Item 2.02 Results of Operations and Financial Condition.
We are announcing
certain preliminary estimated unaudited financial results for the fiscal quarter and year ended December 31, 2020. Our preliminary
estimated results are subject to completion of our customary year-end closing, review and audit procedures and are not a comprehensive
statement of our financial results for the three months and twelve months ended December 31, 2020. We caution that our final results
for the three months and twelve months ended December 31, 2020 that we will file with the SEC could vary significantly from these
preliminary estimates as a result of the completion of our customary year-end closing, review and audit procedures and other developments
arising between now and the time that our financial results for the three months and twelve months ended December 31, 2020 are
finalized. These preliminary estimates should not be viewed as a substitute for complete financial statements prepared in accordance
with GAAP and they are not necessarily indicative of the results to be achieved in any future period. Accordingly, you should
not place undue reliance on these preliminary estimates. The preliminary estimates of results included below have been prepared
by, and is the responsibility of, the Company’s management. MaloneBailey LLP (“MaloneBailey”), the Company’s
independent registered public accounting firm, has not audited, reviewed, compiled or performed any procedures with respect to
the accompanying preliminary financial data. Accordingly, MaloneBailey does not express an opinion or any other form of assurance
with respect thereto.
Fourth quarter 2020 revenue is expected
to be between $5.5 million and $5.6 million and full year 2020 revenue is expected to be between $20.4 million and $20.5
million.
Net loss for the fourth quarter 2020 is
expected to be between $3.2 million and $2.9 million. Net loss for full year 2020 is expected to be between $7.4 million
and $7.1 million.
Cash on hand totaled approximately
$9.1 million as of December 31, 2020.
Gross Margin for the fourth quarter 2020 is expected to be between 72% and 73%.
As of December 31, 2020, monthly
recurring revenue (MRR) was about $1.9 million.
To supplement our condensed consolidated
financial statements presented on a GAAP basis, we use Non-GAAP earnings (loss) and Non-GAAP earnings (loss) per diluted share,
each a non-GAAP measure, which excludes certain items from net loss and net loss per common share, respectively, each a GAAP measure.
Non-GAAP earnings (loss) excludes from net loss non-cash valuation adjustments to liabilities, and includes interest expense, share-based
compensation expense and certain severance expense. Non-GAAP earnings (loss) per diluted share excludes from net loss per common
share non-cash valuation adjustments to liabilities, and includes interest expense, share-based compensation expense and certain
severance expense, each on a per share basis.
We use both GAAP and non-GAAP measures
when planning, monitoring, and evaluating our performance. We believe that Non-GAAP earnings (loss) and Non-GAAP earnings (loss)
per diluted share are useful to investors because they provide supplemental information that allows investors to review our results
of operations from the same perspective as management and our board of directors. Non-GAAP results are presented for supplemental
informational purposes only for understanding our operating results. The non-GAAP results should not be considered a substitute
for financial information presented in accordance with generally accepted accounting principles and may be different from non-GAAP
measures used by other companies.
See the table below for a reconciliation
of preliminary net loss, a GAAP measure, to preliminary Non-GAAP earnings (loss) and Non-GAAP earnings (loss) per diluted share,
each a non-GAAP measure, for the fourth quarter and full year ended December 31, 2020 and 2019. Due to rounding, numbers presented throughout this Current Report on Form 8-K may not add up precisely to the totals provided.
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Three Months Ended
December 31, 2020
(unaudited)
(estimated)
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Three Months Ended
December 31, 2019
(unaudited)
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Year Ended
December 31, 2020
(unaudited)
(estimated)
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Year Ended
December 31, 2019
(unaudited)
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(in millions, except per share data)
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Low End of Range
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High End of Range
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Actual
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Low End of Range
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High End of Range
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Actual
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Net loss (GAAP)
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$
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(3.2
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)
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$
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(2.9
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)
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$
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(1.4
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)
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$
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(7.4
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)
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$
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(7.1
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)
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$
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(7.8
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)
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Non-cash valuation adjustments to liabilities
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0
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0
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(0.1
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)
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(0.1
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)
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(0.1
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)
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(0.1
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)
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Interest expense
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0
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0
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0
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0.1
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0.1
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0.1
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Share-based compensation expense
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2.2
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2.1
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0.2
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4.2
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4.1
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1.2
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Severance (1)
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0
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0
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0
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0.4
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0.4
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0
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Non-GAAP earnings (loss)
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(1.1
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)
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(0.8
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)
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(1.3
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)
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(2.8
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)
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(2.6
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)
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(6.6
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)
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Non-GAAP Earnings (Loss) per Diluted Share Reconciliation
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Net loss per common share (GAAP) — diluted
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(0.32)
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(0.29)
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(0.16)
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(0.79)
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(0.76)
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(0.97)
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Non-cash valuation adjustments to liabilities
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0
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0
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(0.01)
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(0.01)
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(0.01)
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(0.01)
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Interest expense
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0
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0
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0
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0.02
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0.02
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0.01
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Share-based compensation expense
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0.22
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0.21
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0.03
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0.45
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0.44
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0.16
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Severance (1)
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0
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0
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0
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0.04
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0.04
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0
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Non-GAAP earnings (loss) per diluted share (2)
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(0.11)
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(0.08)
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(0.14)
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(0.30)
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(0.27)
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(0.81)
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(1)
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Represents severance expense associated with the move of our technology center to Portland, Oregon, and is exclusive of accrued
vacation paid upon termination of employment.
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(2)
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Non-GAAP earnings per adjusted diluted share for our common stock is computed using the more dilutive
of the two-class method or the if-converted method.
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Note: The number of diluted weighted average
shares used for this calculation is the same as the weighted average common shares outstanding share count when the Company reports
a GAAP and non-GAAP net loss.
The information set forth in this Item
2.02 and in Exhibit 99.1 attached hereto is being furnished and shall not be deemed “filed” for purposes of Section
18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities
of such section nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or
the Exchange Act, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific
reference in such filing.
Forward-Looking Statements
The Company makes forward-looking statements
in this Current Report on Form 8-K within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements relate to expectations or forecasts for future events, including, without limitation, the Company’s earnings,
revenues, expenses, or other future financial or business performance or strategies, results of operations or financial condition.
These statements may be preceded by, followed by or include the words “may,” “might,” “will,”
“will likely result,” “should,” “estimate,” “plan,” “project,” “forecast,”
“intend,” “expect,” “anticipate,” “believe,” “seek,” “continue,”
“target” or similar expressions. These forward-looking statements are based on information available to the Company
as of the date they were made and involve a number of risks and uncertainties which may cause them to turn out to be wrong. Some
of these risks and uncertainties may in the future be amplified by the COVID-19 outbreak and there may be additional risks that
the Company considers immaterial or which are unknown. Accordingly, forward-looking statements should not be relied upon as representing
the Company’s views as of any subsequent date, and the Company does not undertake any obligation to update forward-looking
statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events
or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and
uncertainties, the Company’s actual results or performance may be materially different from those expressed or implied by
these forward-looking statements. Please refer to the Company’s most recent annual report on Form 10-K, as well as the Company’s
subsequent filings on Forms 10-Q and Forms 8-K, which are available on the SEC’s website (www.sec.gov), for a full discussion
of the risks and other factors that may impact any forward-looking statements in this Current Report on Form 8-K.