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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


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FORM 10-Q


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(Mark One)

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

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020 OR

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

EXCHANGE ACT OF 1934

For the transition period from to Commission File Number: 000-20728


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QUMU CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota 41-1577970

(State or other jurisdiction of incorporation or organization)

510 1st Avenue North, Suite 305

(I.R.S. Employer Identification No.)

Minneapolis, Minnesota 55403

(Address of principal executive offices) (Zip Code)

(612) 638-9100

(Registrant’s telephone number, including area code)


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Securities registered pursuant to Section 12(b) of the Act:


Title of each class


Trading

Symbol Name of each exchange on which registered


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Common Stock, $0.01 par value QUMU The Nasdaq Stock Market LLC


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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company (as defined in Rule 12b-2 of the Exchange Act):

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Large accelerated filer Accelerated filer

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Non-accelerated filer Smaller reporting company Emerging growth company

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

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

As of July 30, 2020, the registrant had 13,529,596 outstanding shares of $.01 par value common stock.


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QUMU CORPORATION FORM 10-Q

TABLE OF CONTENTS

FOR THE QUARTER ENDED JUNE 30, 2020



Description

Page

PART 1

FINANCIAL INFORMATION


Item 1.

Financial Statements (unaudited)



Condensed Consolidated Balance Sheets

3


Condensed Consolidated Statements of Operations

4


Condensed Consolidated Statements of Comprehensive Loss

5


Condensed Consolidated Statements of Stockholders' Equity

6


Condensed Consolidated Statements of Cash Flows

7


Notes to Condensed Consolidated Financial Statements

8

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

24

Item 4.

Controls and Procedures

24

PART II

OTHER INFORMATION

25

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 3.

Defaults Upon Senior Securities

35

Item 4.

Mine Safety Disclosures

36

Item 5.

Other Information

36

Item 6.

Exhibits

36

SIGNATURES


37


PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

QUMU CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)



June 30,

2020

December 31,

2019

Assets

(unaudited)


Current assets:



Cash and cash equivalents

$ 9,887

$ 10,639

Receivables, net of allowance for doubtful accounts of $44 and $45, respectively

8,224

4,586

Contract assets

948

1,089

Income tax receivable

515

338

Prepaid expenses and other current assets

1,719

1,981

Total current assets

21,293

18,633

Property and equipment, net of accumulated depreciation of $2,651 and $2,520, respectively

464

596

Right of use assets – operating leases

1,490

1,746

Intangible assets, net

2,537

3,075

Goodwill

6,718

7,203

Deferred income taxes, non-current

12

21

Other assets, non-current

478

442

Total assets

$ 32,992

$ 31,716

Liabilities and Stockholders’ Equity



Current liabilities:



Accounts payable and other accrued liabilities

$ 3,744

$ 2,816

Accrued compensation

1,329

1,165

Deferred revenue

11,142

10,140

Operating lease liabilities

600

587

Financing obligations

203

157

Note payable

1,735

Derivative liability

35

Warrant liability

1,482

2,939

Total current liabilities

20,270

17,804

Long-term liabilities:



Deferred revenue, non-current

3,979

1,449

Income taxes payable, non-current

597

585

Operating lease liabilities, non-current

1,256

1,587

Financing obligations, non-current

39

83

Other liabilities, non-current

151

Total long-term liabilities

6,022

3,704

Total liabilities

26,292

21,508

Commitments and contingencies (Note 3)



Stockholders’ equity:

Preferred stock, $0.01 par value, authorized 250,000 shares, no shares issued and outstanding — —

and 13,553,409, respectively

135

136

Additional paid-in capital

78,416

78,061

Accumulated deficit

(68,492)

(65,128)

Accumulated other comprehensive loss

(3,359)

(2,861)

Total stockholders’ equity

6,700

10,208

Total liabilities and stockholders’ equity

$ 32,992

$ 31,716

Common stock, $0.01 par value, authorized 29,750,000 shares, issued and outstanding 13,529,221


See accompanying notes to unaudited condensed consolidated financial statements.


QUMU CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited – in thousands, except per share data)


Three Months Ended June 30,


Six Months Ended June 30,



2020

2019

2020

2019

Revenues:





Software licenses and appliances

$ 4,061

$ 689

$ 5,601

$ 1,694

Service

5,273

4,676

9,960

10,769

Total revenues

9,334

5,365

15,561

12,463

Cost of revenues:





Software licenses and appliances

1,477

336

2,125

647

Service

1,463

1,227

2,902

2,453

Total cost of revenues

2,940

1,563

5,027

3,100

Gross profit

6,394

3,802

10,534

9,363

Operating expenses:





Research and development

2,088

1,838

3,868

3,512

Sales and marketing

2,181

2,212

4,399

4,564

General and administrative

2,320

1,579

4,913

3,325

Amortization of purchased intangibles

163

201

327

419

Total operating expenses

6,752

5,830

13,507

11,820

Operating loss

(358)

(2,028)

(2,973)

(2,457)

Other income (expense):





Interest expense, net

(22)

(214)

(5)

(419)

Decrease in fair value of derivative liability

105

105

Increase in fair value of warrant liability

(434)

(1,436)

(398)

(1,725)

Other, net

(37)

66

(197)

35

Total other expense, net

(388)

(1,584)

(495)

(2,109)

Loss before income taxes

(746)

(3,612)

(3,468)

(4,566)

Income tax benefit

(54)

(11)

(104)

(15)

Net loss

$ (692)

$ (3,601)

$ (3,364)

$ (4,551)


Net loss per share – basic:


Net loss per share – basic

$ (0.05)

$ (0.37)

$ (0.25)

$ (0.47)

Weighted average shares outstanding – basic

13,534

9,861

13,543

9,775

Net loss per share – diluted:





Loss attributable to common shareholders

$ (820)

$ (3,601)

$ (3,658)

$ (4,551)

Net loss per share – diluted

$ (0.06)

$ (0.37)

$ (0.27)

$ (0.47)

Weighted average shares outstanding – diluted

13,538

9,861

13,573

9,775


See accompanying notes to unaudited condensed consolidated financial statements.


QUMU CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited - in thousands)


Three Months Ended June 30,


Six Months Ended June 30,



2020

2019

2020

2019

Net loss

$ (692)

$ (3,601)

$ (3,364)

$ (4,551)

Other comprehensive loss:





Net change in foreign currency translation adjustments

(18)

(278)

(498)

(35)

Total other comprehensive loss

(18)

(278)

(498)

(35)

Total comprehensive loss

$ (710)

$ (3,879)

$ (3,862)

$ (4,586)


See accompanying notes to unaudited condensed consolidated financial statements.


QUMU CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited – in thousands)



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Common Stock Additional Paid-in


Accumulated

Accumulated Other Comprehensive

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Balance at December 31, 2018 9,624 $ 96 $ 69,072 $ (58,875) $ (3,288) $ 7,005

Shares Amount

Capital

Deficit

Loss Total

Net loss — — — (950) — (950)

Adoption of ASC Topic 842 — — — 190 — 190

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Issuance of stock under employee stock plan, net of forfeitures

156

2

(1)

1

Other comprehensive income, net of taxes — — — — 243 243

Redemption of stock related to tax withholdings on employee

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Stock-based compensation — — 231 — — 231

stock plan issuances (15) — (36) — — (36)

Net loss — — — (3,601) — (3,601)

Balance at March 31, 2019 9,765 $ 98 $ 69,266 $ (59,635) $ (3,045) $ 6,684

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Issuance of stock under employee stock plan, net of forfeitures

146

1

41

42

Other comprehensive loss, net of taxes — — — — (278) (278)

Redemption of stock related to tax withholdings on employee

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Stock-based compensation — — 194 — — 194

stock plan issuances (4) — (17) — — (17)

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Balance at June 30, 2019 9,907 $ 99 $ 69,484 $ (63,236) $ (3,323) $ 3,024

Common Stock Additional Paid-in

Accumulated

Accumulated Other Comprehensive



Shares

Amount

Capital

Deficit

Loss

Total

Balance at December 31, 2019

13,553

$ 136

$ 78,061

$ (65,128)

$ (2,861)

$ 10,208

Net loss

(2,672)

(2,672)

Other comprehensive loss, net of taxes

(480)

(480)

Issuance of stock under employee stock plan, net of forfeitures

4

Redemption of stock related to tax withholdings on employee stock plan issuances

(29)

(53)

(53)

Stock-based compensation

245

245

Balance at March 31, 2020

13,528

$

136

$

78,253

$

(67,800)

$

(3,341)

$

7,248

Net loss




(692)



(692)

Other comprehensive loss, net of taxes





(18)


(18)

Issuance of stock under employee stock plan, net of forfeitures

1


(1)





(1)

Redemption of stock related to tax withholdings on employee stock plan issuances



(1)




(1)

Stock-based compensation



164




164

Balance at June 30, 2020

13,529

$

135

$

78,416

$

(68,492)

$

(3,359)

$

6,700

See accompanying notes to unaudited condensed consolidated financial statements.


