SEACHANGE INTERNATIONAL INC MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

The following discussion should be read in conjunction with our consolidated
financial statements and accompanying notes, prepared in accordance with United
States ("U.S.") generally accepted accounting principles ("GAAP"), included in
this Form 10-K. When reviewing the discussion, you should keep in mind the
substantial risks and uncertainties that characterize our business. In
particular, we encourage you to review the risks and uncertainties described
under Item 1A., "Risk Factors," of this Form 10-K. These risks and uncertainties
could cause actual results to differ materially from those forecasted in
forward-looking statements or implied by past results and trends.
Forward-looking statements are statements that attempt to project or anticipate
future developments in our business; we encourage you to review the discussion
of forward-looking statements under "Cautionary Statement for Purposes of the
"Safe Harbor" Provisions of the Private Securities Litigation Reform Act of
1995," at the beginning of this report. These statements, like all statements in
this report, speak only as of the date of this report (unless another date is
indicated), and we undertake no obligation to update or revise such statements
as a result of future developments. Unless otherwise specified, any reference to
a "year" is to a fiscal year ended January 31st.

Company Overview

SeaChange International, Inc. ("SeaChange" 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
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., 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 video on demand
("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 have initiated restructuring efforts to improve operations and optimize our
cost structure. In fiscal 2021, we reduced our headcount across all departments
in response to the COVID-19 pandemic, which resulted in 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 the first quarter of fiscal 2022, we
restructured our finance department and terminated the lease to our Waltham,
Massachusetts headquarters.

In February 2019we have entered into a cooperation agreement (the “Cooperation Agreement”) with TAR Holdings LLC and Karen Singer (collectively, “TAR Holdings“). From the date of the cooperation agreement, TAR Holdings
held approximately 20.6% of our outstanding common shares. In accordance with the cooperation

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Agreement, we agreed to set the size of the Company's Board of Directors (the
"Board") at up to eight members, appointed Mr. 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 Mr. 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. In January 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 in May 2021 and was replaced by Mr. David Nicol. In
September 2021, Mr. Peter Aquino was appointed as the Company's President and
Chief Executive Officer. Upon the appointment of Mr. Aquino, Mr. Pons resigned
as the Company's Executive Chairman and Principal Executive Officer but remains
Chairman of the Board.

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 net operating loss carryforwards
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 Securities and Exchange Commission (the "SEC"), which registered an
indeterminate number of shares of common stock, preferred stock, Series A
Participating Preferred Stock, warrants or rights to purchase common stock or
preferred stock, and units 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 ("common
stock"), 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 to our former
headquarters in Waltham, Massachusetts, effective March 21, 2021. In connection
with the early termination of the sublease, the Company paid the sublandlord
termination payments of approximately $0.4 million for the fiscal year ended
January 31, 2022. 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 the lease termination is reported as a
component of severance and restructuring expenses on the consolidated statements
of operations and comprehensive loss for the fiscal year ended January 31, 2022.
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 $0.6 million in facilities costs
for each of the next four years.

Merger Agreement

In December 2021, the Company and Triller Hold Co LLC, a Delaware limited
liability company ("Triller"), entered into an Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which Triller will be merged with and into
SeaChange, and the separate existence of Triller shall cease, with SeaChange
continuing as the surviving corporation (the "Merger"). Upon the closing of the
Merger, the name of the combined company (the "Post-Merger Company") will be
changed to "TrillerVerz Corp.".

Pursuant and subject to the terms and conditions of the Merger Agreement, in
addition to other contemplated transactions, (i) the parties anticipate that
Triller will conduct an offering of convertible notes prior to the closing in an
amount in excess of $100 million (the "Triller Convertible Notes"), and (ii) the
charter of the Post-Merger Company will provide for two classes of common stock,
consisting of Class A common stock ("Buyer Class A Common Stock") and Class B
common stock ("Buyer Class B Common Stock"), which Buyer Class B Common Stock is
anticipated to provide for super-voting rights to provide its holders 76% or
more of the total voting rights.

