10-Q 1 gdyn-20220630.htm 10-Q gdyn-20220630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-38685
Grid Dynamics Holdings, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware83-0632724
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
5000 Executive Parkway, Suite 520
San Ramon, CA 94583
(Address of principal executive offices)
(650) 523-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareGDYNThe NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x      No ¨
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x      No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer¨Accelerated filerx
Non-accelerated filer¨Smaller reporting company¨
Emerging growth companyx
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 x
As of August 2, 2022, there were 67,295,463 shares of registrant’s common stock issued and outstanding.



TABLE OF CONTENTS

i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” or similar expressions and the negatives of those terms. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
the evolution of the digital engineering and information technology services landscape facing our customers and prospects;
our ability to educate the market regarding the advantages of our digital transformation products;
our ability to maintain an adequate rate of revenue growth;
our future financial and operating results;
our business plan and our ability to effectively manage our growth and associated investments;
beliefs and objectives for future operations;
our ability to expand a leadership position in enterprise-level digital transformation;
our ability to attract and retain customers;
our ability to further penetrate our existing customer base;
our ability to maintain our competitive technological advantages against new entrants in our industry;
our ability to timely and effectively scale and adapt our existing technology;
our ability to innovate new products and services and bring them to market in a timely manner;
our ability to maintain, protect, and enhance our brand and intellectual property;
our ability to capitalize on changing market conditions;
our ability to develop strategic partnerships;
benefits associated with the use of our services;
our ability to expand internationally;
our ability to raise financing in the future;
operating expenses, including changes in research and development, sales and marketing, and general administrative expenses;
the effects of seasonal trends on our results of operations;
our ability to grow and manage growth profitably and retain our key employees;
the expected benefits and effects of strategic acquisitions of business, products or technologies;
our ability to maintain the listing of our shares of common stock on the NASDAQ;
costs related to being a public company;
changes in applicable laws or regulations;
the military action launched by Russian forces in Ukraine, the actions that have been and could be taken by other countries, including new and stricter sanctions and actions taken in response to such sanctions, and the effect of these developments on our business and results of operations;
the possibility that we have been and may continue to be adversely affected by macroeconomic conditions, inflationary pressures, the geopolitical climate and other economic, business, and/or competitive factors, including the effects of the global COVID-19 pandemic; and
other risks and uncertainties indicated in this Quarterly Report on Form 10-Q, including those set forth in Item 1A, “Risk Factors.”
ii

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described in in Item 1A, “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, new risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on any forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in such forward-looking statements.
Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, restructurings, joint ventures, partnerships, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
iii

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
GRID DYNAMICS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
As of
June 30,
2022
December 31,
2021
Assets
Current assets
Cash and cash equivalents$150,018 $144,364 
Accounts receivable, net of allowance of $447 and $315 as of June 30, 2022 and December 31, 2021, respectively
44,160 38,838 
Unbilled receivables4,599 4,475 
Prepaid income taxes1,171 584 
Prepaid expenses and other current assets7,805 4,503 
Total current assets207,753 192,764 
Property and equipment, net7,343 6,169 
Operating lease right-of-use assets, net4,929  
Intangible assets, net17,856 19,097 
Goodwill35,958 35,958 
Deferred tax assets3,153 2,731 
Other noncurrent assets1,181  
Total assets$278,173 $256,719 
Liabilities and equity
Current liabilities
Accounts payable$3,394 $2,053 
Accrued liabilities1,932 1,150 
Accrued compensation and benefits18,509 10,562 
Accrued income taxes5,058 1,980 
Operating lease liabilities, current2,053  
Other current liabilities7,622 9,599 
Total current liabilities38,568 25,344 
Deferred tax liabilities4,015 4,324 
Operating lease liabilities, noncurrent2,665  
Total liabilities45,248 29,668 
Commitments and contingencies (Note 16)
Stockholders’ equity (Note 13)
Common stock, $0.0001 par value; 110,000,000 shares authorized; 67,294,377 and 66,850,941 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
7 7 
Additional paid-in capital234,869 212,077 
Retained earnings/(accumulated deficit)(760)15,093 
Accumulated other comprehensive loss(1,191)(126)
Total stockholders’ equity232,925 227,051 
Total liabilities and stockholders’ equity$278,173 $256,719 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1

