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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Sonic Foundry Inc (CE) | USOTC:SOFO | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.0003 | 0.00 | 01:00:00 |
|
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|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
MARYLAND
|
|
39-1783372
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
Large accelerated filer
|
|
¨
|
|
Accelerated filer
|
|
¨
|
|
|
|
|
|
|
|
Non-accelerated filer
|
|
¨
|
|
Smaller reporting company
|
|
x
|
|
|
|
|
|
|
|
|
|
|
|
Emerging growth company
|
|
¨
|
Class
|
|
Outstanding
August 4, 2017
|
Common Stock, $0.01 par value
|
|
4,458,075
|
|
|
|
PAGE NO.
|
PART I
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|
|
Item 1.
|
|
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||
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||
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Item 2.
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||
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Item 3.
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||
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Item 4.
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||
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PART II
|
|
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Item 1.
|
||
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|
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Item 1A.
|
||
|
|
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Item 2.
|
|
|
|
|
|
Item 6.
|
||
|
|
|
Treasury stock, at cost, 12,716 shares
|
(169
|
)
|
|
(169
|
)
|
||
Total stockholders’ equity
|
4,023
|
|
|
6,516
|
|
||
Total liabilities and stockholders’ equity
|
$
|
28,956
|
|
|
$
|
33,082
|
|
|
Three Months Ended June 30,
|
Nine Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
2017
|
|
2016
|
||||||||
Revenue:
|
|
|
|
|
|
|
||||||||
Product and other
|
$
|
4,420
|
|
|
$
|
4,062
|
|
11,543
|
|
|
$
|
12,162
|
|
|
Services
|
5,413
|
|
|
5,755
|
|
16,157
|
|
|
16,356
|
|
||||
Total revenue
|
9,833
|
|
|
9,817
|
|
27,700
|
|
|
28,518
|
|
||||
Cost of revenue:
|
|
|
|
|
|
|
||||||||
Product and other
|
1,560
|
|
|
1,547
|
|
4,728
|
|
|
4,823
|
|
||||
Services
|
1,026
|
|
|
1,035
|
|
2,952
|
|
|
2,811
|
|
||||
Total cost of revenue
|
2,586
|
|
|
2,582
|
|
7,680
|
|
|
7,634
|
|
||||
Gross margin
|
7,247
|
|
|
7,235
|
|
20,020
|
|
|
20,884
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
||||||||
Selling and marketing
|
4,368
|
|
|
4,575
|
|
13,186
|
|
|
13,449
|
|
||||
General and administrative
|
1,482
|
|
|
1,371
|
|
4,400
|
|
|
4,218
|
|
||||
Product development
|
1,768
|
|
|
1,741
|
|
5,581
|
|
|
4,999
|
|
||||
Total operating expenses
|
7,618
|
|
|
7,687
|
|
23,167
|
|
|
22,666
|
|
||||
Loss from operations
|
(371
|
)
|
|
(452
|
)
|
(3,147
|
)
|
|
(1,782
|
)
|
||||
Non-operating income (expenses):
|
|
|
|
|
|
|
||||||||
Interest expense, net
|
(130
|
)
|
|
(149
|
)
|
(396
|
)
|
|
(452
|
)
|
||||
Other income (expense), net
|
34
|
|
|
31
|
|
(43
|
)
|
|
34
|
|
||||
Total non-operating expenses
|
(96
|
)
|
|
(118
|
)
|
(439
|
)
|
|
(418
|
)
|
||||
Loss before income taxes
|
(467
|
)
|
|
(570
|
)
|
(3,586
|
)
|
|
(2,200
|
)
|
||||
Benefit (provision) for income taxes
|
(22
|
)
|
|
18
|
|
132
|
|
|
(270
|
)
|
||||
Net loss
|
(489
|
)
|
|
(552
|
)
|
(3,454
|
)
|
|
(2,470
|
)
|
||||
Dividends on preferred stock
|
(75
|
)
|
|
—
|
|
(75
|
)
|
|
—
|
|
||||
Net loss attributable to common stockholders
