Company Quick10K Filing
Sonic Foundry
Price1.09 EPS-1
Shares7 P/E-2
MCap7 P/FCF-10
Net Debt2 EBIT-3
TEV9 TEV/EBIT-3
TTM 2019-09-30, in MM, except price, ratios
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SOFO 10Q Quarterly Report

Part I. Financial Information
Item 1
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 ex_201432.htm
EX-31.2 ex_201433.htm
EX-32 ex_201434.htm

Sonic Foundry Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
403020100-102012201420172020
Assets, Equity
1593-3-9-152012201420172020
Rev, G Profit, Net Income
2.91.60.3-0.9-2.2-3.52012201420172020
Ops, Inv, Fin

10-Q 1 sofo20200824_10q.htm FORM 10-Q sofo20200824_10q.htm
 

 

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

(Mark One)

 

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

For the Quarterly period ended December 31, 2020

OR

 

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

 

Commission File Number 000-30407

 

 

SONIC FOUNDRY, INC.

(Exact name of registrant as specified in its charter)

 

 

MARYLAND

 

39-1783372

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

222 West Washington Ave, Madison, WI 53703

(Address of principal executive offices)

(608) 443-1600

(Registrant’s telephone number including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days

Yes  ☒           No   ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ☒            No   ☐

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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

        Yes  ☐    No   ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐            No  ☒

State the number of shares outstanding of each of the issuer’s common equity as of the last practicable date:

 

Class

 

Outstanding

January 31, 2021

Common Stock, $0.01 par value

 

8,012,279

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. For a more complete discussion of accounting policies and certain other information, refer to the Company’s annual report filed on Form 10-K for the fiscal year ended September 30, 2020.

 

 

 

TABLE OF CONTENTS

 

 

 

PAGE NO.

PART I

FINANCIAL INFORMATION

2

 

 

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

4

 

 

 

 

Condensed Consolidated Balance Sheets – December 31, 2020 and September 30, 2020

4

 

 

 

 

Condensed Consolidated Statements of Operations – Three months ended December 31, 2020 and 2019

5

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) - Three months ended December 31, 2020 and 2019

6

 

 

 

 

Condensed Consolidated Statements of Stockholders' Deficit - Three months ended December 31, 2020 and 2019

7

 

 

 

 

Condensed Consolidated Statements of Cash Flows – Three months ended December 31, 2020 and 2019

8

 

 

 

 

Notes to Condensed Consolidated Financial Statements

9

 

 

 

Item 2.

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

24

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

 

 

 

Item 4.

Controls and Procedures

30

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

31

 

 

 

Item 1A.

Risk Factors

31

 

 

 

Item 6.

Exhibits

31

 

 

 

Signatures

34

 

 

 

Item 1

 

Sonic Foundry, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except for share data)

(Unaudited)

 

   

December 31,

   

September 30,

 
   

2020

   

2020

 

Assets

               

Current assets:

               

Cash and cash equivalents

  $ 5,845     $ 7,619  

Accounts receivable, net of allowances of $258 & $236

    5,260       6,250  

Inventories

    1,214       1,167  

Investment in sales-type lease, current

    217       275  

Capitalized commissions, current

    373       440  

Prepaid expenses and other current assets

    1,048       1,065  

Total current assets

    13,957       16,816  

Property and equipment:

               

Leasehold improvements

    1,136       1,128  

Computer equipment

    8,213       7,960  

Furniture and fixtures

    1,444       1,366  

Total property and equipment

    10,793       10,454  

Less accumulated depreciation and amortization

    7,596       7,295  

Property and equipment, net

    3,197       3,159  

Other assets:

               

Investment in sales-type lease, long-term

    78       76  

Capitalized commissions, long-term

    72       100  

Right-of-use assets under operating leases

    1,827       2,081  

Other long-term assets

    499       397  

Total assets

  $ 19,630     $ 22,629  

Liabilities and stockholders’ deficit

               

Current liabilities:

               

Accounts payable

  $ 891     $ 2,689  

Accrued liabilities

    2,374       2,565  

Unearned revenue

    9,053       10,402  

Current portion of finance lease obligations

    100       119  

Current portion of operating lease obligations

    1,482       1,425  

Current portion of notes payable and warrant debt, net of discounts

    1,038       1,104  

Total current liabilities

    14,938       18,304  

Long-term portion of unearned revenue

    1,717       1,736  

Long-term portion of finance lease obligations

    68       89  

Long-term portion of operating lease obligations

    344       665  

Long-term portion of notes payable and warrant debt, net of discounts

    2,399       2,673  

Derivative liability, at fair value

    71       66  

Other liabilities

    160       144  

Total liabilities

    19,697       23,677  

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; 8,012,279 and 7,965,325 shares issued, respectively and 7,999,563 and 7,952,609 shares outstanding, respectively

    80       80  

Additional paid-in capital

    209,283       209,022  

Accumulated deficit

    (208,887 )     (209,519 )

Accumulated other comprehensive loss

    (374 )     (462 )

Treasury stock, at cost, 12,716 shares

    (169 )     (169 )

Total stockholders’ deficit

    (67 )     (1,048 )

Total liabilities and stockholders’ deficit

  $ 19,630     $ 22,629  

 

See accompanying notes to the condensed consolidated financial statements.

 

 

 

Sonic Foundry, Inc.

Condensed Consolidated Statements of Operations

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

(Unaudited)

 

   

Three Months Ended December 31,

 
   

2020

   

2019

 

Revenue:

               

Product and other

  $ 2,161     $ 2,055  

Services

    7,004       5,960  

Total revenue

    9,165       8,015  

Cost of revenue:

               

Product and other

    813       831  

Services

    1,598       1,348  

Total cost of revenue

    2,411       2,179  

Gross margin

    6,754       5,836  

Operating expenses:

               

Selling and marketing

    3,010       3,396  

General and administrative

    1,198       1,441  

Product development

    1,741       1,590  

Total operating expenses

    5,949       6,427  

Income (loss) from operations

    805       (591 )

Non-operating expenses:

               

Interest expense, net

    (29 )     (263 )

Other expense, net

    11       15  

Total non-operating expenses

    (18 )     (248 )

Income (loss) before income taxes

    787       (839 )

Income tax (expense) benefit

    (155 )     19  

Net income (loss)

  $ 632     $ (820 )

Dividends on preferred stock

           

Net income (loss) attributable to common stockholders

  $ 632     $ (820 )

Income (loss) per common share

               

– basic

  $ 0.08     $ (0.12 )

– diluted

  $ 0.08     $ (0.12 )

Weighted average common shares

               

– basic

    7,963,775       6,736,643  

– diluted

    8,336,028       6,736,643  

 

See accompanying notes to the condensed consolidated financial statements

 

 

 

Sonic Foundry, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(Unaudited)

 

   

Three Months Ended December 31,

 
   

2020

   

2019

 

Net income (loss)

  $ 632     $ (820 )

Other comprehensive income (loss)

               

Foreign currency translation adjustment

    88       (8 )

Comprehensive income (loss)

  $ 720     $ (828 )

 

See accompanying notes to the condensed consolidated financial statements.

 

 

 

Sonic Foundry, Inc.

Condensed Consolidated Statements of Stockholders' Deficit

(in thousands)

(Unaudited)

 

                                   

Accumulated

                 
                   

Additional

           

other

                 
           

Common

   

paid-in

   

Accumulated

   

comprehensive

   

Treasury

         
   

Preferred stock

   

stock

   

capital

   

deficit

   

loss

   

stock

   

Total

 

Balance, September 30, 2019

  $     $ 67     $ 203,735     $ (209,340 )   $ (546 )   $ (169 )   $ (6,253 )

Stock compensation

                52                         52  

Foreign currency translation adjustment

                            (8 )           (8 )

Net loss

                      (820 )                 (820 )

Balance, December 31, 2019

  $     $ 67     $ 203,787     $ (210,160 )   $ (554 )   $ (169 )   $ (7,029 )

 

 

                                   

Accumulated

                 
                   

Additional

           

other

                 
           

Common

   

paid-in

   

Accumulated

   

comprehensive

   

Treasury

         
   

Preferred stock

   

stock

   

capital

   

deficit

   

loss

   

stock

   

Total

 

Balance, September 30, 2020

  $     $ 80     $ 209,022     $ (209,519 )   $ (462 )   $ (169 )   $ (1,048 )

Stock compensation

                119                         119  

Issuance of common stock

                142                         142  

Foreign currency translation adjustment

                            88             88  

Net income

                      632                   632  

Balance, December 31, 2020

  $     $ 80     $ 209,283     $ (208,887 )   $ (374 )   $ (169 )   $ (67 )

 

 

 

Sonic Foundry, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

   

Three Months Ended

 
   

December 31,

 
   

2020

   

2019

 

Operating activities

               

Net income (loss)

  $ 632     $ (820 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

               

Amortization of other intangibles

    19       94  

Depreciation and amortization of property and equipment

    268       227  

Provision for doubtful accounts - including financing receivables

    22       9  

Stock-based compensation expense related to stock options and warrants

    119       52  

Deferred loan interest to related party

          123  

Remeasurement loss on derivative liability

    5       2  

Changes in operating assets and liabilities:

               

