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ORGANIZATION AND DESCRIPTION OF BUSINESS | 6 Months Ended
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Jun. 30, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
ORGANIZATION AND DESCRIPTION OF BUSINESS | ORGANIZATION AND DESCRIPTION OF BUSINESS System1, Inc. and subsidiaries (“System1”, or the “Company”, f/k/a Trebia Acquisition Corp.) operates an omnichannel customer acquisition platform, delivering high-intent customers to advertisers and sells antivirus software packages to end user customers. The Company provides its omnichannel customer acquisition platform services through its proprietary responsive acquisition marketing platform, or RAMP. Operating seamlessly across major advertising networks and advertising category verticals to acquire users on its behalf, RAMP allows the Company to monetize such users through its relationships with third party advertisers and advertising networks, which the Company refers to as its Advertising Partners. RAMP also allows third party advertising platforms and publishers, which the Company refers to as its Network Partners, to send user traffic to, and monetize user traffic on, the Company’s owned and operated websites. RAMP operates across the Company’s network of owned and operated websites and related products, allowing the Company to monetize user traffic that the Company sources from various acquisition marketing channels, including Google, Facebook, Taboola, Snapchat and TikTok. The Company, through Protected.net, also provides antivirus software solutions to its customers, offering its customers a single packaged solution that provides protection and reporting to the end user. The Company delivers its antivirus software solutions directly to end-user customers across the world. The antivirus software solutions product offering comprises a core security package with varying levels of extra protection based on a customer's specific needs. The Company’s primary operations are in the United States; however, the Company also has operations in Canada, the United Kingdom, and the Netherlands. Operations outside the United States are subject to risks inherent in operating under different legal systems and various political and economic environments. Among these risks are changes in existing tax laws, possible limitations on foreign investment and income repatriation, government foreign exchange controls, and exposure to currency exchange fluctuations. The Company does not engage in hedging activities to mitigate its exposure to fluctuations in foreign currency exchange rates. For the purposes of the condensed consolidated financial statements, periods on or before January 26, 2022 reflect the financial position, results of operations and cash flows of S1 Holdco and its consolidated subsidiaries prior to the Merger transaction (as defined in Note 3), referred to herein as the “Predecessor,” and periods beginning on or after January 27, 2022 reflect the financial position, results of operations and cash flows of the Company and its consolidated subsidiaries as a result of the Merger transaction, referred to herein as the “Successor”. Revenue attributable to the United States of the total revenue were as follows:
| Successor |  |  | Predecessor |  | Successor |  |  | Predecessor
| Three Months Ended June 30, 2022 |  |  | Three Months Ended June 30, 2021 |  | Period from January 27, 2022 through June 30, 2022 |  |  | Period from January 1, 2022 through January 26, 2022 |  | Six Months Ended June 30, 2021
United States | 76 | % |  |  | 96 | % |  | 78 | % |  |  | 98 | % |  | 97 | %
Long-lived assets attributable to the United States and Canada represent 77% and 16% of total long-lived assets as of June 30, 2022 (Successor), respectively, and 99% and 1% of total long-lived assets as of December 31, 2021 (Predecessor), respectively. Going Concern As of June 1, 2023, the Company had not delivered audited financial statements for the fiscal year ended December 31, 2022 to Bank of America as required by the covenants of the Term Loan (refer to Note 12 – DEBT). The failure to timely deliver the audited financial statements is an event of default under the Term Loan and provides Bank of America the ability to immediately call the outstanding principal balances of the Term Loan and Revolving Facility of $430,000, as of the date of this filing, at the request of, or with the consent of, the required majority of lenders until such time that the audited financial statements are delivered to Bank of America. The Company does not have sufficient liquidity to settle the outstanding principal balances should they be called, nor has the Company identified sufficient alternative sources of capital. As a result, this matter raises substantial doubt about the Company’s ability to continue as a going concern. Upon delivery of the audited financial statements by the Company, the event of default will be remediated and, once remediated, Bank of America will no longer have the ability to call the outstanding principal balances on the Term Loan and Revolving Facility. Separate from the default under the Term Loan and Revolving Facility, in the third and fourth quarters of 2022, the Company experienced declining cash flows and financial performance as a result of deteriorating macroeconomic conditions, resulting in reductions in both advertiser and overall consumer demand for our marketing services. As of December 31, 2022, the Company had cash on hand of $24,606. The declining cash flows and financial performance also raised substantial doubt regarding the Company's ability to continue as a going concern for a period of one year following the date that the consolidated financial statements are issued. In response to the declining cash flows, the Company implemented a plan to raise additional financing. On April 10, 2023, the Company entered into an incremental revolver note (“2023 Revolving Note”) with related parties for $20,000 (refer to Note 12—DEBT for additional information regarding the 2023 Revolving Note). As of the date of this filing, the available balance under the 2023 Revolving Note was $15,000. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. Restatement of Previously Issued Financial Statements The Company identified errors impacting the previously issued unaudited condensed consolidated financial statements for the periods indicated below. The Company analyzed the errors using Staff Accounting Bulletin (“SAB”) No. 99, Materiality and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, and determined the errors were material to the previously issued unaudited condensed consolidated financial statements. Accordingly, in accordance with Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections, the Company has restated herein the unaudited condensed consolidated statements of operations, of comprehensive income (loss), of changes in members’ deficit and of cash flows for the predecessor period from January 1, 2022 to January 26, 2022, the successor condensed consolidated balance sheet as of June 30, 2022 and the condensed consolidated statements of operations, of comprehensive income (loss), of changes in stockholders' equity and of cash flows for the Successor periods from January 27, 2022 to June 30, 2022 and from April 1, 2022 to June 30, 2022 and related footnote disclosures that were impacted by the errors. A description of