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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 July 31, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-39125

 

IronNet, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

83-4599446

(State or other jurisdiction

of incorporation)

 

(IRS Employer

Identification No.)

 

 

 

7900 Tysons One Place, Suite 400

 

 

McLean, VA

 

22102

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (443) 300-6761

(Former Name or Former Address, if Changed Since Last Report)

 

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, par value $0.0001 per share

 

IRNT

 

The New York Stock Exchange

Warrants to purchase common stock

 

IRNT.WS

 

The New York Stock Exchange

 

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 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, a 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

There were 101,918,919 shares of Common Stock, par value $0.0001 per share, outstanding as of September 9, 2022.

 

 


 

IronNet, Inc.

Table of Contents

FORM 10‑Q

 

 

 

Page

PART I — FINANCIAL INFORMATION

 

2

Item 1. Financial Statements

 

2

Unaudited Condensed Consolidated Balance Sheets

 

2

Unaudited Condensed Consolidated Statements of Operations

 

3

Unaudited Condensed Consolidated Statements of Comprehensive Loss

 

4

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity

 

5

Unaudited Condensed Consolidated Statements of Cash Flows

 

7

Notes to Unaudited Condensed Consolidated Financial Statements

 

8

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

 

18

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

27

Item 4. Controls and Procedures

 

28

PART II — OTHER INFORMATION

 

28

Item 1. Legal Proceedings

 

29

Item 1A. Risk Factors

 

29

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

 

34

Item 3. Defaults upon Senior Securities

 

34

Item 4. Mine Safety Disclosures

 

34

Item 5. Other Information

 

34

Item 6. Exhibits

 

35

SIGNATURES

 

37

 

1


 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

IronNet, Inc.

Condensed Consolidated Balance Sheets

($ and share data in thousands, except par value per share)

(unaudited)

 

 

July 31,

 

 

January 31,

 

 

2022

 

 

2022

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

$

9,650

 

 

$

47,673

 

Accounts receivable

 

5,430

 

 

 

1,991

 

Unbilled receivables

 

564

 

 

 

4,637

 

Related party receivables and loan receivables

 

3,233

 

 

 

3,233

 

Accounts, related party and loans receivable

 

9,227

 

 

 

9,861

 

Inventory

 

6,588

 

 

 

4,581

 

Deferred costs

 

2,712

 

 

 

2,599

 

Prepaid warranty

 

1,021

 

 

 

829

 

Prepaid expenses

 

2,565

 

 

 

3,660

 

Other current assets

 

2,382

 

 

 

1,458

 

Total current assets

$

34,145

 

 

$

70,661

 

Deferred costs

 

3,413

 

 

 

3,243

 

Property and equipment, net

 

6,228

 

 

 

5,606

 

Prepaid warranty

 

1,209

 

 

 

1,229

 

Deposits and other assets

 

2,688

 

 

 

493

 

Total assets

$

47,683

 

 

$

81,232

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

$

3,253

 

 

$

2,348

 

Accrued expenses

 

10,762

 

 

 

4,709

 

Deferred revenue

 

20,461

 

 

 

16,049

 

Deferred rent

 

-

 

 

 

159

 

Income tax payable

 

468

 

 

 

542

 

Other current liabilities

 

1,469

 

 

 

689

 

Total current liabilities

 

36,413

 

 

 

24,496

 

Deferred revenue

 

13,618

 

 

 

17,517

 

Deferred rent

 

-

 

 

 

769

 

   Warrants

 

4

 

 

 

7

 

   Other long-term liabilities

 

2,355

 

 

 

-

 

Total liabilities

$

52,390

 

 

$

42,789

 

Stockholders’ equity

 

 

 

 

 

Preferred stock, $0.0001 par value; 100,000 shares authorized; none issued or outstanding

 

-

 

 

 

-

 

Common stock; $0.0001 par value; 500,000 shares authorized; 101,649 and 88,876  shares issued and outstanding at July 31, 2022 and January 31, 2022, respectively

 

10

 

 

 

9

 

Additional paid-in capital

 

474,547

 

 

 

455,849

 

Accumulated other comprehensive income

 

6

 

 

 

271

 

Accumulated deficit

 

(479,270

)

 

 

(417,686

)

Total stockholders’ (deficit) equity

 

(4,707

)

 

 

38,443

 

Total liabilities and stockholders' (deficit) equity

$

47,683

 

 

$

81,232

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2


 

IronNet, Inc.

Condensed Consolidated Statements of Operations

($ in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended July 31,

 

 

Six Months Ended July 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Product, subscription and support revenue

 

$

6,214

 

 

$

5,770

 

 

$

12,657

 

 

$

11,907

 

Professional services revenue

 

 

394

 

 

 

306

 

 

 

639

 

 

 

546

 

Total revenue

 

 

6,608

 

 

 

6,076

 

 

 

13,296

 

 

 

12,453

 

Cost of product, subscription and support revenue

 

 

2,339

 

 

 

1,668

 

 

 

4,669

 

 

 

3,422

 

Cost of professional services revenue

 

 

149

 

 

 

147

 

 

 

314

 

 

 

331

 

Total cost of revenue

 

 

2,488

 

 

 

1,815

 

 

 

4,983

 

 

 

3,753

 

Gross profit

 

 

4,120

 

 

 

4,261

 

 

 

8,313

 

 

 

8,700

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

9,715

 

 

 

7,571

 

 

 

20,442

 

 

 

14,462

 

Sales and marketing

 

 

8,754

 

 

 

7,687

 

 

 

19,420

 

 

 

14,836

 

General and administrative

 

 

13,433

 

 

 

5,965

 

 

 

29,020

 

 

 

11,685

 

Total operating expenses

 

 

31,902

 

