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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-38828

 

SEACHANGE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

04-3197974

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

177 Huntington Ave, Ste 1703 #73480, Boston, MA

 

02115

(Address of principal executive offices)

 

(Zip Code)

(978) 897-0100

 

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 Par Value

SEAC

The Nasdaq Global Select Market

Series A Participating Preferred Stock Purchase Rights

SEAC

The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES      NO  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES      NO  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    YES      NO  

 

The number of shares outstanding of the registrant’s Common Stock on June 1, 2021 was 48,405,679.

 



 

 

SEACHANGE INTERNATIONAL, INC.

Table of Contents

 

 

Page

PART I. FINANCIAL  INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Consolidated Balance Sheets

2

 

 

 

 

Consolidated Statements of Operations and Comprehensive Loss

3

 

 

 

 

Consolidated Statements of Stockholders’ Equity

4

 

 

 

 

Consolidated Statements of Cash Flows

5

 

 

 

 

Notes to Consolidated Financial Statements

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

 

 

 

Item 4.

Controls and Procedures

28

 

PART II. OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

29

 

 

 

Item 1A.

Risk Factors

29

 

 

 

Item 5.

Other Information

29

 

 

 

Item 6.

Exhibits

29

 

 

SIGNATURES

31

 

 

 

 

 

 

 

 


 

 

PART I – FINANCIAL INFORMATION

ITEM 1.

Financial Statements

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, amounts in thousands, except share data)

 

 

 

April 30,

 

 

January 31,

 

 

 

2021

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,278

 

 

$

5,856

 

Marketable securities

 

 

 

 

 

252

 

Accounts receivable, net of allowance for doubtful accounts of $931

   and $934 at April 30, 2021 and January 31, 2021, respectively

 

 

6,249

 

 

 

6,050

 

Unbilled receivables

 

 

8,420

 

 

 

9,359

 

Prepaid expenses and other current assets

 

 

4,427

 

 

 

4,372

 

Total current assets

 

 

40,374

 

 

 

25,889

 

Property and equipment, net

 

 

478

 

 

 

605

 

Operating lease right-of-use assets

 

 

2,707

 

 

 

4,968

 

Intangible assets, net

 

 

953

 

 

 

1,272

 

Goodwill

 

 

10,566

 

 

 

10,577

 

Unbilled receivables

 

 

5,842

 

 

 

6,340

 

Other assets

 

 

1,098

 

 

 

757

 

Total assets

 

$

62,018

 

 

$

50,408

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,854

 

 

$

1,825

 

Accrued expenses

 

 

3,926

 

 

 

4,277

 

Deferred revenue

 

 

5,165

 

 

 

4,737

 

Promissory note

 

 

2,144

 

 

 

1,340

 

Total current liabilities

 

 

13,089

 

 

 

12,179

 

Deferred revenue

 

 

444

 

 

 

657

 

Operating lease liabilities

 

 

1,997

 

 

 

4,070

 

Taxes payable

 

 

772

 

 

 

763

 

Promissory note

 

 

269

 

 

 

1,073

 

Other liabilities

 

 

125

 

 

 

125

 

Total liabilities

 

 

16,696

 

 

 

18,867

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value; 100,000,000 shares authorized at

   April 30, 2021 and January 31, 2021; 48,408,342 shares issued and

   48,236,422 shares outstanding at April 30, 2021; 37,811,224 shares

   issued and 37,639,304 shares outstanding at January 31, 2021;

 

 

484

 

 

 

378

 

Additional paid-in capital

 

 

264,147

 

 

 

246,446

 

Treasury stock, at cost; 171,920 shares at April 30, 2021 and

   January 31, 2021

 

 

(227

)

 

 

(227

)

Accumulated other comprehensive loss

 

 

(31

)

 

 

(73

)

Accumulated deficit

 

 

(219,051

)

 

 

(214,983

)

Total stockholders' equity

 

 

45,322

 

 

 

31,541

 

Total liabilities and stockholders' equity

 

$

62,018

 

 

$

50,408

 

 

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

 

2


 

 

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, amounts in thousands, except per share data)

 

 

 

For the Three Months

Ended April 30,

 

 

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

 

 

Product

 

$

1,620

 

 

$

3,098

 

Service

 

 

3,432

 

 

 

3,817

 

Total revenue

 

 

5,052

 

 

 

6,915

 

Cost of revenue:

 

 

 

 

 

 

 

 

Product

 

 

406

 

 

 

1,580

 

Service

 

 

1,815

 

 

 

2,826

 

Total cost of revenue

 

 

2,221

 

 

 

4,406

 

Gross profit

 

 

2,831

 

 

 

2,509

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

2,668

 

 

 

4,166

 

Selling and marketing

 

 

1,380

 

 

 

2,126

 

General and administrative

 

 

2,105

 

 

 

2,054

 

Severance and restructuring costs

 

 

484

 

 

 

486

 

Total operating expenses

 

 

6,637

 

 

 

8,832

 

Loss from operations

 

 

(3,806

)

 

 

(6,323

)

Other expense, net

 

 

(228

)

 

 

(208

)

Loss before income taxes

 

 

(4,034

)

 

 

(6,531

)

Income tax provision (benefit)

 

 

34

 

 

 

(21

)

Net loss

 

$

(4,068

)

 

$

(6,510

)

Net loss per share, basic

 

$

(0.10

)

 

$

(0.17

)

Net loss per share, diluted

 

$

(0.10

)

 

$

(0.17

)

Weighted average common shares outstanding, basic

 

 

41,307

 

 

 

37,521

 

Weighted average common shares outstanding, diluted

 

 

41,307

 

 

 

37,521

 

Comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

$

(4,068

)

 

$

(6,510

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

41

 

 

 

(24

)

Unrealized gains on marketable securities

 

 

1

 

 

 

9

 

Total other comprehensive income (loss)

 

 

42

 

 

 

(15

)

Comprehensive loss

 

$

(4,026

)

 

$

(6,525

)

 

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

3


 

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, amounts in thousands except number of shares)

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

Accumulated

Other

 

 

 

 

 

 

Total

 

 

 

Number of

Shares

 

 

Par Value

 

 

Paid-in

Capital

 

 

Treasury

Stock

 

 

Comprehensive

Loss

 

 

Accumulated

Deficit

 

 

Stockholders'

Equity

 

Balances at January 31, 2021

 

 

37,811,224

 

 

$

378

 

 

$

246,446

 

 

$

(227

)

 

$

(73

)

 

$

(214,983

)

 

$

31,541

 

Issuance of common stock pursuant to

   vesting of restricted stock units

 

 

178,096

 

 

 

2

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock pursuant to

   exercise of stock options

 

 

95,538

 

 

 

1

 

 

 

136

 

 

 

 

 

 

 

 

 

 

 

 

137

 

Issuance of common stock, net of issuance costs

 

 

10,323,484

 

 

 

103

 

 

 

17,359

 

 

 

 

 

 

 

 

 

 

 

 

17,462

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

208

 

 

 

 

 

 

 

 

 

 

 

 

208

 

Unrealized gains on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

41

 

 

 

 

 

 

41

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,068

)

 

 

(4,068

)

Balances at April 30, 2021

 

 

48,408,342

 

 

$

484

 

 

$

264,147

 

 

$

(227

)

 

$

(31

)

 

$

(219,051

)

 

$

45,322

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

Accumulated

Other

 

 

 

 

 

 

Total

 

 

 

Number of

Shares

 

 

Par Value

 

 

Paid-in

Capital

 

 

Treasury

Stock

 

 

Comprehensive

Loss

 

 

Accumulated

Deficit

 

 

Stockholders'

Equity

 

Balances at January 31, 2020

 

 

37,303,952

 

 

 

373

 

 

 

245,067

 

 

 

(147

)

 

 

(2,137

)

 

 

(193,224

)

 

$

49,932

 

Issuance of common stock pursuant to

   vesting of restricted stock units

 

 

312,717

 

 

 

3

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock pursuant to

   exercise of stock options

 

 

39,270

 

 

 

 

 

 

119

 

 

 

 

 

 

 

 

 

 

 

 

119

 

Issuance of common stock pursuant to

   ESPP purchases

 

 

5,702

 

 

 

 

 

 

18

 

 

 

 

 

 

 

 

 

 

 

 

18

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

357

 

 

 

 

 

 

 

 

 

 

 

 

357

 

Unrealized gains on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24

)

 

 

 

 

 

(24

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,510

)

 

 

(6,510

)

Balances at April 30, 2020

 

 

37,661,641

 

 

$

376

 

 

$

245,558

 

 

$

(147

)

 

$

(2,152

)

 

$

(199,734

)

 

$

43,901

 

 

 

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

4


 

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, amounts in thousands)

 

 

 

For the Three Months Ended April 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(4,068

)

 

$

(6,510

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

376

 

 

 

357

 

Loss on disposal of fixed assets

 

 

77

 

 

 

 

Gain on write-off of operating lease right-of-use assets and liabilities

     related to termination

 

 

(328

)

 

 

 

Change in allowance for doubtful accounts

 

 

 

 

 

(316

)

Stock-based compensation expense

 

 

208

 

 

 

357

 

Realized and unrealized foreign currency transaction loss (gain)

 

 

263

 

 

 

(29

)

Other

 

 

1

 

 

 

14

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(208

)

 

 

3,111

 

Unbilled receivables

 

 

1,431

 

 

 

589

 

Prepaid expenses and other current assets and other assets

 

 

 

 

 

(554

)

Accounts payable

 

 

34

 

 

 

417

 

Accrued expenses and other liabilities

 

 

173

 

 

 

(1,689

)

Deferred revenue

 

 

221

 

 

 

(10

)

Net cash used in operating activities

 

 

(1,820

)

 

 

(4,263

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(7

)

 

 

(138

)

Proceeds from sales and maturities of marketable securities

 

 

252

 

 

 

1,201

 

Net cash provided by investing activities

 

 

245

 

 

 

1,063

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from stock option exercises

 

 

137

 

 

 

119

 

Proceeds from employee stock purchase plan

 

 

 

 

 

18

 

Proceeds from issuance of common stock, net of issuance costs

 

 

17,462

 

 

 

 

Net cash provided by financing activities

 

 

17,599

 

 

 

137

 

Effect of exchange rate on cash, cash equivalents and restricted cash

 

 

(199

)

 

 

153

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

15,825

 

 

 

(2,910

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

6,084

 

 

 

9,297

 

Cash, cash equivalents and restricted cash at end of period

 

$

21,909

 

 

$

6,387

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Income taxes paid

 

$

101

 

 

$

11

 

Non-cash activities:

 

 

 

 

 

 

 

 

Right-of-use assets obtained in exchange for lease obligations

 

$

 

 

$

402

 

 

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

 

5


 

 

SEACHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.

