What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-05 compared with 2021-05-06 · 113 added, 69 removed, 213 unchanged (46% of the section changed)

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We also operate a full-service media advertising agency and our VeriAds™ Network.

For the three months ended March 31, 2021 and 2020, we reported total revenue of $18.3 million and $11.9 million, respectively.

Total revenue from our aiWARE SaaS solutions increased 51% for the three months ended March 31, 2021, compared with the same period in 2020.

For the three and six months ended June 30, 2021 we reported total revenue of $19.2 million and $37.5 million, respectively, as compared to $13.3 million and $25.2 million, respectively, in the corresponding prior year period.

Total revenue from our aiWARE SaaS solutions increased 86% and 68%, respectively, for the three and six months ended June 30, 2021, compared with the same periods in 2020.

Significant Transactions

In the first quarter of 2021, we received $4.3 million from the exercise of stock options and purchases of shares under our ESPP and $2.3 million in proceeds received from the exercise of stock warrants.

In the first six months of 2021, we received $4.8 million from the exercise of stock options and purchases of shares under our ESPP and $2.3 million in proceeds received from the exercise of stock warrants.

In July 2021, the Company entered into a definitive agreement to acquire Pandologic Ltd., a company incorporated under the laws of the state of Israel (“Pandologic”) for total consideration of $150 million (the “Merger Consideration”).

The Merger Consideration consists of upfront payments of $50 million in cash and $35 million in common stock (approximately 1.7 million shares) and $65 million payable based on earnouts tied to financial performance of Pandologic in fiscal 2021 and 2022, which amount will be paid in a combination of cash and common stock.

The merger close is subject to customary conditions (as defined) and is expected to finalize by late Q3 2021.

Opportunities, Challenges and Risks

In the first quarters of 2021 and 2020, we derived our revenue through our aiWARE SaaS solutions, aiWARE content licensing and media services, and advertising services.

Beginning in the second half of 2020 and continuing into the first quarter of 2021, we began to experience significant growth in revenue across our aiWARE SaaS solutions, which increased 51% during the quarter ended March 31, 2021, compared with the same period in 2020.

In the first six months of 2021 and 2020, we derived our revenue through our aiWARE SaaS solutions, aiWARE content licensing and media services, and advertising services.

Beginning in the second half of 2020 and continuing into the first half of 2021, we began to experience significant growth in revenue across our aiWARE SaaS solutions, which increased 86% and 68%, respectively, during the three and six months ended June 30, 2021, compared with the same period in 2020.

The year-over-year growth in aiWARE SaaS solutions revenue was driven primarily by expanded services to existing and new customers in the media and entertainment and government, legal and compliance markets.

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We believe there will be significant near and long term opportunities for revenue growth from the U.S.

Government adopting our aiWARE SaaS solutions and related AI technologies, as discussed under “Business - Overview” in our Annual Report on Form 10-K for the year ended December 31, 2020 .

However, many sales opportunities with government customers can involve long sales cycles, during which we must invest significant time and resources without a guarantee of success.

We may seek to acquire businesses with deep relationships and greater scale with the U.S.

Government to further accelerate our pursuit of the growth opportunities we see in this market.

Government and regulated industries such as energy adopting our aiWARE SaaS solutions and related AI technologies .

However, many sales opportunities with these customers can involve long sales cycles, during which we must invest significant time and resources without a guarantee of success.

We may seek to acquire businesses with deep relationships and greater scale within the U.S.

Government and regulated industries such as energy to further accelerate our pursuit of the growth opportunities we see in this market.

We are a leader in AI-based SaaS, advertising and content licensing solutions across the media and entertainment market.

In addition to the growth in our aiWARE SaaS solutions in this market, we have also demonstrated our ability to grow our advertising services, including our VeriAds Network, with our revenue from these services increasing 72% during the quarter ended March 31, 2021, compared with the prior year period.

In addition to the growth in our aiWARE SaaS solutions in this market, we have also demonstrated our ability to grow our advertising services, including our VeriAds Network, with our revenue from these services increasing 42% and 56%, respectively, during the three and six months ended June 30, 2021, compared with the corresponding prior year periods.

