Company Quick10K Filing
Veritone
Price3.83 EPS-2
Shares23 P/E-2
MCap89 P/FCF-5
Net Debt-50 EBIT-49
TEV39 TEV/EBIT-1
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-11
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-09
10-K 2018-12-31 Filed 2019-03-18
10-Q 2018-09-30 Filed 2018-11-13
10-Q 2018-06-30 Filed 2018-08-13
10-Q 2018-03-31 Filed 2018-05-08
10-K 2017-12-31 Filed 2018-03-09
10-Q 2017-09-30 Filed 2017-11-07
10-Q 2017-06-30 Filed 2017-08-08
10-Q 2017-03-31 Filed 2017-06-26
8-K 2020-06-15
8-K 2020-05-18
8-K 2020-05-11
8-K 2020-04-24
8-K 2020-04-14
8-K 2020-03-04
8-K 2019-11-06
8-K 2019-09-16
8-K 2019-08-07
8-K 2019-06-25
8-K 2019-05-22
8-K 2019-05-08
8-K 2019-02-21
8-K 2019-01-15
8-K 2019-01-09
8-K 2018-12-10
8-K 2018-11-12
8-K 2018-10-15
8-K 2018-09-06
8-K 2018-08-31
8-K 2018-08-24
8-K 2018-08-20
8-K 2018-08-13
8-K 2018-08-13
8-K 2018-08-10
8-K 2018-06-29
8-K 2018-06-20
8-K 2018-06-01
8-K 2018-05-18
8-K 2018-05-08
8-K 2018-03-15
8-K 2018-02-26
8-K 2018-01-17

VERI 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1. Description of Business
Note 2. Presentation and Summary of Significant Accounting Policies
Note 3. Net Loss per Share
Note 4. Financial Instruments
Note 5. Goodwill and Intangible Assets, Net
Note 6. Consolidated Financial Statements Details
Note 7. Commitments and Contingencies
Note 8. Stockholders' Equity (Deficit)
Note 9. Stock Plans
Note 10. Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 veri-ex311_6.htm
EX-31.2 veri-ex312_8.htm
EX-32.1 veri-ex321_7.htm

Veritone Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
135986124-13-502017201820192020
Assets, Equity
157-1-9-17-252017201820192020
Rev, G Profit, Net Income
7047241-22-452017201820192020
Ops, Inv, Fin

10-Q 1 veri-10q_20200331.htm 10-Q veri-10q_20200331.htm

 

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 March 31, 2020

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: 001-38093

 

Veritone, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

47-1161641

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

575 Anton Blvd., Suite 100, Costa Mesa, CA 92626

(Address of principal executive offices, including zip code)

(888) 507-1737

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

VERI

 

The 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

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

As of May 8, 2020, 27,084,372 shares of the registrant’s common stock were outstanding.

 

 

 


VERITONE, INC.

QUARTERLY REPORT ON FORM 10-Q

March 31, 2020

TABLE OF CONTENTS

 

Special Note Regarding Forward-Looking Statements

 

 

PART I.

  

FINANCIAL INFORMATION

 

2

Item 1.

  

Financial Statements (Unaudited)

 

2

 

  

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

 

2

 

  

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2020 and 2019

 

3

 

  

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019

 

4

 

  

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019

 

5

 

  

Notes to the Condensed Consolidated Financial Statements

 

6

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

18

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

 

23

Item 4.

  

Controls and Procedures

 

24

PART II.

  

OTHER INFORMATION

 

25

Item 1.

  

Legal Proceedings

 

25

Item 1A.

  

Risk Factors

 

25

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

 

26

Item 3.

  

Defaults Upon Senior Securities

 

26

Item 4.

  

Mine Safety Disclosures

 

26

Item 5.

  

Other Information

 

26

Item 6.

