ssti-10q_20190930.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

☐	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.

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

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.

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.

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.

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

	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.

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.

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.