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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from    to

Commission file number [001-38825]
LIVEVOX HOLDINGS, INC.
(Name of Registrant as Specified In Its Charter)
 
Delaware
(State or other jurisdiction of
incorporation or organization)

82-3447941
(I.R.S. Employer Identification No.)

655 Montgomery Street, Suite 1000, San Francisco, CA 94111
(Address of principal executive offices, including zip code)

(844) 207-6663
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.0001 per shareLVOXThe NASDAQ Stock Market LLC
Redeemable Warrants, each whole Warrant exercisable to purchase one share of Class A common stock at an exercise price of $11.50LVOXWThe NASDAQ Stock Market LLC
Units, each consisting of one share of Class A common stock and one-half of one redeemable WarrantLVOXUThe NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes      No   

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).     Yes     No   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes        No  


APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

    Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐  Yes   No
APPLICABLE ONLY TO CORPORATE ISSUERS:

As of August 9, 2021, the registrant had 94,628,387 shares of Class A common stock, par value $0.0001 per share, issued and outstanding.


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TABLE OF CONTENTS
 
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q (this “Quarterly 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, other than statements of present or historical fact included in this Quarterly 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 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 Quarterly Report may include, for example, statements about:
the Company’s ability to maintain its listing on Nasdaq;
the Company’s ability to raise financing or complete acquisitions in the future;
the Company’s success in retaining or recruiting, or changes required in, its officers, key employees or directors;
the future financial performance of the Company;
the outcome of any legal proceedings that may be instituted against the Company;
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 will operate;
reliance on information systems and the ability to properly maintain the confidentiality and integrity of data;
the occurrence of cyber incidents or a deficiency in cybersecurity protocols;
the ability to obtain third-party software licenses for use in or with the Company’s products;
the business, operations and financial performance of the Company, including market conditions and global and economic factors beyond the Company’s control;
the impact of COVID-19 and related changes in base interest rates and significant market volatility on the Company’s business, our industry and the global economy;
the effect of legal, tax and regulatory changes; and
other statements preceded by, followed by or that include the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other risk factors included or incorporated by reference herein. Forward-looking statements reflect current views about LiveVox’s plans, strategies and prospects, which are based on information available as of the date of this Quarterly Report. Except to the extent required by applicable law, LiveVox undertakes no obligation (and expressly disclaims any such obligation) to update or revise the forward-looking statements whether as a result of new information, future events or otherwise.
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PART I—FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
LIVEVOX HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
As of June 30, 2021 and December 31, 2020
(In thousands, except per share data)
As of
June 30, 2021December 31, 2020
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$161,423 $18,098 
Restricted cash, current 1,368 
Accounts receivable, net15,850 13,817 
Deferred sales commissions, current1,797 1,521 
Prepaid expenses and other current assets5,390 2,880 
Total Current Assets184,460 37,684 
Property and equipment, net3,205 3,505 
Goodwill47,481 47,481 
Intangible assets, net22,425 18,688 
Operating lease right-of-use assets6,304 3,858 
Deposits and other538 2,334 
Deferred sales commissions, net of current3,709 3,208 
Deferred tax asset37  
Restricted cash, net of current100 100 
Total Assets$268,259 $116,858 
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$3,912 $3,521 
Accrued expenses53,721 11,667 
Deferred revenue, current1,178 1,140 
Term loan, current2,160 1,440 
Operating lease liabilities, current1,842 1,353 
Finance lease liabilities, current163 392 
Total current liabilities62,976 19,513 
Long term liabilities:
Line of credit 4,672 
Deferred revenue, net of current166 237 
Term loan, net of current53,236 54,604 
Operating lease liabilities, net of current5,038 3,088 
Finance lease liabilities, net of current25 38 
Deferred tax liability, net 193 
Warrant liability1,633  
Other long-term liabilities371 372 
Total liabilities123,445 82,717 
Commitments and contingencies (Note 10 and 22)
Stockholders’ equity:
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Preferred stock, $0.0001 par value per share; 25,000 shares authorized, none issued and outstanding as of June 30, 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 June 30, 2021 and December 31, 2020; 87,085 and 66,637 shares issued and outstanding as of June 30, 2021 and December 31, 2020
9 7 
Additional paid-in capital249,843 59,168 
Accumulated other comprehensive loss(192)(206)
Accumulated deficit(104,846)(24,828)
Total stockholders’ equity144,814 34,141 
Total liabilities & stockholders’ equity$268,259 $116,858 
    
