UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.WASHINGTON, DC 20549

_________________________
FORM 10-Q

_________________________
(MARK ONE)

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

For the quarterquarterly period ended June 30, 20202021

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
Commission file number: 001-38947_________________________

SOUTH MOUNTAIN MERGER CORP.BTRS HOLDINGS INC.
(Exact Namename of Registrantregistrant as Specifiedspecified in Its Charter)its charter)

_________________________
Delaware83-3780685
(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)

767 Fifth Avenue, 9th Floor
New York, NY 10153(609) 235-1010
(Address of principal executive offices)Registrant's telephone number, including area code)

(646) 446-2700
 (Issuer’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each classEach ClassTrading Symbol(s)
Name of each exchangeEach Exchange on
which registered
Which Registered
Units,Class 1 Common Stock, $0.0001 par value
BTRSThe Nasdaq Global Select Market
Warrants, each consisting ofwhole warrant exercisable for one share of Class A common
stock, $0.0001 par value, and one-half1 Common Stock at an exercise price of one warrant
$11.50 per share
SMMCU
BTRSW
The Nasdaq Stock Market LLC
Shares of Class A common stockSMMCThe Nasdaq StockCapital Market LLC
WarrantsSMMCWThe Nasdaq Stock Market LLC

CheckIndicate by check mark whether the issuerregistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the pastpreceding 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 electronically 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”,filer,” “accelerated filer”,filer,” “smaller reporting company”,company,” and “emerging"emerging growth company”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 August 14, 2020, 25,000,0006, 2021, there were 153,016,018 and 5,223,666 shares of Class A1 and Class 2 common stock par value $0.0001 per share, and 6,250,000 shares of Class B common stock, par value $0.0001 per share, were issued and outstanding.

outstanding, respectively.

SOUTH MOUNTAIN MERGER CORP.



BTRS HOLDINGS INC.
INDEX TO FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2020
TABLE OF CONTENTS

Page Number
1
3
PART I. FINANCIAL INFORMATION
1
5
Condensed Consolidated Balance Sheets
1
5
Condensed Consolidated Statements of Operations (Unaudited)and Comprehensive Loss
2
6
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
3
7
Condensed Consolidated Statements of Cash Flows (Unaudited)
4
9
Notes to Condensed Consolidated Financial Statements
Notes to Condensed Financial Statements (Unaudited)10
5
Item 2. Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations
14
34
17
50
17
50
PART II. OTHER INFORMATION
18
Item 1. Legal Proceedings
18
52
18
52
19
53
19
53
19
53
19
53
20
54
21
55


2
Table of Contents

PART I - FINANCIAL INFORMATION

SOUTH MOUNTAIN MERGER CORP.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.
CONDENSED BALANCE SHEETSThis 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.

  
June 30,
2020
  
December 31,
2019
 
  (unaudited)    
ASSETS      
Current assets      
Cash 
$
1,401,047
  
$
1,606,261
 
Prepaid income taxes  
105,257
   
41,921
 
Prepaid expenses  
145,783
   
102,712
 
Total Current Assets  
1,652,087
   
1,750,894
 
         
Marketable securities held in Trust Account  
252,360,923
   
251,865,941
 
TOTAL ASSETS $254,013,010  $253,616,835 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liability - Accrued expenses 
$
451,763
  
$
366,561
 
Deferred underwriting fee payable  
7,970,375
   
7,970,375
 
Total Liabilities  8,422,138   8,336,936 
         
Commitments (see Note 6)
        
         
Common stock subject to possible redemption, 23,827,156 and 23,861,949 shares at redemption value at June 30, 2020 and December 31, 2019, respectively  
240,590,864
   
240,279,893
 
         
Stockholders’ Equity        
Preferred stock, $0.0001 par value; 1,000,000 authorized; none issued and outstanding  
—
   
—
 
Class A Common stock, $0.0001 par value; 200,000,000 shares authorized; 1,172,844 and 1,138,051 shares issued and outstanding (excluding 23,827,156 and 23,861,949 shares subject to possible redemption) at June 30, 2020 and December 31, 2019, respectively.  
117
   
114
 
Class B Common stock, $0.0001 par value; 20,000,000 shares authorized; 6,250,000 shares issued and outstanding at June 30, 2020 and December 31, 2019  
625
   
625
 
Additional paid-in capital  
3,284,806
   
3,595,780
 
Retained earnings  
1,714,460
   
1,403,487
 
Total Stockholders’ Equity  5,000,008   5,000,006 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $254,013,010  $253,616,835 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The accompanying notesThis 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 our future financial condition, business strategy and plans, and objectives of management for future operations, are an integral partforward-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 condensed financial statements.

1
Table of Contents
SOUTH MOUNTAIN MERGER CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

  
Three Months
Ended
June 30,
  
Six Months
Ended
June 30,
  
For the
Period
from
February
28, 2019
(inception)
through
June 30,
 
  2020  2019  2020  2019 
             
Operating and formation costs $243,841  $65,808  $489,692  $66,808 
Loss from operations  (243,841)  (65,808)  (489,692)  (66,808)
                 
Other income:                
Interest income on marketable securities held in Trust Account  96,195   86,506   883,329   86,506 
                 
(Loss) income before provision for income taxes  (147,646)  20,698   393,637   19,698 
Benefit (provision) for income taxes  31,005   (4,137)  (82,664)  (4,137)
Net (loss) income $(116,641) $16,561  $310,973  $15,561 
                 
Weighted average shares outstanding, basic and diluted (1)
  7,398,328   5,767,805   7,393,190   5,767,805 
                 
Basic and diluted net loss per common share (2)
 $(0.03) $(0.00) $(0.05) $(0.00)

(1)
Excludes an aggregate of 23,827,156 and 23,886,104 shares subject to possible redemption at June 30, 2020 and 2019, respectively.
(2)
Net loss per common share – basic and diluted excludes interest income of $73,579 and $667,804 attributable to common stock subject to possible redemption for the three and six months ended June 30, 2020, respectively, and $30,925 attributable to common stock subject to possible redemption for the three months ended June 30, 2019 and for the period from February 28, 2019 (inception) through June 30, 2019.

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

2
Table of Contents
SOUTH MOUNTAIN MERGER CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)

THREE AND SIX MONTHS ENDED JUNE 30, 2020

  
Class A
Common Stock
  
Class B
Common Stock
  
Additional
Paid-in
  Retained  
Total
Stockholders’
 
  Shares  Amount  Shares  Amount  Capital  Earnings  Equity 
Balance – January 1, 2020  1,138,051  $114   6,250,000  $625  $3,595,780  $1,403,487  $5,000,006 
                             
Change in value of common stock subject to possible redemption  10,277   1   —   —   (427,612)  —   (427,611)
                             
Net income  —   —   —   —   —   427,614   427,614 
                             
Balance – March 31, 2020  1,148,328   115   6,250,000   625   3,168,168   1,831,101   5,000,009 
                             
Change in value of common stock subject to possible redemption  24,516   2   —   —   116,638   —   116,640 
                             
Net loss  —   —   —   —   —   (116,641)  (116,641)
                             
Balance – June 30, 2020  1,172,844  $117   6,250,000  $625  $3,284,806  $1,714,460  $5,000,008 

THREE MONTHS ENDED JUNE 30, 2019 AND
FOR THE PERIOD FROM FEBRUARY 28, 2019 (INCEPTION) THROUGH JUNE 30, 2019

  
Class A
Common Stock
  
Class B
Common Stock
  
Additional
Paid-in
  
(Accumulated
Deficit)/
Retained
  
Total
Stockholders’
(Deficit)/
 
  Shares  Amount  Shares  Amount  Capital  Earnings  Equity 
Balance – February 28, 2019 (inception)  —  $—   —  $—  $—  $—  $— 
                             
Net loss          —   —   —   (1,000)  (1,000)
                             
Balance – March 31, 2019  —   —   —   —   —   (1,000)  (1,000)
                             
Issuance of Class B common stock to Sponsor  —   —   6,468,750   647   24,353   —   25,000 
                             
Sale of 25,000,000 Units, net of underwriting discount and offering expenses  25,000,000   25,000   —   —   236,894,412   —   236,896,912 
                             
Sale of 6,954,500 Private Placement Warrants  —   —   —   —   6,954,500   —   6,954,500 
                             
Common stock subject to possible redemption  (23,886,104)  (2,389)  —   —   (238,889,578)  —   (238,891,967)
                             
Net income          —   —   —   16,561   16,561 
                             
Balance – June 30, 2019  1,113,896  $111   6,468,750  $647  $4,983,687  $15,561  $5,000,006 

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

3
Table of Contents
SOUTH MOUNTAIN MERGER CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

  
Six Months
Ended
June 30,
2020
  
For the Period
from February
28, 2019
(Inception)
Through
June 30,
2019
 
Cash Flows from Operating Activities:      
Net income $310,973  $15,561 
Adjustments to reconcile net income to net cash used in operating activities:        
Interest earned on marketable securities held in Trust Account  (883,329)  (86,506)
Changes in operating assets and liabilities:        
Prepaid expenses  (43,071)  (27,538)
Prepaid income taxes  (63,336)  — 
Accrued expenses  85,202   60,833 
Income taxes payable  —   4,137 
Net cash used in operating activities  (593,561)  (33,513)
         
Cash Flows from Investing Activities:        
Cash withdrawn from Trust Account to pay taxes and regulatory compliance costs  388,347   — 
Investment of cash in Trust Account  —   (250,000,000)
Net cash provided by (used in) investing activities  388,347   (250,000,000)
         
Cash Flows from Financing Activities:        
Proceeds from issuance of Class B common stock to Sponsor  —   25,000 
Proceeds from sale of Units, net of underwriting discounts paid  —   245,445,500 
Proceeds from sale of Private Placement Warrants  —   6,954,500 
Proceeds from promissory notes – related party  —   175,000 
Repayment of promissory notes – related party  —   (175,000)
Payment of offering costs  —   (224,279)
Net cash provided by financing activities  —   252,200,721 
         
Net Change in Cash  (205,214)  2,167,208 
Cash – Beginning  1,606,261   — 
Cash – Ending $1,401,047  $2,167,208 
         
Supplemental cash flow information:        
Cash paid for income taxes $146,000  $— 
         
Non-cash investing and financing activities:        
Initial classification of common stock subject to possible redemption $—  $238,875,410 
Change in value of common stock subject to possible redemption $310,971  $16,557 
Deferred underwriting fee payable $—  $7,970,375 
Offering costs included in accrued offering costs $—  $353,934 

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

4
Table of Contents
SOUTH MOUNTAIN MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)

Note 1—Description of Organization and Business Operations

South Mountain Merger Corp. (the “Company”) was incorporated in Delaware as a blank check company on February 28, 2019. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganizationterms or similar business combination with one or more businesses (the “Business Combination”).

Although the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the Company intends to focus on businesses in the financial technology segment of the broader financial services industry. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

As of June 30, 2020, the Company had not yet commenced any operations. All activity through June 30, 2020 relates to the Company’s formation, the initial public offering (the “Initial Public Offering”), which is described below, and identifying a target company for a Business Combination.

The registration statement for the Company’s Initial Public Offering was declared effective on June 19, 2019. On June 24, 2019, the Company consummated the Initial Public Offering of 25,000,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), which includes a partial exercise by the underwriter of the over-allotment option to purchase an additional 2,500,000 Units, at $10.00 per Unit, generating gross proceeds of $250,000,000, which is described in Note 3.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 6,954,500 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to our sponsor, South Mountain LLC (the “Sponsor”), generating gross proceeds of $6,954,500, which is described in Note 4.

Transaction costs amounted to $13,103,088, consisting of $4,554,500 of underwriting fees, $7,970,375 of deferred underwriting fees and $578,213 of other offering costs. In addition, as of June 30, 2020, cash of $1,401,047 was held outside of the Trust Account (as defined below) and is available for working capital purposes.

Following the closing of the Initial Public Offering on June 24, 2019, an amount of $250,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) which was invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination or (ii) the distribution of the Trust Account, as described below, except that interest earned on the Trust Account can be released to the Company to fund its regulatory compliance costs and to pay its tax obligations (“permitted withdrawals”).

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (excluding the deferred underwriting fees and taxes payable on interest earned) at the time of the signing an agreement to enter into a Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to complete a Business Combination successfully.

expressions.
The Company will providehas based these forward-looking statements largely on its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely incurrent expectations and projections about future events and financial trends it believes may affect its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then on deposit in the Trust Account ($10.00 per Public Share, plus any pro rata interest, net of amounts withdrawn to fund permitted withdrawals). The per-share amount to be distributed to public stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriter (as discussed in Note 6). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.

5
Table of Contents
SOUTH MOUNTAIN MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)

The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation, conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem Public Shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor has agreed to vote its Founder Shares (as defined below in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.

Notwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the Public Shares, without the prior consent of the Company.

The Sponsor and the Company’s officers and directors have agreed (a) to waive their redemption rights with respect to their Founder Shares and Public Shares held by them in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation (a) that would modify the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (b) with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.

The Company will have until June 24, 2021 to consummate a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (net of permitted withdrawals and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish the public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.

The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or any of the Company’s officers, directors or any of their affiliates acquires Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriter has agreed to waive its rights to its deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).

6
Table of Contents
SOUTH MOUNTAIN MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)

In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party (other than the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a definitive agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the permitted withdrawals. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account or to any claims under the Company’s indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

Note 2—Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position,condition, results of operations, or cash flows. Inbusiness strategy, and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties, and assumptions, including risks described in the opinion of management,section titled "Part I, Item 1A. Risk Factors" contained in the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 20192020 (the "Annual Report on Form 10-K"), as filed with the US Securities and Exchange Commission (the "SEC") on March 24, 2021, and the section titled "Risk Factors" contained in both the Company's Amendment No. 1 to the Current Report on Form 8-K (the "Amendment on Form 8-K"), as filed with the SEC on March 20, 2020, which contains24, 2021, and the auditedCompany's Registration Statement on Form S-1, as amended (File No. 333-257488), originally filed with the SEC on June 28, 2021 (the "Registration Statement on Form S-1"), including, among other things, risks associated with:
•our financial statements and notes thereto. Thebusiness performance, including the financial informationprojections, forecasts and business metrics, and any underlying assumptions thereunder;
•changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, and plans;
•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;
•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, 20192021;
•our future capital requirements and sources and uses of cash;
•our ability to obtain funding for our operations;
•our business, expansion plans, and 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 derivednot 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
3

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 auditedforward-looking statements in this Quarterly Report on Form 10-Q by these cautionary statements.
4

PART 1.
Item 1. Financial Statements
BTRS HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share and share amounts)
June 30, 2021December 31, 2020
ASSETS(Unaudited)
Current assets:
Cash and cash equivalents$241,607 $14,642 
Short-term investments45,037 0 
Customer funds24,618 20,924 
Accounts receivable, net29,009 23,009 
Prepaid expenses5,072 2,961 
Deferred implementation, commission, and other costs, current4,706 4,718 
Other current assets1,032 4,108 
Total current assets351,081 70,362 
Property and equipment, net16,194 16,650 
Goodwill36,956 36,956 
Intangible assets, net8,423 9,534 
Deferred implementation and commission costs, non-current8,453 8,677 
Other assets5,068 5,361 
Total assets$426,175 $147,540 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Customer funds payable$24,618 $20,924 
Current portion of debt and capital lease obligations, net of deferred financing costs124 380 
Accounts payable1,841 1,646 
Accrued expenses and other31,055 26,341 
Deferred revenue8,012 14,895 
Other current liabilities462 906 
Total current liabilities66,112 65,092 
Long-term debt and capital lease obligations, net of deferred financing costs28 43,295 
Customer postage deposits10,227 10,418 
Deferred revenue, net of current portion17,214 14,861 
Deferred taxes859 768 
Other long-term liabilities7,361 9,296 
Total liabilities101,801 143,730 
Commitments and contingencies (Note 10)00
Stockholders' equity:
Preferred stock, $0.0001 par value,10,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively0 0 
Class 1 common stock, $0.0001 par value, 538,000,000 shares authorized; 150,648,937 and 92,760,478 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively15 9 
Class 2 common stock, $0.0001 par value, 27,000,000 shares authorized; 7,251,307 and 8,196,622 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively1 1 
Additional paid-in capital502,765 148,677 
Accumulated deficit(178,407)(144,877)
Total stockholders’ equity324,374 3,810 
Total liabilities and stockholders’ equity$426,175 $147,540 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
5

BTRS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited, amounts in thousands, except per share amounts)
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Revenues:
Subscription, transaction, and services$31,589 $25,646 $64,708 $50,170 
Reimbursable costs8,643 8,945 17,460 18,566 
Total revenues40,232 34,591 82,168 68,736 
Cost of revenues:
Cost of subscription, transaction, and services9,360 7,633 18,613 15,523 
Cost of reimbursable costs8,643 8,945 17,460 18,566 
Total cost of revenues, excluding depreciation and amortization18,003 16,578 36,073 34,089 
Operating expenses:
Research and development11,270 8,778 22,263 18,162 
Sales and marketing9,980 5,129 18,916 11,551 
General and administrative10,478 4,871 22,928 10,119 
Depreciation and amortization1,359 1,410 2,719 2,821 
Total operating expenses33,087 20,188 66,826 42,653 
Loss from operations(10,858)(2,175)(20,731)(8,006)
Other income (expense):
Interest income131 1 234 17 
Interest expense and loss on extinguishment of debt(3)(1,102)(2,945)(2,285)
Change in fair value of financial instruments and other income5 411 (9,985)392 
Total other income (expense)133 (690)(12,696)(1,876)
Loss before income taxes(10,725)(2,865)(33,427)(9,882)
Provision for income taxes(11)(37)(103)(117)
Net loss and comprehensive loss$(10,736)$(2,902)$(33,530)$(9,999)
Net loss per common share, basic and diluted$(0.07)$(0.03)$(0.22)$(0.10)
Weighted average common shares outstanding, basic and diluted157,197 99,854 151,289 99,829 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

6

BTRS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, amounts in thousands, except share amounts)
Three Months Ended June 30, 2021
Class 1 Common StockClass 2 Common StockAdditional Paid-in CapitalAccumulated DeficitTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance, March 31, 2021149,315,319 $15 7,251,307 $1 $495,165 $(167,671)$327,510 
Issuance of common stock under stock plans1,331,318 — — — 1,868 — 1,868 
Shares issued for exercise of warrants2,300 — — — 26 — 26 
Stock-based compensation expense— — — — 5,706 — 5,706 
Net loss— — — — — (10,736)(10,736)
Balance, June 30, 2021150,648,937 $15 7,251,307 $1 $502,765 $(178,407)$324,374 