We continue to see significant opportunities for growth in the media and entertainment market, as we continue to extend our customer base beyond radio broadcasters to major media companies and rights holders, where our AI solutions could add tremendous value in content creation and distribution, including in news, television, and film.

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Our aiWARE technology is in the early stages of deployment in the energy market, and we expect to continue making significant investments in product, sales and engineering over the next 12 to 24 months to further develop our current and future technologies to address the opportunities in this market.

At the end of the first quarter of 2021, we reported 1,777 SaaS accounts, which represented growth of 12% compared with the first quarter of 2020.

At the end of the second quarter of 2021, we reported 1,820 SaaS accounts.

To continue to grow our SaaS account base, and drive increased sales within our existing customer base, we will need to increase our sales and marketing spending in 2021 compared with 2020.

We believe our aiWARE SaaS technology will extend the capabilities of many third-party software platforms and products that are widely used today.

For example, we integrated aiWARE with the Alteryx platform, enabling Alteryx users to access aiWARE’s AI models and AI analytics capabilities, and we enhanced aiWARE to run on the NVIDIA ® CUDA ® GPU-based platform, enabling dramatic increases in

aiWARE’s processing speed and opening up a wide range of new use cases for our technology.

We are in the process of developing and marketing specific use cases for these integrations, which we believe will open up new markets for our products and accelerate our near and long term revenue growth.

For example, we recently announced the acquisition of PandoLogic, a technology that utilizes machine-learning and AI to accelerate the hiring process for large enterprises.

We believe when integrated with aiWARE, PandoLogic users will be given greater visibility and transparency in their hiring processes.

In addition, we integrated aiWARE with the Alteryx platform, enabling Alteryx users to access aiWARE’s AI models and AI analytics capabilities, and we enhanced aiWARE to run on the NVIDIA ® CUDA ® GPU-based platform, enabling dramatic increases in aiWARE’s processing speed and opening up a wide range of new use cases for our technology.

We are in the process of developing and marketing more specific use cases for these integrations, which we believe will open up new markets for our products and accelerate our near and long term revenue growth.

We plan to hire additional engineers and business development resources in the near term to further accelerate our pursuit of these potential opportunities, as well as other third-party technology integrations.

For the first quarter of 2021, our gross margin (calculated as described in “Non-GAAP Financial Measures” below) improved to 74%, compared with 73% for the first quarter of 2020, driven by recent enhancements made to the aiWARE platform that significantly reduced our computing and storage costs, coupled with the growth of new customers across our aiWARE SaaS Solutions, which generated incremental gross margins in excess of 80% during the quarter ended March 31, 2021.

For the second quarter and first half of 2021, our gross margin (calculated as described in “Non-GAAP Financial Measures” below) improved to 73%, compared with 72% for the second quarter and first half of 2020, driven by growth of new customers across our aiWARE SaaS Solutions, which generated incremental gross margins in excess of 80% during the three and six months ended June 30, 2021.

Our gross margin is impacted significantly by the mix of our aiWARE SaaS revenue, aiWARE content licensing and media services revenue and advertising revenue in a given period.

Our gross profit (calculated as described in “Non-GAAP Financial Measures” below) is also dependent upon our ability to grow our revenue by expanding our customer base and increasing business with existing customers, and to manage our costs by negotiating favorable economic terms with cloud computing providers such as AWS and Microsoft Azure.

With the addition of PandoLogic in late Q3 2021, we expect our consolidated gross margin and related gross profit to improve even further beginning in Q4 2021.

Our gross profit (see “Non-GAAP Financial Measures” below) is also dependent upon our ability to grow our revenue by expanding our customer base and increasing business with existing customers, and to manage our costs by negotiating favorable economic terms with cloud computing providers such as AWS and Microsoft Azure.

While we are focused on continuing to improve our gross profit, our ability to attract new and retain existing customers to grow our revenue will be highly dependent on our ability to implement and continually improve upon our technology and services and improve our technology infrastructure and operations as we experience increased network capacity constraints due to our growth.