The accompanying notes are an integral part of these consolidated financial statements.
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LIVEVOX HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Loss
For the Three and Six Months Ended June 30, 2021 and 2020
(Unaudited) (In thousands, except per share data)
For the three months ended June 30,For the six months ended June 30,
2021202020212020
Revenue$28,913 $22,505 $56,858 $49,024 
Cost of revenue21,615 9,613 32,795 19,585 
Gross profit7,298 12,892 24,063 29,439 
Operating expenses
Sales and marketing expense27,685 6,982 36,593 15,101 
General and administrative expense24,637 3,393 29,517 6,459 
Research and development expense30,169 4,765 36,349 9,503 
Total operating expenses82,491 15,140 102,459 31,063 
Loss from operations(75,193)(2,248)(78,396)(1,624)
Interest expense, net941 969 1,885 1,953 
Change in the fair value of warrant liability(375) (375) 
Other expense (income), net32 (50)25 82 
Total other expense, net598 919 1,535 2,035 
Pre-tax loss(75,791)(3,167)(79,931)(3,659)
Provision for income taxes52 352 87 413 
Net loss$(75,843)$(3,519)$(80,018)$(4,072)
Comprehensive loss
Net loss(75,843)(3,519)(80,018)(4,072)
Other comprehensive income (loss)(25)(9)14 (114)
Comprehensive loss$(75,868)$(3,528)$(80,004)$(4,186)
Net loss per share—basic and diluted$(1.08)$(0.05)$(1.17)$(0.06)
Weighted average shares outstanding—basic and diluted69,945 66,637 68,291 66,637 
The accompanying notes are an integral part of these consolidated financial statements.
 

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LIVEVOX HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
For the Three and Six Months Ended June 30, 2021 and 2020
(Unaudited) (In thousands)
Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
SharesAmount
Balance at December 31, 20191$ $58,619 $(218)$(20,183)$38,218 
Retroactive application of reverse recapitalization66,6367 (7) 
Balance at December 31, 2019, as converted66,637$7 $58,612 $(218)$(20,183)$38,218 
Foreign currency translation adjustment(105)(105)
Stock-based compensation157 157 
Net loss(553)(553)
Balance at March 31, 202066,637$7 $58,769 $(323)$(20,736)$37,717 
Foreign currency translation adjustment(9)(9)
Stock-based compensation156 156 
Net loss(3,519)(3,519)
Balance at June 30, 202066,637$7 $58,925 $(332)$(24,255)$34,345 

Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
SharesAmount
Balance at December 31, 20201$ $59,175 $(206)$(24,828)$34,141 
Retroactive application of reverse recapitalization66,6367 (7) 
Balance at December 31, 2020, as converted66,637$7 $59,168 $(206)$(24,828)$34,141 
Foreign currency translation adjustment39 39 
Stock-based compensation139 139 
Net loss(4,175)(4,175)
Balance at March 31, 202166,637$7 $59,307 $(167)$(29,003)$30,144 
Merger and PIPE financing 20,4482 190,397 190,399 
Foreign currency translation adjustment(25)(25)
Stock-based compensation139 139 
Net loss(75,843)(75,843)
Balance at June 30, 202187,085$9 $249,843 $(192)$(104,846)$144,814 
The accompanying notes are an integral part of these consolidated financial statements.
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LIVEVOX HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2021 and 2020
(Unaudited) (Dollars in thousands)
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For the six months ended June 30,
20212020
Operating activities:
Net loss$(80,018)$(4,072)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization962 923 
Amortization of identified intangible assets2,244 2,095 
Amortization of deferred loan origination costs72 71 
Amortization of deferred sales commissions832 552 
Non-cash lease expense801 679 
Stock compensation expense278 313 
Equity incentive bonus68,674  
Bad debt expense22 984 
Deferred income tax benefit(230)(310)
Change in the fair value of the warrant liability(375) 
Offering cost associated with Warrants recorded as liabilities41  
Changes in assets and liabilities
Accounts receivable(1,358)2,862 
Other assets(807)(460)
Deferred sales commissions(1,609)(843)
Accounts payable1,362 (743)
Accrued expenses218 611 
Deferred revenue(33)(5)
Operating lease liabilities(724)(623)
Other long-term liabilities(1)(12)
Net cash provided by (used in) operating activities(9,649)2,022 
Investing activities:
Purchases of property and equipment(604)(259)
Acquisition of businesses, net of cash acquired (20)
Asset acquisition1,326  
Net cash provided by (used in) investing activities722 (279)
Financing activities:
Proceeds from Merger and PIPE financing, net of cash paid157,383  
Repayment on loan payable(1,536)(576)
Repayment of drawdown on line of credit(4,672)4,672 
Repayments on finance lease obligations(242)(393)
Net cash provided by financing activities150,933 3,703 
Effect of foreign currency translation(49)(120)
Net increase in cash, cash equivalents and restricted cash141,957 5,326 
Cash, cash equivalents, and restricted cash beginning of period19,566 16,513 
Cash, cash equivalents, and restricted cash end of period$161,523 $21,839 

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For the six months ended June 30,
20212020
Supplemental disclosure of cash flow information:
Interest paid$1,805 $1,896 
Income taxes paid175 73 
Supplemental schedule of noncash investing activities:
Additional right-of-use assets$3,246 $ 
Contingent consideration in asset acquisition7,000  

Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets (dollars in thousands):

As of June 30,
20212020
Cash and cash equivalents$161,423 $20,388 
Restricted cash, current 1,343 
Restricted cash, net of current100 108 
Total cash, cash equivalents and restricted cash$161,523 $21,839 
The accompanying notes are an integral part of these consolidated financial statements.
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LIVEVOX HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Unaudited)
1.    Organization
LiveVox Holdings, Inc. (formerly known as Crescent Acquisition Corp), 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 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 “Closing Date” or “Closing”) Crescent Acquisition Corp (“Crescent”), a Delaware corporation, consummated the previously announced business combination pursuant to an Agreement and Plan of Merger, dated January 13, 2021 (the “Merger Agreement”, or the “Merger), by and among Crescent, Function Acquisition I Corp, a Delaware corporation and direct, wholly owned subsidiary of Crescent (“First Merger Sub”), Function Acquisition II LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of Crescent (“Second Merger Sub”), LiveVox Holdings, Inc., a Delaware corporation (hereinafter referred to as “Old LiveVox”), and GGC Services Holdco, Inc., a Delaware corporation, solely in its capacity as the representative, agent and attorney-in-fact (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”). Pursuant to the Merger Agreement, a business combination between Crescent and Old LiveVox was effected through the merger of First Merger Sub with and into Old LiveVox, with Old LiveVox continuing as the surviving corporation (the “First Merger” and collectively with the other transactions described in the Merger Agreement, the “Merger”). On Closing Date, Crescent changed its name to “LiveVox Holdings, Inc.” and Second Merger Sub, as the surviving entity of the Second Merger, changed its name to “LiveVox Intermediate LLC”. See Note 3 for further discussion of the Merger.
On June 22, 2021, the Company’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 Old LiveVox prior to the Merger and is a wholly owned subsidiary of the Company 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, Inc.” On March 21, 2014, LiveVox, Inc. and its subsidiaries were acquired by Old LiveVox. The principal United States operations of LiveVox, Inc. are located in San Francisco, California; New York City, New York; Columbus, Ohio and Atlanta, Georgia. LiveVox, Inc. has four main operating subsidiaries: LiveVox Colombia SAS which is wholly owned with an office located in Medellin, Colombia, LiveVox Private Solutions, LTD with an office located in Bangalore, India, Speech IQ, LLC located in Columbus, Ohio, and Engage Holdings, LLC (d/b/a BusinessPhone.com”) located in Columbus, Ohio. Additionally, LiveVox, Inc. has a wholly owned subsidiary, LiveVox International, Inc. that is incorporated in Delaware. LiveVox, Inc. and LiveVox International, Inc. own 99.99% and 0.01%, respectively, of LiveVox Private Solutions, LTD.
2.    Summary of Significant Accounting Policies
 