QUMU CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited – in thousands)


Six Months Ended June 30,


2020

2019

Operating activities:



Net loss

$ (3,364)

$ (4,551)

Adjustments to reconcile net loss to net cash used in operating activities:



Depreciation and amortization

618

809

Stock-based compensation

409

425

Accretion of debt discount and issuance costs

20

263

Gain on lease modification

(21)

Decrease in fair value of derivative liability

(105)

Increase in fair value of warrant liability

398

1,725

Deferred income taxes

9

7

Changes in operating assets and liabilities:



Receivables

(3,685)

3,290

Contract assets

140

(1,010)

Income taxes receivable / payable

(184)

(15)

Prepaid expenses and other assets

394

586

Accounts payable and other accrued liabilities

1,030

(397)

Accrued compensation

177

(711)

Deferred revenue

3,709

(1,445)

Other non-current liabilities

151

(24)

Net cash used in operating activities

(283)

(1,069)

Investing activities:



Purchases of property and equipment

(29)

(43)

Net cash used in investing activities

(29)

(43)

Financing activities:



Proceeds from issuance of common stock under employee stock plans

42

Principal payments on financing obligations

(185)

(158)

Common stock repurchases to settle employee withholding liability

(54)

(53)

Net cash used in financing activities

(239)

(169)

Effect of exchange rate changes on cash

(201)

(6)

Net decrease in cash and cash equivalents

(752)

(1,287)

Cash and cash equivalents, beginning of period

10,639

8,636

Cash and cash equivalents, end of period

$ 9,887

$ 7,349

Supplemental disclosures of net cash paid (received) during the period:



Income taxes, net

$ 27

$ (12)

Interest, net

$ 7

$ 8

Non-cash investing and financing activities:

Issuance of note payable and derivative liability for cancellation of warrant $ 1,855 $ —


See accompanying notes to unaudited condensed consolidated financial statements.


QUMU CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


  1. Nature of Business and Basis of Presentation

    Qumu Corporation ("Qumu" or the "Company") provides the software solutions to create, manage, secure, distribute and measure the success of live and on-demand video for enterprises. The Qumu platform enables global organizations to drive employee engagement, increase access to video, and modernize the workplace by providing a more efficient and effective way to share knowledge. The world’s largest organizations leverage the Qumu platform for a variety of cloud, on-premise and hybrid deployments. Use cases including self-service webcasting, sales enablement, internal communications, product training, regulatory compliance and customer engagement. The Company markets its products to customers primarily in North America, Europe and Asia.

    The Company views its operations and manages its business as one segment and one reporting unit. Factors used to identify the Company's single operating segment and reporting unit include the financial information available for evaluation by the chief operating decision maker in making decisions about how to allocate resources and assess performance. The Company manages the marketing of its products and services through regional sales representatives and independent distributors in the United States and international markets.

    The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

    The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

    The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in a complete set of financial statements have been condensed or omitted. However, in the opinion of management, the financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position and results of operations and cash flows of the interim periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2019.

    Recently Adopted Accounting Standards

    In August 2018, the FASB issued ASU 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820), which changes the fair value measurement disclosure requirements of ASC 820. The ASU is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein. The Company adopted ASU 2018-13 effective January 1, 2020. The impact of adopting this standard was not material to the Company's consolidated financial statements or disclosures.

    Accounting Standards Not Yet Adopted

    In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing exceptions within the general principles of Topic 740 regarding the calculation of deferred tax liabilities, the incremental approach for intraperiod tax allocation, and calculating income taxes in an interim period. In addition, the ASU adds clarifications to the accounting for franchise tax (or similar tax) which is partially based on income, evaluating tax basis of goodwill recognized from a business combination, and reflecting the effect of any enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The ASU is effective for fiscal years beginning after December 15, 2020, and will be applied either retrospectively or prospectively based upon the applicable amendments. Early adoption is permitted. The Company does not believe the impact of adopting this standard will be material to its consolidated financial statements and related disclosures.

    In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The purpose of the amendment is to simplify how an entity is required to test goodwill for impairment


    by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted. The Company does not believe the impact of adopting this standard will be material to its consolidated financial statements.

    In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which supersedes current guidance requiring recognition of credit losses when it is probable that a loss has been incurred. The standard requires the establishment of an allowance for estimated credit losses on financial assets, including trade and other receivables, at each reporting date. The ASU will result in earlier recognition of allowances for losses on trade and other receivables and other contractual rights to receive cash. This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted. The Company does not believe the impact of adopting this standard will be material to its consolidated financial statements and related disclosures.


  2. Intangible Assets and Goodwill Intangible Assets

    The Company’s amortizable intangible assets consisted of the following (in thousands):


    June 30, 2020


    Customer Relationships

    Developed Technology

    Trademarks / Trade Names

    Total

    Original cost

    $ 4,750

    $ 7,902

    $ 2,178

    $ 14,830

    Accumulated amortization

    (3,470)

    (7,670)

    (1,153)

    (12,293)

    Intangibles assets, net

    $ 1,280

    $ 232

    $ 1,025

    $ 2,537


    December 31, 2019


    Customer Relationships

    Developed Technology

    Trademarks / Trade Names

    Total

    Original cost

    $ 4,878

    $ 8,135

    $ 2,182

    $ 15,195

    Accumulated amortization

    (3,293)

    (7,741)

    (1,086)

    (12,120)

    Intangibles assets, net

    $ 1,585

    $ 394

    $ 1,096

    $ 3,075

    Changes to the carrying amount of net amortizable intangible assets consisted of the following (in thousands):


    Six Months Ended June 30, 2020

    Balance, beginning of period

    $

    3,075

    Amortization expense


    (467)

    Currency translation


    (71)

    Balance, end of period

    $

    2,537


    Amortization expense of intangible assets consisted of the following (in thousands):



    Three Months Ended June 30,

    Six Months Ended June 30,




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    Total amortization expense $ 231 $ 315 $ 467 $ 650

    2020


    2019


    2020


    2019


    Amortization expense associated with the developed technology included in

    cost of revenues $

    68

    $

    114

    $

    140

    $

    231

    Amortization expense associated with other acquired intangible assets included in operating expenses

    163


    201


    327


    419

    Goodwill

    On October 3, 2014, the Company completed the acquisition of Kulu Valley, Ltd., subsequently renamed Qumu Ltd., and recognized $8.8 million of goodwill and $6.7 million of intangible assets. The goodwill balance of $6.7 million at June 30, 2020 reflects the impact of foreign currency exchange rate fluctuations since the acquisition date.


    As of June 30, 2020, the Company’s market capitalization, without a control premium, was greater than its book value and, as a result, the Company concluded there was no goodwill impairment. Sustained declines in the Company’s market capitalization or a downturn in its future financial performance and/or future outlook could require the Company to record goodwill and other impairment charges. While a goodwill impairment charge is a non-cash charge, it would have a negative impact on the Company's results of operations.


  3. Commitments and Contingencies Leases

    The Company is obligated under finance leases covering certain IT equipment that expire at various dates over the next three years. The Company also has non-cancellable operating leases, primarily for office space, that expire at various dates over the next four years. The Company has two leases that each contain a renewal option for a period of five years. Because the Company is not reasonably certain to exercise this option, the option is not considered in determining the lease term.

    The components of lease cost were as follows (in thousands):


    Three Months Ended June 30,


    Six Months Ended June 30,


    2020


    2019


    2020


    2019


    Operating lease cost $

    98

    $

    85

    $

    194

    $

    278

    Finance lease cost:








    Amortization of right of use assets

    31


    31


    62


    44

    Interest on lease liabilities

    2


    3


    4


    5

    Total finance cost

    33


    34


    66


    49

    Total lease cost $

    131

    $

    119

    $

    260

    $

    327


    Future payments used in the measurement of lease liabilities on the condensed consolidated balance sheet as of June 30, 2020 are as follows (in thousands):


    Operating Finance

    leases leases

    Remainder of 2020

    $ 411

    $ 45

    2021

    707

    80

    2022

    668

    5

    2023

    290

    2024

    112

    Thereafter

    Total undiscounted lease payments

    2,188

    130

    Less amount representing interest

    (332)

    (5)

    Present value of lease liabilities

    $ 1,856

    $ 125


    Subleases




    On January 17, 2019, the Company terminated a sublease agreement related to its Minneapolis, Minnesota headquarters and contemporaneously modified the Company's primary lease agreement. Upon modification, the Company recognized a gain of

    $21,000, which is reported in other income (expense) in the Company's condensed consolidated statement of operations for the six months ended June 30, 2019. Sublease income was $35,000 and $73,000 for the three and six months ended June 30, 2019, respectively, which is reported in other income (expense) in the Company's condensed consolidated statement of operations.

