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EX-31.1 - EX-31.1 - MOBILEIRON, INC.mobl-20150630ex311edbe8b.htm
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EX-31.2 - EX-31.2 - MOBILEIRON, INC.mobl-20150630ex312366aaa.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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, 2015

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 001-36471


MobileIron, Inc.

(Exact name of Registrant as specified in its charter)


 

 

 

 

 

 

 

Delaware

 

26-0866846

(State or other jurisdiction of
incorporation or organization)

 

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

 

 

415 East Middlefield Road

Mountain View, California

 

94043

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:

(650) 919-8100


 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes       No  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

 

 

 

 

 

 

 

 

 

Large accelerated filer                      Accelerated filer  

 

Non-accelerated filer  

 

Smaller reporting company  

 

 

 

 

 

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

 

At August 5, 2015, there were 78,788,392 shares of the registrant’s common stock, $0.0001 par value, issued and outstanding.

 

 

 

 


 

INDEX TO QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended June 30, 2015

 

 

 

Page

PART I FINANCIAL INFORMATION 

 

 

Item 1. Financial Statements: 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014 

 

5

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2014 

 

6

Condensed Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2015 

 

7

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014 

 

8

Notes to Condensed Consolidated Financial Statements 

 

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 

 

29

Item 3. Quantitative and Qualitative Disclosure About Market Risk 

 

46

Item 4. Controls and Procedures 

 

46

PART II OTHER INFORMATION 

 

48

Item 1. Legal Proceedings 

 

48

Item 1A. Risk Factors 

 

48

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 

 

72

Item 3. Defaults Upon Senior Securities 

 

72

Item 4. Mine Safety Disclosures 

 

72

Item 5. Other Information 

 

72

Item 6. Exhibits 

 

73

Signatures 

 

75

 

 

 

2


 

 

 

WHERE YOU CAN FIND MORE INFORMATION

 

Investors and others should note that we announce material financial information to our investors using our investor relations website address, press releases, SEC filings and public conference calls and webcasts. We also use the following social media channels as a means of disclosing information about the company, our services and other matters and for complying with our disclosure obligations under Regulation FD:

 

MobileIron Company Blog (https://www.mobileiron.com/en/smartwork-blog)

 

MobileIron Facebook Page (https://www.facebook.com/mobileiron)

 

MobileIron Twitter Account (https://twitter.com/mobileiron); @mobileiron

 

MobileIron LinkedIn Page (https://www.linkedin.com/company/mobileiron)

 

The information we post through these social media channels may be deemed material. Accordingly, investors should monitor these accounts and the blog, in addition to following our press releases, SEC filings and public conference calls and webcasts. This list may be updated from time to time. The information we post through these channels is not a part of this quarterly report on Form 10-Q. These channels may be updated from time to time on MobileIron’s investor relations website.

3


 

 

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “might,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “should,” “would,” “project,” ”potentially,” ”predict,” “plan,” “outlook,” “target,” “expect,” or similar expressions, or the negative or plural of these words or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

 

 

 

 

 

beliefs and objectives for future operations;

 

 

 

 

our business plan and our ability to effectively manage our growth and associated investments;

 

 

 

 

our ability to timely and effectively scale and adapt our existing technology;

 

 

 

 

our ability to innovate new products and bring them to market in a timely manner;

 

 

 

 

our ability to expand internationally;

 

 

 

 

our ability to further penetrate our existing customer base;

 

 

 

 

our expectations concerning renewal rates for subscriptions and services by existing customers;

 

 

 

 

cost of revenue, including changes in costs associated with production, manufacturing and customer support;

 

 

 

 

operating expenses, including changes in research and development, sales and marketing, and general and administrative expenses;

 

 

 

 

our expectations concerning relationships with third parties, including channel partners and logistics providers;

 

 

 

 

outcome of patent litigation;

 

 

 

 

economic and industry trends or trend analysis;

 

 

 

 

the effects of seasonal trends on our results of operations;

 

 

 

 

future acquisitions of or investments in complementary companies, products, subscriptions or technologies; and

 

 

 

 

the sufficiency of our existing cash and investments to meet our cash needs for at least the next 12 months.

 

These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. These risks are not exhaustive. These statements are within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements appear throughout this Form 10-Q and are statements regarding our intent, belief, or current expectations, primarily with respect to our business and related industry developments. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Form 10-Q. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us and described in Part II, Item 1A, entitled “Risk Factors,” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this Form 10-Q. We undertake no obligation to update any forward-looking statements for any reason to conform these statements to actual results or to changes in our expectations.

