Delaware |
7372 |
83-4599446 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer |
☒ | Smaller reporting company | ||||
Emerging growth company |
• |
our ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably; |
• |
our future operating or financial results; |
• |
future acquisitions, business strategy and expected capital spending; |
• |
changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans; |
• |
the implementation, market acceptance and success of our business model and growth strategy; |
• |
our expectations and forecasts with respect to the size and growth of the cybersecurity industry and our products and services in particular; |
• |
the ability of our products and services to meet customers’ compliance and regulatory needs; |
• |
our ability to compete with others in the cybersecurity industry; |
• |
our ability to retain pricing power with our products; |
• |
our ability to grow our market share; |
• |
our ability to attract and retain qualified employees and management; |
• |
our ability to adapt to changes in consumer preferences, perception and spending habits and develop and expand our product offerings and gain market acceptance of our products, including in new geographies; |
• |
developments and projections relating to our competitors and industry; |
• |
our ability to develop and maintain our brand and reputation; |
• |
developments and projections relating to our competitors and industry; |
• |
the impact of health epidemics, including the COVID-19 pandemic, on our business and on the economy in general; |
• |
the impact of the COVID-19 pandemic on customer demands for our products; |
• |
our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others; |
• |
expectations regarding the time during which we will be an emerging growth company under the JOBS Act; |
• |
our future capital requirements and sources and uses of cash; |
• |
our ability to obtain funding for our operations and future growth; and |
• |
our business, expansion plans and opportunities. |
Page |
||||
ii |
||||
1 |
||||
8 |
||||
45 |
||||
46 |
||||
47 |
||||
48 |
||||
49 |
||||
67 |
||||
100 |
||||
108 |
||||
126 |
||||
132 |
||||
134 |
||||
141 |
||||
147 |
||||
154 |
||||
157 |
||||
157 |
||||
158 |
||||
F-i |
• | We have experienced rapid growth in recent periods, and if we do not manage our future growth, our business and results of operations will be adversely affected. |
• | We have a history of losses and we may not be able to achieve or sustain profitability in the future. |
• | If organizations do not adopt cloud-enabled, and/or software as a service (“SaaS”)-delivered cybersecurity solutions that may be based on new and untested security concepts, our ability to grow our business and results of operations may be adversely affected. |
• | Competition from existing or new companies could cause us to experience downward pressure on prices, fewer customer orders, reduced margins, the inability to take advantage of new business opportunities and loss of market share. |
• | If our solutions fail or are perceived to fail to detect or prevent incidents or have or are perceived to have defects, errors, or vulnerabilities, our brand and reputation would be harmed, which would adversely affect our business and results of operations. |
• | We rely on third-party data centers and our own colocation data centers to host and operate our platform, and any disruption of or interference with its use of these facilities may negatively affect our ability to maintain the performance and reliability of our platform, which could cause our business to suffer. |
• | Our future success will be substantially dependent on our ability to attract, retain, and motivate the members of our management team and other key employees throughout our organization, and the loss of one or more key employees or an inability to attract and retain highly skilled employees could harm our business. |
• | If we are unable to maintain successful relationships with our distribution partners, or if our distribution partners fail to perform, our ability to market, sell and distribute our platform and solutions efficiently will be limited, and our business, financial position and results of operations will be harmed. |
• | Our business depends, in part, on sales to government organizations, and significant changes in the contracting or fiscal policies of such government organizations could have an adverse effect on our business and results of operations. |
• | The success of our business will depend in part on our ability to protect and enforce our intellectual property rights. |
• | We are subject to laws and regulations, including governmental export and import controls, sanctions, and anti-corruption laws, that could impair our ability to compete in our markets and subject us to liability if we are not in full compliance with applicable laws. |
• | Our management identified material weaknesses in our internal control over financial reporting, which resulted in a restatement of our unaudited condensed consolidated financial statements as of and for the period ended October 31, 2021. In the future, we may identify additional material weaknesses or otherwise fail to maintain effective internal control over financial reporting, which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations. |
Shares of common stock offered by us |
13,824,992 shares of common stock, consisting of (i) 5,200,000 shares of common stock that are issuable upon exercise of the Private Warrants and (ii) 8,596,273 shares of common stock that are issuable upon exercise upon the exercise of the Public Warrants. |
Shares of common stock outstanding prior to the exercise of all Warrants |
100,426,374 (as of April 30, 2022) |
Shares of common stock outstanding assuming exercise of all Warrants |
148,929,699 (based on the total shares outstanding as of April 30, 2022) |
Exercise price of warrants |
$11.50 per share, subject to adjustment as described herein |
Use of proceeds |
We will receive up to an aggregate of approximately $159.0 million from the exercise of the Warrants if they are exercised for cash. To the extent that Warrants are net exercised in accordance with their terms, we will not receive any net proceeds. We expect to use the net proceeds from the exercise of the Warrants, if any, for general corporate purposes. We will not receive any proceeds from the sale of shares of common stock that are issuable upon the exercise of the Private Warrants or the Public Warrants. See “ Use of Proceeds. |
Shares of common stock offered by the selling securityholders |
We are registering the resale by the selling securityholders named in this prospectus, or their permitted transferees, an aggregate of 64,020,756 shares of common stock, consisting of: |
• | up to 12,500,000 PIPE Shares; |
• | up to 2,904,375 Founder Shares; |
• | up to 5,200,000 shares of common stock issuable upon the exercise of the Private Warrants; and |
• | up to 43,416,381 shares of common stock pursuant to the Registration Rights Agreement (including up to 81,412 shares of common stock issuable pursuant to outstanding options, 7,465,923 shares of common stock issuable in connection with the vesting and settlement of restricted stock units, and 560,703 shares of common stock that were issued as Earnout Shares on September 17, 2021). |
Warrants offered by selling securityholders |
Up to 5,200,000 Private Warrants |
Redemption |
The Public Warrants are redeemable in certain circumstances. See “ Description of Our Securities – Warrants. |
Lock-Up Agreements |
Certain of our securityholders are subject to certain restrictions on transfer until the termination of applicable lock-up periods. See the section titled “Certain Relationships and Related Party Transactions—IronNet Related Agreements — Lock-Up Agreements. |
Terms of the offering |
The selling securityholders will determine when and how they will dispose of the securities registered for resale under this prospectus. |
Use of proceeds |
We will not receive any proceeds from the sale of shares of common stock or Warrants by the selling securityholders. |
Risk factors |
Before investing in our securities, you should carefully read and consider the information set forth in “Risk Factors” beginning on page 8. |
NYSE ticker symbols |
“IRNT” and “IRNT.WS” |
• | effectively attract, integrate and retain a large number of new employees, particularly members of our sales and marketing, data science, and research and development teams; |
• | further improve our platform and products, including our cloud modules and security capabilities, analytics, collective defense capabilities, and visualizations, and IT infrastructure, including expanding and optimizing our data centers, collection, and analytic capabilities, to support our business needs; |
• | enhance our information and communication systems to ensure that our employees and offices around the world are well coordinated and can effectively communicate with each other and our growing base of customers and partners; and |
• | improve our financial, management, and compliance systems and controls. |
• | product capabilities, including performance and reliability, of our platform, including our services and features particularly in the areas of analytics and collective defense, compared to those of our competitors; |
• | our ability, and the ability of our competitors, to improve existing products, services and features, or to develop new ones to address evolving customer needs; |
• | our ability to attract, retain and motivate talented employees; |
• | our ability to establish, capitalize on, maintain, and grow relationships with distribution and technology partners; |
• | the strength of our sales and marketing efforts; and |
• | acquisitions or consolidation within our industry, which may result in more formidable competitors. |
• | first-generation NDR vendors such as DarkTrace or Vectra Networks, who offer point products based on Bayesian analysis, outlier analysis, and heuristic detection-based detection; |
• | network security vendors, such as Cisco and Palo Alto Networks, Inc., who are supplementing their core network security additional behavioral-based detection with behavioral-based detection, threat intelligence and security operations solutions; and |
• | legacy network infrastructure and performance monitoring companies such as ExtraHop and Arista Networks, who are adding security use cases to their infrastructure products. |
• | the development and maintenance of the infrastructure of the internet; |
• | the performance and availability of third-party providers of cloud infrastructure services with the necessary speed, data capacity, and security for providing reliable internet access and services; |
• | decisions by the owners and operators of the data centers where our cloud infrastructure is deployed to terminate our contracts, discontinue services, shut down operations or facilities, increase prices, change service levels, limit bandwidth, declare bankruptcy or prioritize the traffic of other parties; |
• | physical or electronic break-ins, acts of war or terrorism, human error or interference (including by disgruntled employees, former employees or contractors) and other catastrophic events; |
• | cyberattacks, including denial of service attacks, targeted at us, our data centers, or the infrastructure of the internet; |
• | failure by us to maintain and update our cloud infrastructure to meet our data capacity requirements; |
• | errors, defects, or performance problems in our software, including third-party or open-source software incorporated in our software; |
• | improper deployment or configuration of our solutions; |
• | the failure of our redundancy systems, in the event of a service disruption at one of our data centers, to provide failover to other data centers in our data center network; |
• | the failure of our disaster recovery and business continuity arrangements; and |
• | effects of third-party software updates with hidden malware, similar to the supply chain attack that occurred via SolarWinds. |
Year Ended January 31, |
||||||||
2022 |
2021 |
|||||||
Customer A |
* | 10 | % | |||||
Customer B |
11 | % | * | |||||
Customer C |
10 | % | * | |||||
|
|
|
|
|||||
21 | % | 10 | % |
* | Less than 10% |
• | the impact of the COVID-19 pandemic, including the emergence of variant strains of COVID-19, on our operations, financial results, and liquidity and capital resources, including on customers, sales, expenses, and employees; |
• | our ability to attract new and retain existing customers; |
• | the budgeting cycles, seasonal buying patterns, and purchasing practices of customers; |
• | the timing and length of our sales cycles; |
• | changes in customer or distribution partner requirements or market needs; |
• | changes in the growth rate of our market; |
• | the timing and success of new product and service introductions by us or our competitors or any other competitive developments, including consolidation among our customers or competitors; |
• | the level of awareness of cybersecurity threats, particularly advanced cyberattacks, and the market adoption of our platform; |
• | our ability to successfully expand our business domestically and internationally; |
• | decisions by organizations to purchase security solutions from larger, more established security vendors or from their primary IT equipment vendors; |
• | changes in our pricing policies or those of our competitors; |
• | any disruption in our relationship with distribution partners; |
• | insolvency or credit difficulties confronting our customers, affecting their ability to purchase or pay for our solutions; |
• | significant security breaches of, technical difficulties with or interruptions to, the use of our platform; |
• | extraordinary expenses such as litigation or other dispute-related settlement payments or outcomes; |
• | rising inflation and our ability to control costs, including our operating expenses |
• | general economic conditions, both in domestic and foreign markets; |
• | future accounting pronouncements or changes in our accounting policies or practices; |
• | negative media coverage or publicity; |
• | political events; |
• | the amount and timing of operating costs and capital expenditures related to the expansion of our business; and |
• | increases or decreases in expenses caused by fluctuations in foreign currency exchange rates. |
• | selling to governmental agencies can be highly competitive, expensive and time-consuming, often requiring significant upfront time and expense without any assurance that such efforts will generate a sale; |
• | government certification requirements applicable to our products may change and, in doing so, restrict our ability to sell into the U.S. federal government sector until it has attained the required certifications. |
• | government demand and payment for our platform may be impacted by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our platform; |
• | governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing to continue buying our platform, which would adversely impact our revenue and results of operations, or institute fines or civil or criminal liability if the audit were to uncover improper or illegal activities; |
• | interactions with the U.S. federal government may be limited by post-employment ethics restrictions on members of our management; |
• | foreign governments may have concerns with purchasing security products from a company that employs former NSA employees and officials, which may negatively impact sales; and |
• | governments may require certain products to be manufactured, hosted, or accessed solely in their country or in other relatively high-cost manufacturing locations, and we may not manufacture all products in locations that meet these requirements, affecting our ability to sell these products to governmental agencies. |
• | investigations, enforcement actions and sanctions; |
• | mandatory changes to our platform; |
• | disgorgement of profits, fines and damages; |
• | civil and criminal penalties or injunctions; |
• | claims for damages by our customers or distribution partners; |
• | termination of contracts; |
• | loss of intellectual property rights; and |
• | temporary or permanent debarment from sales to government organizations. |
• | resulting in time-consuming and costly litigation; |
• | diverting management’s time and attention from developing our business; |
• | requiring us to pay monetary damages or enter into royalty and licensing agreements that we would not normally find acceptable; |
• | causing delays in the deployment of our platform or service offerings to our customers; |
• | requiring us to stop offering certain services or features of our platform; |
• | requiring us to redesign certain components of our platform using alternative non-infringing or non-open source technology, which could require significant effort and expense; |
• | requiring us to disclose our software source code and the detailed program commands for our software; |
• | prohibiting us from charging license fees for the proprietary software that uses certain open source; and |
• | requiring us to satisfy indemnification obligations to our customers. |
• | diversion of management time and focus from operating our business to addressing acquisition integration challenges; |
• | coordination of engineering, analytics, research and development, operations, and sales and marketing functions; |
• | integration of product and service offerings; |
• | retention of key employees from the acquired company; |
• | changes in relationships with strategic partners as a result of product acquisitions or strategic positioning resulting from the acquisition; |
• | cultural challenges associated with integrating employees from the acquired company into the organization; |
• | integration of the acquired company’s accounting, management information, human resources and other administrative systems; |
• | the need to implement or improve controls, procedures, and policies at a business that prior to the acquisition may have lacked sufficiently effective controls, procedures and policies; |
• | financial reporting, revenue recognition or other financial or control deficiencies of the acquired company that are not adequately addressed and that cause our reported results to be incorrect; |
• | liability for activities of the acquired company before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; |
• | unanticipated write-offs or charges; and |
• | litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders or other third parties. |
• | greater difficulty in negotiating contracts with standard terms, enforcing contracts, and managing collections, including longer collection periods; |
• | higher costs of doing business internationally, including costs incurred in establishing and maintaining office space and equipment for international operations and creating international operating entities, where applicable; |
• | management communication and integration problems resulting from cultural and geographic dispersion; |
• | risks associated with trade restrictions and foreign legal requirements, including any importation, certification, and localization of our platform that may be required in foreign countries; |
