What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-09 compared with 2021-11-03 · 89 added, 87 removed, 226 unchanged (44% of the section changed)

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 our consolidated financial statements, the accompanying notes, and other information included in this Quarterly Report and our annual report for the year ended March 31, 2021.

In particular, the disclosure contained in Item 1A in our annual report, as updated by Part II, Item 1A in this Quarterly Report, may reflect trends, demands, commitments, events, or uncertainties that could materially impact our results of operations and liquidity and capital resources.

The following discussion contains forward-looking statements, such as statements regarding COVID-19's anticipated impacts on our business, our future operating results and financial position, our business strategy and

plans, and our objectives for future operations.

In particular, the disclosure contained in Part I, Item 1A in our Annual Report on form 10-K, as updated by Part II, Item 1A in this Quarterly Report, may reflect trends, demands, commitments, events, or uncertainties that could materially impact our results of operations and liquidity and capital resources.

Please see "Note Regarding Forward-Looking Statements" for more information about relying on these forward-looking statements.

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interest associated with our long term debt and income taxes.

Highlights from second quarter of fiscal year 2022 included:

• Revenue increased 5% from the prior quarter and 9% year-over-year to $93 million.

• We completed the Pivot3 assets acquisition, which adds a portfolio of industry leading hyperconverged infrastructure (HCI) and intelligent software solutions for the security and surveillance markets.

Highlights from third quarter of fiscal year 2022 included:

• Revenue increased 2% sequentially to $95.3 million and 8% year to date compared to the prior year to $277.6 million.

• We completed the EnCloudEn assets acquisition which will enable us to expand the addressable market for our video surveillance portfolio, offering customers a solution using their server hardware of choice with a flexible subscription-based software model.

• We completed the refinancing of our term loan, significantly reducing our annual debt service and greatly increasing our financial flexibility related to covenants and restrictions.

• We brought on industry veteran John Hurley as Chief Revenue Officer.

John brings extensive experience working with the largest global enterprise, commercial, and service provider customers.

• We announced a new collaboration and Remote Editing Solution for Adobe Premiere Pro Users.

• We announced a partnership with IBM on the next generation of LTO technology in which we will collaborate with IBM in its development of LTO-10 tape drives and media in order to accelerate time-to-market, capacity, and performance.

• We were awarded one Platinum and one Gold 'ASTORS' Homeland Security Award from American Security Today.

The Annual 'ASTORS' Awards Program, is specifically designed to honor distinguished government and vendor solutions that deliver enhanced value, benefit, and intelligence to end-users in a variety of government, homeland security, enterprise, and public safety vertical markets.

COVID-19 IMPACT AND ASSOCIATED ACTIONS

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In light of these events, we have taken actions to protect the health and safety of our employees while continuing to serve our global customers as an essential business.

We have implemented more thorough sanitation practices as outlined by health organizations and instituted social distancing policies at our locations around the world, including working from home, limiting the number of employees attending meetings, reducing the number of people in our sites at any one time, and suspending employee travel.

We have implemented more thorough sanitation practices as outlined by health organizations and instituted mitigation practices at our locations around the world, including working from home, limiting the number of employees attending meetings, reducing the number of people in our sites at any one time, and decreasing employee travel.

We have seen a gradual stabilization in our business during the second half of fiscal 2021 and into fiscal 2022 as customers increasingly adapted to the COVID-19 environment.

The pervasive disruption in the global supply chain continues to have an impact on our business.

However, COVID-19 has caused a significant disruption to the global supply chain, which continues to have a negative impact on our business.

Before the current disruptions in the global supply chain our historical backlog was very limited and typically represented less than 5% of quarterly revenues.

During our second fiscal quarter our backlog grew to $50 million from $30 million at the end of the prior quarter.

During our third fiscal quarter our backlog grew to $62 million from $50 million at the end of the prior quarter and $30 million as of June 30, 2021.

Approximately $50 million of the ending backlog represented tape products a majority of which is for orders from our hyperscale customers.

This unprecedented backlog is a result of the strong demand we have been seeing across our business but limited by the ongoing supply constraints.

Of the $50 million ending backlog, just over 70% of the backlog was from hyperscaler customers and just over 85% of the backlog was related to tape products.

Approximately two-thirds of the backlog is expected to be shipped in the second half of fiscal 2022 and the remaining one-third of the backlog has ship dates early in fiscal 2023.