4


 

 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

MOBILEIRON, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

 

2015

 

2014

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

45,739

 

$

104,287

 

Short-term investments

 

 

61,970

 

 

13,869

 

Accounts receivable, net of allowance for doubtful accounts of $692 and $550 at June 30, 2015 and December 31, 2014, respectively

 

 

32,037

 

 

34,676

 

Prepaid expenses and other current assets

 

 

5,690

 

 

4,018

 

TOTAL CURRENT ASSETS

 

 

145,436

 

 

156,850

 

Long-term investments

 

 

9,626

 

 

22,220

 

Property and equipment—net

 

 

4,752

 

 

3,978

 

Intangible assets—net

 

 

1,685

 

 

2,132

 

Goodwill

 

 

5,475

 

 

5,475

 

Other assets

 

 

1,715

 

 

1,187

 

TOTAL ASSETS

 

$

168,689

 

$

191,842

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

2,369

 

$

1,137

 

Accrued expenses

 

 

16,074

 

 

21,169

 

Deferred revenue-current

 

 

48,645

 

 

44,096

 

TOTAL CURRENT LIABILITIES

 

 

67,088

 

 

66,402

 

Long-term liabilities:

 

 

 

 

 

 

 

Deferred revenue-noncurrent

 

 

12,596

 

 

10,078

 

Other long-term liabilities

 

 

304

 

 

268

 

TOTAL LIABILITIES

 

 

79,988

 

 

76,748

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Common stock, $0.0001 par value, 300,000,000 shares authorized, 78,603,696 shares and 76,153,844 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively

 

 

8

 

 

8

 

Additional paid-in capital

 

 

325,389

 

 

305,809

 

Accumulated deficit

 

 

(236,696)

 

 

(190,723)

 

TOTAL STOCKHOLDERS’ EQUITY

 

 

88,701

 

 

115,094

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

168,689

 

$

191,842

 

See accompanying notes.

5


 

 

MOBILEIRON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Perpetual license

 

$

12,347

 

$

15,933

 

$

24,406

 

$

30,608

 

Subscription

 

 

11,217

 

 

7,104

 

 

21,414

 

 

13,070

 

Software support and services

 

 

11,193

 

 

8,430

 

 

22,431

 

 

16,002

 

Total revenue

 

 

34,757

 

 

31,467

 

 

68,251

 

 

59,680

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

Perpetual license

 

 

627

 

 

1,013

 

 

1,226

 

 

2,124

 

Subscription

 

 

1,688

 

 

1,466

 

 

3,427

 

 

2,706

 

Software support and services

 

 

4,254

 

 

3,429

 

 

8,411

 

 

6,315

 

Total cost of revenue

 

 

6,569

 

 

5,908

 

 

13,064

 

 

11,145

 

Gross profit

 

 

28,188

 

 

25,559

 

 

55,187

 

 

48,535

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

14,899

 

 

11,919

 

 

28,400

 

 

22,218

 

Sales and marketing

 

 

29,037

 

 

25,063

 

 

54,842

 

 

46,827

 

General and administrative

 

 

9,105

 

 

5,117

 

 

17,503

 

 

9,725

 

Amortization of intangible assets

 

 

 —

 

 

365

 

 

 

 

417

 

Total operating expenses

 

 

53,041

 

 

42,464

 

 

100,745

 

 

79,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(24,853)

 

 

(16,905)

 

 

(45,558)

 

 

(30,652)

 

Other expense - net

 

 

16

 

 

95

 

 

138

 

 

192

 

Loss before income taxes

 

 

(24,869)

 

 

(17,000)

 

 

(45,696)

 

 

(30,844)

 

Income tax expense

 

 

144

 

 

111

 

 

277

 

 

229

 

Net loss

 

$

(25,013)

 

$

(17,111)

 

$

(45,973)

 

$

(31,073)

 

Net loss per share, basic and diluted

 

$

(0.32)

 

$

(0.66)

 

$

(0.59)

 

$

(1.67)

 

Weighted-average shares used to compute net loss per share, basic and diluted

 

 

78,198

 

 

26,028

 

 

77,599

 

 

18,590

 

 

See accompanying notes.

 

6


 

MOBILEIRON, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

    

 

    

    

 

    

    

 

    

 

 

 

 

    

 

 

 

 

Additional

 

 

 

 

Total

 

 

 

Common Stock

 

Paid-in

 

Accumulated

 

Stockholders’

 

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

Equity

 

BALANCE—December 31, 2014

 

76,153,844

 

$

8

 

$

305,809

 

$

(190,723)

 

$

115,094

 

Issuance of common stock for stock option exercises, net of repurchases

 

1,432,157

 

 

 —

 

 

3,566

 

 

 —

 

 

3,566

 

Vesting of early exercised stock options and restricted stock

 

139,940

 

 

 —

 

 

155

 

 

 —

 

 

155

 

Issuance of common stock pursuant to the Employee Stock Purchase Plan

 

623,634

 

 

 —

 

 

4,771

 

 

 —

 

 

4,771

 

Vesting of restricted stock units

 

254,121

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Stock-based compensation

 

 —

 

 

 —

 

 

11,088

 

 

 —

 

 

11,088

 

Net loss

 

 —

 

 

 —

 

 

 —

 

 

(45,973)

 

 

(45,973)

 

BALANCE—June 30, 2015

 

78,603,696

 

$

8

 

$

325,389

 

$

(236,696)

 

$

88,701

 

 

See accompanying notes.

