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Item 7. Management’s Discussion and Analysis

2025-08-26 compared with 2024-06-28 · 112 added, 426 removed, 333 unchanged (62% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion gives effects to the restatement of our consolidated financial statements for the fiscal years ended March 31, 2023 and 2022, discussed in Note 14 to the consolidated financial statements of this Annual Report.

and should be read together with our consolidated financial statements, the accompanying notes, and other information included in this Annual Report.

In particular, the risk factors contained in Item 1A may reflect trends, demands, commitments, events, or uncertainties that could materially impact our results of operations and liquidity and capital resources.

Our fiscal year ends on March 31 of each calendar year.

"Fiscal 2024" in this Annual Report refers to the fiscal year ended March 31, 2024.

The following discussion contains forward-looking statements, such as statements regarding anticipated impacts on our business, our future operating results and financial position, our business strategy and plans, our market growth and trends, and our objectives for future operations.

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

Investors should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in the section titled “Risk Factors” and in other parts of this Annual Report on Form 10-K.

See also the section titled “Note Regarding Forward-Looking Statements” in this report.

The following discussion of our financial condition and results of operations covers fiscal 2025 and fiscal 2024 items and year-over-year comparisons between fiscal 2025 and fiscal 2024.

Discussions of fiscal 2023 items and year-over-year comparisons between fiscal 2024 and 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, that was filed with the SEC on June 28, 2024.

Overview and Highlights

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and income taxes.

The accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations gives effect to the restatement adjustments made to the previously reported consolidated financial statements for the fiscal years ended March 31, 2022 and March 31, 2023.

For additional information and a detailed discussion of the restatement, see Note 14:

Restatement of Previously Issued Financial Statements in the Notes to our consolidated financial statements included in this Annual Report under the caption Item 8.

Financial Statements and Supplementary Data .

Restatement adjustments have also been made to the previously reported consolidated financial statements for the quarterly periods ended June 30, 2022 and June 30, 2023 as well as the quarters ended September 30, 2022 and December 31, 2022.

For additional information related to the quarterly restatement, see Note 14:

Quarterly Financial Summary (Unaudited) in the Notes to our consolidated financial statements included in this Annual Report on Form 10-K under the caption Item 8.

Restatement of Unaudited Quarterly Financial Statements in the Notes to our consolidated financial statements included in this Annual Report on Form 10-K under the caption Item 8.

Financial Statements and Supplementary Data.

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(in thousands) 2025 2024

Restated Restated

Total revenue $ 274,058 $ 311,600

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Sales and marketing (1)

52,320 60,893

General and administrative (1)

63,961 51,547

Research and development (1)

31,141 38,046

Restructuring charges 4,090 3,280

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Loss from operations (41,680) (28,877)

Other income (expense), net (1,746) 1,956 (251)

Other expense, net (710) (1,746)

Interest expense (23,607) (15,089)

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Total $ 2,828 $ 4,721

Comparison of the Years Ended March 31, 2024 and 2023 (restated)

Comparison of the Years Ended March 31, 2025 and 2024

Year Ended March 31,

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In fiscal 2025, product revenue decreased $20.7 million, or 12%, as compared to fiscal 2024.

The primary driver of the decrease was a $62.5 million decrease in demand from our large hyperscale customers, as well as more general decreases in the overall tape market with declines in media and devices revenue.

The primary driver of the decrease was a drop in demand from our large hyperscale customers in the first quarter of the prior year, as well as more general decreases in the overall tape market.

Outside of the Tape and Hyperscale business, our remaining Secondary and Primary storage systems are also offered as a subscription.

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Product Gross Margin

Product gross margin increased 210 basis points for fiscal 2024, as compared to fiscal 2023.

This increase was due primarily to a $9.8 million inventory provision recorded during fiscal 2023.

Due to longer purchasing lead times and other factors caused by the global supply chain disruptions occurring since the beginning of the COVID-19 pandemic, certain inventory had become obsolete due to next generation products being released and legacy products being discontinued.

In addition, following our integration of several past acquisitions, certain legacy products were discontinued and replaced with updated product offerings rendering the related inventory obsolete.

We do not believe that the magnitude of this inventory provision is indicative of our ongoing operations and was not repeated in fiscal 2024.

The other primary driver of product gross margin improvement in fiscal 2024 was a revenue mix less weighted towards hyperscalers, media, and devices.

These revenue lines typically carry a lower gross margin than sales of our other secondary and primary storage products.

Product gross margin decreased 30 basis points for fiscal 2025, as compared to fiscal 2024.

This decrease was due primarily to a revenue mix less weighted towards higher margin tape products.

Service and Subscription Gross Margin

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This increase was due primarily to improved operational costs as we implemented strict cost controls and improved our organization design.

It was also partially driven by service parts inventory write downs in fiscal 2023, caused by the transition of certain service logistics activities to a third party provider

Royalty Gross Margin

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In fiscal 2025, sales and marketing expenses decreased $8.6 million, or 14%, as compared with fiscal 2024.

This decrease was primarily driven by decreased commission expense on lower revenue.

In fiscal 2024, general and administrative expenses increased $3.8 million, or 8%, as compared with fiscal 2023 This increase was primarily driven by large non-recurring costs related to our re-evaluation of Topic 606, and other related projects.

This decrease was primarily driven by an increase in operational cost management, as well as decreased commission expense on lower revenue.

In fiscal 2025, general and administrative expenses increased $12.4 million, or 24%, as compared with fiscal 2024 This increase was primarily driven by large non-recurring costs related to our re-evaluation of Topic 606, and other non-recurring projects.

In fiscal 2025, research and development expenses decreased $6.9 million, or 18%, as compared with fiscal 2024.

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Other income (expense), net $ (710) 0 % $ (1,746) (1) % $ (1,036) (59) %

In fiscal 2024, other income (expense), net decrease of $3.7 million or 189%, compared to fiscal 2023.