• | greater risk of unexpected changes in applicable foreign laws, regulatory practices, tariffs, and tax laws and treaties; |
• | compliance with anti-bribery laws, including the FCPA, the U.S. Travel Act and the Bribery Act, violations of which could lead to significant fines, penalties, and collateral consequences; |
• | heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements; |
• | the uncertainty of protection for intellectual property rights in some countries; |
• | general economic and political conditions in these foreign markets; |
• | foreign exchange controls or tax regulations that might prevent us from repatriating cash earned outside the United States; |
• | political and economic instability in some countries; |
• | the potential for foreign government demands for access to information or corporate property; |
• | double taxation of international earnings and potentially adverse tax consequences due to changes in the tax laws of the United States or the foreign jurisdictions in which we operate; |
• | unexpected costs for the localization of services, including translation into foreign languages and adaptation for local practices and regulatory requirements; |
• | requirements to comply with foreign privacy, data protection, and information security laws and regulations and the risks and costs of noncompliance; |
• | greater difficulty in identifying, attracting and retaining local qualified personnel, and the costs and expenses associated with such activities; |
• | greater difficulty identifying qualified distribution partners and maintaining successful relationships with such partners; |
• | differing employment practices and labor relations issues; and |
• | difficulties in managing and staffing international offices and increased travel, infrastructure, and legal compliance costs associated with multiple international locations. |
• | threatened or actual litigation or government investigations; |
• | the occurrence of severe weather conditions and other catastrophes; |
• | publication of research reports or news stories about us, our competitors or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts; |
• | the public’s reaction to our press releases, our other public announcements and our filings with the |
• | SEC; |
• | announcements by us or our competitors of acquisitions, business plans or commercial relationships; |
• | any major change in our Board or senior management; |
• | additional sales of our securities by us, our directors, executive officers or principal stockholders; |
• | adverse market reaction to any indebtedness we may incur or securities we may issue in the future; |
• | short sales, hedging and other derivative transactions in our securities; |
• | exposure to capital market risks related to changes in interest rates, realized investment losses, credit spreads, equity prices, foreign exchange rates and performance of insurance linked investments; |
• | our creditworthiness, financial condition, performance, and prospects; |
• | our dividend policy and whether dividends on our common stock have been, and are likely to be, declared and paid from time to time; |
• | perceptions of the investment opportunity associated with our securities relative to other investment alternatives; |
• | regulatory or legal developments; |
• | changes in general market, economic, and political conditions; |
• | conditions or trends in our industry, geographies or customers; and |
• | changes in accounting standards, policies, guidance, interpretations or principles. |
• | limited availability of market quotations for our securities; |
• | a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules, |
• | possibly resulting in a reduced level of trading activity in the secondary trading market for shares of our common stock; |
• | a limited amount of analyst coverage; and |
• | a decreased ability to issue additional securities or obtain additional financing in the future. |
• | existing stockholders’ proportionate ownership interest in our company will decrease; |
• | the amount of cash available per share, including for payment of dividends in the future, may decrease; |
• | the relative voting strength of each share of previously outstanding common stock may be diminished; and |
• | the market price of our common stock may decline. |
• | the division of the Board into three classes and the election of each class for three-year terms; |
• | advance notice requirements for stockholder proposals and director nominations; |
• | provisions limiting stockholders’ ability to call special meetings of stockholders, to require special meetings of stockholders to be called, and to take action by written consent; |
• | restrictions on business combinations with interested stockholders; |