 

7


 

MOBILEIRON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

June 30, 

 

 

    

2015

    

2014

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net loss

 

$

(45,973)

 

$

(31,073)

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

11,088

 

 

6,932

 

Depreciation

 

 

1,253

 

 

1,085

 

Amortization of intangible assets

 

 

447

 

 

655

 

Provision for doubtful accounts

 

 

150

 

 

 —

 

Accretion of investment securities

 

 

151

 

 

 —

 

Loss on disposal of equipment

 

 

 —

 

 

21

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

2,489

 

 

(4,187)

 

Other current and noncurrent assets

 

 

(2,050)

 

 

(817)

 

Accounts payable

 

 

1,232

 

 

1,167

 

Accrued expenses and other long-term liabilities

 

 

(3,457)

 

 

562

 

Deferred revenue

 

 

7,067

 

 

5,559

 

Net cash used in operating activities

 

 

(27,603)

 

 

(20,096)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(2,027)

 

 

(1,415)

 

Proceeds from maturities of investment securities

 

 

10,700

 

 

 —

 

Purchase of investment securities

 

 

(46,359)

 

 

 —

 

Net cash used in investing activities

 

 

(37,686)

 

 

(1,415)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Amount drawn from revolving line of credit

 

 

 —

 

 

3,300

 

Repayments of revolving line of credit

 

 

 —

 

 

(7,600)

 

Proceeds from the issuance of convertible preferred stock-net of cash issuance costs

 

 

 —

 

 

1,994

 

Proceeds from initial public offering

 

 

 —

 

 

106,950

 

Payment of offering costs related to initial public offering

 

 

 —

 

 

(3,440)

 

Proceeds from Employee Stock Purchase Plan

 

 

3,325

 

 

 —

 

Proceeds from exercise of stock options

 

 

3,416

 

 

2,047

 

Net cash provided by financing activities

 

 

6,741

 

 

103,251

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

(58,548)

 

 

81,740

 

CASH AND CASH EQUIVALENTS—Beginning of period

 

 

104,287

 

 

73,573

 

CASH AND CASH EQUIVALENTS—End of period

 

$

45,739

 

$

155,313

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

137

 

$

99

 

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING ACTIVITIES TO ACQUIRE AVERAIL IN 2014:

 

 

 

 

 

 

 

Fair value of assets acquired

 

 

 —

 

 

2,276

 

Liabilities assumed

 

 

 —

 

 

(294)

 

Issuance of common stock

 

 

 —

 

 

(1,982)

 

SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Issuance of shares under the Employee Stock Purchase Plan

 

$

4,771

 

$

 —

 

Offering costs recorded in accrued liabilities

 

$

 —

 

$

705

 

 

See accompanying notes.

8


 

MOBILEIRON, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.Description of Business and Significant Accounting Policies

 

Description of Business

 

MobileIron, Inc., and its wholly owned subsidiaries collectively, the “Company”, “we”, “us” or “our”, provides a purpose-built mobile IT platform that enables enterprises to manage and secure mobile applications, content and devices while providing their employees with device choice, privacy and a native user experience. We were incorporated in Delaware in July 2007 and are headquartered in Mountain View, California, with additional sales and support presence in North America, Europe, the Middle East, Asia and Australia.

 

Initial Public Offering

 

In June 2014, we completed our initial public offering, or our IPO, in which we issued and sold 12,777,777 shares of common stock, including 1,666,666 million shares of common stock sold pursuant to the full exercise of the underwriters’ over-allotment option, at a price of $9.00 per share. We received aggregate proceeds of $107.0 million from the sale of shares of common stock, net of underwriters’ discounts and commissions, but before deducting offering expenses of approximately $4.1 million. Upon the closing of the initial public offering, all shares of our outstanding convertible preferred stock automatically were converted into 49,646,975 shares of common stock.

 

Basis of Presentation and Consolidation

 

The accompanying unaudited condensed consolidated financial statements as of June 30, 2015 and for the three and six months ended June 30, 2015 and 2014 have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC, and include the accounts of our wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

 

Certain information and footnote disclosures in this Form 10-Q normally included in annual financial statements prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of the SEC have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary for a fair presentation of our balance sheet as of June 30, 2015 and our operating results for the three and six months ended June 30, 2015 and 2014, and our cash flows for the six months ended June 30, 2015 and 2014. Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2015. The condensed consolidated balance sheet as of December 31, 2014 has been derived from the audited consolidated financial statements as of that date but does not include all the footnotes required by U.S. GAAP for complete financial statements.

 

The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with our audited financial statements and related notes thereto for the year ended December 31, 2014, included in our Annual Report on Form 10-K filed with the SEC on February 27, 2015.

 

Foreign Currency Translation

 

Our reporting currency is the U.S. dollar. The functional currency of all our international operations is the U.S. dollar. All monetary asset and liability accounts are translated into U.S. dollars at the period-end rate, nonmonetary assets and liabilities are translated at historical exchange rates, and revenue and expenses are translated at the weighted-average exchange rates in effect during the period. Translation adjustments arising are recorded as foreign currency gains (losses) in the consolidated statements of operations. We recognized a foreign currency loss of approximately $83,000 and $93,000 for the three months ended June 30, 2015 and 2014, respectively, and approximately $257,000 and

9


 

$169,000 for the six months ended June 30, 2015 and 2014, respectively, in other expense—net in our condensed consolidated statements of operations.

 

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 at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates include, but are not limited to, revenue recognition, stock-based compensation, stock-settled bonus expense, goodwill, intangible assets and accounting for income taxes. Actual results could differ from those estimates.

 

Concentrations of Credit Risk

 

Financial instruments that potentially subject us to a concentration of credit risk consist of cash, money market funds and fixed income investments. Although we deposit our cash with multiple financial institutions, our deposits, at times, exceed federally insured limits. We invest in fixed income securities that are of high-credit quality. Substantially all of our money market funds, or $20.7 million, are held in a two funds that are rated “AAA.”

