Gitlab Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) GitLab Inc. Condensed Consolidated Balance Sheets (in thousands, except per share data) (unaudited) April 30, 2024 (1) January 31, 2024 (1) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 420,322 $ 287,996 Short-term investments 641,173 748,289 Accounts receivable, net of allowance for doubtful accounts of $ 582 and $ 673 as of April 30, 2024 and January 31, 2024, respectively 135,195 166,731 Deferred contract acquisition costs, current 31,034 32,300 Prepaid expenses and other current assets 35,319 45,601 Total current assets 1,263,043 1,280,917 Property and equipment, net 2,820 2,954 Operating lease right-of-use assets 543 405 Goodwill 16,070 8,145 Intangible assets, net 16,637 1,733 Deferred contract acquisition costs, non-current 17,738 19,317 Other non-current assets 4,776 4,390 TOTAL ASSETS $ 1,321,627 $ 1,317,861 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 3,230 $ 1,738 Accrued expenses and other current liabilities 306,734 286,178 Accrued compensation and benefits 22,743 35,809 Deferred revenue, current 341,830 338,348 Total current liabilities 674,537 662,073 Deferred revenue, non-current 15,267 23,794 Other non-current liabilities 17,465 14,060 TOTAL LIABILITIES 707,269 699,927 Commitments and contingencies (Note 14) STOCKHOLDERS’ EQUITY: Preferred stock, $ 0.0000025 par value; 50,000 shares authorized as of April 30, 2024 and January 31, 2024; no shares issued and outstanding as of April 30, 2024 and January 31, 2024 — — Class A Common stock, $ 0.0000025 par value; 1,500,000 shares authorized as of April 30, 2024 and January 31, 2024; 132,670 and 114,670 shares issued and outstanding as of April 30, 2024 and January 31, 2024, respectively — — Class B Common stock, $ 0.0000025 par value; 250,000 shares authorized as of April 30, 2024 and January 31, 2024; 26,212 and 42,887 shares issued and outstanding as of April 30, 2024 and January 31, 2024, respectively — — Additional paid-in capital 1,768,947 1,718,661 Accumulated deficit ( 1,204,466 ) ( 1,149,822 ) Accumulated other comprehensive income 3,360 2,335 Total GitLab stockholders’ equity 567,841 571,174 Noncontrolling interests 46,517 46,760 TOTAL STOCKHOLDERS’ EQUITY 614,358 617,934 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,321,627 $ 1,317,861 ___________ (1) As of April 30, 2024 and January 31, 2024, the condensed consolidated balance sheet includes assets of the consolidated variable interest entity, GitLab Information Technology (Hubei) Co., LTD (“JiHu”), of $ 46.7 million and $ 47.6 million, respectively, and liabilities of $ 6.1 million and $ 6.1 million , respectively. The assets of JiHu can be used only to settle obligations of JiHu and creditors of JiHu do not have recourse against the genera l credit of the Company. Refer to “Note 11. Joint Venture and Equity Method Investment” for further discussion. The accompanying notes are an integral part of these condensed consolidated finan cial statements. 5 Table of Contents GitLab Inc. Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Three Months Ended April 30, 2024 2023 Revenue: Subscription—self-managed and SaaS $ 151,179 $ 111,191 License—self-managed and other 18,008 15,687 Total revenue 169,187 126,878 Cost of revenue: Subscription—self-managed and SaaS 13,839 10,891 License—self-managed and other 4,937 3,048 Total cost of revenue 18,776 13,939 Gross profit 150,411 112,939 Operating expenses: Sales and marketing 92,424 86,537 Research and development 54,140 50,387 General and administrative 57,487 34,248 Total operating expenses 204,051 171,172 Loss from operations ( 53,640 ) ( 58,233 ) Interest income 12,030 7,315 Other income (expense), net ( 567 ) 253 Loss before income taxes and loss from equity method investment ( 42,177 ) ( 50,665 ) Loss from equity method investment, net of tax — ( 748 ) Provision for income taxes 12,710 1,486 Net loss $ ( 54,887 ) $ ( 52,899 ) Net loss attributable to noncontrolling interest ( 243 ) ( 430 ) Net loss attributable to GitLab $ ( 54,644 ) $ ( 52,469 ) Net loss per share attributable to GitLab Class A and Class B common stockholders, basic and diluted $ ( 0.35 ) $ ( 0.35 ) Weighted-average shares used to compute net loss per share attributable to GitLab Class A and Class B common stockholders, basic and diluted 158,157 151,692 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents GitLab Inc. Condensed Consolidated Statements of Comprehensive Loss (in thousands) (unaudited) Three Months Ended April 30, 2024 2023 Net loss $ ( 54,887 ) $ ( 52,899 ) Foreign currency translation adjustments 2,632 ( 857 ) Net change in unrealized gains (losses) on available-for-sale securities ( 1,721 ) 1,497 Comprehensive loss including noncontrolling interest $ ( 53,976 ) $ ( 52,259 ) Net loss attributable to noncontrolling interest ( 243 ) ( 430 ) Foreign currency translation adjustments attributable to noncontrolling interest ( 114 ) ( 1,068 ) Comprehensive loss attributable to noncontrolling interest ( 357 ) ( 1,498 ) Comprehensive loss attributable to GitLab $ ( 53,619 ) $ ( 50,761 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents GitLab Inc. Condensed Consolidated Statements of Stockholders’ Equity (in thousands) (unaudited) Three Months Ended April 30, 2024 Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Noncontrolling Interests Total Stockholders’ Equity Shares Amount Shares Amount Balances at January 31, 2024 114,670 $ — 42,887 $ — $ 1,718,661 $ ( 1,149,822 ) $ 2,335 $ 46,760 $ 617,934 Conversion of Class B common stock to Class A common stock 17,236 — ( 17,236 ) — — — — — — Issuance of common stock related to vested exercised stock options — — 561 — 5,093 — — — 5,093 Issuance of common stock related to RSUs vested 711 — — — — — — — — Charitable donation of common stock 53 — — — 2,957 — — — 2,957 Vesting of early exercised stock options — — — — 98 — — — 98 Stock-based compensation expense — — — — 42,548 — — ( 296 ) 42,252 Change in noncontrolling interest ownership — — — — ( 410 ) — — 410 — Other comprehensive income (loss) — — — — — — 1,025 ( 114 ) 911 Net loss — — — — — ( 54,644 ) — ( 243 ) ( 54,887 ) Balances at April 30, 2024 132,670 $ — 26,212 $ — $ 1,768,947 $ ( 1,204,466 ) $ 3,360 $ 46,517 $ 614,358 Three Months Ended April 30, 2023 Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive (Loss) Income Noncontrolling Interests Total Stockholders’ Equity Shares Amount Shares Amount Balances at January 31, 2023 94,655 $ — 56,489 $ — $ 1,497,373 $ ( 725,648 ) $ ( 705 ) $ 53,705 $ 824,725 Conversion of Class B common stock to Class A common stock 1,145 — ( 1,145 ) — — — — — — Issuance of common stock related to vested exercised stock options — — 1,120 — 7,613 — — — 7,613 Repurchases, net of early exercised stock options — — ( 11 ) — — — — — — Issuance of common stock related to RSUs vested 359 — — — — — — — — Charitable donation of common stock 81 — — — 2,675 — — — 2,675 Vesting of early exercised stock options — — — — 517 — — — 517 Stock-based compensation expense — — — — 34,804 — — ( 2,474 ) 32,330 Change in noncontrolling interest ownership — — — — ( 379 ) — — 379 — Other comprehensive income (loss) — — — — — — 1,708 ( 1,068 ) 640 Net loss — — — — — ( 52,469 ) — ( 430 ) ( 52,899 ) Balances at April 30, 2023 96,240 $ — 56,453 $ — $ 1,542,603 $ ( 778,117 ) $ 1,003 $ 50,112 $ 815,601 The accompanying notes are an integral part of these condensed consolidated financial statements. 