What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-06-28 compared with 2023-06-06 · 1763 added, 263 removed, 756 unchanged (73% of the section changed)

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Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Quantum Corporation

Opinion on the financial statements

We have audited the accompanying consolidated balance sheet of Quantum Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of March 31, 2024, the related consolidated statement of operations and comprehensive loss, consolidated statement of stockholders’ deficit, and cash flows for the year ended March 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024, and the results of its operations and its cash flows for the year ended March 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Going concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, as of March 31, 2024, the Company was in default of certain debt covenants of its term debt and credit facility and obtained a waiver from its lenders.

All defaults existing at March 31, 2024 were waived by the lenders through July 2024.

The Company believes it is probable that it will be in violation certain debt covenants at the next testing date of July 2024.

The Company’s plan, which is also described in Note 1, contemplates the Company obtaining additional covenant waivers or refinancing the existing term debt and credit facility.

Additionally, the Company is evaluating strategies to obtain the additional funding, including potential asset sales.

In the event the Company is unable to obtain an extension of the waiver additional funding will be required to pay the amount due on the revolver and term loan.

However, the Company may be unable to obtain an extension of the waiver or obtain additional funding.

As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all.

The Company’s ability to achieve this plan is uncertain and raises substantial doubt about its ability to continue as a going concern.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Determination of Standalone Selling Price

As described further in Note 1 to the financial statements, the Company’s contracts with customers often include multiple performance obligations.

The transaction price of each contract is allocated to individual performance obligations based upon relative stand-alone selling price (“SSP”).

The SSP of performance obligations is determined based on observable prices at which the Company separately sells the products and services or alternative methods.

We identified the determination of the SSP of performance obligations as a critical audit matter.

The principal consideration for our assessment that the determination of the SSP of performance obligations represents a critical audit matter is that the estimates made in determining SSP involve significant judgments.

Evaluating the appropriateness of these estimates requires a high degree of auditor judgment and an increased extent of effort.

Our audit procedures related to the determination of the SSP of performance obligations included the following procedures, among others:

• Tested management’s process for developing the estimates of SSP by evaluating the appropriateness of the overall methodology used by management to develop the estimates by considering (i) whether the methodology maximized the use of observable inputs available and (ii) making inquiries of staff members outside of the accounting department.

• Tested the accuracy of management’s calculations of estimated selling prices.

• In the cases where directly observable standalone sales were not available, for selected items we evaluated whether the significant assumptions used by management were reasonable by (i) considering the consistency with external market and competitor margin data and (ii) making inquiries of staff members outside of the accounting department.

/s/ GRANT THORNTON LLP

We have served as the Company's auditor since 2023.

Bellevue, Washington

June 28, 2024

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

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San Jose, California

Opinions on the Consolidated Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Quantum Corporation and its subsidiaries (the Company) as of March 31, 2023 and 2022 and the related consolidated statements of operations, comprehensive loss, stockholders' deficit, and cash flows for each of the years in the three-year period ended March 31, 2023, and the related notes (collectively referred to as the consolidated financial statements).

We also have audited the Company's internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal controls over financial reporting as of March 31, 2023, based on the criteria established in Internal Controls - Integrated Framework (2013) issued by COSO.

Opinions on the Financial Statements

We have audited the accompanying consolidated balance sheets of Quantum Corporation (the Company) as of March 31, 2023 and 2022 and the related consolidated statements of operations and comprehensive loss, stockholders' deficit, and cash flows for each of the two years in the period ended March 31, 2023, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Restatement of Previously Issued Financial Statements

As discussed in Note 14 to the consolidated financial statements, the 2023 and 2022 consolidated financial statements have been restated to correct misstatements.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company's consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable

assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition — Refer to Note 1 to the Consolidated Financial Statements

Critical Audit Matter Description

The Company recognizes revenue from sales of products as control is transferred to customers, which generally occurs at the point of shipment or upon delivery, unless customer acceptance is uncertain.

Revenue from distributors is recognized when the customer obtains control of the product, which generally occurs at the point of shipment or upon delivery, unless customer acceptance is uncertain.

We identified the timing of revenue recognition for product sales (i.e., whether the Company recorded product sales in the appropriate fiscal year) as a critical audit matter because of the significant judgments used when applying Accounting Standards Codification Topic 606 – Revenue from Contracts with Customers – to contracts with customers.

The Company ships products to a broad network of distributors, value-added resellers (“VARs”), direct marketing resellers (“DMRs”), original equipment manufacturers (“OEMs”) and other suppliers to fulfill performance obligations.

This made auditing the timing of revenue recognition for product sales challenging and required significant audit effort to validate the timing of revenue recognition.

How the Critical Audit Matter Was Addressed in the Audit

Our principal audit procedures related to the timing of revenue recognition for product sales included the following, among others:

• We tested the effectiveness of internal controls over the timing of revenue recognition.

• We selected a sample of product sales, obtained the invoice, purchase order, customer contract or agreement, packing list, bill of lading, proof of delivery, and evidence of cash collection, to validate no customer acceptance clauses existed that would preclude revenue recognition, and revenue was recognized in the appropriate fiscal year.

• We selected a sample of credit memos from the period immediately subsequent to the Company’s fiscal year end and the related invoice, return merchandise authorization form, and shipping documents, and validated revenue was recognized in the fiscal year ended March 31, 2023 only when control was transferred to the customer and if applicable, customer acceptance had occurred.

• We obtained and evaluated internal certifications provided by the Company’s sales employees to validate no side agreements existed that could impact the timing of revenue recognition.

Inventories – Excess and Obsolescence write down — Refer to Note 1 to the Consolidated Financial Statements

Critical Audit Matter Description

The Company’s manufacturing and service parts inventories are recorded on a first-in, first-out basis, subject to the lower of cost or net realizable value, and as necessary, the Company writes down the valuation of inventories for excess and obsolescence (“E&O”).

We identified the E&O write-down as a critical audit matter because of the judgments management makes to estimate future parts demand.

This required a high degree of auditor judgment and significant effort to validate.

How the Critical Audit Matter Was Addressed in the Audit

Our principal audit procedures related to the Company’s excess and obsolescence write-down included the following procedures, among others:

• We tested the effectiveness of internal controls over inventory valuation.

• We gained an understanding and evaluated the Company’s methodology for determining inventory that is excess or obsolete and the key assumptions and judgments made as part of the process.

• We evaluated the reasonableness of sales demand, tested the completeness and accuracy of prior usage data, and specific product considerations used to estimate parts demand.

• We verified that estimated parts demand was properly compared to inventories on hand to determine excess inventory, and that such excess was properly written down to net realizable value.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provides a reasonable basis for our opinion.

/s/ Armanino LLP

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We have served as the Company's auditor since 2019.

In 2023, we became the predecessor auditor.

June 6, 2023, except for the effects of the tables reflecting the impact of the restatement as of and for the years ended March 31, 2023 and 2022 discussed in Note 14 and Note 15 (not presented herein) to the consolidated financial statements appearing under Item 8 of the Company’s 2024 Annual Report (Form 10-K), as to which the date is June 28, 2024.

QUANTUM CORPORATION

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(in thousands, except per share amounts)

2024 2023 2022

Restated Restated

Current assets:

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Restricted cash 168 212 283

Accounts receivable, net of allowance for doubtful accounts of $ 201 and $ 422 , respectively

Accounts receivable, net of allowance for credit losses of $ 22 , $ 201 and $ 422 , respectively

67,788 72,464 69,354

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Accounts payable $ 26,087 $ 35,716 $ 34,220

Deferred revenue, current portion 82,504 86,517

Long-term debt, current portion 5,000 4,375

Accrued compensation 18,214 15,710 16,141

Deferred revenue, current portion 78,511 79,807 87,128

Term debt, current portion 82,496 5,000 4,375

Revolving credit facility 26,604 — —

Warrant liabilities 4,046 7,989 18,237

Other accrued liabilities 13,986 13,666 16,562

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Revolving credit facility — 16,750 17,735

Long-term debt, net of current portion 66,354 89,448

Term debt, net of current portion — 66,354 89,448

Operating lease liabilities 9,621 10,169 9,891

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Preferred stock, 20,000 shares authorized;

no shares issued as of March 31, 2023 and 2022

no shares issued as of March 31, 2024, 2023 and 2022, respectively

Common stock:

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QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share amounts)

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2024 2023 2022

Restated Restated

Product $ 174,879 $ 274,854 $ 230,814

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Operating expenses

Research and development 44,555 51,812 41,703

Sales and marketing 60,893 66,034 62,957

General and administrative 51,547 47,752 45,256

Research and development 38,046 44,555 51,812

Restructuring charges 3,280 1,605 850

Total operating expenses 153,766 159,946 160,875

Income (loss) from operations

( 26,007 ) ( 13,840 ) 8,403

Loss from operations ( 28,877 ) ( 16,682 ) ( 3,235 )

Other income (expense), net ( 1,746 ) 1,956 ( 251 )

Interest expense ( 15,089 ) ( 10,560 ) ( 11,888 )

Change in fair value of warrant liability 5,137 10,250 60,030

Loss on debt extinguishment, net — ( 1,392 ) ( 4,960 )

Net loss before income taxes

( 36,003 ) ( 30,939 ) ( 35,220 )

Net income (loss) before income taxes ( 40,575 ) ( 16,428 ) 39,696

Income tax provision 711 1,940 1,341

Net loss $ ( 37,943 ) $ ( 32,280 ) $ ( 35,459 )

Deemed dividend on warrants ( 389 ) — —

Net loss attributable to common stockholders $ ( 38,332 ) $ ( 32,280 ) $ ( 35,459 )

Net loss per share attributable to common stockholders - basic and diluted $ ( 0.42 ) $ ( 0.55 ) $ ( 0.83 )

Weighted average shares - basic and diluted 90,348 58,871 42,852

Net loss $ ( 37,943 ) $ ( 32,280 ) $ ( 35,459 )

Net income (loss) $ ( 41,286 ) $ ( 18,368 ) $ 38,355

Net income (loss) per share - basic $ ( 0.43 ) $ ( 0.20 ) $ 0.65

Net income (loss) per share - diluted $ ( 0.43 ) $ ( 0.28 ) $ ( 0.32 )

Weighted average shares - basic 95,087 90,348 58,871

Weighted average shares - diluted 95,087 91,188 66,017

Net income (loss) $ ( 41,286 ) $ ( 18,368 ) $ 38,355

Foreign currency translation adjustments, net ( 612 ) ( 158 ) ( 567 )

Total comprehensive loss $ ( 38,101 ) $ ( 32,847 ) $ ( 34,793 )

Total comprehensive income (loss) $ ( 41,898 ) $ ( 18,526 ) $ 37,788

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

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2024 2023 2022

Restated Restated

Operating activities

Net income (loss)

$ ( 41,286 ) $ ( 18,368 ) $ 38,355

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

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization 9,313 10,118 9,418

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Stock-based compensation 4,721 10,750 13,829

Non-cash income tax benefit — — ( 577 )

Non-cash loss on debt extinguishment — — 10,087

Change in fair value of warrant liabilities ( 3,943 ) ( 10,250 ) ( 60,030 )

Other non-cash 3,304 ( 2,067 ) ( 832 )

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Repayments of credit facility ( 412,704 ) ( 498,665 ) ( 291,265 )

Borrowings of paycheck protection program — — 10,000

Proceeds from secondary offering, net — — 96,756

Payment of taxes due upon vesting of restricted stock — — ( 236 )

Proceeds from issuance of common stock — 67,146 1,762

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Paid-in-kind interest $ 2,314 $ 319 $ —

Deemed dividend $ 389 $ — $ —

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the statement of cash flows:

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Restricted cash, current 168 212 283

Restricted cash, long-term — — 5,000

Total cash, cash equivalents and restricted cash at the end of period $ 25,860 $ 26,175 $ 5,493

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Shares Amount

Balance, March 31, 2020 39,905 $ 399 $ 505,762 $ ( 703,164 ) $ ( 1,522 ) $ ( 198,525 )

Net loss — — — ( 35,459 ) — ( 35,459 )

Balances as restated, March 31, 2021* 56,915 $ 570 $ 606,431 $ ( 806,081 ) $ ( 856 ) $ ( 199,936 )

Net income — — — 38,355 — 38,355

Foreign currency translation adjustments, net of income taxes — — — — ( 567 ) ( 567 )

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Shares issued under employee incentive plans, net 2,308 23 ( 23 ) — — —

Shares surrendered for employees' tax liability upon settlement of restricted stock units ( 44 ) — ( 236 ) — — ( 236 )

Shares issued in connection with business acquisition 821 8 2,810 — — 2,818

Shares issued in connection with secondary equity offering, net 15,109 151 96,604 — — 96,755

Warrants issued related to long-term debt — — 11,515 — — 11,515

Stock-based compensation — — 13,829 — — 13,829

Balance, March 31, 2021 56,915 $ 570 $ 626,664 $ ( 738,623 ) $ ( 856 ) $ ( 112,245 )

Restated, March 31, 2022 60,433 $ 605 $ 624,805 $ ( 767,726 ) $ ( 1,423 ) $ ( 143,739 )

Net loss — — — ( 18,368 ) — ( 18,368 )

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Shares issued under employee incentive plans, net 2,180 21 ( 21 ) — — —

Shares issued in connection with rights offering, net 30,000 300 65,949 — — 66,249

Shares issued in connection with business acquisition 361 4 ( 4 ) — — —

Stock-based compensation — — 10,750 — — 10,750

Balance, March 31, 2022 60,433 $ 605 $ 645,038 $ ( 770,903 ) $ ( 1,423 ) $ ( 126,683 )

Restated, March 31, 2023 93,574 $ 936 $ 702,370 $ ( 786,094 ) $ ( 1,581 ) $ ( 84,369 )

Net loss — — — ( 41,286 ) — ( 41,286 )

Foreign currency translation adjustments, net of income taxes — — — — ( 612 ) ( 612 )

Shares issued under employee stock purchase plan 600 6 891 — — 897

Shares issued under employee incentive plans, net 2,276 23 ( 23 ) — — —

Shares issued in connection with rights offering, net 30,000 300 65,949 — — 66,249

Shares issued in connection with business acquisition 361 4 ( 4 ) — — —

Settlement of warrant down round provision — — 389 — — 389

Deemed dividend on warrants — — ( 389 ) — — ( 389 )

Warrants issued related to long-term debt — — 49 — — 49

Stock-based compensation — — 4,720 — — 4,720

Balance, March 31, 2023 93,574 $ 936 $ 722,603 $ ( 808,846 ) $ ( 1,581 ) $ ( 86,888 )

March 31, 2024 95,850 $ 959 $ 707,116 $ ( 827,380 ) $ ( 2,193 ) $ ( 121,498 )

* The March 31, 2021 ending total shareholders’ deficit reflects the impact of the restatement totaling $ 87.7 million related to SSP and warrant classification adjustments prior to that time, including a $ 67.5 million increase of Accumulated deficit and a $ 20.2 million decrease of Additional paid-in -capital.

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

INDEX TO NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Description of Business and Summary of Significant Accounting Policies

Revenue Recognition

INDEX TO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Description of Business and Significant Accounting Policies

Business Acquisitions

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Restructuring Charges

Net Loss Per Share

Net Income (Loss) Per Share

Commitments and Contingencies

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Subsequent Events

Restatement of Previously Issued Financial Statements

Quarterly Financial Summary (Unaudited)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Description of Business

Quantum Corporation, together with its consolidated subsidiaries (“Quantum” or the “Company”), is a leader in storing and managing digital video and other forms of unstructured data, delivering top streaming performance for video and rich media applications, along with low-cost, long-term storage systems for data protection and archiving.

Quantum Corporation, together with its consolidated subsidiaries (“Quantum” or the “Company”), stores and manages digital video and other forms of unstructured data, providing streaming performance for video and rich media applications, along with low-cost, long-term storage systems for data protection and archiving.

The Company helps customers around the world capture, create and share digital data and preserve and protect it for decades.

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To determine whether or not the entity is consolidated with the Company’s results, the Company also evaluates which interests are variable interests in the VIE and which party is the primary beneficiary of the VIE.

The accompanying consolidated financial statements of the Company have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern.

The Company generated negative cash flows from operations of approximately $ 4.9 million, $ 33.7 million and $ 0.8 million for the fiscal years ended March 31, 2023, 2022 and 2021, respectively, and generated net losses of approximately $ 37.9 million, $ 32.3 million, and $ 35.5 million for the fiscal years ended March 31, 2023, 2022 and 2021, respectively.

The Company has funded

operations through the sale of common stock, term debt borrowings and revolving credit facility borrowings described in Note 5:

Management believes that it has the ability to obtain additional debt or equity financing, if required, and has historically been able to do so.

Management also believes that current working capital, borrowings available under the revolving credit facility and future equity financing or debt financing (including additional Term Debt borrowings described in Note 13:

Subsequent Events) will provide the Company with sufficient capital to fund operations for at least one year from the consolidated financial statement issuance date.

There is no assurance that the Company would be able to obtain sufficient additional funds when needed or that such funds, if available, would be obtainable on terms satisfactory to the Company.

Principles of Consolidation

The consolidated financial statements include the accounts of Quantum and its wholly owned subsidiaries.

All intercompany accounts and transactions have been eliminated.

Going Concern

These consolidated financial statements have been prepared in accordance with GAAP assuming the Company will continue as a going concern.

The going concern assumption contemplates the realization of assets and satisfaction

of liabilities in the normal course of business.

However, substantial doubt about the Company’s ability to continue as a going concern exists.

The Company was in violation of its March 31, 2024 net leverage covenant and received a waiver from its lenders in May 2024 (See Note 13:

Subsequent Events for additional information) which provides forbearance from the lenders exercising their rights to immediately call the loans until the next net leverage covenant testing date in July 2024.

However, the Company believes it is probable that it will be in violation of the net leverage covenant at the next testing date.

If the Company is unable to obtain additional waivers, the Term Debt and PNC Credit Facility will become immediately due, and additional liquidity will be required to satisfy the obligations.

Due to the fact that a violation of the debt covenants results in the debt becoming currently payable, the long-term portion of the Term Debt and PNC Credit Facility have been classified as a current liability in the accompanying consolidated balance sheet as of March 31, 2024.

Debt for additional information related to the Company’s debt agreements.

The Company is currently working to obtain additional covenant waivers or refinance the existing Term Debt and PNC Credit Facility.

Additionally, the Company is evaluating strategies to obtain the additional funding, including potential asset sales.

In the event the Company is unable to obtain an extension of the waiver additional funding will be required to pay the amount due on the revolver and term loan.

However, the Company may be unable to obtain an extension of the waiver, or obtain additional funding.

As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all.

The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

Our credit facilities are collateralized by a pledge of all our assets.

Restatement of Previously Issued Consolidated Financial Statements

During the year ended March 31, 2024, the Company identified multiple prior period misstatements.

In accordance with Staff Accounting Bulletins No.

99”) Topic 1.M, “Materiality” and SAB No.

99 Topic 1.N “Considering the Effects of Misstatements when Quantifying Misstatements in the Current Year Financial Statements,” the Company assessed the materiality of these errors to its previously issued consolidated financial statements.

Based upon the Company’s evaluation of both quantitative and qualitative factors, the Company concluded the errors were material to the Company’s previously issued consolidated financial statements for the fiscal years ended March 31, 2023 and 2022.

Accordingly, the Company has restated the accompanying fiscal years ended March 31, 2023 and 2022 Consolidated Financial Statements for the fiscal years ended March 31, 2023 and 2022.

Restatement of Previously Issued Financial Statements.

Use of Estimates

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Actual results could differ from these estimates and assumptions due to risks and uncertainties.

