ý | ANNUAL 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.) |
222 W. Washington Ave, Madison, WI 53703 | (608) 443-1600 | |
(Address of principal executive offices) | (Issuer’s telephone number) |
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ | Smaller reporting company | x | |||
Emerging growth company | ¨ |
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• | Improve learners’ academic and professional success |
• | Keep geographically-dispersed audiences and mobile teams connected |
• | Boost productivity and overall organizational knowledge |
• | Reduce logistical and financial impacts of day-to-day communications |
• | Stream live and on-demand video to any device |
• | Create an enterprise or campus YouTube with Mediasite Showcase |
• | Automatically publish video to their learning management system (LMS), content management system (CMS), training portal or any website |
• | Deepen engagement and improve learning with polls, ask-a-question, surveys and other interactive tools |
• | Search everything with fully indexed audio, video and slide content |
• | Monitor who is watching what videos when to measure learner engagement and outcomes |
• | Centrally manage and secure any video |
• | My Mediasite: My Mediasite makes it a snap for instructors, employees and students to create great looking videos, screencasts and slideshows from their computers or mobile devices. From demos and video training to flipped classes, lectures and assignments, everything to record, upload, manage and publish personal videos is in one simple-to-use tool, requiring no pro video skills. |
• | Mediasite RL Recorders: The RL Series of built-in room appliances uses schedule-based capture and advanced audio/video integration to fully automate video and content recording in lecture halls, training rooms, simulation labs and auditoriums. Instructors and speakers teach and present as they are most comfortable, free from technology worries and confident that everything they say and show is captured. |
• | Mediasite RL Mini: Our latest video capture solution, the Mini, provides the automation and high-quality capture Mediasite is known for in a compact, affordable device, ensuring even more students never miss a lecture. With the Mini, there’s no need for AV in the room. Instructors simply plug in their laptop and camera and start teaching. The plug-and-play device makes it easy to build or expand an automated lecture capture programs in community colleges, vocational-tech schools, small departments and even K12 classrooms. |
• | Mediasite Catch: Our latest video capture solution, Mediasite Catch, provides a scalable, economical solution to extend video capture to any classrooms on campus, even if they’re not equipped with extensive audio/video capabilities. Combining the reliability of Mediasite’s recorder-based scheduling automation with the affordability and simplicity of podium-based software, Mediasite Catch provides faculty a worry-free classroom recording experience. |
• | Mediasite ML Recorders: Anyone can be a video producer with the ML Series of portable recording solutions to capture and stream broadcast-quality video. Designed for on-the-go webcasting, hybrid events, guest speakers and conferences, Mediasite ML’s lightweight design moves easily from location to location and can be set up and ready to record in only a few minutes. |
• | Mediasite Join: Real-time video is how today’s best teams, businesses and schools collaborate, exchange ideas and get things done. But too often great ideas, subject matter expertise and important details are forgotten or left behind when a video call ends. Mediasite Join automatically records video and web conferences, transforming them into valuable, searchable video on demand. As a cloud service, it’s the easiest way to capture and preserve any video call or meeting. |
• | Expand their audience reach by streaming to those that cannot attend in person |
• | Maximize event ROI by generating additional revenue streams from video recordings |
• | Differentiate themselves from competing events |
• | Bolster training and communication effectiveness with interactive video and audience engagement tools |
• | Build stronger teams and deepen morale |
• | Save travel time and money |
• | Improve retention and learning outcomes |
• | Advanced Integration Services: The value of Mediasite grows when customers’ video assets and streaming workflows seamlessly integrate with the systems that drive their online learning, training or communication strategies. Mediasite Advanced Integration Services provides the resources and expertise to incorporate Mediasite video creation, management and delivery processes into existing or planned application platforms, infrastructures and workflows. Leveraging Mediasite’s open architecture and application programming interfaces (APIs), Sonic Foundry developers collaborate with customers to scope, design and implement a Mediasite solution tailored to their unique requirements. |
• | Installation Services: Sonic Foundry provides on-site consulting and installation services to help customers optimize deployments and efficiently integrate Mediasite within existing AV and IT infrastructures, processes and workflows. |
• | Training Services: Expert Sonic Foundry trainers provide the necessary knowledge transfer so organizations feel confident in using, managing and leveraging Mediasite’s capabilities. On-site training is customized to specific requirements and skill levels, while online training provides convenient anytime access to a web-based catalog of training modules. |
• | Software upgrades and updates for Mediasite Video Platform and Mediasite Capture Solutions |
• | Unlimited technical support assistance |
• | Mediasite Recorder hardware warranty extension |
• | Advanced Mediasite Recorder replacement |
• | Authorized access to the Mediasite Customer Care Portal for 24/7 case management, software downloads, documentation, the Mediasite Knowledge Base and other technical resources |
• | Authorized access to the Mediasite Community for online training videos, customer-exclusive webcasts, peer-to-peer best practice sharing and more |
• | Priority technical support with queue bypass and support case escalation |
• | Proactive Mediasite version administration and management |
• | Mediasite roadmap discussions with Sonic Foundry’s executive team |
• | Complete platform addressing the entire video lifecycle - From content creation and delivery to retention and management. Mediasite’s portfolio of video solutions provides customers maximum flexibility and scalability to develop a comprehensive enterprise video strategy. |
• | Interactive, consistent playback experiences across devices - Mediasite involves the viewer in their online video experience with polls, bookmarks, sharing, ask-a-question, resource links and more. Plus, Mediasite’s consistent playback experience across all devices significantly reduces learning curves and accelerates adoption and content mastery. |
• | Auto-indexing and powerful video search - As a video search pioneer for over a decade, we have substantial experience in search precision. Mediasite SmartSearch automatically makes all videos as searchable as text, so keywords can be found anywhere - in audio, slides, handwriting, video or tags. |
• | Deep viewership analytics - Mediasite’s powerful video analytics and built-in reports show exactly who is watching what and when. It’s the deep insight users need to understand viewing behaviors and engagement, to measure video’s impact and value and make informed decisions. |
• | Unmatched support network - Sonic Foundry and the growing Mediasite Community provide a reliable, collaborative support network for all Mediasite customers. Our worldwide network of field-based system engineers and responsive customer care ensure that customers have resources committed to their success. Plus, with nearly 2,000 active customers, the Mediasite Community is one of the most vibrant and growing user communities for video, webcasting, lecture capture and e-learning. Members share ideas and get feedback year-round from community experts through a private online portal, customer-exclusive webcasts and unrivaled networking and learning opportunities at the global Mediasite user conference and other regional customer events. |
• | Lecture capture |
• | Flipped classroom instruction: students view lectures from home and use classroom time for discussion |
• | Blended, hybrid and distance learning |
• | Continuing education |
• | Campus YouTube |
• | Special events: commencement, guest speakers, sporting events, etc. |
• | Faculty training and development |
• | Student video projects |
• | Recruitment and admissions |
• | University business: leadership meetings, alumni relations, outreach |
• | Improves student learning outcomes |
• | Keeps their institution competitive by supporting higher enrollment and/or tuition without new classrooms |
• | Empowers faculty with technology supporting new teaching pedagogies both in the classroom and online |
• | Boosts campus outreach, recruitment efforts and awareness of campus events |
• | Helps campuses manage, secure and search all campus video |
• | Executive communications: town hall meetings, all-hands meetings |
• | Workforce development: onboarding and training, HR communications, policy documentation |
• | Secure corporate YouTube |
• | Sales, marketing and customer support |
• | Investor relations: earnings calls, analyst briefings, annual reports |
• | Conferences and events: user group, sales and annual meetings |
• | Continuing medical education, medical conferences and seminars |
• | Grand rounds, simulations and procedural training |
• | Pharmaceutical and new product education |
• | Caregiver and patient education |
• | Emergency response coordination and public health announcements |
• | Research and collaboration |
• | Training and compliance |
• | Inter- and intra-agency communications |
• | Legislative proceedings |
• | Constituent outreach, committee meetings, public safety announcements |
• | Relief work, military coordination, emergency preparedness |
• | Expands training and communications opportunities |
• | Cuts travel and meeting expenses |
• | Boosts efficiency by allowing participants to watch when it’s convenient to avoid interruptions and increase retention |
• | Helps build stronger teams through direct management and employee communications |
• | Advancing enterprise video content management to accommodate organizations’ existing digital video assets, content generated from third-party video sources and the corresponding metadata associated with those video assets. |
• | Introducing new applications to easily publish, search and retrieve videos from a video library as well as expanding and automating Mediasite’s powerful multi-modal search capabilities. |
• | Offering the industry’s widest variety of content capture solutions capable of scaling economically across entire organizations and allowing anyone, on any device, to capture and share their knowledge or expertise. |
• | Delivering content capture solutions that test the limits of recording, synchronizing and playing back multiple high definition video sources. |
• | Supporting consistent, interactive content playback experiences across all viewing devices. |
• | Deepening integration with core enterprise platforms including collaborative platforms like video and web conferencing, learning and course management systems (LMS/CMS), content management systems and student information systems (SIS). |
• | Introducing market-driven innovations to our Mediasite Video Cloud offering. |
• | Customer success stories regularly shared through our best practices webinar series, speaking placements at industry events, email marketing, industry guest columns and blog |
• | Thought leadership content created and curated from customer successes, Sonic Foundry subject matter experts (SMEs) and industry experts in the form of ebooks, whitepapers, videos, best practice toolkits and more |
• | The Mediasite Community, a vibrant online community of 2000+ users and its companion community events including the global Mediasite User Conference, Unleash; Mediasite Summits in Europe and Australia/New Zealand; and year-round regional chapter meetings |
• | Appliance- or room-based lecture capture provides a fully integrated system with complete recording automation for live or on-demand content. The automated, pre-scheduled workflow results in the greatest faculty and staff adoption and largest volumes of recorded content in the shortest amount of time. |
• | Software-based lecture capture that resides on a podium or computer in the classroom also captures and publishes rich media content, but relies on campus- or user-supplied hardware. |
• | Desktop capture tools reside on individual users’ laptops or computers allowing them to record user-generated content. |
• | Appliance- or room-based lecture capture provides a fully integrated system with complete recording automation for live or on-demand content. The automated, pre-scheduled workflow results in the greatest faculty and staff adoption and largest volumes of recorded content in the shortest amount of time. |
• | Software-based lecture capture that resides on a podium or computer in the classroom also captures and publishes rich media content, but relies on campus- or user-supplied hardware. |
• | Desktop capture tools reside on individual users’ laptops or computers allowing them to record user-generated content. |
• | Difficulties in establishing and managing international subsidiaries, distribution channels and operations; |
• | Difficulties in selling, servicing and supporting overseas products, translating products into foreign languages and compliance with local hardware requirements; |
• | Difficulties in managing the demands of large international deployments, many of which distract key sales personnel from opportunities in other parts of the world; |
• | Challenges associated with management transition; |
• | Challenges related to language or cultural differences; |
• | The uncertainty of laws and enforcement in certain countries, such as China, relating to the protection of intellectual property or requirements for product certification, protection of personal data or other restrictions; |
• | Competitive pressure impacting other parts of the world; |
• | Multiple and possibly overlapping tax structures; |
• | Currency and exchange rate fluctuations; |
• | Difficulties in collecting accounts receivable in foreign countries, including complexities in documenting letters of credit; |
• | Economic or political changes in international markets; |
• | Restrictions on access to the Internet; and |
• | Difficulty in complying with international employment related requirements |
• | Variations in our operating results, earnings per share, cash flows from operating activities, deferred revenue and other financial metrics and non-financial metrics, and how those results compare to investor expectations; |
• | Our announcement of actual results for a fiscal period that are higher or lower than expected results or our announcement of revenue or earnings guidance that is higher or lower than expected, including as a result of difficulty forecasting seasonal variations in our financial condition and operating results; |
• | Changes in the estimates of our operating results or changes in recommendations by securities analysts that elect to follow our common stock; |
• | Announcements of technological innovations, new services or service enhancements, strategic alliances or significant agreements by us or by our competitors; |
• | Announcements by us or by our competitors of mergers or other strategic acquisitions, or rumors of such transactions involving us or our competitors; |
• | Announcements of customer additions and customer cancellations or delays in customer purchases; |
• | Recruitment or departure of key personnel; |
• | Disruptions in our service due to computer hardware, software, network or data center problems; |
• | The economy as a whole, market conditions in our industry and the industries of our customers; |
• | The issuance of shares of common stock and preferred stock by us, whether in connection with an acquisition or a capital raising transaction; |
• | Low trading volumes of our shares and inconsistent trading activity; |
• | Issuance of debt and other convertible securities; and |
• | Any other factors discussed herein. |
• | The potential failure to achieve the expected benefits of the combination or acquisition; |
• | Difficulties in and the cost of integrating operations, technologies, services and personnel; |
• | Diversion of financial and managerial resources from existing operations; |
• | Risk of entering new markets in which we have little or no experience or where competitors may have stronger market positions; |
• | Potential write-offs of acquired assets or investments, and potential financial and credit risks associated with acquired customers; |
• | Potential loss of key employees; |
• | Inability to generate sufficient revenue to offset acquisition or investment costs; |
• | The inability to maintain relationships with customers and partners of the acquired business; |
• | The difficulty of transitioning the acquired technology onto our existing platforms and maintaining the security standards consistent with our other services for such technology; |
• | Potential unknown liabilities associated with the acquired businesses; |
• | Unanticipated expenses related to acquired technology and its integration into existing technology; |
• | Negative impact to our results of operations because of the depreciation and amortization of amounts related to acquired intangible assets, fixed assets and deferred compensation, and the loss of acquired deferred revenue and unbilled deferred revenue; |
• | Delays in customer purchases due to uncertainty related to any acquisition; |
• | The need to implement controls, procedures and policies at the acquired company; |
• | Challenges caused by distance, language and cultural differences; |
• | In the case of foreign acquisitions, the challenges associated with integrating operations across different cultures and languages and currency, technological, employee and other regulatory risks and uncertainties in the economic, social and political conditions associated with specific countries; and |
• | The tax effects of any such acquisitions. |
• | Damage our reputation; |
• | Cause our customers to initiate product liability suits against us; |
• | Increase our product development resources; |
• | Cause customers to cancel orders, ask for partial refunds or potential customers to purchase competitive products or services; |
• | Delay release or market acceptance of our products, or otherwise adversely impact our relationships with our customers; and |
• | Cause us to allocate valuable engineering resources to fix our existing products, which may cause us to allocate fewer resources toward developing new products, or toward adding features to our existing products. |
• | Any patents acquired by or issued to us may not be broad enough to protect us. |
• | Any issued patent could be successfully challenged by one or more third parties, which could result in our loss of the right to prevent others from exploiting the inventions claimed in those patents. |
• | Current and future competitors may independently develop similar technology, duplicate our services or design around any of our patents. |
• | Effective patent protection, including effective legal-enforcement mechanisms against those who violate our patent-related assets, may not be available in every country in which we do or plan to do business. |
• | We may not have the resources to enforce our patents or may determine the potential benefits are not worth the cost and risk of ultimately being unsuccessful. |
• | Third parties may infringe or misappropriate our copyrights, trademarks and similar proprietary rights. |
• | Laws and contractual restrictions may not be sufficient to prevent misappropriation of our technology or to deter others from developing similar technologies, particularly in foreign countries where the laws may not protect our proprietary rights as fully or as readily as Unites States laws. Our recent growth in activities in China will likely increase this risk. |
• | There have been attacks on certain patent systems, increasing the likelihood of changes to established laws, including in the United States. We cannot predict the long-term effects of any potential changes, which could be detrimental to our licensing program. |
• | Effective trademark, copyright and trade secret protection, including effective legal-enforcement mechanisms against those who violate our trademark, copyright or trade secret assets, may be cost prohibitive or unavailable or limited in foreign countries. |
• | Contractual agreements may not provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information. |
• | Other companies may claim common law trademark rights based upon state or foreign laws that precede the federal registration of our marks. |
• | Policing unauthorized use of our services and trademarks is difficult, expensive and time-consuming, and we may be unable to determine the extent of any unauthorized use. |
High | Low | ||||||
Year Ended September 30, 2018: | |||||||
First Quarter (through December 29, 2017) | $ | 3.87 | $ | 2.05 | |||
Year Ended September 30, 2017: | |||||||
First Quarter | 5.92 | 3.75 | |||||
Second Quarter | 5.35 | 4.50 | |||||
Third Quarter | 5.25 | 3.72 | |||||
Fourth Quarter | 4.13 | 3.03 | |||||
Year Ended September 30, 2016: | |||||||
First Quarter | 8.25 | 5.00 | |||||
Second Quarter | 6.98 | 4.28 | |||||
Third Quarter | 8.51 | 5.76 | |||||
Fourth Quarter | 6.50 | 5.75 |
Plan category | Number of securities to be issued upon exercise of outstanding options | Weighted average exercise price of outstanding options | Number of securities remaining available for future issuance | ||||||
(a) | (b) | (c) | |||||||
Equity compensation plans approved by security holders (1) | 1,756,643 | $ | 7.83 | 1,056,390 | |||||
Equity compensation plans not approved by security holders (2) | 48,800 | 11.24 | — | ||||||
Total | 1,805,443 | $ | 8.33 | 1,056,390 |
(1) | Consists of the 2009 Stock Incentive Plan, Employee Incentive Stock Option Plan and the Directors Stock Option Plans. For further information regarding these plans, reference is made to Note 5 of the financial statements. |
(2) | Consists of the Non-Qualified Stock Option Plan. For further information regarding this plan, reference is made to Note 5 of the financial statements. |
Years Ended September 30, | |||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
Statement of Operations Data: | |||||||||||||||||||
Revenue | $ | 36,000 | $ | 37,975 | $ | 36,459 | $ | 35,830 | $ | 27,756 | |||||||||
Cost of revenue | 9,867 | 9,985 | 10,635 | 10,275 | 7,696 | ||||||||||||||
Gross margin | 26,133 | 27,990 | 25,824 | 25,555 | 20,060 | ||||||||||||||
Operating expenses | 30,091 | 30,266 | 29,916 | 28,637 | 20,698 | ||||||||||||||
Impairment of goodwill | 600 | — | — | — | — | ||||||||||||||
Income (loss) from operations | (4,558 | ) | (2,276 | ) | (4,092 | ) | (3,082 | ) | (638 | ) | |||||||||
Gain on investment in Mediasite KK | — | — | — | 1,390 | — | ||||||||||||||
Equity in earnings from investment in Mediasite KK | — | — | — | 38 | 209 | ||||||||||||||
Other income (expense), net | (65 | ) | (178 | ) | 46 | 173 | (123 | ) | |||||||||||