    The Company reported no sublease income for the three and six months ended June 30, 2020.

    Note Payable and Derivative Liability

    On May 1, 2020, the Company canceled its outstanding warrant to ESW Holdings, Inc., which was for the purchase of up

    to 925,000 shares of Qumu's common stock at an exercise price of $1.96 per share and expiring January 2028. Additionally, the terms of the warrant provided for a cash settlement in the event of a change of control transaction referred to as a Fundamental Transaction, computed using a Black-Scholes option pricing model with specified inputs stipulated in the warrant agreement. The fair value of the warrant instrument has historically been reported as a liability in Qumu's consolidated financial statements, and, for certain historical reporting periods since its issuance, the shares underlying the warrant instrument were dilutive in the calculation of earnings per share.


    As consideration for the warrant cancellation, the Company entered into a secured promissory note to ESW Holdings, Inc. ("note payable"), having a face amount of $1,833,000, which was less than the cash settlement amount of $1,983,000 computed under the terms of the warrant agreement, due on April 1, 2021 and bearing no interest. The payment obligations of the note will be accelerated upon a Fundamental Transaction, and Qumu would be required to pay an additional $150,000 to ESW Holdings, Inc. upon the closing of a Fundamental Transaction. The note to ESW Holdings, Inc. may be prepaid at any time without penalty.

    The note payable was recorded at its present value of future cash flows of $1,833,000 discounted at 7.25% (prime plus 4.0%), which was $1,715,000 at May 1, 2020. The value of the note payable will be accreted up to its face value at maturity. As of June 30, 2020, the carrying value of the note payable was $1,735,000, which also approximated its fair value (Level 2).

    The note payable contains a $150,000 contingent payment obligation due upon the closing of a Fundamental Transaction on or prior to the April 1, 2021 maturity date. This contingent payment obligation qualifies as an embedded derivative in accordance with ASC Topic 815, Derivatives and Hedging. The embedded derivative is measured at fair value and is remeasured at fair value each subsequent reporting period and reported on the Company's consolidated balance sheet as a derivative liability.

    Changes in fair value are recognized in other income (expense) in the consolidated statement of operations as "Decrease (increase) in fair value of derivative liability." See Note 4–"Fair Value Measurements."

    In connection with the note, the Company and ESW Holdings, Inc. entered into a security agreement dated May 1, 2020 providing for a future security interest in certain assets of the Company that would not attach unless and until the occurrence of the Triggering Event specified therein. The termination of the merger agreement with Synacor, Inc. represented a Triggering Event, resulting in ESW Holdings, Inc. securing an interest in certain of Qumu's cash deposit accounts.

    Contingencies

    In connection with the termination of merger agreement with Synacor, Inc. on June 29, 2020, Qumu is contingently obligated to pay Synacor, Inc. $1,450,000 upon the occurrence of certain events with respect to an Acquisition Transaction during the 15 months following the termination. The Company has not accrued a liability related to this contingent obligation as the payment is not triggered until an Acquisition Transaction occurs. See Note 9–"Termination of Merger Agreement with Synacor, Inc."

    The Company is exposed to asserted and unasserted claims encountered in the normal course of business. Legal costs related to loss contingencies are expensed as incurred. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company’s financial position or results of operations.

    The Company’s standard arrangements include provisions indemnifying customers against liabilities if the Company's products infringe a third-party’s intellectual property rights. The Company has not incurred any costs in its continuing operations as a result of such indemnifications and has not accrued any liabilities related to such contingent obligations in the accompanying condensed consolidated financial statements.


  4. Fair Value Measurements

    Assets and liabilities measured at fair value are classified into the following categories:


As of June 30, 2020, the following warrants for the purchase of Qumu's common stock were outstanding and exercisable:


Number of underlying


Warrant exercise price


Warrant

Description

warrant shares

(per share)

expiration date

Warrant issued in conjunction with October 2016 debt financing ("Hale warrant")

314,286

$ 2.80

October 21, 2026

Warrant issued to sales partner, iStudy Co., Ltd. ("iStudy warrant")

100,000

$ 2.43

August 31, 2028

Total warrants outstanding

414,286




The warrant liability was recorded in the Company's consolidated balance sheets at its fair value on the respective dates of issuance and is revalued on each subsequent balance sheet date until such instrument is exercised or expires, with any changes in the fair value between reporting periods recorded in other income (expense) of the consolidated statement of operations as "Decrease (increase) in fair value of warrant liability." The Company recorded non-cash expense of $434,000 and $1.4 million for the three months ended June 30, 2020 and 2019, respectively, and non-cash expense of $398,000 and $1.7 million for the six months ended June 30, 2020 and 2019, respectively, resulting from the change in fair value of the warrant liability.

On May 1, 2020, the Company canceled the ESW warrant in exchange for a note payable (see Note 3–"Commitments and Contingencies") which contained an embedded derivative liability that is measured on a recurring basis at fair value. The Company recorded non-cash income of $105,000 for both the three and six months ended June 30, 2020 resulting from the change in fair value of the derivative liability.

The Company’s liabilities measured at fair value on a recurring basis and the fair value hierarchy utilized to determine such fair values is as follows at June 30, 2020 and December 31, 2019 (in thousands):


Fair Value Measurements Using



Total Fair Value at

Significant Other Significant Quoted Prices in Observable Unobservable Active Markets Inputs Inputs

June 30, 2020

(Level 1) (Level 2) (Level 3)

Liabilities:



Warrant liability - Hale

$ 1,224

$ — $ — $ 1,224

Warrant liability - iStudy

258

— — 258

Warrant liability

$ 1,482

$ — $ — $ 1,482

Derivative liability

$ 35

$ — $ — $ 35

Total

$ 1,517

$ — $ — $ 1,517




Fair Value Measurements Using



Total Fair

Significant Other Significant Quoted Prices in Observable Unobservable


Value at December 31, 2019

Active Markets Inputs Inputs

(Level 1) (Level 2) (Level 3)

Liabilities:



Warrant liability - ESW

$ 2,149

$ — $ — $ 2,149

Warrant liability - Hale

645

— — 645

Warrant liability - iStudy

145

— — 145

Total

$ 2,939

$ — $ — $ 2,939


The Company's evaluation of the probability and timing of a change in control represents an unobservable input (Level 3) that shortens or lengthens the expected term input of the option pricing model for all warrants, and generally correspondingly increases or decreases, respectively, the discounted value of the minimum cash payment component of the Hale warrant and, prior to its cancellation, the ESW warrant. Consequently, as of June 30, 2020 and December 31, 2019, the liability related to each warrant was classified as a Level 3 liability.

The Company's evaluation of the probability and timing of a change in control represents an unobservable input (Level 3) that increases or decreases the likelihood of triggering the note payable agreement's Fundamental Transaction contingency, resulting in Level 3 classification of the derivative liability.


The following table represents the significant unobservable input used in the fair value measurement of Level 3 warrant liability instruments:


image

image

Probability-weighted timing of change in control 5.2 years

June 30, 2020


The following table summarizes the changes in fair value measurements for the six months ended June 30, 2020:



Warrant liability

Derivative liability

Total

Balance at December 31, 2019

$ 2,939

$ —

$ 2,939

Cancellation of ESW warrant liability (Note 3)

(1,855)

(1,855)

Issuance of derivative liability upon cancellation of ESW warrant

140

140

Change in fair value

398

(105)

293

Balance at June 30, 2020

$ 1,482

$ 35

$ 1,517


(5) Revenue




The Company generates revenue through the sale of enterprise video content management software, hardware, maintenance and support, and professional and other services. Software sales may take the form of a perpetual software license, a cloud- hosted software as a service (SaaS) or a term software license. Software licenses and appliances revenue includes sales of perpetual software licenses and hardware. Service revenue includes SaaS, term software licenses, maintenance and support, and professional and other services.

Revenues by product category and geography

The Company combines its products and services into three product categories and three geographic regions, based on customer location, as follows (in thousands):


Three Months Ended June 30,


Six Months Ended June 30,



2020

2019

2020

2019

Software licenses and appliances

$ 4,061

$ 689

$ 5,601

$ 1,694

Service





Subscription, maintenance and support

4,673

4,154

8,833

9,717

Professional services and other

600

522

1,127

1,052

Total service

5,273

4,676

9,960

10,769

Total revenues

$ 9,334

$ 5,365

$ 15,561

$ 12,463


Three Months Ended June 30,

Six Months Ended June 30,



2020

2019

2020

2019

North America

$ 7,513

$ 3,192

$ 11,563

$ 7,500

Europe

1,616

1,904

3,490

4,145

Asia

205

269

508

818

Total

$ 9,334

$ 5,365

$ 15,561

$ 12,463


Contract Balances






The Company’s balances for contract assets totaled $948,000 and $1.1 million as of June 30, 2020 and December 31, 2019, respectively. The Company’s balances for contract liabilities, which are included in deferred revenue, totaled $15.1 million and

$11.6 million as of June 30, 2020 and December 31, 2019, respectively.

