What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-06-08 compared with 2021-05-26 · 151 added, 122 removed, 257 unchanged (52% of the section changed)

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and income taxes.

Highlights from fiscal year 2021 compared with fiscal year 2020 included:

• We ended fiscal 2021 with $27.4 million in cash and cash equivalents, representing an increase of $21.0 million from the end of fiscal 2020.

Our cash flows used in operating activities during 2021 was $0.8 million, compared to $1.2 million during 2020.

• We completed an equity offering which generated $96.8 million in net proceeds and reduced our total outstanding debt by approximately 50%.

• We fully integrated our Active Scale acquisition to expand our footprint in the object storage space, and completed the acquisition of SBS and their CatDV Media Asset Manager to continue to broaden our solutions and leadership position in video and unstructured data.

• We increased research and development investment 15% as we released several new product lines including StorNext 7, ATFS, and our H-Series platform.

• We began a project to replace and modernize our IT infrastructure and most notably our ERP system which will significantly enhance our operational capabilities and efficiency.

• We hired new leadership with expertise across multiple industries to drive innovation and fuel our next growth phase.

Square Box Systems Acquisition

In December 2020, we expanded our portfolio that classifies, manages, and protects data across its lifecycle by adding technology advancements to further enrich video, digital images and other forms of unstructured data with the acquisition of SBS, a specialist in data cataloging, user collaboration, and digital asset management software.

This acquisition will strengthen our ability to provide software solutions to help companies unlock the business value contained in their data, both on-premises and in the cloud.

Impact of COVID-19 Pandemic

Since the beginning of March 2020, COVID-19 has led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to reduce its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business limitations and closures (subject to exceptions for essential operations and businesses), quarantines and shelter-in-place orders.

Highlights from fiscal year 2022 included:

• We announced a new partnership with Supermicro and our ActiveScale 6.0 software and storage platform, as we expand our Object Storage line of business.

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

• 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

including restrictions on freedom of movement and business operations such as travel bans, border closings, business limitations and closures (subject to exceptions for essential operations and businesses), quarantines and shelter-in-place orders.

These measures may remain in place for a significant period of time.

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.

This was then followed by a gradual stabilization in our business during the second half of fiscal 2021 as customers increasingly adapted to the COVID-19 environment.

Partially offsetting the headwinds from COVID-19 were reduced operating expenses in the areas of travel and marketing costs.

In addition, we effected certain restructuring activities to streamline our operations, such as limited workforce realignments and vacating certain office leases.

We continue to actively monitor the situation 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.

See “The COVID-19 pandemic could adversely affect our business, results of operations and financial condition” in Part II, Item 1A, Risk Factors, of this Annual Report on Form 10-K for more information regarding the risks we face as a result of the COVID-19 pandemic.

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.

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 fourth fiscal quarter our backlog remained above $60 million for the second consecutive quarter, up from $50 million as of September 30, 2021, and $30 million as of June 30, 2021.

Approximately 80% of the ending backlog represented tape products a majority of which is for orders from our hyperscale customers.

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.

See “The recent COVID-19 pandemic could adversely affect our business, results of operations and financial condition” in Item 1A for more information regarding the risks we face as a result of the COVID-19 pandemic.

RESULTS OF OPERATIONS

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Income (loss) from operations (13,840) 8,403 21,204

Other income (expense) (1,312) (261) 2,878

Other expense, net (251) (1,312) (261)

Interest expense (11,888) (27,522) (25,350)

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(in thousands) 2022 % of

revenue 2020 1

revenue 2021 % of

revenue $ Change % Change

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Total product revenue $ 223,761 60 % $ 209,808 60 % $ 13,953 7 %

Service revenue 124,904 36 % 131,050 33 % (6,146) (5) %

Service and subscription revenue 133,689 36 % 124,904 36 % 8,785 7 %

Royalty revenue 15,377 4 % 14,864 4 % 513 3 %

Total revenue $ 372,827 100 % $ 349,576 100 % $ 23,251 7 %

1 Primary and Secondary storage system revenue has been adjusted for fiscal year 2020 due to certain reclassifications from Primary to Secondary storage systems.

Product Revenue

In fiscal 2021, product revenue decreased $41.4 million, or 16%, as compared to fiscal 2020.