  

Exhibits

 

27

Signatures

 

28

 

 

 


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain 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”), and we intend that such forward-looking statements be subject to the safe harbors created thereby. For this purpose, any statements made in this Quarterly Report on Form 10-Q that are not historical or current facts may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “anticipates,” “believes,” “seeks,” “estimates,” “expects,” “intends,” “continue,” “can,” “may,” “plans,” “potential,” “projects,” “should,” “could,” “will,” “would” or similar expressions and the negatives of those expressions are intended to identify forward-looking statements. Such statements include, but are not limited to, any statements that refer to projections of our future financial condition and results of operations, capital needs and financing plans, competitive position, industry environment, potential growth and market opportunities, acquisition plans and strategies, compensation plans, governance structure and policies and/or the price of our common stock.

The forward-looking statements included herein represent our management’s current expectations and assumptions based on information available as of the date of this report. These statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that may cause or contribute to such differences include, but are not limited to, those discussed in more detail in Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of Part I, and Item 1A (Risk Factors) of Part II, of this Quarterly Report on Form 10-Q, and in Item 1 (Business) and Item 1A (Risk Factors) of Part I of our Annual Report on Form 10-K for the year ended December 31, 2019. Readers should carefully review these risks, as well as the additional risks described in other documents we file from time to time with the Securities and Exchange Commission. In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking information, which speak only as of the date of this report.

Moreover, we operate in an evolving environment. New risks and uncertainties emerge from time to time and it is not possible for our management to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual future results to be materially different from those expressed or implied by any forward-looking statements.

Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. We qualify all of our forward-looking statements by these cautionary statements.

1


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

VERITONE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share and share data)

(Unaudited)

 

 

 

As of

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

49,165

 

 

$

44,065

 

Accounts receivable, net of allowance for doubtful accounts of $39 and $29, respectively

 

 

21,907

 

 

 

21,352

 

Expenditures billable to clients

 

 

4,840

 

 

 

10,286

 

Prepaid expenses and other current assets

 

 

4,486

 

 

 

5,409

 

Total current assets

 

 

80,398

 

 

 

81,112

 

Property, equipment and improvements, net

 

 

2,967

 

 

 

3,214

 

Intangible assets, net

 

 

14,778

 

 

 

16,126

 

Goodwill

 

 

6,904

 

 

 

6,904

 

Long-term restricted cash

 

 

855

 

 

 

855

 

Other assets

 

 

315

 

 

 

315

 

Total assets

 

$

106,217

 

 

$

108,526

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Accounts payable

 

$

16,233

 

 

$

16,996

 

Accrued media payments

 

 

19,885

 

 

 

16,551

 

Client advances

 

 

20,140

 

 

 

19,193

 

Accrued compensation

 

 

1,957

 

 

 

2,486

 

Other accrued liabilities

 

 

4,393

 

 

 

4,510

 

Total current liabilities

 

 

62,608

 

 

 

59,736

 

Other liabilities

 

 

1,337

 

 

 

1,379

 

Total liabilities

 

 

63,945

 

 

 

61,115

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Common stock, par value $0.001 per share; 75,000,000 shares authorized;

27,074,372 and 25,670,737 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively

 

 

27

 

 

 

26

 

Additional paid-in capital

 

 

287,368

 

 

 

279,828

 

Accumulated deficit

 

 

(245,173

)

 

 

(232,489

)

Accumulated other comprehensive income

 

 

50

 

 

 

46

 

Total stockholders' equity

 

 

42,272

 

 

 

47,411

 

Total liabilities and stockholders' equity

 

$

106,217

 

 

$

108,526

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


VERITONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(in thousands, except per share and share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Net revenues

 

$

11,904

 

 

$

12,125

 

Cost of revenues

 

 

3,811

 

 

 

3,872

 

Gross profit

 

 

8,093

 

 

 

8,253

 

Operating expenses:

 

 

 

 

 

 

 

 

Sales and marketing

 

 

5,460

 

 

 

6,133

 

Research and development

 

 

3,902

 

 

 

6,938

 

General and administrative

 

 

11,543

 

 

 

11,690

 

Total operating expenses

 

 

20,905

 

 

 

24,761

 

Loss from operations

 

 

(12,812

)

 