During the three and six months ended June 30, 2020, the Company recognized $3.9 million and $6.6 million, respectively, of revenue that was included in the deferred revenue balance at the beginning of the period. During the three and six months ended June 30, 2019, the Company recognized $3.7 million and $6.3 million, respectively, of revenue that was included in the deferred revenue balance at the beginning of the period. All other activity in deferred revenue is due to the timing of invoices in relation to the timing of recognizable revenue as described above.

Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and


recognized as revenue in future periods. Contracted but unsatisfied performance obligations were approximately $24.2

million as of June 30, 2020, of which the Company expects to recognize $12.9 million of revenue over the next 12 months and the remainder thereafter. During the six months ended June 30, 2020 and 2019, no revenue was recognized from performance obligations satisfied in previous periods.


  1. Stock-Based Compensation

    The Company granted the following stock-based awards in the periods indicated:


    Three Months Ended June 30,


    Six Months Ended June 30,



    2020


    2019

    2020

    2019

    Stock options


    8,000

    25,000

    Restricted stock awards and restricted stock units


    98,196

    53,600

    196,688


    The stock options, restricted stock awards and restricted stock units granted during the six months ended June 30, 2020 and 2019 were granted under the Company's Second Amended and Restated 2007 Stock Incentive Plan (the "2007 Plan"), a shareholder approved plan.


    In settlement of vested performance stock units granted in 2018, during the six months ended June 30, 2019 the Company issued 98,492 shares of restricted stock, which was equal to the number of vested 2018 performance stock units multiplied by the performance goals achievement of 100.0%. At December 31, 2019, there were 40,599 shares of common stock underlying the outstanding 2018 performance stock units that were subject to vesting upon the achievement of performance goals for the performance period of January 1, 2019 to December 31, 2019. The outstanding unvested 2018 performance stock units were canceled on February 10, 2020 upon determination by the Compensation Committee of the Company's Board of Directors that the performance metric for the 2019 performance period was not achieved. Accordingly, as of June 30, 2020, there were no performance stock units outstanding.

    The Company recognized the following expense related to its share-based payment arrangements (in thousands):


    Three Months Ended June 30,


    Six Months Ended June 30,



    2020

    2019

    2020

    2019

    Stock-based compensation cost, before income tax benefit:





    Stock options

    $ 69

    $ 76

    $ 138

    $ 170

    Restricted stock awards and restricted stock units

    95

    118

    271

    250

    Performance stock units

    5

    Total stock-based compensation

    $ 164

    $ 194

    $ 409

    $ 425


    Three Months Ended June 30,

    Six Months Ended June 30,

    image image

    image

    Stock-based compensation cost included in:

    2020 2019 2020 2019

    Cost of revenues $ 5 $ 6 $ 10 $ 14

    Operating expenses 159

    188

    399

    411

    Total stock-based compensation $ 164

    $ 194

    $ 409 $

    425

    image image image image


  2. Income Taxes

    As of both June 30, 2020 and December 31, 2019, the Company’s liability for gross unrecognized tax benefits (excluding interest and penalties) totaled $1.8 million. The Company had accrued interest and penalties relating to unrecognized tax benefits of $39,000 and $28,000 on a gross basis at June 30, 2020 and December 31, 2019, respectively. The change in the liability for gross unrecognized tax benefits reflects an increase in reserves established for federal and state uncertain tax positions. The Company does not currently expect significant changes in the amount of unrecognized tax benefits during the next twelve months.


  3. Computation of Net Loss Per Share of Common Stock

    The following table identifies the components of net loss per basic and diluted share (in thousands, except for per share data):


    Three Months Ended June 30,


    Six Months Ended June 30,


    2020

    2019

    2020

    2019

    Net loss per share – basic




    Net loss

    $ (692)

    $ (3,601)

    $ (3,364)

    $ (4,551)

    Weighted average shares outstanding

    13,534

    9,861

    13,543

    9,775

    Net loss per share – basic

    $ (0.05)

    $ (0.37)

    $ (0.25)

    $ (0.47)






    Net loss per share – diluted

    Loss attributable to common shareholders: Net loss $ (692) $ (3,601) $ (3,364) $ (4,551)

    Numerator effect of dilutive securities


    Warrants

    (128)

    (294)

    Loss attributable to common shareholders

    $ (820)

    $ (3,601)

    $ (3,658)

    $ (4,551)

    Weighted average shares outstanding – diluted:





    Weighted average shares outstanding – basic

    13,534

    9,861

    13,543

    9,775

    Denominator effect of dilutive securities





    Warrants

    4

    30

    Diluted potential common shares

    4

    30

    Weighted average shares outstanding – diluted

    13,538

    9,861

    13,573

    9,775

    Net loss per share – diluted

    $ (0.06)

    $ (0.37)

    $ (0.27)

    $ (0.47)


    image image image image


    Stock options, warrants and restricted stock units to acquire common shares that were excluded from the computation of diluted weighted-average common shares as their effect is anti-dilutive were as follows (in thousands):


    Three Months Ended June 30,


    Six Months Ended June 30,



    2020

    2019

    2020

    2019

    Stock options

    1,054

    1,328

    1,055

    1,372

    Warrants

    414

    1,339

    414

    1,339

    Restricted stock units

    172

    115

    164

    132

    Total anti-dilutive

    1,640

    2,782

    1,633

    2,843


  4. Termination of Merger Agreement with Synacor, Inc.

As previously disclosed, on February 11, 2020, Qumu Corporation (“Qumu) entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Synacor, Inc. (“Synacor”) and Quantum Merger Sub I, Inc., a direct, wholly owned subsidiary of Synacor (“Merger Sub”).

On June 29, 2020, Qumu, Synacor and Merger Sub entered into an agreement to terminate the Merger Agreement (the “Mutual Termination Agreement”). Pursuant to the Mutual Termination Agreement, the Merger Agreement was terminated and the parties provided a mutual release of claims relating to the Merger Agreement and related agreements.

Pursuant to the terms of the Mutual Termination Agreement, Qumu paid Synacor $250,000 on June 29, 2020 and is obligated to pay an additional $1,450,000 if (a) within 15 months following June 29, 2020, an Acquisition Transaction in respect of Qumu is consummated with a Person other than Synacor or (b) (i) within 15 months following June 29, 2020, Qumu enters into a binding definitive agreement for an Acquisition Transaction with a Person other than Synacor and (ii) such Acquisition Transaction is ultimately consummated (whether or not during the foregoing 15 months period). For the purposes of the Mutual Termination Agreement, all references to 15% or 85% in the definition of “Acquisition Transaction” of the Merger Agreement shall be replaced by 50%.

During the three and six months ended June 30, 2020, the Company recognized transaction-related expenses related to the Company's Merger Agreement with Synacor, Inc. totaling $699,000 and $1.5 million, which are included within general and administrative expenses in the Company's condensed consolidated statement of operations.


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with the section titled “Financial Information” and our audited financial statements and related notes which are included in our most recent Annual Report on Form 10-K. Our actual results could differ materially from those anticipated in the forward-looking statements included in this discussion as a result of certain factors, including, but not limited to, those discussed in “Risk Factors” included in Part II. Other Information, Item 1A. Risk Factors of this Quarterly Report on Form 10-Q.

Overview

Qumu Corporation ("Qumu" or the "Company") provides the software solutions to create, manage, secure, distribute and measure the success of live and on-demand video for enterprises. Qumu's platform enables global organizations to drive employee engagement, increase access to video, and modernize the workplace by providing a more efficient and effective way to share knowledge.

Impact of COVID-19

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic, which continues to be spread throughout the U.S. and the world. The COVID-19 pandemic has changed the businesses of Qumu’s customers and prospective customers in a number of ways. As part of these changes, enterprises of all sizes are implementing technology plans to virtualize customer meetings, employee communications and major events – as well as record and store video assets for on-demand viewing.

Widespread adoption and use of video in the enterprise is critical to our future growth and success. Qumu believes that the COVID-19 crisis will act as a tipping point for the use and acceptance of video as a primary communication channel within the enterprise. As video content and software to manage video content achieve high levels of acceptance within the enterprise, we believe this will drive demand and market adoption for Qumu’s video platform and tools. Qumu received early evidence of this expected increase in adoption and use of video in the enterprise due to COVID-19 in the first quarter 2020 ended March 31, 2020. During the last weeks of March 2020, Qumu received customer orders of $9.7 million total contract value, which were directly attributable to the new working environment caused by the pandemic COVID-19. Other customer orders and sales opportunities have also accelerated due to the customers’ COVID-19-driven video needs. Revenue increased 74% in the second quarter 2020 to $9.3 million from $5.4 million in the second quarter 2019. The increase in revenue was primarily due to a large customer order received at the end of the first quarter 2020, which the customer identified as specifically driven by COVID-19.