The decrease was primarily related to differences in foreign currency gains and losses during each period, as well as the non-recurring sale of $2.3 million IP licenses in fiscal 2023.

In fiscal 2025, other income (expense) resulted in a net decrease of $1.0 million or 59%, compared to fiscal 2024.

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

Interest expense

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Change in fair value of warrant liabilities $ (45,270) (17) % $ 5,137 2 % $ (50,407) (981) %

In fiscal 2024, the fair value of warrant liabilities decreased $5.1 million, or 50%, as compared to fiscal 2023.

The decrease was primarily due to a lower average stock price in fiscal 2024.

Loss on debt extinguishment, net

Year Ended March 31,

(in thousands) 2024 % of

revenue 2023 % of

revenue $ Change % Change

Loss on debt extinguishment, net $ — — % $ (1,392) — % $ 1,392 100 %

In fiscal 2023, loss on debt extinguishment, net was related to prepayment of our long-term debt.

Income tax provision

Year Ended March 31,

(in thousands) 2024 % of

revenue 2023 % of

revenue $ Change % Change

Income tax provision $ 711 — % $ 1,940 1 % $ 1,229 63 %

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

In fiscal 2024, the income tax provision decreased $1.2 million or 63%, compared to fiscal 2023, related primarily to lower current foreign taxes as a result of a decrease 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.

Accordingly, we have established a full valuation allowance against our U.S.

and certain foreign net deferred tax assets.

Significant management judgment is required in assessing our ability to realize any future benefit from our net deferred tax assets.

We intend to maintain this valuation allowance until sufficient positive evidence exists to support its reversal.

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 Years Ended March 31, 2023 and 2022

Year Ended March 31,

(in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Restated Restated

Product revenue $ 274,854 65 % $ 230,814 60 % $ 44,040 19 %

Service and subscription revenue 133,518 32 % 137,241 36 % (3,723) (3) %

Royalty revenue 13,705 3 % 15,377 4 % (1,672) (11) %

Total revenue $ 422,077 100 % $ 383,432 100 % $ 38,645 10 %

Product Revenue

In fiscal 2023, product revenue increased $44.0 million, or 19%, as compared to fiscal 2022.

The primary driver of the increase was demand from our large hyperscale customers, as well as continued strong demand globally for data protection and archive solutions.

Outside of the Tape and Hyperscale business, our remaining Secondary and Primary storage systems are also offered as a subscription.

We anticipate the product revenue portion of our Primary and Secondary storage systems to decrease as we continue to transition to subscription-based offerings.

The devices and media also decreased partially driven by lower volume of linear-tape open media sales.

Service and Subscription Revenue

Service and subscription revenue decreased $3.7 million, or 3%, in fiscal 2023 compared to fiscal 2022.

This decrease was due in part to certain long-lived products reaching their end-of-service-life, partially offset by new support bookings and the transition towards subscription-based licensing.

Royalty Revenue

We receive royalties from third parties that license our linear-tape open media patents through our membership in the linear-tape open consortium.

Royalty revenue decreased $1.7 million, or 11%, in fiscal 2023, as compared to fiscal 2022, related to lower overall unit shipments.

Gross Profit and Margin

Year Ended March 31,

(in thousands) 2023 Gross

margin % 2022 Gross

margin % $ Change Basis point change

Restated Restated

Product gross profit $ 54,823 19.9 % $ 61,034 26.4 % $ (6,211) (650)

Service and subscription gross profit 74,736 56.0 % 81,229 59.2 % (6,493) (320)

Royalty gross profit 13,705 100.0 % 15,377 100.0 % (1,672) —

Gross profit $ 143,264 33.9 % $ 157,640 41.1 % $ (14,376) (720)

Gross profit and margin percentages are key metrics that management monitors to assess the performance on the business.

Product Gross Margin

Product gross margin decreased 650 basis points for fiscal 2023, as compared to fiscal 2022.

This decrease was due primarily to a $9.8 million inventory provision recorded during fiscal 2023.

Due to longer purchasing lead times and other factors caused by the global supply chain disruptions occurring since the beginning of the COVID-19 pandemic, certain inventory has become obsolete due to next generation products being released and legacy products being discontinued.

In addition, following our integration of several past acquisitions, certain legacy products were discontinued and replaced with updated product offerings rendering the related inventory obsolete.

We do not believe that the magnitude of this inventory provision is indicative of our ongoing operations and is not expected to be repeated in the near term.

Excluding this non-recurring adjustment, product gross margin declined approximately 370 basis points for fiscal 2023, as compared to fiscal 2022 primarily due to the continuation of pricing pressure on 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

Service and subscription gross margin decreased 320 basis points for fiscal 2023, as compared to fiscal 2022.

This decrease was due partially to increased costs for freight and repair on replacement parts in addition to additional inventory write downs required for service parts caused by the transition of certain service logistics activities to a third party provider.

Royalty Gross Margin

Royalties do not have significant related cost of sales.

Operating expenses

Year Ended March 31,

(in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Restated Restated

Sales and marketing $ 66,034 16 % $ 62,957 16 % $ 3,077 5 %

General and administrative 47,752 11 % 45,256 12 % 2,496 6 %

Research and development 44,555 11 % 51,812 14 % (7,257) (14) %

Restructuring charges 1,605 — % 850 — % 755 89 %

Total operating expenses $ 159,946 38 % $ 160,875 42 % $ (929) (1) %

In fiscal 2023, sales and marketing expenses increased $3.1 million, or 5%, as compared with fiscal 2022.

This increase was partially driven by increased investment in sales resources in key strategic markets, as well as the resumption of large trade shows and other events that are a key driver of our marketing activities.

In fiscal 2023, general and administrative expenses increased $2.5 million, or 6%, as compared with fiscal 2022.