Such estimates include, but are not limited to, the determination of standalone selling price for revenue arrangements with multiple performance obligations, useful lives of intangible assets and property and equipment, stock-based compensation and provision for income taxes including related reserves.

Such estimates include, but are not limited to, the determination of standalone selling price for revenue arrangements with multiple performance obligations, inventory adjustments, useful lives of intangible assets and property and equipment, stock-based compensation, fair value of warrants, and provision for income taxes including related reserves.

Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

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The Company has not experienced any losses with these financial institutions and does not believe such balances are exposed to significant credit risk.

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts for estimated losses based on historical experience and expected collectability of outstanding accounts receivable.

Restricted Cash

Restricted cash is comprised of bank guarantees and similar required minimum balances that serve as cash collateral in connection with various items including insurance requirements, value added taxes, ongoing tax audits and leases in certain countries.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recorded at the invoiced amount, and stated at realizable value, net of an allowance for credit losses.

The Company maintains an allowance for credit losses for estimated losses based on historical experience and expected collectability of outstanding accounts receivable.

The Company performs ongoing credit evaluations of its customers’ financial condition, and for the majority of its customers require no collateral.

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The Company will write-off customer balances in full to the reserve when it has determined that the balance is not recoverable.

Changes in the allowance for doubtful accounts are recorded in general and administrative expenses.

Changes in the allowance for credit losses are recorded in general and administrative expenses.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Unadjusted quoted prices in active markets for identical assets or liabilities.

Other than quoted prices that are observable in the market for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or model-derived valuations or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Inputs are unobservable and reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company's financial instruments consist of Level 3 liabilities.

The carrying value of our financial instruments, excluding debt and warrants, approximates fair value.

Manufacturing Inventories

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Judgment is used when applying these impairment rules to determine the timing of impairment testing, the undiscounted cash flows used to assess impairments and the fair value of the asset group.

In fiscal 2022, we entered into a new lease in Centennial, Colorado and we incurred material leasehold improvements which are being amortized over the term of the lease.

At the time of inception, this term was 15.5 years and as at March 31, 2024 there are 13.4 years remaining.

Business Combinations

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During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the estimated fair value of the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

The results of operations of an acquired business is included in its consolidated financial statements from the date of acquisition.

The results of operations of an acquired business are included in its consolidated financial statements from the date of acquisition.

Acquisition-related expenses are expensed as incurred.

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Lease liabilities are recognized at the present value of the future lease payments at commencement date.

The interest rate implicit in the Company's operating leases is not readily determinable, and therefore an incremental borrowing rate is estimated to determine the present value of future payments.

The interest rate implicit in the Company's operating leases are not readily determinable, and therefore an incremental borrowing rate is estimated to determine the present value of future payments.

The estimated incremental borrowing rate factors in a hypothetical interest rate on a collateralized basis with similar terms, payments, and economic environments.

The operating lease right-of-use ("ROU") asset is determined based on the lease liability initially established and reduced for any prepaid lease payments and any lease incentives.

The operating lease right-of-use ("ROU") asset is determined based on the lease liability initially established and reduced for any

prepaid lease payments and any lease incentives.

The Company accounts for the lease and non-lease components of operating lease contract consideration as a single lease component.

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The Company generally uses the base, non-cancelable, lease term when recognizing the lease assets and liabilities, unless it is reasonably certain that an extension or termination option will be exercised.

Certain operating leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the leased asset.

Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature.

These variable lease costs are recognized as a variable lease expense when incurred.

In addition, certain operating lease agreements contain tenant improvement allowances from the Company's landlords.

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The Company generates revenue from three main sources:

(1) product, (2) professional services, and (3) royalties.

(1) product, (2) service and subscription, and (3) royalties.

Sales tax collected on sales is netted against government remittances and thus, recorded on a net basis.

The Company's performance obligations are satisfied at a point in time or over time as stand ready obligations.

The majority of revenue is recognized at a point in time when products are accepted, installed or delivered.

The majority of revenue is recognized at a point in time when products are accepted or based upon shipping terms when control transfers.

Product Revenue

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Support plans provide additional services and assurance outside the scope of the Company's primary product warranties.

Revenue from support plans is recognized ratably over the contractual term of the service contract.

Revenue from support plans is recognized ratably over the contractual term of the service contract as this aligns with delivery to the customer.

The Company also sells software subscriptions that include term licenses which are recognized as revenue when the license is delivered to the customer and related customer support which is recognized ratably over the service period.

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Deferred Revenue

Deferred revenue primarily consists of amounts that have been invoiced but have not yet been recognized as revenue and performance obligations pertaining to subscription services.

Deferred revenue primarily consists of amounts that have been invoiced, which are typically with net 45-day payment terms, but have not yet been recognized as revenue and performance obligations pertaining to subscription services.

The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the consolidated balance sheet dates.

Significant Judgements

Significant Judgments

The Company generally enters into contracts with customers to provide storage solutions to meet their individual needs.

Most of the Company’s contracts contain multiple goods and services designed to meet each customers’ unique storage needs.

Most of the Company’s contracts contain multiple goods and services designed to meet each customer's unique storage needs.

Contracts with multiple goods and services have multiple distinct performance obligations as the promise to transfer hardware, installation services, and support services are capable of being distinct and provide economic benefit to customers on their own.

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The SSP represents the amount for which the Company would sell the good or service to a customer on a standalone basis (i.e., not sold as a bundle with any other products or services).

Where SSP may not be directly observable (e.g., the performance obligation is not sold separately), the Company maximized the use of observable inputs by using information including reviewing discounting practices, performance obligations with similar customers and product groupings.

The Company evaluated all methods included in ASC 606 to determine SSP and concluded that invoice price is the best representation of what the Company expects to receive from the delivery of each performance obligation.

Where SSP may not be directly observable (e.g., the performance obligation is not sold separately), the Company maximized the use of observable inputs by using information including historical and current selling prices, internal discounting practices competitor information for similar customers and similar products/services, and other observable inputs.

Variable consideration

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The Company does not include significant financing components in its contracts.

The Company constrains estimates of variable consideration to amounts that are not expected to result in a significant revenue reversal in the future, primarily based on the most likely level of consideration to be returned to the customer under the specific terms of the underlying programs.

The Company constrains estimates of variable consideration to amounts that are not expected to result in a significant revenue reversal in the future, primarily based on the expected value of consideration to be returned to the customer under the specific terms of the underlying programs.

The expected value method is used to estimate the consideration expected to be returned to the customer.

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The Company records a reduction to revenue to account for these programs.

The Company initially measures this asset at the carrying amount of the inventory, less any expected costs to recover the goods including potential decreases in the value of the returned goods.

For inventory returns, the Company initially measures this asset at the carrying amount of the inventory, less any expected costs to recover the goods including potential decreases in the value of the returned goods.

Costs of Obtaining Contracts with Customers

The Company’s primary cost to obtain contracts is sales commissions earned by sales representatives.

These costs are incremental and expected to be recovered indirectly through the margin inherent within the contract.

A large portion of the Company’s contracts are completed within a one-year performance period, and for contracts with a specified term of one year or less, the Company has elected to apply a practical expedient available in Topic

340-40, which allows the Company to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company would otherwise have recognized is one year or less.

Sales commissions earned on contracts exceeding one year qualify for capitalization after application of the practical expedient.

The duration of these contracts ranges from 1 - 7 years.

Total capitalized costs were $ 2.7 million, $ 2.0 million and $ 1.1 million for fiscal 2024, 2023 and 2022, respectively.

Total amortization of capitalized costs of obtaining revenue contracts were $ 0.9 million, $ 0.5 million and $ 0.1 million for fiscal 2024, 2023 and 2022, respectively.

These costs are recognized straight line over the associated sales contract term.

Cost of Service and Subscription Revenue

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The Company capitalizes costs incurred to implement software solely for its internal use, including (i) hosted applications used to deliver the Company's support services, and (ii) certain implementation costs incurred in a hosting arrangement that is a service contract when the preliminary project stage is complete, management with the relevant authority authorizes and commits to the funding of the software project, and it is probable the project will be completed and used to perform the intended function.

Software implementation costs are capitalized to either other current assets or other long-term assets on the Company's consolidated balance sheet and amortized over 10 years.

Software implementation costs capitalized were $ 5.6 million, $ 3.1 million and $ 3.1 million for fiscal 2023, 2022 and 2021, respectively.

Related amortization expense for software implementation costs was $ 0.1 million, $ 0.1 million and $ 0 during fiscal 2023, 2022 and 2021, respectively.

Software implementation costs are capitalized to either other current assets or other long-term assets on the Company's consolidated balance sheet and amortized over 10 years starting when the software is ready for its intended use.

Software implementation costs capitalized were $ 5.0 million, $ 5.6 million and $ 3.1 million in fiscal 2024, 2023 and 2022, respectively.

Related amortization expense for software implementation costs was $ 0.1 million, $ 0.1 million and $ 0.1 million during fiscal 2024, 2023 and 2022, respectively.

Advertising Expense

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Shipping and Handling Fees

Shipping and handling fees are included in cost of revenue and were $ 12.1 million, $ 11.5 million, and $ 9.4 million in fiscal 2023, 2022 and 2021, respectively.

Shipping and handling fees are included in cost of revenue as incurred and were $ 9.7 million, $ 12.1 million, and $ 11.5 million in fiscal 2024, 2023 and 2022, respectively.

Restructuring Reserves

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Resulting translation adjustments are reported as a component of other comprehensive loss and recorded in accumulated other comprehensive loss in the accompanying consolidated balance sheets.

Warrant Accounting

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance ASC Topic 480 , Distinguishing Liabilities from Equity (“Topic 480”) and ASC Topic 815, Derivatives and Hedging (“Topic 815”).

The assessment considers whether the warrants are freestanding financial instruments pursuant to Topic 480, meet the definition of a liability pursuant to Topic 480, and whether the warrants meet all of the requirements for equity classification under Topic 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance or modification.

For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.

This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s consolidated statement of operations.

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes, in which deferred tax asset and liabilities are recognized based on differences between the financial reporting carrying values of assets and liabilities and the tax basis of those assets and liabilities, measured at the enacted tax rates expected to apply to taxable income in the years in which those tax assets or liabilities are expected to be realized or settled.

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Amortization of these debt issuance costs is included in interest expense while the unamortized debt issuance cost balance is included in other current assets or other assets.

Debt issuance costs for the Company’s term loans are recorded as a reduction to the carrying amount and are amortized over their terms using the effective interest method.

Debt issuance costs for the Term Loans are recorded as a reduction to the carrying amount and are amortized over their terms using the effective interest method.

Amortization of these debt issuance costs is included in interest expense.

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Liability awards are re-measured to fair value each reporting period.

Each reporting period, the Company recognizes the change in fair value of awards issued to non-employees as expense.

The Company recognizes stock-based compensation on a straight-line basis over the award’s requisite service period, which is generally the vesting period of the award, less actual forfeitures.

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The Company does not believe it has significant credit risk beyond that provided for in the consolidated financial statements in the ordinary course of business.

During the fiscal year ended March 31, 2023, one customer represented more than 10% of the Company's total revenue.

In fiscal 2022 and 2021, no customers represented 10% or more of the Company’s total revenue.

During the fiscal year ended March 31, 2024, no customer represented 10% or more of the Company's total revenue.

In fiscal 2023, one customer represented more than 10% of the Company's total revenue.

In fiscal 2022, no customer represented 10% or more of the Company’s total revenue.

One customer comprised approximately 23 % of accounts receivable as of March 31, 2024.

One customer comprised approximately 22 % of accounts receivable as of March 31, 2023.

If the Company is unable to obtain adequate quantities of the inventory needed to sell its products, the Company could face costs increases or delays or discontinuations in product shipments, which could have a material adverse effect on the Company’s results of operations.

One customer comprised approximately 21 % of accounts receivable as of March 31, 2022.

If the Company is unable to obtain adequate quantities of the inventory needed to sell its products, the Company could face cost increases or delays or discontinuations in product shipments, which could have a material adverse effect on the Company’s results of operations.

In many cases, the Company’s chosen vendor may be the sole source of supply for the products or parts they manufacture, or services they provide, for the Company.

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Segment Reporting

The Company’s chief operating decision-maker is its Chief Executive Officer who makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis.

The Company’s chief operating decision-maker is its Chief Executive Officer and Chief Financial Officer who make resource allocation decisions and assess performance based on financial information presented on a consolidated basis.

There are no segment managers who are held accountable by the chief operating decision-maker, or anyone else, for operations, operating results, and planning for levels or components below the consolidated unit level.

Accordingly, the Company has a one reportable segment and operates in three geographic regions:

Accordingly, the Company has one reportable segment and operates in three geographic regions:

(a) Americas;

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For the year ended March 31,

2024 2023 2022

United States 1

$ 11,759 $ 16,289 $ 12,506

International 269 266 347

Total $ 12,028 $ 16,555 $ 12,853

1 Property and equipment for regions outside of the United States is not significant.

Defined Contribution Plan

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For the years ended March 31, 2024, 2023 and 2022, the Company incurred $ 1.4 million, $ 1.7 million, and $ 1.7 million in matching contributions, respectively.

Recently Adopted Accounting Pronouncements

There are no recently issued accounting pronouncements that are expected to have a material impact on our consolidated financial statements and accompanying disclosures.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires disclosure of incremental segment information on an annual and interim basis.

ASU 2023-07 will be effective for our fiscal year beginning April 1, 2024, and interim periods within our fiscal year beginning April 1, 2025, with early adoption permitted and requires application on a fully retrospective basis.

We are currently evaluating the impact of this standard on our financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which requires greater disaggregation of tax information in rate reconciliation and income taxes paid by jurisdiction.

ASU 2023-09 will be effective for our fiscal year beginning April 1, 2025, with early adoption permitted.

We are currently evaluating the impact of this standard on our financial statement disclosures.

In the following table, revenue is disaggregated by major product offering and geographies (in thousands):

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2024 % 2023 % 2022 %

Restated Restated

Product revenue $ 92,907 $ 175,652 $ 130,248

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2024 % 2023 % 2022 %

As restated As restated

Primary storage systems $ 53,525 17 % $ 63,334 15 % $ 67,592 18 %

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Revenue recognized in the period from amounts included in contract liabilities at the beginning of the period $ 76,304

March 31, 2023

Deferred revenue $ 115,302

Revenue recognized in the period from amounts included in contract liabilities at the beginning of the period $ 83,113

March 31, 2022

Deferred revenue $ 126,916

Revenue recognized in the period from amounts included in contract liabilities at the beginning of the period $ 86,731

Remaining Performance Obligations

Total remaining performance obligations (“RPO”) which is contracted but not recognized revenue was $ 131.4 million as of March 31, 2024.

RPO consists of both deferred revenue and non-cancelable amounts that are expected to be invoiced and recognized as revenue in future periods and excludes variable consideration related to sales-based royalties.

Of the $ 131.4 million RPO at the end of fiscal 2024, we expect to recognize approximately 31.1 % over the next 13 to 60 months.

Remaining performance obligations consisted of the following (in thousands):

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As of March 31, 2024 $ 90,546 $ 40,895 $ 131,441

Deferred revenue primarily consists of amounts invoiced and paid but not recognized as revenue including performance obligations pertaining to subscription services.

The table below reflects our deferred revenue as of March 31, 2024 (in thousands):

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Total $ 116,687 $ 78,512 $ 31,870 $ 6,305

The Company expects to recognize approximately 68.2 % of the remaining performance obligations within the next 12 months.

The majority of the Company’s noncurrent remaining performance obligations is expected to be recognized in the next 13 to 60 months.

BUSINESS ACQUISITIONS

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Total $ 7,818

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the date of the acquisition (in thousands):

The following table summarizes the fair values of assets acquired and liabilities assumed as of the date of the acquisition (in thousands):

Amount Estimated Useful Life

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Manufacturing inventories March 31,

2024 2023 2022

Manufactured finished goods $ 7,074 $ 6,958 $ 14,607

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Service inventories March 31,

2024 2023 2022

Finished goods $ 3,660 $ 19,834 $ 19,234

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Property and equipment, net March 31,

2024 2023 2022

Machinery and equipment, and software $ 49,095 $ 48,534 $ 47,777

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Total property, plant and equipment, net $ 12,028 $ 16,555 $ 12,853

Depreciation and amortization expense for property and equipment amounted to $ 10.1 million, $ 9.4 million, and $ 5.7 million for the years ended March 31, 2023, 2022, and 2021, respectively.

Intangibles, net March 31, 2023 March 31, 2022

Gross Accumulated Amortization Net Gross Accumulated Amortization Net

Depreciation expense for property and equipment amounted to $ 6.0 million, $ 5.5 million, and $ 5.7 million for the years ended March 31, 2024, 2023, and 2022, respectively.

Intangibles, net March 31, 2024 March 31, 2023 March 31, 2022

Gross Accumulated Amortization Net Gross Accumulated Amortization Net Gross Accumulated Amortization Net

Developed technology $ 9,013 $ ( 8,550 ) $ 463 $ 9,013 $ ( 6,269 ) $ 2,744 $ 9,208 $ ( 3,121 ) $ 6,087

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Fiscal year ending Estimated future amortization expense

Thereafter 281

Total $ 1,669

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Balance at March 31, 2023 $ 12,969

Goodwill acquired —

Balance at March 31, 2024

Other long-term assets March 31,

2024 2023 2022

Capitalized SaaS implementation costs for internal use $ 15,349 $ 11,483 $ 6,261

Capitalized debt costs 1,923 1,690 1,779

Contract asset 1,477 1,247 699

Deferred taxes 734 1,054 866

Other 257 372 320

Total other long-term assets $ 19,740 $ 15,846 $ 9,925

Other accrued liabilities March 31,

2024 2023 2022

Accrued expenses

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Asset retirement obligation

2,069 2,513 4,590

Accrued income taxes

1,044 1,509 943

Accrued warranty

1,545 2,094 1,899

Accrued interest

Lease liability 1,256 1,364 1,727

3,297 3,704 2,141

Total other accrued liabilities $ 13,986 $ 13,666 $ 16,562

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Year Ended March 31,

2024 2023 2022

Term Loan $ 87,942 $ 74,667 $ 98,723

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Unamortized debt issuance costs related to the PNC Credit Facility are presented within other assets on the accompanying consolidated balance sheets.

On December 27, 2018, the Company entered into a senior secured term loan (the "Senior Secured Term Loan”) and amended its Revolving Credit and Security Agreement with PNC Bank, National Association (the "PNC Credit Facility").

On February 11, 2021, the Company prepaid $ 92.3 million of its outstanding Senior Secured Term Loan.

On August 5, 2021, the Company entered into a new senior secured term loan to borrow an aggregate of $ 100.0 million (the “Term Loan”).

A portion of the proceeds were used to repay in full all outstanding borrowings under the Senior Secured Term Loan.

Borrowings under the Term Loan mature on August 5, 2026.

On August 5, 2021, the Company entered into a senior secured term loan, as amended (the “2021 Term Loan”).

Principal is payable at a rate per annum equal to (a) 2.5 % of the original principal balance thereof during the first year following the closing date of the 2021 Term Loan and (b) 5 % of the original principal balance thereof thereafter.

Principal and interest payments are payable on a quarterly basis.

On April 25, 2022, the Company entered into amendments to the Term Loan and the PNC Credit Facility.

The Term Loan amendment, among other things, (a) amended the total net leverage ratio financial covenant and the minimum liquidity financial covenant commencing with the fiscal quarter ended June 30, 2022;

(b) replaced the benchmark rate for LIBOR Rate Loans with a rate based on the Secured Overnight Financing Rate ("SOFR").

