10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2019

OR

☐ 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: 001-38093

Veritone, Inc.

(Exact name of registrant as specified in its charter)

Delaware	47-1161641
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

575 Anton Blvd., Suite 100, Costa Mesa, CA 92626

(Address of principal executive offices, including zip code)

(888) 507-1737

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	VERI	The NASDAQ Stock Market LLC

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☒    No  ☐

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

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

As of July 31, 2019, 22,223,453 shares of the registrant’s common stock were outstanding.

VERITONE, INC.

QUARTERLY REPORT ON FORM 10-Q

June 30, 2019

TABLE OF CONTENTS

Special Note Regarding Forward-Looking Statements
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2019 and 2018	3
	Condensed Consolidated Statements of Stockholders’ Equity as of June 30, 2019	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II.	OTHER INFORMATION	31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
Signatures		33

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend that such forward-looking statements be subject to the safe harbors created thereby. For this purpose, any statements made in this Quarterly Report on Form 10-Q that are not historical or current facts may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “anticipates,” “believes,” “seeks,” “estimates,” “expects,” “intends,” “continue,” “can,” “may,” “plans,” “potential,” “projects,” “should,” “could,” “will,” “would” or similar expressions and the negatives of those expressions are intended to identify forward-looking statements. Such statements include, but are not limited to, any statements that refer to projections of our future financial condition and results of operations, capital needs and financing plans, competitive position, industry environment, potential growth and market opportunities, acquisition plans and strategies, compensation plans, governance structure and policies and/or the price of our common stock.

The forward-looking statements included herein represent our management’s current expectations and assumptions based on information available as of the date of this report. These statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that may cause or contribute to such differences include, but are not limited to, those discussed in more detail in Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of Part I of this Quarterly Report on Form 10-Q, and in Item 1 (Business) and Item 1A (Risk Factors) of Part I of our Annual Report on Form 10-K for the year ended December 31, 2018. Readers should carefully review these risks, as well as the additional risks described in other documents we file from time to time with the Securities and Exchange Commission. In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking information, which speak only as of the date of this report.

Moreover, we operate in an evolving environment. New risks and uncertainties emerge from time to time and it is not possible for our management to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual future results to be materially different from those expressed or implied by any forward-looking statements.

Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. We qualify all of our forward-looking statements by these cautionary statements.

1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

VERITONE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share and share data)

(Unaudited)

	As of
	June 30,			December 31,
	2019			2018
ASSETS
Cash and cash equivalents	$	40,275		$	37,539
Marketable securities		4,998			13,565
Accounts receivable, net of allowance for doubtful accounts of $71 and $40, respectively		26,820			29,142
Expenditures billable to clients		4,806			2,695
Prepaid expenses and other current assets		3,625			3,579
Total current assets		80,524			86,520
Long-term restricted cash		1,135			1,237
Property, equipment and improvements, net		3,660			4,008
Intangible assets, net		18,823			20,480
Goodwill		5,420			5,509
Total assets	$	109,562		$	117,754
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	18,459		$	28,714
Accrued media payments		12,414			7,416
Client advances		14,281			9,639
Accrued compensation		2,819			6,570
Other accrued liabilities		5,721			3,746
Total current liabilities		53,694			56,085
Other liabilities		1,369			1,386
Total liabilities		55,063			57,471
Commitments and contingencies (Note 8)
Stockholders' equity
Common stock, par value $0.001 per share; 75,000,000 shares authorized; 21,918,406 and 19,335,220 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		22			19
Additional paid-in capital		257,813			230,674
Accumulated deficit		(203,408	)		(170,411	)
Accumulated other comprehensive income		72			1
Total stockholders' equity		54,499			60,283
Total liabilities and stockholders' equity	$	109,562		$	117,754

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

2

VERITONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(in thousands, except per share and share data)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net revenues	$	12,270		$	4,168		$	24,395		$	8,556
Cost of revenues		4,562			820			8,434			1,384
Gross profit		7,708			3,348			15,961			7,172
Operating expenses:
Sales and marketing		6,448			5,142			12,581			10,890
Research and development		6,351			5,146			13,289			9,674
General and administrative		11,645			7,513			23,335			14,291
Total operating expenses		24,444			17,801			49,205			34,855
Loss from operations		(16,736	)		(14,453	)		(33,244	)		(27,683	)
Other income, net		51			133			262			316
Loss before provision for income taxes		(16,685	)		(14,320	)		(32,982	)		(27,367	)
Provision for income taxes		6			10			15			12
Net loss	$	(16,691	)	$	(14,330	)	$	(32,997	)	$	(27,379	)
Net loss per share:
Basic and diluted	$	(0.80	)	$	(0.88	)	$	(1.64	)	$	(1.69	)
Weighted average shares outstanding:
Basic and diluted		20,759,396			16,314,236			20,138,756			16,192,569
Comprehensive loss:
Net loss		(16,691	)		(14,330	)		(32,997	)		(27,379	)
Unrealized gain (loss) on marketable securities, net of income    taxes		13			61			48			(2	)
Foreign currency translation adjustments, net of income taxes		45			30			24			20
Total comprehensive loss	$	(16,633	)	$	(14,239	)	$	(32,925	)	$	(27,361	)

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

3

VERITONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(Unaudited)

	Six Months Ended June 30, 2019
										Accumulated
					Additional					Other
	Common Stock				Paid-in		Accumulated			Comprehensive
	Shares		Amount		Capital		Deficit			Loss		Total
Balance as of December 31, 2018		19,335,220	$	19	$	230,674	$	(170,411	)	$	1	$	60,283
Common stock offerings, net		1,668,663		2		12,213		—			—		12,215
Exercise of options		47,099		—		120		—			—		120
Common stock purchases under employee stock purchase plan		64,967		—		294		—			—		294
Common stock issued upon vesting of restricted stock units		35,609		—		—		—			—		—
Machine Box holdback consideration		—		—		620		—			—		620
Common stock issued for acquisitions		766,848		1		3,834		—			—		3,835
Stock-based compensation expense		—		—		10,058		—			—		10,058
Net loss		—		—		—		(32,997	)		—		(32,997	)
Other		—		—		—		—			71		71
Balance as of June 30, 2019		21,918,406	$	22	$	257,813	$	(203,408	)	$	72	$	54,499

	Three Months Ended June 30, 2019
										Accumulated
					Additional					Other
	Common Stock				Paid-in		Accumulated			Comprehensive
	Shares		Amount		Capital		Deficit			Loss		Total
Balance as of March 31, 2019		20,197,188	$	20	$	244,182	$	(186,717	)	$	14	$	57,499
Common stock offerings, net		1,006,663		1		8,054		—			—		8,055
Exercise of options		27,049		—		90		—			—		90
Common stock issued upon vesting of restricted stock units		35,609		—		—		—			—		—
Machine Box holdback consideration		—		—		162		—			—		162
Common stock issued for acquisitions		651,897		1		70		—			—		71
Stock-based compensation expense		—		—		5,255		—			—		5,255
Net loss		—		—		—		(16,691	)		—		(16,691	)
Other		—		—		—		—			58		58
Balance as of June 30, 2019		21,918,406	$	22	$	257,813	$	(203,408	)	$	72	$	54,499

4

VERITONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(Unaudited)

	Six Months Ended June 30, 2018
										Accumulated
					Additional					Other
	Common Stock				Paid-in		Accumulated			Comprehensive
	Shares		Amount		Capital		Deficit			Loss			Total
Balance as of December 31, 2017		16,158,883	$	16	$	170,728	$	(109,307	)	$	(135	)	$	61,302
Common stock offerings, net		1,955,000		2		32,534		—			—			32,536
Common stock issued under employee stock plans, net		203,551		—		921		—			—			921
Stock-based compensation expense		—		—		5,125		—			—			5,125
Net loss		—		—		—		(27,379	)		—			(27,379	)
Other		—		—		—		—			18			18
Balance as of June 30, 2018		18,317,434	$	18	$	209,308	$	(136,686	)	$	(117	)	$	72,523

	Three Months Ended June 30, 2018
										Accumulated
					Additional					Other
	Common Stock				Paid-in		Accumulated			Comprehensive
	Shares		Amount		Capital		Deficit			Loss			Total
Balance as of March 31, 2018		16,254,054	$	16	$	173,817	$	(122,479	)	$	(208	)	$	51,146
Common stock offerings, net		1,955,000		2		32,599		—			—			32,601
Common stock issued under employee stock plans, net		108,380		—		364		—			—			364
Stock-based compensation expense		—		—		2,528		—			—			2,528
Net loss		—		—		—		(14,330	)		—			(14,330	)
Other		—		—		—		123			91			214
Balance as of June 30, 2018		18,317,434	$	18	$	209,308	$	(136,686	)	$	(117	)	$	72,523

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

5

VERITONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(32,997	)	$	(27,379	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,719			828
Costs of warrants issued		—			207
Change in fair value of warrant liability		50			15
Provision for doubtful accounts		44			22
Stock-based compensation expense		11,285			5,125
Other		(19	)		—
Changes in assets and liabilities:
Accounts receivable		2,278			(3,914	)
Expenditures billable to clients		(2,111	)		(900	)
Prepaid expenses and other current assets		413			(367	)
Accounts payable		(10,255	)		2,421
Accrued media payments		4,998			1,945
Client advances		4,642			1,148
Other accrued liabilities		2,364			(966	)
Other liabilities		(17	)		474
Net cash used in operating activities		(16,606	)		(21,341	)
Cash flows from investing activities:
Proceeds from sales of marketable securities		8,616			14,000
Capital expenditures		(208	)		(2,899	)
Intangible assets acquired		(477	)		(70	)
Acquisition of businesses, net of cash acquired		(883	)		—
Net cash provided by investing activities		7,048			11,031
Cash flows from financing activities:
Proceeds from common stock offerings, net		11,778			32,536
Proceeds from exercise of stock options		120			—
Proceeds from issuances of stock under employee stock plans		294			921
Net cash provided by financing activities		12,192			33,457
Net increase in cash, cash equivalents and restricted cash		2,634			23,147
Cash, cash equivalents and restricted cash, beginning of period		38,776			29,545
Cash, cash equivalents and restricted cash, end of period	$	41,410		$	52,692

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

6

VERITONE, INC.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except share and per share data and percentages)

(Unaudited)

NOTE 1. DESCRIPTION OF BUSINESS

Description of Business

Veritone, Inc., a Delaware corporation (“Veritone”) (together with its wholly owned subsidiaries, collectively, the “Company”), is a provider of artificial intelligence (“AI”) based computing solutions. The Company has developed aiWARE^TM, a proprietary AI operating system that integrates and orchestrates an open ecosystem of top performing cognitive engines, together with a suite of powerful applications, to reveal valuable multivariate insights from vast amounts of unstructured and structured data and conduct cognitive workflows based on these insights.  The Company’s aiWARE platform incorporates proprietary technology to integrate and intelligently orchestrate a wide variety of cognitive engine capabilities to mimic human cognitive functions such as perception, prediction and problem solving in order to quickly, efficiently and cost effectively transform unstructured data into structured data. It stores the results in a time-correlated database, creating a rich, online, searchable index of the unstructured and structured data that users can use and analyze in near real-time through the platform’s suite of general and industry-specific applications to drive business processes and insights. aiWARE is based on an open architecture that enables new cognitive engines and applications to be added quickly and efficiently, resulting in a future proof, scalable and evolving solution that can be easily leveraged for a broad range of industries that capture or use audio, video and other unstructured data including, without limitation, the media and entertainment, legal and compliance, and government vertical markets.

In August 2018, the Company acquired Wazee Digital, Inc. (“Wazee Digital”), a provider of cloud-native digital content management and content licensing services, as discussed in more detail in Note 3. The Wazee Digital offerings serve customers primarily in the media and entertainment market. The Company has integrated its aiWARE platform with these offerings, providing these customers with unique capabilities to enrich and drive expanded revenue opportunities from their content.

In addition, the Company operates a full-service advertising agency. The Company’s expertise in media buying, planning and creative development, coupled with its proprietary technology platform, enables the Company to analyze the effectiveness of advertising in a way that is simple, scalable and trackable. In August 2018, the Company acquired S Media Limited, doing business as Performance Bridge Media (“Performance Bridge”), a podcast advertising agency, as discussed in more detail in Note 3. The Performance Bridge offerings have enhanced the Company’s advertising offerings to include more comprehensive podcast solutions.

NOTE 2. PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Preparation

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial statements and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. Such unaudited condensed consolidated financial statements and accompanying notes are the representations of the Company’s management, who is responsible for their integrity and objectivity. The information included in this Form 10-Q should be read in conjunction with the information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 18, 2019. Interim results for the three and six months ended June 30, 2019 are not necessarily indicative of the results the Company will have for the full year ending December 31, 2019.

The accompanying condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which are normal and recurring, necessary to fairly state its financial position, results of operations and cash flows. All significant intercompany transactions have been eliminated in consolidation. The financial data and the other information disclosed in these notes to the condensed consolidated financial statements reflected in the three month period presented are unaudited. The December 31, 2018 balance sheet included herein was derived from the audited financial statements but does not include all disclosures or notes required by GAAP for complete financial statements.

Liquidity and Capital Resources

During 2018 and 2017, the Company generated negative cash flows from operations of $42,227 and $31,911, respectively, and incurred net losses of $61,104 and $59,601, respectively. In the six months ended June 30, 2019, the Company generated negative cash flow from operations of $16,606 and incurred a net loss of $32,997. Also, the Company had an accumulated deficit of $203,408 as of June 30, 2019. Historically, the Company has satisfied its capital needs with the net proceeds from its sales of equity securities, its issuance of convertible debt, and the exercise of common stock warrants. In June 2018, the Company raised net proceeds of $32,780 through an underwritten offering of its common stock, and in the first six months of 2019, the Company raised net proceeds of $12,215 through sales of its common stock under an Equity Distribution Agreement dated June 1, 2018 (the “Equity Distribution Agreement”).

7

The Company expects to continue to generate net losses for the foreseeable future as it makes significant investments in developing and selling its products and services. Also, the Company will continue to evaluate potential acquisitions of, or investments in, companies or technologies that complement its business, which acquisitions may require the use of cash.

Management believes that the Company’s existing balances of cash, cash equivalents and marketable securities, which totaled $45,273 as of June 30, 2019, will be sufficient to meet its anticipated cash requirements for at least twelve months from the date that these financial statements are issued.  However, the Company’s does not expect that its current cash, cash equivalents and marketable securities will be sufficient to support the development of its business to the point at which the Company has positive cash flows from operations, particularly if it uses cash to finance any acquisitions or investments in the future.  The Company plans to meet its future needs for additional capital through equity and/or debtfinancings. Such equity financings may include sales of common stock under the Company’s Equity Distribution Agreement pursuant to which the Company may offer and sell, from time to time, shares of its common stock having an aggregate available offering price of up to $35,468. Such financing may not be available on terms favorable to the Company or at all.  If the Company is unable to obtain adequate financing or financing on terms satisfactory to it when required, the Company’s ability to continue to support its business growth, scale its infrastructure, develop product enhancements and to respond to business challenges could be significantly impaired.

Use of Accounting Estimates

The preparation of the accompanying 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 as of the date of the accompanying condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The principal estimates relate to revenue recognition, allowance for doubtful accounts, the valuation of stock awards and stock warrants, income taxes, and the allocation of net assets acquired from business acquisitions as well as contingent consideration, where applicable. Actual results could differ from those estimates.

Significant Customers

The Company’s top ten customers accounted for approximately 25.9% and 24.9% of the Company’s net revenues for the three and six months ended June 30, 2019, respectively. The Company’s top ten customers accounted for approximately 49.7% and 52.1% of the Company’s net revenues for the three and six months ended June 30, 2018, respectively. No individual customer accounted for 10% or more of the Company’s net revenues for the three and six months ended June 30, 2019.

Significant Accounting Policies

During the six months ended June 30, 2019, there have been no material changes in the Company’s significant accounting policies from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2018.

Recently Adopted Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force), which provides guidance intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. This standard became effective for the Company beginning in the first quarter of 2019. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which provides guidance on the presentation of restricted cash or restricted cash equivalents and is intended to reduce the diversity in practice of such presentations. This standard requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts on the statement of cash flows. This standard became effective for the Company beginning in the first quarter of 2019. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount that the entity expects to be entitled to receive when products are transferred to customers. Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”); ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”); and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12,” and together with ASU 2014-09, ASU 2016-08 and ASU 2016-10 the “new revenue standard”). The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. As an emerging growth company, the Company is not required to accelerate the application of the revenue standard to interim periods.  The new revenue standard will be effective for the Company for annual reporting periods beginning after December 15, 2018 and to interim periods within annual reporting periods beginning after December 15, 2019.

8

The Company will apply the new revenue standard on a modified retrospective basis with an adjustment to retained earnings to recognize the cumulative effect of adoption. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments under this pronouncement will change the way all leases with duration of one year or more are treated. Under this guidance, lessees will be required to capitalize virtually all leases on the balance sheet as a right-of-use asset and an associated financing lease liability or capital lease liability. The right-of-use asset represents the lessee’s right to use, or control the use of, a specified asset for the specified lease term. The lease liability represents the lessee’s obligation to make lease payments arising from the lease, measured on a discounted basis. Based on certain characteristics, leases are classified as financing leases or operating leases. Financing lease liabilities, those that contain provisions similar to capitalized leases, are amortized in the same manner as capital leases are amortized under current accounting rules, as amortization expense and interest expense in the statement of operations. Operating lease liabilities are amortized on a straight-line basis over the life of the lease as lease expense in the statement of operations. This standard will be effective for the Company beginning with the first quarter of fiscal year 2020. The Company is currently evaluating the impact this standard will have on its policies and procedures pertaining to its existing and future lease arrangements, its disclosure requirements and its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if the reporting unit had been acquired in a business combination. Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendments in this update will be effective for the Company beginning with fiscal year 2022, including interim periods, with early adoption permitted. The adoption of the amendments in this update is not expected to have a material impact on the Company's consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which provides expanded guidance to simplify the accounting for stock-based compensation by aligning the treatment of stock-based awards for nonemployees with that of stock-based awards for employees. This standard will be effective for the Company beginning in the first quarter of fiscal year 2020, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, as part of its disclosure framework project intended to improve the effectiveness of disclosures in the notes to the financial statements by updating certain disclosure requirements related to fair value measurements. The standard will be effective for the Company beginning in the first quarter of fiscal year 2020, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements.

NOTE 3. BUSINESS COMBINATIONS

Acquisition of Performance Bridge

On August 21, 2018, the Company acquired all of the outstanding capital stock of Performance Bridge by means of a merger of an indirect, wholly owned subsidiary of the Company with and into Performance Bridge, with Performance Bridge surviving the merger as an indirect, wholly owned subsidiary of the Company. The Company paid initial consideration of $5,158 and paid a total of $3,909 in additional contingent earnout amounts based on the achievement of certain revenue milestones by Performance Bridge in its 2018 fiscal year. The initial consideration was comprised of $1,220 paid in cash and the issuance of 349,072 shares of the Company’s common stock, valued at $3,938 based on the Company’s closing stock price on August 21, 2018. The initial consideration was subject to adjustment based on a final calculation of Performance Bridge’s net assets at closing, which was completed in the first quarter of 2019 and resulted in the issuance to the former stockholder of Performance Bridge of an additional 6,482 shares of common stock valued at $34 based on the closing price of the Company’s common stock on January 25, 2019, which was the date both parties agreed upon the final calculation of the adjustment. A portion of the initial consideration, consisting of $120 in cash and 34,335 shares of common stock, was deposited into a third-party escrow account at closing and will be held in such account until August 21, 2020, to secure certain indemnification and other obligations of the former stockholder of Performance Bridge. The additional earnout consideration was comprised of $883 in cash and 574,231 shares of the Company’s common stock, valued at $3,026 based on the closing price of the Company’s common stock on March 28, 2019, which were paid and issued to the former stockholder of Performance Bridge in the second quarter of 2019.

The acquisition of Performance Bridge has expanded the Company’s media agency offerings of comprehensive podcast solutions.

9

The following table summarizes the fair value of the purchase price consideration for the acquisition of Performance Bridge:

Acquisition consideration	Amount
Cash consideration at closing	$	1,220
Equity consideration at closing		3,938
Working capital adjustment		34
Contingent earnout consideration		3,770
Estimated purchase price	$	8,962

The following allocation of the purchase price as of the August 21, 2018 closing date under the acquisition method of accounting is preliminary as to the determination of deferred taxes as the information is not available at the time of this filing. The purchase price allocation is based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition:

Preliminary purchase price allocation:	Amount
Cash	$	2,283
Accounts receivable		3,551
Prepaid and other current assets		23
Property and equipment		43
Intangible assets		5,800
Accounts payable		(1,402	)
Accrued expenses and other current liabilities		(4,337	)
Accrued compensation		(42	)
Identifiable net assets acquired	$	5,919
Goodwill		3,043
Total purchase price	$	8,962

The following table presents details of the acquired intangible assets of Performance Bridge:

	Estimated Useful Life (in years)		Fair Value
Customer relationships		5.0	$	5,100
Noncompete agreement		4.0		700
Total intangible assets			$	5,800

In the first quarter of 2019, the Company recorded expense of $139 in general and administrative expenses, representing the difference between the fair value of the contingent earnout consideration recorded by the Company and the final amount of contingent earnout consideration paid by the Company.    

Acquisition of Wazee Digital, Inc.

On August 31, 2018, the Company acquired all of the outstanding capital stock of Wazee Digital by means of a merger of a wholly owned subsidiary of the Company with and into Wazee Digital, with Wazee Digital surviving the merger as a wholly owned subsidiary of the Company.  The Company paid an aggregate purchase price of $12,552, comprised of $7,423 paid in cash and the issuance of a total of 491,157 shares of the Company’s common stock, valued at $5,129 based on the Company’s closing stock price on August 31, 2018. A portion of the consideration, consisting of $925 in cash and 60,576 shares of common stock, was deposited into a third-party escrow account at closing and will be held in such account to secure certain indemnification and other obligations of the former stockholders of Wazee Digital. A portion of such escrowed consideration was released in March 2019, and the balance will be held in such account until August 31, 2020.  

The acquisition of Wazee Digital has expanded the Company’s offerings to include digital content management and licensing solutions.

The following table summarizes the fair value of the purchase price consideration for the acquisition of Wazee Digital:

Acquisition consideration	Amount
Cash consideration at closing	$	7,423
Equity consideration at closing		5,129
Total	$	12,552

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The following is an allocation of the purchase price as of the August 31, 2018 closing date under the acquisition method of accounting and is preliminary as to the determination of deferred taxes as the information is not available at the time of this filing. The purchase price allocation is based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition:

Preliminary purchase price allocation:	Amount
Cash	$	975
Accounts receivable		2,396
Prepaid and other current assets		376
Property and equipment		292
Intangible assets		13,300
Accounts payable		(825	)
Accrued expenses and other current liabilities		(3,516	)
Accrued compensation		(850	)
Other long-term liabilities		(700	)
Identifiable net assets acquired	$	11,448
Goodwill		1,104
Total purchase price	$	12,552

The following table presents details of the acquired intangible assets of Wazee Digital:

	Estimated Useful Life (in years)		Fair Value
Developed technology		5.0	$	9,100
Customer relationships		5.0		4,200
Total intangible assets			$	13,300

Acquisition of Machine Box, Inc.

On September 6, 2018, the Company acquired all of the outstanding capital stock of Machine Box, Inc. (“Machine Box”) by means of a merger of a wholly owned subsidiary of the Company with and into Machine Box, with Machine Box surviving the merger as a wholly owned subsidiary of the Company. The Company paid initial consideration of $1,484, and agreed to pay up to an additional $3,000 in contingent amounts if Machine Box achieves certain technical development and integration milestones within 12 months after the closing of the acquisition, a portion of which was paid in the first six months of 2019, as discussed below. The initial consideration was comprised of $423 paid in cash and issuance of a total of 128,300 shares of the Company’s common stock, valued at $1,061 based on the Company’s closing stock price on September 6, 2018, of which $80 in cash and 26,981 shares of common stock were held back from payment and issuance by the Company until September 6, 2020, to secure certain indemnification and other obligations of the former stockholders of Machine Box. The additional contingent payments (if earned) will be comprised of 20% cash and 80% shares of the Company’s common stock.

The fair value of the contingent amount totaled $2,880 and is treated as compensation expense for post-combination services as payment of such amount is conditioned upon the continued employment of certain key employees of Machine Box in addition to the achievement of certain performance milestones by Machine Box. The preliminary fair value of the contingent amount was determined using a probability-weighted expected payment model. This expense is being recognized as research and development expense over three separate intervals tied to the specific performance milestones during the twelve months following the acquisition. The Company recorded compensation expense of $453 and $1,333 in research and development expense in connection with the additional contingent amounts in the three and six months ended June 30, 2019, respectively.

In March 2019, the Company determined that Machine Box had achieved the technical development and integration milestones required to be completed as of March 6, 2019 and, as a result, the former Machine Box stockholders became entitled to receive an aggregate of $200 in cash and an aggregate of 135,583 shares of the Company’s common stock, valued at $880 based on the closing price of the Company’s common stock on March 6, 2019.  In March 2019, the Company paid to the former Machine Box stockholders an aggregate of $160 in cash and issued to them an aggregate of 108,469 shares of the Company’s common stock. The remaining $40 in cash and 27,114 shares of common stock were held back from payment and issuance by the Company until September 6, 2020, to secure certain indemnification and other obligations of the former stockholders of Machine Box. The value of the common stock that was held back was recorded to additional paid-in capital.

In June 2019, the Company determined that Machine Box had achieved the technical development and integration milestones required to be completed as of June 6, 2019 and, as a result, the former Machine Box stockholders became entitled to receive an aggregate of $200 in cash and an aggregate of 97,082 shares of the Company’s common stock, valued at $808 based on the closing price of the Company’s common stock on June 6, 2019.  The Company issued to the former Machine Box stockholders an aggregate of 77,666 shares of the Company’s common stock in June 2019, and paid to them an aggregate of $160 in cash in July 2019. The remaining $40 in cash and 19,416 shares of common stock were held back from payment and issuance by the Company until September 6, 2020, to secure certain indemnification and other obligations of the former stockholders of Machine Box. The value of the common stock that was held back was recorded to additional paid-in capital.

11

Machine Box is a developer of state-of-the-art machine learning technologies, which have enhanced the Company’s aiWARE platform capabilities.

The following table summarizes the fair value of the initial purchase price consideration for the acquisition of Machine Box:

Acquisition consideration	Amount
Cash consideration at closing	$	423
Equity consideration at closing		1,061
Total	$	1,484

The following is an allocation of the purchase price as of the September 6, 2018 closing date under the acquisition method of accounting and is preliminary as to the determination of deferred taxes as the information is not available at the time of this filing. The purchase price allocation is based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition:

Preliminary purchase price allocation:	Amount
Cash	$	25
Intangible assets	700
Accrued expenses		(375	)
Identifiable net assets acquired	$	350
Goodwill		1,134
Total purchase price	$	1,484

The following table presents details of the acquired intangible assets of Machine Box:

	Estimated Useful Life (in years)		Fair Value
Developed technology		5.0	$	500
Trademarks and tradenames		2.3		100
Noncompete agreement		3.0		100
Total intangible assets			$	700

Assumptions in the Allocations of Purchase Price

Management prepared the purchase price allocations for the acquired businesses, and in doing so considered or relied in part upon a report of a third party valuation expert to calculate the fair value of certain acquired assets and liabilities of each acquired business, which would primarily include identifiable intangible assets and the contingent earn-out amounts. Determining the fair value of assets and liabilities requires management to make significant estimates and assumptions which are preliminary and subject to change upon finalization of the valuation analysis. The goodwill recognized is the excess of the purchase price over the fair value of net assets acquired. Certain liabilities and deferred taxes included in the purchase price allocations are based on management's best estimates of the amounts to be paid or settled and based on information available at the time the purchase price allocations were prepared. Updates to and/or completion of the Company’s evaluation of certain income tax positions may result in changes to the recorded amounts of assets and liabilities, with corresponding adjustments to goodwill amounts in subsequent periods. The Company does not expect to deduct any of the acquired goodwill for tax purposes.

NOTE 4. NET LOSS PER SHARE

The following table presents the computation of basic and diluted net loss per share:

12

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Numerator
Net loss	$	(16,691	)	$	(14,330	)	$	(32,997	)	$	(27,379	)
Denominator
Weighted-average common shares outstanding		20,817,466			16,438,897			20,201,819			16,324,431
Less:  Weighted-average shares subject to repurchase		(58,070	)		(124,661	)		(63,063	)		(131,862	)
Denominator for basic and diluted net loss per share		20,759,396			16,314,236			20,138,756			16,192,569
Basic and diluted net loss per share	$	(0.80	)	$	(0.88	)	$	(1.64	)	$	(1.69	)

Potentially dilutive securities that were not included in the calculation of diluted net loss per share because their effect would be anti-dilutive were as follows (in common equivalent shares):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Common stock options and restricted stock units		10,125,468		4,947,896		9,715,403		4,826,523
Warrants to purchase common stock		1,297,151		1,214,104		1,297,151		1,167,249
		11,422,619		6,162,000		11,012,554		5,993,772

NOTE 5. FINANCIAL INSTRUMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, the first two of which are considered observable and the last unobservable, that may be used to measure fair value, as follows:

• Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2—inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

• Level 3—unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company classifies its cash, cash equivalents and marketable securities within Level 1 or Level 2 of the fair value hierarchy on the basis of valuations using quoted market prices or alternate pricing sources and models utilizing market observable inputs, respectively. The Company’s money market funds are valued based on quoted prices for the specific securities in an active market and are therefore classified as Level 1. The Company’s government securities and corporate debt securities are valued on the basis of valuations provided by third-party pricing services, as derived from such services’ pricing models, and are therefore classified as Level 2. As of June 30, 2019, the Company has not made any adjustments to the prices obtained from its third-party pricing providers.

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Cash and Cash Equivalents and Marketable Securities

The Company’s money market funds and marketable securities are categorized as Level 1 and 2, respectively, within the fair value hierarchy. The following table shows the cost, gross unrealized losses and fair value, with a breakdown by significant investment category, of the Company’s cash and cash equivalents and marketable securities as of June 30, 2019:

			Gross				Cash and
			Unrealized		Fair		Cash		Marketable
	Cost		Losses		Value		Equivalents		Securities
Cash	$	16,258	$	—	$	16,258	$	16,258	$	—
Level 1:
Money market funds		24,017		—		24,017		24,017		—
Level 2:
Corporate debt securities		4,998		—		4,998		—		4,998
Total	$	45,273	$	—	$	45,273	$	40,275	$	4,998

As of December 31, 2018, the Company’s cash and cash equivalents and marketable securities balances were as follows:

			Gross					Cash and
			Unrealized			Fair		Cash		Marketable
	Cost		Losses			Value		Equivalents		Securities
Cash	$	13,337	$	—		$	13,337	$	13,337	$	—
Level 1:
Money market funds		24,202		—			24,202		24,202		—
Level 2:
U.S. government securities		2,500		(2	)		2,498		—		2,498
Corporate debt securities		11,113		(46	)		11,067		—		11,067
Subtotal		13,613		(48	)		13,565		—		13,565
Total	$	51,152	$	(48	)	$	51,104	$	37,539	$	13,565

The Company had no marketable securities that have been in a continuous unrealized loss position for less than 12 months and for 12 months or greater as of June 30, 2019.

The following tables show information about the Company’s marketable securities that have been in a continuous unrealized loss position for less than 12 months and for 12 months or greater as of December 31, 2018:

	December 31, 2018
	Continuous Unrealized Losses
	Less than			12 Months
	12 Months			or Greater		Total
Fair value of marketable securities	$	13,565		$	—	$	13,565
Unrealized losses	$	(48	)	$	—	$	(48	)

All marketable securities held by the Company as of June 30, 2019 will mature in one year or less.

The Company may sell certain of its marketable securities prior to their stated maturities for strategic reasons including, but not limited to, anticipation of credit deterioration and duration management. The Company typically invests in highly-rated securities, and its investment policy generally limits the amounts that may be invested with any one issuer. The policy generally requires investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss. Fair values were determined for each individual security in the securities portfolio.

Stock Warrants

All of the Company’s outstanding stock warrants are categorized as Level 3 within the fair value hierarchy. Stock warrants have been recorded at their fair value using either a probability weighted expected return model or the Black-Scholes option-pricing model. These models incorporate contractual terms, maturity, risk-free interest rates and volatility. The value of the Company’s stock warrants would increase if a higher risk-free interest rate was used, and would decrease if a lower risk-free interest rate was used. Similarly, a higher volatility assumption would increase the value of the stock warrants, and a lower volatility assumption would decrease the value of the stock warrants. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management with the assistance of a third-party valuation specialist.

14

In April 2018, in connection with the advisory agreement between the Company and a financial advisory firm, the Company issued such firm a five-year warrant to purchase up to 20,000 shares of the Company’s common stock (“April 2018 Warrant”). The April 2018 Warrant was fully vested and exercisable upon issuance and has an exercise price of $11.73 per share. The Company recorded this stock warrant at its fair value using the Black-Scholes option-pricing model. The holder is able to redeem the warrant for a number of shares having a value equal to the in-the-money value of the warrant. The Company recorded the fair value of the warrant as a liability upon issuance, and such fair value is remeasured as of the end of each reporting period. The April 2018 Warrant was outstanding at June 30, 2019.

The following table summarizes quantitative information with respect to the significant unobservable inputs that were used to value the April 2018 Warrant:

	June 30, 2019			December 31, 2018
Volatility		70	%		70	%
Risk-free rate		1.76	%		2.51	%
Term	3.75 years			4.25 years

The following table represents a roll-forward of the fair value of the April 2018 Warrant, which was recorded within other accrued liabilities in the accompanying condensed consolidated balance sheet at June 30, 2019:

Balance, December 31, 2018	$	23
Change in fair value		50
Balance, June 30, 2019	$	73

Adjustments to the fair value of the April 2018 Warrant were recorded in other income, net in the Company’s consolidated statement of operations and comprehensive loss for the three and six months ended June 30, 2019.

There were no transfers between Level 1, Level 2 or Level 3 financial instruments in the six months ended June 30, 2019.

NOTE 6. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

The following table presents the changes in the carrying amount of goodwill:

	Carrying Amount
Balance as of December 31, 2018	$	5,509
Performance Bridge working capital adjustment		34
Wazee Digital purchase accounting adjustment		(123	)
Balance as of June 30, 2019	$	5,420

Intangible Assets

Intangible assets, net consisted of the following:

			June 30, 2019							December 31, 2018
	Weighted		Gross					Net		Gross					Net
	Average Useful		Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Life (in years)		Amount		Amortization			Amount		Amount		Amortization			Amount
Acquired software and technology		1.3	$	3,576	$	(2,031	)	$	1,545	$	3,576	$	(1,613	)	$	1,963
Licensed technology		2.1		500		(125	)		375		500		(42	)		458
Developed technology		4.1		10,077		(1,613	)		8,464		9,600		(792	)		8,808
Customer relationships		4.1		9,300		(1,550	)		7,750		9,300		(733	)		8,567
Trademarks and trade names		1.4		100		(37	)		63		100		(15	)		85
Noncompete agreements		3.0		800		(174	)		626		800		(201	)		599
Total		3.6	$	24,353	$	(5,530	)	$	18,823	$	23,876	$	(3,396	)	$	20,480

15

The following table presents amortization expense associated with the Company’s finite-lived intangible assets, which is included in the consolidated statement of operations and comprehensive loss:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Cost of revenues	$	535	$	48	$	905	$	96
Sales and marketing		319		—		391		—
Research and development		256		256		512		517
General and administrative		212		3		355		5
Total	$	1,322	$	307	$	2,163	$	618

The following table presents future amortization of the Company’s finite-lived intangible assets at June 30, 2019:

2019 (6 months)	$	2,697
2020		5,382
2021		4,261
2022		3,963
2023		2,520
Total	$	18,823

NOTE 7. CONSOLIDATED FINANCIAL STATEMENTS DETAILS

Consolidated Balance Sheets Details

Cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash consisted of the following:

	As of
	June 30,		December 31,
	2019		2018
Cash and cash equivalents	$	40,275	$	37,539
Long-term restricted cash		1,135		1,237
Total cash, cash equivalents and restricted cash	$	41,410	$	38,776

The Company’s restricted cash is held as collateral for the Company’s stand-by letter of credit and credit cards.

Accounts Receivable, Net

Accounts receivable consisted of the following:

	As of
	June 30,			December 31,
	2019			2018
Accounts receivable — Advertising	$	23,167		$	26,226
Accounts receivable — aiWARE SaaS Solutions		2,166			2,418
Accounts receivable — aiWARE Content Licensing and Media Services		1,558			538
		26,891			29,182
Less: allowance for doubtful accounts		(71	)		(40	)
Accounts receivable, net	$	26,820		$	29,142

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The amount that the Company invoices and collects from advertising clients includes the cost of the advertisement placed for them with media vendors and the amount of the commission earned by the Company.  The average commission earned by the Company is less than 15% of the total amount invoiced and collected from the advertising clients.

Property, equipment and improvements, net

Property, equipment and improvements, net consisted of the following:

	As of
	June 30,			December 31,
	2019			2018
Property and equipment	$	2,151		$	2,019
Leasehold improvements		2,876			2,875
		5,027			4,894
Less: accumulated depreciation		(1,367	)		(886	)
Property, equipment and improvements, net	$	3,660		$	4,008

Depreciation expense was $263 and $555 for the three and six months ended June 30, 2019, respectively. Depreciation expense was $167 and $215 for the three and six months ended June 30, 2018, respectively.

Accounts Payable

Accounts payable consisted of the following:

	As of
	June 30,		December 31,
	2019		2018
Accounts payable — Advertising	$	17,148	$	27,655
Accounts payable — Other		1,311		1,059
Total	$	18,459	$	28,714

Accounts payable – Advertising reflects the cost of advertisements placed with media vendors on behalf of the Company’s advertising clients.

Consolidated Statement of Operations and Comprehensive Loss Details

Net Revenues

Net revenues for the periods presented were comprised of the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Advertising	$	5,842	$	3,308	$	11,556	$	6,429
aiWARE SaaS Solutions		2,677		860		5,457		2,127
aiWARE Content Licensing and Media Services		3,751		—		7,382		—
Total net revenues	$	12,270	$	4,168	$	24,395	$	8,556

During the three and six months ended June 30, 2019, the Company made $52,973 and $103,755, respectively, in gross media placements, of which $48,676 and $97,744, respectively, were billed directly to clients. Of the amounts billed directly to clients, $43,125 and $86,712 represented media-related costs netted against billings during the three and six months ended June 30, 2019, respectively.

During the three and six months ended June 30, 2018, the Company made $31,451 and $60,872, respectively, in gross media placements, of which $26,322 and $51,895, respectively, were billed directly to clients. Of the amounts billed directly to clients, $23,014 and $45,464 represented media-related costs netted against billings during the three and six months ended June 30, 2018, respectively.

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Other Income, Net

Other income, net for the periods presented was comprised of the following:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Interest income, net	$	160		$	168		$	329		$	349
Change in fair value of warrant liability		(37	)		(15	)		(50	)		(15	)
Other		(72	)		(20	)		(17	)		(18	)
Other income, net	$	51		$	133		$	262		$	316

NOTE 8. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases facilities under operating lease arrangements expiring on various dates through fiscal year 2024. Certain of the Company’s leases contain standard rent escalation and renewal clauses. Under certain leases, the Company is required to pay operating expenses in addition to base rent.  Rent expense for lease payments is recognized on a straight-line basis over the lease term.

As of June 30, 2019, future minimum lease payments were as follows:

2019 (6 months)	$	1,256
2020		2,414
2021		2,211
2022		1,852
2023		1,680
Thereafter		1,730
Total minimum payments	$	11,143

The total rent expense for all operating leases was $735 and $1,479 for the three and six months ended June 30, 2019, respectively. The total rent expense for all operating leases was $501 and $833 for the three and six months ended June 30, 2018, respectively.

Other Contingencies

From time to time, the Company may be involved in litigation relating to claims arising out of its operations in the normal course of business. The Company currently is not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on the Company’s results of operations, financial position or cash flows.

NOTE 9. STOCKHOLDERS’ EQUITY

Common Stock Issuances

During the first six months of 2019, the Company issued an aggregate of 1,668,663 shares of its common stock, which were sold pursuant to the Equity Distribution Agreement. The Company received net proceeds from such sales of $12,215 after deducting expenses of $428.

During the first six months of 2019, the Company issued an aggregate of 580,713 shares of common stock to the former stockholder of Performance Bridge. See Note 3 for additional information.

During the first six months of 2019, the Company issued 186,135 shares of common stock to the former stockholders of Machine Box. See Note 3 for additional information.

During the first six months of 2019, the Company issued an aggregate of 147,675 shares of its common stock in connection with the exercise of stock options and vesting of restricted stock units under its stock incentive plans and purchases under its Employee Stock Purchase Plan (the “ESPP”).

Common Stock Warrants

As of June 30, 2019 and December 31, 2018, the Company had outstanding warrants to purchase an aggregate of 1,297,151 shares of the Company’s common stock.

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NOTE 10. STOCK PLANS

Stock-Based Compensation

During six months ended June 30, 2019, the Company granted options to purchase an aggregate of 555,346 shares of its common stock that are subject to time-based vesting conditions (“Time-Based Options”), and options to purchase an aggregate of 1,545,849 shares of its common stock that are subject to performance-based vesting conditions (“Performance Options”).

All Time-Based Options granted during the six months ended June 30, 2019 will vest over a period of four years. All Performance Options granted during the six months ended June 30, 2019 will become exercisable in three equal tranches based on the achievement of market price goals for the Company’s common stock of $49.15 per share, $98.31 per share and $196.62 per share, respectively. For each tranche to become exercisable, the closing price per share of the Company’s common stock must meet or exceed the applicable stock price goal for a period of 30 consecutive trading days.

The Company valued the Time-Based Options using the Black-Scholes Merton option pricing model.  The following assumptions were used to compute the grant date fair values of the Time-Based Options granted during the six months ended June 30, 2019:

Expected term (in years)	6.0 - 6.1
Expected volatility	66% - 68%
Risk-free interest rate	1.8% - 2.5%
Expected dividend yield		—

The Company valued the Performance Options using a Monte Carlo simulation model. The following assumptions were used in the Monte Carlo simulation model for computing the grant date fair values of the Performance Options granted during the six months ended June 30, 2019:

Estimated volatility	65	%
Risk-free interest rate	2.7	%
Dividend yield	—	%
Cost of equity	14	%

The fair value per share was determined for each of the three tranches of each Performance Option. The weighted average grant date fair value of the Performance Options granted during the six months ended June 30, 2019 was $2.57 per share. The total fair value of such Performance Options is $3,970 and is being recorded as stock-based compensation expense over an average derived service period of 6.4 years.

The assumptions used in calculating the fair values of purchase rights granted under the ESPP during the six months ended June 30, 2019 are set forth in the table below:

Expected term (in years)	0.5 - 2.0
Expected volatility	51% - 71%
Risk-free interest rate	1.3% - 2.5%
Expected dividend yield		—

The Company’s stock-based compensation expense recognized for the periods presented was as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Stock-based compensation expense by type of award:
Restricted stock units	$	299	$	99	$	497	$	147
Restricted stock awards		96		135		256		353
Machine Box contingent common stock issuances		523		—		1,227		—
Performance-based stock options		2,020		53		3,956		53
Stock options		2,703		2,246		5,060		4,282
Employee stock purchase plan		137		118		289		290
Total	$	5,778	$	2,651	$	11,285	$	5,125

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	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Stock-based compensation expense by operating expense grouping:
Sales and marketing	$	271	$	248	$	514	$	568
Research and development		900		266		1,984		507
General and administrative		4,607		2,137		8,787		4,050
	$	5,778	$	2,651	$	11,285	$	5,125

Equity Award Activity

Restricted Stock Awards

The Company’s restricted stock award activity for the six months ended June 30, 2019 was as follows:

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested at December 31, 2018		72,208		$	7.26
Vested		(31,245	)	$	6.95
Unvested at June 30, 2019		40,963		$	7.50

At June 30, 2019, total unrecognized compensation cost related to restricted stock was $246, which is expected to be recognized over a weighted average period of 1.3 years.

Restricted Stock Units

The Company’s restricted stock unit activity for the six months ended June 30, 2019 was as follows:

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested at December 31, 2018		49,143		$	12.57
Granted		150,211		$	7.28
Forfeited		(1,000	)	$	8.81
Vested		(35,609	)	$	13.99
Unvested at June 30, 2019		162,745		$	7.40

At June 30, 2019, total unrecognized compensation cost related to restricted stock units was $950, which is expected to be recognized over a weighted average period of 1.2 years.

Performance-Based Stock Options

The activity during the six months ended June 30, 2019 related to stock options that are subject to performance-based vesting conditions tied to the future achievement of stock price goals by the Company was as follows:

				Weighted-Average
						Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
Outstanding at December 31, 2018		3,167,325		$	21.25
Granted		1,545,849		$	5.74
Forfeited		(102,648	)	$	5.67
Outstanding at June 30, 2019		4,610,526		$	16.40	9.11 years		$	3,771
Exercisable at June 30, 2019		—		$	—		—	$	—

The weighted average grant date fair values of the performance-based stock options granted during the six months ended June 30, 2019 and 2018 were $2.57 and $9.59 per share, respectively. No performance-based stock options vested during the six months ended June 30, 2019 or

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2018. At June 30, 2019, total unrecognized compensation expense related to performance-based stock options was $26,231 and is expected to be recognized over a weighted average period of 3.7 years.

Stock Options

The activity during the six months ended June 30, 2019 related to all other stock options was as follows:

				Weighted-Average
						Remaining	Aggregate
				Exercise		Contractual	Intrinsic
	Options			Price		Term	Value
Outstanding at December 31, 2018		5,154,691		$	13.78
Granted		555,346		$	5.98
Exercised		(47,099	)	$	2.56
Forfeited		(183,892	)	$	12.45
Expired		(58,459	)	$	13.09
Outstanding at June 30, 2019		5,420,587		$	13.13	8.08 years	$	3,368
Exercisable at June 30, 2019		3,269,820		$	13.94	7.65 years	$	1,811

The weighted average grant date fair value of stock options granted during the six months ended June 30, 2019 and 2018 was $3.72 and $9.73 per share, respectively. The aggregate intrinsic value of the options exercised during the six months ended June 30, 2019 and 2018 was $177 and $1,698, respectively. The total grant date fair value of stock options vested during the six months ended June 30, 2019 and 2018 was $5,465 and $4,626, respectively. At June 30, 2019, total unrecognized compensation expense related to stock options was $13,924 and is expected to be recognized over a weighted average period of 2.1 years.

The aggregate intrinsic values in the tables above represents the difference between the fair market value of the Company’s common stock and the average option exercise price of in-the-money options, multiplied by the number of such options.

Employee Stock Purchase Plan

On January 31, 2019, a total of 64,967 shares of common stock were purchased under the Company’s ESPP. As of June 30, 2019, accrued employee contributions for future purchases under the ESPP totaled $277.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2018. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed under “Risk Factors,” set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018. See “Special Note Regarding Forward-Looking Statements” above at page 1.

Overview

Veritone, Inc.(collectively with our subsidiaries, referred to as “Veritone,” “Company,” “we,” “our,” and “us”) is a provider of artificial intelligence (“AI”) solutions, including our proprietary AI operating system, aiWARE™. Through our acquisition of Wazee Digital, Inc. (“Wazee Digital”), we have expanded our offerings to include digital content management and licensing services. We also operate a full-service media advertising agency. Through our acquisition of S Media Limited, doing business as Performance Bridge Media (“Performance Bridge”), we have expanded our advertising offerings to include more comprehensive podcast solutions.

The following is a discussion and analysis of certain factors that have affected our results of operations and financial condition during the periods included in the accompanying condensed consolidated financial statements. In this discussion, we refer to our media advertising agency, including Performance Bridge’s offerings, as our advertising business, our aiWARE platform and digital content management offerings, including Wazee Digital’s SaaS offerings, collectively as our aiWARE SaaS solutions, and our content licensing and live events services as our aiWARE content licensing and media services.

Acquisitions

Performance Bridge

On August 21, 2018, we acquired all of the outstanding capital stock of Performance Bridge by means of a merger of one of our indirect, wholly owned subsidiaries with and into Performance Bridge, with Performance Bridge surviving the merger as our indirect, wholly owned subsidiary. We paid initial consideration of $5.2 million and paid a total of $3.9 million in additional contingent earnout amounts based on the achievement of certain revenue milestones by Performance Bridge in its 2018 fiscal year. The initial consideration was comprised of $1.2 million paid in cash and the issuance of 349,072 shares of our common stock valued at $3.9 million based on our closing stock price on August 21, 2018. The initial consideration was subject to adjustment based on a final calculation of Performance Bridge’s net assets at closing, which was completed in the first quarter of 2019 and resulted in the issuance to the former stockholder of Performance Bridge of an additional 6,482 shares of common stock valued at less than $0.1 million based on the closing price of our common stock on January 25, 2019, which was the date both parties agreed upon the final calculation. A portion of the initial consideration, consisting of $0.1 million in cash and 34,335 shares of common stock, was deposited into a third-party escrow account at closing and will be held in such account until August 21, 2020, to secure certain indemnification and other obligations of the former stockholder of Performance Bridge. The additional earnout consideration was comprised of $0.9 million in cash and 574,231 shares of our common stock, valued at $3.0 million based on the closing price of our common stock on March 28, 2019, which were paid and issued to the former stockholder of Performance Bridge in the second quarter of 2019.

Wazee Digital

On August 31, 2018, we acquired all of the outstanding capital stock of Wazee Digital by means of a merger of one of our wholly owned subsidiaries with and into Wazee Digital, with Wazee Digital surviving the merger as our wholly owned subsidiary.  We paid an aggregate purchase price of $12.6 million, comprised of $7.4 million paid in cash and the issuance of a total of 491,157 shares of our common stock valued at $5.1 million based on our closing stock price on August 31, 2018. A portion of the consideration, consisting of $0.9 million in cash and 60,576 shares of common stock, was deposited into a third-party escrow account at closing and will be held in such account to secure certain indemnification and other obligations of the former stockholders of Wazee Digital. A portion of such escrowed consideration was released in March 2019, and the balance will be held in such account until August 31, 2020.  

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Machine Box

On September 6, 2018, we acquired all of the outstanding capital stock of Machine Box, Inc. (“Machine Box”) by means of a merger of one of our wholly owned subsidiaries with and into Machine Box, with Machine Box surviving the merger as our wholly owned subsidiary. We paid initial consideration of $1.5 million, and we agreed to pay up to an additional $3.0 million in contingent amounts if Machine Box achieves certain technical development and integration milestones within 12 months after the closing of the acquisition, a portion of which was paid in the first six months of 2019, as discussed below. The initial consideration was comprised of $0.4 million paid in cash and the issuance of a total of 128,300 shares of our common stock, valued at $1.1 million based on our closing stock price on September 6, 2018, of which $0.1 million in cash and 26,981 shares of common stock were held back from payment and issuance by us until September 6, 2020, to secure certain indemnification and other obligations of the former stockholders of Machine Box. The additional contingent payments (if earned) will be comprised of 20% cash and 80% shares of our common stock.

The fair value of the contingent amount totaled $2.9 million and is treated as compensation expense for post-combination services as payment of such amount is conditioned upon the continued employment of certain key employees of Machine Box in addition to the achievement of certain performance milestones by Machine Box. The preliminary fair value of the contingent amount was determined using a probability-weighted expected payment model. This expense is being recognized as research and development expense over three separate intervals tied to the specific performance milestones during the twelve months following the acquisition. We recorded compensation expense of $0.5 million and $1.3 million in research and development expense in connection with the additional contingent amounts in the three and six months ended June 30, 2019, respectively.

In March 2019, we determined that Machine Box had achieved the technical development and integration milestones required to be completed as of March 6, 2019 and, as a result, the former Machine Box stockholders became entitled to receive an aggregate of $0.2 million in cash and an aggregate of 135,583 shares of our common stock, valued at $0.9 million based on the closing price of our common stock on March 6, 2019.  In March 2019, we paid to the former Machine Box stockholders an aggregate of $160,000 in cash and issued to them an aggregate of 108,469 shares of our common stock. We held back $40,000 in cash and 27,114 shares of common stock from payment and issuance until September 6, 2020, to secure certain indemnification and other obligations of the former stockholders of Machine Box. The value of the common stock that was held back was recorded as additional paid-in capital.

In June 2019, we determined that Machine Box had achieved the technical development and integration milestones required to be completed as of June 6, 2019 and, as a result, the former Machine Box stockholders became entitled to receive an aggregate of $0.2 million in cash and an aggregate of 97,082 shares of our common stock, valued at $0.8 million based on the closing price of our common stock on June 6, 2019.  We issued to the former Machine Box stockholders an aggregate of 77,666 shares of our common stock in June 2019, and we paid to them an aggregate of $160,000 in cash in July 2019. We held back $40,000 in cash and 19,416 shares of common stock from payment and issuance until September 6, 2020, to secure certain indemnification and other obligations of the former stockholders of Machine Box. The value of the common stock that was held back was recorded as additional paid-in capital.

Sales of Common Stock

During the first six months of 2019, we sold an aggregate of 1,668,663 shares of our common stock pursuant to the Equity Distribution Agreement that we entered into with JMP Securities LLC in June 2018 (the “Equity Distribution Agreement”).  We received net proceeds from such sales of approximately $11.8 million, after deducting expenses of $0.4 million.  The terms of the Equity Distribution Agreement are discussed under the heading “Capital Resources” below.

Key Performance Indicators

We track key performance indicators (“KPIs”) for our advertising business and our aiWARE SaaS solutions business. We do not currently track KPIs for our aiWARE content licensing and media services.

The key performance indicators for our advertising business include: (i) number of new clients, (ii) total number of clients with active advertising campaigns, (iii) average advertising spend per active client, and (iv) net revenue. The key performance indicators for our aiWARE SaaS solutions business include: (i) total number of customers; (ii) total number of accounts on the platform, (iii) number of active cognitive engines on the platform, (iv) hours of data processed, (v) total contract value of new bookings, (vi) monthly recurring revenue under active agreements, and (vii) net revenue.

We have incorporated the Performance Bridge and Wazee Digital businesses, which we acquired in the third quarter of 2018, in tracking our performance against certain of these KPIs, where appropriate.  As our combined businesses evolve, we will continue to evaluate the KPIs that are most relevant to our businesses, and we anticipate that our KPIs may change over time.

Advertising KPI Results

The following table sets forth the results for each of the KPIs for our advertising business. For comparability, these KPI results are shown both including and excluding the results of the Performance Bridge business.  Performance Bridge’s results are included in each KPI for the three most recent full quarters, and with respect to net revenue, Performance Bridge’s results are also included for the portion of the quarter ended September 30, 2018 following the closing date of that acquisition.

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		Quarter Ended
		Mar 31,		Jun 30,		Sept 30,		Dec 31,		Mar 31,		Jun 30,
		2018		2018		2018		2018		2019		2019
Including acquisition:
	Net new advertising clients added during quarter		14		14		10		14		14		21
	Clients with active advertising campaigns during quarter		60		74		78		115		107		108
	Average advertising spend per active client during quarter (in 000's)	$	490	$	425	$	540	$	478	$	486	$	497
	Net revenue during quarter (in 000's)	$	3,121	$	3,308	$	4,730	$	5,986	$	5,714	$	5,842
Excluding acquisition:
	Net new advertising clients added during quarter		14		14		10		14		14		21
	Clients with active advertising campaigns during quarter		60		74		78		76		71		71
	Average advertising spend per active client during quarter (in 000's)	$	490	$	425	$	540	$	616	$	604	$	542
	Net revenue during quarter (in 000's)	$	3,121	$	3,308	$	4,296	$	4,681	$	4,186	$	4,299

Our advertising business has experienced and may continue to experience volatility in net revenues due to a number of factors, including: (i) the timing of new large client wins; (ii) loss of clients who choose to replace our services by bringing their advertising placement in-house; (iii) clients who experience reductions in their advertising budgets due to issues with their own business; (iv) loss of clients who change providers from time to time based largely on pricing; and (v) the seasonality of the campaigns for certain large clients. Our advertising business also relies on certain large key clients and has historically generated a significant portion of its net revenues from a few major clients. As we continue to grow and diversify our client base, we expect that our average media spend per active client may decline, while our dependency on a limited number of large clients will also be minimized.

aiWARE SaaS Solutions KPI Results

The following table sets forth the results for each of the KPIs for our aiWARE SaaS solutions business. For comparability, these KPI results are shown both including and excluding results related to the Wazee Digital and Machine Box offerings. Results related to the Wazee Digital and Machine Box offerings are included in the following KPIs for the three most recent full quarters: (i) total number of customers, (ii) total accounts on the platform, (iii) total contract value of new bookings, (iv) monthly recurring revenue under active agreements and (v) net revenue. The results related to the Wazee Digital and Machine Box offerings are also included in net revenue for the portion of the quarter ended September 30, 2018 following the closing date of that acquisition. The other KPIs are not applicable to the Wazee Digital or Machine Box offerings.

		Quarter Ended
		Mar 31,		Jun 30,		Sept 30,		Dec 31,		Mar 31,		Jun 30,
		2018		2018		2018		2018		2019		2019
Including acquisitions:
	Total customers at quarter end		70		86		93		123		129		136
	Total accounts on platform at quarter end		591		625		634		840		911		941
	Active cognitive engines at quarter end		184		214		252		287		343		357
	Hours of data processed during quarter		2,805,000		2,729,000		2,830,000		3,566,000		4,061,000		4,015,050
	Total contract value of new bookings received during quarter (in 000's)	$	237	$	583	$	226	$	1,196	$	1,316	$	1,362
	Monthly recurring revenue under agreements in effect at quarter end (in 000's)	$	169	$	214	$	191	$	544	$	494	$	545
	Net revenue during quarter (in 000's)	$	1,267	$	860	$	1,406	$	2,426	$	2,754	$	2,677
Excluding acquisitions:
	Total customers at quarter end		70		86		93		97		103		107
	Total accounts on platform at quarter end		591		625		634		814		885		913
	Active cognitive engines at quarter end		184		214		252		287		343		357
	Hours of data processed during quarter		2,805,000		2,729,000		2,830,000		3,566,000		4,061,000		4,015,050
	Total contract value of new bookings received during quarter (in 000's)	$	237	$	583	$	226	$	898	$	736	$	765
	Monthly recurring revenue under agreements in effect at quarter end (in 000's)	$	169	$	214	$	191	$	229	$	235	$	283
	Net revenue during quarter (in 000's)	$	1,267	$	860	$	1,077	$	1,474	$	1,639	$	1,735

As we grow our aiWARE SaaS solutions business, we expect that our KPI results will be impacted in different ways based on our customer profiles and the nature of their use of our aiWARE SaaS solutions in certain target markets.  For example, in the legal and government markets, use of our aiWARE SaaS solutions is often project-based and, accordingly, in a given period, we may experience significant increases or

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decreases in net revenue and in hours of data processed without any change in total customers, accounts or monthly recurring revenue.  In the media and entertainment market, as our existing customers expand their use of new applications and services available through aiWARE to gain additional insights from their data, our monthly recurring revenues and net revenues would increase while the associated number of customers, accounts and hours of data processed would remain unchanged.  As such, our results for different KPIs may fluctuate significantly within the same period, and the result for a particular KPI in one period may not be indicative of the results that we will achieve for that KPI in future periods.

Results of Operations

The following table sets forth items from our condensed consolidated statement of operations and comprehensive loss for the three and six months ended June 30, 2019 and 2018, presented as a percentage of revenue:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net revenues		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenues		37.2			19.7			34.6			16.2
Gross profit		62.8			80.3			65.4			83.8
Operating expenses:
Sales and marketing		52.6			123.4			51.6			127.3
Research and development		51.8			123.5			54.5			113.1
General and administrative		94.9			180.3			95.7			167.0
Total operating expenses		199.2			427.1			201.7			407.4
Loss from operations		(136.4	)		(346.8	)		(136.3	)		(323.6	)
Other income, net		0.4			3.2			1.1			3.7
Loss before provision for income taxes		(136.0	)		(343.6	)		(135.2	)		(319.9	)
Provision for income taxes		—			—			—			—
Net loss		(136.0	)		(343.6	)		(135.2	)		(319.9	)

Three and Six Months Ended June 30, 2019 Compared with Three and Six Months Ended June 30, 2018

Net Revenues

	Three Months Ended									Six Months Ended
(dollars in thousands)	June 30,									June 30,
	2019		2018		$ Change		% Change			2019		2018		$ Change		% Change
Advertising	$	5,842	$	3,308	$	2,534		76.6	%	$	11,556	$	6,429	$	5,127			79.7	%
aiWARE SaaS Solutions		2,677		860		1,817		211.3	%		5,457		2,127		3,330			157	%
aiWARE Content Licensing and Media Services		3,751		—		3,751	NM				7,382		—		7,382		NM
Net revenues	$	12,270	$	4,168	$	8,102		194.4	%	$	24,395	$	8,556	$	15,839			185	%

Advertising net revenues increased in the second quarter and first six months of 2019 compared with the corresponding prior year periods, due primarily to the addition of $1.5 million and $3.1 million in net revenues generated by Performance Bridge for the three and six months ended June 30, 2019, respectively. Excluding the impact of the Performance Bridge acquisition, our advertising net revenues increased by $1.0 million, or 30%, in the second quarter of 2019 and $2.1 million, or 32%, in the first six months of 2019 compared with the corresponding prior year periods, due primarily to a combination of the addition of new clients and increased business with existing clients.

aiWARE SaaS Solutions net revenues increased in the second quarter and first six months of 2019 compared with the corresponding prior year periods due primarily to the addition of $0.9 million and $2.1 million in net revenues generated by Wazee Digital for the three and six months ended June 30, 2019, respectively. Excluding the impact of the Wazee Digital acquisition, our aiWARE SaaS solutions net revenues increased by $0.9 million, or 102%, in the second quarter of 2019 compared with the second quarter of 2018, due primarily to an increase of $0.7 million, or 83%, in net revenues in our media and entertainment market as we added new customers and expanded our services to some existing customers. Excluding the impact of the Wazee Digital acquisition, our aiWARE SaaS solutions net revenues increased by $1.2 million, or 59%, in the first six months of 2019 compared with the corresponding prior year period, due primarily to an increase of $1.1 million in net revenues from customers in our media and entertainment market and an increase of $0.5 million in net revenues from customers in our government market. These increases were offset in part by a decrease of $0.4 million in net revenues from customers in our legal market, due primarily to a large project in the 2018 period that did not recur in the current year period.

All of the net revenues generated from aiWARE content licensing and media services in the second quarter and first six months of 2019 resulted from our acquisition of Wazee Digital, for which we had no corresponding net revenues in the corresponding prior year periods.

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Net revenues in our advertising business are impacted by the timing of particular advertising campaigns of our major clients, in many cases due to the seasonal nature of their advertising activities.  Net revenues from our aiWARE content licensing and media services are impacted by the timing of major sporting events throughout the year.  In our aiWARE SaaS solutions business, revenues from customers in certain markets, particularly in the legal market, are often project-based and are impacted by the timing of large projects.  As such, in general, we expect that our net revenues from these businesses and markets may fluctuate significantly from period to period.

Cost of Revenues; Gross Profit and Gross Margin

	Three Months Ended											Six Months Ended
(dollars in thousands)	June 30,											June 30,
	2019			2018			$ Change		% Change			2019			2018			$ Change		% Change
Cost of net revenue	$	4,562		$	820		$	3,742		456.3	%	$	8,434		$	1,384		$	7,050		509.4	%
Gross profit		7,708			3,348			4,360		130.2	%		15,961			7,172			8,789		122.5	%
Gross margin		63	%		80	%							65	%		84	%

The decrease in gross margin in the three and six months ended June 30, 2019 compared with the corresponding prior year periods reflects the lower proportion of our total net revenues, represented by our advertising business.  Our advertising revenues represented 48% and 47% of our total net revenues for the three and six months ended June 30, 2019, respectively, compared with 79% and 75% of our total revenues for the three and six months ended June 30, 2018, respectively.  Our advertising business generally has gross margins exceeding 95%, significantly higher than the gross margins of our aiWARE SaaS solutions and aiWARE content licensing and media services businesses, and with a higher proportion of our net revenues from our aiWARE businesses, our overall gross margin decreased in the three and six months ended June 30, 2019.  We expect this trend to continue over time as net revenues from our aiWARE SaaS solutions and aiWARE content licensing and media services continue to comprise a higher proportion of our total net revenues.  In addition, our cost of revenues for the three and six months ended June 30, 2019 included $0.5 million and $0.8 million of expense, respectively, related to the amortization of intangible assets acquired in the third quarter of 2018, which reduced our gross margin by approximately 3.9% and 3.3% compared with the three and six months ended June 30, 2018, respectively.

Operating Expenses

	Three Months Ended									Six Months Ended
(dollars in thousands)	June 30,									June 30,
	2019		2018		$ Change		% Change			2019		2018		$ Change		% Change
Sales and marketing	$	6,448	$	5,142	$	1,306		25.4	%	$	12,581	$	10,890	$	1,691		15.5	%
Research and development		6,351		5,146		1,205		23.4	%		13,289		9,674		3,615		37.4	%
General and administrative		11,645		7,513		4,132		55.0	%		23,335		14,291		9,044		63.3	%
Total operating expenses	$	24,444	$	17,801	$	6,643		37.3	%	$	49,205	$	34,855	$	14,350		41.2	%

Sales and Marketing. The increases in sales and marketing expenses in absolute dollars for the three and six months ended June 30, 2019 compared with the corresponding prior year periods were due primarily to the addition of $1.0 million and $1.9 million of sales and marketing expenses for Wazee Digital and Performance Bridge for the three and six months ended June 30, 2019, respectively, and to expenses of $0.4 million and $0.5 million in the three and six months ended June 30, 2019, respectively, related to amortization of customer relationships associated with those acquisitions. These increases were offset in part by spending reductions as we focused on sales and marketing efforts that we believe would deliver the highest value. As a percentage of net revenues, sales and marketing expenses declined to 52.6% and 51.6% in the three and six months ended June 30, 2019, respectively, from 123.4% and 127.3% in the corresponding prior year periods, due to the increased operating leverage provided by our higher revenue level.

Research and Development. The increase in research and development expenses in absolute dollars in the three months ended June 30, 2019 compared with the corresponding prior year period was due primarily to the addition of $0.9 million of research and development expenses for Wazee Digital and Machine Box and $0.6 million of amortization of intangibles and earn-out compensation expense associated with those acquisitions. As a percentage of net revenues, research and development expenses declined to 51.8% in the second quarter of 2019 from 123.5% in prior year period, due to the increased operating leverage provided by our higher revenue level.

The increase in research and development expenses in absolute dollars in the six months ended June 30, 2019 compared with the prior year period was due primarily to the addition of $1.7 million of research and development expenses for Wazee Digital and Machine Box, $1.1 million of amortization of intangibles and earn-out compensation expense associated with those acquisitions. As a percentage of net revenues, research and development expenses declined to 54.5% in the first six months of 2019 from 113.1% in prior year period, due to the increased operating leverage provided by our higher revenue level.

26

General and Administrative.The increase in general and administrative expenses in absolute dollars in the three months ended June 30, 2019compared with the corresponding prior year period was due primarily to an increase in stock-based compensation expense of $2.4 million, related primarily to performance-based stock options and acquisition-related stock awards, and the addition of $1.3 million of general and administrative expenses for Wazee Digital and Performance Bridge.As a percentage of net revenues, general and administrative expenses declined to 94.9% in thesecond quarter of 2019 from 180.3% in the prior year period, due to the increased operating leverage provided by our higher revenue level.

The increase in general and administrative expenses in the six months ended June 30, 2019 compared with the prior year period was due primarily to an increase in stock-based compensation expense of $4.6 million, related primarily to performance-based stock options and acquisition-related stock awards, and the addition of $2.8 million of general and administrative expenses for Wazee Digital and Performance Bridge. As a percentage of net revenues, general and administrative expenses declined to 95.7% in the first six months of 2019 from 167.0% in the prior year period, due to the increased operating leverage provided by our higher revenue level.

We intend to continue to invest in the development of our AI capabilities and enhancement of our aiWARE SaaS solutions and services, and in our sales and marketing efforts in order to drive greater awareness of our offerings, gain new customers and grow our business.  We also expect that we will incur additional general and administrative expenses in the future to support the growth of our business.  However, we plan to manage our operating expenses prudently and to grow them at a rate less than the growth in our net revenues. As such, we expect that our operating expenses will continue to increase in absolute dollars, but will decrease as a percentage of net revenues as we grow revenues in the future.

Other Income, Net

Other income, net, which totaled $0.1 million in each of the three month periods ended June 30, 2019 and 2018, and totaled $0.3 million in each of the six month periods ended June 30, 2019 and 2018, was comprised primarily of interest income on investments in money market funds and marketable securities.

Liquidity and Capital Resources

Our principal sources of liquidity are our cash and cash equivalents and marketable securities, which totaled $45.3 million as of June 30, 2019, compared with total cash and cash equivalents and marketable securities of $51.1 million as of December 31, 2018. The decrease in the combined balance of our cash and cash equivalents and marketable securities in the six months ended June 30, 2019 was due primarily to cash used to fund our operations, offset in large part by the net proceeds of $11.8 million received from sales of common stock during the first six months of 2019.

Cash Flows

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

	Six Months Ended
(in thousands)	June 30,
	2019			2018
Cash used in operating activities	$	(16,606	)	$	(21,341	)
Cash provided by investing activities		7,048			11,031
Cash provided by financing activities		12,192			33,457
Net increase in cash and cash equivalents	$	2,634		$	23,147

Operating Activities

Our operating activities used cash of $16.6 million in the six months ended June 30, 2019, due primarily to our net loss of $33.0 million, adjusted by $14.0 million in non-cash expenses, including $11.3 million in stock-based compensation expense. The cash used in operating activities reflects our business strategy of investing in the development of our AI capabilities and enhancement of our aiWARE SaaS solutions and services to grow our business and future revenues. We gauge the amount of cash utilized in these efforts using the adjusted EBITDAS metric presented below under the heading “Non-GAAP Financial Measure.” Our use of cash as measured by adjusted EBITDAS decreased to $18.5 million in the six months ended June 30, 2019 from $21.2 million in the six months ended June 30, 2018, as we leveraged the increase in net revenues, offset by the operating costs associated with the businesses we acquired in the third quarter of 2018, to reduce our adjusted EBITDAS loss.

Our operating activities used cash of $21.3 million in the six months ended June 30, 2018. The cash used in operating activities in the first six months of 2018 reflected our business strategy, namely adding internal resources in software engineering and data science to expand the capabilities of our aiWARE platform and in sales and marketing to develop future revenues from our platform.

27

Investing Activities

Our investing activities provided cash of $7.0 million in the six months ended June 30, 2019. Net cash provided by investing activities consisted primarily of proceeds from maturing marketable securities, which were used to fund a portion of the cash used in our operating activities, offset in part by $0.9 million of cash paid to the former stockholder of Performance Bridge as additional earnout consideration and $0.5 million of cash to acquire software that we expect will enhance aiWARE.

Our investing activities provided cash of $11.0 million in the six months ended June 30, 2018, due primarily to proceeds of $14.0 million from maturing marketable securities offset in part by capital expenditures of $2.9 million related to the build-out and furnishing of our leased headquarters.

Financing Activities

Our financing activities provided cash of $12.2 million in the six months ended June 30, 2019. Net cash provided by financing activities consisted of $11.8 million in net proceeds received from our sales of common stock and $0.4 million received from the exercise of stock options and purchases of shares under our ESPP.

Our financing activities provided cash of $33.5 million in the six months ended June 30, 2018, due primarily to$32.9 million in net proceeds received from our common stock offering in June 2018 and $0.9 million received from the exercise of stock options and purchases of shares under our ESPP.

Capital Resources

In June 2018, we entered into an Equity Distribution Agreement with JMP Securities LLC, as sales agent (“JMP Securities”), pursuant to which we may offer and sell, from time to time, through JMP Securities, shares of our common stock having an aggregate offering price of up to $50.0 million, of which $35.5 million remains available for sale as of the date of this filing. Subject to the terms and conditions of the Equity Distribution Agreement and satisfaction of certain conditions, JMP Securities will use commercially reasonable efforts, consistent with its normal trading and sales practices, applicable state and federal law, rules and regulations, and the rules of The Nasdaq Global Market, to sell shares of our common stock from time to time based upon our instructions, including any price, time or size limits that we specify, in any method deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act. We will pay JMP Securities a commission of 3.0% of the aggregate gross proceeds from each sale of shares.

We are not obligated to sell any shares under the Equity Distribution Agreement. The Equity Distribution Agreement may be terminated by JMP Securities or us at any time upon notice to the other party, or by JMP Securities at any time in certain circumstances, including the occurrence of a material adverse change in our business or financial condition that makes it impractical or inadvisable to market our shares or to enforce contracts for the sale of the shares.

As of June 30, 2019, we had no outstanding debt obligations.

We used $0.2 million in cash in July 2019 to fund the second contingent payment, and we expect to use an additional $0.2 million in cash in the third quarter of 2019 to fund the final contingent payment, in connection with our acquisition of Machine Box.

We have generated significant losses since inception and expect to continue to generate losses for the foreseeable future. However, we believe that our current cash and cash equivalents and marketable securities balances will be sufficient to fund the contingent payments discussed above and our operations in the ordinary course of business for at least the next twelve months. We have no present agreements or commitments with respect to any material acquisitions of businesses or technologies or any other material capital expenditures. We will continue to evaluate potential acquisitions of and/or investments in companies or technologies that complement our business and may make such acquisitions and/or investments in the future. Accordingly, we may need to obtain additional sources of capital in the future to finance any such acquisitions and/or investments. We may not be able to obtain such financing on commercially reasonable terms, if at all. If we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.

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

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.

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Non-GAAP Financial Measure

We have presented an adjusted EBITDAS measure in the discussion of our cash flows above. The items excluded from adjusted EBITDAS are detailed in the reconciliation below. Adjusted EBITDAS is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”) and should not be considered as an alternative to net income (loss), operating income (loss) or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. Other companies (including our competitors) may define adjusted EBITDAS differently. We have presented adjusted EBITDAS because management believes it to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in our industry, and believes that it provides a useful comparison of our current period financial results to our historical and future financial results. Management also uses this information internally for forecasting and budgeting. This non-GAAP measure may not be indicative of our historical operating results or predictive of our potential future results. Investors should not consider adjusted EBITDAS in isolation or as a substitute for analysis of our results as reported in accordance with GAAP.

	Three Months Ended						Six Months Ended
(in thousands)	June 30,						June 30,
	2019			2018			2019			2018
Reconciliation of Net Loss to Adjusted EBITDAS:
Net loss	$	(16,691	)	$	(14,330	)	$	(32,997	)	$	(27,379	)
Provision for income taxes		6			10			15			12
Depreciation and amortization		1,586			473			2,719			828
Stock-based compensation expense		5,255			2,651			10,058			5,125
Issuance of warrants		—			207			—			207
Change in fair value of warrant liability		37			15			50			15
Machine Box contingent payments		530			—			1,447			—
Machine Box earn-out fair value adjustment		70			—			70			—
Performance Bridge earn-out fair value adjustment		—			—			139			—
Adjusted EBITDAS	$	(9,207	)	$	(10,974	)	$	(18,499	)	$	(21,192	)

Item 3.Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by Item 305 of Regulation S-K.

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Quarterly Report on Form 10-Q due to the material weakness that was previously reported in our Annual Report on Form 10-K for the year ended December 31, 2018, related to accounting for infrequent complex transactions such as the three business combinations completed in the third quarter of 2018.  We have initiated measures to remediate such material weakness; however, it had not been remediated as of June 30, 2019.  Notwithstanding the foregoing, our management has concluded that our condensed consolidated financial statements for the periods covered by and included in this Quarterly Report are prepared in accordance with GAAP and fairly present, in all material respects, our financial position, results of operations and cash flows for each of the periods presented herein.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q, other than additional measures initiated to continue to remediate the material weakness disclosed above that was identified during the fourth quarter of 2018, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based

29

upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

30

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. We currently are not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on our results of operations, financial position or cash flows. Regardless of the outcome, any litigation could have an adverse impact on us due to defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors

Our Annual Report on Form 10-K for the year ended December 31, 2018 contains a discussion of the most significant risks associated with our business. There have been no other material changes to the risks described in our Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Equity Securities

On January 24, 2019, we issued a total of 6,482 shares of our common stock to the former stockholder of Performance Bridge as additional consideration based on a final calculation of Performance Bridge’s net assets at closing.

On March 6, 2019, we issued a total of 108,469 shares of our common stock as additional contingent consideration to the former stockholders of Machine Box.

On May 28, 2019, we issued a total of 574,231 shares of our common stock as additional earnout consideration to the former stockholder of Performance Bridge.

On June 6, 2019, we issued a total of 77,666 shares of our common stock as additional contingent consideration to the former stockholders of Machine Box.

No underwriters were involved in the foregoing issuances of securities.  The securities were issued in reliance upon the exemption from the registration requirements of the Securities Act, as set forth in Section 4(a)(2) of the Securities Act.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

31

Item 6. Exhibits

Exhibit No.	Description of Exhibit
31.1	Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
31.2	Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
32.1*	Certifications pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350.
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

* The certifications furnished in Exhibit 32.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (including this Quarterly Report on Form 10-Q), unless the Registrant specifically incorporates the foregoing information into those documents by reference.

32

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Veritone, Inc.
August 8, 2019	By	/s/ Chad Steelberg
		Chad Steelberg
		Chief Executive Officer and Chairman of the Board
		(Principal Executive Officer)
August 8, 2019	By	/s/ Peter F. Collins
		Peter F. Collins
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

33

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

RULE 13a-14(a) OR RULE 15d-14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

I, Chad Steelberg, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Veritone, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant ‘s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2019	By:	/s/ Chad Steelberg
		Chad Steelberg
		Chief Executive Officer and Chairman of the Board
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

RULE 13a-14(a) OR RULE 15d-14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

I, Peter F. Collins, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Veritone, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2019	By:	/s/ Peter F. Collins
		Peter F. Collins
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS PURSUANT TO RULE 13a-14(b) OR RULE 15d-14(b)
OF THE SECURITIES EXCHANGE ACT OF 1934

AND 18 U.S.C. SECTION 1350

Each of the undersigned hereby certifies, pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, in his capacity as an officer of Veritone, Inc., that, to his knowledge, the Quarterly Report on Form 10-Q of Veritone, Inc. for the period ended June 30, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Veritone, Inc.

Date: August 8, 2019	By	:	/s/ Chad Steelberg
			Chad Steelberg
			Chief Executive Officer and Chairman of the Board
			(Principal Executive Officer)
Date: August 8, 2019	By	:	/s/ Peter F. Collins
			Peter F. Collins
			Executive Vice President and Chief Financial Officer
			(Principal Financial and Accounting Officer)

A signed original of this written statement required by 18 U.S.C. Section 1350 has been provided to Veritone, Inc. and will be retained by Veritone, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Jul. 31, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Trading Symbol	VERI
Entity Registrant Name	Veritone, Inc.
Entity Central Index Key	0001615165
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity File Number	001-38093
Entity Tax Identification Number	471161641
Entity Address, Address Line One	575 Anton Blvd.
Entity Address, Address Line Two	Suite 100
Entity Address, City or Town	Costa Mesa
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92626
City Area Code	888
Local Phone Number	507-1737
Entity Common Stock, Shares Outstanding		22,223,453

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
ASSETS
Cash and cash equivalents	$ 40,275	$ 37,539
Marketable securities	4,998	13,565
Accounts receivable, net of allowance for doubtful accounts of $71 and $40, respectively	26,820	29,142
Expenditures billable to clients	4,806	2,695
Prepaid expenses and other current assets	3,625	3,579
Total current assets	80,524	86,520
Long-term restricted cash	1,135	1,237
Property, equipment and improvements, net	3,660	4,008
Intangible assets, net	18,823	20,480
Goodwill	5,420	5,509
Total assets	109,562	117,754
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	18,459	28,714
Accrued media payments	12,414	7,416
Client advances	14,281	9,639
Accrued compensation	2,819	6,570
Other accrued liabilities	5,721	3,746
Total current liabilities	53,694	56,085
Other liabilities	1,369	1,386
Total liabilities	55,063	57,471
Commitments and contingencies (Note 8)
Stockholders' equity
Common stock, par value $0.001 per share; 75,000,000 shares authorized; 21,918,406 and 19,335,220 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively	22	19
Additional paid-in capital	257,813	230,674
Accumulated deficit	(203,408)	(170,411)
Accumulated other comprehensive income	72	1
Total stockholders' equity	54,499	60,283
Total liabilities and stockholders' equity	$ 109,562	$ 117,754

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Allowance for doubtful accounts	$ 71	$ 40
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	21,918,406	19,335,220
Common stock, shares outstanding	21,918,406	19,335,220

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Net revenues	$ 12,270	$ 4,168	$ 24,395	$ 8,556
Cost of revenues	4,562	820	8,434	1,384
Gross profit	7,708	3,348	15,961	7,172
Operating expenses:
Sales and marketing	6,448	5,142	12,581	10,890
Research and development	6,351	5,146	13,289	9,674
General and administrative	11,645	7,513	23,335	14,291
Total operating expenses	24,444	17,801	49,205	34,855
Loss from operations	(16,736)	(14,453)	(33,244)	(27,683)
Other income, net	51	133	262	316
Loss before provision for income taxes	(16,685)	(14,320)	(32,982)	(27,367)
Provision for income taxes	6	10	15	12
Net loss	$ (16,691)	$ (14,330)	$ (32,997)	$ (27,379)
Net loss per share:
Basic and diluted	$ (0.80)	$ (0.88)	$ (1.64)	$ (1.69)
Weighted average shares outstanding:
Basic and diluted	20,759,396	16,314,236	20,138,756	16,192,569
Comprehensive loss:
Net loss	$ (16,691)	$ (14,330)	$ (32,997)	$ (27,379)
Unrealized gain (loss) on marketable securities, net of income taxes	13	61	48	(2)
Foreign currency translation adjustments, net of income taxes	45	30	24	20
Total comprehensive loss	$ (16,633)	$ (14,239)	$ (32,925)	$ (27,361)

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Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Loss [Member]
Beginning balance at Dec. 31, 2017	$ 61,302	$ 16	$ 170,728	$ (109,307)	$ (135)
Beginning balance, shares at Dec. 31, 2017		16,158,883
Common stock offerings, net	32,536	$ 2	32,534
Common stock offerings, net, shares		1,955,000
Common stock issued under employee stock purchase plan	921		921
Common stock issued under employee stock purchase plan, shares		203,551
Stock-based compensation expense	5,125		5,125
Net loss	(27,379)			(27,379)
Other	18				18
Ending balance at Jun. 30, 2018	72,523	$ 18	209,308	(136,686)	(117)
Ending balance, shares at Jun. 30, 2018		18,317,434
Beginning balance at Dec. 31, 2017	61,302	$ 16	170,728	(109,307)	(135)
Beginning balance, shares at Dec. 31, 2017		16,158,883
Net loss	(61,104)
Ending balance at Dec. 31, 2018	60,283	$ 19	230,674	(170,411)	1
Ending balance, shares at Dec. 31, 2018		19,335,220
Beginning balance at Mar. 31, 2018	51,146	$ 16	173,817	(122,479)	(208)
Beginning balance, shares at Mar. 31, 2018		16,254,054
Common stock offerings, net	32,601	$ 2	32,599
Common stock offerings, net, shares		1,955,000
Common stock issued under employee stock purchase plan	364		364
Common stock issued under employee stock purchase plan, shares		108,380
Stock-based compensation expense	2,528		2,528
Net loss	(14,330)			(14,330)
Other	214			123	91
Ending balance at Jun. 30, 2018	72,523	$ 18	209,308	(136,686)	(117)
Ending balance, shares at Jun. 30, 2018		18,317,434
Beginning balance at Dec. 31, 2018	60,283	$ 19	230,674	(170,411)	1
Beginning balance, shares at Dec. 31, 2018		19,335,220
Common stock offerings, net	12,215	$ 2	12,213
Common stock offerings, net, shares		1,668,663
Exercise of options	120		120
Exercise of options, shares		47,099
Common stock issued under employee stock purchase plan	294		294
Common stock issued under employee stock purchase plan, shares		64,967
Common stock issue upon vesting of restricted stock units, shares		35,609
Machine Box holdback consideration	620		620
Common stock issued for acquisitions	3,835	$ 1	3,834
Common stock issued for acquisitions, shares		766,848
Stock-based compensation expense	10,058		10,058
Net loss	(32,997)			(32,997)
Other	71				71
Ending balance at Jun. 30, 2019	54,499	$ 22	257,813	(203,408)	72
Ending balance, shares at Jun. 30, 2019		21,918,406
Beginning balance at Mar. 31, 2019	57,499	$ 20	244,182	(186,717)	14
Beginning balance, shares at Mar. 31, 2019		20,197,188
Common stock offerings, net	8,055	$ 1	8,054
Common stock offerings, net, shares		1,006,663
Exercise of options	90		90
Exercise of options, shares		27,049
Common stock issue upon vesting of restricted stock units, shares		35,609
Machine Box holdback consideration	162		162
Common stock issued for acquisitions	71	$ 1	70
Common stock issued for acquisitions, shares		651,897
Stock-based compensation expense	5,255		5,255
Net loss	(16,691)			(16,691)
Other	58				58
Ending balance at Jun. 30, 2019	$ 54,499	$ 22	$ 257,813	$ (203,408)	$ 72
Ending balance, shares at Jun. 30, 2019		21,918,406

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net loss	$ (32,997)	$ (27,379)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,719	828
Costs of warrants issued		207
Change in fair value of warrant liability	50	15
Provision for doubtful accounts	44	22
Stock-based compensation expense	11,285	5,125
Other	(19)
Changes in assets and liabilities:
Accounts receivable	2,278	(3,914)
Expenditures billable to clients	(2,111)	(900)
Prepaid expenses and other current assets	413	(367)
Accounts payable	(10,255)	2,421
Accrued media payments	4,998	1,945
Client advances	4,642	1,148
Other accrued liabilities	2,364	(966)
Other liabilities	(17)	474
Net cash used in operating activities	(16,606)	(21,341)
Cash flows from investing activities:
Proceeds from sales of marketable securities	8,616	14,000
Capital expenditures	(208)	(2,899)
Intangible assets acquired	(477)	(70)
Acquisition of businesses, net of cash acquired	(883)
Net cash provided by investing activities	7,048	11,031
Cash flows from financing activities:
Proceeds from common stock offerings, net	11,778	32,536
Proceeds from exercise of stock options	120
Proceeds from issuances of stock under employee stock plans	294	921
Net cash provided by financing activities	12,192	33,457
Net increase in cash, cash equivalents and restricted cash	2,634	23,147
Cash, cash equivalents and restricted cash, beginning of period	38,776	29,545
Cash, cash equivalents and restricted cash, end of period	$ 41,410	$ 52,692

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Description of Business

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Description of Business

NOTE 1. DESCRIPTION OF BUSINESS

Description of Business

Veritone, Inc., a Delaware corporation (“Veritone”) (together with its wholly owned subsidiaries, collectively, the “Company”), is a provider of artificial intelligence (“AI”) based computing solutions. The Company has developed aiWARE^TM, a proprietary AI operating system that integrates and orchestrates an open ecosystem of top performing cognitive engines, together with a suite of powerful applications, to reveal valuable multivariate insights from vast amounts of unstructured and structured data and conduct cognitive workflows based on these insights.  The Company’s aiWARE platform incorporates proprietary technology to integrate and intelligently orchestrate a wide variety of cognitive engine capabilities to mimic human cognitive functions such as perception, prediction and problem solving in order to quickly, efficiently and cost effectively transform unstructured data into structured data. It stores the results in a time-correlated database, creating a rich, online, searchable index of the unstructured and structured data that users can use and analyze in near real-time through the platform’s suite of general and industry-specific applications to drive business processes and insights. aiWARE is based on an open architecture that enables new cognitive engines and applications to be added quickly and efficiently, resulting in a future proof, scalable and evolving solution that can be easily leveraged for a broad range of industries that capture or use audio, video and other unstructured data including, without limitation, the media and entertainment, legal and compliance, and government vertical markets.

In August 2018, the Company acquired Wazee Digital, Inc. (“Wazee Digital”), a provider of cloud-native digital content management and content licensing services, as discussed in more detail in Note 3. The Wazee Digital offerings serve customers primarily in the media and entertainment market. The Company has integrated its aiWARE platform with these offerings, providing these customers with unique capabilities to enrich and drive expanded revenue opportunities from their content.

In addition, the Company operates a full-service advertising agency. The Company’s expertise in media buying, planning and creative development, coupled with its proprietary technology platform, enables the Company to analyze the effectiveness of advertising in a way that is simple, scalable and trackable. In August 2018, the Company acquired S Media Limited, doing business as Performance Bridge Media (“Performance Bridge”), a podcast advertising agency, as discussed in more detail in Note 3. The Performance Bridge offerings have enhanced the Company’s advertising offerings to include more comprehensive podcast solutions.

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Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Presentation and Summary of Significant Accounting Policies

NOTE 2. PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Preparation

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial statements and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. Such unaudited condensed consolidated financial statements and accompanying notes are the representations of the Company’s management, who is responsible for their integrity and objectivity. The information included in this Form 10-Q should be read in conjunction with the information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 18, 2019. Interim results for the three and six months ended June 30, 2019 are not necessarily indicative of the results the Company will have for the full year ending December 31, 2019.

The accompanying condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which are normal and recurring, necessary to fairly state its financial position, results of operations and cash flows. All significant intercompany transactions have been eliminated in consolidation. The financial data and the other information disclosed in these notes to the condensed consolidated financial statements reflected in the three month period presented are unaudited. The December 31, 2018 balance sheet included herein was derived from the audited financial statements but does not include all disclosures or notes required by GAAP for complete financial statements.

Liquidity and Capital Resources

During 2018 and 2017, the Company generated negative cash flows from operations of $42,227 and $31,911, respectively, and incurred net losses of $61,104 and $59,601, respectively. In the six months ended June 30, 2019, the Company generated negative cash flow from operations of $16,606 and incurred a net loss of $32,997. Also, the Company had an accumulated deficit of $203,408 as of June 30, 2019. Historically, the Company has satisfied its capital needs with the net proceeds from its sales of equity securities, its issuance of convertible debt, and the exercise of common stock warrants. In June 2018, the Company raised net proceeds of $32,780 through an underwritten offering of its common stock, and in the first six months of 2019, the Company raised net proceeds of $12,215 through sales of its common stock under an Equity Distribution Agreement dated June 1, 2018 (the “Equity Distribution Agreement”).

The Company expects to continue to generate net losses for the foreseeable future as it makes significant investments in developing and selling its products and services. Also, the Company will continue to evaluate potential acquisitions of, or investments in, companies or technologies that complement its business, which acquisitions may require the use of cash.

Management believes that the Company’s existing balances of cash, cash equivalents and marketable securities, which totaled $45,273 as of June 30, 2019, will be sufficient to meet its anticipated cash requirements for at least twelve months from the date that these financial statements are issued.  However, the Company’s does not expect that its current cash, cash equivalents and marketable securities will be sufficient to support the development of its business to the point at which the Company has positive cash flows from operations, particularly if it uses cash to finance any acquisitions or investments in the future.  The Company plans to meet its future needs for additional capital through equity and/or debtfinancings. Such equity financings may include sales of common stock under the Company’s Equity Distribution Agreement pursuant to which the Company may offer and sell, from time to time, shares of its common stock having an aggregate available offering price of up to $35,468. Such financing may not be available on terms favorable to the Company or at all.  If the Company is unable to obtain adequate financing or financing on terms satisfactory to it when required, the Company’s ability to continue to support its business growth, scale its infrastructure, develop product enhancements and to respond to business challenges could be significantly impaired.

Use of Accounting Estimates

The preparation of the accompanying 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 as of the date of the accompanying condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The principal estimates relate to revenue recognition, allowance for doubtful accounts, the valuation of stock awards and stock warrants, income taxes, and the allocation of net assets acquired from business acquisitions as well as contingent consideration, where applicable. Actual results could differ from those estimates.

Significant Customers

The Company’s top ten customers accounted for approximately 25.9% and 24.9% of the Company’s net revenues for the three and six months ended June 30, 2019, respectively. The Company’s top ten customers accounted for approximately 49.7% and 52.1% of the Company’s net revenues for the three and six months ended June 30, 2018, respectively. No individual customer accounted for 10% or more of the Company’s net revenues for the three and six months ended June 30, 2019.

Significant Accounting Policies

During the six months ended June 30, 2019, there have been no material changes in the Company’s significant accounting policies from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2018.

Recently Adopted Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force), which provides guidance intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. This standard became effective for the Company beginning in the first quarter of 2019. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which provides guidance on the presentation of restricted cash or restricted cash equivalents and is intended to reduce the diversity in practice of such presentations. This standard requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts on the statement of cash flows. This standard became effective for the Company beginning in the first quarter of 2019. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount that the entity expects to be entitled to receive when products are transferred to customers. Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”); ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”); and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12,” and together with ASU 2014-09, ASU 2016-08 and ASU 2016-10 the “new revenue standard”). The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. As an emerging growth company, the Company is not required to accelerate the application of the revenue standard to interim periods.  The new revenue standard will be effective for the Company for annual reporting periods beginning after December 15, 2018 and to interim periods within annual reporting periods beginning after December 15, 2019.

The Company will apply the new revenue standard on a modified retrospective basis with an adjustment to retained earnings to recognize the cumulative effect of adoption. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments under this pronouncement will change the way all leases with duration of one year or more are treated. Under this guidance, lessees will be required to capitalize virtually all leases on the balance sheet as a right-of-use asset and an associated financing lease liability or capital lease liability. The right-of-use asset represents the lessee’s right to use, or control the use of, a specified asset for the specified lease term. The lease liability represents the lessee’s obligation to make lease payments arising from the lease, measured on a discounted basis. Based on certain characteristics, leases are classified as financing leases or operating leases. Financing lease liabilities, those that contain provisions similar to capitalized leases, are amortized in the same manner as capital leases are amortized under current accounting rules, as amortization expense and interest expense in the statement of operations. Operating lease liabilities are amortized on a straight-line basis over the life of the lease as lease expense in the statement of operations. This standard will be effective for the Company beginning with the first quarter of fiscal year 2020. The Company is currently evaluating the impact this standard will have on its policies and procedures pertaining to its existing and future lease arrangements, its disclosure requirements and its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if the reporting unit had been acquired in a business combination. Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendments in this update will be effective for the Company beginning with fiscal year 2022, including interim periods, with early adoption permitted. The adoption of the amendments in this update is not expected to have a material impact on the Company's consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which provides expanded guidance to simplify the accounting for stock-based compensation by aligning the treatment of stock-based awards for nonemployees with that of stock-based awards for employees. This standard will be effective for the Company beginning in the first quarter of fiscal year 2020, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, as part of its disclosure framework project intended to improve the effectiveness of disclosures in the notes to the financial statements by updating certain disclosure requirements related to fair value measurements. The standard will be effective for the Company beginning in the first quarter of fiscal year 2020, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements.

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Business Combinations

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Business Combinations

NOTE 3. BUSINESS COMBINATIONS

Acquisition of Performance Bridge

On August 21, 2018, the Company acquired all of the outstanding capital stock of Performance Bridge by means of a merger of an indirect, wholly owned subsidiary of the Company with and into Performance Bridge, with Performance Bridge surviving the merger as an indirect, wholly owned subsidiary of the Company. The Company paid initial consideration of $5,158 and paid a total of $3,909 in additional contingent earnout amounts based on the achievement of certain revenue milestones by Performance Bridge in its 2018 fiscal year. The initial consideration was comprised of $1,220 paid in cash and the issuance of 349,072 shares of the Company’s common stock, valued at $3,938 based on the Company’s closing stock price on August 21, 2018. The initial consideration was subject to adjustment based on a final calculation of Performance Bridge’s net assets at closing, which was completed in the first quarter of 2019 and resulted in the issuance to the former stockholder of Performance Bridge of an additional 6,482 shares of common stock valued at $34 based on the closing price of the Company’s common stock on January 25, 2019, which was the date both parties agreed upon the final calculation of the adjustment. A portion of the initial consideration, consisting of $120 in cash and 34,335 shares of common stock, was deposited into a third-party escrow account at closing and will be held in such account until August 21, 2020, to secure certain indemnification and other obligations of the former stockholder of Performance Bridge. The additional earnout consideration was comprised of $883 in cash and 574,231 shares of the Company’s common stock, valued at $3,026 based on the closing price of the Company’s common stock on March 28, 2019, which were paid and issued to the former stockholder of Performance Bridge in the second quarter of 2019.

The acquisition of Performance Bridge has expanded the Company’s media agency offerings of comprehensive podcast solutions.

The following table summarizes the fair value of the purchase price consideration for the acquisition of Performance Bridge:

Acquisition consideration	Amount
Cash consideration at closing	$	1,220
Equity consideration at closing		3,938
Working capital adjustment		34
Contingent earnout consideration		3,770
Estimated purchase price	$	8,962

The following allocation of the purchase price as of the August 21, 2018 closing date under the acquisition method of accounting is preliminary as to the determination of deferred taxes as the information is not available at the time of this filing. The purchase price allocation is based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition:

Preliminary purchase price allocation:	Amount
Cash	$	2,283
Accounts receivable		3,551
Prepaid and other current assets		23
Property and equipment		43
Intangible assets		5,800
Accounts payable		(1,402	)
Accrued expenses and other current liabilities		(4,337	)
Accrued compensation		(42	)
Identifiable net assets acquired	$	5,919
Goodwill		3,043
Total purchase price	$	8,962

The following table presents details of the acquired intangible assets of Performance Bridge:

	Estimated Useful Life (in years)		Fair Value
Customer relationships		5.0	$	5,100
Noncompete agreement		4.0		700
Total intangible assets			$	5,800

In the first quarter of 2019, the Company recorded expense of $139 in general and administrative expenses, representing the difference between the fair value of the contingent earnout consideration recorded by the Company and the final amount of contingent earnout consideration paid by the Company.    

Acquisition of Wazee Digital, Inc.

On August 31, 2018, the Company acquired all of the outstanding capital stock of Wazee Digital by means of a merger of a wholly owned subsidiary of the Company with and into Wazee Digital, with Wazee Digital surviving the merger as a wholly owned subsidiary of the Company.  The Company paid an aggregate purchase price of $12,552, comprised of $7,423 paid in cash and the issuance of a total of 491,157 shares of the Company’s common stock, valued at $5,129 based on the Company’s closing stock price on August 31, 2018. A portion of the consideration, consisting of $925 in cash and 60,576 shares of common stock, was deposited into a third-party escrow account at closing and will be held in such account to secure certain indemnification and other obligations of the former stockholders of Wazee Digital. A portion of such escrowed consideration was released in March 2019, and the balance will be held in such account until August 31, 2020.  

The acquisition of Wazee Digital has expanded the Company’s offerings to include digital content management and licensing solutions.

The following table summarizes the fair value of the purchase price consideration for the acquisition of Wazee Digital:

Acquisition consideration	Amount
Cash consideration at closing	$	7,423
Equity consideration at closing		5,129
Total	$	12,552

The following is an allocation of the purchase price as of the August 31, 2018 closing date under the acquisition method of accounting and is preliminary as to the determination of deferred taxes as the information is not available at the time of this filing. The purchase price allocation is based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition:

Preliminary purchase price allocation:	Amount
Cash	$	975
Accounts receivable		2,396
Prepaid and other current assets		376
Property and equipment		292
Intangible assets		13,300
Accounts payable		(825	)
Accrued expenses and other current liabilities		(3,516	)
Accrued compensation		(850	)
Other long-term liabilities		(700	)
Identifiable net assets acquired	$	11,448
Goodwill		1,104
Total purchase price	$	12,552

The following table presents details of the acquired intangible assets of Wazee Digital:

	Estimated Useful Life (in years)		Fair Value
Developed technology		5.0	$	9,100
Customer relationships		5.0		4,200
Total intangible assets			$	13,300

Acquisition of Machine Box, Inc.

On September 6, 2018, the Company acquired all of the outstanding capital stock of Machine Box, Inc. (“Machine Box”) by means of a merger of a wholly owned subsidiary of the Company with and into Machine Box, with Machine Box surviving the merger as a wholly owned subsidiary of the Company. The Company paid initial consideration of $1,484, and agreed to pay up to an additional $3,000 in contingent amounts if Machine Box achieves certain technical development and integration milestones within 12 months after the closing of the acquisition, a portion of which was paid in the first six months of 2019, as discussed below. The initial consideration was comprised of $423 paid in cash and issuance of a total of 128,300 shares of the Company’s common stock, valued at $1,061 based on the Company’s closing stock price on September 6, 2018, of which $80 in cash and 26,981 shares of common stock were held back from payment and issuance by the Company until September 6, 2020, to secure certain indemnification and other obligations of the former stockholders of Machine Box. The additional contingent payments (if earned) will be comprised of 20% cash and 80% shares of the Company’s common stock.

The fair value of the contingent amount totaled $2,880 and is treated as compensation expense for post-combination services as payment of such amount is conditioned upon the continued employment of certain key employees of Machine Box in addition to the achievement of certain performance milestones by Machine Box. The preliminary fair value of the contingent amount was determined using a probability-weighted expected payment model. This expense is being recognized as research and development expense over three separate intervals tied to the specific performance milestones during the twelve months following the acquisition. The Company recorded compensation expense of $453 and $1,333 in research and development expense in connection with the additional contingent amounts in the three and six months ended June 30, 2019, respectively.

In March 2019, the Company determined that Machine Box had achieved the technical development and integration milestones required to be completed as of March 6, 2019 and, as a result, the former Machine Box stockholders became entitled to receive an aggregate of $200 in cash and an aggregate of 135,583 shares of the Company’s common stock, valued at $880 based on the closing price of the Company’s common stock on March 6, 2019.  In March 2019, the Company paid to the former Machine Box stockholders an aggregate of $160 in cash and issued to them an aggregate of 108,469 shares of the Company’s common stock. The remaining $40 in cash and 27,114 shares of common stock were held back from payment and issuance by the Company until September 6, 2020, to secure certain indemnification and other obligations of the former stockholders of Machine Box. The value of the common stock that was held back was recorded to additional paid-in capital.

In June 2019, the Company determined that Machine Box had achieved the technical development and integration milestones required to be completed as of June 6, 2019 and, as a result, the former Machine Box stockholders became entitled to receive an aggregate of $200 in cash and an aggregate of 97,082 shares of the Company’s common stock, valued at $808 based on the closing price of the Company’s common stock on June 6, 2019.  The Company issued to the former Machine Box stockholders an aggregate of 77,666 shares of the Company’s common stock in June 2019, and paid to them an aggregate of $160 in cash in July 2019. The remaining $40 in cash and 19,416 shares of common stock were held back from payment and issuance by the Company until September 6, 2020, to secure certain indemnification and other obligations of the former stockholders of Machine Box. The value of the common stock that was held back was recorded to additional paid-in capital.

Machine Box is a developer of state-of-the-art machine learning technologies, which have enhanced the Company’s aiWARE platform capabilities.

The following table summarizes the fair value of the initial purchase price consideration for the acquisition of Machine Box:

Acquisition consideration	Amount
Cash consideration at closing	$	423
Equity consideration at closing		1,061
Total	$	1,484

The following is an allocation of the purchase price as of the September 6, 2018 closing date under the acquisition method of accounting and is preliminary as to the determination of deferred taxes as the information is not available at the time of this filing. The purchase price allocation is based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition:

Preliminary purchase price allocation:	Amount
Cash	$	25
Intangible assets	700
Accrued expenses		(375	)
Identifiable net assets acquired	$	350
Goodwill		1,134
Total purchase price	$	1,484

The following table presents details of the acquired intangible assets of Machine Box:

	Estimated Useful Life (in years)		Fair Value
Developed technology		5.0	$	500
Trademarks and tradenames		2.3		100
Noncompete agreement		3.0		100
Total intangible assets			$	700

Assumptions in the Allocations of Purchase Price

Management prepared the purchase price allocations for the acquired businesses, and in doing so considered or relied in part upon a report of a third party valuation expert to calculate the fair value of certain acquired assets and liabilities of each acquired business, which would primarily include identifiable intangible assets and the contingent earn-out amounts. Determining the fair value of assets and liabilities requires management to make significant estimates and assumptions which are preliminary and subject to change upon finalization of the valuation analysis. The goodwill recognized is the excess of the purchase price over the fair value of net assets acquired. Certain liabilities and deferred taxes included in the purchase price allocations are based on management's best estimates of the amounts to be paid or settled and based on information available at the time the purchase price allocations were prepared. Updates to and/or completion of the Company’s evaluation of certain income tax positions may result in changes to the recorded amounts of assets and liabilities, with corresponding adjustments to goodwill amounts in subsequent periods. The Company does not expect to deduct any of the acquired goodwill for tax purposes.

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Net Loss Per Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Net Loss Per Share

NOTE 4. NET LOSS PER SHARE

The following table presents the computation of basic and diluted net loss per share:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Numerator
Net loss	$	(16,691	)	$	(14,330	)	$	(32,997	)	$	(27,379	)
Denominator
Weighted-average common shares outstanding		20,817,466			16,438,897			20,201,819			16,324,431
Less:  Weighted-average shares subject to repurchase		(58,070	)		(124,661	)		(63,063	)		(131,862	)
Denominator for basic and diluted net loss per share		20,759,396			16,314,236			20,138,756			16,192,569
Basic and diluted net loss per share	$	(0.80	)	$	(0.88	)	$	(1.64	)	$	(1.69	)

Potentially dilutive securities that were not included in the calculation of diluted net loss per share because their effect would be anti-dilutive were as follows (in common equivalent shares):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Common stock options and restricted stock units		10,125,468		4,947,896		9,715,403		4,826,523
Warrants to purchase common stock		1,297,151		1,214,104		1,297,151		1,167,249
		11,422,619		6,162,000		11,012,554		5,993,772

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Financial Instruments

6 Months Ended

Jun. 30, 2019

Investments All Other Investments [Abstract]

Financial Instruments

NOTE 5. FINANCIAL INSTRUMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, the first two of which are considered observable and the last unobservable, that may be used to measure fair value, as follows:

• Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2—inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

• Level 3—unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company classifies its cash, cash equivalents and marketable securities within Level 1 or Level 2 of the fair value hierarchy on the basis of valuations using quoted market prices or alternate pricing sources and models utilizing market observable inputs, respectively. The Company’s money market funds are valued based on quoted prices for the specific securities in an active market and are therefore classified as Level 1. The Company’s government securities and corporate debt securities are valued on the basis of valuations provided by third-party pricing services, as derived from such services’ pricing models, and are therefore classified as Level 2. As of June 30, 2019, the Company has not made any adjustments to the prices obtained from its third-party pricing providers.

Cash and Cash Equivalents and Marketable Securities

The Company’s money market funds and marketable securities are categorized as Level 1 and 2, respectively, within the fair value hierarchy. The following table shows the cost, gross unrealized losses and fair value, with a breakdown by significant investment category, of the Company’s cash and cash equivalents and marketable securities as of June 30, 2019:

			Gross				Cash and
			Unrealized		Fair		Cash		Marketable
	Cost		Losses		Value		Equivalents		Securities
Cash	$	16,258	$	—	$	16,258	$	16,258	$	—
Level 1:
Money market funds		24,017		—		24,017		24,017		—
Level 2:
Corporate debt securities		4,998		—		4,998		—		4,998
Total	$	45,273	$	—	$	45,273	$	40,275	$	4,998

As of December 31, 2018, the Company’s cash and cash equivalents and marketable securities balances were as follows:

			Gross					Cash and
			Unrealized			Fair		Cash		Marketable
	Cost		Losses			Value		Equivalents		Securities
Cash	$	13,337	$	—		$	13,337	$	13,337	$	—
Level 1:
Money market funds		24,202		—			24,202		24,202		—
Level 2:
U.S. government securities		2,500		(2	)		2,498		—		2,498
Corporate debt securities		11,113		(46	)		11,067		—		11,067
Subtotal		13,613		(48	)		13,565		—		13,565
Total	$	51,152	$	(48	)	$	51,104	$	37,539	$	13,565

The Company had no marketable securities that have been in a continuous unrealized loss position for less than 12 months and for 12 months or greater as of June 30, 2019.

The following tables show information about the Company’s marketable securities that have been in a continuous unrealized loss position for less than 12 months and for 12 months or greater as of December 31, 2018:

	December 31, 2018
	Continuous Unrealized Losses
	Less than			12 Months
	12 Months			or Greater		Total
Fair value of marketable securities	$	13,565		$	—	$	13,565
Unrealized losses	$	(48	)	$	—	$	(48	)

All marketable securities held by the Company as of June 30, 2019 will mature in one year or less.

The Company may sell certain of its marketable securities prior to their stated maturities for strategic reasons including, but not limited to, anticipation of credit deterioration and duration management. The Company typically invests in highly-rated securities, and its investment policy generally limits the amounts that may be invested with any one issuer. The policy generally requires investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss. Fair values were determined for each individual security in the securities portfolio.

Stock Warrants

All of the Company’s outstanding stock warrants are categorized as Level 3 within the fair value hierarchy. Stock warrants have been recorded at their fair value using either a probability weighted expected return model or the Black-Scholes option-pricing model. These models incorporate contractual terms, maturity, risk-free interest rates and volatility. The value of the Company’s stock warrants would increase if a higher risk-free interest rate was used, and would decrease if a lower risk-free interest rate was used. Similarly, a higher volatility assumption would increase the value of the stock warrants, and a lower volatility assumption would decrease the value of the stock warrants. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management with the assistance of a third-party valuation specialist.

In April 2018, in connection with the advisory agreement between the Company and a financial advisory firm, the Company issued such firm a five-year warrant to purchase up to 20,000 shares of the Company’s common stock (“April 2018 Warrant”). The April 2018 Warrant was fully vested and exercisable upon issuance and has an exercise price of $11.73 per share. The Company recorded this stock warrant at its fair value using the Black-Scholes option-pricing model. The holder is able to redeem the warrant for a number of shares having a value equal to the in-the-money value of the warrant. The Company recorded the fair value of the warrant as a liability upon issuance, and such fair value is remeasured as of the end of each reporting period. The April 2018 Warrant was outstanding at June 30, 2019.

The following table summarizes quantitative information with respect to the significant unobservable inputs that were used to value the April 2018 Warrant:

	June 30, 2019			December 31, 2018
Volatility		70	%		70	%
Risk-free rate		1.76	%		2.51	%
Term	3.75 years			4.25 years

The following table represents a roll-forward of the fair value of the April 2018 Warrant, which was recorded within other accrued liabilities in the accompanying condensed consolidated balance sheet at June 30, 2019:

Balance, December 31, 2018	$	23
Change in fair value		50
Balance, June 30, 2019	$	73

Adjustments to the fair value of the April 2018 Warrant were recorded in other income, net in the Company’s consolidated statement of operations and comprehensive loss for the three and six months ended June 30, 2019.

There were no transfers between Level 1, Level 2 or Level 3 financial instruments in the six months ended June 30, 2019.

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Goodwill and Intangible Assets, Net

6 Months Ended

Jun. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, Net

NOTE 6. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

The following table presents the changes in the carrying amount of goodwill:

	Carrying Amount
Balance as of December 31, 2018	$	5,509
Performance Bridge working capital adjustment		34
Wazee Digital purchase accounting adjustment		(123	)
Balance as of June 30, 2019	$	5,420

Intangible Assets

Intangible assets, net consisted of the following:

			June 30, 2019							December 31, 2018
	Weighted		Gross					Net		Gross					Net
	Average Useful		Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Life (in years)		Amount		Amortization			Amount		Amount		Amortization			Amount
Acquired software and technology		1.3	$	3,576	$	(2,031	)	$	1,545	$	3,576	$	(1,613	)	$	1,963
Licensed technology		2.1		500		(125	)		375		500		(42	)		458
Developed technology		4.1		10,077		(1,613	)		8,464		9,600		(792	)		8,808
Customer relationships		4.1		9,300		(1,550	)		7,750		9,300		(733	)		8,567
Trademarks and trade names		1.4		100		(37	)		63		100		(15	)		85
Noncompete agreements		3.0		800		(174	)		626		800		(201	)		599
Total		3.6	$	24,353	$	(5,530	)	$	18,823	$	23,876	$	(3,396	)	$	20,480

The following table presents amortization expense associated with the Company’s finite-lived intangible assets, which is included in the consolidated statement of operations and comprehensive loss:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Cost of revenues	$	535	$	48	$	905	$	96
Sales and marketing		319		—		391		—
Research and development		256		256		512		517
General and administrative		212		3		355		5
Total	$	1,322	$	307	$	2,163	$	618

The following table presents future amortization of the Company’s finite-lived intangible assets at June 30, 2019:

2019 (6 months)	$	2,697
2020		5,382
2021		4,261
2022		3,963
2023		2,520
Total	$	18,823

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Consolidated Financial Statements Details

6 Months Ended

Jun. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Consolidated Financial Statements Details

NOTE 7. CONSOLIDATED FINANCIAL STATEMENTS DETAILS

Consolidated Balance Sheets Details

Cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash consisted of the following:

	As of
	June 30,		December 31,
	2019		2018
Cash and cash equivalents	$	40,275	$	37,539
Long-term restricted cash		1,135		1,237
Total cash, cash equivalents and restricted cash	$	41,410	$	38,776

The Company’s restricted cash is held as collateral for the Company’s stand-by letter of credit and credit cards.

Accounts Receivable, Net

Accounts receivable consisted of the following:

	As of
	June 30,			December 31,
	2019			2018
Accounts receivable — Advertising	$	23,167		$	26,226
Accounts receivable — aiWARE SaaS Solutions		2,166			2,418
Accounts receivable — aiWARE Content Licensing and Media Services		1,558			538
		26,891			29,182
Less: allowance for doubtful accounts		(71	)		(40	)
Accounts receivable, net	$	26,820		$	29,142

The amount that the Company invoices and collects from advertising clients includes the cost of the advertisement placed for them with media vendors and the amount of the commission earned by the Company.  The average commission earned by the Company is less than 15% of the total amount invoiced and collected from the advertising clients.

Property, equipment and improvements, net

Property, equipment and improvements, net consisted of the following:

	As of
	June 30,			December 31,
	2019			2018
Property and equipment	$	2,151		$	2,019
Leasehold improvements		2,876			2,875
		5,027			4,894
Less: accumulated depreciation		(1,367	)		(886	)
Property, equipment and improvements, net	$	3,660		$	4,008

Depreciation expense was $263 and $555 for the three and six months ended June 30, 2019, respectively. Depreciation expense was $167 and $215 for the three and six months ended June 30, 2018, respectively.

Accounts Payable

Accounts payable consisted of the following:

	As of
	June 30,		December 31,
	2019		2018
Accounts payable — Advertising	$	17,148	$	27,655
Accounts payable — Other		1,311		1,059
Total	$	18,459	$	28,714

Accounts payable – Advertising reflects the cost of advertisements placed with media vendors on behalf of the Company’s advertising clients.

Consolidated Statement of Operations and Comprehensive Loss Details

Net Revenues

Net revenues for the periods presented were comprised of the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Advertising	$	5,842	$	3,308	$	11,556	$	6,429
aiWARE SaaS Solutions		2,677		860		5,457		2,127
aiWARE Content Licensing and Media Services		3,751		—		7,382		—
Total net revenues	$	12,270	$	4,168	$	24,395	$	8,556

During the three and six months ended June 30, 2019, the Company made $52,973 and $103,755, respectively, in gross media placements, of which $48,676 and $97,744, respectively, were billed directly to clients. Of the amounts billed directly to clients, $43,125 and $86,712 represented media-related costs netted against billings during the three and six months ended June 30, 2019, respectively.

During the three and six months ended June 30, 2018, the Company made $31,451 and $60,872, respectively, in gross media placements, of which $26,322 and $51,895, respectively, were billed directly to clients. Of the amounts billed directly to clients, $23,014 and $45,464 represented media-related costs netted against billings during the three and six months ended June 30, 2018, respectively.

Other Income, Net

Other income, net for the periods presented was comprised of the following:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Interest income, net	$	160		$	168		$	329		$	349
Change in fair value of warrant liability		(37	)		(15	)		(50	)		(15	)
Other		(72	)		(20	)		(17	)		(18	)
Other income, net	$	51		$	133		$	262		$	316

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 8. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases facilities under operating lease arrangements expiring on various dates through fiscal year 2024. Certain of the Company’s leases contain standard rent escalation and renewal clauses. Under certain leases, the Company is required to pay operating expenses in addition to base rent.  Rent expense for lease payments is recognized on a straight-line basis over the lease term.

As of June 30, 2019, future minimum lease payments were as follows:

2019 (6 months)	$	1,256
2020		2,414
2021		2,211
2022		1,852
2023		1,680
Thereafter		1,730
Total minimum payments	$	11,143

The total rent expense for all operating leases was $735 and $1,479 for the three and six months ended June 30, 2019, respectively. The total rent expense for all operating leases was $501 and $833 for the three and six months ended June 30, 2018, respectively.

Other Contingencies

From time to time, the Company may be involved in litigation relating to claims arising out of its operations in the normal course of business. The Company currently is not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on the Company’s results of operations, financial position or cash flows.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Stockholders' Equity

NOTE 9. STOCKHOLDERS’ EQUITY

Common Stock Issuances

During the first six months of 2019, the Company issued an aggregate of 1,668,663 shares of its common stock, which were sold pursuant to the Equity Distribution Agreement. The Company received net proceeds from such sales of $12,215 after deducting expenses of $428.

During the first six months of 2019, the Company issued an aggregate of 580,713 shares of common stock to the former stockholder of Performance Bridge. See Note 3 for additional information.

During the first six months of 2019, the Company issued 186,135 shares of common stock to the former stockholders of Machine Box. See Note 3 for additional information.

During the first six months of 2019, the Company issued an aggregate of 147,675 shares of its common stock in connection with the exercise of stock options and vesting of restricted stock units under its stock incentive plans and purchases under its Employee Stock Purchase Plan (the “ESPP”).

Common Stock Warrants

As of June 30, 2019 and December 31, 2018, the Company had outstanding warrants to purchase an aggregate of 1,297,151 shares of the Company’s common stock.

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Stock Plans

6 Months Ended

Jun. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Plans

NOTE 10. STOCK PLANS

Stock-Based Compensation

During six months ended June 30, 2019, the Company granted options to purchase an aggregate of 555,346 shares of its common stock that are subject to time-based vesting conditions (“Time-Based Options”), and options to purchase an aggregate of 1,545,849 shares of its common stock that are subject to performance-based vesting conditions (“Performance Options”).

All Time-Based Options granted during the six months ended June 30, 2019 will vest over a period of four years. All Performance Options granted during the six months ended June 30, 2019 will become exercisable in three equal tranches based on the achievement of market price goals for the Company’s common stock of $49.15 per share, $98.31 per share and $196.62 per share, respectively. For each tranche to become exercisable, the closing price per share of the Company’s common stock must meet or exceed the applicable stock price goal for a period of 30 consecutive trading days.

The Company valued the Time-Based Options using the Black-Scholes Merton option pricing model.  The following assumptions were used to compute the grant date fair values of the Time-Based Options granted during the six months ended June 30, 2019:

Expected term (in years)	6.0 - 6.1
Expected volatility	66% - 68%
Risk-free interest rate	1.8% - 2.5%
Expected dividend yield		—

The Company valued the Performance Options using a Monte Carlo simulation model. The following assumptions were used in the Monte Carlo simulation model for computing the grant date fair values of the Performance Options granted during the six months ended June 30, 2019:

Estimated volatility	65	%
Risk-free interest rate	2.7	%
Dividend yield	—	%
Cost of equity	14	%

The fair value per share was determined for each of the three tranches of each Performance Option. The weighted average grant date fair value of the Performance Options granted during the six months ended June 30, 2019 was $2.57 per share. The total fair value of such Performance Options is $3,970 and is being recorded as stock-based compensation expense over an average derived service period of 6.4 years.

The assumptions used in calculating the fair values of purchase rights granted under the ESPP during the six months ended June 30, 2019 are set forth in the table below:

Expected term (in years)	0.5 - 2.0
Expected volatility	51% - 71%
Risk-free interest rate	1.3% - 2.5%
Expected dividend yield		—

The Company’s stock-based compensation expense recognized for the periods presented was as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Stock-based compensation expense by type of award:
Restricted stock units	$	299	$	99	$	497	$	147
Restricted stock awards		96		135		256		353
Machine Box contingent common stock issuances		523		—		1,227		—
Performance-based stock options		2,020		53		3,956		53
Stock options		2,703		2,246		5,060		4,282
Employee stock purchase plan		137		118		289		290
Total	$	5,778	$	2,651	$	11,285	$	5,125

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Stock-based compensation expense by operating expense grouping:
Sales and marketing	$	271	$	248	$	514	$	568
Research and development		900		266		1,984		507
General and administrative		4,607		2,137		8,787		4,050
	$	5,778	$	2,651	$	11,285	$	5,125

Equity Award Activity

Restricted Stock Awards

The Company’s restricted stock award activity for the six months ended June 30, 2019 was as follows:

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested at December 31, 2018		72,208		$	7.26
Vested		(31,245	)	$	6.95
Unvested at June 30, 2019		40,963		$	7.50

At June 30, 2019, total unrecognized compensation cost related to restricted stock was $246, which is expected to be recognized over a weighted average period of 1.3 years.

Restricted Stock Units

The Company’s restricted stock unit activity for the six months ended June 30, 2019 was as follows:

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested at December 31, 2018		49,143		$	12.57
Granted		150,211		$	7.28
Forfeited		(1,000	)	$	8.81
Vested		(35,609	)	$	13.99
Unvested at June 30, 2019		162,745		$	7.40

At June 30, 2019, total unrecognized compensation cost related to restricted stock units was $950, which is expected to be recognized over a weighted average period of 1.2 years.

Performance-Based Stock Options

The activity during the six months ended June 30, 2019 related to stock options that are subject to performance-based vesting conditions tied to the future achievement of stock price goals by the Company was as follows:

				Weighted-Average
						Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
Outstanding at December 31, 2018		3,167,325		$	21.25
Granted		1,545,849		$	5.74
Forfeited		(102,648	)	$	5.67
Outstanding at June 30, 2019		4,610,526		$	16.40	9.11 years		$	3,771
Exercisable at June 30, 2019		—		$	—		—	$	—

The weighted average grant date fair values of the performance-based stock options granted during the six months ended June 30, 2019 and 2018 were $2.57 and $9.59 per share, respectively. No performance-based stock options vested during the six months ended June 30, 2019 or 2018. At June 30, 2019, total unrecognized compensation expense related to performance-based stock options was $26,231 and is expected to be recognized over a weighted average period of 3.7 years.

Stock Options

The activity during the six months ended June 30, 2019 related to all other stock options was as follows:

				Weighted-Average
						Remaining	Aggregate
				Exercise		Contractual	Intrinsic
	Options			Price		Term	Value
Outstanding at December 31, 2018		5,154,691		$	13.78
Granted		555,346		$	5.98
Exercised		(47,099	)	$	2.56
Forfeited		(183,892	)	$	12.45
Expired		(58,459	)	$	13.09
Outstanding at June 30, 2019		5,420,587		$	13.13	8.08 years	$	3,368
Exercisable at June 30, 2019		3,269,820		$	13.94	7.65 years	$	1,811

The weighted average grant date fair value of stock options granted during the six months ended June 30, 2019 and 2018 was $3.72 and $9.73 per share, respectively. The aggregate intrinsic value of the options exercised during the six months ended June 30, 2019 and 2018 was $177 and $1,698, respectively. The total grant date fair value of stock options vested during the six months ended June 30, 2019 and 2018 was $5,465 and $4,626, respectively. At June 30, 2019, total unrecognized compensation expense related to stock options was $13,924 and is expected to be recognized over a weighted average period of 2.1 years.

The aggregate intrinsic values in the tables above represents the difference between the fair market value of the Company’s common stock and the average option exercise price of in-the-money options, multiplied by the number of such options.

Employee Stock Purchase Plan

On January 31, 2019, a total of 64,967 shares of common stock were purchased under the Company’s ESPP. As of June 30, 2019, accrued employee contributions for future purchases under the ESPP totaled $277.

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Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation and Preparation

Basis of Presentation and Preparation

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial statements and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. Such unaudited condensed consolidated financial statements and accompanying notes are the representations of the Company’s management, who is responsible for their integrity and objectivity. The information included in this Form 10-Q should be read in conjunction with the information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 18, 2019. Interim results for the three and six months ended June 30, 2019 are not necessarily indicative of the results the Company will have for the full year ending December 31, 2019.

The accompanying condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which are normal and recurring, necessary to fairly state its financial position, results of operations and cash flows. All significant intercompany transactions have been eliminated in consolidation. The financial data and the other information disclosed in these notes to the condensed consolidated financial statements reflected in the three month period presented are unaudited. The December 31, 2018 balance sheet included herein was derived from the audited financial statements but does not include all disclosures or notes required by GAAP for complete financial statements.

Liquidity and Capital Resources

Liquidity and Capital Resources

During 2018 and 2017, the Company generated negative cash flows from operations of $42,227 and $31,911, respectively, and incurred net losses of $61,104 and $59,601, respectively. In the six months ended June 30, 2019, the Company generated negative cash flow from operations of $16,606 and incurred a net loss of $32,997. Also, the Company had an accumulated deficit of $203,408 as of June 30, 2019. Historically, the Company has satisfied its capital needs with the net proceeds from its sales of equity securities, its issuance of convertible debt, and the exercise of common stock warrants. In June 2018, the Company raised net proceeds of $32,780 through an underwritten offering of its common stock, and in the first six months of 2019, the Company raised net proceeds of $12,215 through sales of its common stock under an Equity Distribution Agreement dated June 1, 2018 (the “Equity Distribution Agreement”).

The Company expects to continue to generate net losses for the foreseeable future as it makes significant investments in developing and selling its products and services. Also, the Company will continue to evaluate potential acquisitions of, or investments in, companies or technologies that complement its business, which acquisitions may require the use of cash.

Management believes that the Company’s existing balances of cash, cash equivalents and marketable securities, which totaled $45,273 as of June 30, 2019, will be sufficient to meet its anticipated cash requirements for at least twelve months from the date that these financial statements are issued.  However, the Company’s does not expect that its current cash, cash equivalents and marketable securities will be sufficient to support the development of its business to the point at which the Company has positive cash flows from operations, particularly if it uses cash to finance any acquisitions or investments in the future.  The Company plans to meet its future needs for additional capital through equity and/or debtfinancings. Such equity financings may include sales of common stock under the Company’s Equity Distribution Agreement pursuant to which the Company may offer and sell, from time to time, shares of its common stock having an aggregate available offering price of up to $35,468. Such financing may not be available on terms favorable to the Company or at all.  If the Company is unable to obtain adequate financing or financing on terms satisfactory to it when required, the Company’s ability to continue to support its business growth, scale its infrastructure, develop product enhancements and to respond to business challenges could be significantly impaired.

Use of Accounting Estimates

Use of Accounting Estimates

The preparation of the accompanying 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 as of the date of the accompanying condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The principal estimates relate to revenue recognition, allowance for doubtful accounts, the valuation of stock awards and stock warrants, income taxes, and the allocation of net assets acquired from business acquisitions as well as contingent consideration, where applicable. Actual results could differ from those estimates.

Significant Customers

Significant Customers

The Company’s top ten customers accounted for approximately 25.9% and 24.9% of the Company’s net revenues for the three and six months ended June 30, 2019, respectively. The Company’s top ten customers accounted for approximately 49.7% and 52.1% of the Company’s net revenues for the three and six months ended June 30, 2018, respectively. No individual customer accounted for 10% or more of the Company’s net revenues for the three and six months ended June 30, 2019.

Significant Accounting Policies

Significant Accounting Policies

During the six months ended June 30, 2019, there have been no material changes in the Company’s significant accounting policies from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2018.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force), which provides guidance intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. This standard became effective for the Company beginning in the first quarter of 2019. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which provides guidance on the presentation of restricted cash or restricted cash equivalents and is intended to reduce the diversity in practice of such presentations. This standard requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts on the statement of cash flows. This standard became effective for the Company beginning in the first quarter of 2019. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount that the entity expects to be entitled to receive when products are transferred to customers. Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”); ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”); and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12,” and together with ASU 2014-09, ASU 2016-08 and ASU 2016-10 the “new revenue standard”). The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. As an emerging growth company, the Company is not required to accelerate the application of the revenue standard to interim periods.  The new revenue standard will be effective for the Company for annual reporting periods beginning after December 15, 2018 and to interim periods within annual reporting periods beginning after December 15, 2019.

The Company will apply the new revenue standard on a modified retrospective basis with an adjustment to retained earnings to recognize the cumulative effect of adoption. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments under this pronouncement will change the way all leases with duration of one year or more are treated. Under this guidance, lessees will be required to capitalize virtually all leases on the balance sheet as a right-of-use asset and an associated financing lease liability or capital lease liability. The right-of-use asset represents the lessee’s right to use, or control the use of, a specified asset for the specified lease term. The lease liability represents the lessee’s obligation to make lease payments arising from the lease, measured on a discounted basis. Based on certain characteristics, leases are classified as financing leases or operating leases. Financing lease liabilities, those that contain provisions similar to capitalized leases, are amortized in the same manner as capital leases are amortized under current accounting rules, as amortization expense and interest expense in the statement of operations. Operating lease liabilities are amortized on a straight-line basis over the life of the lease as lease expense in the statement of operations. This standard will be effective for the Company beginning with the first quarter of fiscal year 2020. The Company is currently evaluating the impact this standard will have on its policies and procedures pertaining to its existing and future lease arrangements, its disclosure requirements and its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if the reporting unit had been acquired in a business combination. Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendments in this update will be effective for the Company beginning with fiscal year 2022, including interim periods, with early adoption permitted. The adoption of the amendments in this update is not expected to have a material impact on the Company's consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which provides expanded guidance to simplify the accounting for stock-based compensation by aligning the treatment of stock-based awards for nonemployees with that of stock-based awards for employees. This standard will be effective for the Company beginning in the first quarter of fiscal year 2020, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, as part of its disclosure framework project intended to improve the effectiveness of disclosures in the notes to the financial statements by updating certain disclosure requirements related to fair value measurements. The standard will be effective for the Company beginning in the first quarter of fiscal year 2020, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements.

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Business Combinations (Tables)

6 Months Ended

Jun. 30, 2019

Performance Bridge [Member]

Summary of Fair Value of Purchase Price Consideration

The following table summarizes the fair value of the purchase price consideration for the acquisition of Performance Bridge:

Acquisition consideration	Amount
Cash consideration at closing	$	1,220
Equity consideration at closing		3,938
Working capital adjustment		34
Contingent earnout consideration		3,770
Estimated purchase price	$	8,962

Purchase Price Allocation Based Upon Preliminary Estimate of Fair Value of Assets Acquired and Liabilities Assumed

The following allocation of the purchase price as of the August 21, 2018 closing date under the acquisition method of accounting is preliminary as to the determination of deferred taxes as the information is not available at the time of this filing. The purchase price allocation is based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition:

Preliminary purchase price allocation:	Amount
Cash	$	2,283
Accounts receivable		3,551
Prepaid and other current assets		23
Property and equipment		43
Intangible assets		5,800
Accounts payable		(1,402	)
Accrued expenses and other current liabilities		(4,337	)
Accrued compensation		(42	)
Identifiable net assets acquired	$	5,919
Goodwill		3,043
Total purchase price	$	8,962

Summary of Details of Acquired Intangible Assets

The following table presents details of the acquired intangible assets of Performance Bridge:

	Estimated Useful Life (in years)		Fair Value
Customer relationships		5.0	$	5,100
Noncompete agreement		4.0		700
Total intangible assets			$	5,800

Wazee Digital Inc [Member]

Summary of Fair Value of Purchase Price Consideration

The following table summarizes the fair value of the purchase price consideration for the acquisition of Wazee Digital:

Acquisition consideration	Amount
Cash consideration at closing	$	7,423
Equity consideration at closing		5,129
Total	$	12,552

Purchase Price Allocation Based Upon Preliminary Estimate of Fair Value of Assets Acquired and Liabilities Assumed

The following is an allocation of the purchase price as of the August 31, 2018 closing date under the acquisition method of accounting and is preliminary as to the determination of deferred taxes as the information is not available at the time of this filing. The purchase price allocation is based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition:

Preliminary purchase price allocation:	Amount
Cash	$	975
Accounts receivable		2,396
Prepaid and other current assets		376
Property and equipment		292
Intangible assets		13,300
Accounts payable		(825	)
Accrued expenses and other current liabilities		(3,516	)
Accrued compensation		(850	)
Other long-term liabilities		(700	)
Identifiable net assets acquired	$	11,448
Goodwill		1,104
Total purchase price	$	12,552

Summary of Details of Acquired Intangible Assets

The following table presents details of the acquired intangible assets of Wazee Digital:

	Estimated Useful Life (in years)		Fair Value
Developed technology		5.0	$	9,100
Customer relationships		5.0		4,200
Total intangible assets			$	13,300

Machine Box, Inc. [Member]

Summary of Fair Value of Purchase Price Consideration

The following table summarizes the fair value of the initial purchase price consideration for the acquisition of Machine Box:

Acquisition consideration	Amount
Cash consideration at closing	$	423
Equity consideration at closing		1,061
Total	$	1,484

Purchase Price Allocation Based Upon Preliminary Estimate of Fair Value of Assets Acquired and Liabilities Assumed

The following is an allocation of the purchase price as of the September 6, 2018 closing date under the acquisition method of accounting and is preliminary as to the determination of deferred taxes as the information is not available at the time of this filing. The purchase price allocation is based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition:

Preliminary purchase price allocation:	Amount
Cash	$	25
Intangible assets	700
Accrued expenses		(375	)
Identifiable net assets acquired	$	350
Goodwill		1,134
Total purchase price	$	1,484

Summary of Details of Acquired Intangible Assets

The following table presents details of the acquired intangible assets of Machine Box:

	Estimated Useful Life (in years)		Fair Value
Developed technology		5.0	$	500
Trademarks and tradenames		2.3		100
Noncompete agreement		3.0		100
Total intangible assets			$	700

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Net Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Computation of Basic and Diluted Net Loss Per Common Share

The following table presents the computation of basic and diluted net loss per share:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Numerator
Net loss	$	(16,691	)	$	(14,330	)	$	(32,997	)	$	(27,379	)
Denominator
Weighted-average common shares outstanding		20,817,466			16,438,897			20,201,819			16,324,431
Less:  Weighted-average shares subject to repurchase		(58,070	)		(124,661	)		(63,063	)		(131,862	)
Denominator for basic and diluted net loss per share		20,759,396			16,314,236			20,138,756			16,192,569
Basic and diluted net loss per share	$	(0.80	)	$	(0.88	)	$	(1.64	)	$	(1.69	)

Effect of Anti-dilutive Securities

Potentially dilutive securities that were not included in the calculation of diluted net loss per share because their effect would be anti-dilutive were as follows (in common equivalent shares):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Common stock options and restricted stock units		10,125,468		4,947,896		9,715,403		4,826,523
Warrants to purchase common stock		1,297,151		1,214,104		1,297,151		1,167,249
		11,422,619		6,162,000		11,012,554		5,993,772

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Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2019

Schedule of Cash and Available-For-Sale Securities' Cost, Gross Unrealized Losses and Fair Value by Significant Investment Category

The following table shows the cost, gross unrealized losses and fair value, with a breakdown by significant investment category, of the Company’s cash and cash equivalents and marketable securities as of June 30, 2019:

			Gross				Cash and
			Unrealized		Fair		Cash		Marketable
	Cost		Losses		Value		Equivalents		Securities
Cash	$	16,258	$	—	$	16,258	$	16,258	$	—
Level 1:
Money market funds		24,017		—		24,017		24,017		—
Level 2:
Corporate debt securities		4,998		—		4,998		—		4,998
Total	$	45,273	$	—	$	45,273	$	40,275	$	4,998

As of December 31, 2018, the Company’s cash and cash equivalents and marketable securities balances were as follows:

			Gross					Cash and
			Unrealized			Fair		Cash		Marketable
	Cost		Losses			Value		Equivalents		Securities
Cash	$	13,337	$	—		$	13,337	$	13,337	$	—
Level 1:
Money market funds		24,202		—			24,202		24,202		—
Level 2:
U.S. government securities		2,500		(2	)		2,498		—		2,498
Corporate debt securities		11,113		(46	)		11,067		—		11,067
Subtotal		13,613		(48	)		13,565		—		13,565
Total	$	51,152	$	(48	)	$	51,104	$	37,539	$	13,565

Schedule of Marketable Securities That Have Been in Continuous Unrealized Loss Position for Less than 12 months and for 12 months or Greater

The following tables show information about the Company’s marketable securities that have been in a continuous unrealized loss position for less than 12 months and for 12 months or greater as of December 31, 2018:

	December 31, 2018
	Continuous Unrealized Losses
	Less than			12 Months
	12 Months			or Greater		Total
Fair value of marketable securities	$	13,565		$	—	$	13,565
Unrealized losses	$	(48	)	$	—	$	(48	)

Reconciliation of Level 3 Measurement of Company's April 2018 Warrant

The following table represents a roll-forward of the fair value of the April 2018 Warrant, which was recorded within other accrued liabilities in the accompanying condensed consolidated balance sheet at June 30, 2019:

Balance, December 31, 2018	$	23
Change in fair value		50
Balance, June 30, 2019	$	73

April 2018 Warrant [Member]

Summary of Quantitative Information with Respect to Significant Unobservable Inputs

The following table summarizes quantitative information with respect to the significant unobservable inputs that were used to value the April 2018 Warrant:

	June 30, 2019			December 31, 2018
Volatility		70	%		70	%
Risk-free rate		1.76	%		2.51	%
Term	3.75 years			4.25 years

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Goodwill and Intangible Assets, Net (Tables)

6 Months Ended

Jun. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Summary of Changes in Carrying Amount of Goodwill

The following table presents the changes in the carrying amount of goodwill:

	Carrying Amount
Balance as of December 31, 2018	$	5,509
Performance Bridge working capital adjustment		34
Wazee Digital purchase accounting adjustment		(123	)
Balance as of June 30, 2019	$	5,420

Summary of Intangible Assets, Net

Intangible assets, net consisted of the following:

			June 30, 2019							December 31, 2018
	Weighted		Gross					Net		Gross					Net
	Average Useful		Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Life (in years)		Amount		Amortization			Amount		Amount		Amortization			Amount
Acquired software and technology		1.3	$	3,576	$	(2,031	)	$	1,545	$	3,576	$	(1,613	)	$	1,963
Licensed technology		2.1		500		(125	)		375		500		(42	)		458
Developed technology		4.1		10,077		(1,613	)		8,464		9,600		(792	)		8,808
Customer relationships		4.1		9,300		(1,550	)		7,750		9,300		(733	)		8,567
Trademarks and trade names		1.4		100		(37	)		63		100		(15	)		85
Noncompete agreements		3.0		800		(174	)		626		800		(201	)		599
Total		3.6	$	24,353	$	(5,530	)	$	18,823	$	23,876	$	(3,396	)	$	20,480

Summary of Amortization Expense Associated with Finite-Lived Intangible Assets

The following table presents amortization expense associated with the Company’s finite-lived intangible assets, which is included in the consolidated statement of operations and comprehensive loss:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Cost of revenues	$	535	$	48	$	905	$	96
Sales and marketing		319		—		391		—
Research and development		256		256		512		517
General and administrative		212		3		355		5
Total	$	1,322	$	307	$	2,163	$	618

Summary of Future Amortization of Finite-Lived Intangible Assets

The following table presents future amortization of the Company’s finite-lived intangible assets at June 30, 2019:

2019 (6 months)	$	2,697
2020		5,382
2021		4,261
2022		3,963
2023		2,520
Total	$	18,823

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Consolidated Financial Statements Details (Tables)

6 Months Ended

Jun. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Schedule of Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents, and restricted cash consisted of the following:

	As of
	June 30,		December 31,
	2019		2018
Cash and cash equivalents	$	40,275	$	37,539
Long-term restricted cash		1,135		1,237
Total cash, cash equivalents and restricted cash	$	41,410	$	38,776

Summary of Accounts Receivable, Net

Accounts receivable consisted of the following:

	As of
	June 30,			December 31,
	2019			2018
Accounts receivable — Advertising	$	23,167		$	26,226
Accounts receivable — aiWARE SaaS Solutions		2,166			2,418
Accounts receivable — aiWARE Content Licensing and Media Services		1,558			538
		26,891			29,182
Less: allowance for doubtful accounts		(71	)		(40	)
Accounts receivable, net	$	26,820		$	29,142

Summary of Property Equipment and Improvements, Net

Property, equipment and improvements, net consisted of the following:

	As of
	June 30,			December 31,
	2019			2018
Property and equipment	$	2,151		$	2,019
Leasehold improvements		2,876			2,875
		5,027			4,894
Less: accumulated depreciation		(1,367	)		(886	)
Property, equipment and improvements, net	$	3,660		$	4,008

Summary of Accounts Payable

Accounts payable consisted of the following:

	As of
	June 30,		December 31,
	2019		2018
Accounts payable — Advertising	$	17,148	$	27,655
Accounts payable — Other		1,311		1,059
Total	$	18,459	$	28,714

Summary of Net Revenues

Net revenues for the periods presented were comprised of the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Advertising	$	5,842	$	3,308	$	11,556	$	6,429
aiWARE SaaS Solutions		2,677		860		5,457		2,127
aiWARE Content Licensing and Media Services		3,751		—		7,382		—
Total net revenues	$	12,270	$	4,168	$	24,395	$	8,556

Schedule of Other Income, Net

Other income, net for the periods presented was comprised of the following:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Interest income, net	$	160		$	168		$	329		$	349
Change in fair value of warrant liability		(37	)		(15	)		(50	)		(15	)
Other		(72	)		(20	)		(17	)		(18	)
Other income, net	$	51		$	133		$	262		$	316

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Summary of Future Minimum Rentals Under Leases

As of June 30, 2019, future minimum lease payments were as follows:

2019 (6 months)	$	1,256
2020		2,414
2021		2,211
2022		1,852
2023		1,680
Thereafter		1,730
Total minimum payments	$	11,143

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Stock Plans (Tables)

6 Months Ended

Jun. 30, 2019

Schedule of Stock-based Compensation Expense

The Company’s stock-based compensation expense recognized for the periods presented was as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Stock-based compensation expense by type of award:
Restricted stock units	$	299	$	99	$	497	$	147
Restricted stock awards		96		135		256		353
Machine Box contingent common stock issuances		523		—		1,227		—
Performance-based stock options		2,020		53		3,956		53
Stock options		2,703		2,246		5,060		4,282
Employee stock purchase plan		137		118		289		290
Total	$	5,778	$	2,651	$	11,285	$	5,125

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Stock-based compensation expense by operating expense grouping:
Sales and marketing	$	271	$	248	$	514	$	568
Research and development		900		266		1,984		507
General and administrative		4,607		2,137		8,787		4,050
	$	5,778	$	2,651	$	11,285	$	5,125

Schedule of Restricted Stock Award Activity

The Company’s restricted stock award activity for the six months ended June 30, 2019 was as follows:

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested at December 31, 2018		72,208		$	7.26
Vested		(31,245	)	$	6.95
Unvested at June 30, 2019		40,963		$	7.50

Schedule of Restricted Stock Unit Activity

The Company’s restricted stock unit activity for the six months ended June 30, 2019 was as follows:

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested at December 31, 2018		49,143		$	12.57
Granted		150,211		$	7.28
Forfeited		(1,000	)	$	8.81
Vested		(35,609	)	$	13.99
Unvested at June 30, 2019		162,745		$	7.40

Schedule of Stock Option Activity

The activity during the six months ended June 30, 2019 related to all other stock options was as follows:

				Weighted-Average
						Remaining	Aggregate
				Exercise		Contractual	Intrinsic
	Options			Price		Term	Value
Outstanding at December 31, 2018		5,154,691		$	13.78
Granted		555,346		$	5.98
Exercised		(47,099	)	$	2.56
Forfeited		(183,892	)	$	12.45
Expired		(58,459	)	$	13.09
Outstanding at June 30, 2019		5,420,587		$	13.13	8.08 years	$	3,368
Exercisable at June 30, 2019		3,269,820		$	13.94	7.65 years	$	1,811

Employee Stock Purchase Plan [Member]

Summary of Fair Value Assumptions of Stock Purchase Plan

The assumptions used in calculating the fair values of purchase rights granted under the ESPP during the six months ended June 30, 2019 are set forth in the table below:

Expected term (in years)	0.5 - 2.0
Expected volatility	51% - 71%
Risk-free interest rate	1.3% - 2.5%
Expected dividend yield		—

Timebased Stock Option [Member]

Schedule of Fair Value Assumptions

The following assumptions were used to compute the grant date fair values of the Time-Based Options granted during the six months ended June 30, 2019:

Expected term (in years)	6.0 - 6.1
Expected volatility	66% - 68%
Risk-free interest rate	1.8% - 2.5%
Expected dividend yield		—

Performance-based Stock Options [Member]

Summary of Fair Value Assumptions of Stock Purchase Plan

The following assumptions were used in the Monte Carlo simulation model for computing the grant date fair values of the Performance Options granted during the six months ended June 30, 2019:

Estimated volatility	65	%
Risk-free interest rate	2.7	%
Dividend yield	—	%
Cost of equity	14	%

Schedule of Stock Option Activity

The activity during the six months ended June 30, 2019 related to stock options that are subject to performance-based vesting conditions tied to the future achievement of stock price goals by the Company was as follows:

				Weighted-Average
						Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
Outstanding at December 31, 2018		3,167,325		$	21.25
Granted		1,545,849		$	5.74
Forfeited		(102,648	)	$	5.67
Outstanding at June 30, 2019		4,610,526		$	16.40	9.11 years		$	3,771
Exercisable at June 30, 2019		—		$	—		—	$	—

XML

Presentation and Summary of Significant Accounting Policies - Additional Information (Details) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) Customer	Jun. 30, 2018 USD ($) Customer	Jun. 30, 2019 USD ($) Customer	Jun. 30, 2018 USD ($) Customer	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Significant Accounting Policies [Line Items]
Negative cash flows from operations				$ 16,606	$ 21,341	$ 42,227	$ 31,911
Net loss		$ 16,691	$ 14,330	32,997	27,379	61,104	$ 59,601
Accumulated deficit		203,408		203,408		$ 170,411
Proceeds from common stock offerings, net	$ 32,780			11,778	$ 32,536
Cash, cash equivalents and marketable securities		$ 45,273		$ 45,273
Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
Significant Accounting Policies [Line Items]
Number of major customers | Customer		10	10	10	10
Concentration risk percentage		25.90%	49.70%	24.90%	52.10%
Equity Distribution Agreement [Member]
Significant Accounting Policies [Line Items]
Proceeds from common stock offerings, net				$ 12,215
Equity Distribution Agreement [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Aggregate available offering price, common stock				$ 35,468

XML

Business Combinations - Additional Information (Detail) $ / shares in Units, $ in Thousands						1 Months Ended			3 Months Ended			6 Months Ended
	Jun. 06, 2019 USD ($) shares	Mar. 06, 2019 USD ($) shares	Sep. 06, 2018 USD ($) Interval shares	Aug. 31, 2018 USD ($) shares	Aug. 21, 2018 USD ($) shares	Jul. 31, 2019 USD ($) shares	Jun. 30, 2019 shares	Mar. 31, 2019 USD ($) shares	Jun. 30, 2019 USD ($) shares	Mar. 31, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) shares	Jun. 30, 2018 USD ($)	Jan. 25, 2019 $ / shares
Business Acquisition [Line Items]
General and administrative									$ 11,645		$ 7,513	$ 23,335	$ 14,291
Performance Bridge [Member]
Business Acquisition [Line Items]
Business acquisition, effective date					Aug. 21, 2018
Business acquisition, initial consideration paid					$ 5,158
Business acquisition, contingent earn-out					3,909
Business acquisition, initial consideration cash paid					1,220
Business acquisition, cash consideration					$ 1,220
Escrow deposit closing, date					Aug. 21, 2020
Business acquisition, additional contingent consideration paid in cash									883
General and administrative										$ 139
Aggregate purchase price paid					$ 8,962
Performance Bridge [Member] | Common Stock [Member]
Business Acquisition [Line Items]
Business acquisition, shares issued or issuable, value					$ 3,938
Business acquisition, shares issued or issuable | shares					349,072							580,713
Business acquisition initial consideration, additional shares issued | shares					6,482
Business acquisition, closing price of common stock | $ / shares														$ 34
Business combination, common stock issued for contingent earn-out payments									$ 3,026
Business combination, common stock shares issued for contingent earn-out payments | shares									574,231
Performance Bridge [Member] | Escrow Deposit [Member]
Business Acquisition [Line Items]
Business acquisition, cash consideration					$ 120
Performance Bridge [Member] | Escrow Deposit [Member] | Common Stock [Member]
Business Acquisition [Line Items]
Business acquisition, shares issued or issuable | shares					34,335
Wazee Digital Inc [Member]
Business Acquisition [Line Items]
Business acquisition, effective date				Aug. 31, 2018
Business acquisition, cash consideration				$ 7,423
Escrow deposit closing, date				Aug. 31, 2020
Aggregate purchase price paid				$ 12,552
Wazee Digital Inc [Member] | Common Stock [Member]
Business Acquisition [Line Items]
Business acquisition, shares issued or issuable, value				$ 5,129
Business acquisition, shares issued or issuable | shares				491,157
Wazee Digital Inc [Member] | Escrow Deposit [Member]
Business Acquisition [Line Items]
Business acquisition, cash consideration				$ 925
Wazee Digital Inc [Member] | Escrow Deposit [Member] | Common Stock [Member]
Business Acquisition [Line Items]
Business acquisition, shares issued or issuable | shares				60,576
Machine Box, Inc. [Member]
Business Acquisition [Line Items]
Business acquisition, effective date			Sep. 06, 2018
Business acquisition, contingent earn-out	$ 200	$ 200	$ 3,000					$ 160		$ 160
Business acquisition, cash consideration			$ 423
Escrow deposit closing, date			Sep. 06, 2020					Sep. 06, 2020
Aggregate purchase price paid			$ 1,484
Business acquisition, percentage of consideration paid in cash			20.00%
Fair value of the contingent amount			$ 2,880
Compensation expense number of intervals | Interval			3
Machine Box, Inc. [Member] | Subsequent Event [Member]
Business Acquisition [Line Items]
Business acquisition, contingent earn-out						$ 160
Escrow deposit closing, date						Sep. 06, 2020
Machine Box, Inc. [Member] | Research and Development [Member]
Business Acquisition [Line Items]
Compensation expense									$ 453			$ 1,333
Machine Box, Inc. [Member] | Common Stock [Member]
Business Acquisition [Line Items]
Business acquisition, shares issued or issuable, value	$ 808	$ 880	$ 1,061
Business acquisition, shares issued or issuable | shares	97,082	135,583	128,300
Business acquisition, percentage of consideration paid in shares			80.00%
Business acquisition, additional shares issued or issuable | shares							77,666	108,469				186,135
Machine Box, Inc. [Member] | Escrow Deposit [Member] | Common Stock [Member]
Business Acquisition [Line Items]
Business acquisition, cash consideration			$ 80					$ 40
Business acquisition, indemnification and other obligations, shares issued or issuable | shares			26,981					27,114
Machine Box, Inc. [Member] | Escrow Deposit [Member] | Common Stock [Member] | Subsequent Event [Member]
Business Acquisition [Line Items]
Business acquisition, cash consideration						$ 40
Business acquisition, indemnification and other obligations, shares issued or issuable | shares						19,416

XML

Business Combinations - Summary of Fair Value of Purchase Price Consideration (Detail) - USD ($) $ in Thousands	Sep. 06, 2018	Aug. 31, 2018	Aug. 21, 2018
Performance Bridge [Member]
Acquisition consideration
Cash consideration at closing			$ 1,220
Equity consideration at closing			3,938
Working capital adjustment			34
Contingent earnout consideration			3,770
Acquisition consideration, Total			$ 8,962
Wazee Digital Inc [Member]
Acquisition consideration
Cash consideration at closing		$ 7,423
Equity consideration at closing		5,129
Acquisition consideration, Total		$ 12,552
Machine Box, Inc. [Member]
Acquisition consideration
Cash consideration at closing	$ 423
Equity consideration at closing	1,061
Acquisition consideration, Total	$ 1,484

XML

Business Combinations - Purchase Price Allocation Based Upon Preliminary Estimate of Fair Value of Assets Acquired and Liabilities Assumed (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018	Sep. 06, 2018	Aug. 31, 2018	Aug. 21, 2018
Preliminary purchase price allocation:
Goodwill	$ 5,420	$ 5,509
Performance Bridge [Member]
Preliminary purchase price allocation:
Cash					$ 2,283
Accounts receivable					3,551
Prepaid and other current assets					23
Property and equipment					43
Intangible assets					5,800
Accounts payable					(1,402)
Accrued expenses and other current liabilities					(4,337)
Accrued compensation					(42)
Identifiable net assets acquired					5,919
Goodwill					3,043
Total purchase price					$ 8,962
Wazee Digital Inc [Member]
Preliminary purchase price allocation:
Cash				$ 975
Accounts receivable				2,396
Prepaid and other current assets				376
Property and equipment				292
Intangible assets				13,300
Accounts payable				(825)
Accrued expenses and other current liabilities				(3,516)
Accrued compensation				(850)
Other long-term liabilities				(700)
Identifiable net assets acquired				11,448
Goodwill				1,104
Total purchase price				$ 12,552
Machine Box, Inc. [Member]
Preliminary purchase price allocation:
Cash			$ 25
Intangible assets			700
Accrued expenses			(375)
Identifiable net assets acquired			350
Goodwill			1,134
Total purchase price			$ 1,484