Interest expense, net | (495 | ) | (594 | ) | (372 | ) | (231 | ) | — | ||||||||||
Provision for income taxes | 79 | (269 | ) | (107 | ) | (1,104 | ) | (240 | ) | ||||||||||
Net loss | $ | (5,039 | ) | $ | (3,317 | ) | $ | (4,525 | ) | $ | (2,816 | ) | $ | (792 | ) | ||||
Dividends on preferred stock | $ | (169 | ) | - | - | - | - | ||||||||||||
Net loss attributable to shareholders | $ | (5,208 | ) | $ | (3,317 | ) | $ | (4,525 | ) | $ | (2,816 | ) | $ | (792 | ) | ||||
Basic net income (loss) per common share | $ | (1.17 | ) | $ | (0.76 | ) | $ | (1.04 | ) | $ | (0.67 | ) | $ | (0.20 | ) | ||||
Diluted net income (loss) per common share | $ | (1.17 | ) | $ | (0.76 | ) | $ | (1.04 | ) | $ | (0.67 | ) | $ | (0.20 | ) | ||||
Weighted average common shares: – Basic | 4,436,333 | 4,389,421 | 4,332,576 | 4,174,191 | 3,932,692 | ||||||||||||||
– Diluted | 4,436,333 | 4,389,421 | 4,332,576 | 4,174,191 | 3,932,692 | ||||||||||||||
Balance Sheet Data at September 30: | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||
Cash and cash equivalents | $ | 1,211 | $ | 1,794 | $ | 1,976 | $ | 4,344 | $ | 3,482 | |||||||||
Working capital | (4,833 | ) | (3,720 | ) | (618 | ) | 18 | 2,575 | |||||||||||
Total assets | 28,356 | 33,082 | 34,803 | 34,623 | 24,333 | ||||||||||||||
Long-term liabilities | 8,147 | 7,249 | 8,435 | 7,268 | 3,585 | ||||||||||||||
Stockholders’ equity | 3,118 | 6,516 | 7,803 | 11,315 | 10,704 |
• | Revenue recognition, allowance for doubtful accounts and reserves; |
• | Impairment of long-lived assets; |
• | Valuation allowance for net deferred tax assets; and |
• | Accounting for stock-based compensation. |
• | Product and other revenue from the sale of Mediasite recorder units and server software decreased from $16.2 million in fiscal 2016 to $14.9 million in fiscal 2017. Revenue for 208 recorders billed in Q4-2015 and shipped in Q1-2017 to an international customer was recognized during Q1-2017, and the units are included in the units sold figures shown below. The average sales price per unit decreased in fiscal 2017 primarily due to an increase in demand for our low-cost, reduced function recorder. |
2017 | 2016 | ||
Units sold | 1,544 | 1,474 | |
Rack to mobile ratio | 9.1 to 1 | 5.9 to 1 | |
Average sales price, excluding support (000’s) | $7.1 | $7.9 | |
Refresh Units | 457 | 426 |
• | 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 from $21.7 million in fiscal 2016 to $21.1 million in fiscal 2017 due primarily to a decrease in customer support |
• | Other revenue relates to freight charges billed separately to our customers. |
• | Material and freight costs for Mediasite recorders. Costs for fiscal 2017 Mediasite recorder hardware and other costs totaled $3.5 million compared to $3.8 million in fiscal 2016. Freight costs were $259 thousand, and labor and allocated costs were $1.7 million in fiscal 2017 compared to $278 thousand and $1.6 million, respectively, in fiscal 2016. The remaining $644 thousand in fiscal 2017 and $750 thousand in fiscal 2016 relate to material and freight costs for Sonic Foundry International and MSKK. |
• | Services costs. Staff wages and other costs allocated to cost of service revenues were $1.9 million in fiscal 2017 and $2.0 million in fiscal 2016, respectively, resulting in gross margin on services of 82% in fiscal 2017 and 84% in fiscal 2016, respectively. The remaining $1.8 million in fiscal 2017 and $1.5 million in fiscal 2016 relate to costs of providing content hosting, events and technical support services at Sonic Foundry International and MSKK. |
• | Advertising and tradeshow expenses increased $160 thousand. |
• | Public relations expense increased by $123 thousand due to entering into a new contract. |
• | Salary, commissions and benefits expenses decreased by $302 thousand as a result of decreased headcount. |
• | Expenses related to business meetings and travel and entertainment decreased by $161 thousand, primarily due to expense management and venue changes for company meetings. |
• | Overall costs allocated to selling & marketing decreased by $683 thousand, primarily as a result of lower stock compensation and bonus expense. |
• | Selling and marketing expenses for Sonic Foundry International and MSKK accounted for $355 thousand and $2.7 million, respectively in fiscal 2017, an aggregate decrease of $33 thousand from the prior year. |
• | Increase in compensation and benefits of $34 thousand due to an increase in compensation rates and benefits. |
• | Increase in bad debt expense of $369 thousand due to increased allowance for doubtful accounts. |
• | Professional services increased by $123 thousand due to an increase in bank fees, investor relations and audit related expenses. |
• | Travel and entertainment decreased by $69 thousand due reduced travel and changes in policy. |
• | Decrease in costs allocable to G&A of $105 thousand, primarily as a result of lower stock compensation and bonus expense. |
• | G&A expenses for Sonic Foundry International and MSKK accounted for $152 thousand and $896 thousand, respectively in fiscal 2017, an aggregate increase of $9 thousand from the prior year. |
• | Increase in compensation and benefits of $593 thousand due to a higher average headcount during the year, an increase in compensation rates, and the expansion of our international quality assurance team. |
• | Professional services decreased by $128 thousand due to decreased use of outsourced labor. |
• | Costs allocated from G&A decreased by $291 thousand. |
• | Product development expenses for Sonic Foundry International and MSKK accounted for $376 thousand and $266 thousand, respectively for fiscal 2017, an aggregate increase of $203 thousand from the prior year related to the subsidiaries. |
Contractual Obligations: | Total | Less than 1 Year | Years 2-3 | Years 4-5 | Over 5 years | ||||||||||||||
Product purchase commitments | $ | 535 | $ | 535 | $ | — | $ | — | $ | — | |||||||||
Operating lease obligations | 2,493 | 1,239 | 1,136 | 118 | — | ||||||||||||||
Capital lease obligations (a) | 533 | 279 | 240 | 14 | — | ||||||||||||||
Notes payable (a) | 841 | 841 | — | — | — |
(a) | Includes fixed and determinable interest payments |
September 30, | |||||||
2017 | 2016 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,211 | $ | 1,794 | |||
Accounts receivable, net of allowances of $375 and $225 | 7,903 | 9,769 | |||||
Financing receivables, current, net of allowances of $200 and $0 | 925 | 726 | |||||
Inventories | 986 | 1,904 | |||||
Investment in sales-type lease, current | 148 | — | |||||
Prepaid expenses and other current assets | 1,085 | 1,404 | |||||
Total current assets | 12,258 | 15,597 | |||||
Property and equipment: | |||||||
Leasehold improvements | 1,041 | 879 | |||||
Computer equipment | 6,101 | 5,837 | |||||
Furniture and fixtures | 789 | 825 | |||||
Total property and equipment | 7,931 | 7,541 | |||||
Less accumulated depreciation and amortization | 6,181 | 5,510 | |||||
Property and equipment, net | 1,750 | 2,031 | |||||
Other assets: | |||||||
Goodwill | 10,455 | 11,310 | |||||
Customer relationships, net of amortization of $990 and $723 | 1,505 | 1,882 | |||||
Product rights, net of amortization of $411 and $287 | 261 | 385 | |||||
Financing receivables, long-term | 1,310 | 1,151 | |||||
Investment in sales-type lease, long-term | 407 | — | |||||
Other long-term assets | 410 | 726 | |||||
Total assets | $ | 28,356 | $ | 33,082 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Revolving line of credit | $ | 2,065 | $ | 1,772 | |||
Accounts payable | 1,314 | 961 | |||||
Accrued liabilities | 1,387 | 1,883 | |||||
Unearned revenue | 11,332 | 12,834 | |||||
Current portion of capital lease and financing arrangements | 256 | 283 | |||||
Current portion of notes payable, net of discounts | 737 | 1,491 | |||||
Current portion of subordinated note payable | — | 93 | |||||
Total current liabilities | 17,091 | 19,317 | |||||
Long-term portion of unearned revenue | 2,970 | 1,257 | |||||
Long-term portion of capital lease and financing arrangements | 244 | 231 | |||||
Long-term portion of notes payable and warrant debt, net of discounts | 123 | 871 | |||||
Derivative liability, at fair value | 12 | 67 | |||||
Other liabilities | 372 | 259 | |||||
Deferred tax liability | 4,426 | 4,564 | |||||
Total liabilities | 25,238 | 26,566 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
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 2,500 shares; 1,510 shares issued and outstanding, at amounts paid in | 1,280 | — |
5% Preferred stock, Series B, voting, cumulative, convertible, $.01 par value (liquidation preference at par), authorized 1,000,000 shares, none issued | — | — | |||||
Common stock, $.01 par value, authorized 10,000,000 shares; 4,470,791 and 4,424,275 shares issued and 4,458,075 and 4,411,559 shares outstanding | 45 | 44 | |||||
Additional paid-in capital | 197,836 | 197,064 | |||||
Accumulated deficit | (195,253 | ) | (190,214 | ) | |||
Accumulated other comprehensive loss | (595 | ) | (183 | ) | |||
Receivable for common stock issued | (26 | ) | (26 | ) | |||
Treasury stock, at cost, 12,716 shares | (169 | ) | (169 | ) | |||
Total stockholders’ equity | 3,118 | 6,516 | |||||
Total liabilities and stockholders’ equity | $ | 28,356 | $ | 33,082 |
Years Ended September 30, | |||||||
2017 | 2016 | ||||||
Revenue: | |||||||
Product and other | $ | 14,883 | $ | 16,241 | |||
Services | 21,117 | 21,734 | |||||
Total revenue | 36,000 | 37,975 | |||||
Cost of revenue: | |||||||
Product and other | 6,097 | 6,459 | |||||
Services | 3,770 | 3,526 | |||||
Total cost of revenue | 9,867 | 9,985 | |||||
Gross margin | 26,133 | 27,990 | |||||
Operating expenses: | |||||||
Selling and marketing | 16,912 | 17,801 | |||||
General and administrative | 5,941 | 5,628 | |||||
Product development | 7,238 | 6,837 | |||||
Impairment of goodwill | 600 | — | |||||
Total operating expenses | 30,691 | 30,266 | |||||
Loss from operations | (4,558 | ) | (2,276 | ) | |||
Non-operating income (expenses): | |||||||
Interest expense, net | (495 | ) | (594 | ) | |||
Other expense | (65 | ) | (178 | ) | |||
Total non-operating expenses | (560 | ) | (772 | ) | |||
Loss before income taxes | (5,118 | ) | (3,048 | ) | |||
Provision for income taxes | 79 | (269 | ) | ||||
Net loss | $ | (5,039 | ) | $ | (3,317 | ) | |
Dividends on preferred stock | (169 | ) | — | ||||
Net loss attributable to common stockholders | $ | (5,208 | ) | $ | (3,317 | ) | |
Loss per common share: | |||||||
Basic net loss per common share | $ | (1.17 | ) | $ | (0.76 | ) | |
Diluted net loss per common share | $ | (1.17 | ) | $ | (0.76 | ) | |
Weighted average common shares – Basic | 4,436,333 | 4,389,421 | |||||
– Diluted | 4,436,333 | 4,389,421 |
Years Ended September 30, | |||||||
2017 | 2016 | ||||||
Net loss | $ | (5,039 | ) | $ | (3,317 | ) | |
Foreign currency translation adjustment | (412 | ) | 939 | ||||
Comprehensive loss | $ | (5,451 | ) | $ | (2,378 | ) |
Common stock | Preferred stock | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive loss | Receivable for common stock issued | Treasury stock | Total | ||||||||||||||||||||||||
Balance, September 30, 2015 | $ | 44 | $ | — | $ | 195,973 | $ | (186,897 | ) | $ | (1,122 | ) | $ | (26 | ) | $ | (169 | ) | $ | 7,803 | |||||||||||
Stock compensation | — | — | 847 | — | — | — | — | 847 | |||||||||||||||||||||||
Issuance of common stock | — | — | 244 | — | — | — | — | 244 | |||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | 939 | — | — | 939 | |||||||||||||||||||||||
Net loss | — | — | — | (3,317 | ) | — | — | — | (3,317 | ) | |||||||||||||||||||||
Balance, September 30, 2016 | $ | 44 | $ | — | $ | 197,064 | $ | (190,214 | ) | $ | (183 | ) | $ | (26 | ) | $ | (169 | ) | $ | 6,516 | |||||||||||
Stock compensation | — | — | 754 | — | — | — | — | 754 | |||||||||||||||||||||||
Issuance of common stock | 1 | — | 48 | — | — | — | — | 49 | |||||||||||||||||||||||
Issuance of preferred stock | — | 1,250 | — | — | — | — | — | 1,250 | |||||||||||||||||||||||
Preferred stock dividends | 30 | (30 | ) | — | — | — | — | — | |||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | (412 | ) | — | — | (412 | ) | |||||||||||||||||||||
Net loss | — | — | — | (5,039 | ) | — | — | — | (5,039 | ) | |||||||||||||||||||||
Balance, September 30, 2017 | $ | 45 | $ | 1,280 | $ | 197,836 | $ | (195,253 | ) | $ | (595 | ) | $ | (26 | ) | $ | (169 | ) | $ | 3,118 |
Years Ended September 30, | |||||||
2017 | 2016 | ||||||
Operating activities | |||||||
Net loss | $ | (5,039 | ) | $ | (3,317 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Amortization of other intangibles | 555 | 652 | |||||
Depreciation and amortization of property and equipment | 1,422 | 1,553 | |||||
Impairment of goodwill | 600 | — | |||||
Loss on sale of fixed assets | 8 | 72 | |||||
Provision for doubtful accounts - including financing receivables | 349 | 75 | |||||
Deferred taxes | (103 | ) | 341 | ||||
Stock-based compensation expense related to stock options and warrants | 622 | 861 | |||||
Remeasurement gain on subordinated debt | (6 | ) | (3 | ) | |||
Remeasurement gain on derivative liability | (55 | ) | (58 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 1,613 | 2,887 | |||||
Financing receivables | (558 | ) | (1,546 | ) | |||
Inventories | 904 | 514 | |||||
Prepaid expenses and other current assets | 89 | (532 | ) | ||||
Accounts payable and accrued liabilities | (109 | ) | (966 | ) | |||
Other long-term liabilities | 129 | (60 | ) | ||||
Unearned revenue | 250 | 1,243 | |||||
Net cash provided by operating activities | 671 | 1,716 | |||||
Investing activities | |||||||
Purchases of property and equipment | (839 | ) | (339 | ) | |||
Net cash used in investing activities | (839 | ) | (339 | ) | |||
Financing activities | |||||||
Proceeds from notes payable | — | 500 | |||||
Proceeds from line of credit | 23,257 | 17,845 | |||||
Payments on notes payable | (1,727 | ) | (1,693 | ) | |||
Payments on line of credit | (22,928 | ) | (17,958 | ) | |||
Payment of debt issuance costs | (26 | ) | (36 | ) | |||
Proceeds from issuance of preferred stock, common stock and warrants | 1,298 | 66 | |||||
Payments on capital lease and financing arrangements | (348 | ) | (278 | ) | |||
Net cash used in financing activities | (474 | ) | (1,554 | ) | |||
Changes in cash and cash equivalents due to changes in foreign currency | 59 | (5 | ) | ||||
Net decrease in cash and cash equivalents | (583 | ) | (182 | ) | |||
Cash and cash equivalents at beginning of year | 1,794 | 1,976 | |||||
Cash and cash equivalents at end of year | $ | 1,211 | $ | 1,794 | |||
Supplemental cash flow information: | |||||||
Interest paid | $ | 505 | $ | 529 | |||
Income taxes paid, foreign | 111 | 27 | |||||
Non-cash financing and investing activities: | |||||||
Property and equipment financed by capital lease or accounts payable | 341 | 402 | |||||
Debt discount | — | 16 | |||||
Stock issued for board of director's fees | 133 | 164 |
Deemed dividend for beneficial conversion feature of preferred stock | 139 | — | |||||
Preferred stock dividend paid in additional shares | 30 | — | |||||
Warrants issued for investor relations services | — | 14 |
September 30, 2017 | September 30, 2016 | ||||||
Customer support contracts, current and long-term, gross | $ | 384 | $ | — | |||
Product receivables, gross | $ | 2,051 | $ | 1,877 | |||
Allowance for losses on financing receivables | $ | (200 | ) | $ | — | ||
$ | 2,235 | $ | 1,877 |
September 30, 2017 | September 30, 2016 | ||||||
Investment in sales-type lease | $ | 555 | $ | — | |||
$ | 555 | $ | — |
September 30, | |||||||
2017 | 2016 | ||||||
Raw materials and supplies | $ | 156 | $ | 149 | |||
Finished goods | 830 | 1,755 | |||||
$ | 986 | $ | 1,904 |
Years | |
Leasehold improvements | 5 to 10 years |
Computer equipment | 3 to 5 years |
Furniture and fixtures | 5 to 7 years |
September 30, 2017 | Level 1 | Level 2 | Level 3 | Total Fair Value | |||||||||||
Derivative liability | $ | — | $ | 12 | $ | — | $ | 12 |
September 30, 2016 | Level 1 | Level 2 | Level 3 | Total Fair Value | |||||||||||
PFG debt, net of discount | $ | — | $ | — | $ | 1,225 | $ | 1,225 | |||||||
Warrant debt | — | — | 102 | 102 | |||||||||||
Derivative liability | — | 67 | — | 67 | |||||||||||
$ | — | $ | 67 | $ | 1,327 | $ | 1,394 |
PFG Debt, net of discount | Warrant Debt | ||||||
Balance as of September 30, 2016 | $ | 1,225 | $ | 102 | |||
Activity during the period: | |||||||
Payments to PFG | (807 | ) | — | ||||
Change in fair value | 73 | 21 | |||||
Balance as of September 30, 2017 | $ | 491 | $ | 123 |
Years Ending September 30, | |||
2017 | 2016 | ||
Expected life | 4.7 - 4.9 years | 4.9 – 5.0 years | |
Risk-free interest rate | 1.08%-1.51% | 0.84%-1.23% | |
Expected volatility | 56.98%-62.21% | 53.8%-57.2% | |
Expected forfeiture rate | 10.17%-11.72% | 10.3 %-11.8% | |
Expected exercise factor | 1.29-1.35 | 1.35-1.44 | |
Expected dividend yield | —% | —% |
Years Ending September 30, | |||||
2017 | 2016 | ||||
Denominator for basic earnings (loss) per share | |||||
-weighted average common shares | 4,436,333 | 4,389,421 | |||
Effect of dilutive options and warrants (treasury method) | — | — | |||
Denominator for diluted earnings (loss) per share | |||||
-adjusted weighted average common shares | 4,436,333 | 4,389,421 | |||
Options and warrants outstanding during each year, but not included in the computation of diluted earnings (loss) per share because they are antidilutive | 1,940,245 | 1,737,624 |
Fiscal Year (in thousands) | Capital | ||
2018 | $ | 279,025 | |
2019 | 181,359 | ||
2020 | 58,887 | ||
2021 | 11,482 | ||
2022 | 2,689 | ||
Total payments | 533,441 | ||
Less interest | (33,314 | ) | |
Total | $ | 500,127 |
Fiscal Year (in thousands) | Operating | ||
2018 | $ | 1,239 | |
2019 | 661 | ||
2020 | 474 | ||
2021 | 119 | ||
2022 | — | ||
Total | $ | 2,493 |
Fiscal Year (in thousands) | |||
2018 | $ | 816 | |
Plus warrant debt & discount | 76 | ||
Total | $ | 892 |
September 30, | |||||||
2017 | 2016 | ||||||
Accrued compensation | $ | 871 | $ | 1,258 | |||
Accrued expenses | 211 | 365 | |||||
Accrued interest & taxes | 288 | 257 | |||||
Other accrued liabilities | 17 | 3 | |||||
Total | $ | 1,387 | $ | 1,883 |
Qualified Employee Stock Option Plans | Director Stock Option Plans | ||||
Shares available for grant at September 30, 2015 | 586,031 | 17,000 | |||
Options granted | (233,381 | ) | (10,500 | ) | |
Options forfeited | 14,239 | — | |||
Shares available for grant at September 30, 2016 | 366,889 | 6,500 | |||
Stockholder approval to increase shares | 900,000 | 50,000 | |||
Options granted | (312,020 | ) | (8,500 | ) | |
Options forfeited | 53,521 | — | |||
Shares available for grant at September 30, 2017 | 1,008,390 | 48,000 |
Years Ended September 30, | |||||||||||||||
2017 | 2016 | ||||||||||||||
Options | Weighted Average Exercise Price | Options | Weighted Average Exercise Price | ||||||||||||
Outstanding at beginning of year | 1,602,822 | $ | 9.51 | 1,449,409 | $ | 10.03 | |||||||||
Granted | 320,520 | 4.73 | 243,881 | 7.16 | |||||||||||
Exercised | — | — | (2,968 | ) | 6.74 | ||||||||||
Forfeited | (117,899 | ) | 14.62 | (87,500 | ) | 11.02 | |||||||||
Outstanding at end of year | 1,805,443 | $ | 8.33 | 1,602,822 | $ | 9.51 | |||||||||
Exercisable at end of year | 1,260,609 | 1,062,837 | |||||||||||||
Weighted average fair value of options granted during the year | $ | 1.82 | $ | 2.62 |
Options Outstanding | Options Exercisable | ||||||||||||||
Exercise Prices | Options Outstanding at September 30, 2017 | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Options Exercisable at September 30, 2017 | Weighted Average Exercise Price | ||||||||||
$ 3.20 to $4.88 | 302,695 | 9.22 | $ | 4.72 | 6,650 | $ | 4.70 | ||||||||
5.00 to 9.81 | 1,190,948 | 5.67 | 8.18 | 960,219 | 8.22 | ||||||||||
10.00 to 24.90 | 311,800 | 4.49 | 12.41 | 293,740 | 12.54 | ||||||||||
1,805,443 | 1,260,609 |
Shares | Weighted Average Grant Date Fair Value | |||||
Non-vested shares at October 1, 2016 | 539,985 | $ | 3.21 | |||
Granted | 320,520 | 1.82 | ||||
Vested | (276,430 | ) | 3.14 | |||
Forfeited | (39,241 | ) | 2.56 | |||
Non-vested shares at September 30, 2017 | 544,834 | $ | 2.42 |
Years Ended September 30, | |||||||
2017 | 2016 | ||||||
Current tax expense (benefit) U.S. | $ | (96 | ) | $ | 136 | ||
Current tax expense (benefit) foreign | 17 | 133 | |||||
Deferred income tax expense | — | — | |||||
Provision for income taxes | $ | (79 | ) | $ | 269 |
Years Ended September 30, | |||||||
2017 | 2016 | ||||||
U.S. | $ | (5,225 | ) | $ | (3,504 | ) | |
Foreign | 107 | 456 | |||||
Income (loss) before income taxes | $ | (5,118 | ) | $ | (3,048 | ) |
Years Ended September 30, | |||||||
2017 | 2016 | ||||||
Income tax expense (benefit) at statutory rate | $ | (1,800 | ) | $ | (1,036 | ) | |
State income tax expense (benefit) | (192 | ) | (130 | ) | |||
Foreign tax activity | 41 | 9 | |||||
R&D tax credit expiration | — | — | |||||
Permanent differences, net | 469 | 274 | |||||
Adjustment of temporary differences to income tax returns | — | — | |||||
Change in valuation allowance | 1,403 | 1,152 | |||||
Income tax expense (benefit) | $ | (79 | ) | $ | 269 |
September 30, | |||||||
2017 | 2016 | ||||||
Deferred tax assets: | |||||||
Net operating loss and other carryforwards | $ | 35,529 | $ | 34,563 | |||
Common stock options | 1,246 | 1,134 | |||||
Unearned revenue | 520 | 389 | |||||
Other | 650 | 423 | |||||
Total deferred tax assets | 37,945 | 36,509 | |||||
Deferred tax liabilities: | |||||||
Other | (146 | ) | (144 | ) | |||
Total deferred tax liabilities | (146 | ) | (144 | ) | |||
Net deferred tax asset | 37,799 | 36,365 | |||||
Valuation allowance | (37,702 | ) | (36,299 | ) | |||
Equity gains on investment in Mediasite KK | (916 | ) | (916 | ) | |||
Customer relationships | (570 | ) | (718 | ) | |||
Goodwill amortization | (2,940 | ) | (2,930 | ) | |||
Net deferred tax liability for goodwill and intangible assets amortization | $ | (4,329 | ) | $ | (4,498 | ) |
Balance as of September 30, 2015 | $ | 10,853 | |
Foreign currency translation adjustment | 457 | ||
Balance as of September 30, 2016 | 11,310 | ||
Accumulated impairment losses | (600 | ) | |
Foreign currency translation adjustment | (255 | ) | |
Balance as of September 30, 2017 | $ | 10,455 |
(in thousands) | Life (years) | Gross | Accumulated Amortization at September 30, 2017 | Balance at September 30, 2017 | ||||||
Amortizable: | ||||||||||
Customer relationships | 10 | 2,495 | 990 | 1,505 | ||||||
Software development costs | 3 | 533 | 533 | — | ||||||
Product rights | 6 | 672 | 411 | 261 | ||||||
Total | 3,700 | 1,934 | 1,766 |
(in thousands) | Life (years) | Gross | Accumulated Amortization at September 30, 2016 | Balance at September 30, 2016 | ||||||
Amortizable: | ||||||||||
Customer relationships | 10 | 2,605 | 723 | 1,882 | ||||||
Software development costs | 3 | 533 | 533 | — | ||||||
Product rights | 6 | 672 | 287 | 385 | ||||||
Total | 3,810 | 1,543 | 2,267 |
Fiscal Year (in thousands) | |||
2018 | $ | 389 | |
2019 | 362 | ||
2020 | 302 | ||
2021 | 273 | ||
2022 | 266 | ||
Thereafter | 174 | ||
Total | $ | 1,766 |
Years Ended September 30, | |||||||
2017 | 2016 | ||||||
United States | $ | 21,476 | $ | 22,686 | |||
Europe and Middle East | 4,720 | 4,843 | |||||
Asia | 8,267 | 8,760 | |||||
Other | 1,537 | 1,686 | |||||
Total | $ | 36,000 | $ | 37,975 |
Quarterly Financial Data | |||||||||||||||||||||||||||||||
(in thousands except per share data) | Q4-’17 | Q3-’17 | Q2-’17 | Q1-’17 | Q4-’16 | Q3-’16 | Q2-’16 | Q1-’16 | |||||||||||||||||||||||
Revenue | $ | 8,300 | $ | 9,833 | $ | 8,560 | $ | 9,307 | $ | 9,455 | $ | 9,817 | $ | 9,612 | $ | 9,091 | |||||||||||||||
