(Mark One)
|
|||
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended
|
||
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
|
|
(Exact name of registrant as specified in its charter)
|
|
|
|
(State of incorporation)
|
(I.R.S. Employer Identification Number)
|
|
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant’s telephone number, including area code: (
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
|
Smaller reporting company
|
Emerging growth company
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
|
|
|
Page
|
||
PART I.
|
FINANCIAL INFORMATION
|
3
|
Item 1.
|
Financial Statements (unaudited)
|
|
3
|
||
4 | ||
5 | ||
6 | ||
7
|
||
8
|
||
Item 2.
|
24
|
|
Item 3.
|
33
|
|
Item 4.
|
34
|
|
PART II.
|
34
|
|
Item 1.
|
34
|
|
Item 1A.
|
34
|
|
Item 2.
|
34
|
|
Item 3
|
34
|
|
Item 4
|
34 |
|
Item 5.
|
34
|
|
Item 6.
|
35
|
March 31, 2023
|
December 31, 2022
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Restricted cash, current
|
||||||||
Contract receivables, net of allowance for credit loss
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Equipment, software and leasehold improvements, net
|
|
|
||||||
Software development costs, net
|
|
|
||||||
Goodwill
|
|
|
||||||
Intangible assets, net
|
|
|
||||||
Restricted cash - long term | ||||||||
Operating lease right-of-use assets, net
|
|
|
||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Current portion of long-term note
|
$ |
|
$ |
|
||||
Accounts payable
|
|
|
||||||
Accrued expenses
|
|
|
||||||
Accrued compensation
|
|
|
||||||
Billings in excess of revenue earned
|
|
|
||||||
Accrued warranty
|
|
|
||||||
Income taxes payable
|
|
|
||||||
Derivative liabilities
|
||||||||
Other current liabilities
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Long-term note, less current portion
|
|
|
||||||
Operating lease liabilities noncurrent
|
|
|
||||||
Other noncurrent liabilities
|
|
|
||||||
Total liabilities
|
|
|
||||||
Commitments and contingencies (Note 16)
|
||||||||
Stockholders’ equity:
|
||||||||
Preferred stock $
|
|
|
||||||
Common stock $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
Accumulated other comprehensive (loss) income
|
(
|
)
|
|
|||||
Treasury stock at cost,
|
(
|
)
|
(
|
)
|
||||
Total stockholders’ equity
|
|
|
||||||
Total liabilities and stockholders’ equity
|
$
|
|
$
|
|
Three months ended
|
||||||||
March 31, 2023
|
March 31, 2022
|
|||||||
Revenue
|
$ | $ | ||||||
Cost of revenue
|
||||||||
Gross profit
|
||||||||
Operating expenses:
|
||||||||
Selling, general and administrative
|
||||||||
Research and development
|
||||||||
Depreciation
|
||||||||
Amortization of intangible assets
|
||||||||
Total operating expenses
|
||||||||
Operating loss
|
( |
) | ( |
) | ||||
Other income and (expenses), net |
||||||||
Interest expense, net
|
( |
) | ( |
) | ||||
Change in fair value of derivative instruments, net
|
( |
) | ||||||
Other income, net
|
||||||||
Loss before income taxes
|
( |
) | ( |
) | ||||
(Benefit from) provision for income taxes
|
( |
) | ||||||
Net loss
|
$ | ( |
) | $ | ( |
) | ||
Net loss per common share - basic and diluted
|
$ | ( |
) | $ | ( |
) | ||
Weighted average shares outstanding used to compute net loss per share - basic and diluted
|
Three months ended
|
||||||||
March 31, 2023
|
March 31, 2022
|
|||||||
Net loss
|
$ | ( |
) | $ | ( |
) | ||
Cumulative translation adjustment
|
( |
) | ||||||
Comprehensive loss
|
$ | ( |
) | $ | ( |
) |
Common Stock
|
Treasury Stock
|
|||||||||||||||||||||||||||||||
Three Months Ended
|
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Accumulated
Other
Comprehensive
Loss
|
Shares |
Amount
|
Total
|
||||||||||||||||||||||||
Balance, January 1, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||||||
Adoption of ASC 326 Current Expected Credit Losses (CECL)
|
( |
) | ( |
) | ||||||||||||||||||||||||||||
Adjusted balance, January 1, 2023
|
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
Stock-based compensation expense
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
|
|
(
|
)
|
|
|
-
|
|
|
|||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
|
(
|
)
|
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Repayment of convertible note in shares
|
- | |||||||||||||||||||||||||||||||