 

We generally do not require collateral or other security in support of accounts receivable. Allowances are provided for individual accounts receivable when we become aware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy, deterioration in the customer’s operating results, or change in financial position. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. We also consider broader factors in evaluating the sufficiency of our allowances for doubtful accounts, including the length of time receivables are past due, significant one-time events and historical experience. As of June 30, 2015 and December 31, 2014 we have an allowance for doubtful accounts of $692,000 and $550,000, respectively.

 

One reseller accounted for 17% of total revenue (1% as an end customer) and 18% of total revenue (1% as an end customer) for the three and six months ended June 30, 2015, respectively, and for 26% of total revenue (2% as an end customer) and 25% of total revenue (1% as an end customer) for the three and six months ended June 30, 2014, respectively. The same reseller accounted for 27% and 16% of net accounts receivable as of June 30, 2015 and December 31, 2014, respectively.

 

There were no other resellers or end-user customers that accounted for 10% or more as a percentage of our revenue or net accounts receivable for any period presented.

 

Segments

 

We have one reportable segment.

 

Summary of Significant Accounting Policies

 

Revenue Recognition

 

We derive revenue principally from software-related arrangements consisting of perpetual software licenses, post-contract customer support for such licenses, or PCS or software support, including when and if available updates, and professional services such as consulting and training services. We also offer our software as term-based licenses and cloud-based arrangements. In addition, we install our software on servers that we ship to customers.

 

We begin to recognize revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been provided, (iii) the sales price is fixed or determinable, and (iv) collection of the related receivable is probable. If collection is not considered probable, revenue is recognized only upon collection.

 

10


 

Signed agreements, including by electronic acceptance, are used as evidence of an arrangement. Delivery is considered to occur when we provide a customer with a link and credentials to download our software. Delivery of a hardware appliance (an “appliance”) is considered to occur when title and risk of loss has transferred to the customer, which typically occurs when appliances are delivered to a common carrier. Delivery of services occurs when performed.

 

Prior to January 1, 2013, we had not established vendor specific objective evidence, or VSOE, of fair value for any of the elements in our multiple-element arrangements. As of January 1, 2013, we determined that we had sufficient history to establish VSOE of fair value for PCS and professional services. Prior to January 1, 2013, we did not have VSOE of fair value for our software-related undelivered elements due to limited history of stand-alone sales transactions and inconsistency in pricing. We established VSOE of fair value when we had a substantial majority of stand-alone sales transactions of software support and services pricing within a narrow pricing band. In our VSOE analysis, we generally include stand-alone sales transactions completed during a rolling 12 month period unless a shorter period is appropriate due to changes in our pricing structure.

 

We typically enter into multiple-element arrangements with our customers in which a customer may purchase a combination of software on a perpetual or subscription license, PCS, and professional services. The professional services are not considered essential to the functionality of the software. All of these elements are considered separate units of accounting. Our standard agreements do not include rights for customers to cancel or terminate arrangements or to return software to obtain refunds.

 

We use the residual method to recognize revenue when a perpetual license arrangement includes one or more elements to be delivered at a future date provided the following criteria are met: (i) VSOE of fair value does not exist for one or more of the delivered items but exists for all undelivered elements, (ii) all other applicable revenue recognition criteria are met and (iii) the fair value of all of the undelivered elements is less than the arrangement fee. VSOE of fair value is based on the normal pricing practices for those products and services when sold separately by us and contractual customer renewal rates for post-contract customer support services. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue in the period in which it was earned. If evidence of the fair value of one or more undelivered elements does not exist, then the revenue is deferred and recognized when delivery of those elements occurs, or when fair value can be established, or ratably over the PCS period if the only undelivered element is PCS—we refer to these deferred revenue elements as the “Deferred Portion.”

 

Revenue from subscriptions to our on-premise term licenses, arrangements where perpetual and subscriptions to our on-premise term licenses are sold together, and subscriptions to our cloud service are recognized ratably over the contractual term for all periods presented and are included as a component of subscription revenue within our consolidated statements of operations. We refer to arrangements where perpetual and subscriptions to our on-premise term licenses are sold together as “Bundled Arrangements.”

 

Occasionally, we enter into multiple-element arrangements with our customers in which a customer may purchase a combination of software on a perpetual or term basis, PCS, professional services, and appliances. We generally provide the appliances and software upon the commencement of the arrangement and provide software-related elements throughout the support period. We account for appliance-bundled arrangements under the revised accounting standard related to multiple-element arrangements, Accounting Standard Update, or ASU, No. 2009-13, Multiple Element Arrangements, and determine the revenue to be recognized based on the standard’s fair value hierarchy and then determine the value of each element in the arrangement based on the relative selling price of the arrangement. Amounts related to appliances are generally recognized upon delivery with the remaining consideration allocated to software and software-related elements, which are recognized as described elsewhere in this policy.

 

Revenue from PCS is recognized ratably over the support term and is included as a component of software support and service revenue within the consolidated statements of operations.

 

Revenue related to professional services is recognized upon delivery and is included as a component of software support and services revenue within the consolidated statements of operations.

