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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended October 31, 2014

OR

For the transition period from                      to                     

Commission File Number: 001- 36069

VIOLIN MEMORY, INC.

(Exact Name of Registrant as Specified in Its Charter)

(650) 396-1500

(Registrant’s Telephone Number, Including Area Code)

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  x    No  ¨

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter time period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of December 3, 2014, 93,582,162 shares of the registrant’s common stock were outstanding.

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Part I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

VIOLIN MEMORY, INC.

Condensed Consolidated Balance Sheets

(In thousands, except per share amounts)

See accompanying notes to the condensed consolidated financial statements.

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VIOLIN MEMORY, INC.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

See accompanying notes to the condensed consolidated financial statements.

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VIOLIN MEMORY, INC.

Consolidated Statements of Comprehensive Loss

(In thousands)

See accompanying notes to the condensed consolidated financial statements.

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VIOLIN MEMORY, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

See accompanying notes to the condensed consolidated financial statements.

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VIOLIN MEMORY, INC.

Notes to Condensed Consolidated Financial Statements

1. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying condensed consolidated balance sheets and the condensed consolidated statements of operations, comprehensive loss and cash flows are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, in the opinion of management, the financial statements include all the normal and recurring adjustments that are necessary to fairly present the results of the interim periods presented. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2014, filed with the SEC on April 16, 2014. The results of operations for the three and nine months ended October 31, 2014 are not necessarily indicative of the results to be expected for any subsequent interim period, the year ending January 31, 2015 or any other future period.

The Company effected a two-for-one reverse stock split to its common stock for all stockholders of record as of September 12, 2013 with an automatic adjustment to the conversion ratio of the outstanding shares of convertible preferred stock to reflect the same reverse stock split ratio upon conversion of the convertible preferred stock into common stock. Based on the adjusted conversion ratio, two outstanding shares of preferred stock converted into one share of common stock, except for Series D convertible preferred stock for which every two shares converted into 1.016998402 shares of common stock. All information related to common stock, stock options, RSUs and earnings per share for prior periods has been retroactively adjusted to give effect to the reverse stock split.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Summary of Significant Accounting Policies

The Company’s significant accounting policies have been described in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2014 filed with the SEC on April 16, 2014. With exception of the discussions below, there have been no changes to the Company’s significant accounting policies described in the Annual Report on Form 10-K that have had a material impact on the Company’s condensed consolidated financial statements and related notes.

Sale of Assets

In May 2014, the Company entered into an asset purchase agreement with SK Hynix Inc. (“SK Hynix”) to sell certain intellectual property rights and fixed assets related to its PCIe product line. As consideration, SK Hynix agreed to pay the Company $23.0 million and assumed certain employee-related liabilities of approximately $0.5 million. The transaction closed in July 2014, and the Company recorded a gain of $17.4 million after deducting from the aggregate consideration (i) compensation paid to the transferred workforce of $3.2 million, which includes $1.4 million of stock-based compensation, (ii) professional fees of $2.4 million and (iii) the net book value of the fixed assets sold of $0.5 million.

Restricted Cash

Pursuant to the asset purchase agreement with SK Hynix, the Company is required to maintain a balance of $2.3 million in an escrow account in support of certain guarantees the Company made to the purchaser as part of the transaction. The amount will be released from escrow in July 2015, net of any disbursements related to the covered guarantees, if any.

Convertible Senior Notes

On September 19, 2014, the Company issued $120 million aggregate principal amount of convertible senior notes (the “Notes”), which included $15 million of principal amount issued pursuant to an over-allotment option granted to the initial purchasers. The aggregate principal amount of the Notes is due on October 1, 2019, unless earlier repurchased, redeemed or converted. The Company received net proceeds of $115.4 million after deducting offering expenses paid by the Company. (See Note 13 for further details.)

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Recent Accounting Pronouncements

In August 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which requires management to assess a company’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. Before this new standard, there was minimal guidance in U.S. GAAP specific to going concern. Under the new standard, disclosures are required when conditions give rise to substantial doubt about a company’s ability to continue as a going concern within one year from the financial statement issuance date. The new standard applies to all companies and is effective for the annual period ending after December 15, 2016, and all annual and interim periods thereafter. The Company has determined that this pronouncement does not have a material impact on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, a converged standard on revenue recognition. The new pronouncement requires revenue recognition to depict the transfer of promised goods or services to customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for some costs to obtain or fulfil a contract with a customer, as well as enhanced disclosure requirements. ASU 2014-9 is effective for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting periods. Early adoption is not permitted. The Company is currently in the process of evaluating the impact of the adoption will have on its consolidated financial statements.

In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 2015) and Property Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an entity, an accounting standard update that changes the criteria for reporting discontinued operations. Under the accounting standard update, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results when either it qualifies as held for sale, disposed of by sale, or disposed of other than by sale. This accounting standard update will be effective for the Company on February 1, 2015. The Company anticipates that this pronouncement will not have a material impact on the Company’s consolidated financial statements.

In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry-forward, a Similar Tax Loss, or a Tax Credit Carry-forward Exists, which is effective for the periods beginning after December 15, 2013. The new guidance provides that a liability related to an unrecognized tax benefit would be presented as a reduction of a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. The new guidance became effective for the Company on February 1, 2014, and was applied prospectively to unrecognized tax benefits that existed at the effective date. The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements.

In March 2013, the FASB issued an accounting standard update requiring an entity to release into net income the entire amount of a cumulative translation adjustment related to its investment in a foreign entity when as a parent it either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets within a foreign entity. This accounting standard update was effective prospectively for the Company on February 1, 2014. The adoption of this accounting standard update did not have a material impact on the Company’s consolidated financial statements.