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The stockholders of SeaChange will have the right to elect to receive either
(i) their pro rata portion of $25 million cash consideration along with their
pro rata portion of an aggregate $75 million in principal of notes (the "Notes
Consideration") to be issued by the Post-Merger Company to the holders of
SeaChange common stock (such cash and notes consideration, the "Cash/Notes
Consideration") or (ii) a number of shares of Buyer Class A Common Stock (the
"Stock Consideration"), in an amount equal to that which such holder would have
received if such SeaChange stockholder had purchased the Triller Convertible
Notes in an aggregate amount equal to its pro rata portion of the Cash/Notes
Consideration and then converted such Triller Convertible Notes at the
conversion price at which such Triller Convertible Notes were issued and then
participated pro-rata along with the Triller holders in the proposed Merger.
Assuming that (i) all holders of SeaChange common stock elect the Stock
Consideration and (ii) that Triller issues $250 million of Triller Convertible
Notes which convert in connection with the proposed Merger at an agreed discount
of 20% to an assumed $5 billion Triller valuation, the stockholders of SeaChange
would own approximately 2.3% of the Post-Merger Company and the holders of
Triller would hold approximately 97.7% of the Post-Merger Company. If all
stockholders of SeaChange elected to receive the Cash/Notes Consideration, such
stockholders would have no equity interest in the Post-Merger Company, and the
Triller holders would collectively own 100% of the Post-Merger Company. For
SeaChange stockholders that elect the Cash/Notes Consideration, each would
receive their pro rata portion of such Cash/Notes Consideration which would then
also reduce the resulting SeaChange stockholders' ownership percentages by
taking into account the payment of the Cash/Notes Consideration and related
reduction in the Stock Consideration. The notes (the "Merger Consideration
Notes") to be issued to SeaChange stockholders who elect the Cash/Notes
Consideration are payable on the one-year anniversary of issuance, bear interest
at a rate of 5% per annum and will be automatically converted into Buyer Class A
Common Stock at such time as the market capitalization of the Post-Merger
Company equals or exceeds $6 billion for ten consecutive trading days. The
holders of the Merger Consideration Notes will have the option to convert into
Buyer Class A Common Stock if the Post-Merger Company exercises its optional
redemption right, which it may do at any time, in whole or in part, on the same
terms set forth above. The holders of the Merger Consideration Notes will have
recourse against the Post-Merger Company and its assets only to the extent of
the Post-Merger Company's interest in certain of its subsidiaries (who will also
provide guarantees of the Merger Consideration Notes). The existing subsidiaries
of SeaChange prior to the proposed Merger are also anticipated to provide a
first lien security interest on their assets securing the Merger Consideration
Notes. The Merger Consideration Notes will have limited covenants

Shares of Buyer Class A Common Stock to be issued in the Merger are expected to
be listed on the NASDAQ Stock Exchange ("Nasdaq") under the ticker symbol
"ILLR". No fractional shares of Buyer Class A Common Stock and Buyer Class B
Common Stock will be issued in the Merger, and holders of shares of SeaChange
common stock will receive cash in lieu of any such fractional shares. SeaChange
stock options and other equity awards will generally, upon completion of the
Merger, be converted into Buyer Class A Common Stock.

The Merger Agreement provides that, upon the closing of the Merger, the board of
directors of the Post-Merger Company will be composed of seven members, with all
members to be designated by Triller. Upon completion of the Merger, all
executive officers of the Post-Merger Company will be appointed by Triller, in
each case to serve in such positions until successors are duly elected or
appointed.

The respective boards of directors of SeaChange and Triller have approved the
Merger Agreement, and have agreed to recommend that SeaChange's stockholders and
Triller's unitholders, respectively, adopt the Merger Agreement.

Neither SeaChange nor Triller is permitted to solicit, initiate or knowingly
encourage or induce any alternative transaction proposals from third parties or
to engage in discussions or negotiations with third parties regarding any
alternative transaction proposals. Notwithstanding this limitation, prior to a
party's stockholders or unitholders, as applicable, approving the transactions,
including the Merger, such party may under certain circumstances provide
information to and participate in discussions or negotiations with third parties
with respect to an unsolicited alternative transaction proposal that its board
of directors has determined in good faith, after consultation with its outside
financial advisors and outside legal counsel, is or could reasonably be expected
to lead to a superior proposal. SeaChange's board of directors may change its
recommendation to its stockholders (subject to Triller's right to terminate the
Merger Agreement following such change in recommendation by the SeaChange board
of directors) in response to a superior proposal or an intervening event if the
board of directors determines in good faith, after consultation with its outside
financial advisors and outside legal counsel, that the failure to take such
action would be inconsistent with the exercise of the directors' fiduciary
duties under applicable law.