 

11


 

Prior to establishing VSOE of fair value for PCS and professional services on January 1, 2013, we recognized revenue for multiple element software and software-related arrangements ratably from the date of service commencement over the contractual term of the related PCS arrangement. After January 1, 2013, the deferred revenue related to these arrangements continues to be recognized ratably over the remaining contractual term of the PCS arrangement. Approximately $616,000 and $1.4 million of perpetual license revenue in three months ended 2015 and 2014, respectively, and approximately $1.4 and $3.0 million of perpetual license revenue in the six months ended June 30, 2015 and 2014 respectively, related to sales made prior to January 1, 2013. Approximately $758,000 and $2.1 million of deferred revenue as of June 30, 2015 and December 31, 2014, respectively, related to sales made prior to January 1, 2013.

 

We allocated the revenue from all multiple-element arrangements entered into prior to the establishment of VSOE of fair value for our PCS and professional services to each respective revenue caption using our best estimate of value of each element based on the facts and circumstances of the arrangements, our go-to-market strategy, price list and discounts from price list as applicable. We believe that the allocation between the revenue captions allows for greater transparency and comparability of revenue from period to period even though VSOE of fair value may not have existed at that time.

 

Appliance revenue was less than 10% of total revenue for all periods presented and is included as a component of perpetual license revenue within the consolidated statements of operations.

 

Generally, sales made through resellers are fulfilled to the end customer and processed in the same period. The inventory of licenses held by the resellers was immaterial for all periods presented.

 

Shipping charges and sales tax billed to partners are excluded from revenue.

 

Sales commissions and other incremental costs to acquire contracts are also expensed as incurred and are recorded in sales and marketing expense.

 

For all arrangements, any revenue that has been deferred and is expected to be recognized beyond one year is classified as long-term deferred revenue in the consolidated balance sheets.

 

Cash Equivalents

 

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. As of June 30, 2015 and December 31, 2014 cash and cash equivalents consist of cash deposited with banks, money market funds and investments that mature within three months of their purchase.

Held-To-Maturity Investments

We determine the appropriate classification of our fixed income investments at the time of purchase and reevaluate their classifications each reporting period. Investments are classified as held-to-maturity since the Company has positive intent and the ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost.

 

Comprehensive Loss

 

Comprehensive loss includes all changes in equity (net assets) during a period from non-owner sources. For the three and six months ended June 30, 2015 and 2014, there were no differences between net loss and comprehensive loss. Therefore, the consolidated statements of comprehensive loss have been omitted.

 

12


 

Net Loss per Share of Common Stock

 

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury-stock and if-converted methods. For purposes of the diluted net loss per share calculation, unvested restricted stock and stock options are considered to be potentially dilutive securities. Because we have reported a net loss for the three and six months ended June 30, 2015 and 2014, the number of shares used to calculate diluted net loss per common share is the same as the number of shares used to calculate basic net loss per common share for those periods presented because the potentially dilutive shares would have been anti-dilutive if included in the calculation.

 

Inventory

 

We have appliances (industry standard hardware servers available from multiple vendors) that are available for customers to purchase, on which we will preinstall our software prior to shipment. Inventory is stated at the lower of cost or net realizable value. We value our inventory using the first-in, first-out method. Appropriate consideration is given to obsolescence, excessive levels, deterioration and other factors in evaluating net realizable value—such adjustments were not material for any period presented. The entire inventory is comprised of finished goods. As of June 30, 2015 and December 31, 2014, we had inventory of $313,000 and $528,000, respectively, which is included in prepaid expenses and other current assets in the consolidated balance sheets.

 

Software Development Costs Incurred in Connection with Software to be Sold or Marketed

 

The costs to develop new software products and enhancements to existing software products are expensed as incurred until technological feasibility has been established. We consider technological feasibility to have occurred when all planning, designing, coding and testing have been completed according to design specifications. Once technological feasibility is established, any additional costs would be capitalized. We believe our current process for developing software is essentially completed concurrent with the establishment of technological feasibility, and accordingly, no costs have been capitalized.

 

Internal Use Software

 

We capitalize costs incurred during the application development stage related to our internally used software. Such costs are primarily incurred by third party vendors and consultants. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Amounts capitalized in all periods presented were not significant.

 

All software development costs incurred in connection with our cloud offering, or SaaS are also sold or marketed to partners or end customers, therefore we start capitalizing costs when technological feasibility is achieved. No costs were capitalized in any periods presented as we believe that our current process for developing software is essentially completed concurrent with the establishment of technological feasibility.

 

Property and Equipment

 

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives, determined to be three years for computers and equipment and software, five years for furniture and fixtures, and the lesser of the remaining lease term or estimated useful life for leasehold improvements. Expenditures for repairs and software support are charged to expense as incurred. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected as operating expenses in the consolidated statements of operations.

 

13


 

Goodwill and Intangible Assets

 

We record the excess of the acquisition purchase price over the fair value of the tangible and identifiable intangible assets acquired as goodwill. We perform an impairment test of our goodwill in the third quarter of our fiscal year, or more frequently if indicators of potential impairment arise. We have a single reporting unit and consequently evaluate goodwill for impairment based on an evaluation of the fair value of the Company as a whole. We record purchased intangible assets at their respective estimated fair values at the date of acquisition. Purchased intangible assets are being amortized using the straight-line method over their remaining estimated useful lives, which range from three to five years. We evaluate the remaining useful lives of intangible assets on a periodic basis to determine whether events or circumstances warrant a revision to the remaining estimated amortization period.