the errors is as follows: I.Merger and business combination errors, and other errors impacting the successor period opening statement of stockholders’ equity: a.Valuation related errors - The Company identified the following valuation errors related to the Merger with S1 Holdco, LLC (“S1 Holdco”) and System1 SS Protected Holdings. Inc. (“Protected”) ("the Merger") which occurred on January 27, 2022 ("the Merger date") and the NextGen Shopping, Inc. d/b/a CouponFollow (“CouponFollow”) acquisition which occurred on March 4, 2022: i.Error in the valuation of acquired developed technology from S1 Holdco in the Merger due to incorrectly recording capitalized internal-use software costs that were already included in the valuation of the RAMP developed technology which overstated capitalized Internal-use software development costs by $11,312 and understated Goodwill by $11,312 as of the Merger date. As a result of this error, capitalized Internal-use software development costs, net, was overstated by $9,352 and Goodwill was understated by $11,312 as of June 30, 2022 and Depreciation and amortization expense was overstated by $1,118 and $1,960 for the Successor period three months ended June 30, 2022 and for the period from January 27, 2022 to June 30, 2022, respectively; ii.Errors in the valuation of intangible assets of S1 Holdco in the Merger due to the use of incorrect forecasts and assumptions that were not updated to reflect the facts and circumstances as of the date of the Merger, which understated intangible assets by $9,400 and overstated Goodwill by $9,400 as of the Merger date. The impact to the intangible assets as of the Merger date was as follows: trademarks were understated by $10,900 and customer relationship and developed technology intangible assets were overstated by $500 and $1,000, respectively. As a result of these errors, Intangible assets, net, was understated by $9,085 and Goodwill was overstated by $9,400 as of June 30, 2022 and Depreciation and amortization expense was understated by $186 and $315 for the Successor period three months ended June 30, 2022 and for the period from January 27, 2022 to June 30, 2022, respectively; iii.Errors in the valuation of intangible assets of Protected in the Merger due to the use of incorrect forecasts and assumptions that were not updated to reflect facts and circumstances as of the date of the Merger, which overstated intangible assets by $2,800 and understated Goodwill by $2,800 as of the Merger date. The impact to the intangible assets as of the Merger date was as follows: trademarks were overstated by $7,700 and customer relationships were understated by $4,900. As a result of these errors, Intangible assets, net, was overstated by $2,163 and Goodwill was understated by $2,800 as of June 30, 2022, and Depreciation and amortization expense was overstated by $506 and $638 for the Successor period three months ended June 30, 2022 and for the period from January 27, 2022 to June 30, 2022, respectively; iv.Errors in the valuation of intangible assets from the CouponFollow acquisition due to the use of incorrect forecasts and assumptions that were not updated to reflect facts and circumstances as of the date of the acquisition, which understated intangible assets by $11,900, and overstated Goodwill by $11,900 as of the acquisition date. As a result of these errors, Intangible assets, net was understated by $11,506 and Goodwill was overstated by $11,900 as of June 30, 2022 and Depreciation and amortization expense was understated by $305 and $394 for the successor period three months ended June 30, 2022 and for the period from January 27, 2022 to June 30, 2022, respectively. b.Not used c.Stock retirement error – The Company identified an error in the accounting for the repurchase and retirement of common stock that was incorrectly recorded to Additional paid-in capital upon the Merger rather than directly to Accumulated deficit. This error resulted in an understatement of Additional paid-in capital and Accumulated deficit by $31,167 as of January 27, 2022 and June 30, 2022. d.Forward purchase liability error – The Company identified an error in the opening balance sheet as of January 27, 2022 related to the accounting and valuation of a modification to a forward purchase contract classified as a liability with Cannae (as defined in Note 3). As further described in Note 3, on June 28, 2021, and as amended on January 10, 2022, the Trebia Sponsors agreed to forfeit up to 2,600 shares of Trebia Class B common stock in exchange for Cannae providing backstop funding for the Merger. This should have resulted in Trebia recording a forward purchase agreement liability on June 28, 2021, with mark-to-market adjustments to fair value at each future reporting date. The Company estimated the value of this liability immediately preceding the Merger based on the final redemptions and Cannae’s anticipated backstop funding and the impact of reversing the gain recorded upon termination of the original forward agreement with Cannae. This error resulted in an understatement of Accumulated deficit and Additional paid-in capital by $25,336 as of June 30, 2022. e.Tax related opening balance sheet errors - The Company identified tax related errors in the acquired assets and liabilities relating to the Merger and its other business acquisitions due to the valuation errors noted in (a) above and a failure to identify and record acquired tax assets and liabilities as follows: i.The Company identified tax related errors in the acquired assets and liabilities relating to S1 Holdco which, after consideration of measurement period adjustments originally recorded in the period, resulted in an understatement of prepaid expenses and other current assets of $2,537, an understatement of Other non-current assets of $27, an understatement of Accrued expenses and other current liabilities of $362, an overstatement of the Deferred tax liability of $5,844, and an overstatement of Goodwill of $8,047 as of the Merger date and June 30, 2022; ii.The Company identified tax related errors in the acquired assets and liabilities relating to Protected during the Merger which resulted in an understatement of Prepaid expenses and other current assets of $2,063, an understatement of Accrued expenses and other current liabilities of $1,744, an overstatement of the Deferred tax liability of $110, and an overstatement of Goodwill of $429 as of the Merger date and June 30, 2022; iii.The Company identified tax related errors in the acquired assets and liabilities relating to the CouponFollow acquisition which resulted in an overstatement of Accrued expenses and other current liabilities by $693, an understatement of Deferred tax liability by $2,802, and an understatement of Goodwill by $2,109 as of the acquisition date and June 30, 2022. II.Equity related errors: f.CouponFollow Incentive Plan error - The Company failed to record a post-combination bonus expense for the three months ended June 30, 2022 related to CouponFollow’s Incentive Plan. The impact of this error was an understatement of Salaries, commissions and benefits expense of $1,001 for the Successor period three months ended June 30, 2022 and the Successor period from January 27, 2022 to June 30, 2022 and an understatement of Accrued expenses and other current liabilities by $1,001 as of June 30, 2022. g.Stock based compensation - The Company identified errors in its