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Immediately prior to the execution of the Merger Agreement, SeaChange entered
into an amendment (the "Amendment") to the Tax Benefits Preservation Plan, dated
as of March 4, 2019 (the "Rights Agreement"), by and between the SeaChange and
Computershare Inc., as rights agent. Pursuant to the Amendment, in connection
with the Merger Agreement, Triller and its affiliates and associates will not be
deemed an "Acquiring Person" under the Rights Agreement.

We have registered $1.5 million transaction costs in fiscal year 2022, which are included in the consolidated statements of income and comprehensive income for the year ended January 31, 2022. We are still evaluating the accounting for the business combination for the Merger.

Summary of operating results

The following discussion summarizes the key factors our management believes are
necessary for an understanding of our consolidated financial statements for the
fiscal years ended January 31, 2022 and 2021.

Turnover and gross profit

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

                                           For the Fiscal Years Ended
                                                   January 31,                         Change
                                            2022                 2021             $              %
                                              (Amounts in thousands, except for percentage data)
Revenue:
Product revenue:
License and subscription                $     10,843         $      5,135     $    5,708          111.2 %
Hardware                                       2,178                1,473            705           47.9 %
Total product revenue                         13,021                6,608          6,413           97.0 %
Service revenue:
Maintenance and support                       12,249               13,657         (1,408 )        (10.3 %)
Professional services and other                2,040                1,734            306           17.6 %
Total service revenue                         14,289               15,391         (1,102 )         (7.2 %)
Total revenue                                 27,310               21,999          5,311           24.1 %
Cost of product revenue                        3,876                3,556            320            9.0 %
Cost of service revenue                        7,083                8,513         (1,430 )        (16.8 %)
Total cost of revenue                         10,959               12,069         (1,110 )         (9.2 %)
Gross profit                            $     16,351         $      9,930     $    6,421           64.7 %
Gross product profit margin                     70.2 %               46.2 %                        24.0 %
Gross service profit margin                     50.4 %               44.7 %                         5.7 %
Gross profit margin                             59.9 %               45.1 %                        14.7 %


International revenue accounted for 43% and 69% of total revenue in fiscal 2022
and fiscal 2021, respectively. The decrease in international sales as a
percentage of total revenue in fiscal 2022 as compared to fiscal 2021 is
primarily attributable to a $5.0 million increase in perpetual license sales to
U.S. customers as compared to international customers, for which we had a $0.1
million decrease in perpetual license sales. Additionally, in fiscal 2022, we
had a $1.8 million decrease in revenue related to our largest international
customer and its affiliates as their maintenance and support and professional
services needs were reduced.

Product revenue

Product sales increased by $6.4 million in fiscal 2022 compared to fiscal 2021, primarily due to an increase in the sale of perpetual licenses and delivery of third-party products and hardware as customers resumed or initiated new investments and technology deployments that have been postponed or discontinued due to COVID-19. 19 pandemic.

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Service revenue

Services revenue decreased by $1.1 million in fiscal 2022 compared to fiscal 2021, primarily due to reduced maintenance and support for licenses previously sold to a major customer.

Gross profit and margin

Product cost primarily includes the cost of resold third-party products and services, purchased components and subassemblies, labor and overhead, testing and implementation, and ongoing maintenance of complete systems. .

Our gross profit margin increased by approximately 15% in fiscal 2022 as
compared to fiscal 2021 primarily due to an increase in higher margin perpetual
license revenue while associated costs remained relatively consistent, coupled
with a decrease in cost of service revenue as a result of the reduction in
headcount and overhead in relation to our cost-saving efforts. Product profit
margin increased by 24% in fiscal 2022 as compared to fiscal 2021 also primarily
due to higher margin perpetual license revenue while associated costs remained
relatively consistent. Service profit margin increased by 6% in fiscal 2022 as
compared to fiscal 2021 primarily due to a reduction in headcount and overhead
expenses in relation to our cost-saving efforts.

Functionnary costs

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 Fiscal Years Ended January 31,              Change
                                              2022                    2021             $              %
                                                 (Amounts in thousands, except for percentage data)
Research and development expenses       $           8,910         $     13,808     $   (4,898 )        (35.5 %)
% of total revenue                                   32.6 %               62.8 %




Research and development expenses decreased by $4.9 million in fiscal 2022 as
compared to fiscal 2021 primarily due to a $1.1 million decrease in salaries and
compensation costs associated with our reduction in headcount, a $3.1 million
decrease in contract labor, a $0.4 million decrease in stock-based compensation
expense, a $0.2 million decrease in allocated overhead and facility expenses,
and reductions in other research and development expenditures in relation to our
restructuring and cost-saving efforts.

