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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________________________________
FORM 10-Q
_____________________________________
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from   to
Commission File Number 001-38947
_________________________
BTRS HOLDINGS INC.
(Exact name of registrant as specified in its charter)
_________________________
Delaware
83-3780685
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1009 Lenox Drive, Suite 101
Lawrenceville, New Jersey
08648
(Address of Principal Executive Offices)
(Zip Code)
(609) 235-1010
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Class 1 Common Stock, $0.0001 par value BTRS
The Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒  No  ☐ 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☒  No  ☐ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
 ☐
Non-accelerated filer  
Smaller reporting company
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐  No  
As of November 3, 2022, there were 164,717,883 shares of Class 1 common stock outstanding and no shares of Class 2 common stock outstanding.




BTRS HOLDINGS INC.
INDEX TO FORM 10-Q
Page Number
PART I
PART II

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In this Quarterly Report on Form 10-Q, unless otherwise stated or as the context otherwise requires, references to “the Company,” “we,” “us,” "our,” "it," and similar references refer to BTRS Holdings Inc., a Delaware corporation, and its consolidated subsidiaries. This Quarterly Report on Form 10-Q also contains registered marks, trademarks, and trade names of other companies, all of which are the property of their respective holders. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, endorsement, or sponsorship of us by these other companies.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding the timing, expected completion and impacts of the proposed Merger (as defined herein) and the potential impacts should the Merger not be consummated on a timely basis or at all for any reason, our business strategy and plans, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would,” “potentially,” or the negative of these terms or similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends we believe may affect our financial condition, results of operations, business strategy, and financial needs.
These forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions, including those described in the section titled "Part I, Item 1A. Risk Factors" contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (the "Annual Report on Form 10-K"), as filed with the U.S. Securities and Exchange Commission (the "SEC") on March 9, 2022, including, among other things, risks associated with:
our ability to secure the required regulatory and stockholder approvals for the Merger and our ability to meet the applicable closing conditions of the Merger;
the diversion of management time relating to the pending Merger;
our financial and business performance, including the financial projections, forecasts, business metrics, and any underlying assumptions thereunder;
changes in our strategy, future operations, financial position, estimated revenues or losses, projected costs, prospects, and plans;
the macroeconomic conditions, including supply chain disruptions, higher rates of inflation, higher interest rates, increased volatility in foreign currency exchange rates, and increased volatility in the global capital markets, among others;
the capabilities and benefits to our customers of our technology platforms;
the advantages and expected growth of our Business Payments Network;
our ability to digitally transform the accounts receivable industry;
our ability to scale in a cost-effective manner;
developments and projections relating to our competitors and industry;
the impact of health epidemics, including the COVID-19 pandemic, on our business and the actions we may take in response thereto;
unstable market and economic conditions may have serious adverse consequences on our business, financial condition, and share price;
geopolitical conditions, including the direct or indirect consequences of acts of war, terrorism, or social unrest;
the timing, outcome, and results of integrating our operations with newly acquired companies;
any disruption of management time from ongoing business operations due to recent acquisitions;
creating additional infrastructure to support our operations as a public company, losing emerging growth company status, and becoming a large accelerated filer effective as of December 31, 2021;
our future capital requirements and sources and uses of cash;
our ability to obtain funding for our operations;
our business, expansion plans, and opportunities;
3


our growth strategy for expanding our operations both within and outside the United States and the potential impact of foreign currency exchange rates;
our ability to acquire or invest in businesses, products, or technologies that may complement or expand our products or platforms, enhance our technical capabilities, or otherwise offer growth opportunities; and
the outcome of any known and unknown litigation and regulatory proceedings.
These risks are not exhaustive. Additional factors could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Unless required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information or future events or developments. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. We qualify all of the forward-looking statements in this Quarterly Report on Form 10-Q by these cautionary statements.
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PART 1.
Item 1. Financial Statements
BTRS HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share amounts)
September 30, 2022December 31, 2021
ASSETS(Unaudited)
Current assets:
Cash and cash equivalents$145,915 $187,672 
Marketable securities 45,117 
Customer funds16,951 22,541 
Accounts receivable, net43,979 34,394 
Prepaid expenses5,881 3,715 
Deferred implementation and commission costs, current portion4,995 5,060 
Other current assets1,607 1,164 
Total current assets219,328 299,663 
Property and equipment, net9,768 15,516 
Operating lease right-of-use assets15,378 28,623 
Goodwill115,970 88,148 
Intangible assets, net42,116 24,339 
Deferred implementation and commission costs, net of current portion9,686 9,238 
Other assets5,173 5,122 
Total assets$417,419 $470,649 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Customer funds payable$16,951 $22,541 
Accounts payable2,633 2,968 
Accrued expenses and other current liabilities55,486 46,426 
Deferred revenue, current portion27,093 24,983 
Total current liabilities102,163 96,918 
Operating lease liabilities, net of current portion31,302 32,461 
Customer postage deposits10,334 10,081 
Deferred revenue, net of current portion8,406 14,259 
Deferred taxes8,817 4,338 
Other non-current liabilities4,617 2,958 
Total liabilities165,639 161,015 
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock, $0.0001 par value,10,000 shares authorized; no shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
  