Accounts receivable

    1,079       1,137  

Inventories

    (42 )     (351 )

Investment in sales-type lease

    63       33  

Capitalized commissions

    95       87  

Prepaid expenses and other current assets

    45       216  

Right-of-use assets under operating leases

    285       289  

Operating lease obligations

    (295 )     (289 )

Other long-term assets

    (91 )     5  

Accounts payable and accrued liabilities

    (2,053 )     (136 )

Other long-term liabilities

    12       (6 )

Unearned revenue

    (1,431 )     (1,090 )

Net cash used in operating activities

    (1,268 )     (418 )

Investing activities

               

Purchases of property and equipment

    (287 )     (59 )

Net cash used in investing activities

    (287 )     (59 )

Financing activities

               

Payments on notes payable

    (368 )     (250 )

Proceeds from exercise of common stock options

    142        

Payments on finance lease obligations

    (41 )     (70 )

Net cash used in financing activities

    (267 )     (320 )

Changes in cash and cash equivalents due to changes in foreign currency

    48       13  

Net decrease in cash and cash equivalents

    (1,774 )     (784 )

Cash and cash equivalents at beginning of year

    7,619       4,295  

Cash and cash equivalents at end of period

  $ 5,845     $ 3,511  

Supplemental cash flow information:

               

Interest paid

  $ 20     $ 253  

Income taxes paid, foreign

   

44

      81  

Non-cash financing and investing activities:

               

Property and equipment financed by finance lease or accounts payable

   

      36  

 

See accompanying notes to the condensed consolidated financial statements.

 

 

Sonic Foundry, Inc.

Notes to Condensed Consolidated Financial Statements

December 31, 2020

(Unaudited)

 

 

1.

Basis of Presentation and Significant Accounting Policies

 

Financial Statements

 

The accompanying condensed consolidated financial statements are unaudited and have been prepared on a basis substantially consistent with the Company's audited financial statements as of and for the year ended September 30, 2020 included in the Company's Annual Report on Form 10-K.

 

In the opinion of management, the accompanying unaudited, condensed consolidated financial statements contain all adjustments necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods presented. All such adjustments are of a normal recurring nature. Operating results for the three month period ended December 31, 2020 are not necessarily indicative of the results that might be expected for the year ending September 30, 2021.

 

Impacts of COVID-19

 

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns.  While we are unable to accurately predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration, severity and impact of the pandemic and containment measures, our compliance with these measures has impacted our day-to-day operations and could disrupt our business and operations, as well as those of our key business partners, vendors and other counterparties for an indefinite period of time.  To support the health and well-being of our employees, business partners and communities, a vast majority of our employees have been working remotely since mid-March 2020 and continue to do so for the foreseeable future. 

 

COVID-19 has had negative impacts on our operations and the future impacts of the pandemic and any corresponding economic results are largely unknown and rapidly evolving.  Beginning in March 2020 and continuing through today, the in-person events portion of our business was and continues to be significantly impacted by cancellations and/or postponements due to social distancing protocols enacted to stem the spread of the virus.  In response to the cancellations, the Company introduced a new virtual events platform as an alternate solution for our customers. In addition, the closure of educational institutions globally and the negative financial impact on their funding, could impact sales in the upcoming quarters.  While the virus has increased awareness of the need for distance learning tools and the adoption of video as a necessary communication medium, it is impossible for us to predict with confidence the long-term financial impact on our business including results of operations and liquidity.

 

Restructuring and exit activities

 

The determination of when the Company accrues for involuntary termination benefits under restructuring plans depends on whether the termination benefits are provided under an on-going benefit arrangement or under a one-time benefit arrangement. The Company accounts for on-going benefit arrangements, such as those documented by employment agreements, in accordance with Accounting Standards Codification 712 ("ASC 712") Nonretirement Postemployment Benefits. Under ASC 712, liabilities for postemployment benefits are recorded at the time the obligations are probable of being incurred and can be reasonably estimated. The Company accounts for one-time employment benefit arrangements in accordance with ASC 420 Exit or Disposal Cost Obligations. When applicable, the Company records such costs into operating expense.

 

During the quarter ended December 31, 2020, the Company expensed involuntary termination benefits of $101 thousand under ASC 420 compared to zero in the same quarter last year.

 

Investment in Sales-Type Lease

 

The Company has entered into sales-type lease arrangements with certain customers, consisting of recorders leased with terms ranging from 3-5 years.

 

Investment in sales-type leases consists of the following (in thousands) as of December 31, 2020:

 

Investment in sales-type lease, gross:

       

2021

  $ 218  

2022

    78  

Gross investment in sales-type lease

    296  

Less: Unearned income

    (1 )

Total investment in sales-type lease

  $ 295  
         

Current portion of total investment in sales-type lease

  $ 217  

Long-term portion of total investment in sales-type lease

    78  
    $ 295  

 

 

Inventory

 

Inventory consists of raw materials and supplies used in the assembly of Mediasite recorders and finished units. Inventory of completed units and spare parts are carried at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. An obsolescence reserve has been established to account for slow moving inventory.

 

Inventory consists of the following (in thousands):

 

    December 31,     September 30,  
   

2020

   

2020

 

Raw materials and supplies

  $ 282     $ 267  

Finished goods

    1,054       1,022  

Less: Obsolescence reserve

    (122 )     (122 )
    $ 1,214     $ 1,167  

 

Asset Retirement Obligation

 

An asset retirement obligation (“ARO”) associated with the retirement of a tangible long-lived asset is recognized as a liability in the period in which it is incurred or becomes determinable, with an associated increase in the carrying amount of the related long-term asset.  The cost of the tangible asset, including the initially recognized asset retirement cost, is depreciated over the useful life of the asset.  As of December 31, 2020 and September 30, 2020, the Company has recorded a liability of $138 thousand and $134 thousand, respectively, for retirement obligations associated with returning the MSKK leased property to the respective lessors upon the termination of the lease arrangement. Asset retirement obligations are included in other-long term liabilities on the condensed consolidated balance sheets.

 

Fair Value of Financial Instruments

 

In determining the fair value of financial assets and liabilities, the Company currently utilizes market data or other assumptions that it believes market participants would use in pricing the asset or liability in the principal or most advantageous market, and adjusts for non-performance and/or other risk associated with the Company as well as counterparties, as appropriate. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

 

Level 1 Inputs: Unadjusted quoted prices which are available in active markets for identical assets or liabilities accessible to the Company at the measurement date.

    

Level 2 Inputs: Inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

 

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

 

The hierarchy gives the highest priority to Level 1, as this level provides the most reliable measure of fair value, while giving the lowest priority to Level 3.

 

Financial Liabilities Measured at Fair Value on Recurring Basis

 

The fair value of the bifurcated conversion feature represented by the warrant derivative liability associated with the PFG debt is measured at fair value on a recurring basis based on a Black Scholes option pricing model with assumptions for stock price, exercise price, volatility, expected term, risk free interest rate and dividend yield similar to those described for share-based compensation which were generally observable (Level 2).

 

Financial liabilities measured at fair value on a recurring basis are summarized below (in thousands):

 

December 31, 2020

 

Level 1

   

Level 2

   

Level 3

   

Total Fair Value

 

Derivative liability

  $     $ 71     $     $ 71  

 

 

September 30, 2020

 

Level 1

   

Level 2

   

Level 3

   

Total Fair Value

 

Derivative liability

  $     $ 66     $     $ 66  

 

The gain or loss related to the fair value remeasurement on the derivative liability is included in the other expense line on the condensed consolidated statements of operations.

 

Financial Liabilities Measured at Fair Value on a Non-Recurring Basis

 

The initial fair values of PFG debt and warrant debt (see Note 4) were based on the present value of expected future cash flows and assumptions about current interest rates and the creditworthiness of the Company (Level 3). 

 

The Mr. Mark D. Burish ("Mr. Burish") warrant was measured at fair value using a Black Scholes model and the remaining fair value was allocated to the related Mr. Burish note purchase agreement (see Note 4) which management believes materially approximated the fair value based on calculating the present value of expected future cash flows (Level 3). The non-recurring fair value measurements were performed as of the date of issuance of the note purchase agreement and warrant. The discount was being amortized over the life of the related debt until May 2020, at which time the debt was extinguished and exchanged for the Company's common stock.

 

Financial Instruments Not Measured at Fair Value

 

The Company's other financial instruments consist primarily of cash and cash equivalents, accounts receivable, investment in sales-type lease, accounts payable, debt instruments and capital lease obligations. The book values of cash and cash equivalents, accounts receivable, investment in sales-type lease, and accounts payable are considered to be representative of their respective fair values due their short term nature. The carrying value of debt including the current portion, approximates fair market value as the variable and fixed rate approximates the current market rate of interest available to the Company.

 

Legal Contingencies

 

When legal proceedings are brought or claims are made against the Company and the outcome is uncertain, we are required to determine whether it is probable that an asset has been impaired or a liability has been incurred. If such impairment or liability is probable and the amount of loss can be reasonably estimated, the loss must be charged to earnings.

 

No legal contingencies were recorded or were required to be disclosed for the three months ended December 31, 2020 or 2019.

