Delaware |
6770 |
61-1898603 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
Stephen Glover, Esq. Andrew Fabens, Esq. Gibson, Dunn & Crutcher LLP 1050 Connecticut Avenue, N.W. Washington, D.C. 20036 Telephone: (202) 955-8500 |
Roxane F. Reardon Benjamin N. Heriaud Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York 10017 Telephone: (212) 455-2000 |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
Emerging growth company |
| ||||
Title of each class of securities to be registered |
Proposed maximum aggregate offering price(1)(2) |
Amount of registration fee | ||
Common stock, par value $0.0001 per share |
$100,000,000 | $9,270 | ||
| ||||
|
(1) | Includes shares of common stock that the underwriters have the option to purchase. See “Underwriting.” |
(2) | Estimated solely for the purpose of calculating the registration fee under Rule 457(o) of the Securities Act of 1933, as amended. |
Per share |
Total |
|||||||
Public offering price |
$ |
$ |
||||||
Underwriting discounts and commissions (1) |
$ |
$ |
||||||
Proceeds to us before expenses |
$ |
$ |
||||||
|
(1) |
See “Underwriting” for a description of all underwriting compensation payable in connection with this offering. |
J.P. Morgan |
BofA Securities |
ii | ||||
1 | ||||
15 | ||||
20 | ||||
52 | ||||
54 | ||||
55 | ||||
56 | ||||
57 | ||||
59 | ||||
80 | ||||
114 | ||||
120 | ||||
126 | ||||
130 | ||||
134 | ||||
140 | ||||
142 | ||||
145 | ||||
149 | ||||
156 | ||||
156 | ||||
156 | ||||
F-1 |
Nine months ended September 30, |
Year ended December 31, |
|||||||||||||||
2021 |
2020 |
2020 |
2019 |
|||||||||||||
(in millions) |
(Unaudited) | |||||||||||||||
Revenues |
$ | 238.2 | $ | 215.0 | $ | 289.5 | $ | 312.1 | ||||||||
Net loss |
(53.3 | ) | (40.2 | ) | (49.9 | ) | (54.0 | ) | ||||||||
Adjusted EBIDTA (1) |
49.9 | 43.8 | 63.3 | 68.7 |
(1) | Adjusted EBITDA is a non-GAAP measure. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-U.S. GAAP Financial Measures.” |
• | eDiscovery. |
• | Information governance. |
many demands placed upon that data. These demands include everything from ready access to data for business utility and continuity, to data protection against ransomware and other cyber-attacks, to complying with proliferating privacy and other regulatory requirements, to responding to regulatory investigations and civil litigation. Radicati estimates the information governance market to be $6.5 billion in 2021 and expects it to grow to approximately $8.9 billion in 2024. |
• | Data recovery. |
• | Growing significance of legal services worldwide. |
• | Technological transformation within the legal industry. |
• | The proliferation of enterprise data. |
• | Increased focus on flexibility of solution delivery. one-size fits all approach, there is a greater emphasis on customized legal technology offerings that feature seamless workflows from start to finish across multiple delivery options. |
• | Users involved in complex cases require strong project management and client service. |
• | Strategic relevance of privacy and security protocols. |
and the litany of state laws being enacted in the United States. The rise of cybersecurity issues such as data breaches, ransomware and phishing attacks and other incidents is also driving demand. |
• | Lack of providers offering both software and technology-enabled services. |
• | Software providers do not offer critical client service resources. |
• | Service providers rely almost exclusively on third-party technology. use-cases and needs of their buyers. This lack of technological independence either results in gaps in what a provider can offer or requires service providers to license multiple disparate systems in a manner that is neither seamless nor cost effective. |
• | Lack of comprehensive solutions. |
• | Limited flexibility and scalability of offerings. on-premise. |
• | Lack of scalable, end-to-end one-size fits all approach, and lack the technology, functionality, expertise and technical and project support required to help clients successfully navigate the complexity and nuances of large-scale projects. |
• | eDiscovery – end-to-end |
• | Nebula – end-to-end |
• | Nebula Big Data – |
• | Nebula Legal Hold – |
• | eDiscovery.com Review (EDR) – |
• | Relativity – |
• | KLD AI and review automation – |
• | Processing – |
• | Technology-enabled services – |
• | Data recovery – |
• | Highly differentiated combination of proprietary software and human capital. |
• | Full stack, scalable technology offerings covering the full spectrum of the EDRM. AI-powered software solutions for corporate legal functions allowing clients to collect, process, transmit, store, analyze, and govern all of their data on a single platform in a timely and efficient manner. Our solutions are designed for enterprise adoption and can be applied to a wide variety of enterprise use cases outside of litigation such as internal investigations, merger clearance and legal holds. |
• | Nebula is a highly differentiated and comprehensive technology platform. end-to-end |
• | State of the art AI / ML functionality. |
• | Simplified and flexible pricing to provide end-to-end |
• | Client benefits. |
• | Network effect. |
• | Partner Channel Subscriptions. |
• | A trusted partner for the most complex, mission critical legal matters and data needs. |
• | Comprehensive technology solutions that expand beyond traditional eDiscovery use cases. end-to-end one-stop platform that offers comprehensive solutions allows clients to contract with a single provider, avoiding frictions and risks in moving data and contracting multiple providers. |
• | Founder led, proven and experienced management team. co-founded our Company in 2005 with a mission to support clients through their most complex and stressful legal and data challenges. As one of the longest-tenured CEOs in the global eDiscovery sector, he provides extensive industry expertise and relationships. Moreover, we have a deep team of seasoned executives who have collectively spent over 180 years in the legal and technology industries. Furthermore, our sales and software development executives have worked together over the past 15+ years and developed a seamless feedback loop to improve our technology in response to the changing needs of our clients. |
• | Expansive global footprint. |
• | Highly qualified and experienced sales force. value-add sales professionals to act as consultants for their clients across a wide array of offerings. |
• | Established track-record with scale and financial flexibility to fund investments. |
• | Extend our technology leadership with continued innovation and platform expansion. |
• | Continue to increase adoption of Nebula on a global scale. |
service providers, law firms, and corporations. As we continue to innovate and improve Nebula’s offerings, we plan to gradually transition our clients who rely on third-party software onto our proprietary Nebula platform. |
• | Grow our client base and drive incremental penetration within existing clients. add-ons, and features has increased the value we provide to our clients, and our growing product capabilities will continue to attract new and maintain existing clients. |
• | Build partner channels. |
• | Expand and strengthen sales force coverage. |
• | Further our presence in international markets. |
• | Pursue opportunistic strategic acquisitions. |
• | Our actual or perceived failure to comply with legal and other requirements related to privacy and information security could adversely affect our business and reputation. |
• | Our products, SaaS offerings, website and networks may be subject to disruption or unauthorized access that could adversely affect our reputation and business. |
• | An outbreak of disease or similar public health threat, such as the COVID-19 pandemic, could have an ongoing adverse effect on our business. |
• | We operate in highly competitive markets and our inability to compete may adversely affect our business. |
• | Our continued growth largely depends upon achieving market acceptance of Nebula. |
• | Our business depends on clients increasing their use of our solutions and services. |
• | If we are unable to attract new clients, our business, financial condition and results of operations will be adversely affected. |
• | Our inability to successfully recover from a continuity event could impair our ability to deliver our solutions and adversely affect our business. |
• | Defects in our product offerings could impair our ability to deliver our solutions, expose us to liability, damage our brand or reputation or otherwise harm our business. |
• | Our failure to comply with the terms of third-party open source software licenses for certain components of our products and solutions could restrict our ability to provide our products and services. |
• | The unavailability of third-party technology could adversely impact our business. |
• | We have a history of losses and may not be able to achieve or sustain profitability. |
• | Our growth depends on our ability to continue to attract and retain senior management team members and key employees. |
• | If we are unable to maintain, promote or expand our brand, our brand and business could be adversely affected. |
• | Risks related to acquisitions and integration of acquired businesses could have an adverse effect on our business. |
• | Our international business operations subject our business to additional risks. |
• | Failure to comply with export controls, trade and economic sanctions laws and regulations could result in legal liability and adversely affect our reputation and business. |
• | Our failure to comply with the anti-corruption laws and regulations could adversely affect our reputation and business. |
• | The legal industry is highly regulated and we are or may become subject to a wide range of laws and regulations, and any failure to comply with them may adversely affect our business. |
• | Litigation could have an adverse effect on us. |
• | Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. |
• | Our substantial levels of indebtedness could adversely affect our business. |
• | The terms of our existing indebtedness restrict our actions, which could adversely affect our business. |
• | There is currently no active public market for our common stock and one may not develop. |
• | The trading price of our common stock may be volatile and could decline substantially following this offering. |
• | Coverage of our business by analysts, or the absence thereof, could adversely affect our stock price and trading volume. |
• | We may issue additional equity securities, which would dilute existing ownership interests and may depress the market price of our common stock. |
• | We have broad discretion in the use of the net proceeds from this offering and may not use them effectively. |
• | If we comply with reduced reporting and disclosure requirements available to us, our common stock may become less attractive to investors. |
• | Failure to maintain an effective system of internal control over financial reporting could adversely affect our business and stock price. |
• | If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results. |
• | Our second amended and restated certificate of incorporation contains anti-takeover provisions that could adversely affect stockholders’ rights. |
• | reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; |
• | exemption from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute payments; and |
• | exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting. |
• | presenting only the two most recent fiscal years of audited financial statements in our annual reports on Form 10-K and registration statements, including the registration statement of which this prospectus forms a part; and |
• | reduced narrative disclosure obligations, particularly with respect to executive compensation, in our periodic reports, proxy statements and registration statements. |
Issuer |
KLDiscovery Inc. |
Common stock offered by us |
shares of common stock. |
Option to purchase additional shares of common stock |
We have granted the underwriters an option to purchase up to additional shares of common stock. The underwriters may exercise this option at any time within 30 days from the date of this prospectus. See “Underwriting.” |
Common stock to be outstanding immediately after this offering |
shares of common stock (or shares if the underwriters exercise in full their option to purchase additional shares). |
Use of proceeds |
We estimate that the net proceeds to us from the sale of the shares of our common stock in this offering will be approximately $ million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us (or $ million if the underwriters exercise in full their option to purchase additional shares). |
The principal purposes of this offering are to increase our capitalization and financial flexibility and create a public market for our common stock. We intend to use the net proceeds from this offering to repay indebtedness and for general corporate purposes, including working capital, operating expenses and capital expenditures. We may also use a portion of the net proceeds to acquire or make investments in complementary businesses, products, offerings and technologies, although we do not have agreements or commitments for any material acquisitions or investments at this time. |
Dividends |
We have never declared or paid any cash dividends on our common stock and we do not have any present intention to pay any cash dividends for the foreseeable future. Instead, we anticipate that all of our earnings will be used to provide working capital, to support our operations, and to finance the growth and development of our business. Any future determination relating to dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors. See “Dividend Policy.” |
Trading market and symbol |
Our common stock is currently quoted on the OTC Pink Open Market under the symbol “KLDI”. We intend to apply to list our common stock on under the symbol “ ” in connection with this offering. |
Risk Factors |