Class 1 common stock, $0.0001 par value, 538,000 shares authorized; 164,648 and 159,413 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
17 15 
Class 2 common stock, $0.0001 par value, 27,000 shares authorized; no shares and 3,396 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
 1 
Additional paid-in capital540,506 516,987 
Accumulated deficit(271,524)(206,077)
Accumulated other comprehensive loss(17,219)(1,292)
Total stockholders’ equity251,780 309,634 
Total liabilities and stockholders’ equity$417,419 $470,649 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
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BTRS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, amounts in thousands, except per share amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Revenues:
Subscription, transaction, and services$42,508 $32,732 $120,157 $97,440 
Reimbursable costs8,854 8,625 26,112 26,085 
Total revenues51,362 41,357 146,269 123,525 
Cost of revenues:
Cost of subscription, transaction, and services11,255 9,368 32,729 27,981 
Cost of reimbursable costs8,854 8,625 26,112 26,085 
Total cost of revenues, excluding depreciation and amortization20,109 17,993 58,841 54,066 
Operating expenses:
Research and development15,943 13,453 46,922 35,716 
Sales and marketing11,591 10,310 34,030 29,226 
General and administrative19,613 9,838 49,426 32,766 
Depreciation and amortization2,191 1,205 6,218 3,924 
Impairment and restructuring4,636  18,520  
Total operating expenses53,974 34,806 155,116 101,632 
Loss from operations(22,721)(11,442)(67,688)(32,173)
Other income (expense):
Change in fair value of financial instruments360  122 (9,995)
Interest expense and loss on extinguishment of debt(15)(2)(22)(2,947)
Other non-operating income916 277 1,171 521 
Total other income (expense)1,261 275 1,271 (12,421)
Loss before income taxes(21,460)(11,167)(66,417)(44,594)
Income tax expense (benefit)(251)27 (970)130 
Net loss$(21,209)$(11,194)$(65,447)$(44,724)
Net loss per common share, basic and diluted$(0.13)$(0.07)$(0.40)$(0.29)
Weighted average common shares outstanding, basic and diluted164,175 158,316 163,586 154,303 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

6


BTRS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, amounts in thousands)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Net loss $(21,209)$(11,194)$(65,447)$(44,724)
Other comprehensive loss from foreign currency translation(7,914) (15,927) 
Total comprehensive loss$(29,123)$(11,194)$(81,374)$(44,724)
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

7


BTRS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, amounts in thousands)
Three Months Ended September 30, 2022
Class 1 Common StockClass 2 Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance, June 30, 2022160,536 $16 3,396 $1 $532,409 $(250,315)$(9,305)$272,806 
Issuance of common stock under stock plans716 — — — 1,157 — — 1,157 
Exchange of shares upon sale of Class 2 common stock3,396 1 (3,396)(1)— — —  
Stock-based compensation expense— — — — 6,940 — — 6,940 
Foreign currency translation— — — — — — (7,914)(7,914)
Net loss— — — — — (21,209)— (21,209)
Balance, September 30, 2022164,648 $17  $ $540,506 $(271,524)$(17,219)$251,780 

Three Months Ended September 30, 2021
Class 1 Common StockClass 2 Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance, June 30, 2021150,649 $15 7,251 $1 $503,029 $(178,407)$ $324,638 
Issuance of common stock under stock plans714 — — — 1,371 — — 1,371 
Shares exchanged in connection with Secondary Offering (Note 17)2,028 — (2,028)— — — — — 
Stock-based compensation expense— — — — 5,914 — — 5,914 
Net loss— — — — — (11,194)— (11,194)
Balance, September 30, 2021153,391 $15 5,223 $1 $510,314 $(189,601)$ $320,729 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

8


BTRS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, amounts in thousands)

Nine Months Ended September 30, 2022
Class 1 Common StockClass 2 Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance, December 31, 2021159,413 $15 3,396 $1 $516,987 $(206,077)$(1,292)$309,634 
Issuance of common stock under stock plans1,839 1 — — 3,226 — — 3,227 
Exchange of shares upon sale of Class 2 common stock3,396 1 (3,396)(1)— — —  
Stock-based compensation expense— — — — 20,293 — — 20,293 
Foreign currency translation— — — — — — (15,927)(15,927)
Net loss— — — — — (65,447)— (65,447)
Balance, September 30, 2022164,648 $17  $ $540,506 $(271,524)$(17,219)$251,780 

Nine Months Ended September 30, 2021
Class 1 Common StockClass 2 Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance, December 31, 202092,760 $9 8,197 $1 $148,677 $(144,877)$ $3,810 
Reverse recapitalization and PIPE financing (Note 3)44,522 5 (1,659)— 329,881 — — 329,886 
Fair value of Earnout Shares (Note 3)— — — — (230,995)— — (230,995)
Issuance and vesting of Earnout Shares (Note 3)10,204 1 713 — 237,008 — — 237,009 
Issuance of common stock under stock plans3,875 — — — 5,271 — — 5,271 
Shares exchanged in connection with Secondary Offering (Note 17)2,028 — (2,028)— — — — — 
Shares issued for exercise of warrants2 — — — 26 — — 26 
Stock-based compensation expense— — — — 20,446 — — 20,446 
Net loss— — — — — (44,724)— (44,724)
Balance, September 30, 2021153,391 $15 5,223 $1 $510,314 $(189,601)$ $320,729 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
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BTRS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, amounts in thousands)
Nine Months Ended September 30,
20222021
Cash flows from operating activities:
Net loss$(65,447)$(44,724)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization6,218 3,924 
Provision for bad debts144 94 
Impairments and reduction in carrying amount of operating lease right-of-use assets15,817 2,086 
Impairments of fixed assets4,949  
Loss on extinguishment of debt and amortization of debt discount 2,799 
Stock-based compensation expense20,293 20,446 
Change in fair value of financial instruments and other expenses116 9,996 
Change in fair value of contingent consideration(122) 
Deferred income taxes(935)106 
Changes in assets and liabilities:
Accounts receivable(7,800)(6,549)
Prepaid expenses(2,139)(2,036)
Deferred implementation and commission costs(373)227 
Other assets (current and non-current)(432)896 
Accounts payable(2,524)556 
Accrued expenses and other9,688 10,228 
Operating lease liabilities(2,757)(2,086)
Deferred revenue(4,492)(4,713)
Other liabilities (current and non-current)1,429 (1,059)
Net cash used in operating activities(28,367)(9,809)
Cash flows from investing activities:
Purchase of business, net of acquired cash(59,456) 
Purchases of marketable securities(57)(45,077)
Proceeds from marketable securities45,174  
Purchases of property and equipment(1,364)(1,570)
Net cash used in investing activities(15,703)(46,647)
Cash flows from financing activities:
Payments on borrowings (44,663)
Business Combination and PIPE financing 349,638 
Payments of equity issuance costs (19,936)
Debt extinguishment costs (1,565)
Payment of deferred purchase price(557) 
Change in customer funds payable(5,590)(1,636)
Payments on finance leases(223)(177)
Proceeds from common stock issued3,274 5,651 
Taxes paid on net share issuance of stock-based compensation(48)(4,367)
Net cash provided by (used in) financing activities(3,144)282,945 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(125) 
Net increase (decrease) in cash, cash equivalents, and restricted cash(47,339)226,489 
Cash, cash equivalents, and restricted cash, beginning of period
212,809 38,843 
Cash, cash equivalents, and restricted cash, end of period (Note 2)$165,470 $265,332 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

