Item 8. Financial Statements and Supplementary Data
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 248 )
43
Report of Independent Registered Public Accounting Firm (PCAOB ID: 32 )
Consolidated Balance Sheets
48
Consolidated Statements of Operations and Comprehensive Loss
49
Consolidated Statements of Cash Flows
50
Consolidated Statements of Stockholders’ Deficit
51
Index to Notes to Consolidated Financial Statements
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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 and subsidiaries (the “Company”) as of March 31, 2026, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2026, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The consolidated financial statements of the Company as of March 31, 2025, were audited by other auditors whose report dated August 26, 2025, expressed an unqualified opinion on those statements.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of March 31, 2026, based on criteria established in 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated June 25, 2026, expressed an adverse opinion.
Basis for Opinion
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 audit. We are a public accounting firm registered with the 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 consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit 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. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated 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 consolidated 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 consolidated 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.
Determination of Standalone Selling Price
As described further in Note 1 to the consolidated 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. If the SSP is not directly observable, the Company will estimate the SSP considering historical and current selling prices, internal discounting practices, and competitor information for similar products/services, which can require significant judgment and are subject to change based on continuous reevaluation.
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Significant judgment is exercised by the Company in determination and allocation of stand-alone selling prices for each distinct performance obligation, for products and services that are not sold separately.
Given these factors, the related audit effort in evaluating management’s judgments in determining and allocating the SSP of performance obligations was challenging, subjective, and complex and required a high degree of auditor judgment.
How our audit addressed the Critical Audit Matter
Our principal audit procedures related to the determination and allocation of the SSP of performance obligations included the following:
• We gained an understanding of and evaluated the design and implementation of the Company’s controls that address the risk of material misstatement related to the determination and allocation of SSP to performance obligations.
• We evaluated management’s significant accounting policies related to revenue recognition for reasonableness.
• We evaluated the appropriateness of the overall methodology used by management to develop the estimates, including considering whether the methodology maximized the use of observable outputs.
• We evaluated the reasonableness of management’s estimate of stand-alone selling prices for products and services that are not sold separately.
• We tested management’s process, including by evaluating key assumptions for performance obligations that do not include directly observable sales. Specifically, included in our procedures we:
◦ considered the consistency with external market and competitor margin data for products and services;
◦ evaluated the appropriateness of the categorization and classification of products and services;
◦ recalculated and evaluated the inputs used in management’s calculations, including selling prices and discounts;
◦ evaluated the completeness and accuracy of management’s calculations of estimated selling prices, including the allocation between products and services.
/s/ CohnReznick LLP
We have served as the Company's auditor since 2025.
Melville, New York
June 25, 2026
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Quantum Corporation
Adverse Opinion on Internal Control over Financial Reporting
We have audited Quantum Corporation and subsidiaries (the "Company") internal control over financial reporting as of March 31, 2026, 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, because of the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.
A material weakness is a control deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment:
Revenue Recognition — The Company did not maintain effective internal control related to revenue recognition for the following: (i) internal control for reviewing and updating deferred revenue schedules; (ii) internal control over the accuracy of the inputs into the sales order entry process; and (iii) internal control over the allocation of revenue to performance obligations on a stand-alone selling price basis.
Inventories — The Company did not maintain effective internal control related to inventories. Specifically, internal control over the reconciliation of physical inventories with the Company’s underlying system records.
Income taxes – The Company did not maintain effective internal control related to income taxes. Specifically, the Company did not document and review relevant facts and apply the appropriate tax accounting under accounting standards generally accepted in the United States of America.
Control Environment — The Company did not maintain effective entity-level internal control within the control environment to prevent or detect material misstatements to the consolidated financial statements. Specifically, the Company (i) did not maintain a sufficient complement of trained, knowledgeable resources to execute their responsibilities with respect to internal control over financial reporting for certain financial statements accounts and disclosures; and (ii) conducted inadequate monitoring activities resulting in untimely or ineffective identification of internal control risks to support the design implementation and evaluation of the internal control necessary to provide effective oversight over financial reporting.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated balance sheet and the related consolidated statements of operations and comprehensive loss, stockholders’ deficit, and cash flows of the Company as of and for the year ended March 31, 2026, and our report dated June 25, 2026 expressed an unqualified opinion.
Basis for Opinion
The Company’s management is responsible 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’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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 effective internal control over financial reporting
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was maintained in all material respects. 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 audit provides a reasonable basis for our opinion.
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 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.
/s/ CohnReznick LLP
Melville, New York
June 25, 2026
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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, 2025, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit, and cash flows for the year in the period ended March 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2025, and the results of its operations and its cash flows for the year in the period ended March 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
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 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 provides a reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We served as the Company’s auditor from 2023 to 2025.
Bellevue, Washington
August 26, 2025
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QUANTUM CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
March 31,
2026 2025
Assets
Current assets:
Cash and cash equivalents $ 15,572 $ 16,464
Restricted cash 662 139
Accounts receivable, net of allowance for credit losses of $ 3,234 and $ 99 , respectively
69,650 52,502
Inventories 16,103 22,434
Prepaid expenses 2,431 2,738
Other current assets 8,068 8,529
Total current assets 112,486 102,806
Property and equipment, net 9,284 11,378
Intangible assets, net — 281
Goodwill 12,969 12,969
Right-of-use assets, net 7,416 8,580
Other long-term assets 14,737 19,388
Total assets $ 156,892 $ 155,402
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable $ 29,342 $ 31,463
Accrued compensation 11,862 9,214
Deferred revenue, current portion 75,654 75,076
Accrued restructuring charges 566 786
Term debt
54,811 96,486
Revolving credit facility — 26,600
Warrant liabilities 14,105 —
Other accrued liabilities 19,457 17,982
Total current liabilities 205,797 257,607
Deferred revenue, net of current portion 39,030 38,847
Convertible note 90,034 —
Operating lease liabilities 8,172 8,934
Other long-term liabilities 12,716 14,380
Total liabilities 355,749 319,768
Commitments and contingencies (Note 10)
Stockholders’ deficit
Preferred stock:
Preferred stock, 20,000 shares authorized; no shares issued as of March 31, 2026 and 2025, respectively
— —
Common stock:
Common stock, $ 0.01 par value; 225,000 shares authorized; 14,638 and 6,962 shares issued and outstanding at March 31, 2026 and 2025, respectively
146 70
Additional paid-in capital 853,974 779,645
Accumulated deficit ( 1,043,517 ) ( 942,471 )
Accumulated other comprehensive loss ( 9,460 ) ( 1,610 )
Total stockholders' deficit ( 198,857 ) ( 164,366 )
Total liabilities and stockholders' deficit $ 156,892 $ 155,402
The accompanying notes are an integral part of these consolidated financial statements.
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QUANTUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share amounts)
Year Ended March 31,
2026 2025
Revenue
Product $ 172,385 $ 154,182
Service and subscription 99,226 110,658
Royalty 7,970 9,218
Total revenue 279,581 274,058
Cost of revenue
Product 136,199 119,730
Service and subscription 40,341 44,496
Total cost of revenue 176,540 164,226
Gross profit 103,041 109,832
Operating expenses
Sales and marketing 52,016 52,320
General and administrative 43,917 63,961
Research and development 23,503 31,141
Restructuring charges 8,112 4,090
Total operating expenses 127,548 151,512
Loss from operations ( 24,507 ) ( 41,680 )
Other expense, net
( 1,511 ) ( 710 )
Interest expense ( 21,575 ) ( 23,607 )
Change in fair value of warrant liability 11,315 ( 45,270 )
Change in fair value of convertible note ( 4,119 ) —
Loss on debt extinguishment, net ( 59,641 ) ( 3,003 )
Loss before income taxes ( 100,038 ) ( 114,270 )
Income tax provision 1,008 821
Net loss
$ ( 101,046 ) $ ( 115,091 )
Net loss per share - basic and diluted
$ ( 7.97 ) $ ( 22.35 )
Weighted average shares - basic and diluted 12,674 5,150
Net loss
$ ( 101,046 ) $ ( 115,091 )
Change in fair value of convertible note ( 8,444 ) —
Foreign currency translation adjustments, net 594 583
Total comprehensive loss
$ ( 108,896 ) $ ( 114,508 )
The accompanying notes are an integral part of these consolidated financial statements.
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QUANTUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended March 31,
2026 2025
Operating activities
Net loss $ ( 101,046 ) $ ( 115,091 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 5,282 5,598
Amortization of debt issuance costs 6,613 5,475
Non-cash lease expense
1,277 1,606
Paid-in-kind interest 6,598 5,179
Provision for manufacturing and service inventories 5,333 4,877
Bad debt expense 2,733 77
Stock-based compensation ( 849 ) 2,828
Warrants issued in connection with debt amendments 25,420 —
Change in fair value of warrant liabilities ( 11,315 ) 45,270
Change in fair value of convertible note 4,119 —
Non-cash loss on debt extinguishment 34,221 3,003
Other non-cash ( 331 ) 16
Changes in assets and liabilities:
Accounts receivable ( 19,881 ) 15,209
Inventories 944 801
Accounts payable ( 793 ) 6,154
Prepaid expenses 307 ( 552 )
Operating lease liabilities
( 931 ) ( 1,490 )
Deferred revenue 760 ( 2,764 )
Accrued restructuring charges ( 220 ) 786
Accrued compensation 2,647 ( 9,000 )
Other assets 686 2,110
Other liabilities 570 6,295
Net cash used in operating activities
( 37,856 ) ( 23,613 )
Investing activities
Purchases of property and equipment ( 1,706 ) ( 4,947 )
Net cash used in investing activities
( 1,706 ) ( 4,947 )
Financing activities
Borrowings of long-term debt, net of debt issuance costs 45,045 25,000
Borrowing of convertible note 54,718 —
Repayment of long-term debt — ( 19,129 )
Repayments of long-term debt on Assignment ( 52,270 ) —
Repayments of long-term debt on Exchange ( 56,979 ) —
Borrowings of credit facility 102,914 416,418
Repayments of credit facility and payment of amendment fees ( 129,514 ) ( 418,811 )
Proceeds from shares related to the SEPA, net 75,174 15,828
Proceeds from issuance of common stock, net 80 —
Net cash provided by financing activities 39,168 19,306
Effect of exchange rate changes on cash and cash equivalents 25 ( 3 )
Net change in cash, cash equivalents, and restricted cash ( 369 ) ( 9,257 )
Cash, cash equivalents, and restricted cash at beginning of year 16,603 25,860
Cash, cash equivalents, and restricted cash at end of year $ 16,234 $ 16,603
Supplemental disclosure of cash flow information
Cash paid for interest $ 5,170 $ 11,927
Cash paid for income taxes, net of refunds $ 1,194 $ 1,814
Non-cash transactions
Purchases of property and equipment included in accounts payable $ 116 $ 850
Right-of-use assets obtained in exchange for new lease liabilities $ 112 $ 678
Warrants issued $ 25,420 $ —
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 consolidated statements of cash flows:
Cash and cash equivalents $ 15,572 $ 16,464
Restricted cash 662 139
Total cash, cash equivalents and restricted cash at the end of year $ 16,234 $ 16,603
The accompanying notes are an integral part of these consolidated financial statements.
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QUANTUM CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(in thousands)
Common Stock Additional
Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Deficit
Shares Amount
March 31, 2024 4,792 $ 48 $ 708,027 $ ( 827,380 ) $ ( 2,193 ) $ ( 121,498 )
Net loss — — — ( 115,091 ) — ( 115,091 )
Foreign currency translation adjustments, net of income taxes — — — — 583 583
Shares issued under employee incentive plans, net 157 2 ( 2 ) — — —
Warrants exercised related to long-term debt
856 9 52,975 — — 52,984
Shares issued related to the SEPA, net
1,157 11 15,817 — — 15,828
Stock-based compensation — — 2,828 — — 2,828
March 31, 2025 6,962 $ 70 $ 779,645 $ ( 942,471 ) $ ( 1,610 ) $ ( 164,366 )
Net loss — $ — — ( 101,046 ) $ — ( 101,046 )
Foreign currency translation adjustments, net of income taxes — — — — 594 594
Change in fair value of convertible note — — — — ( 8,444 ) ( 8,444 )
Shares issued under employee incentive plans, net 121 1 79 — — 80
Shares issued related to the SEPA, net 7,555 75 75,099 — — 75,174
Stock-based compensation — — ( 849 ) — — ( 849 )
March 31, 2026 14,638 $ 146 $ 853,974 $ ( 1,043,517 ) $ ( 9,460 ) $ ( 198,857 )
The accompanying notes are an integral part of these consolidated financial statements.
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INDEX TO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Note 1: Description of Business and Significant Accounting Policies
52
Note 2: Revenue
62
Note 3: Balance Sheet Information
63
Note 4: Debt
64
Note 5: Leases
68
Note 6: Restructuring Charges
69
Note 7: Common Stock
69
Note 8: Net Loss Per Share
74
Note 9: Income Taxes
75
Note 10: Commitments and Contingencies
78
Note 11: Fair Value of Financial Instruments
79
Note 12:
Segment Information
81
Note 13:
Subsequent Events
83
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Quantum Corporation, together with its consolidated subsidiaries (“Quantum”, the “Company”, "our" or "we"), 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. The Company’s software-defined, hyperconverged storage solutions span from non-violate memory express (“NVMe”), to solid state drives (“SSD”), hard disk drives, (“HDD”), tape and the cloud and are tied together leveraging a single namespace view of the entire data environment. The Company works closely with a broad network of distributors, value-added resellers (“VARs”), direct marketing resellers (“DMRs”), original equipment manufacturers (“OEMs”) and other suppliers to meet customers’ evolving needs.
Basis of Presentation
The consolidated financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). All intercompany balances and transactions have been eliminated. The Company reviews subsidiaries and affiliates, as well as other entities, to determine if they should be considered variable interest entities (“VIE”), and whether it should change the consolidation determinations based on changes in their characteristics. The Company considers an entity a VIE if its equity investors own an interest therein that lacks the characteristics of a controlling financial interest, or if such investors do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support, or if the entity is structured with non-substantive voting interests. 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. There were no VIEs for the years ended March 31, 2026 or 2025.
Reclassifications
Certain prior-period amounts in the condensed consolidated statements of cash flows have been reclassified to conform to the current period presentation. These reclassifications had no effect on total cash flows. Also, due to the size of the Balance, we have aggregated Manufacturing and Service Inventory into a single line called Inventories on the Consolidated Balance Sheets. Details of the balances in the Inventories line item has been included in Note 3: Balance Sheet Information.
Reverse Stock Split
On August 15, 2024, the Company's stockholders approved an amendment to the Company's Amended and Restated Certificate of Incorporation to effect a reverse stock split of the issued shares of the Company’s common stock, par value $ 0.01 per share, at a ratio ranging from 1-for-5 shares up to a ratio of 1-for-20 shares, with the exact ratio, if any, to be selected by the Board and set forth in a public announcement. On August 15, 2024, the Board approved a 1-for-20 reverse stock split (the “Reverse Stock Split”) of the common stock. The Reverse Stock Split became effective as of August 26, 2024 at 4:01 p.m., Eastern Time (the “Effective Time”). At the Effective Time, every twenty issued shares of common stock were automatically reclassified into one issued share of common stock, with any fractional shares resulting from the Reverse Stock Split rounded up to the nearest whole share. The number of outstanding shares of common stock was reduced from approximately 95.9 million shares to approximately 4.8 million shares.
All share and per share amounts for common stock in these consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split.
Liquidity
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.
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The Company generated negative cash flows from operations of approximately $ 37.9 million and $ 23.6 million for the fiscal years ended March 31, 2026 and 2025, respectively, and generated net losses of approximately $ 101.0 million and $ 115.1 million for the fiscal years ended March 31, 2026 and 2025, respectively. The Company has funded operations through the sale of common stock and term debt borrowings in Note 4: Debt and Note 7: Common Stock. 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 will provide the Company with sufficient capital to fund operations for at least one year from the consolidated financial statement issuance date.
As previously disclosed, the Company identified that there was substantial doubt about the Company’s ability to continue as a going concern. This was due to the requirement to repay the Term Loans (as defined herein) on August 5, 2026. Subsequent to March 31, 2026, the Company completed several transactions which resulted in the repayment of the Term Loans and removed the substantial doubt noted above. On June 1, 2026, the Company entered into Securities Purchase Agreements to issue and sell to certain accredited investors an aggregate of 10,615,712 shares of the Company’s common stock. After deducting placement agent fees and other offering expenses payable by the Company, the Company received net proceeds of $ 94.7 million. On June 4, 2026, the Company paid an aggregate of $ 57.8 million in connection with the termination of the Term Loan Credit Agreement. This fully paid down and extinguished the Company's Term Loans. Also on June 4, 2026, the Company provided a notice to YA II PN, Ltd. ("YA") regarding its termination of the Standby Equity Purchase Agreement (the "SEPA"), effective June 11, 2026. There were no amounts owed to YA under the SEPA at the time the termination notice was provided. See Note 13 : Subsequent Events, for further details. With the cash proceeds, after repayment of the Term Loans, the Company forecasts that operating performance, cash and current working capital will provide sufficient capital to fund operations for at least one year from the financial statement issuance date.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. 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, inventory adjustments, useful lives of intangible assets and property and equipment, stock-based compensation, fair value of warrants, fair value of the convertible note 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.
Cash and Cash Equivalents
The Company has cash deposits and cash equivalents deposited in or managed by major financial institutions. Cash equivalents include all highly liquid investment instruments with an original maturity of three months or less and consist primarily of money market accounts. At times the related amounts are in excess of amounts insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses with these financial institutions and does not believe such balances are exposed to significant credit risk.
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. For customers that do not meet the Company’s credit standards, the Company may require a form of collateral, such as cash deposits or letters of credit, prior to the completion of a transaction. These credit evaluations require significant judgment and are based on multiple sources of information. The Company analyzes such factors as its historical bad debt experience, industry and geographic concentrations of credit risk, current economic trends and changes in
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customer payment terms. 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 credit losses are recorded in general and administrative expenses.
Fair Value of Financial Instruments
The carrying value of our financial instruments approximates fair value.
Inventories
Manufacturing inventories are recorded at the lower of cost or net realizable value, with cost being determined on a first-in, first-out (“FIFO”) basis. Costs include material, direct labor, and an allocation of overhead in the case of work in process. Adjustments to reduce the cost of manufacturing inventory to its net realizable value, if required, are made for estimated excess, obsolete or impaired balances. Factors influencing these adjustments include declines in demand, rapid technological changes, product life cycle and development plans, component cost trends, product pricing, physical deterioration and quality issues. Revisions to these adjustments would be required if these factors differ from the Company’s estimates.
Service parts inventories are recorded at the lower of cost or net realizable value, with cost being determined on a FIFO basis. The Company carries service parts because it generally provides product warranty for one to three years and earns revenue by providing enhanced and extended warranty and repair services during and beyond this warranty period. Service parts inventories consist of both component parts, which are primarily used to repair defective units, and finished units, which are provided for customer use permanently or on a temporary basis while the defective unit is being repaired. The Company records adjustments to reduce the carrying value of service parts inventory to its net realizable value and disposes of parts with no use and a net realizable value of zero. Factors influencing these adjustments include product life cycles, end of service life plans and volume of enhanced or extended warranty service contracts. Estimates of net realizable value involve significant estimates and judgments about the future, and revisions would be required if these factors differ from the Company’s estimates.
Property and Equipment
Property and equipment are carried at cost, less accumulated depreciation and amortization, computed on a straight-line basis over the estimated useful lives of the assets as follows:
Machinery and equipment 3 to 5 years
Furniture and fixtures 5 years
Leasehold improvements Shorter of useful life or life of lease
When assets are retired or otherwise disposed of, the related costs and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive loss in the period realized.
The Company evaluates the recoverability of the carrying amount of its property and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be fully recoverable. A potential impairment charge is evaluated when the undiscounted expected cash flows derived from an asset group are less than its carrying amount. Impairment losses, if applicable, are measured as the amount by which the carrying value of an asset group exceeds its fair value and are recognized in operating results. 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.
Goodwill
Goodwill represents the excess of the purchase price consideration over the estimated fair value of the tangible and intangible assets acquired and liabilities assumed in a business combination. Goodwill is evaluated for impairment annually in the third quarter of the Company's fiscal year as a single reporting unit, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. The Company may elect to qualitatively assess whether it is more likely than not that the fair value of its reporting unit is less than its carrying value. If the Company opts not to qualitatively assess, a quantitative goodwill impairment test is performed. The quantitative test compares its reporting unit's carrying amount, including goodwill, to its fair value calculated based on its enterprise value. If the carrying amount exceeds its fair value, an impairment loss is recognized for the
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excess. The Company did not recognize any impairment of goodwill in any of the periods presented in the consolidated financial statements.
Purchased Intangible Assets
Purchased intangible assets with finite lives are stated at cost, net of accumulated amortization. The Company amortizes its intangible assets on a straight-line basis over an estimated useful life of two to four years .
Impairment of Long-Lived Assets
The Company reviews its long-lived asset group, including property and equipment and finite-lived intangible assets, for impairment annually, or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. The Company measures the recoverability of this asset group by comparing the carrying amounts to the future undiscounted cash flows the asset group is expected to generate. If the total of the future undiscounted cash flows is less than the carrying amount of an asset group, the Company records an impairment charge for the amount by which the carrying amount of the asset group exceeds its fair market value.
Operating Leases
The Company determines if an arrangement contains a lease at inception. Lease liabilities are recognized at the present value of the future lease payments at commencement date. The interest rates 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 Company accounts for the lease and non-lease components of operating lease contract consideration as a single lease component.
Certain of the operating lease agreements contain rent concession, rent escalation, and option to renew provisions. Rent concession and rent escalation provisions are considered in determining the lease cost. Lease cost is recognized on a straight-line basis over the lease term commencing on the date the Company has the right to use the leased property. 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. These allowances are accounted for as lease incentives and reduce its ROU asset and lease cost over the lease term.
The Company has applied the practical expedient for short-term leases which have a lease term of less than 12 months and do not include an option to purchase the underlying asset that is reasonably certain to be exercised. The Company recognizes rent expense in the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term and record variable lease payments as incurred.
Revenue Recognition
The Company generates revenue from three main sources: (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 or based upon shipping terms when control transfers.
Product Revenue
The Company's product revenue is comprised of multiple storage solution hardware and software offerings targeted towards consumer and enterprise customers. Revenue from product sales is recognized at the point in time when the customer takes control of the product. If there are significant post-delivery obligations, the related revenue is
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deferred until such obligations are fulfilled. Revenue from contracts with customer acceptance criteria are recognized upon end user acceptance.
Service and Subscription Revenue
Service and subscription revenue consists of four components: (a) post-contract customer support agreements,
(b) software subscriptions, (c) installation, and (d) consulting and training.
Customers have the option to choose between different levels of hardware and software support. The Company's support plans include various stand-ready obligations such as technical assistance hot-lines, replacement parts maintenance, and remote monitoring that are delivered whenever called upon by its customers. 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 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.
The Company offers installation services on all its products. Customers can opt to either have Quantum or a Quantum-approved third-party service provider install its products. Installation services are typically completed within a short period of time and revenue from these services are recognized at the point when installation is complete.
A majority of the Company's consulting and training revenue does not take significant time to complete therefore these obligations are satisfied over time as each day is completed.
Royalty Revenue
The Company licenses certain intellectual property to third-party manufacturers which gives the manufacturers rights to intellectual property including the right to either manufacture or include the intellectual property in their products for resale. Licensees pay the Company a per-unit royalty for sales of their products that incorporate its intellectual property. On a periodic and timely basis, the licensees provide the Company with reports containing units sold to end users subject to the royalties. The reports substantiate that the performance obligation has been satisfied therefore revenue is recognized based on the reports or when amounts can be reasonably estimated.
Deferred Revenue
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 service and subscription contracts which have not been satisfied as of the year end. 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 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 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.
Standalone selling price
For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation based on the relative standalone selling price (“SSP”) of the good or service underlying each performance obligation. 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 historical and current selling prices, internal discounting practices, competitor information for similar customers and similar products/services, and other observable inputs.
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Variable consideration
Product revenue includes multiple types of variable consideration, such as rebates, returns, or stock rotations. All contracts with variable consideration require payment upon satisfaction of the performance obligation typically with net 45-day payment terms. 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 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. The Company uses historical data and current trends to drive the estimates. The Company records a reduction to revenue to account for these programs. 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: Other Assets and Deferred Costs – Contracts with Customers , 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 $ 2.3 million and $ 2.3 million for fiscal 2026 and 2025, respectively. Total amortization of capitalized costs of obtaining revenue contracts were $ 1.3 million and $ 1.3 million for fiscal 2026 and 2025, respectively. These costs are recognized on a straight-line basis over the associated sales contract term.
Cost of Service and Subscription Revenue
The Company classifies expenses as service cost of revenue by estimating the portion of its total cost of revenue that relates to providing field support to its customers under contract. These estimates are based upon a variety of factors, including the nature of the support activity and the level of infrastructure required to support the activities from which it earns service and subscription revenue. In the event its service business changes, its estimates of cost of service and subscription revenue may be impacted.
Research and Development Costs
Expenditures relating to the development of new products and processes are expensed as incurred. These costs include expenditures for employee compensation, materials used in the development effort, other internal costs, as well as expenditures for third-party professional services. The Company has determined that technological feasibility for its software products is reached shortly before the products are released to manufacturing. Costs incurred after technological feasibility is established have not been material, therefore, the Company expenses software-related research and development costs as incurred.
Internal-use Software Costs
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 sheets and amortized over 10 years starting when the software is ready for its intended use. Software implementation costs capitalized were $ 0.0 million and $ 1.0 million in fiscal 2026 and 2025, respectively. Related amortization expense for software implementation costs was $ 1.9 million and $ 1.8 million during fiscal 2026 and 2025, respectively.
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Advertising Expense
Advertising expense is recorded as incurred and was $ 1.9 million and $ 2.0 million in fiscal 2026 and 2025, respectively.
Shipping and Handling Fees
Shipping and handling fees are included in cost of revenue as incurred and were $ 11.9 million and $ 6.8 million in fiscal 2026 and 2025, respectively.
Accrued Restructuring Charges
Accrued restructuring charges include charges related to the realignment and restructuring of the Company’s business operations. These charges represent judgments and estimates of the Company’s costs of severance, closure and consolidation of facilities and settlement of contractual obligations under its operating leases, including sublease rental rates, asset write-offs and other related costs. The Company reassesses the restructuring liability requirements to complete each individual plan under the restructuring programs at the end of each reporting period. If these estimates change in the future or actual results differ from the Company’s estimates, additional charges may be required. See Note 6: Restructuring Charges, for more information.
Foreign Currency Translation
The Company's international operations generally use their local currency as their functional currency. Assets and liabilities are translated at exchange rates in effect at the balance sheet date. Income and expense accounts are translated at the average monthly exchange rates during the year. 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 statements of operations and comprehensive loss. All Lender Warrants were exercised as of March 31, 2025. Quantum issued a Forbearance Warrant in September 2025. See Note 4: Debt and Note 7: Common Stock, for further details.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes, in which deferred tax assets 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.
A valuation allowance is provided if the Company believes it is more likely than not that all or some portion of the deferred tax asset will not be realized. An increase or decrease in the valuation allowance, if any, that results from a change in circumstances, and which causes a change in the Company’s judgment about the realizability of the related deferred tax asset, is included in the tax provision.
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The Company assesses whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized in the consolidated financial statements from such a position is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company reevaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances and changes in tax law. The Company recognizes penalties and tax-related interest expense as a component of income tax expense in the consolidated statements of operations and comprehensive loss.
Asset Retirement Obligations
The Company records an asset retirement obligation for the fair value of legal obligations associated with the retirement of tangible long-lived assets and a corresponding increase in the carrying amount of the related asset in the period in which the obligation is incurred. In periods subsequent to initial measurement, the Company recognizes changes in the liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate. Over time, the liability is accreted to its present value and the capitalized cost is depreciated over the estimated useful life of the asset. The Company’s obligations relate primarily to certain legal obligations to remediate leased property on which certain assets are located. The liability is recorded in Other accrued liabilities and Other long-term liabilities in the consolidated balance sheets.
Warranty Expense
The Company warranties its products against certain defects and the terms range from one to three years . The Company provides for the estimated costs of fulfilling its obligations under hardware warranties at the time the related revenue is recognized. The Company estimates the provision based on historical and projected product failure rates, historical and projected repair costs, and knowledge of specific product failures (if any). The Company regularly reassess its estimates to determine the adequacy of the recorded warranty liability and adjusts the provision, as necessary. See Note 3: Balance Sheet Information, for further information.
Debt Issuance Costs
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. See Note 4: Debt, for further information.
Stock-Based Compensation
The Company classifies stock-based awards granted in exchange for services as either equity awards or liability awards. The classification of an award as either an equity award or a liability award is generally based upon cash settlement options. Equity awards are measured based on the fair value of the award at the grant date. 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. No compensation expense is recognized for awards for which participants do not render the requisite services. For equity and liability awards earned based on performance or upon occurrence of a contingent event, when and if the awards will be earned is estimated. If an award is not considered probable of being earned, no amount of stock-based compensation is recognized. If the award is deemed probable of being earned, related compensation expense is recorded over the estimated service period. To the extent the estimate of awards considered probable of being earned changes, the amount of stock-based compensation recognized will also change. We account for forfeitures as they occur for all stock-based awards.
Concentration of Credit Risk
The Company sells products to customers in a wide variety of industries on a worldwide basis. In countries or industries where the Company is exposed to material credit risk, the Company may require collateral, including cash deposits and letters of credit, prior to the completion of a transaction. 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.
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In fiscal 2026, one customer represented more than 10% of total revenues and in fiscal 2025 no customer represented more than 10% of the Company's total revenue.
No customer comprised over 10% of accounts receivable as of March 31, 2026 and March 31, 2025.
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. Some of the products the Company purchases from these sources are proprietary or complex in nature, and therefore cannot be readily or easily replaced by alternative sources.
In fiscal 2026 two vendors represented more than 10% of total expenses and in fiscal 2025 two vendors represented more than 10% of our total expenses.
Segment Reporting
The Company’s chief operating decision-maker ("CODM") is its Chief Executive Officer who makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis. The CODM reviews and utilizes consolidated financial information, including revenue, gross profit, operating income and net income as reported on the consolidated statements of operations and comprehensive loss, to assess performance and allocate resources to support strategic priorities. Consolidated net loss is our segment's primary measure of profit or loss. The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets. There are no segment managers who are held accountable by the CODM, or anyone else, for operations, operating results, and planning for levels or components below the consolidated unit level. Accordingly, the Company has one reportable segment and operates in three geographic regions: (a) Americas; (b) Europe, Middle East, and Africa (“EMEA”); and (c) Asia Pacific (“APAC”). See Note 12: Segment Information, for more information.
Defined Contribution Plan
The Company sponsors a qualified 401(k) retirement plan for its U.S. employees. The plan covers substantially all employees who have attained the age of 18. Participants may voluntarily contribute to the plan up to the maximum limits established by Internal Revenue Service regulations. For the years ended March 31, 2026 and 2025, the Company incurred $ 0.1 million and $ 0.3 in matching contributions, respectively. The Company suspended its program of matching contributions under the 401(k) retirement plan as of July 2024.
The Company has other defined contribution plans at its international subsidiaries, as required by local law.
Recently Adopted Accounting Pronouncements
In December 2023, the Financial Account Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for annual periods beginning on or after December 15, 2024, and may be applied either prospectively or retrospectively.
In fiscal 2026, Quantum revised its tax footnote disclosures upon the adoption of ASU 2023-09. The Company now applies a consistent approach to categorizing and presenting the information and provides enhanced disaggregation within the rate reconciliation. Additionally, the footnote disclosure provides further disaggregation of income taxes paid in foreign jurisdictions. The adoption of ASU 2023-09 did not have a material impact on the Company's consolidated financial statements for the fiscal year ended March 31, 2026. The Company adopted the standard on a prospective basis.
Recent Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income -Expense Disaggregation Disclosures (Subtopic220-40): Disaggregation of Income Statement Expenses , which requires additional disclosures of specific expense categories included within each expense caption presented on the Statements of Operations. The new standard can be applied on either a fully retrospective or prospective basis ASU 2024-03 will be effective for our fiscal year beginning April 1, 2027, and interim periods within our fiscal year
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beginning April 1, 2028, with early adoption permitted. The Company is currently evaluating the impact of this new standard on its financial statement disclosures.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurements of Credit Losses for Accounts Receivable and Contract Assets . The amendments in this update provide a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under FASB Accounting Standards Codification 606. Under ASU 2025-05, an entity is required to disclose whether it has elected to use the practical expedient. An entity that makes the accounting policy election is required to disclose the date through which subsequent cash collections are evaluated. ASU 2025-05 is effective for the Company beginning in the fiscal year beginning April 1, 2026,with early adoption permitted. The Company is currently evaluating the impact of this new standard on its financial statement disclosures.
In September 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software” (Topic 350) . The updates eliminate references to software development project stages and revises the criteria that must be met to begin capitalizing internal-use software costs. The standard permits entities to adopt the guidance using a prospective, retrospective, or modified transition approach and becomes effective for the Company beginning January 1, 2028, with early adoption permitted. The Company is currently assessing the potential impact that ASU 2025-06 will have on its financial statements disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements , which clarifies certain aspects of interim reporting guidance. The standard is effective for interim periods within fiscal years beginning after December 15, 2027, which will be the Company’s fiscal year beginning April 1, 2029, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its interim financial statements disclosures.
NOTE 2: REVENUE
Contract Balances
The following table presents the Company’s contract assets and liabilities together with certain information related to this balance as of March 31, 2026 (in thousands):
March 31, 2026 March 31, 2025 March 31, 2024
Accounts receivable, net
$ 69,650 $ 52,502 $ 67,788
Contract assets (in Other current assets) $ 351 $ 278 $ 501
Deferred revenue $ 114,684 $ 113,923 $ 116,687
Revenue recognized in the period from amounts included in contract liabilities at the beginning of the period $ 77,996 $ 74,048 $ 76,304
Remaining Performance Obligations
Total remaining performance obligations (“RPO”) which are contracted but not recognized into revenue was $ 163.2 million as of March 31, 2026. RPO consists of both deferred revenue, which is included in the consolidated balance sheets, and non-cancelable amounts from contracts that will be invoiced and are not included in the consolidated balance sheets. These amounts exclude variable consideration related to sales-based royalties.
Remaining performance obligations consisted of the following (in thousands):
Current Non-Current Total
As of March 31, 2026 $ 123,962 $ 39,271 $ 163,233
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, 2026 (in thousands):
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Deferred revenue by period
Current Non-current Total
Service revenue $ 62,897 $ 29,252 $ 92,149
Subscription revenue 12,161 9,778 21,939
Product revenue $ 596 $ — $ 596
Total $ 75,654 $ 39,030 $ 114,684
NOTE 3: BALANCE SHEET INFORMATION
Certain significant amounts included in the Company's consolidated balance sheets consist of the following (in thousands):
Manufacturing inventories March 31,
2026 2025
Manufactured finished goods $ 5,887 $ 10,471
Work in progress 990 380
Raw materials 8,508 9,485
Service parts Inventories 718 2,098
Total manufacturing inventories $ 16,103 $ 22,434
Property and equipment, net March 31,
2026 2025
Machinery and equipment, and software $ 48,298 $ 47,385
Leasehold improvements 13,645 13,529
Furniture and fixtures 1,169 1,095
63,112 62,009
Less: accumulated depreciation ( 53,828 ) ( 50,631 )
Total property, plant and equipment, net $ 9,284 $ 11,378
Depreciation expense for property and equipment was $ 3.1 million and $ 4.2 million for the years ended March 31, 2026 and 2025, respectively.
Intangible assets, net March 31, 2026 March 31, 2025
Gross Accumulated Amortization Net Gross Accumulated Amortization Net
Developed technology $ 9,013 $ ( 9,013 ) $ — $ 9,013 $ ( 9,013 ) $ —
Customer lists 4,398 ( 4,398 ) — 4,398 ( 4,117 ) 281
Intangible assets, net $ 13,411 $ ( 13,411 ) $ — $ 13,411 $ ( 13,130 ) $ 281
Intangible assets amortization expense was $ 0.3 million and $ 1.4 million for the years ended March 31, 2026 and 2025, respectively. As of March 31, 2026, the intangible assets were fully amortized. The Company recorded amortization of developed technology in cost of product revenue, and customer lists in sales and marketing expenses in the consolidated statements of operations and comprehensive loss.
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Goodwill
Amount
Balance at March 31, 2024 $ 12,969
Goodwill acquired —
Balance at March 31, 2025
12,969
Goodwill acquired —
Balance at March 31, 2026
$ 12,969
Other long-term assets March 31,
2026 2025
Capitalized SaaS implementation costs for internal use $ 12,063 $ 13,910
Capitalized debt costs — 2,871
Deferred taxes 1,062 705
Contract cost asset 994 1,144
Other 618 758
Total other long-term assets $ 14,737 $ 19,388
Other accrued liabilities March 31,
2026 2025
Accrued expenses
$ 7,456 $ 7,947
Accrued interest
2,827 350
Accrued supplier owned inventory obsolescence
2,057 1,302
Accrued income taxes
1,153 528
Accrued warranty
772 1,032
Lease liability 799 856
Accrued product returns 783 818
Other
3,610 5,149
Total other accrued liabilities $ 19,457 $ 17,982
The following table details the change in the accrued warranty balance (in thousands):
Year Ended March 31,
2026 2025
Balance as of April 1 $ 1,032 $ 1,545
Current period accruals 2,645 2,333
Adjustments to prior estimates ( 23 ) 46
Charges incurred ( 2,758 ) ( 2,735 )
Reclassification to long-term warranty ( 124 ) ( 157 )
Balance as of March 31 $ 772 $ 1,032
NOTE 4: DEBT
The following table summarizes the Company's borrowing as of the dates presented (in thousands):
Year Ended March 31,
2026 2025
Term Loan $ 55,906 $ 102,507
Convertible Note 90,034 —
PNC Credit Facility — 26,600
Less: current portion ( 54,811 ) ( 123,086 )
Less unamortized debt issuance costs (1)
( 1,095 ) ( 6,021 )
Long-term debt, net $ 90,034 $ —
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(1) The unamortized debt issuance costs related to the Term Loan are presented as a reduction of the carrying amount of the corresponding debt balance on the accompanying consolidated balance sheets. Unamortized debt issuance costs related to the PNC Credit Facility are presented within other assets on the accompanying consolidated balance sheets.
On August 5, 2021, the Company entered into a Term Loan Credit and Security Agreement (the “Term Loan Credit Agreement”), pursuant to which a senior secured term loan was issued (the “2021 Term Loan”), maturing on August 5, 2026. The Company also entered into an Amended and Restated Revolving Credit and Security Agreement on December 27, 2018 (the “PNC Credit Facility” and, together with the Term Loan Credit Agreement, the “Credit Agreements”), which, per its terms, was maturing on August 5, 2026 and provided 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.
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, together 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 term of the loan. 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 62,500 shares (the “June 2023 Warrants”) of the Company’s common stock, at an exercise price of $ 20.00 per share.
On July 11, 2024, the Company entered into amendments to the Credit Agreements (the “July 2024 Amendments”) which, among other things, delayed the testing of the Company’s June 30, 2024 net leverage ratio financial covenant until July 31, 2024. In connection with the amendments, the Company issued the Term Loan lenders warrants to purchase an aggregate of 50,000 shares of the common stock at a purchase price of $ 8.20 (the “July 2024 Warrants”).
The July 2024 Amendments to the 2021 Term Loan were accounted for as a modification. The fair value of the July 2024 Warrants of $ 0.4 million is reflected as a reduction to the carrying amount of the 2021 Term Loan and amortized to interest expense over the remaining term of the loan. The July 2024 Amendments to the PNC Credit Facility were accounted for as a modification and the $ 0.1 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 August 13, 2024, the Company entered into amendments to the Credit Agreements (the “August 2024 Amendments”) which, among other things, (i) waived compliance with the June 30, 2024 net leverage ratio financial covenant; (ii) waived any non-compliance with the minimum liquidity financial covenant through the date of the amendments; (iii) removed the fixed charges coverage ratio financial covenant until the fiscal quarter ended September 30, 2025; (iv) waived the testing requirement for the net leverage ratio financial covenant for the fiscal quarter ended September 30, 2024; (v) replaced the net leverage ratio financial covenant with a minimum EBITDA financial covenant for the fiscal quarters ended December 31, 2024 and March 31, 2025; (vi) reset the net leverage ratio financial covenant requirements for the fiscal quarters ended June 30, 2025 and September 30, 2025; (vii) reduced the minimum liquidity covenant to $ 10 million through September 30, 2025; (viii) adjusted the applicable interest rates on the Term Loan and PNC Credit Facility; (ix) removed required 2021 Term Loan principal amortization until the fiscal quarter ended September 30, 2025; and (x) repriced certain lender warrants.
In connection with the August 2024 Amendments, the Company entered into a new senior secured delayed draw term loan facility with a borrowing capacity of up to $ 26.3 million ($ 25.0 million after original issuance discount) and a commitment period expiring on October 31, 2024 (each draw, an “August 2024 Term Loan”). The Company borrowed $ 10.5 million at closing (“Initial August 2024 Term Loan”). Borrowings under the August 2024 Term Loan have an August 5, 2026 maturity date, which aligns with the 2021 Term Loan. The principal is payable quarterly beginning September 30, 2025, at a rate per annum equal to 5 % of the original principal balance. The August 2024 Term Loan’s interest rate margin is (a) until March 31, 2025 (i) for any August 2024 Term Loan designated as a ‘SOFR Loan’, 12.00 % per annum and (ii) for any August 2024 Term Loan designated an ‘ABR Loan’, 11.00 % per annum, in each case, with 6.00 % of such interest rate margin paid-in-kind, and (b) from April 1, 2025, (i) for any
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August 2024 Term Loan designated as a ‘SOFR Loan’, 14.00 % per annum and (ii) for any August 2024 Term Loan designated an ‘ABR Loan’, 13.00 % per annum, in each case, with 8.00 % of such interest rate margin paid-in-kind. The August 2024 Term Loan also includes a multiple on invested capital payable to the August 2024 Term Loan lenders. Subsequently, the Company borrowed the remaining $ 15.8 million of the August 2024 Term Loan’s borrowing capacity before September 30, 2024.
Subsequent to the August 2024 Amendments, the 2021 Term Loan amortizes at 5.00 % per annum commencing on September 30, 2025. Subsequent to the August 2024 Amendments and (A) until March 31, 2025, loans under the 2021 Term Loan designated as ABR Loans bear interest at a rate per annum equal to the “ABR Rate” (calculated as the greatest of (i) 1.75 %; (ii) the Federal funds rate plus 0.50 %; (iii) a secured overnight financing rate (the “SOFR Rate”) 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 8.75 %, and (y) SOFR Rate Loans bear interest at a rate per annum equal to the SOFR Rate plus an applicable margin of 9.75 %, in each case, with 3.75 % of such interest rate margin paid-in-kind, with two specified step-downs in such applicable margin upon the receipt by the Company of cash proceeds from certain specified capital raises, and (B) from and after April 1, 2025, loans under the 2021 Term Loan designated as (x) ABR Loans bear interest at a rate per annum equal to the ABR Rate, plus an applicable margin of 8.75 %, and (y) SOFR Rate Loans bear interest at a rate per annum equal to the SOFR Rate plus an applicable margin of 9.75 %, in each case, with 3.75 % of such applicable margin paid-in-kind, with a step-up of 1.00 % per annum (which shall be paid-in-kind) if the Company’s total net leverage ratio is greater than 4.00 x, and a step-down of 1.00 % per annum if the Company’s total net leverage ratio is less than 3.50 x (which shall reduce the paid-in-kind component of the applicable margin). The SOFR Rate is subject to a floor of 2.00 %. The Company can designate a loan as an ABR Rate Loan or SOFR Rate Loan in its discretion.
Subsequent to the August 2024 Amendments, PNC Credit Facility loans designated as (x) PNC SOFR Loans bear interest at a rate per annum equal to a SOFR based rate, plus an applicable margin of 4.75 % and (y) 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; (ii) the Overnight Bank Funding Rate plus 0.5 %; and (iii) the daily SOFR rate plus 1.0 %, plus an applicable margin of 3.75 %. The Company can designate a loan as a PNC SOFR Loan or PNC Domestic Rate Loan in its discretion.
In connection with the August 2024 Amendments, the Company issued warrants to purchase an aggregate of 380,310 shares of common stock, at an exercise price of $ 6.20 per share (the “August 2024 Warrants”) and which had a fair value of $ 2.0 million.
The August 2024 Amendments to the 2021 Term Loan held by one lender was accounted for as a modification. The $ 1.2 million fair value of the August 2024 Warrants issued to this lender and the $ 0.5 million of PIK fees paid to this lender are reflected as a reduction to the carrying amount of their Term Loan and their initial delayed draw term loan and amortized to interest expense over the remaining term of the loan. The August 2024 Amendments to the 2021 Term Loan held by another lender was accounted for as a debt extinguishment. The Company recorded a loss on debt extinguishment of $ 3.0 million related to the write-off of a portion of unamortized debt issuance costs and fees and expenses incurred with the August 2024 Amendments.
On April 2, 2025, the Company consented to an assignment (the “Master Assignment Agreement”) of the 2021 Term Loan and 2024 Term Loans. One of the lenders sold $ 51.4 million of Term Loan and assigned all of its interests to Dialectic Technology SPV, LLC (“Dialectic”). The Master Assignment Agreement was accounted for as a debt extinguishment. The Company recorded a gain on debt extinguishment of $ 2.4 million related to the net of discount on issuance of term loans to a new lender and write-off of all unamortized debt issuance costs and fees related to the previous lender. The $ 0.4 million in new lender fees were recorded as a reduction to the carrying amounts of the term loans and amortized to interest expense over the remaining term of the loan.
On May 5, 2025, the Company entered into an amendment (the “May 2025 Term Loan Amendment”) to the Term Loan. The May 2025 Term Loan Amendment, among other things, revised the prepayment requirements under the Term Loan Credit Agreement in connection with the net cash proceeds received from the SEPA. The May 2025 Term Loan Amendment was accounted for as a modification and the $ 0.1 million in lender amendment fees were recorded as a reduction to the carrying amounts of the term loans and amortized to interest expense over the remaining term of the loan.
On August 13, 2025, the Company terminated its PNC Credit Facility. As of the date of termination, there were no amounts outstanding under the facility. In connection with the termination, the Company paid an exit fee of
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$ 1.2 million, which was recorded within Loss on Debt Extinguishment on the consolidated statement of operations and comprehensive loss.
On August 13, 2025, the Company obtained waivers to certain covenants including the net leverage covenant under the Term Loan Credit Agreement for the quarter ended June 30, 2025. Additionally, the requirement to use certain proceeds of the SEPA to pay down the Term Loan was waived.
On September 23, 2025, the Company entered into the Fifteenth Amendment to the Term Loan Credit Agreement with Quantum LTO Holdings, LLC, Dialectic, OC III LVS XXXIII LP (“LVS XXXIII”), OC III LVS XL LP (“LVS XL” and together with LVS XXXIII, the “OC III Lenders”), and Alter Domus (US) LLC, as disbursing agent and collateral agent (the “Fifteenth Amendment”). The Fifteenth Amendment, among other things, (i) permits the Company to retain up to $ 15.0 million of net cash proceeds from the SEPA received on or after the date of the Fifteenth Amendment for working capital and general corporate purposes, (ii) converts certain tranches of Term Loans held by the OC III Lenders into new and separate tranches, (iii) defers payment of cash interest on Term Loans held by Dialectic accruing during the quarters ended September 30, 2025 and December 31, 2025, until the earliest of (a) the date the Company elects to pay such deferred cash interest, (b) the maturity of such term loans, or (c) the date the Debt Exchange (as defined below) occurs, at which point such deferred interest will be subject to the terms of the Convertible Note indenture, and increases the interest rate applicable to such term loans by 2.00 % during the period that such cash interest is being deferred, (iv) eliminates the existing maximum total net leverage ratio covenant and minimum daily liquidity covenant (noting that, following the Debt Exchange (as defined below), the Convertible Note will be subject to a minimum liquidity covenant), and (v) amends certain other provisions, including mandatory prepayment events, payment of fees and expenses, and reporting requirements.
In connection with the Fifteenth Amendment, the Company issued a warrant (the “Forbearance Warrant”) to Dialectic to purchase up to 2,653,308 shares of its common stock, representing 19.9 % of the Company’s outstanding shares as of the date of the Transaction Agreement (as defined below) as consideration for the forbearance, waivers, and amendments granted under the Fifteenth Amendment. See Note 7: Common Stock, for additional information.
With respect to the Term Loans held by Dialectic, the Fifteenth Amendment was accounted for as an extinguishment under ASC 470-50, resulting in the recognition of a new debt instrument, the derecognition of the original term loans, and a loss on extinguishment of $ 31.0 million, which is included in loss on debt extinguishment on the consolidated statement of operations and comprehensive loss for fiscal year ended March 31, 2026. The fair value of the Forbearance Warrant was treated as a lender fee and included in the extinguishment loss calculation. The Fifteenth Amendment to the Term Loans held by OC III Lenders was accounted for as a modification. See Note 11: Fair Value of Financial Instruments, for additional information.
On September 23, 2025, the Company entered into an agreement with Dialectic and the OC III Lenders (the “Transaction Agreement”). Pursuant to the Transaction Agreement, the Company agreed to issue to Dialectic, on a dollar-for-dollar basis, one or more 10.00 % PIK Senior Secured Convertible Notes due 2028 ("Convertible Note") in exchange for the amounts then outstanding under the term loans held by Dialectic (the “Debt Exchange”). On December 18, 2025, the Company closed the transactions contemplated by the Transaction Agreement (the “Closing”), including its issuance to Dialectic of the Convertible Note and extinguishing $ 54.7 million of Term Debt. Associated lender fees of $ 2.2 million were also incurred. The Closing was conditioned upon, among other things, approval of the Debt Exchange by the Company’s stockholders, which approval was obtained on December 16, 2025.
The Convertible Note has a three -year maturity and bears interest at 10 % per annum, payable in kind and compounded annually. The Convertible Note is secured by substantially all of the assets of the Company that secure the Term Loan. The initial conversion price equals $ 10.00 per share of the Company’s common stock (the “Conversion Price”). The Conversion Price is subject to four quarterly resets on the last day of each calendar quarter immediately following September 15, 2025 (each, a “Reset Price Date”) to the greater of (a) $ 4.00 per share and (b) the lesser of (i) the then-current Conversion Price and (ii) the 30-day Volume-Weighted Average Price (VWAP) of the Company’s common stock immediately preceding the Reset Price Date.
The Lender may, at any time, elect to exchange all or any portion of the outstanding principal amount, accrued and unpaid interest and premium (if any) of the Convertible Note for shares of the Company’s common stock at the then-applicable Conversion Price. Beginning six months after the Closing, if certain conditions are met, the Company may, at its election, require the Lender to exchange a portion of the outstanding Convertible Note into shares of the Company’s common stock at the then-applicable Conversion Price if the 10-day VWAP exceeds specified multiples of the Conversion Price (the “Company Mandatory Exchange”). The Company Mandatory
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Exchange, if triggered, occurs in tranches of 20 %, 20 %, 30 %, and the remaining balance. If certain conditions are met, at the Company’s option, on the maturity date, any outstanding principal, accrued and unpaid interest, and premium (if any) may be exchanged for shares of the Company’s common stock at 80 % of the average of the Daily VWAP for each of the five lowest consecutive trading days during the 20 consecutive trading days ending on (and including) the trading day immediately prior to the maturity date.
The Company accounted for the exchange of Dialectic’s term loans for the Convertible Note as an extinguishment of the term loans and recognized a loss on debt extinguishment of $ 28.9 million on the consolidated statement of operations and comprehensive loss for the fiscal year ended March 31, 2026. The Company elected the fair value option under ASC 825 for the Convertible Note. See Note 11: Fair Value of Financial Instruments , for additional information.
Related Party Transactions
The Forbearance Warrant and Convertible Note issued to Dialectic constitute related party transactions, as John Fichthorn, a member of the Company's Board, is also Managing Partner of Dialectic Capital Management, the investment adviser to Dialectic. On issuance of the Convertible Note, Quantum paid $ 1.1 million to Dialectic for consulting services. The fair values of the Forbearance Warrant and Convertible Note as of March 31, 2026 are included in Note 11: Fair Value of Financial Instruments .
NOTE 5: LEASES
Supplemental consolidated balance sheets information related to leases is as follows (in thousands):
Year Ended March 31,
Operating leases 2026 2025
Operating lease right-of-use assets $ 7,416 $ 8,580
Operating lease liability, current - included in other accrued liabilities $ 799 $ 856
Operating lease liability 8,172 8,934
Total operating lease liabilities $ 8,971 $ 9,790
The components of lease expense were as follows (in thousands):
Year Ended March 31,
Lease expense 2026 2025
Operating lease expense $ 2,190 $ 2,895
Variable lease expense 251 263
Short-term lease expense 426 48
Total lease expense $ 2,867 $ 3,206
Maturity of Lease Liabilities Operating Leases
Fiscal year ending March 31, 2027 $ 1,964
2028 1,606
2029 1,234
2030 1,237
2031 1,285
Thereafter 9,569
Total lease payments 16,895
Less: Imputed interest ( 7,924 )
Present value of lease liabilities $ 8,971
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Lease Term and Discount Rate March 31,
2026 2025
Weighted average remaining operating lease term (years) 10.16 10.53
Weighted average discount rate for operating leases 12.67 % 12.64 %
Operating cash outflows related to operating leases totaled $ 2.2 million and $ 2.8 million for the fiscal years ended March 31, 2026 and March 31, 2025, respectively.
NOTE 6: RESTRUCTURING CHARGES
During fiscal years 2026 and 2025, the Company approved certain restructuring plans to improve operational efficiencies and rationalize its cost structure. All restructuring activities from 2025 fiscal year were completed by the fourth quarter of fiscal 2026. During fiscal year 2026, all employees were notified; however, due to local requirements, not all employees had left employment by the end of the fiscal year. No asset impairments occurred in fiscal year 2026 or in fiscal year 2025.
The following tables show the activity for accrued restructuring (in thousands):
Severance and
benefits
Balance as of March 31, 2024 $ —
Restructuring charges 4,090
Cash payments ( 3,266 )
Other non-cash ( 38 )
Balance as of March 31, 2025 786
Restructuring charges 8,112
Cash payments ( 8,363 )
Other non-cash 31
Balance as of March 31, 2026 $ 566
NOTE 7: COMMON STOCK
In the fiscal year ended March 31, 2023, the Company’s stockholders approved an increase in its authorized shares of common stock from 125 million to 225 million.
Long-Term Incentive Plan
The Company maintains the 2023 Long-Term Incentive Plan (the “2023 LTIP”) which provides for grants of performance share units, restricted stock units and stock options. On August 15, 2024, the stockholders of the Company approved an additional 250,000 shares of Common Stock under the 2023 LTIP for future issuance and on December 16, 2025, the Company’s stockholders approved an amendment to (i) increase the number of shares of the Company’s common stock reserved for issuance thereunder by 1,400,000 shares and (ii) remove the individual annual award limits for employees and consultants.
Equity awards typically vest between one and four years . Stock options, performance shares and restricted stock grants to non-employee directors typically vest over one year . The term of each stock option under the 2023 Plan will not exceed seven years . 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 2.2 million shares authorized for issuance of new shares, with 0.5 million performance shares and restricted shares outstanding, 0.1 million stock options outstanding, and 1.6 million shares available for future issuance under the Plan as of March 31, 2026.
2021 Inducement Plan
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The Company's 2021 Inducement Plan (the "2021 Inducement Plan") became effective on February 1, 2021 and provides for issuance of inducement equity awards to individuals who were not previously an employee or non-employee director of the Company as an inducement to such individual's entering into employment with the Company. The term of each stock option and restricted stock unit under the plan will not exceed seven years , and each award generally vests between two and three years .
On December 30, 2022, the Leadership and Compensation Committee of the Board of Directors approved an amendment to the 2021 Inducement Plan to increase the number of shares of common stock of the Company authorized for issuance thereunder from 38,500 to 0.1 million. In addition, the committee approved increasing the number of shares of common stock of the Company authorized for issuance under the 2021 Inducement Plan to 0.2 million. There were 0.1 million shares available for future issuance as of March 31, 2026.
The Company accounts for all forfeitures of stock-based awards when they occur.
Employee Stock Purchase Plan
The Company's has an Employee Stock Purchase Plan (the "ESPP") which enables eligible employees to purchase shares of its common stock at a discount. Purchases will be accomplished through participation in discrete offering periods. On each purchase date, eligible employees will purchase the Company's common stock at a price per share equal to 85 % of the lesser of (i) the fair market value of the Company's common stock on the first trading day of the offering period, and (ii) the fair market value of the Company's common stock on the purchase date.
The Company has reserved shares of common stock for future issuance under its ESPP as follows (in thousands):
March 31,
2026 2025
Shares available for issuance at beginning of year 204.4 4.4
Additional shares authorized for issuance during the period — 200
Total shares available for future issuance at end of year 204.4 204.4
Performance Stock Units
The Company granted 120,000 and 180,126 units of performance stock units with financial performance conditions (“Performance PSUs”) in the fiscal years ended March 31, 2026 and 2025, respectively. Performance PSUs become eligible for vesting based on the Company achieving certain financial performance targets, and are contingent upon continued service of the holder of the award during the vesting period. Performance PSUs are valued at the market closing share price on the date of grant and compensation expense for Performance PSUs is recognized when it is probable that the performance conditions will be achieved. Compensation expense recognized related to Performance PSUs is reversed if the Company determines that it is no longer probable that the performance conditions will be achieved.
The following table summarizes activity for the unvested Market PSUs and Performance PSUs for the year ended March 31, 2026 (shares in thousands) :
Shares Weighted-Average
Grant Date Fair Value per Share
Unvested as of March 31, 2025 213 $ 6.87
Granted 120 $ 6.11
Vested ( 4 ) $ 19.53
Forfeited or cancelled ( 200 ) $ 7.23
Unvested as of March 31, 2026 129 $ 6.87
As of March 31, 2026 , there was $ 0.7 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 1.6 years .
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The total grant date fair value of shares granted during fiscal years ended March 31, 2026 and 2025 was $ 0.7 million and $ 0.4 million , respectively.
Restricted Stock Units
The Company granted 370,905 and 312,250 of service-based restricted stock units (“RSUs”) in the fiscal years ended March 31, 2026 and 2025, respectively, which generally vest ratably over a three-year service period. RSUs are valued at the market closing share price on the date of grant and compensation expense for RSUs is recognized ratably over the applicable vesting period.
The following table summarizes activity for the unvested RSUs for the year ended March 31, 2026 (shares in thousands) :
Shares Weighted-Average
Grant Date Fair Value per Share
Unvested as of March 31, 2025
327 $ 11.32
Granted 371 $ 6.93
Vested ( 117 ) $ 8.58
Forfeited or cancelled ( 170 ) $ 13.94
Unvested as of March 31, 2026
411 $ 7.06
The total grant date fair value of RSUs granted during fiscal years ended March 31, 2026 and 2025 was $ 2.6 million and $ 3.8 million, respectively.
As of March 31, 2026 , there was $ 2.8 million of total unrecognized stock-based compensation related to RSUs, which is expected to vest over a weighted-average period of 1.7 years .
Stock Options
During fiscal 2026, the Company granted equity awards to its Chief Executive Officer including options to purchase 100,000 shares of the Company’s common stock, one award for 50,000 in November 2025 with a grant date fair value of $ 7.39 per share and the other award for 50,000 in January 2026 which had a grant date fair value if $ 5.02 per share. Both awards vest in four equal annual installments, subject to continued service. The stock option was valued using the Black-Scholes option pricing model on the grant date.
The significant assumptions used by the Company to estimate the fair value of the option awards as of March 31, 2026 are summarized below:
November 1, 2025 January 1, 2026
Term (years) 7.00 years 7.00 years
Volatility 1
100.2 % 98.8 %
Dividend yield 2
0.00 % 0.00 %
Risk-free interest rate 3
3.66 % 3.79 %
Grant date fair value
$ 7.39 $ 5.02
1 Volatility is based of the Company's historical stock price over a period of the expected term of the options.
2 Dividend yield is set to — % as the Company has not historically paid dividends.
3 Risk-free interest rate is based on the Treasury yield for the expected term of the options.
Stock-based Compensation Expense
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The following table details the Company's stock-based compensation expense (in thousands):
Year Ended March 31,
2026 2025
Cost of revenue $ ( 21 ) $ 373
Research and development 73 495
Sales and marketing ( 66 ) 317
General and administrative ( 835 ) 1,643
Total stock-based compensation $ ( 849 ) $ 2,828
Year Ended March 31,
2026 2025
Restricted stock units $ 693 $ 2,515
Performance share units ( 1,635 ) 313
Stock options 93 —
Total stock-based compensation $ ( 849 ) $ 2,828
The negative stock compensation expense in fiscal 2026 is largely driven by separations during the period.
Warrants
In connection with various debt refinancing and debt amendment activities detailed in Note 4: Debt , the Company issued warrants to purchase shares of the Company common stock. As of March 31, 2026, there was a Forbearance Warrant issued in September 2025 which are exercisable until the seventh anniversary of its issuance. As of March 31, 2024, there were Lender Warrants that were issued in December 2018 which were exercisable until December 27, 2028, issued in June 2020 which were exercisable until June 16, 2030 and issued in June 2023 which were exercisable until June 1, 2033 (collectively the "Lender Warrants"). The Lender Warrants were fully exercised in fiscal 2025.
Lender Warrants
On December 30, 2024, 467,248 warrants were exercised in a cashless exercise whereby 61,270 shares with a value of $ 6.20 per share were used to settle the exercise price and the remaining 405,978 shares were issued to the warrant holders.
On January 3, 2025, certain PIMCO-managed entities exercised 677,905 warrants in a cashless exercise whereby 228,195 shares with a weighted-average value of $ 35.42 per share were used to settle the exercise price and the remaining 449,710 shares were issued to the warrant holders. As PIMCO was a related party, this transaction was reviewed and approved in accordance with the Company’s related party transaction policy.
The table below sets forth a summary of changes in the fair value of the Company’s Level 2 Lender Warrant liabilities for the years ended March 31, 2024 and March 31, 2025. The Company did not issue any Lender Warrants during the year ended March 31, 2026 and had no outstanding Lender Warrants as of March 31, 2026.
Balance at March 31, 2024 $ 4,046
Issuance of warrants 3,157
Exercise of warrants ( 52,985 )
Repricing adjustment 512
Change in fair value of warrant liabilities 45,270
Balance at March 31, 2025 $ —
Forbearance Warrant
The Forbearance Warrant, issued on September 23, 2025, has an exercise price of $ 8.81 per share, representing 80 % of the seven -day volume-weighted average price as of September 22, 2025, and is exercisable until the seventh anniversary of its issuance. It includes a put right that allows the holder to require the Company to repurchase the unexercised portion for cash after the fifth anniversary, or earlier upon a change of control or
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liquidation. The repurchase price equals the holder’s pro rata share of the original issue value of $ 20 million, adjusted for any exercised portion.
The Forbearance Warrant is classified as a liability under ASC 480, as it may require cash settlement and meets the definition of a derivative. It is initially measured at fair value, with subsequent changes recognized in the consolidated statements of operations and comprehensive loss under “Change in fair value of warrant liabilities.” See Note 11: Fair Value of Financial Instruments , for additional information.
The table below sets forth a summary of changes in the fair value of the Company’s Level 2 Forbearance Warrant liabilities for the years ended March 31, 2026 and March 31, 2025:
Balance at March 31, 2025
$ —
Issuance of warrants 25,420
Change in fair value of warrant liabilities ( 11,315 )
Balance at March 31, 2026
$ 14,105
Other Warrants
The Company also issued 2,500 warrants to purchase the Company's common stock in June 2020 and June 2023 to advisors of the Company at an exercise price of $ 60.00 and $ 20.00 , 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.
Standby Equity Purchase Agreement
On January 25, 2025, we entered into the SEPA with YA in which pursuant to and subject to its terms, the Company has the right, but not the obligation, to sell up to $ 200.0 million of common stock at any time during the three-year period following the date of the SEPA. On January 27, 2025, the Company filed a registration statement on Form S-1 in connection with the SEPA. The Registration Statement on Form S-1 was declared effective February 11, 2025.
Sales of common stock under the SEPA may be made by the Company at its discretion from time to time and will depend upon market conditions and other factors. The purchase price for shares sold under the SEPA is based on a formula tied to the volume-weighted average price of the Company’s common stock.
In addition, in no event may the Company issue more than 1,157,139 shares of common stock under the SEPA, representing 19.99 % of the Company’s common stock outstanding immediately prior to execution of the SEPA (the “Exchange Cap”), unless the Company obtains stockholder approval in accordance with applicable Nasdaq rules or otherwise satisfies the conditions under which the Exchange Cap would not apply. The SEPA is also subject to a 4.99 % beneficial ownership limitation, which restricts YA from acquiring shares that would result in ownership above that threshold.
As of March 31, 2026, the Company has issued approximately 8.7 million shares of common stock under the SEPA for net proceeds of approximately $ 91.0 million with 7.6 million shares sold in fiscal 2026 for net proceeds of $ 75.2 million.
The amount of additional capital that may be raised under the SEPA will depend on market conditions, trading volumes, the Company’s stock price, and the continued satisfaction of the applicable limitations and conditions under the agreement.
The Company evaluated the SEPA that includes the right to require YA to purchase shares of common stock in the future (“put right”) considering the guidance in ASC 815-40, Derivatives and Hedging — Contracts on an Entity’s Own Equity, and concluded that it is an equity-linked contract that does not qualify for equity classification, and therefore requires fair value accounting. The Company has analyzed the terms of the freestanding put right and has concluded that it has an immaterial value as of March 31, 2026 and 2025.
Registration Rights Agreements
Pursuant to the registration rights agreements applicable to the Lender Warrants, the holders have certain registration rights for the shares of common stock issuable upon 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
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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.
The registration rights agreement dated September 23, 2025, by and between the Company and Dialectic, grants Dialectic certain registration rights with respect to the shares of common stock issuable upon exercise of the Forbearance Warrant, including certain mandatory resale registration and piggyback registration rights, subject to certain limitations.
In addition, the registration rights agreement dated December 18, 2025, by and between the Company and Dialectic, grants Dialectic certain registration rights with respect to the shares of common stock issuable upon conversion of the Convertible Note, including certain mandatory resale registration and piggyback registration rights, subject to certain limitations.
NOTE 8: NET LOSS PER SHARE
Equity Instruments Outstanding
The Company has stock options, warrants, performance share units and restricted stock units granted under various stock incentive plans that, upon exercise and vesting, would increase shares outstanding.
The following table sets forth the computation of basic and diluted net loss (in thousands, except per share data):
Year Ended March 31,
2026 2025
Numerator:
Net loss used in basic and diluted earnings per share $ ( 101,046 ) $ ( 115,091 )
Denominator:
Weighted average common shares outstanding used in basic and diluted earnings per share 12,674 5,150
Net income loss per share - basic and diluted $ ( 7.97 ) $ ( 22.35 )
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 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,
2026 2025
Stock awards 1
62 127
Warrants 2,653 634
Total 2,715 761
1 Stock awards include stock options, performance share units and restricted stock units
The Company had outstanding market based restricted stock units as of March 31, 2026 and 2025 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. These contingently issuable shares are excluded from the computation of diluted earnings per share if, based on current period results, the shares would not be issuable if the end of the reporting period were the end of the contingency period. There were 30,517 and 186,616 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, 2026 and 2025, respectively.
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NOTE 9: INCOME TAXES
Pre-tax loss reflected in the consolidated statements of operations and comprehensive loss for the years ended March 31, 2026 and 2025 is as follows (in thousands):
Year Ended March 31,
2026 2025
U.S. $ ( 98,392 ) $ ( 112,416 )
Foreign ( 1,646 ) ( 1,854 )
Total $ ( 100,038 ) $ ( 114,270 )
Income tax provision consists of the following (in thousands):
Year Ended March 31,
2026 2025
Current tax expense
Federal $ — $ —
State 19 36
Foreign 1,312 741
Total current tax expense 1,331 777
Deferred tax expense (benefit)
Federal 19 20
State 7 37
Foreign ( 349 ) ( 13 )
Total deferred tax expense (benefit) ( 323 ) 44
Income tax provision $ 1,008 $ 821
Income taxes paid, net of refunds received (in thousands):
For the year ended March 31,
2026
Federal $ —
State ( 52 )
Foreign
Belgium 116
France 77
India 149
Israel 449
Italy 93
Malaysia 79
Mexico 80
United Kingdom 103
Other Foreign Jurisdictions 100
Total Foreign 1,246
Total Income Taxes paid, net of refunds received $ 1,194
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Beginning with 2026 annual reporting, the Company adopted ASU 2023-09, Improvements to Income Tax Disclosures , prospectively as described in Note 9. In FY26, state and local income taxes in California, South Carolina, Minnesota, and New Jersey comprise the majority of the state and local income taxes, net of federal effect category.
A reconciliation of the federal statutory income tax rate of 21 % to the effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended March 31, 2026 was as follows (in thousands, except percentages):
For the year ended March 31,
2026
At Statutory Rate $ ( 21,008 ) 21.0 %
State Income Taxes, net of Federal Effect 1,733 ( 1.7 ) %
Change in Valuation Allowance ( 7,131 ) 7.1 %
Nontaxable or Nondeductible Items
Loss on Debt Extinguishment 12,526 ( 12.5 ) %
Warrants Mark-to-Market ( 2,376 ) 2.4 %
Legal Services 2,368 ( 2.4 ) %
Other Nondeductible Items 1,477 ( 1.5 ) %
Changes in Tax Laws or Rates — — %
Tax Credits
R&D Credits 4,614 ( 4.6 ) %
Foreign Tax Credit 11,915 ( 11.9 ) %
Cross-Border Tax Laws
Subpart F Inclusion 281 ( 0.3 ) %
Worldwide Changes in UTB ( 4,683 ) 4.7 %
Other 519 ( 0.5 ) %
Foreign Tax Effects
Other Foreign Jurisdictions 773 ( 0.8 ) %
Total Tax Expense $ 1,008 ( 1.0 ) %
The income tax provision differs from the amount computed by applying the federal statutory rate of 21 % to loss before income taxes as follows (in thousands):
For the year ended March 31,
2026 2025
Expense (benefit) at the federal statutory rate $ ( 21,008 ) 21.0 % $ ( 24,122 ) 21.1 %
Equity compensation 188 ( 0.2 ) % 580 ( 0.5 ) %
Permanent items 17,351 ( 17.3 ) % 309 ( 0.3 ) %
Foreign taxes 1,135 ( 1.1 ) % 299 ( 0.3 ) %
State income taxes 1,733 ( 1.7 ) % 36 — %
Valuation allowance ( 7,152 ) 7.1 % 13,907 ( 12.2 ) %
Uncertain tax positions ( 4,722 ) 4.7 % ( 6,672 ) 5.8 %
Expiration of attributes 16,963 ( 17.0 ) % 8,427 ( 7.4 ) %
Research and development credits ( 367 ) 0.4 % ( 844 ) 0.7 %
Warrant fair value adjustments ( 2,376 ) 2.4 % 9,507 ( 8.3 ) %
Other ( 737 ) 0.8 % ( 606 ) 0.5 %
Income tax provision $ 1,008 ( 1.0 ) % $ 821 ( 0.7 ) %
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Significant components of deferred tax assets and liabilities are as follows (in thousands):
As of March 31,
2026 2025
Deferred tax assets
Loss carryforwards $ 71,533 $ 61,466
Deferred revenue 23,865 25,895
Capitalized research and development 23,094 28,824
Tax credits 2,817 15,517
Disallowed interest 22,890 19,696
Other accruals and reserves not currently deductible for tax purposes 3,651 3,913
Lease obligations 1,853 2,016
Inventory 4,537 3,779
Acquired intangibles 989 1,285
Accrued warranty expense 178 277
Depreciation 1,491 1,755
Gross deferred tax assets 156,898 164,423
Valuation allowance ( 154,616 ) ( 161,730 )
Total deferred tax assets, net of valuation allowance 2,282 2,693
Deferred tax liabilities
Lease assets ( 1,529 ) ( 1,711 )
Other 290 ( 323 )
Total deferred tax liabilities ( 1,239 ) ( 2,034 )
Net deferred tax assets (liabilities) $ 1,043 $ 659
The valuation allowance increased by $ 6.9 million during the year ended March 31, 2026 and increased by $ 14.1 million during the year ended March 31, 2025, respectively.
A reconciliation of the gross unrecognized tax benefits is as follows (in thousands):
For the year ended March 31,
2026 2025
Beginning Balance $ 81,678 $ 88,341
Increase in balances related to tax positions in current period 1,050 1,558
Increase (decrease) in balances related to tax positions in prior period 40 ( 12 )
Decrease in balances due to lapse in statute of limitations ( 6,179 ) ( 8,209 )
Ending balance $ 76,589 $ 81,678
During fiscal 2026, excluding interest and penalties, there was a $( 5.1 ) million change in the Company's unrecognized tax benefits. Including interest and penalties, the total unrecognized tax benefit at March 31, 2026 was $ 77.8 million, of which $ 68.8 million, if recognized, would favorably affect the effective tax rate. At March 31, 2026, accrued interest and penalties totaled $ 1.2 million. The Company's practice is to recognize interest and penalties related to income tax matters in the income tax provision in the consolidated statements of operations and comprehensive loss. As of March 31, 2026, $ 70.9 million of unrecognized tax benefits were recorded as a contra deferred tax asset in other long-term assets in the consolidated balance sheets and $ 6.9 million (including interest and penalties) were included in other long-term liabilities in the consolidated balance sheets.
The Company files its tax returns as prescribed by the laws of the jurisdictions in which it operates. The Company's U.S. tax returns have been audited for years through 2002 by the Internal Revenue Service. In other major
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jurisdictions, the Company is generally open to examination for the most recent three to five fiscal years. During the next 12 months, it is reasonably possible that approximately $ 2.6 million of tax benefits, inclusive of interest and penalties, that are currently unrecognized could be recognized as a result of the expiration of applicable statutes of limitations. Upon recognition of the tax benefit related to the expiring statutes of limitation, $ 1.7 million will be offset by the establishment of a related valuation allowance. The net tax benefit recognized in the consolidated statements of operations and comprehensive loss is estimated to be $ 0.9 million.
As of March 31, 2026, the Company had federal net operating loss and tax credit carryforwards of approximately $ 324.8 million and $ 26.7 million, respectively. The net operating loss and tax credit carryforwards expire in varying amounts in fiscal 2026 if not previously utilized, and $ 151.5 million are indefinite-lived net operating loss carryforwards. These carryforwards include $ 5.3 million of acquired net operating losses, the utilization of which is subject to various limitations due to prior changes in ownership.
Certain changes in stock ownership could result in a limitation on the amount of both acquired and self-generated net operating loss and tax credit carryovers that can be utilized each year. If the Company has previously undergone, or should it experience in the future, such a change in stock ownership, it could severely limit the usage of these carryover tax attributes against future income, resulting in additional tax charges.
Due to its history of net losses and the difficulty in predicting future results, Quantum believes that it cannot rely on projections of future taxable income to realize the deferred tax assets. Accordingly, it has established a full valuation allowance against its U.S. and certain foreign 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. The Company's income tax expense recorded in the future will be reduced to the extent that sufficient positive evidence materializes to support a reversal of, or decrease in, its valuation allowance.
NOTE 10: COMMITMENTS AND CONTINGENCIES
Commitments to Purchase Inventory
The Company uses contract manufacturers for its manufacturing operations. Under these arrangements, the contract manufacturer procures inventory to manufacture products based upon its forecast of customer demand. The Company has similar arrangements with certain other suppliers. The Company is responsible for the financial impact on the supplier or contract manufacturer of any reduction or product mix shift in the forecast relative to materials that the third party had already purchased under a prior forecast. Such a variance in forecasted demand could require a cash payment for inventory in excess of current customer demand or for costs of excess or obsolete inventory. As of March 31, 2026, the Company had issued non-cancelable commitments for $ 76.8 million to purchase inventory from its contract manufacturers and suppliers.
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 additional 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.
Litigation
Shareholder Litigation
On September 4, 2025, a shareholder class action complaint was filed in the United States District Court for the District of Colorado. The complaint identifies Seung Lee as the plaintiff and names Quantum Corporation and James J. Lerner, Kenneth P. Gianella, and Laura Nash as defendants. It alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 related to certain disclosures made in the Company’s quarterly and annual reports regarding its financial reporting for the third quarter of the Company’s fiscal year 2025 and its restatement of that financial reporting. The complaint sought to designate the plaintiff as the lead plaintiff for the class and define a class period of November 15, 2024 through August 18, 2025. On January 27, 2026, a revised final complaint named Hunsu Son as the lead plaintiff and reiterated the violations alleged in the original complaint. The revised complaint seeks an award of unspecified damages, costs, and expenses. The Company has filed a motion to dismiss the litigation. Briefing of that motion is underway. At this time, Quantum is not
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able to determine whether this lawsuit would have any material adverse effect on our business, operating results, or financial condition.
Derivative Litigation
On October 28, 2025, a shareholder derivative complaint was filed in the United States District Court for the District of Colorado. The complaint was filed by Brent Cullison derivatively on behalf of Quantum Corporation against James J. Lerner, Kenneth P. Gianella, Laura Nash, Don Jaworski, John Fichthorn, Hugues Meyrath, John R. Tracy, Emily White, James C. Clancy, and Tony J. Blevins. The complaint substantially repeats the allegations of the shareholder litigation described above and alleges related breaches of fiduciary duties and other causes of action. The complaint seeks recovery of damages sustained by Quantum arising from the allegations, as well as fees and costs incurred.
Another shareholder derivative complaint was filed in the same court on November 4, 2025. That complaint names Felicia Marti on behalf of Quantum Corporation as the plaintiff, with James J. Lerner, Kenneth P. Gianella, Laura Nash, John Fichthorn, Donald J. Jaworski, Hugues Meyrath, John R. Tracy, and Emily White named as defendants.The complaint substantially repeats the allegations of the Cullison derivative litigation and seeks relief of recovery of damages sustained by Quantum arising from the allegations, certain corporate governance reforms, and fees and costs incurred.
The court ordered the separate Cullison and Marti shareholder derivative complaints to be consolidated and stayed pending final resolution of the motion to dismiss the amended complaint in the Lee shareholder class action litigation. At this time, Quantum is not able to determine whether the consolidated lawsuits would have any material impact on our business, operating results, or financial condition.
Leases
At the end of fiscal 2026, the Company had various non-cancelable operating leases for office facilities. Refer to Note 5: Leases, for additional information regarding lease commitments.
NOTE 11: 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. 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, 2026 and 2025.
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:
Level 1: 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.
Level 2: 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.
Level 3: Unobservable inputs based on management’s assessment of the assumptions that market participants would use in pricing the asset or liability.
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Information related to the fair value of the Company's warrant liabilities and Convertible Note, which were determined utilizing Level 2 inputs to determine such fair value, are included in Note 4: Debt .
The following table represents the carrying value and total estimated fair value of the Company's Term Loan which was determined utilizing Level 2 inputs to determine fair value.
March 31,
2026 2025
Carrying Value Fair Value Carrying Value Fair Value
Term Loan $ 55,906 $ 51,339 $ 102,507 $ 91,576
The carrying amounts reported in the accompanying consolidated financial statements for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and other current liabilities approximate their respective fair values because of the short-term nature of these accounts.
Warrants
On September 23, 2025, the Company established the initial fair value for the Forbearance Warrant issued to Dialectic in connection with the Fifteenth Amendment. The fair value was subsequently remeasured as of March 31, 2026, and the resulting change in fair value was recognized in the consolidated statement of operations and comprehensive loss under “Change in fair value of warrant liability.”
The Forbearance Warrant was valued using a Monte Carlo simulation model in conjunction with a Probability-Weighted Expected Return Model. This model incorporates various assumptions, including the Company’s common stock price, expected volatility, risk-free interest rate, and the remaining contractual term of the warrant.
Because the valuation relies on significant unobservable inputs, the fair value of the Forbearance Warrant is classified as Level 3 within the fair value hierarchy.
The following table summarizes the key assumptions used in estimating the fair value of the Forbearance Warrant at issuance and at March 31, 2026:
March 31, 2026 September 23, 2025
Discount period (years) 6.48 years 7.0 years
Risk-free interest rate 3.65 % - 4.02 %
3.52 % - 3.83 %
Stock price volatility 100.00 % 98.00 %
Stock price at valuation date $ 4.75 $ 10.69
Probability 1
15 % - 15 % - 70 %
35 % - 15 % - 50 %
Fair value (in thousands) $ 14,105 $ 25,420
(1) Scenario probability as of issuance was based on timing expectations of management that a liquidation event occurring was estimated at 35 %; a fundamental transaction occurring was estimated at 15 %; and none of the previous events were estimated at 50 % and were revised at March 31, 2026 to a 15 % of a liquidation event occurring; a 15 % of a fundamental transaction occurring; and none of the previous events were estimated at 70 %.
The table below sets forth a summary of changes in the fair value of the Company’s Forbearance warrant liabilities for the period ended March 31, 2026:
Balance at March 31, 2025
$ —
Issuance of warrants 25,420
Change in fair value of warrant liabilities ( 11,315 )
Balance at March 31, 2026
$ 14,105
Convertible Note
The Company measures the Convertible Note at fair value using significant inputs that are not observable in active markets and therefore classifies the Convertible Note as a Level 3 measurement within the fair value hierarchy.
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Changes in the fair value of the Convertible Note resulting from updated assumptions and estimates are recognized as a fair value adjustments in the consolidated statements of operations and comprehensive loss.
The Company estimated the fair value of the Convertible Note using a Monte Carlo simulation method, as the Convertible Note includes features for which the settlement outcome depends on the path of the Company’s common stock price and other variables over time. In addition, the Company assigned probabilities to various possible settlement scenarios.
The significant assumptions used by the Company to estimate the fair value of the Convertible Note as of December 18, 2025 and March 31, 2026 are summarized below:
March 31, 2026 December 18, 2025
Term (years) 2.7 years 3.0 years
Volatility 85.0 % 120.0 %
Dividend yield 0.00 % 0.00 %
Risk-free interest rate 3.77 % 3.47 %
Probability for maturity 85 % 65 %
Probability for liquidation event 1
15 % 35 %
1 See probability discussed under Warrants. Scenario probability was consistently applied.
The table below sets forth a summary of changes in the fair value of the Convertible Note for the period ended March 31, 2026:
Balance at March 31, 2025
$ —
Issuance of Convertible Note
77,471
Change in fair value of Convertible Note recognized in Net Loss 4,119
Change in fair value of Convertible Note recognized in Other Comprehensive Loss 8,444
Balance at March 31, 2026
$ 90,034
NOTE 12: SEGMENT INFORMATION
Disaggregation of Revenue
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The following table depicts the disaggregation of revenue by geographic areas and major product offerings and geographies and is consistent with how the Company evaluates its financial performance (in thousands):
Year Ended March 31,
2026 % 2025 %
Americas 1
Product revenue $ 90,053 $ 82,772
Service and subscription 56,816 59,277
Total revenue 146,869 52.5 % 142,049 51.8 %
EMEA
Product revenue 62,714 53,742
Service and subscription 34,128 40,818
Total revenue 96,842 34.6 % 94,560 34.5 %
APAC
Product revenue 19,618 17,668
Service and subscription 8,282 10,563
Total revenue 27,900 10.0 % 28,231 10.3 %
Consolidated
Product revenue 172,385 154,182
Service and subscription 99,226 110,658
Royalty 2
7,970 2.9 % 9,218 3.4 %
Total revenue $ 279,581 100 % $ 274,058 100 %
1 Revenue for Americas geographic region outside of the United States is not significant.
2 Royalty revenue is not allocable to geographic regions.
Revenue by Solution
Year Ended March 31,
2026 % 2025 %
Primary storage systems $ 44,252 16 % $ 58,127 21 %
Secondary storage systems 100,865 36 % 73,772 27 %
Device and media 40,448 14 % 34,352 13 %
Service 86,046 31 % 98,589 36 %
Royalty 7,970 3 % 9,218 3 %
Total revenue 1
$ 279,581 100 % $ 274,058 100 %
1 Subscription revenue of $ 13.2 million and $ 12.1 million allocated to Primary and Secondary storage systems for the fiscal years ended 2026 and 2025, respectively.
Net Loss
The following table shows reported segment revenue, segment profit or loss, and significant segment expenses were as follows (in thousands):
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Year Ended March 31,
2026 2025
Total revenue
$ 279,581 $ 274,058
Total cost of revenue
176,540 164,226
Gross profit
103,041 109,832
Gross margin
36.9 % 40.1 %
Operating expenses
Salaries & fringe 1
68,342 80,882
Outside services 2
21,003 37,171
Infrastructure 3
9,203 10,783
Operational costs 4
8,861 9,874
Restructuring
8,112 4,090
Other segment items 5
12,027 8,712
Total operating expenses
127,548 151,512
Loss from operations
( 24,507 ) ( 41,680 )
Other expense, net
( 1,511 ) ( 710 )
Interest expense ( 21,575 ) ( 23,607 )
Change in fair value of warrant liability 11,315 ( 45,270 )
Change in fair value of convertible note ( 4,119 ) —
Loss on debt extinguishment, net ( 59,641 ) ( 3,003 )
Loss before income taxes ( 100,038 ) ( 114,270 )
Income tax provision 1,008 821
Net loss
$ ( 101,046 ) $ ( 115,091 )
1 Salaries & fringe includes spend on contractors.
2 Outside services includes contractor, recruiting and legal expenses.
3 Infrastructure includes property related expenses, including fixed and variable lease expense, telecommunications and depreciation.
4 Operational costs include due and subscriptions, computer expenses, office supplies and other miscellaneous items.
5 Other segment items includes travel related spend, marketing expense, taxes, fees and other miscellaneous items.
Long-lived assets
The following table summarizes property and equipment, net by geographic region (in thousands):
For the year ended March 31,
2026 2025
United States $ 9,163 $ 11,160
International 121 218
Total $ 9,284 $ 11,378
NOTE 13: SUBSEQUENT EVENTS
Private Placement
On June 1, 2026, the Company entered into Securities Purchase Agreements (the “Purchase Agreement”) with certain accredited investors (the “Investors”), pursuant to which the Company, in a private placement (the “Private Placement”), agreed to issue and sell to the Investors an aggregate of 10,615,712 shares of the Company’s common stock, par value $ 0.01 per share, at a price of $ 9.42 per share, for aggregate gross proceeds to the Company of $ 100.0 million. After deducting placement agent fees and other offering expenses payable by the Company, the Company received net proceeds of approximately $ 94.7 million. The Private Placement closed June 4, 2026 (the “Closing”).
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Amendment to Term Loan
On June 1, 2026, the Company entered into a Sixteenth Amendment (the “Sixteenth Amendment”) to its Term Loan Credit Agreement. Pursuant to the Sixteenth Amendment, among other things, the maturity date of the loans under the Term Loan Credit Agreement was extended to September 2028 and a portion of the proceeds of future equity issuances by the Company are allowed to be retained by the Company rather than 100% of the net proceeds having to be used to mandatorily prepay loans under the Term Loan Credit Agreement. In addition, the Sixteenth Amendment clarifies that, following the conversion or exchange of the Convertible Notes (as described below), the liens securing the Convertible Notes, and the intercreditor agreement governing the priority of those liens vis-a-vis the liens securing the obligations of the Company under the Existing Credit Agreement, will terminate, and all of the outstanding obligations under the Term Loan Credit Agreement will continue to be secured by the assets of the Company on a first priority basis.
Note Conversion Agreement
In order to facilitate the Private Placement and the Sixteenth Amendment, Dialectic, as the sole beneficial owner of the Convertible Notes, agreed to voluntarily convert the Convertible Note into common stock. Pursuant to a Conversion Agreement dated June 1, 2026 (the “Conversion Agreement”), by and among the Company, Dialectic and, solely with respect to Sections 7.1 and 7.3 and Articles III and X thereof, U.S. Bank Trust Company, National Association, as the trustee and Notes Collateral Agent under the Indenture (the “Indenture”), dated as of December 18, 2025, by and among the Company, the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee and collateral agent, on June 4, 2026, Dialectic converted the entire principal amount of the Convertible Note, together with all accrued and unpaid interest thereon, which was approximately $ 57.2 million, at the Closing, subject to certain conditions set forth in the Conversion Agreement (the “Conversion”). At the Closing, the Convertible Note was canceled.
As consideration for Dialectic’s agreement to voluntarily convert the Convertible Notes to facilitate the Private Placement and the Sixteenth Amendment, the Company agreed to, at the Closing, (i) amend the Convertible Note to waive certain notice and settlement requirements otherwise applicable to a voluntary exchange; (ii) issue to Dialectic approximately 3.1 million additional shares of the Company’s common stock in connection with the Conversion (the “Share Consideration”), which represents the quotient of (A) approximately $ 13.0 million, the present value of nominal PIK interest that would accrue on the Convertible Note from the Closing to the maturity date thereof, assuming it had remained outstanding until the end of the stated term, discounted at a rate of 11 %, plus (B) approximately $ 3.0 million, the Term Loan Deferred Cash Interest Amount (as defined in the Term Loan Credit Agreement) owed to Dialectic, divided by $ 5.1940 , the current conversion price of the Convertible Note; and (iii) issue to Dialectic the Conversion Warrant (as defined below).
Warrant
On June 1, 2026, as additional consideration for the Conversion, the Company issued to Dialectic a warrant (the “Conversion Warrant”) to purchase up to 105,911 shares of common stock at an exercise price of $ 5.1940 per share (the “Conversion Warrant Exercise Price”) (equal to the conversion price of the Convertible Note in effect following the reset period ending March 31, 2026), at any time until the fifth anniversary of the issuance of the Conversion Warrant. Upon exercise, the aggregate exercise price may be paid, at Dialectic’s election, in cash or on a net issuance basis, based upon the then current market price of the common stock at the time of exercise. The Conversion Warrant includes certain antidilution protections in favor of Dialectic, subject to certain limitations, including limitations that restrict Dialectic from beneficially owning more than 19.99 % of the Company’s outstanding Common Stock and certain exclusions. Additionally, Dialectic may require the Company to repurchase the unexercised portion of the Conversion Warrant for an amount equal to $ 844,255 , proportionately adjusted for the portion of the Conversion Warrant subject to repurchase, after the fourth anniversary of the issuance of the Conversion Warrant, or, prior to the fourth anniversary, upon a change of control of the Company or immediately prior to the occurrence of a voluntary dissolution, liquidation or winding up of the affairs of the Company.
Right of First Refusal Agreement
On June 1, 2026, the Company entered into a Right of First Refusal Agreement (the “ROFR Agreement”) with Dialectic and certain investors in the Private Placement, pursuant to which the Company granted a right of first refusal to purchase 25 % of all equity securities to each investor that the Company may issue or sell for a period of the earlier of six (6) months following the date of the ROFR Agreement and completion of the Company’s next equity financing transaction, subject to certain exceptions as described in the ROFR Agreement.
Termination of Term Loan Credit Agreement
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On June 4, 2026, the Company paid an aggregate of $ 57.8 million in connection with the termination of the Term Loan Credit Agreement, consisting of the entire outstanding principal amount of $ 56.0 million, accrued interest of $ 1.5 million, and fees and expenses of $ 0.3 million incurred in connection with the termination.
Termination of Equity Line of Credit
On June 4, 2026, in accordance with the terms of the SEPA, the Company provided a notice to YA regarding its termination of the SEPA, effective June 11, 2026. There were no amounts owed to YA under the SEPA at the time the termination notice was provided.
Termination of Indenture
Pursuant to the terms of that the Conversion Agreement, on June 4, 2026, all of the Company’s outstanding Convertible Notes were canceled, and the Indenture was satisfied and discharged in full.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.