Continuing into the second quarter ended June 30, 2020, Qumu believes that COVID-19 travel restrictions, work-from-home requirements and social distancing protocols are continuing factors motivating customers’ consideration of Qumu’s live and on- demand video for the enterprise software solutions. In particular, customers have expressed increased interest in our cloud and cloud-hybrid offering, evidenced by the addition in the second quarter ended June 30, 2020 of five new cloud or cloud-hybrid customers as well as the expansion or conversion of two existing enterprise customers to cloud or cloud-hybrid deployment.

Additionally, the significantly higher than historic usage of Qumu’s cloud-based enterprise video solution that experienced in the last weeks of the first quarter of 2020 continued into the second quarter 2020. The dramatic increase is the result of Qumu’s Global 2000 customer base mobilizing to support thousands of concurrent video users, as they operate under travel restrictions and mandatory work-at-home policies due to COVID-19. Through the second quarter 2020, Qumu continued to experience higher than average usage among its customers and anticipates this will continue at least for the duration of widespread travel restrictions and mandatory work-at-home policies due to COVID-19. Qumu anticipates these usage patterns will continue at least for the duration of widespread travel restrictions and mandatory work-at-home policies due to COVID-19, as well as generally following this period as customers increase their use of video as a primary communication channel in the enterprise.

The factors that initially drove demand for Qumu's solutions in the first quarter ended March 31, 2020 continue to impact the Company's business. Qumu expects to capture additional revenue opportunities presented by the widespread adoption and use of video in the enterprise. On May 5, 2020, Qumu announced that it expected 2020 revenue to be approximately $28.0 million as compared to 2019 revenue of $25.4 million. Given Qumu’s visibility to customer contracts and pipeline activity, Qumu announced on July 15, 2020 that it expects 2020 revenue to be approximately $29.0.

Qumu is continuing to adapt to the COVID-19 pandemic environment, with a focus on mitigating the near-term impact while positioning Qumu’s business for success during and coming out of the crisis. Actions being taken include:

In the second half of 2020, Qumu expects cash flows from operating activities to be affected by those factors that have historically impacted operating cash flows – fluctuations in revenues, timing of customer payments, personnel costs, outside service providers, and the amount and timing of royalty payments and equipment purchases as Qumu continues to support the growth of its business. Other than as described in this section, Qumu does not expect cash flows from operating activities to be specifically affected by COVID-19 impacts.

Qumu has not applied for any loan program under the Coronavirus Aid, Relief and Economic Security (CARES) Act, such as the Paycheck Protection Program, which requires an applicant to certify that the loan is necessary to support its ongoing operations. Due to Qumu’s current and expected future financial performance, Qumu does not believe a Paycheck Protection Program loan is necessary to support its ongoing operations.

For those entities such as Qumu not participating in the Paycheck Protection Program, the CARES Act provides companies the option to defer the payment of the employer's portion of social security taxes that would otherwise be required to be made during the period beginning on March 27, 2020 and ending December 31, 2020 (Payroll Tax Deferral Period). The first half of the deferred payments are due to be paid by December 31, 2021, and the second half of the deferred payments are due to be paid by December 31, 2022. Qumu intends to defer approximately $300,000 of payments related to the employer's portion of employees' social security taxes throughout the Payroll Tax

Deferral Period in accordance with the CARES Act.

Our actual results could differ materially from those anticipated in the forward-looking statements included in this discussion of the impact of COVID-19 as a result of certain factors, including, but not limited to, those discussed in “Risk Factors” included our most recent Annual Report on Form 10-K and those additional factors discussed in Part II. Other Information, Item 1A. Risk Factors of this Quarterly Report on Form 10-Q.

Critical Accounting Policies

The discussion of the Company's financial condition and results of operations is based upon its financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of the Company's financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. On an ongoing basis, management evaluates its estimates and assumptions. Management bases its estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that management believes to be reasonable. The Company's actual results may differ from these estimates under different assumptions or conditions.


Management utilizes its technical knowledge, cumulative business experience, judgment and other factors in the selection and application of the Company’s accounting policies. The accounting policies considered by management to be the most critical to the presentation of the condensed consolidated financial statements because they require the most difficult, subjective and complex judgments include revenue recognition, accounting for leases, and derivative liabilities for outstanding warrants. Our significant accounting policies applicable to the six months ended June 30, 2020 are discussed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Results of Operations

The percentage relationships to revenues of certain income and expense items for the three and six months ended June 30, 2020 and 2019, and the percentage changes in these income and expense items relative to the prior year period, are contained in the following table:


image

image

Three Months Ended June 30, Six Months Ended June 30,


Percentage of Revenues

Percent Increase

(Decrease) Percentage of Revenues

Percent Increase (Decrease)



2020

2019

2019 to 2020

2020

2019

2019 to 2020

Revenues

100.0 %

100.0 %

74 %

100.0 %

100.0 %

25 %

Cost of revenues

(31.5)

(29.1)

88

(32.3)

(24.9)

62

Gross profit

68.5

70.9

68

67.7

75.1

13

Operating expenses:







Research and development

22.4

34.3

14

24.8

28.2

10

Sales and marketing

23.4

41.2

(1)

28.3

36.6

(4)

General and administrative

24.8

29.5

47

31.6

26.7

48

Amortization of purchased intangibles

1.7

3.7

(19)

2.1

3.3

(22)

Total operating expenses

72.3

108.7

16

86.8

94.8

14

Operating loss

(3.8)

(37.8)

(82)

(19.1)

(19.7)

21

Other expense, net

(4.2)

(29.5)

(76)

(3.2)

(16.9)

(77)

Loss before income taxes

(8.0)

(67.3)

(79)

(22.3)

(36.6)

(24)

Income tax benefit

(0.6)

(0.2)

391

(0.7)

(0.1)

593

Net loss

(7.4)%

(67.1)%

(81)%

(21.6)%

(36.5)%

(26)%


Revenues








The Company generates revenue through the sale of enterprise video content management software, hardware, maintenance and support, and professional and other services. Software sales may take the form of a perpetual software license, a cloud- hosted software as a service (SaaS) or a term software license. Software licenses and appliances revenue includes sales of perpetual software licenses and hardware. Service revenue includes SaaS, term software licenses, maintenance and support, and professional and other services.

The table below describes Qumu's revenues by product category (dollars in thousands):


Three Months Ended June 30, Six Months Ended June 30,



Increase (Decrease)

Percent Increase (Decrease)




Increase (Decrease)

Percent Increase (Decrease)



2020


2019

2019 to

2020

2019 to

2020


2020


2019

2019 to

2020

2019 to

2020

Software licenses and appliances

$ 4,061

$ 689

$ 3,372

489%

$ 5,601

$ 1,694

$ 3,907

231%

Service

Subscription, maintenance and









support

4,673


4,154


519

12

8,833


9,717


(884)

(9)

Professional services and other

600


522


78

15

1,127


1,052


75

7

Total service

5,273


4,676


597

13

9,960


10,769


(809)

(8)

Total revenues

$ 9,334


$ 5,365


$ 3,969

74%

$ 15,561


$ 12,463


$ 3,098

25%

image image image image image image


image

Revenues can vary period to period based on the type of contract the Company enters into with each customer. The quarterly software licenses and appliances revenues are also subject to the timing of fulfillment of products, which can result in large fluctuations when compared to the prior quarters. The increase in software licenses and appliances revenues in the three and six


months ended June 30, 2020 and the increase in subscription, maintenance and support revenues in the three months ended June 30, 2020, compared to the corresponding 2019 periods, was primarily driven by revenue attributable to a large customer order received at the end of the first quarter 2020, which the customer identified as specifically driven by the change in working environment due to COVID-19.

The decrease in subscription, maintenance and support revenues in the six months ended June 30, 2020, compared to the corresponding 2019 period, primary resulted from significant term software license sales in the six months ended June 30, 2019 for which revenue is recognized up front in accordance with the revenue recognition provisions of ASC 606.

Professional services revenues for the three and six months ended June 30, 2020 were generally consistent with the corresponding 2019 periods.

Future consolidated revenues will be dependent upon many factors, including the rate of adoption of the Company's software solutions in its targeted markets and whether arrangements with customers are structured as a perpetual, term or SaaS licenses, which impacts the timing of revenue recognition. Other factors that will influence future consolidated revenues include the timing of customer orders and renewals, the product and service mix of customer orders, the impact of changes in economic conditions and the impact of foreign currency exchange rate fluctuations.

Due to the impact COVID-19 has had on working environments, Qumu generally expects increased demand for Qumu’s enterprise video as a service and Qumu’s other video software offerings both in the short-term and in the long-term, as well as increased usage of its video platform among existing and future customers.

Qumu expects to capture additional revenue opportunities presented by the widespread adoption and use of video in the enterprise. Given Qumu’s current visibility to customer contracts and pipeline activity, Qumu expects 2020 revenue to be approximately $29.0 million as compared to 2019 revenue of $25.4 million.