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2. Cash Equivalents and Short-Term Investments

The following is a summary of cash equivalents and short-term investments by type of instrument as of October 31, 2014 and January 31, 2014 (in thousands):

All marketable securities are deemed by management to be available-for-sale and are reported at fair value. Net unrealized gains or losses that are not determined to be other-than-temporary are reported within stockholders’ equity on the Company’s condensed consolidated balance sheets as a component of accumulated comprehensive loss. Realized gains or losses are recorded based on the specific identification method. For the nine months ended October 31, 2014, the Company’s realized gains or losses on short-term investments were not material.

The amortized cost and fair value of investments held as of October 31, 2014, by contractual years-to-maturity, are as follows (in thousands):

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3. Fair Value Measurements

Assets Measured and Recorded at Fair Value on a Recurring Basis

The Company measures its financial assets and liabilities at fair value. The inputs used in the valuation methodologies in measuring fair value are defined in the fair value hierarchy as follows:

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following tables present the fair value of our financial assets and liabilities using the above input categories (in thousands):

The Company measures its cash equivalents and marketable securities at fair value. Money market funds are valued primarily using quoted market prices utilizing market observable inputs. The Company’s investments in commercial paper, treasury bills, corporate debt securities and federal and municipal obligations are classified within Level 2 as the market inputs to value these instruments consist of market yields, reported trades and broker/dealer quotes. There have been no transfers between Level 1 and 2 during the three and nine months ended October 31, 2014.

Fair Value of Other Financial Instruments

The carrying amounts of the Company’s accounts receivable, accounts payable, accrued liabilities and other liabilities approximate their fair value due to their short term maturities.

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4. Balance Sheet Components

Accounts Receivable

The following table shows the components of accounts receivable, net (in thousands):

Inventory

The following table shows the components of inventory (in thousands):

Property and Equipment, Net

The following table shows the components of property and equipment (in thousands):

Depreciation expense (including amortization of leasehold improvements and intangibles) was $2.5 million and $3.3 million for the three months ended October 31, 2014 and 2013, respectively, and $8.4 million and $8.7 million for the nine months ended October 31, 2014 and 2013, respectively.

Accrued Liabilities

The following table shows the components of accrued liabilities (in thousands):

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Accrued Warranty

The following table is a reconciliation of the changes in the Company’s product warranty liability (in thousands):

Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income as of October 31, 2014 and January 31, 2014, net of tax, were as follows (in thousands):

The Company did not have any other-than-temporary loss on its available-for-sale securities for all periods presented.

5. Equity Award and Employee Compensation Plans

The 2012 Stock Plan

In November 2012, the Company’s stockholders approved the adoption of the 2012 Stock Incentive Plan (the “2012 Stock Plan”) as the successor plan to the 2005 Stock Plan effective at the completion of the Company’s initial public offering (“IPO”). Unexercised options under the 2005 Plan that cancel due to a grantee’s termination may be reissued under the 2012 Stock Plan. Under the 2012 Stock Plan, stock options, restricted shares, restricted stock units and stock appreciation rights may be granted to employees, outside directors and consultants at not less than 100% of the fair value on the date of grant. These share awards and options generally expire seven years from the date of grant. Such share awards and options generally vest ratably over three to four years.

Shares authorized under the 2012 Plan include 9,088,950 shares subject to outstanding awards and shares subject to vesting restrictions under the Company’s 2005 Plan and 7,500,000 shares which were authorized under the 2012 Plan. The reserve will automatically increase on the first day of each fiscal year in an amount equal to the lesser of (i) 5% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year or (ii) another amount determined by the Board of Directors. On February 1, 2014, the share reserve increased by 4,150,000 shares, to an aggregate of 11,650,000 shares authorized under the plan. The 2012 Stock Plan is administered by the Compensation Committee of the Board of Directors (the “Compensation Committee”), and the Compensation Committee may terminate or amend the plan at any time. In addition, during the nine months ended October 31, 2014, the Company issued Inducement Awards totaling 6,250,000 shares outside of the 2012 Plan under the employee inducement award exemption under the New York Stock Exchange Listed Company Manual Rule 303A.08, to the Company’s CEO and certain key executives.

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The following table summarizes the stock option activity related to shares of common stock under the Company’s 2005 and 2012 Plans as well as the Inducement Awards (in thousands, except per share data):

The weighted average grant date fair value of options granted during the nine months ended October 31, 2014 was $1.73 per share. The total intrinsic value of options exercised during the nine months ended October 31, 2014 was $4.8 million.

Restricted Stock Units

The Company’s outstanding restricted stock units, or RSUs, vest upon the satisfaction of both a service condition and a liquidity condition. The service condition for the majority of these awards is satisfied over three to four years. The liquidity condition was settled with the Company’s IPO and was settled in March 2014. Share-based compensation expense related to these grants is based on the grant date fair value of the RSUs and is recognized on a straight-line basis over the applicable service period.

The table below summarizes the RSU activity under the Company’s 2005 and 2012 Plans (in thousands, except per share data):

The aggregate intrinsic value of RSUs that vested during the nine months ended October 31, 2014 amounted to $39.6 million.

During the nine months ended October 31, 2014, 3.7 million of RSUs for which the service condition was satisfied vested in March 2014 upon satisfaction of the liquidity condition. Under net settlement procedures applicable to the March 2014 vesting dates, approximately 786,000 RSUs were withheld to cover the required withholding tax, which is based on the value of the RSU on the applicable settlement date. The remaining amounts are delivered to the recipient as shares of the Company’s common stock.

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Non-employee Stock Options and Awards

For the three months ended October 31, 2014, the Company did not grant any options to non-employees. For the three months ended October 31, 2013, the Company granted 5,000 stock options to a non-employee. For the nine months ended October 31, 2014 and 2013, the Company granted approximately 309,000 and 292,500 restricted shares of common stock to non-employees, respectively.