accounting for stock-based compensation arrangements as follows: i.Errors in accounting for Class F Unit ("F units") awards relating to the modification of the awards and the attribution of compensation cost between purchase consideration and post-combination expense due to the incorrect use of graded vesting for expense recognition subsequent to the Merger rather than recognizing expense on a straight-line basis; the determination of the fair value of awards upon the Merger; a spreadsheet formula error; and the accounting for forfeitures of awards subsequent to the Merger. In the Predecessor period there was an overstatement of Additional paid-in capital and an overstatement of Stock-based compensation expense of $3,993. As a result of these errors, Goodwill was overstated by $4,115, Accrued expenses and other current liabilities was overstated by $159, Other liabilities was overstated by $147, Additional paid-in capital was understated by $6,774, and Accumulated other comprehensive income was overstated by $1 as of June 30, 2022. In addition, these errors resulted in an understatement of stock-based compensation included in Salaries, commissions and benefits of $497 and $10,582 for the Successor period three months ended June 30, 2022 and for the period from January 27, 2022 through June 30, 2022, respectively; ii.Errors in accounting for Value Creation Unit ("VCU") awards relating to the modification of the awards and the attribution of compensation cost between purchase consideration and post-combination expense due to the incorrect use of graded vesting for expense recognition subsequent to the Merger rather than recognizing expense on a straight-line basis; the determination of the fair value of awards upon the Merger; and the accounting for forfeitures of awards subsequent to the Merger. As a result of these errors, Goodwill was overstated by $7,133, Accrued expenses and other current liabilities was overstated by $512, Other liabilities was overstated by $1,390, and Additional paid-in capital was overstated by $4,036 as of June 30, 2022. In addition, these errors resulted in an understatement of stock-based compensation included in Salaries, commissions and benefits of $1,017 and $1,195 for the Successor period three months ended June 30, 2022 and for the period from January 27, 2022 through June 30, 2022, respectively; iii.Errors in the accounting for restricted stock awards issued to the SPAC sponsors, which should have been treated as an equity exchange on the Merger date rather than as compensation expense in the Successor period from January 27, 2022 to June 30, 2022 As a result, Salaries, commissions, and benefits was overstated by $0 and $12,746 in the Successor period three months ended June 30, 2022 and the period from January 27, 2022 to June 30, 2022 and Additional paid-in capital was overstated by $12,746 as of June 30, 2022; iv.Error in the accounting and valuation for Sponsor Promote Shares which should have been recorded in the Successor period from January 27, 2022 to June 30, 2022 rather than the Trebia financial statements as of January 26, 2022. As a result, Additional paid-in capital and Accumulated deficit were overstated by $8,079 in opening shareholders' equity as of January 27, 2022. This error resulted in an understatement of Additional paid-in capital of $288 as of June 30, 2022. Additionally, this error resulted in an understatement of stock-based compensation expense included in Salaries, commissions and benefits of $0 and $7,706 and an understatement of Selling, general and administrative expense of $0 and $661 for the Successor period three months ended June 30, 2022 and the period from January 27, 2022 to June 30, 2022, respectively. h.Stock based compensation errors, other - The Company identified other errors relating to the improper accounting for equity awards, which overstated Goodwill by $518 and overstated Additional paid-in capital by $518 as of the Merger date. These errors resulted in an understatement of stock-based compensation expense included in Salaries, commissions and benefits of $1,473 for the Successor period three months ended June 30, 2022 and the period from January 27, 2022 to June 30, 2022, respectively. As a result of these errors, Goodwill was overstated by $518 and Additional paid-in capital was understated by $955 as of June 30, 2022. III.Other errors: i.Non-controlling interest errors - The Company identified errors related to its calculation of net loss attributable to non-controlling interests due to the inclusion of entities that did not have non-controlling interests. In addition, the Company has corrected Net loss attributable to non-controlling interest for other errors described herein. The impact of the errors was an understatement of Accumulated other comprehensive income by $368 an overstatement of Accumulated deficit by $2,420, and an overstatement of Non-controlling interest by $2,788 as of June 30, 2022. Net loss attributable to non-controlling interest was understated by $3,240 and $2,481 for the Successor period three months ended June 30, 2022 and for the period from January 27, 2022 to June 30, 2022, respectively. As a result of these adjustments, Comprehensive loss attributable to non-controlling interest was understated by $3,234 and $2,469 for the Successor three months ended June 30, 2022 and the period from January 27, 2022 through June 30, 2022. j.Internal-use software development costs – The Company identified errors in the capitalization of internal-use software costs subsequent to the Merger which resulted in an understatement of Internal-use software development costs, net by $1,316 as of June 30, 2022 and an overstatement of Salaries, commissions, and benefits expense by $36 and $519, and an overstatement of Depreciation and amortization expense by $170 and $797 for the Successor period three months ended June 30, 2022 and the period from January 27, 2022 through June 30, 2022, respectively. k.Accrual related errors - The Company identified various errors in accruals at period ends which impacted the Predecessor and Successor Periods. These errors had the impact of overstating Cost of revenues by $261 and understating Selling, general and administrative expense by $744 in the Predecessor period from January 1, 2022 to January 26, 2022 and understating Accrued expenses and other current liabilities by $319 and overstating Prepaid expenses and other current assets by $164 as of the Merger date. These errors also had the impact of understating Cost of revenues by $0 and $261 and Selling, general and administrative expense by $537 and $92 in the Successor period three months ended June 30, 2022 and for the period from January 27, 2022 to June 30, 2022, respectively, and understating Accrued expenses and other current liabilities and Goodwill by $836 and $483, respectively, as of June 30, 2022. l.RoadWarrior contingent consideration errors - Errors in the valuation of contingent consideration for the RoadWarrior acquisition resulting from a misinterpretation of the arrangement. The Company erroneously recorded a liability in the opening balance sheet for contingent consideration; however, the arrangement does not include contingent consideration provisions. The impact of the error was an overstatement of Goodwill, Accrued expenses and other current liabilities, and Other liabilities by $540, $337, and $209, respectively, as of June 30, 