On February 14, 2022, Billtrust acquired 100% of the outstanding shares of Anachron Beheer BV and subsidiaries, d/b/a Order2Cash ("Order2Cash"), a privately-held company headquartered in Amsterdam, the Netherlands. Order2Cash is a European B2B order-to-cash platform provider. Their enterprise customer base, global interoperability capabilities, and established connections to over 70 B2B and business-to-government (“B2G”) e-invoicing networks broaden BPN’s reach to deliver fully compliant and secure e-invoicing across multiple markets. The acquisition is part of Billtrust's strategic plan to continue expanding its physical presence in Europe while also enhancing its global invoicing and payments capabilities. The acquisition of Order2Cash was determined to be an acquisition of a business under ASC 805, Business Combinations. Pursuant to the terms of the purchase agreement, the Company paid an initial amount of $59.9 million in cash at closing.

(1)Cash paid at close represents the gross contractual amounts paid. Net cash paid, which accounts for cash acquired of $0.4 million, was $59.5 million and is reflected as an investing activity on the Condensed Consolidated Statements of Cash Flows.

(2)An additional $0.6 million is payable within four years of the closing date upon achievement of certain conditions. This amount is recognized as purchase price. Refer to Note 13 - Fair Value Measurements for information on determining the fair value.

Additionally, the acquisition included earnout consideration to be paid to the sellers based on the amount and timing of Order2Cash's achievement of certain conditions. These amounts may be earned by the sellers during periods following the closing date based on the financial performance of Order2Cash during 2022, and each of the 12-month periods ending June 30, 2023 and June 30, 2024. Under ASC 805, the Company determined that the earnout consideration arrangement is compensation and therefore recognized separately from the acquisition transaction. In accordance with ASC 710, Compensation, the amount will be recognized over the arrangement period and is recorded in general and administrative expenses on the Condensed Consolidated Statements of Operations.

The preliminary acquisition date fair value of the total earnout consideration was $11.5 million. At June 30, 2022, the fair value of the total earnout consideration was $4.3 million, which was included in accrued expenses and other current liabilities and other non-current liabilities on the Condensed Consolidated Balance Sheets. The determination of the fair value included the following significant inputs; projected revenue, a risk adjusted discount rate, and estimated volatility. Increases or decreases in the inputs would have resulted in a higher or lower fair value measurement. The range of undiscounted amounts that could be payable under the earnout arrangement is zero to $23.7 million. The amount expensed for the six months ended June 30, 2022 was $1.0 million.


Assets:
Cash and cash equivalents	$	422
Accounts receivable	2,189
Property and equipment	184
Operating lease right-of-use assets	569
Goodwill (1)	40,838
Intangible assets (2)	27,238
Other assets (current and non-current)	—
Total Assets	$	71,440
Liabilities:
Accounts payable	$	861
Accrued expenses and other current liabilities	1,510
Operating lease liabilities	569
Deferred revenue	1,226
Deferred taxes	6,810
Total Liabilities	10,976
Net assets acquired	$	60,464

The determination of the fair value of the finite-lived intangible assets requires management judgment and the consideration of a number of factors. The Company relies on income, market, and replacement cost valuation methodologies, which include estimates related to projected cash flows for each asset, discount rates, useful lives of each asset, and published industry benchmark data. Based on the preliminary valuation, the intangible assets acquired were (in thousands):

Due to the timing of the acquisition in the first quarter of 2022, the purchase price allocation is preliminary with respect to the valuation of acquired assets, liabilities assumed (including income taxes), intangible assets, and goodwill. The Company continues to obtain the information to complete the purchase price allocation and will record adjustments, if any, during the 12 month measurement period from the acquisition date. No purchase price adjustments were recorded during the six months ended June 30, 2022.

The operating results of Order2Cash have been included in the Company’s financial statements since the acquisition date. Order2Cash’s operating results and the goodwill resulting from the acquisition are reported in the Company’s Software and Payments segment. The acquisition added approximately $4.2 million of additional revenue and $5.1 million of direct expenses during the six months ended June 30, 2022. Had the Company acquired Order2Cash in prior periods, the Company's operating results would have been materially different. As a result, the following unaudited pro forma financial information is presented as if Order2Cash had been acquired by the Company on January 1, 2021 (in thousands):

The pro forma results have been prepared in accordance with U.S. GAAP and include the following pro forma adjustments: (1) an increase for amortization expense for the three and six months ended June 30, 2022 and 2021 as a result of the preliminary purchase price allocation for finite-lived intangible assets, (2) an increase in operating costs for the for the three and six months ended June 30, 2021 to recognize non-recurring acquisition costs incurred to close the transaction, and (3) an increase in the estimated tax benefits as a result of the pro forma adjustments. These pro forma results do not necessarily reflect the combined actual results of operations of the Company and Order2Cash that would have been achieved, nor are they necessarily indicative of future results of operations.

On January 12, 2021, Billtrust consummated the previously announced Business Combination pursuant to the Agreement dated October 18, 2020, and amended as of December 13, 2020. As a result of the Agreement, Billtrust stockholders received aggregate consideration with a value equal to approximately $1,190.0 million, which consists of:

ii.Approximately $1,099.0 million in South Mountain Class A and Class C common stock at closing of the Business Combination, accounted for as a reverse recapitalization, or 109.9 million shares (including 15.2 million shares issuable pursuant to outstanding vested and unvested options from the 2003 and 2014 Plans), converted at an exchange ratio of 7.2282662 shares (the "Conversion Rate") per share of Legacy Billtrust common stock based on an assumed share price of $10.00 per share.

i.138.7 million shares of Class 1 common stock, including 2.4 million shares to prior South Mountain shareholders that are subject to the vesting and forfeiture provisions based upon the same share price targets described below in the First Earnout and Second Earnout. During the first quarter of 2021, all of these shares vested;

Immediately prior to the closing, each issued and outstanding share of Legacy Billtrust preferred stock converted into equal shares of Legacy Billtrust common stock. At the closing of the Business Combination, each stockholder of Legacy Billtrust received 7.2282662 shares of the Company’s Class 1 common stock, par value $0.0001 per share (“Common Stock”), for each share of Legacy Billtrust common stock, par value $0.001 per share, that such stockholder owned, except for one investor who requested to receive shares of Class 2 common stock, which is the same in all respects as Class 1 common stock except it does not have voting rights.

Upon the closing of the Business Combination, the Company’s certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of capital stock to 575.0 million shares, of which 538.0 million shares were designated Class 1 common stock, $0.0001 par value per share; 27.0 million shares were designated Class 2 common stock, $0.0001 par value per share; and 10.0 million shares were designated preferred stock, $0.0001 par value per share.

In connection with the Business Combination, 9.0 million shares of common stock were repurchased for cash from Legacy Billtrust shareholders (after conversion) at a price of $10.00 per share. Additionally, in connection with a previous loan agreement in July 2014, the Company issued a lender a warrant to purchase shares of the Company’s Series C preferred stock. In connection with Business Combination, the warrant was exercised and converted into 0.1 million shares of Common Stock.

The following table reconciles the elements of the Business Combination, accounted for as a reverse recapitalization, to the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated Statements of Stockholders' Equity for the six months ended June 30, 2021 (in thousands):


	Reverse Recapitalization
Cash - South Mountain (net of redemptions and non-contingent expenses)	$	240,670
Cash - PIPE investors	200,000
Cash electing shares of Legacy Billtrust shareholders	(90,061)
Fees to underwriters and other transaction costs	(19,936)
Net cash received from reverse recapitalization	330,673
Net assets acquired and other adjustments	255
Net contributions from reverse recapitalization	$	330,928


			Number of Shares
Common Stock outstanding prior to Business Combination			25,000
South Mountain founder shares			5,500
Redemption of South Mountain shares			(2)
Common stock of South Mountain			30,498
Shares issued from PIPE			20,000
Legacy Billtrust shareholders' shares purchased for cash			(9,006)
Recapitalization shares			41,492
Legacy Billtrust stockholders' shares			103,774
Total shares			145,266

Following the closing of the Merger, holders of Billtrust common stock (including all redeemable preferred shareholders whose shares were converted into common stock at the closing of the Merger) and holders of stock options and restricted stock pursuant to the 2003 Plan and the 2014 Plan (as defined in the Business Combination Agreement) had the contingent right to receive, in the aggregate, up to 12.0 million shares of Class 1 common stock if, from the closing of the Merger until the fifth anniversary thereof, the average closing price of BTRS Holdings Inc. Common Stock exceeds certain thresholds. The first issuance of 6.0 million earnout shares is based on the volume-weighted average price of Common Stock exceeding $12.50 for any 20 trading days within any 30 trading day period (the “First Earnout”). The second issuance of 6.0 million earnout shares is based on the volume weighted average price of Common Stock exceeding $15.00 for any 20 trading days within any 30 trading day period (the “Second Earnout” and together with the First Earnout, the "Earnout Shares").

The difference in the Earnout Shares issued and the aggregate amounts defined in the Merger Agreement is primarily due to 0.8 million unissued shares reserved for future issuance to holders of unvested options in the form of restricted stock units (the "Earnout RSUs"), which are subject to the same vesting terms and conditions as the underlying unvested stock options and are not replacement awards. Additionally, 0.2 million shares of Common Stock were withheld from employees to satisfy the mandatory tax withholding requirements, for which the company remitted cash of $4.0 million to the appropriate tax authorities.

As of the BCA Closing Date, the prior holders of South Mountain stock agreed that of their existing issued and outstanding shares of Class 1 common stock, 2.4 million shares would be subject to vesting conditions based upon the same price milestones in the First Earnout (1.2 million shares) and Second Earnout (1.2 million shares) as discussed above ("Sponsor Vesting Shares").

The Company determined that the Earnout Shares issued to non-employee shareholders and to holders of BTRS Holdings Inc. common stock, vested options from the 2003 Plan and 2014 Plan, and the Sponsor Vesting Shares did not meet the criteria for equity classification under Accounting Standards Codification ("ASC") 815-40. Accordingly, these shares were required to be classified as a liability and recorded at their fair values, with the remeasurement of their fair values at each reporting period recorded in earnings. Upon closing of the Business Combination, the fair value of the shares was determined using a Monte Carlo simulation (using the same assumptions as Earnout RSUs discussed below), resulting in a fair value of $16.80 per share. The shares were remeasured at their fair values through the dates the First Earnout and Second Earnout were achieved in the first quarter of 2021. The liability associated with the Earnout Shares delivered to the equity holders and the Vesting Shares that vested upon achievement of the First Earnout and Second Earnout during the first quarter of 2021 was then reclassified to equity as the shares issued, with the appropriate allocation to common stock at par value and additional paid-in capital.


	Earnout Shares		Sponsor Vesting Shares		Total
Fair value on Closing Date	$	191,095	$	39,900	$	230,995
Fair value adjustment (1)	8,246		1,780		10,026
Amount paid for tax withholding	(4,013)		—		(4,013)
Amount reclassified to equity	(195,328)		(41,680)		(237,008)
Balance, March 31, 2021	$	—	$	—	$	—

Earnout RSUs issued based on the amount of the unvested options are recognized in earnings as stock-based compensation expense under ASC 718. The fair value of the Earnout RSUs was determined using a Monte Carlo simulation, including the stock price on the BCA Closing Date of $16.80, a risk free rate of 0.5%, and a volatility rate of 42%.

In accordance with ASC 340-10-S99-1, the offering costs, consisting principally of underwriters' fees and professional, printing, filing, regulatory, and other costs, were charged to additional paid-in capital upon completion of the Business Combination.

In connection with the Business Combination, the Company paid all of its outstanding debt facilities in full. In connection therewith, the unamortized debt discount of $1.2 million and a prepayment penalty and associated costs of $1.6 million were recorded in interest expense and loss on extinguishment of debt on the Condensed Consolidated Statements of Operations.

On October 7, 2021, Billtrust acquired 100% of the outstanding shares of iController BV ("iController"), a privately-held company based in Ghent, Belgium and Amsterdam, the Netherlands. iController is a B2B provider of SaaS intelligent solutions for collections management. Their SaaS offerings enable a wide range of users, from credit and collections managers to chief financial officers, to see payment and collections information and communication in real time, providing visibility into cash flow management. The acquisition is part of Billtrust's strategic plan to expand its physical presence in Europe while enhancing its global collections capabilities. The acquisition of iController was determined to be an acquisition of a business under ASC 805, Business Combinations.

(1)The cash paid at close represents the gross contractual amounts paid. Net cash paid, which accounts for cash acquired of $0.2 million, was $56.8 million and is reflected as an investing activity on the Condensed Consolidated Statements of Cash Flows.

(2)The acquisition of iController included contingent consideration to be paid in cash to the seller based on the amount and timing of iController’s achievement of certain recurring revenue growth targets over a three year period subsequent to the acquisition date. The fair value of this contingent consideration on the closing date was $5.1 million, which is recognized as purchase price. Refer to Note 13 - Fair Value Measurements for information on determining the fair value.


Assets:
Cash and cash equivalents	$	187
Accounts receivable	1,217
Property and equipment	439
Operating lease right-of-use assets	651
Goodwill (1)	52,386
Intangible assets (2)	17,385
Other assets (current and non-current)	76
Total Assets	$	72,341
Liabilities:
Accounts payable	$	524
Accrued expenses and other current liabilities	641
Operating lease liabilities, net of current portion	917
Deferred revenue	3,775
Deferred taxes	3,800
Total Liabilities	9,657
Net assets acquired	$	62,684

The purchase price allocation is preliminary with respect to the valuation of acquired assets, liabilities assumed (including income taxes), intangible assets, and goodwill. The Company continues to obtain the information to complete the purchase price allocation and will record adjustments, if any, during the 12 month measurement period from the acquisition date. No purchase price adjustments were recorded since the acquisition date or during the six months ended June 30, 2022.

The operating results of iController have been included in the Company’s financial statements since the acquisition date and are not material to the Company’s consolidated financial results. iController’s operating results and the goodwill resulting from the acquisition are reported in the Company’s Software and Payments segment.

The Company recognized $0.3 million and $2.0 million of acquisition costs during the three and six months ended June 30, 2022, respectively. These costs primarily consisted of legal, accounting, tax professional fees, and the Order2Cash earnout consideration, and are included in general and administrative expenses on the Condensed Consolidated Statements of Operations. The Company did not have acquisition costs in three and six months ended June 30, 2021.