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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
    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
qumu-20220630_g1.jpg
QUMU CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota41-1577970
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
400 S. 4th Street, Suite 401-412
Minneapolis, Minnesota
55415
(Address of principal executive offices)(Zip Code)
(612) 638-9100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol
Name of each exchange on which registered
Common Stock, $0.01 par valueQUMUThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically 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):
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes No
As of August 8, 2022, the registrant had 17,919,761 outstanding shares of $.01 par value common stock.


Table of Contents
QUMU CORPORATION
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED JUNE 30, 2022
 DescriptionPage
 
 
 
 
 
 
 

2

Table of Contents
PART 1 – FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
QUMU CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30,
2022
December 31,
2021
Assets(unaudited)
Current assets:
Cash and cash equivalents$6,435 $20,563 
Receivables, net of allowance for credit losses of $41 and $42, respectively
3,467 3,709 
Contract assets676 446 
Income tax receivable658 556 
Other receivable649  
Prepaid expenses and other current assets2,094 2,184 
Total current assets13,979 27,458 
Property and equipment, net of accumulated depreciation of $1,640 and $1,544, respectively
222 337 
Right of use assets – operating leases45 146 
Intangible assets, net1,049 1,388 
Goodwill6,639 7,388 
Deferred income taxes, non-current17 17 
Other assets, non-current320 362 
Total assets$22,271 $37,096 
Liabilities and Stockholders’ Equity  
Current liabilities:  
Accounts payable and other accrued liabilities$3,521 $2,742 
Accrued compensation1,380 1,725 
Deferred revenue9,604 10,862 
Operating lease liabilities192 597 
Financing obligations152 5,502 
Warrant liability684 801 
Total current liabilities15,533 22,229 
Long-term liabilities:  
Deferred revenue, non-current1,102 1,507 
Income taxes payable, non-current641 630 
Operating lease liabilities, non-current 21 
Financing obligations, non-current87 113 
Total long-term liabilities1,830 2,271 
Total liabilities17,363 24,500 
Commitments and contingencies (Note 3)
Stockholders’ equity:  
Preferred stock, $0.01 par value, authorized 250,000 shares, no shares issued and outstanding
  
Common stock, $0.01 par value, authorized 29,750,000 shares, issued and outstanding 17,904,854
 and 17,786,959, respectively
179 178 
Additional paid-in capital105,785 105,655 
Accumulated deficit(97,955)(90,693)
Accumulated other comprehensive loss(3,101)(2,544)
Total stockholders’ equity4,908 12,596 
Total liabilities and stockholders’ equity$22,271 $37,096 
See accompanying notes to unaudited condensed consolidated financial statements.
3

Table of Contents
QUMU CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited – in thousands, except per share data)
 Three Months Ended
 June 30,
Six Months Ended
 June 30,
 2022202120222021
Revenues:    
Software licenses and appliances$278 $138 $389 $246 
Service4,853 5,729 9,682 11,441 
Total revenues5,131 5,867 10,071 11,687 
Cost of revenues:    
Software licenses and appliances48 63 79 127 
Service1,212 1,486 2,591 2,989 
 Total cost of revenues1,260 1,549 2,670 3,116 
Gross profit3,871 4,318 7,401 8,571 
Operating expenses:    
Research and development1,930 2,184 3,755 4,214 
Sales and marketing2,687 5,173 6,495 9,649 
General and administrative2,251 2,142 4,694 4,669 
Amortization of purchased intangibles153 163 309 325 
Total operating expenses7,021 9,662 15,253 18,857 
Operating loss(3,150)(5,344)(7,852)(10,286)
Other income (expense):    
Employee Retention Credit income649  649  
Interest expense, net(39)(15)(109)(69)
Decrease in fair value of derivative liability   37 
Decrease in fair value of warrant liability51 1,018 117 1,375 
Other, net(156)(89)(184)(27)
Total other income (expense), net505 914 473 1,316 
Loss before income taxes(2,645)(4,430)(7,379)(8,970)
Income tax benefit(23)(109)(117)(199)
Net loss$(2,622)$(4,321)$(7,262)$(8,771)
Net loss per share – basic:
Net loss per share – basic$(0.15)$(0.24)$(0.40)$(0.51)
Weighted average shares outstanding – basic18,072 17,741 18,042 17,096 
Net loss per share – diluted:
Loss attributable to common shareholders$(2,622)$(5,339)$(7,262)$(10,146)
Net loss per share – diluted$(0.15)$(0.30)$(0.40)$(0.59)
Weighted average shares outstanding – diluted18,072 17,899 18,042 17,299 
See accompanying notes to unaudited condensed consolidated financial statements.

