What changed in this filing

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Item 1. Financial Statements

2021-08-12 compared with 2021-05-13 · 332 added, 207 removed, 623 unchanged (46% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

As of March 31, 2021 and December 31, 2020

As of June 30, 2021 and December 31, 2020

(Amounts in thousands, except per share data)

June 30, 2021

December 31, 2020

Current assets:

1 unchanged sentence

Funds held for customers

Accounts receivable, net of allowance of $ 8,059 , and $ 8,592

Accounts receivable, net of allowance of $ 9,399 , and $ 8,592 , respectively

Prepaid expenses and other current assets

6 unchanged sentences

Operating lease right-of-use assets

Liabilities and Equity

Liabilities and stockholders' equity

Current liabilities:

4 unchanged sentences

Accrued salaries and benefits

Accrued variable compensation

Deferred compensation, current

Accrued and deferred compensation, current

Deferred revenue

25 unchanged sentences

Total stockholders' equity

Total liabilities and equity

Total liabilities and stockholders' equity

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

and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

For the three months ended March 31, 2021 and 2020

Condensed Consolidated Statements of Comprehensive Loss

For the three and six months ended June 30, 2021 and 2020

(Amounts in thousands, except per share data)

Three months ended

Six Months Ended

Software subscriptions

8 unchanged sentences

Depreciation and amortization

Other operating (income) expense, net

Other operating expense, net

Total operating expenses

Income (loss) from operations

Interest expense, net

Interest (income) expense, net

Income (loss) before income taxes

Income tax (benefit) expense

Income tax benefit

Net income (loss)

Other comprehensive loss from foreign currency translation adjustments and revaluations, net of tax

Total comprehensive income (loss)

Net income attributable to Class A stockholders

Net income per Class A share, basic

Total comprehensive loss

Net income (loss) attributable to Class A stockholders

Net income (loss) per Class A share, basic

Weighted average Class A common stock, basic

Net income attributable to Class A stockholders, diluted

Net income per Class A share, diluted

Net income (loss) attributable to Class A stockholders, diluted

Net income (loss) per Class A share, diluted

Weighted average Class A common stock, diluted

8 unchanged sentences

Condensed Consolidated Statements of Changes in Equity (Deficit)

For the three months ended March 31, 2021 and 2020 (unaudited)

For the three and six months ended June 30, 2021 (unaudited)

(Amounts in thousands)

4 unchanged sentences

Balance, January 1, 2021

Remeasurement of options for redeemable shares

Distributions declared

Foreign currency translation adjustments and revaluations

ASC 842 transition adjustment

Exercise of stock options, net

Shares issued upon vesting of Restricted Stock Units, net

Stock-based compensation expense

Foreign currency translation adjustments and revaluations, net of tax

Balance, March 31, 2021

Exercise of stock options, net

Shares issued upon vesting of Restricted Stock Awards

Stock-based compensation expense

Shares issued under ESPP

Class B shares exchanged for Class A shares

Foreign currency translation adjustments and revaluations, net of tax

Balance, June 30, 2021

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

and Subsidiaries

Condensed Consolidated Statements of Changes in Equity (Deficit)

For the three and six months ended June 30, 2020 (unaudited)

(Amounts in thousands)

Before Recapitalization

3 unchanged sentences

Balance, January 1, 2020

ASC 842 transition adjustment

Exercise of stock options, net

Shares issued upon vesting of Restricted Stock Units

Stock-based compensation expense

Remeasurement of options for redeemable shares

Distributions declared

Foreign currency translation adjustments and revaluations, net of tax

Balance, March 31, 2020

Remeasurement of options for redeemable shares

Exercise of stock options, net

Distributions declared

Foreign currency translation adjustments and revaluations, net of tax

Balance, June 30, 2020

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

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

For the three months ended March 31, 2021 and 2020

For the six months ended June 30, 2021 and 2020

(Amounts in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

5 unchanged sentences

Stock-based compensation expense

Deferred income tax (benefit) provision

Deferred income tax benefit

Non-cash operating lease costs

1 unchanged sentence

Accounts receivable

Advances to stockholders

Prepaid expenses and other current assets

5 unchanged sentences

Operating lease liabilities

Net cash used in operating activities

Net cash provided by operating activities

Cash flows from investing activities:

10 unchanged sentences

Payments for deferred financing costs, net

Proceeds from purchases of stock under ESPP

Payments for taxes related to net share settlement of stock-based awards

1 unchanged sentence

Distributions to stockholders

Payments on financing lease liabilities

Net cash (used in) provided by financing activities

Distributions under Tax Sharing Agreement

Payments for purchase commitment liability

Payments on finance lease liabilities

Net cash provided by (used in) financing activities

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

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

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets, end of period:

Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets, end of period:

Cash and cash equivalents

Restricted cash—funds held for stockholder distributions

Restricted cash—funds held for customers

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All intercompany transactions have been eliminated in consolidation.

On May 12, 2021, the Company acquired 95 % of the outstanding equity of EVAT Solutions Limited (“EVAT”) and its subsidiaries, doing business as Taxamo (collectively “Taxamo”), a cloud-based provider of tax and payment automation for global eCommerce and marketplaces.

As the Company has a controlling interest in Taxamo, its accounts have been included in the condensed consolidated financial statements from the acquisition date.

On January 7, 2020, the Company acquired a 60 % controlling interest in Systax Sistemas Fiscais LTDA (“Systax”), a provider of Brazilian transaction tax content and software.

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The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and include the accounts of the Company.

Certain information and disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the U.S.

Certain information and disclosures normally included in consolidated financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted.

Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes for the year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report”) filed with the SEC on March 15, 2021.

The interim condensed consolidated balance sheet as of December 31, 2020 has been derived from audited financial statements included in the 2020 Annual Report on Form 10-K for the year ended December 31, 2020.

The accompanying interim condensed consolidated balance sheet as of March 31, 2021, and the interim condensed consolidated statements of comprehensive income (loss), changes in equity (deficit) and cash flows for the three months ended March 31, 2021 and 2020 are unaudited.

The interim condensed consolidated balance sheet as of December 31, 2020 has been derived from audited financial statements included in the 2020 Annual Report.

The accompanying interim condensed consolidated balance sheet as of June 30, 2021, the interim condensed consolidated statements of comprehensive loss and changes in equity (deficit) for the three and six months ended June 30, 2021 and 2020, and interim condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020 are unaudited.

The unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the annual audited consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the condensed consolidated financial statements.

The operating results for the three months ended March 31, 2021 are not necessarily indicative of the results expected for the full year ending December 31, 2021.

The operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results expected for the full year ending December 31, 2021.

The Company operates its business as one operating segment.

For the three months ended March 31, 2021 and 2020, approximately 5 % and 3 %, respectively, of the Company’s revenues were generated outside the U.S..

For the three and six months ended June 30, 2021 approximately 7 % and 6 %, respectively, of the Company’s revenues were generated outside the U.S.

For the three and six months ended June 30, 2020, revenues generated outside of the U.S.

were approximately 3 % in each respective period.

Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a measurement date.

A three-level fair value hierarchy (the “Fair Value

Hierarchy”) prioritizes the inputs used to measure fair value.

A three-level fair value hierarchy (the “Fair Value Hierarchy”) prioritizes the inputs used to measure fair value.

The Fair Value Hierarchy requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs.

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(i) the estimated allowance for subscription cancellations, (ii) expected credit losses associated with the allowance for doubtful accounts;

(iii) the reserve for self-insurance, (iv) assumptions related to achievement of technological feasibility for software developed for sale, (v) product life cycles, (vi) estimated useful lives and potential impairment of long-lived assets, intangible assets and goodwill, (vii) determination of the fair value of tangible and intangible assets acquired, liabilities assumed and consideration transferred in an acquisition, (viii) amortization period of material rights and deferred commissions (ix) valuation of the Company’s stock used to measure stock-based compensation awards, (x) Black-Scholes-Merton option pricing model (“Black-Scholes model”) input assumptions used to determine the fair value of stock-based compensation awards, and (x) the potential outcome of future tax consequences of events that have been recognized in the condensed consolidated financial statements or tax returns.

