Quarterly report pursuant to Section 13 or 15(d)

Restatement of Condensed Consolidated Financial Statements

v3.22.1
Restatement of Condensed Consolidated Financial Statements
9 Months Ended
Oct. 31, 2021
Accounting Changes and Error Corrections [Abstract]  
Restatement of Condensed Consolidated Financial Statements

2. Restatement of Condensed Consolidated Financial Statements

 

IronNet has restated its previously issued unaudited condensed consolidated interim financial statements and related disclosures as of and for the three and nine months ended October 31, 2021 included in its Original Form 10-Q (as defined below) filed with the Securities and Exchange Commission (the “SEC”) in order to correct errors resulting from the incorrect application of generally accepted accounting principles relating to the recognition of stock-based compensation expense as it pertains to restricted stock unit awards (“RSUs”) granted under the 2014 Stock Incentive Plan. Additionally, the Company is also correcting for other previously identified immaterial errors. The applicable Notes were also updated to reflect the restatement.



Impact of Restatement

a) Correction of stock-based compensation expense: Subsequent to the issuance of the October 31, 2021 financial statements, it was determined that the Company considered the requisite service rendered by an employee to start from the original vesting commencement date of the award when calculating the stock-based compensation cost to recognize during the period for modified unvested awards for the three months ended October 31, 2021. Upon further evaluation, the Company determined that the correct expense recognition applicable under Accounting Standards Codification Topic 718, Stock Compensation for a Type III (improbable-to-probable) modification requires the use of a method that utilizes the date of modification (August 26, 2021) as the beginning of the requisite service period for unvested portions of the awards outstanding, rather than the original vesting commencement date of the award
. The impact of correcting the requisite service period is to shift the recognition of stock-based compensation expense to later periods. The Company determined that the correction to stock-based compensation decreased stock-based compensation expense, as disclosed in Note 6. Stock Incentive Plan, and net loss by approximately $30.2 million for the three and nine months ended October 31, 2021.



These overstatements relate to stock-based compensation expense for certain of the Company’s RSUs granted pursuant to Legacy IronNet’s 2014 Stock Incentive Plan, which was approved in 2014 as part of Legacy IronNet’s overall compensation offerings.



b) Correction of immaterial errors related to the balances of accounts receivable, unbilled receivables, related party receivables, and deferred revenue: Subsequent to the issuance of the October 31, 2021 financial statements, an error was identified related to contracts with customers of approximately $
2.4 million, $1.2 million, $0.6 million, and $4.2 million for the respective account as of October 31, 2021. The Company was previously reporting receivable balances only to the extent that basic criteria for revenue recognition had already been satisfied, and was netting the receivable associated with deferred revenue against the corresponding deferred revenue balance. The Company has corrected the unaudited condensed consolidated financial statements to increase the receivables and corresponding deferred revenue for which it has the unconditional right to receive the consideration as of October 31, 2021.
 



The following tables reflect the impact of the restatement adjustments to the specific line items presented in the Company’s previously issued unaudited condensed consolidated interim financial statements as of October 31, 2021 and for the three and nine months then ended (in thousands):

 

 

 

 

 

As of October 31, 2021

 

Balance Sheet

 

As Previously Reported

 

 

Adjustments

 

 

As Restated

 

Assets

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

$

2,246

 

 

$

2,429

 

 

$

4,675

 

Unbilled receivables

 

 

3,885

 

 

 

1,179

 

 

 

5,064

 

Related party receivables and loan receivables

 

 

3,521

 

 

 

571

 

 

 

4,092

 

Account and loan receivable

 

 

9,652

 

 

 

4,179

 

 

 

13,831

 

Total current assets

 

 

93,699

 

 

 

4,179

 

 

 

97,878

 

Total assets

 

$

102,002

 

 

$

4,179

 

 

$

106,181

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Deferred Revenue

 

$

12,929

 

 

$

3,450

 

 

$

16,379

 

Total current liabilities

 

 

24,483

 

 

 

3,450

 

 

 

27,933

 

Deferred Revenue

 

 

17,181

 

 

 

729

 

 

 

17,910

 

Total liabilities

 

$

43,204

 

 

$

4,179

 

 

$

47,383

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

 

Additional paid-in capital

 

$

459,349

 

 

$

(30,173

)

 

$

429,176

 

Accumulated deficit

 

 

(400,828

)

 

 

30,173

 

 

 

(370,655

)

Total liabilities and stockholders' equity

 

$

102,002

 

 

$

4,179

 

 

$

106,181

 

 

 

 

 

 

3 Months Ended October 31, 2021

 

 

9 Months Ended October 31, 2021

 

Statement of Operations

 

As Previously Reported

 

 

Adjustments

 

 

As Restated

 

 

As Previously Reported

 

 

Adjustments

 

 

As Restated

 

Research and development

 

$

28,144

 

 

$

(3,689

)

 

$

24,455

 

 

$

42,606

 

 

