August 10, 2020 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐	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 August 7, 2020, 27,602,769 shares of the registrant’s common stock were outstanding.

VERITONE, INC.

QUARTERLY REPORT ON FORM 10-Q

June 30, 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 June 30, 2020 and December 31, 2019	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2020 and 2019	3
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
PART II.	OTHER INFORMATION	27
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
Signatures		29

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.

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
	June 30,			December 31,
	2020			2019
ASSETS
Cash and cash equivalents	$	50,081		$	44,065
Accounts receivable, net of allowance for doubtful accounts of $245 and $29, respectively		24,535			21,352
Expenditures billable to clients		3,177			10,286
Prepaid expenses and other current assets		5,279			5,409
Total current assets		83,072			81,112
Property, equipment and improvements, net		2,732			3,214
Intangible assets, net		13,432			16,126
Goodwill		6,904			6,904
Long-term restricted cash		855			855
Other assets		292			315
Total assets	$	107,287		$	108,526
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	20,498		$	17,014
Accrued media payments		31,797			26,664
Client advances		4,461			9,080
Accrued compensation		2,334			2,486
Other accrued liabilities		6,830			4,492
Total current liabilities		65,920			59,736
Other liabilities		1,287			1,379
Total liabilities		67,207			61,115
Commitments and contingencies (Note 7)
Stockholders' equity
Common stock, par value $0.001 per share; 75,000,000 shares authorized; 27,516,307 and 25,670,737 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively		28			26
Additional paid-in capital		296,967			279,828
Accumulated deficit		(256,966	)		(232,489	)
Accumulated other comprehensive income		51			46
Total stockholders' equity		40,080			47,411
Total liabilities and stockholders' equity	$	107,287		$	108,526

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

VERITONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(in thousands, except per share and share data)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Net revenues	$	13,268		$	12,270		$	25,172		$	24,395
Cost of revenues		4,325			4,562			8,136			8,434
Gross profit		8,943			7,708			17,036			15,961
Operating expenses:
Sales and marketing		5,460			6,448			10,920			12,581
Research and development		3,696			6,351			7,598			13,289
General and administrative		11,343			11,645			22,886			23,335
Total operating expenses		20,499			24,444			41,404			49,205
Loss from operations		(11,556	)		(16,736	)		(24,368	)		(33,244	)
Other income (expense), net		(235	)		51			(104	)		262
Loss before provision for income taxes		(11,791	)		(16,685	)		(24,472	)		(32,982	)
Provision for income taxes		2			6			5			15
Net loss	$	(11,793	)	$	(16,691	)	$	(24,477	)	$	(32,997	)
Net loss per share:
Basic and diluted	$	(0.43	)	$	(0.80	)	$	(0.91	)	$	(1.64	)
Weighted average shares outstanding:
Basic and diluted		27,117,432			20,759,396			26,945,297			20,138,756
Comprehensive loss:
Net loss	$	(11,793	)	$	(16,691	)	$	(24,477	)	$	(32,997	)
Unrealized gain on marketable securities, net of income taxes		—			13			—			48
Foreign currency translation gain, net of income taxes		1			45			5			24
Total comprehensive loss	$	(11,792	)	$	(16,633	)	$	(24,472	)	$	(32,925	)

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

VERITONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(Unaudited)

	Three Months Ended June 30, 2020
										Accumulated
					Additional					Other
	Common Stock				Paid-in		Accumulated			Comprehensive
	Shares		Amount		Capital		Deficit			Income		Total
Balance as of March 31, 2020		27,074,372	$	27	$	287,368	$	(245,173	)	$	50	$	42,272
Common stock offerings, net		199,109		1		3,021		—			—		3,022
Common stock issued under employee stock plans, net		88,515		—		39		—			—		39
Stock-based compensation expense		—		—		4,131		—			—		4,131
Exercise of warrants		154,311		—		2,100		—			—		2,100
Warrant issuance		—		—		308		—			—		308
Net loss		—		—		—		(11,793	)		—		(11,793	)
Other comprehensive gain		—		—		—		—			1		1
Balance as of June 30, 2020		27,516,307	$	28	$	296,967	$	(256,966	)	$	51	$	40,080

	Six Months Ended June 30, 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		1,491,317		2		6,004		—			—		6,006
Common stock issued under employee stock plans, net		199,942		—		140		—			—		140
Stock-based compensation expense		—		—		8,587		—			—		8,587
Exercise of warrants		154,311		—		2,100		—			—		2,100
Warrant issuance		—		—		308		—			—		308
Net loss		—		—		—		(24,477	)		—		(24,477	)
Other comprehensive gain		—		—		—		—			5		5
Balance as of June 30, 2020		27,516,307	$	28	$	296,967	$	(256,966	)	$	51	$	40,080

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

VERITONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(Unaudited)

	Three Months Ended June 30, 2019
										Accumulated
					Additional					Other
	Common Stock				Paid-in		Accumulated			Comprehensive
	Shares		Amount		Capital		Deficit			Income		Total
Balance as of March 31, 2019		20,197,188	$	20	$	244,182	$	(186,717	)	$	14	$	57,499
Common stock offerings, net		1,006,663		1		8,054		—			—		8,055
Common stock issued under employee stock plans, net		62,658		—		90		—			—		90
Machine Box holdback consideration		—		—		162		—			—		162
Common stock issued for acquisitions		651,897		1		70		—			—		71
Stock-based compensation expense		—		—		5,255		—			—		5,255
Net loss		—		—		—		(16,691	)		—		(16,691	)
Other comprehensive gain		—		—		—		—			58		58
Balance as of June 30, 2019		21,918,406	$	22	$	257,813	$	(203,408	)	$	72	$	54,499

	Six Months Ended June 30, 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		1,668,663		2		12,213		—			—		12,215
Common stock issued under employee stock plans, net		147,675		—		414		—			—		414
Machine Box holdback consideration		—		—		620		—			—		620
Common stock issued for acquisitions		766,848		1		3,834		—			—		3,835
Stock-based compensation expense		—		—		10,058		—			—		10,058
Net loss		—		—		—		(32,997	)		—		(32,997	)
Other comprehensive gain		—		—		—		—			71		71
Balance as of June 30, 2019		21,918,406	$	22	$	257,813

Form: 10-Q

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