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Our ability to attract, grow and retain customers for our aiWARE platform is highly sensitive to rapidly changing technology and is dependent on our ability to maintain the attractiveness of our platform, content and services to our customers.

Moreover, we expect to continue to report operating losses in the near term.

Moreover, we expect to continue to report operating losses through Q3 2021 and in the near term;

however, with the addition of PandoLogic, we expect to report substantial improvements in our consolidated operating results as early as Q4 2021.

The future revenue and operating growth across our platform will rely heavily on our ability to grow our SaaS customer base, continue to develop and deploy quality and innovative AI-driven applications, provide unique and attractive content and advertising services to our customers, continue to grow in newer markets such as government and energy, and manage our corporate overhead costs.

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Since 2017, we have made acquisitions that extended our business and technology reach in several areas, as discussed in more detail in in our Annual Report on Form 10-K for the year ended December 31, 2020.

We believe there are strategic acquisition targets that can accelerate our entry into key strategic markets, as well as our ability to grow our business.

As a result, we are prioritizing corporate development efforts beginning in the first half of 2021.

We believe there are strategic acquisition targets that can accelerate our entry into key strategic markets, such as the July 2021 announced acquisition of PandoLogic that accelerates our entry into the intelligent hiring of essential workers, as well as our ability to grow our business.

As a result, we will continue to prioritize corporate development efforts beyond the first half of 2021.

Our acquisition strategy is threefold:

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The pandemic has affected and may continue to affect some of our customers, which may further reduce the demand and/or delay purchase decisions for our products and services, and may additionally impact the creditworthiness of customers.

We have assessed the potential credit deterioration of our customers due to changes in the macroeconomic environment and have determined that no additional allowance for doubtful accounts was necessary due to credit deterioration as of March 31, 2021.

We have assessed the

potential credit deterioration of our customers due to changes in the macroeconomic environment and have determined that no additional allowance for doubtful accounts was necessary due to credit deterioration as of June 30 , 2021 .

The extent to which the COVID-19 pandemic and the related macroeconomic conditions may continue to affect our financial condition or results of operations is uncertain.

The severity and duration of the pandemic and the resulting macroeconomic conditions are difficult to predict, and our revenue and operating results may be adversely impacted in future periods.

The extent of the impact on our operational and financial performance will depend on various factors, including the duration and spread of the outbreak;

advances in testing, treatment and prevention;

the impact of government measures to contain the virus;

and related government stimulus actions.

Due to the nature of our business, the effect of the COVID-19 pandemic may not be fully reflected in its results of operations until future periods.

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In addition, in compliance with government mandates, we have temporarily closed our offices and initiated a work from home policy.

We expect to continue to enforce these and other actions we deem appropriate until or when the COVID-19 pandemic is officially no longer declared a pandemic by the World Health Organization.

Non-GAAP Financial Measure

In evaluating our cash flows and financial performance, we use a measure of Non-GAAP net loss, the results for which measure are presented below for the three months ended March 31, 2021 and 2020.

In evaluating our cash flows and financial performance, we use a measure of Non-GAAP net loss, the results for which measure are presented below for the three and six months ended June 30, 2021 and 2020.

The items excluded from Non-GAAP net loss, as well as a breakdown of GAAP net loss, non-GAAP net income (loss) and these excluded items between our core operations and corporate, are detailed in the reconciliation below.

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(in thousands)

For the Three Months Ended March 31,

Three Months Ended June 30,

Core Operations (1)

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Change in fair value of warrant liability

Warrant expense

State sales tax reserve

Interest expense

Acquisition and due diligence costs

Severance and executive search

Non-GAAP Net Income (Loss)

(in thousands)

Six Months Ended June 30,

Core Operations (1)

Corporate (2)

Core Operations (1)

Corporate (2)

Provision for income taxes

Depreciation and amortization

Stock-based compensation expense

Change in fair value of warrant liability

Warrant expense

State sales tax reserve

Gain on sale of asset

Interest expense

Acquisition and due diligence costs

Charges related to sublease

Severance costs

Severance and executive search

Non-GAAP Net Income (Loss)

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(2) Corporate consists of general and administrative functions such as executive, finance, legal, people operations, fixed overhead expenses (including facilities and information technology expenses), other income (expenses) and taxes, and other expenses that support the entire company, including public company driven costs.