 

 

21,223

 

 

 

68,882

 

 

 

40,983

 

Operating loss

 

 

(27,782

)

 

 

(16,962

)

 

 

(60,569

)

 

 

(32,283

)

Other income

 

 

24

 

 

 

8

 

 

 

34

 

 

 

16

 

Other expense

 

 

(664

)

 

 

(248

)

 

 

(1,044

)

 

 

(377

)

Loss before income taxes

 

 

(28,422

)

 

 

(17,202

)

 

 

(61,579

)

 

 

(32,644

)

Benefit (provision) for income taxes

 

 

7

 

 

 

35

 

 

 

(5

)

 

 

(23

)

Net loss

 

$

(28,415

)

 

$

(17,167

)

 

$

(61,584

)

 

$

(32,667

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per common share

 

 

(0.28

)

 

 

(0.25

)

 

 

(0.61

)

 

 

(0.49

)

Weighted average shares outstanding, basic and diluted

 

 

101,352

 

 

 

67,421

 

 

 

100,346

 

 

 

67,303

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


 

IronNet, Inc.

Condensed Consolidated Statements of Comprehensive Loss

($ in thousands)

(unaudited)

 

 

Three Months Ended July 31,

 

 

Six Months Ended July 31,

 

 

 

2022

 

 

2021

 

 

 

2022

 

 

2021

 

Net loss

$

 

(28,415

)

 

$

(17,167

)

 

$

 

(61,584

)

 

$

(32,667

)

Foreign currency translations adjustment, net of tax

 

 

(173

)

 

 

(72

)

 

 

 

(265

)

 

 

(74

)

     Comprehensive loss

$

 

(28,588

)

 

$

(17,239

)

 

$

 

(61,849

)

 

$

(32,741

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


 

IronNet, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity

For the Six Months Ended July 31, 2022 and 2021

($ in thousands, number of common stock in thousands)

(unaudited)

 

 

 

Common Stock

 

 

Additional Paid- In Capital

 

 

Accumulated Deficit

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

Subscription Notes Receivable

 

 

Total Stockholders' Equity

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 31, 2022

 

 

88,876

 

 

$

9

 

 

$

455,849

 

 

$

(417,686

)

 

$

271

 

 

$

-

 

 

$

38,443

 

Exercise of stock options and delivery of vested restricted stock units

 

 

12,788

 

 

 

1

 

 

 

205

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

206

 

Statutory tax withholding related to net-share settlement of restricted stock units

 

 

(15

)

 

 

-

 

 

 

(91

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(91

)

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

18,584

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18,584

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(61,584

)

 

 

-

 

 

 

-

 

 

 

(61,584

)

Foreign currency translation adjustment, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(265

)

 

 

-

 

 

 

(265

)

Balance at July 31, 2022

 

 

101,649

 

 

$

10

 

 

$

474,547

 

 

$

(479,270

)

 

$

6

 

 

$

 

 

$

(4,707

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 31, 2021 as recasted (1)

 

 

66,934

 

 

$

7

 

 

$

180,853

 

 

$

(175,039

)

 

$

39

 

 

$

(835

)

 

$

5,026

 

 Issuance of common stock

 

 

568

 

 

 

-

 

 

 

295

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

295

 

Interest earned on subscription notes receivable

 

 

-

 

 

 

-

 

 

 

6

 

 

 

-

 

 

 

-

 

 

 

(6

)

 

 

-

 

Payments on subscription notes receivable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

293

 

 

 

293

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

27

 

 

 

-

 

 

 

 

 

 

-

 

 

 

27

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(32,667

)

 

 

 

 

 

-

 

 

 

(32,667

)

Foreign currency translation adjustment, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(74

)

 

 

-

 

 

 

(74

)

Balance at July 31, 2021

 

 

67,502

 

 

$

7

 

 

$

181,181

 

 

$

(207,706

)

 

$

(35

)

 

$

(548

)

 

$

(27,101

)

 

(1) The shares of the Company’s Class A Common Stock, prior to the Merger, have been recast as shares of Common Stock reflecting the exchange ratio established in the Merger of approximately 0.8141070 as further discussed in Footnote 1.

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5


 

IronNet, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months Ended July 31, 2022 and 2021

($ in thousands, number of common stock in thousands)

(unaudited)

 

 

 

Common Stock

 

 

Additional Paid- In Capital

 

 

Accumulated Deficit

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

Subscription Notes Receivable

 

 

Total Stockholders' Equity

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at April 30, 2022

 

 

100,426

 

 

$

10

 

 

$

467,296

 

 

$

(450,854

)

 

$

179

 

 

$

-

 

 

$

16,631

 

Exercise of stock options and delivery of vested restricted stock units

 

 

1,223

 

 

 

-

 

 

 

113

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

113

 

Statutory tax withholding related to net-share settlement of restricted stock units

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

7,138

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,138

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(28,416

)

 

 

-

 

 

 

-

 

 

 

(28,416

)

Foreign currency translation adjustment, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(173

)

 

 

-

 

 

 

(173

)

Balance at July 31, 2022

 

 

101,649

 

 

$

10

 

 

$

474,547

 

 

$

(479,270

)

 

$

6

 

 

$

-

 

 

$

(4,707

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at April 30, 2021, as recasted (1)

 

 

67,348

 

 

$

7

 

 

$

181,083

 

 

$

(190,539

)

 

$

37

 

 

$

(777

)

 

$

(10,189

)

 Issuance of common stock

 

 

154

 

 

 

-

 

 

 

86

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

86

 

Interest earned on subscription notes receivable

 

 

-

 

 

 

-

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

(2

)

 

 

-

 

Payments on subscription notes receivable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

231

 

 

 

231

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

10

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10

 

Net loss