Gross Profit and Gross Margin

A comparison of gross profit and gross margin by revenue category is as follows (dollars in thousands):


image

image

Three Months Ended June 30, Six Months Ended June 30,


2020 2019


Increase 2019 to

2020


Percent Increase

2019 to

2020 2020 2019


Increase (Decrease)

2019 to

2020

Percent Increase (Decrease)

2019 to

2020


Gross profit:


Software licenses and appliances

$ 2,584

$ 353

$ 2,231

632%

$ 3,476

$ 1,047

$ 2,429

232%

Service

3,810

3,449

361

10

7,058

8,316

(1,258)

(15)

Total gross profit

$ 6,394

$ 3,802

$ 2,592

68%

$ 10,534

$ 9,363

$ 1,171

13%










Gross margin:









Software licenses and appliances

63.6%

51.2%

12.4 %

62.1%

61.8%

0.3 %

Service

72.3%

73.8%

(1.5)%

70.9%

77.2%

(6.3)%

Total gross margin

68.5%

70.9%

(2.4)%

67.7%

75.1%

(7.4)%


The total gross margin percentage decreased 2.4% and 7.4% in the three and six months ended June 30, 2020, respectively, compared to the corresponding 2019 periods, resulting from sales mix in the current year periods that included more appliance revenue, which generally has lower margins. The 12.4% and 0.3% increase in software licenses and appliances gross margin in the three and six months ended June 30, 2020, respectively, compared to the corresponding 2019 periods, was due primarily to higher sales volume and sales mix that included a higher proportion of perpetual software revenue, for which the related costs are generally fixed. The 1.5% and 6.3% decrease in service gross margin in the three and six months ended June 30, 2020, respectively, compared to the corresponding 2019 periods, was primarily due to a decrease in higher margin term software license revenue, partially offset by decreased amortization expense as certain purchased intangible assets became fully amortized at the end of 2019. Additionally, the six months ended June 30, 2020 included outsourced professional services expenses for certain customer-specific projects, which negatively impacted services gross margin.

Gross profit includes $68,000 and $114,000 for the three months ended June 30, 2020 and 2019, respectively, and $140,000 and

$231,000 for the six months ended June 30, 2020 and 2019, respectively, for the amortization of intangible assets acquired as a result of the acquisition of Qumu, Inc. in the fourth quarter of 2011 and the acquisition of Kulu Valley in the fourth quarter of 2014. Cost of revenues for the full year 2020 is expected to include approximately $0.3 million of amortization expense for


purchased intangibles, compared to $0.5 million for the full year 2019. Included in cost of revenues are the costs related to the Company's service personnel, of which there were 22 and 19 at June 30, 2020 and 2019, respectively.

Future gross profit margins are expected fluctuate quarter to quarter and will be impacted by the rate of growth and mix of the Company's product and service offerings, utilization of service personnel, fixed and variable royalty expense, and foreign currency exchange rate fluctuations.

Operating Expenses

The following is a summary of operating expenses (dollars in thousands):


image

image

Three Months Ended June 30, Six Months Ended June 30, Percent


Percent

Increase

(Decrease)

2020 2019 2019 to

Increase (Decrease)

2019 to

Increase

(Decrease)

2020 2019 2019 to

Increase (Decrease)

2019 to

2020 2020 2020 2020

Operating expenses:


Research and development

$ 2,088

$ 1,838

$ 250

14%

$ 3,868

$ 3,512

$ 356

10%

Sales and marketing

2,181

2,212

(31)

(1)

4,399

4,564

(165)

(4)

General and administrative

Amortization of purchased

2,320

1,579

741

47

4,913

3,325

1,588

48

intangibles

163

201

(38)

(19)

327

419

(92)

(22)

Total operating expenses

$ 6,752

$ 5,830

$ 922

16%

$ 13,507

$ 11,820

$ 1,687

14%

image image image image image image


image

Total operating expenses as a percent of revenues decreased to 72% for the three months ended June 30, 2020, compared to 109% for the three months ended June 30, 2019, decreased to 87% for the six months ended June 30, 2020, compared to 95% for the six months ended June 30, 2019, with the decrease primarily driven by higher revenue for the three and six months ended June 30, 2020. This decrease was partially offset by transaction-related expenses totaling $699,000 and $1.5 million for the three and six months ended June 30, 2020, respectively, related to the Company's merger agreement with Synacor, Inc. that were included in general and administrative expense. On June 29, 2020, Qumu and Synacor terminated the merger agreement and Qumu incurred a $250,000 termination fee, included in transaction-related expenses in general and administrative expense for the three and six months ended June 30, 2020. The Company had 86 and 80 personnel in operating activities at June 30, 2020 and 2019, respectively.

Research and development

Research and development expenses were as follows (dollars in thousands):

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Three Months Ended June 30, Six Months Ended June 30, Percent


Percent

Increase

(Decrease)

2020 2019 2019 to

Increase (Decrease)

2019 to

Increase

(Decrease)

2020 2019 2019 to

Increase (Decrease)

2019 to

2020 2020 2020 2020

Compensation and employee-related

$ 1,453

$ 1,217

$ 236

19%

$ 2,701

$ 2,414

$ 287

12%

Overhead and other expenses

407

385

22

6

801

720

81

11

Outside services and consulting

203

202

1

316

310

6

2

Depreciation and amortization

2

1

1

100

2

2

Equity-based compensation

23

33

(10)

(30)

48

66

(18)

(27)

Total research and development expenses

$

2,088

$

1,838

$

250

14%

$

3,868

$

3,512

$

356

10%

image image image image image image


Total research and development expenses as a percent of revenues were 22% and 34% for the three months ended June 30, 2020 and 2019, respectively, and 25% and 28% for the six months ended June 30, 2020 and 2019, respectively. The Company

had 38 and 34 research and development personnel as of June 30, 2020 and 2019, respectively.

The increase in total research and development expenses of $250,000 and $356,000 in the three and six months ended June 30, 2020, compared to the corresponding 2019 periods, was primarily due to increased costs related to additional research and development personnel and increased incentive compensation costs. Qumu expects to incur increased research and development expenses in the second half of 2020 for additional projects to support customers’ increased usage of Qumu’s cloud-based enterprise video solution due to COVID-19.


Sales and marketing

Sales and marketing expenses were as follows (dollars in thousands):

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Three Months Ended June 30, Six Months Ended June 30, Percent


Percent

Increase (Decrease)

2020 2019 2019 to

Increase (Decrease)

2019 to

Increase (Decrease)

2020 2019 2019 to

Increase (Decrease)

2019 to

2020 2020 2020 2020

Compensation and employee-related

$ 1,818

$ 1,695

$ 123

7 %

$ 3,589

$ 3,521

$ 68

2 %

Overhead and other expenses

190

253

(63)

(25)

427

544

(117)

(22)

Outside services and consulting

145

270

(125)

(46)

317

479

(162)

(34)

Depreciation and amortization

5

2

3

150

16

3

13

433

Equity-based compensation

23

(8)

31

(388)

50

17

33

194

Total sales and marketing expenses

$ 2,181

$ 2,212

$ (31)

(1)%

$ 4,399

$ 4,564

$ (165)

(4)%

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Total sales and marketing expenses as a percent of revenues were 23% and 41% for the three months ended June 30, 2020 and 2019, respectively, and 28% and 37% for the six months ended June 30, 2020 and 2019, respectively. The Company had 31 and

27 sales and marketing personnel at June 30, 2020 and 2019, respectively.

The decrease in sales and marketing expenses of $31,000 and $165,000 in the three and six months ended June 30, 2020, respectively, compared to the corresponding 2019 periods, was primarily driven by cost savings resulting from sales activities and customer marketing events that were conducted virtually rather than in person and the inclusion of severance expense in the 2019 period, partially offset by higher costs associated with an increase in sales and marketing personnel, increased commissions expense, and increased incentive compensation expense. Additionally, expenses for the three and six months ended June 30, 2020, compared to the corresponding 2019 periods, were favorably impacted by cost reductions in overhead and other expenses in connection with the Company's consolidation of cloud hosting providers. Qumu expects higher sales and marketing expense for the full year 2020 as compared to the full year 2019 driven primarily by expected increased compensation and employee-related costs due to higher commissions expense, consistent with Qumu’s higher expected revenue in 2020 due to COVID-19.