2022. Additionally, Selling, general and administrative was overstated by $0 and $6 for the Successor period three months ended June 30, 2022 and the period from January 27, 2022 to June 30, 2022, respectively. m.Impact of errors on tax accounts: i.The income tax provision was recomputed based on the restated pre-tax income (loss) for the period, resulting in an understatement of Income tax benefit for the Successor period three months ended June 30, 2022 and the period from January 27, 2022 to June 30, 2022 by $3,454 and $1,851, respectively, and an overstatement of the related Deferred tax liability of $1,851 as of June 30, 2022; ii.As a result of the valuation errors identified in the opening balance sheet, the Company corrected the tax impacts of the Company’s contribution of the net assets of CouponFollow to System1 Opco, LLC immediately following the acquisition, resulting in an overstatement of the Deferred tax liability and an understatement of Additional paid-in capital of $3,573, as of June 30, 2022; iii.The Company identified errors in the reconciliation of its tax accounts as of June 30, 2022 which resulted in an overstatement of Prepaid expenses and other current assets by $1,973, an overstatement of Accrued expenses and other current liabilities of $2,032, an understatement of Deferred tax liability by $534 and an overstatement of Accumulated other comprehensive income of $475 as of June 30, 2022. The accumulated other comprehensive income adjustment was the result of the Company correcting for a foreign currency error incorrectly applied to deferred tax balances. n.Other classification errors - The Company identified classification errors between current and non-current Restricted cash and Accounts receivable, which overstated Restricted cash, current by $1,185, understated Restricted cash, non-current and Accounts receivable by $920 and $265, respectively, as of June 30, 2022. o.Other adjustments - In addition to the impacts of the adjustments described herein, the Company identified various adjustments primarily related to rounding. p.Impact of errors on foreign currency translation - As a result of the correction of the identified errors and preparation of the financial statements, the effects of foreign currency translation adjustments and their effects on other comprehensive income have also been reflected within the restated amounts. q.Cash flow errors - In addition to the impacts of adjustments to correct the statements of cash flows from the adjustments described above, the Company also determined that various line items within the operating activities section required the correction of errors and total cash flows within operating, investing, and financing activities were misstated due to errors resulting from incorrect support utilized by the Company in preparing the statements of cash flows. The aggregate impact of these errors to the consolidated statements of cash flows for the Successor period from January 27, 2022 to June 30, 2022 was an understatement of Share-based compensation of $38, an overstatement of decrease in Change in fair value of contingent consideration and CEO equity profit interest of $45, and overstatement of increase in Accounts receivable of $19, an understatement of increase in Prepaids and other assets of $863, an understatement of decrease in Accrued expenses and other liabilities of $7,274, an understatement of increase in Protected.net incentive plan liability of $5,694, an understatement of increase in Other long-term liabilities of $72, an understatement of Purchases of property and equipment of $25, an understatement of Capitalized software development costs of $77, an overstatement of Acquisitions of businesses, net of cash acquired of $1,886. The Company also identified other immaterial errors for the Successor period from January 27, 2022 to June 30, 2022 which have been corrected herein. r.Cash flow lease payments error - Cash lease payments of $784 for the Successor period from January 27, 2022 through June 30, 2022 were previously classified as noncash "Amortization of right-of-use-assets" rather than as lease liability outflows in changes in operating assets and liabilities in the statement of cash flows. s.Earnings per share error - The Company identified an error in its computation of weighted average number of shares which impacted the earnings per share disclosure for the Successor three months ended June 30, 2022 and the period from January 27, 2022 to June 30, 2022. Additionally, the Company did not appropriately include the impact of “in-the-money” warrants on the presentation of diluted earnings per share for the three months ended June 30, 2022. This error resulted in an increase in the diluted net loss per share by $(0.04) which was offset by the change in net income attributable to System1 impacts above. t.Not used The accompanying notes to the condensed consolidated financial statements have also been corrected to reflect the impacts of the adjustments described above. In addition, the Company has corrected the following disclosures errors: •Authorized share disclosure - The Company corrected disclosure of the number of authorized Class A common stock on the condensed consolidated balance sheet. •Merger disclosures - The Company corrected the disclosure in Note 3 related to the presentation of assets acquired and liabilities assumed from the Merger and the unaudited pro forma information due to errors resulting from incorrect support utilized in preparing the disclosures and incorrect application of adjustments to the pro forma information. •CouponFollow acquisition disclosures – The Company corrected the disclosure in Note 4 for transaction costs incurred for the CouponFollow acquisition that did not include total amounts incurred in 2021 and the amount of deferred contingent consideration; •Reportable segment goodwill disclosure - The Company corrected the disclosure in Note 6 related to errors in the allocation of goodwill from the Merger and other business acquisitions to its reportable segments; •Segment disclosures – The Company also corrected the disclosure in Note 16 related to errors in the allocation of revenues and adjusted gross profit to the Owned and Operated and the Partner Network segments. For the Predecessor period from January 1, 2022 to January 26, 2022, Owned and Operated segment revenue was overstated and Partner Network segment revenue was understated by $542 and Owned and Operated adjusted gross profit was overstated by $542 and Partner Network adjusted gross profit was understated by $91. For the Successor period three months ended June 30, 2022, Owned and Operated segment revenue was overstated and Partner Network segment revenue was understated by $5,754 and Owned and Operated adjusted gross profit was overstated by $5,754 and Partner Network adjusted gross profit was understated by $585. For the Successor period from January 27, 2022 to June 30, 2022, Owned and Operated segment revenue was overstated and Partner Network segment revenue was understated by $9,128 and Owned and Operated adjusted gross profit was overstated by $9,128 and Partner Network adjusted gross profit was understated by $1,022; •CouponFollow Incentive Plan disclosure - The Company corrected the disclosure in Note 18 to include the disclosure of terms of the CouponFollow Incentive Plan that were previously omitted; The following table summarizes the effect of the adjustments to correct errors on each affected financial statement line item impacting the condensed consolidated balance sheet as of June 30, 2022. The footnotes correspond to the error descriptions above:
| Successor
| June 30, 2022
| As Previously Reported |  | Adjustments |  | As Restated
ASSETS |  |  |  |  |
Current assets: |  |  |  |  |
Cash and cash equivalents | $ | 37,442 |  |  | $ | — |  |  | $ | 37,442 |
Restricted cash, current | 5,757 |  |  | (1,185) |  | (n) | 4,572 |
Accounts receivable | 93,397 |  |  | 265 |  | (n) | 93,662 |
Prepaid expenses and other current assets | 9,671 |  |  | 4,600 |  | (e) |
|  |  | (1,973) |  | (m) | 12,298 |
Total current assets | 146,267 |  |  | 1,707 |  |  | 147,974 |
Restricted cash, non-current | 1,532 |  |  | 920 |  | (n) | 2,452 |
Property and equipment, net | 4,330 |  |  | — |  |  | 4,330 |
Internal-use software development costs, net | 11,647 |  |  | (9,352) |  | (a) |
|  |  | 1,316 |  | (j) |
|  |  | (1) |  | (o) | 3,610 |
Intangible assets, net | 537,913 |  |  | 18,428 |  | (a) | 556,341 |
Goodwill | 907,248 |  |  | (7,188) |  | (a) |
|  |  | (6,367) |  | (e) |
|  |  | (11,248) |  | (g) |
|  |  | (518) |  | (h) |
|  |  | 483 |  | (k) |
|  |  | (540) |  | (l) |
|  |  | 1 |  | (o) |
|  |  | (501) |  | (p) | 881,370 |
Operating lease right-of-use assets | 7,533 |  |  | — |  |  | 7,533 |
Other non-current assets | 779 |  |  | 27 |  | (e) |
|  |  | (2) |  | (o) | 804 |
Total assets | $ | 1,617,249 |  |  | $ | (12,835) |  |  | $ | 1,604,414 |
LIABILITIES AND STOCKHOLDERS’ EQUITY/MEMBERS’ DEFICIT |  |  |  |  |
Current liabilities: |  |  |  |  |
Accounts payable | 17,286 |  |  | — |  |  | 17,286 |
Accrued expenses and other current liabilities | 97,752 |  |  | 1,413 |  | (e) |
|  |  | 1,001 |  | (f) |
|  |  | (671) |  | (g) |
|  |  | 836 |  | (k) |
|  |  | (337) |  | (l) |
|  |  | (2,032) |  | (m) |
|  |  | (3) |  | (o) | 97,959 |
Deferred revenue | 68,368 |  |  | — |  |  | 68,368 |
Operating lease liabilities, current | 2,065 |  |  | — |  |  | 2,065 |
Notes payable, current | 14,888 |  |  | — |  |  | 14,888 |
Total current liabilities | 200,359 |  |  | 207 |  |  | 200,566 |
Operating lease liabilities, non-current | 7,073 |  |  |  |  | 7,073 |
Notes payable, non-current | 406,026 |  |  | — |  |  | 406,026 |
Warrant liability | 13,669 |  |  | — |  |  | 13,669 |
Deferred tax liability | 137,354 |  |  | (3,152) |  | (e) |
|  |  | (4,890) |  | (m) |
|  |  | (2) |  | (o) | 129,310 |
Protected incentive plan liability | 18,163 |  |  | — |  |  | 18,163 |
Other liabilities | 7,482 |  |  | (1,537) |  | (g) |
|  |  | (209) |  | (l) |
|  |  | (1) |  | (o) | 5,735 |
Total liabilities | 790,126 |  |  | (9,584) |  |  | 780,542 |
Commitments and contingencies |  |  |  |  |
STOCKHOLDERS’ EQUITY / MEMBERS’ DEFICIT |  |  |  |  |
Class A common stock - $0.0001 par value; 500,000 shares authorized, 90,587 Class A shares issued and outstanding as of June 30, 2022 | 9 |  |  | — |  |  | 9 |
Class C common stock - $0.0001 par value; 25,000 shares authorized, 22,077 Class C shares issued and outstanding as of June 30, 2022 | 2 |  |  | — |  |  | 2 |
Additional paid-in capital | 761,002 |  |  | 31,167 |  | (c) |
|  |  | 25,336 |  | (d) |
|  |  | (9,720) |  | (g) |
|  |  | 955 |  | (h) |
|  |  | 3,573 |  | (m) |
|  |  | (4) |  | (p) | 812,309 |
Accumulated deficit | (118,373) |  |  | 1,888 |  | (a) |
|  |  | (31,167) |  | (c) |
|  |  | (25,336) |  | (d) |
|  |  | (1,001) |  | (f) |
|  |  | 681 |  | (g) |
|  |  | (1,473) |  | (h) |
|  |  | 2,420 |  | (i) |
|  |  | 1,316 |  | (j) |
|  |  | (353) |  | (k) |
|  |  | 6 |  | (l) |
|  |  | 1,851 |  | (m) |
|  |  | (17) |  | (o) |
|  |  | (45) |  | (p) | (169,603) |
Accumulated other comprehensive income (loss) | 179 |  |  | (1) |  | (e) |
|  |  | (1) |  | (g) |
|  |  | 368 |  | (i) |
|  |  | (475) |  | (m) |
|  |  | (39) |  | (o) |
|  |  | (452) |  | (p) | (421) |
Total stockholders’ equity/members’ deficit attributable to System1, Inc. | 642,819 |  |  | $ | (523) |  |  | 642,296 |
Non-controlling interest | 184,304 |  |  | (2,788) |  | (i) |
|  |  | 60 |  | (o) | 181,576 |
Total stockholders’ equity/members’ deficit | 827,123 |  |  | (3,251) |  |  | 823,872 |
Total liabilities and stockholders’ equity/members’ deficit | $ | 1,617,249 |  |  | $ | (12,835) |  |  | $ | 1,604,414 |
The following tables summarize the effect of the adjustments to correct errors on each affected financial statement line item for the periods indicated, impacting the condensed consolidated statements of operations. The footnotes correspond to the error descriptions above:
| Successor |  |  | Predecessor
| Three Months Ended June 30, 2022 |  |  | Period from January 27, 2022 through June 30, 2022 |  | Period from January 1, 2022 through January 26, 2022
| As Previously Reported |  | Adjustments |  | As Restated |  |  | As Previously Reported |  | Adjustments |  | As Restated |  |  | As Previously Reported |  | Adjustments |  | As Restated
Revenue | $ | 219,797 |  |  | $ | — |  |  | $ | 219,797 |  |  |  | $ | 385,905 |  |  | $ | — |  |  | 385,905 |  |  |  | $ | 52,712 |  |  |  |  | $ | 52,712 |
Operating costs and expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of revenues (excluding depreciation and amortization) | 152,558 |  |  | — |  |  | 152,558 |  |  |  | 272,689 |  |  | 261 |  | (k) |  |  |  | 41,760 |  |  | (261) |  | (k) |
|  |  |  |  |  |  |  |  |  | (8) |  | (o) | 272,942 |  |  |  |  |  | 8 | (o) | 41,507 |
Salaries, commissions, and benefits | 45,555 |  |  | 1,001 |  | (f) |  |  |  | 89,014 |  |  | 1,001 |  | (f) |  |  |  | 35,175 |  |  | (3,993) |  | (g) |
|  |  | 1,514 |  | (g) |  |  |  |  |  | 6,737 |  | (g) |  |  |  |  |  | (1) |  | (o) | 31,181 |
|  |  | 1,473 |  | (h) |  |  |  |  |  | 1,473 |  | (h) |  |  |  |  |  |  |  |
|  |  | (36) |  | (j) |  |  |  |  |  | (519) |  | (j) |  |  |  |  |  |  |  |
|  |  | 4 |  | (o) | 49,511 |  |  |  |  |  | 3 |  | (o) | 97,709 |  |  |  |  |  |  |  |
Selling, general, and administrative | 16,167 |  |  | 537 |  | (k) |  |  |  | 31,148 |  |  | 661 |  | (g) |  |  |  | 14,817 |  |  | 744 |  | (k) |
|  |  | 43 |  | (p) | 16,747 |  |  |  |  |  | 92 |  | (k) |  |  |  |  |  | 104 |  | (o) | 15,665 |
|  |  |  |  |  |  |  |  |  | (6) |  | (l) |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | (103) |  | (o) |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | 43 |  | (p) | 31,835 |  |  |  |  |  |  |  |
Depreciation and amortization | 33,397 |  |  | (1,133) |  | (a) |  |  |  | 56,708 |  |  | (1,889) |  | (a) |  |  |  | 1,000 |  |  | — |  |  | 1,000 |
|  |  | (170) |  | (j) | 32,094 |  |  |  |  |  | (797) |  | (j) | 54,022 |  |  |  |  |  |  |  |
Total operating costs and expenses | 247,677 |  |  | 3,233 |  |  | 250,910 |  |  |  | 449,559 |  |  | 6,949 |  |  | 456,508 |  |  |  | 92,752 |  |  | (3,399) |  |  | 89,353 |
Operating income (loss) | (27,880) |  |  | (3,233) |  |  | (31,113) |  |  |  | (63,654) |  |  | (6,949) |  |  | (70,603) |  |  |  | (40,040) |  |  | 3,399 |  |  | (36,641) |
Other expense (income): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense | 7,324 |  |  | — |  |  | 7,324 |  |  |  | 12,100 |  |  | — |  |  | 12,100 |  |  |  | 1,049 |  |  | — |  |  | 1,049 |
Change in fair value of warrant liabilities | (4,139) |  |  | — |  |  | (4,139) |  |  |  | 9,622 |  |  | — |  |  | 9,622 |  |  |  | — |  |  | — |  |  | — |
Total other expense | 3,185 |  |  | — |  |  | 3,185 |  |  |  | 21,722 |  |  | — |  |  | 21,722 |  |  |  | 1,049 |  |  | — |  |  | 1,049 |