See “Risk Factors” for a discussion of factors you should carefully consider before deciding to invest in our common stock. |
• | up to shares of common stock issuable in connection with outstanding equity awards granted pursuant to the KLDiscovery Inc. 2019 Incentive Award Plan, or the 2019 Stock Plan, including shares underlying options to purchase common stock with a weighted average exercise price of $ ; |
• | shares of common stock issuable upon exercise of stock purchase warrants at an exercise price of $11.50 per share; |
• | shares of common stock issuable upon conversion of our outstanding 8.00% convertible debentures due 2024, or the Debentures, at a conversion price of $18.00 per share; and |
• | shares of common stock reserved for future issuance under the 2019 Stock Plan. |
Nine months ended September 30, |
Year ended December 31, |
|||||||||||||||
2021 |
2020 |
2020 |
2019 |
|||||||||||||
(in thousands, except share and per share data) |
(Unaudited) | |||||||||||||||
Consolidated statements of comprehensive loss data: |
||||||||||||||||
Revenues |
$ | 238,222 | $ | 214,953 | $ | 289,545 | $ | 312,054 | ||||||||
Cost of revenues |
120,161 | 111,472 | 147,732 | 160,845 | ||||||||||||
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Gross profit |
118,061 | 103,481 | 141,813 | 151,209 | ||||||||||||
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Operating expenses |
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General and administrative |
46,366 | 42,534 | 58,509 | 55,005 | ||||||||||||
Research and development |
7,341 | 5,134 | 7,167 | 5,945 | ||||||||||||
Sales and marketing |
29,338 | 29,460 | 38,395 | 48,517 | ||||||||||||
Impairment of intangible asset (1) |
22,259 | — | — | — | ||||||||||||
Depreciation and amortization |
22,636 | 27,135 | 35,955 | 39,149 | ||||||||||||
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Total operating expenses |
128,210 | 104,263 | 140,026 | 148,616 | ||||||||||||
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(Loss) income from operations |
(10,149 | ) | (782 | ) | 1,787 | 2,593 | ||||||||||
Other (income) expenses |
||||||||||||||||
Other expense |
10 | 102 | 118 | 308 | ||||||||||||
Change in fair value of Private Warrants |
(1,651 | ) | — | — | — | |||||||||||
Interest expense |
37,584 | 38,303 | 50,659 | 48,377 | ||||||||||||
Loss on debt extinguishment |
7,257 | — | — | 7,203 | ||||||||||||
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Loss before income taxes |
(53,349 | ) | (39,187 | ) | (48,990 | ) | (53,295 | ) | ||||||||
Income tax (benefit) provision |
(97 | ) | 964 | 936 | 719 | |||||||||||
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Net loss |
$ | (53,252 | ) | $ | (40,151 | ) | $ | (49,926 | ) | $ | (54,014 | ) | ||||
Other comprehensive (loss) income, net of tax |
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Foreign currency translation |
(3,559 | ) | 547 | 4,947 | 311 | |||||||||||
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Total other comprehensive (loss) income, net of tax |
(3,559 | ) | 547 | 4,947 | 311 | |||||||||||
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Comprehensive loss |
$ | (56,811 | ) | $ | (39,604 | ) | $ | (44,979 | ) | $ | (53,703 | ) | ||||
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Net loss per share—basic and diluted |
$ | (1.25 | ) | $ | (0.94 | ) | $ | (1.17 | ) | $ | (1.27 | ) | ||||
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Weighted average shares outstanding—basic and diluted |
42,577,128 | 42,529,017 | 42,529,017 | 42,425,295 | ||||||||||||
Consolidated cash flow data: |
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Net cash provided by (used in) operating activities |
$ | 7 | $ | 25,307 | $ | 39,776 | $ | (8,297 | ) | |||||||
Net cash used in investing activities |
(9,708 | ) | (11,501 | ) | (14,059 | ) | (15,218 | ) | ||||||||
Net cash provided by (used in) financing activities |
661 | (13,438 | ) | (18,595 | ) | 43,490 |
Nine months ended September 30, |
Year ended December 31, |
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2021 |
2020 |
2020 |
2019 |
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(in thousands) |
(Unaudited) | |||||||||||||||
Consolidated balance sheet data (at period end): |
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Cash and cash equivalents |
$ | 41,786 | $ | 51,201 | $ | 43,407 | ||||||||||
Total assets |
$ | 644,752 | $ | 679,746 | $ | 714,912 | ||||||||||
Current portion of long-term debt, net |
$ | 3,000 | $ | 10,948 | $ | 11,689 | ||||||||||
Long term debt—net of current portion |
$ | 499,183 | $ | 472,600 | $ | 468,932 | ||||||||||
Total stockholders’ equity |
$ | 84,712 | $ | 142,221 | $ | 183,765 | ||||||||||
Working capital |
$ | 109,122 | $ | 93,968 | $ | 100,103 | ||||||||||
Other financial data: |
||||||||||||||||
EBITDA (2) |
$ | 43,421 | $ | 35,179 | $ | 49,431 | $ | 52,692 | ||||||||
Adjusted EBITDA (2) |
$ | 49,869 | $ | 43,841 | $ | 63,290 | $ | 68,723 |
(1) |
Relates to a charge associated with our trademark intangible assets. See Note 1 – Organization, business and summary of significant accounting policies to our unaudited condensed consolidated financial statements included elsewhere in this prospectus. |
(2) |
EBITDA and adjusted EBITDA are non-GAAP measures. See “Management’s Discussion and Analysis and Financial Condition and Results of Operations—Non-U.S. GAAP Financial Measures” for additional information, including a definition of how we calculate these measures, certain limitations regarding their use and a reconciliation thereof to the most directly comparable GAAP measure. |
• | sensitive data regarding our business, including intellectual property and other proprietary data, could be stolen or mishandled; |
• | our sensitive or proprietary data or the sensitive and proprietary data of our clients could be rendered unavailable through a ransomware or other cyberattack, resulting in potentially significant service disruptions, negative publicity, and loss of business; |
• | our electronic communications systems, including email and other methods, could be disrupted, and our ability to conduct our business operations could be seriously damaged until such systems can be restored and secured; |
• | our ability to process client orders and electronically deliver products and solutions could be lost or degraded, and our distribution channels could be disrupted, resulting in delays in revenue recognition; |
• | defects and security vulnerabilities could be exploited or introduced into our products or our cloud offerings, thereby damaging the reputation and perceived reliability and security of our products and solutions and potentially making the data systems of our clients vulnerable to further data loss and cyber incidents; and |
• | personal information, protected health information, or PHI or other confidential data of our clients, employees and business partners could be accessed without authorization, stolen or lost. |
• | enhance and improve our existing products and solutions (such as by adding new content and functionalities); |
• | develop new products and solutions; |
• | invest in technology; and |
• | strategically acquire additional businesses and partner with other businesses in key sectors that will allow us to offer a broader array of products and solutions. |
• | managing the length of the development cycle for new products and product enhancements, including the continued development of Nebula, which can fluctuate as new features are developed; |
• | designing and marketing products and professional services solutions that will be adopted by our client base as well as attract new clients for our technology; |
• | managing clients’ transitions to new products and solutions; |
• | adapting to emerging and evolving industry standards and to technological developments by our competitors and clients; |
• | extending the operation of our products and solutions to new and evolving platforms, operating systems, operating environments and models, including support of new workloads and data management technologies, and hardware products; |
• | clients’ ability to upgrade to the most current versions of software to take advantage of new functionalities; |
• | reacting to trends and predicting which technologies will be successful and develop into industry standards; |
• | tailoring our business and pricing models appropriately as we enter new markets and respond to competitive pressures and technological changes; |
• | extending or creating technology alliances with other key technology players in our industry; |
• | managing new product and solutions for the markets in which we operate; |
• | addressing trade compliance issues affecting our ability to ship our products; |
• | developing or expanding efficient sales channels; and |
• | obtaining sufficient licenses to technology and technical access from proprietary software providers, open source software providers and operating system software vendors on reasonable terms to enable the development and deployment of interoperable products, including source code licenses for certain products with deep technical integration into operating systems. |
• | foreign certification, licensing and regulatory requirements, which may be substantially more complex or burdensome than our domestic requirements; |
• | risk associated with selecting or terminating partners for foreign expansion, including marketing agents, distributors or other strategic partners for particular markets; |
• | risk associated with local ownership and/or investment requirements, as well as difficulties in obtaining financing in foreign countries for local operations; |
• | reduced protection of confidential consumer information in some countries; |
• | political unrest, international hostilities, military actions, terrorist or cyber-terrorist activities, natural disasters, pandemics, and infrastructure disruptions; |
• | differing economic cycles and adverse economic conditions; |
• | unexpected changes in and compliance with foreign regulatory requirements, including GDPR; |
• | regulations or restrictions on the use, import or export of technologies that could delay or prevent the acceptance and use of our products; |
• | differing business practices, which may require us to enter into agreements that include non-standard terms; |
• | varying tax regimes, including with respect to the imposition of withholding taxes on remittances and other payments by our partnerships or subsidiaries; |
• | differing labor regulations; |
• | foreign exchange controls and restrictions on repatriation of funds from our international subsidiaries; |
• | fluctuations in currency exchange rates, economic instability and inflationary conditions |
• | inability to collect payments or seek recourse under or comply with ambiguous or vague commercial or other laws; |
• | potential loss of proprietary or personal information due to misappropriation or laws that may be less protective of our intellectual property rights than U.S. laws or that may not be adequately enforced |
• | varying attitudes towards censorship and the treatment of information service providers by foreign governments, in particular in emerging markets |
• | difficulties in attracting and retaining qualified management and employees, or rationalizing our workforce; |
• | difficulties in staffing, managing and operating our international operations, including difficulties related to administering our stock plans in some foreign countries; |
• | difficulties in coordinating the activities of our geographically dispersed and culturally diverse operations; |
• | costs and delays associated with developing software and providing support in multiple languages; and |
• | difficulties in penetrating new markets due to entrenched competitors, lack of recognition of our brands or lack of local acceptance of our products and solutions. |
• | economic conditions and other factors affecting client budgets; |
• | the regulatory environment in which our clients operate; |
• | the discretionary nature of clients’ purchasing decisions and budget cycles; |
• | the effectiveness of our sales force, particularly new salespeople, as we increase the size of our sales force and train our new salespeople; |
• | clients’ procurement processes, including their evaluation of competing products and services; |
• | evolving client demands; and |
• | competitive conditions. |
• | increasing our vulnerability to, and reducing our flexibility to respond to, general adverse economic and industry conditions; |
• | requiring the dedication of a substantial portion of cash flow from operations to the payment of principal of, and interest on, our indebtedness, thereby reducing the availability of such cash flow to fund operations, working capital, capital expenditures, acquisitions, joint ventures or other future business opportunities; |
• | exposing us to the risk of increased interest rates on our borrowings under our credit facility, which is at variable rates of interest; |
• | limiting flexibility in planning for, or reacting to, changes in our business, market conditions and the competitive environment, placing us at a competitive disadvantage compared to our competitors who are less highly leveraged; and |
• | limiting our ability to borrow additional funds and increasing the cost of any such borrowing. |
• | pay dividends, redeem capital stock and make other restricted payments and investments; |
• | sell assets or merge, consolidate, or transfer all or substantially all of our subsidiaries’ assets; |
• | engage in certain transactions with affiliates; |
• | incur or guarantee additional debt; |
• | impose dividend or other distribution restrictions on our subsidiaries; and |
• | create liens on our subsidiaries’ assets. |
• | the likelihood that an active trading market for our common stock will develop or be sustained; |
• | the liquidity of any such market; |
• | the ability of our stockholders to sell their shares of common stock; or |
• | the price that our stockholders may obtain for their common stock. |
• | actual or anticipated variations in our operating and financial performance and that of our competitors, including reserve estimates; |
