UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM10-Q

(Mark One)

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

For the quarterly period ended ~~October~~July 31, ~~2018~~2019

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

For the transition period fromto

Commission File Number:~~0-21393~~ 001-38828

SEACHANGE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware


~~Delaware~~		04-3197974
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

50 Nagog Park, Acton, MA		01720
Address of Principal Executive Offices		Zip Code

~~50 Nagog Park, Acton, MA 01720~~

~~(Address of principal executive offices, including zip code)~~

~~Registrant’s telephone number, including area code:~~(978) 897-0100

Registrant’s Telephone Number, Including Area Code

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	SEAC	The Nasdaq Global Select Market
Series A Participating Preferred Stock Purchase Rights	SEAC	The Nasdaq Global Select Market

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

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act.): YES ☐ NO ☒

The number of shares outstanding of the registrant’s Common Stock on ~~December 5, 2018~~August 23, 2019 was ~~35,749,131.~~36,683,245.

SEACHANGE INTERNATIONAL, INC.

Table of Contents


				Page
PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements ~~(interim periods unaudited)~~

		Consolidated Balance Sheets ~~at October 31, 2018 and January 31, 2018~~			3	2

		Consolidated Statements of Operations and Comprehensive Loss ~~for the three and nine months ended October 31, 2018 and October 31, 2017~~			4	3

	Consolidated Statements of Stockholders’ Equity	4

	Consolidated Statements of Cash Flows ~~for the nine months ended October 31, 2018 and October 31, 2017~~			5

		Notes to Consolidated Financial Statements			6

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			26	23

Item 3.		Quantitative and Qualitative Disclosures About Market Risk			37	30

Item 4.		Controls and Procedures			38
30

PART II. OTHER INFORMATION

Item 1.		Legal Proceedings			38	31

Item 1A.		Risk Factors			38	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 6.		Exhibits			38	32

SIGNATURES		33
			40

PART I – ~~FINANCIAL~~FINANCIAL INFORMATION

ITEM 1.

Financial Statements

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(~~Amounts~~Unaudited, amounts in thousands, except share data)


	October 31,			January 31,
	2018			2018			July 31,			January 31,
	(Unaudited)						2019			2019
Assets
Current assets:
Cash and cash equivalents	$	21,554		$	43,652		$	9,202		$	20,317
Restricted cash		543			9
Marketable securities		1,732			3,991			2,746			4,020
Accounts and other receivables, net of allowance for doubtful accounts of $16 at October 31, 2018 and $16 at January 31, 2018, respectively		12,669			22,537
Accounts receivable, net of allowance for doubtful accounts of $575 and $577 at July 31, 2019 and January 31, 2019, respectively								11,019			19,267
Unbilled receivables		7,881			3,101			9,002			5,448
Inventories, net		706			666
Inventory								198			924
Prepaid expenses and other current assets		5,479			3,557			6,087			6,033

Total current assets		50,564			77,513			38,254			56,009
Property and equipment, net		8,660			9,471			6,888			7,192
Operating lease right-of-use assets								1,745			—
Marketable securities, long-term		8,554			4,449			6,843			6,339
Intangible assets, net		531			1,303			2,977			—
Goodwill, net		23,956			25,579
Goodwill								9,783			8,753
Unbilled receivables, long-term								3,066			—
Other assets		1,069			1,015			636			450

Total assets	$	93,333		$	119,330		$	70,192		$	78,743

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	4,669		$	2,431		$	6,564		$	4,503
Deferred revenues		6,199			11,598
Other accrued expenses		6,337			15,379

Accrued expenses								6,417			7,762
Deferred revenue								7,142			8,104
Total current liabilities		17,205			29,408			20,123			20,369
Deferred revenue, long-term		875			2,835			2,014			2,642
Operating lease liabilities, long-term								1,222			—
Taxes payable, long-term								418			429
Deferred tax liabilities, long-term		196			215			—			203
Taxes payable, long-term		405			1,152

Total liabilities		18,681			33,610			23,777			23,643

Commitments and contingencies (Note 6)
Stockholders’ equity:
Common stock, $0.01 par value; 100,000,000 shares authorized; 35,795,099 shares issued and 35,754,609 outstanding at October 31, 2018, and 35,634,984 shares issued and 35,594,494 outstanding at January 31, 2018		358			356
Commitments and contingencies (Note 7)
Stockholders' equity:
Common stock, $0.01 par value; 100,000,000 shares authorized at July 31, 2019 and January 31, 2019; 36,811,061 shares issued and 36,670,571 shares outstanding at July 31, 2019, 35,946,100 shares issued and 35,905,610 outstanding at January 31, 2019								367			359
Additionalpaid-in capital		242,074			239,423			243,514			242,442
Treasury stock, at cost; 40,490 common shares at October 31, 2018 and January 31, 2018, respectively		(5	)		(5	)
Accumulated loss		(164,679	)		(148,620	)
Treasury stock, at cost; 140,490 shares at July 31, 2019 and 40,490 shares at January 31, 2019								(147	)		(5	)
Accumulated other comprehensive loss		(3,095	)		(5,434	)		(1,993	)		(3,393	)

Total stockholders’ equity		74,653			85,720

Total liabilities and stockholders’ equity	$	93,333		$	119,330

Accumulated deficit								(195,326	)		(184,303	)
Total stockholders' equity								46,415			55,100
Total liabilities and stockholders' equity							$	70,192		$	78,743

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

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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

   Three Months Ended Nine Months Ended
   October 31, October 31,
   2018 2017 2018 2017
Revenues:

Products
   $ 8,268 $ 11,119 $ 12,821 $ 18,907
Services
   10,343 12,311 32,626 38,415


Total revenues
   18,611 23,430 45,447 57,322


Cost of revenues:

Products
   1,716 1,198 2,518 3,088
Services
   5,428 5,612 15,914 15,810
Amortization of intangible assets
   178 255 534 764
Stock-based compensation expense
   1 1 1 3


Total cost of revenues
   7,323 7,066 18,967 19,665


Gross profit
   11,288 16,364 26,480 37,657


Operating expenses:

Research and development
   4,836 5,634 15,477 17,411
Selling and marketing
   3,705 3,916 10,776 9,292
General and administrative
   3,209 3,868 11,224 10,595
Amortization of intangible assets
   205 370 664 1,075
Stock-based compensation expense
   768 696 2,570 2,224
Professional fees - other
   50 —   50 21
Severance and other restructuring costs
   1,030 960 1,620 3,670


Total operating expenses
   13,803 15,444 42,381 44,288


(Loss) income from operations
   (2,515 ) 920 (15,901 ) (6,631 )
Other (expenses) income, net
   (2,087 ) 14 (4,898 ) 969


(Loss) income before income taxes
   (4,602 ) 934 (20,799 ) (5,662 )
Income tax (benefit) provision
   (775 ) 1,154 (2,421 ) 1,458


Net loss
   $ (3,827 ) $ (220 ) $ (18,378 ) $ (7,120 )


Net loss
   $ (3,827 ) $ (220 ) $ (18,378 ) $ (7,120 )
Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustment
   923 (79 ) 2,354 (76 )
Unrealized gain (loss) on marketable securities
   3 (12 ) (15 ) (17 )


Comprehensive loss
   $ (2,901 ) $ (311 ) $ (16,039 ) $ (7,213 )


Net loss per share:

Basic
   $ (0.11 ) $ (0.00 ) $ (0.52 ) $ (0.20 )


Diluted
   $ (0.11 ) $ (0.00 ) $ (0.52 ) $ (0.20 )


Weighted average common shares outstanding:

Basic
   35,747 35,479 35,668 35,381


Diluted
   35,747 35,479 35,668 35,381

	For the Three Months Ended July 31,						For the Six Months Ended July 31,
	2019			2018			2019			2018
Revenue:
Product	$	11,968		$	1,462		$	13,147		$	4,553
Service		6,844			10,439			14,150			22,283
Total revenue		18,812			11,901			27,297			26,836
Cost of revenue:
Product		3,039			490			3,948			816
Service		4,885			5,125			9,553			10,828
Total cost of revenue		7,924			5,615			13,501			11,644
Gross profit		10,888			6,286			13,796			15,192
Operating expenses:
Research and development		3,775			5,185			8,027			10,914
Selling and marketing		2,963			3,932			5,815			7,599
General and administrative		4,150			4,903			8,399			9,475
Severance and restructuring costs		659			536			870			590
Total operating expenses		11,547			14,556			23,111			28,578
Loss from operations		(659	)		(8,270	)		(9,315	)		(13,386	)
Other expense, net		(78	)		(1,962	)		(1,869	)		(2,811	)
Loss before income taxes		(737	)		(10,232	)		(11,184	)		(16,197	)
Income tax benefit		(563	)		(1,152	)		(161	)		(1,646	)
Net loss	$	(174	)	$	(9,080	)	$	(11,023	)	$	(14,551	)
Net loss per share, basic and diluted	$	-		$	(0.26	)	$	(0.30	)	$	(0.41	)
Weighted average common shares outstanding, basic and diluted		36,602			35,649			36,532			35,628

Comprehensive loss:
Net loss	$	(174	)	$	(9,080	)	$	(11,023	)	$	(14,551	)
Other comprehensive income, net of tax:
Foreign currency translation adjustment		133			856			1,340			1,431
Unrealized gains (losses) on marketable securities		25			11			60			(18	)
Total other comprehensive income		158			867			1,400			1,413
Comprehensive loss	$	(16	)	$	(8,213	)	$	(9,623	)	$	(13,138	)

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

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS’ EQUITY

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

   Nine Months Ended
   October 31,
   2018 2017
Cash flows from operating activities:

Net loss
   $ (18,378 ) $ (7,120 )
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization of property and equipment
   1,053 1,758
Amortization of intangible assets
   1,198 1,839
Stock-based compensation expense
   2,571 2,227
Deferred income taxes
   (702 ) 102
Other
   27 76
Changes in operating assets and liabilities:

Accounts receivable
   9,100 (1,401 )
Unbilled receivables
   (4,957 ) 3,289
Inventories
   (43 ) (165 )
Prepaid expenses and other assets
   (2,107 ) 62
Accounts payable
   2,401 (3,199 )
Accrued expenses
   (9,068 ) 942
Deferred revenues
   (7,060 ) 355
Other operating activities
   2,422 327


Total cash used in operating activities
   (23,626 ) (908 )


Cash flows from investing activities:

Purchases of property and equipment
   (328 ) (386 )
Purchases of marketable securities
   (8,510 ) (7,246 )
Proceeds from sale and maturity of marketable securities
   6,649 7,993
Other investing activities
   —   176


Total cash used in investing activities
   (2,189 ) 537


Cash flows from financing activities:

Proceeds from issuance of common stock
   81 53
Payments of withholding tax on RSU vesting
   (43 ) (52 )


Total cash provided by financing activities
   38 1


Effect of exchange rate changes on cash, cash equivalents and restricted cash
   4,213 (878 )


Net decrease in cash, cash equivalents and restricted cash
   (21,563 ) (1,248 )


Cash, cash equivalents and restricted cash, beginning of period
   43,661 28,411


Cash, cash equivalents and restricted cash, end of period
   $ 22,097 $ 27,163


Supplemental disclosure of cash flow information:

Income taxes paid
   $ 2,908 $ 267

	Common Stock				Additional						Accumulated Other						Total
	Number of Shares		Par Value		Paid-in Capital			Treasury Stock			Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balances at January 31, 2019		35,946,100	$	359	$	242,442		$	(5	)	$	(3,393	)	$	(184,303	)	$	55,100
Issuance of common stock pursuant to acquisition of Xstream		541,738		5		869			—			—			—			874
Issuance of common stock pursuant to vesting of restricted stock units		57,368		1		(1	)		—			—			—			—
Issuance of common stock pursuant to ESPP purchases		7,819		—		9			—			—			—			9
Stock-based compensation expense		—		—		(434	)		—			—			—			(434	)
Unrealized gains on marketable securities		—		—		—			—			35			—			35
Foreign currency translation adjustment		—		—		—			—			1,207			—			1,207
Net loss		—		—		—			—			—			(10,849	)		(10,849	)
Balances at April 30, 2019		36,553,025		365		242,885			(5	)		(2,151	)		(195,152	)		45,942
Issuance of common stock pursuant to vesting of restricted stock units		258,036		2		(2	)		—			—			—			—
Stock-based compensation expense		—		—		631			—			—			—			631
Repurchases of common stock		—		—		—			(142	)		—			—			(142	)
Unrealized gains on marketable securities		—		—		—			—			25			—			25
Foreign currency translation adjustment		—		—		—			—			133			—			133
Net loss		—		—		—			—			—			(174	)		(174	)
Balances at July 31, 2019		36,811,061	$	367	$	243,514		$	(147	)	$	(1,993	)	$	(195,326	)	$	46,415

	Common Stock					Additional						Accumulated Other						Total
	Number of Shares			Par Value		Paid-in Capital			Treasury Stock			Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balances at January 31, 2018		35,634,984		$	356	$	239,423		$	(5	)	$	(5,434	)	$	(148,620	)	$	85,720
Adjustment resulting from the adoption of ASC 606		—			—		—			—			—			2,319			2,319
Issuance of common stock pursuant to exercise of stock options		5,875			—		17			—			—			—			17
Issuance of common stock pursuant to vesting of restricted stock units		8,356			—		—			—			—			—			—
Issuance of common stock pursuant to ESPP purchases		9,421			1		21			—			—			—			22
Stock-based compensation expense		—			—		879			—			—			—			879
Unrealized losses on marketable securities		—			—		—			—			(29	)		—			(29	)
Foreign currency translation adjustment		—			—		—			—			575			—			575
Net loss		—			—		—			—			—			(5,471	)		(5,471	)
Balances at April 30, 2018		35,658,636			357		240,340			(5	)		(4,888	)		(151,772	)		84,032
Issuance of common stock pursuant to exercise of stock options		15,062			—		39			—			—			—			39
Issuance of common stock pursuant to vesting of restricted stock units		97,353			1		(1	)		—			—			—			—
Adjustment to common stock pursuant to ESPP purchases		(1,604	)		—		(4	)		—			—			—			(4	)
Stock-based compensation expense		—			—		923			—			—			—			923
Unrealized losses on marketable securities		—			—		—			—			11			—			11
Foreign currency translation adjustment		—			—		—			—			856			—			856
Net loss		—			—		—			—			—			(9,080	)		(9,080	)
Balances at July 31, 2018		35,769,447		$	358	$	241,297		$	(5	)	$	(4,021	)	$	(160,852	)	$	76,777

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

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, amounts in thousands)

	For the Six Months Ended July 31,
	2019			2018
Cash flows from operating activities:
Net loss	$	(11,023	)	$	(14,551	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		1,093			1,552
Provision for bad debts		388			—
Stock-based compensation expense		197			1,802
Deferred income taxes		(203	)		(758	)
Unrealized foreign currency transaction gain		1,340			1,431
Other		67			76
Changes in operating assets and liabilities, including impact of acquisitions:
Accounts receivable		8,482			10,115
Unbilled receivables		(6,598	)		(2,335	)
Inventory		726			(165	)
Prepaid expenses and other current assets and other assets		196			(1,584	)
Accounts payable		1,350			371
Accrued expenses and other liabilities		(2,463	)		(10,640	)
Deferred revenue		(1,590	)		(5,729	)
Other operating activities		—			2,430
Net cash used in operating activities		(8,038	)		(17,985	)
Cash flows from investing activities:
Purchases of property and equipment		(153	)		(284	)
Cash paid for acquisitions, net		(3,838	)		—
Purchases of marketable securities		(823	)		(4,354	)
Proceeds from sales and maturities of marketable securities		1,593			2,761
Other investing activities		—			(60	)
Net cash used in investing activities		(3,221	)		(1,937	)
Cash flows from financing activities:
Proceeds from issuance of common stock		9			74
Repurchases of common stock		(142	)		—
Other financing activities		—			(35	)
Net cash (used in) provided by financing activities		(133	)		39
Effect of exchange rate on cash and cash equivalents		277			1,162
Net decrease in cash, cash equivalents and restricted cash		(11,115	)		(18,721	)
Cash, cash equivalents and restricted cash at beginning of period		20,317			43,661
Cash, cash equivalents and restricted cash at end of period	$	9,202		$	24,940
Supplemental disclosure of cash flow information
Income taxes paid	$	76		$	2,735
Non-cash activities:
Purchases of property and equipment included in accounts payable	$	58		$	—
Fair value of common stock issued in acquisition	$	874		$	—

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

SEACHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	Nature of Business and Basis of Presentation

~~The Company~~

SeaChange International, Inc. ~~and its consolidated subsidiaries (collectively “SeaChange”~~, ~~“we”, or the “Company”) is~~a Delaware corporation, was founded on July 9, 1993. We are an industry leader in the delivery of multiscreen, ~~video,~~ advertising and premiumover-the-top (“OTT”) video management solutions. Our software products and services are designed to empower video providers to create, manage and monetize the increasingly personalized, highly engaging experiences that viewers demand.

Liquidity

We continue to realize the savings related to our restructuring activities. During fiscal 2019, we made significant reductions to our headcount as part of our ongoing restructuring effort from which we expect to generate annualized savings of approximately $6 million. 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 results, augmented by the plans highlighted below (see Note 9), 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, to take advantage of unanticipated strategic opportunities or 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.

Basis of Presentation and Principles of Consolidation

The accompanying ~~unaudited~~ consolidated financial statements ~~include the accounts of SeaChange International, Inc. and its subsidiaries (“SeaChange” or the “Company”) and are~~have been prepared in accordance with ~~U.S.~~accounting principles generally accepted ~~accounting principles~~in the United States (“U.S. GAAP”) ~~for interim~~. We consolidate the financial ~~reports as well as rules~~statements of our wholly-owned subsidiaries and ~~regulations of the Securities and Exchange Commission (“SEC”). All~~all intercompany transactions and account balances have been ~~eliminated. Certain information and footnote disclosures normally included~~eliminated in financial statements prepared under U.S. GAAP have been condensed or omitted pursuant to such regulations. However, we believe that the disclosures are adequate to make the information presented not misleading. consolidation. In the opinion of management, the accompanying financial statements include all adjustments, consisting of only normal recurring items, necessary to present a fair presentation of the consolidated financial statements for the periods shown. ~~These consolidated financial statements should be read in conjunction with our most recently audited financial statements and related footnotes included in our Annual Report on Form10-K~~ ~~(“Form10-K”)~~ ~~as filed with the SEC. The balance sheet data as~~

2.	Significant Accounting Policies

Use of ~~January 31, 2018 that is included in this Quarterly Report on Form10-Q~~ ~~(“Form10-Q”)~~ ~~was derived from our audited financial statements. Certain prior period amounts have been reclassified to conform to current period presentation.~~Estimates

The preparation of these consolidated financial statements in conformity with U.S. GAAP requires usmanagement to make estimates and judgments that affect the reported amounts of assets, liabilities, ~~revenues~~revenue and expenses, and disclosure of contingent assets and liabilities. ~~Interim results~~Significant estimates and assumptions reflected in these consolidated financial statements include, but are not ~~necessarily indicative~~limited to, those related to revenue recognition, allowance for doubtful accounts, goodwill and intangible assets, right-of-use operating leases, impairment of long-lived assets, accounting for income taxes, and the ~~operating results for~~valuation of stock-based awards. We base our estimates on historical experience, known trends and other market-specific or relevant factors that are believed to be reasonable under the ~~full fiscal year or any future periods~~circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and ~~actual~~experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from ~~our estimates. During the three and nine months ended October 31, 2018, there have been no material changes to our significant accounting policies that were described in our fiscal 2018 Form10-K,~~ ~~as filed with the SEC. As noted in our Form10-Q~~ ~~for the quarterly period ended April 30, 2018, in the three months ended April 30, 2018, our policy for revenue recognition was updated as a result of adopting the new revenue recognition guidance.~~those estimates or assumptions.

