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 September 30, 2019

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 November 7, 2019, the registrant had 11,432,652 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 (Unaudited)

2

 

Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018

2

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018

3

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2019 and 2018

4

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2019 and 2018

5

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018

7

 

Notes to Condensed Consolidated Financial Statements

8

Item 2.

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

17

Item 3.

Qualitative and Quantitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

29

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

54

Item 6.

Exhibits

55

Exhibit Index

56

Signatures

57

 

 

 

i


 

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

ShotSpotter, Inc.

Condensed Consolidated Balance Sheets  

(In thousands)

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,138

 

 

$

10,218

 

Accounts receivable and unbilled revenue

 

 

6,785

 

 

 

15,267

 

Prepaid expenses and other current assets

 

 

1,985

 

 

 

1,527

 

Restricted cash

 

 

 

 

 

60

 

Total current assets

 

 

34,908

 

 

 

27,072

 

Property and equipment, net

 

 

16,574

 

 

 

16,504

 

Operating lease right-of-use asset

 

 

627

 

 

 

 

Goodwill

 

 

1,379

 

 

 

1,379

 

Intangible assets, net

 

 

243

 

 

 

242

 

Other assets

 

 

1,518

 

 

 

1,922

 

Total assets

 

$

55,249

 

 

$

47,119

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

716

 

 

$

1,307

 

Deferred revenue, short-term

 

 

20,584

 

 

 

23,102

 

Accrued expenses and other current liabilities

 

 

4,643

 

 

 

4,427

 

Total current liabilities

 

 

25,943

 

 

 

28,836

 

Deferred revenue, long-term

 

 

755

 

 

 

1,060

 

Other liabilities

 

 

383

 

 

 

76

 

Total liabilities

 

 

27,081

 

 

 

29,972

 

Stockholders' equity

 

 

 

 

 

 

 

 

Common stock

 

 

57

 

 

 

55

 

Additional paid-in capital

 

 

125,235

 

 

 

114,618

 

Accumulated deficit

 

 

(96,906

)

 

 

(97,377

)

Accumulated other comprehensive loss

 

 

(218

)

 

 

(149

)

Total stockholders' equity

 

 

28,168

 

 

 

17,147

 

Total liabilities and stockholders' equity

 

$

55,249

 

 

$

47,119

 

 

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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues

 

$

9,984

 

 

$

9,211

 

 

$

29,837

 

 

$

25,045

 

Costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

4,019

 

 

 

3,898

 

 

 

12,300

 

 

 

10,795

 

Impairment of property and equipment

 

 

 

 

 

271

 

 

 

 

 

 

632

 

Total costs

 

 

4,019

 

 

 

4,169

 

 

 

12,300

 

 

 

11,427

 

     Gross profit

 

 

5,965

 

 

 

5,042

 

 

 

17,537

 

 

 

13,618

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

2,426

 

 

 

2,453

 

 

 

7,494

 

 

 

6,202

 

Research and development

 

 

1,358

 

 

 

1,196

 

 

 

4,026

 

 

 

3,687

 

General and administrative

 

 

1,803

 

 

 

2,912

 

 

 

5,669

 

 

 

6,764

 

Total operating expenses

 

 

5,587

 

 

 

6,561

 

 

 

17,189

 

 

 

16,653

 

Operating income (loss)

 

 

378

 

 

 

(1,519

)

 

 

348

 

 

 

(3,035

)

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

131

 

 

 

23

 

 

 

335

 

 

 

72

 

Other expense, net

 

 

(70

)

 

 

(21

)

 

 

(179

)

 

 

(96

)

Total other income (expense), net

 

 

61

 

 

 

2

 

 

 

156

 

 

 

(24

)

Income (loss) before income taxes

 

 

439

 

 

 

(1,517

)

 

 

504

 

 

 

(3,059

)

Provision (benefit) for income taxes

 

 

(7

)

 

 

(76

)

 

 

33

 

 

 

(32

)

Net income (loss)

 

$

446

 

 

$

(1,441

)

 

$

471

 

 

$

(3,027

)

Net income (loss) per share, basic

 

$

0.04

 

 

$

(0.13

)

 

$

0.04

 

 

$

(0.29

)

Net income (loss) per share, diluted

 

$

0.04

 

 

$

(0.13

)

 

$

0.04

 

 

$

(0.29

)

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

 

 

11,449,946

 

 

 

10,780,996

 

 

 

11,275,195

 

 

 

10,481,901

 

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

 

 

11,917,382

 

 

 

10,780,996

 

 

 

11,865,319

 

 

 

10,481,901

 

 

See accompanying notes to condensed consolidated financial statements.