Nature of Business and Basis of Presentation

SeaChange International, Inc. (“we” or the “Company”), was incorporated under the laws of the state of Delaware on July 9, 1993. We are an industry leader in the delivery of multiscreen, advertising and premium over-the-top (“OTT”) video management solutions.  Our software products and services are designed to empower video providers to create, manage and monetize the increasingly personalized, highly engaging experiences that viewers demand.

Liquidity

In the first half of fiscal 2021, we reduced our headcount across all departments in response to the COVID-19 pandemic and in the second quarter of fiscal 2021 we transferred our technical support services to our Poland location in an effort to further reduce cost. In the first quarter of fiscal 2022, we entered into a Sublease Termination Agreement (the “Termination Agreement”) which terminated the office sublease for our former headquarters in Waltham, Massachusetts, effective March 21, 2021. Additionally, in the first quarter of fiscal 2022, we issued and sold 10,323,484 shares of common stock, $0.01 par value per share, at a public offering price of $1.85 per share (the “Offering”). The Offering resulted in approximately $17.5 million in proceeds, net of underwriting discounts and commissions of 6.5%, or $0.12025 per share of common stock, and offering expenses of approximately $0.2 million. In addition to the Offering, the Company also granted the underwriters a 45-day option to purchase up to an additional 1,548,522 shares at a purchase price of $1.85 per share, less underwriting discounts and commissions (the “Underwriter Option”). The Underwriter Option was not exercised and has expired. These measures are important steps in restoring us to profitability and positive cash flow. We believe that existing cash and cash equivalents and cash expected to be provided by future operating results will be adequate to satisfy our working capital, capital expenditure requirements and other contractual obligations for at least the next 12 months.

If our expectations are incorrect, we may need to raise additional funds to fund our operations or take advantage of unanticipated strategic opportunities in order to strengthen our financial position. In the future, we may enter into other arrangements for potential investments in, or acquisitions of, complementary businesses, services or technologies, which could require us to seek additional equity or debt financing. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of market opportunities, to develop new products or to otherwise respond to competitive pressures.

Impact of COVID-19 Pandemic

In the first quarter of fiscal 2021, concerns related to the spread of COVID-19 began to create global business disruptions as well as disruptions in our operations and to create potential negative impacts on our revenues and other financial results. COVID-19 was declared a pandemic by the World Health Organization on March 11, 2020. The extent to which COVID-19 will impact our financial condition or results of operations is currently uncertain and depends on factors including the impact on our customers, partners, and vendors and on the operation of the global markets in general. Due to our business model, the effect of COVID-19 on our results of operations may also not be fully reflected for some time.

We are currently conducting business with substantial modifications to employee travel, employee work locations, virtualization or cancellation of customer and employee events, and remote sales, implementation, and support activities, among other modifications. These decisions may delay or reduce sales and harm productivity and collaboration. We have observed other companies and governments making similar alterations to their normal business operations, and in general, the markets are experiencing a significant level of uncertainty at the current time. Virtualization of our team’s sales activities could foreclose future business opportunities, particularly as our customers limit spending, which could negatively impact the willingness of our customers to enter into or renew contracts with us. The pandemic has impacted our ability to complete certain implementations, negatively impacting our ability to recognize revenue, and could also negatively impact the payment of accounts receivable and collections. We continue to realize our on-going cost optimization efforts in response to the impact of the pandemic. We may take further actions that alter our business operations as the situation evolves. As a result, the ultimate impact of the COVID-19 pandemic and the effects of the operational alterations we have made in response on our business, financial condition, liquidity, and financial results cannot be predicted at this time.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief and Economic Security Act (the “CARES) Act”).  The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.  We continue to examine the impact that the CARES Act may have on our business, including the extent of our Paycheck Protection Program (the “PPP”) loan forgiveness eligibility.

6


 

The Paycheck Protection Program

On May 5, 2020, the Company entered into a promissory note (the “Note”) with Silicon Valley Bank (the “Lender”) evidencing an unsecured loan in an aggregate principal amount of $2,412,890 pursuant to the PPP under the CARES Act administered by the U.S. Small Business Administration (“SBA”). The Note is included in our consolidated balance sheets.

Interest accrues on the Note at a fixed rate of one percent (1%) per annum, with the payment of the first ten months of interest and principal deferred, and is included in accrued expenses in our consolidated balance sheets. The Note has an initial term of two years, is unsecured and is guaranteed by the SBA. The Company applied to the Lender for forgiveness of the Note in March 2021, with the amount which may be forgiven equal to the sum of qualifying expenses, including payroll costs, covered rent obligations, and covered utility payments incurred by the Company during the twenty-four week period beginning on May 7, 2020, calculated in accordance with the terms of the CARES Act, however, we cannot provide assurance that the Note will be forgiven.

Subject to any forgiveness under the PPP, the Note will mature on May 5, 2022. Beginning on the seventeen-month anniversary of the date of the Note, the Company is required to make equal monthly payments of principal and interest. The Note may be prepaid at any time prior to maturity with no prepayment penalties. The Note provides for customary events of default including, among others, those relating to breaches of the Company’s obligations under the Note, including a failure to make payments, any bankruptcy or similar proceedings involving the Company, and certain material effects on the Company’s ability to repay the Note. The Note may be accelerated upon the occurrence of an event of default.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). We consolidate the financial statements of our wholly-owned subsidiaries and all intercompany transactions and account balances have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current year presentation.

The accompanying unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to applicable rules and regulations. In the opinion of management, all adjustments of a normal recurring nature which were considered necessary for a fair presentation have been included. The year-end consolidated balance sheet data as of January 31, 2021 was derived from our audited consolidated financial statements and may not include all disclosures required by U.S. GAAP. The results of operations for the three months ended April 30, 2021 are not necessarily indicative of the results to be expected for the entire year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed with the SEC on April 15, 2021.

2.

Significant Accounting Policies

Use of Estimates

The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities.  Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, those related to revenue recognition, allowance for doubtful accounts, goodwill and intangible assets, impairment of long-lived assets, accounting for income taxes, the valuation of stock-based awards, and management’s assessment of the Company’s ability to continue as a going concern. We base our estimates on historical experience, known trends and other market-specific or relevant factors that are believed to be reasonable under the circumstances.  On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known.  Actual results may differ from those estimates or assumptions.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash on hand and on deposit and highly liquid investments in money market mutual funds, government sponsored enterprise obligations, treasury bills, commercial paper and other money market securities with remaining maturities at the date of purchase of 90 days or less. All cash equivalents are carried at cost, which approximates fair value. Restricted cash represents cash that is restricted as to withdrawal or usage and consists primarily of cash held as collateral in relation to obligations set forth by our U.S. bank and the landlord of our Poland facility.

7


 

The following table provides a summary of cash, cash equivalents and restricted cash that constitutes the total amounts shown in the consolidated statements of cash flows as of April 30, 2021 and 2020:

 

 

 

As of April 30,

 

 

 

2021

 

 

2020

 

 

 

(Amounts in thousands)

 

Cash and cash equivalents

 

$

21,278

 

 

$

6,187

 

Restricted cash

 

 

631

 

 

 

200

 

Total cash, cash equivalents and restricted cash

 

$

21,909

 

 

$

6,387

 

 

Restricted cash is included as a component of other assets in the consolidated balance sheets.

Marketable Securities

Our investments in debt securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss in stockholders’ equity. Realized gains and losses and declines in value determined to be other than temporary are based on the specific identification method and are included as a component of other expense, net in the consolidated statements of operations and comprehensive loss.

We evaluate our investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, we consider such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, our ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that we consider to be “other than temporary,” we reduce the investment to fair value through a charge to the consolidated statement of operations and comprehensive loss. No such adjustments were necessary during the periods presented.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

 

Level 1—Quoted prices in active markets for identical assets or liabilities.

 

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

 

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Our cash equivalents and marketable securities are carried at fair value determined according to the fair value hierarchy described above. The carrying values of our accounts and other receivables, unbilled receivables, accounts payable, accrued expenses, and the Note approximate their fair values due to the short-term nature of these assets and liabilities.

 

Concentration of Credit Risk and of Significant Customers

Financial instruments which potentially expose us to concentrations of credit risk include cash, cash equivalents and restricted cash, marketable securities and accounts receivable. We have cash investment policies which, among other things, limit investments to investment-grade securities. We restrict our cash equivalents and marketable securities to repurchase agreements with major banks and U.S. government and corporate securities which are subject to minimal credit and market risk. We perform ongoing credit evaluations of our customers.

We sell our software products and services worldwide primarily to service providers consisting of operators, telecommunications companies, satellite operators and broadcasters. Two customers accounted for 18% and 16% of total revenue for the three months ended April 30, 2021 and two customers accounted for 15% and 13% of total revenue for the three months ended April 30, 2020. Three customers accounted for 22%, 16%, and 15% of the accounts receivable balance as of April 30, 2021. Two customers accounted for 18% and 16% of the accounts receivable balance as of January 31, 2021.

8


 

Goodwill and Acquired Intangible Assets

We record goodwill when consideration paid in a business acquisition exceeds the value of the net assets acquired. Our estimates of fair value are based upon assumptions believed to be reasonable at that time but such estimates are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate and unanticipated events or circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results.