a)    Basis of Presentation and Principles of Consolidation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations or if they substantially duplicate the disclosures contained in the Company’s annual audited consolidated financial statements. Therefore, these unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes as
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LIVEVOX HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Unaudited)
of and for the year ended December 31, 2020 included in Crescent’s Definitive Proxy Statement (the “Proxy”) on Schedule 14A filed with the SEC on May 14, 2021. The information as of December 31, 2020 included in the consolidated balance sheets was derived from those audited consolidated financial statements.
As a result of the Merger completed on June 18, 2021, prior period share and per share amounts presented in the accompanying consolidated financial statements and these related notes have been retroactively converted as shares reflecting the exchange ratio established in the Merger Agreement.
In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. All intercompany transactions and balances have been eliminated in consolidation. Results of operations for the three and six months ended June 30, 2021 and 2020 are not necessarily indicative of the results to be expected for the full annual periods.
b)    Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. 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. 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, 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.
c)    Segment Information
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.
d)    Foreign Currency Translation
The financial position and results of the Company’s international subsidiaries are measured using the local currency as the functional currency. Revenues 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.
e)    Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments, which include cash, cash equivalents and accounts receivable approximate their fair values due to their short maturities. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of debt and finance lease obligations approximates fair value.
The Company’s Value Creation Incentive Plan (“VCIP”) and the Option-based Incentive Plan (“OBIP”) accrued liability has historically been determined by the Old LiveVox board of directors with assistance of management, and remeasured at each reporting period. As discussed in Note 2, on June 18, 2021, the Company consummated the previously announced Merger between Old LiveVox and Crescent, in which all outstanding VCIP and OBIP awards are fully vested. The VCIP and OBIP
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LIVEVOX HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Unaudited)
awards are paid to the plan participants in a combination of cash and shares in the third quarter of 2021. A liability was accrued for the cash portion of the bonus and the stock portion was recorded to additional paid-in capital for unissued equity shares. Upon consummation of the Merger on June 18, 2021, the fair value of the VCIP and OBIP accrued liability for the cash bonus payments is 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 from a Level 3 fair value measurement to a Level 2 fair value measurement as of June 30, 2021.
The Company’s contingent consideration liability related to BusinessPhone asset acquisition as of the Asset Acquisition Date (as defined below) was determined using Monte Carlo simulation based on various inputs, including projected revenue during the earn-out period, revenue volatility, and discount rate. As discussed in Note 4, as of June 30, 2021, the contingency is resolved and the final amount of consideration is based on the terms of the Acquisition Agreement (as defined below). Since the inputs used to measure fair value are directly or indirectly observable in the marketplace, asset acquisition contingent consideration liability was transferred from a Level 3 fair value measurement to a Level 2 fair value measurement as of June 30, 2021.
The Company employed option pricing models specific to the contractual terms of the Forward Purchase Warrants (as defined below) to determine their fair value at each reporting period, with changes in fair value recognized in the consolidated statements of operations and comprehensive loss. The Forward Purchase Warrants are classified as Level 3 fair value measurement and were valued using a Black-Scholes option-pricing model. Refer to Note 20 for more information.
f)    Liquidity and Capital Resources
LiveVox’s consolidated financial statements have been prepared assuming the Company will continue as a going concern for 12 months 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. The Company’s main sources of liquidity were cash generated by operating cash flows and debt. For the six months ended June 30, 2021 and 2020, the Company’s cash flow from operations was $(9.6) million and $2.0 million, respectively. The change in cash during the six months ended June 30, 2021 and 2020 was $142.0 million and $5.3 million, respectively. The Company had restricted cash of $0.1 million as of June 30, 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 the two acquisitions the Company made in 2019, included in the change in cash. The Company’s primary use of cash is for operation 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 development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced services offerings, the continuing market acceptance of the 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 the Merger. 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 LiveVox’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.
On June 18, 2021, the Company completed the Merger and raised net cash proceeds of $157.4 million, net of transaction costs. In conjunction with the Merger, the Company repaid in full the revolving
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LIVEVOX HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Unaudited)
portion of the Credit Facility of $4.7 million. The Company believes it has sufficient financial resources for at least the next 12 months from the date of this Quarterly Report.
g)    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.
h)    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 June 30, 2021 and December 31, 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 indemnifications of outstanding liabilities. Such amounts are retained temporarily for a period of 16.5 months and then remitted to the applicable stockholders; net of fees paid for indemnification liabilities. Since restricted cash amounts represent funds held for others, there is also a corresponding liability account. As of June 30, 2021, the Company has identified $0.1 million as restricted cash as 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.
i)    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 June 30, 2021 and December 31, 2020, the allowance for doubtful accounts was $1.3 million for both periods. 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 three and six months ended June 30, 2021 and 2020 were immaterial. The bad debt expense recorded for the three and six months ended June 30, 2021 was immaterial, and for the three and six months ended June 30, 2020 was $0.4 million and $1.0 million, respectively. The accounts written off for the three and six months ended June 30, 2021 was immaterial, and for the three and six months ended June 30, 2020 was $0.2 million for both periods.
j)    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
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LIVEVOX HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Unaudited)
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:

 Years
Computer equipment
3 - 5
Computer software3
Furniture and fixtures
5 - 10
Leasehold improvements5
Website development2
k)    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-based7
Technology-based
4 - 10
Customer-based
7 - 16
Trademark-based4
Workforce-based10
l)    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 at 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 six months ended June 30, 2021 and 2020, no triggering events have occurred that would require an impairment review of goodwill outside of the required annual impairment review. Refer to Note 7 for more information.
In testing for goodwill impairment, the Company first assesses qualitative factors. If based on the qualitative assessment, it is determined that 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, the Company will perform 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 three and six months ended June 30, 2021 and 2020.
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LIVEVOX HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Unaudited)
m)    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 three and six months ended June 30, 2021 and 2020.
n)    Amounts Due to Related Parties
In the ordinary course of business, the Company has and expects to continue to have transactions, including borrowings, with its stockholders and affiliates. Refer to Note 12 for more information.
o)    Concentration of Risk
Customer Concentration
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. Risks associated with cash 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. The Company’s customers are primarily in the receivables management, tele-sales and customer care industries.
During three and six months ended June 30, 2021, substantially all the Company’s revenue was generated in the United States. For the three and six months ended June 30, 2021 and 2020, 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 June 30, 2021 and December 31, 2020 individually represented 10% or more of the Company’s total accounts receivable.
  