 

(16,508

)

Other income, net

 

 

131

 

 

 

211

 

Loss before provision for income taxes

 

 

(12,681

)

 

 

(16,297

)

Provision for income taxes

 

 

3

 

 

 

9

 

Net loss

 

$

(12,684

)

 

$

(16,306

)

Net loss per share:

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.47

)

 

$

(0.84

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic and diluted

 

 

26,773,163

 

 

 

19,511,220

 

Comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

 

(12,684

)

 

 

(16,306

)

Unrealized gain on marketable securities, net of income taxes

 

 

-

 

 

 

35

 

Foreign currency translation gain (loss), net of income taxes

 

 

4

 

 

 

(21

)

Total comprehensive loss

 

$

(12,680

)

 

$

(16,292

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


VERITONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income

 

 

Total

 

Balance as of December 31, 2019

 

 

25,670,737

 

 

$

26

 

 

$

279,828

 

 

$

(232,489

)

 

$

46

 

 

$

47,411

 

Common stock offerings, net

 

 

1,292,208

 

 

 

1

 

 

 

2,983

 

 

 

 

 

 

 

 

 

2,984

 

Common stock issued under employee stock plans, net

 

 

111,427

 

 

 

 

 

 

101

 

 

 

 

 

 

 

 

 

101

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,456

 

 

 

 

 

 

 

 

 

4,456

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(12,684

)

 

 

 

 

 

(12,684

)

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

4

 

Balance as of March 31, 2020

 

 

27,074,372

 

 

$

27

 

 

$

287,368

 

 

$

(245,173

)

 

$

50

 

 

$

42,272

 

 

 

 

 

Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income

 

 

Total

 

Balance as of December 31, 2018

 

 

19,335,220

 

 

$

19

 

 

$

230,674

 

 

$

(170,411

)

 

$

1

 

 

$

60,283

 

Common stock offerings, net

 

 

662,000

 

 

 

1

 

 

 

4,159

 

 

 

 

 

 

 

 

 

4,160

 

Common stock issued under employee stock plans, net

 

 

85,017

 

 

 

 

 

 

324

 

 

 

 

 

 

 

 

 

324

 

Machine Box holdback consideration

 

 

 

 

 

 

 

 

458

 

 

 

 

 

 

 

 

 

458

 

Common stock issued for acquisitions

 

 

114,951

 

 

 

 

 

 

3,764

 

 

 

 

 

 

 

 

 

3,764

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,803

 

 

 

 

 

 

 

 

 

4,803

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(16,306

)

 

 

 

 

 

(16,306

)

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

13

 

Balance as of March 31, 2019

 

 

20,197,188

 

 

$

20

 

 

$

244,182

 

 

$

(186,717

)

 

$

14

 

 

$

57,499

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


VERITONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(12,684

)

 

$

(16,306

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,604

 

 

 

1,133

 

Change in fair value of warrant liability

 

 

(2

)

 

 

13

 

Provision for doubtful accounts

 

 

 

 

 

25

 

Stock-based compensation expense

 

 

4,456

 

 

 

5,507

 

Other

 

 

 

 

 

(19

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(555

)

 

 

2,716

 

Expenditures billable to clients

 

 

5,446

 

 

 

(4,331

)

Prepaid expenses and other current assets

 

 

406

 

 

 

637

 

Accounts payable

 

 

(763

)

 

 

(7,999

)

Accrued media payments

 

 

3,334

 

 

 

5,927

 

Client advances

 

 

947

 

 

 

6,582

 

Other accrued liabilities

 

 

(644

)

 

 

1,593

 

Other liabilities

 

 

(42

)

 

 

(110

)

Net cash provided by (used in) operating activities

 

 

1,503

 

 

 

(4,632

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from sales of marketable securities

 

 

 

 

 

2,473

 

Capital expenditures

 

 

(9

)

 

 

(98

)

Net cash (used in) provided by investing activities

 

 

(9

)

 

 

2,375

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from common stock offerings, net

 

 

3,505

 

 

 