Goodwill is tested for impairment annually and more frequently if events and circumstances indicate that the asset might be impaired. We have determined that there is a single reporting unit for the purpose of conducting the goodwill impairment assessment. Goodwill impairment is recorded if the amount of our carrying value exceeds our fair value, not to exceed the carrying amount of goodwill. Factors that could lead to a future impairment include material uncertainties such as a significant reduction in projected revenues, a deterioration of projected financial performance, future acquisitions and/or mergers, and a decline in our market value as a result of a significant decline in our stock price. There were no impairment charges recorded in fiscal 2021 or the first quarter of fiscal 2022.

Intangible assets are recorded at their estimated fair values at the date of acquisition. We amortize intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.

Impairment of Long-Lived Assets

Long-lived assets primarily consist of property, plant and equipment and intangible assets with finite lives. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. Recoverability of long-lived assets or groups of assets is assessed based on a comparison of the carrying amount to the estimated future undiscounted cash flows. If estimated future undiscounted net cash flows are less than the carrying amount, the asset is considered impaired and expense is recorded at an amount required to reduce the carrying amount to fair value. Determining the fair value of long-lived assets includes significant judgment by management, and different judgments could yield different results.

We assess the useful lives and possible impairment of existing recognized long-lived assets whenever events or changes in circumstances occur that indicate that it is more likely than not that an impairment has occurred. Factors considered important which could trigger a review include:

 

significant underperformance relative to historical or projected future operating results;

 

significant changes in the manner of use of the acquired assets or the strategy for our overall business;

 

identification of other impaired assets within a reporting unit;

 

significant negative industry or economic trends;

 

a significant decline in our stock price for a sustained period; and

 

a decline in our market capitalization relative to net book value.

Determining whether a triggering event has occurred involves significant judgment.

Revenue Recognition

Overview

We adopted Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, effective February 1, 2018, using the modified retrospective method. Our revenue is derived from sales of software licenses and associated third party hardware and support services, as well as professional services and support fees related to our software licenses.

The Company recognizes revenue from contracts with customers using a five-step model, which is described below:

 

identify the customer contract;

 

identify performance obligations that are distinct;

 

determine the transaction price;

 

allocate the transaction price to the distinct performance obligations; and

 

recognize revenue as the performance obligations are satisfied.

9


 

 

Identify the customer contract

A customer contract is generally identified when there is approval and commitment from both the Company and its customer, the rights have been identified, payment terms are identified, the contract has commercial substance and collectability and consideration is probable.

Identify performance obligations that are distinct

A performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services. A good or service that is promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and a company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.

Determine the transaction price 

The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer, excluding sales and VAT taxes that are collected on behalf of government agencies.

 

Allocate the transaction price to distinct performance obligations 

The transaction price is allocated to each performance obligation based on the relative standalone selling prices (“SSP”) of the goods or services being provided to the customer. Our contracts typically contain multiple performance obligations, for which we account for individual performance obligations separately, if they are distinct.

Recognize revenue as the performance obligations are satisfied 

We enter into contracts that include combinations of license, support and professional services, and third-party products, which are accounted for as separate performance obligations with differing revenue recognition patterns. Revenue is recognized when or as control of the promised goods or services is transferred to customers. Our software licenses are primarily delivered on a perpetual basis, whereby the customer receives rights to use the software for an indefinite time period or a specified term and delivery and revenue recognition occurs at the point in time when the customer has the ability to download or access the software. Our customers may also contract with us for a Software as a Service (“SaaS”) type license whereby the customer only has a right to access the software for a defined term. SaaS licenses are recognized ratably over the subscription period beginning on the date the license is made available to customers.

Our services revenue is comprised of support services and professional services. Support services consist of software upgrades on a when-and-if available basis, telephone support, bug fixes or patches and general hardware maintenance support. Revenue related to support services is recognized ratably over the term of the contract. Professional services are recognized as the services are performed.

Revenues attributable to third party products typically consist of hardware and related support contracts. Hardware products are typically recognized when control is transferred to the customer, which is defined as the point in time when the client can use and benefit from the hardware. In situations where the hardware is distinct and it is delivered before services are provided and is functional without services, control is transferred upon delivery or acceptance by the customer. Revenue attributable to third-party support contracts is recognized ratably over the term of the contract.

Significant Judgments

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Once we determine the performance obligations, we determine the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. The transaction price is then allocated to each performance obligation in the contract based on the SSP. The corresponding revenue is recognized as the related performance obligations are satisfied.

Judgment is required to determine the SSP for each distinct performance obligation. We determine SSP based on the price at which the performance obligation is sold separately and the methods of estimating SSP under the guidance of ASC 606-10-32-33. If the SSP is not observable through past transactions, we estimate the SSP, taking into account available information such as market conditions, expected margins, and internally approved pricing guidelines related to the performance obligations. In February 2019, we began selling a new software bundle called the Framework in addition to our legacy software products and services. Our legacy products were historically sold on a standalone basis and therefore the SSP and revenue recognition may differ from the Framework. A typical Framework deal licenses our software products and services, including upgrades for one fixed price. Management considers the pricing of our Framework perpetual licenses as highly variable and uncertain and we do

10


 

not have a history of selling the Framework software on a standalone basis. We recognize the portion of the transaction price allocated to the Framework software on a residual basis, as we have at least one performance obligation for which the SSP is observable. The Company notes that both hardware and support services represent observable pricing. The SSP for our legacy software is also recognized on a residual basis, as we have observable SSP for the associated support services sold with the software license based on historical observable data of selling support contracts on a standalone basis. We may also license our software as a SaaS type license, whereby our customer only has a right to access the software over a specified time period and the service includes technical support and unspecified upgrades and bug fixes. We recognize the full value of the contract ratably over the contractual term of the SaaS license.

Our services revenue is comprised of support services, software license implementation services, engineering services, training and reimbursable expenses. We have concluded that services are distinct performance obligations, with the exception of engineering services. Engineering services may be provided on a standalone basis or bundled with a license when we are providing custom development.

We utilize the cost-plus margin method to determine the SSP for our Framework support services offerings and hardware sales. For Framework support services, we calculate the average cost of support to within a small range to arrive at an average expected cost. Legacy support services are priced as a percentage of the list price of the related software license and hardware. Historically, we determined the SSP of the support services based on this pricing relationship and observable data from standalone sales of support contracts. The expected cost-plus margin for hardware is based on the cost of the hardware from third parties, plus a reasonable markup that the Company believes is reflective of a market-based reseller margin.

The SSP for services in time and materials contracts is determined by observable prices in standalone services arrangements. We estimate the SSP for fixed price services based on estimated hours adjusted for historical experience at time and material rates charged in standalone services arrangements. Revenue for fixed price services is recognized over time as the services are provided based on an input measure of hours incurred to total estimated hours.

Some of our contracts have payment terms that differ from the timing of revenue recognition, which requires us to assess whether the transaction price for those contracts include a significant financing component. We have elected the practical expedient that permits an entity to not adjust for the effects of a significant financing component if we expect that at the contract inception, the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service, will be one year or less. For those contracts in which the period exceeds the one-year threshold, this assessment, as well as the quantitative estimate of the financing component and its relative significance, requires judgment. We estimate the significant financing component provided to our customers with extended payment terms by determining the present value of the future payments by applying an average standard industry discount rate that reflects the customer’s creditworthiness.

Payment terms with customers typically require payment 30 days from invoice date. Our agreements with customers do not provide for any refunds for services or products and therefore no specific reserve for such is maintained. In the infrequent instances where customers raise a concern over delivered products or services, we have endeavored to remedy the concern and all costs related to such matters have been insignificant in all periods presented.

We occasionally enter into amendments to previously executed contracts that may constitute contract modifications. The amendments are assessed to determine if (1) the additional products and services are distinct from the product and services in the original arrangement; and (2) the amount of consideration expected for the added products and services reflects the SSP of those products and services. An amendment or contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either a prospective basis as a termination of the existing contract and the creation of a new contract or a cumulative catch-up basis.

Contract Balances

Contract assets consist of unbilled revenue, which is recognized as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. Unbilled receivables expected to be billed and collected within one year are classified as current assets or long-term assets if expected to be billed and collected after one year (see Note 10).

Costs to Obtain and Fulfill a Contract

 

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that commissions and special incentive payments (“Spiffs”) for hardware and software maintenance and support and professional services paid under our sales incentive programs meet the requirements to be capitalized under ASC 340-40. Costs to obtain a contract are amortized as selling and marketing expense over the expected

11


 

period of benefit in a manner that is consistent with the transfer of the related goods or services to which the asset relates. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract and the estimate of the amortization period. The commissions and Spiffs related to professional services are amortized over time as work is completed. The commissions and Spiffs for hardware and software maintenance are amortized over the life of the contract. These costs are periodically reviewed for impairment. We determined that no impairment of these assets existed as of April 30, 2021 or January 31, 2021. We have elected to apply the practical expedient and recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. Total deferred capitalized commission costs were $504 thousand as of April 30, 2021 compared to $553 thousand as of January 31, 2021. Current deferred capitalized commission costs are included in prepaid expense and other current assets in our consolidated balance sheets and non-current deferred capitalized commission costs are included in other assets in our consolidated balance sheets. Capitalized commissions expensed during the three months ended April 30, 2021 and 2020 included in the consolidated statement of operations and comprehensive loss were $49 thousand and $135 thousand, respectively.

Leases

We account for our leases in accordance with ASC 842, Leases. A contract is accounted for as a lease when we have the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. We determine if an arrangement is a lease or contains an embedded lease at inception. For arrangements that meet the definition of a lease, we determine the initial classification and measurement of our right-of-use operating lease asset and corresponding liability at the lease commencement date. We determine the classification and measurement of a modified lease at the date it is modified. The lease term includes only renewal options that are reasonably assured to exercise. The present value of lease payments is typically determined by using the Company’s estimated secured incremental borrowing rate for the associated lease term as interest rates implicit in the leases are not normally readily determinable. Management’s policy is to utilize the practical expedient to not record leases with an original term of twelve months or less on our consolidated balance sheets. Lease payments are recognized in the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.

Our existing leases are for facilities and equipment. None of our leases are with related parties. In addition to rent, office leases may require us to pay additional amounts for taxes, insurance, maintenance and other expenses, which are generally referred to as non-lease components. As a practical expedient, we account for the non-lease components together with the lease components as a single lease component for all of our leases. Only the fixed costs for leases are accounted for as a single lease component and recognized as part of a right-of-use asset and liability.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of unrestricted common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of unrestricted common shares outstanding during the period and the weighted average number of potential common shares from the assumed exercise of stock options and the vesting of shares of restricted and deferred common stock units using the “treasury stock” method when the effect is not anti-dilutive. In periods in which we report a net loss, diluted net loss per share is the same as basic net loss per share.

The number of common shares used in the computation of diluted net loss per share for the periods presented does not include the effect of the following potentially outstanding common shares because the effect would have been anti-dilutive:

 

 

 

For the Three Months

Ended April 30,

 

 

 

2021

 

 

2020

 

 

 

(Amounts in thousands)

 

Stock options

 

 

1,897

 

 

 

766

 

Restricted stock units

 

 

135

 

 

 

58

 

Deferred stock units

 

 

41

 

 

 

81

 

 

 

 

2,073

 

 

 

905

 

 

Recently Issued Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740), which simplifies the accounting for income taxes and removes certain exceptions and improves consistent application of accounting principles for certain areas in Topic 740. ASU 2019-12 was effective in the first quarter of fiscal 2022 and did not have an effect on our consolidated financial statements.

12


 

Pending Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), which introduces a new methodology for accounting for credit losses on financial instruments, including available-for-sale debt securities and accounts receivable. The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. Any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. ASU 2016-13 is effective in the first quarter of fiscal 2024. We are currently evaluating if this guidance will have a material effect to our consolidated financial statements.

3.

Fair Value Measurements

The following tables set forth our financial assets that were accounted for at fair value on a recurring basis. There were no fair value measurements of our financial assets using level 3 inputs for the periods presented:

 

 

 

 

 

 

 

Fair Value at April 30, 2021 Using

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

 

(Amounts in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

46

 

 

$

46

 

 

$

 

Total

 

$

46

 

 

$

46

 

 

$

 

 

 

 

 

 

 

 

Fair Value at January 31, 2021 Using

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

 

(Amounts in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

46

 

 

$

46

 

 

$

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes and bonds

 

 

252

 

 

 

252

 

 

 

 

Total

 

$

298

 

 

$

298

 

 

$

-

 

 

Cash equivalents include money market funds and U.S. treasury bills.

  

There were no marketable securities as of April 30, 2021. Marketable securities by security type consisted of the following as of January 31, 2021:

 

 

 

As of January 31, 2021

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

 

 

(Amounts in thousands)

 

U.S. Treasury Notes and bonds

 

$

249

 

 

$

3

 

 

$

 

 

$

252

 

 

 

$

249

 

 

$

3

 

 

$

 

 

$

252

 

 

4.

Consolidated Balance Sheet Detail

 

Property and Equipment, Net

Property and equipment, net consists of the following:

 

 

 

As of

 

 

 

April 30, 2021

 

 

January 31, 2021

 

 

 

(Amounts in thousands)

 

Computer equipment, software and demonstration equipment

 

$

3,182

 

 

$

9,765

 

Office furniture and equipment

 

 

259

 

 

 

306

 

Leasehold improvements

 

 

154

 

 

 

238

 

 

 

 

3,595

 

 

 

10,309

 

Less:  Accumulated depreciation and amortization

 

 

(3,117

)

 

 

(9,704

)

Total property and equipment, net

 

$

478

 

 

$

605

 

13


 

 

 

Depreciation expense was $60 thousand and $73 thousand for the three months ended April 30, 2021 and April 30, 2020, respectively.

 

Accrued Expenses

Accrued expenses consist of the following:

 

 

 

As of

 

 

 

April 30, 2021

 

 

January 31, 2021

 

 

 

(Amounts in thousands)

 

Accrued employee compensation and benefits

 

$

825

 

 

$

742

 

Accrued professional fees

 

 

111

 

 

 

575

 

Sales tax and VAT payable

 

 

365

 

 

 

271

 

Current obligation - right of use operating leases

 

 

866

 

 

 

1,387

 

Accrued other

 

 

1,759

 

 

 

1,302

 

Total accrued expenses

 

$

3,926

 

 

$

4,277

 

 

 

5.

Goodwill and Intangible Assets

Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed. We are required to perform an impairment test related to our goodwill annually, which we perform during the third quarter of each fiscal year or sooner if we identify certain events or circumstances that would more likely than not reduce the estimated fair value of the goodwill below its carrying amount. The following table represents the changes in goodwill since January 31, 2021:

 

 

 

Goodwill

 

 

 

(Amounts in

thousands)

 

Balance as of January 31, 2021

 

$

10,577

 

Translation adjustment

 

 

(11

)

Balance as of April 30, 2021

 

$

10,566

 

Intangible assets, net, consisted of the following at April 30, 2021:

 

 

 

As of April 30, 2021

 

 

 

Gross

 

 

Accumulated

Amortization

 

 

Cumulative

Translation

Adjustment

 

 

Net

 

 

 

(Amounts in thousands)

 

Finite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired customer contracts

 

$

2,205

 

 

$

(1,665

)

 

$

48

 

 

$

588

 

Acquired existing technology

 

 

1,364

 

 

 

(1,032

)

 

 

33

 

 

 

365

 

Total finite-lived intangible assets

 

$

3,569

 

 

$

(2,697

)

 

$

81

 

 

$

953

 

 

 

 

We recognized amortization expense of intangible assets in operating expense categories on the consolidated statements of operations and comprehensive loss as follows:

 

 

 

For the Three Months

Ended April 30,

 

 

 

2021

 

 

2020

 

 

 

(Amounts in thousands)

 

Selling and marketing

 

$

195

 

 

$

175

 

Research and development

 

 

121

 

 

 

109

 

 

 

$

316

 

 

$

284

 

14


 

 

 

Future estimated amortization expense of intangibles as of April 30, 2021 was $953 thousand to be recognized in fiscal 2022.

 

6.

Commitments and Contingencies

Litigation

Certain conditions may exist as of the date the consolidated financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. We assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us, or unasserted claims that may result in such proceedings, we evaluate the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our consolidated financial statements. If our assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed.

Indemnification and Warranties

We provide indemnification, to the extent permitted by law, to our officers, directors, employees and agents for liabilities arising from certain events or occurrences while the officer, director, employee or agent is, or was, serving at our request in such capacity. With respect to acquisitions, we provide indemnification to, or assume indemnification obligations for, the current and former directors, officers and employees of the acquired companies in accordance with the acquired companies’ governing documents. As a matter of practice, we have maintained directors’ and officers’ liability insurance including coverage for directors and officers of acquired companies.

We enter into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers. Most of our historical agreements require us to defend and/or indemnify the other party against intellectual property infringement claims brought by a third-party with respect to our products. From time to time, we also indemnify customers and business partners for damages, losses and liabilities they may suffer or incur relating to personal injury, personal property damage, product liability, and environmental claims relating to the use of our products and services or resulting from the acts or omissions of us, our employees, authorized agents or subcontractors. From time to time, we have received requests from customers for indemnification of patent litigation claims. Management cannot reasonably estimate any potential losses, but these claims could result in material liability for us. There are no current pending legal proceedings, in the opinion of management that would have a material adverse effect on our financial position, results from operations and cash flows. There is no assurance that future legal proceedings arising from ordinary course of business or otherwise, will not have a material adverse effect on our financial position, results from operations or cash flows.

We warrant that our products, including software products, will substantially perform in accordance with our standard published specifications in effect at the time of delivery. In addition, we provide maintenance support to our customers and therefore allocate a portion of the product purchase price to the initial warranty period and recognize revenue on a straight-line basis over that warranty period related to both the warranty obligation and the maintenance support agreement. When we receive revenue for extended warranties beyond the standard duration, it is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred.

 

7.

Operating Leases

The Company has operating leases for facilities and equipment expiring at various dates through 2025.  

 

The components of lease expense are as follows:

 

 

 

For the Three Months Ended April 30,

 

 

 

2021

 

 

2020

 

 

 

(Amounts in thousands)

 

Operating lease cost

 

$

283

 

 

$

322

 

Short term lease cost, net

 

 

5

 

 

 

31

 

Total lease cost

 

$

288

 

 

$

353

 

 

15


 

 

Supplemental cash flow information related to the Company’s operating leases was as follows:

 

 

 

For the Three Months Ended April 30,

 

 

 

2021

 

 

2020

 

 

 

(Amounts in thousands)

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

473

 

 

$

322

 

 

Supplemental balance sheet information related to the Company's operating leases was as follows:

 

 

 

As of April 30, 2021

 

 

As of January 31, 2021

 

 

 

(Amounts in thousands)

 

Operating lease right-of-use assets

 

$

2,707

 

 

$

4,968

 

 

 

 

 

 

 

 

 

 

Current portion, operating lease liabilities

 

 

866

 

 

 

1,387

 

Operating lease liabilities, long term

 

 

1,997

 

 

 

4,070

 

Total operating lease liabilities

 

$

2,863

 

 

$

5,457

 

 

 

 

 

 

 

 

 

 

Weighted average remaining lease term (years)

 

 

3.7

 

 

 

4.0

 

Weighted average incremental borrowing rate

 

 

5.0

%

 

 

5.0

%

 

The current portion, operating lease liabilities is included in the balance of accrued expenses at April 30, 2021. Rent payments for continuing operations were approximately $0.4 million for the three months ended April 30, 2021. Future minimum lease payments for operating leases, with initial or remaining terms in excess of one year at April 30, 2021, are as follows:

 

 

 

Payments for

Operating Leases

 

For the Fiscal Years Ended January 31,

 

(Amounts in thousands)

 

2022

 

$

663

 

2023

 

 

823

 

2024

 

 

812

 

2025

 

 

838

 

Total lease payments

 

 

3,136

 

Less interest

 

 

273

 

Total operating lease liabilities

 

$

2,863

 

 

In the first quarter of fiscal 2022, we entered into the Termination Agreement which terminated the sublease with respect to our former headquarters in Waltham, Massachusetts, effective March 21, 2021. In connection with the early termination of the sublease, the Company is to pay the sublandlord a termination payment of approximately $0.4 million, of which $0.3 million was paid during the three months ended April 30, 2021, and the remaining $0.1 million was paid subsequent to quarter end. The Company also wrote off all related operating lease right-of-use assets and liabilities as of the termination date, resulting in a $0.3 million non-cash gain, which partially offset the loss on the termination payments. The net $0.1 million loss on lease termination is reported as a component of severance and restructuring expense on the consolidated statements of operations and comprehensive loss for the three months ended April 30, 2021. Prior to the execution of the Termination Agreement, the sublease had been scheduled to expire in February 2025.

8.

Severance and Restructuring Costs

During the three months ended April 30, 2021, we incurred severance and restructuring costs of $0.1 million and $0.4 million, respectively, primarily for employee-related termination benefits in relation to the restructuring of our finance department and expenses related to the closure of our leased facility in Waltham, Massachusetts.

16


 

The following table shows the change in accrued restructuring balances since January 31, 2021 primarily related to our finance department restructuring efforts and closure of our leased headquarters facility, reported as a component of accrued expenses on the consolidated balance sheets:

 

 

 

Employee-

Related

Benefits

 

 

Closure of

Leased

Facilities

 

 

Total

 

 

 

(Amounts in thousands)

 

Accrued balance as of January 31, 2021

 

$

 

 

$

 

 

$

 

Restructuring charges incurred

 

 

147

 

 

 

463

 

 

 

610

 

Cash payments

 

 

(72

)

 

 

(337

)

 

 

(409

)

Accrued balance as of April 30, 2021

 

$

75

 

 

$

126

 

 

$

201

 

 

 

9.

Stock-Based Compensation Expense

Equity Plans

2011 Compensation and Incentive Plan

Our 2011 Compensation and Incentive Plan (the “2011 Plan”) provides for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units (“RSUs”), deferred stock units (“DSUs”), performance stock units (“PSUs”) and other equity based non-stock option awards as determined by the plan administrator to our officers, employees, consultants and directors. We may satisfy awards upon the exercise of stock options or the vesting of stock units with newly issued shares or treasury shares. The Board of Directors is responsible for the administration of the 2011 Plan and determining the terms of each award, award exercise price, the number of shares for which each award is granted and the rate at which each award vests. In certain instances, the Board of Directors may elect to modify the terms of an award. The number of shares authorized for issuance under the 2011 Plan is 9,300,000. Additionally, outstanding awards under the 2005 Equity Compensation and Incentive Plan that, since adoption of the 2011 Plan, expire, terminate, or are surrendered or canceled without having been fully exercised are available for issuance under the 2011 Plan. As of April 30, 2021, there were 3,359,383 shares available for future grant.      

Nonemployee members of the Board of Directors may elect to receive DSUs or stock options in lieu of RSUs. The number of units subject to the DSUs is determined as of the grant date and shall fully vest one year from the grant date. The shares underlying the DSUs are not vested and issued until the earlier of the director ceasing to be a member of the Board of Directors (provided such time is subsequent to the first day of the succeeding fiscal year) or immediately prior to a change in control.

Option awards may be granted to employees at an exercise price per share of not less than 100% of the fair market value per common share on the date of the grant. Option awards granted under the 2011 Plan generally vest over a period of one to three years and expire ten years from the date of the grant.

We have a Long-Term Incentive Program, adopted in fiscal 2016, under which the named executive officers and other of our key employees may receive long-term equity-based incentive awards, which are intended to align the interests of our named executive officers and other key employees with the long-term interests of our stockholders and to emphasize and reinforce our focus on team success. Long-term equity-based incentive compensation awards are made in the form of stock options, RSUs and PSUs subject to vesting based in part on the extent to which employment continues. 

2015 Employee Stock Purchase Plan

Under our 2015 Employee Stock Purchase Plan (the “ESPP”), six-month offering periods begin on October 1 and April 1 of each year during which eligible employees may elect to purchase shares of our common stock according to the terms of the offering.  On each purchase date, eligible employees can purchase our stock at a price per share equal to 85% of the closing price of our common stock on the exercise date, but no less than par value.  The maximum number of shares of our common stock authorized for sale under the ESPP is 1,150,000 shares, of which 1,075,024 remain available under the ESPP as of April 30, 2021. Under the ESPP, 5,702 shares were purchased during the first three months of fiscal 2021. There were no shares purchased under the ESPP during the first three months of fiscal 2022 as the Company suspended the ESPP as of April 1, 2020 and is still evaluating when the suspension will be lifted, if at all.

Award Activity

In the first three months of fiscal 2022, we granted 830,000 option awards and 109,489 RSU awards with a total grant date fair value of $1.2 million. In the first three months of fiscal 2022, we canceled 802,500 option awards and 171,308 RSU awards, including PSUs.

17


 

Stock-Based Compensation

We recognized stock-based compensation expense within the accompanying consolidated statements of operations and comprehensive loss as follows:

 

 

 

For the Three Months

Ended April 30,

 

 

 

2021

 

 

2020

 

 

 

(Amounts in thousands)

 

Cost of revenue

 

$

1

 

 

$

(8

)

Research and development

 

 

(77

)

 

 

67

 

Sales and marketing

 

 

18

 

 

 

40

 

General and administrative

 

 

266

 

 

 

258

 

 

 

$

208

 

 

$

357

 

 

 

As of April 30, 2021, unrecognized stock-based compensation expense related to unvested stock options was approximately $0.4 million, which is expected to be recognized over a weighted average period of 2.2 years. As of April 30, 2021, unrecognized stock-based compensation expense related to unvested RSUs and DSUs was $0.5 million, which is expected to be recognized over a weighted average amortization period of 0.9 years. Additionally, as of April 30, 2021, unrecognized stock-based compensation expense related to unvested PSUs was less than $0.1 million, which is expected to be recognized over a weighted average amortization period of 1.1 years.

10.

Accounts Receivables, Contract Assets, and Contract Liabilities

 

Receivables

 

 

The following table summarizes our accounts receivable, net and unbilled receivables:

 

 

 

As of April 30,

 

 

As of January 31,

 

 

 

2021

 

 

2021

 

 

 

(Amounts in thousands)

 

Accounts receivable, net

 

$

6,249

 

 

$

6,050

 

Unbilled receivables, current

 

 

8,420

 

 

 

9,359

 

Unbilled receivables, long-term

 

 

5,842

 

 

 

6,340

 

 

 

$

20,511

 

 

$

21,749

 

 

Contract Assets

Contract assets consist of unbilled receivables and are customer committed amounts for which revenue recognition precedes billing, and billing is solely subject to the passage of time.

Unbilled receivables are expected to be billed in the future as follows (amounts in thousands, except percentage amounts):

 

 

 

As of April 30,

 

 

 

2021

 

 

Percentage

 

1 year or less

 

$

8,420

 

 

 

59

%

1-2 years

 

 

4,623

 

 

 

32

%

2-5 years

 

 

1,219

 

 

 

9

%

Total unbilled receivables

 

$

14,262

 

 

 

100

%

Contract Liabilities

Contract liabilities consist of deferred revenue and customer deposits that arise when amounts are billed to or collected from customers in advance of revenue recognition. Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current deferred revenue and the remaining portion is recorded as deferred revenue, long-term. The change in deferred revenue in the first quarter ended April 30, 2021 is due to new billings in advance of revenue recognition offset by revenue recognized during the period.

 

 

Deferred Revenue

 

 

 

Current

 

 

Long-Term

 

 

 

(Amounts in thousands)

 

Balance as of January 31, 2021

 

$

4,737

 

 

$

657

 

Increase (decrease)

 

 

428

 

 

 

(213

)

Balance as of April 30, 2021

 

$

5,165

 

 

$

444

 

18


 

 

We recognized $1.7 million of revenue related to deferred billings in the first quarter of fiscal 2022.

 

Remaining Performance Obligations

The aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied or are partially satisfied as of April 30, 2021 is $27.7 million. This amount includes amounts billed for undelivered services that are included in deferred revenue reported on the consolidated balance sheets. Revenue recognized in the first quarter of fiscal 2022 related to remaining performance obligations as of the previous fiscal year ended January 31, 2021 was $3.3 million.

11.

Disaggregated Revenue and Geographic Information

Disaggregated Revenue

The following table summarizes our revenue disaggregated by revenue stream:

 

 

For the Three Months

Ended April 30,

 

 

 

2021

 

 

2020

 

 

 

(Amounts in thousands)

 

Product revenue:

 

 

 

 

 

 

 

 

Framework

 

$

1,016

 

 

$

968

 

Online video platform and other

 

 

604

 

 

 

837

 

Hardware

 

 

 

 

 

1,293

 

Total product revenue

 

 

1,620

 

 

 

3,098

 

Service revenue:

 

 

 

 

 

 

 

 

Maintenance and support

 

 

2,038

 

 

 

2,605

 

Framework and support services

 

 

939

 

 

 

931

 

Professional services and other

 

 

455

 

 

 

281

 

Total service revenue

 

 

3,432

 

 

 

3,817

 

Total revenue

 

$

5,052

 

 

$

6,915

 

Geographic Information

The following summarizes revenue by customers’ geographic locations:

 

 

 

For the Three Months

Ended April 30,

 

 

 

2021

 

 

%

 

 

2020

 

 

%

 

 

 

(Amounts in thousands, except percentages)

 

Revenue by customers' geographic locations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America (1)

 

$

2,701

 

 

53%

 

 

$

3,578

 

 

52%

 

Europe and Middle East

 

 

1,961

 

 

39%

 

 

 

1,982

 

 

29%

 

Latin America

 

 

213

 

 

4%

 

 

 

1,133

 

 

16%

 

Asia Pacific

 

 

177

 

 

4%

 

 

 

222

 

 

3%

 

Total revenue

 

$

5,052

 

 

 

 

 

 

$

6,915

 

 

 

 

 

 

 

(1)

Includes total revenue for the United States for the periods shown as follows: 

 

 

 

For the Three Months

Ended April 30,

 

 

 

2021

 

 

2020

 

 

 

(Amounts in thousands,

except percentages)

 

US Revenue

 

$

2,198

 

 

$

2,343

 

% of total revenue

 

 

44

%

 

 

34

%

 

19


 

 

The following summarizes long-lived assets by geographic locations:

 

 

 

As of April 30, 2021

 

 

%

 

 

As of January 31, 2021

 

 

%

 

 

 

(Amounts in thousands, except percentages)

 

Long-lived assets by geographic locations(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

7,955

 

 

72%

 

 

$

10,864

 

 

79%

 

Europe and Middle East

 

 

3,092

 

 

28%

 

 

 

2,819

 

 

21%

 

Asia Pacific

 

 

31

 

 

0%

 

 

 

31

 

 

0%

 

Total long-lived assets by geographic location

 

$

11,078

 

 

 

 

 

 

$

13,714

 

 

 

 

 

 

 

(1)

Excludes goodwill.

12.

Income Taxes

Each interim period is considered an integral part of the annual period and, accordingly, we measure our income tax expense using an estimated annual effective tax rate.  A company is required, at the end of each interim reporting period, to make its best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, as adjusted for discrete taxable events that occur during the interim period.

We recorded an income tax provision of less than $0.1 million and an income tax benefit of less than $0.1 million for the three months ended April 30, 2021 and April 30, 2020, respectively. Our effective tax rate in fiscal 2022 and in future periods may fluctuate on a quarterly basis as a result of changes in our jurisdictional forecasts where losses cannot be benefitted due to the existence of valuation allowances on our deferred tax assets, changes in actual results versus our estimates, or changes in tax laws, regulations, accounting principles or interpretations thereof.

 

We review all available evidence to evaluate the recovery of deferred tax assets, including the recent history of losses in all tax jurisdictions, as well as our ability to generate income in future periods. As of April 30, 2021, due to the uncertainty related to the ultimate use of certain deferred income tax assets, we have recorded a valuation allowance on certain deferred assets.

We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions and various foreign jurisdictions. We have closed out an audit with the Internal Revenue Service through fiscal 2013; however, the taxing authorities will still have the ability to review the propriety of certain tax attributes created in closed years if such tax attributes are utilized in an open tax year, such as our federal research and development credit carryovers.

On March 4, 2019, our Board of Directors approved and adopted a tax benefits preservation plan (the “Tax Benefits Preservation Plan”) to potentially limit our ability to use net operating loss carryforwards and certain other tax attributes (“NOLs”) to reduce our potential future federal income tax obligations.  In connection with the Tax Benefits Preservation Plan, we declared a dividend of one preferred share purchase right for each share of our common stock issued and outstanding as of March 15, 2019 to our stockholders of record on that date. The Tax Benefits Preservation Plan expires no later than March 4, 2022, and was approved by our stockholders at our 2019 annual meeting of stockholders on July 11, 2019. 

20


 

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Form 10-Q contains or incorporates forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and such statements involve risks and uncertainties. The following information should be read in conjunction with the unaudited consolidated financial information and the notes thereto included in this Form 10-Q. You should not place undue reliance on these forward-looking statements. Actual events or results may differ materially due to competitive factors and other factors referred to in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K (the “Form 10-K”) for our fiscal year ended January 31, 2021 and elsewhere in this Form 10-Q. These factors may cause our actual results to differ materially from any forward-looking statement. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which we operate, and management’s beliefs and assumptions. We undertake no obligation to publicly update or revise the statements in light of future developments. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,” “seek,” “anticipate,” “intend,” “plan,” “believe,” “could,” “estimate,” “may,” “target,” “project,” or variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict.

Business Overview  

SeaChange International, Inc., a Delaware corporation founded on July 9, 1993, is an industry leader in the delivery of multiscreen, advertising and premium OTT video management solutions. Our software products and services facilitate the aggregation, licensing, management and distribution of video and advertising content for service providers, telecommunications companies, satellite operators, broadcasters, and other content providers. We sell our software products and services worldwide, primarily to service providers including: operators, such as Liberty Global, plc., Altice NV, Cox Communications, Inc. and Rogers Communications, Inc.; telecommunications companies, such as Verizon Communications, Inc., AT&T, Inc. and Frontier Communications Corporation; satellite operators such as Dish Network Corporation; and broadcasters.

Our software products and services are designed to empower video providers to create, manage and monetize the increasingly personalized, highly engaging experiences that viewers demand. Using our products and services, we believe customers can increase revenue by offering services such as VOD programming on a variety of consumer devices, including televisions, smart phones, PCs, tablets and OTT streaming players. Our solutions enable service providers to offer other interactive television services that allow subscribers to receive personalized services and interact with their video devices, thereby enhancing their viewing experience. Our products also allow our customers to insert advertising into broadcast and VOD content.

SeaChange serves an exciting global marketplace where multiscreen viewing is increasingly required, consumer device options are evolving rapidly, and viewing habits are ever-shifting. The primary driver of our business is enabling the delivery of video content in the changing multiscreen television environment. We have expanded our capabilities, products and services to address the delivery of content to devices other than television set-top boxes, namely PCs, tablets, smart phones and OTT streaming players. We believe that our strategy of expanding into adjacent product lines will also position us to further support and maintain our existing service provider customer base. Providing our customers with more scalable software platforms enables them to further reduce their infrastructure costs, improve reliability and expand service offerings to their customers. Additionally, we believe we are well positioned to capitalize on new customers entering the multiscreen marketplace and increasingly serve adjacent markets. Our core technologies provide a foundation for software products and services that can be deployed in next generation video delivery systems capable of increased levels of subscriber activity across multiple devices.

We continue to initiate restructuring efforts to improve operations and optimize our cost structure. In the first quarter of fiscal 2022, we restructured our finance department and terminated the lease to our Waltham, Massachusetts headquarters. In the first half of fiscal 2021, we reduced our headcount across all departments in response to the COVID-19 pandemic, for which we expect approximately $7.6 million of annualized savings. Additionally, in the second quarter of fiscal 2021 we transferred our technical support services to our Poland location in an effort to further reduce cost.

In February 2019, we entered into a cooperation agreement (the “Cooperation Agreement”) with TAR Holdings LLC and Karen Singer (collectively, “TAR Holdings”). As of the date of the Cooperation Agreement, TAR Holdings beneficially owned approximately 20.6% of our outstanding common stock. Pursuant to the Cooperation Agreement, we agreed to set the size of the Board at up to eight members, appointed Robert Pons to the Board as a Class II Director with an initial term that expired at the 2019 annual meeting of stockholders, and appointed Jeffrey Tuder to the Board as a Class III Director with an initial term that expired at the 2020 annual meeting of stockholders. Messrs. Pons and Tuder were subsequently re-elected in the 2019 and 2020 annual meeting of stockholders, respectively. On January 8, 2021, our Chief Executive Officer resigned, and Mr. Pons was subsequently appointed Executive Chairman and Principal Executive Officer in the interim. Mr. Tuder resigned from the Board on May 14, 2021 and was replaced by David Nicol.

21


 

In March 2019, our Board approved and adopted a tax benefits preservation plan (the “Tax Benefits Preservation Plan”) to deter acquisitions of our common stock that would potentially limit our ability to use NOLs to reduce our potential future federal income tax obligations. In connection with the Tax Benefits Preservation Plan, we declared a dividend of one preferred share purchase right for each share of our common stock issued and outstanding as of March 15, 2019 to our stockholders of record on that date. The Tax Benefits Preservation Plan was approved by our stockholders at our 2019 annual meeting of stockholders.

In February 2021, the Company filed a Registration Statement on Form S-3 with the SEC, which registered an indeterminate number of Securities using a “shelf” registration or continuous offering process. Under this shelf registration, we may, from time to time, sell any combination of the securities in one or more offerings up to a total aggregate offering price of $200 million. The shelf registration was declared effective on March 16, 2021.

In connection with the shelf registration statement, the Company entered into an underwriting agreement with Aegis Capital Corp. on March 30, 2021, to issue and sell 10,323,484 shares of common stock, $0.01 par value per share, at a public offering price of $1.85 per share (the “Offering”). The Offering closed on April 1, 2021 and resulted in approximately $17.5 million in proceeds, net of underwriting discounts and commissions of 6.5%, or $0.12025 per share of common stock, and offering expenses of approximately $0.2 million. In addition to the Offering, the Company also granted the underwriters a 45-day option (the “Underwriter Option”) to purchase up to an additional 1,548,522 shares of common stock at a purchase price of $1.85 per share, less underwriting discounts and commissions. The Underwriter Option was not exercised and has expired.

In March 2021, we entered into a Sublease Termination Agreement (the “Termination Agreement”) which terminated the sublease with respect to our former headquarters in Waltham, Massachusetts, effective March 21, 2021. In connection with the early termination of the sublease, the Company is to pay the sublandlord a termination payment of approximately $0.4 million, of which $0.3 million was paid during the three months ended April 30, 2021, and the remaining $0.1 million was paid subsequent to quarter end. The Company also wrote off all related operating lease right-of-use assets and liabilities as of the termination date, resulting in a $0.3 million non-cash gain, which partially offset the loss on the termination payments. The net $0.1 million loss on lease termination is reported as a component of severance and restructuring expenses on the consolidated statements of operations and comprehensive loss as of April 30, 2021. Prior to the execution of the Termination Agreement, the sublease had been scheduled to expire in February 2025. As a result of the Termination Agreement, we expect annualized savings of approximately $600 thousand in facilities costs for each of the next four years.

 

Results of Operations

The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial statements.  

22


 

Revenue and Gross Profit

The components of our total revenue and gross profit are described in the following table:

 

 

 

For the Three Months

Ended April 30,

 

 

Change

 

 

 

2021

 

 

2020

 

 

$

 

 

%

 

 

 

(Amounts in thousands, except for percentage data)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Framework

 

$

1,016

 

 

$

968

 

 

$

48

 

 

 

5.0

%

Online video platform and other

 

 

604

 

 

 

837

 

 

 

(233

)

 

 

(27.8

%)

Hardware

 

 

 

 

 

1,293

 

 

 

(1,293

)

 

 

(100.0

%)

Total product revenue

 

 

1,620

 

 

 

3,098

 

 

 

(1,478

)

 

 

(47.7

%)

Service revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maintenance and support

 

 

2,038

 

 

 

2,605

 

 

 

(567

)

 

 

(21.8

%)

Framework and support services

 

 

939

 

 

 

931

 

 

 

8

 

 

 

0.9

%

Professional services and other

 

 

455

 

 

 

281

 

 

 

174

 

 

 

61.9

%

Total service revenue

 

 

3,432

 

 

 

3,817

 

 

 

(385

)

 

 

(10.1

%)

Total revenue

 

 

5,052

 

 

 

6,915

 

 

 

(1,863

)

 

 

(26.9

%)

Cost of product revenue

 

 

406

 

 

 

1,580

 

 

 

(1,174

)

 

 

(74.3

%)

Cost of service revenue

 

 

1,815

 

 

 

2,826

 

 

 

(1,011

)

 

 

(35.8

%)

Total cost of revenue

 

 

2,221

 

 

 

4,406

 

 

 

(2,185

)

 

 

(49.6

%)

Gross profit

 

$

2,831

 

 

$

2,509

 

 

$

322

 

 

 

12.8

%

Gross product profit margin

 

 

74.9

%

 

 

49.0

%

 

 

 

 

 

 

25.9

%

Gross service profit margin

 

 

47.1

%

 

 

26.0

%

 

 

 

 

 

 

21.2

%

Gross profit margin

 

 

56.0

%

 

 

36.3

%

 

 

 

 

 

 

19.8

%

 

Two customers accounted for 18% and 16% of total revenue for the three months ended April 30, 2021 and two customers accounted for 15% and 13% of total revenue for the three months ended April 30, 2021. See Part I Item I, Note 2, “Significant Accounting Policies,” to this Form 10-Q for more information.

International revenue accounted for 56% and 66% of total revenue in the three months ended April 30, 2021 and 2020, respectively. The decrease in international sales as a percentage of total revenue in the three months ended April 30, 2021 as compared to the three months ended April 30, 2020 is primarily due to a decrease in international revenue at a higher rate than U.S. revenue primarily due to the COVID-19 pandemic.

Product Revenue

Product revenue decreased by $1.5 million for the three months ended April 30, 2021 as compared to the three months ended April 30, 2020. The decrease for the three months ended April 30, 2021 was primarily due to the shift to our Framework sales model, which did not include any third-party hardware, and a decrease in legacy product sales in which we would procure and sell third-party hardware to our customers.

Service Revenue

Service revenue decreased by $0.4 million for the three months ended April 30, 2021 as compared to the three months ended April 30, 2020. The decrease for the three months ended April 30, 2020 was primarily due to a decrease in our maintenance and support revenue provided on post warranty contracts as customers continue to provide their own solutions and legacy products are decommissioned.

Gross Profit and Margin

Cost of revenue consists primarily of the cost of resold third-party products and services, purchased components and subassemblies, labor and overhead relating to the assembly, testing and implementation and ongoing maintenance of complete systems.

23


 

Our gross profit margin increased from 36% to 56% for the three months ended April 30, 2021 as compared to the three months ended April 30, 2020 primarily due to the lower cost of product and service revenue. Gross product profit margin increased from 49% to 75% for the three months ended April 30, 2021 as compared to the three months ended April 30, 2020 primarily due to a reduction in third-party hardware costs and an increase in higher margin software sales. Gross service profit margins increased from 26% to 47% for the three months ended April 30, 2021 as compared to the three months ended April 30, 2020 primarily due to a reduction in headcount in relation to our cost-saving efforts driven by the COVID-19 pandemic which drove higher margins.

Operating Expenses

Research and Development

Research and development expenses consist of salaries and related costs, including stock-based compensation for personnel in software development and engineering functions, as well as contract labor costs, depreciation of development and test equipment and an allocation of related facility expenses. The following table provides information regarding the change in research and development expenses during the periods presented:

 

 

 

For the Three Months

Ended April 30,

 

 

Change

 

 

 

2021

 

 

2020

 

 

$

 

 

%

 

 

 

(Amounts in thousands, except for percentage data)

 

Research and development expenses

 

$

2,668

 

 

$

4,166

 

 

$

(1,498

)

 

 

(36.0

%)

% of total revenue

 

 

52.8

%

 

 

60.2

%

 

 

 

 

 

 

 

 

 

Research and development expenses decreased by $1.5 million for the three months ended April 30, 2021 as compared to the three months ended April 30, 2020 primarily due to a $1.2 million decrease in labor and compensation costs associated with the reduction in headcount and outside services and a reduction in other research and development expenditures in relation to our cost-saving efforts driven by the COVID-19 pandemic.

Selling and Marketing

Selling and marketing expenses consist of salaries and related costs, including stock-based compensation for personnel engaged in selling and marketing functions, as well as commissions, travel expenses, certain promotional expenses and an allocation of related facility expenses. The following table provides information regarding the change in selling and marketing expenses during the periods presented:

 

 

 

For the Three Months

Ended April 30,

 

 

Change

 

 

 

2021

 

 

2020

 

 

$

 

 

%

 

 

 

(Amounts in thousands, except for percentage data)

 

Selling and marketing expenses

 

$

1,380

 

 

$

2,126

 

 

$

(746

)

 

 

(35.1

%)

% of total revenue

 

 

27.3

%

 

 

30.7

%

 

 

 

 

 

 

 

 

 

Selling and marketing expenses decreased by $0.7 million for the three months ended April 30, 2021 as compared to the three months ended April 30, 2020 primarily due to a $0.6 million decrease in labor and compensations costs associated with the reduction in headcount, a $0.1 million decrease in travel expenses, and a reduction in other sales and marketing expenditures in relation to our cost-saving efforts driven by the COVID-19 pandemic.

General and Administrative

General and administrative expenses consist of salaries and related costs, including stock-based compensation for personnel in executive, finance, legal, human resources, information technology and administrative functions, as well as legal and accounting services, insurance premiums and an allocation of related facilities expenses. The following table provides information regarding the change in general and administrative expenses during the periods presented:

 

 

 

For the Three Months

Ended April 30,

 

 

Change

 

 

 

2021

 

 

2020

 

 

$

 

 

%

 

 

 

(Amounts in thousands, except for percentage data)

 

General and administrative expenses

 

$

2,105

 

 

$

2,054

 

 

$

51

 

 

 

2.5

%

% of total revenue

 

 

41.7

%

 

 

29.7

%

 

 

 

 

 

 

 

 

24


 

 

 

General and administrative expenses increased by $0.1 million for the three months ended April 30, 2021 as compared to the three months ended April 30, 2020 primarily due to a $0.1 million increase in outside professional services and no bad debt expense or recoveries as compared to the $0.3 million recovery of bad debt in the prior period offset by a $0.3 million reduction in salaries and compensation and a reduction in other general expenditures driven by the COVID-19 pandemic.

Severance and Restructuring Costs

Severance costs consist of employee-related severance charges not related to a restructuring plan. Restructuring costs consist of charges related to restructuring including employee-related severance charges, remaining lease obligations and termination costs, and the disposal of equipment. The following table provides information regarding the change in severance and restructuring costs during the periods presented:

 

 

 

For the Three Months

Ended April 30,

 

 

Change

 

 

 

2021

 

 

2020

 

 

$

 

 

%

 

 

 

(Amounts in thousands, except for percentage data)

 

Severance and restructuring costs

 

$

484

 

 

$

486

 

 

$

(2

)

 

 

(0.4

%)

% of total revenue

 

 

9.6

%

 

 

7.0

%

 

 

 

 

 

 

 

 

 

Severance and restructuring costs remained constant for the three months ended April 30, 2021 as compared to the three months ended April 30, 2020. Severance and restructuring costs for the three months ended April 30, 2021 consisted primarily of employee related termination benefits for the restructuring of our finance department and facility related closure costs, including a $0.1 million net loss on our Waltham lease termination. Severance and restructuring costs for the three months ended April 30, 2020 consisted primarily of employee related termination benefits due to a reduction in headcount driven by the COVID-19 pandemic.

Other Expense, Net

The table below provides detail regarding our other expense, net:

 

 

 

For the Three Months

Ended April 30,

 

 

Change

 

 

 

2021

 

 

2020

 

 

$

 

 

%

 

 

 

(Amounts in thousands, except for percentage data)

 

Interest income, net

 

 

26

 

 

 

119

 

 

 

(93

)

 

 

(78.2

%)

Foreign exchange loss, net

 

 

(263

)

 

 

(331

)

 

 

68

 

 

 

(20.5

%)

Miscellaneous income, net

 

 

9

 

 

 

4

 

 

 

5

 

 

 

125.0

%

 

 

$

(228

)

 

$

(208

)

 

$

(20

)

 

 

 

 

 

The principal components of other expense, net were interest income, net of less than $0.1 million and foreign exchange loss, net of $0.3 million for the three months ended April 30, 2021 and interest income, net of $0.1 million and foreign exchange loss, net of $0.3 million for the three months ended April 30, 2020. Our foreign exchange loss, net is primarily due to the revaluation of intercompany notes.

Income Tax Provision (Benefit)

We recorded an income tax provision of less than $0.1 million and an income tax benefit of less than $0.1 million for the three months ended April 30, 2021 and April 30, 2020, respectively. Our effective tax rate in fiscal 2022 and in future periods may fluctuate on a quarterly basis as a result of changes in our jurisdictional forecasts where losses cannot be benefitted due to the existence of valuation allowances on our deferred tax assets, changes in actual results versus our estimates, or changes in tax laws, regulations, accounting principles or interpretations thereof.

We review all available evidence to evaluate the recovery of deferred tax assets, including the recent history of losses in all tax jurisdictions, as well as our ability to generate income in future periods. As of April 30, 2021, due to the uncertainty related to the ultimate use of certain deferred income tax assets, we have recorded a valuation allowance on certain deferred assets.

25


 

We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions and various foreign jurisdictions. We have closed out an audit with the Internal Revenue Service through fiscal 2013; however, the taxing authorities will still have the ability to review the propriety of certain tax attributes created in closed years if such tax attributes are utilized in an open tax year, such as our federal research and development credit carryovers.

 

Liquidity and Capital Resources

The following table includes key line items of our consolidated statements of cash flows:

 

 

 

For the Three Months Ended April 30,

 

 

 

2021

 

 

2020

 

 

 

(Amounts in thousands)

 

Net cash used in operating activities

 

$

(1,820

)

 

$

(4,263

)

Net cash provided by investing activities

 

 

245

 

 

 

1,063

 

Net cash provided by financing activities

 

 

17,599

 

 

 

137

 

Effect of exchange rate changes on cash, cash equivalents

   and restricted cash

 

 

(199

)

 

 

153

 

     Net increase (decrease) in cash, cash equivalents and restricted cash

 

$

15,825

 

 

$

(2,910

)

 

Historically, we have financed our operations and capital expenditures primarily with our cash and investments. Our cash, cash equivalents, and restricted cash and marketable securities totaled $21.9 million at April 30, 2021.

In the first half of fiscal 2021, we reduced our headcount across all departments in response to the COVID-19 pandemic, which will result in approximately $7.6 million of annualized cost savings, and transferred our technical support services to our Poland location in an effort to further reduce cost. In the first quarter of fiscal 2022, we entered into the Termination Agreement which terminated the sublease for our former headquarters in Waltham, Massachusetts, effective March 21, 2021. In connection with the early termination of the sublease the Company will pay the sublandlord a termination payment of approximately $430 thousand against an obligation of approximately $2.8 million. Prior to the execution of the Termination Agreement, the sublease had been scheduled to expire in February 2025. As a result of the Termination Agreement, we expect annualized savings of approximately $600 thousand in facilities costs for each of the next four years. Additionally, in the first quarter of fiscal 2022, we issued and sold 10,323,484 shares of common stock, $0.01 par value per share, at a public offering price of $1.85 per share. The Offering resulted in approximately $17.5 million in proceeds, net of underwriting discounts and commissions of 6.5%, or $0.12025 per share of common stock, and offering expenses of approximately $0.2 million.

We believe that existing cash and cash equivalents and cash expected to be provided by future operating activities will be adequate to satisfy our working capital, capital expenditure requirements and other contractual obligations for at least the next 12 months.

If our expectations are incorrect, we may need to raise additional funds to fund our operations or take advantage of unanticipated strategic opportunities in order to strengthen our financial position. In the future, we may enter into other arrangements for potential investments in, or acquisitions of, complementary businesses, services or technologies, which could require us to seek additional equity or debt financing. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of market opportunities, to develop new products or to otherwise respond to competitive pressures.

Net cash used in operating activities

Net cash used in operating activities was $1.8 million for the three months ended April 30, 2021. Net cash used in operating activities was primarily the result of our net loss of $4.1 million, a $0.4 million non-cash expense for depreciation and amortization, a $0.2 million non-cash expense for stock-based compensation, a $0.3 million non-cash gain on the write-off of our operating lease right-of-use assets and liabilities in relation to the Waltham lease termination, a $0.3 million non-cash foreign currency transaction loss, and changes in working capital, which include a $0.2 million increase in accounts receivable, a $1.4 million decrease in unbilled receivables, a $0.2 million decrease in accrued expenses and other liabilities, and a $0.2 million increase in deferred revenue.

Net cash used in operating activities was $4.3 million for the three months ended April 30, 2020. Net cash used in operating activities was primarily the result of our net loss of $6.5 million, a $0.4 million non-cash expense for depreciation and amortization, a $0.3 million non-cash recovery of allowance for doubtful accounts, a $0.4 million non-cash expense for stock-based compensation, and changes in working capital, which include a $3.1 million decrease in accounts receivable, a $0.6 million decrease in unbilled receivables, a $0.6 million decrease in prepaid expenses and other current assets and other assets, a $0.4 million increase in accounts payable, and a $1.7 million decrease in accrued expenses and other liabilities.

26


 

Net cash provided by investing activities

Net cash provided by investing activities was $0.2 million and $1.1 million for the three months ended April 30, 2021 and April 30, 2020, respectively, due to proceeds from the sales and maturities of our marketable securities partially offset by purchases of property and equipment.

 

Net cash provided by financing activities

Net cash provided by financing activities was $17.6 million for the three months ended April 30, 2021 due to $0.1 million in proceeds from stock option exercises and $17.5 million in net proceeds from the issuance of common stock in relation to the Offering. Net cash provided by financing activities was $0.1 million for the three months ended April 30, 2020 due to proceeds from stock option exercises and purchases through the Company’s Employee Stock Purchase Plan.

Impact of COVID-19 Pandemic

In the first quarter of fiscal 2021, concerns related to the spread of COVID-19 began to create global business disruptions as well as disruptions in our operations and to create potential negative impacts on our revenues and other financial results. COVID-19 was declared a pandemic by the World Health Organization on March 11, 2020. The extent to which COVID-19 will impact our financial condition or results of operations is currently uncertain and depends on factors including the impact on our customers, partners, and vendors and on the operation of the global markets in general. Due to our business model, the effect of COVID-19 on our results of operations may also not be fully reflected for some time.

We are currently conducting business with substantial modifications to employee travel, employee work locations, virtualization or cancellation of customer and employee events, and remote sales, implementation, and support activities, among other modifications. These decisions may delay or reduce sales and harm productivity and collaboration. We have observed other companies and governments making similar alterations to their normal business operations, and in general, the markets are experiencing a significant level of uncertainty at the current time. Virtualization of our team’s sales activities could foreclose future business opportunities, particularly as our customers limit spending, which could negatively impact the willingness of our customers to enter into or renew contracts with us.  The pandemic has impacted our ability to complete certain implementations, negatively impacting our ability to recognize revenue, and could also negatively impact the payment of accounts receivable and collections. We continue to realize our on-going cost optimization efforts in response to the impact of the pandemic. We may take further actions that alter our business operations as the situation evolves. As a result, the ultimate impact of the COVID-19 pandemic and the effects of the operational alterations we have made in response on our business, financial condition, liquidity, and financial results cannot be predicted at this time.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).  The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. We continue to examine the impact that the CARES Act may have on our business, including the extent of our PPP loan forgiveness eligibility.

The Paycheck Protection Program

On May 5, 2020, the Company entered into a promissory note (the “Note”) with Silicon Valley Bank (the “Lender”) evidencing an unsecured loan in an aggregate principal amount of $2,412,890 pursuant to the PPP under the CARES Act administered by the U.S. Small Business Administration (“SBA”).

Interest accrues on the Note at a fixed rate of one percent (1%) per annum, with the payment of the first ten months of interest and principal deferred. The Note has an initial term of two years, is unsecured and is guaranteed by the SBA. The Company applied to the Lender for forgiveness of the Note in March 2021 with the amount which may be forgiven equal to the sum of qualifying expenses, including payroll costs, covered rent obligations, and covered utility payments incurred by the Company during the twenty-four week period beginning on May 7, 2020, calculated in accordance with the terms of the CARES Act. Management believes we have properly satisfied all eligibility requirements for full forgiveness, however, we cannot provide assurance that the Note will be forgiven.

Subject to any forgiveness under the PPP, the Note will mature on May 5, 2022. Beginning on the seventeen-month anniversary of the date of the Note, the Company is required to make equal monthly payments of principal and interest. The Note may be prepaid at any time prior to maturity with no prepayment penalties. The Note provides for customary events of default including, among others, those relating to breaches of the Company’s obligations under the Note, including a failure to make payments, any bankruptcy or similar proceedings involving the Company, and certain material effects on the Company’s ability to repay the Note. The Note may be accelerated upon the occurrence of an event of default.

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Critical Accounting Policies and Significant Judgments and Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management.

There have been no material changes to our critical accounting policies and estimates from those disclosed in our financial statements and the related notes and other financial information included in our Form 10-K on file with the Securities and Exchange Commission (the “SEC”).

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

 

 

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this item.

ITEM 4.

Controls and Procedures

Evaluation of disclosure controls and procedures. We maintain “disclosure controls and procedures,” as defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of April 30, 2021, our principal executive officer and principal financial officer concluded that, as of that date, our disclosure controls and procedures were effective.

Changes in internal control over financial reporting. There were no changes in our internal controls over financial reporting during the three months ended April 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

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PART II. OTHER INFORMATION

ITEM 1.

We enter into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers. Most of our historical agreements require us to defend and/or indemnify the other party against intellectual property infringement claims brought by a third party with respect to our products. From time to time, we also indemnify customers and business partners for damages, losses and liabilities they may suffer or incur relating to personal injury, personal property damage, product liability, and environmental claims relating to the use of our products and services or resulting from the acts or omissions of us, our employees, authorized agents or subcontractors. Management cannot reasonably estimate any potential losses, but these claims could result in material liability for us (see Note 6 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q).

ITEM 1A.

Risk Factors

In addition to other information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Form 10-K for the fiscal year ended January 31, 2021, which could materially affect our business, financial conditions, and results of operations. The risks described in our Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

ITEM 5.

Other Information

None.

ITEM 6.

Exhibits

The following list of exhibits includes exhibits submitted with this Form 10-Q as filed with the SEC and those incorporated by reference to other filings.

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Index to Exhibits

 

No. 

 

Description 

3.1*

 

Amended and Restated Certificate of Incorporation of the Company.

 

 

 

 

 

 

3.2

 

Amended and Restated By-laws of the Company (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K previously filed on May 18, 2021 with the Commission and incorporated herein by reference).

 

 

 

10.1#

 

Sublease Termination Agreement, dated March 21, 2021, by and between Saucony, Inc. and SeaChange International, Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K previously filed on March 25, 2021 with the Commission and incorporated herein by reference).

 

 

 

31.1*

 

Certification Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

31.2*

 

Certification Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1*

 

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.2*

 

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101.INS

 

Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document.

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

 

 

 

104

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 filed herewith).

 

*

Filed herewith.

#

Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, SeaChange International, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: June 11, 2021

 

SEACHANGE INTERNATIONAL, INC.

 

 

by:

/s/ ROBERT PONS

 

Robert Pons

 

Executive Chairman

(Principal Executive Officer)

 

by:

/s/ MICHAEL PRINN

 

Michael Prinn

 

Chief Financial Officer, Senior Vice President and Treasurer

(Principal Financial and Accounting Officer)

 

31