Long-Lived Assets with Finite Lives

Long-lived assets are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable. We evaluate the recoverability of each of our long-lived assets, including purchased intangible assets and property and equipment, by comparison of its carrying amount to the future undiscounted cash flows we expect the asset to generate. If we consider the asset to be impaired, we measure the amount of any impairment as the difference between the carrying amount and the fair value of the impaired asset.

 

Stock-Based Compensation

 

We use the estimated grant-date fair value method of accounting in accordance with Accounting Standards Codification, or ASC, Topic 718 Compensation—Stock Compensation. Fair value is determined using the Black-Scholes Model using various inputs, including our estimates of expected volatility, term and future dividends. We estimated the forfeiture rate for the three and six months ended June 30, 2015 and the corresponding periods of 2014 based on our historical experience for annual grant years where the majority of the vesting terms have been satisfied. We recognize compensation costs for awards with service and performance vesting conditions on an accelerated method over the requisite service period of the award. For stock options, restricted stock units or restricted stock grants with no performance condition, we recognize compensation costs on a straight-line basis over the requisite service period of the award, which is generally the vesting term of four years.

 

Research and Development

 

Research and development, or R&D, costs are charged to expense as incurred.

 

Advertising

 

Advertising costs are expensed and included in sales and marketing expense when incurred. Advertising expense for the three and six months ended June 30, 2015 and 2014 was not significant.

 

Income Taxes

 

We account for income taxes in accordance with ASC Topic 740, Income Taxes, under which deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

 

We use a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. A tax position is recognized when it is more likely than not that the tax position will be sustained upon examination, including resolution of any related appeals or litigation processes. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority. The standard also provides guidance on derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transition.

 

14


 

Recent Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

 

In May 2014, the FASB, jointly with the International Accounting Standards Board, issued a comprehensive new standard on revenue recognition from contracts with customers. The standard’s core principle is that a reporting entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying this new guidance to contracts within its scope, an entity will: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. Additionally, this new guidance will require significantly expanded disclosures about revenue recognition. As clarified by the FASB on July 9, 2015, provisions of this new standard are effective for annual reporting periods (including interim reporting periods within those annual periods) beginning after December 15, 2017. Early adoption is permitted for annual reporting periods (including interim reporting periods within those annual periods) beginning after December 15, 2016. Entities have the option of using either a full retrospective or a modified retrospective approach to adopt this new guidance. We are currently evaluating the potential effect on our consolidated financial statements from adoption of this standard.

 

 

2.Significant Balance Sheet Components

 

Property and Equipment —Property and equipment at June 30, 2015 and December 31, 2014 consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

December 31, 2014

 

Computers and appliances

 

$

7,386

 

$

6,405

 

Purchased software

 

 

2,013

 

 

1,698

 

Furniture and fixtures

 

 

395

 

 

182

 

Leasehold improvements

 

 

1,235

 

 

717

 

Total property and equipment

 

 

11,029

 

 

9,002

 

Accumulated depreciation and amortization

 

 

(6,277)

 

 

(5,024)

 

Total property and equipment—net

 

$

4,752

 

$

3,978

 

 

 

Accrued Expenses —Accrued expenses at June 30, 2015 and December 31, 2014 consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

December 31, 2014

 

Accrued commissions

 

$

3,721

 

$

6,199

 

Accrued vacation

 

 

2,102

 

 

3,589

 

Employee Stock Purchase Plan liability

 

 

2,837

 

 

4,280

 

Other accrued payroll-related expenses

 

 

1,752

 

 

2,231

 

Liability for early exercised stock options (Note 10)

 

 

136

 

 

294

 

Other accrued liabilities

 

 

5,526

 

 

4,576

 

Total accrued expenses

 

$

16,074

 

$

21,169

 

 

15


 

Deferred Revenue —Current and non-current deferred revenue at June 30, 2015 and December 31, 2014 consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

    

June 30, 2015

    

December 31, 2014

 

Perpetual license

 

$

1,512

 

$

3,045

 

Subscription

 

 

22,884

 

 

19,981

 

Software support

 

 

34,645

 

 

29,213

 

Professional services

 

 

2,200

 

 

1,935

 

Total current and noncurrent deferred revenue

 

$

61,241

 

$

54,174

 

 

 

Included in deferred perpetual license revenue was $758,000 and $2.1 million at June 30, 2015 and December 31, 2014, respectively, of revenue deferred for multiple element software license arrangements billed prior to January 1, 2013 for which we did not recognize revenue immediately due to lack of VSOE of fair value for software support and services. See Note 1 entitled “Description of Business and Significant Accounting Policies” of these condensed consolidated financial statements.

 

 

3.Fair Value Measurement

 

With the exception of our held-to-maturity fixed income investments, we report all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis in accordance with ASC 820 (formerly FASB Statement No. 157, Fair Value Measurements). ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.

 

ASC 820 also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is available and significant to the fair value measurement. ASC 820 establishes and prioritizes three levels of inputs that may be used to measure fair value:

 

 

 

 

 

 

 

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

 

 

 

 

 

 

 

Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.

 

 

 

 

 

 

 

Level 3—Inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation.