Secondary storage systems decreased by 20%, driven by fluctuating purchase cycles with our hyperscale customers.

Primary storage systems decreased 10%, driven by early disruption in the media and entertainment market as COVID-19 significantly decreased major television and film production.

We have since returned much closer to our pre-COVID quarterly run rate in this vertical as we closed out the fiscal year.

Devices and media decreased $11.2 million driven partially by unusually high demand in fiscal 2020 following the resolution of a legal dispute, which had caused a constraint on LTO tape supply between the two principal suppliers in the market.

Service Revenue

Service revenue decreased $6.1 million, or 5%, in fiscal 2021 compared to fiscal 2020.

This decrease was due to reduced support renewals from our legacy backup customers, partially offset by new customer support agreements and installations.

In fiscal 2022, product revenue increased $14.0 million, or 7%, as compared to fiscal 2021.

Secondary storage systems increased by 32%, driven by increased demand from our large hyperscale customers, as well as continued strong demand globally for data protection and archive solutions.

Primary storage systems decreased 20%, driven by large end-of-life purchases in the prior year.

Devices and media decreased $1.1 million driven partially by decreased supply of LTO tape drives.

Service and Subscription Revenue

Service and subscription revenue increased $8.8 million, or 7%, in fiscal 2022 compared to fiscal 2021.

This increase was due in part to acquisitions made during fiscal 2022.

The increase also reflects a shift to subscription-based software licensing.

Royalty Revenue

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

Royalty revenue decreased $5.9 million, or 28%, in fiscal 2021, as compared to fiscal 2020, related to overall declines in market unit volumes as the primary use of tape transitions from backup to archive workflows.

Royalty revenue increased $0.5 million, or 3%, in fiscal 2022, as compared to fiscal 2021, related to shifts in market unit volumes towards more recent technologies such as LTO9 and LTO8.

Gross Profit and Margin

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Product gross profit $ 53,981 24.1 % $ 59,551 28.4 % $ (5,570) (430)

Service gross profit 76,338 61.1 % 80,369 61.3 % (4,031) (20)

Service and subscription gross profit 77,677 58.1 % 76,338 61.1 % 1,339 (300)

Royalty gross profit 15,377 100.0 % 14,864 100.0 % 513 —

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Product Gross Margin

Product gross margin was flat comparing fiscal 2021 to fiscal 2020.

Service Gross Margin

Service gross margin decreased 20 basis points for fiscal 2021, as compared with the same period in 2020.

This decrease was due primarily to reduced service revenues from some of our legacy backup customers, partially offset by a reduction in service costs.

Product gross margin decreased 430 basis points for fiscal 2022, as compared with the same period in 2021.

This decrease was due primarily to an increase in materials cost and freight, as global supply chain constraints disrupted normal procurement channels.

Our product mix was also more heavily weighted to lower margin solutions.

Service and subscription gross margin decreased 300 basis points for fiscal 2022, as compared with the same period in 2021.

This decrease was due primarily to increased costs for freight and repair on replacement parts.

Royalty Gross Margin

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In fiscal 2022, research and development expense increased $10.1 million, or 24%, as compared with fiscal 2021.

This increase was partially attributable to an increase in research and development headcount and professional services cost related to new product development.

Most notably this includes headcount related to business acquisitions and integration of the associated development teams.

In fiscal 2021, sales and marketing expenses decreased $4.6 million, or 8%, as compared with fiscal 2020.

This decrease was driven by a decrease in compensation as the result of lower sales performance and a decrease in marketing programs and professional services costs.

Travel expenses were also significantly reduced during the fiscal year due to restrictions from the COVID-19 pandemic.

In fiscal 2021, general and administrative expenses decreased $12.5 million, or 23%, as compared with fiscal 2020.

This decrease was driven primarily by lower costs related to our prior financial restatement and related activities, which we primarily incurred during fiscal 2019 and fiscal 2020 and decreased facilities expenses as we consolidate our physical footprint.

These decreases were partially offset by increases to software expense as we modernize our existing IT infrastructure.

In fiscal 2021, restructuring expenses increased $2.7 million, or 262%, as compared with fiscal 2020.

This increase was primarily due to footprint and associated headcount reductions that occurred in fiscal 2021, as well as changes in key leadership positions.

Other Income (Expense)

This increase was partially attributable to acquisitions made during fiscal 2022 which broaden our portfolio in the video surveillance and media and entertainment markets.

We have also invested in a partnership with IBM to develop the next generation LTO technology.

In fiscal 2022, sales and marketing expenses increased $8.0 million, or 15%, as compared with fiscal 2021.

This increase was partially driven by acquisitions made during fiscal 2022, expanding us into new markets.

Marketing program spend also increased as in-person events started to occur again after a halt in the previous year.

In fiscal 2022, general and administrative expenses increased $3.3 million, or 8%, as compared with fiscal 2021.

This increase was driven primarily by one-time legal and financial expenses related to acquisitions.

In fiscal 2022, restructuring expenses decreased $2.9 million, or 77%, as compared with fiscal 2021.

This decrease is driven by corporate restructuring activities in the prior year as we consolidated our physical footprint and operations in certain markets.

Other expense, net

Year Ended March 31,

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revenue $ Change % Change

Other income (expense) $ (1,312) 0 % $ (261) 0 % $ 1,051 403 %

Other expense, net $ (251) 0 % $ (1,312) 0 % $ (1,061) (81) %

In fiscal 2022, other expense, net decreased $1.1 million or 81%, compared to fiscal 2021.

The decrease was primarily related to differences in foreign currency gains and losses during each period.

Interest expense

Loss on debt extinguishment (14,789) — % — — % 14,789 100 %

In fiscal 2021, other (income) expense, net increased $1.1 million or 403%, compared to fiscal 2020.

The increase was primarily related to differences in foreign currency gains and losses during each period.

In fiscal 2021, interest expense increased $2.2 million, or 9%, as compared to fiscal 2020.

This increase was primarily due to a higher average principal balance of our outstanding debt.

Year Ended March 31,

(in thousands) 2022 % of

revenue 2021 % of

revenue $ Change % Change

Interest expense (11,888) (3) % (27,522) (8) % (15,634) (57) %

In fiscal 2022, interest expense decreased $15.6 million, or 57%, as compared to fiscal 2021.

This decrease was primarily due to a lower principal balance and a lower effective interest rate on our Term Loan.

Loss on debt extinguishment, net

Year Ended March 31,

(in thousands) 2022 % of

revenue 2021 % of

revenue $ Change % Change

Loss on debt extinguishment, net (4,960) (1) % (14,789) (4) % (9,829) (66) %

In fiscal 2022, loss on debt extinguishment, net 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.

In fiscal 2021, we incurred a loss on debt extinguishment related to our Senior Secured Term Loan.

Income tax provision

Year Ended March 31,

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Our income tax provision is primarily influenced by foreign and state income taxes.

In fiscal 2021, the income tax provision decreased $0.6 million or 70%, compared to fiscal 2020, related primarily to an unfavorable $1.4 million valuation allowance recorded in fiscal 2020 for certain foreign deferred tax assets.

In fiscal 2022, the income tax provision increased $1.1 million or 461%, compared to fiscal 2021, related primarily to higher current foreign taxes as a result of an increase in foreign taxable income.

Due to our history of net losses in the U.S., 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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(in thousands) 2021 % of

revenue 2019 1

revenue 2020 % of

revenue $ Change % Change

Product revenue

Primary storage systems $ 77,152 19 % $ 58,811 15 % $ 18,341 31 %

Secondary storage systems $ 89,000 25 % $ 111,672 28 % $ (22,672) (20) %

Primary storage systems 69,644 20 % 77,152 19 % $ (7,508) (10) %

Devices and media 51,164 15 % 62,344 15 % (11,180) (18) %

Total product revenue $ 209,808 60 % $ 251,168 62 % $ (41,360) (16) %

Service revenue 131,050 33 % 134,696 33 % (3,646) (3) %

Service and subscription revenue 124,904 36 % 131,050 33 % (6,146) (5) %

Royalty revenue 14,864 4 % 20,731 5 % (5,867) (28) %

Total revenue $ 349,576 100 % $ 402,949 100 % $ (53,373) (13) %

1 Primary and Secondary storage system revenue has been adjusted for fiscal years 2019 due to certain reclassifications from Primary to Secondary storage systems.

Product Revenue

In fiscal 2020, product revenue increased $6.5 million, or 3%, as compared to fiscal 2019.

Primary storage systems represented $18.3 million of the increase driven by growth across both our Media & Entertainment and government vertical markets.

Devices and media increased $3.0 million driven by the resolution of a legal dispute, which had caused a constraint on LTO tape supply between the two principal suppliers in the market.

This was offset in part by a $14.9 million decrease in Secondary storage systems due to declines in our legacy enterprise backup business for both branded and OEM products.

Service Revenue

In fiscal 2021, product revenue decreased $41.4 million, or 16%, as compared to fiscal 2020.

Secondary storage systems decreased by 20%, driven by fluctuating purchase cycles with our hyperscale customers.

Primary storage systems decreased 10%, driven by early disruption in the media and entertainment market as COVID-19 significantly decreased major television and film production.

Service and Subscription Revenue

Service revenue decreased $6.1 million, or 5%, in fiscal 2021 compared to fiscal 2020.

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Product gross profit $ 59,551 28.4 % $ 71,408 28.4 % $ (11,857) —

Service gross profit 80,369 61.3 % 79,476 59.0 % 893 230

Service and subscription gross profit 76,338 61.1 % 80,369 61.3 % (4,031) (20)

Royalty gross profit 14,864 100.0 % 20,731 100.0 % (5,867) —

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Product Gross Margin

Product gross margin increased 190 basis points in fiscal 2020, as compared with fiscal 2019.

This increase was due primarily to cost reductions across a wide range of product offerings, and a mix weighted towards more profitable products.

Service Gross Margin

Service gross margin increased 230 basis points for fiscal 2020, as compared with the same period in 2019.

This increase was due primarily to reductions in cost of service.

Product gross margin was flat comparing fiscal 2021 to fiscal 2020.

Service and Subscription Gross Margin

Service and subscription gross margin decreased 20 basis points for fiscal 2021, as compared with the same period in 2020.

This decrease was due primarily to reduced service and subscription revenues from some of our legacy backup customers, partially offset by a reduction in service and subscription costs.

Royalty Gross Margin

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This increase was partially attributable to an increase in research and development headcount and professional services cost related to new product development.

Most notably this includes headcount related to business acquisitions and integration of the associated development teams.

In fiscal 2021, sales and marketing expenses decreased $4.6 million, or 8%, as compared with fiscal 2020.

This decrease was driven by a decrease in compensation and benefits as the result of lower headcount and a decrease in marketing programs and professional services costs.

This decrease was driven by a decrease in compensation as the result of lower sales performance and a decrease in marketing programs and professional services costs.

Travel expenses were also significantly reduced during the fiscal year due to restrictions from the COVID-19 pandemic.

In fiscal 2021, general and administrative expenses decreased $12.5 million, or 23%, as compared with fiscal 2020.

This decrease was driven primarily by lower costs related to our prior financial restatement and related activities, which we primarily incurred in fiscal 2019 compared to fiscal 2020, lower software expenses as we streamline our processes and tools throughout the company, decreased facilities expenses as we consolidate our physical footprint, and decreased bank fees.

These decreases were partially offset by increases to stock compensation expense.

In fiscal 2020, restructuring expenses decreased $4.5 million, or 82%, as compared with fiscal 2019.

This decrease was primarily due to the higher level of headcount reductions that occurred during fiscal 2019.

Other Income (Expense)

These decreases were partially offset by increases to software expense as we modernize our existing IT infrastructure.

In fiscal 2021, restructuring expenses increased $2.7 million, or 262%, as compared with fiscal 2020.

This increase was primarily due to footprint and associated headcount reductions that occurred in fiscal 2021, as well as changes in key leadership positions.

Other expense, net

Year Ended March 31,

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revenue $ Change % Change

Other income (expense) $ (261) 0 % $ 2,878 1 % 3,139 (109) %

Other expense $ (1,312) 0 % $ (261) 0 % $ 1,051 403 %

Interest expense (27,522) (8) % (25,350) (6) % 2,172 9 %

Loss on debt extinguishment — — % (17,458) (4) % (17,458) 100 %

In fiscal 2020, other income (expense), net increased $3.1 million or 109%, compared to fiscal 2019.

The increase was primarily related to a gain on the disposal of an investment that occurred in fiscal 2019, and differences in foreign currency gains and losses during each period.

Loss on debt extinguishment, net (14,789) (4) % — — % 14,789 100 %

In fiscal 2021, other expense, net increased $1.1 million or 403%, compared to fiscal 2020.

The increase was primarily related to differences in foreign currency gains and losses during each period.

Interest expense

Year Ended March 31,

(in thousands) 2021 % of

revenue 2020 % of

revenue $ Change % Change

Interest expense (27,522) (8) % (25,350) (6) % 2,172 9 %

In fiscal 2021, interest expense increased $2.2 million, or 9%, as compared to fiscal 2020.

This increase was primarily due to a higher average principal balance of our outstanding debt.

In fiscal 2019, we incurred a loss on debt extinguishment related to our Term Loan.

Loss on debt extinguishment, net

Year Ended March 31,

(in thousands) 2021 % of

revenue 2020 % of

revenue $ Change % Change

Loss on debt extinguishment, net (14,789) (4) % — — % 14,789 100 %

In fiscal 2021, we incurred a loss on debt extinguishment related to our Senior Secured Term Loan.

Income tax provision

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Our income tax provision is primarily influenced by foreign and state income taxes.

In fiscal 2020, the income tax provision decreased $1.6 million or 66%, compared to fiscal 2019, related primarily to an income tax benefit of $0.6 million recorded in fiscal 2021 for foreign currency related gains recognized in other comprehensive income.

In fiscal 2021, the income tax provision decreased $0.6 million or 70%, compared to fiscal 2020, related primarily to a valuation allowance recorded in fiscal 2020 for certain foreign deferred tax assets.

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and the global economy.

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

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

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

We have also experienced negative impacts on sales due to global supply chain constraints which has resulted in a significant increase in our sales backlog compared to our historical levels.

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

We expect the impact of COVID-19 to continue to have a significant impact on our liquidity and capital resources.

We had cash and cash equivalents of $5.2 million as of March 31, 2022, compared to $27.4 million as of March 31, 2021.

These amounts exclude, as of both dates, $5.0 million in restricted cash that we are required to maintain under our Amended PNC Credit Agreement and $0.7 million and $0.8 million of short-term restricted cash, respectively.

As of March 31, 2021 we had $32.7 million available to borrow under the Amended PNC Credit Agreement.

We believe that our existing sources of liquidity including the Amended PNC Credit Facility will be sufficient to fund our cash flow requirements for at least the next 12 months.

We may need or decide to seek additional funding through equity or debt financings but cannot guarantee that additional funds would be available on terms acceptable to us, if at all.

We believe we were in compliance with all covenants under the Credit Agreements as of the date of filing of this Annual Report on Form 10-K.

These amounts exclude $0.0 and $5.0 million in long-term restricted cash that we were required to maintain under our PNC Credit Facility, and $0.3 million and $0.7 million of short-term restricted cash as of March 31, 2022 and March 31, 2021, respectively.

As of March 31, 2022 we had $5.0 million available to borrow under the PNC Credit Agreement.

We generated negative cash flows from operations of approximately $33.7 million, $0.8 million and $1.2 million for the fiscal years ended March 31, 2022, 2021 and 2020, respectively, and generated net losses of approximately

$32.3 million, $35.5 million, and $5.2 million for the fiscal years ended March 31, 2022, 2021 and 2020, respectively.

We have funded operations through the sale of common stock, term debt borrowings, revolving credit facility borrowings and proceeds from the Paycheck Protection Program Loan described in Note 5:

Management believes that it has the ability to obtain additional debt or equity financing, if required, and has historically been able to do so.

Management also believes that current working capital, borrowings available under the revolving credit facility and future equity financing (including the April 22, 2022 sale of 30 million shares of our common stock for gross proceeds of $67.5 million) or debt financing will provide the Company with sufficient capital to fund operations for at least one year from the financial statement issuance date.

There is no assurance that we would be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to us.

Our outstanding long-term debt amounted to $107.2 million as of March 31, 2022, net of $4.9 million in unamortized debt issuance costs and $4.4 million in current portion of long-term debt, and $90.9 million as of March 31, 2021 net of $9.7 million in unamortized debt issuance costs and $1.9 million in current portion of long-term debt.

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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.

See "Risks Related to our Indebtedness" section of Item 1A Risk Factors.

On March 15, 2022, we received waivers of our financial covenants under our term debt and PNC Credit Facility.

We believe we were in compliance with all covenants under our debt agreements as of the date of filing of this Annual Report on Form 10-K.

See "Risks Related to our Indebtedness" section of Item 1A.

Risk Factors.

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

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Net Cash Used in Operating Activities

Net cash used in operating activities was $0.8 million for the year ended March 31, 2021, primarily attributable to greater net loss, offset in part by a $10.1 million non-cash adjustment pertaining to the debt refinancing.

Net cash used in operating activities was $1.2 million for the year ended March 31, 2020, primarily attributable $20.9 million of changes in assets and liabilities due primarily to lower deferred revenue and manufacturing inventories, offset in part by certain non-cash items.

Net cash used in operating activities was $16.9 million in fiscal 2019, mainly reflecting changes in working capital accounts including inventories and accounts payable.

Net Cash Provided by (Used in) Investing Activities

Net cash used in investing activities was $9.6 million for the year ended March 31, 2021, primarily attributable to $6.9 million of capital expenditures and $2.7 million for the acquisition of SBS.

Net cash used in investing activities was $4.6 million for the year ended March 31, 2020, primarily attributable to $2.6 million of capital expenditures and $2.0 million for the purchase of the ActiveScale business.

Net cash provided by investing activities was $0.2 million in fiscal 2019, reflecting investment income of $2.9 million related to an investment in an equity fund that was liquidated during the period, which more than offset $2.7 million in capital expenditures.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities was $31.3 million for the year ended March 31, 2021 due primarily to a secondary equity offering which generated net proceeds of $96.8 million, 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, offset in part by the prepayment of $92.3 million of our Senior Secured Term Loan.

Net cash provided by (used in) financing activities was $1.2 million and $16.2 million for the years ended March 31, 2020 and 2019, respectively.

Net cash provided by financing activities during the year ended March 31, 2020 related primarily to net borrowings under the Amended PNC Credit Facility.

Activity during the year ended March 31, 2019 related primarily to our debt refinancing activities.

Net cash used in operating activities was $33.7 million for the year ended March 31, 2022, primarily attributable to $30.5 million of changes in assets and liabilities due primarily to working capital requirements due to higher inventories and prepaid expenses.

Net cash used in operating activities was $0.8 million for the year ended March 31, 2021, primarily attributable to cash provided by operating activities excluding changes in assets and liabilities of $3.6 million offset by working capital changes.

Net cash used in operating activities was $1.2 million for the year ended March 31, 2020, primarily attributable $20.9 million of changes in assets and liabilities due primarily to lower deferred revenue and an increase in manufacturing inventories offset by cash provided by operating activities excluding changes in assets and liabilities.

Net Cash Used in Investing Activities

Net cash used in investing activities was $14.1 million for the year ended March 31, 2022, primarily attributable to $7.8 million of business acquisitions and $6.3 million of capital expenditures.

Net cash used in investing activities was $9.6 million for the year ended March 31, 2021, primarily attributable to $6.9 million of capital expenditures and $2.7 million for a business acquisition.

Net cash used in investing activities was $4.6 million for the year ended March 31, 2020, primarily attributable to $2.6 million of capital expenditures and $2.0 million for a business acquisition.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $20.2 million for the year ended March 31, 2022 due primarily to $17.7 million of borrowings under PNC Credit Facility.

Net cash provided by financing activities was $31.3 million for the year ended March 31, 2021 due primarily to a secondary equity offering which generated net proceeds of $96.8 million, 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, offset in part by the prepayment of $92.3 million of our term debt.

Net cash provided by financing activities was $1.2 million for the year ended March 31, 2020 related primarily to net borrowings under the Amended PNC Credit Facility offset by principal repayments on our term debt.

Commitments and Contingencies

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Historically, payments made by us under these agreements have not had a material impact on our operating results, financial position or cash flows.

We are also subject to ordinary course of business litigation, See Note 11, Commitments and Contingencies , to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

We are also subject to ordinary course of business litigation, See Note 10:

Commitments and Contingencies , to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Contractual Obligations

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(in thousands) Total 1 year or less 1 – 3 Years 3 –5 Years More than

Long-term debt (1)

$ 92,426 $ 1,850 $ 90,576 $ — $ —

Interest on long-term debt (2)

Debt obligations (1)

$ 149,186 $ 12,355 $ 24,972 $ 111,859 $ —

Operating leases (3)

Future lease commitments (2)

24,137 2,638 4,141 2,902 14,456

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Total $ 237,924 $ 79,594 $ 29,113 $ 114,761 $ 14,456

(1) Represents nominal principal amount of debt outstanding under the Senior Secured Term Loan as of March 31, 2021.

Debt , to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

(2) Estimated interest payment obligations have been calculated for all periods assuming an interest rate of 12.0%, which was the rate applicable to outstanding amounts under the Senior Secured Term Loan as of March 31, 2021.

(3) Operating leases include leases of certain facilities under non-cancelable lease agreements and equipment leases for various types of office equipment.

Some of the leases have renewal options ranging from one to ten years and others contain escalation clauses.

(4) Includes primarily contractual commitments to purchase inventory from contract manufacturers and other suppliers.

Debt , to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

(1) Consists of (i) principal and interest payments on our term loan based on the amount outstanding and interest rates in effect at March 31, 2022, and (ii) principal, interest, and unused commitment fees on our PNC Credit Facility based on the amount outstanding and rates in effect at March 31, 2022.

(2) Represents aggregate future minimum lease payments under non-cancelable operating leases.

(3) Includes primarily non-cancelable inventory purchase commitments.

Off-Balance Sheet Arrangements

10 unchanged sentences

Our revenue is derived from three main sources:

(1) Products, (2) Professional services and (3) Royalties.

(a) products, (b) service and subscription, and (c) royalties.

Our performance obligations are satisfied at a point in time or over time as stand ready obligations.

The majority of our revenue is recognized at a point in time when products are accepted, installed or delivered.

Product revenue is recognized at the point in time when the customer takes control of the product, which typically occurs at the point of shipment.

Professional services revenue primarily consists of installation, consulting and training and hardware and software support.

Installation services are typically completed within a short period of time and revenue from these services is recognized upon completion, while revenue from support plans is recognized ratably over the contractual term of the service contract.

Service and subscription revenue consists of customer support agreements, software subscriptions, installation, and consulting & training.

Our software subscriptions include term licenses which are recognized as revenue when the license has been delivered to the customer and related customer support which is recognized ratably over the service period.

Revenue from customer support agreements is recognized ratably over the contractual term of the agreement.

Installation services are typically completed within a short period of time and revenue from these services are recognized at the point when installation is complete.

A majority of the Company's consulting and training revenue does not take significant time to complete therefore these obligations are satisfied upon completion of such services at a point in time.

We license certain products under royalty arrangements, pursuant to which our licensees periodically provide us with reports containing units sold to end users subject to the royalties.

11 unchanged sentences

We initially measure a returned asset at the carrying amount of the inventory, less any expected costs to recover the goods including potential decreases in value of the returned goods.

Deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and tax bases of assets and liabilities, measured at the enacted tax rates expected to apply to taxable income in the

years in which those tax assets or liabilities are expected to be realized or settled.

Based on the evaluation of available evidence, both positive and negative, we recognize future tax benefits, such as net operating loss carryforwards and tax credit carryforwards, to the extent that realizing these benefits is considered to be more likely than not.

8 unchanged sentences

Our manufacturing inventory is recorded at the lower of cost or net realizable value, with cost being determined on a first-in, first-out (“FIFO”) basis.

Costs include material, direct labor, and an allocation of overhead in the case of work in process.

Costs include material, direct labor, and an allocation of overhead.

Adjustments to reduce the cost of manufacturing inventory to its net realizable value, if required, are made for estimated excess, obsolete or impaired balances.

18 unchanged sentences

For recently issued and adopted accounting pronouncements, see Note 1:

Business Description and Significant Accounting Policies , to our consolidated financial statements.

Description of Business and Significant Accounting Policies , to our consolidated financial statements.

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-K

Item 7. Management’s Discussion and Analysis