$

(3,689

)

 

$

38,917

 

Sales and marketing

 

 

57,196

 

 

 

(5,952

)

 

 

51,244

 

 

 

72,046

 

 

 

(5,951

)

 

 

66,095

 

General and administrative

 

 

100,267

 

 

 

(20,532

)

 

 

79,735

 

 

 

111,952

 

 

 

(20,533

)

 

 

91,419

 

Operating Expenses

 

 

185,607

 

 

 

(30,173

)

 

 

155,434

 

 

 

226,604

 

 

 

(30,173

)

 

 

196,432

 

Operating Loss

 

 

(181,062

)

 

 

30,173

 

 

 

(150,889

)

 

 

(213,361

)

 

 

30,173

 

 

 

(183,188

)

Loss before income taxes

 

 

(193,088

)

 

 

30,173

 

 

 

(162,915

)

 

 

(225,733

)

 

 

30,173

 

 

 

(195,560

)

Benefit (provision) for income taxes

 

 

(34

)

 

 

-

 

 

 

(34

)

 

 

(56

)

 

 

-

 

 

 

(56

)

Net loss

 

 

(193,122

)

 

 

30,173

 

 

 

(162,949

)

 

 

(225,789

)

 

 

30,173

 

 

 

(195,616

)

Basic and diluted net loss per common share

 

$

(2.22

)

 

$

0.35

 

 

$

(1.87

)

 

$

(3.05

)

 

$

0.41

 

 

$

(2.64

)

 

 

 

 

 

9 Months Ended October 31, 2021

 

Statement of Cash Flows

 

As Previously Reported

 

 

Adjustments

 

 

As Restated

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Net Loss

 

$

(225,789

)

 

$

30,173

 

 

$

(195,616

)

Employee stock based compensation

 

 

160,156

 

 

 

(30,173

)

 

 

129,983

 

Change in Operating Assets and Liabilities

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(2,984

)

 

 

(4,179

)

 

 

(7,163

)

Deferred revenue

 

 

(3,934

)

 

 

4,179

 

 

 

245

 

Net cash used in operating activities

 

$

(59,095

)

 

$

-

 

 

$

(59,095

)

 

 

 

 

 

3 Months Ended October 31, 2021

 

 

9 Months Ended October 31, 2021

 

Statements of Comprehensive Loss

 

As Previously Reported

 

 

Adjustments

 

 

As Restated

 

 

As Previously Reported

 

 

Adjustments

 

 

As Restated

 

Net loss

 

$

(193,122

)

 

$

30,173

 

 

$

(162,949

)

 

$

(225,789

)

 

$

30,173

 

 

$

(195,616

)

Comprehensive loss

 

$

(192,819

)

 

$

30,173

 

 

$

(162,646

)

 

$

(225,561

)

 

$

30,173

 

 

$

(195,388

)

 

 

 

Statement of Changes in Stockholders' Equity for the 3 months Ended October 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Additional Paid-In Capital

 

 

Accumulated Deficit

 

 

Total Stockholders' Equity

 

 

 

As Previously Reported

 

 

Adjustments

 

 

As Restated

 

 

As Previously Reported

 

 

Adjustments

 

 

As Restated

 

 

As Previously Reported

 

 

Adjustments

 

 

As Restated

 

Stock-based compensation

 

$

160,129

 

 

$

(30,173

)

 

$

129,956

 

 

 

 

 

 

 

 

 

 

 

$

160,129

 

 

$

(30,173

)

 

$

129,956

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(193,122

)

 

 

30,173

 

 

 

(162,949

)

 

 

(193,122

)

 

 

30,173

 

 

 

(162,949

)

Balance at October 31, 2021

 

$

459,349

 

 

$

(30,173

)

 

$

429,176

 

 

$

(400,828

)

 

$

30,173

 

 

$

(370,655

)

 

$

58,798

 

 

$

-

 

 

$

58,798

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statement of Changes in Stockholders' Equity for the 9 months Ended October 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Additional Paid-In Capital

 

 

Accumulated Deficit

 

 

Total Stockholders' Equity

 

 

 

As Previously Reported

 

 

Adjustments

 

 

As Restated

 

 

As Previously Reported

 

 

Adjustments

 

 

As Restated

 

 

As Previously Reported

 

 

Adjustments

 

 

As Restated

 

Stock-based compensation

 

$

160,156

 

 

$

(30,173

)

 

$

129,983

 

 

 

 

 

 

 

 

 

 

 

$

160,156

 

 

$

(30,173

)

 

$

129,983

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(225,789

)

 

 

30,173

 

 

 

(195,616

)

 

 

(225,789

)

 

 

30,173

 

 

 

(195,616

)

Balance at October 31, 2021

 

$

459,349

 

 

$

(30,173

)

 

$

429,176

 

 

$

(400,828

)

 

$

30,173

 

 

$

(370,655

)

 

$

58,798

 

 

$

-

 

 

$

58,798