4

Table of Contents
QUMU CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited - in thousands)
 Three Months Ended
 June 30,
Six Months Ended
 June 30,
 2022202120222021
Net loss$(2,622)$(4,321)$(7,262)$(8,771)
Other comprehensive income (loss):   
Net change in foreign currency translation adjustments(373)144 (557)123 
Total other comprehensive income (loss)(373)144 (557)123 
Total comprehensive loss$(2,995)$(4,177)$(7,819)$(8,648)

See accompanying notes to unaudited condensed consolidated financial statements.

5

Table of Contents
QUMU CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited – in thousands)


Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total
 SharesAmount
Balance at December 31, 202013,780 $138 $79,489 $(74,328)$(2,414)$2,885 
Net loss— — — (4,450)— (4,450)
Other comprehensive loss, net of taxes— — — — (21)(21)
Issuance of common stock3,709 37 23,048 — — 23,085 
Warrant exercise50 — 560 — — 560 
Issuance of stock under employee stock plan, net of forfeitures52 1 141 — — 142 
Redemption of stock related to tax withholdings on employee stock plan issuances— — (3)— — (3)
Stock-based compensation— — 589 — — 589 
Balance at March 31, 202117,591 $176 $103,824 $(78,778)$(2,435)$22,787 
Net loss— — — (4,321)— (4,321)
Other comprehensive loss, net of taxes— — — — 144 144 
Issuance of stock under employee stock plan, net of forfeitures34  85 — — 85 
Redemption of stock related to tax withholdings on employee stock plan issuances(1)— (3)— — (3)
Stock-based compensation— — 566 — — 566 
Balance at June 30, 202117,624 $176 $104,472 $(83,099)$(2,291)$19,258 

Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total
 SharesAmount
Balance at December 31, 202117,787 $178 $105,655 $(90,693)$(2,544)$12,596 
Net loss— — — (4,640)— (4,640)
Other comprehensive loss, net of taxes— — — — (184)(184)
Issuance of stock under employee stock plan, net of forfeitures87 1 (1)— —  
Redemption of stock related to tax withholdings on employee stock plan issuances(9)— (17)— — (17)
Stock-based compensation— — 356 — — 356 
Balance at March 31, 202217,865 $179 $105,993 $(95,333)$(2,728)$8,111 
Net loss— — — (2,622)— (2,622)
Other comprehensive loss, net of taxes— — — — (373)(373)
Issuance of stock under employee stock plan, net of forfeitures42   — —  
Redemption of stock related to tax withholdings on employee stock plan issuances(2)— (2)— — (2)
Stock-based compensation— — (206)— — (206)
Balance at June 30, 202217,905 $179 $105,785 $(97,955)$(3,101)$4,908 

See accompanying notes to unaudited condensed consolidated financial statements.