The amendment to the Term Loan was accounted for as a modification.

The Company incurred $ 0.4 million in costs related to the modification which are reflected as a reduction to the carrying amount of the Term Loan and amortized to interest expense over the remaining loan term.

Loans under the Term Loan designated as ABR Loans bear interest at a rate per annum equal to the greatest of (i) 1.75 %;

(ii) the Federal funds rate plus 0.50 %;

(iii) the SOFR Rate based upon an interest period of one month plus 1.0 %;

(iii) the secured overnight financing rate ("SOFR") based upon an interest period of one month plus 1.0 %;

and (iv) the “Prime Rate” last quoted by the Wall Street Journal, plus an applicable margin of 5.00 %.

Loans designated as SOFR Rate Loans bear interest at a rate per annum equal to the SOFR Rate plus an applicable margin of 6.00 %

(the "Applicable Margin").

The SOFR Rate is subject to a floor of 0.75 %.

The Company can designate a loan as an ABR Rate Loan or SOFR Rate Loan in its discretion.

The PNC Credit Facility amendment, among other things, (a) increased the principal amount of revolving commitments from $ 30.0 million to $ 40.0 million;

(b) waived compliance with the fixed charge coverage ratio financial covenant until the fiscal quarter ended March 31, 2025;

(c) amended the total net leverage ratio financial covenant and the minimum liquidity financial covenant commencing with the fiscal quarter ended June 30, 2022;

and (d) replaced the benchmark rate for PNC LIBOR Rate Loans with a rate based on SOFR.

The amendment to the PNC Credit Facility was accounted for as a modification.

The Company incurred $ 0.4 million in costs which were recorded to other assets and amortized to interest expense over the remaining term of the agreement.

Loans designated as PNC SOFR Loans bear interest at a rate per annum equal to the SOFR Rate plus 2.75 % until December 31, 2023 and thereafter between 2.25 % and 2.75 % determined based on the Company’s Total Net Leverage Ratio, (as defined in the PNC Bank Credit Facility Agreement) for the most recently completed fiscal quarter (the "PNC SOFR Loan Interest Rate").

The Company has a revolving credit facility agreement with PNC Bank, as amended (the "PNC Credit Facility" and, collectively with the Term Loan, the "Credit Agreements") maturing on August 5, 2026 and providing for borrowings up to a maximum principal amount of the lesser of:

(a) $ 40.0 million or (b) the amount of the borrowing base, as defined in the PNC Credit Facility agreement.

PNC Credit Facility loans designated as PNC SOFR Loans bear interest at a rate per annum equal to the SOFR rate plus 2.75 % until December 31, 2023 and thereafter between 2.25 % and 2.75 % determined based on the Company’s Total Net Leverage Ratio, (as defined in the PNC Credit Facility agreement) for the most recently completed fiscal quarter (the "PNC SOFR Loan Interest Rate").

Loans under the PNC Credit Facility designated as PNC Domestic Rate Loans and Swing Loans bear interest at a rate per annum equal to the greatest of (i) the base commercial lending rate of PNC Bank;

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With respect to any Domestic Rate Loan or Swing Loan, the Company has agreed to pay an affiliate of certain Term Loan lenders a fee equal to a percentage per annum equal to the sum of (x) 5.50 %, minus (y) the PNC Domestic Loan Interest Rate, plus (z) if the Alternative Base Rate applicable to such interest payment is less than 1.00 %, (i) 1.00 % minus (ii) such Alternative Base Rate.

During the quarter ended December 31, 2022, the Company recorded a loss on debt extinguishment of $ 1.4 million related to a $ 20.0 million prepayment of the Term Loan which was comprised of a $ 0.4 million prepayment penalty and the write-off of unamortized debt issuance costs of $ 1.0 million.

As of March 31, 2023, the interest rate on the Term Loan was 10.8 % and the interest rate on the PNC Credit Facility for Domestic Rate Loans and Swing Loans was 9.75 % and the PNC SOFR Rate Loan was 7.5 %.

As of March 31, 2023, the PNC Credit Facility had an available borrowing base of $ 36.8 million, of which $ 20.0 million was available to borrow at that date.

Subsequent to year end these terms were renegotiated, please See Note 13:

Subsequent Event for more information.

The Credit Agreements contain certain covenants, including requirements to prepay the Term Loan in an amount equal to (i) 100 % of the net cash proceeds from certain asset dispositions, extraordinary receipts, debt issuances and equity issuances, subject to certain reinvestment rights and other exceptions and (ii) 75 % of certain excess cash flow of the Company and its subsidiaries beginning in the fiscal year ended March 31, 2023, subject to certain exceptions, including reductions to the percentage of such excess cash flow that is required to prepay the loans to 50 % and 0 %, based on the Company’s applicable total net leverage ratio.

Amounts outstanding under the Term Loan may become due and payable upon the occurrence of specified events, which among other things include (subject to certain exceptions and cure periods):

(i) failure to pay principal, interest, or any fees when due;

(ii) breach of any representation or warranty, covenant, or other agreement in the Term Loan and other related loan documents;

(iii) the occurrence of a bankruptcy or insolvency proceeding with respect to the Company or certain of its subsidiaries;

(iv) any “Event of Default” with respect to other indebtedness involving an aggregate amount of $ 3,000,000 or more;

(v) any lien created by the Term Loan or any related security documents ceasing to be valid and perfected;

(vi) the Term Loan or any related security documents or guarantees ceasing to be legal, valid, and binding upon the parties thereto;

or (vii) a change of control shall occur.

Additionally, the Credit Agreements contain financial covenants relating to minimum liquidity and quarterly total net leverage.

The PNC Credit Facility contains a financial covenant related to the Company's quarterly fixed charges coverage ratio, as defined in the PNC Credit Facility agreements beginning in the fiscal quarter ending March 31, 2025.

The Term Loan and PNC Credit Facility matures on August 5, 2026 under the terms of the related agreements.

As discussed in Note 1:

Description of Business and Significant Accounting Policies—Going Concern , the Company expect to be in violation of its net leverage covenant as of the June 30, 2024 testing date and the violation will cause the outstanding Term Loan and PNC Credit Facility outstanding balances to become due as an event of default.

As a result, the Company has classified the Term Loan and PNC Credit Facility as current liabilities in the accompanying consolidated balance sheet.

On June 1, 2023, the Company entered into amendments to the Credit Agreements (the “June 2023 Amendment”) which, among other things, provided an advance of $ 15.0 million in additional Term Loan borrowings (the “2023 Term Loan” and, collectively with the 2021 Term Loan, the "Term Loan") and incurred $ 0.9 million in original issuance discount and origination fees which have been recorded as a reduction to the carrying amount of the 2023 Term Loan and amortized to interest expense over the loan term.

The terms of the 2023 Term Loan are substantially similar to the terms of the 2021 Term Loan, including in relation to maturity and security, except that, among other things, (a) the Applicable Margin (i) for any 2023 Term Loan designated an “ABR Loan” is 9.00 % per annum and (ii) for any 2023 Term Loan designated as a “ SOFR Loan” is 10.00 % per annum, (b) accrued interest on the 2023 Term Loan is payable in kind ("PIK"), and is capitalized and added to the principal amount of the 2023 Term Loan at the end of each interest period applicable thereto, (c) the 2023 Term Loan does not amortize prior to the maturity date thereof, and (d) the 2023 Term Loan may not be prepaid prior to the payment in full of the existing term loans.

In connection with the 2023 Term Loan, the Company issued warrants to purchase an aggregate of 1.25 million shares

(the “June 2023 Warrants”) of the Company’s common stock, at an exercise price of $ 1.00 per share.

Common Stock for additional discussion related to the 2023 Warrants.

The June 2023 Amendment to the Term Loan was accounted for as a modification.

The value of the June 2023 Warrants in addition to $ 0.7 million of fees paid to the lenders have been reflected as a reduction to the carrying amount of the Term Loan and amortized to interest expense over the remaining loan term.

The Company incurred $ 0.9 million of legal and financial advisory fees which were included in general and administrated expenses in the condensed consolidated statement of operations and comprehensive loss.

The June 2023 Amendments to the PNC Credit Facility were accounted for as modifications and $ 0.7 million in related fees and expenses were recorded to other assets and are amortized to interest expense over the remaining term of the agreement.

On February 14, 2024, the Company entered into amendments to the Credit Agreements which waived testing of the total net leverage ratio financial covenant for the fiscal quarter ended December 31, 2023.

In connection with the amendment, the Company incurred fees related to the Term Loan that was paid-in-kind of $ 1.2 million and an amendment fee of $ 0.1 million that was paid in cash.

These fees have been reflected as a reduction to the carrying amount of the Term Loan and are amortized to interest expense over the remaining loan term.

In connection with the related PNC Credit Facility amendment, the Company incurred $ 0.2 in fees and expenses.

On March 22, 2024, the Company entered into amendments to the Credit Agreements.

The amendment, among other things, (i) permits the sale of certain assets by the Company and (ii) require that certain proceeds from the sale of such assets be applied to partially prepay the outstanding term loans under the Term Loan credit facility.

The Company did not incur any amendment fees related to the March 2024 amendments and the financial terms of the Credit Agreements were not impacted.

The Company is required to pay an undrawn commitment fee related to the PNC Credit Facility at a rate per annum of between 0.25 % and 0.375 % (the “PNC Commitment Fee”) based on the average PNC Credit Facility Usage Amount ending on the last day off the most recently completed quarter (the “Average Usage Amount”) multiplied by $ 40 million less the Average Usage Amount.

The Company has also agreed to pay affiliates of certain Term Loan lenders a fee at a rate per annum equal to 1.00 % minus the PNC Commitment Fee multiplied by $ 40 million less the Average Usage Amount.

As of March 31, 2024, the interest rates on the 2021 Term Loan and 2023 Term Loan was 11.65 % and 15.65 %, respectively.

As of March 31, 2024, the interest rate on the PNC Credit Facility was 10.25 %.

As of March 31, 2024, the PNC Credit Facility had a borrowing base of $ 27.3 million which includes a reduction of $ 0.8 million related to outstanding letters of credit issued on the Company's behalf.

As of March 31, 2024, there was $ 0.7 million available to borrow under the PNC Credit Facility.

We are subject to various debt covenants under our debt agreements.

Our failure to comply with our debt covenants could materially and adversely affect our financial condition and ability to service our obligations.

On February 14, 2024, we entered into amendments to the Credit Agreements which waived testing of the total net leverage ratio financial covenant for the fiscal quarter ended December 31, 2023.

On May 24, 2024, we entered into amendments to the Credit Agreements which, among other things, waives compliance with our net leverage covenant as of March 31, 2024, reduced the daily minimum liquidity below $ 15.0 million until June 16, 2023 and waived any default that might arise as a result of the restatement of certain of our historical financial statements.

The Term Loan and PNC Credit Facility both mature on August 5, 2026 under the terms of the related agreements.

As discussed in Note 1 :

Description of Business and Significant Accounting Policies—Going Concern , we expect to be in violation of our net leverage covenant as of the June 30, 2024 testing date and the violation will cause the outstanding Term Loan and PNC Credit Facility outstanding balances to become due as an event of default.

As a result, we have classified the Term Loan and PNC Credit Facility as current liabilities in the accompanying consolidated balance sheet.

We are currently working to obtain additional covenant waivers or refinance the existing Term Debt and PNC Credit Facility.

Additionally, we are evaluating strategies to obtain additional funding to provide additional liquidity, including potential asset sales.

In the event we are unable to obtain an extension of the waiver, additional funding will be required to pay the amount due on the revolver and term loan.

However, we may be unable to obtain an extension of the waiver, or obtain additional funding.

As such, there can be no assurance that we will be able to obtain additional liquidity when needed or under acceptable terms, if at all.

The June 2023 Amendment and the June 2023 Warrants were entered into with and issued to certain entities managed by Pacific Investment Management Company, LLC ("PIMCO") which is considered a related party due to the fact that Christopher D.

Neumeyer is a member of the Company's Board of Directors and also an executive vice president and portfolio manager at PIMCO.

The principal and PIK interest related to the June 2023 Amendment which totaled $ 17.3 million as of March 31, 2024 are payable at maturity.

Supplemental balance sheet information related to leases is as follows (in thousands):

Operating leases March 31, 2023 March 31, 2022

Year Ended March 31,

Operating leases 2024 2023 2022

Operating lease right-of-use assets $ 9,425 $ 10,291 $ 11,107

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Lease Term and Discount Rate March 31,

2024 2023 2022

Weighted average remaining operating lease term (years) 10.53 10.85 10.88

Weighted average discount rate for operating leases 12.64 % 12.66 % 12.9 %

Operating cash outflows related to operating leases totaled $ 3.5 million and $ 3.7 million for the fiscal years ended March 31, 2023 and March 31, 2022, respectively.

Operating cash outflows related to operating leases totaled $ 2.9 million, $ 3.5 million and $ 3.7 million for the fiscal years ended March 31, 2024, March 31, 2023, and March 31, 2022, respectively.

RESTRUCTURING CHARGES

During fiscal years 2024, 2023 and 2022, the Company approved certain restructuring plans to improve operational efficiencies and rationalize its cost structure.

All restructuring activities were completed by the fourth quarter of fiscal 2024, and no asset impairments occurred as a result.

The following tables show the activity and the estimated timing of future payouts for accrued restructuring (in thousands):

Severance and

benefits Facilities Total

Balance as of March 31, 2020 $ — $ — $ —

Restructuring costs 3,701 — 3,701

Cash payments ( 3,121 ) — ( 3,121 )

benefits Total

Balance as of March 31, 2021 $ 580 $ 580

Adjustments of prior estimates 850 850

Cash payments 850 — 850

Other non-cash ( 1,430 ) ( 1,430 )

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Balance as of March 31, 2023 — —

In the quarter ended September 30, 2022, the Company’s shareholders approved an increase in its authorized shares of common stock from 125 million to 225 million.

Restructuring costs 3,280 3,280

Cash payments ( 3,280 ) ( 3,280 )

Balance as of March 31, 2024 $ — $ —

In the fiscal year ended March 31, 2023, the Company’s shareholders approved an increase in its authorized shares of common stock from 125 million to 225 million.

Common Stock Rights Offering

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A portion of the proceeds from the Rights Offering was used to prepay $ 20.0 million of the Company’s Term Loan.

Secondary Public Offering

On February 8, 2021, the Company closed a secondary public offering of 15,109,489 shares of its common stock for gross proceeds of $ 103.5 million.

The Company received net proceeds of $ 96.8 million after deducting underwriters' discounts and other offering related expenses.

Amended and Restated 2012 Long-Term Incentive Plan

The Company has a stockholder-approved 2012 Long-Term Incentive Plan (the “Plan”) that has 7.0 million shares authorized for issuance of new shares, with 5.6 million performance shares and restricted shares outstanding, and 1.4 million shares available for future issuance under the Plan as of March 31, 2023.

The majority of performance share units, restricted stock units and stock options granted to employees typically vest between one and three years .

Long-Term Incentive Plan

The Company maintains two stockholder-approved incentive plans, the 2012 Long-Term Incentive Plan (“2012 Plan”) and a 2023 Long-Term Incentive Plan ("2023 Plan").

The 2023 Plan serves as the successor to our 2012 Plan and provides for grants of performance share units, restricted stock units and stock options.

Our equity awards typically vest between one and three years .

Stock options, performance shares and restricted stock grants to non-employee directors typically vest over one year .

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Stock options, performance share units and restricted stock units granted under the 2023 Plan are subject to forfeiture if employment terminates.

The 2023 Plan has 7.4 million shares authorized for issuance of new shares, with 1.6 million performance shares and restricted shares outstanding, and 6.7 million shares available for future issuance under the Plan as of March 31, 2024.

2021 Inducement Plan

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The Company has reserved shares of common stock for future issuance under its ESPP as follows (in thousands):

2024 2023 2022

Shares available for issuance at beginning of period 88 688 1,077

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2024 2023 2022

Expected life 0.5 years 0.5 years 0.5 years

Volatility 96 %

Risk-free interest rate 3.10 %

0.06 % - 0.23 %

0.05 % - 0.11 %

Dividend yield — % — % — %

Fair value of common stock $ 1.85

Expected life n/a 0.5 years 0.5 years

Volatility n/a 96 %

Risk-free interest rate n/a 3.10 %

0.06 % - 0.23 %

Dividend yield n/a — % — %

Fair value of common stock n/a $ 1.85

$ 4.60 - $ 6.40

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Outstanding as of March 31, 2024 1,547 $ 1.79

As of March 31, 2023 , there was $ 1.6 million and $ 0.0 million of unrecognized stock-based compensation related to Market PSUs and Performance PSUs, respectively, which is expected to be recognized over a weighted-average period of one year .

As of March 31, 2024 , there was $ 0.6 million of unrecognized stock-based compensation related to Market PSUs and Performance PSUs, which is expected to be recognized over a weighted-average period of one year .

The total grant date fair value of shares vested during fiscal years ended March 31, 2024 , 2023, and 2022 was $ 1.0 million, $ 1.9 million, and $ 3.9 million, respectively.

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Outstanding as of March 31, 2024 2,881 $ 1.87

As of March 31, 2023 , there was $ 9.2 million of total unrecognized stock-based compensation related to RSUs, which is expected to be recognized over a weighted-average period of two years .

The total grant date fair value of RSUs vested during fiscal years ended March 31, 2024, 2023, and 2022 was $ 6.4 million, $ 5.2 million, and $ 5.0 million, respectively.

As of March 31, 2024 , there was $ 2.6 million of total unrecognized stock-based compensation related to RSUs, which is expected to be recognized over a weighted-average period of two years .

Compensation Expense

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Total stock-based compensation $ 4,721 $ 10,750 $ 13,829

As of March 31, 2023 and 2022, the Company had outstanding warrants to purchase 7,110,616 shares of the Company’s common stock exercisable until December 27, 2028 at an exercise price of $ 1.33 per share (the "$ 1.33 Warrants").

As of March 31, 2022 and the date of the Rights Offering, the Company had outstanding warrants to purchase 3,400,000 shares of the Company's common stock exercisable until June 16, 2030 at an exercise price of $ 3.00 per share (the “$ 3.00 Warrants").

The exercise price and the number of shares underlying the $ 1.33 Warrants and the $ 3.00 Warrants are subject to adjustment in the event of specified events, including dilutive issuances of common stock linked equity instruments at a price lower than the exercise price of the warrants, a subdivision or combination of the Company’s common stock, a reclassification of the Company’s common stock or specified dividend payments (the “Down Round Feature”).

The Rights Offering triggered the Down Round Feature on April 22, 2022, the for the $ 3.00 Warrants due to the price per share received in the Rights Offering being lower than the exercise price.

The exercise price for the $ 3.00 Warrants was adjusted to $ 2.79 per share and an additional 256,113 warrants were subsequently issued with an exercise price of $ 2.79 .

The Company calculated the difference between the $ 3.00 Warrants’ fair value before and after the Down Round Feature was triggered using the original exercise price and the new exercise price in addition to the value of the newly issued warrants.

The difference in fair value of the effect of the Down Round Feature of $ 0.4 million was reflected as a deemed dividend and a reduction to income available to common stockholders in the basic and diluted earnings per share calculations.

The Company used the Black-Scholes-Merton option-pricing model to determine the fair value of the deemed dividend.

The assumptions used in the model are as follows:

dividend rate of 0 %;

expected term of 8 years;

volatility of 56 %;

and a risk-free rate 2.85 %.

As of March 31, 2023 and 2022, the Company had outstanding warrants to purchase 50,000 shares of the Company's common stock exercisable until June 16, 2030 at an exercise price of $ 3.00 per share.