XML

Business Combinations - Summary of Details of Acquired Intangible Assets (Detail) - USD ($) $ in Thousands	Sep. 06, 2018	Aug. 31, 2018	Aug. 21, 2018
Performance Bridge [Member]
Business Acquisition [Line Items]
Total intangible assets, Fair Value			$ 5,800
Performance Bridge [Member] | Customer Relationships [Member]
Business Acquisition [Line Items]
Intangible assets, Estimated Useful Life			5 years
Total intangible assets, Fair Value			$ 5,100
Performance Bridge [Member] | Noncompete Agreements [Member]
Business Acquisition [Line Items]
Intangible assets, Estimated Useful Life			4 years
Total intangible assets, Fair Value			$ 700
Wazee Digital Inc [Member]
Business Acquisition [Line Items]
Total intangible assets, Fair Value		$ 13,300
Wazee Digital Inc [Member] | Developed Technology [Member]
Business Acquisition [Line Items]
Intangible assets, Estimated Useful Life		5 years
Total intangible assets, Fair Value		$ 9,100
Wazee Digital Inc [Member] | Customer Relationships [Member]
Business Acquisition [Line Items]
Intangible assets, Estimated Useful Life		5 years
Total intangible assets, Fair Value		$ 4,200
Machine Box, Inc. [Member]
Business Acquisition [Line Items]
Total intangible assets, Fair Value	$ 700
Machine Box, Inc. [Member] | Developed Technology [Member]
Business Acquisition [Line Items]
Intangible assets, Estimated Useful Life	5 years
Total intangible assets, Fair Value	$ 500
Machine Box, Inc. [Member] | Noncompete Agreements [Member]
Business Acquisition [Line Items]
Intangible assets, Estimated Useful Life	3 years
Total intangible assets, Fair Value	$ 100
Machine Box, Inc. [Member] | Trademarks and Trade Names [Member]
Business Acquisition [Line Items]
Intangible assets, Estimated Useful Life	2 years 3 months 18 days
Total intangible assets, Fair Value	$ 100

XML

Net Income Loss Per Share - Computation of Basic and Diluted Net Loss Per Common Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Dec. 31, 2017
Numerator
Net loss	$ (16,691)	$ (14,330)	$ (32,997)	$ (27,379)	$ (61,104)	$ (59,601)
Denominator
Weighted-average common shares outstanding	20,817,466	16,438,897	20,201,819	16,324,431
Less: Weighted-average shares subject to repurchase	(58,070)	(124,661)	(63,063)	(131,862)
Denominator for basic and diluted net loss per share	20,759,396	16,314,236	20,138,756	16,192,569
Basic and diluted net loss per share	$ (0.80)	$ (0.88)	$ (1.64)	$ (1.69)

XML

Net Income Loss Per Share - Effect of Anti-dilutive Securities (Detail) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Effect of Anti-dilutive Securities	11,422,619	6,162,000	11,012,554	5,993,772
Employee Stock Option and Restricted Stock Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Effect of Anti-dilutive Securities	10,125,468	4,947,896	9,715,403	4,826,523
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Effect of Anti-dilutive Securities	1,297,151	1,214,104	1,297,151	1,167,249

XML

Financial Instruments - Schedule of Cash and Available-For-Sale Securities' Cost, Gross Unrealized Losses and Fair Value by Significant Investment Category (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Schedule of Available-for-sale Securities [Line Items]
Cash and cash equivalents	$ 40,275	$ 37,539
Marketable securities	4,998	13,565
Cash [Member]
Schedule of Available-for-sale Securities [Line Items]
Cash and cash equivalents	16,258	13,337
Fair Value, Cash	16,258	13,337
Level 1 [Member] | Money Market Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Cash and cash equivalents	24,017	24,202
Cash and cash equivalents gross before unrealized losses	24,017	24,202
Fair Value, Cash	24,017	24,202
Level 2 [Member]
Schedule of Available-for-sale Securities [Line Items]
Cash and cash equivalents	40,275	37,539
Marketable securities	4,998	13,565
Debt Securities		13,613
Gross Unrealized Losses		(48)
Fair Value, Debt Securities		13,565
Total Cash and Debt Securities	45,273	51,152
Total Fair Value, Cash and Debt Securities	45,273	51,104
Level 2 [Member] | U.S. Government Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Marketable securities		2,498
Debt Securities		2,500
Gross Unrealized Losses		(2)
Fair Value, Debt Securities		2,498
Level 2 [Member] | Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Marketable securities	4,998	11,067
Debt Securities	4,998	11,113
Gross Unrealized Losses		(46)
Fair Value, Debt Securities	$ 4,998	$ 11,067

XML

Financial Instruments - Schedule of Marketable Securities That Have Been in Continuous Unrealized Loss Position for Less than 12 months and for 12 months or Greater (Detail) $ in Thousands	Dec. 31, 2018 USD ($)
Cash And Cash Equivalents [Abstract]
Fair Value of Marketable Securities, Continuous Unrealized Losses, Less than 12 Months	$ 13,565
Fair Value of Marketable Securities, Continuous Unrealized Losses, Total	13,565
Unrealized Losses, Continuous Unrealized Losses, Less Than 12 Months	(48)
Unrealized Losses, Continuous Unrealized Losses, Total	$ (48)

XML

Financial Instruments - Additional Information (Detail) - USD ($)	1 Months Ended	6 Months Ended
	Apr. 30, 2018	Jun. 30, 2019	Dec. 31, 2018
Schedule of Available-for-sale Securities [Line Items]
Marketable securities maturity period		1 year
Warrants to purchase common stock		1,297,151	1,297,151
Financial instruments fair value transfers between Level 1, Level 2 or Level 3		$ 0
April 2018 Warrant [Member]
Schedule of Available-for-sale Securities [Line Items]
Warrants maturity period	5 years
Warrants to purchase common stock	20,000
Warrant exercise price	$ 11.73

XML

Financial Instruments - Summary of Quantitative Information with Respect to Significant Unobservable Inputs (Detail) - April 2018 Warrant [Member]	Jun. 30, 2019	Dec. 31, 2018
Volatility [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Warrants, measurement input	70	70
Risk-free Rate [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Warrants, measurement input	1.76	2.51
Term [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Warrants term	3 years 9 months	4 years 3 months

XML

Financial Instruments - Reconciliation of Level 3 Measurement of Company's April 2018 Warrant (Detail) - April 2018 Warrant [Member] $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning, Balance	$ 23
Change in fair value	50
Ending, Balance	$ 73

XML

Goodwill and Intangible Assets, Net - Summary of Changes in Carrying Amount of Goodwill (Detail) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Goodwill [Line Items]
Balance as of December 31, 2018	$ 5,509
Balance as of June 30, 2019	5,420
Performance Bridge [Member]
Goodwill [Line Items]
Adjustment	34
Wazee Digital Inc [Member]
Goodwill [Line Items]
Adjustment	$ (123)

XML

Goodwill and Intangible Assets, Net - Summary of Intangible Assets, Net (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Finite Lived Intangible Assets [Line Items]
Weighted Average Useful Life (in years)	3 years 7 months 6 days
Gross Carrying Amount	$ 24,353	$ 23,876
Accumulated Amortization	(5,530)	(3,396)
Net Carrying Amount	$ 18,823	20,480
Acquired Software and Technology [Member]
Finite Lived Intangible Assets [Line Items]
Weighted Average Useful Life (in years)	1 year 3 months 18 days
Gross Carrying Amount	$ 3,576	3,576
Accumulated Amortization	(2,031)	(1,613)
Net Carrying Amount	$ 1,545	1,963
Licensed Technology [Member]
Finite Lived Intangible Assets [Line Items]
Weighted Average Useful Life (in years)	2 years 1 month 6 days
Gross Carrying Amount	$ 500	500
Accumulated Amortization	(125)	(42)
Net Carrying Amount	$ 375	458
Developed Technology [Member]
Finite Lived Intangible Assets [Line Items]
Weighted Average Useful Life (in years)	4 years 1 month 6 days
Gross Carrying Amount	$ 10,077	9,600
Accumulated Amortization	(1,613)	(792)
Net Carrying Amount	$ 8,464	8,808
Customer Relationships [Member]
Finite Lived Intangible Assets [Line Items]
Weighted Average Useful Life (in years)	4 years 1 month 6 days
Gross Carrying Amount	$ 9,300	9,300
Accumulated Amortization	(1,550)	(733)
Net Carrying Amount	$ 7,750	8,567
Trademarks and Trade Names [Member]
Finite Lived Intangible Assets [Line Items]
Weighted Average Useful Life (in years)	1 year 4 months 24 days
Gross Carrying Amount	$ 100	100
Accumulated Amortization	(37)	(15)
Net Carrying Amount	$ 63	85
Noncompete Agreements [Member]
Finite Lived Intangible Assets [Line Items]
Weighted Average Useful Life (in years)	3 years
Gross Carrying Amount	$ 800	800
Accumulated Amortization	(174)	(201)
Net Carrying Amount	$ 626	$ 599

XML

Goodwill and Intangible Assets, Net - Summary of Amortization Expense Associated with Finite-Lived Intangible Assets (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Finite Lived Intangible Assets [Line Items]
Total amortization of expenses	$ 1,322	$ 307	$ 2,163	$ 618
Cost of Revenue [Member]
Finite Lived Intangible Assets [Line Items]
Total amortization of expenses	535	48	905	96
Selling and Marketing [Member]
Finite Lived Intangible Assets [Line Items]
Total amortization of expenses	319		391
Research and Development [Member]
Finite Lived Intangible Assets [Line Items]
Total amortization of expenses	256	256	512	517
General and Administrative [Member]
Finite Lived Intangible Assets [Line Items]
Total amortization of expenses	$ 212	$ 3	$ 355	$ 5

XML

Goodwill and Intangible Assets, Net - Summary of Future Estimated Annual Amortization Expense (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Finite Lived Intangible Assets Future Amortization Expense [Abstract]
2019 (6 months)	$ 2,697
2020	5,382
2021	4,261
2022	3,963
2023	2,520
Net Carrying Amount	$ 18,823	$ 20,480

XML

Consolidated Financial Statements Details - Schedule of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Statement Of Financial Position [Abstract]
Cash and cash equivalents	$ 40,275	$ 37,539
Long-term restricted cash	1,135	1,237
Total cash, cash equivalents and restricted cash	$ 41,410	$ 38,776	$ 52,692	$ 29,545

XML

Consolidated Financial Statements Details - Summary of Accounts Receivable,Net (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accounts receivable, gross	$ 26,891	$ 29,182
Less: allowance for doubtful accounts	(71)	(40)
Accounts receivable, net	26,820	29,142
Advertising [Member]
Accounts receivable, gross	23,167	26,226
aiWARE SaaS Solutions [Member]
Accounts receivable, gross	2,166	2,418
aiWARE Content Licensing and Media Services [Member]
Accounts receivable, gross	$ 1,558	$ 538

XML

Consolidated Financial Statements Details - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Condensed Financial Statements, Captions [Line Items]
Depreciation Expense	$ 263	$ 167	$ 555	$ 215
Cost of revenues	4,562	820	$ 8,434	1,384
Advertising [Member]
Condensed Financial Statements, Captions [Line Items]
Percentage of average commission earned on amount invoiced and collected			15.00%
Gross media placements	52,973	31,451	$ 103,755	60,872
Advertising [Member] | Billed Revenues [Member]
Condensed Financial Statements, Captions [Line Items]
Gross media placements	48,676	26,322	97,744	51,895
Advertising [Member] | Netted Against Billings [Member]
Condensed Financial Statements, Captions [Line Items]
Cost of revenues	$ 43,125	$ 23,014	$ 86,712	$ 45,464

XML

Consolidated Financial Statements Details - Summary of Property Equipment and Improvements, Net (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Property Plant And Equipment [Abstract]
Property and equipment	$ 2,151	$ 2,019
Leasehold improvements	2,876	2,875
Property, equipment and improvements, gross	5,027	4,894
Less: accumulated depreciation	(1,367)	(886)
Property, equipment and improvements, net	$ 3,660	$ 4,008

XML

Consolidated Financial Statements Details - Accounts Payable (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Accounts payable — Advertising	$ 17,148	$ 27,655
Accounts payable — Other	1,311	1,059
Total	$ 18,459	$ 28,714

XML

Consolidated Financial Statements Details - Summary of Net Revenues (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Revenue Reconciling Item [Line Items]
Total net revenues	$ 12,270	$ 4,168	$ 24,395	$ 8,556
Advertising [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Total net revenues	5,842	3,308	11,556	6,429
aiWARE SaaS Solutions [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Total net revenues	2,677	$ 860	5,457	$ 2,127
aiWARE Content Licensing and Media Services [Member]
Segment Reporting Revenue Reconciling Item [Line Items]
Total net revenues	$ 3,751		$ 7,382

XML

Consolidated Financial Statements Details - Schedule of Other Income, Net (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Other Income And Expenses [Abstract]
Interest income, net	$ 160	$ 168	$ 329	$ 349
Change in fair value of warrant liability	(37)	(15)	(50)	(15)
Other	(72)	(20)	(17)	(18)
Other income, net	$ 51	$ 133	$ 262	$ 316

XML

Commitments and Contingencies - Summary of Future Minimum Rentals Under Leases (Detail) - Building Lease Agreement [Member] $ in Thousands	Jun. 30, 2019 USD ($)
Other Commitments [Line Items]
2019 (6 months)	$ 1,256
2020	2,414
2021	2,211
2022	1,852
2023	1,680
Thereafter	1,730
Total minimum payments	$ 11,143

XML

Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Commitments And Contingencies Disclosure [Abstract]
Rent expense	$ 735	$ 501	$ 1,479	$ 833

XML

Stockholders' Equity - Additional Information (Detail) - USD ($) $ in Thousands					1 Months Ended		3 Months Ended		6 Months Ended
	Jun. 06, 2019	Mar. 06, 2019	Sep. 06, 2018	Aug. 21, 2018	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Class of Stock [Line Items]
Net proceeds from stock issuance							$ 8,055	$ 32,601	$ 12,215	$ 32,536
Warrants outstanding					1,297,151		1,297,151		1,297,151		1,297,151
Common Stock and Employee Stock Purchase Plan [Member]
Class of Stock [Line Items]
Shares issued in connection with stock option exercise									147,675
Common Stock [Member]
Class of Stock [Line Items]
Common stock shares issued							1,006,663	1,955,000	1,668,663	1,955,000
Net proceeds from stock issuance							$ 1	$ 2	$ 2	$ 2
Stock issuance costs									$ 428
Shares issued in connection with stock option exercise							27,049		47,099
Common Stock [Member] | Performance Bridge [Member]
Class of Stock [Line Items]
Business acquisition, shares issued or issuable				349,072					580,713
Common Stock [Member] | Machine Box, Inc. [Member]
Class of Stock [Line Items]
Business acquisition, shares issued or issuable	97,082	135,583	128,300
Business acquisition, additional shares issued or issuable					77,666	108,469			186,135

XML

Stock Plans - Additional Information (Detail) - USD ($)		6 Months Ended
	Jan. 31, 2019	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Class of Stock [Line Items]
Accrued employee contributions		$ 2,819,000		$ 6,570,000
Employee Stock Purchase Plan [Member]
Class of Stock [Line Items]
Common stock were purchased under ESPP	64,967
Accrued employee contributions		$ 277,000
Timebased Stock Option [Member]
Class of Stock [Line Items]
Options granted		555,346
Vesting period		4 years
Performance-based Stock Options [Member]
Class of Stock [Line Items]
Options granted		1,545,849
Vesting period		30 days
Options exercise price		$ 5.74
Total grant date fair value of stock options granted		$ 3,970,000
Weighted Average Grant Date Fair Value, Granted		$ 2.57	$ 9.59
Expected term (in years)		6 years 4 months 24 days
Cost of share-based compensation awards, recognition period		3 years 8 months 12 days
Total grant date fair value of stock options vested		$ 0	$ 0
Unrecognized compensation expense related to stock options		$ 26,231,000
Performance-based Stock Options [Member] | Tranche 1 [Member]
Class of Stock [Line Items]
Options exercise price		$ 49.15
Performance-based Stock Options [Member] | Tranche 2 [Member]
Class of Stock [Line Items]
Options exercise price		98.31
Performance-based Stock Options [Member] | Tranche 3 [Member]
Class of Stock [Line Items]
Options exercise price		$ 196.62
Restricted Stock [Member]
Class of Stock [Line Items]
Unrecognized cost of share-based compensation awards		$ 246,000
Cost of share-based compensation awards, recognition period		1 year 3 months 18 days
Restricted Stock Units [Member]
Class of Stock [Line Items]
Unrecognized cost of share-based compensation awards		$ 950,000
Cost of share-based compensation awards, recognition period		1 year 2 months 12 days
Stock Options [Member]
Class of Stock [Line Items]
Options granted		555,346
Options exercise price		$ 5.98
Weighted Average Grant Date Fair Value, Granted		$ 3.72	$ 9.73
Cost of share-based compensation awards, recognition period		2 years 1 month 6 days
Total grant date fair value of stock options vested		$ 5,465,000	$ 4,626,000
Unrecognized compensation expense related to stock options		13,924,000
Aggregate intrinsic value of the options exercised		$ 177,000	$ 1,698,000

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Stock Plans - Schedule of Fair Value Assumptions (Detail) - Timebased Stock Option [Member]	6 Months Ended
	Jun. 30, 2019
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)	6 years
Expected volatility	66.00%
Risk-free interest rate	1.80%
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)	6 years 1 month 6 days
Expected volatility	68.00%
Risk-free interest rate	2.50%

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Stock Plans - Summary of Fair Value Assumptions of Stock Purchase Plan (Detail)	6 Months Ended
	Jun. 30, 2019
Employee Stock Purchase Plan [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	51.00%
Risk-free interest rate	1.30%
Expected term (in years)	6 months
Employee Stock Purchase Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	71.00%
Risk-free interest rate	2.50%
Expected term (in years)	2 years
Performance-based Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	65.00%
Risk-free interest rate	2.70%
Cost of equity	14.00%
Expected term (in years)	6 years 4 months 24 days

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Stock Plans - Schedule of Stock-based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ 5,778	$ 2,651	$ 11,285	$ 5,125
Sales and Marketing [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	271	248	514	568
Research and Development [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	900	266	1,984	507
General and Administrative [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	4,607	2,137	8,787	4,050
Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	299	99	497	147
Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	96	135	256	353
Machine Box Contingent Common Stock Issuances [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	523		1,227
Performance-based Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	2,020	53	3,956	53
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	2,703	2,246	5,060	4,282
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ 137	$ 118	$ 289	$ 290

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Stock Plans - Schedule of Restricted Stock Award Activity (Detail) - Restricted Stock Awards [Member]	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares, Unvested, Beginning Balance | shares	72,208
Shares, Vested | shares	(31,245)
Shares, Unvested, Ending Balance | shares	40,963
Weighted Average Grant Date Fair Value, Unvested, Beginning Balance | $ / shares	$ 7.26
Weighted Average Grant Date Fair Value, Vested | $ / shares	6.95
Weighted Average Grant Date Fair Value, Unvested, Ending Balance | $ / shares	$ 7.50

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Stock Plans - Schedule of Restricted Stock Unit Activity (Detail) - Restricted Stock Units [Member]	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares, Unvested, Beginning Balance | shares	49,143
Shares, Granted | shares	150,211
Shares, Forfeited | shares	(1,000)
Shares, Vested | shares	(35,609)
Shares, Unvested, Ending Balance | shares	162,745
Weighted Average Grant Date Fair Value, Unvested, Beginning Balance | $ / shares	$ 12.57
Weighted Average Grant Date Fair Value, Granted | $ / shares	7.28
Weighted Average Grant Date Fair Value, Forfeited | $ / shares	8.81
Weighted Average Grant Date Fair Value, Vested | $ / shares	13.99
Weighted Average Grant Date Fair Value, Unvested, Ending Balance | $ / shares	$ 7.40

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Stock Plans - Schedule of Performance-Based Stock Options Activity (Detail) - Performance-based Stock Options [Member] $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, Outstanding, Beginning Balance | shares	3,167,325
Options Granted | shares	1,545,849
Options Forfeited | shares	(102,648)
Options, Outstanding, Ending Balance | shares	4,610,526
Weighted-Average Exercise Price, Outstanding, Beginning Balance | $ / shares	$ 21.25
Weighted-Average Exercise Price, Options Granted | $ / shares	5.74
Weighted-Average Exercise Price, Options Forfeited | $ / shares	5.67
Weighted-Average Exercise Price, Outstanding, Ending Balance | $ / shares	$ 16.40
Weighted-Average Remaining Contractual Term, Outstanding	9 years 1 month 9 days
Weighted-Average Aggregate Intrinsic Value | $	$ 3,771

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Stock Plans - Schedule of Stock Option Activity (Detail) - Stock Options [Member] - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, Outstanding, Beginning Balance	5,154,691
Options Granted	555,346
Options Exercised	(47,099)
Options Forfeited	(183,892)
Options Expired	(58,459)
Options, Outstanding, Ending Balance	5,420,587
Options Exercisable at June 30, 2019	3,269,820
Weighted-Average Exercise Price, Outstanding, Beginning Balance	$ 13.78
Weighted-Average Exercise Price, Options Granted	5.98
Weighted-Average Exercise Price, Options Exercised	2.56
Weighted-Average Exercise Price, Options Forfeited	12.45
Weighted-Average Exercise Price, Options Expired	13.09
Weighted-Average Exercise Price, Outstanding, Ending Balance	13.13
Weighted-Average Exercise Price, Exercisable	$ 13.94
Weighted-Average Remaining Contractual Term, Outstanding	8 years 29 days
Weighted-Average Remaining Exercisable	7 years 7 months 24 days
Weighted-Average Aggregate Intrinsic Value	$ 3,368
Weighted-Average Aggregate Intrinsic Value, Exercisable	$ 1,811