2.	~~Significant Accounting Policies~~

Cash, cash equivalents and restricted cash

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

The following table provides a summary of cash, cash equivalents and restricted cash that constitutes the total amounts shown in the consolidated statements of cash flows for the ~~nine~~six months ended ~~October~~July 31, ~~2018~~2019 and ~~2017:~~2018:


	Nine Months Ended
	October 31,				For the Six Months Ended July 31,
	2018		2017		2019		2018
	(Amounts in thousands)				(Amounts in thousands)
Cash and cash equivalents	$	21,554	$	27,155	$	9,202	$	24,393
Restricted cash		543		8		-		547

Total cash, cash equivalents, and restricted cash	$	22,097	$	27,163

Total cash, cash equivalents and restricted cash					$	9,202	$	24,940

~~Revenue Recognition~~

~~The Company adopted Accounting Standards Codification No. (“ASC”) 606,~~~~“Revenue from Contracts~~Concentration of Credit Risk and of Significant Customers

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

We sell our software products and services worldwide primarily to service providers, consisting of operators, telecommunications companies, satellite operators and broadcasters. Two customers accounted for 20% and 10%,” ~~on February 1, 2018 using~~ respectively, of total revenue in the ~~modified retrospective method~~second quarter of fiscal 2020, and one customer accounted for ~~all contracts not completed~~19% of total revenue in the second quarter of fiscal 2019. One customer accounted for 14% of total revenue in the first six months of fiscal 2020, and one customer accounted for 19% of total revenue in the first six months of fiscal 2019. Three customers accounted for 17%, 15% and 10%, respectively, of the accounts receivable balance as of July 31, 2019. Two customers accounted for 44% and 15%, respectively, of the accounts receivable balance as of January 31, 2019.

Marketable Securities

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

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

Fair Value Measurements

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

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

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

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

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

Goodwill and Acquired Intangible Assets

We record goodwill when consideration paid in a business acquisition exceeds the value of the net assets acquired. Our estimates of fair value are based upon assumptions believed to be reasonable at that time but that 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 not amortized, but rather is tested for impairment annually in our third quarter beginning August 1^st of each year, or more frequently if facts and circumstances warrant a review, such as the ones mentioned in impairments of long-lived assets below. We have determined that there is a single reporting unit for the purpose of conducting this goodwill impairment assessment. We assess both the existence of potential impairment and the amount of impairment loss by comparing the fair value of the reporting unit with its carrying amount, including goodwill. Through July 31, 2019, we have recorded accumulated goodwill impairment charges of $54.8 million (see Note 6).

Intangible assets are recorded at their estimated fair values at the date of ~~adoption. The adoption of ASC 606 did not have a material impact~~acquisition. We amortize acquired intangible assets over their estimated useful lives based on the ~~Company’s consolidated financial statements. The reported results~~pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.

Impairment of Long-Lived Assets

Long-lived assets primarily consist of property, plant and equipment and intangible assets with finite lives. Long-lived assets are evaluated for ~~fiscal 2019~~impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. Recoverability of long-lived assets or groups of assets is assessed based on a comparison of the carrying amount to the estimated future undiscounted cash flows. If estimated future undiscounted net cash flows are less than the carrying amount, the asset is considered impaired and expense is recorded at an amount required to reduce the carrying amount to fair value. Determining the fair value of long-lived assets includes significant judgment by management, and different judgments could yield different results.

We assess the useful lives and possible impairment of existing recognized long-lived assets whenever events or changes in circumstances occur that indicate that it is more likely than not that an impairment has occurred. We test long-lived assets for impairment by comparing the carrying amount to the sum of the net undiscounted cash flows expected to be generated by the asset whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the asset exceeds its net undiscounted cash flows, then an impairment loss is recognized for the amount by which the carrying amount exceeds its fair value. We use a discounted cash flow approach or other methods, if appropriate, to assess fair value. Factors considered important which could trigger a review include:

significant underperformance relative to historical or projected future operating results;

~~reflect~~significant changes in the ~~application~~manner of ~~ASC 606 guidance while~~use of the ~~reported results for fiscal 2018 were prepared under the guidance of ASC 605,~~~~“Revenue Recognition,”~~ ~~which is also referred to herein as “legacy U.S. GAAP”~~acquired assets or the ~~“previous guidance.” The adoption~~strategy for our overall business;

identification of ~~ASC 606 represents~~other impaired assets within a ~~change~~reporting unit;

significant negative industry or economic trends;

a significant decline in ~~accounting principle that will more closely align revenue recognition with the delivery of the Company’s goods~~our stock price for a sustained period; and ~~services and will provide financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized when~~

a ~~customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration~~decline in our market capitalization relative to ~~which the Company expects to be entitled to receive in exchange for these goods or services, and excludes any sales incentives or taxes collected from~~net book value.

Determining whether a ~~customer which are subsequently remitted to government authorities. To achieve this core principle, the Company applies the following five steps:~~triggering event has occurred involves significant judgment. (see Note 6).

Revenue Recognition

Identify the contract(s) with a customer - A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to those goods or services, (ii) the contract has commercial substance, and (iii) the Company determines that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

Identify the performance obligations in the contract - Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods or services, the Company must apply judgment to determine whether promised goods or services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised goods or services are accounted for as a combined performance obligation.

Determine the transaction price - The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Determining the transaction price requires significant judgment, which is discussed by revenue category in further detail below.

Allocate the transaction price to the performance obligations in the contract - If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct good or service that forms part of a single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

Recognize revenue when (or as) the Company satisfies a performance obligation - The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or service to a customer.

~~The Company’s~~Our revenue is derived from sales of hardware, software licenses, professional services, and maintenance fees related to the hardware and ~~the Company’s~~our software licenses.

~~Contracts with multiple performance obligations~~

~~The Company’s~~Our contracts often contain multiple performance obligations. For contracts with multiple performance obligations, ~~the Company accounts~~we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative ~~stand-alone~~standalone selling price basis. If the transaction price contains discounts or ~~the Company expects~~we expect to provide future price concessions, these elements are considered when determining the transaction price prior to allocation. Variable fees within the transaction price ~~will be~~are estimated and recognized inas revenue ~~as the Company satisfies its~~when we satisfy our performance obligations to the extent it is probable that a significant reversal of cumulative revenue recognized will not ~~occur when the uncertainty associated with the variable fee is resolved.~~occur. If the contract grants the client the option to acquire additional products or services, ~~the Company assesses~~we assess whether or not any discount on the products and services is in excess of levels normally available to similar clients and, if so, ~~accounts~~we account for that discount as an additional performance obligation.

Hardware

~~Hardware~~

~~The Company has~~We have concluded that hardware is either (1) a distinct performance obligation as the client can benefit from the product on its own or (2) a combined performance obligation with software licenses. This conclusion is dependent on the nature of the promise to the customer. In either scenario, hardware revenue is typically recognized at a point in time when control is transferred to the client, 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, it is delivered before services are provided and is functional without services, therefore the point in time when control is transferred is upon delivery or acceptance by the customer. When hardware and software are combined, ~~the Company has~~we have determined ~~stand-alone~~standalone selling price for hardware utilizing the relative allocation method based on observable evidence.

Software licenses

~~The Company has~~We have concluded that ~~its~~our software licenses are either (1) a distinct performance obligation as the client can benefit from the software on its own or (2) a combined performance obligation with hardware, depending on the nature of the promise to the customer. In either scenario, software license revenue is typically recognized at a point in time when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the license. The software license is delivered before related services are provided and is functional without services, updates, and technical support. ~~The Company’s~~Our license arrangements generally contain multiple performance obligations, including hardware, installation services, training, and maintenance. ~~The Company has~~We have determined ~~stand-alone~~standalone selling price for software utilizing the relative allocation method based on observable evidence.

Maintenance

Maintenance revenue, which is included in services revenue in our consolidated statements of operations and comprehensive loss, includes revenue from client support and related professional services. Client support includes software upgrades on a whenand-if available basis, telephone support, bug fixes or patches and general hardware maintenance support. Maintenance is priced as a percentage of the list price of the related software license and hardware. ~~The Company~~We determined the standalone selling price of maintenance based on this pricing relationship and observable data from standalone sales of maintenance.

~~The Company has~~We have identified three separate distinct performance obligations of maintenance:

Software upgrades and updates;

Technical support; and

Hardware support.

These performance obligations are distinct within the contract and, although they are not sold separately, the components are not essential to the functionality of the other components. Each of the performance obligations included in maintenance revenue is a stand ready obligation that is recognized ratably over the passage of the contractual term for products sold on a standalone basis. For framework deals we have identified a single support service obligation which ~~is typically one year.~~includes software upgrades and updates, installation services, and technical support.

Services

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

The ~~stand-alone~~standalone selling price for services in time and materials contracts is determined by observable prices in ~~stand-alone~~standalone services arrangements and recognized as revenue as the services are performed based on an input measure of hours incurred to total estimated hours.

~~The Company estimates~~We estimate the ~~stand-alone~~standalone selling price for fixed price services based on estimated hours adjusted for historical experience, at time and material rates charged in ~~stand-alone~~standalone services arrangements. Revenue for fixed price services is recognized over time as the services are provided based on an input measure of hours incurred to total estimated hours.

For framework deals we have identified a single support service obligation which includes software upgrades and updates, installations services, and technical support.

Contract modifications

~~The Company~~We occasionally ~~enters~~enter into amendments to previously executed contracts that constitute contract modifications. ~~The Company assesses~~We assess each of these contract modifications to determine:

If the additional products and services are distinct from the product and services in the original ~~arrangement,~~arrangement; and

If the amount of consideration expected for the added products and services reflects the ~~stand-alone~~standalone selling price of those products and services.

A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either a prospective basis as a termination of the existing contract and the creation of a new contract, or a cumulativecatch-up basis.

~~Impairment~~Significant Judgments

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Once we determine the performance obligations, we determine the transaction price, which includes estimating the amount of ~~Assets~~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 a relative standalone selling price method. The corresponding revenue is recognized as the related performance obligations are satisfied as discussed in the revenue categories above.

~~Indefinite-lived intangible assets,~~

Judgment is required to determine the standalone selling price for each distinct performance obligation. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into account available information such as ~~goodwill,~~market conditions and internally approved pricing guidelines related to the performance obligations.

With the exception of travel and entertainment expenses, our contracts do not generally include a variable component to the transaction price. With certain statements of work, we explicitly state that we are ~~not amortized but~~to be reimbursed for reasonable travel and entertainment expenses incurred as part of the delivery of professional services. In the cases when we are ~~evaluated for impairment~~entitled to collect all travel and entertainment expenses incurred, an estimate of the fulfillment costs is made at the ~~reporting unit level annually,~~onset of the contract in order to determine the transaction price. The revenue associated with travel and entertainment expenses is then recognized over time along with the professional services.

Some of our ~~third quarter beginning August 1st. Indefinite-lived intangible assets may~~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 ~~tested for impairment on an interim basis~~one year or less. For those contracts in ~~addition~~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 annual evaluation if an event occurs or circumstances change such as declines in sales, earnings or cash flows, decline in the Company’s stock price, or material adverse changes in the business climate, which would more likely than not reduce the fairpresent value of the future payments by applying a ~~reporting unit below its carrying amount.~~discount rate that reflects the customer’s creditworthiness.

Contract Balances

Contract assets consist of unbilled revenue, which is recognized as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. Unbilled receivables expected to be billed and collected within one year are classified as current assets or long-term assets if expected to be billed and collected after one year. Contract liabilities consist of deferred revenue and customer deposits that arise when amounts are billed to or collected from customers in advance of revenue recognition.

Costs to Obtain and Fulfill a Contract

We ~~also evaluate other long-lived assets such as property and equipment and intangible assets with finite useful lives, on a regular basis~~recognize an asset for the ~~existence~~incremental costs of ~~facts or circumstances, both internal~~obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that commissions and ~~external that may suggest an asset is not recoverable. If such circumstances exist, we evaluate~~special incentive payments (“Spiffs”) for hardware and software maintenance and support and professional services paid under our sales incentive programs meet the ~~carrying value of long-lived assets~~requirements to ~~determine if impairment exists based upon estimated undiscounted future cash flows~~be capitalized under ASC 340-40. Costs to obtain a contract are amortized as selling and marketing expense over the ~~remaining useful~~expected period of benefit in a manner that is consistent with the transfer of the related goods or services to which the asset relates. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract and the estimate of the amortization period. The commissions and Spiffs related to professional services are amortized over time, as work is completed. The commissions and Spiffs for hardware and software maintenance are amortized over the life of the assets and compares that value to the carrying value of the assets. Our cash flow estimates contain management’s best estimates, using appropriate and customary assumptions and projections at the time.

~~In the second quarter of fiscal 2019, we determined there~~customer, which is estimated to be ~~a triggering event~~five years. These costs are periodically reviewed for impairment. We determined that ~~prompted us to test our goodwill for~~no impairment existed as of July 31, 2019 or 2018. ~~As a result~~We have elected

to apply the practical expedient and recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the ~~quantitative goodwill impairment test performed as of July 31, 2018, the Company determined~~assets that ~~the fair value of the reporting unit exceeded its carrying value. Therefore, no impairment charges on our goodwill~~we otherwise would have recognized is one year or ~~other long-lived assets were recorded in the second quarter of fiscal 2019. See Note 5,~~~~“Goodwill and Intangible Assets,”~~~~for more information.~~less.

~~Liquidity~~

We ~~continue~~capitalize incremental costs incurred to ~~realize savings related~~fulfill our contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy our ~~previous restructuring activities. These measures~~performance obligation under the contract, and (iii) are ~~important steps in restoring SeaChange to profitability and positive cash flow. The Company believes that existing funds and cash~~ expected to be ~~provided~~recovered through revenue generated under the contract. Contract fulfillment costs include direct labor for support services, software enhancements, reimbursable expenses and professional services for customized software development costs. The revenue associated with the support services, software enhancements and reimbursable expenses is recognized ratably over time; therefore, the costs associated are expensed as incurred. The professional services associated with the customized software are not recognized until completion. As such, the professional services costs are capitalized and recognized upon completion of the services.

Leases

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

Our existing leases are for facilities, automobiles and equipment. None of our leases are with related parties. In addition to rent, office leases may require us to pay additional amounts for taxes, insurance, maintenance and other ~~contractual obligations~~expenses, which are generally referred to as non-lease components. As a practical expedient, we account for the ~~foreseeable future, including at least~~non-lease components together with the ~~next 12 months.~~lease components as a single lease component for all of our leases. Only the fixed costs for leases are accounted for as a single lease component and recognized as part of a right-of-use asset and liability. Rent expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in operating expense in the consolidated statements of operations.

Net Income (Loss) Per Share

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

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

3.	~~Fair Value Measurements~~

	For the Three Months Ended July 31,				For the Six Months Ended July 31,
	2019		2018		2019		2018
	(Amounts in thousands)
Stock options		2,596		2,923		2,764		3,014
Restricted stock units		128		193		219		192
Deferred stock units		254		173		229		189
Performance stock units		120		352		111		291
		3,098		3,641		3,323		3,686

~~Definition~~Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-15, “Intangibles—Goodwill and ~~Hierarchy~~Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting

~~The applicable accounting guidance defines~~11

for the service element of a hosting arrangement that is a service contract is not affected by these amendments. We adopted ASU 2018-15 on February 1, 2019, which did not have a material impact to our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the disclosure requirements on fair value measurements. We adopted ASU 2018-13 on February 1, 2019, which did not have a material impact to our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” ASU 2018-07 expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees. We adopted ASU 2018-07 on February 1, 2019, which did not have a material impact to our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” On December 22, 2017, the U.S. federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (“Tax Cuts and Jobs Act”), which requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws. ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Reform Act. We adopted ASU 2018-02 effective February 1, 2019 and elected not to reclassify the income tax effects stranded in other comprehensive income to retained earnings and, as a result, there was no impact to our consolidated financial statements.

In March 2017, the ~~exchange~~FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities which requires companies to amend the amortization period for premiums on debt securities with explicit call features to be the earliest call date rather than through the contractual life of the debt instrument. This amendment aims to more closely align the recognition of interest income with the manner in which market participants price ~~that would be received for~~such instruments. We adopted this guidance on February 1, 2019, which did not have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which is intended to improve financial reporting about leasing transactions. In July 2018, the Financial Accounting Standards Board issued ASU 2018-11 to amend ASU 2016-02 and provide an ~~asset or paid~~additional (and optional) transition method to ~~transfer~~adopt the new lease standard. This transition method allows entities to apply the new lease standard at the adoption date and recognize a ~~liability~~cumulative-effect adjustment to the opening balance of retained earnings in the ~~principal~~period of adoption instead of using the original modified retrospective transition method of adoption which requires the restatement of all prior-period financial statements. Under this new transition method, the comparative periods in the financial statements will continue to be presented in accordance with prior GAAP. On February 1, 2019, we adopted the new lease standard on a prospective basis using the new transition method under ASU 2018-11. Under this guidance, as of February 2019, we recognized right-of-use assets and operating lease liabilities of $1.7 million for all leases with lease terms of more than 12 months. There was no impact to retained earnings as of that date. In addition, we adopted the guidance by electing the following practical expedients: (1) We did not reassess whether any expired or ~~most advantageous market~~existing contracts contained leases, (2) We did not reassess the lease classification for any expired or existing leases, and (3) We excluded variable payments from the ~~asset~~lease contract consideration and recorded those as incurred. The adoption of the standard did not have a material impact on our results of operations or ~~liability~~cash flows. Our future commitments under lease obligations and additional disclosures are summarized in ~~an orderly transaction between market participants~~Note 8.

Recently Issued Accounting Pronouncement

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), which introduces a new methodology for accounting for credit losses on ~~the measurement date.~~financial instruments, including available-for-sale debt securities and accounts receivable. The guidance establishes a ~~framework for measuring fair value~~new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and expands required disclosure about the fair value measurements of assets and liabilities. This guidance requires us to classify and disclose assets and liabilities measured at fair value on a recurring basis, as well as fair value measurements of assets and liabilities measured on a~~non-recurring~~ ~~basis in periods subsequent to initial measurement, in a fair value hierarchy.~~

The fair value hierarchy is broken down into three levels based on the reliability of inputs and requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required, as well as the assets and liabilities that we value using those levels of inputs:

~~Level 1 – Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.~~

~~Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that~~relevant information. Any expected credit losses are ~~not very active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.~~

~~Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.~~

~~Valuation Techniques~~

Inputs to valuation techniques are observable and unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. When developing fair value estimates for certain financial assets and liabilities, we maximize the use of observable inputs and minimize the use of unobservable inputs. When available, we use quoted market prices, market comparables and discounted cash flow projections. Financial assets include money market funds, U.S. treasury notes or bonds, U.S. government agency bonds and corporate bonds.

In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine fair value. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then we use quoted prices for similar assets and liabilities or inputs that are observable either directly or indirectly. In periods of market inactivity, the observability of prices and inputs may be reduced for certain instruments. This condition could cause an instrument to be ~~reclassified from Level 1~~reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. ASU 2016-13 is effective in the first quarter of our fiscal 2021. We are currently evaluating if this guidance will have a material effect to ~~Level 2 or from Level 2 to Level 3.~~our consolidated financial statements.

~~Assets and Liabilities that are Measured at Fair Value on a Recurring Basis~~12

3.	Fair Value Measurements

The following tables set forth our financial assets ~~and liabilities~~ that were accounted for at fair value on a recurring ~~basis as of October 31, 2018 and January 31, 2018.~~basis. There were no fair value measurements of our financial assets ~~and liabilities~~ using ~~significant Level~~level 3 inputs for the periods presented:

      Fair Value at October 31, 2018 Using
      Quoted
      Prices in    Significant
      Active    Other
      Markets for    Observable
   October 31,    Identical Assets    Inputs
   2018    (Level 1)    (Level 2)
   (Amounts in thousands)
Financial assets:

Money market accounts⁽¹⁾
   $ 2,832    $ 2,649    $ 183
Available-for-sale marketable securities:

Current marketable securities:

U.S. treasury notes and bonds - conventional
   745    745    —
Non-current marketable securities:

U.S. treasury notes and bonds - conventional
   6,274    6,274    —
U.S. government agency issues
   986    —      986
Corporate bonds
   2,280    —      2,280






Total
   $ 13,117    $ 9,668    $ 3,449






      Fair Value at January 31, 2018 Using
      Quoted
      Prices in    Significant
      Active    Other
      Markets for    Observable
   January 31,    Identical Assets    Inputs
   2018    (Level 1)    (Level 2)
   (Amounts in thousands)
Financial assets:

Money market accounts⁽¹⁾
   $ 4,568    $ —      $ 4,568
Available-for-sale marketable securities:

Current marketable securities:

U.S. treasury notes and bonds - conventional
   1,993    1,993    —
U.S. government agency issues
   1,998    —      1,998
Non-current marketable securities:

U.S. treasury notes and bonds - conventional
   1,724    1,724    —
U.S. government agency issues
   985    —      985
Corporate bonds
   1,740    —      1,740






Total
   $ 13,008    $ 3,717    $ 9,291

			Fair Value at July 31, 2019 Using
	Total		Level 1		Level 2
	(Amounts in thousands)
Assets:
Cash equivalents	$	333	$	-	$	333
Marketable securities:
U.S. Treasury Notes and bonds		6,585		6,585		—
U.S. Agency bonds		998		—		998
Corporate bonds		2,006		—		2,006
Total	$	9,922	$	6,585	$	3,337

~~(1)~~

Money market funds and U.S. treasury bills are included in cash and cash equivalents on the accompanying consolidated balance sheets and are valued at quoted market prices for identical instruments in active markets.