Sales 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 Fiscal Years Ended
                                                   January 31,                         Change
                                            2022                 2021             $              %
                                              (Amounts in thousands, except for percentage data)
Selling and marketing expenses          $      5,862         $      6,420     $     (558 )         (8.7 %)
% of total revenue                              21.5 %               29.2 %




Selling and marketing expenses decreased by $0.6 million in fiscal 2022 as
compared to fiscal 2021 primarily due to a decrease in allocated overhead and
facility expenses, a decrease in tradeshow and travel expenses, and reductions
in other selling and marketing expenditures in relation to our restructuring and
cost-saving efforts.

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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 Fiscal Years Ended
                                                   January 31,                         Change
                                            2022                 2021             $              %
                                              (Amounts in thousands, except for percentage data)
General and administrative expenses     $      8,779         $      9,746     $     (967 )         (9.9 %)
% of total revenue                              32.1 %               44.3 %




General and administrative expenses decreased by $1.0 million in fiscal 2022 as
compared to fiscal 2021 primarily due to a $1.2 million decrease in salaries and
compensation costs associated with our reduction in headcount, a $0.4 million
decrease in outside professional services, a $0.4 million decrease in allocated
overhead and facility expenses, and reductions in other general expenditures in
relation to our cost-saving efforts partially offset by a $0.8 million increase
in Board affiliated stock-based compensation and a $0.3 million increase in
corporate insurance premiums.

Redundancy and restructuring costs

Severance benefits consist of employee-related severance benefits and other severance benefits not related to a restructuring plan. Restructuring includes employee severance and facility closure costs.

                                        For the Fiscal Years Ended January 31,               Change
                                             2022                     2021              $              %
                                                 (Amounts in thousands, except for percentage data)
Severance and restructuring costs       $           717           $       1,477     $     (760 )        (51.5 %)
% of total revenue                                  2.6 %                   6.7 %




Severance and restructuring costs decreased by $0.8 million in fiscal 2022 as
compared to fiscal 2021. Severance and restructuring costs in fiscal 2022
consisted primarily of Board and employee-related termination benefits as well
as a $0.1 million loss on lease termination and a $0.1 million loss on disposal
of fixed assets in relation to the Termination Agreement, for which we expect
annualized cost savings of $0.6 million over the next four years. Severance and
restructuring costs in fiscal 2021 consisted primarily of employee-related
termination benefits associated with our reduction in headcount in fiscal 2021,
which resulted in approximately $7.6 million of annualized cost savings.

Transaction costs

Transaction costs to effect the Merger totaled $1.5 million in fiscal 2022 and
included third-party direct costs such as legal, accounting, and other
professional fees. Transaction costs were expensed as incurred and accounted for
separately from the Merger consideration.

Gain on extinguishment of debt

In May 2020, we entered into a promissory note (the "Note") with Silicon Valley
Bank (the "Lender") evidencing an unsecured loan in an aggregate principal
amount of $2.4 million pursuant to the Paycheck Protection Program ("PPP") under
the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act")
administered by the U.S. Small Business Administration ("SBA"). Interest on the
Note accrued at a fixed interest rate of one percent (1%) per annum. The Note
and accrued interest were fully forgiven by the SBA in June 2021 and a $2.4
million gain on extinguishment of debt was recorded on the consolidated
statements of operations and comprehensive loss in the second quarter of fiscal
2022.

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Other expenses, net

The table below provides details of our other expenses, net:

                                            For the Fiscal Years Ended January 31,                   Change
                                               2022                         2021                $              %
                                                     (Amounts in thousands, except for percentage data)
Interest income, net                    $              258           $              454     $     (196 )        (43.2 %)
Foreign exchange loss, net                            (896 )                       (793 )         (103 )         13.0 %
Miscellaneous income, net                              159                          159              -            0.0 %
                                        $             (479 )         $             (180 )   $     (299 )

Our foreign exchange loss, net, is mainly attributable to the revaluation of intercompany notes.

Provision for income tax

We recorded an income tax benefit of less than $0.1 million and an income tax
expense of $0.1 million in fiscal 2022 and 2021, respectively. Our tax expense
was largely driven by foreign withholding taxes. Our effective tax rate in
fiscal 2022 and in future periods may fluctuate, 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.