GRID DYNAMICS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND
COMPREHENSIVE LOSS
(In thousands, except per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Revenue$77,335 $47,676 $148,745 $86,810 
Cost of revenue48,474 27,879 93,105 51,676 
Gross profit28,861 19,797 55,640 35,134 
Operating expenses
Engineering, research, and development3,840 1,772 6,936 3,555 
Sales and marketing5,132 2,837 9,347 5,869 
General and administrative30,738 13,804 50,003 26,104 
Total operating expenses39,710 18,413 66,286 35,528 
Income/(loss) from operations(10,849)1,384 (10,646)(394)
Other expenses(626)(79)(1,326)(1,129)
Income/(loss) before income taxes(11,475)1,305 (11,972)(1,523)
Provision for income taxes1,711 2,788 3,881 2,022 
Net loss$(13,186)$(1,483)$(15,853)$(3,545)
Foreign currency translation adjustments, net of tax(782)(35)(1,065)14 
Comprehensive loss$(13,968)$(1,518)$(16,918)$(3,531)
Loss per share
Basic$(0.20)$(0.03)$(0.24)$(0.07)
Diluted$(0.20)$(0.03)$(0.24)$(0.07)
Weighted average shares outstanding
Basic67,136 54,431 67,028 53,044 
Diluted67,136 54,431 67,028 53,044 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2

GRID DYNAMICS HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(In thousands)
Common StockAdditional
paid-in
capital
Retained
earnings/(accumulated deficit)
Accumulated
other
comprehensive
income/(loss)
Total
stockholders’
equity
SharesAmount
Balance at December 31, 202166,851 $7 $212,077 $15,093 $(126)$227,051 
Net loss— — — (2,667)— (2,667)
Stock-based compensation— — 8,661 — — 8,661 
Exercise of stock options72 — 292 — — 292 
Issuance of shares and payments of tax obligations resulted from net share settlement of vested stock awards134 — (1,802)— — (1,802)
Foreign currency translation adjustment, net of tax— — — — (283)(283)
Balance at Balance at March 31, 202267,057 $7 $219,228 $12,426 $(409)$231,252 
Net loss— — — (13,186)— (13,186)
Stock-based compensation— — 16,387 — — 16,387 
Exercise of stock options160 — 538 — — 538 
Issuance of shares and payments of tax obligations resulted from net share settlement of vested stock awards77 — (1,284)— — (1,284)
Foreign currency translation adjustment, net of tax— — — — (782)(782)
Balance at June 30, 202267,294 $7 $234,869 $(760)$(1,191)$232,925 













3

GRID DYNAMICS HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(In thousands)
Common StockAdditional
paid-in
capital
Retained
earnings/(accumulated deficit)
Accumulated
other
comprehensive
income/(loss)
Total
stockholders’
equity
SharesAmount
Balance at December 31, 202050,879 $5 $128,930 $22,793 $(4)$151,724 
Net loss— — — (2,062)— (2,062)
Stock-based compensation— — 5,671 — — 5,671 
Exchange of warrants into common stock2,221 — — — —  
Exercise of stock options41 — 162 — — 162 
Issuance of shares and payments of tax obligations resulted from net share settlement of vested stock awards1,030 — (15,297)— — (15,297)
Foreign currency translation adjustment, net of tax— — — — 49 49 
Balance at March 31, 202154,171 $5 $119,466 $20,731 $45 $140,247 
Net loss— — — (1,483)— (1,483)
Stock-based compensation— — 6,675 — — 6,675 
Exchange of warrants into common stock271 — 918 — — 918 
Exercise of stock options138 — 254 — — 254 
Issuance of shares and payments of tax obligations resulted from net share settlement of vested stock awards149 — (3,564)— — (3,564)
Foreign currency translation adjustment, net of tax— — — — (35)(35)
Balance at June 30, 202154,729 $5 $123,749 $19,248 $10 $143,012 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

GRID DYNAMICS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
For the six months ended
June 30,
20222021
Cash flows from operating activities
Net loss$(15,853)$(3,545)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization3,280 2,100 
Operating lease right-of-use assets amortization expense1,431  
Bad debt expense/(recovery)132 (65)
Deferred income taxes(731)1,115 
Debt issuance cost amortization20  
Stock-based compensation25,048 12,346 
Change in fair value of warrants 839 
Changes in assets and liabilities:
Accounts receivable(5,454)(8,779)
Unbilled receivables(124)(371)
Prepaid income taxes(587)(229)
Prepaid expenses and other current assets(3,302)(1,666)
Accounts payable1,341 1,393 
Accrued liabilities782 358 
Accrued compensation and benefits7,947 1,410 
Operating lease liabilities(1,642) 
Accrued income taxes3,078 376 
Other current liabilities(44)1,368 
Net cash provided by operating activities15,322 6,650 
Cash flows from investing activities
Purchase of property and equipment(3,213)(1,940)
Purchase of investment(1,000) 
Acquisition of business, net of cash acquired (30,585)
Net cash used in investing activities(4,213)(32,525)
Cash flows from financing activities
Equity issuance costs (465)
Proceeds from exercises of stock options, net of shares withheld for taxes830 416 
Payments of tax obligations resulted from net share settlement of vested stock awards(3,086)(18,861)
Payment of contingent consideration related to previously acquired business(1,933) 
Proceeds from debt5,000  
Repayment of debt(5,000) 
Debt issuance cost(201) 
Net cash used in financing activities(4,390)(18,910)
Effect of exchange rate changes on cash and cash equivalents(1,065)14 
Net increase/(decrease) in cash and cash equivalents5,654 (44,771)
Cash and cash equivalents, beginning of period144,364 112,745 
Cash and cash equivalents, end of period$150,018 $67,974 
Supplemental disclosure of cash flow information:
Cash paid for income taxes$1,880 $1,150 
Supplemental disclosure of non-cash activities:
Conversion of warrants$ $918 
Fair value of contingent consideration issued for acquisition of business$ $3,400 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

GRID DYNAMICS HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
Note 1 — Background and nature of operations
Grid Dynamics Holdings, Inc. (the “Company”) provides enterprise-level digital transformation in the areas of search, analytics, and release automation to Fortune 1000 companies. The Company’s headquarters and principal place of business is in San Ramon, California.
The Company was originally incorporated in Delaware on May 21, 2018 as a special purpose acquisition company under the name ChaSerg Technology Acquisition Corp. (“ChaSerg”).  On March 5, 2020, the Company consummated its business combination with Grid Dynamics International, Inc. In connection with the business combination, the Company changed its name from ChaSerg Technology Acquisition Corp. to Grid Dynamics Holdings, Inc. The Company’s common stock is listed on the NASDAQ under the symbol “GDYN”.
Note 2 — Basis of presentation and summary of significant accounting policies
The following is a summary of critical accounting policies consistently applied in the preparation of the accompanying unaudited condensed consolidated financial statements. Full description of significant accounting policies is provided in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on March 3, 2022.
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited condensed consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of the Company’s management, necessary for the fair presentation of the results of operations for the interim periods. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. These interim financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2021 included in the Company’s annual report on Form 10-K that the Company filed with the SEC on March 3, 2022.
Principles of consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and all of its subsidiaries that are directly or indirectly owned or controlled. Intercompany transactions and balances have been eliminated upon consolidation.
The Company provides services to its customers utilizing its own personnel as well as personnel from subcontractors. The most significant subcontractors are GD Ukraine, LLC and GD AM, LLC (“Affiliates”), third-party contractors in Ukraine and Armenia, respectively. The Affiliates exclusively support and perform services on behalf of the Company and its customers. The Company has no ownership in the Affiliates. The Company is required to apply accounting standards which address how a business enterprise should evaluate whether it has a controlling financial interest in a variable interest entity (“VIE”) through means other than voting rights and accordingly should determine whether or not to consolidate the entity. The Company has determined that it is required to consolidate the Affiliates because the Company has the power to direct the VIEs' most significant activities and is the primary beneficiary of the Affiliates. The assets and liabilities of the Affiliates primarily consist of inter-company balances and transactions all of which have been eliminated in consolidation.
Use of estimates
The preparation of the unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates and such differences could be material. Significant estimates include allowances for receivables, calculation of accrued liabilities, capitalization of internally developed software, stock-based compensation, contingent consideration payable, determination of fair value, useful lives and recoverability of intangible assets and goodwill, determination of provision for income taxes and uncertain tax positions.
6

Recently adopted accounting pronouncements
Changes to U.S. GAAP are established by the Financial Accounting Standards Board (the “FASB”), in the form of Accounting Standards Updates (“ASUs”), to the FASB’s ASC. The Company has elected not to opt out of the extended transition period and thus 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.
Leases — In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”). The standard supersedes previously existing lease guidance (“Topic 840”) and requires entities to recognize all leases, with the exception of leases with a term of twelve months or less, on the balance sheet as right-of-use assets (“RoU Assets”) and lease liabilities. Disclosures should provide the information in the financial statements summarizing the amount, timing and cash flows arising from leasing. The Company adopted Topic 842, effective January 1, 2022 using current period adjustment method. Prior period amounts were not adjusted.
The Company determines if an arrangement is a lease or contains a lease at lease inception. Assessment and classification of lease as either an operating or a financing is performed at the lease commencement date. Operating lease liabilities and their corresponding RoU Assets are initially measured based on the present value of future lease payments over the expected remaining lease term. RoU Asset value is additionally adjusted by initial direct costs and incentives received. Present value is calculated based in either interest rate implicit in lease agreement or, if not available, based on incremental borrowing rate. Incremental borrowing rate reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.
The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew or terminate a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will exercise the renewal option. RoU Assets are subject to periodic impairment tests. Lease expense for operating leases is recognized on a straight-line basis over the lease term.
In accordance with Topic 842, components of a lease should be split into three categories: lease components, non-lease components, and non-components. The fixed and in-substance fixed contract consideration (including any consideration related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components. The Company elected a practical expedient to account for lease and non-lease components together as a single lease component. The Company also elected the short-term lease recognition exemption for all classes of lease assets with an original term of twelve months or less. For transition, practical expedients were accepted to carry forward historical accounting for any expired or existing contracts that are or contain lease contracts and not to re-assess initial direct costs for any expired or existing leases.
The adoption of Topic 842 on January 1, 2022 resulted in the recognition of RoU Assets for operating leases of $5.9 million and operating lease liabilities of $5.7 million. The adoption of Topic 842 did not have an impact on the unaudited condensed consolidated statement of loss and comprehensive loss, condensed consolidated statement of changes in stockholders’ equity or the condensed consolidated statement of cash flows.
See Note 11 “Leases” in the unaudited condensed consolidated financial statements for additional information regarding leases.
Recently issued accounting pronouncements
The Company considered the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) — Measurement of Credit Losses on Financial Instruments. Topic 326 was subsequently amended by ASU 2019-4, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, ASU 2019-5, Financial Instruments — Credit Losses (Topic 326): Targeted Transition Relief, and clarified the guidance with the release of ASU 2020-2 Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842). These ASUs replace the current incurred loss impairment methodology with a methodology that reflects expected credit losses measured at amortized cost and certain other instruments, including loans, held-to-maturity debt securities, net investments in leases, and off-balance sheet credit exposures. The update is effective for fiscal years beginning after December 15, 2022, and interim periods with fiscal years after December 15, 2022. The Company has not yet determined the impact that the adoption of this guidance will have on the consolidated financial statements.
7

In March 2020, FASB issued ASU No. 2020-3, Codification to Financial Instruments. This ASU improves and clarifies various financial instruments topics, including the current expected credit losses standard issued in 2016. The ASU includes seven different issues that describe the areas of improvement and the related amendments to U.S. GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The amendments related to Issue 1, Issue 2, Issue 3, Issue 4, and Issue 5 were effective upon issuance of this update. The new guidance did not have a material impact on the consolidated financial statements. The amendments related to Issue 6 and Issue 7 are effective for the Company the earlier of January 1, 2023 or when the Company adopts ASU 2016-13, if early adopted. The Company is currently evaluating the impact these topics will have on the consolidated financial statements.
Note 3 — Acquisitions
Tacit — On May 29, 2021, the Company acquired 100% of the equity interest of the global consultancy company Tacit Knowledge Inc. (“Tacit”). Founded in 2002, Tacit is a global provider of digital commerce solutions, serving customers across the UK, North America, Continental Europe, and Asia. The acquisition of Tacit added approximately 180 employees to the Company's headcount. The acquisition will augment the Company's service offerings and will strengthen its competitive position within the market. Additionally, the acquisition also enabled the Company to leverage near-shore capabilities with Tacit's presence in Mexico.
The total purchase consideration is $37.6 million and consists of cash consideration of $33.6 million paid at closing, and fair value of the contingent consideration at the date of the acquisition of $4.0 million. The maximum amount of potential contingent cash consideration is $5.0 million. During the fourth quarter of 2021 the Company adjusted fair value of contingent consideration as of December 31, 2021 to its maximum amount and reflected the expense in its consolidated statement of loss. The contingent consideration is payable based on revenue and EBITDA metrics to be achieved by Tacit within 12 months. The Company recorded a liability for the contingent consideration amount based on the Company’s best estimate of the fair value of the expected payout. See Note 4 for further details on contingent consideration.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed (in thousands):
Tacit
Current assets$9,145 
Property, plant and equipment466 
Intangible assets12,913 
Goodwill21,268 
Total assets acquired$43,792 
Accounts payable and accrued expenses(3,675)
Deferred taxes(2,500)
Total liabilities assumed$(6,175)
Purchase price allocation$37,617 
Current assets acquired include cash and cash equivalents in the amount of $3.0 million. The purchase price was assigned to assets acquired and liabilities assumed based on their estimated fair values as of the date of acquisition, and any excess was allocated to goodwill, as shown in the table above. Goodwill represents the value the Company expects to achieve through the implementation of operational synergies and growth opportunities as the Company expands its global reach. The goodwill for Tacit is not deductible for income tax purposes. 
During the second half of 2021 the Company updated fair value of contingent consideration for Tacit at acquisition date that resulted in the increase of goodwill for $0.7 million. During the fourth quarter of 2021, the Company finalized the fair value of the assets acquired and liabilities assumed in the acquisition of Tacit.
8

The estimated fair value, useful lives and amortization methods of identifiable intangible assets as of the date of acquisition updated for any changes during June 30, 2022 are as follows (in thousands):
TacitFair ValueUseful LifeAmortization
method
Customer relationships$11,737 12 yearsStraight-line
Trade name1,176 4 yearsDeclining balance
Total Tacit identified intangible assets$12,913 
The acquisition of Tacit was accounted for using the acquisition method of accounting, and consequently, the results of operations for Tacit are reported in the consolidated financial statements from the date of acquisition. Tacit revenue was approximately $14.3 million and $2.5 million during six months ended June 30, 2022 and from the date of acquisition to June 30, 2021, respectively.
The following unaudited pro forma information presents the combined results of operations as if the acquisition of Tacit had occurred at the beginning of 2021. Tacit pre-acquisition results have been added to the Company’s historical results. The pro forma results contained in the table below include adjustment for amortization of acquired intangibles. Any potential cost savings or other operational efficiencies that could result from the acquisition are not included in these pro forma results. 
These pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations as they would have been had the acquisitions occurred on the assumed dates, nor are they necessarily an indication of future operating results.
Six Months Ended
June 30,
(Unaudited, in thousands, except per share data)20222021
Revenue$148,745 $94,842 
Net loss$(15,853)$(1,755)
Diluted loss per share$(0.24)$(0.03)
Note 4 — Fair value
The Company’s financial assets and liabilities, with the exceptions of contingent consideration payable described further herein, are all short term in nature; therefore, the carrying value of these items approximates their fair value.
The Company measures contingent consideration payable at fair value on a recurring basis using significant inputs that are not observable in the market. Fair value of the contingent consideration liability is based on the Monte-Carlo model which is primarily based on budgets and discounted cash flow analysis. The Company believes its estimates and assumptions are reasonable, however, there is significant judgment involved. Changes in the fair value of contingent consideration payable primarily result from changes in the timing and amount of specific milestone estimates and changes in probability assumptions with respect to the likelihood of achieving the various earnout criteria. These changes could cause a material impact to, and volatility in the Company’s operating results.
During the years ended December 31, 2021 and 2020 the Company completed two acquisitions under which the Company committed to make a cash earnout payment subject to attainment of specific performance targets. The weighted average


discount rates used to determine the final fair value of Daxx Web Industries B.V. (“Daxx”) and Tacit contingent considerations was 4.8% and 13.5%, respectively.
The Company records contingent consideration payable in Other current liabilities in its consolidated balance sheet. A reconciliation of the beginning and ending balances of Level 3 acquisition-related contingent consideration payable using significant unobservable inputs for the six months ended June 30, 2022 are as follows (in thousands):
Amount
Contingent consideration payable as of December 31, 2021$6,933 
Payment of contingent consideration - Daxx(1,933)
Contingent consideration payable as of June 30, 2022
$5,000 
The Company holds investment in equity securities of its related party that do not have readily determinable fair values. This investment is recorded at cost and is remeasured to fair value based on certain observable price changes or impairment events as they occur. The carrying amount of the investment was $1.0 million as of June 30, 2022 and was classified as "Other noncurrent assets" in the Company’s unaudited condensed consolidated balance sheets. The Company did not hold investments in equity securities recorded at cost as of December 31, 2021.
Note 5 — Prepaid expenses
The prepaid expenses were as follows (in thousands):
As of
June 30,
2022
December 31,
2021
Prepaid expenses$3,888 $2,188 
Prepaid insurance1,462 921 
Guarantee deposits placed1,388 345 
Value added tax receivable911 931 
Other assets156 118 
Total prepaid expenses and other current assets$7,805 $4,503 



Note 6 — Property and equipment, net
Property and equipment consist of the following (in thousands):
Estimated
Useful
Life
(In Years)
As of
June 30,
2022
December 31,
2021
Computers and equipment
2-5
$12,128 $10,784 
Machinery and automobiles5282 246 
Furniture and fixtures
3-7
1,194 1,174 
Software5513 513 
Leasehold improvements
7-12
500 486 
14,617 13,203 
Less: Accumulated depreciation and amortization(8,477)(8,240)
6,140 4,963 
Capitalized software development costs
2-3
5,340 4,656 
Less: Accumulated amortization(4,137)(3,450)
1,203 1,206 
Property and equipment, net$7,343 $6,169 

Note 7 — Intangible assets, net
Intangible assets consist of the following (in thousands):
Estimated
Useful Life
(In Years)
As of
June 30,
2022
December 31,
2021
Customer relationships
8-12
$15,971 $15,971 
Tradenames
4-10
4,676 4,676 
Non-compete agreements2440 440 
21,087 21,087 
Less: Accumulated amortization(3,231)(1,990)
Intangible assets, net$17,856 $19,097 


Note 8 — Other current liabilities
The components of other current liabilities were as follows (in thousands):
As of
June 30,
2022
December 31, 2021
Contingent consideration payable$5,000 $6,933 
Value added tax payable1,232 1,274 
Customer deposits752 798 
Other liabilities638 594 
Total other current liabilities$7,622 $9,599 


As of June 30, 2022 and December 31, 2021 the Company had payable to its related party in the amount of $0.6 million that was classified as Other current liabilities in unaudited condensed consolidated balance sheet.
Note 9 — Debt
Revolving Credit Facility — On March 15, 2022, the Company entered into a Credit Agreement (the “2022 Credit Agreement”) by and among the Company, as borrower, the guarantors party thereto from time to time, the lenders party thereto from time to time, and JPMorgan Chase Bank, N.A., as administrative agent for the lenders (the “Agent”). The 2022 Credit Agreement provides for a secured multicurrency revolving loan facility with an initial aggregate principal amount of up to $30.0 million, with a $10.0 million letter of credit sublimit. The Company may increase the size of the revolving loan facility up to $50.0 million, subject to certain conditions and additional commitments from existing and/or new lenders. The 2022 Credit Agreement matures on March 15, 2025.
At the Company’s option, borrowings under the 2022 Credit Agreement accrue interest at a per annum rate based on either (i) the base rate plus a margin ranging from 1.0% to 1.5%, (ii) an adjusted term Secured Overnight Financing Rate ("SOFR") or adjusted the Euro Interbank Offer Rate ("EURIBOR") (based on one, three or six-month interest periods) plus a margin ranging from 2.0% to 2.5%, or (iii) an adjusted daily simple SOFR rate (or SONIA rate in the case of loans denominated in pounds sterling, or SARON rate in the case of loans denominated in Swiss francs), plus a margin ranging from 2.0% to 2.5%, in each case, with the applicable margin determined based on the Company’s consolidated total leverage ratio. The Company is also obligated to pay other closing fees, administration fees, commitment fees and letter of credit fees customary for a credit facility of this size and type.
The Company’s obligations under the 2022 Credit Agreement are required to be guaranteed by certain of its domestic subsidiaries meeting materiality thresholds set forth in the 2022 Credit Agreement. Such obligations, including the guaranties, are secured by substantially all of the personal property of the Company and the Company’s subsidiary guarantors.

The 2022 Credit Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and its subsidiaries to, among other things, incur debt, grant liens, undergo certain fundamental changes, make investments and acquisitions, make certain restricted payments, dispose of assets, enter into certain transactions with affiliates, and enter into burdensome agreements, in each case, subject to limitations and exceptions set forth in the 2022 Credit Agreement. The Company is also required to maintain compliance with a consolidated total leverage ratio, determined in accordance with the terms of the 2022 Credit Agreement. As of June 30, 2022, the Company was in compliance with all covenants contained in the 2022 Credit Agreement.
In October, 2017, the Company entered into a loan agreement for a revolving line of credit facility (the “Line of Credit”) with a borrowing capacity of $0.5 million. The Line of Credit is secured by substantially all of the Company’s assets and was secured in order to provide credit support for a letter of credit facility and balances under the Company’s credit cards. Borrowings under the Line of Credit are subject to a variable interest rate, based on changes in the Prime Rate, as calculated published by the Wall Street Journal. The Company closed the Line of Credit in March of 2022.
As of June 30, 2022 and December 31, 2021, respectively, the Company did not have any outstanding debt under the 2022 Credit Agreement and Line of Credit.
Note 10 — Revenue
Disaggregation of revenues
The tables below present disaggregated revenues from contracts with customer by customer location, industries and contract-types. The Company believes this disaggregation best depicts how the nature, amount, timing and uncertainty of our revenues


and cash flows are affected by industry, market and other economic factors. The Company has a single reportable segment for the three and six months ended June 30, 2022 and 2021.
The following table shows the disaggregation of the Company’s revenues by major customer location. Revenues are attributed to geographic regions based upon billed client location. Substantially all of the revenue in our North America region relates to operations in the United States.
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Customer Location(in thousands)
North America$63,658 $38,783 $121,267 $71,389 
Europe13,596 8,855 27,331 15,383 
Other81 38 147 38 
Total Revenues$77,335 $47,676 $148,745 $86,810 
The following table shows the disaggregation of the Company’s revenues by main vertical markets:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Vertical(in thousands)
Retail$25,452 $12,729 $48,759 $21,579 
Technology, Media and Telecom23,391 16,115 44,835 30,526 
CPG/Manufacturing16,090 9,899 31,069 18,624 
Finance5,049 4,071 9,576 7,509 
Other7,353 4,862 14,506 8,572 
Total Revenues$77,335 $47,676 $148,745 $86,810 