			Fair Value at January 31, 2019 Using
	Total		Level 1		Level 2
	(Amounts in thousands)
Assets:
Cash equivalents	$	2,887	$	2,724	$	163
Marketable securities:
U.S. Treasury Notes and bonds		7,072		7,072		—
U.S. Agency bonds		992		—		992
Corporate bonds		2,295		—		2,295
Total	$	13,246	$	9,796	$	3,450

~~Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis~~

~~Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible property and equipment, goodwill, and other intangible assets, which arere-measured~~ when the derived fair value is below carrying value on our consolidated balance sheets. For these assets and liabilities, we do not periodically adjust carrying value to fair value except in the event of impairment. If we determine that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is recorded to loss from impairment of long-lived assets in our consolidated statements of operations and comprehensive loss.

~~Available-For-Sale~~ ~~Securities~~

~~We determine the appropriate classification of debt investment securities at the time of purchase and reevaluate such designation as of each balance sheet date. Our investment portfolio consists of~~Cash equivalents include money market funds and U.S. treasury notes and bonds, U.S. government agency notes and bonds and corporate bonds as of October 31, 2018 and January 31, 2018. All highly liquid investments with an original maturity of three months or less when purchased are considered to be cash equivalents. All cash equivalents are carried at cost, which approximates fair value. Our marketable securities are classified as~~available-for-sale~~ and are reported at fair value with unrealized gains and losses, net of tax, reported in stockholders’ equity as a component of accumulated other comprehensive loss. The amortization of premiums and accretion of discounts to maturity are computed under the effective interest method and are included in other (expenses) income, net, in our consolidated statements of operations and comprehensive loss. Interest on securities is recorded as earned and is also included in other (expenses) income, net. Any realized gains or losses would be shown in the accompanying consolidated statements of operations and comprehensive loss in other (expenses) income, net. We provide fair value measurement disclosures of~~available-for-sale~~ ~~securities in accordance with one of the three levels of fair value measurement mentioned above.~~

~~The following is a summary of cash, cash equivalents andavailable-for-sale~~ securities, including the cost basis, aggregate fair value and gross unrealized gains and losses, for short- and long-term marketable securities portfolio as of October 31, 2018 and January 31, 2018:bills.

   Amortized
Cost    Gross
Unrealized
Gains    Gross
Unrealized
Losses Estimated
Fair Value
   (Amounts in thousands)
October 31, 2018:

Cash
   $ 18,723    $ —      $ —   $ 18,723
Cash equivalents
   2,820    11    —   2,831






Cash and cash equivalents
   21,543    11    —   21,554






U.S. treasury notes and bonds - short-term
   749    —      (3 ) 746
U.S. treasury notes and bonds - long-term
   6,306    —      (32 ) 6,274
U.S. government agency issues - long-term
   1,001    —      (15 ) 986
Corporate bonds - long-term
   2,310    —      (30 ) 2,280






Total cash, cash equivalents and marketable securities
   $ 31,909    $ 11    $ (80 ) $ 31,840






January 31, 2018:

Cash
   $ 39,084    $ —      $ —   $ 39,084
Cash equivalents
   4,568    —      —   4,568






Cash and cash equivalents
   43,652    —      —   43,652






U.S. treasury notes and bonds - short-term
   2,001    —      (8 ) 1,993
U.S. treasury notes and bonds - long-term
   1,740    —      (16 ) 1,724
U.S. government agency issues - short-term
   1,991    9    (2 ) 1,998
U.S. government agency issues - long-term
   1,002    —      (17 ) 985
Corporate bonds - long-term
   1,760       (20 ) 1,740






Total cash, cash equivalents and marketable securities
   $ 52,146    $ 9    $ (63 ) $ 52,092

~~The gross realized gains and losses on sale ofavailable-for-sale~~Marketable securities ~~as of October 31, 2018 and January 31, 2018 were immaterial. For purposes of determining gross realized gains and losses, the cost of securities is based on specific identification.~~

~~Contractual maturities ofavailable-for-sale~~ ~~investments as of October 31, 2018 are as follows (amounts in thousands):~~

   Estimated
   Fair Value
Maturity of one year or less
   $ 1,732
Maturity between one and five years
   8,554


Total
   $ 10,286

~~Cash, Cash Equivalents and Marketable Securities~~

Cash and cash equivalents consist primarily of highly liquid investments in money market mutual funds, government sponsored enterprise obligations, treasury bills, commercial paper and other money market securities with remaining maturities at date of purchase of 90 days or less.

~~The fair value of cash, cash equivalents, restricted cash and marketable securities at October 31, 2018 and January 31, 2018 was $32.4 million and $52.1 million, respectively.~~

~~Restricted Cash~~

At times, we may be required to maintain cash held as collateral for performance obligations with our customers which we classify as restricted cash on our consolidated balance sheets. Restricted cash was $0.5 million as of October 31, 2018 and was not material as of January 31, 2018.

4.	~~Consolidated Balance Sheet Detail~~

~~Inventories, net~~

~~Inventories consist primarily of hardware and related component parts and are stated at the lower of cost (on afirst-in,first-out~~ ~~basis) or market. Inventories consist~~by security type consisted of the following:

   As of
   October 31,    January 31,
   2018    2018
   (Amounts in thousands)
Components and assemblies
   $ 592    $ 426
Finished products
   114    240




Total inventories, net
   $ 706    $ 666

	As of July 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Amounts in thousands)
U.S. Treasury Notes and bonds	$	6,513	$	72	$	—		$	6,585
U.S. Agency bonds		1,000		—		(2	)		998
Corporate bonds		2,007		—		(1	)		2,006
	$	9,520	$	72	$	(3	)	$	9,589

As of January 31, 2019

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

(Amounts in thousands)

U.S. Treasury Notes and bonds

$
7,055

$
17

$
—

$
7,072

U.S. Agency bonds

1,001

—

(9
)

992

Corporate Bonds

2,308

—

(13
)

2,295

$
10,364

$
17

$
(22
)

$
10,359

As of July 31, 2019, marketable securities consisted of investments that mature within one year, with the exception of investments with a fair value of $3.8 million that mature between one and three years.

4.	Consolidated Balance Sheet Detail

Inventory

Inventory consists of the following:

As of

July 31, 2019

January 31, 2019

(Amounts in thousands)

Components and assemblies

$
156

$
763

Finished products

42

161

Total inventory

$
198

$
924

Property and equipment, net

Property and equipment, net consists of the following:

									As of
	Estimated		As of						July 31, 2019			January 31, 2019
	Useful		October 31,			January 31,			(Amounts in thousands)
	Life (Years)		2018			2018
			(Amounts in thousands)
Buildings									$	3,467		$	3,467
Land			$	2,780		$	2,780			2,780			2,780
Buildings		20		11,861			11,839
Office furniture and equipment		5		730			774
Computer equipment, software and demonstration equipment		3		12,414			12,770			11,868			12,316
Service and spare components		5		1,158			1,158			1,158			1,158
Office furniture and equipment										738			738
Leasehold improvements		1-7		513			537			524			531
										20,535			20,990
				29,456			29,858
Less - Accumulated depreciation and amortization				(20,796	)		(20,387	)

Less: Accumulated depreciation and amortization										(13,647	)		(13,798	)
Total property and equipment, net			$	8,660		$	9,471		$	6,888		$	7,192

Depreciation and amortization expense on property and equipment, net was $0.3 million and $1.0 million for the three and nine months ended October 31, 2018 and $0.6 million and $1.8 million for the three and nine months ended October 31, 2017.Accrued expenses

~~Other accrued expenses~~

~~Other accrued~~Accrued expenses consist of the following:

   As of
   October 31,    January 31,
   2018    2018
   (Amounts in thousands)
Accrued compensation and commissions
   $ 1,340    $ 1,414
Accrued bonuses
   1,174    2,715
Employee benefits
   301    601
Sales tax and VAT payable
   420    4,001
Income taxes payable
   41    2,869
Accrued other
   2,337    3,554
Accrued Restructuring
   724    225




Total other accrued expenses
   $ 6,337    $ 15,379

	As of
	July 31, 2019		January 31, 2019
	(Amounts in thousands)
Accrued employee compensation and benefits	$	1,666	$	1,866
Accrued professional fees		1,002		1,521
Sales tax and VAT payable		274		1,502
Current obligation - right of use operating leases		667		—
Accrued payroll taxes and withholdings		425		295
Accrued restructuring (Note 9)		403		653
Customer deposits		1,066		-
Accrued other		914		1,925
Total accrued expenses	$	6,417	$	7,762

5.	Acquisition

On February 6, 2019, we acquired all of the outstanding stock of Xstream A/S (“Xstream”) for $4.6 million in cash and 541,738 shares of common stock for a total transaction value of $5.4 million. Xstream provides a managed service, OTT video solution that serves more than five million active subscribers globally.

The acquisition has been accounted for as a business combination and, in accordance with ASC 805, Business Combinations, we have recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The following table summarizes the preliminary purchase price allocation recorded:

Estimated fair value of consideration:
Cash	$	4,552
Stock consideration		874
Total purchase price	$	5,426

Estimated fair value of assets acquired and liabilities assumed:
Cash and cash equivalents	$	714
Other current assets		927
Other long-term assets		152
Finite-life intangible assets		3,648
Goodwill		1,221
Current liabilities		(1,236	)
Allocated purchase price	$	5,426

The significant intangible assets identified in the preliminary purchase price allocation discussed above include developed technology and customer relationships, which are amortized over their respective useful lives on a straight-line basis. Amortization of existing technology is included within research and development and amortization of customer relationships and tradenames is included within sales and marketing expense. To value the developed technology asset, the Company utilized the income approach, specifically a discounted cash-flow method known as the multi-period excess earnings method. Customer relationships represent the underlying relationships with certain customers to provide ongoing services for products sold. The Company utilized the income approach, specifically the distribution method, a subset of the excess-earnings method to value the customer relationships.

The following table presents the estimated fair values and useful lives of the identifiable intangible assets acquired:

	Useful Life	Fair Value
		(amounts in thousands)
Customer contracts	3 years	$	2,273
Existing technology	3 years		1,375
		$	3,648

Goodwill was recognized for the excess purchase price over the fair value of the net assets acquired. The goodwill reflects the value of the synergies the Company expects to realize and the assembled workforce. Goodwill from the Xstream acquisition is included within the Company’s one reporting unit and is included in the Company’s enterprise-level annual review for impairment. Goodwill resulting from the Xstream acquisition is not deductible for tax purposes.

The purchase price has been allocated to the tangible and intangible assets acquired and liabilities assumed based upon the respective estimates of fair value as of the date of the acquisition, which remains preliminary, and using assumptions that the Company’s management believes are reasonable given the information then available. The final allocation of the purchase price may differ materially from the information presented in these consolidated financial statements. Any changes to the preliminary estimates of the fair value of the assets acquired and liabilities assumed will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill.

The revenues and loss before income taxes from Xstream included in our consolidated results for the six months ended July 31, 2019 were $1.9 million and $1.2 million, respectively. The Xstream results include expenses resulting from purchase accounting that include amortization of intangibles. We have not presented pro forma results of operations for the Xstream acquisition because it is not material to the Company's consolidated results of operations, financial position, or cash flows.

6.	Goodwill and Intangible Assets

~~Goodwill~~

Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed. We are required to perform impairment tests related to our goodwill annually, which we perform during the third quarter of each fiscal year, or when we identify certain triggering events or circumstances that would more likely than not reduce the estimated fair value of the goodwill ~~of the Company~~ below its carrying amount. The following table represents the changes in ~~the carrying amount of~~ goodwill ~~for the nine months ended October~~since January 31, ~~2018 (amounts in thousands):~~2019:

Balance as of January 31, 2017:

Goodwill, gross
   $ 62,566
Accumulated impairment losses
   (39,279 )


Goodwill, net
   23,287
Cumulative translation adjustment
   2,292


Balance as of January 31, 2018:

Goodwill, gross
   64,858
Accumulated impairment losses
   (39,279 )


Goodwill, net
   25,579
Cumulative translation adjustment
   (1,623 )


Balance as of October 31, 2018:

Goodwill, gross
   63,235
Accumulated impairment losses
   (39,279 )


Goodwill, net
   $ 23,956

In the second quarter of fiscal 2019, we determined there to be a triggering event that prompted us to test our goodwill for impairment as of July 31, 2018. The triggering event was a decline in actual revenue for the quarter compared to projected amounts, which was reported in a Current Report on Form~~8-K~~ ~~furnished to the SEC on August 21, 2018. The Company performed a quantitative goodwill impairment test, utilizing the single-step approach under ASU2017-04,~~~~“Intangibles-Goodwill and Other (Topic 350): Simplifying the Test of Goodwill Impairment,”~~ comparing the carrying value of the reporting unit to its estimated fair value, which was calculated using a discounted cash flow analysis, a form of income approach. We considered three generally accepted approaches for valuing businesses: the market approach, the income approach and the asset-based (cost) approach to arrive at fair value. The discounted cash flow analysis relied on certain assumptions regarding future net free cash flows based on industry market data, historical performance and expected future performance. Future net free cash flows were discounted to present value using a risk-adjusted discount rate, which reflects the Weighted Average Cost of Capital (“WACC”). The WACC was developed using information from same or similar industry participants and publicly available market data. As a result of the quantitative goodwill impairment test performed as of July 31, 2018, the Company determined that the estimated fair value of the reporting unit exceeded its carrying value, including goodwill, by 28.7%. Therefore, no impairment charges on our goodwill or other long-lived assets were recorded in the second quarter of fiscal 2019.

	Goodwill
	(Amounts in thousands)
Balance as of January 31, 2019	$	8,753
Goodwill arising from the Xstream acquisition		1,221
Cumulative translation adjustment		(191	)
Balance as of July 31, 2019	$	9,783

~~Intangible Assets~~

Intangible assets, net, consisted of the following at ~~October~~July 31, ~~2018 and January 31, 2018:~~2019:

      As of October 31, 2018    As of January 31, 2018
   Weighted average
remaining life
(Years)    Gross    Accumulated
Amortization Net    Gross    Accumulated
Amortization Net
   (Amounts in thousands)
Finite-life intangible assets:

Customer contracts
   1.85    $ 17,895    $ (17,482 ) $ 413    $ 30,818    $ (29,836 ) $ 982
Non-compete agreements
   —      2,473    (2,473 ) —      2,639    (2,635 ) 4
Completed technology
   1.86    9,655    (9,561 ) 94    11,479    (11,203 ) 276
Trademarks, patents and other
   3.0    6,948    (6,924 ) 24    7,189    (7,148 ) 41








Total finite-life intangible assets
   1.9    $ 36,971    $ (36,440 ) $ 531    $ 52,125    $ (50,822 ) $ 1,303

~~Amortization expense for~~15

	As of July 31, 2019
	Gross		Accumulated Amortization		Cumulative translation Adjustment			Net
	(Amounts in thousands)
Finite-lived intangible assets:
Acquired customer contracts	$	2,233	$	370	$	(8	)	$	1,855
Acquired existing technology		1,352		228		(2	)		1,122
Total finite-lived intangible assets	$	3,585	$	598	$	(10	)	$	2,977

As a result of our impairment analysis in the fourth quarter of fiscal 2019, the carrying value of our intangible assets was ~~$0.4 million and $1.2 million, respectively, for the three and nine months ended October~~zero as of January 31, ~~2018 and $0.6 million and $1.8 million, respectively, for the three and nine months ended October 31, 2017.~~2019.

~~As of October 31, 2018, the estimated future~~We recognized amortization expense ~~for our finite-life~~of intangible assets in cost of revenue and operating expense categories as follows:

	For the Three Months Ended July 31,				For the Six Months Ended July 31,
	2019		2018		2019		2018
	(Amounts in thousands)				(Amounts in thousands)
Cost of revenue	$	—	$	178	$	—	$	356
Selling and marketing		185		149		370		294
Research and development		115		84		228		165
	$	300	$	411	$	598	$	815

Future estimated amortization expense of acquired intangibles as of July 31, 2019 is as ~~follows (amounts in thousands):~~follows:

For the Fiscal Years Ended January 31,			Estimated Amortization Expense
			(Amounts in thousands)
	Estimated
	Amortization
Fiscal Year Ended January 31,	Expense
2019 (for the remaining three months)	$	217
2020		311	$	595
2021		3		1,191
2022		—		1,191
2023		—
2024 and thereafter		—

2023 and thereafter				—
Total	$	531	$	2,977

Commitments and Contingencies

Indemnification and Warranties

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

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

We warrant that our products, including software products, will substantially perform in accordance with our standard published specifications in effect at the time of delivery. In addition, we provide maintenance support to our customers and therefore

allocate a portion of the product purchase price to the initial warranty period and recognize revenue on a straight-line basis over

that warranty period related to both the warranty obligation and the maintenance support agreement. When we ~~enter into arrangements that include~~receive revenue for extended warranties beyond the standard duration, ~~the revenue~~it is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred.

8.	Operating leases

The Company has noncancelable operating leases for facilities, automobiles and equipment expiring at various dates through 2023 and thereafter. As discussed in Note 2, the Company adopted ASC 842 as of February 1, 2019 on a prospective basis using the transition method under ASU 2018-11. In accordance with this method, the Company recognized a right of use asset and an operating lease liability of $1.7 million as of February 1, 2019.

The components of lease expense for the three and six months ended July 31, 2019 are as follows:

	Three Months Ended July 31, 2019		Six Months Ended July 31, 2019
	(Amounts in thousands)
Operating lease cost	$	206	$	412
Short term lease cost		3	14
Total lease cost	$	209	$	426

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

	Six Months Ended July 31, 2019
	(Amounts in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	406

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	348

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

	July 31, 2019
	(Amounts in thousands)
Operating lease right-of-use assets	$	1,745

Current portion, operating lease liabilities		667
Operating lease liabilities, long term		1,222
Total operating lease liabilities	$	1,889

Weighted average remaining lease term	2.8 years
Weighted average incremental borrowing rate		7.0	%

The current portion, operating lease liabilities is included in the balance of accrued expenses at July 31, 2019. Rent payments for continuing operations were approximately $0.2 million and $0.4 million for the three and six months ended July 31, 2019. Future minimum lease payments for operating leases, with initial or remaining terms in excess of one year at July 31, 2019, are as follows:

	Payments for Operating Leases
For the fiscal years ended January 31,	(Amounts in thousands)
2020	$	392
2021		688
2022		660
2023		249
2024		19
Thereafter		—
Total lease payments		2,008
Less interest		119
Total operating lease liabilities	$	1,889

9.	Severance and ~~Other~~ Restructuring Costs

~~Restructuring Costs~~

During the ~~nine~~three and six months ended ~~October~~July 31, ~~2018,~~ 2019, we incurred severance and restructuring ~~charges,~~costs of $0.7 million and $0.9 million, respectively, primarily for employee-related benefits for terminated employees, partially offset by the reversal of ~~certain accruals from fiscal 2018 for costs related to the restructuring.~~

~~The following table shows the activity in accrued restructuring reported as a component of other accrued expenses on the consolidated balance sheet as of October 31, 2018 (amounts in thousands):~~

   Employee-
Related    Closure of
Leased    Other
   Benefits    Facilities    Restructuring Total
Accrual balance as of January 31, 2018
   $ 61    $ 135    $ 29 $ 225
Restructuring charges incurred
   950    (7 )    (29 ) 914
Cash payments
   (287 )    (128 )    —   (415 )
Other charges
   —      —      —   —






Accrual balance as of October 31, 2018
   $ 724    $ —      $ —   $ 724

During the third quarter of fiscal 2017, we implemented a restructuring program (the “2017 Restructuring Program”) with the purpose of reducing costs and assisting in restoring SeaChange to profitability and positive cash flow. This program included measures intended to allow the Company to more efficiently operate in a leaner, more direct cost structure. These measures included reductions in workforce, consolidation of facilities, transfers of certain business processes to lower cost regions and reduction in third-party service costs. The Restructuring Plan was substantially complete as of January 31, 2018. However, we incurred a small charge for employee-related benefits during the first quarter of fiscal 2019 and reversed any remaining estimates to severance and other restructuring charges in our consolidated statements of operations and comprehensive loss in April 2018. Since its implementation, we recognized $7.1 million in restructuring charges related to the 2017 Restructuring Program.

deferred rent. In September 2018, ~~in order to return the Company to profitability by the end of fiscal 2019,~~ we announced that we implemented ~~further~~ cost-savings actions during the third quarter of fiscal 2019 (the “2019 Restructuring Program”). The primary element of this restructuring program was staff reductions across all of our functions and geographic areas and ~~we expect~~ the program ~~to be~~was substantially completed byat the end of the first six months of fiscal ~~2019. Annualized cost savings are expected to be approximately $6 million once completed and other restructuring and severance charges are expected to be approximately $1 million.~~

~~Severance~~2020. Costs

~~During~~ incurred in the 2019 Restructuring Program during the three and ~~nine~~six months ended ~~October~~July 31, ~~2018, we incurred additional severance charges not related~~2019 amounted to ~~a restructuring plan of $0.1~~$0.7 million and ~~$0.7~~$0.8 million, ~~respectively, primarily from~~respectively.