Employee Stock Purchase Plan

In November 2012, the Company’s stockholders approved the adoption of the 2012 Employee Stock Purchase Plan (the “2012 Purchase Plan”). Upon adoption a total of 1,000,000 shares were reserved for issuance under the 2012 Purchase Plan. The number of shares available for issuance under the 2012 Purchase Plan automatically increases on February 1 each year, beginning in 2014, by the lesser of 0.75% of the shares of common stock then outstanding or 1,000,000 shares. On February 1, 2014, pursuant to the provisions of the plan, the share reserved was increased by 600,000 shares to an aggregate of 1,600,000 shares reserved under the plan. The 2012 Purchase Plan permits eligible employees to purchase common stock on favorable terms via payroll deductions of up to 15% of the employee’s salary, subject to certain share and statutory dollar limits. Two overlapping offering periods commence during each calendar year, on each June 1 and December 1 or such other periods or dates as determined by the Compensation Committee from time to time, and the offering periods last up to 24 months with a purchase date every six months. The price of each share purchased is 85% of the lower of a) the fair value per share of common stock on the last trading day before the commencement of the applicable offering period, or in the case of an offering period that commences on the IPO, 85% of the price at which one share of stock was offered to the public in the IPO, or b) the fair value per share of common stock on the purchase date. The 2012 Purchase Plan is administered by the Compensation Committee, and the Compensation Committee may terminate or amend the plan at any time.

Employee 401(k) Plan

The Company sponsors the Violin Memory, Inc. 401(k) Plan (“401(k) Plan”), which qualifies under Section 401(k) of the Internal Revenue Code and is designed to provide retirement benefits for its eligible employees through tax-deferred salary deductions.

Employees may elect to contribute up to 90% of their eligible compensation to the 401(k) Plan. Employee contributions are limited to a maximum annual amount as set periodically by the Internal Revenue Service (“IRS”). The Company does not currently match employee contributions.

6. Stock-Based Compensation

As of October 31, 2014, total stock-based compensation cost related to unvested equity awards not yet recognized, net of estimated forfeitures, totaled $31.2 million. The Company expects to recognize $2.4 million during the remainder of fiscal 2015, $9.4 million in fiscal 2016, $9.0 million in fiscal 2017, $7.1 million in fiscal 2018 and $3.3 million in fiscal 2019. There was no capitalized stock-based compensation expense for any period presented.

Stock based compensation associated with non-employee awards was approximately $0.2 million and $0.3 million for the three months ended October 31, 2014 and 2013, respectively, and $0.7 million and $0.6 million for the nine months ended October 31, 2014 and 2013, respectively.

During the nine months ended October 31, 2014, the Company accelerated vesting of certain options and RSU awards as a result of the Company’s restructuring initiatives and recognized incremental charges related to equity awards of approximately $1.4 million in the consolidated statement of operations.

7. Income Taxes

The Company’s quarterly provision for income taxes is based on an estimated effective annual income tax rate. The Company’s quarterly provision for income taxes also includes the tax impact of certain unusual or infrequently occurring items, if any, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur.

Income tax expense for the nine months ended October 31, 2014 and 2013 was $80,000 and $45,000, respectively, and $44,000 and $18,000 for the three months ended October 31, 2014 and 2013, respectively. As of October 31, 2014, the income tax rate varies from the United States statutory income tax rate primarily due to valuation allowances in the United States and taxable income generated by the Company’s foreign wholly-owned subsidiaries.

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The Company has a full valuation allowance against its net operating loss carryforwards and research and development credits for both federal and state purposes. Utilization of the net operating loss carry forwards and credits may be subject to substantial annual limitations due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitations may result in the expiration of net operating loss carryforwards and credits before utilization.

The Company reviews the likelihood that it will realize the benefit of its deferred tax assets and, therefore, the need for valuation allowances on a quarterly basis. There is no corresponding income tax benefit recognized with respect to losses incurred and no corresponding income tax expense recognized with respect to earnings generated in jurisdictions with a valuation allowance. This causes variability in the Company’s effective tax rate. The Company intends to maintain the valuation allowances until it is more likely than not that the net deferred tax assets will be realized.

As of October 31, 2014, the Company had no unrecognized tax benefits that would affect the Company’s effective tax rate if recognized.

8. Commitments and Contingencies

Litigation

On August 22, 2012, GCA Savvian Advisors, LLC (“Savvian”) filed an action against the Company in the San Francisco County Superior Court, alleging breach of contract under a financial advisory services agreement. On November 2, 2012, the Company filed a response denying Savvian’s allegations and a cross-complaint against Savvian for fraud, breach of fiduciary duty, negligent representation and breach of contract. On December 7, 2012, Savvian filed a motion to dismiss, which was denied by the court on March 13, 2013. Savvian filed a response to the Company’s complaint on March 26, 2013, denying the Company’s allegations and asserting additional defenses. On August 26, 2013, Savvian filed an amended complaint seeking payment of offering fees totaling $10 million, as well as interest, damages and attorney’s fees. In August 2014, the Company entered into a settlement agreement with Savvian, whereby the Company agreed to pay $2.0 million and issue common stock valued at $0.5 million in exchange for a full release. The Company had previously accrued professional fees of $1.8 million associated with an equity financing. As such, the Company accrued $0.7 million as a result of this settlement during the second quarter of fiscal 2015.

Beginning on November 26, 2013, four putative class action lawsuits were filed in the United States District Court for the Northern District of California, naming as defendants the Company, a number of the Company’s present or former directors and officers, and several underwriters of the Company’s September 27, 2013 IPO. The four complaints have been consolidated into a single, putative class action, and lead co-lead plaintiffs have been appointed by the court. On March 28, 2014, a consolidated complaint was filed. The complaint purports to assert claims under the federal securities laws on behalf of purchasers of our common stock issued in the IPO, and seeks damages in an unspecified amount and other relief. On April 18, 2014, the defendants filed motions to dismiss the complaint. On October 31, 2014, the court granted in part and denied in part defendants’ motions to dismiss. The court’s order dismissed all except one of plaintiffs’ claims against the Company and the present or former directors and officers but gave plaintiffs the opportunity to amend their complaint. On November 21, 2014, the plaintiffs filed an Amended Complaint. In so doing, the plaintiffs chose not to amend their claims against the Company or the present or former directors and officers. Pending further developments regarding plaintiffs’ claims against the underwriters, the case will proceed to the discovery phase on the remaining claim against the Company and the present or former directors and officers.

A purported stockholder derivative action also is pending before the same federal district court judge to whom the putative class action has been assigned. In the derivative action, it is alleged that certain of the Company’s current and former officers and directors breached their fiduciary duties to the Company by violating the federal securities laws and exposing the Company to possible financial liability. Previously, the court approved a stipulation among the parties to stay the derivative action pending resolution of the motion to dismiss the complaint in the putative class action. The parties have agreed to extend the stay of the derivate action an additional sixty (60) days to January 30, 2015.

The Company intends to defend itself vigorously in both securities actions.

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Indemnification

The Company indemnifies certain of its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity. The Company’s certificate of incorporation and bylaws require that it indemnify its officers and directors against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceedings arising out of their services to the Company. In addition, the Company has entered into separate indemnification agreements with each of its directors and executive officers, which provide for indemnification of these individuals under certain circumstances. The maximum amount of potential future indemnification is unlimited; however, the Company has a Directors and Officers insurance policy that enables the Company to recover a portion of any future amounts paid. Historically, the Company has not been obligated to make any payments for these obligations and no liabilities have been recorded for these obligations on the consolidated balance sheets as of October 31, 2014 and January 31, 2014.

The Company may, in the ordinary course of business, agree to defend and indemnify some customers against legal claims that the Company’s products infringe on certain U.S. patents or copyrights. The terms of such obligations may vary. To date, the Company has not been required to make any payments resulting from such infringement indemnifications and no amounts have been accrued for such matters.

Operating Lease Commitments

The Company leases office space under various non-cancelable operating leases that expire at various dates through fiscal 2018. Future minimum lease payments under the Company’s operating leases as of October 31, 2014, are as follows (in thousands):

Purchase Commitments

The Company depends upon one contract manufacturer to manufacture its products and provide test services. Due to the lengthy lead times, the Company must order from its contract manufacturer well in advance and is obligated to pay for the materials when received and services once they are completed. As of October 31, 2014, the Company had approximately $8.1 million of outstanding purchase commitments to such contract manufacturer and other vendors.

In July 2013, the Company entered into an OEM agreement with a software vendor, which obligates the Company to pay up to an aggregate of $12.0 million, upon the software vendor meeting certain delivery milestones through December 2014. As of October 31, 2014, the remaining purchase commitment totaled $1.5 million.

In July 2012, we entered into an OEM agreement with a software vendor, which obligates us to pay an aggregate of $5.0 million in minimum royalty fees over a three-year period beginning after the first commercial shipment of the related product. The Company made the first commercial shipment in April 2013 and began paying royalties. As of October 31, 2014, the remaining purchase commitment was $3.3 million.

Advertising Commitment

In June 2012, the Company entered into an agreement with the Forty Niners SC Stadium Company LLC, which was amended in April 2014. As part of the amended agreement, the Company will receive advertising and related benefits at the stadium in Santa Clara, California from 2014 through 2023 for $1.8 million per year over the 10-year term. The balance of the Company’s first payment of approximately $1.25 million is due in November 2014. The Company recognized $0.6 million in advertising expenses related to this agreement in the three and nine months ended October 31, 2014. The advertising expense is expected to be recognized over the periods benefited by the agreement.

Other Contingencies

From time to time, the Company may become involved in legal proceedings or other claims and assessments arising in the ordinary course of business. The Company is not currently a party to any litigation matters, except as discussed above, which, individually or in the aggregate, are expected to have a material adverse effect on the Company’s business, financial condition or results of operations.

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9. Related-Party Transactions

Toshiba

As of October 31, 2014, Toshiba Corporation and its affiliates, including Toshiba America Electronic Components, Inc. (collectively Toshiba), owned 9.2 million shares of the Company’s common stock or 10% of the Company’s total common stock outstanding.

In June 2011, the Company entered into a Sales Agreement with Toshiba pursuant to which the Company agreed to purchase at least 70% of its annual flash memory requirement from Toshiba.

In July 2013, the Company signed an agreement with Toshiba for the development of PCIe cards and the sale of sample cards and received a prepayment of $16 million. The $16 million prepayment consisted of $8 million for services to be performed for the development of the PCIe cards and $8 million for the sale of sample PCIe cards and related support services. The Company retains all ownership of the intellectual property developed under the agreement. The Company applied ASC 605-25, Revenue Recognition-Multiple Element Arrangements to identify the deliverables. The Company concluded that the deliverables are development services, sample PCIe cards and support services for the sample PCIe cards. The Company recognized $6.0 million of revenue related to development services of PCIe cards and $3.1 million of revenue related to sample products during fiscal 2014 as determined on a relative fair value basis.

For the three months ended April 30, 2014, the Company recognized an additional $1.0 million under the agreement related to development services performed. The remaining $5.8 million advance payment was repaid to Toshiba in May 2014 pursuant to the Mutual Termination of Contract Agreement between Toshiba and the Company.

