Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

May 6, 2021

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2021

OR

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

For the transition period from              to             

Commission File Number: 001-38093

 

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.)

 

1515 Arapahoe St., Tower 3, Suite 400, Denver, CO 80202

(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 April 30, 2021, 32,683,519 shares of the registrant’s common stock were outstanding.

 

 

 


 

VERITONE, INC.

QUARTERLY REPORT ON FORM 10-Q

March 31, 2021

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, 2021 and December 31, 2020

 

2

 

  

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2021 and 2020

 

3

 

  

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020

 

4

 

  

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020

 

5

 

  

Notes to the Condensed Consolidated Financial Statements

 

6

Item 2.

  

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

 

16

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

 

24

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

 

25

Item 3.

  

Defaults Upon Senior Securities

 

25

Item 4.

  

Mine Safety Disclosures

 

25

Item 5.

  

Other Information

 

25

Item 6.

  

Exhibits

 

26

Signatures

 

27

 

 

 


 

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, 2020, filed with the SEC on March 5, 2021. 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,

 

 

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

127,459

 

 

$

114,817

 

Accounts receivable, net

 

 

24,100

 

 

 

16,666

 

Expenditures billable to clients

 

 

16,129

 

 

 

18,365

 

Prepaid expenses and other current assets

 

 

5,220

 

 

 

6,719

 

Total current assets

 

 

172,908

 

 

 

156,567

 

Property, equipment and improvements, net

 

 

385

 

 

 

2,354

 

Intangible assets, net

 

 

9,666

 

 

 

10,744

 

Goodwill

 

 

6,904

 

 

 

6,904

 

Long-term restricted cash

 

 

855

 

 

 

855

 

Other assets

 

 

229

 

 

 

230

 

Total assets

 

$

190,947

 

 

$

177,654

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Accounts payable

 

$

19,186

 

 

$

15,632

 

Accrued media payments

 

 

65,391

 

 

 

55,874

 

Client advances

 

 

8,321

 

 

 

6,496

 

Other accrued liabilities

 

 

10,143

 

 

 

10,246

 

Total current liabilities

 

 

103,041

 

 

 

88,248

 

Other non-current liabilities

 

 

2,113

 

 

 

1,196

 

Total liabilities

 

 

105,154

 

 

 

89,444

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Common stock, par value $0.001 per share; 75,000,000 shares authorized; 32,676,286 and 31,799,354 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

33

 

 

 

32

 

Additional paid-in capital

 

 

396,619

 

 

 

368,477

 

Accumulated deficit

 

 

(310,932

)

 

 

(280,365

)

Accumulated other comprehensive income

 

 

73

 

 

 

66

 

Total stockholders' equity

 

 

85,793

 

 

 

88,210

 

Total liabilities and stockholders' equity

 

$

190,947

 

 

$

177,654

 

 

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,

 

 

 

2021

 

 

2020

 

Revenue

 

$

18,295

 

 

$

11,904

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenue

 

 

4,823

 

 

 

3,250

 

Sales and marketing

 

 

6,427

 

 

 

4,929

 

Research and development

 

 

4,960

 

 

 

3,646

 

General and administrative

 

 

31,543

 

 

 

11,543

 

Amortization

 

 

1,078

 

 

 

1,348

 

Total operating expenses

 

 

48,831

 

 

 

24,716

 

Loss from operations

 

 

(30,536

)

 

 

(12,812

)

Other (expense) income, net

 

 

(9

)

 

 

131

 

Loss before provision for income taxes

 

 

(30,545

)

 

 

(12,681

)

Provision for income taxes

 

 

22

 

 

 

3

 

Net loss

 

$

(30,567

)

 

$

(12,684

)

Net loss per share:

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.95

)

 

$

(0.47

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic and diluted

 

 

32,172,038

 

 

 

26,773,163

 

Comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

 

(30,567

)

 

 

(12,684

)

Foreign currency translation gain, net of income taxes

 

 

7

 

 

 

4

 