Net loss
|
-
|
|
|
(
|
)
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Balance, March 31, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Balance, January 1, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||
Stock-based compensation expense
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Common stock issued for RSUs vested
|
|
|
(
|
)
|
|
|
-
|
|
|
|||||||||||||||||||||||
Shares withheld to pay taxes
|
-
|
|
(
|
)
|
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
|
|
|
-
|
|
|
||||||||||||||||||||||||
Net income
|
-
|
|
|
(
|
)
|
|
-
|
|
(
|
)
|
||||||||||||||||||||||
Balance, March 31, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Three months ended
|
||||||||
March 31, 2023
|
March 31, 2022
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
||||||||
Goodwill and intangible asset impairment charge
|
||||||||
Depreciation
|
|
|
||||||
Amortization of intangible assets
|
|
|
||||||
Amortization of capitalized software development costs
|
|
|
||||||
Amortization of deferred financing costs
|
|
|
||||||
Amortization of debt discount
|
||||||||
Loss on debt settled in shares
|
||||||||
Stock-based compensation expense
|
|
|
||||||
Credit loss expense
|
|
|
||||||
Change in fair value of derivative instruments, net
|
(
|
)
|
|
|||||
Deferred income taxes
|
||||||||
Changes in assets and liabilities:
|
||||||||
Contract receivables, net
|
(
|
)
|
|
|||||
Prepaid expenses and other assets
|
|
|
||||||
Accounts payable, accrued compensation and accrued expenses
|
|
|
||||||
Billings in excess of revenue earned
|
(
|
)
|
|
|||||
Accrued warranty
|
(
|
)
|
|
|||||
Other liabilities
|
(
|
)
|
(
|
)
|
||||
Net cash (used in) provided by operating activities
|
(
|
)
|
|
|||||
Cash flows from investing activities:
|
||||||||
Capital expenditures
|
|
(
|
)
|
|||||
Capitalized software development costs
|
(
|
)
|
(
|
)
|
||||
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Repayment of line of credit
|
|
(
|
)
|
|||||
Repayment of insurance premium financing
|
(
|
)
|
(
|
)
|
||||
Proceeds from issuance of long-term debt and warrants
|
|
|
||||||
Payments of debt issuance and original discount on issuance of long-term debt and warrants
|
( |
) | ||||||
Principal repayment of convertible note
|
( |
) | ||||||
Tax paid for shares withheld
|
(
|
)
|
(
|
)
|
||||
Net cash (used in) provided by financing activities
|
(
|
)
|
|
|||||
Effect of exchange rate changes on cash
|
|
(
|
)
|
|||||
Net (decrease) increase in cash, cash equivalents and restricted cash
|
(
|
)
|
|
|||||
Cash, cash equivalents and restricted cash at beginning of the period
|
|
|
||||||
Cash, cash equivalents and restricted cash at the end of the period
|
$
|
|
$
|
|
||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash, current | ||||||||
Restricted cash included in other long-term assets | ||||||||
Total cash, cash equivalents and restricted cash | $ | $ | ||||||
Supplemental cash flow disclosures: | ||||||||
Non-cash financing activities
|
||||||||
Repayment of convertible note in shares
|
$ | $ | ||||||
Discount on issuance of convertible note
|
$ | $ |
•
|
had met the market value of publicly held shares requirement for continuing listing,
|
•
|
had met all other listing requirements for NASDAQ (other than bid price requirement), and
|
•
|
had provided written notice to NASDAQ with a plan of how it intends to regain compliance with the bid price requirement during
the second
|
•
|
The Company’s Board of Directors considered and approved a resolution on April 3, 2023, to conduct a reverse stock split of
one-for-
|
•
|
The Company filed a Definitive Proxy Statement with the SEC on May 2, 2023 containing this proposal and commenced mailing of
notices to stockholders with instructions for obtaining copies of the proxy materials and voting their shares;
|
•
|
Stockholders will vote on the proposed reverse stock split at the annual meeting, which is scheduled to be held on June 12,
2023; and
|
•
|
If the reverse stock split is approved by stockholders, and if the closing bid price on the Company’s Common Stock does not
increase, the Board of Directors will cause the Company to effectuate the reverse stock split in a manner intended to achieve compliance well in advance of October 30, 2023.
