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00

014

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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, 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: 001-38107

 

ShotSpotter, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-0949915

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

7979 Gateway Blvd., Suite 210

Newark, California

94560

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (510) 794-3100

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

 

 

 

Common stock, par value $0.005 per share

SSTI

The Nasdaq Capital Market

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, 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 July 31, 2021, the registrant had 11,678,163 shares of common stock, $0.005 par value per share, outstanding.

 

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements

2

Condensed Consolidated Balance Sheets

2

Condensed Consolidated Statements of Operations

3

Condensed Consolidated Statements of Comprehensive Income (Loss)

4

 

Condensed Consolidated Statements of Stockholders’ Equity

5

Condensed Consolidated Statements of Cash Flows

6

Notes to Condensed Consolidated Financial Statements

7

Item 2.

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

15

Item 3.

Qualitative and Quantitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

PART II.

OTHER INFORMATION

 

Item 1A.

Risk Factors

27

Item 6.

Exhibits

56

Exhibit Index

57

Signatures

58

 

 

 

1


 

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

ShotSpotter, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

15,567

 

 

$

16,043

 

Accounts receivable and contract asset

 

 

7,353

 

 

 

12,921

 

Prepaid expenses and other current assets

 

 

3,272

 

 

 

2,172

 

Total current assets

 

 

26,192

 

 

 

31,136

 

Property and equipment, net

 

 

16,063

 

 

 

15,346

 

Operating lease right-of-use assets

 

 

623

 

 

 

882

 

Goodwill

 

 

2,816

 

 

 

2,811

 

Intangible assets, net

 

 

14,051

 

 

 

14,540

 

Other assets

 

 

1,696

 

 

 

1,605

 

Total assets

 

$

61,441

 

 

$

66,320

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

1,214

 

 

$

1,192

 

Deferred revenue, short-term

 

 

19,231

 

 

 

24,174

 

Accrued expenses and other current liabilities

 

 

4,533

 

 

 

5,613

 

Total current liabilities

 

 

24,978

 

 

 

30,979

 

Deferred revenue, long-term

 

 

560

 

 

 

405

 

Other liabilities

 

 

515

 

 

 

631

 

Total liabilities

 

 

26,053

 

 

 

32,015

 

 

 

 

 

 

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Preferred stock: $0.005 par value; 20,000,000 shares authorized; no shares issued and outstanding as of December 31, 2021 and 2020

 

 

 

 

 

 

Common stock: $0.005 par value; 500,000,000 shares authorized;
11,678,163 and 11,538,998 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

 

58

 

 

 

58

 

Additional paid-in capital

 

 

130,004

 

 

 

128,771

 

Accumulated deficit

 

 

(94,525

)

 

 

(94,354

)

Accumulated other comprehensive loss

 

 

(149

)

 

 

(170

)

Total stockholders' equity

 

 

35,388

 

 

 

34,305

 

Total liabilities and stockholders' equity

 

$

61,441

 

 

$

66,320

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

2


 

ShotSpotter, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues

 

$

14,624

 

 

$

11,277

 

 

$

29,637

 

 

$

21,735

 

Costs

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

6,317

 

 

 

4,353

 

 

 

12,617

 

 

 

8,695

 

Impairment of property and equipment

 

 

 

 

 

 

 

 

25

 

 

 

 

Total costs

 

 

6,317

 

 

 

4,353

 

 

 

12,642

 

 

 

8,695

 

Gross profit

 

 

8,307

 

 

 

6,924

 

 

 

16,995

 

 

 

13,040

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

3,928

 

 

 

2,321

 

 

 

7,863

 

 

 

4,837

 

Research and development

 

 

1,740

 

 

 

1,377

 

 

 

3,453

 

 

 

2,729

 

General and administrative

 

 

2,812

 

 

 

2,316

 

 

 

5,683

 

 

 

4,587

 

Total operating expenses

 

 

8,480

 

 

 

6,014

 

 

 

16,999

 

 

 

12,153

 

Operating (loss) income

 

 

(173

)

 

 

910

 

 

 

(4

)

 

 

887

 

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

9

 

 

 

5

 

 

 

20

 

 

 

98

 

Other expense, net

 

 

(86

)

 

 

(57

)

 

 

(138

)

 

 

(115

)

Total other income (expense), net

 

 

(77

)

 

 

(52

)

 

 

(118

)

 

 

(17

)

(Loss) income before income taxes

 

 

(250

)

 

 

858

 

 

 

(122

)

 

 

870

 

Provision (benefit) for income taxes

 

 

 

 

 

(8

)

 

 

49

 

 

 

(9

)

Net (loss) income

 

$

(250

)

 

$

866

 

 

$

(171

)

 

$

879

 

Net (loss) income per share, basic

 

$

(0.02

)

 

$

0.08

 

 

$

(0.01

)

 

$

0.08

 

Net (loss) income per share, diluted

 

$

(0.02

)

 

$

0.07

 

 

$

(0.01

)

 

$

0.08

 

Weighted average shares used in computing net (loss) income per share, basic

 

 

11,627,546

 

 

 

11,390,580

 

 

 

11,606,194

 

 

 

11,364,035

 

Weighted average shares used in computing net (loss) income per share, diluted

 

 

11,627,546

 

 

 

11,727,654

 

 

 

11,606,194

 

 

 

11,717,937

 

 

See accompanying notes to condensed consolidated financial statements.

3


 

ShotSpotter, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net (loss) income

 

$

(250

)

 

$

866

 

 

$

(171

)

 

$

879

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Change in foreign currency translation adjustment, net

 

 

38

 

 

 

24

 

 

 

21

 

 

 

(203

)

Comprehensive (loss) income

 

$

(212

)

 

$

890

 

 

$

(150

)

 

$

676

 

 

See accompanying notes to condensed consolidated financial statements.

4


 

ShotSpotter, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance at January 1, 2021

 

 

11,538,998

 

 

$

58

 

 

$

128,771

 

 

$

(94,354

)

 

$

(170

)

 

$

34,305

 

Exercise of stock options

 

 

60,600

 

 

 

 

 

 

213

 

 

 

 

 

 

 

 

 

213

 

Issuance of common stock in connection with exercise of warrants

 

 

50,716

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Issuance of common stock from RSUs vested

 

 

24,332

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase of common stock

 

 

(56,162

)

 

 

 

 

 

(2,192

)

 

 

 

 

 

 

 

 

(2,192

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,375

 

 

 

 

 

 

 

 

 

1,375

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17

)

 

 

(17

)

Net income

 

 

 

 

 

 

 

 

 

 

 

79

 

 

 

 

 

 

79

 

Balance at March 31, 2021

 

 

11,618,484

 

 

$

58

 

 

$

128,175

 

 

$

(94,275

)

 

$

(187

)

 

$

33,771

 

Exercise of stock options

 

 

16,432

 

 

 

 

 

 

364

 

 

 

 

 

 

 

 

 

364

 

Issuance of common stock from RSUs vested

 

 

37,538

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock from ESPP purchase

 

 

18,294

 

 

 

 

 

 

462

 

 

 

 

 

 

 

 

 

462

 

Repurchase of common stock

 

 

(12,585

)

 

 

 

 

 

(491

)

 

 

 

 

 

 

 

 

(491

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,494

 

 

 

 

 

 

 

 

 

1,494

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38

 

 

 

38

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(250

)

 

 

 

 

 

(250

)

Balance at June 30, 2021

 

 

11,678,163

 

 

$

58

 

 

$

130,004

 

 

$

(94,525

)

 

$

(149

)

 

$

35,388

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance at January 1, 2020

 

 

11,314,150

 

 

$

57

 

 

$

122,907

 

 

$

(95,579

)

 

$

(134

)

 

$

27,251

 

Exercise of stock options

 

 

17,543

 

 

 

 

 

 

57

 

 

 

 

 

 

 

 

 

57

 

Issuance of common stock in connection with exercise of warrants

 

 

46,939

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock from RSUs vested

 

 