The following tables set forth the calculation of our gross profit and gross margin, followed by a reconciliation of non-GAAP to GAAP financial information presented in our condensed consolidated financial statements for three months ended March 31, 2021 and 2020.

Three Months Ended

Six Months Ended

(dollars in thousands)

Cost of revenue

(in thousands)

Three Months Ended

Six Months Ended

Cost of revenue

GAAP sales and marketing expenses

Stock-based compensation expense

Severance costs

Severance and executive search

Non-GAAP sales and marketing expenses

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Stock-based compensation expense

Severance costs

Severance and executive search

Non-GAAP research and development expenses

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Stock-based compensation expense

Warrant expense

Charges related to sublease

State sales tax reserve

Severance costs

Acquisition and due diligence costs

Severance and executive search

Non-GAAP general and administrative expenses

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Non-GAAP loss from operations

GAAP other (expense) income, net

GAAP other expense, net

Change in fair value of warrant liability

Interest expense

Gain on sale of asset

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As such, our results for different KPIs may fluctuate significantly within the same period, and the result for a particular KPI in one period may not be indicative of the results that we will achieve for that KPI in future periods.

Results of Operations The following tables set forth our results of operations for the three months ended March 31, 2021 and 2020, in dollars and as a percentage of our revenue for those periods.

Throughout this discussion regarding our results of operations, certain amounts for the 2020 period have been reclassified to conform to the presentation for the 2021 period.

Results of Operations The following tables set forth our results of operations for the three and six months ended June 30, 2021 and 2020, in dollars and as a percentage of our revenue for those periods.

Throughout this discussion regarding our results of operations, certain amounts for the 2020 periods have been reclassified to conform to the presentation for the 2021 periods.

In particular, amortization expense, which was previously presented within cost of revenue, sales and marketing, research and development, and general and administrative operating expenses, has been reclassified and is presented as a single separate line item in operating expenses.

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Three Months Ended

Six Months Ended

(dollars in thousands)

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Loss from operations

Other (expense) income, net

Other expense, net

Loss before provision for income taxes

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Three Months Ended

Six Months Ended

Operating expenses:

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Loss from operations

Other (expense) income, net

Other expense, net

Loss before provision for income taxes

Provision for income taxes

Three Months Ended March 31, 2021 Compared with Three Months Ended March 31, 2020

Three and Six Months Ended June 30, 2021 Compared with Three and Six Months Ended June 30, 2020

Three Months Ended

Six Months Ended

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aiWARE Content Licensing and Media Services

The increase in advertising revenue in the first quarter of 2021 compared with the corresponding prior year period was due in large part to a combination of the addition of new advertising clients and increased business with existing advertising clients.

In addition, we generated $2.0 million in revenue from our VeriAds Network in the first quarter of 2021, reflecting an increase of $1.8 million, compared to the first quarter of 2020.

aiWARE SaaS solutions revenue increased in the three months ended March 31, 2021 compared with the corresponding prior year period due primarily to expanded services to existing and new customers in the media and entertainment and government, legal and compliance markets.

aiWARE content licensing and media services revenue increased in the three months ended March 31, 2021 compared with the corresponding prior year period.

The increase in advertising revenue in the second quarter and first six months of 2021 compared with the corresponding prior year periods was due in large part to a combination of the addition of new advertising clients and increased business with existing advertising clients.

In addition, revenue generated from our VeriAds Network t otaled $2.1 million and $4.0 million for the three and six months ended June 30, 2021, respectively, as compared to $0.9 million and $1.0 million for the three and six months ended June 30, 2020, respectively.

aiWARE SaaS solutions revenue increased in the three and six months ended June 30, 2021 compared with the corresponding prior year periods due primarily to expanded services to existing customers in media and entertainment, and to a lesser extent, from customers in government, legal and compliance.

aiWARE content licensing and media services revenue increased in the three and six months ended June 30, 2021 compared with the corresponding prior year periods.