Gross margin | 6,113 | 7,247 | 6,064 | 6,709 | 7,102 | 7,235 | 7,273 | 6,380 | |||||||||||||||||||||||
Income (loss) from operations | (1,411 | ) | (371 | ) | (1,274 | ) | (1,502 | ) | (493 | ) | (452 | ) | (214 | ) | (1,117 | ) | |||||||||||||||
Net income (loss) | (1,585 | ) | (489 | ) | (1,456 | ) | (1,509 | ) | (847 | ) | (552 | ) | (711 | ) | (1,207 | ) | |||||||||||||||
Basic and diluted net income (loss) per share | $ | (0.37 | ) | $ | (0.13 | ) | $ | (0.33 | ) | $ | (0.34 | ) | $ | (0.19 | ) | $ | (0.13 | ) | $ | (0.16 | ) | $ | (0.28 | ) |
(a) | The following financial statements are filed as part of this report: |
1 | Financial Statements furnished are listed in the Table of Contents provided in response to Item 8. |
2 | Exhibits. |
NUMBER | DESCRIPTION | ||
3.1 | |||
3.2 | |||
3.3 | |||
3.4 | |||
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 | |||
10.33 | |||
10.34 | |||
10.35 | |||
10.36 | |||
21 | |||
23.1 | |||
31.1 | |||
31.2 | |||
32 | |||
101 | The following materials from the Sonic Foundry, Inc. Form 10-K for the year ended September 30, 2017 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Operations, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Comprehensive Loss, (iv) the Consolidated Statements of Stockholder’s Equity, (v) the Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements. |
* | Compensatory Plan or Arrangement |
By: | /s/ Gary R. Weis | |
Gary R. Weis Chairman and Chief Executive Officer | ||
Date: | January 12, 2018 |
Signature | Title | Date | ||
/s/ Gary R. Weis | Chief Executive Officer and Director | January 12, 2018 | ||
/s/ Kenneth A. Minor | Chief Financial Officer and Secretary | January 12, 2018 | ||
/s/ Mark D. Burish | Chair and Director | January 12, 2018 | ||
/s/ Frederick H. Kopko, Jr. | Director | January 12, 2018 | ||
/s/ Brian T. Wiegand | Director | January 12, 2018 | ||
/s/ Nelson A. Murphy | Director | January 12, 2018 | ||
/s/ David F. Slayton | Director | January 12, 2018 |
1. | I have reviewed this Annual Report on Form 10-K of Sonic Foundry, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within that entity, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Gary R. Weis | |
By: Gary R. Weis | ||
Title: Chief Executive Officer |
1. | I have reviewed this Annual Report on Form 10-K of Sonic Foundry, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within that entity, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Kenneth A. Minor | |
By: Kenneth A. Minor | ||
Title: Chief Financial Officer and Secretary |
By: | /s/ Gary R. Weis | |
By: | Gary R. Weis | |
Title: | Chief Executive Officer | |
By: | /s/ Kenneth A. Minor | |
By: | Kenneth A. Minor | |
Title: | Chief Financial Officer and Secretary | |
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Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Dec. 29, 2017 |
Mar. 31, 2017 |
|
Document And Entity Information [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Sep. 30, 2017 | ||
Document Fiscal Year Focus | 2017 | ||
Document Fiscal Period Focus | FY | ||
Trading Symbol | SOFO | ||
Entity Registrant Name | SONIC FOUNDRY INC | ||
Entity Central Index Key | 0001029744 | ||
Current Fiscal Year End Date | --09-30 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Common Stock, Shares Outstanding | 4,458,075 | ||
Entity Public Float | $ 19,284,000 |
Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (5,039) | $ (3,317) |
Foreign currency translation adjustment | (412) | 939 |
Comprehensive loss | $ (5,451) | $ (2,378) |
Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands |
Total |
Common Stock [Member] |
Preferred Stock [Member] |
Additional Paid-in Capital |
Accumulated Deficit [Member] |
Accumulated Other Comprehensive Loss [Member] |
Receivable for Common Stock Issued [Member] |
Treasury Stock [Member] |
---|---|---|---|---|---|---|---|---|
Beginning balance at Sep. 30, 2015 | $ 7,803 | $ 44 | $ 0 | $ 195,973 | $ (186,897) | $ (1,122) | $ (26) | $ (169) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Stock compensation | 847 | 847 | ||||||
Issuance of common stock | 244 | 244 | ||||||
Foreign currency translation adjustment | 939 | 939 | ||||||
Net loss | (3,317) | (3,317) | ||||||
Ending balance at Sep. 30, 2016 | 6,516 | 44 | 0 | 197,064 | (190,214) | (183) | (26) | (169) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Stock compensation | 754 | 754 | ||||||
Issuance of common stock | 49 | 1 | 48 | |||||
Issuance of preferred stock | 1,250 | 1,250 | ||||||
Preferred stock dividends | 0 | 30 | 30 | |||||
Foreign currency translation adjustment | (412) | (412) | ||||||
Net loss | (5,039) | (5,039) | ||||||
Ending balance at Sep. 30, 2017 | $ 3,118 | $ 45 | $ 1,280 | $ 197,836 | $ (195,253) | $ (595) | $ (26) | $ (169) |
Basis of Presentation and Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Significant Accounting Policies | Basis of Presentation and Significant Accounting Policies Business Sonic Foundry, Inc. (the Company) is in the business of providing enterprise solutions and services for the web communications market. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Sonic Foundry Media Systems, Inc., Sonic Foundry International B.V. (formerly Media Mission B.V.) and Mediasite K.K. All significant intercompany transactions and balances have been eliminated. The name change for the subsidiary formerly known as Media Mission B.V. occurred in October 2016. Prior to January 2014, the Company owned approximately 26% of Mediasite KK and accounted for its investment under the equity method of accounting. On January 14, 2014, the Company purchased the remaining 74% of Mediasite KK. Reclassifications Reclassifications have been made to the September 30, 2016 financial statements to conform to the September 30, 2017 presentation. These reclassifications had no effect on the Company’s net loss or stockholders’ equity as previously reported. See Financing Receivables below for additional details. Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America (US GAAP), management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the period. Actual results could differ from those estimates. Revenue Recognition General Revenue is recognized when persuasive evidence of an arrangement exists, delivery occurs or services are rendered, the sales price is fixed or determinable and collectability is reasonably assured. Revenue is deferred when undelivered products or services are essential to the functionality of delivered products, customer acceptance is uncertain, significant obligations remain, or the fair value of undelivered elements is unknown. Typically, the Company does not offer customers the right to return product, other than for exchange or repair pursuant to a warranty or stock rotation. The Company’s policy is to reduce revenue if it incurs an obligation for price rebates or other such programs during the period the obligation is reasonably estimated to occur. The following policies apply to the Company’s major categories of revenue transactions. Products Products are considered delivered, and revenue is recognized, when title and risk of loss have been transferred to the customer or upon customer acceptance if non-delivered products or services are essential to the functionality of delivered products. Under the terms and conditions of the sale, this occurs at the time of shipment to the customer. Product revenue currently represents sales of our Mediasite recorder and Mediasite related products such as our server software and other software licenses. If a license is time-based, the revenue is recognized over the term of the license agreement. Services The Company sells support and content hosting contracts to our customers, typically one year in length, and records the related revenue ratably over the contractual period. Our support contracts cover phone and electronic technical support availability over and above the level provided by our distributors, software upgrades on a when and if available basis, advance hardware replacement and an extension of the standard hardware warranty from 90 days to one year. The manufacturers the Company contracts with to build the units provide a limited one-year warranty on the hardware. The Company also sells installation, training, event webcasting, and customer content hosting services. Revenue for those services is recognized when performed in the case of installation, training and event webcasting services. Occasionally, the Company will sell customization services to enhance the server software. Revenue from those services is recognized when performed, if perfunctory, or under contract accounting. Service amounts invoiced to customers in excess of revenue recognized are recorded as deferred revenue until the revenue recognition criteria are met. Revenue Arrangements that Include Multiple Elements Sales of software, with or without installation, training, and post customer support fall within the scope of the software revenue recognition rules. Under the software revenue recognition rules, the fee from a multiple-deliverable arrangement is allocated to each of the undelivered elements based upon vendor-specific objective evidence (VSOE), which is limited to the price charged when the same deliverable is sold separately, with the residual value from the arrangement allocated to the delivered element. The portion of the fee that is allocated to each deliverable is then recognized as revenue when the criteria for revenue recognition are met with respect to that deliverable. If VSOE does not exist for all of the undelivered elements, then all revenue from the arrangement is typically deferred until all elements have been delivered to the customer. In the case of the Company’s hardware products with embedded software, the Company has determined that the hardware and software components function together to deliver the product’s essential functionality, and therefore, the revenue from the sale of these products is accounted for under the revenue recognition rules for tangible products whereby the fee from a multiple-deliverable arrangement is allocated to each of the deliverables based upon their relative selling prices as determined by a selling-price hierarchy. A deliverable in an arrangement qualifies as a separate unit of accounting if the delivered item has value to the customer on a stand-alone basis. A delivered item that does not qualify as a separate unit of accounting is combined with the other undelivered items in the arrangement and revenue is recognized for those combined deliverables as a single unit of accounting. The selling price used for each deliverable is based upon VSOE if available, from third-party evidence (TPE) if VSOE is not available, and best estimate of selling price (ESP) if neither VSOE nor TPE are available. TPE is the price of the Company’s or any competitor’s largely interchangeable products or services in stand-alone sales to similarly situated customers. ESP is the price at which the Company would sell the deliverable if it were sold regularly on a stand-alone basis, considering market conditions and entity-specific factors. All revenue arrangements, excluding the sale of all software-only products and associated services, have been accounted for under this guidance. The selling prices used in the relative selling price allocation method are as follows: (1)the Company’s products and services are based upon VSOE and (2) hardware products with embedded software, for which VSOE does not exist, are based upon ESP. The Company does not believe TPE exists for any of these products and services because they are differentiated from competing products and services in terms of functionality and performance and there are no competing products or services that are largely interchangeable. Management establishes ESP for hardware products with embedded software using a cost plus margin approach with consideration for market conditions, such as the impact of competition and geographic considerations, and entity-specific factors, such as the cost of the product and the Company’s profit objectives. Management believes that ESP is reflective of reasonable pricing of that deliverable as if priced on a stand-alone basis. When a sales transaction includes deliverables that are divided between Accounting Standards Codification (ASC) Topic 605 and ASC Subtopic 985-605, the Company allocates the selling price using the relative selling price method whereas value is allocated using an ESP for software developed using a percent of list price approach. The other deliverables are valued using ESP or VSOE as previously discussed. While the pricing model, currently in use, captures all critical variables, unforeseen changes due to external market forces may result in a revision of the inputs. These modifications may result in the consideration allocation differing from the one presently in use. Absent a significant change in the pricing inputs or the way in which the industry structures its transactions, future changes in the pricing model are not expected to materially affect our allocation of arrangement consideration. Management has established VSOE for hosting services. Billings for hosting are spread ratably over the term of the hosting agreement, with the typical hosting agreement having a term of 1 year, with renewal on an annual basis. The Company sells most hosting contracts without the inclusion of products. When the hosting arrangement is sold in conjunction with product, the product revenue is recognized immediately while the remaining hosting revenue is spread ratably over the term of the hosting agreement. The selling price is allocated between these elements using the relative selling price method. The Company uses ESP for development of the selling price for hardware products with embedded software. The Company also offers hosting services bundled with events services. The Company uses VSOE to establish relative selling prices for its events services. The Company recognizes events revenue when the event takes place and recognizes the hosting revenue over the term of the hosting agreement. The total amount of the arrangement is allocated to each element based on the relative selling price method. Reserves The Company reserves for stock rotations, price adjustments, rebates, and sales incentives to reduce revenue and accounts receivable for these and other credits granted to customers. Such reserves are recorded at the time of sale and are calculated based on historical information (such as rates of product stock rotations) and the specific terms of sales programs, taking into account any other known information about likely customer behavior. If actual customer behavior differs from our expectations, it may compromise our ability to recognize revenue to these distributors at the time of shipment. Also, if the Company determines that it can no longer accurately estimate amounts for stock rotations and sales incentives, the Company would not be able to recognize revenue until resellers sell the inventory to the final end user. Shipping and Handling The Company’s shipping and handling costs billed to customers are included in other revenue. Costs related to shipping and handling are included in cost of revenue and are recorded at the time of shipment to the customer. Concentration of Credit Risk and Other Risks and Uncertainties As of September 30, 2017, of the $1.2 million in cash and cash equivalents, $103 thousand is deposited with 2 major U.S. financial institutions. At times, deposits in these institutions exceed the amount of insurance provided on such deposits. The Company has not experienced any losses on such amounts and believes that it is not exposed to any significant credit risk on these balances. The remaining $1.1 million of cash and cash equivalents is held by our foreign subsidiaries in financial institutions in Japan and the Netherlands and held in their local currency. The cash held in foreign financial institutions is not guaranteed. We assess the realization of our receivables by performing ongoing credit evaluations of our customers’ financial condition. Through these evaluations, we may become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. Our reserve requirements are based on the best facts available to us and are reevaluated and adjusted as additional information is received. Our reserves are also based on amounts determined by using percentages applied to certain aged receivable categories. These percentages are determined by a variety of factors including, but not limited to, current economic trends, historical payment and bad debt write-off experience. Allowance for doubtful accounts for accounts receivable and financing receivables was $575,000 at September 30, 2017 and $225,000 at September 30, 2016. We had billings for Mediasite product and support services as a percentage of total billings to one distributor of approximately 11% in 2017 and 14% in 2016 and to a second distributor of approximately 15% in 2017 and 13% in 2016. At September 30, 2017 and 2016, these two distributors represented 23% and 28% of total accounts receivable, respectively. Currently all of our product inventory purchases are from one third-party contract manufacturer. Although we believe there are multiple sources of supply from other contract manufacturers as well as multiple suppliers of component parts required by the contract manufacturers, a disruption of supply of component parts or completed products, even if short term, would have a material negative impact on our revenues. At September 30, 2017 and 2016, this supplier represented 27% and 40%, respectively, of total accounts payable. We also license technology from third parties that is embedded in our software. We believe there are alternative sources of similar licensed technology from other third parties that we could also embed in our software, although it could create potential programming related issues that might require engineering resources. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of September 30, 2017, of the $1.2 million aggregate cash and cash equivalents held by the Company, the amount of cash and cash equivalents held by our foreign subsidiaries was $1.1 million. If the funds held by our foreign subsidiaries were needed for our operations in the United States, the repatriation of some of these funds to the United States could require payment of additional U.S. taxes. Trade Accounts Receivable The majority of the Company’s accounts receivable are due from entities in, or distributors or value added resellers to, the education, corporate and government sectors. Credit is extended based on evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts receivable are typically due within 30 days and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered to be past due. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes-off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Interest is not accrued on past due receivables. Financing Receivables Financing receivables consist of customer receivables resulting from the sale of the Company's products and services, primarily software and long-term customer support contracts, and are presented net of allowance for losses. The Company has a single portfolio consisting of fixed-term receivables, which is further segregated into two classes based on products, customer type, and credit risk evaluation. The Company generally determines its allowance for losses on financing receivables at the customer class level by considering a number of factors, including the length of time financing receivable are past due, historical and anticipated experience, the customer’s current ability to pay its obligation, and the condition of the general economy and the industry as a whole. The Company writes-off financing receivables when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for financing receivable losses. Interest is not accrued on past due receivables. There was an allowance of $200 thousand and $0 at September 30, 2017 and 2016, respectively. The Company's financing receivables are aggregated into the following categories: Long-term customer support contracts: These contracts are typically entered into in conjunction with sale-type lease arrangements, over the life of which the Company agrees to provide support services similar to those offered within Mediasite Customer Care plans. Contract terms range from 3-5 years, and payments are generally due from the customer annually on the contract anniversary. There was $384 thousand and $0 of receivables outstanding for long-term customer support contracts as of September 30, 2017 and 2016, respectively. All amounts due were current as of the balance sheet date and there are no credit losses expected to be incurred related to long-term support contracts. Product receivables: Amounts due primarily represent sales of perpetual software licenses to a single international distributor on invoices outstanding for product delivered from March 2016 through June 2017. In prior years receivables related to this customer were classified as trade accounts receivable, however these were reclassified to financing receivables as of September 30, 2017 (and also within the September 30, 2016 consolidated balance sheets and statements of cash flows for comparability) as the Company is currently in the process of considering revised payment terms, potentially extending through December 2018. There was $2.1 million receivable as of September 30, 2017, $1.5 million of which has been deferred for revenue recognition purposes due to a history of delayed payment. As of September 30, 2016, $1.9 million was receivable from this customer, of which $625 thousand was deferred. The Company delivered $901 thousand of product to this customer and received payment of $726 thousand in FY2017. As a result of the circumstances described, the entire allowance for losses on financing receivables of $200 thousand is considered attributable to this class of customer as of September 30, 2017. As of September 30, 2017 financing receivables consisted of the following (in thousands):
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. All amounts due are current as of the balance sheet date. As of September 30, 2017 investment in sales-type leases consisted of the following (in thousands):
Inventory Valuation 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 market, with cost determined on a first-in, first-out basis. Inventory consists of the following (in thousands):
Capitalized Software Development Costs Software development costs incurred in conjunction with product development are charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs are capitalized and reported at the net realizable value of the related product. Typically the period between achieving technological feasibility of the Company’s products and the general availability of the products has been short. Consequently, software development costs qualifying for capitalization are typically immaterial and are generally expensed to research and development costs. During 2013, the Company’s My Mediasite product release required software capitalization since there was a longer period between technological feasibility and the general availability of the product. Upon product release, the amortization of software development costs is determined annually as the greater of the amount computed using the ratio of current gross revenues for the products to their total of current and anticipated future gross revenues or the straight-line method over the estimated economic life of the products, expected to be three years. Amortization expense of software development costs of $0 thousand and $104 thousand is included in Cost of Revenue – Product for each of the years ending September 30, 2017 and 2016, respectively. The gross amount of capitalized external and internal development costs was $533 thousand at September 30, 2017 and 2016. There were no software development efforts that qualified for capitalization for the years ended September 30, 2017 or 2016, respectively. Property and Equipment Property and equipment are recorded at cost and are depreciated using the straight-line method for financial reporting purposes. The estimated useful lives used to calculate depreciation are as follows:
Impairment of Long-Lived Assets Goodwill has an indefinite useful life and is recorded at cost and not amortized but, instead, tested at least annually for impairment. We assess the impairment of goodwill on an annual basis or whenever events or changes in circumstances indicate that the fair value of these assets is less than the carrying value. If a qualitative assessment is used and the Company determines that the fair value of goodwill is more likely than not (i.e., a likelihood of more than 50%) less than its carrying amount, a quantitative impairment test will be performed. If goodwill is quantitatively assessed for impairment, the Company compares the estimated fair value of the reporting unit to which goodwill is allocated to its carrying value. The amount of impairment, if any, is equal to the amount by which the carrying value of the reporting unit exceeds its fair value. For purposes of the fiscal 2017 and 2016 tests, goodwill balances are evaluated within three separate reporting units. In fiscal 2016, we performed a two-step goodwill test and determined that the fair value of goodwill was more than the carrying value. In fiscal 2017, we performed a quantitative analysis and determined that the fair value of one of the Company's reporting units is less than its carrying value, and that the fair value of the remaining reporting units is greater than their respective carrying values. The Company recognized impairment charges of $600 thousand and $0 as of September 30, 2017 and 2016, respectively. Long-lived assets and intangible assets other than goodwill are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based on expected undiscounted cash flows attributable to that asset. For the year ended September 30, 2017, it was determined that changes in circumstances were present, primarily the decline in the Company's market capitalization during the fiscal year. However, after performing analysis of undiscounted cash flows attributable to our long-lived assets along with other relevant factors, it was determined that there is no impairment of long-lived and intangible assets other than goodwill. Key assumptions utilized in the analysis of discounted cash flows for each asset or asset group being tested included 1) whether cash flows were attributable solely to the asset or group, or to an entire reporting unit; and 2) the useful lives of the asset or asset group. Forecasts used in the discounted cash flow analysis were also consistent with those used in determining fair value of reporting units during goodwill impairment testing. For the year ended September 30, 2016, no events or changes in circumstances occurred that required this analysis. For the year ended September 30, 2016, no events or changes in circumstances occurred that required this analysis. Comprehensive Loss Comprehensive loss includes disclosure of financial information that historically has not been recognized in the calculation of net income. Our comprehensive loss encompasses net loss and foreign currency translation adjustments. Assets and liabilities of international operations that have a functional currency that is not in U.S. dollars are translated into U.S. dollars at year-end exchange rates, and revenue and expense items are translated using weighted average exchange rates. Any adjustments arising on translation are included in shareholders’ equity as an element of accumulated other comprehensive loss. Advertising Expense Advertising costs included in selling and marketing, are expensed when the advertising first takes place. Advertising expense was $479 thousand and $403 thousand for years ended September 30, 2017 and 2016, respectively. Research and Development Costs Research and development costs are expensed in the period incurred, unless they meet the criteria for capitalized software development costs. Income Taxes Deferred tax assets and liabilities are determined based on differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. We do not provide for U.S. income taxes on the undistributed earnings of our foreign subsidiaries, which we consider to be permanently invested outside of the U.S. We make judgments regarding the realizability of our deferred tax assets. The balance sheet carrying value of our net deferred tax assets is based on whether we believe that it is more likely than not that we will generate sufficient future taxable income to realize these deferred tax assets after consideration of all available evidence. We regularly review our deferred tax assets for recoverability considering historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses. Generally, cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome in determining that a valuation allowance is not needed. As of September 30, 2017 and 2016, valuation allowances have been established for all U.S. and for certain foreign deferred tax assets which we believe do not meet the “more likely than not” criteria for recognition. The Company also accounts for the uncertainty in income taxes related to the recognition and measurement of a tax position and measurement of a tax position taken or expected to be taken in an income tax return. The Company follows the applicable accounting guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure related to the uncertainty in income tax positions. Fair Value of Financial Instruments Nonfinancial Assets Measured at Fair Value on a Nonrecurring Basis The Company’s goodwill, intangible assets and other long-lived assets are nonfinancial assets that were acquired either as part of a business combination, individually or with a group of other assets. These nonfinancial assets were initially measured and recognized at amounts equal to the fair value determined as of the date of acquisition. Fair value measurements of reporting units are estimated using an income approach involving discounted or undiscounted cash flow models and the public company guideline method that contain certain Level 3 inputs requiring management judgment, including projections of economic conditions and customer demand, revenue and margins, changes in competition, operating costs, working capital requirements, and new product introductions. Fair value measurements of the reporting units associated with the Company’s goodwill balances are estimated at least annually at the beginning of the fourth quarter of each fiscal year for purposes of impairment testing. Fair value measurements associated with the Company’s intangible assets and other long-lived assets are estimated when events or changes in circumstances such as market value, asset utilization, physical change, legal factors, or other matters indicate that the carrying value may not be recoverable. 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 a Recurring Basis The initial fair values of PFG debt and warrant debt (see Note 3) 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 fair value of the bifurcated conversion feature represented by the warrant derivative liability, which is measured at fair value on a recurring basis is 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):
Included below is a summary of the changes in our Level 3 fair value measurements (in thousands):
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, financing receivables, accounts payable and debt instruments, excluding the PFG debt. The book values of cash and cash equivalents, accounts receivable, investment in sales-type lease, debt (excluding the PFG debt) and accounts payable are considered to be representative of their respective fair values. The carrying value of capital lease obligations and debt (excluding the PFG 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 In June 2014, the Company entered into a settlement agreement with Astute Technology, LLC (“Astute”). The key terms of the agreement were: 1) a grant of a non-revocable license of Astute patents to the Company; 2) a grant of a fully paid, non-refundable license of certain Sonic Foundry patents to Astute; 3) both Astute and our customer agreed to identify three meetings they currently capture that the other party will not seek or respond to any request for proposal; and 4) a payment of $1.35 million to Astute. Pursuant to the settlement agreement, the payments were made in three equal amounts with the first paid in June 2014, the second paid in October 2014 and the final installment paid in March 2015. The Company contributed $1.1 million of the $1.35 million payable to Astute with our customer paying the residual amount. Of the $1.1 million, $428 thousand related to prior use and was recorded as a charge to income during fiscal 2014. The remaining $672 thousand was recorded as a product right asset, which is being amortized, on a straight-line basis, over the remaining life of the patents, through 2020. Future amounts due to Astute were accrued for as of the time of settlement. No legal contingencies were recorded for the either of the years ended September 30, 2017 or 2016, respectively. 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:
Common Stock Warrants On December 22, 2014, the company issued 74,802 warrants to two individuals, one of which is the Chairman of the Company’s Board of Directors, in combination with the sale of a like number of shares of common stock. These warrants were immediately exercisable, expire five years after the date of issuance and have an exercise price of $14.00. The remaining contractual life of these outstanding warrants as of September 30, 2017 was 2.23 years. The fair value of the warrants was determined using the lattice model and the same inputs as those used for valuing the Company’s stock option fair value. The fair value of the warrants was $133 thousand at the date of issuance. The Company determined that the warrants are freestanding and do not fall within the scope of ASC 480 or ASC 815. The warrants were recorded in conjunction with the stock issued. See Note 3, Credit Arrangements for disclosures on additional warrants issued during fiscal 2015. Preferred stock and dividends In May 2017, the Company created a new series of preferred stock entitled "9% Cumulative Voting Convertible Preferred Stock, Series A" (the "Preferred Stock, Series A"). One thousand shares were authorized with a stated value and liquidation preference of $1,000 per share. In August 2017, 1,500 additional shares were authorized for an aggregated total of 2,500 shares. Holders of the Preferred Stock, Series A will receive monthly dividends at an annual rate of 9%, payable in additional shares of Preferred Stock, Series A. Dividends declared on the preferred stock are earned monthly as additional shares and accounted for as a reduction to paid-in capital since the Company is currently in an accumulated deficit position. Each share of Preferred Stock, Series A is convertible into that number of shares of common stock determined by dividing $4.23 into the liquidation amount. As of September 30, 2017, 1,510 shares of Preferred Stock, Series A have been issued and are outstanding. The Company considered relevant guidance when accounting for the issuance of preferred stock, and determined that the preferred shares meet the criteria for equity classification. Dividends accrued on preferred shares will be shown as a reduction to net income (or an increase in net loss) for purposes of calculating earnings per share. 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). The following table sets forth the computation of basic and diluted weighted average shares used in the earnings per share calculations:
Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The guidance substantially converges final standards on revenue recognition between the FASB and the International Accounting Standards Board providing a framework on addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance, including industry-specific guidance, in current U.S. generally accepted accounting principles. The FASB subsequently issued a one-year deferral of the effective date for the new revenue reporting standard for entities reporting under U.S. GAAP. In accordance with the deferral, the guidance is effective for annual reporting periods beginning after December 15, 2017. Subsequently, the FASB issued ASU 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations" ("ASU 2016-08"); ASU 2016-10, "Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing" ("ASU 2016-10"); and ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients" ("ASU 2016-12"). The Company must adopt ASU 2016-08, ASU 2016-10 and ASU 2016-12 with ASU 2014-09. We anticipate that adoption of FASB Topic 606 will have a material impact on our consolidated financial statements. While we are continuing to assess all potential impacts of the standard, particularly regarding expenses, the Company believes the most significant impact will relate to accounting for software license revenue. We expect revenue related to recorders, customer support, hosting, and events services to remain largely unchanged. Specifically, under the new standard we expect to recognize revenue for annual or multi-year software licenses predominantly at the time of billing rather than ratably over the license term as is current practice. Due to the complexity of certain of our customer contracts, the actual revenue recognition treatment required under the standard will be dependent on contract-specific terms, and may vary in some instances from recognition at the time of billing. In July 2015, the FASB issued ASU 2015-11, "Inventory (Topic 330)" ("ASU 2015-11"). The amendments in ASU 2015-11 require an entity to measure inventory at the lower of cost and net realizable value. The amendments in ASU 2015-11 are effective for fiscal years beginning after December 15, 2016 and interim periods within those years. Early adoption is permitted. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company does not believe the implementation of this standard will result in a material impact to its financial statements. In November 2015, the FASB issued ASU 2015-17, "Income Taxes (Topic 740)", ("ASU 2015-17"). ASU 2015-17 simplifies the presentation of deferred income taxes. The amendments in ASU 2015-17 are effective for financial statements issued for annual periods beginning after December 15, 2016, including interims periods within those annual periods. The amendments may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company does not believe the implementation of this standard will result in a material impact to its financial statements. In January 2016, the FASB issued ASU 2016-01, "Financial Instruments - Overall (Subtopic 825-10)", ("ASU 2016-01"). ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments in ASU 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values should be applied prospectively to equity investments that exist at the date of the adoption. The Company is currently evaluating this guidance and its impact to the financial statements. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)", ("ASU 2016-02"). ASU 2016-02 aims to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for public entities. Early application of the amendment is permitted. The Company is currently reviewing this guidance and its impact to the financial statements. In March 2016, the FASB issued ASU 2016-05, "Derivatives and Hedging (Topic 815)", ("ASU 2016-05"). ASU 2016-05 clarifies the effect of novation related to a derivative instrument. The amendments in ASU 2016-05 are effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. An entity has the option to apply the amendments in ASU 2016-05 on either a prospective or a modified retrospective basis. The Company is currently evaluating this guidance and its impact to the financial statements. In March 2016, the FASB issued ASU 2016-06, "Derivatives and Hedging (Topic 815)", ("ASU 2016-06"). ASU 2016-06 clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The amendments in ASU 2016-06 are effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Entities should apply the amendments on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year for which the amendments are effective. The Company is currently evaluating this guidance and its impact to the financial statements. In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation (Topic 718)", ("ASU 2016-09"). ASU 2016-09 simplifies the accounting for share-based payment transactions. The amendments in ASU 2016-09 are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently evaluating this guidance and its impact to the financial statements. In May 2016, the FASB issued ASU 2016-11, "Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815)", ("ASU 2016-11"). ASU 2016-11 rescinds SEC paragraphs pursuant to the SEC Staff Announcement, "Rescission of Certain SEC Staff Observer Comments upon Adoption of Topic 606", and the SEC Staff Announcement, "Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or Equity", announced at the March 3, 2016 Emerging Issues Task Force (EITF) meeting. The effective dates in ASU 2016-11 coincide with the effective dates of Topic 606 (ASU 2014-09) and ASU 2014-16. The Company is currently evaluating the impact of adopting ASU 2014-09 and related amendments, such as ASU 2016-11, to determine the impact, if any, it may have on our financial statements. The Company previously reviewed ASU 2014-16 and determined that is it not applicable. In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230)", ("ASU 2016-15"). ASU 2016-15 addresses classification of certain cash receipts and cash payments within the statement of cash flows. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods with those fiscal years. The Company is currently evaluating this guidance and its impact to the financial statements. In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740)", ("ASU 2016-16"). ASU 2016-16 prohibits the recognition of current and deferred income taxes for an intra-entity transfer until the asset has been sold to an outside party. The amendment in ASU 2016-16 are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company is currently evaluating this guidance and its impact to the financial statements. In January 2017, the FASB issued ASU 2017-01 "(ASC Topic 805), Business Combination: Clarifying the Definition of a Business", ("ASU 2017-01"). The amendments in this ASU change the definition of a business to assist with evaluating when a set of transferred assets and activities is a business. The Company is required to adopt the guidance in the first quarter of fiscal 2019. Early adoption is permitted. The Company is in the process of assessing the impact, if any, of this ASU on its consolidated financial statements. In February 2017, the FASB issued ASU 2017-05, "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets", ("ASU 2017-05"). ASU 2017-05 clarifies the scope of Subtopic 610-20, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets, which provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. The amendments in ASU 2017-05 are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company is in the process of assessing the impact, if any, of this ASU on its consolidated financial statements. In March 2017, the FASB issued ASU 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost", ("ASU 2017-07"). ASU 2017-07 was issued to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost within an entity's financial statements. The amendments in ASU 2017-07 are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company is currently evaluating this guidance and its impact to the consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, "Compensation-Stock Compensation (Topic 718)", ("ASU 2017-09"). The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendments in ASU 2017-09 are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company is in the process of assessing the impact, if any, of this ASU on its consolidated financial statements. In July 2017, the FASB issued ASU 2017-11, "Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815)", ("ASU 2017-11"). This update was issued to address complexities in accounting for certain equity-linked financial instruments containing down round features. The amendment changes the classification analysis of these financial instruments (or embedded features) so that equity classification is no longer precluded. The amendments in ASU 2017-11 are effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is in the process of assessing the impact, if any, of this ASU on its consolidated 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. Recently Adopted Accounting Pronouncements In August 2014, the FASB issued No. ASU 2014-15, "Presentation of Financial Statements — Going Concern" ("ASU 2014-15"), which requires management to evaluate relevant conditions, events and certain management plans that are known or reasonably knowable that when, considered in the aggregate, raise substantial doubt about an entity's ability to continue as a going concern within one year after the date that financial statements are issued. This ASU is effective for interim and annual reporting periods ending after December 15, 2016, and early adoption is permitted. ASU 2014-15 was early adopted by the Company on March 31, 2017, and did not have a material impact on the consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, ("ASU 2017-04"). ASU 2017-04 simplifies the subsequent measurement of goodwill by allowing an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This update also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendments in ASU 2017-04 are effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those annual reporting periods. ASU 2017-04 was early adopted by the Company for the year ending September 30, 2017. The adoption may have had a material impact on the consolidated financial statements as a goodwill impairment charge was recognized for one of the Company's reporting units in the current year (which was measured based on the updated guidance outlined in ASU 2017-04), and a second reporting unit has a negative carrying amount. However, in accordance with the newly adopted requirements, a Step 2 analysis was not performed for either reporting unit, which could have resulted in additional impairment of goodwill under previous guidance. See Note 8 for further discussion of goodwill. |
Commitments |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments | Commitments The Company leases certain equipment under capital lease and financing agreements expiring through January 2022. Capital leases that are currently outstanding on equipment included in fixed assets have a cost of $1.0 million and accumulated depreciation of $571 thousand at September 30, 2017. Minimum lease payments, including principal and interest, are summarized in the table below.
