Quantum Corporation
11/13/2025 | Press release | Distributed by Public on 11/13/2025 16:08
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis compares the change in the consolidated financial statements for quarters and six months ended September 30, 2025 and September 30, 2024, and should be read together with our condensed consolidated financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes thereto and management's discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 (the "Annual Report"). In particular, the risk factors contained in Part I, Item 1A of the Annual Report under the heading "Risk Factors" may reflect trends, demands, commitments, events, or uncertainties that could materially impact our results of operations and liquidity and capital resources. For comparisons of quarters and six months ended September 30, 2024 and September 30, 2023, see our Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, filed with the SEC on November 14, 2024, and incorporated herein by reference. Our fiscal year ends on March 31 of each calendar year. "Fiscal 2025" refers to the fiscal year ended March 31, 2025.
The following discussion contains forward-looking statements, such as statements regarding anticipated impacts on our business, our future operating results and financial position, our business strategy and plans, our market growth and trends, and our objectives for future operations. Please see "Note Regarding Forward-Looking Statements" for more information about relying on these forward-looking statements.
OVERVIEW
We are a technology company whose mission is to deliver innovative solutions to organizations across the world. We design, manufacture and sell technology and services that help customers capture, create and share digital content, and protect it for decades. We emphasize innovative technology in the design and manufacture of our products to help our customers unlock the value in their video and unstructured data in new ways to solve their most pressing business challenges.
We generate revenue by designing, manufacturing, and selling technology and services. Our most significant expenses are related to compensating employees; designing, manufacturing, marketing, and selling our products and services; data center costs in support of our cloud-based services; and interest associated with our long-term debt and income taxes.
Macroeconomic Conditions
We continue to actively monitor, evaluate and respond to the current uncertain macro environment, including the impact of changing interest rates, inflation, tariffs, lingering supply chain challenges, and fluctuation in the U.S. dollar. During the quarter we continued to experience longer sales cycle for opportunities with our enterprise as well as commercial customers.
The macro environment remains unpredictable and our past results may not be indicative of future performance.
RESULTS OF OPERATIONS
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Total revenue | $ | 62,715 | $ | 71,846 | $ | 127,002 | $ | 144,111 | |||||||||||||||
|
Total cost of revenue(1)
|
39,163 | 41,201 | 80,736 | 86,410 | |||||||||||||||||||
| Gross profit | 23,552 | 30,645 | 46,266 | 57,701 | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
|
Sales and marketing(1)
|
11,819 | 13,578 | 24,474 | 26,873 | |||||||||||||||||||
|
General and administrative(1)
|
11,006 | 13,977 | 24,576 | 35,042 | |||||||||||||||||||
|
Research and development (1)
|
5,692 | 8,264 | 12,353 | 16,572 | |||||||||||||||||||
|
Restructuring charges (1)
|
3,193 | 383 | 5,616 | 1,574 | |||||||||||||||||||
| Total operating expenses | 31,710 | 36,202 | 67,019 | 80,061 | |||||||||||||||||||
| Loss from operations | (8,158) | (5,557) | (20,753) | (22,360) | |||||||||||||||||||
| Other income (expense), net | (185) | (1,334) | (616) | (1,375) | |||||||||||||||||||
| Interest expense | (6,227) | (6,131) | (12,743) | (9,921) | |||||||||||||||||||
| Change in fair value of warrant liabilities | 1,525 | 3,550 | 1,525 | 5,216 | |||||||||||||||||||
| Loss on debt extinguishment | (33,254) | (2,308) | (30,695) | (3,003) | |||||||||||||||||||
| Loss before income taxes | (46,299) | (11,780) | (63,282) | (31,443) | |||||||||||||||||||
| Income tax provision | 157 | 370 | 380 | 605 | |||||||||||||||||||
| Net loss | $ | (46,456) | $ | (12,150) | $ | (63,662) | $ | (32,048) | |||||||||||||||
(1) Includes stock-based compensation as follows:
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Cost of revenue | $ | 41 | $ | 76 | $ | (567) | $ | 266 | |||||||||||||||
| Research and development | 19 | 161 | 87 | 349 | |||||||||||||||||||
| Sales and marketing | (82) | 85 | (6) | 173 | |||||||||||||||||||
| General and administrative | 346 | 394 | 281 | 853 | |||||||||||||||||||
| Total | $ | 324 | $ | 716 | $ | (205) | $ | 1,641 | |||||||||||||||
Comparison of the Three Months Ended September 30, 2025 and 2024
Revenue
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 |
% of revenue |
2024 |
% of revenue |
$ Change | % Change | |||||||||||||||||||||||||||||
| Product revenue | $ | 35,368 | 56 | % | $ | 39,278 | 55 | % | $ | (3,910) | (10) | % | |||||||||||||||||||||||
| Service and subscription | 25,620 | 41 | % | 30,205 | 42 | % | (4,585) | (15) | % | ||||||||||||||||||||||||||
| Royalty | 1,727 | 3 | % | 2,363 | 3 | % | (636) | (27) | % | ||||||||||||||||||||||||||
| Total revenue | $ | 62,715 | 100 | % | $ | 71,846 | 100 | % | $ | (9,131) | (13) | % | |||||||||||||||||||||||
Product Revenue
In the three months ended September 30, 2025, product revenue decreased $3.9 million, or 10%, as compared to the same period in fiscal 2025. The primary driver of the decrease was due to large orders in the prior period across secondary and primary storage.
