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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, 2020

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, 2020, the registrant had 11,422,070 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

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

17

Item 3.

Qualitative and Quantitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

28

PART II.

OTHER INFORMATION

 

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

56

Item 6.

Exhibits

56

Exhibit Index

57

Signatures

58

 

 

 

i


 

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

ShotSpotter, Inc.

Condensed Consolidated Balance Sheets  

(In thousands)

 

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

25,824

 

 

$

24,550

 

Accounts receivable and contract asset

 

 

7,839

 

 

 

13,883

 

Prepaid expenses and other current assets

 

 

2,587

 

 

 

1,764

 

Total current assets

 

 

36,250

 

 

 

40,197

 

Property and equipment, net

 

 

16,273

 

 

 

16,556

 

Operating lease right-of-use assets

 

 

854

 

 

 

556

 

Goodwill

 

 

1,379

 

 

 

1,379

 

Intangible assets, net

 

 

231

 

 

 

249

 

Other assets

 

 

1,419

 

 

 

1,634

 

Total assets

 

$

56,406

 

 

$

60,571

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

869

 

 

$

1,179

 

Deferred revenue, short-term

 

 

21,957

 

 

 

26,360

 

Accrued expenses and other current liabilities

 

 

3,795

 

 

 

4,885

 

Total current liabilities

 

 

26,621

 

 

 

32,424

 

Deferred revenue, long-term

 

 

351

 

 

 

598

 

Other liabilities

 

 

566

 

 

 

298

 

Total liabilities

 

 

27,538

 

 

 

33,320

 

Stockholders' equity

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

 

57

 

 

 

57

 

Additional paid-in capital

 

 

123,848

 

 

 

122,907

 

Accumulated deficit

 

 

(94,700

)

 

 

(95,579

)

Accumulated other comprehensive loss

 

 

(337

)

 

 

(134

)

Total stockholders' equity

 

 

28,868

 

 

 

27,251

 

Total liabilities and stockholders' equity

 

$

56,406

 

 

$

60,571

 

 

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,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues

 

$

11,277

 

 

$

10,260

 

 

$

21,735

 

 

$

19,853

 

Costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

4,353

 

 

 

4,277

 

 

 

8,695

 

 

 

8,281

 

Total costs

 

 

4,353

 

 

 

4,277

 

 

 

8,695

 

 

 

8,281

 

     Gross profit

 

 

6,924

 

 

 

5,983

 

 

 

13,040

 

 

 

11,572

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

2,321

 

 

 

2,439

 

 

 

4,837

 

 

 

5,068

 

Research and development

 

 

1,377

 

 

 

1,374

 

 

 

2,729

 

 

 

2,668

 

General and administrative

 

 

2,316

 

 

 

1,880

 

 

 

4,587

 

 

 

3,866

 

Total operating expenses

 

 

6,014

 

 

 

5,693

 

 

 

12,153

 

 

 

11,602

 

Operating income (loss)

 

 

910

 

 

 

290

 

 

 

887

 

 

 

(30

)

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

5

 

 

 

171

 

 

 

98

 

 

 

204

 

Other expense, net

 

 

(57

)

 

 

(52

)

 

 

(115

)

 

 

(109

)

Total other income (expense), net

 

 

(52

)

 

 

119

 

 

 

(17

)

 

 

95

 

Income before income taxes

 

 

858

 

 

 

409

 

 

 

870

 

 

 

65

 

Provision (benefit) for income taxes

 

 

(8

)

 

 

22

 

 

 

(9

)

 

 

40

 

Net income

 

$

866

 

 

$

387

 

 

$

879

 

 

$

25

 

Net income per share, basic

 

$

0.08

 

 

$

0.03

 

 

$

0.08

 

 

$

0.00

 

Net income per share, diluted

 

$

0.07

 

 

$

0.03

 

 

$

0.08

 

 

$

0.00

 

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

 

 

11,390,580

 

 

 

11,365,472

 

 

 

11,364,035

 

 

 

11,186,371

 

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

 

 

11,727,654

 

 

 

11,973,476

 

 

 

11,717,937

 

 

 

11,857,346

 

 

See accompanying notes to condensed consolidated financial statements.

3


 

ShotSpotter, Inc.

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

 

$

866

 

 

$

387

 

 

$

879

 

 

$

25

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in foreign currency translation adjustment, net

 

 

24

 

 

 

35

 

 

 

(203

)

 

 

23

 

Comprehensive income

 

$

890

 

 

$

422

 

 

$

676

 

 

$

48

 

 

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 December 31, 2019

 

 

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

 

 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

879

 

 

$

25

 

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

 

 

 

 

 

 

 

 

Depreciation of property and equipment

 

 

2,664

 

 

 

2,264

 

Amortization of intangible assets

 

 

48

 

 

 

138

 

Stock-based compensation

 

 

2,050

 

 

 

1,659

 

Loss on disposal of property and equipment

 

 

2

 

 

 

 

Provision for accounts receivable

 

49

 

 

 

 

      Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable and contract asset

 

 

5,995

 

 

 

6,299

 

Prepaid expenses and other assets

 

 

(648

)

 

 

(621

)

Accounts payable

 

 

(405

)

 

 

(514

)

Accrued expenses and other current liabilities

 

 

(771

)

 

 

(510

)

Deferred revenue

 

 

(4,650

)

 

 

(1,049

)

Net cash provided by operating activities

 

 

5,213

 

 

 

7,691

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(2,300

)

 

 

(2,363

)

Investment in intangible and other assets

 

 

(34

)

 

 

(39

)

Net cash used in investing activities

 

 

(2,334

)

 

 

(2,402

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payment of contingent consideration liability

 

 

(347

)

 

 

 

Proceeds from issuance of common stock in public offering

 

 

 

 

 

11,247

 

Payments of offering costs

 

 

 

 

 

(445

)

Proceeds from exercise of stock options

 

 

98

 

 

 

348

 

Repurchases of common stock

 

 

(1,615

)

 

 

 

Proceeds from exercise of warrants

 

 

 

 

 

51

 

Proceeds from employee stock purchase plan

 

 

408

 

 

 

642

 

Net cash provided by (used in) financing activities

 

 

(1,456

)

 

 

11,843

 

Increase in cash and cash equivalents

 

 

1,423

 

 

 

17,132

 

Effect of exchange rate on cash and cash equivalents

 

 

(149

)

 

 

22

 

Cash and cash equivalents at beginning of year

 

 

24,550

 

 

 

10,278

 

Cash and cash equivalents at end of period

 

$

25,824

 

 

$

27,432

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable

 

$

415

 

 

$

512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 to help prevent and reduce 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 over 100 cities. ShotSpotter SecureCampus and ShotSpotter SiteSecure are designed to help law enforcement and security personnel serving universities, corporate campuses and key infrastructure or transportation centers mitigate risk and enhance security by notifying authorities of a potential outdoor gunfire incident. ShotSpotter Missions uses machine learning-driven analysis to help strategically plan directed 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 four wholly-owned subsidiaries in South Africa, Columbia, 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, 2019 (“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 loss, equity statement 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 2020 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, stock-based compensation expense, 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.

7


 

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 three domestic and two 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. 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 –At June 30, 2020, three customers accounted for 30%, 12% and 10%, respectively, of the Company’s total accounts receivable. At December 31, 2019, one customer accounted for 55% of the Company’s total accounts receivable.

Concentration of Revenues – For the three months ended June 30, 2020, two customers accounted for 19% and 12%, respectively, of the Company’s total revenues. For the three months ended June 30, 2019, two customers accounted for 20% and