10


Nine Months Ended September 30,
20222021
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest$ $135 
Noncash Investing & Financing Activities:
Equity issuance costs charged to additional paid-in-capital$ $1,624 
Issuance and vesting of Earnout Shares (Note 3)$ $237,008 
Reclassification of stock warrant liability to equity (Note 3)$ $1,433 
Deferred purchase price (Note 3)$586 $ 
Net assets acquired in Business Combination and other$ $255 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
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BTRS HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Organization and Nature of Business
BTRS Holdings Inc., formerly known as Factor Systems, Inc. ("Legacy Billtrust"), utilizing the trade name Billtrust (the "Company” or “Billtrust”), was incorporated on September 4, 2001, in the State of Delaware and maintains its headquarters in Lawrenceville, New Jersey, with additional domestic offices and print facilities in Colorado and California, and international offices in Belgium, the Netherlands, Germany, and Poland.
The Company provides a comprehensive suite of order-to-cash software as a service ("SaaS") solutions with integrated payments, including credit decisioning and monitoring, online ordering, invoicing, cash application, and collections. In addition, Billtrust founded the Business Payments Network ("BPN") as part of its strategic relationship with VISA, Inc., which combines remittance data with business-to-business ("B2B") payments and facilitates straight-through payment processing. Billtrust primarily serves B2B companies and integrates the key areas of the order-to-cash process: credit decisioning, e-commerce solutions, invoice presentment, invoice payment, cash application, and collections workflow management, helping its clients connect with their customers and cash.
Proposed Merger
On September 28, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Bullseye FinCo, Inc., a Delaware corporation (“Parent”), and Bullseye Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Parent (“Merger Sub” and, together with Parent, the "Acquiring Parties"), pursuant to which Merger Sub will, upon the terms and subject to the conditions set forth in the Merger Agreement, merge with and into the Company, with the Company surviving such merger as a wholly-owned subsidiary of Parent (the “Merger”). Parent and Merger Sub are each affiliated with the EQT X Fund.
Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of Class 1 common stock of the Company, $0.0001 par value, and Class 2 common stock of the Company, $0.0001 par value (other than shares rolled over in accordance with the Merger Agreement, and shares of its common stock held by the Company as treasury stock), issued and outstanding immediately prior to the Effective Time (other than dissenting shares) will be cancelled and immediately converted into the right to receive $9.50 in cash, without interest and less any applicable withholding taxes.
The completion of the Merger is subject to several conditions beyond the Company's control that may prevent, delay or otherwise adversely affect its completion in a material way, including the approval of the Company's stockholders, the expiration or termination of applicable waiting periods, and the receipt of applicable approvals or consents under antitrust and competition laws and foreign investment laws of certain jurisdictions. Assuming the satisfaction of the remaining outstanding conditions set forth in the Merger Agreement, the Merger is currently expected to close in the fourth quarter of 2022 or first quarter of 2023. However, the Company cannot assure completion of the Merger by any particular date, if at all or that, if completed, it will be completed on the terms set forth in the Merger Agreement.
If the Merger is consummated, the Company’s securities will be de-listed from the Nasdaq Global Select Market and de-registered under the Securities Exchange Act of 1934 as soon as practicable following the Effective Time.
Under the terms of the Merger Agreement, the Company may be required to pay Parent a termination fee of $50.2 million if the Merger Agreement is terminated under certain specified circumstances, including the Company terminating the Merger Agreement to enter into a definitive written agreement with respect to a superior proposal that did not result from a breach of the non-solicitation provisions. The Merger Agreement additionally provides that Parent pay the Company a termination fee of $100.5 million under certain specified circumstances.
During the three and nine months ended September 30, 2022, the Company incurred $5.8 million in Merger related costs, primarily consisting of investment banking, legal, accounting, and other professional advisory fees, filing fees, regulatory fees, and other related costs. These costs were recorded in general and administrative expenses on the Condensed Consolidated Statements of Operations.
12