20,297

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

887

 

 

 

 

 

 

 

 

 

887

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(227

)

 

 

(227

)

Net income

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

13

 

Balance at March 31, 2020

 

 

11,398,929

 

 

$

57

 

 

$

123,851

 

 

$

(95,566

)

 

$

(361

)

 

$

27,981

 

Exercise of stock options

 

 

26,562

 

 

 

 

 

 

41

 

 

 

 

 

 

 

 

 

41

 

Issuance of common stock from RSUs vested

 

 

22,754

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock from ESPP purchase

 

 

21,431

 

 

 

 

 

 

408

 

 

 

 

 

 

 

 

 

408

 

Repurchase of common stock

 

 

(74,520

)

 

 

 

 

 

(1,615

)

 

 

 

 

 

 

 

 

(1,615

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,163

 

 

 

 

 

 

 

 

 

1,163

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

 

 

 

24

 

Net income

 

 

 

 

 

 

 

 

 

 

 

866

 

 

 

 

 

 

866

 

Balance at June 30, 2020

 

 

11,395,156

 

 

$

57

 

 

$

123,848

 

 

$

(94,700

)

 

$

(337

)

 

$

28,868

 

 

See accompanying notes to condensed consolidated financial statements.

5


 

ShotSpotter, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

Net (loss) income

 

$

(171

)

 

$

879

 

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

 

 

 

 

 

 

Depreciation of property and equipment

 

 

2,810

 

 

 

2,664

 

Amortization of intangible assets

 

 

518

 

 

 

48

 

Impairment of property and equipment

 

 

25

 

 

 

 

Stock-based compensation

 

 

2,869

 

 

 

2,050

 

Loss on disposal of property and equipment

 

 

 

 

 

2

 

Provision for accounts receivable

 

 

(40

)

 

 

49

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable and contract asset

 

 

5,609

 

 

 

5,995

 

Prepaid expenses and other assets

 

 

(1,241

)

 

 

(648

)

Accounts payable

 

 

47

 

 

 

(405

)

Accrued expenses and other current liabilities

 

 

(502

)

 

 

(771

)

Deferred revenue

 

 

(4,788

)

 

 

(4,650

)

Net cash provided by operating activities

 

 

5,136

 

 

 

5,213

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property and equipment

 

 

(3,573

)

 

 

(2,300

)

Investment in intangible and other assets

 

 

(32

)

 

 

(34

)

Business acquisition purchase price adjustment

 

 

15

 

 

 

 

Net cash used in investing activities

 

 

(3,590

)

 

 

(2,334

)

Cash flows from financing activities:

 

 

 

 

 

 

Payment of contingent consideration liability

 

 

(403

)

 

 

(347

)

Proceeds from exercise of stock options

 

 

577

 

 

 

98

 

Repurchases of common stock

 

 

(2,683

)

 

 

(1,615

)

Proceeds from exercise of warrants

 

 

8

 

 

 

 

Proceeds from employee stock purchase plan

 

 

462

 

 

 

408

 

Net cash used in financing activities

 

 

(2,039

)

 

 

(1,456

)

(Decrease) increase in cash and cash equivalents

 

 

(493

)

 

 

1,423

 

Effect of exchange rate on cash and cash equivalents

 

 

17

 

 

 

(149

)

Cash and cash equivalents at beginning of year

 

 

16,043

 

 

 

24,550

 

Cash and cash equivalents at end of period

 

$

15,567

 

 

$

25,824

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash financing activities:

 

 

 

 

 

 

Property and equipment purchases included in accounts payable

 

$

498

 

 

$

415

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

6


 

ShotSpotter, Inc.

Notes to Condensed Consolidated Financial Statements

Note 1. Organization and Description of Business

ShotSpotter, Inc. (the “Company”) provides precision-policing solutions for law enforcement and security personnel to help prevent and reduce gun violence and make cities, campuses and facilities safer. The Company’s flagship product, ShotSpotter Respond is the leading outdoor gunshot detection, location and alerting system trusted by 120 cities. ShotSpotter Connect creates crime forecasts designed to enable more precise and effective use of patrol resources to deter crime. The Company’s case management solution, ShotSpotter Investigate, is a cloud-based investigative platform to help law enforcement agencies modernize every phase of an investigation and accelerate case work with easy-to-use software tools. The Company offers its solutions on a Software as a Service, ("SaaS"), subscription model to its customers. ShotSpotter Labs is the Company’s effort to support innovative uses of its technology to help protect wildlife and the environment.

The Company’s principal executive offices are located in Newark, California. The Company has five wholly-owned subsidiaries globally, including in South Africa, Colombia, Brazil and Mexico.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated financial statements include the results of the Company and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated upon consolidation.

The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the consolidated financial statements filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (“Annual Report”).

In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive income, stockholders’ equity and cash flows for the interim periods, but are not necessarily indicative of the results of operations or cash flows to be anticipated for the full year 2021 or any future period. The Company has evaluated subsequent events occurring after the date of the condensed consolidated financial statements for events requiring recording or disclosure in the condensed consolidated financial statements.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its significant estimates, including the valuation of accounts receivable, the lives and realization of tangible and intangible assets, contingent consideration liabilities, stock-based compensation expense, customer life, accounting for revenue recognition, contingent liabilities related to legal matters, and income taxes including deferred taxes and any related valuation allowance. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions it believes to be reasonable under the circumstances. Actual results could differ from those estimates and such differences could be material to the Company’s financial position and results of operations.

7


 

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. In the event the Company determines that it would be able to realize its deferred assets in the future in excess of their net recorded amount, the Company makes an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

Concentrations of Risk

Credit Risk – Financial instruments that potentially subject the Company to concentration of credit risk consisted primarily of cash and cash equivalents and accounts receivable from trade customers. The Company maintains its cash deposits at one domestic and four international financial institutions. The Company is exposed to credit risk in the event of default by a financial institution to the extent that cash and cash equivalents are in excess of the amount insured by the Federal Deposit Insurance Corporation and other local country government agencies. The Company generally places its cash and cash equivalents with high-credit quality financial institutions. To date, the Company has not experienced any losses on its cash and cash equivalents.

Concentration of Accounts Receivable and Contract Asset – At June 30, 2021, two customers accounted for 31% and 13% of the Company’s total accounts receivable, respectively. At December 31, 2020, three customers accounted for 37%, 27% and 11%, respectively, of the Company’s total accounts receivable.

Concentration of Revenues – For the three months ended June 30, 2021, two customers accounted for 30% and 14% of the Company’s total revenues, respectively. For the three months ended June 30, 2020, two customers accounted for 19% and 12% of the Company’s total revenues, respectively. For the six months ended June 30, 2021, two customers accounted for 32% and 14% of the Company’s total revenues, respectively. For the six months ended June 30, 2020, two customers accounted for 19% and 13% of the Company’s total revenues, respectively.

Concentration of Suppliers The Company relies on a limited number of suppliers and contract manufacturers. In particular, a single supplier is currently the sole manufacturer of the Company’s proprietary sensors.

Accounting Pronouncements Recently Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), simplifying the accounting for income taxes by removing certain exceptions to the general principles. The Company adopted this ASU as of January 1, 2021. The adoption of this ASU did not have any impact on the Company’s condensed consolidated financial statements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects current expected credit loss (“CECL”) and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted this ASU as of January 1, 2021. The adoption of this ASU did not have a material impact on the Company’s condensed consolidated financial statements. 

Note 3. Revenue Related Disclosures

The changes in deferred revenue were as follows (in thousands):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Balance at the beginning of period

 

$

25,008

 

 

$

24,588

 

 

$

24,579

 

 

$

26,958

 

   New billings

 

 

9,179

 

 

 

8,942

 

 

 

24,824

 

 

 

17,002

 

   Revenue recognized during the period from balance at the beginning of the period

 

 

(10,932

)

 

 

(1,540

)

 

 

(18,642

)

 

 

(3,865

)

   Revenue recognized during the period from new billings

 

 

(3,466