We anticipate that supply chain constraints will remain challenging, limiting our ability to ship against all customer demand and recognize a meaningful portion of the current backlog.

We will continue to actively monitor the impact of COVID-19 and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities.

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RESULTS OF OPERATIONS

Three Months Ended September 30, Six Months Ended September 30,

Three Months Ended December 31, Nine Months Ended December 31,

(in thousands) 2021 2020 2021 2020

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Income (loss) from operations (7,225) 6,093 (8,218) 6,098

Other income (expense), net 126 (312) (71) (697)

Other expense, net (150) (698) (223) (1,395)

Interest expense (2,431) (7,808) (9,387) (21,823)

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(1) Includes stock-based compensation as follows:

Three Months Ended September 30, Six Months Ended September 30,

Three Months Ended December 31, Nine Months Ended December 31,

(in thousands) 2021 2020 2021 2020

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Total $ 4,307 $ 1,878 $ 10,580 $ 6,428

Comparison of the Three Months Ended September 30, 2021 and 2020

Three Months Ended September 30,

Comparison of the Three Months Ended December 31, 2021 and 2020

Three Months Ended December 31,

(dollars in thousands) 2021 % of

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Product revenue

In the three months ended September 30, 2021, product revenue increased $3.8 million, or 7%, as compared to the same period in 2020.

Secondary storage systems represented $7.4 million, or a 39% increase, driven by higher demand in our hyperscale, backup and archive use cases.

Primary storage systems decreased $3.9 million, or 19%, partially driven by our transition to a recurring software subscription licensing model which results in a shift from product to services revenue.

In the three months ended December 31, 2021, product revenue decreased $4.5 million, or 7%, as compared to the same period in 2020.

Primary storage systems decreased $9.9 million, or 42%, primarily as a result of delayed purchase cycles with some government customers in addition to our transition to a recurring software subscription licensing model which results in a shift from product to services revenue.

Secondary storage systems increased $5.3 million, or 21%, driven by higher demand in our hyperscale, backup and archive use cases.

Service revenue

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Standard service contracts may be extended or include enhanced service, such as faster service response times.

Service revenue increased 9% in the three months ended September 30, 2021 compared to the same period in 2020 driven partially by growing sales of our recurring software subscription offerings as well as service revenue associated with newly acquired businesses.

Service revenue increased 6% in the three months ended December 31, 2021 compared to the same period in 2020 driven partially by growing sales of our recurring software subscription offerings as well as service revenue associated with newly acquired businesses.

Royalty revenue

We receive royalties from third parties that license our LTO media patents through our membership in the LTO consortium.

Royalty revenue increased $0.7 million, or 20%, in the three months ended September 30, 2021 compared to the same period in 2020 due to increased market volume of LTO media.

Royalty revenue decreased $0.2 million, or 5%, in the three months ended December 31, 2021 compared to the same period in 2020 due to decreased market volume of older generation LTO media.

Gross Profit and Margin

Three Months Ended September 30,

Three Months Ended December 31,

(dollars in thousands) 2021 Gross

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Product Gross Margin

Product gross margin decreased 640 basis points for the three months ended September 30, 2021, as compared with the same period in 2020.

This decrease was due primarily to a product mix weighted towards lower margin offerings and cost pressures as a result of constraints in the global supply chain.

Product gross margin decreased 840 basis points for the three months ended December 31, 2021, as compared with the same period in 2020.

This decrease was due primarily to recent cost surges in materials across our global supply chain.

We expect these cost increases to continue for the foreseeable future and are taking proactive measures to address the impact these cost increases could have on our business in the future.

Service Gross Margin

Service gross margins decreased 140 basis points for the three months ended September 30, 2021, as compared with the same period in 2020.

Service gross margins decreased 540 basis points for the three months ended December 31, 2021, as compared with the same period in 2020.

This was partially driven by cost pressures as a result of certain constraints in the global supply chain.

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Operating expenses

Three Months Ended September 30,

Three Months Ended December 31,

(dollars in thousands) 2021 % of

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Total operating expenses $ 42,435 44.5 $ 36,186 36.9 $ 6,249 17

In the three months ended September 30, 2021, research and development expense increased $2.2 million, or 21%, as compared with the same period in 2020.

This increase was primarily driven by an increase in personnel costs due to increased headcount focused on new product development.

This increase in headcount includes those employees added through acquisitions over the year.

In the three months ended September 30, 2021, sales and marketing expenses increased $2.3 million, or 18%, as compared with the same period in 2020.