 

Stock Based Compensation

 

The Company uses a lattice valuation model to account for all employee stock options granted. The lattice valuation model is a more flexible analysis to value options because of its ability to incorporate inputs that change over time, such as actual exercise behavior of option holders. The Company uses historical data to estimate the option exercise and employee departure behavior in the lattice valuation model. Expected volatility is based on historical volatility of the Company’s stock. The Company considers all employees to have similar exercise behavior and therefore has not identified separate homogeneous groups for valuation. The expected term of options granted is derived from the output of the option pricing model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods the options are expected to be outstanding is based on the U.S. Treasury yields in effect at the time of grant. Forfeitures are based on actual behavior patterns. The expected exercise factor and forfeiture rates are calculated using historical exercise and forfeiture activity for the previous three years.

 

 

The fair value of each option grant is estimated using the assumptions in the following table:

 

   

Three Months Ended

 
   

December 31,

 
   

2020

   

2019

 

Expected life

 

4.7 years

   

4.5 years

 

Risk-free interest rate

  0.33 %   1.63 %

Expected volatility

  82.61 %   72.40 %

Expected forfeiture rate

  14.18 %   15.05 %

Expected exercise factor

  1.2     1.2  

Expected dividend yield

  0 %   0 %

 

A summary of option activity at December 31, 2020 and changes during the three months then ended is presented below:

 

           

Weighted-

   

Weighted-Average

 
           

Average

   

Remaining Contractual

 
   

Options

   

Exercise Price

   

Period in Years

 

Outstanding at October 1, 2020

    1,707,515     $ 5.09       4.6  

Granted

    489,250       3.29       9.9  

Exercised

    (59,670 )     2.39       0.1  

Forfeited

    (168,409 )     7.34       0.0  

Outstanding at December 31, 2020

    1,968,686       4.53       6.5  

Exercisable at December 31, 2020

    1,256,704               4.6  

 

A summary of the status of the Company’s non-vested options and changes during the three month period ended December 31, 2020 is presented below:

 

           

Weighted-Average

 
           

Grant Date Fair

 

Non-vested Options

 

Options

   

Value

 

Non-vested at October 1, 2020

    339,897     $ 0.60  

Granted

    489,250      

1.55

 

Vested

    (141,336 )     0.78  

Forfeited

    (8,745 )     0.58  

Non-vested at December 31, 2020

    679,066     $

1.33

 

 

The weighted average grant date fair value of options granted during the three months ended December 31, 2020 was $1.55. As of December 31, 2020, there was $510 thousand of total unrecognized compensation cost related to non-vested stock-based compensation, with total forfeiture adjusted unrecognized compensation cost of $394 thousand. The cost is expected to be recognized over a weighted-average remaining life of 1.9 years.

 

Stock-based compensation recorded in the three months ended December 31, 2020 was $119 thousand. Stock-based compensation recorded in the three months ended December 31, 2019 was $52 thousand. There was $142 thousand in cash received from exercises under all stock option plans and warrants during the three months ended December 31, 2020 and zero during the same period in 2019. There were no tax benefits realized for tax deductions from option exercises in either of the three month period ended December 31, 2020 or 2019. The Company currently expects to satisfy share-based awards with registered shares available to be issued.

 

The Company also has an Employee Stock Purchase Plan ("Purchase Plan") under which an aggregate of 300,000 common shares may be issued. The board passed a resolution in December 2020 to increase the share count by an additional 100,000 shares. A total of 106,710 shares are available to be issued under the plan as December 31, 2020. The Company recorded stock compensation expense under this plan of less than $1 thousand for each of the three month period ended December 31, 2020 and 2019.

 

 

Preferred Stock and Dividends

 

A total of zero shares of Preferred Stock, Series A were issued and outstanding as of December 31, 2020 and 2019.

 

Per Share Computation

 

Basic earnings (loss) per share has been computed using the weighted-average number of shares of common stock outstanding during the period, less shares that may be repurchased, and excludes any dilutive effects of options and warrants. In periods where the Company reports net income, diluted net income per share is computed using common equivalent shares related to outstanding options and warrants to purchase common stock. The numerator for the calculation of basic and diluted earnings per share is net income (loss) attributable to common stockholders. The following table sets forth the computation of basic and diluted weighted average shares used in the earnings per share calculations:

 

   

Three Months Ended

 
   

December 31,

 
   

2020

   

2019

 

Denominator for basic net income (loss) per share - weighted average common shares

    7,963,775       6,736,643  

Effect of dilutive options and warrants (treasury method)

    372,253        

Denominator for diluted net income (loss) per share - adjusted weighted average common shares

    8,336,028       6,736,643  

Options, warrants and convertible shares outstanding during each period, but not included in the computation of diluted net loss per share because they are antidilutive

    1,132,365       2,124,738  

 

Liquidity

 

At December 31, 2020, approximately $3.1 million of cash and cash equivalents was held by the Company's foreign subsidiaries.

 

The Company believes its cash position plus available resources is adequate to accomplish its business plan through at least the next twelve months. We will likely evaluate lease opportunities to finance equipment purchases in the future and support working capital needs. We may also seek additional equity financing but there are no assurances that these will be on terms acceptable to the Company.

 

Recent Accounting Pronouncements

 

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes", ("ASU 2019-12"). The amendments in this ASU affect entities within the scope of Topic 740. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2020. Early adoption of the amendments is permitted, including adoption in any interim period for public entities for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. An entity that elects early adoption must adopt all the amendments in the same period. The Company is currently evaluating the guidance and its impact to the financial statements.

 

Accounting standards that have been issued but are not yet effective by the FASB or other standards-setting bodies that do not require adoption until a future date, which are not discussed above, are not expected to have a material impact on the Company’s financial statements upon adoption.

 

 

 

 

 

 

 

2. Related Party Transactions

 

During the three months ended December 31, 2020, the Company incurred fees of $32 thousand to a law firm, a partner of which is a director and stockholder of the Company. The Company incurred similar fees of $110 thousand during the three months ended December 31, 2019. The Company had accrued liabilities of $10 thousand and $36 thousand for unbilled services to the same law firm at December 31, 2020 and September 30, 2020, respectively.

 

On May 13, 2020, the Company entered into a debt conversion agreement with Mr. Burish to convert all outstanding debt owed to Mr. Burish into common stock at a conversion price of $5.00 per share. The total debt amount, including accrued interest and fees, of $5.6 million was converted into 1,114,723 shares of common stock. The transaction was recommended by the Company's Special Committee of Independent and Disinterested Directors, unanimously approved by all disinterested directors of the Company, and ratified by shareholders at the Company's most recent shareholder meeting. Silverwood Partners, the Special Committee's financial advisor, issued a fairness opinion in connection with the transaction.

 

Mr. Burish beneficially owns more than 5% of the Company’s common stock. Mr. Burish also serves as the Chairman of the Board of Directors. An affiliated party beneficially owns more than 5% of the Company's common stock. All transactions with Mr. Burish and with the affiliated party were approved by a Special Committee of Disinterested and Independent Directors.

 

 

 

3. Commitments

 

Inventory Purchase Commitments

 

The Company enters into unconditional purchase commitments on a regular basis for the supply of Mediasite product for hardware inventory, as well as services to support our hosting environment, which are not recorded on the Company's condensed consolidated balance sheet. At December 31, 2020, the Company had an obligation to purchase $199 thousand of Mediasite product and $237 thousand of services during fiscal 2021, and $422 thousand during fiscal 2022 and 2023.

 

Leases

 

The Company has operating leases for corporate office space with various expiration dates. Our leases have remaining lease terms of up to three years, some of which include escalation clauses, renewal options for up to twelve years or termination options within one year.

 

We determine if an arrangement is a lease upon contract inception. The Company has both operating and finance leases. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments according to the arrangement.

 

A contract contains a lease if the contract conveys the right to control the use of the identified property, plant or equipment for a period of time in exchange for consideration. At commencement, contracts containing a lease are further evaluated for classification as an an operating or finance lease where the Company is a lessee, or as an operating, sales-type or direct financing lease where the Company is a lessor, based on their terms.

 

Lease right-of-use assets and lease liabilities are recognized as of the commencement date based on the present value of the lease payments over the lease term. The lease right-of use asset is reduced for tenant incentives and includes any initial direct costs incurred. We use the implicit rate when it is readily determinable. Otherwise, the present value of future minimum lease payments is determined using the Company's incremental borrowing rate. The incremental borrowing rate is based on the interest rate of the Company's most recent borrowing.

 

The lease term we use for the valuation of our right-of-use assets and lease liabilities may include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. Lease expense is recognized on a straight-line basis over the expected lease term for operating leases. Amortization expense of the right-of-use asset for finance leases is recognized on a straight-line basis over the lease term and interest expense for finance leases is recognized based on the incremental interest rate.

 

Right-of-use assets and lease liabilities are recognized for our leases. Right-of-use assets under finance leases are included in property and equipment on the condensed consolidated balance sheets and have a net carrying value of $191 thousand at September 30, 2020 and $152 thousand at December 31,2020.

 

We have operating lease arrangements with lease and non-lease components. The non-lease components in our arrangements are not significant when compared to the lease components. For all operating leases, we account for the lease and non-lease components as a single component.

