May 11, 2017 (March 31, 2017) Date of Report (Date of earliest event reported) | ||||
Sonic Foundry, Inc. (Exact name of registrant as specified in its charter) | ||||
Maryland (State or other jurisdiction of incorporation) | 000-30407 (Commission File Number) | 39-1783372 (IRS Employer Identification No.) |
222 W. Washington Ave Madison, WI 53703 (Address of principal executive offices) | (608) 443-1600 (Registrant's telephone number) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
(a) | Exhibits |
99.1 | Press release concerning financial results for the fiscal quarter ended March 31, 2017 . |
99.1 | Press release concerning financial results for the fiscal quarter ended March 31, 2017. |
By: | /s/ Kenneth A. Minor | |
By: | Kenneth A. Minor | |
Title: | Chief Financial Officer | |
• | Total revenues of $8.6 million, represent a decrease of 11% compared to $9.6 million in the second quarter of 2016 |
• | Gross margin decreased to $6.1 million, or 71% of sales compared to $7.3 million, or 76% of sales for the second quarter of 2016 |
• | Adjusted EBITDA of $(736) thousand compared to $461 thousand in the second quarter of 2016 |
• | Net loss of $1.5 million, or $(0.33) per share compared to a net loss of $711 thousand, or $(0.16) per share in the second quarter of 2016 |
• | Billings totaled $9.2 million in the second quarter of 2017, a decline of 10% compared to last year's same period |
• | Unearned revenue from services and products decreased $1.4 million, or 10% to $12.7 million as of March 31, 2017, compared to $14.1 million at the beginning of the year |
March 31, 2017 | September 30, 2016 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 850 | $ | 1,794 | |||
Accounts receivable, net of allowances of $275 and $225 | 12,156 | 11,646 | |||||
Inventories | 1,434 | 1,904 | |||||
Prepaid expenses and other current assets | 1,245 | 1,404 | |||||
Total current assets | 15,685 | 16,748 | |||||
Property and equipment: | |||||||
Leasehold improvements | 1,043 | 879 | |||||
Computer equipment | 6,445 | 5,837 | |||||
Furniture and fixtures | 891 | 825 | |||||
Total property and equipment | 8,379 | 7,541 | |||||
Less accumulated depreciation and amortization | 6,237 | 5,510 | |||||
Property and equipment, net | 2,142 | 2,031 | |||||
Other assets: | |||||||
Goodwill | 10,993 | 11,310 | |||||
Customer relationships, net of amortization of $857 and $723 | 1,600 | 1,882 | |||||
Product rights, net of amortization of $349 and $287 | 323 | 385 | |||||
Other long-term assets | 322 | 726 | |||||
Total assets | $ | 31,065 | $ | 33,082 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Revolving lines of credit | $ | 4,022 | $ | 1,772 | |||
Accounts payable | 1,738 | 961 | |||||
Accrued liabilities | 1,817 | 1,883 | |||||
Unearned revenue | 10,824 | 12,834 | |||||
Current portion of capital lease and financing arrangements | 356 | 283 | |||||
Current portion of notes payable, net of discounts | 1,364 | 1,491 | |||||
Current portion of subordinated note payable | — | 93 | |||||
Total current liabilities | 20,121 | 19,317 | |||||
Long-term portion of unearned revenue | 1,880 | 1,257 | |||||
Long-term portion of capital lease and financing arrangements | 342 | 231 | |||||
Long-term portion of notes payable and warrant debt, net of discounts | 237 | 871 | |||||
Derivative liability, at fair value | 46 | 67 | |||||
Other liabilities | 386 | 259 | |||||
Deferred tax liability | 4,462 | 4,564 | |||||
Total liabilities | 27,474 | 26,566 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock, $.01 par value, authorized 500,000 shares; none issued | — | — | |||||
5% Preferred stock, Series B, voting, cumulative, convertible, $.01 par value (liquidation preference at par), authorized 1,000,000 shares, none issued | — | — | |||||
Common stock, $.01 par value, authorized 10,000,000 shares; 4,462,609 and 4,424,275 shares issued and 4,449,893 and 4,411,559 shares outstanding, respectively | 45 | 44 | |||||
Additional paid-in capital | 197,603 | 197,064 | |||||
Accumulated deficit | (193,179 | ) | (190,214 | ) | |||
Accumulated other comprehensive loss | (683 | ) | (183 | ) | |||
Receivable for common stock issued | (26 | ) | (26 | ) | |||
Treasury stock, at cost, 12,716 shares | (169 | ) | (169 | ) | |||
Total stockholders’ equity | 3,591 | 6,516 | |||||
Total liabilities and stockholders’ equity | $ | 31,065 | $ | 33,082 |
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||
Revenue: | ||||||||||||||
Product and other | $ | 3,354 | $ | 4,209 | $ | 7,123 | $ | 8,101 | ||||||