The Company leases certain facilities and equipment under operating lease agreements expiring at various times through December 31, 2020. Total rent expense on all operating leases was approximately $1.3 million and $1.6 million for the years ended September 30, 2017 and 2016, respectively. In November 2011, the Company occupied office space related to a lease agreement entered into on June 28, 2011. The lease term is from November 2011 through December 2018. The lease includes a tenant improvement allowance of $613 thousand that was recorded as a leasehold improvement liability and is being amortized as a credit to rent expense on a straight-line basis over the lease term. At September 30, 2017, the unamortized balance was $95 thousand. The following is a schedule by year of future minimum lease payments under operating leases:
The Company enters into unconditional purchase commitments on a regular basis for the supply of Mediasite product. At September 30, 2017, the Company has an obligation to purchase $535 thousand of Mediasite product, which is not recorded on the Company’s Consolidated Balance Sheet. The Company enters into license agreements that generally provide indemnification against intellectual property claims for its customers as well as indemnification agreements with certain service providers, landlords and other parties in the normal course of business. The Company has not incurred any material costs as a result of such indemnifications, or accrued any liabilities related to such obligations in the consolidated financial statements, except as noted above related to Astute (Note 1). |
Credit Arrangements |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||
Credit Arrangements | Credit Arrangements Silicon Valley Bank The Company and its wholly owned subsidiary, Sonic Foundry Media Systems, Inc. (the “Companies”) entered into the Second Amended and Restated Loan and Security Agreement with Silicon Valley Bank, dated June 27, 2011, as amended by the First, Second, Third, Fourth, Fifth, Sixth, and Seventh Amendments, dated May 31, 2013, January 10, 2014, March 31, 2014, January 27, 2015, May 13, 2015, October 5, 2015, and February 8, 2016 (the Second Amended and Restated Loan Agreement, as amended by the First, Second, Third, Fourth, Fifth, Sixth, and Seventh Amendments, collectively, the “Second Amended and Restated Loan Agreement”). The Second Amended and Restated Loan Agreement provides for a revolving line of credit in the maximum principal amount of $4,000,000. Interest accrued on the revolving line of credit at the variable per annum rate equal to the Prime Rate (as defined) plus one and one-quarter percent (1.25%). The Second Amended and Restated Loan Agreement provides for an advance rate on domestic receivables of 80%, and an advance rate on foreign receivables of 75% of the lesser of (x) Foreign Eligible Accounts (as defined) or (y) $1,000,000. The maturity date of the revolving credit facility was January 31, 2017. Under the Second Amended and Restated Loan Agreement, a term loan was entered into on January 27, 2015 in the original principal amount of $2,500,000 which accrues interest at the variable per annum rate equal to the Prime Rate (as defined) plus two and three-quarters percent (which currently equates to an interest rate of 7.00%), and is being repaid in 36 equal monthly principal payments, beginning in February 2015. The Second Amended and Restated Loan Agreement also requires Sonic Foundry to comply with certain financial covenants, including (i) a liquidity financial covenant, which requires minimum Liquidity (as defined), tested with respect to the Company only (excluding the subsidiaries) of at least 1.50:1.00 at the last day of each month and (ii) a covenant that requires a Minimum EBITDA, as defined, on a trailing six month period, of at least $1.00 plus the net change in Deferred Revenue, as defined, with such covenant measured as of the last day of each fiscal quarter. Collections from accounts receivable are directly applied to the outstanding obligations under the revolving line of credit. On December 9, 2016, the Companies entered into an Eighth Amendment to the Second Amended and Restated Loan and Security Agreement (the "Eighth Amendment") with Silicon Valley Bank. The Eighth Amendment: (i) extended the revolving line of credit maturity date to January 31, 2019, (ii) increased maximum subsidiary indebtedness allowable to $1,000,000 outstanding at any one time and (iii) provided for a "streamline period", during which bank reporting is due monthly when a streamline period is in effect and weekly when a streamline period is not in effect. On March 22, 2017, the Companies entered into a Ninth Amendment to the Second Amended and Restated Loan and Security Agreement (the "Ninth Amendment") with Silicon Valley Bank. Under the Ninth Amendment: (i) the Liquidity covenant was modified to require minimum Liquidity (as defined) with respect to the Company only, on a monthly basis, of at least 1.6:1.0 for each month-end that is not the last day of a fiscal quarter, and 1.75:1.0 for each month-end that is the last day of a fiscal quarter, replacing the previous Liquidity requirement of 1.5:1.0 at the last day of each month; (ii) the streamline threshold pursuant to which bank reporting can be made monthly rather than weekly was increased; and (iii) certain collection procedures and reporting requirements regarding account debtors and request for advances were modified. On May 10, 2017, the Companies entered into a Waiver and Tenth Amendment to the Second Amended and Restated Loan and Security Agreement (the "Tenth Amendment") with Silicon Valley Bank. The Tenth Amendment: (i) waived the existing default under the Second Amended and Restated Loan Agreement by virtue of the Companies’ failure to comply with the minimum EBITDA financial covenant for the compliance period ended March 31, 2017; (ii) modified the interest rate applicable to the Revolving Line to the variable per annum rate equal to the Prime Rate plus two percent (2.00%) which currently equates to 6.25%; (iii) modified the Minimum EBITDA financial covenant, to require the Companies to achieve, commencing with the period ending June 30, 2017, measured as of the last day of each fiscal quarter, on a trailing six (6) month basis ending as of the date of measurement, (a) EBITDA (negative EBITDA) plus (b) the net change in Deferred Revenue (as defined) during such measurement period, of at least (x) for the period ending June 30, 2017, no worse than negative Five Hundred Thousand Dollars (-$500,000); and (y) for the period ending September 30, 2017, and each quarterly period ending thereafter, Zero Dollars ($0.00) and (iv) required the Companies to receive, on or before September 30, 2017, net proceeds of not less than Seven Hundred Fifty Thousand Dollars ($750,000) from the issuance and sale of additional equity (which can be in the form of convertible indebtedness) or Subordinated Debt (subject to a Subordination Agreement in form and substance acceptable to Silicon Valley Bank, in Silicon Valley Bank’s reasonable discretion) of the Companies, to be issued to investors of similar character and quality as the investors in the Companies as of the Effective Date. At September 30, 2017, a balance of $278 thousand was outstanding on the term loan with Silicon Valley Bank, with an effective interest rate of seven percent (7.00%). At September 30, 2017, a balance of $1.6 million was outstanding on the revolving line of credit with Silicon Valley Bank, with an effective interest rate of six-and-one-quarter percent (6.25%). At September 30, 2016, a balance of $1.1 million was outstanding on the term loans with Silicon Valley Bank and a balance of $1.6 million was outstanding on the revolving line of credit. At September 30, 2017, there was a remaining amount of $2.2 million available under the line of credit facility for advances. The Second Amended and Restated Agreement, as amended, contains events of default that include, among others, non-payment of principal or interest, inaccuracy of any representation or warranty, violation of covenants, bankruptcy and insolvency events, material judgments, cross defaults to certain other indebtedness, and material adverse changes. The occurrence of an event of default could result in the acceleration of the Companies’ obligations under the Second Amended Agreement, as amended. At September 30, 2017, the Company was in compliance with all covenants in the Second Amended and Restated Loan Agreement, as amended. On December 22, 2017, the Company entered into an Eleventh Amendment to the Second Amended and Restated Loan and Security Agreement (the “Eleventh Amendment”) with Silicon Valley Bank. Under the Eleventh Amendment: the Minimum EBITDA covenant was modified to require Minimum EBITDA (as defined) plus the net change in Deferred Revenue, (i) for the period ending December 31, 2017, measured on a trailing three (3) month basis, to be no less than negative ($1,900,000); (ii) for the quarterly period ending March 31, 2018, measured on a trailing three (3) month basis, to be no less than Zero Dollars, and (iii) for the quarterly period ending June 30, 2018, and each quarterly period thereafter, in each case measured on a trailing six month basis, to be no less than Zero Dollars. Pursuant to the Second Amended Agreement, as amended, the Companies pledged as collateral to Silicon Valley Bank substantially all non-intellectual property business assets. The Companies also entered into an Intellectual Property Security Agreement with respect to intellectual property assets. Partners for Growth IV, L.P. On May 13, 2015, Sonic Foundry, Inc., entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Partners for Growth IV, L.P. (“PFG”), (the “Loan and Security Agreement”). The Loan and Security Agreement provides for a Term Loan in the amount of $2,000,000, which can be disbursed in two (2) Tranches as follows: Tranche 1 was drawn in the amount of $1,500,000 shortly after execution thereof; and Tranche 2 in the amount of $500,000, was drawn on December 15, 2015. Each tranche of the Term Loan bears interest at 10.75% per annum. Tranche 1 of the Term Loan was payable interest only until November 30, 2015. Beginning on December 1, 2015, principal is due in 30 equal monthly principal installments, plus accrued interest, continuing until May 1, 2018, when the principal balance is to be paid in full. Tranche 2 of the Term Loan is payable in 29 equal monthly principal installments, plus accrued interest, beginning January 1, 2015 and continuing until May 1, 2018. The principal of the Term Loan may be prepaid at any time after May 13, 2016 without a prepayment fee. Coincident with execution of the Loan and Security Agreement, the Company entered into a Warrant Agreement (“Warrant”) with PFG. Pursuant to the terms of the Warrant, the Company issued to PFG a warrant to purchase up to 50,000 shares of common stock of the Company at an exercise price of $9.66 per share, subject to certain adjustments, of which 37,500 were exercisable with the disbursement of Tranche 1 and 12,500 became exercisable with the disbursement under Tranche 2. Pursuant to the Warrant, PFG is also entitled, under certain conditions, to require the Company to exchange the Warrant for the sum of $200,000. Each warrant issued has an exercise term of 5 years from the date of issuance. On August 12, 2015, the Company and PFG entered into a waiver agreement to waive a then existing covenant default and to change the exercise price of the aforementioned warrants from $9.66 per share to $6.80 per share. The warrants can be settled for cash in the event of acquisition of the company, any liquidation of the company, or expiration of the warrant. The Company has determined the cash payment date to be the expiration date (May 14, 2020). Due to the fixed payment amount on the expiration date, the warrant structure is in substance a debt arrangement (the “Warrant Debt”) with a zero interest rate, a fixed maturity date and a feature that makes the debt convertible to common stock. The Warrant Debt had a fair value of $80 thousand at the time of issuance. The derivative had a fair value of $136 thousand. The conversion feature is an embedded derivative; thus, for accounting purposes, the conversion feature is bifurcated and accounted for separately from the PFG Debt and Warrant Debt as a derivative liability measured at fair value at each reporting period. On February 8, 2017, the Company and PFG entered into a Modification No. 2 to the Loan and Security Agreement (“Modification No. 2”). Under Modification No. 2: (i) the Minimum EBITDA covenant default for December 31, 2016 was waived (ii) the Liquidity covenant was modified to require minimum Liquidity (as defined) with respect to the Company only, on a monthly basis, of at least 1.60:1.00 for the first and second month of each quarterly fiscal period; and 1.75:1.00 for the third month of each quarterly fiscal period, replacing the previous Liquidity requirement of 1.5:1.0 for each month-end. On May 11, 2017, the Company and PFG entered into a Waiver and Modification No. 3 to the Loan and Security Agreement ("Modification No. 3"). Modification No. 3: (i) waived the minimum EBITDA covenant default for the compliance period ended March 31, 2017; (ii) modified the Minimum EBITDA financial covenant to conform to the terms of the Tenth Amendment with Silicon Valley Bank, and (iii) required the Company to receive additional equity or Subordinated Debt, to conform to the terms of the Tenth Amendment with Silicon Valley Bank. As of September 30, 2017, the estimated fair value of the derivative liability associated with the warrants issued in connection with the Loan and Security Agreement, was $12 thousand as compared with $67 thousand at September 30, 2016. The change in the fair value of the derivative liability was recorded as a gain of $55 thousand included in other income. The proceeds from the Loan and Security Agreement were allocated between the PFG Debt and the Warrant Debt (inclusive of its conversion feature) based on their relative fair value on the date of issuance which resulted in initial carrying values of $1.8 million and $216 thousand, respectively. The conversion feature of $216 thousand is treated together as a debt discount on the PFG Debt and will be accreted to interest expense under the effective interest method over the three-year term of the PFG Debt and the five-year term of the Warrant Debt. For fiscal 2017, the Company recorded accretion of discount expenses associated with the warrants issued with the PFG loan of $21 thousand as well as $73 thousand related to amortization of the debt discount. For fiscal 2016, the Company recorded accretion of discount expense associated with the warrants issued with the PFG loan of $17 thousand as well as $71 thousand related to amortization of the debt discount. The fair values of term debt and warrant debt are based on the present value of expected future cash flows and assumptions about current interest rates and the creditworthiness of the Company (Level 3). At December 14, 2015, the carrying amounts of the Company’s term debt and warrant debt totaled $1.8 million and $216 thousand, respectively. At December 14, 2015, the Company’s term debt and warrant debt were recorded at fair value. At September 30, 2017, the derivative liability was remeasured at fair value. The fair value of the bifurcated conversion feature represented by the warrant derivative liability is 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 previously for share-based compensation which were generally observable (Level 2). At September 30, 2017, a balance of $491 thousand was outstanding on the term debt with PFG, with an effective interest rate of ten-and-three-quarters percent (10.75%). At September 30, 2016, a balance of $1.3 million with outstanding on the term debt with PFG. The Term Loan is collateralized by substantially all the Company’s assets, including intellectual property, subject to a first lien held by Silicon Valley Bank, The Term Loan requires compliance with the same financial covenants as set forth in the loan from Silicon Valley Bank. At September 30, 2017, the Company was in compliance with all covenants in the Loan and Security Agreement, as amended. On December 28, 2017, the Company and PFG entered into a Modification No. 4 to the Loan and Security Agreement (“Modification No. 4”). Modification No. 4: the Minimum EBITDA covenant was modified to require Minimum EBITDA (as defined) plus the net change in Deferred Revenue (i) for the period ending December 31, 2017, measured on a trailing three (3) month basis, to be no less than negative ($1,900,000); (ii) for the quarterly period ending March 31, 2018, measured on a trailing three (3) month basis, to be no less than Zero Dollars, and (iii) for the quarterly period ending June 30, 2018, and each quarterly period thereafter, in each case measured on a trailing six month basis, to be no less than Zero Dollars. Other Indebtedness At September 30, 2017, a balance of $417 thousand was outstanding on the line of credit with Mitsui Sumitomo Bank. At September 30, 2016, a balance of $198 thousand was outstanding on the line of credit. The notes and credit facility are both related to Mediasite K.K., and both accrue an annual interest rate of approximately one-and-one half percent (1.575%). At September 30, 2017, no balance was outstanding on the subordinated note payable related to the acquisition of Sonic Foundry International. The outstanding balance was $93 thousand at September 30, 2016. In the year ended September 30, 2017, a foreign currency gain of $6 thousand was realized related to re-measurement of the subordinated notes payable related to the Company’s foreign subsidiaries. In the year ended September 30, 2016, a foreign currency gain of $3 thousand was recorded related to the remeasurement. The annual principal payments on the notes payable to SVB and PFG are as follows:
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Accrued Liabilities |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities | Accrued Liabilities Accrued liabilities consists of the following (in thousands):
The Company accrues expenses as they are incurred. Accrued compensation includes wages, vacation, commissions and bonuses. Accrued expenses is mainly related to stock compensation, professional fees and amounts owed to suppliers. Other accrued liabilities is made up of employee-related expenses. |
Stock Options and Employee Stock Purchase Plan |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options and Employee Stock Purchase Plan | Stock Options and Employee Stock Purchase Plan On March 5, 2009, Stockholders approved adoption of the 2009 Stock Incentive Plan (the “2009 Plan”). The 2009 Plan, beginning October 1, 2009, replaced two former employee stock option plans that terminated coincident with the effectiveness of the 2009 Plan. On March 7, 2012, Stockholders approved an amendment to increase the number of shares of common stock subject to this plan by 600,000 and to increase the number of shares for the directors’ stock option plan by 50,000 shares. On March 6, 2014, Stockholders approved an amendment to increase the number of shares of common stock subject to the 2009 Plan by 800,000. On March 7, 2017, Stockholders approved an amendment to increase the number of shares of common stock subject to the 2009 Plan by 900,000 to an aggregated total of 2,700,000 shares of common stock. Stockholders also approved an increase in the number of shares for the directors' stock option plan of 50,000. The Company maintains a directors’ stock option plan under which options may be issued to purchase up to an aggregate of 150,000 shares of common stock. Each non-employee director, who is re-elected or who continues as a member of the board of directors on each annual meeting date and on each subsequent meeting of Stockholders, will be granted options to purchase 2,000 shares of common stock under the directors’ plan, or at other times or amounts at the discretion of the Board of Directors. Each option entitles the holder to purchase one share of common stock at the specified option price. The exercise price of each option granted under the plans was set at the fair market value of the Company’s common stock at the respective grant date. Options vest at various intervals and expire at the earlier of termination of employment, discontinuance of service on the board of directors, ten years from the grant date or at such times as are set by the Company at the date of grant. The Company has applied a graded (tranche-by-tranche) attribution method and expenses share-based compensation on an accelerated basis over the vesting period of the share award, net of estimated forfeitures. The number of shares available for grant under these stockholder approved plans at September 30, is as follows:
The following table summarizes information with respect to outstanding stock options under all plans:
The options outstanding at September 30, 2017 have been segregated into three ranges for additional disclosure as follows:
As of September 30, 2017, there was $571 thousand of total unrecognized compensation cost related to non-vested stock-based compensation, with total forfeiture adjusted unrecognized compensation costs of $450 thousand. The cost is expected to be recognized over a weighted-average life of 1.8 years. A summary of the status of the Company’s non-vested shares under all plans at September 30, 2017 and for the year then ended is presented below:
Stock-based compensation recorded in the year ended September 30, 2017 was $611 thousand. Stock-based compensation recorded in the year ended September 30, 2016 was $847 thousand. There was no cash received from exercises under all stock options plans and warrants for the years ended September 30, 2017 or 2016. There were no tax benefits realized for tax deductions from option exercises for the years ended September 30, 2017 and 2016. The Company currently expects to satisfy stock-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 200,000 common shares may be issued. The Stockholders approved an amendment to increase the number of shares of common stock subject to the plan from 150,000 to 200,000 at the Company’s annual meeting in March 2017. All employees who have completed 90 days of employment with the Company on the first day of each offering period and customarily work twenty hours per week or more are eligible to participate in the Purchase Plan. An employee who, after the grant of an option to purchase, would hold common stock and/or hold outstanding options to purchase stock possessing 5% or more of the total combined voting power or value of the Company will not be eligible to participate. Eligible employees may make contributions through payroll deductions of up to 10% of their compensation. No participant in the Purchase Plan is permitted to purchase common stock under the Purchase Plan if such option would permit his or her rights to purchase stock under the Purchase Plan to accrue at a rate that exceeds $25,000 of the fair market value of such shares, or that exceeds 1,000 shares, for each calendar year. The Company makes a bi-annual offering to eligible employees of options to purchase shares of common stock under the Purchase Plan on the first trading day of January and July. Each offering period is for a period of 6 months from the date of the offering, and each eligible employee as of the date of offering is entitled to purchase shares of common stock at a purchase price equal to the lower of 85% of the fair market value of common stock on the first or last trading day of the offering period. A total of 60,662 shares are available to be issued under the plan. There were 13,046 and 14,708 shares purchased by employees during fiscal 2017 and 2016, respectively. The Company recorded stock compensation expense under this plan of $12 and $19 thousand during fiscal 2017 and 2016, respectively. Cash received from issuance of stock under this plan was $48 and $66 thousand during fiscal 2017 and 2016, respectively. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The provision for income taxes consists of the following (in thousands):
U.S. and foreign components of income (loss) before income taxes were as follows (in thousands):
The reconciliation of income tax expense (benefit) computed at the appropriate country specific rate to income tax expense (benefit) is as follows (in thousands):
The significant components of the deferred tax accounts recognized for financial reporting purposes are as follows (in thousands):
The Company has a $97 thousand and $66 thousand deferred tax asset at September 30, 2017 and 2016, respectively, recorded within the prepaid expenses and other current assets and other long-term assets lines on the consolidated balance sheet and is primarily related to net operating losses of MSKK. At September 30, 2017, the Company had net operating loss carryforwards of approximately $97 million for U.S. Federal and $44 million for state tax purposes. For Federal tax purposes, the carryforwards expire in varying amounts between 2019 and 2037. For state tax purposes, the carryforwards expire in varying amounts between 2017 and 2036. Utilization of the Company’s net operating loss may be subject to substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss carryforwards before utilization. In addition, the Company has research and development tax credit carryforwards of approximately $418 thousand, which expire in varying amounts between 2019 and 2020. The Company maintains an additional paid-in-capital (APIC) pool which represents the excess tax benefits related to share-based compensation that are available to absorb future tax deficiencies. If the amount of future tax deficiencies is greater than the available APIC pool, the Company records the excess as income tax expense in its consolidated statements of income. For fiscal 2017 and fiscal 2016, the Company had a sufficient APIC pool to cover any tax deficiencies recorded and as a result, these deficiencies did not affect its results of operations. At September 30, 2017, the Company has $1.1 million of net operating loss carry forwards for which a benefit would be recorded in APIC when realized. Earnings of the Company’s foreign subsidiaries are generally subject to U.S. taxation upon repatriation to the U.S. and the Company’s tax provision reflects the related incremental U.S. tax except for certain foreign subsidiaries whose unremitted earnings are considered to be indefinitely reinvested. No deferred tax liability has been recognized with regard to the remittance of such earnings after MSKK and Sonic Foundry International BV acquisitions were completed. At September 30, 2017, unremitted earnings of $925 thousand for foreign subsidiaries were deemed to be indefinitely reinvested. Beginning with an acquisition in fiscal year 2002, the Company has amortized Goodwill for tax purposes over a 15 year life. Tax amortization is not applicable to the goodwill from the foreign acquisitions that took place during fiscal 2014 since the foreign goodwill is non-deductible for US federal tax purposes. The difference between the book and tax balance of certain of the company’s goodwill creates a deferred tax liability and an annual tax expense. Because of the long term nature of the goodwill timing difference, tax planning strategies cannot be utilized with respect to the deferred tax liability. The Company’s tax rate differs from the expected tax rate each reporting period as a result of the aforementioned items. The balance of the Deferred Tax Liability was $4.4 million at September 30, 2017 and $4.6 million at September 30, 2016, respectively. The Company recorded a deferred tax liability related to the Customer Relationship intangibles value acquired as part of the purchase of Sonic Foundry International BV and Mediasite KK. The Company also recorded tax expense related to the “step-up” gain on its original equity investment in Mediasite KK. The Company has some other temporary differences related to its Mediasite KK subsidiary. In accordance with accounting guidance for uncertainty in income taxes, the Company has concluded that a reserve for income tax contingencies is not necessary. 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 September 30, 2017 or September 30, 2016 and has not recognized any interest or penalties in the Condensed Consolidated Statements of Operations for either of the years ended September 30, 2017 or 2016. The Company is subject to taxation in the U.S., Netherlands, Japan and various state jurisdictions. All of the Company’s tax years are subject to examination by the U.S., Dutch, Japanese and state tax authorities due to the carryforward of unutilized net operating losses. On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into United States tax law and included numerous provisions that will affect businesses. Given this date of enactment, our financial statements for the year ended September 30, 2017 do not reflect the impact of this legislation. We are currently undergoing an analysis of the tax reform law and its impact to the financial statements and tax footnote disclosures. We are also evaluating any impact the tax reform law will have on the realizability of deferred tax assets and carryforwards. A more detailed analysis will be completed in our quarterly report for the period in which the law was enacted. |
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Postemployment Benefits [Abstract] | |
Savings Plan | Savings Plan The Company’s defined contribution 401(k) savings plan covers substantially all employees meeting certain minimum eligibility requirements. Participating employees can elect to defer a portion of their compensation and contribute it to the plan on a pretax basis. The Company may also match certain amounts and/or provide additional discretionary contributions, as defined. The Company made matching contributions of $321 thousand and $426 thousand during the years ended September 30, 2017 and 2016, respectively. The Company made no additional discretionary contributions during 2017 and 2016. |
Goodwill and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill and intangible assets that have indefinite useful lives are recorded at cost and are not amortized but, instead, tested at least annually for impairment. The Company assesses the impairment of goodwill on an annual basis or whenever events or changes in circumstances indicate that the fair value of these assets is less than the carrying value. The Company performs annual goodwill impairment test as of July 1, and tested goodwill recognized in connection with the acquisitions of Mediasite, Sonic Foundry International and Mediasite KK. For purposes of the test, goodwill on the Company’s books is evaluated within three separate reporting units. The fair values of the reporting units were initially measured as of July 1, 2017, in accordance with annual testing procedures, and were reevaluated at the end of Q4 2017 as a result of the decline in the Company's stock price during the quarter. Goodwill related to the Sonic Foundry (Mediasite) and Sonic Foundry International reporting units was found not to be impaired, however, the Company recognized an impairment loss of $600 thousand for goodwill related to the Mediasite KK reporting unit as of September 30, 2017. This non-cash loss was primarily due to delays in expected growth related to partner relationships in Japan, resulting in revenues and operating cash flows being lower than expected for the reporting unit in FY17. As a consequence, management forecasts were revised and additional risk factors were applied. The fair value of the Mediasite KK reporting unit was estimated using a combination of market comparables (level 1 inputs) and expected present value of future cash flows (level 3 inputs). See Fair Value of Financial Instruments section in Note 1 for additional discussion regarding fair value measurement of reporting units. The Sonic Foundry (Mediasite) reporting unit, to which $7.6 million of goodwill is allocated, had a negative carrying amount on September 30, 2017. This reporting unit is considered to be an operating segment on its own and is not part of any other reportable segment. The changes in the carrying amount of goodwill for the years ended September 30, 2017 and 2016, respectively, are as follows:
The following tables present details of the Company’s total intangible assets that are being amortized at September 30, 2017 and 2016:
Estimated amortization expense for each of the five subsequent fiscal years is expected to be (in thousands):
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Related-Party Transactions |
12 Months Ended |
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Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related-Party Transactions | Related-Party Transactions The Company incurred fees of $143 thousand and $126 thousand during the years ended September 30, 2017 and 2016, respectively, to a law firm whose partner is a director and stockholder of the Company. The Company had accrued liabilities for unbilled services to the same law firm of $55 and $45 thousand at September 30, 2017 and 2016, respectively. As of September 30, 2017 and 2016, the Company had a loan outstanding to an executive totaling $26 thousand. The loan is collateralized by Company stock. On December 22, 2014, the company issued 74,802 warrants to two individuals in combination with the sale of a like number of shares of common stock, one of which is the Chairman of the Company’s Board of Directors. These warrants were immediately exercisable, expire 5 years after the date of issuance and have an exercise price of $14.00. On May 30, 2017, the Company sold to Mark Burish $500 thousand of shares of Preferred Stock, Series A, at $910 per share. On June 8, 2017, the Company sold to Andrew Burish $200 thousand of shares of Preferred Stock, Series A, at $910 per share. On June 8, 2017, the Company sold to Mark Burish an additional $50 thousand of shares of Preferred Stock, Series A, at $910 per share. On August 23, 2017, the Company sold to Mark Burish an additional $500 thousand of shares of Preferred Stock, Series A, at $762.85 per share. Mark Burish is a director of the Company and both Mark and Andrew Burish beneficially own more than 5% of the Company’s common stock. These transactions were approved by a special committee of disinterested directors. |
Segment Information |
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Segment Information | Segment Information We have determined that in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280-10, Segment Reporting, we operate in three operating segments, however these segments meet the criteria for aggregation for reporting purposes as one reporting segment as of September 30, 2017. The following summarizes revenue by geographic region (in thousands):
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Customer Concentration |
12 Months Ended |
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Sep. 30, 2017 | |
Risks and Uncertainties [Abstract] | |
Customer Concentration | Customer Concentration In the fiscal year ended September 30, 2017 and 2016, two distributors represented 26% and 27% of total revenue, respectively. At September 30, 2017 and 2016, these two distributors represented 23% and 28% of total accounts receivable, respectively. |
Legal Proceedings |
12 Months Ended |
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Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Legal Proceedings | Legal Proceedings From time to time, the Company is subject to legal proceedings or claims arising from its normal course of operations. The Company accrues for costs related to loss contingencies when such costs are probable and reasonably estimable. As of September 30, 2017, the Company is not aware of any material pending legal proceedings or threatened litigation that would have a material adverse effect on the Company’s financial condition or results of operations. |
Quarterly Financial Data (unaudited) |
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Data (unaudited) | Quarterly Financial Data (unaudited) The following table sets forth selected quarterly financial information for the years ended September 30, 2017 and 2016. The operating results are not necessarily indicative of results for any future period.