• | changes in our industry or the markets in which we operate; |
• | our ability to accurately project future results and our ability to achieve those or meet the expectations of other industry and analyst forecasts; |
• | changes in market valuations of similar companies; |
• | strategic actions, including acquisitions, or investments by us or our competitors; |
• | speculation in the press or investment community; |
• | sales of our common stock by us, our directors or officers or the perception that such sales may occur; |
• | changes in key management personnel; |
• | actions by our stockholders, including sales of large blocks of our common stock; |
• | general economic and political conditions, including an economic slowdown; |
• | new or changes to existing legislation or other regulatory developments that affect us, or our industry or our markets; |
• | short selling of our common stock or related derivative securities or hedging activities; and |
• | the realization of any risks described in this “Risk Factors” section or elsewhere in this prospectus. |
• | provisions that authorize our Board of Directors, without action by our stockholders, to issue additional shares of common stock and preferred stock with preferential rights determined by our Board of Directors; |
• | provisions that permit only a majority of our Board of Directors to call stockholder meetings and therefore do not permit stockholders to call stockholder meetings; |
• | provisions that impose advance notice requirements, minimum shareholding periods and ownership thresholds, and other requirements and limitations on the ability of stockholders to propose matters for consideration at stockholder meetings; |
• | provisions limiting stockholders’ ability to act by written consent; and |
• | a staggered Board of Directors whereby our directors are divided into three classes, with each class subject to retirement and re-election once every three years on a rotating basis. |
• | the ability to obtain and maintain the listing of our securities on a nationally recognized exchange; |
• | the potential liquidity and trading of our public securities; |
• | potential failure to comply with privacy and information security regulations governing the client datasets that we process and store; |
• | the outbreak of disease or similar public health threat, such as COVID-19; |
• | the ability to operate in highly competitive markets, and potential adverse effects of this competition; |
• | risk of decreased revenues if we do not adapt our pricing models; |
• | the ability to attract, motivate and retain qualified employees, including members of our senior management team; |
• | the ability to maintain a high level of client service and expand operations; |
• | potential issues with our product offerings that could cause legal exposure, reputational damage and an inability to deliver services; |
• | the ability to develop new products, improve existing products and adapt our business model to keep pace with industry trends; |
• | risk that our products and services fail to interoperate with third-party systems; |
• | potential unavailability of third-party technology that we use in our products and services; |
• | potential disruption of our products, offerings, website and networks; |
• | difficulties resulting from our implementation of new consolidated business systems; |
• | the ability to deliver products and services following a disaster or business continuity event; |
• | potential unauthorized use of our products and technology by third parties and/or data security breaches and other incidents; |
• | potential intellectual property infringement claims; |
• | the ability to comply with various trade restrictions, such as sanctions and export controls, resulting from its international operations; |
• | consequences of our substantial levels of indebtedness; |
• | potential impairment charges related to goodwill, identified intangible assets and fixed assets; |
• | impacts of laws and regulations on our business; |
• | potential litigation and regulatory proceedings involving us; |
• | costs related to the Business Combination; |
• | expectations regarding the time during which we will be an emerging growth company or smaller reporting company; and |
• | other risks and uncertainties indicated in the section titled “Risk Factors.” |
September 30, 2021 |
||||||||
Actual |
As Adjusted |
|||||||
Cash and cash equivalents |
$ | 41,786 | $ | |||||
|
|
|
|
|||||
Debt |
||||||||
Term loan due 2026 |
$ | 298,500 | $ | |||||
Revolving credit facility (1) |
— | |||||||
Convertible debenture notes due 2024 |
221,115 | |||||||
Less: unamortized original issue discount |
(15,600 | ) | ||||||
Less: unamortized debt issuance costs |
(1,832 | ) | ||||||
|
|
|
|
|||||
Total debt, net |
$ | 502,183 | $ | |||||
Stockholders’ equity |
||||||||
Common stock, $0.0001 par value, authorized 200,000,000 shares actual and as adjusted; issued and outstanding 42,637,315 shares actual and shares as adjusted |
4 | |||||||
Additional paid-in capital |
384,689 | |||||||
Accumulated deficit |
(308,676 | ) | ||||||
Accumulated other comprehensive income |
8,695 | |||||||
|
|
|
|
|||||
Total stockholders’ equity |
$ | 84,712 | $ | |||||
|
|
|
|
|||||
Total capitalization |
$ | 586,895 | $ | |||||
|
|
|
|
(1) |
As of September 30, 2021, there was $39.4 million available capacity for borrowing based on letters of credit outstanding. |
Assumed public offering price per share of common stock |
$ | |||||||
Net tangible book value per share of common stock as of , |
$ | |||||||
Pro forma increase in net tangible book value per share of common stock attributable to new investors in this offering |
$ | |||||||
|
|
|||||||
Pro forma net tangible book value per share of common stock immediately after this offering |
$ | |||||||
|
|
|||||||
Dilution per share of common stock to new investors |
$ | |||||||
|
|
Shares of Common Stock Purchased |
Total Consideration |
Average Price Per Share of Common Stock |
||||||||||||||||||
Number |
Percent |
Amount |
Percent |
|||||||||||||||||
Existing stockholders |
% | $ | % | $ | ||||||||||||||||
New investors in this offering |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
100.0 | % | $ | 100.0 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
Year ended December 31, |
|||||||||||||||
2021 |
2020 |
2020 |
2019 |
|||||||||||||
(in millions) |
(Unaudited) | |||||||||||||||
Revenues |
$ | 238.2 | $ | 215.0 | $ | 289.5 | $ | 312.1 | ||||||||
Net loss |
(53.3 | ) | (40.2 | ) | (49.9 | ) | (54.0 | ) | ||||||||
Adjusted EBIDTA (1) |
49.9 | 43.8 | 63.3 | 68.7 |
(1) | Adjusted EBITDA is a non-GAAP measure. See “—Non-U.S. GAAP Financial Measures.” |
September 30, 2021 |
December 31, 2020 |
December 31, 2019 |
||||||||||
Legal Technology clients |
5,427 | 5,216 | 4,593 | |||||||||
Nebula clients |
1,131 | 910 | 625 |
September 30, 2021 |
December 31, 2020 |
December 31, 2019 |
||||||||||
Legal Technology matters |
7,951 | 7,598 | 6,690 | |||||||||
Nebula matters |
905 | 819 | 703 |
Twelve months ended |
||||||||||||
September 30, 2021 |
December 31, 2020 |
December 31, 2019 |
||||||||||
Legal Technology net revenue retention |
101 | % | 87 | % | 99 | % |
(1) | Legal Technology, including Nebula and our expansive suite of technology solutions, such as our end-to-end |
(2) | Data recovery solutions, which provides data restoration, data erasure and data management services. |
• | Acquisition, financing and transaction costs generally represent non-ordinary course earn-out valuation the day-to-day operating |
• | Strategic initiatives expenses relate to costs resulting from pursuing strategic business opportunities. We do not consider the amounts to be representative of the day-to-day operating |
• | Stock compensation and other primarily represent portions of compensation paid to our employees and executives through stock-based instruments. Determining the fair value of the stock-based instruments involves a high degree of judgment and estimation and the expenses recorded may not align with the actual value realized upon the future exercise or termination of the related stock-based awards. Additionally, stock compensation is a non-cash expense. Therefore, we believe it is useful to exclude stock-based compensation to better understand the long-term performance of our core business. |
• | Change in fair value of private warrants relates to changes in the fair market value of the Private Warrants issued in conjunction with the Business Combination. We do not consider the amount to be representative of a component of the day-to-day operating |
• | Restructuring costs generally represent non-ordinary course costs incurred in connection with a change in a contract or a change in the makeup of our personnel often related to an acquisition, such as severance payments, recruiting fees and retention charges. We do not consider the amount of restructuring costs to be a representative component of the day-to-day operating |
• | Systems establishment costs relate to non-ordinary course expenses incurred to develop our IT infrastructure, including system automation and enterprise resource planning system implementation. We do not consider the amount to be representative of a component of the day-to-day operating |
• | our cash expenditures or future requirements for capital expenditures; |
• | changes in, or cash requirements for, our working capital needs; |
• | interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness; |
• | any cash income taxes that we may be required to pay; |
• | any cash requirements for replacements of assets that are depreciated or amortized over their estimated useful lives and may have to be replaced in the future; or |
• | all non-cash income or expense items that are reflected in our statements of cash flows. |
Nine months ended September 30, |
||||||||
2021 |
2020 |
|||||||
(in millions) |
(Unaudited) | |||||||
Revenues |
$ | 238.2 | $ | 215.0 | ||||
Cost of revenues |
120.1 | 111.5 | ||||||
|
|
|
|
|||||
Gross profit |
118.1 | 103.5 | ||||||
Operating expenses, including impairment of $22.5 |
128.2 | 104.3 | ||||||
|
|
|
|
|||||
Loss from operations |
(10.1 | ) | (0.8 | ) | ||||
Interest expense |
37.6 | 38.3 | ||||||
Change in fair value of Private Warrants |
(1.7 | ) | — | |||||
Loss on debt extinguishment |
7.3 | — | ||||||
Other expense |
— | 0.1 | ||||||
|
|
|
|
|||||
Loss before income taxes |
(53.3 | ) | (39.2 | ) | ||||
Income tax (benefit) provision |
(0.1 | ) | 1.0 | |||||
|
|
|
|
|||||
Net loss |
(53.2 | ) | (40.2 | ) | ||||
Total other comprehensive loss, net of tax |
(3.6 | ) | 0.6 | |||||
|
|
|
|
|||||
Comprehensive loss |
$ | (56.8 | ) | $ | (39.6 | ) | ||
|
|
|
|
Nine months ended September 30, |
||||||||
(in millions) |
2021 |
2020 |
||||||
Net loss |
$ | (53.3 | ) | $ | (40.2 | ) | ||
Interest expense |
37.6 | 38.3 | ||||||
Income tax (benefit) provision |
(0.1 | ) | 1.0 | |||||
Extinguishment of debt |
7.3 | — | ||||||
Impairment of intangible asset |
22.5 | — | ||||||
Depreciation and amortization expense |
29.4 | 36.1 | ||||||
|
|
|
|
|||||
EBITDA (1) |
$ | 43.4 | $ | 35.2 | ||||
Acquisition, financing and transaction costs |
2.5 | 1.6 | ||||||
Strategic initiatives: |
||||||||
Sign-on bonus amortization |
— | 0.2 | ||||||
Non-recoverable draw |
— | 0.3 | ||||||
|
|
|
|
|||||
Total strategic initiatives |
— | 0.5 | ||||||
Stock compensation and other |
3.2 | 2.7 | ||||||
Change in fair value of Private Warrants |
(1.7 | ) | — | |||||
Restructuring costs |
1.0 | 2.3 | ||||||
Systems establishment |
1.4 | 1.6 | ||||||
|
|
|
|
|||||
Adjusted EBITDA (1) |
$ | 49.9 | $ | 43.8 | ||||
|
|
|
|
(1) | EBITDA and adjusted EBITDA are non-GAAP measures. See “—Non-U.S. GAAP Financial Measures.” |
Year ended December 31, |
||||||||
(in millions) |
2020 |
2019 |
||||||
Revenues |
$ | 289.5 | $ | 312.1 | ||||
Cost of revenues |
147.7 | 160.9 | ||||||
|
|
|
|
|||||
Gross profit |
141.8 | 151.2 | ||||||
Operating expenses |
140.0 | 148.6 | ||||||
|
|
|
|
|||||
Income from operations |
1.8 | 2.6 | ||||||
|
|
|
|
|||||
Interest expense |
50.7 | 48.4 | ||||||
Loss on debt extinguishment |
— | 7.2 | ||||||
Other expense |
0.1 | 0.3 | ||||||
|
|
|
|
|||||
Loss before income taxes |
(49.0 | ) | (53.3 | ) | ||||
Income tax provision |
0.9 | 0.7 | ||||||
|
|
|
|
|||||
Net loss |
(49.9 | ) | (54.0 | ) | ||||
Total other comprehensive income, net of tax |
4.9 | 0.3 | ||||||
|
|
|
|
|||||
Comprehensive loss |
$ | (45.0 | ) | $ | (53.7 | ) | ||
|
|
|
|
Year ended December 31 |
||||||||
(in millions) |
2020 |
2019 |
||||||
Net loss |
$ | (49.9 | ) | $ | (54.0 | ) | ||
Interest expense |
50.7 | 48.4 | ||||||
Income tax expense |
0.9 | 0.7 | ||||||
Depreciation and amortization expense |
47.7 | 50.4 | ||||||
Loss on debt extinguishment |
— | 7.2 | ||||||
|
|
|
|
|||||
EBITDA (1) |
$ | 49.4 | $ | 52.7 | ||||
Acquisition, financing and transaction costs |
5.2 | 3.6 | ||||||
Strategic initiatives: |
||||||||
Sign-on bonus amortization |
0.2 | 0.4 | ||||||
Non-recoverable draw |
0.3 | 3.7 | ||||||
|
|
|
|
|||||
Total strategic initiatives |
0.5 | 4.1 | ||||||
Management fees, stock compensation and other |
3.7 | 3.5 | ||||||
Restructuring costs |
2.5 | 2.2 | ||||||
Systems establishment |
2.0 | 2.6 | ||||||
|
|
|
|
|||||
Adjusted EBITDA (1) |
$ | 63.3 | $ | 68.7 | ||||
|
|
|
|
(1) | EBITDA and adjusted EBITDA are non-GAAP measures. See “—Non-U.S. GAAP Financial Measures.” |
Three months ended |
||||||||||||||||||||||||||||||||||||||||||||
March 31, 2019 |
June 30, 2019 |
September 30, 2019 |
December 31, 2019 |
March 31, 2020 |
June 30, 2020 |
September 30, 2020 |
December 31, 2020 |
March 31, 2021 |
June 30, 2021 |
September 30, 2021 |
||||||||||||||||||||||||||||||||||
Revenues |
$ | 75,026 | $ | 78,331 | $ | 78,169 | $ | 80,527 | $ | 78,271 | $ | 64,381 | $ | 72,301 | $ | 74,592 | $ | 75,450 | $ | 81,650 | $ | 81,122 | ||||||||||||||||||||||
Cost of Revenues |
37,455 | 39,463 | 42,018 | 41,908 | 39,520 | 34,214 | 37,738 | 36,260 | 37,422 | 40,887 | 41,852 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Gross Profit |
37,571 | 38,869 | 36,151 | 38,619 | 38,751 | 30,167 | 34,563 | 38,332 | 38,028 | 40,763 | 39,270 | |||||||||||||||||||||||||||||||||
Operating expenses |
38,804 | 37,661 | 35,324 | 36,827 | 38,081 | 31,684 | 34,498 | 35,763 | 34,709 | 36,572 | 56,929 | (1) | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Income (loss) from operations |
(1,233 | ) | 1,208 | 827 | 1,792 | 670 | (1,517 | ) | 65 | 2,569 | 3,319 | 4,191 | (17,659 | ) | ||||||||||||||||||||||||||||||
Other (income) expense |
97 | 36 | (9 | ) | 186 | 28 | 63 | 11 | 16 | 14 | 11 | (15 | ) | |||||||||||||||||||||||||||||||
Change in fair value of Private Warrants |
— | — | — | — | — | — | — | — | (1,969 | ) | 254 | 64 | ||||||||||||||||||||||||||||||||
Interest expense |
12,066 | 12,387 | 12,034 | 11,890 | 12,962 | 12,970 | 12,371 | 12,356 | 12,257 | 12,535 | 12,792 | |||||||||||||||||||||||||||||||||
Loss on debt extinguishment |
— | — | — | 7,203 | — | — | — | — | 7,257 | — | — | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Loss before income taxes |
(13,396 | ) | (11,215 | ) | (11,198 | ) | (17,487 | ) | (12,320 | ) | (14,550 | ) | (12,317 | ) | (9,803 | ) | (14,240 | ) | (8,609 | ) | (30,500 | ) | ||||||||||||||||||||||
Income tax (benefit) provision |
95 | 233 | 62 | 328 | 206 | 368 | 390 | (28 | ) | 616 | 256 | (969 | ) | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Net loss |
(13,491 | ) | (11,448 | ) | (11,260 | ) | (17,815 | ) | (12,526 | ) | (14,918 | ) | (12,707 | ) | (9,775 | ) | (14,856 | ) | (8,865 | ) | (29,531 | ) | ||||||||||||||||||||||
Total other comprehensive loss (income), net of tax |
(810 | ) | 855 | 2,248 | (2,604 | ) | 4,428 | (2,733 | ) | (2,242 | ) | (4,400 | ) | 2,462 | (715 | ) | 1,812 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Comprehensive loss |
(12,681 | ) | (12,303 | ) | (13,508 | ) | (15,211 | ) | (16,954 | ) | (12,185 | ) | (10,465 | ) | (5,375 | ) | (17,318 | ) | (8,150 | ) | (31,343 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | We negotiated the termination of our use of our license for the Kroll Ontrack and Kroll Discovery tradenames and executed the final agreements in October 2021. As a result, the Company recognized an impairment loss of $22.5 million in the third quarter of 2021, which was included in impairment of intangible assets in the Company’s Condensed Consolidated Statements of Comprehensive Loss. |
Three months ended |
||||||||||||||||||||||||||||||||||||||||||||
March 31, 2019 |
June 30, 2019 |
September 30, 2019 |
December 31, 2019 |
March 31, 2020 |
June 30, 2020 |
September 30, 2020 |
December 31, 2020 |
March 31, 2021 |
June 30, 2021 |
September 30, 2021 |
||||||||||||||||||||||||||||||||||
Legal Technology revenues |
$ | 62,575 | $ | 67,508 | $ | 66,935 | $ | 68,831 | $ | 66,759 | $ | 55,108 | $ | 62,036 | $ | 63,382 | $ | 63,734 | $ | 70,704 | $ | 70,323 | ||||||||||||||||||||||
Data recovery revenues |
12,451 | 10,823 | 11,234 | 11,696 | 11,512 | 9,273 | 10,265 | 11,210 | 11,716 | 10,946 | 10,799 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total revenues |
$ | 75,026 | $ | 78,331 | $ | 78,169 | $ | 80,527 | $ | 78,271 | $ | 64,381 | $ | 72,301 | $ | 74,592 | $ | 75,450 | $ | 81,650 | $ | 81,122 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
||||||||||||||||||||||||||||||||||||||||||||
March 31, 2019 |
June 30, 2019 |
September 30, 2019 |
December 31, 2019 |
March 31, 2020 |
June 30, 2020 |
September 30, 2020 |
December 31, 2020 |
March 31, 2021 |
June 30, 2021 |
September 30, 2021 |
||||||||||||||||||||||||||||||||||
Nebula revenues |
$ | 3,745,181 | $ | 4,110,767 | $ | 3,929,248 | $ | 4,058,546 | $ | 5,351,030 | $ | 4,045,153 | $ | 4,266,890 | $ | 5,111,406 | $ | 5,404,644 | $ | 6,839,458 | $ | 7,061,949 |
Nine months ended September 30, |
||||||||
(in thousands, unaudited) |
2021 |
2020 |
||||||
Net cash provided by (used in): |
||||||||
Operating activities |
$ | 7 | $ | 25,307 | ||||
Investing activities |
$ | (9,708 | ) | $ | (11,501 | ) | ||
Financing activities |
$ | 661 | $ | (13,438 | ) | |||
Effect of foreign exchange rates |
$ | (375 | ) | $ | 63 | |||
|
|
|
|
|||||
Net decrease in cash |
$ | (9,415 | ) | $ | 431 | |||
|
|
|
|
Year ended December 31, |
||||||||
2020 |
2019 |
|||||||
Net cash provided by (used in): |
||||||||
Operating activities |
$ | 39,776 | $ | (8,297 | ) | |||
Investing activities |
$ | (14,059 | ) | $ | (15,218 | ) | ||
Financing activities |
$ | (18,595 | ) | $ | 43,490 | |||
Effect of foreign exchange rates |
$ | 672 | $ | (7 | ) | |||
|
|
|
|
|||||
Net increase in cash |
$ | 7,794 | $ | 19,968 | ||||
|
|
|
|
Nine months ended September 30, |
Year ended December 31, |
|||||||||||||||
2021 |
2020 |
2020 |
2019 |
|||||||||||||
(in millions) |
(Unaudited) | |||||||||||||||
Revenues |
$ | 238.2 | $ | 215.0 | $ | 289.5 | $ | 312.1 | ||||||||
Net loss |
(53.3 | ) | (40.2 | ) | (49.9 | ) | (54.0 | ) | ||||||||
Adjusted EBIDTA (1) |
49.9 | 43.8 | 63.3 | 68.7 |
(1) | Adjusted EBITDA is a non-GAAP measure. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-U.S. GAAP Financial Measures.” |
September 30, 2021 |
December 31, 2020 |
December 31, 2019 |
||||||||||
Legal Technology clients |
5,427 | 5,216 | 4,593 | |||||||||
Nebula clients |
1,131 | 910 | 625 | |||||||||
Legal Technology matters |
7,951 | 7,598 | 6,690 | |||||||||
Nebula matters |
905 | 819 | 703 |
• | Corporations and other entities |
• | Law firms in-house matters and as an extension of their litigation technology teams. As a result, law firms not only become direct sources of revenue for service and software providers, but also an important source of referrals to corporations that providers can leverage to build direct relationships |
• | Service providers |
• | Software providers “hands-off” approach with respect to substantive matter support or client service. They typically offer only software without domain expertise and support that goes beyond the software itself. This DIY approach is not equipped to handle large engagements. Moreover, most software providers focus their technology to a particular segment of the EDRM and/or a specific delivery vehicle, forcing buyers to maintain multiple relationships to ensure all their needs are satisfied |
• | Machine Learning |
• | Automated Workflow |
• | Workflow Reporting Suite— on-demand information on the progress, productivity, and tagging trends for document review projects run within the Workflow system. |
• | Natural Language Processing— |
• | Audio Transcription— |
• | Foreign Language Translation— |
• | Ontrack Data Recovery |
• | Ontrack PowerControls |
• | Ransomware recovery |
• | Email extraction |
• | Tape solutions |
• | Data destruction |
• | Pricing pre-defined term (typically one to three years) at a discount over the usage-based rates typically associated with project-by-project |
• | Client benefits |
• | Network effect |
• | Partner Channel Subscriptions |
• | Team |
• | Humility |
• | Availability and connectivity |
• | Frugality |
• | Creativity |
• | Urgency and Productivity |
• | Vigilance (courage / honesty) |
• | Singular Focus |
• | Recruiting |
• | Client focus |
Region |
||||
North America |
63 | % | ||
Europe, Middle East, and Africa |
33 | % | ||
Asia Pacific |
4 | % |
Gender |
||||
Female |
29 | % | ||
Male |
71 | % | ||
Ethnicity |
||||
Asian |
8.3 | % | ||
Black / African American |
7.2 | % | ||
Hispanic / Latin |
5.4 | % | ||
Multiracial, Native American and Pacific Islander |
2.8 | % | ||
White |
76.3 | % |
• | Hosted in Microsoft Azure |
currently available via Azure with a wide regional diversity to address data sovereignty considerations across the globe. Clients with cloud-first strategies, or those with “in-region” mandates, will easily satisfy those requirements by utilizing the Nebula global cloud footprint. Further, we are always expanding Nebula’s global reach with multiple new regions added each year. |
• | Hosted in Nebula data centers best-in-class |
• | Portable appliance carry-on suitcase that functions as an entirely private and isolated Nebula instance. As with all our applications, security is of the utmost importance—providing clients with an elegant air-gapped solution for needs including data privacy, fraud investigations, cross-border litigation, and reviewing highly sensitive data. |
• | Enterprise appliance plug-and-play |
• | Reliability |
• | Scalability |
• | Comprehensive dashboard |
• | Scheduled Nebula updates |
• | Email Threading— |
• | Near-Duplicate Detection— Language Identification— |
• | KLD Translations— |
• | Native Spreadsheet Redaction— |
• | A/V Suite— |
• | Auto Redaction— |
• | PrivLog Builder— |
• | Machine Learning |
review. As a result, we can automate the classification of electronic data, drastically reducing the time required for legal review and creating significant cost savings. Our predictive coding technology gets smarter with every document reviewed and supports proven statistical methodologies to create defensible workflows. In addition, we offer Predictive Coding in multiple ways including TAR 1.0 or Simple Active Learning and TAR 2.0 or Continuous Active Learning, which provides flexibility and optionality for our clients. |
• | Automated Workflow hand-in-hand |
• | Workflow Reporting Suite— on-demand information on the progress, productivity, and tagging trends for document review projects run within the Workflow system. |
• | Natural Language Processing— |
• | Technology Enabled Managed Review Services |
• | Digital Forensics Services in-person and remote locations. |
• | Information Archiving Services |
• | Advisory Services |
• | backup infrastructure migration and consolidation; |
• | legacy tape and data remediation; |
• | recovery from physically-damaged tapes; and |
• | recovery from quickly-erased or partially-overwritten tapes. |
• | 9,165,239 documents came into the review database |
• | 2,342,222 documents moved to our near-line environment |
• | 5,928,554 documents included to technology-assisted review (TAR) |
• | 20,766 documents trained within a TAR workflow |
• | 2,119,084 documents suggested as relevant |
• | 60% of the included TAR population removed from production consideration |
• | 2,409,000 documents produced (this includes particular custodians and specs that required production regardless of TAR score) |
• | Software providers |
• | Legacy on-premise software |
• | Cloud software |
• | Service providers |
• | Legal services in-house eDiscovery solutions and legal document review services to their clients that may compete with our solutions. |
• | breadth of offering; |
• | client service and support; |
• | level of client satisfaction |
• | solution features and capabilities; |
• | flexibility of solution deployment; |
• | ease of access, deployment, implementation, and use; |
• | breadth of geographic coverage; |
• | accuracy, quality and depth of services offered; |
• | quality and use of technology; |
• | cost and predictability of costs; |
• | security; and |
• | client relationships and brand loyalty. |
Country |
Location |
Legal Technologies Office |
Data Storage Technologies Office |
Managed Review Facility |
Data Center |
Clean Room |
||||||||||||||||
Australia |
Brisbane | X | X | X | ||||||||||||||||||
Canada |
Toronto | X | X | |||||||||||||||||||
Canada |
Toronto | X | ||||||||||||||||||||
China |
Shanghai | X | ||||||||||||||||||||
Finland |
Helsinki | X | X | |||||||||||||||||||
France |
Paris | X | X | X | ||||||||||||||||||
France |
Paris | X | ||||||||||||||||||||
Germany |
Boblingen | X | X | X | ||||||||||||||||||
Germany |
Frankfurt | X | ||||||||||||||||||||
Greece |
Athens | X | ||||||||||||||||||||
Hong Kong |
North Point | X | X | |||||||||||||||||||
Hong Kong |
Won Chai | X | ||||||||||||||||||||
Ireland |
Balleycoolin | X | ||||||||||||||||||||
Italy |
Varese | X | X | |||||||||||||||||||
Japan |
Tokyo | X | X | X | ||||||||||||||||||
Japan |
Tokyo | X | ||||||||||||||||||||
Netherlands |
Amersfoort | X | X | |||||||||||||||||||
Norway |
Kongsvinger | X | X | X | ||||||||||||||||||
Poland |
Katowice | X | X | X | X | |||||||||||||||||
Spain |
Madrid | X | X | |||||||||||||||||||
Sweden |
Uppsala | X | X | |||||||||||||||||||
Switzerland |
Wallisellen | X | X | |||||||||||||||||||
United Kingdom |
London | X | X | X | X | |||||||||||||||||
United Kingdom |
Slough | X | ||||||||||||||||||||
United States |
Austin, Texas | X | X | |||||||||||||||||||
United States |
Ambler, PA | X | ||||||||||||||||||||
United States |
Brooklyn Park, Minnesota | X | ||||||||||||||||||||
United States |
Chicago, Illinois | X | ||||||||||||||||||||
United States |
Eden Prairie, Minnesota | X | X | X | X | X | ||||||||||||||||
United States |
Fairfax, Virginia | X | ||||||||||||||||||||
United States |
McLean, Virginia | X | X | X | X | |||||||||||||||||
United States |
Richmond, Virginia | X |
Name |
Age |
Position | ||||
Christopher J. Weiler |
59 | Chief Executive Officer and Director | ||||
Dawn Wilson |
55 | Chief Financial Officer | ||||
Krystina Jones |
38 | Executive Vice President, Global Sales and Marketing | ||||
Donna Morea |
66 | Director (Chair) | ||||
Ian Fujiyama |
49 | Director | ||||
Kevin Griffin |
45 | Director | ||||
Evan Morgan |
36 | Director | ||||
Lawrence Prior III |
65 | Director | ||||
Arjun Shah |
32 | Director | ||||
Lauren Tanenbaum |
34 | Director | ||||
Richard Williams |
60 | Director |
• | discussing with management and our independent registered public accounting firm regarding, among other issues, audits and the adequacy of our accounting and control systems; |
• | evaluating the independence of the independent registered public accounting firm; |
• | verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law; |
• | inquiring and discussing with management our compliance with applicable laws and regulations; |
• | pre-approving all audit services and permitted non-audit services to be performed by our independent registered public accounting firm, including the fees and terms of the services to be performed; |
• | appointing or replacing the independent registered public accounting firm; |