Three Months Ended June 30, 2020
Class 1 Common StockClass 2 Common StockAdditional Paid-in CapitalAccumulated DeficitTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance, March 31, 202091,653,631 $9 8,196,622 $1 $144,910 $(134,947)$9,973 
Issuance of common stock under stock plans79,511 — — — 129 — 129 
Stock-based compensation expense— — — — 680 — 680 
Net loss— — — — — (2,902)(2,902)
Balance, June 30, 202091,733,142 $9 8,196,622 $1 $145,719 $(137,849)$7,880 
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, except share amounts)
Six Months Ended June 30, 2021
Redeemable Convertible Preferred StockClass 1
 Common Stock		Class 2
 Common Stock		Additional Paid-in CapitalAccumulated DeficitTotal Stockholders’ Equity (Deficit)
SharesAmountSharesAmountSharesAmount
Balance, December 31, 202068,382,882 $159,028 32,574,218 $3 0 $0 $16,301 $(171,527)$(155,223)
Retroactive application of reverse recapitalization (Note 3)(68,382,882)(159,028)60,186,260 6 8,196,622 1 132,376 26,650 159,033 
Adjusted balance, December 31, 2020— — 92,760,478 9 8,196,622 1 148,677 (144,877)3,810 
Reverse recapitalization and PIPE Financing (Note 3)— — 44,522,375 5 (1,658,887)— 329,617 0 329,622 
Fair value of Earnout Share liabilities (Note 13)— — — — — — (230,995)— (230,995)
Issuance and vesting of Earnout Shares at fair value (Note 3)— — 10,204,164 1 713,572 — 237,008 — 237,009 
Issuance of common stock under stock plans— — 3,159,620 — — — 3,900 — 3,900 
Shares issued for exercise of warrants— — 2,300 — — — 26 — 26 
Stock-based compensation expense— — — — — — 14,532 — 14,532 
Net loss— — — — — — — (33,530)(33,530)
Balance, June 30, 20210 $0 150,648,937 $15 7,251,307 $1 $502,765 $(178,407)$324,374 
Six Months Ended June 30, 2020
Redeemable Convertible Preferred StockClass 1
 Common Stock		Class 2
 Common Stock		Additional Paid-in CapitalAccumulated
 Deficit		Total Stockholders’ Equity (Deficit)
SharesAmountSharesAmountSharesAmount
Balance, December 31, 201968,382,882 $150,356 31,234,610 $3 0 $0 $11,933 $(145,830)$(133,894)
Retroactive application of reverse recapitalization (Note 3)(68,382,882)(150,356)60,186,260 6 8,196,622 1 132,373 17,980 150,360 
Adjusted balance, December 31, 2019— — 91,420,870 9 8,196,622 1 144,306 (127,850)16,466 
Issuance of common stock under stock plans— — 312,272 — — — 252 — 252 
Stock-based compensation expense— — — — — — 1,161 — 1,161 
Net loss— — — — — — — (9,999)(9,999)
Balance, June 30, 20200 $0 91,733,142 $9 8,196,622 $1 $145,719 $(137,849)$7,880 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
8

BTRS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, amounts in thousands)
Six Months Ended June 30,
20212020
Operating activities:
Net loss$(33,530)$(9,999)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization2,719 2,821 
Provision for bad debts65 20 
Loss on extinguishment of debt and amortization of debt discount2,799 161 
Stock-based compensation expense14,532 1,161 
Change in fair value of financial instruments and other income9,985 (406)
Deferred income taxes92 109 
Changes in assets and liabilities:
Accounts receivable(6,064)(53)
Prepaid expenses(2,112)(1,196)
Deferred implementation, commissions, and other costs236 (380)
Other assets (current and non-current)1,475 184 
Accounts payable195 (1,160)
Accrued expenses and other4,165 (127)
Deferred revenue(4,530)1,305 
Other liabilities (current and non-current)(848)122 
Net cash used in operating activities(10,821)(7,438)
Investing activities:
Purchases of short-term investments(45,037)0 
Purchases of property and equipment(1,120)(1,310)
Net cash used in investing activities(46,157)(1,310)
Financing activities:
Proceeds from borrowings, net of costs0 46,554 
Payments on borrowings(44,663)(31,696)
Business Combination and PIPE financing349,902 0 
Payments of equity issuance costs(20,200)0 
Debt extinguishment costs(1,565)0 
Payments of deferred purchase consideration0 (524)
Payments on capital lease obligations(125)(134)
Proceeds from common stock issued4,184 252 
Taxes paid on net share issuance of stock-based compensation(4,271)0 
Net cash provided by financing activities283,262 14,452 
Net increase in cash, cash equivalents, and restricted cash226,284 5,704 
Cash, cash equivalents, and restricted cash, beginning of period17,919 4,736 
Cash, cash equivalents, and restricted cash, end of period (Note 2)$244,203 $10,440 
Supplemental disclosure of cash flow information:
Cash paid for interest$135 $2,078 
Cash paid for income taxes$0 $8 
Non-cash investing & financing activities:
Reclassification of Series C preferred stock warrant liability to equity (Note 3)$1,433 $0 
Net assets acquired in Business Combination and other$255 $0 
Equity issuance costs in other assets and accrued expenses charged to additional paid-in-capital$1,888 $0 
Issuance and vesting of Earnout Shares at fair value (Note 3)$237,008 $0 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
9

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 offices or print facilities in Colorado, Illinois, and California.
The Company provides a comprehensive suite of order-to-cash software as a service ("SaaS") solutions with integrated payments, including credit and collections, invoice presentment, and cash application services to its customers, primarily based in North America, but with global operations. In addition, Billtrust founded the business payments network ("BPN") in its strategic relationship with VISA, which combines remittance data with business-to-business ("B2B") payments and facilitates straight-through payment processing. Billtrust serves businesses across both business-to-business and business-to-consumer segments. Billtrust integrates the key areas of the order-to-cash process: credit decisioning, e-commerce solutions, bill presentment, bill payment, cash application, and collections workflow management, helping its clients connect with their customers and cash.
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 the Company ("Billtrust"), entered into a Business Combination Agreement (“BCA”), pursuant to which (i) First Merger Sub was merged with and into Billtrust (the “First Merger”), with Billtrust surviving the First 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 Merger”, and together with the First Merger, the “Mergers”), with Second Merger Sub surviving the Second Merger as a wholly owned subsidiary of South Mountain (such 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 20,000,000 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, the Business Combination and PIPE Financing closed on January 12, 2021 (the "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 presentedof "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 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 common stock began trading on the Nasdaq stock exchange 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 US 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
10

conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2019. 2020 (as filed with the SEC on March 24, 2021), the audited financial statements included in the Company's Amendment No. 1 to the Current Report on Form 8-K (as filed with the SEC on March 24, 2021), and the Company's Registration Statement on Form S-1 (as filed with the SEC on June 28, 2021). Since the date of these filings, there have been no changes or updates to the Company's significant accounting policies, other than those described below.
The accompanying Condensed Consolidated Financial Statements for periods ended prior to January 12, 2021 reflect Legacy Billtrust, which was a single entity, and its capital structure prior to the Business Combination, and do not reflect New Billtrust or South Mountain.
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 six months ended June 30, 2020 are2021 may not necessarilybe indicative of the results for the full fiscal year ended December 31, 2021 or any other period. The Condensed Consolidated Balance Sheet as of December 31, 2020 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.
The Company's fiscal year is the twelve-month period from January 1 through December 31. Unless otherwise indicated, all references to a "year" mean the Company's fiscal year.
Reclassification
During the second quarter of 2021, the Condensed Consolidated Balance Sheets were updated to remove restricted cash as a standalone line item and combine it with other current assets or other assets. Prior periods have been reclassified to conform to the current period presentation, which resulted in approximately $3.3 million of restricted cash being reclassified into other current assets for the year ended December 31, 2020. The reclassification had no impact on the amount of total current assets or total assets previously reported.
Impact of COVID-19
In March 2020, the United States declared a State of National Emergency due to the COVID-19 pandemic. Since then, the Company has continued to operate despite the disruption to many of our customer's operations. The pandemic has served to increase awareness and urgency around accelerating the digital transformation of accounts receivable through the Company's products and platforms. While this helped avoid significant business, bookings, or revenue disruptions thus far, during the three months ended June 30, 2020, the pandemic did cause a decrease in the Company's transaction fee revenues for certain customers. This was a result of the pandemic's broader economic impact on some companies in heavily transaction based industries and the related slowing of their business activity. These revenues started rebounding in the second half of 2020 and into 2021, which the Company expects to continue.
We are unable to predict the full impact the COVID-19 pandemic will have on our future results of operations, liquidity, and financial condition due to numerous uncertainties, including the duration, severity, and spread of the virus, actions that may be taken by government authorities, the impact to our customers, employees, and suppliers, and various other factors beyond our knowledge and control. The pandemic has caused us to modify our business practices, such as employee travel restrictions, cancellation of physical participation in meetings, events and conferences, and requiring employees to work remotely. We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees and customers. The Company has previously implemented certain cost savings measures, some of which have ended, such as reducing employee incentive compensation programs, and others which are continuing, such as restricted travel and reduced discretionary spend in certain areas. The Company will continue to monitor the situation and adjust its response accordingly.
On March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security ("CARES") Act. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, technical corrections to tax depreciation methods for qualified improvement property, and appropriation of funds for the SBA Paycheck Protection Program. The Company, through its payroll provider, elected to defer employer side social security payments effective as of April 2020. During 2021, the Company expects to pay the entire amount due for 2020 of approximately $2.3 million, which is included in accrued expenses and other in the Condensed Consolidated Balance Sheets as of both June 30, 2021 and December 31, 2020.
11

Change in Filing Status from Emerging Growth Company
Billtrust currently qualifies as an emerging growth company (“EGC”), under the Jumpstart Our Business Startups Act (“JOBS Act”), which allows the Company to delay adoption of new or revised accounting pronouncements until such pronouncements are applicable to private companies. The Company has elected to use the extended transition period under the JOBS Act until such time that the Company is not considered to be expectedan EGC. 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 will be deemed a large accelerated filer as of December 31, 2021. As a result, beginning with the Annual Report on Form 10-K for the year ending December 31, 2020 or for any future interim periods.

Emerging Growth2021, the Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable will not be able to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory voterely on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period noted above and comply withwill be required to adopt all new accounting pronouncements within the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable.same time periods as public companies. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparisoneffect of the Company’s financial statements with another public company whichloss of ECG status and impact on the adoption of new accounting pronouncements is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

7
Table of Contents
SOUTH MOUNTAIN MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)

discussed further below.
Use of Estimates

The preparation of condensed financial statementsthe Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities andreported, disclosure ofabout contingent assets and liabilities, at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date ofin the financial statements whichand accompanying notes. Such estimates include, but are not limited to, revenue recognition, recoverability of deferred tax assets, valuation of acquired assets and liabilities, 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 consideredevaluates its estimates and changes in formulating its estimate, could changeestimates are recorded in the near term dueperiod in which they become known. Actual results may differ from these estimates.
Retroactive Adjustments Related to one or more future confirming events. Accordingly,Reverse Recapitalization
On May 14, 2021, the actual results could differ significantly from those estimates.

Cash and Cash Equivalents

The Company considers all short-term investmentsfiled its Quarterly Report on Form 10-Q with an original maturity ofthe SEC for the three months or less when purchased to be cash equivalents. Theended March 31, 2021 and 2020, with such interim financial statements reflecting the reverse recapitalization of Billtrust (as described in Note 1 - Organization and Nature of Business and Note 3 - Business Combination) as if it had occurred as of the beginning of each period presented. As a result, in conformity with U.S. GAAP, the Company did not have any cash equivalentshas retroactively adjusted its financial statements and related notes herein, as of the year ended December 31, 2020, and as of and for the three and six months ended June 30, 2020 to reflect the aforementioned reverse recapitalization as follows:
•Within the Condensed Consolidated Balance Sheets, redeemable convertible preferred stock in mezzanine equity was converted into Class 1 and December 31, 2019.2 common stock and classified in permanent equity.

•The Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit were renamed the Condensed Consolidated Statements of Stockholders’ Equity.
Marketable Securities Held in Trust Account•Within the Condensed Consolidated Statements of Stockholders’ Equity:

◦Redeemable convertible preferred stock, common stock, share activity, and per share amounts were converted to Class 1 and 2 common stock at an exchange ratio of 7.2282662 shares per share of Legacy Billtrust common stock (the "Conversion Rate").
At June 30, 2020, substantially all◦Preferred stock dividends and accretion of the assets held in the Trust Account were held in money market funds, which primarily invest in U.S. Securities. At December 31, 2019, substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills. Through June 30, 2020, the Company withdrew $860,463 of interest earned on the Trust Account, of which $388,347 was withdrawn duringpreferred stock to redemption value for the six months ended June 30, 2020.

Common Stock Subject to Possible Redemption

The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.

Income Taxes

The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income2020 in the years in which those temporary differences are expectedamount $4.3 million has been reclassified from redeemable convertible preferred stock to be recovered or settled. The effect on deferred tax assetsaccumulated deficit.
•Within the Condensed Consolidated Statements of Operations and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2020 and December 31, 2019. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

8
Table of Contents
SOUTH MOUNTAIN MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)

The Company may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and city tax laws. The Company is subject to income tax examinations by major taxing authorities since inception. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

NetComprehensive Loss, Per Common Share

Netnet loss per common share is computed by dividing net loss byand the weighted average number of shares used to compute net loss per share were adjusted based on the converted number of Class 1 and 2 common shares.
•Within the Notes to Financial Statements:
◦In Note 6 - Loss Per Share, all per share and share amounts for the 2020 periods presented were adjusted based on (1) the converted number of Class 1 and 2 common shares, and (2) the removal of the preferred stock dividends and accretion to redemption value.
◦In Note 7 - Stockholders' Equity and Stock-Based Compensation, stock options outstanding forat December 31, 2020 and the period. The Company appliesweighted average fair value of stock options granted during the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption atsix
12

months ended June 30, 2020 and 2019, which are not currently redeemable and are not redeemable at fair value,before the Business Combination have been excluded fromadjusted using the calculation of basic loss per share since such shares, if redeemed, only participate in their pro rata share ofConversion Rate.
Except as otherwise noted, the Trust Account earnings. The Company hasfinancial statements and related notes included herein have not considered the effect of warrants sold in the Initial Public Offering and the private placement to purchase 19,454,500 shares of Class A common stock in the calculation of diluted loss per share, since the exercise of the warrants is contingent upon the occurrence of future events. As a result, diluted loss per common share is the same as basic loss per common share for the periods presented.been adjusted.

Reconciliation of Net Loss Per Common Share

The Company’s net (loss) income is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares only participate in the earnings of the Trust Account and not the income or losses of the Company. Accordingly, basic and diluted loss per common share is calculated as follows:

  
Three Months
Ended
June 30,
  
Six Months
Ended
June 30,
  
For the
Period
from
February 28,
2019
(inception)
Through
June 30,
 
  2020  2019  2020  2019 
Net (loss) income $(116,641) $16,561  $310,973  $15,561 
Less: Income attributable to common stock subject to possible redemption  (73,579)  (30,925)  (667,804)  (30,925)
Adjusted net loss $(190,220) $(14,364) $(356,831) $(15,364)
                 
Weighted average shares outstanding, basic and diluted  7,398,328   5,767,805   7,393,190   5,767,805 
                 
Basic and diluted net loss per common share $(0.03) $(0.00) $(0.05) $(0.00)

ConcentrationConcentrations of Credit Risk

Financial instrumentsThe Company maintains its deposits of cash, cash equivalents, restricted cash, and customer funds with high-credit quality financial institutions and the amounts of these balances may exceed federally insured limits. The Company’s accounts receivable are reported in the Condensed Consolidated Balance Sheets net of allowances for uncollectible accounts. The Company believes that potentially subject the Company to concentrationsconcentration of credit risk consistwith respect to accounts receivable is limited due to the large number of companies and diverse industries comprising its customer base. On-going credit evaluations are performed, generally with a cash account in a financial institution, which, at times, may exceedfocus on new customers or customers with whom the Federal Depository Insurance Coverage of $250,000.Company has no prior collections history, and collateral is generally not required. The Company hasmaintains reserves for potential losses based on customer specific situations as well as on historic experience and such losses, in the aggregate, have not experienced lossesexceeded management’s expectations. As of June 30, 2021 and December 31, 2020 the allowances for uncollectible accounts were $0.3 million and $0.4 million, respectively.
For the six months ended June 30, 2021 and 2020, no individual customer accounted for 10% or greater of total revenues. As of June 30, 2021 and December 31, 2020, no individual customer had a balance of 10% or greater of accounts receivable.
Presentation of Restricted Cash
The following table summarizes the period ending cash and cash equivalents from the Company's Condensed Consolidated Balance Sheets and the total cash, cash equivalents, and restricted cash as presented on this accountthe Condensed Consolidated Statements of Cash Flows (in thousands):
Six Months Ended June 30,
20212020
Cash and cash equivalents$241,607 $7,164 
Restricted cash (1)2,596 3,276 
Total cash, cash equivalents, and restricted cash$244,203 $10,440 
(1) Restricted cash consists of collateral for letters of credit required for leased office space. At June 30, 2021 restricted cash is included in other assets in the Condensed Consolidated Balance Sheets. At December 31, 2020 restricted cash is included in other current 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 management believesAdopted
In November 2019, the Company is not exposedFinancial Accounting Standards Board ("FASB") Issued Accounting Standards Update ("ASU") 2019-08, Compensation - Stock Compensation (Topic 718): Improvements to significant risksNon-employee Share-Based Payment Accounting, which requires share-based payment awards granted to a customer to be measured and classified in accordance with Topic 718. Accordingly, the amount that will be recorded as a reduction in the transaction price should be based on such account.

Fair Value of Financial Instruments

Thethe grant-date fair value of the Company’s assetsshare-based payment award. The new guidance was adopted by the Company on January 1, 2021 and liabilities, which qualify as financialthe adoption did not have a material impact on its Consolidated Financial Statements.
In August 2020, the FASB issued 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) to simplify the accounting for convertible instruments under ASC 820, “Fair Value Measurement,” approximatesby eliminating large sections of the carrying amounts represented inexisting guidance and eliminating several triggers for derivative accounting, including a requirement to settle certain contracts by delivering registered shares. The new guidance was adopted by the accompanying condensed balance sheets, primarily due to their short-term nature.Company on January 1, 2021 and the adoption did not impact its Consolidated Financial Statements.