Income (loss) before income tax | (31,065) |  |  | (3,233) |  |  | (34,298) |  |  |  | (85,376) |  |  | (6,949) |  |  | (92,325) |  |  |  | (41,089) |  |  | 3,399 |  |  | (37,690) |
Income tax (benefit) provision | 3,000 |  |  | (3,454) |  | (m) | (454) |  |  |  | (13,252) |  |  | (1,851) |  | (m) | (15,103) |  |  |  | (629) |  |  | — |  |  | (629) |
Net income (loss) | $ | (34,065) |  |  | $ | 221 |  |  | $ | (33,844) |  |  |  | $ | (72,124) |  |  | $ | (5,098) |  |  | $ | (77,222) |  |  |  | $ | (40,460) |  |  | $ | 3,399 |  |  | $ | (37,061) |
Net loss attributable to non-controlling interest | (4,867) |  |  | (3,240) |  | (i) | (8,107) |  |  |  | (12,935) |  |  | (2,481) |  | (i) | (15,416) |  |  |  | — |  |  | — |  |  | — |
Net income (loss) attributable to System1, Inc. | $ | (29,198) |  |  | $ | 3,461 |  |  | $ | (25,737) |  |  |  | $ | (59,189) |  |  | $ | (2,617) |  |  | $ | (61,806) |  |  |  | $ | (40,460) |  |  | $ | 3,399 |  |  | $ | (37,061) |
Basic net loss per share | $ | (0.33) |  |  | $ | 0.04 |  |  | $ | (0.29) |  |  |  | $ | (0.68) |  |  | $ | (0.03) |  |  | $ | (0.71) |  |  |  | n/a |  |  |  | n/a
Diluted net loss per share | $ | (0.33) |  |  |  |  | $ | (0.33) |  | (s) |  | n/a |  |  |  | n/a |  |  | n/a |  |  |  | n/a
Weighted average units outstanding - basic | 89,701 |  |  |  |  | 89,701 |  |  |  | 87,351 |  |  | (511) |  | (s) | 86,840 |  |  |  | n/a |  |  |  | n/a
Weighted average units outstanding - diluted | 89,701 |  |  | 1,481 |  | (s) | 91,182 |  |  |  | n/a |  |  |  | n/a |  |  | n/a |  |  |  | n/a
Basic and diluted net income (loss) per unit | n/a |  |  |  | n/a |  |  | n/a |  |  |  | n/a |  |  | $ | (1.97) |  |  | $ | 0.16 |  |  | $ | (1.81) |
Weighted average units outstanding - basic and diluted | n/a |  |  |  | n/a |  |  | n/a |  |  |  | n/a |  |  | 20,488 |  |  |  |  | 20,488 |
The following tables summarize the effect of the adjustments to correct errors on each affected financial statement line item for the periods indicated, impacting the condensed consolidated statements of comprehensive income (loss). The footnotes correspond to the error descriptions above:
| Successor |  | Successor |  |  | Predecessor
| Three Months Ended June 30, 2022 |  | Period from January 27, 2022 through June 30, 2022 |  |  | Period from January 1, 2022 through January 26, 2022
| As Previously Reported |  | Adjustments |  | As Restated |  | As Previously Reported |  | Adjustments |  | As Restated |  |  | As Previously Reported |  | Adjustments |  | As Restated
Net income (loss) | $ | (34,065) |  |  | $ | 221 |  | (a)(f)(g)(h)(j)(k)(m)(o)(p) | $ | (33,844) |  |  | $ | (72,124) |  |  | $ | (5,098) |  | (a)(f)(g)(h)(j)(k)(m)(o)(p) | $ | (77,222) |  |  |  | $ | (40,460) |  |  | $ | 3,399 |  | (g)(k) (o) | $ | (37,061) |
Other comprehensive income (loss) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency translation income (loss) | 262 |  |  | (786) |  | (m)(p) | (524) |  |  | 228 |  |  | (649) |  | (m)(p) | (421) |  |  |  | 87 |  |  | — |  |  | 87 |
Comprehensive income (loss) | $ | (33,803) |  |  | $ | (565) |  |  | $ | (34,368) |  |  | $ | (71,896) |  |  | $ | (5,747) |  |  | $ | (77,643) |  |  |  | $ | (40,373) |  |  | $ | 3,399 |  |  | $ | (36,974) |
Comprehensive loss attributable to non-controlling interest | (4,812) |  |  | (3,234) |  | (i) | (8,046) |  |  | (12,886) |  |  | (2,469) |  | (i) | (15,355) |  |  |  |  |  |  |  | — |
Comprehensive income (loss) attributable to System1, Inc. | $ | (28,991) |  |  | $ | 2,669 |  |  | $ | (26,322) |  |  | $ | (59,010) |  |  | $ | (3,278) |  |  | $ | (62,288) |  |  |  | $ | (40,373) |  |  | $ | 3,399 |  |  | $ | (36,974) |
The following tables summarize the effect of the adjustments to correct errors on each affected financial statement line item for the periods ended as indicated, impacting the condensed consolidated statements of changes in stockholders' equity. The footnotes correspond to the error descriptions above:
| Class A Common Stock |  | Class C Common Stock |  | Class D Common Stock |  |  |  |  |  |  |  |  |  |
| Shares | Amount |  | Shares | Amount |  | Shares | Amount |  | Additional Paid-In-Capital |  | Accumulated Deficit |  | Accumulated Other Comprehensive Income |  | Non-Controlling Interest |  | Total Stockholders’ Equity |
As Previously Reported |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Successor: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the period from January 27, 2022 to June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BALANCE—January 26, 2022 | 52,680 |  | $ | 5 |  |  | — |  | $ | — |  |  | — |  | $ | — |  |  | $ | 525,579 |  |  | $ | (59,184) |  |  | $ | — |  |  | $ | — |  |  | $ | 466,400 |  |
Effect of Merger transaction | 29,017 |  | 3 |  |  | 22,077 |  | 2 |  |  | 2,900 |  | — |  |  | 157,046 |  |  | — |  |  | — |  |  | 198,691 |  |  | 355,742 |  |
BALANCE—January 27, 2022 | 81,697 |  | 8 |  |  | 22,077 |  | 2 |  |  | 2,900 |  | — |  |  | 682,625 |  |  | (59,184) |  |  | — |  |  | 198,691 |  |  | 822,142 |  |
Net loss | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | (29,991) |  |  | — |  |  | (8,068) |  |  | (38,059) |  |
Issuance of common stock in connection with the acquisition of business | 2,000 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 25,500 |  |  | — |  |  | — |  |  | — |  |  | 25,500 |  |
Issuance of market-based restricted stock units upon vesting | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |
Conversion of Class D shares to Class A shares | 2,900 |  | 1 |  |  | — |  | — |  |  | (2,900) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1 |  |
Net deferred tax liability resulting from changes in outside basis difference on investment in S1 Holdco, LLC | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | (6,752) |  |  | — |  |  | — |  |  | — |  |  | (6,752) |  |
Other comprehensive income | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | — |  |  | (28) |  |  | (6) |  |  | (34) |  |
Share-based compensation | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 27,167 |  |  | — |  |  | — |  |  | — |  |  | 27,167 |  |
Distribution to members | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | — |  |  | — |  |  | (247) |  |  | (247) |  |
BALANCE—March 31, 2022 | 86,597 |  | $ | 9 |  |  | 22,077 |  | $ | 2 |  |  | — |  | $ | — |  |  | $ | 728,540 |  |  | $ | (89,175) |  |  | $ | (28) |  |  | $ | 190,370 |  |  | $ | 829,718 |  |
Net loss | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | (29,198) |  |  | — |  |  | (4,867) |  |  | (34,065) |  |
Exercise of warrants | 3,969 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 27,989 |  |  | — |  |  | — |  |  | — |  |  | 27,989 |  |
Issuance of restricted stock, net of forfeitures and shares withheld for taxes | 21 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |
Net deferred tax liability resulting from changes in outside basis difference on investment in S1 Holdco, LLC | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 585 |  |  | — |  |  | — |  |  | — |  |  | 585 |  |
Other comprehensive income | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | — |  |  | 207 |  |  | 55 |  |  | 262 |  |
Share-based compensation | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 3,888 |  |  | — |  |  | — |  |  | — |  |  | 3,888 |  |
Distribution to members | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,254) |  |  | (1,254) |  |