• | determining the compensation and oversight of the work of the independent registered public accounting firm (including resolution of disagreements between management and the independent registered public accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; |
• | establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and |
• | reviewing and approving all payments made to our executive officers or directors and their respective affiliates. Any payments made to members of our Audit Committee will be reviewed and approved by our Board of Directors, with the interested director or directors abstaining from such review and approval. |
• | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, annually evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation; |
• | reviewing and approving the compensation of all of our other executive officers; |
• | reviewing our executive compensation policies and plans; |
• | implementing and administering our incentive compensation and equity-based compensation plans; |
• | assisting management in complying with our proxy statement and annual report disclosure requirements; |
• | if required, producing a compensation committee report to be included in our annual report on Form 10-K or annual proxy statement; and |
• | reviewing and making recommendations to the compensation for directors. |
• | Christopher J. Weiler, Chief Executive Officer |
• | Dawn M. Wilson, Chief Financial Officer; and |
• | Krystina L. Jones, Executive Vice President, Global LT Sales & Marketing |
Name and Principal Position |
Year |
Salary ($) |
Bonus ($) |
Stock Awards ($) (2) |
Option Awards ($) (2) |
Non-Equity Incentive Plan Compensation ($) |
All Other Compensation ($) (4) |
Total ($) |
||||||||||||||||||||||||
Christopher J. Weiler Chief Executive Officer |
2020 | 372,692 | — | 274,800 | — | — | 13,196 | 660,688 | ||||||||||||||||||||||||
2019 | 493,269 | — | — | 425,447 | — | 12,037 | 930,753 | |||||||||||||||||||||||||
Dawn M. Wilson Chief Financial Officer |
2020 | 354,769 | 870,127 | 9,529 | — | 6,851 | 1,241,276 | |||||||||||||||||||||||||
2019 | 355,769 | 240,000 | — | 1,063,599 | — | 7,461 | 1,666,829 | |||||||||||||||||||||||||
Krystina L. Jones EVP, Global LT Sales & Marketing (1) |
2020 | 524,404 | (2) |
— | 342,662 | 55,695 | 1,865,520 | (3) |
7,300 | 2,795,581 | ||||||||||||||||||||||
2019 | 569,230 | — | — | 319,076 | 1,666,151 | 11,200 | 2,565,657 | |||||||||||||||||||||||||
(1) | Ms. Jones became Executive Vice President, Global Sales and Marketing in May 2021. |
(2) | The amount shown includes Ms. Jones’s base salary of $374,404, and irrecoverable draw of $150,000 earned pursuant to the KLDiscovery 2020 Americas Legal Technology Sales Commission Plan, or the 2020 Commission Plan, which is described below under the heading “— Sales Commission Plan. |
(2) | The amounts reported in these columns do not reflect the actual economic value realized by the NEO. Amounts in these columns reflect the estimated aggregate grant date fair value of stock awards and options granted computed in accordance with ASC Topic 718, excluding the effect of estimated forfeitures. The assumptions used by the Company in calculating these amounts are included in Note 9 – Commitments and contingencies to our audited consolidated financial statements included elsewhere in this prospectus. |
(3) | Amount reflects commissions earned by Ms. Jones pursuant to the 2020 Commission Plan, as described below under the heading “— Sales Commission Plan. |
(4) | Consists of Company matching contribution payments pursuant to the Company’s 401(k) plan, Company paid insurance premiums and for Mr. Weiler, a wellness gift card of $800 in 2020. |
Name |
Annual Base Salary as of December 31, 2019 ($) |
Annual Base Salary as of December 31, 2020 ($) |
||||||
Christopher J. Weiler (1) |
490,000 | 300,000 | ||||||
Dawn Wilson (2) |
400,000 | 320,000 | ||||||
Krystina Jones (3) |
575,000 | 490,000 |
(1) | Effective February 24, 2020, Mr. Weiler’s annual base salary was reduced to $400,000. Effective April 21, 2020, Mr. Weiler’s annual base salary was reduced to $350,000. Effective August 1, 2020, Mr. Weiler’s annual base salary was reduced to $300,000 until December 31, 2020, and he also agreed to forgo one week’s salary in August 2020. On December 22, 2020, Mr. Weiler agreed that his annual base salary would continue to be $300,000 until September 30, 2021. |
(2) | Effective April 23, 2020, Ms. Wilson’s annual base salary was reduced to $320,000. On July 31, 2020, Ms. Wilson agreed that her annual base salary would continue to be $320,000 until December 31, 2020, and she also agreed to forgo one week’s salary in August 2020. On December 22, 2020, Ms. Wilson agreed that her annual base salary would continue to be $320,000 until September 30, 2021. |
(3) | Amounts include the $150,000 annual irrecoverable draw payable to Ms. Jones pursuant to the 2020 Commission Plan, as further described below under the heading “— Sales Commission Plan. |
• | If a change in control occurs prior to the listing of our common stock on a nationally recognized stock exchange, or a Listing Event, a portion of the RSUs will vest upon the change in control and the remainder will vest in up to three annual installments thereafter unless the change in control occurs after the third anniversary of a specified vesting commencement date, in which case the RSUs will become fully vested upon the change in control; and |
• | If a Listing Event occurs before a change in control, a portion of the RSUs will vest upon the Listing Event (unless the Listing Event occurs before the first anniversary of a specified vesting commencement date), with the remainder vesting in three annual installments on the first three anniversaries of the specified vesting commencement date, and with additional accelerated vesting upon a subsequent change in control of the excess, if any, of 50% of the total number of RSUs over the amount of RSUs then vested. |
Option Awards |
Stock Awards |
|||||||||||||||||||||||||||
Name and Principal Position |
Grant Date |
Number of Securities Underlying Unexercised Options Exercisable (2) |
Number of Securities Underlying Unexercised Options Unexercisable (2) |
Option Exercise Price |
Option Expiration Date |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (3) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (4) |
|||||||||||||||||||||
Christopher J. Weiler Chief Executive Officer |
(1) |
— | — | — | — | — | — | |||||||||||||||||||||
— | — | — | — | — | — | |||||||||||||||||||||||
Dawn M. Wilson Chief Financial Officer |
4/21/2020 | — | 5,015 | $ | 9.95 | 4/20/2030 | 1,656 | $ | 13,331 | |||||||||||||||||||
2/17/2020 | — | — | — | — | 118,333 | $ | 952,581 | |||||||||||||||||||||
12/19/2019 | 100,923 | 201,847 | $ | 9.90 | 12/18/2029 | — | — | |||||||||||||||||||||
Krystina L. Jones EVP, Global LT Sales & Marketing (5) |
4/21/2020 | — | 23,913 | $ | 9.95 | 4/20/2030 | 6,878 | $ | 55,367.90 | |||||||||||||||||||
2/17/2020 | — | — | — | — | 33,333 | $ | 268,330.65 | |||||||||||||||||||||
12/19/2019 | 30,276 | 60,534 | $ | 9.90 | 12/18/2029 | — | — |
(1) | As of December 31, 2020, Mr. Weiler held no stock options or RSUs due to the voluntary forfeiture of his equity awards, as described below under the heading entitled “— Equity Compensation |
(2) | The option vests in accordance with the Standard Option Vesting Schedule, as described below under the heading entitled “— Equity Compensation |
(3) | The RSUs vest in accordance with the Standard RSU Vesting Schedule described above below the heading “— Equity Compensation |
(4) | The amounts shown were determined based on the per share closing market price of our common stock on December 31, 2020, which was $8.05. |
(5) | Ms. Jones became Executive Vice President, Global Sales and Marketing in May 2021. |
• | each person known by us to be the beneficial owner of more than 5% of our outstanding common stock (based on our review of filings with the SEC); |
• | each of our named executive officers and directors; and |
• | all of our executive officers and directors as a group. |
Approximate Percentage of Outstanding Shares |
||||||||||||||||
Name and Address of Beneficial Owner |
Amount and Nature of Beneficial Ownership |
Before this Offering |
After this Offering (Assuming No Exercise of Underwriters’ Option) |
After this Offering (Assuming Full Exercise of Underwriters’ Option) |
||||||||||||
Directors and Named Executive Officers (1) |
||||||||||||||||
Kevin Griffin (2)(3)(4) |
15,887,065 | 29.9 | % | |||||||||||||
Evan Morgan (5) |
61,967 | * | ||||||||||||||
Richard J. Williams (6) |
1,607,823 | 3.8 | % | |||||||||||||
Donna Morea (7) |
77,545 | * | ||||||||||||||
Christopher J. Weiler (8) |
1,588,803 | 3.7 | % | |||||||||||||
Dawn Wilson (9) |
102,595 | * | ||||||||||||||
Krystina Jones (10) |
173,221 | * | ||||||||||||||
Lawrence Prior III |
16,667 | * | ||||||||||||||
Ian Fujiyama |
— | — | ||||||||||||||
Lauren Tanenbaum |
— | — | ||||||||||||||
Arjun Shah |
— | — | ||||||||||||||
All executive officers and directors as a group (11 individuals) |
29,193,314 | 50.2 | % | |||||||||||||
Five Percent Holders |
||||||||||||||||
Pivotal Acquisition Holdings LLC (2) |
9,655,889 | 20.5 | % | |||||||||||||
The Carlyle Group Inc. (11) |
21,250,970 | 48.5 | % | |||||||||||||
OTPP (12) |
7,416,079 | 15.3 | % | |||||||||||||
MGG (3) |
5,805,556 | 12.1 | % | |||||||||||||
Revolution Growth (13) |
4,098,642 | 9.6 | % | |||||||||||||
Linden Capital L.P. (14) |
3,164,907 | 6.9 | % |
* Denotes | less than 1%. |
(1) | Unless otherwise indicated, the business address of each of the individuals is c/o KLDiscovery Inc., 8201 Greensboro Dr., Suite 300, McLean, Virginia 22102. |
(2) | Includes (i) 5,070,608 shares of common stock and (ii) 4,585,281 shares of common stock that may be acquired upon the exercise of Private Warrants held of record by Pivotal, of which Pivotal Spac Funding LLC, an affiliate of Mr. Griffin, is a managing member. The business address of Pivotal is c/o Graubard Miller, The Chrysler Building, 405 Lexington Avenue, 11th Floor, New York, New York 10174. |
(3) | Includes (i) 250,000 shares of common stock held of record and (ii) 5,959,437 shares of common stock that may be acquired upon conversion of Debentures held of record by certain investment funds and/or accounts for which MGG Investment Group LP, or MGG, is the investment advisor. MGG is controlled by Mr. Griffin, its Chief Executive Officer, and Mr. Gregory Racz, its President and Chief Legal Officer. Each of Mr. Griffin and Mr. Racz disclaims beneficial ownership of the securities held by the investment funds affiliated with MGG. The business address of MGG is One Penn Plaza, New York, New York 10119. |
(4) | Includes 21,739 RSUs awarded to Mr. Griffin that have vested or will vest within 60 days of the Table Date. |
(5) | Includes (i) 4,984 shares of common stock held by Conifer Partners and (ii) 32,852 shares of common stock held by Radcliff Principal Holdings LLC; does not include (i) 315 Contingent Shares that may be issuable to Conifer Partners and (ii) 2,077 Contingent Shares that may be issuable to Radcliff Principal Holdings LLC. Mr. Morgan has, or, in the case of the Contingent Shares, will have, voting and dispositive control over such |
shares of common stock and Contingent Shares. Also includes 21,739 RSUs awarded to Mr. Morgan that will vest within 60 days of the Table Date. |
(6) | Includes 1,512,223 shares of common stock held by WestView; does not include 95,600 Contingent Shares that may be issuable to WestView. Mr. Williams is a co-managing partner of this entity and has, or, in the case of the Contingent Shares, will have, voting and dispositive control over such shares of common stock and Contingent Shares. |
(7) | Includes 52,488 shares of common stock held by Ms. Morea and 21,739 RSUs awarded to Ms. Morea that will vest within 60 days of the Table Date; does not include 3,318 Contingent Shares that may be issuable to Ms. Morea. |
(8) | Includes 1,455,090 shares of common stock held by Mr. Weiler; does not include 133,713 Contingent Shares that may be issuable to Mr. Weiler. |
(9) | Includes 102,595 vested options that may be exercised by Ms. Wilson. Does not include 39,996 RSUs for which the time-based vesting requirements have been satisfied, but which remain subject to the condition that a change in control or Listing Event occur before these RSUs fully vest. See “Executive Compensation—Company Named Executive Officers and Director Compensation—Equity Compensation.” We expect to list our common stock in connection with this offering, which would constitute a Listing Event for purposes of these RSUs, causing them to become fully vested. |
(10) | Includes 126,949 shares of common stock held by Ms. Jones and 38,247 vested options that may be exercised by Ms. Jones; does not include 8,025 Contingent Shares that may be issuable to Ms. Jones. Does not include 13,404 RSUs for which the time-based vesting requirements have been satisfied, but which remain subject to the condition that a change in control or Listing Event occur before these RSUs fully vest. See “Executive Compensation—Company Named Executive Officers and Director Compensation—Equity Compensation.” We expect to list our common stock in connection with this offering, which would constitute a Listing Event for purposes of these RSUs, causing them to become fully vested. |
(11) | Includes (i) 18,261,123 shares of common stock held of record by CEOF II DE I AIV, L.P., (ii) 1,658,789 shares of common stock held of record by CEOF II Coinvestment (DE), L.P. and (iii) 76,892 shares of common stock held of record by CEOF II Coinvestment B (DE), L.P.; does not include (i) 1,154,439 Contingent Shares that may be issuable to CEOF II DE I AIV, L.P., (ii) 104,866 Contingent Shares that may be issuable to CEOF II Coinvestment (DE), L.P. and (iii) 4,861 Contingent Shares that may be issuable to CEOF II Coinvestment B (DE), L.P. Carlyle Group Management L.L.C. is the general partner of The Carlyle Group Inc., which is a publicly traded entity listed on NASDAQ. The Carlyle Group Inc. is the sole shareholder of Carlyle Holdings I GP Inc., which is the sole member of Carlyle Holdings I GP Sub L.L.C., which is the general partner of Carlyle Holdings I L.P., which is the sole member of TC Group, L.L.C., which is the general partner of TC Group Sub L.P., which is the sole member of CEOF II DE GP AIV, L.L.C., which is the general partner CEOF II DE AIV GP, L.P., which is the general partner of each of the three identified funds that is a record holder of our common stock. Accordingly, each of the foregoing entities may be deemed to share beneficial ownership of the securities held of record by, or that may be issuable to, the record holder funds. The address of each of the persons or entities named in this footnote is c/o The Carlyle Group, 1001 Pennsylvania Ave. NW, Suite 220 South, Washington, D.C. 20004-2505. |