Business Combination Agreement
On October 18, 2020, as amended on December 13, 2020, South Mountain Merger Corp., a Delaware corporation (“South Mountain”), BT Merger Sub I, Inc., a Delaware corporation and a direct, wholly owned subsidiary of South Mountain (“First Merger Sub”), BT Merger Sub II, LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of South Mountain (“Second Merger Sub”), and Legacy Billtrust entered into a Business Combination Agreement (the “BCA”), pursuant to which (i) First Merger Sub was merged with and into Legacy Billtrust (the “First BCA Merger”), with Legacy Billtrust surviving the First BCA Merger as a wholly owned subsidiary of South Mountain (“Surviving Corporation”), and (ii) the Surviving Corporation merged with and into Second Merger Sub (the “Second BCA Merger”, and together with the First BCA Merger, the “BCA Mergers”), with Second Merger Sub surviving the Second BCA Merger as a wholly owned subsidiary of South Mountain (such BCA Mergers, collectively with the other transactions described in the BCA, the “Business Combination”).
In connection with the execution of the Business Combination, on October 18, 2020, South Mountain entered into separate subscription agreements (“Subscription Agreements”) with a number of investors (“PIPE Investors”), pursuant to which the PIPE Investors agreed to purchase, and South Mountain sold to the PIPE Investors, an aggregate of 20.0 million shares of South Mountain Class A common stock, for a purchase price of $10.00 per share and at an aggregate purchase price of $200.0 million, in a private placement (“PIPE Financing”).
As described in Note 3 - Business Combination & Acquisitions, the Business Combination and PIPE Financing closed on January 12, 2021 (the "BCA Closing Date"). The Business Combination was accounted for as a reverse recapitalization in accordance with the generally accepted accounting principles in the United States of America ("U.S. GAAP"). Under this method of accounting, South Mountain was treated as the “acquired” company for financial reporting purposes. For accounting purposes, Billtrust was the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of Billtrust (i.e., a capital transaction involving the issuance of stock by South Mountain for the stock of Billtrust). Accordingly, the assets, liabilities, and results of operations of Billtrust became the historical financial statements of "New Billtrust", which was renamed BTRS Holdings Inc., and South Mountain’s assets, liabilities, and results of operations were consolidated with Billtrust beginning on the BCA Closing Date. All amounts of BTRS Holdings Inc. reflect the historical amounts of Billtrust carried over at book value with no step up in basis to fair value. After the Business Combination, the Company’s Class 1 common stock began trading on the Nasdaq Global Select Market under the ticker symbol "BTRS".
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting on Form 10-Q. Accordingly, certain information and disclosures required for complete financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These Condensed Consolidated Financial Statements and notes should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (as filed with the SEC on March 9, 2022). Since the date of that filing, there have been no changes or updates to the Company's significant accounting policies, other than those described below.
In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all normal recurring adjustments necessary for a fair statement of financial position, results of operations, comprehensive loss, and cash flows as of the dates and for the interim periods presented. The results of operations for the three and nine months ended September 30, 2022 may not be indicative of the results for the full fiscal year ended December 31, 2022 or any other period. The Condensed Consolidated Balance Sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date, but does not include all disclosures required by U.S. GAAP on an annual reporting basis. Certain prior period amounts have been reclassified to conform to the current period presentation.
The Company's fiscal year is the twelve-month period from January 1 through December 31 and all references to "2022", “2021”, and “2020” refer to the fiscal year unless otherwise noted.
Principles of Consolidation
The Condensed Consolidated Financial Statements include the accounts of BTRS Holdings Inc. and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation.
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Use of Estimates
The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported, disclosure about contingent liabilities, and the reported amounts of revenues and expenses in the financial statements and accompanying notes. Such estimates include, but are not limited to, revenue recognition, leases, valuation of goodwill, intangible assets, other long-lived assets, and other assets and liabilities from acquisitions, recoverability of deferred tax assets, ongoing impairment reviews of goodwill, intangible assets, and other long-lived assets, contingent consideration, and stock-based compensation. The Company bases its estimates on historical experience, known trends, market specific information, or other relevant factors it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, and changes in estimates are recorded in the period in which they become known. Actual results may differ from these estimates.
Foreign Currency
The functional currency of the Company’s subsidiaries is their respective local currencies. These subsidiary financial statements are translated to U.S. dollars using the period-end exchange rates for assets and liabilities, average exchange rates during the corresponding period for revenues and expenses, and historical rates for equity. The effects of foreign currency translation adjustments are recorded in accumulated other comprehensive income (loss) within stockholders’ equity on the Condensed Consolidated Balance Sheets.
Foreign currency transaction gains (losses) are included in other non-operating income (expense) on the Condensed Consolidated Statements of Operations. Foreign exchange gains and losses were not material during the three and nine months ended September 30, 2022 and 2021.
Liquidity
For the nine months ended September 30, 2022, the Company incurred a net loss of $65.4 million and used cash in operations of $28.4 million. As of September 30, 2022, the Company had cash and cash equivalents of $145.9 million and an accumulated deficit of $271.5 million. Based on the Company’s business plan, existing cash, and cash equivalents, the Company expects to satisfy its working capital requirements for at least the next 12 months after the date that these Condensed Consolidated Financial Statements are issued.
Impact of COVID-19 and Other Macroeconomic Events
During 2021 and the nine months ended September 30, 2022, the COVID-19 pandemic did not adversely impact the Company, as evidenced by the continued growth in subscription and transaction revenues. The Company's focus remains on investing in its products and supporting its long-term growth, including global expansion. Since the start of the pandemic, the Company has continued to operate despite the disruption to some of its customer's operations. The pandemic has served to increase awareness and urgency around accelerating the digital transformation of accounts receivable through the Company's platform and offerings, which has helped avoid significant business, bookings, or revenue disruptions thus far. Additionally, shifts from in-person buying and traditional payment methods (such as cash or check) towards e-commerce and digital payments, and the related increase in consumer and B2B demand for safer payment and delivery solutions, have benefited the Company as it has further ingrained its platform in its customers’ critical day-to-day order-to-cash operations. In response to the pandemic, the Company has modified some of its business practices, such as enabling and encouraging its employees to work from anywhere and establishing health and safety protocols in its offices.
In addition, the spread of COVID-19 and its variants has contributed to a global slowdown of economic activity, increased unemployment, supply chain disruptions, higher rates of inflation, higher interest rates, increased volatility in foreign currency exchange rates, and increased volatility in the global capital markets, among other macroeconomic events. The Company is unable to predict the impact the COVID-19 pandemic or other macroeconomic events will have on its future results of operations, liquidity, financial condition, ability to access capital markets, and business practices due to numerous uncertainties, including the duration, severity, and spread of the virus and its variants, actions that may be taken by government authorities, the impact to the Company's employees, customers, and partners, prolonged macroeconomic uncertainty, volatility, and disruption, and various other factors beyond the Company's knowledge or control. The Company continues to monitor these situations and may take further actions as may be required by government authorities or that it determines are in the best interests of its employees, customers, and partners.
14