• | in certain cases, the approval of holders representing at least 66 2/3% of the total voting power of the shares entitled to vote generally in the election of directors will be required for stockholders to adopt, amend or repeal the bylaws, or amend or repeal certain provisions of the Charter; |
• | no cumulative voting; and |
• | the ability of the Board to designate the terms of and issue new series of preferred stock without stockholder approval, which could be used, among other things, to institute a rights plan that would have the effect of significantly diluting the stock ownership of a potential hostile acquirer, likely preventing acquisitions by such acquirer. |
1. | continue to invest in research and development related to new technologies; |
2. | increase our investment in marketing and advertising, as well as the sales and distribution infrastructure for its products and services; |
3. | maintain and improve operational, financial, and management information systems; |
4. | hire additional personnel; |
5. | obtain, maintain, expand, and protect our intellectual property portfolio; and |
6. | enhance internal functions to support our operations as a publicly-traded company. |
January 31, |
||||||||
2022 |
2021 |
|||||||
Recurring Software Customers |
88 | 27 | ||||||
Year-over-year growth |
226 | % | 35 | % |
January 31, |
||||||||
2022 |
2021 |
|||||||
($ in millions) | ||||||||
Annual recurring revenues |
$ | 31.8 | $ | 25.8 | ||||
Year-over-year growth |
23 | % | 72 | % |
a. | Numerator: We multiply the average total length of the contracts, measured in years or fractions thereof, by the respective revenue recognized for fiscal year 2022 and 2021, as applicable. |
b. | Denominator: We use the revenue attributable to software and product customers for fiscal year 2022 and fiscal year 2021 in the numerator. This effectively represents the revenue base that is being generated by those customers. |
January 31, |
||||||||
2022 |
2021 |
|||||||
(in years) | ||||||||
Dollar-based average contract length |
2.7 | 2.9 |
Year Ended January 31, |
||||||||||||||||
2022 |
2021 |
2022 vs 2021 |
||||||||||||||
($ in millions) | ||||||||||||||||
Revenue |
$ | 27.5 | $ | 29.2 | $ | (1.7 | ) | (6 | )% | |||||||
Add: Total Deferred revenue, end of period |
33.6 | 34.0 | (0.4 | ) | -1 | |||||||||||
Less: Total Deferred revenue, beginning of period |
34.0 | 20.3 | 13.7 | 67 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Calculated billings |
$ | 27.1 | $ | 42.9 | $ | (15.8 | ) | (37 | )% | |||||||
|
|
|
|
|
|
|
|
For the Year Ended January 31, |
||||
2022 |
||||
($ in thousands) | ||||
Net loss |
$ | (242,647 | ) | |
Stock compensation expense (1) |
156,596 | |||
Change in fair value of warrants liabilities |
11,265 | |||
Transaction costs expense (2) |
3,166 | |||
|
|
|||
Adjusted Net Loss |
$ | (71,620 | ) | |
|
|
1. | Total stock based compensation of $156.6 million has been recorded within research and development of $22.9 million, sales and marketing of $51.8 million, and general and administrative expense of $81.9 million on the statement of operations |
2. | Transaction expenses have been recorded within general and administrative expense on the statement of operations |
Fiscal Year Ended January 31, |
2022 vs 2021 |
|||||||||||||||||||||||
2022 |
2021 |
Change $ |
Change % |
|||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Product, subscription and support revenue |
$ | 25,347 | 92 | % | $ | 24,701 | 85 | % | $ | 646 | 3 | % | ||||||||||||
Professional services revenue |
2,197 | 8 | % | 4,526 | 15 | % | (2,329 | ) | (51 | )% | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenue |
27,544 | 100 | % | 29,227 | 100 | % | (1,683 | ) | (6 | )% | ||||||||||||||
Cost of product, subscription and support revenue |
8,225 | 30 | % | 5,393 | 18 | % | 2,832 | 53 | % | |||||||||||||||
Cost of professional services revenue |
1,158 | 4 | % | 1,629 | 5 | % | (471 | ) | (29 | )% | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total cost of revenue |
9,383 | 34 | % | 7,022 | 24 | % | 2,361 | 34 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Gross profit |
18,161 | 66 | % | 22,205 | 76 | % | (4,044 | ) | (18 | )% | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating expenses |
||||||||||||||||||||||||
Research and development |
52,899 | 192 | % | 25,754 | 88 | % | 27,145 | 105 | % | |||||||||||||||
Sales and marketing |
82,922 | 301 | % | 30,381 | 104 | % | 52,541 | 173 | % | |||||||||||||||
General and administrative |
112,099 | 407 | % | 21,347 | 73 | % | 90,752 | 425 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total operating expenses |
247,920 | 900 | % | 77,482 | 265 | % | 170,438 | 220 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating loss |
(229,759 | ) | -834 | % | (55,277 | ) | -189 | % | (174,482 | ) | 316 | % | ||||||||||||
