at a specified date in the future based on the satisfaction of various service conditions and the achievement of certain performance thresholds including year over year revenue growth and unlevered free cash flow growth.

Equity-based compensation for the PSUs is only recognized to the extent a threshold is probable of being achieved and is recognized using the accelerated attribution approach.

The Company will continue to assess the probability of each

condition being achieved at each reporting period to determine whether and when to recognize compensation cost.

The following table presents a summary of activity on the PSUs for the period ended December 31, 2021.

Non-vested PSUs as of December 31, 2020

Non-vested PSUs as of December 31, 2021

Equity-based compensation expense related to the PSUs was $ 5,481 for the year ended December 31, 2021.

At December 31, 2021, the total unrecognized equity-based compensation expense related to outstanding PSUs was $ 5,141 , which is expected to be recognized over a weighted-average period of 19.77 months.

The number of restricted stock awards and RSUs vested in 2021 includes 11,103 shares that were withheld on behalf of employees to satisfy the statutory tax withholding requirements.

2020 Employee Stock Purchase Plan

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Participants may not acquire rights to purchase more than $ 25 of common stock under the Employee Stock Purchase Plan for any calendar year.

Common stock will be available for purchase for up to 27 months, with an expected period of six months, beginning in 2021.

Common stock will be available for purchase for up to 27 months .

Shares will be purchased at a discounted per-share purchase price equal to 85 % of the per-share closing price of the Company’s common stock on the last day of the applicable offering period.

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General and administrative expenses

The tax benefit related to compensation expense was $ 117 for the year ended December 31, 2021.

There were no tax benefits related to compensation expense for the year ended December 31, 2020 and 2019.

The Company leases certain office facilities and equipment under non-cancelable operating and finance leases with remaining terms from one to seven years .

Operating lease ROU assets are included in other asset section while finance lease ROU assets are included in "Property and equipment, net"

in the consolidated balance sheets.

With respect to operating lease liabilities, current and non-current operating lease liabilities are included in "Other current liabilities"

and "Operating lease liabilities, net of current portion.” Current and non-current finance lease liabilities are included in "Other current liabilities"

and "Other long-term liabilities"

in the Consolidated Balance Sheets.

The following table presents information about the operating and finance lease right-of-use assets and lease liabilities as well as lease term and discount rates:

Lease right-of-use assets, lease liabilities, lease term and discount rate:

December 31, 2021

Lease right of use assets

Operating leases

Financing leases

Lease liabilities

Operating leases

Financing leases

Operating leases

Financing leases

For the year ended

Weighted-average remaining lease term (years):

December 31, 2021

Operating leases

Financing leases

Weighted-average discount rate:

Operating leases

Financing leases

The components of total lease cost were as follows:

December 31, 2021

Operating lease cost

Short-term lease cost

Variable lease cost

Sublease income

Finance lease cost:

Amortization of right-of-use assets

Interest on lease liabilities

Total lease cost

Supplemental cash flow and non-cash flow information was as follows:

December 31, 2021

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from finance leases

Operating cash flows from operating leases

Financing cash flows from finance leases

Right-of-use assets obtained in exchange for new and remeasured operating leases

Right-of-use assets obtained through acquisition

The following table summarizes by year the maturities of our minimum lease payments as of December 31, 2021.

Year ending December 31,

Total future lease payments

imputed interest

The gross amounts of assets under capital leases, in accordance with the superseded leasing standard (ASC 840), was $ 1,501 at December 31, 2020.

The total accumulated amortization associated with equipment under capital leases was approximately $ 946 at December 31, 2020.

The related amortization expense is included in depreciation expense.

Rent expense under the operating leases was $ 6,534 and $ 6,377 for the years ended December 31, 2020 and 2019, respectively.

Non-cancelable future minimum lease commitments as of December 31, 2020, in accordance with the superseded leasing standard, were:

Year ending December 31,

Operating Leases

Capital Leases

Non-cancelable future minimum lease payments

Less amount representing interest

Net non-cancelable future minimum lease payments

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance.