In addition to the development agreement, the Company recognized revenue of $0.5 million and $2.6 million related to the sale of All Flash Arrays and services to Toshiba during the three months ended October 31, 2014 and 2013, and $1.4 million and $5.0 million during the nine months ended October 31, 2014 and 2013, respectively.

The Company purchased $0.5 million and $7.8 million of NAND flash memory from Toshiba during the three months ended October 31, 2014 and 2013, respectively, and $6.5 million and $21.1 million during the nine months ended October 31, 2014 and 2013, respectively.

10. Restructuring Charges

During the fourth quarter of fiscal 2014, the Company initiated a restructuring plan focused on accelerating growth and increasing operating leverage, including a reorganization of its sales, marketing and engineering functions in order to better focus on the core segments of the flash-based storage market and improve operating and financial efficiency. In connection with the Company’s restructuring activities and decision to focus on its core All Flash Array market, the Company also decided to evaluate strategic alternatives for its PCIe Flash Memory Card product line and engaged an investment banker. In July 2014, the Company sold its PCIe product line to SK Hynix for $23.0 million.

The Company’s restructuring charges consist primarily of severance, facility costs and other related charges. Severance generally includes severance payments, payments for pro-rata share of earned incentive pay and health insurance coverage. Facility costs include rent expense and related common area maintenance charges attributable to a leased facility that will not be utilized over the remaining lease term.

As of October 31, 2014, total restructuring charges incurred to date were $7.9 million, primarily relating to severance and benefits. Information related to the Company’s restructuring related activities for the nine months ended October 31, 2014 is below (in thousands):

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11. Segment Information and Customer Concentration

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, the Company’s chief executive officer. The Company’s chief executive officer reviews financial information presented on a consolidated basis, accompanied by information about revenue by geographic region for purposes of allocating resources and evaluating financial performance. The Company has one business activity, and there are no segment managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. Accordingly, the Company considers itself to be in a single reportable segment and operating unit structure.

Revenue by geography is based on the billing address of the customer. The following table sets forth revenue and property and equipment by geographic area (in thousands):

Concentrations

For the three months ended October 31, 2014, two customers represented 20% and 13% of net revenue. One customer represented 12% of net revenues for the nine months ended October 31, 2014. For the three months ended October 31, 2013, one customer represented 20% of net revenue. One customer accounted for 10% of revenue for the nine months ended October 31, 2013. Revenue from the Company’s five largest customers for the three months ended October 31, 2014 and 2013 was 54% and 41%, respectively, and 32% for both the nine month periods ended October 31, 2014 and 2013. As a consequence of the limited number of customers and the concentrated nature of their purchases, the Company’s revenue, gross margin and operating results may fluctuate significantly from period to period and are difficult to estimate.

At October 31, 2014, one customer represented 21% of the accounts receivable balance. At January 31, 2014, two customers represented 27% and 15% of accounts receivable.

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12. Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, less the weighted-average unvested common stock subject to repurchase or forfeiture. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including preferred stock, stock options and warrants, to the extent dilutive. Basic and diluted net loss per share was the same for each period presented as the inclusion of all potential common shares outstanding would have been anti-dilutive. The following table sets forth the computation of historical basic and diluted net loss per share (in thousands, except per share data):

Since the Company experienced losses for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods. The following potential common stock equivalents that could potentially dilute net loss per share in the future were excluded from the computation of diluted net loss per share because including them would have been anti-dilutive for the periods presented (in thousands):

13. Debt and Line of Credit

Convertible Senior Notes

On September 19, 2014, the Company issued $120 million aggregate principal amount of Convertible Senior Notes (the “Notes”), which included $15 million of principal amount issued pursuant to an over-allotment option granted to the initial purchasers. The aggregate principal amount of the Notes is due on October 1, 2019, unless earlier repurchased, redeemed or converted. The Company received net proceeds of $115.4 million after deducting offering costs.

Interest on the outstanding principal amount of the Notes accrues at a rate of 4.25% per annum and is payable semi-annually on April 1 and October 1 of each year beginning on April 1, 2015. Interest began to accrue on September 24, 2014. The Notes are unsecured senior obligations of Violin. These Notes were offered and sold only to qualified institutional investors, as defined in Rule 144 under the Securities Act of 1933 (“Securities Act”), and the Notes and the shares of the Company’s common stock issuable upon conversion of the Notes have not been registered under the Securities Act.

The Company intends to use the net proceeds for general corporate purposes, including working capital and to repay all amounts outstanding and owed under its credit agreement with Silicon Valley Bank. In addition, the Company believes that the issuance of the Notes provides greater financial flexibility to the Company and should provide its customers and/or potential customers with greater confidence in the Company’s liquidity.

The Company may redeem the notes, at its option, in whole or in part on or after October 1, 2017, if the last reported sale price per share of its common stock equals or exceeds 127.5% of the applicable conversion price for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on the trading day immediately prior to the date on which the Company delivers notice of the redemption.

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Holders of the Notes may convert all or any portion of their notes, in multiples of $1,000 principal amount, at their option at any time prior to the close of business on the business day immediately preceding the maturity date. The Notes are convertible at an initial conversion rate of 177.8489 shares of our common stock per $1,000 principal amount of notes. This is equivalent to an initial conversion price of approximately $5.62 per share of the Company’s common stock, subject to adjustment upon the occurrence of certain dilutive events, or, if the Company obtains the required consent from its shareholders, into shares of the Company’s common stock, cash or a combination of cash and shares of its common stock, at the Company’s election. The conversion rate will be increased in the case of corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the indenture governing the notes). As of October 31, 2014, the Notes are not yet convertible.

