SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
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| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the fiscal year ended December 31,
20202021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the transition period from
_______ to
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Commission file number 001-38825
Crescent Acquisition Corp
LIVEVOX HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
| 82-3447941
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Delaware | 82-3447941 |
| (State or Other Jurisdiction of
Incorporation or Organization)
| (I.R.S. Employer
Identification No.)
|
11100 Santa Monica Blvd.,
655 Montgomery Street, Suite
2000, Los Angeles,1000, San Francisco, CA
9002594111
(Address of principal executive offices) (Zip Code)
(310) 235-5900
(844) 207-6663
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading symbol symbol(s) | | Name of each exchange on which registered |
Class A common stock, par value $0.0001 per share | | LVOX | | The Nasdaq Stock Market LLC |
| Redeemable Warrants, each whole Warrant exercisable to purchase one share of Class A common stock at an exercise price of $11.50 | | LVOXW | | The Nasdaq Stock Market LLC |
| Units, each consisting of one share of Class A common stock and one-half of one redeemable Warrant | | CRSAU
LVOXU | | The NASDAQNasdaq Stock Market LLC |
Class A common stock, $0.0001 par value per share
| | CRSA
| | The NASDAQ Stock Market LLC
|
Redeemable Warrants, each whole Warrant exercisable for one share of Class A common stock at an exercise price of $11.50
| | CRSAW
| | The NASDAQ Stock Market LLC
|
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
☐ No
☒Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
☐ No
☒Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
☒ No
☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒ No
☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer | ☐ | Accelerated filer | ☐
☒ |
Non-Accelerated filer | ☒
☐ | Smaller reporting company | ☒ |
Emerging growth company | ☒ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☐Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes
☒☐ No
☐☒
The aggregate market value of the common stock held by non-affiliates of the registrant, computed as of June 30,
20202021 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately
$261,500,000.$143,338,563.
As of March 2, 2021,7, 2022, the registrant had 25,000,00098,240,727 shares of its Class A common stock, $0.0001 par value $0.0001 per share, issued and 6,250,000outstanding.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some
This annual report on Form 10-K (this “Annual Report”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements,
containedother than statements of present or historical fact included in this
annual reportAnnual Report, regarding the future financial performance of LiveVox Holdings, Inc. (“LiveVox” or the “Company”), as well as LiveVox’s strategy, future operations, future operating results, financial position, expectations regarding revenue, losses, and costs, prospects, plans and objectives of management are forward-looking
in nature. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future.statements. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,”
“contemplate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,
” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this
annual reportAnnual Report are subject to risks and uncertainties that may include, for
example, statements about:example:
•the impact of COVID-19 and related changes in base interest rates, constraints in supply chain, inflationary pressures and significant market volatility in the Company’s business, our industry and the global economy;
•the high level of competition in the cloud contact center industry and the intense competition and competitive pressures from other companies in the industry in which the Company operates;
•the effect of legal, tax and regulatory changes;
•the Company’s ability to select an appropriate target business or businesses;maintain its listing on The Nasdaq Stock Market LLC (“Nasdaq”);
our•the Company’s ability to raise financing or complete an initial business combination;
our expectations aroundacquisitions in the performance of a prospective target business or businesses;
future;our•the Company’s success in retaining or recruiting, or changes required in, ourits officers, key employees or directors following an initial business combination;
directors;•the future financial performance of the Company;
•the outcome of any legal proceedings that may be instituted against the Company;
our officers•reliance on information systems and directors allocating their timethe ability to other businessesproperly maintain the confidentiality and potentially having conflictsintegrity of interest with our businessdata;
•the occurrence of cyber incidents or a deficiency in approving an initial business combination;cybersecurity protocols;
our potential•the ability to obtain additional financing to complete an initialthird-party software licenses for use in or with the Company’s products; and
•the business, combination;
our pooloperations and financial performance of prospective target businesses,the Company, including market conditions and global and economic factors beyond the locationCompany’s control.
The foregoing review of important factors should not be construed as exhaustive and industry of such target businesses;
should be read in conjunction with the ability of our officersother risk factors included herein. Forward-looking statements reflect current views about LiveVox’s plans, strategies and directors to generate a number of potential business combination opportunities;
our public securities’ potential liquidity and trading;
the lack of a market for our securities;
the use of proceeds not held in the trust account or available to us from interest income on the trust account balance; or
the trust account not being subject to claims of third parties.
The forward-looking statements contained in this annual reportprospects, which are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can beinformation available as of the date of this Annual Report. Except to the extent required by applicable law, LiveVox undertakes no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors” beginning on page 24. Should one or more of these risks or uncertainties materialize, or shouldobligation (and expressly disclaims any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligationsuch obligation) to update or revise anythe forward-looking statements whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
otherwise.
PART I
ITEM 1. BUSINESS
We are a blank check company incorporated on November 17, 2017
Unless the context otherwise requires, the “Company,” “LiveVox,” “we,” “us” or “our” and similar terms refer to LiveVox Holdings, Inc. (formerly known as Crescent Acquisition Corp), and its subsidiaries, collectively.
Merger
On June 18, 2021 (the “Closing Date” or “Closing”), Crescent Acquisition Corp, a Delaware corporation
and formed for(“Crescent”), consummated the
purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similarpreviously announced business combination
with one or more businesses.On March 7, 2019 (the “IPO Closing Date”), we consummated our initial public offering (the “Initial Public Offering”) of 25,000,000 units (the “Units”) of the Company. Each Unit consists of one share of Class A common stock of the Company, par value $0.0001 per share (the “Common Stock”), and one-half of one warrant of the Company (“Warrant”), each whole Warrant entitling the holder thereof to purchase one share of Common Stock at an exercise price of $11.50 per share (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuance of equity or equity linked securities) of Common Stock. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to us of $250,000,000. Simultaneously with the Initial Public Offering, we completed the private sale of an aggregate of 7,000,000 warrants (the “Private Placement Warrants”) to our sponsor, CFI Sponsor, LLC, a Delaware limited liability company (the “Sponsor”), at a price of $1.00 per Private Placement Warrant, each exercisable to purchase one share of Common Stock at $11.50 per share, generating gross proceeds to us of $7,000,000. The Private Placement Warrants have terms and provisions that are identical to those of the Warrants sold as part of the Units in the Initial Public Offering, except that the Private Placement Warrants may be net share (cashless) settled and are not redeemable so long as they are held by the Sponsor or its permitted transferees. The sale of the Private Placement Warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).
On the IPO Closing Date, $250,000,000 of the gross proceeds from the Initial Public Offering and the sale of the Private Placement Warrants was deposited in a U.S.-based trust account (the “Trust Account”) with Continental Stock Transfer and Trust Company acting as trustee (the “Trustee”). Of the $7,000,000 held outside of the Trust Account, $5,000,000 was used to pay underwriting discounts and commissions, $300,000 was used to repay notes payable to our Sponsor and the balance was available to pay accrued offering and formation costs, business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. Funds held in the Trust Account have been invested only in U.S. government treasury bills with a maturity of one hundred and eighty (180) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), that invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earliest of (i) the completion of an initial business combination; (ii) the redemption of any shares of Common Stock properly tendered in connection with a stockholder vote to amend our amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of such shares of Common Stock if we do not complete an initial business combination by June 30, 2021 (see ‘Extension Meeting” below), and (iii) the redemption of 100% of the shares of Common Stock if we are unable to complete an initial business combination by June 30, 2021 (subject to applicable law, see “Extension Meeting” below).
On April 15, 2019, we announced that the holders of our Units may elect to separately trade the Common Stock and Warrants included in the Units commencing on April 16, 2019, on the National Association of Securities Dealers Automated Quotations Capital Market (“NASDAQ”) under the symbols “CRSA” and “CRSAW,” respectively. Those Units not separated continued to trade on the NASDAQ under the symbol “CRSAU.”
We believe our ability to consummate an initial business combination is enhanced by our entering into a forward purchase agreement (the “Forward Purchase Agreement”) pursuant to which Crescent Capital Group Holdings LP (“Crescent”) has committed to purchase, subject to the terms and conditions set forth in such agreement, including a lock up period that restricts the transfer of securities issued pursuant to the Forward Purchase Agreement and registration rights granted thereto, an aggregate of 2,500,000 shares of Common Stock plus 833,333 Warrants for an aggregate purchase price of $25,000,000 in cash in a private placement that will close immediately prior to an initial business combination, which such commitment Crescent may assign, in whole or in part, to certain transferees, including, but not limited to, its current or prospective limited partners (Crescent and such possible transferees together comprising the Forward Purchasers). The proceeds from the Forward Purchase Agreement will be used as part of the consideration in an initial business combination and, expenses in connection therewith. These purchases will be made regardless of whether any shares of Class A common stock are redeemed by our public stockholders in connection with an initial business combination and are intended to provide us with a minimum funding level for an initial business combination.
With respect to the above, past performance of our senior management team or Crescent is not a guarantee of the ability to successfully consummate an initial business combination. You should not rely on the historical record of management or Crescent as indicative of future performance. Neither management nor Crescent has past experience with a blank check company or special purpose acquisition company.
Agreement for Business Combination
On January 13, 2021, we entered into an Agreement and Plan of Merger, dated January 13, 2021 (the “Merger Agreement”) with, by and among Crescent, Function Acquisition I Corp, a Delaware corporation and our direct, wholly owned subsidiary of Crescent (“First Merger Sub”), Function Acquisition II LLC, a Delaware limited liability company and oura direct, wholly owned subsidiary of Crescent (“Second Merger Sub”), LiveVox Holdings, Inc., a Delaware corporation (“Old LiveVox”), and GGC Services Holdco, Inc., a Delaware corporation, solely in its capacity as the representative, agent and attorney-in-fact of the stockholder of LiveVox (in such capacity, the “Stockholder Representative”) of LiveVox TopCo, LLC (“LiveVox TopCo”), a Delaware limited liability company and the sole stockholder of Old LiveVox as of immediately prior to Closing (the “LiveVox Stockholder”). ThePursuant to the Merger Agreement, provides for, among other things, (i)a business combination between Crescent and Old LiveVox was effected through (a) the merger of First Merger Sub with and into Old LiveVox, with Old LiveVox continuing as the surviving corporation (the “Surviving Corporation”) and becoming our direct, wholly owned subsidiary as a consequence (the “First Merger”) and (ii)(b) immediately following the First Merger and as part of the same overall transaction as the First Merger, the merger of the Surviving CorporationOld LiveVox with and into Second Merger Sub, with Second Merger Sub continuing as the surviving entity which will be renamed such name as LiveVox shall designate no later than five business days prior to the closing of the transaction (the “Second Merger”, and together with the First Merger, the “Mergers” and, togethercollectively with the other transactions contemplated bydescribed in the Merger Agreement, the “Business Combination”“Merger”). On the Closing Date, Crescent changed its name to “LiveVox Holdings, Inc.” and Second Merger Sub changed its name to “LiveVox Intermediate LLC”. See Note 3 to our consolidated financial statements included in Part II, Item 8 of this Annual Report for further discussion of the Merger.
On June 22, 2021, the Company’s ticker symbols on Nasdaq for its Class A common stock, warrants to purchase Class A common stock and public units were changed to “LVOX,” “LVOXW” and “LVOXU,” respectively.
Business Overview
LiveVox is a next generation, cloud-based contact-center-as-a-service (CCaaS) platform focused on deployments in both mid-market and enterprise organizations. Our mission is to help contact centers maximize their performance by seamlessly integrating omnichannel communications (voice, email, chat, SMS, etc.), artificial intelligence (AI), customer relationship management (CRM) and workforce optimization (WFO), in each case, in accordance with the termsan easy-to-implement and subjecteasy-to-optimize platform. Built on a scalable, public cloud infrastructure, LiveVox can serve as a self-contained, out-of-the-box solution, or as a foundational platform that connects to other services through application programming interfaces (APIs). Facilitating more than 14 billion transactions annually, we have built a differentiated approach to the conditionscontact center software market, complemented by an attractive financial model.
•Large and growing CCaaS market opportunity: The contact center market is in the early stages of a shift to cloud-based solutions and we estimate that the vast majority of call center agents are not using cloud-based solutions today. Various trends are driving this transition, including digital transformation, the automation of manual contact center labor, and the need for AI-enabled analytics to support omnichannel workflows and agents. We estimate the contact center market to be approximately $27 billion for 2021, of which approximately $4 billion is comprised of cloud-based solutions. LiveVox and other industry sources estimate the total spend of this market to reach approximately $83 billion by 2030. As enterprises continue to execute on their digital transformation strategies, we believe we are well positioned to capture a meaningful amount of this growth as we increase our investment in sales and marketing to educate more potential customers about our platform.
•Differentiated product: We offer a cloud-based, enterprise-focused contact center solution. The LiveVox Platform consists of innovative cloud-based AI and omnichannel offerings, anchored by its native CRM solution. Our products are designed to enable customers to remove legacy technology barriers and accelerate adoption of cloud-based solutions, regardless of their digital transformation journey status. Our platform is configured with features and functionalities as well as compliance standards and capabilities, and integrations with many existing third-party solutions, providing customers with a simple and scalable implementation process. We believe that our integrated offering accelerates the adoption of cloud-based contact center solutions, eliminates data silos, and allows our users to maximize engagement with their customers and create differentiated end user experiences. We believe that we are currently the only company to offer a product that integrates Omnichannel, Contact Center, CRM, WFO and AI capabilities in a single offering.
◦Integration: Our products integrate AI and omnichannel capabilities under one platform, alongside CRM and WFO functionalities, equipping customers with a single platform to support their contact center capabilities while providing consistent platform-wide analysis and reporting.
◦Approach to CRM and data: Our products unify multiple disparate systems that clients already have in place by integrating the existing systems of record, many of the Merger Agreement. FollowingCRMs already within departments, and other often-used communication platforms, in order to present a single view of all customer conversations. Additionally, the closingplatform provides a variety of integration methods, from data exchange methods, APIs, visual integration points through our embedded framework to a Robotic Process Automation library. Moreover, the Business Combination, we will own, directly or indirectly,CRM platform is used for a number of out-of-the-box use-cases, such as delivering customer service and ticketing functionality, lead management workflows and follow-up cadences, and agent guides and knowledge management tools.
◦Enterprise-grade architecture: We offer enterprise-grade compliance, security, and governance capabilities that benefit our customers, many of whom are in highly regulated industries. While our platform is scalable for businesses of all sizes, currently it primarily serves enterprise companies with complex contact center needs, interactions in the stockmillions, and use cases focused on the needs of LiveVox and its direct and indirect subsidiaries and LiveVox TopCo, LLC, a Delaware limited liability company and the sole stockholder of LiveVox as of immediately prior to the effective time of the First Merger (the “LiveVox Stockholder”) will hold a portion of the Company’s stock.Consummation of the transactions contemplatedmodern contact center.
•Attractive financial profile, underpinned by the Merger Agreement are subjectfollowing qualities:
◦Recurring revenue model: We typically sell our products to customary conditions of the respective parties, including the approval of the Business Combination and certain other actions related thereto by our stockholders, certain approvals or other determinations from certain regulatory authorities, as applicable, and the availability ofcustomers under one- to three-year subscription contracts that stipulate a minimum amount of cashmonthly usage and associated revenue with the ability for the customer to consume more usage above the minimum contract amount each month. Our subscription revenue is comprised of the minimum usage revenue under contract (which we call “contract revenue”) and amounts billed for usage above the minimum contract value (which we call “excess usage revenue”), both of which are recognized on a monthly basis following deployment to the customer. Excess usage revenue is deemed to be specific to the month in which the Trust Account (and/orusage occurs, since the minimum usage commitments reset at the beginning of each month. For the year ended December 31, 2021, our total revenue was $119.2 million, 98% of which was subscription revenue (including contract revenue and excess usage revenue), with the remainder consisting of professional services and other non-recurring revenue derived from other specified sources, if necessary)the implementation of our products.
◦Attractive unit economics: We benefit from strong sales efficiency, driven by the productivity of our salesforce and flexible commercial model. This model seeks to meet customers at any stage of their digital transformation by utilizing a “land and expand” strategy that allows us to provide a subset of our full contact center solution to meet a customer’s initial requirements, and then expand that relationship by providing more features and functionality that empowers the customer to continue on their journey to greater digital and AI adoption. For the year ended December 31, 2021, our net revenue retention rate for the last twelve month period (“LTM”) was 105%, after giving effectand our average net revenue retention rate was 112% over the period 2018 to redemptions by our public stockholders, if any. Accordingly, there can be no assurance2021. We estimate that the Business Combination will be consummated.For additional information regarding LiveVox, the Merger Agreement and the Business Combination, see the Proxy Statement/Prospectus initially filed by the Company on February 11, 2021.
Other than as specifically discussed, this report does not assume the closing of the Business Combination.
Extension Meeting
We mailed to our shareholders of record as of January 22, 2021, a definitive proxy statement for a special meeting of shareholders to be held on February 17, 2021 (the “Special Meeting”) to approve an extension of time for us to complete an initial business combination through June 30, 2021 (the “Extension Date”). The Charter Extension and Trust Extension Proposals were approved, providing our shareholders with more time to evaluate our Business Combination.
In connection with the vote to approve the Charter Extension and Trust Extension Proposals, the holders of 12,238 Class A ordinary shares properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.14 per share, for an aggregate redemption amount of $124,138. As such, only approximately 0.05% of the Class A ordinary shares were redeemed and approximately 99.95% of the Class A ordinary shares remain outstanding. After the satisfaction of such redemptions, the balance in our trust account will be $253,467,308.
BUSINESS STRATEGY
Our acquisition andaverage calculated lifetime value creation strategy is to identify and complete an initial business combination with a growth-oriented, market-leading company in an industry that complements the collective investment experience and expertise of our management teamcustomers is approximately 7 times the associated cost of acquiring them for the time period from 2018 to 2021.
We intend to build
long-term shareholder value. Key componentson this foundation and have strategically increased our sales and marketing investment to capture future opportunities, including by increasing the size and reach of our
business strategy include:Leveragego-to-market organization, expanding our channel and geographic presence, and continuing to build on the Crescent Platformefficiency and Our Extensive Relationship Networkproductivity of our salesforce.
Shift to
Source Acquisition TargetsWe plan to leverage Crescent’s proprietary, extensive deal-sourcing network of strong, long-standing relationships with more than 300 private equity Sponsors to identify potential acquisition targets. Crescent’s position as a partner of choice for private equity firms, earned over 29 years, has resulted in significant deal flow, with the platform reviewing nearly 1,400 deals in 2020. This relationship network has led to numerous transactions which were proprietary or where a limited group of investors were invited to participate in the transaction process. In addition, we will also leverage our team’s expansive network of industry and lending community relationships
5
as well as relationships with management teams of former portfolio companies, investment bankers, attorneys and accountants, which we believe will provide us with a robust, differentiated source of potential acquisition candidates.
Identify and Acquire a Business that will Perform Well in Public Markets
Our investment philosophy is focused on finding attractively valued assets through deep, analytical evaluation of business fundamentals and the identification of opportunities for creating shareholder value, which may include operational or capital structure improvements, corporate governance leadership and/or expertise or guidance with implementing strategic growth initiatives. Cloud-Based CCaaS Solutions
We believe that the demonstrated abilityvast majority of today’s businesses are still using on-premise solutions and that the market for cloud-based contact center software is growing rapidly, driven by a number of factors including the following:
•Digital transformation: Many companies continue to modernize all aspects of their businesses, incorporating digital, mobile, and cloud technologies in all areas. This is especially true for contact centers, where cloud-based solutions increase agility, flexibility, and efficiency. As more retail transactions occur online and not in a physical storefront, the contact center plays a bigger role in a consumer's learning and buying process. Consumers’ preferences are moving away from voice to digital, and our platform enables companies to provide a digital-first service option.
•Automation of manual labor: Human labor has traditionally been a necessity and the largest area of spend for the contact center. However, modern AI and cloud technologies support offerings that streamline manual processes. As these solutions reach cost and performance parity with manual labor, we expect their penetration to further increase.
•Increased focus on customer experience: In the past, contact centers were viewed primarily as cost centers. Today, they are viewed as an important part of the customer experience, and, ultimately, the enterprise brand. As a result, the contact center is viewed as a key point of contact in facilitating a high-value customer experience. Contact centers are increasingly focused on user engagement, resulting in greater focus on AI-enabled analytics and CRM. Organizations are subsequently evaluating their technology strategies and the role of the contact center agent, and increasingly shifting to cloud-based solutions.
•Increased demand for work-from-home flexibility: Historically, organizations viewed on-premise infrastructure as better suited for deployments with significant security, compliance, and governance requirements. Those beliefs have evolved more towards acceptance of cloud-based solutions in recent years. The COVID-19 pandemic accelerated this evolution, as it caused a rapid increase in remote work and distributed workforces.
LiveVox’s Market Opportunity
Our CCaaS market opportunity consists of the total spend on contact center software solutions. We estimate this market to have been approximately $27 billion in 2021, of which approximately $4 billion was comprised of cloud-based solutions and we estimate the market to reach approximately $83 billion by 2030. While the contact center market is our initial focus, we are seeing a major convergence take place as the CCaaS market converges with the CRM market, as well as digital-first service platforms. This convergence, along with our product set, positions us well to capture the newly converged marketplace and deliver our clients a solution that is easy to deploy and manage.
We believe that the majority of our management teamaddressable market is unpenetrated today. Over time, we expect our total addressable market to source, evaluategrow considerably, due to a combination of cloud-based market tailwinds, our shift into new products to expand our addressable market, and complete investmentscontact center labor automation.
LiveVox’s Offerings
Our cloud-based contact center platform is a comprehensive, integrated suite of omnichannel, AI, CRM, and WFO capabilities. Our platform is differentiated by the following characteristics:
•Purpose-Built CRM: Our contact center focused CRM platform provides agents with all of the capabilities to deliver superior customer service by unifying communication channels, optimizing the desktop experience and ensuring connectivity
and collaboration throughout the enterprise. By creating a single pane of glass, the LiveVox Platform provides a view into all of the communication channels utilized by consumers along with the details of each conversation. The CRM further enhances every conversation by allowing a seamless shift for agents between channels for greater problem-to-resolution speed. The configurable desktop is designed to fit the needs of a complex workforce across multiple use cases and verticals, embedding not only third-party platforms but also providing a robotic process automation framework, helping our customers connect agent actions to enterprise processes.
•Investments in Digital: We continue to see an immense increase in digital adoption across our client base. A majority of our customers are now utilizing non-voice communication to respond to and connect with consumers. Our most comprehensive and fully integrated digital communication offering provides our customers with native support of SMS, email, chat & WhatsApp channels. With the continued adoption and growth of these consumer channels, our customers can provide consumers support, launch campaigns, orchestrate workflows and utilize our messaging APIs to deliver customer service through the consumers’ channel of choice.
•Automation & AI: The continued advancements in AI technology have allowed the LiveVox Platform to further enhance the delivery and optimization of customer service workflows. The combination of AI technology, voice and digital channels along with CRM data has helped to substantially decrease the required time to implement and optimize AI virtual agents & chatbots for our customers. Our customers continue to see tremendous ROI in digitally responding to customer inquiries along with increases in consumer satisfaction due to an improvement in self-service options. Paired with our WEM (Workforce Engagement Tools), our AI-driven conversation analytics and agent coaching helps contact centers automate feedback delivery and facilitate improvement to the agent community.
•Performance Analytics & Insights: The combination of products within the LiveVox Platform provides our customers a unique capability to combine CRM, operational performance, agent performance and conversational analytics data sets. This data combination gives insight into the full customer journey across channels and provides our customers the capability to measure as well as identify gaps in customer service. What is commonly a large scale data mapping project is available to our customers out of the box with many pre-built templates across verticals and use cases, thus decreasing the technical labor needed for data cleansing and conserving resources for deeper-level analytics.
Benefits to LiveVox’s Customers
Our platform uses AI capabilities to accelerate digital transformation for our customers. We believe that the following key attributes differentiate our platform, to both our customers and their end users:
•Scalable, easy to use platform: Our omnichannel/AI solution integrates with customers’ existing vendors, providing a flexible data platform that scales to reach customers as businesses grow. We allow businesses to rapidly adapt their strategies to meet the standards of changing technology and regulatory environments, in a varietysimple product that is configured with value-added products built for mid-size and enterprise customers. Our customers can easily add new communication channels, enable higher levels of industries over three decadesautomation for their organization and numerous business cycles, coupledreliably expand capabilities without having to upgrade and obtain new software.
•Accelerating digital transformation: Our products enhance customers’ abilities to transform their businesses, increase agility, facilitate automation and create amazing customer experiences. Our advanced omnichannel / AI capabilities and WFO tools provide insights on both our customers’ contact center operations, as well as on their clients. These insights facilitate strong customer and end user experiences, while improving agent productivity, in addition to helping customers deliver superior service to their clients.
•Cost-efficient and faster time to utilization: Our commercial model typically requires lower implementation costs and resources when compared to other solutions, and following implementation, customers are able to scale their spend with their established networkcontact center needs. Our AI-configured, native CRM facilitates faster deployments for our customers, enabling them to avoid long, costly integrations and deep operationalthe complexity that agents face when navigating multiple systems of record. This helps our customers deliver more personalized service at scale through more customer-centric conversations regardless of the channel of communication utilized.
•Consistent and continuous experience for end users: Our integrated suite of products improves the end user experience by combining all of a user’s information, providing them with a consistent experience across SMS, voice, web, chat, and other channels, with all of their information stored in one central location. Today’s modern contact center needs to route the right communication to the right agents, providing agents access to a single view of pertinent customer information in real time to facilitate a seamless customer journey.
Growth Strategies
We are driving considerable growth in our business by executing across a number of strategies including:
•Acquire new customers: We increased our investment in sales and marketing to grow our customer base. In 2021, we grew our go-to-market team by 63%, adding to all sales and marketing functions as well as building out a channel team and strategy.
•Increase revenue from existing customers: We benefit from a land and expand model in which our revenue from existing customers grows over time. This is driven by our focus on large enterprise customers, as well as our sales strategy in which we often “land” in a single department or line of business, providing us a strong upsell potential over time to expand the amount of business we do with a customer. For the last four years ending December 31, 2021, our LTM net revenue retention rate was 112%, on average. We believe a considerable opportunity exists for additional revenue from our existing customers through the sale of additional seats and products. We have identified opportunities we believe will allow us to identify desirable acquisition opportunities and consummate a business combination. From the extensive experience ofexpand our management team, working in both public and private markets and overseeing recognized growth equity strategies, we will narrow our pipeline of potential acquisition targets to thoserevenue from existing customers based on seats that are positioned to thrive as public companies. We also believe that potential sellers of target businesses will view the fact that Crescent andnot currently using our management team have assisted numerous companies in achieving successful shareholder transitions as a positive factor in considering whether or not to enter into a business combination with us.Partner with the Acquired Business to Create Shareholder Value
software. We will seekcontinue to capitalizeinvest resources into identifying and executing on the significant investing and operating experience and network of our management team to consummate an acquisition and drive shareholder value. Specifically, we will benefit from the acquisition experience of our Chief Executive Officer, Mr. Purdy, who was involved in the acquisitions of 12 portfolio companiesopportunities for increased penetration with a combined transaction enterprise value of more than $15 billion during his tenure at Leonard Green & Partners (“LGP”). We will also leverage the significant public markets, management oversight and governance experience of our management team; collectively, they have held a governance position at more than 50 public and private companies.existing customers.
•Accelerate product innovation: We believe that our management team’s network of currentplatform is ideally suited for expansion and former market-leading portfolio companies represent a tremendous asset that could be leveraged by the company with which we consummate a business combination. Additionally, we believe our management team has a demonstrated track record of identifying businesses at attractive valuations,expanding the functionality and use cases of our products. Since 2014, we have expanded the functionality of our platform from an outbound-focused collections provider to an integrated omnichannel/AI platform that addresses all aspects of the agent experience. We will continue to invest in new technologies and harness existing ones.
•Grow the LiveVox Platform offering through partnerships and opportunistic M&A: We plan to continue to solidify our position as a competitive enterprise cloud-based contact center software company. In addition to ongoing organic investment and partnerships, we may continue to explore opportunistic M&A as a source of product expansion, geographic reach, and growth.
LiveVox’s Products
Our cloud contact center software is provided to customers on a subscription basis and consists of three major families of products that are all fully integrated to deliver a comprehensive end-to-end solution for our customers: CRM, Omnichannel and AI, and WFO. Our CRM platform, designed specifically for contact centers, acts as an orchestration layer, allowing customers to design customer journeys, create smart campaigns and ensure each interaction is routed to the appropriate employee. The combination of a unified data layer joined with omnichannel, AI and WFO functionalities ensures that customers receive what we view as all of the key components necessary to operate a modern contact center. The platform is built upon a public cloud infrastructure with the utilization of a micro-service architecture and a robust set of APIs, allowing for deep integrations and a network of partners further enhancing the growth trajectory, building scaleplatform.
CRM
•Contact Manager and personnelExtract, Transform, and investingLoad (“ETL”) Tools – At the core of the LiveVox Platform is a database layer that functions as a repository and orchestration layer for customers and their customer records. These records function as an index, allowing each communication to be appropriately matched to each customer. This database fills the need for customer service, sales, business process outsourcing (“BPO”) and any other of our customers to ensure no single interaction is orphaned. The combination of historical data, consumer attributes and consent are utilized by multiple applications to enhance consumers’ experiences in accretive acquisitions, resultingany channel, ensure that agents are provided relevant information and confirm analytical models are appropriately set up with the right data. Moreover, the application provides a visual layer, designed to understand customer population, create “what if” scenarios and execute both simple and complex segmentation strategies for personalized campaign launches in an Omnichannel environment. Additionally, we have invested in a robust set of ETL tools designed to integrate with customers’ existing modern CRM platforms, systems of records and legacy systems, ensuring consistent management of data and high reliability of future AI deployments.
•U-CRM – Provides a visual layer, surfacing relevant information to agents during every interaction. This offering provides relevant customer details, helping to expedite calls through a shorter authentication and verification process. Access to prior interactions across voice, email, SMS, chat and other channels helps agents understand use history and gives better context to the conversation. All communication channels are exposed to agents allowing them to send notifications via SMS or follow-up with an email in real time if the conversation requires it. Moreover, supporting attachments, key notes and account details are available through a single interface. A universal inbox ensures all non-voice interactions are routed to agents to easily access and respond to customer inquiries.
•U-Ticket – Creates support tickets and tracks all the relevant details to solve issues. This offering ensures that all communication (including phone calls, emails, chat conversations and SMS messages) is tracked, and relevant details provided to customer teams, helping them solve problems quickly and empowering the team with cross-organizational visibility. It automates processes to route tickets to appropriate teams for quicker resolution, close out customer requests for increased shareholder value.satisfaction, and escalate urgent issues to appropriate teams and managers. It also provides access to channels, by offering digital forms that allow for simple ticket classification and identification by customers 24 hours a day, seven days a week.
•U-Script – A visual agent flow tool designed to provide guidance and visual navigation to agents. U-Script is commonly utilized to improve training for new employees. The tool can be configured and modified by administrators and provided to
agents on demand. Compliance teams seek to ensure appropriate disclosures are presented during each conversation and any customer responses are captured and recorded in an indexed database.
•Attempt Supervisor – Enables contact centers to set rules and restrictions relative to the number of voice calls attempted to any particular phone number and/or account. The application provides holistic capability to manage both campaign-based and manually initiated attempts across a number of granular settings including account type, telephone number type and a consumer’s resident state. The application provides a visual administrative layer allowing compliance professionals to set rules and restrictions based on their enterprise communication standards. This application helps customers ensure consistency in communication and respects consumer privacy and legal standards.
Omnichannel and AI
•Voice
◦Inbound – Provides customers with enterprise-grade voice services and features. Utilizing our unified data model, callers are automatically identified through a combination of automatic number identification match technology, third-party data lookups and/or customer self-authentication methods. Call history is dynamically retrieved, identifying prior agent conversations, agent ownership and/or unique customer attributes, helping to route calls via our automated call distributor. Callers are matched with agents based on a combination of availability, skills and proficiencies, ensuring the appropriate match of customer to agent. Administrators gain real-time visibility across their entire organization through a combination of dashboards, providing top-level metrics with drill-down capabilities and real-time coaching tools such as whisper, barge or take-over.
◦Outbound – Provides what we believe to be best-in-class outbound voice applications that combine the scalability of our platform with compliance standards required by companies in highly regulated industries. Our outbound voice capabilities function independently as a stand-alone service, as well as blended into inbound voice operations, allowing customers to maximize agent efficiency and adhere to inbound and outbound voice service level agreements (“SLA”). We will also benefit frombelieve that our architecture ensures that each outbound dialing system contains software and hardware separation necessary to comply with the large institutional investor basehighest of Crescent, who has been supportiveregulatory standards. Our outbound applications include the following functions:
▪Predictive dialing – a high-velocity dialing tool commonly utilized by investing alongsidesales organizations, enterprise customers and others obtaining strong forms of consent necessary to reach many customers in a short time with live agents. The system utilizes predictive algorithms, which adjust in real time to pair groups of agents with number of calls and consumer answer patterns.
▪Unattended dialing – a high-velocity voice messaging tool designed to deliver critical time-sensitive messages to consumers. Utilized particularly for the firm in numerous transactions historicallyeducation, health care and could potentiallyfinancial services verticals to remind consumers of appointments and other vital business matters.
▪Outbound Interactive Voice Response (IVR) – a messaging application allowing consumers to opt into conversations with agents based on confirmation of good/services or to serve as an immediate escalation point. Commonly utilized in the financial services and health-care verticals for reminders and ability to speak with a deep sourcecontact center individual.
▪Manual dialing – a strictly manual environment allowing agents to manually initiate a call to consumer via a single click on a phone number and/or a manual entry of future growth capital.phone numbers into the agent phone panel. The manual systems do not contain any capability or capacity to make any other forms of calls and are commonly utilized by an organization unsure of current consent and/or a potential revocation of consent by the consumer.
▪Human Call Initiator - a proprietary outbound dialing system that allows agents to launch calls manually via a single click (i.e., single click/single call). The user interface is optimized to deliver a single phone number to an agent to initiate a call while ensuring that no call is dialed automatically.
•IVR and contact flow – We provide customers the tools to create cross-channel, self-service journeys that are customized for their customers. We offer a wide array of features allowing our customers to customize their IVRs, including drag-and-drop features, over 40 pre-built modules, Text to Speech capabilities, a library of professionally recorded voice prompts, and omnichannel capabilities. Additionally, our API modules within Contact Flow Editor permit customers to use representational state transfer APIs to integrate with existing systems. Our IVR supports a “bring-your-own bot environment” while also providing a number of connectors to leading bot and virtual agent providers.
•Dashboard, Reporting, Wall-Boards – We provide a series of dashboard and reporting interfaces across the entire product suite, with the ability to drill down to each individual interaction. A series of dashboards provide valuable insights by displaying real-time contact center metrics across voice, email, SMS, and chat, including agent performance, tickets created and quality of interactions. The bi-directional nature of the dashboards provides true visibility into the contact center. Agent performance views provide the ability to understand agent status and monitor an agent’s current conversation. The reporting suite offers a number of industry standard and best practice reports along with the capability to filter across multiple dimensions and combine interaction, agent and consumer data elements, providing true insight for enterprise organizations. Wallboards are specifically designed for large scale display options within a contact center, providing insight with a highly configurable interface and real-time alert capabilities.
•SMS Messaging – We provide a comprehensive SMS suite for customers ensuring that multiple use cases across many verticals are met. These offerings ensure that messages are delivered at a high throughput across short-code, long-code, toll-free number and 10-digit long code formats. The platform provides an attachment library and facilitates messages via rich communications systems protocols. Our aggregator-agnostic architecture supports the ability to independently route volume to observe high SLA standards for message delivery. Strategies and hold-out timeframes along with key word response management ensure customer service is always top of mind. The LiveVox Platform provides customers the ability to consistently observe guidelines published by the Cellular Telecommunications and Internet Association and offers customer tools for visibility of opt-ins and opt-outs across the consumer base. A universal inbox is provided to ensure SMS responses are appropriately routed, distributed and managed by agents.
•Email – Our email offerings provide campaign and email response capabilities, ensuring all email interactions are stored at the customer level. The campaign-based function provides an HTML build tool, helping customers easily configure templates, insert variables and ensure content meets brand standards. A universal inbox provides agents access to email responses, eliminating race conditions and ensuring every interaction is joined with a customer profile. We provide the ability to comply with the requirements of the Controlling the Assault of Non-Solicited Pornography And Marketing Act of 2003, and every receipt or removal of consent can be managed within the platform.
•WebChat – WebChat offers our customers the capability of providing service through a web-based or mobile channel, allowing customers to begin conversations instantly through any site. The WebChat product ensures text, images, documents and even screen-shares can be easily shared between consumers and agents to deliver quick problem resolution.
•Virtual Agents & Bots– We provide an environment that offers customers the ability to automate and enhance conversations with consumers. The platform offers three variants of assisted conversations:
◦Managed Virtual Agent – a custom-created virtual agent capability combining Natural Language Processing, Automated Speech (Text) Recognition and Learning Intents & Suggestions paired with human oversight. This offering provides customers a fully managed service of tuning and maintaining Virtual Agents & Bots.
◦Self-Service Virtual Agent – a self-directed model to create a virtual agent and/or bot utilizing a visual layer to prescribe intents, analyze patterns and create new automated flows for the virtual agent and/or bot. This is designed for simpler use cases, quicker deployments and smaller enterprise organizations needing to make small changes quickly.
◦Bring Your Own – provides the ability for our customers to integrate their own virtual agent provider into the LiveVox framework utilizing a low-code environment provided through the LiveVox Platform.
All of the above paths for customers offer three advantages: expedited deployments, enhanced customer experience and ability to deploy against any communication channel. Expedited deployments allow customers in a low-code setting to integrate or connect their virtual agent into the contact center setting and enrich each conversation through utilization of LiveVox CRM data directly within the virtual agent, which ensures the virtual agent has the proper context for many interactions. Enhanced customer experience is driven through virtual agent awareness of customers and their data through the LiveVox CRM. In addition, this CRM ensures seamless hand-offs between virtual agents and human agents within the contact center, should the need to escalate arise. Any of the virtual agent deployments may be set against a single or multiple channels in which customers operate, decreasing the need to build separate logic for each channel and ensuring consistency in virtual agent communication.
•Campaign management – We offer a sophisticated tool for managing segmentation and creating campaigns for customers. The visual editor allows for the creation of a variety of scenarios based on consumer attributes, prior interaction outcomes and compliance-based restrictions. Furthermore, strategies are utilized to optimize calling windows and message delivery based on inputs provided by the customer.
WFO
•Call and screen recording– Provides administrators the capability to record voice conversations as well as agent screens to help facilitate quality management activities, and to help with compliance and audits for customers in highly regulated verticals. A reporting graphical user interface (“GUI”) provides the ability to look up conversations and filter for auditing purposes.
•Business Intelligence – Provides administrators and operators business insight by combining CRM data with operational insight across channels through a combination of more than 150 reports and dashboards. The LiveVox analyzer tool gives analysts insight to map new variables and create key metrics and dashboards to discover valuable insights. A number of machine learning models can also be applied to this tool to optimize enterprise performance.
•Quality management – Provides feedback loops between contact center operators and agents by routing contact center interactions to quality management teams for evaluation and analysis. Quality teams can assign values and create scorecards to evaluate every interaction and provide instant agent feedback to ensure agent performance is optimized, documented, and ultimately improved on. An intuitive interface ensures a connection between quality teams and the agent desktop providing a single system to manage quality management. A learning library supports these efforts, giving operators the ability to assign learning material to further enhance agent conversations.
•Outside Collection Agency (OCA) analytics – Connects enterprise customers and the agencies that service them. This auditing tool provides enterprise customers the ability to track call volumes and call recordings to assess agent performance, compare against other outsourcers and create visibility through a normalized data set.
•Speech and Text analytics (SpeechIQ®)– Allows organizations to accurately and objectively monitor, analyze, and score all agent interactions with one intuitive tool by providing an understanding of call categorization and sentiment. The tool can be used to help identify regulatory risk, poor performance, or customer dissatisfaction.
•Agent Scheduling – Provides an interface for administrators and agents to create, modify, bid, and forecast schedules. The tool provides the ability for customers to forecast needed volumes of agents based on inbound volume as well as set goals for service levels. The agent scheduling capability extends to agents with the ability to view, modify and/or trade shifts amongst other agents.
•CSAT (Customer Satisfaction) – Gives customers the ability to understand consumer sentiment following an interaction, creating custom surveys delivered through the voice channel. A visual GUI provides the ability to analyze results for a deeper understanding at the interaction, agent, or contact center level.
•Administration and APIs – We provide a robust set of APIs allowing customers to operate a number of customer or vertical solutions for consumer communications. The API set is highly scalable, allowing enterprise level customers to utilize it for various use cases including channel communication purposes, agent modification, and creation. A robust set of roles and permissions provide customers control of the LiveVox portal environment, which allows the customer to limit access points and ensure compliance and security standards are met for enterprise organizations.
Professional Services
We offer comprehensive professional services to our customers to assist in the successful implementation and optimization of the LiveVox products. Our professional services include application configuration, system integration, business process optimization, technical support and training. Our customers may use our professional services team for initial implementation of our products or when expanding their use of our application suite.
Being cloud-native reduces implementation time and complexity by removing the need for on-premise hardware or dedicated infrastructure. We believe that we can deploy and optimize our products in significantly less time than required for deployments of legacy on-premise contact center systems. Because of this, our professional services engagements typically focus on optimization and process improvement, rather than installation or logistics. A full contact center suite of products can be implemented by us in as little as three weeks as compared to what we believe to be as much as six months for our competitors.
Our SmartStart Master Portal provides new customers the ability to be up and running in days through better integration and customer training tools, which are available to them on day one of implementation.
Customers
We had approximately 353 customers as of December 31, 2021, including enterprises, Fortune 1,000 financial institutions, and BPO firms. As of December 31, 2021, no single customer represented more than 10% of our revenues. Our enterprise customers span a variety of industries, including financial services (including leading banks and fin-techs), healthcare, consumer/retail, and telecommunications.
Sales and Marketing
Our go-to-market strategy is led by our direct sales force. This team is primarily focused on enterprise and mid-market organizations, which we define as organizations with greater than 50 seats and the estimated potential to spend at least $5,000 per month on our services. We have divided the sales team into three groups: (1) the national sales team comprised of (A) “Hunters” (who are responsible for new logo generation and who generally keep accounts with upsell potential for the first year following initial booking) and (B) “Farmers” (who are responsible for account upsell and retention following the transition from a Hunter) focused on accounts greater than or equal to 250 agents; (2) the mid-market sales team comprised of Hunters and Farmers focused on accounts between 50 and 250 agents; and (3) channel account managers who focus on facilitating sale leads from our increasingly growing channel partner ecosystem. We have developed a targeted and disciplined, outcomes-based land and expand sales strategy designed to enable our sales force to efficiently generate and close net new logo opportunities within our ideal customer profile. Additionally, we have a strategic cadence around upsell and cross-sell opportunities that center on regularly scheduled customer business reviews. These business reviews lead to additional products being showcased/positioned into our existing customer base.
Supporting both the National Account and Mid-Market Hunters is our outbound lead generation team, consisting of Business Development Reps (BDRs) and Sales Development Reps (SDRs). The BDRs work in concert with the Hunters through a specific named account strategy to drive high-quality leads through the sales funnel. The SDRs cultivate and nurture over 100,000 subscriber
companies and prospects in partnership with the sales team while also fielding inbound prospect traffic (web chat and inbound inquiries) in an effort to bring them into the sales funnel as highly qualified leads.
Our marketing team uses a data-driven approach for lead generation and nurturing activities. Through a sophisticated marcom/technology stack, the team focuses on prospects that are the strongest fit and that have the highest propensity to buy. Using intent analytics, we craft streams of content and advertising specifically geared to each prospect and their product interests, in an effort to establish relevant awareness and interaction, and ultimately purchase consideration. To accomplish this, the team employs a multi-faceted approach, including content curation, a full array of digital marketing, trade shows, webinars, industry analyst programs, public relations, and more.
We intend to continue investing in initiatives to grow our team of business consultants, technical account managers, and customer success managers, while building out our marketing capabilities and continuing to improve sales force productivity.
In the third quarter of 2021, LiveVox introduced an indirect marketing team and strategy to support the Channel Sales Team of Channel Account Managers (CAMs) formed in July 2021.
The Channel’s go-to-market strategy is supported as follows:
•Partner Recruitment is supported through strategic marketing agreements with five top national Master Agent/TSB entities that drive access to top contact center reselling agents in our focused regions. Additionally, Channel Marketing supports the execution of numerous partner-facing events in the channel including regional events, roadshows, and industry tradeshows.
•Partner Enablement & Readiness is supported through programs that focus on diverse industrieseducating our partners about LiveVox’s products, differentiators, and sectorsvalue proposition. This is accomplished through participation in partner trainings, regional CCaaS academies, and boot camps.
•End User Demand Generation is supported with the creation of through-partner campaigns and assets that complementempower our management team’s background sostrategic partners to promote LiveVox to their existing and prospective customer bases.
Research and Development
Our research and development drives continuous innovation cycles for our contact center platform. Our functional, industry, and technology experts collaborate with customers and partners to analyze data trends, apply industry best practices, and innovate on new products that result in new features and functions regularly being added to the platform – a process we
can capitalize on their abilityrefer to
identify, acquireas Data Driven Innovation (DDI). With our breadth of deeply integrated contact center products and
implement a growth strategy that will generate excess shareholder returns.OUR INVESTMENT CRITERIA
Consistent with our business strategy,over 325 customers, we have identifieda wealth of data to drive new features for agent and customer experiences, including data analytics, machine learning, and artificial intelligence. These features are bundled and released three times a year.
Our core research and development operations are based in San Francisco, California; Medellin, Colombia; and Bangalore, India. This geographic footprint allows for recruitment from broad and diverse talent pools.
Technology and Operations
Our highly scalable SaaS platform was developed with the
following general criteriaend user in mind. Our platform uses market-oriented research, as well as development and
guidelines that we believe are important in evaluating prospective target businesses. We will use these criteriaoperational experience. Our platform is comprised of in-house developed intellectual property, and
guidelines in evaluating acquisition opportunities, but we may decideopen source and commercially available components. Our platform is designed to
enter into an initial business combination with a target business that does not meet these criteriabe redundant and
guidelines.Favorable growth dynamics. We intend to acquire a business that has both demonstrated revenue growth historically and possesses favorable future growth characteristics, combined with a durable business model that is resistant to macroeconomic volatility. We will lookscalable, to leverage cloud-native capabilities in support of business continuity and disaster recovery (BCDR) functionality, and to support multi-tenancy from the skill setsground up. In addition, the architecture is designed to support capacity increases on demand, facilitate continuous integration and continuous development (CI/CD), and permit life cycle management with minimal or no impact to customers’ use of our products.
We currently deliver our products globally from five public cloud third-party data center facilities located in Virginia, Ohio, Oregon, Canada, and Germany. Our infrastructure is designed to support real-time mission-critical telecommunications, applications, and operational support systems as well as multiple customer connectivity methods over carrier services as well as direct connect. Our infrastructure is built with redundant, fault-tolerant components in distinct and secure availability zones forming protective layers for our applications and customer data.
We have implemented and maintained an operations team that focuses on four primary pillars: capacity management, team to help accelerateperformance, security, and availability. The 24x7x365 operations teams ensure continuous health and reliability by monitoring our data centers, applications, and carrier services for potential issues, as well as manage capacity, evaluate potential security incidents, and maintain the sales growthoverall health and integrity of any business combination, given their extensive experience formulating and implementing growth initiatives.our platform environments.
Competition
We believe that companies with consistent cash flow characteristics provide management teams with increased flexibility, whetherthe cloud-based customer engagement and communications industry is highly competitive, and we expect competition to pursue attractive acquisition opportunities, fund growth initiatives, expand horizontallyincrease in the future. We face competition from established providers as well as emerging startups focusing on niche services and channels. Our key competitors include:
•traditional on-premise hardware business communications providers such as Avaya Inc., Alvaria, Cisco Systems, Inc., Mitel Networks Corporation, and partners that resell or vertically or optimize capital structures. Importantly, attractive cash flows help businesses sustain operations over the course of the business cycle.license their software;
Strong management teams. Our investment history has been built upon partnering with talented management teams to grow businesses•cloud-based contact center software providers such as Five9, NICE InContact, Genesys, Serenova, 8x8, RingCentral and create shareholder value. We also believe that properly aligning incentives with management is crucialTalkdesk;
•digital engagement providers such as eGain Corporation, Lithium Technologies and has led to positive outcomes for companies, shareholdersLivePerson; and management teams alike historically.
•developer-focused software providers such as Amazon, and Twilio.
Underappreciated value and/or sub-optimal capital structures. We intend to target companies that could benefit from the unique skill set and experienceMost of our management team through increased investment capacity coupleddirect competitors have greater name recognition, longer operating histories, more diversified customer bases and larger marketing and development budgets. As a result, these competitors may have greater credibility with effective Sponsorship. We will leverage our long historyexisting and potential customers and may be better able to withstand an extended period of providing capital structuredownward pricing pressure. Additionally, with cloud-deployment solutions through either capital infusions, creative and/or unique structures or recapitalizations to optimize a company’s balance sheetgaining more adherents and increase equity value.
Benefit from access to public equity and corporate governance leadership. We intend to target companies that will benefit from having public equity available to initiate accretive acquisitions. Our Chief Executive Officer has extensive experience assisting companies with add-on acquisitions, having worked with portfolio companies that completed more than 40 add-on acquisitions during his tenure at LGP. In addition,technology advancing rapidly, we intend to take advantage ofexpect intensified competition in the vast governance experience of our management team, who have collectively held a governance position at more than 50 public and private companies.
future.Poised for transformative growth. We plan to seek companies that are at an inflection point in their own lifecycle, whether on the cusp of pursing a sizable acquisition, making a significant investment to expand their product offering and addressable market or expanding their geographic footprints. We believe the potential target would benefit fromprincipal competitive factors in our markets include, but are not limited to:
•platform reliability and scalability;
•breadth and depth of platform features;
•compliance and security capabilities;
•ease of administration, integration, and use;
•ease and speed of deployment;
•domain expertise in contact center operations;
•strength of third-party partnership ecosystem;
•artificial intelligence capabilities; and
•scale and expertise offered to the experiencegrowing market for customer engagement and contact center services.
Intellectual Property
We protect our proprietary information through a combination of contractual agreements (containing confidentiality provisions and licensing restrictions) and trade secret laws. We protect our brand through contractual provisions that require our consent before use of our management team, whobrand, as well as through trademark registrations. Additionally, all LiveVox employees sign agreements containing confidentiality and intellectual property assignment provisions, whereby any intellectual property they might develop as LiveVox employees is assigned to LiveVox.
As of December 31, 2021, our intellectual property portfolio included four registered U.S. trademarks, two pending trademark applications, and one issued U.S. patent.
We use third-party technology to support our software platform under various license agreements with those third parties. These license agreements contain standard and customary licensing rights to use the technology. Third-party infringement claims pertaining to this third-party technology could have a demonstrated track recorddisruptive effect on our operations.
Seasonality
We believe that there can be structural factors that may cause our revenues in the first half of successfully guiding companies througha year to be lower than our revenues in the second half of the year. During the year ended December 31, 2021, 52% of our total revenues were generated in the second half of the year. We believe this criticalis due to steadily increasing recurring revenue on our platform that typically drives higher revenue in the second half of each year.
Human Capital Resources
Our workforce is an integral part of our success, with a team of professionals including those focused on technology and operations, research and development, sales and marketing and general and administrative functions. As of December 31, 2021, our workforce consisted of 672 full-time employees, comprised of 239 in Technology and Operations, 174 in Research and Development, 197 in Sales and Marketing and 62 in General and Administrative.
We consider our LiveVox people community and the way we work to support each other and serve our customers to be the foundation of our success. The key human capital measures and objectives that we focus on in managing our business are: maintaining a strong team-first company culture, increasing our diversity, inclusion and belonging, offering fair and competitive compensation and
benefits, investing in people and organizational development, protecting and enriching employee health and wellness, and sustaining a culture of respectful and effective communications.
Team-First Company Culture
We built a high-performance culture on our foundational aspirations expressed in the “LiveVox Way”: a combination of our values, operational priorities and strategic intent. These are:
•Develop great people;
•Marry innovation and discipline;
•Data-driven innovation cycle;
•Build sustainable competitive advantage; and
•Differentiated cloud-first company
The LiveVox Way guides what we invest in, how we work, what we measure and improve to serve all our stakeholders: customers, teammates, stockholders, suppliers, and the communities in which we operate.
Maintaining a culture where innovation thrives is a requirement for all SaaS companies. LiveVox pairs strong business planning discipline with agile development cycles to rapidly deliver innovative solutions our customers want. We align work plans vertically and horizontally throughout the organization using an OKR (Objectives and Key Results) framework. Our company-wide objectives and key measures of success apply and are visible to teams around the world. This strong operational alignment provides great visibility to manage our business and increases our competitive advantage. We quickly identify opportunities to exploit, and obstacles to remove, and we coordinate across teams to effectively manage change and drive higher performance.
LiveVox regularly recognizes teams and individuals for supporting each other and our customers, achieving promotions and other career milestones and even making it through a challenge. In addition to regular team and cross-functional operations calls, we conduct monthly global All Hands calls to keep everyone current, answer questions, and celebrate our teammates – shining the spotlight on our most valuable assets: our people.
We collect feedback from our people to better understand and improve the LiveVox career experience and to identify opportunities to strengthen our culture and our business results. 93% of employees have generally participated in our annual employee survey. Our engagement scores with employees have risen year over year for the last 4 years as we apply our ideas to improve the LiveVox experience. As of December 31, 2021, we have best-in-class career experience with an overall employee engagement favorability score of 88%. We regularly pulse our new hires, managers, and teammates to understand their lifecycle.interview and onboarding experiences, how our learning and development programs are working, and what more we can do to support them.
We are proud of the consistently distinctive efforts of our global teams and grateful for their loyalty. For many years, LiveVox has maintained an annual employee retention rate of over 90%. As of December 31, 2021, over 10% of our employees had been with our company over 10 years, and another estimated 27% had a tenure of between 5 and 10 years. This human continuity increases our ability to build centers of excellence, effectively transfer deep expertise in LiveVox solutions, and nurture a strong teamwork ethic. With our year-over-year growth, we have also added new talent, new skills, and new perspectives to our teams.
Diversity, Inclusion and Belonging at LiveVox
Being a global organization, diversity, inclusion, and belonging are part of the fabric of our culture. We also want to increase diversity at LiveVox, so we have implemented a strategy to do so.
First, we are boosting our cultural competence in seeking out new perspectives and ideas and incorporating them into our business. We do this by learning about and experiencing different cultural traditions and approaches to work. LiveVox hosts monthly events in alignment with our diversity calendar, sponsors Employee Affinity Groups with diverse interests, and has a growing “hands on” community outreach program in every country where we have employees. Activities connect employees to diverse and often under-served groups, fostering a greater sense of cultural appreciation, sensitivity, and a more personally enriching environment for everyone.
We actively teach how to seek out and incorporate new perspectives and ideas. Our People Operations Department delivers new hire and ongoing training in effectively giving and asking for feedback, how to be aware of and prevent unconscious bias, and data-driven performance management. These programs improve communication and foster an inclusive company culture which, in turn, helps us to attract and retain diverse talent.
We have clear anti-discrimination/harassment policies, and we enforce them. Our policies are clearly communicated in our Employee Handbook and Governance Policies – but we go further. During new hire on-boarding we clarify expected and unacceptable conduct. We conduct mandatory management training on anti-discrimination/harassment, and we train managers on how unconscious bias impacts business decisions and how to prevent it. Incidents are rare at LiveVox, but when they occur, our processes and practices ensure everyone in the process knows we take these situations very seriously. The tone starts at the top. Our leadership team walks the walk so everyone understands both what is expected of them, and the support they can count on if there are issues.
We intendare passionate about, and invest in, a fair and level playing field. Equal pay, equal equity and equal career opportunities are foundational to target companies operating within industries undergoing meaningful transformation.attracting and retaining a diverse workforce. Our people team maintains global job, salary and equity structures and decision-supporting tools and train managers on how to use them. Every compensation decision—at job offer, merit review, transfer and promotion—is made in the context of a job-level and internal comparator review. We conduct thorough, annual compensation cohort analyses to address outliers that may emerge.
In 2021, over 20% of our hires were identified by internal recruiters who source talent from diverse groups, targeting diverse talent in passive recruiting strategies.
The success of any project depends on measuring progress. The last element of our strategy is to monitor the success of our diversity and inclusion initiatives. Employee surveys are a great way to do this. We also compare our metrics to external benchmarks for an objective view of our progress.
Government Regulation
The following summarizes important, but not all, regulations that could impact our operations. Regulations are subject to judicial proceedings and to legislative and administrative proposals that could materially affect how LiveVox and others in our industry operate. The specific impact, however, cannot be predicted at this time.
The Federal Communications Commission (“FCC”) has jurisdiction over interstate and international telecommunications services and Voice over Internet Protocol (“VoIP”) telephony in the U.S. The FCC has not classified all Internet Protocol (“IP”)-enabled or VoIP communications services as unregulated information services or as regulated telecommunications services. Based on the nature of our IP-enabled services, we believe that many of those services are information services. Nonetheless, we acknowledge that the regulatory classification of IP-enabled services remains uncertain, and changes to the regulatory treatment of IP-based communications services could significantly affect our investment process,business.
LiveVox is registered with the FCC and began providing interconnected VoIP services in the second half of 2021. The FCC has imposed various regulatory requirements on interconnected VoIP providers that previously applied only to traditional telecommunications providers, such as obligations to provide 911 functionality, to contribute to the federal Universal Service and Telecommunications Relay Services Funds, to comply with regulations relating to local number portability, to abide by the FCC’s service discontinuance rules and to abide by the regulations concerning Customer Proprietary Network Information, outage reporting, access for persons with disabilities, the Communications Assistance for Law Enforcement Act and expanded obligations with respect to the transmission of emergency calls. In some instances, these regulations indirectly affect LiveVox because they directly apply to its customers or its suppliers. We cannot predict whether the FCC will impose additional requirements, regulations or charges upon interconnected VoIP services or other services that may include some voice functionality. Our IP-enabled services (including, where applicable, interconnected VoIP services), or customers who use such services, are or may be subject to some or all of the following regulations:
•The Telephone Consumer Protection Act of 1991 (TCPA), which has been refined overregulates the use of automatic telephone dialing systems and artificial or prerecorded voice technologies to place calls and texts to wireless and residential landline telephone numbers. The FCC, the Federal Trade Commission and state attorneys general have the authority to enforce compliance with the TCPA. Moreover, the TCPA also allows aggrieved private parties to directly seek civil remedies and seek statutory-defined damages, which may be significant, for calls or text messages received without recipients’ proper consent. The scope and interpretation of these laws and regulations is inconsistent and continues to evolve and develop.
•The TRACED Act, which is designed to limit “robocalls” to consumers through a variety of mechanisms, such as call authentication requirements. The TRACED Act directs the FCC to conduct a number of business cycles, will allow usdifferent rulemaking proceedings and increases the FCC’s enforcement authority. The FCC adopted new rules and is conducting several proceedings to properly identify the key characteristics of companies that will thrive in a changing industry environment. In addition, we expect to utilize the extensive networkunderstand and relationships of our Sponsor to conduct deep due diligence, focusing on key themes, including secular growth dynamicsaddress fraud and the competitive landscape.
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant. In the event that we decide to enter into an initial business combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria in our stockholder communications related to an initial business combination, which would beabuse in the form of tender offer documentsillegal robocalling, and we are continuing to assess the impact of such proceedings and subsequent regulations on our business. Currently, recently adopted rules allow carriers to block certain calls that they determine to be unlawful or proxy solicitation materials thatunwanted. The TRACED Act also revised the FCC’s ability to enforce the TCPA, and we would file withcannot predict the United States Securities and Exchange Commission (the “SEC”).
INITIAL BUSINESS COMBINATION
NASDAQ listing rules require that an initial business combination must be with one or more target businesses that together have an aggregate fair market value equal to at least 80%impact of the valuerecent rules adopted by the FCC or what the impact of new rules may be on our business at this time.
•The Telemarketing Sales Rule, which governs the Trust Account (excluding any deferred underwriters feesmanner of telemarketing outreach.
•FCC Universal Service regulations, which implement universal service support for access to communications services in rural and taxes payable on the income earned on the Trust Account)high-cost areas and to low-income consumers at the time of our signing a definitive agreement in connection with an initial business combination. We referreasonable rates; and access to this as the 80% of net assets test. If our board of directors is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of the Financial Industry Regulatory Authority (“FINRA”), or from an independent accounting firm, with respect to the satisfaction of such criteria.We anticipate structuring an initial business combination so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the outstanding equity interests or assets of the target business or businesses. We may, however, structure an initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interestadvanced communications services by schools, libraries and rural health care providers. Any change in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company ownsFCC assessment methodology, or acquires 50% or more of the voting securities of the target, our stockholders prior to an initial business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in an initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to an initial business combination could own less than a majority of our outstanding shares subsequent to an initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or
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acquired is what will be taken into account for purposes of the 80% of net assets test. If an initial business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses.
OUR INITIAL BUSINESS COMBINATION PROCESS
In evaluating a prospective target business, we expect to conduct a thorough due diligence review which will encompass, among other things, meetings with incumbent management, document reviews, inspection of facilities, as well as a review of financial, operational, legal and other information which will be made available to us. We will also utilize our operational and capital planning experience.
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our Sponsor, officers or directors. In the event we seek to complete an initial business combination with a company that is affiliated with our Sponsor, officers or directors, we, or a committee of independent and disinterested directors, will obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm, that an initial business combination is fair to our company from a financial point of view.
If members of our management team acquire public shares or warrants after the Initial Public Offering, they may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate an initial business combination.
Each of our officers and directors presently has, and any of them in the future may have additional fiduciary or contractual obligations to another entity pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor these obligations to present such business combination opportunity to such entity, and only present it to us if such entity rejects the opportunity. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our business combination. Our amended and restated certificate of incorporation provides that, prior to the consummation of an initial business combination, we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue and the director or officer is permitted to refer that opportunity to us without violating any legal obligation. Our officers and directors would continue to be subject to all other fiduciary duties owed to us and our stockholders and no other waivers of their respective fiduciary obligations have been provided to any such officers and directors. We do not have any plan for any waiver of the fiduciary duties of our officers and directors post-business combination.
Our Sponsor, executive officers and directors have agreed, pursuant to a letter agreement, not to participate in the formation of, or become an officer or director of, any other special purpose acquisition company until we have entered into a definitive agreement regarding an initial business combination or we have failed to complete an initial business combination by the Extension Date.
Sourcing of Potential Business Combination Targets
We believe our management team’s significant operating and transaction experience and relationships with companies will provide us with a substantial number of potential business combination targets. Over the course of their careers, the members of our management team have developed a broad network of contacts and corporate relationships around the world. This network has grown through the activities of our management team sourcing, acquiring, financing and selling businesses, our management team’s relationships with sellers, financing sources and target management teams and the experience of our management team in executing transactions under varying economic and financial market conditions.
We believe this network provides our management team with a robust and consistent flow of acquisition opportunities which were proprietary or where a limited group of investors were invited to participate in the sale process. We believe that the network of contacts and relationships of our management team will provide us with important sources of acquisition opportunities. In addition, we anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment market participants, private equity funds and large business enterprises seeking to divest non-core assets or divisions.
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our Sponsor, officers or directors, or making the acquisition through a joint venture or other form of shared ownership with our Sponsor, officers or directors. In the event we seek to complete an initial business combination with a target that is affiliated with our Sponsor, officers or directors,
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we, or a committee of independent and disinterested directors, would obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm, that such an initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.
As more fully discussed in “Conflicts of Interest” below, if any of our officers or directors becomes aware of a business combination opportunity that falls within the line of business of any entity to which he or she has pre-existing fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. Our officers and directors currently have fiduciary duties or contractual obligations to various entities that may present a conflict of interest. As a result of these duties and obligations, situations may arise in which business opportunities may be given to one or more of these other entities prior to being presented to us.
Our executive offices are located at 11100 Santa Monica Boulevard, Suite 2000, Los Angeles, CA 90025 and our telephone number is (310) 235-5900.
Status as a Public Company
We believe our structure will make us an attractive business combination partner to target businesses. As an existing public company, we offer target businesses an alternative to the traditional Initial Public Offering through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination. In this situation, the owners of the target business would exchange their shares of stock in the target business for shares of our stock or for a combination of shares of our stock and cash, allowing us to tailor the consideration to the specific needs of the sellers. Although there are various costs and obligations associated with being a public company, we believe target businesses will find this method a more certain and cost effective method to becoming a public company than the typical Initial Public Offering. In a typical Initial Public Offering, there are additional expenses incurred in marketing, road show and public reporting efforts that may not be present to the same extent in connection with a business combination with us.
Furthermore, once a proposed business combination is completed, the target business will have effectively become public, whereas an Initial Public Offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could delay or prevent the offering from occurring. Once public, we believe the target business would then have greater access to capital and an additional means of providing management incentives consistent with stockholders’ interests. It can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented employees.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of the Initial Public Offering, (b) in which we have total annual gross revenue of at least $1,070,000,000, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700,000,000 as of the end of the prior fiscal year’s second quarter, and (2) the date on which we have issued more than $1,000,000,000 in non-convertible debt securities during the prior three-year period.
Financial Position
With funds available for a business combination initially in the amount of $250,000,000 assuming no redemptions and after payment of $8,750,000 of deferred underwriting commissions, we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt ratio. Because we are able to complete an initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, we have not taken any steps to secure third party financing and there can be no assurance it will be available to us.
Effecting an initial business combination
We are not presently engaged in, and we will not engage in, any operations for an indefinite period of time following the Initial Public Offering. We intend to effectuate an initial business combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants and the forward purchase securities, our capital stock, debt or a combination of these as the consideration to be paid in an initial business combination. We may seek to complete an initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.
If an initial business combination is paid for using equity or debt securities or not all of the funds released from the Trust Account are used for payment of the consideration in connection with an initial business combination or used for redemption of our public shares, we may apply the balance of the cash released to us from the Trust Account for general corporate purposes, including for maintenance or expansion of operations of post-transaction businesses, the payment of principal or interest due on indebtedness incurred in completing an initial business combination, to fund the purchase of other companies or for working capital.
We have not identified any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. Certain members of our management team are employed by Crescent or one of its affiliates. Messrs. Jean-Marc Chapus and Christopher G. Wright are continuously made aware of potential business opportunities, one or more of which we may desire to pursue, for a business combination, but we have not (nor has anyone on our behalf) contacted, or had any discussions, formal or otherwise with, any prospective target business with respect to a business combination transaction with us.
We may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of an initial business combination, and we may effectuate an initial business combination using the proceeds of such offering rather than using the amounts held in the Trust Account.
In the case of an initial business combination funded with assets other than the Trust Account assets, our tender offer documents or proxy materials disclosing the business combination would disclose the terms of the financing and, only if required by law, we would seek stockholder approval of such financing. There are no prohibitions on our ability to raise funds privately or through loans in connection with an initial business combination.
Selection of a Target Business and Structuring of aN initial business combination
NASDAQ listing rules require that an initial business combination must be with one or more target businesses that together have an aggregate fair market value equal to at least 80% of the value of the Trust Account (excluding any deferred underwriters fees and taxes payable on the income earned on the Trust Account) at the time of our signing a definitive agreement in connection with an initial business combination. The fair market value of the target or targets will be determined by our board of directors based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation or value of comparable businesses. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of FINRA, or from an independent accounting firm, with respect to the satisfaction of such criteria. Our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses, although we will not be permitted to effectuate an initial business combination with another blank check company or a similar company with nominal operations.
In any case, we will only complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquire a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be taken into account for purposes of the 80% of net assets test. There is no basis for investors in the Initial Public Offering to evaluate the possible merits or risks of any target business with which we may ultimately complete an initial business combination.
