10-Q/A: Quarterly report pursuant to Section 13 or 15(d)
Published on August 15, 2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
Amendment No. 1
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
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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.
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).
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.
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Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
As of April 30, 2022,
EXPLANATORY NOTE
Background
As disclosed in the Company’s Current Reports on Form 8-K, as furnished or filed, as applicable, with the SEC on August 9, 2022 and August 15, 2022, the Company is restating its previously issued unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2022. On August 9, 2022, the management of the Company and the Audit Committee of the Company’s Board of Directors, after consideration of the relevant facts and circumstances, concluded that the Company’s unaudited condensed consolidated interim financial statements as of March 31, 2022 and for the quarterly period ended March 31, 2022 included in the Original Report should be restated, and that such financial statements previously filed with the SEC should no longer be relied upon due to an error related to the calculation of fair value of contingent consideration at the time of the acquisition of PandoLogic Ltd. (“PandoLogic”), which led to an understatement of goodwill, intangible assets, and contingent consideration at the time of the acquisition, and an overstatement of subsequent changes to the fair value of contingent consideration, and an understatement of subsequent intangible amortization expense in the Original Report (the “Q1 2022 restatement”).
This Amended Report is presented as of the filing date of the Original Report and does not reflect events occurring after that date, or modify or update disclosures in any way other than as required to reflect the Q1 2022 restatement and the full year 2021 adjustment as described below. Accordingly, this Amended Report should be read in conjunction with the Company’s filings with the SEC subsequent to the date on which the Company filed the Original Report.
This Amended Report sets forth the Original Report in its entirety, as amended to reflect the restatement. Among other things, forward-looking statements made in the Original Report have not been revised to reflect events that occurred or facts that became known to the Company after the filing of the Original Report, and such forward-looking statements should be read in their historical context.
In connection with the Q1 2022 restatement and the filing of this Amended Report, the Company has also adjusted its consolidated balance sheet as of December 31, 2021 contained in the Original Report in order to correct for an error that the Company determined was not material to the Company’s previously issued financial statements included in its Annual Report on Form 10-K as further described in Note 2 “Presentation and Summary of Significant Accounting Policies” (the “full year 2021 adjustment”).
Items Amended in this Amended Report
The following sections in the Original Report are revised in this Amended Report, solely as a result of, and to reflect, the restatement:
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Part I – Item 1. Financial Information |
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Part I – Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Part I – Item 4. Controls and Procedures |
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Part II – Item 1A. Risk Factors |
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Part II – Item 6. Exhibits and Signatures |
In accordance with applicable SEC rules, this Amended Report includes an updated signature page and certifications of the Company’s Chief Executive Officer and Chief Financial Officer in Exhibits 31.1, 31.2 and 32.1 as required by Rule 12b-15.
Refer to Note 2, “Presentation and Summary of Significant Accounting Policies,” of Notes to the Condensed Consolidated Financial Statements of this Amended Report for additional information and for the summary of the accounting impacts of these adjustments to the Company’s condensed consolidated financial statements.
The Company has also identified a material weakness in its internal control over financial reporting relating to the appropriate oversight and sufficient review of the work performed by third-party specialists on the Company’s behalf and the coordination of work being performed by more than one specialist. In connection with filing of this Amended Report, the Company has reassessed its disclosure controls and procedures and concluded that they were ineffective as of March 31, 2022. See additional discussion included in Part II Item 1A of this Amended Report.
VERITONE, INC.