Use of Non-WE GAAP Financial Measures

We define non-GAAP loss from operations as GAAP net loss adjusted for
stock-based compensation expenses, amortization of intangible assets, severance
and restructuring costs, acquisition-related costs, other expense, net, gain on
extinguishment of debt, and our income tax (benefit) provision. We discuss
non-GAAP loss from operations in our quarterly earnings releases and certain
other communications, as we believe non-GAAP loss from operations is an
important measure that is not calculated according to GAAP. We use non-GAAP loss
from operations in internal forecasts and models when establishing internal
operating budgets, supplementing the financial results and forecasts reported to
our Board, determining a component of bonus compensation for executive officers
and other key employees based on operating performance and evaluating short-term
and long-term operating trends in our operations. We believe that the non-GAAP
loss from operations financial measure assists in providing an enhanced
understanding of our underlying operational measures to manage the business, to
evaluate performance compared to prior periods and the marketplace, and to
establish operational goals. We believe that the non-GAAP financial adjustments
are useful to investors because they allow investors to evaluate the
effectiveness of the methodology and information used by management in our
financial and operational decision-making.

Non-GAAP loss from operations is a non-GAAP financial measure and should not be
considered in isolation or as a substitute for financial information provided in
accordance with GAAP. This non-GAAP financial measure may not be computed in the
same manner as similarly titled measures used by other companies. We expect to
continue to incur expenses similar to the financial adjustments described above
in arriving at non-GAAP loss from operations and investors should not infer from
our presentation of this non-GAAP financial measure that these costs are
unusual, infrequent or non-recurring.

The following table includes the reconciliations of our GAAP net loss, the most
directly comparable GAAP financial measure, to our non-GAAP loss from operations
for the fiscal years ended January 31, 2022 and 2021:



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                                                          For the Fiscal Years Ended January 31,
                                                             2022                        2021
                                                                  (Amounts in thousands)
GAAP net loss                                         $           (7,430 )       $            (21,759 )
Other expense, net                                                   479                          180
Gain on extinguishment of debt                                    (2,440 )                          -
Income tax (benefit) provision                                       (15 )                         58
GAAP loss from operations                             $           (9,406 )       $            (21,521 )
Amortization of intangible assets                                  1,226                        1,210
Stock-based compensation                                           1,690                        1,247
Severance and restructuring costs                                    717                        1,477
Transaction costs                                                  1,489                            -
Non-GAAP loss from operations                         $           (4,284 )       $            (17,587 )

Non-GAAP loss from operations, basic per share        $            (0.09 )       $              (0.47 )
Non-GAAP loss from operations, diluted per share      $            (0.09 )       $              (0.47 )
Weighted average common shares outstanding, basic
per share                                                         47,030                       37,471

Weighted average number of common shares outstanding, diluted per share

                                                         47,030                       37,471


Cash and capital resources

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


                                                      For the Fiscal Years Ended January 31,
                                                            2022                   2021
                                                              (Amounts in thousands)
Net cash used in operating activities                          $(4,747)     

($9,355)

Net cash (used in) provided by investing
activities                                                        (394)                  4,027
Net cash provided by financing activities                        17,623                  2,470
Effect of exchange rate changes on cash, cash
equivalents
  and restricted cash                                             (710)                  (355)
   Net increase (decrease) in cash, cash
equivalents and
    restricted cash                                             $11,772               $(3,213)


Historically, we have financed our operations and capital expenditures primarily
with our cash and investments. Our cash, cash equivalents and restricted cash
totaled $17.9 million at January 31, 2022.

We have initiated restructuring efforts to improve operations and optimize our
cost structure. In fiscal 2021, we reduced our headcount across all departments
in response to the onset of the COVID-19 pandemic, which resulted in
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 the first quarter of fiscal 2022, we entered into the Termination
Agreement with respect to our former headquarters in Waltham, Massachusetts. In
connection with the Termination Agreement, the Company paid the sublandlord a
termination payment of approximately $0.4 million 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
$0.6 million 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 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.

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In the second quarter of fiscal 2022, we were granted full forgiveness of the
Note we entered into with the Lender in May 2020 pursuant to the PPP under the
CARES Act administered by the SBA. The aggregate principal amount of $2.4
million and interest accrued at a fixed rate of one percent (1%) per annum were
fully forgiven is included in the consolidated statements of operations and
comprehensive loss as a gain on extinguishment of debt.

These measures are important steps in restoring us to profitability and positive
cash flow. We believe that existing cash and investments and cash expected to be
provided by future operating and investing activities, augmented by the plans
highlighted above, are 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 $4.7 million in fiscal 2022 and was
primarily the result of our (i) $7.4 million net loss, (ii) operating activity
non-cash adjustments of $1.2 million, including $1.4 million of depreciation and
amortization expense, a $2.4 million non-cash gain on extinguishment of
debt related to the fully forgiven Note, $1.7 million of stock-based
compensation expense, and $0.9 million of realized and unrealized foreign
currency transaction losses, and (iii) net cash inflows of $1.5 million provided
by changes in our operating assets and liabilities, including a $2.8 million
increase in accounts receivable attributable to up-front perpetual license
invoicing, a $2.4 million decrease in unbilled receivables attributable to the
passage of time on installment invoicing of perpetual licenses previously sold
for which we recognized revenue at the time of delivery, a $2.2 million decrease
in prepaid expenses and other current assets and other assets primarily
attributable to a decrease in prepaid taxes, a $1.2 million increase in accounts
payable attributable to the timing of vendor payments, a $0.2 million decrease
in accrued expenses and other liabilities attributable to a reduction in
expenditures in relation to our cost-saving efforts, and a $1.3 million decrease
in deferred revenue attributable to a decline in up-front maintenance invoicing
for which we recognize revenue over a period of time.

Net cash used in operating activities was $9.4 million in fiscal 2021 and was
primarily the result of our (i) $21.8 million net loss, (ii) operating activity
non-cash adjustments of $3.5 million, including $1.7 million of depreciation and
amortization expense, $1.2 million of stock-based compensation expense, and $0.8
million of realized and unrealized foreign currency transaction losses, and
(iii) net cash inflows of $8.9 million provided by changes in our operating
assets and liabilities, including a $6.4 million decrease in accounts receivable
attributable to a decline in sales driven by the COVID-19 pandemic, an $8.0
million decrease in unbilled receivables attributable to the installment
invoicing of perpetual licenses previously sold for which we recognized revenue
at the time of delivery, a $1.2 million decrease in prepaid expenses and other
current assets and other assets attributable to a decrease in capitalized
commissions due to the decline in sales driven by the COVID-19 pandemic, a $2.2
million decrease in accounts payable attributable to the timing of vendor
payments, a $3.5 million decrease in accrued expenses and other liabilities
attributable to incentive compensation payments made in relation to the previous
fiscal year, and a $0.9 million decrease in deferred revenue attributable to a
decline in up-front maintenance invoicing for which we recognize revenue over a
period of time.

Net cash (used) from investing activities

Net cash used in investing activities was $0.4 million in fiscal 2022 due to
$0.6 million in purchases of property and equipment offset by $0.3 million in
proceeds from the sales and maturities of marketable securities. Net cash
provided by investing activities was $4.0 million in fiscal 2021 due to $4.4
million in proceeds from the sales and maturities of marketable securities
offset by $0.3 million in purchases of property and equipment.

Net cash provided by financing activities

Net cash provided by financing activities was $17.6 million and $2.5 million in
fiscal 2022 and 2021, respectively. Net cash provided by financing activities in
fiscal 2022 was attributable to $17.5 million in proceeds from the issuance of
common stock, net of issuance costs and $0.2 million in proceeds from stock
option exercises. Net cash

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provided by financing activities in fiscal 2021 was attributable to $2.4 million
in proceeds from the PPP Note and $0.1 million in proceeds from stock option
exercises and our employee stock purchase plan partially offset by $0.1 million
in repurchases of common stock.

Impact of the COVID-19 pandemic

COVID-19 was declared a pandemic by the World Health Organization on March 11,
2020. In the first quarter of fiscal 2021, concerns related to the spread
of COVID-19 created global business disruptions as well as disruptions in our
operations and created potential negative impacts on our revenues and other
financial results. 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 continue to conduct 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 on-going 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.

Tax Benefit Preservation Plan

On March 4, 2019, we entered into the Tax Benefits Preservation Plan in the form
of a stockholder rights agreement ("Rights Agreement") and issued a dividend of
one preferred share purchase right (a "Right") for each share of common stock
payable on March 15, 2019 to the stockholders of record of such shares on that
date. Each Right entitles the registered holder, under certain circumstances, to
purchase from us one one-hundredth of a share of Series A Participating
Preferred Stock, par value $0.01 per share (the "Preferred Shares"), of the
Company, at a price of $8.00 per one one-hundredth of a Preferred Share
represented by a Right (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights are set forth in the Rights Agreement.

The Rights are not exercisable until the Distribution Date (as defined in the
Rights Agreement). Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends.

At any time prior to ten (10) business days after the time any person becomes an
Acquiring Person (as defined in the Rights Agreement), the Board may redeem the
Rights in whole, but not in part, at a price of $0.0001 per Right (the
"Redemption Price"). The redemption of the Rights may be made effective at such
time, on such basis and with such conditions as the Board in its sole discretion
may establish. Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.

Rights expired at close of business on March 4, 2022.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP,
which requires management to make estimates, judgments and assumptions that
affect the reported amounts of assets, liabilities, revenue, expenses and
disclosure of contingent assets and liabilities. We base our estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Our actual results could differ from
these estimates under different assumptions and conditions.

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The significant accounting policies and methods used in the preparation of our
consolidated financial statements are described in Note 2, "Significant
Accounting Policies," to our consolidated financial statements set forth in Part
II, Item 8, of this Form 10-K. We believe our critical accounting policies for
revenue recognition and goodwill and other intangible assets use the most
significant estimates, judgments, and assumptions in the preparation of our
consolidated financial statements.

Revenue recognition

Insight

Our revenue is derived from software license sales and related 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 various performance obligations; and

• recognize revenue as performance obligations are met.

Identify the customer contract

A customer contract is generally identified when there is approval and commitment on the part of the Company and its customer, the rights have been identified, the terms of payment are identified, the contract has commercial substance and the recoverability and consideration are 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 price of the transaction

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

Attribute the transaction price to separate 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 performance obligations are met

We enter into contracts that include combinations of license, support,
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.

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SaaS licenses are accounted for in proportion to the subscription period from 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.

Important 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. We then allocate the transaction price 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 Accounting Standards Codification ("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.
We sell software either in a bundle (historically called Framework) or as part
of "a la carte" contracts with multiple performance obligations with separate
pricing for the software, services, and hardware. When we sell a bundled
license, our software products and services, including updates, are sold for one
fixed price and we recognize the portion of the transaction price allocated to
the software license on a residual basis, as the bundle has at least one
performance obligation for which the SSP is observable: hardware and/or support
services. We note that both hardware and support services have observable
standalone pricing. When our software is sold on an "a la carte" basis, revenue
is allocated to the software performance obligation using the residual method,
as we have observable SSP for the associated support services that are 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 SaaS contract ratably
over the contractual term of the SaaS license, as we cannot bifurcate the
separate elements on a standalone basis and the elements have never been sold
separately in a SaaS arrangement.

Our services revenue is comprised of software license implementation,
engineering, training and reimbursable expenses. Services are sold on both a
standalone basis and as part of our customer contracts with multiple performance
obligations. For implementation, engineering and training services, revenue is
recognized on an input method as hours are incurred and services are provided
compared to total estimated hours. We estimate the SSP for fixed price services
based on estimated hours adjusted for historical experience using the time and
material rates charged in standalone service arrangements. When sold on a time
and materials basis, SSP for services is determined by observable prices in
standalone service arrangements. Certain engineering services sold with support
contracts are not distinct in the context of the contract and those services are
bundled with other distinct services to form a single stand ready performance
obligation, which is recognized ratably over the relevant service period.

We have utilized the cost-plus margin method to determine the SSP for our
Framework software support services offerings and hardware sales. When support
services are sold on an "a la carte" basis with our software offerings, we
typically determine the SSP of these 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 we believe is reflective of a
market-based reseller

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margin. When observable standalone pricing for support service offerings are not
readily available, we then revert to the cost-plus margin method to determine
the SSP for the support services.

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. A contract modification meeting both criteria is accounted for as
a separate contract. An amendment or 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.

Good will and other 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. A goodwill impairment is recorded if the amount by which
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.

The Company performed a goodwill impairment test as of August 1, 2021 using a
quantitative approach. The Company considered macroeconomics, industry-specific
and Company specific factors, and estimates and assumptions in its analysis. The
Company estimated the fair value of its reporting unit using the income
(otherwise known as the discounted cash flows model) and market approaches and
determined there was no impairment as the fair value exceeded the carrying value

Intangible assets are recorded at their estimated fair values at the date of
acquisition. We amortize acquired 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.

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