In the three months ended December 31, 2021, research and development expense increased $5.0 million, or 52%, as compared with the same period in 2020.

This increase was primarily driven by an increase in personnel costs due to increased headcount due to acquisitions occurring during the current fiscal year.

In the three months ended December 31, 2021, sales and marketing expenses increased $1.4 million, or 9%, as compared with the same period in 2020.

This increase was driven by increased headcount as we invest in strategic areas to accelerate growth.

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Both marketing expense and travel expense have also increased over the prior year as COVID-19 restrictions ease.

In the three months ended September 30, 2021, general and administrative expenses increased $1.2 million, or 12%, as compared with the same period in 2020.

This increase was due primarily to increased legal and other expenses related to our long-term debt amendments and business acquisition related activities.

In the three months ended September 30, 2021, restructuring expenses decreased $1.6 million, or 99%, as compared with the same period in 2020.

The decrease was the result of one-time workforce reductions in the prior year.

In the three months ended December 31, 2021, general and administrative expenses decreased $0.6 million, or 5%, as compared with the same period in 2020.

This decrease was driven by offsets between reduced IT liabilities and increased intangible amortization from recent acquisitions.

The decrease was also partially driven by reduced facilities expenses as we continue to optimize our physical footprint.

In the three months ended December 31, 2021, restructuring expenses increased $0.4 million, or 188%, as compared with the same period in 2020.

The increase was the result of certain strategic restructuring activities.

Other Income (Expense)

Three Months Ended September 30,

Three Months Ended December 31,

(dollars in thousands) 2021 % of

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Interest expense (2,431) 3 (7,808) 8 5,377 69

Loss on debt extinguishment (4,960) 5 — — (4,960) n/a

The increase in other income (expense), net during the three months ended September 30, 2021 compared with the same period in 2020 was related primarily to fluctuations in foreign currency exchange rates.

In the three months ended September 30, 2021, interest expense decreased $4.5 million, or 59%, as compared with the same period in 2020 due to a lower principal balance and a lower effective interest rate.

Loss on debt extinguishment, net during the three months ended September 30, 2021 was related to prepayment of our Senior Secured Term Loan that occurred during the period offset by the $10.0 million gain on the forgiveness of the Paycheck Protection Program Loan.

Three Months Ended September 30,

The decrease in other income (expense), net during the three months ended December 31, 2021 compared with the same period in 2020 was related primarily to fluctuations in foreign currency exchange rates.

In the three months ended December 31, 2021, interest expense decreased $5.4 million, or 69%, as compared with the same period in 2020 due to a lower principal balance and a lower effective interest rate on our Term Loan.

Three Months Ended December 31,

(dollars in thousands) 2021 % of

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Income tax provision $ 1,254 1 $ 256 1 $ 998 390

The income tax provision for the three months ended September 30, 2021 and 2020 is primarily influenced by foreign and state income taxes.

The income tax provision for the three months ended December 31, 2021 and 2020is primarily influenced by foreign and state income taxes.

Due to our history of net losses in the United States, the protracted period for utilizing tax attributes in certain foreign jurisdictions, and the difficulty in predicting future results, we believe that we cannot rely on projections of future taxable income to realize most of our deferred tax assets.

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Our income tax expense recorded in the future will be reduced to the extent that sufficient positive evidence materializes to support a reversal of, or decrease in, our valuation allowance.

Comparison of the Six Months Ended September 30, 2021 and 2020

Six Months Ended September 30,

Comparison of the Nine Months Ended December 31, 2021 and 2020

Nine Months Ended December 31,

(dollars in thousands) 2021 % of

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Product revenue

In the six months ended September 30, 2021, product revenue increased $16.2 million, or 18%, as compared to the same period in 2020.

In the nine months ended December 31, 2021, product revenue increased $11.8 million, or 8%, as compared to the same period in 2020.

Secondary storage systems represented $22.4 million of the increase, driven primarily by a growing customer base in the hyperscale segment.

Devices and media represented $2.1 million of the increase, driven by higher volume of LTO media sold through our high-volume channel partners.

Primary storage systems decreased $2.8 million driven partially by driven by our transition to a recurring software subscription licensing model which results in a shift from product to services revenue.

Primary storage systems

decreased $12.7 million driven primarily by delayed purchase cycles with some government customers in addition to our transition to a recurring software subscription licensing model which results in a shift from product to services revenue.