BALANCE—June 30, 2022 | 90,587 |  | $ | 9 |  |  | 22,077 |  | $ | 2 |  |  | — |  | $ | — |  |  | $ | 761,002 |  |  | $ | (118,373) |  |  | $ | 179 |  |  | $ | 184,304 |  |  | $ | 827,123 |  |
| Class A Common Stock |  | Class C Common Stock |  | Class D Common Stock |  |  |  |  |  |  |  |  |  |
| Shares | Amount |  | Shares | Amount |  | Shares | Amount |  | Additional Paid-In-Capital |  | Accumulated Deficit |  | Accumulated Other Comprehensive Income |  | Non-Controlling Interest |  | Total Stockholders’ Equity |
Adjustments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Successor: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the period from January 27, 2022 to June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BALANCE—January 26, 2022 | (930) |  | $ | — |  |  | — |  | $ | — |  |  | — |  | $ | — |  |  | $ | 48,424 |  |  | $ | (48,613) |  |  | $ | — |  |  | $ | — |  |  | $ | (189) |  | (c) (d)
Effect of Merger transaction | — |  | — |  |  | — |  | — |  |  | (1,450) |  | — |  |  | (8,687) |  |  | — |  |  | — |  |  | — |  |  | (8,687) |  | (d) (g)
BALANCE—January 27, 2022 | (930) |  | $ | — |  |  | — |  | $ | — |  |  | (1,450) |  | $ | — |  |  | $ | 39,737 |  |  | $ | (48,613) |  |  | $ | — |  |  | $ | — |  |  | (8,876) |  |
Net loss | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | (6,078) |  |  | — |  |  | 759 |  |  | (5,319) |  | (a)(g)(i)(j)(k)(l)(m)(o)
Issuance of common stock in connection with Merger, net of offering costs, underwriting discounts and commissions | 930 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 661 |  |  | — |  |  | — |  |  | — |  |  | 661 |  | (g)
Issuance of market-based restricted stock units upon vesting | — |  | — |  |  | — |  | — |  |  | 1,450 |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  | (g)
Net deferred tax liability resulting from changes in outside basis difference on investment in S1 Holdco, LLC | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 4,156 |  |  | — |  |  | — |  |  | — |  |  | 4,156 |  | (m)
Other comprehensive income | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | — |  |  | 131 |  |  | (178) |  |  | (47) |  | (p)
Share-based compensation | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 4,231 |  |  | — |  |  | — |  |  | — |  |  | 4,231 |  | (g) (h)
BALANCE—March 31, 2022 | — |  | $ | — |  |  | — |  | $ | — |  |  | — |  | $ | — |  |  | $ | 48,785 |  |  | $ | (54,691) |  |  | $ | 131 |  |  | $ | 581 |  |  | $ | (5,194) |  |
Net loss | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | 3,461 |  |  | — |  |  | (3,240) |  |  | 221 |  | (g) (i)
Net deferred tax liability resulting from changes in outside basis difference on investment in S1 Holdco, LLC | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | (585) |  |  | — |  |  | — |  |  | — |  |  | (585) |  | (m)
Other comprehensive income | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | — |  |  | (731) |  |  | (69) |  |  | (800) |  | (p)
Share-based compensation | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 3,107 |  |  | — |  |  | — |  |  | — |  |  | 3,107 |  | (g) (h)
BALANCE—June 30, 2022 | — |  | $ | — |  |  | — |  | $ | — |  |  | — |  | $ | — |  |  | $ | 51,307 |  |  | $ | (51,230) |  |  | $ | (600) |  |  | $ | (2,728) |  |  | $ | (3,251) |  |
| Class A Common Stock |  | Class C Common Stock |  | Class D Common Stock |  |  |  |  |  |  |  |  |  |
| Shares | Amount |  | Shares | Amount |  | Shares | Amount |  | Additional Paid-In-Capital |  | Accumulated Deficit |  | Accumulated Other Comprehensive Income |  | Non-Controlling Interest |  | Total Stockholders’ Equity |
As Restated |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Successor: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
For the period from January 27, 2022 to June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BALANCE—January 26, 2022 | 51,750 |  | $ | 5 |  |  | — |  | $ | — |  |  | — |  | $ | — |  |  | $ | 574,003 |  |  | $ | (107,797) |  |  | $ | — |  |  | $ | — |  |  | $ | 466,211 |  |
Effect of Merger transaction | 29,017 |  | 3 |  |  | 22,077 |  | 2 |  |  | 1,450 |  | — |  |  | 148,359 |  |  | — |  |  | — |  |  | 198,691 |  |  | 347,055 |  |
BALANCE—January 27, 2022 | 80,767 |  | 8 |  |  | 22,077 |  | 2 |  |  | 1,450 |  | — |  |  | 722,362 |  |  | (107,797) |  |  | — |  |  | 198,691 |  |  | 813,266 |  |
Net loss | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | (36,069) |  |  | — |  |  | (7,309) |  |  | (43,378) |  |
Issuance of common stock in connection with Merger, net of offering costs, underwriting discounts and commissions | 930 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 661 |  |  | — |  |  | — |  |  | — |  |  | 661 |  |
Issuance of common stock in connection with the acquisition of business | 2,000 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 25,500 |  |  | — |  |  | — |  |  | — |  |  | 25,500 |  |
Issuance of market-based restricted stock units upon vesting | — |  | — |  |  | — |  | — |  |  | 1,450 |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |
Conversion of Class D shares to Class A shares | 2,900 |  | 1 |  |  | — |  | — |  |  | (2,900) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1 |  |
Net deferred tax liability resulting from changes in outside basis difference on investment in S1 Holdco, LLC | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | (2,596) |  |  | — |  |  | — |  |  | — |  |  | (2,596) |  |
Other comprehensive income | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | — |  |  | 103 |  |  | (184) |  |  | (81) |  |
Share-based compensation | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 31,398 |  |  | — |  |  | — |  |  | — |  |  | 31,398 |  |
Distribution to members | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | — |  |  | — |  |  | (247) |  |  | (247) |  |
BALANCE—March 31, 2022 | 86,597 |  | $ | 9 |  |  | 22,077 |  | $ | 2 |  |  | — |  | $ | — |  |  | $ | 777,325 |  |  | $ | (143,866) |  |  | $ | 103 |  |  | $ | 190,951 |  |  | $ | 824,524 |  |
Net loss | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | (25,737) |  |  | — |  |  | (8,107) |  |  | (33,844) |  |
Exercise of warrants | 3,969 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 27,989 |  |  | — |  |  | — |  |  | — |  |  | 27,989 |  |
Issuance of restricted stock, net of forfeitures and shares withheld for taxes | 21 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |
Net deferred tax liability resulting from changes in outside basis difference on investment in S1 Holdco, LLC | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |
Other comprehensive income | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | — |  |  | (524) |  |  | (14) |  |  | (538) |  |
Share-based compensation | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 6,995 |  |  | — |  |  | — |  |  | — |  |  | 6,995 |  |
Distribution to members | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,254) |  |  | (1,254) |  |
BALANCE—June 30, 2022 | 90,587 |  | $ | 9 |  |  | 22,077 |  | $ | 2 |  |  | — |  | $ | — |  |  | $ | 812,309 |  |  | $ | (169,603) |  |  | $ | (421) |  |  | $ | 181,576 |  |  | $ | 823,872 |  |
The following tables summarize the effect of the adjustments to correct errors on each affected financial statement line item for the periods ended as indicated, impacting the condensed consolidated statement of changes in members' deficit. The footnotes correspond to the error descriptions above:
|  | Members’ Deficit |  | Accumulated Other Comprehensive Income (Loss) |  | Total Members’ Deficit
Predecessor: |  |  |  |  |  |  |  |  |  |
For the period January 1, 2022 to January 26, 2022 |  | As Previously Reported |  | Adjustments |  | As Restated |  |  |  | As Restated
BALANCE—January 1, 2022 |  | $ | (28,829) |  |  | $ | — |  |  | $ | (28,829) |  |  | $ | 428 |  |  | $ | (28,401) |
Net loss |  | (40,460) |  |  | $ | 3,399 |  | (g)(k)(o) | (37,061) |  |  | — |  |  | (37,061) |
Accumulated other comprehensive income |  | — |  |  | — |  |  | — |  |  | 87 |  |  | 87 |
Share-based compensation expense |  | 27,698 |  |  | (3,993) |  | (g) | 23,705 |  |  | — |  |  | 23,705 |
BALANCE—January 26, 2022 |  | $ | (41,591) |  |  | $ | (594) |  |  | $ | (42,185) |  |  | $ | 515 |  |  | $ | (41,670) |
The following tables summarize the effect of the adjustments to correct errors on each affected financial statement line item for the periods ended as indicated, impacting the condensed consolidated statements of cash flows. The footnotes correspond to the error descriptions above:
| Successor |  |  | Predecessor
| Period from January 27, 2022 through June 30, 2022 |  |  | Period from January 1, 2022 through January 26, 2022
| As Previously Reported |  | Adjustments |  | As Restated |  |  | As Previously Reported |  | Adjustments |  | As Restated
Cash flows from Operating Activities: |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) | $ | (72,124) |  |  | $ | (5,098) |  | (a)(f)(g)(h)(j)(k)(l)(m)(o)(p) | $ | (77,222) |  |  |  | $ | (40,460) |  |  | $ | 3,399 |  | (g)(k)(o) | $ | (37,061) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization | 56,708 |  |  | (2,686) |  | (a)(j) | 54,022 |  |  |  | 1,000 |  |  | — |  |  | 1,000 |
Share-based compensation | 49,219 |  |  | 8,251 |  | (g)(h)(o)(q) | 57,470 |  |  |  | 27,698 |  |  | (3,993) |  | (g) | 23,705 |
Amortization of debt issuance costs | 2,226 |  |  | — |  |  | 2,226 |  |  |  | — |  |  | — |  |  | — |
Noncash lease expense | (90) |  |  | 784 |  | (r) | 694 |  |  |  | 115 |  |  | — |  |  | 115 |
Change in fair value of contingent consideration and CEO equity profit interest | (72) |  |  | 45 |  | (q) | (27) |  |  |  | (9) |  |  | — |  |  | (9) |
Change in fair value of warrants | 9,622 |  |  | — |  |  | 9,622 |  |  |  | — |  |  | — |  |  | — |
Deferred tax benefits | (20,893) |  |  | (1,853) |  | (m)(q) | (22,746) |  |  |  | (816) |  |  | — |  |  | (816) |
Other | — |  |  | 661 |  | (g) | 661 |  |  |  | — |  |  | — |  |  | — |
Changes in operating assets and liabilities |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable | (7,890) |  |  | (246) |  | (n)(q) | (8,136) |  |  |  | 11,118 |  |  | — |  |  | 11,118 |
Prepaids and other assets | (978) |  |  | (1,024) |  | (k)(o)(q) | (2,002) |  |  |  | 905 |  |  | 164 |  | (k) | 1,069 |
Accounts payable | 6,535 |  |  | — |  |  | 6,535 |  |  |  | (67,600) |  |  | — |  |  | (67,600) |
Accrued expenses and other liabilities | (5,466) |  |  | (5,759) |  | (f)(k)(o)(q) | (11,225) |  |  |  | 57,170 |  |  | 318 |  | (k)(o) | 57,488 |
Protected.net incentive plan liability | — |  |  | 5,694 |  | (q) | 5,694 |  |  |  | — |  |  | — |  |  | — |
Deferred revenue | 7,211 |  |  | — |  |  | 7,211 |  |  |  | 311 |  |  | — |  |  | 311 |
Other long-term liabilities | (30,217) |  |  | (863) |  | (l)(o)(q)(r) | (31,080) |  |  |  | 78 |  |  | (1) |  | (o) | 77 |
Net cash used in operating activities | (6,209) |  |  | (2,094) |  |  | (8,303) |  |  |  | (10,490) |  |  | (113) |  |  | (10,603) |
Cash flows from Investing Activities: |  |  |  |  |  |  |  |  |  |  |  |
Purchases of property and equipment | (2,285) |  |  | (25) |  | (q) | (2,310) |  |  |  | — |  |  | — |  |  | — |
Capitalized software development costs | (2,901) |  |  | (596) |  | (j)(q) | (3,497) |  |  |  | (441) |  |  | — |  |  | (441) |
Acquisition of businesses, net of cash acquired | (445,893) |  |  | 1,819 |  | (o)(p)(q) | (444,074) |  |  |  | — |  |  | — |  |  | — |
Net cash used in investing activities | (451,079) |  |  | 1,198 |  |  | (449,881) |  |  |  | (441) |  |  | — |  |  | (441) |
Cash flows from Financing Activities: |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from term loan and line of credit | 449,000 |  |  | — |  |  | 449,000 |  |  |  | — |  |  | — |  |  | — |
Repayment of term loan | (177,488) |  |  | — |  |  | (177,488) |  |  |  | — |  |  | — |  |  | — |
Payments for financing costs | (24,845) |  |  | — |  |  | (24,845) |  |  |  | — |  |  | — |  |  | — |
Payments for earnouts | (1,715) |  |  | — |  |  | (1,715) |  |  |  | — |  |  | — |  |  | — |
Redemptions of Class A common stock | (510,469) |  |  | — |  |  | (510,469) |  |  |  | — |  |  | — |  |  | — |
Proceeds from warrant exercises | 5,029 |  |  | (2) |  | (q) | 5,027 |  |  |  | — |  |  | — |  |  | — |
Cash received from the Backstop | 246,484 |  |  | — |  |  | 246,484 |  |  |  | — |  |  | — |  |  | — |
Distributions to members | (1,501) |  |  | — |  |  | (1,501) |  |  |  | — |  |  | — |  |  | — |
Net cash used in financing activities | (15,505) |  |  | (2) |  |  | (15,507) |  |  |  | — |  |  | — |  |  | — |
Effect of exchange rate changes in cash, cash equivalent and restricted cash | (29) |  |  | 633 |  | (p) | 604 |  |  |  | (132) |  |  | 113 |  | (p) | (19) |
Net increase (decrease) in cash, cash equivalents and restricted cash | (472,822) |  |  | (265) |  |  | (473,087) |  |  |  | (11,063) |  |  | — |  |  | (11,063) |
Cash and cash equivalents and restricted cash, beginning of the period | 517,553 |  |  | — |  |  | 517,553 |  |  |  | 48,639 |  |  | — |  |  | 48,639 |
Cash and cash equivalents and restricted cash, end of the period | $ | 44,731 |  |  | $ | (265) |  |  | $ | 44,466 |  |  |  | $ | 37,576 |  |  | $ | — |  |  | $ | 37,576 |
Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 37,442 |  |  | $ | — |  |  | $ | 37,442 |  |  |  | $ | 36,833 |  |  | $ | — |  |  | $ | 36,833 |
Restricted cash | 7,289 |  |  | (265) |  | (n) | 7,024 |  |  |  | 743 |  |  | — |  |  | 743 |
Total cash, cash equivalents and restricted cash | $ | 44,731 |  |  | $ | (265) |  |  | $ | 44,466 |  |  |  | $ | 37,576 |  |  | $ | — |  |  | $ | 37,576 |
Supplemental cash flow information: |  |  |  |  |  |  |  |  |  |  |  |
ROU assets obtained in exchange for operating lease liabilities | $ | 2,064 |  |  | $ | — |  |  | $ | 2,064 |  |  |  | $ | 7,987 |  |  | $ | — |  |  | $ | 7,987 |
Equity issuance to settle intercompany loan | $ | — |  |  | $ | — |  |  | $ | — |  |  |  | $ | — |  |  | $ | 941 |  |  | $ | 941 |
Deferred consideration for acquisition | $ | — |  |  | $ | 7,059 |  |  | $ | 7,059 |  |  |  | $ | — |  |  | $ | — |  |  | $ | — |

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- Definition The entire disclosure for the nature of an entity's business, major products or services, principal markets including location, and the relative importance of its operations in each business and the basis for the determination, including but not limited to, assets, revenues, or earnings. For an entity that has not commenced principal operations, disclosures about the risks and uncertainties related to the activities in which the entity is currently engaged and an understanding of what those activities are being directed toward. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=99393423&loc=d3e5967-108592 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI https://asc.fasb.org/topic&trid=2134479 + Details
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