Supplier Concentration
The Company relies on third parties for telecommunication, bandwidth, and co-location services that are included in cost of revenue.
As of June 30, 2021, two vendors accounted for approximately 38% of the Company’s total accounts payable. No other single vendor exceeded 10% of the Company’s accounts payable at June 30, 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.
p)    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 revenues 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 revenues are 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. Revenues are recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect 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.
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LIVEVOX HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Unaudited)
We determine 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.
We enter into contracts that can include various combinations of services, each of which are distinct and accounted for as separate performance obligations. Our cloud-based contact center solutions typically include a promise to provide continuous access to our hosted technology platform solutions through one of our 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. Our performance obligations are satisfied over time as the customer simultaneously receives and consumes the benefits as we perform our services. Our 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 are deemed to be specific to the month that the usage occurs, since the minimum usage commitments reset at the beginning of each month. We have determined these arrangements meet the variable consideration allocation exception and therefore, we recognize 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, we allocate the contract price to each performance obligation based on its relative standalone selling price (“SSP”). We generally determine SSP based on the prices charged to customers. In instances where SSP is not directly observable, such as when we do not sell the service separately, we determine the SSP 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 on a 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 less than 2% of revenue, is recognized over time as the services are rendered.
Deferred revenues represent billings or payments received in advance of revenue recognition and are 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 revenues that will be recognized during the succeeding twelve-month period are recorded as deferred revenues, current in
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LIVEVOX HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Unaudited)
the consolidated balance sheets, with the remainder recorded as deferred revenue, net of current in the Company’s consolidated balance sheets.
q)    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 are capitalized and amortized on a straight-line basis over the 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 three months ended June 30, 2021 and 2020 was $0.4 million and $0.3 million, respectively, and for the six months ended June 30, 2021 and 2020 was approximately $0.8 million and $0.6 million, respectively. No impairment loss was recognized during the three and six months ended June 30, 2021 and 2020.
r)    Advertising
The Company expenses non-direct response advertising costs as they are incurred. There were no advertising costs capitalized during the three and six months ended June 30, 2021 and 2020. Advertising expense was $0.1 million for the three months ended June 30, 2021 and immaterial for the three months ended June 30, 2020. For the six months ended June 30, 2021 and 2020, advertising expense was approximately $0.2 million for both periods. Advertising expense is included under sales and marketing expenses in the accompanying consolidated statements of operations and comprehensive loss.
s)    Research and Development Costs
Research and development costs, not related to the development of internal use software, are charged to operations as incurred. Research and development expenses primarily include payroll and employee benefit, consulting services, travel related, and software and support costs.
t)    Software Development Costs
The Company capitalizes 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 computer software. Refer to Note 6 for additional information. Software development costs are expensed as incurred until preliminary development efforts are successfully completed, management has authorized and committed project funding, and 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 three and six months ended June 30, 2021 and 2020.
u)    Income Taxes
Deferred 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 reported 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 valuation allowance is provided for
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LIVEVOX HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Unaudited)
deferred tax assets that, based on available evidence, are not expected to be realized. The Company recognized the effect of income tax positions only if those positions are more likely than not of being sustained. 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.
Uncertain Tax Positions
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. 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.
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 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 Company has elected to recognize the tax on GILTI as a period expense in the period of inclusion. As such, no deferred taxes are recorded on the Company’s temporary differences that might reverse as GILTI in future years.
v)    Employee and Non-Employee Incentive Plans
During 2014, the Company established two bonus incentive plans, the Value Creation Incentive Plan (which we refer to as the “VCIP”) and the Option-based Incentive Plan (which we refer to as the “OBIP”), pursuant to which eligible participants will receive a predetermined bonus based on the Company’s equity value at the time of a liquidity event, if the stockholder return associated with the liquidity event exceeds certain thresholds (as defined in the VCIP and OBIP). All of the Company’s executive officers and certain other key employees are eligible to participate in the VCIP and certain other employees are eligible to participate in the OBIP. Awards under the VCIP and OBIP are subject to both time-based and performance-based vesting conditions. 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. Under the VCIP, the value at payoff is further adjusted based on the stockholder returns resulting from the liquidity event while the OBIP has a minimum stockholder return. For a portion of each award, the liquidity event condition can be met post termination of service, as long as the time-based vesting period has been completed. The awards under the VCIP and OBIP may be settled in cash or shares, depending on the nature of the underlying liquidity event. The VCIP is structured as a percentage of shareholder returns following a liquidity event for which 15% is allocated for distribution and we have granted 9.3% as of June 30, 2021, of which 9.3% have met the time-based vesting condition. As of December 31, 2020, we have granted 9.3%, of which 5.7% have met the time-based vesting condition. The OBIP has 2.0 million potential award units and we have granted 1.8 million award units as of June 30, 2021, of which 1.8 million have met the time-based vesting condition. As of December 31, 2020, we have granted 1.8 million award units of which 1.5 million have met the time-based vesting condition. For accounting purposes, the vested awards based on time-based conditions are not reflected as issued or outstanding in the accompanying consolidated statements of stockholders’ equity until the liquidity event is met. 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 is contingent upon a liquidity event, the Company will not record compensation expense until a liquidity event occurs or unless they are repurchased, in which case the Company has recorded compensation expense equal to the vested or repurchase amount.
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Notes to the Consolidated Financial Statements (Unaudited)
During 2019, the LiveVox board of directors approved a one-time management liquidity program, in which certain executives with time-based vested VCIP awards were liquidated and paid out in cash. The Company has recorded this event as compensation expense within cost of revenue and operating expenses within the consolidated financial statements for the year ended December 31, 2019 in the amount of $8.7 million, of which $4.3 million is recorded in accrued bonuses and was paid out in fiscal 2020.
On October 31, 2020, the Company amended the VCIP and OBIP to expand the definition of a liquidity event to include a transaction where the Company merges with a special purpose acquisition company (which we refer to as a “SPAC”). In the event the Company merges with a SPAC, the vested VCIPs and OBIPs can be settled in cash, shares of the SPAC or a combination of both, at the sole discretion of the Company.