The following table shows the ~~departure~~change in accrued balances since January 31, 2019 of ~~17 employees. Severance costs during each~~our 2019 Restructuring Program, reported as a component of other accrued expenses on the consolidated balance sheets:

	Employee- Related Benefits			Closure of Leased Facilities			Other Restructuring			Total
	(Amounts in thousands)
Accrued balance as of January 31, 2019	$	653		$	—		$	—		$	653
Restructuring charges incurred		834			(125	)		90			799
Cash payments		(1,077	)		—			(90	)		(1,167	)
Other charges		(7	)		125			—			118
Accrued balance as of July 31, 2019	$	403		$	—		$	—		$	403

10.	Stock Repurchase Program

On June 6, 2019, the Board authorized a share repurchase program of up to $5 million of then-outstanding shares of the ~~three~~Company over the next year. Under the share repurchase program, the Company is authorized to repurchase, from time to time, outstanding shares of common stock in accordance with applicable laws both on the open market, including under trading plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended and ~~nine~~in privately negotiated transactions.

The following table provides a summary of the Company’s stock repurchase activities during the three months ended ~~October~~July 31, ~~2017 were $0.2 million.~~2019 (in thousands, except per share amounts):

	For the Three Months Ended
	July 31, 2019
Shares repurchased		100
Average cost per share	$	1.42
Value of shares repurchased	$	142

11.

~~Stockholders’ Equity~~Stock-based Compensation Expense

Equity Plans

2011 Compensation and Incentive ~~Plan~~Plan.

~~In July 2011, our stockholders approved the adoption of our~~Our 2011 Compensation and Incentive Plan (the “2011 Plan”)~~. The 2011 Plan~~ provides for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units (“RSUs”), deferred stock units (“DSUs”), performance stock units (“PSUs”) and other equity basednon-stock option awards as determined by the plan administrator to our officers, employees, consultants and ~~directors of the Company.~~

On July 13, 2017, our stockholders approved an amendment to the 2011 Plan which increased the number of shares under the 2011 Plan by 4,000,000 shares and correspondingly, increased the number of incentive stock options that can be authorized for issuance under the 2011 Plan.

~~Effective February 1, 2014, SeaChange gave itsnon-employee~~ members of the Board of Directors the option to receive DSUs in lieu of RSUs, beginning with the annual grant for fiscal 2015. The number of units subject to the DSUs is determined as of the grant date and shall fully vest one year from the grant date. The shares underlying the DSUs are not vested and issued until the earlier of the director ceasing to be a member of the Board of Directors (provided such time is subsequent to the first day of the succeeding fiscal year) or immediately prior to a change in control.

directors. We may satisfy awards upon the exercise of stock options or the vesting of stock units with newly issued shares or treasury shares. The Board of Directors is responsible for the administration of the 2011 Plan and determining the terms of each award, award exercise price, the number of shares for which each award is granted and the rate at which each award vests. In certain instances, the Board of Directors may elect to modify the terms of an award. The number of shares authorized for issuance under the 2011 Plan is 9,300,000. Additionally, outstanding awards under the 2005 Equity Compensation and Incentive Plan that, since adoption of the 2011 Plan, expire, terminate, or are surrendered or canceled without having been fully exercised are available for issuance under the 2011 Plan.As of ~~October~~July 31, ~~2018,~~2019, there were ~~2,523,049~~2,523,690 shares available for future grant.

Nonemployee members of the Board of Directors may elect to receive DSUs in lieu of RSUs. The number of units subject to the DSUs is determined as of the grant ~~under~~date and shall fully vest one year from the ~~2011 Plan.~~grant date. The shares underlying the DSUs are not vested and issued until the earlier of the director ceasing to be a member of the Board of Directors (provided such time is subsequent to the first day of the succeeding fiscal year) or immediately prior to a change in control.

Option awards may be granted to employees at an exercise price per share of not less than 100% of the fair market value per common share on the date of the grant. ~~Stock units may be granted to any officer, employee, director, or consultant at a purchase price per share as determined by the Board of Directors.~~ Option awards granted under the 2011 Plan generally vest over a period of one to ~~four~~three years and expire ten years from the date of the grant.

~~In fiscal 2016, the Board of Directors developed~~We have a Long-Term Incentive (“LTI”) Program, adopted in fiscal 2016, under which the named executive officers and other of our key employees ~~of the Company will~~may receive long-term equity-based incentive awards, which are intended to align the interests of our named executive officers and other key employees with the long-term interests of our stockholders and to emphasize and reinforce our focus on team success. Long-term equity-based incentive compensation awards are made in the form of stock options, RSUs and ~~performance stock units (“PSUs”)~~PSUs subject to vesting based in part on the extent to which employment continues for three years. In fiscal 2018, the Board of Directors changed the structure of prospective LTI performance-based awards, changing from awards based on total shareholder return to awards based on Company-specific financial performance metrics. Since these awards are performance-based awards and do not include market conditions, we record the fair value of these PSUs using the grant date share price rather than the Monte Carlo simulation model used for PSUs previously granted in fiscal 2016 and fiscal 2017, which included market conditions. We recognize stock compensation expense ratably over the required service period based on the estimate that it is probable that the measurement criteria will be achieved and the targeted number of shares will vest. If there is a change in estimate of the number of shares that are probable of vesting, we will cumulatively adjust stock compensation expense in the period that the change in estimate is made.continues.

We have granted market-based options to certain officers in connection with their appointment. These stock options have an exercise price equal to our closing stock price on the date of grant and will vest in approximately equal increments based upon the closing price of SeaChange’s common stock. We record the fair value of these stock options using the Monte Carlo simulation model, since the stock option vesting is variable depending on the closing price of our traded common stock. The model simulated the daily trading price of the market-based stock options expected terms to determine if the vesting conditions would be triggered during the term. Effective April 6, 2016, Ed Terino, who previously served as our Chief Operating Officer (“COO”), was appointed Chief Executive Officer (“CEO”) of SeaChange and was granted 600,000 market-based options, bringing the total of his market-based options, when added to the 200,000 market-based options he received upon hire as COO in June 2015, to 800,000 market-based options. The fair value of these 800,000 stock options was estimated to be $2.1 million. As of October 31, 2018, $0.06 million remained unamortized on these market-based stock options, which will be expensed over the next 0.3 years, the remaining weighted average amortization period.

2015 Employee Stock Purchase Plan

~~In July 2015, we adopted the~~Under our 2015 Employee Stock Purchase Plan (the ~~“ESPP”). The purpose~~“ESPP), six-month offering periods begin on October 1 and April 1 of ~~the ESPP is to provide~~each year during which eligible employees ~~including executive officers of SeaChange, with the opportunity~~may elect to purchase shares of our common stock ~~at a discount through accumulated payroll deductions~~according to the terms of ~~up to 15%, but not less than one percent of their eligible compensation, subject to any plan limitations. Offering periods typically commence on October 1~~^st ~~and April 1~~^st ~~and end on March 31~~^st ~~and September 30~~^th ~~with the last trading day being the exercise date for~~ the offering ~~period.~~. On each purchase date, eligible employees ~~will~~can purchase our stock at a price per share equal to 85% of the closing price of our common stock on the exercise date, but no less than par value. The maximum number of shares of our common stock ~~which will be~~ authorized for sale under the ESPP is 1,150,000 ~~shares. Since its inception, a total~~shares, of ~~56,821 shares have been purchased~~which 1,086,964 remain available under the ~~ESPP. Stock-based~~ESPP as of July 31, 2019. Under the ESPP, 7,819 and 9,421 shares were purchased during the first six months of fiscal 2020 and fiscal 2019, respectively.

Award Activity

Market-Based Options

Our former CEO was granted 800,000 market-based options issued in fiscal 2016 and fiscal 2017. These stock options vest in approximately equal increments based upon the closing price of our common stock achieving a certain level and continued service conditions. We measured the grant-date fair value of these options using a Monte Carlo simulation model and recognized the associated expense over the requisite service period. The fair value of these stock options was $2.1 million, which was recognized over three years. In February 2019, these options were cancelled upon the resignation of our CEO, at which time we reversed $0.5 million of stock-based compensation expense related to the ~~ESPP~~final performance period for a portion of the grant.

We have not granted additional market-based options since fiscal 2017.

In the second quarter of fiscal 2020, we granted 995,000 option awards and 236,688 DSU awards with a combined fair value totaling $1.1 million.

Stock-based Compensation

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

	For the Three Months Ended July 31,					For the Six Months Ended July 31,
	2019		2018			2019			2018
	(Amounts in thousands)					(Amounts in thousands)
Cost of revenue	$	22	$	(1	)	$	19		$	-
Research and development		82		55			150			108
Sales and marketing		77		120			(9	)		234
General and administrative		450		749			37			1,460
	$	631	$	923		$	197		$	1,802

A credit to stock-based compensation expense in the amount of $0.2 million for modifications to awards was ~~not significant for~~recorded in the three and ~~nine~~six months ended ~~October~~July 31, ~~2018~~2019. As of July 31, 2019, unrecognized stock-based compensation expense related to unvested stock options was approximately $1.6 million, which is expected to be recognized over a weighted average period of 2.4 years. As of July 31, 2019, unrecognized stock-based compensation expense related to unvested RSUs and ~~2017.~~DSUs was $1.2 million, which is expected to be recognized over a weighted average amortization period of 1.7 years. As of July 31, 2019, unrecognized stock-based compensation expense related to unvested PSUs was $0.1 million, which is expected to be recognized over a weighted average amortization period of 1.1 years.

9.	~~Accumulated Other Comprehensive Loss~~12.

~~The following shows the changes in the components of accumulated other comprehensive loss for the nine months ended October 31, 2018:~~

      Changes in
   Foreign    Fair Value of
   Currency    Available-
   Translation    for-Sale
   Adjustment    Investments    Total
   (Amounts in thousands)
Balance at January 31, 2018
   $ (5,380 )    $ (54 )    $ (5,434 )
Other comprehensive income (loss)
   2,354    (15 )    2,339






Balance at October 31, 2018
   $ (3,026 )    $ (69 )    $ (3,095 )

~~Unrealized holding gains (losses) on securitiesavailable-for-sale~~ ~~are not material for the periods presented.~~

Comprehensive loss consists of our net loss and other comprehensive income (loss), which includes foreign currency translation adjustments and changes in unrealized gains and losses on marketable securities~~available-for-sale.~~ ~~For purposes of comprehensive loss disclosures, we do not record tax expense or benefits for the net changes in the foreign currency translation adjustments.~~

~~10.~~

Revenues from Contracts with Customers

On February 1, 2018, the Company adopted ASC 606using the modified retrospective method to achieve a consistent application of revenue recognition, resulting in a single revenue model to be applied by reporting companies under U.S. GAAP. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the providing entity expects to be entitled in exchange for those goods or services. Therefore, for arrangements that include customer-specified acceptance criteria, revenue is recognized when the Company can objectively determine that control has been transferred to the customer in accordance with the agreed-upon specifications in the contract, which may occur before formal customer acceptance. In addition, the new guidance requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance no longer requires the Company to have vendor specific object evidence (“VSOE”) to determine the fair value of undelivered elements in a multiple-element software transaction, resulting in revenue attributable to the sale of software being recognized earlier.

Our products and services facilitate the aggregation, licensing, management and distribution of video and advertising content to cable television system operators, telecommunication companies, satellite operators and media companies. Offerings include and revenue is generated from the sales of software, hardware, professional services, maintenance and support in order to deploy SeaChange systems and provide ongoing functionality.

These offerings can be sold on a standalone basis or as a component of a contract with multiple performance obligations. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price. The performance obligations include future credits, significant discounts and material rights in addition to the software, hardware, professional services, maintenance and support.

The revenue for perpetual licenses to software applications and hardware is recognized upon delivery or acceptance by the customer. Product maintenance and ~~technical~~ support services is recognized ratably over the stated ~~and~~or implied maintenance periods.

The professional services are either fixed price or time and material contracts, and consist of installation and integration, customized development and customized software, training, andon-site managed services. The installation and integration is recognized over time based on an input measure of hours incurred to total estimated hours. The customized development and software is recognized at a point in time upon delivery and acceptance of the final software product. The training and theon-site managed services are recognized over the service period.

The cumulative effect of the changes made to our consolidated balance sheet as of February 1, 2018 for the adoption of the new guidance under the modified retrospective method is as follows (amounts in thousands):

Disaggregated Revenue

   As of
   January 31, 2018       February 1, 2018
   Under ASC 605    Adjustment    Under ASC 606
Assets

Unbilled receivables
   $ 3,101    $ 137    $ 3,238
Prepaid expenses and other current assets⁽¹⁾
   $ 3,557    $ 824    $ 4,381
Liabilities

Deferred revenues
   $ 14,433    $ (1,358 )    $ 13,075
Equity

Accumulated loss
   $ (148,620 )    $ 2,319    $ (146,301 )

~~(1)~~

~~Contract assets, short-term are included in prepaid expenses and other current assets in our consolidated balance sheet.~~

The following tables set forth the amount by which each financial statement line item is affected in the current reporting period by the application of ASC 606, as compared to the guidance that was in effect before its adoption. The impact of adoption on the consolidated financial statements as of and for the three and nine months ended October 31, 2018 is as follows (amounts in thousands):

~~Consolidated Balance Sheets:~~

   As of
   October 31, 2018       October 31, 2018
   Under ASC 605    Adjustment    Under ASC 606
Assets

Unbilled receivables
   $ 5,112    $ 366    $ 5,479
Prepaid expenses and other current assets⁽¹⁾
   $ 8,561    $ (680 )    $ 7,880
Liabilities

Deferred revenues
   $ 13,418    $ 6,344    $ 7,075
Equity

Accumulated loss
   $ 170,709    $ 6,030    $ (164,679 )

~~(1)~~

~~Contract assets, short-term, are included in prepaid expenses and other current assets in our consolidated balance sheet.~~

~~Consolidated Statements of Operations and Comprehensive Loss:~~

   For the Three Months Ended October 31, 2018
   Under ASC 605    Adjustment    Under ASC 606
Revenues
   $ 18,352    $ 260    $ 18,612
Cost of revenues
   7,163    160    7,323
Operating expenses
   13,695    110    13,805
Loss from operations
   (2,506 )    (10 )    (2,516 )
Loss before income taxes
   (4,535 )    (10 )    (4,545 )
Income tax (benefit) provision
   (775 )    —      (775 )
Net loss
   (3,818 )    (10 )    (3,828 )
Net loss per share:

Basic
   $ (0.12 )    $ —      $ (0.12 )
Diluted
   $ (0.12 )    $ —      $ (0.12 )
   For the Nine Months Ended October 31, 2018
   Under ASC 605    Adjustment    Under ASC 606
Revenues
   $ 41,216    $ 4,231    $ 45,447
Cost of revenues
   18,509    458    18,967
Operating expenses
   42,381    —      42,381
Loss from operations
   (19,675 )    3,774    (15,901 )
Loss before income taxes
   (24,515 )    3,774    (20,741 )
Income tax (benefit) provision
   (2,412 )    —      (2,421 )
Net loss
   (22,152 )    3,774    (18,378 )
Net loss per share:

Basic
   $ (0.63 )    $ 0.11    $ (0.52 )
Diluted
   $ (0.63 )    $ 0.11    $ (0.52 )

~~Consolidated Statement of Cash Flows:~~

   For the Nine Months Ended October 31, 2018
   Under ASC 605    Adjustment    Under ASC 606
Cash used in operating activities:

Net loss
   $ (22,089 )    $ 3,711    $ (18,378 )
Unbilled receivables
   (5,638 )    680    (4,957 )
Prepaid expenses and other current assets
   (1,740 )    366    (2,107 )
Deferred revenues
   (716 )    (6,344 )    (7,060 )
Other operating activities
   169    2,319    2,488
Total cash used in operating activities
   $ (23,626 )    $ —      $ (23,626 )

~~The following summarizes the significant changes under ASC 606 as compared to legacy U.S. GAAP:~~

Under legacy U.S. GAAP, the Company allocated revenue to licenses under the residual method when it had VSOE for the remaining undelivered elements, which allocated any future credits or significant discounts entirely to the license. Under ASC 606, the Company allocates all future credits, significant discounts, and material rights to all performance obligations based upon their relative selling price. Additional license revenue from the reallocation of such arrangement consideration is recognized when control is transferred to the customer, which is generally upon delivery of the license.

Under legacy U.S. GAAP, the Company did not have VSOE for professional services and maintenance in certain geographical areas, which resulted in revenue being deferred in such instances until such time as VSOE existed for all undelivered elements or recognized ratably over the longest service period. Under ASC 606, the requirement for VSOE is eliminated and replaced with the concept of a standalone selling price. Once the transaction price is allocated to each of the performance obligations, the Company recognizes revenue as the performance obligations are delivered, either at a point in time or over time. Under ASC 606, license revenue is recognized when control is transferred to the customer and professional services revenue is recognized over time based on an input measure of hours incurred to total estimated hours. This results in the acceleration of professional services revenue when compared to the historical practice of ratable recognition for professional services when there is a lack of VSOE.

•

~~Under legacy U.S. GAAP, sales commissions and other third-party acquisition costs resulting directly from securing contracts with customers are expensed when incurred. Under ASC 340,~~~~“Other Assets and Deferred Costs,”~~ because the sales commission paid on the maintenance renewals is not commensurate with the original arrangement, ASC 340 requires that these acquisition costs be expensed over the expected period of benefit, which we estimate as the customer life of five years.

Under legacy U.S. GAAP, professional service costs associated with highly customized development efforts related directly to contracts with customers are expensed when incurred. Under ASC 340, these costs are recognized as an asset when incurred and are expensed along with professional service revenue at the time that customized software is delivered and/or accepted.

~~Disaggregated Revenue~~

The following table shows our revenue disaggregated by revenue stream for the three and ~~nine~~six months ended ~~October~~July 31, ~~2018 (amounts in thousands):~~2019 and 2018:

					For the Three Months Ended July 31,				For the Six Months Ended July 31,
	For the Three Months		For the Nine Months		2019		2018		2019		2018
	Ended October 31, 2018		Ended October 31, 2018		(Amounts in thousands)				(Amounts in thousands)
Revenue by revenue stream:
Product	$	8,268	$	12,821	$	11,968	$	1,462	$	13,147	$	4,553
Professional services		2,948		11,011		1,845		3,426		3,926		8,063
Maintenance - first year		514		1,632		704		460		1,279		1,118
Maintenance - renewal		6,882		19,983		4,295		6,553		8,945		13,102

Total revenues	$	18,612	$	45,447

Total revenue					$	18,812	$	11,901	$	27,297	$	26,836

Transaction Price Allocated to Future Performance Obligations

The aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied or are partially satisfied as of ~~October~~July 31, ~~2018~~2019 is ~~$19.7~~$24.1 million. This amount ~~consists of~~includes amounts billed for undelivered services that are included in deferred revenue.

~~Significant Judgments~~20

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, the Company determines 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 a relative stand-alone selling price method. The corresponding revenue is recognized as the related performance obligations are satisfied as discussed in the revenue categories above.

Judgment is required to determine the standalone selling price for each distinct performance obligation. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

With the exception of travel and entertainment expenses, our contracts do not generally include a variable component to the transaction price. With certain statements of work, we explicitly state that we are to be reimbursed for reasonable travel and entertainment expenses incurred as part of the delivery of professional services. In the cases when we are entitled to collect all travel and entertainment expenses incurred, an estimate of the fulfillment costs is made at the onset of the contract in order to determine the transaction price. The revenue associated with travel and entertainment expenses is then recognized over time along with the professional services.

As discussed above, 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 a discount rate that reflects the customer’s creditworthiness.

~~Contract Balances~~

Contract assets consist of unbilled revenue which arises when revenue is recognized in advance of billing for certain customer contracts. Contract liabilities consist of deferred revenue and customer deposits which arise when amounts are billed to or collected from customers in advance of revenue recognition.

~~Costs to Obtain and Fulfill a Contract~~

The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that commissions and special incentive payments (“Spiffs”) for hardware and software maintenance and support and professional services paid under our sales incentive programs meet the requirements to be capitalized under ASC~~340-40,~~ which prior to the adoption of ASC 606, we had expensed as incurred. The amount capitalized for incremental costs to obtain contracts as of October 31, 2018 was $0.4 million, all of which was short-term and has been included in prepaid expenses and other current assets in our consolidated balance sheet. Costs to obtain a contract are amortized as sales and marketing expense over the expected period of benefit in a manner that is consistent with the transfer of the related goods or services to which the asset relates. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract and the estimate of the amortization period. The commissions and Spiffs related to professional services are amortized over time, as work is completed. The commissions and Spiffs for hardware and software maintenance are amortized over the life of the customer, which is estimated to be five years. These costs are periodically reviewed for impairment; however, we determined that no impairment existed as of October 31, 2018. We have elected to apply the practical expedient and recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less.

We capitalize incremental costs incurred to fulfill our contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy the Company’s performance obligation under the contract, and (iii) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs include direct labor for support services, software enhancements, reimbursable expenses, and professional services for customized software development costs. The revenue associated with the support services, software enhancements, and reimbursable expenses is recognized ratably over time therefore the costs associated are expensed as incurred. The professional services associated with the customized software are not recognized until completion. As such, the professional services costs are capitalized and recognized upon completion of the services.

~~11.~~

13.

Segment Information, Significant Customers and Geographic Information

~~Segment Information~~We have determined that we operate in one segment.

Our operations are organized into one reportable segment. Operating segments are defined as components of an enterprise evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and assess performance. Our reportable segment was determined based upon the nature of the products offered to customers, the market characteristics of each operating segment and the Company’s management structure.

~~Significant Customers~~

Four and one customers each accounted for 10% or more of our total revenues for the three and nine months, respectively, ended October 31, 2018 and one customer accounted for 10% or more of our total revenues for the three and nine months ended October 31, 2017 as follows:

   Three Months Ended Nine Months Ended
   October 31, October 31,
   2018 2017 2018 2017
Customer A
   10 % 53 % 15 % 38 %
Customer B
   13 % —   —   —
Customer C
   12 % —   —   —
Customer D
   10 % —   —   —

Geographic Information

The following ~~table~~ summarizes ~~revenues~~revenue by customers’ geographic ~~locations for the periods presented:~~locations:

																					For the Three Months Ended July 31,						For the Six Months Ended July 31,
	Three Months Ended October 31,										Nine Months Ended October 31,										2019		%	2018		%	2019		%	2018		%
	2018					2017					2018					2017					(Amounts in thousands, except percentages)						(Amounts in thousands, except percentages)
	Amount		%			Amount		%			Amount		%			Amount		%
	(Amounts in thousands, except percentages)
Revenues by customers’ geographic locations:
Revenue by customer's geographic locations:
North America⁽¹⁾	$	10,534		56	%	$	6,931		29	%	$	23,580		52	%	$	23,577		41	%	$	11,567	62%	$	5,932	50%	$	15,656	57%	$	13,046	49%
Europe and Middle East		3,876		21	%		14,560		62	%		13,757		30	%		28,203		49	%		2,724	14%		3,858	32%		5,694	21%		9,881	37%
Latin America		3,863		21	%		1,545		7	%		6,934		15	%		4,408		8	%		4,132	22%		1,575	13%		5,179	19%		3,071	11%
Asia Pacific		338		2	%		394		2	%		1,176		3	%		1,134		2	%		389	2%		536	5%		768	3%		838	3%

Total	$	18,611				$	23,430				$	45,447				$	57,322

Total revenue																					$	18,812		$	11,901		$	27,297		$	26,836

(1)

Includes total ~~revenues~~revenue for the United States for the periods shown as ~~follows (amounts in thousands, except percentage data):~~follows:

   Three Months Ended Nine Months Ended
   October 31, October 31,
   2018 2017 2018 2017
U.S. Revenue
   $ 8,124 $ 6,105 $ 19,013 $ 20,180
% of total revenues
   43.7 % 26.1 % 41.8 % 35.2 %

	For the Three Months Ended July 31,						For the Six Months Ended July 31,
	2019			2018			2019			2018
	(Amounts in thousands, except percentages)						(Amounts in thousands, except percentages)
US Revenue	$	9,666		$	5,102		$	13,064		$	10,889
% of total revenue		51	%		43	%		48	%		41	%

The following summarizes long-lived assets by geographic locations:


	As of July 31, 2019		%	As of January 31, 2019		%
	(Amounts in thousands, except percentages)
Long-lived assets by geographic locations (1):
North America	$	8,620	71%	$	7,148	93%
Europe and Middle East		3,580	29%		446	6%
Asia Pacific		46	0%		48	1%
Total long-lived assets by geographic location	$	12,246		$	7,642

_____________________

~~12.~~

(1)

Excludes long-term marketable securities and goodwill.

14.	Income Taxes

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

We recorded an income tax ~~benefits~~benefit of ~~$0.8~~$0.6 million and ~~$2.4~~$0.2 million in the for the three and ~~nine~~six months ended ~~October~~July 31, ~~2018,~~2019, respectively, and we recorded income tax ~~provisions~~benefits of ~~approximately~~ $1.2 million and ~~$1.5~~$1.6 million for the three and ~~nine~~six months ended ~~October~~July 31, ~~2017.~~2018, respectively. Our effective tax rate in fiscal ~~2019~~2020 and in future periods may fluctuate on a quarterly basis as a result of changes in our jurisdictional forecasts where losses cannot be benefitted due to the existence of valuation allowances on our deferred tax assets, changes in actual results versus our estimates, or changes in tax laws, regulations, accounting principles or interpretations thereof.

The Company reviews all available evidence to evaluate the recovery of deferred tax assets, including the recent history of losses in all tax jurisdictions, as well as its ability to generate income in future periods. As of ~~October~~July 31, ~~2018,~~2019, due to the uncertainty related to the ultimate use of certain deferred income tax assets, the Company has recorded a valuation allowance on certain of its deferred assets.

~~On December 22, 2017, the~~21

The U.S. Tax Cuts and ~~Jobs~~Job Act (“(the “2017 Tax ~~Reform~~ Act”) ~~was signed into law. The Tax Reform Act resulted in~~introduced significant changes ~~in the~~to U.S. ~~corporate~~ income tax ~~system effective January 1, 2018, including,~~law. Changes include, but are not limited to, ~~the following:~~

~~Reduction of the~~a corporate ~~federal income~~ tax rate decrease from 35% to 21%;

~~Repeal~~ effective for tax years beginning after December 31, 2017, the transition of ~~the corporate alternative minimum~~U.S. international taxation from a worldwide tax ~~(“AMT”);~~

Asystem to a territorial system and a one-time ~~transition~~ tax on the mandatory deemed repatriation of ~~accumulated previously untaxed~~cumulative foreign earnings ~~(“Transition~~(the “Transition Tax”);

~~A move to a territorial tax system;~~

~~Additional limitations on the tax treatment~~ as of ~~executive compensation; and~~

~~Acceleration of business asset expensing.~~

On December 22, 2017, the SEC issued guidance under SAB 118, which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. The measurement period is deemed to have ended when the registrant has obtained, prepared, and analyzed the information necessary to finalize its accounting.

SAB 118 summarizes a three-step process to be applied at each reporting period to account for and qualitatively disclose: (1) the effects of the change in tax law for which accounting is complete; (2) any provisional amounts (or adjustments to provisional amounts) for the effects of the tax law where accounting is not complete, but that a reasonable estimate has been determined; and (3) when a reasonable estimate cannot yet be made and therefore taxes are reflected in accordance with law prior to the enactment of the Tax Reform Act.

~~The Company is still evaluating the provisions of the Tax Reform Act and amounts reflected in the financial statements for the three and nine months ended October~~ 31, 2018 are provisional. The ultimate impact may differ from these provisional amounts, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Reform Act. The accounting is expected to be completed within the~~one-year~~2017. ~~measurement period.~~

~~We are subject to additional requirements of the Tax Reform Act during the fiscal year ended January 31, 2019. Those provisions include a tax on global intangiblelow-taxed~~ income (“GILTI”) and a limitation on the tax treatment of certain executive compensation. We have elected to account for GILTI as a period cost, and therefore included GILTI expense in the effective tax rate calculation. Our fiscal 2019 effective tax rate includes estimates of these new provisions.

We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions and various foreign jurisdictions. We have closed out an audit with the Internal Revenue Service (“IRS”) through fiscal ~~2013. We are no longer subject to U.S. federal examinations before fiscal 2016. However,~~2013; however, the taxing authorities will still have the ability to review the propriety of certain tax attributes created in closed years if such tax attributes are utilized in an open tax year, such as our federal research and development credit carryovers.

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

~~13.~~

15.

~~Net Loss Per Share~~Subsequent Event

~~Net loss per share is presented in accordance~~Effective August 29, 2019, Yossi Aloni was appointed as our Chief Executive Officer. Mr. Bonney remains Executive Chair, though no longer functions as our principal executive officer. Concurrent with ~~authoritative guidance which requires~~ the ~~presentation~~appointment of ~~“basic”~~Mr. Aloni as our Chief Executive Officer, Chad Hassler was appointed our Chief Commercial Officer and ~~“diluted” earnings per share. Basic earnings (loss) per share is computed by dividing earnings (loss) available to common shareholders by the weighted-average shares~~Senior Vice President. Mr. Hassler previously served as our head of ~~common stock outstanding during the period. For the purposes~~North America Sales.

On August 8, 2019, we amended our Tax Benefits Preservation Plan, dated as of ~~calculating diluted earnings per share, the denominator includes both the weighted average number of shares of common stock outstanding during the period~~March 4, 2019, and the ~~weighted average number~~Cooperation Agreement, dated as of ~~shares~~March 4, 2019, with Karen Singer and TAR Holdings LLC (collectively “TAR Holdings”) to permit TAR Holdings and its affiliates and associates, including for this purpose CCUR Holdings Inc. and its affiliates and associates, to own up to 25.0% of potential dilutive shares of common stock, such as stock awards, calculated using the treasury stock method. Basic and diluted net loss per share was the same for all the periods presented as the impact of potential dilutive shares outstanding was anti-dilutive.

~~The following table sets forth~~ our ~~computation of basic and diluted net loss per common share (amounts in thousands, except per share amounts):~~securities.

   Three Months Ended    Nine Months Ended
   October 31,    October 31,
   2018    2017    2018 2017
Net loss
   $ (3,827 )    $ (220 )    $ (18,378 ) $ (7,120 )






Weighted average shares used in computing net loss per share - basic and diluted
   35,747    35,479    35,668 35,381






Net loss per share:

Basic
   $ (0.11 )    $ (0.00 )    $ (0.52 ) $ (0.20 )






Diluted
   $ (0.11 )    $ (0.00 )    $ (0.52 ) $ (0.20 )

The number of common shares used in the computation of diluted net loss per share for the three and nine months ended October 31, 2018 and 2017 does not include the effect of the following potentially outstanding common shares because the effect would have been anti-dilutive (amounts in thousands):22

   Three Months Ended    Nine Months Ended
   October 31,    October 31,
   2018    2017    2018    2017
Stock options
   3,204    1,588    3,259    1,676
Restricted stock units
   419    483    389    349
Deferred stock units
   218    42    111    88
Performance stock units
   575    339    527    494








Total
   4,416    2,452    4,286    2,607

~~14.~~

ITEM 2.

~~Recent Accounting Standard Updates~~

We consider the applicability and impact of all ASUs on our consolidated financial statements. Updates not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations. Recently issued ASUs which we feel may be applicable to us are as follows:

~~Recently Issued Accounting Standard Updates – Not Yet Adopted~~

~~Intangibles—Goodwill and Other—Internal-Use Software~~

~~In August 2018, the FASB issued ASU 2018-15, “~~~~Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.”~~ ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments. ASU 2018-15 is effective for us in the first quarter of fiscal 2020, and earlier adoption is permitted. We are currently evaluating the impact the adoption of ASU 2018-15 will have on our consolidated financial statements.

~~Fair Value Measurement~~

~~In August 2018, the FASB issued ASU 2018-13, “~~~~Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.”~~ ~~ASU2018-13~~ modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for us in the first quarter of fiscal 2020, and earlier adoption is permitted. We are currently evaluating what impact the adoption of ASU 2018-13 will have on our consolidated financial statements.

~~Stock-based Compensation~~

~~In June 2018, the FASB issued ASU2018-07,~~~~“Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.”~~~~ASU2018-07~~ ~~expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees. ASU2018-07~~ is effective for us in the first quarter of fiscal 2020. Early adoption is permitted. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

~~Comprehensive Income~~

~~In February 2018, the FASB issued ASU2018-02,~~~~“Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.”~~~~On December 22, 2017, the U.S. federal government enacted a tax bill, H.R.1,~~ ~~An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (“Tax Cuts and Jobs Act”)~~~~, which requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws. ASU2018-02~~ ~~allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Reform Act. ASU2018-02~~ is effective for us in the first quarter of fiscal 2020. Early adoption is permitted. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

~~Leases~~

~~In February 2016, the FASB issued ASU2016-02,~~~~“Leases (Topic 842),”~~ ~~which supersedes ASC 840,~~~~“Leases (Topic 840).”~~~~Subsequently, the FASB issued additional updates which clarify this guidance including ASU2018-01,~~~~“Leases (Topic 842: Land Easement Practical Expedient for Transitioning to Topic 842,”~~ ~~in January 2018,which allows an entity to elect an optional transition practical expedient to not evaluate land easements that exist or expired before the entity’s adoption of Topic 842, and ASU2018-11,~~~~“Leases – Targeted Improvements (Topic 842),”~~which provides for an additional transition method that allows companies to apply the new lease standard at the adoption date, eliminating the requirement to apply the standard to the earliest period presented in the consolidated financial statements. ASU~~2016-02~~ ~~requires a lessee to recognize aright-of-use~~ asset and a lease liability for operating leases with terms over twelve months, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. It also requires lessees to classify leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. Early adoption of the new guidance is permitted. ASU~~2016-02,~~ ~~ASU2018-01~~ ~~and ASU2018-11~~ are effective for us beginning in the first quarter of fiscal 2020. We have begun evaluating and planning for adoption and implementation, including gathering, documenting and analyzing lease agreements subject to the new guidance. We anticipate material additions to the balance sheet (upon adoption) of~~right-of-use~~ ~~assets, offset by the associated liabilities.~~

~~Recently Issued Accounting Standard Updates – Adopted During the Period~~

~~Revenue from Contracts with Customers (Topic 606)~~

~~In May 2014, the FASB issued ASU.2014-09, “~~~~Revenue from Contracts with Customers (Topic 606).”~~ ~~ASU2014-09~~ provides enhancements to the quality and consistency of how revenue is reported while also improving comparability in the financial statements of companies using International Financial Reporting Standards and U.S. GAAP. The core principle requires entities to recognize revenue in a manner that depicts the transfer of goods or services to customers in amounts that reflect the consideration an entity expects to be entitled to in exchange for those goods or services. In July 2015, the FASB voted to approve a~~one-year~~ ~~deferral, making the standard effective for public entities for annual and interim periods beginning after December 15, 2017.~~

~~In March 2016, the FASB issued ASU2016-08, “~~~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)~~~~.” The purpose of ASU2016-08~~ is to clarify the guidance on principal versus agent considerations. It includes indicators that help to determine whether an entity controls the specified good or service before it is transferred to the customer and to assist in determining when the entity satisfied the performance obligation and as such, whether to recognize a gross or a net amount of consideration in their consolidated statement of operations.

~~In April 2016, the FASB issued ASU2016-10, “~~~~Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.”~~ ~~ASU2016-10~~ ~~clarifies that entities are not required to assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract. ASU2016-10~~ also addresses how to determine whether promised goods or services are separately identifiable and permits entities to make a policy election to treat shipping and handling costs as fulfillment activities. In addition, it clarifies key provisions in Topic 606 related to licensing.

~~In May 2016, the FASB issued ASU2016-11, “~~~~Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815).”~~ ~~ASU2016-11~~ rescinds previous SEC comments that were codified in Topic 605, Topic 932 and Topic 815. Upon adoption of Topic 606, certain SEC comments including guidance on accounting for shipping and handling fees and costs and consideration given by a vendor to a customer should not be relied upon.

~~In May 2016, the FASB also issued ASU2016-12, “~~~~Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients~~~~.” ASU2016-12~~ ~~provides clarity around collectability, presentation of sales taxes,non-cash~~ ~~consideration, contract modifications at transition and completed contracts at transition. ASU2016-12~~ ~~also includes a technical correction within Topic 606 related to required disclosures if the guidance is applied retrospectively upon adoption.~~

~~In December 2016, the FASB issued ASU2016-20, “~~~~Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers~~~~.” ASU2016-20~~ allows entities not to make quantitative disclosures about remaining performance obligations in certain cases and requires entities that use any of the optional exemptions to expand their qualitative disclosures. ASU~~2016-20~~ also clarifies other areas of the new revenue standard, including disclosure requirements for prior period performance obligations, impairment guidance for contract costs and the interaction of impairment guidance in ASC~~340-40~~ ~~with other guidance elsewhere in the Codification.~~

~~Effective February 1, 2018, the Company adopted ASC 606 using the modified retrospective adoption model. See Note 10,~~~~“Revenue from Contracts with Customers,”~~~~to this Form10-Q~~ ~~for additional information regarding how the Company is accounting for revenue under the new guidance.~~

~~ITEM 2.~~

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

Forward-Looking Statements

This Form10-Q contains or incorporates forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and such statements involve risks and uncertainties. The following information should be read in conjunction with the unaudited consolidated financial information and the notes thereto included in this Form10-Q. You should not place undue reliance on these forward-looking statements. Actual events or results may differ materially due to competitive factors and other factors referred to in Part I, Item 1A. “Risk Factors” in our Form10-K for our fiscal year ended January 31, ~~2018~~2019 and elsewhere in this Form10-Q. These factors may cause our actual results to differ materially from any forward-looking statement. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which we operate, and management’s beliefs and assumptions. We undertake no obligation to publicly update or revise the statements in light of future developments. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,” “seek,” “anticipate,” “intend,” “plan,” “believe,” “could,” “estimate,” “may,” “target,” “project,” or variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict.

Business Overview

~~We are~~SeaChange International, Inc., a Delaware corporation founded on July 9, 1993, is an industry leader in the delivery of multiscreen, advertising and premium~~over-the-top~~ over the top (“OTT”) video management solutions, headquartered in Acton, Massachusetts. Our software products and services facilitate the aggregation, licensing, management and distribution of video and advertising content for ~~cable television system operators,~~service providers, telecommunications companies, satellite operators and ~~media companies.~~broadcasters. We ~~currently operate under one reporting segment.~~

~~We address what we see~~sell our software products and services worldwide, primarily to service providers including: operators, such as ~~the continuing rise of Internet Protocol Television~~Liberty Global, plc. (“~~IPTV”~~LGI”), Altice NV, Cox Communications, Inc. and ~~OTT services by such companies as Netflix, Hulu, Amazon, mlbam, Kaltura, Ooyala and Brightcove and by media~~Rogers Communications, Inc.; telecommunications companies, such as ~~HBO, CBS~~Verizon Communications, Inc., AT&T, Inc. and ~~BBC. This rise of IPTV~~Frontier Communications Corporation; satellite operators such as Direct TV and ~~OTT~~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, ~~globally has increased the demand for multiscreen capabilities~~we believe customers can increase revenue by offering services such as video-on-demand (“VOD”) programming on a ~~range~~variety of consumer devices, ~~operating on cloud-based platforms. We have been increasing our strategic investments in research~~including televisions (“TVs”), mobile telephones (“smart phones”), personal computers (“PCs”), tablets and ~~development as a percentage of revenue related~~OTT streaming players. Our solutions enable service providers to ~~our cloud-based offerings, as well as in sales~~offer other interactive television services that allow subscribers to receive personalized services and ~~marketing as we focus on ourgo-to-market~~ ~~efforts in this area.~~

~~We continue to invest in developing and commercializing next generation capabilities in our four main product offerings:~~interact with their video ~~back office, advertising, content management and user~~devices, thereby enhancing their viewing experience. Our ~~portfolio~~products also allow our customers to insert advertising into broadcast and VOD content.

SeaChange serves an exciting global marketplace where multiscreen viewing is increasing, consumer device options are evolving rapidly and viewing habits are shifting. The primary driver of our business is enabling the delivery of video assets in the changing multiscreen television environment. Through strategic collaborations, we have expanded our capabilities, products ~~allows us~~and services to ~~provide customers withend-to-end~~ ~~video~~address the delivery ~~capabilities across multiple platforms, thus reducing cost~~of content to devices other than television set-top boxes, namely PCs, tablets, smart phones and ~~increasing speed and ease of use for end users.~~OTT streaming players. We believe that ~~by delivering innovative solutions~~our strategy of expanding into adjacent product lines will also position us to ~~both our existing customer base~~further support and ~~to content owners that are looking to provideend-to-end~~ solutions, we can meet their growing needs and help them get to market faster, which will help them drive new revenue growth. We have virtualized our solutions and products to make integrating with existing networks simple and this~~ease-of-use~~ ~~is a core competency of our platform. We have optimized our software solutions to serve a wide range of consumer devices.~~

We expect to increase software sales in North America and Europe, the Middle East and Africa (“EMEA”) through targeted sales efforts in those regions. In addition, we believe that we have opportunity for revenue growth in other areas of the world by expanding our selling efforts in Asia Pacific and Latin and South America, primarily with partners. We also believe thatmaintain our existing service ~~operator~~provider customer base. Providing our customers ~~will continue upgrading~~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 ~~features~~customers entering the multiscreen marketplace and increasingly serving adjacent markets. Our core technologies provide a foundation for software products and services that can ~~increase average revenue per~~be deployed in next generation video delivery systems capable of increased levels of subscriber ~~reduce operating~~activity across multiple devices.

We have historically sold and ~~capital expenses,~~licensed our products and ~~lower customer churn.~~

~~As evidenced by~~services on a standalone basis. Commencing February 2019, we adopted a value-based selling approach as part of which we offer our ~~financial results from~~customers the ~~three-and nine-month periods ended October 31, 2018, we continue~~ability to ~~experience fluctuations in~~license all of our ~~revenues from period to period due to the following factors:~~

~~Changes to estimated times to complete long-term projects;~~

~~The time required to deliver and install the~~ product and services, including specified upgrades, for ~~the customer to accept the product and services;~~

~~Timing of customers in selecting programs to launch our services to their end users;~~

~~The ability of our customers to process purchase order within their organizations in~~ a ~~timely manner;~~

~~The transition from perpetual license to subscription, cloud-based revenue and the associated movement from our traditional professional services model;~~

~~Budgetary approvals by our customers for capital purchases;~~

~~Uncertainty caused by potential consolidation in the industry; and~~

~~Changes in foreign exchange rates.~~

~~These, together with other factors, could result in reductions in sales of our products, longer sales cycles, difficulties in collection of accounts receivable, a longer~~fixed period of time ~~before~~for a fixed price which we ~~may recognize~~refer to as framework deals.

In February 2019, we acquired Xstream A/S, a leading OTT media cloud platform provider with its primary operations in Warsaw, Poland. Xstream provides a managed service, OTT video solution that serves more than five million active subscribers globally. Xstream’s MediaMaker video platform will enhance the SeaChange end-to-end video framework. We intend to use the acquisition of Xstream to accelerate our penetration in OTT and new market segments with a software-as-a-service (“SaaS”) revenue ~~attributable to a sale, changes in cost estimates on long-term contracts which could result~~model and fully cloud-based end-to-end video platform that operates in a ~~loss provision, gross margin deterioration, slower adoption of new technologies, the transition to SaaS, and increased price competition.~~hosted managed service environment.

OnIn May 5, 2016, we acquired ~~a 100% share of~~ DCC Labs, in exchange for an aggregate of $2.7 million in newly issued shares of SeaChange common stock and $5.2 million in cash, net of cash acquired, resulting in a total net purchase price of $7.9 million. The stock consideration was determined by dividing the total value of $2.7 million by the volume weighted average closing price of our common stock for the twenty trading days preceding the closing. DCC Labs is a developer ofset-top and multiscreen device software. Of the total consideration, $0.5 million in cash and all the stock (681,278 shares) were initially held in escrow as security for the indemnification obligations of the former DCC Labs owners to SeaChange under the purchase agreement, with~~one-third~~ ~~of the stock in escrow to be released to the former DCC Labs owners annually on the anniversary date of the~~This acquisition ~~beginning on May 5, 2017 and ending May 5, 2019, andone-half~~ of the cash in escrow to be released to the former DCC Labs owners on May 5, 2017 and May 5, 2018. As of May 5, 2018, all of the cash and 454,184 shares of our common stock initially deposited with an Escrow Agent have been disbursed to the sellers. The remaining stock held of 227,094 shares will be released on May 5, 2019.

~~The acquisition of DCC Labs in fiscal 2017~~ enabled us to optimize the operations of ourIn-Home business ~~which developed home video gateway software including SeaChange’s Nucleus~~ and NitroX products. In addition, the acquisition brought market-ready products, including an optimized television software stack for Europe’s Digital Video Broadcasting community, and an HTML5 framework for building additional user experience client applications across a variety of CPE devices, including Android TV STBs, tablets, mobile and computer devices. During fiscal 2018, the~~In-Home~~ ~~business became the center of~~centralize our worldwide engineering and expanded to include product development for backoffice, advertising content management and legacy products. The Poland operation became the prime engineering location and as of the end of fiscal 2018, was the largest location by number of engineers. In addition, the engineering efforts were combined and the teams were~~re-organized~~ ~~into a single global~~ team in fiscal 2018, which spans a reduced number of locations globally compared to fiscal 2017. As part of the engineering transition, organizational improvements were implemented in order to focus on software quality, reliability and~~pre-integration,~~ ~~in order tode-risk~~ deployments and reduce time to market for new solutions and existing upgrades. The global engineering team introduced DevOps practices with a customer-centric view of technology improvements across all products within the SeaChange solution. Along with operational improvements, engineering introduced changes to process and workflow which enabled more accurate effort estimations and velocity tracking. With the introduction of common agile project methodology across all teams and products, the efficiency of software engineering increased. This allowed more engineering resources to focus on innovation and development of industry leading features and enhancements to existing products as well as new product releases that expand the SeaChange technology franchise.Warsaw, Poland.

~~In conjunction with the DCC Labs acquisition and an additional company-wide cost savings program established~~23

We have initiated restructuring programs in the ~~second half of fiscal 2017, SeaChange commenced the 2017 Restructuring Program, which has allowed us~~past three years, to achieve approximately $38 million in annualized cost savings since its commencement. The 2017 Restructuring Program resulted in aggregate charges of $9.2 million as of January 31, 2018 in severance and other restructuring costs. These charges include costs for workforce reductions, facility closings and other costs to complete the restructuring, such as legal and consulting fees. As of January 31, 2018, the 2017 Restructuring Program was completed and has helpedhelp us improve operations and optimize our cost structure. Our restructuring programs in 2017 included the wind down of the Timeline Labs operations, inclusive of an impairment charge of long-lived assets related to the Timeline Labs operations, the reorganization of our engineering teams and other company-wide-cost savings initiatives resulting in annualized cost savings of $38 million and aggregate charges of $9 million. In fiscal 2019, we took steps to reduce our costs further, for which to date we have incurred restructuring charges of more than $2 million and for which we expect annualized cost savings of approximately $6 million.

~~In September 2018, in order to help return~~Notwithstanding the ~~Company to profitability by~~success of our restructuring programs, during the ~~end~~fourth quarter of fiscal 2019, we ~~implemented~~experienced a decline in stock price and actual operating results and, accordingly, revised our forecasts. These events were a trigger for an impairment review, as a result of which we determined that the carrying value of goodwill and certain long-lived assets exceeded their fair value, such that we recorded a $17.0 million impairment charge to reduce the carrying value of our building, included in property, plant and equipment, the remaining net book value of our intangible assets and our goodwill to fair value. The impact of this impairment charge is excluded from our non-GAAP operating results included in this report.

In January 2019, we announced the appointment of Yossi Aloni as Senior Vice President and Chief Commercial Officer. In February 2019, Edward Terino resigned as our Chief Executive Officer and as a Director, effective February 24, 2019, and we created an interim Office of the CEO, to provide ongoing leadership and oversight of the day-to-day operations of the Company. The Office of the CEO included Yossi Aloni, Chief Commercial Officer; Peter Faubert, Chief Financial Officer; Marek Kielczewski, Chief Technology Officer; and David McEvoy, General Counsel. On April 4, 2019, we appointed our existing Director, Mark Bonney, to serve as Executive Chair. The Executive Chair serves as Chairman of the Board and principal executive officer. In connection with that appointment, the Office of the CEO was eliminated, and Mr. Markey resigned as Chairman of the Board though continues as a member of the Board of Directors. Effective August 29, 2019, Yossi Aloni was appointed as our Chief Executive Officer. Mr. Bonney remains Executive Chair, though no longer functions as our principal executive officer. Concurrent with the appointment of Mr. Aloni as our Chief Executive Officer, Chad Hassler was appointed our Chief Commercial Officer and Senior Vice President. Mr. Hassler previously served as our head of North America Sales.

On February 28, 2019, we entered into a Cooperation Agreement with TAR Holdings LLC and Karen Singer (collectively, “TAR Holdings”). Pursuant to the Cooperation Agreement, TAR Holdings was limited to not owning more than 20.7% of our outstanding common stock. Pursuant to the Cooperation Agreement, we agreed to set the size of the Board at eight members, appoint Robert Pons to the Board as a Class II Director with a term to expire at the 2019 ~~Restructuring Program. The primary element~~annual meeting of ~~this restructuring program was staff reductions across all~~stockholders, and appoint Jeffrey Tuder to the Board as a Class III Director with a term to expire at the 2020 annual meeting of stockholders. Mr. Pons and Mr. Tuder were accordingly appointed to our Board upon execution of the Cooperation Agreement on February 28, 2019. On August 8, 2019, we amended the Cooperation Agreement to permit TAR Holdings, together with its affiliates, to own up to 25.0% of our ~~functions~~securities.

On March 4, 2019, our Board approved and ~~geographic areas~~adopted a Tax Benefits Preservation Plan to potentially limit our ability to use net operating loss carryforwards and certain other tax attributes (“NOLs”) to reduce our potential future federal income tax obligations. In connection with the Tax Benefits Preservation Plan, we ~~expect~~declared a dividend of one preferred share purchase right for each share of our common stock issued and outstanding as of March 15, 2019 to our stockholders of record on that date. The Tax Benefits Preservation Plan expires no later than March 4, 2022. On August 8, 2019, we amended the ~~program~~Tax Benefits Preservation Plan to ~~be completed by the end~~permit TAR Holdings, together with its affiliates, to own up to 25.0% of ~~fiscal 2019. Annualized cost savings are expected to be approximately $6 million once completed and other restructuring and severance charges are estimated to be approximately $1 million.~~our securities.

Results of Operations

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

~~Revenues~~Revenue and Gross Profit

The components of our total revenue and gross profit are described in the following ~~table summarizes information about our revenues~~table:

	For the Three Months Ended July 31,						Change						For the Six Months Ended July 31,						Change
	2019			2018			$			%			2019			2018			$			%
	(Amounts in thousands, except for percentage data)												(Amounts in thousands, except for percentage data)
Revenue:
Product	$	11,968		$	1,462		$	10,506			718.6	%	$	13,147		$	4,553		$	8,594			188.8	%
Service		6,844			10,439			(3,595	)		(34.4	%)		14,150			22,283			(8,133	)		(36.5	%)
Total revenue		18,812			11,901			6,911			58.1	%		27,297			26,836			461			1.7	%
Cost of product revenue		3,039			490			2,549			520.2	%		3,948			816			3,132			383.8	%
Cost of service revenue		4,885			5,125			(240	)		(4.7	%)		9,553			10,828			(1,275	)		(11.8	%)
Total cost of revenue		7,924			5,615			2,309			41.1	%		13,501			11,644			1,857			15.9	%
Gross profit	$	10,888		$	6,286		$	4,602			73.2	%	$	13,796		$	15,192		$	(1,396	)		(9.2	%)
Gross product profit margin		74.6	%		66.5	%					8.1	%		70.0	%		82.1	%					(12.1	%)
Gross service profit margin		28.6	%		50.9	%					(22.3	%)		32.5	%		51.4	%					(18.9	%)
Gross profit margin		57.9	%		52.8	%					5.1	%		50.5	%		56.6	%					(6.1	%)

Fiscal Three and Six Months ended July 31, 2019 as Compared to Fiscal Three and Six Months ended July 31, 2018

Product Revenue. Product revenue increased by $10.5 million and $8.6 million for the three and ~~nine~~six months ended ~~October~~July 31, ~~2018 and 2017:~~

   Three Months Ended Increase/ Increase/ Nine Months Ended Increase/ Increase/
   October 31, (Decrease) (Decrease) October 31, (Decrease) (Decrease)
   2018 2017 $ Amount % Change 2018 2017 $ Amount % Change
   (Amounts in thousands, except for percentage data)
Revenues:

Product
   $ 8,268 $ 11,119 $ (2,851 ) (25.6 %) $ 12,821 $ 18,907 $ (6,086 ) (32.2 %)
Service
   10,343 12,311 (1,968 ) (16.0 %) 32,626 38,415 (5,789 ) (15.1 %)


Total revenues
   18,611 23,430 (4,819 ) (20.6 %) 45,447 57,322 (11,875 ) (20.7 %)


Cost of product revenues
   1,894 1,453 441 30.4 % 3,052 3,852 (800 ) (20.8 %)
Cost of service revenues
   5,429 5,613 (184 ) (3.3 %) 15,915 15,813 102 (0.6 %)


Total cost of revenues
   7,323 7,066 257 3.6 % 18,967 19,665 (698 ) (3.5 )


Gross profit
   $ 11,288 $ 16,364 $ (5,076 ) (31.0 %) $ 26,480 $ 37,657 $ (11,177 ) (29.7 %)


Gross product profit margin
   77.1 % 86.9 % (9.8 %) 0 % 76.2 % 79.6 % 3.4 %
Gross service profit margin
   47.5 % 54.4 % (6.9 %) 0 % 51.2 % 58.8 % (7.6 %)
Gross profit margin
   60.7 % 69.8 % (9.2 %) 0 % 58.3 % 65.7 % (7.4 %)

Pr~~oduct Revenue.~~The decrease in product revenue for the three and nine months ended October 31, 2018 of $2.8 million and $6.1 million, respectively, included a $5.4 million and a $8.2 million decrease in our video platform, user experience, and third-party product revenues, as compared to the same periods of fiscal 2018. This is primarily a result of a one-time purchase of a significant number of licenses by one of our major customers in the third quarter of the prior fiscal year. The decrease was partially offset by a $1.6 million and $2.2 million increase in advertising revenues in the three and nine months ended October 31, 2018,2019, respectively, as compared to the ~~same periods of fiscal 2018~~three and ~~a $1.0 million~~six months ended July 31, 2018. The increase ~~in hardware sales in~~for the three and six months ended ~~October~~July 31, ~~2018~~2019 was primarily due to revenue generated from our new framework offering partially offset by lower individual product sales and upgrades as ~~compared~~a result of shift in our go-to-market sales to ~~the same periods of fiscal 2018.~~our end-end framework solution.

Service Revenue.Service revenue decreased ~~$2.0~~by $3.6 million and ~~$5.8~~$8.1 million for the three and ~~nine~~six months ended ~~October~~July 31, ~~2018,~~2019, respectively, as compared to the ~~same periods of fiscal 2018,~~three and six months ended July 31, 2019. The decrease for the three and six months ended July 31, 2019 primarily due to ~~lower sales resulting~~a decrease in ~~less~~our legacy professional service ~~engagements with~~revenue related to our ~~customers. Also, revenue recognized for our software-as-a-service was lower as compared~~individual product sales and upgrades and also a reduction to ~~the same periods of fiscal 2018 due to a contract cancellation with our customer in the prior fiscal year. Additionally,~~ maintenance and support revenue provided on ~~post-warranty~~post warranty contracts ~~for both periods decreased~~ as customers continue to provide their own solutions and legacy products are decommissioned.

~~During the three months ended October 31, 2018, four~~Two customers ~~each~~ accounted for ~~more than~~20% and 10%, respectively, of ~~our~~ total revenue in the second quarter of fiscal 2020, and one customer accounted for ~~more than 10%~~19% of ~~our~~ total revenue ~~for the nine months period ended October 31, 2018. In both of the comparable periods~~ in the ~~prior year,~~second quarter of fiscal 2019. One customer accounted for 14% of total revenue in the first six months of fiscal 2020, and one customer accounted for ~~more than 10%~~19% of ~~our~~ total ~~revenue.~~revenue in the first six months of fiscal 2019. See Part I Item I, Note ~~11,~~2, “~~Segment Information,~~Summary of Significant ~~Customers and Geographic Information,~~Accounting Policies,”to ~~our consolidated financial statements~~this Form 10-Q for more information.

International ~~revenues represented approximately 56%~~revenue accounted for 49% and ~~74%~~57% of total ~~revenues~~revenue in the three months ended ~~October~~July 31, ~~2018~~2019 and ~~2017,~~2018, respectively. For the ~~nine~~six months ended ~~October~~July 31, ~~2018~~2019 and ~~2017,~~2018, international revenues accounted for ~~58%~~52% and ~~65%~~59% of total revenues, respectively. The decrease in ~~the~~ international sales as a percentage of total revenue ~~for~~in the three and six months ended ~~October~~July 31, ~~2018,~~2019 as compared to the same period in ~~the prior~~ fiscal ~~year,~~2018, is primarily due to a decrease in revenue generated from one major customer in EMEA during fiscal 2019 compared to ~~the prior~~ fiscal ~~year.~~2018.

Gross Profit and Margin. Cost of ~~revenues~~revenue consists primarily of the cost of resold third-party products and services, purchased components and subassemblies, labor and overhead relating to the assembly, testing and ~~testing~~implementation and ongoing maintenance of complete ~~systems and costs related to customized software development contracts.~~systems.

Our gross profit margin ~~decreased nine percentage points~~increased by 5% for the three months ended ~~October~~July 31, ~~2018, as~~2019 compared to the ~~same period of the prior fiscal year. This decrease is~~three months ended July 31, 2018 primarily due to a change in the ~~product~~sales mix during the ~~quarter, as fewer, higher-margin software licenses were delivered.~~period. Product profit margin ~~decreased ten percentage points~~increased by 8% for the three months ended ~~October~~July 31, ~~2018, as~~2019 compared to the ~~same period of fiscal~~three months ended July 31, 2018, ~~as there was a higher hardware component in the third quarter of fiscal 2019, as compared to more~~primarily due higher margin software ~~licenses~~revenue sales related to our end-end framework solution, partially offset by an increase in ~~product deals~~lower-margin hardware sales and online video platform (OVP) revenue from our Xstream acquisition in the ~~same period last fiscal year.~~first second quarter of 2019. Service profit margins decreased ~~seven percentage points~~by 22% for the three months ended ~~October~~July 31, ~~2018, as~~2019 compared to the ~~same period of fiscal 2018. The reason for this decrease is~~three months ended July 31, 2018, primarily due to lower service revenue to absorb our fixed costs from professional services and maintenance and support revenue during the ~~current fiscal year quarter compared~~three months ended July 31, 2019 as customers continue to ~~the same quarter last fiscal year.~~

provide their own solutions and legacy products are decommissioned.

Our gross profit margin decreased ~~seven percentage points~~by 6% for the ~~nine~~six months ended ~~October~~July 31, ~~2018, as~~2019 compared to the ~~same period of~~six months ended July 31, 2018 primarily due to a change in the ~~prior fiscal year, for~~sales mix during the ~~same reasons discussed above.~~period. Product profit margin decreased by ~~three percentage points during~~12% for the ~~nine~~six months ended ~~October~~July 31, 2019 compared to the six months ended July 31, 2018, primarily due to an increase in lower-margin hardware sales and OVP platform revenue from our Xstream acquisition in the first quarter of 2019 as compared to higher-margin software license revenue, partially offset by higher margin sales related to our end-end framework solution in the ~~same period of fiscal 2018 due to product mix and higher hardware revenues included in our product offering that typically have a lower margin.~~six months

ended April 30, 2018. Service profit margins decreased ~~eight percentage points~~by 19% for the ~~nine~~six months ended ~~October~~July 31, ~~2018, as~~2019 compared to the ~~same period of fiscal 2018. This decrease is~~six months ended July 31, 2018, primarily due to ~~the~~ lower service revenue ~~generated during the first nine months of fiscal 2019~~ to absorb our fixed costs from professional services ~~compared~~and maintenance and support revenue during the six months ended July 31, 2019 as customers continue to ~~the same period of fiscal 2018.~~provide their own solutions and legacy products are decommissioned.

Operating Expenses

Research and Development

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


	Three Months Ended						Decrease			Decrease			Nine Months Ended						Increase			Increase
	October 31,						Decrease			Decrease		October 31,							Increase			Increase		For the Three Months Ended July 31,							Change							For the Six Months Ended July 31,							Change
	2018			2017			$ Amount			% Change			2018			2017			$ Amount			% Change			2019			2018				$				%			2019			2018				$				%
	(Amounts in thousands, except for percentage data)																								(Amounts in thousands, except for percentage data)														(Amounts in thousands, except for percentage data)
Research and development expenses	$	4,836		$	5,634			$	798		14.2	%		$	15,477		$	17,411		$	1,934		11.1	%		$	3,775		$	5,185			$	(1,410	)		(27.2	%)		$	8,027		$	10,914			$	(2,887	)		(26.5	%)
% of total revenues		26.0	%		24.0	%								34.1	%		30.4	%
% of total revenue																										20.1	%		43.6	%										29.4	%		40.7	%

Fiscal Three and Six Months ended July 31, 2019 as Compared to Fiscal Three and Six Months ended July 31, 2018

Research and development expenses ~~consist primarily of employee costs, which include salaries, benefits and related payroll taxes, depreciation of development and test equipment and an allocation of related facility expenses. During~~decreased by $1.4 million for the three ~~and nine~~ months ended ~~October~~July 31, ~~2018, research and development costs decreased $0.8 million and $1.9 million, respectively,~~2019 as compared to the same ~~periods of~~period in fiscal ~~2018,~~ 2019, primarily due to a decrease in labor costs associated with the lower headcount of $0.6 million and contract labor of $0.9 million resulting from the cost-savings efforts implemented as part of our restructuring programs in fiscal 2019.

Research and development expenses decreased by $2.9 million for the ~~2017 Restructuring Program~~six months ended July 31, 2019 as compared to the same period in fiscal 2019, primarily due to a decrease in labor costs associated with the lower headcount of $1.4 million and contract labor of $1.5 million resulting from the ~~2019 Restructuring Program.~~cost-savings efforts implemented as part of our restructuring programs in fiscal 2019.

Selling and Marketing

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


	Three Months Ended						Decrease			Decrease			Nine Months Ended						Increase			Increase
	October 31,						Decrease			Decrease		October 31,							Increase			Increase		For the Three Months Ended July 31,							Change							For the Six Months Ended July 31,							Change
	2018			2017			$ Amount			% Change			2018			2017			$ Amount			% Change			2019			2018				$				%			2019			2018				$				%
	(Amounts in thousands, except for percentage data)																								(Amounts in thousands, except for percentage data)														(Amounts in thousands, except for percentage data)
Selling and marketing expenses	$	3,705		$	3,916			$	211		5.4	%		$	10,776		$	9,292		$	1,484		16.0	%		$	2,963		$	3,932			$	(969	)		(24.6	%)		$	5,815		$	7,599			$	(1,784	)		(23.5	%)
% of total revenues		19.9	%		16.7	%								23.7	%		16.2	%
% of total revenue																										15.8	%		33.0	%										21.3	%		28.3	%

~~Selling~~Fiscal Three and ~~marketing expenses consist primarily of payroll costs, which include salaries~~Six Months ended July 31, 2019 as Compared to Fiscal Three and ~~related payroll taxes, benefits and commissions, travel expenses and certain promotional expenses.~~ Six Months ended July 31, 2018

Selling and marketing expenses decreased ~~$0.2~~by $1.0 million for the three months ended ~~October~~July 31, ~~2018 and increased by $1.5 million for the nine months ended October 31, 2018,~~2019 as compared to the same ~~periods of the prior~~period in fiscal ~~year. The decrease of $0.2 million is~~2019, primarily due to a decrease in labor costs associated with lower ~~commission~~headcount from the cost-saving efforts implemented as part of our restructuring programs in fiscal 2019 and $0.1 million decrease in legal and professional fees.

Selling and marketing expenses ~~of $0.6~~decreased by $1.8 million ~~and partially offset by increased contract labor charges of $0.3 million recorded during~~for the ~~three~~six months ended ~~October~~July 31, ~~2018. The increase of $1.5 million is~~2019 as compared to the same period in fiscal 2019, primarily due ~~primarily~~ to a ~~$1.1 million increase~~decrease in ~~contract~~ labor costs associated with lower headcount from the cost-saving efforts implemented as part of our restructuring programs in fiscal 2019.

General and ~~professional fees~~Administrative

General and ~~$1.0 million increase in salary~~administrative expenses consist of salaries and related costs, ~~partially offset by $0.8 million decrease~~including stock-based compensation, for personnel in ~~commission expense for the nine-month period ended October 31, 2018.~~

~~General~~executive, finance, legal, human resources, information technology and ~~Administrative~~

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:


	Three Months Ended						Decrease			Decrease			Nine Months Ended						Increase			Increase
	October 31,						Decrease			Decrease		October 31,							Increase			Increase		For the Three Months Ended July 31,							Change							For the Six Months Ended July 31,							Change
	2018			2017			$ Amount			% Change			2018			2017			$ Amount			% Change			2019			2018				$				%			2019			2018				$				%
	(Amounts in thousands, except for percentage data)																								(Amounts in thousands, except for percentage data)														(Amounts in thousands, except for percentage data)
General and administrative expenses	$	3,209		$	3,868			$	659		17.0	%		$	11,224		$	10,595		$	629		5.9	%		$	4,150		$	4,903			$	(753	)		(15.4	%)		$	8,399		$	9,475			$	(1,076	)		(11.4	%)
% of total revenues		17.2	%		16.5	%								24.7	%		18.5	%
% of total revenue																										22.1	%		41.2	%										30.8	%		35.3	%

General and administrative expenses consist primarily of employee costs, which include salaries and related payroll taxes and benefit-related costs, legal and accounting services and an allocation of related facilities expenses. Fiscal Three Months ended July 31, 2019 as Compared to Fiscal Three Months ended July 31, 2018

General and administrative expenses decreased ~~$0.7~~by $0.8 million ~~in the three months ended October 31, 2018, and increased $0.6 million in the nine months ended October 31, 2018, as compared to the same periods of fiscal 2018. The $0.7 million decrease~~ for the three months ended ~~October~~July 31, 2019 as compared to July 31, 2018, is primarily due to a ~~$0.3~~$0.7 million decrease in ~~bonus~~labor costs associated with lower headcount from the cost-saving efforts implemented as part of our restructuring programs in fiscal 2019 and lower legal and professional fees of $0.3 million, partially offset by an increase in bad debt expense ~~accrued~~of $0.3 million.

Fiscal Six Months ended July 31, 2019 as Compared to Fiscal Six Months ended July 31, 2018

General and administrative expenses decreased by $1.1 million for the six months ended July 31, 2019 as compared to July 31, 2018, primarily due to a ~~$0.3~~decrease in stock-based compensation of $1.4 million as a result of a reversal of expense related to terminations and $0.8 million decrease in ~~legal and professional fees. In addition,~~labor costs associated with lower headcount from the ~~cost-savings actions taken~~cost-saving efforts implemented as part of our restructuring programs in fiscal 2019, partially offset by an increase in professional fees of $0.5 million related to costs associated with merger and acquisition activity, activist investors and adoption of the ~~2019~~tax benefit preservation plan and an increase in bad debt expense of $0.5 million.

Severance and Restructuring ~~Program also contributed to~~Costs

Severance and other restructuring costs increased $0.1 million ~~decrease during the quarter. The $0.6~~and $0.3 million ~~increase~~ for the ~~nine~~three and six months ended ~~October~~July 31, ~~2018~~2019, respectively, as compared to the same period of fiscal ~~2018 is primarily due to a $0.5 million increase~~2019. Charges in ~~bonus expense accrued and a $0.3 million increase in professional fees from internal technical accounting projects.~~

~~Amortization of Intangible Assets~~

~~The following table provides information regarding the change in amortization of intangible assets expenses during the periods presented:~~

   Three Months Ended    Nine Months
Ended
   October 31, Decrease    Decrease October 31, Decrease    Decrease
   2018 2017 $ Amount    % Change 2018 2017 $ Amount    % Change
   (Amounts in thousands, except for percentage data)
Amortization of intangible assets
   $ 383 $ 625 $ 242    38.7 % $ 1,198 $ 1,839 $ 641    34.9 %
% of total revenues
   2.1 % 2.7 %    2.6 % 3.2 %

Amortization expense is primarily related to the costs of acquired intangible assets. Amortization expense on certain intangible assets is based on the future economic value of the related intangible assets, which is generally higher in the earlier years of the assets’ lives. The decrease in amortization expense for the three and ~~nine~~six months ended ~~October~~July 31, ~~2018, as compared to~~2019 include cost reduction initiatives put in place during the ~~same period~~second half of fiscal ~~2018, is primarily due to [fully amortized intangible assets from prior acquisitions as well as the change in foreign exchange rates.~~

~~Stock-based Compensation Expense~~

~~The following table provides information regarding the change in stock-based compensation expense during the periods presented:~~

   Three Months Ended
Increase

Increase
Nine Months
Ended
   October 31, October 31, Decrease    Decrease
   2018 2017 $ Amount    % Change 2018 2017 $ Amount    % Change
   (Amounts in thousands, except for percentage data)
Stock-based compensation expense
   $ 769 $ 697 $ 72    10.3 % $ 2,571 $ 2,227 $ 344    15.1 %
% of total revenues
   4.10 % 3.0 %    5.7 % 3.9 %

Stock-based compensation expense is related to the issuance of stock grants to our employees, executives and members of our Board of Directors. Stock-based compensation expense increased $0.1 million and $0.3 million, respectively, for the three and nine months ended October 31, 2018, as compared to the same periods in fiscal 2018, primarily due to an increase in stock awards granted to key employees at the end of fiscal 2018 as part of the long-term incentive plan.

~~Severance and Other Restructuring Costs~~

~~The following table provides information regarding the change in severance and other restructuring costs during the periods presented:~~

   Three Months Ended    Nine Months
Ended
   October 31,
Increase

Increase
October 31, Decrease    Decrease
   2018 2017 $ Amount    % Change 2018 2017 $ Amount    % Change
   (Amounts in thousands, except for percentage data)
Severance and other restructuring costs
   $ 1,030 $ 960 $ 70    7.3 % $ 1,620 $ 3,670 $ 2,050    55.9 %
% of total revenues
   5.5 % 4.1 %    3.6 % 6.4 %

In September 2018, in order to return the Company to profitability by the end of fiscal 2019, we announced the 2019 Restructuring Program. The primary element of this program is staff reductions across all of our functions and geographic areas and we expect the program to be completed by the end of fiscal 2019. Annualized cost savings will be approximately $6 million once completed and other restructuring and severance charges are estimated to be approximately $1 million.

Severance and other restructuring costs slightly increased in the three months period ended October 31, 2018 because of the costs associated with the 2019 Restructuring Program. Severance and other restructuring costs decreased $2.1 million for the nine months ended October 31, 2018, as compared to the same period of the prior fiscal year, because the 2017 Restructuring Program was largely completed by the beginning of fiscal year 2019.

Other ~~(Expenses) Income,~~Expense, Net

The table below provides detail regarding our other ~~(expenses) income,~~expense, net:


	Three Months Ended						Increase/			Increase/			Nine Months Ended					Increase/			Increase/
	October 31,						(Decrease)			(Decrease)			October 31,					(Decrease)			(Decrease)			For the Three Months Ended July 31,						Change						For the Six Months Ended July 31,						Change
	2018			2017			$ Amount			% Change			2018			2017		$ Amount			% Change			2019			2018			$			%			2019			2018			$
	(Amounts in thousands, except for percentage data)																							(Amounts in thousands, except for percentage data)												(Amounts in thousands, except for percentage data)
Interest income, net	$	77		$	46		$	31			67.4	%		222			106		116			109	%	$	90		$	102		$	(12	)		(11.8	%)	$	173		$	143		$	30		21.0	%
Foreign exchange losses, net		(2,103	)		(97	)		(2,006	)		(2,068.0	%)		(5,038	)		748		(5,786	)		(774	%)		(186	)		(2,035	)		1,849			(90.9	%)		(2,081	)		(2,934	)		853		(29.1	%)
Miscellaneous (expenses) income, net		(61	)		65			(126	)		(193.8	%)		(82	)		115		(197	)		(171	%)
Miscellaneous income, net																									18			(29	)		47		>(100.0%)				39			(20	)		59	>(100.0%)
																								$	(78	)	$	(1,962	)	$	1,884					$	(1,869	)	$	(2,811	)	$	942
	$	(2,087	)	$	14		$	(2,101	)				$	(4,898	)	$	969	$	(5,867	)

~~For~~

The principal component of other expense, net, are foreign exchange losses, which amounted to $0.2 million and $2.1 million for the three and ~~nine~~six months ended ~~October~~July 31, 2019, respectively, and amounted to $2.0 million and $2.9 million for the three and six months ended July 31, 2018, respectively. Our foreign exchange losses, net ~~increased by $2.0 million and $5.8 million, respectively, as compared to the same periods of fiscal 2018,~~are primarily due to ~~CTA adjustment of $2.1 million related to strengthening of US dollar compared to other foreign currencies during the period, primarily the Euro, and~~ the revaluation of intercompany ~~note receivable between our Netherlands and Ireland subsidiaries of $4.2 million for the first nine months of fiscal 2019, respectively.~~notes receivable.

Income Tax Provision (Benefit) ~~Provision~~

   Three Months Ended    Nine Months Ended
   October 31,
Decrease
   Decrease) October 31, Decrease    Decrease
   2018 2017 $ Amount    % Change 2018 2017 $ Amount    % Change
   (Amounts in thousands, except for percentage data)
Income tax (benefit) provision
   $ (775 ) $ 1,154 $ 1,929    167.2 % $ (2,421 ) $ 1,458 $ 3,879    266.1 %
% of total revenues
   4.2 % 4.9 %    5.3 % 2.5 %

We recorded income tax benefits of ~~$0.8~~$0.6 million and ~~$2.4~~$0.2 million for the three and ~~nine~~six months ended ~~October~~July 31, ~~2018,~~2019, respectively, and ~~we recorded~~ income tax ~~provisions~~benefits of ~~approximately~~ $1.2 million and ~~$1.5~~$1.6 million for the three and ~~nine~~six months ended ~~October~~July 31, ~~2017,~~2018, respectively. Our effective tax rate in fiscal ~~2019~~2020 and in future periods may fluctuate on a quarterly basis, as a result of changes in our jurisdictional forecasts where losses cannot be benefitted due to the existence of valuation allowances on our deferred tax

assets, ~~changes~~variance in actual results ~~versus~~from our estimates, or changes in tax laws, regulations, accounting principles or interpretations thereof.

The ~~U.S.~~2017 Tax ~~Cuts and Jobs~~ Act ~~(“Tax Reform Act”)~~ introduced significant changes to U.S. income tax law. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system and aone-time tax on the mandatory deemed repatriation of cumulative foreign earnings (the “Transition Tax”) as of December 31, 2017.

On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. (“SAB”) 118, which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. The measurement period is deemed to have ended earlier when the registrant has obtained, prepared and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared or analyzed.

The Company is still evaluating the provisions of the Tax Reform Act and amounts reflected in the financial statements for the three and nine months ended October 31, 2018 are provisional. The ultimate impact may differ from these provisional amounts, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued and actions the Company may take as a result of the Tax Reform Act. The accounting is expected to be completed within the~~one-year~~ ~~measurement period.~~

We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various foreign jurisdictions. We have closed out an audit with the Internal Revenue Service (“IRS”) through fiscal 2013. We are no longer subject to U.S. federal examinations before fiscal ~~2016.~~2015. However, the taxing authorities will still have the ability to review the propriety of certain tax attributes created in closed years if such tax attributes are utilized in an open tax year, such as our federal research and development credit carryovers.

Non-GAAP Measures

We definenon-GAAP ~~(loss) income~~ loss from operations as U.S. GAAP operating ~~(loss) income~~loss plus stock-based compensation expenses, amortization of intangible assets,non-operating expense professional fees and severance and other restructuring costs. We discussnon-GAAP ~~(loss) income~~ loss from operations in our quarterly earnings releases and certain other communications, as we believenon-GAAP operating ~~(loss) income~~loss from operations is an important measure that is not calculated according to U.S. GAAP. We usenon-GAAP ~~(loss) income~~ loss from operations in internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our Board of Directors, 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 thenon-GAAP ~~(loss) income~~ 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 thenon-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) income~~ loss from operations is anon-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with U.S. GAAP. Thisnon-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 atnon-GAAP ~~(loss) income~~ loss from operations and investors should not infer from our presentation of thisnon-GAAP financial measure that these costs are unusual, infrequent ornon-recurring.

The following table includes the reconciliations of our U.S. GAAP ~~(loss) income~~loss from operations, the most directly comparable U.S. GAAP financial measure, to ournon-GAAP ~~(loss) income~~ loss from operations for the three and ~~nine~~six months ended ~~October~~July 31, ~~2018~~2019 and ~~2017 (amounts in thousands, except per share and percentage data):~~2018:

   Three Months Ended Three Months Ended
   October 31, 2018 October 31, 2017
   GAAP GAAP
   As Reported Adjustments Non-GAAP As Reported Adjustments Non-GAAP
Revenues:

Products
   $ 8,268 $ —   $ 8,268 $ 11,119 $ —   $ 11,119
Services
   10,343 —   10,343 12,311 —   12,311


Total revenues
   18,611 —   18,611 23,430 —   23,430


Cost of revenues:

Products
   1,716 —   1,716 1,198 —   1,198
Services
   5,428 —   5,428 5,612 —   5,612
Amortization of intangible assets
   178 (178 ) —   255 (255 ) —
Stock-based compensation
   1 (1 ) —   1 (1 ) —


Total cost of revenues
   7,323 (179 ) 7,144 7,066 (256 ) 6,810


Gross profit
   11,288 179 11,467 16,364 256 16,620


Gross profit percentage
   60.7 % 1.0 % 61.6 % 69.8 % 1.1 % 71.0 %
Operating expenses:

Research and development
   4,836 —   4,836 5,634 —   5,634
Selling and marketing
   3,705 —   3,705 3,916 —   3,916
General and administrative
   3,209 —   3,209 3,868 —   3,868
Amortization of intangible assets
   205 (205 ) —   370 (370 ) —
Stock-based compensation expense
   768 (768 ) —   696 (696 ) —
Professional fees - other
   50 (50 ) —   —   —   —
Severance and other restructuring costs
   1,030 (1,030 ) —   960 (960 ) —


Total operating expenses
   13,803 (2,053 ) 11,750 15,444 (2,026 ) 13,418


(Loss) income from operations
   $ (2,515 ) $ 2,232 $ (283 ) $ 920 $ 2,282 $ 3,202


(Loss) income from operations percentage
   (13.5 )% 12.0 % (1.5 )% 3.9 % 9.8 % 13.7 %
Weighted average common shares outstanding:

Basic
   35,747 35,747 35,747 35,479 35,479 35,479


Diluted
   35,747 35,747 35,747 35,479 35,671 35,671


Non-GAAP operating (loss) income per share:

Basic
   $ (0.07 ) $ 0.06 $ (0.01 ) $ 0.03 $ 0.07 $ 0.10


Diluted
   $ (0.07 ) $ 0.06 $ (0.01 ) $ 0.03 $ 0.06 $ 0.09

	For the Three Months Ended July 31,						For the Six Months Ended July 31,
	2019			2018			2019			2018
	(Amounts in thousands)						(Amounts in thousands)
GAAP loss from operations	$	(659	)	$	(8,270	)	$	(9,315	)	$	(13,386	)
Amortization of intangible assets		299			411			598			815
Stock-based compensation		631			923			197			1,802
Professional fees - other		61			-			1,180			-
Severance and other restructuring costs		659			536			870			590
Non-GAAP income (loss) from operations	$	991		$	(6,400	)	$	(6,470	)	$	(10,179	)

   Nine Months Ended Nine Months Ended
   October 31, 2018 October 31, 2017
   GAAP GAAP
   As Reported Adjustments Non-GAAP As Reported Adjustments Non-GAAP
Revenues:

Products
   $ 12,821 $ —   $ 12,821 $ 18,907 $ —   $ 18,907
Services
   32,626 —   62,626 38,415 —   38,415


Total revenues
   45,447 —   45,447 57,322 —   57,322


Cost of revenues:

Products
   2,518 —   2,518 3,088 —   3,088
Services
   15,914 —   15,914 15,810 593 16,403
Amortization of intangible assets
   534 (534 ) —   764 (764 ) —
Stock-based compensation
   1 (1 ) —   3 (3 ) —


Total cost of revenues
   18,967 (535 ) 18,432 19,665 (174 ) 19,491


Gross profit
   26,480 535 27,015 37,657 174 37,831


��

Gross profit percentage
   58.3 % 1.2 % 59.4 % 65.7 % 0.3 % 66.0 %
Operating expenses:

Research and development
   15,477 —   15,477 17,411 —   17,411
Selling and marketing
   10,776 —   10,776 9,292 —   9,292
General and administrative
   11,224 —   11,224 10,595 —   10,595
Amortization of intangible assets
   664 (664 ) —   1,075 (1,075 ) —
Stock-based compensation expense
   2,570 (2,570 ) —   2,224 (2,224 ) —
Professional fees: other
   50 (50 ) —   21 (21 ) —
Severance and other restructuring costs
   1,620 (1,620 ) —   3,670 (3,670 ) —


Total operating expenses
   42,381 (4,904 ) 37,477 44,288 (6,990 ) 37,298


(Loss) income from operations
   $ (15,901 ) $ 5,439 $ (10,462 ) $ (6,631 ) $ 7,164 $ 533


(Loss) income from operations percentage
   (35.0 %) 12.0 % (23.0 %) (11.6 %) 12.5 % 0.9 %
Weighted average common shares outstanding:

Basic
   35,668 35,668 35,668 35,381 35,381 35,381


Diluted
   35,668 35,668 35,668 35,381 35,381 35,381


Non-GAAP operating (loss) income per share:

Basic
   $ (0.45 ) $ 0.15 $ (0.29 ) $ (0.19 ) $ 0.21 $ 0.02


Diluted
   $ (0.45 ) $ 0.15 $ (0.29 ) $ (0.19 ) $ 0.20 $ 0.01

The changes in the table above during the three and nine months ended October 31, 2018, compared to the same periods of 2017, were a result of the factors described in connection with revenues and operating expenses under Item 2.~~“Management’s Discussion and Analysis of Financial Conditions and Results of Operations – Results of Operations,”of this Form10-Q.~~

In managing and reviewing our business performance, we exclude a number of items required by U.S. GAAP. Management believes that excluding these items is useful in understanding the trends and managing our operations. We provide these supplemental~~non-GAAP~~ ~~measures in order to assist the investment community in seeing SeaChange through the “eyes of management,” and therefore enhance the understanding of SeaChange’s operating performance.Non-GAAP~~ ~~financial measures should be viewed in addition to, not as an alternative to, our reported results prepared in accordance with U.S. GAAP. Ournon-GAAP~~ ~~financial measures reflect adjustments based on the following items:~~

~~Amortization of Intangible Assets.~~ We incur amortization expense of intangible assets related to various acquisitions that have been made in recent years. These intangible assets are valued at the time of acquisition, are then amortized over a period of several years after the acquisition and generally cannot be changed or influenced by management after the acquisition. We believe that exclusion of these expenses allows comparisons of operating results that are consistent over time for the Company’s newly-acquired and long-held businesses.

~~Stock-based Compensation Expense.~~ We incur expenses related to stock-based compensation included in our U.S. GAAP presentation of cost of revenues and operating expenses. Although stock-based compensation is an expense we incur and is viewed as a form of compensation, the expense varies in amount from period to period, and is affected by market forces that are difficult to predict and are not within the control of management, such as the market price and volatility of our shares, risk-free interest rates and the expected term and forfeiture rates of the awards.

~~Professional Fees - Other.~~ ~~We have excluded the effect of legal and other professional costs associated with our acquisitions, divestitures, litigation and strategic alternatives because the amounts are considered significantnon-operating~~ ~~expenses.~~

~~Severance and Other Restructuring Costs.~~ We incur charges due to the restructuring of our business, including severance charges and facility reductions resulting from our restructuring and streamlining efforts and any changes due to revised estimates, which we generally would not have otherwise incurred in the periods presented as part of our continuing operations.

~~Off-Balance~~ ~~Sheet Arrangements~~

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating~~off-balance~~ ~~sheet arrangements. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.~~

Liquidity and Capital Resources

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

   Nine Months Ended    Increase/
   October 31,    (Decrease)
   2018    2017    $ Amount
   (Amounts in thousands)
Total cash used in operating activities
   $ (23,626 )    $ (908 )    $ (22,718 )
Total cash used in investing activities
   (2,189 )    537    (2,726 )
Total cash provided by (used in) financing activities
   38    1    37
Effect of exchange rate changes on cash
   4,213    (878 )    5,091






Net decrease in cash, cash equivalents and restricted cash
   $ (21,563 )    $ (1,248 )    $ (20,315 )

	For the Six Months Ended July 31,
	2019			2018
	(Amounts in thousands)
Net cash used in operating activities	$	(8,038	)	$	(17,985	)
Net cash used in investing activities		(3,221	)		(1,937	)
Net cash (used in) provided by financing activities		(133	)		39
Effect of exchange rate changes on cash and cash equivalents		277			1,162
Net decrease in cash and cash equivalents	$	(11,115	)	$	(18,721	)

Historically, we have financed our operations and capital expenditures primarily with ~~cashon-hand.~~ ~~Cash,~~our cash and investments. Our cash, cash equivalents ~~restricted cash,~~ and marketable securities ~~decreased from $52.1~~totaled $18.8 million at ~~January~~July 31, ~~2018 to $32.4 million at October 31, 2018.~~2019.

In September 2018, ~~in order to return the Company to profitability by the end of fiscal 2019,~~ we implemented the 2019 Restructuring Program. The primary element of this restructuring program was staff reductions across all of our functions and geographic ~~areas and we expect the program to be completed by the end of fiscal 2019.~~areas. Annualized cost savings are expected to be approximately $6 million ~~once completed and other restructuring~~ and severance and restructuring charges ~~are estimated~~ to ~~be approximately $1~~date have exceeded $2 million.

During fiscal 2018, we made significant reductions to our headcount as part of our previous restructuring efforts that concluded as of January 31, 2018. These measures are important steps in helping to restore SeaChange to profitability and positive cash flow. The Company believes We believe that existing ~~funds~~cash and investments and cash expected to be provided by future operating activities, augmented by the ~~measures~~plans highlighted above, are adequate to satisfy our working capital, ~~and~~ capital expenditure requirements and other contractual obligations for ~~the foreseeable future, including~~ at least the next 12 months.

~~However, if~~If our expectations are incorrect, we may need to raise additional funds to fund our operations, to take advantage of unanticipated strategic opportunities or 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.

~~Operating Activities~~

~~Below are key line items affecting~~Net cash ~~from~~used in operating ~~activities:~~activities

   Nine Months Ended    Increase/
   October 31,    (Decrease)
   2018    2017    $ Amount
   (Amounts in thousands)
Net loss
   $ (18,378 )    $ (7,120 )    $ (11,258 )
Adjustments to reconcile net loss to cash used in operating activities
   4,147    6,002    (1,855 )






Net loss including adjustments
   (14,231 )    (1,118 )    (13,113 )
Decrease in receivables
   4,143    1,888    2,255
Increase in inventory
   (43 )    (165 )    122
(Increase) decrease in prepaid expenses and other current assets
   (2,107 )    62    (2,169 )
Increase (decrease) in accounts payable
   2,401    (3,199 )    5,600
(Decrease) increase in accrued expenses
   (9,152 )    942    (10,094 )
(Decrease) increase in deferred revenues
   (7,060 )    355    (7,415 )
All other - net
   2,424    327    2,097






Net cash used in operating activities
   $ (23,625 )    $ (908 )    $ (22,717 )

We used net cash in operating activities of ~~$23.6~~$8.0 million for the ~~nine~~six months ended ~~October~~July 31, ~~2018.~~2019. This cash used in operating activities was primarily the result of our net loss ~~including adjustments~~ of ~~$14.2~~$11.0 million and by changes in working capital, which include a ~~decrease~~$6.6 million increase in ~~accrued expenses of $9.2 million related to the payment of severance, bonuses and value-added tax and a decrease in deferred revenue of $7.1 million,~~unbilled receivables, partially offset by a decrease in accounts receivables of ~~$4.1~~$8.5 million due to the timing of customer ~~payments.~~payments.

~~Investing Activities~~

~~Cash flows from~~Net cash used in investing activities ~~are as follows:~~

   Nine Months Ended    Increase/
   October 31,    (Decrease)
   2018    2017    $ Amount
   (Amounts in thousands)
Purchases of property and equipment
   $ (328 )    $ (386 )    $ 58
Purchases of marketable securities
   (8,510 )    (7,246 )    (1,264 )
Proceeds from sale and maturity of marketable securities
   6,649    7,993    (1,344 )
Other investing activities
   —      176    (176 )






Net cash (used in) and provided by investing activities
   $ (2,189 )    $ 537    $ (2,726 )

~~Cash (used in) and provided by~~Net cash used in investing activities ~~includes $0.3~~was $3.2 million for the ~~purchase~~six months ended July 31, 2019. Cash used in investing activities was primarily due to $3.8 million of ~~capital assets during fiscal 2019~~net cash used in the acquisition of Xstream, partially offset by a $0.8 million receipt of net cash related to the timing of purchases, sales and ~~the net purchase~~maturities of marketable ~~securities of $1.9 million.~~securities.

~~Financing Activities~~

~~Cash flows from~~Net cash used in financing activities ~~are as follows:~~

   Nine Months Ended
   October 31,
Increase

   2018    2017    $ Amount
   (Amounts in thousands)
Proceeds from issuance of common stock
   $ 81    $ 53    $ 28
Payments of withholding tax on RSU vesting
   (43 )    (52 )    9






Net cash provided by financing activities
   $ 38    $ 1    $ 37

~~In the nine months ended October 31, 2018,~~Net cash ~~provided by~~used in financing activities ~~reflects proceeds received from the issuance of common stock for the employee stock purchase plan.~~

~~The effect of exchange rate changes increased cash, cash equivalents and restricted cash by $4.2~~was $0.1 million for the ~~nine~~six months ended ~~October~~July 31, ~~2018, primarily due~~2019 related to the ~~translation~~repurchase of ~~European subsidiaries’ cash balances, which use the Euro as their functional currency, to U.S. dollars.~~

~~Effects of Inflation~~

~~Management believes that financial results have not been significantly impacted by inflation and price changes in materials we use in manufacturing our products.~~

~~Contractual Obligations~~

~~There have been no significant changes outside the ordinary course of our business in our contractual obligations disclosed in our Form10-K~~ ~~for the fiscal year ended January 31, 2018.~~common stock.

Critical Accounting Policies and Significant ~~Judgment~~Judgments and Estimates

We prepare our consolidated financial statements in accordance with GAAP. The ~~accounting and~~preparation of consolidated financial ~~reporting policies of SeaChange are in conformity with U.S. GAAP, which~~statements also requires ~~management~~us to make estimates and assumptions that affect the reported amounts of assets, liabilities, ~~revenue,~~revenues, costs and expenses and ~~disclosure of contingent assets and liabilities.~~related disclosures. We ~~evaluate~~base our estimates ~~on anon-going~~ basis, including those related to revenue recognition, allowance for doubtful accounts, acquired intangible assets and goodwill, stock-based compensation, impairment of long-lived assets and accounting for income taxes. Our estimates are based on historical experience and on various other assumptions that ~~are believed~~we believe to be reasonable under the circumstances. Actual results ~~may~~could differ significantly from ~~these estimates. For a description~~the estimates made by our management.

Other than the impact of ~~our critical accounting policies affecting revenue recognition and impairment~~the adoption of ~~assets, see~~ASU 2016-02, “Leases (Topic 842) as disclosed in Note 2~~“Significant Accounting Policies,”~~ ~~to this Form10-Q.~~ ~~For a description of other critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements, refer~~ to our ~~Form10-K~~ ~~for the fiscal year ended January 31, 2018 filed with the SEC.~~

~~Recent Accounting Standard Updates~~

~~See Note 14,~~~~“Recent Accounting Standard Updates,”~~ ~~to our~~unaudited consolidated financial statements included in ~~Item 1~~this Quarterly Report on Form 10-Q, there have been no material changes to our critical accounting policies and estimates from those disclosed in our financial statements and the related notes and other financial information included in our Annual Report on Form 10-K on file with the SEC.

Off-Balance Sheet Arrangements

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

Recently Issued Accounting Pronouncements

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

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

~~Foreign Currency~~We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange ~~Risk~~

~~We face exposure~~Act of 1934, as amended, for this reporting period and are not required to financial market risks, including adverse movements in foreign currency exchange rates and changes in interest rates. These exposures may change over time as business practices evolve and could have a material adverse impact on our financial results. Our foreign currency exchange exposure is primarily associated with product sales arrangements or settlement of intercompany payables and receivables among subsidiaries and their parent company, and/or investment/equity contingency considerations denominated inprovide the ~~local currency where the functional currency of the foreign subsidiary is the U.S. dollar.~~information required under this item.

Our principal currency exposures relate primarily to the U.S. dollar and the Euro. All foreign currency gains and losses are included in other (expenses) income, net, in the accompanying consolidated statements of operations and comprehensive loss. For the nine months ended October 31, 2018, we recorded $5.0 million in losses due to the international subsidiary translations and cash settlements of revenues and expenses.

A substantial portion of our earnings are generated by our foreign subsidiaries whose functional currency is other than the U.S. dollar. Therefore, our earnings could be materially impacted by movements in foreign currency exchange rates upon the translation of the subsidiary’s earnings into the U.S. dollar. If the U.S. dollar had strengthened by 10% compared to the Euro, our total revenues would have decreased by $0.4 million and $1.3 million for the three and nine months ended October 31, 2018, respectively, and it would have increased our loss from operations by $0.3 million and $0.7 million, respectively, for the same periods.

~~Interest Rate Risk~~

Exposure to market risk for changes in interest rates relates primarily to our investment portfolio of marketable debt securities of various issuers, types and maturities. We do not use derivative instruments in our investment portfolio, and our investment portfolio only includes highly liquid instruments. Our cash and marketable securities include cash equivalents, which we consider to be investments purchased with original maturities of 90 days or less. There is risk that losses could be incurred if we were to sell any of our securities prior to stated maturity. Given the short maturities and investment grade quality of the portfolio holdings at October 31, 2018, a hypothetical 10% adverse change in interest rates should not have a material adverse impact on the fair value of our investment portfolio.

ITEM 4.

Controls and Procedures

Evaluation of disclosure controls and procedures.We ~~evaluated the effectiveness of the design and operation of our disclosure~~maintain “disclosure controls and procedures,” as defined in ~~Rule13a-15(e)~~ ofRules 13a‑15(e) and 15d‑15(e) under the Securities Exchange Act of 1934, as amended, ~~(the “Exchange Act”), as of~~or the ~~end of the period covered by this Form10-Q.~~ Edward Terino, our Chief Executive Officer (“CEO”), and Peter R. Faubert, our Chief Financial Officer (“CFO”), reviewed and participated in this evaluation. The Company’s disclosure controls and proceduresExchange Act, that are designed to ensure that ~~material~~ information required to be disclosed ~~by us~~ in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and ~~that such material information is~~(2) accumulated and communicated to our management, including our ~~CEO~~principal executive officer and ~~CFO, as appropriate,~~chief financial officer, to allow timely decisions regarding required ~~disclosures. Based upon~~disclosure. Management recognizes that ~~evaluation, Messrs. Terino and Faubert concluded that our disclosure~~any controls and procedures, ~~were effective as~~no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the ~~end~~cost-benefit relationship of ~~the period covered by this report~~possible controls and ~~as of the date of the evaluation.~~procedures.

Changes in internal control over financial reporting. ~~As a result of the evaluation completed by us, and in which Messrs. Terino and Faubert participated, we have concluded that there~~ There were no changes ~~during the fiscal quarter ended October 31, 2018~~ in our internal ~~control~~controls over financial reporting ~~which~~during the three months ended July 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal ~~control~~controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.

Legal Proceedings

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

ITEM 1A.

Risk Factors

In addition to other information set forth in this Form10-Q, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Form10-K for the fiscal year ended January 31, ~~2018,~~2019, which could materially affect our business, financial conditions, and results of operations. The risks described in our Form10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Repurchases

During the quarter ended July 31, 2019, we effected stock repurchases pursuant to our stock repurchase program. Shares repurchased by us each fiscal month of the quarter ended July 31, 2019 were as follows:

Period		Total Number of Shares Purchased				Average Price Paid Per Share				Total Number of Shares Purchased as Part of Publicly Announced Plan or Program				Maximum Dollar Amount for Shares that May Yet Be Purchased Under the Plan or Program⁽¹⁾
June 1, 2019 to June 30, 2019			100			$	1.42				100			$	4,999,858

_____________________

⁽¹⁾

Refer to Note 10 in Item 1 of Part 1 of this Form 10-Q for additional information.

ITEM 6.

Exhibits

(a)

Exhibits

~~(a)~~

~~Exhibits~~

~~See the Exhibit Index~~The following ~~the signature page to~~list of exhibits includes exhibits submitted with this Form ~~10-Q.~~

10-Q as filed with the SEC and those incorporated by reference to other filings.

Index to Exhibits

No.		Description
~~No.~~		~~Description~~
4.1		Amendment, dated as of June 28, 2019, by and between SeaChange International, Inc. and Computershare Inc., as Rights Agent (filed as Exhibit 4.1 to Current Report on Form 8-K filed on June 28, 2019 with the Commission and incorporated herein by reference).
~~31.1~~
4.2		Amendment, dated as of August 8, 2019, by and between SeaChange International, Inc. and Computershare Inc., as Rights Agent (filed as Exhibit 4.1 to Current Report on Form 8-K filed on August 8, 2019 with the Commission and incorporated herein by reference).

10.1		Amendment, dated as of August 8, 2019, by and among SeaChange International, Inc., Karen Singer and TAR Holdings LLC (filed as Exhibit 10.1 to Current Report on Form 8-K filed on August 8, 2019 and incorporated herein by reference).

10.2		Offer Letter, dated as of August 29, 2019, by and between SeaChange International, Inc. and Yossi Aloni (filed as Exhibit 10.1 to Current Report on Form 8-K filed on August 29, 2019 and incorporated herein by reference).

31.1		Certification Pursuant to Rule13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification Pursuant to Rule13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

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

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

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

SIGNATURES

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

Dated: ~~December 10, 2018~~August 30, 2019


SEACHANGE INTERNATIONAL, INC.

by:	/s/ YOSSI ALONI
	Yossi Aloni
	Chief Executive Officer


by:		/s/ PETER R. FAUBERT
		Peter R. Faubert
		Chief Financial Officer, Senior Vice President and Treasurer

4033

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company