|
$
|
(564
|
)
|
|
$
|
(552
|
)
|
$
|
(3,529
|
)
|
|
$
|
(2,470
|
)
|
Loss per common share:
|
|
|
|
|
|
|
||||||||
– basic
|
$
|
(0.13
|
)
|
|
$
|
(0.13
|
)
|
$
|
(0.80
|
)
|
|
$
|
(0.56
|
)
|
– diluted
|
$
|
(0.13
|
)
|
|
$
|
(0.13
|
)
|
$
|
(0.80
|
)
|
|
$
|
(0.56
|
)
|
Weighted average common shares
|
|
|
|
|
|
|
||||||||
– basic
|
4,449,893
|
|
|
4,402,479
|
|
4,429,006
|
|
|
4,381,987
|
|
||||
– diluted
|
4,449,893
|
|
|
4,402,479
|
|
4,429,006
|
|
|
4,381,987
|
|
|
Three Months Ended June 30,
|
Nine Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
2017
|
|
2016
|
||||||||
Net loss
|
$
|
(489
|
)
|
|
$
|
(552
|
)
|
$
|
(3,454
|
)
|
|
$
|
(2,470
|
)
|
Foreign currency translation adjustment
|
70
|
|
|
487
|
|
(430
|
)
|
|
800
|
|
||||
Comprehensive loss
|
$
|
(419
|
)
|
|
$
|
(65
|
)
|
$
|
(3,884
|
)
|
|
$
|
(1,670
|
)
|
|
Nine Months Ended
June 30, |
||||||
|
2017
|
|
2016
|
||||
Operating activities
|
|
|
|
||||
Net loss
|
$
|
(3,454
|
)
|
|
$
|
(2,470
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
||||
Amortization of other intangibles
|
420
|
|
|
515
|
|
||
Depreciation and amortization of property and equipment
|
1,096
|
|
|
1,181
|
|
||
Provision for doubtful accounts
|
150
|
|
|
(50
|
)
|
||
Gain on sale of fixed assets
|
8
|
|
|
—
|
|
||
Deferred taxes
|
(42
|
)
|
|
253
|
|
||
Stock-based compensation expense related to stock options
|
487
|
|
|
671
|
|
||
Remeasurement gain on subordinated debt
|
(6
|
)
|
|
(4
|
)
|
||
Remeasurement gain on derivative liability
|
(42
|
)
|
|
(53
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
2,191
|
|
|
1,165
|
|
||
Inventories
|
771
|
|
|
239
|
|
||
Prepaid expenses and other current assets
|
(190
|
)
|
|
43
|
|
||
Accounts payable and accrued liabilities
|
(8
|
)
|
|
(717
|
)
|
||
Other long-term liabilities
|
158
|
|
|
(66
|
)
|
||
Unearned revenue
|
(823
|
)
|
|
1,101
|
|
||
Net cash provided by operating activities
|
716
|
|
|
1,808
|
|
||
Investing activities
|
|
|
|
||||
Purchases of property and equipment
|
(676
|
)
|
|
(208
|
)
|
||
Net cash used in investing activities
|
(676
|
)
|
|
(208
|
)
|
||
Financing activities
|
|
|
|
||||
Proceeds from notes payable
|
—
|
|
|
500
|
|
||
Proceeds from line of credit
|
17,531
|
|
|
11,845
|
|
||
Payments on notes payable
|
(1,317
|
)
|
|
(1,279
|
)
|
||
Payments on line of credit
|
(16,999
|
)
|
|
(12,076
|
)
|
||
Payment of debt issuance costs
|
(26
|
)
|
|
(36
|
)
|
||
Proceeds from issuance of preferred stock, common stock and warrants
|
771
|
|
|
31
|
|
||
Payments on capital lease and financing arrangements
|
(255
|
)
|
|
(202
|
)
|
||
Net cash used in financing activities
|
(295
|
)
|
|
(1,217
|
)
|
||
Changes in cash and cash equivalents due to changes in foreign currency
|
66
|
|
|
(30
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
(189
|
)
|
|
353
|
|
||
Cash and cash equivalents at beginning of period
|
1,794
|
|
|
1,976
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,605
|
|
|
$
|
2,329
|
|
Supplemental cash flow information:
|
|
|
|
||||
Interest paid
|
$
|
403
|
|
|
$
|
459
|
|
Income taxes paid, foreign
|
27
|
|
|
10
|
|
||
Non-cash financing and investing activities:
|
|
|
|
||||
Property and equipment financed by capital lease or accounts payable
|
358
|
|
|
355
|
|
||
Debt discount
|
—
|
|
|
16
|
|
||
Stock issued for board of director's fees
|
133
|
|
|
164
|
|
||
Deemed dividend for beneficial conversion feature of preferred stock
|
69
|
|
|
—
|
|
||
Preferred stock dividends paid in additional shares
|
6
|
|
|
—
|
|
1.