Other income |
25 | 0 | % | 71 | 0 | % | (46 | ) | (65 | )% | ||||||||||||||
Other expense |
(1,183 | ) | -4 | % | (90 | ) | 0 | % | (1,093 | ) | 1,214 | % | ||||||||||||
Change in fair value of warrants liabilities |
(11,265 | ) | -41 | % | — | 0 | % | (11,265 | ) | 100 | % | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Loss before income taxes |
(242,182 | ) | -879 | % | (55,296 | ) | -189 | % | (186,886 | ) | 338 | % | ||||||||||||
Provision for income taxes |
(465 | ) | -2 | % | (77 | ) | 0 | % | (388 | ) | 504 | % | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Net loss |
$ | (242,647 | ) | -881 | % | $ | (55,373 | ) | -190 | % | $ | (187,274 | ) | 338 | % | |||||||||
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31, |
2022 vs 2021 |
|||||||||||||||
2022 |
2021 |
Change $ |
Change % |
|||||||||||||
($ in thousands) | ||||||||||||||||
Product, subscription and support gross profit |
$ | 17,122 | $ | 19,308 | $ | (2,186 | ) | (11 | )% | |||||||
Professional services profit |
1,039 | 2,897 | (1,858 | ) | (64 | )% | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total gross profit |
$ | 18,161 | $ | 22,205 | $ | (4,044 | ) | (18 | )% | |||||||
|
|
|
|
|
|
|
|
|||||||||
2022 |
2021 |
Change |
||||||||||||||
Product, subscription and support margin |
67.6 | % | 78.2 | % | (10.6 | )% | ||||||||||
Professional services margin |
47.3 | % | 64.0 | % | (16.7 | )% | ||||||||||
|
|
|
|
|
|
|||||||||||
Total gross margin |
65.9 | % | 76.0 | % | (10.1 | )% | ||||||||||
|
|
|
|
|
|
Year Ended January 31, |
||||||||
2022 |
2021 |
|||||||
(in millions) | ||||||||
Net cash used in operating activities |
$ | (83.7 | ) | $ | (42.7 | ) | ||
Net cash (used in) provided by investing activities |
$ | (3.9 | ) | $ | 0.1 | |||
|
|
|
|
|||||
Net cash provided by financing activities |
$ | 103.4 | $ | 63.3 | ||||
|
|
|
|
1. |
Identification of the contract, or contracts, with a customer |
2. |
Identification of the performance obligations in the contract |
3. |
Determination of the transaction price |
4. |
Allocation of the transaction price to the performance obligations in the contract |
5. |
Recognition of revenue when, or as, we satisfy performance obligations |
• | We did not design and maintain effective controls over the accounting for stock-based compensation modifications. This material weakness resulted in the restatement of our unaudited condensed consolidated financial statements as of and for the three months ended October 31, 2021. However, this error was corrected as of the date of the filing of the Annual Report on Form 10-K for the fiscal year ended January 31, 2022 and the consolidated financial statements are correctly stated for the year ended January 31, 2022. |
• | We did not design and maintain effective controls over the review of journal entries and account reconciliations. Specifically, certain personnel have had the ability to both (i) create and post journal entries within our general ledger system, and (ii) prepare and review account reconciliations. This material weakness did not result in a material misstatement to the consolidated financial statements. |
• | We did not design and maintain effective controls over information technology (“IT”) general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain: (i) program change management controls for the financial systems to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; (ii) appropriate user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs and data to appropriate personnel; (iii) computer operations controls to ensure data backups are authorized and restorations monitored; and (iv) testing and approval controls for program development to ensure that new software development is |
aligned with business and IT requirements. This material weakness did not result in a material misstatement to the consolidated financial statements. |
• | we hired and continued to hire additional accounting and finance resources with public company experience, including expertise in technical accounting and complex transactions, in addition to utilizing third-party consultants and specialists, to supplement our internal resources; |
• | we are revising account reconciliation controls within all business processes to require proper segregation of duties of preparer and reviewer utilizing the additional personnel mentioned above; |
• | we are implementing comprehensive access control protocols to implement restrictions on user and privileged access to certain applications and establishing additional controls over the preparation and review of journal entries; and |
• | we are redesigning and strengthening financial system and application change management controls, testing and approval controls for program development, as well as data backup and restoration controls. |