Service revenue

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Standard service contracts may be extended or include enhanced service, such as faster service response times.

Service revenue increased $5.3 million, or 9% in the six months ended September 30, 2021 compared to the same period in 2020, driven partially by the increase in recurring software subscription revenue.

Service revenue increased $7.3 million, or 8%, in the nine months ended December 31, 2021 compared to the same period in 2020, driven partially by the increase in recurring software subscription revenue.

Growth is also driven by a higher level of installation and professional services attached to our product sales.

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We receive royalties from third parties that license our LTO media patents through our membership in the LTO consortium.

Royalty revenue increased $1.6 million, or 24%, in the six months ended September 30, 2021 compared to the same period in 2020 due to higher overall market volume .

Royalty revenue increased $1.4 million, or 13%, in the nine months ended December 31, 2021 compared to the same period in 2020 due to higher overall market volume of LTO media.

Gross Profit and Margin

Six Months Ended September 30,

Nine Months Ended December 31,

(dollars in thousands) 2021 Gross

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Product Gross Margin

Product gross margin decreased 260 basis points for the six months ended September 30, 2021, as compared with the same period in 2020.

This decrease was primarily the result of a less favorable product mix to our enterprise customers, as well as cost pressures as a result of constraints in the global supply chain.

Product gross margin decreased 480 basis points for the nine months ended December 31, 2021, as compared with the same period in 2020.

This decrease was due primarily to recent cost surges in materials across our global supply chain.

Service Gross Margin

Service gross margin decreased 80 basis points for the six months ended September 30, 2021, as compared with the same period in 2020.

This decrease was partially due to cost pressures as a result of constraints in the global supply chain.

Service gross margin decreased 230 basis points for the nine months ended December 31, 2021, as compared with the same period in 2020.

This decrease was primarily due to cost pressures as a result of constraints in the global supply chain.

Royalty Gross Margin

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Operating expenses

Six Months Ended September 30,

Nine Months Ended December 31,

(dollars in thousands) 2021 % of

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Total operating expenses $ 119,095 42.9 % $ 105,767 41.1 % $ 13,328 13

In the six months ended September 30, 2021, research and development expense increased $3.3 million, or 16%, as compared with the same period in 2020.

This increase was primarily driven by an increase in personnel costs due to increased headcount focused on new product development.

This increase in headcount includes those employees added through acquisitions over the year.

In the six months ended September 30, 2021, sales and marketing expenses increased $4.7 million, or 19%, as compared with the same period in 2020.

In the nine months ended December 31, 2021, research and development expense increased $8.3 million, or 28%, as compared with the same period in 2020.

This increase was primarily driven by an increase in personnel costs due to increased headcount due to acquisitions occurring during the current fiscal year.

In the nine months ended December 31, 2021, sales and marketing expenses increased $6.1 million, or 15%, as compared with the same period in 2020.

This increase was driven by increased headcount as we invest in strategic areas to accelerate growth.

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Both marketing expense and travel expense have also increased over the prior year as COVID-19 restrictions ease.

In the six months ended September 30, 2021, general and administrative expenses increased $1.5 million, or 7% as compared with the same period in 2020.

In the nine months ended December 31, 2021, general and administrative expenses increased $0.9 million, or 3%, as compared with the same period in 2020.

This increase was due primarily to increased legal and other expenses related to our long-term debt amendments and business acquisition related activities.

In the six months ended September 30, 2021, restructuring expenses decreased $2.4 million, or 90% as compared with the same period in 2020.

In the nine months ended December 31, 2021, restructuring expenses decreased $2.0 million, or 70%, as compared with the same period in 2020.

The decrease was the result of a reduction in workforce to improve operational efficiency and rationalize our cost structure in the prior year.

Other Income (Expense)

Six Months Ended September 30,

Nine Months Ended December 31,

(dollars in thousands) 2021 % of

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Interest expense (9,387) (3) (21,823) (8) 12,436 (57)

Loss on debt extinguishment (4,960) (3) — — (4,960) n/a

The change in other income (expense), net during the six months ended September 30, 2021 and 2020 was related primarily to fluctuations in foreign currency exchange rates.

In the six months ended September 30, 2021, interest expense decreased $7.1 million, or 50%, as compared with the same period in 2020 due primarily to a lower principal balance and a lower effective interest rate on the term debt.