Upon exercise, the aggregate exercise price may be paid, at each warrant holder’s election, in cash or on a net issuance basis, based upon the fair market value of the Company’s common stock at the time of exercise.

The $ 1.33 Warrants and $ 3.00 Warrants grant the holders certain registration rights for the shares of common stock issuable upon the exercise of the applicable warrants, including (a) the ability of a holder to request that the Company file a Form S-1 registration statement with respect to at least 40 % of the registrable securities held by such holder as of the issuance date of the applicable warrants;

In connection with a debt refinancing and debt amendment activities, the Company issued warrants to purchase shares of the Company common stock in December 2018 which are exercisable until December 27, 2028 (the "December 2018 Warrants), in June 2020 which are exercisable until June 16, 2030 (the "June 2020 Warrants") and in June 2023 which are exercisable until June 1, 2033 (the "June 2023 Warrants").

The exercise price and the number of shares underlying the Company's December 2018 Warrants, June 2020 Warrants and June 2023 Warrants (collectively, the "Lender Warrants") and are subject to adjustment in the event of specified events, including dilutive issuances of equity instruments at a price lower than the exercise price of the respective warrants (the "Down Round Feature"), repricing of existing equity-linked instruments at a price lower than the exercise price of the respective warrants (the "Warrant Repricing Feature"), a subdivision or combination of the common stock, a reclassification of the common stock or specified dividend payments.

Upon exercise, the aggregate exercise price may be paid, at each warrant holder’s election, in cash or on a net issuance basis, based upon the fair market value of the common stock at the time of exercise.

The Company's warrants also have a provision that determines the potential stock price used when applying the Black-Scholes valuation model to determine the settlement price of the warrants in Successor Major Transactions ("SMT"), as defined in the respective warrant agreements, which include a change in control or liquidation (the "Warrant Settlement Price Provision").

The Warrant Settlement Price Provision requires the use of the greater of the closing price of the

Company's common stock on the trading day immediately preceding the date on which an SMT is consummated, the closing market price of the Company's common stock following the first public announcement of an SMT or the closing market of the Company's common stock immediately preceding the announcement of an SMT.

Because of these terms, equity classification was precluded, and these warrants are carried as liabilities at fair value.

The Company uses Level 2 inputs for its valuation methodology for the warrant liabilities as their fair values were determined by using the Black-Scholes model based on various assumptions.

The assumptions used in calculating fair values of the Lender Warrants are as follows:

December 2018 Warrants June 2020 Warrants June 2023 Warrants

March 31, 2024:

Discount period (years) 4.7 years 6.2 years 9.2 years

Risk-free interest rate 4.19 % 4.16 % 4.16 %

Stock price volatility 87.00 % 86.00 % 81.00 %

Grant date fair value $ 0.33 $ 0.30 $ 0.45

March 31, 2023:

Discount period (years) 5.7 years 7.2 years n/a

Risk-free interest rate 3.55 % 3.52 % n/a

Stock price volatility 79.00 % 77.00 % n/a

Grant date fair value $ 0.77 $ 0.69

March 31, 2022:

Discount period (years) 6.7 years 8.2 years n/a

Risk-free interest rate 2.39 % 2.36 % n/a

Stock price volatility 79.00 % 74.00 % n/a

Grant date fair value $ 1.80 $ 1.59 n/a

The Company has adopted ASC 2017-11, Earnings per share (Topic 260) ;

Distinguishing liabilities from equity (Topic 480);

Derivatives and hedging (Topic 718) ("ASC 2017-11" ) which provides guidance that the inclusion of certain anti-dilution provisions including down-round provisions in which the exercise price and number of shares underlying an equity-linked instrument are adjusted based on certain specified events does not preclude an instrument from being equity classified.

The Company has concluded the Warrant Repricing Feature does not meet the definition of a down-round provision that would provide a scope exception allowing equity classification;

therefore, the Company's warrants are required to be classified as liabilities.

In addition, the Company has concluded that the use of the greater of three share price inputs to the Black-Scholes valuation model in the Warrant Settlement Price Provision precludes the warrants from being indexed to the Company's own common stock under Topic 815 therefore requiring the Company to classify the warrants as liabilities with changes in fair value being recognized in the Company’s consolidated statement of operations.

The following summarizes the Company's outstanding Lender Warrants (in thousands, except exercise price):

December 2018 Warrants June 2020 Warrants June 2023 Warrants Total

March 31, 2024:

Exercise price $ 1.33 $ 2.77 $ 1.00

Number shares under warrant(s) 7,131 3,683 1,250 12,064

Fair value $ 2,320 $ 1,135 $ 591 $ 4,046

March 31, 2023:

Exercise price $ 1.33 $ 2.79 n/a

Number shares under warrant(s) 7,111 3,656 n/a 10,767

Fair value $ 5,447 $ 2,542 n/a $ 7,989

March 31, 2022:

Exercise price $ 1.33 $ 3.00 n/a

Number shares under warrant(s) 7,111 3,400 n/a 10,511

Fair value $ 12,769 $ 5,468 n/a $ 18,237

The Rights Offering triggered the Down Round Feature for the for June 2020 Warrants on April 22, 2022 due to the price per share received in the Rights Offering being lower than the exercise price.

The exercise price for the June 2020 Warrants was adjusted to $ 2.79 per share and an additional 256,111 warrants were issued with an exercise price of $ 2.79 .

The issuance of the June 2023 Warrants triggered the Warrant Repricing Feature in the June 2020 Warrants and the December 2018 Warrants.

The exercise price for the June 2020 Warrants was adjusted to $ 2.77 per share and an additional 27,269 warrants were issued with an exercise price of $ 2.77 .

The exercise price for the December 2018 warrants was not adjusted and an additional 20,417 warrants were issued with an exercise price of $ 1.33 .

The changes to the exercise price and number of warrants related to these adjustments were recorded as an adjustment to the warrant liability and reflected as a change in fair value of the warrant liability in the respective periods.

The table below sets forth a summary of changes in the fair value of the Company’s Level 2 warrant liabilities for the year ended December 31, 2023

Balance at March 31, 2021 $ 78,267

Change in fair value of warrant liabilities ( 60,030 )

Balance at March 31, 2022 $ 18,237

Change in fair value of warrant liabilities ( 10,250 )

Balance at March 31, 2023 $ 7,989

Issuance of warrants 1,194

Change in fair value of warrant liabilities ( 5,137 )

Balance at March 31, 2024 $ 4,046

The Company also issued 50,000 warrants to purchase the Company's common stock in June 2020 and June 2023 to advisors of the Company at an exercise price of $ 3.00 and $ 1.00 , respectively (collectively the "Other Warrants").

The Company has concluded that the Other Warrants do not contain provisions that would require liability classification under Topic 480 or Topic 718 and have been equity classified.

Registration Rights Agreements

The Lender Warrants grant the holders certain registration rights for the shares of common stock issuable upon the exercise of the applicable warrants, including (a) the ability of a holder to request that the Company file a Form S-1 registration statement with respect to at least 40 % of the registrable securities held by such holder as of the issuance date of the applicable warrants;

(b) the ability of a holder to request that the Company file a Form S-3 registration statement with respect to outstanding registrable securities if at any time the Company is eligible to use a Form S-3 registration statement;

and (c) certain piggyback registration rights related to potential future equity offerings of the Company, subject to certain limitations.

NET LOSS PER SHARE

NET INCOME (LOSS) PER SHARE

Equity Instruments Outstanding

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The Company has also issued warrants to purchase shares of the Company’s stock.

The following outstanding shares of common stock equivalents were excluded from the computation of the diluted net loss per share attributable to common stock for the periods presented because their effect would have been anti-dilutive (in thousands):

The following table sets forth the computation of basic and diluted net income (loss) per share attributable to common stockholders (in thousands, except per share data):

Year Ended March 31,

2024 2023 2022

As Restated As Restated

Net income (loss) attributable to common stockholders used in basic earnings per share $ ( 41,286 ) $ ( 18,368 ) $ 38,355

Excluded (gain) loss on assumed exercise of liability-classified common stock warrants during the period — ( 7,323 ) ( 59,753 )

Net loss attributable to common stockholders used in diluted earnings per share $ ( 41,286 ) $ ( 25,691 ) $ ( 21,398 )

Weighted average common shares outstanding used in basic earnings per share 95,087 90,348 58,871

Incremental common shares from:

Assumed exercise of dilutive warrants — 840 7,146

Weighted average common shares outstanding used in diluted earnings per share 95,087 91,188 66,017

Net income (loss) per share attributable to common stockholders - Basic $ ( 0.43 ) $ ( 0.20 ) $ 0.65

Net income (loss) per share attributable to common stockholders - Diluted $ ( 0.43 ) $ ( 0.28 ) $ ( 0.32 )

The dilutive impact related to shares of common stock from incentive plans and outstanding warrants is determined by applying the treasury stock method to the assumed vesting of outstanding performance share units and restricted stock units and the exercise of outstanding options and warrants.

The dilutive impact related to shares of common stock from contingently issuable performance share units is determined by applying a two-step approach using both the contingently issuable share guidance and the treasury stock method.

The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net income (loss) per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive (in thousands):

Year Ended March 31,

2024 2023 2022

Stock awards 336 543 1,996

Warrants 12,164 3,706 50

ESPP 8 11 223

Total 12,500 4,257 2,057

The dilutive impact related to common shares from stock incentive plans and outstanding warrants is determined by applying the treasury stock method to the assumed vesting of outstanding performance share units and restricted stock units and the exercise of outstanding options and warrants.

The dilutive impact related to common shares from contingently issuable performance share units is determined by applying a two-step approach using both the contingently issuable share guidance and the treasury stock method.

The Company had outstanding market based restricted stock units as of March 31, 2024 that were eligible to vest into shares of common stock subject to the achievement of certain stock price targets in addition to a time-based vesting period.

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There were 0.9 million shares of contingently issuable market-based restricted stock units that were excluded from the table above as the market conditions were not satisfied as of March 31, 2024.

Pre-tax loss reflected in the consolidated statements of operations for the years ended March 31, 2023, 2022 and 2021 is as follows (in thousands):

Pre-tax income (loss) reflected in the consolidated statements of operations for the years ended March 31, 2024, 2023 and 2022 is as follows (in thousands):

Year Ended March 31,

2024 2023 2022

As Restated As Restated

$ ( 40,555 ) $ ( 18,429 ) $ 39,146

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2024 2023 2022

As Restated As Restated

Current tax expense

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2024 2023 2022

As Restated As Restated

Expense (benefit) at the federal statutory rate $ ( 8,507 ) $ ( 3,450 ) $ 8,341

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Uncertain tax positions ( 8,010 ) ( 3,791 ) ( 6,349 )

Tax reform — — —

Credit monetization — — ( 2,100 )

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Research and development credits ( 1,169 ) ( 1,582 ) ( 2,094 )

Warrant fair value adjustments ( 1,093 ) ( 2,152 ) ( 12,606 )

Other 1,002 387 1,436

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As of March 31,

2024 2023 2022

As Restated As Restated

Deferred tax assets

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Inventory 2,426 2,715 1,701

Accrued warranty expense 495 447

Acquired intangibles 1,344 961 853

Accrued warranty expense 365 495 447

Gross deferred tax assets 153,045 146,632 143,477

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2024 2023 2022

As restated As restated

Beginning Balance $ 96,343 $ 99,603 $ 101,119

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Increase in balances related to tax positions in prior period — — 4,881

Increase in balances related to acquisitions — — 511

Decrease in balances related to tax positions in prior period ( 1,364 ) ( 817 ) ( 1,020 )

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As of March 31, 2024, the Company had federal net operating loss and tax credit carryforwards of approximately $ 208.5 million and $ 47.3 million, respectively.

The net operating loss and tax credit carryforwards expire in varying amounts in fiscal year 2024 if not previously utilized, and $ 12.8 million are indefinite-lived net operating loss carryforwards.

The net operating loss and tax credit carryforwards expire in varying amounts in fiscal 2025 if not previously utilized, and $ 12.8 million are indefinite-lived net operating loss carryforwards.

These carryforwards include $ 11.1 million of acquired net operating losses and $ 2.5 million of acquired credits, the utilization of which is subject to various limitations due to prior changes in ownership.

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and certain foreign net deferred tax assets.

Significant management judgement is required in determining the Company's deferred tax assets and liabilities and valuation allowances for purposes of assessing its ability to realize any future benefit from its net deferred tax assets.

Significant management judgment is required in determining the Company's deferred tax assets and liabilities and valuation allowances for purposes of assessing its ability to realize any future benefit from its net deferred tax assets.

The Company intends to maintain this valuation allowance until sufficient positive evidence exists to support the reversal of the valuation allowance.

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As of March 31, 2024, the Company had issued non-cancelable commitments for $ 32.4 million to purchase inventory from its contract manufacturers and suppliers.

At the end of fiscal 2023, the Company had various non-cancelable operating for office facilities.

At the end of fiscal 2024, the Company had various non-cancelable operating leases for office facilities.

Refer to Note 6:

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Legal Proceedings

From time to time, we are a party to various legal proceedings and claims arising from the normal course of business activities.

Based on current available information, we do not expect that the ultimate outcome of any currently pending unresolved matters, individually or in the aggregate, will have a material adverse effect on our results of operations, cash flows or financial position.

Realtime Data Matter

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Realtime Data asserts that the Company has incorporated Realtime Data’s patented technology into its compression products and services.

On July 31, 2017, the Court in the Northern District of California stayed proceedings in this litigation pending the outcome of Inter Partes Review proceedings before the Patent Trial and Appeal Board relating to the asserted Realtime patents.

July 31, 2017, the Court in the Northern District of California stayed proceedings in this litigation pending the outcome of Inter Partes Review proceedings before the Patent Trial and Appeal Board relating to the asserted Realtime patents.

In those proceedings the asserted claims of the ’506 patent, the ’992 patent, and the ’513 patent were found unpatentable.

In addition, on July 19, 2019, the United States District Court for the District of Delaware issued a decision finding that all claims of the ’728 patent, the ’530 patent, and the ’908 patent are not eligible for patent protection under 35 U.S.C.

In addition, on July 19, 2019, the United States District Court for the District of Delaware issued a Quantum Corporation Confidential decision finding that all claims of the ’728 patent, the ’530 patent, and the ’908 patent are not eligible for patent protection under 35 U.S.C.

§ 101 (the “Delaware Action”).

On appeal, the Federal Circuit vacated the decision in the Delaware Action and remanded for the Court to “elaborate on its ruling.” In opinions dated May 4, 2021 and August 23, 2021, the Court in the Delaware Action reaffirmed its earlier ruling and granted defendants’ motions to dismiss under Section 101.

Realtime Data has appealed those decisions to the Federal Circuit.

The Federal Circuit argument occurred on February 10, 2023 and a decision is expected sometime in the latter half of the year.

The case pending against Quantum in the Northern District of California remains stayed pending the final outcome of the appeal in the Delaware Action.

Quantum believes the probability that this lawsuit will have a material adverse effect on its business, operating results or financial condition is remote.

Starboard Matter

On July 14, 2020, Starboard Value LP, Starboard Value and Opportunity Master Fund Ltd., Starboard Value and Opportunity S LLC, and Starboard Value and Opportunity C LP (collectively, “Starboard”) filed a lawsuit against Quantum Corporation, Quantum’s former CEO and board member Jon Gacek, and former Quantum board member Paul Auvil in the California Superior Court in Santa Clara County alleging that between 2012 and 2014, Starboard purchased shares of Quantum’s common stock, obtained three seats on the Board of Directors and then, in July 2014, entered into an agreement with Quantum whereby Starboard would not seek control of the Board of Directors but would instead support Quantum’s slate of board nominees so long as Quantum met certain performance objectives by the end of fiscal 2015.

The lawsuit further alleges that Quantum hid its failure to meet those performance objectives by improperly recognizing revenue in fiscal 2015.

Also as previously reported, the California action was stayed and then dismissed.

On April 14, 2021, Starboard filed a new action in the Delaware Court of Chancery, naming as defendants Messrs.

Gacek and Auvil and Quantum.

The new action largely repeats the allegations of the California action, alleging claims for fraud against all defendants, fraudulent concealment against all defendants, negligent misrepresentation against all defendants, breach of contract against Quantum, breach of the implied covenant of good faith and fair dealing against Quantum, and breach of fiduciary duty against Messrs.

Gacek and Auvil.

As of January 12, 2023, all parties signed a settlement agreement amicably resolving both actions.

The litigation will have no material effect on the Company’s financial statements or business operations.

Indemnifications

The Company has certain financial guarantees, both express and implied, related to product liability and potential infringement of intellectual property.

Other than certain product warranty liabilities recorded as of March 31, 2023 and 2022, the Company did not record a liability associated with these guarantees, as the Company has little, or no history of costs associated with such indemnification requirements.

Contingent liabilities associated with product liability may be mitigated by insurance coverage that the Company maintains.

In the normal course of business to facilitate transactions of the Company’s services and products, the Company indemnifies certain parties with respect to certain matters.

The Company has agreed to hold certain parties harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties.

These agreements may limit the time within which an indemnification claim can be made and the amount of the claim.

In addition, the Company has entered into indemnification agreements with its officers and directors, and the Company’s bylaws contain similar indemnification obligations to its agents.

It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of the Company’s indemnification claims, and the unique facts and circumstances involved in each particular agreement.

Historically, payments made by the Company under these agreements have not had a material impact on its operating results, financial position, or cash flows.

On appeal, the

Federal Circuit vacated the decision in the Delaware Action and remanded for the Court to “elaborate on its ruling.” In opinions dated May 4, 2021 and August 23, 2021, the Court in the Delaware Action reaffirmed its earlier ruling and granted defendants’ motions to dismiss under Section 101.

Realtime Data appealed those decisions to the Federal Circuit, which affirmed on August 2, 2023.

In January 2024, the U.S.

Supreme Court denied Realtime Data's petition for certiorari to hear the case.

Following that decision, the parties entered into a covenant not to sue and settlement agreement.

The agreement provides that Realtime Data will not sue Quantum based on certain covered patents and dismissed the action pending in the Northern District of California with prejudice.

Arrow Electronics Matter

On July 27, 2023, Arrow Electronics, Inc.

("Arrow Electronics"), an electronics component distributor filed a lawsuit in a federal court in the Northern District of California against Quantum, alleging breach of contract and breach of the covenant of good faith and fair dealing, seeking, among other things just over $ 4.6 million in damages.

Quantum has filed a responsive pleading disputing Arrow Electronics’ claims and plans to aggressively defend itself against them.

At this time, Quantum believes the probability that this lawsuit will have a material adverse effect on our business, operating results, or financial condition is remote.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company follows the guidance in ASC 820, Fair Value Measurement for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

The Company has certain non-financial assets that are measured at fair value on a non-recurring basis when there is an indicator of impairment, and they are recorded at fair value only when an impairment is recognized.

Common Stock for disclosure related to the Company's asset and liabilities that are revalued at fair value at each reporting period.

These assets include property and equipment and amortizable intangible assets.

The Company did not record impairments to any non-financial assets in the fiscal years ended March 31, 2024, 2023 and 2022.

The Company does not have any non-financial liabilities measured and recorded at fair value on a non-recurring basis.

The carrying amounts reported in the accompanying consolidated financial statements for cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued expenses and other current liabilities approximate their respective fair values because of the short-term nature of these accounts.

The table below represents the carrying value and total estimated fair value of long-term debt as of March 31, 2023 and March 31, 2022, respectively.

The fair value has been classified as Level 2 within the fair value hierarchy.