 

 

Our financial assets that are carried at fair value include cash and money market funds. We had no other financial liabilities, or nonfinancial assets and liabilities that were required to be measured at fair value on a recurring basis, or that were measured at fair value as of June 30, 2015 or December 31, 2014.

 

16


 

Our financial instruments measured at fair value as of June 30, 2015 and December 31, 2014 were as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2015

 

(in thousands)

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Money market funds

 

$

20,719

 

$

 

$

 

$

20,719

 

Corporate debt securities

 

 

 

 

45,766

 

 

 

 

45,766

 

Commercial paper

 

 

 

 

22,564

 

 

 

 

22,564

 

Securities and obligations of U.S. government agencies

 

 

 

 

16,265

 

 

 

 

16,265

 

Total

 

$

20,719

 

$

84,595

 

$

 

$

105,314

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2014

 

(in thousands)

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Money market funds

 

$

77,522

 

$

 

$

 

$

77,522

 

Corporate debt securities

 

 

 

 

19,738

 

 

 

 

19,738

 

Commercial paper

 

 

 

 

16,393

 

 

 

 

16,393

 

Securities and obligations of U.S. government agencies

 

 

 

 

13,636

 

 

 

 

13,636

 

Total

 

$

77,522

 

$

49,767

 

$

 

$

127,289

 

 

 

 

 

 

4.Investments

 

Our portfolio of fixed income securities consists of commercial paper, corporate debt securities and securities and obligations of U.S. government agencies. All our investments in fixed income securities are classified as held-to-maturity. These investments are carried at amortized cost.

 

Our investments in fixed income securities as of June 30, 2015 and December 31, 2014 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2015

 

    

Amortized

    

    

 

    

    

 

    

Fair

(in thousands)

 

cost

 

Gains

 

Losses

 

Value

Corporate debt securities

 

$

45,793

 

$

5

 

$

(32)

 

$

45,766

Commercial paper

 

 

22,562

 

 

2

 

 

 —

 

 

22,564

Securities and obligations of U.S. government agencies

 

 

16,263

 

 

6

 

 

(4)

 

 

16,265

Total

 

$

84,618

 

$

13

 

$

(36)

 

$

84,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2014

 

    

Amortized

    

    

 

    

    

 

    

Fair

(in thousands)

 

cost

 

Gains

 

Losses

 

Value

Corporate debt securities

 

$

19,756

 

$

3

 

$

(21)

 

$

19,738

Commercial paper

 

 

16,391

 

 

2

 

 

 —

 

 

16,393

Securities and obligations of U.S. government agencies

 

 

13,641

 

 

2

 

 

(7)

 

 

13,636

Total

 

$

49,788

 

$

7

 

$

(28)

 

$

49,767

 

The following table summarizes the balance sheet classification of our investments:

 

 

 

 

 

 

 

 

 

 

 

As of June 30,

 

As of December 31,

(in thousands)

 

2015

 

2014

Cash equivalents

 

$

13,022

 

$

13,699

Short-term investments

 

 

61,970

 

 

13,869

Long-term investments

 

 

9,626

 

 

22,220

Total investments

 

$

84,618

 

$

49,788

 

17


 

The gross amortized cost and estimated fair value of our held-to-maturity investments by contractual maturity are shown below. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2015

 

As of December 31, 2014

 

    

Gross

    

 

 

Gross

    

 

 

 

Amortized

 

Fair

 

Amortized

 

Fair

(in thousands)

 

Cost

 

Value

 

Cost

 

Value

Due in one year or less

 

$

74,992

 

$

74,964

 

$

27,568

 

$

27,565

Due after one year through five years

 

 

9,626

 

 

9,631

 

 

22,220

 

 

22,202

Total

 

$

84,618

 

$

84,595

 

$

49,788

 

$

49,767

 

 

We monitor our investment portfolio for impairment on a periodic basis. In order to determine whether a decline in fair value is other-than-temporary, we evaluate, among other factors: the duration and extent to which the fair value has been less than the carrying value; our financial condition and business outlook, including key operational and cash flow metrics, current market conditions and future trends in our industry; our relative competitive position within the industry; and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value. A decline in the fair value of the security below amortized cost that is deemed other-than-temporary is charged to earnings, resulting in the establishment of a new cost basis for the affected securities. In the three and six months ended June 30, 2015, we had an insignificant amount of unrealized gains or losses, and we did not recognize any other-than-temporary impairments. 

 

5.Acquisition

 

In April 2014, we completed the acquisition of certain assets of Averail Corporation, or Averail, a privately-held content security-oriented software company, for 276,466 shares of common stock and the assumption of certain liabilities. The assets acquired provide additional features in our Docs@Work product. We obtained control of the specific assets acquired and liabilities assumed of Averail through the issuance of 276,466 shares of our common stock to the pre-existing Averail shareholders. Included in the total, 43,612 shares are subject to a holdback provision for standard representations and warranties and will be held in escrow for 18 month from the date of acquisition. The aggregate purchase price of the transaction was approximately $2.0 million, net of liabilities assumed. In connection with this acquisition, 206,463 of these shares were distributed to two Averail investors that are also MobileIron investors. In addition, one of our board members served as a director of Averail. The aggregate value of the securities issued to our investors was approximately $1.5 million.