QUARTERLY REPORT ON FORM 10-Q/A
March 31, 2022
TABLE OF CONTENTS
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PART I. |
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2 |
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Item 1. |
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2 |
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Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 |
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Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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35 |
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Item 4. |
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35 |
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PART II. |
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37 |
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Item 1. |
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37 |
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Item 1A. |
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37 |
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Item 2. |
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38 |
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Item 3. |
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38 |
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Item 4. |
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38 |
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Item 5. |
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38 |
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Item 6. |
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39 |
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40 |
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q/A 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/A 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, although not all forward-looking statements contain these identifying words. Such forward-looking 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/A, 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, 2021, filed with the SEC on March 17, 2022. 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)
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As of |
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March 31, |
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2022 |
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December 31, |
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(As Restated) |
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2021 |
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ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Expenditures billable to clients |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, equipment and improvements, net |
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Intangible assets, net |
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Goodwill |
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Long-term restricted cash |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Accounts payable |
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$ |
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$ |
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Accrued media payments |
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Client advances |
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Contingent consideration, current |
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Other accrued liabilities |
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Total current liabilities |
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Convertible senior notes, non-current |
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Contingent consideration, non-current |
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Other non-current liabilities |
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Total liabilities |
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Commitments and contingencies (Note 9) |
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Stockholders' equity |
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Common stock, par value $ |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive income (loss) |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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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)
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Three Months Ended |
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March 31, |
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2022 |
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(As Restated) |
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2021 |
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Revenue |
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$ |
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$ |
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Operating expenses: |
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Cost of revenue |
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Sales and marketing |
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Research and development |
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General and administrative |
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Amortization |
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Total operating expenses |
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Loss from operations |
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Other expense, net |
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Loss before provision for income taxes |
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Provision for income taxes |
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Net loss |
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$ |
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$ |
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Net loss per share: |
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Basic and diluted |
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$ |
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$ |
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Weighted average shares outstanding: |
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Basic and diluted |
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Comprehensive loss: |
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Net loss |
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$ |
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$ |
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Foreign currency translation gain, net of income taxes |
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Total comprehensive loss |
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$ |
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$ |
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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)
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Three Months Ended March 31, 2022 |
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Accumulated |
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Additional |
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Accumulated |
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Other |
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Common Stock |
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Paid-in |
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Deficit |
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Comprehensive |
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Total |
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Shares |
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Amount |
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Capital |
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(As Restated) |
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Income |
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(As Restated) |
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Balance as of December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Cumulative-effect of accounting change adopted as of January 1, 2022 |
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— |
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— |
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— |
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( |
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— |
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Common stock issued under employee stock plans |
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— |
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— |
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Common stock withheld for employee taxes |
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( |
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— |
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— |
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— |
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Common stock issued for acquisitions |
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— |
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— |
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— |
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Common stock issued as part of contingent consideration |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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Other comprehensive gain |
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— |
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— |
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— |
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— |
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Balance as of March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Three Months Ended March 31, 2021 |
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Accumulated |
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Additional |
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Other |
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Common Stock |
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Paid-in |
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Accumulated |
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Comprehensive |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income |
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Total |
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Balance as of December 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Common stock issued under employee stock plans, net |
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— |
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— |
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Common stock issued for services |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Exercise of warrants |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive gain |
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— |
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— |
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— |
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— |
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Balance as of March 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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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)
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Three Months Ended |
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March 31, |
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2022 |
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(As Restated) |
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2021 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
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Loss on disposal of fixed assets |
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— |
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Provision for doubtful accounts |
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Loss on sublease |
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— |
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Stock-based compensation expense |
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|
|
|
|
|
|
|
|
Change in fair value of contingent consideration |
|
|
|
|
|
|
— |
|
|
Change in deferred taxes |
|
|
( |
) |
|
|
— |
|
|
Amortization of debt issuance costs |
|
|
|
|
|
|
— |
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
|
|
|
( |
) |
|
Expenditures billable to clients |
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets |
|
|
( |
) |
|
|
|
|
|
Other assets |
|
|
( |
) |
|
|
— |
|
|
Accounts payable |
|
|
( |
) |
|
|
|
|
|
Accrued media payments |
|
|
|
|
|
|
|
|
|
Client advances |
|
|
( |
) |
|
|
|
|
|
Other accrued liabilities |
|
|
( |
) |
|
|
( |
) |
|
Other liabilities |
|
|
( |
) |
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Minority investment |
|
|
( |
) |
|
|
— |
|
|
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
|
Acquisitions, net of cash acquired |
|
|
( |
) |
|
|
— |
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Payment of contingent considerations |
|
|
( |
) |
|
|
— |
|
|
Taxes paid related to net share settlement of equity awards |
|
|
( |
) |
|
|
— |
|
|
Proceeds from the exercise of warrants |
|
|
— |
|
|
|
|
|
|
Proceeds from issuances of stock under employee stock plans, net |
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
|
Cash and cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents and restricted cash, end of period |
|
$ |
|
|
|
$ |
|
|
|
Supplemental Disclosure of Cash Flow Information |
|
|
|
|
|
|
|
|
|
Non-cash activities: |
|
|
|
|
|
|
|
|
|
Shares issued for acquisition of businesses and earn-out consideration |
|
|
|
|
|
|
— |
|
|
Lease liabilities arising from right-of-use assets |
|
|
|
|
|
|
— |
|
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, 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 aiWARE 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 scalable and evolving solution that can be leveraged by organizations across a broad range of business sectors, serving commercial enterprises as well as government and regulated industries.