During the first quarter of 2020, the Company repurchased in cash a portion of time-based vested OBIPs and VCIPs from terminated employees at an amount deemed to be fair value. These transactions were $0.2 million for the six months ended June 30, 2020 and recorded within the Company’s consolidated financial statements within cost of revenue and operating expenses as compensation expense. There were no compensation expenses related to repurchases in the three and six months ended June 30, 2021 or the three months ended June 30, 2020.
As discussed in Note 1, on June 18, 2021, the Company consummated the previously announced Merger between Old LiveVox and Crescent, in which all outstanding VCIP and OBIP awards are fully vested. As of June 30, 2021, the total value of the incentive plans was $68.6 million, of which $68.6 million had met the time-based vesting condition. The VCIP and OBIP awards are paid to the plan participants in a combination of cash and shares. As of June 30, 2021, the liability accrued for the cash portion of the bonus under two plans was $36.0 million, and the stock portion of the bonus amounted to $32.6 million and was recorded to additional paid-in capital for unissued equity shares. The Company has recorded this event as compensation expense within cost of revenue and operating expenses in the consolidated statements of operations and comprehensive loss in the amount of $69.3 million for the three months ended June 30, 2021 and $69.7 million for the six months ended June 30, 2021, respectively. There were no compensation expenses related to the Merger in the three and six months ended June 30, 2020.
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 two plans was $0.3 million as of December 31, 2020 for the awards deemed probable of repurchase.
During 2019, LiveVox TopCo established a Management Incentive Unit program whereby the LiveVox board of directors has the power and discretion to approve the issuance of Class B Units 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 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 aforementioned SPAC does not meet the limited liability company agreement’s definition of a sale, it would 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
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LIVEVOX HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Unaudited)
to repurchase can be exercised for one year beginning on the latter 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 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 twelve recipients. The Company records compensation expense for the issued and outstanding Units based on the service condition reduced for actual forfeited Units. The Company recognizes 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. See Note 15 for further detail about compensation expenses related to MIUs.
w)    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.
x)    Public and Forward Purchase Warrants
Prior to the Merger, Crescent issued 7,000,000 private placement warrants (“Private Warrants”) and 12,500,000 public warrants (“Public Warrants”) at 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 has agreed to the cancellation of the 7,000,000 Private Warrants prior to 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 Old LiveVox. The 12,500,000 Public Warrants and the 833,333 Forward Purchase Warrants (collectively “Warrants”) remain after the Merger. Each whole warrant entitles the holder to purchase one share of the Company’s common stock at a price of $11.50 per share, subject to adjustments. The Warrants are exercisable at any time commencing the later of (a) 30 days after the completion of the Merger on June 18, 2021 and (b) 12 months from the date of the closing of Crescent’s IPO on March 7, 2019 and terminating five years after the completion of the Merger.
The Forward Purchase Warrants and the shares of common stock issuable upon the exercise of the Forward Purchase Warrants are transferable, assignable or salable after the completion of the Merger, subject to certain limited exceptions. Additionally, the Forward Purchase Warrants are 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 initial purchasers or their 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 13 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 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
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Notes to the Consolidated Financial Statements (Unaudited)
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.
On the consummation of the Merger, 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 June 30, 2021, the fair value of the Forward Purchase Warrants decreased to $1.6 million, included in warrant 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 20 for further information on fair value.
y)    Recently Adopted Accounting Pronouncements
ASU 2018-15—Intangibles—Goodwill and Other—Internal Use Software (Subtopic 350-40)
In August 2018, the FASB issued Accounting Standards Update (“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, 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 (SEC Rule 33-10786)
In May 2020, the SEC issued Final Rule Release 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses (SEC Rule 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. SEC Rule 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. SEC Rule 33-10786 became effective on January 1, 2021. Registrants are not required to comply with the new rules until the beginning of the registrant’s fiscal year beginning after December 31, 2020. Early adoption is permitted as long as all amendments are adopted in their entirety. The Company adopted all provisions of SEC Rule 33-10786 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 33-10825, 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 make pursuant to Regulation S-
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Notes to the Consolidated Financial Statements (Unaudited)
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 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 became effective on November 9, 2020. The Company’s adoption did not have any impact on its consolidated financial statements in this Quarterly Report but is expected to impact its Annual Reports on Form 10-K.
z)    Recently Issued Accounting Pronouncements
As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“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 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 FASB 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 (on an instrument-by-instrument basis) for eligible financial assets measured at amortized cost basis. In November 2019, the FASB issued ASU No. 2019- 11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which included various narrow-scope improvements and clarifications. In November 2019, FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). 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 Company will adopt this standard effective January 1, 2023. The Company is currently evaluating the impact this pronouncement will have on its consolidated financial statements.
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
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Notes to the Consolidated Financial Statements (Unaudited)
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 effective for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company will adopt this standard effective January 1, 2022. The Company is currently evaluating the impact this pronouncement will have on its consolidated financial statements.
SEC Final Rule Release 33-10890, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information (SEC Rule 33-10890)
In November 2020, the SEC issued Final Rule Release 33-10890, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information (SEC Rule 33-10890), which amends certain sections of Regulation S-K to modernize, simplify, and enhance Management’s Discussion and Analysis (“MD&A”), eliminate the requirement to provide 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 to the immediately preceding quarter. SEC Rule 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 time after the effective date (on an item-by-item basis), as long as they provide disclosure responsive to an amended item in its entirety. The Company is currently assessing the potential impacts the adoption of SEC Rule 33-10890 may have on its Annual Reports on Form 10-K and Quarterly Reports upon its adoption.
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 received aggregate consideration of $864.4 million and net cash proceeds of $157.4 million, of which $36.0 million cash bonus payments are payable and 3,578,711 shares of Class A common stocks are to be issued under the VCIP and OBIP plans as of June 30, 2021. 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 six months ended June 30, 2021 (dollars in thousands):

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Notes to the Consolidated Financial Statements (Unaudited)
Recapitalization
Cash proceeds from Crescent
Crescent’s cash in trust account$253,395 
Crescent’s cash and cash equivalents20 
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 Merger transaction costs(38,560)
Net cash proceeds from Merger and PIPE financing157,383 
Non-cash and previously expensed Merger transaction costs2,308 
Non-cash VCIP/OBIP stock bonus32,638 
Non-cash net assets assumed from Crescent37 
Non-cash offering cost associated with warrant liability (3)
41 
Less: warrant liability(2,008)
Net contribution from Merger and PIPE financing$190,399 
(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 and 833,333 warrants (the “Forward Purchase Agreement”).
(3) Capitalized offering costs related to Forward Purchase Warrants which have been expensed in the consolidated statement 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 present the number of shares of the Company’s common stock outstanding immediately following the consummation of the Merger (in thousands):

Number of Shares
Class A common stock of Crescent, outstanding prior to Closing24,988 
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 Closing19,667 
Class F common stock of Crescent converted into Class A common stock on a one-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 Closing74,962 
Shares of Class A common stock outstanding immediately after Closing, including Escrowed Shares94,629 
Less: Escrowed Shares (6)
(7,544)
Total shares of Class A common stock outstanding immediately after Closing, excluding Escrowed Shares87,085 
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Notes to the Consolidated Financial Statements (Unaudited)
(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 the Nasdaq exceeds certain thresholds during the seven-year period following the closing of the Merger pursuant to the terms of the Merger Agreement. No contingent consideration shares were issued or released during the six months ended June 30, 2021.
(4) As additional consideration payable to LiveVox Stockholders, 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 the Nasdaq exceeds certain thresholds during the seven-year period following the closing of the Merger pursuant to the terms of the Merger Agreement. No contingent consideration shares were issued or released during the six months ended June 30, 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, known collectively as the “Escrowed Shares” are accounted for as equity classified equity instruments, were included as merger consideration as part of the Reverse Recapitalization, and recorded in additional paid-in capital. Any Escrowed Shares not released from escrow within the seven-year period following the closing of the Merger 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 of approximately $4.5 million related to the equity issuance, 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 reduction of cash proceeds rather than expensed as incurred. For the three and six months ended June 30, 2021, the Company incurred direct and incremental costs of $0.8 million and $2.6 million, respectively. In addition, the Company incurred $2.0 million in costs such as accounting, investor relations, etc. Since these costs were not incremental or directly attributable to the Merger, they were expensed as incurred. During the three and six months ended June 30, 2021, $0.6 million and $1.3 million of transaction costs were recorded to operating expenses within our consolidated statements of operations and comprehensive loss, respectively.
4.    Acquisitions
BusinessPhone Asset Acquisition
On February 5, 2021 (the “Asset Acquisition Date”), the Company entered into a Unit Purchase Agreement (the “Acquisition Agreement”) with the shareholders of Engage Holdings, LLC (d/b/a “BusinessPhone.com”), a reseller of enterprise-grade Cloud Contact Center and Voice Over Internet Protocol (“VoIP”) telephony solutions, for the purchase 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 is due by September 2021. Before the acquisition, BusinessPhone has 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. We 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, we determined that substantially all of fair value of the gross assets acquired was concentrated in a single identifiable asset, which was customer relationship.
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Notes to the Consolidated Financial Statements (Unaudited)
Accordingly, the acquired set of assets and activities did not meet the definition of a business. As a result, we accounted for the acquisition of BusinessPhone as an asset acquisition as opposed to a business combination and allocated the cost of 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, we 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 consideration5,969 
Direct transaction costs284 
Total cost of the asset acquisition$7,003 