(iii) the reserve for self-insurance, (iv) assumptions related to achievement of technological feasibility for software developed for sale, (v) product life cycles, (vi) estimated useful lives and potential impairment of long-lived assets, intangible assets, (vii) potential impairment of goodwill, (viii) determination of the fair value of tangible and intangible assets acquired, liabilities assumed and consideration transferred in acquisitions, (ix) amortization period of material rights and deferred commissions (x) valuation of the Company’s stock used to measure stock-based compensation awards, (xi) Black-Scholes-Merton option pricing model (“Black-Scholes model”) input assumptions used to determine the fair value of stock-based compensation awards, (xii) measurement of future purchase commitment and contingent consideration liabilities and (xiii) the potential outcome of future tax consequences of events that have been recognized in the condensed consolidated financial statements or tax returns.

Actual results may differ from these estimates.

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Internal-use software is included in internal-use software developed in property and equipment in the condensed consolidated balance sheets once available for its intended use and is depreciated over periods between 3 to 5 years.

Depreciation expense for internal-use software utilized for cloud-based solutions and for software for internal systems and tools is included in cost of revenues, software subscriptions and depreciation and amortization expense, respectively, in the condensed consolidated statements of comprehensive income (loss).

Software Developed for Sale

1 unchanged sentence

Amortization of capitalized software development costs begins when the product is available for general release.

Amortization is provided on a product-by-product basis using the straight-line method over periods between 3 to 5 years and is included in cost of revenues, software subscriptions in the condensed consolidated statements of comprehensive income (loss).

Capitalized software costs are subject to an ongoing assessment of recoverability based on anticipated future revenues and changes in software technologies at least annually at December 31, and whenever events or circumstances make it more likely than not that impairment may have occurred.

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Additionally, uncertain tax positions and tax-related valuation allowances are initially recorded in connection with a business combination as of the acquisition date.

The Company continues to collect information and reevaluate these estimates and assumptions periodically and record any adjustments to preliminary estimates to goodwill, provided the Company is within the Measurement Period, with any adjustments to amortization of new or previously recorded identifiable intangibles being recorded to the consolidated statements of comprehensive income (loss) in the period in which they arise.

In addition, if outside of the Measurement Period, any subsequent adjustments to the acquisition date fair values are reflected in the consolidated statements of comprehensive income (loss) in the period in which they arise.

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination.

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The Company’s Registration Statement on Form S-1 with the SEC was declared effective on July 28, 2020, resulting in the Class A shares being registered and available for trading on the NASDAQ exchange (the “Offering”).

On the effective date of the Offering, the Company adopted the 2020 Incentive Award Plan (the “2020 Plan”) and the 2020 Employee Stock Purchase Plan (the “ESPP”), which provides for the award of stock appreciation rights (“SARs”), stock options (“options”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and participation in the ESPP (collectively, the "awards"), which are subject to guidance set forth in ASC 718, Compensation—Stock Compensation, ("ASC 718") for the award of equity-based instruments.

The Company applies the provisions of ASC 718, Compensation—Stock Compensation, for the award of equity-based instruments.

On the effective date of the Offering, the Company adopted the 2020 Incentive Award Plan (the “2020 Plan”) and the 2020 Employee Stock Purchase Plan (the “ESPP”), which provide for the award of stock appreciation rights (“SARs”), stock options (“options”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and participation in the ESPP (collectively, the "awards").

The awards are subject to, and the Company applies, the guidance set forth in ASC 718, Compensation—Stock Compensation, ("ASC 718") for the award of equity-based instruments.

The provisions of ASC 718 require a company to measure the fair value of stock-based compensation as of the grant date of the award.

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Compensation cost is recognized on a straight-line basis over the requisite service or performance period associated with the award.

Stock-based compensation expense for awards subject to performance-based measurement criteria is recognized when achievement of performance targets is deemed probable.

The ESPP permits participants to purchase Class A common stock through payroll deductions, up to a specified percentage of their eligible compensation or a lump sum contribution amount for the initial offering period.

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Cloud-based contracts consistently provide a benefit to the customer during the subscription period;

thus, the associated revenue is recognized ratably over the related subscription period.

thus, the associated revenue is recognized

ratably over the related subscription period.

Revenue recognition begins on the later of the beginning of the subscription period or the date the customer is provided access to the cloud-based solutions.

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Reimbursable Costs

Reimbursable costs passed through and invoiced to customers of the Company are recorded as services revenues with the associated expenses recorded as cost of revenues, services in the condensed consolidated statements of comprehensive income (loss).

On July 27, 2020, the Company’s S-Corporation election (the “S Election”) was terminated by the Company’s stockholders in connection with the Offering.

11 unchanged sentences

Supplemental cash flow disclosures are as follows for the respective periods:

For the three months ended

For the six months ended

Cash paid for interest

Cash paid for income taxes

Cash paid for income taxes, net of refunds

Operating cash flows from operating leases

Operating cash flows from finance leases

Non-cash investing and financing activities:

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The Company elected the "package of three"

practical expedients permitted under the transition guidance, which allows (i) a carry forward of the historical lease classification conclusions, (ii) management’s assessment on whether a contract is or contains a lease, and (iii) the initial direct costs for any leases that exist prior to adoption of the new standard.

practical expedients permitted under the transition guidance, which allows (i) a carry forward of the historical lease classification conclusions, (ii) management to assess whether a contract is or contains a lease, and (iii) the retention of initial direct costs for any leases that exist prior to adoption of the new standard.

As a result of the adoption of ASC 842 on January 1, 2021, the Company recorded both operating lease right-of-use assets of $ 24,004 and operating lease liabilities of $ 32,562 .

An adjustment to retained earnings of $ 508 , net of the deferred tax impact, was also recorded.

The adoption of ASC 842 had an immaterial impact on the condensed consolidated statements of comprehensive income and cash flows for the three months ended March 31, 2021.

The adoption of ASC 842 had an immaterial impact on the condensed consolidated statement of comprehensive loss for the three and six months ended June 30, 2021, and the condensed consolidated cash flow statement for the six months ended June 30, 2021.

The adoption of this standard also resulted in a change in the naming convention for leases classified historically as capital leases.

These leases are now referred to as finance leases within property and equipment, with corresponding short-term and long-term debt

liabilities being presented as “Current portion of finance lease liabilities” and “Finance lease liabilities, net of current portion”, respectively.

These leases are now referred to as finance leases within property and equipment, with corresponding short-term and long-term debt liabilities being presented as “Current portion of finance lease liabilities” and “Finance lease liabilities, net of current portion,” respectively.

See Note 7 for further information.

The Company does not recognize leases with an initial term less than one year (“short-term leases”) on its condensed consolidated balance sheets, and recognizes such lease payments in the condensed consolidated statements of comprehensive income (loss) on a straight-line basis over the lease term.

Leases with an option to extend the related lease term or terminate early are reflected in the lease term when it is reasonably certain that the Company will exercise such options.

Credit Losses

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

In June 2016, the FASB issued ASU No.

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

Measurement of Credit Losses on Financial Instruments , (“ASU 2016-13”) which replaces the existing incurred loss impairment model with an expected credit loss model and requires financial assets, including trade receivables, to be measured at amortized cost to be presented at the net amount expected to be collected.

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The Company adopted this standard effective January 1, 2021, and this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In December 2019, the FASB issued ASU Update No.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

1 unchanged sentence

The guidance in ASU 2019-12 is required for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2020, for business entities that are public, and after December 15, 2021, including interim periods within those annual periods, for all other entities, with early adoption permitted.

The Company adopted this standard on January 1, 2021.

There was no impact to the condensed consolidated financial statements from the implementation of this standard on the determination of income taxes for the quarter ended March 31, 2021.

The Company adopted this standard effective January 1, 2021, and this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

Risks and Uncertainties

In December 2019, a novel strain of coronavirus (“COVID-19”) appeared.

In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic.

In March 2020, the World Health Organization declared the outbreak of coronavirus disease 2019 (“COVID-19”) to be a pandemic.

The COVID-19 pandemic is continuing to have widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and business practices.

To protect the health and well-being of Company employees and customers, substantial modifications were made to employee travel policies, our offices were closed, and remained closed through March 31, 2021, with employees directed to work from home.

In addition, conferences and other marketing events were cancelled or shifted to virtual-only, and the Company continued to participate virtually through March 31, 2021.

The COVID-19 pandemic has impacted and may continue to impact Company operations, including employees, customers and partners, and there is substantial uncertainty in the nature and degree of its continued effects over time.

The Company did not experience any significant reductions in sales, revenues or collections through March 31, 2021 as a result of COVID-19.