|
(in thousands, except for share amounts)
|
Three months ended | |||||||
|
March 31,
|
|||||||
2023
|
2022
|
|||||||
Numerator:
|
||||||||
Net loss attributed to common stockholders
|
$ | ( |
) |
$ | ( |
) |
||
Denominator:
|
||||||||
Weighted-average shares outstanding for basic
earnings per share
|
||||||||
Adjusted weighted-average shares outstanding and assumed
conversions for diluted earnings per share
|
||||||||
Shares related to potentially dilutive securities excluded
because inclusion would be anti-dilutive
|
(in thousands)
|
March 31, 2023
|
December 31, 2022
|
||||||
Billed receivables
|
$
|
|
$
|
|
||||
Unbilled receivables
|
|
|
||||||
Allowance for credit loss
|
(
|
)
|
(
|
)
|
||||
Total contract receivables, net
|
$
|
|
$
|
|
(in thousands)
|
||||
Beginning balance at January 1, 2023
|
$
|
|
||
Current period provision for expected credit loss
|
|
|||
Write-offs charged against the allowance, net of recoveries
|
|
|||
Currency adjustment |
||||
Balance at March 31, 2023
|
$
|
|
|
Goodwill
|
Accumulated
Impairment
|
Net
|
|||||||||
|
||||||||||||
Engineering
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Workforce Solutions
|
|
(
|
)
|
|
||||||||
Net book value at March 31,
2023
|
$
|
|
$
|
(
|
)
|
$
|
|
|
Goodwill
|
Accumulated
Impairment
|
Net
|
|||||||||
|
||||||||||||
Engineering
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Workforce Solutions
|
|
(
|
)
|
|
||||||||
Net book value at December 31, 2022
|
$
|
|
$
|
(
|
)
|
$
|
|
(in thousands)
|
As of March 31, 2023
|
|||||||||||||||
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Impairment |
Net
|
|||||||||||||
Amortized intangible assets:
|
||||||||||||||||
Customer relationships
|
$
|
|
$
|
(
|
)
|
$ |
( |
) |
$
|
|
||||||
Trade names
|
|
(
|
)
|
|
||||||||||||
Developed technology
|
|
(
|
)
|
|
||||||||||||
Non-contractual customer relationships
|
|
(
|
)
|
|
||||||||||||
Noncompete agreement
|
|
(
|
)
|
|
||||||||||||
Alliance agreement
|
|
(
|
)
|
|
||||||||||||
Others
|
|
(
|
)
|
|
||||||||||||
Total
|
$
|
|
$
|
(
|
)
|
$ | ( |
) |
$
|
|
(in thousands)
|
As of December 31, 2022
|
|||||||||||||||
Gross
Carrying
Amount
|
Accumulated Amortization
|
Impairment
|
Net
|
|||||||||||||
Amortized intangible assets:
|
||||||||||||||||
Customer relationships
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||
Trade names
|
|
(
|
)
|
|
|
|||||||||||
Developed technology
|
|
(
|
)
|
|
|
|||||||||||
Non-contractual customer relationships
|
|
(
|
)
|
|
|
|||||||||||
Noncompete agreement
|
|
(
|
)
|
|
|
|||||||||||
Alliance agreement
|
|
(
|
)
|
|
|
|||||||||||
Others
|
|
(
|
)
|
|
|
|||||||||||
Total
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
(in thousands)
|
||||
Years ended December 31:
|
||||
2023 remainder
|
$
|
|
||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
Thereafter
|
|
|||
Total
|
$
|
|
(in thousands)
|
||||||||
March 31, 2023
|
December 31, 2022
|
|||||||
Computer and equipment
|
$
|
|
$
|
|
||||
Software
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
Furniture and fixtures
|
|
|
||||||
|
|
|||||||
Accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
Equipment, software and leasehold improvements, net
|
$
|
|
$
|
|
Exercise Price
|
$ | ||
Common Stock Price
|
$ | ||
Risk Free Rate
|
% | ||
Volatility
|
% | ||
Term (in years)
|
|
(in thousands)
|
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
|
Significant
Other Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
|
||||||||||||
Derivative liability | $ | $ | $ | $ | ||||||||||||
Warrant liability |
||||||||||||||||
Cash settled performance-vesting restricted stock units
|
||||||||||||||||
Total liabilities | $ | $ | $ | $ |
(in thousands)
|
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
|
Significant
Other Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
|
||||||||||||
Derivative liability | $ | $ | $ | $ | ||||||||||||
Warrant liability |
||||||||||||||||
Cash settled performance-vesting restricted stock units
|
||||||||||||||||
Total liabilities | $ | $ | $ | $ |
(in thousands)
|
Embedded
Redemption Features
|
Warrant |
Cash Settled
PRSUs
|
Level 3 Total |
||||||||||||
Balance at December 31, 2022
|
$
|
|
$ | $ | $ | |||||||||||
Change in FV included in gain on
|
( |
) | ( |
) | ||||||||||||
Stock compensation less payments made
|
||||||||||||||||
Balance at March 31, 2023
|
$
|
|
$ | $ | $ |