To the extent we effect an initial business combination with a company or business that may be financially unstable or in its early stages of development or growth we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
In evaluating a prospective target business, we expect to conduct a thorough due diligence review which will encompass, among other things, meetings with incumbent management, document reviews, inspection of facilities, as well as a review of financial, operational, legal and other information, which will be made available to us.
The time required to select and evaluate a target business and to structure and complete an initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which an initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination.
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Lack of Business Diversification
For an indefinite period of time after the completion of an initial business combination, the prospects for our success may depend entirely on the future performance of a single business.
Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. By completing an initial business combination with only a single entity, our lack of diversification may:
subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after an initial business combination; and
cause us to depend on the marketing and sale of a single product or limited number of products or services.
Limited Ability to Evaluate the Target’s Management Team
Although we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting an initial business combination with that business, our assessment of the target business’s managementapplicability of the FCC assessment methodology to our business, may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members ofaffect our management team, if any, in the target business cannot presently be stated with any certainty. Whilerevenue and expenses, but at this time, it is not possible that one or more of our directors will remain associated in some capacity with us following an initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to an initial business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating topredict the operations of the particular target business.
We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of an initial business combination.
Following an initial business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to Approve Our Business Combination
We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC. However, we will seek stockholder approval if it is required by applicable law or stock exchange rules, or we may decide to seek stockholder approval for business or other reasons. Presented in the table below is a graphic explanation of the types of initial business combinations we may consider and whether stockholder approval is currently required under Delaware law for each such transaction.
Type of Transactions
| | Whether Stockholder Approval is Required
|
Purchase of assets
| | No
|
Purchase of stock of target not involving a merger with the company
| | No
|
Merger of target into a subsidiary of the company
| | No
|
Merger of the company with a target
| | Yes
|
Under NASDAQ’s listing rules, stockholder approvalextent LiveVox would be required for an initial business combinationaffected, if for example:
at all. •Federal Trade Commission enforcement authority and regulations, which generally relate to advertising, privacy practices, and avoiding unfair and deceptive trade practices.
•The Fair Debt Collections Practices Act (FDCPA), which governs the manner of 20% ofthird-party debt collections. Regulation F, which implements the FDCPA and which took effect on November 30, 2021, governs third-party debt collectors and, among other things, limits the number of shares of Class A common stock then outstanding (other than incall attempts that a public offering);
any of our directors, officers or substantial stockholders (as defined by NASDAQ listing rules) has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the target business or assets to be acquired or otherwise and the present or potential issuance of common stock could result in an increase in outstanding shares of common stock or voting power of 5% or more; or
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the issuance or potential issuance of common stock will result in our undergoing a change of control.
The decision as to whether we will seek stockholder approval of a proposed business combination in those instances in which stockholder approval is not required by law will be made by us, solely in our discretion, and will be based on business and legal reasons, which include a variety of factors, including, but not limited to:
the timing of the transaction, including in the event we determine stockholder approval would require additional time and there is either not enough time to seek stockholder approval or doing so would place the company at a disadvantage in the transaction or result in other additional burdens on the company;
the expected cost of holding a stockholder vote;
the risk that the stockholders would fail to approve the proposed business combination;
other time and budget constraints of the company; and
additional legal complexities of a proposed business combination that would be time-consuming and burdensome to present to stockholders.
Permitted Purchases of Our Securities
In the event we seek stockholder approval of an initial business combination and we do not conduct redemptions in connection with an initial business combination pursuant to the tender offer rules, our Sponsor, directors, officers, advisors or any of their affiliatesdebt collector may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of an initial business combination. There is no limit on the number of shares such persons may purchase. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. In the event our initial stockholders, directors, officers, advisors or any of their affiliates determine to make any such purchases at the time of a stockholder vote relating to an initial business combination, such purchases could have the effect of influencing the vote necessary to approve such transaction. None of the funds in the Trust Account will be used to purchase shares in such transactions. They will not make any such purchases when they are in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. Subsequent to the consummation of the Initial Public Offering, we will adopt an insider trading policy which will require insiders to (1) refrain from purchasing securities during certain blackout periods and when they are in possession of any material non-public information and (2) to clear all trades with our legal counsel prior to execution. We cannot currently determine whether our insiders will make such purchases pursuant to a Rule 10b5-1 plan, as it will be dependent upon several factors, including but not limitedconsumer to seven calls per account within a seven-day period. Once the timing and size of such purchases. Depending on such circumstances, our insiders may either make such purchases pursuant to a Rule 10b5-1 plan or determine that such a plan is not necessary.
In the event that our Sponsor, directors, officers, advisors or any of their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules.
The purpose of such purchases could be to (1) vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of an initial business combination or (2) satisfy a closing condition in an agreementdebt collector makes actual contact with a target that requires us to have a minimum net worth or a certain amount of cash atconsumer, the closing of an initial business combination, where it appears that such requirement would otherwise not be met. This may result in the completion of an initial business combination thatdebt collector may not otherwise have been possible.
In addition, if such purchases are made,call the public “float” of our common stock may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Our Sponsor, officers, directors, advisors and/or any of their affiliates anticipateconsumer again about that they may identify the stockholders with whom our Sponsor, officers, directors, advisors or any of their affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption requests submitted by stockholders following our mailing of proxy materials in connection with an initial business combination. To the extent that our Sponsor, officers, directors, advisors or any of their affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their election to redeem their sharessame account for a pro rata share of the Trust Account or vote against an initial business combination. Such persons would select the stockholders from whom to acquire shares based on the number of shares available, the negotiated price per shareseven-day period.
•Various privacy and such other factors as any such person may deem relevant at the time of purchase. The price per share paid in any such transaction may be different than the amount per share a public stockholder would receive if it elected to redeem its shares in connection with an initial business combination. Our Sponsor, officers, directors, advisors or any of their affiliates will purchase shares only if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.Any purchases by our Sponsor, officers, directors and/or any of their affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will be made only to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our Sponsor, officers, directors and/or any of their affiliates will not make purchases of common stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act.
Redemption Rights For Public Stockholders Upon Completion of an initial business combination
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of common stock upon the completion of an initial business combination at a per share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of an initial business combination, including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. At completion of the business combination, we will be required to purchase any public shares properly delivered for redemption and not withdrawn. The amount in the Trust Account is initially anticipated to be $10.00 per public share. The per share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. Our Sponsor has entered into a letter agreement with us, pursuant to which it has agreed to waive its redemption rights with respect to its 6,175,000 shares of Class F common stock (“Founder Shares”) and any public shares it may acquire in connection with the completion of an initial business combination. Our directors and officers have entered into letter agreements similar to the one signed by our Sponsor.
Manner of Conducting Redemptions
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of an initial business combination either: (1) in connection with a stockholder meeting called to approve the business combination; or (2) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factorsdata protection regulations
such as the timingHealth Insurance Portability and Accountability Act, General Data Protection Regulation (GDPR), and California Consumer Privacy Act (CCPA). •Consumer Financial Protection Bureau (CFPB) regulations
•Office of the transaction and whether the termsComptroller of the transaction would require us to seek stockholder approval under applicable law or stock exchange listing requirement. Asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would typically require stockholder approval. We intend to conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC unless stockholder approval is required by applicable law or stock exchange rules or we choose to seek stockholder approval for business or other reasons.If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other reasons, we will, pursuant to our amended and restated certificate of incorporation:
Currency (OCC) regulations conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers; and
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file tender offer documents with the SEC prior to completing an initial business combination which contain substantially the same financial and other information about an initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies.
Upon the public announcement of an initial business combination, we and our Sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of our Class A common stock in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule 14e-5 under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete an initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than a specified number of public shares, which number will be based on the requirement that we may not redeem public shares in an amount that would cause our net tangible assets to be less than $5,000,001, after payment of the deferred underwriting commission (so that we do not then become subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to an initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete such initial business combination.
If, however, stockholder approval of the transaction is required by applicable law or stock exchange rules, or we decide to obtain stockholder approval for business or other reasons, we will, pursuant to our amended and restated certificate of incorporation:
conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules; and
file proxy materials with the SEC.
We expect that a final proxy statement would be mailed to public stockholders at least 10 days prior to the stockholder vote. However, we expect that a draft proxy statement would be made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions in conjunction with a proxy solicitation. Although we are not required to do so, we currently intend to comply with the substantive and procedural requirements of Regulation 14A in connection with any stockholder vote even if we are not able to maintain our NASDAQ listing or Exchange Act registration.
In the event that we seek stockholder approval of an initial business combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders with the redemption rights described above upon completion of an initial business combination.
If we seek stockholder approval, we will complete an initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business combination. In such case, pursuant to the terms of a letter agreement entered into with us, our initial stockholders have agreed (and their permitted transferees will agree) to vote their Founder Shares and any public shares held by them in favor of an initial business combination. Our directors and officers also have agreed to vote in favor of an initial business combination with respect to public shares acquired by them, if any. We expect that at the time of any stockholder vote relating to an initial business combination, our initial stockholders and their permitted transferees will own at least 20% of our outstanding shares of common stock entitled to vote thereon. Each public stockholder may elect to redeem their public shares without voting and, if they do vote, irrespective of whether they vote for or against the proposed transaction. In addition, our initial stockholders have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to their Founder Shares and any public shares held by them in connection with the completion of a business combination. Our directors and officers have entered into letter agreements similar to the one signed by our initial stockholders with respect to public shares acquired by them, if any.
Our amended and restated certificate of incorporation provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we do not then become subject to the SEC’s “penny stock” rules). Redemptions of our public shares•Various State Regulations LiveVox may also be subject to a higher net tangible asset teststate laws and regulations affecting certain communications services or cash requirement pursuant to an agreement relating to an initialother parts of its business, combination. Forincluding for example the proposed business combination may require: (1) cash consideration to be paidstate requirements that are similar to the target or its owners; (2) cash to be transferred to the target for working capital or other general corporate purposes; or (3) the retentiontypes of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof.
Limitation on Redemption Upon Completion of An initial business combination if We Seek Stockholder Approval
Notwithstanding the foregoing, if we seek stockholder approval of an initial business combination and we do not conduct redemptions in connection with an initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to Excess Shares. We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed business combination as a means to force us or our Sponsor or its affiliates to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 15% of the shares sold in the Initial Public Offering could threaten to exercise its redemption rights if such holder’s shares are not purchased by us or our Sponsor or its affiliates at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 15% of the shares sold in the Initial Public Offering, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete an initial business combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against an initial business combination.
Tendering Stock Certificates in Connection with a Tender Offer or Redemption Rights
We may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents or proxy materials mailed to such holders, or up to two business days prior to the vote on the proposal to approve the business combination in the event we distribute proxy materials or to deliver their shares to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, rather than simply voting against an initial business combination at the holder’s option. The tender offer or proxy materials, as applicable, that we will furnish to holders of our public shares in connection with an initial business combination will indicate whether we are requiring public stockholders to satisfy such delivery requirements. Accordingly, a public stockholder would have from the time we send out our tender offer materials until the close of the tender offer period, or up to two business days prior to the vote on the business combination if we distribute proxy materials, as applicable, to tender its shares if it wishes to seek to exercise its redemption rights. Pursuant to the tender offer rules, the tender offer period will be not less than 20 business days and, in the case of a stockholder vote, a final proxy statement would be mailed to public stockholders at least 10 days prior to the stockholder vote. However, we expect that a draft proxy statement would be made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions in conjunction with a proxy solicitation. Given the relatively short exercise period, it is advisable for stockholders to use electronic delivery of their public shares.
There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System. The transfer agent will typically charge the tendering broker $80.00 and it would be up to the broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.
The foregoing is different from the procedures used by many blank check companies. In order to perfect redemption rights in connection with their business combinations, many blank check companies would distribute proxy materials for the stockholders’ vote on an initial business combination, and a holder could simply vote against a proposed business combination and check a box on the proxy card indicating such holder was seeking to exercise his or her redemption rights. After the business combination was approved, the company would contact such stockholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the stockholder then had an “option window” after the completion of the business combination during which he or she could monitor the price of the company’s stock in the market. If the price rose above the redemption price, he or she could sell his or her shares in the open market before actually delivering his or her shares to the company for cancellation. As a result, the redemption rights, to which stockholders were aware they needed to commit before the stockholder meeting, would become “option” rights surviving past the completion of the business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming holder’s election to redeem is irrevocable once the business combination is approved.
Any request to redeem such shares, once made, may be withdrawn at any time up to the date set forth in the tender offer materials or the date of the stockholder meeting set forth in our proxy materials, as applicable. Furthermore, if a holder of a public share delivered its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly after the completion of an initial business combination.
If an initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the Trust Account. In such case, we will promptly return any certificates delivered by public holders who elected to redeem their shares.
If an initial business combination is not completed, we may continue to try to complete a business combination with a different target until the Extension Date.
Redemption of Public Shares and Liquidation if No initial business combination
Our amended and restated certificate of incorporation provides that we will have until the Extension Date to complete an initial business combination. If we are unable to complete an initial business combination by the Extension Date, we will: (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (3) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and thefederal requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete an initial business combination by the Extension Date.
Our initial stockholders have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by the Extension Date. However, if our initial stockholders acquire public shares after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such public shares if we fail to complete an initial business combination by the Extension Date.
Our Sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete an initial business combination by the Extension Date, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we do not then become subject to the SEC’s “penny stock” rules).
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the proceeds held outside the Trust Account which was $306,626 as of December 31, 2020, although we cannot assure you that there will be sufficient funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, todiscussed above.
•Various International Regulations To the extent that there is any interest accrued inwe provide products or services internationally, we are subject to additional foreign regulations that may be ambiguous or more restrictive than domestic law and regulations, such as the Trust Account not required to pay taxes we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costsGDPR.
The application and
expenses.If we were to expend allinterpretation of the net proceeds offederal, state, and international laws and regulations to which LiveVox, its products and its customers are subject are often uncertain, particularly given the Initial Public Offeringnew and the sale of the Private Placement Warrants, other than the proceeds depositedrapidly evolving industry in the Trust Account,which LiveVox operates. Because these federal, state, and without taking into account interest, if any, earned on the Trust Account, the per share redemption amount received by stockholders upon our dissolution would be approximately $10.00. The proceeds deposited in the Trust Account could, however, become subjectinternational laws and regulations have continued to the claims of our creditors which would have higher priority than the claims of our public stockholders. We cannot assure you that the actual per share redemption amount received by stockholders will not be substantially less
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than $10.00. See “Risk Factors—If third parties bring claims against us, the proceeds held in the Trust Account could be reduceddevelop and the per share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors described above. Under Section 281(b) of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.
Although we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of our public stockholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the Trust Account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. WithumSmith+Brown, PC (“Withum”), our independent registered public accounting firm, and the underwriters of the Initial Public Offering will not execute agreements with us waiving such claims to the monies held in the Trust Account.
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where we are unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. In order to protect the amounts held in the Trust Account, our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent registered public accounting firm) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.00 per public share or (2) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our franchise and income taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under our indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and believe that our Sponsor’s only assets are securities of our company and, therefore, our Sponsor may not be able to satisfy those obligations. We have not asked our Sponsor to reserve for such obligations. None of our other officers will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
In the event that the proceeds in the Trust Account are reduced below: (1) $10.00 per public share; or (2) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay our franchise and income taxes, and our Sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us,evolve rapidly, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in certain instances. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per share redemption price will not be substantially less than $10.00 per share. See “Risk Factors—If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors described below.
We will seek to reduce the possibility that our Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businessesLiveVox or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account. Our Sponsor will also not be liable as to any claims under our indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act. We will have access to up to
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$2,000,000 from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000). In the event that we liquidate and it is subsequently determined that the reserve for claims and liabilities is insufficient, stockholders who received funds from our Trust Account could be liable for claims made by creditors.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete an initial business combination by the Extension Date may be considered a liquidating distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete an initial business combination by the Extension Date, is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we are unable to complete an initial business combination by the Extension Date, we will: (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the public shares, at a per share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (3) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following our Extension Date and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent ten years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account.
As a result of this obligation, the claims that could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to the Trust Account is remote. Further, our Sponsor may be liable only to the extent necessary to ensure that the amounts in the Trust Account are not reduced below: (1) $10.00 per public share; or (2) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay our franchise and income taxes and will not be liable as to any claims under our indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible to the extent of any liability for such third-party claims.
If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, we cannot assure you we will be able to return $10.00 per share to our public stockholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a
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bankruptcy court could seek to recover some or all amounts received by our stockholders. Furthermore, our board may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons. See “Risk Factors—If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors and us to claims of punitive damages.”
Our public stockholders will be entitled to receive funds from the Trust Account only in the event of the redemption of our public shares if we do not complete an initial business combination by the Extension Date or if they redeem their respective shares for cash upon the completion of an initial business combination. In no other circumstances will a stockholder have any right or interest of any kind to or in the Trust Account. In the event we seek stockholder approval in connection with an initial business combination, a stockholder’s voting in connection with an initial business combination alone will not result in a stockholder’s redeeming its shares to us for an applicable pro rata share of the Trust Account. Such stockholder must have also exercised its redemption rights described above.
Amended and Restated Certificate of Incorporation
Our amended and restated certificate of incorporation contains certain requirements and restrictions relating to our Initial Public Offering that will apply to us until the consummation of an initial business combination. If we seek to amend any provisions of our amended and restated certificate of incorporation relating to stockholders’ rights or pre-initial business combination activity, we will provide dissenting public stockholders with the opportunity to redeem their public shares in connection with any such vote. Our Initial Stockholders have agreed to waive any redemption rights with respect to their Founder Shares and public shares in connection with the completion of an initial business combination. Specifically, our amended and restated certificate of incorporation provides, among other things, that:
prior to the consummation of an initial business combination, we shall either (1) seek stockholder approval of an initial business combination at a meeting called for such purpose at which stockholders may seek to redeem their shares, regardless of whether they vote for or against the proposed initial business combination, into their pro rata share of the aggregate amount then on deposit in our Trust Account, including interest (which interest shall be net of taxes payable) or (2) provide our public stockholders with the opportunity to tender their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in our Trust Account, including interest (which interest shall be net of taxes payable) in each case subject to the limitations described herein;
we will consummate an initial business combination only if we have net tangible assets of at least $5,000,001 upon such consummation and, solely if we seek stockholder approval, a majority of the outstanding shares of capital stock voted are voted in favor of an initial business combination;
if an initial business combination is not consummated by the Extension Date, then our existence will terminate and we will distribute all amounts in our Trust Account; and
prior to an initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from our Trust Account or (ii) vote on any initial business combination.
These provisions cannot be amended without the approval of holders of 65% of capital stock. In the event we seek stockholder approval in connection with an initial business combination, our amended and restated certificate of incorporation provides that we may consummate an initial business combination only if approved by a majority of the shares of capital stock voted by our stockholders voting at a duly held stockholders meeting.
COMPETITION
In identifying, evaluating and selecting a target business for an initial business combination, we may encounter intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, public companies and operating businesses seeking strategic acquisitions. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than us. Our ability to acquire larger target businesses will
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be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for an initial business combination and our outstanding warrants, and the future dilution they potentially represent,customers may not be, viewed favorably by certain target businesses. Either of these factorsor may place us at a competitive disadvantage in successfully negotiating an initial business combination.
Conflicts of Interest
Certain of our directors and officers and affiliates of our Sponsor manage several investment vehicles. These entities may competenot have been, compliant with us for acquisition opportunities in the same industries and sectors as we may target for an initial business combination.all applicable laws or regulations. If these entities decide to pursue any such opportunity, we may be precluded from procuring such opportunities.
In addition, investment ideas generated within our Sponsor and other persons who may make decisions for the company, may be suitable for both us and forLiveVox or its customers do not comply with current or future entities managed by our directors, officersrules or affiliates of our Sponsorregulations that apply to their respective businesses, LiveVox and its customers may be directedface reputational harm, fines, penalties, investigations, forfeitures, costs, and operational restrictions and LiveVox may have to such investment vehicle rather thanrestructure its products, create new products, and otherwise adapt to us. As employees of Crescent or its affiliates, certain members of the management team arechanging legal and in the future will be involved in the formation of and offerings by these companies as well as the identification, acquisition and management of investments by such companies. The letter agreement entered into with certain of our officers will not restrict them from undertaking any such activities. As a result, conflicts of interest may arise between our officers’ fiduciary and contractual obligations to these companies and our officers’ obligations to us. None of the members of our management team who are also employed by our Sponsor or its affiliates have any obligation to present us with any opportunity for a potential business combinationregulatory landscape, all of which they become aware. Our management team, in their capacities as directors, officers or employees of our Sponsor or its affiliates in their other endeavors, may choose to present potential business combinations to the related entities described above, current or future investment vehicles of our Sponsor or its affiliates, or third parties, before they present such opportunities to us, subject to applicable fiduciary duties. See “Risk Factors—Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.”
Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to one or more other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor these obligations to present such business combination opportunity to such entity, subject to his or her fiduciary duties to us under Delaware law. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materiallycould adversely affect our abilitybusiness operations. Refer to complete an initial business combination.
Potential investors should also be awareItem 1A of the following other potential conflictsPart I of interest as it relates to the Business Combination:
the fact that our Sponsor, officers (other than our officer who was appointed subsequent to our Initial Public Offering, who does not own any shares of our Common Stock) and directors (including our independent directors) have agreed to waive their redemption rights with respect to any shares of our Common Stock they may hold in connection with the consummation of the Business Combination, including all of the Founder Shares;
the fact that our Sponsor has agreed to, in its capacity as the holder of a majority of our Class F Stock, waive the right to a conversion price adjustment with respect to all shares of our Class F Stock in connection with the consummation of the Business Combination, such authority granted to the majority holders of our Class F Stock in our amended and restated certificate of incorporation;
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| the fact that our Sponsor paid an aggregate of $25,000 for 6,250,000 shares of Class F Stock (75,000 of which have been transferred to our independent directors, after giving effect to the (i) surrender of 1,437,500 shares on November 29, 2017 and (ii) forfeiture of 937,500 shares in April 2019) which will be converted into Common Stock upon the closing of the Business Combination, including the 2,725,000 shares that our Sponsor has agreed to cancel concurrently with the closing of the Business Combination and the Lock-Up Shares which will be subject to release only if the price of Common Stock trading on NASDAQ or another national securities exchange exceeds certain thresholds during the seven-year period following the closing of the Business Combination and will otherwise be forfeited and cancelled for no consideration, but which will have no value if the Business Combination is not consummated by our current extended date of June 30, 2021;
|
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the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by our current extended date of June 30, 2021;
if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants)this Annual Report for services rendered or products sold to us, but only if such a third party or target business has not executed a waiver of any and all rights to seek access to the Trust Account;
the fact that our Sponsor will have the right to nominate two independent directors of the post-Business Combination Company pursuant to a stockholders agreement to be entered into upon closing of the Business Combination;
the anticipated continuation of two of our existing directors, Robert D. Beyer and Todd M. Purdy, as directors of the post-Business Combination Company;
the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;
the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by the Extension Date;
that, as described in the Charter Proposals and reflected in Annex C, our proposed Second Amended and Restated Certificate of Incorporation will be amended to expressly elect not to be bound or governed by, or otherwise subject to, Section 203 of the DGCL, thereby removing certain restrictions on business combinations with interested stockholders (which amendment will become effective 12 months after the Second Amended and Restated Certificate of Incorporation is filed and becomes effective);
that, at the closing of the Business Combination we will enter into the Amended and Restated Registration Rights Agreement, which provides for registration rights to, among others, our Sponsor, Crescent and their permitted transferees;
that Crescent has entered into the Forward Purchase Agreement with the Company, pursuant to which Crescent has committed to purchase, subject to the terms and conditions set forth in the Forward Purchase Agreement, including a lock-up period that restricts the transfer of securities issued pursuant to the Forward Purchase Agreement and registration rights granted thereto, an aggregate of 2,500,000 shares of Class A Stock plus 833,333 Warrants for an aggregate purchase price of $25,000,000 in cash in a private placement that will close immediately prior to the Business Combination, which such commitment Crescent may assign, in whole or in part, to certain transferees, including, but not limited to, its current or prospective limited partners (Crescent and such possible transferees together comprising the Forward Purchasers); and
that Crescent, either alone or with our Sponsor, has the right but not the obligation to purchase immediately prior to the closing of the Business Combination additional shares of Class A Stock at a purchase price of $10.00 per share, subject to reasonably acceptable terms to be provided in a separate agreement, to the extent our total cash proceeds are less than $250,000,000.
The conflicts described above may not be resolved in our favor.
In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:
the corporation could financially undertake the opportunity;
the opportunity is within the corporation’s line of business; and
it would not be fair to the corporation and its stockholders for the opportunity not to be brought to the attention of the corporation.
Accordingly, as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities. Furthermore, our amended and restated certificate of incorporation provides that the doctrine of corporate opportunity will not apply with respect to any of our officers or directors in circumstances where the application of the doctrine would conflict with any fiduciary duties or contractual obligations they may have. Below is a table summarizing the entities to which our officers and directors currently have fiduciary duties or contractual obligations that may present a conflict of interest:
| | | | | | |
Name of Individual
| | Entity Name
| | Entity’s Business
| | Affiliation
|
Robert D. Beyer
| | Chaparal Investments LLC
Jefferies Financial Group
| | Private investments
Financial services
| | Chairman
Director
|
Jean-Marc Chapus
| | Crescent Capital Group LP
| | Alternative credit investments
| | Managing Partner
|
Todd M. Purdy
| | N/A
| | | | |
Christopher G. Wright
| | Crescent Capital Group LP
| | Alternative credit investments
| | Managing Partner
|
Al Hassanein
| | Crescent Capital Group LP
| | Alternative credit investments
| | Controller
|
George P. Hawley
| | Crescent Capital Group LP
| | Alternative credit investments
| | General Counsel
|
Kathleen S. Briscoe
| | Dermody Properties
Griffin Capital
Resmark Equity Partners, LLC
Crescent Capital BDC, Inc.
| | Real estate
Asset management
Real estate investments
Business development
| | Partner, Chief Capital Officer
Director
Director
Director
|
John J. Gauthier
| | JJG Advisory, LLC
Reinsurance Group of America, Incorporated
| | Investment consulting
Reinsurance
| | Principal Owner
Director
|
Jason D. Turner
| | Venbrook Group, LLC
| | Insurance
| | Chief Executive Officer
|
Sandra V. Naftzger
| | N/A
| | | | |
Available InformationAccordingly, if any of the above officers or directors become aware of a business combination opportunity which is suitable for any of the above entities to which he or she has then current fiduciary or contractual obligations, he or she will honor these obligations to present such business combination opportunity to such entity, and only present it to us if such entity rejects the opportunity.
We
do not believe, however, that any of the foregoing fiduciary duties or contractual obligations will materially affect our ability to complete the Business Combination. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our Company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.We are not prohibited from pursuing a business combination with a company that is affiliated with our Sponsor, officers or directors. In the event we seek to complete our business combination with such a company, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm which is a member of FINRA, or from an independent accounting firm, that such a business combination is fair to our Company from a financial point of view.
Our Initial Stockholders have agreed to vote their Founder Shares and their public shares, if any, in favor of the Business Combination.
INDEMNITY
Our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent registered public accounting firm) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.00 per public share or (2) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under our indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and believe that our Sponsor’s only assets are securities of our company and, therefore, our Sponsor may not be able to satisfy those obligations. We have not asked our Sponsor to reserve for such obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for an initial business combination and redemptions could be reduced to less than $10.00 per public share. In such event, we may not be able to consummate an initial business combination, and our public shareholders would receive such lesser amount
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per share in connection with any redemptions of public shares. None of our officers or directors will indemnify us for claims by third parties, including, without limitation, claims by vendors and prospective target businesses.
FACILITIES
We currently maintain our executive offices at 11100 Santa Monica Boulevard, Suite 2000, Los Angeles, CA 90025. The cost for this space is included in the $10,000 per month, up to the Extension Date, fee that we will pay an affiliate of our Sponsor for office space, utilities, administrative and support services. We consider our current office space adequate for our current operations.
EMPLOYEES
We currently have six officers and do not intend to have any full-time employees prior to the completion of an initial business combination. Members of our management team are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed an initial business combination. We presently expect our officers to devote such amount of time as they reasonably believe is necessary to complete an initial business combination.
Periodic Reporting and Financial Information
Our Units, Common Stock and Warrants are registered under the Exchange Act and as a result we have reporting obligations, including the requirement that we file annual, quarterly and current reports, with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Securities and Exchange Commission (“SEC”). Our SEC at: http://filings are available to the public over the internet at the SEC’s website at www.sec.gov. Our SEC filings are also available free of charge on the Investor Relations page of our website at www.livevox.com as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Additional information, including our Code of Business Conduct and Ethics, Corporate Governance Guidelines, and board of directors’ committee charters, can also be found on the Investor Relations page of our website at www.livevox.com. The contents of this websiteSEC’s and our websites are not incorporated into this filing.Annual Report. Further, our references to the uniform resource locator (“URL”) for this websitethese websites are intended to be inactive textual references only.
We will provide stockholders with audited financial statements
Implications of
the prospective target business as part of the tender offer materials or proxy solicitation materials sent to stockholders to assist them in assessing the target business. In all likelihood, these financial statements will need to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America (“U.S. GAAP”), or International Financing Reporting Standards (“IFRS”). A particular target business identified by us as a potential acquisition candidate may not have the necessary financial statements. To the extent that this requirement cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential acquisition candidates, we do not believe that this limitation will be material.We are required to evaluate our internal control procedures for the fiscal year ending December 31, 2019 as required by the Sarbanes-Oxley Act. Only in the event we are deemed to be a large accelerated filer orBeing an accelerated filer will we be required to have our internal control procedures audited. A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such target business to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete a business acquisition with such a target business.
Emerging Growth Company
We are an
“emergingemerging growth company
” (“EGC”), as defined in Section 2(a) of the Securities Act, as modified by the
Jumpstart Our Business Startups Act (“JOBS
Act.Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not
“emerging growth companies”EGCs including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an
“emerging growth company”EGC can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an
“emerging growth company”EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We
intendhave elected to take advantage of the benefits of this extended transition period.
We will remain an
emerging growth companyEGC until the earlier of (1) the last day of the fiscal year (a)
following2024, which is the fifth anniversary of the
Initial Public Offering Closing Date,closing of Crescent’s initial public offering, (b) in which we have total annual gross revenue of at least $1,070,000,000, or (c) in which we are deemed to be a large accelerated filer, which means the market value of
Common Stockour Class A common stock that is held by non-affiliates exceeds $700,000,000 as of the prior fiscal year’s second fiscal quarter, and (2) the date on which we have issued more than $1,000,000,000 in
23
non-convertible debt during the prior three-year period. References herein to “emerging growth company”EGC shall have the meaning associated with it in the JOBS Act.
ITEM 1A. RISK FACTORS
RISK FACTORS
An investment
The occurrence of one or more of the events or circumstances described in our securities involvesthe following risk factors, alone or in combination with other events or circumstances, may have a high degreematerial adverse effect on the business, cash flows, financial condition and results of risk.operations of LiveVox. In reviewing these risk factors, you should also consider the ongoing COVID-19 pandemic and its consequences, which implicate, and may amplify, the risks and uncertainties facing LiveVox, and their potential impact on LiveVox’s business, financial position and results of operations. You should carefully review and consider carefully all of the risks described below, together withfollowing risk factors in addition to the other information containedincluded in this annual report, before makingAnnual Report, including matters addressed in the section entitled “Special Note Regarding Forward-Looking Statements.” LiveVox may face additional risks and uncertainties that are not presently known to the Company, or that the Company currently deems immaterial, which may also impair LiveVox’s business or financial condition. The following discussion should be read in conjunction with the audited consolidated financial statements and related notes thereto included in Part II, Item 8 of this Annual Report.
Summary Risk Factors
The following summary description sets forth an overview of the material risks we are exposed to in the normal course of our business activities:
•If we are unable to attract new customers or sell additional products and functionality to our existing customers, our revenue and revenue growth will be harmed.
•The effects of the COVID-19 pandemic have had and could continue to have a decisionmaterial adverse effect on our results of operations and financial condition or on the operations of many of our customers and third-party suppliers, and the duration and extent to investwhich this will impact our future results of operations and overall financial performance remains uncertain.
•Our recent rapid growth may not be indicative of our future growth, and if we continue to grow rapidly, we may fail to manage our growth effectively.
•We have a history of losses and we may be unable to achieve or sustain profitability.
•We depend on our senior management team, and the loss of one or more key employees or an inability to attract and retain highly skilled executives and other employees could harm our business and results of operations.
•Failure to adequately retain our key employees, including those in our units. sales force, could impede our growth.
•The markets in which we participate involve numerous competitors and are highly competitive, and if we do not compete effectively, our operating results could be harmed.
•If we fail to grow our marketing capabilities and develop widespread brand awareness cost effectively, our business may suffer.
•We may expand our international operations, which would expose us to significant risks.
•If we fail to manage our technical operations infrastructure, our existing customers may experience service outages, our new customers may experience delays in the deployment of our products, and we could be subject to, among other things, claims for credits or damages.
•Data security incidents and cybersecurity breaches could harm our reputation, cause us to modify business practices and otherwise adversely affect business, and subject us to liability.
•We rely on third-party telecommunications and internet service providers to provide our products, including connectivity to our cloud contact center software, and any failure by these service providers to provide reliable services could cause us to lose customers and subject us to claims for credits or damages, among other things.
•If our products fail, or are perceived to fail, to perform properly or if they contain technical defects, our reputation could be harmed, our market share may decline, and/or we could be subject to product liability claims.
•The contact center software market is subject to rapid technological change, and we must develop and sell incremental and new features and products in order to maintain and grow our business.
•Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.
•We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.
•We may be unable to generate sufficient cash flow to satisfy our debt service obligations, which would adversely affect our results of operations and financial condition.
•The terms of our indebtedness could adversely affect our business.
•Alleged or actual failure by us, our competitors, or other companies to comply with the following events occur,constantly evolving legal and contractual environment surrounding calling or texting, and the governmental or private enforcement actions related thereto, could harm our business, financial condition, results of operations and operatingcash flows.
•Privacy concerns and domestic or foreign laws and regulations may reduce the demand for our solution, increase our costs and harm our business.
•Increased taxes and surcharges (including Universal Service Fund, whether labeled a “tax,” “surcharge,” or other designation) on our products may increase our customers’ cost of using our products and/or increase our costs and reduce our profit margins to the extent the costs are not passed through to our customers, and we may be subject to liabilities for past sales and other taxes, surcharges and fees.
•Requirements for us or our suppliers to pay federal or state universal service fund contribution amounts and assessments (either we paying directly or paying through our suppliers in the form of surcharges) for other telecommunications funds or taxes could impact the desirability and profitability of our products.
•Changes in government regulation applicable to the collections industry or any failure of us or our customers to comply with existing regulations could result in the suspension, termination or impairment of the ability of us or our customers to conduct business, may require the payment of significant fines by us or our customers and could require changes in customer’s businesses that would reduce the need for our products, or require other significant expenditures.
•We have never paid cash dividends and do not anticipate paying any cash dividends on our common stock.
•Anti-takeover provisions contained in our Second Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
•Our quarterly and annual results may fluctuate significantly and may not fully reflect the underlying performance of our business.
•We may acquire other companies or technologies or be the target of strategic transactions, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.
The summary risk factors described above should be read together with the text of the full risk factors below and in the other information set forth in this Annual Report, including our audited consolidated financial statements and the related notes, as well as in other documents that we file with the SEC. If any such risks and uncertainties actually occur, our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition and results of operations.
Risks Related to Our Business and Industry
If we are unable to attract new customers or sell additional products and functionality to our existing customers, our revenue and revenue growth will be harmed.
To increase our revenue, we must add new customers, increase the amount and types of business we do with existing customers, and encourage existing customers to renew their product subscriptions on terms favorable to us. As our industry matures, as our customers experience seasonal trends in their business, or as competitors introduce lower cost or differentiated products or services that are perceived to compete favorably with us, our ability to add new customers and renew, maintain or sell additional products to existing customers based on pricing, cost of ownership, technology and functionality could be harmed. As a result, our existing customers may not renew their agreements or may decrease the amount of business they do with us, or may place increased pressure on us for pricing concessions, and we may be unable to attract new customers or grow or maintain our business with existing customers, each of which could harm our revenue and growth.
The effects of the COVID-19 pandemic have had and could continue to have a material adverse effect on our results of operations and financial condition or on the operations of many of our customers and third-party suppliers, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.
In December 2019, a novel coronavirus disease known as COVID-19 was reported and on March 11, 2020, the World Health Organization, or WHO, characterized COVID-19 as a pandemic. This pandemic has resulted in a widespread health crisis that has continued to significantly harm the U.S. and global economies and has caused significant fluctuation in financial markets and regulatory frameworks and may impact demand for our products.
In accordance with the various and changing regulatory frameworks and social distancing and other business or office closure orders and recommendations of applicable government agencies, all of our employees transitioned to work-from-home operations and we canceled all business travel by our employees except where necessary and properly authorized, which changed how we operate our business. Our customers and business partners are also subject to various and changing regulatory frameworks and social distancing and business or office closure orders and recommendations and travel restrictions or prohibitions, which have changed the way we interact with our customers and business partners. Recently, we have re-opened our U.S. and foreign offices for employees to voluntarily return, subject to capacity restrictions and applicable government regulations, including relating to COVID-19 vaccination, testing, and masking. We have also reinstated business travel on a voluntary basis and subject to prior approval. Our efforts to re-open our offices, comply with government regulations regarding COVID-19 vaccination, testing, and masking, and reinstate business travel safely may not be successful, could expose our employees and customers to health risks and us to associated liability, and will involve additional financial and administrative burdens.
Moreover, the conditions caused by the COVID-19 pandemic, the extent of which depends upon its prolonged impact, has or may:
•harm our ability to renew and maintain our relationships with our existing customers;
•cause our existing customers to reduce the amount of business they do with us, seek price concessions, declare bankruptcy or go out of business, which would harm our revenue;
•result in some of our customers failing to comply with the terms of their agreements, including payment terms, due to economic uncertainty, financial hardship, and even failure of these businesses, which could result in us being required to take action to collect payments, terminate their product subscriptions, increase accounts receivable, and reduce consumer collections, any of which could increase our expenses, reduce our cashflow, and harm our revenues and results of operations;
•make it more difficult for us to sell additional products or functionality to our existing customers;
•reduce the rate of spending on enterprise software solutions or cloud-based enterprise contact center systems generally;
•delay prospective customers’ decisions to subscribe to our products, increase the length of sales cycles, or slow the typical growth in the use of our products once customers have initially deployed our products;
•harm our ability to effectively market and sell our solutions, particularly as our customers remain subject to office closure orders;
•change the mix and sizes or types of organizations that purchase our products;
•delay the introduction of enhancements to our products and market acceptance of any new features and products;
•harm our ability to establish and/or grow our international sales and operations;
•harm our ability to recruit, onboard and successfully integrate new employees, including members of our direct sales force, both domestically and internationally, as a result of not being able to interface in person;
•harm our ability to maintain our corporate culture with an employee base primarily working remotely and facing unique personal and professional challenges;
•increase the burden on our technical operations infrastructure, which could harm the capacity, stability, security and performance of our operations infrastructure and potentially leave us more vulnerable to security breaches;
•increase the risk that we may experience cybersecurity-related events such as COVID-19 themed phishing attacks, exploitation of any cybersecurity flaws that may exist, an increase in the number cybersecurity threats or attacks, and other security challenges as a result of our employees and service providers continuing to work remotely during the COVID-19 pandemic, and potentially beyond as remote work and resource access expand;
•increase costs in returning to work as our offices continue to re-open, including changes to the workplace, such as space planning, food service, and amenities, and the design, implementation and enforcement of new workplace safety policies and protocols;
•limit our ability to deliver products efficiently to our larger customers, as those products often require services that have sometimes been performed onsite, which could delay implementation of our products at new customers;
•harm our ability to manage, maintain or increase our network of master agents, referral agents and other third-party selling partners to sell our products, and make it more difficult for them to assist us effectively with their sales efforts;
•impact the health and safety of our employees, including our senior management team, and their ability to perform services;
•cause our management team to continue to commit significant time, attention and resources to monitor the COVID-19 pandemic and seek to mitigate our effect on our business and workforce; and
•lead to the adoption of additional new laws and regulations that we and/or our customers and partners are required to comply with and that could harm our results of operations and may subject us to COVID-19 related regulations, fines, penalties, and litigation.
Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter. While several countries, as well as certain states, counties and cities in the United States, began to relax the early public health restrictions with a view to partially or fully reopening their economies, many cities, both globally and in the United States, have since experienced a surge in the reported number of cases and hospitalizations related to the COVID-19 pandemic, including as a result of the emergence of new variants. This increase in cases has led to the reintroduction of restrictions and business shutdowns in certain states, counties and cities in the United States and globally and could continue to lead to the re-introduction of such restrictions elsewhere. Even after the COVID-19 pandemic subsides, the U.S. economy and most other major global economies may experience or continue to experience a recession, and our business and operations could be materially adversely affected.affected by a prolonged recession in the U.S. and other major markets.
Any of the foregoing factors could significantly harm our future sales, operating results, cash flow, gross margin and overall financial performance, which could cause us to experience a decreased level of growth of our business and make our future financial results and prospects difficult to predict. The COVID-19 pandemic and its impact on LiveVox and the U.S. and global economies, could limit our ability to forecast our future operating results, including our ability to predict revenue and expense levels, and plan for and model future results of operations. Moreover, because a significant portion of our revenue is derived from existing customers, downturns in new sales will not immediately be reflected in our operating results and may be difficult to discern until future periods. Our competitors could experience similar or different impacts as a result of COVID-19, which could result in changes to our competitive landscape.
The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the ongoing severity and transmission rate of the virus and the emergence of new virus variants, the extent and effectiveness of vaccine programs and other containment actions, the duration of social distancing, office closure and other restrictions on businesses and society at large, and the specific impact of these and other factors on our business, employees, customers and partners. If we are not able to respond to and manage the impact of such events effectively, our business will be harmed. There are no comparable recent events that provide guidance as to the effect the COVID-19 pandemic may have and, as a result, the ultimate impact of the outbreak on our business and operations is highly uncertain and subject to change. The effects of the COVID- 19 pandemic have had, and could continue to have a material impact on our results of operations and increase many of the other risks described under “Risk Factors” and elsewhere herein.
Our recent rapid growth may not be indicative of our future growth, and if we continue to grow rapidly, we may fail to manage our growth effectively.
For the years ended December 31, 2021, 2020 and 2019, our revenues were $119.2 million, $102.5 million and $92.8 million, respectively, representing year-over-year growth of 16.3% and 10.5%. In the future, as our revenue increases, our annual revenue growth rate may decline. We believe our revenue growth will depend on a number of factors, including our ability to:
•compete with other vendors of cloud-based enterprise contact center systems, including recent market entrants, and with providers of legacy on-premise systems;
•increase our existing customers’ use of our products and further develop our partner ecosystem;
•strengthen and improve our products through significant investments in research and development and the introduction of new and enhanced products;
•introduce our products to new markets outside of the United States and increase global awareness of our brand;
•selectively pursue acquisitions that enhance our product offerings; and
•respond to general macro-economic factors and industry and market conditions.
If we are not successful in achieving these objectives, our ability to grow our revenue may be harmed. In addition, we have recently invested in, and may continue to invest in future growth, including expending substantial financial and other resources on:
•expanding our sales and marketing organizations;
•our technology infrastructure, including systems architecture, management tools, scalability, availability, performance and security, as well as disaster recovery measures;
•our product development, including investments in related personnel and the development of new products, as well as new applications and features for existing products;
•international expansion; and
•general administration, including legal, regulatory compliance and accounting expenses.
Moreover, we have recently expanded our headcount and operations. We grew from 461 employees as of December 31, 2019 to 506 employees as of December 31, 2020, and to 672 employees as of December 31, 2021. We anticipate that we will continue to expand our operations and headcount in future years. This growth has placed, and any future growth will place, a significant strain on our management, administrative, operational and financial resources, company culture and infrastructure. Our success will depend in part on our ability to manage this growth effectively while retaining personnel. To manage future growth of our operations and personnel, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. Failure to effectively manage growth could result in difficulty or delays in adding new customers, declines in quality or customer satisfaction, increases in costs, system failures, difficulties in introducing new features or products, the need for more capital than we anticipate or other operational difficulties, any of which could harm our business performance and results of operations.
The addition of new employees and the capital investments that we anticipate will be necessary to help us grow and to manage that growth may make it more difficult to generate earnings or offset any future revenue shortfalls by reducing costs and expenses in the short term. If we fail to manage our anticipated growth, we will be unable to execute our business plan successfully, which could materially adversely affect our financial position and results of operations.
Our recent growth makes it difficult to evaluate and predict our current business and future prospects.
While we have been in existence for over twenty years, much of our growth has occurred in recent years. Our recent growth may make it difficult for investors to evaluate our current business and our future prospects. We have encountered and will continue to encounter risks and difficulties frequently experienced by companies in rapidly changing industries, including increasing and unforeseen expenses as we may grow our business and the other risks and uncertainties described in this Annual Report.
Our ability to forecast our future operating results is limited and subject to a number of uncertainties, including our ability to predict revenue and expense levels and plan for and model future growth. If our assumptions regarding these risks and uncertainties,
which we use to plan our business, are incorrect or change due to adjustments in our markets or our competitors and their product offerings, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.
We have a history of losses and we may be unable to achieve or sustain profitability.
We incurred a net loss of $103.2 million, $4.6 million and $6.9 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, we had an accumulated deficit of $128.0 million. These losses and our accumulated deficit reflect the substantial investments we have made, and continue to make, to develop our products and acquire new customers, among other expenses. The increase to net loss was primarily attributable to the compensation expense of $68.4 million associated with our Value Creation Incentive Plan (“VCIP”) and Option-based Incentive Plan (“OBIP”) awards that fully vested upon a liquidity event (i.e. the Merger) in the second quarter of 2021. We expect the dollar amount of our costs and expenses to increase in the future as revenue increases, although at a slower rate. We expect our losses to continue for the foreseeable future as we continue to invest in research and development and expand our business and as we will incur significant legal, accounting and other expenses associated with being a public company. Our historical or recent growth in revenue is not necessarily indicative of our future performance. Accordingly, there is no assurance that we will achieve profitability in the future or that, if we do become profitable, we will sustain profitability.
We depend on our senior management team, and the loss of one or more key employees or an inability to attract and retain highly skilled executives and other employees could harm our business and results of operations.
Our success depends, in part, upon the performance and continued services of our executive officers and senior management team. If our executive leadership team fails to perform effectively or if we fail to attract or retain our key executives or senior management, our business, financial condition or results of operations could be harmed. We also rely on our leadership team in the areas of research and development, marketing, sales, services, and general and administrative functions, and on mission-critical individual contributors. The loss of one or more of our executive officers or key employees could seriously harm our business. We currently do not maintain key person life insurance policies on any of our employees.
To execute our growth plan, we must attract and retain highly qualified personnel and we may incur significant costs (including stock-based compensation expense) to do so. Competition for these personnel is intense, especially for senior executives, engineers highly experienced in designing and developing cloud software and for senior sales personnel. We have, from time to time, experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. We invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them and increases our costs. If we fail to attract new personnel or to retain and motivate our current personnel, particularly our executive officers and senior management team, our business and future growth prospects would be harmed. Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached legal obligations, resulting in a diversion of our time and resources and, potentially, damages. We may experience increased attrition of employees to other opportunities, particularly as we reopen our offices, as certain employees may seek more flexible work alternatives than we offer, or may seek positions with companies outside of the geographic area in which they live that offer remote work opportunities.
Continued volatility or lack of performance in the trading price of our
securities could decline, and you could lose all or part of your investment.We are a company with no operating history and no revenues, and you have no basis on which to evaluatecommon stock may also affect our ability to achieveattract and retain qualified personnel because job candidates and existing employees often emphasize the value of the stock awards they receive in connection with their employment when considering whether to accept or continue employment. If the perceived value of our business objective.
We were formed in 2017 and have no business operating results, and we will not commence business operations until completing an initial business combination. Because we lack an operating history, you have no basis upon which to evaluatestock awards is low or declines, it may harm our ability to achieverecruit and retain highly skilled employees.
Failure to adequately retain our business objectivekey employees, including those in our sales force, could impede our growth.
Key to our success is the continuity and development of
completing an initialkey employees, including those in our sales force. We need to continue to retain key employees, including members of our sales force while expanding and optimizing our sales infrastructure in order to grow our customer base and business. Identifying and recruiting qualified personnel and training them in the use and sale of our products requires significant time, expense and attention. It can take several months before our sales representatives are fully trained and productive. Our business
combination with one or more target businesses. We have no plans, arrangements or understandings with any prospective target business concerning an initial business combination and may be
unable to complete an initial business combination. Ifharmed if we fail to
complete an initial business combination, we will never generate any operating revenues.Past performance by Crescent,retain key employees, including our management team, may not be indicative of future performance of an investment in us.
Information regarding performance by, or businesses associated with, Crescent is presented for informational purposes only. Any past experience and performance of Crescent or our management team is not a guarantee either: (1) that we will be able to successfully identify a suitable candidate for an initial business combination; or (2) of any results with respect to any initial business combination we may consummate. You should not rely on the historical record of Crescent or our management team’s performance as indicative of the future performance of an investment in us or the returns we will, or are likely to, generate going forward. An investment in us is not an investment in Crescent. Nonemembers of our Sponsor, officers, directorssales force, or Crescent has had experience with a blank check company or special purpose acquisition company inif our investments, and the past.
Crescent’s financial position could change, negatively impacting its role in helping us complete an initial business combination.
Crescent’s financial position could be negatively impacted dueexpense incurred, to a variety of factors, including investor redemptions, lower management feesexpand and higher operating expenses. From time to time, Crescent may be a party to lawsuits, which if resolved in an unfavorable manner for Crescent, could have a material impact on Crescent’s financial position. To the extent Crescent’s financial position is less stable, it may have difficulty retaining certain key investment professionals, which could negatively impact Crescent’s ability to help us consummate an initial business combination.
Our public stockholders may not be afforded an opportunity to vote ontrain our proposed initial business combination, which means we may complete an initial business combination even though a majority of our public stockholderssales force do not support suchgenerate a combination.
We may not hold a stockholder votecorresponding increase in revenue. In particular, if we are unable to approve an initial business combination unless it would require stockholder approval under applicable law or stock exchange listing requirementshire, develop and retain talented sales personnel or if we decidenew sales personnel are unable to hold a stockholder vote for business or other reasons. For instance, the NASDAQ rules currently allow us to engageachieve desired productivity levels in a tender offer in lieureasonable period of a stockholder meeting but would still require us to obtain stockholder approval if we were seeking to issue more than 20% of our outstanding shares to a target business as consideration in any business combination. Therefore, if we were structuring an initial business combination that required us to issue more than 20% of our outstanding shares, we would seek stockholder approval of such business combination. However, except as required by applicable law or stock exchange rules, the decision as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors, such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. Accordingly, we may consummate an initial business combination even if holders of a majority of the outstanding shares of our common stock do not approve of an initial business combination we consummate.
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In evaluating a prospective target business for an initial business combination, our management may consider the availability of funds from the sale of the forward purchase units, which may be used as part of the consideration to the sellers in an initial business combination. If Crescent determines not to allocate the obligation to purchase the forward purchase units, we may lack sufficient funds to consummate an initial business combination.
We have entered into an amended and restated Forward Purchase Agreement pursuant to which Crescent, in its capacity as investment advisor on behalf one or more investment funds or accounts managed by Crescent and its affiliates (such funds or accounts, the “Crescent Funds”), has committed on behalf of the Crescent Funds, to purchase an aggregate of 2,500,000 Forward Purchase Units, consisting of the forward purchase shares and the forward purchase warrants, for $10.00 per unit, or an aggregate amount of $25,000,000, in a private placement that will close immediately prior to the closing of an initial business combination. The funds from the sale of the forward purchase units are expected to be used as part of the consideration to the sellers in an initial business combination, and to pay expenses in connection with an initial business combination and may be used for working capital in the post-business combination company. The obligations under the forward purchase agreement do not depend on whether any public stockholders elect to redeem their shares in connection with an initial business combination. However, if the sale of the forward purchase units does not close, for example, by reason of the failure of the Crescent Funds (the “Crescent Fund Purchaser”) to fund the purchase price for their forward purchase units, we may lack sufficient funds to consummate an initial business combination. Crescent’s allocation of the obligation to purchase forward purchase units to any Crescent Fund is conditioned on the investment in the post-business combination company being approved by the investment committee, board of directors and/or limited partner advisory board, as applicable, of such Crescent Fund and on an initial business combination involving a company engaged in a business that is within the investment objectives, guidelines and restrictions of such Crescent Fund. Accordingly, if the investment is not approved by any Crescent Fund’s investment committee, board of directors and/or limited partner advisory board, as applicable, or if we pursue an acquisition target that is outside of the investment objectives of any Crescent Fund or that is not reasonably acceptable to Crescent, Crescent would not be required to allocate the obligation to purchase any forward purchase units to any Crescent Funds, and we may need to seek alternative financing.
Additionally, Crescent will not be committed or obligated to purchase any forward purchase units if none of the Crescent Funds is able to purchase any forward purchase units due to the conditions described above. Further, if Crescent allocates the obligation to purchase forward purchase units to a Crescent Fund, such Crescent Fund Purchaser’s and any permitted transferee’s obligations to purchase the forward purchase units will be subject to termination prior to the closing of the sale of such securities by mutual written consent of the Company and such party, or automatically: (i) if an initial business combination is not consummated by the Extension Date; or (ii) if we become subject to any voluntary or involuntary petition under the United States federal bankruptcy laws or any state insolvency law, in each case which is not withdrawn within sixty (60) days after being filed, or a receiver, fiscal agent or similar officer is appointed by a court for business or property of us, in each case which is not removed, withdrawn or terminated within sixty (60) days after such appointment. In addition, a Crescent Fund Purchaser’s obligations to purchase the forward purchase units will be subject to fulfillment of customary closing conditions, including that an initial business combination must be consummated substantially concurrently with the purchase of the forward purchase units and that an initial business combination is unanimously approved by our board of directors. In the event of any such failure to fund by a Crescent Fund Purchaser or its permitted transferee, any obligation is so terminated or any such condition is not satisfied and not waived by such party,time, we may not be able to obtain additional fundsrealize the expected benefits of this investment or increase our revenue, which could negatively affect our financial position and results of operations.
Our growth depends in part on the success of our strategic relationships with third parties and our failure to accountsuccessfully maintain, grow and manage these relationships could harm our business.
We leverage strategic relationships with third-party technology providers, including telecommunications providers. These relationships are typically not exclusive and our partners often also offer products to and enter into partnerships with our competitors. As we grow our business, we will continue to depend on both existing and new strategic relationships. Our competitors may be more successful than we are in establishing or expanding relationships with such third-party technology providers. Furthermore, there has and continues to be a significant amount of consolidation in the technology industry, including telecommunications providers, and if our partners are acquired, fail to work effectively with us or go out of business, they may no longer support our products, or may be less effective in doing so, which could harm our business, financial condition and operations. If we are unsuccessful in establishing or maintaining our strategic relationships with third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our operating results may suffer.
In addition, identifying new third-party technology providers, and negotiating and documenting relationships with them, requires significant time and resources. As the complexity of our products and our third-party relationships increases, the management of those relationships and the negotiation of contractual terms sufficient to protect our rights and limit our potential liabilities will become more complicated. We also license technology from certain third parties. Certain of these agreements permit either party to terminate all or a portion of the relationship without cause at any time and for such shortfall onany reason. If one of these agreements is terminated by the other party, we would have to find an alternative source or develop new technology ourselves, which could preclude, limit or delay our ability to offer our products or certain product features to our customers and could result in increased expense and harm our business. Our inability to manage and maintain these complex relationships successfully or negotiate sufficient and favorable contractual terms favorablecould harm our business.
We have established, and continue to increase, a network of master agents, referral agents and other third-party selling partners to sell our products. Our failure to effectively develop, manage, and maintain this network could materially harm our revenue.
We have established, and continue to increase, our network of master sales agents, referral agents and other third-party selling partners who provide sales leads to us for new customers. These selling partners sell, or at all. Any such shortfall would alsomay in the future decide to sell, products and/or solutions for our competitors. Our competitors may be able to cause our current or potential selling partners to favor their products over our products, either through financial incentives, technological innovation, product features or performance, or by offering a broader array of services to these selling partners or otherwise, which could reduce the amounteffectiveness of funds thatour use of these selling partners. If we have available for working capitalfail to maintain relationships with our current selling partners, fail to develop relationships with new selling partners, fail to manage, train, or provide appropriate incentives to our existing selling partners, or if our selling partners are not successful in their sales efforts, sales of our products may decrease or not grow at an appropriate rate and our operating results could be harmed. Additionally, in order to utilize our selling partners effectively, we must enhance our systems, develop specialized marketing materials and invest in educating selling partners regarding our systems and product offerings. Our failure to accomplish these objectives could limit our success in marketing and selling our products.
In addition, identifying new selling partners and negotiating and documenting relationships with them requires significant time and resources. As the
post-business combination company.Our Initial Stockholders have agreedcomplexity of our products and our selling partner relationships increases, the management of those relationships and the negotiation of contractual terms sufficient to vote in favor of the Business Combination regardless of howprotect our public stockholders vote.
Unlike many other blank check companiesrights and limit our potential liabilities will become more complex, and our inability to successfully manage these relationships or negotiate favorable contractual terms could harm our business.
The markets in which
the founders agree to vote their Founder Shares in accordance with the majority of the votes cast by the public stockholders in connection with an initial business combination, our Initial Stockholders have agreed to vote any shares of our Common Stock owned by them in favor of the Business Combination. As of the date hereof, our Initial Stockholders own shares equal to approximately 20% of our issuedwe participate involve numerous competitors and
outstanding shares of Common Stock. Accordingly, it is more likely that the necessary stockholder approval will be received for the Business Combination than would be the case if our Initial Stockholders agreed to vote any shares of Common Stock owned by them in accordance with the majority of the votes cast by our public stockholders.25
Your only opportunity to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash, unless we seek stockholder approval of such business combination.
At the time of your investment in us, you will not be provided with an opportunity to evaluate the specific merits or risks of an initial business combination. Additionally, since our board of directors may complete an initial business combination without seeking stockholder approval, public stockholders may not have the right or opportunity to vote on an initial business combination, unless we seek such stockholder vote. Accordingly,are highly competitive, and if we do not seek stockholder approval, your only opportunitycompete effectively, our operating results could be harmed.
The market for contact center solutions is highly competitive. We currently compete with large legacy technology vendors that offer on-premise contact center systems, such as Avaya and Cisco, and legacy on-premise software companies, such as Aspect Software and Genesys (including through its acquisition of Interactive Intelligence). These legacy technology and software companies are increasingly supplementing their traditional on-premise contact center systems with competing cloud offerings, through a combination of acquisitions, partnerships and in-house development. Additionally, we compete with vendors that historically provided other contact center services and technologies and expanded to affectoffer cloud contact center software such as NICE inContact. We also face competition from many other contact center service providers including Five9, Talkdesk and Seranova, as well as vendors offering unified communications and contact center solutions. In addition, Amazon and Twilio have introduced solutions aimed at companies who wish to build their own contact centers with in-house developers. Furthermore, CRM vendors are increasingly offering features and functionality that were traditionally provided by contact center providers. CRM vendors also continue to partner with contact center service providers to provide integrated solutions and may, in the investment decision regardingfuture, acquire competitive contact center service providers. These factors could harm our revenue and results of operations.
Our actual and potential competitors may enjoy competitive advantages over us, including greater name recognition, longer operating histories and larger marketing budgets, as well as greater financial or technical resources. With the introduction of new technologies and market entrants, we expect competition to continue to intensify in the future. Our recent, and any future, acquisitions will subject us to new competitors and cause us to face additional and different competition in the markets served by these businesses.
Some of our competitors can devote significantly greater resources than we can to the development, promotion and sale of their products and services and many have the ability to initiate or withstand substantial price competition. Current or potential competitors may also be acquired by third parties with significantly greater resources. In addition, many of our competitors have more established relationships with customers, more comprehensive product offerings, larger installed bases and major distribution agreements with consultants, system integrators and other third-party selling partners. Our competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their product offerings or resources and ability to compete. If our competitors’ products, services or technologies become more accepted than our products, if they are successful in bringing their products or services to market earlier than us, or if their products or services are less expensive or more technologically capable than ours, our revenue could be harmed. Pricing pressures and increased competition could result in reduced sales and revenue, reduced margins and loss of, or a potential business combination may be limitedfailure to exercising your redemption rights within the periodmaintain or improve, our competitive market position, any of time (whichwhich could harm our business.
If our existing customers terminate their product subscriptions or reduce their product subscriptions and related usage, our revenue and gross margin will be at least 20 business days) set forth inharmed and we will be required to spend more money to grow our tender offer documents mailedcustomer base.
We expect to continue to derive a significant portion of our revenue from existing customers. As a result, retaining our existing customers is critical to our
public stockholders in whichfuture operating results. With limited exceptions, we
describe an initial business combination.The abilityoffer annual and multiple-year contracts to our customers. Additional products can be provisioned on limited notice. Product subscriptions and related usage by our existing customers may decrease if:
•customers are not satisfied with our products, prices or the functionality of our public stockholders to redeem their shares for cash may makeproducts;
•the stability, performance or security of our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into an initial business combination with a target.We may seek to enter into an initial business combination transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worthproducts are not satisfactory;
•the U.S. or a certain amount of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition and, as a result, would not be able to proceed with an initial business combination. Furthermore, in no event will we redeem our public shares in an amount that would cause our net tangible assets, after paymentglobal economy declines;
•the ongoing effects of the deferred underwriting commissions,global COVID-19 pandemic on demand for our products and technology spending;
•our customers’ business declines due to be less than $5,000,001 (sothe loss of customers, industry cycles, seasonality, business difficulties or other reasons;
•our customers favor products offered by other contact center providers, particularly as competition continues to increase;
•alternative technologies, products or features emerge or gain popularity that we do not then become subject to the SEC’s “penny stock” rules),provide; or any greater net tangible asset
•our customers or cash requirement which may be contained in the agreement relating to an initial business combination. Consequently, if accepting all properly submitted redemption requests would causepotential customers experience financial difficulties.
If our
net tangible assets to be less than $5,000,001existing customers’ product subscriptions and related usage decrease or
such greater amount necessary to satisfy a closing condition as described above, we would not proceed with such redemption and the related business combination and may instead search for an alternate business combination. Prospective targets will be aware of these risks and, thus, may be reluctant to enter into an initial business combination transaction with us.The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure.
At the time we enter into an agreement for an initial business combination, we will not know how many stockholders may exercise their redemption rights and, therefore,are terminated, we will need to structure the transaction based on our expectations asspend more money to the number of shares that will be submitted for redemption. If an initial business combination agreement requires us to use a portion of the cash in the Trust Account to pay the purchase price or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the Trust Account to meet such requirements or arrange for third-party financing. In addition, if a larger number of shares is submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the Trust Account or arrange for third party financing. Raising additional third-party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. The above considerations may limit our ability to complete the most desirable business combination available to us or optimize our capital structure. The amount of the deferred underwriting commissions payable to the underwriters will not be adjusted for any shares that are redeemed in connection with an initial business combination. The per-share amount we will distribute to stockholders who properly exercise their redemption rights will not be reduced by the deferred underwriting commissionsacquire new customers and after such redemptions, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay the deferred underwriting commissions.
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that an initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.
If an initial business combination agreement requires us to use a portion of the cash in the Trust Account to pay the purchase price, or requires us to have a minimum amount of cash at closing, the probability that an initial business combination would be unsuccessful increases. If an initial business combination is unsuccessful, you would not receive your pro rata portion of the Trust Account until we liquidate the Trust Account. If you are in need of immediate liquidity, you could attempt to sell your stock in the open market; however, at such time our stock may trade at a discount to the pro rata amount per share in the Trust Account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your stock in the open market.
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The requirement that we complete an initial business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating an initial business combination and may limit the time we have in which to conduct due diligence on potential business combination targets, in particular as we approach our dissolution deadline, which could undermine our ability to complete an initial business combination on terms that would produce value for our stockholders.
Any potential target business with which we enter into negotiations concerning an initial business combination will be aware that we must complete an initial business combination by the Extension Date. Consequently, such target business may obtain leverage over us in negotiating an initial business combination, knowing that if we do not complete an initial business combination with that particular target business, we may be unable to complete an initial business combination with any target business. This risk will increase as we get closer to the end of the Extension Date. In addition, we may have limited time to conduct due diligence and may enter into an initial business combination on terms that we would have rejected upon a more comprehensive investigation.
Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.”
As of December 31, 2020, the Company had current liabilities of $356,979 and working capital of $(2,255,057). Further, we have incurred and expect to continue to incur costs in pursuit of an initial business combination. We cannot assure you that our plans to raise capital or to consummate an initial business combination by the Extension Date will be successful. Management has determined that the mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements contained elsewhere in this report do not include any adjustments that might result from our inability to continue as a going concern.
Westill may not be able to completemaintain our existing level of revenue. We incur significant costs and expenses, including sales and marketing expenses, to acquire new customers, and those costs and expenses are an initial business combination within the prescribed time frame,important factor in which case we would cease all operations except for the purpose of winding up and we would redeemdetermining our public shares and liquidate, in which case our public stockholders may receive only $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
Our amended and restated certificate of incorporation provides that we must complete an initial business combination by the Extension Date. We may not be able to find a suitable target business and complete an initial business combination by such date. Our ability to complete an initial business combination may be negatively impacted by general market conditions, volatility in the capital and debt markets and the other risks described herein.
If we have not completed an initial business combination by the Extension Date, we will: (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the public shares, at a per share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (3) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In such case, our public stockholders may receive only $10.00 per share, or less than $10.00 per share, on the redemption of their shares, and our warrants will expire worthless. See “Risk Factors—If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors herein.
If we seek stockholder approval of an initial business combination, our Sponsor, directors, officers, advisors or any of their affiliates may elect to purchase shares or warrants from public stockholders, which may influence a vote on a proposed business combination and reduce the public “float” of our Class A common stock.
If we seek stockholder approval of an initial business combination and we do not conduct redemptions in connection with an initial business combination pursuant to the tender offer rules, our Sponsor, directors, officers, advisors or any of their affiliates may purchase shares or public warrants or a combination thereof in privately negotiated transactions or in the open market either prior to or following the completion of an initial business combination, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such public stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our Sponsor, directors, officers, advisors or any of their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise
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their redemption rights, such selling public stockholders would be required to revoke their prior elections to redeem their shares. The price per share paid in any such transaction may be different than the amount per share a public stockholder would receive if it elected to redeem its shares in connection with an initial business combination. The purpose of such purchases could be to vote such shares in favor of an initial business combination and thereby increase the likelihood of obtaining stockholder approval of an initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of an initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with an initial business combination. Any such purchases of our securities may result in the completion of an initial business combination that may not otherwise have been possible. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”) to the extent such purchasers are subject to such reporting requirements.
In addition, if such purchases are made, the public “float” of our Class A common stock and the number of beneficial holders of our securities may be reduced, possibly making it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
If a stockholder fails to receive notice of our offer to redeem our public shares in connection with an initial business combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.
We will comply with the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with an initial business combination. Despite our compliance with these rules, if a stockholder fails to receive our tender offer or proxy materials, as applicable, such stockholder may not become aware of the opportunity to redeem its shares. In addition, the tender offer documents or proxy materials, as applicable, that we will furnish to holders of our public shares in connection with an initial business combination will describe the various procedures that must be complied with in order to validly tender or redeem public shares. For example, we may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents mailed to such holders, or up to two business days prior to the vote on the proposal to approve an initial business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically. In the event that a stockholder fails to comply with these or any other procedures, its shares may not be redeemed.