Retroactive Adjustments Related to Change in Filing Status
Based on the closing share price and the market value of the Company's common stock held by non-affiliates as of June 30, 2021, the Company was deemed to be a large accelerated filer as of December 31, 2021. As a result, on December 31, 2021, the Company no longer qualified as an emerging growth company (“EGC”) under the Jumpstart Our Business Startups Act (“JOBS Act”). The previous EGC status allowed the Company an extended transition period to adopt new or revised accounting pronouncements until such pronouncements were applicable to private companies. The loss of ECG status required the Company to adopt the following new accounting pronouncements retroactively to January 1, 2021 in its 2021 Annual Report on Form 10-K:
Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), including subsequently issued ASUs (collectively, "Topic 842");
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, including subsequently issued ASUs (collectively, "Topic 326");
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes; and
ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.
As a result, in conformity with U.S. GAAP, the Company has retroactively adjusted its quarterly financial statements and related notes thereto, as of, and for the three and nine months ended September 30, 2021 to reflect the adoption of these new accounting standards as follows:
Within the Condensed Consolidated Statements of Cash Flows, financial statement lines for (1) impairments and reduction in carrying amount of operating lease right-of-use assets and (2) operating lease liabilities were included in the net change in operating activities in accordance with Topic 842.
Within the Notes to Condensed Consolidated Financial Statements, Note 9 - Leases was updated to include the required disclosures under Topic 842.
Except as otherwise noted, the adoption of the accounting pronouncements listed above did not have a material impact on the Company's financial position, results of operations, or the financial statements and related notes included herein.
Concentrations of Credit Risk
The financial instruments that potentially subject the Company to concentrations of credit risk are cash, cash equivalents, restricted cash, accounts receivable, and customer funds. The Company maintains its deposits of cash and cash equivalents, restricted cash, and customer funds with high-credit quality financial institutions and balances may exceed federally insured limits.
The Company’s accounts receivable are reported on the Condensed Consolidated Balance Sheets net of allowances for uncollectible accounts. The Company believes that the concentration of credit risk with respect to accounts receivable is limited due to the large number of companies and diverse industries comprising its customer base. Ongoing credit evaluations are performed, with a focus on new customers or customers with whom the Company has no prior collections history, and collateral is generally not required. The Company maintains reserves for potential losses based on customer specific situations, historical experience, and expectations of forward-looking loss estimates. Such losses, in the aggregate, have not exceeded management’s expectations. As of both September 30, 2022 and December 31, 2021, the allowance for uncollectible accounts was $0.3 million.
For the nine months ended September 30, 2022 and 2021, no individual customer accounted for 10% or greater of total revenues. As of September 30, 2022 and December 31, 2021, no individual customer had a balance of 10% or greater of accounts receivable.
15


Presentation of Restricted Cash
The following table summarizes the period ending cash and cash equivalents as presented on the Company's Condensed Consolidated Balance Sheets and the total cash, cash equivalents, and restricted cash as presented on the Condensed Consolidated Statements of Cash Flows (in thousands):
Nine Months Ended September 30,
20222021
Cash and cash equivalents$145,915 $243,448 
Customer funds16,951 19,288 
Restricted cash (1)2,604 2,596 
Total cash, cash equivalents, and restricted cash$165,470 $265,332 
(1)Restricted cash consists of collateral for letters of credit required for leased office space and is included in other assets in the Condensed Consolidated Balance Sheets. The short-term or long-term classification is determined in accordance with the expiration of the underlying letters of credit.
Recent Accounting Pronouncements
Accounting Pronouncements Issued and Adopted
On January 1, 2022, the Company adopted ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The amendments in this ASU simplify the accounting for convertible instruments by eliminating large sections of the existing guidance and eliminating several triggers for derivative accounting, including a requirement to settle certain contracts by delivering registered shares. The adoption of this standard did not have an impact on the Company's financial position or results of operations.
Accounting Pronouncements Issued but not yet Adopted
In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance. The amendments in this ASU require entities to annually disclose information about certain government assistance they receive. The rule will be effective for public entities for annual periods beginning after December 15, 2021. The adoption of ASU is currently not expected to have a material impact on the Company’s financial statement disclosures.
Note 3 - Business Combination & Acquisitions
2022
Acquisition of Anachron Beheer BV
On February 14, 2022, Billtrust acquired 100% of the outstanding shares of Anachron Beheer BV and subsidiaries, d/b/a Order2Cash ("Order2Cash"), a privately-held company headquartered in Amsterdam, the Netherlands. Order2Cash is a European B2B order-to-cash platform provider. Their enterprise customer base, global interoperability capabilities, and established connections to over 70 B2B and business-to-government (“B2G”) e-invoicing networks broaden BPN’s reach to deliver fully compliant and secure e-invoicing across multiple markets. The acquisition is part of Billtrust's strategic plan to continue expanding its physical presence in Europe while also enhancing its global invoicing and payments capabilities. The acquisition of Order2Cash was determined to be an acquisition of a business under ASC 805, Business Combinations. Pursuant to the terms of the purchase agreement, the Company paid an initial amount of $59.9 million in cash at closing.
16


