mb-10q_20150930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

OR

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

Commission File Number: 001-37453

 

MINDBODY, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

20-1898451

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

4051 Broad Street, Suite 220

San Luis Obispo, CA 93401

(Address of principal executive offices and Zip Code)

(877) 755-4279

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x   No  ¨ 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

o

  

Accelerated filer

 

o

 

 

 

 

Non-accelerated filer

 

x  (Do not check if a small reporting company)

  

Small reporting company

 

o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No x

As of October 30, 2015, the registrant had 9,318,767 shares of Class A common stock, and 29,893,035 shares of Class B common stock outstanding.

 

 

 

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

5

 

Condensed Consolidated Balance Sheets as of December 31, 2014 and September 30, 2015

5

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2014 and 2015

6

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2014 and 2015

7

 

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Year Ended December 31, 2014 and the Nine Months Ended September 30, 2015

8

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2015

9

 

Notes to Condensed Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4.

Controls and Procedures

32

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

57

Item 3.

Defaults Upon Senior Securities

57

Item 4.

Mine Safety Disclosures

57

Item 5.

Other Information

57

Item 6.

Exhibits

57

Signatures

58

Exhibit Index

59

 

 

 

2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

 

·

our ability to attract and retain subscribers;

 

·

our ability to deepen our relationships with existing subscribers;

 

·

our expectations regarding our subscriber growth rate and the usage of our payment platform;

 

·

our business plan and beliefs and objectives for future operations;

 

·

trends associated with our industry, target consumer behaviors and potential market;

 

·

benefits associated with use of our products and services;

 

·

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;

 

·

the network effects associated with our business;

 

·

our ability to further develop strategic relationships;

 

·

our ability to achieve positive returns on investments;

 

·

our plans to further invest in and grow our business, including investment in research and development and in the development of our customer support teams, and our ability to effectively manage our growth and associated investments;

 

·

our ability to timely and effectively scale and adapt our existing technology;

 

·

our ability to increase our revenue and our revenue growth rate;

 

·

our future financial performance, including trends in revenue, cost of revenue, operating expenses, other income and expenses, income taxes, subscribers, average monthly revenue per subscriber and payments volume;

 

·

the sufficiency of our cash and cash equivalents and cash generated from operations to meet our working capital and capital expenditure requirements;

 

·

the sufficiency of our efforts to remediate our past material weaknesses;

 

·

our ability to attract and retain qualified employees and key personnel;

 

·

our ability to successfully identify, acquire and integrate companies and assets;

 

·

our ability to successfully enter new markets and manage our international expansion;

 

·

our ability to maintain, protect and enhance our intellectual property and not infringe upon others’ intellectual property; and

 

·

our anticipated uses of the net proceeds from our recent offering.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this  Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

 

3


The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

 

 

 

4


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

MINDBODY, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)

 

 

 

December 31,

 

 

September 30,

 

 

 

2014

 

 

2015

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

34,675

 

 

$

100,110

 

Accounts receivable, net of allowance for doubtful accounts of $79 and $67 as of December 31,

   2014 and September 30, 2015

 

 

3,193

 

 

 

6,400

 

Prepaid expenses and other current assets

 

 

2,562

 

 

 

2,556

 

Total current assets

 

 

40,430

 

 

 

109,066

 

Restricted cash

 

 

772

 

 

 

 

Property and equipment, net

 

 

28,568

 

 

 

31,999

 

Intangible assets, net

 

 

60

 

 

 

712

 

Goodwill

 

 

1,827

 

 

 

5,396

 

Other noncurrent assets

 

 

1,394

 

 

 

516

 

TOTAL  ASSETS

 

$

73,051

 

 

$

147,689

 

 

 

 

 

 

 

 

 

 

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND

   STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,406

 

 

$

4,954

 

Accrued expenses and other liabilities

 

 

5,219

 

 

 

8,055

 

Deferred revenue, current portion

 

 

2,396

 

 

 

3,104

 

Other current liabilities

 

 

447

 

 

 

590

 

Total current liabilities

 

 

13,468

 

 

 

16,703

 

 

 

 

 

 

 

 

 

 

Deferred revenue, noncurrent portion

 

 

360

 

 

 

1,456

 

Deferred rent, noncurrent portion

 

 

988

 

 

 

1,208

 

Financing obligation on leases, noncurrent portion

 

 

15,496

 

 

 

15,984

 

Preferred stock warrant

 

 

1,188

 

 

 

 

Other noncurrent liabilities

 

 

28

 

 

 

126

 

Total liabilities

 

 

31,528

 

 

 

35,477

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Redeemable convertible preferred stock, par value of $0.000004 per share; 20,542,012 shares

   authorized, 20,454,489 shares issued and outstanding as of December 31, 2014; aggregate

   liquidation preference of $117,636 as of December 31, 2014; no shares authorized,

   issued and outstanding as of September 30, 2015

 

 

166,448

 

 

 

 

Stockholders' equity (deficit):

 

 

 

 

 

 

 

 

Preferred stock, par value $0.000004 per share; no shares authorized, issued and outstanding

   as of December 31, 2014; 100,000,000 shares authorized, no shares issued and outstanding as of

   September 30, 2015

 

 

 

 

 

 

Common stock, par value $0.000004 per share; 50,000,000 shares authorized, 11,189,360

   issued and outstanding as of December 31, 2014; no shares authorized, issued and

   outstanding as of September 30, 2015

 

 

 

 

 

 

Class A common stock, par value of $0.000004 per share; no shares authorized, issued and outstanding

   as of December 31, 2014; 1,000,000,000 shares authorized, 8,555,341 shares issued

   and outstanding as of September 30, 2015

 

 

 

 

 

 

Class B common stock, par value of $0.000004 per share; no shares authorized, issued and outstanding

   as of December 31, 2014; 100,000,000 shares authorized, 30,651,842 shares issued and

   outstanding as of September 30, 2015

 

 

 

 

 

 

Additional paid-in capital

 

 

 

 

 

267,136

 

Accumulated other comprehensive loss

 

 

(132

)

 

 

(292

)

Accumulated deficit

 

 

(124,793

)

 

 

(154,632

)

Total stockholders' equity (deficit)

 

 

(124,925

)

 

 

112,212

 

TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK,

   AND STOCKHOLDERS' EQUITY (DEFICIT)

 

$

73,051

 

 

$

147,689

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


MINDBODY, INC.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2014

 

 

2015

 

 

2014

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

17,618

 

 

$

26,081

 

 

$

49,842

 

 

$

73,104

 

Cost of revenue

 

 

8,146

 

 

 

9,596

 

 

 

21,622

 

 

 

27,098

 

Gross profit

 

 

9,472

 

 

 

16,485

 

 

 

28,220

 

 

 

46,006

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

8,451

 

 

 

12,389

 

 

 

22,745

 

 

 

33,926

 

Research and development

 

 

4,416

 

 

 

6,012

 

 

 

12,043

 

 

 

16,213

 

General and administrative

 

 

4,777

 

 

 

7,256

 

 

 

12,790

 

 

 

21,298

 

Change in fair value of contingent consideration

 

 

(543

)

 

 

 

 

 

(1,381

)

 

 

(11

)

Total operating expenses

 

 

17,101

 

 

 

25,657

 

 

 

46,197

 

 

 

71,426

 

Loss from operations

 

 

(7,629

)

 

 

(9,172

)

 

 

(17,977

)

 

 

(25,420

)

Change in fair value of preferred stock warrant

 

 

(18

)

 

 

 

 

 

41

 

 

 

(25

)

Interest income

 

 

 

 

 

2

 

 

 

 

 

 

8

 

Interest expense

 

 

(21

)

 

 

(337

)

 

 

(46

)

 

 

(620

)

Other income (expense), net

 

 

(52

)

 

 

(20

)

 

 

(26

)

 

 

(112

)

Loss before provision for income taxes

 

 

(7,720

)

 

 

(9,527

)

 

 

(18,008

)

 

 

(26,169

)

Provision for income taxes

 

 

24

 

 

 

101

 

 

 

87

 

 

 

169

 

Net loss

 

 

(7,744

)

 

 

(9,628

)

 

 

(18,095

)

 

 

(26,338

)

Accretion of redeemable convertible preferred stock

 

 

(3,617

)

 

 

 

 

 

(12,735

)

 

 

(9,862

)

Deemed dividend—preferred stock modification

 

 

 

 

 

 

 

 

 

 

 

1,748

 

Net loss attributable to common stockholders

 

$

(11,361

)

 

$

(9,628

)

 

$

(30,830

)

 

$

(34,452

)

Net loss per share attributable to common

   stockholders, basic and diluted

 

$

(1.03

)

 

$

(0.25

)

 

$

(2.80

)

 

$

(1.57

)

Weighted-average shares used to compute net loss

   per share attributable to common stockholders, basic

   and diluted

 

 

11,025,164

 

 

 

39,181,118

 

 

 

10,996,010

 

 

 

21,976,654

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

6


MINDBODY, INC.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2014

 

 

2015

 

 

2014

 

 

2015

 

Net loss

 

$

(7,744

)

 

$

(9,628

)

 

$

(18,095

)

 

$

(26,338

)

Other comprehensive loss, net of taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in cumulative translation adjustment

 

 

(25

)

 

 

(89

)

 

 

(23

)

 

 

(160

)

Comprehensive loss

 

$

(7,769

)

 

$

(9,717

)

 

$

(18,118

)

 

$

(26,498

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

 

7


 

MINDBODY, INC.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Convertible Preferred Stock

 

 

Class A and B Common Stock(1)

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity (Deficit)

 

Balance as of December 31, 2013

 

 

16,761,805

 

 

$

95,224

 

 

 

11,154,388

 

 

$

 

 

$

 

 

$

(66

)

 

$

(81,049

)

 

$

(81,115

)

Issuance of Series G redeemable convertible preferred

   stock (net of issuance costs of $130)

 

 

3,692,684

 

 

 

49,913

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for contingent

   consideration payment

 

 

 

 

 

 

 

 

29,900

 

 

 

 

 

 

322

 

 

 

 

 

 

 

 

 

322

 

Reclassification of restricted stock award liability to

   common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

102

 

 

 

 

 

 

 

 

 

102

 

Accretion of redeemable convertible preferred stock

   to redemption value

 

 

 

 

 

21,311

 

 

 

 

 

 

 

 

 

(2,173

)

 

 

 

 

 

(19,138

)

 

 

(21,311

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,737

 

 

 

 

 

 

 

 

 

1,737

 

Repurchase of common stock from employees

 

 

 

 

 

 

 

 

(2,000

)

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Exercise of stock options

 

 

 

 

 

 

 

 

7,072

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

13

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(66

)

 

 

 

 

 

(66

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24,606

)

 

 

(24,606

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,250

 

 

 

 

 

 

 

 

 

5,250

 

Exercise of stock options

 

 

 

 

 

 

 

 

13,961

 

 

 

 

 

 

67

 

 

 

 

 

 

 

 

 

67

 

Issuance of common stock upon net exercise of warrants

 

 

 

 

 

 

 

 

76,565

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of stock for business acquisition

 

 

 

 

 

 

 

 

103,617

 

 

 

 

 

 

1,500

 

 

 

 

 

 

 

 

 

1,500

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(160

)

 

 

 

 

 

(160

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,338

)

 

 

(26,338

)

Balance as of September 30, 2015

 

 

 

 

$

 

 

 

39,207,183

 

 

$

 

 

$

267,136

 

 

$

(292

)

 

$

(154,632

)

 

$

112,212

 

 

(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.

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

8


 

MINDBODY, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Nine Months Ended

September 30,

 

 

 

2014

 

 

2015

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net loss

 

$

(18,095

)

 

$

(26,338

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,370

 

 

 

4,657

 

Stock-based compensation expense

 

 

1,229

 

 

 

5,250

 

Change in fair value of preferred stock warrant

 

 

(41

)

 

 

25

 

Change in fair value of contingent consideration

 

 

(1,381

)

 

 

(11

)

Other

 

 

948

 

 

 

354

 

Changes in operating assets and liabilities net of effects of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(560

)

 

 

(3,498

)

Prepaid expenses and other current assets

 

 

(1,463

)

 

 

6

 

Other assets

 

 

(200

)

 

 

138

 

Accounts payable

 

 

714

 

 

 

626

 

Accrued expenses and other current liabilities

 

 

184

 

 

 

2,898

 

Deferred revenue

 

 

477

 

 

 

1,804

 

Deferred rent

 

 

278

 

 

 

220

 

Net cash used in operating activities

 

 

(14,540

)

 

 

(13,869

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(4,855

)

 

 

(7,989

)

Change in restricted cash and deposits

 

 

383

 

 

 

788

 

Acquisition of business

 

 

 

 

 

(3,000

)

Net cash used in investing activities

 

 

(4,472

)

 

 

(10,201

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from initial public offering

 

 

 

 

 

93,093

 

Repayment on financing and capital lease obligations

 

 

(103

)

 

 

(144

)

Payments of deferred offering cost

 

 

(113

)

 

 

(3,262

)

Proceeds from issuance of redeemable convertible preferred stock, net

 

 

49,913

 

 

 

-

 

Other

 

 

(230

)

 

 

(6

)

Net cash provided by financing activities

 

 

49,467

 

 

 

89,681

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(27

)

 

 

(176

)

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

 

30,428

 

 

 

65,435

 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

9,545

 

 

 

34,675

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

39,973

 

 

$

100,110

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

47

 

 

66

 

Cash paid for interest

 

15

 

 

604

 

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND

   FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Accretion of redeemable convertible preferred stock to redemption value

 

 

12,735

 

 

 

9,862

 

Deemed dividend—preferred stock modification

 

 

 

 

 

1,748

 

Conversion of preferred stock warrants to common stock warrants

 

 

 

 

 

1,213

 

Unpaid equipment purchases

 

 

981

 

 

 

963

 

Reclassification of restricted stock award liability to common stock

 

 

100

 

 

 

 

Property and equipment acquired with financing obligations and leases

 

 

8,773

 

 

 

844

 

Stock issued in business acquisition

 

 

 

 

 

1,500

 

Unpaid deferred offering costs

 

 

466

 

 

 

118

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

9


 

MINDBODY, INC.

Notes to Condensed Consolidated Financial Statements

 

 

1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

MINDBODY, Inc. (MINDBODY or the Company) was incorporated in California in 2004 and reincorporated in Delaware in March 2015. MINDBODY is headquartered in San Luis Obispo, California and has operations in California, New York, Texas, the United Kingdom, and Australia.

MINDBODY and its wholly owned subsidiaries (collectively, the “Company”, “we”, “us” or “our”) is a provider of an integrated cloud-based business management software and payments platform for the wellness services industry and creator of a leading online wellness services marketplace for consumers. MINDBODY enables its consumers to evaluate, connect, and transact with local businesses in its marketplace.

Initial Public Offering

In June 2015, the Company completed its initial public offering (IPO) in which it issued and sold 7,150,000 shares of its Class A common stock, $0.000004 par value, at a public offering price of $14.00 per share. The Company received net proceeds of $93,093,000 after deducting underwriting discounts and commissions of $7,007,000, but before deducting paid and unpaid offering expenses of $4,024,000. Immediately prior to the closing of the IPO, all shares of the Company’s then-outstanding redeemable convertible preferred stock were automatically converted and reclassified into 20,673,680 shares of its Class B common stock, $0.000004 par value, and all shares of the Company’s then-outstanding common stock were automatically reclassified into 11,305,355 shares of Class B common stock.

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of MINDBODY, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), and following the requirements of the Securities and Exchange Commission ("SEC"), for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments that are necessary for a fair statement of the Company’s financial information. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2015. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted under the rules and regulations of the SEC.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the final prospectus related to the Company’s IPO (the “Prospectus”), which was filed with the SEC on June 19, 2015 pursuant to Rule 424(b) of the Securities Act of 1933, as amended, relating to the Company’s Registration Statement on Form S-1 (File No. 333-204068).

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include the capitalization and estimated useful life of the Company’s capitalized internal-use software, useful lives of property and equipment, the determination of fair value of common stock, stock options, and preferred stock warrants, including a valuation allowance for deferred tax assets, and contingencies. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances. Changes in facts or circumstances may cause the Company to change its assumptions and estimates in future periods, and it is possible that actual results could differ from current or future estimates.

10


 

Summary of Significant Accounting Policies

There have been no changes in the Company’s significant accounting policies from those that were disclosed in the Prospectus that have had a material impact on the Company’s consolidated financial statements and related notes.

Concentration of Credit Risk

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash equivalents and accounts receivable. All of the Company’s cash and cash equivalents are held at financial institutions that management believes to be of high credit quality. The bank deposits of the Company might, at times, exceed federally insured limits and are generally uninsured and uncollateralized. The Company has not experienced any losses on cash and cash equivalents to date. As of September 30, 2015, one customer represented 19% of the accounts receivable balance. As of December 31, 2014, no single customer accounted for more than 10% of total accounts receivable. No single customer represented over 10% of revenue for any of the periods presented in the condensed consolidated statements of operations.

Recently Issued and Adopted Accounting Pronouncements

In September 2015, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance related to measurement period adjustments in business combinations. The guidance requires that an acquirer recognizes adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined, eliminating the current requirement to retrospectively account for these adjustments. Additionally, the full effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts should be recognized in the same period as the adjustments to the provisional amounts. The adjustments related to previous reporting periods since the acquisition date must be disclosed by income statement line item either on the face of the income statement or in the notes. The Company expects to adopt this new standard beginning January 1, 2016. The guidance is not expected to have a material impact on the condensed consolidated financial statements.

In April 2015, the FASB issued authoritative guidance related to a customer’s accounting for fees paid in a cloud computing arrangement. The new guidance requires that management evaluate each cloud computing arrangement in order to determine whether it includes a software license that must be accounted for separately from hosted services. This authoritative guidance applies the same guidance cloud service providers use to make this determination and also eliminates the existing requirement for customers to account for software licenses they acquire by analogizing to the guidance on leases. The new authoritative guidance is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015 and provides the option of applying the guidance prospectively to all arrangements entered into or materially modified after the effective date or on a retrospective basis. Early adoption is permitted. The guidance is not expected to have a material impact on the condensed consolidated financial statements.

In May 2014, the FASB issued authoritative guidance that provides principles for recognizing revenue for the transfer of promised goods or services to customers with the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenues and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015, the FASB approved a one-year deferral in the effective date of the new standard. In accordance with the deferral, the effective date applicable to the Company will be the first quarter of fiscal 2018. The Company has not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our condensed consolidated financial statements and related disclosures.

 

 

11


 

2. FAIR VALUE MEASUREMENTS

The Company measures and reports its cash equivalents and preferred stock warrant at fair value on a recurring basis. The Company’s cash equivalents are invested in money market funds. The following table sets forth the fair value of the Company’s financial assets and liabilities re-measured on a recurring basis, by level within the fair value hierarchy (in thousands):

 

 

 

December 31, 2014

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds(1)

 

$

28,036

 

 

$

 

 

$

 

 

$

28,036

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration related to acquisition(2)

 

$

 

 

$

 

 

$

11

 

 

$

11

 

Preferred stock warrant(3)

 

 

 

 

 

 

 

 

1,188

 

 

 

1,188

 

Total financial liabilities

 

$

 

 

$

 

 

$

1,199

 

 

$

1,199

 

 

 

 

September 30, 2015

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds(1)