In addition, the Company operates a full-service advertising agency that leverages the Company’s aiWARE technologies to provide differentiated Managed 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 VeriAds Network, which is comprised of programs that enable broadcasters, podcasters and social media influencers to generate incremental advertising revenue. The Company also offers cloud-native digital content management solutions and 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.
On March 1, 2022, the Company acquired an influencer-based management company, as discussed in more detail in Note 3. On September 14, 2021, the Company acquired PandoLogic, a company incorporated under the laws of the state of Israel, and a leading provider of intelligent hiring solutions, as discussed in more detail in Note 3. PandoLogic’s software platform, PandoIQ, is an AI-enabled talent acquisition and recruitment platform.
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 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/A 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, 2021, filed with the SEC on March 17, 2022. Interim results for the three months ended March 31, 2022 are not necessarily indicative of the results the Company will have for the full year ending December 31, 2022.
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, 2021 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.
Restatement and Adjustment of Financial Statements
Restatement of Previously Issued Financial Statements
On August 9, 2022, the management of the Company and the Audit Committee of the Board of Directors of the Company, after consideration of the relevant facts and circumstances, determined that the Company’s previously issued financial statements as of and for the three months ended March 31, 2022 should be restated, and that such financial statements should no longer be relied upon due to an error related to the calculation of fair value of contingent consideration at the time of the acquisition of PandoLogic, which led to an understatement of goodwill, intangible assets and contingent consideration at the time of the acquisition, an overstatement of subsequent changes to the fair value of contingent consideration, and an understatement of subsequent intangible amortization expense. The restatement results in a non-cash charge that reduces general and administrative expenses and results in a favorable change to net loss for the three months ended March 31, 2022. The Company has restated its financial statements for the three months ended March 31, 2022 for such errors.
6
Adjustment of Previously Issued Financial Statements
The Company also evaluated the aggregate effects of the errors to its previously issued financial statements in accordance with SEC Staff Accounting Bulletins No. 99 and No. 108 and, based upon quantitative and qualitative factors, determined that the errors were not material to the previously issued financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2021 or for any quarterly periods included therein. However, in order to correctly state equity in connection with the filing of this Form 10-Q/A, the December 31, 2021 consolidated balance sheet has been corrected to reflect the impact of this immaterial error. The Company will adjust its consolidated financial statements for the year ended December 31, 2021 when it files its Form 10-K for the period ended December 31, 2022.
The following tables present the effects of the aforementioned restatement to the specific line items presented in the Company’s previously reported unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2022 (in thousands, except per share amounts):
Condensed Consolidated Balance Sheet
|
|
|
As of March 31, 2022 |
|
|||||||||
|
|
|
As Reported |
|
|
Adjustment |
|
|
As Restated |
|
|||
|
Intangible assets, net |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration, non-current |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other non-current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated deficit |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Total stockholders' equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity |
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statement of Operations and Comprehensive Loss
|
|
|
Three Months Ended |
|
|||||||||
|
|
|
March 31, 2022 |
|
|||||||||
|
|
|
As Reported |
|
|
Adjustment |
|
|
As Restated |
|
|||
|
General and administrative |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Loss from operations |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Loss before provision for income taxes |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Provision for income taxes |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Net loss |
|
|
||||||||||