The holders of the Notes will have the ability to require the Company to repurchase the notes in whole or in part upon the occurrence of an event that constitutes a “Fundamental Change” (as defined in the indenture governing the notes including such events as a “change in control” or “termination of trading”). In such case, the repurchase price would be 100% of the principal amount of the notes plus accrued and unpaid interest, if any. Certain events are also considered “Events of Default,” which may result in the acceleration of the maturity of the Notes, as described in the indenture governing the Notes, including, among other events, the Company’s failure to timely file with the SEC the reports required pursuant to Section 13 or 15(d) of the Securities Exchange of 1934, as amended. There were no “Fundamental Changes” or “Events of Default” that occurred during the three months ended October 31, 2014.

During the time that the Notes are outstanding, the Company may not at any time incur any indebtedness other than permitted debt, which is defined as: (a) revolving debt secured by the Company’s accounts receivable and the proceeds therefrom in a principal amount not to exceed $50 million; (b) unsecured indebtedness (including the Notes) in a principal amount not to exceed (when combined with any indebtedness incurred under clause (c) below) $150 million; (c) secured indebtedness secured by the Company’s intellectual property in a principal amount not to exceed (when combined with any indebtedness incurred under clause (b) above) $150 million; and (d) unsecured subordinated indebtedness in a principal amount not to exceed $50 million. Furthermore, the Company may incur indebtedness if (a) the Company is not in default and such additional debt would not put it into default and (b) the consolidated leverage ratio, as defined, after taking the additional debt into account does not exceed 5:1.

The conversion option of the Notes cannot be settled in cash prior to obtaining the necessary approval of the Company’s shareholders. In accordance with guidance in ASC 470-20, Debt with Conversion and Other Options and ASC 815-15, Embedded Derivatives, the Company determined that until shareholder approval that allows for settlement by issuing shares of the Company’s common stock, cash or a combination of cash and shares of its common stock, the embedded conversion components of the Notes do not require bifurcation and separate accounting. The $120 million principal amount of the Notes has been recorded as debt on the Company’s accompanying condensed consolidated balance sheet as of October 31, 2014.

The deferred debt issuance costs are recorded in other assets and are being amortized to interest and other financing expense using the effective interest method over the Notes’ five-year term. The deferred debt issuance costs have been classified as long-term as the underlying debt instrument is classified as a long-term liability in the Company’s accompanying condensed consolidated balance sheet.

The Company recorded $0.6 million to interest and other financing expense in the three and nine months ended October 31, 2014. $0.4 million of that amount represents interest expense related to the Notes’ contractual interest coupon while $0.2 million represents amortization of debt issuance costs.

Silicon Valley Bank Credit Agreement

In August 2014, the Company entered into a $40.0 million credit facility with Silicon Valley Bank (“SVB”) that provides for a term loan of $10.0 million and a line of credit with a maximum commitment of $30.0 million. The Company’s obligations under the agreement are secured by a first priority security interest in substantially all of its assets. Pursuant to this arrangement, the Company agreed to issue SVB a warrant to purchase 79,323 shares of its common stock, $0.0001 par value per share, at a price per share of $3.782. The warrant expires in August 2019.

In connection with the Notes offering, the Company terminated the credit facility and repaid the loan. In addition, the Company recorded a loss on extinguishment on the term loan amounting to $0.4 million, which relates to the write-off of debt issuance costs, including the warrant issued with the term loan. The loss on extinguishment is reflected as a part of interest and other financing expense in the accompanying condensed consolidated statements of operations.

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In October 2014, the Company entered into a new $20.0 million secured revolving credit facility with SVB. The Company’s obligations under the agreement are secured by a first priority security interest in the Company’s accounts receivable and proceeds therefrom. Borrowings under this facility will bear interest at a rate per annum of either (a) the sum of (i) the Eurodollar rate plus (ii) 5.00%, or (b) the sum of (i) ABR plus (ii) 2.00%. The Company drew down $10.0 million on this facility in October 2014. This balance is reflected as part of short-term borrowings in the accompanying condensed consolidated balance sheet. The line of credit expires on October 24, 2016, subject to acceleration upon certain specified events of defaults.

The Company recorded approximately $0.4 million to interest and other financing expense as debt extinguishment costs in association with the termination of the original facility. The remaining unamortized costs associated with these two transactions are reflected in other assets and are being amortized to interest and other financing expense using the effective interest method over the facility’s two-year term.

TriplePoint Capital Debt Facility

During May 2013, the Company entered into a $50.0 million debt arrangement with TriplePoint Capital LLC, or TriplePoint. The facility had first secured interest in substantially all of the Company’s assets and intellectual property other than $7.5 million of accounts receivable. The Company had one year to utilize the facility, which has a number of borrowing options ranging in duration from three months up to five years. Depending on the loan option, annualized interest rates range from 7.00% to 13.50%. In addition, the loans had an end-of-term payment, ranging from 0.50% to 14.00% of the principal amount depending on the duration of the loan. The facility was terminated in May 2014.

Other Short-term Borrowings

Line of Credit: In July 2013, the Company entered into a $7.5 million line of credit with Comerica Bank. The Company could borrow up to 80% of its current U.S.-based receivables, or $7.5 million, whichever is lower. The line was secured against the Company’s accounts receivable and collections thereof as well as its intellectual property. The line bore interest of prime plus 1%. In August 2014, the Company repaid all outstanding amounts under the line of credit and terminated the Loan and Security Agreement with Comerica.

Product Financing Arrangement: In July 2014, the Company entered into a managed inventory program to run through December 2014. Under the agreement, the Company gave title to 194,000 units of product to the counterparty for approximately $2.3 million. The Company is obligated to repurchase the product in five equal monthly installments, including predetermined transaction fees of between 4.5% and 6%. As of October 31, 2014, the outstanding balance of $0.9 million is reflected as part of short-term borrowings on the condensed consolidated balance sheets.

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The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with the (1) unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and (2) the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended January 31, 2014 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on April 16, 2014 (File No. 001-36069). In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors”, set forth in Part II, Item 1A of this Form 10-Q. We disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements unless required by law.

Overview

We were incorporated in 2005 with the goal of bringing storage performance in line with advancements in server and network technologies. Since our inception, we have focused on persistent memory-based technology as the key to solving the performance limitations of traditional storage solutions in the data center environment. We have invested significantly in our research and development efforts to design hardware and software at each level of the system architecture starting with memory and optimized through the array level to capitalize on the benefits of flash technology. We were recapitalized in 2009. In 2009, we transitioned to build an enterprise-class all-flash storage solution serving diverse end markets and applications.

During the second quarter of fiscal 2015, we announced global availability of enterprise data services software on the Concerto 7000 All Flash Array. The software includes synchronous and asynchronous replication and stretch metro cluster capabilities. Storage snapshots, thin provisioning, LUN and capacity expansion, as well as advanced data protection and storage scaling are also available. Several critical elements of the Concerto enterprise data services software, including continuous data protection, WAN optimized replication and in-flight encryption can all be configured.

We market and sell our products directly to end-customers and through channel partners, including systems vendors, technology partners and resellers. As of October 31, 2014, we had 144 sales and marketing employees worldwide as well as over 100 channel partners in over 30 countries. As of October 31, 2014, we believe our All Flash Arrays have been deployed by over 350 end-customers. We and our authorized service providers also sell support services to our end-customers. A limited number of customers have accounted for a significant portion of our revenue, and the composition of the group of our largest customers has changed from period to period. Some of our end-customers make periodic purchases of our system solutions in large quantities to complete or upgrade specific large-scale storage installations. Purchases are typically made on a purchase order basis rather than pursuant to a long-term contract. Revenue from our five largest customers was 54% and 41% for the three months ended October 31, 2014 and 2013, respectively, and 32% for both nine-month periods ended October 31, 2014 and 2013. As a consequence of these concentrated purchases by a shifting customer base, we believe that revenue may fluctuate in future periods, and period-to-period comparisons of revenue and operating results are not necessarily meaningful and should not be relied upon as an indication of future performance.

Our sales are principally denominated in U.S. dollars. Revenue from customers with a bill-to location in the United States accounted for 79% and 58% of total revenue for the three months ended October 31, 2014 and 2013, respectively, and 67% and 66% of total revenue for the nine months ended October 31, 2014 and 2013, respectively.

We outsource the manufacturing of our hardware products to a single contract manufacturer, Flextronics. We believe this arrangement makes our operations more efficient and flexible. We procure the flash memory components used in our products directly from Toshiba. Our manufacturer procures, on our behalf, the remaining components used in our products. To date, we have not experienced a material shortage of supply of any components. However, because we only have one manufacturer qualified to manufacture our products and some of our components, such as flash memory, are procured from a single-source supplier, we could face product shortages and component shortages, which could prevent us from fulfilling customer orders.

In October 2013, we completed our initial public offering (“IPO”), in which we issued and sold 18,000,000 shares of our common stock and received net proceeds of $145.8 million. In September 2014, we issued convertible senior notes, or the Notes, and received gross proceeds of $120 million, which included $15 million of principal amount issued pursuant to an over-allotment option granted to the initial purchasers.

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Key Trends Affecting Our Results of Operations

Adoption of Flash-Based Solutions

There has been an increasing shift towards the use of persistent memory-based solutions by organizations. Traditional data center architectures have typically deployed disk-based storage approaches. We believe that flash memory technology has the significant potential to displace HDDs in primary storage solutions and bring storage solutions in line with other advanced data center technologies. Our success, however, depends on the adoption of flash-based solutions in enterprise data centers. A lack of demand for flash-based storage solutions for any reason, including technological challenges associated with the use of flash memory or the adoption of competing technologies and products, would adversely affect our growth prospects. To the extent more enterprise IT organizations recognize the benefits of flash memory in data center storage solutions and as the adoption of flash memory technology as primary storage increases, our target customer base will expand.

Relationships with Systems Vendors and Technology Partners

One of the keys to growing our business is our ability to broaden our routes to market and our geographic reach. A key component of this strategy is our intention to establish relationships with systems vendors and technology partners. Systems vendors incorporate our products into a broader enterprise solution offered by them. These relationships also allow us to leverage the account control, marketing, brand and other resources of our systems vendor partners to reach more potential customers and broaden our target markets. Technology partners allow us to enhance our product offerings by leveraging leading technologies that are well-accepted in the marketplace. Our relationships with technology partners also extend our reach into different end markets and new target end-customers. Continued success in establishing relationships with systems vendors and technology partners would allow us to grow our business by expanding our target markets and distribution capabilities.

Size of our Field Organization, Including Sales, Field Application Engineers and Customer Support Personnel

We target large customer storage deployments in the data center. Often, our end-customer relationships start with a limited initial deployment of our products to demonstrate the performance benefits of our solution. Our objective is to leverage initial deployments into large-scale deployments as our customers’ experience with our products and their storage performance and capacity requirements increase. In an effort to do this, we maintain a very close relationship with our end-customers through the efforts of our field organization. Our ability to grow our business and to establish a growing number of these high-touch end-customer relationships is dependent upon our ability to expand the size of our field organization in an efficient and effective manner. As we grow our field organization, we must closely monitor productivity to ensure our investments in personnel are translating into product sales and positive operating results.

Cost of Flash Memory

A significant percentage of our cost of revenue is the cost of flash memory. We have a relationship with Toshiba, our sole supplier of our flash memory components. Although we have historically received competitive pricing from Toshiba, our agreement with Toshiba does not provide us with fixed pricing. Under the agreement with Toshiba, we are required to purchase 70% of our annual requirements of flash memory from Toshiba, subject to specified conditions, and design our products to be substantially compatible with Toshiba. However, our supply of flash memory from Toshiba is not guaranteed. There are many variables that may change our cost to procure flash memory. If the component costs of flash memory were to increase, we may not be able to pass on the cost increase to our customers, which could harm our gross margin and operating results. If the component costs of flash memory were to decrease, we may be able to leverage these cost savings into offering a more competitive solution to our end-customers.