General and administrative

General and administrative expenses were as follows (dollars in thousands):


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Three Months Ended June 30, Six Months Ended June 30, Percent


Percent

Increase (Decrease)

2020 2019 2019 to

Increase (Decrease)

2019 to

Increase (Decrease)

2020 2019 2019 to

Increase (Decrease)

2019 to

2020 2020 2020 2020

Compensation and employee-related

$ 877

$ 739

$ 138

19%

$ 1,575

$ 1,458

$ 117

8%

Overhead and other expenses

252

239

13

5

560

580

(20)

(3)

Outside services and consulting

312

355

(43)

(12)

834

805

29

4

Depreciation and amortization

67

83

(16)

(19)

133

154

(21)

(14)

Equity-based compensation

113

163

(50)

(31)

301

328

(27)

(8)

Transaction-related expenses

699

699

n/m

1,510

1,510

n/m

Total general and administrative expenses

$

2,320

$

1,579

$

741

47%

$

4,913

$

3,325

$

1,588

48%


Total general and administrative expenses as a percent of revenues were 25% and 30% for the three months ended June 30, 2020 and 2019, respectively, and 32% and 27% for the six months ended June 30, 2020 and 2019, respectively. The Company

had 17 and 19 general and administrative personnel at June 30, 2020 and 2019, respectively.

The increase in expenses of $741,000 and $1.6 million in the three and six months ended June 30, 2020, respectively, compared to the corresponding 2019 periods, was driven primarily by transaction-related expenses related to the Company's merger agreement and subsequent merger termination with Synacor, Inc. totaling $699,000 and $1.5 million. Additionally, compensation and employee-related expenses increased due to incentive compensation costs incurred in the three and six months ended June 30, 2020.


Amortization of Purchased Intangibles

Operating expenses include $163,000 and $201,000 for the three months ended June 30, 2020 and 2019, respectively, $327,000 and $419,000 for the six months ended June 30, 2020 and 2019, respectively, for the amortization of intangible assets acquired as part of the Company’s acquisition of Qumu, Inc. in October 2011 and the acquisition of Kulu Valley in October 2014.

Operating expenses for the full year 2020 are expected to include approximately $0.7 million of amortization expense associated with purchased intangibles, exclusive of the portion classified in cost of revenue, compared to $0.8 million for the full year 2019.

Other Income (Expense), Net

Other income (expense), net was as follows (dollars in thousands):


Three Months Ended June 30,

Six Months Ended June 30,



2020

2019

2020

2019

Interest expense, net

(22)

(214)

$ (5)

$ (419)

Decrease in fair value of derivative liability

105

105

Increase in fair value of warrant liability

(434)

(1,436)

(398)

(1,725)

Other, net

(37)

66

(197)

35

Total other expense, net

$ (388)

$ (1,584)

$ (495)

$ (2,109)


The Company recognized interest expense of $22,000 and $214,000 for the three months ended June 30, 2020 and 2019, respectively, and interest expense of $5,000 and $419,000 for the six months ended June 30, 2020 and 2019, respectively, which in 2019 included the accrual of interest on the Company's term loan, as well as the amortization of deferred financing costs. Additionally, interest expense was lower in the three and six months ended June 30, 2020, compared to the corresponding 2019 period, due to the Company's $4.0 million payoff on its term loan principal balance in November 2019.

The Company recorded non-cash expense of $434,000 and $1.4 million for the three months ended June 30, 2020 and 2019, respectively, and $398,000 and $1.7 million for the six months ended June 30, 2020 and 2019, respectively, resulting from the change in the fair value of the Company's warrant liability. For both the three and six months ended June 30, 2020, the Company recognized non-cash income of $105,000 on the change in the fair value of the Company's derivative liability related to a note payable agreement the Company entered into on May 1, 2020.

Other expense included net gains (losses) on foreign currency transactions of $(37,000) and $31,000 for the three months ended June 30, 2020 and 2019, respectively, and $(196,000) and $(63,000) for the six months ended June 30, 2020 and 2019, respectively. See “Liquidity and Capital Resources” below for a discussion of changes in cash levels.

Income Taxes

The provision for income taxes represents federal, state, and foreign income taxes or income tax benefit on income or loss. Net income tax benefit was $54,000 and $11,000 for the three months ended June 30, 2020 and 2019, respectively, and $104,000 and $15,000 for the six months ended June 30, 2020 and 2019, respectively. The net income tax benefit for the three and six months ended June 30, 2020 and 2019, was impacted by the tax benefit for refundable research credits from United Kingdom operations offset by an increase in reserves for unrecognized tax benefits.

Liquidity and Capital Resources

The following table sets forth certain relevant measures of the Company's liquidity and capital resources (in thousands):



June 30,

2020

December 31,

2019

Cash and cash equivalents

$ 9,887

$ 10,639

Working capital

$ 1,023

$ 829

Financing obligations

$ 242

$ 240

Operating lease liabilities

1,856

2,174

Note payable

1,735

Financing obligations, operating lease liabilities and note payable

$ 3,833


image

$ 2,414


image


Management expects the Company will be able to maintain current operations and anticipated capital expenditure requirements for at least the next 12 months through its cash reserves, as well as any cash flows that may be generated from current


operations. Management also expects that the Company's financial resources will allow it to manage the anticipated impact of COVID-19 on its business operations for the foreseeable future, which could include delays in payments from customers and partners. The challenges posed by COVID-19 to the Company are expected to evolve rapidly. Consequently, management will continue to evaluate its financial position in light of future developments, particularly those relating to COVID-19.

At June 30, 2020, the Company had aggregate working capital of $1.0 million, compared to working capital of $829,000 at December 31, 2019. Working capital includes current deferred revenue of $11.1 million and $10.1 million at June 30, 2020 and December 31, 2019, respectively. The primary contributor to the change in working capital was the increase in accounts receivable of $3.6 million, offset by cash used to fund the Company's operating loss during the six months ended June 30, 2020, including $1.5 million of transaction-related expenses related to the Company's merger agreement and subsequent merger termination with Synacor, Inc.

Financing obligations as of June 30, 2020 and December 31, 2019 primarily consist of finance leases related to the acquisition of computer and network equipment and furniture. Operating lease liabilities consists of liabilities primarily related to the Company's office leases. The note payable is non-interest bearing with a face amount of $1.83 million and maturing on April 1, 2021.

The Company's primary source of cash from operating activities has been cash collections from sales of products and services to customers. The Company expects cash inflows from operating activities to be affected by increases or decreases in sales and timing of collections. The Company's primary use of cash for operating activities has been for personnel costs and outside service providers, payment of royalties associated with third-party software licenses and purchases of equipment to fulfill customer orders. The Company expects cash flows from operating activities to be affected by fluctuations in revenues, personnel costs, outside service providers, and the amount and timing of royalty payments and equipment purchases as the Company continues to support the growth of the business. The amount of cash and cash equivalents held by the Company's international subsidiaries that is not available to fund domestic operations unless repatriated was $1.1 million as of June 30, 2020. The repatriation of cash and cash equivalents held by the Company's international subsidiaries would not result in an adverse tax impact on cash given that the future tax consequences of repatriation are expected to be insignificant.

Summary of Cash Flows

A summary of cash flows is as follows (in thousands):


Six Months Ended June 30,

image

2020 2019

Cash flows used in:


Operating activities

$ (283)

$ (1,069)

Investing activities

(29)

(43)

Financing activities

(239)

(169)

Effect of exchange rate changes on cash

(201)

(6)

Net change in cash and cash equivalents

$ (752)

$ (1,287)


Operating activities




Net cash used in operating activities was $283,000 for the six months ended June 30, 2020 compared to $1.1 million for the corresponding 2019 period. The operating cash flows for the 2020 period were unfavorably impacted by the net loss for the period and change in receivables, offset by the favorable change in deferred revenue. The operating cash flows for

the 2019 period were favorably impacted by the change in receivables, offset by unfavorable changes in contract assets, deferred revenue and contract assets.

Investing activities

Net cash used in investing activities for the purchases of property and equipment totaled $29,000 for the six months ended June 30, 2020 compared to $43,000 in the corresponding 2019 period.

Financing activities

Financing activities used net cash of $239,000 for the six months ended June 30, 2020 and $169,000 in the comparable 2019 period. Primarily impacting the current period use of cash were principal payments of $185,000 on finance leases and other financing obligations.


In October 2010, the Company’s Board of Directors approved a common stock repurchase program of up to 3,500,000 shares. Shares may be purchased at prevailing market prices in the open market or in private transactions, subject to market conditions, share price, trading volume and other factors. The repurchase program has been funded to date using cash on hand and may be discontinued at any time. The Company did not repurchase any shares of its common stock under the repurchase program during the six months ended June 30, 2020 and 2019. As of June 30, 2020, the Company had 778,365 shares available for repurchase under the authorizations. While the current authorization remains in effect, the Company expects its primary use of cash will be to fund operations in support of the Company’s goals for revenue growth and operating margin improvement.