Carrying Value Fair Value Carrying Value Fair Value

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date.

In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).

The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

Quoted prices in active markets for identical assets or liabilities.

An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Observable inputs other than Level 1 inputs.

Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Unobservable inputs based on management’s assessment of the assumptions that market participants would use in pricing the asset or liability.

Information related to the fair value of the Company's warrant liabilities which were determined utilizing Level 2 inputs to determine such fair value are included in Note 8:

Common Stock .

The following table represents the carrying value and total estimated fair value of the Company's Term Loan and PNC Credit Facility which have been determined utilizing level 2 inputs to determine fair value.

2024 2023 2022

Carrying Value Fair Value Carrying Value Fair Value Carrying Value Fair Value

Term Loan $ 87,942 $ 75,143 $ 74,667 $ 66,684 $ 98,723 $ 98,723

PNC Credit Facility 26,604 24,743 16,750 15,918 17,735 17,735

SUBSEQUENT EVENTS

Debt Amendments

On June 1, 2023, the Company entered into amendments to the Term Loan and the PNC Credit Facility.

The amendments, among other things, (a) amended the total net leverage ratio financial covenant commencing with the fiscal quarter ended June 30, 2023;

(b) amended the minimum liquidity financial covenant to decrease the minimum liquidity to $ 15 million;

and (c) amended the “EBITDA” definition to increase the add-back cap on non-recurring items including restructuring charges during the fiscal years ended March 31, 2024 and 2025.

The Term Loan amendment (the “June 2023 Term Loan Amendment”) also provided an advance of $ 15 million in additional Term Loan borrowings.

In connection with the amendments, the Company issued to the lender a warrant to purchase an aggregate of 1.25 million shares of the Company’s common stock, par value $ 0.01 per share, at an exercise price of $ 1.00 per share.

The exercise price and the number of shares underlying the warrant are subject to adjustment in the event of specified events, including dilutive issuances at a price lower than the exercise price of the warrant, a subdivision or combination of the Common Stock, a reclassification of the Common Stock or specified dividend payments.

On May 24, 2024, the Company entered into amendments to the Credit Agreements which, among other things, waives compliance with the Company's net leverage covenant as of March 31, 2024 as well as any default that might arise as a result of the restatement of certain of the Company’s historical financial statements.

In connection with the amendment to the Term Loan, the Company issued to the Term Loan lenders (the “2024 Term Loan Warrants”) to purchase an aggregate of 2,000,000 shares of the Company’s common stock at a purchase price of $ 0.46 .

The exercise price and the number of shares underlying the 2024 Term Loan Warrants are subject to adjustment in the event of specified events, including dilutive issuances at a price lower than the exercise price of the 2024 Term Loan Warrants, a subdivision or combination of the common stock, a reclassification of the common stock or specified dividend payments.

Term Debt Prepayment

On March 23, 2024, the Company sold certain service inventory for an approximate $ 15.0 million.

On April 2, 2024, the Company used a portion of the proceeds from the disposition of these assets to prepay $ 12.3 million of the Term Loan.

RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

As described in Note 1:

Description of Business and Significant Accounting Policies, and as further described below, in November 2023, the Company determined that it was necessary to re-evaluate its application of standalone selling price under Topic 606.

The Company concluded that its application of Topic 606 related to standalone selling price was inconsistent with the generally accepted application of the guidance.

The Company’s management reperformed the determination of standalone selling price with the support of external advisors, and the resulting calculations have been applied to the revenue allocations in the fiscal years ended March 31, 2024, March 31, 2023 and March 31, 2022.

The Company additionally identified contractual terms contained within outstanding warrant agreements issued to its prior and current lenders in 2018, 2020 and 2023, which required further evaluation under Topic 815.

After consulting with external advisors and completing an extensive review process, management concluded that the classification of warrants as equity was not consistent with Topic 815 and has restated them as a liability.

This also resulted in the requirement to account for the change in the fair value of the warrants through the Statement of Operations.

As a result of these errors, the Company is restating the financial statements for the years ended March 31, 2023 and 2022.

The nature of the restatement adjustments and their impact on previously reported consolidated financial statements is as follows:

Application of Topic 606 related to standalone selling price - The Company historically used invoice price as the standalone selling price for all goods and services.

This was partly because of the high level of customization for each product sold and because the pricing for individual performance obligations is highly variable.

Standalone selling price has now been established for all goods and services sold in a bundled

contract using the adjusted market assessment approach or the cost plus a reasonable margin approach and maximizing the use of observable inputs.

The impact on the consolidated statement of operations and comprehensive loss for the fiscal years ended March 31, 2022 and March 31, 2023 is an increase to product revenue of $ 7.1 million and $ 8.3 million respectively, an increase to service revenue of $ 3.6 million and $ 1.0 million respectively, and a decrease to pre-tax loss of $ 10.6 million and $ 9.3 million respectively.

The impact to the consolidated balance sheet at March 31, 2022 and March 31, 2023 is an increase to short term deferred revenue of $ 0.6 million as at March 31, 2022, a decrease to short term deferred revenue of $ 2.7 million as at March 31, 2023, and a decrease to long term deferred revenue of $ 1.8 million and $ 7.8 million, respectively.

Application of Topic 815 related to classification of outstanding warrants - The Company inappropriately classified the warrants issued in 2018, 2020 and 2023 as equity.

The impact on the consolidated statement of operations and comprehensive loss for the fiscal years ended March 31, 2022 and March 31, 2023 is an increase to the change in value of warrant liabilities of $ 60.0 million and $ 10.2 million, respectively, and a decrease to pre-tax loss of $ 60.0 million and $ 10.2 million respectively.

The impact to the consolidated balance sheet at March 31, 2022 and March 31, 2023 is a decrease to warrant liabilities of $ 18.2 million and $ 8.0 million, respectively, and a decrease to additional paid-in capital of $ 20.2 million and $ 20.2 million, respectively.

Below are our restated consolidated balance sheets as of March 31, 2023 and 2022, and the restated consolidated statements of operations and comprehensive loss, statements of stockholders’ equity, and statements of cash flows for each of the years ended March 31, 2023 and 2022.

QUANTUM CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

March 31, 2023

As previously reported Restatement adjustments Reference As restated

Current assets:

Cash and cash equivalents $ 25,963 $ — $ 25,963

Restricted cash 212 — 212

Accounts receivable, net of allowance for credit losses of $ 201

72,464 — 72,464

Manufacturing inventories 19,441 — 19,441

Service parts inventories 25,304 — 25,304

Prepaid expenses 4,158 — 4,158

Other current assets 5,513 — 5,513

Total current assets 153,055 — 153,055

Property and equipment, net 16,555 — 16,555

Intangible assets, net 4,941 — 4,941

Goodwill 12,969 — 12,969

Right-of-use assets, net 10,291 — 10,291

Other long-term assets 15,846 — 15,846

Total assets $ 213,657 $ — $ 213,657

Liabilities and Stockholders’ Deficit

Current liabilities:

Accounts payable $ 35,716 $ — 35,716

Accrued compensation 15,710 — 15,710

Deferred revenue, current portion 82,504 ( 2,697 ) (a) 79,807

Term debt, current portion 5,000 — 5,000

Warrant liabilities — 7,989 (b) 7,989

Other accrued liabilities 13,666 — 13,666

Total current liabilities 152,596 5,292 157,888

Deferred revenue, net of current portion 43,306 ( 7,811 ) 35,495

Revolving credit facility 16,750 — 16,750

Term debt, net of current portion 66,354 — 66,354

Operating lease liabilities 10,169 — 10,169

Other long-term liabilities 11,370 — 11,370

Total liabilities 300,545 ( 2,519 ) 298,026

Stockholders’ deficit

Preferred stock:

Preferred stock, 20,000 shares authorized;

no shares issued

Common stock:

Common stock, $ 0.01 par value;

225,000 shares authorized;

93,574 shares issued and outstanding

Additional paid-in capital 722,603 ( 20,233 ) (b) 702,370

Accumulated deficit ( 808,846 ) 22,752 (a) (b) ( 786,094 )

Accumulated other comprehensive loss ( 1,581 ) — ( 1,581 )

Total stockholders' deficit ( 86,888 ) 2,519 ( 84,369 )

Total liabilities and stockholders' deficit $ 213,657 $ — $ 213,657

QUANTUM CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

March 31, 2022

As previously reported Restatement adjustments Reference As restated

Current assets:

Cash and cash equivalents $ 5,210 $ — $ 5,210

Restricted cash 283 — 283

Accounts receivable, net of allowance for credit losses of $ 422 , respectively

69,354 — 69,354

Manufacturing inventories 33,546 — 33,546

Service parts inventories 24,254 — 24,254

Prepaid expenses 7,853 — 7,853

Other current assets 4,697 — 4,697

Total current assets 145,197 — 145,197

Property and equipment, net 12,853 — 12,853

Intangible assets, net 9,584 — 9,584

Goodwill 12,969 — 12,969

Right-of-use assets, net 11,107 — 11,107

Other long-term assets 9,925 — 9,925

Total assets $ 201,635 $ — $ 201,635

Liabilities and Stockholders’ Deficit

Current liabilities:

Accounts payable $ 34,220 $ — 34,220

Accrued compensation 16,141 — 16,141

Deferred revenue, current portion 86,517 611 (a) 87,128

Term debt, current portion 4,375 — 4,375

Warrant liabilities — 18,237 (b) 18,237

Other accrued liabilities 16,562 — 16,562

Total current liabilities 157,815 18,848 176,663

Deferred revenue, net of current portion 41,580 ( 1,792 ) 39,788

Revolving credit facility 17,735 — 17,735

Term debt, net of current portion 89,448 — 89,448

Operating lease liabilities 9,891 — 9,891

Other long-term liabilities 11,849 — 11,849

Total liabilities 328,318 17,056 345,374

Stockholders’ deficit

Preferred stock:

Preferred stock, 20,000 shares authorized;

no shares issued

Common stock:

Common stock, $ 0.01 par value;

225,000 shares authorized;

60,433 shares issued and outstanding

Additional paid-in capital 645,038 ( 20,233 ) (b) 624,805

Accumulated deficit ( 770,903 ) 3,177 (a) (b) ( 767,726 )

Accumulated other comprehensive loss ( 1,423 ) — ( 1,423 )

Total stockholders' deficit ( 126,683 ) ( 17,056 ) ( 143,739 )

Total liabilities and stockholders' deficit $ 201,635 $ — $ 201,635

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share amounts)

Year Ended March 31, 2023

As previously reported Restatement adjustments Reference As restated

Product $ 266,537 $ 8,317 (a) $ 274,854

Service and subscription 132,510 1,008 (a) 133,518

Royalty 13,705 — 13,705

Total revenue 412,752 9,325 422,077

Cost of revenue

Product 220,031 — 220,031

Service and subscription 58,782 — 58,782

Total cost of revenue 278,813 — 278,813

Gross profit 133,939 9,325 143,264

Operating expenses

Sales and marketing 66,034 — 66,034

General and administrative 47,752 — 47,752

Research and development 44,555 — 44,555

Restructuring charges 1,605 — 1,605

Total operating expenses 159,946 — 159,946

Income (loss) from operations ( 26,007 ) 9,325 ( 16,682 )

Other income, net 1,956 — 1,956

Interest expense ( 10,560 ) — ( 10,560 )

Change in fair value of warrant liability — 10,250 (b) 10,250

Loss on debt extinguishment, net ( 1,392 ) — ( 1,392 )

Net income (loss) before income taxes ( 36,003 ) 19,575 ( 16,428 )

Income tax provision 1,940 — 1,940

Net income (loss) $ ( 37,943 ) $ 19,575 $ ( 18,368 )

Deemed dividend on warrants ( 389 ) 389 (b) —

Net income (loss) attributable to common stockholders $ ( 38,332 ) $ 19,964 $ ( 18,368 )

Net income (loss) per share attributable to common stockholders- basic $ ( 0.42 ) $ 0.22 $ ( 0.20 )

Net income (loss) per share attributable to common stockholders - diluted $ ( 0.42 ) $ 0.14 $ ( 0.28 )

Weighted average shares - basic 90,348 90,348 90,348

Weighted average shares - basic and diluted 90,348 91,188 91,188

Net income (loss) $ ( 37,943 ) $ 19,575 $ ( 18,368 )

Foreign currency translation adjustments, net ( 158 ) — ( 158 )

Total comprehensive income (loss) $ ( 38,101 ) $ 19,575 $ ( 18,526 )

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share amounts)

Year Ended March 31, 2022

As previously reported Restatement adjustments Reference As restated

Product $ 223,761 $ 7,053 (a) $ 230,814

Service and subscription 133,689 3,552 (a) 137,241

Royalty 15,377 — 15,377

Total revenue 372,827 10,605 383,432

Cost of revenue

Product 169,780 — 169,780

Service and subscription 56,012 — 56,012

Total cost of revenue 225,792 — 225,792

Gross profit 147,035 10,605 157,640

Operating expenses

Research and development 51,812 — 51,812

Sales and marketing 62,957 — 62,957

General and administrative 45,256 — 45,256

Restructuring charges 850 — 850

Total operating expenses 160,875 — 160,875

Income (loss) from operations ( 13,840 ) 10,605 ( 3,235 )

Other expense, net ( 251 ) — ( 251 )

Interest expense ( 11,888 ) — ( 11,888 )

Change in fair value of warrant liabilities — 60,030 (b) 60,030

Loss on debt extinguishment, net ( 4,960 ) — ( 4,960 )

Net income (loss) before income taxes ( 30,939 ) 70,635 39,696

Income tax provision 1,341 — 1,341

Net income (loss) $ ( 32,280 ) $ 70,635 $ 38,355

Net income (loss) per share - basic $ ( 0.55 ) $ 1.20 $ 0.65

Net income (loss) per share - diluted $ ( 0.55 ) $ 0.23 $ ( 0.32 )

Weighted average shares - basic 58,871 58,871 58,871

Weighted average shares - diluted 58,871 66,017 66,017

Net income (loss) $ ( 32,280 ) $ 70,635 $ 38,355

Foreign currency translation adjustments, net ( 567 ) — ( 567 )

Total comprehensive income (loss) $ ( 32,847 ) $ 70,635 $ 37,788

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Year Ended March 31, 2023

As previously reported Restatement adjustments Reference As restated

Operating activities

Net income (loss)

$ ( 37,943 ) $ 19,575 (a) (b) $ ( 18,368 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization 10,118 — 10,118

Amortization of debt issuance costs 1,624 — 1,624

Long-term debt related costs 992 — 992

Provision for manufacturing and service inventories 18,052 — 18,052

Stock-based compensation 10,750 — 10,750

Change in fair value of warrant liabilities — ( 10,250 ) (b) ( 10,250 )

Other non-cash ( 2,067 ) — ( 2,067 )

Changes in assets and liabilities, net of effect of acquisitions:

Accounts receivable ( 2,966 ) — ( 2,966 )

Manufacturing inventories ( 1,839 ) — ( 1,839 )

Service parts inventories ( 3,503 ) — ( 3,503 )

Accounts payable 1,158 — 1,158

Prepaid expenses 3,695 — 3,695

Deferred revenue ( 2,286 ) ( 9,325 ) (a) ( 11,611 )

Accrued compensation ( 431 ) — ( 431 )

Other assets ( 1,270 ) — ( 1,270 )

Other liabilities 1,022 — 1,022

Net cash used in operating activities

( 4,894 ) — ( 4,894 )

Investing activities

Purchases of property and equipment ( 12,581 ) — ( 12,581 )

Business acquisitions ( 3,020 ) — ( 3,020 )

Net cash used in investing activities

( 15,601 ) — ( 15,601 )

Financing activities

Borrowings of long-term debt, net of debt issuance costs — — —

Repayments of long-term debt ( 24,596 ) — ( 24,596 )

Borrowings of credit facility 497,280 — 497,280

Repayments of credit facility ( 498,665 ) — ( 498,665 )

Borrowings of paycheck protection program — — —

Proceeds from secondary offering, net — — —

Payment of taxes due upon vesting of restricted stock — — —

Proceeds from issuance of common stock 67,146 — 67,146

Net cash provided by financing activities 41,165 — 41,165

Effect of exchange rate changes on cash and cash equivalents 12 — 12

Net change in cash, cash equivalents, and restricted cash 20,682 — 20,682

Cash, cash equivalents, and restricted cash at beginning of period 5,493 — 5,493

Cash, cash equivalents, and restricted cash at end of period $ 26,175 $ — $ 26,175

Supplemental disclosure of cash flow information

Cash paid for interest $ 8,701 $ — $ 8,701

Cash paid for income taxes, net of refunds $ 1,418 $ — $ 1,418

Non-cash transactions

Purchases of property and equipment included in accounts payable $ 1,049 $ — $ 1,049

Transfer of manufacturing inventory to services inventory $ 4,045 $ — $ 4,045

Transfer of manufacturing inventory to property and equipment $ 343 $ — $ 343

Payment of litigation settlements with insurance proceeds $ — $ — $ —

Paid-in-kind interest $ 319 $ — $ 319

Deemed dividend $ 389 $ ( 389 ) (b) $ —

Cash and cash equivalents $ 25,963 $ — $ 25,963

Restricted cash, current 212 — 212

Total cash, cash equivalents and restricted cash at the end of period $ 26,175 $ — $ 26,175

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Year Ended March 31, 2022

As previously reported Restatement adjustments Reference As adjusted

Operating activities

Net income (loss)

$ ( 32,280 ) $ 70,635 (a) (b) $ 38,355

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization 9,418 — 9,418

Amortization of debt issuance costs 2,414 — 2,414

Long-term debt related costs 8,471 — 8,471

Provision for manufacturing and service inventories 5,740 — 5,740

Gain on PPP loan extinguishment ( 10,000 ) — ( 10,000 )

Stock-based compensation 13,829 13,829

Change in fair value of warrant liabilities — ( 60,030 ) (b) ( 60,030 )

Other non-cash ( 832 ) — ( 832 )

Changes in assets and liabilities, net of effect of acquisitions:

Accounts receivable 3,651 — 3,651

Manufacturing inventories ( 12,069 ) — ( 12,069 )

Service parts inventories ( 4,400 ) — ( 4,400 )

Accounts payable ( 1,939 ) — ( 1,939 )

Prepaid expenses ( 3,959 ) — ( 3,959 )

Deferred revenue ( 2,514 ) ( 10,605 ) (a) ( 13,119 )

Accrued restructuring charges ( 580 ) — ( 580 )

Accrued compensation ( 3,073 ) — ( 3,073 )

Other assets ( 2,602 ) — ( 2,602 )

Other liabilities ( 3,003 ) — ( 3,003 )

Net cash used in operating activities

( 33,728 ) — ( 33,728 )

Investing activities

Purchases of property and equipment ( 6,316 ) — ( 6,316 )

Business acquisitions ( 7,808 ) — ( 7,808 )

Net cash used in investing activities

( 14,124 ) — ( 14,124 )

Financing activities

Borrowings of long-term debt, net of debt issuance costs 94,961 — 94,961

Repayments of long-term debt ( 94,301 ) — ( 94,301 )

Borrowings of credit facility 309,000 — 309,000

Repayments of credit facility ( 291,265 ) — ( 291,265 )

Proceeds from issuance of common stock 1,762 1,762

Net cash provided by financing activities 20,157 — 20,157

Effect of exchange rate changes on cash and cash equivalents 51 — 51

Net change in cash, cash equivalents, and restricted cash ( 27,644 ) — ( 27,644 )

Cash, cash equivalents, and restricted cash at beginning of period 33,137 — 33,137

