Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
QUANTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts, unaudited)
June 30, 2026 March 31, 2026
Assets
Current assets:
Cash and cash equivalents 54,449 15,572
Restricted cash 141 662
Accounts receivable, net of allowance for credit losses of $ 3,778 and $ 3,234 , respectively
66,659 69,650
Inventories 15,195 16,103
Prepaid expenses 4,717 2,431
Other current assets 7,557 8,068
Total current assets 148,720 112,486
Property and equipment, net 9,054 9,284
Goodwill 12,969 12,969
Right-of-use assets, net 7,275 7,416
Other long-term assets 13,879 14,737
Total assets $ 191,897 $ 156,892
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable $ 26,663 $ 29,342
Accrued compensation 10,120 12,428
Deferred revenue, current portion 76,158 75,654
Term debt
— 54,811
Warrant liabilities 31,690 14,105
Other current liabilities 15,327 19,457
Total current liabilities 159,959 205,797
Deferred revenue, net of current portion 38,980 39,030
Convertible note — 90,034
Operating lease liabilities 7,979 8,172
Other long-term liabilities 12,805 12,716
Total liabilities 219,722 355,749
Commitments and contingencies (Note 10)
Stockholders’ deficit
Preferred stock:
Preferred stock, 20,000 shares authorized; no shares issued as of June 30, 2026 and March 31, 2026, respectively
— —
Common stock:
Common stock, $ 0.01 par value; 225,000 shares authorized; 39,375 and 14,638 shares issued and outstanding at June 30, 2026 and March 31, 2026, respectively
393 146
Additional paid-in capital 1,171,684 853,974
Accumulated deficit ( 1,198,810 ) ( 1,043,517 )
Accumulated other comprehensive loss ( 1,092 ) ( 9,460 )
Total stockholders' deficit ( 27,825 ) ( 198,857 )
Total liabilities and stockholders' deficit $ 191,897 $ 156,892
The accompanying notes are an integral part of these condensed consolidated financial statements.
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QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share amounts, unaudited)
Three Months Ended June 30,
2026 2025
Revenue
Product $ 53,871 $ 37,535
Service and subscription 24,668 24,943
Royalty 2,264 1,808
Total revenue 80,803 64,286
Cost of revenue
Product 39,723 30,745
Service and subscription 9,360 10,829
Total cost of revenue 49,083 41,574
Gross profit 31,720 22,712
Operating expenses
Sales and marketing 11,027 12,655
General and administrative 9,609 13,569
Research and development 6,023 6,661
Restructuring charges 23 2,423
Total operating expenses 26,682 35,308
Income (loss) from operations 5,038 ( 12,596 )
Other income (expense), net 211 ( 430 )
Interest expense ( 2,097 ) ( 6,516 )
Change in fair value of warrant liability ( 16,305 ) —
Change in fair value of convertible note ( 129,715 ) —
Gain (loss) on debt extinguishment, net ( 11,716 ) 2,559
Loss before income taxes ( 154,583 ) ( 16,983 )
Income tax provision 710 223
Net loss
$ ( 155,293 ) $ ( 17,206 )
Net loss per share - basic and diluted
$ ( 7.06 ) $ ( 1.87 )
Weighted average shares - basic and diluted 21,988 9,187
Net loss
$ ( 155,293 ) $ ( 17,206 )
Reclassification of loss on Convertible Note to loss on debt extinguishment 8,444 —
Foreign currency translation adjustments, net ( 76 ) 722
Total comprehensive loss
$ ( 146,925 ) $ ( 16,484 )
The accompanying notes are an integral part of these condensed consolidated financial statements.
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QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Three Months Ended June 30,
2026 2025
Operating activities
Net loss $ ( 155,293 ) $ ( 17,206 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 1,170 1,032
Amortization of debt issuance costs 530 2,075
Non-cash lease expense
260 343
Paid-in-kind interest 924 1,758
Provision for manufacturing and service inventories 163 2,701
Stock-based compensation 748 ( 529 )
Warrants issued in connection with debt amendments 1,280 —
Change in fair value of warrant liabilities 16,305 —
Change in fair value of convertible note 129,715 —
Non-cash loss (gain) on debt extinguishment 8,372 ( 2,559 )
Other non-cash 282 1,201
Changes in assets and liabilities:
Accounts receivable 2,690 4,043
Inventories 745 ( 297 )
Accounts payable ( 2,804 ) ( 4,484 )
Prepaid expenses ( 2,286 ) ( 1,024 )
Operating lease liabilities
( 236 ) ( 283 )
Deferred revenue 454 ( 7,668 )
Accrued restructuring charges ( 496 ) 993
Accrued compensation ( 1,811 ) 1,036
Other assets 895 840
Other liabilities ( 660 ) 1,137
Net cash provided by (used in) operating activities 947 ( 16,891 )
Investing activities
Purchases of property and equipment ( 395 ) ( 1,192 )
Net cash used in investing activities
( 395 ) ( 1,192 )
Financing activities
Repayment of long-term debt, net ( 56,830 ) —
Repayments of long-term debt on Assignment — ( 909 )
Borrowings of credit facility — 71,625
Repayments of credit facility and payment of amendment fees — ( 98,682 )
Proceeds from shares related to the SEPA, net — 66,993
Proceeds from shares issued related to private placement, net 94,638 —
Net cash provided by financing activities 37,808 39,027
Effect of exchange rate changes on cash and cash equivalents ( 4 ) —
Net change in cash, cash equivalents, and restricted cash 38,356 20,944
Cash, cash equivalents, and restricted cash at beginning of period 16,234 16,603
Cash, cash equivalents, and restricted cash at end of period $ 54,590 $ 37,547
Supplemental disclosure of cash flow information
Cash paid for interest $ — $ 2,987
Cash paid for income taxes, net of refunds $ 142 $ 141
Non-cash investing and financing transactions:
Purchases of property and equipment included in accounts payable $ 164 $ 105
Right-of-use assets obtained in exchange for new lease liabilities $ 30 $ —
Warrants issued in connection with debt amendments $ 1,280 $ —
Common stock issued upon conversion of Convertible Note ( 14,104,620 shares)
$ 222,571 $ —
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows:
Cash and cash equivalents $ 54,449 $ 37,404
Restricted cash 141 143
Total cash, cash equivalents and restricted cash at the end of period $ 54,590 $ 37,547
The accompanying notes are an integral part of these condensed consolidated financial statements.
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QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(in thousands, unaudited)
Common Stock Additional
Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Deficit
Shares Amount
Balance, March 31, 2025 6,962 $ 70 $ 779,645 $ ( 942,471 ) $ ( 1,610 ) $ ( 164,366 )
Net loss — — — ( 17,206 ) — ( 17,206 )
Foreign currency translation adjustments, net of income taxes — — — — 722 722
Shares issued under employee incentive plans 37 — — — — —
Shares issued related to the SEPA, net of issuance costs 6,320 63 66,930 — — 66,993
Stock-based compensation — — ( 529 ) — — ( 529 )
Balance, June 30, 2025 13,319 $ 133 $ 846,046 $ ( 959,677 ) $ ( 888 ) $ ( 114,386 )
Balance, March 31, 2026 14,638 $ 146 $ 853,974 $ ( 1,043,517 ) $ ( 9,460 ) $ ( 198,857 )
Net loss — — — ( 155,293 ) — ( 155,293 )
Foreign currency translation adjustments, net of income taxes — — — — ( 76 ) ( 76 )
Change in fair value of convertible note — — — — 8,444 8,444
Shares issued related to private placement, net of issuance costs 10,616 106 94,532 — — 94,638
Shares issued under employee stock incentive plans 16 — — — — —
Shares issued related to the convertible note 14,105 141 222,430 — — 222,571
Stock-based compensation — — 748 — — 748
Balance, June 30, 2026 39,375 $ 393 $ 1,171,684 $ ( 1,198,810 ) $ ( 1,092 ) $ ( 27,825 )
The accompanying notes are an integral part of these condensed consolidated financial statements.
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INDEX TO NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page
Note 1: Description of Business and Significant Accounting Policies
10
Note 2: Revenue
12
Note 3: Balance Sheet Information
13
Note 4: Debt
14
Note 5: Leases
18
Note 6: Restructuring Charges
19
Note 7: Common Stock
19
Note 8: Net Loss Per Share
21
Note 9: Income Taxes
21
Note 10: Commitments and Contingencies
22
Note 11: Fair Value of Financial Instruments
23
Note 12: Segment Information
25
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QUANTUM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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 accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. All intercompany balances and transactions have been eliminated. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. However, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included within the Company’s Annual Report
on Form 10-K for the fiscal year ended March 31, 2026 (the “Annual Report”).
The unaudited condensed consolidated interim financial statements reflect all adjustments, consisting only of normal and recurring items, necessary to present fairly our financial position as of June 30, 2026, the results of operations and comprehensive loss, our cash flows, and changes in stockholders’ deficit, as of and for the three months ended June 30, 2026 and 2025. Interim results are not necessarily indicative of full year performance because of short-term variations.
The condensed consolidated balance sheet at March 31, 2026 was derived from audited financial statements for the year ended March 31, 2026 included in the Annual Report but does not contain all of the footnote disclosures from the annual financial statements.
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.
We have aggregated Manufacturing and Service Inventory into a single line called Inventories on the Condensed Consolidated Balance Sheets and we have aggregated Accrued Restructuring into Accrued Compensation. Details of the balances in the Inventories line item has been included in Note 3 : Balance Sheet Information and Accrued Restructuring has been included in Note 6 : Restructuring Charges.
Liquidity
These condensed 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.
The Company generated cash flows from operations of approximately $ 0.9 million for the quarter ended June 30, 2026, and had negative cash flows from operations of $( 16.9 ) million for the quarter ended June 30, 2025. 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.
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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 $ 94.6 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.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the condensed 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.
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 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.
The company has applied the practical expedient for credit losses, where current conditions that do not affect the historical loss information are taken into account when determining the expected credit loss.
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 Accounting Standards Codification ("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-
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measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s condensed consolidated statements of operations and comprehensive loss. Quantum issued a Conversion Warrant in June 2026 and Forbearance Warrant in September 2025. See Note 4: Debt and Note 7: Common Stock, for further details.
Accounting Pronouncements Recently Adopted
In July 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 ASC 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 adoption of this new standard did not have a material impact on our financial statement disclosures.
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 beginning April 1, 2028, with early adoption permitted. The Company is currently evaluating the impact of this new standard on its financial statement disclosure.
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 statement 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 statement disclosures.
NOTE 2: REVENUE
Contract Balances
The following table presents the Company’s contract assets and liabilities:
June 30, 2026 March 31, 2026 June 30, 2025 March 31, 2025
Accounts receivable, net $ 66,659 $ 69,650 $ 48,445 $ 52,502
Contract assets - included in Other current assets 342 351 278 278
Deferred revenue, current portion 76,158 75,654 69,675 75,076
Deferred revenue, net of current portion 38,980 39,030 36,580 38,847
Remaining Performance Obligations
Total remaining performance obligations (“RPO”) refers to goods and services which have been contracted for but not recognized into revenue. RPO consists of both deferred revenue, which is included in the condensed
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consolidated balance sheets, and non-cancelable amounts from contracts that will be invoiced in the future. As of June 30, 2026, the total balance was $ 165.9 million. This amount excludes variable consideration related to sales-based royalties.
Remaining performance obligations consisted of the following (in thousands):
Current Non-Current Total
As of June 30, 2026 $ 126,924 $ 38,980 $ 165,904
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 June 30, 2026 (in thousands):
Deferred revenue as of June 30, 2026
Current Non-current Total
Service revenue $ 62,133 $ 29,645 $ 91,778
Subscription revenue 12,899 9,335 22,234
Product revenue 1,126 — 1,126
Total $ 76,158 $ 38,980 $ 115,138
The Company recognized revenue $ 22.9 million in the 3 months ended June 30,2026 and $ 26.6 million in the 3 months ended June 30, 2025 that was included in the contract liability balances at March 31, 2026 and 2025, respectively.
NOTE 3: BALANCE SHEET INFORMATION
Certain significant amounts included in the Company's consolidated balance sheets consist of the following (in thousands):
Inventories
June 30, 2026 March 31,2026
Manufactured finished goods $ 6,307 $ 5,887
Work in progress 729 990
Raw materials 8,159 8,508
Service parts — 718
Total inventories $ 15,195 $ 16,103
Goodwill
As of June 30, 2026 and March 31, 2026, goodwill was approximately $ 13.0 million. There were no impairments to goodwill as of June 30, 2026 and March 31, 2026.
Other Long-term Assets
June 30, 2026 March 31, 2026
Capitalized SaaS implementation costs for internal use $ 11,584 $ 12,063
Deferred taxes 1,062 1,062
Contract cost asset 907 994
Other 326 618
Total other long-term assets $ 13,879 $ 14,737
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Other current liabilities
June 30, 2026 March 31, 2026
Accrued expenses
$ 6,506 $ 7,456
Accrued interest
— 2,827
Accrued supplier owned inventory obsolescence
2,633 2,057
Accrued income taxes
1,365 1,153
Accrued warranty
920 772
Lease liability 877 799
Accrued product returns 717 783
Other
2,309 3,610
Total other accrued liabilities $ 15,327 $ 19,457
The following table details the change in the accrued warranty balance (in thousands):
June 30, 2026 June 30, 2025
Beginning balance $ 772 $ 1,032
Current period accruals 483 622
Adjustments to prior estimates 196 ( 19 )
Charges incurred ( 507 ) ( 735 )
Reclassification to long-term warranty ( 25 ) 27
Ending balance $ 920 $ 927
NOTE 4: DEBT
The following table summarizes the Company's borrowing as of the dates presented (in thousands):
June 30, 2026 March 31, 2026
Term loan $ — $ 55,906
Convertible note — 90,034
Less: current portion — ( 54,811 )
Less unamortized debt issuance costs (1)
— ( 1,095 )
Long-term debt, net $ — $ 90,034
(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 condensed consolidated balance sheet as of March 31, 2026.
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 was 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 were 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” was 9.00 % per annum and (ii) for
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any 2023 Term Loan designated as a “SOFR Loan” was 10.00 % per annum, (b) accrued interest on the 2023 Term Loan was payable in kind ("PIK"), and was 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 did not amortize prior to the maturity date thereof, and (d) the 2023 Term Loan could 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 was 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 were 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 had an August 5, 2026 maturity date, which aligned with the 2021 Term Loan. The principal was 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 was (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 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 included 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 amortized 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 bore 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 bore 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 bore interest at a rate per annum equal to the ABR Rate, plus an applicable margin of 8.75 %, and (y) SOFR Rate Loans bore 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 would have been paid-in-kind) if the Company’s total net leverage ratio was greater than 4.00 x, and a
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step-down of 1.00 % per annum if the Company’s total net leverage ratio was less than 3.50 x (which would have reduced the paid-in-kind component of the applicable margin). The SOFR Rate was subject to a floor of 2.00 %. The Company could designate a loan as an ABR Rate Loan or SOFR Rate Loan in its discretion.
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 were 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 $ 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
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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 Note 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 had a three-year maturity and bore interest at 10 % per annum, payable in-kind and compounded annually. The Convertible Note was secured by substantially all of the assets of the Company that secure the Term Loan. The initial conversion price equaled $ 10.00 per share of the Company’s common stock (the “Conversion Price”). The Conversion Price was subject to four quarterly reset 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 could have, at any time, elected 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 were met, the Company could have, at its election, required 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 exceeded specified multiples of the Conversion Price (the “Company Mandatory Exchange”). The Company Mandatory Exchange, if triggered, occured in tranches of 20 %, 20 %, 30 %, and the remaining balance. If certain conditions were met, at the Company’s option, on the maturity date, any outstanding principal, accrued and unpaid interest, and premium (if any) could 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 statements 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.
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 were 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 Note (as described below), the liens securing the Convertible Note, 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, would be terminated, and all of the outstanding obligations under the Term Loan Credit Agreement would continue to be secured by the assets of the Company on a first priority basis.
In order to facilitate the Private Placement and the Sixteenth Amendment, Dialectic, as the sole beneficial owner of the Convertible Note, 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
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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 Note 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 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) $ 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) $ 2.8 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 in Note 7: Common Stock) .
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, accrued interest, and fees and expenses incurred in connection with the termination. The Company recorded a loss on debt extinguishment of $ 11.7 million associated with this transaction.
On June 4, 2026 and pursuant to the terms of that the Conversion Agreement, all of the Company’s outstanding Convertible Notes were canceled, and the Indenture was satisfied and discharged in full. See Note 11: Fair Value of Financial Instruments for full details of the transaction.
Related Party Transactions
The Forbearance Warrant, Conversion 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. The fair values of the Forbearance Warrant and Conversion warrant as of June 30, 2026 are included in Note 11: Fair Value of Financial Instruments . The Convertible Note was cancelled on June 4, 2026 when the Indenture was satisfied and discharged in full.
NOTE 5: LEASES
Supplemental condensed consolidated balance sheets information related to leases is as follows (in thousands):
Operating leases June 30, 2026 March 31, 2026
Operating lease right-of-use assets $ 7,275 $ 7,416
Operating lease liability, current - included in other accrued liabilities $ 877 $ 799
Operating lease liability 7,979 8,172
Total operating lease liabilities $ 8,856 $ 8,971
The components of lease expense were as follows (in thousands):
Three Months Ended June 30,
Lease expense 2026 2025
Operating lease expense $ 540 $ 669
Variable lease expense 33 39
Short-term lease expense 108 75
Total lease expense $ 681 $ 783
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Maturity of Lease Liabilities Operating Leases
Remainder of fiscal year 2027 $ 1,476
2028 1,618
2029 1,244
2030 1,237
2031 1,285
Thereafter 9,569
Total lease payments 16,429
Less: Imputed interest ( 7,573 )
Present value of lease liabilities $ 8,856
Lease Term and Discount Rate
June 30, 2026 March 31, 2026
Weighted average remaining operating lease term (years) 10.00 10.16
Weighted average discount rate for operating leases 12.68 % 12.67 %
Operating cash outflows related to operating leases totaled $ 0.5 million and $ 0.7 million for the three months ended June 30, 2026 and 2025, respectively.
NOTE 6: RESTRUCTURING CHARGES
During the quarters ended June 30, 2026 and 2025, the Company approved certain restructuring plans to complete a plan to rationalize its cost structure. All restructuring activities from prior years 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.
The following tables show the activity for accrued restructuring (in thousands):
Severance and
benefits
Balance as of March 31, 2025 $ 786
Restructuring charges 2,423
Cash payments ( 1,475 )
Other non-cash 45
Balance as of June 30, 2025 1,779
Balance as of March 31, 2026 566
Restructuring charges 23
Cash payments ( 521 )
Other non-cash 2
Balance as of June 30, 2026 $ 70
NOTE 7: COMMON STOCK
Stock Options
On April 1, 2026, the Company granted options to purchase 1.5 million shares of the Company’s common stock. The stock options were valued using the Black-Scholes option pricing model on the grant date. There were no options granted during the first quarter of fiscal 2026. There
The significant assumptions used by the Company to estimate the fair value of the option awards are summarized below:
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April 1, 2026
Term (years) 7.00 years
Volatility 1
99.9 %
Dividend yield 2
0.00 %
Risk-free interest rate 3
4.02 %
Grant date fair value
$ 3.94
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 0.00 % 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
The following table details the Company's stock-based compensation expense (in thousands):
Three Months Ended June 30,
2026 2025
Cost of revenue $ 8 $ ( 21 )
Research and development 99 68
Sales and marketing 138 76
General and administrative 503 ( 652 )
Total stock-based compensation $ 748 $ ( 529 )
Three Months Ended June 30,
2026 2025
Restricted stock units $ 337 $ ( 305 )
Performance share units ( 13 ) ( 224 )
Stock options 424 —
Total stock-based compensation $ 748 $ ( 529 )
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.
Additionally, on June 1, 2026, the Company and Dialectic entered into a First Amendment to the Registration Rights Agreement dated as of September 23, 2025 (the “First Amendment”), pursuant to which, among other things, the Forbearance Warrant was amended to update its terms to be consistent with the Conversion Warrant, including the exercise price of $ 5.1940 per share.
Private Placement
On June 1, 2026, the Company entered into Securities Purchase Agreements with certain accredited 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
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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 $ 94.6 million. The Private Placement closed June 4, 2026.
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.
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.
The Company did not make any sales on the SEPA during the first quarter of fiscal 2027. Comparatively, the Company had sales of 6.32 million shares for net proceeds of approximately $ 67 million in the first quarter of fiscal 2026.
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 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):
Three Months Ended June 30,
2026 2025
Stock awards 1
357 210
Warrants 265 —
Total 622 210
1 Stock awards include stock options, performance share units and restricted stock units
The Company had outstanding market based restricted stock units as of June 30, 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 2,506 and 77,545 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 June 30, 2026 and 2025, respectively.
NOTE 9: INCOME TAXES
The effective tax rate for the three months ended June 30, 2026 and 2025 was - 0.5 %, and - 1.1 %, respectively. The effective tax rates differed from the federal statutory tax rate of 21% during each of these periods due primarily to unbenefited losses experienced in jurisdictions with valuation allowances on deferred tax assets as well as the forecasted mix of earnings in domestic and international jurisdictions.
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As of June 30, 2026, including interest and penalties, the Company had $ 78.3 million of unrecognized tax benefits, $ 69.1 million of which, if recognized, would favorably affect the effective tax rate without consideration of the valuation allowance. As of June 30, 2026, the Company had accrued interest and penalties related to these unrecognized tax benefits of $ 1.2 million. The Company recognizes interest and penalties related to income tax matters in the income tax provision in the condensed consolidated statements of operations and comprehensive loss. As of June 30, 2026, $ 71.3 million of unrecognized tax benefits were recorded as a contra deferred tax asset in other long-term assets in the condensed consolidated balance sheets and $ 7.0 million (including interest and penalties) were recorded in other long-term liabilities in the condensed consolidated balance sheets. During the next 12 months, it is reasonably possible that approximately $ 1.8 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, $ 0.8 million will be offset by the establishment of a related valuation allowance. The net tax benefit recognized in the statements of operations and comprehensive loss is estimated to be $ 1.0 million.
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 June 30, 2026, the Company had issued non-cancelable commitments for $ 142.6 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, which has not yet been decided. At this time, Quantum is not 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.
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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 June 30 2026 and March 31, 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 quarters ended June 30, 2026 and 2025.
The carrying amounts reported in the accompanying condensed 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.
Debt
The fair value of the Company’s debt was estimated using a discounted cash flow approach based on the Company’s current borrowing rates for similar types of debt instruments, adjusted for credit and nonperformance risk. The Company uses significant other observable market data and assumptions (Level 2 inputs, as defined in ASC 820, Fair Value Measurement ) that it believes market participants would use in pricing such debt.
The carrying value and estimated fair value of the Company’s debt were as follows (in thousands):
June 30, 2026 March 31, 2026
Carrying Value Fair Value Carrying Value Fair Value
Term Loan $ — $ — $ 55,906 $ 51,339
Warrants
Forbearance Warrant
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 June 30, 2026 and March 31,2026, and the resulting changes in fair value were recognized in the condensed 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 (as defined in ASC 820, Fair Value Measurement ).
The following table summarizes the key assumptions used in estimating the fair value of the Forbearance Warrant at issuance and at June 30, 2026 and March 31, 2026:
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June 30, 2026 March 31, 2026
Discount period (years) 6.23 years 6.48 years
Risk-free interest rate 3.94 % - 4.21 %
3.65 % - 4.02 %
Stock price volatility 100.00 % 100.00 %
Stock price at valuation date $ 11.00 $ 4.75
Probability 1
10 % - 15 % - 75 %
15 % - 15 % - 70 %
Fair value (in thousands) $ 30,395 $ 14,105
(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 % at March 31, 2026 and were revised at June 30, 2026 to a 10 % of a liquidation event occurring; a 15 % of a fundamental transaction occurring; and none of the previous events were estimated at 75 %.
The table below sets forth a summary of changes in the fair value of the Company’s Forbearance Warrant liabilities for the period ended June 30, 2026:
Balance at March 31, 2026 $ 14,105
Change in fair value of warrant liabilities 16,290
Balance at June 30, 2026
$ 30,395
Conversion Warrant
On June 1, 2026, the Company established the initial fair value for the Conversion Warrant issued to Dialectic in connection with the Sixteenth Amendment. The fair value was subsequently remeasured as of June 30, 2026, and the resulting change in fair value was recognized in the condensed consolidated statement of operations and comprehensive loss under “Change in fair value of warrant liability.”
The Conversion 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 Conversion Warrant is classified as Level 3 within the fair value hierarchy (as defined in ASC 820, Fair Value Measurement ).
The following table summarizes the key assumptions used in estimating the fair value of the Conversion Warrant at issuance and at June 30, 2026:
June 30, 2026 June 1, 2026
Discount period (years) 4.92 years 5 years
Risk-free interest rate 3.94 % - 4.15 %
3.81 % - 4.14 %
Stock price volatility 100.00 % 100.00 %
Stock price at valuation date $ 11.00 $ 10.49
Probability 1
10 % - 15 % - 75 %
10 % - 15 % - 75 %
Fair value (in thousands) $ 1,295 $ 1,280
(1) Scenario probability as of issuance was based on timing expectations of management that a liquidation event occurring was estimated at 10 %; a fundamental transaction occurring was estimated at 15 %; and none of the previous events were estimated at 50 % and were not revised at June 30, 2026.
The table below sets forth a summary of changes in the fair value of the Company’s Conversion warrant liabilities for the period ended June 30, 2026:
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Balance at March 31, 2026 $ —
Issuance of warrants 1,280
Change in fair value of warrant liabilities 15
Balance at June 30, 2026
$ 1,295
Convertible Note
On June 4, 2026 and pursuant to the terms of that the Conversion Agreement, all of the Company’s outstanding Convertible Notes were canceled, and the Indenture was satisfied and discharged in full. At the time of settlement, the Company issued to Dialectic 14,104,620 shares of common stock with an aggregate fair value of $ 222.6 million, at a share price of $ 15.78 . Of this amount, $ 219.7 million represents the fair value of the Convertible Note prior to conversion, and $ 2.8 million represents the deferred cash interest owed to Dialectic under the Term Loan Credit Agreement that was settled through the share issuance. The change in the fair value of the Convertible Note was recognized in the condensed consolidated statement of operations and comprehensive loss under “Change in fair value of convertible note.”
The table below sets forth a summary of changes in the fair value of the Company’s Convertible Note for the period ended June 30, 2026:
Balance at March 31, 2026 $ 90,034
Change in fair value of convertible note 129,715
Exercise of convertible note ( 219,749 )
Balance at June 30, 2026
$ —
NOTE 12: SEGMENT INFORMATION
The Company operates as a single operating segment and a single reportable segment. The Company's chief operating decision maker ("CODM") is its Chief Executive Officer. The measure of segment profit or loss that the CODM uses to allocate resources and assess performance is net income (loss). The CODM uses net income (loss) to make resource allocation decisions, evaluate budgets and forecasts, and assess the Company's overall performance, including monitoring budgeted versus actual results.
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):
Three Months Ended June 30,
2026 % 2025 %
Americas 1
Product revenue $ 24,272 $ 22,750
Service and subscription 13,454 14,359
Total revenue 37,726 46.7 % 37,109 57.7 %
EMEA
Product revenue 19,501 9,983
Service and subscription 8,698 8,482
Total revenue 28,199 34.9 % 18,465 28.7 %
APAC
Product revenue 10,098 4,802
Service and subscription 2,516 2,102
Total revenue 12,614 15.6 % 6,904 10.7 %
Consolidated
Product revenue 53,871 37,535
Service and subscription 24,668 24,943
Royalty 2
2,264 2.8 % 1,808 2.8 %
Total revenue $ 80,803 100 % $ 64,286 100 %
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
Three Months Ended June 30,
2026 % 2025 %
Primary storage systems $ 8,487 11 % $ 12,529 19 %
Secondary storage systems 37,032 46 % 18,506 29 %
Device and media 10,361 13 % 9,941 15 %
Service 22,659 28 % 21,502 33 %
Royalty 2,264 3 % 1,808 3 %
Total revenue 1
$ 80,803 100 % $ 64,286 100 %
1 Subscription revenue of $ 2.0 million and $ 3.4 million allocated to Primary and Secondary storage systems for the three months ended June 30, 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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Three Months Ended June 30,
2026 2025
Total revenue
$ 80,803 $ 64,286
Total cost of revenue
49,083 41,574
Gross profit
31,720 22,712
Gross margin
39.3 % 35.3 %
Operating expenses
Salaries & fringe 1
15,743 18,001
Outside services 2
4,346 7,676
Infrastructure 3
1,836 2,522
Operational costs 4
2,317 2,332
Restructuring
23 2,423
Other segment items 5
2,417 2,354
Total operating expenses
26,682 35,308
Income (loss) from operations 5,038 ( 12,596 )
Other income (expense), net 211 ( 430 )
Interest expense ( 2,097 ) ( 6,516 )
Change in fair value of warrant liability ( 16,305 ) —
Change in fair value of convertible note ( 129,715 ) —
Gain (loss) on debt extinguishment, net ( 11,716 ) 2,559
Loss before income taxes ( 154,583 ) ( 16,983 )
Income tax provision 710 223
Net loss
$ ( 155,293 ) $ ( 17,206 )
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.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.