3


 

ShotSpotter, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income (loss)

 

$

446

 

 

$

(1,441

)

 

$

471

 

 

$

(3,027

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in foreign currency translation adjustment, net

 

 

(91

)

 

 

(32

)

 

 

(69

)

 

 

(136

)

Comprehensive income (loss)

 

$

355

 

 

$

(1,473

)

 

$

402

 

 

$

(3,163

)

 

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

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2018

 

 

10,864,722

 

 

$

55

 

 

$

114,618

 

 

$

(97,377

)

 

$

(149

)

 

$

17,147

 

Exercise of stock options

 

 

177,408

 

 

 

1

 

 

 

218

 

 

 

 

 

 

 

 

 

219

 

Issuance of common stock upon secondary offering,

   net of costs

 

 

250,000

 

 

 

1

 

 

 

10,553

 

 

 

 

 

 

 

 

 

10,554

 

Issuance of common stock from RSUs vested

 

 

28,790

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

754

 

 

 

 

 

 

 

 

 

754

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13

)

 

 

(13

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(362

)

 

 

 

 

 

(362

)

Balance at March 31, 2019

 

 

11,320,920

 

 

$

57

 

 

$

126,143

 

 

$

(97,739

)

 

$

(162

)

 

$

28,299

 

Exercise of stock options

 

 

65,960

 

 

 

 

 

 

129

 

 

 

 

 

 

 

 

 

129

 

Issuance of common stock in connection

   with exercise of warrants

 

 

12,225

 

 

 

 

 

 

51

 

 

 

 

 

 

 

 

 

51

 

Issuance of common stock from ESPP purchase

 

 

53,508

 

 

 

 

 

 

642

 

 

 

 

 

 

 

 

 

642

 

Issuance of common stock from RSUs vested

 

 

24,072

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

905

 

 

 

 

 

 

 

 

 

905

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35

 

 

 

35

 

Net income

 

 

 

 

 

 

 

 

 

 

 

387

 

 

 

 

 

 

387

 

Balance at June 30, 2019

 

 

11,476,685

 

 

$

57

 

 

$

127,870

 

 

$

(97,352

)

 

$

(127

)

 

$

30,448

 

Exercise of stock options

 

 

58,806

 

 

 

1

 

 

 

94

 

 

 

 

 

 

 

 

 

95

 

Repurchase of common stock

 

 

(120,000

)

 

 

(1

)

 

 

(3,465

)

 

 

 

 

 

 

 

 

(3,466

)

Issuance of common stock in connection

   with exercise of warrants

 

 

13,873

 

 

 

 

 

 

20

 

 

 

 

 

 

 

 

 

20

 

Issuance of common stock from RSUs vested

 

 

2,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

716

 

 

 

 

 

 

 

 

 

716

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(91

)

 

 

(91

)

Net income

 

 

 

 

 

 

 

 

 

 

 

446

 

 

 

 

 

 

446

 

Balance at September 30, 2019

 

 

11,432,178

 

 

$

57

 

 

$

125,235

 

 

$

(96,906

)

 

$

(218

)

 

$

28,168

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5


 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2017

 

 

9,827,129

 

 

$

48

 

 

$

109,708

 

 

$

(97,595

)

 

$

1

 

 

$

12,162

 

Exercise of stock options

 

 

486,588

 

 

 

3

 

 

 

340

 

 

 

 

 

 

 

 

 

343

 

Issuance of common stock in connection

   with exercise of warrants

 

 

16,129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

427

 

 

 

 

 

 

 

 

 

427

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29

 

 

 

29

 

Cumulative effect of change in accounting principle

 

 

 

 

 

 

 

 

 

 

 

3,025

 

 

 

 

 

 

3,025

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,217

)

 

 

 

 

 

(1,217

)

Balance at March 31, 2018

 

 

10,329,846

 

 

$

51

 

 

$

110,475

 

 

$

(95,787

)

 

$

30

 

 

$

14,769

 

Exercise of stock options

 

 

66,628

 

 

 

 

 

 

108

 

 

 

 

 

 

 

 

 

108

 

Issuance of common stock in connection

   with exercise of warrants

 

 

272,309

 

 

 

1

 

 

 

988

 

 

 

 

 

 

 

 

 

989

 

Issuance of common stock from ESPP purchase

 

 

43,624

 

 

 

1

 

 

 

420

 

 

 

 

 

 

 

 

 

421

 

Issuance of common stock from RSU's vested

 

 

47,312

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

648

 

 

 

 

 

 

 

 

 

648

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(133

)

 

 

(133

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(369

)

 

 

 

 

 

(369

)

Balance at June 30, 2018

 

 

10,759,719

 

 

$

53

 

 

$

112,639

 

 

$

(96,156

)

 

$

(103

)

 

$

16,433

 

Exercise of stock options

 

 

37,822

 

 

 

1

 

 

 

71

 

 

 

 

 

 

 

 

 

72

 

Issuance of common stock in connection

   with exercise of warrants

 

 

6,169

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock from ESPP purchase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock from RSU's vested

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

748

 

 

 

 

 

 

 

 

 

748

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(32

)

 

 

(32

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,441

)

 

 

 

 

 

(1,441

)

Balance at September 30, 2018

 

 

10,803,710

 

 

$

54

 

 

$

113,458

 

 

$

(97,597

)

 

$

(135

)

 

$

15,780

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

6


 

ShotSpotter, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

471

 

 

$

(3,027

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,641

 

 

 

2,766

 

Impairment of property and equipment

 

 

 

 

 

632

 

Stock-based compensation

 

 

2,375

 

 

 

1,823

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

8,482

 

 

 

(3,472

)

Prepaid expenses and other assets

 

 

(303

)

 

 

(891

)

Accounts payable

 

 

(617

)

 

 

715

 

Accrued expenses and other current liabilities

 

 

(73

)

 

 

860

 

Deferred revenue

 

 

(2,825

)

 

 

3,109

 

Net cash provided by operating activities

 

 

11,151

 

 

 

2,515

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(3,672

)

 

 

(7,426

)

Investment in intangible and other assets

 

 

(59

)

 

 

(36

)

Net cash used in investing activities

 

 

(3,731

)

 

 

(7,462

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock upon secondary offering

 

 

11,247

 

 

 

 

Payment of line of credit costs

 

 

 

 

 

(10

)

Payments of offering costs

 

 

(445

)

 

 

 

Proceeds from exercise of stock options

 

 

443

 

 

 

523

 

Repurchases of common stock

 

 

(3,466

)

 

 

 

Proceeds from exercise of warrants

 

 

71

 

 

 

988

 

Proceeds from employee stock purchase plan

 

 

642

 

 

 

421

 

Net cash provided by financing activities

 

 

8,492

 

 

 

1,922

 

Increase (decrease) in cash, cash equivalents and restricted cash

 

 

15,912

 

 

 

(3,025

)

Effect of exchange rate on cash and cash equivalents

 

 

(52

)

 

 

(164

)

Cash, cash equivalents and restricted cash at beginning of year

 

 

10,278

 

 

 

19,597

 

Cash, cash equivalents and restricted cash at end of period

 

$

26,138

 

 

$

16,408

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

 

 

Deferred offering costs included in other assets

 

$

 

 

$

249

 

Line of credit costs included in other assets

 

$

 

 

$

91

 

Supplemental disclosure of non-cash operating activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable

 

$

26

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

7


 

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 to help deter gun violence and make cities, campuses and facilities safer. The company’s flagship product, ShotSpotter Flex, is the leading outdoor gunshot detection, location and forensic system trusted by approximately 100 cities. ShotSpotter Missions uses machine learning-driven analysis to help strategically plan patrol missions and tactics for maximum crime deterrence. ShotSpotter Labs is the Company’s effort to support innovative uses of its technology to help protect wildlife and the environment. The Company offers its solutions on a SaaS-based subscription model to its customers.

The Company’s principal executive offices are located in Newark, California. The Company has two wholly-owned subsidiaries, ShotSpotter (Pty) Ltd. formed in South Africa and ShotSpotter Colombia S.A.S. which was formed in Colombia in March 2019.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited 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 during consolidation.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss, stockholder’s 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 2019 or any future period.

 

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 of tangible and intangible assets, stock-based compensation expense, and accounting for revenue recognition and income taxes. 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.