(12) | According to a Schedule 13D filed jointly by Ontario Teachers’ Pension Plan Board, or OTPP, and 1397225 Ontario Limited with the SEC on December 30, 2019, each reporting person has shared voting power and sole dispositive power with respect to 7,416,079 shares of common stock and sole voting power and shared dispositive power with respect to 0 shares of common stock. Includes 1,411,775 shares of common stock that may be acquired upon the exercise of Debenture Holder Warrants and 4,525,925 shares of common stock that may be acquired upon conversion of Debentures. The President and Chief Executive Officer of OTPP has delegated to each of Mr. Christopher Witkowski and Mr. Michael Merkoulovitch the authority to implement disposition decisions with respect to the shares of common stock that are held by or may be acquired by 1397225; however, approval of such decisions is made by senior personnel within the capital markets group of OTPP in accordance with internal portfolio guidelines. Voting decisions are made by personnel within the public equities group of OTPP in accordance with internal proxy voting guidelines. As such, each of Messrs. Witkowski and Merkoulovitch expressly disclaims beneficial ownership of the shares |
of common stock that are held by or may be acquired by 1397225. The business address of the reporting persons is 5650 Yonge Street, Toronto, Ontario M2M 4H5. |
(13) | According to a Schedule 13G filed jointly by Revolution Growth III, LP, Revolution Growth GP III, LP, Revolution Growth UGP III, LLC and Steven J. Murray with the SEC on February 3, 2020, each reporting person has shared voting power and shared dispositive power with respect to 4,098,642 shares of common stock and sole voting power and sole dispositive power with respect to 0 shares of common stock. The amount does not include 259,110 Contingent Shares that may be issuable to Revolution Growth III. Steven J. Murray is the operating manager of Revolution Growth UGP III, LLC, the general partner of Revolution Growth GP III, LP, which is the general partner of Revolution Growth III, LP. Revolution Growth UGP III, LLC, Revolution Growth GP III, LP and Mr. Murray may be deemed to have voting and dispositive power with respect to these shares of common stock. The business address of the reporting persons is 1717 Rhode Island Avenue, NW, 10th Floor, Washington, D.C. 20036. |
(14) | According to a Schedule 13G/A filed jointly by Linden Capital L.P., Linden GP LLC, Linden Advisors LP and Siu Min Wong with the SEC on February 4, 2021, (i) Linden Capital and Linden GP each have shared voting power and shared dispositive power with respect to 2,823,924 shares of common stock that may be acquired upon the exercise of Public Warrants and sole voting power and sole dispositive power with respect to 0 shares of common stock, and (ii) Linden Advisors and Mr. Wong each have shared voting power and shared dispositive power with respect to 3,164,907 shares of common stock that may be acquired upon the exercise of Public Warrants and sole voting power and sole dispositive power with respect to 0 shares of common stock. Linden GP is the general partner of Linden Capital. Linden Advisers is the investment manager of Linden Capital and trading advisor or investment advisors of certain managed accounts. Mr. Wong is the principal owner and controlling person of Linden Advisors and Linden GP. In such capacities, Linden GP may be deemed to beneficially own the shares held of record by Linden Capital, and each of Linden Advisors and Mr. Wong may be deemed to beneficially own the shares held of record of each of Linden Capital and the managed accounts. The business address for Linden Capital is Victoria Place, 31 Victoria Street, Hamilton HM10, Bermuda. The business address for each of Linden Advisors, Linden GP and Mr. Wong is 590 Madison Avenue, 15th Floor, New York, New York 10022. |
• | at any time while the warrants are exercisable; |
• | upon not less than 30 days’ prior written notice of redemption to each warrant holder; |
• | if, and only if, the reported last sale price of our common stock equals or exceeds $18.00 per share, for any 20 trading days within a 30-day trading period ending on the third business day prior to the notice of redemption to warrant holders; and |
• | if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants commencing five business days prior to the 30-day trading period and continuing each day thereafter until the date of redemption. |
• | U.S. expatriates and former citizens or long-term residents of the United States; |
• | persons subject to the alternative minimum tax; |
• | persons holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment; |
• | banks, insurance companies, and other financial institutions; |
• | brokers, dealers or traders in securities; |
• | “controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax; |
• | partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein); |
• | tax-exempt organizations or governmental organizations; |
• | persons deemed to sell our common stock under the constructive sale provisions of the Code; |
• | persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation; |
• | tax-qualified retirement plans; |
• | “qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds; and |
• | persons subject to special tax accounting rules as a result of any item of gross income with respect to the stock being taken into account in an applicable financial statement. |
• | an individual who is a citizen or resident of the United States; |
• | a corporation created or organized under the laws of the United States, any state thereof, or the District of Columbia; |
• | an estate, the income of which is subject to U.S. federal income tax regardless of its source; or |
• | a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (2) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes. |
• | the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such gain is attributable); |
• | the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or |
• | our common stock constitutes a U.S. real property interest, or USRPI by reason of our status as a U.S. real property holding corporation, or USRPHC, for U.S. federal income tax purposes. |
Name |
Number of Shares |
|||
J.P. Morgan Securities LLC |
||||
BofA Securities, Inc. |
||||
|
|
|||
Total |
||||
|
|
Without option to purchase additional shares exercise |
With full option to purchase additional shares exercise |
|||||||
Per Share |
$ | $ | ||||||
Total |
$ | $ |
• | The information set forth in this prospectus and otherwise available to the representatives. |
• | Our prospects and the history and prospects for the industry in which we compete. |
• | An assessment of our management. |
• | Our prospects for future earnings. |
• | The general condition of the securities markets at the time of this offering. |
• | The recent market prices of, and demand for, publicly traded common stock of generally comparable companies. |
• | Other factors deemed relevant by the underwriters and us. |
(a) | to any legal entity which is a “qualified investor” as defined under the Prospectus Regulation; |
(b) | to fewer than 150 natural or legal persons (other than “qualified investors” as defined under the Prospectus Regulation), subject to obtaining the prior consent of the underwriters for any such offer; or |
(c) | in any other circumstances falling within Article 1(4) of the Prospectus Regulation, |
(a) | to any legal entity which is a “qualified investor” as defined under the UK Prospectus Regulation; |
(b) | to fewer than 150 natural or legal persons (other than “qualified investors” as defined under the UK Prospectus Regulation), subject to obtaining the prior consent of the underwriters for any such offer; or |
(c) | in any other circumstances falling within section 86 of the Financial Services and Markets Act 2000, as amended, or FSMA, |
(a) | a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or |
(b) | a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, |
(i) | to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; |
(ii) | where no consideration is or will be given for the transfer; |
(iii) | where the transfer is by operation of law; |
(iv) | as specified in Section 276(7) of the SFA; or |
(v) | as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore. |
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 |
F-21 | ||||
F-22 | ||||
F-23 | ||||
F-24 | ||||
F-25 | ||||
F-26 |
September 30, 2021 |
December 31, 2020 |
|||||||
(unaudited) |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, net of allowance for doubtful accounts of $ |
||||||||
Prepaid expenses |
||||||||
Other current assets |
||||||||
|
|
|
|
|||||
Total current assets |
||||||||
|
|
|
|
|||||
Property and equipment |
||||||||
Computer software and hardware |
||||||||
Leasehold improvements |
||||||||
Furniture, fixtures and other equipment |
||||||||
Accumulated depreciation |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Property and equipment, net |
||||||||
Intangible assets, net |
||||||||
Goodwill |
||||||||
Other assets |
||||||||
|
|
|
|
|||||
Total assets |
$ | $ | ||||||
|
|
|
|
|||||
Current liabilities |
||||||||
Current portion of long-term debt, net |
$ | $ | ||||||
Accounts payable and accrued expense |
||||||||
Current portion of contingent consideration |
||||||||
Deferred revenue |
||||||||
|
|
|
|
|||||
Total current liabilities |
||||||||
Long-term debt, net |
||||||||
Deferred tax liabilities |
||||||||
Other liabilities |
||||||||
|
|
|
|
|||||
Total liabilities |
||||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Stockholders’ equity |
||||||||
Common stock |
||||||||
$ |
||||||||
Preferred Stock |
||||||||
$ |
||||||||
Additional paid-in capital |
||||||||
Accumulated deficit |
( |
) | ( |
) | ||||
Accumulated other comprehensive income |
||||||||
|
|
|
|
|||||
Total stockholders’ equity |
||||||||
|
|
|
|
|||||
Total liabilities and stockholders’ equity |
$ | $ | ||||||
|
|
|
|
Three Months Ended September 30, 2021 |
Three Months Ended September 30, 2020 |
Nine Months Ended September 30, 2021 |
Nine Months Ended September 30, 2020 |
|||||||||||||
Revenues |
$ | $ | $ | $ | ||||||||||||
Cost of revenues |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating expenses |
||||||||||||||||
General and administrative |
||||||||||||||||
Research and development |
||||||||||||||||
Sales and marketing |
||||||||||||||||
Impairment of intangible asset |
— | — | ||||||||||||||
Depreciation and amortization |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) from operations |
( |
) | ( |
) | ( |
) | ||||||||||
Other (income) expenses |
||||||||||||||||
Other (income) expense |
( |
) | ||||||||||||||
Change in fair value of Private Warrants |
— | ( |
) | — | ||||||||||||
Interest expense |
||||||||||||||||
Loss on debt extinguishment |
— | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Income tax (benefit) provision |
( |
) | ( |
) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss), net of tax |
||||||||||||||||
Foreign currency translation |
( |
) | ( |
) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other comprehensive income (loss), net of tax |
( |
) | ( |
) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
|
|
|
|
|
|
|
|||||||||
Net loss per share - basic and diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average shares outstanding - basic and diluted |
||||||||||||||||
|
|
|
|
|
|
|
|
Common Stock Issued |
Additional paid-in capital |
Accumulated deficit |
Accumulated other comprehensive income (loss) |
Total |
||||||||||||||||||||
Shares |
Amount |
|||||||||||||||||||||||
Balance as of December 31, 2020 |
$ |
$ |
$ |
( |
) | $ |
$ |
|||||||||||||||||
Share-based compensation |
— | — | — | — | ||||||||||||||||||||
Exercise of stock options |
— | — | — | |||||||||||||||||||||
Stock issued in exchanges for vested units |
— | — | — | — | — | |||||||||||||||||||
Warrants (See Note 2) |
— | — | ( |
) | — | — | ( |
) | ||||||||||||||||
Foreign exchange translation |
— | — | — | ( |
) | ( |
) | |||||||||||||||||
Net loss |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance as of March 31, 2021 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
Share-based compensation |
— | — | — | — | ||||||||||||||||||||
Exercise of stock options |
— | — | — | |||||||||||||||||||||
Stock issued in exchanges for vested units |
— | — | — | — | — | |||||||||||||||||||
Foreign exchange translation |
— | — | — | — | ||||||||||||||||||||
Net loss |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance as of June 30, 2021 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Share-based compensation |
— | — | — | — | ||||||||||||||||||||
Foreign exchange translation |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Net loss |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance as of September 30, 2021 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Issued |
Additional paid-in capital |
Accumulated deficit |
Accumulated other comprehensive income (loss) |
Total |
||||||||||||||||||||
Shares |
Amount |
|||||||||||||||||||||||
Balance as of December 31, 2019 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
Share-based compensation |
— | — | — | — | ||||||||||||||||||||
Foreign exchange translation |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Net loss |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance as of March 31, 2020 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