4,160

 

Proceeds from issuances of stock under employee stock plans, net

 

 

101

 

 

 

324

 

Net cash provided by financing activities

 

 

3,606

 

 

 

4,484

 

Net increase in cash, cash equivalents and restricted cash

 

 

5,100

 

 

 

2,227

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

44,920

 

 

 

38,776

 

Cash, cash equivalents and restricted cash, end of period

 

$

50,020

 

 

$

41,003

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


VERITONE, INC.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except share and per share data and percentages)

(Unaudited)

NOTE 1. DESCRIPTION OF BUSINESS

Description of Business

Veritone, Inc., a Delaware corporation (“Veritone”) (together with its wholly owned subsidiaries, collectively, the “Company”), is a provider of artificial intelligence (“AI”) computing solutions. The Company has developed aiWARETM, a proprietary AI operating system that integrates and orchestrates an open ecosystem of top performing cognitive engines, together with a suite of powerful applications, to reveal valuable multivariate insights from vast amounts of unstructured and structured data and conduct cognitive workflows based on these insights.  The Company’s aiWARE platform incorporates proprietary technology to integrate and intelligently orchestrate a wide variety of cognitive engine capabilities to mimic human cognitive functions such as perception, prediction and problem solving in order to quickly, efficiently and cost effectively transform unstructured data into structured data. aiWARE stores the results in a time-correlated database, creating a rich, online, searchable index of the unstructured and structured data that users can use and analyze in near real-time through the platform’s suite of general and industry-specific applications to drive processes and insights.  aiWARE is based on an open architecture that enables new cognitive engines and applications to be added quickly and efficiently, resulting in a future proof, scalable and evolving solution that can be easily leveraged for a broad range of industries that capture or use audio, video and other unstructured data, including, without limitation, the media and entertainment, government, legal and compliance, and other vertical markets.

The Company also offers cloud-native digital content management solutions and content licensing services, primarily to customers in the media and entertainment market. These offerings leverage the Company’s aiWARE technologies, providing customers with unique capabilities to enrich and drive expanded revenue opportunities from their content.

In addition, the Company operates a full-service advertising agency. The Company’s advertising services include media planning and strategy, advertisement buying and placement, campaign messaging, clearance verification and attribution, and custom analytics, specializing in host-endorsed and influencer advertising across primarily radio, podcasting, streaming audio, social media and other digital media channels.

NOTE 2. PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Preparation

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial statements and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. Such unaudited condensed consolidated financial statements and accompanying notes are the representations of the Company’s management, who is responsible for their integrity and objectivity. The information included in this Form 10-Q should be read in conjunction with the information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 11, 2020. Interim results for the three months ended March 31, 2020 are not necessarily indicative of the results the Company will have for the full year ending December 31, 2020.

The accompanying condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which are normal and recurring, necessary to fairly state its financial position, results of operations and cash flows. All significant intercompany transactions have been eliminated in consolidation. The financial data and the other information disclosed in these notes to the condensed consolidated financial statements reflected in the three month period presented are unaudited. The December 31, 2019 balance sheet included herein was derived from the audited financial statements but does not include all disclosures or notes required by GAAP for complete financial statements.

Reclassifications

Certain reclassifications to other assets have been made to prior year amounts for consistency and comparability with the current year’s financial statements presentation. These reclassifications had no effect on the reported total assets.

Liquidity and Capital Resources

During 2019 and 2018, the Company generated negative cash flows from operations of $30,117 and $41,770, respectively, and incurred net losses of $62,078 and $61,104, respectively. In the three months ended March 31, 2020, the Company generated cash flows from operations of $1,503 and incurred a net loss of $12,684.  As of March 31, 2020, the Company had an accumulated deficit of $245,173. Historically, the Company has satisfied its capital needs with the net proceeds from its sales of equity securities, its issuances of convertible debt, and the exercise of common stock warrants. In the first three months of 2020, the Company raised net proceeds of $2,984 through sales of its common stock under an Equity Distribution Agreement dated June 1, 2018 (the “Equity Distribution Agreement”). As of March 31, 2020, the Company’s cash and cash equivalents totaled $49,165.