Cash, cash equivalents, and restricted cash at end of period $ 5,493 $ — $ 5,493

Supplemental disclosure of cash flow information

Cash paid for interest $ 9,140 $ — $ 9,140

Cash paid for income taxes, net of refunds $ 944 $ — $ 944

Non-cash transactions

Purchases of property and equipment included in accounts payable $ 147 $ — $ 147

Transfer of manufacturing inventory to services inventory $ 211 $ — $ 211

Cash and cash equivalents $ 5,210 $ — $ 5,210

Restricted cash, current 283 — 283

Total cash, cash equivalents and restricted cash at the end of period $ 5,493 $ — $ 5,493

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(in thousands)

Common Stock Additional

Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Deficit

Reference Shares Amount

As previously reported

Balance, March 31, 2022 60,433 $ 605 $ 645,038 $ ( 770,903 ) $ ( 1,423 ) $ ( 126,683 )

Net loss — — — ( 37,943 ) — ( 37,943 )

Foreign currency translation adjustments, net — — — — ( 158 ) ( 158 )

Shares issued under employee stock purchase plan 600 6 891 — — 897

Shares issued under employee incentive plans, net 2,180 21 ( 21 ) — — —

Shares issued in connection with rights offering, net 30,000 300 65,949 — — 66,249

Shares issued in connection with business acquisition 361 4 ( 4 ) — — —

Settlement of warrant down round provision — — 389 — — 389

Deemed dividend on warrants — — ( 389 ) — — ( 389 )

Stock-based compensation — — 10,750 — — 10,750

Balance, March 31, 2023 93,574 $ 936 $ 722,603 $ ( 808,846 ) $ ( 1,581 ) $ ( 86,888 )

March 31, 2022 (a) (b) — — ( 20,233 ) 3,177 — ( 17,056 )

Net loss (a) (b) — — — 19,575 — 19,575

March 31, 2023 — $ — $ ( 20,233 ) $ 22,752 $ — $ 2,519

March 31, 2022 60,433 $ 605 $ 624,805 $ ( 767,726 ) $ ( 1,423 ) $ ( 143,739 )

Net loss — — — ( 18,368 ) — ( 18,368 )

Foreign currency translation adjustments, net — — — — ( 158 ) ( 158 )

Shares issued under employee stock purchase plan 600 6 891 — — 897

Shares issued under employee incentive plans, net 2,180 21 ( 21 ) — — —

Shares issued in connection with rights offering, net 30,000 300 65,949 — — 66,249

Shares issued in connection with business acquisition 361 4 ( 4 ) — — —

Stock-based compensation — — 10,750 — — 10,750

March 31, 2023 93,574 $ 936 $ 702,370 $ ( 786,094 ) $ ( 1,581 ) $ ( 84,369 )

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(in thousands)

Common Stock Additional

Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Deficit

Reference Shares Amount

As previously reported

Balance, March 31, 2021 56,915 $ 570 $ 626,664 $ ( 738,623 ) $ ( 856 ) $ ( 112,245 )

Net loss — — — ( 32,280 ) — ( 32,280 )

Foreign currency translation adjustments, net — — — — ( 567 ) ( 567 )

Shares issued under employee stock purchase plan 389 4 1,758 — — 1,762

Shares issued under employee incentive plans, net 2,308 23 ( 23 ) — — —

Shares issued in connection with business acquisition 821 8 2,810 — — 2,818

Stock-based compensation — — 13,829 — — 13,829

Balance, March 31, 2022 60,433 $ 605 $ 645,038 $ ( 770,903 ) $ ( 1,423 ) $ ( 126,683 )

March 31, 2021 (a) (b) — — ( 20,233 ) ( 67,458 ) — ( 87,691 )

Net loss (a) (b) — — — 70,635 — 70,635

March 31, 2022 — $ — $ ( 20,233 ) $ 3,177 $ — $ ( 17,056 )

March 31, 2021 56,915 $ 570 $ 606,431 $ ( 806,081 ) $ ( 856 ) $ ( 199,936 )

Net loss — — — 38,355 — 38,355

Foreign currency translation adjustments, net — — — — ( 567 ) ( 567 )

Shares issued under employee stock purchase plan 389 4 1,758 — — 1,762

Shares issued under employee incentive plans, net 2,308 23 ( 23 ) — — —

Shares issued in connection with business acquisition 821 8 2,810 — — 2,818

Stock-based compensation — — 13,829 — — 13,829

March 31, 2022 60,433 $ 605 $ 624,805 $ ( 767,726 ) $ ( 1,423 ) $ ( 143,739 )

QUARTERLY FINANCIAL SUMMARY (Unaudited)

The following tables present the impact of the restatement for the quarters ended June 30, 2023, December 31, 2022, September 30, 2022, and June 30, 2022.

These tables also include financial information for the quarters ended December 31, 2023 and September 30, 2023 that were not previously filed.

The unaudited consolidated interim financial statements reflect all adjustments, consisting only of normal and recurring items, necessary to present fairly our financial position as of March 31, 2024, the results of operations and comprehensive loss, statements of cash flows, and changes in stockholder's deficit for the three and nine months ended June 30, September 30 and December 31, 2023 and 2022.

The nature of the restatement adjustments are as follows:

Application of Topic 606 related to standalone selling price - The Company historically used invoice price as the standalone selling price for all goods and services.

This was partly because of the high level of customization for each product sold and because the pricing for individual performance obligations is highly variable.

Standalone selling price has now been established for all goods and services sold in a bundled contract using the adjusted market assessment approach or the cost plus a reasonable margin approach and maximizing the use of observable inputs.

Application of Topic 815 related to classification of outstanding warrants - The Company inappropriately classified the warrants issued in 2018, 2020 and 2023 as equity.

Summarized Financial Items

The following table sets forth financial information summarizing the effects of the restatement and other immaterial error correction on our previously reported Statements of Operations for the quarters ended June 30, 2023, December 31, 2022, September 30, 2022, and June 30, 2022.

It also includes summarized information for each of the quarters ended December 31, 2023 and September 30, 2023.

(in thousands, except per share data) FY 2024

March 31 December 31 September 30 June 30

Total revenue $ 71,500 $ 71,926 $ 75,680 $ 92,495

Gross profit 27,332 29,181 32,736 35,641

Income (loss) from operations ( 13,808 ) ( 6,216 ) ( 3,712 ) ( 5,139 )

Change in fair value of warrants ( 2,203 ) 2,213 4,402 726

Income (loss) before income taxes ( 19,805 ) ( 9,359 ) ( 2,798 ) ( 8,612 )

Net income (loss) ( 18,943 ) ( 9,869 ) ( 3,331 ) ( 9,142 )

Income (loss) per share - basic $ ( 0.20 ) $ ( 0.10 ) $ ( 0.04 ) $ ( 0.10 )

(in thousands, except per share data) FY 2023

March 31 December 31 September 30 June 30

As restated As restated As restated As restated

Total revenue $ 109,203 $ 113,475 $ 100,565 $ 98,833

Gross profit 35,642 42,568 29,259 35,807

Income (loss) from operations ( 5,666 ) 4,047 ( 9,741 ) ( 5,319 )

Change in fair value of warrants ( 430 ) 4 3,092 7,582

Income (loss) before income taxes ( 9,800 ) 806 ( 6,963 ) ( 469 )

Net income (loss) ( 10,176 ) 113 ( 7,424 ) ( 879 )

Income (loss) per share - basic $ ( 0.11 ) $ — $ ( 0.08 ) $ ( 0.01 )

Income (loss) per share - diluted $ ( 0.11 ) $ — $ ( 0.10 ) $ ( 0.07 )

Quarterly Financial Summary

The net impact of the restatement on our quarterly and year-to-date unaudited condensed financial statements is as follows:

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

December 31 September 30 June 30

Current assets:

Cash and cash equivalents $ 24,377 $ 25,574 $ 25,465

Restricted cash 172 180 200

Accounts receivable, net of allowance for credit losses of $ 21 , $ 26 and $ 163 , respectively

60,020 51,529 66,245

Manufacturing inventories 20,409 21,376 20,017

Service parts inventories 25,423 25,880 25,276

Prepaid expenses 3,763 4,149 6,444

Other current assets 7,224 5,389 6,004

Total current assets 141,388 134,077 149,651

Property and equipment, net 13,251 14,621 15,583

Intangible assets, net 1,986 2,819 3,801

Goodwill 12,969 12,969 12,969

Right-of-use assets, net 9,625 9,844 10,017

Other long-term assets 19,986 20,475 18,463

Total assets $ 199,205 $ 194,805 $ 210,484

Liabilities and Stockholders’ Deficit

Current liabilities:

Accounts payable $ 22,426 $ 26,946 $ 30,560

Accrued compensation 15,286 13,746 14,894

Deferred revenue, current portion 73,240 70,696 76,688

Term debt, current portion 82,587 82,681 5,000

Revolving credit facility 32,000 21,450 17,800

Warrant liabilities 1,843 4,056 8,457

Other accrued liabilities 13,854 11,724 12,715

Total current liabilities 241,236 231,299 166,114

Deferred revenue, net of current portion 37,281 35,337 35,685

Term debt, net of current portion — — 77,814

Operating lease liabilities 9,885 10,079 10,001

Other long-term liabilities 12,734 12,522 12,191

Total liabilities 301,136 289,237 301,805

Stockholders’ deficit

Preferred stock:

Preferred stock, 20,000 shares authorized;

no shares issued

Common stock:

Common stock, $ 0.01 par value;

225,000 shares authorized;

95,850 , 95,519 and 93,705 shares issued and outstanding, respectively

Additional paid-in capital 706,133 705,229 704,309

Accumulated deficit ( 808,436 ) ( 798,566 ) ( 795,236 )

Accumulated other comprehensive loss ( 587 ) ( 2,052 ) ( 1,332 )

Total stockholders' deficit ( 101,931 ) ( 94,433 ) ( 91,321 )

Total liabilities and stockholders' deficit $ 199,205 $ 194,804 $ 210,484

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

December 31 September 30 June 30

As restated As restated As restated

Current assets:

Cash and cash equivalents $ 26,028 $ 25,698 $ 26,528

Restricted cash 219 223 255

Accounts receivable, net of allowance for credit losses of $ 219 , $ 195 and $ 195 respectively

72,911 61,309 64,909

Manufacturing inventories 32,402 23,671 32,642

Service parts inventories 25,822 25,458 25,129

Prepaid expenses 7,198 9,241 10,715

Other current assets 7,489 4,839 4,574

Total current assets 172,069 150,439 164,752

Property and equipment, net 16,794 15,973 14,093

Intangible assets, net 6,497 7,245 8,420

Goodwill 12,969 12,969 12,969

Right-of-use assets, net 10,468 10,579 10,641

Other long-term assets 13,600 12,477 10,796

Total assets $ 232,397 $ 209,682 $ 221,671

Liabilities and Stockholders’ Deficit

Current liabilities:

Accounts payable $ 41,788 $ 34,263 $ 33,867

Accrued compensation 15,527 13,192 14,531

Deferred revenue, current portion 70,876 69,499 74,130

Term debt, current portion 5,000 5,000 5,000

Warrant liabilities 7,559 7,563 10,655

Other accrued liabilities 15,852 14,502 14,157

Total current liabilities 156,602 144,019 152,340

Deferred revenue, net of current portion 36,220 36,480 37,391

Revolving credit facility 27,736 21,500 17,300

Term debt, net of current portion 67,306 68,250 69,195

Operating lease liabilities 10,346 10,315 9,932

Other long-term liabilities 12,150 11,653 12,013

Total liabilities 310,360 292,217 298,171

Stockholders’ deficit

Preferred stock:

Preferred stock, 20,000 shares authorized;

no shares issued

Common stock:

Common stock, $ 0.01 par value;

225,000 shares authorized;

93,144 , 92,158 and 90,606 shares issued and outstanding, respectively

Additional paid-in capital 699,536 696,567 693,895

Accumulated deficit ( 775,914 ) ( 776,027 ) ( 768,603 )

Accumulated other comprehensive loss ( 2,517 ) ( 3,997 ) ( 2,699 )

Total stockholders' deficit ( 77,963 ) ( 82,535 ) ( 76,500 )

Total liabilities and stockholders' deficit $ 232,397 $ 209,682 $ 221,671

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

June 30, 2023

As previously reported Restatement adjustments Reference As restated

Current assets:

Cash and cash equivalents $ 25,465 $ — $ 25,465

Restricted cash 200 — 200

Accounts receivable, net of allowance for credit losses of $ 163

66,245 — 66,245

Manufacturing inventories 20,017 — 20,017

Service parts inventories 25,276 — 25,276

Prepaid expenses 6,444 — 6,444

Other current assets 6,004 — 6,004

Total current assets 149,651 — 149,651

Property and equipment, net 15,583 — 15,583

Intangible assets, net 3,801 — 3,801

Goodwill 12,969 — 12,969

Right-of-use assets, net 10,017 — 10,017

Other long-term assets 18,463 — 18,463

Total assets $ 210,484 $ — $ 210,484

Liabilities and Stockholders’ Deficit

Current liabilities:

Accounts payable $ 30,560 $ — $ 30,560

Accrued compensation 14,894 — 14,894

Deferred revenue, current portion 79,686 ( 2,998 ) (a) 76,688

Term debt, current portion 5,000 — 5,000

Revolving credit facility 17,800 — 17,800

Warrant liabilities — 8,457 (b) 8,457

Other accrued liabilities 12,715 — 12,715

Total current liabilities 160,655 5,459 166,114

Deferred revenue, net of current portion 43,903 ( 8,218 ) 35,685

Term debt, net of current portion 77,814 — 77,814

Operating lease liabilities 10,001 — 10,001

Other long-term liabilities 12,191 — 12,191

Total liabilities 304,564 ( 2,759 ) 301,805

Stockholders’ deficit

Preferred stock:

Preferred stock, 20,000 shares authorized;

no shares issued

Common stock:

Common stock, $ 0.01 par value;

225,000 shares authorized;

93,705 shares issued and outstanding

Additional paid-in capital 725,736 ( 21,427 ) (b) 704,309

Accumulated deficit ( 819,422 ) 24,186 (a) (b) ( 795,236 )

Accumulated other comprehensive loss ( 1,332 ) — ( 1,332 )

Total stockholders' deficit ( 94,080 ) 2,759 ( 91,321 )

Total liabilities and stockholders' deficit $ 210,484 $ — $ 210,484

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

December 31, 2022

As previously reported Restatement adjustments Reference As restated

Current assets:

Cash and cash equivalents $ 26,028 $ — $ 26,028

Restricted cash 219 — 219

Accounts receivable, net of allowance for credit losses of $ 219

72,911 — 72,911

Manufacturing inventories 32,402 — 32,402

Service parts inventories 25,822 — 25,822

Prepaid expenses 7,198 — 7,198

Other current assets 7,489 — 7,489

Total current assets 172,069 — 172,069

Property and equipment, net 16,794 — 16,794

Intangible assets, net 6,497 — 6,497

Goodwill 12,969 — 12,969

Right-of-use assets, net 10,468 — 10,468

Other long-term assets 13,600 — 13,600

Total assets $ 232,397 $ — $ 232,397

Liabilities and Stockholders’ Deficit

Current liabilities:

Accounts payable $ 41,788 $ — $ 41,788

Accrued compensation 15,527 — 15,527

Deferred revenue, current portion 72,669 ( 1,793 ) (a) 70,876

Term debt, current portion 5,000 — 5,000

Warrant liabilities — 7,559 (b) 7,559

Other accrued liabilities 15,852 — 15,852

Total current liabilities 150,836 5,766 156,602

Deferred revenue, net of current portion 41,076 ( 4,856 ) 36,220

Revolving credit facility 27,736 — 27,736

Term debt, net of current portion 67,306 — 67,306

Operating lease liabilities 10,346 — 10,346

Other long-term liabilities 12,150 — 12,150

Total liabilities 309,450 910 310,360

Stockholders’ deficit

Preferred stock:

Preferred stock, 20,000 shares authorized;

no shares issued

Common stock:

Common stock, $ 0.01 par value;

225,000 shares authorized;

93,144 shares issued and outstanding

Additional paid-in capital 719,769 ( 20,233 ) (b) 699,536

Accumulated deficit ( 795,237 ) 19,323 (a) (b) ( 775,914 )

Accumulated other comprehensive loss ( 2,517 ) — ( 2,517 )

Total stockholders' deficit ( 77,053 ) ( 910 ) ( 77,963 )

Total liabilities and stockholders' deficit $ 232,397 $ — $ 232,397

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

September 30, 2022

As previously reported Restatement adjustments Reference As restated

Current assets:

Cash and cash equivalents $ 25,698 $ — $ 25,698

Restricted cash 223 — 223

Accounts receivable, net of allowance for credit losses of $ 195

61,309 — 61,309

Manufacturing inventories 23,671 — 23,671

Service parts inventories 25,458 — 25,458

Prepaid expenses 9,241 — 9,241

Other current assets 4,839 — 4,839

Total current assets 150,439 — 150,439

Property and equipment, net 15,973 — 15,973

Intangible assets, net 7,245 — 7,245

Goodwill 12,969 — 12,969

Right-of-use assets, net 10,579 — 10,579

Other long-term assets 12,477 — 12,477

Total assets $ 209,682 $ — $ 209,682

Liabilities and Stockholders’ Deficit

Current liabilities:

Accounts payable $ 34,263 $ — $ 34,263

Accrued compensation 13,192 — 13,192

Deferred revenue, current portion 70,184 ( 685 ) (a) 69,499

Term debt, current portion 5,000 — 5,000

Warrant liabilities — 7,563 (b) 7,563

Other accrued liabilities 14,502 — 14,502

Total current liabilities 137,141 6,878 144,019

Deferred revenue, net of current portion 40,165 ( 3,685 ) 36,480

Revolving credit facility 21,500 — 21,500

Term debt, net of current portion 68,250 — 68,250

Operating lease liabilities 10,315 — 10,315

Other long-term liabilities 11,653 — 11,653

Total liabilities 289,024 3,193 292,217

Stockholders’ deficit

Preferred stock:

Preferred stock, 20,000 shares authorized;

no shares issued

Common stock:

Common stock, $ 0.01 par value;

225,000 shares authorized;

92,158 shares issued and outstanding

Additional paid-in capital 716,800 ( 20,233 ) (b) 696,567

Accumulated deficit ( 793,067 ) 17,040 (a) (b) ( 776,027 )

Accumulated other comprehensive loss ( 3,997 ) — ( 3,997 )

Total stockholders' deficit ( 79,342 ) ( 3,193 ) ( 82,535 )

Total liabilities and stockholders' deficit $ 209,682 $ — $ 209,682

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

June 30, 2022

As previously reported Restatement adjustments Reference As restated

Current assets:

Cash and cash equivalents $ 26,528 $ — $ 26,528

Restricted cash 255 — 255

Accounts receivable, net of allowance for credit losses of $ 195

64,909 — 64,909

Manufacturing inventories 32,642 — 32,642

Service parts inventories 25,129 — 25,129

Prepaid expenses 10,715 — 10,715

Other current assets 4,574 — 4,574

Total current assets 164,752 — 164,752

Property and equipment, net 14,093 — 14,093

Intangible assets, net 8,420 — 8,420

Goodwill 12,969 — 12,969

Right-of-use assets, net 10,641 — 10,641

Other long-term assets 10,796 — 10,796

Total assets $ 221,671 $ — $ 221,671

Liabilities and Stockholders’ Deficit

Current liabilities:

Accounts payable $ 33,867 $ — $ 33,867

Accrued compensation 14,531 — 14,531

Deferred revenue, current portion 74,267 ( 137 ) (a) 74,130

Term debt, current portion 5,000 — 5,000

Warrant liabilities — 10,655 (b) 10,655

Other accrued liabilities 14,157 — 14,157

Total current liabilities 141,822 10,518 152,340

Deferred revenue, net of current portion 40,196 ( 2,805 ) 37,391

Revolving credit facility 17,300 — 17,300

Term debt, net of current portion 69,195 — 69,195

Operating lease liabilities 9,932 — 9,932

Other long-term liabilities 12,013 — 12,013

Total liabilities 290,458 7,713 298,171

Stockholders’ deficit

Preferred stock:

Preferred stock, 20,000 shares authorized;

no shares issued as of June 30, 2022

Common stock:

Common stock, $ 0.01 par value;

225,000 shares authorized;

90,606 shares issued and outstanding at June 30, 2022

Additional paid-in capital 714,128 ( 20,233 ) (b) 693,895

Accumulated deficit ( 781,123 ) 12,520 (a) (b) ( 768,603 )

Accumulated other comprehensive loss ( 2,699 ) — ( 2,699 )

Total stockholders' deficit ( 68,787 ) ( 7,713 ) ( 76,500 )

Total liabilities and stockholders' deficit $ 221,671 $ — $ 221,671

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share amounts)

3 Months Ended 9 Months Ended 3 Months Ended 6 Months Ended 3 Months Ended

December 31 September 30 June 30

Product $ 37,113 $ 138,635 $ 42,947 $ 101,522 $ 58,577

Service and subscription 32,771 94,229 30,505 61,458 30,953

Royalty 2,042 7,235 2,228 5,194 2,965

Total revenue 71,926 240,099 75,680 168,174 92,495

Cost of revenue

Product 30,044 105,214 30,719 75,170 44,451

Service and subscription 12,701 37,329 12,225 24,628 12,403

Total cost of revenue 42,745 142,543 42,944 99,798 56,854

Gross profit 29,181 97,556 32,736 68,376 35,641

Operating expenses

Sales and marketing 14,244 45,800 15,717 31,557 15,839

General and administrative 11,893 34,833 10,241 22,940 12,699

Research and development 8,763 28,828 9,152 20,065 10,913

Restructuring charges 497 3,164 1,338 2,667 1,329

Total operating expenses 35,397 112,625 36,448 77,229 40,780

Loss from operations ( 6,216 ) ( 15,069 ) ( 3,712 ) ( 8,853 ) ( 5,139 )

Other income (expense), net ( 1,419 ) ( 2,049 ) 367 ( 630 ) ( 998 )

Interest expense ( 3,937 ) ( 10,992 ) ( 3,855 ) ( 7,055 ) ( 3,201 )

Change in fair value of warrant liabilities 2,213 7,341 4,402 5,128 726

Net loss before income taxes

( 9,359 ) ( 20,769 ) ( 2,798 ) ( 11,410 ) ( 8,612 )

Income tax provision 510 1,573 533 1,063 530

Net loss $ ( 9,869 ) $ ( 22,342 ) $ ( 3,331 ) $ ( 12,473 ) $ ( 9,142 )

Net loss per share - basic $ ( 0.10 ) $ ( 0.24 ) $ ( 0.04 ) $ ( 0.13 ) $ ( 0.10 )

Net loss per share - diluted $ ( 0.10 ) $ ( 0.24 ) $ ( 0.04 ) $ ( 0.13 ) $ ( 0.10 )

Weighted average shares - basic 95,806 94,834 95,010 94,345 93,673

Weighted average shares - diluted 95,806 94,834 95,010 94,345 93,711

Net loss $ ( 9,869 ) $ ( 22,342 ) $ ( 3,331 ) $ ( 12,473 ) $ ( 9,142 )

Foreign currency translation adjustments, net 1,465 994 ( 720 ) ( 471 ) 249

Total comprehensive loss $ ( 8,404 ) $ ( 21,348 ) $ ( 4,051 ) $ ( 12,944 ) $ ( 8,893 )

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share amounts)

3 Months Ended 9 Months Ended 3 Months Ended 6 Months Ended 3 Months Ended

December 31 September 30 June 30

As restated As restated As restated As restated As restated

Product $ 77,494 $ 203,192 $ 64,110 $ 125,698 $ 61,588

Service and subscription 33,155 99,937 32,977 66,782 33,805

Royalty 2,826 9,744 3,478 6,918 3,440

Total revenue 113,475 312,873 100,565 199,398 98,833

Cost of revenue

Product 58,528 163,010 56,561 104,482 47,921

Service and subscription 12,379 42,229 14,745 29,850 15,105

Total cost of revenue 70,907 205,239 71,306 134,332 63,026

Gross profit 42,568 107,634 29,259 65,066 35,807

Operating expenses

Sales and marketing 16,339 47,894 15,593 31,555 15,962

General and administrative 10,969 35,223 11,940 24,254 12,314

Research and development 11,254 33,925 10,546 22,671 12,125

Restructuring charges ( 41 ) 1,605 921 1,646 725

Total operating expenses 38,521 118,647 39,000 80,126 41,126

Income (loss) from operations 4,047 ( 11,013 ) ( 9,741 ) ( 15,060 ) ( 5,319 )

Other income (expense), net ( 544 ) 2,638 2,431 3,182 751

Interest expense ( 2,701 ) ( 7,537 ) ( 2,745 ) ( 4,836 ) ( 2,091 )

Change in fair value of warrant liability 4 10,678 3,092 10,675 7,582

Loss on debt extinguishment, net — ( 1,392 ) — ( 1,392 ) ( 1,392 )

Net income (loss) before income taxes 806 ( 6,626 ) ( 6,963 ) ( 7,431 ) ( 469 )

Income tax provision 693 1,564 461 872 410

Net income (loss) $ 113 $ ( 8,190 ) $ ( 7,424 ) $ ( 8,303 ) $ ( 879 )

Net income (loss) per share - basic and diluted $ 0.00 $ ( 0.10 ) $ ( 0.08 ) $ ( 0.09 ) $ ( 0.01 )

Net income (loss) per share - basic and diluted $ 0.00 $ ( 0.18 ) $ ( 0.10 ) $ ( 0.18 ) $ ( 0.07 )

Weighted average shares - basic and diluted 92,752 89,335 91,550 87,617 83,641

Weighted average shares - basic and diluted 92,752 90,440 92,773 89,315 85,756

Net income (loss) $ 113 $ ( 8,190 ) $ ( 7,424 ) $ ( 8,303 ) $ ( 879 )

Foreign currency translation adjustments, net 1,480 ( 1,094 ) ( 1,298 ) ( 2,574 ) ( 1,276 )

Total comprehensive income (loss) $ 1,593 $ ( 9,284 ) $ ( 8,722 ) $ ( 10,877 ) $ ( 2,155 )

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share amounts)

Three Months Ended

As previously reported Adjustments Reference As restated

Product $ 57,447 $ 1,130 (a) $ 58,577

Service and subscription 31,375 ( 422 ) (a) 30,953

Royalty 2,965 — 2,965

Total revenue 91,787 708 92,495

Cost of revenue

Product 44,451 — 44,451

Service and subscription 12,403 — 12,403

Total cost of revenue 56,854 — 56,854

Gross profit 34,933 708 35,641

Operating expenses

Sales and marketing 15,839 — 15,839

General and administrative 12,699 — 12,699

Research and development 10,913 — 10,913

Restructuring charges 1,329 — 1,329

Total operating expenses 40,780 — 40,780

Income (loss) from operations ( 5,847 ) 708 ( 5,139 )

Other expense, net ( 998 ) — ( 998 )

Interest expense ( 3,201 ) — ( 3,201 )

Change in fair value of warrant liabilities — 726 (b) 726

Net income (loss) before income taxes ( 10,046 ) 1,434 ( 8,612 )

Income tax provision 530 — 530

Net income (loss) from operations $ ( 10,576 ) $ 1,434 $ ( 9,142 )

Net income (loss) per share - basic and diluted $ ( 0.11 ) $ 0.01 $ ( 0.10 )

Weighted average shares - basic and diluted 93,673 93,673 93,673

Weighted average shares - basic and diluted 93,673 93,711 93,711

Net income (loss) $ ( 10,576 ) $ 1,434 $ ( 9,142 )

Foreign currency translation adjustments, net 249 — 249

Total comprehensive income (loss) $ ( 10,327 ) $ 1,434 $ ( 8,893 )

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share amounts)

Three Months Ended

As previously reported Adjustments Reference As restated

Product $ 75,420 $ 2,074 (a) $ 77,494

Service and subscription 32,950 205 (a) 33,155

Royalty 2,826 — 2,826

Total revenue 111,196 2,279 113,475

Cost of revenue

Product 58,528 — 58,528

Service and subscription 12,379 — 12,379

Total cost of revenue 70,907 — 70,907

Gross profit 40,289 2,279 42,568

Operating expenses

Sales and marketing 16,339 — 16,339

General and administrative 10,969 — 10,969

Research and development 11,254 — 11,254

Restructuring charges ( 41 ) — ( 41 )

Total operating expenses 38,521 — 38,521

Income from operations 1,768 2,279 4,047

Other expense, net ( 544 ) — ( 544 )

Interest expense ( 2,701 ) — ( 2,701 )

Change in fair value of warrant liability — 4 (b) 4

Net income (loss) before income taxes ( 1,477 ) 2,283 806

Income tax provision 693 — 693

Net income (loss) $ ( 2,170 ) $ 2,283 $ 113

Net income (loss) per share - basic $ ( 0.02 ) $ 0.02 $ 0.00

Net income (loss) per share - diluted $ ( 0.02 ) $ 0.02 $ 0.00

Weighted average shares - basic 92,752 92,752 92,752

Weighted average shares - diluted 92,752 92,752 92,752

Net income (loss) $ ( 2,170 ) $ 2,283 $ 113

Foreign currency translation adjustments, net 1,480 — 1,480

Total comprehensive income (loss) $ ( 690 ) $ 2,283 $ 1,593

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share amounts)

Three Months Ended

9/30/2022 6/30/2022

As previously reported Adjustments Reference As restated As previously reported Adjustments Reference As restated

Product $ 62,967 $ 1,143 (a) $ 64,110 $ 60,211 $ 1,377 (a) $ 61,588

Service and subscription 32,692 285 (a) 32,977 33,423 382 (a) 33,805

Royalty 3,478 — 3,478 3,440 — 3,440

Total revenue 99,137 1,428 100,565 97,074 1,759 98,833

Cost of revenue

Product 56,561 — 56,561 47,921 — 47,921

Service and subscription 14,745 — 14,745 15,105 — 15,105

Total cost of revenue 71,306 — 71,306 63,026 — 63,026

Gross profit 27,831 1,428 29,259 34,048 1,759 35,807

Operating expenses

Sales and marketing 15,593 — 15,593 15,962 — 15,962

General and administrative 11,940 — 11,940 12,314 — 12,314

Research and development 10,546 — 10,546 12,125 — 12,125

Restructuring charges 921 — 921 725 — 725

Total operating expenses 39,000 — 39,000 41,126 — 41,126

Income (loss) from operations ( 11,169 ) 1,428 ( 9,741 ) ( 7,078 ) 1,759 ( 5,319 )

Other income, net 2,431 — 2,431 751 — 751

Interest expense ( 2,745 ) — ( 2,745 ) ( 2,091 ) — ( 2,091 )

Change in fair value of warrant liability — 3,092 (b) 3,092 — 7,582 (b) 7,582

Loss on debt extinguishment, net — — — ( 1,392 ) — ( 1,392 )

Net income (loss) before income taxes ( 11,483 ) 4,520 ( 6,963 ) ( 9,810 ) 9,341 ( 469 )

Income tax provision 461 — 461 410 — 410

Net income (loss) $ ( 11,944 ) $ 4,520 $ ( 7,424 ) $ ( 10,220 ) $ 9,341 $ ( 879 )

Deemed dividend on warrants — — — ( 389 ) 389 (b) —

Net income (loss) attributable to common stockholders $ ( 11,944 ) $ 4,520 $ ( 7,424 ) $ ( 10,609 ) $ 9,730 $ ( 879 )

Net income (loss) per share attributable to common stockholders - basic and diluted $ ( 0.13 ) $ 0.05 $ ( 0.08 ) $ ( 0.12 ) $ 0.11 $ ( 0.01 )

Net income (loss) per share attributable to common stockholders - basic and diluted $ ( 0.13 ) $ 0.03 $ ( 0.10 ) $ ( 0.12 ) $ 0.05 $ ( 0.07 )

Weighted average shares - basic and diluted 91,550 91,550 91,550 83,641 83,641 83,641

Weighted average shares - basic and diluted 91,550 92,773 92,773 83,641 85,756 85,756

Net income (loss) attributable to common stockholders $ ( 11,944 ) $ 4,520 $ ( 7,424 ) $ ( 10,220 ) $ 9,341 $ ( 879 )

Foreign currency translation adjustments, net ( 1,298 ) — ( 1,298 ) ( 1,276 ) — ( 1,276 )

Total comprehensive income (loss) $ ( 13,242 ) $ 4,520 $ ( 8,722 ) $ ( 11,496 ) $ 9,341 $ ( 2,155 )

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share amounts)

Nine Months Ended Six Months Ended

December 31 September 30

As previously reported Adjustments Reference As restated As previously reported Adjustments Reference As restated

Product $ 198,597 $ 4,595 (a) $ 203,192 $ 123,178 $ 2,520 (a) $ 125,698

Service and subscription 99,066 871 (a) 99,937 66,116 666 (a) 66,782

Royalty 9,744 — 9,744 6,918 — 6,918

Total revenue 307,407 5,466 312,873 196,212 3,186 199,398

Cost of revenue

Product 163,010 — 163,010 104,482 — 104,482

Service and subscription 42,229 — 42,229 29,850 — 29,850

Total cost of revenue 205,239 — 205,239 134,332 — 134,332

Gross profit 102,168 5,466 107,634 61,880 3,186 65,066

Operating expenses

Sales and marketing 47,894 — 47,894 31,555 — 31,555

General and administrative 35,223 — 35,223 24,254 — 24,254

Research and development 33,925 — 33,925 22,671 — 22,671

Restructuring charges 1,605 — 1,605 1,646 — 1,646

Total operating expenses 118,647 — 118,647 80,126 — 80,126

Income (loss) from operations ( 16,479 ) 5,466 ( 11,013 ) ( 18,246 ) 3,186 ( 15,060 )

Other income, net 2,638 — 2,638 3,182 — 3,182

Interest expense ( 7,537 ) — ( 7,537 ) ( 4,836 ) — ( 4,836 )

Change in fair value of warrant liability — 10,678 (b) 10,678 — 10,675 (b) 10,675

Loss on debt extinguishment, net ( 1,392 ) — ( 1,392 ) ( 1,392 ) — ( 1,392 )

Net income (loss) from operations before income taxes ( 22,770 ) 16,144 ( 6,626 ) ( 21,292 ) 13,861 ( 7,431 )

Income tax provision 1,564 — 1,564 872 — 872

Net income (loss) from operations $ ( 24,334 ) $ 16,144 $ ( 8,190 ) $ ( 22,164 ) $ 13,861 $ ( 8,303 )

Deemed dividend on warrants ( 389 ) 389 (b) — ( 389 ) 389 (b) —

Net income (loss) attributable to common stockholders $ ( 24,723 ) $ 16,533 $ ( 8,190 ) $ ( 22,553 ) $ 14,250 $ ( 8,303 )

Net income (loss) per share attributable to common stockholders - basic $ ( 0.28 ) $ 0.18 $ ( 0.10 ) $ ( 0.25 ) $ 0.16 $ ( 0.09 )

Net income (loss) per share attributable to common stockholders - diluted $ ( 0.28 ) $ 0.10 $ ( 0.18 ) $ ( 0.25 ) $ — $ ( 0.18 )

Weighted average shares - basic 89,335 89,335 89,335 87,617 87,617 87,617

Weighted average shares - diluted 89,335 89,335 90,440 87,617 87,617 89,315

Net income (loss) $ ( 24,334 ) $ 16,144 $ ( 8,190 ) $ ( 22,164 ) $ 13,861 $ ( 8,303 )

Foreign currency translation adjustments, net ( 1,094 ) — ( 1,094 ) ( 2,574 ) — ( 2,574 )

Total comprehensive income (loss) $ ( 25,428 ) $ 16,144 $ ( 9,284 ) $ ( 24,738 ) $ 13,861 $ ( 10,877 )

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

9 months ended 6 months ended 3 months ended

12/31/2023 9/30/2023 6/30/2023

Operating activities

Net loss $ ( 22,342 ) $ ( 12,473 ) $ ( 9,142 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization 7,593 5,295 2,752

Amortization of debt issuance costs 1,948 1,234 520

Provision for manufacturing and service inventories 3,328 892 516

Gain on PPP loan extinguishment — —

Stock-based compensation 3,741 2,831 1,901

Change in fair value of warrant liabilities ( 6,146 ) ( 3,933 ) 469

Other non-cash 3,010 826 750

Changes in assets and liabilities, net of effect of acquisitions:

Accounts receivable 12,616 21,109 6,255

Manufacturing inventories ( 3,099 ) ( 2,070 ) ( 692 )

Service parts inventories ( 1,520 ) ( 1,505 ) ( 516 )

Accounts payable ( 13,226 ) ( 9,073 ) ( 5,421 )

Prepaid expenses 394 8 ( 2,287 )

Deferred revenue ( 4,780 ) ( 9,268 ) ( 2,929 )

Accrued restructuring charges — — 110

Accrued compensation ( 425 ) ( 1,946 ) ( 816 )

Other assets ( 3,230 ) ( 2,240 ) ( 1,422 )

Other liabilities 2,605 162 508

Net cash used in operating activities

( 19,533 ) ( 10,151 ) ( 9,444 )

Investing activities

Purchases of property and equipment ( 5,025 ) ( 3,925 ) ( 2,299 )

Net cash used in investing activities

( 5,025 ) ( 3,925 ) ( 2,299 )

Financing activities

Borrowings of long-term debt, net of debt issuance costs 12,889 12,889 12,889

Repayments of long-term debt ( 4,497 ) ( 3,247 ) ( 1,997 )

Borrowings of credit facility 318,223 217,084 108,186

Repayments of credit facility ( 303,671 ) ( 213,082 ) ( 107,834 )

Proceeds from issuance of common stock — — ( 9 )

Net cash provided by financing activities 22,944 13,644 11,235

Effect of exchange rate changes on cash and cash equivalents ( 12 ) 11 ( 2 )

Net change in cash, cash equivalents, and restricted cash ( 1,626 ) ( 421 ) ( 510 )

Cash, cash equivalents, and restricted cash at beginning of period 26,175 26,175 26,175

Cash, cash equivalents, and restricted cash at end of period $ 24,549 $ 25,754 $ 25,665

Supplemental disclosure of cash flow information

Cash paid for interest $ 9,154 $ 6,079 $ 2,665

Cash paid for income taxes, net of refunds $ 1,136 $ 831 $ 307

Non-cash transactions

Purchases of property and equipment included in accounts payable $ 164 $ 689 $ 977

Transfer of manufacturing inventory to services inventory $ 75 $ ( 218 ) $ ( 226 )

Transfer of manufacturing inventory to property and equipment $ 205 $ 172 $ 143

Paid-in-kind interest $ 1,401 $ 777 $ 191

Cash and cash equivalents $ 24,377 $ 25,574 $ 25,465

Restricted cash, current 172 180 200

Total cash, cash equivalents and restricted cash at the end of period $ 24,549 $ 25,754 $ 25,665