|
Basis of Presentation and Significant Accounting Policies
|
|
June 30,
2017 |
|
September 30, 2016
|
||||
Investment in sales-type lease
|
$
|
495
|
|
|
$
|
—
|
|
Support contract receivable
|
358
|
|
|
—
|
|
||
|
$
|
853
|
|
|
$
|
—
|
|
|
June 30,
2017 |
|
September 30, 2016
|
||||
Raw materials and supplies
|
$
|
158
|
|
|
$
|
149
|
|
Finished goods
|
961
|
|
|
1,755
|
|
||
|
$
|
1,119
|
|
|
$
|
1,904
|
|
June 30, 2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Fair Value
|
||||||||
Derivative liability
|
|
—
|
|
|
25
|
|
|
—
|
|
|
25
|
|
||||
|
|
$
|
—
|
|
|
$
|
25
|
|
|
$
|
—
|
|
|
$
|
25
|
|
September 30, 2016
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Fair Value
|
||||||||
Derivative liability
|
|
—
|
|
|
67
|
|
|
—
|
|
|
67
|
|
||||
|
|
$
|
—
|
|
|
$
|
67
|
|
|
$
|
—
|
|
|
$
|
67
|
|
|
|
PFG Debt, net of discount
|
|
Warrant Debt
|
||||
Balance at September 30, 2016
|
|
$
|
1,225
|
|
|
$
|
102
|
|
Activity during the current period:
|
|
|
|
|
||||
Payments to PFG
|
|
(605
|
)
|
|
—
|
|
||
Change in fair value
|
|
55
|
|
|
15
|
|
||
Balance at June 30, 2017
|
|
$
|
675
|
|
|
$
|
117
|
|
|
|
|
|
|
|
Options
|
|
Weighted-
Average
Exercise Price
|
|
Weighted-
Average
Remaining
Contractual
Period in
Years
|
|||
Outstanding at October 1, 2016
|
1,602,822
|
|
|
$
|
9.51
|
|
|
6.6
|
Granted
|
315,020
|
|
|
4.75
|
|
|
9.5
|
|
Exercised
|
—
|
|
|
—
|
|
|
0.0
|
|
Forfeited
|
(84,314
|
)
|
|
16.81
|
|
|
4.9
|
|
Outstanding at June 30, 2017
|
1,833,528
|
|
|
8.36
|
|
|
6.1
|
|
Exercisable at June 30, 2017
|
1,265,843
|
|
|
9.21
|
|
|
5.0
|
|
2017
|
|||||
Non-vested Shares
|
Shares
|
|
Weighted-Average
Grant Date Fair
Value
|
|||
Non-vested at October 1, 2016
|
539,985
|
|
|
$
|
3.21
|
|
Granted
|
315,020
|
|
|
1.83
|
|
|
Vested
|
(256,248
|
)
|
|
3.06
|
|
|
Forfeited
|
(31,072
|
)
|
|
2.58
|
|
|
Non-vested at June 30, 2017
|
567,685
|
|
|
$
|
2.50
|
|
|
Three Months Ended
June 30, |
Nine Months Ended
June 30, |
||||||||
|
2017
|
|
2016
|
2017
|
|
2016
|
||||
Denominator for basic loss per share - weighted average common shares
|
4,449,893
|
|
|
4,402,479
|
|
4,429,006
|
|
|
4,381,987
|
|
Effect of dilutive options (treasury method)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
Denominator for diluted loss per share - adjusted weighted average common shares
|
4,449,893
|
|
|
4,402,479
|
|
4,429,006
|
|
|
4,381,987
|
|
Options and warrants outstanding during each period, but not included in the computation of diluted loss per share because they are antidilutive
|
1,968,330
|
|
|
1,754,262
|
|
1,968,330
|
|
|
1,754,262
|
|
Balance at September 30, 2016
|
$
|
11,310
|
|
Foreign currency translation adjustment
|
(274
|
)
|
|
Balance at June 30, 2017
|
$
|
11,036
|
|
•
|
Product and other revenue from sale of Mediasite recorder units and server software was
$4.4 million
in
Q3-2017
and
$4.1 million
in
Q3-2016
.