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The following table summarizes revenue by geographic area:

YEAR ENDED DECEMBER 31,

Revenue (1) :

United States

(1) Revenue is attributable to the countries based on the location of the customer

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Property, plant and equipment, net:

United States

The components of loss before income taxes were as follows:

YEAR ENDED DECEMBER 31,

The components of income tax expense (benefit) were as follows:

YEAR ENDED DECEMBER 31,

Current tax expense (benefit)

The components of provision for (benefit from) income taxes were as follows:

Current tax provision

State and local

Total current

Deferred tax expense (benefit)

Deferred tax benefit

State and local

Total deferred

Total (benefit) provision

Total provision (benefit)

The effective income tax rate was ( 293.06 %), 1.56 %, and 2.46 % for the years ended December 31, 2021, 2020 and 2019, respectively.

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Equity compensation

GILTI inclusion

GIL TI inclusion

Other adjustments

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A portion of the Company’s income was attributable to Madeira, Portugal, which qualified for special tax programs authorized by the European Union.

For the period of 2008 through 2011, the Company was subject to Madeira's income tax rate of 0%, for 2012 an income tax rate of 4% applied, and for the period of 2013 through 2020 an income tax rate of 5% applied.

For the period of 2008 through 2011, the Company was subject to Madeira's income tax rate of 0 %, for 2012 an income tax rate of 4 % applied, and for the period of 2013 through 2020 an income tax rate of 5 % applied, and for the period 2021 through 2027 an income tax rate of 5 % will apply.

The tax effects of temporary differences that gave rise to deferred tax assets and liabilities are summarized as follows:

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Accrued expenses

Deferred revenue

Net operating loss carryforwards

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Interest rate hedge

Equity based compensation

Interest expense

Right-of-use (ROU) Liability

Total gross deferred tax asset

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Prepaid expenses

Accrued expenses

Deferred revenue

Right-of-use (ROU) Asset

Total gross deferred tax liability

Net deferred tax liability

The net change in the total valuation allowance resulted in a decrease of $3,831 in 2020 compared to an increase of $7,439 in 2019.

The valuation allowance was determined separately for each jurisdiction.

The net change in the total valuation allowance resulted in an increase of $ 1,520 in 2021 compared to a decrease of $ 3,831 in 2020.

The valuation allowance is determined separately for each jurisdiction.

valuation allowance was required against the foreign tax credit carryforward.

At the foreign subsidiaries, the valuation allowance was primarily related to foreign net operating losses that, in the judgment of management, are not more likely than not to be realized.

The Company released the valuation allowance against certain U.S.

carryforwards and foreign tax credits, as management deemed such attributes more likely than not to be realized.

In assessing the realizability of deferred tax assets, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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Management believes it is more likely than not that the Company will realize the benefits of the deferred tax assets, net of the existing valuation allowance, at December 31, 2021.

At December 31, 2020, the Company has net operating loss carryforwards for federal income tax purposes of approximately $3,350, majority of which will expire if unused in years 2024 through 2036.

At December 31, 2021, the Company has net operating loss carryforwards for federal income tax purposes of approximately $ 2,416 , the majority of which will expire if unused in years 2024 through 2040.

The Company has net operating loss carryforwards for state income tax purposes of approximately $ 2,576 , which will expire if unused in years 2029 through 2039.

The Company has foreign net operating loss carryforwards of $ 24,491 which will expire if unused starting in 2022.

The Company has $2,268 of federal research and development credits that will expire if unused in years 2024 through 2040, $570 of California research and development credits with indefinite carryover period, and $2,504 of foreign research and development credits that will expire if unused in years 2029 through 2030.

The Company has $ 1,475 of federal research and development credits that will expire if unused in years 2025 through 2041, $ 417 of California research and development credits with indefinite carryover period, and $ 406 of foreign research and development credits that will expire if unused starting in 2029.

The Company has foreign tax credits of $ 15,054 that will expire if unused in years 2025 through 2031, and also Canadian investment tax credits of $ 3,809 which will expire if unused in years 2030 through 2039.