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements that involve risks and uncertainties. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties. The Company's actual results could differ significantly from those discussed in the forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part II. Other Information, Item 1A. Risk Factors of this Quarterly Report on Form 10-Q, as well as other factors not now identified. These forward-looking statements are made as of the date of this report and the Company assumes no obligation to update such forward-looking statements, or to update the reasons why actual results could differ materially from those anticipated in such forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company, the Company is not required to provide information typically disclosed under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer, TJ Kennedy, and the Company’s Chief Financial Officer, David G. Ristow, have evaluated the Company’s disclosure controls and procedures as of June 30, 2020. Based upon such evaluation, they have concluded that these disclosure controls and procedures are effective. The Company’s Chief Executive Officer and Chief Financial Officer used the definition of “disclosure controls and procedures” as set forth in Rule 13a-15(e) under the Exchange Act in making their conclusion as to the effectiveness of such controls and procedures.

Changes in Internal Control Over Financial Reporting

No changes in internal controls over financial reporting have occurred during the quarter ended June 30, 2020 that have materially affected, or are reasonable likely to materially affect, the Company’s internal control over financial reporting.


PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Not Applicable.


Item 1A. Risk Factors

Below is a full restatement of the most significant risk factors applicable to Qumu. These risk factors supersede the risk factors described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019 and the risk factors described in Part II, Item 1A “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

If any of the following risks actually occur, our business, results of operations and financial condition and the market price of our common stock could be negatively impacted. Although we believe that we have identified and discussed below the most significant risk factors affecting our business, there may be additional risks and uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect our performance or financial condition. Any forecast regarding our future performance, including, but not limited to, forecasts regarding future revenue, product mix, cash flow and cash balances, are forward-looking statements. These forward-looking statements reflect various assumptions and are subject to significant uncertainties and risks that could cause the actual results to differ materially from those described in the forward- looking statement, including the risks reflected in the risk factors set forth below. Consequently, the future results expressed or implied by any forward-looking statement are not guaranteed and the variation of actual results or events from such statements may be material and adverse.

The COVID-19 pandemic has significantly impacted worldwide business practices and economic conditions and could have a material effect on Qumu’s business, financial condition and operating results.

As a result of the COVID-19 pandemic, governmental authorities have implemented and are continuing to implement numerous and constantly evolving measures to try to contain the virus, such as travel bans and restrictions, limits on gatherings, quarantines, shelter-in-place orders, and business shutdowns.

In response to these developments, we have modified our business practices by restricting employee travel, moving to remote work, cancelling attendance at events and conferences, and implementing social distancing. The resources available to our employees working remotely may not enable them to maintain the same level of productivity and efficiency, particularly our sales employees whose in-person access to our customers and customer prospects has been significantly limited. While we have experienced only limited absenteeism from employees, absenteeism may increase in the future and may harm our productivity. Due to customer demand, Qumu has and may in the future rely upon outsourced professional services, which generally will negatively impact margins.

The COVID-19 pandemic also has changed worldwide business practices as companies have implemented COVID-19 travel restrictions, work-from-home requirements and social distancing protocols. As part of these changes, enterprises of all sizes are implementing technology plans to virtualize customer meetings, employee communications and major events – as well as record and store video assets for on-demand viewing.

Qumu believes that the COVID-19 crisis will act as a tipping point for the use and acceptance of video as a primary communication channel within the enterprise. As video content and software to manage video content achieve high levels of acceptance within the enterprise, we believe this will drive demand and market adoption for Qumu’s video platform and tools. Widespread adoption and use of video in the enterprise is critical to Qumu’s future growth and success. However, there is no assurance that the COVID-19 crisis will result in substantial and sustained increased in use and acceptance of video as a primary communication channel or that this increased in use and acceptance of video will result in an increased demand among customers for Qumu’s video platform and tools.

Restrictions on the manufacturing, operations or workforce of our vendors and suppliers could limit our ability to meet customer demand for hardware purchased as a component of the overall Qumu solution, which would harm our ability to meet our delivery and installation obligations to customers and result in delayed or lost revenue and cash flow from collections.

Furthermore, restrictions or disruptions of transportation, such as reduced availability of air transport, port closures and increased border controls or closures, may result in higher costs and delays for supply of hardware, which could reduce our margins on hardware.

The current spread of COVID-19 across many countries is expected to cause a significant global recession with a high proportion of economies of many nations experiencing the recession. Unfavorable changes in economic conditions, including recession, inflation, lack of access to capital, or other changes, have in the past resulted in and may in the future result in lower


corporate spending among our customers and target customer. At this time, it is uncertain whether the COVID-19 driven recession would result in lower spending by our customers and target customers on video technologies or soften the demand for our products. Further, challenging economic conditions also may impair the ability of our customers to pay for products and services they have purchased. As a result, our cash flow may be negatively impacted and our allowance for doubtful accounts and write-offs of accounts receivable may increase.

The degree to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and geographic spread of the outbreak, its severity, the actions to contain the virus and address its impact, travel restrictions imposed, business closures or business disruption, and the actions taken throughout the world, to contain COVID-19 or treat its impact.

The markets for video content and software to manage video content are each in early stages of development. If this market does not develop or develops more slowly than Qumu expects, including as a result of COVID-19 impacts, Qumu’s revenues may decline or fail to grow.

The use of video as a mainstream communication and collaboration platform and the market for video content management software is in an early stage of development, and it is uncertain whether this use of video will achieve high levels of acceptance. Widespread adoption and use of video in the enterprise is critical to Qumu’s future growth and success. Likewise, it is uncertain whether video content management software will achieve high levels of demand and market adoption. Qumu’s success will depend on enterprises adopting video as a platform and upon enterprise demand for software to help them capture, organize and distribute this content. Qumu believes that the COVID-19 crisis will act as a tipping point for the use and acceptance of video as a primary communication channel within the enterprise. As video content and software to manage video content achieve high levels of acceptance within the enterprise, we believe this will drive demand and market adoption for Qumu’s video platform and tools. In particular, we have noted a trend toward new customers choosing Qumu’s cloud-based enterprise video solution or existing customers converting to a cloud-based solution.

Despite the changes in business practices caused by the COVID-19 pandemic, some customers may be reluctant or unwilling to use video as a medium within the enterprise for a number of reasons, including lack of perceived benefit of this new method of communication and existing investments in other enterprise-wide communications tools. Further, even if customers are using video as a medium, these customers may choose to rely upon their own IT infrastructure and resources to manage their video content. Because many companies generally are predisposed to maintaining control of their IT systems and infrastructure, there may be resistance to using software as a service provided by a third party. Privacy concerns and transition costs are also factors that may affect a potential customer’s decision to subscribe to an external solution.

Additional factors that may limit market acceptance of Qumu’s video content management software include:

These measures could discourage or prevent a takeover of our company or changes in our management, even if an acquisition or such changes would be beneficial to our shareholders. This may have a negative effect on the price of our common stock.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Issuer Purchases of Equity Securities

In October 2010, the Company’s Board of Directors approved a common stock repurchase program of up to 3,500,000 shares of the Company’s common stock. Shares may be purchased at prevailing market prices in the open market or in private transactions, subject to market conditions, share price, trading volume and other factors. The repurchase program may be discontinued at any time. The repurchase program has been funded to date using cash on hand. During the three months ended June 30, 2020, no repurchases were made under the repurchase program. While the current authorization remains in effect, the Company expects its primary use of cash will be to fund operations in support of the Company’s goals for revenue growth and operating margin improvement.

In addition to shares that may be purchased under the Board authorization, the Company purchases shares of common stock held by employees who wish to tender owned shares to satisfy the exercise price or tax withholding on stock option exercises or vesting of restricted awards and performance stock units. All of the share repurchase activity included in the table below for the three months ended June 30, 2020 was associated with satisfaction of employee tax withholding requirements on vesting of restricted stock and restricted stock units.

Information on the Company’s repurchases of its common stock during each month of the quarter ended June 30, 2020 is as follows:




Maximum Number

Total Number of

of Shares that may

Shares Purchased as

yet be Purchased

part of Publicly

under the Plans or


Total Number of

Average Price

Announced Plans or

Programs (at end of

Monthly Period

Shares Purchased

Paid per Share

Programs

period)

April 2020

306

$2.44

778,365

May 2020

$—

778,365

June 2020

75

$2.37

778,365


Item 3. Defaults Upon Senior Securities

Not Applicable.






Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

Not Applicable.

Item 6. Exhibits

(a) The following exhibits are included herein:

31.1 Certificate of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act. 31.2 Certificate of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act. 32 Certifications pursuant to 18 U.S.C. §1350.

101‡ Interactive Data Files Pursuant to Rule 405 of Regulation S-T, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019, (iii) Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2020 and 2019, (iv) Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2020 and 2019, (v) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 and (vi) Notes to Condensed Consolidated Financial Statements

104The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL


image

† Filed herewith.

‡ Furnished herewith.


SIGNATURES

In accordance with the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.



QUMU CORPORATION

Registrant

Date:

August 4, 2020

By:

/s/ TJ Kennedy




TJ Kennedy

President and Chief Executive Officer (Principal Executive Officer)

Date:

August 4, 2020

By:

/s/ David G. Ristow




David G. Ristow Chief Financial Officer

(Principal Financial Officer)

(Principal Accounting Officer)