6


As described in Note 10, on April 3, 2020, the Company applied for loans under the Paycheck Protection Program (the “PPP”) established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), and on April 14 and April 15, 2020, the Company entered into loan agreements and promissory notes evidencing unsecured loans in the aggregate amount of $6,491 made to the Company under the PPP. The proceeds from these loans will be used for payroll costs and any payments of rent and utilities. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. No assurance can be given that the Company will seek or obtain forgiveness of the loans in whole or in part, or that the Company will not elect to prepay the loans.     

The Company expects to continue to generate net losses for the foreseeable future as it makes significant investments in developing and selling its aiWARE SaaS solutions. Management believes that the Company’s existing balances of cash and cash equivalents will be sufficient to meet its anticipated cash requirements for at least twelve months from the date that these financial statements are issued. However, the Company does not expect that its current cash and cash equivalents will be sufficient to support the development of its business to the point at which the Company has continued positive cash flows from operations. The Company plans to meet its future needs for additional capital through equity and/or debt financings.  Equity financings may include sales of common stock under the Company’s Equity Distribution Agreement pursuant to which the Company may offer and sell, from time to time, shares of its common stock having an aggregate available offering price of up to $21,737. Such financing may not be available on terms favorable to the Company or at all.  If the Company is unable to obtain adequate financing or financing on terms satisfactory to it when required, the Company’s ability to continue to support its business growth, scale its infrastructure, develop product enhancements and to respond to business challenges could be significantly impaired.   

 

Impact of the Coronavirus (“COVID-19”) Pandemic

 

The COVID-19 outbreak emerged in late 2019 and was declared a global pandemic by the World Health Organization on March 11, 2020.  The COVID-19 pandemic, and the actions being taken by governments worldwide to mitigate the public health consequences of the pandemic, have significantly impacted the global economy. For most of the first quarter of 2020, the Company’s results reflect historical trends and seasonality.  However, in March 2020, the Company began to experience a reduction in the demand for certain of its products and services as some customers began to reduce or delay their spending due to the negative impact of the pandemic on their businesses. In particular, net revenues from the Company’s aiWARE content licensing and media services business, which typically has significant revenues driven by major live sporting events, were negatively impacted in the first quarter of 2020 compared with the same period in 2019, due to the cancellation or postponement of substantially all major live sporting events in the United States. As such suspension is expected to continue for the foreseeable future, the associated reduction in demand for the Company’s services is expected to have a material adverse impact on net revenues from the Company’s aiWARE content licensing and media services business in the second quarter of 2020, and such impact could continue in future quarters.

 

The Company expects the pandemic to affect substantially all of its customers, which may reduce the demand and/or delay purchase decisions for the Company’s products and services, and may impact the creditworthiness of customers.  However, the Company has assessed the potential credit deterioration of its customers due to changes in the macroeconomic environment and has determined that no additional allowance for doubtful accounts was necessary as of March 31, 2020.

 

The extent to which the COVID-19 pandemic and the related macroeconomic conditions may affect the Company’s financial condition or results of operations is uncertain. While the Company’s advertising and aiWARE SaaS solutions businesses did not experience decreases in net revenues in the first quarter of 2020 compared with the same period in 2019, the severity and duration of the pandemic and the resulting macroeconomic conditions are difficult to predict, and the Company’s revenues and operating results may be negatively impacted in future periods.  The extent of the impact on the Company’s operational and financial performance will depend on various factors, including the duration and spread of the outbreak; advances in testing, treatment and prevention; the impact of government measures to contain the virus; and related government stimulus actions. Due to the nature of the Company’s business, the effect of the COVID-19 pandemic may not be fully reflected in its results of operations until future periods. The most significant risks arising from the COVID-19 pandemic to the Company’s business and results of operations are discussed in Part II, Item 1A. (Risk Factors) below.