Revenues from our aiWARE content licensing and media services business, which typically has significant revenue driven by major sporting events, were negatively impacted in the first quarter of 2020 due to the cancellation or postponement of substantially all major sporting events in March 2020 as a result of the COVID-19 pandemic.

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Three Months Ended

Six Months Ended

(dollars in thousands)

Cost of revenue

The increase in gross margin in the three months ended March 31, 2021 compared with the corresponding prior year period was due primarily to a decrease in platform costs from computing cost reductions and completed enhancements to our aiWARE operating system that have improved our computing efficiency, coupled with the growth in revenue from our customers across our aiWARE SaaS Solutions, which generated incremental gross margins in excess of 80% during the quarter ended March 31, 2021.

The increase in gross profit and gross margin in the three and six months ended June 30, 2021 compared with the corresponding prior year period was due primarily to growth in revenue from existing customers across our aiWARE SaaS Solutions, which generated incremental gross margins in excess of 80% during the three and six months ended June 30, 2021.

Operating Expenses

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Cost of Revenue.

The increase in cost of revenue in the three months ended March 31, 2021 compared with the corresponding prior year period was due primarily to our higher revenue level, offset in part by the decrease in platform costs, as discussed above.

The increase in cost of revenue in the three and six months ended June 30, 2021 compared with the corresponding prior year periods was due primarily to our higher revenue level, as discussed above.

Sales and Marketing .

The increase in sales and marketing expenses in the three months ended March 31, 2021 compared with the corresponding prior year period was due primarily to increases in personnel-related costs, including a $0.7 million increase in stock-based compensation expense attributable primarily to the accelerated recognition of compensation expense related to the vesting of performance-based stock options as a result of our achievement of the stock price milestones applicable to such options during the first quarter of 2021, and $0.2 million in severance costs.

As a percentage of revenue, sales and marketing expenses declined to 35% in the three months ended March 31, 2021 from 41% in the corresponding prior year period.

The increase in sales and marketing expenses in the three and six months ended June 30, 2021 compared with the corresponding prior year periods was due primarily to increases in personnel-related costs.

The six months ended June 30, 2021 includes a $0.8 million increase in stock-based compensation expense attributable primarily to the accelerated recognition of compensation expense related to the vesting of performance-based stock options as a result of our achievement of the stock price milestones applicable to such options during the six months ended June 30, 2021, and $0.2 million in severance costs.

As a percentage of revenue, sales and marketing expenses declined to 27% and 31% in the three and six months ended June 30, 2021, respectively, from 37% and 39% in the corresponding prior year periods.

Research and Development.

The increase in research and development expenses in the three months ended March 31, 2021 compared with the corresponding prior year period was due primarily to $0.8 million increase in stock-based compensation expense attributable primarily to additional expense related to the vesting of performance-based stock options, as discussed above, and a $0.6 million increase in personnel-related costs from the addition of new engineering resources.

As a percentage of revenue, research and development expenses improved to 27% in the three months ended March 31, 2021, from 31% in the corresponding prior year period.

The increase in research and development expenses in the three and six months ended June 30, 2021 compared with the corresponding prior year periods was due primarily to an increase of $0.6 million and $1.2 million, respectively, in personnel-related costs from the addition of new engineering resources.

Stock-based compensation increased in the three and six months ended June 30, 2021 compared with the corresponding prior year periods by $0.4 million and $1.2 million, respectively, attributable primarily to awards for new engineering resources and additional expense related to the vesting of performance-based stock options, as discussed above.

a percentage of revenue, research and development expenses declined to 24 % and 26% in the three and six months ended June 30 , 202 1, respectively, from 26 % and 28% in the corresponding prior year period s .

General and Administrative.

General and administrative expenses increased in the three months ended March 31, 2021 compared with the corresponding prior year period due primarily to an increase of $15.7 million in non-cash stock-based compensation expense, attributable primarily to additional expense related to the vesting of performance-based stock options, as discussed above, and $3.4 million in one-time charges related to the sublease of our former Costa Mesa corporate office space in the first quarter of 2021.

General and administrative expenses increased in the three months ended June 30, 2021 compared with the corresponding prior year period due to a $2.1 million increase in stock-based compensation, primarily for senior executive stock grants in 2021, and a $1.6 million increase in salaries, bonuses and other personnel-related costs.