You will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced to sell your public shares or warrants, potentially at a loss.
Our public stockholders will be entitled to receive funds from the Trust Account only upon the earlier to occur of: (1) the completion of an initial business combination, and then only in connection with those shares of Class A common stock that such stockholder properly elected to redeem, subject to the limitations described herein; (2) the redemption of any public shares properly tendered in connection with a stockholder vote to amend our amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete an initial business combination by the Extension Date; and (3) the redemption of all of our public shares if we are unable to complete an initial business combination by the Extension Date, subject to applicable law and as further described herein. In no other circumstances will a public stockholder have any right or interest of any kind in the Trust Account. Holders of warrants will not have any right to the proceeds held in the Trust Account with respect to the warrants. Accordingly, to liquidate your investment, you may be forced to sell your public shares or warrants, potentially at a loss.
profitability. There can be no assurance that our Class A Stock thatefforts to acquire new customers will be issuedsuccessful.
The loss of one or more of our key customers, or a failure by us to renew our product subscription agreements with one or more of our key customers, could harm our revenue and financial position, and our ability to market our products.
We rely on our reputation and recommendations from key customers in connection with the Business Combination will be approved for listing on NASDAQorder to market and sell our products. The loss of any of our key customers, or if approved, willa failure of some of them to renew or to continue to be so listed followingrecommend our products, could have a significant impact on our revenue, reputation and our ability to obtain new customers. In addition, acquisitions of our customers could lead to cancellation of our contracts with those customers, thereby reducing the closingnumber of the Business Combination, or that we will be ableour existing and potential customers and key reference customers.
Our customers may fail to comply with the
continued listing standardsterms of
NASDAQ.Our Class A Stock, Units and Public Warrants are currently listed on NASDAQ. Our continued eligibilitytheir agreements, necessitating action by us to collect payment, or may terminate their subscriptions for listing may depend on, among other things,our products.
If customers fail to pay us under the
numberterms of our
shares that are redeemed. We intendagreements or fail to
apply to continuecomply with the
listingterms of our
Class A Stock, Unitsagreements, including compliance with regulatory requirements and
Public Warrants on NASDAQ. If, after the Business Combination, NASDAQ delists our Class A Stock, Units and Public Warrants from trading on its exchange for failureintellectual property terms, we may terminate customers, lose revenue, be unable to
meet the listing standards, we and our stockholders could face significant material adverse consequences including:a limited availability of market quotations for our securities;
reduced liquidity for our securities;
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a determination that our Class A Stock is a “penny stock” which will require brokers trading in our Class A Stockcollect amounts due to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
a limited amount of news and analyst coverage; and
a decreased ability to issue additional securities or obtain additional financing in the future.
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our Class A Stock, Units and Public Warrants are listed on NASDAQ, they are covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state, other than the State of Idaho, having used these powers to prohibit or restrict the sale of securities issued by blank check companies, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on NASDAQ, our securities would not be covered securities and we wouldus, be subject to regulationlegal or regulatory action and incur costs in each state inenforcing the terms of our contracts, including litigation. Some of our customers may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, seek reimbursement for amounts already paid, or pay those amounts more slowly, which we offercould harm our securities.
You will notoperating results, financial position and cash flow.
Many of our customer contracts contain usage-based revenue components that depend upon such customer’s ability to sustain or increase their business activity and such business activity can be
entitled to protections normally afforded to investors of many other blank check companies.Since the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants are intended to be used to complete an initial business combination with a target business that has not been identified, we may be deemed to be a “blank check” company under the U.S. securities laws. However, because we will have net tangible assets in excess of $5,000,000 upon the successful completion of the Initial Public Offering and the sale of the Private Placement Warrants and will file a Current Report on Form 8-K, including an audited balance sheet demonstrating this fact, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits or protections of those rules. Among other things, this means our units will be immediately tradable and we will have a longer period of time to complete an initial business combination than do companies subject to Rule 419. Moreover, if the Initial Public Offering were subject to Rule 419, that rule would prohibitimpact of external events beyond our control or the release of any interest earned on funds held in the Trust Account to us unless and until the funds in the Trust Account were released to us in connection with our completion of an initial business combination.
If you or a “group” of stockholders of which you are a part are deemed to hold an aggregate of more than fifteen percent (15%) of our Class A Stock issued in the Initial Public Offering, you (or, if a membercontrol of such a group, all of the members of such group in the aggregate) will lose the ability to redeem all such shares in excess of 15% of our Class A Stock issued in the Initial Public Offering.
Acustomers, including unexpected weather conditions, political instability or government shutdowns, public stockholder, together with any of his, herhealth issues (including pandemics and quarantines) or its affiliates or any other person with whom it is acting in concert or as a group (as deemed a “person” under Section 13 of the Exchange Act), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 15% of the shares of Class A Stock included in the units sold in our Initial Public Offering. In order to determine whether a stockholder is acting in concert or as a group with another stockholder, we will require each public stockholder seeking to exercise redemption rights to certify to us whether such stockholder is acting in concert or as a group with any other stockholder. Such certifications, together with other public information relating to stock ownership available to us at that time, such as Section 13D, Section 13Gnatural disasters. Our revenue and Section 16 filings under the Exchange Act, will be the sole basis on which we make the above-referenced determination. Your inability to redeem any such excess shares will reduce your influence over our ability to consummate the Business Combination and you could suffer a material loss on your investment in us if you sell such excess shares in open market transactions. Additionally, you will not receive redemption distributions with respect to such excess shares if we consummate the Business Combination. As a result, you will continue to hold that number of shares aggregating to more than 15% of the shares sold in our Initial Public Offering and, in order to dispose of such excess shares, would be required to sell your stock in open market transactions, potentially at a loss. We cannot assure you that the value of such excess shares will appreciate over time following the Business Combination or that the market price of our Class A Stock will exceed the per-share redemption price. Notwithstanding the foregoing, stockholders may challenge our determination as to whether a stockholder is acting in concert or as a group with another stockholder in a court of competent jurisdiction.
However, our stockholders’ ability to vote all of their shares (including such excess shares) for or against the Business Combination is not restricted by this limitation on redemption.
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Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete an initial business combination. If we are unable to complete an initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on our redemption of their stock, and our warrants will expire worthless.
We expect to encounter intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more local industry knowledge than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there will be numerous target businesses we could potentially acquire with the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, in the event we seek stockholder approval of an initial business combination and we are obligated to pay cash for shares of our Class A common stock, it will potentially reduce the resources available to us for an initial business combination. Any of these obligations may place us at a competitive disadvantage in successfully negotiating an initial business combination. If we are unable to complete an initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our Trust Account and our warrants will expire worthless. See “Risk Factors—If third parties bring claims against us, the proceeds held in the Trust Accountprofitability could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors herein.
If the net proceeds of our Initial Public Offering and the sale of the Private Placement Warrants not being held in the Trust Account are insufficient to allow us to operate until the Extension Date, we may be unable to complete an initial business combination, in which case our public stockholders may only receive $10.00 per share, or less than such amount in certain circumstances, and our Warrants will expire worthless.
As of December 31, 2020, we had $306,626 available to us outside the Trust Account to fund our working capital requirements. The funds available to us outside of the Trust Account may not be sufficient to allow us to operate until the Extension Date assuming that an initial business combination is not completed by such date. Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision (a provision in letters of intent designed to keep target businesses from “shopping” around for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed initial business combination, although we do not have any current intention to do so. If we entered into a letter of intent where we paid for the right to receive exclusivity from a target business and were subsequently required to forfeit such funds, whetherharmed as a result of any decrease to such customer’s business activity.
Many of our breachcustomer contracts contain usage-based revenue components that depend upon such customers’ ability to sustain or otherwise,increase their business activity. Such customers’ business activity has in the past been and could in the future be subject to the impact of external events beyond our control or the control of such customers, such as unexpected weather conditions, public health issues (including pandemics and quarantines), political instability or government shutdowns or natural disasters. Additionally, certain of our customers typically increase their collection activities from January through April when many Americans receive federal tax refunds. Any delay in the Internal Revenue Service’s ability to timely process Americans’ federal tax returns and remit refunds to filers, including as a result of COVID-19 precautions or a government shutdown such as the one that occurred in late 2018 and early 2019, has in the past caused and could in the future cause those customers to forgo increases in hiring or usage which could in turn unfavorably impact our revenue and profitability.
We sell our products to larger enterprises that can require longer sales cycles, longer and more costly implementation periods, and more configuration and integration services or customized features and functions that we mightmay not have sufficient fundsoffer, any of which could delay the time until revenue is recognized from these customers or prevent these sales from ever occurring, all of which could harm our revenue growth rates and profitability.
As we continue to
continue searching for,target our sales efforts at larger enterprises, we face higher costs, longer sales cycles and longer and more costly implementation periods and less predictability in closing sales. These larger enterprises typically require more configuration and integration services which increases our upfront investment in sales and deployment efforts with no guarantee that these customers will subscribe to additional LiveVox products or
conduct due diligencesubscribe to our products at all. Furthermore, with
respectlarger enterprises, we must provide a higher level of education regarding the use and benefits of our products to a
target business.If we are unablebroader group of people in order to complete an initial business combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of our Trust Account (or less than $10.00 per share in certain circumstances wheregenerate a third-party brings a claim against us that our Sponsor is unable to indemnify) and our Warrants will expire worthless. See ‘‘—If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors herein.
If the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants not being held in the Trust Account are insufficient, it could limit the amount available to fund our search for a target business or businesses and complete an initial business combination and we will depend on loans from our Sponsor or management team to fund our search for an initial business combination, to pay our franchise and income taxes and to complete an initial business combination. If we are unable to obtain these loans, we may be unable to complete an initial business combination.
Of the net proceeds from our Initial Public Offering and the sale of the Private Placement Warrants, as of December 31, 2020, $306,626 was available to us outside the Trust Account to fund our working capital requirements. If we are required to seek additional capital, we would need to borrow funds from our Sponsor, management team or other third parties to operate or may be forced to liquidate. None of our Sponsor, members of our management team or any of their affiliates is under any obligation to advance funds to us in such circumstances. Any such advances would be repaid only from funds held outside the Trust Account or from funds released to us upon completion of an initial business combination. If we are unable to complete an initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. Consequently, our public
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stockholders may only receive approximately $10.00 per share on our redemption of our public shares (or less than $10.00 per share in certain circumstances where a third-party brings a claim against us that or Sponsor is unable to indemnify), and our Warrants will expire worthless. See ‘‘Risk Factors—If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share” and other risk factors herein.
Subsequent to our completion of an initial business combination, we may be required to subsequently take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the price of our securities, which could cause you to lose some or all of your investment.
Even if we conduct extensive due diligence on a target business with which we combine, we cannot assure you that this diligence will identify all material issues that may be present with a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise.sale. As a result of these factors, we must devote a significant amount of sales support and professional services resources to individual customers and prospective customers, thereby increasing the cost and time required to complete sales. Our typical sales cycle for larger enterprises is six to twelve months, but can be significantly longer, and our average sales cycle may increase as sales to larger enterprises continue to grow in proportion to our overall new sales. In addition, many of our customers that are larger enterprises initially deploy our products to support only a portion of their contact center agents. Our success depends, in part, on our ability to increase the number of agent seats and the number of products utilized by these larger enterprises over time and we incur additional sales and marketing expenses in these efforts. There is no guarantee that these customers will purchase additional products from us or increase the number of agent seats for which they subscribe. If we do not expand our initial relationships with larger enterprises, the return on our investments in sales, marketing and implementation for these customers will decrease and our business may suffer.
Because a significant percentage of our revenue is recurring from existing customers, downturns or upturns in new sales will not be immediately reflected in our operating results and may be forceddifficult to later write-downdiscern.
We generally recognize revenue from customers monthly as services are delivered. As a result, the vast majority of the revenue we report in each quarter is derived from existing customers. Consequently, a decline in new product subscriptions in any single quarter will likely have only a small impact on our revenue results for that quarter. However, the cumulative impact of such declines could negatively impact our business and results of operations in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our products, and potential changes in our pricing policies or write-off assets, restructurerenewal rates, will typically not be reflected in our results of operations until future periods. We also may be unable to adjust our cost structure to reflect the changes in revenue, resulting in lower margins and earnings. In addition, our subscription model makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers will be recognized over time as services are delivered. Moreover, many of our customers initially deploy our products to support only a portion of their contact center agents and, therefore, we may not generate significant revenue from these new customers at the outset of their relationship, if at all. Any increase to our revenue and the value of these existing customer relationships will only be reflected in our results of operations as revenue is recognized, and if and when these customers increase the number of agent seats and the number of components of our products they deploy over time.
Shifts over time or from quarter-to-quarter in the mix of sizes or types of organizations that purchase our products or changes in the components of our products purchased by our customers could affect our gross margins and operating results.
Our strategy is to sell our products to both smaller and larger organizations. Our gross margins can vary depending on numerous factors related to the implementation and use of our products, including the features and number of agent seats purchased by our
customers and the level of usage required by our customers. Sales to larger organizations may also entail longer sales cycles and more significant selling efforts and expense. Selling to smaller customers may involve smaller contract sizes, fewer opportunities to sell additional services, a higher likelihood of contract terminations, lower returns on sales and marketing expense, fewer potential agent seats and greater credit risk and uncertainty. If the mix of organizations that purchase our products, or the mix of product components purchased by our customers, changes unfavorably, our revenues and gross margins could decrease and our operating results could be harmed.
If we fail to grow our marketing capabilities and develop widespread brand awareness cost effectively, our business may suffer.
Our ability to increase our customer base and achieve broader market acceptance of our cloud contact center software products will depend to a significant extent on our ability to expand our marketing operations. We plan to continue to dedicate significant resources to our marketing programs, including internet advertising, digital marketing campaigns, social media, trade shows, industry events, and co-marketing with strategic partners. The effectiveness of our internet advertising is as yet unproven, and there is existing competition for key search terms. All of these marketing efforts will continue to require us to invest significant financial and other resources. Our business will be seriously harmed if our efforts and expenditures do not generate a proportionate increase in revenue.
In addition, we believe that developing and maintaining widespread awareness of our brand in a cost-effective manner is critical to achieving widespread acceptance of our products and attracting new customers. Brand promotion activities may not generate customer awareness or increase revenues, and even if they do, any increase in revenues may occur after the expense has been incurred and may not offset the costs and expenses of building our brand. If we fail to successfully promote, maintain and protect our brand, or incur substantial costs and expenses, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building efforts, or to achieve the widespread brand awareness that is critical to increasing customer adoption of our products.
We may expand our international operations, which would expose us to significant risks.
To date, we have not generated significant revenues outside of the U.S. However, we may seek to grow our international presence in the future. The future success of our business may depend, in part, on our ability to expand our operations or incur impairment orand customer base to other chargescountries. Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic, and political risks that are different from those in the U.S. In addition, in order to effectively market and sell our products in international markets, we could be required to localize our products, including the language in which our products are offered, which will increase our costs, could result in delays in offering our products in these markets and may decrease the effectiveness of our sales efforts. Due to our limited experience with international operations and developing and managing sales and distribution channels in international markets, our international expansion efforts may not be successful.
Sales to customers outside the United States or with international operations and our international sales efforts and operations support expose us to risks inherent in international sales and operations.
An element of our growth strategy is to expand our international sales efforts and develop a worldwide customer base. Because of our limited experience with international sales, our international expansion may not be successful and may not produce the return on investment we expect. To date, we have realized only a small portion of our revenues from customers outside the United States, with approximately 6% of our revenue for the year ended December 31, 2021 derived from customers with a billing address outside of the United States.
Our international subsidiaries employ workers primarily in India and Colombia. Operating in international markets requires significant resources and management attention and subjects us to legal, labor and employment, intellectual property, regulatory, economic and political risks that are different from those in the United States. As we increase our international sales efforts we will face risks in doing business internationally that could harm our business, including:
•the need to establish and protect our brand in international markets;
•the need to localize and adapt our products for specific countries, including translation into foreign languages and associated costs and expenses;
•difficulties in staffing and managing foreign operations, particularly hiring and training qualified sales and service personnel;
•the need to implement and offer customer care in various languages;
•different pricing environments, longer sales and accounts receivable payment cycles and collections issues;
•weaker protection for intellectual property and other legal rights than in the U.S. and practical difficulties in enforcing intellectual property and other rights outside of the U.S.;
•privacy and data protection laws and regulations that are complex, expensive to comply with and may require that customer data be stored and processed in a designated territory;
•increased risk of piracy, counterfeiting and other misappropriation of our intellectual property in our locations outside the U.S.;
•new and different sources of competition;
•general economic conditions in international markets;
•fluctuations in the value of the U.S. dollar and foreign currencies, which may make our products more expensive in other countries or may increase our costs, impacting our operating results when translated into U.S. dollars;
•compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including corporate, employment, tax, telecommunications and telemarketing laws and regulations;
•increased risk of international telecom fraud;
•laws and business practices favoring local competitors;
•compliance with laws and regulations applicable to foreign operations and cross border transactions, including the Foreign Corrupt Practices Act, the U.K. Bribery Act and other anti-corruption laws, supply chain restrictions, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our products in certain foreign markets, and the risks and costs of non-compliance;
•increased financial accounting and reporting losses.burdens and complexities;
•restrictions or taxes on the transfer of funds;
•adverse tax consequences; and
•unstable economic and political conditions and potential accompanying shifts in laws and regulations.
These risks could harm our international operations, increase our operating costs and hinder our ability to grow our international business and, consequently, our overall business and results of operations.
In addition, compliance with laws and regulations applicable to our international operations increases our cost of doing business outside the United States. We may be unable to keep current with changes in foreign government requirements and laws as they change from time to time, which often occurs with minimal or no advance notice. Failure to comply with these regulations could harm our business. In many countries outside the United States, it is common for others to engage in business practices that are prohibited by our internal policies and procedures or United States or international regulations applicable to it. Although we have implemented policies and procedures designed to ensure compliance with these laws and policies, there can be no assurance that all of our employees, contractors, strategic partners and agents will comply with these laws and policies. Violations of laws or key control policies by our employees, contractors, strategic partners or agents could result in delays in revenue recognition, financial reporting misstatements, fines, delays in filing financial reports required as a public company, penalties, or prohibitions on selling our products, any of which could harm our business.
We may not be able to utilize a significant portion of our net operating loss, and under the existing federal corporate tax rates such tax benefits will be of less value, which could harm our profitability and financial condition.
As of December 31, 2021, we had available federal and combined state net operating loss carryforwards which may offset future taxable income of $23.5 million and $95.5 million, respectively. The federal net operating losses expire between 2026 and 2035 while the state net operating losses expire between 2025 and 2041. If we are unable to generate sufficient taxable income to utilize our net operating loss carryforwards, they could expire unused and be unavailable to offset future income tax liabilities, which could harm our profitability and financial condition in future periods.
In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or IRC Sections 382 and 383, our ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if we experience an “ownership change.” An IRC Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. Subsequent or future issuances or sales of our stock could cause an “ownership change,” which would impose an annual limit on the amount of pre-ownership change net operating loss carryforwards and other tax attributes we can use to reduce our taxable income, potentially causing those tax attributes to expire unused or to be reduced, and increasing and accelerating our liability for income taxes. It is possible that such an ownership change could materially reduce our ability to use our net operating loss carryforwards or other tax attributes to offset taxable income, which could require us to pay more income taxes than if we were able to fully utilize our net operating loss carryforwards and harm our profitability.
Risks Related to Technology and Cybersecurity
If we fail to manage our technical operations infrastructure, our existing customers may experience service outages, our new customers may experience delays in the deployment of our products, and we could be subject to, among other things, claims for credits or damages.
Our success depends in large part upon the capacity, stability, security and performance of our operations infrastructure. From time to time, we have experienced interruptions in service, and we may experience such interruptions in the future. These service interruptions may be caused by a variety of factors, including infrastructure changes, human or software errors, viruses, security attacks, fraud, spikes in customer usage and denial of service issues. In some instances, we may not be able to identify the cause or
causes of these performance problems within an acceptable period of time. Our failure to achieve or maintain expected performance levels, stability and security, particularly as we increase the number of users of our products and the product applications that run on our system, could harm our relationships with our customers, result in claims for credits or damages, damage our reputation, significantly reduce customer demand for our products, cause us to incur significant expense and personnel time replacing and upgrading our infrastructure, and harm our business.
We have experienced significant growth in the number of agent seats and interactions that our infrastructure supports. As the number of agent seats within our customer base grows and our customers’ use of our products increases, we need to continue to make additional investments in our capacity to maintain adequate and reliable stability and performance, the availability of which may be limited or the cost of which may be prohibitive, and any failure may cause interruptions in service that may harm our business. In addition, we need to manage our operations infrastructure properly in order to support version control, changes in hardware and software parameters and the evolution of our suite of products. If we do not accurately predict our infrastructure requirements or efficiently improve our infrastructure, our business could be harmed.
Data security incidents could harm our reputation, cause us to modify business practices and otherwise adversely affect business, and subject us to liability.
We are dependent on information technology systems and infrastructure to operate. In the ordinary course of business, we will collect, store, process and transmit large amounts of information, including, for example, information about our customers, our customers’ clients or other information treated by our customers as confidential. We will need to be able to do so in a secure manner to maintain the confidentiality, integrity and availability of such information. Our obligations under applicable laws, regulations, contracts, industry standards, self-certifications, and other documentation may include maintaining the confidentiality, integrity and availability of personal information in our possession or control and maintaining reasonable and appropriate security safeguards as part of an information security program. These obligations create potential legal liability to regulators, business partners, customers, and other relevant stakeholders and also affect the attractiveness of our products to existing and potential customers.
All information technology operations are inherently vulnerable to inadvertent or intentional security breaches, incidents, attacks and exposures. Vulnerabilities can be exploited from inadvertent or intentional actions of our employees, third-party vendors, business partners, or by malicious third parties. Attacks of this nature are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise, including industrial espionage, organized criminal groups, “hacktivists,” nation states and others.
Although we have, and may in the future, implement remote working protocols and offer work-issued devices to certain employees, the actions of employees while working remotely may have a greater effect on the security of our systems and the personal data we process, including for example by increasing the risk of compromise to systems or data arising from employees’ combined personal and private use of devices, accessing our systems or data using wireless networks that we do not control, or the ability to transmit or store company-controlled data outside of our secured network. Although many of these risks are not unique to the remote working environment, they have been heightened by the dramatic increase in the numbers of our employees who have been and are continuing to work from home as a result of government requirements or guidelines and internal policies that have been put in place in response to the COVID-19 pandemic.
In addition to the threat of unauthorized access or acquisition of sensitive or personal information, other threats could include the deployment of harmful malware, ransomware attacks, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information. Our systems likely experience directed attacks on at least a periodic basis that are intended to interrupt our operations; interrupt our customers’ ability to access our platform; extract money from us; and/or obtain our data (including without limitation user or employee personal information or proprietary information). Although we have implemented certain security measures, systems, processes, and safeguards intended to protect our information technology systems and data from such threats and mitigate risks to our systems and data, we cannot be certain that threat actors will not have a material impact on our systems or products in the future. Our safeguards intended to prevent or mitigate certain threats may not be sufficient to protect our information technology systems and data due to the developing sophistication and means of attack in the threat landscape. In addition, third parties may attempt to fraudulently induce employees or users to disclose information in order to gain access to our data or our users’ data. Recent developments in the threat landscape include an increased number of cyber extortion and ransomware attacks, with increases in the amount of ransom demands and the sophistication and variety of ransomware techniques and methodology.
Significant disruptions of third-party vendors’ and/or commercial partners’ information technology systems or other similar data security incidents could adversely affect our business operations and/or result in the loss, misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, sensitive or personal information, which could harm our business. In addition, information technology system disruptions, whether from attacks on our technology environment or from computer viruses, natural disasters, terrorism, war and telecommunication and electrical failures, could result in a material disruption of our product development and business operations.
There is no way of knowing for certain whether we have experienced any data security incidents that have not been discovered. While we have no reason to believe that we have experienced a data security incident that we have not discovered, attackers have become very sophisticated in the way they conceal their unauthorized access to systems, and many companies are not aware when they have been attacked. Any event that leads to unauthorized access, use or disclosure of sensitive or personal information, including, but not limited to, personal information regarding our customers or our customers’ customers, could disrupt our business, harm our reputation, compel us to comply with applicable federal and/or state breach notification laws and foreign law equivalents, subject us to time consuming, distracting and expensive litigation, regulatory investigation and oversight, mandatory corrective action, require us to verify the correctness of database contents, or otherwise subject us to liability under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information. This could result in increased costs to us and result in significant legal and financial exposure and/or reputational harm. Such incidents could also cause interruptions to the products we provide, degrade the user experience, or cause customers to lose confidence in our products.
Applicable data privacy and security laws may also obligate us to employ security measures that are appropriate to the nature of the data we collect and process and, among other factors, the risks attendant to data processing activities in order to protect personal information from unauthorized access or disclosure, or accidental or unlawful destruction, loss, or alteration. We have implemented security measures that we believe are appropriate, but a regulator could deem the security measures not to be appropriate given the lack of prescriptive measures in certain data protection laws. Given the evolving nature of security threats and evolving safeguards, we cannot be sure that our chosen safeguards will protect against security threats to our business including the personal data that we process. Even security measures that are appropriate, reasonable, and/or in accordance with applicable legal requirements may not be able to fully protect our information technology systems and the data contained in those systems, or our data that is contained in third parties’ systems. Moreover, certain data protection laws impose on us responsibility for our employees and third parties that assist with aspects of our data processing. Our employees’ or third parties’ intentional, unintentional, or inadvertent actions may increase our vulnerability or expose us to security threats, such as phishing attacks, and we may remain responsible for successful access, acquisition or other disclosure of our data despite the quality and legal sufficiency of our security measures.
Any failure or perceived failure by us or our vendors or business partners to comply with privacy, confidentiality or data security-related legal or other obligations to third parties, or any security incidents or other events that result in the unauthorized access, release or transfer of sensitive information, which could include personal information, may result in governmental investigations, enforcement actions, regulatory fines, litigation, or public statements against us by advocacy groups or others. These could also cause third parties, including current and potential customers or partners, to lose trust in us, including for example perceiving our platform, system or networks as unreliable or less desirable. We could also be subject to claims by third parties that we have breached privacy- or confidentiality-related obligations, which could materially and adversely affect our business and prospects.
We rely on third-party telecommunications and internet service providers to provide our products, including connectivity to our cloud contact center software, and any failure by these service providers to provide reliable services could cause us to lose customers and subject us to claims for credits or damages, among other things.
We rely on services from third-party telecommunications providers in order to provide services to our customers and their customers, including telephone numbers. In addition, we depend on our internet bandwidth suppliers to provide uninterrupted and error-free service through their networks. We exercise little control over these third-party providers, which increases our vulnerability to problems with the services they provide.
When problems occur, it may be difficult to identify the source of the problem. Service disruption or outages, whether caused by our service, the products or services of our third-party service providers, or our customers’ or their customers’ equipment and systems, may result in loss of market acceptance of our products and any necessary repairs or other remedial actions may force us to incur significant costs and expenses.
If any of these service providers fail to provide reliable services, suffer outages, degrade, disrupt, increase the cost of or terminate the services that we and our customers depend on, we may be required to switch to another service provider. Delays caused by switching our technology to another service provider, if available, and qualifying this new service provider could materially harm our customer relationships, business, financial condition and operating results. Further, any failure on the part of third-party service providers to achieve or maintain expected performance levels, stability and security could harm our relationships with our customers, cause us to lose customers, result in claims for credits or damages, increase our costs or the costs incurred by our customers, damage our reputation, significantly reduce customer demand for our products and seriously harm our financial condition and operating results.
Our customers rely on internet service providers to provide them with access and connectivity to our cloud contact center software, and changes in how internet service providers handle and charge for access to the internet could materially harm our customer relationships, business, financial condition and operating results.
Our customers must have access to broadband internet access services in order to use our products and certain of our offerings require substantial capacity to operate effectively. In the United States, internet access services are provided by relatively few companies that, depending on the geographic area, have market power over such offerings. It is possible that these companies could charge us, our customers, or both, fees to guarantee a service amount of capacity, or for quality of broadband internet access services, or advantage themselves or our competitors by degrading, disrupting, limiting, or otherwise restricting the use of their infrastructure to support our services. Notably, some of the largest providers of broadband internet access services have committed to not engage in acts that would impede our customers’ broadband internet access services from accessing products or services like ours but, depending on the facts, there may be no law that prohibits such providers from doing so. However, these providers likely have the ability to increase our rates, our customers’ rates, or both for broadband internet access services which may increase the cost of our products making our products less competitive or decreasing our profit margins.
In 2018, the Federal Communications Commission or FCC released an order repealing rules that would have prevented broadband internet access providers from degrading, disrupting or otherwise restricting ours and our customers’ broadband internet access services. The FCC’s 2018 repeal was largely upheld by the D.C. Circuit Court of Appeals in a decision issued in October 2019. That same court rejected the FCC’s attempt to categorically preempt states from adopting their own network neutrality requirements, requiring case by case determinations as to whether state and local regulation conflicts with the FCC’s rules. The court also required the FCC to reexamine three issues from the order where it found insufficient analysis but allowed the order to remain in effect pending the FCC’s review. The original parties were denied a rehearing by the full U.S. Court of Appeals for the D.C. Circuit in February 2020 and the period to seek review by the Supreme Court has ended. On remand, the FCC reaffirmed its existing approach in October 2020; however, four petitioners sought reconsideration of the FCC’s decision in February 2021, and the FCC subsequently filed a motion requesting that the D.C. Circuit hold the case in abeyance, which the court granted. To the extent the courts, the agencies or the states do not uphold or adopt sufficient safeguards to protect against discriminatory conduct, network operators may seek to engage in blocking, throttling or other discriminatory practices against us or our customers, and our business could be harmed .
As we consider approaches for expanding internationally, government regulation protecting the non- discriminatory provision of internet access may be nascent or non-existent. In those markets where regulatory safeguards against unreasonable discrimination are nascent or non-existent and where local network operators possess substantial market power, we could experience anti-competitive practices that could impede our growth, cause us to incur additional expenses or otherwise harm our business. Future regulations or changes in laws and regulations or their existing interpretations or applications could also hinder our operational flexibility, raise compliance costs and result in additional liabilities for us, which may harm our business.
We depend on data centers operated by third parties and public cloud providers and any disruption in the operation of these facilities could harm our business.
We host our products at data centers owned and operated by third party providers and located in Virginia, Ohio, Oregon, Canada, and Germany. Any failure or downtime in one of our data center facilities could affect a significant percentage of our customers. We do not control the operation of these facilities. The owners of our data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, or if one of our data center operators is acquired, closes, suffers financial difficulty or is unable to meet our growing capacity needs, we may be required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and service interruptions in connection with doing so.
The data centers within which we host our products are subject to various points of failure. Problems with cooling equipment, generators, uninterruptible power supply, routers, switches, or other equipment, could result in service interruptions for our customers as well as equipment damage. These data centers are subject to disasters such as earthquakes, floods, fires, hurricanes, acts of terrorism, sabotage, break-ins, acts of vandalism and other events, which could cause service interruptions or the operators of these data centers to close their facilities for an extended period of time or permanently. The destruction or impairment of any of these data center facilities could result in significant downtime for our products and the loss of customer data. Because our ability to attract and retain customers depends on us providing customers with highly reliable service, even minor interruptions in our service could harm our business, revenues and reputation. Additionally, in connection with the continuing expansion of our existing data center facilities, there is an increased risk that service interruptions may occur as a result of server addition, relocation or other issues.
These data centers are also subject to increased power costs. We may not be able to pass on any increase in power costs to our customers, which could reduce our operating margins.
We have little or no control over public cloud providers. Any disruption of the public cloud or any failure of the public cloud providers to effectively design and implement sufficient security systems or plan for increases in capacity could, in turn, cause delays or disruptions in our products. In addition, using the public cloud presents a variety of additional risks, including risks related to sharing the same computing resources with others, reliance on public cloud providers’ authentication, security, authorization and access control mechanisms, a lack of control over the public cloud’s redundancy and security systems and fault tolerances, and a reduced ability to control data security and privacy.
Our plans to establish public cloud-based data centers for our international operations may be unsuccessful and may present execution and competitive risks.
We may seek to establish new public cloud deployments in the future to facilitate our platform in certain international markets. We may partner with a third-party to develop, test and deploy our technology to offer a full stack of products on the public cloud in certain international markets. If we are successful in the deployment of our technology to the public cloud, we may expand our public cloud deployments to facilitate our platform in the U.S. and in international markets. Our public cloud-based platform offering is critical to developing and providing our products to our customers, scaling our business for future growth, accurately maintaining data and otherwise operating our business. Infrastructure buildouts on the public cloud are complex, time-consuming and may involve substantial expenditures. In addition, the implementation of public cloud-based data centers involves risks inherent in the conversion to a new system, including loss of information and potential disruption to our normal operations. Even once we implement public cloud-based data centers, we may discover deficiencies in the design, implementation or maintenance of the system that could materially harm our business.
Development of our AI products to make agents more efficient and improve customer experience may not be successful and may result in reputational harm and our future operating results could be materially harmed.
We plan to increase and provide our customers with AI-powered applications, including conversational virtual agents, agent assistance and business insights. While we aim for our AI-powered applications to make agents more efficient and improve customer experience, our AI models may not achieve sufficient levels of accuracy. In addition, we may not be able to acquire sufficient training data or our training data may contain biased information. Furthermore, the costs of AI technologies, such as speech recognition and natural language processing, may be too high for market adoption. Our competitors or other organizations may incorporate AI features into their products more quickly or effectively and their AI features may achieve higher market acceptance than ours, which may result in us failing to recoup our investments in developing AI-powered applications. Should any of these items or others occur, our ability to compete, our reputation and operating results may be materially and adversely affected.
If our products fail, or are perceived to fail, to perform properly or if they contain technical defects, our reputation could be harmed, our market share may decline, and/or we could be subject to product liability claims.
Our products may contain undetected errors or defects that may result in failures or otherwise cause our products to fail to perform in accordance with customer expectations and contractual obligations. Moreover, our customers could incorrectly implement or inadvertently misuse our products, which could result in customer dissatisfaction and harm the perceived utility of our products and our brand. Because our customers use our products for mission-critical aspects of their business, any real or perceived errors or defects in, or other performance problems with, our products may damage our customers’ businesses and could significantly harm our reputation. If that occurs, we could lose future sales, or our existing customers could cancel their use of our products, seek payment credits, seek damages against us, or delay or withhold payment to it, which could result in reduced revenues, an increase in our provision for uncollectible accounts and service credits, an increase in collection cycles for accounts receivable, and harm our financial results. Customers also may make indemnification or warranty claims against us, which could result in significant expense and risk of litigation. Performance problems could result in loss of market share, reputational harm, failure to achieve market acceptance and the diversion of development resources.
Any product liability, intellectual property, warranty or other claims against us could damage our reputation and relationships with our customers and could require us to spend significant time and money in litigation or pay significant settlements or damages. Although we maintain general liability insurance, including coverage for errors and omissions, this coverage may not be sufficient to cover liabilities resulting from such claims. Also, our insurers may disclaim coverage. Our liability insurance also may not continue to be available to us on reasonable terms, in sufficient amounts, or at all. Any contract or product liability claims successfully brought against us would harm our business.
The contact center software market is subject to rapid technological change, and we must develop and sell incremental and new features and products in order to maintain and grow our business.
The contact center software market is characterized by rapid changes in customer requirements, frequent introductions of new and enhanced products and features and continuing and rapid technological advancement. To compete successfully, we must continue to devote significant resources to design, develop, deploy and sell new and enhanced contact center products, applications and features that provide increasingly higher capabilities, performance and stability at lower cost. If we are unable to develop or acquire new features for our existing products or new applications that achieve market acceptance or that keep pace with technological developments, our business would be harmed. For example, we are focused on enhancing the reliability, features and functionality of our contact center products to enhance our utility to our customers, particularly larger customers, with complex, dynamic and global
operations. The success of these enhancements depends on many factors, including timely development, introduction and market acceptance, as well as our ability to transition our existing customers to these new products, applications and features. Failure in this regard may significantly impede our revenue growth. In addition, because our products are designed to operate on a variety of systems, we need to continuously modify and enhance our solution to keep pace with changes in hardware, operating systems, the increasing trend toward multichannel communications and other changes to software technologies. We may not be successful in developing or acquiring these modifications and enhancements or bringing them to market in a timely fashion. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could delay introduction of changes and updates to our products and increase our research and development expenses. Any failure of our products to operate effectively, including with future network platforms and technologies, could reduce the demand for our products, result in customer dissatisfaction and harm our business.
Our ability to continue to enhance our products is dependent on adequate research and development resources. If we are not able to adequately fund our research and development efforts, we may not be able to compete effectively and our business and operating results may be harmed.
In order to remain competitive, we must devote significant and increasing resources to developing new product offerings, features, and enhancements to our existing cloud contact center software, which will increase our research and development and operating expenses. Our research and development expenses totaled $52.6 million, $20.2 million and $16.6 million for the years ended December 31, 2021, 2020 and 2019, respectively. The increase in research and development expense was primarily due to the VCIP and OBIP awards that fully vested upon a liquidity event (i.e. the Merger) and was recorded as compensation expense in the consolidated statements of operations and comprehensive loss in the second quarter of 2021. Maintaining adequate research and development personnel and resources to meet the demands of the market is essential. If we are unable to develop products, applications or features internally due to constraints, such as high employee turnover, insufficient cash, inability to hire sufficient research and development personnel or a lack of other research and development resources, we may miss market opportunities. Furthermore, many of our competitors have greater financial resources and expend considerably greater amounts on their research and development programs than we do, and those that do not may be acquired by larger companies that would allocate greater resources to our competitors’ research and development programs. Our failure to devote adequate research and development resources or compete effectively with the research and development programs of our competitors could harm our business.
If we are unable to maintain the compatibility of our software with other products and technologies, our business would be harmed.
Our customers often integrate our products with their business applications. These third-party providers or their partners could alter their products so that our products no longer integrate well with them, or they could delay or deny our access to technology releases that allow us to adapt our products to integrate with their products in a timely fashion. If we cannot adapt our products to changes in complementary technology deployed by our customers, it may significantly impair our ability to compete effectively.
Our business could be harmed if our due diligence successfully identifiescustomers are not satisfied with the professional services or technical support provided by us or our partners.
Our business depends on our ability to satisfy our customers, not only with respect to our products, but also with the professional services and technical support that are required for our customers to implement and use our products to address their business needs. Professional services and technical support may be performed by our own staff or, in a select subset of cases, by third parties. Some of our professional services offerings have negative margins. Accordingly, any increase in sales of professional services could harm our gross margins and operating results. We will need to continue to expand and optimize our professional services and technical support in order to keep up with new customer installations and ongoing service, which takes time and expense to implement. Identifying and recruiting qualified service personnel and training them in our products is difficult and competitive and requires significant time, expense and attention. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. We also may be unable to modify the format of our support services or change our pricing to compete with changes in support services provided by our competitors. Increased customer demand for these services, without corresponding revenues, could increase our costs and harm our operating results. If a customer is not satisfied with the deployment and ongoing services performed by us or a third party, we could lose customers, miss opportunities to expand our business with these customers, incur additional costs, or suffer reduced (including negative) margins on our service revenue, any of which could damage our ability to grow our business. In addition, negative publicity related to our professional services and technical support, regardless of its accuracy, may damage our business by affecting our ability to compete for new business with current and prospective customers.
We employ third-party licensed software for use in or with our products, and the inability to maintain these licenses or errors in the software we license could result in increased costs, or reduced service levels, which could harm our business.
Our products incorporate certain risks, unexpected risksthird-party software obtained under licenses from other companies. We anticipate that we will continue to rely on such software from third parties in the future. Although we believe that there are commercially reasonable alternatives to the third-party software we currently license, this may arisenot be the case, or it may be difficult or costly to transition to other providers. In addition, integration of the software used in our products with new third-party software may require significant work and previously known risksrequire substantial investment of our time and resources. To the extent that our products depend upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our products, delay new product introductions, result in increased costs, or a failure of our products and injure our reputation. Our use of additional or alternative third-party software would require us to enter into license agreements with third parties and to integrate such software into our products.
There can be no assurance that the technology licensed by us will continue to provide competitive features and functionality or that licenses for technology currently utilized by us or other technology that we may materializeseek to license in the future, including to replace current third-party software, will be available to us at a reasonable cost or on commercially reasonable terms, or at all. Third-party licensors may also be acquired or go out of business, which could preclude us from continuing to use such technology. The loss of, or inability to maintain, existing licenses could result in lost product features and litigation. The loss of existing licenses could also result in implementation delays or reductions until equivalent technology or suitable alternative products could be developed, identified, licensed and integrated, and could increase our costs and harm our business.
Our products utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
Our products include software covered by open source licenses, which may include, for example, free general public use licenses, open source frontend libraries and open source applications. The terms of various open source licenses have not been interpreted by United States courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our products. By the terms of certain open source licenses, we could be required to release the source code of our proprietary software, and to make our proprietary software available under open source licenses, if we combine our proprietary software with open source software in a certain manner. In the event that portions of our proprietary software are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our technologies and products. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not consistentprovide warranties or controls on the origin of the software. Given the nature of open source software, there is also a risk that third parties may assert copyright and other intellectual property infringement claims against us based on our use of certain open source software programs. Many of the risks associated with the usage of open source software cannot be eliminated and could harm our business.
Risks Related to Intellectual Property
Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.
Our success and ability to compete depend in part upon our intellectual property. As of December 31, 2021, our intellectual property portfolio included four registered U.S. trademarks, two pending trademark applications, and one issued U.S. patent. We primarily rely on copyright, trade secret and trademark laws, trade secret protection and confidentiality or license agreements with our preliminary risk analysis. Even though these chargesemployees, customers, partners and others to protect our intellectual property rights. The steps we take to secure, protect and enforce our intellectual property rights may be non-cash itemsinadequate. We may not be able to obtain any further patents or trademarks, our current patents could be invalidated or our competitors could design their products around our patented technology, and our pending applications may not result in the issuance of patents or trademarks. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in other countries are uncertain and may afford little or no effective protection of our proprietary technology, and the risk of intellectual property misappropriation may be higher in these countries. Consequently, we may be unable to prevent our proprietary technology from being infringed or exploited abroad, which could affect our ability to expand into international markets or require costly efforts to protect our technology.
In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time consuming and distracting to our management and could result in the impairment or loss of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Accordingly, we may not be able to prevent third parties from infringing upon or misappropriating our
intellectual property. Our failure to secure, protect and enforce our intellectual property rights could substantially harm the value of our technology, products, brand and business.
We will likely be subject to third-party intellectual property infringement claims.
There is considerable patent and other intellectual property development activity and litigation in our industry. Our success depends upon our not infringing upon the intellectual property rights of others. Our competitors, as well as a number of other entities and individuals, may own or claim to own intellectual property relating to our industry.
Certain technology necessary for us to provide our products may be patented, copyrighted or otherwise protected by other parties either now or in the future. In such case, we would have to negotiate a license for the use of that technology. We may not be able to negotiate such a license at a price that is acceptable, or at all. The existence of such a patent, copyright or other protections, or our inability to negotiate a license for any such technology on acceptable terms, could force us to cease using such technology and offering products incorporating such technology.
Others in the future may claim that our products and underlying technology infringe upon or violate their intellectual property rights. However, we may be unaware of the intellectual property rights that others may claim cover some or all of our technology or products. Any claims or litigation could cause us to incur significant costs and expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, require that we refrain from using, manufacturing or selling certain offerings or features or using certain processes, prevent us from offering our products or certain features thereof, or require that we comply with other unfavorable terms, any of which could harm our business and operating results. We may also be obligated to indemnify our customers or business partners and pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, which could be costly. Even if we were to prevail in such a dispute, any litigation regarding our intellectual property could be costly and time consuming and divert the attention of our management and key personnel from our business operations.
Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.
In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, vendors, lessors, business partners and other parties for third-party claims with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, certain claims related to third-party privacy or cyber security breaches or from intellectual property infringement claims made by third parties. Large indemnity payments or damage claims from contractual breach could harm our business, results of operations and financial condition. Although we often contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them. Any dispute with a customer with respect to such obligations could be expensive, even if we ultimately prevail, and could harm our relationship with that customer and other current and prospective customers, reduce demand for our products and harm our business, results of operations and financial condition.
Risks Related to Our Indebtedness
We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.
We may require additional capital to respond to business opportunities, challenges, acquisitions, a decline in sales, increased regulatory obligations or unforeseen circumstances and may engage in equity or debt financings or enter into credit facilities. We have a substantial amount of debt. As of December 31, 2021, we had approximately $55.5 million in principal amount outstanding under the term loan. See Note 11 to our consolidated financial statements included in Part II, Item 8 of this Annual Report.
Any debt financing obtained by us in the future could cause us to incur additional debt service expenses and could include restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and pursue business opportunities and could be secured by all of our assets. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution in their percentage ownership of us, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to grow and support our business and to respond to business challenges could be significantly limited.
We may be unable to generate sufficient cash flow to satisfy our debt service obligations, which would adversely affect our results of operations and financial condition.
Our ability to make scheduled payments on, or to refinance our obligations under, our indebtedness will depend on our future operating performance and on economic, financial, competitive, legislative, regulatory and other factors. Many of these factors are beyond our control. We can provide no assurance that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to satisfy our obligations under our indebtedness or to fund our other needs. In order for us to satisfy our obligations under our indebtedness, we must continue to execute our business strategy. If we are unable to do so, we may need to refinance all or a portion of our indebtedness on or before maturity. We can provide no assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.
The terms of our indebtedness could adversely affect our business.
Our credit facility contains restrictive covenants that, among others, limit our ability to:
•pay dividends and make distributions and repurchase stock;
•engage in transactions with affiliates;
•create liens;
•incur indebtedness not under the credit facility;
•engage in sale-leaseback transactions;
•make investments;
•make loans and guarantee obligations of other persons;
•amend material agreements and organizational documents and enter into agreement affecting ability to pay dividends;
•maintain or contribute to a defined employee benefit plan or arrangement that is not subject to the laws of the U.S.; and
•sell or dispose of all or substantially all of our assets and engage in specified mergers or consolidations.
In addition, our credit facility contains certain financial covenants, including the maintenance of a consolidated total leverage ratio and a consolidated fixed charge coverage ratio that come into effect in March 2022. Our ability to borrow under the revolving facility depends on our compliance with these financial covenants. Events beyond our control, including changes in general economic and business conditions, may affect our ability to meet these financial covenants. We cannot guarantee that we will meet these financial covenants in the future, or that the lenders will waive any failure to meet these financial covenants.
Risks Related to Regulation
Alleged or actual failure by us, our competitors, or other companies to comply with the constantly evolving legal and contractual environment surrounding calling or texting, and the governmental or private enforcement actions related thereto, could harm our business, financial condition, results of operations and cash flows.
The legal and contractual environment surrounding calling and texting is constantly evolving. In the United States, two federal agencies, the FTC and the FCC, and various states have laws and regulations including, at the federal level, the Telephone Consumer Protection Act of 1991, that restrict the placing of certain telephone calls and texts by means of automatic telephone dialing systems, prerecorded or artificial voice messages and fax machines. In addition, there are a series of federal and state laws that regulate marketing calls and texts. Some of these laws require companies to institute processes and safeguards to comply with applicable restrictions. The legal interpretation of certain of the requirements of these laws has been in dispute before the courts and federal agencies, including for example as part of pending FCC proceedings and a case currently pending before the U.S. Supreme Court. Some of these laws, where a violation is established, can be enforced by the FTC, FCC, State Attorneys General, or private party litigants. In these types of actions and depending on the circumstances, the plaintiff may seek damages, statutory penalties, or other fees.
We have designed our products to comply with applicable law. To the extent that our products are viewed by customers or potential customers as less functional, or more difficult to deploy or use, because of our products’ compliance features, we may lose market share to competitors that do not include similar compliance safeguards. Our contractual arrangements with our customers who use our solution to place calls also expressly require the customers to comply with all such laws and to indemnify us for any failure to do so.
Although we take steps to confirm that the use of our products complies with applicable laws, it is possible that the FTC, FCC, private litigants or others may attempt to hold our customers, or us as a software solution provider, responsible for alleged violations of these laws. To the extent any court finds that the products violated a controlling legal standard, we could face indemnification demands from our customers for costs, fees and damages with respect to calls placed using those products. It also is possible that we may not successfully enforce or collect upon our contractual indemnities from our customers. Defending such suits can be costly and time-consuming and could result in fines, damages, expenses and losses. Additionally, these laws, and any changes to them or the applicable interpretation thereof, that further restrict calling or texting consumers, adverse publicity regarding the alleged or actual failure by companies, including us, our customers and competitors, or other third parties, to comply with such laws or governmental or private enforcement actions related thereto, could result in a reduction in the use of our products by our customers and potential customers, which could harm our business, financial condition, results of operations and cash flows.
On December 12, 2018, the FCC issued an order concluding that certain text messaging services qualify as an “information service” under federal law and not a “telecommunications service.” The regulatory significance to us is that the FCC’s decision gives wireless carriers additional flexibility to manage messaging traffic on their network, including by blocking traffic. Such blocking efforts by carriers may make it more difficult for our customers to use messaging services provided by us as a part of our overall communications and outreach solution for our customers. Thus, although SMS comprises only a small portion of our revenue base, our future availability as an effective tool for communication and outreach for our customers and their customers remains uncertain and could cause our products to be less valuable to customers and potential customers.
Privacy concerns and domestic or foreign laws and regulations may reduce the demand for our solution, increase our costs and harm our business.
In order to provide our products, we receive and store personal data from customers, and we may also collect and store personal data from or about potential customers and website visitors. We may share personal data with our service providers, such as cloud or other technical services providers, as necessary to provide the products. Various federal, state, and foreign laws and regulations as well as industry standards and contractual obligations govern the processing of personal data. The regulatory environment for the collection and use of personal data by online service providers is evolving in the United States and internationally. Privacy groups and government bodies, including the FTC, state attorneys general, the European Commission and European data protection authorities, have an immediateincreasingly scrutinized privacy issues with respect to personal data, and we expect such scrutiny to continue to increase. The United States and foreign governments have enacted and are considering laws and regulations that could significantly impact the processing of personal data. These include laws such as the EU GDPR and the CCPA.
We have made and continue to make changes to our data protection compliance program to address applicable legal requirements. We also continue to monitor the implementation and evolution of data protection regulations, but if we are deemed to not be compliant with applicable law, we may be subject to significant fines and penalties (such as restrictions on personal data processing) and our liquidity,business may be harmed. We also may be bound by additional, more stringent contractual obligations relating to our collection, use, and disclosure of personal, financial, and other data.
Additionally, some laws might require us to disclose proprietary or confidential aspects of our products in a manner that compromises the facteffectiveness of our products or that enables our competitors or bad actors to gain insight into the operation of our technology, enabling them to copy or circumvent our products and thereby reducing the value of our technology.
We publish privacy policies, notices and other documentation regarding our collection, processing, use and disclosure of personal information and/or other confidential information. Although we report chargesendeavor to comply with published policies, certifications, and documentation, we may at times fail to do so or may be perceived to have failed to do so. Moreover, despite our efforts, we may not be successful in achieving full compliance if our employees or vendors fail to comply with our published policies, certifications, and documentation.
The costs of this nature could contributecompliance with, and other burdens imposed by, such laws and regulations that are applicable to negative market perceptions aboutus and the businesses of our customers may limit the use and adoption of our products and reduce overall demand for our products. Also, failure to comply with such laws may lead to significant fines, penalties or other regulatory liabilities, such as orders or consent decrees forcing us or our securities.customers to modify business practices, and reputational damage or third-party lawsuits for any noncompliance with such laws. Our business could be harmed if legislation or regulations are adopted, interpreted or implemented in a manner that is inconsistent from country to country and inconsistent with our current policies and practices, or those of our customers.
Furthermore, privacy and data protection concerns may cause consumers to resist providing the personal data or other types of protected data that may be subject to laws and regulations that is necessary to allow our customers to use our products effectively. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our products in certain industries or countries.
The European Union’s GDPR may continue to increase our costs and the costs of our customers to operate, limit the use of our products or change the way we operate, expose us to substantial fines and penalties if we fail to comply, and has led to similar laws being enacted in other jurisdictions.
On May 25, 2018, the EU adopted the GDPR. The GDPR replaced the EU Data Protection Directive, also known as Directive 95/46/EC, and is intended to harmonize data protection laws throughout the EU by applying a single data protection law that is binding throughout each member state. We and many of our customers are subject to the GDPR based upon our processing of personal data collected from EU data subjects, such as our processing of personal data of our customers in the EU.
The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements and onerous new obligations on services providers. Non-compliance with the GDPR can trigger steep fines of up to €20 million or 4% of total worldwide annual turnover, whichever is higher. The member states of the EU were tasked under
the GDPR to enact certain implementing legislation that would add to or further interpret the GDPR requirements and this additional implementing legislation potentially extends our obligations and potential liability for failing to meet such obligations.
Given the breadth and depth of changes in data protection obligations, our compliance with the GDPR’s requirements will continue to require time, resources and review of the technology and systems we use to satisfy the GDPR’s requirements. We have ongoing procedures to maintain GDPR compliance. We continue to deliver product features that enhance our data management and security in support of GDPR compliance.
While we do not regularly transfer high volumes of personal data outside of the European Economic Area (“EEA”), there may be circumstances in which ex-EEA transfers of personal data, including to countries which European regulators do not recognize as providing an adequate level of protection for personal data, are necessary to provide products to our customers or otherwise operate our business. In the event we conduct any such transfers of personal data, we may have to implement new or additional processes, transfer mechanisms, or tools to comply with the GDPR or other applicable data protection laws, which may result in increased operational costs. Additionally, there are certain unsettled legal issues regarding transferring personal data outside of the EEA, the resolution of which may impact our ability to transfer personal data from the EEA to the United States.
Given the complexity of operationalizing the GDPR, the maturity level of proposed compliance frameworks and the relative lack of guidance in the interpretation of our numerous requirements, we and our customers are at risk of enforcement actions taken by EU data protection authorities or litigation from consumer advocacy groups acting on behalf of data subjects. This risk will likely remain until there is more guidance on the GDPR, including as to implementing legislation enacted by the member states and enforcement actions taken by various data protection authorities.
The implementation of the GDPR has led other jurisdictions to amend, or propose legislation to amend, their existing data protection laws to align with the requirements of the GDPR with the aim of obtaining an adequate level of data protection to facilitate the transfer of personal data from the EU. Accordingly, the challenges we face in the EU will likely also apply to other jurisdictions outside the EU that adopt laws similar in construction to the GDPR or regulatory frameworks of equivalent complexity.
The CCPA and its amendments could increase our costs and the costs of our customers to operate, limit the use of our products or change the way we operate, and expose us to substantial fines and class action risk if we fail to comply, and lead to similar laws being enacted in other states.
In 2018, the State of California adopted the CCPA. The CCPA applies to certain for-profit entities doing businesses in California. We and our qualifying customers were required to comply with these requirements before the CCPA became effective on January 1, 2020.
The CCPA establishes a new privacy framework for covered businesses by creating an expanded definition of personal information and creating new data privacy rights for consumers in the State of California. As required by the statute, entities doing business in California have new and ongoing disclosure obligations to consumers for whom they hold or process personal data. Businesses must also provide consumers with the right to dictate how their personal information is used and shared. Complying with these obligations will involve continued expenditures that could increase as more consumers exercise their rights under the statute.
The CCPA also creates a new and potentially severe statutory damages framework for violations of provisions. The California Attorney General can enforce the CCPA by seeking statutory penalties for failure to comply with the act. For businesses that fail to implement reasonable security procedures, the CCPA also creates a private right of action for consumers whose personal data is subject to certain data breaches. This private right of action has the potential to create significant class action liability for businesses, like ours, that operate in California. To protect against these new risks, we may be necessary to change our insurance programs or take other business steps. The CCPA has been amended multiple times, and the California Office of the Attorney General has published final regulations to implement portions of the CCPA and is currently reviewing modifications to those regulations. Additionally, in November 2020, California voters passed the California Privacy Rights Act (the “CPRA”) ballot initiative, which introduces significant amendments to the CCPA. The CPRA will go into effect on January 1, 2023 and new CPRA regulations are expected to be introduced. The potential effects of the CCPA amendments, Attorney General implementation, and CPRA are far-reaching and may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply. Other states may enact laws similar to the CCPA and the CPRA. In 2021, Virginia and Colorado adopted comprehensive privacy laws, which will each become effective in 2023. We are continuing to assess the impact of these developments on our business as additional information and guidance becomes available.
Increased taxes and surcharges (including Universal Service Fund, whether labeled a “tax,” “surcharge,” or other designation) on our products may increase our customers’ cost of using our products and/or increase our costs and reduce our profit margins to the extent the costs are not passed through to our customers, and we may be subject to liabilities for past sales and other taxes, surcharges and fees.
The applicability of federal, state, and local taxes, fees, surcharges or similar taxes to our products is complex and subject to interpretation and change. Based on analysis of our activities, we have determined that either we are directly obligated to collect and remit U.S. state or local sales or use taxes in certain U.S. states, municipalities or local tax jurisdictions depending on the state(s) in question and the location of our customers, among other factors. The taxing authorities may challenge our interpretation of the laws and may assess additional taxes, penalties and interests which could have adverse effects on the results of operations and, to the extent we pass these through to our customers, demand for our products. We are registered for collecting and remitting applicable taxes where such a determination has been made and such registration is required. We analyze our activities and revenue to determine if we are subject to taxes in additional jurisdictions. Based on such ongoing assessment of our U.S. federal, state and local tax collection and remittance obligations, we register for tax purposes in such jurisdictions we deem required and collect and remit applicable state and local taxes to these jurisdictions.
Federal, state, and local taxing and regulatory authorities may challenge our position and may decide to audit our business and operations with respect to, for example, state or local sales, use, gross receipts, excise and utility user taxes, fees or surcharges, which could result in us being liable for taxes, fees, or surcharges, as well as related penalties and interest, above our recorded accrued liability or additional liability for taxes, fees, or surcharges, as well as penalties and interest for our customers, which could harm our results of operations and our relationships with our customers. In addition, chargesif our international sales grow, additional foreign countries may seek to impose sales or other tax collection obligations on us, which would increase our exposure to liability.
If jurisdictions enact new legislation or if taxing and regulatory authorities promulgate new rules or regulations or expand or otherwise alter their interpretations of this natureexisting rules and regulations, we could incur additional liabilities. In addition, the collection of additional taxes, fees or surcharges in the future could increase our prices or reduce our profit margins. Compliance with new or existing legislation, rules or regulations may causealso make us less competitive with those competitors who are not subject to, or choose not to comply with, such legislation, rules or regulations. We have incurred, and will continue to incur, substantial ongoing costs associated with complying with state or local tax, fee or surcharge requirements in the numerous markets in which we conduct or will conduct business.
Our ability to offer products outside the United States is subject to different regulatory and taxation requirements which may be complicated and uncertain.
When we expand the sale and implementation of our solutions internationally, we will be subject to additional regulations, taxes, surcharges and fees. Compliance with these new complex regulatory requirements differ from country to country and are frequently changing and may impose substantial compliance burdens on our business. At times, it may be difficult to determine which laws and regulations apply and we may discover that we are required to comply with certain laws and regulations after having provided services for some time in that jurisdiction, which could subject us to violate net worthliability for taxes, fees and penalties on prior revenues, and we may be subject to conflicting requirements. Additionally, as we expand internationally, there is risk that governments will regulate or impose new or increased taxes or fees on the types of products that we provide. Any such additional regulation or taxes could decrease the value of our international expansion and harm our results of operations.
Requirements for us or our suppliers to pay federal or state universal service fund contribution amounts and assessments (either us paying directly or paying through our suppliers in the form of surcharges) for other telecommunications funds or taxes could impact the desirability and profitability of our products.
Applicable requirements for us to pay to our suppliers, or in some instances to pay directly, federal or state universal service surcharge amounts and assessments for other telecommunications funds or taxes, continue to change over time and may impact the desirability and profitability of our products. For example, interconnected voice over internet protocol (“VoIP”) providers are generally required to contribute to the federal Universal Service Fund, and the contribution rates have increased in recent years. In addition, if we are unable to continue to pass some or all of the cost of these surcharges and assessments to our customers, our profit margins will decrease. Our surcharge and assessment obligations, whether made directly or indirectly, may significantly increase in the future, due to new interpretations by governing authorities, governmental budget pressures, changes in our business model or products or other covenantsfactors.
If we do not comply with federal or state laws and regulations, to the extent applicable, we could be subject to enforcement actions, forfeitures, loss of licenses/authorizations and possibly restrictions on our ability to operate or offer certain of our products.
Our business is impacted by federal and state laws and regulations. Additionally, we are registered with the FCC and began providing interconnected VoIP services in the second half of 2021. As an interconnected VoIP provider, we are subject to certain existing or potential FCC regulations. If we do not comply with federal or state laws and regulations, to the extent applicable to our interconnected VoIP or other services, we could be subject to enforcement actions, forfeitures, behavioral or operational remedies, and possibly restrictions on our ability to operate or offer certain of our products. Any enforcement action, elements of which may become
public, would hurt our reputation in the industry, could impair our ability to sell our products to customers and could harm our business and results of operations.
Some of the regulations to which we may be subject as a resultor which otherwise may impact our business (in whole or in part) include:
•the Communications Assistance for Law Enforcement Act, or CALEA, which requires covered entities to assist law enforcement in undertaking electronic surveillance;
•contributions to federal or state Universal Service funds;
•payment of assuming pre-existing debt heldannual FCC regulatory fees based on our interstate and international revenues;
•rules pertaining to access to our products by a targetpeople with disabilities and contributions to the Telecommunications Relay Services;
•911 and E911 requirements;
•TRACED Act requirements; and
•FCC rules regarding Customer Proprietary Network Information, or CPNI, which prohibit us from using such information without customer approval, subject to certain exceptions.
If we do not comply with any current or future rules or regulations that apply to our business, we could be subject to additional and substantial fines and penalties (including those mentioned above), we may have to restructure our products, exit certain markets, accept lower margins or by virtueraise the price of our obtaining post-combination debt financing. Accordingly,products, any stockholdersof which could harm our business and results of operations.
Changes in government regulation applicable to the collections industry or
warrant holders who chooseany failure of us or our customers to
remain a stockholder or warrant holder following an initial business combinationcomply with existing regulations could
suffer a reductionresult in the
valuesuspension, termination or impairment of
their securities. Such stockholdersthe ability of us or
warrant holders are unlikelyour customers to
have a remedyconduct business, may require the payment of significant fines by us or our customers and could require changes in customer’s businesses that would reduce the need for
such reduction in value.If third parties bring claims against us, the proceeds heldour products, or require other significant expenditures.
Many of our customers operate in the
Trust Account could be reducedcollections industry, which is heavily regulated under various federal, state, and
local laws, rules, and regulations. In particular, the
per share redemption amount received by stockholders may be less than $10.00 per share.Our placingConsumer Financial Protection Bureau (“CFPB”), FTC, state attorneys general and other regulatory bodies have the authority to impose certain restrictions on the collections industry and to investigate a variety of funds in the Trust Account may not protect those funds from third-party claimsmatters, including consumer complaints against us. Althoughdebt collection companies, and can bring enforcement actions and seek monetary penalties, consumer restitution, and injunctive relief. If we, will seekor our customers fail to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses or other entitiescomply with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account,applicable laws, rules, and regulations, including, but not limited to, fraudulent inducement, breachidentity theft, privacy, data security, the use of fiduciary responsibilityautomated dialing equipment, laws related to consumer protection, debt collection, and laws applicable to specific types of debt, it could result in the suspension or other similar claims, as well as claims challenging the enforceabilitytermination of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Withum, our independent registered public accounting firm, and the underwriters of the Initial Public Offering will not execute agreements with us waiving such claims to the monies held in the Trust Account.
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where we are unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Upon redemptionability of our public shares, if we are unablecustomers to complete an initial business combination within the prescribed timeframe,conduct collection operations, which in turn would adversely affect us.
Additionally, new laws, rules or
upon the exercise of a redemption rightregulations, including changes to permissible communications in connection with
an initial business combination, we will be requiredconsumer debt collection enacted by the CFPB, could limit the ability of certain of our customers to
provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per share redemption amount received by public stockholdersuse our products or could
be less than the $10.00 per share initially held in the Trust Account, due to claims of such creditors.Our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent registered public accounting firm) for services rendered or products sold topotentially expose us or a prospective targetour customers to fines or penalties, which could reduce our revenues, or increase our expenses, and consequently adversely affect our business, with which we have discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.00 per public share or (2) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our franchisefinancial condition and income taxes (less up to $100,000 of interest to pay dissolution expenses), except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under our indemnity of the underwriters of the Initial Public Offering
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against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and believe that our Sponsor’s only assets are securities of our company and, therefore, our Sponsor may not be able to satisfy those obligations. We have not asked our Sponsor to reserve for such obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for an initial business combination and redemptions could be reduced to less than $10.00 per public share. In such event, we may not be able to consummate an initial business combination, and our public stockholders would receive such lesser amount per share in connection with any redemptions of public shares. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public stockholders.
In the event that the proceeds in the Trust Account are reduced below the lesser of: (1) $10.00 per public share; or (2) such lesser amount per share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our franchise and income taxes, and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in certain instances. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to our public stockholders may be reduced below $10.00 per share.
If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors and us to claims of punitive damages.
If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders.operating results. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/new federal, state or having acted in bad faith by paying public stockholders from the Trust Account prior to addressing the claims of creditors, thereby exposing itself and us to claims of punitive damages.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, the per share amount that would otherwise be received by our public stockholders in connection with our liquidation would be reduced.
If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete an initial business combination.
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:
restrictions on the nature of our investments; and
restrictions on the issuance of securities;
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each of which may make it difficult for us to complete an initial business combination.
In addition, we may have imposed upon us burdensome requirements, including:
registration as an investment company with the SEC;
adoption of a specific form of corporate structure; and
reporting, record keeping, voting, proxy and disclosure requirements and compliance with other rules and regulations.
We do not believe that our anticipated principal activities will subject us to the Investment Company Act. The proceeds held in the Trust Account may be invested by the trustee only in U.S. government treasury bills with a maturity of 180 days or less or in money market funds investing solely in U.S. treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act. Because the investment of the proceeds will be restricted to these instruments, we believe we will meet the requirements for the exemption provided in Rule 3a-1 promulgated under the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to consummate an initial business combination. If we are unable to complete an initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our Trust Account and our warrants will expire worthless.
Changes inlocal laws or regulations, or a failure to comply with anychanges in the ways these rules or laws are interpreted or enforced, could limit the activities of us or our customers in the future and regulations, may adversely affect our business, including our ability to negotiate and complete an initial business combination, and resultscould significantly increase the cost of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements.regulatory compliance. Compliance with this extensive regulatory framework is expensive and monitoringlabor-intensive. Any of applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changesthe foregoing could have a materialan adverse effect on our business, investmentsfinancial condition and operating results.
Regulation F, which implements the Final Debt Collection Practices Act and which took effect on November 30, 2021, governs third-party debt collectors and, among other things, limits the number of call attempts that a debt collector may make to a consumer to seven calls per account within a seven-day period. Once the debt collector makes actual contact with a consumer, the debt collector may not call the consumer again about that same account for a seven-day period. Adoption of the Regulation F Rule has required significant changes in the collection practices of some of our customers, and several of our customers have taken an even more conservative approach in their collection practices to ensure compliance with the rules, which has negatively impacted our revenue from these customers. We are not able to give any assurance that the effect of these new rules will not have a material impact on our results of operations. In addition, a failureoperations or financial condition.
Legislative and regulatory changes to comply with applicable laws or regulations, as interpreted and applied,policies related to loan deferment, forbearance, or forgiveness could have a material adverse effectnegative impact on the business operations and prospects of certain of our customers and as a result have a negative impact on our business, operations, and financial condition.
Legislative and regulatory changes to laws or policies related to loan deferment, forbearance, or forgiveness, including as a response to COVID-19, may have a significant impact on our abilitycustomers’ businesses. For example, on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. In compliance with the CARES Act, payments and interest accruals on federal student loans were suspended until September 30, 2020, and subsequent Executive Orders have directed the Department of Education (“ED”) to negotiateextend the suspension until May 1, 2022. While the CARES Act applies only to loans owned by the ED, several states announced various initiatives to suspend payment obligations for private student loan borrowers
in those states. Additionally, on March 25, 2020, the ED announced that private collection agencies were required to stop making outbound collection calls and
complete an initial business combination,sending letters or billing statements to borrowers in default. Moreover, in April 2020, various restrictions around the servicing and
resultscollection of
operations.Our stockholders may be held liable for claimsprivate education loans were enacted by third parties against uscertain states. There is additional uncertainty as to the extentfuture of distributions received by them upon redemption of their shares.
Understudent loan forbearance or forgiveness under President Biden’s administration. President Biden has indicated a desire and a willingness to cancel federal student loan debt for certain individuals up to a threshold amount and there have been similar proposals in Congress.
Additionally, the
Delaware General Corporation Law (the “DGCL”), stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete an initial business combinationCARES Act allowed borrowers affected by the
Extension Date may be consideredCOVID-19 pandemic to request temporary loan forbearance for federally-backed mortgage loans. Nevertheless, servicers of mortgage loans are contractually bound to advance monthly payments to investors, insurers, and taxing authorities regardless of whether the borrower actually makes those payments. While government-sponsored enterprises, including Fannie Mae and Freddie Mac, recently issued guidance limiting the number of payments a
liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public shares as soon as reasonably possible following the Extension Date in the event we do not complete an initial business combination and, therefore, we do not intend to comply with those procedures.Because we do not intend to comply with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the 10 years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, consultants, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do
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not complete an initial business combination by the Extension Date is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, asservicer must advance in the case of a liquidating distribution.
Weforbearance, loan servicers expect that a borrower who has experienced a loss of employment or a reduction of income may not hold an annual meeting of stockholders until afterrepay the consummation of an initial business combination and you will not be entitled to anyforborne payments at the end of the corporate protections providedforbearance period. Additionally, loan servicers are prohibited by the CARES Act from collecting certain servicing related fees, such a meeting.
We may not hold an annual meeting of stockholders until after we consummate an initial business combination (unless required by NASDAQ)as late fees, during the forbearance plan period. They are further prohibited from initiating foreclosure and/or eviction proceedings under applicable investor and/or state law requirements.
These legislative and
thus may not be in compliance with Section 211(b) of the DGCL, which requires an annual meeting of stockholders be held for the purposes of electing directors in accordance with a company’s bylaws unless such election is made by written consent in lieu of such a meeting. Therefore, if our stockholders want us to hold an annual meeting prior to our consummation of an initial business combination, they may attempt to force us to hold one by submitting an application to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL.The grant of registration rights to our initial stockholdersregulatory changes have had, and their permitted transferees may make it more difficult to complete an initial business combination,these and the future exercise of such rights may adversely affect the market price of our Class A common stock.
Pursuant to an agreement entered into concurrently with the issuance and sale of the securities in the Initial Public Offering, our initial stockholders and their permitted transferees can demand that we register the resale of their Founder Shares after those shares convert to shares of our Class A common stock at the time of an initial business combination. In addition, our Sponsor and its permitted transferees can demand that we register the resale of the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants, and holders of warrantsother changes that may be issued upon conversionpromulgated in the future, may have a negative impact on certain of working capitalour customers who service student loans or federally backed mortgage loans. In particular, forgiveness of outstanding loans or a suspension of loan payments and interest accruals may lead to a reduction in the demand that we register the resale of such warrants or the Class A common stock issuable upon exercise of such warrants. Pursuantfor our customers’ business, resulting in a corresponding reduction to our business. Due to the Forward Purchase Agreement, we have agreed that we will use our commercially reasonable efforts to file within 30 days after the closingimpact of an initial business combination a registration statementnew legislation and regulation, coupled with the SEC for a secondary offeringadditional uncertainty of the forward purchase sharesnew presidential administration’s student loan-related initiatives, we are not able to estimate the ultimate impact of changes in law on our customers and consequently our financial results, business operations, or strategies. Until the forward purchase warrants (andfuture of loan servicing is decided, our customers in this industry will continue to experience increased uncertainty. Our profitability, results of operations, financial condition, cash flows, and future business prospects could be materially and adversely affected as a result.
Risks Related to Ownership of Our Securities
We are a “controlled company” within the underlying Class A common stock)meaning of the rules of Nasdaq and, as a result, LiveVox is qualified for exemptions from certain corporate governance requirements. Our shareholders may not have the same protections as those afforded to causeshareholders of companies that are subject to such registration statement to be declared effective as soon as practicable after it is filed. We will beargovernance requirements.
Funds affiliated with Golden Gate Capital have sole voting and dispositive power over the costsecurities held by LiveVox TopCo LLC, which controls a majority of registering these securities. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market pricevoting power of our Class A common stock. In addition,As a result, we are a “controlled company” within the existencemeaning of the registration rights may make an initial business combinationcorporate governance standards of Nasdaq. Under these rules, a company of which more costly or difficult to complete. This is because the stockholdersthan 50% of the target businessvoting power for the election of directors is held by an individual, group or another company is a “controlled company” and may increase elect not to comply with certain corporate governance requirements, including:
•the equity stake they seekrequirement that a majority of our Board consist of independent directors;
•the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;
•the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
•the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.
While we currently do not utilize any of these exceptions, we are qualified to do so. As a result, we may not have a majority of independent directors on our Board, our compensation and nominating and corporate governance committees may not consist entirely of independent directors and our compensation and nominating and corporate governance committees may not be subject to annual performance evaluations. Accordingly, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq.
Golden Gate Capital controls us, and its interests may conflict with ours or yours in the combined entityfuture.
Golden Gate Capital beneficially owns approximately 73.34% of our common stock as of December 31, 2021.
As long as Golden Gate Capital owns or
ask for more cash considerationcontrols a significant percentage of our outstanding voting power, they will have the ability to
offsetsignificantly influence all corporate actions requiring stockholder approval, including the
negative impact onelection and removal of directors and the size of our Board, any amendment to our Second Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets. This concentration of ownership could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of the Company, which could cause the market price of our Class A common stock
that is expected whento decline or prevent stockholders from realizing a premium over the
common stock owned by our initial stockholders or their permitted transferees, the Private Placement Warrants owned by our Sponsor, the forward purchase shares and forward purchase warrants owned by Crescent or its permitted transferees or warrants issued in connection with working capital loans are registeredmarket price for
resale.Because we are neither limited to evaluating target businesses in a particular industry nor have we identified any specific target businesses with which to pursue an initial business combination, you will be unable to ascertain the merits or risks of any particular target business’s operations.
We may seek to complete an initial business combination with an operating company in any industry or sector, but we will not, under our amended and restated certificate of incorporation, be permitted to effectuate an initial business combination with another blank check company or similar company with nominal operations. Because we have not yet identified or approached any specific target business with respect to an initial business combination, there is no basis to evaluate the possible merits or risks of any particular target business’s operations, results of operations, cash flows, liquidity, financial condition or prospects. To the extent we complete an initial business combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. We also cannot assure you that an investment in our units will ultimately prove to be more favorable to investors than a direct investment, if such opportunity were available, in an initial business combination target. Accordingly, any stockholders or warrant holders who choose to remain a stockholder or warrant holder following an initial business combination could suffer a reduction in the value of their securities. Such stockholders or warrant holders are unlikely to have a remedy for such reduction in value.
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Although we have identified general criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into an initial business combination with a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter into an initial business combination may not have attributes entirely consistent with our general criteria and guidelines.
Although we have identified general criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter into an initial business combination will not have all of these positive attributes. If we complete an initial business combination with a target that does not meet some or all of these criteria and guidelines, such combination may not be as successful as a combination with a business that does meet all of our general criteria and guidelines. In addition, if we announce a prospective business combination with a target that does not meet our general criteria and guidelines, a greater number of stockholders may exercise their redemption rights, which may make it difficult for us to meet any closing condition with a target business that requires us to have a minimum net worth or a certain amount of cash. In addition, if stockholder approval of the transaction is required by applicable law or stock exchange rules, or we decide to obtain stockholder approval for business or other reasons, it may be more difficult for us to attain stockholder approval of an initial business combination if the target business does not meet our general criteria and guidelines. If we are unable to complete an initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our Trust Account and our warrants will expire worthless.
We may seek acquisition opportunities with an early stage company, a financially unstable business or an entity lacking an established record of revenue or earnings.
To the extent we complete an initial business combination with an early stage company, a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by numerous risks inherent in the operations of the business with which we combine. These risks include investing in a business without a proven business model and with limited historical financial data, volatile revenues or earnings, intense competition and difficulties in obtaining and retaining key personnel. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not be able to properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business.
We are not required to obtain an opinion from an independent investment banking firm or from an independent accounting firm, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our company from a financial point of view.
Unless we complete an initial business combination with an affiliated entity or our board cannot independently determine the fair market value of the target business or businesses, we are not required to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm that the price we are paying is fair to our company from a financial point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our tender offer documents or proxy solicitation materials, as applicable, related to an initial business combination.
We may issue additional shares of Class A common stock or preferred stockstock.
Because our Certificate of Incorporation opts out of Section 203 of the DGCL regulating certain business combinations with interested stockholders, Golden Gate Capital may transfer shares to
complete an initial business combination or under an employee incentive plan after completion of an initial business combination. We may also issuea third party by transferring their shares of
Class A common stock uponCommon Stock without the
conversion of the Class F common stock at a ratio greater than one-to-one at the time of an initial business combination as a result of the anti-dilution provisions described herein. Any such issuances would dilute the interestapproval of our
Board or other stockholders,
and likely present other risks.Our amended and restated certificate of incorporation authorizeswhich may limit the issuance of upprice that investors are willing to 500,000,000 shares of Class A common stock, par value $0.0001 per share, and 25,000,000 shares of Class F common stock, par value $0.0001 per share, and 5,000,000 shares of undesignated preferred stock, par value $0.0001 per share. Immediately afterpay in the Initial Public Offering, there was 455,500,000 and 18,750,000 authorized but unissued shares of Class A and Class F common stock available, respectively,future for issuance, which amount takes into account shares reserved for issuance upon exercise of outstanding warrants but not the forward purchase shares or forward purchase warrants upon the conversion of the Class F common stock. Shares of Class F common stock are automatically convertible into shares of our Class A common stock at the time of an initial business combination, initially at a one-for-one ratio but subject to adjustment as set forth herein.
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WeCommon Stock.
Golden Gate Capital’s interests may
issue a substantial number of additional shares of Class A common stock and may issue shares of preferred stock, in order to complete an initial business combination or under an employee incentive plan after completion of an initial business combination. We may also issue shares of Class A common stock upon conversion of the Class F common stock at a ratio greater than one-to-one at the time of an initial business combinationnot align with our interests as a
result ofcompany or the
anti-dilution provisions described herein. However, our amended and restated certificate of incorporation provides, among other things, that prior to an initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (1) receive funds from the Trust Account or (2) vote on any initial business combination. The issuance of additional shares of common or preferred stock:may significantly dilute the equity interest of investors in the Initial Public Offering;
may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock;
could cause a change in control if a substantial number of common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removalinterests of our present officersother stockholders. In the ordinary course of their business activities, Golden Gate Capital and directors; and
its affiliates may adversely affect prevailing market prices forengage in activities where their interests conflict with our units, common stock and/interests or warrants.
Resources could be wasted in researching acquisitions that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete an initial business combination, our public stockholders may receive only approximately $10.00 per share, or less than such amount in certain circumstances, on the liquidationthose of our Trust Account and our warrants will expire worthless.
We anticipateother shareholders, such as investing in or advising businesses that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete an initial business combination for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquiredirectly or mergeindirectly compete with another business. If we are unable to complete an initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidationportions of our Trust Account and our warrants will expire worthless.
business or are suppliers or customers of ours. Our officers and directors will allocate their time to other businesses thereby causing conflictsCertificate of interest in their determinationIncorporation provides that none of Golden Gate Capital, any of its affiliates or any director who is not employed by us (including any non-employee director who serves as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete an initial business combination.
Our officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for an initial business combination and their other businesses. We do not intend to have any full-time employees prior to the completion of an initial business combination. Eachone of our officers is engaged in several otherboth his director and officer capacities) or its affiliates has any duty to refrain from engaging, directly or indirectly, in the same business endeavors foractivities or similar business activities or lines of business in which hewe operate. Golden Gate Capital also may pursue acquisition opportunities that may be entitledcomplementary to substantial compensation and our officers are not obligated to contribute any specific number of hours per week to our affairs. Our independent directors may also serve as officers or board members for other entities. If our officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete an initial business combination.
Our ability to successfully effect an initial business combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of whom may join us following an initial business combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Our ability to successfully effect an initial business combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior management or advisory positions following an initial business combination, it is likely that some or all of the management of the target business will remain in place. While we intend to closely scrutinize any individuals we engage after an initial business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be
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unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements.
Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These agreements may provide for them to receive compensation following an initial business combination and as a result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous.
Our key personnel may be able to remain with the company after the completion of an initial business combination only if they are able to negotiate employment or consulting agreements in connection with it. Such negotiations would take place simultaneously with the negotiation of an initial business combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of an initial business combination. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business. However, we believe the ability of such individuals to remain with us after the completion of an initial business combination will not be the determining factor in our decision as to whether or not we will proceed with any potential business combination. There is no certainty, however, that any of our key personnel will remain with us after the completion of an initial business combination. We cannot assure you that any of our key personnel will remain in senior management or advisory positions with us. The determination as to whether any of our key personnel will remain with us will be made at the time of an initial business combination.
We may have a limited ability to assess the management of a prospective target business, and, as a result, may affect an initial business combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company.
When evaluating the desirability of effecting an initial business combination with a prospective target business, our ability to assess the target business’s management may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should the target’s management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination business may be negatively impacted. Accordingly, any stockholders or warrant holders who choose to remain a stockholder or warrant holder following an initial business combination could suffer a reduction in the value of their securities. Such stockholders or warrant holders are unlikely to have a remedy for such reduction in value.
The officers and directors of anthose acquisition candidate may resign upon completion of an initial business combination. The departure of a business combination target’s key personnel could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidate’s key personnel upon the completion of an initial business combination cannot be ascertained at this time. Although we contemplate that certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following an initial business combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place.
Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
Since the completion of the Initial Public Offering and until we consummate an initial business combination, we have engaged and intend to continue to engage in the business of identifying and combining with one or more businesses. Our Sponsor and officers and directors are, or may in the future become, affiliated with entities that are engaged in a similar business.
Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to another entity pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor these obligations to present such business combination opportunity to such entity, and only present it to us if such entity rejects the opportunity. These conflictsopportunities may not be resolved in our favor and a potential target business may be presented to another entity prior to its presentationavailable to us. Our amended and restated certificate of incorporation provides that we renounce ourIn addition, Golden Gate Capital may have an interest in any corporate opportunity offeredpursuing acquisitions, divestitures, and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
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Our officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.
you.
We have
not adopted a policy that expressly prohibits our directors, officers, security holders or affiliates from having a direct or indirect pecuniary or financial interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. In fact, we may enter into an initial business combination with a target business that is affiliated with our Sponsor, our directors or officers. Nor do we have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between their interestsnever paid cash dividends and
ours.In particular, affiliates of our Sponsor have invested in a broad array of sectors. As a result, there may be substantial overlap between companies that would be a suitable initial business combination for us and companies that would make an attractive target for such other affiliates.
We may engage in an initial business combination with one or more target businesses that have relationships with entities that may be affiliated with our Sponsor, officers or directors which may raise potential conflicts of interest.
In light of the involvement of our Sponsor, officers and directors with other entities, we may decide to acquire one or more businesses affiliated with our Sponsor, officers and directors. Our officers and directors also serve as officers and board members for other entities, including, without limitation, those described under “Management—Conflicts of Interest.” Such entities may compete with us for business combination opportunities. Our Sponsor, officers and directors are not currently aware of any specific opportunities for us to complete an initial business combination with any entities with which they are affiliated, and there have been no preliminary discussions concerning an initial business combination with any such entity or entities. Although we will not be specifically focusing on, or targeting, any transaction with any affiliated entities, we would pursue such a transaction if we determined that such affiliated entity met our criteria for an initial business combination as set forth in “Effecting Our Initial Business Combination—Selection of a Target Business and Structuring of Our Initial Business Combination” and such transaction was approved by a majority of our independent and disinterested directors. Despite our agreement to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm, regarding the fairness to our company from a financial point of view of an initial business combination with one or more domestic or international businesses affiliated with our Sponsor, officers or directors, potential conflicts of interest still may exist and, as a result, the terms of an initial business combination may not be as advantageous to our public stockholders as they would be absent any conflicts of interest.
Since our Sponsor, officers and directors will lose their entire investment in us if an initial business combination is not completed, a conflict of interest may arise in determining whether a particular initial business combination target business is appropriate for an initial business combination.
On November 29, 2017, our Sponsor purchased 8,625,000 Founder Shares for $25,000. In January 2018, our Sponsor surrendered 1,437,500 Founder Shares to the Company for no consideration, resulting in an aggregate of 7,187,500 Founder Shares outstanding. As used herein, unless the context otherwise requires, Founder Shares shall be deemed to include the shares of Class A common stock issuable upon conversion thereof. The Founder Shares are identical to the Class A common stock included in the units sold in the Initial Public Offering except that the Founder Shares are shares of Class F common stock which automatically convert into shares of Class A common stock at the time of the Company’s initial business combination and are subject to certain transfer restrictions, as described in more detail below. Up to 937,500 Founder Shares were subject to forfeiture to the extent that the over-allotment option was not exercised by the underwriters within 45 days from the effective date of the registration statement, March 7, 2019. In April 2019, the Underwriters’ over-allotment option expired and as a result our Sponsor forfeited 937,500 shares of Class F common stock, resulting in an aggregate of 6,250,000 Founder Shares outstanding.
The Founder Shares will be worthless if we do not complete an initial business combination. In February 2019, our Sponsor transferred 25,000 Founder Shares to each of Ms. Briscoe and Messrs. Gauthier and Turner, our independent directors (for a total of 75,000 Founder Shares). In addition, our Sponsor has purchased an aggregate of 7,000,000 Private Placement Warrants, each exercisable for one share of our Class A common stock, for a purchase price of $7,000,000 in the aggregate, or $1.00 per warrant, that will also be worthless if we do not complete an initial business combination. Each Private Placement Warrant may be exercised for one share of Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein.
The Founder Shares are identical to the shares of common stock included in the units sold in the Initial Public Offering, except that: (1) the Founder Shares are subject to certain transfer restrictions, as described in more detail below; (2) our initial stockholders have entered into a letter agreement with us, pursuant to which they have agreed to: (a) waive their redemption rights with respect to their
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Founder Shares andanticipate paying any public shares held by them in connection with the completion of an initial business combination; (b) waive their redemption rights with respect to their Founder Shares and any public shares held by them in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we have not consummated an initial business combination by the Extension Date; and (c) waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares they hold if we fail to complete an initial business combination by the Extension Date (although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if we fail to complete an initial business combination by such date); (3) the Founder Shares are automatically convertible into shares of our Class A common stock at the time of an initial business combination on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution rights, as described in more detail below; and (4) the Founder Shares are entitled to registration rights. In addition, our officers and directors have entered into letter agreements similar to the one signed by our initial stockholders with respect to any public shares acquired by them, if any.
The personal and financial interests of our Sponsor, officers and directors may influence their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing the operation of the business following an initial business combination. This risk may become more acute as the Extension Date nears, which is the deadline for the completion of an initial business combination.
We may issue notes or other debt securities, or otherwise incur substantial debt, to complete an initial business combination, which may adversely affect our leverage and financial condition and thus negatively impact the value of our stockholders’ investment in us.
Although we have no commitments as of December 31, 2020 to issue any notes or other debt securities, or to otherwise incur outstanding debt following the Initial Public Offering, we may choose to incur substantial debt to complete an initial business combination. We have agreed that we will not incur any indebtedness unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in the Trust Account. As such, no issuance of debt will affect the per share amount available for redemption from the Trust Account. Nevertheless, the incurrence of debt could have a variety of negative effects, including:
default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;
acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;
our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt security is outstanding;
our inability to paycash dividends on our common stock;
stock.using a substantial portionWe currently do not plan to declare dividends on shares of our cash flowcommon stock in the foreseeable future and plan to, instead, retain any earnings to finance our operations and growth. In addition, the terms of our credit facility restrict our ability to pay principaldividends. Because we have never paid cash dividends and interest on our debt, which will reduce the funds available fordo not anticipate paying any cash dividends on our common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;
limitationsin the foreseeable future, the only opportunity to achieve a return on our flexibility in planning for and reacting to changesan investor's investment in our business and in the industry in which we operate;
increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and
limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.
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We may onlycompany will be able to complete one initial business combination with the proceeds of our Initial Public Offering and the sale of the Private Placement Warrants, which will cause us to be solely dependent on a single business which may have a limited number of products or services. This lack of diversification may negatively impact our operations and profitability.
The net proceeds from our Initial Public Offering and the sale of the Private Placement Warrants provided us with $250,000,000 that we may use to complete an initial business combination and pay related fees and expenses.
We may effectuate an initial business combination with a single target business, or multiple target businesses simultaneously or within a short period of time. However, we may not be able to effectuate an initial business combination with more than one target business because of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By completing an initial business combination with only a single entity our lack of diversification may subject us to numerous economic, competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success may be:
solely dependent upon the performance of a single business, property or asset; or
dependent upon the development or market acceptance of a single or limited number of products, processes or services.
This lack of diversification may subject us to numerous economic, competitive and regulatory risks, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to an initial business combination.
We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete an initial business combination and give rise to increased costs and risks that could negatively impact our operations and profitability.
If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete an initial business combination. With multiple business combinations, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business. If we are unable to adequately address these risks, it could negatively impact our profitability and results of operations.
We may attempt to complete an initial business combination with a private company about which little information is available, which may result in an initial business combination with a company that is not as profitable as we suspected, if at all.
In pursuing our acquisition strategy, we may seek to effectuate an initial business combination with a privately held company. Very little public information generally exists about private companies, and we could be required to make our decision on whether to pursue a potential initial business combination on the basis of limited information, which may result in an initial business combination with a company that is not as profitable as we suspected, if at all.
Our management may not be able to maintain control of a target business after an initial business combination. We cannot provide assurance that, upon loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
We may structure an initial business combination so that the post-transaction company in which our public stockholders own shares will own less than 100% of the equity interests or assets of a target business, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for us not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet such criteria. Even if the post-transaction company owns 50% or more of the voting securities of the target, our stockholders prior to an initial business combination may collectively own a minority interest in the post business combination company, depending on valuations ascribed to the target and us in an initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares of common stock in exchange for all of
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the outstanding capital stock of a target. In this case, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares of common stock, our stockholders immediately prior to such transaction could own less than a majority of our outstanding shares of common stock subsequent to such transaction. In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group obtaining a larger share of the company’s stock than we initially acquired. Accordingly, this may make it more likely that our management will not be able to maintain our control of the target business.
We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete an initial business combination with which a substantial majority of our stockholders do not agree.
Our amended and restated certificate of incorporation will not provide a specified maximum redemption threshold, except that in no event will we redeem our public shares in an amount that would cause our net tangible assets, after payment of the deferred underwriting commissions, to be less than $5,000,001 (such that we do not then become subject to the SEC’s “penny stock” rules), or any greater net tangible asset or cash requirement that may be contained in the agreement relating to an initial business combination. As a result, we may be able to complete an initial business combination even though a substantial majority of our public stockholders do not agree with the transaction and have redeemed their shares or, if we seek stockholder approval of an initial business combination and do not conduct redemptions in connection with an initial business combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our Sponsor, officers, directors, advisors or any of their affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete an initial business combination or redeem any shares, all shares of common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
In order to effectuate an initial business combination, blank check companies have, in the recent past, amended various provisions of their charters and modified governing instruments, including their warrant agreements. We cannot assure you that we will not seek to amend our amended and restated certificate of incorporation or governing instruments in a manner that will make it easier for us to complete an initial business combination that some of our stockholders may not support.
In order to effectuate an initial business combination, blank check companies have, in the recent past, amended various provisions of their charters and modified governing instruments, including their warrant agreements. For example, blank check companies have amended the definition of business combination, increased redemption thresholds extended the time to consummate an initial business combination and, with respect to their warrants, amended their warrant agreements to require the warrants to be exchanged for cash and/or other securities. We cannot assure you that we will not seek to amend our charter or governing instruments or extend the time to consummate an initial business combination in order to effectuate an initial business combination.
Certain provisions of our amended and restated certificate of incorporation that relate to our pre-business combination activity (and corresponding provisions of the agreement governing the release of funds from our Trust Account) may be amended with the approval of holders of 65% of our common stock, which is a lower amendment threshold than that of some other blank check companies. It may be easier for us, therefore, to amend our amended and restated certificate of incorporation to facilitate the completion of an initial business combination that some of our stockholders may not support.
Some other blank check companies have a provision in their charter which prohibits the amendment of certain of its provisions, including those which relate to a company’s pre-business combination activity, without approval by holders of a certain percentage of the company’s stockholders. In those companies, amendment of these provisions typically requires approval by holders holding between 90% and 100% of the company’s public shares. Our amended and restated certificate of incorporation provides that any of its provisions related to pre-business combination activity (including the requirement to deposit proceeds of the Initial Public Offering and the Private Placement Warrants into the Trust Account and not release such amounts except in specified circumstances) may be amended if approved by holders of at least 65% of our common stock who attend and vote in a stockholder meeting, and corresponding provisions of the trust agreement governing the release of funds from our Trust Account may be amended if approved by holders of 65% of our common stock. In all other instances, our amended and restated certificate of incorporation provides that it may be amended by holders of a majority of our common stock, subject to applicable provisions of the DGCL or applicable stock exchange rules. Our initial stockholders, who beneficially own 20% of our common stock upon the closing of the Initial Public Offering, may participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner they choose. As a result, we may be able to amend the provisions of our amended and restated certificate of incorporation which will govern our pre-business combination behavior more easily than some other blank check companies, and this may increase our ability to complete an
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initial business combination with which you do not agree. Our stockholders may pursue remedies against us for any breach of our amended and restated certificate of incorporation.
Our Sponsor, officers and directors have agreed, pursuant to a written agreement, that they will not propose any amendment to our amended and restated certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete an initial business combination by the Extension Date, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, divided by the number of then outstanding public shares. These agreements are contained in a letter agreement that we have entered into with our Sponsor, officers and directors. Our stockholders are not parties to, or third-party beneficiaries of, these agreements and, as a result, will not have the ability to pursue remedies against our Sponsor, officers or directors for any breach of these agreements. As a result, in the event of a breach, our stockholders would need to pursue a stockholder derivative action, subject to applicable law.
We may be unable to obtain additional financing to complete an initial business combination or to fund the operations and growth of a target business, which could compel us to restructure or abandon a particular business combination.
Although we believe that the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants and the forward purchase securities will represent sufficient equity capital to allow us to complete an initial business combination, because we have not yet identified any prospective target business we cannot ascertain the capital requirements for any particular transaction. If the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants and the forward purchase securities prove to be insufficient, either because of the size of an initial business combination, the depletion of the available net proceeds in search of a target business, the obligation to redeem for cash a significant number of shares from stockholders who elect redemption in connection with an initial business combination or the terms of negotiated transactions to purchase shares in connection with an initial business combination, we may be required to seek additional financing or to abandon the proposed business combination. We cannot assure you that such financing will be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete an initial business combination, we would be compelled to either restructure the transaction or abandon that particular business combination and seek an alternative target business candidate. In addition, even if we do not need additional financing to complete an initial business combination, we may require such financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or stockholders is required to provide any financing to us in connection with or after an initial business combination. If we are unable to complete an initial business combination, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our Trust Account, and our warrants will expire worthless.
Our initial stockholders will hold a substantial interest in us. As a result, they may exert a substantial influence on actions requiring stockholder vote, potentially in a manner that you do not support.
As of December 31, 2020, our initial stockholders own 20% of our outstanding common stock. Accordingly, they may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our amended and restated certificate of incorporation. If our initial stockholders purchase any additional shares of Class A common stock in the aftermarket or in privately negotiated transactions, this would increase their control. Our Sponsor has no current intention to purchase additional securities, other than as described in this Annual Report on Form 10-K. Factors that would be considered in making such additional purchases would include consideration of the current tradingmarket price of our Class A common stock. In addition, our board of directors, whose members were elected by our Sponsor,Common Stock appreciates and the investor sells its shares at a profit. There is and will be divided into three classes, each of which will generally serve for three years with only one class of directors being elected in each year. We may not hold an annual meeting of stockholders to elect new directors prior tono guarantee that the completion of our business combination, in which case all of the current directors will continue in office until at least the completion of an initial business combination. If there is an annual meeting, as a consequence of our “staggered” board of directors, only a minority of the board of directors will be considered for election and our initial stockholders, because of their ownership position, will have considerable influence regarding the outcome. Accordingly, our initial stockholders will continue to exert control at least until the completion of our business combination. The forward purchase shares will not be issued until completion of an initial business combination, and, accordingly, will not be included in any stockholder vote until such time.
Our Sponsor paid an aggregate of $25,000, or approximately $0.004 per founder share, and, accordingly, you will experience immediate and substantial dilution from the purchaseprice of our Class A common stock.
The difference between the Initial Public Offering price per share (allocating all of the unit purchase price to the common stock and none to the warrant includedCommon Stock that will prevail in the unit) andmarket will ever exceed the pro forma net tangible book value per share of our Class A common stock after the
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Initial Public Offering constitutes the dilution to you and the other investors in the Initial Public Offering. Our Sponsor acquired the Founder Shares at a nominal price significantly contributing to this dilution. Upon the closing of the Initial Public Offering, and assuming no value is ascribed to the warrants included in the units, you and the other public stockholders will incurthat an immediate and substantial dilution of approximately 93.3% (or $9.33 per share), the difference between the pro forma net tangible book value per share of $0.67 and the initial offering price of $10.00 per unit. This dilution would increase to the extent that the anti-dilution provisions of the Class F common stock result in the issuance of shares of Class A common stock on a greater than one-to-one basis upon conversion of the Class F common stock at the time of an initial business combination and would become exacerbated to the extent that public stockholders seek redemptions from the trust. In addition, because of the anti-dilution protection in the Founder Shares, any equity or equity-linked securities issued in connection with an initial business combination would be disproportionately dilutive to our Class A common stock.
investor pays.
We may amend the terms of the
warrantsWarrants in a manner that may be adverse to holders of
public warrantsPublic Warrants with the approval by the holders of at least 65% of the then outstanding
public warrants.Public Warrants. As a result, the exercise price of your
warrantsWarrants could be increased, the
warrantsWarrants could be converted into cash or stock, the exercise period could be shortened and the number of shares of our Class A common stock purchasable upon exercise of a
warrantWarrant could be decreased, all without your approval.
Our
warrants will beWarrants were issued in registered form under a
warrant agreementWarrant Agreement between Continental Stock Transfer & Trust Company, as
warrant agent,Warrant Agent, and us.
The warrant agreementSuch Warrant Agreement provides that the terms of the
warrantsWarrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding
public warrantsPublic Warrants to make any change that adversely affects the interests of the registered holders of
public warrants.Public Warrants. Accordingly, we may amend the terms of the
public warrantsPublic Warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding
public warrantsPublic Warrants approve of such amendment. Although our ability to amend the terms of the
public warrantsPublic Warrants with the consent of at least 65% of the then outstanding
public warrantsPublic Warrants is
not unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the
warrants,Warrants, convert the
warrantsWarrants into cash or stock, shorten the exercise period or decrease the number of shares of our
Class A common stock purchasable upon exercise of a
warrant.Warrant.
We may redeem your unexpired
warrantsWarrants prior to their exercise at a time that is disadvantageous to you, thereby making your
warrantsWarrants worthless.
We have the ability to redeem outstanding
warrantsWarrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per
warrant,Warrant; provided that the last reported sales price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuances of Class A common stock and equity-linked securities as described above) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the
warrantWarrant holders. If and when the
warrantsWarrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding
warrantsWarrants could force you to: (1) exercise your
warrantsWarrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so (2) sell your
warrantsWarrants at the then-current market price when you might otherwise wish to hold your
warrants;Warrants; or (3) accept the nominal redemption price which, at the time the outstanding
warrantsWarrants are called for redemption, is likely to be substantially less than the market value of your
warrants. None of the Private Placement Warrants will be redeemable by us so long as they are held by our Sponsor or its permitted transferees.Our Warrants and Founder Shares may have an adverse effect on the market price of our Class A common stock and make it more difficult to effectuate an initial business combination.
We issued warrants to purchase 12,500,000 shares of our Class A common stock, at a price of $11.50 per whole share and simultaneously with the closing of the Initial Public Offering, we issued in a private placement an aggregate of 7,000,000 Private Placement Warrants, each exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein. In addition, we may also issue 2,500,000 shares of Class A common stock and approximately 833,333 warrants, each exercisable to purchase one share of Class A common stock in connection with an initial business combination pursuant to the Forward Purchase Agreement. Our initial stockholders hold 6,250,000 Founder Shares. The Founder Shares are convertible into shares of Class A common stock on a one-for-one basis, subject to adjustment as set forth herein. In addition, if our Sponsor, an affiliate of our Sponsor or certain of our officers and directors make any working capital loans, up to $1,500,000 of such loans may be converted into warrants, at the price of $1.00 per warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants. To the extent we issue shares of Class A common stock to effectuate a business transaction, the potential for the issuance of a substantial number of additional shares of Class A common stock upon exercise of these warrants or conversion rights could make us a less attractive acquisition vehicle to a target business. Any such issuance will increase the number of outstanding shares of our Class A common stock
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and reduce the value of the Class A common stock issued to complete the business transaction. Therefore, our warrants and Founder Shares may make it more difficult to effectuate an initial business combination or increase the cost of acquiring the target business.
The Private Placement Warrants are identical to the warrants sold as part of the units in the Initial Public Offering except that, so long as they are held by our Sponsor or its permitted transferees: (1) they will not be redeemable by us; (2) they (including the Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our Sponsor until 30 days after the completion of an initial business combination; (3) they may be exercised by the holders on a cashless basis; and (4) they (including the shares of common stock issuable upon exercise of these warrants) are entitled to registration rights.
The determination of the offering price of our units and the size of the Initial Public Offering is more arbitrary than the pricing of securities and size of an offering of an operating company in a particular industry. You may have less assurance, therefore, that the offering price of our units properly reflects the value of such units than you would have in a typical offering of an operating company.
Prior to the Initial Public Offering there has been no public market for any of our securities. The Initial Public Offering price of the units and the terms of the warrants were negotiated between us and the underwriters. In determining the size of the Initial Public Offering, management held customary organizational meetings with representatives of the underwriters, both prior to our inception and thereafter, with respect to the state of capital markets, generally, and the amount the underwriters believed they reasonably could raise on our behalf. Factors considered in determining the size of the Initial Public Offering, prices and terms of the units, including the Class A common stock and warrants underlying the units, include:
the history and prospects of companies whose principal business is the acquisition of other companies;
prior offerings of those companies;
our prospects for acquiring an operating business at attractive values;
a review of debt to equity ratios in leveraged transactions;
an assessment of our management and their experience in identifying operating companies;
general conditions of the securities markets at the time of the Initial Public Offering; and
other factors as were deemed relevant.
Although these factors were considered, the determination of our Initial Public Offering price is more arbitrary than the pricing of securities of an operating company in a particular industry since we have no historical operations or financial results.
Because we must furnish our stockholders with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination with some prospective target businesses.
The federal proxy rules require that a proxy statement with respect to a vote on an initial business combination meeting certain financial significance tests include historical and/or pro forma financial statement disclosure in periodic reports. We will include the same financial statement disclosure in connection with our tender offer documents, whether or not they are required under the tender offer rules. These financial statements may be required to be prepared in accordance with, or be reconciled to, U.S. GAAP, or IFRS, depending on the circumstances and the historical financial statements may be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”). These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such financial statements in time for us to disclose such financial statements in accordance with federal proxy rules and complete an initial business combination within the prescribed time frame.
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We are an “emerging growth company” within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensationAnti-takeover provisions contained in our periodic reportsSecond Amended and proxy statements,Restated Certificate of Incorporation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensationAmended and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700,000,000Restated Bylaws, as of the end of any second quarter of a fiscal year, in which case we would no longer be an emerging growth companywell as of the end of such fiscal year. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.
Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate an initial business combination, require substantial financial and management resources, and increase the time and costs of completing an initial business combination.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls beginning with our Annual Report on Form 10-K for the year ending December 31, 2020. Only in the event we are deemed to be a large accelerated filer or an accelerated filer will we be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. Further, for as long as we remain an emerging growth company, we will not be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target business with which we seek to complete an initial business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal control of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such initial business combination.
Provisions in our amended and restated certificate of incorporation and Delaware law, may inhibitcould impair a takeover attempt.
Our Second Amended and Restated Certificate of Incorporation and our
Class A common stockAmended and
could entrench management.Our amended and restated certificate of incorporation willRestated Bylaws contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include a staggered board of directors and the ability of the board of directors to designate the terms of and issue new series of preferred shares, which may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
These provisions include:
Provisions in our amended and restated certificate of incorporation and Delaware law may have the effect of discouraging lawsuits against our directors and officers.
Our amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only
•no cumulative voting in the Courtelection of Chancery indirectors, which limits the Stateability of Delaware and, if brought outsideminority stockholders to elect director candidates;
•a classified board of Delaware,directors with three-year staggered terms, which could delay the stockholder bringing such suit willability of stockholders to change the membership of a majority of the Board;
•the requirement that directors may only be deemedremoved from the Board for cause;
•the right of our Board to have consentedelect a director to servicefill a vacancy created by the expansion of process on such stockholder’s counsel. This provision may have the effect of discouraging lawsuits against our directors and officers.Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure,Board or the systemsresignation, death or infrastructureremoval of third partiesa director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board;
•a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or the cloud, could lead to corruption or misappropriationspecial meeting of our assets, proprietary information and sensitive or confidential data. As an early stage company without significant investments in data security protection, we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or stockholders;
•a combination of them, could have adverse consequencesprohibition on our business and lead to financial loss.Events outside of our control, including public health crises, may negatively affect the results of our operations.
Periods of market volatility may continue to occur in response to pandemics or other events outside of our control. These types of events could adversely affect our operating results. For example, beginning in late 2019,stockholders calling a novel strain of coronavirus, known as COVID-19, has resulted in the extended and continuing closure of many corporate offices, retail stores, and manufacturing facilities and factories, and other businesses around the world. The timing of re-opening businesses is uncertain. The impacts on the global economy and markets from the COVID-19 pandemic have been profound,special meeting and the continued impacts are difficult to predict. The extent to which the COVID-19 pandemicrequirement that a meeting of stockholders may negatively affect our operating results or the duration of any potential business disruption is uncertain. Any potential impact to our results will depend to a large extent on future developments and new information that may emerge regarding the duration and severity of the pandemic and the actions takenonly be called by authorities and other entities to contain the coronavirus or treat its impact, all of which are beyond our control. These potential impacts, while uncertain, could adversely affect our operating results.
If our management team pursues a company with operations or opportunities outside of the United States for an initial business combination, we may face additional burdens in connection with investigating, agreeing to and completing such combination, and if we effect such initial business combination, we would be subject to a variety of additional risks that may negatively impact our operations.
If our management team pursues a company with operations or opportunities outside of the United States for an initial business combination, we would be subject to risks associated with cross-border business combinations, including in connection with investigating, agreeing to and completing an initial business combination, conducting due diligence in a foreign market, having such transaction approved by any local governments, regulators or agencies and changes in the purchase price based on fluctuations in foreign exchange rates.
If we effect an initial business combination with such a company, we would be subject to any special considerations or risks associated with companies operating in an international setting, including any of the following:
costs and difficulties inherent in managing cross-border business operations and complying with commercial and legal requirements of overseas markets;
rules and regulations regarding currency redemption;
complex corporate withholding taxes on individuals;
laws governing the manner in which future business combinations may be effected;
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tariffs and trade barriers;
regulations related to customs and import/export matters;
tax consequences, such as tax law changes, including termination or reduction of tax and other incentives that the applicable government provides to domestic companies, and variations in tax laws as compared to the United States;
currency fluctuations and exchange controls;
challenges in collecting accounts receivable;
cultural and language differences;
crime, strikes, riots, civil disturbances, terrorist attacks, natural disasters and wars;
deterioration of political relations with the United States;
obligatory military service by personnel; and
government appropriation of assets.
We may not be able to adequately address these additional risks. If we were unable to do so, we may be unable to complete such combination or, if we complete such combination, our operations might suffer, either of which may adversely impact our results of operations and financial condition.
If our management following an initial business combination is unfamiliar with U.S. securities laws, they may have to expend time and resources becoming familiar with such laws, which could lead to various regulatory issues.
Following an initial business combination, any or all of our management could resign from their positions as officers of the Company, and the management of the target business at the time of an initial business combination could remain in place. Management of the target business may not be familiar with U.S. securities laws. If new management is unfamiliar with U.S. securities laws, they may have to expend time and resources becoming familiar with such laws. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect our operations.
Our Sponsor, certain members of our Board, and our officers have interests inwhich may delay the Business Combination that are different from or are in addition to other stockholders.
Our stockholders should be aware that our directors and officers have interests in the Business Combination that may be different from, or in addition to, the interestsability of our stockholders. These interests include:
stockholders to force consideration of a proposal or to take action, including the factremoval of directors;
•the requirement that our Sponsor, officers (other than our officer who was appointed subsequentchanges or amendments to our Initial Public Offering, who does not own any sharescertain provisions of our Common Stock) and directors (including our independent directors) have agreed to waive their redemption rights with respect to any shares of our Common Stock they may hold in connection with the consummation of the Business Combination, including all of the Founder Shares;
the fact that our Sponsor has agreed to, in its capacity as the holder of a majority of our Class F Stock, waive the right to a conversion price adjustment with respect to all shares of our Class F Stock in connection with the consummation of the Business Combination, such authority granted to the majority holders of our Class F Stock in our amended and restated certificate of incorporation;
the fact that our Sponsor paid an aggregate of $25,000 for 6,250,000 shares of Class F Stock (75,000 of which have been transferred to our independent directors, after giving effect to the (i) surrender of 1,437,500 shares on November 29, 2017 and (ii) forfeiture of 937,500 shares in April 2019) which will be converted into Class A Stock upon the closing of the Business Combination, including the 2,725,000 shares that our Sponsor has agreed to cancel concurrently with the closing of the Business Combination and the Lock-Up Shares which will be subject to release only if the price of Class A Stock trading on NASDAQ or another national securities exchange exceeds certain thresholds during the seven-year period following the closing of the Business Combination and will otherwise be forfeited and canceled for no consideration, but which will have no value if an initial business combination is not consummated by the Extension Date;
the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to consummate an initial business combination by the Extension Date;
if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a third party or target business has not executed a waiver of any and all rights to seek access to the Trust Account;
the fact that our Sponsor will have the right to nominate two independent directors of the post-Business Combination Company pursuant to a stockholders agreement to be entered into upon closing of the Business Combination;
the anticipated continuation of two of our existing directors, Robert D. Beyer and Todd M. Purdy, as directors of the post-Business Combination Company;
the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;
the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if we are unable to consummate an initial business combination by the Extension Date;
that, as described in the Charter Proposals and reflected in Annex C, our proposed Second Amended and Restated Certificate of Incorporation willor Amended and Restated Bylaws must be amendedapproved by holders of at least two-thirds of the Common Stock entitled to expressly elect notvote; and
•advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be boundacted upon at a meeting of stockholders, which may discourage or governed by,deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise subjectattempting to Section 203obtain control of the DGCL, thereby removing certain restrictions on business combinations with interested stockholders (which amendment will become effective 12 months after theCompany.
Our Second Amended and Restated Certificate of Incorporation is filed and becomes effective);
that, at the closing of the Business Combination we will enter into the Amended and Restated Registration Rights Agreement, which provides for registration rights to, among others, our Sponsor, Crescent and their permitted transferees;
that Crescent has entered into the Forward Purchase Agreement with the Company, pursuant to which Crescent has committed to purchase, subject to the terms and conditions set forth in the Forward Purchase Agreement, including a lock-up period that restricts the transfer of securities issued pursuant to the Forward Purchase Agreement and registration rights granted thereto, an aggregate of 2,500,000 shares of Class A Stock plus 833,333 Warrants for an aggregate purchase price of $25,000,000 in cash in a private placement that will close immediately prior to the Business Combination, which such commitment Crescent may assign, in whole or in part, to certain transferees, including, but not limited to, its current or prospective limited partners (Crescent and such possible transferees together comprising the Forward Purchasers); and
that Crescent, either alone or with our Sponsor, has the right but not the obligation to purchase immediately prior to the closing of the Business Combination additional shares of Class A Stock at a purchase price of $10.00 per share, subject to reasonably acceptable terms to be provided in a separate agreement, to the extent our total cash proceeds are less than $250,000,000.
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We have not registered the shares of Class A Stock issuable upon exercise of the Warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its Warrants except on a cashless basis and potentially causing such Warrants to expire worthless.
We have not registered the shares of Class A Stock issuable upon exercise of the Warrants under the Securities Act or any state securities laws at this time. However, under the terms of the Warrant Agreement, dated March 7, 2019, by and between the Company and Continental Stock Transfer & Trust Company, we have agreed to use our best efforts to file a registration statement under the Securities Act covering such shares and maintain a current prospectus relating to the Class A Stock issuable upon exercise of the Warrants, until the expiration of the Warrants in accordance with the provisions of such Warrant Agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in such registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the Warrants are not registered under the Securities Act, we will be required to permit holders to exercise their Warrants on a cashless basis. However, no Warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption from registration is available. Notwithstanding the above, if our Class A Stock is at the time of any exercise of a Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of Warrants who exercise their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will be required to use our best efforts to register the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any Warrant, or issue securities or other compensation in exchange for the Warrants in the event that we are unable to register or qualify the shares underlying the Warrants under applicable state securities laws and there is no exemption available. If the issuance of the shares upon exercise of the Warrants is not so registered or qualified or exempt from registration or qualification, the holder of such Warrant shall not be entitled to exercise such Warrant and such Warrant may have no value and expire worthless. In such event, holders who acquired their Warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of Class A Stock included in such units. If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying shares of Class A Stock for sale under all applicable state securities laws.
The exercise price for our Warrants is higher than in some similar blank check company offerings in the past, and, accordingly, the Warrants are more likely to expire worthless.
The exercise price of our Warrants is higher than is typical with many similar blank check companies in the past. Historically, with regard to units offered by blank check companies, the exercise price of a Warrant was generally a fraction of the purchase price of the units in the initial public offering. The exercise price for our Warrants is $11.50 per share, subject to adjustment as provided herein. As a result, the Warrants are less likely to ever be in the money and more likely to expire worthless.
Because each unit contains one-half of one Warrant and only a whole Warrant may be exercised, the units may be worth less than units of other blank check companies.
Each unit contains one-half of one Warrant. Because, pursuant to the Warrant Agreement that governs such Warrants, the Warrants may only be exercised for a whole number of shares, only a whole Warrant may be exercised at any given time. This is different from other offerings similar to ours whose units include one share of common stock and one warrant to purchase one whole share. We have established the components of the units in this way in order to reduce the dilutive effect of the Warrants upon consummation of an initial business combination since the Warrants will be exercisable in the aggregate for one-half of the number of shares compared to Units that each contain a Warrant to purchase one whole share, thus making us, we believe, a more attractive merger partner for target businesses. Nevertheless, this unit structure may cause our units to be worth less than if they included a Warrant to purchase one whole share.
Warrants will become exercisable for our Class A Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
We issued Warrants to purchase 12,500,000 shares of Class A Stock as part of our Initial Public Offering and, on the Initial Public Offering closing date, we issued Private Placement Warrants to our Sponsor to purchase 7,000,000 shares of our Class A Stock, in each case at $11.50 per share. In addition, prior to consummating an initial business combination, nothing prevents us from issuing additional
49
securities in a private placement so long as they do not participate in any manner in the Trust Account or vote as a class with the Common Stock on an initial business combination. We expect to issue 2,500,000 shares of Class A Stock plus 833,333 Warrants to the Forward Purchasers pursuant to the Forward Purchase Agreement immediately prior to an initial business combination. The shares of Class A Stock issued pursuant to the Forward Purchase Agreement and additional shares of our Class A Stock issued upon exercise of our Warrants will result in dilution to the then existing holders of our Class A Stock and increase the number of shares eligible for resale in the public market.
Pursuant to the Sponsor Support Agreement entered into in connection with the Business Combination, our Sponsor agreed to the cancelation of (i) 7,000,000 Warrants acquired by our Sponsor pursuant to a private placement in connection with the initial public offering of the Company at a purchase price of $1.00 per warrant and (ii) 2,725,000 shares of Class F Stock held by our Sponsor, in each case, for no consideration and concurrent with and contingent upon the consummation of the Business Combination. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Class A Stock.
Even if we consummate an initial business combination, there is no guarantee that the Public Warrants will ever be in the money, and they may expire worthless and the terms of our Warrants may be amended.
The exercise price for our Warrants is $11.50 per share of Class A Stock. There is no guarantee that the Public Warrants will ever be in the money prior to their expiration, and as such, the Warrants may expire worthless.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.
Following the Business Combination, the price of our securities may fluctuate significantly due to the market’s reaction to the Business Combination and general market and economic conditions. An active trading market for our securities following the Business Combination may never develop or, if developed, it may not be sustained. In addition, the price of our securities after the Business Combination can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if our securities are not listed on, or become delisted from, NASDAQ for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on NASDAQ or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.
If, following the Business Combination, securities or industry analysts do not publish or cease publishing research or reports about the post-Business Combination Company, its business, or its market, or if they change their recommendations regarding our Class A Stock adversely, then the price and trading volume of our Class A Stock could decline.
The trading market for our Class A Stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. Securities and industry analysts do not currently, and may never, publish research on us or the post-Business Combination Company. If no securities or industry analysts commence coverage of the post-Business Combination Company, our stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover the post-Business Combination Company change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our Class A Stock would likely decline. If any analyst who may cover us were to cease coverage of the post-Business Combination Company or fail to regularly publish reports on it, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
50
Our amended and restated certificate of incorporation includes a forum selection clause.
Subject to certain limitations, our amended
Our Second Amended and restated certificateRestated Certificate of incorporationIncorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery inof the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring: (a) any(1) derivative action or proceeding brought on our behalf (b) anyof the Company, (2) action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or employee of our directors, officersthe Company to the Company or other employees to us or ourits stockholders, (c) any(3) action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the DGCL or our amendedSecond Amended and restated certificateRestated Certificate of incorporationIncorporation, or our bylaws, or (d) any(4) action asserting a claim against us, ourthe Company, its directors, officers or employees governed by the internal affairs doctrine, except for, as to eachdoctrine. Notwithstanding the foregoing, our Second Amended and Restated Certificate of (a) through (d) above, any claim as to whichIncorporation provides that the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vestedprovision described in the exclusive jurisdiction ofpreceding paragraph shall not apply to suits to enforce a courtduty or forumliability created by the Securities Act, the Exchange Act or any other than the Court of Chancery, orclaim for which the federal courts have exclusive jurisdiction. Our Second Amended and Restated Certificate of Incorporation further provides the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Our decision to adopt a federal forum provision for suits arising under federal securities laws in our Second Amended and Restated Certificate of Incorporation followed a decision by the Supreme Court of Chancery doesthe State of Delaware holding that such provisions are facially valid under Delaware law. However, such provision may not be enforceable under Section 22 of the Securities Act, and it may be possible for the Company to be sued in applicable state and local courts notwithstanding such provision.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court. Our stockholders will not be deemed to have
subject matter jurisdiction.waived our compliance with the federal securities laws and the regulations promulgated thereunder.
The forum selection clause may discourage claims or limit stockholders’ ability to submit claims in a judicial forum that they find favorable and may result in additional costs for a stockholder seeking to bring a claim. If a court were to determine the forum selection clause to be inapplicable or unenforceable in an action, we may incur additional costs in conjunction with our efforts to resolve the dispute in an alternative jurisdiction, which could have a negative impact on our results of operations and financial condition and result in a diversion of the time and resources of our management and board of directors.
The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.
We qualify as an
“emergingemerging growth
company”company (“EGC”) as defined in Section 2(a)(19) of the Securities Act, as modified by the
Jumpstart Our Business Startups Act (“JOBS
Act.Act”). As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not
emerging growth companiesEGCs for as long as we continue to be an
emerging growth company,EGC, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under SOX, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. As a result, our stockholders may not have access to certain information they deem important. We will remain an
emerging growth companyEGC until the earliest of (i) the last day of the fiscal year (a)
following March 12, 2024, the fifth anniversary of
our Initial Public Offering,Crescent’s IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A
Stockcommon stock that is held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We
cannot predict if investors will find our Common Stock less attractive if we choose to rely on these exemptions. If some investors find our Common Stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our Common Stock and the price of our Common Stock may be more volatile. LiveVox Holdings, Inc., a Delaware corporation (“LiveVox”)had net revenues during
calendar year 2019fiscal 2021 and 2020 of
$92.7 million.$119.2 million and $102.5 million, respectively. If
the post-Business Combination Company expands itswe expand our business through acquisitions and/or
continuescontinue to grow revenues organically,
post-Business Combination, we may cease to be an
emerging growth companyEGC prior to
March 12,the end of 2024.
In addition, Section 107 of the JOBS Act also provides that an
emerging growth companyEGC can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an
emerging growth company.EGC. An
emerging growth companyEGC can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging growth companies,non-EGSs, but any such election to opt out is irrevocable. We have elected to avail ourselves of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an
emerging growth company,EGC, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company that is neither an
emerging growth companyEGC nor an
emerging growth companyEGC that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
We cannot predict if investors will find our Class A
Stockcommon stock less attractive because we will rely on these exemptions. If some investors find our Class A
Stockcommon stock less attractive as a result
of any choices to reduce future disclosure, there may be a less active trading market for our Class A
Stockcommon stock and our stock price may be more volatile.
There is no guarantee that a stockholder’s decision whether to redeem its shares for a pro rata portion
General Risks
Our quarterly and annual results may fluctuate significantly and may not fully reflect the underlying performance of
the Trust Account will put the stockholder in a better future economic position.We can give no assurance as to the price at which a stockholderour business.
Our quarterly and annual results of operations, including our revenues, profitability and cash flow have varied, and may be able to sell its public sharesvary significantly in the future, followingand period-to-period comparisons of our operating results may not be meaningful. Accordingly, the consummationresults of any one quarter or period, or series of quarters or periods, should not be relied upon as an indication of future performance. Our quarterly and annual financial results may fluctuate as a result of a variety of factors, many of which are outside our control and, as a result, may not fully reflect the Business Combinationunderlying performance of our business. Fluctuation in quarterly and annual results may harm the value of our common stock. Factors that may cause fluctuations in our quarterly and annual results include, without limitation:
•market acceptance of our products;
•our ability to attract new customers and grow our business with existing customers;
•customer renewal rates;
•customer attrition rates;
•our ability to adequately expand our sales and service team;
•our ability to acquire and maintain strategic and customer relationships;
•the timing and success of new product and feature introductions by us or our competitors or any alternative business combination. Certain events followingother change in the consummationcompetitive dynamics of any initial business combination,our industry, including the Business Combination, may cause an increase in our share price, andconsolidation, partnership or collaboration among competitors, customers or strategic partners;
•network outages or security incidents, which may result in a lower value realized now than a stockholderadditional expenses or losses, legal or regulatory actions, the loss of customers, the Company might realizeprovision of customer credits, and/or harm to our reputation;
•general economic, industry and market conditions;
•the amount and timing of costs and expenses related to the maintenance and expansion of our business, operations and infrastructure;
•seasonal factors that may cause our revenues to fluctuate across quarters;
•inaccessibility or failure of our products due to failures in the future had products or services provided by third parties;
•the stockholder not redeemed its shares.51
Similarly, if a stockholder does not redeem its shares, the stockholder will bear the riskamount and timing of ownership of the public shares after the consummation of any initial business combination,costs and there can be no assurance that a stockholder can sell its sharesexpenses related to our research and development efforts or in the acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies;
•our ability to successfully integrate companies and businesses that we acquire and achieve a greater amount than the redemption price set forthpositive return on our investment;
•our ability to expand and effectively utilize our network of master agents, referral agents and other third-party selling partners;
•changes in accounting rules under current and future generally accepted accounting principles in the proxy statement. A stockholder should consultUnited States (“U.S. GAAP”);
•changes in our pricing policies or those of our competitors;
•increases or decreases in the stockholder’s own tax and/costs to provide our products or financial advisorpricing changes upon any renewals of customer agreements;
•the level of professional services and support we provide our customers;
•fluctuations or changes in the components of our revenue;
•the addition or loss of key customers, including through acquisitions or consolidations;
•compliance with, or changes in, the current and future domestic and international regulatory environments;
•the hiring, training and retention of our key employees;
•changes in law or policy that impact us or our customers or suppliers;
•the outcome of litigation or other claims against it;
•the ability to expand internationally, and to do so profitably;
•our ability to obtain additional financing on acceptable terms if and when needed; and
•advances and trends in new technologies and industry standards.
Adverse economic conditions may harm our business.
Our business depends on the overall demand for
assistancecloud contact center software solutions and on
how this may affect his, her or its individual situation.Our stockholders who wish to redeem their shares for a pro rata portionthe economic health of the Trust Account must comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights priorour current and prospective customers. In addition to the deadline.United States, we may market and sell our products in international markets in the future. If stockholders faileconomic conditions, including currency exchange rates, in these areas and other key potential markets for our solutions remain uncertain or deteriorate, customers may delay or reduce their contact center and overall information technology spending. If our customers or potential customers experience economic hardship, this could reduce the demand for our products, delay and lengthen sales cycles, lower prices for our products, and lead to slower growth or even a decline in our revenue, operating results and cash flows.
Compliance obligations under the Sarbanes-Oxley Act may require substantial financial and management resources.
As a public company, we are required to comply with the redemptionSEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act of 2002 (“SOX”), which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal control over financial reporting.
We may need to undertake various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff. Testing and maintaining these controls can also divert our management’s attention from other matters that are important to the operation of our business. If we are not able to implement the requirements specifiedof Section 404, including any additional requirements once we are no longer an EGC, in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our securities. Additionally, once we are no longer an EGC, we will be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting.
Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
If we identify material weaknesses in the proxy statement, they will not be entitledinternal control over financial reporting or are unable to redeem their sharescomply with the requirements of Section 404 or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting when we no longer qualify as an EGC, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A Stockcommon stock, Warrants, and Units could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.
Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported operating results.
U.S. GAAP is subject to interpretation by the FASB, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in accounting standards or practices can have a significant effect on our reported results and may even affect our consolidated financial statements issued before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and will occur in the future. Changes to existing rules or the questioning of current practices may harm our reported financial results or the way we account for or conduct our business.
For example, in May 2014, the FASB issued new revenue recognition rules under ASC 606, Revenue from Contracts with Customers (“ASC 606”), which included a pro rata portionsingle set of rules and criteria for revenue recognition to be used across all industries. We adopted this standard in January 2019 using a full retrospective method. With the adoption of this standard, the timing of our commission expense recognition changed, which caused fluctuations in our operating results. See Note 6 to our consolidated financial statements included in Part II, Item 8 of this Annual Report.
Further, in February 2016, the FASB issued new rules for leases under the ASC 842, Leases (“ASC 842”), which requires a lessee to recognize assets and liabilities for both finance, previously known as capital, and operating leases with lease terms of more than 12 months. We adopted this standard on January 1, 2020 using a modified retrospective method. With the adoption of this standard, we recognized right-of-use, or ROU, assets and lease liabilities for operating leases. See Note 10 to our consolidated financial statements included in Part II, Item 8 of this Annual Report.
The application of any new accounting guidance is, and will be, based on all information available to us as of the
funds helddate of adoption and up through subsequent interim reporting, including transition guidance published by the standard setters. However, the interpretation of these new standards may continue to evolve as other public companies adopt the new guidance and the standard setters issue new interpretative guidance related to these rules. As a result, changes in the interpretation of these rules could result in material adjustments to our application of the new guidance, which could have a material effect on our results of operations and financial condition. Additionally, any difficulties in implementing these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline, cessation or disruption of trading in our
Trust Account.Our public stockholders who wishcommon stock and harm investors’ confidence in us.
In addition, certain factors have in the past and may in the future cause us to redeem their shares for a pro rata portiondefer recognition of revenues. For example, the Trust Account must, among other things (i) submit a requestinclusion in writing and (ii) tender their certificates to our Transfer Agent or deliver their shares tocustomer contracts of non-standard terms, such as acceptance criteria, could require the Transfer Agent electronically throughdeferral of revenue. To the DWAC system at least two business days prior toextent that such contracts become more prevalent in the Special Meeting. In order to obtain a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC andfuture our Transfer Agent will need to act to facilitate this request. It is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the Transfer Agent. However, because we do not have any control over this process or over the brokers, which we refer to as “DTC,” it may take significantly longer than two weeks to obtain a physical stock certificate. If it takes longer than anticipated to obtain a physical certificate, stockholders who wish to redeem their sharesrevenue may be unable to obtain physical certificates by the deadlineimpacted.
Because of these factors and other specific requirements under U.S. GAAP for
exercising their redemption rightsrevenue recognition, we must have precise terms and
thus will be unable to redeem their shares.Stockholders electing to redeem their shares will receive their pro rata portion of the Trust Account less franchise and income taxes payable, calculated as of two business days prior to the anticipated consummation of the Business Combination.
If a stockholder fails to receive notice ofconditions in our offer to redeem our public shares in connection with an initial business combination or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.
If, despite our compliance with the proxy rules, a stockholder fails to receive our proxy materials, such stockholder may not become aware of the opportunity to redeem its shares. In addition, the proxy materials that we are furnishing to holders of our public shares in connection with an initial business combination describes the various procedures that must be complied witharrangements in order to validly redeem public shares. Inrecognize revenue when we deliver our products or perform our professional services. Negotiation of mutually acceptable terms and conditions can extend our sales cycle, and we may accept terms and conditions that do not permit revenue recognition at the event that a stockholder fails to comply with these procedures, its shares may not be redeemed.
time of delivery.
Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.
We
will beare subject to income taxes in the United States, and our domestic tax liabilities
will beare subject to the allocation of expenses in differing jurisdictions. Our
future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:
•changes in the valuation of our deferred tax assets and liabilities;
•expected timing and amount of the release of any tax valuation allowances;
•tax effects of stock-based compensation;
•costs related to intercompany restructurings;
•changes in tax laws, regulations or interpretations thereof; or
•lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.
In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal and state authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.
52
Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules,
A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.
An active trading market for our securities may not be sustained. In addition, the price of our securities can vary due to general economic conditions and forecasts, our general business
investmentscondition and
resultsthe release of
operations.our financial reports. Additionally, if our securities become delisted from Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.
We are subject to laws, regulationsmany hazards and rules enactedoperational risks that can disrupt our business, some of which may not be insured or fully covered by national, regionalinsurance.
Our operations are subject to many hazards inherent in the cloud contact center software business, including:
•damage to third-party and local governmentsour infrastructure and NASDAQ. In particular,data centers, related equipment and surrounding properties caused by earthquakes, hurricanes, tornadoes, floods, fires and other natural disasters, explosions and acts of terrorism;
•security breaches resulting in loss or disclosure of confidential customer and customer data and potential liability to customers and non-customer third parties for such losses on disclosures; and
•other hazards that could also result in suspension of operations, personal injury and even loss of life.
These risks could result in substantial losses and the curtailment or suspension of our operations. For example, in the event of a major earthquake, hurricane, tropical storm, flooding or severe weather or catastrophic events such as fire, power loss, telecommunications failure, cyber-attack, war or terrorist attack impacting our headquarters or any of the data centers we use, we may be unable to continue our operations and may endure system and service interruptions, reputational harm, delays in product development, breaches of data security and loss of critical data, any of which could harm our business and operating results.
We are not insured against all claims, events or accidents that might occur. If a significant accident or event occurs that is not fully insured, if we fail to recover all anticipated insurance proceeds for significant accidents or events for which we are requiredinsured, or if we or our data center providers fail to complyreopen facilities damaged by such accidents or events, our operations and financial condition could be harmed. In addition to being denied coverage under existing insurance policies, we may not be able to maintain or obtain insurance of the type and amount we desire at reasonable rates.
We may acquire other companies or technologies or be the target of strategic transactions, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.
We may acquire or invest in businesses, applications or technologies that we believe could complement or expand our products, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management, and cause us to incur various costs and expenses in identifying, investigating and pursuing acquisitions, whether or not they are consummated. We may not be able to identify desirable acquisition targets or be successful in entering into an agreement with certain SEC, NASDAQany particular target.
To date, the growth in our business has been primarily organic, and we have limited experience in acquiring other businesses. With respect to any future acquisitions, we may not be able to successfully integrate acquired personnel, operations and technologies, or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from these or any future acquisitions due to a number of factors, including:
•inability to integrate or benefit from acquisitions in a profitable manner;
•unanticipated costs or liabilities associated with the acquisition, including legal claims arising from the activities of companies or regulatory requirements. Compliancebusinesses we acquire;
•acquisition-related costs;
•difficulty converting the customers of the acquired business to our products and contract terms, including due to disparities in the revenue, licensing, support or professional services model of the acquired company;
•difficulty integrating the accounting systems, operations and personnel of the acquired business;
•difficulties and additional costs and expenses associated with supporting legacy products and monitoringthe hosting infrastructure of applicable laws, regulationsthe acquired business;
•diversion of management’s attention from other business concerns;
•harm to our existing relationships with our partners and rules may be difficult, time consuming and costly. Those laws, regulationscustomers as a result of the acquisition;
•the loss of our or rules and their interpretation and application may also change from time to time and those changesthe acquired business’s key employees;
•diversion of resources that could have a material adverse effect onbeen more effectively deployed in other parts of our business, investmentsbusiness; and results
•use of operations. substantial portions of our available cash to consummate the acquisition.
In addition, a failuresignificant portion of the purchase price of companies and businesses we acquire may be allocated to comply with applicable laws, regulationsacquired goodwill and other intangible assets, which must be assessed for impairment at least annually. If our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could harm our results of operations.
Acquisitions could also result in dilutive issuances of equity securities, the use of our available cash, or rules, as interpreted and applied,the incurrence of additional debt to fund such acquisitions, which could have a material adverse effect onharm our operating results. If an acquired business fails to meet our expectations, our operating results, business and resultsfinancial condition could suffer.
In addition, third parties may be interested in acquiring us. We will continue to consider, evaluate and negotiate such transactions as we deem appropriate. Such potential transactions may divert the attention of
operations.management, and cause us to incur various costs and expenses in investigating, evaluating and negotiating such transactions, whether or not they are consummated.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
None.
We do not own any real estate or other physical properties materially important to our operation. Our principal executive offices are located at 11100 Santa Monica Blvd.,655 Montgomery Street, Suite 2000, Los Angeles, CA 90025. Our1000, San Francisco, California, 94111. In addition to our principal executive offices, our business operates in New York, New York; Columbus, Ohio; Alpharetta, Georgia; Denver, Colorado; Fairview Heights, Illinois; Medellin, Colombia; and certain of ourBangalore, India. LiveVox's principal executive and other offices are leased by our Managerthe Company or one of its affiliates from third partiesparties. We use our principal executive and pursuantother offices primarily for our management, engineering, technology, product management, sales and marketing, finance, legal, people operation, general administrative and information technology teams.
We believe that our current facilities are adequate to
meet our needs for the
termsimmediate future and that suitable additional space will be available to accommodate any expansion of our
Management Agreement, we reimburse our Manager (or its affiliate,operations as
applicable) for expenses (including our pro-rata portion of rent, telephone, printing, mailing, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses) relating to such offices, including disaster backup recovery sites and facilities maintained for us, our affiliates, our investments or our Manager or its affiliates required for our operation.needed.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, we may be subject to various legal proceedings
The Company is currently, and from time to
time. Totime may become, involved in legal or regulatory proceedings arising in the
knowledgeordinary course of
our management, thereits business, including tort claims, employment disputes and commercial contract disputes. Although the outcome of such claims cannot be predicted with certainty, as of the date of this Annual Report, we were not a party to any litigation or regulatory proceeding that would reasonably be expected to be material to LiveVox’s business, results of operations, financial condition or cash flows. Please read Note 23 to the consolidated financial statements included in Part II, Item 8 of this Annual Report, which is
no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.incorporated by reference herein.
ITEM 4. MINE SAFETY DISCLOSURES
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market
For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity SecuritiesCOMMON STOCK
Information
Our units,Class A common stock, Warrants and warrants are each tradedUnits trade on the NASDAQ Capital MarketNasdaq under the symbols “CRSAU,“LVOX,” “CRSA”“LVOXW” and “CRSAW”,“LVOXU,” respectively. Our units commenced public trading on
Holders
On March
8, 2019, and our common stock and warrants commenced public trading on April 16, 2019.HOLDERS
On February 22, 2021,7, 2022, there was one holder of record of our units, one holderwere 26 holders of record of our Class A common stock, and two13 holders of record of our warrants.
DISTRIBUTION POLICY
Warrants, and 1 holder of record of our Units. These numbers do not include a greater number of beneficial holders of our securities whose securities are held by banks, brokers and other financial institutions.
Distribution Policy
We have not paid any cash dividends on our
Class A common stock to
date and do not intend to pay cash dividends prior to the completion of an initial business combination.date. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial
condition subsequent to completion of an initial business combination.condition. The payment of any cash dividends
subsequent to an initial business combination will be within the discretion of our board of directors at such time. In
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addition, our board of directors is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future. Further, if we incur any indebtedness,under the terms of our credit facility, our ability to declare dividends may beis limited by restrictive covenants we may agree to in connection therewith.
UNREGISTERED SALES OF EQUITY SECURITIES AND PURCHASES OF EQUITY SECURITIES
covenants.
Unregistered Sales of
unregistered securitiesOn November 29, 2017, the Sponsor purchased 8,625,000 Founder Shares for $25,000. In January 2018, the Sponsor surrendered 1,437,500 Founder Shares to the Company for no consideration, resulting in an aggregateEquity Securities, Use of 7,187,500 Founder Shares outstanding. Up to 937,500 Founder Shares were subject to forfeiture to the extent that the over-allotment option was not exercised by the underwriters within 45 days from the effective dateProceeds, and Purchases of the registration statement, March 7, 2019. In April 2019, the underwriters’ over-allotment option expired and as a result the Sponsor forfeited 937,500 shares of Class F common stock, resulting in an aggregate of 6,250,000 Founder Shares outstanding.
The holders of the Founder Shares have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of an initial business combination or (B) subsequent to an initial business combination, (x) if the last sale price of the Company’s Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after an initial business combination, or (y) the date on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property.
On March 12, 2019, the Company consummated the Initial Public Offering of 25,000,000 units. Each unit consists of one Class A ordinary share and one-half of one warrant. Credit SuisseEquity Securities and BofA Merrill Lynch acted as joint book-running managers for the offering and I-Bankers Securities, Inc. acted as the co-manager for the offering. The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $250,000,000, $245,000,000 of which was deposited into a Trust Account with Continental Stock Transfer & Trust Company acting as trustee.
The Sponsor purchased an aggregate of 7,000,000 Private Placement Warrants at a price of $1.00 per warrant for an aggregate purchase price of $7,000,000 in a private placement that occurred simultaneously with the closing of the Initial Public Offering. Each Private Placement Warrant is exercisable for one whole share of the Company’s Class A common stock at a price of $11.50 per share (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuances of equity or equity-linked securities). $5,000,000 of the proceeds of the Private Placement Warrants were added to the proceeds from the Initial Public Offering to be held in the Trust Account such that, at the closing of the Initial Public Offering, $250,000,000 was held in the Trust Account. If an initial business combination is not completed by the Extension Date, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.
None.
ITEM 6.
SELECTED FINANCIAL DATAAs a “smaller reporting company,” we are not required to provide the information called for by this Item.
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[RESERVED]
ITEM 7.
Management’s Discussion And Analysis Of Financial Condition And Results Of OperationsThe information contained inMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Throughout this section,
should be read in conjunction withunless otherwise noted, the
accompanying consolidated financial statements“Company,” “LiveVox,” “we,” “us,” and
notes thereto appearing elsewhere in this report. Except where the context otherwise requires, all references in this Annual Report“our” refers to
the “Company”, “we”, “us”, “our” or similar words or phrases are to Crescent Acquisition Corp, a Delaware company, and references to the “Sponsor” refer to CFI Sponsor, LLC, a Delaware limited liability company.CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
All statements other than statements of historical fact included in this Annual Report on Form 10-K including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward looking statements. When used in this Form 10-K, words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions, as they relate to us or our management, identify forward looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings. Such forward looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. No assurance can be given that results in any forward-looking statement will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. The cautionary statements made in this Annual Report on Form 10-K should be read as being applicable to all forward-looking statements whenever they appear in this Annual Report. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.
OVERVIEW
We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate an initial business combination using cash from the proceeds of our Initial Public Offering and the sale of the Private Placement Warrants and the forward purchase securities, our capital stock, debt or a combination of cash, stock and debt.
The issuance of additional shares of our stock in a business combination, including the forward purchase securities:
may significantly dilute the equity interest of investors in our Initial Public Offering, which dilution would increase if the anti-dilution provisions in the Founder Shares resulted in the issuance of Class A shares on a greater than one-to-one basis upon conversion of the Founder Shares;
may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock;
could cause a change of control if a substantial number of shares of our common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;
may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and
may adversely affect prevailing market prices for our Class A common stock and/or warrants.
Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:
default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;
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acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;
our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt security is outstanding;
our inability to pay dividends on our common stock;
using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;
limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and
limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.
As indicated in the accompanying consolidated financial statements, we had cash of $306,626 as of December 31, 2020. We expect to incur significant costs in the pursuit of our acquisition plans. We cannot assure that our plans to raise capital or to complete an initial business combination will be successful.
Agreement for Business Combination
On January 13, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Function Acquisition I Corp, a Delaware corporation and our direct, wholly owned subsidiary (“First Merger Sub”), Function Acquisition II LLC, a Delaware limited liability company and our direct, wholly owned subsidiary (“Second Merger Sub”), LiveVox Holdings, Inc., a Delaware corporation (“LiveVox”), and GGC Services Holdco, Inc., a Delaware corporation, solely in its capacity as the representative, agent and attorney-in-fact of the stockholder of LiveVox (in such capacity, the “Stockholder Representative”). The Merger Agreement provides for, among other things, (i) the merger of First Merger Sub with and into LiveVox, with LiveVox continuing as the surviving corporation (the “Surviving Corporation”) and becoming our direct, wholly owned subsidiary as a consequence (the “First Merger”) and (ii) immediately following the First Merger and as part of the same overall transaction as the First Merger, the merger of the Surviving Corporation with and into Second Merger Sub with Second Merger Sub continuing as the surviving entity, which will be renamed such name as LiveVox shall designate no later than five business days prior to the closing of the transaction (the “Second Merger” and, together with the First Merger, the “Mergers” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”), in each case, in accordance with the terms and subject to the conditions of the Merger Agreement. Following the closing of the Business Combination, we will own, directly or indirectly, all the stock of LiveVox and its direct and indirect subsidiaries, and LiveVox TopCo, LLC, a Delaware limited liability company andcollectively. You should read the sole stockholder of LiveVox as of immediately prior to the effective time of the First Merger (the “LiveVox Stockholder”) will hold a portion of the Company’s stock.
LiveVox is a next-generation contact center platform that powers more than 14 billion transactions a year. By seamlessly integrating omnichannel communications, CRM, and WFO, LiveVox delivers exceptional agent and customer experiences, while helping to reduce compliance risk. LiveVox’s reliable, easy-to-use technology enables effective engagement strategies on channels of choice to help drive contact center performance.
For additional information regarding LiveVox, the Merger Agreement and the Business Combination, see the Proxy Statement/Prospectus initially filed by the Company on February 11, 2021.
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Extension Meeting
We mailed to our shareholders of record as of January 22, 2021, a definitive proxy statement for a special meeting of shareholders to be held on February 17, 2021 (the “Special Meeting”) to approve an extension of time for us to complete an initial business combination through June 30, 2021. The Charter Extension and Trust Extension Proposals were approved, providing our shareholders with more time to evaluate our Business Combination.
In connection with the vote to approve the Charter Extension and Trust Extension Proposals, the holders of 12,238 Class A ordinary shares properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.14 per share, for an aggregate redemption amount of $124,138. As such, only approximately 0.05% of the Class A ordinary shares were redeemed and approximately 99.95% of the Class A ordinary shares remain outstanding. After the satisfaction of such redemptions, the balance in our trust account will be $253,467,308.
RESULTS OF OPERATIONS AND KNOWN TRENDS OR FUTURE EVENTS
We have neither engaged in any operations nor generated any revenues to date. Our primary activities since inception have been organizational activities and those necessary to prepare for our Initial Public Offering which was consummated on March 12, 2019. Since March 12, 2019, our activities have included activities associated with our search for a business combination candidate and our costs have included the professional, insurance and other costs associated with operating a public company.
On March 11, 2020, the World Health Organization officially declared the outbreak of the novel coronavirus (“COVID-19”) a “pandemic.” A significant outbreak of COVID-19 and other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and the business of any potential target business with which we consummate an initial business combination could be materially and adversely affected. Furthermore, we may be unable to complete an initial business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for an initial business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID- 19 or other matters of global concern continue for an extensive period of time, our ability to consummate an initial business combination, or the operations of a target business with which we ultimately consummate an initial business combination, may be materially adversely affected.
Included in general and administrative expenses on the accompanying consolidated statements of operations, during the years ended December 31, 2020 and 2019, our principal operating expenses included $2,795,651 and $189,670, respectively, for professional, insurance and regulatory costs, $200,000 and $200,000, respectively, in franchise taxes, $149,164 and $38,890, respectively, in consulting and travel costs and $120,000 and $98,065, respectively, in administrative fees to an affiliate of the Sponsor. Further, during the years ended December 31, 2020 and 2019, we generated $910,070 and $4,472,458, respectively, of interest income on the U.S. Treasury bills in the Trust Account. Such interest income is currently taxable and results in a provision for income taxes of $136,730 and $1,195,607 during the years ended December 31, 2020 and 2019, respectively, since the majority of our operating expenses are considered start-up costs and are not currently deductible. We will periodically withdraw funds from the Trust Account to fund the payment of income and franchise taxes.
Following the closing of our Initial Public Offering in March 2019, we have not generated, and will not generate, any operating revenues until after completion of an initial business combination. As discussed above, we currently generate non-operating income in the form of interest income on cash and cash equivalents after our Initial Public Offering and such income generates a currently payable provision for income taxes on such income since our operating expenses are considered start-up expenses and are not currently deductible. In addition to our taxes, administrative fees to an affiliate of the Sponsor and costs associated with our public reporting, we expect to incur increased expenses for our due diligence and other costs of identifying, documenting and closing a business combination and such costs are expected to be very significant and will vary with the stage of development of a business combination. We intend to pay our income and franchise taxes from the income of the Trust Account.
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LIQUIDITY AND CAPITAL RESOURCES
Prior to the completion of our Initial Public Offering, our liquidity needs were satisfied through receipt of $25,000 from the sale of the Founder Shares to our Sponsor, $300,000 in note payable and $118,323 in advances from an affiliate of the Sponsor.
The net proceeds from (i) the sale of the Units in our Initial Public Offering, after deducting offering expenses of approximately $900,000 and underwriting commissions of $5,000,000 (excluding deferred underwriting fees of $8,750,000), and (ii) the sale of the Private Placement Warrants for a purchase price of $7,000,000, were approximately $251,100,000. Of this amount, $250,000,000 was placed in the Trust Account, which includes up to $8,750,000 of deferred underwriting fees. The remaining approximately $1,100,000 was available to us for working capital and is not held in the Trust Account.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (which interest shall be net of taxes payable and excluding deferred underwriting fees) to complete an initial business combination. We may withdraw interest to pay taxes. Delaware franchise tax is based on our authorized shares or on our assumed par and non-par capital, whichever yields a lower result. Our annual franchise tax obligation is expected to be capped at the maximum amount of annual franchise taxes payable by us as a Delaware corporation of $200,000. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete an initial business combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of December 31, 2020 and 2019, we had available to us $306,626 and $1,126,200, respectively, of cash held outside the Trust Account as well as certain amounts we may draw from the Trust Account to fund our taxes (as described above). We believe that such sources of liquidity are adequate to fund our operations for at least the next 12 months. We will use these funds primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a business combination, pay our professional and other costs of being a public company and pay taxes to the extent the interest earned on the Trust Account is not sufficient to pay our taxes. We do not expect to have any capital expenditures during 2021, except as may be incurred in connection with an initial business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete an initial business combination, we would repay such loaned amounts. In the event that an initial business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants of the post-business combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants issued to our Sponsor, including as to exercise price, exercisability and exercise period. The terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account.
Unless and until we complete an initial business combination, we expect our primary liquidity requirements until the Extension Date to include legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting successful business combinations; legal and accounting fees related to regulatory reporting requirements; NASDAQ and other regulatory fees; office space, administrative, consulting and support services provided under an agreement with our Sponsor and other working capital needs. In addition, we expect to use a portion of the funds not being placed in our Trust Account to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed business combination. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business for the next 12 months from the date of this filing. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our business combination. Moreover, we may need to obtain additional financing either to complete our business combination or because we become obligated to redeem a significant number of our Public Shares upon completion of our business combination, in which case we may issue additional securities or incur debt in connection with such business combination.
RELATED PARTY TRANSACTIONS
Founder Shares
On November 29, 2017, the Sponsor purchased 8,625,000 Founder Shares for $25,000. In January 2018, the Sponsor surrendered 1,437,500 Founder Shares to the Company for no consideration, resulting in an aggregate of 7,187,500 Founder Shares outstanding. Up to 937,500 Founder Shares were subject to forfeiture to the extent that the over-allotment option was not exercised by the underwriters within 45 days from the effective date of the registration statement, March 7, 2019. In April 2019, the Underwriters’ over-allotment option expired and as a result the Sponsor forfeited 937,500 shares of Class F common stock, resulting in an aggregate of 6,250,000 Founder Shares outstanding.
The holders of the Founder Shares have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of an initial business combination or (B) subsequent to an initial business combination, (x) if the last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after an initial business combination, or (y) the date on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Warrants
The Sponsor purchased an aggregate of 7,000,000 Private Placement Warrants at a price of $1.00 per warrant for an aggregate purchase price of $7,000,000 in a private placement that occurred simultaneously with the closing of the Initial Public Offering. Each Private Placement Warrant is exercisable for one whole share of the Company’s Class A common stock at a price of $11.50 per share (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuances of equity or equity-linked securities). $5,000,000 of the proceeds of the Private Placement Warrants were added to the proceeds from the Initial Public Offering to be held in the Trust Account such that, at the closing of the Initial Public Offering, $250,000,000 was held in the Trust Account. If an initial business combination is not completed by the Extension Date from the closing of the Initial Public Offering, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees. On February 17, 2021, our shareholders approved to extend the date by which we must consummate an initial business combination from March 12, 2021 to June 30, 2021.
The Sponsor and the Company’s officers and directors will agree, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of an initial business combination. In April 2019, the Underwriters’ over-allotment option expired and as a result the Sponsor’s agreement to purchase up to an additional 750,000 Private Placement Warrants also expired.
Forward Purchase Agreement
On February 26, 2019, the Company entered into the Forward Purchase Agreement, which was subsequently amended on January 13, 2021, pursuant to which Crescent, in its capacity as investment advisor on behalf of the Crescent Funds, has committed on behalf of the Crescent Funds, to purchase, subject to the terms and conditions set forth the Forward Purchase Agreement, including obtaining fund-level approvals by the relevant investment committee and/or other governing body of such funds, the Forward Purchase Units, each consisting of one share of the Company’s Class A common stock (such shares of Class A common stock to be issued pursuant to the Forward Purchase Agreement, the “Forward Purchase Shares”) and one-third of one warrant to purchase one share of the Company’s
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Class A common stock (such warrants to be issued pursuant to the Forward Purchase Agreement, the “Forward Purchase Warrants”), for $10.00 per unit, or an aggregate amount of $25,000,000, in a private placement that will close immediately prior to the closing of an initial business combination. The Forward Purchase Warrants will have the same terms as the Private Placement Warrants so long as they are held by the Crescent Fund Purchaser or its permitted transferees, and the Forward Purchase Shares will be identical to the Public Shares sold in the Initial Public Offering, except the Forward Purchase Shares will be subject to transfer restrictions and certain registration rights. Any Forward Purchase Warrant held by a holder other than a Crescent Fund Purchaser or its permitted transferees will have the same terms as the Warrants included in the Units sold in the Initial Public Offering.
Registration Rights
The holders of Founder Shares, Private Placement Warrants and Warrants that may be issued upon conversion of working capital loans, if any, will be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock) pursuant to a registration rights agreement dated March 7, 2019. The holders of these securities will be entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Related Party Loans and Advances
On November 21, 2017, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to an unsecured promissory note (the ‘‘Note’’). This Note was amended and restated on November 6, 2018. This Note was non-interest bearing and payable on the earlier of June 30, 2019 or the closing of the Initial Public Offering. On March 13, 2019, the Note balance of $300,000 was repaid in full.
As of December 31, 2020 and 2019, an affiliate of the Company paid administrative expenses of $624,013 and $454,757, respectively, of which $623,520 and $333,063 were repaid, respectively, for a net of $493 and $121,694, respectively, which are reflected in the accompanying balance sheets. These amounts are due on demand and are non-interest bearing.
Administrative Support Agreement
On March 7, 2019, the Company entered into an agreement to pay $10,000 a month for office space, utilities, administrative and support services to an affiliate of the Sponsor and will terminate the agreement upon the earlier of an initial business combination or the liquidation of the Company. For the years ended December 31, 2020 and 2019, the Company incurred expenses of $120,000 and $98,065, respectively, which are included in general and administrative expenses on the consolidated statements of operations, of which $0 and $60,000 were payable as of December 31, 2020 and 2019, respectively, and included in accounts payable and accrued expenses on the accompanying balance sheets.
CRITICAL ACCOUNTING POLICIES
Ourfollowing discussion and analysis of our financial condition and results of operations in conjunction with other sections of this Annual Report, including “Item 1. Business,” and the audited consolidated financial statements and related notes thereto included in Part II, Item 8 of this Annual Report. In addition to historical information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth in the section entitled “Item 1A. Risk Factors” in this Annual Report.
Overview
We enable next-generation cloud contact center functionality through a cloud contact-center-as-a-service (or CCaaS) platform that we provide for enterprises, business process outsourcers (BPOs) and collections agencies. Our CCaaS platform provides customers with a scalable, cloud-based architecture and pre-integrated artificial intelligence (AI) capabilities to support enterprise-grade deployments of our solutions including omnichannel customer connectivity, customer relationship management (CRM) and workforce optimization (WFO). Our omnichannel product offerings enable our customers to connect with their customers via their channel of choice, including human voice, virtual agents powered by artificial intelligence (AI), email, text or web chat. Our platform features a native CRM which unifies disparate, department-level systems of record to present contact center agents with a single view of its customers without displacing or replacing existing CRMs or other systems of record. Our WFO offerings include a lightweight yet fully-featured product that meets the needs of smaller or less mature contact center operations as well as seamless integration with WFO products from other providers.
We typically sell our products to customers under one- to three-year subscription contracts that stipulate a minimum amount of monthly usage and associated revenue with the ability for the customer to consume more usage above the minimum contract amount each month. Our subscription revenue is comprised of the minimum usage revenue under contract (which we call “contract revenue”) and amounts billed for usage above the minimum contract value (which we call “excess usage revenue”), both of which are based uponrecognized on a monthly basis following deployment to the customer. Excess usage revenue is deemed to be specific to the month in which the usage occurs, since the minimum usage commitments reset at the beginning of each month. For the years ended December 31, 2021, 2020 and 2019, subscription revenue (including contract revenue and excess usage revenue) accounted for 98%, 99% and 99%, respectively, of our total revenue with the remainder consisting of professional services and other non-recurring revenue derived from the implementation of our products.
Reverse Recapitalization
LiveVox’s financial condition and results of operations may not be comparable between periods as a result of the Merger (as defined below) and becoming a public company.
Pursuant to Accounting Standards Codification (“ASC”) 805, Business Combinations, the merger between LiveVox Holdings, Inc. (hereinafter referred to as “Old LiveVox”) and Crescent Acquisition Corp (“Crescent”) consummated on June 18, 2021 (the transaction referred to as the “Merger”) was accounted for as a Reverse Recapitalization, rather than a business combination, for financial accounting and reporting purposes. Accordingly, Old LiveVox was deemed the accounting acquirer (and legal acquiree) and Crescent was treated as the accounting acquiree (and legal acquirer). Under this method of accounting, the Reverse Recapitalization was treated as the equivalent of Old LiveVox issuing stock for the net assets of Crescent, accompanied by a recapitalization. The net assets of Crescent are stated at historical cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the Merger are those of Old LiveVox. The shares and corresponding capital amounts and earnings per share available for common stockholders, prior to the Merger, have been retroactively restated as shares reflecting the exchange ratio established in the Merger Agreement dated January 13, 2021.
There have been no material changes to the aggregate consideration received or the total transaction costs incurred as a result of the Merger previously disclosed in our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (“SEC”) on August 13, 2021.
Impact of COVID-19
While impacts associated with COVID-19 had certain adverse impacts on our business and operating results in the first two quarters of fiscal 2020, we have not experienced a sustained disruption in our overall business other than as described below.
In March of fiscal 2020, we began to experience softness in our excess usage revenue in relation to our contract revenue (as evidenced by the calculation of total revenue divided by contract revenue which we call the “usage multiplier”) as a result of the
COVID-19 pandemic and this softness continued to persist through the end of fiscal 2021. We attribute this softness to financial stimulus packages designed to address the financial hardships of Americans brought about by the COVID-19 pandemic which allowed many of our customers in the collections industry to meet their collection goals with fewer interactions with debtors. As a result, our usage multiplier declined sequentially from the fourth quarter of fiscal 2020 to the second quarter of fiscal 2021. In the second half of fiscal 2021 our usage multiplier increased slightly over the second quarter of fiscal 2021, but remained below the first quarter of fiscal 2021. When the effects of the pandemic and the associated financial stimulus (including, but not limited to direct stimulus payments, extensions and enhancements of unemployment benefits and loan forbearances) dissipate and there is a return to growth in consumer debt relative to disposable income, we believe the usage multiplier will recover to normal historical levels. As that relationship moves towards normal historical levels, our excess usage revenue is likely to grow faster than our contract revenue.
Impact of Consumer Financial Protection Bureau (CFPB) Seven Voice Attempts In Seven Days Ruling
The dialing practices of several of our larger BPOs and collection customers were constrained by Regulation F, which took effect on November 30, 2021. Regulation F governs third-party debt collectors and, among other things, limits the number of call attempts that a debt collector may make to a consumer to seven calls per account within a seven day period (sometimes referred to as “7 in 7”). Once the debt collector makes actual contact with a consumer, the debt collector may not call the consumer again about that same account for a seven-day period. Excess usage revenue in December 2021 was impacted by approximately $1.0 million as many customers conservatively changed their dialing pattern to less than 7 in 7. We are actively presenting a best practice designed to enhance our customers’ profitability that replaces their previous behavior with a Regulation F-compliant calling regimen supplemented by best-time dial technology and/or 2 text messages per week. Sales of our Attempt Supervisor product have increased in the fourth quarter of fiscal 2021, and while we expect sales of this product to continue to increase, we believe the conservative dialing behavior demonstrated by our customers immediately following the implementation of Regulation F will be replaced by behavior that optimizes the profitability of our customers in the future. We believe that our recommended best practices, if implemented, will result in higher collection results for our customers, at a lower labor cost with a slight increase in software costs. However, there can be no assurance as to when our customers will adopt our recommended Regulation F-compliant practices, if at all. For the fourth quarter of fiscal 2021, our usage multiplier was unfavorably impacted by approximately 0.04x.
LiveVox’s Segments
The Company has determined that its Chief Executive Officer is its chief operating decision maker. The Company’s Chief Executive Officer reviews financial information presented on a consolidated basis for purposes of assessing performance and making decisions on how to allocate resources. Accordingly, the Company has determined that it operates in a single reportable segment.
Key Operating and Non-GAAP Financial Performance Metrics
In addition to measures of financial performance presented in our consolidated financial statements, we monitor the key metrics set forth below to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess operational efficiencies.
LTM Net Revenue Retention Rate
We believe that our LTM Net Revenue Retention Rate provides us and investors with insight into our ability to retain and grow revenue from our customers and is a meaningful measure of the long-term value of our customer relationships. We calculate LTM Net Revenue Retention Rate by dividing the recurring revenue recognized during the most recent LTM period by the recurring revenue recognized during the LTM period immediately preceding the most recent LTM period, provided, however, that recurring revenue from a customer in the most recent LTM period is excluded from the calculation if recurring revenue was not recognized from that customer in the preceding LTM period. Customers who cease using our products during the most recent LTM period are included in the calculation. For example, LTM Net Revenue Retention for the 12-month period ending December 2021 includes recurring revenue from all customers for whom revenue was recognized in 2020 regardless of whether such customers increased, decreased, or stopped their use of our products during 2021 (i.e., old customers), but excludes recurring revenue from all customers who began using our services during 2021 (i.e., new customers). We define monthly recurring revenue as recurring monthly contract and excess usage revenue, which we calculate separately from one-time, non-recurring revenue by month by customer. We consider all contract and excess usage revenue, which represents 98% of our revenue, to be recurring revenue as all of our contracts provide for a minimum commitment amount. We consider professional services revenue and one-time adjustments, which are booked on a one-time, nonrecurring basis, to be non-recurring revenue. Professional services and other one-time adjustments are generally not material to the result of the calculation. However, one-time non-recurring revenue is important with respect to timing as we bill installation and non-standard statement of work fees immediately and recognize the revenue as the work is completed, which is generally in advance of the beginning of recurring revenue which is when we recognize the beginning of the LTM period immediately preceding the most recent LTM period.
The following table shows our LTM Net Revenue Retention Rate for the periods presented:
| | | | | | | | | | | | | | | | | | | |
| Twelve Months Ended December 31, |
| 2021 | | | | 2020 | | 2019 |
| LTM Net Revenue Retention Rate | 105 | % | | | | 106 | % | | 118 | % |
Our LTM Net Revenue Retention Rate reflects the expansion over time of our existing customers as they add new products and additional units of service. A much higher percentage of the product revenue from our customers is contracted on our variable per minute pricing model with a minimum commitment as compared to our per agent pricing model with minimum commitments for both agents and units of service.
Our LTM Net Revenue Retention Rate decreased by 1% percentage points, to 105% in the twelve months ended December 31, 2021 from 106% in the twelve months ended December 31, 2020 primarily as a result of the impacts of COVID-19 and the related decrease in excess usage revenue, described above. Despite the decline in LTM Net Revenue Retention Rate, monthly minimum contract revenue for customers grew by 26% from fiscal 2020 to fiscal 2021.
Our LTM Net Revenue Retention Rate decreased by 12 percentage points, to 106% in the twelve months ended December 31, 2020 from 118% in the twelve months ended December 31, 2019 primarily as a result of the impacts of COVID-19 and the related decrease in excess usage revenue, described above. Despite the decline in LTM Net Revenue Retention Rate, monthly minimum contract revenue for customers grew by 20 % from fiscal 2019 to fiscal 2020.
Adjusted EBITDA
We monitor Adjusted EBITDA, a non-generally accepted accounting principle (“Non-GAAP”) financial measure, to analyze our financial results and believe that it is useful to investors, as a supplement to U.S. GAAP measures, in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance. We believe that Adjusted EBITDA helps illustrate underlying trends in our business that could otherwise be masked by the effect of the income or expenses that we exclude from Adjusted EBITDA. Furthermore, we use this measure to establish budgets and operational goals for managing our business and evaluating our performance. We also believe that Adjusted EBITDA provides an additional tool for investors to use in comparing our recurring core business operating results over multiple periods with other companies in our industry.
Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP, and our calculation of Adjusted EBITDA may differ from that of other companies in our industry. We compensate for the inherent limitations associated with using Adjusted EBITDA through disclosure of these limitations, presentation of our consolidated financial statements in accordance with U.S. GAAP and reconciliation of Adjusted EBITDA to the most directly comparable U.S. GAAP measure, net loss. We calculate Adjusted EBITDA as net loss before (i) depreciation and amortization, (ii) long-term equity incentive bonus, (iii) stock-based compensation expense, (iv) interest expense, net, (v) change in the fair value of warrant liability, (vi) other expense (income), net, (vii) provision for income taxes, and (viii) other items that do not directly affect what we consider to be our core operating performance.
The following table shows a reconciliation of net loss to Adjusted EBITDA for the periods presented (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| Net loss | | | | | $ | (103,194) | | | $ | (4,645) | | | $ | (6,913) | |
| Non-GAAP adjustments: | | | | | | | | | |
| Depreciation and amortization (1) | | | | | 6,579 | | | 6,065 | | | 4,894 | |
| Long-term equity incentive bonus and stock-based compensation expenses (2)(3) | | | | | 74,489 | | | 1,323 | | | 9,182 | |
| Interest expense, net | | | | | 3,732 | | | 3,890 | | | 3,320 | |
| Change in the fair value of warrant liability | | | | | (1,242) | | | — | | | — | |
| Other expense (income), net | | | | | (460) | | | 154 | | | (22) | |
| Acquisition and financing related fees and expenses (4) | | | | | 1,537 | | | 25 | | | 1,664 | |
| Transaction-related costs (5) | | | | | 2,263 | | | 707 | | | — | |
| Golden Gate Capital management fee expenses (6) | | | | | 135 | | | 781 | | | 732 | |
| Provision for income taxes | | | | | 166 | | | 196 | | | 149 | |
| Other non-recurring expenses | | | | | — | | | — | | | 249 | |
| Adjusted EBITDA | | | | | $ | (15,995) | | | $ | 8,496 | | | $ | 13,255 | |
(1) Depreciation and amortization expenses included in our results of operations are as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| Cost of revenue | | | | | $ | 3,776 | | | $ | 3,826 | | | $ | 3,130 | |
| Sales and marketing expense | | | | | 2,390 | | | 1,961 | | | 1,531 | |
| General and administrative expense | | | | | 281 | | | 160 | | | 153 | |
| Research and development expense | | | | | 132 | | | 118 | | | 80 | |
| Total depreciation and amortization | | | | | $ | 6,579 | | | $ | 6,065 | | | $ | 4,894 | |
(2) Long-term equity incentive bonus included in our results of operations are as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| Cost of revenue | | | | | $ | 9,697 | | | $ | 123 | | | $ | 1,007 | |
| Sales and marketing expense | | | | | 18,405 | | | 277 | | | 1,874 | |
| General and administrative expense | | | | | 18,594 | | | 336 | | | 4,420 | |
| Research and development expense | | | | | 23,888 | | | 31 | | | 1,881 | |
| Total long-term equity incentive bonus | | | | | $ | 70,584 | | | $ | 767 | | | $ | 9,182 | |
(3) Stock-based compensation expenses included in our results of operations are as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| Cost of revenue | | | | | $ | 500 | | | $ | 57 | | | $ | — | |
| Sales and marketing expense | | | | | 865 | | | 113 | | | — | |
| General and administrative expense | | | | | 1,169 | | | 273 | | | — | |
| Research and development expense | | | | | 1,371 | | | 113 | | | — | |
| Total stock-based compensation expenses | | | | | $ | 3,905 | | | $ | 556 | | | $ | — | |
(4) Acquisition and financing related fees and expenses included in our results of operations are as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| Cost of revenue | | | | | $ | — | | | $ | — | | | $ | — | |
| Sales and marketing expense | | | | | — | | | — | | | — | |
| General and administrative expense | | | | | 1,537 | | | 25 | | | 1,664 | |
| Research and development expense | | | | | — | | | — | | | — | |
| Total acquisition and financing related fees and expenses | | | | | $ | 1,537 | | | $ | 25 | | | $ | 1,664 | |
(5) Transaction-related costs included in our results of operations are as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| Cost of revenue | | | | | $ | — | | | $ | — | | | $ | — | |
| Sales and marketing expense | | | | | — | | | — | | | — | |
| General and administrative expense | | | | | 2,263 | | | 707 | | | — | |
| Research and development expense | | | | | — | | | — | | | — | |
| Total transaction-related costs | | | | | $ | 2,263 | | | $ | 707 | | | $ | — | |
(6) Golden Gate Capital management fee expenses included in our results of operations are as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| Cost of revenue | | | | | $ | — | | | $ | — | | | $ | — | |
| Sales and marketing expense | | | | | — | | | — | | | — | |
| General and administrative expense | | | | | 135 | | | 781 | | | 732 | |
| Research and development expense | | | | | — | | | — | | | — | |
| Total Golden Gate Capital management fee expenses | | | | | $ | 135 | | | $ | 781 | | | $ | 732 | |
Non-GAAP Gross Profit and Non-GAAP Gross Margin Percentage
U.S. GAAP defines gross profit as revenue less cost of revenue. Cost of revenue includes all expenses associated with our various product offerings as more fully described under the caption “Components of Results of Operations—Cost of Revenue” below. We define Non-GAAP gross profit as gross profit after adding back the following items:
•depreciation and amortization;
•long-term equity incentive bonus and stock-based compensation expenses; and
•other non-recurring expenses
We add back depreciation and amortization, long-term equity incentive bonus and stock-based compensation expenses and other non-recurring expenses because they are one-time or non-cash items. We eliminate the impact of these one-time or non-cash items because we do not consider them indicative of our core operating performance. Their exclusion facilitates comparisons of our operating performance on a period-to-period basis. Therefore, we believe showing Non-GAAP gross margin to remove the impact of these one-time or non-cash expenses is helpful to investors in assessing our gross profit and gross margin performance in a way that is similar to how management assesses our performance.
We calculate Non-GAAP gross margin percentage by dividing Non-GAAP gross profit by revenue, expressed as a percentage of revenue.
Management uses Non-GAAP gross profit and Non-GAAP gross margin percentage to evaluate operating performance and to determine resource allocation among our various product offerings. We believe Non-GAAP gross profit and Non-GAAP gross margin percentage provide useful information to investors and others to understand and evaluate our operating results in the same manner as our management and board of directors and allows for better comparison of financial results among our competitors. Non-GAAP gross profit and Non-GAAP gross margin percentage may not be comparable to similarly titled measures of other companies because other companies may not calculate Non-GAAP gross profit and Non-GAAP gross margin percentage or similarly titled measures in the same manner as we do.
The following table shows a reconciliation of gross profit to Non-GAAP gross margin percentage for the periods presented (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| Gross profit | | | | | $ | 58,592 | | | $ | 63,069 | | | $ | 54,502 | |
| Depreciation and amortization | | | | | 3,776 | | | 3,826 | | | 3,130 | |
| Long-term equity incentive bonus and stock-based compensation expenses | | | | | 10,197 | | | 180 | | | 1,007 | |
| Other non-recurring expenses | | | | | — | | | — | | | 211 | |
| Non-GAAP gross profit | | | | | $ | 72,565 | | | $ | 67,075 | | | $ | 58,850 | |
| Non-GAAP gross margin % | | | | | 60.9 | % | | 65.4 | % | | 63.4 | % |
Components of Results of Operations
Revenue
We derive revenue by providing products under a variety of pricing models. Our recently released AI Virtual Agent product and our historical Voice product are provided under a usage-based pricing model with prices calculated on a per-minute basis with a contracted minimum commitment in accordance with the terms of the underlying pricing agreements. Voice is our predominant source of revenue. Other revenue sources are derived from products under the following pricing models:
1)a per “unit of measure” with a minimum commitment (e.g., Speech IQ);
2)the combination of per agent and per “unit of measure” models with minimum contracted commitments for each (e.g., SMS, email, U-CRM services);
3)a per agent pricing model with a minimum agent commitment (e.g., U-Script, U-Ticket, U-Chat, U-Quality Management, U-Screen Capture, U-CSAT, U-BI, Hosted PBX services); and
4)a per agent pricing model with a minimum agent commitment with a monthly maximum commitment (e.g., PDAS–our compliance product, U-BI).
Outside of Voice, our pricing models detailed above are relatively new to the market and are not yet material to our business from a financial perspective.
Cost of Revenue
Our cost of revenue consists of personnel costs and associated costs such as travel, information technology, facility allocations and stock-based compensation for Implementation and Training Services, Customer Care, Technical Support, Professional Services, User Acceptance Quality Assurance, Technical Operations and VoIP services to our customers. Other costs of revenue include non-cash costs associated with depreciation and amortization including acquired technology, charges from telecommunication providers for communications, data center costs and costs to providers of cloud communication services, software, equipment maintenance and support costs to maintain service delivery operations.
In the fourth quarter of fiscal 2021, we completed a major strategic milestone when our data center transitioned from a model based on maintaining a co-location facility with our own capital equipment to a 100% cloud strategy based on monthly recurring charges for capacity added in generally small step function increments. As a result, we have reduced our capital expenditures for data center equipment, which has slowed growth in depreciation and increased our data center costs for our cloud provisioning. We expect feature release efficiencies for our cloud operations as research and development resources eliminate the release effort associated with our co-location deployment. We have accelerated depreciation expense associated with the change in useful life estimate of the co-location facility.
As our business grows, we expect to realize economies of scale in our cost of revenue. We use the LiveVox platform to facilitate data-driven innovations to identify and facilitate efficiency improvement to our implementation, customer care and support, and technical operations teams. Additionally, our research and development priorities include ease of implementation, reliability and ease of use objectives that reduce costs and result in economies of scale relative to revenue growth.
Operating Expenses
We classify our operating expenses as sales and marketing, general and administrative, and research and development.
Sales and Marketing. Sales and marketing expenses consist primarily of salaries and related expenses, including stock-based compensation, for personnel in sales and marketing, sales commissions, channel special program incentive funds (SPIFF) and channel commissions, travel costs, as well as marketing pipeline management, content delivery, programs, campaigns, lead generation, and allocated overhead. We believe it is important to continue investing in sales and marketing to continue to generate revenue growth, and we expect sales and marketing expenses to increase in absolute dollars and fluctuate as a percentage of revenue as we continue to support our growth initiatives.
General and Administrative. General and administrative expenses consist primarily of salary and related expenses, including stock-based compensation, for management, finance and accounting, legal, information systems and human resources personnel, professional fees, compliance costs, other corporate expenses and allocated overhead. We expect that general and administrative expenses will fluctuate in absolute dollars from period to period but decline as a percentage of revenue over time.
Research and Development. Research and development expenses consist primarily of salary and related expenses, including stock-based compensation, for LiveVox personnel as well as limited outsourced software development resources related to the identification and development of improvements, and expanded features for our products, as well as quality assurance, testing, product management and allocated overhead. Research and development costs are expensed as incurred. We have not performed research and development for internal-use software that would meet the qualifications for capitalization. We believe it is important to continue investing in research and development to continue to expand and improve our products and generate future revenue growth, and we expect research and development expenses to increase in absolute dollars and fluctuate as a percentage of revenue as we continue to support our growth initiatives.
Results of Operations
Comparison of the years ended December 31, 2021 and 2020
The following tables summarize key components of our results of operations for the years ended December 31, 2021 and 2020 (in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | |
| | 2021 | | 2020 | | | | |
| Revenue | | $ | 119,231 | | | | | $ | 102,545 | | | | | | | |
| Cost of revenue | | 60,639 | | | | | 39,476 | | | | | | | |
| Gross profit | | 58,592 | | | | | 63,069 | | | | | | | |
| Operating expenses | | | | | | | | | | | | |
| Sales and marketing expense | | 62,333 | | | | | 29,023 | | | | | | | |
| General and administrative expense | | 44,694 | | | | | 14,291 | | | | | | | |
| Research and development expense | | 52,562 | | | | | 20,160 | | | | | | | |
| Total operating expenses | | 159,589 | | | | | 63,474 | | | | | | | |
| Loss from operations | | (100,997) | | | | | (405) | | | | | | | |
| Interest expense, net | | 3,732 | | | | | 3,890 | | | | | | | |
| Change in the fair value of warrant liability | | (1,242) | | | | | — | | | | | | | |
| Other expense (income), net | | (459) | | | | | 154 | | | | | | | |
| Total other expense, net | | 2,031 | | | | | 4,044 | | | | | | | |
| Pre-tax loss | | (103,028) | | | | | (4,449) | | | | | | | |
| Provision for income taxes | | 166 | | | | | 196 | | | | | | | |
| Net loss | | $ | (103,194) | | | | | $ | (4,645) | | | | | | | |
| | | | | | | | | | | | |
| Net loss per share—basic and diluted | | $ | (1.29) | | | | | $ | (0.07) | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Weighted average shares outstanding—basic and diluted | | 79,964 | | | | | 66,637 | | | | | | | |
| | | | | | | | | | | | |
Revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | |
| | 2021 | | 2020 | | $ Change | | % Change |
| Revenue | | $ | 119,231 | | | $ | 102,545 | | | $ | 16,686 | | | 16.3 | % |
Revenue increased by $16.7 million, or 16.3%, to $119.2 million in fiscal 2021 from $102.5 million in fiscal 2020, primarily due to the acquisition of new customers and upsells to our existing customer base. The recent stimulus packages designed to address the COVID-19 pandemic have allowed our customers to meet their goals with less effort, reducing usage volumes, which was more than offset by 26% growth in contract revenue.
Cost of revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | |
| | 2021 | | 2020 | | $ Change | | % Change |
| Cost of revenue | | $ | 60,639 | | | $ | 39,476 | | | $ | 21,163 | | | 53.6 | % |
| % of revenue | | 50.9 | % | | 38.5 | % | | | | |
Cost of revenue increased by $21.2 million, or 53.6%, to $60.6 million in fiscal 2021 from $39.5 million in fiscal 2020. The increase was attributable primarily to increased personnel costs of $11.0 million, of which $9.5 million was associated with our Value Creation Incentive Plan (“VCIP”) and Option-based Incentive Plan (“OBIP”) awards that fully vested upon a liquidity event (i.e., the Merger) and were recorded as compensation expense within cost of revenue in the consolidated statements of operations and comprehensive loss in the second quarter of fiscal 2021. We also experienced increased cloud data center costs of $4.8 million in fiscal 2021 while transitioning from our co-location deployment. With the transition to the cloud complete in late 2021, going forward, we expect continued benefit from reduced technical debt (i.e., the implied cost of additional rework caused by choosing an easy
solution now instead of using a better approach that would take longer), increased development efficiency and significantly reduced capital expenditure needs. Additionally, stock-based compensation expenses increased $0.4 million associated with restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) granted under the 2021 Equity Incentive Plan (the “2021 Plan”) in fiscal 2021.
Gross profit
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | |
| | 2021 | | 2020 | | $ Change | | % Change |
| Gross profit | | $ | 58,592 | | | $ | 63,069 | | | $ | (4,477) | | | (7.1) | % |
| Gross margin percentage | | 49.1 | % | | 61.5 | % | | | | |
Gross profit decreased by $4.5 million, or 7.1%, to $58.6 million in fiscal 2021 from $63.0 million in fiscal 2020. The decrease in gross profit was a result of increased personnel costs of $11.0 million, of which $9.5 million was associated with our VCIP and OBIP awards that fully vested upon a liquidity event (i.e. the Merger) and were recognized as compensation expense in the second quarter of fiscal 2021, increased cloud data center costs of $4.8 million in fiscal 2021 while transitioning from our co-location deployment which we began in early 2020 and completed in late 2021, and increased stock-based compensation expenses of $0.4 million associated with the RSUs and PSUs granted under the 2021 Plan in fiscal 2021, partially offset by higher revenue.
Sales and marketing expense
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | |
| | 2021 | | 2020 | | $ Change | | % Change |
| Sales and marketing expense | | $ | 62,333 | | | $ | 29,023 | | | $ | 33,310 | | | 114.8 | % |
| % of revenue | | 52.3 | % | | 28.3 | % | | | | |
Sales and marketing expense increased by $33.3 million, or 114.8%, to $62.3 million in fiscal 2021 from $29.0 million in fiscal 2020. The increase was primarily due to increased personnel costs of $28.7 million of which $18.1 million was associated with the VCIP and OBIP awards that fully vested upon a liquidity event (i.e., the Merger) and were recorded as compensation expense within sales and marketing expense in the consolidated statements of operations and comprehensive loss in the second quarter of fiscal 2021. Additionally, marketing, promotions and tradeshow expenses increased $2.7 million, and stock-based compensation expenses increased $0.8 million associated with the RSUs and PSUs granted under the 2021 Plan in fiscal 2021.
General and administrative expense
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | |
| | 2021 | | 2020 | | $ Change | | % Change |
| General and administrative expense | | $ | 44,694 | | | $ | 14,291 | | | $ | 30,403 | | | 212.7 | % |
| % of revenue | | 37.5 | % | | 13.9 | % | | | | |
General and administrative expense increased by $30.4 million, or 212.7%, to $44.7 million in fiscal 2021 from $14.3 million in fiscal 2020. The increase was primarily due to increased personnel costs of $21.0 million of which $18.4 million was associated with the VCIP and OBIP awards that fully vested upon a liquidity event (i.e., the Merger) and were recorded as compensation expense within general and administrative expense in the consolidated statements of operations and comprehensive loss in the second quarter of fiscal 2021. Additionally, accounting, audit and legal fees increased $3.8 million in connection with our transition to a public company, miscellaneous general and administrative expenses increased $3.3 million primarily attributable to $1.5 million for directors’ and officers’ insurance, and stock-based compensation expenses increased $0.9 million associated with the RSUs and PSUs granted under the 2021 Plan in fiscal 2021.
Research and development expense
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | |
| | 2021 | | 2020 | | $ Change | | % Change |
| Research and development expense | | $ | 52,562 | | | $ | 20,160 | | | $ | 32,402 | | | 160.7 | % |
| % of revenue | | 44.1 | % | | 19.7 | % | | | | |
Research and development expense increased by $32.4 million, or 160.7%, to $52.6 million in fiscal 2021 from $20.2 million in fiscal 2020. The increase was primarily due to increased personnel costs of $29.1 million of which $23.5 million was associated with the VCIP and OBIP awards that fully vested upon a liquidity event (i.e., the Merger) and were recorded as compensation expense within research and development expense in the consolidated statements of operations and comprehensive loss in the second quarter of fiscal 2021. Additionally, computing costs used in the development of software increased $1.6 million, and stock-based compensation expenses increased $1.3 million associated with the RSUs and PSUs granted under the 2021 Plan in fiscal 2021.
Interest expense, net
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | |
| | 2021 | | 2020 | | $ Change | | % Change |
| Interest expense, net | | $ | 3,732 | | | $ | 3,890 | | | $ | (158) | | | (4.1) | % |
| % of revenue | | 3.1 | % | | 3.8 | % | | | | |
Interest expense, net decreased by $0.2 million, or 4.1%, to $3.7 million in fiscal 2021 from $3.9 million in fiscal 2020. The decrease was attributable primarily to decreased interest expense of $0.2 million associated with the decreased outstanding principal amount of our term loan and lower interest rates, partially offset by the BusinessPhone asset acquisition contingent consideration payment.
Change in the fair value of warrant liability
| | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | |
| | 2021 | | 2020 | | $ Change | | |
| Change in the fair value of warrant liability | | $ | (1,242) | | | $ | — | | | $ | (1,242) | | | |
| % of revenue | | (1.0) | % | | — | % | | | | |
Gain recognized due to change in the fair value of warrant liability increased by $1.2 million to $1.2 million in fiscal 2021 from $0 in fiscal 2020. The increase was attributable primarily to decrease in the fair value of Forward Purchase Warrants. Upon the consummation of the Merger on June 18, 2021, the Company recorded a liability related to the Forward Purchase Warrants of $2.0 million, with an offsetting entry to additional paid-in capital. On December 31, 2021, the fair value of the Forward Purchase Warrants decreased to $0.8 million, with the adjustment reflected as a warrant liability within the consolidated balance sheets, and the gain on fair value change recorded as a change in the fair value of warrant liability within the consolidated statements of operations and comprehensive loss.
Comparison of the years ended December 31, 2020 and 2019
A comparison of our results of operations for the years ended December 31, 2020 and 2019 can be found in the section entitled “LiveVox Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Crescent’s Definitive Proxy Statement filed with the SEC on May 14, 2021.
Liquidity and Capital Resources
Sources of Cash
LiveVox’s consolidated financial statements have been prepared assuming the Company will continue as a going concern for the 12-month period from the date of issuance of the consolidated financial statements, which contemplates the realization of assets and
the settlement of liabilities and commitments in the normal course of business. Historically, the Company’s main sources of liquidity were cash generated by operating cash flows and debt. For the years ended December 31, 2021, 2020 and 2019, the Company’s cash flow from operations was $(69.1) million, $1.1 million and $1.6 million, respectively. During the year ended December 31, 2021, the Company’s cash flows also include net cash proceeds of $157.6 million from the Merger and the related PIPE, net of transaction costs, which are available for general corporate purposes.
As of December 31, 2021 and December 31, 2020, the Company held cash and cash equivalents of $47.2 million and $18.1 million, respectively. In addition, the Company had restricted cash of $0.1 million as of December 31, 2021 related to the holdback amount for one acquisition the Company made in 2019 and $1.5 million in restricted cash as of December 31, 2020 related to the holdback amount for two acquisitions the Company made in 2019. The Company invested in various marketable securities in the year ended December 31, 2021, and held marketable securities of $49.4 million as of December 31, 2021.
On February 28, 2018, the Company entered into an amendment to its term loan and revolving credit facility with PNC Bank originally dated November 7, 2016 (as so amended, the “Credit Facility”) to provide for a $45.0 million term loan, a $5.0 million line of credit and a $1.5 million letter of credit sub-facility. The agreement governing the Credit Facility initially had a five-year term ending November 7, 2021, which has been extended as described below. The Credit Facility is collateralized by a first-priority perfected security interest in substantially all the assets of the Company and is subject to certain financial covenants before and after a covenant conversion date. Covenant conversion may be elected early by the Company if certain criteria are met, including, but not limited to, meeting fixed charge coverage and liquidity ratio targets as of the most recent twelve-month period. Prior to the covenant conversion date, the Company is required to maintain minimum levels of liquidity and recurring revenue. As of the covenant conversion date, the Company is required to maintain the Fixed Charge Coverage Ratio and Leverage Ratio (as defined in the Credit Facility) measured on a quarter-end basis for the four-quarter period ending on each such date through the end of the agreement.
On December 16, 2019, the Company amended the Credit Facility, increasing the term loan borrowing therein by $13.9 million to $57.6 million and amending certain terms and conditions. The amendment to the Credit Facility reset the minimum recurring revenue covenant and qualified cash amounts through December 31, 2021 and extended the quarterly measurement dates through September 30, 2023 and the maturity date to November 7, 2023.
On August 2, 2021, the Company further amended the Credit Facility, extending the maturity date to December 31, 2025. The amendment to the Credit Facility reset the minimum recurring revenue covenant amounts through December 31, 2025 and extended the quarterly measurement dates through September 30, 2025.
The Company was in compliance with all debt covenants at December 31, 2021 and December 31, 2020 and was in compliance with all debt covenants as of the date of issuance of these consolidated financial statements. There was no unused borrowing capacity under the term loan portion of the Credit Facility at December 31, 2021 and December 31, 2020. On March 17, 2020, as a precautionary measure to ensure financial flexibility and maintain maximum liquidity in response to the COVID-19 pandemic, the Company drew down approximately $4.7 million under the revolving portion of the Credit Facility, which was repaid in full by the Company in connection with the Merger in the second quarter of fiscal 2021.
Cash Requirements
LiveVox’s cash requirements within the next 12 months consist primarily of operation and administrative activities including employee related expenses and general, operating and overhead expenses, current maturities of the Company’s term loan, operating and finance leases and other obligations.
LiveVox’s long-term cash requirements consist of various contractual obligations and commitments, including:
•Term loan – The Company has contractual obligations under its term loan to make principal and interest payments. Please see Note 11 to the Company’s consolidated financial statements included in Part II, Item 8 of this Annual Report for a discussion of the contractual obligations under the Company’s term loan and the timing of principal maturities. The principal amount is due December 31, 2025;
•Operating and finance lease obligations – The Company leases its corporate headquarters and worldwide offices under operating leases, and finance computer and networking equipment and software purchases for its co-location data centers under finance leases. Please see Note 10 to the Company’s consolidated financial statements included in Part II, Item 8 of this Annual Report for further detail of the Company’s obligations under operating and finance leases and the timing of expected future lease payments;
•Other liabilities – These include other long-term liabilities reflected in the Company’s consolidated balance sheets as of December 31, 2021, including obligations associated with certain employee and non-employee incentive plans, Forward Purchase Warrants, unrecognized tax benefits and various long-term liabilities, which have some inherent uncertainty in the timing of these payments.
Future capital requirements will depend on many factors, including the Company’s customer growth rate, customer retention, timing and extent of development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product offerings, the continuing market acceptance of the Company’s products, effective integration of acquisition activities, and maintaining the Company’s bank credit facility. Additionally, the duration and extent of the impact from the COVID-19 pandemic continues to depend on future developments that cannot be accurately predicted at this time, such as the ongoing severity and transmission rate of the virus, the extent and effectiveness of vaccine programs and other containment actions, the duration of social distancing, office closure and other restrictions on businesses and society at large, and the specific impact of these and other factors on the Company’s business, employees, customers and partners. While the COVID-19 pandemic has caused operational difficulties, and may continue to create unprecedented challenges, it has not thus far had a substantial net impact on the Company’s liquidity position.
The Company believes the cash generated by operating cash flows and debt will be sufficient to meet the Company’s anticipated cash requirements for at least the next 12 months from the date of this Annual Report and beyond, while maintaining sufficient liquidity for normal operating purposes.
Acquisition Opportunities
The Company believes that there may be opportunity for further consolidation in LiveVox’s industry. From time to time, the Company evaluates potential strategic opportunities, including acquisitions of other providers of cloud-based services. The Company has been in, and from time to time may engage in, discussions with counterparties in respect of various potential strategic acquisition and investment transactions. Some of these transactions could be material to the Company’s business and, if completed, could require significant commitments of capital, result in increased leverage or dilution and/or subject the Company to unexpected liabilities. In connection with evaluating potential strategic acquisition and investment transactions, the Company may incur significant expenses for the evaluation and due diligence investigation of these potential transactions.
Comparison of cash flows for the years ended December 31, 2021 and 2020
The following table summarizes key components of our cash flows for the years ended December 31, 2021 and 2020 (dollars in thousands):
| | | | | | | | | | | | | |
| Years Ended December 31, |
| 2021 | | 2020 | | |
| Net cash (used in) provided by operating activities | $ | (69,057) | | | $ | 1,070 | | | |
| Net cash used in investing activities | (49,803) | | | (773) | | | |
| Net cash provided by financing activities | 146,689 | | | 2,768 | | | |
| Effect of foreign currency translation | (78) | | | (12) | | | |
| Net increase in cash, cash equivalents and restricted cash | $ | 27,751 | | | $ | 3,053 | | | |
Net cash (used in) provided by operating activities
Cash flows from operating activities in fiscal 2021 decreased by $70.1 million to $(69.1) million from $1.1 million in fiscal 2020. The decrease to net cash provided by operating activities was primarily attributable to a $98.5 million increase to net loss and an increase of $35.8 million in non-cash adjustments to net loss. These non-cash items primarily consisted of a $32.6 million increase of compensation expense associated with the VCIP and OBIP awards fully vesting in connection with the Merger in the second quarter of fiscal 2021, and a $3.3 million increase of stock-based compensation expenses associated with the RSUs and PSUs granted under the 2021 Plan in fiscal 2021. Net cash used in operating activities also included a decrease of $7.4 million in cash from operating assets and liabilities, primarily due to the payment of indirect or non-incremental transaction costs of $2.1 million associated with the Merger, and the timing of cash payments to vendors and cash receipts from customers.
Net cash used in investing activities
Cash flows used in investing activities in fiscal 2021 increased by $49.0 million to $(49.8) million from $(0.8) million during the same period in fiscal 2020. Net cash used in investing activities in fiscal 2021 was primarily comprised of $50.8 million in purchases of debt securities.
Net cash provided by financing activities
Cash flows provided by financing activities in fiscal 2021 increased by $143.9 million to $146.7 million from $2.8 million during the same period in 2020, reflecting the net cash proceeds of $159.7 million received in fiscal 2021 as a result of the Merger, net of direct and incremental transaction costs. Net cash provided by financing activities was partially offset by the repayment of $4.7 million, representing the revolving portion of the Credit Facility, made in conjunction with the Merger, and the cash payment made in
the third quarter of fiscal 2021 up to the fair value of the contingent consideration liability on the acquisition date of $6.0 million associated with the BusinessPhone asset acquisition.
Comparison of cash flows for the years ended December 31, 2020 and 2019
A comparison of our cash flows for the years ended December 31, 2020 and 2019 can be found in the section entitled “LiveVox Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Crescent’s Definitive Proxy Statement filed with the SEC on May 14, 2021.
Critical Accounting Estimates
Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements included in Part II, Item 8 of this Annual Report, which have been prepared in accordance with U.S. GAAP.
The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities
revenues and
expenses. Changes indisclosure of contingent assets and liabilities at the
economic environment,date of the consolidated financial
marketsstatements and
any other parameters used in determiningthe reported amounts of revenue and expenses during the reporting periods. Significant items subject to such estimates
could cause actual results to differ materially.In additionand assumptions include, but are not limited to, the discussion below,determination of the useful lives of long-lived assets, allowances for doubtful accounts, fair value of goodwill and long-lived assets, fair value of incentive awards, fair value of Warrants, establishing standalone selling price, valuation of deferred tax assets, income tax uncertainties, and other contingencies. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation. Actual results could differ from those estimates, and such differences could be material to the Company’s consolidated financial position and results of operations, requiring adjustment to these balances in future periods.
While our
criticalsignificant accounting policies are
furthermore fully described in
Note 2. Summarythe notes to the consolidated financial statements included in Part II, Item 8 of
Significant Accounting Policiesthis Annual Report, we believe that the following accounting estimates are critical to our
accompanyingbusiness operations and understanding of our financial results. We consider an accounting judgment, estimate or assumption to be critical when (i) the estimate or assumption is complex in nature or requires a high degree of subjectivity and judgment and (ii) the use of different judgments, estimates and assumptions could have a material impact on our consolidated financial statements.
Class A Common Stock Subject
Impairment of long-lived assets, including intangible assets
Long-lived assets to
Possible Redemptionbe held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset and long-lived assets to be disposed of are reported at the lower of the carrying amount or fair value. No impairment losses have been recognized in any of the periods presented.
We perform our annual impairment review of goodwill on October 1 of each year, and when a triggering event occurs between annual impairment tests. In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine if it is more likely than not that the fair value of the Company’s single reporting unit is less than its carrying amount, including goodwill. In the fourth quarter of 2021, the Company elected to bypass the qualitative assessment and proceed directly to the quantitative impairment test to determine if the fair value of the reporting unit exceeds its carrying amount. If the fair value is determined to be less than the carrying value, an impairment charge is recorded for the amount by which the reporting unit’s carrying amount exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. No impairment losses have been recognized in any of the periods presented.
Intangible assets, consisting of acquired developed technology, corporate name, customer relationships and workforce, are reviewed for impairment whenever events or changes in circumstances indicate an asset’s carrying value may not be recoverable. No impairment losses have been recognized in any of the periods presented.
Impairment of marketable securities
The Company monitors the carrying value of debt securities compared to their fair value to determine whether an other-than-temporary impairment has occurred. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, credit quality and the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. If a decline in fair value of debt securities is determined to be other-than-temporary, an impairment charge related to that specific investment is recorded in the consolidated statements of operations and comprehensive loss. The Company has determined that the unrealized losses for debt securities at December 31, 2021 were temporary in nature and did not consider any debt securities to be other-than-temporarily impaired. The Company will continue to assess whether a debt security is other-than-temporarily impaired at every reporting period (i.e., on quarterly basis).
Revenue Recognition
The Company recognizes revenue in accordance with U.S. GAAP, pursuant to ASC 606, Revenue from Contracts with Customers.
The Company derives substantially all of its revenue by providing cloud-based contact center voice products under a usage-based model. The Company’s performance obligations are satisfied over time as the customer has continuous access to its hosted technology platform solutions through one of its data centers and simultaneously receives and consumes the benefits and the Company performs its services. Other immaterial ancillary revenue is derived from call recording, local caller identification packages, performance/speech analytics, text messaging services and professional services billed monthly on primarily usage-based fees, and to a lesser extent, fixed fees. Professional services, which represents approximately 2% of revenue, are billed on a fixed-price or on a time and material basis and the revenue is recognized over time as the services are rendered.
The Company has service-level agreements with customers warranting defined levels of uptime reliability and performance. If the services do not meet certain criteria, fees are subject to adjustment or refund representing a form of variable consideration. The Company records reductions to revenue for these estimated customer credits at the time the related revenue is recognized. These customer credits are estimated based on current and historical customer trends, and communications with its customers. Such customer credits have not been significant to date.
For contracts with multiple performance obligations (e.g., including various combinations of services), the Company allocates the contract price to each performance obligation based on its relative standalone selling price (“SSP”). The Company generally determines SSP based on the prices charged to customers. In instances where SSP is not directly observable, the Company determines the SSP using information that generally includes market conditions or other observable inputs.
Income Taxes
The Company accounts for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recognized for the future tax consequences arising from the temporary differences between the tax basis of an asset or liability and its Classreported amount in the consolidated financial statements, as well as from net operating loss and tax credit carryforwards. Deferred tax amounts are determined by using the tax rates expected to be in effect when the taxes will be paid or refunds received, as provided for under currently enacted tax law. A common stock subjectvaluation allowance is provided for deferred tax assets that, based on available evidence, are not expected to possible redemptionbe realized.
The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained in accordance with the guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 480, “Distinguishing Liabilities from Equity.” Sharesa court of Class A common stock subject to mandatory redemption are classified as a liability instrument andlast resort. Recognized income tax positions are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that feature redemption rightsthe largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company does not believe its consolidated financial statements include any uncertain tax positions. It is the Company’s policy to recognize interest and penalties accrued on any unrecognized tax benefit as a component of income tax expense.
Judgment is required in assessing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Variations in the actual outcome of these future tax consequences could materially impact our consolidated financial statements.
Employee and Non-Employee Incentive Plans
Value Creation Incentive Plan and Option-Based Incentive Plan
During 2014, the Company established two bonus incentive plans, the VCIP and the OBIP, pursuant to which eligible participants receive a predetermined bonus based on the Company’s equity value at the time of a liquidity event. Awards under the VCIP and OBIP generally time vest over five years and performance vest upon certain liquidity event conditions, subject to continued service through the vesting dates. The Company also has an option to repurchase awards under either withinplan at an amount deemed to be fair value for which the controltime-based vesting period has been completed, contingent on the employee’s termination of service. The fair value used by the Company has historically been determined by the Company’s board of directors with assistance of management at each reporting period by considering a number of objective and subjective factors including important developments in the Company’s operations, valuations performed by an independent third party, actual results and financial performance, the conditions in the CCaaS industry and the economy in general, volatility of comparable public companies, among other factors. On June 18, 2021, the Company consummated the Merger in which all outstanding VCIP and OBIP awards became fully vested and were recorded as compensation expense. The VCIP and OBIP awards were paid to the plan participants in a combination of cash awards and equity awards. The cash portion of the holderawards was recorded to accrued liability for unpaid cash awards, and the stock portion of the awards was recorded to additional paid-in capital for undelivered equity shares. The fair value of the VCIP and OBIP accrued liability for unpaid cash awards was determined based on the terms of the respective VCIP and OBIP agreements. Since the inputs used to measure fair value are directly or indirectly observable in the marketplace, VCIP and OBIP accrued liability was transferred out of the Level 3 fair value measurement to the Level 2 fair value measurement upon the consummation of the Merger on June 18, 2021. As of December 31,
2021, the VCIP and OBIP awards were paid in full and the fair value of the VCIP and OBIP accrued liability was transferred out of the Level 3 fair value measurement and reduced to zero.
Management Incentive Units
During 2019, LiveVox TopCo, LLC (“LiveVox TopCo”), a Delaware limited liability company and the sole stockholder of the Company prior to the Merger, established a Management Incentive Unit program whereby the LiveVox TopCo board of directors has the power and discretion to approve the issuance of Class B Units of LiveVox TopCo that represent management incentive units (which we call “Management Incentive Units” or “MIUs”) to any manager, director, employee, officer or consultant of the Company or its subsidiaries. Vesting begins on the date of issuance, and the MIUs vest ratably over five years with 20% of the MIUs vesting on each anniversary of a specified vesting commencement date, subject to redemptionthe grantee’s continued employment with the Company on the applicable vesting date. Vesting of the MIUs will accelerate upon consummation of a “sale of the company”, which is defined in the LiveVox TopCo limited liability company agreement. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of five years. Stock-based compensation for MIUs is measured based on the grant date fair value of the award using a Monte Carlo simulation. Assumptions used in the Monte Carlo simulation are holding period, expected share price volatility, discount for lack of marketability, and risk-free interest rate.
2021 Equity Incentive Plan
On June 16, 2021, the stockholders of the Company approved the 2021 Equity Incentive Plan (the “2021 Plan”), which became effective upon the
occurrenceclosing of
uncertain events not solely within the
Company’s control) is classified as temporary equity. At all other times,Merger on June 18, 2021. The Compensation Committee of the Company approved 5,091,331 RSU and 1,611,875 PSU awards in the year ended December 31, 2021 to employees, executive officers, directors, and consultants of the Company. RSUs are subject only to service conditions and typically vest over periods ranging from three to six years based on the grantee’s role in the Company. PSUs are granted to certain key employees and vest either based on the achievement of predetermined market conditions, or based on both service and market conditions. All RSU and PSU awards will be settled in shares of Class A common stock
and are classified as
stockholders’ equity.
Equity-classified awards are generally recognized as stock-based compensation expense over an employee’s requisite service period or a nonemployee’s vesting period on the basis of the grant-date fair value. The
Company recognizes stock-based compensation expense of RSUs using the straight-line method, and recognizes stock-based compensation expense of PSUs subject to graded market vesting using the accelerated attribution method. The fair value of the RSUs is estimated by using the closing price of the Company’s
60
Class A common stock features certain redemption rights that are considered to be outside ofon Nasdaq on the Company’s control and subject to occurrence of uncertain future events.measurement date. The Company recognizes changes in redemption value immediately as they occur and will adjust the carryingfair value of the securityPSUs at each measurement date is estimated by using a Monte Carlo simulation. The key inputs used in the Monte Carlo simulation are stock price, expected share price volatility, expected life, risk-free interest rate, and vesting hurdles. While the Company believes that the assumptions used in these calculations are reasonable, differences in actual experience or changes in assumptions could materially affect the expense related to equal the redemptionCompany’s 2021 Plan.
Acquisitions
The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is accounted for as an asset acquisition. If the screen is not met, further determination is required as to whether or not we have acquired inputs and processes that have the ability to create outputs which would meet the definition of a business. Significant judgment is required in the application of the screen test to determine whether an acquisition is a business combination or an acquisition of assets.
If an acquisition is determined to be a business combination, the assets acquired and liabilities assumed are recorded at their respective estimated fair values at the enddate of each reporting period. Increases or decreasesthe acquisition. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.
If an acquisition is determined to be an asset acquisition, the cost of the asset acquisition, including transaction costs, are allocated to identifiable assets acquired and liabilities assumed based on a relative fair value basis. If the cost of the asset acquisition is less than the fair value of the net assets acquired, no gain is recognized in earnings. The excess fair value of the carryingacquired net assets acquired over the consideration transferred is allocated on a relative fair value basis to the identifiable net assets (excluding non-qualifying assets).
Determining estimated fair value requires a significant amount of redeemablejudgment and estimates. If our assumptions change or errors are determined in our calculations, the fair value could materially change resulting in a change in our goodwill or identifiable net assets acquired.
Public and Forward Purchase Warrants
Prior to the Merger, Crescent issued 7,000,000 private placement warrants (“Private Warrants”) and 12,499,995 public warrants (“Public Warrants”) at the close of Crescent’s initial public offering (“IPO”) on March 7, 2019. As an incentive for LiveVox to enter
into the Merger Agreement, pursuant to the Sponsor Support Agreement dated January 13, 2021, Crescent’s sponsor agreed to the cancellation of all of the Private Warrants prior to the Closing Date. 833,333 Forward Purchase Warrants (“Forward Purchase Warrants”) were issued pursuant to the Forward Purchase Agreement dated January 13, 2021 between Crescent and LiveVox. The 12,499,995 Public Warrants and the 833,333 Forward Purchase Warrants (collectively “Warrants”) remain outstanding after the Merger. Each whole warrant entitles the holder to purchase one share of the Company’s Class A common stock will be affected by charges against additional paid-in capital. Accordingly, asat a price of December 31, 2020 and 2019, 23,762,298 and 24,011,445, respectively,$11.50 per share, subject to adjustments.
Upon consummation of the
25,000,000Merger, the Company concluded that (a) the Public
Shares were classified outside of permanent equity.Emerging Growth Company
Section 102(b)(1) ofWarrants meet the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Section 4(a)(2) ofderivative scope exception for contracts in the Securities Act registration statement declared effective orCompany’s own stock and are recorded in stockholders’ equity and (b) the Forward Purchase Warrants do not havemeet the derivative scope exception and are recorded as liabilities on the consolidated balance sheets at fair value upon the Merger, with subsequent changes in the fair value recognized in the consolidated statements of operations and comprehensive loss at each reporting date. The Forward Purchase Warrants are classified as Level 3 fair value measurement and the fair value is measured using a class of securities registered under the Exchange Act)Black-Scholes option pricing model. Inherent in options pricing models are requiredassumptions related to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition periodcurrent stock price, exercise price, expected share price volatility, expected life, risk-free interest rate and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies,dividend yield. While the Company as an emerging growth company, can adoptbelieves that the new or revised standard atassumptions used in these calculations are reasonable, changes in assumptions could materially affect the time private companies adoptliabilities related to the new or revised standard. This may make comparison of the Company’sWarrants.
Recently Adopted Accounting Pronouncements
See Note 2 to our consolidated financial statements
with another public company which is neither an emerging growth company nor an emerging growth company which has opted outincluded in Part II, Item 8 of
using the extended transition period difficult or impossible becausethis Annual Report for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the
potential differences in accounting standards used.New Accounting Standards
We do not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have an effect on the Company’s consolidated financial statements.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
As of December 31, 2020, we did not have any off-balancebalance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations other than obligations disclosed herein. No unaudited quarterly operating data isdate included in this prospectus, as we have conducted no operations to date.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” under the JOBS Act and are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We elected to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
As an “emerging growth company”, we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of the Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We were incorporated
Concentration risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities and accounts receivable. Risks associated with cash and cash equivalents and marketable securities are mitigated using what the Company considers creditworthy institutions. The Company performs ongoing credit evaluations of its customers’ financial condition. Substantially all of LiveVox’s assets are in Delawarethe United States.
As of December 31, 2021 and 2020, no single issuer represented more than 10% of our marketable securities.
As of December 31, 2021 and 2020, no single customer represented more than 10% of our accounts receivable. For the years ended December 31, 2021, 2020 and 2019, no single customer represented more than 10% of our revenue.
The Company relies on November 17, 2017third parties for the purposetelecommunication, bandwidth, and colocation services that are included in cost of effecting an initial business combination.revenue.
As of December 31, 2021, one vendor accounted for approximately 43% of our total accounts payable. No other single vendor exceeded 10% of our accounts payable at December 31, 2021. As of December 31, 2020, we had not commenced any operations or generated any revenues. All activity throughtwo vendors accounted for approximately 55% of our accounts payable. No other single vendor exceeded 10% of our accounts payable at December 31, 2020 relates2020. We believe there could be a material impact on future operating results should a relationship with an existing supplier cease.
Interest rate sensitivity
The term loan portion of the Credit Facility is subject to
interest rate risk, as the loan is termed as either a base rate loan or LIBOR rate loan (each as defined in the agreement governing the Credit Facility) and can be a combination of both. LIBOR interest elections are for one, two or three-month periods. Interest changes affect the fair value of the term loan but do not impact our
formation and our Initial Public Offering and subsequentfinancial position, cash flows or results of operations due to the
Initial Public Offering, efforts have been directed toward locating61
and completing a suitable initial business combination. Net proceedsfixed nature of $250,000,000 from the Initial Public Offering and the private placement that closed in March 2019 were deposited into a Trust Account that invests solelydebt obligation.
Foreign exchange risk
The Company reports its results in U.S. Treasury bills withdollars, which is its reporting currency. The functional currency of the Company’s foreign subsidiaries is their local currency. We also have international sales that are denominated in foreign currencies. For these international subsidiaries and customers, the monetary assets and liabilities are translated into U.S. dollars at the current exchange rate as of the balance sheet date, and all non-monetary assets and liabilities are translated into U.S. dollars at historical exchange rates. Revenue and expenses are translated using average rates in effect on a maturitymonthly basis. The resulting translation gain and loss adjustments are recorded directly as a separate component of 180 daysstockholders’ equity (accumulated other comprehensive loss), unless there is a sale or lesscomplete liquidation of the underlying foreign investments, or the adjustment is inconsequential.
We experience fluctuations in money market funds meeting certain conditions under Rule 2a-7 undertransaction gains or losses from remeasurement of monetary assets and liabilities that are denominated in currencies other than the Investment Company Actfunctional currency of the entities in which invest onlythey are recorded. Exchange gains and losses
resulting from foreign currency transactions were not significant in
direct U.S. government obligations. As of December 31, 2020, there was $253,628,041any period and are reported in other expense (income), net in the
Trust Account. We have not engaged in any hedging activities since our incorporation. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.consolidated statements of operations and comprehensive loss.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Index to Consolidated Financial Statements included in this
annual report on Form 10-K.Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure
Under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we evaluated the effectiveness of our disclosure controls and procedures, areas defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of December 31, 2021.
We previously identified a material weakness in the internal control over financial reporting of our predecessor, Crescent, with respect to the classification of the Warrants and Forward Purchase Agreement as components of equity instead of as derivative liabilities. We have determined that we have remediated the material weakness related to Crescent as of December 31, 2021.
Based on management’s evaluation, our CEO and CFO concluded that, as of December 31, 2021, our disclosure controls and
other procedures
were designed at a reasonable assurance level and were effective to provide reasonable assurance that
are designed to ensure thatthe information required to be disclosed
by the Company in
ourthe reports
filedthat we file or
submittedsubmit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms. Disclosure controlsforms, and
procedures include, without limitation, controls and procedures designed to ensure that
such information
required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to
our management, including our
Chief Executive OfficerCEO and
Chief Financial Officer,CFO, as appropriate to allow timely decisions regarding required disclosure.
As required by Rules 13a-15
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and
15d-15maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange
Act,Act). Under the supervision and with the participation of our
Chief Executive Officermanagement, including our CEO and
Chief Financial Officer carried outCFO, we conducted an
evaluationassessment of the effectiveness of
the design and operation of our
disclosure controls and proceduresinternal control over financial reporting, as of December 31,
2020.2021, based on the criteria set forth in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
upon their evaluation,on the assessment, our
Chief Executive Officer and Chief Financial Officermanagement has concluded that our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) wereinternal control over financial reporting was effective as of December 31,
2020.2021 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP.
This Annual Report does not include an attestation report of our independent registered public accounting firm as permitted in this transition period under the rules of the SEC for newly public companies.
Changes in Internal Control over Financial Reporting
During the year ended December 31, 2020, there has
There have been no
changechanges in our internal control over financial reporting
during our most recent fiscal quarter ended December 31, 2021 that
hashave materially affected or
isare reasonably likely to materially affect our internal control over financial reporting.
Limitations on
the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that the Company’sProcedures
Our disclosure controls and procedures
or the Company’sand internal
controlscontrol over financial reporting
will prevent all errors and all fraud. Aare designed to provide reasonable assurance of achieving their objectives as specified above. Our management recognizes that any control system, no matter how well
conceiveddesigned and operated,
canis based upon certain judgments and assumptions and cannot provide only reasonable, not absolute, assurance that
theits objectives
of the control system arewill be met.
Further,In addition, the design of a control system must reflect the fact that there are resource constraints and
that our management is required to apply its judgment in evaluating the benefits of
possible controls
must be consideredand procedures relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
ITEM 9B. OTHER INFORMATION
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
ITEM 10. Directors, Executive OfficersDIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item will be included in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2021 (the “2022 Proxy Statement”), and
Corporate GovernanceDirectors and Executive Officers
is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be included in our 2022 Proxy Statement, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item will be included in our 2022 Proxy Statement, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item will be included in our 2022 Proxy Statement, which is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item will be included in our 2022 Proxy Statement, which is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed as part of this Annual Report:
1.Financial Statements—See the Index to Financial Statements on Page F-1.
2.Financial Statement Schedules—None. We have omitted financial statement schedules because they are not required or are not applicable, or the required information is shown in the financial statements or notes to the financial statements.
3.Exhibits.
| | | | |
Name
| | Age
| | Title
|
Robert D. Beyer
| | 61
| | Executive Chairman
|
Jean-Marc Chapus
| | 61
| | Chairman of the Board
|
Todd M. Purdy
| | 46
| | Chief Executive Officer and Director
|
Christopher G. Wright
| | 48
| | President
|
Al Hassanein
| | 41
| | Chief Financial Officer and Treasurer
|
George P. Hawley
| | 53
| | General Counsel and Secretary
|
Kathleen S. Briscoe
| | 61
| | Director
|
John J. Gauthier
| | 59
| | Director
|
Jason D. Turner
| | 53
| | Director
|
Sandra V. Naftzger
| | 60
| | Director
|
Our directors and executive officers are as follows:
Robert D. Beyer has served as our Chief Executive Officer from November 2017 to November 2018 and as our Executive Chairman, acting as Co-Chairman of the Board, since November 2018. Mr. Beyer is Chairman of Chaparal Investments LLC, a private investment firm and holding company which he founded in 2009. From 2005 to 2009, Mr. Beyer served as Chief Executive Officer of The TCW Group, Inc., a global investment management firm. Mr. Beyer previously served as Chief Investment Officer from 2000 to 2005. Mr. Beyer has been a director of Jefferies Financial Group Inc. since 2013. Mr. Beyer is also the Chairman of the Board of Councilors of USC Dornsife School of Letters, Arts and Sciences, a member of the Harvard-Westlake School Board of Trustees and a member of the Advisory Board of Milwaukee Brewers Baseball Club. Mr. Beyer was formerly a director of Société Générale Asset Management, S.A. and The TCW Group, Inc. Mr. Beyer was a director of The Allstate Corporation, an NYSE listed company, from 2006 through 2016. Mr. Beyer was a director at The Kroger Co., a NYSE listed company, from 1999 to 2019. Mr. Beyer received an MBA from the UCLA Anderson School of Management and a BS from the University of Southern California.
We believe Mr. Beyer’s extensive leadership and business experience, together with his strong background in capital markets and public company governance, make him well qualified to serve as a member of our board of directors.
Jean-Marc Chapus has served as our Chairman of the Board, acting as Co-Chairman of the Board, since November 2017. Mr. Chapus is a Co-Founder and has been Managing Partner of Crescent and a member of Crescent’s Management Committee since 2011. Prior to 2011, Mr. Chapus was Group Managing Director of TCW, co-managing TCW’s Leveraged Finance Group. Mr. Chapus is also a member of the board of several non-profit organizations, including the Harvard-Westlake School Board of Trustees, and the Advisory Board of the Milwaukee Brewers Baseball Club. Mr. Chapus received his MBA and AB from Harvard University.
We believe Mr. Chapus’s significant investment and financial expertise make him well qualified to serve as a member of our board of directors.
Todd M. Purdy has served as our Chief Executive Officer since November 2018. Mr. Purdy is a seasoned private equity investor with 23 years of investment industry experience. Most recently, Mr. Purdy was a Partner at Leonard Green & Partners, a leading private equity investment firm based in Los Angeles, California, where he focused on investments in the consumer, retail and services sectors. During Mr. Purdy’s tenure with the firm from 2000 to 2018, LGP grew significantly from investing its third fund, a $1.2 billion pool of committed capital, to investing its seventh fund, a $9.6 billion pool of committed capital. During this time, Mr. Purdy was involved in the acquisitions of 12 portfolio companies, representing more than $15 billion of transaction enterprise value, which collectively completed more than 40 follow-on acquisitions. Prior to LGP, Mr. Purdy was an investment banker with Donaldson, Lufkin & Jenrette in Los Angeles and London. Mr. Purdy graduated from the Honors Business Administration Program at the Ivey Business School at Western University in Canada.
We believe Mr. Purdy’s significant investment and financial expertise make him well qualified to serve as a member of our board of directors.
Christopher G. Wright has served as our President since November 2017. Mr. Wright is a Managing Director, the Head of Private Markets, a member of Crescent Capital’s Management Committee and a member of the board of directors of Crescent Capital BDC, Inc. Prior to joining Crescent in 2001, Mr. Wright completed the Financial Management Program with the General Electric Company and upon completion, worked in various finance roles within GE Industrial Systems. Mr. Wright is a current and former member or observer of the Board of numerous private companies, including the lead Director of Savers, Inc. In addition, Mr. Wright is a member of the board of directors of other non-profit organizations including St. Raphael School Development Board. Mr. Wright received his MBA from Harvard Business School and his BA from Michigan State University.
Al Hassanein has served as our Chief Financial Officer and Treasurer since October 2019. Mr. Hassanein is also the Controller of Crescent since September 2017. Prior to joining Crescent, Mr. Hassanein served as Vice President and Assistant Controller at American Capital, Ltd., a position he held from August 2008 until June 2017. He started his career at Deloitte after receiving his BS in Accounting and Finance from the University of Maryland at College Park and is an active Certified Public Accountant.
George P. Hawley has served as our General Counsel and Secretary since November 2017. Mr. Hawley is Secretary of Crescent Capital BDC, Inc. In addition, Mr. Hawley serves as the general counsel for Crescent. Prior to joining Crescent in 2012, Mr. Hawley was senior vice president and associate general counsel at Trust Company of the West where he supported Crescent on certain funds and accounts sub-advised by TCW to Crescent. From 2000 to 2008, Mr. Hawley was an associate at Paul, Hastings, Janofsky & Walker LLP specializing in asset management, securities, finance and restructuring, and general corporate. Prior to joining Paul Hastings, Mr. Hawley began his legal career at Baker, Keener & Nahra LLP where he practiced litigation. Mr. Hawley received a JD from Loyola Law School and a BA from the University of Notre Dame.
Kathleen S. Briscoe serves as a member of our board of directors. Ms. Briscoe has been a private investor continually since 2004. In addition, Ms. Briscoe has served as Partner, Chief Capital Officer for Dermody Properties since March 2018. Ms. Briscoe was the Chief Investment Officer and Chief Operating Officer Real Estate of Cordia Capital Management from November 2013 to February 2017, served as a real estate consultant to Institutional Real Estate, Inc. and Crosswater Realty Advisors from November 2011 to November 2013, and was the Chief Investment Officer of IDS Real Estate Group from March 2009 to October 2011. Prior to that, Ms. Briscoe was a managing director at Buchanan Street Partners and an Executive Vice President at Lowe Enterprises Investors. Ms. Briscoe is a current director of Crescent Capital BDC, Inc., a business development company managed by an affiliate of Crescent, Resmark Equity Partners, LLC and Griffin Capital Essential Assets REIT, Inc. Ms. Briscoe is also a member of the National Association of Corporate Directors. Ms. Briscoe received her MBA from Harvard Business School and her BA from Dartmouth College.
We believe Ms. Briscoe’s significant investment and financial expertise make her well qualified to serve as a member of our board of directors.
John J. Gauthier, CFA serves as a member of our board of directors. Mr. Gauthier runs his own investment governance consulting company, JJG Advisors, LLC and is a Partner at Talcott Capital Partners, a third party, investment placement agent. Mr. Gauthier served as EVP and Chief Investment Officer from February 2010 to February 2017 and SVP and Chief Investment Officer from October 2008 to February 2010 at Allied World Assurance Company Holdings, AG. He remained an employee of Allied World Assurance Company Holdings, AG, through January 2018. Additionally, Mr. Gauthier was President of Allied World Financial Services from September 2012 to February 2017. Prior to his time at Allied, Mr. Gauthier was a Managing Director at Goldman, Sachs & Co. He was also a Managing Director at Conning Asset Management. Mr. Gauthier is a member of the board of directors of Reinsurance Group of America and was a member of the board of directors of MatlinPatterson Asset Management, L.P. from November 2012 to February 2017 and of Blue Vista Capital Management from October 2014 to February 2017. He is also a board member of Middlesex Health Systems (Middletown, CT). Mr. Gauthier received his MBA from The Wharton School, University of Pennsylvania and his BS from Quinnipiac University.
We believe Mr. Gauthier’s significant investment and financial expertise make him well qualified to serve as a member of our board of directors.
Jason D. Turner serves as a member of our board of directors. Mr. Turner has been the founder, president and Chief Executive Officer of Venbrook Group, LLC since July 2002. Mr. Turner was a board member of various private organizations, including Los Angeles Conservation Corps, American Red Cross (Los Angeles) and Young Presidents Organization. Mr. Turner received his BS from St. Mary’s College of Maryland.
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We believe Mr. Turner’s significant insurance and risk management expertise make him well qualified to serve as a member of our board of directors.
Sandra V. Naftzger serves as a member of our board of directors. Ms. Naftzger runs family owned businesses in California, concentrating in oil and gas production and cattle ranching. Ms. Naftzger’s previous work experience includes positions as Director of Business Development at The Times Mirror Company and Vice President of Corporate Finance at Drexel Burnham Lambert. Ms. Naftzger previously served on the Board of Directors of Water.org, a global nonprofit organization focused on providing access to safe water and sanitation solutions to those in need, as well as Children’s Bureau of Southern California, an agency focused on early childhood abuse prevention and treatment. Ms. Naftzger has also served on the Board of Trustees of the Diocesan Investment Trust of the Episcopal Diocese of Los Angeles, which is responsible for investing the collective funds of 150 church institutions in Southern California. Ms. Naftzger received her MBA from Harvard Business School and her BA from Stanford University.
We believe Ms. Naftzger‘s significant investment and financial expertise make her well qualified to serve as a member of our board of directors.
NUMBER, TERMS OF OFFICE AND ELECTION OF OFFICERS AND DIRECTORS
Our board of directors consists of seven members. Our board of directors are divided into three classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. In accordance with NASDAQ corporate governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing on NASDAQ. The term of office of the first class of directors, consisting of Ms. Briscoe and Mr. Gauthier, will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Mr. Turner and Ms. Naftzger, will expire at the second annual meeting of stockholders. The term of office of the third class of directors, consisting of Messrs. Chapus, Beyer and Purdy, will expire at the third annual meeting of stockholders.
Our officers are elected by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Co-Chairman of the Board, Executive Chairman, a Chief Executive Officer, a President, a Chief Financial Officer, Vice Presidents, a Secretary, Assistant Secretaries, a Treasurer and such other offices as may be determined by the board of directors.
DIRECTOR INDEPENDENCE
NASDAQ listing rules require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. We have four “independent directors” as defined in the NASDAQ listing rules and applicable SEC rules. The majority of our board of directors are comprised of independent directors within 12 months from the date of listing to comply with the majority independent board requirement in Rule 5605(b) of the NASDAQ listing rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
None of our officers or directors have received any cash compensation for services rendered to us. Commencing on the date that our securities are first listed on NASDAQ through the earlier of consummation of an initial business combination and our liquidation, we will pay an affiliate of our Sponsor a total of $10,000 per month, up to the Extension Date for office space, utilities, administrative and support services. Our Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers, directors or our or any of their affiliates.
After the completion of an initial business combination, directors or members of our management team who remain with us may be paid consulting, management or other compensation from the combined company. All compensation will be fully disclosed to stockholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed business combination. It is unlikely the amount of such compensation will be known at the time, because the directors of the post-combination business will be responsible for determining executive officer and director compensation. Any compensation to be paid to our officers after the completion of an initial business combination will be determined by a compensation committee constituted solely by independent directors.
We are not party to any agreements with our executive officers and directors that provide for benefits upon termination of employment. The existence or terms of any such employment or consulting arrangements may influence our management’s motivation in identifying or selecting a target business, and we do not believe that the ability of our management to remain with us after the consummation of an initial business combination should be a determining factor in our decision to proceed with any potential business combination.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors have two standing committees: an audit committee and a compensation committee. Both our audit committee and our compensation committee will be composed solely of independent directors.
Audit Committee
The members of our audit committee are Mss. Briscoe and Naftzger and Messrs. Gauthier and Turner. Ms. Briscoe serves as chairman of the audit committee.
Each member of the audit committee is financially literate and our board of directors has determined that Ms. Briscoe qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
We will adopt an audit committee charter, which will detail the principal functions of the audit committee, including:
the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm and any other independent registered public accounting firm engaged by us;
pre-approving all audit and permitted non-audit services to be provided by the independent registered public accounting firm or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;
reviewing and discussing with the independent registered public accounting firm all relationships the independent registered public accounting firm have with us in order to evaluate their continued independence;
setting clear hiring policies for employees or former employees of the independent registered public accounting firm;
setting clear policies for audit partner rotation in compliance with applicable laws and regulations;
obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent registered public accounting firm’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;
reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and
reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the FASB, the SEC or other regulatory authorities.
66
Compensation Committee
The members of our Compensation Committee are Mss. Briscoe and Naftzger and Messrs. Gauthier and Turner. Mr. Gauthier serves as chairman of the compensation committee. We will adopt a compensation committee charter, which will detail the principal functions of the compensation committee, including:
reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;
reviewing and approving the compensation of all of our other officers;
reviewing our executive compensation policies and plans;
implementing and administering our incentive compensation equity-based remuneration plans;
assisting management in complying with our proxy statement and annual report disclosure requirements;
approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;
producing a report on executive compensation to be included in our annual proxy statement; and
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
The charter will also provide that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by NASDAQ and the SEC.
DIRECTOR NOMINATIONS
We do not have a standing nominating committee, though we intend to form a corporate governance and nominating committee as and when required to do so by applicable law or stock exchange rules. In accordance with Rule 5605(e)(2) of the NASDAQ listing rules, a majority of the independent directors may recommend a director nominee for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. In accordance with Rule 5605(e)(1)(A) of the NASDAQ listing rules, all such directors are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.
Prior to an initial business combination, the board of directors will also consider director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand for election at an annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Our stockholders that wish to nominate a director for election to the Board should follow the procedures set forth in our bylaws.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our officers currently serves, and in the past year has not served, as a member of the board of directors or compensation committee of any entity that has one or more officers serving on our board of directors.
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CODE OF ETHICS
We will have adopted a Code of Ethics applicable to our directors, officers and employees. We filed a copy of our form of Code of Ethics and our audit committee charter. You will be able to review these documents by accessing our public filings at the SEC’s website at www.sec.gov.
Item 11. Executive Compensation
Compensation Discussion and Analysis
None of our executive officers or directors has received any cash (or non-cash) compensation for services rendered to us. Our Sponsor, executive officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our independent directors will review on a quarterly basis all payments that were made to our Sponsor, officers, directors or our or their affiliates.
After the completion of an initial business combination, directors or members of our management team who remain with us may be paid consulting, management or other fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed business combination. It is unlikely the amount of such compensation will be known at the time, because the directors of the post-combination business will be responsible for determining executive and director compensation. Any compensation to be paid to our officers will be determined by our compensation committee.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of an initial business combination, although it is possible that some or all of our executive officers and directors may negotiate employment or consulting arrangements to remain with us after an initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of an initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our executive officers and directors that provide for benefits upon termination of employment.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information regarding the beneficial ownership of our common stock as of the date of this annual report, and as adjusted to reflect the sale of our common stock included in the units offered by this prospectus, and assuming no purchase of units in the Initial Public Offering, by:
each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;
each of our executive officers and directors; and
all our executive officers and directors as a group.
In the table below, percentage ownership is based on 25,000,000 shares of our Class A common stock, which includes Class A common stock underlying the units sold in our Initial Public Offering, and 6,250,000 shares of our Class F common stock outstanding as of February 22, 2021. Voting power represents the combined voting power of Class A common stock and Class F common stock owned beneficially by such person. On all matters to be voted upon, the holders of the Class A common stock and the Class F common stock vote together as a single class. Currently, all of the shares of Class F common stock are convertible into shares of Class A common stock on a one-for-one basis. The table below does not include the shares of Class A common stock underlying the Private Placement Warrants held or to be held by our officers or Sponsor because these securities are not exercisable within 60 days of this report.
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Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.
| | Class A Common Stock | | | Class F Common Stock | | | | | |
Name and Address of Beneficial Owner(1) | | Number of Shares Beneficially Owned | | | Approximate Percentage of Class | | | Number of Shares Beneficially Owned | | | Approximate Percentage of Class | | | Approximate Percentage of Outstanding Common Stock | |
CFI Sponsor LLC (our sponsor)(2)(3) | | | - | | | | - | | | | 6,175,000 | | | | 98.8 | % | | | 19.8 | % |
Crescent Capital Group LP(3) | | | - | | | | - | | | | 6,175,000 | | | | 98.8 | % | | | 19.8 | % |
Mark Attanasio(3) | | | - | | | | - | | | | 6,175,000 | | | | 98.8 | % | | | 19.8 | % |
Robert D. Beyer(3) | | | - | | | | - | | | | 6,175,000 | | | | 98.8 | % | | | 19.8 | % |
Jean-Marc Chapus(3) | | | - | | | | - | | | | 6,175,000 | | | | 98.8 | % | | | 19.8 | % |
Todd M. Purdy(3) | | | - | | | | - | | | | 6,175,000 | | | | 98.8 | % | | | 19.8 | % |
Christopher G. Wright | | | - | | | | - | | | | - | | | | - | | | | - | |
Al Hassanein | | | - | | | | - | | | | - | | | | - | | | | - | |
George P. Hawley | | | - | | | | - | | | | - | | | | - | | | | - | |
Sandra V. Naftzger | | | - | | | | - | | | | - | | | | - | | | | - | |
Kathleen S. Briscoe(2) | | | - | | | | - | | | | 25,000 | | | * | | | * | |
John J. Gauthier(2) | | | - | | | | - | | | | 25,000 | | | * | | | * | |
Jason D. Turner(2) | | | - | | | | - | | | | 25,000 | | | * | | | * | |
HGC Investment Management Inc.(4) | | | 2,004,504 | | | | 8.0 | % | | | - | | | | - | | | | 6.4 | % |
Polar Asset Management Partners Inc.(5) | | | 2,220,867 | | | | 8.9 | % | | | - | | | | - | | | | 7.1 | % |
Magnetar Financial LLC(6) | | | 1,886,800 | | | | 7.5 | % | | | - | | | | - | | | | 6.0 | % |
EJF Capital LLC(7) | | | 1,450,000 | | | | 5.8 | % | | | - | | | | - | | | | 4.6 | % |
All directors and executive officers as a group (10 individuals) | | | - | | | | - | | | | 6,250,000 | | | | 100.0 | % | | | 20.0 | % |
(1)
| Unless otherwise noted, the business address of each of the following entities or individuals is 11100 Santa Monica Boulevard, Suite 2000, Los Angeles, CA 90025.
|
(2)
| Interests shown consist solely of Founder Shares. Such shares will automatically convert into shares of Class A common stock at the time of an initial business combination on a one-for-one basis, subject to adjustment.
|
(3)
| CFI Sponsor LLC is the record holder of the shares reported herein. Crescent Capital Group LP, Beyer Family Interests LLC and TSJD Family LLC control the voting and investment decisions with respect to such Class F Shares held by CFI Sponsor LLC. Messrs. Attanasio and Chapus are the managing members of Crescent Capital Group LP. Mr. Beyer is a managing member of Beyer Family Interests LLC. Mr. Purdy is a managing member of TSJD Family LLC. As such, Messrs. Attanasio, Chapus, Beyer and Purdy may be deemed to have beneficial ownership of the Class F Common Stock held by CFI Sponsor LLC.
|
(4)
| According to a Schedule 13G filed with the SEC on February 14, 2020, HGC Investment Management Inc. serves as the investment manager to HGC Arbitrage Fund LP. HGC Investment Management Inc. has voting and dispositive power with regard to the 2,004,504 shares of the Company and their business address is 366 Adelaide, Suite 601, Toronto, Ontario M5V 1R9, Canada.
|
(5)
| According to a Schedule 13G filed with the SEC on February 8, 2021, Polar Asset Management Partners Inc. serves as the investment manager to Polar Multi-Strategy Master Fund, a Cayman Islands exempted company and certain managed accounts. Polar Asset Management Partners Inc. has voting and dispositive power with regard to the 2,220,867 shares of the Company and their business address is 401 Bay Street, Suite 1900, PO Box 19, Toronto, Ontario M5H 2Y4, Canada.
|
(6)
| According to a Schedule 13G filed with the SEC on February 13, 2020, Magnetar Financial LLC, a Delaware limited liability company (“Magnetar Financial”) shares voting and dispositive power with Magnetar Capital Partners LP, Supernova Management LLC and Alec N. Litowitz with regard to the 1,886,800 shares of the Company. These shares are held for Magnetar Constellation Master Fund, Ltd, Magnetar Constellation Fund II, Ltd, Magnetar Xing He Master Fund Ltd, Magnetar SC Fund Ltd, and Magnetar Capital Master Fund Ltd, all Cayman Islands exempted companies, collectively (the “Magnetar Funds”). Magnetar Financial serves as the investment adviser to the Magnetar Funds, and as such, Magnetar Financial exercises voting and investment power over the common Shares held for the Magnetar Funds’ accounts. Magnetar Capital Partners LP serves as the sole member and parent holding company of Magnetar Financial. Supernova Management LLC is the general partner of Magnetar Capital Partners LP. The manager of Supernova Management LLC is Alec N. Litowitz. The address of the principal business office of each of Magnetar Financial, Magnetar Capital Partners LP, Supernova Management LLC and Alec N. Litowitz is 1603 Orrington Avenue, 13th Floor, Evanston, Illinois 60201.
|
69
(7)
| According to a Schedule 13G filed with the SEC on January 15, 2021, each of EJF Debt Opportunities Master Fund, L.P. and EJF Debt Opportunities Master Fund II, LP is the record owner of 1,118,529 and 331,471, respectively, shares of Class A Stock. EJF Debt Opportunities GP, LLC serves as the general partner of EJF Debt Opportunities Master Fund, L.P. and as investment manager of an affiliate thereof, and may be deemed to share beneficial ownership of the Class A Stock of which EJF Debt Opportunities Master Fund, L.P. is the record owner. EJF Debt Opportunities II GP, LLC serves as the general partner of EJF Debt Opportunities Master Fund II, LP and as investment manager of an affiliate thereof, and may be deemed to share beneficial ownership of the Class A Stock of which EJF Debt Opportunities Master Fund II, LP is the record owner. EJF Capital LLC is the sole member and manager of EJF Debt Opportunities GP, LLC and EJF Debt Opportunities II GP, LLC, and may be deemed to share beneficial ownership of the Class A Stock of which EJF Debt Opportunities GP, LLC and EJF Debt Opportunities II GP, LLC may share beneficial ownership. Emanuel J. Friedman is the controlling member of EJF Capital LLC and may be deemed to share beneficial ownership of the Class A Stock of which EJF Capital LLC may share beneficial ownership. The address of the principal business office of each of EJF Capital LLC, Emanuel J. Friedman, EJF Debt Opportunities Master Fund, L.P., EJF Debt Opportunities GP, LLC, EJF Debt Opportunities Master Fund II, LP and EJF Debt Opportunities II GP, LLC is 2107 Wilson Boulevard, Suite 410, Arlington, Virginia 22201.
|
Changes in Control
None.
Item 13. Certain Relationships and Related Party Transactions, and Director Independence
On November 29, 2017, the Sponsor purchased 8,625,000 Founder Shares for $25,000. In January 2018, the Sponsor surrendered 1,437,500 Founder Shares to the Company for no consideration, resulting in an aggregate of 7,187,500 Founder Shares outstanding. Up to 937,500 Founder Shares were subject to forfeiture to the extent that the over-allotment option was not exercised by the underwriters within 45 days from the effective date of the registration statement, March 7, 2019. In April 2019, the Underwriters’ over-allotment option expired and as a result the Sponsor forfeited 937,500 shares of Class F common stock, resulting in an aggregate of 6,250,000 Founder Shares outstanding.
Our Sponsor purchased an aggregate of 7,000,000 Private Placement Warrants at a price of $1.00 per warrant ($7,000,000 in the aggregate) in a private placement that occurred simultaneously with the closing of the Initial Public Offering. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein. Private Placement Warrants may be exercised only for a whole number of shares. The Private Placement Warrants (including the Class A common stock issuable upon exercise of the Private Placement Warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by it until 30 days after the completion of an initial business combination.
We have entered into a forward purchase agreement pursuant to which Crescent, in its capacity as investment advisor on behalf of one or more Crescent Funds, has committed on behalf of the Crescent Funds, to purchase, subject to the terms and conditions set forth in such agreement as described below, an aggregate of 2,500,000 forward purchase units, consisting of the forward purchase shares and the forward purchase warrants, for $10.00 per unit, or an aggregate amount of $25,000,000, in a private placement that will close simultaneously with the closing of an initial business combination. Crescent will determine prior to the announcement of an initial business combination the particular Crescent Fund or Funds, if any, the Crescent Fund Purchasers. The sale of these forward purchase units will, if the relevant conditions are satisfied, result in gross proceeds to us necessary to enable us to consummate an initial business combination and pay related fees and expenses, after first applying amounts available to us from the Trust Account (after paying the deferred underwriting discount and giving effect to any redemptions of public shares), plus any additional amounts to be retained by the post-business combination company for working capital or other purposes. To the extent that we obtain alternative financing to fund an initial business combination, the aggregate commitment under the forward purchase agreement will be reduced by the amount of such alternative financing. Crescent will allocate the obligation to purchase the forward purchase units to a Crescent Fund if and only if, as applicable: (i) the investment has been approved by the investment committee, board of directors and/or limited partner advisory board of such Crescent Fund; and (ii) an initial business combination shall be consummated with a company engaged in a business that is within the investment objectives, guidelines and restrictions of such Crescent Fund and not in violation of any conflicts of interest provisions applicable to such Crescent Fund or Crescent.
Crescent will not be committed or obligated to purchase any forward purchase units if none of the Crescent Funds are able to purchase any forward purchase units due to the conditions described above, unless Crescent expressly agrees in writing to do so. The obligations of the Crescent Fund Purchasers to purchase forward purchase units are, among other things, conditioned on a requirement that such initial business combination is approved by a unanimous vote of our board of directors.
The forward purchase warrants will have the same terms as the Private Placement Warrants so long as they are held by a Crescent Fund Purchaser or its permitted transferees, and the forward purchase shares will be identical to the shares of Class A common stock included in the units sold in the Initial Public Offering, except the forward purchase shares will be subject to transfer restrictions and certain registration rights, as described herein. Any forward purchase warrant held by a holder other than a Crescent Fund Purchaser or its permitted transferees will have the same terms as the warrants included in the units sold in the Initial Public Offering.
A Crescent Fund Purchaser will have the right to transfer all or a portion of its obligation to purchase, and, in lieu of allocating to a Crescent Fund, Crescent may assign all or a portion of the obligation to purchase, the forward purchase units to one or more third parties, subject to compliance with applicable securities laws. In such event, such Crescent Fund Purchaser’s commitment will be reduced by the amount to be purchased by its transferee. To the extent Crescent assigns all or a portion of the obligation to purchase the forward purchase units to one or more third parties, the aggregate commitment of Crescent Fund Purchasers will be reduced by the amount to be purchased by such third party or parties.
The forward purchase agreement also provides that the Crescent Fund Purchasers and any of their permitted transferees will be entitled to certain registration rights with respect to their forward purchase shares, including the Class A common stock underlying their forward purchase warrants. The forward commitment of Crescent, on behalf of the Crescent Funds, to purchase securities pursuant to the forward purchase agreement is intended to provide us with a minimum funding level for an initial business combination. The proceeds from the sale of the forward purchase units may be used as part of the consideration to the sellers in an initial business combination, expenses in connection with an initial business combination or for working capital in the post-business combination company. Subject to the conditions in the forward purchase agreement, the purchase of the forward purchase units will be binding obligations of the Crescent Fund Purchasers, regardless of whether any shares of Class A common stock are redeemed by our public stockholders in connection with an initial business combination.
We entered into an Administrative Services Agreement pursuant to which we pay an affiliate of our Sponsor a total of $10,000 per month, until the Extension Date, for office space, utilities, administrative and support services. Upon completion of an initial business combination or our liquidation, we will cease paying these monthly fees. Accordingly, in the event the consummation of an initial business combination takes until the Extension Date, an affiliate of our Sponsor will be paid a total of $240,000 ($10,000 per month) for office space, utilities, administrative and support services and will be entitled to be reimbursed for any out-of-pocket expenses.
Our Sponsor, officers and directors or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers, directors or our or any of their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
On November 21, 2017, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a Note. This Note was amended and restated on November 6, 2018. This Note was non-interest bearing and payable on the earlier of December 31, 2019 or the closing of the Initial Public Offering. On March 13, 2019, the Note balance of $300,000 was repaid in full.
In addition, in order to finance transaction costs in connection with an intended initial business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete an initial business combination, we would repay such loaned amounts out of the proceeds of the Trust Account released to us. Otherwise, such loans would be repaid only out of funds held outside the Trust Account. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants issued to our Sponsor. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account.
After an initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to our stockholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held to consider an initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive officer and director compensation.
Item 14. Principal Accountant Fees and Services
Fees for professional services provided by our independent registered public accounting firm are as follows:
| For the years ended December 31, |
| 2020 | | 2019 |
Audit fees(1) | $ | 69,874 | | $ | 66,165 |
Audit-related fees(2) | | - | | | - |
Tax fees(3) | | 11,625 | | | 7,500 |
All other fees(4) | | - | | | - |
Total | $ | 81,499 | | $ | 73,665 |
(1)
| Audit Fees. Audit fees consist of fees for professional services rendered for the audit of our year-end financial statements and services that are normally provided by our independent register public accounting firm in connection with statutory and regulatory filings.
|
(2)
| Audit-Related Fees. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards.
|
(3)
| Tax Fees. Tax fees consist of fees billed for professional services relating to tax compliance, tax planning and tax advice.
|
(4)
| All Other Fees. All other fees consist of fees billed for all other services.
|
Pre-Approval Policy
Our audit committee was formed upon the consummation of our Initial Public Offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our independent registered public accounting firm, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
72
PART IV
ITEM 15. Exhibits and Financial Statement Schedules
The following documents are filed as part of this annual report:
| 1.
| Financial Statements—See the Index to Financial Statements on Page F-1.
|
| 2.
| Financial Statement Schedules—None. We have omitted financial statement schedules because they are not required or are not applicable, or the required information is shown in the financial statements or notes to the financial statements.
|
| | |
Exhibit No. | | Description of Exhibits |
| 2.1# | | |
1.1
| | Underwriting Agreement, dated March 7, 2019, among the Company, Credit Suisse Securities (USA) LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several underwriters (incorporated by reference to Exhibit 1.1 to the Company’s Form 8-K filed on March 13, 2019).
|
| | |
2.1
| | |
| 3.1 | | |
3.1
| | |
| 3.2 | | |
3.2
| | |
| 4.1* | | |
4.4
4.2 | | |
| 10.1 | | |
10.1
| | |
| | |
10.2
| | Investment Management Trust Agreement, dated March 7, 2019, between the Company and Continental Stock Transfer & Trust Company (incorporated by reference to(filed as Exhibit 10.2 to the Company’sCurrent Report on Form 8-K filedof the Company on March 13, 2019)January 14, 2021 and incorporated herein by reference).
|
| 10.2 | | |
10.3
| | |
| | |
10.4
| | Administrative Services Agreement, dated March 7, 2019, betweenof the Company on June 24, 2021 and Crescent Capital Group LP (incorporatedincorporated herein by reference to Exhibit 10.4 to the Company’s Form 8-K filed on March 13, 2019)reference).
|
| | |
10.5
| | Sponsor Warrants Purchase Agreement, dated January 12, 2018, between the Company and the Sponsor (incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed on March 13, 2019).
|
| | |
10.6
| | Indemnity Agreement, dated March 7, 2019, between the Company and Robert D. Beyer (incorporated by reference to Exhibit 10.6 to the Company’s Form 8-K filed on March 13, 2019).
|
| | |
10.7
| | Indemnity Agreement, dated March 7, 2019, between the Company and Jean-Marc Chapus (incorporated by reference to Exhibit 10.7 to the Company’s Form 8-K filed on March 13, 2019).
|
| | |
10.8
| | Indemnity Agreement, dated March 7, 2019, between the Company and Todd M. Purdy (incorporated by reference to Exhibit 10.8 to the Company’s Form 8-K filed on March 13, 2019).
|
| | |
10.9
| | Indemnity Agreement, dated March 7, 2019, between the Company and Christopher G. Wright (incorporated by reference to Exhibit 10.9 to the Company’s Form 8-K filed on March 13, 2019).
|
| | |
10.10
| | Indemnity Agreement, dated March 7, 2019, between the Company and George P. Hawley (incorporated by reference to Exhibit 10.11 to the Company’s Form 8-K filed on March 13, 2019).
|
| | |
10.11
| | Indemnity Agreement, dated March 7, 2019, between the Company and Kathleen S. Briscoe (incorporated by reference to Exhibit 10.12 to the Company’s Form 8-K filed on March 13, 2019).
|
| | |
73
| | |
10.12
| | Indemnity Agreement, dated March 7, 2019, between the Company and John J. Gauthier (incorporated by reference to Exhibit 10.13 to the Company’s Form 8-K filed on March 13, 2019).
| | | |
| 10.3 | | |
10.13
| | |
| | |
10.14
| | Amendment No. 1 to the Investment Management TrustStockholders Agreement, dated as of February 17, 2021, between the Company and Continental Stock Transfer & Trust Company, as trustee (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on February 22, 2021).
|
| | |
10.15
| | Forward Purchase Agreement, dated as of January 13,June 18, 2021, by and between Crescent Acquisition Corp and Crescent Capital Group Holdings LP (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 14, 2021).
|
| | |
10.16
| | Form of Subscription Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on January 14, 2021).
|
| | |
10.17
| | Sponsor Support Agreement, dated as of January 13, 2021, by and among Crescent Acquisition Corp, LiveVox Holdings, Inc., CFI Sponsor LLC and the parties set forth on Schedule A thereto (incorporated by reference toGGC (filed as Exhibit 10.3 to the Company’sCurrent Report on Form 8-K filedof the Company on January 14, 2021)June 24, 2021 and incorporated herein by reference).
|
| 10.4 | | |
10.18
| | Stockholder Support Agreement, dated as of January 13, 2021, by and among Crescent Acquisition Corp, LiveVox Holdings, Inc., GGC Services Holdco, Inc. and LiveVox TopCo, LLC (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on January 14, 2021).
|
| | |
10.19
| | |
| 10.5† | | |
10.20
10.6† | | |
| 10.7† | | |
| 10.8† | | |
| 10.9† | | |
| 10.10† | | |
| 10.11† | | |
| 10.12† | | |
| 10.13 | | |
| 10.14 | | |
| 10.15 | | |
| 16.1 | | |
| 21.1* | | |
31.1
23.1* | | |
| 31.1* | | |
| 31.2* | | |
31.2
| | |
| 32.1* | | |
32
| | |
| 32.2* | | |
101.INS
101.INS* | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
| 101.SCH* | | |
101.SCH
| | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL* | | |
101.CAL
| | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF* | | |
101.DEF
| | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB* | | |
101.LAB
| | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE* | | |
101.PRE
| | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| | | | | | | | |
| * | | Filed herewith. |
| # | | Schedules and similar attachments to this Exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of such omitted materials to the SEC upon request. |
| † | | Indicates a management contract or compensatory plan, contract or arrangement. |
ITEM 16.
FormFORM 10-K
SummarySUMMARY
LIVEVOX HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
Crescent Acquisition CorpLiveVox Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
Crescent Acquisition CorpLiveVox Holdings, Inc. (the
“Company”),Company) as of December 31,
20202021 and
2019,2020, the related consolidated statements of operations
changes in stockholders’and comprehensive loss, stockholders' equity and cash flows for each of the
twothree years in the period ended December 31,
2020,2021, and the related notes (collectively referred to as the
“financial“consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company
as ofat December 31,
20202021 and
2019,2020, and the results of its operations and its cash flows for each of the
twothree years in the period ended December 31,
2020,2021 in conformity with
accounting principlesU.S. generally accepted
in the United States of America.Going Concern
The financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, if the Company is unable to raise additional funds to alleviate liquidity needs and complete a business combination by June 30, 2021 then the Company will cease all operations except for the purpose of liquidating. The liquidity condition and date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
accounting principles.
These financial statements are the responsibility of the
Company’sCompany's management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(“PCAOB”)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
auditsaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial
statement,statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
WithumSmith+Brown, PCErnst & Young LLP
We have served as the Company’s auditor since
2017.New York, New York
2014.
San Francisco, California
March 2, 202111, 2022
| | As of December 31, | |
| | 2020 | | | 2019 | |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash | | $ | 306,626 | | | $ | 1,126,200 | |
Prepaid expenses | | | 27,353 | | | | 108,675 | |
Other assets | | | 23,000 | | | | - | |
Total current assets | | | 356,979 | | | | 1,234,875 | |
Cash and investments held in Trust Account | | | 253,628,041 | | | | 253,569,459 | |
Total assets | | $ | 253,985,020 | | | $ | 254,804,334 | |
Liabilities and Stockholders’ Equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable and accrued expenses | | $ | 2,611,543 | | | $ | 326,401 | |
Accrued franchise and income taxes | | | - | | | | 491,781 | |
Advance from related party | | | 493 | | | | 121,694 | |
Total current liabilities | | | 2,612,036 | | | | 939,876 | |
Deferred underwriting fee payable | | | 8,750,000 | | | | 8,750,000 | |
Total liabilities | | | 11,362,036 | | | | 9,689,876 | |
Commitments and Contingencies | | | | | | | | |
Class A common stock subject to possible redemption, 23,762,298 and 24,011,445 shares at redemption value of approximately $10.00 per share as of December 31, 2020 and 2019, respectively | | | 237,622,980 | | | | 240,114,450 | |
Stockholders’ Equity | | | | | | | | |
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding | | | - | | | | - | |
Class A common stock, $0.0001 par value; 500,000,000 shares authorized; 1,237,702 and 988,555 shares issued and outstanding (excluding 23,762,298 and 24,011,445 shares subject to possible redemption) as of December 31, 2020 and 2019, respectively | | | 124 | | | | 99 | |
Class F common stock, $0.0001 par value; 25,000,000 shares authorized; 6,250,000 shares issued and outstanding as of December 31, 2020 and 2019 | | | 625 | | | | 625 | |
Additional paid-in capital | | | 4,748,125 | | | | 2,256,679 | |
Retained earnings | | | 251,130 | | | | 2,742,605 | |
Total stockholders’ equity | | | 5,000,004 | | | | 5,000,008 | |
Total liabilities and stockholders’ equity | | $ | 253,985,020 | | | $ | 254,804,334 | |
See
Consolidated Balance Sheets
(In thousands, except per share data)
| | | | | | | | | | | |
| As of |
| December 31, 2021 | | December 31, 2020 |
| | | |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 47,217 | | | $ | 18,098 | |
| Restricted cash, current | 100 | | | 1,368 | |
| Marketable securities, current | 7,226 | | | — | |
| Accounts receivable, net | 20,128 | | | 13,817 | |
| Deferred sales commissions, current | 2,691 | | | 1,521 | |
| Prepaid expenses and other current assets | 6,151 | | | 2,880 | |
| Total Current Assets | 83,513 | | | 37,684 | |
| Property and equipment, net | 3,010 | | | 3,505 | |
| Goodwill | 47,481 | | | 47,481 | |
| Intangible assets, net | 20,195 | | | 18,688 | |
| Operating lease right-of-use assets | 5,483 | | | 3,858 | |
| Deposits and other | 664 | | | 2,334 | |
| Marketable securities, net of current | 42,148 | | | — | |
| Deferred sales commissions, net of current | 6,747 | | | 3,208 | |
| | | |
| Restricted cash, net of current | — | | | 100 | |
| Total Assets | $ | 209,241 | | | $ | 116,858 | |
| | | |
| LIABILITIES & STOCKHOLDERS’ EQUITY | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 6,490 | | | $ | 3,521 | |
| Accrued expenses | 13,855 | | | 11,667 | |
| Deferred revenue, current | 1,307 | | | 1,140 | |
| Term loan, current | 561 | | | 1,440 | |
| Operating lease liabilities, current | 1,946 | | | 1,353 | |
| Finance lease liabilities, current | 26 | | | 392 | |
| Total current liabilities | 24,185 | | | 19,513 | |
| Long term liabilities: | | | |
| Line of credit | — | | | 4,672 | |
| Deferred revenue, net of current | 456 | | | 237 | |
| Term loan, net of current | 54,459 | | | 54,604 | |
| Operating lease liabilities, net of current | 4,046 | | | 3,088 | |
| Finance lease liabilities, net of current | 11 | | | 38 | |
| Deferred tax liability, net | 2 | | | 193 | |
| Warrant liability | 767 | | | — | |
| Other long-term liabilities | 337 | | | 372 | |
| Total liabilities | 84,263 | | | 82,717 | |
| | | |
| Commitments and contingencies (Note 11 and 23) | 0 | | 0 |
| Stockholders’ equity: | | | |
| Preferred stock, $0.0001 par value per share; 25,000 shares authorized, none issued and outstanding as of December 31, 2021; none authorized, issued and outstanding as of December 31, 2020. | — | | | — | |
| Common stock, $0.0001 par value per share; 500,000 shares authorized as of December 31, 2021 and 2020; 90,697 and 66,637 shares issued and outstanding as of December 31, 2021 and 2020, respectively. | 9 | | | 7 | |
| Additional paid-in capital | 253,468 | | | 59,168 | |
| | | | | | | | | | | |
| Accumulated other comprehensive loss | (477) | | | (206) | |
| Accumulated deficit | (128,022) | | | (24,828) | |
| Total stockholders’ equity | 124,978 | | | 34,141 | |
| Total liabilities & stockholders’ equity | $ | 209,241 | | | $ | 116,858 | |
The accompanying notes toare an integral part of these consolidated financial statements.
F-3
CRESCENT ACQUISITION CORP
Table of ContentsCONSOLIDATED STATEMENTS OF OPERATIONS
| | For the years ended December 31, | |
| | 2020 | | | 2019 | |
Revenues | | $ | - | | | $ | - | |
General and administrative expenses | | | (3,264,815 | ) | | | (526,625 | ) |
Loss from operations | | | (3,264,815 | ) | | | (526,625 | ) |
Interest income on Trust Account | | | 910,070 | | | | 4,472,458 | |
(Loss) income before income taxes | | | (2,354,745 | ) | | | 3,945,833 | |
Provision for income taxes | | | (136,730 | ) | | | (1,195,607 | ) |
Net (loss) income | | $ | (2,491,475 | ) | | $ | 2,750,226 | |
Net (loss) income per share information: | | | | | | | | |
Weighted average Class A common stock outstanding (basic and diluted) | | | 25,000,000 | | | | 25,000,000 | |
Net income per Class A common stock (basic and diluted) | | $ | 0.02 | | | $ | 0.12 | |
Weighted average Class F common stock outstanding (basic and diluted) | | | 6,250,000 | | | | 6,250,000 | |
Net loss per Class F common stock (basic and diluted) | | $ | (0.49 | ) | | $ | (0.05 | ) |
See
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | |
| | | For the years ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| Revenue | | | | | $ | 119,231 | | | $ | 102,545 | | | $ | 92,755 | |
| Cost of revenue | | | | | 60,639 | | | 39,476 | | | 38,253 | |
| Gross profit | | | | | 58,592 | | | 63,069 | | | 54,502 | |
| Operating expenses | | | | | | | | | |
| Sales and marketing expense | | | | | 62,333 | | | 29,023 | | | 24,423 | |
| General and administrative expense | | | | | 44,694 | | | 14,291 | | | 16,938 | |
| Research and development expense | | | | | 52,562 | | | 20,160 | | | 16,607 | |
| Total operating expenses | | | | | 159,589 | | | 63,474 | | | 57,968 | |
| Loss from operations | | | | | (100,997) | | | (405) | | | (3,466) | |
| Interest expense, net | | | | | 3,732 | | | 3,890 | | | 3,320 | |
| Change in the fair value of warrant liability | | | | | (1,242) | | | — | | | — | |
| Other expense (income), net | | | | | (459) | | | 154 | | | (22) | |
| Total other expense, net | | | | | 2,031 | | | 4,044 | | | 3,298 | |
| Pre-tax loss | | | | | (103,028) | | | (4,449) | | | (6,764) | |
| Provision for income taxes | | | | | 166 | | | 196 | | | 149 | |
| Net loss | | | | | $ | (103,194) | | | $ | (4,645) | | | $ | (6,913) | |
| Comprehensive loss | | | | | | | | | |
| Net loss | | | | | (103,194) | | | (4,645) | | | (6,913) | |
| Other comprehensive (loss) income, net of tax | | | | | | | | | |
| Foreign currency translation adjustment | | | | | (94) | | | 12 | | | (48) | |
| Unrealized loss on marketable securities | | | | | (177) | | | — | | | — | |
| Total other comprehensive (loss) income, net of tax | | | | | (271) | | | 12 | | | (48) | |
| Comprehensive loss | | | | | $ | (103,465) | | | $ | (4,633) | | | (6,961) | |
| | | | | | | | | |
| Net loss per share—basic and diluted | | | | | $ | (1.29) | | | $ | (0.07) | | | $ | (0.10) | |
| | | | | | | | | |
| | | | | | | | | |
| Weighted average shares outstanding—basic and diluted | | | | | 79,964 | | | 66,637 | | | 66,637 | |
| | | | | | | | | |
The accompanying notes toare an integral part of these consolidated financial statements.
F-4
Crescent Acquisition Corp
Table of ContentsCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| | Common Stock | | | Additional | | | Retained Earnings | | | Total | |
| | Class A | | | Class F | | | Paid-In | | | (Accumulated | | | Stockholders’ | |
| | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit) | | | Equity | |
Balance at December 31, 2018 | | | - | | | $ | - | | | | 7,187,500 | | | $ | 719 | | | $ | 24,281 | | | $ | (7,621 | ) | | $ | 17,379 | |
Sale of units in Initial Public Offering | | | 25,000,000 | | | | 2,500 | | | | - | | | | - | | | | 249,997,500 | | | | - | | | | 250,000,000 | |
Underwriters’ fees and offering expenses | | | - | | | | - | | | | - | | | | - | | | | (14,653,147 | ) | | | - | | | | (14,653,147 | ) |
Sale of Private Placement Warrants | | | - | | | | - | | | | - | | | | - | | | | 7,000,000 | | | | - | | | | 7,000,000 | |
Forfeited Class F common stock by Sponsor | | | - | | | | - | | | | (937,500 | ) | | | (94 | ) | | | 94 | | | | - | | | | - | |
Class A common stock subject to possible redemption | | | (24,011,445 | ) | | | (2,401 | ) | | | - | | | | - | | | | (240,112,049 | ) | | | - | | | | (240,114,450 | ) |
Net income | | | - | | | | - | | | | - | | | | - | | | | | | | | 2,750,226 | | | | 2,750,226 | |
Balance at December 31, 2019 | | | 988,555 | | | $ | 99 | | | | 6,250,000 | | | $ | 625 | | | $ | 2,256,679 | | | $ | 2,742,605 | | | $ | 5,000,008 | |
Class A common stock subject to possible redemption | | | 249,147 | | | | 25 | | | | - | | | | - | | | | 2,491,446 | | | | - | | | | 2,491,471 | |
Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (2,491,475 | ) | | | (2,491,475 | ) |
Balance at December 31, 2020 | | | 1,237,702 | | | $ | 124 | | | | 6,250,000 | | | $ | 625 | | | $ | 4,748,125 | | | $ | 251,130 | | | $ | 5,000,004 | |
See
Consolidated Statements of Stockholders’ Equity
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional
Paid-in
Capital | | Accumulated
Other
Comprehensive
Loss | | Accumulated
Deficit | | Total |
| Shares | | Amount | |
| Balance at December 31, 2018 | 1 | | $ | — | | | $ | 58,619 | | | $ | (170) | | | $ | (13,270) | | | $ | 45,179 | |
| Retroactive application of reverse recapitalization | 66,636 | | 7 | | | (7) | | | | | | | — | |
| Balance at December 31, 2018, as converted | 66,637 | | $ | 7 | | | $ | 58,612 | | | $ | (170) | | | $ | (13,270) | | | $ | 45,179 | |
| Foreign currency translation adjustment | — | | — | | | — | | | (48) | | | — | | | (48) | |
| | | | | | | | | | | |
| Net loss | — | | — | | | — | | | — | | | (6,913) | | | (6,913) | |
| Balance at December 31, 2019 | 66,637 | | $ | 7 | | | $ | 58,612 | | | $ | (218) | | | $ | (20,183) | | | $ | 38,218 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional
Paid-in
Capital | | Accumulated
Other
Comprehensive
Loss | | Accumulated
Deficit | | Total |
| Shares | | Amount | |
| Balance at December 31, 2019 | 1 | | $ | — | | | $ | 58,619 | | | $ | (218) | | | $ | (20,183) | | | $ | 38,218 | |
| Retroactive application of reverse recapitalization | 66,636 | | 7 | | | (7) | | | | | | | — | |
| Balance at December 31, 2019, as converted | 66,637 | | $ | 7 | | | $ | 58,612 | | | $ | (218) | | | $ | (20,183) | | | $ | 38,218 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Foreign currency translation adjustment | — | | — | | | — | | | 12 | | | — | | | 12 | |
| Stock-based compensation | — | | — | | | 556 | | | — | | | — | | | 556 | |
| Net loss | — | | — | | | — | | | — | | | (4,645) | | | (4,645) | |
| Balance at December 31, 2020 | 66,637 | | $ | 7 | | | $ | 59,168 | | | $ | (206) | | | $ | (24,828) | | | $ | 34,141 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional
Paid-in
Capital | | Accumulated
Other
Comprehensive
Loss | | Accumulated
Deficit | | Total |
| Shares | | Amount | |
| Balance at December 31, 2020 | 1 | | $ | — | | | $ | 59,175 | | | $ | (206) | | | $ | (24,828) | | | $ | 34,141 | |
| Retroactive application of reverse recapitalization | 66,636 | | 7 | | | (7) | | | | | | | — | |
| Balance at December 31, 2020, as converted | 66,637 | | $ | 7 | | | $ | 59,168 | | | $ | (206) | | | $ | (24,828) | | | $ | 34,141 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Merger and PIPE financing | 24,060 | | 2 | | | 190,395 | | | — | | | — | | | 190,397 | |
| Foreign currency translation adjustment | — | | — | | | — | | | (94) | | | — | | | (94) | |
| Unrealized loss on marketable securities | — | | — | | | — | | | (177) | | | — | | | (177) | |
| Stock-based compensation | — | | — | | | 3,905 | | | — | | | — | | | 3,905 | |
| Net loss | — | | — | | | — | | | — | | | (103,194) | | | (103,194) | |
| Balance at December 31, 2021 | 90,697 | | $ | 9 | | | $ | 253,468 | | | $ | (477) | | | $ | (128,022) | | | $ | 124,978 | |
The accompanying notes toare an integral part of these consolidated financial statements.
F-5
Crescent Acquisition Corp
Table of ContentsCONSOLIDATED STATEMENTS OF CASH FLOWS
| | For the years ended December 31, | |
| | 2020 | | | 2019 | |
Cash Flows from Operating Activities | | | | | | | | |
Net (loss) income | | $ | (2,491,475 | ) | | $ | 2,750,226 | |
Adjustments to reconcile net (loss) income to net cash used in operating activities: | | | | | | | | |
Interest earned on securities held in Trust Account | | | (910,070 | ) | | | (4,472,458 | ) |
Changes in operating assets and liabilities: | | | | | | | | |
Prepaid expenses | | | 81,322 | | | | (108,675 | ) |
Other assets | | | (23,000 | ) | | | - | |
Accounts payable and accrued expenses | | | 2,285,142 | | | | 83,660 | |
Accrued franchise and income taxes | | | (491,781 | ) | | | 491,781 | |
Net cash used in operating activities | | | (1,549,862 | ) | | | (1,255,466 | ) |
Cash Flows from Investing Activities | | | | | | | | |
Investment of cash in Trust Account | | | - | | | | (250,000,000 | ) |
Interest income released from Trust Account to pay taxes | | | 851,488 | | | | 903,000 | |
Net cash provided by (used in) investing activities | | | 851,488 | | | | (249,097,000 | ) |
Cash Flows from Financing Activities | | | | | | | | |
Proceeds from sale of units in Initial Public Offering | | | - | | | | 250,000,000 | |
Proceeds from sale of Private Placement Warrants | | | - | | | | 7,000,000 | |
Advances from related party | | | 169,257 | | | | 454,757 | |
Repayment of advances from related party | | | (290,457 | ) | | | (333,063 | ) |
Proceeds from note payable - related party | | | - | | | | 37,120 | |
Repayment of note payable - related party | | | - | | | | (300,000 | ) |
Payment of offering costs | | | - | | | | (5,425,044 | ) |
Net cash (used in) provided by financing activities | | | (121,200 | ) | | | 251,433,770 | |
Net (decrease) increase in cash | | | (819,574 | ) | | | 1,081,304 | |
Cash—beginning of the year | | | 1,126,200 | | | | 44,896 | |
Cash—end of the year | | $ | 306,626 | | | $ | 1,126,200 | |
Supplemental disclosure of non-cash activities: | | | | | | | | |
Deferred underwriting fee payable charged to additional paid-in capital in connection with the Initial Public Offering | | $ | - | | | $ | 8,750,000 | |
Deferred offering costs charged to additional paid-in capital upon completion of the Initial Public Offering | | $ | - | | | $ | 478,104 | |
Forfeiture of shares of Class F common stock | | $ | - | | | $ | 94 | |
Class A common stock subject to possible redemption | | $ | (2,491,471 | ) | | $ | 240,114,450 | |
Supplemental cash flow disclosure: | | | | | | | | |
Cash paid for taxes | | $ | 851,488 | | | $ | 903,000 | |
See
Consolidated Statements of Cash Flows
(Dollars in thousands)
| | | | | | | | | | | | | | | | | |
| For the years ended December 31, |
| 2021 | | 2020 | | 2019 |
| Operating activities: | | | | | |
| Net loss | $ | (103,194) | | | $ | (4,645) | | | $ | (6,913) | |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | | | | | |
| Depreciation and amortization | 2,106 | | | 1,876 | | | 1,559 | |
| Amortization of identified intangible assets | 4,473 | | | 4,189 | | | 3,335 | |
| Amortization of deferred loan origination costs | 129 | | | 143 | | | 154 | |
| Amortization of deferred sales commissions | 2,052 | | | 1,259 | | | 889 | |
| Non-cash lease expense | 1,622 | | | 1,241 | | | — | |
| Stock-based compensation expense | 3,905 | | | 556 | | | — | |
| Equity incentive bonus | 32,626 | | | — | | | — | |
| Bad debt expense | 195 | | | 636 | | | 340 | |
| Loss on disposition of asset | — | | | 54 | | | — | |
| Deferred income tax benefit | (191) | | | (127) | | | (288) | |
| | | | | |
| | | | | |
| | | | | |
| Change in the fair value of the warrant liability | (1,242) | | | — | | | — | |
| | | | | |
| Changes in assets and liabilities | | | | | |
| Accounts receivable | (5,810) | | | 1,934 | | | (4,439) | |
| Other assets | (3,297) | | | (2,296) | | | (379) | |
| Deferred sales commissions | (6,761) | | | (2,465) | | | (1,599) | |
| Accounts payable | 3,403 | | | 1,015 | | | 966 | |
| Accrued expenses | 2,199 | | | (1,666) | | | 5,510 | |
| Deferred revenue | 385 | | | 579 | | | 655 | |
| Operating lease liabilities | (1,664) | | | (1,281) | | | — | |
| Other long-term liabilities | 7 | | | 68 | | | 1,778 | |
| Net cash (used in) provided by operating activities | (69,057) | | | 1,070 | | | 1,568 | |
| Investing activities: | | | | | |
| Purchases of property and equipment | (1,582) | | | (753) | | | (1,140) | |
| Purchases of marketable securities | (50,797) | | | — | | | — | |
| Proceeds from sale of marketable securities | 1,250 | | | — | | | — | |
| Acquisition of businesses, net of cash acquired | — | | | (20) | | | (11,018) | |
| Proceeds from asset acquisition, net of cash paid | 1,326 | | | — | | | — | |
| Net cash used in investing activities | (49,803) | | | (773) | | | (12,158) | |
| Financing activities: | | | | | |
| Proceeds from Merger and PIPE financing, net of cash paid | 159,691 | | | — | | | — | |
| Proceeds from borrowing on term loans | — | | | — | | | 13,900 | |
| Repayment on loan payable | (1,816) | | | (1,152) | | | (844) | |
| Proceeds from drawdown on line of credit | — | | | 4,672 | | | — | |
| Repayment of drawdown on line of credit | (4,672) | | | — | | | — | |
| Debt issuance costs | (153) | | | — | | | (265) | |
| Payment of contingent consideration liability | (5,969) | | | — | | | — | |
| Repayments on finance lease obligations | (392) | | | (752) | | | (1,038) | |
| Net cash provided by financing activities | 146,689 | | | 2,768 | | | 11,753 | |
| Effect of foreign currency translation | (78) | | | (12) | | | (62) | |
| | | | | | | | | | | | | | | | | |
| Net increase in cash, cash equivalents and restricted cash | 27,751 | | | 3,053 | | | 1,101 | |
| Cash, cash equivalents, and restricted cash beginning of period | 19,566 | | | 16,513 | | | 15,412 | |
| Cash, cash equivalents, and restricted cash end of period | $ | 47,317 | | | $ | 19,566 | | | $ | 16,513 | |
| | | | | |
| | | | | | | | | | | | | | | | | |
| For the years ended December 31, |
| 2021 | | 2020 | | 2019 |
| Supplemental disclosure of cash flow information: | | | | | |
| Interest paid | $ | 3,484 | | | $ | 3,768 | | | $ | 3,329 | |
| Income taxes paid | 292 | | | 241 | | | 228 | |
| Supplemental schedule of noncash investing activities: | | | | | |
| Equipment and software acquired under finance lease obligations | $ | — | | | $ | 74 | | | $ | 403 | |
| Additional right-of-use assets | 3,246 | | | 997 | | | — | |
| | | | | |
| | | | | |
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets (dollars in thousands):
| | | | | | | | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 | | 2019 |
| Cash and cash equivalents | $ | 47,217 | | | $ | 18,098 | | | $ | 14,910 | |
| Restricted cash, current | 100 | | | 1,368 | | | 171 | |
| Restricted cash, net of current | — | | | 100 | | | 1,432 | |
| Total cash, cash equivalents and restricted cash | $ | 47,317 | | | $ | 19,566 | | | $ | 16,513 | |
The accompanying notes toare an integral part of these consolidated financial statements.