This increase was driven primarily by transition costs as we complete large projects in our IT and facilities infrastructure.

In fiscal 2023, research and development expense decreased $7.3 million, or 14%, as compared with fiscal 2022.

This decrease was the result of one-time acquisition-related costs that occurred in the prior year, as well as the overall consolidation of those acquisitions.

In fiscal 2023, restructuring expenses increased $0.8 million, or 89%, as compared with fiscal 2022.

This increase is driven by corporate restructuring activities as we consolidated our physical footprint and operations in certain markets.

Other expense, net

Year Ended March 31,

(in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Restated Restated

Other income (expense), net $ 1,956 1 % $ (251) 0 % $ 2,207 879 %

In fiscal 2023, other income (expense), net increased $2.2 million or 879%, compared to fiscal 2022.

The increase was primarily related to differences in foreign currency gains and losses during each period, as well as the sale of IP licenses.

Interest expense

Year Ended March 31,

(in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Restated Restated

Interest expense $ 10,560 3 % $ 11,888 3 % $ (1,328) (11) %

In fiscal 2023, interest expense decreased $1.3 million, or 11%, as compared to fiscal 2022.

This decrease was primarily due to a lower principal balance on our Term Loan.

Warrant liabilities

Year Ended March 31,

(in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Restated Restated

Change in fair value of warrant liabilities $ 10,250 2 % $ 60,030 16 % $ (49,780) (83) %

In fiscal 2023, the fair value of warrant liabilities decreased $49.8 million, or 83%, as compared to fiscal 2022.

This decrease was primarily due to a lower average stock price in fiscal 2023.

In fiscal 2025, we recorded a non-cash loss of $45.3 million related to the change in fair value of our warrant liabilities, compared to a non-cash gain of $5.1 million in the same period in fiscal 2024.

This change was primarily driven by fluctuations in our stock price.

Loss on debt extinguishment, net

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revenue $ Change % Change

Restated Restated

Loss on debt extinguishment, net $ (3,003) (1) % $ — — % $ (3,003) (100) %

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revenue $ Change % Change

Restated Restated

Income tax provision $ 821 — % $ 711 0 % $ (110) (15) %

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

In fiscal 2023, the income tax provision increased $0.6 million or 45%, compared to fiscal 2022, related primarily to higher current foreign taxes as a result of an increase in foreign taxable income.

In fiscal 2025, the income tax provision increased $110 thousands or 15%, compared to fiscal 2024.

The income tax provision increased in 2025 primarily due to a higher valuation allowance and a warrant mark-to-market adjustment, which together offset the federal statutory tax benefit from pre-tax losses.

Additionally, the expiration of tax attributes contributed to the increase, as previously available deferred tax assets could no longer be used.

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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 Three Months Ended December 31, 2023 and 2022

Comparison of the Three Months Ended December 31, 2024 (Restated) and 2023

Three Months Ended December 31,

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Product Revenue

In the three months ended December 31, 2023, product revenue decreased $40.4 million, or 52%, as compared to the same period in 2022.

The primary driver of the decrease was lower demand from our large hyperscale customers, as well as declines in the linear-tape open media market impacting both media cartridge sales and associated linear-tape open royalties.

Service Revenue

Service and subscription revenue decreased $0.4 million, or 1%, in the three months ended December 31, 2023 compared to the same period in 2022.

This decrease was due in part to certain long-lived products reaching their end-of-service-life, partially offset by new support bookings and the transition towards subscription-based licensing.

In the three months ended December 31, 2024, product revenue increased $1.5 million, or 4%, as compared to the same period in fiscal 2024.

The primary driver of the increase was in Primary storage systems with higher sales of our StorNext based solutions.

Service and Subscription Revenue

Service and subscription revenue decreased $5.0 million, or 15%, in the three months ended December 31, 2024 compared to the same period in fiscal 2024.

This decrease was due to certain long-lived products reaching their end-of-service-life.

Royalty Revenue

We receive royalties from third parties that license our linear-tape open media patents through our membership in the linear-tape open consortium.

Royalty revenue decreased $0.8 million, or 28%, in the three months ended December 31, 2023 compared to the same period in 2022 due to decreased market volume of older generation linear-tape open media.

Royalty revenue saw a small increase of $0.3 million, or 14%, in the three months ended December 31, 2024 compared to the same period in fiscal 2024 due to product mix.

Gross Profit and Margin

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Product Gross Margin

Product gross margin decreased to 19.0%, or by 550 basis points, for the three months ended December 31, 2023, as compared with the same period in 2022.

Product gross margin increased by $0.6 million, or by 100 basis points, for the three months ended December 31, 2024, as compared with the same period in fiscal 2024.

This increase was primarily due to a more favorable mix of revenues, weighted towards our higher margin product lines, as well as improvements in our operational efficiency and logistics costs.

Service and Subscription Gross Margin

Service and subscription gross margins decreased 150 basis points for the three months ended December 31, 2023, as compared with the same period in 2022.

This decrease was primarily driven by lower service revenues on a similar service cost basis.

Service and subscription gross margins increased 320 basis points for the three months ended December 31, 2024, as compared with the same period in fiscal 2024.

This increase was primarily driven by improvements in our operations efficiency.

Royalty Gross Margin

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Three Months Ended December 31,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

(dollars in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change

Sales and marketing $ 12,448 18 % $ 14,244 20 % $ (1,796) (13) %

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Total operating expenses $ 35,615 52 % $ 35,397 49 % $ 218 1 %

In the three months ended December 31, 2023, sales and marketing expenses decreased $2.1 million, or 13%, as compared with the same period in 2022.

This decrease was primarily driven by the pivot of existing sales and marketing investment towards high-growth markets.

In the three months ended December 31, 2023, general and administrative expenses increased $0.9 million, or 8%, as compared with the same period in 2022.

This increase was largely driven by higher project expense related to the re-evaluation of the Company's application of standalone selling price under Topic 606.

In the three months ended December 31, 2023, research and development expenses decreased $2.5 million, or 22%, as compared with the same period in 2022.

This decrease was primarily driven by cost reduction measures to streamline common development functions across business units, and further consolidate acquired businesses.

In the three months ended December 31, 2023, restructuring expenses increased $0.5 million as compared with the same period in 2022.

The increase was the result of cost reduction initiatives.

In the three months ended December 31, 2024, sales and marketing expenses decreased $1.8 million, or 13%, as compared with the same period in fiscal 2024.

This decrease was primarily driven by improved operational efficiency and increased leverage of our channel.

In the three months ended December 31, 2024, general and administrative expenses increased $2.2 million, or 19%, as compared with the same period in fiscal 2024 This increase was primarily driven by higher expense in compliance focused outside services related to ongoing projects.

In the three months ended December 31, 2024, research and development expenses decreased $1.1 million, or 12%, as compared with the same period in fiscal 2024 This decrease was the result of the continued consolidation of acquisition costs, and efficiencies realized through improved organization design.

In the three months ended December 31, 2024, restructuring expenses increased $0.8 million, or 170% as compared with the same period in fiscal 2024 The increase was the result of cost reduction initiatives in the current year.

Other Income (Expense)

Three Months Ended December 31,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

(dollars in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change

Other income (expense) $ 967 1 % $ (1,419) (2) % $ 2,386 168 %

The change in other income (expense), net during the three months ended December 31, 2023 compared with the same period in 2022 was related primarily to fluctuations in foreign currency exchange rates during the three months ended December 31, 2023.

The change in other income (expense), net during the three months ended December 31, 2024 compared with the same period in fiscal 2024 was related primarily to fluctuations in foreign currency exchange rates during the three months ended December 31, 2024.

Interest Expense

Three Months Ended December 31,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

(dollars in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change

Interest expense $ (6,840) (10) % $ (3,937) (5) % $ (2,903) 74 %

In the three months ended December 31, 2023, interest expense increased $1.2 million, or 46%, as compared with the same period in 2022 due to a higher effective interest rate on our Term Loan.

Loss on Debt Extinguishment

There were no debt extinguishments in the three months ended December 31, 2023 and 2022.

In the three months ended December 31, 2024, interest expense increased $2.9 million, or 74%, as compared with the same period in fiscal 2024 due to a higher effective interest rate on our Term Loan.

Warrant liabilities

Three Months Ended December 31,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

(dollars in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change

Change in fair value of warrant liabilities $ (61,630) (90) % $ 4,402 6 % $ (66,032) (1,500) %

In December 31, 2024, we recorded a non-cash loss of $61.6 million related to the change in fair value of our warrant liabilities, compared to a non-cash gain of $4.4 million in the same period in fiscal 2024.

This change was primarily driven by fluctuations in our stock price.

Three Months Ended December 31,

(dollars in thousands) 2024 % of pretax income 2023 % of pretax income $ Change % Change

Income tax provision $ 70 — % $ 510 (5) % $ (440) (86) %

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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 Nine Months Ended December 31, 2023 and 2022

Comparison of the Nine Months Ended December 31, 2024 (Restated) and 2023

Nine Months Ended December 31,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

(dollars in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change

Product revenue $ 120,565 56 % $ 138,635 58 % $ (18,070) (13) %

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Product Revenue

In the nine months ended December 31, 2023, product revenue decreased $64.6 million, or 32%, as compared to the same period in 2022.

Service Revenue

In the nine months ended December 31, 2024, product revenue decreased $18.1 million, or 13%, as compared to the same period in fiscal 2024.

The primary driver of the decrease was a $20 million decrease in demand from our large hyperscale customers, as well as more general decreases in the overall tape market with declines in media and devices revenue.

Outside of the Tape and Hyperscale business, our remaining Secondary and Primary storage systems are also offered as a subscription.

We expect the product revenue portion of our Primary and Secondary storage systems to decrease as we continue to transition to subscription-based offerings.

Service and Subscription Revenue

We offer a broad range of services including product maintenance, implementation, and training as well as software subscriptions.

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

Service and subscription revenue decreased $5.7 million or 6% in the nine months ended December 31, 2023 compared to the same period in 2022, partially driven by lower overall legacy service revenues offset by higher subscription revenue.

Service and subscription revenue decreased $9.6 million, or 10%, in the nine months ended December 31, 2024 compared to the same period in fiscal 2024.

This decrease was primarily driven by certain long-lived products reaching their end-of-service-life, partially offset by increases in subscription-based revenue.

Royalty Revenue

We receive royalties from third parties that license our linear-tape open media patents through our membership in the linear-tape open consortium.

Royalty revenue decreased $2.5 million, or 26%, in the nine months ended December 31, 2023 compared to the same period in 2022 due to decreased market volume of older generation linear-tape open media.

Royalty revenue saw a small increase of $0.4 million, or 5%, in the nine months ended December 31, 2024 compared to the same period in fiscal 2024 due to product mix.

Gross Profit and Margin

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Product Gross Margin

Product gross margin increased to 24.1% or by 430 basis points for the nine months ended December 31, 2023, as compared with the same period in 2022.

This increase was primarily due to a more favorable mix of revenues, weighted towards our higher margin product lines, as well as improvements in our operational efficiency and logistics costs.

In addition, the prior year period included a $6.9 million inventory reserve provision recorded during the nine months ended December 31, 2022.

Product gross margin decreased 140 basis points, for the nine months ended December 31, 2024, as compared with the same period in fiscal 2024.

This decrease was primarily due to a less favorable mix of revenues, weighted towards our lower margin product lines, which were partially offset from improvements in our operational efficiency and logistics costs.

Service and Subscription Gross Margin

Service and subscription gross margin of 60.4% increased 270 basis points for the nine months ended December 31, 2023, as compared with the same period in 2022.

This increase was primarily driven by lower overhead costs across our support and repair functions.

Service and subscription gross margin decreased 50 basis points for the nine months ended December 31, 2024, as compared with the same period in fiscal 2024.

This decrease was primarily driven by lower service revenues.

Royalty Gross Margin

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Nine Months Ended December 31,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

(dollars in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change

Sales and marketing $ 39,321 18 % $ 45,800 19 % $ (6,479) (14) %

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Total operating expenses $ 115,678 54 % $ 112,625 47 % $ 3,053 3 %

In the nine months ended December 31, 2023, sales and marketing expenses decreased $2.1 million, or 4% compared with the same period in 2022 as we pivoted existing sales and marketing investment towards high growth markets.

In the nine months ended December 31, 2023, general and administrative expenses decreased $0.4 million, or 1%, as compared with the same period in 2022.

This decrease was largely driven by a reduced facilities footprint, as well as other cost reduction efforts across the business, offset by higher project expense related to the re-evaluation of the Company's application of standalone selling price under Topic 606.

In the nine months ended December 31, 2023, research and development expense decreased $5.1 million, or 15%, as compared with the same period in 2022.

This decrease was primarily driven by cost reduction measures to streamline common development functions across business units, and further consolidate acquired businesses.

In the nine months ended December 31, 2023, restructuring expenses increased $1.6 million as compared with the same period in 2022.

The increase was the result of cost reduction initiatives.

In the nine months ended December 31, 2024, sales and marketing expense decreased $6.5 million, or 14% , compared with the same period in fiscal 2024.

This decrease was primarily driven by improved operational efficiency and increased leverage of our channel.

In the nine months ended December 31, 2024, general and administrative expense increased $14.4 million, or 41%, compared with the same period in fiscal 2024.

This increase was primarily driven by non-recurring costs related to our previously announced restatement of our historical financial statements, and other related projects.

In the nine months ended December 31, 2024, research and development expenses decreased $4.6 million, or 16%, as compared with the same period in fiscal 2024.

This decrease was the result of the continued consolidation of acquisition costs, and efficiencies realized through improved organization design.

In the nine months ended December 31, 2024, restructuring expenses decreased $0.2 million, or 8% , as compared with the same period in fiscal 2024.

The decrease was the result of cost reduction initiatives in the prior year.

Other Income (Expense)

Nine Months Ended December 31,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

(dollars in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change

Other income (expense) $ (408) 0 % $ (2,049) (1) % $ 1,641 80 %

The change in other income (expense), net during the nine months ended December 31, 2023 compared with the same period in 2022 was related primarily to fluctuations in foreign currency exchange rates during the nine months ended December 31, 2023.

The change in other income (expense), net during the nine months ended December 31, 2024 compared with the same period in fiscal 2024 was related primarily to fluctuations in foreign currency exchange rates during the nine months ended December 31, 2024.

Interest Expense

Nine Months Ended December 31,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

(dollars in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change

Interest expense $ (16,761) (8) % $ (10,992) (5) % $ (5,769) 52 %

In the nine months ended December 31, 2023, interest expense increased $3.5 million, or 46%, as compared with the same period in 2022 due to a higher effective interest rate on our Term Loan.

In the nine months ended December 31, 2024, interest expense increased $5.8 million, or 52%, as compared with the same period in fiscal 2024 due to a higher effective interest rate on our Term Loan.

Warrant liabilities

Nine Months Ended December 31,

(dollars in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change

Change in fair value of warrant liabilities $ (56,414) (27) % $ 7,341 3 % $ (63,755) (868) %

In December 31, 2024, we recorded a non-cash loss of $56.4 million related to the change in fair value of our warrant liabilities, compared to a non-cash gain of $7.3 million in the same period in fiscal 2024.

This change was primarily driven by fluctuations in our stock price.

Loss on Debt Extinguishment

Nine Months Ended December 31,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

(dollars in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change

Loss on debt extinguishment $ (3,003) 1 % $ — — % $ (3,003) 100 %

In the nine months ended December 31, 2023, loss on debt extinguishment decreased $1.4 million as compared with the same period in 2022 due to a loss on debt extinguishment of $1.4 million for a prepayment of our Term Loan.

In the nine months ended December 31, 2024, loss on debt extinguishment was related to a prepayment of our Term Loan.

Nine Months Ended December 31,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

(dollars in thousands) 2024 % of pretax income 2023 % of pretax income $ Change % Change

Income tax provision $ 675 (1) % $ 1,573 (8) % $ (898) (57) %

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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 Three Months Ended September 30, 2023 and 2022

Three Months Ended September 30,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Product revenue $ 42,947 57 % $ 64,110 64 % $ (21,163) (33) %

Service and subscription 30,505 40 % 32,977 33 % (2,472) (7) %

Royalty 2,228 3 % 3,478 3 % (1,250) (36) %

Total revenue $ 75,680 100 % $ 100,565 100 % $ (24,885) (25) %

Product Revenue

In the three months ended September 30, 2023, product revenue decreased $21.2 million, or 33%, as compared to the same period in 2022.

Service and subscription revenue decreased $2.5 million, or 7%, in the three months ended September 30, 2023 compared to the same period in 2022.

This decrease was due in part to certain long-lived products reaching their end-of-service-life, partially offset by new support bookings and the transition towards subscription-based licensing.

Royalty Revenue

We receive royalties from third parties that license our linear-tape open media patents through our membership in the linear-tape open consortium.

Royalty revenue decreased $1.3 million, or 36%, in the three months ended September 30, 2023 compared to the same period in 2022 due to decreased market volume of older generation linear-tape open media.

Gross Profit and Margin

Three Months Ended September 30,

(dollars in thousands) 2023 Gross

margin % 2022 Gross

margin % $ Change Basis point change

Product $ 12,228 28.5 % $ 7,550 11.8 % $ 4,678 1,670

Service and subscription 18,279 59.9 % 18,231 55.3 % 48 460

Royalty 2,228 100.0 % 3,478 100.0 % (1,250) —

Gross profit $ 32,735 43.3 % $ 29,259 29.1 % $ 3,476 1,420

Gross profit and margin percentages are key metrics that management monitors to assess the performance on the business.

Product Gross Margin

Product gross margin increased to 28.5%, or by 1,670 basis points, for the three months ended September 30, 2023, as compared with the same period in 2022.

This increase was primarily due to a more favorable mix of revenues, weighted towards our higher margin product lines, as well as improvements in our operational efficiency and logistics costs.

In addition, the prior year period included a $6.9 million inventory reserve provision recorded during the three months ended September 30, 2022.

Service and Subscription Gross Margin

Service and subscription gross margins increased 460 basis points for the three months ended September 30, 2023, as compared with the same period in 2022.

This increase was primarily driven by lower overhead costs across our support and repair functions.

Royalty Gross Margin

Royalties do not have significant related cost of sales.

Operating Expenses

Three Months Ended September 30,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Sales and marketing $ 15,717 21 % $ 15,593 16 % $ 124 1 %

General and administrative 10,241 14 % 11,940 12 % (1,699) (14) %

Research and development 9,152 12 % 10,546 10 % (1,394) (13) %

Restructuring charges 1,338 2 % 921 1 % 417 45 %

Total operating expenses $ 36,448 48 % $ 39,000 39 % $ (2,552) (7) %

In the three months ended September 30, 2023, sales and marketing expense increased $0.1 million, or 1%, as compared with the same period in 2022.

Overall costs remain relatively flat as we pivot existing sales and marketing investment towards high-growth markets.

In the three months ended September 30, 2023, general and administrative expenses decreased $1.7 million, or 14%, as compared with the same period in 2022.

This decrease was largely driven by a reduced facilities footprint, as well as other cost reduction efforts across the business.

In the three months ended September 30, 2023, research and development expenses decreased $1.4 million, or 13%, as compared with the same period in 2022.

This decrease was primarily driven by cost reduction measures to consolidate acquired businesses.

In the three months ended September 30, 2023, restructuring expenses increased $0.4 million as compared with the same period in 2022.

The increase was the result of cost reduction initiatives.

Other Income (Expense)

Three Months Ended September 30,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Other income (expense) $ 367 0 % $ 2,431 2 % $ (2,064) 85 %

The change in other income (expense), net during the three months ended September 30, 2023 compared with the same period in 2022 was related primarily to fluctuations in foreign currency exchange rates during the three months ended September 30, 2023.

Interest Expense

Three Months Ended September 30,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Interest expense $ 3,855 5 % $ 2,745 3 % $ 1,110 40 %

In the three months ended September 30, 2023, interest expense increased $1.1 million, or 40%, as compared with the same period in 2022 due to a higher effective interest rate on our Term Loan.

Loss on Debt Extinguishment

There were no debt extinguishments in the three months ended September 30, 2023 and 2022.

Three Months Ended September 30,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Income tax provision $ 533 1 % $ 461 — % $ 72 16 %

The income tax provision for the three months ended September 30, 2023 and 2022 is 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.

Accordingly, we have established a full valuation allowance against our U.S.

and certain foreign net deferred tax assets.

Significant management judgment is required in assessing our ability to realize any future benefit from our net deferred tax assets.

We intend to maintain this valuation allowance until sufficient positive evidence exists to support its reversal.

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, 2023 and 2022

Six Months Ended September 30,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Product revenue $ 101,522 60 % $ 125,698 64 % $ (24,176) (19) %

Service and subscription 61,458 37 % 66,782 33 % (5,324) (8) %

Royalty 5,194 3 % 6,918 3 % (1,724) (25) %

Total revenue $ 168,174 100 % $ 199,398 100 % $ (31,224) (16) %

Product Revenue

In the six months ended September 30, 2023, product revenue decreased $24.2 million, or 19%, as compared to the same period in 2022.

Service Revenue

We offer a broad range of services including product maintenance, implementation, and training as well as software subscriptions.

Service revenue is primarily comprised of customer field support contracts which provide standard support services for our hardware.

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

Service and subscription revenue decreased $5.3 million, or 8%, in the six months ended September 30, 2023 compared to the same period in 2022, partially driven by lower overall legacy service revenues offset by higher subscription revenue.

Royalty Revenue

We receive royalties from third parties that license our linear-tape open media patents through our membership in the linear-tape open consortium.

Royalty revenue decreased $1.7 million, or 25%, in the six months ended September 30, 2023 compared to the same period in 2022 due to decreased market volume of older generation linear-tape open media.

Gross Profit and Margin

Six Months Ended September 30,

(dollars in thousands) 2023 Gross

margin % 2022 Gross

margin % $ Change Basis point change

Product $ 26,352 26.0 % $ 21,216 16.9 % $ 5,136 910

Service and subscription 36,830 59.9 % 36,932 55.3 % (102) 460

Royalty 5,194 100.0 % 6,918 100.0 % (1,724) —

Gross profit $ 68,376 40.7 % $ 65,066 32.6 % $ 3,310 810

Gross profit and margin percentages are key metrics that management monitors to assess the performance on the business.

Product Gross Margin

Product gross margin increased to 26.0%, or by 910 basis points, for the six months ended September 30, 2023, as compared with the same period in 2022.

This increase was primarily due to a more favorable mix of revenues, weighted towards our higher margin product lines, as well as improvements in our operational efficiency and logistics costs.

In addition, the prior year period included a $6.9 million inventory reserve provision recorded during the six months ended September 30, 2022.

Service and Subscription Gross Margin

Service and subscription gross margin of 59.9% increased 460 basis points for the six months ended September 30, 2023, as compared with the same period in 2022.

This increase was primarily driven by lower overhead costs across our support and repair functions.

Royalty Gross Margin

Royalties do not have significant related cost of sales.

Operating expenses

Six Months Ended September 30,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Sales and marketing $ 31,557 19 % $ 31,555 16 % $ 2 — %

General and administrative 22,940 14 % 24,254 12 % (1,314) (5) %

Research and development 20,065 12 % 22,671 11 % (2,606) (11) %

Restructuring charges 2,667 2 % 1,646 1 % 1,021 62 %

Total operating expenses $ 77,229 46 % $ 80,126 40 % $ (2,897) (4) %

In the six months ended September 30, 2023, sales and marketing expense was flat compared with the same period in 2022 as we pivoted existing sales and marketing investment towards high-growth markets.

In the six months ended September 30, 2023, general and administrative expense decreased $1.3 million, or 5%, compared with the same period in 2022.

This decrease was largely driven by a reduced facilities footprint, as well as other cost reduction efforts across the business.

In the six months ended September 30, 2023, research and development expenses decreased $2.6 million, or 11%, as compared with the same period in 2022.

This decrease was primarily driven by cost reduction measures to consolidate acquired businesses.

In the six months ended September 30, 2023, restructuring expenses increased $1.0 million as compared with the same period in 2022.

The increase was the result of cost reduction initiatives.

Other Income (Expense)

Six Months Ended September 30,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Other income (expense) $ (630) 0 % $ 3,182 2 % $ (3,812) 120 %

The change in other income (expense), net during the six months ended September 30, 2023 compared with the same period in 2022 was related primarily to fluctuations in foreign currency exchange rates during the three months ended September 30, 2023.

Interest expense

Six Months Ended September 30,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Interest expense $ 7,055 4 % $ 4,836 2 % $ 2,219 46 %

In the six months ended September 30, 2023, interest expense increased $2.2 million, or 46%, as compared with the same period in 2022 due to a higher effective interest rate on our Term Loan.

Loss on debt extinguishment

Six Months Ended September 30,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Loss on debt extinguishment $ — — % $ (1,392) (1) % $ 1,392 100 %

In the six months ended September 30, 2023, loss on debt extinguishment decreased $1.4 million as compared with the same period in 2022 due to a loss on debt extinguishment of $1.4 million for a prepayment of our Term Loan.

Six Months Ended September 30,

(dollars in thousands) 2023 % of

revenue 2022 % of

revenue $ Change % Change

Income tax provision $ 1,063 1 % $ 872 — % $ 191 22 %

The income tax provision for the six months ended September 30, 2023 and 2022 is primarily influenced by foreign and state income taxes.

Accordingly, we have established a full valuation allowance against our U.S.

and certain foreign net deferred tax assets.

Significant management judgment is required in assessing our ability to realize any future benefit from our net deferred tax assets.

We intend to maintain this valuation allowance until sufficient positive evidence exists to support its reversal.

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.

Liquidity and Capital Resources

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

Our principal sources of liquidity include cash from operating activities, cash and cash equivalents on our balance sheet and amounts available under our credit facility with PNC Bank, National Association (as amended from time to time, the “PNC Credit Facility”) pursuant to the Amended Restated Revolving Credit and Security Agreement dated December 27, 2018.

Our principal sources of liquidity include cash from operating activities, cash and cash equivalents on our balance sheet and amounts available under our revolving credit facility agreement with PNC Bank, National Association, as amended from time to time (the “PNC Credit Facility”).

We require significant cash resources to meet obligations to pay principal and interest on our outstanding debt, provide for our research and development activities, fund our working capital needs, and make capital expenditures.

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We generated negative cash flows from operations of approximately $23.6 million and $10.2 million for the fiscal years ended March 31, 2025 and 2024, respectively, and generated net losses of approximately $115.1 million and $41.3 million for the fiscal years ended March 31, 2025 and 2024, respectively.

We have funded operations through the sale of common stock, term debt borrowings and revolving credit facility borrowings described in Note 5:

We are subject to various debt covenants under our debt agreements.

We have funded operations through the sale of common stock, term debt borrowings and PNC Credit Facility borrowings described in Note 4:

On January 25, 2025, the Company entered into a SEPA in which pursuant to and subject to its terms, the Company has the right, but not the obligation, to sell up to $200 million of Common Stock at any time during the three-year period following the date of the SEPA.

As of March 31, 2025, the Company has sold 1.2 million shares of Common Stock under the SEPA with net proceeds of approximately $16.4 million.

Subsequent to March 31, 2025 through July 31, 2025, the Company sold an additional 6.3 million shares of Common Stock under the SEPA with net proceeds of $66.6 million.

As of July 31, 2025, the Company had cash and cash equivalents of approximately $28.1 million as well as $0.0 borrowed.

C ommon Stock for additional information related to the SEPA.

On August 13, 2025, the Company terminated the PNC Credit Facility.

We are subject to various debt covenants under our credit agreements.

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

On February 14, 2024, we entered into amendments to the Credit Agreements which waived testing of the total net leverage ratio financial covenant for the fiscal quarter ended December 31, 2023.

On May 24, 2024, we entered into amendments to the Credit Agreements which, among other things, waives compliance with our net leverage covenant as of March 31, 2024, reduced the daily minimum liquidity below $15.0 million until June 16, 2023 and waived any default that might arise as a result of the restatement of certain of our historical financial statements.

The Term Loan and PNC Credit Facility both mature on August 5, 2026 under the terms of the related agreements.

As discussed in Note 1:

Description of Business and Significant Accounting Policies—Going Concern , we expect to be in violation of our net leverage covenant as of the June 30, 2024 testing date and the violation will cause the outstanding Term Loan and PNC Credit Facility outstanding balances to become due as an event of default.

As a result, we have classified the Term Loan and PNC Credit Facility as current liabilities in the accompanying consolidated balance sheet.

We are currently working to obtain additional covenant waivers or refinance the existing Term Debt and PNC Credit Facility.

Additionally, we are evaluating strategies to obtain additional funding to provide additional liquidity, including potential asset sales.

In the event we are unable to obtain an extension of the waiver, additional funding will be required to pay the amount due on the revolver and term loan.

However, we may be unable to obtain an extension of the waiver, or obtain additional funding.

Description of Business and Significant Accounting Policies—Going Concern , we believe we will be in violation of our net leverage covenant as of the September 30, 2025 testing date and the violation will cause the Term Loan outstanding balance to become due as an event of default.

As a result, we classified the Term Loan as current liabilities in the accompanying consolidated balance sheet.

Additionally, the Company is evaluating strategies to restructure or refinance our debt, including potential covenant waivers.

We may be unable to obtain additional funding.

As such, there can be no assurance that we will be able to obtain additional liquidity when needed or under acceptable terms, if at all.

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

Risk Factors.

Registration Rights Agreement

We have entered into a registration rights agreement with the holders of warrants previously issued to certain lenders in December 2018, June 2020 and June 2023 (the "Registration Rights Agreement").

The Registration Rights Agreement grants certain registration rights for the shares of common stock issuable upon the exercise of the warrants, including (i) the ability of a holder to request that the Company file a Form S-1 registration statement with respect to at least 40% of the registrable securities held by such holder, (ii) the ability of a holder to request that the Company file a Form S-3 registration statement with respect to outstanding registrable securities if at any time the Company is eligible to use a Form S-3 registration statement, and (iii) customary piggyback registration rights, subject to certain customary limitations.

For additional information about our debt, see the sections entitled “Risk Factors—Risks Related to Our Indebtedness and Liquidity” in Item 1A.

Risk Factors and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in this Annual Report.

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 $10.2 million for the year ended March 31, 2024, primarily attributable to lower revenue and timing of certain vendor payments.

Net cash used in operating activities was $4.9 million for the year ended March 31, 2023, primarily attributable to cash provided by operating activities excluding changes in assets and liabilities of $1.5 million offset by cash used associated with working capital changes of $6.4 million including cash used related to manufacturing and service inventories of $5.3 million.

Net cash used in operating activities increased by $13.5 million to $23.6 million for the year ended March 31, 2025 compared to $10.2 million for the year ended March 31, 2024, The increase was primarily attributable the decrease in revenue and associated gross profit in addition to an increase in large non-recurring costs related to our re-evaluation of Topic 606, and other non-recurring projects.

Net Cash Used in Investing Activities

Net cash used in investing activities was $4.9 million for the year ended March 31, 2025, primarily attributable to capital expenditures.

Net cash used in investing activities was $5.9 million for the year ended March 31, 2024, primarily attributable to the implementation costs of a new Enterprise Resource Planning system.

Net cash used in investing activities was $15.6 million for the year ended March 31, 2023, primarily attributable to $12.6 million of capital expenditures and $3.0 million of cash paid related to the deferred purchase price for a prior business acquisition.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $19.3 million for the year ended March 31, 2025 due primarily to borrowings under our Term Loan credit facility.

Net cash provided by financing activities was $41.2 million for the year ended March 31, 2023 due primarily to $66.2 million of net cash received from the rights offering of 30 million shares of our common stock offset in part by a $20.0 million prepayment of our term debt and term debt principal amortization payments and amendment fees totaling $3.3 million.

Net cash provided by financing activities was $15.7 million for the year ended March 31, 2024 due primarily to borrowings under our Term Loan credit facility.

Commitments and Contingencies

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The preparation of our consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make judgments, estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K.

On an ongoing basis, we evaluate estimates, which are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

On an ongoing basis, we evaluate estimates, which are based on historical experience and on various other assumptions that we believe to be reasonable under the

circumstances.

We consider the following 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.

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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 our 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.

A majority of our consulting and training revenue does not take significant time to complete therefore these obligations are satisfied upon completion of such services over time as each day is completed.

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.

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We reevaluate these uncertain tax positions on a quarterly basis.

This evaluation is based on factors including, but not limited to, changes in facts or circumstances and changes in tax law.

This evaluation is based on factors including, but not limited to, changes in facts or

circumstances and changes in tax law.

We recognize penalties and tax-related interest expense as a component of income tax expense in our consolidated statements of operations.

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Estimates of net realizable value involve significant estimates and judgments about the future, and revisions would be required if these factors differ from our estimates.

Business Acquisitions, Goodwill and Acquisition-Related Intangible Assets

We allocate the purchase price to the intangible and tangible assets acquired and liabilities assumed in a business combination at their estimated fair values on the date of acquisition, with the excess recorded to goodwill.

We use our best estimates and assumptions to assign fair value to the assets acquired and liabilities assumed as well as the useful lives of the acquired intangible assets.

Examples of critical estimates in valuing certain intangible assets we have acquired include, but are not limited to, future expected cash flows, expected technology life cycle, attrition rates of customers, and discount rates.

We estimate the useful lives of each intangible asset based on the expected period over which we anticipate generating economic benefit from the asset.

The amounts and useful lives assigned to acquired intangible assets impact the amount and timing of future amortization expense.

While we use our best estimates and assumptions as part of the purchase price allocation process to value assets acquired and liabilities assumed, these estimates are inherently uncertain and subject to refinement.

As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the estimated fair value of the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

Upon the conclusion of the measurement period, any subsequent adjustments are recorded to the consolidated statements of operations.

Warrant Accounting

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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-K

Item 7. Management’s Discussion and Analysis