9
Table of Contents
SOUTH MOUNTAIN MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)

Recent Accounting Standards

Management does not believe that any recently issued,Pronouncements Issued but not yet Adopted
As an EGC, the JOBS Act permits the Company an extended transition period for complying with new or revised accounting pronouncements affecting public companies. The Company has elected to use this extended
13

transition period and adopts certain new accounting pronouncements on the private company timeline, which means that its financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting pronouncements on a non-delayed basis. The Company will cease to qualify as an EGC effective December 31, 2021 unless the eligibility standards are modified. Loss of EGC status will result in the Company losing the extended transition period noted above and will require it to adopt new accounting standards, ifpronouncements within the same time periods as public companies.
In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842), which outlines a comprehensive lease accounting model and supersedes the current lease guidance. Topic 842 requires lessees to recognize almost all of their leases on the balance sheet by recording a lease liability and a corresponding right-of-use ("ROU") asset for all leases longer than 12 months. It also changes the definition and classification of a lease, with the classification affecting the pattern of expense recognition, and expands the qualitative and quantitative disclosure requirements of lease arrangements.
The two permitted transition methods under the new standard are both modified retrospective methods. Under the first method, the standard is applied to all leases that existed at, or subsequently commenced after, the beginning of the earliest comparative period presented in the financial statements, with a cumulative effect adjustment recorded at the beginning of the earliest comparative period for all leases that commenced prior to such date. Under the second method, comparative periods are not adjusted and the cumulative effect of applying the standard is recorded at the date of initial application.
As a result of losing EGC status effective as of December 31, 2021, the Company will be required to adopt the standard for annual reporting on December 31, 2021 and for quarterly reporting beginning with the first quarter of 2022. While the Company is currently adopted, wouldin the process of quantifying the full impact of the new guidance, the adoption of this standard is expected to have a material effectimpact on the Company’s condensedCompany's financial statements.position as most operating leases longer than 12 months will be recorded on the balance sheets as a ROU asset and a lease liability. The standard is not expected to have a material impact on the Company's results of operations or liquidity. The Company is currently evaluating the changes related to this standard on its future financial reporting and disclosures, as well as designing and implementing related processes and controls related to Topic 842.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. Topic 326 requires an entity to utilize a new impairment model known as the current expected credit loss ("CECL") model to estimate its lifetime "expected credit loss" using a forward-looking approach and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. Topic 326 also requires new disclosures for financial assets measured at amortized cost, loans, and available-for-sale debt securities. The standard requires an entity to record a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. As a result of losing EGC status effective as of December 31, 2021, the Company will be required to adopt the standard for annual reporting on December 31, 2021 and for quarterly reporting beginning with the first quarter of 2022. The Company is currently evaluating the impact of this standard on its Consolidated Financial Statements.
In January 2017, the FASB issued ASU No. 2017-04 Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test and requires an entity to write down the carrying value of goodwill up to the amount by which the carrying amount of a reporting unit exceeds its fair value. As a result of losing EGC status effective as of December 31, 2021, the Company will be required to adopt the standard for annual reporting on December 31, 2021 and for quarterly reporting beginning with the first quarter of 2022. The Company is currently evaluating the impact of this standard on its Consolidated Financial Statements.
In August 2018, the FASB issued ASU 2018-15 Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). As a result of losing EGC status effective as of December 31, 2021, the Company will be required to adopt the standard for annual reporting on December 31, 2021 and for quarterly reporting beginning with the first quarter of 2022. The Company is currently evaluating the impact that the pronouncement will have on its Consolidated Financial Statements.
14

In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, whichsimplifies various aspects related to accounting for income taxes. As a result losing EGC status effective as of December 31, 2021, the Company will be required to adopt the standard for annual reporting on December 31, 2021 and for quarterly reporting beginning with the first quarter of 2022. The adoption of this standard is not expected to have a material impact on the Company's Consolidated Financial Statements.
Note 3—Initial Public Offering3 - Business Combination

Closing of Business Combination, Accounted for as a Reverse Recapitalization
PursuantOn January 12, 2021, Billtrust consummated the previously announced Business Combination pursuant to the Initial Public Offering,Agreement dated October 18, 2020 and amended as of December 13, 2020. As a result of the Company sold 25,000,000 UnitsAgreement, 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 purchasereverse 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 109,944,090 shares (including 15,175,967 shares issuable pursuant to outstanding vested and unvested options from the 2003 and 2014 Plans), converted at an exchange ratio of 7.2282662 shares per share of Legacy Billtrust common stock based on an assumed share price of $10.00 per Unit, which includesshare.
As of the completion of the Business Combination, accounted for as a partial exercise byreverse recapitalization, on January 12, 2021, the underwritermerged companies, BTRS Holdings Inc. and subsidiaries, had the following outstanding securities:
i.138,728,373 shares of its optionClass 1 common stock, including 2,375,000 shares to purchase an additional 2,500,000 Units at $10.00 per Unit. Each Unit consistsprior 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 one2021, all of these shares vested;
ii.6,537,735 shares of Class 2 common stock; and
iii.12,500,000 warrants, each exercisable for 1 share of Class A common stock and one-half of one warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A1 common stock at a price of $11.50 per share subject(the "Public Warrants", refer to adjustment (see Note 7)7 - Stockholders' Equity and Stock-Based Compensation).

In connection with the Merger:
Note 4—Private Placementi.Each issued and outstanding South Mountain Class A and Class B share was converted into 1.0 share of Class 1 common stock of the Company; and

ii.All 6,954,500 private placement warrants of South Mountain were cancelled and are no longer outstanding.
Simultaneously withImmediately 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 Initial Public Offering,Business Combination, each stockholder of Legacy Billtrust received 7.2282662 shares of the Sponsor purchased an aggregateCompany’s Class 1 common stock, par value $0.0001 per share (“Common Stock”), for each share of 6,954,500 Private Placement Warrants at a priceLegacy Billtrust common stock, par value $0.001 per share, that such stockholder owned, except for one investor who requested to receive shares of $1.00Class 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 575,000,000 shares, of which 538,000,000 shares were designated Class 1 common stock, $0.0001 par value per Private Placement Warrant,share; 27,000,000 shares were designated Class 2 common stock, $0.0001 par value per share; and 10,000,000 shares were designated preferred stock, $0.0001 par value per share.
Concurrently with the completion of the Business Combination, on the Closing Date 20,000,000 new shares of Common Stock were issued (such purchases, the “PIPE”) for an aggregate purchase price of $6,954,500. Each Private Placement Warrant is exercisable$200.0 million.
In connection with the Business Combination, 9,005,863 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
15

with a previous loan agreement in July 2014, the Company issued a lender a warrant to purchase one shareshares of the Company’s Series C preferred stock. In connection with Business Combination, the warrant was exercised and converted into 85,004 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 six months ended June 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(20,200)
Net cash received from reverse recapitalization330,409 
Net assets acquired and other adjustments255 
Net contributions from reverse recapitalization$330,664 
The number of shares of Class A1 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:
Number of Shares
Common Stock outstanding prior to Business Combination25,000,000 
South Mountain founder shares5,500,000 
Redemption of South Mountain shares(2,015)
Common stock of South Mountain30,497,985 
Shares issued from PIPE20,000,000 
Legacy Billtrust shareholders' shares purchased for cash(9,005,863)
Recapitalization shares41,492,122 
Legacy Billtrust stockholders' shares103,773,986 
Total Shares145,266,108 
Earnout Consideration
Following the closing of the Merger, holders of Billtrust common stock (including all redeemable preferred shareholders whose shares were converted into common stock at an exercisethe closing of the Merger) 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 12,000,000 shares of Class 1 common stock if, from the closing of the Merger until the fifth anniversary thereof, the average closing price of $11.50.BTRS Holdings Inc. Common Stock exceeds certain thresholds. The proceeds fromfirst issuance of 6,000,000 earnout shares is based on the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and all underlying securities will expire worthless.

Note 5—Related Party Transactions

Founder Shares

In April 2019, the Sponsor purchased 5,750,000 shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregatevolume-weighted average price of $25,000. On June 19, 2019, the Company effected a 1.125-for-1 stock split of its Class B common stock. As a result, the Sponsor held 6,468,750 Founder Shares, of which up to 218,750 shares were subject to forfeiture following the underwriter’s election to partially exercise its over-allotment option, so that the Sponsor would own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering (assuming the Sponsor did not purchase any Public Shares in the Initial Public Offering). The underwriters’ election to exercise their remaining over-allotment option expired unexercised on August 5, 2019 and, as a result, 218,750 Founder Shares were forfeited, resulting in 6,250,000 Founder Shares outstanding as of August 5, 2019. The Founder Shares will automatically convert into Class A common stock upon the consummation of a Business Combination on a one-for-one basis, subject to adjustments as described in Note 7.

The Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (i) one year after the completion of a Business Combination or (ii) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property. Notwithstanding the foregoing, if the last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like)Common Stock exceeding $12.50 for any 20 trading days within any 30-trading30 trading day period commencing at least 150(the “First Earnout”). The second issuance of 6,000,000 earnout shares is based on the volume weighted average price of Common Stock exceeding $15.00 for any 20 trading days after a Business Combination,within any 30 trading day period (the “Second Earnout” and together with the Founder Shares will be released fromFirst Earnout, the lock-up."Earnout Shares").

Promissory Note—Related Party

On April 19, 2019, the Company issued an unsecured promissory noteSubsequent to the Sponsorclosing of the Merger and in the first quarter of 2021, 10,917,736 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 Merger Agreement is primarily attributable to 836,208 unissued shares reserved for future issuance to holders of unvested options in the form of restricted stock units (the “Promissory Note”"Earnout RSU's"), pursuantwhich are subject to the same vesting terms and conditions as the underlying unvested stock options, and are not replacement awards. Additionally, 246,056 shares of common stock were withheld from employees to satisfy the mandatory tax withholding requirements, for which the Sponsor agreed to loan the Company an aggregatecompany remitted cash of up to $300,000 to cover expenses related$4.0 million to the Initial Public Offering. The Promissory Note was non-interest bearing and payable on the earlier of December 31, 2019 or the completionappropriate tax authorities.
16

As of the Initial Public Offering. The borrowingsClosing date, the prior holders of South Mountain stock agreed that of their existing issued and outstanding under the Promissory Noteshares of $175,000 were repaidClass 1 common stock, 2,375,000 shares would be subject to vesting conditions based upon the consummation ofsame price milestones in the Initial Public Offering on June 24, 2019.

10
Table of Contents
SOUTH MOUNTAIN MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)

Administrative Support Agreement

First Earnout (1,187,500 shares) and Second Earnout (1,187,500 shares) as discussed above ("Sponsor Vesting Shares").
The Company entered into an agreement whereby, commencing on June 19, 2019,determined that the Company will pay an affiliateEarnout 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 do not meet the criteria for equity classification under Accounting Standards Codification ("ASC") 815-40. Accordingly, these shares are required to be classified as a totalliability and recorded at their fair values, with the remeasurement of $25,000 per month for office space, administrative and support services.their fair values at each reporting period recorded in earnings. Upon completionclosing of the Business Combination, or the Company’s liquidation,fair value of the Company will cease paying these monthly fees. 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 were then reclassified to equity as 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 Closing Date and the changes therein for the six months ended June 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)0 (4,013)
Amount reclassified to equity(195,328)(41,680)(237,008)
Ending balance, June 30, 2021$0 $0 $0 
(1) Included in change in fair value of financial instruments and other income in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
Earnout RSU's 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 RSU's was determined using a Monte Carlo simulation, including the stock price on the Closing Date of $16.80, a risk free rate of 0.5%, and a volatility rate of 42%. Stock-based compensation expense is recorded over the vesting period of the Earnout RSU's.
For the three and six months ended June 30, 2020,2021, $2.0 million and $4.1 million of expense, respectively, was recognized for the Company incurred $75,000Earnout RSU's and $150,000 in fees for these services, of which $300,000 and $150,000 areis included in accruedoperating expenses and cost of subscription, transaction and services in the accompanying condensed balance sheetsCondensed Consolidated Statements of Operations and Comprehensive Loss.
Offering Costs
In accordance with ASC 340-10-S99-1, 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. As of December 31, 2020, of $2.8 million of these costs were accrued and deferred in other assets on the Condensed Consolidated Balance Sheets.
Note 4 - Goodwill and Intangible Assets
Goodwill
Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair values of the tangible and identifiable intangible net assets acquired. Goodwill is not amortized; however, it is required to be tested for impairment annually, which requires assessment of the potential impairment at the reporting unit level. Testing for impairment is also required on an interim basis if an event or circumstance indicates it is more likely than not an impairment loss has been incurred.
17

The Company performed its annual impairment testing as of October 1, 2020 utilizing a qualitative assessment to determine if it was more likely than not that the fair values of each of its reporting units was less than their respective carrying values and concluded that no impairment existed. Subsequent to completing the annual test and through June 30, 2021, there were no events or circumstances that required an interim impairment test. Additionally, as of June 30, 20202021, the Company had no accumulated goodwill impairment losses.
All of the Company's goodwill is attributable to its Software and Payments segment. There were no changes to the carrying amount of goodwill during the six months ended June 30, 2021.
Finite-Lived IntangibleAssets
The gross carrying values, accumulated amortization, and net carrying values of finite-lived intangible assets as of June 30, 2021 and December 31, 2019, respectively.2020 are as follows (in thousands):

June 30, 2021
Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Customer relationships$16,350 $(9,524)$6,826 
Non-compete agreements1,430 (773)657 
Trademarks and trade names160 (60)100 
Technology1,540 (700)840 
Total$19,480 $(11,057)$8,423 
December 31, 2020
Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Customer relationships$16,350 $(8,698)$7,652 
Non-compete agreements1,460 (660)800 
Trademarks and trade names160 (47)113 
Technology1,540 (571)969 
Total$19,510 $(9,976)$9,534 
Amortization expense for finite-lived intangible assets was $0.6 million for both the three months ended June 30, 2021 and 2020, and $1.1 million for both the six months ended June 30, 2021 and 2020.
Estimated amortization expense for each of the next five years and thereafter is as follows (in thousands):
2021 (remainder)$714 
20221,269 
20231,174 
2024930 
2025737 
Thereafter3,599 
Total$8,423 
18

Note 5 - Revenue and Related Party LoansMatters

Disaggregated Revenue
The Company disaggregates revenue as set forth in the following table (in thousands):
Revenue by Type
Three Months Ended June 30,Six Months Ended June 30,
Revenues:2021202020212020
Subscription and transaction fees$29,072 $23,809 $59,255 $46,935 
Services and other2,517 1,837 5,453 3,235 
Subscription, transaction, and services$31,589 $25,646 $64,708 $50,170 
Contract Assets and Liabilities
Accounts Receivable
Accounts receivable includes amounts billed and currently due from customers. The Company’s payment terms and conditions vary by contract type and generally require payment of 25% to 100% of total contract consideration upon signing. Also included in accounts receivable are unbilled amounts resulting from revenue exceeding the amount billed to the customer, where the right to payment is unconditional. If the right to payment for services performed was conditional on something other than the passage of time, the unbilled amount would be recorded as a separate contract asset. There were no contract assets as of June 30, 2021 or 2020.
In orderaddition, since payment is generally expected within one year from the transfer of products and services, the Company does not adjust its receivables or transaction prices for the effects of a significant financing component.
Deferred Revenue
Amounts billed to finance transaction costsclients in connection with a Business Combination,excess of revenue recognized are contract liabilities (referred to as deferred revenue in the Sponsor, an affiliateCondensed Consolidated Balance Sheets). Deferred revenue primarily relates to implementation fees for new customers or for new services. These fees are recognized ratably over the estimated term of the Sponsor, orcustomer relationship, which is five years for the Company’s officersCompany's SaaS products, and directors may, but none of them are obligatedtwo to loanfour years for services sold from acquired companies, billing data storage fees, and annual maintenance services agreements.
During the three months ended June 30, 2021 and 2020, the Company fundsrecognized $4.9 million and $4.1 million of revenue, respectively, related to its deferred revenue balance at the beginning of each such period. During the six months ended June 30, 2021 and 2020, the Company recognized $11.5 million and $5.4 million of revenue, respectively, related to its deferred revenue balance at the beginning of each such period. To determine revenue recognized in each period, the Company first allocates revenue to the deferred revenue balance outstanding at the beginning of each period, until the revenue equals that balance.
The amount of revenue recognized in the six months ended June 30, 2021 included $2.5 million in the first quarter of 2021 related to the acceleration of previously paid and deferred revenue from timea customer that terminated its contract in the first quarter of 2021.
Remaining Performance Obligations
As of June 30, 2021, the Company had approximately $33.3 million of remaining performance obligations, primarily from multi-year contracts for the Company's services, which includes both the deferred revenue balance and amounts that will be invoiced and recognized as revenue in future periods. The Company expects to timerecognize revenue for approximately 95% of this amount during the next 36 months, and the remainder thereafter.
To determine the amount of remaining performance obligations, the Company applies the practical expedient which allows for the exclusion of (1) amounts from contracts with an original expected duration of one year or at any time, as may be required (“Working Capital Loans”). Each Working Capital Loan would be evidenced byless, and (2) variable consideration allocated to unsatisfied performance obligations for which variable consideration is allocated entirely to a promissory note. The Working Capital Loans would either be paid upon consummationwholly unsatisfied performance obligation, or to a wholly unsatisfied promise to transfer a distinct good or service, that forms part of a Business Combination, without interest,single performance obligation.
19

Deferred Commissions
The Company capitalizes commissions paid to sales personnel that are incremental and recoverable costs of obtaining customer contracts. These costs are included in deferred implementation, commissions, and other costs, current in the Condensed Consolidated Balance Sheets. Commission costs are amortized to earnings ratably over four to five years based on the Company's experience with its customers (including initial contract term and renewal periods), the average customer life of acquired customers, future cash flows expected from customers, industry peers, and other available information.
Commissions are earned by sales personnel upon the execution of a sales contract by the customer. Commissions associated with subscription-based arrangements are typically earned when a customer order is received and when the customer is billed for the underlying contractual period. Commissions associated with professional services are typically earned in the month that services are rendered. Substantially all sales commissions are generally paid at one of three points: (1) upon execution of a customer contract, (2) when a customer completes implementation and training processes or atcommences usage based volume, or (3) after a period of time from three to twelve months thereafter.
During the holder’s discretion, upsix months ended June 30, 2021, the Company capitalized commission costs of $1.7 million and amortized $1.5 million to $1,500,000sales and marketing expense in the Condensed Consolidated Statements of the Working Capital Loans may be converted into warrants at a price of $1.00 per warrant. The warrants would be identicalOperations and Comprehensive Loss, in addition to commissions which were expensed as incurred related to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portionachievement of the proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.

Note 6—Commitments

Registration Rights

Pursuant to a registration rights agreement entered into on June 19, 2019, the holdersquotas or other sales performance targets. As of the Founder Shares, Private Placement Warrants and warrants issued upon conversion of Working Capital Loans (and any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of the Initial Public Offering requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion into shares of Class A common stock). These holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Sale of Units to Related Party

A fund managed by an affiliate of the Sponsor purchased 2,227,500 Units in the Initial Public Offering at the Initial Public Offering price. The underwriter did not receive any underwriting discount or commissions on the Units purchased by such fund.

Underwriting Agreement

The underwriter was paid a cash underwriting discount of 2.0% of the gross proceeds from the Units sold in the Initial Public Offering, after deducting the proceeds received from the fund managed by an affiliate of the Sponsor, or $4,554,500 in the aggregate. In addition, the underwriter is entitled to a deferred fee of 3.5% of the gross proceeds from the Units sold in the Initial Public Offering, or $7,970,375. The deferred fee will be forfeited by the underwriter solely in the event that the Company fails to complete a Business Combination, subject to the terms of the underwriting agreement. The underwriter did not receive any underwriting discount or commissions on Units purchased by a fund managed by an affiliate of the Sponsor.

Note 7—Stockholders’ Equity

Preferred Stock —The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At June 30, 20202021 and December 31, 2019,2020 the Company had approximately $2.6 million and $2.4 million, respectively, of current deferred commissions for amounts expected to be recognized in the next 12 months, and $5.3 million and $5.2 million, respectively, of non-current deferred commissions for amounts expected to be recognized thereafter.
The Company evaluates the recoverability of deferred commissions at each balance sheet date and there were no shares of preferred stock issuedimpairments recorded during the six months ended June 30, 2021 or outstanding.2020.

11Note 6 - Loss Per Share
Table of Contents
SOUTH MOUNTAIN MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)

Class A Common Stock —The CompanyThe Company's basic and diluted earnings per share are computed using the two-class method in accordance with ASC 260. The two-class method is authorized to issue 200,000,000 shares of Class A common stock with a par value of $0.0001an earnings allocation that determines net income (loss) per share. Holders of Class A common stock are entitled to one voteshare for each share. At June 30, 2020 and December 31, 2019, there were 1,172,844 and 1,138,051 sharesclass of Class A common stock issued and outstanding, excluding 23,827,156 and 23,861,949 shares of Class Astock. Per share amounts are calculated by dividing the net loss attributable to common stock subject to possible redemption, respectively.

Class B Common Stock —The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. At June 30, 2020 and December 31, 2019, there were 6,250,000 shares of Class B common stock issued and outstanding.

Holders of Class B common stock will havestockholders by the right to elect all of the Company’s directors prior to the consummation of a Business Combination. On any other matter submitted to a vote of the Company’s stockholders, holders of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders, except as required by law. These provisions of the Company’s Amended and Restated Certificate of Incorporation may only be amended if approved by a majority of at least 90% of the Company’s common stock voting at a stockholder meeting.

The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that theweighted-average number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding uponduring the completionperiod, without consideration for potentially dilutive securities as they do not share in losses. During periods when the Company is in a net loss position, basic net loss per share attributable to common stockholders is the same as diluted net loss per share attributable to common stockholders as the effects of potentially dilutive securities are antidilutive given the net loss of the Initial Public Offering (not includingCompany.
The following table sets forth the computation of the basic and diluted net loss per share attributable to the Class 1 and Class 2 common stockholders, which have the same rights and privileges, except for voting rights, for the periods presented (in thousands, except per share and share amounts):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Numerator:
Net loss$(10,736)$(2,902)$(33,530)$(9,999)
Denominator:
Weighted-average common shares outstanding157,196,511 99,853,968 151,289,243 99,828,779 
Net loss per share attributable to common stockholders:
 Basic and diluted$(0.07)$(0.03)$(0.22)$(0.10)
20

Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share as the inclusion of all potential common shares outstanding would have been anti-dilutive. Potentially dilutive securities that were not included in the diluted per share calculations because they would be antidilutive, were as follows as of Class Athe dates presented, based on the underlying shares and not considering all factors that would be involved in determining the common stock underlying the Private Placement Warrants) plus all shares of Class A common stockequivalents:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Stock options21,082,614 16,913,426 21,082,614 16,913,426 
Restricted stock units706,471 0 706,471 0 
Warrants12,497,700 12,500,000 12,497,700 12,500,000 
34,286,785 29,413,426 34,286,785 29,413,426 
Note 7 - Stockholders' Equity and equity-linked securities issued or deemed issued inStock-Based Compensation
Public Warrants
In connection with athe Business Combination (excluding any shares or equity-linked securities(refer to Note 3 - Business Combination), Billtrust assumed the Public Warrants that had previously been issued or to be issued, to any seller in a Business Combination, any private placement-equivalent securities issued, or to be issued, to any seller in a Business Combination, any private placement equivalent securities issued to the Sponsor or its affiliates upon conversion of loans made to the Company).

Warrants —Publicby South Mountain. The Public Warrants may only be exercised for a whole number of shares.shares of Class 1 common stock at a price of $11.50 per share. No fractional warrants will be issued upon separation of the Unitsunits and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months fromFollowing the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available. The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its best efforts to filefiled a registration statement with the SEC and within 60 business days following a Business Combination to havethat was declared effective a registration statementin February 2021 covering the issuance of the shares of Class A1 common stock issuable upon exercise of the Public Warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrantsPublic Warrants expire or are redeemed. Notwithstanding the above, if ourthe Company's Class A1 common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act weat the time of any exercise of a Public Warrant, the Company may, at ourits option, require holders of public warrantsPublic Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, inAct. In the event wethe Company so elect, weelects, it will not be required to file or maintain in effect a registration statement, but will use ourits reasonable best efforts to qualify the shares under applicable blue sky laws to the extent an exemption is not available. The Public Warrants will expire five years after the completion of a Business Combinationbusiness combination or earlier upon redemption or liquidation.

Redemptions of Warrants for Cash — Once the warrantsPublic Warrants become exercisable, the Company may redeem the Public Warrants:
them as follows:

ini.In whole and not in part;
atii.At a price of $0.01 per warrant;
uponiii.Upon a minimum of 30 days’ prior written notice of redemption; and
if,iv.If, and only if, the reported last sale price of the Company’s Class A1 common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

12
Table of Contents
SOUTH MOUNTAIN MERGER CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)

If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

Note 8—Fair Value Measurements

The Company followsdetermined (1) the guidancePublic Warrants meet the definition of a derivative pursuant to ASC 815, (2) the Public Warrants are indexed to the Company’s common stock pursuant to ASC 815-40-15-7, and (3) the Public Warrants meet all other criteria for equity classification pursuant to ASC 815-40. Therefore as of the Closing Date, the Public Warrants were accounted for within stockholders' equity as a component of additional paid-in capital in ASC 820the Condensed Consolidated Balance Sheets. As part of this assessment, it was concluded only events that would constitute a fundamental change of ownership could require the Company to settle the warrants for its financial assetscash.
Common Stock
Each share of Class 1 common stock has the right to one vote. The holders of the common stock are also entitled to receive dividends whenever funds are legally available and liabilities thatif/when declared by the Board of Directors. No dividends have been declared or paid since inception. Each share of Class 2 common stock is the same in all respects as Class 1 common stock, except it does not have voting rights.
21

Preferred Stock
As of June 30, 2021, the Board of Directors had authorized 10,000,000 shares of preferred stock, par value $0.0001, of which no shares were issued and outstanding.
Equity Incentive Plans
As part of the Business Combination (refer to Note 3 - Business Combination), the Company adopted the 2020 Equity Incentive Plan (the "2020 Plan") and 2020 Employee Stock Purchase Plan (the "2020 ESPP"). These plans are re-measuredadministered by the Board of Directors, which has the authority to designate participants and reported atdetermine the number and type of awards to be granted and any other terms or conditions of the awards. Awards eligible to be granted include incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards, and other awards. The Board of Directors authorized up to 14,526,237 shares of common stock to be granted pursuant to the 2020 Plan and 1,452,623 shares of common stock to be issued pursuant to the 2020 ESPP. Such aggregate number of shares automatically increase on January 1 of each year, for a period of ten years commencing on January 1, 2022 and ending on (and including) January 1, 2031, in an amount equal to 4 percent (for the 2020 Plan) and 1 percent (for the 2020 ESPP) of the total number of shares of the Company’s Class 1 and Class 2 common stock outstanding on December 31 of the preceding year. The Board of Directors may act prior to January 1st of a given year to restrict the increase for such year to a lesser number of shares.
In connection with adopting the 2020 Plan and 2020 ESPP, the 2003 Stock Incentive Plan and the 2014 Incentive Compensation Plan (together, the "Prior Plans") were frozen and no further grants can be made pursuant to the Prior Plans. All outstanding options under the Prior Plans were converted to options of the Company using the Conversion Rate applied to the number of options and original exercise price. The converted options continue to vest based upon their original terms.
Stock Options
Stock option activity for the six months ended June 30, 2021 is presented below (in thousands, except share, per share, and contractual life amounts):
Number of SharesWeighted-Average Exercise PriceWeighted-Average Remaining Contractual Life (in Years)Aggregate Intrinsic Value
Outstanding at December 31, 202016,170,738 $2.69 
Granted8,251,638 16.70 
Exercised(3,046,982)1.39 
Forfeited(292,780)10.24 
Outstanding at June 30, 202121,082,614 $8.26 8.2$125,232 
Vested and expected to vest at June 30, 202118,285,991 $7.36 8.0$120,570 
Exercisable at June 30, 20217,122,553 $2.97 6.4$70,029 
Restricted Stock Units
Restricted stock units ("RSU's") represent the right to receive one share of Billtrust common stock upon meeting the vesting conditions. Shares are delivered to the grantee upon vesting, less shares for the payment of withholding taxes. The fair value atof RSU's is determined based on the closing price of the common stock on the grant date.
22

Restricted stock unit activity for the six months ended June 30, 2021 is presented below:
Number of SharesWeighted-Average Grant Date Fair Value
Unvested at December 31, 20200 $0 
Granted (1)847,888 16.77 
Vested(134,823)16.58 
Forfeited(27,492)16.80 
Unvested at June 30, 2021685,573 $16.80 
(1) No RSU's were granted prior to the Business Combination. 836,208 of the granted shares represent the Earnout RSU's issued as part of the Business Combination (refer to Note 3 - Business Combination for further discussion).
Additionally, 21,898 shares of common stock were withheld from employees to satisfy the mandatory tax withholding requirements, for which the Company remitted cash of $0.3 million to the appropriate tax authorities.
Employee Stock Purchase Plan ("ESPP")
Under the terms of the 2020 ESPP, on May 26, 2021, the Board of Directors approved the Company's ESPP offering program. With certain limitations, all Billtrust employees whose customary employment is more than 20 hours per week are eligible to participate in the ESPP.
The initial offering period, which consists of one purchase period, will commence on July 1, 2021 and run through November 30, 2021. Thereafter, each reportingoffering period will run for approximately six months, consisting of a single six month purchase period commencing on each successive June 1 and non-financial assetsDecember 1. At the end of each purchase period, employee payroll contributions are used to purchase shares of the Company's common stock. Employees can elect to have up to 15% of their eligible compensation withheld for the purpose of purchasing shares under the ESPP. During an offering period, employees may decrease their contributions to, or withdraw from, the ESPP by the 20th day of the month in which the purchase period ends, and liabilitiesreceive a refund of their accumulated payroll contributions.
During each purchase period, the maximum number of shares of common stock that are re-measuredmay be purchased by an employee is limited to the number of shares equal to $12,500 divided by the common stock closing price on the first day of a purchase period. The number of shares purchased on any single date, by any one employee, cannot exceed 5,000 shares. The purchase price for each share of common stock purchased is the lower of: (1) 85% of the closing price of the common stock on the first day of the purchase period, or (2) 85% of the closing price of the common stock on the last day of the purchase period.
During the six months ended June 30, 2021, 0 shares were purchased or issued pursuant to the 2020 ESPP.
Stock-Based Compensation Expense
The Company records stock-based compensation expense related to all of the Company’s stock-based awards over the requisite service period of the individual grantee, which is generally equal to the vesting period. Stock-based compensation expense was recorded in the following categories in the Condensed Consolidated Statements of Operations and reported at fair value at least annually.Comprehensive Loss (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Cost of subscription, transaction, and services$405 $57 $848 $88 
Research and development1,091 139 2,314 237 
Sales and marketing961 117 2,292 193 
General and administrative3,249 367 9,078 643 
Total$5,706 $680 $14,532 $1,161 
23

The fair value of RSU's was estimated based on the closing market price of the Company's common stock on the date of grant. As of June 30, 2021, the total unrecognized stock-based compensation expense related to RSUs was $10.6 million. These costs are expected to be recognized over a weighted-average period of 2.5 years.
The fair value of stock options granted was estimated at the date of grant using the Black-Scholes valuation model with the following assumptions:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Risk-free interest rate1.3% - 1.4%0.5% - 0.7%0.6% - 1.4%0.5% - 1.6%
Expected dividend yield0 %0 %0 %0 %
Expected volatility41 %39% -44%41% - 42%39% - 44%
Expected life (in years)5.56.95.56.9
Weighted average grant date fair value$6.61 $0.97 $7.47 $1.14 
As of June 30, 2021, the total unrecognized stock-based compensation expense related to stock options was $39.2 million. These costs are expected to be recognized over a weighted average period of 3.1 years.
Note 8 - Defined Contribution Plan
The Company sponsors a 401(k) defined contribution benefit plan. Participation in the plan is available to substantially all employees. Company contributions to the plan are discretionary and are subject to vesting requirements based on four years of continuing employment. The Company generally makes matching contributions of one-half of the first 6% of employee contributions. During the three months ended June 30, 2021 and 2020 the Company contributed $0.4 million and $0.1 million, respectively. During the six months ended June 30, 2021 and 2020 the Company contributed $0.9 million and $0.4 million, respectively.
Note 9 - Debt and Capital Lease Obligations
The following table summarizes the Company's total debt and capital lease obligations as of the dates indicated (in thousands):
June 30,December 31,
20212020
Term Loan$0 $44,663 
Unamortized debt issuance costs0 (1,234)
Capital lease obligations (Note 10)152 246 
Net carrying amounts152 43,675 
2020 Financing Agreement
On January 17, 2020, the Company entered into a Financing Agreement (the "2020 Financing Agreement") for a $72.5 million credit facility, secured by substantially all the assets of the Company. In connection therewith, the previously outstanding Term Loan and Revolver of $28.3 million was paid in full and the related liens were released.
The 2020 Financing Agreement consisted of the following facilities:
i.An Initial Term Loan of $45.0 million, which was drawn at closing and used to pay off previously outstanding borrowings;
ii.A Delayed Draw Term Loan of up to $20.0 million, which was available to draw in minimum increments through July 17, 2021; and
iii.A Revolving Commitment facility of $7.5 million, including a sub-limit of up to $4.0 million for issuing additional letters of credit.
24

In connection with the Business Combination on January 12, 2021 (refer to Note 3 - Business Combination), the Company paid the outstanding facilities in full, along with a prepayment penalty, and extinguished the 2020 Financing Agreement. 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 in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
Note 10 - Commitments and Contingencies
Lease Commitments
The majority of the Company's leases are operating leases for its office space and print facilities.
In August 2017, the Company entered into a lease agreement for its Company headquarters consisting of 88,759 square feet of office space in Lawrenceville, New Jersey. The term of this lease is 15 years, 6 months subject to early termination if (1) there is not sufficient space for expansion beyond the initial space, starting 6 years, 6 months after lease commencement, which will require an early termination payment that declines from $7.5 million at such date by $0.7 million per year after such date, or (2) upon advance notice by the Company, at 12 years, 6 months after lease commencement, which will require an early termination payment of $3.6 million. The lease contains an option to lease up to 61,000 additional square feet, starting 6 years, 6 months after lease commencement, and also contains 2 extension periods of 5 years each. The lease commenced in June 2018 and the Company recognizes rent expense on a straight-line basis over the initial term of the lease, including the free rent period.
The Company has capitalized approximately $5.7 million of costs related to leasehold improvements, furniture and fixtures, and computer equipment associated with this office space. Additionally, in 2018 the landlord paid for approximately $5.8 million of costs and related improvements to modify the existing space to meet the Company's requirements. This lease incentive was recorded as an asset and other long term liability as of the date the lease commenced. The asset is being amortized over term of the lease, and the long term liability is being recorded as a reduction to rent expense over the same period of time.
The Company also leases equipment under capital lease agreements. The capital leases have stated or implied interest rates between 5% and 11% and maturity dates into 2024. The equipment financed under the capital leases serves as collateral, and certain leases contain casualty loss values if the equipment is not returned in working order at the end of the lease term.
Future minimum lease payments under non-cancelable operating and capital leases as of June 30, 2021 are as follows (in thousands):
Operating LeasesCapital Leases
2021 (remainder)$2,333 $91 
20224,563 52 
20234,284 13 
20244,138 1 
20254,115 0 
Thereafter28,136 0 
Total minimum lease payments$47,569 $157 
Less: Amounts representing interest(5)
Present value of lease payments152 
Less: Current portion(124)
Long-term portion of minimum lease payments$28 
Total rent expense for both the six months ended June 30, 2021 and 2020 amounted to $2.6 million.
Purchase Commitments
The Company enters into purchase commitments with certain vendors to secure pricing for paper, envelopes, and similar products necessary for its print operations. As of June 30, 2021, the Company did not have a material balance remaining under such purchase orders.
25

Legal Contingencies, Claims, and Assessments
During the normal course of business, the Company is occasionally involved with various claims and litigation. Reserves are established for such matters when a loss is probable and the amount of such loss can be reasonably estimated, including for indemnifications with customers or other parties as a result of contractual agreements. Currently, the Company is not party to any such matters that, in the opinion of management, would individually or taken together have a material adverse effect on its business, operating results, financial condition, or cash flows. Accordingly, no material reserves have been recorded.
Note 11 - Income Taxes
The Company is subject to federal and various state income taxes in the United States. The Company’s provision for income taxes during interim periods is determined using an estimate of the Company’s annual effective tax rate, which is adjusted for certain discrete tax items during interim periods.
Income taxes for the six months ended June 30, 2021 and 2020 are primarily due to tax amortization of indefinite-lived assets and state income taxes.
Section 382 of the Internal Revenue Code of 1986, as amended, imposes an annual limitation on the amount of net operating loss carryforwards that may be used to offset federal taxable income and federal tax liabilities when a corporation has undergone significant changes in its ownership. The Company is evaluating the ownership change as a result of the Business Combination (refer to Note 3 - Business Combination) to determine any impact on utilization of net operating loss carryforwards.
Note 12 - Short Term Investments
The Company’s investments at June 30, 2021 consist entirely of certificates of deposit with a financial institution, and have maturity dates of twelve months or less.
Management determines the appropriate classification of investments at the time of purchase and re-evaluates such designation as of each balance sheet date. Investments are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity, with related amortization included in interest income (expense) in the Condensed Consolidated Statements of Operations and Comprehensive Loss. The Company uses the specific identification method to determine the cost basis of securities sold and realized gains or losses are included in earnings.
The Company did not have any investments classified as held-to-maturity as of June 30, 2021 or December 31, 2020.
Investments are impaired when a decline in fair value is judged to be other-than-temporary. The Company evaluates an investment for impairment by considering the length of time and extent to which market value has been less than cost or amortized cost, the financial condition and near-term prospects of the issuer, specific events or circumstances that may influence the operations of the issuer, and the Company’s intent to sell the security, or the likelihood that it will be required to sell the security, before recovery of the entire amortized cost. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new costs basis in the investment is established.
Note 13 - Fair Value Measurements
The carrying amounts reflected in the Condensed Consolidated Balance Sheets for cash, cash equivalents, restricted cash, accounts receivable, funds held for customers, other current assets, other assets, accounts payable, accrued expenses (excluding the contingent consideration and warrants discussed below), other current liabilities, and other liabilities approximate fair value due to their short-term maturities.
Additionally, the Company measures certain financial assets and liabilities reflects management’s estimateat fair value on a recurring basis including short term investments, contingent consideration, and warrants to purchase Series C preferred stock (refer to Note 3 - Business Combination). The fair values of amountsthese financial assets and liabilities have been
26

classified as Level 1, 2, or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements:
•Level 1: Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities.
•Level 2: Inputs, other than Level 1 inputs, that are observable either directly or indirectly, such as quoted prices for similar assets or liabilities, quotes prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the Company would have received in connection with the salefull term of the assets or paid in connection with the transfer of the liabilities in an orderly transaction betweenliabilities.
•Level 3: Unobservable inputs for which there is little or no market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities,data, requiring the Company seeks to maximize the use of observable inputs (market data obtained from independent sources)develop its own estimates and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
The following tables present the Company's fair value hierarchy is used to classifyfor its financials assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:


Level 1:
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.


Level 2:
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.


Level 3:
Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis (in thousands):
June 30, 2021
BalanceLevel 1Level 2Level 3
Assets:
Short-term investments45,037 45,037 0 0 
Total Assets$45,037 $45,037 $0 $0 
Liabilities:
Contingent consideration (1)$370 $0 $0 $370 
Total Liabilities$370 $0 $0 $370 

December 31, 2020
BalanceLevel 1Level 2Level 3
Liabilities:
Contingent consideration (1)$660 $0 $0 $660 
Warrants to purchase Series C Preferred Stock (2)1,172 0 0 1,172 
Total Liabilities$1,832 $0 $0 $1,832 
(1) The acquisition of Second Phase, LLC in April 2019 included a contingent consideration arrangement that required additional consideration to be paid to the sellers annually based meeting certain recurring revenue growth and profitability targets (together, "the Financial Targets") during the three-year period beginning May 1, 2019. No amounts were paid during 2020 or 2021 for the first or second year as the Financial Targets were not met. The year three amount, if any, is expected to be finalized and paid to the sellers by the end of 2022. The range of outcomes for the year three amount cannot be estimated as the amount payable is a percentage of the growth in the Financial Targets. The fair value of the remaining contingent consideration is included in other current liabilities in the Condensed Consolidated Balance Sheets.
(2) The Company had outstanding warrants to purchase Series C stock, as described in Note 3 - Business Combination. The amount was included in other long term liabilities in the Condensed Consolidated Balance Sheets.
During the six months ended June 30, 2021 and 2020, the Company did not transfer assets or liabilities between levels of the fair value hierarchy. Additionally, there have been no changes to the valuation techniques for Level 2 or Level 3 liabilities.
27

The following tables present the changes in the Company’s Level 3 financial instruments measured at fair value on a recurring basis (in thousands):
Contingent
Consideration
Ending balance, December 31, 2020$660 
Fair value adjustment to contingent consideration (1)(290)
Ending balance, June 30, 2021$370 

Warrants
Ending balance, December 31, 2020$1,172 
Change in fair value (2)256 
Exercise of Series C warrants (3)(1,428)
Ending balance, June 30, 2021$0 
(1) Subsequent to the acquisition of Second Phase, LLC, the changes in the fair value of the contingent consideration were primarily due to management's estimates and the achievements of the Financial Targets during each period. Increases or decreases in the inputs would have resulted in higher or lower fair value adjustments. This amount was recognized in change in fair value of financial instruments and other income in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
(2) Included in change in fair value of financial instruments and other expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
(3) As part of the Business Combination on January 12, 2021 (refer to Note 3 - Business Combination), the warrants were exercised and subsequently converted to common stock.
Note 14 - Property and Equipment
Property and equipment, net consists of the following (in thousands):
June 30,December 31,
20212020
Assets held under capital leases$3,784 $3,752 
Computer, print and mail equipment8,777 7,998 
Furniture and fixtures4,073 4,073 
Leasehold improvements12,133 12,120 
Software1,437 1,437 
Vehicles115 115 
Internal software development2,959 2,644 
Construction in progress90 79 
Total property and equipment33,368 32,218 
Less: accumulated depreciation and amortization(17,174)(15,568)
Total property and equipment, net$16,194 $16,650 
Depreciation and amortization expense of property and equipment, including amortization of software development costs and depreciation of capital leases, was $0.8 million and $0.9 million for the three months ended June 30, 2021 and 2020, respectively and $1.6 million and $1.7 million for the six months ended June 30, 2021 and 2020, respectively.
The Company had 0 material write-offs or disposals of fixed assets during the six months ended June 30, 2021 and 2020.
28

Note 15 - Accrued Expenses and Other
Accrued expenses and other consist of the following (in thousands):
June 30,December 31,
20212020
Accrued expenses$14,152 $11,749 
Accrued compensation10,059 9,513 
Accrued professional services and other5,707 3,569 
Accrued business combination expense1,137 1,510 
Total accrued expenses and other$31,055 $26,341 
Note 16 - Segment Information
The Company's operations are grouped into 2 reportable segments: (1) Print, and (2) Software and Payments. The Company's Chief Operating Decision Maker (“CODM”) is the Chief Executive Officer ("CEO"), who reviews discrete financial and other information presented for print services and software and payment services for purposes of allocating resources and evaluating the Company's financial performance.
•Print – The Print segment is primarily responsible for printing customer invoices and optimizing the amount of time and costs associated with billing customers via mail.
•Software and Payments – The Software and Payments segment primarily operates using software and cloud based services, optimizes electronic invoice presentment, electronic payments, credit decisioning, collections automation, cash application and deduction management, and e-commerce of B2B customers.
“All other” represents implementation, services, and other business activities which are not reviewed by CODM on regular basis.
The Company evaluates segment performance and allocates resources based on revenues, cost of revenues, and gross profit. The accounting policies used by the reportable segments are the same as those used by the Company. All of the revenues shown in the reportable segments is revenue from external customers; there is no revenue from transactions with other operating segments. Segment expenses include the direct expenses of each segment's operations and exclude sales and marketing expenses, research and development expenses, general and administrative expenses, depreciation and amortization expense, stock-based compensation expense, interest income (expense), and certain other identified costs that the Company does not allocate to its segments for purposes of evaluating operational performance.
Given the nature of the Company’s business, the amount of assets does not provide meaningful insight into the operating performance of the Company. As a result, the Company does not identify or allocate assets by reportable segment and total assets are not included in the Company’s segment financial information.
29

The following tables include a reconciliation of segment revenues, cost of revenues, and gross profits to loss before income taxes (in thousands):
Three Months Ended June 30, 2021
PrintSoftware and PaymentsAll otherConsolidated
Revenues:
Subscription and transaction$4,490 $24,582 $0 $29,072 
Services and other0 0 2,517 2,517 
Subscription, transaction, and services4,490 24,582 2,517 31,589 
Reimbursable costs8,643 0 0 8,643 
Total revenues13,133 24,582 2,517 40,232 
Cost of Revenues:
Cost of subscription, transaction, and services revenue1,900 3,679 3,781 9,360 
Cost of reimbursable costs8,643 0 0 8,643 
Total cost of revenues10,543 3,679 3,781 18,003 
Gross profit:
Total segment gross profit (loss)$2,590 $20,903 $(1,264)$22,229 
Total segment gross margin20 %85 %(50)%55 %
Subscription, transaction, and services gross margin58 %85 %(50)%70 %
Unallocated amounts:
Sales, marketing, research, development, and administrative expenses(31,728)
Depreciation and amortization(1,359)
Interest, loss on extinguishment of debt, changes in fair value of financial instruments, and other income (expenses)133 
Loss before income taxes$(10,725)
30

Three Months Ended June 30, 2020
PrintSoftware and PaymentsAll otherConsolidated
Revenues:
Subscription and transaction$4,448 $19,361 $0 $23,809 
Services and other0 0 1,837 1,837 
Subscription, transaction, and services4,448 19,361 1,837 25,646 
Reimbursable costs8,945 0 0 8,945 
Total revenues13,393 19,361 1,837 34,591 
Cost of Revenues:
Cost of subscription, transaction, and services revenue2,297 2,880 2,456 7,633 
Cost of reimbursable costs8,945 0 0 8,945 
Total cost of revenues11,242 2,880 2,456 16,578 
Gross profit:
Total segment gross profit (loss)$2,151 $16,481 $(619)$18,013 
Total segment gross margin16 %85 %(34)%52 %
Subscription, transaction, and services gross margin48 %85 %(34)%70 %
Unallocated amounts:
Sales, marketing, research, development, and administrative expenses(18,778)
Depreciation and amortization(1,410)
Interest, loss on extinguishment of debt, changes in fair value of financial instruments, and other expenses(690)
Loss before income taxes$(2,865)
Six Months Ended June 30, 2021
PrintSoftware and PaymentsAll otherConsolidated
Revenues:
Subscription and transaction$8,988 $50,267 $0 $59,255 
Services and other0 0 5,453 5,453 
Subscription, transaction, and services8,988 50,267 5,453 64,708 
Reimbursable costs17,460 0 0 17,460 
Total revenues26,448 50,267 5,453 82,168 
Cost of revenues:
Cost of subscription, transaction, and services revenue3,826 7,391 7,396 18,613 
Cost of reimbursable costs17,460 0 0 17,460 
Total cost of revenues21,286 7,391 7,396 36,073 
Gross profit:
Total segment gross profit (loss)$5,162 $42,876 $(1,943)$46,095 
Total segment gross margin20 %85 %(36)%56 %
Subscription, transaction, and services gross margin57 %85 %(36)%71 %
Unallocated amounts:
Sales, marketing, research, development, and administrative expenses(64,107)
Depreciation and amortization(2,719)
Interest, loss on extinguishment of debt, changes in fair value of financial instruments, and other expenses(12,696)
Loss before income taxes$(33,427)
31

Six Months Ended June 30, 2020
PrintSoftware and PaymentsAll otherConsolidated
Revenues:
Subscription and transaction$9,234 $37,701 $0 $46,935 
Services and other0 0 3,235 3,235 
Subscription, transaction, and services9,234 37,701 3,235 50,170 
Reimbursable costs18,566 0 0 18,566 
Total revenues27,800 37,701 3,235 68,736 
Cost of Revenues:
Cost of subscription, transaction, and services revenue4,508 5,994 5,021 15,523 
Cost of reimbursable costs18,566 0 0 18,566 
Total cost of revenues23,074 5,994 5,021 34,089 
Gross profit:
Total segment gross profit (loss)$4,726 $31,707 $(1,786)$34,647 
Total segment gross margin17 %84 %(55)%50 %
Subscription, transaction, and services gross margin51 %84 %(55)%69 %
Unallocated amounts:
Sales, marketing, research, development, and administrative expenses(39,832)
Depreciation and amortization(2,821)
Interest, loss on extinguishment of debt, changes in fair value of financial instruments, and other expenses(1,876)
Loss before income taxes$(9,882)
Note 17 - Related Party Transactions
A member of the Company's Board of Directors is also an executive at a company (the "Related Party Customer") that purchases certain of Billtrust's services under an ongoing commercial relationship. During the three months ended June 30, 2021 and 2020, the Related Party Customer generated total revenues of approximately $78 thousand and $64 thousand, respectively. During the six months ended June 30, 2021 and 2020, the Related Party Customer generated total revenues of approximately $150 thousand and $147 thousand, respectively. At June 30, 2021 and December 31, 2020, Billtrust had open receivable balances from the Related Party Customer of $64 thousand and $46 thousand, respectively.
The Company also has ongoing commercial agreements with several of Bain Capital Ventures, LLC's ("Bain") portfolio companies ("Portfolio Companies"). Bain is a greater than 5% shareholder of the Company's outstanding common stock at June 30, 2021, and one of the members of the Company's Board of Directors is also an executive at Bain. During the three months ended June 30, 2021 and 2020, the Company incurred expenses to the Portfolio Companies of approximately $122 thousand and $85 thousand, respectively. During the six months ended June 30, 2021 and 2020, the Company incurred expenses to the Portfolio Companies of approximately $226 thousand and $159 thousand, respectively. At June 30, 2021 and December 31, 2019,2020, Billtrust had open payables balances to the Portfolio Companies of 0 and indicates$102 thousand, respectively. Additionally, during the fair value hierarchythree months ended June 30, 2021 and 2020, the Portfolio Companies generated total revenues of approximately $46 thousand and $26 thousand, respectively. During the valuation inputssix months ended June 30, 2021 and 2020, the Portfolio Companies generated total revenues of approximately $85 thousand and $48 thousand, respectively. At June 30, 2021 and December 31, 2020, Billtrust had open receivables balances from Portfolio Companies of $30 thousand and $25 thousand, respectively.
Refer to Note 18 - Subsequent Events for a description of costs the Company utilized to determine such fair value:paid for on behalf of several of its selling security holders associated with the secondary offering that closed in July 2021.

32
Description
  Level 
June 30,
2020
 
December 31,
2019
 
Assets:        
Marketable securities held in Trust Account  1  $252,360,923  $251,865,941 


Note 9—18 - Subsequent Events

The Company evaluated subsequentreviews events and transactions that occurredoccur after the balance sheet date, upbut before this Quarterly Report on Form 10-Q is filed with the SEC, to identify matters that require additional disclosure or to provide additional support relative to certain estimates made in preparing the date that the condensed financial statements were issued. Based upon this review,statements. The Company has evaluated subsequent events through August 12, 2021, and except as discussed below, the Company didis not identifyaware of any subsequent events thatwhich would have required adjustmentrequire recognition or disclosure in the condensed financial statements.

On July 6, 2021, the Company completed an underwritten secondary offering (the "Offering") of 10,350,000 shares of the Company's Class 1 common stock at a public offering price of $12.25 per share. All of the Class 1 common stock was offered by existing shareholders. No new shares were issued and Billtrust did not receive any proceeds from the Offering. The gross proceeds from the Offering, before deducting underwriting discounts and commissions, was $126.8 million.
13
TableDuring the three months ended June 30, 2021, the Company incurred $0.5 million of Contents
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to South Mountain Merger Corp. References to our “management” or our “management team” refer to our officers and directors, and referencescosts directly related to the “Sponsor” referOffering, consisting principally of professional, printing, filing, regulatory and other costs. These costs were recorded in general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss since the Offering did not generate any proceeds to South Mountain, LLC. The following discussionthe Company, and analysistherefore the costs do not qualify to be deferred or charged to additional paid-in capital under ASC 340-10-S99-1. Additionally, as no new shares were issued, the shares transacted as part of the Company’s financial conditionOffering would not have impacted the number of common shares outstanding at the end of June 30, 2021 for the purposes of calculating earnings per share as of that date.
33


Item 2. Management's Discussion and resultsAnalysis of operationsFinancial Condition and Results of Operations
You should be read this section in conjunction with the financial statementsCondensed Consolidated Financial Statements and related notes included in Part I. Item 1 of this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2020 (the "Annual Report on Form 10-K"), as filed with the US Securities and Exchange Commission (the "SEC") on March 24, 2021, the Company's Amendment No. 1 to the Current Report on Form 8-K (the "Amendment on Form 8-K"), as filed with the SEC on March 24, 2021, and the notes thereto contained elsewhereCompany's Registration Statement on Form S-1 as amended (File No. 333-257488), originally filed with the SEC on June 28, 2021.
Certain figures, such as interest rates and other percentages, included in this Quarterly Report. Certain information containedsection have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our Condensed Consolidated Financial Statements or in the Notes to Condensed Consolidated Financial Statements. Certain other amounts that appear in this section may similarly not sum due to rounding.
Forward Looking Statements
This discussion and analysis set forth below includescontains forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are identified by words 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 in this Quarterly Report on Form 10-Q. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions, and financial performance and the assumptions that underlie these statements. These forward-looking statements are not historical facts and involvesubject to certain risks and uncertainties that could cause actual resultsa difference include, but are not limited to, differ materially from those expecteddiscussed under the caption “Risk Factors” in our Annual Report on Form 10-K, the Amendment on Form 8-K, the Company's Registration Statement on Form S-1, and projected. All statements, other than statements of historical fact includedelsewhere in this Quarterly Report including, without limitation,(refer to the section titled “Special Note Regarding Forward-Looking Statements”). Forward-looking statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflectbased on management’s current beliefs and assumptions and based on information currently available. These statements, like all statements in this Quarterly Report on Form 10-Q, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments, except as required by law.
Business Overview
We are a leading provider of cloud-based software and integrated payment processing solutions that simplify and automate B2B commerce. Accounts receivable (“AR”) is broken and relies on conventional processes that are outdated, inefficient, manual, and largely paper-based. We are at the forefront of the digital transformation of AR, providing mission-critical solutions that span credit decisioning and monitoring, online ordering, invoicing, cash application, and collections. Our solutions provide our customers accelerated savings, faster realization of cash, and a better user experience.
Companies throughout the world have the daunting task of capturing and applying payments from hundreds or thousands of their customers, all via different channels and payment types. Larger buyers, or their outsourced accounts payable ("AP") providers, offer their portals as a means for suppliers to be paid. Suppliers, on the other hand, prefer a single source of payments with clean remittance or payment instructions. To address this large and increasingly growing pain point for suppliers, we created a leading, two-sided B2B payments network, the Business Payments Network ("BPN") that connects buyers and suppliers. We built integrations with leading enterprise resource planning ("ERP") and accounting systems, banks, and AP software providers to offer an online supplier business directory, programmatic payment preferences, payment flexibility, and streamlined reconciliation of remittance data.
Customers use our integrated AR platform to automate credit decisioning, online ordering, invoice delivery, payment capture, cash application, and collections. Our solutions integrate with a number of ecosystem players, including financial institutions, ERP systems, and AP software platforms, to help customers accelerate cash flow and generate sales more quickly and efficiently.
34

Our proprietary technology also offers our customers multiple ways to send invoices (via print, fax, email, online, and AP portals) and receive payments (via paper check, ACH, email, phone, and credit card). Our electronic solutions team that works closely with customers to transition their users from paper invoices and payments to electronic, helping them convert from expensive paper invoicing and check acceptance to efficient electronic billing and payments.
We have expanded our product reach and customer base over the past years and scaled our business operations in recent periods. Our total revenues were $82.2 million and $68.7 million for the six months ended June 30, 2021 and 2020, respectively. As a result of our focus on product development and sales and marketing, we have generated net losses of $33.5 million and $10.0 million for the six months ended June 30, 2021 and 2020, respectively.
Business Combination with South Mountain Merger Corporation ("SMMC")
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 the Company ("Billtrust"), entered into a Business Combination Agreement (“BCA”), pursuant to which (i) First Merger Sub was merged with and into Billtrust (the “First Merger”), with Billtrust surviving the First 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 Merger”, and together with the First Merger, the “Mergers”), with Second Merger Sub surviving the Second Merger as a wholly owned subsidiary of South Mountain (such 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 20,000,000 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”).
The Business Combination and PIPE Financing closed on January 12, 2021 (the "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, we were 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 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, our common stock began trading on the Nasdaq stock exchange under the ticker symbol BTRS.
Impact of COVID-19 on Billtrust's Business
In March 2020, the United States declared a State of National Emergency due to the COVID-19 pandemic. Since then, our business has continued to operate despite the disruption to many of our customer's operations. The pandemic has served to increase awareness and urgency around accelerating the digital transformation of AR through our products and platforms. While this helped us avoid significant business, bookings, or revenue disruptions thus far, during the three months ended June 30, 2020, the pandemic did cause a decrease in our transaction fee revenues for certain customers. This was a result of the pandemic's broader economic impact on some companies in heavily transaction based industries and the related slowing of their business activity. These revenues started rebounding in the second half of 2020 and into 2021, which we expect to continue.
We are unable to predict the full impact the COVID-19 pandemic will have on our future results of operations, liquidity, and financial condition due to numerous uncertainties, including the duration, severity, and spread of the virus, actions that may be taken by government authorities, the impact to our customers, employees, and suppliers, and various other factors beyond our knowledge and control. The pandemic has caused us to modify our business practices, such as employee travel restrictions, cancellation of physical participation in
35

meetings, events and conferences, and requiring employees to work remotely. We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees and customers. We have previously implemented certain cost savings measures, some of which have ended, such as reducing employee incentive compensation programs, and others are continuing, such as restricted travel and reduced discretionary spend in certain areas. We will continue to monitor the situation and adjust our response accordingly.
Key Factors Affecting Our Performance
We believe our performance and future growth depends on a number of factors could cause actual events, performance or results to differ materially from the events, performancethat present significant opportunities, but also pose risks and resultschallenges, including those discussed below and in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipatedsection titled “Risk Factors” in the forward-looking statements, please refer to the Risk Factors section of the Company’sour Annual Report on Form 10-K, filedour Amendment on Form 8-K, and our Registration Statement on Form S-1. For additional information related to key performance metrics we use to evaluate the health of our business, identify trends affecting our growth, formulate goals and objectives, and make strategic decisions, please see the section within this Quarterly Report on Form 10-Q titled “Key Performance Metrics.” We believe the most significant factors affecting our results of operations include:
Investment in Technology
Our goal is to transform the way businesses send and capture payments in order to be the leader in the order-to-cash process by digitizing areas including credit decisioning, ordering, invoicing, payments, cash application, and collections. We continue to invest in technology and the digitizing of our platforms. Further, we continue to invest in certain internal initiatives targeted at improving internal processes and enhancing the efficiency, security, and scalability of our platforms. Our investment in technology is expected to have a positive impact on our long-term profitability and operations. We also intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to drive product and market expansion. Our future success is dependent on our ability to successfully develop, market, and sell existing and new products.
Acquisition of New Customers
We reach new business-to-business and business-to-consumer customers through our proven go-to-market strategies, which include digital marketing campaigns, our direct sales force, and partnerships with the SEC. The Company’s securities filings can be accessedfinancial institutions and other complementary companies. Our growth largely depends on our ability to acquire new customers.
As of June 30, 2021, we hadcustomers across a wide variety of industries and geographies, including distributors of building materials, electrical, plumbing and technology equipment, healthcare, construction, and consumer products, primarily located in North America. We continue to invest in our sales, marketing, and go-to-market strategies in order to acquire customers in our target markets. Our marketing efforts are campaign and content driven and targeted depending on the EDGAR sectionsize and industry of the SEC’s websitecustomer. Marketing initiatives focus on demand generation and include promotional activity and emphasis on online digital marketing programs (e.g. webinars, virtual events). There is a long-term opportunity to expand into large, new markets with compatible trends.
Our ability to attract new customers depends on a number of factors, including the effectiveness and pricing of our products, our competitors' offerings, and successfully executing our marketing efforts. Our financial performance depends in large part on the overall demand for our platforms, and acquisition of new customers is expected to have a positive impact on our long-term profitability and operations.
Expansion of Relationships with Existing Customers
Our revenue growth depends on our customers’ usage of our range of products. Our ability to monetize transactions and payments is an important part of our business model. As we solve customers’ problems and become more integrated into their daily businesses, we see an increased opportunity to cross-sell to these existing customers. This strategy is achieved by driving adoption of an existing solution across different divisions and / or subsidiaries of an existing customer and then expanding the scope of service with additional solutions. Our ability to influence customers to process more transactions and payments on our platforms will have a direct impact on our revenue.
Our revenue from existing customers is generally reliable due to both the pricing structure and the business-critical nature of the functions our products support for customers. For the six months ended June 30, 2021 and 2020, 95% or more of our subscription and transaction fees revenue came from customers who had entered into contracts prior to the start of each such calendar year. We expand within our existing customer base by selling
36

additional products on our platform, adding divisions, increasing transactions per customer through proven e-solutions, as well as through effective pricing and packaging our services. Our ability to increase sales to existing customers depends on a number of factors, including our customers’ satisfaction with our solutions, competition, pricing, and overall changes in our customers’ spending levels with us.
Key Performance Metrics
We monitor the following key metrics to help us evaluate the health of our business, identify trends affecting our growth, formulate goals and objectives, and make strategic decisions.
Total Payment Volume
Total Payment Volume (“TPV”) is the dollar value of customer payment transactions that we process on our platform during a particular period. TPV is made up of the two payment categories:
▪TPV - ACH/Wire - payments made via our software, portals, gateways, and our Business Payments Network that are processed via automated clearing house ("ACH") or wire transfers.
▪TPV - Card - payments through our software, portals, gateways, and third party processors, and includes our payment facilitator (“PayFac”) customers.
To grow payments revenue from customers, we must deliver software platforms that both simplifies the process of accepting electronic payments and streamlines the reconciliation of remittance data. Additionally, as we increase the digital delivery of invoices, it increases the probability that the digitally delivered invoices will be paid electronically by our customers’ end customers. The more customers use our software platforms, the more payments transactions they are likely to process through our various products. TPV provides an important indication of the dollar value of transactions that customers are completing on the platform and is helpful to investors as an indicator of our ability to generate revenue from our customers.
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(in billions)
Total Payment Volume$18.8 $12.7 $33.9 $24.1 
TPV - ACH/Wire12.2 8.9 21.9 16.7 
TPV - Card$6.6 $3.9 $12.0 $7.4 
The increase in TPV for the three and six months ended June 30, 2021 compared to the prior year periods was primarily due to the addition of new customers on our PayFac platform as well as an increase in existing customer transactions on both our card and ACH/Wire platforms (including an expansion of our product platforms for ACH transactions).
Number of Electronic Invoices Presented
Electronic invoices presented is the number of invoices sent via email, fax, or loaded to a presentment or AP portal, and includes volumes from acquired platforms, where volumes are normalized to best match equivalents on our platform. The measure also includes invoices that are charged on a per transaction basis for legacy customer agreements, as well as for subscription customers with defined tiers of electronic transactions for a fixed price. Electronic invoices presented is a key indicator of the growth of our Software and Payments segment revenues, as well as the future opportunity for an electronic payment on those invoices.
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(in millions)
Number of electronic invoices presented77 63 148 128 
The increase in the number of electronic invoices presented for the three and six months ended June 30, 2021 compared to the prior year periods was primarily due to growth in existing customer transactions on our platforms as well as new customer volumes.
37

Components of Results of Operations
Revenues
Billtrust generates revenue from three sources: (1) Subscription and Transaction Fees, (2) Services, and (3) Reimbursable Costs.
Subscription and Transaction Fees
Subscription revenues are primarily derived from our hosted software as a service (“SaaS”) platforms that enable billings and payment processing on behalf of customers, credit decisioning and monitoring, online ordering, invoicing, cash application, and collections. Our SaaS solutions do not provide a perpetual license or the right to take possession of our software. Our platforms are billed as a subscription fee on a monthly, quarterly, or annual basis as a part of an overall service agreement with a customer. Subscription revenues from the SaaS solutions are recognized ratably over the customer agreement term, beginning on the date each solution is made available to the customer.
Transaction fees for certain services are billed monthly based on the volume of items processed each month at www.sec.gov. Excepta contractual rate per item processed. Transaction revenue is recognized in the same period as expressly required by applicable securities law, the Company disclaims any intentiontransactions are processed. Recurring transaction revenue is recognized monthly as these services are performed based on the volume of transactions processed and are recognized as revenue in the period when the usage amounts are determined and reported.
Services
Services revenues consists of fees for professional services provided to our customers related to implementing our platforms and post-implementation change requests. Professional services are billed on a time and materials or obligationfixed fee basis. Services revenues are recognized ratably over the estimated period of the customer relationship, which is estimated to updatebe five years.
Reimbursable Costs
Reimbursable costs revenues consists primarily of amounts charged to our customers for postage on printed and mailed invoices to their end customers. The related revenues are recorded on a gross basis, with an offsetting amount recorded as a cost of revenue.
Cost of Revenues
Costs of Subscription, Transaction, and Services
Cost of subscription, transaction, and services consists primarily of personnel-related costs, including stock-based compensation expenses, for our customer success, professional services, file, and payment operations teams, print operations equipment costs, costs directly attributed to processing customers’ transactions (such as the cost of printing and mailing invoices, excluding postage), expenses for processing payments (ACH and credit card), direct and amortized costs for implementing and integrating our cloud-based platforms with customers’ systems, cloud hosting and related costs for the infrastructure directly associated with production platforms, rent and utilities expense for our leased print operations facilities, and allocated overhead costs. Cost of subscription, transaction, and services excludes depreciation and amortization. We expect that cost of subscription, transaction, and services will increase in absolute dollars, but may fluctuate as a percentage of total revenues from period to period, as we continue to invest in growing our business.
Cost of Reimbursable Costs
Cost of reimbursable costs consists of fees for postage related costs, primarily paid to the United States Postal Service or revise any forward-looking statements whetherthird parties associated with printed and mailed invoice deliveries for our customers, and are recorded at no incremental margin on reimbursable costs revenues.
Operating Expenses
Research and Development
Research and development expenses consist primarily of personnel-related expenses, including stock-based compensation expenses, incurred in developing and engineering new products or enhancing existing products, quality assurance and testing of new and existing product technology, maintenance, and enhancement of our existing technology and infrastructure, and allocated overhead costs. We capitalize certain software development costs that are attributable to developing new products and adding incremental functionality to our
38

platforms, and amortize such costs over the estimated life of the new product or incremental functionality, which is generally four years.
In accordance with U.S. GAAP, we expense a substantial portion of research and development expenses as incurred. We expect our research and development expenses to increase in absolute dollars, but they may fluctuate as a percentage of total revenues from period to period as we continue to expand our research and development team to develop new products and product enhancements as well as to support our growing infrastructure.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel-related expenses, including stock-based compensation expenses, sales commissions, marketing program expenses, travel-related expenses, and costs to market and promote our platforms through advertisements, marketing events, partnership arrangements, direct customer acquisition, and allocated overhead costs. Sales commissions that are incremental to obtaining customer contracts are deferred and amortized ratably over the estimated period of the customer relationship, which is estimated to be five years.
Our sales and marketing efforts are focused on increasing revenue from the acquisition of new customers, the expansion of subscription revenue from existing customers, and from facilitating increased electronic adoption and resulting digital processing activity between our customers and their end customers. Sales and marketing expenses may fluctuate from period to period based on a variety of factors, including changes in the broader economic environment and our return on this spend.
General and Administrative
General and administrative expenses consist of personnel-related expenses, including stock-based compensation expenses associated with our executive team, talent (human resources), finance, procurement, legal and compliance, and other administrative functions, facility costs (including rent and utilities expense for our leased real estate offices, excluding those used in our print operations) and allocated overhead costs. We expect to incur additional general and administrative expenses as a result of new information, future events or otherwise.

Overview

We areoperating as a blank checkpublic company, formed underincluding expenses to comply with the lawsrules and regulations applicable to companies listed on a national securities exchange, expenses related to compliance, and reporting obligations pursuant to the rules and regulations of the StateSEC, as well as higher expenses for director and officer insurance, investor relations, and professional services. We also expect to increase the size of Delawareour general and administrative functions to support the growth in our business. As a result, we expect that our general and administrative expenses will increase in absolute dollars but may fluctuate as a percentage of total revenues from period to period.
Depreciation and Amortization
Depreciation and amortization expense includes the costs associated with depreciating our owned furniture and fixtures, computer equipment, software, and technology assets, as well as amortization of leasehold improvements, capitalized software, and amortizable intangible assets.
Interest Income
Interest income consists primarily of income earned on February 28, 2019 for the purposeour cash, cash equivalents, and short term investments.
Interest Expense and Loss on Extinguishment of effecting capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business CombinationDebt
Interest expense and loss on extinguishment of debt consists of interest on any outstanding debt, amortization of associated debt issuance costs, payment of early termination fees, and writing off unamortized debt discounts associated with one or more businesses. We intendrepaying our outstanding debt facilities prior to effectuate our Business Combination using cash from the proceedsmaturity.
Change in Fair Value of Initial Public OfferingFinancial Instruments and the saleOther Income
Change in fair value of financial instruments and other income consists primarily of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.

The issuance of additional shares of our stock in a Business Combination:

may significantly dilute the equity interest of investors, which dilution would increase if the anti-dilution provisionschange in the Class B common stock resultedfair value of equity instruments that do not meet the criteria to be classified as equity (including Earnout Shares issued in connection with the Business Combination), changes in the issuancefair value of Class A shares on a greater than one-to-one basis upon conversion of the Class B common stock;
may subordinate the rights of holders of common stock if preferred stock is issued with rights seniorcontingent consideration, and gains (losses) related to those afforded our common stock;
could cause a change of control if a substantial number of shares of our common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;
may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and
may adversely affect prevailing market prices for our Class A common stock and/or warrants.

Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:

default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations;
acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;
our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding;
our inability to pay dividends on our common stock;
using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, expenses, capital expenditures, acquisitionsforeign exchange and other general corporate purposes;
non-operating income (expense).

Provision for Income Taxes
14
TableProvision for income taxes consists primarily of Contents
limitations on our flexibility in planning for and reactingincome taxes related to changes in our business and in the industrystate jurisdictions in which we operate;conduct business. Income tax benefit, if any, is primarily related to the release of valuation allowances for
39

increased vulnerabilitydeferred tax assets, partially offset by income taxes related to adverse changesstate jurisdictions. We maintain a full valuation allowance on net deferred tax assets for our U.S. federal taxes and certain state taxes as we have concluded that it is not more likely than not that the deferred assets will be utilized.
Segments
Our operations are grouped into two reportable segments: (1) Print, and (2) Software and Payments. Our Chief Operating Decision Maker (“CODM”) is the Chief Executive Officer ("CEO"), who reviews discrete financial and other information presented for print services and software and payment services for purposes of allocating resources and evaluating the Company's financial performance. The accounting policies used by the reportable segments are the same as those used in our Condensed Consolidated Financial Statements.
•Print – The Print segment is primarily responsible for printing customer invoices and optimizing the amount of time and costs associated with billing customers via mail.
•Software and Payments – The Software and Payments segment primarily operates using software and cloud based services, optimizes electronic invoice presentment, electronic payments, credit decisioning, collections automation, cash application and deduction management, and e-commerce of B2B customers.
We evaluate segment performance and allocate resources based on revenues, cost of revenues, and gross profit. All of the revenues shown in the reportable segments is revenue from external customers; there is no revenue from transactions with other operating segments. Segment expenses include the direct expenses of each segment's operations and exclude sales and marketing expenses, research and development expenses, general economic, industry and competitive conditionsadministrative expenses, depreciation and adverse changes in government regulation;amortization expense, stock-based compensation expense, and
certain other identified costs that we do not allocate to the segments for purposes of evaluating their operational performance.
limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, executionGiven the nature of our strategybusiness, the amount of assets does not provide meaningful insight into our operating performance. As a result, we do not identify or allocate assets by reportable segment and other purposes and other disadvantages compared tototal assets are not included in our competitors who have less debt.segment financial information.
40

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.


Results of Operations

The following tables set forth select Condensed Consolidated Statements of Operations data, and such data as a percentage of total revenues, for each of the periods indicated (in thousands, except percentages):
We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception through
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Revenues:
Subscription, transaction, and services$31,589 79 %$25,64674 %$64,70879 %$50,17073 %
Reimbursable costs8,64321 8,94526 17,46021 18,56627 
Total revenues40,232100 34,591100 82,168100 68,736100 
Cost of revenues:
Cost of subscription, transaction, and services9,36023 7,63322 18,61323 15,52323 
Cost of reimbursable costs8,64321 8,94526 17,46021 18,56627 
Total cost of revenues18,00345 16,57848 36,07344 34,08950 
Operating expenses:
Research and development11,27028 8,77825 22,26327 18,16226 
Sales and marketing9,98025 5,12915 18,91623 11,55117 
General and administrative10,47826 4,87114 22,92828 10,11915 
Depreciation and amortization1,3593 1,4104 2,7193 2,8214 
Total operating expenses33,08782 20,18858 66,82681 42,65362 
Loss from operations(10,858)(27)(2,175)(6)(20,731)(25)(8,006)(12)
Other income (expense):
Interest income131— 1— 234— 17— 
Interest expense and loss on extinguishment of debt(3)— (1,102)(3)(2,945)(4)(2,285)(3)
Change in fair value of financial instruments and other income5— 4111 (9,985)(12)3921 
Total other income (expense)133— (690)(2)(12,696)(15)(1,876)(3)
Loss before income taxes(10,725)(27)(2,865)(8)(33,427)(41)(9,882)(14)
Provision for income taxes(11)— (37)— (103)— (117)— 
Net loss and comprehensive loss$(10,736)(27)%$(2,902)(8)%$(33,530)(41)%$(9,999)(15)%
41

Comparison of Results of Operations for the Three Months Ended June 30, 2020 were organizational activities2021 and those necessary to prepare for the Initial Public Offering, described below, and, after our Initial Public Offering, identifying a target company for a Business Combination. We do not expect to generate any operating2020
Total Revenues
Three Months Ended June 30,Change
20212020Amount%
(in thousands)
Subscription and transaction fees$29,072 $23,809 $5,263 22 %
Services and other2,517 1,837 680 37 %
Subscription, transaction, and services31,589 25,646 5,943 23 %
Reimbursable costs8,643 8,945 (302)(3)%
Total revenues$40,232 $34,591 $5,641 16 %
The increase in total revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We are incurring expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

Forduring the three months ended June 30, 2020, we had2021 compared to the prior year period was primarily due to (1) a net loss$5.2 million increase in subscription and transaction fees as a result of $116,641, which consists of operating costs of $243,841, offset by interest incomecontracting with new customers, existing customers purchasing additional products, and increased transaction volumes, primarily from payments, and (2) a $0.7 million increase in services revenue from existing customers purchasing additional professional services consulting engagements and a shift to providing more services on marketable securities heldan hourly rate basis as compared to more fixed pricing arrangements in the Trust Accountprior period.
Cost of $96,195 and income tax benefitRevenues
Three Months Ended June 30,Change
20212020Amount%
(in thousands)
Cost of subscription, transaction, and services$9,360$7,633$1,727 23 %
Cost of reimbursable costs8,6438,945(302)(3)%
Total cost of revenues$18,003$16,578$1,425 9 %
The increase in total cost of $31,005.

For the six months ended June 30, 2020, we had net income of $310,973, which consists of interest income on marketable securities held in the Trust Account of $883,329, offset by operating costs of $489,692 and a provision for income taxes of $82,664.

Forrevenues during the three months ended June 30, 2019,2021 compared to the prior year period was primarily due to a $2.1 million increase in personnel-related costs, including non-cash stock based compensation expense resulting from the grant of stock options to substantially all employees in January 2021 and the impact of Earnout RSU's associated with the Business Combination. The increased personnel-related costs also include reinstating incentive programs that were eliminated as part of the cost-reduction measures implemented in 2020 as a result of the COVID-19 pandemic, and amortization of deferred service costs for personnel providing implementation and consulting services to our customers. These increases were partially offset by a $0.4 million decrease in print related costs resulting from efficiencies in our operations and slightly lower print transactional volumes as a result of existing customers converting to electronic invoicing.
Research and Development
Three Months Ended June 30,Change
20212020Amount%
(in thousands)
Research and development$11,270 $8,778 $2,492 28 %
The increase in research and development expenses during the three months ended June 30, 2021 compared to the prior year period was due primarily to a $2.5 million increase in personnel-related costs, including non-cash stock-based compensation expense of $1.0 million resulting from the grant of stock options to substantially all employees in January 2021 and the impact of Earnout RSU's associated with the Business Combination. The increased personnel-related costs also include reinstating incentive programs that were eliminated as part of the cost-reduction measures implemented in 2020 as a result of the COVID-19 pandemic.
42

Sales and Marketing
Three Months Ended June 30,Change
20212020Amount%
(in thousands)
Sales and marketing$9,980 $5,129 $4,851 95 %
The increase in selling and marketing expenses during the three months ended June 30, 2021 compared to the prior year period was due primarily to a $4.2 million increase in personnel-related cost, including non-cash stock based compensation of $0.8 million resulting from the grant of stock options to substantially all employees in January 2021 and the impact of Earnout RSU's associated with the Business Combination. The increased personnel-related costs also include reinstating incentive programs that were eliminated as part of the cost-reduction measures implemented in 2020 as a result of the COVID-19 pandemic. An additional $0.6 million of the increase is due to marketing expenses related to announcements of product enhancements and our annual virtual Summit.
General and Administrative
Three Months Ended June 30,Change
20212020Amount%
(in thousands)
General and administrative$10,478 $4,871 $5,607 115 %
The increase in general and administrative expenses during the three months ended June 30, 2021 compared to the prior year period was due primarily to a $4.9 million increase in personnel-related costs, including non-cash stock-based compensation of $2.9 million resulting from the grant of stock options to substantially all employees in January 2021 and the impact of Earnout RSU's associated with the Business Combination. The increased personnel-related costs also include reinstating incentive programs that were eliminated as part of the cost-reduction measures implemented in 2020 as a result of the COVID-19 pandemic. An additional $0.9 million of the increase is due to professional and consulting fees for reporting and compliance requirements as a result of becoming a public company in 2021.
Depreciation and Amortization
Three Months Ended June 30,Change
20212020Amount%
(in thousands)
Depreciation and amortization$1,359 $1,410 $(51)(4)%
Depreciation and amortization expense during the three months ended June 30, 2021 was consistent with the prior year period as we had netdid not have a material change in purchases, capitalization, write offs, or impairments of property, equipment, or intangible assets during either period.
Total other income (expense)
Three Months Ended June 30,Change
20212020Amount%
(in thousands)
Total other income (expense)$133 $(690)$823 119 %
The increase in other income during the three months ended June 30, 2021 compared to the prior year period was due primarily to a reduction in interest expense as all of $16,561, which consists of interest income on marketable securities heldour outstanding borrowings were paid off in the Trust Accountfirst quarter of $86,506, offset by operating costs2021 as part of $65,808, and athe Business Combination.
43

Provision for Income Taxes
Three Months Ended June 30,Change
20212020Amount%
(in thousands)
Provision for income taxes(11)(37)$26 70 %
The provision for income taxes of $4,137.

Forfor the period from February 28, 2019 (inception) throughthree months ended June 30, 2019, we had net income of $15,561, which consists of interest income on marketable securities held in the Trust Account of $86,506, offset by operating costs of $66,808, and a provision for income taxes of $4,137.

Liquidity and Capital Resources

On June 24, 2019, we consummated the Initial Public Offering of 25,000,000 Units, which includes a partial exercise by the underwriter of the over-allotment option to purchase an additional 2,500,000 Units, at $10.00 per Unit, generating gross proceeds of $250,000,000. Simultaneously2021 is consistent with the closingprior year period due to a low effective tax rate resulting from our net operating losses. We maintain a valuation allowance on our deferred taxes.
Comparison of Results of Operations for the Initial Public Offering, we consummated the sale of 6,954,500 Private Placement Warrants, at $1.00 per Private Placement Warrant, to our Sponsor, generating gross proceeds of $6,954,500.

As ofSix Months Ended June 30, 2021 and 2020 we had marketable securities held
Total Revenues
Six Months Ended June 30,Change
20212020Amount%
(in thousands)
Subscription and transaction fees$59,255 $46,935 $12,320 26 %
Services and other5,453 3,235 2,218 69 %
Subscription, transaction, and services64,708 50,170 14,538 29 %
Reimbursable costs17,460 18,566 (1,106)(6)%
Total revenues$82,168 $68,736 $13,432 20 %
The increase in the Trust Account of $252,360,923 (including approximately $2,361,000 of interest income) consisting of U.S. Treasury Bills with a maturity of 180 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through June 30, 2020, we withdrew $860,463 of interest earned on the Trust Account, of which $388,347 was withdrawntotal revenues during the six months ended June 30, 2020.2021 compared to the prior year period was primarily due to (1) a $12.6 million increase in subscription and transaction fees as a result of contracting with new customers, existing customers purchasing additional products, and increasing transaction volume, primarily from payments, and (2) a $2.2 million increase in services revenue from existing customers purchasing additional professional services consulting engagements and a shift to providing more services on an hourly rate basis as compared to more fixed pricing arrangements in the prior period. These increases were partially offset by a $1.1 million decrease in reimbursable costs due to lower transactional volumes.

Cost of Revenues
For
Six Months Ended June 30,Change
20212020Amount%
(in thousands)
Cost of subscription, transaction, and services$18,613$15,523$3,090 20 %
Cost of reimbursable costs17,46018,566(1,106)(6)%
Total cost of revenues$36,073$34,089$1,984 6 %
The increase in total cost of revenues during the six months ended June 30, 2021 compared to the prior year period was primarily due to a $3.8 million increase in personnel-related costs, including non-cash stock based compensation expense of $0.8 million resulting from the grant of stock options to substantially all employees in January 2021 and the impact of Earnout RSU's associated with the Business Combination. The increased personnel-related costs also include reinstating incentive programs that were eliminated as part of the cost-reduction measures implemented in 2020 as a result of the COVID-19 pandemic, and amortization of deferred service costs for personnel providing implementation and consulting services to our customers. These increases were partially offset by an $0.8 million decrease in print related costs resulting from efficiencies in our operations and slightly lower print transactional volumes as a result of existing customers converting to electronic invoicing.
44

Research and Development
Six Months Ended June 30,Change
20212020Amount%
(in thousands)
Research and development$22,263 $18,162 $4,101 23 %
The increase in research and development expenses during the six months ended June 30, 2021 compared to the prior year period was due to a $4.1 million increase in personnel-related costs, including non-cash stock based compensation expense of $2.1 million resulting from the grant of stock options to substantially all employees in January 2021 and impact of Earnout RSU's associated with the Business Combination. The increased personnel-related costs also include reinstating incentive programs that were eliminated as part of the cost-reduction measures implemented in 2020 as a result of the COVID-19 pandemic.
Sales and Marketing
Six Months Ended June 30,Change
20212020Amount%
(in thousands)
Sales and marketing$18,916 $11,551 $7,365 64 %
The increase in sales and marketing expenses during the six months ended June 30, 2021 compared to the prior year period was due primarily to a $7.0 million increase in personnel-related cost, including non-cash stock based compensation of $2.1 million resulting from the grant of stock options to substantially all employees in January 2021, as well as the impact of certain Earnout RSU's associated with the Business Combination. The increased personnel-related costs also include reinstating incentive programs that were eliminated as part of the cost-reduction measures implemented in 2020 as a result of the COVID-19 pandemic. An additional $0.4 million of the increase is due to marketing expenses related to announcements of product enhancements and our annual virtual Summit.
General and Administrative
Six Months Ended June 30,Change
20212020Amount%
(in thousands)
General and administrative$22,928 $10,119 $12,809 127 %
The increase in general and administrative expenses during the six months ended June 30, 2021 compared to the prior year period was due primarily to a $12.1 million increase in personnel-related costs, including non-cash stock-based compensation of $8.4 million resulting from the grant of stock options to substantially all employees in January 2021 and the impact of certain Earnout RSU's associated with the Business Combination and the increased personnel-related costs also include reinstating incentive programs that were eliminated as part of the cost-reduction measures implemented in 2020 as a result of the COVID-19 pandemic. And additional $1.0 million of the increase is due to professional and consulting fees for reporting and compliance requirements as a result of becoming a public company in 2021.
Depreciation and Amortization
Six Months Ended June 30,Change
20212020Amount%
(in thousands)
Depreciation and amortization$2,719 $2,821 $(102)(4)%
Depreciation and amortization expense during the six months ended June 30, 2021 was consistent with the prior year period as we did not have a material change in purchases, capitalization, write offs, or impairments of property, equipment, or intangible assets during either period.
45

Total other income (expense)
Six Months Ended June 30,Change
20212020Amount%
(in thousands)
Total other income (expense)$(12,696)$(1,876)$(10,820)(577)%
The increase in other expenses during the six months ended June 30, 2021 compared to the prior year period was due primarily to a $10.0 million increase in the fair value of Earnout Shares and a $2.8 million a loss on extinguishment of debt associated with the early payment of all of our outstanding borrowings, both as part of the Business Combination. These increases were partially offset by a reduction in interest expense as all of our outstanding borrowings were paid off in the first quarter of 2021.
Provision for Income Taxes
Six Months Ended June 30,Change
20212020Amount%
(in thousands)
Provision for income taxes$(103)$(117)$14 12 %
The provision for income taxes for the six months ended June 30, 2021 is consistent with the prior year period due to a low effective tax rate resulting from our net operating losses. We maintain a valuation allowance on our deferred taxes.
Liquidity and Capital Resources
Our principal sources of liquidity are cash, cash equivalents, short-term investments, cash flows from financing activities, and, since becoming a public company, through public offerings of equity securities. As of June 30, 2021, we had cash and cash equivalents of $241.6 million and short-term investments of $45.0 million. Our primary uses of liquidity are operating expenses, capital expenditures, and acquiring businesses. We believe our current cash, cash equivalents, short-term investments, and cash flows from financing activities are sufficient to meet our working capital and capital expenditure requirements for a period of at least twelve months from the date of this Quarterly Report.
The following table summarizes our cash flows for the periods presented (in thousands, except percentages):
Six Months Ended June 30,Change
20212020Amount%
Net cash used in operating activities$(10,821)$(7,438)$(3,383)(45)%
Net cash used in investing activities(46,157)(1,310)(44,847)(3,423)%
Net cash provided by financing activities283,262 14,452 268,810 1,860 %
Net increase in cash, cash equivalents, and restricted cash$226,284 $5,704 
Operating Activities
Cash flows from operations have historically been negative as we continue to invest in our product features and platform, develop new products, and increase our sales and marketing efforts to sign contracts with new customers and expand the product breadth within existing customers. We do not expect this trend to change on an annual basis, although we do see quarterly shifts where cash flows from operations may be positive, primarily associated with invoicing and collecting subscription fees from customers which are typically payable in advance.
The $3.4 million decrease in cash provided by operating activities for the six months ended June 30, 2021 compared to the prior year period was primarily due to a $10.6 million decrease in cash generated from accounts receivable and deferred revenue offset by a $3.1 million increase in cash used for working capital (excluding accounts receivable and deferred revenue), and, combined with the effect of non-cash items, a $3.3 million decrease in net loss.
46

Investing Activities
During the six months ended June 30, 2021 cash used in investing activities was $46.2 million, which consisted of $45.0 million for the purchases of short-term investments and $1.1 million for purchases of property and equipment. During the six months ended June 30, 2020 cash used in operatinginvesting activities consisted of $1.3 million for purchases of property and equipment.
Financing Activities
During the six months ended June 30, 2021 cash provided by financing activities was $593,561. Net income$283.3 million, which primarily consisted of $310,973 was$329.7 million of proceeds from the Business Combination and PIPE Financing, net of offering costs. These proceeds were partially offset by interest earned$46.2 million used to fully repay our outstanding borrowings, including debt extinguishment costs, pursuant to the Business Combination.
During the six months ended June 30, 2020 cash provided by financing activities was $14.5 million, primarily consisting of $46.5 million in proceeds from borrowings, offset by $31.7 million in repayments on marketable securities heldthe outstanding borrowings.
Contractual Obligations
There has been a material change to the contractual obligations table as disclosed in our Annual Report on Form 10-K and our Amendment No. 1 to the Trust AccountCurrent Report on Form 8-K, as filed with the SEC on March 24, 2021, due to the Business Combination. As of $883,329. ChangesJune 30, 2021, our future contractual obligations table is as follows (in thousands):
Contractual Obligations (1)Total< 1 Year1-3 Years3-5 Years> 5 Years
Capital leases$157 $128 $29 $— $— 
Operating leases47,569 4,600 8,594 8,235 26,140 
Contingent consideration (2)370 370 — — — 
Total contractual cash obligations$48,096 $5,098 $8,623 $8,235 $26,140 
(1) In connection with the Business Combination on January 12, 2021 we repaid all amounts outstanding on our long term debt. Accordingly, long term debt is no longer shown as a contractual obligation.
(2) The acquisition of Second Phase, LLC in operating assetsApril 2019 included a contingent consideration arrangement that required additional consideration to be paid to the sellers annually based meeting certain recurring revenue growth and profitability targets (together, "the Financial Targets") during the three-year period beginning May 1, 2019. In May 2021, we determined the second year Financial Targets were not met and accordingly reduced the amount of remaining contingent consideration payable.
Except as noted above, there were no material changes to our contractual obligations.
In addition to the contractual cash commitments included above, we have other payables and liabilities used $21,205 of cash from operating activities.that may be legally enforceable but are not considered contractual commitments.

For the period from February 28, 2019 (inception) through June 30, 2019, cash used in operating activities was $33,513. Net income of $15,561 was offset by interest earned on marketable securities held in the Trust Account of $86,506. Changes in operating assets and liabilities provided $37,432 of cash from operating activities.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (which interest shall be net of amounts withdrawn to pay our taxes) to complete a Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete a Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business.

15
Off-Balance Sheet Arrangements
As of June 30, 2020,2021, other than the operating leases described above, we had cash of $1,401,047 held outside the Trust Account. We intend to use the funds held outside the Trust Account to pay for our accrued expenses, working capital costs and to identify and evaluate prospective acquisition candidates, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses, review corporate documents and material agreements of prospective target businesses, select the target business to acquire and structure, negotiate and complete a Business Combination

In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our initial stockholders, officers and directors or their affiliates may, but are not obligated to, loan us funds from time to time or at any time, as may be required. If we complete a Business Combination, we would repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from our Trust Account would be used to repay such loaned amounts. Up to $1,500,000 of such loans may be convertible into private warrants at a price of $1.00 per private warrant at the option of the lender. The private warrants would be identical to the Private Placement Warrants.

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amounts necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our Public Shares upon completion of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements asthat have, or are reasonably likely to have, a current or future material effect on our financial condition, results of June 30, 2020. We do not participateoperations, liquidity, capital expenditures, or capital.
Non-GAAP Financial Measures
In addition to Billtrust’s results determined in transactions that create relationshipsaccordance with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Contractual Obligations

We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor a monthly fee of $25,000 for office space, administrative and support services, provided to the Company. We began incurring these fees on June 19, 2019 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination and our liquidation.

The underwriter is entitled to a deferred fee of 3.5% of the gross proceeds from the Units sold in the Initial Public Offering, or $7,970,375. The deferred fee will be forfeited by the underwriter solely in the event that we fail to complete a Business Combination, subject to the terms of the underwriting agreement. The underwriter did not receive any underwriting discount or commissions on Units purchased by a fund managed by an affiliate of our Sponsor.

Critical Accounting Policies

The preparation of condensed financial statements and related disclosures in conformity withgenerally accepted accounting principles generally accepted in the United States of America requires(“U.S. GAAP”), we believe the following non-GAAP financial measures are useful in evaluating our operating performance.
We present these non-GAAP measures to assist investors in understanding our financial performance from the perspective of management. We believe these measures provide an additional tool for investors to use in comparing our financial performance over multiple periods with other companies in our industry. While we believe the use of these non-GAAP measures provides useful information to investors and management to make estimates and assumptionsin analyzing our financial performance, non-GAAP measures have inherent limitations in that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date they do not reflect all
47

of the amounts and transactions that are included in our financial statements prepared in accordance with U.S. GAAP. Non-GAAP measures do not serve as an alternative to U.S. GAAP, nor do we consider our non-GAAP measures in isolation. Accordingly we present non-GAAP financial measures only in connection with U.S. GAAP results. We urge investors to consider non-GAAP measures only in conjunction with our U.S. GAAP financials and incometo review the reconciliation of our non-GAAP financial measures to the most comparable U.S. GAAP financial measures, as described below, included in this Quarterly Report on Form 10-Q.
Net Revenue (non-GAAP)
Net revenue (non-GAAP) is defined as total revenues less reimbursable costs revenue, which is equal to subscription, transaction, and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:

Common Stock Subjectservices revenue. Reimbursable costs revenue consists primarily of amounts charged to Possible Redemption

customers for postage (with an offsetting amount recorded as a cost of revenue) which we do not consider internally when monitoring operating performance.
We accountbelieve net revenue (non-GAAP) allows investors to evaluate comparability with our past financial performance and facilitates period-to-period comparisons of core operations. The most directly comparable U.S. GAAP measure to net revenue (non-GAAP) is total revenues in our Condensed Consolidated Statements of Operations and Comprehensive Loss.
Adjusted Gross Profit (non-GAAP) & Adjusted Gross Margin (non-GAAP)
Adjusted gross profit (non-GAAP) is defined as total revenues less total cost of revenues, plus stock based compensation expense included in total cost of revenues. Adjusted gross margin (non-GAAP) is defined as our adjusted gross profit (non-GAAP) divided by total revenues less reimbursable costs revenue or net revenue (non-GAAP).
We believe adjusted gross profit (non-GAAP) and adjusted gross margin (non-GAAP) are useful financial measures to investors as they eliminate the impact of certain non-cash expenses and allow a direct comparison of our cash operations and ongoing operating performance between periods. We expect adjusted gross margin (non-GAAP) to continue to improve over time to the extent that we are able to increase our scale by successfully growing revenues, both from cross-selling existing customers and upselling current and future offerings. However, our ability to improve adjusted gross margin (non-GAAP) over time is not guaranteed and will be impacted by the factors affecting our performance discussed above and outlined in the section titled "Risk Factors" in Part II, Item 1. of this Quarterly Report on Form 10-Q. The most directly comparable U.S. GAAP measure to adjusted gross profit (non-GAAP) and adjusted gross margin (non-GAAP) is total revenues in our Condensed Consolidated Statements of Operations and Comprehensive Loss.
The following table presents a reconciliation of our net revenue (non-GAAP), adjusted gross profit (non-GAAP), and adjusted gross margin (non-GAAP) to their most directly comparable U.S. GAAP financial measures (in thousands, except percentages):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Total revenues$40,232 $34,591 $82,168 $68,736 
Less: Reimbursable costs revenue8,643 8,945 17,460 18,566 
Net revenue (non-GAAP)$31,589 $25,646 $64,708 $50,170 
Total revenues$40,232 $34,591 $82,168 $68,736 
Less: Cost of revenue, excluding depreciation and amortization18,003 16,578 36,073 34,089 
Gross profit, excluding depreciation and amortization22,229 18,013 46,095 34,647 
Add: Stock-based compensation expense405 57 848 88 
Adjusted gross profit (non-GAAP)$22,634 $18,070 $46,943 $34,735 
Gross margin, excluding depreciation and amortization55.3 %52.1 %56.1 %50.4 %
Adjusted gross margin (non-GAAP)71.7 %70.5 %72.5 %69.2 %
48

Adjusted EBITDA (non-GAAP)
Adjusted EBITDA (non-GAAP) is defined as net loss and comprehensive loss, plus (1) income tax benefit (expense), (2) the change in fair value of financial instruments and other income including the change in the fair value of liabilities (for earnout shares, warrants, contingent consideration or other items classified as liabilities), (3) interest expense and loss on extinguishment of debt, (4) depreciation and amortization, (5) stock-based compensation expense, (6) restructuring and severance costs, (7) acquisition and integration costs, and (8) other capital structure transaction costs, minus (9) interest income.
We believe adjusted EBITDA (non-GAAP) is a key measure for us to understand and evaluate our operating performance, to establish budgets, and to develop operational and strategic goals. Adjusted EBITDA (non-GAAP) helps identify underlying trends since the expenses we exclude in the calculation may not directly correlate to our overall operating performance in any specific period. Accordingly, we believe adjusted EBITDA (non-GAAP) also provides useful information to investors in understanding and evaluating our operating results in the same manner as management. The most directly comparable U.S. GAAP measure to adjusted EBITDA (non-GAAP) is net loss and comprehensive loss in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
We believe that excluding the impact of these expenses in calculating adjusted EBITDA (non-GAAP) can provide a useful measure for period-to-period comparisons of our core operating performance. We believe it is useful to exclude certain non-cash charges, such as share-based compensation expenses from our non-GAAP financial measures because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. Other income (expense), net, includes interest income, loss on asset disposals, and fair value adjustments related to warrants and contingent consideration. Restructuring and severance costs are associated with realigning our organization. Acquisition and integration expenses are related to the third party costs associated with acquiring companies and internal direct costs associated with integrating their customers onto our platforms. These costs are not expected to recur within two years, for prior acquisitions, and only reoccur if we have new acquisitions. Our last acquisition was in April 2019. Other capital structure transaction costs are related to third-party fees, including legal, accounting, and other professional fees, associated with the secondary offering of our common stock, subjectsuch as the offering completed in July 2021. These costs are not expected to possible redemptionrecur over the next two years as the secondary offering was a one-time transaction between existing and new shareholders, with no new shares being issued or offered by us.
The following table reconciles adjusted EBITDA (non-GAAP) to the most directly comparable U.S. GAAP financial measure (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Net loss and comprehensive loss$(10,736)$(2,902)$(33,530)$(9,999)
Provision for income taxes11 37 103 117 
Change in fair value of financial instruments and other income(5)(411)9,985 (392)
Interest expense and loss on extinguishment of debt3 1,102 2,945 2,285 
Interest income(131)(1)(234)(17)
Depreciation and amortization1,359 1,410 2,719 2,821 
Stock-based compensation expense5,706 680 14,532 1,161 
Restructuring & severance317 101 323 282 
Acquisition and integration expense— 83 — 136 
Other capital structure transaction costs498 — 498 — 
Adjusted EBITDA (non-GAAP)$(2,978)$99 $(2,659)$(3,606)
For the three months ended June 30, 2021 adjusted EBITDA decreased $3.1 million compared to the prior year period and for the six months ended June 30, 2021 adjusted EBITDA improved $0.9 million compared to the prior year period. The change in accordanceboth periods compared to the prior year periods was driven by the increase in total revenues, as discussed in the Comparison of Results of Operations sections, offset by higher expenses in the second quarter of 2021 due to (1) stock-based compensation expense resulting from the grant of stock options to substantially all employees in January 2021 and the impact of Earnout RSU's associated with the guidanceBusiness
49

Combination, (2) reinstating incentive programs that were eliminated as part of the cost-reduction measures implemented in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified2020 as a liability instrumentresult of the COVID-19 pandemic, and is measured at fair value. Conditionally redeemable(3) fees associated with the secondary offering of our common stock (including common stock that features redemption rights that are either within the controlcompleted in July 2021.
Free Cash Flow (non-GAAP)
Free cash flow (non-GAAP) is defined as net cash used in operating activities, less purchases of property and equipment (which includes capitalized internal-use software costs).
We believe free cash flow (non-GAAP) is an important liquidity measure of the holdercash available for our operational expenses and investment in business growth. It is useful to investors as a liquidity measure of our ability to generate or subjectuse cash to, redemption uponmaintain a strong balance sheet and invest in future growth. The most directly comparable U.S. GAAP measure to free cash flow (non-GAAP) is net cash used in operating activities in the occurrenceCondensed Consolidated Statement of uncertain eventsCash Flows.
The following table presents a reconciliation of free cash flow to the most directly comparable U.S. GAAP measure (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Net cash used in operating activities$(904)$1,423 $(10,821)$(7,438)
Purchases of property and equipment(617)(445)(1,120)(1,310)
Free cash flow (non-GAAP)$(1,521)$978 $(11,941)$(8,748)
Critical Accounting Policies and Procedures
There have been no material changes to the critical accounting policies, significant judgments, or estimates included in our Annual Report on Form 10-K, our Amendment on Form 8-K, or our Registration Statement on Form S-1.
Recent Accounting Pronouncements
As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. We have elected to use the extended transition period under the JOBS Act until such time the Company is not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outsidean EGC. Based on the closing share price and the market value of our control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption valueCommon Stock held by non-affiliates as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets.

Net Loss Per Common Share

We apply the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic net loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. Our net income is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares only participate in the earnings of the Trust Account and not our income or losses.

Recent Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.

Item 3.
Quantitative and Qualitative Disclosures About Market Risk

As of June 30, 2020,2021, we were not subjectwill become a large accelerated filer on December 31, 2021. As a result, beginning with the Annual Report on Form 10-K for the year ended December 31, 2021, we are required to any market or interest rate risk. Followingadopt all new accounting pronouncements within the consummationsame time periods as public companies. Refer to Note 1 - Organization and Nature of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amountsBusiness in the Trust Account,Notes to Condensed Consolidated Financial Statements for a full description of recent accounting pronouncements, including the expected dates of adoption and effects on our Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been investedno material changes in U.S. government treasury bills, notesour determination of the market risks we are exposed to or bonds with a maturityour assessment of 180 dayssensitivity to these market risks since our discussion included in the section titled "Quantitative and Qualitative Disclosures About Market Risk" contained in our Annual Report on Form 10-K, our Amendment on Form 8-K, or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.our Registration Statement on Form S-1.

Item 4.
Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosureThe term “disclosure controls and procedures,” as of the end of the fiscal quarter ended June 30, 2020, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosureAct refers to controls and procedures were effective.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by usa company in ourthe reports that it files or submits under the Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms,forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our
50

the company’s management, including ourits principal executive officer and principal financial officerofficers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Because there are inherent limitations in all control systems, a control system, no matter how well conceived and operated, can provide only reasonable, as opposed to absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2021. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective, at a reasonable assurance level, as of that date.
Changes in Internal Control Overover Financial Reporting

During the fiscal quarter covered by this Current Report on Form 10-Q, there hasThere have been no changechanges in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(f) under the Exchange Act) that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

reporting during our quarter ended June 30, 2021. In response to the COVID-19 pandemic, we have undertaken measures to protect our employees, partners, and clients, including encouraging employees to work remotely, which required us to modify some of our control procedures. These changes have not been material and we are continually monitoring and assessing the COVID-19 situation to minimize the impact on our internal control design and operating effectiveness.
17
51

PART II -II. OTHER INFORMATION

Item 1.
Legal Proceedings.

None.Item 1. Legal Proceedings

Item 1A.
Risk Factors.

During the normal course of business, we are occasionally involved with various claims and litigation. Reserves are established for such matters when a loss is probable and the amount of such loss can be reasonably estimated, including for indemnifications with customers or other parties as a result of contractual agreements. Currently, we are not party to any such matters that, in the opinion of management, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows. Accordingly no material reserves have been recorded.
Item 1A. Risk Factors
Our business is subject to risks and events that, if they occur, could causeadversely affect our actualfinancial condition and results of operations and the trading price of our securities. In addition to differ materially from thosethe other information set forth in this report includeQuarterly Report on Form 10-Q, you should carefully consider the risk factors described in "Part I, Item 1A. Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 20192020 (the "Annual Report on Form 10-K"), as filed with the US Securities and Exchange Commission (the "SEC") on March 24, 2021, the section titled "Risk Factors" contained in both our Amendment No. 1 to the Current Report on Form 8-K (the "Amendment on Form 8-K"), as filed with the SEC on March 20, 2020. As of the date of this Report, there have been no material changes to the risk factors disclosed24, 2021, and in our Annual ReportRegistration Statement on Form S-1, as amended (File No. 333-257488), originally filed with the SEC other than the risk described below:

The securities inon June 28, 2021 (the "Registration Statement on Form S-1"), which we invest the funds held in the Trust Account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per-share redemption amount received by public stockholders may be less than $10.00 per share.

The proceeds held in the Trust Account are invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. While short-term U.S. government treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States.remain applicable to our business. In the event thataddition, we are unable to complete our initial business combination or make certain amendments to our Amended and Restated Certificate of Incorporation, our public stockholders are entitled to receive their pro-rata share ofadding the proceeds held in the Trust Account, plus any interest income not released to us, net of taxes payable. Negative interest rates could impact the per-share redemption amount that may be received by public stockholders.following risk factor:

The recent global coronavirus outbreak could harm the business prospects of the Company.

InWe will no longer qualify as an “emerging growth company” after December 2019, a coronavirus (COVID-19) outbreak was reported in China, and, in March 2020, the World Health Organization declared it a pandemic. Since that time, the coronavirus has spread throughout the United States. In response, many state and local governments, including the Commonwealth of Pennsylvania, have instituted emergency restrictions that have substantially limited the operation of non-essential businesses and the activities of individuals. The ultimate effect of COVID-19 on the local or broader economy is not known nor is the ultimate length of the restrictions described and any accompanying effects. Moreover, the Federal Reserve has taken action to lower the Federal Funds rate, which may negatively affect interest income and, therefore, earnings, of the Company with respect to the Trust Account.

The effect of COVID-19 and related events, including those described above and those not yet known or knowable, could have a negative effect on the stock price and business prospects of the Company, including as a result of quarantines, market volatility, market downturns, changes in consumer behavior, business closures and disruptions of the credit and equity markets, which could have a material adverse effect on the Company’s ability to complete a Business Combination.

The outbreak has resulted in authorities implementing numerous measures to try to contain the virus, such as quarantines and shelter in place orders. These measures may remain in place for a significant period of time and may adversely affect the business, operations and financial condition of the companies we target for a Business Combination, which may cause such companies to delay or terminate acquisition discussions in order to focus on their business operations. The spread of the virus has also caused us to modify our due diligence practices with respect to target companies (including cancellation of physical participation in meetings) in ways that may be detrimental to our business prospects (including working remotely and its attendant cybersecurity risks). We may take further actions as may be required by government authorities or that we determine are in the best interests of the Company and its stockholders. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities.

Given the ongoing and dynamic nature of the circumstances, it is not possible to predict the ultimate impact of the coronavirus outbreak on the stock price or business prospects of the Company. Notwithstanding any actions by national, state and local governments to mitigate the impact of COVID-19 or by the Company to address the adverse impacts of COVID-19, there can be no assurance that any of the foregoing activities will be successful in mitigating or preventing significant adverse effects on the Company and its ability to successfully complete a Business Combination.

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

In April 2019, the Sponsor purchased 5,750,000 shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price of $25,000. On June 19, 2019, we effected a 1.125-for-1 stock split of its Class B common stock, resulting in our Sponsor holding an aggregate of 6,468,750 founder shares. The underwriters’ election to exercise their over-allotment option expired unexercised on August 5, 201931, 2021, and as a result, 218,750 Founder Shares were forfeited, resultingwe will have to comply with increased disclosure and compliance requirements.
We are currently an emerging growth company ("EGC") as defined in 6,250,000 Founder Shares outstandingthe Jumpstart Our Business Startups Act (the "JOBS Act"). However, based on the market value of our common stock held by non-affiliates exceeding $700 million as of August 5, 2019. The foregoing issuance was made pursuantthe last business day of our second fiscal quarter of 2021, we will no longer qualify as an EGC but instead will be deemed a large accelerated filer as of December 31, 2021.
As a large accelerated filer, we will be subject to certain disclosure and compliance requirements that apply to other public companies but did not previously apply to us due to our status as an emerging growth company. These requirements include, but are not limited to:
•the requirement that our independent registered public accounting firm attest to the exemption from registration contained ineffectiveness of our internal control over financial reporting under Section 4(a)(2)404(b) of the SecuritiesSarbanes-Oxley Act of 1933, as amended (“Securities Act”).2002:

On June 24, 2019, we consummated the Initial Public Offering of 25,000,000 Units, which includes a partial exercise•compliance with any requirement that may be adopted by the underwriterPCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements;
•the requirement that we provide full and more detailed disclosures regarding executive compensation; and
•the requirement that we hold a non-binding advisory vote on executive compensation and obtain stockholder approval of any golden parachute payments not previously approve.
An EGC also may elect to delay the over-allotment optionadoption of new accounting pronouncements to purchasewhen they become applicable to private companies, rather than when public companies must adopt them. We have elected to use this extended transition period and adopt certain new accounting pronouncements on the private company timeline, which means that our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting pronouncements on a non-delayed basis. We will cease to qualify as an EGC effective December 31, 2021, unless the eligibility standards are modified. Loss of EGC status will result in our losing the extended transition period noted above and will require us to adopt new accounting pronouncements within the same time periods as public companies.
We expect that the loss of EGC status and compliance with the additional 2,500,000 Units. The Units soldrequirements of being a large accelerated filer will increase our legal and financial compliance costs and cause management and other personnel to divert attention from operational and other business matters to devote substantial time to public company reporting requirements. In addition, if we are not able to comply with changing requirements in a timely manner, the Initial Public Offering were sold at an offeringmarket price of $10.00 per Unit, generating total gross proceedsour stock could decline and we could be subject to sanctions or investigations
52

by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities, which would require additional financial and management resources.
The risks described in "Part I, Item 1A. Risk Factors” of $250,000,000. Citigroup Global Markets Inc. acted as sole book-running manager ofour Annual Report on Form 10-K, and the Initial Public Offering. The securitiessection titled "Risk Factors" in the offering were registered under the Securities Actboth our Amendment on a registration statementForm 8-K and Registration Statement on Form S-1, (No. 333-231881). The SEC declaredand the registration statement effective on June 19, 2019.

Simultaneous with the consummation of the Initial Public Offering, we consummated the private placement of an aggregate of 6,954,500 warrants, each exercisable to purchase one share of the Company’s Class A common stock for $11.50 per share (“Private Placement Warrants”), to the Sponsor at a price of $1.00 per Private Placement Warrant, generating total proceeds of $6,954,500. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrantsupdated risks within this Form 10-Q are not transferable, assignablethe only risks that we face. Additional risks and uncertainties not currently known to us or salable until after the completionthat we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants are exercisable on a cashless basisEquity Securities and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees.Use of Proceeds

Not applicable.
Of the gross proceeds received from the Initial Public Offering and the Private Placement Warrants, $250,000,000 was placed in a Trust Account. We paid a total of $4,554,500 in underwriting discounts and commissions and $578,213 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $7,970,375 in underwriting discounts and commissions.

Item 3. Defaults Upon Senior Securities
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Not applicable.
Item 2 of this Form 10-Q.4. Mine Safety Disclosures

Not applicable.
Item 5. Other Information
Not applicable.
53

Item 6. Exhibits
Item 3.
Defaults Upon Senior Securities.

None

Item 4.Exhibit
Number
Mine Safety Disclosures.
Description

Not Applicable.

Item 5.3.1
Other Information.
Second Amended and Restated Certificate of Incorporation of the Company, dated January 12, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 14, 2021).

On August 10, 2020, we entered into an amendment to the letter agreement with our Sponsor and our officers and directors, as a result of which our directors and officers are no longer restricted from forming and organizing other special purpose acquisition companies.

Item 6.3.2
Exhibits
Amended and Restated Bylaws of the Company, dated January 12, 2021(incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on January 14, 2021).
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

4.1Form of Common Stock Certificate of the Company (incorporated by reference to Exhibit No.4.1 filed to the Company’s Current Report on Form 8-K filed with the SEC on January 14, 2021).
4.2DescriptionForm of ExhibitsWarrant Certificate of the Company (incorporated by reference to Exhibit 4.2 filed to the Company’s Current Report on Form 8-K filed with the SEC on January 14, 2021).
4.3Amended and Restated Registration Rights Agreement, dated October 18, 2020, by and among the Company and certain stockholders of the Company (incorporated by reference to Exhibit 4.4 filed to the Company’s Current Report on Form 8-K filed with the SEC on January 14, 2021).
4.4Form of Lock-Up Agreement (incorporated by reference to Exhibit 4.5 filed to the Company’s Current Report on Form 8-K filed with the SEC on January 14, 2021).
31.1
Certification of Principal Executive Officer Pursuantpursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act Rules 13a-14(a),of 1934, as adopted Pursuantpursuant to Section 302 of the Sarbanes-Oxley Act of 20022002.
31.2
Certification of Principal Financial Officer Pursuantpursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act Rules 13a-14(a),of 1934, as adopted Pursuantpursuant to Section 302 of the Sarbanes-Oxley Act of 20022002.
32.1
Certification of Principal Executive Officer Pursuantpursuant to 18 U.S.C. Section 1350, as adopted Pursuantpursuant to Section 906 of the Sarbanes-Oxley Act of 20022002.
32.2
Certification of Principal Financial Officer Pursuantpursuant to 18 U.S.C. Section 1350, as adopted Pursuantpursuant to Section 906 of the Sarbanes-Oxley Act of 20022002.
101.INS*101.INSXBRL Instance Document
101.CAL*101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.SCH*101.DEFXBRL Taxonomy Extension Schema Document
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*101.LABXBRL Taxonomy Extension Labels Linkbase Document
101.PRE*101.PREXBRL Taxonomy Extension Presentation Linkbase Document


(1)    Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
* Filed herewith.


20
54

SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



SOUTH MOUNTAIN MERGER CORP.
August 12, 2021BTRS Holdings Inc.
Date: August 14, 2020By:/s/ Charles B. Bernicker
Name:By:Charles B. Bernicker/s/ Mark Shifke
Title:Name:Chief Executive OfficerMark Shifke
Title:(Principal Executive Officer)
Date: August 14, 2020By:/s/ Nicholas Dermatas
Name:Nicholas Dermatas
Title:Chief Financial Officer
(Principal Financial and Accounting Officer)


21
55