Table of ContentsF-6
Crescent Acquisition Corp
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
1.
Description of Organization
and Business OperationsOrganization and General
Crescent Acquisition Corp
LiveVox Holdings, Inc. (formerly known as Crescent Funding Inc.Acquisition Corp (“Crescent”)), and its subsidiaries (collectively, the “Company,” “LiveVox,” “we,” “us” or “our”) is engaged in the business of developing and marketing a cloud-hosted Contact Center as a Service (“CCaaS”) customer engagement platform that leverages microservice technology to rapidly innovate and scale digital engagement functionality that also incorporates the capabilities of fully integrated omnichannel customer connectivity, multichannel enabled Customer Relationship Management and Workforce Optimization applications. LiveVox’s customers are located primarily in the United States. LiveVox’s services are used to initiate and manage customer contact campaigns primarily for companies in the accounts receivable management, tele-sales and customer care industries.
On June 18, 2021 (the “Company”“Closing Date” or “Closing”) was incorporated in, Crescent, a Delaware on November 17, 2017. On October 30, 2018,corporation, consummated the Company changed its name to Crescent Acquisition Corp. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similarpreviously announced business combination with one or more businesses. The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).As of December 31, 2020, the Company had not yet commenced operations. All activity for the period from November 17, 2017 (inception) through December 31, 2020 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), and since the closing of the Initial Public Offering, a search for a business combination as described below. The Company will not generate any operating revenues until after completion of its initial business combination, at the earliest. The Company has generated non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering.
Sponsor and Financing
The Company’s sponsor is CFI Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on March 7, 2019. On March 12, 2019, the Company consummated the Initial Public Offering of 25,000,000 units (“Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $250,000,000 (see Note 3) and incurring offering costs of approximately $14,650,000, consisting principally of underwriter discounts of $13,750,000 (including $8,750,000 of which payment is deferred) and approximately $900,000 of other offering costs. The Company intends to finance its initial business combination with proceeds from the $250,000,000 Initial Public Offering of Units and a $7,000,000 private placement (see Note 4). Upon the closing of the Initial Public Offering and the private placement, $250,000,000 was placed in a trust account (the “Trust Account”).
Trust Account
Funds from the Initial Public Offering have been placed in the Trust Account. The proceeds held in the Trust Account will be invested only in U.S. Treasury obligations with a maturity of one hundred eighty (180) days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended (the “Investment Company Act”) and that invest only in direct U.S. Treasury obligations. Funds will remain in the Trust Account until the earlier of (i) the consummation of an initial business combination or (ii) the distribution of the Trust Account proceeds as described below. The remaining proceeds outside the Trust Account may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses.
The Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of interest earned on the funds held in the Trust Account that may be released to the Company to pay taxes, none of the funds held in the Trust Account will be released until the earlier of: (i) the completion of an initial business combination; (ii) the redemption of any Public Shares sold in the Initial Public Offering that have been properly submitted in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation to modify the substance or timing of its obligation to redeem 100% of such Public Shares if it does not complete an initial business combination by June 30, 2021 or (iii) the redemption of 100% of the Public Shares if the Company is unable to complete an initial business combination by June 30, 2021 (subject to the requirements of law). The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.
See Note 10 included in these consolidated financial statements for a subsequent event regarding an extension to complete an initial business combination.
F-7
Initial Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering, although substantially all of the net proceeds of the Initial Public Offering are intended to be generally applied toward consummating an initial business combination. An initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the value of the Trust Account (excluding any deferred underwriters fees and taxes payable on the income earned on the Trust Account) at the time of the agreement to enter into an initial business combination. Furthermore, there is no assurance that the Company will be able to successfully effect an initial business combination.
The Company, after signing a definitive agreement for an initial business combination, will either (i) seek stockholder approval of an initial business combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against an initial business combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of an initial business combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes, or (ii) provide stockholders with the opportunity to sell their Public Shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of an initial business combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes. The decision as to whether the Company will seek stockholder approval of an initial business combination or will allow stockholders to sell their Public Shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval, unless a vote is required by applicable law or under stock exchange listing requirements. If the Company seeks stockholder approval, it will complete its initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of an initial business combination. However, in no event will the Company redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. In such case, the Company would not proceed with the redemption of its Public Shares and the related initial business combination, and instead may search for an alternate initial business combination.
If the Company holds a stockholder vote or there is a tender offer for shares in connection with an initial business combination, a public stockholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of an initial business combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes. As a result, such shares of Class A common stock are recorded at redemption amount and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity.”
Pursuant to the Company’s amended and restated certificate of incorporation, if the Company is unable to complete an initial business combination by June 30, 2021, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter subject to lawfully available funds therefor, redeem the Public Shares, at a per share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. The Sponsor and the Company’s officers and directors will enter into a letter agreement with the Company, pursuant to which they will agree to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares (as defined below) held by them if the Company fails to complete an initial business combination by June 30, 2021. However, if the Sponsor or any of the Company’s directors, officers or affiliates acquires shares of Class A common stock in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete an initial business combination within the prescribed time period. See Note 10 included in these consolidated financial statements for a subsequent event regarding an extension to complete an initial business combination.
In the event of a liquidation, dissolution or winding up of the Company after an initial business combination, the Company’s stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. The Company’s stockholders have no preemptive or
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other subscription rights. There are no sinking fund provisions applicable to the common stock, except that the Company will provide its stockholders with the opportunity to redeem their Public Shares for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, upon the completion of an initial business combination, subject to the limitations described herein.
On June 24, 2020, the Company entered into an Agreement and Plan of Merger, dated January 13, 2021 (the “F45 Merger“Merger Agreement”), by and among the Company,Crescent, Function Acquisition I Corp, a Delaware corporation and a direct, wholly owned subsidiary of the Company,Crescent (“First Merger Sub”), Function Acquisition II LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of the Company, F45 Training Holdings Inc., a Delaware corporation (“F45”), and Shareholder Representative Services LLC, a Colorado limited liability company. On October 5, 2020, the Company and F45 entered into a Termination and Release Agreement, effective as of such date, pursuant to which the parties agreed to mutually terminate the F45 Merger Agreement.
On January 13, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Function Acquisition I Corp, a Delaware corporation and the Company’s direct, wholly owned subsidiary (“First Merger Sub”), Function Acquisition II LLC, a Delaware limited liability company and its direct, wholly owned subsidiaryCrescent (“Second Merger Sub”), LiveVox Holdings, Inc., a Delaware corporation (“Old LiveVox”), and GGC Services Holdco, Inc., a Delaware corporation, solely in its capacity as the representative, agent and attorney-in-fact of the stockholder of LiveVox (in such capacity, the “Stockholder Representative”) of LiveVox TopCo, LLC (“
LiveVox TopCo”), a Delaware limited liability company and the sole stockholder of Old LiveVox as of immediately prior to Closing (the “LiveVox Stockholder”). ThePursuant to the Merger Agreement, provides for, among other things, (i)a business combination between Crescent and Old LiveVox was effected through (a) the merger of First Merger Sub with and into Old LiveVox, with Old LiveVox continuing as the surviving corporation (the “Surviving Corporation”) and becoming its direct, wholly owned subsidiary as a consequence (the “First Merger”) and (ii)(b) immediately following the First Merger and as part of the same overall transaction as the First Merger, the merger of the Surviving CorporationOld LiveVox with and into Second Merger Sub, with Second Merger Sub continuing as the surviving entity which will be renamed such name as LiveVox shall designate no later than five business days prior to the closing of the transaction (the “Second Merger”, and together with the First Merger, the “Mergers” and, togethercollectively with the other transactions contemplated bydescribed in the Merger Agreement, the “Business Combination”“Merger”), in each case, in accordance with. On the termsClosing Date, Crescent changed its name to “LiveVox Holdings, Inc.” and subjectSecond Merger Sub changed its name to the conditions“LiveVox Intermediate LLC”. See Note 3 for further discussion of the Merger Agreement. Following. On June 22, 2021, the closingCompany’s ticker symbols on The Nasdaq Stock Market LLC (“Nasdaq”) for its Class A common stock, warrants to purchase Class A common stock and public units were changed to “LVOX”, “LVOXW” and “LVOXU”, respectively.
LiveVox, Inc. was a direct, wholly owned subsidiary of
the Business Combination, the Company will own, directly or indirectly, all the stock ofOld LiveVox
and its direct and indirect subsidiaries and LiveVox TopCo, LLC, a Delaware limited liability company and the sole stockholder of LiveVox as of immediately prior to the
effective timeMerger and is a wholly owned subsidiary of the
First Merger (theCompany after the Merger. LiveVox, Inc. was first incorporated in Delaware in 1998 under the name “Tools for Health” and in 2005 changed its name to “LiveVox,
Stockholder”) will hold a portionInc.” On March 21, 2014, LiveVox, Inc. and its subsidiaries were acquired by Old LiveVox. The principal United States operations of the
Company’s stock.Company are located in San Francisco, California; New York, New York; Columbus, Ohio and Atlanta, Georgia. The Company mailed to its shareholders of record as of January 22, 2021, has 4 main operating subsidiaries: LiveVox Colombia SAS which is wholly owned with an office located in Medellin, Colombia, LiveVox Solutions Private Limited with an office located in Bangalore, India, Speech IQ, LLC located in Columbus, Ohio, and Engage Holdings, LLC (d/b/a definitive proxy statement for a special meeting of shareholders to be held on February 17, 2021 (the “Special Meeting”BusinessPhone.com) (“BusinessPhone.com”) to approve an extension of time forlocated in Columbus, Ohio. Additionally, the Company to complete its initial business combination through June 30, 2021 (the “Extension Date”).has a wholly owned subsidiary, LiveVox International, Inc., that is incorporated in Delaware. The Charter ExtensionCompany and Trust Extension Proposals were approved, providing the Company’s shareholders with more time to evaluate its Business Combination.
In connection with the vote to approve the Charter ExtensionLiveVox International, Inc. own 99.99% and Trust Extension Proposals, the holders0.01%, respectively, of 12,238 Class A ordinary shares properly exercised their right to redeem their shares for cash at a redemption priceLiveVox Solutions Private Limited.
2. Summary of approximately $10.14 per share, for an aggregate redemption amountSignificant Accounting Policies
a) Basis of
$124,138. As such, only approximately 0.05%Presentation and Principles of
the Class A ordinary shares were redeemed and approximately 99.95% of the Class A ordinary shares remain outstanding. After the satisfaction of such redemptions, the balance in the Company’s trust account will be $253,467,308.Going Concern Consideration
Consolidation
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As of December 31, 2020, the Company had $306,626 available outside the Trust Account to fund its working capital requirements, $3,628,041 of investment income held in the Trust Account available to be released to pay for franchise and income taxes and working capital of $(2,255,057). Further, the Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans.Prior to the completion of the Company’s Initial Public Offering, the Company’s liquidity needs were satisfied through receipt of $25,000 from the sale of the Founder Shares (as defined below) to the Company’s Sponsor, $300,000 in a note payable and $118,323 in advances from an affiliate of the Sponsor. The Company fully repaid these borrowings and advances from the Sponsor and related parties.
In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the current lack of liquidity, mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements contained in this report do not include any adjustments that might
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result from the Company’s inability to continue as a going concern, should the Company be required to liquidate after June 30, 2021. See Note 10 included in these consolidated financial statements for a subsequent event regarding an extension to complete an initial business combination.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with United States generally accepted accounting principles in the United States (“U.S. GAAP”) and pursuant to theapplicable rules and regulations of the SEC. TheSecurities and Exchange Commission (“SEC”) regarding annual financial statements reflect all adjustmentsreporting. All intercompany transactions and reclassifications that,balances have been eliminated in consolidation.
As a result of the Merger completed on June 18, 2021, prior period share and per share amounts presented in the
opinion of management, are necessary for the fair presentation of the Company’s results of operations and financial condition as of and for the periods presented.Principles of Consolidation
Theaccompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Function Acquisition I Corp and Function Acquisition II LLC, since their formation. All material intercompany balances and transactionsthese related notes have been eliminated.
retroactively converted as shares reflecting the exchange ratio established in the Merger Agreement.
b) Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS ActAct”) exempts emerging growth companiescompany (“EGC”) from being required to comply with new or revised financial accounting standards until private companies (that
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
is, those that have not had a Securities Act
of 1933, as amended (“Securities Act”) registration statement declared effective or do not have a class of securities registered under the
Securities Exchange Act of 1934, as amended
or the(the “Exchange Act”) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging growth companiesnon-EGCs but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an
emerging growth company,EGC, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial
statementsstatement with another public company which is neither an
emerging growth companyEGC nor an
emerging growth companyEGC which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Net Income (Loss) Per Share
The Company
complies with accounting and disclosure requirementswill remain an EGC until the earlier of
FASB ASC Topic 260, “Earnings Per Share.” Net income per share is computed by dividing net income applicable to common stockholders by(1) the
weighted average number of shares of common stock outstanding for the period. The Company has not considered the effectlast day of the
warrants sold infiscal year (a) following the fifth anniversary of the Initial Public Offering
and Private Placement Warrants (as definedClosing Date, (b) in
Note 4)which the Company has total annual gross revenue of at least $1,070,000,000, or (c) in which the Company is deemed to
purchase an aggregatebe a large accelerated filer, which means the market value of
19,500,000 shares ofthe Company’s Class A common stock
inthat is held by non-affiliates exceeds $700,000,000 as of the
calculation of diluted earnings per share, since their inclusion would be anti-dilutive underprior fiscal year’s second fiscal quarter, and (2) the
treasury stock method. As a result, diluted earnings per share is the same as basic earnings per share for the periods presented.The Company’s accompanying consolidated statements of operations includes a presentation of income per share for common stock subject to redemption in a manner similar to the two-class method of income per share. For the years ended December 31, 2020 and 2019, net income per share, basic and diluted, for Class A common stock is calculated by dividing the investment income earneddate on the Trust Account of $910,070 and $4,472,458, respectively, net of applicable income and franchise taxes of $336,730 and $1,395,607, respectively, by the weighted average number of shares of Class A common stock outstanding of 25,000,000. Net loss per share, basic and diluted, for Class F common stock is calculated by dividing the net income, less income attributable to Class A common stock, by the weighted average number of shares of Class F common stock outstanding for the period.
Concentration of Credit Risk
Financial instruments that potentially subjectwhich the Company to concentration of credit risk consist of cash accountshas issued more than $1,000,000,000 in a financial institution which, at times, may exceednon-convertible debt during the federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
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Cash and cash equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of December 31, 2020 and 2019.
Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying consolidated balance sheets.
prior three-year period.
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires
the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
as ofat the date of the consolidated financial statements and the reported amounts of
incomerevenue and expenses during the reporting periods. Actual results could differ from those
estimates.Offering Costs
estimates, and such differences could be material to the Company’s consolidated financial position and results of operations, requiring adjustment to these balances in future periods. Significant items subject to such estimates and assumptions include, but are not limited to, the determination of the useful lives of long-lived assets, allowances for doubtful accounts, fair value of goodwill and long-lived assets, fair value of incentive awards, fair value of Warrants, establishing standalone selling price, valuation of deferred tax assets, income tax uncertainties and other contingencies, including the Company’s ability to exercise its right to repurchase incentive options from terminated employees.
d) Segment Information
The Company complies withhas determined that its Chief Executive Officer is its chief operating decision maker. The Company’s Chief Executive Officer reviews financial information presented on a consolidated basis for purposes of assessing performance and making decisions on how to allocate resources. Accordingly, the Company has determined that it operates in a single reportable segment.
e) Foreign Currency Translation
The financial position and results of the Company’s international subsidiaries are measured using the local currency as the functional currency. Revenue and expenses have been translated into U.S. dollars at average exchange rates prevailing during the periods. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of stockholders’ equity (accumulated other comprehensive loss), unless there is a sale or complete liquidation of the underlying foreign investments, or the adjustment is inconsequential.
f) Fair Value of Financial Instruments
Fair value is defined as the price that would be received from the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date. The Company utilizes a fair value hierarchy to classify fair value amounts of the Company’s assets and liabilities recognized or disclosed in the Company’s consolidated financial statements based on the lowest level of input that is significant to the fair value measurement. The levels of the hierarchy are described below:
•Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
•Level 2—Includes other inputs that are directly or indirectly observable in the marketplace.
•Level 3—Unobservable inputs that are supported by little or no market activity.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. Observable or market inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions based on the best information available. The Company recognizes transfers into and out of the levels as of the end of each reporting period. Refer to Note 21 for additional information regarding the fair value measurements.
g) Liquidity and Capital Resources
LiveVox’s consolidated financial statements have been prepared assuming the Company will continue as a going concern for the 12-month period from the date of issuance of the consolidated financial statements, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Historically, the Company’s main sources of liquidity were cash generated by operating cash flows and debt. For the years ended December 31, 2021, 2020 and 2019, the Company’s cash flow from operations was $(69.1) million, $1.1 million and $1.6 million, respectively. During the year ended December 31, 2021, the Company’s cash flows also include net cash proceeds of $157.6 million from the Merger and the related PIPE, net of transaction costs, which are available for general corporate purposes. The Company had restricted cash of $0.1 million as of December 31, 2021 related to the holdback amount for 1 acquisition the Company made in 2019, and $1.5 million in restricted cash as of December 31, 2020 related to the holdback amount for 2 acquisitions the Company made in 2019, included in the change in cash. The Company’s primary use of cash is for operating and administrative activities including employee-related expenses, and general, operating and overhead expenses. Future capital requirements will depend on many factors, including the Company’s customer growth rate, customer retention, timing and extent of FASB ASC 340-10-S99-1development efforts, the expansion of sales and SEC Staff Accounting Bulletin Topic 5A—“Expensesmarketing activities, the introduction of Offering.” Offering costs consistnew and enhanced services offerings, the continuing market acceptance of costs incurredthe Company’s services, effective integration of acquisition activities, and maintaining the Company’s bank credit facility. On March 17, 2020, as a precautionary measure to ensure financial flexibility and maintain liquidity in response to the COVID-19 pandemic, LiveVox drew down approximately $4.7 million under the revolving portion of the Credit Facility (as defined below), which was repaid in full by the Company in connection with formationthe Merger. Additionally, the duration and preparationextent of the impact from the COVID-19 pandemic continues to depend on future developments that cannot be accurately predicted at this time, such as the ongoing severity and transmission rate of the virus, the extent and effectiveness of vaccine programs and other containment actions, the duration of social distancing measures, office closure and other restrictions on businesses and society at large, supply chain constraints, inflationary pressures and the specific impact of these and other factors on LiveVox’s business, employees, customers and partners. While the COVID-19 pandemic has caused operational difficulties, and may continue to create challenges for the Initial Public Offering.Company’s performance, it has not, thus far, had a substantial net impact on the Company’s liquidity position.
The Company believes it has sufficient financial resources for at least the next 12 months from the date these consolidated financial statements are issued.
h) Debt Discount and Issuance Costs
The Company’s debt issuance costs and debt discount are recorded as a direct reduction of the carrying amount of the debt liability and are amortized to interest expense over the contractual term of the term loan.
i) Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents are stated at fair value. The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. The Company limits its credit risk associated with the cash and cash equivalents by placing investments with banks it believes are highly credit worthy. The Company has exposure to credit risk to the extent cash balances exceed amounts covered by Federal deposit insurance. At December 31, 2021 and 2020, the Company had no cash equivalents. Cash consists of bank deposits. Restricted cash consists entirely of amounts held back from stockholders of the Company’s acquired businesses for indemnification of outstanding liabilities. Such amounts are retained temporarily for a period of 10.5 months and then remitted to the applicable stockholders, net of fees paid for indemnification of liabilities. Since restricted cash amounts represent funds held for others, there is also a corresponding liability account. As of December 31, 2021, the Company has identified $0.1 million as restricted cash as
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
management’s intention is to use this cash for the specific purpose of fulfilling the obligations associated with the holdback amount from recent acquisitions. As of December 31, 2020, the Company had $1.5 million in restricted cash.
j) Marketable Securities
The Company invests in various marketable securities. As of December 31, 2021, the Company designated all of these marketable securities as debt securities and classified them as available-for-sale (“AFS”). No debt securities were classified as held-to-maturity or trading. The Company determines the appropriate classification of marketable securities at the time of purchase and re-evaluates such designation as of each balance sheet date.
Debt securities classified as AFS are reported at fair value with unrealized gains and losses, net of income taxes, as a separate component of other comprehensive income in the consolidated balance sheets until the securities are sold or there are indicators of impairment. Debt securities are classified as current or non-current, based on maturities and the Company’s expectations of sales and redemptions in the next 12 months.
The Company monitors the carrying value of debt securities compared to their fair value to determine whether an other-than-temporary impairment has occurred. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, credit quality and the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. If a decline in fair value of debt securities is determined to be other-than-temporary, an impairment charge related to that specific investment is recorded in the consolidated statements of operations and comprehensive loss.
Please refer to Note 6 for additional information relating to marketable securities.
k) Accounts Receivable
Trade accounts receivable are stated net of any write-offs and the allowance for doubtful accounts, at the amount the Company expects to collect. The Company performs ongoing credit evaluations of its customers and generally does not require collateral unless a customer has previously defaulted. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: aging of the account receivable, customer creditworthiness, past transaction history with the customer, current economic and industry trends, and changes in customer payment trends. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. At December 31, 2021, 2020 and 2019, the allowance for doubtful accounts was $1.3 million, $1.3 million and $1.0 million, respectively. Accounts receivable are charged off against the allowance for doubtful accounts after all means of collection have been exhausted and the potential for recovery is considered remote. Recoveries of accounts receivable previously written off are recorded as income when received. The accounts receivable recoveries during the years ended December 31, 2021, 2020 and 2019 were immaterial. The bad debt expense recorded for the years ended December 31, 2021, 2020 and 2019 was $0.2 million, $0.6 million and $0.3 million, respectively. The accounts written off for the years ended December 31, 2021, 2020 and 2019 was $0.2 million, $0.3 million and $0.3 million, respectively.
l) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs, including planned major maintenance activities, are charged to expense as incurred. When assets are retired or disposed, the asset’s original cost and related accumulated depreciation are eliminated from the accounts and any gain or loss is reflected in the consolidated statements of operations and comprehensive loss. Amortization expense on capitalized software is included in depreciation expense. Depreciation of leasehold improvements is recorded over the shorter of the estimated useful life of the leasehold improvement or lease terms that are reasonably assured.
Depreciation of property and equipment is provided using the straight-line method based on the following estimated useful lives:
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
| | | | | |
| Years |
| Computer equipment | 3 - 5 |
| Computer software | 3 |
| Furniture and fixtures | 5 - 10 |
| Leasehold improvements | 5 |
| Website development | 2 |
m) Identified Intangible Assets
On March 21, 2014, LiveVox, Inc. and subsidiaries were acquired by LiveVox Holdings, Inc. On October 16, 2019, the Company acquired the rights to certain assets of Teckst Inc. On December 16, 2019, the Company acquired the rights to Speech IQ, LLC. On February 5, 2021, the Company completed its asset acquisition of BusinessPhone. The acquisitions resulted in identified marketing-based, technology-based, customer-based, trademark-based, and workforce-based intangible assets. The fair value of the identified assets was determined as of the date of the acquisition by management with the assistance of an independent valuation firm. The identified intangible assets are being amortized using the straight-line method based on the following estimated useful lives:
| | | | | |
| Years |
| Marketing-based | 7 |
| Technology-based | 4 - 10 |
| Customer-based | 7 - 16 |
| Trademark-based | 4 |
| Workforce-based | 10 |
n) Goodwill
Goodwill represents the excess of the purchase price of acquired business over the fair value of the underlying net tangible and intangible assets. Through the year ended December 31, 2019, the Company performed its annual impairment review of goodwill on December 31, and when a triggering event occurs between annual impairment tests. In anticipation of the reporting requirements in connection with being a public company, the Company changed the date of its annual goodwill impairment test to October 1, effective for the year 2020.
During the years ended December 31, 2021, 2020 and 2019, no triggering events have occurred that would require an impairment review of goodwill outside of the required annual impairment review. Refer to Note 8 for more information.
In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine if it is more likely than not that the fair value of the Company’s single reporting unit is less than its carrying amount, including goodwill. In the fourth quarter of 2021, the Company elected to bypass the qualitative assessment and proceed directly to the quantitative impairment test in accordance with Accounting Standards Codification (“ASC”) 350-20-35, as amended by Accounting Standards Update (“ASU”) 2017-04, to determine if the fair value of the reporting unit exceeds its carrying amount. If the fair value is determined to be less than the carrying value, an impairment charge is recorded for the amount by which the reporting unit’s carrying amount exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. No impairment charges were recorded during the years ended December 31, 2021, 2020 and 2019.
o) Impairment of Long-Lived Assets
Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset and long-lived assets to be disposed of are reported at the lower of the carrying amount or fair value. No impairment loss was recognized during the years ended December 31, 2021, 2020 and 2019.
p) Amounts Due to Related Parties
In the ordinary course of business, the Company has and expects to continue to have transactions with its stockholders and affiliates. Refer to Note 13 for more information.
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
q) Concentration of Risk
Concentration of Customer and Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities and accounts receivable. Risks associated with cash and cash equivalents and marketable securities are mitigated using what the Company considers creditworthy institutions. The Company performs ongoing credit evaluations of its customers’ financial condition. Substantially all of the Company’s assets are in the United States.
As of December 31, 2021 and 2020, no single issuer represented more than 10% of the Company’s marketable securities.
The Company’s customers are primarily in the receivables management, tele-sales and customer care industries. During years ended December 31, 2021, 2020 and 2019, substantially all the Company’s revenue was generated in the United States. For the years ended December 31, 2021, 2020 and 2019, the Company did not have any customers that individually represented 10% or more of the Company’s total revenue or whose accounts receivable balance at December 31, 2021 and 2020 individually represented 10% or more of the Company’s total accounts receivable.
Concentration of Supplier Risk
The Company relies on third parties for telecommunication, bandwidth, and co-location services that are included in cost of revenue.
As of December 31, 2021, one vendor accounted for approximately 43% of the Company’s total accounts payable. No other single vendor exceeded 10% of the Company’s accounts payable at December 31, 2021. At December 31, 2020, two vendors accounted for approximately 55% of the Company’s accounts payable. No other single vendor exceeded 10% of the Company’s accounts payable at December 31, 2020. The Company believes there could be a material impact on future operating results should a relationship with an existing supplier cease.
r) Revenue Recognition
The Company recognizes revenue in accordance with U.S. GAAP, pursuant to ASC 606, Revenue from Contracts with Customers.
The Company derives substantially all of its revenue by providing cloud-based contact center voice products under a usage-based model, with prices calculated on a per-call, per-seat, or, more typically, a per-minute basis and contracted minimum usage in accordance with the terms of the underlying agreements. Other immaterial ancillary revenue is derived from call recording, local caller identification packages, performance/speech analytics, text messaging services and professional services billed monthly on primarily usage-based fees and, to a lesser extent, fixed fees. Revenue is recognized when control of these services is transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those services excluding amounts collected on behalf of third parties such as sales taxes, which are collected on behalf of and remitted to governmental authorities based on local tax law.
The Company determines revenue recognition through the following steps:
a.Identification of the contract, or contracts, with a customer;
b.Identification of the performance obligations in the contract;
c.Determination of the transaction price;
d.Allocation of the transaction price to the performance obligations in the contract; and
e.Recognition of revenue when, or as, the performance obligations are satisfied.
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Notes to the Consolidated Financial Statements
The Company enters into contracts that can include various combinations of services, each of which are distinct and accounted for as separate performance obligations. The Company’s cloud-based contact center solutions typically include a promise to provide continuous access to its hosted technology platform solutions through one of its data centers. Arrangements with customers do not provide the customer with the right to take possession of the Company’s software platform at any time. LiveVox’s performance obligations are satisfied over time as the customer simultaneously receives and consumes the benefits and the Company performs its services. The Company’s contracts typically range from one to three year agreements with payment terms of net 10-60 days. As the services provided by the Company are generally billed monthly there is not a significant financing component in the Company’s arrangements.
The Company’s arrangements typically include monthly minimum usage commitments and specify the rate at which the customer must pay for actual usage above the monthly minimum. Additional usage in excess of contractual minimum commitments is deemed to be specific to the month that the usage occurs, since the minimum usage commitments reset at the beginning of each month. The Company has determined these arrangements meet the variable consideration allocation exception and therefore, it recognizes contractual monthly commitments and any overages as revenue in the month they are earned.
The Company has service-level agreements with customers warranting defined levels of uptime reliability and performance. Customers may receive credits or refunds if the Company fails to meet such levels. If the services do not meet certain criteria, fees are subject to adjustment or refund representing a form of variable consideration. The Company records reductions to revenue for these estimated customer credits at the time the related revenue is recognized. These customer credits are estimated based on current and historical customer trends, and communications with its customers. Such customer credits have not been significant to date.
For contracts with multiple performance obligations, the Company allocates the contract price to each performance obligation based on its relative standalone selling price (“SSP”). The Company generally determines SSP based on the prices charged to customers. In instances where SSP is not directly observable, such as when the Company does not sell the service separately, the SSP is determined using information that generally includes market conditions or other observable inputs.
Professional services for configuration, system integration, optimization or education are billed on a fixed-price or time and material basis and are performed by the Company directly or, alternatively, customers may also choose to perform these services themselves or engage their own third-party service providers. Professional services revenue, which represents approximately 2% of revenue, is recognized over time as the services are rendered.
Deferred revenue represents billings or payments received in advance of revenue recognition and is recognized upon transfer of control. Balances consist primarily of annual or multi-year minimum usage agreements not yet provided as of the balance sheet date. Deferred revenue that will be recognized during the succeeding twelve-month period is recorded as deferred revenue, current in the consolidated balance sheets, with the remainder recorded as deferred revenue, net of current in the Company’s consolidated balance sheets.
s) Costs to Obtain Customer Contracts (Deferred Sales Commissions)
Sales commissions are paid for initial contracts and expansions of existing customer contracts. Sales commissions and related expenses are considered incremental and recoverable costs of acquiring customer contracts. These costs together withare capitalized and amortized on a straight-line basis over the deferred underwriter fee,anticipated period of benefit, which the Company has estimated to be five years. The Company determined the period of benefit by taking into consideration the length of the Company’s customer contracts, the customer attrition rate, the life of the technology provided and other factors. Amortization expense is recorded in sales and marketing expense within the Company’s consolidated statements of operations and comprehensive loss. Amortization expense for the years ended December 31, 2021, 2020 and 2019 was approximately $2.1 million, $1.3 million and $0.9 million, respectively. No impairment loss was recognized during the years ended December 31, 2021, 2020 and 2019.
t) Advertising
The Company expenses non-direct response advertising costs as they are incurred. There were no advertising costs capitalized during the years ended December 31, 2021, 2020 and 2019. For the years ended December 31, 2021, 2020
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Notes to the Consolidated Financial Statements
and 2019, advertising expense was approximately $1.2 million, $0.6 million and $0.4 million, respectively. Advertising expense is included under sales and marketing expenses in the accompanying consolidated statements of operations and comprehensive loss.
u) Research and Development Costs
Research and development costs not related to the development of internal use software are charged to
additional paid-in capital upon completion of the Initial Public Offering.Income Taxes
operations as incurred. Research and development expenses primarily include payroll and employee benefits, consulting services, travel, and software and support costs.
v) Software Development Costs
The Company followscapitalizes costs of materials, consultants, payroll, and payroll-related costs of employees incurred in developing internal-use software after certain capitalization criteria are met and includes these costs in the computer software. Refer to Note 7 for additional information. Software development costs are expensed as incurred until preliminary development efforts are successfully completed, management has authorized and committed project funding, it is probable that the project will be completed, and the software will be used as intended. To date, all software development costs have been charged to research and development expense in the accompanying consolidated statements of operations and comprehensive loss. There were no capitalized software development costs related to internal-use software during the years ended December 31, 2021, 2020 and 2019.
w) Income Taxes
Deferred Taxes
The Company accounts for income taxes using the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.”approach. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable toarising from the temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements, carryingas well as from net operating loss and tax credit carryforwards. Deferred tax amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measureddetermined by using enactedthe tax rates expected to apply to taxable incomebe in effect when the years in which those temporary differencestaxes will be paid or refunds received, as provided for under currently enacted tax law. A valuation allowance is provided for deferred tax assets that, based on available evidence, are not expected to be recoveredrealized.
Enactment of the Tax Cuts and Jobs Act in 2017 subjects a U.S. shareholder to current tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. Under U.S. GAAP, an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or settled.provide for the tax expense related to GILTI resulting from those items in the year of the GILTI inclusion (i.e., as a period expense). The effectCompany has elected to recognize the tax on deferred tax assets and liabilities ofGILTI as a change in tax rates is recognized in incomeperiod expense in the period of inclusion. As such, no deferred taxes are recorded on the Company’s temporary differences that includedmight reverse as GILTI in future years.
Uncertain Tax Positions
The Company recognizes the
enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurementeffect of income tax positions taken or expected to be taken in a tax return. Foronly if those benefits to be recognized, a tax position must bepositions are more likely than not to be sustained upon examination by taxing authorities.in a court of last resort. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company does not believe its consolidated financial statements include any uncertain tax positions. It is the Company’s policy to recognize interest and penalties accrued on any unrecognized tax benefit as a component of income tax expense.
x) Employee and Non-Employee Incentive Plans
Value Creation Incentive Plan and Option-Based Incentive Plan
During 2014, the Company established 2 bonus incentive plans, the Value Creation Incentive Plan (“VCIP”) and the Option-Based Incentive Plan (“OBIP”), pursuant to which eligible participants receive a predetermined award based on the Company’s equity value at the time of a liquidity event, which includes a transaction where the Company merges
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Notes to the Consolidated Financial Statements
with a special purpose acquisition company (“SPAC”). The VCIP was structured as a percentage of shareholder returns following a liquidity event for which 15% was allocated for distribution and the Company had granted 9.3% as of December 31, 2021, of which 9.3% fully vested following the Merger. As of December 31, 2020, the Company had granted 9.3%, of which 5.7% had met the time-based vesting condition. The OBIP had 2.0 million potential award units and 2019, there were no unrecognized tax benefits. Thethe Company recognizes accrued interest and penalties related to unrecognized tax benefitshad granted 1.8 million award units as income tax expense.of December 31, 2021, of which 1.8 million fully vested following the Merger. As of December 31, 2020, the Company had granted 1.8 million award units of which 1.5 million had met the time-based vesting condition. Awards under the VCIP and OBIP generally time vest over five years and performance vest upon certain liquidity event conditions, subject to continued service through the vesting dates. The Company also has an option to repurchase both awards at an amount deemed to be fair value for which the time-based vesting period has been completed, contingent on the employee’s termination of service. Because vesting and payment under the VCIP and OBIP was contingent upon a liquidity event, the Company did not record compensation expense until a liquidity event occurred or unless and until they are repurchased, in which case the Company will record compensation expense equal to the vested or repurchase amount.
During 2019,
no amountsthe LiveVox board of directors approved a one-time management liquidity program, in which certain executives with time-based vested VCIP awards were
accruedliquidated and paid out in cash. The Company has recorded this event as compensation expense within the Company’s consolidated financial statements within cost of revenue and operating expenses for the
paymentyear ended December 31, 2019 in the amount of
interest$8.7 million, of which $4.3 million is recorded in accrued bonuses and
penalties. The Company is currently not aware of any issues under review that could resultwas paid out in
significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.As of December 31,fiscal 2020.
During 2020 and 2019, the Company
had deferred tax assetsrepurchased in cash a portion of
$885,206time-based vested OBIPs and
$70,106, respectively, which had a full valuation allowance recorded against them.The Company’s current taxable income primarily consists of interest income on the Trust Account. The Company’s general and administrative costs are generally consideredVCIPs from terminated employees at an amount deemed to be start-up costsfair value. These transactions were $0.8 million and are not currently deductible. During$0.1 million for the years ended December 31, 2020 and 2019, respectively, and were recorded as compensation expense within the Company’s consolidated financial statements within cost of revenue and operating expenses.
As of December 31, 2020, the total value of the incentive plans was $21.2 million, of which $13.7 million had met the time-based vesting condition. The liability accrued for the 2 plans was $0.3 million as of December 31, 2020 for the awards deemed probable of repurchase.
As discussed in Note 1, on June 18, 2021, the Company consummated the previously announced Merger between Old LiveVox and Crescent, as a result of which all outstanding VCIP and OBIP awards became fully vested. As of December 31, 2021, the total value of the incentive plans was $68.7 million, of which $68.7 million were fully vested and paid to the plan participants in a combination of cash and equity. For the year ended December 31, 2021, the Company recorded income taxcompensation expense in the amount of $136,730$68.4 million for this event within cost of revenue and $1,195,607, respectively, primarilyoperating expenses in the consolidated statements of operations and comprehensive loss.
Management Incentive Units
During 2019, LiveVox TopCo established a Management Incentive Unit program whereby the LiveVox TopCo board of directors has the power and discretion to approve the issuance of Class B Units that represent management incentive units (“Management Incentive Units”, “MIUs” or “Units”) to any manager, director, employee, officer or consultant of the Company or its subsidiaries. Vesting begins on the date of issuance, and the MIUs vest ratably over five years with 20% of the MIUs vesting on each anniversary of a specified vesting commencement date, subject to the grantee’s continued employment with the Company on the applicable vesting date. Vesting of the MIUs will accelerate upon consummation of a “sale of the company”, which is defined by the LiveVox TopCo limited liability company agreement as (i) the sale or transfer of all or substantially all of the assets of LiveVox TopCo on a consolidated basis or (ii) any direct or indirect sale or transfer of a majority of interests in LiveVox TopCo and its subsidiaries on a consolidated basis, as a result of any party other than certain affiliates of Golden Gate Capital obtaining voting power to elect the majority of LiveVox TopCo’s governing body. Since the Merger does not meet the limited liability company agreement’s definition of a sale, it did not cause acceleration in vesting of the unvested Units and the Units will continue to vest based on the service condition.
If a MIU holder terminates employment, any vested MIUs as of the termination date will be subject to a repurchase option held by LiveVox TopCo or funds affiliated with Golden Gate Capital. The option to repurchase can be exercised for one year beginning on the later of (a) the MIU holder’s termination date and (b) the 181st day following the initial acquisition of the MIUs by the MIU holder. The repurchased MIUs will be valued at fair market value as of the date that
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
is 30 days prior to the date of the repurchase. However, if the fair market value is less than or equal to the participation threshold of the vested MIUs, the MIUs may be repurchased for no consideration.
On December 19, 2019, 3,518,096 Class B Units were issued to 12 recipients. The Company records stock-based compensation expense for the issued and outstanding Units based on the service condition reduced for actual forfeited Units. The Company elects to recognize stock-based compensation expense on a straight-line basis over the requisite service period of five years. Stock-based compensation for MIUs is measured based on the grant date fair value of the award estimated by using a Monte Carlo simulation. Monte Carlo simulation is a widely accepted approach for financial instruments with path dependencies. See Note 17 for further detail about stock-based compensation expenses related to interest income earnedMIUs.
2021 Equity Incentive Plan
On June 16, 2021, the stockholders of the Company approved the 2021 Equity Incentive Plan (the “2021 Plan”), which became effective upon the closing of the Merger on June 18, 2021. The initial number of shares reserved for issuance under the 2021 Plan is 9,770,000. The number of shares of Company common stock reserved for issuance under the 2021 Plan will automatically increase on January 1 of each year during the term of the 2021 Plan, beginning on January 1, 2022, by 5% of the total number of shares of Company common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the board of directors. The Company grants Restricted Stock Units (“RSUs”) and Performance-based Restricted Stock Units (“PSUs”) awards to employees, executive officers, directors, and consultants of the Company.
On November 11, 2021, the Company entered into letter agreements (the “Acceleration Letters”) with each of Louis Summe, Chief Executive Officer and Director, Gregory Clevenger, Chief Financial Officer and Executive Vice President, and Alexis Waadt, Vice President of Investor Relations, which amend the RSU Award Agreements entered into on August 18, 2021 to include a double trigger provision relating to the accelerated vesting of unvested RSUs in the event of a change in control and in the event the applicable executive’s employment is terminated within six months after the change in control by the Company without Cause or by such executive for Good Reason (each as defined in the Acceleration Letters). The addition of a double trigger accelerated vesting provision would not change the fair value of the applicable executives’ RSU awards on the
Trust Account. For the years ended December 31, 2020 and 2019, the Company’s effective tax rate was (5.81)% and 30.30%, respectively, which differs from the expected income tax rate duemodification date or result in incremental compensation cost to
the start-up costs which are not currently deductible.Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemptionrecognize.
Awards settled in
accordance with the guidance in FASB ASC 480. Shares of Class A common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that are eitherF-11
within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, shares of Class A common stock are classified as stockholders’ equity.equity, and awards settled in cash are classified as liabilities. The Company’s Class A common stock features certain redemption rightsliability versus equity treatment will be reassessed on a quarterly basis for any changes that have occurred during the period that may result in a reclassification. Equity-classified awards are considered to be outsidegenerally recognized as stock-based compensation expense over an employee’s requisite service period or a nonemployee’s vesting period on the basis of the Company’s controlgrant date fair value. Liability-classified awards are initially based on the grant date fair value and subjectsubsequently remeasured at each reporting date to occurrence of uncertain future events. The Company recognizes changes in redemption value immediately as they occur and will adjust the carrying value ofthen-current fair value. Ultimately, the security to equal the redemption valuetotal stock-based compensation expense recognized at the end of each reporting period. Increases or decreasesthe vesting period equals the amount of cash paid to settle an award.
RSUs are subject only to service conditions and typically vest over an employee’s requisite service period ranging from three to six years based on the employee’s role in the carrying amountCompany or a nonemployee’s vesting period of redeemable Class A common stock will be affectedfour years. The Company elects to recognize stock-based compensation expense of RSUs subject to graded service vesting on a straight-line basis over the vesting period for the entire award. The choice of straight-line method is applied to both equity-classified and liability-classified RSUs subject to graded service vesting. The Company recognizes stock-based compensation expense of RSUs subject to cliff service vesting on a straight-line basis over the entire vesting period. If the stock-based compensation expense calculated by charges against additional paid-in capital. Accordingly,an application of the straight-line method as of December 31, 2020 and 2019, 23,762,298 and 24,011,445, respectively,any date is less than the portion of the 25,000,000 Public Shares were classified outsidegrant date fair value that is vested at that date, it is adjusted for the difference between two amounts. Stock-based compensation expense of permanent equity.Recent Accounting Pronouncements
RSUs issued to nonemployees is recognized as the goods are received or services are performed. The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s accompanying consolidated financial statements.
3. Initial Public Offering
Pursuant to the Initial Public Offering, the Company sold 25,000,000 Units at a price of $10.00 per Unit. The Sponsor purchased an aggregate of 7,000,000 warrants at a price of $1.00 per warrant in a private placement that closed simultaneously with the Initial Public Offering.
Each Unit consists of one sharefair value of the Company’s Class A common stock, $0.0001 par value, and one half of one warrant (each, a “Warrant” and, collectively,RSUs is estimated by using the “Warrants”). Each Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuances of equity or equity-linked securities). No fractional warrants will be issued upon separation of the Units and only whole Warrants will trade. Each Warrant will become exercisable on the later of 30 days after the completion of the Company’s initial business combination or 12 months from the closing of the Initial Public Offering and will expire five years after the completion of the Company’s initial business combination or earlier upon redemption or liquidation. Once the Warrants become exercisable, the Company may redeem the outstanding Warrants in whole and not in part at a price of $0.01 per Warrant upon a minimum of 30 days’ prior written notice of redemption, if and only if the last sale price of the Company’s Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period endingon Nasdaq on the third trading day priormeasurement date.
PSUs are granted to certain key employees and vest either based on the date on which the Company sent the noticeachievement of redemption to the Warrant holders.The Company granted the underwriters a 45-day option to purchase up to 3,750,000 additional Units to cover any over-allotments at the Initial Public Offering price less the underwriting discounts and commissions. The Units that would be issued in connection with the over-allotment option would be identical to the Units issued in the Initial Public Offering. In April 2019, the Underwriters’ over-allotment option expired unexercised by the underwriters.
The Company paid an underwriting discount of 2.0% of the gross offering proceeds to the underwriters at the closing of the Initial Public Offering ($5,000,000)predetermined market conditions (e.g., with an additional fee (the “Deferred Underwriting Fee”) of 3.5% of the gross offering proceeds ($8,750,000) payable upon the Company’s completionvolume-weighted average share price during the specified period achieving a specified level), or based on both service and market conditions. The Company records stock-based compensation expense for the issued and outstanding PSUs over an employee’s requisite service period, which is the longer of an initial business combination.the time-vesting period of four to six years or the derived service period inferred from the valuation model. The Deferred Underwriting Fee will become payableCompany recognizes stock-based compensation expense of PSUs subject to graded market vesting from the service inception date to the underwriters fromvesting date for each tranche separately, as if the amounts heldaward was in substance multiple awards (i.e., the accelerated attribution method). stock-based compensation expense of equity-classified PSUs is recognized regardless of whether the market condition is
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Notes to the Consolidated Financial Statements
satisfied. stock-based compensation expense of liability-classified PSUs until settlement is based on the change in fair value pro-rated for the portion of the requisite service period rendered. The total stock-based compensation expense recognized at the end of the requisite service period equals the amount of cash paid to settle an award if the market condition is met. However, if the market condition is not satisfied, the fair value on the settlement date will be zero; therefore, on a cumulative basis, the award has not been earned and no stock-based compensation expense would be recognized. The fair value of the PSUs at each measurement date is estimated by using a Monte Carlo simulation.
Except for the double trigger accelerated vesting provision included in the
Trust Account solely inAcceleration Letters, if a grantee incurs a termination of continuous service for any reason, any unvested awards will be forfeited without consideration by the
event thegrantee. The Company
completes its initial business combination.4. Related Party Transactions
Founder Shares
On November 29, 2017, the Sponsor purchased 8,625,000 shareselects to account for forfeitures as they occur, rather than making estimates of Class F common stock (“Founder Shares”) for $25,000. In January 2018, the Sponsor surrendered 1,437,500 Founder Sharesfuture forfeitures. Outstanding RSU and PSU awards have dividend equivalent rights that entitle holders of such outstanding awards to the Company for no consideration, resulting in an aggregate of 7,187,500 Founder Shares outstanding. As used herein, unless the context otherwise requires, Founder Shares shall be deemed to include the sharessame dividend value per share as holders of Class A common stock issuable upon conversion thereof. The Founder Shares are identical to the Class A common stock included in the Units sold in the Initial Public Offering except that the Founder Shares are shares of Class F common stock which automatically convert into shares of Class A common stock at the time of the Company’s initial business combination andstock. Dividend equivalent rights are subject to certain transfer restrictions,the same vesting and other terms and conditions as describedthe corresponding unvested awards. Dividend equivalent rights are accumulated and paid in moreadditional shares when the underlying shares vest.
See Note 17 for further detail below. Upabout stock-based compensation expenses related to 937,500 Founder Shares were subjectRSUs and PSUs under the 2021 Plan.
y) Acquisitions
The Company evaluates acquisitions of assets and other similar transactions to
forfeiture toassess whether or not the
extent that the over-allotment option was not exercised by the underwriters within 45 days from the effective date of the registration statement, March 7, 2019. In April 2019, the Underwriters’ over-allotment option expired andtransaction should be accounted for as a
result the Sponsor forfeited 937,500 shares of Class F common stock, resulting in an aggregate of 6,250,000 Founder Shares outstanding as of December 31, 2020 and 2019.
The holders of the Founder Shares have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of an initial business combination or (B) subsequentasset acquisition by first applying a screen test to an initial business combination, (x)determine if the last sale pricesubstantially all of the Company’s Class A common stock equalsfair value of the gross assets acquired is concentrated in a single identifiable asset or exceeds $12.00 per share (as adjustedgroup of similar identifiable assets. If the screen is met, the transaction is accounted for stock splits, stock dividends, reorganizations, recapitalizationsas an asset acquisition. If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and processes that have the like) for any 20 trading days within any 30-trading day period commencing at least 150 days afterability to create outputs which would meet the definition of a business. Significant judgment is required in the application of the screen test to determine whether an initialacquisition is a business combination or (y)an acquisition of assets.
z) Public and Forward Purchase Warrants
Prior to the
date on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.Private Placement Warrants
The Sponsor purchased an aggregate ofMerger, Crescent issued 7,000,000 private placement warrants (“Private Warrants”) and 12,499,995 public warrants (“Public Warrants”) at a pricethe close of $1.00 per warrantCrescent’s initial public offering (“IPO”) on March 7, 2019. As an incentive for an aggregate purchase priceLiveVox to enter into the Merger Agreement, pursuant to the Sponsor Support Agreement dated January 13, 2021, Crescent’s sponsor agreed to the cancellation of $7,000,000 in a private placement that occurred simultaneously with the closingall of the InitialPrivate Warrants prior to the Closing Date. In addition, 833,333 Forward Purchase Warrants (“Forward Purchase Warrants”) were issued pursuant to the Forward Purchase Agreement dated January 13, 2021 between Crescent and Old LiveVox. The 12,499,995 Public Offering (the “Private Placement Warrants”Warrants and the 833,333 Forward Purchase Warrants (collectively, the “Warrants”). remain outstanding after the Merger. Each Private Placement Warrant is exercisable for one whole warrant entitles the holder to purchase 1 share of the Company’s Class A common stock at a price of $11.50 per share, (subjectsubject to adjustment for stock splits, stock dividends, reorganizations, recapitalizationsadjustments. The Warrants are exercisable at any time prior to June 18, 2026.
The Forward Purchase Warrants and the like and for certain issuancesshares of equity or equity-linked securities). $5,000,000Class A common stock issuable upon the exercise of the proceeds ofForward Purchase Warrants are transferable, assignable or salable after June 18, 2021, subject to certain limited exceptions. Additionally, the Private PlacementForward Purchase Warrants were added to the proceeds from the Initial Public Offering to be held in the Trust Account such that, at the closing of the Initial Public Offering, $250,000,000 was held in the Trust Account. If an initial business combination is not completed by the Extension Date, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable andare exercisable for cash or on a cashless basis, at the holder’s option, and are non-redeemable so long as they are held by the Sponsorinitial purchasers or itstheir permitted transferees. If the Forward Purchase Warrants are held by someone other than the initial purchasers or their permitted transferees, the Forward Purchase Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrant. See Note 1014 for further information on stock warrants.
Upon consummation of the Merger, the Company concluded that (a) the Public Warrants meet the derivative scope exception for contracts in the Company’s own stock and are recorded in stockholders’ equity and (b) the Forward Purchase Warrants do not meet the derivative scope exception and are accounted for as derivative liabilities. Specifically, the Forward Purchase Warrants contain provisions that cause the settlement amounts to be dependent upon the characteristics of the holder of the warrant which is not an input into the pricing of a fixed-for-fixed option on equity shares. Therefore, the Forward Purchase Warrants are not considered indexed to the Company’s stock and should be classified as a liability. Since the Forward Purchase Warrants meet the definition of a derivative, the Company recorded the Forward Purchase Warrants as liabilities on the consolidated balance sheets at fair value upon the Merger, with subsequent changes in the fair value recognized in the consolidated statements of operations and comprehensive loss at each reporting date. The fair value of the Forward Purchase Warrants was measured using the Black-Scholes option-pricing model at each measurement date.
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
On June 18, 2021, the Company recorded a liability related to the Forward Purchase Warrants of $2.0 million, with an offsetting entry to additional paid-in capital. On December 31, 2021, the fair value of the Forward Purchase Warrants decreased to $0.8 million, which amount is included in thesewarrant liability within the consolidated balance sheets, with the gain on fair value change recorded in change in the fair value of warrant liability within the consolidated statements of operations and comprehensive loss. See Note 21 for further information on fair value.
aa) Recently Adopted Accounting Pronouncements
As an EGC, the JOBS Act allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election.
ASU 2018-15—Intangibles—Goodwill and Other—Internal Use Software (Subtopic 350-40)
In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), which clarifies the accounting for implementation costs in cloud computing arrangements. The guidance is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, the guidance is effective for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. The Company adopted ASU 2018-15 on January 1, 2021 and it did not have a material impact on the Company’s consolidated financial position, operating results or cash flows.
SEC Final Rule Release 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses (Release No. 33-10786)
In May 2020, the SEC issued Final Rule Release 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses ("Release No. 33-10786"), which amends the disclosure requirements applicable to acquisitions and dispositions of businesses to improve the financial information provided to investors, facilitate more timely access to capital, and reduce the complexity and costs to prepare disclosure. Release No. 33-10786, among other things, (i) amends the tests used to determine significance and expands the use of proforma financial information; (ii) revises the proforma information requirements; (iii) reduces the maximum number of years for which financial statements under Regulation S-X are required to two years; (iv) permits abbreviated financial statements for certain acquisitions; (v) modifies the disclosure requirements relating to the aggregate effect of acquisitions for which financial statements are not required; and (vi) conforms the significance threshold and tests on both disposed and acquired businesses. Release No. 33-10786 became effective on January 1, 2021. The Company adopted all provisions of Release No. 33-10786 on January 1, 2021 and it did not have a subsequent event regarding an extensionmaterial impact on the Company’s consolidated financial position, operating results or cash flows.
SEC Final Rule Release 33-10825, Modernization of Regulation S-K Items 101, 103, and 105 (SEC Rule 33-10825)
In August 2020, the SEC issued Final Rule Release 33-10825, Modernization of Regulation S-K Items 101, 103, and 105 (SEC Rule 33-10825), which modernize the description of business, legal proceedings, and risk factor disclosures that registrants are required to completemake pursuant to Regulation S-K. Key changes include: (i) requiring a principles-based description of the company’s human capital resources, including any human capital measures/objectives that the company focuses on in managing its business (e.g., those that address the development, attraction, and retention of personnel) when material to understanding the business; (ii) eliminating the requirement to disclose business developments over the last five years and focusing on developments that are critical to understanding the company’s business, and, after an initial registration statement, permitting companies to provide only an update of material business combination.developments, so long as the full discussion of business developments from a single previously-filed registration statement or report is incorporated by reference; (iii) increasing the quantitative threshold for disclosing certain governmental environmental proceedings and allowing legal proceedings disclosures to be hyperlinked or cross-referenced to other sections in the document; and (iv) shifting the focus to “material” risk factors categorized by relevant heading and requiring a risk factor summary when the risk factor section is longer than 15 pages. SEC Rule 33-10825
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
became effective for all registration statements, annual reports and quarterly reports filed on or after November 9, 2020. The SponsorCompany adopted all provisions of Release No. 33-10825 in this Annual Report.
SEC Final Rule Release 33-10890, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information (Release No. 33-10890)
In November 2020, the Company’s officersSEC issued Final Rule Release 33-10890, Management’s Discussion and directors will agree, subjectAnalysis, Selected Financial Data, and Supplementary Financial Information ("Release No. 33-10890"), which amends certain sections of Regulation S-K to limited exceptions, notmodernize, simplify, and enhance Management’s Discussion and Analysis (“MD&A”), eliminate the requirement to transfer, assignprovide certain selected financial data and streamline supplementary financial information. Key changes include: (i) elimination of five years of Selected Financial Data; (ii) replacement of the current requirement for two years of quarterly tabular disclosure only when there are material retrospective changes; (iii) clarification of the objective of MD&A; (iv) enhancement and clarification of the disclosure requirements for liquidity and capital resources; (v) elimination of tabular disclosure of contractual obligations; (vi) integration of disclosure of off-balance sheet arrangements within the context of the MD&A; (vii) codification of prior SEC guidance on critical accounting estimates; and (viii) flexibility in comparison of the most recently completed quarter to either the corresponding quarter of the prior year or sellto the immediately preceding quarter. Release No. 33-10890 became effective on February 10, 2021. Registrants are required to comply with the new rules beginning with the first fiscal year ending on or after August 9, 2021. Registrants may early adopt the amended rules at any of their Private Placement Warrants until 30 daystime after the completioneffective date (on an item-by-item basis), as long as they provide disclosure responsive to an amended item in its entirety. The Company adopted all provisions of an initial business combination.Release No. 33-10890 in this Annual Report.
ab) Recently Issued Accounting Pronouncements
ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326)
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of Topic 326, Financial Instruments—Credit Losses. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. In April 2019, the Underwriters’ over-allotmentFASB issued ASU No. 2019- 04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which clarifies treatment of certain credit losses. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief, which permits an entity, upon adoption of ASU 2016-13, to irrevocably elect the fair value option expired(on an instrument-by-instrument basis) for eligible financial assets measured at amortized cost basis. In November 2019, FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which changes the effective dates for Topic 326 to give implementation relief to certain types of entities. In November 2019, the FASB issued ASU No. 2019- 11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which includes various narrow-scope improvements and clarifications. In March 2020, the FASB issued ASU No. 2020- 03, Codification Improvements to Financial Instruments, which clarifies and improves certain financial instruments guidance. The guidance is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, for annual reporting periods beginning after December 15, 2022 and interim periods within those fiscal years. The guidance is to be adopted on a modified retrospective basis. The Company is currently evaluating the impact this pronouncement will have on its consolidated financial statements and plans to adopt this standard effective January 1, 2023.
ASU No. 2019-12, Income Taxes (Topic 740)
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments and interim-period accounting for enacted changes in tax law. The guidance is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. For all other entities, the guidance is
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
effective for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The guidance has various elements and different transition methods (retrospective, modified-retrospective, or prospective) which are applied based on the nature of the elements. The Company is currently evaluating the impact this pronouncement will have on its consolidated financial statements and will adopt this standard on December 31, 2022.
ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments and contracts on an entity’s own equity, including removing certain conditions for equity classification, and amending certain guidance on the computation of EPS for contracts on an entity’s own equity. The guidance is effective for public business entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. For all other entities, the guidance is effective for annual reporting periods beginning after December 15, 2023, and interim periods within fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Entities can elect to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company is currently evaluating the impact this pronouncement will have on its consolidated financial statements and plans to adopt this standard effective January 1, 2024.
3. Reverse Recapitalization
Pursuant to ASC 805, Business Combinations, the merger between Old LiveVox and Crescent was accounted for as a Reverse Recapitalization, rather than a business combination, for financial accounting and reporting purposes. Accordingly, Old LiveVox was deemed the accounting acquirer (and legal acquiree) and Crescent was treated as the accounting acquiree (and legal acquirer). Under this method of accounting, the Reverse Recapitalization was treated as the equivalent of Old LiveVox issuing stock for the net assets of Crescent, accompanied by a recapitalization. The net assets of Crescent are stated at historical cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the Merger are those of Old LiveVox. The shares and corresponding capital amounts and earnings per share available for common stockholders, prior to the Merger, have been retroactively restated as shares reflecting the exchange ratio established in the Merger Agreement.
As a result of the Merger, the Company’s stockholders received shares of Class A common stock, with an aggregate value of $666.4 million, or $10.00 per share. Additionally, the Company received net cash proceeds of $157.6 million, net of transaction costs. The following table reconciles the elements of the Merger to the consolidated statements of cash flows and the consolidated statements of stockholders’ equity for the year ended December 31, 2021 (dollars in thousands):
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
| | | | | |
| Recapitalization |
| Cash proceeds from Crescent | |
| Crescent’s cash in trust account | $ | 253,395 | |
| Crescent’s cash and cash equivalents | 20 | |
| Less: redemptions | (155,372) | |
| Cash proceeds from PIPE Investment (1) | 75,000 | |
| Cash proceeds from Forward Purchase Agreement (2) | 25,000 | |
| Less: Cash payments to escrow | (2,000) | |
| Less: Cash payments to stockholder representative expense holdback | (100) | |
| Less: Cash payments of direct and incremental Merger transaction costs | (36,252) | |
| Net cash proceeds from Merger and PIPE financing reflected as financing cash flows | 159,691 | |
| Cash payments of indirect or non-incremental Merger transaction costs | (2,085) | |
| Net cash proceeds from Merger and PIPE financing reflected as operating cash flows | (2,085) | |
| Net cash proceeds from Merger and PIPE financing | 157,606 | |
| Merger transaction costs not impacting additional paid-in capital | 2,085 | |
| Non-cash VCIP/OBIP stock bonus | 32,637 | |
| Non-cash net assets assumed from Crescent | 36 | |
| Non-cash offering cost associated with warrant liability (3) | 41 | |
| Less: warrant liability | (2,008) | |
| Net contribution from Merger and PIPE financing | $ | 190,397 | |
(1) Proceeds of $75.0 million from the Company’s private placement of an aggregate of 7,500,000 shares of Class A common stock at a per share price of $10.00 (the “PIPE Investment”).
(2) Proceeds of $25.0 million from the Company’s private placement of an aggregate of 2,500,000 shares of Class A common stock at a per share price of $10.00 (the “Forward Purchase Agreement”).
(3) Capitalized offering costs related to Forward Purchase Warrants which have been expensed in the consolidated statements of operations and comprehensive loss.
In connection with the Merger, the Company issued 74,962,092 shares of Class A common stock. Immediately following the Merger, there were 87,084,637 shares of the Company’s Class A common stock outstanding. The following table presents the number of shares of the Company’s common stock outstanding as of the Closing Date (in thousands):
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
| | | | | |
| Number of Shares |
| Class A common stock of Crescent, outstanding prior to Closing | 24,988 | |
| Less: Redemption of Crescent Class A common stock | (15,321) | |
| Class A common stock issued in PIPE Investment (1) | 7,500 | |
| Class A common stock issued under Forward Purchase Agreement (2) | 2,500 | |
| Shares of Crescent common stock prior to Closing | 19,667 | |
| |
| Class F common stock of Crescent converted into Class A common stock on a 1-for-one basis (3) | 6,250 | |
| Less: cancellation of Class F common stock of Crescent | (2,925) | |
| Earn-Out Shares placed into an escrow account (4) | 5,000 | |
| Recapitalization of Old LiveVox common stock into Class A common stock (5) | 66,637 | |
| Shares of newly issued Class A common stock in connection with Closing | 74,962 | |
| |
| Shares of Class A common stock outstanding as of the Closing Date, including Escrowed Shares | 94,629 | |
Less: Escrowed Shares (6) | (7,544) | |
| Total shares of Class A common stock outstanding as of the Closing Date, excluding Escrowed Shares | 87,085 | |
(1) See footnote (1) to the preceding table.
(2) See footnote (2) to the preceding table.
(3) Includes a total of 2,543,750 shares of converted Class A common stock held by the SPAC sponsor and certain independent directors (the “Lock-Up Shares”) immediately following the closing, which were placed in an escrow account to be subject to release only if the price of Class A common stock trading on Nasdaq exceeds certain thresholds during the seven-year period beginning June 18, 2021. No contingent consideration shares were issued or released during the year ended December 31, 2021.
(4) As additional consideration payable to the LiveVox Stockholder, the Company issued 5,000,000 shares of Class A common stock (the “Earn-Out Shares”) held in an escrow account to be released only if the price of Class A common stock trading on Nasdaq exceeds certain thresholds during the seven-year period beginning June 18, 2021. No contingent consideration shares were issued or released during the year ended December 31, 2021.
(5) The number of Old LiveVox shares was determined from 1,000 shares of Old LiveVox common stock outstanding immediately prior to the closing of the Merger converted at the exchange ratio of 66,637 established in the Merger.
(6) 2,543,750 Lock-Up Shares and 5,000,000 Earn-Out Shares (collectively, the “Escrowed Shares”) are accounted for as equity-classified equity instruments, were included as merger consideration as part of the Reverse Recapitalization, and are recorded in additional paid-in capital. Any Escrowed Shares not released from escrow within the seven-year period beginning June 18, 2021 will be forfeited and canceled for no consideration. The Escrowed Shares are treated as equity-linked instruments as opposed to shares outstanding, and as such are not included in shares outstanding on the Company’s consolidated balance sheets.
In connection with the Merger, the Company incurred direct and incremental costs related to the equity issuance of approximately $4.5 million, including $2.6 million during the year ended December 31, 2021, consisting primarily of filing, registration, listing, legal, accounting and other professional fees, which were deducted from the Company’s additional paid-in capital as a
resultreduction of cash proceeds rather than expensed as incurred. In addition, the
Sponsor’s agreementCompany incurred $2.0 million in costs, including $1.3 million during the year ended December 31, 2021, related to
purchase upaccounting, investor relations and other fees. Since these costs were not incremental or directly attributable to
an additional 750,000 Private Placement Warrants also expired.Forward Purchase Agreement
the Merger, they were expensed as incurred and recorded to operating expenses within the Company’s consolidated statements of operations and comprehensive loss.
4. Acquisition
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
BusinessPhone Asset Acquisition
On February 26, 2019,5, 2021 (the “Asset Acquisition Date”), the Company entered into a forwardUnit Purchase Agreement (the “Acquisition Agreement”) with the shareholders of BusinessPhone.com, a reseller of enterprise-grade Cloud Contact Center and Voice Over Internet Protocol (“VoIP”) telephony solutions, for the purchase agreement (the “Forward Purchase Agreement”)of the entire share capital of BusinessPhone. The total consideration transferred is contingent upon the Company’s earnout revenue set forth in the Acquisition Agreement, up to a maximum cash consideration of $7.0 million that was due by September 2021. Before the acquisition, BusinessPhone had been owned by IQ Ventures, which sold SpeechIQ LLC to LiveVox on December 16, 2019. In connection with the acquisition of BusinessPhone, the $1.1 million holdback related to the acquisition of SpeechIQ LLC was released, net of holdback adjustments. The Company completed this acquisition primarily to obtain access to BusinessPhone’s knowledge and Unified Communications as a Service expertise.
In accordance with ASC 805, Business Combinations, the Company determined that substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset, which was customer relationships. Accordingly, the acquired set of assets and activities did not meet the definition of a business. As a result, the Company accounted for the acquisition of BusinessPhone as an asset acquisition as opposed to a business combination and allocated the cost of the asset acquisition, including transaction costs, to identifiable assets acquired and liabilities assumed based on a relative fair value basis.
As of the Asset Acquisition Date, the total cost of the asset acquisition amounted to $7.0 million, of which $6.0 million of contingent consideration was not paid to BusinessPhone’s shareholders. The Company determined that the contingent consideration was not subject to derivative accounting. As a result, the Company allocated the excess fair value of the net assets acquired over the initial consideration transferred to the identifiable net assets (excluding non-qualifying assets) based on their relative fair values on the Asset Acquisition Date. The fair value of identifiable intangible assets acquired was based on estimates and assumptions made by management using the income, market and cost approaches. The following tables present the total cost of the asset acquisition and the allocation to the assets acquired and liabilities assumed based upon their relative fair value at the Asset Acquisition Date (dollars in thousands):
| | | | | |
| Amount |
| Cost of the asset acquisition | |
| Base purchase price | $ | 750 | |
| Contingent consideration | 5,969 | |
| Direct transaction costs | 284 | |
| Total cost of the asset acquisition | $ | 7,003 | |
| | | | | |
| Amount |
| Assets acquired | |
| Cash and cash equivalents | $ | 784 | |
| Restricted cash | 826 | |
| Accounts receivable, net | 696 | |
| Deposits and other | 78 | |
| Property and equipment, net | 76 | |
| Intangible assets, net: | |
| |
| |
| Customer relationships | 5,600 | |
| Acquired workforce | 380 | |
| Total assets acquired | 8,440 | |
| Liabilities assumed | |
| Accounts payable | 439 | |
| Accrued expenses and other | 182 | |
| Short-term debt | 816 | |
| Total liabilities assumed | 1,437 | |
| Net identifiable assets acquired | $ | 7,003 | |
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
The identified intangible assets acquired as part of this asset acquisition were customer relationships and acquired workforce at their allocated cost of $5.6 million and $0.4 million, respectively, with their estimated useful lives of 10 years and 10 years, respectively. The intangible assets are amortized on a straight-line basis.