General and administrative expenses increased in the six months ended June 30, 2021 compared with the corresponding prior year period due primarily to an increase of $17.7 million in non-cash stock-based compensation expense, attributable primarily to additional expense related to the vesting of performance-based stock options, as discussed above, a $3.4 million in one-time charges related to the sublease of our former Costa Mesa corporate office space in the first quarter of 2021, and a $2.6 million increase in salaries, bonuses and other personnel-related costs.

We expect general and administrative expenses to increase as a result of the acquisition of Pandologic.

Amortization Expense.

Amortization expense decreased in the three months ended March 31, 2021 compared with the corresponding prior year period due to certain intangible assets that were acquired in 2017 becoming fully amortized during 2020.

Amortization expense decreased in the three and six months ended June 30, 2021 compared with the corresponding prior year periods due to certain intangible assets that were acquired in 2017 becoming fully amortized during 2020.

Other (Expense) Income, Net

For the three months ended March 31, 2021 , other expense, net was comprised primarily of currency exchange losses.

For the three months ended March 31, 2020, other income, net was comprised primarily of interest income on investments in money market funds.

For the three and six months ended June 30, 2021 , other expense, net was comprised primarily of currency exchange losses.

For the three months ended June 30, 2020, other income, net was comprised primarily warrant expense of $0.2 million.

Liquidity and Capital Resources

Our principal sources of liquidity are our cash and cash equivalents, which totaled $127.5 million as of March 31, 2021 and $114.8 million as of December 31, 2020.

The increase in our cash and cash equivalents in the three months ended March 31, 2021 was due primarily to $4.3 million in proceeds from the exercise of stock options and purchases of shares under our ESPP, $2.3 million in proceeds from the exercise of stock warrants, and a $1.5 million increase in our working capital.

Our principal sources of liquidity are our cash and cash equivalents, which totaled $120.6 million as of June 30, 2021 and $114.8 million as of December 31, 2020.

The increase in our cash and cash equivalents in the six months ended June 30, 2021 was due primarily to $4.8 million in proceeds from the exercise of stock options and purchases of shares under our ESPP and $2.3 million in proceeds from the exercise of stock warrants.

A summary of cash flows from our operating, investing and financing activities is shown in the table below.

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Six Months Ended

(in thousands)

Cash provided by operating activities

Cash used in investing activities

Cash used in operating activities

Cash (used in) provided by investing activities

Cash provided by financing activities

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Operating Activities

Our operating activities provided cash of $6.2 million in the three months ended March 31, 2021, due primarily to the net increase of $11.1 million of cash received from advertising clients for future payments to vendors, offset in part by the effect of our net loss of $30.6 million, adjusted by $26.0 million in non-cash expenses, including $21.6 million in stock-based compensation expense.

Our operating activities used cash of $1.0 million in the six months ended June 30, 2021, due primarily to our net loss of $43.3 million, adjusted by $33.7 million in non-cash expenses, including $28.2 million in stock-based compensation expense, offset in part by the net increase of $8.2 million of cash received from advertising clients for future payments to vendors.

Our business strategy includes streamlining operational costs while investing in the development of our AI capabilities and enhancement of our aiWARE SaaS solutions and services to grow our business and future revenue.

We gauge the amount of cash utilized in these efforts using the Non-GAAP net loss measure, as presented under the heading “Non-GAAP Financial Measures” above.

Our use of cash as measured by Non-GAAP net loss decreased to $3.9 million for the three months ended March 31, 2021 from $6.7 million for the three months ended March 31, 2020, due primarily to the increase in our revenues.

Our operating activities provided cash of $1.5 million in the three months ended March 31, 2020, due primarily to $9.7 million of cash received from advertising clients for future payments to vendors, which more than offset our net loss of $12.7 million, after adjustments of $6.1 million in non-cash expenses, including $4.5 million in stock-based compensation expense.

Our use of cash as measured by Non-GAAP net loss decreased to $7.8 million for the six months ended June 30, 2021 from $12.4 million for the six months ended June 30, 2020, due primarily to the increase in our revenues, partially offset by an increase in non-GAAP expenses.