To protect the health and well-being of Company employees and customers, substantial modifications were made to employee travel policies, and our offices were closed, and remained closed through June 30, 2021, with employees directed to work from home.

In addition, conferences and other marketing events were cancelled or shifted to virtual-only, and the Company continued to participate virtually through June 30, 2021.

The COVID-19 pandemic has impacted, and may continue to impact, Company operations, including employees, customers and partners, and there is substantial uncertainty regarding the nature and degree of its continued effects over time.

The Company did not experience any significant reductions in sales, revenues or collections through June 30, 2021 as a result of COVID-19.

The uncertainty caused by the COVID-19 pandemic could, however, impact Company billings to new customers for the remainder of 2021, and may also negatively impact Company efforts to expand revenues from existing customers as they continue to evaluate certain long-term projects and budget constraints.

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However, these delays are not expected to materially impact the business, and thus the Company has not recorded additional credit losses associated with the allowance for doubtful accounts in connection with any delays.

The Company believes it has ample liquidity and capital resources to continue to meet its operating needs, and to service debt and other financial obligations.

Company believes it has ample liquidity and capital resources to continue to meet its operating needs and to service debt and other financial obligations.

The extent to which the COVID-19 pandemic impacts the business going forward will depend on numerous evolving factors that cannot reliably be predicted, including the duration and scope of the pandemic;

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Three months ended

Sources of revenues:

Six months ended

Software subscriptions:

Software licenses

Cloud subscriptions

Software subscriptions

Total revenues

1 unchanged sentence

Timing of revenue recognition may differ from the timing of invoicing customers.

A receivable is recorded in the consolidated balance sheets when customers are billed related to revenue to be collected and recognized for subscription agreements as there is an unconditional right to invoice and receive payment in the future related to these subscriptions.

A receivable is recorded in the condensed consolidated balance sheets when customers are billed related to revenue to be collected and recognized for subscription agreements as there is an unconditional right to invoice and receive payment in the future related to these subscriptions.

A receivable and related revenue may also be recorded in advance of billings to the extent services have been performed and the Company has a right under the contract to bill and collect for such performance.

Subscription-based customers are generally invoiced annually at the beginning of each annual subscription period.

Accounts receivable is presented net of an allowance for potentially uncollectible accounts and estimated cancellations of software license and cloud-based subscriptions (the “allowance”) of $ 8,059 and $ 8,592 at March 31, 2021 and December 31, 2020, respectively.

Accounts receivable is presented net of an allowance for potentially uncollectible accounts and estimated cancellations of software license and cloud-based subscriptions (the “allowance”) of $ 9,399 and $ 8,592 at June 30, 2021 and December 31, 2020, respectively.

The allowance represents future expected credit losses over the life of the receivables based on past experience, current information and forward-looking economic considerations.

The beginning and ending balances of accounts receivable, net of allowance, are as follows:

For the three months ended

For the six months ended

For the year ended

March 31, 2021

June 30, 2021

December 31, 2020

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(Decrease) increase, net

A contract liability is recorded as deferred revenue on the consolidated balance sheets when customers are billed in advance of performance obligations being satisfied, and revenue is recognized after invoicing ratably over the subscription period or over the amortization period of material rights.

Deferred revenue is reflected net of a related deferred allowance

for subscription cancellations (the “deferred allowance”) of $ 5,515 and $ 6,432 at March 31, 2021 and December 31, 2020, respectively.

A contract liability is recorded as deferred revenue on the condensed consolidated balance sheets when customers are billed in advance of performance obligations being satisfied, and revenue is recognized after invoicing ratably over the subscription period or over the amortization period of material rights.

Deferred revenue is reflected net of a related deferred allowance for subscription cancellations (the “deferred allowance”) of $ 6,267 and $ 6,432 at June 30, 2021 and December 31, 2020, respectively.

The deferred allowance represents the portion of the allowance for subscription cancellations associated with deferred revenue.

The beginning and ending balances of and changes to the allowance and the deferred allowance are as follows:

For the three months ended March 31,

For the three months ended June 30,

Allowance balance, April 1

Allowance balance, June 30

Change in allowance

Deferred allowance balance, April 1

Deferred allowance balance, June 30

Change in deferred allowance

Net amount charged to revenues

For the six months ended June 30,

Allowance balance, January 1

Allowance balance, March 31

Allowance balance, June 30

Change in allowance

Deferred allowance balance, January 1

Deferred allowance balance, March 31

Deferred allowance balance, June 30

Change in deferred allowance

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The tables provide information about the balances of and changes to deferred revenue for the following periods:

As of March 31,

As of June 30,

As of December 31,

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For the three months ended

For the six months ended

Changes to deferred revenue:

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Deferred sales commissions earned by the Company’s sales force and certain sales incentive programs and vendor referral agreements are considered incremental and recoverable costs of obtaining a contract with a customer.

An asset is recognized for these incremental contract costs and reflected as deferred commissions in the consolidated balance sheets.

An asset is recognized for these incremental contract costs and reflected as deferred commissions in the condensed consolidated balance sheets.

These contract costs are amortized on a straight-line basis over a period consistent with the transfer of the associated product and services to the customer, which is generally three years .

Amortization of these costs are included in selling and marketing expense in the consolidated statements of comprehensive income (loss).

The Company periodically reviews

these contract assets to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these assets.

Amortization of these costs are included in selling and marketing expense in the condensed consolidated statements of comprehensive loss.

The Company periodically reviews these contract assets to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these assets.

There were no impairment losses recorded for the periods presented.

1 unchanged sentence

For the three months ended

For the six months ended

Deferred commissions:

1 unchanged sentence

Ending balance

BUSINESS COMBINATION

BUSINESS COMBINATIONS

On May 12, 2021, the Company acquired 95 % of the outstanding equity of EVAT and its wholly owned subsidiaries (collectively “Taxamo”), a cloud-based provider of tax and payment automation for global eCommerce and marketplaces.

This acquisition supports the Company’s growth strategies across eCommerce platforms and marketplaces in Europe and North America.

The preliminary purchase price for the Taxamo acquisition was $ 200,689 as of the acquisition date, consisting of (i) $ 190,153 of cash paid at closing, partially offset by $ 2,662 of Taxamo’s cash received in the acquisition resulting in net cash consideration at closing of $ 187,491 , (ii) an acquisition holdback with an estimated fair value upon acquisition of $ 502 , and (iii) an option to purchase from and an option for the remaining shareholder to sell, the remaining 5 % of the outstanding equity of EVAT (the “Option”) at a fixed amount between August and December 2021 for an estimated fair value of $ 10,034 .

The Company recorded the estimated fair value of the Option payment amount in purchase commitment and contingent consideration liabilities, current on the condensed consolidated balance sheets.

Cash consideration was funded by the Company from available cash on hand.

The following table summarizes the preliminary purchase price for Taxamo:

Cash paid to Taxamo sellers at closing

Fair value of acquisition holdbacks

Fair value of purchase commitment liability

The Company’s accounting for the Taxamo acquisition is preliminary.

The purchase price is subject to purchase price adjustments related to the final determination of Taxamo’s cash, net working capital, and taxes as of May 12, 2021.

The Taxamo acquisition was accounted for as a business combination.

The total preliminary purchase price was allocated to the net assets acquired based on management’s determination of their estimated fair values using available information as of the acquisition date.

The excess of purchase consideration over the net assets acquired is recorded as goodwill, which primarily reflects the value of acquired technology, and the existence of intangible assets not recognized under U.S.

GAAP such as the value of the assembled workforce and other market factors.

The Company expects that goodwill associated with the Taxamo acquisition will not be deductible for tax purposes.

The preliminary values recorded, which are reflected in the table below, will be adjusted during the Measurement Period as more detailed analyses are performed and further information becomes available regarding the fair values of these amounts on the acquisition date.

The Company does not have a preliminary estimate of identifiable intangible assets as of June 30, 2021.

A third-party expert has been engaged to assist in the valuation of identifiable intangible assets as part of the acquisition.

Any subsequent adjustments to the preliminary values not associated with determination of their fair values on the acquisition date will be recorded in the condensed consolidated statements of comprehensive loss in the period in which the change is identified.

Taxamo’s business and product offerings are being integrated into the Company's one operating segment.