 

As of December 31, 2020, future maturities of operating and finance lease liabilities for the fiscal years ended September 30 are as follows (in thousands):

 

   

Operating Leases

   

Finance Leases

 

2021 (remaining)

  $ 1,208     $ 85  

2022

    472       80  

2023

    105       8  

2024

    111       5  

2025

    35        

Thereafter

    70        

Total

    2,001       178  

Less: imputed interest

    (175 )     (10 )

Total

  $ 1,826     $ 168  

 

 

Adoption of ASC 842

 

Supplemental information related to leases is as follows (in thousands, except lease term and discount rate):

 

   

Three Months Ended December 31, 2020

 

Operating lease costs

  $ 337  

Variable operating lease costs

    16  

Total operating lease cost

  $ 353  
         

Finance lease cost:

       

Amortization of right-of-use assets

  $ 40  

Interest on lease liabilities

    4  

Total finance lease cost

  $ 44  

 

Variable lease costs include operating costs for U.S. office lease based on square footage and Consumer Price Index ("CPI") rent escalation and related VAT for office lease in the Netherlands.

 

Supplemental cash flow information related to operating and finance leases were as follows (in thousands):

 

   

Three Months Ended December 31, 2020

 

Cash paid for amounts included in the measurement of lease liabilities:

       

Operating cash outflows for operating leases

  $ 347  

Operating cash outflows for finance leases

    4  

Financing cash outflows for finance leases

    41  

 

Other information related to leases was as follows:

 

   

December 31, 2020

 

Weighted average remaining lease term (in years)

       

Operating leases

    2.1  

Finance leases

    1.7  

Weighted average discount rate

       

Operating leases

    9.39 %

Finance leases

    7.46 %

 

 

 

4. Credit Arrangements

 

Partners for Growth V, L.P.

 

On May 11, 2018, Sonic Foundry, Inc., entered into a Loan and Security Agreement (the “2018 Loan and Security Agreement”) with Partners for Growth V, L.P. (“PFG V”).

 

The 2018 Loan and Security Agreement provides for a Term Loan ("Term Loan") in the amount of $2,500,000, which was disbursed in two (2) Tranches as follows: Tranche 1 was disbursed on May 14, 2018 in the amount of $2,000,000; and Tranche 2 in the amount of $500,000, was disbursed on November 8, 2018. Each tranche of the Term Loan bears interest at 10.75% per annum. Tranche 1 of the Term Loan is payable interest only until November 30, 2018. Thereafter, principal is due in 30 equal monthly principal installments, plus accrued interest, beginning December 1, 2018 and continuing until May 1, 2021, when the principal balance is to be paid in full. Tranche 2 of the Term Loan is payable using the same repayment schedule as Tranche 1. Upon maturity, Sonic Foundry is required to pay PFG V a cash fee of $150,000. The principal of the Term Loan may be prepaid at any time without penalty as of May 14, 2019. The Term Loan is collateralized by substantially all the Company’s assets, including intellectual property.

 

Coincident with execution of the 2018 Loan and Security Agreement, the Company entered into a Warrant Agreement (“Warrant”) with PFG V. Pursuant to the terms of the Warrant, the Company issued to PFG V a warrant to purchase up to 66,000 shares of common stock of the Company at an exercise price of $2.57 per share, subject to certain adjustments. Pursuant to the Warrant, PFG V is also entitled, under certain conditions, to require the Company to exchange the Warrant for the sum of $250,000. All warrants issued in connection with PFG V expire on May 11, 2023.

 

At December 31, 2020, and September 30, 2020, the estimated fair value of the derivative liability associated with the warrants issued in connection with the 2018 Loan and Security Agreement, was $71 thousand and $66 thousand, respectively. Included in other expense, the remeasurement loss on the derivative liability during the three months ended December 31, 2020 was $5 thousand compared to remeasurement loss of $2 thousand during the three months ended December 31, 2019.

 

The proceeds from the 2018 Loan and Security Agreement were allocated between the PFG V Debt and the Warrant Debt (inclusive of its conversion feature) based on their relative fair value on the date of issuance which resulted in carrying values of $2.3 million and $156 thousand, respectively. The warrant debt is treated together as a debt discount on the PFG V Debt and will be accreted to interest expense under the effective interest method over the three-year term of the PFG V Debt and the five-year term of the Warrant Debt. During the three months ended December 31, 2020, the Company recorded accretion of discount expense associated with the warrants issued with the PFG V loan of $6 thousand compared to $5 thousand in the same periods last year. In addition, $14 thousand amortization of the debt discount was recorded in the current three month period compared to $14 thousand in the prior year. At December 31, 2020, the carrying value of the PFG V Debt and the Warrant Debt (inclusive of its conversion feature) were $417 thousand and $178 thousand, respectively. In addition, the Company agreed to pay PFG V a cash fee of up to $150,000 payable upon maturity (the “back-end fee”), which will be earned ratably over the three year term of the PFG V loan. During the three months ended December 31, 2020, the Company recorded interest expense of $13 thousand associated with recognition of the back-end fee compared to $13 thousand during the three months ended December 31, 2019.

 

The non-cash effective interest expense is calculated on the net balance of the PFG V Debt, debt discount, back-end fee and related loan origination fees, on a monthly basis. During the three months ended December 31, 2020, non-cash interest expense of $18 thousand related to the effective interest rate on the PFG V loan was recorded compared to $3 thousand in the three months ended December 31, 2019.

 

On March 11, 2019, Sonic Foundry, Inc. entered into a Consent, Waiver & Modification to the 2018 Loan and Security Agreement dated May 11, 2018 (the "Modification") with Partners for Growth V, L.P. ("PFG"). Under the Modification: PFG waived the Company's default on the Minimum EBITDA financial covenant for the quarterly reporting period ending December 31, 2018; modified the existing financial covenants to be as follows: (i) Minimum Coverage Ratio (as defined), which requires, as of the last day of each month on or after the closing date, to be equal to or greater than (x) 0.7: 1.00 for the December through May calendar months, and (y) 0.9:1.00 for the June through November calendar months; (ii) Minimum Qualifying Revenue (as defined), which requires, as of the last day of each calendar month, on or after December 1, 2018, on a trailing twelve-month basis, to be no less than $13,000,000; and modified the negative covenants to be as follows: the Company (x) shall not cause or permit (a) Japanese subsidiary indebtedness under its revolving line of credit facility to exceed at any time $1,000,000 outstanding, or (b) aggregate subsidiary indebtedness to exceed $1,200,000 at any time. At December 31, 2020, the Company was in compliance with all covenants per the 2018 Loan and Security Agreement, as modified.

 

 

 

 

The existing terms of the PFG loan in terms of amortization, interest rate, payment schedule and maturity date are unchanged.

 

At December 31, 2020, a gross balance of $417 thousand was outstanding on the term debt with PFG V with an effective interest rate of sixteen-and-six-tenths percent (16.60%). At September 30, 2020, a gross balance of $667 thousand was outstanding with PFG V.

 

Initial Notes of the February 28, 2019 Note Purchase Agreement

 

On January 4, 2019, Sonic Foundry, Inc. and Mr. Burish entered into a Promissory Note (the "Promissory Note") pursuant to which Mr. Burish purchased a 9.25% Unsecured Promissory Note for $1,000,000 in cash. Interest accrued and outstanding principal on the Promissory Note was due and payable on January 4, 2020. The Promissory Note may be prepaid at any time without penalty. The Promissory Note was later included in the Note Purchase Agreement, dated February 28, 2019, as detailed below.

 

On January 31, 2019, Sonic Foundry, Inc. and Mr. Burish entered into a Promissory Note (the "January 31, 2019 Promissory Note") pursuant to which Mr. Burish purchased a 9.25% Unsecured Promissory Note for $1,000,000 in cash. Interest accrued and outstanding principal on the January 31, 2019 Promissory Note was due and payable on January 31, 2020. The January 31, 2019 Promissory Note may be prepaid any time without penalty. The note may be paid by the Company by issuing common stock to Mr. Burish, with each share valued at $1.30 per share. The January 31, 2019 Promissory Note was later included in the Note Purchase Agreement, dated February 28, 2019, as detailed below.

 

On February 14, 2019, Sonic Foundry, Inc. and Mr. Burish entered into a Promissory Note (the "February 14, 2019 Promissory Note") pursuant to which Mr. Burish purchased a 9.25% Unsecured Promissory Note for $1,000,000 in cash. Interest accrued and outstanding principal on the February 14, 2019 Promissory Note was due and payable on February 14, 2020. The February 14, 2019 Promissory Note may be prepaid any time without penalty. The note may be paid by the Company by issuing common stock to Mr. Burish with each share valued at $1.30 per share. The February 14, 2019 Promissory Note was later included in the Note Purchase Agreement, dated February 28, 2019, as detailed below.

 

February 28, 2019 Note Purchase Agreement

 

On February 28, 2019, Sonic Foundry, Inc. entered into a Note Purchase Agreement (the "Note Purchase Agreement") with Mr. Burish.

 

The Note Purchase Agreement provided for subordinated secured promissory notes (the "Subordinated Promissory Notes") in an aggregate original principal amount of up to $5,000,000. Mr. Burish acquired from the Company (a) on the initial closing date, the notes in an aggregate principal amount of $3,000,000 (the "Initial Notes") and (b) two additional tranches, each in the amount of $1,000,000 and payable at any time prior to the first anniversary of the Agreement (the "Additional Notes" and together with the Initial Notes, collectively, the "Purchase Price"). The Initial Notes were previously disbursed in January and February of 2019, as detailed above (the Promissory Note, the January 31st, 2019 Promissory Note, and the February 14, 2019 Promissory Note, collectively referred to as the "Initial Notes"). The fourth tranche was disbursed on March 13, 2019 and the fifth and final tranche was disbursed on April 4, 2019.

 

The Subordinated Promissory Notes accrued interest at the variable per annum rate equal to the Prime Rate (as defined) plus four percent (4.00%). The outstanding principal balance of the Subordinated Promissory Notes, plus all unpaid accrued interest, plus all outstanding and unpaid obligations, was set to mature on February 28, 2024 (the "Maturity Date"). Principal installments of $100,000 were to begin monthly on August 31, 2020, and continue through the Maturity Date. The Note Purchase Agreement dated February 28, 2019 was subordinated to the existing PFG loan.

 

At each anniversary of the Closing, an administration fee will be payable to Mr. Burish equal to 0.5% of the purchase price less principal payments made.

 

 

The proceeds from the Note Purchase Agreement were allocated between the Subordinated Promissory Notes and the Burish Warrant based on their relative fair value on the date of issuance. The warrant was treated together as a debt discount on the Subordinated Notes Payable and was accreted to interest expense under the effective interest rate method over the five-year term of the Subordinated Notes Payable. During the first fiscal quarter of 2020, the Company recorded accretion of discount expense associated with the Subordinated Promissory Notes of $34 thousand.

 

The non-cash effective interest expense was calculated on the net balance of the Subordinated Promissory Notes, Burish Warrant, and related loan origination fees, on a monthly basis. During the three months ended December 31, 2019, $15 thousand of non-cash interest benefit related to the effective interest rate on the Subordinated Promissory Notes was recorded.

 

February 28, 2019 Warrant

 

Coincident with execution of the Note Purchase Agreement, the Company entered into a Warrant Agreement ("Burish Warrant") with Mr. Burish. Pursuant to the terms of the Burish Warrant, the Company issued to Mr. Burish a warrant to purchase up to 728,155 shares of common stock of the Company at an exercise price of $1.18 per share, subject to certain adjustments.

 

On April 25, 2019, Mr. Burish exercised his warrant to purchase 728,155 shares of common stock of the Company at an exercise price of $1.18 per share. A special committee of disinterested and independent directors approved the issuance of the Subordinated Promissory Notes and the Burish Warrant.

 

May 13, 2020 Debt Conversion Agreement

 

On May 13, 2020, the Company entered into a debt conversion agreement with Mr. Burish to convert all outstanding debt owed to Mr. Burish into common stock at a conversion price of $5.00 per share. The net carrying value of $5.0 million, including principal and accrued interest of $5.6 million less debt discount and loan origination fees of $596 thousand, was converted into 1,114,723 shares of common stock. The debt conversion was treated as a debt extinguishment, and resulted in a net loss of $26 thousand.

 

Paycheck Protection Program (PPP) Loan Dated April 20, 2020

 

Following the approval of the Board of Directors, the Company and First Business Bank entered into a $2.3 million Promissory Note (the "Promissory Note") under the Paycheck Protection Program (PPP) contained within the new Coronavirus Aid, Relief, and Economic Security (CARES) Act. The PPP loan has a term of two years for those companies receiving loan proceeds prior to June 5, 2020, is unsecured, and is guaranteed by the U.S. Small Business Administration ("SBA"). The loan carries a fixed interest rate of 1% per annum. Under the terms of the CARES Act, the Company will be eligible for and intends to apply for forgiveness of all loan proceeds used for payroll costs, rent, utilities, and other qualifying expenses during the eight-week or twenty-four week period ("covered period") following receipt of the loan, provided the Company maintains its employment and compensation within certain parameters during such period, and provided further that not more than 40% of the amount forgiven can be attributable to non-payroll costs. The Company must apply for forgiveness within 10 months from the end of the covered period. First Business Bank will then have 60 days to review the application and submit it to the SBA and the SBA will have 90 days from receipt of the application to review and render a decision back to the lender. If the borrower does not apply for loan forgiveness within the 10 month time frame, or if the SBA determines that the loan is not eligible for forgiveness (in whole or in part), the PPP loan is no longer deferred and the borrower must begin paying principal and interest. If this occurs, the lender must notify the borrower of the amount and the date the first payment is due. The SBA began accepting applications for forgiveness from lenders on August 10, 2020 when the development of its new software-as-a-service platform went live. As of December 31, 2020 the full amount of the loan has been split between short-term and long-term notes payable of $482 thousand and $1.8 million, respectively, as well as short-term accrued interest of $16 thousand. The Company plans to apply for 100% forgiveness in Q2-2021.

 

Other Indebtedness

 

On January 30, 2020, Mediasite K.K. entered into a Term Loan ("Term Loan") with Sumitomo Mitsui Banking Corporation for $460 thousand in cash. The Term loan accrued interest at an annual rate of 1.475%. Beginning in January 2020, principal payments in 12 equal monthly installments, plus accrued interest were made. The principal has been paid in full as of December 30, 2020.

 

At December 31, 2020 and September 30, 2020, no balance was outstanding on the line of credit with Mitsui Sumitomo Bank. The credit facility is related to Mediasite K.K., and accrues interest at an annual rate of approximately one-and-one half percent (1.575%). The available line of credit at December 31, 2020 was $485 thousand and matures on March 1, 2021.

 

On August 20, 2020, Mediasite K.K. and Sumitomo Mitsui Banking Corporation entered into a $379 thousand Promissory Note under an initiative by the Japanese Finance Corporation government institution in response to the Cabinet Decision entitled "Emergency Economic Measures to Cope With COVID-19." Extending financial relief to organizations impacted by COVID-19, the loan has a term of three years and carries a fixed interest rate of 0.46% per annum. Government subsidies provided through the Japanese Finance Corporations will provide interest relief throughout the term of the loan. In addition, the loan agreement includes a three year grace period with principal payments deferred through the end of the loan, which is September 30, 2023. As of September 30, 2020 the full amount of the loan has been included in long-term notes payable.

 

 

 

5. Income Taxes

 

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accruals for interest and penalties on the Company’s Condensed Consolidated Balance Sheets at December 31, 2020 or September 30, 2020, and has not recognized any interest or penalties in the Condensed Consolidated Statements of Operations for either of the three or three months ended December 31, 2020 or 2019.

 

The Company’s tax rate differs from the expected tax rate each reporting period as a result of permanent differences, the valuation allowance, and international tax items.

 

 

 

6. Revenue

 

Disaggregation of Revenues

 

The following tables summarize revenues from contracts with customers for the three months ended December 31, 2020 and 2019, respectively, (in thousands) by subsidiary, which includes the parent (SOFO), our Netherlands location (SFI) and our Japanese location (MSKK) :

 

Three months ended December 31, 2020

 
   

SOFO

   

SFI

   

MSKK

   

Eliminations

   

Total

 
                                         

Revenue:

                                       
                                         

Hardware

  $ 1,315     $ 86     $ 80     $ (134 )   $ 1,347  

Software

    787       101       59       (147 )     800  

Shipping

    13       1                   14  
                                         

Product and other total

    2,115       188       139       (281 )     2,161  
                                         

Support

    1,806       179       239       (216 )     2,008  

Hosting

    1,477       258       704       (63 )     2,376  

Events

    1,053       17       872             1,942  

Installs & training

    417       10       251             678  
                                         

Services total

    4,753       464       2,066       (279 )     7,004  
                                         

Total revenue

  $ 6,868     $ 652     $ 2,205     $ (560 )   $ 9,165  

 

 

Three months ended December 31, 2019

 
   

SOFO

   

SFI

   

MSKK

   

Eliminations

   

Total

 
                                         

Revenue:

                                       
                                         

Hardware

  $ 1,046     $ 66     $ 15     $ (73 )   $ 1,054  

Software

    714       189       37       (56 )     884  

Shipping

    116       1                   117  
                                         

Product and other total

    1,876       256       52       (129 )     2,055  
                                         

Support

    2,010       155       318       (192 )     2,291  

Hosting

    1,006       120       376             1,502  

Events

    1,318       62       672             2,052  

Installs & training

    114       1                   115  
                                         

Services total

    4,448       338       1,366       (192 )     5,960  
                                         

Total revenue

  $ 6,324     $ 594     $ 1,418     $ (321 )   $ 8,015  

 

Transaction price allocated to future performance obligations

 

As of December 31, 2020, the aggregate amount of the transaction price that is allocated to our future performance obligations was approximately $4.0 million in the next three months, $9.1 million in the next twelve months, and the remaining $1.7 million thereafter.

 

 

Disclosures related to our contracts with customers

 

Timing may differ between the satisfaction of performance obligations and the invoicing and collection of amounts related to our contracts with customers. We record assets for amounts related to performance obligations that are satisfied but not yet billed and/or collected. Liabilities are recorded for amounts that are collected in advance of the satisfaction of performance obligations. These liabilities are classified as current and non-current unearned revenue.

 

Unearned revenues

 

Unearned revenues represent our obligation to transfer products or services to our client for which we have received consideration, or an amount of consideration is due, from the client. During the three months ended December 31, 2020, revenues recognized related to the amount included in the unearned revenues balance at the beginning of the period was $4.2 million compared to $4.3 million recognized during the  three months ended December 31, 2019.

 

Assets recognized from the costs to obtain our contracts with customers

 

We recognize an asset for the incremental costs of obtaining a contract with a customer. We amortize these deferred costs proportionate with related revenues over the period of the contract. During the three months ended December 31, 2020, amortization expense related to the amount included in the capitalized commissions at the beginning of the period was $215 thousand compared to $203 thousand recognized during the three months ended December 31, 2019.

 

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Risks and Uncertainties

 

This report includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including the following sections: “Management’s Discussion and Analysis,” and “Risk Factors.” These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially. We describe risks and uncertainties that could cause actual results and events to differ materially in “Risk Factors” (Part I, Item 1A of the Company’s Annual Report on Form 10-K for the Fiscal Year ended September 30, 2020 and Part II, Item 1A of this Form 10-Q), “Quantitative and Qualitative Disclosures about Market Risk” (Part I, Item 3 of this Form 10-Q and Part II, Item 7A of the Company’s Annual Report on Form 10-K for the Fiscal Year ended September 30, 2020), and “Management’s Discussion and Analysis” (Part I, Item 2 of this Form 10-Q). We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.

 

Overview

 

Sonic Foundry, Inc. is a trusted global leader for video capture, management and streaming solutions. Trusted by educational institutions, corporations and government entities, Mediasite Video Platform quickly and cost-effectively automates the capture, management, delivery and search of live and on-demand streaming video and rich media. Mediasite transforms communications, training, education and events for our customers.

 

Recent Developments

 

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. While we are unable to accurately predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration, severity and impact of the pandemic and containment measures, our compliance with these measures has impacted our day-to-day operations and could disrupt our business and operations, as well as those of our key business partners, vendors and other counterparties for an indefinite period of time. To support the health and well-being of our employees, business partners and communities, a vast majority of our employees have been working remotely since mid-March 2020 and continue to do so.

 

COVID-19 has had both positive and negative near-term impacts on our operations and the future impacts of the pandemic and any corresponding economic results are largely unknown and rapidly evolving. Beginning in March 2020 and continuing through this quarter and beyond, the in-person events portion of our business continues to be impacted by cancellations and/or postponements due to social distancing protocols enacted to stem the spread of the virus. While there was a return in the current quarter to the type of smaller, in-person web events that are common for our Japan subsidiary, the events business in the US remains primarily a virtual events initiative, which has been a growing portion of our events business. In addition, the closure of educational institutions globally and the negative financial impact on their funding, could impact our sales in the upcoming quarters. While the virus has increased awareness of the need for distance learning tools and the adoption of video as a necessary communication medium, it is impossible for us to predict with confidence the long-term financial impact on our business including results of operations and liquidity.

 

 

Restructuring and exit activities

 

The determination of when the Company accrues for involuntary termination benefits under restructuring plans depends on whether the termination benefits are provided under an on-going benefit arrangement or under a one-time benefit arrangement. The Company accounts for on-going benefit arrangements, such as those documented by employment agreements, in accordance with Accounting Standards Codification 712 ("ASC 712") Nonretirement Postemployment Benefits. Under ASC 712, liabilities for postemployment benefits are recorded at the time the obligations are probable of being incurred and can be reasonably estimated. The Company accounts for one-time employment benefit arrangements in accordance with ASC 420 Exit or Disposal Cost Obligations. When applicable, the Company records such costs into operating expense.

 

During the fourth quarter of fiscal 2020, the Company expensed involuntary termination benefits of $705 thousand under ASC 712. During the quarter ended December 31, 2020, the Company expensed involuntary termination benefits of $101 thousand under ASC 420 compared to zero in the same quarter last year. No further expenses relating to this restructuring are anticipated in future quarters.

 

RESULTS OF OPERATIONS

 

Revenue

 

Revenue from our business includes the sale of Mediasite recorders and server software products and related services contracts, such as customer support, installation, customization services, training, content hosting and event services. We market our products to educational institutions, corporations and government agencies that need to deploy, manage, index and distribute video content on Internet-based networks. We reach both our domestic and international markets through reseller networks, a direct sales effort and partnerships with system integrators.

 

Q1-2021 compared to Q1-2020

 

Revenue in Q1-2021 increased $1.2 million, or 14% to $9.2 million, from Q1-2020 revenue of $8.0 million. Revenue consisted of the following:

 

 

Product and other revenue from sale of Mediasite recorder units and server software increased 5% to $2.2 million in Q1-2021 from $2.1 million in Q1-2020. Unit sales in Q1-2021 were slightly higher due to a small number of hardware refresh orders both here and in Japan.  Average selling price was slightly lower in Q1-2021 as compared to Q1-2020 even though the rack to mobile ratio shifted. This is due to a larger mix of the rack-mounted pro recorder in the current quarter as opposed to the lower priced units.

 

   

Q1-2021

   

Q1-2020

 

Recorders sold

    232       203  

Rack units to mobile units ratio

    18.33 to 1       9.15 to 1  

Average sales price, excluding service (000’s)

  $ 5.40     $ 5.80  

Refresh Units

    116       64  

 

 

 

Service revenue represents the portion of fees charged for Mediasite customer support contracts amortized over the length of the contract, typically 12 months, as well as training, installation, events and content hosting services. Services revenue increased $1.0 million or 18% from $6.0 million in Q1-2020 to $7.0 million in Q1-2021 primarily due to increases in hosting and professional services.

 

 

At December 31, 2020, $10.8 million of revenue was deferred, of which we expect to recognize $9.0 million in the next twelve months, including approximately $4.0 million in the quarter ending March 31, 2021. At September 30, 2020, $12.1 million of revenue was deferred.

 

 

Other revenue relates to freight charges billed separately to our customers.

            

 

 

 

 

 

 

Gross Margin

Q1-2021 compared to Q1-2020

 

Gross margin for Q1-2021 was $6.8 million or 74% of revenue compared to Q1-2020 gross margin of $5.8 million or 73%. The significant components of cost of revenue include:

 

 

Product costs. Product costs consist of costs associated with our Mediasite recorder hardware, freight, labor and certain allocated costs. These costs were $813 thousand in Q1-2021 and $831 thousand in Q1-2020, resulting in gross margin on products of 62% and 60%, respectively.

 

 

Services costs. Service costs consist of staff wages for tech support, hosting and events, operating costs for events and hosting, as well as depreciation expense for hosting infrastructure. These costs were $1.6 million in Q1-2021 and $1.3 million in Q1-2020, resulting in gross margin on services of 77% for both periods. .

 

 

Operating Expenses

 

Selling and Marketing Expenses

 

Selling and marketing expenses include wages and commissions for sales, marketing and business development personnel, print advertising and various promotional expenses for our products. Timing of these costs may vary greatly depending on introduction of new products and services or entrance into new markets, or participation in major tradeshows.

 

Q1-2021 compared to Q1-2020

 

Selling and marketing expenses decreased $386 thousand or 11% from $3.4 million in Q1-2020 to $3.0 million in Q1-2021. Differences in the major categories include:

 

 

Salary, commissions, and benefits expense decreased by $94 thousand as a result of reduced headcount.

 

 

Travel expenses, including entertainment and meals, decreased by $126 thousand due to COVID-19.

 

 

 

Selling and marketing expenses for Sonic Foundry International and Mediasite KK accounted for $195 thousand and $692 thousand respectively, an aggregate increase of $71 thousand from Q1-2020

 

We anticipate selling and marketing headcount to remain consistent throughout the remainder of the fiscal year.

 

General and Administrative Expenses

 

General and administrative (“G&A”) expenses consist of personnel and related costs associated with the facilities, finance, legal, human resource and information technology departments, as well as other expenses not fully allocated to functional areas.

 

Q1-2021 compared to Q1-2020

 

G&A expenses decreased $243 thousand or 17% from $1.4 million in Q1-2020 to $1.2 million in Q1-2021. Differences in the major categories include:

 

 

Increase in compensation and benefits of $280 thousand due to an increase in option expense as well as a bonus accrual for employees..

 

 

Decrease in professional fees of of $286 thousand, which relates primarily to a reduction in auditing fees and consulting services..

 

 

G&A expenses for Sonic Foundry International and Mediasite KK accounted for $24 thousand and $159 thousand respectively, an aggregate decrease of $74 thousand from Q1-2020.

 

We anticipate G&A headcount to remain consistent throughout the remainder of the fiscal year.

 

 

 

 

Product Development Expenses

 

Product development expenses include salaries and wages of the software research and development staff and an allocation of benefits, facility and administrative expenses.

 

Q1-2021 compared to Q1-2020

 

Product development expenses increased by $151 thousand, or 9% from $1.6 million in Q1-2020 to $1.7 million in Q1-2021. Differences in the major categories include:

 

 

Increase in compensation and benefits of $99 thousand as a result of additional headcount at the end of fiscal 2020.

 

 

Product development expense for Sonic Foundry International and Mediasite KK accounted for $96 thousand and $87 thousand respectively, an aggregate decrease of $5 thousand compared to Q1-2020

 

 

We anticipate product development headcount to remain consistent throughout the remainder of the fiscal year. We do not anticipate that any fiscal 2021 software development efforts will qualify for capitalization.

 

Other Income and Expense, Net

 

Interest expense for the three months ended December 31, 2020 was $29 thousand, a decrease of $234 thousand from the same period last year. The YTD decrease over the prior year is mainly a result of the Burish debt to equity conversion, which occurred on May 13, 2020. The Company also recorded $14 thousand of interest expense for the three months ended December 31, 2020 related to the accretion of discounts on the PFG Loan and Warrant Debt compared to $14 thousand for the three months ended December 31, 2019. The Company also recorded amortization expense related to the back-end fee on the PFG loan of $13 thousand for the three months ended December 31, 2020 compared to $13 thousand for the same period last year. The Company also recorded zero interest expense during the three months ended December 31, 2020 related to the accretion of discounts on the Burish notes payable compared to $34 thousand for the three months ended December 31, 2019.

 

During the three months ended December 31, 2020, a loss in fair value of $5 thousand was recorded related to the fair value remeasurement on the derivative liability associated with the Loan and Security Agreement and Warrant Debt with PFG compared to a loss in fair value of $2 thousand during the three months ended December 31, 2019. The fair value of the derivative liability is measured at fair value based on a Black Scholes option pricing model with assumptions for stock price, exercise price, volatility, expected term, risk free interest rate and dividend yield.

 

 

Foreign Currency Translation Adjustment

 

The Company's wholly-owned subsidiaries operate in Japan and the Netherlands, and utilize the Japanese Yen and Euro, respectively, as their functional currency. Assets and liabilities of the Company's foreign operations are translated in US dollars at period end exchange rates while revenues and expenses are translated using average rates for the period. Gains and losses from the translation are deferred and included in accumulated other comprehensive loss in the consolidated statements of operations.

 

For the three months ended December 31, 2020, the Company's foreign currency translation adjustment was a gain of $88 thousand compared to a loss of $8 thousand for the three months ended December 31, 2019.

 

During the three months ended December 31, 2020, the Company recorded an aggregate transaction loss of $5 thousand compared to an aggregate gain of $15 thousand and for the three months ended December 31, 2019. The aggregate transaction gain or loss is included in the other expense line of the condensed consolidated statements of operations.

 

Liquidity and Capital Resources

 

The Company’s primary sources of liquidity are its cash from operations and debt and equity financing. During the first three months of fiscal 2021, the Company used $1.3 million of cash from operating activities compared with $418 thousand used in the same period of fiscal 2020.

 

Capital expenditures were $287 thousand in the first three months of fiscal 2021 compared to $59 thousand in the same period in fiscal 2020.

 

The Company used $267 thousand of cash for financing activities during the first three months of fiscal 2021. Payments on notes payable of $368 thousand and payments on finance lease obligations of $41 thousand were offset by proceeds from stock option exercises of $142 thousand. For the same period in fiscal 2020, the Company used $320 thousand, which included $250k in payments on the PFG note and $70 thousand in payments on finance lease obligations.

 

At December 31, 2020, the Company had $3.4 million outstanding, net of warrant debt and debt discounts, related to notes payable with PFG V, the Mediasite KK term debt and the PPP loan. During the current quarter, the Company made principal payments of $250 thousand on the PFG V debt, and $118 thousand on the Mediasite KK term debt.

 

At December 31, 2020, approximately $3.1 million of cash and cash equivalents was held by the Company’s foreign subsidiaries.

 

The Company believes its cash position plus available resources is adequate to accomplish its business plan through at least the next twelve months. We will likely evaluate lease opportunities to finance equipment purchases in the future and anticipate continuing to utilize proceeds from the notes and term debt to support working capital needs. We may also seek additional equity financing but there are no assurances that these will be on terms acceptable to the Company.

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

There have been no material changes from those reported in the Company’s Annual Report on Form 10-K for the year-ended September 30, 2020. At December 31, 2020, none of the Company’s $3.7 million in outstanding debt is variable rate, therefore, an increase in the level of interest rates would not have any material impact on our Consolidated Financial Statements. We monitor our positions with, and the credit quality of, the financial institutions that are party to any of our financial transactions.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Based on evaluations at December 31, 2020, our principal executive officer and principal financial officer, with the participation of our management team, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Securities Exchange Act). Disclosure controls and procedures ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that material information relating to the Company is accumulated and communicated to management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2020.

 

Changes in Internal Controls

 

 

 

During the period covered by the quarterly report on Form 10-Q, the Company has not made any changes to its internal control over financial reporting (as referred to in Paragraph 4(b) of the Certifications of the Company's principal executive officer and principal financial officer included as exhibits to the report) that have materially affected, or are reasonably likely to affect the Company's internal control over financial reporting.

 

 

PART II

OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

There have been no material changes in our risk factors from those disclosed in our Form 10-K for the fiscal year ended September 30, 2020 filed with the SEC.

 

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 6. EXHIBITS

 

NUMBER

 

DESCRIPTION

3.1

 

Articles of Amendment of Amended and Restated Articles of Incorporation, effective November 16, 2009, Amended and Restated Articles of Incorporation, effective January 26, 1998, and Articles of Amendment, effective April 9, 2000, filed as Exhibit No. 3.1 to the Annual Report on Form 10-K for the year ended September 30, 2009, and hereby incorporated by reference.

 

 

 

3.2

 

Articles Supplementary to the Company Charter of the Registrant, as relates to Series A Preferred Stock, dated May 30, 2017, filed as Exhibit 5.03 to the 8-K filed on June 5, 2017, and hereby incorporated by reference.

 

 

 

3.3

 

Articles Supplementary to the Company Charter of the Registrant, as relates to Series A Preferred Stock, dated November 6, 2017, filed as Exhibit 3.1 to the Form 8-K filed on November 21, 2017, and hereby incorporated by reference.

 

 

 

3.4

 

Amended and Restated By-Laws of the Registrant, filed as Exhibit No. 3.1 to the Form 8-K filed on January 25, 2018, and hereby incorporated by reference.

 

 

 

3.5

 

Articles Supplementary to the Company Charter of the Registrant, as relates to Series A Preferred Stock, filed as Exhibit 3.1 to the Form 8-K filed on May 23, 2018, and hereby incorporated by reference.

 

 

 

10.1*

 

Registrant’s 2008 Non-Employee Directors’ Stock Option Plan, as amended, filed as Exhibit 3 to the Form 14A filed on January 26, 2017, and hereby incorporated by reference.

 

 

 

10.2*

 

Registrant’s 2008 Employee Stock Purchase Plan, as amended, filed as Exhibit 1 to the Form 14A filed on January 26, 2017, and hereby incorporated by reference.

 

 

 

10.3*

 

Registrant’s 2009 Stock Incentive Plan, as amended, filed as Exhibit 2 to the Form 14A filed on January 26, 2017, and hereby incorporated by reference.

 

 

 

10.4

 

Lease Agreement between Registrant, as tenant, and West Washington Associates, LLC as landlord, dated June 28, 2011, filed as Exhibit 10.1 to the Form 8-K filed on July 1, 2011, and hereby incorporated by reference.

 

 

 

10.5*

 

Employment Agreement dated March 21, 2014 between Sonic Foundry, Inc. and Kenneth A. Minor, filed as Exhibit 10.2 to the Form 8-K filed on March 26, 2014, and hereby incorporated by reference.

     

10.6

 

Forms of Subscription Agreements, Lock-Up Agreements and Warrant Agreements dated December 22, 2014 among Sonic Foundry, Inc. and Mark Burish, and Sonic Foundry, Inc. and Andrew Burish, filed as Exhibits 10.1, 10.2, and 10.3 to the Form 8-K filed on December 30, 2014 and hereby incorporated by reference.

 

 

 

10.7

 

Lease Agreement between Sonic Foundry International, as tenant, and Prinsen Geerligs as landlord, dated February 1, 2014, filed as Exhibit 10.25 to the form 10-Q on February 6, 2015, and hereby incorporated by reference.

 

 

 

10.8

 

Loan and Security Agreement, dated May 13, 2015 among Registrant, Sonic Foundry, Inc. and Partners for Growth IV, L.P., filed as Exhibit 10.27 to the form 10-Q filed on May 14, 2015, and hereby incorporated by reference.

 

 

 

10.9

 

Warrant, dated as of May 13, 2015, between Registrant and Partners for Growth IV, L.P., filed as Exhibit 10.28 to the form 10-Q filed on May 14, 2015, and hereby incorporated by reference.

 

 

 

10.10

 

Warrant dated as of May 13, 2015, between Registrant and PFG Equity Investors, LLC, filed as Exhibit 10.30 to the form 10-Q filed on May 14, 2015, and hereby incorporated by reference.

 

 

10.11

 

Intellectual Property Security Agreement, dated as of May 13, 2015, between Registrant and Partners for Growth IV, L.P., filed as Exhibit 10.31 to form 10-Q filed on May 14, 2015, and hereby incorporated by reference.

 

 

 

10.12

 

Modification No. 1 to Loan and Security Agreement, dated September 30, 2015 among Registrant, Sonic Foundry, Inc. and Partners for Growth IV, L.P., filed as Exhibit No. 10.2 to the Form 8-K filed on October 9, 2015, and hereby incorporated by reference.

 

 

 

10.13

 

Lease Agreement between Mediasite KK, as tenant, and Sumitomo Metal Mining Co., Ltd., as landlord, dated August 1, 2016, filed as Exhibit 10.1 to the Form 8-K filed on August 3, 2016, and hereby incorporated by reference.

 

 

 

10.14

 

Modification No. 2 to Loan and Security Agreement, dated February 8, 2017 among Registrant, Sonic Foundry, Inc. and Partners for Growth IV, L.P., filed as Exhibit 10.28 to the Form 10-Q filed on February 9, 2017, and hereby incorporated by reference.

 

 

 

10.15

 

Waiver and Modification No. 3 to Loan and Security Agreement, dated May 11, 2017 among Registrant Sonic Foundry, Inc. and Partners for Growth IV, L.P., filed as Exhibit 10.31 to the Form 10-Q filed on May 11, 2017, and hereby incorporated by reference.

 

 

 

10.16

 

Subscription Agreement between Registrant and Mark D. Burish, dated May 30, 2017, filed as Exhibit 3.02 to the 8-K filed on June 5, 2017, and hereby incorporated by reference.

 

 

 

10.17

 

Agreement Not to Convert between Registrant and Mark D. Burish, dated November 17, 2017, filed as Exhibit 10.1 to the Form 8-K filed on November 21, 2017, and hereby incorporated by reference.

 

 

 

10.18

 

Subscription Agreement between Registrant and Mark D. Burish, dated August 23, 2017, filed as Exhibit 10.1 to the Form 8-K filed on August 25, 2017, and hereby incorporated by reference.

 

 

 

10.19

 

Modification No. 4 to Loan and Security Agreement, dated December 28, 2017 among Registrant, Sonic Foundry, Inc. and Partners for Growth IV, L.P., filed as Exhibit 10.2 to the Form 8-K filed on December 29, 2017, and hereby incorporated by reference.

 

 

 

10.20

 

Subscription Agreement between Registrant and Mark D. Burish, dated January 19, 2018, filed as Exhibit 10.1 to the Form 8-K filed on January 25, 2018, and hereby incorporated by reference.

 

 

 

10.21

 

10.75% Convertible Secured Subordinated Promissory Note between Registrant and Mark D. Burish, filed as Exhibit 10.2 to the Form 8-K filed on January 25, 2018, and hereby incorporated by reference.

 

 

 

10.22

 

Subscription Agreement between Registrant and Andrew D. Burish, dated April 16, 2018, filed as Exhibit 10.1 to the Form 8-K filed on April 18, 2018 and hereby incorporated by reference.

 

 

 

10.23

 

Warrant, dated April 16, 2018, filed as Exhibit 10.2 to the Form 8-K filed on April 16, 2018, and hereby incorporated by reference.

 

 

 

10.24

 

Loan and Security Agreement, dated May 11, 2018 among Registrant, Sonic Foundry, Inc. and Partners for Growth V, L.P., filed as Exhibit 10.41 to the Form 10-Q filed on May 15, 2018, and hereby incorporated by reference.

 

 

 

10.25

 

Warrant, dated as of May 11, 2018, between Registrant and Partners for Growth V, L.P., filed as Exhibit 10.42 to the Form 10-Q filed on May 15, 2018, and hereby incorporated by reference.

 

 

 

10.26

 

Promissory Note between Registrant and Mark D. Burish, dated January 4, 2019, filed as Exhibit 10.1 to the Form 8-K filed on January 8, 2019, and hereby incorporated by reference.

 

 

 

10.27

 

Promissory Note between Registrant and Mark D. Burish, dated January 31, 2019, effective upon receipt of funds on February 5, 2019, filed as Exhibit 10.1 to the Form 8-K filed on February 12, 2019, and hereby incorporated by reference.

 

 

 

10.28

 

Promissory Note between Registrant and Mark D. Burish, dated February 14, 2019, filed as Exhibit 10.1 to the Form 8-K filed on February 20, 2019, and hereby incorporated by reference.

 

 

 

10.29

 

Note Purchase Agreement between the Company and Mark Burish, dated February 28, 2019, filed as Exhibit 10.1 to the Form 8-K filed on March 6, 2019, and hereby incorporated by reference.

 

 

 

10.30

 

Warrant between the Company and Mark Burish, dated February 28, 2019, filed as Exhibit 10.2 to the Form 8-K filed on March 6, 2019, and hereby incorporated by reference.

 

 

 

10.31

 

Consent, Waiver & Modification to Loan and Security Agreement between Sonic Foundry, Inc. and Partners for Growth V, L.P., dated March 11, 2019, filed as Exhibit 10.1 to the Form 8-K filed on March 12, 2019, and hereby incorporated by reference.

 

 

 

10.32

 

Employment Agreement dated April 22, 2019 between Sonic Foundry, Inc. and Michael Norregaard, filed as Exhibit 10.1 to the Form 8-K filed on April 24, 2019, and hereby incorporated by reference.

 

 

 

10.33

 

Retirement and Transition Agreement dated April 22, 2019 between Sonic Foundry, Inc. and Gary Weis, filed as Exhibit 10.2 to the Form 8-K filed on April 24, 2019, and hereby incorporated by reference.

 

 

10.34

 

Retirement and Transition Agreement dated August 5, 2019 between Sonic Foundry, Inc. and Kenneth Minor, filed as Exhibit 10.1 to the Form 8-K filed on August 9, 2019, and hereby incorporated by reference.

 

 

 

10.35

 

Amended and Restated Employment Agreement dated as of August 23, 2019 by and between Sonic Foundry, Inc. and Michael Norregaard, filed as Exhibit 10.1 to the Form 8-K filed on August 29, 2019, and hereby incorporated by reference.

 

 

 

10.36

 

Note Modification Agreement dated November 22, 2019 between Sonic Foundry, Inc. and Mark Burish, filed as Exhibit 10.36 to the Form 10-Q filed on February 13, 2020, and hereby incorporated by reference.

 

 

 

10.37

 

Lease Agreement between Mediasite KK, as tenant, and Sanji Kato, as landlord, dated November 2, 2019, filed with the March 31, 2020 Form 10-Q and hereby incorporated by reference.

 

 

 

10.38

 

Lease Agreement between Mediasite KK, as tenant, and Maida Housing Corporation, as landlord, dated April 1, 2014, filed with the March 31, 2020 Form 10-Q and hereby incorporated by reference.

 

 

 

10.39

 

Term Loan Agreement dated January 30, 2020 between Mediasite KK and Sumitomo Mitsui Banking, filed with the March 31, 2020 Form 10-Q and hereby incorporated by reference.

 

 

 

10.40

 

First Amendment to Note Modification Agreement dated March 24, 2020 between Sonic Foundry, Inc. and Mark Burish, filed with the March 31, 2020 Form 10-Q and hereby incorporated by reference.

 

 

 

10.41

 

Term Loan Agreement dated April 20, 2020 between Sonic Foundry, Inc. and First Business bank, filed as Exhibit 10.1 to the Form 8-K filed on April 23, 2020 and hereby incorporated by reference.

 

 

 

10.42

 

Debt Conversion Agreement dated May 13, 2020 between Sonic Foundry, Inc. and Mark Burish, filed with the March 31, 2020 Form 10-Q and hereby incorporated by reference.

     

10.43

  Employment Agreement dated October 8, 2020 between Sonic Foundry, Inc. and Kelsy Boyd, filed as Exhibit 10.1 to the Form 8-K filed on October 15, 2020, and hereby incorporated by reference.
     

10.44

  Employment Agreement dated October 20, 2020 between Sonic Foundry, Inc. and Joseph Mozden, Jr., filed as Exhibit 10.1 to the Form 8-K filed on October 22, 2020, and hereby incorporated by reference.

 

 

 

31.1

 

Section 302 Certification of Chief Executive Officer

 

 

 

31.2

 

Section 302 Certification of Chief Financial Officer

 

 

 

32

 

Section 906 Certification of Chief Executive Officer and Chief Financial Officer

 

 

 

101

 

The following materials from the Sonic Foundry, Inc. Form 10-Q for the quarter ended December 31, 2020 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statement of Comprehensive Income (Loss), (iv) the Condensed Consolidated Statements of Stockholders' Deficit, (v) the Condensed Consolidated Statements of Cash Flows and (vi) Notes to Condensed Consolidated Financial Statements.

 

Registrant will furnish upon request to the Securities and Exchange Commission a copy of all exhibits, annexes and schedules attached to each contract referenced in item 10.

 

*

Compensatory Plan or Arrangement

 

 

SIGNATURES

 

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

 

Sonic Foundry, Inc.

(Registrant

February 11, 2021

By:

/s/ Joe Mozden, Jr.

 

 

Joe Mozden, Jr.

 

 

Chief Executive Officer

 

 

 

February 11, 2021

By:

/s/ Kelsy L. Boyd

 

 

Kelsy L. Boyd

 

 

Chief Financial Officer

 

34