Services | 5,206 | 5,403 | 10,744 | 10,602 | ||||||||||
Total revenue | 8,560 | 9,612 | 17,867 | 18,703 | ||||||||||
Cost of revenue: | ||||||||||||||
Product and other | 1,481 | 1,410 | 3,168 | 3,275 | ||||||||||
Services | 1,015 | 929 | 1,926 | 1,775 | ||||||||||
Total cost of revenue | 2,496 | 2,339 | 5,094 | 5,050 | ||||||||||
Gross margin | 6,064 | 7,273 | 12,773 | 13,653 | ||||||||||
Operating expenses: | ||||||||||||||
Selling and marketing | 4,008 | 4,467 | 8,818 | 8,879 | ||||||||||
General and administrative | 1,468 | 1,376 | 2,918 | 2,847 | ||||||||||
Product development | 1,862 | 1,644 | 3,813 | 3,258 | ||||||||||
Total operating expenses | 7,338 | 7,487 | 15,549 | 14,984 | ||||||||||
Loss from operations | (1,274 | ) | (214 | ) | (2,776 | ) | (1,331 | ) | ||||||
Non-operating income (expenses): | ||||||||||||||
Interest expense, net | (116 | ) | (154 | ) | (266 | ) | (303 | ) | ||||||
Other income (expense), net | (89 | ) | (61 | ) | (77 | ) | 4 | |||||||
Total non-operating expenses | (205 | ) | (215 | ) | (343 | ) | (299 | ) | ||||||
Loss before income taxes | (1,479 | ) | (429 | ) | (3,119 | ) | (1,630 | ) | ||||||
Benefit (provision) for income taxes | 23 | (282 | ) | 154 | (288 | ) | ||||||||
Net loss | $ | (1,456 | ) | $ | (711 | ) | $ | (2,965 | ) | $ | (1,918 | ) | ||
Loss per common share: | ||||||||||||||
– basic | $ | (0.33 | ) | $ | (0.16 | ) | $ | (0.67 | ) | $ | (0.44 | ) | ||
– diluted | $ | (0.33 | ) | $ | (0.16 | ) | $ | (0.67 | ) | $ | (0.44 | ) | ||
Weighted average common shares | ||||||||||||||
– basic | 4,425,720 | 4,379,943 | 4,418,562 | 4,371,797 | ||||||||||
– diluted | 4,425,720 | 4,379,943 | 4,418,562 | 4,371,797 |
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net loss | $ | (1,456 | ) | $ | (711 | ) | $ | (2,965 | ) | $ | (1,918 | ) | |||
Add: | |||||||||||||||
Depreciation and amortization | 518 | 549 | 1,011 | 1,085 | |||||||||||
Income tax expense | (23 | ) | 282 | (154 | ) | 288 | |||||||||
Interest expense | 93 | 154 | 220 | 303 | |||||||||||
Stock-based compensation expense | 132 | 187 | 386 | 521 | |||||||||||
Adjusted EBITDA | $ | (736 | ) | $ | 461 | $ | (1,502 | ) | $ | 279 | |||||
Six Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Operating activities | |||||||
Net loss | $ | (2,965 | ) | $ | (1,918 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
Amortization of other intangibles | 282 | 362 | |||||
Depreciation and amortization of property and equipment | 757 | 801 | |||||
Provision for doubtful accounts | 50 | (50 | ) | ||||
Deferred taxes | (15 | ) | 178 | ||||
Stock-based compensation expense related to stock options | 386 | 521 | |||||
Remeasurement gain on subordinated debt | (6 | ) | (2 | ) | |||
Remeasurement gain on derivative liability | (21 | ) | (33 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (701 | ) | 2,077 | ||||
Inventories | 457 | 284 | |||||
Prepaid expenses and other current assets | 511 | (61 | ) | ||||
Accounts payable and accrued liabilities | 798 | (1,002 | ) | ||||
Other long-term liabilities | 141 | (43 | ) | ||||
Unearned revenue | (1,296 | ) | (73 | ) | |||
Net cash provided by (used in) operating activities | (1,622 | ) | 1,041 | ||||
Investing activities | |||||||
Purchases of property and equipment | (586 | ) | (149 | ) | |||
Net cash used in investing activities | (586 | ) | (149 | ) | |||
Financing activities | |||||||
Proceeds from notes payable | — | 500 | |||||
Proceeds from line of credit | 12,529 | 5,445 | |||||
Payments on notes payable | (907 | ) | (862 | ) | |||
Payments on line of credit | (10,249 | ) | (5,932 | ) | |||
Payment of debt issuance costs | (26 | ) | (10 | ) | |||
Proceeds from issuance of common stock and warrants | 21 | 31 | |||||
Payments on capital lease and financing arrangements | (150 | ) | (129 | ) | |||
Net cash provided by (used in) financing activities | 1,218 | (957 | ) | ||||
Changes in cash and cash equivalents due to changes in foreign currency | 46 | (27 | ) | ||||
Net decrease in cash and cash equivalents | (944 | ) | (92 | ) | |||
Cash and cash equivalents at beginning of period | 1,794 | 1,976 | |||||
Cash and cash equivalents at end of period | $ | 850 | $ | 1,884 | |||
Supplemental cash flow information: | |||||||
Interest paid | $ | 277 | $ | 310 | |||
Income taxes paid, foreign | 27 | 10 | |||||
Non-cash financing and investing activities: | |||||||
Property and equipment financed by capital lease or accounts payable | 341 | 246 | |||||
Debt discount | — | 16 | |||||
Stock issued for board of director's fees | 133 | 164 |