Share-based compensation |
— | — | — | — | ||||||||||||||||||||
Foreign exchange translation |
— | — | — | — | ||||||||||||||||||||
Net loss |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance as of June 30, 2020 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Share-based compensation |
— | — | — | — | ||||||||||||||||||||
Foreign exchange translation |
— | — | — | — | ||||||||||||||||||||
Net loss |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance as of September 30, 2020 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2021 |
Nine Months Ended September 30, 2020 |
|||||||
Operating activities |
||||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
||||||||
Non-cash interest |
||||||||
Loss on extinguishment of debt |
— | |||||||
Stock-based compensation |
||||||||
Provision for losses on accounts receivable |
||||||||
Deferred income taxes |
( |
) | ||||||
Change in fair value of contingent consideration |
||||||||
Change in fair value of Private Warrants |
( |
) | — | |||||
Impairment of intangible asset |
— | |||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
( |
) | ||||||
Prepaid expenses and other assets |
( |
) | ( |
) | ||||
Accounts payable and accrued expenses |
( |
) | ||||||
Deferred revenue |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Net cash provided by operating activities |
||||||||
|
|
|
|
|||||
Investing activities |
||||||||
Acquisitions, net of cash acquired |
— | ( |
) | |||||
Purchases of property and equipment |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Net cash used in investing activities |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Financing activities |
||||||||
Issuance of common stock |
— | |||||||
Revolving credit facility - draws |
— | |||||||
Revolving credit facility - repayments |
— | ( |
) | |||||
Payments for capital lease obligations |
( |
) | ( |
) | ||||
Debt acquisition costs |
( |
) | — | |||||
Proceeds long-term debt, net of original issue discount |
— | |||||||
Retirement of debt |
( |
) | — | |||||
Payments on long-term debt |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Net cash provided by (used in) financing activities |
( |
) | ||||||
|
|
|
|
|||||
Effect of foreign exchange rates |
( |
) | ||||||
Net (decrease) increase in cash |
( |
) | ||||||
Cash at beginning of period |
||||||||
|
|
|
|
|||||
Cash at end of period |
$ | $ | ||||||
|
|
|
|
|||||
Supplemental disclosure: |
||||||||
Cash paid for interest |
$ | $ | ||||||
|
|
|
|
|||||
Income tax refunds |
$ | $ | ||||||
|
|
|
|
|||||
Significant non-cash investing and financing activities |
||||||||
Purchases of property and equipment in accounts payable and accrued expenses on the consolidated balance sheets |
$ | $ | ||||||
|
|
|
|
Computer software and hardware |
||||
Leasehold improvements |
||||
Furniture, fixtures and other equipment |
2021 Q3 |
2020 Q3 |
|||||||||||||||||||||||||||
Consolidated | Technology Solutions |
Nebula | Consolidated | Technology Solutions |
Nebula | |||||||||||||||||||||||
Legal technology |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Data recovery |
— | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenue |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
2021 September YTD |
2020 September YTD |
|||||||||||||||||||||||||||
Consolidated | Technology Solutions |
Nebula | Consolidated | Technology Solutions |
Nebula | |||||||||||||||||||||||
Legal technology |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Data recovery |
— | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenue |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Legal Technology, including Nebula and our expansive suite of technology solutions, such as our end-to-end |
(2) | Data recovery solutions, which provides data restoration, data erasure and data management services. |
December 31, 2020 & September 30, 2021 |
||||
Expected volatility |
% | |||
Expected term (in years) |
||||
Risk free interest rate |
% | |||
Dividend yield |
% | |||
Exercise Price |
$ | |||
Fair value of Common Stock |
$ |
• | Expected volatility – as of the valuation date, the Public Warrants (as defined in Note 7) and the Common Stock were traded and their market prices were used to infer the expected annual volatility of the Common Stock. The expected volatility is used to value the Private Warrants. |
• | Expected term – the expected term is based on the exercise period, which began 30 days after the consummation of the Business Combination in December 2019 and ends on December 19, 2024 (which is |
• | Risk-free interest rate – the risk-free interest rate is based on the U.S. Treasury Bill yields for the period commensurate with the time to exercise the Private Warrants. |
• | Dividend yield – the Company does not pay dividends and has no plans to do so. As a result, the expected dividend yield is zero. |
• | Exercise price – the exercise price is contractually set at $ |
• | Fair value of stock – the stock price is the quoted market price as of the valuation date. |
Balance at December 31, 2019 |
$ | |||
Change in fair value of contingent consideration |
||||
|
|
|||
Balance at December 31, 2020 |
||||
Private warrants |
||||
Change in fair value of Private Warrants |
( |
) | ||
Change in fair value of contingent consideration |
||||
|
|
|||
Balance at September 30, 2021 |
$ | |||
|
|
September 30, |
Capital Leases |
Operating Leases |
||||||
2021 (3 months) |
$ | $ | ||||||
2022 |
||||||||
2023 |
||||||||
2024 |
— | |||||||
2025 |
— | |||||||
Thereafter |
— | |||||||
|
|
|
|
|||||
Total |
$ | $ | ||||||
|
|
|||||||
Less interest on lease obligations |
( |
) | ||||||
|
|
|||||||
Less current portion |
( |
) | ||||||
|
|
|||||||
Non-current portion |
$ | |||||||
|
|
September 30, 2021 |
December 31, 2020 |
|||||||
First lien facility due 2022 |
$ | — | $ | |||||
Convertible debenture notes due 2024 |
||||||||
2021 Credit Agreement due 2026 |
— | |||||||
|
|
|
|
|||||
Total debt |
||||||||
Less: unamortized original issue discount |
( |
) | ( |
) | ||||
Less: unamortized debt issuance costs |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total debt, net |
||||||||
Current portion of debt |
||||||||
Less: current portion of unamortized original issue discount |
— | ( |
) | |||||
Less: current portion of unamortized debt issuance costs |
— | ( |
) | |||||
|
|
|
|
|||||
Total current portion of debt, net |
||||||||
|
|
|
|
|||||
Total long-term debt, net |
$ | $ | ||||||
|
|
|
|
Description |
Options Outstanding |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term (Years) |
Aggregate Intrinsic Value (1) |
||||||||||||
Options Outstanding, December 31, 2020 |
$ | $ | ||||||||||||||
Granted |
||||||||||||||||
Exercised |
( |
) | ||||||||||||||
Forfeited |
( |
) | ||||||||||||||
Expired |
( |
) | ||||||||||||||
|
|
|||||||||||||||
Options Outstanding, September 30, 2021 |
$ | $ | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Options Vested and Exercisable, September 30, 2021 |
$ | $ | — | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Options Vested and Expected to Vest, September 30, 2021 |
$ | $ | ||||||||||||||
|
|
|
|
|
|
|
|
(1) | Aggregate intrinsic value represents the difference between the estimated fair value of the underlying Common Stock and the exercise price of outstanding in-the-money |
2019 Plan |
||||||||
Nine Months Ended September 30, 2021 |
Nine Months Ended September 30, 2020 |
|||||||
Total fair value of stock options granted |
$ | $ | ||||||
Total fair value of options vested |
— |
Nine Months Ended September 30, 2021 |
Nine Months Ended September 30, 2020 | |||
Expected volatility |
||||
Expected term (in years) |
||||
Dividend yield |
||||
Risk-free interest rate |
• | Expected volatility |
• | Expected term |
• | Dividend yield |
• | Risk-free interest rate |
Three Months Ended September 30, 2021 |
Three Months Ended September 30, 2020 |
Nine Months Ended September 30, 2021 |
Nine Months Ended September 30, 2020 |
|||||||||||||
Cost of revenues |
$ | $ | $ | $ | ||||||||||||
General and administrative |
||||||||||||||||
Research and development |
||||||||||||||||
Sales and marketing |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | $ | $ | $ | ||||||||||||
|
|
|
|
|
|
|
|
Description |
RSUs Outstanding |
|||
Balance at December 31, 2020 |
||||
Granted |
||||
Vested |
( |
) | ||
Forfeited |
( |
) | ||
Expired |
— | |||
Balance at September 30, 2021 |
||||
December 31, 2020 |
December 31, 2019 |
|||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, net of allowance for doubtful accounts of $ |
||||||||
Prepaid expenses |
||||||||
Other current assets |
||||||||
|
|
|
|
|||||
Total current assets |
||||||||
|
|
|
|
|||||
Property and equipment |
||||||||
Computer software and hardware |
||||||||
Leasehold improvements |
||||||||
Furniture, fixtures and other equipment |
||||||||
Accumulated depreciation |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Property and equipment, net |
||||||||
Intangible assets, net |
||||||||
Goodwill |
||||||||
Other assets |
||||||||
|
|
|
|
|||||
Total assets |
$ | $ | ||||||
|
|
|
|
|||||
Current liabilities |
||||||||
Current portion of long-term debt, net |
$ | $ | ||||||
Accounts payable and accrued expense |
||||||||
Current portion of contingent consideration |
||||||||
Deferred revenue |
||||||||
|
|
|
|
|||||
Total current liabilities |
||||||||
Long-term debt, net |
||||||||
Deferred tax liabilities |
||||||||
Other liabilities |
||||||||
|
|
|
|
|||||
Total liabilities |
||||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Stockholders’ equity |
||||||||
Common stock |
||||||||
$ |
||||||||
Preferred Stock |
||||||||
$ |
||||||||
Additional paid-in capital |
||||||||
Accumulated deficit |
( |
) | ( |
) | ||||
Accumulated other comprehensive income |
||||||||
|
|
|
|
|||||
Total stockholders’ equity |
||||||||
|
|
|
|
|||||
Total liabilities and stockholders’ equity |
$ | $ | ||||||
|
|
|
|
(in thousands) |
Year ended December 31, 2020 |
Year ended December 31, 2019 |
||||||
Revenues |
$ | $ | ||||||
Cost of revenues |
||||||||
|
|
|
|
|||||
Gross profit |
||||||||
|
|
|
|
|||||
Operating expenses |
||||||||
General and administrative |
||||||||
Research and development |
||||||||
Sales and marketing |
||||||||
Depreciation and amortization |
||||||||
|
|
|
|
|||||
Total operating expenses |
||||||||
|
|
|
|
|||||
Income from operations |
||||||||
Other expenses |
||||||||
Other expense |
||||||||
Loss on extinguishment of debt |
— | |||||||
Interest expense |
||||||||
|
|
|
|
|||||
Loss before income taxes |
( |
) | ( |
) | ||||
Income tax provision |
||||||||
|
|
|
|
|||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
|||||
Other comprehensive income, net of tax |
||||||||
Foreign currency translation |
||||||||
|
|
|
|
|||||
Total other comprehensive income, net of tax |
||||||||
|
|
|
|
|||||
Comprehensive loss |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
|||||
Net loss per share – basic and diluted |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
|||||
Weighted average shares outstanding – basic and diluted |
||||||||
|
|
|
|
Common Stock Issued |
||||||||||||||||||||||||||||
Shares |
Amount |
Additional paid-in capital |
Treasury Stock |
Accumulated deficit |
Accumulated other comprehensive income |
Total |
||||||||||||||||||||||
Balance as of December 31, 2018 |
$ |
$ |
$ |
( |
) | $ |
( |
) | $ |
$ |
||||||||||||||||||
Issuance of common stock |
— | — | — | — | ||||||||||||||||||||||||
Recapitalization transaction |
— | — | — | ( |
) | — | ||||||||||||||||||||||
Retirement of treasury stock |
— | — | ( |
) | — | — | — | |||||||||||||||||||||
Share-based compensation |
— | — | — | — | ||||||||||||||||||||||||
Foreign exchange translation |
— | — | — | — | — | |||||||||||||||||||||||
Net loss |
— | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2019 |
$ | $ | $ | — | $ | ( |
) | $ | $ | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Share-based compensation |
— | — | — | — | — | |||||||||||||||||||||||
Foreign exchange translation |
— | — | — | — | — | |||||||||||||||||||||||
Net loss |
— | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2020 |
$ | $ | $ | — | $ | ( |
) | $ | $ | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2020 |
Year ended December 31, 2019 |
|||||||
Operating activities |
||||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
||||||||
Non-cash interest |
||||||||
Loss on extinguishment of debt |
— | |||||||
Stock-based compensation |
||||||||
Provision for losses on accounts receivable |
||||||||
Deferred income taxes |
||||||||
Change in fair value of contingent consideration |
||||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
( |
) | ||||||
Prepaid expenses and other assets |
||||||||
Accounts payable and accrued expenses |
( |
) | ||||||
Deferred revenue |
( |
) | ||||||
Net cash provided by (used in) operating activities |
( |
) | ||||||
Investing activities |
||||||||
Acquisitions, net of cash |
( |
) | ( |
) | ||||
Purchases of property and equipment |
( |
) | ( |
) | ||||
Net cash used in investing activities |
( |
) | ( |
) | ||||
Financing activities |
||||||||
Recapitalization transaction |
— | |||||||
Revolving credit facility draws |
||||||||
Revolving credit facility repayments |
( |
) | ( |
) | ||||
Payments for capital lease obligations |
( |
) | ( |
) | ||||
Payments on long-term debt |
( |
) | ( |
) | ||||
Issuance of common stock |
— | |||||||
Net cash (used in) provided by financing activities |
( |
) | ||||||
Effect of foreign exchange rates |
( |
) | ||||||
Net increase in cash |
||||||||
Cash at beginning of period |
||||||||
Cash at end of period |
$ | $ | ||||||
Supplemental disclosure: |
||||||||
Cash paid for interest |
$ | $ | ||||||
Income taxes paid, net of refunds |
$ | ( |
) | $ | ||||
Significant noncash investing and financing activities |
||||||||
Assumption of Pivotal Debentures |
$ | — | $ | |||||
Equity issued for acquisitions |
$ | — | $ | |||||
Purchases of property and equipment in accounts payable and accrued expenses on the consolidated balance sheets |
$ | $ | ||||||