8 Table of Contents GitLab Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Three Months Ended April 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss, including amounts attributable to noncontrolling interest $ ( 54,887 ) $ ( 52,899 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Stock-based compensation expense 42,252 32,330 Charitable donation of common stock 2,957 2,675 Amortization of intangible assets 1,087 579 Depreciation expense 937 1,092 Amortization of deferred contract acquisition costs 11,109 10,549 Loss from equity method investment — 947 Net amortization of premiums or discounts on short-term investments ( 4,900 ) ( 3,596 ) Unrealized foreign exchange loss (gain), net 545 ( 262 ) Other non-cash expense (income), net 412 ( 59 ) Changes in assets and liabilities: Accounts receivable 31,072 4,840 Prepaid expenses and other current assets 10,354 ( 2,087 ) Deferred contract acquisition costs ( 8,540 ) ( 8,497 ) Other non-current assets ( 419 ) ( 302 ) Accounts payable 1,336 ( 2,158 ) Accrued expenses and other current liabilities 19,617 2,789 Accrued compensation and benefits ( 13,152 ) ( 5,121 ) Deferred revenue ( 4,448 ) 8,383 Other non-current liabilities 2,806 ( 164 ) Net cash provided by (used in) operating activities 38,138 ( 10,961 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of short-term investments ( 144,392 ) ( 58,864 ) Proceeds from maturities of short-term investments 254,687 83,500 Purchases of property and equipment ( 700 ) ( 256 ) Payments for business combination, net of cash acquired ( 20,210 ) — Net cash provided by investing activities 89,385 24,380 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the issuance of common stock upon exercise of stock options, including early exercises, net of repurchases 5,093 7,513 Net cash provided by financing activities 5,093 7,513 Impact of foreign exchange on cash and cash equivalents ( 290 ) ( 401 ) Net increase in cash and cash equivalents 132,326 20,531 Cash, cash equivalents, and restricted cash at beginning of period 287,996 297,902 Cash, cash equivalents, and restricted cash at end of period $ 420,322 $ 318,433 Supplemental disclosure of cash flow information: Cash paid for income taxes $ 1,011 $ 1,066 Supplemental disclosure of non-cash investing and financing activities: Vesting of early exercised stock options $ 98 $ 517 Right-of-use assets obtained in exchange for new operating lease liabilities $ 284 $ — 9 Table of Contents Reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheets to the amounts shown in the statements of cash flows above: Cash and cash equivalents $ 420,322 $ 315,933 Restricted cash, included in prepaid expenses and other current assets — 2,500 Total cash, cash equivalents and restricted cash $ 420,322 $ 318,433 The accompanying notes are an integral part of these condensed consolidated financial statements. 10 Table of Contents GitLab Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 1. Organization and Description of Business GitLab Inc. (the “Company”) began as an open source project in 2011 and was incorporated in Delaware on September 12, 2014. The Company operates on an all-remote model. The Company is a technology company and its primary offering is “GitLab”, a complete DevSecOps platform delivered as a single application. GitLab is used by a wide range of organizations. The Company also provides related training and professional services. GitLab is offered on both self-managed and software-as-a-service ("SaaS") models. The principal markets for GitLab are currently located in the United States, Europe, and Asia Pacific. The Company is focused on accelerating innovation and broadening the distribution of its platform to companies across the world to help them become better software-led businesses. 2. Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with U.S. GAAP. Fiscal Year The Company's fiscal year ends on January 31. For example, references to fiscal year 2025 and 2024 refer to the fiscal year ending January 31, 2025 and the fiscal year ended January 31, 2024, respectively. Use of Estimates The preparation of the 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, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Such estimates include, but are not limited to, allocation of revenue to the license element in the Company's self-managed subscriptions, estimating the amortization period for capitalized costs to obtain a contract, allowance for doubtful accounts, stock-based compensa tion expense, fair value of contingent consideration, fair valuation of retained interest in an investee on loss of control, valuation allowance for deferred income taxes, reserves for unrecognized income tax benefits, valuation of acquired intangibles assets and impairment of goodwill and equity method investments. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ from those estimates. Principles of Consolidation The condensed consolidated financial statements include 100% of the accounts of wholly owned and majority owned subsidiaries as well as a variable interest entity for which the Company is the primary beneficiary. The ownership interest of other investors is recorded as noncontrolling interest. All intercompany accounts and transactions have been eliminated in consolidation. Summary of Significant Accounting Policies There were no significant changes to the Company’s significant accounting policies disclosed in “Note 2” of the Company’s Annual Report on Form 10-K f or the fiscal year ended January 31, 2024 . 