Backlog

Product backlog includes orders confirmed for products scheduled to be shipped generally within two weeks to customers. We believe that our product backlog, as of any particular date, is not necessarily indicative of actual product revenue for any future period because a substantial portion of our products is sold on the basis of standard purchase orders that are cancellable prior to shipment without penalty. Orders for services for multiple years are billed upfront shortly after their receipt and are included in deferred revenue until such time revenue recognition obligations are satisfied. Timing of revenue recognition for services may vary depending on the contractual service period or when the services are rendered.

Components of Consolidated Statements of Operations

Revenue

We derive revenue primarily from the sale of our All Flash Array products, software and related support and services. We sell our products on a purchase order basis directly to end-customers and through channel partners, including systems vendors and resellers. Our mix of sales between end-customers and channel partners impacts the average selling price of our products. We derive support services revenue from the sale of our premium support services. These support services are provided pursuant to support terms that generally are for either one- or three-year durations. Support services are typically billed in advance on an annual basis or at the inception of a multiple year support contract, and revenue is recognized ratably over the support period. We expect our support services revenue to continue to grow in future periods as support contracts are renewed and the installed base of All Flash Arrays grows.

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Cost of Revenue

Cost of revenue consists primarily of component costs, amounts paid to our contract manufacturer to assemble our products, shipping and logistics costs and estimated warranty obligations. The largest portion of our cost of revenue consists of the cost of flash memory components. Neither our contract manufacturer nor we enter into supply contracts with fixed pricing for our product components, including our flash memory, which can cause our cost of revenue to fluctuate from quarter to quarter. We may not be able to pass flash or component cost increases to our customers immediately or at all resulting in lower gross margins. Cost of revenue is recorded when the related product revenue is recognized. Cost of revenue also includes personnel expenses related to customer support and carrying value adjustments recorded for excess and obsolete inventory. We intend to add customer support personnel to increase our customer support efforts as we increase the installed base of our All Flash Arrays globally.

Operating Expenses

Operating expenses consist primarily of sales and marketing, research and development and general and administrative expenses. The largest component of our operating expenses is personnel costs, consisting of salaries, benefits and incentive compensation for our employees, including stock-based compensation. As a result, operating expenses have increased significantly over the periods presented. We expect operating expenses to decrease in absolute dollars over the next several quarters as we continue to restructure our operations; however, they may fluctuate from quarter to quarter or as a percentage of revenue from period to period, as we grow our revenue.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel costs, incentive compensation, marketing programs, travel-related expenses, consulting expenses associated with sales and marketing activities and allocated facilities costs. Our sales personnel are typically not immediately productive, and therefore, the increase in sales and marketing expenses is not immediately offset by increased revenue and may not result in increased revenue over the long-term. The timing of our hiring of new sales personnel and the rate at which they generate incremental revenue could cause our future period-to-period financial performance to fluctuate. We have generated a larger percentage of our sales from direct sales or through resellers with whom we will be directly involved in the sales process with the end-customer. This type of selling typically requires greater involvement of our direct sales force than sales to systems vendors and may increase our sales and marketing expense as a percentage of revenue. We are focused on improving the productivity of our direct sales teams. In addition, we continue to work with our technology partners on joint solutions and to develop go-to-market capabilities through channel partners. To the extent we are successful, these activities will provide incremental sales leverage to our existing direct selling efforts.

Research and Development

Research and development expenses consist primarily of personnel costs, prototype expenses, software tools, consulting services and allocated facilities costs. Consulting services generally consist of contracted engineering consulting for specific projects on an as-required basis. We recognize research and development expense as incurred. We expect to continue to devote substantial resources to the development of our products including the development of new software capabilities. We believe that these investments are necessary to maintain and improve our competitive position. In particular, our recent hiring has been focused on software engineers. We believe our current level of personnel is sufficient to develop our products in the near term.

General and Administrative

General and administrative expenses consist primarily of personnel costs, legal expenses, consulting and professional services, insurance and allocated facilities costs for our executive, finance, human resources and legal organizations. While we expect personnel costs to be the primary component of general and administrative expenses, we also expect to incur significant additional legal and accounting costs related to compliance with rules and regulations implemented by the SEC and the NYSE, as well as additional insurance, investor relations and other costs associated with being a public company.

Other Operating Expenses

Other operating expenses consist of the gain on the sale of our PCIe product line, costs associated with the restructuring activities and expenses for a legal settlement.

Other Expense, Net

Other expense, net generally consists of interest income and foreign currency gains and losses.

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Interest and Other Financing Expense

Interest and other financing expense consists of interest related to convertible notes and debt as well as amortization of deferred debt issuance costs associated with the securities. Also included in interest and other financing expense is the loss on extinguishment of the Silicon Valley Bank term loan and the costs associated with the reduction of the revolving credit facility.

Provision for Income Taxes

From inception through October 31, 2014, we incurred operating losses and, accordingly, have not recorded a provision for U.S. federal income taxes but have recorded provisions for foreign income and state taxes. As of January 31, 2014, we had approximately $150.5 million and $65.8 million of net operating loss carry forwards available to offset future taxable income for both Federal and State purposes, respectively. If not utilized, these carry forward losses will expire in various amounts for Federal and State tax purposes beginning in 2026 and 2014, respectively.

Results of Operations

The following table summarizes our historical condensed consolidated statements of operations data for the periods shown (in thousands, except per share data):