 

 

Use of Accounting Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the accompanying condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The principal estimates relate to revenue recognition, allowance for doubtful accounts, the valuation of stock awards and stock warrants and income taxes. Actual results could differ from those estimates.

Significant Customers

The Company’s top ten customers accounted for approximately 32% and 28% of the Company’s net revenues for the three months ended March 31, 2020 and 2019, respectively. No individual customer accounted for 10% or more of the Company’s net revenues for the three months ended March 31, 2020 and 2019.

 

7


Remaining Performance Obligations

 

As of March 31, 2020, the aggregate amount of the transaction prices under the Company’s contracts allocated to the Company’s remaining performance obligations was $5,767, approximately 64% of which the Company expects to recognize as revenue over the next nine months, and the remainder thereafter.  This aggregate amount excludes amounts allocated to remaining performance obligations under contracts that have an original duration of one year or less and variable consideration that is allocated to remaining performance obligations.  

Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2019.  

 

Recently Adopted Accounting Pronouncements

Effective for the Company’s fiscal year ended December 31, 2019, the Company adopted the provisions and expanded disclosure requirements described in ASU 2014-09, Revenue from Contracts with Customers (Topic 606)(“Topic 606”) for its annual financial statements.  The Company adopted the standard using the modified retrospective method.  Accordingly, the results for the prior comparable periods were not adjusted to conform to the current year measurement and recognition of results. As of the beginning of 2019, the impact of the adoption of Topic 606 was not material.  However, in adopting Topic 606, the Company has modified its revenue recognition policy in the following ways:

 

Some multi-year contracts include fixed annual price increases.  Historically, the Company recognized revenue based on the price allocated to each year.  Now, the Company recognizes the aggregate fixed price as revenue ratably over the full term of the contract.

 

Historically, certain variable consideration was recognized one month in arrears when the amount became known.  These revenues are now recognized in the month in which the service is provided based on an estimate of the amount that the Company expects to be entitled to receive for the services.  These revenues do not represent a material portion of the Company’s total net revenues.

During the year ended December 31, 2019, the Company’s quarterly financial statements were prepared using the prior revenue recognition standard, Topic 605, Revenue Recognition.  Beginning in the first quarter of 2020, the Company’s quarterly financial statements are presented using Topic 606.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, as part of its disclosure framework project intended to improve the effectiveness of disclosures in the notes to the financial statements by updating certain disclosure requirements related to fair value measurements. The standard became effective for the Company beginning in the first quarter of fiscal year 2020. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments under this pronouncement will change the way all leases with duration of one year or more are treated. Under this guidance, lessees will be required to capitalize virtually all leases on the balance sheet as a right-of-use asset and an associated financing lease liability or capital lease liability. The right-of-use asset represents the lessee’s right to use, or control the use of, a specified asset for the specified lease term. The lease liability represents the lessee’s obligation to make lease payments arising from the lease, measured on a discounted basis. Based on certain characteristics, leases are classified as financing leases or operating leases. Financing lease liabilities, those that contain provisions similar to capitalized leases, are amortized in the same manner as capital leases are amortized under current accounting rules, as amortization expense and interest expense in the statement of operations. Operating lease liabilities are amortized on a straight-line basis over the life of the lease as lease expense in the statement of operations. This standard will be effective for the Company beginning with the first quarter of fiscal year 2021. The Company is currently evaluating the impact this standard will have on its policies and procedures pertaining to its existing and future lease arrangements, its disclosure requirements and its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326). which requires measurement and recognition of expected credit losses for financial assets held. This standard will be effective for the Company beginning in the first quarter of fiscal year 2023. The Company is currently evaluating the impact that this standard will have on its financial statements and related disclosures as well as the timing of adoption.

In December 2019, the FASB issued ASU No. 2019-12 to simplify the accounting in ASC 740, Income Taxes. This standard removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This guidance also clarifies and simplifies other areas of ASC 740. This standard will be effective for the Company beginning in the first quarter of fiscal year 2022. The Company is currently evaluating the impact that this standard will have on its financial statements and related disclosures as well as the timing of adoption.