11 Table of Contents 3. Revenues Disaggregation of Revenue The following table shows the components of revenues and their respective percentages of total revenue for the periods indicated (in thousands, except percentages): Three Months Ended April 30, 2024 2023 Subscription—self-managed and SaaS $ 151,179 89 % $ 111,191 88 % Subscription—self-managed 103,673 61 79,587 63 SaaS 47,506 28 31,604 25 License—self-managed and other $ 18,008 11 % $ 15,687 12 % License—self-managed 14,837 9 13,355 10 Professional services and other 3,171 2 2,332 2 Total revenue $ 169,187 100 % $ 126,878 100 % Total Revenue by Geographic Location The following table summarizes the Company’s total revenue by geographic location based on the region of the Company’s contracting entity, which may be different than the region of the customer (in thousands): Three Months Ended April 30, 2024 2023 United States $ 137,526 $ 102,962 Europe 27,652 20,957 Asia Pacific 4,009 2,959 Total revenue $ 169,187 $ 126,878 During the three months ended April 30, 2024 and 2023 , the United States accounted for 81 % of total revenue. No other individual country exceeded 10% of total revenue for any of the periods presented. The Company operates its business as a single operating segment. Deferred Revenue During the three months ended April 30, 2024 and 2023, $ 125.3 million and $ 90.6 million, respectively, of revenue was recognized, which was included in the corresponding deferred revenue balance at the beginning of the periods presented. Remaining Performance Obligations As of April 30, 2024 and January 31, 2024, the aggregate amount of the transaction price allocated to bill ed and unbilled remaining performance obligations for which revenue has not yet been recognized was approximately $ 681.2 million and $ 673.8 million, respectively. As of April 30, 2024, the Company expects to recognize approximately 64 % of the transaction price as product or services revenue over the next 12 months and 87 % over the next 24 months. Concentration of Credit Risk and Significant Customers Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, short-term investments, and accounts receivable. At 12 Table of Contents times, cash deposits may be in excess of insured limits. The Company believes that the financial institutions or corporations that hold its cash, cash equivalents, restricted cash, and short-term investments are financially sound and, accordingly, minimal credit risk exists with respect to these balances. The Company maintains allowances for potential credit losses on accounts receivable when deemed necessary. The Company uses various distribution channels. As of April 30, 2024 , two of these channel partners represented 10 % and 14 % of the accounts receivable balance, respectiv ely, while as of January 31, 2024, two of these channel partners represented 12 % and 13 % of the accounts receivable balance, respectively. There were no individual customers whose balance represented more than 10% of accounts receivable as of April 30, 2024 and January 31, 2024. There were no individual customers whose revenue represented more than 10% of total revenue during the three months ended April 30, 2024 and 2023. 4. Cash, Cash Equivalents and Short-Term Investments The following table summarizes the Company’s cash equivalents and short-term investments by category (in thousands): As of April 30, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Level 1: Cash equivalents (1) Money market funds $ 259,744 $ — $ — $ 259,744 Level 2: Cash equivalents (1) U.S. Treasury securities 57,887 — ( 3 ) 57,884 Commercial paper 12,916 — ( 3 ) 12,913 Total cash equivalents 330,547 — ( 6 ) 330,541 Short-term investments Commercial paper 27,592 2 ( 17 ) 27,577 Corporate debt securities 212,399 30 ( 692 ) 211,737 U.S. Agency securities 48,848 — ( 153 ) 48,695 U.S. Treasury securities 353,904 — ( 740 ) 353,164 Total short-term investments 642,743 32 ( 1,602 ) 641,173 Level 2 total 713,546 32 ( 1,608 ) 711,970 Total cash equivalents and short-term investments $ 973,290 $ 32 $ ( 1,608 ) $ 971,714 (1) Included in “cash and cash equivalents” in our condensed consolidated balance sheet as of April 30, 2024, in addition to cash of $ 89.8 million. 13 Table of Contents As of January 31, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Level 1: Cash equivalents (1) Money market funds $ 187,175 $ — $ — $ 187,175 Level 2: Cash equivalents (1) U.S. Treasury securities 15,909 — ( 2 ) 15,907 Commercial paper 3,962 — ( 1 ) 3,961 Total cash equivalents 207,046 — ( 3 ) 207,043 Short-term investments Commercial paper 23,229 14 ( 1 ) 23,242 Corporate debt securities 231,219 740 ( 250 ) 231,709 U.S. Agency securities 56,324 29 ( 136 ) 56,217 U.S. Treasury securities 437,369 141 ( 389 ) 437,121 Total short-term investments 748,141 924 ( 776 ) 748,289 Level 2 total 768,012 924 ( 779 ) 768,157 Total cash equivalents and short-term investments $ 955,187 $ 924 $ ( 779 ) $ 955,332 (1) Included in “cash and cash equivalents” in our condensed consolidated balance sheet as of January 31, 2024, in addition to cash of $ 81.0 million. The fair value of the Company’s Level 1 financial instruments, such as money market funds which are traded in active markets, is based on quoted market prices for identical instruments. The fair value of the Company’s Level 2 financial instruments such as commercial paper, corporate debt and U.S. government securities are obtained from an independent pricing service, which may use inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security that may not be actively traded. The Company’s marketable securities are held by custodians who obtain investment prices from a third-party pricing provider that incorporates standard inputs in various asset price models. The Company uses the specific-identification method to determine any realized gains or losses from the sale of the Company’s short-term investments classified as available-for-sale. For the three months ended April 30, 2024 and 2023 , the Company did not have any material realized gains or losses as a result of maturities or sales of short-term investments. During the three months ended April 30, 2024 and 2023, the Company recorded $ 12.0 million and $ 7.3 million of interest income on cash and cash equivalents and short-term investments, respectively, which includes $ 4.9 million and $ 3.6 million of net amortization of premiums or discounts on short-term investments during the three months ended April 30, 2024 and 2023, respectively. The following table summarizes unrealized losses on the Company’s cash equivalents and short-term investments aggregated by category and the length of time such aggregated investments have been in a continuous unrealized loss position as of the periods presented (in thousands): 14 Table of Contents Less Than 12 Months 12 