Our operating activities used cash of $2.8 million in the six months ended June 30, 2020, due primarily to our net loss of $24.5 million, adjusted by $12.3 million in non-cash expenses, including $8.6 million in stock-based compensation expense, and an increase of $9.2 million of cash received from advertising clients for future payments to vendors

Investing Activities

Our investing activities consisted of minimal amounts used for capital expenditures in the three months ended March 31, 2021 and 2020.

Our investing activities consisted of minimal amounts used for capital expenditures and proceeds from the sale of equipment in the six months ended June 30, 2021 and 2020.

Financing Activities

Our financing activities provided cash of $6.5 million in the three months ended March 31, 2021.

Net cash provided by financing activities consisted of $4.3 million received from the exercise of stock options and purchases of shares under our ESPP and $2.3 million in proceeds received from the exercise of stock warrants.

Our financing activities provided cash of $3.6 million in the three months ended March 31, 2020.

Net cash provided by financing activities consisted of $3.5 million in net proceeds received from our sales of common stock and $0.1 million received from the exercise of stock options and purchases of shares under our ESPP.

Our financing activities provided cash of $ 7.1 million in the six months ended June 30, 2021 .

Net cash provided by financing activities consisted of $ 4.8 million received from the exercise of stock options and purchases of shares under our ESPP and $ 2.

3 million in proceeds received from the exercise of stock warrants .

Our financing activities provided cash of $8.8 million in the six months ended June 30, 2020.

Net cash provided by financing activities consisted of $6.5 million in net proceeds received from our sales of common stock, $2.1 million in proceeds received from the exercise of stock warrants and $0.1 million received from the exercise of stock options and purchases of shares under our ESPP.

Proceeds received from loans under the Paycheck Protection Program in April 2020 were repaid in full in May 2020.

Capital Resources

As of March 31, 2021, we had no outstanding debt obligations.

We have no present agreements or commitments with respect to any material acquisitions of businesses or technologies or any other material capital expenditures.

As of June 30, 2021, we had no outstanding debt obligations.

In July 2021, we entered into a definitive agreement to acquire Pandologic Ltd., a company incorporated under the laws of the state of Israel (“Pandologic”) for total consideration of $150.0 million, comprised of upfront payments of $50.0 million in cash and $35.0 million in common stock (approximately 1.7 million shares) at closing and $65.0 million payable based on earnouts tied to financial performance of Pandologic in fiscal 2021 and 2022, which amount will be paid in a combination of cash and common stock.

The merger close is subject to customary conditions (as defined) and is expected to finalize by late Q3 2021.

We have generated significant losses since inception and expect to continue to generate losses for the foreseeable future.

We believe that our current cash and cash equivalents balances will be sufficient to fund our operations in the ordinary course of business for at least the next twelve months from the date of this filing.

However, our current cash and cash equivalents may not be sufficient to support the development of our business to the point at which we have positive cash flows from operations.

In addition, we intend to continue to evaluate potential acquisitions of and/or investments in companies or technologies that complement our business and may make such acquisitions and/or investments in the future.

With the acquisition of PandoLogic, which is expected to generate over $25.0 million of operating cash flows in its fiscal year 2021, we believe we have an opportunity to drastically improve our operating income/(loss) as early as Q4 2021.

We believe that our current cash and cash equivalents balance will be sufficient to fund our operations in the ordinary course of business for at least the next twelve months from the date of this filing.

However, our current cash and cash equivalents may not be sufficient to support the development of our business to the point at which we have positive cash flows from operations, including the acquisition of PandoLogic.

In addition, we intend to continue to evaluate potential new acquisitions of and/or investments in companies or technologies that complement our business and may make such acquisitions and/or investments in the future.

Accordingly, we may need to obtain additional sources of capital in the future.

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We currently have no available lines of credit for future borrowings.

We have a shelf registration statement that allows us to sell up to $300 million of our equity or debt securities, at prices and on terms to be determined in the future.

Future equity or debt financing may not be available on favorable terms or at all.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis