What changed in QUANTUM CORP /DE/'s 10-K — 2024 vs 2025
vs
Paragraph-level year-over-year comparison of QUANTUM CORP /DE/'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.
+204 added−268 removedSource: 10-K (2025-08-26) vs 10-K (2024-06-28)
Top changes in QUANTUM CORP /DE/'s 2025 10-K
204 paragraphs added · 268 removed · 147 edited across 8 sections
- Item 7. Management's Discussion & Analysis+86 / −170 · 73 edited
- Item 1A. Risk Factors+73 / −49 · 43 edited
- Item 1. Business+32 / −37 · 21 edited
- Item 5. Market for Registrant's Common Equity+4 / −4 · 2 edited
- Item 7A. Quantitative and Qualitative Disclosures About Market Risk+4 / −4 · 4 edited
Item 1. Business
Business — how the company describes what it does
21 edited+11 added−16 removed38 unchanged
Item 1. Business
Business — how the company describes what it does
21 edited+11 added−16 removed38 unchanged
2024 filing
2025 filing
Biggest changeMr. Spanjaard holds a degree from M.T.S Technical College (Electronics), from Ede, The Netherlands. Laura Nash, 44, has served as Chief Accounting Officer of the Company since June 2023. Prior to her appointment as Chief Accounting Officer, Ms. Nash served as Controller from June 2019 to June 2023. Prior to that, from September 2005 to June 2019, Ms.
Biggest changePrior to her appointment as Chief Accounting Officer, Ms. Nash served as Controller from June 2019 to June 2023. Prior to that, from September 2005 to June 2019, Ms. Nash held various positions in Audit and Financial Accounting Advisory Services at Ernst & Young, an accounting firm, in both the U.S. and the U.K. Ms.
Our services are delivered with a combination of expertise and technology, including the MyQuantum Service Delivery Platform, and Cloud-Based Analytics ("CBA") AIOps software for proactive remote monitoring. Global Support and Services, and Warranty Table of Contents Our global services strategy is an integral component of our total customer solution.
Our services are delivered with a combination of expertise and technology, including the MyQuantum Service Delivery Platform, and Cloud-Based Analytics ("CBA") AIOps software for proactive remote monitoring. 6 Table of Contents Global Support and Services, and Warranty Our global services strategy is an integral component of our total customer solution.
The contents of our website are not incorporated into this Annual Report on Form 10-K. The SEC maintains an internet site that contains reports, proxy, and information statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. Table of Contents
The contents of our website are not incorporated into this Annual Report on Form 10-K. The SEC maintains an internet site that contains reports, proxy, and information statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. 11 Table of Contents
The Chief Administrative Officer partners directly with the Board of Directors, the Leadership and Compensation Committee, and Senior Management on the design, cost, and effectiveness of our people programs to ensure they are competitive and reward our teams for driving company performance.
The Chief Administrative Officer worked directly with the Board of Directors, the Leadership and Compensation Committee, and Senior Management on the design, cost, and effectiveness of our people programs to ensure they are competitive and reward our teams for driving company performance.
To build high performing products and services, we aim to build high performing teams that are inclusive, diverse, and respected regardless of gender, race, color, religion, age, sexual orientation, or disability. We invest in diverse hiring and training initiatives, performance and professional development opportunities, and candidates ranging from interns to experienced leaders.
To build high performing products and services, we aim to build high performing teams that are inclusive, diverse, and respected regardless of gender, race, color, religion, age, sexual orientation, or disability. We invest in diverse hiring and training initiatives, performance and professional development opportunities, and candidates ranging 10 Table of Contents from interns to experienced leaders.
Seasonality We generally have the greatest demand for our products and services in the fourth quarter of each calendar year, or our fiscal third quarter. We usually experience the lowest demand for our products and services in the first and second quarters of each calendar year, or our fiscal fourth quarter and fiscal first quarter, respectively.
Risk Factors. Seasonality We generally have the greatest demand for our products and services in the fourth quarter of each calendar year, or our fiscal third quarter. We usually experience the lowest demand for our products and services in the second quarter of each calendar year, or our fiscal first quarter.
The global supply chain and logistics have been severely constrained and impacted by inflationary pricing for the past couple of years. While we are cautiously optimistic and see signs of improvement over the past year with supply of both server and tape automation components, we continue to see some constraints.
The global supply chain and logistics have been severely constrained and impacted by inflationary pricing for the past couple of years as well as import tariffs in the current year. While we are cautiously optimistic and see signs of improvement over the past year with supply of both server and tape automation components, we continue to see some constraints.
Management’s Discussion and Analysis of Financial Condition and Results of Operations and information about revenue and long-lived assets attributable to certain geographic regions is included in Note 2: Revenue and Note 4: Balance Sheet Information , respectively, to the consolidated financial statements and risks attendant to our foreign operations is set forth below in Item 1A. Risk Factors.
Management’s Discussion and Analysis of Financial Condition and Results of Operations and information about revenue and long-lived assets attributable to certain geographic regions is included in N ote 12 : Segment Information and Note 3: Balance Sheet Information , respectively, to the consolidated financial statements and risks attendant to our foreign operations is set forth below in Item 1A.
Table of Contents Our workforce is currently distributed across 19 countries, with approximately 770 employees globally as of March 31, 2024, including 390 in North America, 200 in APAC, and 180 in EMEA. We engage with contractors, consultants, or temporary employees as needs for special projects occur.
Our workforce is currently distributed across 19 countries, with approximately 635 employees globally as of March 31, 2025, including 305 in North America, 180 in APAC, and 150 in EMEA. We engage with contractors, consultants, or temporary employees as needs for special projects occur.
We also license our software to certain OEM customers that include this software in their own brand name products. These OEM relationships enable us to reach end users not served by our branded distribution channels or our direct sales force. They also allow us to sell to select geographic or vertical markets where specific OEMs have exceptional strength.
We also license our software to certain OEM customers that include this software in their own brand name products. These OEM relationships enable us to reach end users not served by our branded distribution channels or our direct sales force.
See Note 11: Commitments and Contingencies for additional disclosures regarding lawsuits alleging patent infringement. On occasion, we have entered into various patent licensing and cross-licensing agreements with other companies. We may enter into patent cross-licensing agreements with other third parties in the future as part of our normal business activities.
On occasion, we have entered into various patent licensing and cross-licensing agreements with other companies. We may enter into patent cross-licensing agreements with other third parties in the future as part of our normal business activities.
As our customers look to use more public cloud storage services, these providers offer a competitive alternative, as well as new platforms and new ways to deploy our software.
Additionally, the competitive landscape continues to change due to merger and acquisition activity as well as new entrants into the market. As our customers look to use more public cloud storage services, these providers offer a competitive alternative, as well as new platforms and new ways to deploy our software.
We may Table of Contents also hold foreign patents and patent applications for certain of our products and technologies. Although we believe that our patents and applications have significant value, rapidly changing technology in our industry means that our future success may also depend heavily on the technical competence and creative skills of our employees.
Although we believe that our patents and applications have significant value, rapidly changing technology in our industry means that our future success may also depend heavily on the technical competence and creative skills of our employees. From time to time, third parties have asserted that the manufacture and sale of our products have infringed on their patents.
Intellectual Property and Technology We generally rely on patent, copyright, trademark and trade secret laws and contract rights to establish and maintain our proprietary rights in our technology and products. As of March 31, 2024, we hold over 221 U.S. patents. In general, these patents have a 20-year term from the first effective filing date for each patent.
Intellectual Property and Technology 8 Table of Contents We generally rely on patent, copyright, trademark and trade secret laws and contract rights to establish and maintain our proprietary rights in our technology and products. As of March 31, 2025, we hold over 198 U.S. patents.
Information About Our Executive Officers Following are the names and positions of our management team as of June 12, 2024, including a brief account of the business experience of each. Name Position with Quantum James J. Lerner President, Chief Executive Officer and Chairman of the Board Kenneth P. Gianella Chief Financial Officer Brian E.
Information About Our Executive Officers Following are the names and positions of our management team as of August 1, 2025, including a brief account of the business experience of each. Name Position with Quantum Hugues Meyrath President and Chief Executive Officer Lewis W.
Customers Table of Contents We provide solutions to multiple industries globally. Historically, our primary customers are in hyperscale, technology and industrial, media and entertainment, federal government, life sciences and healthcare, and financial industries. In addition, we sell to OEMs, distributors, VARs and DMRs to reach end user customers.
They also allow us to sell to select geographic or vertical markets where specific OEMs have exceptional strength. 7 Table of Contents Customers We provide solutions to multiple industries globally. Historically, our primary customers are in hyperscale, technology and industrial, media and entertainment, federal government, life sciences and healthcare, and financial industries.
From time to time, third parties have asserted that the manufacture and sale of our products have infringed on their patents. We are not knowingly infringing any third-party patents. Should it ultimately be determined that licenses for third-party patents are required, we will undertake best efforts to obtain such licenses on commercially reasonable terms.
We are not knowingly infringing any third-party patents. Should it ultimately be determined that licenses for third-party patents are required, we will undertake best efforts to obtain such licenses on commercially reasonable terms. See Note 10: Commitments and Contingencies for additional disclosures regarding lawsuits alleging patent infringement.
In some cases, our competitors in one market area are customers or suppliers in another. Our competitors often have greater financial, technical, manufacturing, marketing, or other resources than we do. Additionally, the competitive landscape continues to change due to merger and acquisition activity as well as new entrants into the market.
Competition The markets in which we participate are highly competitive, characterized by rapid technological change and changing customer requirements. In some cases, our competitors in one market area are customers or suppliers in another. Our competitors often have greater financial, technical, manufacturing, marketing, or other resources than we do.
She is a member of the Institute of Chartered Accountants of Scotland. Human Capital Our Chief Administrative Officer leads our human capital initiatives, which include the design and execution of all people strategies.
Human Capital In the fiscal year ended March 31, 2025, our Chief Administrative Officer lead our human capital initiatives, which include the design and execution of all people strategies.
Nash held various positions in Audit and Financial Accounting Advisory Services at Ernst & Young, an accounting firm, in both the U.S. and the U.K. Ms. Nash holds a Bachelor of Laws from University of Aberdeen and a Certificate in Accounting from University of Washington – Michael G. Foster School of Business.
Nash holds a Bachelor of Laws from University of Aberdeen and a Certificate in Accounting from University of Washington – Michael G. Foster School of Business. She is a member of the Institute of Chartered Accountants of Scotland.
Sales to our top five customers represented 26%, 32% and 17% of revenue in fiscal 2024, fiscal 2023 and fiscal 2022, respectively, of which none of our hyperscale customers represented 10% or more of our total 2024 revenue. Competition The markets in which we participate are highly competitive, characterized by rapid technological change and changing customer requirements.
In addition, we sell to OEMs, distributors, VARs and DMRs to reach end user customers. Sales to our top five customers represented 21% and 26% of revenue in fiscal 2025 and fiscal 2024, respectively, of which none of our customers represented 10% or more of our total fiscal 2025 revenue.
Removed
Cabrera Chief Administrative Officer and Chief Legal and Compliance Officer Henk Jan Spanjaard Chief Revenue Officer Laura Nash Chief Accounting Officer James J. Lerner, 54, was appointed as President and Chief Executive Officer of the Company, effective July 1, 2018, and was appointed Chairman of the Company’s Board of Directors (the “Board of Directors”) on August 7, 2018. Mr.
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In general, these patents have a 20-year term from the first effective filing date for each patent. We may also hold foreign patents and patent applications for certain of our products and technologies.
Removed
Lerner has previously served as Vice President and Chief Operating Officer at Pivot3 Inc., a smart infrastructure solutions company, from March 2017 to June 2018, and as Chief Revenue Officer from November 2016 to March 2017. Prior to Pivot3 Inc., from March 2014 to August 2015, Mr.
Added
Moorehead Chief Financial Officer Anthony Craythorne Chief Revenue Officer Laura Nash Chief Accounting Officer Hugues Meyrath, 55, was appointed as President and Chief Executive Officer of the Company, effective June 2, 2025. Mr. Meyrath has served on the Board of Directors since September 2022, and serves as an advisor to startup companies. Mr.
Removed
Lerner served as President of Cloud Systems and Solutions at Seagate Technology Holdings Public Limited Company (“Seagate”) (Nasdaq: STX), a data storage company. Prior to Seagate, Mr. Lerner served in various executive roles at Cisco Systems, Inc.
Added
Meyrath served as chief product officer of ServiceChannel from January 2017 through December 2021, a provider of SaaS-based multi-site solutions, which was acquired by Fortive Corporation, a provider of connected workflow solutions, in 2021. Following the acquisition, Mr. Meyrath continued to serve as an advisor to ServiceChannel until August 2022.
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(Nasdaq: CSCO), a networking hardware and software manufacturing company, including most recently as Senior Table of Contents Vice President and General Manager of the Cloud & Systems Management Technology Group. Before beginning his career as a technology company executive, Mr. Lerner was a Senior Consultant at Andersen Consulting, a financial advisory and consulting firm. Since 2011, Mr.
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Prior to that, he served as vice president at Dell Technologies Capital, a venture capital arm of Dell Technologies that invests in enterprise and cloud infrastructure, where he was responsible for 9 Table of Contents driving venture funding and mergers and acquisitions, while also holding advisory roles for portfolio companies.
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Lerner has served on the Board of Trustees of Astia, a global not-for-profit organization built on a community of men and women dedicated to the success of women-led, high-growth ventures, and is currently serving as the Chair of the Board of Trustees. Mr. Lerner earned a Bachelor of Arts in Quantitative Economics and Decision Sciences from U.C. San Diego.
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Prior to its acquisition by Dell Technologies Capital, he served as vice president of product management and business development for EMC Corporation’s backup and recovery services, which offers data protection and business continuity products. Mr.
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Kenneth P. Gianella, 51, has served as our Chief Financial Officer since January 2023. Prior to joining us, he served as the Vice President of Investor Relations; Mergers, Divestitures, & Acquisitions; and Environmental, Social & Governance (ESG) Strategy at Itron, Inc.
Added
Meyrath previously held senior leadership roles at Juniper Networks, Brocade Communications and SBS Corp, and was an employee of the Company from January 2002 to September 2003. Mr. Meyrath holds a bachelor’s degree in engineering from the University of Louvain in Belgium and an MBA from the University of California, Berkeley.
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(Nasdaq: ITRI), an energy and water network technology and services company, since July 2018 to January 2023, and as Vice President of Finance and Treasury of Itron’s Networks segment from January 2018 to July 2018. Prior to that, from December 2012 to December 2017, Mr.
Added
Lewis Moorehead, 53, served as Chief Financial Officer from April 2025 to August 2025. He previously served as Vice-President of Finance and Treasurer from June 2023 to April 2025, and Chief Accounting Officer from October 2018 to June 2023. Prior to joining Quantum, Mr. Moorehead was the Director of Finance, Accounting and Tax at Carvana, Co.
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Gianella held various senior finance positions at Silver Springs Networks, an IoT and smart networks company (acquired by Itron in December 2017), including as interim Chief Financial Officer, Senior Vice President, Finance and Treasurer. Mr.
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(NYSE: CVNA), a publicly traded on-line retailer, from November 2016 to October 2018. From September 2004 to October 2016, he served as Managing Partner at Quassey, an investment firm. While at Quassey, he also served as Vice President of Finance and Principal Accounting Officer at Edgio, Inc.
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Gianella also was the Head of Finance and Administration at Sensity Systems, Inc., a producer of smart LED lights for enabling Smart Cities, and held various senior finance roles at KLA-Tencor Corporation, a leader in process control, yield management, and computational analytics for the semiconductor industry. Mr.
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(f/k/a Limelight Networks) (Nasdaq: EGIO), a NASDAQ-listed global content delivery network and SaaS provider, from March 2010 to August 2013. He has also held finance and accounting positions at eTelecare Global Solutions, Rivers and Moorehead PLLC, Intelligentias, Inc., American Express and PricewaterhouseCoopers. He holds a Bachelor of Business Administration (B.B.A.), in Accounting from the University of Wisconsin-Whitewater.
Removed
Gianella holds a Master of Business Administration from University of Pittsburgh and a Bachelor of Science in Business Administration from Duquesne University. Brian E. Cabrera, 59, was appointed Chief Legal and Compliance Officer in September 2021 and Chief Administrative Officer in August 2022.
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Anthony Craythorne, 56, was appointed Chief Revenue Officer in July 2025. Prior to that, he held various positions at leading technology companies in the U.S., Europe, and Asia. He joined Quantum following two years as a contract Chief Revenue Officer, where he helped startups launch and growth-stage companies optimize their go-to-market strategies in SaaS, cybersecurity, and data storage.
Removed
Prior to that, he served as the Assistant United States Attorney from October 2018 to April 2020 and as Special Assistant United States Attorney from October 2017 to October 2018 in the Office of the United States Attorney, Northern District of California. From May 2014 to June 2017, Mr.
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Tony has held senior leadership roles including Chief Revenue Officer at Index Engines and Zadara; CEO of Bamboo Systems; Senior Vice President of Worldwide Sales at Komprise; and executive positions at Brocade, Hitachi Data Systems, Nexsan, among others. Laura Nash, 45, has served as Chief Accounting Officer of the Company since June 2023.
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Cabrera served as Senior Vice President & General Counsel of NVIDIA Corporation (“NVIDIA”) (Nasdaq: NVIDIA), a graphics processing units technology company. Prior to NVIDIA, Mr. Cabrera served as General Counsel and Corporate Secretary, Chief Ethics & Compliance Officer of Synopsys, Inc. (Nasdaq: SNPS), an electronic design automation company, from 2006 to 2014. From 1999 to 2006, Mr.
Removed
Cabrera served as Senior Vice President, Operations, General Counsel and Corporate Secretary of Callidus Software, Inc., an enterprise software company. Prior to Callidus Software, Inc., Mr.
Removed
Cabrera held various legal positions with PeopleSoft, Inc., a human resource management systems provider, Netscape Communications Corporation, an internet software developing company, Silicon Graphics, Inc., a computer hardware and software manufacturing company, and Bronson, Bronson & McKinnon LLP, a law firm. Mr. Cabrera holds Bachelor’s and Master’s degrees and a Juris Doctorate from the University of Southern California.
Removed
Henk Jan Spanjaard, 58, was appointed Chief Revenue Officer in November 2023. Prior to that, he served as Vice President, EMEA Sales , from July 2020 to November 2023. From August 2018 to July 2020, he served as Vice President and General Manager, EMEA & India , of DriveScale, Inc., a software development company.
Removed
Prior to that, he served as Vice President, EMEA , of A10 Networks, Inc. (NYSE: ATEN), an application security company, from January 2015 to July 2018. Prior to his role at A10 Networks, Inc., he held several technology sales leadership roles, including at Infoblox, Inc., an IT automation and security company, and NetApp, Inc. (Nasdaq: NTAP), intelligent data infrastructure company.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
43 edited+30 added−6 removed141 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
43 edited+30 added−6 removed141 unchanged
2024 filing
2025 filing
Biggest changeWe currently derive significant revenue from products that incorporate some form of tape technology, and we expect to continue to do so in the next several years. As a result, our future operating results depend in part on continued market acceptance and use of tape products.
Biggest changeOur future operating results depend in part on continued market acceptance and use of tape products; in the past, decreases in the tape products market have materially and adversely impacted our business, financial condition and operating results. 17 Table of Contents We currently derive significant revenue from products that incorporate some form of tape technology, and we expect to continue to do so in the next several years.
Risks that we may face in our efforts to integrate any recent or future acquisitions include, among others: • failure to realize anticipated synergies or return on investment from the acquisition; • difficulties assimilating and retaining employees, business culture incompatibility, or resistance to change; • diverting management’s attention from ongoing business concerns; • coordinating geographically separate organizations and infrastructure operations in a rapid and efficient manner; • the potential inability to maximize our financial and strategic position through the successful incorporation of acquired technology and rights into our products and services; • failure of acquired technology or products to provide anticipated revenue or margin contribution; • insufficient revenues to offset increased expenses associated with the acquisition; • costs and delays in implementing or integrating common systems and procedures; • reduction or loss of customer orders due to the potential for market confusion, hesitation and delay; • impairment of existing customer, supplier and strategic relationships of either company; • insufficient cash flows from operations to fund the working capital and investment requirements; • difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions; • dissatisfaction or performance problems with the acquired company; Table of Contents • the assumption of risks, unknown liabilities, or other unanticipated adverse circumstances of the acquired company that are difficult to quantify; and • the cost associated with the acquisition, including restructuring actions, which may require cash payments that, if large enough, could materially and adversely affect our liquidity.
Risks that we may face in our efforts to integrate any recent or future acquisitions include, among others: • failure to realize anticipated synergies or return on investment from the acquisition; • difficulties assimilating and retaining employees, business culture incompatibility, or resistance to change; • diverting management’s attention from ongoing business concerns; • coordinating geographically separate organizations and infrastructure operations in a rapid and efficient manner; • the potential inability to maximize our financial and strategic position through the successful incorporation of acquired technology and rights into our products and services; • failure of acquired technology or products to provide anticipated revenue or margin contribution; • insufficient revenues to offset increased expenses associated with the acquisition; • costs and delays in implementing or integrating common systems and procedures; • reduction or loss of customer orders due to the potential for market confusion, hesitation and delay; • impairment of existing customer, supplier and strategic relationships of either company; • insufficient cash flows from operations to fund the working capital and investment requirements; 21 Table of Contents • difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions; • dissatisfaction or performance problems with the acquired company; • the assumption of risks, unknown liabilities, or other unanticipated adverse circumstances of the acquired company that are difficult to quantify; and • the cost associated with the acquisition, including restructuring actions, which may require cash payments that, if large enough, could materially and adversely affect our liquidity.
Because of these operations, we are subject to a number of risks in addition to those already described, including: Table of Contents • increasing import and export duties and value-added taxes, or trade regulation changes that could erode our profit margins or delay or restrict our ability to transport our products; • war, military conflict, and geopolitical unrest, including the Russia-Ukraine and Hamas-Israel conflicts, may affect our engineering and support teams outside the U.S. and their ability to perform as well as our sales and services delivery with sanctioned entities and countries; • reduced or limited protection of our intellectual property; • difficulty complying with multiple and potentially conflicting regulatory requirements and practices, including laws governing corporate conduct outside the U.S., such as the Foreign Corrupt Practices Act, United Kingdom Bribery Act, and similar regulations; • commercial laws that favor local businesses and cultural differences that affect how we conduct business; • differing technology standards or customer requirements; • exposure to economic uncertainty and fluctuations including inflation, adverse movement of foreign currencies against the U.S. dollar (the currency in which we report our results), restrictions on transferring funds between countries, and continuing sovereign debt risks; • fluctuations in freight costs, limitations on shipping and receiving capacity, and other disruptions in the transportation and shipping infrastructure at important geographic points for our products and shipments; • inflexible employee contracts and employment laws that may make it difficult to terminate or change the compensation structure for employees in the event of business downturns; • difficulties attracting and recruiting employees and wage inflation in highly competitive markets; • political instability, military, social and infrastructure risks, especially in emerging or developing economies; • political or nationalist sentiment impacting global trade, including the willingness of non-U.S. consumers to purchase goods or services from U.S. corporations; • natural disasters, including earthquakes, flooding, typhoons and tsunamis; and • pandemics and epidemics, and varying and potentially inconsistent governmental restrictions on the operation of businesses, travel and other restrictions.
Because of these global operations, we are subject to a number of risks in addition to those already described, including: • increasing import and export duties and value-added taxes, or trade regulation changes, including tariffs, that could erode our profit margins or delay or restrict our ability to transport our products; • war, military conflict, and geopolitical unrest, including the Russia-Ukraine and Hamas-Israel conflicts, may affect our engineering and support teams outside the U.S. and their ability to perform as well as our sales and services delivery with sanctioned entities and countries; • reduced or limited protection of our intellectual property; • difficulty complying with multiple and potentially conflicting regulatory requirements and practices, including laws governing corporate conduct outside the U.S., such as the Foreign Corrupt Practices Act, United Kingdom Bribery Act, and similar regulations; • commercial laws that favor local businesses and cultural differences that affect how we conduct business; • differing technology standards or customer requirements; • exposure to economic uncertainty and fluctuations including inflation, adverse movement of foreign currencies against the U.S. dollar (the currency in which we report our results), restrictions on transferring funds between countries, and continuing sovereign debt risks; • fluctuations in freight costs, limitations on shipping and receiving capacity, and other disruptions in the transportation and shipping infrastructure at important geographic points for our products and shipments; • inflexible employee contracts and employment laws that may make it difficult to terminate or change the compensation structure for employees in the event of business downturns; • difficulties attracting and recruiting employees and wage inflation in highly competitive markets; • political instability, military, social and infrastructure risks, especially in emerging or developing economies; • political or nationalist sentiment impacting global trade, including the willingness of non-U.S. consumers to purchase goods or services from U.S. corporations; • natural disasters, including earthquakes, flooding, typhoons and tsunamis; and • pandemics and epidemics, and varying and potentially inconsistent governmental restrictions on the operation of businesses, travel and other restrictions.
We were also notified on November 14, 2023 and February 13, 2024 that we were not in compliance with Nasdaq Listing Rule 5250(c)(1) (the “Filings Requirement”) as a result of our failure to timely file the Quarterly Reports on Table of Contents Form 10-Q for the fiscal quarters ended September 30, 2023 and December 31, 2023.
We were also notified on November 14, 2023 and February 13, 2024 that we were not in compliance with Nasdaq Listing Rule 5250(c)(1) (the “Filings Requirement”) as a result of our failure to timely file the Quarterly Reports on 25 Table of Contents Form 10-Q for the fiscal quarters ended September 30, 2023 and December 31, 2023.
As a result of our indebtedness: • Our ability to invest in growing our business is constrained by the financial covenants contained in our credit facilities, which require us to maintain certain maximum total net leverage ratio levels, a minimum fixed charge coverage ratio, and liquidity levels and restrict our ability to: ▪ Incur debt and liens; ▪ Acquire businesses or entities or sell certain assets; ▪ Make investments, including loans, guarantees, and advances; ▪ Engage in transactions with affiliates; ▪ Pay dividends or repurchase stock; and ▪ Enter into certain restrictive agreements; • We must dedicate a significant portion of our cash flow from operations and other capital resources to debt service, thereby reducing our ability to fund working capital, capital expenditures, research and development, mergers and acquisitions, and other cash-based activities, all of which may place us at a competitive disadvantage; • If we are not able to generate sufficient cash flows to meet our substantial debt service obligations or to fund our other liquidity needs, we may have to take actions such as selling assets or raising additional equity or reducing or delaying capital expenditures, strategic acquisitions, investments and joint ventures, restructuring our debt and other capital-intensive activities; • We are subject to mandatory field audits and control of cash receipts by the lenders if we do not maintain liquidity above certain thresholds; • We may be more vulnerable to adverse economic and industry conditions; • We may not be able to fund future working capital, capital investments and other business activities; and • We may be unable to make payments on other indebtedness or obligations.
As a result of our indebtedness: • Our ability to invest in growing our business is constrained by the financial covenants contained in our credit facilities, which require us to maintain certain maximum total net leverage ratio levels, a minimum fixed charge coverage ratio, and liquidity levels and restrict our ability to: • Incur debt and liens; • Acquire businesses or entities or sell certain assets; 18 Table of Contents • Make investments, including loans, guarantees, and advances; • Engage in transactions with affiliates; • Pay dividends or repurchase stock; and • Enter into certain restrictive agreements; • We must dedicate a significant portion of our cash flow from operations and other capital resources to debt service, thereby reducing our ability to fund working capital, capital expenditures, research and development, mergers and acquisitions, and other cash-based activities, all of which may place us at a competitive disadvantage; • If we are not able to generate sufficient cash flows to meet our substantial debt service obligations or to fund our other liquidity needs, we may have to take actions such as selling assets or raising additional equity or reducing or delaying capital expenditures, strategic acquisitions, investments and joint ventures, restructuring our debt and other capital-intensive activities; • We are subject to mandatory field audits and control of cash receipts by the lenders if we do not maintain liquidity above certain thresholds; • We may be more vulnerable to adverse economic and industry conditions; • We may not be able to fund future working capital, capital investments and other business activities; and • We may be unable to make payments on other indebtedness or obligations.
Table of Contents Because we rely heavily on channel partners to market and sell our products, if one or more of them were to experience a significant deterioration in its financial condition or its relationship with us, this could disrupt our product distribution and reduce our revenue, which could materially and adversely affect our business, financial condition, and operating results.
Because we rely heavily on channel partners to market and sell our products, if one or more of them were to experience a significant deterioration in its financial condition or its relationship with us, this could 14 Table of Contents disrupt our product distribution and reduce our revenue, which could materially and adversely affect our business, financial condition, and operating results.
Any imposition of liability or litigation costs that are not covered by insurance or could harm our business. Competition is intense in the data storage and protection market in which we operate. Table of Contents Our competitors in the data storage and protection market are aggressively trying to advance and develop new technologies and products to compete against us.
Any imposition of liability or litigation costs that are not covered by insurance or could harm our business. Competition is intense in the data storage and protection market in which we operate. 22 Table of Contents Our competitors in the data storage and protection market are aggressively trying to advance and develop new technologies and products to compete against us.
As a result, our business, financial condition, and operating result could be materially and adversely affected. Table of Contents If we fail to protect our intellectual property or if others use our proprietary technology without authorization, our competitive position may suffer. Our future success and ability to compete depends in part on our proprietary technology.
As a result, our business, financial condition, and operating result could be materially and adversely affected. If we fail to protect our intellectual property or if others use our proprietary technology without authorization, our competitive position may suffer. 23 Table of Contents Our future success and ability to compete depends in part on our proprietary technology.
In addition, recently we have focused our direct-sales business on the largest users of hierarchical storage architectures, the so-called “hyperscalers”; there are very few of these extremely large storage customers, but their order activity has a significant impact on our results from quarter to quarter.
In addition, we have focused our direct-sales business on the largest users of hierarchical storage architectures, the so-called “hyperscalers”; there are very few of these extremely large storage customers, but their order activity has a significant impact on our results from quarter to quarter.
We could be responsible for the financial impact from any forecast reduction or product mix shift relative to materials already purchased under a prior Table of Contents forecast, including the cost of finished goods in excess of current customer demand or for excess or obsolete inventory.
We could be responsible for the financial 12 Table of Contents impact from any forecast reduction or product mix shift relative to materials already purchased under a prior forecast, including the cost of finished goods in excess of current customer demand or for excess or obsolete inventory.
Table of Contents Uncertainty about economic conditions poses risks as businesses may further reduce or postpone spending in response to reduced budgets, tightening of credit markets, increases in inflation and interest rates, negative financial news, and declines in income or asset values which could adversely affect our business, financial condition and operating results.
Uncertainty about economic conditions poses risks as businesses may further reduce or postpone spending in response to reduced budgets, tightening of credit markets, increases in inflation and interest rates, negative financial news, and declines in income or asset values which could adversely affect our business, financial condition and operating results.
Table of Contents A limited number of products comprise a significant majority of our sales, and due to rapid technological change in our industry, our future operating results depend on our ability to improve existing products and develop and successfully introduce new products. We have devoted and expect to continue to devote considerable management and financial resources to these efforts.
A limited number of products comprise a significant majority of our sales, and due to rapid technological change in our industry, our future operating results depend on our ability to improve existing products and develop and successfully introduce new products. We have devoted and expect to continue to devote considerable management and financial resources to these efforts.
Table of Contents Our credit facilities are collateralized by a pledge of all our assets. If we were to default and be unable to cure it within any applicable grace periods or obtain a waiver of such default, the lenders would have a right to foreclose on our assets to satisfy our obligations under these agreements.
Our credit facilities are collateralized by a pledge of all our assets. If we were to default and be unable to cure it within any applicable grace periods or obtain a waiver of such default, the lenders would have a right to foreclose on our assets to satisfy our obligations under these agreements.
While we maintain a Table of Contents rigorous corporate ethics and compliance program, we may be subject to increased regulatory scrutiny, significant monetary fines or penalties, suspension of business opportunities, loss of jurisdictional operating rights, and increased litigation and investigation costs as a result of any failure to comply with those requirements.
While we maintain a rigorous corporate ethics and compliance program, we may be subject to increased regulatory scrutiny, significant monetary fines or penalties, suspension of business opportunities, loss of jurisdictional operating rights, and increased litigation and investigation costs as a result of any failure to comply with those requirements.
A significant portion of our manufacturing, sales, and supply chain operations occur in countries other than the U.S. We utilize third-party business partners to engineer, produce, sell, and fulfill orders for our products, several of which have operations located in foreign countries including China, Hungary, India, Japan, Malaysia, Singapore, Mexico, the Philippines, Thailand, and Ukraine.
A significant portion of our manufacturing, sales, and supply chain operations occur in countries other than the U.S. We utilize third-party business partners to engineer, produce, sell, and fulfill orders for our products, several of which have operations located in foreign countries including China, Hungary, India, Japan, Malaysia, Singapore, 13 Table of Contents Mexico, the Philippines, Thailand, and Ukraine.
If we are Table of Contents unable to successfully manage the changes that we implement and detect and address issues as they arise, our business could be disrupted, and our results of operations and financial condition could be materially and adversely impacted.
If we are unable to successfully manage the changes that we implement and detect and address issues as they arise, our business could be disrupted, and our results of operations and financial condition could be materially and adversely impacted.
As a public company, we are obligated to file with the SEC annual and quarterly reports and other reports that are specified in Section 13 and other sections of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
As a public company, we are obligated to file with the SEC annual and quarterly reports and other reports that are specified in Section 13 and other sections of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The restatement of our previously issued financial statements has been time-consuming and expensive and could expose us to additional risks that could materially adversely affect our financial position, results of operations and cash flows, including unanticipated costs for accounting and legal fees in connection with or related to the restatement and the risk of potential stockholder litigation.
The restatement of our previously issued financial statements is time-consuming and expensive and could expose us to additional risks that could materially adversely affect our financial position, results of operations and cash flows, including unanticipated costs for accounting and legal fees in connection with or related to the restatement and the risk of potential stockholder litigation.
Our supply and distribution models may be reliant upon the actions of our third-party business partners and we may also be exposed to potential liability resulting from their violation of these or other compliance requirements. Further, our U.S. and international business models are based on currently applicable regulatory requirements and exceptions.
Our supply and distribution models may be reliant upon the actions of our third-party business partners and 24 Table of Contents we may also be exposed to potential liability resulting from their violation of these or other compliance requirements. Further, our U.S. and international business models are based on currently applicable regulatory requirements and exceptions.
In addition, we continue to face risks related to uncertain tariff levels between countries where our products are manufactured and sold, unstable political and economic conditions, including the war between Russia and Ukraine and the Hamas-Israel conflict, and concerns about sovereign debt, which could negatively impact the U.S. and global economies and adversely affect our financial results.
In addition, we continue to face 15 Table of Contents risks related to uncertain tariff levels between countries where our products are manufactured and sold, unstable political and economic conditions, including the war between Russia and Ukraine and the Hamas-Israel conflict, and concerns about sovereign debt, which could negatively impact the U.S. and global economies and adversely affect our financial results.
The trading price of our common stock may continue to fluctuate in response to a number of events and factors, many of which may be beyond our control, such as: • quarterly variations in our operating results; • failure to meet our financial guidance or the expectations of securities analysts and investors; • new products, services, innovations, strategic developments, or business combinations and investments by our competitors or us; • changes in our capital structure, including incurring new debt, issuing additional debt or equity to the public, and issuing common stock upon exercise of our outstanding warrants or subscribing to our recent rights offering; • large or sudden purchases or sales of stock by investors; • changes in interest and exchange rates; • market volatility resulting from a public health emergency; • a continued widespread decline in the U.S. or global economy as a result of the impact of COVID-19, supply chain constraints, or other factors; • fluctuations in the stock market in general and market prices for technology companies in particular; • tariffs imposed by the U.S. government on sales originating in or being shipped to countries with which we have on-going trade or other political conflicts; • investigations or enforcement actions related to a potential or actual failure to comply with applicable regulations; • costs of new or ongoing commercial litigation; and • significant changes in our brand or reputation.
The trading price of our common stock may continue to fluctuate in response to a number of events and factors, many of which may be beyond our control, such as: • quarterly variations in our operating results; • failure to meet our financial guidance or the expectations of securities analysts and investors; • new products, services, innovations, strategic developments, or business combinations and investments by our competitors or us; • changes in our capital structure, including incurring new debt, issuing additional debt or equity to the public, and issuing common stock upon exercise of our outstanding warrants or subscribing to our recent rights offering; • large or sudden purchases or sales of stock by investors; • changes in interest and exchange rates; • market volatility resulting from a public health emergency; • fluctuations in the stock market in general and market prices for technology companies in particular; • tariffs imposed by the U.S. government on sales originating in or being shipped to countries with which we have on-going trade or other political conflicts; • investigations or enforcement actions related to a potential or actual failure to comply with applicable regulations; • costs of new or ongoing commercial litigation; and • significant changes in our brand or reputation.
In recent years, we have implemented several significant initiatives involving our sales and marketing, product engineering, and operations organizations, aimed at transitioning our revenue model from discrete hardware sales to recurring software revenue, increasing our efficiency, and better aligning internal operations with our corporate strategy.
In recent years, we have implemented several significant initiatives involving our sales and marketing, product engineering, and operations organizations, aimed at transitioning our revenue model from discrete hardware sales to recurring software revenue, increasing our efficiency, and better 20 Table of Contents aligning internal operations with our corporate strategy.
Table of Contents Risks Related to Our Indebtedness We have significant indebtedness, which imposes upon us debt service obligations, and our term loan and revolving credit facilities contain various operating and financial covenants that limit our discretion in operating our business.
Risks Related to Our Indebtedness and Liquidity We have significant indebtedness, which imposes upon us debt service obligations, and our term loan and revolving credit facilities contain various operating and financial covenants that limit our discretion in operating our business.
These restructuring plans may result in decreases to our revenues or adversely affect our ability to grow our business in the future. Workforce reductions may also adversely affect employee morale and our ability to retain our employees.
These restructuring plans may result in decreases to our revenues or adversely affect our ability to grow our business in the future. Workforce reductions may also adversely affect employee morale and our ability to retain our employees, and may result in increased legal proceedings by terminated employees.
Decreased market acceptance or use of products employing tape technology has materially and adversely impacted our business, financial condition, and operating results, and we expect that our revenues from certain types of tape products could continue to decline in the future.
As a result, our future operating results depend in part on continued market acceptance and use of tape products. Decreased market acceptance or use of products employing tape technology has materially and adversely impacted our business, financial condition, and operating results, and we expect that our revenues from certain types of tape products could continue to decline in the future.
As a result of the filing of this Annual Report on Form 10-K, which includes the financial statements and other information required in the Quarterly Reports on Form 10-Q for the fiscal quarters ended December 31, 2023 and September 30, 2023, we have complied with the Filings Requirement.
As a result of the filing of the Annual Report on Form 10-K for the fiscal year ended March 31, 2024 on June 28, 2024, which included the financial statements and other information required in the Quarterly Reports on Form 10-Q for the fiscal quarters ended December 31, 2023 and September 30, 2023, we complied with the Filings Requirement.
There are no assurances that we can continue to maintain compliance with these covenants. Our ability to comply with these covenants may be affected by circumstances and events beyond our control, such as prevailing economic conditions and changes in regulations.
Furthermore, they may restrict our ability to expand and pursue our business strategies and otherwise conduct our business. There are no assurances that we can continue to maintain compliance with these covenants. Our ability to comply with these covenants may be affected by circumstances and events beyond our control, such as prevailing economic conditions and changes in regulations.
The applicable interest rate on the facility may increase if our total leverage ratio increases to specified amounts that would result in our interest expenses rising. These covenants could materially adversely affect our ability to finance our future operations or capital needs. Furthermore, they may restrict our ability to expand and pursue our business strategies and otherwise conduct our business.
The applicable interest rate on the facility may increase if our total leverage ratio increases to specified amounts that would result in our interest expenses rising. 19 Table of Contents These covenants could materially adversely affect our ability to finance our future operations or capital needs.
Further, as our debt reaches maturity, we will be required to make large cash payments or adopt one or more alternatives, such as restructuring indebtedness or obtaining additional debt or equity financing on terms that may be onerous or highly dilutive.
Further, as our debt reaches maturity, we will be required to make large cash payments or adopt one or more alternatives, such as restructuring indebtedness or obtaining additional debt or equity financing on terms that may be highly dilutive. Our ability to restructure or refinance our debt will depend on the capital markets and our financial condition at such time.
When exercised, these warrants will result in significant dilution to our stockholders. As a result, the issuance of common stock upon the exercise of our outstanding warrants may cause our stock price to decline. We must maintain compliance with the terms of our existing credit facilities or receive a waiver for any non-compliance.
These warrants were exercised in December 2024 and January 2025 and resulted in significant dilution to our stockholders. Future sales of common stock issued upon the exercise of these warrants may cause our stock price to decline. We must maintain compliance with the terms of our existing credit facilities or receive a waiver for any non-compliance.
We have identified material weaknesses in our internal control over financial reporting, which could, if not properly remediated, result in additional material misstatements in our interim or annual consolidated financial statements, could impair our ability to produce accurate and timely financial statements and could adversely affect investor confidence in our financial reports, which could negatively affect our business.
We have identified material weaknesses in our internal control over financial reporting, which could, if not properly remediated, result in additional material misstatements in our interim or annual consolidated financial statements, could impair our ability to produce accurate and timely financial statements and could adversely affect investor confidence in our financial reports, which could negatively affect our business. 26 Table of Contents We have concluded that our internal control over financial reporting and disclosure controls and procedures were not effective as of March 31, 2025 due to the existence of material weaknesses in our internal control over financial reporting, as described in
Each of these limitations are subject to certain liquidity levels, thresholds, or grace periods. In addition, the credit agreement contains affirmative covenants, including certain financial covenants that require us to maintain minimum fixed charge coverage ratios.
In addition, the credit agreement contains affirmative covenants, including certain financial covenants that require us to maintain minimum fixed charge coverage ratios.
Any such action could harm our reputation and the confidence of investors and customers in us and could materially and adversely affect our business and cause our share price to fall.
Any such action could harm our reputation and the confidence of investors and customers in us and could materially and adversely affect our business and cause our share price to fall. If we do not continue to meet all of the continued listing requirements of Nasdaq, we may be delisted.
The risks and uncertainties described below could materially and adversely affect our business, operating results, revenue, financial condition, liquidity, market share or competitive position, and consequently, the value of our securities. Risks Related to Our Supply Chain, Customers and Sales Strategy Cost increases, supply disruptions, or raw material shortages, including in single source components, could harm our business.
Risks Related to Our Supply Chain, Customers and Sales Strategy Cost increases, supply disruptions, or raw material shortages, including in single source components, could harm our business.
If any of our large customers should significantly decrease or stop purchasing our solutions, we would see a significant reduction in revenue that may result in a material adverse effect on our operating results. The U.S. federal government is an important customer, and our business may be materially and adversely harmed by changes in government purchasing activity.
During the fiscal year ended March 31, 2025 and 2024, no customer represented 10% or more of our total revenue. If any of our large customers should significantly decrease or stop purchasing our solutions, we would see a significant reduction in revenue that may result in a material adverse effect on our operating results.
Our ability to restructure or refinance our debt will depend on the capital markets and our financial condition at such time. We may be unable to incur additional debt or refinance our existing debt on acceptable terms, if at all, which could result in a default on our debt obligations.
We may be unable to incur additional debt or refinance our existing debt on acceptable terms, if at all, which could result in a default on our debt obligations. We continue to review and discuss potential financial transactions, including with our current lenders, in an effort to restructure our currently outstanding debt and to improve our balance sheet.
The determination to restate the financial statements was made by our Audit Committee of the Board of Directors upon management’s Table of Contents recommendation. Our management concluded that certain of our previously issued financial statements should no longer be relied upon.
Our management concluded that certain of our previously issued financial statements should no longer be relied upon.
For further description of our outstanding debt, see the section captioned “Liquidity and Capital Resources” in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .
As recently as December 2024, we fell out of compliance with certain financial covenants in our credit agreements, which resulted in defaults for which we received waivers of noncompliance from our lenders. For further description of our outstanding debt, see the section captioned “Liquidity and Capital Resources” in Management’s Discussion and Analysis of Financial Condition and Results of Operations .
In March 2024, we fell out of compliance with certain financial covenants in our credit agreements, which would have resulted in default had we not received a waiver of noncompliance from our lenders. Our credit agreements contain negative covenants and customary events of default provisions, including for payment default, covenant default, cross default to other material indebtedness, and judgment default.
In March 2024, June 2024, July 2024, August 2024 and again in December 2024, we fell out of compliance with certain financial covenants in our credit agreements, which resulted in defaults for which we received waivers of noncompliance from our lenders.
In addition, we plan to comply with the Minimum Bid Price Requirement by the extension period by effecting a reverse stock split of our common stock by such date. While we expect to regain compliance with the Minimum Bid Price Requirement within the granted extension period, there can be no guarantee that we will regain compliance by such date.
While we expect to regain compliance with the Filings Requirement with respect to the 2025 10-K within the timeline prescribed by Nasdaq, there can be no assurance that we will be able to regain compliance within such period.
Any of these events and factors may cause our stock price to rise or fall and may adversely affect our business and financing opportunities. We are not in compliance with the Nasdaq Global Market’s continued listing standards, and if we do not regain compliance, we will be delisted from Nasdaq.
Any of these events and factors may cause our stock price to rise or fall and may adversely affect our business and financing opportunities. Significant changes to our leadership team and management transitions might harm our future operating results.
Even if new financing were available at such time, it may not be on terms that are acceptable to us or as favorable to us as our current agreements. Without a sufficient credit facility, we would be adversely affected by a lack of access to liquidity needed to operate our business.
Without a sufficient credit facility, we would be adversely affected by a lack of access to liquidity needed to operate our business. It is not possible to predict the actual number of shares we will sell under the Standby Equity Purchase Agreement (the “SEPA”), or the actual gross proceeds resulting from those sales.
If we do not regain compliance with the Minimum Bid Price Requirement within the extension period, we will be delisted from Nasdaq. Furthermore, there can be no assurance that we will maintain compliance with the other Nasdaq listing requirements. We may be unable to attract and retain key talent necessary to effectively meet our business objectives.
If we fail to regain compliance and Nasdaq determines to delist our common stock, our common stock would be traded on the over-the-counter market, and the value and liquidity of our stockholders’ investments would be materially impacted. Furthermore, there can be no assurance that we will maintain compliance with the other Nasdaq listing requirements.
Removed
ITEM 1A. RISK FACTORS Before investing in any of our securities, you should carefully consider the risks and uncertainties described below, together with all other information in this Annual Report.
Added
ITEM 1A. RISK FACTORS Investing in our common stock involves a high degree of risk. Before you make a decision to buy our common stock, in addition to the risks and uncertainties discussed above under “Note Regarding Forward-Looking Statements,” you should carefully consider the risks set forth herein.
Removed
During the fiscal year ended March 31, 2024, no customer represented 10% or more of our total revenue compared to the fiscal year ended March 31, 2023, when we had one customer represent 10% or more of our total revenue.
Added
If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of operations. As a result, the market price of our common stock could decline, and you could lose all or part of your investment.
Removed
The hearing and stay request with respect to the Minimum Bid Price Requirement and the Filings Requirement stayed any further action by the Nasdaq Staff pending a written decision from the Panel and our common stock remains listed and eligible for trading on the Nasdaq Global Market.
Added
Additionally, the risks and uncertainties described in this Annual Report are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business.
Removed
We derive significant revenue from products incorporating tape technology. Our future operating results depend in part on continued market acceptance and use of tape products; in the past, decreases in the tape products market have materially and adversely impacted our business, financial condition and operating results.
Added
The U.S. federal government is an important customer, and our business may be materially and adversely harmed by changes in government purchasing activity.
Removed
As recently as March 2024, we were in danger of failing to meet certain financial covenants in our debt agreements, which could have resulted in a default under these agreements if we had not obtained a waiver of noncompliance from our lenders.
Added
For example, the closing price of our common stock on the Nasdaq Global Market ranged from $2.22 to $90.64 from June 1, 2024 through May 31, 2025. During this time, we did not experience any material changes in our financial condition or results of operations that would explain such price volatility.
Removed
We have concluded that our internal control over financial reporting and disclosure controls and procedures were not effective as of March 31, 2024 due to the existence of material weaknesses in our internal control over financial reporting, as described in Item 9A. Controls and Procedures of this Annual Report on Form 10-K. As described in
Added
We have experienced significant changes to our leadership team in 2025, including changes to our Chief Executive Officer, Chief Financial Officer and Chief Administrative Officer. Although we believe these leadership transitions are in the best interest of our stockholders, these transitions may result in the loss of personnel with deep institutional knowledge.
Added
Further, the transition could potentially disrupt our operations and relationships with employees, suppliers, partners, and customers due to added costs, operational inefficiencies, decreased employee morale and productivity and increased turnover. We must successfully recruit and integrate our new leadership team members within our organization to achieve our operating objectives.
Added
As such, the leadership transition may temporarily affect our business performance and results of operations while the new members of our leadership team become familiar with our business and acclimate into their new roles.
Added
Furthermore, these changes increase our dependency on the other members of our leadership team that remain with us, who are not contractually obligated to remain employed with us and may leave at any time.
Added
Any such departure could be particularly disruptive given that we are already experiencing leadership transitions and, to the extent we experience additional management turnover, competition for top management is high such that it may take some time to find candidates that meet our requirements.
Added
Our future operating results may depend upon the continued service of our key personnel and in significant part upon our ability to attract and retain qualified management personnel.
Added
If we are unable to mitigate these or other similar risks, our business, results of operations and financial condition may be materially and adversely affected. 16 Table of Contents We may be unable to attract and retain key talent necessary to effectively meet our business objectives.
Added
We derive significant revenue from products incorporating tape technology.
Added
If we proceed with any of these potential financial transactions, they could be highly dilutive to our stockholders.
Added
If a potential financial transaction does not occur or we are unable to repay all our outstanding debt from the proceeds of this offering, then we intend to continue to explore one or more alternatives, such as restructuring remaining indebtedness or obtaining additional debt or equity financing on terms that may be highly dilutive.
Added
Our credit agreements contain negative covenants and customary events of default provisions, including for payment default, covenant default, cross default to other material indebtedness, and judgment default. Each of these limitations are subject to certain liquidity levels, thresholds, or grace periods.
Added
We continue to review and discuss potential financial transactions, including with our current lenders, if an effort to restructure our currently outstanding debt and to improve our balance sheet. If we proceed with any of these potential financial transactions, they could be highly dilutive to our stockholders.
Added
If a potential financing transaction does not occur or we are unable to repay all our outstanding debt from the proceeds of this offering, then we intend to continue to explore one or more alternatives to restructure or repay our remaining debt.
Added
On January 25, 2025, we entered into the SEPA with YA II PN, Ltd., a Cayman Islands exempt limited partnership (“YA”), pursuant to which YA committed to purchase up to $200.0 million in shares of our common stock, subject to certain limitations and conditions.
Added
We generally have the right to control the timing and amount of any sales of our shares of common stock to YA under the SEPA.
Added
Because the purchase price per share to be paid by YA for the shares of common stock that we may elect to sell to YA under the SEPA will fluctuate based on the market prices of our common stock during the applicable purchase valuation period for each purchase made pursuant to the SEPA, it is not possible for us to predict the total number of shares of common stock that we will sell to YA under the SEPA, the purchase price per share that YA will pay for shares purchased from us in the future under the SEPA, or the aggregate gross proceeds that we will receive from those purchases by YA under the SEPA.
Added
Sales of shares of our common stock pursuant to the SEPA will be dilutive to stockholders. Moreover, although the SEPA provides that we may sell up to an aggregate of $200.0 million of our common stock to YA, only an aggregate of 19,811,201 shares of our common stock under the SEPA have been registered for resale by YA.
Added
If it becomes necessary for us to issue and sell to YA under the SEPA more than the shares that were registered for resale under the Registration Statement in order to receive aggregate gross proceeds equal to the total commitment of aggregate of $200.0 million under the SEPA, we must file with the SEC one or more additional registration statements to register under the Securities Act of 1933 the resale by YA of any such additional shares of our common stock we wish to sell from time to time under the SEPA, which the SEC must declare effective.
Added
In addition, on August 26, 2024, we effected a 1-for-20 reverse stock split of our common stock following stockholder approval at our annual meeting of stockholders in order to comply with the Minimum Bid Price Requirement.
Added
On September 17, 2024, we received a letter from the Nasdaq Staff confirming that we regained compliance and that our securities will continue to be listed on Nasdaq.
Added
On October 4, 2024, we received written notice from Nasdaq that we were not in compliance with Nasdaq Listing Rule 5450(b)(3)(C) (the "Market Value Requirement") as a result of our failure to maintain a minimum market value of publicly held shares of $15,000,000.
Added
On December 9, 2024, we received a letter from the Nasdaq Staff confirming that we had regained compliance with the Market Value Requirement and that the matter would be closed.
Added
On July 17, 2025, we received written notice from Nasdaq that we were not in compliance with the Filings Requirement as a result of our failure to timely file the Annual Report on Form 10-K for the fiscal year ended March 31, 2025 (the "2025 10-K").
Added
In addition, we have not been able to file our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2025 by August 14, 2025.
Added
Also, in the Annual Report on Form 10-K for the fiscal year ended March 31, 2024 (the “2024 Annual Report”), we restated certain of our financial statements. The determination to restate the financial statements was made by our Audit Committee of the Board of Directors upon management’s recommendation.
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
1 edited+0 added−0 removed14 unchanged
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
1 edited+0 added−0 removed14 unchanged
2024 filing
2025 filing
Biggest changeBoard members receive presentations on cybersecurity topics from our CIO, Table of Contents internal security staff or external experts as part of the Board’s continuing education on topics that impact public companies. The CIEC is responsible for assessing and managing our material risks from cybersecurity threats.
Biggest changeBoard members receive presentations on cybersecurity topics from our CIO, 30 Table of Contents internal security staff or external experts as part of the Board’s continuing education on topics that impact public companies. The CIEC is responsible for assessing and managing our material risks from cybersecurity threats.
Item 2. Properties
Properties — owned and leased real estate
1 edited+1 added−0 removed0 unchanged
Item 2. Properties
Properties — owned and leased real estate
1 edited+1 added−0 removed0 unchanged
2024 filing
2025 filing
Biggest changeITEM 2. PROPERTIES Our headquarters are located in San Jose, California. We lease facilities in North America, Europe, and Asia Pacific. We believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate expansion of our operations.
Biggest changeWe believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate expansion of our operations.
Added
ITEM 2. PROPERTIES As of March 31, 2025, our headquarters were located in San Jose, California. Effective August 1, 2025, we moved our headquarters to Centennial, Colorado. We lease facilities in North America, Europe, and Asia Pacific.
Item 4. Mine Safety Disclosures
Mine Safety Disclosures — required of mining issuers
2 edited+0 added−0 removed0 unchanged
Item 4. Mine Safety Disclosures
Mine Safety Disclosures — required of mining issuers
2 edited+0 added−0 removed0 unchanged
2024 filing
2025 filing
Biggest changeFinancial Statements and Supplementary Data 57 Item 9 . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 127 Item 9A . Controls and Procedures 127 Item 9B . Other Information 128
Biggest changeFinancial Statements and Supplementary Data 49 Item 9 . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 89 Item 9A . Controls and Procedures 89 Item 9B . Other Information 90
Item 4. Mine Safety Disclosures 30 PART II Item 5 . Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 31 Item 6 . [Reserved] 33 Item 7 . Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 7A . Quantitative and Qualitative Disclosures About Market Risk 56 Item 8 .
Item 4. Mine Safety Disclosures 31 PART II Item 5 . Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 32 Item 6 . [Reserved] 33 Item 7 . Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 7A . Quantitative and Qualitative Disclosures About Market Risk 47 Item 8 .
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
2 edited+2 added−2 removed1 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
2 edited+2 added−2 removed1 unchanged
2024 filing
2025 filing
Biggest changeIssuer Purchases of Equity Securities During each of the fiscal quarters ended March 31, 2024, December 31, 2023 and September 30, 2023, there were no purchases of our common stock by or on behalf of us or any of our affiliated purchasers, as such term is defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended ("the "Exchange Act").
Biggest changeIssuer Purchases of Equity Securities During the three months ended March 31, 2025, there were no purchases of our common stock by or on behalf of us or any of our affiliated purchasers, as such term is defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended ("the "Exchange Act"). 32 Table of Contents
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the Nasdaq Global Market under the symbol "QMCO". Holders of Record, and Dividends As of June 25, 2024, we had 223 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the Nasdaq Global Market under the symbol "QMCO". Holders of Record As of June 24, 2025, we had 200 holders of record of our common stock.
Removed
Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 5: Debt to the consolidated financial statements. Recent Sales of Unregistered Securities During the periods covered by this Annual Report, we did not sell any equity securities that were not registered under the Securities Act of 1933.
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 4: Debt to the consolidated financial statements. Recent Sales of Unregistered Securities In connection with the execution of the SEPA, the Company issued 42,158 shares of common stock as commitment shares on January 29, 2025.
Removed
Table of Contents Stock Performance Graph The graph below compares the cumulative total return of a $100 investment in our common stock with the cumulative total return of the same investment in the Nasdaq and the S&P 500 Index from March 31, 2019 through March 31, 2024. Table of Contents
Added
Pursuant to the SEPA, the Company issued (i) 190,000 shares of common stock on February 18, 2025, (ii) 480,000 shares of common stock on February 20, 2025, (iii) 22,000 shares of common stock on March 3, 2025, (iv) 315,000 shares of common stock on March 14, 2025, and (v) 107,981 on March 18th, 2025.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
73 edited+13 added−97 removed39 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
73 edited+13 added−97 removed39 unchanged
2024 filing
2025 filing
Biggest changeTable of Contents RESULTS OF OPERATIONS Year Ended March 31, (in thousands) 2024 2023 2022 Restated Restated Total revenue $ 311,600 $ 422,077 $ 383,432 Total cost of revenue (1) 186,711 278,813 225,792 Gross profit 124,889 143,264 157,640 Operating expenses Sales and marketing (1) 60,893 66,034 62,957 General and administrative (1) 51,547 47,752 45,256 Research and development (1) 38,046 44,555 51,812 Restructuring charges 3,280 1,605 850 Total operating expenses 153,766 159,946 160,875 Loss from operations (28,877) (16,682) (3,235) Other income (expense), net (1,746) 1,956 (251) Interest expense (15,089) (10,560) (11,888) Change in fair value of warrant liability 5,137 10,250 60,030 Loss on debt extinguishment, net — (1,392) (4,960) Net income (loss) before income taxes (40,575) (16,428) 39,696 Income tax provision 711 1,940 1,341 Net income (loss) $ (41,286) $ (18,368) $ 38,355 (1) Includes stock-based compensation as follows: Year Ended March 31, (in thousands) 2024 2023 2022 Cost of revenue $ 774 $ 929 $ 1,112 Research and development 1,091 2,997 5,843 Sales and marketing 669 2,397 2,516 General and administrative 2,187 4,427 4,358 Total $ 4,721 $ 10,750 $ 13,829 Comparison of the Years Ended March 31, 2024 and 2023 (restated) Revenue Year Ended March 31, (in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change Restated Product revenue $ 174,879 56 % $ 274,854 65 % $ (99,975) (36) % Service and subscription revenue 126,590 41 133,518 32 (6,928) (5) % Royalty revenue 10,131 3 13,705 3 (3,574) (26) % Total revenue $ 311,600 100 % $ 422,077 100 % $ (110,477) (26) % Product Revenue Table of Contents In fiscal 2024, product revenue decreased $100.0 million, or 36%, as compared to fiscal 2023.
Biggest changeFinancial Statements and Supplementary Data. 34 Table of Contents RESULTS OF OPERATIONS Year Ended March 31, (in thousands) 2025 2024 Total revenue $ 274,058 $ 311,600 Total cost of revenue (1) 164,226 186,711 Gross profit 109,832 124,889 Operating expenses 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 Total operating expenses 151,512 153,766 Loss from operations (41,680) (28,877) Other expense, net (710) (1,746) Interest expense (23,607) (15,089) Change in fair value of warrant liability (45,270) 5,137 Loss on debt extinguishment, net (3,003) — Net income (loss) before income taxes (114,270) (40,575) Income tax provision 821 711 Net income (loss) $ (115,091) $ (41,286) (1) Includes stock-based compensation as follows: Year Ended March 31, (in thousands) 2025 2024 Cost of revenue $ 373 $ 774 Research and development 495 1,091 Sales and marketing 317 669 General and administrative 1,643 2,187 Total $ 2,828 $ 4,721 Comparison of the Years Ended March 31, 2025 and 2024 Revenue Year Ended March 31, (in thousands) 2025 % of revenue 2024 % of revenue $ Change % Change Product revenue $ 154,182 57 % $ 174,879 56 % $ (20,697) (12) % Service and subscription revenue 110,658 40 % 126,590 41 % (15,932) (13) % Royalty revenue 9,218 3 % 10,131 3 % (913) (9) % Total revenue $ 274,058 100 % $ 311,600 100 % $ (37,542) (12) % Product Revenue 35 Table of Contents In fiscal 2025, product revenue decreased $20.7 million, or 12%, as compared to fiscal 2024.
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.
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.
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.
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.
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.
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.
This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s consolidated statement of operations. Recently Issued and Adopted Accounting Pronouncements Table of Contents For recently issued and adopted accounting pronouncements, see Note 1: Description of Business and Significant Accounting Policies , to our consolidated financial statements.
This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s consolidated statement of operations. Recently Issued and Adopted Accounting Pronouncements For recently issued and adopted accounting pronouncements, see Note 1: Description of Business and Significant Accounting Policies , to our consolidated financial statements.
See Note 10: Income Taxes , to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Inventories Manufacturing Inventories Table of Contents 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.
See Note 9: Income Taxes , to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Inventories Manufacturing Inventories 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.
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. Outside of the Tape and Hyperscale business, our remaining Secondary and Primary storage systems are also offered as a subscription.
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.
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.
This evaluation is based on factors including, but not limited to, changes in facts or 46 Table of Contents 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.
Revenue Recognition Table of Contents Our revenue is derived from three main sources: (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.
Revenue Recognition Our revenue is derived from three main sources: (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.
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.
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 over time as each day is completed.
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 45 Table of Contents circumstances.
We anticipate 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 Service and subscription revenue decreased $6.9 million, or 5%, in fiscal 2024 compared to fiscal 2023.
We anticipate 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 Service and subscription revenue decreased $15.9 million, or 13%, in fiscal 2025 compared to fiscal 2024.
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”).
For additional information related to the quarterly restatement, see Note 15: 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. Financial Statements and Supplementary Data .
For additional information related to the quarterly restatement, see Note 14: 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.
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 discussed in Note 1: 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.
Other Income (Expense) Nine Months Ended December 31, (dollars in thousands) 2023 % of revenue 2022 % of revenue $ Change % Change Other income (expense) $ (2,049) (1) % $ 2,638 1 % $ (4,687) 178 % 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.
Other Income (Expense) Nine Months Ended December 31, (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, 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.
Restatement 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.
Restatement 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 quarter ended December 31, 2024.
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.
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.
We generated negative cash flows from operations of approximately $10.2 million and $4.9 million for the fiscal years ended March 31, 2024 and 2023, respectively, and generated net losses of approximately $41.3 million and $18.4 million for the fiscal years ended March 31, 2024 and 2023, respectively.
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.
Interest Expense Three Months Ended December 31, (dollars in thousands) 2023 % of revenue 2022 % of revenue $ Change % Change Interest expense $ 3,937 5 % $ 2,701 2 % $ 1,236 46 % 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.
Interest Expense Three Months Ended December 31, (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, 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.
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. 36 Table of Contents 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 2024, research and development expenses decreased $6.5 million, or 15%, as compared with fiscal 2023. This decrease was the result of the continued consolidation of acquisition costs, and efficiencies realized through improved organization design. In fiscal 2024, restructuring expenses increased $1.7 million, or 104%, as compared with fiscal 2023.
In fiscal 2025, research and development expenses decreased $6.9 million, or 18%, as compared with fiscal 2024. This decrease was the result of the continued consolidation of acquisition costs, and efficiencies realized through improved organization design. In fiscal 2025, restructuring expenses increased $0.8 million, or 25%, as compared with fiscal 2024.
Income Taxes Nine Months Ended December 31, (dollars in thousands) 2023 % of revenue 2022 % of revenue $ Change % Change Income tax provision $ 1,573 1 % $ 1,564 — % $ 9 1 % The income tax provision for the nine months ended December 31, 2023 and 2022 is primarily influenced by foreign and state income taxes.
Income Taxes Nine Months Ended December 31, (dollars in thousands) 2024 % of pretax income 2023 % of pretax income $ Change % Change Income tax provision $ 675 (1) % $ 1,573 (8) % $ (898) (57) % The income tax provision for the nine months ended December 31, 2024 and 2023 is primarily influenced by foreign and state income taxes.
Royalty revenue decreased $3.6 million, or 26%, in fiscal 2024, as compared to fiscal 2023, related to lower overall unit shipments.
Royalty revenue decreased $0.9 million, or 9%, in fiscal 2025, as compared to fiscal 2024, related to lower overall unit shipments.
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.
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. For additional information about our debt, see the sections entitled “Risk Factors—Risks Related to Our Indebtedness and Liquidity” in Item 1A.
We had cash and cash equivalents of $25.7 million as of March 31, 2024, which excludes $0.2 million of short-term restricted cash. Our total outstanding Term Loan debt was $87.9 million, and we had $27.3 million available to borrow under the PNC Credit Facility as of March 31, 2024.
We had cash and cash equivalents of $16.5 million as of March 31, 2025, which excludes $0.1 million of short-term restricted cash. Our total outstanding Term Loan debt was $102.5 million, and we had $0.4 million available to borrow under the PNC Credit Facility as of March 31, 2025.
Income Taxes Three Months Ended December 31, (dollars in thousands) 2023 % of revenue 2022 % of revenue $ Change % Change Income tax provision $ 510 1 % $ 693 1 % $ (183) (26) % The income tax provision for the three months ended December 31, 2023 and 2022 is primarily influenced by foreign and state income taxes.
Income Taxes 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) % The income tax provision for the three months ended December 31, 2024 and 2023 is primarily influenced by foreign and state income taxes.
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. Royalty Gross Margin Royalties do not have significant related cost of sales.
Service and Subscription Gross Margin 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 Royalties do not have significant related cost of sales.
The increase was primarily related to differences in foreign currency gains and losses during each period, as well as the sale of IP licenses.
The decrease was primarily related to differences in foreign currency gains and losses during each period.
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 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.
Net Cash Used in Investing Activities 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 $5.9 million for the year ended March 31, 2024, primarily attributable to the implementation costs of a new Enterprise Resource Planning system. 44 Table of Contents 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.
Gross Profit and Margin Nine Months Ended December 31, (dollars in thousands) 2023 Gross margin % 2022 Gross margin % $ Change Basis point change Product $ 33,421 24.1 % $ 40,182 19.8 % $ (6,761) 430 Service and subscription 56,900 60.4 % 57,708 57.7 % (808) 270 Royalty 7,235 100.0 % 9,744 100.0 % (2,509) — Gross profit $ 97,556 40.6 % $ 107,634 34.4 % $ (10,078) 620 Gross profit and margin percentages are key metrics that management monitors to assess the performance on the business.
Gross Profit and Margin Nine Months Ended December 31, (dollars in thousands) 2024 Gross margin % 2023 Gross margin % $ Change Basis point change Restated Product $ 27,314 22.7 % $ 33,421 24.1 % $ (6,107) (141) Service and subscription 50,686 59.9 % 56,900 60.4 % (6,214) (48) Royalty 7,592 100.0 % 7,235 100.0 % 357 — Gross profit $ 85,592 40.2 % $ 97,556 40.6 % $ (11,964) (43) Gross profit and margin percentages are key metrics that management monitors to assess the performance on the business.
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.
This decrease was primarily driven by lower service revenues. Royalty Gross Margin Royalties do not have significant related cost of sales.
Interest expense Year Ended March 31, (in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change Restated Interest expense $ 15,089 5 % $ 10,560 3 % 4,529 43 % In fiscal 2024, interest expense increased $4.5 million, or 43%, as compared to fiscal 2023.
Interest expense Year Ended March 31, (in thousands) 2025 % of revenue 2024 % of revenue $ Change % Change Interest expense $ (23,607) (9) % $ (15,089) (5) % (8,518) 56 % In fiscal 2025, interest expense increased $8.5 million, or 56%, as compared to fiscal 2024.
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.
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.
In the normal course of business to facilitate transactions of our services and products, we indemnify certain parties with respect to certain matters, such as intellectual property infringement or other claims. We also have indemnification agreements with our current and former officers and directors.
We have little history of costs associated with such indemnification requirements and contingent liabilities associated with product liability may be mitigated by our insurance coverage. In the normal course of business to facilitate transactions of our services and products, we indemnify certain parties with respect to certain matters, such as intellectual property infringement or other claims.
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 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 $9.6 million, or 10%, in the nine months ended December 31, 2024 compared to the same period in fiscal 2024.
Below is a table that shows our contractual obligations as of March 31, 2024 (in thousands): Payments Due by Period (in thousands) Total 1 year or less 1 – 3 Years 3 –5 Years More than 5 years Debt obligations (1) $ 114,546 $ 114,546 $ — $ — $ — Future lease commitments (2) 21,127 2,538 3,776 2,730 12,083 Purchase obligations (3) 32,400 32,400 — — — Total $ 168,073 $ 149,484 $ 3,776 $ 2,730 $ 12,083 (1) Consists of principal on our Term Loan and PNC Credit Facility.
Below is a table that shows our contractual obligations as of March 31, 2025 (in thousands): Payments Due by Period (in thousands) Total 1 year or less 1 – 3 Years 3 –5 Years More than 5 years Debt obligations (1) $ 129,107 $ 129,107 $ — $ — $ — Future lease commitments (2) 19,111 2,346 3,429 2,481 10,855 Purchase obligations (3) 48,612 48,612 — — — Total $ 196,830 $ 180,065 $ 3,429 $ 2,481 $ 10,855 (1) Consists of principal on our Term Loan and PNC Credit Facility.
Operating Expenses Three Months Ended December 31, (dollars in thousands) 2023 % of revenue 2022 % of revenue $ Change % Change Sales and marketing $ 14,244 20 % $ 16,339 14 % $ (2,095) (13) % General and administrative 11,893 17 % 10,969 10 % 924 8 % Research and development 8,763 12 % 11,254 10 % (2,491) (22) % Restructuring charges 497 1 % (41) — % 538 (1,312) % Total operating expenses $ 35,397 49 % $ 38,521 34 % $ (3,124) (8) % 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.
Operating Expenses Three Months Ended December 31, (dollars in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change Sales and marketing $ 12,448 18 % $ 14,244 20 % $ (1,796) (13) % General and administrative 14,142 21 % 11,893 17 % 2,249 19 % Research and development 7,683 11 % 8,763 12 % (1,080) (12) % Restructuring charges 1,342 2 % 497 1 % 845 170 % Total operating expenses $ 35,615 52 % $ 35,397 49 % $ 218 1 % 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.
Net Cash Provided by Financing Activities 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.
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 Our contingent liabilities consist primarily of certain financial guarantees, both express and implied, related to product liability and potential infringement of intellectual property.
Table of Contents Loss on debt extinguishment Nine Months Ended December 31, (dollars in thousands) 2023 % of revenue 2022 % of revenue $ Change % Change Loss on debt extinguishment $ — — % $ (1,392) — % $ 1,392 100 % 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.
Loss on Debt Extinguishment Nine Months Ended December 31, (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, 2024, loss on debt extinguishment was related to a prepayment of our Term Loan.
Other expense, net Year Ended March 31, (in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change Restated Other income (expense), net $ (1,747) (1) % $ 1,956 1 % $ 3,703 (189) % In fiscal 2024, other income (expense), net decrease of $3.7 million or 189%, compared to fiscal 2023.
Other expense, net Year Ended March 31, (in thousands) 2025 % of revenue 2024 % of revenue $ Change % Change Other income (expense), net $ (710) 0 % $ (1,746) (1) % $ (1,036) (59) % In fiscal 2025, other income (expense) resulted in a net decrease of $1.0 million or 59%, compared to fiscal 2024.
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.
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. 41 Table of Contents Service and Subscription Gross Margin 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.
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.
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.
It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of our indemnification claims, and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these agreements have not had a material impact on our operating results, financial position or cash flows.
We also have indemnification agreements with our current and former officers and directors. It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of our indemnification claims, and the unique facts and circumstances involved in each particular agreement.
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.
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.
Other Income (Expense) Three Months Ended December 31, (dollars in thousands) 2023 % of revenue 2022 % of revenue $ Change % Change Other income (expense) $ (1,419) (2) % $ (544) (—) % $ (875) (161) % 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.
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. 39 Table of Contents Other Income (Expense) Three Months Ended December 31, (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, 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.
Loss on debt extinguishment, net Year Ended March 31, (in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change Restated 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.
Loss on debt extinguishment, net Year Ended March 31, (in thousands) 2025 % of revenue 2024 % of revenue $ Change % Change Loss on debt extinguishment, net $ (3,003) (1) % $ — — % $ (3,003) (100) % In fiscal 2025, loss on debt extinguishment, net was related to prepayment of our long-term debt. 37 Table of Contents Income tax provision Year Ended March 31, (in thousands) 2025 % of revenue 2024 % of revenue $ Change % Change Income tax provision $ 821 — % $ 711 0 % $ (110) (15) % In fiscal 2025, the income tax provision increased $110 thousands or 15%, compared to fiscal 2024.
Gross Profit and Margin Year Ended March 31, (in thousands) 2024 Gross margin % 2023 Gross margin % $ Change Basis point change Restated Product gross profit $ 38,459 22.0 % $ 54,823 19.9 % $ (16,364) 210 Service and subscription gross profit 76,299 60.3 % 74,736 56.0 % 1,563 430 Royalty gross profit 10,131 100.0 % 13,705 100.0 % (3,574) — Gross profit $ 124,889 40.1 % $ 143,264 33.9 % $ (18,375) 614 Gross profit and margin percentages are key metrics that management monitors to assess the performance on the business.
Gross Profit and Margin Year Ended March 31, (in thousands) 2025 Gross margin % 2024 Gross margin % $ Change Basis point change Product gross profit $ 34,452 22.3 % $ 38,459 22.0 % $ (4,007) 30 Service and subscription gross profit 66,162 59.8 % 76,299 60.3 % (10,137) (50) Royalty gross profit 9,218 100.0 % 10,131 100.0 % (913) — Gross profit $ 109,832 40.1 % $ 124,889 40.1 % $ (15,057) — Gross profit and margin percentages are key metrics that management monitors to assess the performance on the business.
Comparison of the Three Months Ended December 31, 2023 and 2022 Revenue Three Months Ended December 31, (dollars in thousands) 2023 % of revenue 2022 % of revenue $ Change % Change Product revenue $ 37,113 51 % $ 77,494 69 % $ (40,381) (52) % Service and subscription 32,771 46 % 33,155 29 % (384) (1) % Royalty 2,042 3 % 2,826 2 % (784) (28) % Total revenue $ 71,926 100 % $ 113,475 100 % $ (41,549) (37) % 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.
Comparison of the Three Months Ended December 31, 2024 (Restated) and 2023 Revenue Three Months Ended December 31, (dollars in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change Restated Product revenue $ 38,634 57 % $ 37,113 51 % $ 1,521 4 % Service and subscription 27,724 40 % 32,771 46 % (5,047) (15) % Royalty 2,326 3 % 2,042 3 % 284 14 % Total revenue $ 68,684 100 % $ 71,926 100 % $ (3,242) (5) % Product Revenue 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.
Interest expense Nine Months Ended December 31, (dollars in thousands) 2023 % of revenue 2022 % of revenue $ Change % Change Interest expense $ 10,992 5 % $ 7,537 2 % $ 3,455 46 % 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.
Interest Expense Nine Months Ended December 31, (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, 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. 42 Table of Contents 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.
Table of Contents Operating expenses Year Ended March 31, (in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change Restated Sales and marketing $ 60,893 20 % $ 66,034 16 % $ (5,141) (8) % General and administrative 51,547 17 % 47,752 11 % 3,795 8 % Research and development 38,046 12 % 44,555 11 % (6,509) (15) % Restructuring charges 3,280 1 % 1,605 — % 1,675 104 % Total operating expenses $ 153,766 49 % $ 159,946 38 % $ (6,180) (4) % In fiscal 2024, sales and marketing expenses decreased $5.1 million, or 8%, as compared with fiscal 2023.
Operating expenses Year Ended March 31, (in thousands) 2025 % of revenue 2024 % of revenue $ Change % Change Sales and marketing $ 52,320 19 % $ 60,893 20 % $ (8,573) (14) % General and administrative 63,961 23 % 51,547 17 % 12,414 24 % Research and development 31,141 11 % 38,046 12 % (6,905) (18) % Restructuring charges 4,090 2 % 3,280 1 % 810 25 % Total operating expenses $ 151,512 55 % $ 153,766 50 % $ (2,254) (1) % In fiscal 2025, sales and marketing expenses decreased $8.6 million, or 14%, as compared with fiscal 2024.
Table of Contents 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.
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.
Operating expenses Nine Months Ended December 31, (dollars in thousands) 2023 % of revenue 2022 % of revenue $ Change % Change Sales and marketing $ 45,800 19 % $ 47,894 15 % $ (2,094) (4) % General and administrative 34,833 15 % 35,223 11 % (390) (1) % Research and development 28,828 12 % 33,925 11 % (5,097) (15) % Restructuring charges 3,164 1 % 1,605 1 % 1,559 97 % Total operating expenses $ 112,625 47 % $ 118,647 38 % $ (6,022) (5) % 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.
Operating Expenses Nine Months Ended December 31, (dollars in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change Sales and marketing $ 39,321 18 % $ 45,800 19 % $ (6,479) (14) % General and administrative 49,186 23 % 34,833 15 % 14,353 41 % Research and development 24,255 11 % 28,828 12 % (4,573) (16) % Restructuring charges 2,916 1 % 3,164 1 % (248) (8) % Total operating expenses $ 115,678 54 % $ 112,625 47 % $ 3,053 3 % 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.
Service and subscription Gross Margin Service and subscription gross margin increased 430 basis points for fiscal 2024, as compared to fiscal 2023. This increase was due primarily to improved operational costs as we implemented strict cost controls and improved our organization design.
This increase was due primarily to improved operational costs as we implemented strict cost controls and improved our organization design. Royalty Gross Margin Royalties do not have significant related cost of sales.
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. Contractual Obligations Contractual obligations are cash amounts that we are obligated to pay as part of certain contracts that we have entered into during the normal course of business.
Contractual Obligations Contractual obligations are cash amounts that we are obligated to pay as part of certain contracts that we have entered into during the normal course of business.
Year Ended March 31, ( in thousands) 2024 2023 Restated Cash provided by (used in): Operating activities $ (10,156) $ (4,894) Investing activities (5,869) (15,601) Financing activities 15,713 41,165 Effect of exchange rate changes (3) 12 Net change in cash, cash equivalents, and restricted cash $ (315) $ 20,682 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.
Year Ended March 31, ( in thousands) 2025 2024 Cash provided by (used in): Operating activities $ (23,613) $ (10,156) Investing activities (4,947) (5,869) Financing activities 19,306 15,713 Effect of exchange rate changes (3) (3) Net change in cash, cash equivalents, and restricted cash $ (9,257) $ (315) Net Cash Used in Operating Activities 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 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 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.
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 We receive royalties from third parties that license our linear-tape open media patents through our membership in the linear-tape open consortium.
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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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.
Table of Contents Warrant liabilities Year Ended March 31, (in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change Restated Change in fair value of warrant liabilities $ 5,137 2 % $ 10,250 2 % $ (5,113) (50) % In fiscal 2024, the fair value of warrant liabilities decreased $5.1 million, or 50%, as compared to fiscal 2023.
Warrant liabilities Year Ended March 31, (in thousands) 2025 % of revenue 2024 % of revenue $ Change % Change Change in fair value of warrant liabilities $ (45,270) (17) % $ 5,137 2 % $ (50,407) (981) % 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.
Gross Profit and Margin Three Months Ended December 31, (dollars in thousands) 2023 Gross margin % 2022 Gross margin % $ Change Basis point change Product $ 7,069 19.0 % $ 18,966 24.5 % $ (11,897) (550) Service and subscription 20,070 61.2 % 20,776 62.7 % (706) (150) Royalty 2,042 100.0 % 2,826 100.0 % (784) — Gross profit $ 29,181 40.6 % $ 42,568 37.5 % $ (13,387) 310 Gross profit and margin percentages are key metrics that management monitors to assess the performance on the business.
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. 38 Table of Contents Gross Profit and Margin Three Months Ended December 31, (dollars in thousands) 2024 Gross margin % 2023 Gross margin % $ Change Basis point change Restated Product $ 7,712 20.0 % $ 7,069 19.0 % $ 643 100 Service and subscription 17,850 64.4 % 20,070 61.2 % (2,220) 320 Royalty 2,326 100.0 % 2,042 100.0 % 284 — Gross profit $ 27,888 40.6 % $ 29,181 40.6 % $ (1,293) — Gross profit and margin percentages are key metrics that management monitors to assess the performance on the business.
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.
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 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.
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.
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.
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 We offer a broad range of services including product maintenance, implementation, and training as well as software subscriptions.
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.
We have funded operations through the sale of common stock, term debt borrowings and revolving credit facility borrowings described in Note 5: Debt . We are subject to various debt covenants under our debt agreements. Our failure to comply with our debt covenants could materially and adversely affect our financial condition and ability to service our obligations.
Our failure to comply with our debt covenants could materially and adversely affect our financial condition and ability to service our obligations.
Table of Contents Comparison of the Nine Months Ended December 31, 2023 and 2022 Revenue Nine Months Ended December 31, (dollars in thousands) 2023 % of revenue 2022 % of revenue $ Change % Change Product revenue $ 138,635 58 % $ 203,192 65 % $ (64,557) (32) % Service and subscription 94,229 39 % 99,937 32 % (5,708) (6) % Royalty 7,235 3 % 9,744 3 % (2,509) (26) % Total revenue $ 240,099 100 % $ 312,873 100 % $ (72,774) (23) % 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.
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. 40 Table of Contents Comparison of the Nine Months Ended December 31, 2024 (Restated) and 2023 Revenue Nine Months Ended December 31, (dollars in thousands) 2024 % of revenue 2023 % of revenue $ Change % Change Restated Product revenue $ 120,565 56 % $ 138,635 58 % $ (18,070) (13) % Service and subscription 84,640 40 % 94,229 39 % (9,589) (10) % Royalty 7,592 4 % 7,235 3 % 357 5 % Total revenue $ 212,797 100 % $ 240,099 100 % $ (27,302) (11) % Product 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.
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. Table of Contents 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 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.
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.
Product Gross Margin 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 Service and subscription gross margin increased 50 basis points for fiscal 2025, as compared to fiscal 2024.
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.
Product Gross Margin Product gross margin decreased 140 basis points, for the nine months ended December 31, 2024, as compared with the same period in fiscal 2024.
Cash Flows The following table summarizes our consolidated cash flows for the periods indicated.
Risk Factors and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in this Annual Report. Cash Flows The following table summarizes our consolidated cash flows for the periods indicated.
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.
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.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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 .
Added
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.
Removed
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.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
4 edited+0 added−0 removed3 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
4 edited+0 added−0 removed3 unchanged
2024 filing
2025 filing
Biggest changeInterest Rate Risk We are subject to interest rate risk on borrowings under our variable interest rate term debt and PNC Credit Facility. See Note 5: Debt to our consolidated financial statements for a description of our long-term debt. Changes in the market interest rate will increase or decrease our interest expense.
Biggest changeWe do not hold financial instruments for trading purposes. 47 Table of Contents Interest Rate Risk We are subject to interest rate risk on borrowings under our variable interest rate term debt and PNC Credit Facility. See Note 4: Debt to our consolidated financial statements for a description of our long-term debt.
We may enter into foreign exchange derivative contracts or other economic hedges in the future. Our goal in managing our foreign exchange risk is to reduce to the extent practicable our potential exposure to the changes that exchange rates might have on our earnings. Table of Contents
We may enter into foreign exchange derivative contracts or other economic hedges in the future. Our goal in managing our foreign exchange risk is to reduce to the extent practicable our potential exposure to the changes that exchange rates might have on our earnings. 48 Table of Contents
Assuming no change in the outstanding borrowings under the term debt and the PNC Credit Facility during fiscal 2024, a hypothetical 100-basis point increase or decrease in market interest rates sustained throughout the year would not result in a material change to our annual interest expense.
Changes in the market interest rate will increase or decrease our interest expense. Assuming no change in the outstanding borrowings under the term debt and the PNC Credit Facility during fiscal 2025, a hypothetical 100-basis point increase or decrease in market interest rates sustained throughout the year would not result in a material change to our annual interest expense.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure due to potential changes in inflation or interest rates. We do not hold financial instruments for trading purposes.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure due to potential changes in inflation or interest rates.