The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed as recorded in the Company’s condensed consolidated balance sheet as of the acquisition date:

Cash and cash equivalents

Funds held for customers

Accounts receivable

Prepaid expenses and other current assets

Property and equipment

Accounts payable

Accrued expenses

Accrued compensation

Deferred other income

The transaction costs associated with the acquisition were $ 4,522 and were recorded in other operating expense, net for the three and six months ended June 30, 2021.

The Company has included the financial results of Taxamo in the condensed consolidated statement of comprehensive loss from the date of acquisition.

As the Taxamo acquisition did not have a material impact on the Company’s reported revenue or net income for the three and six months ended June 30, 2021, pro forma financial information has not been presented.

On January 25, 2021, the Company executed an Asset Purchase Agreement with Tellutax LLC, a Portland, Oregon-based edge computing technology startup (“Tellutax”), to acquire substantially all of Tellutax’s assets (the “Tellutax Acquisition”).

Cash consideration paid for the acquisition was $ 6,100 , funded through cash on hand, and serves to strengthen the Company’s technology roadmap and hybrid cloud strategy enabling it to better serve customers in an increasingly hyper-connected environment.

Cash consideration paid for the acquisition was $ 6,100 , funded through cash on hand, and serves to

strengthen the Company’s technology roadmap and hybrid cloud strategy enabling it to better serve customers in an increasingly hyper-connected environment.

The Tellutax Acquisition entitles the sellers to contingent consideration if sales targets are met during a period of time following the acquisition.

The Tellutax Acquisition was accounted for as a business combination.

The total preliminary purchase price was allocated to the net assets acquired based on Management’s determination of their estimated fair values using available information as of the acquisition date.

The total purchase price was allocated to the net assets acquired based on management’s determination of their estimated fair values using available information as of the acquisition date.

The excess of purchase consideration over the net assets acquired is recorded as goodwill, which primarily reflects the value of expected future synergies, the existence of intangible assets not recognized under U.S.

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The Company expects that goodwill associated with the Tellutax Acquisition will be deductible for tax purposes.

The preliminary values recorded, which are reflected in the table below, will be adjusted during the measurement period as more detailed analyses are performed and further information becomes available regarding the fair values of these amounts on the acquisition date.

Any subsequent adjustments to these values not associated with determination of their fair values on the acquisition date will be recorded in the consolidated statements of comprehensive income (loss) in the period the change is identified.

The preliminary purchase price for the Tellutax Acquisition includes cash paid at closing plus an estimated fair value of contingent consideration of $ 2,200 (the “Tellutax Contingent Consideration”) as of January 25, 2021.

The following table presents the allocation of the preliminary purchase price recorded in the condensed consolidated balance sheet as of the acquisition date:

The fair values of these amounts on the acquisition date, which are reflected in the table below, have been finalized.

Any subsequent adjustments to these values will be recorded in the condensed consolidated statements of comprehensive loss in the period in which the change is identified.

The purchase price for the Tellutax Acquisition includes cash paid at closing plus an estimated fair value of contingent consideration of $ 2,200 (the “Tellutax Contingent Consideration”) as of January 25, 2021.

The following table presents the allocation of the purchase price recorded in the condensed consolidated balance sheet as of the acquisition date:

January 25, 2021

Capitalized Software - Developed technology

The Company has included the financial results of Tellutax in the condensed consolidated statement of comprehensive income (loss) from the date of acquisition.

As the Tellutax Acquisition did not have a material impact on the Company’s reported revenue or net income for the three months ended March 31, 2021, pro forma financial information has not been presented.

The Company has included the financial results of Tellutax in the condensed consolidated statement of comprehensive loss from the date of acquisition.

As the Tellutax Acquisition did not have a material impact on the Company’s reported revenue or net income for the three and six months ended June 30, 2021, pro forma financial information has not been presented.

The fair value of developed technology was valued using the multi-period excess earnings method, which is a variation of the income approach.

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The fair value of Tellutax Contingent Consideration is estimated using a Monte Carlo Simulation to compute the expected cash flows from earn-out payments specified in the purchase agreement.

Such estimate represents a recurring fair value measurement with significant unobservable inputs, which management considers to be Level 3 measurements under the Fair Value Hierarchy.

The significant assumptions used in these calculations included forecasted results and the estimated likelihood for each performance scenario.

The Tellutax Contingent Consideration is based on three potential earn-out payments determined by periodic revenue achievements over a thirty-month period.

Earn-out payments had no maximum limit, but if certain targets are not met, there would be no earn-out payment for the applicable measurement period.

The estimated fair value of the Tellutax Contingent Consideration recorded as of the acquisition date was $ 2,200 .

Earn-out payments have no maximum limit, but if certain targets are not met, there will be no earn-out payment for the applicable measurement period.

The estimated fair value of the Tellutax Contingent Consideration recorded as of the acquisition date was $ 2,200 , see Note 4 for information on recurring fair value adjustments after the acquisition date.

On January 7, 2020, the Company acquired a 60 % controlling interest in Systax, a provider of Brazilian transaction tax content and software.

Cash consideration for the purchase was $ 12,374 .

This acquisition provided the Company with full access to a sizeable database of Brazilian tax content that is critical to supporting its global multi-national customers’ business expansion into Brazil.

The Company has a contractual purchase commitment to acquire the remaining 40 % equity interest from the original Systax Quotaholders incrementally between 2021 through 2024.

Future purchase commitment payments for these incremental acquisition amounts are based on a multiple of Systax revenue and earnings before interest, depreciation, amortization and income taxes (“EBITDA”) performance at the end of 2020, 2022 and 2023, whereby the Company will have full ownership after the final transaction in 2024.

Management determined these future purchase commitments to be a forward contract, resulting in the Company being required to estimate and record an estimated future purchase commitment amount (the “Purchase Commitment Liability”) in connection with recording the initial purchase.

The fair value of the Purchase Commitment Liability at the acquisition date was finalized to be $ 12,592 .

This amount will fluctuate

as a result of changes in foreign currency exchange rates and is reflected in purchase commitment and contingent consideration liabilities in the condensed consolidated balance sheets, with such changes in exchange rates being reflected in other comprehensive income or loss in the condensed consolidated statements of comprehensive loss.

The Purchase Commitment Liability was $ 9,750 at December 31, 2020 reflecting the impacts of such fluctuations in foreign currency exchange rates.

Adjustments to the settlement date value that arise as a result of remeasurement at future balance sheet dates will be recorded as interest expense related to financing costs in the consolidated statements of comprehensive income or loss in the period the change is identified.

No such adjustments have been recorded through June 30, 2021.

The Company acquired an additional 5 % equity interest of Systax through a Purchase Commitment Liability payment of $ 788 during the three and six months ended June 30, 2021, increasing the Company’s equity interest in Systax to 65 % and reducing the remaining Purchase Commitment Liability to $ 9,334 at June 30, 2021.

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

The Company has investments in money market accounts, which are included in cash and cash equivalents on the consolidated balance sheets.

Fair value inputs for these investments are considered Level 1 measurements within the Fair Value Hierarchy since money market account fair values are known and observable through daily published floating net asset values.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company has investments in money market accounts, which are included in cash and cash equivalents on the consolidated balance sheets.

The Company has investments in money market accounts, which are included in cash and cash equivalents on the condensed consolidated balance sheets.

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Fair Value Measurements Using

As of March 31, 2021

As of June 30, 2021

Prices in active markets for identical assets (Level 1)

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Money market funds

As discussed in Note 3, this amount reflects the Tellutax Contingent Consideration for potential payments based on achievement of future revenue targets.

Tellutax Contingent Consideration

As discussed in Note 3, the Tellutax Contingent Consideration is based on three potential earn-out payments determined by periodic revenue achievements over a thirty-month period.

Such estimate represents a recurring fair value measurement with significant unobservable inputs, which management considers to be Level 3 measurements under the Fair Value Hierarchy.

The significant assumptions used in these calculations included forecasted results and the estimated likelihood for each performance scenario.

The estimated fair value of the Tellutax Contingent Consideration was determined using a Monte Carlo Simulation valuation as of the acquisition date of January 25, 2021.

Management performed a present value analysis as of June 30, 2021 using the outputs of the Monte Carlo Simulation as of the acquisition date, the term of 4.3 years as of the acquisition date was reduced to 3.9 years as of June 30, 2021 to reflect the passage of time, resulting in a $(76) fair value adjustment increasing the carrying value of the Tellutax Contingent Consideration liability at June 30, 2021 which was recorded in other operating expense, net for the three and six months ended June 30, 2021.

Management used this approach as there were no significant changes identified in forecasted results or the estimated likelihood for each performance scenario since the acquisition date which could result in significant changes to potential earn-out payments.

Tellutax Contingent Consideration fair value as of June 30, 2021 and the acquisition date, and unobservable inputs used for the Monte Carlo Simulation valuation as of the acquisition date were as follows:

June 30, 2021

January 25, 2021

Valuation Technique

Unobservable Inputs

Tellutax Contingent Consideration

Monte Carlo Simulation

Revenue volatility

Revenue discount rate

Term (in years)

Changes in the fair value of Level 3 Tellutax Contingent Consideration during the six months ended June 30, 2021 were as follows:

Tellutax Contingent Consideration

Balance, January 1, 2021

Acquisition of Tellutax

Fair value adjustments

Foreign currency translation adjustments

Balance, June 30, 2021

Assets and Liabilities for Which Fair Value is Only Disclosed

The residual carrying amount of cash and cash equivalents and the carrying amount of funds held for customers were the same as their respective fair values and are considered Level 1 measurements.

The carrying amounts for accounts receivable, accounts payable, and accrued expenses approximate their relative fair values due to their short-term nature and are considered Level 2 measurements.

The carrying amounts for accounts receivable, accounts payable, and accrued expenses approximate their relative fair values due to their short-term nature.

Non-recurring Fair Value Measurements

The Tellutax Acquisition on January 25, 2021, was accounted for as a business combination and the total purchase price was allocated to the net assets acquired and liabilities assumed based on their estimated fair values.

The Taxamo Acquisition on May 12, 2021 and the Tellutax Acquisition on January 25, 2021, were accounted for as business combinations and the total purchase price for each acquisiton was allocated to the net assets acquired and liabilities assumed based on their estimated fair values.

PROPERTY AND EQUIPMENT

The major components of property and equipment are as follows:

As of March 31,

As of June 30,

As of December 31,

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Property and equipment, net

Depreciation expense for property and equipment, excluding all internal-use software developed and finance leases, was $ 1,906 and $ 2,175 for the three months ended March 31, 2021 and 2020 (unaudited), respectively.

Depreciation for property and equipment, excluding internal-use software developed for cloud-based customer solutions, is reflected in depreciation and amortization in the condensed consolidated statements of comprehensive income (loss).

Finance lease amortization was $ 224 for the three months ended March 31, 2021 and depreciation expense for assets held under capital leases was $ 168 for the three months ended March 31, 2020, and are included in depreciation and amortization expense in the condensed consolidated statements of comprehensive income (loss).

Assets under finance leases was $ 1,533 , net of accumulated depreciation of $ 224 , at March 31, 2021 are included in property and equipment in the condensed consolidated balance sheets.

Assets under capital leases of $ 1,360 , net of accumulated depreciation of $ 1,369 , at March 31, 2020 (unaudited) are included in property and equipment in the condensed consolidated balance sheets.

Depreciation expense for property and equipment, excluding all internal-use software developed and finance leases, was $ 1,902 and $ 1,773 for the three months ended June 30, 2021 and 2020, respectively, and $ 3,808 and $ 3,948 for the six months ended June 30, 2021 and 2020, respectively Depreciation for property and equipment, excluding internal-use software developed for cloud-based customer solutions, is reflected in depreciation and amortization in the condensed consolidated statements of comprehensive loss.

Finance lease amortization was $ 240 and $ 464 for the three and six months ended June 30, 2021, respectively, and depreciation expense for assets held under capital leases was $ 167 and $ 335 for the three and six months ended June 30, 2020, respectively.

Finance lease amortization and depreciation expense for assets held under capital leases are included in depreciation and amortization expense in the condensed consolidated statements of comprehensive loss.

Assets under finance leases of $ 1,070 , net of accumulated amortization of $ 464 , at June 30, 2021 are included in property and equipment in the condensed consolidated balance sheets.

Assets under capital leases of $ 1,360 , net of accumulated depreciation of $ 1,370 , at December 31, 2020, are included in property and equipment in the condensed consolidated balance sheets.

The major components of internal-use software are as follows:

As of March 31,

As of June 30,

As of December 31,

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Amounts capitalized for internal-use software and included in property and equipment additions on the condensed consolidated statements of cash flows are as follows:

As of March 31,

For the six months ended June 30,

For the six months ended December 31,

Cloud-based customer solutions

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In-process internal-use software developed is not depreciated until it is available for its intended use.

Depreciation expense for internal-use software developed for cloud-based customer solutions for the three months ended March 31, 2021 and 2020 (unaudited) was $ 2,676 and $ 2,011 , respectively, and is included in cost of revenues, software subscriptions in the condensed consolidated statements of comprehensive income (loss).

Depreciation expense for internal-use software developed for internal systems and tools for the three months ended March 31, 2021 and 2020 (unaudited) was $ 697 and $ 526 , respectively, and is included in depreciation and amortization in the condensed consolidated statements of comprehensive income (loss).

Depreciation expense for internal-use software developed for cloud-based customer solutions for the three months ended June 30, 2021 and 2020, was $ 2,669 and $ 2,453 , respectively, and was $ 5,345 and $ 4,464 for the six months ended June 30, 2021 and 2020, respectively, and is included in cost of revenues, software subscriptions in the condensed consolidated statements of comprehensive loss.

Depreciation expense for internal-use software developed for internal systems and tools for the three months ended June 30, 2021 and 2020, was $ 736 and $ 565 , respectively, and was $ 1,433 and $ 1,091 for the six months ended June 30, 2021 and 2020, respectively, and is included in depreciation and amortization in the condensed consolidated statements of comprehensive loss.

CAPITALIZED SOFTWARE

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The major components of capitalized software are as follows:

As of March 31,

As of June 30,

As of December 31,

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Capitalized software, net

Software development costs capitalized for the three months ended March 31, 2021 and 2020 (unaudited) were $ 2,221 and $ 3,706 , respectively.

During the three months ended March 31, 2021, a preliminary value of $ 3,600 for developed technology the Company acquired in the Tellutax business combination was recorded and is reflected in in-process capitalized software as the Company undertakes necessary enhancements to integrate it with the Company’s existing software architecture.

Capitalized software amortization expense for the three months ended March 31, 2021 and 2020 was $ 3,168 and $ 2,556 , respectively, and is included in cost of revenues, software subscriptions in the condensed consolidated statements of comprehensive income (loss).

Software development costs capitalized for the three months ended June 30, 2021 and 2020 were $ 2,904 and $ 3,558 , respectively, and were $ 8,725 and $ 7,264 for the six months ended June 30, 2021 and 2020, respectively.

During the six months ended June 30, 2021, an acquisition date value of $ 3,600 for developed technology the Company acquired in the Tellutax business combination was recorded and is reflected in in-process capitalized software as the Company undertakes necessary enhancements to integrate it with the Company’s existing software architecture.

Capitalized software amortization expense for the three months ended June 30, 2021 and 2020 was $ 3,182 and $ 3,022 , respectively, and was $ 6,350 and $ 5,578 for the six months ended June 30, 2021 and 2020, respectively, and is included in cost of revenues, software subscriptions in the condensed consolidated statements of comprehensive loss.

The Company leases office space, IT equipment and office equipment.

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The following table sets forth the Company’s lease assets and liabilities and their balance sheet location as follows:

As of March 31,

As of June 30,

Balance Sheet Location

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Total lease liabilities

The major components of lease cost is as follows:

For the three months ended

March 31, 2021

The major components of lease cost are as follows:

For the three months ended June 30,

For the six months ended June 30,

Operating lease cost

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Total lease cost

The weighted-average term and discount rate for leases is as follows:

As of March 31,

The weighted-average term and discount rate for leases are as follows:

As of June 30,

Weighted-average remaining lease term (years):

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Finance leases

Lease liability maturities for the next five years and thereafter are as follows as of March 31, 2021:

Lease liability maturities for the next five years and thereafter are as follows as of June 30, 2021:

Operating Leases

Finance Leases

Remainder of 2021 (nine months remaining)

Remainder of 2021 (six months remaining)

Total lease payments

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GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets were as follows:

As of March 31,

Goodwill and other intangible assets are as follows:

As of June 30,

As of December 31,

Other intangible assets, net

The changes in the carrying amount of goodwill for the three months ended March 31, 2021 are as follows:

The changes in the carrying amount of goodwill for the six months ended June 30, 2021 are as follows:

Balance, January 1, 2021

Acquisition of Tellutax (Note 3)

Acquisition of Taxamo

Acquisition of Tellutax

Foreign currency translation adjustments

Balance, March 31, 2021, gross

Balance, June 30, 2021, gross

Accumulated impairment losses

Balance, March 31, 2021, net

Balance, June 30, 2021, net

The Company has recognized various amortizable other intangible assets in connection with acquisitions, including related to customer relationships, technology, and tradenames.

The following tables provide additional information for other intangible assets, which are individually not material to the condensed consolidated financial statements:

As of March 31,

As of June 30,

As of December 31,

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Carrying value

For the three months ended March 31, 2021

For the three months ended June 30, 2021

Cost of Revenues, Software Subscriptions

Marketing Expense

Total Expense

Amortization of acquired intangible assets

For the six months ended June 30, 2021

Cost of Revenues, Software Subscriptions

Marketing Expense

Amortization of acquired intangible assets

Credit Agreement

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A portion of the Offering proceeds was used to repay the $ 175,000 Term Loan in full on July 31, 2020.

The Line of Credit matures in March 2025 and had no outstanding borrowings at March 31, 2021 or December 31, 2020.

The Line of Credit matures in March 2025 and had no outstanding borrowings at June 30, 2021 or December 31, 2020.

The Company has the option to select an applicable interest rate at either the bank base rate plus an applicable margin (the “Base Rate Option”) or the LIBOR plus an applicable margin (the “LIBOR Option”).

The applicable margins are determined by certain financial covenant performance as defined in the Credit Agreement.

At March 31, 2021, the Base Rate Option and LIBOR Option applicable to Line of Credit borrowings were 3.25 % and 2.00 %, respectively.

At June 30, 2021, the Base Rate Option and LIBOR Option applicable to Line of Credit borrowings were 3.25 % and 2.00 %, respectively.

The Credit Agreement is collateralized by certain assets of the Company and contains financial and operating covenants.

The Company was in compliance with these covenants at March 31, 2021.

The Company was in compliance with these covenants at June 30, 2021.

STOCKHOLDERS’ EQUITY

Recapitalization and Initial Public Offering

Recapitalization

On July 28, 2020, the Company filed its amended and restated certificate of incorporation with the Delaware Secretary of State to:

(i) effect a three-for-one forward stock split (the “Stock Split”);

(ii) establish a new capital structure for the

Company (the “New Capital Structure”);

(ii) establish a new capital structure for the Company (the “New Capital Structure”);

and (iii) effect a share exchange (the “Share Exchange”) (collectively, the “Recapitalization”).

The Stock Split resulted in each one share owned by a stockholder being exchanged for three shares of common stock, and the number of shares of the Company’s common stock issued and outstanding was increased proportionately based on the Stock Split.

After the Stock Split, the Share Exchange occurred, resulting in stockholders of record exchanging their existing Class A and Class B common stock (“former Class A” and “former Class B”, respectively) for newly created shares of Class A and Class B common stock (“Class A” and “Class B”, respectively) issued in connection with the New Capital Structure.

The effect of the Stock Split is recognized retrospectively in the condensed consolidated financial statements.

After the Stock Split, the Share Exchange occurred, resulting in stockholders of record exchanging their existing Class A and Class B common stock (“former Class A” and “former Class B,” respectively) for newly created shares of Class A and Class B common stock (“Class A” and “Class B,” respectively) issued in

connection with the New Capital Structure.

The effect of the Stock Split and Share Exchange are recognized retrospectively in the condensed consolidated financial statements.

In connection with the New Capital Structure, Treasury Stock was retired and amounts associated with the Treasury Stock were reclassified to additional paid in capital.

Thus, at March 31, 2021 and December 31, 2020, there was no Treasury Stock.

During March 31, 2021, the Company issued an aggregate 640 shares of Class A related to the exercise of stock options, net of 356 shares returned to the Company in lieu of payment of the exercise price and taxes due on these exercises.

During March 31, 2021, the Company also issued 5 shares Class A in connection with the vesting of RSUs, net of 1 share returned to the Company in lieu of payment of taxes due on the vesting of these RSUs.

At March 31, 2020, the Company had 147 shares of former Class A common stock and 120,270 shares of former Class B common stock outstanding.

At March 31, 2020, members of a family (the “Family”) owned all outstanding shares of both former classes of common stock.

Thus, at June 30, 2021 and December 31, 2020, there was no Treasury Stock.

During the three months ended March 31, 2021 and June 30, 2021, the Company issued 640 and 462 shares of Class A, respectively, related to the exercise of stock options, net of 356 and 219 shares, respectively, returned to the Company in lieu of payment of the exercise price and taxes due on these exercises.

During the three months ended March 31, 2021 the Company issued 5 shares of Class A in connection with the vesting of RSUs, net of 1 share returned to the Company in lieu of payment of taxes due on the vesting of these RSUs.

During the three months ended June 30, 2021, 234 shares of Class A were issued in connection with the vesting of RSAs.

No Class A shares were issued during the three months ended March 31, 2021 and June 30, 2021 in connection with the vesting of RSAs and RSUs, respectively.

During the three months ended June 30, 2021, a stockholder exchanged 12,100 shares of Class B for an equivalent number of shares of Class A.

At June 30, 2020, the Company had 147 shares of former Class A common stock and 120,443 shares of former Class B common stock outstanding.

At June 30, 2020, members of a family (the “Family”) owned all 147 outstanding shares of former Class A common stock and 120,270 shares of the former Class B common stock.

The remaining 173 shares of former Class B common stock outstanding were owned by non-Family members in connection with the exercise of stock options in April 2020 for cash of $ 53 .

There were no dividend or liquidation preference differences between the former Class A and former Class B shares.

There were common stock equivalents outstanding at March 31, 2020 held by non-Family members that entitled such holders to receive an equivalent number of former Class B shares upon exercise.

In connection with establishing the New Capital Structure in July 2020, the shareholders authorized 450,000 shares of common stock, par value $ 0.001 per share, and 30,000 shares of preferred stock, par value $ 0.001 per share.

There were common stock equivalents outstanding at June 30, 2020 held by non-Family members that entitled such holders to receive an equivalent number of former Class B shares upon exercise.

In connection with establishing the New Capital Structure in July 2020, the stockholders authorized 450,000 shares of common stock, par value $ 0.001 per share, and 30,000 shares of preferred stock, par value $ 0.001 per share.

In connection with the New Capital Structure, common stock is divided into two classes, Class A with one vote per share, and Class B with ten votes per share.

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There are no dividend or liquidation preference differences between Class A and Class B.

In connection with the Share Exchange in July 2020, the Family members exchanged each share of former Class A and former Class B for the equivalent number of Class B shares established as part of the New Capital Structure.

In addition, the non-Family members exchanged their former Class B shares for an equivalent number of Class A shares established as part of the New Capital Structure.

No funds were exchanged in connection with the Share Exchange, and the aggregate number of shares outstanding both immediately prior to and after the Share Exchange remained the same at 120,590 .

In addition, common stock equivalents, all of which were held by non-Family members and which were previously exercisable into former Class B shares, became exercisable into Class A shares established as part of the New Capital Structure.

Historical earnings per share information for all periods presented prior to the Offering was retrospectively restated similar to the treatment of a stock split to reflect the Share Exchange as management concluded that there was no economic value attributable to such exchange of shares in connection with the Recapitalization.

Distributions

The Board declared and paid aggregate distributions pro rata to stockholders of the former Class A and Class B common stock of $ 4,010 ($ 0.03 per share) during the three months ended March 31, 2020.

The board of directors (the “Board”) declared and paid aggregate distributions pro rata to stockholders of the former Class A and Class B common stock of $ 123,185 ($ 1.02 per share) and $ 4,010 ($ 0.03 per share) during the three months ended June 30, 2020 and March 31, 2020, respectively.

Tax Sharing Agreement Payments

In connection with termination of the Company’s S-Corporation status effective July 27, 2020, the Company entered into a Tax Sharing Agreement with the former S-Corporation shareholders.

During the three months ended March 31, 2021, the Company did not distribute to or receive any amounts from the former S-Corporation shareholders under the Tax Sharing Agreement.

The Company has an estimated liability of $ 2,700 at March 31, 2021 and December 31, 2020 in connection with obligations under the Tax Sharing Agreement for estimated amounts to be distributed to the former S-Corporation shareholders for income taxes related to the allocation of taxable income to the S-Corporation short tax period ended July 26, 2020.

This number is subject to change based upon the finalization of the associated tax returns for the 2020 S-Corporation short tax period.

The Company is required to settle this liability on or before July 30, 2021 under the Tax Sharing Agreement.

The Tax Sharing Agreement, as amended on June 30, 2021, requires the Company to finalize the S-Corporation income tax returns for the short period ended July 26, 2020 no later than August 15, 2021 (previously June 30, 2021 prior to the amendment).

The Company is required to settle any remaining liability for taxes to the former S-Corporation shareholders within 15 days thereafter under the amended Tax Sharing Agreement.

All obligations of the Company under the Tax Sharing Agreement are satisfied by adjustments of additional paid in capital.

During the three months ended June 30, 2021, the Company distributed $ 2,700 to the former S-Corporation shareholders under the Tax Sharing Agreement in connection with preliminary estimates of obligations for income taxes related to the allocation of taxable income to the S-Corporation short tax period ended July 26, 2020.

EARNINGS PER SHARE

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See Note 10 for further information on the Share Exchange.

For the Three Months Ended March 31,

For the three months ended

For the six months ended

Class A common stock:

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Class A common stock as a percentage of total shares outstanding, basic 1

Net income attributable to Class A stockholders, basic

Net income (loss) attributable to Class A stockholders, basic 1

Numerator, diluted:

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Class A common stock as a percentage of total shares outstanding, diluted 1

Net income attributable to Class A stockholders, diluted

Net income (loss) attributable to Class A stockholders, diluted 1

Denominator, basic and diluted:

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Weighted average Class A common stock, diluted 1

Net income per Class A share, basic

Net income per Class A share, diluted

Net income (loss) per Class A share, basic 1

Net income (loss) per Class A share, diluted 1

1 The net income (loss) attributable to Class A stockholders, basic and diluted, and the weighted average Class A common stock basic and diluted, as of and for the three and six months ended June 30, 2020 were retrospectively restated to effect the Share Exchange.

This resulted in a reduction in the loss per Class A share, basic and diluted, for the six months ended June 30, 2020 from $(0.48) per share to $(0.24) per share as a result of there being no Class A shares outstanding during the three months ended March 31, 2020 after effecting the Share Exchange.

2 The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net income (loss) per share attributable to Class A stockholders because the impact of including them would have been anti-dilutive:

84 and 3,734 for the three months ended March 31, 2021 and 2020, respectively.

For the Three Months Ended March 31,

251 and 3,653 for the three months ended June 30, 2021 and 2020, respectively, and 168 and 3,693 for the six months ended June 30, 2021 and 2020, respectively.

For the three months ended

For the six months ended

Class B common stock:

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Net income (loss) per Class B share, diluted 1

The net income (loss) attributable to Class B stockholders, basic and diluted, and the weighted average Class B common stock basic and diluted, as of and for the three and six months ended June 30, 2020 were retrospectively restated to effect the Share Exchange.

As there were no changes to the total number of shares outstanding as a result of the Share Exchange, there was no change to net loss per Class B share, basic or diluted from previously disclosed results for the three and six months ended June 30, 2020.

STOCK-BASED AWARD PLANS

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The ESPP provides eligible employees with rights during each six-month ESPP offering period to purchase shares of the Company’s Class A common at the ESPP Discount through payroll deductions, except for the initial offering period (July 28 to November 30, 2020) whereby the participants were permitted to make lump sum contributions to the ESPP for such period.

Amounts withheld or received from participants are reflected in accrued salaries and benefits in the consolidated balance sheets until such shares are purchased.

Amounts withheld from participants for the offering period ending May 31, 2021 aggregated $ 810 as of March 31, 2021.

Amounts withheld or received from participants are reflected in accrued salaries and benefits in the condensed consolidated balance sheets until such shares are purchased.

Amounts withheld from participants for the offering period ending November 30, 2021 aggregated $ 152 as of June 30, 2021.

Prior to the adoption of the 2020 Plan, the Company had a SAR plan for the purpose of providing incentives to key members of management and consultants to contribute to the growth and financial success of the Company.

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All SAR participants eligible to receive the SAR Exchange Offer accepted and had their outstanding SARs converted to stock options with equivalent terms under the 2020 Plan at the Offering effective date (the “Converted SARs”) of July 28, 2020.

This was considered a modification of these SAR awards which was recorded in the respective quarter this occured.

This was considered a modification of these SAR awards which was recorded in the respective quarter this occurred.

The SAR plan was subsequently retired (“Retired SAR Plan”) and any SARs issued after such date will be granted under the 2020 Plan.

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Any options issued subsequent to this exchange will be granted under the 2020 Plan.

As of March 31, 2021, 1,857 shares of Class A common were available for issuance under the 2020 Plan.

As of June 30, 2021, 854 shares of Class A common were available for issuance under the 2020 Plan.

Awards issued under the 2020 Plan vest based on service criteria established by the Board.

1 unchanged sentence

Retired SAR Plan

At March 31, 2020, the fair value of the common stock underlying the SAR Awards was determined by the Board with assistance from management and an independent third-party valuation firm.

At June 30, 2020, the fair value of the common stock underlying the SAR Awards was determined by the Board with assistance from management and an independent third-party valuation firm.

The determination of value used the market and income approaches, with an adjustment for marketability discount pertinent to private company entities in arriving at the per share fair value (the “valuation methodology”).

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Amended Options

Prior to the amendment of the options in connection with the Offering in July 2020, the options permitted holders to put their exercised shares back to the Company, thus the options were classified as temporary equity and included in “Options for Redeemable Shares” on the condensed consolidated balance sheet at March 31, 2020.

The Company recorded an increase in the value of Options for Redeemable Shares of $ 15,242 during the three months ended March 31, 2020, pertaining to the 3,849 in options outstanding.

As all options outstanding were fully vested, no related compensation expense was recorded for the three months ended March 31, 2020.

The Company recorded an increase in the value of Options for Redeemable Shares of $ 14,637 and $ 29,879 during the three and six months ended June 30, 2020, respectively, pertaining to the 3,676 options outstanding at June 30, 2020.

As all options outstanding were fully vested, no related compensation expense was recorded for the six months ended June 30, 2020.

In connection with the amendment, the option holders’ ability to put the exercised Amended Option shares to the Company in order to attain liquidity was exchanged for the right by the holders to exercise these options and sell the related shares on the NASDAQ exchange.

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Outstanding at January 1, 2021

2020 Plan options outstanding at March 31, 2021

2020 Plan options exercisable at March 31, 2021

The detail of options outstanding, vested and exercisable under the 2020 Plan as of March 31, 2021 is as follows:

2020 Plan options outstanding at June 30, 2021

2020 Plan options exercisable at June 30, 2021

The detail of options outstanding, vested and exercisable under the 2020 Plan as of June 30, 2021 is as follows:

Options Outstanding

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The Board intends all options granted to be exercisable at a price per share not less than the per share fair market value of the Company’s Class A common stock underlying the options on the date of grant.

Compensation expense for new option awards issued subsequent to the Offering to participants under the 2020 Plan are measured based on the grant date fair value of the awards and recognized in the condensed consolidated statements of comprehensive income (loss) over the period during which the participant is required to perform the requisite services.

Compensation expense for new option awards issued subsequent to the Offering to participants under the 2020 Plan are measured based on the grant date fair value of the awards and recognized in the condensed consolidated statements of comprehensive loss over the period during which the participant is required to perform the requisite services.

The vesting period is generally one to four years .

The grant date fair value of options is estimated using the Black-Scholes model.

There were no options issued or outstanding under the 2020 Plan for the three months ended March 31, 2020.

The Company issued 251 options under the 2020 Plan during the three months ended March 31, 2021.

The assumptions used

in the Black-Scholes model to determine the value of the options issued during the three months ended March 31, 2021 are as follows:

There were no options issued or outstanding under the 2020 Plan for the three months ended June 30, 2020.

The Company issued 251 options and 12 options under the 2020 Plan during the three months ended March 31 and June 30, 2021, respectively.

The assumptions used in the Black-Scholes model to determine the value of the options issued during these periods are as follows:

Option Valuation Period

Fair market value of common stock

2 unchanged sentences

Risk-free interest rate

The fair market value of common stock reflects the market closing price on NASDAQ on the option grant date.

As of the valuation date, the Company lacked sufficient historical data on the volatility of its stock price.

Selected volatility is representative of expected future volatility and was based on the historical and implied volatility of comparable publicly traded companies over a similar expected term.

The fair market value of common stock reflects the market closing price on NASDAQ on the respective option grant date.

As of the valuation dates, the Company lacked sufficient historical data on the volatility of its stock price.

volatility is representative of expected future volatility and was based on the historical and implied volatility of comparable publicly traded companies over a similar expected term.

The expected term represents the term the options are expected to be exercised over, which differs from the term of the option grants which is ten years .

2 unchanged sentences

Treasury zero-coupon issue with a term that closely approximates the expected term of the option grants.

During the three months ended March 31, 2021, the Company recognized aggregate stock-based compensation expense for options and Converted SARs that were exchanged for options under the 2020 Plan of $ 3,768 .

At March 31, 2021, $ 30,605 of unrecognized compensation expense associated with options and Converted SARs is expected to be recognized over a weighted average period of approximately 3.6 years.

During the three and six months ended June 30, 2021, the Company recognized aggregate stock-based compensation expense for options and Converted SARs that were exchanged for options under the 2020 Plan of $ 3,913 and $ 7,681 , respectively, net of forfeitures related to these awards.

At June 30, 2021, $ 25,025 of unrecognized compensation expense associated with options and Converted SARs is expected to be recognized over a weighted average period of approximately 3.0 years.

Restricted Stock Units

The following table summarizes RSU activity for the three months ended March 31, 2021:

The following table summarizes RSU activity for the six months ended June 30, 2021:

Grant Date Fair

1 unchanged sentence

Outstanding at January 1, 2021

Outstanding at March 31, 2021

There were no RSUs issued or outstanding for the three months ended March 31, 2020.

Stock-based compensation cost for RSUs is measured based on the fair value of the Company’s underlying common stock on the date of grant and is recognized on a straight-line basis in the condensed consolidated statements of comprehensive income (loss) over the period during which the participant is required to perform services in exchange for the award, which is generally one to four years .

Outstanding at June 30, 2021

There were no RSUs issued or outstanding for the six months ended June 30, 2020.

Stock-based compensation cost for RSUs is measured based on the fair value of the Company’s underlying common stock on the date of grant and is recognized on a straight-line basis in the condensed consolidated statements of comprehensive loss over the period during which the participant is required to perform services in exchange for the award, which is generally one to four years .

Vested RSUs are settled by issuing Class A shares or the equivalent value in cash at the Board’s discretion.

During the three months ended March 31, 2021, the Company recognized stock-based compensation expense for RSUs of $ 436 .

At March 31, 2021, $ 10,775 of unrecognized compensation cost for RSUs is expected to be recognized over a weighted average period of approximately 3.8 years.

During the three and six months ended June 30, 2021, the Company recognized stock-based compensation expense for RSUs of $ 793 and $ 1,229 , respectively, net of forfeitures related to these awards.

At June 30, 2021, $ 11,108 of unrecognized compensation cost for RSUs is expected to be recognized over a weighted average period of approximately 3.6 years.

In connection with the Taxamo acquisition, certain continuing employees of Taxamo received RSUs with service and performance conditions covering up to 1,230 shares of our Class A common stock (“PSUs”) with an aggregate grant date fair value of $ 21,729 that will be accounted for as post-acquisition compensation expense over the vesting period.

The performance-based condition will be satisfied upon meeting certain performance targets for the year ended 2023.

As of June 30, 2021, it is not probable that these targets will be met, thus no compensation expense has been recorded to date related to these PSUs.

Restricted Stock Awards

The following table summarizes RSA activity for the three months ended March 31, 2021:

The following table summarizes RSA activity for the six months ended June 30, 2021:

Grant Date Fair

1 unchanged sentence

Outstanding at January 1, 2021

Outstanding at March 31, 2021

There were no RSAs issued or outstanding for the three months ended March 31, 2020.

Stock-based compensation cost for RSAs is measured based on the fair value of the Company’s underlying common stock on the date of grant and is recognized on a straight-line basis in the condensed consolidated statements of comprehensive income (loss) over the period during which the participants are required to perform services in exchange for the award, which is generally one to four years .

Outstanding at June 30, 2021

There were no RSAs issued or outstanding for the six months ended June 30, 2020.

Stock-based compensation cost for RSAs is measured based on the fair value of the Company’s underlying common stock on the date of grant and is

recognized on a straight-line basis in the condensed consolidated statements of comprehensive loss over the period during which the participants are required to perform services in exchange for the award, which is generally one to four years .

Vested RSAs are settled by issuing Class A shares upon vesting.

During the three months ended March 31, 2021, the Company recognized stock-based compensation expense for RSAs of $ 2,209 , net of forfeitures related to these awards.

At March 31, 2021, $ 6,588 of unrecognized compensation cost for RSAs is expected to be recognized over a weighted average period of approximately 2.4 years.

During the three and six months ended June 30, 2021, the Company recognized stock-based compensation expense for RSAs of $ 1,446 and $ 3,655 , respectively, net of forfeitures related to these awards.

At June 30, 2021, $ 5,903 of unrecognized compensation cost for RSAs is expected to be recognized over a weighted average period of approximately 2.2 years.

Employee Stock Purchase Plan

10 unchanged sentences

The ESPP is administered by a committee of the Board.

During the three months ended March 31, 2021, the Company recorded stock-based compensation expense of $ 130 related to the ESPP.

There were no shares of Class A common stock purchased under the ESPP during the three months ended March 31, 2021 as the current offering period does not end until May 31, 2021.

As of March 31, 2021, there was approximately $ 88 of unrecognized ESPP stock-based compensation cost that is expected to be recognized on a straight-line basis over the remaining term of the current offering period.

The fair value of ESPP purchase rights is comprised of the value of the 15 % ESPP discount and the value associated with the Call/Put over the ESPP offering period.

The value of the Call/Put for the current offering period (December 1, 2020 – May 31, 2021) was estimated using the Black-Scholes model with the following assumptions:

The Company recorded stock-based compensation expense of $ 133 and $ 263 for the three and six months ended June 30, 2021, respectively, related to the ESPP.

Class A common stock purchased under the ESPP for the six-month offering period ended May 31, 2021 aggregated 60 shares.

As of June 30, 2021, there was approximately $ 227 of unrecognized ESPP stock-based compensation cost that is expected to be recognized on a straight-line basis over the remaining term of the six-month offering period that started June 1, 2021.

The fair value of ESPP purchase rights is comprised of the value of the 15 % ESPP Discount and the value associated with the Call/Put over the respective ESPP offering period.

The value of the Call/Put for the previous offering period (December 1, 2020 – May 31, 2021) and the current offering period (June 1, 2021 – November 30, 2021) was estimated using the Black-Scholes model with the following assumptions:

Offering Period

Fair market value of common stock

5 unchanged sentences

The expected term represents the term of the ESPP offering period, which is generally six months .

The Company does not expect to pay dividends after the Offering.

The Company does not expect to pay dividends.

The risk-free interest rate was based on the rate for a U.S.

2 unchanged sentences

The Company recognized total stock-based compensation cost related to incentive awards as follows:

For the three months ended

For the six months ended

Stock-based compensation expense:

2 unchanged sentences

Total stock-based compensation expense

The Company recognized stock-based compensation cost in the condensed consolidated statements of comprehensive income (loss) as follows:

The Company recognized stock-based compensation cost in the condensed consolidated statements of comprehensive loss as follows:

For the three months ended

For the six months ended

Stock-based compensation expense:

9 unchanged sentences

The Company is not aware of any such legal proceedings or claims that management believes will have a material adverse effect on its business, financial condition, or operating results.

SUBSEQUENT EVENTS

On May 12, 2021, the Company acquired EVAT Solutions Limited and its subsidiaries, doing business as Taxamo (collectively “Taxamo”), a cloud-based pioneer in tax and payment automation for global e-commerce and marketplaces for approximately $ 200,000 in cash on hand.

The acquisition supports and accelerates the Company’s growth strategies across ecommerce platforms and marketplaces in the enterprise and mid-market in Europe and North America, and among its existing global customers.

The Company’s accounting for the Taxamo acquisition, including whether it constitutes an asset or business purchase, is preliminary.

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

What changed 10-Q

Item 1. Financial Statements