6

Table of Contents
QUMU CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited – in thousands)
 Six Months Ended
 June 30,
20222021
Operating activities:  
Net loss$(7,262)$(8,771)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization427 492 
Loss on disposal of property and equipment 3 
Stock-based compensation150 1,155 
Accretion of debt discount and issuance costs27 33 
Decrease in fair value of derivative liability (37)
Decrease in fair value of warrant liability(117)(1,375)
Changes in operating assets and liabilities:
Receivables138 1,802 
Contract assets(230)238 
Income taxes receivable / payable(152)221 
Other receivable(649) 
Prepaid expenses and other assets151 (105)
Accounts payable and other accrued liabilities658 (242)
Accrued compensation(322)(1,305)
Deferred revenue(1,360)(3,724)
 Net cash used in operating activities(8,541)(11,615)
Investing activities:  
Purchases of property and equipment(8)(216)
Net cash used in investing activities(8)(216)
Financing activities:  
Principal payments on line of credit(5,000)(1,840)
Proceeds from line of credit 1,840 
Principal payment on term loan (1,833)
Payment for line of credit issuance costs(86) 
Principal payments on financing obligations(376)(219)
Net proceeds from common stock issuance 23,085 
Proceeds from issuance of common stock under employee stock plans 226 
Common stock repurchases to settle employee withholding liability(19)(6)
Net cash provided by (used in) financing activities(5,481)21,253 
Effect of exchange rate changes on cash(98)28 
Net increase (decrease) in cash and cash equivalents(14,128)9,450 
Cash and cash equivalents, beginning of period20,563 11,878 
Cash and cash equivalents, end of period$6,435 $21,328 
Supplemental disclosures of net cash paid (received) during the period:  
Income taxes, net$17 $(413)
Interest, net$86 $31 
Non-cash financing activity:
Reclassification from warrant liability to additional paid-in capital for non-cash exercise$ $560 

See accompanying notes to unaudited condensed consolidated financial statements.
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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 tools 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 future workplace by providing a more efficient and effective way to share knowledge. Qumu’s customers, which include some of the world’s largest organizations, leverage the Qumu platform for a variety of cloud, on-premise and hybrid deployments. Use cases include, but are not limited to, CEO and executive town halls, self-service webcasting, sales enablement, training, employee onboarding, internal communications, product releases and training, regulatory compliance and customer engagement. The Company and its channel partners market Qumu’s 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 markets 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, 2021.
Liquidity and Going Concern Considerations
At June 30, 2022, the Company's principal source of liquidity consists of cash and cash equivalents and potential availability under its revolving line of credit with Silicon Valley Bank ("SVB"). As disclosed in the Company's consolidated financial statements for the year ended December 31, 2021, management concluded that the Company's history of losses and its cash resources available to execute its business plan over the twelve months following the release of its audited financial statements raised substantial doubt about the Company's ability to continue as a going concern. While management continues to execute the plans noted below, the execution of those plans has not yielded sufficient results for management to conclude that substantial doubt has been alleviated.
Management’s plans to address the doubt regarding the Company’s ability to continue as a going concern include positioning the targeted channel-led strategy for success through efforts to expand the number of high quality channel partners, educating channel partners on the Company’s platform, tools and differentiated features, and providing performance-based incentives to channel partners to accelerate customer deals, as well as continuous assessment of the sales pipeline to forecast SaaS revenue growth driven by new customer and expansion bookings sourced through the channel. Additionally, management will actively monitor eligible accounts for the purposes of the SVB Agreement borrowing base calculation and monitor doubtful accounts and write-offs of accounts receivable, which have historically been minimal. Management continues to manage costs to align with its operating plan. To the extent that increasing traction in the channel-led strategy is not realized, management may implement additional cost optimization plans to further align expenditures with the timing and amount of cash receipts from new sales and renewals of existing sales contracts. These cost optimization measures may include reductions in the Company's personnel, reduced utilization of contractors, and decreases in other discretionary spend.
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The Company may also increase its cash resources by drawing on the SVB line of credit to the extent of any availability. To the extent the Company requires additional capital, it may seek capital by refinancing its existing line of credit or from offering of the Company's equity securities or both. If the Company experiences a significant shortfall in performance as compared to plan and also is unable to secure additional capital in a sufficient amount or on acceptable terms, management may be required to implement more significant cost reduction and other cash-focused measures to manage liquidity and the Company may have to significantly delay, scale back, or cease operations, in part or in full.
As of June 30, 2022, management continues to realize positive results from the execution of its plans. Regarding its channel-led strategy, the Company met its new logo growth targets for both the first and second quarters of 2022, with over 80% of the new logos associated with channel partners. Additionally, net cash used in operating activities improved to $3.7 million in the second quarter 2022, compared to $4.9 million in first quarter 2022 and $6.1 million in the second quarter 2021. As a result, as of June 30, 2022 and through the filing date of this Form 10-Q, management has not initiated new cost optimization or headcount reduction measures beyond those initially planned to alleviate substantial doubt regarding the Company’s ability to continue as a going concern. Following the end of the quarter, the Company drew $2.0 million on the SVB line of credit on August 12, 2022.
These condensed consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty. If the Company cannot continue as a going concern, adjustments to the carrying values and classification of its assets and liabilities and the reported amounts of income and expenses could be required and could be material.
Employee Retention Credit
During the three months ended June 30, 2022, the Company completed its analysis of its eligibility for the Employee Retention Credit under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) for qualified wages paid during the second quarter of 2021. During the three months ended June 30, 2022, the Company submitted for a refund of $649,000 for the second quarter 2021 reporting period and recorded the amount as Other Income (Expense) on the Company’s condensed consolidated statements of operations and as Other Receivable on the Company's condensed consolidated balance sheet as of June 30, 2022. The Company believes the relevant conditions of the Employee Retention Credit provision of the CARES Act have been substantially met for the second quarter 2021 reporting period and that it will receive the credit, although there can be no assurance regarding timing of the receipt of the credit. The Company expects to recognize additional amounts under the Employee Retention Credit in future reporting periods as it completes further analyses and submits for refunds for other historical quarters for which it determines the Company has eligible wages. Subsequent to June 30, 2022, the Company completed additional analyses and submitted a refund of $623,000 for the third quarter 2021.
Recently Adopted Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This update amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and improves and amends the related earnings per share guidance for both Subtopics. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2021. Early adoption is permitted. The Company adopted this standard effective January 1, 2022. The adoption of this standard did not materially impact the Company's condensed consolidated financial statements and related disclosures.
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The objective of ASU 2021-10 is to increase the transparency of government assistance including the disclosure of the types of assistance, an entity’s accounting for the assistance, and the effect of the assistance on an entity’s financial statements. ASU 2021-10 is effective for all entities for annual periods beginning after December 15, 2021. The Company adopted this standard effective January 1, 2022. The adoption of this standard did not materially impact the Company's financial statements disclosures.
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(2) Intangible Assets and Goodwill
Intangible Assets
The Company’s amortizable intangible assets consisted of the following (in thousands):
June 30, 2022
Customer RelationshipsTrademarks / Trade NamesTotal
Original cost$4,730 $2,121 $6,851 
Accumulated amortization(4,423)(1,379)(5,802)
Intangibles assets, net$307 $742 $1,049 
December 31, 2021
Customer RelationshipsTrademarks / Trade NamesTotal
Original cost$4,927 $2,121 $7,048 
Accumulated amortization(4,352)(1,308)(5,660)
Intangibles assets, net$575 $813 $1,388 
Balances as of December 31, 2021 exclude intangible assets fully amortized as of that date having an original cost as follows:
December 31, 2021
Developed TechnologyTrademarks / Trade NamesTotal
Original cost$8,224 $62 $8,286 
Changes to the carrying amount of net amortizable intangible assets consisted of the following (in thousands):
Six Months Ended
 June 30, 2022
Balance, beginning of period$1,388 
Amortization expense(309)
Currency translation(30)
Balance, end of period$1,049 
Amortization expense of intangible assets consisted of the following (in thousands):
 Three Months Ended
 June 30,
Six Months Ended
 June 30,
 2022202120222021
Amortization expense associated with the developed technology included in cost of revenues$ $27 $ $54 
Amortization expense associated with other acquired intangible assets included in operating expenses153 163 309 325 
Total amortization expense$153 $190 $309 $379 
Goodwill
The goodwill balance of $6.6 million at June 30, 2022 reflects the impact of foreign currency exchange rate fluctuations since the acquisition date.
(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 was surrendered, that expire at various dates over the next 7 months.
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The components of lease cost were as follows (in thousands):
Three Months Ended
 June 30,
Six Months Ended
 June 30,
2022202120222021
Operating lease cost$51 $46 $101 $91 
Finance lease cost:
Amortization of right of use assets26 26 52 55 
Interest on lease liabilities2 3 4 5 
Total finance cost28 29 56 60 
Total lease cost$79 $75 $157 $151 
Future payments used in the measurement of lease liabilities on the condensed consolidated balance sheet as of June 30, 2022 are as follows (in thousands):
Operating
leases
Finance
leases
Remainder of 2022$237 $29 
202321 58 
2024 58 
2025 4 
2026  
Total undiscounted lease payments258 149 
Less amount representing interest(8)(10)
Present value of lease liabilities$250 $139 
Wells Fargo Credit Facility
On January 15, 2021, the Company entered into a Loan and Security Agreement (the “Wells Fargo line of credit”) with Wells Fargo Bank, National Association providing for a revolving line of credit. Pursuant to the Wells Fargo line of credit, the Company granted a security interest in substantially all of its properties, right and assets (including certain equity interest of the Company’s subsidiaries). As of March 31, 2022, the Company maintained an outstanding principal balance on the revolving line of $5.0 million and was in compliance with its covenants. On April 12, 2022, the Company repaid the outstanding balance on the revolving line and terminated its Loan and Security Agreement with Wells Fargo.
Silicon Valley Bank Credit Facility
On April 15, 2022, the Company entered into a Loan and Security Agreement (the “SVB Agreement”) with Silicon Valley Bank providing for a $7.5 million revolving line of credit. The maximum availability for borrowing under the SVB Agreement is the lesser of $7.5 million or the sum of a defined borrowing base of 85% of eligible accounts receivable plus a non-formula amount of $2.5 million. The non-formula amount will be eliminated from availability under the line of credit at the earlier of April 30, 2023 or the date on which the Company's net cash, as defined, is less than $5.0 million. The maturity of the SVB Agreement is April 15, 2024. No amounts were outstanding under the SVB Agreement as of June 30, 2022. Subsequent to June 30, 2022, the Company drew $2.0 million on the line of credit on August 12, 2022.
Any borrowings under the SVB Agreement bear interest, based on an interest rate that is dependent upon whether Net Cash is above or below $5.0 million. Net Cash is defined as (a) the Company's cash maintained with Silicon Valley Bank less (b) the outstanding line of credit balance. If Net Cash is greater than $5.0 million, then the interest rate is the "prime rate” as published in The Wall Street Journal ("WSJ") for the relevant period plus 1.50%. If cash liquidity is less than $5.0 million, then the interest rate is the WSJ prime rate plus 2.00%. The SVB Agreement contains certain reporting requirements, conditions, and covenants, including a covenant requiring the Company to maintain an adjusted quick ratio greater than or equal to 1.25 to 1.00. The adjusted quick ratio is the ratio of (a) unrestricted cash and cash equivalents in SVB deposit accounts or securities accounts plus net billed accounts receivable and (b) the sum of current liabilities less the current portion of deferred revenue.
Pursuant to the SVB Agreement, the Company granted a security interest in substantially all of its properties, rights and assets (including certain equity interests of the Company’s subsidiaries). The SVB Agreement contains customary events of default, upon the occurrence of which, the lender may accelerate repayment of any outstanding balance. Additionally, the line of credit contains various provisions that limit our ability to, among other things, incur, create or assume certain indebtedness; create, incur or assume certain liens; make certain investments; make sales, transfers and dispositions of certain property; undergo certain fundamental changes, including certain mergers, liquidations and consolidations; purchase, hold or acquire certain investments; and declare or make certain dividends and distributions.
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Contingencies
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:
Level 1: Inputs are unadjusted quoted prices in active markets for identical assets and liabilities.
Level 2: Inputs include data points that are observable such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) such as interest rates and yield curves that are observable for the asset or liability, either directly or indirectly.
Level 3: Inputs are generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect an entity’s own estimates of assumptions that market participants would use in pricing the asset or liability.
As of June 30, 2022, the following warrants for the purchase of Qumu’s common stock were outstanding and exercisable:
DescriptionNumber of underlying warrant sharesWarrant exercise price
(per share)
Warrant expiration date
Warrant issued in conjunction with October 2016 debt financing ("Hale warrant")238,583 $2.80 October 21, 2026
Warrant issued to sales partner, iStudy Co., Ltd. ("iStudy warrant")100,000 $2.43 August 31, 2028
Total warrants outstanding338,583 
The warrant liability was recorded in the Company’s consolidated balance sheets at its fair value on the respective dates of issuance of the warrants 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 condensed consolidated statement of operations as "decrease (increase) in fair value of warrant liability." The Company recorded non-cash income of $51,000 and $1.0 million for the three months ended June 30, 2022 and 2021, respectively, and $117,000 and $1.4 million for the six months ended June 30, 2022 and 2021, respectively, resulting from the decrease in fair value of the warrant liability.
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The Company has historically estimated the fair value of this liability using option pricing models that are based on the individual characteristics of the warrants on the valuation date, which include the Company’s stock price and assumptions for expected volatility, expected life and risk-free interest rate, as well as the present value of the minimum cash payment component of the instrument for the warrants, when applicable. During the three months ended June 30, 2022, the Company began estimating the fair value of the Hale warrant using a Monte Carlo simulation performed by a third-party valuation firm, as the Company considers the simulation to better capture the potential range of future cash flows, particularly cash flows from scenarios in which the minimum cash payment is triggered.
Changes in the assumptions used could have a material impact on the resulting fair value of each warrant. The primary inputs affecting the value of the warrant liability are the Company’s stock price and volatility in the Company’s stock price, as well as assumptions about the probability and timing of certain events, such as a change in control or future equity offerings. Increases in the fair value of the underlying stock or increases in the volatility of the stock price generally contribute to an increase in the fair value of the warrant liability; conversely, decreases in the fair value of the underlying stock or decreases in the volatility of the stock price generally contribute to a decrease in the fair value of the warrant liability.
The Company’s liabilities measured at fair value on a recurring basis and the fair value hierarchy utilized to determine such fair values were as follows at June 30, 2022 and December 31, 2021 (in thousands):
  Fair Value Measurements Using
 
Total Fair
Value at
June 30, 2022
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Liabilities:    
Warrant liability - Hale$661 $ $ $661 
Warrant liability - iStudy23   23 
Warrant liability$684 $ $ $684 

  Fair Value Measurements Using
 
Total Fair
Value at
December 31, 2021
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Liabilities:    
Warrant liability - Hale$685 $ $ $685 
Warrant liability - iStudy116   116 
Warrant liability$801 $ $ $801 

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 present value of the minimum cash payment component of the Hale warrant. Consequently, as of June 30, 2022 and December 31, 2021, the liability related to each warrant was classified as a Level 3 warrant liability.
The following table represents the significant unobservable input used in the fair value measurement of Level 3 warrant liability instruments:
 June 30, 2022December 31, 2021
Probability-weighted timing of change in control2.7 years3.7 years
The following table summarizes the changes in Level 3 fair value measurements for the six months ended June 30, 2022:
Total
Balance at December 31, 2021$801 
Change in fair value(117)
Balance at June 30, 2022$684 
(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 cloud-hosted software as a service (SaaS), term software license or perpetual software license. Software licenses and appliances revenue includes sales of perpetual
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software licenses, term software licenses and hardware. Service revenue includes SaaS, maintenance and support, and professional and other services.
Revenues by product category and geography
The Company combines its products and services into four product categories and three geographic regions, based on customer location, as follows (in thousands):
 Three Months Ended
 June 30,
Six Months Ended
 June 30,
 2022202120222021
Software licenses and appliances$278 $138 $389 $246 
Service
Subscription and support2,764 2,512 5,419 4,827 
Maintenance and support1,769 2,570 3,562 5,234 
Subscription, maintenance and support4,533 5,082 8,981 10,061 
Professional services and other320 647 701 1,380 
Total service4,853 5,729 9,682 11,441 
Total revenues$5,131 $5,867 $10,071 $11,687 

Three Months Ended
 June 30,
Six Months Ended
 June 30,
 2022202120222021
North America$3,385 $3,710 $6,663 $7,648 
Europe1,365 303 2,743 1,924 
Asia381 1,854 665 2,115 
Total$5,131 $5,867 $10,071 $11,687 
Contract Balances
The Company’s balances for contract assets totaled $676,000 and $446,000 as of June 30, 2022 and December 31, 2021, respectively. The Company’s balances for contract liabilities, which are included in deferred revenue, totaled $10.7 million and $12.4 million as of June 30, 2022 and December 31, 2021, respectively.
During the three months ended June 30, 2022 and 2021, the Company recognized $4.7 million and $4.6 million, respectively, of revenue that was included in the deferred revenue balance at the beginning of each respective period. During the six months ended June 30, 2022 and 2021, the Company recognized $8.3 million and $8.3 million, respectively, of revenue that was included in the deferred revenue balance at the beginning of each respective 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 $23.8 million as of June 30, 2022, of which the Company expects to recognize $11.9 million of revenue over the next 12 months and the remainder thereafter. During the six months ended June 30, 2022 and 2021, no revenue was recognized from performance obligations satisfied in previous periods.
(6)    Stock-Based Compensation
The Company granted the following stock-based awards in the periods indicated:
 Three Months Ended
 June 30,
Six Months Ended
 June 30,
 2022202120222021
Stock options50,000  50,000  
Restricted stock units746,400 253,802 821,195 352,302 
Performance stock units 140,060 320,755 303,700 
The restricted stock units and performance stock units granted during the three and six months ended June 30, 2022 and 2021 were granted under the Company’s Second Amended and Restated 2007 Stock Incentive Plan (the "2007 Plan"), a shareholder approved plan.
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The Company recognized the following expense (benefit) related to its share-based payment arrangements (in thousands):
 Three Months Ended
 June 30,
Six Months Ended
 June 30,
 2022202120222021
Stock-based compensation cost, before income tax benefit:    
Stock options$(283)$182 $(171)$353 
Restricted stock awards and restricted stock units159 384 398 802 
Performance stock units(82) (77) 
Total stock-based compensation$(206)$566 $150 $1,155 
 Three Months Ended
 June 30,
Six Months Ended
 June 30,
 2022202120222021
Stock-based compensation cost included in:    
Cost of revenues$17 $17 $36 $32 
Operating expenses(223)549 114 1,123 
Total stock-based compensation$(206)$566 $150 $1,155 

(7)    Income Taxes
As of both June 30, 2022 and December 31, 2021, the Company’s liability for gross unrecognized tax benefits (excluding interest and penalties) totaled $1.9 million. The Company had accrued interest and penalties relating to unrecognized tax benefits of $84,000 and $72,000 on a gross basis at June 30, 2022 and December 31, 2021, respectively. The change in the liability for gross unrecognized tax benefits reflects an increase in reserves established for federal and state uncertain tax positions. The Company does not currently expect significant changes in the amount of unrecognized tax benefits during the next twelve months.
(8)    Computation of Net Loss Per Share of Common Stock
The following table identifies the components of net loss per basic and diluted share (in thousands, except for per share data):
 Three Months Ended
 June 30,
Six Months Ended
 June 30,
 2022202120222021
Net loss per share – basic
Net loss$(2,622)$(4,321)$(7,262)$(8,771)
Weighted average shares outstanding18,072 17,741 18,042 17,096 
Net loss per share – basic$(0.15)$(0.24)$(0.40)$(0.51)
Net loss per share – diluted
Loss attributable to common shareholders:
Net loss$(2,622)$(4,321)$(7,262)$(8,771)
Numerator effect of dilutive securities
Warrants (1,018) (1,375)
Loss attributable to common shareholders$(2,622)$(5,339)$(7,262)$(10,146)
Weighted average shares outstanding – diluted:
Weighted average shares outstanding – basic18,072 17,741 18,042 17,096 
Denominator effect of dilutive securities
Warrants 158  203 
Diluted potential common shares