 

8


NOTE 3. NET LOSS PER SHARE

The following table presents the computation of basic and diluted net loss per share:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Numerator

 

 

 

 

 

 

 

 

Net loss

 

$

(12,684

)

 

$

(16,306

)

Denominator

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

26,794,326

 

 

 

19,579,332

 

Less:  Weighted-average shares subject to repurchase

 

 

(21,163

)

 

 

(68,112

)

Denominator for basic and diluted net loss per share

 

 

26,773,163

 

 

 

19,511,220

 

Basic and diluted net loss per share

 

$

(0.47

)

 

$

(0.84

)

 

The Company reported net losses for both periods presented and, as such, all potentially dilutive shares of common stock would have been antidilutive for such periods. The table below presents the weighted-average securities (in common equivalent shares) outstanding during the periods presented that have been excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Common stock options and restricted stock units

 

 

9,781,808

 

 

 

9,300,783

 

Warrants to purchase common stock

 

 

1,297,151

 

 

 

1,297,151

 

 

 

 

11,078,959

 

 

 

10,597,934

 

 

 

NOTE 4. FINANCIAL INSTRUMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, the first two of which are considered observable and the last unobservable, that may be used to measure fair value, as follows:

 

Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities;

 

 

Level 2—inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

 

 

Level 3—unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Cash and Cash Equivalents

The Company’s money market funds are categorized as Level 1 within the fair value hierarchy.  The following table shows the cost, gross unrealized losses and fair value, with a breakdown by significant investment category, of the Company’s cash and cash equivalents as of March 31, 2020:

 

 

 

 

 

 

 

 

Gross

 

 

 

 

 

 

Cash and

 

 

 

 

 

 

 

Unrealized

 

 

Fair

 

 

Cash

 

 

 

Cost

 

 

Losses

 

 

Value

 

 

Equivalents

 

Cash

 

$

35,749

 

 

$

 

 

$

35,749

 

 

$

35,749

 

Level 1:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

13,416

 

 

 

 

 

 

13,416

 

 

 

13,416

 

Total

 

$

49,165

 

 

$

 

 

$

49,165

 

 

$

49,165

 

 

9


As of December 31, 2019, the Company’s cash and cash equivalents balances were as follows:

 

 

 

 

 

 

 

Gross

 

 

 

 

 

 

Cash and

 

 

 

 

 

 

 

Unrealized

 

 

Fair

 

 

Cash

 

 

 

Cost

 

 

Losses

 

 

Value

 

 

Equivalents

 

Cash

 

$

23,710

 

 

$

 

 

$

23,710

 

 

$

23,710

 

Level 1:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

20,355

 

 

 

 

 

 

20,355

 

 

 

20,355

 

Total

 

$

44,065

 

 

$

 

 

$

44,065

 

 

$

44,065

 

Stock Warrants

All of the Company’s outstanding stock warrants are categorized as Level 3 within the fair value hierarchy. Stock warrants have been recorded at their fair value using either a probability weighted expected return model or the Black-Scholes option-pricing model. These models incorporate contractual terms, maturity, risk-free interest rates and volatility. The value of the Company’s stock warrants would increase if a higher risk-free interest rate was used, and would decrease if a lower risk-free interest rate was used. Similarly, a higher volatility assumption would increase the value of the stock warrants, and a lower volatility assumption would decrease the value of the stock warrants. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management with the assistance of a third-party valuation specialist.

In April 2018, in connection with the advisory agreement between the Company and a financial advisory firm, the Company issued such firm a five-year warrant to purchase up to 20,000 shares of the Company’s common stock (“April 2018 Warrant”). The April 2018 Warrant was fully vested and exercisable upon issuance and has an exercise price of $11.73 per share. The Company recorded this stock warrant at its fair value using the Black-Scholes option-pricing model. The holder is able to redeem the warrant for a number of shares having a value equal to the in-the-money value of the warrant. The Company recorded the fair value of the award as a liability upon issuance, and such fair value is remeasured at the end of each reporting period. The April 2018 Warrant was outstanding at March 31, 2020.   

The following table summarizes quantitative information with respect to the significant unobservable inputs that were used to value the April 2018 Warrant:

 

 

March 31, 2020

 

 

December 31, 2019

 

Volatility

 

70

%

 

 

70

%

Risk-free rate

 

0.29

%

 

 

1.62

%

Term

3.0 years

 

 

3.25 years

 

 

The fair value of the April 2018 Warrant, which was recorded within other accrued liabilities in the accompanying condensed consolidated balance sheets at March 31, 2020 and December 31, 2019 was $5 and $7, respectively. Changes in fair value of the April 2018 Warrant are recorded in other income, net in the Company’s consolidated statement of operations and comprehensive loss. During the three months ended March 31, 2020 and 2019, the Company recorded a gain of $2 and loss of $13, respectively, for the change in fair value.

 

10


NOTE 5. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

The carrying amount of goodwill was $6,904 as of December 31, 2019 and March 31, 2020.

Intangible Assets

The following table sets forth the Company’s finite-lived intangible assets resulting from business acquisitions and other purchases, which continue to be amortized: 

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

Weighted

Average

Remaining

Useful Life

 

 

Gross

Carrying

 

 

Accumulated

 

 

Net

Carrying

 

 

Gross

Carrying

 

 

Accumulated

 

 

Net

Carrying

 

 

 

(in years)

 

 

Amount

 

 

Amortization

 

 

Amount

 

 

Amount

 

 

Amortization

 

 

Amount

 

Software and technology

 

 

1.2

 

 

$

3,582

 

 

$

(2,469

)

 

$

1,113

 

 

$

3,582

 

 

$

(2,171

)

 

$

1,411

 

Licensed technology

 

 

1.5

 

 

 

500

 

 

 

(250

)

 

 

250

 

 

 

500

 

 

 

(208

)

 

 

292

 

Developed technology

 

 

3.4

 

 

 

9,600

 

 

 

(3,040

)

 

 

6,560

 

 

 

9,600

 

 

 

(2,560

)

 

 

7,040

 

Customer relationships

 

 

3.4

 

 

 

9,300

 

 

 

(2,945

)

 

 

6,355

 

 

 

9,300

 

 

 

(2,480

)

 

 

6,820

 

Trademarks and trade names

 

 

0.7

 

 

 

100

 

 

 

(70

)

 

 

30

 

 

 

100

 

 

 

(59

)

 

 

41

 

Noncompete agreements

 

 

2.3

 

 

 

800

 

 

 

(330

)

 

 

470

 

 

 

800

 

 

 

(278

)

 

 

522

 

Total

 

 

3.2

 

 

$

23,882

 

 

$

(9,104

)

 

$

14,778

 

 

$

23,882

 

 

$

(7,756

)

 

$

16,126

 

 

The following table presents amortization expense associated with the Company’s finite-lived intangible assets, which is included in the consolidated statement of operations and comprehensive loss as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Cost of revenues

 

$

561

 

 

$

370

 

Sales and marketing

 

 

531

 

 

 

213

 

Research and development

 

 

256

 

 

 

256

 

General and administrative

 

 

 

 

 

2

 

Total

 

$

1,348

 

 

$

841

 

 

Amortization of finite-lived intangible assets in cost of revenues and research and development in the consolidated statements of operations and comprehensive loss relates primarily to acquired developed technology.

 

The following table presents future amortization of the Company’s finite-lived intangible assets at March 31, 2020:

 

2020 (nine months)

 

$

4,034

 

2021

 

 

4,261

 

2022

 

 

3,963

 

2023

 

 

2,520

 

Total

 

$

14,778

 

 

11


NOTE 6. CONSOLIDATED FINANCIAL STATEMENTS DETAILS

Consolidated Balance Sheets Details

Accounts Receivable, Net

Accounts receivable consisted of the following:

 

 

 

As of

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Accounts receivable Advertising

 

$

18,760

 

 

$