As of December 31, 2021, the final amount of consideration is determined to be $7.4 million which is based on the terms of the Acquisition Agreement. Since the contingency is resolved and the consideration is paid in full as of December 31, 2021, the amount of contingent consideration liability as of December 31, 2021 was reduced to zero. Since the measurement period is not applicable to an asset acquisition, there has been no adjustment to the cost basis of assets acquired and liabilities assumed.
5. Revenue
Contract Balance
The following table provides information about accounts receivable, net, and contract liabilities from contracts with customers. The Company did not have any contract assets as of December 31, 2021 or December 31, 2020 (dollars in thousands):
| | | | | | | | | | | |
| | December 31, 2021 | | December 31, 2020 |
| Accounts receivable, net | $ | 20,128 | | | $ | 13,817 | |
| Contract liabilities, current (deferred revenue) | 1,307 | | | 1,140 | |
| Contract liabilities, non-current (deferred revenue) | 456 | | | 237 | |
Changes in the contract liabilities balances are as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | |
| | December 31, 2021 | | December 31, 2020 | | $ Change |
| Contract liabilities (deferred revenue) | $ | 1,762 | | | $ | 1,377 | | | $ | 385 | |
The increase in deferred revenue was due to billings in advance of performance obligations being satisfied, net of revenue recognized for services rendered during the period. Revenue of $1.2 million was recognized during the year ended December 31, 2021 which was included in the deferred revenue balance at the beginning of the period, and revenue of $0.7 million was recognized during the year ended December 31, 2020 which was included in the deferred revenue balance at the beginning of the period.
Remaining Performance Obligations
Remaining performance obligations represent the contracted minimum usage commitments and do not include an estimate of additional usage in excess of contractual minimum commitments. The Company’s contract terms typically range from one to three years. Revenue as of December 31, 2021 that has not yet been recognized was approximately $160.2 million, of which $80.2 million and $80.0 million is expected to be recognized as revenue within one year and beyond one year, respectively. The Company expects to recognize revenue on the remaining performance obligations over the next 66 months.
6. Marketable Securities
The Company invested in various debt securities in the year ended December 31, 2021. As of December 31, 2021, the Company designated these investments as AFS debt securities and did not have any debt securities classified as HTM or trading. As of December 31, 2020, the Company did not hold any debt securities.
The following table presents the amortized cost, gross unrealized gains and losses, and fair value of the Company’s debt securities at December 31, 2021 aggregated by major security type (dollars in thousands):
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | |
| Amortized Cost | | Gross Unrealized Gain | | Gross Unrealized Loss | | Fair Value |
| U.S. corporate securities | $ | 39,370 | | | $ | 5 | | | $ | (154) | | | $ | 39,221 | |
| U.S. government securities | 2,997 | | | — | | | (1) | | | 2,996 | |
| Asset-backed securities | 6,439 | | | 1 | | | (22) | | | 6,418 | |
| Other debt securities | 745 | | | — | | | (6) | | | 739 | |
| Total available for sale securities | 49,551 | | | 6 | | | (183) | | | 49,374 | |
| Total debt securities | $ | 49,551 | | | $ | 6 | | | $ | (183) | | | $ | 49,374 | |
The following table presents the amortized cost and fair value of the Company’s debt securities by contractual maturities at December 31, 2021 (dollars in thousands):
| | | | | | | | | | | |
| As of December 31, 2021 | Amortized Cost | | Fair Value |
| Due in one year or less | $ | 8,858 | | | $ | 8,847 | |
| Due after one year through five years | 40,693 | | | 40,527 | |
| | | |
| | | |
| Total available for sale securities | 49,551 | | | 49,374 | |
| Total debt securities | $ | 49,551 | | | $ | 49,374 | |
Refer to Note 21 for additional information regarding the fair value measurements of the Company’s marketable securities.
Proceeds from sales of debt securities and the associated gains and losses during the years ended December 31, 2021, 2020, and 2019 are listed below (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| Available for sale debt securities: | | | | | | | | | |
| Proceeds from sales of debt securities | | | | | $ | 1,250 | | | $ | — | | | $ | — | |
| Gross realized gains | | | | | 4 | | | — | | | — | |
| Gross realized losses | | | | | — | | | — | | | — | |
Gains and losses on sales of debt securities are recorded on the trade date in other income (expense), net, and determined using the specific identification method. There were no transfers of debt securities from AFS category into other categories during the years ended December 31, 2021, 2020 and 2019.
The Company reviewed its debt securities to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, credit quality and its ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. The Company has determined that the unrealized losses for debt securities at December 31, 2021 were temporary in nature and did not consider any debt securities to be other-than-temporarily impaired. The Company will continue to assess whether a debt security is other-than-temporarily impaired at every reporting period (i.e., on quarterly basis). The following table presents the amortized cost and fair value of the Company’s debt securities that are in an unrealized loss position and for which an other-than-temporary impairment has not been recognized in earnings at December 31, 2021 (dollars in thousands):
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | |
| In Unrealized Loss Position For
Less Than 12 Months | | In Unrealized Loss Position For
12 Months Or Longer |
| Fair Value | | Gross Unrealized Loss | | Fair Value | | Gross Unrealized Loss |
| U.S. corporate securities | $ | 35,961 | | | $ | (154) | | | $ | — | | | $ | — | |
| U.S. government securities | 2,996 | | | (1) | | | — | | | — | |
| Asset-backed securities | 4,938 | | | (22) | | | — | | | — | |
| Other debt securities | 739 | | | (6) | | | — | | | — | |
| Total available for sale securities | 44,634 | | | (183) | | | — | | | — | |
| Total debt securities | $ | 44,634 | | | $ | (183) | | | $ | — | | | $ | — | |
7. Property and Equipment
Property and equipment consisted of the following at December 31, 2021 and 2020 (dollars in thousands):
| | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Computer software | $ | 1,253 | | | $ | 1,226 | |
| Computer equipment | 9,063 | | | 7,965 | |
| Furniture and fixtures | 1,181 | | | 1,152 | |
| Leasehold improvements | 1,478 | | | 1,064 | |
| Total | 12,975 | | | 11,407 | |
| Less: accumulated depreciation and amortization | (9,965) | | | (7,902) | |
| Property and equipment, net | $ | 3,010 | | | $ | 3,505 | |
Depreciation and amortization expense for property and equipment for the years ended December 31, 2021, 2020 and 2019 totaled $2.1 million, $1.9 million and $1.6 million, respectively. Amortization of computer software charged to operations for the years ended December 31, 2021, 2020 and 2019 was $0.2 million, $0.2 million and $0.2 million, respectively, and is included in depreciation expense.
8. Goodwill and Identified Intangible Assets
Goodwill
Goodwill was recorded as a result of the acquisition of the Company in 2014 by funds affiliated with Golden Gate Capital and the acquisitions made by the Company in 2019 of Teckst Inc. and SpeechIQ LLC.
During the fourth quarter of 2021, the Company completed its annual goodwill impairment test. The Company elected to bypass the qualitative assessment and proceed directly to the quantitative impairment test. Based on its quantitative impairment test, the Company’s management concluded that the fair value of the reporting unit was not less than its carrying amount as of October 1, 2021. As such, no impairment charge was recognized. Subsequent to the 2021 annual impairment test, the Company believes there have been no significant events or circumstances negatively affecting the valuation of goodwill. For the years ended December 31, 2021, 2020 and 2019, there was no impairment to the carrying value of the Company’s goodwill.
The changes in the carrying amount of goodwill for the years ended December 31, 2021 and 2020, are as follows (dollars in thousands):
| | | | | | | | | | | |
| December 31,
2021 | | December 31,
2020 |
| Balance, beginning of period | $ | 47,481 | | | $ | 47,461 | |
| Addition | — | | | 20 | |
| | | |
| Balance, end of period | $ | 47,481 | | | $ | 47,481 | |
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
Identified Intangible Assets
Intangible assets were acquired in connection with the acquisition of the Company in March 2014 by Golden Gate Capital, and the Company’s acquisition of Teckst Inc., SpeechIQ LLC and BusinessPhone in October 2019, December 2019, and February 2021, respectively.
Amortization expense related to the Company’s identified intangible assets was $4.5 million, $4.2 million and $3.3 million for the years ended December 31, 2021, 2020 and 2019, respectively. On the face of the consolidated statements of operations and comprehensive loss the amortization of technology-based intangible assets is included within cost of revenue, the amortization of marketing-based and customer-based intangible assets are included within sales and marketing expense, and the amortization of the acquired workforce is included within cost of revenue and research and development expense.
Identified intangible assets consisted of the following at December 31, 2021 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Cost | | Accumulated
Amortization | | Carrying
Amount | | Weighted Average
Remaining Life
(In Years) |
| Marketing-based | $ | 1,400 | | | $ | (1,253) | | | $ | 147 | | | 1.96 |
| Technology-based | 18,300 | | | (15,791) | | | 2,509 | | | 2.01 |
| Customer-based | 27,700 | | | (10,506) | | | 17,194 | | | 8.37 |
| Workforce-based | 380 | | | (35) | | | 345 | | | 9.10 |
| $ | 47,780 | | | $ | (27,585) | | | $ | 20,195 | | | |
Identified intangible assets consisted of the following at December 31, 2020 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Cost | | Accumulated
Amortization | | Carrying
Amount | | Weighted Average
Remaining Life
(In Years) |
| Marketing-based | $ | 1,400 | | | $ | (1,144) | | | $ | 256 | | | 2.59 |
| Technology-based | 18,300 | | | (13,484) | | | 4,816 | | | 2.56 |
| Customer-based | 22,100 | | | (8,484) | | | 13,616 | | | 9.05 |
| $ | 41,800 | | | $ | (23,112) | | | $ | 18,688 | | | |
Future amortization of identified intangible assets at December 31, 2021 is shown below (dollars in thousands):
| | | | | |
| As of December 31, 2021 | Amount |
| |
| 2022 | $ | 3,479 | |
| 2023 | 3,189 | |
| 2024 | 2,328 | |
| 2025 | 2,114 | |
| 2026 and beyond | 9,085 | |
| Total future identified intangible asset amortization | $ | 20,195 | |
9. Accrued Expenses
Accrued expenses consisted of the following at December 31, 2021 and 2020 (dollars in thousands):
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
| | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Accrued bonuses | $ | 3,580 | | | $ | 3,602 | |
| | | |
| Accrued paid time off | 2,802 | | | 2,240 | |
| Accrued commissions | 2,748 | | | 1,036 | |
| | | |
| Other accrued expenses | 4,725 | | | 4,789 | |
| Total accrued expenses | $ | 13,855 | | | $ | 11,667 | |
10. Leases
The Company accounts for operating leases and finance leases in accordance with U.S. GAAP, pursuant to ASC 842, Leases.
The Company has leases for offices, data centers and other computer and networking equipment that expire at various dates through 2027. The Company’s leases have remaining terms of one to six years, and some of the leases include a Company option to extend the leases. As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company has elected the practical expedient on not separating lease components from non-lease components for right-of-use assets.
The components of lease expenses were as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| Operating lease cost | | | | | $ | 2,059 | | | $ | 1,515 | | | $ | — | |
| Finance lease cost: | | | | | | | | | |
| Amortization of right-of-use assets | | | | | $ | 462 | | | $ | 534 | | | $ | 522 | |
| Interest on lease liabilities | | | | | 16 | | | 59 | | | 119 | |
| Total finance lease cost | | | | | $ | 478 | | | $ | 593 | | | $ | 641 | |
Supplemental cash flow information related to leases was as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Cash paid for amounts included in the measurement of lease liabilities: | | | | | |
| Operating cash used in operating leases | $ | 2,104 | | | $ | 1,608 | | | $ | — | |
| Financing cash used in finance leases | 408 | | | 810 | | | 1,022 | |
| Right-of-use assets obtained in exchange for lease obligations: | | | | | |
| Operating leases | $ | 3,246 | | | $ | 997 | | | $ | — | |
| Finance leases | — | | | 74 | | | 403 | |
Supplemental balance sheet information related to leases was as follows (dollars in thousands):
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
| | | | | | | | | | | |
| December 31,
2021 | | December 31,
2020 |
| Operating Leases | | | |
| Operating lease right-of-use assets | $ | 5,483 | | | $ | 3,858 | |
| Operating lease liabilities: | | | |
| Operating lease liabilities—current | $ | 1,946 | | | $ | 1,353 | |
| Operating lease liabilities—less current portion | 4,046 | | | 3,088 | |
| Total operating lease liabilities | $ | 5,992 | | | $ | 4,441 | |
| Finance Leases | | | |
| Property and equipment, gross | $ | 2,182 | | | $ | 2,182 | |
| Less: accumulated depreciation and amortization | (1,621) | | | (1,159) | |
| Property and equipment, net | $ | 561 | | | $ | 1,023 | |
| Finance lease liabilities: | | | |
| Finance lease liabilities—current | $ | 26 | | | $ | 392 | |
| Finance lease liabilities—less current portion | 11 | | | 38 | |
| Total finance lease liabilities | $ | 37 | | | $ | 430 | |
Weighted average remaining terms were as follows:
| | | | | | | | | | | |
| December 31,
2021 | | December 31,
2020 |
| Weighted average remaining lease term | | | |
| Operating Leases | 3.58 years | | 3.64 years |
| Finance Leases | 1.67 years | | 1.05 years |
Weighted average discount rates were as follows:
| | | | | | | | | | | |
| December 31,
2021 | | December 31,
2020 |
| Weighted average discount rate | | | |
| Operating Leases | 8.1 | % | | 6.9 | % |
| Finance Leases | 7.5 | % | | 7.6 | % |
Maturities of lease liabilities were as follows (dollars in thousands):
| | | | | | | | | | | |
| As of December 31, 2021 | Operating
Leases | | Finance
Leases |
| | | |
| 2022 | $ | 2,301 | | | $ | 28 | |
| 2023 | 1,880 | | | 11 | |
| 2024 | 1,168 | | | — | |
| 2025 | 997 | | | — | |
| 2026 and beyond | 429 | | | — | |
| Total lease payments | 6,775 | | | 39 | |
| Less: imputed interest | (783) | | | (2) | |
| Total | $ | 5,992 | | | $ | 37 | |
As of December 31, 2021, the Company did not have any operating leases that had not yet commenced.
11. Borrowings Under Term Loan and Line of Credit
At December 31, 2021 and 2020, term loan borrowings were as follows (dollars in thousands):
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
| | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Total term loan obligations | $ | 55,020 | | | $ | 56,044 | |
| Less: current portion of term loan | (561) | | | (1,440) | |
| Long-term term loan obligations | $ | 54,459 | | | $ | 54,604 | |
On February 28, 2018, LiveVox entered into an amendment to its term loan and revolving credit facility with PNC Bank originally dated November 7, 2016 (as amended, the “Credit Facility”) to provide for a $45.0 million term loan, a $5.0 million line of credit and a $1.5 million letter of credit sub-facility.
The Credit Facility is collateralized by a first-priority perfected security interest in substantially all the assets of the Company and is subject to certain financial covenants before and after a covenant conversion date. Covenant conversion may be elected early by the Company if certain criteria are met, including, but not limited to meeting fixed charge coverage and liquidity ratio targets as of the most recent twelve-month period. Prior to the covenant conversion date, the Company is required to maintain minimum levels of liquidity and recurring revenue. As of the covenant conversion date, the Company is required to maintain the Fixed Charge Coverage Ratio and Leverage Ratio (each as defined in the Credit Facility) measured on a quarter-end basis for the four-quarter period ending on each such date through the end of the agreement.
The Company may elect that the term and revolving loans bear interest under a base rate or a LIBOR rate definition within the Credit Facility. LIBOR interest elections are for one, two or three-month periods. Loans are termed as either a Base Rate loan or LIBOR Rate loan and can be a combination of both.
On December 16, 2019, the Company amended the Credit Facility, increasing the term loan borrowing therein by $13.9 million to $57.6 million and amending certain terms and conditions. The amendment to the Credit Facility reset the minimum recurring revenue covenant and qualified cash amounts through December 31, 2021 and extended the quarterly measurement dates through September 30, 2023 and the maturity date to November 7, 2023. The amendment to the Credit Facility also reset the mandatory covenant commencement date of the Fixed Charge Coverage Ratio and Leverage Ratio to March 31, 2022 and reset the applicable ratio amounts. Under the Credit Facility, principal on the term loan was to be repaid in quarterly installments of $0.3 million beginning on March 31, 2020 through December 31, 2020, $0.4 million on March 31, 2021 through December 31, 2021, and $0.7 million on each quarter thereafter.
On August 2, 2021, the Company further amended the Credit Facility, extending the maturity date to December 31, 2025. The amendment to the Credit Facility reset the minimum recurring revenue covenant amounts through December 31, 2025 and extended the quarterly measurement dates through September 30, 2025. The amendment to the Credit Facility also removed the mandatory covenant commencement date of the Fixed Charge Coverage Ratio and Leverage Ratio and the applicable ratio amounts. Under the Credit Facility, principal on the term loan is to be repaid in quarterly installments of $0.1 million beginning on September 30, 2021 through March 31, 2023, $0.3 million on June 30, 2023 through March 31, 2024, and $0.5 million on June 30, 2024 through March 31, 2025, and $0.7 million on each quarter thereafter. All other terms and conditions of the original Credit Facility remain in effect. Term loan repayments made by the Company totaled $1.0 million, $1.2 million and $0.8 million during the years ended December 31, 2021, 2020 and 2019, respectively.
LiveVox, Inc. will account for previously deferred original issue discount and loan fees in the amount of $0.3 million related to the original Credit Facility dated November 7, 2016, first amendment to the Credit Facility dated February 28, 2018, and third amendment to Credit Facility dated December 16, 2019, by amortizing and recording to interest expense over the remaining term of the amended credit agreement using the effective interest method. The additional original issue discount related to the seventh amendment to Credit Facility dated August 2, 2021 in the amount of $0.2 million is being amortized as an adjustment of interest expense over the amended Credit Facility using the effective interest method. Third party loan fees totaling $0.1 million associated with the $13.9 million increase of the term loan related to the third amendment to Credit Facility are expensed upon close of the loan. Total unamortized loan costs associated with the term loan totaled $0.4 million and $0.4 million at December 31, 2021 and 2020, respectively and are recorded within term loan, net of current. The Company was in compliance with all debt covenants at December 31, 2021 and 2020 and was in compliance with all debt covenants as of the date of issuance of these consolidated financial statements. There was no unused borrowing capacity under the term loan portion of the Credit Facility at December 31, 2021 and 2020. On March 17, 2020, as a precautionary measure to ensure financial flexibility and maintain maximum liquidity in response to COVID-19 pandemic, the Company drew down approximately $4.7 million under the revolving portion of the Credit Facility, which Crescent Capital Group LP (“Crescent”),was repaid in full by the Company in connection with the Merger.
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
Aggregate principal maturities of the term loan as of December 31, 2021 was as follows (dollars in thousands):
| | | | | |
| As of December 31, 2021 | Amount to Mature |
| |
| 2022 | $ | 561 | |
| 2023 | 982 | |
| 2024 | 1,753 | |
| 2025 | 52,158 | |
| |
| Total | $ | 55,454 | |
The net carrying amount of the liability component of the term loan was as follows (dollars in thousands):
| | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Principal | $ | 55,454 | | | $ | 56,454 | |
| Unamortized issuance costs | (434) | | | (410) | |
| Net carrying amount | $ | 55,020 | | | $ | 56,044 | |
12. Letters of Credit
On November 8, 2016, the Company established an irrevocable letter of credit in the amount of $0.3 million using a sub-facility under the Credit Facility, to serve as a security deposit for the Company’s San Francisco office. The letter of credit automatically extends for one-year periods from the expiration date, September 10, 2017, unless written notice is presented to the beneficiary at least 60 days prior to the expiration date. During 2017, the Company expanded its capacitySan Francisco office with lease terms that required an additional $0.1 million deposit. On April 26, 2017, the Company’s irrevocable letter of credit was amended, increasing the total amount to $0.5 million and providing for decreases in the letter of credit as investment advisorspecified in the lease, in the amount of $0.1 million on each of the following dates: February 1, 2019, February 3, 2020, February 1, 2021 and February 1, 2022. All other terms and conditions remained the same.
13. Related Party Transactions
Prior to the closing of the Merger, Old LiveVox paid quarterly management fees plus reimbursement of expenses incurred on behalf of oneOld LiveVox to funds affiliated with Golden Gate Capital, its majority shareholder pre-Merger. During the year ended December 31, 2021, management fees, expense reimbursements and acquisition related expenses were immaterial. As of December 31, 2021, there was no unpaid balance. During the year ended December 31, 2020, management fees totaled $0.5 million and there were no expense reimbursements or more investment funds or accounts managed by Crescentacquisition-related expenses. As of December 31, 2020, there was no unpaid balance. During the year ended December 31, 2019, management fees, expense reimbursements and its affiliates (such funds or accounts, the “Crescent Funds”), has committedacquisition related expenses totaled $0.4 million, $0.1 million and $0.6 million, respectively, of which $0.5 million was unpaid as of December 31, 2019.
The Company pays monthly board of director fees plus reimbursement of expenses incurred on behalf of the Crescent Funds,Company to members of the Company’s board of directors. During the year ended December 31, 2021, board of director fees totaled $0.6 million and expense reimbursements were immaterial. As discussed in Note 2(x), in connection with the Merger, the VCIP awards granted to the board of directors were liquidated, which resulted in $4.1 million expenses related to the board of directors for the year ended December 31, 2021. The Company also granted RSUs to directors under the 2021 Plan. During the year ended December 31, 2021, stock-based compensation expense relating to the RSU awards to the board of directors totaled $0.2 million. As of December 31, 2021, the unpaid balance of board of director fees due to related parties was immaterial. During the year ended December 31, 2020, board of director fees totaled $0.5 million and there were no expense reimbursements or expenses relating to the VCIP awards granted to the board of directors. As of December 31, 2020, there was no unpaid balance of board of director fees due to related parties. During the year ended December 31, 2019, board of director fees totaled $0.5 million and there were no expense reimbursements. The Company also performed a one-time management liquidity program, in which vested VCIP awards were liquidated and paid out, which resulted in $0.3 million in related expenses incurred to a director of the board. As of December 31, 2019, there was no unpaid balance of board of director fees due to related parties.
There were no related party accounts receivable as of December 31, 2021, 2020 and 2019.
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
14. Stock Warrants
Public and Forward Purchase Warrants
Immediately following the Merger, LiveVox assumed 833,333 Forward Purchase Warrants and 12,499,995 Public Warrants that had been previously issued by Crescent. Each whole warrant entitles the holder to purchase subject to the terms and conditions set forth the Forward Purchase Agreement, including obtaining fund-level approvals by the relevant investment committee and/or other governing body of such funds, an aggregate of 5,000,000 forward purchase units (the “Forward Purchase Units”), each consisting of one1 share of the Company’s Class A common stock (suchat a price of $11.50 per share, subject to adjustments. The Company may redeem the outstanding Public Warrants, in whole and not in part, upon a minimum of 30 days’ prior written notice of redemption (“Redemption Period”). For purposes of the redemption, “Redemption Price” shall mean the last reported sales price of the Company’s common stock for any 20 trading days within the thirty trading-day period ending on the third trading day prior to the date on which notice of the redemption is given.
The Company may redeem the outstanding Public Warrants for cash at a price of $0.01 per warrant if the Reference Value equals or exceeds $18.00 per share. The warrant holders have the right to exercise their outstanding warrants prior to the scheduled redemption date during the Redemption Period at $11.50 per share. If the Company calls the Public Warrants for redemption, the Company will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis”, as described in the warrant agreement.
The Forward Purchase Warrants are identical to the Public Warrants except that the Forward Purchase Warrants were not transferable, assignable or salable until 30 days after June 18, 2021, subject to certain limited exceptions. Additionally, the Forward Purchase Warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Forward Purchase Warrants are held by someone other than the initial purchasers or their permitted transferees then such warrants will be redeemable by the Company and exercisable by the warrant holders on the same basis as the Public Warrants.
As of December 31, 2021, there were 13,333,328 Warrants outstanding, and no Warrants have been exercised.
15. Stockholders’ Equity
Common Stock
On June 22, 2021, the Company’s Class A common stock, publicly traded warrants and publicly traded units began trading on Nasdaq under the ticker symbols “LVOX”, “LVOXW” and “LVOXU,” respectively. Pursuant to the Company’s certificate of incorporation, the Company is authorized to issue 500,000,000 shares of Class A common stock with a par value of $0.0001 per share. As of December 31, 2021, the Company had 90,696,977 shares of Class A common stock issued and outstanding (98,240,727 shares of common stock, less 7,543,750 of which are held in escrow).
In connection with the Merger consummated on June 18, 2021, the Company issued 74,962,092 shares of Class A common stock. See Note 3 for more information. On November 2, 2021, pursuant to the terms of the Merger Agreement, the Company issued 33,609 shares of Class A common stock valued at $336,097 to LiveVox TopCo as part of the post-closing adjustment of merger consideration required as part of the Merger. After the Merger, the Company issued additional shares of Class A common stock of 3,578,731 for the equity portion of VCIP and OBIP awards that fully vested in connection with the Merger but were undelivered at the time of the Merger.
Prior to the Merger, Old LiveVox had 1,000 outstanding shares of common stock. Upon the Closing, holders of these outstanding common stock received shares of the Company’s Class A common stock in an amount determined by application of the exchange ratio, as discussed in Note 3. After converting the prior period share amounts retrospectively, 500,000,000 shares of common stock were authorized, and 66,637,092 shares were issued and outstanding as of December 31, 2020.
The accumulated other comprehensive loss and accumulated deficit is included in stockholders’ equity. At December 31, 2021 and 2020, the accumulated other comprehensive loss totaled $0.5 million and $0.2 million, respectively. The Company’s accumulated deficit totaled $128.0 million and $24.8 million at December 31, 2021 and 2020, respectively.
Preferred Stock
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
Pursuant to the Company’s certificate of incorporation, the Company is authorized to issue 25,000,000 shares of preferred stock having a par value of $0.0001 per share. As of December 31, 2021, no shares of LiveVox preferred stock were issued and outstanding. As of December 31, 2020, no shares of preferred stock were authorized, issued and outstanding.
16. Analysis of the Changes in Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) includes foreign currency translation items associated with the Company’s foreign operations and unrealized gain or loss on the Company's marketable securities available for sale. Following is an analysis of the changes in the accumulated other comprehensive loss, net of applicable taxes, at December 31, 2021 and 2020 (dollars in thousands):
| | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Foreign currency translation adjustment | | Unrealized loss on marketable securities | | Total accumulated other comprehensive loss |
| Balance, beginning of period | $ | (218) | | | $ | — | | | $ | (218) | |
| Other comprehensive income | 12 | | | — | | | 12 | |
| Balance, end of period | $ | (206) | | | $ | — | | | $ | (206) | |
| | | | | |
| December 31, 2021 |
| Foreign currency translation adjustment | | Unrealized loss on marketable securities | | Total accumulated other comprehensive loss |
| Balance, beginning of period | $ | (206) | | | $ | — | | | $ | (206) | |
| Other comprehensive loss | (94) | | | (177) | | | (271) | |
| Balance, end of period | $ | (300) | | | $ | (177) | | | $ | (477) | |
Components of other comprehensive income (loss) and related taxes for the years ended December 31, 2021, 2020 and 2019 are as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Before tax | | Tax effect | | Net of tax | | Before tax | | Tax effect | | Net of tax | | Before tax | | Tax effect | | Net of tax |
| Foreign currency translation adjustment | $ | (94) | | | $ | — | | | $ | (94) | | | $ | 11 | | | $ | 1 | | | $ | 12 | | | $ | (47) | | | $ | (1) | | | $ | (48) | |
| Unrealized loss on marketable securities | (177) | | | — | | | (177) | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total other comprehensive income (loss) | $ | (271) | | | $ | — | | | $ | (271) | | | $ | 11 | | | $ | 1 | | | $ | 12 | | | $ | (47) | | | $ | (1) | | | $ | (48) | |
17. Stock-Based Compensation
The following tables present the Company's stock-based compensation expense by award type and financial statement line for the years ended December 31, 2021, 2020 and 2019 (dollars in thousands):
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| Equity-classified awards: | | | | | | | | | |
| MIUs | | | | | $ | 556 | | | $ | 556 | | | $ | — | |
| RSUs - employee (1) | | | | | 2,949 | | | — | | | — | |
| RSUs - nonemployee (2) | | | | | 12 | | | — | | | — | |
| PSUs - employee (1) | | | | | 388 | | | — | | | — | |
| Total equity-classified awards | | | | | 3,905 | | | 556 | | | — | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Total stock-based compensation | | | | | $ | 3,905 | | | $ | 556 | | | $ | — | |
(1) Represents awards granted to employees, executive officers and directors of the Company. Nonemployee directors acting in their role as members of a board of directors are treated as employees if (a) those directors were elected by the Company’s shareholders and (b) the awards granted to nonemployee directors are for their services as directors but not for other services.
(2) Represents awards granted to consultants of the Company.
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| Cost of revenue | | | | | $ | 500 | | | $ | 57 | | | $ | — | |
| Sales and marketing expense | | | | | 865 | | | 113 | | | — | |
| General and administrative expense | | | | | 1,169 | | | 273 | | | — | |
| Research and development expense | | | | | 1,371 | | | 113 | | | — | |
| Total stock-based compensation | | | | | $ | 3,905 | | | $ | 556 | | | $ | — | |
As of December 31, 2021, unrecognized stock-based compensation expense related to nonvested awards by award type and their expected weighted-average recognition periods are summarized in the following table (dollars in thousands):
| | | | | | | | | | | |
| Unrecognized Stock-based Compensation Expense | | Weighted-average Recognition Period (1) |
| Equity-classified awards: | | | |
| MIUs | $ | 1,668 | | | 3.00 years |
| RSUs - employee | 29,014 | | | 3.53 years |
| RSUs - nonemployee | 115 | | | 3.47 years |
| PSUs - employee | 10,097 | | | 10.43 years |
| Total equity-classified awards | 40,894 | | | |
| | | |
| | | |
| | | |
| | | |
| Total unrecognized stock-based compensation | $ | 40,894 | | | |
(1) The weighted-average recognition period is calculated as the sum of the weighted remaining period to recognize expense for nonvested awards divided by the sum of the shares that are expected to vest for all awards that have not vested or expired by the end of the reporting period. For awards that the straight-line method is used for expense recognition, the remaining recognition period is the amount of time between the end of the reporting period and the end of the entire award. For awards that the accelerated attribution method is used for expense recognition, the remaining recognition period is the amount of time between the end of the reporting period and the end of each separately vesting portion of the award.
2021 Equity Incentive Plan
The Compensation Committee of the Company approved 5,091,331 RSU and 1,611,875 PSU awards in the year ended December 31, 2021. As of December 31, 2021, 109,862 unvested RSUs were forfeited upon the grantee’s termination of service, and 4,981,469 RSUs and 1,611,875 PSUs were outstanding.
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
Restricted Stock Units
As of December 31, 2021, all RSUs granted to employees and nonemployees are classified as equity.
RSU activities for the year ended December 31, 2021 are summarized as follows (in thousands, except for per share data):
| | | | | | | | | | | | | | | | | | | | | |
| Equity-classified RSUs - employee | | |
| Number of Shares | | Weighted-average Grant Date Fair Value (per share) | | Weighted-average Remaining Contractual Term (1) | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Outstanding at December 31, 2020 | — | | | $ | — | | | | | | | |
| Granted | 5,072 | | | 6.44 | | | | | | | |
| Vested | — | | | — | | | | | | | |
| Forfeited | (110) | | | 6.33 | | | | | | | |
| Outstanding at December 31, 2021 | 4,962 | | | $ | 6.44 | | | 1.86 years | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Equity-classified RSUs - nonemployee | | |
| Number of Shares | | Weighted-average Grant Date Fair Value (per share) | | Weighted-average Remaining Contractual Term (1) | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Outstanding at December 31, 2020 | — | | | $ | — | | | | | | | |
| Granted | 20 | | | 6.51 | | | | | | | |
| Vested | — | | | — | | | | | | | |
| Forfeited | — | | | — | | | | | | | |
| Outstanding at December 31, 2021 | 20 | | | $ | 6.51 | | | 1.69 years | | | | |
(1) The weighted-average remaining contractual term is calculated as the sum of the weighted amount of time between the reporting period end and the vest date divided by the sum of the shares that are outstanding, expected to vest or currently exercisable by the end of the reporting period.
Performance-Based Restricted Stock Units
As of December 31, 2021, all PSUs granted to employees are classified as equity.
As discussed in Note 2(x), the Company estimates the fair value of the PSUs at each measurement date by using a Monte Carlo simulation. The key inputs used in the Monte Carlo simulation are disclosed in the table below. The stock price is based on the closing price of the Company’s Class A common stock on Nasdaq as of the valuation date. The volatility input is estimated using the volatility of Company’s peer companies as well as the Company’s own implied volatility. The expected life of the PSUs 30 years and all PSUs are assumed to be fully vested at the end of year 30. The risk-free interest rate is based on the Thirty-year Constant Maturity Treasury Rate. The vesting hurdles are set forth in the PSU agreement.
The weighted average assumptions (weighted by relative grant date fair value) used to value PSUs during the periods presented are as follows:
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
| | | | | | | | | |
| December 31, 2021 | | | | |
| Stock price | $ | 6.13 | | | | | |
| Measurement period | 30.00 years | | | | |
| Expected volatility | 47.50 | % | | | | |
| Risk-free rate | 1.89 % | | | | |
| Vesting hurdle 1 | $ | 12.50 | | | | | |
| Vesting hurdle 2 | $ | 15.00 | | | | | |
| Vesting hurdle 3 | $ | 17.50 | | | | | |
PSU activities for the year ended December 31, 2021 are summarized as follows (in thousands, except for per share data):
| | | | | | | | | | | | | | | | | | | | | |
| Equity-classified PSUs - employee | | |
| Number of Shares | | Weighted-average Grant Date Fair Value (per share) | | Weighted-average Remaining Contractual Term (1) | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Outstanding at December 31, 2020 | — | | | $ | — | | | | | | | |
| Granted | 1,612 | | | 6.50 | | | | | | | |
| Vested | — | | | — | | | | | | | |
| Forfeited | — | | | — | | | | | | | |
| Outstanding at December 31, 2021 | 1,612 | | | $ | 6.50 | | | 10.43 years | | | | |
(1) The weighted-average remaining contractual term is calculated as the sum of the weighted amount of time between the reporting period end and the vest date divided by the sum of the shares that are outstanding, expected to vest or currently exercisable by the end of the reporting period.
Management Incentive Units
As discussed in Note 2(x), stock-based compensation for MIUs is measured based on the grant date fair value of the award estimated by using a Monte Carlo simulation. Assumptions used in the Monte Carlo simulation are disclosed in the table below. The holding period is the expected period until a major liquidity event is expected to occur. The expected volatility assumption is based on the historical volatility of a peer group of publicly traded companies. The discount for lack of marketability is driven by (i) the assumed participation threshold as outlined in the agreements governing the MIUs and (ii) the assumed holding period of two years. The risk-free rate for the expected term of the awards is based on U.S. Treasury zero-coupon issues at the time of grant.
The weighted average assumptions (weighted by relative grant date fair value) used to value MIUs during the periods presented are as follows:
| | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 | | December 31, 2019 |
| Holding period | 2.00 years | | 2.00 years | | 2.00 years |
| Volatility | 45.0 % | | 45.0 | % | | 45.0 | % |
| Discount for lack of marketability | 28.0 % | | 28.0 | % | | 28.0 | % |
| Risk-free rate | 1.6 % | | 1.6 | % | | 1.6 | % |
MIU activities for the years ended December 31, 2021, 2020 and 2019 are summarized as follows (in thousands, except for per share data):
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | | | | |
| Number of Shares | | Weighted-average Grant Date Fair Value (per share) | | Weighted-average Remaining Contractual Term (1) | | | | |
| Outstanding at December 31, 2018 | — | | $ | — | | | | | | | |
| Granted | 3,518 | | 0.79 | | | | | | | |
| Vested | — | | — | | | | | | | |
| Forfeited | — | | — | | | | | | | |
| Outstanding at December 31, 2019 | 3,518 | | $ | 0.79 | | | | | | | |
| Granted | — | | — | | | | | | | |
| Vested | — | | — | | | | | | | |
| Forfeited | — | | — | | | | | | | |
| Outstanding at December 31, 2020 | 3,518 | | $ | 0.79 | | | | | | | |
| Granted | — | | — | | | | | | | |
| Vested | (704) | | 0.79 | | | | | | | |
| Forfeited | — | | — | | | | | | | |
| Outstanding at December 31, 2021 | 2,814 | | $ | 0.79 | | | 1.50 years | | | | |
(1) The weighted-average remaining contractual term is calculated as the sum of the weighted amount of time between the reporting period end and the vest date divided by the sum of the shares that are outstanding, expected to vest or currently exercisable by the end of the reporting period.
18. Geographic Information
Disaggregation of Revenue
The following table disaggregates the Company’s revenue by geographic area for the years ended December 31, 2021, 2020, and 2019 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| United States | | | | | $ | 111,836 | | | $ | 97,034 | | | $ | 90,522 | |
| Americas (excluding United States) | | | | | 2,808 | | | 1,870 | | | 1,227 | |
| Asia | | | | | 4,450 | | | 3,509 | | | 864 | |
| Europe | | | | | 137 | | | 132 | | | 142 | |
| Total revenue | | | | | $ | 119,231 | | | $ | 102,545 | | | $ | 92,755 | |
Property and Equipment
The following table summarizes total property and equipment, net in the respective locations at December 31, 2021 and 2020 (dollars in thousands):
| | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| United States | $ | 1,989 | | | $ | 3,174 | |
| Americas (excluding United States) | 367 | | | 192 | |
| Asia | 654 | | | 139 | |
| Property and equipment, net | $ | 3,010 | | | $ | 3,505 | |
The geographical location of the Company’s customers affects the nature, amount, timing and uncertainty of revenue and cash flows due to the potential for unfavorable and uncertain regulatory, political, economic and tax conditions. These uncertainties can impact the amount of revenue recognized through price adjustments and uncertainty of cash flows that may arise due to local regulations.
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
19. Income Taxes
The provision for income taxes charged to operations consisted of the following for the years ended December 31, 2021, 2020 and 2019 (dollars in thousands):
| | | | | | | | | | | | | | | | | |
| |
| 2021 | | 2020 | | 2019 |
| Current tax expense: | | | | | |
| Federal | $ | — | | | $ | (2) | | | $ | (2) | |
| State | 47 | | | 8 | | | 188 | |
| Foreign | 310 | | | 317 | | | 251 | |
| Total current tax expense | 357 | | | 323 | | | 437 | |
| Deferred tax expense: | | | | | |
| Federal | 3 | | | 2 | | | 2 | |
| State | (186) | | | (124) | | | (282) | |
| Foreign | (8) | | | (5) | | | (8) | |
| Total deferred tax benefit | (191) | | | (127) | | | (288) | |
| Provision for income taxes | $ | 166 | | | $ | 196 | | | $ | 149 | |
A reconciliation between the Company’s federal statutory tax rate and its effective tax rate for the years ended December 31, 2021, 2020 and 2019 is as follows:
| | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | 2019 |
| Federal statutory tax rate | 21.00 | % | | 21.00 | % | | 21.00 | % |
| State tax, net of federal benefit | 3.01 | % | | 3.93 | % | | 0.55 | % |
| Meals and entertainment | (0.11) | % | | (1.07) | % | | (1.69) | % |
| Global intangible low-taxed income inclusion | (0.07) | % | | (2.41) | % | | (1.07) | % |
| Nondeductible stock-based compensation | (0.11) | % | | (2.83) | % | | 0.00 | % |
| Nondeductible compensation | (2.15) | % | | 0.00 | % | | 0.00 | % |
| Transaction costs | (2.61) | % | | 0.00 | % | | 0.00 | % |
| Prior year provision to return true-up | 0.16 | % | | (2.13) | % | | (1.16) | % |
| Change in valuation allowance | (19.20) | % | | (18.90) | % | | (19.94) | % |
| Foreign tax differential and permanent items | (0.07) | % | | (2.27) | % | | 0.07 | % |
| Other | (0.01) | % | | (0.08) | % | | (0.06) | % |
| Effective tax rate | (0.16) | % | | (4.76) | % | | (2.30) | % |
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities consisted of the following at December 31, 2021 and 2020 (dollars in thousands):
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
| | | | | | | | | | | |
| 2021 | | 2020 |
| Deferred tax assets: | | | |
| Net operating loss carryforward | $ | 26,828 | | | $ | 9,779 | |
| SPAC Transaction | 944 | | | — | |
| Compensation accruals | 1,326 | | | 675 | |
| Share based compensation | 807 | | | — | |
| Foreign tax credits | 487 | | | 552 | |
| Bad debt reserve | 319 | | | 321 | |
| Interest expense limitation | 1,080 | | | 274 | |
| Lease liability | 1,489 | | | 1,119 | |
| Other | 398 | | | 265 | |
| Total deferred tax assets | 33,678 | | | 12,985 | |
| Deferred tax liabilities: | | | |
| Capitalized commissions | (2,346) | | | (1,192) | |
| Right-of-use asset | (1,363) | | | (972) | |
| Other intangibles amortization | (2,447) | | | (3,423) | |
| Other | (274) | | | (168) | |
| Total deferred tax liabilities | (6,430) | | | (5,755) | |
| Net deferred tax assets before valuation allowance | 27,248 | | | 7,230 | |
| Valuation allowance | (27,250) | | | (7,423) | |
| Net deferred tax liabilities | $ | (2) | | | $ | (193) | |
At December 31, 2021, the Company had available federal and combined state net operating loss carryforwards which may offset future taxable income of $23.5 million and $95.5 million, respectively. The federal net operating losses expire between 2026 and 2035 while the state net operating losses expire between 2025 and 2041. In addition, the Company has federal and state net operating loss carryforwards at December 31, 2021, of $72.4 million and $20.4 million, respectively, which do not expire. There were insufficient federal and state deferred tax liabilities to offset the federal and state deferred tax assets at December 31, 2021 and 2020; therefore, based on this and other available evidence, management believes it is more likely than not that the net federal and state deferred tax assets of LiveVox will not be fully realized and has recorded valuation allowances in the amounts of $27.3 million and $7.4 million as of December 31, 2021 and 2020, respectively.
Past ownership changes and other equity transactions have triggered Section 382 and 383 provisions of the Internal Revenue Code, resulting in certain annual limitations on the utilization of existing federal and state net operating losses and credits. Such provisions may limit the potential future tax benefit to be realized by the Company from its accumulated net operating losses and tax credit carryforwards.
Historically, the Company had not accrued a provision for U.S. deferred taxes or foreign withholding taxes on undistributed earnings of the Company’s wholly owned foreign subsidiaries because it was the intention of management to reinvest the undistributed earnings indefinitely in foreign operations. Undistributed earnings are generally no longer subject to U.S. tax upon repatriation beginning January 1, 2018; however, undistributed earnings remain subject to certain state income and foreign withholding taxes. It remains the intention of management to reinvest the undistributed earnings indefinitely in foreign operations. The Company also believes that any such state income or foreign withholding taxes would be immaterial.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law. The CARES Act contained certain income tax relief provisions, including a modification to the limitation of business interest expense for tax years beginning in 2019 and 2020. The modification to the interest expense limitation increased the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income for 2019 and 2020. This modification resulted in the allowance of additional interest expense for the Company, resulting in an increase in its 2020 net operating loss carryforwards. The Company does not anticipate any further material tax impacts from the CARES Act.
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, India and Colombia. The tax returns are subject to statutes of limitations that vary by jurisdiction. At December 31, 2021, the Company remains subject to U.S. and certain state income tax examinations for tax years 2018 through 2021, and in certain other states for tax years 2017 through 2021. However, due to the Company’s net operating loss carryforwards in various jurisdictions, tax authorities have the ability to adjust carryforwards related to closed years.
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
20. Retirement Benefit Plan
The Company amended its existing 401(k) plan (the “Plan”) effective on July 1, 2018. The amended Plan covers eligible employees immediately upon employment with the Company. Participants may contribute up to a maximum percentage of their annual compensation to the Plan as determined by the Company limited to the maximum annual amount set by the Internal Revenue Service. The Plan provides for traditional tax-deferred and Roth 401(k) contribution options. Prior to the Plan amendment, the Company did not provide a matching contribution. The Company began matching 50 percent of the employee contribution up to a maximum of two-hundred dollars per pay period, limited to forty-eight hundred dollars annually, upon adoption of the Plan. NaN percent of the employer match vests immediately. The Company made matching contributions totaling $1.1 million, $0.8 million and $0.6 million during the years ended December 31, 2021, 2020 and 2019, respectively.
21. Fair Value Measurement
The following table sets forth the fair value of the Company’s assets and liabilities at December 31, 2021 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Level 1 | | Level 2 | | Level 3 | | Totals |
| Cash and cash equivalents | $ | 47,217 | | | $ | — | | | $ | — | | | $ | 47,217 | |
| Restricted cash | 100 | | | — | | | — | | | 100 | |
| Marketable securities | — | | | 49,374 | | | — | | | 49,374 | |
| Total assets | $ | 47,317 | | | $ | 49,374 | | | $ | — | | | $ | 96,691 | |
| | | | | | | |
| Term loan | $ | — | | | $ | 55,020 | | | $ | — | | | $ | 55,020 | |
| Finance lease obligations | — | | | 37 | | | — | | | 37 | |
| | | | | | | |
| | | | | | | |
| Warrant liability—Forward Purchase Warrants | — | | | — | | | 767 | | | 767 | |
| | | | | | | |
| Total liabilities | $ | — | | | $ | 55,057 | | | $ | 767 | | | $ | 55,824 | |
The following table sets forth the fair value of the Company’s assets and liabilities at December 31, 2020 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Level 1 | | Level 2 | | Level 3 | | Totals |
| Cash and cash equivalents | $ | 18,098 | | | $ | — | | | $ | — | | | $ | 18,098 | |
| Restricted cash | 1,468 | | | — | | | — | | | 1,468 | |
| Total assets | $ | 19,566 | | | $ | — | | | $ | — | | | $ | 19,566 | |
| | | | | | | |
| Term loan | $ | — | | | $ | 56,044 | | | $ | — | | | $ | 56,044 | |
| Finance lease obligations | — | | | 430 | | | — | | | 430 | |
| VCIP/OBIP liability | — | | | — | | | 286 | | | 286 | |
| Total liabilities | $ | — | | | $ | 56,474 | | | $ | 286 | | | $ | 56,760 | |
Level 1 and Level 2 of the Fair Value Hierarchy
As of December 31, 2021 and 2020, the carrying amounts of the Company’s cash, cash equivalents and restricted cash approximate their fair values due to their short maturities and has been classified as Level 1 of the fair value hierarchy. The fair value of the term loan and finance lease obligations approximate their carrying value. The fair value is determined based on observable inputs on the price of the term loan in the market and has been classified as Level 2 of the fair value hierarchy. The fair value of the Company’s AFS debt securities are determined based on valuations provided by external investment managers who obtain them from a variety of industry standard data providers and has been classified as Level 2 of the fair value hierarchy. Refer to Note 6 for additional information regarding the fair value of the Company’s marketable securities.
Level 3 of the Fair Value Hierarchy
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
The Company’s liability related to the Forward Purchase Warrants is measured at fair value on a recurring basis and is classified as Level 3 within the fair value hierarchy. There were no other assets or liabilities measured at fair value on a recurring basis at December 31, 2021.
Warrant liability—Forward Purchase Warrants
As discussed in Note 2(z), 833,333 Forward Purchase Warrants were issued pursuant to the Forward Purchase Agreement dated January 13, 2021 between Crescent and Old LiveVox. Upon consummation of the “ForwardMerger, the Company concluded that the Forward Purchase Shares”)Warrants do not meet the derivative scope exception and one-thirdare accounted for as derivative liabilities. The Forward Purchase Warrants are classified as Level 3 fair value measurement. The Company employed a Black-Scholes option pricing model specific to the contractual terms of one warrantthe Forward Purchase Warrants to purchase onedetermine their fair value at each reporting period, with changes in fair value recognized in the consolidated statements of operations and comprehensive loss. Inherent in the options pricing model are assumptions related to current stock price, exercise price, expected share price volatility, expected life, risk-free interest rate and dividend yield. The stock price is based on the closing price of the Company’s Class A common stock (such warrants to be issued pursuant toon Nasdaq as of the valuation date. The exercise price is based on the terms of the warrant agreement. The volatility input is estimated using the implied volatility of the Public Warrants and the volatility of the Company’s peer companies. The expected life of the Forward Purchase Agreement,Warrants is based on the “Forward Purchase Warrants”),time from valuation date to the contractual expiration date. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of issuance for $10.00 per unit, or an aggregate amount of $50,000,000,zero-coupon U.S. Treasury notes with maturities corresponding to the expected five-year term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. Future change in these assumptions could result in a private placement that will close simultaneously withmaterial change to the closingfair value of an initial business combination. Thethe Forward Purchase Warrants, and such changes will havebe recorded in the same terms asconsolidated statements of operations and comprehensive loss.
The following table provides quantitative information regarding assumptions used in the Private Placement Warrants so long as they are held by a Crescent Fund purchasingBlack Scholes option-pricing model to determine the fair value of the Forward Purchase Units (such Crescent Fund,Warrants:
| | | | | | | | | | | |
| December 31, 2021 | | June 18, 2021 (Closing Date) |
| Stock price | $ | 5.15 | | $ | 9.12 |
| Exercise price | $ | 11.50 | | $ | 11.50 |
| Contractual term | 4.50 years | | 5.00 years |
| Expected volatility | 47.50% | | 37.50% |
| Risk-free rate | 1.20% | | 0.90% |
| Dividend yield | 0.00% | | 0.00% |
Transfers Out of the “Crescent Fund Purchaser”) or its permitted transferees,Level 3 Fair Value Measurement
The Company’s VCIP and OBIP accrued liability has historically been classified as Level 3 with the fair value hierarchy. The Old LiveVox board of directors, with assistance of management, has estimated the fair value of VCIP and OBIP accrued liability at each reporting period by considering a number of objective and subjective factors including important developments in the Company’s operations, valuations performed by an independent third party, actual results and financial performance, the conditions in the CCaaS industry and the Forward Purchase Shares will be identicaleconomy in general, volatility of comparable public companies, among other factors.
As discussed in Note 2(x), on June 18, 2021, the Company consummated the previously announced Merger between Old LiveVox and Crescent, in which all outstanding VCIP and OBIP awards were fully vested. The VCIP and OBIP awards were paid to the
Public Shares soldplan participants in a combination of cash awards and equity awards. The cash portion of the awards was recorded to accrued liability for unpaid cash awards, and the stock portion of the awards was recorded to additional paid-in capital for undelivered equity shares. The fair value of the VCIP and OBIP accrued liability for unpaid cash awards was determined based on the terms of the respective VCIP and OBIP agreements. Since the inputs used to measure fair value are directly or indirectly observable in the
Initial Public Offering, except the Forward Purchase Shares will be subject to transfer restrictionsmarketplace, VCIP and
certain registration rights. Any Forward Purchase Warrant held by a holder other than a Crescent Fund Purchaser or its permitted transferees will have the same terms as the Warrants included in the Units sold in the Initial Public Offering.Registration Rights
The holders of Founder Shares, Private Placement Warrants and Warrants that may be issued upon conversion of working capital loans, if any, will be entitled to registration rights (in the caseOBIP accrued liability was transferred out of the Founder Shares, only after conversion of such sharesLevel 3 fair value measurement to shares of Class A common stock) pursuant to a registration rights agreement dated March 7, 2019. The holders of these securities will be entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides thatLevel 2 fair value measurement upon the Company will not permit any registration statement filed under the Securities Act to become effective until terminationconsummation of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
F-13
Related Party Loans and Advances
On November 21, 2017, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to an unsecured promissory note (the ‘‘Note’’). This Note was amended and restatedMerger on November 6, 2018. This Note was non-interest bearing and payable on the earlier of June 30, 2019 or the closing of the Initial Public Offering. On March 13, 2019, the Note balance of $300,000 was repaid in full.
18, 2021.
As of December 31, 20202021, the VCIP and 2019, an affiliateOBIP awards were paid in full and the fair value of the Company paid administrative expenses for an aggregateVCIP and OBIP accrued liability was transferred out of $624,013the Level 2 fair value measurement and $454,757, respectively,reduced to zero.
LIVEVOX HOLDINGS, INC.
Notes to the Company, for a net accrual of $493 and $121,694, respectively, which is reflectedConsolidated Financial Statements
Changes in the
accompanying consolidated balance sheets. These amounts are due on demand and are non-interest bearing.Administrative Support Agreement
On March 7, 2019, the Company entered into an agreement to pay $10,000 a month for office space, utilities, administrative and support services to an affiliateLevel 3 Fair Value Measurement
The changes in fair value of the SponsorLevel 3 liabilities are as follows (dollars in thousands):
| | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Balance, beginning of period | $ | 286 | | | $ | 286 | |
| VCIP/OBIP liability transferred out of Level 3 | (286) | | | — | |
| Closing-date fair value of warrant liability | 2,008 | | | — | |
| Changes in fair value of warrant liability | (1,241) | | | — | |
| | | |
| | | |
| | | |
| Balance, end of period | $ | 767 | | | $ | 286 | |
During the year ended December 31, 2021, the gain recognized due to decrease in the fair value of warrant liability was $1.2 million and will terminatewas recorded within other expense, net in the agreement uponconsolidated statements of operations and comprehensive loss. There were no gains or losses recognized due to change in the earlier of an initial business combination or the liquidation of the Company. Forfair value during the years ended December 31, 2020 and 2019,2019.
22. Basic and Diluted Loss Per Share
As discussed in Note 3, the shares and corresponding capital amounts and earnings per share available for common stockholders, prior to the Merger, have been retroactively restated as shares reflecting the exchange ratio established in the Merger. As a result of the Merger, the Company
incurred expenseshas retrospectively adjusted the weighted-average number of
$120,000 and $98,065, respectively, which are included in general and administrative expenses on the accompanying consolidated statementsshares of
operations, of which $0 and $60,000 were payable as of December 31, 2020 and 2019, respectively, and included in accounts payable and accrued expenses on the accompanying consolidated balance sheets.5. Stockholders’ Equity
Common Stock
The authorized common stock outstanding prior to June 18, 2021 by multiplying them by the exchange ratio of the Company includes up66,637 used to 500,000,000 shares of Class A common stock and 25,000,000 shares of Class F common stock. If the Company enters into an initial business combination, it may (depending on the terms of such an initial business combination) be required to increasedetermine the number of shares of Class A common stock into which they converted.
Basic net loss per share is calculated by dividing net loss by the
Company is authorized to issue at the same time as the Company’s stockholders vote on an initial business combination to the extent the Company seeks stockholder approval in connection with an initial business combination. Holdersweighted average number of
the Company’s common stock are entitled to one vote for each share of common stock.As of December 31, 2020 and 2019, there were 1,237,702 and 988,555, respectively, of Class A common stock issued and outstanding, excluding 23,762,298 and 24,011,445, respectively, shares of Class A common stock subjectoutstanding during the period, and excludes any dilutive effects of employee stock-based awards. Diluted net loss per share is computed giving effect to possible redemption.
As of December 31, 2020 and 2019, there were 6,250,000all potentially dilutive shares of Class FA common stock, issuedincluding Class A common stock issuable upon vesting of stock-based payment awards and outstanding.
Preferred Stock
contingent earnout shares. Basic and diluted loss per share was the same for each period presented as the inclusion of all potential Class A common stock outstanding would have been antidilutive.
The
Company is authorized to issue 5,000,000computation of loss per share and weighted average shares
of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of December 31, 2020 and 2019, there were no shares of preferred stock issued or outstanding.6. Fair Value Measurements
The Company classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with FASB ASC 320 “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying consolidated balance sheets and adjusted for the amortization or accretion of premiums or discounts.
The Company follows the guidance in FASB ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The Company did not have any held to maturity securities as of December 31, 2020.
F-14
The gross holding gains and fair value of held-to-maturity securities as of December 31, 2019 are as follows:
Held-To-Maturity | | Amortized Cost | | | Gross Holding Gains | | | Fair Value | |
U.S Treasury Securities (Matured 3/12/2020) | | $ | 253,551,083 | | | $ | 6,361 | | | $ | 253,557,444 | |
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1— Quoted prices in active marketscommon stock outstanding for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2— Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3— Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability.
As of December 31, 2020, assets held in the Trust Account were comprised of $253,628,041 in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government obligations. As of December 31, 2019, assets held in the Trust Account were comprised of $253,551,083 in U.S. Treasury bills and $18,376 in cash. Cash, money market funds and U.S. Treasury bills are classified as Level 1 securities.
7. Income Taxes
The income tax provision consists of the following:
| | For the years ended December 31, |
| | 2020 | | 2019 |
Current | | | | | | |
Federal | | $ | 93,518 | | $ | 817,897 |
State | | | 43,212 | | | 377,710 |
Deferred | | | | | | |
Federal | | | (524,082) | | | (68,511) |
State | | | (197,599) | | | - |
Change in valuation allowance | | | 721,681 | | | 68,511 |
Income tax provision expense | | $ | 136,730 | | $ | 1,195,607 |
The Company’s net deferred tax assets are as follows:
| | As of December 31, |
| | 2020 | | 2019 |
Deferred tax assets: | | | | | | |
Startup/organizational costs | | $ | 885,206 | | $ | 70,106 |
Valuation allowance | | | (885,206) | | | (70,106) |
Deferred tax assets, net of allowance | | $ | - | | $ | - |
As of December 31, 2020 and 2019, the Company had a deferred tax asset of $885,206 and $70,106, respectively, which had a full valuation allowance recorded against it.
F-15
The Company’s current taxable income primarily consists of interest income on the Trust Account. The Company’s general and administrative costs are generally considered to be start-up costs and are not currently deductible. During the years ended December 31, 2021, 2020, and 2019 are as follows (in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| Numerator: | | | | | | | | | |
| Loss attributable to common stockholders—basic and diluted | | | | | $ | (103,194) | | | $ | (4,645) | | | $ | (6,913) | |
| Denominator: | | | | | | | | | |
| Weighted average shares outstanding—basic and diluted | | | | | 79,964 | | | 66,637 | | | 66,637 | |
| Loss per share: | | | | | | | | | |
| Basic and diluted | | | | | $ | (1.29) | | | $ | (0.07) | | | $ | (0.10) | |
The following outstanding common stock equivalents were either considered antidilutive or were contingently issuable upon the Company recorded income tax expenseresolution of $136,730their contingencies, and $1,195,607, respectively, primarily relatedtherefore, excluded from the computation of diluted net loss per share attributable to interest income earnedcommon stockholders for the periods presented (in thousands):
LIVEVOX HOLDINGS, INC.
Notes to the Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended December 31, |
| | | | | 2021 | | 2020 | | 2019 |
| Earn-Out Shares | | | | | 5,000 | | — | | — |
| Lock-Up Shares | | | | | 2,544 | | — | | — |
Finders Agreement Shares (1) | | | | | 1,644 | | — | | — |
| Warrants to purchase common stock | | | | | 13,333 | | — | | — |
| RSUs | | | | | 4,981 | | — | | — |
| PSUs | | | | | 1,612 | | — | | — |
| Total | | | | | 29,114 | | — | | — |
(1) Represents 1,643,750 Class A common stock to be issued only if the price of Class A common stock trading on
Nasdaq exceeds certain thresholds during the
Trust Account.A reconciliationseven-year period beginning June 18, 2021 through June 18, 2028, pursuant to the terms of the statutory federal income tax rate toFinders Agreement. No contingent consideration shares were issued during the Company’s effective tax rate is as follows:
year ended December 31, 2021. | | For the years ended December 31, |
| | 2020 | | 2019 |
Statutory federal income tax rate | | 21.00 | % | | | 21.00% |
State taxes, net of federal tax benefit | | (1.45) | % | | | 7.56% |
Meals & entertainment | | (0.12) | % | | | 0.00% |
Valuation allowance | | (25.24) | % | | | 1.74% |
Effective tax rate | | (5.81) | % | | | 30.30% |
8.
23. Commitments and Contingencies
Risks
Commitments
As of December 31, 2021 and UncertaintiesOn March 11, 2020, the World Health Organization officially declared the outbreak$55.5 million and $56.5 million of the novel coronavirus (“COVID-19”)term loan principal was outstanding, respectively. The term loan is due December 31, 2025. S
ee Note 11 for more information. Contingencies
The Company is subject to the possibility of various gain or loss contingencies arising in the ordinary course of business that will ultimately be resolved depending on future events. The Company considers the likelihood of loss or impairment of an asset, or the incurrence of a “pandemic.” A significant outbreakliability, as well as the ability to reasonably estimate the amount of COVID-19loss, in determining loss contingencies. An estimated loss contingency is accrued when information available prior to issuance of the consolidated financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the consolidated financial statements, and the amount or range of loss can be reasonably estimated. Legal costs are expensed as incurred. Gain contingencies are not recognized until they’re realized or realizable.
Indemnification Agreements
The Company has entered into indemnification agreements with its directors, officers and certain employees that will require us, among other infectious diseases could result in a widespread health crisisthings, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. There are no claims that the Company is aware of that could adversely affecthave a material effect on its consolidated balance sheets, consolidated statements of operations and comprehensive loss, or consolidated statements of cash flows.
Litigation and Claims
From time to time and in the economies and financial markets worldwide, and theordinary course of business, of any potential target business with which the Company consummate an initial business combination could be materially and adversely affected. Furthermore, the Company may be unablesubject to complete an initial business combination if continued concerns relating to COVID-19 restrict travel, limitvarious claims, charges, investigations, and litigation.
The Company is engaged in 3 collection actions against former customers who defaulted in their contractual obligations. NaN of those customers have filed counterclaims against LiveVox, also alleging breach of contract. LiveVox is vigorously defending against these counterclaims while pursuing its own claims and believes that the
ability to have meetings with potential investors or the target company’s personnel, vendors and services providerscounterclaims are
unavailable to negotiate and consummate a transaction in a timely manner.without merit. The
extent to which COVID-19 impacts the Company’s search for an initial business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, the Company’s ability to consummate an initial business combination, or the operations of a target business with which the Company
ultimately consummate an initial business combination, may be materially adversely affected.9. Business Combination
On June 24, 2020, the Company entered into an Agreement and Plan of Merger (the “F45 Merger Agreement”), by and among the Company, Function Acquisition I Corp, a Delaware corporation and a direct, wholly owned subsidiarydoes not expect that any of the Company, Function Acquisition II LLC,3 cases will have a Delaware limited liability company and a direct, wholly owned subsidiarymaterial adverse effect on its business operations or financial position. As of the Company, F45 Training Holdings Inc., a Delaware corporation (“F45”), and Shareholder Representative Services LLC, a Colorado limited liability company. For more information, please see the Company’s proxy statement/prospectus filed with the SEC on July 16, 2020.
On October 5, 2020, the Company and F45 entered into a Termination and Release Agreement, effective as of such date, pursuant to which the parties agreed to mutually terminate the F45 Merger Agreement. As a result of the termination of the F45 Merger Agreement, the F45 Merger Agreement will be of no further force and effect as well as each of the transaction agreements entered into in connection with the F45 Merger Agreement. For more information, please see the Company’s Form 8-K filed with the SEC on October 6, 2020.
See Note 10 included in these consolidated financial statements for a subsequent event regarding an initial business combination.
10. Subsequent Events
Management has performed an evaluation of subsequent events through the date of issuance of thethese consolidated financial statements,. a potential loss as a result of the aforementioned cases is neither probable nor estimable.
24. Subsequent Events
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the
consolidated financial
statements, except as disclosed below.On January 13, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, First Merger Sub, Second Merger Sub, LiveVox Holdings, Inc., a Delaware corporation (“LiveVox”), and GGC Services Holdco, Inc., a Delaware corporation, which provides for, among other things: (a) the merger of First Merger Sub with and into LiveVox,
F-16
statements.
with LiveVox being the surviving corporation of the merger and a direct, wholly owned subsidiary of the Company as a consequence of the merger (the “First Merger”); and (b) immediately following the First Merger and as part of the same overall transaction as the First Merger, the merger of LiveVox with and into Second Merger Sub, with Second Merger Sub being the surviving corporation of the merger (together with the First Merger, the “Mergers” and, collectively with the other transactions contemplated by the Merger Agreement, the “Business Combination”). The Merger Agreement and the transactions contemplated thereby were unanimously approved by the board of directors of the Company and LiveVox.
On February 17, 2021, the Company’s shareholders approved to extend the date by which the Company must (1) consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination, which the Company refers to as its initial business combination, (2) cease its operations except for the purpose of winding up if it fails to complete such initial business combination, and (3) redeem all of the shares of Class A Stock, included as part of the units sold in the Company’s Initial Public Offering, from March 12, 2021 to June 30, 2021.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
reportAnnual Report to be signed on its behalf by the undersigned thereunto duly authorized.
| Crescent Acquisition Corp
| | | | | | | |
| | LiveVox Holdings, Inc. |
| | |
Date: March 2, 202110, 2022 | By: | /s/ Todd M. Purdy Louis Summe |
| | |
| | Todd M. Purdy
Louis Summe |
| | Chief Executive Officer and Director |
| | (Principal Executive Officer) |
| | |
Date: March 2, 2021 10, 2022 | By: | /s/ Al Hassanein Gregg Clevenger |
| | |
| | Al Hassanein
Gregg Clevenger |
| | Executive Vice President and Chief Financial Officer |
| | (Principal Financial and Accounting Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this
reportAnnual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | | | | | | | | |
Date: March 2, 202110, 2022 | By: | /s/ Todd M. Purdy Louis Summe | | |
| | | | |
| | Todd M. Purdy
Louis Summe | | |
| | Chief Executive Officer and Director | | |
| | (Principal Executive Officer) | | |
| | | | |
Date: March 2, 2021 10, 2022 | By: | /s/ Al Hassanein Gregg Clevenger | | |
| | | | |
| | Al Hassanein
Gregg Clevenger | | |
| | Executive Vice President and Chief Financial Officer Director | | |
| | (Principal Financial and Accounting Officer) | | |
| | | | |
Date: March 2, 2021 10, 2022 | By: | /s/ Robert D. Beyer | | |
| | | | |
| | Robert D. Beyer | | |
| | Executive Chairman, Director
| | |
| | | | |
Date: March 2, 2021 10, 2022 | By: | /s/ Jean-Marc Chapus Stewart Bloom | | |
| | | | |
| | Jean-Marc Chapus
Stewart Bloom | | |
| | Chairman of the Board, Director
| | |
| | | | |
| Date: March 10, 2022 | By: | /s/ Leslie C.G. Campbell | | |
| | | | |
| | Leslie C.G. Campbell | | |
| | Director | | |
| | | | |
| Date: March 10, 2022 | By: | /s/ Doug Ceto | | |
| | | | |
| | Doug Ceto | | |
| | | | | | | | | | | | | | |
| | Director | | |
| | | | |
| Date: March 10, 2022 | By: | /s/ Rishi Chandna | | |
| | | | |
| | Rishi Chandna | | |
| | Director | | |
| | | | |
| Date: March 10, 2022 | By: | /s/ Susan Morisato | | |
| | | | |
| | Susan Morisato | | |
| | Director | | |
| | | | |
| Date: March 10, 2022 | By: | /s/ Bernhard Nann | | |
| | | | |
| | Bernhard Nann | | |
| | Director | | |
| | | | |
| Date: March 10, 2022 | By: | /s/ Kathleen Pai | | |
| | | | |
| | Kathleen Pai | | |
| | Director | | |
| | | | |
| Date: March 10, 2022 | By: | /s/ Marcello Pantuliano | | |
| | | | |
| | Marcello Pantuliano | | |
| | Director | | |
| | | | |
| Date: March 10, 2022 | By: | /s/ Todd Purdy | | |
| | | | |
| | Todd Purdy | | |
| | Director | | |
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