Total Consideration Transferred
The following table summarizes the fair value of the aggregate consideration paid for Order2Cash (in thousands):
Cash paid at close (1)$59,878 
Deferred purchase price (2)586 
Total purchase consideration$60,464 
(1)Cash paid at close represents the gross contractual amounts paid. Net cash paid, which accounts for cash acquired of $0.4 million, was $59.5 million and is reflected as an investing activity on the Condensed Consolidated Statements of Cash Flows.
(2)An additional $0.6 million is payable within four years of the closing date upon achievement of certain conditions. This amount is recognized as purchase price. Refer to Note 13 - Fair Value Measurements for information on determining the fair value.
Additionally, the acquisition included contingent consideration to be paid to the sellers based on the amount and timing of Order2Cash's achievement of certain conditions. These amounts may be earned by the sellers during periods following the closing date based on the financial performance of Order2Cash during 2022, and each of the 12-month periods ending June 30, 2023 and June 30, 2024. Under ASC 805, the Company determined that the contingent consideration arrangement is compensation and therefore recognized separately from the acquisition transaction. In accordance with ASC 710, Compensation, the contingent consideration will be recognized over the arrangement period and is recorded in general and administrative expenses on the Condensed Consolidated Statements of Operations.
The preliminary acquisition date fair value of the total contingent consideration was $11.5 million. At September 30, 2022, the fair value of the total contingent consideration was $3.1 million, which was included in accrued expenses and other current liabilities and other non-current liabilities on the Condensed Consolidated Balance Sheets. The determination of the fair value included the following significant inputs; projected revenue, a risk adjusted discount rate, and estimated volatility. Increases or decreases in the inputs would have resulted in a higher or lower fair value measurement. The range of undiscounted amounts that could be payable under the earnout arrangement is zero to $20.7 million. The amount expensed for the nine months ended September 30, 2022 was $1.1 million.
17


Preliminary Allocation of Purchase Price
The following table summarizes the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed for the acquisition of Order2Cash (in thousands):
Assets:
Cash and cash equivalents$422 
Accounts receivable2,189 
Property and equipment184 
Operating lease right-of-use assets569 
Goodwill (1)40,838 
Intangible assets (2)27,238 
Total assets$71,440 
Liabilities:
Accounts payable$861 
Accrued expenses and other current liabilities1,510 
Operating lease liabilities569 
Deferred revenue1,226 
Deferred taxes6,810 
Total liabilities10,976 
Net assets acquired$60,464 
(1)Goodwill represents the expected revenue synergies from combining Order2Cash with Billtrust, as well as the value of the acquired workforce. The goodwill is not expected to be deductible for income tax purposes.
(2)All of the intangible assets are expected to be finite lived.
The determination of the fair value of the finite-lived intangible assets requires management judgment and the consideration of a number of factors. The Company relies on income, market, and replacement cost valuation methodologies, which include estimates related to projected cash flows for each asset, discount rates, useful lives of each asset, and published industry benchmark data. Based on the preliminary valuation, the intangible assets acquired were (in thousands):
Fair ValueUseful Life
(in Years)
Customer relationships$22,471 
13 - 14
Developed technology3,405 5
Trade names1,362 6
Total intangible assets$27,238 
The weighted average amortization period of all the acquired intangible assets is 11.9 years.
Due to the timing of the acquisition in the first quarter of 2022, the purchase price allocation is preliminary with respect to the valuation of acquired assets, liabilities assumed (including income taxes), intangible assets, and goodwill. The Company continues to obtain the information to complete the purchase price allocation and will record adjustments, if any, during the 12 month measurement period from the acquisition date. No purchase price adjustments were recorded during the nine months ended September 30, 2022.
18