• | LD Topco, Inc.’s operations comprise the ongoing operations of the combined entity; |
• | The officers of the newly combined company consist of LD Topco, Inc.’s executives, including the Chief Executive Officer, Chief Financial Officer and General Counsel; and, |
• | The former shareholders of LD Topco, Inc. own a majority voting interest in the combined entity. |
Balance at December 31, 2018 |
$ | |||
Charged to/reversed from expense |
||||
Charged to/from other accounts |
— | |||
Deductions (write offs) |
( |
) | ||
|
|
|||
Balance at December 31, 2019 |
$ | |||
Charged to/reversed from expense |
||||
Charged to/from other accounts |
||||
Deductions (write offs) |
( |
) | ||
|
|
|||
Balance at December 31, 2020 |
$ | |||
|
|
Computer software and hardware |
||||
Leasehold improvements |
||||
Furniture, fixtures and other equipment |
Balance at December 31, 2018 |
$ | |||
Acquisitions |
||||
Foreign currency translation |
||||
|
|
|||
Balance at December 31, 2019 |
||||
Acquisitions |
||||
Disposal |
( |
) | ||
Foreign currency translation |
||||
|
|
|||
Balance at December 31, 2020 |
$ | |||
|
|
2020 |
2019 |
|||||||||||||||||||||||
Consolidated |
Technology Solutions |
Nebula |
Consolidated |
Technology Solutions |
Nebula |
|||||||||||||||||||
Legal technology |
$ |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
$ |
||||||
Data recovery |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
$ |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
$ |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Legal Technology, including Nebula and our expansive suite of technology solutions, such as our end-to-end eDiscovery technology solutions, managed review solutions, collections, processing, analytics, hosting, production and professional services, and |
(2) |
Data recovery solutions, which provides data restoration, data erasure and data management services. |
Gross cash received by KLDiscovery from Business Combination |
$ | |||
Less: fees to underwriters |
( |
) | ||
Less: other transaction costs |
( |
) | ||
|
|
|||
Net cash received by KLDiscovery from Business Combination |
$ | |||
|
|
Balance at December 31, 2018 |
$ | |||
Additions (payments) to contingent consideration |
||||
Change in fair value of contingent consideration |
||||
|
|
|||
Balance at December 31, 2019 |
||||
Additions (payments) to contingent consideration |
||||
Change in fair value of contingent consideration |
||||
|
|
|||
Balance at December 31, 2020 |
$ | |||
|
|
Description |
Weighted Average Remaining Useful Life in Years |
December 31, 2020 |
December 31, 2019 |
|||||||||
Trademark and tradenames |
$ | $ | ||||||||||
Accumulated amortization |
( |
) | ( |
) | ||||||||
|
|
|
|
|||||||||
Trademark and tradenames, net |
||||||||||||
|
|
|
|
|||||||||
Developed technology |
||||||||||||
Accumulated amortization |
( |
) | ( |
) | ||||||||
|
|
|
|
|||||||||
Developed technology, net |
||||||||||||
|
|
|
|
|||||||||
Non-compete agreements |
— | |||||||||||
Accumulated amortization |
( |
) | ( |
) | ||||||||
|
|
|
|
|||||||||
Non-compete agreements, net |
— | |||||||||||
|
|
|
|
|||||||||
Customer relationships |
||||||||||||
Accumulated amortization |
( |
) | ( |
) | ||||||||
|
|
|
|
|||||||||
Customer relationships, net |
||||||||||||
|
|
|
|
|||||||||
Intangible assets, net of amortization |
$ | $ | ||||||||||
|
|
|
|
December 31, |
Amount |
|||
2021 |
$ | |||
2022 |
||||
2023 |
||||
2024 |
||||
2025 |
||||
Thereafter |
||||
In process |
||||
|
|
|||
Total |
$ | |||
|
|
December 31, |
||||||||
2020 |
2019 |
|||||||
Accrued expenses: |
||||||||
Accrued interest |
$ | $ | ||||||
Accrued salaries |
||||||||
Current taxes payable |
||||||||
Other accrued expenses |
||||||||
|
|
|
|
|||||
Total |
$ | $ | ||||||
|
|
|
|
December 31, |
Capital Leases |
Operating Leases |
||||||
2021 |
$ | $ | ||||||
2022 |
||||||||
2023 |
||||||||
2024 |
||||||||
2025 |
— | |||||||
Thereafter |
— | |||||||
|
|
|
|
|||||
Total |
$ | $ | ||||||
|
|
|||||||
Less: interest on lease obligations |
( |
) | ||||||
|
|
|||||||
Net amount |
||||||||
Less: current portion |
( |
) | ||||||
|
|
|||||||
Non-current |
$ | |||||||
|
|
December 31, |
||||||||
2020 |
2019 |
|||||||
First lien facility due 2022 |
||||||||
Convertible debenture notes due 2024 |
||||||||
|
|
|
|
|||||
Total debt |
||||||||
Less: unamortized original issue discount |
( |
) | ( |
) | ||||
Less: unamortized debt issuance costs |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total debt, net |
||||||||
Current portion of debt |
||||||||
Less: current portion of unamortized original issue discount |
( |
) | ( |
) | ||||
Less: current portion of unamortized debt issuance costs |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total current portion of debt, net |
||||||||
|
|
|
|
|||||
Total long-term debt, net |
$ | $ | ||||||
|
|
|
|
December 31, |
Amount |
|||
2021 |
||||
2022 |
||||
2023 |
— | |||
2024 |
||||
Thereafter |
— | |||
|
|
|||
Total |
$ | |||
|
|
December 31, |
Amount |
|||
2021 |
$ | |||
2022 |
||||
2023 |
||||
2024 |
||||
|
|
|||
Total |
$ | |||
|
|
Description |
Options Outstanding |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term (Years) |
Aggregate Intrinsic Value (1) |
||||||||||||
Options outstanding, December 31, 2018 |
— | |||||||||||||||
Granted |
$ | |||||||||||||||
Forfeited |
— | |||||||||||||||
Expired |
— | |||||||||||||||
|
|
|||||||||||||||
Options outstanding, December 31, 2019 |
$ | |||||||||||||||
Granted |
||||||||||||||||
Forfeited |
( |
) | ||||||||||||||
Expired |
( |
) | ||||||||||||||
Options outstanding, December 31, 2020 |
$ | $ | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Options vested and exercisable, December 31, 2020 |
$ | $ | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Options vested and expected to vest, December 31, 2020 |
$ | $ | ||||||||||||||
|
|
|
|
|
|
|
|
Description |
Options Outstanding |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term (Years) |
Aggregate Intrinsic Value (1) |
||||||||||||
Options Outstanding, December 31, 2018 |
$ | $ | — | |||||||||||||
Granted |
||||||||||||||||
Forfeited |
( |
) | ||||||||||||||
Expired |
( |
) | ||||||||||||||
Cancelled |
( |
) | ||||||||||||||
|
|
|||||||||||||||
Options Outstanding, December 31, 2019 |
— | $ | — |
(1) | Aggregate intrinsic value (in thousands) represents the difference between the estimated fair value of the underlying common stock and the exercise price of outstanding, in-the-money |
2016 Plan |
2019 Plan |
|||||||||||||||
Year Ended December 31, 2020 |
Year Ended December 31, 2019 |
Year Ended December 31, 2020 |
Year Ended December 31, 2019 |
|||||||||||||
Total fair value of stock options granted |
$ | — | $ | $ | $ | |||||||||||
Total fair value of options vested |
— | — |
Year Ended December 31, 2020 |
Year Ended December 31, 2019 | |||
Expected volatility |
||||
Expected term (in years) |
||||
Dividend yield |
||||
Risk free interest rate |
• | Expected volatility |
• | Expected term |
• | Dividend yield |
• | Risk-free interest rate |
December 31, |
||||||||
2020 |
2019 |
|||||||
Cost of revenues |
$ | $ | ||||||
General and administrative |
||||||||
Research and development |
||||||||
Sales and marketing |
||||||||
|
|
|
|
|||||
Total |
$ | $ | ||||||
|
|
|
|
Description |
RSUs Outstanding |
|||
Outstanding at December 31, 2019 |
— | |||
Granted |
||||
Forfeited |
( |
) | ||
Expired |
— | |||
|
|
|||
Outstanding at December 31, 2020 |
||||
|
|
Year Ended December 31, 2020 |
Year Ended December 31, 2019 |
|||||||
Basic and diluted loss per share: |
||||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
|||||
Weighted average common shares outstanding – basic |
||||||||
Dilutive effect of potentially issuable shares |
— | — | ||||||
|
|
|
|
|||||
Weighted average common shares outstanding – diluted |
||||||||
|
|
|
|
|||||
Basic loss per share |
$ | ( |
) | $ | ( |
) | ||
Dilutive effect of potentially issuable shares |
— | — | ||||||
|
|
|
|
|||||
Diluted loss per share |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
|||||
Common share equivalents excluded due to anti-dilutive effect |
— | |||||||
|
|
|
|
Year Ended December 31, 2020 |
Year Ended December 31, 2019 |
|||||||
Current |
||||||||
Federal |
$ | ( |
) | $ | ( |
) | ||
State |
||||||||
Foreign |
||||||||
Deferred |
||||||||
Federal |
||||||||
State |
||||||||
Foreign |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total income tax provision |
$ | $ | ||||||
|
|
|
|
Year Ended December 31, 2020 |
Year Ended December 31, 2019 |
|||||||
Pre-tax book loss |
$ | ( |
) | $ | ( |
) | ||
Tax at Federal statutory rate of |
( |
) | ( |
) | ||||
State taxes |
||||||||
Stock based compensation |
||||||||
Foreign rate differential |
( |
) | ( |
) | ||||
Unrecognized tax benefit |
— | |||||||
Other adjustments |
( |
) | ||||||
Valuation allowance |
||||||||
|
|
|
|
|||||
Total income tax provision |
$ | $ | ||||||
|
|
|
|
Year Ended December 31, 2020 |
Year Ended December 31, 2019 |
|||||||
Domestic |
$ | ( |
) | $ | ( |
) | ||
Foreign |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
Year Ended December 31, 2020 |
Year Ended December 31, 2019 |
|||||||
Net operating losses and other carryforwards |
$ | $ | ||||||
Interest expense carryforward |
||||||||
Property and equipment |
||||||||
Accrued expenses |
||||||||
Payroll tax deferral |
— | |||||||
Allowance for doubtful accounts |
||||||||
Stock-based compensation |
— | |||||||
Other |
||||||||
|
|
|
|
|||||
Deferred tax asset |
||||||||
Valuation allowance |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total deferred tax assets, net of valuation allowance |
||||||||
Intangible assets |
( |
) | ( |
) | ||||
Prepaid expenses |
( |
) | ( |
) | ||||
Other |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Deferred tax liability |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Net deferred tax liability |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
Year Ended December 31, 2020 |
Year Ended December 31, 2019 |
|||||||
Beginning Balance |
$ | $ | ||||||
Additions |
$ | $ | ||||||
Reductions |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Ending Balance |
$ | $ | ||||||
|
|
|
|
Year Ended December 31, 2020 |
||||
Beginning Balance |
$ | — | ||
Additions |
$ | |||
Reductions |
— | |||
|
|
|||
Ending Balance |
$ | |||
|
|
Year Ended December 31, 2020 |
Year Ended December 31, 2019 |
|||||||
Costs of revenues |
$ | $ | ||||||
General and administrative |
||||||||
Sales and marketing |
||||||||
Research and development |
||||||||
|
|
|
|
|||||
Total |
$ | $ | ||||||
|
|
|
|
Balance at December 31, 2018 |
$ | |||
Payments |
( |
) | ||
Expense |
||||
|
|
|||
Balance at December 31, 2019 |
$ | |||
Payments |
( |
) | ||
Expense |
||||
|
|
|||
Balance at December 31, 2020 |
$ | |||
|
|
Item 13. |
Other Expenses of Issuance and Distribution. |
SEC registration fee |
$ | 9,270 | ||
FINRA filing fee |
$ | 15,500 | ||
Listing fee |
$ | * | ||
Transfer agent’s fees and expenses |
$ | * | ||
Printing expenses |
$ | * | ||
Legal fees and expenses |
$ | * | ||
Accounting fees and expenses |
$ | * | ||
Miscellaneous |
$ | * | ||
|
|
|||
Total expenses |
$ | * | ||
|
|
* | Estimated expenses not presently known. |
Item 14. |
Indemnification of Directors and Officers. |
Item 15. |
Recent Sales of Unregistered Securities. |
• | On August 2, 2018, we issued 5,750,000 shares of Class B common stock to a purchaser that was an accredited investor for aggregate consideration of $25,000. The issuance was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof as a transaction by an issuer not involving any public offering. |
• | On February 4, 2019, simultaneously with the consummation of the IPO, we issued 6,350,000 warrants to purchase common stock to a purchaser that was an accredited investor for aggregate consideration of $6.4 million. The issuance was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof as a transaction by an issuer not involving any public offering. |
• | On December 16, 2019, we offered and sold an aggregate of $200 million aggregate principal amount of our 8.00% convertible debentures due 2024, 2,097,974 shares of common stock and 1,764,719 warrants to purchase shares of common stock to purchasers who were accredited investors for aggregate consideration of approximately $201.7 million. These issuances were exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof as transactions by an issuer not involving any public offering. |
Item 16. |
Exhibits and Financial Statement Schedules. |
(a) | Exhibits. |
(b) | Financial Statements. F-1 for an index to the financial statements and schedules included in the registration statement. |
Item 17. |
Undertakings. |
(a) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
(b) | The undersigned registrant hereby undertakes that: |
1. | For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
2. | For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
+ | Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request. |
# | Denotes management compensatory plan or arrangement. |
^ | Certain confidential information contained in this agreement has been omitted because it (i) is not material and (ii) would be competitively harmful if publicly disclosed. |
* | To be filed by amendment. |
By |
/s/ Christopher J. Weiler | |
Christopher J. Weiler | ||
Chief Executive Officer |
Signature |
Title |
Date | ||
/s/ Christopher J. Weiler Christopher J. Weiler |
Chief Executive Officer (Principal Executive Officer) and Director | November 23, 2021 | ||
/s/ Dawn Wilson Dawn Wilson |
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | November 23, 2021 | ||
/s/ Donna Morea Donna Morea |
Chair of the Board | November 23, 2021 | ||
/s/ Ian Fujiyama Ian Fujiyama |
Director | November 23, 2021 | ||
/s/ Kevin Griffin Kevin Griffin |
Director | November 23, 2021 | ||
/s/ Evan Morgan Evan Morgan |
Director | November 23, 2021 | ||
/s/ Lawrence Prior III Lawrence Prior III |
Director | November 23, 2021 | ||
/s/ Arjun Shah Arjun Shah |
Director | November 23, 2021 |
Signature |
Title |
Date | ||
/s/ Lauren Tanenbaum Lauren Tanenbaum |
Director |
November 23, 2021 | ||
/s/ Richard Williams Richard Williams |
Director |
November 23, 2021 |