May 14, 2020 (March 31, 2020) 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, 2020. |
By: | /s/ Kenneth A. Minor | |
By: | Kenneth A. Minor | |
Title: | Interim Chief Financial Officer | |
• | Billings totaled $9.8 million in the second quarter of 2020; an increase of 31 percent compared to the same period last year |
• | Total revenues of $8.7 million compared to $8.0 million in the second quarter of 2019, a 9 percent increase |
• | Gross margin was $6.3 million, or 72 percent of sales, compared to $6.0 million, or 75 percent of sales, in the second quarter of 2019 |
• | Net income attributable to common stockholders of $95,000, or $0.01 per share, compared to $(1.5) million, or $(0.29) per share, in the second quarter of 2019 |
• | Adjusted EBITDA was $767,000 compared to $(784,000) in the second quarter of 2019 |
• | Unearned revenue was $11.5 million as of March 31, 2020 and September 30, 2019 |
March 31, 2020 | September 30, 2019 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 4,586 | $ | 4,295 | |||
Accounts receivable, net of allowances of $135 and $135 | 6,344 | 6,532 | |||||
Inventories, net of reserves of $30 and $0 | 602 | 558 | |||||
Investment in sales-type lease, current | 11 | 163 | |||||
Capitalized commissions, current | 334 | 464 | |||||
Prepaid expenses and other current assets | 910 | 972 | |||||
Total current assets | 12,787 | 12,984 | |||||
Property and equipment: | |||||||
Leasehold improvements | 1,121 | 1,121 | |||||
Computer equipment | 6,499 | 5,610 | |||||
Furniture and fixtures | 1,291 | 1,233 | |||||
Total property and equipment | 8,911 | 7,964 | |||||
Less accumulated depreciation and amortization | 6,838 | 6,396 | |||||
Property and equipment, net | 2,073 | 1,568 | |||||
Other assets: | |||||||
Investment in sales-type lease, long-term | 159 | 134 | |||||
Capitalized commissions, long-term | 102 | 106 | |||||
Right-of-use assets under operating leases | 1,972 | — | |||||
Other long-term assets | 384 | 388 | |||||
Total assets | $ | 17,477 | $ | 15,180 | |||
Liabilities and stockholders’ deficit | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 1,994 | $ | 843 | |||
Accrued liabilities | 1,649 | 2,216 | |||||
Unearned revenue | 9,453 | 9,610 | |||||
Current portion of finance lease obligations | 155 | 194 | |||||
Current portion of operating lease obligations | 1,160 | — | |||||
Current portion of notes payable and warrant debt, net of discounts | 1,915 | 968 | |||||
Total current liabilities | 16,326 | 13,831 | |||||
Long-term portion of unearned revenue | 2,055 | 1,842 | |||||
Long-term portion of finance lease obligations | 130 | 179 | |||||
Long-term portion of operating lease obligations | 840 | — | |||||
Long-term portion of notes payable and warrant debt, net of discounts | 4,743 | 5,429 | |||||
Derivative liability, at fair value | 72 | 9 | |||||
Other liabilities | 142 | 143 | |||||
Total liabilities | 24,308 | 21,433 | |||||
Commitments and contingencies | |||||||
Stockholders’ deficit: | |||||||
Preferred stock, $.01 par value, authorized 500,000 shares; none issued | — | — |
9% Preferred stock, Series A, voting, cumulative, convertible, $.01 par value (liquidation preference of $1,000 per share), authorized 4,500 shares; zero shares issued and outstanding, at amounts paid in | — | — | |||||
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; 6,800,037 and 6,749,359 shares issued, respectively and 6,787,321 and 6,736,643 shares outstanding, respectively | 68 | 67 | |||||
Additional paid-in capital | 203,884 | 203,735 | |||||
Accumulated deficit | (210,065 | ) | (209,340 | ) | |||
Accumulated other comprehensive loss | (549 | ) | (546 | ) | |||
Treasury stock, at cost, 12,716 shares | (169 | ) | (169 | ) | |||
Total stockholders’ deficit | (6,831 | ) | (6,253 | ) | |||
Total liabilities and stockholders’ deficit | $ | 17,477 | $ | 15,180 |
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenue: | |||||||||||||||
Product and other | $ | 2,812 | $ | 1,796 | $ | 4,867 | $ | 3,547 | |||||||
Services | 5,854 | 6,201 | 11,814 | 11,952 | |||||||||||
Total revenue | 8,666 | 7,997 | 16,681 | 15,499 | |||||||||||
Cost of revenue: | |||||||||||||||
Product and other | 1,158 | 645 | 1,989 | 1,296 | |||||||||||
Services | 1,247 | 1,359 | 2,595 | 2,550 | |||||||||||
Total cost of revenue | 2,405 | 2,004 | 4,584 | 3,846 | |||||||||||
Gross margin | 6,261 | 5,993 | 12,097 | 11,653 | |||||||||||
Operating expenses: | |||||||||||||||
Selling and marketing | 3,057 | 3,836 | 6,453 | 7,779 | |||||||||||
General and administrative | 1,176 | 1,345 | 2,617 | 2,883 | |||||||||||