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Subsequent Events |
12 Months Ended |
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Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On November 9, 2017, the Company sold to Mark Burish $500 thousand of shares of Preferred Stock, Series A, at $762.85 per share. Mark Burish is a director of the Company and beneficially owns more than 5% of the Company’s common stock. All sales of Preferred Stock, Series A, were approved by a special committee of disinterested directors. On December 22, 2017, the Company entered into an Eleventh Amendment to the Second Amended and Restated Loan and Security Agreement (the “Eleventh Amendment”) with Silicon Valley Bank (“Silicon Valley”). Under the Eleventh Amendment: (i) the Minimum EBITDA covenant was modified to require Minimum EBITDA (as defined) plus the net change in Deferred Revenue for the period ending December 31, 2017, measured on a trailing three (3) month basis, no worse than negative ($1,900,000); for the quarterly period ending March 31, 2018, measured on a trailing three (3) month basis, no less than Zero Dollars and for the quarterly period ending June 30, 2018, and each quarterly period thereafter, in each case measured on a trailing six month basis, no less than Zero Dollars. On December 28, 2017, the Company also entered into a Modification No. 4 to the Loan and Security Agreement (“Modification No. 4”) with Partners for Growth IV, L.P., which sets forth the same financial covenant modifications as set forth above. |
Basis of Presentation and Significant Accounting Policies (Policies) |
12 Months Ended |
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Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Sonic Foundry Media Systems, Inc., Sonic Foundry International B.V. (formerly Media Mission B.V.) and Mediasite K.K. All significant intercompany transactions and balances have been eliminated. The name change for the subsidiary formerly known as Media Mission B.V. occurred in October 2016. Prior to January 2014, the Company owned approximately 26% of Mediasite KK and accounted for its investment under the equity method of accounting. On January 14, 2014, the Company purchased the remaining 74% of Mediasite KK. |
Reclassifications | Reclassifications Reclassifications have been made to the September 30, 2016 financial statements to conform to the September 30, 2017 presentation. These reclassifications had no effect on the Company’s net loss or stockholders’ equity as previously reported. |
Use of Estimates | Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America (US GAAP), management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the period. Actual results could differ from those estimates. |
Revenue Recognition | Revenue Recognition General Revenue is recognized when persuasive evidence of an arrangement exists, delivery occurs or services are rendered, the sales price is fixed or determinable and collectability is reasonably assured. Revenue is deferred when undelivered products or services are essential to the functionality of delivered products, customer acceptance is uncertain, significant obligations remain, or the fair value of undelivered elements is unknown. Typically, the Company does not offer customers the right to return product, other than for exchange or repair pursuant to a warranty or stock rotation. The Company’s policy is to reduce revenue if it incurs an obligation for price rebates or other such programs during the period the obligation is reasonably estimated to occur. The following policies apply to the Company’s major categories of revenue transactions. Products Products are considered delivered, and revenue is recognized, when title and risk of loss have been transferred to the customer or upon customer acceptance if non-delivered products or services are essential to the functionality of delivered products. Under the terms and conditions of the sale, this occurs at the time of shipment to the customer. Product revenue currently represents sales of our Mediasite recorder and Mediasite related products such as our server software and other software licenses. If a license is time-based, the revenue is recognized over the term of the license agreement. Services The Company sells support and content hosting contracts to our customers, typically one year in length, and records the related revenue ratably over the contractual period. Our support contracts cover phone and electronic technical support availability over and above the level provided by our distributors, software upgrades on a when and if available basis, advance hardware replacement and an extension of the standard hardware warranty from 90 days to one year. The manufacturers the Company contracts with to build the units provide a limited one-year warranty on the hardware. The Company also sells installation, training, event webcasting, and customer content hosting services. Revenue for those services is recognized when performed in the case of installation, training and event webcasting services. Occasionally, the Company will sell customization services to enhance the server software. Revenue from those services is recognized when performed, if perfunctory, or under contract accounting. Service amounts invoiced to customers in excess of revenue recognized are recorded as deferred revenue until the revenue recognition criteria are met. Revenue Arrangements that Include Multiple Elements Sales of software, with or without installation, training, and post customer support fall within the scope of the software revenue recognition rules. Under the software revenue recognition rules, the fee from a multiple-deliverable arrangement is allocated to each of the undelivered elements based upon vendor-specific objective evidence (VSOE), which is limited to the price charged when the same deliverable is sold separately, with the residual value from the arrangement allocated to the delivered element. The portion of the fee that is allocated to each deliverable is then recognized as revenue when the criteria for revenue recognition are met with respect to that deliverable. If VSOE does not exist for all of the undelivered elements, then all revenue from the arrangement is typically deferred until all elements have been delivered to the customer. In the case of the Company’s hardware products with embedded software, the Company has determined that the hardware and software components function together to deliver the product’s essential functionality, and therefore, the revenue from the sale of these products is accounted for under the revenue recognition rules for tangible products whereby the fee from a multiple-deliverable arrangement is allocated to each of the deliverables based upon their relative selling prices as determined by a selling-price hierarchy. A deliverable in an arrangement qualifies as a separate unit of accounting if the delivered item has value to the customer on a stand-alone basis. A delivered item that does not qualify as a separate unit of accounting is combined with the other undelivered items in the arrangement and revenue is recognized for those combined deliverables as a single unit of accounting. The selling price used for each deliverable is based upon VSOE if available, from third-party evidence (TPE) if VSOE is not available, and best estimate of selling price (ESP) if neither VSOE nor TPE are available. TPE is the price of the Company’s or any competitor’s largely interchangeable products or services in stand-alone sales to similarly situated customers. ESP is the price at which the Company would sell the deliverable if it were sold regularly on a stand-alone basis, considering market conditions and entity-specific factors. All revenue arrangements, excluding the sale of all software-only products and associated services, have been accounted for under this guidance. The selling prices used in the relative selling price allocation method are as follows: (1)the Company’s products and services are based upon VSOE and (2) hardware products with embedded software, for which VSOE does not exist, are based upon ESP. The Company does not believe TPE exists for any of these products and services because they are differentiated from competing products and services in terms of functionality and performance and there are no competing products or services that are largely interchangeable. Management establishes ESP for hardware products with embedded software using a cost plus margin approach with consideration for market conditions, such as the impact of competition and geographic considerations, and entity-specific factors, such as the cost of the product and the Company’s profit objectives. Management believes that ESP is reflective of reasonable pricing of that deliverable as if priced on a stand-alone basis. When a sales transaction includes deliverables that are divided between Accounting Standards Codification (ASC) Topic 605 and ASC Subtopic 985-605, the Company allocates the selling price using the relative selling price method whereas value is allocated using an ESP for software developed using a percent of list price approach. The other deliverables are valued using ESP or VSOE as previously discussed. While the pricing model, currently in use, captures all critical variables, unforeseen changes due to external market forces may result in a revision of the inputs. These modifications may result in the consideration allocation differing from the one presently in use. Absent a significant change in the pricing inputs or the way in which the industry structures its transactions, future changes in the pricing model are not expected to materially affect our allocation of arrangement consideration. Management has established VSOE for hosting services. Billings for hosting are spread ratably over the term of the hosting agreement, with the typical hosting agreement having a term of 1 year, with renewal on an annual basis. The Company sells most hosting contracts without the inclusion of products. When the hosting arrangement is sold in conjunction with product, the product revenue is recognized immediately while the remaining hosting revenue is spread ratably over the term of the hosting agreement. The selling price is allocated between these elements using the relative selling price method. The Company uses ESP for development of the selling price for hardware products with embedded software. The Company also offers hosting services bundled with events services. The Company uses VSOE to establish relative selling prices for its events services. The Company recognizes events revenue when the event takes place and recognizes the hosting revenue over the term of the hosting agreement. The total amount of the arrangement is allocated to each element based on the relative selling price method. Reserves The Company reserves for stock rotations, price adjustments, rebates, and sales incentives to reduce revenue and accounts receivable for these and other credits granted to customers. Such reserves are recorded at the time of sale and are calculated based on historical information (such as rates of product stock rotations) and the specific terms of sales programs, taking into account any other known information about likely customer behavior. If actual customer behavior differs from our expectations, it may compromise our ability to recognize revenue to these distributors at the time of shipment. Also, if the Company determines that it can no longer accurately estimate amounts for stock rotations and sales incentives, the Company would not be able to recognize revenue until resellers sell the inventory to the final end user. Shipping and Handling The Company’s shipping and handling costs billed to customers are included in other revenue. Costs related to shipping and handling are included in cost of revenue and are recorded at the time of shipment to the customer. |
Concentration of Credit Risk and Other Risks and Uncertainties | Concentration of Credit Risk and Other Risks and Uncertainties As of September 30, 2017, of the $1.2 million in cash and cash equivalents, $103 thousand is deposited with 2 major U.S. financial institutions. At times, deposits in these institutions exceed the amount of insurance provided on such deposits. The Company has not experienced any losses on such amounts and believes that it is not exposed to any significant credit risk on these balances. The remaining $1.1 million of cash and cash equivalents is held by our foreign subsidiaries in financial institutions in Japan and the Netherlands and held in their local currency. The cash held in foreign financial institutions is not guaranteed. We assess the realization of our receivables by performing ongoing credit evaluations of our customers’ financial condition. Through these evaluations, we may become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. Our reserve requirements are based on the best facts available to us and are reevaluated and adjusted as additional information is received. Our reserves are also based on amounts determined by using percentages applied to certain aged receivable categories. These percentages are determined by a variety of factors including, but not limited to, current economic trends, historical payment and bad debt write-off experience. Allowance for doubtful accounts for accounts receivable and financing receivables was $575,000 at September 30, 2017 and $225,000 at September 30, 2016. We had billings for Mediasite product and support services as a percentage of total billings to one distributor of approximately 11% in 2017 and 14% in 2016 and to a second distributor of approximately 15% in 2017 and 13% in 2016. At September 30, 2017 and 2016, these two distributors represented 23% and 28% of total accounts receivable, respectively. Currently all of our product inventory purchases are from one third-party contract manufacturer. Although we believe there are multiple sources of supply from other contract manufacturers as well as multiple suppliers of component parts required by the contract manufacturers, a disruption of supply of component parts or completed products, even if short term, would have a material negative impact on our revenues. At September 30, 2017 and 2016, this supplier represented 27% and 40%, respectively, of total accounts payable. We also license technology from third parties that is embedded in our software. We believe there are alternative sources of similar licensed technology from other third parties that we could also embed in our software, although it could create potential programming related issues that might require engineering resources. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of September 30, 2017, of the $1.2 million aggregate cash and cash equivalents held by the Company, the amount of cash and cash equivalents held by our foreign subsidiaries was $1.1 million. If the funds held by our foreign subsidiaries were needed for our operations in the United States, the repatriation of some of these funds to the United States could require payment of additional U.S. taxes. |
Trade Accounts Receivable | Trade Accounts Receivable The majority of the Company’s accounts receivable are due from entities in, or distributors or value added resellers to, the education, corporate and government sectors. Credit is extended based on evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts receivable are typically due within 30 days and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered to be past due. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes-off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Interest is not accrued on past due receivables. |
Financing Receivables | Financing Receivables Financing receivables consist of customer receivables resulting from the sale of the Company's products and services, primarily software and long-term customer support contracts, and are presented net of allowance for losses. The Company has a single portfolio consisting of fixed-term receivables, which is further segregated into two classes based on products, customer type, and credit risk evaluation. The Company generally determines its allowance for losses on financing receivables at the customer class level by considering a number of factors, including the length of time financing receivable are past due, historical and anticipated experience, the customer’s current ability to pay its obligation, and the condition of the general economy and the industry as a whole. The Company writes-off financing receivables when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for financing receivable losses. |
Investment in Sales-Type Lease | 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. |
Inventory Valuation | Inventory Valuation 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 market, with cost determined on a first-in, first-out basis. |
Capitalized Software Development Costs | Capitalized Software Development Costs Software development costs incurred in conjunction with product development are charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs are capitalized and reported at the net realizable value of the related product. Typically the period between achieving technological feasibility of the Company’s products and the general availability of the products has been short. Consequently, software development costs qualifying for capitalization are typically immaterial and are generally expensed to research and development costs. During 2013, the Company’s My Mediasite product release required software capitalization since there was a longer period between technological feasibility and the general availability of the product. Upon product release, the amortization of software development costs is determined annually as the greater of the amount computed using the ratio of current gross revenues for the products to their total of current and anticipated future gross revenues or the straight-line method over the estimated economic life of the products, expected to be three years. Amortization expense of software development costs of $0 thousand and $104 thousand is included in Cost of Revenue – Product for each of the years ending September 30, 2017 and 2016, respectively. The gross amount of capitalized external and internal development costs was $533 thousand at September 30, 2017 and 2016. There were no software development efforts that qualified for capitalization for the years ended September 30, 2017 or 2016, respectively. |
Property and Equipment | Property and Equipment Property and equipment are recorded at cost and are depreciated using the straight-line method for financial reporting purposes. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Goodwill has an indefinite useful life and is recorded at cost and not amortized but, instead, tested at least annually for impairment. We assess the impairment of goodwill on an annual basis or whenever events or changes in circumstances indicate that the fair value of these assets is less than the carrying value. If a qualitative assessment is used and the Company determines that the fair value of goodwill is more likely than not (i.e., a likelihood of more than 50%) less than its carrying amount, a quantitative impairment test will be performed. If goodwill is quantitatively assessed for impairment, the Company compares the estimated fair value of the reporting unit to which goodwill is allocated to its carrying value. The amount of impairment, if any, is equal to the amount by which the carrying value of the reporting unit exceeds its fair value. For purposes of the fiscal 2017 and 2016 tests, goodwill balances are evaluated within three separate reporting units. In fiscal 2016, we performed a two-step goodwill test and determined that the fair value of goodwill was more than the carrying value. In fiscal 2017, we performed a quantitative analysis and determined that the fair value of one of the Company's reporting units is less than its carrying value, and that the fair value of the remaining reporting units is greater than their respective carrying values. The Company recognized impairment charges of $600 thousand and $0 as of September 30, 2017 and 2016, respectively. Long-lived assets and intangible assets other than goodwill are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based on expected undiscounted cash flows attributable to that asset. For the year ended September 30, 2017, it was determined that changes in circumstances were present, primarily the decline in the Company's market capitalization during the fiscal year. However, after performing analysis of undiscounted cash flows attributable to our long-lived assets along with other relevant factors, it was determined that there is no impairment of long-lived and intangible assets other than goodwill. Key assumptions utilized in the analysis of discounted cash flows for each asset or asset group being tested included 1) whether cash flows were attributable solely to the asset or group, or to an entire reporting unit; and 2) the useful lives of the asset or asset group. Forecasts used in the discounted cash flow analysis were also consistent with those used in determining fair value of reporting units during goodwill impairment testing. For the year ended September 30, 2016, no events or changes in circumstances occurred that required this analysis. For the year ended September 30, 2016, no events or changes in circumstances occurred that required this analysis. |
Comprehensive Loss | Comprehensive Loss Comprehensive loss includes disclosure of financial information that historically has not been recognized in the calculation of net income. Our comprehensive loss encompasses net loss and foreign currency translation adjustments. Assets and liabilities of international operations that have a functional currency that is not in U.S. dollars are translated into U.S. dollars at year-end exchange rates, and revenue and expense items are translated using weighted average exchange rates. Any adjustments arising on translation are included in shareholders’ equity as an element of accumulated other comprehensive loss. |
Advertising Expense | Advertising Expense Advertising costs included in selling and marketing, are expensed when the advertising first takes place. |
Research and Development Costs | Research and Development Costs Research and development costs are expensed in the period incurred, unless they meet the criteria for capitalized software development costs. |
Income Taxes | Income Taxes Deferred tax assets and liabilities are determined based on differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. We do not provide for U.S. income taxes on the undistributed earnings of our foreign subsidiaries, which we consider to be permanently invested outside of the U.S. We make judgments regarding the realizability of our deferred tax assets. The balance sheet carrying value of our net deferred tax assets is based on whether we believe that it is more likely than not that we will generate sufficient future taxable income to realize these deferred tax assets after consideration of all available evidence. We regularly review our deferred tax assets for recoverability considering historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses. Generally, cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome in determining that a valuation allowance is not needed. As of September 30, 2017 and 2016, valuation allowances have been established for all U.S. and for certain foreign deferred tax assets which we believe do not meet the “more likely than not” criteria for recognition. The Company also accounts for the uncertainty in income taxes related to the recognition and measurement of a tax position and measurement of a tax position taken or expected to be taken in an income tax return. The Company follows the applicable accounting guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure related to the uncertainty in income tax positions. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Nonfinancial Assets Measured at Fair Value on a Nonrecurring Basis The Company’s goodwill, intangible assets and other long-lived assets are nonfinancial assets that were acquired either as part of a business combination, individually or with a group of other assets. These nonfinancial assets were initially measured and recognized at amounts equal to the fair value determined as of the date of acquisition. Fair value measurements of reporting units are estimated using an income approach involving discounted or undiscounted cash flow models and the public company guideline method that contain certain Level 3 inputs requiring management judgment, including projections of economic conditions and customer demand, revenue and margins, changes in competition, operating costs, working capital requirements, and new product introductions. Fair value measurements of the reporting units associated with the Company’s goodwill balances are estimated at least annually at the beginning of the fourth quarter of each fiscal year for purposes of impairment testing. Fair value measurements associated with the Company’s intangible assets and other long-lived assets are estimated when events or changes in circumstances such as market value, asset utilization, physical change, legal factors, or other matters indicate that the carrying value may not be recoverable. 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 a Recurring Basis The initial fair values of PFG debt and warrant debt (see Note 3) 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 fair value of the bifurcated conversion feature represented by the warrant derivative liability, which is measured at fair value on a recurring basis is 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 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, financing receivables, accounts payable and debt instruments, excluding the PFG debt. The book values of cash and cash equivalents, accounts receivable, investment in sales-type lease, debt (excluding the PFG debt) and accounts payable are considered to be representative of their respective fair values. The carrying value of capital lease obligations and debt (excluding the PFG 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 | Legal Contingencies In June 2014, the Company entered into a settlement agreement with Astute Technology, LLC (“Astute”). The key terms of the agreement were: 1) a grant of a non-revocable license of Astute patents to the Company; 2) a grant of a fully paid, non-refundable license of certain Sonic Foundry patents to Astute; 3) both Astute and our customer agreed to identify three meetings they currently capture that the other party will not seek or respond to any request for proposal; and 4) a payment of $1.35 million to Astute. Pursuant to the settlement agreement, the payments were made in three equal amounts with the first paid in June 2014, the second paid in October 2014 and the final installment paid in March 2015. The Company contributed $1.1 million of the $1.35 million payable to Astute with our customer paying the residual amount. Of the $1.1 million, $428 thousand related to prior use and was recorded as a charge to income during fiscal 2014. The remaining $672 thousand was recorded as a product right asset, which is being amortized, on a straight-line basis, over the remaining life of the patents, through 2020. Future amounts due to Astute were accrued for as of the time of settlement. |
Stock-Based Compensation | 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. |
Per Share Computation | 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). |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The guidance substantially converges final standards on revenue recognition between the FASB and the International Accounting Standards Board providing a framework on addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance, including industry-specific guidance, in current U.S. generally accepted accounting principles. The FASB subsequently issued a one-year deferral of the effective date for the new revenue reporting standard for entities reporting under U.S. GAAP. In accordance with the deferral, the guidance is effective for annual reporting periods beginning after December 15, 2017. Subsequently, the FASB issued ASU 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations" ("ASU 2016-08"); ASU 2016-10, "Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing" ("ASU 2016-10"); and ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients" ("ASU 2016-12"). The Company must adopt ASU 2016-08, ASU 2016-10 and ASU 2016-12 with ASU 2014-09. We anticipate that adoption of FASB Topic 606 will have a material impact on our consolidated financial statements. While we are continuing to assess all potential impacts of the standard, particularly regarding expenses, the Company believes the most significant impact will relate to accounting for software license revenue. We expect revenue related to recorders, customer support, hosting, and events services to remain largely unchanged. Specifically, under the new standard we expect to recognize revenue for annual or multi-year software licenses predominantly at the time of billing rather than ratably over the license term as is current practice. Due to the complexity of certain of our customer contracts, the actual revenue recognition treatment required under the standard will be dependent on contract-specific terms, and may vary in some instances from recognition at the time of billing. In July 2015, the FASB issued ASU 2015-11, "Inventory (Topic 330)" ("ASU 2015-11"). The amendments in ASU 2015-11 require an entity to measure inventory at the lower of cost and net realizable value. The amendments in ASU 2015-11 are effective for fiscal years beginning after December 15, 2016 and interim periods within those years. Early adoption is permitted. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company does not believe the implementation of this standard will result in a material impact to its financial statements. In November 2015, the FASB issued ASU 2015-17, "Income Taxes (Topic 740)", ("ASU 2015-17"). ASU 2015-17 simplifies the presentation of deferred income taxes. The amendments in ASU 2015-17 are effective for financial statements issued for annual periods beginning after December 15, 2016, including interims periods within those annual periods. The amendments may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company does not believe the implementation of this standard will result in a material impact to its financial statements. In January 2016, the FASB issued ASU 2016-01, "Financial Instruments - Overall (Subtopic 825-10)", ("ASU 2016-01"). ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments in ASU 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values should be applied prospectively to equity investments that exist at the date of the adoption. The Company is currently evaluating this guidance and its impact to the financial statements. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)", ("ASU 2016-02"). ASU 2016-02 aims to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for public entities. Early application of the amendment is permitted. The Company is currently reviewing this guidance and its impact to the financial statements. In March 2016, the FASB issued ASU 2016-05, "Derivatives and Hedging (Topic 815)", ("ASU 2016-05"). ASU 2016-05 clarifies the effect of novation related to a derivative instrument. The amendments in ASU 2016-05 are effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. An entity has the option to apply the amendments in ASU 2016-05 on either a prospective or a modified retrospective basis. The Company is currently evaluating this guidance and its impact to the financial statements. In March 2016, the FASB issued ASU 2016-06, "Derivatives and Hedging (Topic 815)", ("ASU 2016-06"). ASU 2016-06 clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The amendments in ASU 2016-06 are effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Entities should apply the amendments on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year for which the amendments are effective. The Company is currently evaluating this guidance and its impact to the financial statements. In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation (Topic 718)", ("ASU 2016-09"). ASU 2016-09 simplifies the accounting for share-based payment transactions. The amendments in ASU 2016-09 are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently evaluating this guidance and its impact to the financial statements. In May 2016, the FASB issued ASU 2016-11, "Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815)", ("ASU 2016-11"). ASU 2016-11 rescinds SEC paragraphs pursuant to the SEC Staff Announcement, "Rescission of Certain SEC Staff Observer Comments upon Adoption of Topic 606", and the SEC Staff Announcement, "Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or Equity", announced at the March 3, 2016 Emerging Issues Task Force (EITF) meeting. The effective dates in ASU 2016-11 coincide with the effective dates of Topic 606 (ASU 2014-09) and ASU 2014-16. The Company is currently evaluating the impact of adopting ASU 2014-09 and related amendments, such as ASU 2016-11, to determine the impact, if any, it may have on our financial statements. The Company previously reviewed ASU 2014-16 and determined that is it not applicable. In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230)", ("ASU 2016-15"). ASU 2016-15 addresses classification of certain cash receipts and cash payments within the statement of cash flows. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods with those fiscal years. The Company is currently evaluating this guidance and its impact to the financial statements. In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740)", ("ASU 2016-16"). ASU 2016-16 prohibits the recognition of current and deferred income taxes for an intra-entity transfer until the asset has been sold to an outside party. The amendment in ASU 2016-16 are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company is currently evaluating this guidance and its impact to the financial statements. In January 2017, the FASB issued ASU 2017-01 "(ASC Topic 805), Business Combination: Clarifying the Definition of a Business", ("ASU 2017-01"). The amendments in this ASU change the definition of a business to assist with evaluating when a set of transferred assets and activities is a business. The Company is required to adopt the guidance in the first quarter of fiscal 2019. Early adoption is permitted. The Company is in the process of assessing the impact, if any, of this ASU on its consolidated financial statements. In February 2017, the FASB issued ASU 2017-05, "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets", ("ASU 2017-05"). ASU 2017-05 clarifies the scope of Subtopic 610-20, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets, which provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. The amendments in ASU 2017-05 are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company is in the process of assessing the impact, if any, of this ASU on its consolidated financial statements. In March 2017, the FASB issued ASU 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost", ("ASU 2017-07"). ASU 2017-07 was issued to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost within an entity's financial statements. The amendments in ASU 2017-07 are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company is currently evaluating this guidance and its impact to the consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, "Compensation-Stock Compensation (Topic 718)", ("ASU 2017-09"). The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendments in ASU 2017-09 are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company is in the process of assessing the impact, if any, of this ASU on its consolidated financial statements. In July 2017, the FASB issued ASU 2017-11, "Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815)", ("ASU 2017-11"). This update was issued to address complexities in accounting for certain equity-linked financial instruments containing down round features. The amendment changes the classification analysis of these financial instruments (or embedded features) so that equity classification is no longer precluded. The amendments in ASU 2017-11 are effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is in the process of assessing the impact, if any, of this ASU on its consolidated 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. Recently Adopted Accounting Pronouncements In August 2014, the FASB issued No. ASU 2014-15, "Presentation of Financial Statements — Going Concern" ("ASU 2014-15"), which requires management to evaluate relevant conditions, events and certain management plans that are known or reasonably knowable that when, considered in the aggregate, raise substantial doubt about an entity's ability to continue as a going concern within one year after the date that financial statements are issued. This ASU is effective for interim and annual reporting periods ending after December 15, 2016, and early adoption is permitted. ASU 2014-15 was early adopted by the Company on March 31, 2017, and did not have a material impact on the consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, ("ASU 2017-04"). ASU 2017-04 simplifies the subsequent measurement of goodwill by allowing an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This update also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendments in ASU 2017-04 are effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those annual reporting periods. ASU 2017-04 was early adopted by the Company for the year ending September 30, 2017. The adoption may have had a material impact on the consolidated financial statements as a goodwill impairment charge was recognized for one of the Company's reporting units in the current year (which was measured based on the updated guidance outlined in ASU 2017-04), and a second reporting unit has a negative carrying amount. However, in accordance with the newly adopted requirements, a Step 2 analysis was not performed for either reporting unit, which could have resulted in additional impairment of goodwill under previous guidance. See Note 8 for further discussion of goodwill. |
Basis of Presentation and Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financing Receivables | As of September 30, 2017 financing receivables consisted of the following (in thousands):
As of September 30, 2017 investment in sales-type leases consisted of the following (in thousands):
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Inventory | Inventory consists of the following (in thousands):
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Estimated Useful Lives of Property and Equipment | The estimated useful lives used to calculate depreciation are as follows:
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Summary of Financial Liabilities Measured at Fair Value on Recurring Basis | Financial liabilities measured at fair value on a recurring basis are summarized below (in thousands):
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Summary of Changes in Level 3 Fair Value Measurements | Included below is a summary of the changes in our Level 3 fair value measurements (in thousands):
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Fair Value Assumptions for Stock Options Granted | The fair value of each option grant is estimated using the assumptions in the following table:
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Computation of Basic and Diluted Weighted Average Shares Used in Earnings Per Share Calculations | The following table sets forth the computation of basic and diluted weighted average shares used in the earnings per share calculations:
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Commitments (Tables) |
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Minimum Lease Payments Under Capital Lease, Including Principal and Interest | Minimum lease payments, including principal and interest, are summarized in the table below.