The operating results of Order2Cash have been included in the Company’s financial statements since the acquisition date. Order2Cash’s operating results are reported in both the Company’s Software and Payments segment and Print segment. The goodwill resulting from the acquisition is reported in the Software and Payments segment. The acquisition added approximately $6.8 million of additional revenue and $8.6 million of direct expenses during the nine months ended September 30, 2022. Had the Company acquired Order2Cash in prior periods, the Company's operating results would have been materially different. As a result, the following unaudited pro forma financial information is presented as if Order2Cash had been acquired by the Company on January 1, 2021 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Pro forma total revenue
$51,362 $43,343 $147,621 $131,676 
Pro forma net loss
$(21,092)$(10,732)$(65,271)$(47,188)
The pro forma results have been prepared in accordance with U.S. GAAP and include the following pro forma adjustments: (1) an increase for amortization expense for the three and nine months ended September 30, 2022 and 2021 as a result of the preliminary purchase price allocation for finite-lived intangible assets, (2) an increase in operating costs for the three and nine months ended September 30, 2021 to recognize non-recurring acquisition costs incurred to close the transaction, and (3) an increase in the estimated tax benefits as a result of the pro forma adjustments. These pro forma results do not necessarily reflect the combined actual results of operations of the Company and Order2Cash that would have been achieved, nor are they necessarily indicative of future results of operations.
2021
Closing of Business Combination, Accounted for as a Reverse Recapitalization
On January 12, 2021, Billtrust consummated the previously announced Business Combination pursuant to the Agreement dated October 18, 2020, and amended as of December 13, 2020. As a result of the Agreement, Billtrust stockholders received aggregate consideration with a value equal to approximately $1,190.0 million, which consists of:
i.Approximately $90.1 million in cash to certain Billtrust shareholders who elected to receive cash for shares of Billtrust common stock at closing of the Business Combination, accounted for as a reverse recapitalization; and
ii.Approximately $1,099.0 million in South Mountain Class A and Class C common stock at closing of the Business Combination, accounted for as a reverse recapitalization, or 109.9 million shares (including 15.2 million shares issuable pursuant to outstanding vested and unvested options from the 2003 and 2014 Plans), converted at an exchange ratio of 7.2282662 shares (the "Conversion Rate") per share of Legacy Billtrust common stock based on an assumed share price of $10.00 per share.
As of the completion of the Business Combination, accounted for as a reverse recapitalization, on January 12, 2021, the merged companies, BTRS Holdings Inc. and subsidiaries, had the following outstanding securities:
i.138.7 million shares of Class 1 common stock, including 2.4 million shares to prior South Mountain shareholders that are subject to the vesting and forfeiture provisions based upon the same share price targets described below in the First Earnout and Second Earnout. During the first quarter of 2021, all of these shares vested;
ii.6.5 million shares of Class 2 common stock; and
iii.12.5 million warrants, each exercisable for one share of Class 1 common stock at a price of $11.50 per share (the "Warrants", refer to Note 7 - Stockholders' Equity and Stock-Based Compensation).
In connection with the Business Combination:
i.Each issued and outstanding South Mountain Class A and Class B share was converted into one share of Class 1 common stock of the Company; and
ii.All 7.0 million private placement warrants of South Mountain were cancelled and were no longer outstanding.
19


Immediately prior to the closing, each issued and outstanding share of Legacy Billtrust preferred stock converted into equal shares of Legacy Billtrust common stock. At the closing of the Business Combination, each stockholder of Legacy Billtrust received 7.2282662 shares of the Company’s Class 1 common stock, par value $0.0001 per share (“Common Stock”), for each share of Legacy Billtrust common stock, par value $0.001 per share, that such stockholder owned, except for one investor who requested to receive shares of Class 2 common stock, which is the same in all respects as Class 1 common stock except it does not have voting rights.
Upon the closing of the Business Combination, the Company’s certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of capital stock to 575.0 million shares, of which 538.0 million shares were designated Class 1 common stock, $0.0001 par value per share; 27.0 million shares were designated Class 2 common stock, $0.0001 par value per share; and 10.0 million shares were designated preferred stock, $0.0001 par value per share.
Concurrently with the completion of the Business Combination, on the BCA Closing Date 20.0 million new shares of Common Stock were issued (such purchases, the “PIPE”) for an aggregate purchase price of $200.0 million.
In connection with the Business Combination, 9.0 million shares of common stock were repurchased for cash from Legacy Billtrust shareholders (after conversion) at a price of $10.00 per share. Additionally, in connection with a previous loan agreement in July 2014, the Company issued a lender a warrant to purchase shares of the Company’s Series C preferred stock. In connection with Business Combination, the warrant was exercised and converted into 0.1 million shares of Common Stock.
The following table reconciles the elements of the Business Combination, accounted for as a reverse recapitalization, to the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated Statements of Stockholders' Equity for the nine months ended September 30, 2021 (in thousands):
Reverse Recapitalization
Cash - South Mountain (net of redemptions and non-contingent expenses)$240,670 
Cash - PIPE investors200,000 
Cash electing shares of Legacy Billtrust shareholders(90,061)
Fees to underwriters and other transaction costs(19,936)
Net cash received from reverse recapitalization330,673 
Net assets acquired and other adjustments255 
Net contributions from reverse recapitalization$330,928 
The number of shares of Class 1 and Class 2 common stock of BTRS Holdings Inc. issued immediately following the consummation of the Business Combination, accounted for as a reverse recapitalization, is summarized as follows (in thousands):
Number of Shares
Common Stock outstanding prior to Business Combination25,000 
South Mountain founder shares5,500 
Redemption of South Mountain shares(2)
Common stock of South Mountain30,498 
Shares issued from PIPE20,000 
Legacy Billtrust shareholders' shares purchased for cash(9,006)
Recapitalization shares41,492 
Legacy Billtrust stockholders' shares103,774 
Total shares145,266 
20