Loss on debt extinguishment, net during the six months ended September 30, 2021 was related to prepayment of our Senior Secured Term Loan that occurred during the period offset by the $10.0 million gain on the forgiveness of the Paycheck Protection Program loan.

Six Months Ended September 30,

Loss on debt extinguishment, net (4,960) (2) — — (4,960) n/a

The change in other income (expense), net during the nine months ended December 31, 2021 and 2020 was related primarily to fluctuations in foreign currency exchange rates.

In the nine months ended December 31, 2021, interest expense decreased $12.4 million, or 57%, as compared with the same period in 2020 due primarily to a lower principal balance and a lower effective interest rate on our Term Loan.

Loss on debt extinguishment, net during the nine months ended December 31, 2021 was related to prepayment of our Senior Secured Term Loan that occurred during the period offset by the $10.0 million gain on the forgiveness of the Paycheck Protection Program loan.

Nine Months Ended December 31,

(dollars in thousands) 2021 % of

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Income tax provision $ 1,678 1 % $ 877 — % $ 801 91 %

The income tax provision for the six months ended September 30, 2021 and 2020 is primarily influenced by foreign and state income taxes.

The income tax provision for the nine months ended December 31, 2021 and 2020 is primarily influenced by foreign and state income taxes.

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LIQUIDITY AND CAPITAL RESOURCES

We had cash and cash equivalents of $22.8 million as of September 30, 2021, which consisted primarily of bank deposits and money market accounts.

We had cash and cash equivalents of $4.0 million as of December 31, 2021, which consisted primarily of bank deposits and money market accounts.

We consider liquidity in terms of the sufficiency of internal and external cash resources to fund our operating, investing and financing activities.

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We believe that these social and economic impacts have had a negative effect on sales due to disruptions in our supply chain and a decline in our customers' ability or willingness to purchase our products and services.

We have also been impacted by significant increases in the procurement cost of certain materials which has negatively impacted our margins.

The extent of the impact will depend, in part, on how long the negative trends in customer demand and supply chain levels will continue.

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Our failure to comply with our debt covenants could materially and adversely affect our financial condition and ability to service our obligations.

As of December 31, 2021, we were in compliance with our debt covenants.

However, we believe the challenges that we have experienced in recent periods with our supply chain, including challenges sourcing components for our products and increased costs, will continue to negatively impact our results of operations and liquidity for the foreseeable future.

As a result, we are working with our lenders to address any potential future covenant compliance issues as well as any potential need for additional liquidity.

We believe this is the prudent course to take at this time to address any potential issues as we attempt to work through and address the temporary headwinds from supply chain.

For additional information about our debt, see the sections entitled “Risk Factors—Risks Related to Our Business Operations” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

On August 5, 2021 (the “Closing Date”), we entered into a senior secured term loan to borrow an aggregate of $100.0 million, (the “Term Loan”).

On August 5, 2021, we entered into a senior secured term loan to borrow an aggregate of $100.0 million, (the “Term Loan”).

A portion of the proceeds were used to repay in full all outstanding borrowings under the Senior Secured Term Loan.

Borrowings under the Term Loan mature on August 5, 2026.

Principal is payable at a rate per annum equal to (a) 2.5% of the original principal balance thereof during the first year following the Closing Date and (b) 5% of the original principal balance thereof thereafter.

Principal is payable at a rate per annum equal to (a) 2.5% of the original principal balance thereof during the first year following the closing date of the Term Loan and (b) 5% of the original principal balance thereof thereafter.

Principal and interest payments are payable on a quarterly basis.

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(b) reduced the principal amount of the revolving commitments to a maximum amount equal to the lesser of:

(i) $30.0 million or (ii) the amount of the borrowing base, as defined in the PNC Credit Facility agreement;(c) replaced existing debt covenants with net leverage ratio, minimum liquidity and fixed charges coverage ratio covenants;

(i) $30.0 million or (ii) the amount of the borrowing base, as defined in the PNC Credit agreement;(c) replaced existing debt covenants with net leverage ratio, minimum liquidity and fixed charges coverage ratio covenants;

and, (d) removed the requirement to maintain a $5.0 million restricted cash reserve with PNC.

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Small Business Administration.

We recorded the amount forgiven as gain on debt extinguishment of $10.0 million in the three and six months ended September 30, 2021.

We recorded the amount forgiven as gain on debt extinguishment of $10.0 million in the nine months ended December 31, 2021.

The following table summarizes our consolidated cash flows for the periods indicated.