Product development | 1,499 | 1,935 | 3,089 | 3,768 | |||||||||||
Total operating expenses | 5,732 | 7,116 | 12,159 | 14,430 | |||||||||||
Income (loss) from operations | 529 | (1,123 | ) | (62 | ) | (2,777 | ) | ||||||||
Non-operating expenses: | |||||||||||||||
Interest expense, net | (218 | ) | (227 | ) | (481 | ) | (381 | ) | |||||||
Other expense, net | (58 | ) | (11 | ) | (43 | ) | (3 | ) | |||||||
Total non-operating expenses | (276 | ) | (238 | ) | (524 | ) | (384 | ) | |||||||
Income (loss) before income taxes | 253 | (1,361 | ) | (586 | ) | (3,161 | ) | ||||||||
Income tax expense | (158 | ) | (125 | ) | (139 | ) | (113 | ) | |||||||
Net income (loss) | $ | 95 | $ | (1,486 | ) | $ | (725 | ) | $ | (3,274 | ) | ||||
Dividends on preferred stock | — | (45 | ) | — | (98 | ) | |||||||||
Net loss attributable to common stockholders | $ | 95 | $ | (1,531 | ) | $ | (725 | ) | $ | (3,372 | ) | ||||
Loss per common share | |||||||||||||||
– basic | $ | 0.01 | $ | (0.29 | ) | $ | (0.11 | ) | $ | (0.64 | ) | ||||
– diluted | $ | 0.01 | $ | (0.29 | ) | $ | (0.11 | ) | $ | (0.64 | ) | ||||
Weighted average common shares | |||||||||||||||
– basic | 6,785,180 | 5,278,500 | 6,760,779 | 5,232,449 | |||||||||||
– diluted | 6,933,227 | 5,278,500 | 6,760,779 | 5,323,449 |
Six Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Operating activities | |||||||
Net loss | $ | (725 | ) | $ | (3,274 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
Amortization of other intangibles | 150 | 97 | |||||
Depreciation and amortization of property and equipment | 433 | 516 | |||||
Provision for doubtful accounts - including financing receivables | 9 | 26 | |||||
Stock-based compensation expense related to stock options and warrants | 86 | 219 | |||||
Deferred loan interest to related party | 264 | — | |||||
Stock issued for board of director fees | 64 | — | |||||
Remeasurement loss (gain) on derivative liability | 63 | (7 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 175 | 1,354 | |||||
Financing receivables | — | (2 | ) | ||||
Inventories | (45 | ) | (612 | ) | |||
Investment in sales-type lease | 126 | — | |||||
Capitalized commissions | 134 | 105 | |||||
Prepaid expenses and other current assets | 64 | (25 | ) | ||||
Right-of-use assets under operating leases | 562 | — | |||||
Operating lease obligations | (578 | ) | — | ||||
Other long-term assets | 4 | — | |||||
Accounts payable and accrued liabilities | (162 | ) | 89 | ||||
Other long-term liabilities | (1 | ) | (33 | ) | |||
Unearned revenue | 57 | (1,704 | ) | ||||
Net cash provided by (used in) operating activities | 680 | (3,251 | ) | ||||
Investing activities | |||||||
Purchases of property and equipment | (118 | ) | (222 | ) | |||
Net cash used in investing activities | (118 | ) | (222 | ) | |||
Financing activities | |||||||
Proceeds from notes payable | 463 | 4,500 | |||||
Proceeds from lines of credit | — | 8,748 | |||||
Payments on notes payable | (618 | ) | (333 | ) | |||
Payments on lines of credit | — | (9,186 | ) | ||||
Payment of debt issuance costs | — | (110 | ) | ||||
Proceeds from issuance of preferred stock and common stock | — | 5 | |||||
Proceeds from exercise of common stock options | 1 | — | |||||
Payments on finance lease obligations | (124 | ) | (134 | ) | |||
Net cash provided by (used in) financing activities | (278 | ) | 3,490 | ||||
Changes in cash and cash equivalents due to changes in foreign currency | 7 | (24 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 291 | (7 | ) | ||||
Cash and cash equivalents at beginning of year | 4,295 | 1,189 | |||||
Cash and cash equivalents at end of year | $ | 4,586 | $ | 1,182 | |||
Supplemental cash flow information: | |||||||
Interest paid | $ | 479 | $ | 264 | |||
Income taxes paid, foreign | 90 | 160 | |||||
Non-cash financing and investing activities: | |||||||
Property and equipment financed by finance lease or accounts payable | 821 | 112 | |||||
Debt discount | — | 676 | |||||
Preferred stock dividends paid in additional shares | — | 98 | |||||
Conversion of preferred shares | — | 563 |
Three Months Ended March 31, | Six Months Ended March 31, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net income (loss) | $ | 95 | $ | (1,486 | ) | $ | (725 | ) | $ | (3,274 | ) | ||||
Add: | |||||||||||||||
Depreciation and amortization | 262 | 294 | 583 | 613 | |||||||||||
Income tax expense | 158 | 125 | 139 | 113 | |||||||||||
Interest expense | 218 | 227 | 481 | 381 | |||||||||||
Stock-based compensation expense | 34 | 56 | 86 | 219 | |||||||||||
Adjusted EBITDA | $ | 767 | $ | (784 | ) | $ | 564 | $ | (1,948 | ) | |||||