|
|
Q3-2017
|
|
Q3-2016
|
||||
Recorders sold
|
434
|
|
|
406
|
|
||
Rack units to mobile units ratio
|
11.8 to 1
|
|
|
7.0 to 1
|
|
||
Average sales price, excluding service (000’s)
|
$
|
7.3
|
|
|
$
|
8.0
|
|
Refresh Units
|
184
|
|
|
161
|
|
•
|
Services 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, event and content hosting services. Services revenue
decreased
$342 thousand
or
6%
from
$5.8 million
in
Q3-2016
to
$5.4 million
in
Q3-2017
primarily due to a decrease in support contract and events billings. At
June 30, 2017
,
$13.2 million
of revenue was deferred, of which we expect to recognize
$11.4 million
in the next twelve months, including approximately
$3.7 million
in the quarter ending September 30, 2017. At
September 30, 2016
,
$14.1 million
of revenue was deferred.
|
•
|
Other revenue relates to freight charges billed separately to our customers.
|
•
|
$11.5 million
product and other revenue from the sale of 1,200 Mediasite recorders and software versus
$12.2 million
from the delivery of 1,025 Mediasite recorders and software in
YTD-2016
. Revenue of 208 recorders billed in Q4-2015 and shipped in Q1-2017 for an international customer was recognized during Q1-2017, and the units are included in the units sold figures.
|
•
|
$16.2 million
from Mediasite customer support contracts, installation, training, event and hosting services versus
$16.4 million
in 2016. Services revenue decreased primarily due to a decrease in support contract billings.
|
•
|
Material and freight costs for the Mediasite recorders. Costs for
Q3-2017
Mediasite recorder hardware and other costs totaled
$884 thousand
, along with
$64 thousand
of freight costs, and
$463 thousand
of labor and allocated costs, compared to
Q3-2016
Mediasite recorder costs of
$1.2 million
for hardware and other costs,
$76 thousand
for freight and
$384 thousand
of labor and allocated costs. This resulted in gross margin on products of
65%
in
Q3-2017
and
62%
in
Q3-2016
.
|
•
|
Services costs. Staff wages and other costs allocated to cost of service revenue were
$1.0 million
in
Q3-2017
and
$1.0 million
in
Q3-2016
, resulting in gross margin on services of
81%
in
Q3-2017
and
82%
in
Q3-2016
.
|
•
|
Material and freight costs for the Mediasite recorders. Costs for
YTD-2017
Mediasite recorder hardware and other costs totaled
$2.7 million
, along with
$202 thousand
of freight costs, and
$1.4 million
of labor and allocated costs, compared to
YTD-2016
Mediasite recorder costs of
$2.8 million
for hardware and other costs,
$223 thousand
for freight and
$1.2 million
of labor and allocated costs. This resulted in gross margin on products of
59%
in
YTD-2017
and
60%
in
YTD-2016
. The material costs decrease from YTD-2017 compared to YTD-2016 is primarily related to a large amount of low margin peripheral sales for MSKK during Q1-2016.
|
•
|
Services costs. Staff wages and other costs allocated to cost of service revenue were
$3.0 million
in
YTD-2017
and
$2.8 million
in
YTD-2016
, resulting in gross margin on services of
82%
in
YTD-2017
and
83%
in
YTD-2016
.
|
•
|
Costs allocated from general and administrative
decreased
by
$188 thousand
primarily as a result of lower stock compensation and bonus expense.
|
•
|
Selling and marketing expenses for Sonic Foundry International and Mediasite KK accounted for
$102 thousand
and
$659 thousand
respectively, an aggregate
decrease
of
$39 thousand
from
Q3-2016
.
|
•
|
Advertising & tradeshow expenses
increased
by
$153 thousand
.
|
•
|
Costs allocated from general and administrative
decreased
by
$488 thousand
primarily as a result of lower stock compensation and bonus expense.
|
•
|
Expenses related to business meetings and travel and entertainment decreased by
$106 thousand
, primarily due to expense management and venue changes for company meetings.
|
•
|
Public relations expenses increased by
$88 thousand
as a result of entering into a new service contract in 2017.
|
•
|
Professional services decreased by
$59 thousand
due to a more focused approach to expense management.
|
•
|
Selling and marketing expenses for Sonic Foundry International and Mediasite KK accounted for $264 thousand and $2.1 million respectively, an aggregate
increase
of
$192 thousand
from
YTD-2016
.
|
•
|
Increase
d salary and benefits of
$23 thousand
due to an increase in compensation rates and benefits.
|
•
|
Increase
in bad debt expense of
$118 thousand
due to increasing allowance for doubtful accounts.
|
•
|
Depreciation and amortization expenses decreased by
$42 thousand
.
|
•
|
Professional services increased by
$56 thousand
partially due to fees incurred related to raising equity during the third quarter.