Months or Greater Total Carrying Value Gross Unrealized Losses Carrying Value Gross Unrealized Losses Fair Value Gross Unrealized Losses April 30, 2024 U.S. Agency securities $ 36,247 $ ( 113 ) $ 9,448 $ ( 40 ) $ 45,695 $ ( 153 ) Commercial paper 37,421 ( 20 ) — — 37,421 ( 20 ) Corporate debt securities 168,986 ( 675 ) 13,195 ( 17 ) 182,181 ( 692 ) U.S. Treasury securities 392,924 ( 704 ) 18,124 ( 39 ) 411,048 ( 743 ) Total cash equivalents and short-term investments $ 635,578 $ ( 1,512 ) $ 40,767 $ ( 96 ) $ 676,345 $ ( 1,608 ) Less Than 12 Months 12 Months or Greater Total Carrying Value Gross Unrealized Losses Carrying Value Gross Unrealized Losses Fair Value Gross Unrealized Losses January 31, 2024 U.S. Agency securities $ 35,979 $ ( 53 ) $ 11,386 $ ( 83 ) $ 47,365 $ ( 136 ) Commercial paper 15,462 ( 2 ) — — 15,462 ( 2 ) Corporate debt securities 85,998 ( 192 ) 15,485 ( 58 ) 101,483 ( 250 ) U.S. Treasury securities 139,567 ( 192 ) 41,193 ( 199 ) 180,760 ( 391 ) Total cash equivalents and short-term investments $ 277,006 $ ( 439 ) $ 68,064 $ ( 340 ) $ 345,070 $ ( 779 ) The following table classifies the Company’s short-term investments by contractual maturities (in thousands): April 30, 2024 January 31, 2024 Amortized cost Fair Value Amortized cost Fair Value Due within 1 year $ 500,465 $ 499,318 $ 619,286 $ 618,765 Due between 1 year to 2 years 142,278 141,855 128,855 129,524 Total $ 642,743 $ 641,173 $ 748,141 $ 748,289 All available-for-sale securities have been classified as current, based on management’s ability to use the funds in current operations. Liabilities are measured at fair value on a recurring basis. The Company has contingent cash consideration from business acquisitions which is determined based upon the satisfaction of certain defined operational milestones and remeasured at fair value at each reporting period through earnings. As the fair value is based on unobservable inputs, the liability is included in Level 3 of the fair value measurement hierarchy. The Company reassessed the fair value of outstanding operational milestones and there was no change d uring the three months ended April 30, 2024 and 2023. The Company h ad $ 3.7 million and $ 3.6 million of Level 3 contingent consideration as of April 30, 2024 and January 31, 2024, respec tively. Interest accretion expense on contingent cash consideration wa s immaterial fo r th e three months ended April 30, 2024 and 2023. 15 Table of Contents 5. Supplemental Financial Statement Information Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in thousands): April 30, 2024 January 31, 2024 Income tax liability related to BAPA (1) $ 265,254 $ 258,675 Accrued expenses 21,015 11,499 ESPP employee contributions 6,912 2,827 Acquisition related liabilities (2) 3,766 3,608 Income taxes payable 3,380 2,212 Customer refunds payable 3,335 3,019 Indirect taxes payable 2,701 3,928 Operating lease liabilities, current 371 410 Total accrued expenses and other current liabilities $ 306,734 $ 286,178 (1) Refer to “Note 12. Income Taxes” for a discussion on the unrecognized tax benefits related to the BAPA. (2) $ 0.1 million relates to Oxeye acquisition founder holdback (see Note 6. Business Combination ) and $ 3.7 million relates to Opstrace acquisition. Other Inc ome (Expense), Net Other income (expense), net consisted of the following (in thousands): Three Months Ended April 30, 2024 2023 Foreign exchange gains (losses), net $ ( 637 ) $ 274 Other income (expense), net 70 ( 21 ) Total other income (expense), net $ ( 567 ) $ 253 6. Business Combination On March 20, 2024 (the “Acquisition Date”), the Company completed the acquisition of Oxeye Security Limited (“Oxeye”), a cloud-native application security and risk management solution company based in Israel. The Company believes this acquisition will allow the Company to strengthen its product offerings. The transaction was accounted for as a business combination. The Acquisition Date fair value of the consideration transferred consisted of the following (in thousands): Closing cash consideration $ 16,737 Cash held in escrow 3,593 Total consideration $ 20,330 Total consideration includes $ 3.6 million deposited in an escrow account as partial security for post-closing indemnification claims made within 15 months of the Acquisition Date. As the Company is not the 16 Table of Contents legal owner of the escrow account, it is not recorded on the condensed consolidated balance sheet as of April 30, 2024. As part of the acquisition, there was also a holdback in the amount of $ 3.2 million (the “holdback”). The holdback will be paid to the two co-founders (the “founder holdback”) in three equal tranches of 33.3 %. The first such payment will be paid if certain milestones are achieved on or before the first anniversary of the closing date, provided such founder is employed by the Company on the first anniversary. The second and third tranches will be paid provided such founder is employed by the Company on the second and third anniversaries of the closing dates, respectively. As the founder holdback arrangement represents compensation for post-combination services, the Company has excluded the entire $ 3.2 million from the purchase price to be allocated, and will recognize the amount as expense over the period of services rendered after factoring in the likelihood of achieving the milestones. During the three months ended April 30, 2024, $ 0.1 million of the founder holdback was expensed by the Company in general and administrative expenses in its condensed consolidated statement of operations. Acquisition related transaction costs were $ 1.3 million for the three months ended April 30, 2024 and were expensed by the Company in general and administrative expenses in its condensed consolidated statement of operations. The Company recorded the assets acquired and liabilities assumed at their estimated fair values, with the difference between the fair value of the net assets acquired and the purchase consideration reflected in goodwill. The total purchase price of $ 20.3 million was allocated using information available to the Company at the time of acquisition. The Company may continue to adjust the preliminary purchase price allocation after obtaining more information regarding asset valuations, liabilities assumed, tax-related items and revisions of preliminary estimates. During the three months ended April 30, 2024, there were no measurement period adjustments identified and recorded. The following table reflects the fair values of assets acquired and liabilities assumed (in thousands): Cash and cash equivalents $ 120 Developed technology 16,276 Goodwill 8,055 Prepaid expenses and other current assets 121 Accrued expenses and payroll ( 3,582 ) Deferred tax liability ( 660 ) Net assets acquired $ 20,330 As of March 20, 2024, developed technology of the acquired business had an estimated useful life of three years . The fair value of the developed technology intangible asset was estimated using the replacement cost method, which utilizes assumptions for the cost to replace it, such as time and resources required, as well as a theoretical profit margin and opportunity costs. The goodwill is primarily attributed to the synergies expected to be realized following the acquisition. The goodwill is not deductible for Israeli income tax purposes. Results of operations of the business acquired have been included in the Company’s condensed consolidated financial statements subsequent to the date of acquisition. The revenue and net income (loss) earned by the business acquired following the acquisition are not material to the Company’s condensed consolidated results of operations; and accordingly, pro forma financial statements have not been presented. 17 Table of Contents 7. Goodwill and Intangible Assets, Net Goodwill The carrying amount of goodwill was as follows (in thousands): Carrying Amount Balance as of January 31, 2024 $ 8,145 Acquisition of Oxeye 8,055 Foreign currency translation adjustments ( 130 ) Balance as of April 30, 2024 $ 16,070 There was no goodwill impairment for any periods presented. Intangible Assets Intangible assets, net consisted of the following (in thousands): April 30, 2024 (1) Gross Carrying Amount Accumulated Amortization Net Book Value Weighted average remaining amortization period (years) Developed technology from business combination $ 22,192 $ ( 5,555 ) $ 16,637 2.5 Developed technology from asset acquisitions 906 ( 906 ) — 0.0 Total $ 23,098 $ ( 6,461 ) $ 16,637 January 31, 2024 Gross Carrying Amount Accumulated Amortization Net Book Value Weighted average remaining amortization period (years) Developed technology from business combination $ 6,200 $ ( 4,467 ) $ 1,733 0.8 Developed technology from asset acquisitions (1) 914 ( 914 ) — 0.0 Total $ 7,114 $ ( 5,381 ) $ 1,733 (1) The amounts in the tables above include cumulative foreign currency translation adjustments, reflecting movement in the currencies of the underlying intangibles. Amortization expense w a s $ 1.1 million and $ 0.6 million for t h e three months ended April 30, 2024 and 2023, respectively. 18 Table of Contents As of April 30, 2024, future a mortization expense related to the intangibles assets is expected to be as follows (in thousands): Fiscal Years 2025 $ 5,221 2026 5,330 2027 5,330 2028 756 Total future amortization $ 16,637 8. Team Member Benefit Plans The Company contributes to defined c ontribution plans in a number of countries including a 401(k) savings plan for U.S. based team members and defined contribution arrangements in the United Kingdom, Australia, New Zealand and select other countries based on the legislative and tax requirements of the respective countries. Total contributions to these plans were $ 1.8 million and $ 1.7 million for t he three months ended April 30, 2024 and 2023 , respectively. 9. Equity Common Stock The Company had shares of common stock reserved for future issuance as follows (in thousands): April 30, 2024 January 31, 2024 Class A and Class B common stock Options issued and outstanding 7,880 8,503 Shares available for issuance under Equity Incentive Plans 30,067 24,868 RSUs and PSUs issued and outstanding 12,960 10,930 Shares reserved for issuance to charitable organizations 1,351 1,404 ESPP 6,974 5,398 Total 59,232 51,103 Equity Incentive Plans In September 2021, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”) as a successor of the Company’s 2015 Equity Incentive Plan (together the “Plans”). Effective February 1, 2024 , the number of shares available under the 2021 Plan was automatically increased by 7,877,919 shar es pursuant to the terms of the 2021 Plan. 19 Table of Contents The awards available for grant under the above Plans for the pe riods presented were as follows (in thousands): April 30, 2024 January 31, 2024 Available at beginning of period 24,868 21,483 Awards authorized 7,878 7,557 RSUs and PSUs granted ( 3,159 ) ( 6,258 ) RSUs and PSUs canceled and forfeited 418 1,292 Options canceled and forfeited 62 777 Options repurchased — 17 Available at end of period 30,067 24,868 In the event that shares previously issued u nder the above Plans are reacquire d by the Company, such shares shall be added to the number of shares then available for issuance under the 2021 Plan. In the event that an outstanding stock option for any reason expires or is canceled, the shares allocable to the unexercised portion of su ch stock option will be added to the number of shares then available for issuance under the 2021 Plan. Both Plans allow the grantees to early exercise stock options. Stock Options, RSUs and PSUs The following table summarizes options activity under the Plans, and related information: Number of Stock Options Outstanding (in thousands) Weighted Average Exercise Price Weighted Average Remaining Years Aggregate Intrinsic value (in millions) Balances at January 31, 2024 8,503 $ 13.03 5.85 $ 499.2 Options granted — — — Options exercised ( 561 ) 9.08 — Options canceled ( 6 ) 10.11 — Options forfeited ( 56 ) 18.79 — Balances at April 30, 2024 7,880 $ 13.27 5.63 $ 312.6 Options vested at April 30, 2024 6,213 $ 11.98 5.37 $ 251.6 Options vested and expected to vest at April 30, 2024 7,880 $ 13.27 5.63 $ 312.6 During the three months ended April 30, 2024 and 2023, the Company recorded $ 3.5 million and $ 4.8 million stock-based compensation expenses related to options, respectively. As of April 30, 2024, approximately $ 17.6 million of total unrecognized compensation cost was related to stock options granted, that is expected to be recognized over a weighted-average period of 1.4 years. The expected stock compensation expense remaining to be recognized reflects only outstanding stock awards as of the periods presented, and assumes no forfeitures. 20 Table of Contents The following table summarizes the Company’s RSU activity: Number of Shares (in thousands) (1) Weighted- Average grant date fair value Balances at January 31, 2024 7,701 $ 47.20 Granted 3,159 56.18 Vested ( 711 ) 47.77 Canceled/forfeited ( 418 ) 50.02 Balances at April 30, 2024 9,731 $ 49.93 (1) The table above does not include 3 million RSUs granted to the Company’s founder and the Chief Executive Officer (“CEO”) described below. These RSUs are grants of shares of the Company’s common stock, the vesting of which is based on the requisite service requirement. Generally, the Company’s RSUs are subject to forfeiture and are expected to vest over two to four years ratably on a combination of bi-annual and quarterly basis. During the three months ended April 30, 2024 and 2023, the Company recorded $ 35.5 million and $ 23.2 million stock-based compensation expenses related to RSUs, respectively. As of April 30, 2024, approximately $ 468.5 million of total unrecognized compensation cost was related to RSUs granted to team members other than the CEO, that is expected to be recognized over a weighted-average period of 3.1 years. The expected stock compensation expense remaining to be recognized reflects only outstanding stock awards as of the periods presented, and assumes no forfeitures. In June 2022, the Company granted 0.4 million PSUs to senior members of its management team subject to revenue performance condition and service conditions. The number of awards granted represents 100 % of the target goal; under the terms of the awards, the recipient may earn between 0 % and 200 % of the original grant. The performance c ondition is set to be achieved in fiscal year 2025 and the service condition in calendar year 2025. The Company recorded $ 0.6 million and $ 0.4 million of stock-based compensation expense related to PSUs during the three months ended April 30, 2024 and 2023 , respectively. As of April 30, 2024, unrecognized stock-based compensation expense related to these PSUs was $ 2.3 million to be recognized over a period of 1.6 years. CEO Performance Award In May 2021, the Company granted 3 million RSUs tied to its Class B common stock to Sytse Sijbrandij, the Company’s co-founder and CEO, with an estimated aggregate grant date fair value of $ 8.8 million. During the three months ended April 30, 2024 and 2023, the Company recorded $ 0.4 million of stock-based compensation expense related to the CEO RSUs. As measured from the grant date, the derived service period of the respective tranches ranges from 2 to 7 years. As of April 30, 2024, unrecognized stock-based compensation expense related to these RSUs was $ 3.9 million which will be recognized over 4.6 years. 2021 Employee Stock Purchase Plan (“ESPP”) In September 2021, the Company’s board of directors and its stockholders approved the ESPP and participation of eligible team members. Effective as of February 1, 2024, the number of shares available under the ESPP was automatically increased by 1,575,583 shares pursuant to the terms of the 2021 ESPP. 21 Table of Contents The Company rec orded $ 2.6 million and $ 4.5 million of stock-based compensation expense related to the ESPP during the three months ended April 30, 2024 and 2023, respectively. As of April 30, 2024, approximately $ 10.1 million of total unrecognized compensation cost was related to the ESPP that is expected to be recognized over 1.6 years. Stock-Based Compensation Expense The Company recognized stock-based compensation expense as follows (in thousands): Three Months Ended April 30, 2024 2023 Cost of revenue $ 1,855 $ 1,414 Sales and marketing 17,397 13,764 Research and development 12,336 11,702 General and administrative 10,664 5,450 Total stock-based compensation expense (1) $ 42,252 $ 32,330 (1) The table above includes stock-based compensation of JiHu. Refer to “Note 11. Joint Venture and Equity Method Investment” for further discussion. The corporate income tax benefit recognized in the condensed consolidated statements of operations for stock-based compensation expense was zero and $ 2.8 million for the three months ended April 30, 2024 and 2023 , respectively. Charitable Donation of Common Stock In September 2021, the Company’s board of directors approved the reservation of up to 1,635,545 shares of Class A common stock for issuance to charitable organizations. In March 2024 and 2023, the Company’s board of directors approved the donation of $ 11.8 million and $ 10.7 million aggregate principal amount of shares of Class A common stock to the GitLab Foundation (the “Foundation”), a California nonprofit public benefit corporation, respectively. The Foundation is also a related party as certain of the Company’s officers serve as directors of the Foundation. These donations shall occur in four equal quarterly distributions. During the three months ended April 30, 2024 and 2023, the Company donated 53,226 shares and 80,742 shares of Class A common stock at fair value to the Foundation, respectively. The fair value of the common stock was determined based on the quoted market price on the grant date. The donation expense of $ 3.0 million and $ 2.7 million was recorded in general and administrative expense in the condensed consolidated statements of operations for the three months ended April 30, 2024 and 2023, respectively. 10. Restructuring and Other Related Charges In February 2024, the Company restructured certain departments to better align functions and recognized total restructuring charges of approximately $ 1.0 million during the three months ended April 30, 2024. In February 2023, the Company reduced its total global headcount by approximately 7 % . As a result, the Company recognized total restructuring charges of approximately $ 9.0 million during the three months ended April 30, 2023, which consisted primarily of one-time severance and other termination benefit costs of $ 7.7 million, as well as accelerated stock-based compensation of $ 1.3 million. The Company recognized severance and other termination benefit costs as follows (in thousands): 22 Table of Contents Three Months Ended April 30, 2024 2023 Cost of revenue $ — $ 417 Research and development — 2,059 Sales and marketing 730 3,559 General and administrative 276 1,618 Total (1) $ 1,006 $ 7,653 (1) Excludes stock-based compensation of zero and $ 1.3 million for the three months ended April 30, 2024 and 2023, respectively. The changes in liabilities resulting from the restructuring charges and related accruals were as follows (in thousands) : Balance as of January 31, 2024 $ 188 Charges 1,006 Cash payments ( 1,176 ) Balance as of April 30, 2024 (1) $ 18 (1) Balance is included in accrued compensation and benefits on the condensed consolidated balance sheet as of April 30, 2024. 