The following table shows the disaggregation of the Company’s revenues by contract types:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Contract Type(in thousands)
Time-and-material$71,002 $44,230 $136,208 $80,470 
Fixed-fee6,333 3,446 12,537 6,340 
Total Revenues$77,335 $47,676 $148,745 $86,810 

Contract balances

A contract asset is a right to consideration that is conditional upon factors other than the passage of time. A contract liability, or deferred revenue, consist of advance payments and billings in excess of revenues recognized. As of June 30, 2022 and December 31, 2021 the Company did not have material contract assets or liabilities recognized in condensed consolidated financial statements.
Remaining performance obligation
ASC 606 “Revenue from Contracts with Customers” requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of June 30, 2022. This disclosure is not required for:
1)contracts with an original duration of one year or less, including contracts that can be terminated for convenience without a substantive penalty,


2)contracts for which the Company recognizes revenues based on the right to invoice for services performed,
3)variable consideration allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with ASC 606-10-25-14(b), for which the criteria in ASC 606-10-32-40 have been met, or
4)variable consideration in the form of a sales-based or usage-based royalty promised in exchange for a license of intellectual property.
All of the Company’s contracts met one or more of these exemptions as of June 30, 2022.
Customers concentration
The following table shows the amount of revenue derived from each customer exceeding 10% of the Company’s revenue:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Customer 111.9 %11.9 %11.6 %12.4 %
Customer 211.1 %11.5 %10.7 %12.8 %
During the three and six months ended June 30, 2022 the Company recorded revenue from its related parties of $1.4 million and $2.6 million, respectively. During the same periods of 2021 the Company recorded revenue from related parties of $1.0 million and $1.9 million, respectively.
The following table shows number of customers exceeding 10% of the Company’s billed and unbilled receivable balances:
As of
June 30,
2022
December 31,
2021
Accounts receivable31
Unbilled receivable21
As of June 30, 2022 and December 31, 2021 accounts receivable from related parties was $1.1 million and $0.6 million, respectively.

Note 11 — Leases
A major part of the Company's lease obligations is for office real estate. The Company may also lease corporate apartments, cars and office equipment. Payments on some of our leases may depend on index or rate, including Consumer Price Index. Such payments are included in the calculation of lease liability and assets at the commencement dates, all future changes are accounted as variable payments similar to other variable payments, such as common area maintenance, property and other taxes, utilities and insurance that are based on the lessor’s cost.
The Company’s leases have remaining lease terms ranging from 0.4 to 4.1 years. Certain lease agreements may include the option to extend or terminate before the end of the contractual term and are often non-cancelable or cancellable only by the payment of penalties. The Company includes these options in the lease term when it is reasonably certain that they will be exercised.
As of June 30, 2022, the Company had no finance leases. Operating lease expense is recorded on a straight-line basis over the lease term. During six months ended June 30, 2022 lease costs were as follows (in thousands):


Three Months Ended
Six Months Ended
June 30, 2022
Operating lease cost$858 $1,552 
Variable lease cost(96)(72)
Short-term lease cost28 267 
Total lease cost$790 $1,747 
Supplemental information related to operating lease transactions is as follows (in thousands):
Three Months EndedSix Months Ended
June 30, 2022
Lease liability payments$752 $1,618 
Lease assets obtained in exchange for liabilities$1,514 $1,514 
Non-cash net decrease in lease assets due to lease modifications$(858)$(886)
Non-cash net decrease in lease liability due to lease modifications$858 $886 
Weighted average remaining lease term and discount rate as of June 30, 2022 is as follows:
As of
June 30,
2022
Weighted average remaining lease term, in years2.78
Weighted average discount rate4.7 %
As of June 30, 2022, operating lease liabilities will mature as follows:
Years ending December 31, (in thousands)Lease Payments
2022 (excluding six months ended June 30, 2022)
$1,263 
20231,604 
20241,404 
2025565 
2026172 
Total lease payments5,008 
Less: imputed interest(290)
Total$4,718 
Note 12 — Income taxes
The Company recorded income tax expense of $1.7 million and $2.8 million for the three months ended June 30, 2022 and 2021, respectively. The Company’s effective tax rate was (14.9)% and 213.6% for the second quarter of 2022 and 2021, respectively. The change in the effective tax rate for the three months ended June 30, 2022, as compared to the same periods in 2021 was attributable mainly to Section 162(m) compensation deduction limitations and foreign rate differential.
Income tax expenses for the six months ended June 30, 2022 increased to $3.9 million from $2.0 million recognized during the same period last year. The effective tax rate for the six months ended June 30, 2022 and 2021 was (32.4)% and (132.8)%, respectively.
For the three and six months ended June 30, 2022, the Company used a discrete effective tax rate method to calculate income taxes due to sensitivity of the forecast. Through June 30, 2022, the Company determined that small changes in estimated "ordinary" income would result in significant changes in the estimated annual effective tax rate causing material distortion in the year-to-date tax provision. As of June 30, 2022, the Company is unable to produce a reliable estimate of ordinary income


for the quarter and year ending 2022 due to the inability to reliably or accurately forecast 2022 operating expenses. Similarly, for the three and six months ended June 30, 2022, due to uncertainties created by geopolitical risks, the Company’s estimated annual effective tax rate method would not provide a reliable estimate and therefore was not used.
Note 13 — Stockholders’ equity
The following description summarizes the material terms and provisions of the securities that the Company has authorized.
Common stock
The Company is authorized to issue 110.0 million shares of common stock. As of June 30, 2022 and December 31, 2021 the Company had 67.3 million and 66.9 million shares of common stock that were outstanding, respectively.
Warrants
On April 12, 2021, the Staff of the SEC issued the “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “Staff Statement”). The Staff Statement provided new guidance for all SPAC-related companies regarding the accounting and reporting for their warrants that could result in the warrants issued by SPACs being classified as a liability measured at fair value, with non-cash fair value adjustments reported in earnings at each reporting period. The Company reviewed the accounting for both its public warrants and private warrants following the Staff Statement. The Company determined that the accounting for its public warrants as equity was consistent with the Staff Statement. The Company determined that its private warrants should be accounted for as liabilities but that the related accounting errors during the year ended December 31, 2020 were not material to the required financial statements and disclosures included in its annual report on Form 10-K filed on March 5, 2021. In the three months ended March 31, 2021, the Company began accounting for the private warrants correctly, as disclosed in its quarterly report on Form 10-Q filed on May 6, 2021.
As of June 30, 2021, there were a total of 0.01 million private warrants outstanding and 4.2 million public warrants outstanding. As part of its initial public offering (“IPO”), ChaSerg issued 22.0 million units including one share of common stock and one-half of one redeemable warrant. Simultaneously with its IPO, ChaSerg issued 0.6 million private placement units to its sponsor underwriter, each consisting of one common share and one-half of one redeemable warrant. ChaSerg issued 0.1 million units as a result of the conversion of a working capital sponsor loan consisting of one common share and one-half of one redeemable warrant. 
On February 17, 2021, the Company and Riverview Group LLC, an affiliate of Millennium Management LLC, a holder of 6.4 million of the outstanding publicly traded warrants (the “Public Warrants”) entered into a Warrant Exchange Agreement (the “Exchange Agreement”). Pursuant to the Exchange Agreement, the holder exchanged each of its public warrants for 0.3480 shares of the Company’s common stock, i.e., 2.2 million shares. During the three months ended June 30, 2021, the Company entered into agreements with investors resulting in exchange of 0.8 million of its private warrants for 0.3 million shares of the Company's common stock.

As of June 30, 2022, there were no outstanding private or public warrants.  
Note 14 — Stock-based compensation
Employee stock-based compensation cost recognized in the consolidated statements of loss and comprehensive loss was as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
(in thousands)
Cost of revenue$272 $149 $521 $260 
Engineering, research, and development1,638 617 2,502 1,171 
Sales and marketing1,207 453 1,878 1,244 
General and administrative13,270 5,456 20,147 9,671 
Total stock-based compensation$16,387 $6,675 $25,048 $12,346 


Stock Options
2018 Plan
Stock option activity under the Company’s 2018 Plan is set forth below:
Number of OptionsWeighted Average Exercise PriceAggregate Intrinsic ValueWeighted Average Contractual Term
(in years)
Options outstanding as of December 31, 2021
1,916,101 $3.54 $65,971 6.97
Options exercised(216,160)$3.54 
Options forfeited(2,978)$3.54 
Options outstanding as of June 30, 2022
1,696,963 $3.54 $22,371 6.56
Options vested and exercisable as of June 30, 2022
1,575,452 $3.54 $20,922 6.52
The total unrecognized compensation expenses related to 2018 Plan options as of June 30, 2022 was $0.1 million to be expensed on a straight-line basis over 1.19 years.
2020 Plan
As of June 30, 2022, 8.2 million shares were available for grant under 2020 Incentive Stock Plan ("2020 Plan").
Stock option activity under the Company’s 2020 Plan is set forth below:
Number of OptionsWeighted Average Exercise PriceAggregate Intrinsic Value, in thousandsWeighted Average Contractual Term
(in years)
Options outstanding as of December 31, 2021
2,224,687