Six Months Ended September 30,

Nine Months Ended December 31,

(in thousands) 2021 2020

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Cash Used In Operating Activities

Net cash used in operating activities was $15.3 million for the six months ended September 30, 2021.

This use of cash was primarily attributable to changes in working capital of $14.6 million driven by increases in manufacturing and service part inventories of $7.0 million, a decrease in deferred revenue of $9.0 million and a net changes in other assets and liabilities of $5.8 million.

These were partially offset by cash generated by a $10.0 million decrease in accounts receivables.

Net cash used in operating activities was $26.7 million for the nine months ended December 31, 2021.

This use of cash was primarily attributable to changes in working capital of $24.3 million driven by increases in manufacturing and service part inventories of $13.0 million, a decrease in deferred revenue of $8.6 million and a net change in other assets and liabilities of $12.2 million which includes an increase in prepaid inventory of approximately $5.5 million in order to secure manufacturing materials.

These were partially offset by a decrease in accounts receivable of $7.0 million and a $5.4 million increase in accounts payable.

The decrease in deferred revenue reflects the seasonal nature of service contract renewals.

Net cash used in operating activities was $19.3 million for the six months ended September 30, 2020.

This use of cash was primarily attributable to changes in working capital of $19.1 million driven by the increases in manufacturing and service inventory of $13.2 million and a decrease in deferred revenue of $12.6 million.

These were partially offset by a decrease in accounts receivable of $7.6 million.

Net cash used in operating activities was $20.3 million for the nine months ended December 31, 2020.

This use of cash is primarily attributable to changes in working capital of $24.5 million driven by an increase in manufacturing and service inventory of $12.3 million, a decrease in deferred revenue of $9.7 million, and a decrease in accounts payable of $7.0 million.

The decrease in deferred revenue reflects the seasonal nature of service contract renewals which peak in the fourth fiscal quarter.

Cash Used in Investing Activities

Net cash used in investing activities for the six months ended September 30, 2021 was attributable to cash paid for our acquisition of Pivot3 of $5.0 million and capital expenditures of $2.4 million.

Net cash used in investing activities was $1.4 million in the six months ended September 30, 2020 related to capital expenditures.

Net cash used in investing activities was $11.8 million in the nine months ended December 31, 2021, which was primarily attributable to cash paid for our acquisition of Pivot3 of $5.0 million and capital expenditures of $2.8 million.

Net cash used in investing activities was $7.3 million in the nine months ended December 31, 2020, which included approximately $2.6 million related to the Square Box Systems acquisition and capital expenditures.

Cash Provided by Financing Activities

Net cash provided by financing activities for the six months ended September 30, 2021 was related primarily to borrowings under our credit facility, and proceeds from the new Term Loan offset by the repayment in full of the Senior Secured Term Loan.

Net cash provided by financing activities was $26.9 million in the six months ended September 30, 2020 which included Senior Secured Term Loan borrowings of $19.4 million, $10.0 million in borrowings under the Paycheck Protection Program and the net pay-down of our Amended PNC Credit Facility.

Net cash provided by financing activities was $9.6 million in the nine months ended December 31, 2021, which was related primarily to borrowings under our credit facility, and proceeds from the new Term Loan offset by the repayment in full of the Senior Secured Term Loan.

Net cash provided by financing activities was $32.8 million in the nine months ended December 31, 2020 which included Senior Secured Term Loan borrowings of $19.4 million (net of lender fees of $0.6 million), $10.0 million in borrowings under the Paycheck Protection Program and the net pay-down of our PNC Credit Facility.

Commitments and Contingencies

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We consider certain accounting policies to be critical to understanding our financial statements because the application of these policies requires significant judgment on the part of management, which could have a material impact on our financial statements if actual performance should differ from historical experience or if our assumptions were to change.

Our accounting policies that include estimates that require management’s subjective or complex judgments about the effects of matters that are inherently uncertain are summarized in our most recently filed Annual Report on Form 10-K for the fiscal year ended March 31, 2021 under the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Critical Accounting Policies.” For additional information on our significant accounting policies, see Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Our accounting policies that include estimates that require management’s subjective or complex judgments about the effects of matters that are inherently uncertain are summarized in our most recently filed Annual Report on Form 10-K for the fiscal year ended March 31, 2021 under the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Critical Accounting Estimates and Policies.” For additional information on our significant accounting policies, see Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Recently Issued and Adopted Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis