ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On January 15, 2021, Qumu Corporation (the "Company") and its wholly-owned
subsidiary, Qumu, Inc., a California corporation (with the Company, the
"Borrower") entered into and closed on that certain Loan and Security Agreement
(the "Loan Agreement") with Wells Fargo Bank, National Association (the
"Lender") providing for a revolving line of credit.
Concurrently with the closing of the Loan Agreement, the Company received an
advance of approximately $1,877,000 from the line of credit and used
$1,832,888.27 to repay the face amount of that certain secured promissory note
dated May 1, 2020 to ESW Holdings, Inc. (the "ESW Note"), which represented the
deferred purchase price of the Company's purchase and termination of the warrant
to ESW Holdings, Inc. dated January 12, 2018 for 925,000 shares of the Company's
common stock. In connection with the repayment of the ESW Note, the related
security agreement May 1, 2020 between the Company and ESW Holdings, Inc. was
terminated. As provided in the ESW Note, the Company will be obligated to pay
ESW Holdings, Inc. an additional $150,000 if a "Fundamental Transaction," as
defined in the ESW Note, occurs prior to April 1, 2021.
Under the Loan Agreement, the revolving line has a maximum availability for
borrowing of the lesser of $10 million or a defined borrowing base, less any
outstanding letters of credit and the outstanding principal balance of any
advances. The borrowing base is six times the prior quarter's monthly average
recurring revenue from eligible customer accounts. The revolving line has a
January 15, 2023 maturity date and amounts borrowed bear interest at a floating
per annum rate equal to 1.25% above the Lender's prime rate, currently 3.25%.
The Borrower will also be obligated to pay the Lender an unused revolving line
facility fee quarterly in arrears of 0.25% per annum of the average unused
portion of the Revolving Line during such quarterly period.
The Loan Agreement contains customary affirmative and negative covenants and
requirements relating to the Borrower and its operations. The affirmative
covenants also require the Company to maintain at all times minimum quarterly
recurring revenue and minimum liquidity. As of the last day of each fiscal
quarter, commencing with the fiscal quarter ending March 31, 2021, Borrower's
recurring revenue may not less than the amounts reflected in a financial
covenant side letter agreement entered into between Borrower and Lender on
January 15, 2021 (the "Letter Agreement"). The Letter Agreement specifies
minimum quarterly recurring revenue for the first, second, third and fourth
quarters of 2021 of $5 million, $5 million, $6 million and $8 million,
respectively. The Letter Agreement also specifies minimum quarterly recurring
revenue of $8 million for all quarters of 2022. The Loan Agreement provides that
Borrower's liquidity, tested as of the last day of each fiscal quarter, of not
less than $5 million, with liquidity generally defined as including the
aggregate amount of unrestricted and unencumbered cash and cash equivalents held
at such time by Borrower in accounts maintained with Lender or its affiliates in
the United States, and the availability under the line of credit.
Pursuant to the Loan Agreement, the Borrower granted a security interest in
substantially all of its properties, rights and assets (including certain equity
interests of the Company's subsidiaries).
The foregoing summaries of the Loan Agreement and Letter Agreement do not
purport to be complete and are subject to and qualified in their respective
entirety by reference to the Loan Agreement and Letter Agreement, which are
attached hereto as Exhibit 10.1 and Exhibit 10.2, respectively, and are
incorporated herein by reference.
ITEM 1.02 TERMINATION OF MATERIAL DEFINITIVE AGREEMENT.
The information as set forth under Item 1.01 of this Current Report on Form 8-K
is incorporated herein by reference.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
The information as set forth under Item 1.01 of this Current Report on Form 8-K
is incorporated herein by reference.
ITEM 8.01 OTHER EVENTS.
On January 12, 2021, HCP-FVD, LLC, the holder of the outstanding warrant dated
October 21, 2016 to purchase 314,286 shares of the Company's common stock,
exercised a portion of the warrant in a cashless exercise. The exercise resulted
in the issuance by the Company to HCP-FVD, LLC of 50,000 shares of its common
stock and an overall reduction of 75,703 warrant shares. Immediately following
the exercise, HCP-FVD, LLC retains the right under the warrant to purchase
238,583 shares of the Company's common stock at an exercise price of $2.80 per
share through and including October 21, 2026.
As of January 15, 2021, the Company has 13,831,665 shares of its common stock
issued and outstanding.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit No. Description
10.1 Loan and Security Agreement dated January 15, 2021 among Qumu
Corporation, Qumu, Inc. and Wells Fargo Bank, National Association
10.2 Financial Covenant Side Letter Agreement dated January 15, 2021
among Qumu Corporation, Qumu, Inc. and Wells Fargo Bank, National
Association
99.1 Press release issued by Qumu Corporation on January 19, 2021.
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