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

9 months ended 6 months ended 3 months ended

12/31/2022 9/30/2022 6/30/2022

As restated As restated As restated

Operating activities

Net income (loss)

$ ( 8,190 ) $ ( 8,303 ) $ ( 879 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization 7,235 5,133 2,586

Amortization of debt issuance costs 1,201 768 336

Long-term debt related costs 992 992 —

Provision for manufacturing and service inventories 11,334 9,946 1,631

Gain on PPP loan extinguishment — — —

Stock-based compensation 8,340 5,357 3,069

Change in fair value of warrant liabilities ( 10,678 ) ( 10,675 ) ( 7,582 )

Non-cash loss on debt extinguishment — — 992

Other non-cash ( 3,193 ) ( 2,918 ) ( 1,469 )

Changes in assets and liabilities, net of effect of acquisitions:

Accounts receivable ( 3,367 ) 8,264 4,677

Manufacturing inventories ( 9,352 ) 416 ( 412 )

Service parts inventories ( 2,671 ) ( 1,971 ) ( 1,384 )

Accounts payable 7,015 293 ( 175 )

Prepaid expenses 654 ( 1,208 ) —

Deferred revenue ( 19,817 ) ( 20,933 ) ( 15,393 )

Accrued restructuring charges 130 115 39

Accrued compensation ( 614 ) ( 2,949 ) ( 1,610 )

Other assets ( 1,455 ) ( 835 ) ( 3,000 )

Other liabilities 2,840 573 228

Net cash used in operating activities

( 19,596 ) ( 17,935 ) ( 18,346 )

Investing activities

Purchases of property and equipment ( 10,644 ) ( 7,795 ) ( 3,036 )

Business acquisitions ( 2,000 ) ( 2,000 ) ( 2,000 )

Net cash used in investing activities

( 12,644 ) ( 9,795 ) ( 5,036 )

Financing activities

Borrowings of long-term debt, net of debt issuance costs — — —

Repayments of long-term debt ( 23,346 ) ( 22,096 ) ( 20,846 )

Borrowings of credit facility 363,103 229,605 109,740

Repayments of credit facility ( 353,502 ) ( 226,240 ) ( 110,575 )

Proceeds from issuance of common stock 66,718 66,723 66,324

Net cash provided by financing activities 52,973 47,992 44,643

Effect of exchange rate changes on cash and cash equivalents 21 166 29

Net change in cash, cash equivalents, and restricted cash 20,754 20,428 21,290

Cash, cash equivalents, and restricted cash at beginning of period 5,493 5,493 5,493

Cash, cash equivalents, and restricted cash at end of period $ 26,247 $ 25,921 $ 26,783

Supplemental disclosure of cash flow information

Cash paid for interest $ 6,270 $ 4,114 $ 1,863

Cash paid for income taxes, net of refunds $ 837 $ 465 $ 115

Non-cash transactions

Purchases of property and equipment included in accounts payable $ 1,198 $ 548 $ 133

Transfer of manufacturing inventory to services inventory $ 2,308 $ 1,905 $ 890

Transfer of manufacturing inventory to property and equipment $ 264 $ 279 $ 193

Paid-in-kind interest $ 319 $ 319 $ 319

Cash and cash equivalents $ 26,028 $ 25,698 $ 26,528

Restricted cash, current 219 223 255

Total cash, cash equivalents and restricted cash at the end of period $ 26,247 $ 25,921 $ 26,783

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended June 30, 2023

As previously reported Restatement adjustments Reference As restated

Operating activities

Net income (loss)

$ ( 10,576 ) $ 1,434 (a) (b) $ ( 9,142 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization 2,752 — 2,752

Amortization of debt issuance costs 520 — 520

Long-term debt related costs — — —

Provision for manufacturing and service inventories 516 — 516

Gain on PPP loan extinguishment — — —

Stock-based compensation 1,901 — 1,901

Change in fair value of warrant liabilities — 469 (b) 469

Non-cash income tax benefit — — —

Non-cash loss on debt extinguishment — — —

Other non-cash 734 16 750

Changes in assets and liabilities, net of effect of acquisitions:

Accounts receivable 6,255 — 6,255

Manufacturing inventories ( 692 ) — ( 692 )

Service parts inventories ( 516 ) — ( 516 )

Accounts payable ( 5,421 ) — ( 5,421 )

Prepaid expenses ( 2,287 ) — ( 2,287 )

Deferred revenue ( 2,221 ) ( 708 ) (a) ( 2,929 )

Accrued restructuring charges 110 — 110

Accrued compensation ( 816 ) — ( 816 )

Other assets ( 1,422 ) — ( 1,422 )

Other liabilities 508 — 508

Net cash used in operating activities

( 10,655 ) 1,211 ( 9,444 )

Investing activities

Purchases of property and equipment ( 2,299 ) — ( 2,299 )

Net cash used in investing activities

( 2,299 ) — ( 2,299 )

Financing activities

Borrowings of long-term debt, net of debt issuance costs 14,100 ( 1,211 ) 12,889

Repayments of long-term debt ( 1,997 ) — ( 1,997 )

Borrowings of credit facility 108,186 — 108,186

Repayments of credit facility ( 107,834 ) — ( 107,834 )

Proceeds from issuance of common stock ( 9 ) — ( 9 )

Net cash provided by financing activities 12,446 ( 1,211 ) 11,235

Effect of exchange rate changes on cash and cash equivalents ( 2 ) — ( 2 )

Net change in cash, cash equivalents, and restricted cash ( 510 ) — ( 510 )

Cash, cash equivalents, and restricted cash at beginning of period 26,175 — 26,175

Cash, cash equivalents, and restricted cash at end of period $ 25,665 $ — $ 25,665

Supplemental disclosure of cash flow information

Cash paid for interest $ 2,665 $ — $ 2,665

Cash paid for income taxes, net of refunds $ 307 $ — $ 307

Non-cash transactions

Purchases of property and equipment included in accounts payable $ 977 $ — $ 977

Transfer of manufacturing inventory to services inventory $ ( 226 ) $ — $ ( 226 )

Transfer of manufacturing inventory to property and equipment $ 143 $ — $ 143

Paid-in-kind interest $ 191 $ — $ 191

Cash and cash equivalents $ 25,465 $ — $ 25,465

Restricted cash, current 200 — 200

Total cash, cash equivalents and restricted cash at the end of period $ 25,665 $ — $ 25,665

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Nine Months Ended December 31, 2022

As previously reported Restatement adjustments Reference As restated

Operating activities

Net income (loss)

$ ( 24,334 ) $ 16,144 (a) (b) $ ( 8,190 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization 7,235 — 7,235

Amortization of debt issuance costs 1,201 — 1,201

Long-term debt related costs 992 — 992

Provision for manufacturing and service inventories 11,334 — 11,334

Stock-based compensation 8,340 — 8,340

Change in fair value of warrant liabilities — ( 10,678 ) (b) ( 10,678 )

Other non-cash ( 3,193 ) — ( 3,193 )

Changes in assets and liabilities, net of effect of acquisitions:

Accounts receivable ( 3,367 ) — ( 3,367 )

Manufacturing inventories ( 9,352 ) — ( 9,352 )

Service parts inventories ( 2,671 ) — ( 2,671 )

Accounts payable 7,015 — 7,015

Prepaid expenses 654 — 654

Deferred revenue ( 14,351 ) ( 5,466 ) (a) ( 19,817 )

Accrued restructuring charges 130 — 130

Accrued compensation ( 614 ) — ( 614 )

Other assets ( 1,455 ) — ( 1,455 )

Other liabilities 2,840 — 2,840

Net cash used in operating activities

( 19,596 ) — ( 19,596 )

Investing activities

Purchases of property and equipment ( 10,644 ) — ( 10,644 )

Business acquisitions ( 2,000 ) — ( 2,000 )

Net cash used in investing activities

( 12,644 ) — ( 12,644 )

Financing activities

Borrowings of long-term debt, net of debt issuance costs — — —

Repayments of long-term debt ( 23,346 ) — ( 23,346 )

Borrowings of credit facility 363,103 — 363,103

Repayments of credit facility ( 353,502 ) — ( 353,502 )

Proceeds from issuance of common stock 66,718 — 66,718

Net cash provided by financing activities 52,973 — 52,973

Effect of exchange rate changes on cash and cash equivalents 21 — 21

Net change in cash, cash equivalents, and restricted cash 20,754 — 20,754

Cash, cash equivalents, and restricted cash at beginning of period 5,493 — 5,493

Cash, cash equivalents, and restricted cash at end of period $ 26,247 $ — $ 26,247

Supplemental disclosure of cash flow information

Cash paid for interest $ 6,270 $ — $ 6,270

Cash paid for income taxes, net of refunds $ 837 $ — $ 837

Non-cash transactions

Purchases of property and equipment included in accounts payable $ 1,198 $ — $ 1,198

Transfer of manufacturing inventory to services inventory $ 2,308 $ — $ 2,308

Transfer of manufacturing inventory to property and equipment $ 264 $ — $ 264

Paid-in-kind interest $ 319 $ — $ 319

Deemed dividend $ 389 $ ( 389 ) (b) $ —

Cash and cash equivalents $ 26,028 $ — $ 26,028

Restricted cash, current 219 — 219

Total cash, cash equivalents and restricted cash at the end of period $ 26,247 $ — $ 26,247

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Six Months Ended September 30, 2022

As previously reported Restatement adjustments Reference As restated

Operating activities

Net income (loss)

$ ( 22,164 ) $ 13,861 (a) (b) $ ( 8,303 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization 5,133 — 5,133

Amortization of debt issuance costs 768 — 768

Long-term debt related costs 992 — 992

Provision for manufacturing and service inventories 9,946 — 9,946

Gain on PPP loan extinguishment — — —

Stock-based compensation 5,357 — 5,357

Change in fair value of warrant liabilities — ( 10,675 ) (b) ( 10,675 )

Other non-cash ( 2,918 ) — ( 2,918 )

Changes in assets and liabilities, net of effect of acquisitions:

Accounts receivable 8,264 — 8,264

Manufacturing inventories 416 — 416

Service parts inventories ( 1,971 ) — ( 1,971 )

Accounts payable 293 — 293

Prepaid expenses ( 1,208 ) — ( 1,208 )

Deferred revenue ( 17,747 ) ( 3,186 ) (a) ( 20,933 )

Accrued restructuring charges 115 — 115

Accrued compensation ( 2,949 ) — ( 2,949 )

Other assets ( 835 ) — ( 835 )

Other liabilities 573 — 573

Net cash used in operating activities

( 17,935 ) — ( 17,935 )

Investing activities

Purchases of property and equipment ( 7,795 ) — ( 7,795 )

Business acquisitions ( 2,000 ) — ( 2,000 )

Net cash used in investing activities

( 9,795 ) — ( 9,795 )

Financing activities

Borrowings of long-term debt, net of debt issuance costs — — —

Repayments of long-term debt ( 22,096 ) — ( 22,096 )

Borrowings of credit facility 229,605 — 229,605

Repayments of credit facility ( 226,240 ) — ( 226,240 )

Proceeds from issuance of common stock 66,723 — 66,723

Net cash provided by financing activities 47,992 — 47,992

Effect of exchange rate changes on cash and cash equivalents 166 — 166

Net change in cash, cash equivalents, and restricted cash 20,428 — 20,428

Cash, cash equivalents, and restricted cash at beginning of period 5,493 — 5,493

Cash, cash equivalents, and restricted cash at end of period $ 25,921 $ — $ 25,921

Supplemental disclosure of cash flow information

Cash paid for interest $ 4,114 $ — $ 4,114

Cash paid for income taxes, net of refunds $ 465 $ — $ 465

Non-cash transactions

Purchases of property and equipment included in accounts payable $ 548 $ — $ 548

Transfer of manufacturing inventory to services inventory $ 1,905 $ — $ 1,905

Transfer of manufacturing inventory to property and equipment $ 279 $ — $ 279

Paid-in-kind interest $ 319 $ — $ 319

Deemed dividend $ 389 $ ( 389 ) (b) $ —

Cash and cash equivalents $ 25,698 $ — $ 25,698

Restricted cash, current 223 — 223

Total cash, cash equivalents and restricted cash at the end of period $ 25,921 $ — $ 25,921

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended June 30, 2022

As previously reported Restatement adjustments Reference As restated

Operating activities

Net income (loss)

$ ( 10,220 ) $ 9,341 (a) (b) $ ( 879 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization 2,586 — 2,586

Amortization of debt issuance costs 336 — 336

Long-term debt related costs — —

Provision for manufacturing and service inventories 1,631 — 1,631

Gain on PPP loan extinguishment — — —

Stock-based compensation 3,069 — 3,069

Change in fair value of warrant liabilities — ( 7,582 ) (b) ( 7,582 )

Non-cash income tax benefit — — —

Non-cash loss on debt extinguishment 992 — 992

Other non-cash ( 1,469 ) — ( 1,469 )

Changes in assets and liabilities, net of effect of acquisitions:

Accounts receivable 4,677 — 4,677

Manufacturing inventories ( 412 ) — ( 412 )

Service parts inventories ( 1,384 ) — ( 1,384 )

Accounts payable ( 175 ) — ( 175 )

Prepaid expenses — — —

Deferred revenue ( 13,634 ) ( 1,759 ) (a) ( 15,393 )

Accrued restructuring charges 39 — 39

Accrued compensation ( 1,610 ) — ( 1,610 )

Other assets ( 3,000 ) — ( 3,000 )

Other liabilities 228 — 228

Net cash used in operating activities

( 18,346 ) — ( 18,346 )

Investing activities

Purchases of property and equipment ( 3,036 ) — ( 3,036 )

Business acquisitions ( 2,000 ) — ( 2,000 )

Net cash used in investing activities

( 5,036 ) — ( 5,036 )

Financing activities

Borrowings of long-term debt, net of debt issuance costs — — —

Repayments of long-term debt ( 20,846 ) — ( 20,846 )

Borrowings of credit facility 109,740 — 109,740

Repayments of credit facility ( 110,575 ) — ( 110,575 )

Borrowings of paycheck protection program — — —

Proceeds from secondary offering, net — — —

Payment of taxes due upon vesting of restricted stock — — —

Proceeds from issuance of common stock 66,324 — 66,324

Net cash provided by financing activities 44,643 — 44,643

Effect of exchange rate changes on cash and cash equivalents 29 — 29

Net change in cash, cash equivalents, and restricted cash 21,290 — 21,290

Cash, cash equivalents, and restricted cash at beginning of period 5,493 — 5,493

Cash, cash equivalents, and restricted cash at end of period $ 26,783 $ — $ 26,783

Supplemental disclosure of cash flow information

Cash paid for interest $ 1,863 $ — $ 1,863

Cash paid for income taxes, net of refunds $ 115 $ — $ 115

Non-cash transactions

Purchases of property and equipment included in accounts payable $ 133 $ — $ 133

Transfer of manufacturing inventory to services inventory $ 890 $ — $ 890

Transfer of manufacturing inventory to property and equipment $ 193 $ — $ 193

Paid-in-kind interest $ 319 $ — $ 319

Deemed dividend $ 389 $ ( 389 ) (b) $ —

Cash and cash equivalents $ 26,528 $ — $ 26,528

Restricted cash, current 255 — 255

Total cash, cash equivalents and restricted cash at the end of period $ 26,783 $ — $ 26,783

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(in thousands)

Common Stock Additional

Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Deficit

Three Months Ended Shares Amount

Balance, March 31, 2023, As restated 93,574 $ 936 $ 702,370 $ ( 786,094 ) $ ( 1,581 ) $ ( 84,369 )

Activity, As reported 131 2 3,133 ( 10,576 ) 249 ( 7,192 )

Adjustments — — ( 1,194 ) 1,434 — 240

Balance, June 30, 2023, As restated 93,705 $ 938 $ 704,309 $ ( 795,236 ) $ ( 1,332 ) $ ( 91,321 )

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(in thousands)

Common Stock Additional

Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Deficit

Three Months Ended Shares Amount

Balance, June 30, 2023, As Restated 93,705 $ 938 $ 704,309 $ ( 795,236 ) $ ( 1,332 ) $ ( 91,321 )

Net loss — — — ( 3,331 ) — ( 3,331 )

Foreign currency translation adjustments, net — — — — ( 720 ) ( 720 )

Shares issued under employee incentive plans, net 1,814 18 ( 18 ) — — —

Stock-based compensation — — 939 — — 939

Balance, September 30, 2023 95,519 $ 956 $ 705,230 $ ( 798,567 ) $ ( 2,052 ) $ ( 94,433 )

Six Months Ended

Balance, March 31, 2023, As Restated 93,574 $ 936 $ 702,370 $ ( 786,094 ) $ ( 1,581 ) $ ( 84,369 )

Net loss — — — ( 12,473 ) — ( 12,473 )

Foreign currency translation adjustments, net — — — — ( 471 ) ( 471 )

Warrants issued related to long-term debt — — 49 — — 49

Shares issued under employee incentive plans, net 1,945 20 ( 20 ) — — —

Stock-based compensation — — 2,831 — — 2,831

Balance, September 30, 2023 95,519 $ 956 $ 705,230 $ ( 798,567 ) $ ( 2,052 ) $ ( 94,433 )

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(in thousands)

Common Stock Additional

Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Deficit

Three Months Ended Shares Amount

Balance, September 30, 2023 95,519 $ 956 $ 705,230 $ ( 798,567 ) $ ( 2,052 ) $ ( 94,433 )

Net loss — — — ( 9,869 ) — ( 9,869 )

Foreign currency translation adjustments, net — — — — 1,465 1,465

Shares issued under employee incentive plans, net 331 3 ( 3 ) — — —

Stock-based compensation — — 906 — — 906

Balance, December 31, 2023 95,850 $ 959 $ 706,133 $ ( 808,436 ) $ ( 587 ) $ ( 101,931 )

Nine Months Ended

Balance, March 31, 2023 93,574 $ 936 $ 702,370 $ ( 786,094 ) $ ( 1,581 ) $ ( 84,369 )

Net loss — — — ( 22,342 ) — ( 22,342 )

Foreign currency translation adjustments, net — — — — 994 994

Shares issued under employee incentive plans, net 2,276 23 ( 23 ) — — —

Warrants issued in connection with debt refinancing — — 49 — — 49

Stock-based compensation — — 3,737 — — 3,737

Balance, December 31, 2023 95,850 $ 959 $ 706,133 $ ( 808,436 ) $ ( 587 ) $ ( 101,931 )

QUANTUM CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(in thousands)

Common Stock Additional

Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Deficit

Three Months Ended Shares Amount

Balance, March 31, 2022, As restated 60,433 $ 605 $ 624,805 $ ( 767,726 ) $ ( 1,423 ) $ ( 143,739 )

Activity, As reported 30,173 302 69,091 ( 10,219 ) ( 1,276 ) 57,898

Adjustments — — — 9,341 — 9,341

Balance, June 30, 2022, As restated 90,606 $ 907 $ 693,896 $ ( 768,604 ) $ ( 2,699 ) $ ( 76,500 )

Activity, As reported 1,552 15 2,671 ( 11,943 ) ( 1,298 ) ( 10,555 )

Adjustments — — — 4,520 — 4,520

Balance, September 30, 2022, As restated 92,158 $ 922 $ 696,567 $ ( 776,027 ) $ ( 3,997 ) $ ( 82,535 )

Activity, As reported 986 $ 10 $ 2,969 $ ( 2,170 ) $ 1,480 2,289

Adjustments — — — 2,283 — 2,283

Balance, December 31, 2022, As restated 93,144 $ 932 $ 699,536 $ ( 775,914 ) $ ( 2,517 ) $ ( 77,963 )

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data