The total consideration for this transaction was approximately $2.0 million and consisted of the following (in thousands except share data):

 

 

 

 

 

Common stock issued (232,854 shares)

    

$

1,670

Holdback common stock (43,612 shares)

    

 

312

Total Consideration

    

$

1,982

Transaction costs associated with the acquisition were $167,000, all of which we expensed in three and six months ended June 30, 2014, and are included in general and administrative expense in the accompanying unaudited consolidated statements of operations.

We accounted for the Averail acquisition as a business combination. The assets acquired and liabilities assumed were recorded at fair market value. The excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill generated from this business combination was primarily related to value placed on the employee workforce and expected synergies and will not be deductible for tax purposes.

18


 

The purchase price was allocated as follows (in thousands):

 

 

 

 

 

Technology – intangible asset

    

$

1,600

Goodwill

    

 

676

Liabilities assumed

    

 

(294)

Net assets acquired

    

$

1,982

The technology intangible asset is being amortized over a period of four years and is reported net of accumulated amortization in the accompanying unaudited condensed consolidated balance sheets as of June 30, 2015 and December 31, 2014. Amortization expense related to the intangible asset was $100,000 in each of the three months ended June 30, 2015 and 2014 and $200,000 and $100,000 in the six months ended June 30, 2015 and 2014, all of which was included in cost of revenue.

The amount of revenue and earnings of Averail since the acquisition date are included in the condensed consolidated statements of operations and pro forma results of operations for the acquisition have not been presented because the effect of the acquisition was not significant to our financial results.

 

6.Goodwill and Intangibles

 

The following table reflects intangible assets subject to amortization as of June 30, 2015 and December 31, 2014 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

 

 

Gross Carrying

 

Accumulated

 

 

 

 

Net Book

 

 

 

Amount

 

Amortization

 

Impairment

 

Value

 

Technology

 

$

3,080

 

$

(1,395)

 

 

 

$

1,685

 

Total

 

$

3,080

 

$

(1,395)

 

$

 

$

1,685

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

Gross Carrying

 

Accumulated

 

 

 

 

Net Book

 

 

 

Amount

 

Amortization

 

Impairment

 

Value

 

Technology

 

$

3,080

 

$

(948)

 

 

 

$

2,132

 

Total

 

$

3,080

 

$

(948)

 

$

 

$

2,132

 

 

Amortization of the technology intangible assets was recorded in cost of revenue. The weighted average remaining life of our intangible assets on June 30, 2015 was 2.4 years.

 

Estimated remaining intangible assets amortization expense for the next five fiscal years and thereafter is as follows (in thousands):

 

 

 

 

 

 

 

Year

 

 

 

 

2015 (remaining)

 

$

423

 

2016

 

 

617

 

2017

 

 

545

 

2018

 

 

100

 

2019

 

 

 

Total

 

$

1,685

 

 

19


 

At June 30, 2015 and December 31, 2014, the carrying value of goodwill was as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2014

 

$

5,475

 

Additions

 

 

 

Balance, June 30, 2015

 

$

5,475

 

 

 

 

 

 

 

 

 

7.Line of Credit

 

We have a $20.0 million revolving line of credit with a  financial instritution that can be used to (a) borrow for working capital and general business requirements, (b) issue letters of credit, and (c) enter into foreign exchange contracts. Amounts borrowed accrue interest at a floating per annum rate equal to the prime rate. A default interest rate shall apply during an event of default at a rate per annum equal to 5% above the otherwise applicable interest rate. The line of credit is collateralized by substantially all of our assets, except intellectual property, and requires us to comply with working capital, net worth and other nonfinancial covenants, including limitations on indebtedness and restrictions on dividend distributions, among others, and the borrowing capacity is limited to eligible accounts receivable. We are required to maintain an adjusted quick ratio (defined as the ratio of current assets to current liabilities minus deferred revenue) of at least 1.25.

 

In the six months ended June 30, 2014, we withdrew $3.3 million and repaid $7.6 million under our line of credit. There were no outstanding amounts under the line of credit at June 30, 2015 or December 31, 2014.

 

In May 2015, we issued a letter of credit for $1.5 million as a security deposit for a new Mountain View headquarters lease thereby reducing the borrowing capacity under our line of credit to $18.5 million.

 

As of June 30, 2015 and December 31, 2014, we were in compliance with all financial covenants.

 

In July 2015, we amended our revolving line of credit and extended its maturity date to August 2017.

 

 

8.Preferred Stock

 

In January 2014, we issued 200,903 shares of Series F for net cash proceeds of $2.0 million.

 

Upon completion of our IPO in June 2014, all shares of our issued and outstanding convertible preferred stock were automatically converted into 49,646,975 shares of common stock.

 

We amended and restated our certificate of incorporation in June 2014 to authorize the future issuance of up to 10,000,000 shares of convertible preferred stock. No shares of convertible preferred stock were issued and outstanding as of June 30, 2015.

 

 

 

9.Common Stock

 

We were authorized to issue 300,000,000 shares of common stock with a par value of $0.0001 per share as of June 30, 2015 and December 31, 2014. Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends out of funds legally available therefore, when and if declared by the board of directors, subject to the approval and priority rights of holders of all classes of preferred stock outstanding.

 

20


 

As of June 30, 2015 and December 31, 2014, we reserved shares of common stock for issuance as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

June 30, 

    

December 31,

 

    

2015

    

2014

Options outstanding

    

14,529,839