Earnout Consideration
Following the closing of the Business Combination, holders of Legacy Billtrust common stock (including all redeemable preferred shareholders whose shares were converted into common stock at the closing of the Business Combination) and holders of stock options and restricted stock pursuant to the 2003 Plan and the 2014 Plan (as defined in the Business Combination Agreement) had the contingent right to receive, in the aggregate, up to 12.0 million shares of Class 1 common stock if, from the closing of the Business Combination until the fifth anniversary thereof, the average closing price of BTRS Holdings Inc. Common Stock exceeds certain thresholds. The first issuance of 6.0 million earnout shares is based on the volume-weighted average price of Common Stock exceeding $12.50 for any 20 trading days within any 30 trading day period (the “First Earnout”). The second issuance of 6.0 million earnout shares is based on the volume weighted average price of Common Stock exceeding $15.00 for any 20 trading days within any 30 trading day period (the “Second Earnout” and together with the First Earnout, the "Earnout Shares").
Subsequent to the closing of the Business Combination and in the first quarter of 2021, 10.9 million shares of Class 1 and Class 2 common stock were issued associated with attainment of the First Earnout and the Second Earnout thresholds.
The difference in the Earnout Shares issued and the aggregate amounts defined in the BCA is primarily due to 0.8 million unissued shares reserved for future issuance to holders of unvested options in the form of restricted stock units (the "Earnout RSUs"), which are subject to the same vesting terms and conditions as the underlying unvested stock options and are not replacement awards. Additionally, 0.2 million shares of Common Stock were withheld from employees to satisfy the mandatory tax withholding requirements, for which the company remitted cash of $4.0 million to the appropriate tax authorities.
As of the BCA Closing Date, the prior holders of South Mountain stock agreed that of their existing issued and outstanding shares of Class 1 common stock, 2.4 million shares would be subject to vesting conditions based upon the same price milestones in the First Earnout (1.2 million shares) and Second Earnout (1.2 million shares) as discussed above ("Sponsor Vesting Shares").
The Company determined that the Earnout Shares issued to non-employee shareholders and to holders of BTRS Holdings Inc. common stock, vested options from the 2003 Plan and 2014 Plan, and the Sponsor Vesting Shares did not meet the criteria for equity classification under Accounting Standards Codification ("ASC") 815-40. Accordingly, these shares were required to be classified as a liability and recorded at their fair values, with the remeasurement of their fair values at each reporting period recorded in earnings. Upon closing of the Business Combination, the fair value of the shares was determined using a Monte Carlo simulation (using the same assumptions as Earnout RSUs discussed below), resulting in a fair value of $16.80 per share. The shares were remeasured at their fair values through the dates the First Earnout and Second Earnout were achieved in the first quarter of 2021. The liability associated with the Earnout Shares delivered to the equity holders and the Vesting Shares that vested upon achievement of the First Earnout and Second Earnout during the first quarter of 2021 was then reclassified to equity as the shares issued, with the appropriate allocation to common stock at par value and additional paid-in capital.
The following table is a reconciliation of the liability balance at the BCA Closing Date and the changes therein for the nine months ended September 30, 2021 (in thousands):
Earnout SharesSponsor Vesting SharesTotal
Fair value on Closing Date$191,095 $39,900 $230,995 
Fair value adjustment (1)8,246 1,780 10,026 
Amount paid for tax withholding(4,013) (4,013)
Amount reclassified to equity(195,328)(41,680)(237,008)
Balance, March 31, 2021$ $ $ 
(1) Included in change in fair value of financial instruments on the Condensed Consolidated Statements of Operations.
Earnout RSUs issued based on the amount of the unvested options are recognized in earnings as stock-based compensation expense under ASC 718. The fair value of the Earnout RSUs was determined using a Monte Carlo simulation, including the stock price on the BCA Closing Date of $16.80, a risk free rate of 0.5%, and a volatility rate of 42%.
21


Offering Costs
In accordance with ASC 340-10-S99-1, the offering costs, consisting principally of underwriters' fees and professional, printing, filing, regulatory, and other costs, were charged to additional paid-in capital upon completion of the Business Combination.
Repayment of Financing Agreement
In connection with the Business Combination, the Company paid all of its outstanding debt facilities in full. In connection therewith, the unamortized debt discount of $1.2 million and a prepayment penalty and associated costs of $1.6 million were recorded in interest expense and loss on extinguishment of debt on the Condensed Consolidated Statements of Operations.
Acquisition of iController BV
On October 7, 2021, Billtrust acquired 100% of the outstanding shares of iController BV ("iController"), a privately-held company based in Ghent, Belgium and Amsterdam, the Netherlands. iController is a B2B provider of SaaS intelligent solutions for collections management. Their SaaS offerings enable a wide range of users, from credit and collections managers to chief financial officers, to see payment and collections information and communication in real time, providing visibility into cash flow management. The acquisition is part of Billtrust's strategic plan to expand its physical presence in Europe while enhancing its global collections capabilities. The acquisition of iController was determined to be an acquisition of a business under ASC 805, Business Combinations.
Pursuant to the terms of the purchase agreement, the Company paid an initial amount of $57.0 million in cash at closing, which was subject to a closing working capital adjustment and typical indemnity provisions from the seller.
Total Consideration Transferred
The following table summarizes the fair value of the aggregate consideration paid for iController (in thousands):
Cash paid at close (1)$57,020 
Contingent consideration (2)5,085 
Deferred purchase price (3)579 
Total purchase consideration$62,684 
(1)The cash paid at close represents the gross contractual amounts paid. Net cash paid, which accounts for cash acquired of $0.2 million, was $56.8 million and is reflected as an investing activity on the Condensed Consolidated Statements of Cash Flows.
(2)The acquisition of iController included contingent consideration to be paid in cash to the seller based on the amount and timing of iController’s achievement of certain recurring revenue growth targets over a three-year period subsequent to the acquisition date. The fair value of this contingent consideration on the closing date was $5.1 million, which was recognized as purchase price. Refer to Note 13 - Fair Value Measurements for information on determining the fair value.
(3)The deferred purchase price was paid in the first quarter of 2022 upon completion of certain conditions.
22


Allocation of Purchase Price
The following table summarizes the final allocation of the purchase price to the fair value of the assets acquired and liabilities assumed for the acquisition of iController (in thousands):
Assets:
Cash and cash equivalents$187 
Accounts receivable1,217 
Property and equipment439