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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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20-1898451
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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x
(Do not check if a small reporting company)
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Small reporting company
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o
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Page
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PART I.
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II.
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
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•
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our ability to attract and retain subscribers;
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•
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our ability to deepen our relationships with existing subscribers;
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•
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our business plan and beliefs and objectives for future operations, including regarding our pricing and pricing model;
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•
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benefits associated with use of our products and services;
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•
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our ability to develop or acquire new products and services, improve our existing products and services and increase the value of our products and services;
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•
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our ability to further develop strategic relationships;
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•
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our ability to achieve positive returns on investments;
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•
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our plans to further invest in and grow our business, including investment in research and development, sales and marketing, in the development of our customer support teams, and our data center infrastructure, and our ability to effectively manage our growth and associated investments;
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•
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our ability to timely and effectively scale and adapt our existing technology;
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•
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our ability to increase our revenue and our revenue growth rate;
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•
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our future financial performance, including expectations regarding trends in revenue, cost of revenue, operating expenses, other income and expenses, income taxes, subscribers, average monthly revenue per subscriber, payments volume, and dollar-based net expansion rate;
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•
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the sufficiency of our cash and cash equivalents and cash generated from operations to meet our working capital and capital expenditure requirements;
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•
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the effects of seasonal trends on our operating results;
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•
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the sufficiency of our efforts to remediate our past material weaknesses;
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•
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our ability to attract and retain senior management, qualified employees and key personnel;
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•
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our ability to successfully identify, acquire and integrate companies and assets;
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•
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our ability to successfully enter new markets and manage our international expansion; and
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•
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our ability to maintain, protect and enhance our intellectual property and not infringe upon others’ intellectual property.
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September 30,
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December 31,
|
||||
2016
|
|
2015
|
|||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
86,288
|
|
|
$
|
93,405
|
|
Accounts receivable, net of allowance for doubtful accounts of $221 and $90 as of September 30, 2016 and December 31, 2015
|
8,520
|
|
|
6,643
|
|
||
Prepaid expenses and other current assets
|
3,710
|
|
|
3,082
|
|
||
Total current assets
|
98,518
|
|
|
103,130
|
|
||
Property and equipment, net
|
33,658
|
|
|
31,754
|
|
||
Intangible assets, net
|
2,193
|
|
|
636
|
|
||
Goodwill
|
9,039
|
|
|
5,396
|
|
||
Other noncurrent assets
|
538
|
|
|
498
|
|
||
TOTAL ASSETS
|
$
|
143,946
|
|
|
$
|
141,414
|
|
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|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
5,500
|
|
|
$
|
4,426
|
|
Accrued expenses and other liabilities
|
10,099
|
|
|
7,911
|
|
||
Deferred revenue, current portion
|
4,486
|
|
|
3,367
|
|
||
Other current liabilities
|
984
|
|
|
645
|
|
||
Total current liabilities
|
21,069
|
|
|
16,349
|
|
||
|
|
|
|
||||
Deferred revenue, noncurrent portion
|
2,909
|
|
|
1,886
|
|
||
Deferred rent, noncurrent portion
|
1,359
|
|
|
1,254
|
|
||
Financing obligation on leases, noncurrent portion
|
15,640
|
|
|
15,961
|
|
||
Other noncurrent liabilities
|
996
|
|
|
181
|
|
||
Total liabilities
|
41,973
|
|
|
35,631
|
|
||
Commitments and contingencies (Note 7)
|
|
|
|
|
|
||
Stockholders' equity:
|
|
|
|
||||
Class A common stock, par value of $0.000004 per share; 1,000,000,000 shares authorized, 26,769,797 shares issued and outstanding as of September 30, 2016; 1,000,000,000 shares authorized, 14,931,016 shares issued and outstanding as of December 31, 2015
|
—
|
|
|
—
|
|
||
Class B common stock, par value of $0.000004 per share; 100,000,000 shares authorized, 13,650,774 shares issued and outstanding as of September 30, 2016; 100,000,000 shares authorized, 24,296,346 shares issued and outstanding as of December 31, 2015
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
285,641
|
|
|
270,436
|
|
||
Accumulated other comprehensive loss
|
(247
|
)
|
|
(271
|
)
|
||
Accumulated deficit
|
(183,421
|
)
|
|
(164,382
|
)
|
||
Total stockholders' equity
|
101,973
|
|
|
105,783
|
|
||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
143,946
|
|
|
$
|
141,414
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||
Revenue
|
$
|
35,262
|
|
|
$
|
26,081
|
|
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$
|
100,830
|
|
|
$
|
73,104
|
|
Cost of revenue
|
10,972
|
|
|
9,596
|
|
|
31,657
|
|
|
27,098
|
|
||||
Gross profit
|
24,290
|
|
|
16,485
|
|
|
69,173
|
|
|
46,006
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Sales and marketing
|
14,599
|
|
|
12,389
|
|
|
41,534
|
|
|
33,926
|
|
||||
Research and development
|
7,747
|
|
|
6,012
|
|
|
22,758
|
|
|
16,213
|
|
||||
General and administrative
|
7,346
|
|
|
7,256
|
|
|
22,550
|
|
|
21,298
|
|
||||
Change in fair value of contingent consideration
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
||||
Total operating expenses
|
29,692
|
|
|
25,657
|
|
|
86,842
|
|
|
71,426
|
|
||||
Loss from operations
|
(5,402
|
)
|
|
(9,172
|
)
|
|
(17,669
|
)
|
|
(25,420
|
)
|
||||
Change in fair value of preferred stock warrant
|
—
|
|
|
—
|
|
|
—
|
|
|
(25
|
)
|
||||
Interest expense, net
|
(261
|
)
|
|
(335
|
)
|
|
(865
|
)
|
|
(612
|
)
|
||||
Other expense, net
|
(90
|
)
|
|
(20
|
)
|
|
(226
|
)
|
|
(112
|
)
|
||||
Loss before provision for income taxes
|
(5,753
|
)
|
|
(9,527
|
)
|
|
(18,760
|
)
|
|
(26,169
|
)
|
||||
Provision for income taxes
|
142
|
|
|
101
|
|
|
279
|
|
|
169
|
|
||||
Net loss
|
(5,895
|
)
|
|
(9,628
|
)
|
|
(19,039
|
)
|
|
(26,338
|
)
|
||||
Accretion of redeemable convertible preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,862
|
)
|
||||
Deemed dividend—preferred stock modification
|
—
|
|
|
—
|
|
|
—
|
|
|
1,748
|
|
||||
Net loss attributable to common stockholders
|
$
|
(5,895
|
)
|
|
$
|
(9,628
|
)
|
|
$
|
(19,039
|
)
|
|
$
|
(34,452
|
)
|
Net loss per share attributable to common stockholders, basic and diluted
|
$
|
(0.15
|
)
|
|
$
|
(0.25
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
(1.57
|
)
|
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted
|
39,965,454
|
|
|
39,181,118
|
|
|
39,708,257
|
|
|
21,976,654
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||
Net loss
|
$
|
(5,895
|
)
|
|
$
|
(9,628
|
)
|
|
$
|
(19,039
|
)
|
|
$
|
(26,338
|
)
|
Other comprehensive gain (loss), net of taxes:
|
|
|
|
|
|
|
|
||||||||
Change in cumulative translation adjustment
|
(6
|
)
|
|
(89
|
)
|
|
24
|
|
|
(160
|
)
|
||||
Comprehensive loss
|
$
|
(5,901
|
)
|
|
$
|
(9,717
|
)
|
|
$
|
(19,015
|
)
|
|
$
|
(26,498
|
)
|
|
Redeemable
Convertible Preferred Stock
|
|
|
Class A
and B Common Stock
(1)
|
|
|||||||||||||||||||||||||
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Accumulated
Deficit
|
|
Total
Stockholders'
Equity (Deficit)
|
|||||||||||||||
Balance as of December 31, 2014
|
20,454,489
|
|
|
$
|
166,448
|
|
|
|
11,189,360
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(132
|
)
|
|
$
|
(124,793
|
)
|
|
$
|
(124,925
|
)
|
Reclassification of restricted stock award liability to common stock
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
88
|
|
|
—
|
|
|
—
|
|
|
88
|
|
||||||
Deemed dividend—preferred stock modification
|
—
|
|
|
(1,748
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,748
|
|
|
1,748
|
|
||||||
Accretion of redeemable convertible preferred stock to redemption value
|
—
|
|
|
9,862
|
|
|
|
—
|
|
|
—
|
|
|
(4,613
|
)
|
|
—
|
|
|
(5,249
|
)
|
|
(9,862
|
)
|
||||||
Issuance of common stock upon initial public offering, net of offering costs of $4,024
|
—
|
|
|
—
|
|
|
|
7,150,000
|
|
|
—
|
|
|
89,069
|
|
|
—
|
|
|
—
|
|
|
89,069
|
|
||||||
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering
|
(20,454,489
|
)
|
|
(174,562
|
)
|
|
|
20,673,680
|
|
|
—
|
|
|
174,562
|
|
|
—
|
|
|
—
|
|
|
174,562
|
|
||||||
Reclassification of preferred stock warrant liability to equity in connection with initial public offering
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
1,213
|
|
|
—
|
|
|
—
|
|
|
1,213
|
|
||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
8,375
|
|
|
—
|
|
|
—
|
|
|
8,375
|
|
||||||
Issuance of common stock for equity awards
|
—
|
|
|
—
|
|
|
|
34,140
|
|
|
—
|
|
|
242
|
|
|
—
|
|
|
—
|
|
|
242
|
|
||||||
Issuance of common stock upon net exercise of warrants
|
—
|
|
|
—
|
|
|
|
76,565
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Issuance of stock for business acquisition
|
—
|
|
|
—
|
|
|
|
103,617
|
|
|
—
|
|
|
1,500
|
|
|
—
|
|
|
—
|
|
|
1,500
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(139
|
)
|
|
—
|
|
|
(139
|
)
|
||||||
Net loss
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(36,088
|
)
|
|
(36,088
|
)
|
||||||
Balance as of December 31, 2015
|
—
|
|
|
—
|
|
|
|
39,227,362
|
|
|
—
|
|
|
270,436
|
|
|
(271
|
)
|
|
(164,382
|
)
|
|
105,783
|
|
||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
6,606
|
|
|
—
|
|
|
—
|
|
|
6,606
|
|
||||||
Issuance of common stock for contingent consideration payment
|
—
|
|
|
—
|
|
|
|
207,234
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Issuance of common stock for equity awards, net of tax withholdings
|
—
|
|
|
—
|
|
|
|
679,801
|
|
|
—
|
|
|
5,059
|
|
|
—
|
|
|
—
|
|
|
5,059
|
|
||||||
Issuance of common stock under employee stock purchase plan
|
—
|
|
|
—
|
|
|
|
277,215
|
|
|
—
|
|
|
3,040
|
|
|
—
|
|
|
—
|
|
|
3,040
|
|
||||||
Issuance of common stock related to HealCode Acquisition
|
—
|
|
|
—
|
|
|
|
28,959
|
|
|
—
|
|
|
500
|
|
|
—
|
|
|
—
|
|
|
500
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
24
|
|
||||||
Net loss
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19,039
|
)
|
|
(19,039
|
)
|
||||||
Balance as of September 30, 2016
|
—
|
|
|
$
|
—
|
|
|
|
40,420,571
|
|
|
$
|
—
|
|
|
$
|
285,641
|
|
|
$
|
(247
|
)
|
|
$
|
(183,421
|
)
|
|
$
|
101,973
|
|
(1)
|
The activity through June 24, 2015 reflects the sole class of common stock authorized through the closing of the IPO on June 24, 2015, at which point the Company’s certificate of incorporation was amended and restated to authorize Class A and Class B common stock. All capital stock outstanding prior to the IPO was reclassified into Class B common stock and Class A common stock was issued in the IPO.
|
|
Nine Months Ended September 30,
|
||||||
2016
|
|
2015
|
|||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
||||
Net loss
|
$
|
(19,039
|
)
|
|
$
|
(26,338
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
5,671
|
|
|
4,657
|
|
||
Stock-based compensation expense
|
6,606
|
|
|
5,250
|
|
||
Change in fair value of preferred stock warrant
|
—
|
|
|
25
|
|
||
Other
|
820
|
|
|
343
|
|
||
Changes in operating assets and liabilities net of effects of acquisitions:
|
|
|
|
||||
Accounts receivable
|
(2,229
|
)
|
|
(3,498
|
)
|
||
Prepaid expenses and other current assets
|
(605
|
)
|
|
6
|
|
||
Other assets
|
(67
|
)
|
|
138
|
|
||
Accounts payable
|
(52
|
)
|
|
626
|
|
||
Accrued expenses and other liabilities
|
2,635
|
|
|
2,898
|
|
||
Deferred revenue
|
2,031
|
|
|
1,804
|
|
||
Deferred rent
|
105
|
|
|
220
|
|
||
Net cash used in operating activities
|
(4,124
|
)
|
|
(13,869
|
)
|
||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
||||
Purchase of property and equipment
|
(6,466
|
)
|
|
(7,989
|
)
|
||
Change in restricted cash and deposits
|
—
|
|
|
788
|
|
||
Acquisition of business
|
(4,138
|
)
|
|
(3,000
|
)
|
||
Net cash used in investing activities
|
(10,604
|
)
|
|
(10,201
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
||||
Proceeds from exercise of equity awards
|
4,884
|
|
|
67
|
|
||
Proceeds from employee stock purchase plan
|
3,040
|
|
|
—
|
|
||
Repayment on financing and capital lease obligations
|
(287
|
)
|
|
(144
|
)
|
||
Proceeds from initial public offering
|
—
|
|
|
93,093
|
|
||
Payments of deferred offering cost
|
—
|
|
|
(3,262
|
)
|
||
Other
|
(33
|
)
|
|
(73
|
)
|
||
Net cash provided by financing activities
|
7,604
|
|
|
89,681
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
7
|
|
|
(176
|
)
|
||
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
|
(7,117
|
)
|
|
65,435
|
|
||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
93,405
|
|
|
34,675
|
|
||
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
$
|
86,288
|
|
|
$
|
100,110
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
||||
Cash paid for income taxes
|
186
|
|
|
66
|
|
||
Cash paid for interest
|
980
|
|
|
604
|
|
||
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES: |
|
|
|
||||
Accretion of redeemable convertible preferred stock to redemption value
|
—
|
|
|
9,862
|
|
||
Deemed dividend—preferred stock modification
|
—
|
|
|
1,748
|
|
||
Conversion of preferred stock warrants to common stock warrants
|
—
|
|
|
1,213
|
|
||
Unpaid equipment purchases
|
1,592
|
|
|
963
|
|
||
Property and equipment acquired with financing obligations and leases
|
—
|
|
|
844
|
|
||
Stock issued in business acquisition
|
500
|
|
|
1,500
|
|
||
Unpaid acquisition consideration held back to satisfy potential indemnification claims
|
750
|
|
|
—
|
|
||
Unpaid offering costs
|
—
|
|
|
118
|
|
|
September 30, 2016
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Financial Assets:
|
|
|
|
|
|
|
|
||||||||
Money market funds
(1)
|
$
|
80,990
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
80,990
|
|
|
December 31, 2015
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Financial Assets:
|
|
|
|
|
|
|
|
||||||||
Money market funds
(1)
|
$
|
90,524
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
90,524
|
|
(1)
|
The Company held certain assets that are required to be measured at fair value on a recurring basis, included in cash equivalents, which are held in money market funds. All such assets as of
September 30, 2016
and
December 31, 2015
were recorded based on Level 1 inputs.
|
|
September 30,
|
|
December 31,
|
||||
2016
|
|
2015
|
|||||
Computer equipment
|
$
|
16,403
|
|
|
$
|
13,195
|
|
Leasehold improvements
|
11,196
|
|
|
9,882
|
|
||
Capitalized software development costs
|
1,878
|
|
|
1,888
|
|
||
Office equipment
|
2,608
|
|
|
2,336
|
|
||
Software licenses
|
2,932
|
|
|
1,768
|
|
||
Building, leased
|
16,438
|
|
|
16,438
|
|
||
Property and equipment – gross
|
51,455
|
|
|
45,507
|
|
||
Less: accumulated depreciation and amortization
|
(17,797
|
)
|
|
(13,753
|
)
|
||
Property and equipment – net
|
$
|
33,658
|
|
|
$
|
31,754
|
|
|
September 30,
|
|
December 31,
|
||||
2016
|
|
2015
|
|||||
Accrued payroll
|
$
|
6,396
|
|
|
$
|
3,918
|
|
Accrued vacation
|
2,224
|
|
|
1,699
|
|
||
Employee stock purchase plan contributions
|
427
|
|
|
1,496
|
|
||
Other liabilities
|
1,052
|
|
|
798
|
|
||
Total accrued expenses and other liabilities
|
$
|
10,099
|
|
|
$
|
7,911
|
|
|
|
Amount
|
||
Liabilities assumed
|
|
$
|
(105
|
)
|
Tangible assets acquired
|
|
32
|
|
|
Intangible asset – developed software/technology
|
|
1,818
|
|
|
Goodwill
|
|
3,643
|
|
|
Fair value of total purchase consideration
|
|
$
|
5,388
|
|
|
Amount
|
||
Tangible assets acquired
|
$
|
18
|
|
Intangible asset – developed software/technology
|
913
|
|
|
Goodwill
|
3,569
|
|
|
Fair value of total purchase consideration
|
$
|
4,500
|
|
|
September 30, 2016
|
|||||||||
|
Useful Life
(Years) |
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|||
Network list
|
2
|
|
420
|
|
|
(420
|
)
|
|
—
|
|
Technology
|
3 to 5
|
|
2,731
|
|
|
(538
|
)
|
|
2,193
|
|
Total intangible assets
|
|
|
3,151
|
|
|
(958
|
)
|
|
2,193
|
|
|
December 31, 2015
|
|||||||||
|
Useful Life
(Years)
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|||
Network list
|
2
|
|
420
|
|
|
(420
|
)
|
|
—
|
|
Technology
|
3
|
|
913
|
|
|
(277
|
)
|
|
636
|
|
Total intangible assets
|
|
|
1,333
|
|
|
(697
|
)
|
|
636
|
|
Year Ending December 31,
|
|
||
2016 (remaining three months)
|
$
|
168
|
|
2017
|
666
|
|
|
2018
|
390
|
|
|
2019
|
363
|
|
|
2020
|
364
|
|
|
2021 and after
|
242
|
|
|
Total amortization expense
|
$
|
2,193
|
|
Year Ending December 31,
|
|
Operating
Leases
|
|
Financing
Obligation,
Building-
Leased
|
|
Total
|
||||||
2016 (remaining three months)
|
|
$
|
817
|
|
|
$
|
399
|
|
|
$
|
1,216
|
|
2017
|
|
2,558
|
|
|
1,630
|
|
|
4,188
|
|
|||
2018
|
|
2,063
|
|
|
1,679
|
|
|
3,742
|
|
|||
2019
|
|
1,940
|
|
|
1,729
|
|
|
3,669
|
|
|||
2020
|
|
1,915
|
|
|
1,781
|
|
|
3,696
|
|
|||
Thereafter
|
|
10,817
|
|
|
19,362
|
|
|
30,179
|
|
|||
Total minimum lease payments
|
|
$
|
20,110
|
|
|
$
|
26,580
|
|
|
$
|
46,690
|
|
Year Ending December 31,
|
|
||
2016 (remaining three months)
|
$
|
1,013
|
|
2017
|
3,228
|
|
|
2018
|
2,863
|
|
|
2019
|
725
|
|
|
Total minimum purchase commitments
|
$
|
7,829
|
|
Preferred Stock
|
|
Number of
Shares,
Actual
|
|
Conversion
Rate
|
|
Number of
Shares, As
Converted
|
|||
Series A
|
|
1,319,940
|
|
|
1.0088
|
|
|
1,331,507
|
|
Series B
|
|
988,411
|
|
|
1.0148
|
|
|
1,003,071
|
|
Series C
|
|
4,019,524
|
|
|
1.0192
|
|
|
4,096,561
|
|
Series D
|
|
5,308,875
|
|
|
1.0218
|
|
|
5,424,802
|
|
Series E
|
|
2,439,058
|
|
|
1.0000
|
|
|
2,439,058
|
|
Series F
|
|
2,685,997
|
|
|
1.0000
|
|
|
2,685,997
|
|
Series G
|
|
3,692,684
|
|
|
1.0000
|
|
|
3,692,684
|
|
Total
|
|
20,454,489
|
|
|
|
|
20,673,680
|
|
•
|
established that, on any matter that is submitted to a vote of the stockholders, the holder of each share of Class A common stock is entitled to
1 vote per share
, while the holder of each share of Class B common stock is entitled to
10 votes per share
;
|
•
|
established that shares of Class B common stock are convertible into shares of Class A common stock at the option of the holder and automatically convert into shares of Class A common stock upon transfer, subject to limited exceptions; and
|
•
|
established that, except with respect to voting and conversion rights, as discussed above, the rights of the holders of Class A and Class B common stock are identical.
|
|
Number of
Shares
|
|
Weighted-
Average
Grant Date
Fair Value
(per share)
|
|
Weighted-
Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic
Value
|
|||||
Unvested balance – December 31, 2015
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
Granted
|
937,863
|
|
|
13.74
|
|
|
|
|
|
|||
Vested
|
(207,860
|
)
|
|
12.92
|
|
|
|
|
|
|||
Forfeited
|
(11,850
|
)
|
|
13.84
|
|
|
|
|
|
|||
Unvested balance – September 30, 2016
|
718,153
|
|
|
$
|
13.97
|
|
|
3.8
|
|
$
|
14,119
|
|
Expected to vest – September 30, 2016
|
679,139
|
|
|
$
|
13.97
|
|
|
3.8
|
|
$
|
13,352
|
|
|
Options Outstanding
|
||||||||||||
Number of
Shares
Underlying
Outstanding
Options
|
|
Weighted-
Average
Exercise Price
|
|
Weighted-
Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic Value
|
|||||||
Outstanding – December 31, 2015
|
4,311,463
|
|
|
$
|
9.87
|
|
|
7.9
|
|
|
$
|
22,709
|
|
Granted
|
612,144
|
|
|
13.89
|
|
|
9.4
|
|
|
|
|||
Exercised
|
(679,175
|
)
|
|
7.45
|
|
|
—
|
|
|
|
|||
Forfeited or cancelled
|
(187,185
|
)
|
|
12.68
|
|
|
—
|
|
|
|
|||
Outstanding – September 30, 2016
|
4,057,247
|
|
|
$
|
10.75
|
|
|
7.9
|
|
|
$
|
36,161
|
|
Exercisable – September 30, 2016
|
2,089,327
|
|
|
$
|
7.93
|
|
|
6.6
|
|
|
$
|
24,514
|
|
Vested and expected to vest – September 30, 2016
|
3,988,909
|
|
|
$
|
10.70
|
|
|
7.6
|
|
|
$
|
35,755
|
|
|
Nine Months Ended September 30,
|
||
2016
|
|
2015
|
|
Expected term (in years)
|
5.8
|
|
5.8
|
Expected volatility
|
44% - 45%
|
|
45% - 46%
|
Risk-free interest rate
|
1.2% - 1.5%
|
|
1.4% - 1.8%
|
Dividend yield
|
0%
|
|
0%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||
Cost of revenue
|
$
|
231
|
|
|
$
|
219
|
|
|
$
|
666
|
|
|
$
|
451
|
|
Sales and marketing
|
613
|
|
|
1,043
|
|
|
1,636
|
|
|
2,487
|
|
||||
Research and development
|
490
|
|
|
288
|
|
|
1,456
|
|
|
546
|
|
||||
General and administrative
|
975
|
|
|
735
|
|
|
2,848
|
|
|
1,766
|
|
||||
Total stock-based compensation expense
|
$
|
2,309
|
|
|
$
|
2,285
|
|
|
$
|
6,606
|
|
|
$
|
5,250
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||
Net loss attributable to common stockholders
|
$
|
(5,895
|
)
|
|
$
|
(9,628
|
)
|
|
$
|
(19,039
|
)
|
|
$
|
(34,452
|
)
|
Net loss per share attributable to common stockholders, basic and diluted
|
$
|
(0.15
|
)
|
|
$
|
(0.25
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
(1.57
|
)
|
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted
|
39,965,454
|
|
|
39,181,118
|
|
|
39,708,257
|
|
|
21,976,654
|
|
|
As of September 30,
|
|||
2016
|
|
2015
|
||
Shares subject to outstanding stock options and employee stock purchase plan
|
4,093,778
|
|
4,519,766
|
|
Shares subject to outstanding restricted stock units
|
718,153
|
|
—
|
|
Total
|
4,811,931
|
|
4,519,766
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Subscription and services
|
$
|
21,185
|
|
|
$
|
15,965
|
|
|
$
|
60,554
|
|
|
$
|
44,346
|
|
Payments
|
13,484
|
|
|
9,539
|
|
|
38,540
|
|
|
26,840
|
|
||||
Product and other
|
593
|
|
|
577
|
|
|
1,736
|
|
|
1,918
|
|
||||
Total revenue
|
$
|
35,262
|
|
|
$
|
26,081
|
|
|
$
|
100,830
|
|
|
$
|
73,104
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||
United States
|
$
|
29,000
|
|
|
$
|
21,843
|
|
|
$
|
83,639
|
|
|
$
|
61,160
|
|
Other
|
6,262
|
|
|
4,238
|
|
|
17,191
|
|
|
11,944
|
|
||||
Total
|
$
|
35,262
|
|
|
$
|
26,081
|
|
|
$
|
100,830
|
|
|
$
|
73,104
|
|
|
As of and for the Three Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
Subscribers (end of period)
|
58,566
|
|
|
48,650
|
|
||
Average monthly revenue per subscriber
|
$
|
204
|
|
|
$
|
182
|
|
Payments volume (in billions)
|
$
|
1.6
|
|
|
$
|
1.3
|
|
Dollar-based net expansion rate (end of period)
|
115
|
%
|
|
119
|
%
|
•
|
Subscribers
. Subscribers are defined as unique physical business locations or individual practitioners who have active subscriptions to our platform as of the end of the period. We believe the number of subscribers is a key indicator of the growth of our platform. Growth in the number of subscribers depends, in part, on our ability to successfully develop and market our platform to local wellness businesses and their consumers who have not yet become part of our network. While growth in the number of subscribers is an important indicator of expected revenue growth, it also informs our management’s decisions with respect to the areas of our business that will require further investment to support expected future subscriber growth. For example, as the number of subscribers increases, we will need to increase the headcount in our customer support organization and increase our IT infrastructure capital expenditures to maintain the effectiveness of our platform and the performance of our software for our subscribers and their consumers. The number of subscribers increased as of
September 30, 2016
compared to
September 30, 2015
, and we expect the number of subscribers to continue to increase in the future. The growth rate of the number of subscribers declined for the
three months ended September 30, 2016
compared to the
three months ended September 30, 2015
and may continue to do so in the future as the size of our subscriber base increases and we make changes to our pricing and subscription offerings.
|
•
|
Average Monthly Revenue per Subscriber
. We believe that our ability to increase the average monthly revenue per subscriber, which we also refer to as ARPS, is an indicator of our ability to increase the long-term value of our existing subscriber relationships. ARPS is calculated by dividing the subscription and services and payments revenue generated in a given month by the number of subscribers at the end of the previous month. For periods greater than one month, ARPS is the sum of the average monthly revenue per subscriber for each month in the period, divided by the number of months in the period. ARPS increased for the
three months ended September 30, 2016
compared to the
three months ended September 30, 2015
, and we expect it to continue to increase in the future, although we expect the growth rate to fluctuate over time.
|
•
|
Payments Volume
. We believe that payments volume is an indicator of the underlying current health of our subscribers’ businesses and of consumer spending trends as well as being a major driver of our payments revenue. Payments volume is the total dollar volume of transactions between our subscribers and their consumers utilizing our payments platform. Payments volume increased for the
three months ended September 30, 2016
compared to the
three months ended September 30, 2015
, and we expect it to continue to increase in the future. The growth rate in payments volume declined for the
three months ended September 30, 2016
compared to the
three months ended September 30, 2015
and may continue to do so in the future due to the increasing base amount of payments volume.
|
•
|
Dollar-Based Net Expansion Rate
. Our business model focuses on maximizing the lifetime value of a subscriber relationship. We can achieve this by focusing on delivering value and functionality that retains our existing subscribers and by expanding the revenue derived from our subscribers over the lifetime of the relationship by upselling the subscriber to higher priced subscription plans, through the utilization of our premium customer support offering, by increasing the value of transactions that our subscribers process through our payments platform, and through their subscriptions to our application programming interface, or API, and technology partners’ software offerings. We assess our performance in this area by measuring our dollar-based net expansion rate. Our dollar-based net expansion rate provides a measurement of our ability to increase revenue across our existing customer base, offset by churn, downgrades in subscriptions, reduction in services utilization and reductions in the value of transactions that our subscribers process through our payments platform. Our dollar-based net expansion rate is based upon our monthly subscription and services and payments revenue for a set of subscriber accounts. We calculate our dollar-based net expansion rate by dividing our retained revenue net of contraction and churn by our base revenue. We define our base revenue as the aggregate monthly subscription and services and payments revenue of our subscriber base as of the date one year prior to the date of calculation. We define our retained revenue net of contraction and churn as the aggregate monthly subscription and services and payments revenue of the same subscriber base included in our measure of base revenue at the end of the annual period being measured. We expect our dollar based net expansion rate to fluctuate over time.
|
•
|
Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
|
•
|
Adjusted EBITDA does not reflect: (1) changes in, or cash requirements for, our working capital needs; (2) the potentially dilutive impact of stock-based compensation; or (3) tax payments that may represent a reduction in cash available to us;
|
•
|
Adjusted EBITDA excludes stock-based compensation expense, which has been and will continue to be for the foreseeable future a significant recurring expense in our business; and
|
•
|
Other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||
(in thousands)
|
|||||||||||||||
Net loss
|
$
|
(5,895
|
)
|
|
$
|
(9,628
|
)
|
|
$
|
(19,039
|
)
|
|
$
|
(26,338
|
)
|
Stock-based compensation expense
|
2,309
|
|
|
2,285
|
|
|
6,606
|
|
|
5,250
|
|
||||
Depreciation and amortization
|
2,013
|
|
|
1,808
|
|
|
5,671
|
|
|
4,657
|
|
||||
Change in fair value of contingent consideration
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
||||
Change in fair value of preferred stock warrant
|
—
|
|
|
—
|
|
|
—
|
|
|
25
|
|
||||
Provision for income taxes
|
142
|
|
|
101
|
|
|
279
|
|
|
169
|
|
||||
Other expense, net
|
351
|
|
|
355
|
|
|
1,091
|
|
|
724
|
|
||||
Adjusted EBITDA
|
$
|
(1,080
|
)
|
|
$
|
(5,079
|
)
|
|
$
|
(5,392
|
)
|
|
$
|
(15,524
|
)
|
•
|
Subscription and services
. Subscription and services revenue is generated primarily from sales of subscriptions to our cloud-based business management software for the wellness services industry. The majority of subscription fees are prepaid by subscribers on a monthly basis via a credit card and, to a lesser extent, billed to subscribers on an annual or quarterly basis. Additionally, our subscribers can choose to enter into a separate contract with our technology partners to purchase additional features and functionalities. We receive a revenue share from these arrangements from our technology partners, which is recognized when earned. We also earn revenue from API partners for subscriber site access, data query, and consumer bookings through our platform. The revenue from API partners is recognized when earned. Subscription revenue is recognized ratably over the term of the subscription agreement. Amounts invoiced in excess of revenue recognized are deferred. Service revenue is generated primarily through our premium customer support offering and is recognized in the period in which it is earned. We expect our subscription and services revenue to increase as we continue to increase the number of our subscribers and increase our revenue from our technology and API partners.
|
•
|
Payments
. We earn payments revenue from revenue share arrangements with third-party payment processors on transactions between our subscribers who utilize our payments platform and their consumers. These payment transactions are generally related to purchases of classes, goods or services through a subscriber’s website, at its business location, and through the MINDBODY app. These transaction fees are recorded as revenue on a net basis when the payment transactions occur. We expect our payments revenue to increase in absolute dollars as we add new subscribers who utilize our payments platform and as existing subscribers increase the volume of transactions that they process through our payments platform.
|
•
|
Product and other
. We offer various point-of-sale system products and physical gift cards to our subscribers. Product and other revenue is recognized upon the delivery of these products to our subscribers. We expect product and other revenue to decline both in absolute dollars and as a percentage of total revenue as mobile point-of-sale systems and electronic gift cards become more prevalent in the marketplace.
|
•
|
Sales and marketing
. Sales and marketing expense consists primarily of personnel costs, including salaries, benefits, bonuses, stock-based compensation and commission costs for our sales and marketing personnel. Sales and marketing expense also includes costs for market development programs, advertising, promotional and other marketing activities, and allocated overhead. Sales and marketing expense is our largest operating expense, driving growth in subscribers, ARPS and consumer adoption, and we expect to continue to increase this expense in absolute dollars as we increase our sales and marketing efforts, although such expense may fluctuate as a percentage of total revenue.
|
•
|
Research and development
. Research and development expense consists primarily of personnel costs, including salaries, benefits, bonuses, and stock-based compensation for our development personnel. Research and development expense also includes outsourced software development costs and allocated overhead. We expect research and development expense to continue to increase in absolute dollars as we continue to invest in our research and product development efforts to enhance our product capabilities and access new markets, although such expense may fluctuate as a percentage of total revenue.
|
•
|
General and administrative
. General and administrative expense consists primarily of personnel costs, including salaries, benefits, bonuses, and stock-based compensation for our executive, finance, legal, human resources, information technology, and other administrative personnel. General and administrative expense also includes consulting, legal and accounting services and allocated overhead. We expect general and administrative expense to continue to increase in absolute dollars as we grow our operations and operate as a public company, although such expense may fluctuate as a percentage of total revenue.
|
•
|
Change in fair value of contingent consideration
. We recognized a contingent consideration liability related to an earn-out provision from our acquisition of Jill’s List in 2013, which was subsequently re-measured to fair value at each balance sheet date with a corresponding charge recorded within operating expenses. The period during which earn-out consideration could be earned ended in the second quarter of 2015, at which time the associated liability was permanently extinguished and was no longer subject to fair value accounting.
|
•
|
Change in fair value of preferred stock warrant
. The preferred stock warrant was classified as a liability on our consolidated balance sheet and re-measured to fair value at each balance sheet date with the corresponding charge recorded as change in fair value of preferred stock warrant. Upon the completion of our initial public offering, or IPO, the preferred stock warrant liability was reclassified to stockholders’ equity, at which time it was no longer subject to fair value accounting.
|
•
|
Interest expense, net
. Interest expense, net consists primarily of the interest incurred on the financing obligation associated with the build-to-suit lease arrangement and interest earned on our cash and cash equivalent balances. Interest expense, net has not been material to our operations.We entered into a line of credit agreement in January 2015, and any future draws on this agreement will incur interest expense and result in increased interest expense in future periods.
|
•
|
Other expense, net
. Other expense, net consists primarily of gains and losses on disposals of property and equipment, gains and losses from foreign currency transactions, and other income and expenses.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||
(in thousands)
|
|||||||||||||||
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
||||||||
Revenue
|
$
|
35,262
|
|
|
$
|
26,081
|
|
|
$
|
100,830
|
|
|
$
|
73,104
|
|
Cost of revenue(1)
|
10,972
|
|
|
9,596
|
|
|
31,657
|
|
|
27,098
|
|
||||
Gross profit
|
24,290
|
|
|
16,485
|
|
|
69,173
|
|
|
46,006
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Sales and marketing(1)
|
14,599
|
|
|
12,389
|
|
|
41,534
|
|
|
33,926
|
|
||||
Research and development(1)
|
7,747
|
|
|
6,012
|
|
|
22,758
|
|
|
16,213
|
|
||||
General and administrative(1)
|
7,346
|
|
|
7,256
|
|
|
22,550
|
|
|
21,298
|
|
||||
Change in fair value of contingent consideration
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
||||
Total operating expenses
|
29,692
|
|
|
25,657
|
|
|
86,842
|
|
|
71,426
|
|
||||
Loss from operations
|
(5,402
|
)
|
|
(9,172
|
)
|
|
(17,669
|
)
|
|
(25,420
|
)
|
||||
Change in fair value of preferred stock warrant
|
—
|
|
|
—
|
|
|
—
|
|
|
(25
|
)
|
||||
Interest expense, net
|
(261
|
)
|
|
(335
|
)
|
|
(865
|
)
|
|
(612
|
)
|
||||
Other expense, net
|
(90
|
)
|
|
(20
|
)
|
|
(226
|
)
|
|
(112
|
)
|
||||
Loss before provision for income taxes
|
(5,753
|
)
|
|
(9,527
|
)
|
|
(18,760
|
)
|
|
(26,169
|
)
|
||||
Provision for income taxes
|
142
|
|
|
101
|
|
|
279
|
|
|
169
|
|
||||
Net loss
|
$
|
(5,895
|
)
|
|
$
|
(9,628
|
)
|
|
$
|
(19,039
|
)
|
|
$
|
(26,338
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||
|
|
|
|
|
|
|
|||||
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
||||
Revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
Cost of revenue
|
31
|
%
|
|
37
|
%
|
|
31
|
%
|
|
37
|
%
|
Gross profit
|
69
|
%
|
|
63
|
%
|
|
69
|
%
|
|
63
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
||||
Sales and marketing
|
41
|
%
|
|
47
|
%
|
|
41
|
%
|
|
47
|
%
|
Research and development
|
22
|
%
|
|
23
|
%
|
|
23
|
%
|
|
22
|
%
|
General and administrative
|
21
|
%
|
|
28
|
%
|
|
22
|
%
|
|
29
|
%
|
Change in fair value of contingent consideration
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Total operating expenses
|
84
|
%
|
|
98
|
%
|
|
86
|
%
|
|
98
|
%
|
Loss from operations
|
(15
|
)%
|
|
(35
|
)%
|
|
(17
|
)%
|
|
(35
|
)%
|
Change in fair value of preferred stock warrant
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Interest expense, net
|
(1
|
)%
|
|
(1
|
)%
|
|
(1
|
)%
|
|
(1
|
)%
|
Other expense, net
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Loss before provision for income taxes
|
(16
|
)%
|
|
(36
|
)%
|
|
(18
|
)%
|
|
(36
|
)%
|
Provision for income taxes
|
(1
|
)%
|
|
(1
|
)%
|
|
(1
|
)%
|
|
—
|
%
|
Net loss
|
(17
|
)%
|
|
(37
|
)%
|
|
(19
|
)%
|
|
(36
|
)%
|
(1)
|
Cost of revenue and operating expenses include stock-based compensation expense as follows (in thousands):
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||
Cost of revenue
|
$
|
231
|
|
|
$
|
219
|
|
|
$
|
666
|
|
|
$
|
451
|
|
Sales and marketing
|
613
|
|
|
1,043
|
|
|
1,636
|
|
|
2,487
|
|
||||
Research and development
|
490
|
|
|
288
|
|
|
1,456
|
|
|
546
|
|
||||
General and administrative
|
975
|
|
|
735
|
|
|
2,848
|
|
|
1,766
|
|
||||
Total stock-based compensation expense
|
$
|
2,309
|
|
|
$
|
2,285
|
|
|
$
|
6,606
|
|
|
$
|
5,250
|
|
|
Three Months Ended
September 30, |
|
Change
|
|
Nine Months Ended
September 30, |
|
Change
|
||||||||||||||||||||||
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Subscription and services
|
$
|
21,185
|
|
|
$
|
15,965
|
|
|
$
|
5,220
|
|
|
33
|
%
|
|
$
|
60,554
|
|
|
$
|
44,346
|
|
|
$
|
16,208
|
|
|
37
|
%
|
Payments
|
$
|
13,484
|
|
|
$
|
9,539
|
|
|
3,945
|
|
|
41
|
%
|
|
$
|
38,540
|
|
|
$
|
26,840
|
|
|
11,700
|
|
|
44
|
%
|
||
Product and other
|
$
|
593
|
|
|
$
|
577
|
|
|
16
|
|
|
3
|
%
|
|
$
|
1,736
|
|
|
$
|
1,918
|
|
|
(182
|
)
|
|
(9
|
)%
|
||
Total revenue
|
$
|
35,262
|
|
|
$
|
26,081
|
|
|
$
|
9,181
|
|
|
35
|
%
|
|
$
|
100,830
|
|
|
$
|
73,104
|
|
|
$
|
27,726
|
|
|
38
|
%
|
|
Three Months Ended
September 30, |
|
Change
|
|
Nine Months Ended
September 30, |
|
Change
|
||||||||||||||||||||||
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||||||||||
Cost of revenue
|
$
|
10,972
|
|
|
$
|
9,596
|
|
|
$
|
1,376
|
|
|
14
|
%
|
|
$
|
31,657
|
|
|
$
|
27,098
|
|
|
$
|
4,559
|
|
|
17
|
%
|
Gross margin
|
69
|
%
|
|
63
|
%
|
|
|
|
|
|
69
|
%
|
|
63
|
%
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Change
|
|
Nine Months Ended
September 30, |
|
Change
|
||||||||||||||||||||||
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||||||||||
Sales and marketing
|
$
|
14,599
|
|
|
$
|
12,389
|
|
|
$
|
2,210
|
|
|
18
|
%
|
|
$
|
41,534
|
|
|
$
|
33,926
|
|
|
$
|
7,608
|
|
|
22
|
%
|
|
Three Months Ended
September 30, |
|
Change
|
|
Nine Months Ended
September 30, |
|
Change
|
||||||||||||||||||||||
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||||||||||
Research and development
|
$
|
7,747
|
|
|
$
|
6,012
|
|
|
$
|
1,735
|
|
|
29
|
%
|
|
$
|
22,758
|
|
|
$
|
16,213
|
|
|
$
|
6,545
|
|
|
40
|
%
|
|
Three Months Ended
September 30, |
|
Change
|
|
Nine Months Ended
September 30, |
|
Change
|
||||||||||||||||||||||
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||||||||||
General and Administrative
|
$
|
7,346
|
|
|
$
|
7,256
|
|
|
$
|
90
|
|
|
1
|
%
|
|
$
|
22,550
|
|
|
$
|
21,298
|
|
|
$
|
1,252
|
|
|
6
|
%
|
|
Three Months Ended
September 30, |
|
Change
|
|
Nine Months Ended
September 30, |
|
Change
|
||||||||||||||||||||||
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||||||||||
(dollars in thousands)
|
|||||||||||||||||||||||||||||
Change in fair value of preferred stock warrant
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
—
|
|
|
$
|
(25
|
)
|
|
$
|
25
|
|
|
(100
|
)%
|
Interest expense, net
|
(261
|
)
|
|
(335
|
)
|
|
74
|
|
|
(22
|
)%
|
|
(865
|
)
|
|
(612
|
)
|
|
(253
|
)
|
|
41
|
%
|
||||||
Other expense, net
|
(90
|
)
|
|
(20
|
)
|
|
(70
|
)
|
|
350
|
%
|
|
(226
|
)
|
|
(112
|
)
|
|
(114
|
)
|
|
102
|
%
|
||||||
Provision for income taxes
|
(142
|
)
|
|
(101
|
)
|
|
(41
|
)
|
|
41
|
%
|
|
(279
|
)
|
|
(169
|
)
|
|
(110
|
)
|
|
65
|
%
|
|
As of September 30,
|
||||||
2016
|
|
2015
|
|||||
Cash and cash equivalents
|
$
|
86,288
|
|
|
$
|
100,110
|
|
|
Nine Months Ended September 30,
|
||||
2016
|
|
2015
|
|||
Cash used in operating activities
|
(4,124
|
)
|
|
(13,869
|
)
|
Cash used in investing activities
|
(10,604
|
)
|
|
(10,201
|
)
|
Cash provided by financing activities
|
7,604
|
|
|
89,681
|
|
•
|
continuing the development of our platform, including investments in our research and development team, the development or acquisition of new products, features and functionality, and improvements to the scalability, availability and security of our platform;
|
•
|
expenses related to international expansion in an effort to increase our subscriber base;
|
•
|
improving our technology infrastructure and hiring additional employees for our sales, operations and customer support teams;
|
•
|
strategic acquisitions;
|
•
|
sales and marketing expenses, including personnel costs and promotional spending; and
|
•
|
general and administrative expenses, including IT-related costs, legal, accounting and other expenses related to being a public company.
|
•
|
our ability to attract new subscribers, retain and increase sales to existing subscribers and satisfy our subscribers’ requirements;
|
•
|
the volume of transactions processed on our payments platform;
|
•
|
the variability of revenues derived from our partners;
|
•
|
the number of new employees added;
|
•
|
the rate of expansion and productivity of our sales force;
|
•
|
the entrance of new competitors in our market, whether by established companies or new companies;
|
•
|
changes in our or our competitors’ pricing policies;
|
•
|
the amount and timing of operating costs and capital expenditures related to the expansion of our business, including our sales force;
|
•
|
new pricing models, products, features or functionalities introduced by our competitors;
|
•
|
significant security breaches, technical difficulties or interruptions to our platform and any related impact on our reputation;
|
•
|
the timing of payments by subscribers and other payment processing partners and payment defaults by subscribers or other payment processing partners;
|
•
|
litigation, including class action litigation, involving our company, our services or our industry;
|
•
|
general economic conditions that may adversely affect either our subscribers’ ability or willingness to purchase additional subscriptions, delay a prospective subscriber’s purchasing decision, reduce the value of new subscription contracts or affect subscriber retention;
|
•
|
changes in the relative and absolute levels of customer support we provide;
|
•
|
changes in foreign currency exchange rates;
|
•
|
extraordinary expenses such as litigation or other dispute-related settlement payments;
|
•
|
the impact of new accounting pronouncements; and
|
•
|
the timing of the grant or vesting of equity awards to employees.
|
•
|
variations in our pricing structure and terms over time;
|
•
|
the need to educate prospective subscribers about the uses and benefits of our platform;
|
•
|
the discretionary nature of purchasing and budget cycles and decisions;
|
•
|
the competitive nature of evaluation and purchasing processes;
|
•
|
evolving functionality demands;
|
•
|
announcements or planned introductions of new products, features or functionality by us or our competitors; and
|
•
|
lengthy purchasing approval processes, particularly among larger organizations.
|
•
|
these apps may not meet the same quality standards that we apply to our own development efforts (including, among other things, data and privacy protections), and to the extent they contain bugs or defects, they may create disruptions in our subscribers’ use of our platform or adversely affect our brand;
|
•
|
we do not currently provide substantive support for software apps developed by our partner ecosystem, and users may be left without adequate support and potentially cease using our platform if our partners do not provide adequate support for these apps;
|
•
|
our partners may not possess the appropriate intellectual property rights to develop and share their apps;
|
•
|
our relationship with our partners may change, which could adversely affect our revenue and our results of operations;
|
•
|
our revenues from technology and API partners have grown rapidly and, if our relationship with partners who contribute or have contributed more significantly to this growth or demand for products or services of these partners changes, this could adversely affect our revenue and results of operations;
|
•
|
some of our partners may use the insight they gain from integrating with our software and from information publicly available to develop competing products or product features; and
|
•
|
our partners may establish relationships with, or functionality to offer to, our subscribers that diminish or eliminate the need or desire for our API platform.
|
•
|
increased management, travel, infrastructure and legal compliance costs associated with having multiple international operations;
|
•
|
compliance with foreign privacy, information security, and data protection laws and regulations and the risks and costs of non-compliance;
|
•
|
longer payment cycles and difficulties in enforcing contracts, collecting accounts receivable or satisfying revenue recognition criteria, especially in emerging markets;
|
•
|
increased financial accounting and reporting burdens and complexities;
|
•
|
uncertainty regarding the expected departure of the United Kingdom from the European Union;
|
•
|
requirements or preferences for domestic products;
|
•
|
differing technical standards, existing or future regulatory and certification requirements and required features and functionality;
|
•
|
economic conditions in each country or region and general economic uncertainty around the world;
|
•
|
compliance with laws and regulations for foreign operations, including anti-bribery laws (such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. Travel Act, and the U.K. Bribery Act 2010), import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our platform in certain foreign markets, and the risks and costs of non-compliance;
|
•
|
heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact our financial results and result in restatements of our consolidated financial statements;
|
•
|
fluctuations in currency exchange rates and related effect on our operating results;
|
•
|
difficulties in repatriating or transferring funds from or converting currencies in certain countries;
|
•
|
communication and integration problems related to entering new markets with different languages, cultures and political systems;
|
•
|
differing labor standards, including restrictions related to, and the increased cost of, terminating employees in some countries;
|
•
|
the need for localized software and licensing programs;
|
•
|
the need for localized language support;
|
•
|
reduced protection for intellectual property rights in some countries and practical difficulties of enforcing rights abroad; and
|
•
|
compliance with the laws of numerous foreign taxing jurisdictions, including withholding obligations, and overlapping of different tax regimes.
|
•
|
issue additional equity securities that would dilute our existing stockholders;
|
•
|
use cash that we may need in the future to operate our business;
|
•
|
incur large charges or substantial liabilities associated with the acquisition;
|
•
|
incur acquisition-related costs, which would be recognized as current period expenses;
|
•
|
encounter difficulties maintaining relationships with customers and partners of the acquired business;
|
•
|
encounter difficulties incorporating acquired technologies and rights into our platform and of maintaining quality and security standards consistent with our reputation and brand;
|
•
|
incur debt on terms unfavorable to us or that we are unable to repay;
|
•
|
encounter difficulties retaining key employees of the acquired company, integrating diverse software codes or business cultures or coordinating organizations that are geographically diverse and that have different business cultures; and
|
•
|
become subject to adverse tax consequences, substantial depreciation or deferred compensation charges.
|
•
|
sell or otherwise dispose of our assets;
|
•
|
make material changes in our business;
|
•
|
enter into a transaction in which stockholders who were not stockholders immediately prior to such transaction own more than 40% of our voting stock after giving effect to such transaction;
|
•
|
consolidate, merge with, or acquire other entities;
|
•
|
incur additional indebtedness;
|
•
|
create liens on our assets;
|
•
|
pay dividends or make other distributions on our capital stock;
|
•
|
make investments;
|
•
|
enter into transactions with affiliates; and
|
•
|
pay off or redeem subordinated indebtedness.
|
•
|
establishing a classified board of directors whose members serve staggered three-year terms;
|
•
|
authorizing “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;
|
•
|
limiting the liability of, and providing indemnification to, our directors and officers;
|
•
|
limiting the ability of our stockholders to call and bring business before special meetings;
|
•
|
requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;
|
•
|
controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; and
|
•
|
authorizing two classes of common stock, as discussed above.
|
•
|
price and volume fluctuations in the overall stock market from time to time;
|
•
|
volatility in the market prices and trading volumes of technology securities;
|
•
|
changes in operating performance and stock market valuations of other technology companies generally or those in our industry in particular;
|
•
|
sales of shares of our Class A common stock by us or our stockholders;
|
•
|
failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow us, or our failure to meet these estimates or the expectations of investors;
|
•
|
the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections;
|
•
|
announcements by us or our competitors of new products or services;
|
•
|
the public’s reaction to our press releases, other public announcements and filings with the SEC;
|
•
|
rumors and market speculation involving us or other companies in our industry;
|
•
|
actual or anticipated changes in our operating results or fluctuations in our operating results;
|
•
|
actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;
|
•
|
litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;
|
•
|
developments or disputes concerning our intellectual property or other proprietary rights;
|
•
|
announced or completed acquisitions of businesses or technologies by us or our competitors;
|
•
|
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
|
•
|
changes in accounting standards, policies, guidelines, interpretations or principles;
|
•
|
any significant change in our management; and
|
•
|
general economic conditions and slow or negative growth of our markets.
|
|
MINDBODY, INC.
|
|
|
|
|
Date: November 10, 2016
|
By:
|
/s/ Richard Stollmeyer
|
|
|
Richard Stollmeyer
|
|
|
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
Date: November 10, 2016
|
By:
|
/s/ Brett White
|
|
|
Brett White
|
|
|
Chief Financial Officer and Chief Operating Officer
(Principal Financial Officer)
|
|
|
|
|
Incorporated by Reference
|
||||||
Exhibit
Number
|
|
Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
|
|
|
|
|
|
|
|
|
|
10.1+
|
|
First Amendment to Employment Agreement between the Registrant and Robert Murphy.
|
|
8-K
|
|
001-37453
|
|
10.1
|
|
July 27, 2016
|
10.2+
|
|
Separation Agreement and Release between the Registrant and Robert Murphy.
|
|
8-K
|
|
001-37453
|
|
10.1
|
|
August 11, 2016
|
10.3+*
|
|
Employment Agreement between the Registrant and Kunal Mittal.
|
|
|
|
|
|
|
|
|
10.4+*
|
|
Amendment No. 1 to Employment Agreement between the Registrant and Kunal Mittal.
|
|
|
|
|
|
|
|
|
10.5*
|
|
Second Amendment to Loan and Security Agreement between Registrant and Silicon Valley Bank, dated as of January 29, 2016.
|
|
|
|
|
|
|
|
|
31.1*
|
|
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
31.2*
|
|
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
32.1**
|
|
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
32.2**
|
|
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
101.INS*
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
|
+
|
Indicates management contract or compensatory plan.
|
*
|
Filed herewith.
|
**
|
Furnished herewith. The certifications attached as Exhibit 32.1 and Exhibit 32.2 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of MINDBODY, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
|
2.
|
Cash and Incentive Compensation
.
|
5.
|
Termination
.
|
6.
|
Termination Benefits
.
|
7.
|
Conditions to Receipt of Severance; No Duty to Mitigate
.
|
(c)
|
Section 409A
.
|
8.
|
Definitions
.
|
(d)
|
“
Code
” means the Internal Revenue Code of 1986, as amended.
|
10.
|
Golden Parachute
.
|
11.
|
Pre-Employment Conditions
.
|
12.
|
Successors
.
|
13.
|
Arbitration
.
|
14.
|
Miscellaneous Provisions
.
|
|
Very truly yours,
|
|
|
|
|
MINDBODY, INC.
|
|
|
|
|
|
By: /s/ Jeff Harper
|
|
|
(Signature)
|
|
|
|
ACCEPTED AND AGREED:
|
|
|
|
Kunal Mittal
|
|
|
|
/s/ Kunal Mittal
|
|
(Signature)
|
|
|
|
October 30, 2015
|
|
Date
|
|
(i)
|
other financial information reasonably requested by Bank.”
|
3.
|
Limitation of Amendments.
|
4.
|
Representations and Warranties.
To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:
|
Financial Covenants
|
Required
|
Actual
|
Complies
|
Borrower must be in compliance with one (1) of the following financial covenants, each, measured
(i)
monthly on a trailing three
(3)
month basis when Credit Extensions are outstanding a
(ii)
quarterly on a trailing three (3) month basis when no Credit Extensions are outstanding
|
|
|
|
Performance to Plan; Revenue
|
81% of projected revenue*
|
$______________
|
Yes No
|
Cash at Bank, minus, aggregate amount of outstanding
Obligations
|
$40,000,000
|
$______________
|
Yes No
|
Have there been any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries? If yes, provide copies of any such amendments or changes with this Compliance Certificate.
|
Yes No
|
1.
|
I am the Secretary, Assistant Secretary or other officer of Borrower. My title is as set forth below.
|
5.
|
The persons listed above are Borrower’s officers or employees with their titles and signatures
|
Date:
|
November 10, 2016
|
By:
|
/s/ Richard Stollmeyer
|
|
|
Richard Stollmeyer
|
|
|
President and Chief Executive Officer
|
||
|
(Principal Executive Officer)
|
Date:
|
November 10, 2016
|
By:
|
/s/ Brett White
|
|
|
Brett White
|
|
|
Chief Financial Officer and Chief Operating Officer
|
||
|
(Principal Financial Officer)
|
Date:
|
November 10, 2016
|
By:
|
/s/ Richard Stollmeyer
|
|
|
|
Richard Stollmeyer
|
|
|
|
Chief Executive Officer
|
|
|
|
(Principal Executive Officer)
|
Date:
|
November 10, 2016
|
By:
|
/s/ Brett White
|
|
|
|
Brett White
|
|
|
|
Chief Financial Officer and Chief Operating Officer
|
|
|
|
(Principal Financial Officer)
|