Total comprehensive loss

 

$

(30,560

)

 

$

(12,680

)

 

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, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income

 

 

Total

 

Balance as of December 31, 2020

 

 

31,799,354

 

 

$

32

 

 

$

368,477

 

 

$

(280,365

)

 

$

66

 

 

$

88,210

 

Common stock issued under employee stock plans, net

 

 

608,886

 

 

 

1

 

 

 

4,253

 

 

 

 

 

 

 

 

 

4,254

 

Common stock issued for services

 

 

15,828

 

 

 

 

 

 

119

 

 

 

 

 

 

 

 

 

119

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

21,491

 

 

 

 

 

 

 

 

 

21,491

 

Exercise of warrants

 

 

252,218

 

 

 

 

 

 

2,279

 

 

 

 

 

 

 

 

 

2,279

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(30,567

)

 

 

 

 

 

(30,567

)

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

7

 

Balance as of March 31, 2021

 

 

32,676,286

 

 

$

33

 

 

$

396,619

 

 

$

(310,932

)

 

$

73

 

 

$

85,793

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(30,567

)

 

$

(12,684

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,253

 

 

 

1,604

 

Loss on disposal of fixed assets

 

 

1,894

 

 

 

 

Loss on sublease

 

 

1,211

 

 

 

 

Change in fair value of warrant liability

 

 

 

 

 

(2

)

Provision for doubtful accounts

 

 

5

 

 

 

 

Stock-based compensation expense

 

 

21,610

 

 

 

4,456

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(7,439

)

 

 

(555

)

Expenditures billable to clients

 

 

2,236

 

 

 

5,446

 

Prepaid expenses and other current assets

 

 

1,507

 

 

 

406

 

Accounts payable

 

 

3,554

 

 

 

(763

)

Accrued media payments

 

 

9,517

 

 

 

3,334

 

Client advances

 

 

1,825

 

 

 

947

 

Other accrued liabilities

 

 

(103

)

 

 

(644

)

Other liabilities

 

 

(294

)

 

 

(42

)

Net cash provided by operating activities

 

 

6,209

 

 

 

1,503

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(100

)

 

 

(9

)

Net cash used in investing activities

 

 

(100

)

 

 

(9

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from common stock offerings, net

 

 

 

 

 

3,505

 

Proceeds from the exercise of warrants

 

 

2,279

 

 

 

 

Proceeds from issuances of stock under employee stock plans, net

 

 

4,254

 

 

 

101

 

Net cash provided by financing activities

 

 

6,533

 

 

 

3,606

 

Net increase in cash and cash equivalents and restricted cash

 

 

12,642

 

 

 

5,100

 

Cash and cash equivalents and restricted cash, beginning of period

 

 

115,672

 

 

 

44,920

 

Cash and cash equivalents and restricted cash, end of period

 

$

128,314

 

 

$

50,020

 

 

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’s proprietary AI operating system, aiWARETM, uses machine learning algorithms, or AI models, together with a suite of powerful applications, to reveal valuable insights from vast amounts of structured and unstructured data. The platform offers capabilities that mimic human cognitive functions such as perception, prediction and problem solving, enabling users to quickly, efficiently and cost effectively transform unstructured data into structured data, and analyze and optimize data to drive business processes and insights.  aiWARE is based on an open architecture that enables new AI models, applications and workflows to be added quickly and efficiently, resulting in a future-proof, scalable and evolving solution that can be leveraged by organizations across a broad range of industries, including media and entertainment, government, legal and compliance, energy 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 that leverages the Company’s aiWARE technologies to provide differentiated services to its clients. 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. The Company’s advertising services also include its VeriAdsTM Network, which is comprised of programs that enable broadcasters, podcasters and social media influencers to generate incremental advertising revenue.

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 based on 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, 2020, filed with the SEC on March 5, 2021. Interim results for the three months ended March 31, 2021 are not necessarily indicative of the results the Company will have for the full year ending December 31, 2021.

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, recurring and necessary to fairly state the Company’s 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 periods presented are unaudited. The December 31, 2020 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

Amortization expense, which was presented in prior year periods within cost of revenue, sales and marketing, research and development, and general and administrative operating expenses, has been reclassified and is presented as a single separate line item in operating expenses. Gross profit, which was previously reflected in the statement of operations and comprehensive loss, is no longer presented. Additionally, cost of revenue, which was presented in prior periods within gross profit, is now presented as an operating expense. The Company believes that this presentation more accurately reflects the Company’s cost of revenue and operating expenses. These reclassifications had no effect on reported net loss.

Liquidity and Capital Resources

During the years ended December 31, 2020 and 2019, the Company generated cash flows from operations of $1,433 and negative cash flows from operations of $30,432, respectively, and incurred net losses of $47,876 and $62,078, respectively. In the three months ended March 31, 2021, the Company generated cash flows from operations of $6,209 and incurred a net loss of $30,567.  As of March 31, 2021, the Company had an accumulated deficit of $310,932. Historically, the Company has satisfied its capital needs with the net proceeds from sales of

6


equity securities, issuances of convertible debt, and the exercise of common stock options and warrants. In 2020, the Company completed an offering of its common stock for aggregate net proceeds of $59,771 and raised additional net proceeds of $5,986 through sales of its common stock under an Equity Distribution Agreement dated June 1, 2018 (the “Equity Distribution Agreement”). In the first three months of 2021, the Company received net proceeds of $4,254 from the issuance of common stock under the Company’s employee stock plans and $2,279 from the exercise of common stock warrants.  

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, which totaled $127,459 as of March 31, 2021, will be sufficient to meet its anticipated cash requirements for at least twelve months from the date that these financial statements are issued. However, should the Company’s current cash and cash equivalents not be sufficient to support the development of its business to the point at which it has 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. 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.    

 

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, purchase accounting, impairment of long-lived assets, the valuation of stock awards and stock warrants and income taxes, where applicable.

There has been uncertainty and disruption in the global economy and financial markets due to the COVID-19 pandemic. The Company is not aware of any specific event or circumstance that would require an update to its estimates or assumptions or a revision of the carrying value of its assets or liabilities as of the date of filing of this Quarterly Report on Form 10-Q.

These estimates and assumptions may change as new events occur and additional information is obtained. As a result, actual results could differ materially from these estimates and assumptions.

Significant Customers

One individual customer accounted for 10% of the Company’s net revenues for the three months ended March 31, 2021. No individual customer accounted for 10% or more of the Company’s net revenues for the three months ended March 31, 2020.

 

Remaining Performance Obligations

 

As of March 31, 2021, the aggregate amount of the transaction prices under the Company’s contracts allocated to the Company’s remaining performance obligations was $4,730, approximately 74% of which the Company expects to recognize as revenue over the next twelve 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, 2020.  

 


7


 

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 2022, assuming the Company maintains its emerging growth company status. The Company is currently evaluating the expected 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, but anticipates that the required recognition of a lease liability and related right-of-use asset may significantly increase both assets and liabilities recognized and reported on its balance sheet.

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, assuming the Company maintains its emerging growth company status, and early adoption is permitted. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements and related disclosures as well as the timing of adoption.

In December 2019, the FASB issued ASU 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, assuming the Company maintains its emerging growth company status, and early adoption is permitted. 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.

 

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,

 

 

 

2021

 

 

2020

 

Numerator

 

 

 

 

 

 

 

 

Net loss

 

$

(30,567

)

 

$

(12,684

)

Denominator

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

32,191,419

 

 

 

26,794,326

 

Less:  Weighted-average shares subject to repurchase

 

 

(19,381

)

 

 

(21,163

)

Denominator for basic and diluted net loss per share

   attributable to common stockholders

 

 

32,172,038

 

 

 

26,773,163

 

Basic and diluted net loss per share

 

$

(0.95

)

 

$

(0.47

)

 

 

The Company reported net losses for all 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,

 

 

 

2021

 

 

2020

 

Common stock options and restricted stock units

 

 

10,274,878

 

 

 

9,781,808

 

Warrants to purchase common stock

 

 

639,169

 

 

 

1,297,151

 

 

 

 

10,914,047

 

 

 

11,078,959

 

 


8


 

 

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 that may be used to measure fair value. Level 1 and Level 2 are considered observable and Level 3 is considered unobservable, 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. As of March 31, 2021, the Company’s cash and cash equivalents balances were as follows:

 

 

 

 

 

 

Gross

 

 

 

 

 

 

Cash and

 

 

 

 

 

 

 

Unrealized

 

 

Fair

 

 

Cash

 

 

 

Cost

 

 

Losses

 

 

Value

 

 

Equivalents

 

Cash

 

$

57,435

 

 

$

 

 

$

57,435

 

 

$

57,435

 

Level 1:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

70,024

 

 

 

 

 

 

70,024

 

 

 

70,024

 

Total

 

$

127,459

 

 

$

 

 

$

127,459

 

 

$

127,459

 

 

 

As of December 31, 2020, the Company’s cash and cash equivalents balances were as follows:

 

 

 

 

 

 

Gross

 

 

 

 

 

 

Cash and

 

 

 

 

 

 

 

Unrealized

 

 

Fair

 

 

Cash

 

 

 

Cost

 

 

Losses

 

 

Value

 

 

Equivalents

 

Cash

 

$

44,795

 

 

$

 

 

$

44,795

 

 

$

44,795

 

Level 1:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

70,022

 

 

 

 

 

 

70,022

 

 

 

70,022

 

Total

 

$

114,817

 

 

$

 

 

$

114,817

 

 

$

114,817

 

 

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, the Monte Carlo simulation 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. 

 

 


9


 

 

NOTE 5. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

The carrying amount of goodwill was $6,904 as of March 31, 2021 and December 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, 2021

 

 

December 31, 2020

 

 

 

Weighted

Average

Remaining

Useful

Life (in years)

 

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

 

Gross

Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

Software and technology

 

 

1.2

 

 

$

3,582

 

 

$

(3,396

)

 

$

186

 

 

$

3,582

 

 

$

(3,357

)

 

$

225

 

Licensed technology

 

 

0.5

 

 

 

500

 

 

 

(417

)

 

 

83

 

 

 

500

 

 

 

(375

)

 

 

125

 

Developed technology

 

 

2.4

 

 

 

9,600

 

 

 

(4,960

)

 

 

4,640

 

 

 

9,600

 

 

 

(4,480

)

 

 

5,120

 

Customer relationships

 

 

2.4

 

 

 

9,300

 

 

 

(4,805

)

 

 

4,495

 

 

 

9,300

 

 

 

(4,340

)

 

 

4,960

 

Noncompete agreements

 

 

1.4

 

 

 

800

 

 

 

(538

)

 

 

262

 

 

 

800

 

 

 

(486

)

 

 

314

 

Total

 

 

2.3

 

 

$

23,782

 

 

$

(14,116

)

 

$

9,666

 

 

$

23,782

 

 

$

(13,038

)

 

$

10,744

 

 

 

The following table presents future amortization of the Company’s finite-lived intangible assets at March 31, 2021:

2021 (9 months)

 

$

3,183

 

2022

 

 

3,963

 

2023

 

 

2,520

 

Total

 

$

9,666

 

 

NOTE 6. CONSOLIDATED FINANCIAL STATEMENTS DETAILS

Consolidated Balance Sheets Details

Cash and cash equivalents

As of March 31, 2021 and December 31, 2020, the Company had cash and cash equivalents of $127,459 and $114,817, respectively, including $51,129 and $40,052, respectively, of cash received from advertising clients for future payments to vendors. 

 

Accounts Receivable, Net

Accounts receivable consisted of the following:

 

 

As of

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Accounts receivable Advertising

 

$

18,820

 

 

$

12,641

 

Accounts receivable Other