Service and Subscription Revenue
Service and subscription revenue decreased $4.6 million, or 15%, in the three months ended September 30, 2025 compared to the same period in fiscal 2025. This decrease was due to certain long-lived products reaching their end-of-service-life.
Royalty Revenue
We receive royalties from third parties that license our linear-tape open media patents through our membership in the linear-tape open consortium. Royalty revenue decreased $0.6 million, or 27%, in the three months ended September 30, 2025 compared to the same period in fiscal 2025 due to both lower market volume and a mix weighted towards linear-tape-open ("LTO") types with lower royalty rates.
Gross Profit and Margin
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 |
Gross margin % |
2024 |
Gross margin % |
$ Change | Basis point change | |||||||||||||||||||||||||||||
| Product | $ | 6,620 | 18.7 | % | $ | 9,504 | 24.2 | % | $ | (2,884) | (550) | ||||||||||||||||||||||||
| Service and subscription | 15,205 | 59.3 | % | 18,778 | 62.2 | % | (3,573) | (290) | |||||||||||||||||||||||||||
| Royalty | 1,727 | 100.0 | % | 2,363 | 100.0 | % | (636) | - | |||||||||||||||||||||||||||
| Gross profit | $ | 23,552 | 37.6 | % | $ | 30,645 | 42.7 | % | $ | (7,093) | (510) | ||||||||||||||||||||||||
Gross profit and margin percentages are key metrics that management monitors to assess the performance on the business.
Product Gross Margin
Product gross margin decreased by $2.9 million, or by 550 basis points, for the three months ended September 30, 2025, as compared with the same period in fiscal 2025. This decrease was primarily due to an inventory provision accrued for certain end-of-life products, as well as an overall mix weighted towards lower margin products.
Service and Subscription Gross Margin
Service and subscription gross margins decreased 290 basis points for the three months ended September 30, 2025, as compared with the same period in fiscal 2025. This decrease was primarily driven by reduced revenue as many long-lived products reach their end-of-service life. To mitigate these declines, costs of service has been reduced across the organization, including logistics, repair, and labor.
Royalty Gross Margin
Royalties do not have significant related cost of sales.
Operating Expenses
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | % of revenue | 2024 | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
| Sales and marketing | $ | 11,819 | 19 | % | $ | 13,578 | 19 | % | $ | (1,759) | (13) | % | |||||||||||||||||||||||
| General and administrative | 11,006 | 18 | % | 13,977 | 19 | % | (2,971) | (21) | % | ||||||||||||||||||||||||||
| Research and development | 5,692 | 9 | % | 8,264 | 12 | % | (2,572) | (31) | % | ||||||||||||||||||||||||||
| Restructuring charges | 3,193 | 5 | % | 383 | 1 | % | 2,810 | 734 | % | ||||||||||||||||||||||||||
| Total operating expenses | $ | 31,710 | 51 | % | $ | 36,202 | 50 | % | $ | (4,492) | (12) | % | |||||||||||||||||||||||
In the three months ended September 30, 2025, sales and marketing expenses decreased $1.8 million, or 13%, as compared with the same period in fiscal 2025. This decrease was primarily driven by improved operational efficiency and increased leverage of our channel.
In the three months ended September 30, 2025, general and administrative expenses decreased $3.0 million, or 21%, as compared with the same period in fiscal 2025. This decrease was primarily driven by higher expense in the prior year related to compliance focused outside services.
In the three months ended September 30, 2025, research and development expenses decreased $2.6 million, or 31%, as compared with the same period in fiscal 2025. This decrease was the result of efficiencies realized through improved organization design, including the consolidation of common functions and increased weighting of resources in lower-cost regions.
In the three months ended September 30, 2025, restructuring expenses increased $2.8 million, or 734% as compared with the same period in fiscal 2025. This increase in restructuring expenses primarily involves workforce reductions and related severance and termination benefits.These actions are part of management's ongoing efforts to align the Company's organizational structure and resources with its strategic priorities and to streamline operations across business units.
The Company expects these initiatives to result in future cost savings and productivity improvements beginning in fiscal 2026. The restructuring activities are expected to be substantially completed by the end of the fourth quarter of fiscal year 2026; however, the timing and total amount of charges are subject to change as implementation progresses.
Other Income (Expense), net
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | % of revenue | 2024 | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
|
Other income (expense),net
|
$ | (185) | 0 | % | $ | (1,334) | (2) | % | $ | 1,149 | 86 | % | |||||||||||||||||||||||
The change in other income (expense), net during the three months ended September 30, 2025 compared with the same period in fiscal 2025 was related primarily to fluctuations in foreign currency exchange rates during the three months ended September 30, 2025.
Interest Expense
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | % of revenue | 2024 | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
| Interest expense | $ | (6,227) | (10) | % | $ | (6,131) | (9) | % | $ | (96) | 2 | % | |||||||||||||||||||||||
In the three months ended September 30, 2025, interest expense increased $0.1 million, or 2%, as compared with the same period in fiscal 2025 due to a higher effective interest rate on our Term Loan.
Warrant Liabilities
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | % of revenue | 2024 | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
| Change in fair value of warrant liabilities | $ | 1,525 | 2 | % | $ | 3,550 | 6 | % | $ | (2,025) | (57) | % | |||||||||||||||||||||||
In the three months ended September 30, 2025, we recorded a non-cash gain of $1.5 million related to the change in fair value of our Forbearance Warrant liabilities. In the three months ended September 30, 2024, we recorded a non-cash gain of $3.6 million.
Loss on Debt Extinguishment
| Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | % of revenue | 2024 | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
|
Loss on debt extinguishment
|
$ | (33,254) | (48) | % | $ | (2,308) | (3) | % | $ | (30,946) | 1,341 | % | |||||||||||||||||||||||
In September 30, 2025, loss on debt extinguishment was related to the net of discount on issuance of term loans to a new lender and write-off of all unamortized debt issuance costs and fees. In September 30, 2024, loss on debt extinguishment was related to prepayment of our long-term debt.
Income Taxes
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | % of pretax income | 2024 | % of pretax income | $ Change | % Change | |||||||||||||||||||||||||||||
| Income tax provision | $ | 157 | - | % | $ | 370 | (3) | % | $ | (213) | (58) | % | |||||||||||||||||||||||
The income tax provision for the three months ended September 30, 2025 and 2024 is primarily influenced by foreign and state income taxes. Due to our history of net losses in the United States, the protracted period for utilizing tax attributes in certain foreign jurisdictions, and the difficulty in predicting future results, we believe that we cannot rely on projections of future taxable income to realize most of our deferred tax assets. Accordingly, we have established a full valuation allowance against our U.S. and certain foreign net deferred tax assets. Significant management judgment is required in assessing our ability to realize any future benefit from our net deferred tax assets. We intend to maintain this valuation allowance until sufficient positive evidence exists to support its reversal. Our income tax expense recorded in the future will be reduced to the extent that sufficient positive evidence materializes to support a reversal of, or decrease in, our valuation allowance.
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA), which includes various tax law changes effective beginning in 2025; while the Act had no material impact on the Company's third-quarter 2025 results, the Company is evaluating its future effects.
Comparison of the Six Months Ended September 30, 2025 and 2024
Revenue
| Six Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 |
% of revenue |
2024 |
% of revenue |
$ Change | % Change | |||||||||||||||||||||||||||||
| Product revenue | $ | 72,905 | 57 | % | $ | 81,931 | 57 | % | $ | (9,026) | (11) | % | |||||||||||||||||||||||
| Service and subscription | 50,563 | 40 | % | 56,915 | 39 | % | (6,352) | (11) | % | ||||||||||||||||||||||||||
| Royalty | 3,534 | 3 | % | 5,265 | 4 | % | (1,731) | (33) | % | ||||||||||||||||||||||||||
| Total revenue | $ | 127,002 | 100 | % | $ | 144,111 | 100 | % | $ | (17,109) | (12) | % | |||||||||||||||||||||||
Product Revenue
In the six months ended September 30, 2025, product revenue decreased $$9.0 million, or 11%, as compared to the same period in fiscal 2025. The primary driver of the decrease was in Primary storage systems with a large video surveillance order in the prior period.
Service and Subscription Revenue
Service and subscription revenue decreased $6.4 million, or 11%, in the six months ended September 30, 2025 compared to the same period in fiscal 2025. This decrease was due to certain long-lived products reaching their end-of-service-life.
Royalty Revenue
We receive royalties from third parties that license our linear-tape open media patents through our membership in the linear-tape open consortium. Royalty revenue saw a decrease of $1.7 million, or 33%, in the six months ended September 30, 2025 compared to the same period in fiscal 2025 due to both lower market volume and a mix weighted towards LTO types with lower royalty rates.
Gross Profit and Margin
| Six Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 |
Gross margin % |
2024 |
Gross margin % |
$ Change | Basis point change | |||||||||||||||||||||||||||||
| Product | $ | 13,412 | 18.7 | % | $ | 19,601 | 24.2 | % | $ | (6,189) | (550) | ||||||||||||||||||||||||
| Service and subscription | 29,320 | 59.3 | % | 32,835 | 62.2 | % | (3,515) | (290) | |||||||||||||||||||||||||||
| Royalty | 3,534 | 100.0 | % | 5,265 | 100.0 | % | (1,731) | - | |||||||||||||||||||||||||||
| Gross profit | $ | 46,266 | 37.6 | % | $ | 57,701 | 42.7 | % | $ | (11,435) | (510) | ||||||||||||||||||||||||
Gross profit and margin percentages are key metrics that management monitors to assess the performance on the business.
Product Gross Margin
Product gross margin decreased by $6.2 million, or by 550 basis points, for the six months ended September 30, 2025, as compared with the same period in fiscal 2025. This decrease was primarily due to an inventory provision accrued for certain end-of-life products, as well as supply chain logistics costs including import tariffs.
Service and Subscription Gross Margin
Service and subscription gross margins decreased (290) basis points for the six months ended September 30, 2025, as compared with the same period in fiscal 2025. This decrease was primarily driven by reduced revenue as many long-lived products reach their end-of-service life. To mitigate these declines, costs of service has been reduced across the organization, including logistics, repair, and labor.
Royalty Gross Margin
Royalties do not have significant related cost of sales.
Operating Expenses
| Six Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | % of revenue | 2024 | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
| Sales and marketing | $ | 24,474 | 39 | % | $ | 26,873 | 37 | % | $ | (2,399) | (9) | % | |||||||||||||||||||||||
| General and administrative | 24,576 | 39 | % | 35,042 | 49 | % | (10,466) | (30) | % | ||||||||||||||||||||||||||
| Research and development | 12,353 | 20 | % | 16,572 | 23 | % | (4,219) | (25) | % | ||||||||||||||||||||||||||
| Restructuring charges | 5,616 | 9 | % | 1,574 | 2 | % | 4,042 | 257 | % | ||||||||||||||||||||||||||
| Total operating expenses | $ | 67,019 | 107 | % | $ | 80,061 | 111 | % | $ | (13,042) | (16) | % | |||||||||||||||||||||||
In the six months ended September 30, 2025, sales and marketing expenses decreased $2.4 million, or 9%, as compared with the same period in fiscal 2025. This decrease was primarily driven by improved operational efficiency and increased leverage of our channel.
In the six months ended September 30, 2025, general and administrative expenses decreased $10.5 million, or 30%, as compared with the same period in fiscal 2025. This decrease was primarily driven by higher expense in the prior year related to compliance focused outside services.
In the six months ended September 30, 2025, research and development expenses decreased $4.2 million, or 25%, as compared with the same period in fiscal 2025. This decrease was the result of efficiencies realized through improved organization design, including the consolidation of common functions and increased weighting of resources in lower-cost regions.
In the six months ended September 30, 2025, restructuring expenses increased $4.0 million, or 257% as compared with the same period in fiscal 2025. The increase was the result of significant changes in management structure, and overall consolidation of resources designed to improve operational efficiencies and rationalize its cost structure. These actions are part of management's ongoing efforts to align the Company's organizational structure and resources with its strategic priorities and to streamline operations across business units. The restructuring plan primarily involves workforce reductions and related severance and termination benefits.
The Company expects these initiatives to result in future cost savings and productivity improvements beginning in fiscal 2026. The restructuring activities are expected to be substantially completed by the end of the fourth quarter of fiscal year 2026; however, the timing and total amount of charges are subject to change as implementation progresses.
Other Income (Expense), net
| Six Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | % of revenue | 2024 | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
|
Other income (expense), net
|
$ | (616) | (1) | % | $ | (1,375) | (2) | % | $ | 759 | 55 | % | |||||||||||||||||||||||
The change in other income (expense), net during the six months ended September 30, 2025 compared with the same period in fiscal 2025 was related primarily to fluctuations in foreign currency exchange rates during the three months ended September 30, 2025.
Interest Expense
| Six Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | % of revenue | 2024 | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
| Interest expense | $ | (12,743) | (10) | % | $ | (9,921) | (7) | % | $ | (2,822) | 28 | % | |||||||||||||||||||||||
In the six months ended September 30, 2025, interest expense increased $0.1 million, or 2%, as compared with the same period in fiscal 2025 due to a higher effective interest rate on our Term Loan.
Warrant Liabilities
| Six Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | % of revenue | 2024 | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
| Change in fair value of warrant liabilities | $ | 1,525 | 1 | % | $ | 5,216 | 4 | % | $ | (3,691) | (71) | % | |||||||||||||||||||||||
In the six months ended September 30, 2025, we recorded a non-cash gain of $1.5 million related to the change in fair value of our Forebearance Warrant liabilities. In the six months ended September 30, 2024, we recorded a non-cash gain of $5.2 million.
Loss on Debt Extinguishment
| Six Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | % of revenue | 2024 | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
|
Loss on debt extinguishment
|
$ | (30,695) | (24) | % | $ | (3,003) | (2) | % | $ | (27,692) | 922 | % | |||||||||||||||||||||||
In September 30, 2025, loss on debt extinguishment was related to the net of discount on issuance of term loans to a new lender and write-off of all unamortized debt issuance costs and fees. In September 30, 2024, loss on debt extinguishment was related to prepayment of our long-term debt.
Income Taxes
| Six Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | % of pretax income | 2024 | % of pretax income | $ Change | % Change | |||||||||||||||||||||||||||||
| Income tax provision | $ | 380 | - | % | $ | 605 | (3) | % | $ | (225) | (37) | % | |||||||||||||||||||||||
The income tax provision for the six months ended September 30, 2025 and 2024 is primarily influenced by foreign and state income taxes. Due to our history of net losses in the United States, the protracted period for utilizing tax attributes in certain foreign jurisdictions, and the difficulty in predicting future results, we believe that we cannot rely on projections of future taxable income to realize most of our deferred tax assets. Accordingly, we have established a full valuation allowance against our U.S. and certain foreign net deferred tax assets. Significant management judgment is required in assessing our ability to realize any future benefit from our net deferred tax assets. We intend to maintain this valuation allowance until sufficient positive evidence exists to support its reversal. Our income tax expense recorded in the future will be reduced to the extent that sufficient positive evidence materializes to support a reversal of, or decrease in, our valuation allowance.
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA), which includes various tax law changes effective beginning in 2025; while the Act had no material impact on the Company's third-quarter 2025 results, the Company is evaluating its future effects.
LIQUIDITY AND CAPITAL RESOURCES
We consider liquidity in terms of the sufficiency of internal and external cash resources to fund our operating, investing and financing activities. Our principal sources of liquidity include cash from operating activities, and cash and cash equivalents on our balance sheet. We require significant cash resources to meet obligations to pay principal and interest on our outstanding debt, provide for our research and development activities, fund our working capital needs, and make capital expenditures. Our future liquidity requirements will depend on multiple factors, including our ability to raise additional capital, research and development plans and capital asset needs.
We had cash and cash equivalents of $14.7 million as of September 30, 2025, which consisted primarily of bank deposits and money market accounts. As of September 30, 2025, our total outstanding Term Loan debt was $106.1 million.
We generated negative cash flows from operations of approximately $32.5 million and $17.2 million for the six months ended September 30, 2025 and 2024, respectively, and generated net losses of approximately $63.7 million and $32.0 million for the six months ended September 30, 2025 and 2024, respectively. We have funded operations through the sale of Common Stock, Term Loan borrowings and PNC Credit Facility borrowings described in Note 4:Debt.
On January 25, 2025, the Company entered into the SEPA, in which pursuant to and subject to its terms, the Company has the right, but not the obligation, to sell up to $200 million of Common Stock at any time during the three-year period following the date of the SEPA. As of September 30, 2025, the Company has issued approximately 7.5 million shares of Common Stock under the SEPA for net proceeds of approximately $82.8 million, of which 6.3 million shares of Common Stock for net proceeds of approximately $66.9 million were issued in the six months ended September 30, 2025. No shares were issued in the three months ended September 30, 2025.
Our Term Loan has a maturity date of August 5, 2026. As discussed in Note 1: Description of Business and Summary of Significant Accounting Policies-Going Concern, we believe we will not be able to make the required repayment on that date using cash generated from operating activities. We entered into the Transaction Agreement that will convert Dialectic's portion of the Term Loan into a Convertible Note with a three year maturity. We also agreed to use the proceeds from the SEPA to repay the OC III Lenders portion of the Term Loan. The issuance of the Convertible Note is subject to stockholder approval and there is no assurance that it will be approved. Also, we may not be able to access the SEPA to generate sufficient cash to repay OC III Lenders by the maturity date. We may be unable to obtain additional funding from other sources.
Cash Flows
The following table summarizes our condensed consolidated cash flows for the periods indicated.
| Six Months Ended September 30, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Cash provided by (used in): | |||||||||||
| Operating activities | $ | (32,489) | $ | (17,194) | |||||||
| Investing activities | (1,606) | (3,228) | |||||||||
| Financing activities | 32,791 | 11,525 | |||||||||
| Effect of exchange rate changes | 30 | (3) | |||||||||
|
Net decrease in cash, cash equivalents and restricted cash
|
$ | (1,274) | $ | (8,900) | |||||||
Cash Used In Operating Activities
Net cash used in operating activities was $32.5 million for the six months ended September 30, 2025. This use of cash was primarily attributed to lower earnings.
Net cash used in operating activities was $17.2 million for the six months ended September 30, 2024. This use of cash was primarily attributed to lower earnings.
Cash Used in Investing Activities
Net cash used in investing activities was $1.6 million in the six months ended September 30, 2025, which was attributable to capital expenditures.
Net cash used in investing activities was $3.2 million in the six months ended September 30, 2024, which was attributable to capital expenditures.
Cash Provided by Financing Activities
Net cash provided by financing activities was $32.8 million for the six months ended September 30, 2025, which was related primarily to borrowings on our Term Loan.
Net cash provided by financing activities was $11.5 million for the six months ended September 30, 2024, which was related primarily to proceeds from shares issued under the SEPA.
Commitments and Contingencies
Our contingent liabilities consist primarily of certain financial guarantees, both express and implied, related to product liability and potential infringement of intellectual property. We have little history of costs associated with such indemnification requirements and contingent liabilities associated with product liability may be mitigated by our insurance coverage. In the normal course of business to facilitate transactions of our services and products, we indemnify certain parties with respect to certain matters, such as intellectual property infringement or other claims. We also have indemnification agreements with our current and former officers and directors. It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of our indemnification claims, and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these agreements have not had a material impact on our operating results, financial position or cash flows.
We are also subject to ordinary course litigation. See Note 10: Commitments and Contingencies to the unaudited condensed consolidated financial statements for a discussion of our legal matters.
Off Balance Sheet Arrangements
Except for the indemnification commitments described under "Commitments and Contingencies" above, we do not currently have any other off-balance sheet arrangements and do not have any holdings in variable interest entities.
Contractual Obligations
We have contractual obligations and commercial commitments, some of which, such as purchase obligations, are not recognized as liabilities in our condensed consolidated financial statements. There have not been any material changes to the contractual obligations disclosed in the Annual Report.
Critical Accounting Estimates and Policies
The preparation of our consolidated financial statements in accordance with generally accepted accounting principles requires management to make judgments, estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report. On an ongoing basis, we evaluate estimates, which are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We consider certain accounting policies to be critical to understanding our financial statements because the application of these policies requires significant judgment on the part of management, which could have a material impact on our financial statements if actual performance should differ from historical experience or if our assumptions were to change. Our accounting policies that include estimates that require management's subjective or complex judgments about the effects of matters that are inherently uncertain are summarized in the Annual Report under the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates and Policies." For additional information on our significant accounting policies, see Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
Recently Issued and Adopted Accounting Pronouncements
See Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
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