Sonic Foundry finds new funding source — within its own board
Sonic Foundry has closed on a $5 million loan — from the chairman of its board of directors.
It’s not an expansion of the debt held by the Madison streaming media and video archiving company but rather a replacement of its longtime revolving line of credit from Silicon Valley Bank, CEO Gary Weis said.
With the reporting requirements and restrictions tied to a bank line of credit, “we concluded we could do things to make the business more efficient if we had a different form of lending,” Weis said.
The five-year, $5 million loan, at 9 percent interest, is from Mark Burish, a Madison attorney and member of Sonic Foundry’s board since 2010.
The loan follows another recent financial move by Sonic Foundry.
In December, the company switched from the Nasdaq market to the OTC (over-the-counter) market. Weis said that change also provides more flexibility.
Sonic stock had been traded on Nasdaq since 2000, two years after staging its initial public offering on the American Stock Exchange, now known as the NYSE American.
On Nasdaq, the company’s share price lagged, making it hard to meet Nasdaq’s requirements for listed companies.
Weis said Sonic took a $600,000 non-cash impairment charge in 2017 based on a drop in “goodwill” — the intangible value of its acquisitions and its brand — and was facing an even larger charge for 2018 along with the “continued erosion of the stock price.”
A goodwill charge is “purely an accounting thing,” he said.
So, rather than raise a large amount of equity that Nasdaq would have required, the company voluntarily took the goodwill charge and moved to the OTC market.
“We really are a very small company to be a public company; that’s just the reality of it,” Weis said. “This allows us to spend more time focusing on fundamentals of the business.”
The business itself, Weis said, is “very solid” and no jobs have been cut. Sonic has about 180 employees worldwide, including 90 in Madison, at 222 W. Washington Ave.
A preliminary report on Sonic’s fiscal fourth quarter that ended Sept. 30, 2018, showed the company had $8.5 million in revenue, up from $8.3 million in the same period of 2017, but a net loss of $10.7 million, or $2.14 a share, due to an $11.8 million goodwill impairment charge. That’s wider than the company’s $1.6 million net loss, or 37 cents a share, for the 2017 fourth quarter.
The company’s report for the full 2018 fiscal year has not been released yet.
Meanwhile, Sonic’s Mediasite hardware and software — primarily sold to colleges and universities for recording and archiving class lectures — has found a new type of audience: coffee drinkers.
Sonic Foundry has teamed with Briggo, an Austin, Texas, company with customized coffee ordered via mobile app or touch screen in airports, convention centers and corporate offices. Each Briggo “Coffee Haus” now provides video panels with entertainment and messages provided to customers via Mediasite technology.
Weis said it’s a new market Sonic hopes to plumb as more businesses look to use video “to enhance their appeal to their customers.”