|
•
|
G&A expenses for Sonic Foundry International and Mediasite KK accounted for
$39 thousand
and
$210 thousand
respectively, an aggregate
decrease
of
$1 thousand
compared to
Q3-2016
.
|
•
|
Increase
d salary and benefits of
$77 thousand
due to an increase in compensation rates and benefits.
|
•
|
Increase
in bad debt expense of
$127 thousand
due to increasing allowance for doubtful accounts.
|
•
|
Depreciation and amortization expenses decreased by
$124 thousand
.
|
•
|
Professional services increased by
$83 thousand
partially due to fees incurred related to raising equity during the third quarter.
|
•
|
G&A expenses for Sonic Foundry International and Mediasite KK accounted for
$119 thousand
and
$695 thousand
respectively, an aggregate
increase
of
$50 thousand
compared to
YTD-2017
.
|
•
|
Increase
in compensation and benefits of
$154 thousand
due to an increase in headcount.
|
•
|
Decrease
in professional services of
$88 thousand
, mainly due to decreased use of outsourced development.
|
•
|
Costs allocated from general and administrative
decreased
by
$86 thousand
primarily as a result of lower stock compensation and bonus expense.
|
•
|
Product development expense for Sonic Foundry International and Mediasite KK accounted for
$102 thousand
and
$67 thousand
respectively, an aggregate
increase
of
$42 thousand
compared to
Q3-2016
.
|
•
|
Increase
in compensation and benefits of
$603 thousand
due to an increase in headcount.
|
•
|
Costs allocated from general and administrative
decreased
by
$219 thousand
primarily as a result of lower stock compensation and bonus expense.
|
•
|
Product development expense for Sonic Foundry International and Mediasite KK accounted for
$197 thousand
and
$288 thousand
respectively, an aggregate
increase
of
$144 thousand
compared to
YTD-2016
.
|
NUMBER
|
|
DESCRIPTION
|
|
3.1
|
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3.2
|
|
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3.3
|
|
|
|
|
|
|
|
10.1*
|
|
|
|
|
|
|
|
10.2*
|
|
|
|
|
|
|
|
10.3*
|
|
|
|
|
|
|
|
10.4*
|
|
|
|
|
|
|
|
10.5
|
|
|
|
|
|
|
|
10.6
|
|
|
|
|
|
|
|
10.7
|
|
|
|
|
|
|
|
10.8
|
|
|
|
|
|
|
|
10.9*
|
|
|
|
10.10*
|
|
|
|
|
|
|
|
10.11
|
|
|
|
|
|
|
|
10.12
|
|
|
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.
|
|
|
|
|
10.13
|
|
|
|
|
|
|
|
10.14
|
|
|
|
|
|
|
|
10.15
|
|
|
|
|
|
|
|
10.16
|
|
|
|
|
|
|
|
10.17
|
|
|
|
|
|
|
10.18
|
|
|
|
|
|
|
|
10.19
|
|
|
|
|
|
|
|
10.20
|
|
|
|
|
|
|
|
10.21
|
|
|
|
|
|
|
|
10.22
|
|
|
|
10.23
|
|
|
|
|
|
|
|
10.24
|
|
|
|
|
|
|
|
10.25
|
|
|
|
|
|
|
|
10.26
|
|
|
|
|
|
|
|
10.27
|
|
|
|
|
|
|
|
10.28
|
|
|
|
|
|
|
|
10.29
|
|
|
|
|
|
|
|
10.30
|
|
|
|
|
|
|
|
10.31
|
|
|
|
|
|
|
|
10.32
|
|
|
|
|
|
|
|
31.1
|
|
|
Section 302 Certification of Chief Executive Officer
|
|
|
|
|
31.2
|
|
|
Section 302 Certification of Chief Financial Officer and Secretary
|
|
|
|
|
32
|
|
|
Section 906 Certification of Chief Executive Officer and Chief Financial Officer and Secretary
|
|
|
|
|
101
|
|
|
The following materials from the Sonic Foundry, Inc. Form 10-Q for the quarter ended June 30, 2017 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 Cash Flows and (v) Notes to Condensed Consolidated Financial Statements.
|
*
|
Compensatory Plan or Arrangement
|
|
|
|
|
|
August 10, 2017
|
|
By:
|
|
/s/ Gary R. Weis
|
|
|
|
|
Gary R. Weis
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
August 10, 2017
|
|
By:
|
|
/s/ Kenneth A. Minor
|
|
|
|
|
Kenneth A. Minor
|
|
|
|
|
Chief Financial Officer and Secretary
|
1 Year Sonic Foundry (CE) Chart |
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