Amount
Assets acquired
Cash and cash equivalents$784 
Restricted cash826 
Accounts receivable, net696 
Deposits and other78 
Property and equipment, net76 
Intangible assets, net:
Customer relationship5,600 
Acquired workforce380 
Total assets acquired8,440 
Liabilities assumed
Accounts payable439 
Accrued expenses and other182 
Short-term debt816 
Total liabilities assumed1,437 
Net identifiable assets acquired$7,003 

The identified intangible assets acquired as part of this asset acquisition were customer relationship 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. Intangible asset is amortized on a straight-line basis.
As of June 30, 2021, the contingency is resolved and the final amount of consideration is determined to be $7.0 million which is based on the terms of the Acquisition Agreement. Since the consideration is not paid as of June 30, 2021, the amount of contingent consideration liability recognized as of June 30, 2021 was adjusted to $7.0 million. The Company will continue to monitor the contingent consideration at each reporting period. 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.
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Notes to the Consolidated Financial Statements (Unaudited)
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 June 30, 2021 or December 31, 2020 (dollars in thousands):
 
 June 30, 2021  December 31, 2020
Accounts receivable, net$15,850 $13,817 
Contract liabilities, current (deferred revenue)1,178 1,140 
Contract liabilities, non-current (deferred revenue)166 237 
Changes in the contract liabilities balances are as follows (dollars in thousands):

 June 30, 2021  December 31, 2020  $ Change
Contract liabilities (deferred revenue)$1,344 $1,377 $(33)
The decrease 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 $0.4 million and $1.0 million was recognized during the three and six months ended June 30, 2021, respectively, which were included in the deferred revenue balance at the beginning of the period.
Remaining Performance Obligations
The Company’s contract terms typically range from one to three years. Revenue as of June 30, 2021 that has not yet been recognized was approximately $142.2 million and represents the contracted minimum usage commitments and does not include an estimate of additional usage in excess of contractual minimum commitments. The Company expects to recognize revenue on the remaining performance obligations over the next 61 months.
6.    Property and Equipment
Property and equipment consisted of the following at June 30, 2021 and December 31, 2020 (dollars in thousands):
 
June 30, 2021December 31, 2020
Computer software$1,253 $1,226 
Computer equipment8,524 7,965 
Furniture and fixtures1,170 1,152 
Leasehold improvements1,102 1,064 
Total12,049 11,407 
Less: accumulated depreciation and amortization(8,844)(7,902)
Property and equipment, net$3,205 $3,505 
 
Depreciation and amortization expense for property and equipment for the three months ended June 30, 2021 and 2020 totaled $0.5 million for both periods, and totaled $1.0 million and $0.9 million for the six months ended June 30, 2021 and 2020, respectively. Amortization of computer software charged to operations for the six months ended June 30, 2021 and 2020 was $0.1 million for both periods, and is included in depreciation expense. Amortization of computer software charged to operations for the three months ended June 30, 2021 and 2020 was immaterial for both periods.
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Table of Contents

LIVEVOX HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (Unaudited)
7.    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.
Subsequent to the annual impairment test completed during the fourth quarter of 2020, the Company believes there have been no significant events or circumstances negatively affecting the valuation of goodwill. For the three and six months ended June 30, 2021 and 2020, there was no impairment to the carrying value of the Company’s goodwill.
The changes in the carrying amount of goodwill for the six months ended June 30, 2021 and the year ended 2020, are as follows (dollars in thousands):

June 30,
2021
December 31,
2020
Balance, beginning of the year$47,481 $47,461 
Addition 20 
Balance, end of period$47,481 $47,481 
Identified Intangible Assets
Intangible assets were acquired in connection with the Company’s acquisition by Golden Gate Capital, and the acquisition of Teckst Inc., SpeechIQ LLC and BusinessPhone in March 2014, October 2019, December 2019, and February 2021, respectively.
Amortization expense related to the Company’s identified intangible assets was $1.1 million and $1.0 million for the three months ended June 30, 2021 and 2020, respectively, and $2.2 million and $2.1 million for the six months ended June 30, 2021 and 2020, respectively. On the face of the consolidated statements of operations and comprehensive loss 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 June 30, 2021 (dollars in thousands):

CostAccumulated
Amortization
Carrying
Amount
Weighted Average
Remaining Life
(In Years)
Marketing-based$1,400 $(1,216)$