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Minimum Lease Payments Under Operating Leases | The following is a schedule by year of future minimum lease payments under operating leases:
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Credit Arrangements (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||
Schedule of Maturities of Long-term Debt | The annual principal payments on the notes payable to SVB and PFG are as follows:
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Accrued Liabilities (Tables) |
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Schedule of Accrued Liabilities | Accrued liabilities consists of the following (in thousands):
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Stock Options and Employee Stock Purchase Plan (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Number of Shares Available for Grant | The number of shares available for grant under these stockholder approved plans at September 30, is as follows:
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Summary of Options Activity | The following table summarizes information with respect to outstanding stock options under all plans:
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Summary of Options Outstanding Segregated By Range | The options outstanding at September 30, 2017 have been segregated into three ranges for additional disclosure as follows:
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Summary of Status of Company's Non-Vested Shares | A summary of the status of the Company’s non-vested shares under all plans at September 30, 2017 and for the year then ended is presented below:
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Income Taxes (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for Income Taxes | The provision for income taxes consists of the following (in thousands):
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Schedule of Components of Income Tax Expense (Benefit) [Table Text Block] | U.S. and foreign components of income (loss) before income taxes were as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Income Tax Expense (Benefit) Computed at Country Specific Rate | The reconciliation of income tax expense (benefit) computed at the appropriate country specific rate to income tax expense (benefit) is as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Deferred Tax Accounts Recognized for Financial Purposes | The significant components of the deferred tax accounts recognized for financial reporting purposes are as follows (in thousands):
|
Goodwill and Other Intangible Assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Carrying Amount of Goodwill | The changes in the carrying amount of goodwill for the years ended September 30, 2017 and 2016, respectively, are as follows:
|
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Summary of Company's Total Intangible Assets | The following tables present details of the Company’s total intangible assets that are being amortized at September 30, 2017 and 2016:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Estimated Amortization Expense | Estimated amortization expense for each of the five subsequent fiscal years is expected to be (in thousands):
|
Segment Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Revenue by Geographic Region | The following summarizes revenue by geographic region (in thousands):
|
Quarterly Financial Data (unaudited) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Data Information | The following table sets forth selected quarterly financial information for the years ended September 30, 2017 and 2016. The operating results are not necessarily indicative of results for any future period.
|
Basis of Presentation and Significant Accounting Policies Basis of Presentation and Significant Accounting Policies - Financing Receivables (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Financing receivables, gross | $ 2,235 | $ 1,877 |
Allowance for losses on financing receivables | (200) | 0 |
Customer support contracts, current and long-term, gross | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Financing receivables, gross | 384 | 0 |
Product receivables, gross | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Financing receivables, gross | $ 2,051 | $ 1,877 |
Basis of Presentation and Significant Accounting Policies Basis of Presentation and Significant Accounting Policies - Investment in Sales-Type Lease (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Financing receivables, gross | $ 2,235 | $ 1,877 |
Investment in sales-type lease | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Financing receivables, gross | $ 555 | $ 0 |
Basis of Presentation and Significant Accounting Policies - Inventory (Detail) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Accounting Policies [Abstract] | ||
Raw materials and supplies | $ 156 | $ 149 |
Finished goods | 830 | 1,755 |
Inventory, Net | $ 986 | $ 1,904 |
Basis of Presentation and Significant Accounting Policies - Summary of Changes in Level 3 Fair Value Measurements (Detail) - Level 3 [Member] $ in Thousands |
12 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
PFG Debt [Member] | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Balance | $ 1,225 |
Payments to PFG | (807) |
Change in fair value | 73 |
Balance | 491 |
Warrant Debt [Member] | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Balance | 102 |
Payments to PFG | 0 |
Change in fair value | 21 |
Balance | $ 123 |
Basis of Presentation and Significant Accounting Policies - Fair Value Assumptions for Stock Options Granted (Detail) |
12 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected dividend yield | 0.00% | 0.00% |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected life | 4 years 10 months 25 days | 4 years 9 months 20 days |
Risk-free interest rate | 0.84% | 0.96% |
Expected volatility | 53.80% | 45.50% |
Expected forfeiture rate | 10.30% | 10.70% |
Expected exercise factor | 1.35 | 1.40 |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected life | 5 years | 5 years |
Risk-free interest rate | 1.23% | 1.05% |
Expected volatility | 57.20% | 50.00% |
Expected forfeiture rate | 11.80% | 12.00% |
Expected exercise factor | 1.44 | 1.43 |
Basis of Presentation and Significant Accounting Policies - Computation of Basic and Diluted Weighted Average Shares Used in Earnings per Share Calculations (Detail) - shares |
12 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Accounting Policies [Abstract] | ||
Denominator for basic earnings per share (in shares) - weighted average common shares | 4,436,333 | 4,389,421 |
Effect of dilutive options and warrants (treasury method) (in shares) | 0 | 0 |
Denominator for diluted earnings per share - adjusted weighted average common shares (in shares) | 4,436,333 | 4,389,421 |
Options and warrants outstanding during each year, but not included in the computation of diluted earnings (loss) per share because they are antidilutive (in shares) | 1,940,245 | 1,737,624 |
Commitments - Additional Information (Detail) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Jun. 28, 2011 |
|
Commitments and Contingencies Disclosure [Abstract] | |||
Capital Lease agreement expiry date | 2022-01 | ||
Portion of leases in fixed assets | $ 1,000 | ||
Portion of leases in accumulated depreciation | $ 571 | ||
Operating lease agreement expiry date | Dec. 31, 2020 | ||
Operating leases rent expense | $ 1,300 | $ 1,600 | |
Lease term | November 2011 through December 2018 | ||
Leasehold improvement liability | $ 613 | ||
Unamortized balance of lease | $ 95 | ||
Purchase which is not recorded on Company's Balance Sheet | $ 535 |
Commitments - Minimum Lease Payments Under Capital Lease, Including Principal and Interest (Detail) $ in Thousands |
Sep. 30, 2017
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2018 | $ 279,025 |
2019 | 181,359 |
2020 | 58,887 |
2021 | 11,482 |
2022 | 2,689 |
Total payments | 533,441 |
Less interest | (33,314) |
Total | $ 500,127 |
Commitments - Minimum Lease Payments Under Operating Leases (Detail) $ in Thousands |
Sep. 30, 2017
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2018 | $ 1,239 |
2019 | 661 |
2020 | 474 |
2021 | 119 |
2022 | 0 |
Total | $ 2,493 |
Credit Arrangements - Other Indebtedness (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Line of Credit Facility [Line Items] | ||
Current portion of subordinated note payable | $ 0 | $ 93,000 |
Senior Notes [Member] | ||
Line of Credit Facility [Line Items] | ||
Foreign Currency Transaction Gain (Loss), Realized | $ 6,000 | 3,000 |
Mitsui Sumitomo Bank [Member] | ||
Line of Credit Facility [Line Items] | ||
Annual interest rate | 1.575% | |
Mitsui Sumitomo Bank [Member] | Term Loan [Member] | ||
Line of Credit Facility [Line Items] | ||
Notes payable outstanding | $ 417,000 | 198,000 |
Media Mission [Member] | Senior Notes [Member] | ||
Line of Credit Facility [Line Items] | ||
Notes payable outstanding | 93,000 | |
Mediasite KK [Member] | Senior Notes [Member] | ||
Line of Credit Facility [Line Items] | ||
Notes payable outstanding | $ 0 |
Credit Arrangements - Summary of Annual Principal Payments (Detail) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Debt Instrument [Line Items] | ||
Total | $ 1,225 | |
SVB, PFG and Mitsui Sumitomo Bank [Member] | ||
Debt Instrument [Line Items] | ||
2016 | $ 816 | |
Less warrant debt & discount | (76) | |
Total | $ 892 |
Accrued Liabilities - Schedule of Accrued Liabilities (Detail) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Payables and Accruals [Abstract] | ||
Accrued compensation | $ 871 | $ 1,258 |
Accrued expenses | 211 | 365 |
Accrued interest & taxes | 288 | 257 |
Other accrued liabilities | 17 | 3 |
Total | $ 1,387 | $ 1,883 |
Income Taxes - Provision for Income Taxes (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Income Tax Disclosure [Abstract] | ||
Current tax expense (benefit) U.S. | $ (96) | $ 136 |
Current tax expense (benefit) foreign | 17 | 133 |
Deferred income tax expense | 0 | 0 |
Income tax expense | $ (79) | $ 269 |
Income Taxes Components of Income (Loss) Before Income Taxes (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Income Tax Disclosure [Abstract] | ||
U.S. | $ (5,225) | $ (3,504) |
Foreign | 107 | 456 |
Loss before income taxes | $ (5,118) | $ (3,048) |
Income Taxes - Reconciliation of Income Tax Expense (Benefit) Computed at Country Specific Rate (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Income Tax Disclosure [Abstract] | ||
Income tax expense (benefit) at statutory rate | $ (1,800) | $ (1,036) |
State income tax expense (benefit) | (192) | (130) |
Foreign tax activity | 41 | 9 |
R&D tax credit expiration | 0 | 0 |
Permanent differences, net | 469 | 274 |
Adjustment of temporary differences to income tax returns | 0 | 0 |
Change in valuation allowance | 1,403 | 1,152 |
Income tax expense | $ (79) | $ 269 |
Income Taxes - Components of Deferred Tax Accounts Recognized for Financial Purposes (Detail) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Deferred tax assets: | ||
Net operating loss and other carryforwards | $ 35,529 | $ 34,563 |
Common stock options | 1,246 | 1,134 |
Unearned revenue | 520 | 389 |
Other | 650 | 423 |
Total deferred tax assets | 37,945 | 36,509 |
Deferred tax liabilities: | ||
Other | (146) | (144) |
Total deferred tax liabilities | (146) | (144) |
Net deferred tax asset | 37,799 | 36,365 |
Valuation allowance | (37,702) | (36,299) |
Equity gains on investment in Mediasite KK | (916) | (916) |
Customer relationships | (570) | (718) |
Goodwill amortization | (2,940) | (2,930) |
Net deferred tax liability for goodwill and intangible assets amortization | $ (4,329) | $ (4,498) |
Savings Plan - Additional Information (Detail) - USD ($) |
12 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Postemployment Benefits [Abstract] | ||
Defined savings plan contributions | $ 321,000 | $ 426,000 |
Additional discretionary contributions | $ 0 | $ 0 |
Goodwill and Other Intangible Assets - Additional Information (Detail) |
Jul. 01, 2015
segment
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
Number of reporting units | 3 |
Goodwill and Other Intangible Assets - Schedule of Changes in Carrying Amount of Goodwill (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Goodwill [Roll Forward] | ||
Beginning balance | $ 11,310 | $ 10,853 |
Foreign currency translation adjustment | (255) | 457 |
Ending balance | $ 10,455 | $ 11,310 |
Goodwill and Other Intangible Assets - Total Intangible Assets (Detail) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Goodwill [Line Items] | |||
Gross | $ 3,700 | $ 3,810 | |
Accumulated Amortization | 1,934 | 1,543 | |
Intangible Assets, Net | 1,766 | 2,267 | |
Non-amortizable goodwill, Net | $ 10,455 | $ 11,310 | $ 10,853 |
Customer relationships | |||
Goodwill [Line Items] | |||
Life (years) | 10 years | 10 years | |
Gross | $ 2,495 | $ 2,605 | |
Accumulated Amortization | 990 | 723 | |
Intangible Assets, Net | $ 1,505 | $ 1,882 | |
Software development costs | |||
Goodwill [Line Items] | |||
Life (years) | 3 years | 3 years | |
Gross | $ 533 | $ 533 | |
Accumulated Amortization | 533 | 533 | |
Intangible Assets, Net | $ 0 | $ 0 | |
Product rights | |||
Goodwill [Line Items] | |||
Life (years) | 6 years | 6 years | |
Gross | $ 672 | $ 672 | |
Accumulated Amortization | 411 | 287 | |
Intangible Assets, Net | $ 261 | $ 385 |
Goodwill and Other Intangible Assets - Schedule of Estimated Amortization Expense (Detail) $ in Thousands |
Sep. 30, 2017
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2017 | $ 389 |
2018 | 362 |
2019 | 302 |
2020 | 273 |
2021 | 266 |
Thereafter | 174 |
Total | $ 1,766 |
Segment Information - Additional Information (Detail) |
12 Months Ended |
---|---|
Sep. 30, 2017
segment
| |
Segment Reporting [Abstract] | |
Number of operating segments | 3 |
Number of reportable segments | 1 |
Segment Information - Summarizes Revenue by Geographic Region (Detail) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Segment Reporting Information [Line Items] | ||||||||||
Revenues | $ 8,300 | $ 9,833 | $ 8,560 | $ 9,307 | $ 9,455 | $ 9,817 | $ 9,612 | $ 9,091 | $ 36,000 | $ 37,975 |
United States | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Revenues | 21,476 | 22,686 | ||||||||
Europe and Middle East | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Revenues | 4,720 | 4,843 | ||||||||
Asia | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Revenues | 8,267 | 8,760 | ||||||||
Other | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Revenues | $ 1,537 | $ 1,686 |
Customer Concentration - Additional Information (Detail) - distributor |
12 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Total Revenue | ||
Concentration Risk [Line Items] | ||
Number of distributors | 2 | 2 |
Percentage of account receivables represented by two distributors | 26.00% | 27.00% |
Accounts Receivable [Member] | ||
Concentration Risk [Line Items] | ||
Number of distributors | 2 | 2 |
Percentage of account receivables represented by two distributors | 23.00% | 28.00% |
Quarterly Financial Data (unaudited) - Quarterly Financial Data Information (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Income Statement [Abstract] | ||||||||||
Revenue | $ 8,300 | $ 9,833 | $ 8,560 | $ 9,307 | $ 9,455 | $ 9,817 | $ 9,612 | $ 9,091 | $ 36,000 | $ 37,975 |
Gross margin | 6,113 | 7,247 | 6,064 | 6,709 | 7,102 | 7,235 | 7,273 | 6,380 | 26,133 | 27,990 |
Income (loss) from operations | (1,411) | (371) | (1,274) | (1,502) | (493) | (452) | (214) | (1,117) | (4,558) | (2,276) |
Net income (loss) | $ (1,585) | $ (489) | $ (1,456) | $ (1,509) | $ (847) | $ (552) | $ (711) | $ (1,207) | $ (5,039) | $ (3,317) |
Basic and diluted net income (loss) per share | $ (0.37) | $ (0.13) | $ (0.33) | $ (0.34) | $ (0.19) | $ (0.13) | $ (0.16) | $ (0.28) |
Subsequent Event (Details) - USD ($) |
Nov. 09, 2017 |
Aug. 23, 2017 |
Jun. 08, 2017 |
May 30, 2017 |
Dec. 22, 2017 |
---|---|---|---|---|---|
Director | Subsequent Event | |||||
Subsequent Event [Line Items] | |||||
Percent of ownership after sale of stock to related parties | 5.00% | ||||
Series A Preferred Stock | Director | |||||
Subsequent Event [Line Items] | |||||
Stock sold to related party, value | $ 500,000 | $ 50,000 | $ 500,000 | ||
Stock sold to related party (in dollars per share) | $ 762.85 | $ 910 | $ 910 | ||
Series A Preferred Stock | Director | Subsequent Event | |||||
Subsequent Event [Line Items] | |||||
Stock sold to related party, value | $ 500,000 | ||||
Stock sold to related party (in dollars per share) | $ 762.85 | ||||
Period Ending December 31, 2017 | Eleventh Amendment | Subsequent Event | |||||
Subsequent Event [Line Items] | |||||
Maximum change in deferred revenue | $ 1,900,000 |
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