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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 September 30, 2021
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 November 2, 2021, there were 65,251,896 shares of registrant’s common Stock issued and outstanding.



TABLE OF CONTENTS
Page

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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 possibility that we have been and may continue to be adversely affected by 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.”
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
ii

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
September 30,
2021
December 31,
2020
Assets
Current assets
Cash and cash equivalents$199,297 $112,745 
Accounts receivable, net of allowance of $254 and $418 as of September 30, 2021 and December 31, 2020, respectively
30,773 16,890 
Unbilled receivables4,883 1,799 
Prepaid income taxes694 821 
Prepaid expenses and other current assets5,301 2,361 
Total current assets240,948 134,616 
Property and equipment, net5,395 4,095 
Intangible assets, net19,729 8,125 
Deferred tax assets3,258 5,609 
Goodwill35,358 14,690 
Total assets$304,688 $167,135 
Liabilities and equity
Current liabilities
Accounts payable$1,772 $757 
Accrued liabilities1,148 628 
Accrued compensation and benefits11,222 7,479 
Accrued income taxes2,302 1,248 
Other current liabilities7,775 3,206 
Total current liabilities24,219 13,318 
Deferred tax liabilities4,903 2,093 
Total liabilities29,122 15,411 
Stockholders’ equity (Note 9)
Common stock, $0.0001 par value; 110,000,000 shares authorized; 65,121,241 and 50,878,780 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
7 5 
Additional paid-in capital256,936 128,930 
Retained earnings18,699 22,793 
Accumulated other comprehensive income/(loss)(76)(4)
Total stockholders’ equity275,566 151,724 
Total liabilities and stockholders’ equity$304,688 $167,135 
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 September 30,Nine Months Ended
September 30,
2021202020212020
Revenue$57,933 $26,332 $144,743 $81,157 
Cost of revenue32,667 15,178 84,343 51,799 
Gross profit25,266 11,154 60,400 29,358 
Operating expenses
Engineering, research, and development2,132 2,076 5,687 7,193 
Sales and marketing4,073 2,245 9,942 7,451 
General and administrative17,091 8,504 43,195 26,606 
Total operating expenses23,296 12,825 58,824 41,250 
Income/(loss) from operations1,970 (1,671)1,576 (11,892)
Other income/(expenses), net114 455 (1,015)419 
Income/(loss) before income taxes2,084 (1,216)561 (11,473)
Provision/(benefit) for income taxes2,633 (99)4,655 (3,594)
Net loss$(549)$(1,117)$(4,094)$(7,879)
Foreign currency translation adjustments, net of tax(86) (72) 
Comprehensive loss$(635)$(1,117)$(4,166)$(7,879)
Loss per share
Basic$(0.01)$(0.02)$(0.07)$(0.18)
Diluted$(0.01)$(0.02)$(0.07)$(0.18)
Weighted average shares outstanding
Basic62,610 49,651 56,280 43,074 
Diluted62,610 49,651 56,280 43,074 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2

GRID DYNAMICS HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
(In thousands)
Convertible
Preferred Stock
Common StockAdditional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
income/(loss)
Total
stockholders’
equity
SharesAmountSharesAmount
Balance at December 31, 2020 $ 50,879 $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 stock— — 2,221 — — — — — 
Exercise of stock options— — 41 — 162 — — 162 
Issuance of shares and payments of tax obligations resulted from net share settlement of vested stock awards— — 1,030 — (15,297)— — (15,297)
Foreign currency translation adjustment, net of tax— — — — — — 49 49 
Balance at March 31, 2021 $ 54,171 $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 stock— — 271 — 918 — — 918 
Exercise of stock options— — 138 — 254 — — 254 
Issuance of shares and payments of tax obligations resulted from net share settlement of vested stock awards— — 149 — (3,564)— — (3,564)
Foreign currency translation adjustment, net of tax— — — — — — (35)(35)
Balance at June 30, 2021 $ 54,729 $5 $123,749 $19,248 $10 $143,012 
Net loss— — — — — (549)— (549)
Stock-based compensation— — — — 9,113 — — 9,113 
Exchange of warrants into common stock— — 4,188 1 48,205 — — 48,206 
Exercise of stock options— — 656 — 203 — — 203 
Issuance of common stock in July 2021 offering, net of transaction costs of $498
— — 5,470 1 77,812 77,813 
Issuance of shares and payments of tax obligations resulted from net share settlement of vested stock awards— — 78 — (2,146)— — (2,146)
Foreign currency translation adjustment, net of tax— — — — — — (86)(86)
Balance at September 30, 2021 $ 65,121 $7 $256,936 $18,699 $(76)$275,566 
3

GRID DYNAMICS HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
(In thousands)
(Continued)
Convertible
Preferred Stock
Common StockAdditional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
income/(loss)
Total
stockholders’
equity
SharesAmountSharesAmount
Balance at December 31, 2019622 $9,187 12,847 $8,117 $10,535 $35,392 $ $54,044 
Retroactive application of recapitalization (Note 3)
426 — 8,797 (8,115)8,115 — —  
Adjusted balance beginning of period1,048 $9,187 21,644 $2 $18,650 $35,392 $ $54,044 
Net loss— — — — — (4,596)— (4,596)
Stock-based compensation— — — — 4,804 — — 4,804 
Conversion of preferred stock(1,048)(9,187)1,048 1 9,187 — — 9,188 
Consideration paid to Grid shareholders— — — — (123,865)— — (123,865)
ChaSerg shares recapitalized, net of transaction costs of $4,142
— — 28,088 2 204,323 — — 204,325 
Conversion of promissory note to common stock— — 53 — 530 — — 530 
Balance at March 31, 2020 $ 50,833 $5 $113,629 $30,796 $ $144,430 
Net loss— — — — — (2,166)— (2,166)
Stock-based compensation— — — — 3,654 — — 3,654 
Exercise of stock options— — 6 — 59 — — 59 
Balance at June 30, 2020 $ 50,839 $5 $117,342 $28,630 $ $145,977 
Net loss— — — — — (1,117)— (1,117)
Stock-based compensation— — — — 5,126 — — 5,126 
Exercise of stock options— — 6 — 19 — — 19 
Issuance of shares in connection with vested RSUs— — 15 — — — — — 
Balance at September 30, 2020 $ 50,860 $5 $122,487 $27,513 $ $150,005 
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 nine months ended
September 30,
20212020
Cash flows from operating activities
Net loss$(4,094)$(7,879)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization3,520 1,896 
Bad debt(17)398 
Deferred income taxes2,663 (4,519)
Stock-based compensation21,459 13,584 
Change in fair value of warrants979  
Changes in assets and liabilities:
Accounts receivable(10,549)(2,139)
Unbilled receivables(1,257)2,973 
Prepaid income taxes127 (822)
Prepaid expenses and other current assets(2,062)10 
Accounts payable676 (250)
Accrued liabilities16 (576)
Accrued compensation and benefits1,533 348 
Accrued income taxes848 110 
Other current liabilities813 (136)
Net cash provided by operating activities14,655 2,998 
Cash flows from investing activities
Purchase of property and equipment(3,016)(1,607)
Acquisition of Tacit, net of cash acquired (Note 4)(30,585) 
Net cash used in investing activities(33,601)(1,607)
Cash flows from financing activities
Cash received from ChaSerg 208,997 
GDI shares redeemed for cash (123,865)
Equity issuance costs (2,264)
Payments of tax obligations resulted from net share settlement of vested stock awards(21,007) 
Proceeds from exercises of stock options, net of shares withheld for taxes619 78 
Proceeds from exercise of public warrants48,145  
Proceeds related to issuance of Common Stock from July 2021 Offering78,311  
Payments for professional fees related to issuance of common stock from July 2021 Offering(498) 
Net cash provided by financing activities105,570 82,946 
Effect of exchange rate changes on cash and cash equivalents(72) 
Net increase in cash and cash equivalents86,552 84,337 
Cash and cash equivalents, beginning of period112,745 42,189 
Cash and cash equivalents, end of period$199,297 $126,526 
Supplemental disclosure of cash flow information:
Cash paid for income taxes$1,403 $1,370 
Supplemental disclosure of non-cash activities
Conversion of preferred stock to common stock$ $9,187 
Conversion of private warrants979  
Contingent consideration for acquisition of businesses$2,979 $ 
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” or “GDH”) 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”) for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving ChaSerg and one or more businesses. On March 5, 2020 (the “Closing”), the Company consummated its business combination with Grid Dynamics International, Inc. (“GDI”) pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated November 13, 2019 (the “Business Combination”). In connection with the Closing, the Company changed its name from ChaSerg Technology Acquisition Corp. to Grid Dynamics Holdings, Inc. The Company’s common stock is now listed on the NASDAQ under the symbol “GDYN” and warrants to purchase the common stock at an exercise price of $11.50 per share were listed on the NASDAQ under the symbol “GDYNW” until they all were delisted on August 30, 2021 following redemption.
Unless the context otherwise requires, the “Company” refers to the combined company and its subsidiaries following the Business Combination, “ChaSerg” refers to the Company prior to the Closing, and “GDI” refers to GDI prior to the Closing. Refer to Note 3 for further discussion of the Business Combination.
Note 2 — Basis of presentation and summary of significant accounting policies
The following is a summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements.
Unaudited Interim Financial Statements
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 nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. These interim financial statements should be read in conjunction with GDH’s audited financial statements for the year ended December 31, 2020 included in the Company’s annual report on Form 10-K that the Company filed with the SEC on March 5, 2021.
Basis of presentation
The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Although ChaSerg was the legal acquirer, for accounting purposes, GDI was deemed to be the accounting acquirer. GDI was determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
GDI holds executive management roles for the Company and those individuals are responsible for the day-to-day operations;
GDI’s former owners have the largest minority voting rights in the Company;
From a revenue and business operation standpoint, GDI was the larger entity in terms of relative size;
GDI’s San Ramon, CA headquarters are the headquarters of the Company; and
The intended strategy of the Company will continue GDI’s strategy of driving enterprise-level digital transformation in the Fortune 1000 companies.

6

In conjunction with the Business Combination, outstanding shares of GDI were converted into common stock of the Company, par value $0.0001 per share, shown as a recapitalization, and the net assets of ChaSerg were acquired at historical cost, with no goodwill or other intangible assets recorded. GDI was deemed to be the predecessor of the Company, and the consolidated assets and liabilities and results of operations prior to the Closing (for the years ended December 31, 2019 and 2018 and the period from January 1, 2020 to March 5, 2020) are those of GDI. ChaSerg’s assets and liabilities, which include net cash from the trust of $85.1 million, and results of operations were consolidated with GDI beginning on the Closing.
In accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparative periods up to the Closing Date, to reflect the number of shares of the Company’s common stock, $0.0001 par value per share, issued to GDI shareholders in connection with the recapitalization transaction. As such, the shares and corresponding capital amounts and earnings per share related to GDI preferred and common stock prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination.
Principles of consolidation
The accompanying condensed 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.
Use of estimates
The preparation of the consolidated condensed financial statements in accordance with U.S. GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the 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.
Certain significant risks and uncertainties
The Company is subject to risks, including but not limited to customer concentration, concentrations of credit and foreign currency risks. Refer to the section below for additional information. Additionally, the Company has been impacted by the coronavirus (“COVID-19”) pandemic. The global pandemic of COVID-19 has negatively affected the U.S. and global economy, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial market. In 2020 the COVID-19 pandemic impacted the Company’s revenues, and the Company’s business continues to be exposed to risks and uncertainties related to the pandemic. The impact of the COVID-19 pandemic had been more pronounced with the Company’s retail customers, which depended on keeping their stores open. Additionally, in situations where the Company’s customers encountered financial difficulties, there was a risk associated with the Company’s inability to collect money from customers. In 2020 the Company took several actions to deal with the COVID-19 pandemic. These included enabling its employees to work from home, company-wide salary and compensation cuts, hiring freezes, and suspending all non-essential travel. Some of these actions such as working from home as well as suspending all non-essential travel continues to be currently in place. As the Company's business recovered in 2021, the Company discontinued some of the cost saving measures such as compensation cuts and hiring freezes. The Company now is facing the opposite challenges including employee retention and shortage of talent on the job market. The ultimate impact and the extent to which the COVID-19 pandemic will continue to affect the business, results of operation and financial condition is difficult to predict and depends on numerous evolving factors outside of the Company’s control including: the duration and scope of the pandemic, including from renewed waves and new variants; government, social, business and other actions that have been and will be taken in response to the pandemic; and the effect of the pandemic on short and long-term general economic conditions.
Concentrations of credit risk and significant customers
The Company records its accounts receivable and unbilled receivables at their face amounts less allowances. Accounts receivable and unbilled receivables are generally dispersed across the Company’s customers in proportion to their revenue. Two customers individually exceeded 10% of the Company’s accounts receivable balance as of September 30, 2021 and three customers individually exceeded 10% of the Company’s accounts receivable balance as of December 31, 2020. Two customers individually exceeded 10% of the unbilled receivables as of September 30, 2021 and three customers individually exceeded 10% of the unbilled receivables as of December 31, 2020. Two customers individually accounted for greater than 10% of the sales for the three and nine months ended September 30, 2021 and 2020, respectively.
7

Cash and cash equivalents
The Company considers cash equivalents to be highly liquid investments with original maturities of three months or less from the date of purchase. Cash equivalents are stated at cost, which approximates fair value. At times, cash deposits with banks may exceed federally insured limits.
Accounts receivable and allowance for doubtful accounts
Accounts receivable, less allowance for doubtful accounts, reflect the net realizable value of receivables and approximate fair value. The Company maintains an allowance against accounts receivable for the estimated probable losses on uncollectible accounts. The allowance is based upon historical loss experience, current economic conditions within the industries the Company serves as well as determination of the specific risk related to certain customers. Accounts receivable are charged off against the reserve when, in management’s estimation, further collection efforts would not result in a reasonable likelihood of receipt.
As of
September 30,
2021
December 31,
2020
(in thousands)
Trade accounts receivable$31,027 $17,308 
Allowance for doubtful accounts(254)(418)
Total trade accounts receivable, net$30,773 $16,890 
Unbilled receivables
Generally, the Company will not bill customers until the services have been completed. From time-to-time, a service period may overlap with a period-end and the unbilled receivables represent amounts for services performed through period-end, but not yet billed. The unbilled receivable represents the amount expected to be billed and collected for services performed through period-end in accordance with contract terms. The unbilled receivables balances were $4.9 million and $1.8 million as of September 30, 2021 and December 31, 2020, respectively.
Goodwill
Goodwill represents the excess of purchase price over the fair value of the net assets of businesses acquired. On an annual basis, the Company makes a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill. If the Company determines that the fair value of the reporting unit is less than its carrying amount, it will perform a quantitative analysis; otherwise, no further evaluation is necessary. For the quantitative impairment assessment, the Company compares the fair value of the reporting unit to its carrying value, including goodwill. The Company uses the discounted cash flow method of the income approach and market approach to determine the fair value of the reporting unit. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired, and no further testing is performed. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company will recognize a loss equal to the excess, limited to the total amount of goodwill allocated to that reporting unit. Impairments, if any, are charged directly to earnings. As of September 30, 2021, the Company has a single reporting unit and determined there were no indicators of impairment.
Intangible assets
Finite-lived intangible assets are stated at cost less accumulated amortization. Amortization is computed on the straight-line basis over the asset’s useful lives ranging between 2 and 12 years. Intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be fully recoverable. If facts and circumstances indicate that the carrying value might not be recoverable, projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining useful lives is compared against their respective carrying amounts. If an asset is found to be impaired, the impairment charge will be measured as the amount by which the carrying amount of an entity exceeds its fair value. As of September 30, 2021, the Company determined there were no indicators of impairment.
8

Revenue recognition
The Company accounts for a contract with a customer when 1) the parties to the contract have approved the contract and are committed to performing their respective obligations, 2) the contract identifies each party’s rights regarding the goods or services to be transferred, 3) the contract identifies the payment terms for the goods or services to be transferred, 4) the contract has commercial substance, and 5) collection of substantially all consideration pursuant to the contract is probable.
The Company derives its revenue from offering a suite of digital engineering and information technology (“IT”) consulting services, including digital transformation strategy, emerging technology, lean labs and legacy system replatforming. For most contracts, the Company uses master agreements to govern the overall relevant terms and conditions of the business arrangement between the Company and its customers. When the Company and a customer enter into a Master Services Agreement (“MSA”), purchases are generally made by the customer via a statement of work (“SOW”) which explicitly references the MSA and specifies the services to be delivered. Fees for these contracts may be in the form of time-and-materials or fixed-fee arrangements. The majority of the Company’s revenues are generated under time-and-material contracts which are billed using hourly rates to determine the amounts to be charged directly to the customer. Fees are billed and collected as stipulated in the contract, and revenue is recognized as services are performed. If there is an uncertainty about the receipt of payment for the services, revenue is recognized to the extent that a significant reversal of revenue would not be probable.
Consulting services revenue is a single performance obligation earned through a series of distinct daily services and may include services such as those described above. The Company recognizes revenue for services over time as the customer simultaneously receives and consumes the benefits as the Company performs IT consulting services. For revenue contracts, the customer derives value from the Company providing daily consulting services, and the value derived corresponds to the labor hours expended. Therefore, the Company measures the progress and recognizes revenue using an effort-based input method. For fixed fee contracts, the Company recognizes revenue as the work is performed, the monthly calculation of which is based upon actual labor hours incurred and level of effort expended throughout the duration of the contract.
For time-and-material contracts, the Company applies the variable consideration allocation exception. Therefore, instead of allocating the variable consideration to the entire performance obligation, the Company determined the variable consideration should be allocated to each distinct service to which the variable consideration relates, which is providing the customer daily consulting services. The Company also offers volume discounts or early settlement discounts. Volume discounts apply once the customer reaches certain contractual spend thresholds. Early settlement discounts are issued contingent upon the timing of the payment from the customer. If the consideration promised in a contract includes a variable amount, the Company only includes estimated amounts of consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. These estimates may require management to make subjective judgments and to make estimates about the effects of matters inherently uncertain. The determination of whether to constrain consideration in the transaction price are based on information (historical, current and forecasted) that is reasonably available to the Company, taking into consideration the type of customer, the type of transaction and the specific facts and circumstances of each arrangement. Although the Company believes that its approach in developing estimates and its reliance on certain judgments and underlying inputs is reasonable, actual results may differ from management’s estimates, judgments and assumptions. These estimates have historically not been material to the consolidated financial statements.
Remaining performance obligation
ASC 606 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 September 30, 2021. 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 September 30, 2021.
9

Stock-based compensation expense
Stock-based compensation expense is measured based on the grant-date fair value of the share-based awards. Forfeitures are recognized as incurred. The Company estimates stock options grant-date fair value using the Black-Scholes-Merton option pricing model. The model requires management to make a number of key assumptions including expected volatility, expected term, risk-free interest rate, and expected dividends. The Company evaluates the assumptions used to value its share-based awards on each grant date. The fair market value of Grid Dynamics stock is determined based on the closing price on NASDAQ on the measurement date. The Company amortizes the grant-date fair value of all share-based compensation awards over the employee’s requisite service period for the entire award on a straight-line basis, which is generally the vesting period. For an award with graded vesting that is subject only to a service condition (e.g., time-based vesting), the Company uses the straight-line attribution method under ASC 718 under which they recognize compensation cost on a straight-line basis over the total requisite service period for the entire award (i.e., over the requisite service period of the last separately-vesting tranche of the award). Additionally, the Company applies the “floor” concept so that the amount of compensation cost that is recognized as of any date is at least equal to the grant-date fair value of the vested portion of the award on that date. That is, if the straight-line expense recognized to date is less than the grant date fair value of the award that is legally vested at that date, the company will increase its recognized expense to at least equal the fair value of the vested amount. Refer to Note 10 — Stock-based compensation for additional information.
Income taxes
The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized for the tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of the assets and liabilities. The determination of the provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. The provision for income taxes reflects a combination of income earned and taxed in the various U.S. federal and state, international and other jurisdictions. Jurisdictional tax law changes, increases or decreases in permanent differences between book and tax items, accruals or adjustments of accruals for tax contingencies or valuation allowances, and the change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. Management considers all available evidence, both positive and negative, in determining whether a valuation allowance is required. Such evidence includes prior earnings history, the scheduled reversal of deferred tax liabilities, projected future taxable income, carryback and carryforward periods of tax attributes, and tax planning strategies that could potentially enhance the likelihood of realization of a deferred tax asset in making this assessment. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified.
The Company evaluates for uncertain tax positions at each balance sheet date. When it is more likely than not that a position will be sustained upon examination by a tax authority that has full knowledge of all relevant information, the Company measures the amount of tax benefit from the position and records the largest amount of tax benefit that is greater than 50% likely of being realized after settlement with a tax authority. The Company’s policy for interest and/or penalties related to underpayments of income taxes is to include interest and penalties in income tax expense.
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.
In December 2019, the FASB issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. The update is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, and early adoption is permitted. The Company adopted the standard as of January 1, 2021 and has determined that the adoption of this guidance did not have a material effect on the consolidated financial statements.
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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 February 2016, the FASB issued ASU No. 2016-2, Leases. ASU 2016-2 requires lessees to put most leases on their balance sheet while recognizing expense in a manner similar to existing accounting. ASU 2016-2 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The standard allows for two methods of adoption to recognize and measure leases: retrospectively to each prior period presented in the financial statements with the cumulative effect of initially applying the guidance recognized at the beginning of the earliest comparative period presented or retrospectively at the beginning of the period of adoption with the cumulative effect of initially applying the guidance recognized at the beginning of the period in which the guidance is first applied. Both adoption methods include a number of optional practical expedients that entities may elect to apply. The Company will adopt the standard retrospectively at the beginning of the period of adoption with the cumulative effect of initially applying the guidance recognized at the beginning of the period in which the guidance is first applied. The new accounting guidance is effective for the Company for fiscal periods beginning after December 15, 2021. The Company expects the impact to be material but has not yet determined the impact that the adoption of this guidance will have 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.
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 – Business combination
On March 5, 2020, ChaSerg consummated its business combination with GDI pursuant to the Merger Agreement. Immediately following the Business Combination, there were 50.8 million shares of common stock with a par value of $0.0001, and 11.3 million warrants outstanding.
GDI began operations in September 2006 to provide next-generation e-commerce platform solutions in the areas of search, analytics, and release automation to Fortune 1000 companies. Under ASC 805, Business Combinations, GDI was deemed the accounting acquirer, and the Business Combination was accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded in accordance with U.S. GAAP. ChaSerg was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of GDI issuing stock for the net assets of ChaSerg, accompanied by a recapitalization. The net assets of ChaSerg were stated at historical cost, with no goodwill or other intangible assets recorded. Reported shares and earnings per share available to holders of the Company’s common stock, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination (approximately 1.685 GDH shares to 1.0 GDI share).
The aggregate consideration for the Business Combination was $396.5 million, consisting of $130.0 million in cash and 27.0 million shares of ChaSerg’s common stock valued at $10.19 per share, less a post-Closing share adjustment amount of 0.9 million shares which were placed in escrow post-Closing. The shares transferred at Closing included 4.3 million options to purchase the Company’s shares that were vested, outstanding and unexercised, which were determined using 1.7 million vested options at Closing converted at an exchange ratio of approximately 2.48. Additionally, 0.4 million options to purchase the
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Company’s common stock that were unvested, outstanding and unexercised were assumed by the Company, which were determined using 0.1 million unvested options at Closing converted at an exchange ratio of approximately 2.48. The following represents the aggregate consideration for the Business Combination ( in thousands except for per share amount):
Shares transferred at Closing27,006 
Less: Post-Closing share adjustment(857)
Total shares transferred at Closing26,149 
Value per share$10.19 
Total share consideration$266,459 
Plus: Cash transferred to GDI stockholders130,000 
Closing merger consideration$396,459 
In connection with the Closing, 0.1 million shares of common stock were redeemed at a price per share of approximately $10.21.
In connection with the Business Combination, the Company incurred direct and incremental costs of approximately $4.7 million, consisting of legal and professional fees, of which $4.1 million were related to equity issuance costs and recorded to additional paid-in capital as a reduction of proceeds and $0.6 million were recorded to general and administrative expenses.
In connection with the Business Combination, all outstanding retention bonus obligations from a 2017 acquisition totaling $3.4 million were accelerated and paid in full to Grid Dynamics’ personnel immediately prior to the Closing and were recorded in cost of revenue and operating expenses in the consolidated financial statements.
Note 4 — Acquisition of Tacit Knowledge Inc.
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 will also enable the Company to leverage near-shore capabilities with Tacit’s presence in Mexico.
The total purchase consideration is $37.0 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 $3.4 million. The maximum amount of potential contingent cash consideration is $5.0 million. 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.
The primary areas of the preliminary purchase price allocations that have not been finalized relate to the finalization of working capital, the valuation and useful lives of intangible assets, the valuation of the contingent consideration ("earn-out"), and the deferred tax liabilities. Upon completion of the fair value assessment, the Company anticipates that the ultimate intangible assets may differ from the preliminary assessment outlined above. Any change in the finalization of working capital will reduce or increase the cash consideration. Any changes to the preliminary estimates of the fair value of the and intangible assets or contingent consideration ("earn-out") will be adjusted to goodwill during the measurement period, with subsequent changes in estimates recorded in the Company’s Consolidated Statements of Loss and Comprehensive Loss.

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The purchase price of Tacit has been preliminarily allocated to the assets acquired and liabilities assumed based on their estimated respective fair values as of May 29, 2021 with the excess purchase price allocated to goodwill. The Company’s preliminary allocation of the purchase price to the net tangible and intangible assets acquired and liabilities assumed is as follows (in thousands):
Fair market values
Current assets (including $2,967 of cash)
$9,145 
Property, plant and equipment466 
Customer relationships11,737 
Tradename1,176 
Goodwill20,603 
Total assets acquired$43,127 
Accounts payable and accrued expenses$(3,675)
Deferred taxes(2,500)
Total liabilities assumed$(6,175)
Purchase price allocation$36,952 
The preliminary fair value of identifiable intangible assets as of the date of acquisition is as follows:
(In thousands)Fair ValueUseful LifeAmortization
method
Customer relationships$11,737 12 yearsStraight-line
Tacit tradename1,176 4 yearsAccelerated
Total identified intangible assets$12,913 
As a result of the acquisition, the Company recognized a total of $20.6 million of goodwill. 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 is not deductible for income tax purposes. 
The Company used various valuation techniques to determine fair value, with the primary techniques being discounted cash flow analysis, relief-from-royalty, and multi-period excess earnings valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. Under these valuation approaches, the Company is required to make estimates and assumptions about sales, operating margins, growth and attrition rates, royalty rates and discount rates based on budgets, business projections, anticipated future cash flows, and marketplace data.
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 $9.5 million and net income was approximately $1.7 million from the date of acquisition to September 30, 2021.
The following unaudited pro forma information presents the combined results of operations as if the acquisition of Tacit had occurred at the beginning of 2020. 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. 
The 2021 pro forma results include transaction related expenses incurred by the Company prior to the acquisition of $0.6 million including items such as consultant fees and other deal costs.
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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.
Nine Months Ended
September 30,
(Unaudited)20212020
Revenue$152,775 $92,462 
Net loss$(2,304)$(8,156)
Diluted loss per share$(0.04)$(0.19)
Note 5 — Property and equipment, net
Property and equipment consist of the following (in thousands):
Estimated
Useful
Life
(In Years)
As of
September 30,
2021
December 31,
2020
Computers and equipment
2-5
$9,241 $6,447 
Machinery and automobiles5631 551 
Furniture and fixtures
3-7
1,012 643 
Software5513 554 
Leasehold improvements
3-12
526 236 
11,923 8,430 
Less: Accumulated depreciation and amortization(7,798)(5,622)
4,125 2,809 
Capitalized software development costs
2-3
4,394 3,531 
Less: Accumulated amortization(3,124)(2,245)
1,270 1,287 
Property and equipment, net$5,395 $4,095 

Note 6 — Intangible assets, net
Intangible assets consist of the following (in thousands):
Estimated
Useful Life
(In Years)
As of
September 30,
2021
December 31,
2020
Customer relationships
8-12
$15,971 $4,234 
Tradename
4-10
4,676 3,500 
Non-compete agreements2440 440 
21,087 8,174 
Less: Accumulated amortization(1,358)(49)
Intangible assets, net$19,729 $8,125 

0
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Note 7 — Other current liabilities
The components of other current liabilities were as follows (in thousands):
As of
September 30, 2021December 31, 2020
Customer deposits$781 $731 
Other liabilities2,068 528 
Contingent consideration payable4,926 1,947 
Total other current liabilities$7,775 $3,206 
In connection with the acquisition of Daxx Web Industries B.V.("Daxx") on December 14, 2020, the Company recorded a contingent consideration payable, which is a post-closing earn-out consideration, estimated based on fair value of $1.9 million. During the third quarter of 2021 the Company made an adjustment to the fair value of the earn-out consideration that resulted in recognition of $0.4 million of income that was classified as Other income/(expenses), net in unaudited condensed consolidated statement of loss and comprehensive loss. In connection with the acquisition of Tacit on May 29, 2021, the Company recorded a contingent consideration payable, which is a post-closing earn-out consideration, estimated based on fair value of $3.4 million.
As of September 30, 2021 the Company had payable to one of its related parties in the amount of $1.1 million that was classified as Other current liabilities in unaudited condensed consolidated balance sheet.
Note 8 — Income taxes
The Company recorded income tax expense of $2.6 million and income tax benefit of $(0.1) million for the three months ended September 30, 2021 and 2020, respectively. The Company’s effective tax rate was 126.3% and 8.1% for the three months ended September 30, 2021 and 2020, respectively. The increase in effective tax rate for the three months ended September 30, 2021, as compared to the same periods in 2020 was attributable mainly to Section 162 (m) compensation deduction limitations partially offset by stock-based compensation excess tax benefit. The Company recorded income tax expense of $4.7 million and income tax benefit of $(3.6) million for the nine months ended September 30, 2021 and 2020, respectively. The Company’s effective tax rate was 829.8% and 31.3% for the nine months ended September 30, 2021 and 2020, respectively. The increase in effective tax rate for the nine months ended September 30, 2021, as compared to the same periods in 2020 was attributable mainly to Section 162 (m) compensation deduction limitations partially offset by stock-based compensation excess tax benefit. Additionally, the United Kingdom’s (“UK”) recently enacted Finance Act 2021 has increased its corporate tax rate to 25% for companies with profits exceeding 250,000 pounds, effective beginning April 1, 2023. As a result of this change in tax law, the Company remeasured its UK deferred taxes which resulted in a $0.5 million discrete tax expense in the nine months ended September 30, 2021. For the three and nine months ended September 30, 2021, the Company used a discrete effective tax rate method to calculate income taxes due to sensitivity of the forecast. Through June 30, 2021, 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 September 30, 2021, the Company is unable to produce a reliable estimate of ordinary income for the quarter and year ending 2021 due to the inability to reliably or accurately forecast fourth quarter 2021 operating expenses. Similarly, for the three and nine months ended September 30, 2020, due to uncertainties created by the COVID-19 pandemic, the Company’s estimated annual effective tax rate method would not provide a reliable estimate and therefore was not used.
Note 9 — 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. At Closing, March 5, 2020, the Company had issued 50.8 million shares of common stock. As of September 30, 2021 the Company had 65.1 million shares of common stock that were outstanding.
On July 6, 2021, the Company concluded a follow-on public offering of 11.6 million shares of its common stock, which included 5.5 million shares offered by Grid Dynamics and 6.1 million shares offered by certain selling stockholders, at a price
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to the public of $15.03 per share. These amounts included shares sold upon exercise in full of the underwriters' option to purchase additional shares. J.P. Morgan Securities, LLC, William Blair & Company, L.L.C. and Cowen and Company, LLC acted as joint book-running managers for the offering. Needham & Company, LLC and Cantor Fitzgerald & Co. acted as co-managers for the offering. The net proceeds from this offering for the company, after deducting underwriting discounts and commissions and estimated offering expenses, were $78.3 million. The Company did not receive any proceeds from the sale of the shares by the selling stockholders.
Preferred Stock
As of December 31, 2019 GDI had 1.0 million shares of no par value shares of preferred stock outstanding convertible on a 1:1 basis with GDI’s common stock. At the Closing, the preferred stock outstanding was converted into common stock of the Company, par value $0.0001 per share.
Founders and underwriter shares subject to earnout provisions
At the Closing, the Company had 1.2 million shares of common stock issued and outstanding subject to earnout provisions (the “Earnout Shares”). The Earnout Shares were subject to transfer restrictions and the owners of the Earnout Shares could not sell, transfer, or otherwise dispose of their respective shares until the respective earnout provisions were achieved as described further below. The Earnout Shares have full ownership rights including the right to vote and receive dividends and other distributions thereon. Dividends and other distributions are not subject to forfeiture in accordance with the Amended and Restated Sponsor Share Letter filed with the SEC on January 26, 2020. The Earnout Shares were eligible to vest and were no longer subject to the transfer restrictions as follows:
399,999; 400,000; and 400,001 Earnout Shares would vest if the closing price of the Company’s common stock on the principal exchange on which the securities are listed or quoted have been at or about $12.00; $13.50; and $15.00 per share, respectively, for 20 trading days (which need not be consecutive) over a thirty-trading day period at any time.
As of December 31, 2020, none of the Earnout Shares were vested. On January 20, 2021, 399,999 Earnout Shares vested and are no longer subject to transfer restrictions. On March 2, 2021, 400,000 Earnout Shares vested and are no longer subject to transfer restrictions. On March 29, 2021, 400,001 Earnout Shares vested and are no longer subject to transfer restrictions. Accordingly, as of March 29, 2021, all of the Earnout Shares have vested.
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. During the second and third quarter of 2021, all remaining private warrants were exchanged to common stock.
From July 23, 2021 to July 26, 2021, 1.4 million public warrants were exercised with cash proceeds of $16.4 million. On July 28, 2021, the Company announced the redemption of its 2.8 million then outstanding public warrants. Any public warrants not exercised prior to 5:00 p.m., New York City time, on August 30, 2021 were redeemed at that time for $0.01 per warrant. The public warrants were exercisable at a price of $11.50 per share. Of the total of 2.8 million warrants outstanding on July 28, 2021, 2.75 million were exercised and cash proceeds generated from these exercised warrants were approximately $31.7 million. Pursuant to the terms of the agreements governing the rights of the holders of the public warrants, the Company redeemed the remaining unexercised and outstanding 19,744 public warrants on August 30, 2021 for a redemption price of $0.01 per public warrant.
As of September 30, 2021, there were no outstanding private or public warrants.  

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Note 10 — Stock-based compensation
2018 Stock Plan
GDI had previously adopted a stock plan in 2018 (the “2018 Stock Plan”). Under the terms of the 2018 Stock Plan, certain option grants were accelerated in full or by an additional 12 months as a result of the Business Combination. Therefore, on the date of Closing, the acceleration of vesting for 2.6 million stock options resulted in a stock compensation charge and corresponding increase to additional paid-in capital of $2.5 million. Additionally, at Closing, a percentage of outstanding vested GDI stock options were settled in exchange for cash consideration, pursuant to the terms of the Merger Agreement.
The remaining portion of outstanding vested options totaling 1.7 million and all unvested options totaling 0.1 million were automatically assumed and converted into options to purchase the Company’s common stock as of the Closing. The number of each participant’s assumed options and the exercise price were adjusted as provided in the Merger Agreement. There was no incremental compensation cost attributable to the incremental fair value of the modified options compared to the original options on the modification date. The assumed stock options will continue to be subject to the same terms and conditions, including vesting schedule terms, in accordance with the 2018 Stock Plan. Exercise prices for 2018 Stock Plan options range between $3.51 and $3.54 per share.

The following table sets forth the activity for the 2018 Stock Plan, including the conversion of the vested and unvested options, for the nine months ended September 30, 2021:
Options
Outstanding, in thousands
Balance at December 31, 20192,734 
Cashed out(829)
Forfeited(19)
Balance at March 31, 2020 (prior to exchange ratio conversion)1,887 
Converted vested balance4,314 
Converted unvested balance364 
Balance at March 6, 2020 (post to exchange ratio conversion)4,678 
Exercised in 2020(28)
Forfeited/Cancelled in 2020(50)
Options Outstanding as of December 31, 20204,600 
Exercised in quarter ended March 31, 2021(37)
Forfeited/Cancelled in quarter ended March 31, 2021(11)
Options Outstanding as of March 31, 20214,552 
Exercised in quarter ended June 30, 2021(257)
Forfeited/Cancelled in quarter ended June 30, 2021(3)
Options Outstanding as of June 30, 20214,291 
Exercised in quarter ended September 30, 2021(687)
Forfeited/Cancelled in quarter ended September 30, 2021(1)
Options Outstanding as of September 30, 20213,603 
As of September 30, 2021, a total of 0.07 million shares were forfeited, and 1.01 million shares were exercised for the total proceeds of $2.1 million in cash and 0.25 million shares net withheld for exercise price and taxes. The number of shares exercisable as of September 30, 2021 was 3.5 million with the average exercise price $3.54 per share. The intrinsic value of the 3.6 million total outstanding shares of 2018 Plan Options as of September 30, 2021, was $92.5 million with the remaining contractual term of 7.23 years. The unrecognized compensation expenses related to 2018 Plan options as of September 30, 2021 was $0.2 million, net of forfeitures, to be expensed on a straight-line basis over 1.93 years.
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2020 Equity Incentive Plan
Effective March 5, 2020, our board of directors approved an equity incentive plan (the “2020 Plan”). The 2020 Plan permits the Company to grant a maximum aggregate amount of 16.3 million Incentive Stock Options, Non-Statutory Stock Options (“NSOs”), Restricted Stock, Restricted Stock Units (“RSUs”), Stock Appreciation Rights, Performance Units (“PSUs”), and Performance Shares (“PSAs”) (collectively, the “Awards”) to employees, directors, and consultants of the Company. Our board of directors or any committee appointed by the board has the authority to grant Awards. During the quarter ended September 30, 2021, our board of directors granted 0.32 million NSOs and 0.04 million RSUs. The following table represent the number of shares available for grants from 2020 Equity Incentive Plan (in thousands):
Available
for grant
Available for grant, December 31, 20209,881 
Options granted(