11. Joint Venture and Equity Method Investment Joint Venture In February 2021, the Company along with Sequoia CBC Junyuan (Hubei) Equity Investment Partnership (Limited Partnership) and Suzhou Gaocheng Xinjian Equity Investment Fund Partnership (Limited Partnership) executed an investment agreement (the “Investment Agreement”) to establish GitLab Information Technology (Hubei) Co., LTD (“JiHu”), a legal entity in the People’s Republic of China. The Company accounted for JiHu as a variable interest entity and consolidated the entity in accordance with ASC Topic 810, Consolidation. As of April 30, 2024, the Company retains control over JiHu with its equity stake at approxima tely 54 %. JiHu maintains an employee stock option plan (“JiHu ESOP”) for its employees. As a result of forfeitures triggered by the departure of key executives during the three months ended April 30, 2024 and 2023 , t he Company reversed stock-based compensation previously recorded which resulted in a $ 0.3 million gain and $ 2.5 million gain, respectively. As of April 30, 2024, approximately $ 1.2 million of total unrecognized compensation cost was related to the JiHu ESOP that is expected to be recognized over 3.6 years. Operating Leases JiHu entered into a new lease in March 2024 and has various non-cancelable long-term operating leases maturing by June 30, 2026 with total lease payments of $ 0.5 million and a total present value of lease liabilities of $ 0.5 million. In addition, there is one short-term lease for which the associated lease expense was immaterial during the three months ended April 30, 2024 and 2023. The Company recognized $ 0.2 million of operating lease expense during the three months ended April 30, 2024 and 2023. 23 Table of Contents The table below presents supplemental information related to operating leases for the three months ended April 30, 2024 (in thousands, except weighted-average information): Weighted-average remaining lease term (in years) 0.88 Weighted-average discount rate 3.6 % Right-of-use assets obtained in exchange for new operating lease liabilities $ 284 Cash paid for amounts included in the measurement of lease liabilities $ 195 Selected Financial Information Selected financial information of JiHu, post intercompany eliminations, is as follows (in thousands): Three Months Ended April 30, 2024 2023 Revenue $ 1,646 $ 1,464 Cost of revenue 484 491 Gross profit 1,162 973 Operating expenses: Sales and marketing 1,635 2,084 Research and development ( 211 ) 1,956 General and administrative 838 ( 1,444 ) Total operating expenses 2,262 2,596 Loss from operations ( 1,100 ) ( 1,623 ) Interest income 227 315 Other income, net 347 269 Net loss before income taxes ( 526 ) ( 1,039 ) Net loss $ ( 526 ) $ ( 1,039 ) Net loss attributable to noncontrolling interest $ ( 243 ) $ ( 430 ) April 30, 2024 January 31, 2024 Cash and cash equivalents $ 41,901 $ 43,896 Property and equipment, net 357 489 Operating lease right-of-use assets 543 405 Other assets 3,884 2,835 Total assets $ 46,685 $ 47,625 Total liabilities $ 6,071 $ 6,080 Equity Method Investment In April 2021, the Company reorganized Meltano Inc. (“Meltano”), now operating as Arch Data, Inc. (“Arch”), which started as an internal project within the Company in July 2018, into a separate legal entity. 24 Table of Contents The Company recorded an impairment charge of $ 8.9 million in other income (expense), net in the condensed consolidated statement of operations during the year ended January 31, 2024 which reduced the equity method investment value to zero a s of January 31, 2024 . During the three months ended April 30, 2024 and 2023 , the Company recorded a loss from equity method investment of zero and $ 0.7 million, net of tax on the condensed consolidated statements of operations, respectively. 12. Income Taxes For the three months ended April 30, 2024, the Company recorded income tax expense of $ 12.7 million on pretax loss of $ 42.2 million. The income tax expense for the three months ended April 30, 2024 was primarily related to an increase in tax expense for unrecognized tax benefits and the Company's foreign and domestic operations. For the three months ended April 30, 2023 , the Company recorded income tax expense of $ 1.5 million on pretax loss of $ 50.7 million . The income tax expense for the three months ended April 30, 2023 was primarily related to the Company's foreign and domestic operations. The Company's provision for income taxes is based on its worldwide estimated annualized effective tax rate, except for jurisdictions for which a loss is expected for the year and no benefit can be realized for those losses, jurisdictions for which forecasted pre-tax income or loss cannot be estimated, and the tax effect of discrete items occurring during the period. The tax provision for jurisdictions for which a forecast cannot be estimated is based on actual taxes and tax reserves for the quarter. Under the provisions of ASC 740, Income Taxes , the determination of the Company’s ability to recognize its deferred tax asset requires an assessment of both negative and positive evidence when determining the Company’s ability to recognize its deferred tax assets. As in prior years, the Company maintained that it was not more likely than not that the Company could recognize deferred tax assets in certain jurisdictions. The evidence evaluated by the Company included operating results during the most recent three-year period and future projections. More weight was given to historical results than to expectations of future profitability, which are inherently uncertain. Certain entities’ net losses in recent periods represented sufficient negative evidence to require a valuation allowance against its net deferred tax assets. This valuation allowance will be evaluated periodically and could be reversed partially or totally if business results have sufficiently improved to support realization of deferred tax assets. As of April 30, 2024, unrecognized tax benefits were $ 398.3 million, of which $ 210.3 million would affect the effective tax rate if recognized. The Company has classified approximately $ 209.7 million of unrecognized tax benefit as current tax liability due to anticipated timing of the settlement of the bilateral advance pricing agreement (“BAPA”) with the U.S. Internal Revenue Service (“IRS”) and Dutch Tax Authority (“DTA”) and their associated payments, which are expected to be made within the next 12 months. The Company is unable to reasonably estimate the timing of remaining long-term payments or the amount by which the liability will increase or decrease. It is the Company’s policy to classify accrued interest and penalties related to unrecognized tax benefits in provision for income taxes. Accrued interest and penalties were $ 56.7 million as of April 30, 2024 and $ 52.1 million as of January 2024, respectively. The Company has been in BAPA negotiations between the IRS and the DTA relating to the Company’s transfer pricing arrangements between the United States and the Netherlands. In the year ended January 31, 2024, the Company for the first time discussed with the IRS and DTA a framework to finalize its transfer pricing arrangements for the proposed BAPA period consisting of tax years ending December 31, 2018 through January 31, 2027. The proposed agreements between the Company, the IRS and the DTA are not yet final; in anticipation of the agreements, $ 254.9 million of net tax liability was recorded in the year ended January 31, 2024, and an additional $ 8.7 million of net tax liability was recorded for the three months ended April 30, 2024. These amounts represent the unrecognized tax 25 Table of Contents benefit relating to the BAPA. The unrecognized tax benefit represents the Company’s best estimate of the tax liability associated with the proposed agreements and their related effects. As of April 30, 2024, the Company’s U.S. federal 2018 through 2022 tax years were open and subject to potential examination in one or more jurisdictions. In addition, in the United States, any net operating losses or credits that were generated in prior years but not yet fully utilized in a year that is closed under the statute of limitations may also be subject to examination. The Company is currently under examination in the Netherlands for the tax years ended December 31, 2015 and 2016. The Company expects negotiations to continue to the middle of fiscal year 2025. The Company believes that it has adequately reserved for the outcome of this audit. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. The Company continues to monitor the progress of ongoing discussions with tax authorities and the effect, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. 13. Net Loss per Share The following table sets forth basic and diluted loss per share for each of the periods presented (in thousands, except per share data): Three Months Ended April 30, 2024 2023 Numerator: Net loss attributable to GitLab $ ( 54,644 ) $ ( 52,469 ) Denominator: Weighted-average shares used to compute net loss per share attributable to GitLab Class A and Class B common stockholders, basic and diluted 158,157 151,692 Net loss per share attributable to GitLab Class A and Class B common stockholders, basic and diluted $ ( 0.35 ) $ ( 0.35 ) Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive. Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows (in thousands): As of April 30, 2024 January 31, 2024 Shares subject to outstanding common stock options 7,880 8,503 Unvested restricted stock in connection with business combination 2 3 Unvested early exercised stock options 17 22 Unvested RSUs and PSUs 12,960 10,930 Shares subject to the ESPP 155 63 Total 21,014 19,521 26 Table of Contents 14. Commitments and Contingencies Contractual Obligations and Commitments The Company’s purchase oblig ations of $ 136.8 million as of April 30, 2024 , represent third-party non-cancelable hosting infrastructure agreements, subscription arrangements and other commitments used in the ordinary course of business to meet operational requirements. Loss Contingencies In accordance with ASC 450, Loss Contingencies, the Company accrues for contingencies when losses become probable and reasonably estimable. Accordingly, the Company has recorded an estimated liability related to certain labor matters regarding its use o f contractors in certain foreign countries. As of April 30, 2024 and January 31, 2024, the estimated liability relating to these matters was $ 2.1 million and $ 2.2 million recorded in other non-current liabilities on the condensed consolidated balance sheets, respectively. Warranties and Indemnifications The Company enters into service level agreements with customers which warrant defined levels of uptime and support response times and permit those customers to receive credits for prepaid amounts in the event that those performance and response levels are not met. To date, the Company has not experienced any significant failures to meet defined levels of performance and response. In connection with the service level agreements, the Company has not incurred any significant costs and has not accrued any liabilities in the condensed consolidated financial statements. In the ordinary course of business, the Company enters into contractual arrangements under which the Company agrees to provide indemnification of varying scope and terms to business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties, and other liabilities relating to or arising from the Company’s platform or the Company’s acts or omissions. In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract. Further, the Company’s obligations under these agreements may be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments. In addition, the Company has agreed to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines, and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by the Company, arising out of that person’s services as the Company’s director or officer or that person’s services provided to any other company or enterprise at the Company’s request. The Company maintains director and officer insurance coverage that may enable the Company to recover a portion of any future amounts paid. Legal Proceedings The Company is, and from time to time, may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. The Company is not presently a party to any legal proceedings that in the opinion of management, if determined adversely to the Company, would individually or taken together have a material adverse effect on its business, financial condition or operating results. Defending such proceedings is costly and can impose a significant burden on management and team members. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. 27 Table of Contents 15. Subsequent Event On May 23, 2024, the Company completed its acquisition of certain assets, primarily software intellectual property, of Rezilion Inc. and its subsidiary, Rezilion Ltd. (collectively, “Rezilion”) for approximately $ 7.3 million in cash, subject primarily to a one-time payment to the Israel Innovation Authority and settlement of a bank borrowing, and the assumption of select liabilities. Select employees of Rezilion have also joined the Company. Rezilion has developed software security solutions and this transaction will allow the Company to strengthen its product offerings. 28 Table of Contents