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The Company has analyzed the realizability of these tax attributes carried forward and have recorded deferred tax assets for the attributes that meet the more likely than-not realizability threshold.

Foreign undistributed earnings were considered permanently invested, therefore no provision for US income taxes was accrued as of December 31, 2020 and 2019, with the exception of the withholding tax liability of $168 on the potential repatriation from Certara Canada Corporation.

Foreign undistributed earnings were considered permanently invested, therefore no provision for U.S.

income taxes was accrued as of December 31, 2021 and 2020, with the exception of the withholding tax liability of $ 168 on the potential repatriation from Certara Canada Corporation.

The Company assessed its uncertain tax positions and determined that a liability of $ 1,059 and $ 897 was required to be recorded for uncertain tax positions as of December 31, 2021 and 2020, respectively.

2 unchanged sentences

For December 31, 2021 and 2020, there were no interest or penalties recorded.

The Company does not anticipate any significant changes to its uncertain tax positions during the next twelve months.

The Company does not anticipate any significant changes to its uncertain tax positions during the next 12 months.

A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:

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The uncertain tax positions, exclusive of interest and penalties, were $ 1,059 and $ 897 as of December 31, 2021 and December 31, 2020, respectively, which also represents potential tax benefits that if recognized, would impact the effective tax rate.

The audits of the federal income tax returns for the tax year ended December 31, 2016 and December 31, 2017 are closed.

The Internal Revenue Service can audit the NOLs generated in respective years in the years that the NOLs are utilized.

federal income tax returns are generally subject to examination for a period of three years after the filing of the return.

However, the Internal Revenue Service can audit the NOLs generated in respective years in the years that the NOLs are utilized.

State income tax returns are generally subject to examination for a period of three to six years after the filing of the respective return.

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The Company is subject to tax on Global Intangible Low-Taxed Income (“GILTI”) and has elected to account for GILTI as a current period expense.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted and implemented certain tax legislation, among which temporarily increases the interest expense limitation pursuant to Section 163(j), allows for acceleration of refunds of alternative minimum tax (AMT) credits, and retroactively clarified the immediate recovery of qualified improvement property costs under 100% expensing rather than 39 year recovery period for assets placed in service after November 27, 2017.

The Company was able to deduct all of its' interest expense incurred during 2020, as a result of the CARES Act.

Net Loss per Share

Basic and diluted loss per share is computed by dividing net loss by the weighted-average shares outstanding:

YEAR ENDED DECEMBER 31,

Earnings per Share

Basic and diluted earnings per share is computed by dividing net earnings by the weighted-average shares outstanding:

Weighted average common shares outstanding, basic and diluted

Net loss per common share, basic and diluted

The Company had 5,941,693 restricted share awards that were excluded from the calculation of diluted EPS during the year ended December 31, 2020 that could potentially dilute EPS in the future due to being in a net loss position.

During the years ended December 31, 2019 and 2018, there were no potentially dilutive securities outstanding.

The Company excluded the restricted stock and restricted stock units from the calculation of diluted earnings per share during the years ended December 31, 2021 and 2020 that could potentially dilute earnings per share in the future due to being in a net loss position.

For the year ended December 31, 2021, the Company did not include 3,910,722 restricted shares and 1,288,724 shares of time-based restricted stock units, and 61,456 shares of performance based restricted stock units in the calculation.

For the year ended December 31, 2020, the Company did not include 5,941,693 restricted shares and 30,052 shares of restricted time-based stock units in the calculation.

During the year ended December 31, 2019, there was no potentially dilutive securities outstanding .

Subsequent Events

On January 3, 2022, the Company completed the acquisition of Integrated Nonclinical Development Solutions, Inc.

(“INDS”), a company that provides the SEND Explorer® software and drug development consulting, for total consideration of $ 7,078 .

The Company will complete the initial accounting for the acquisition of INDS, including the allocation of purchase consideration, in the first quarter of 2022.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

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-K

Item 8. Financial Statements and Supplementary Data