| Restatement of Previously Issued Financial Statements | RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS As described in Note 1: Description of Business and Significant Accounting Policies, and as further described below, in November 2023, the Company determined that it was necessary to re-evaluate its application of standalone selling price under Topic 606. The Company concluded that its application of Topic 606 related to standalone selling price was inconsistent with the generally accepted application of the guidance. The Company’s management reperformed the determination of standalone selling price with the support of external advisors, and the resulting calculations have been applied to the revenue allocations in the fiscal years ended March 31, 2024, March 31, 2023 and March 31, 2022. The Company additionally identified contractual terms contained within outstanding warrant agreements issued to its prior and current lenders in 2018, 2020 and 2023, which required further evaluation under Topic 815. After consulting with external advisors and completing an extensive review process, management concluded that the classification of warrants as equity was not consistent with Topic 815 and has restated them as a liability. This also resulted in the requirement to account for the change in the fair value of the warrants through the Statement of Operations. As a result of these errors, the Company is restating the financial statements for the years ended March 31, 2023 and 2022. The nature of the restatement adjustments and their impact on previously reported consolidated financial statements is as follows: 1. Application of Topic 606 related to standalone selling price - The Company historically used invoice price as the standalone selling price for all goods and services. This was partly because of the high level of customization for each product sold and because the pricing for individual performance obligations is highly variable. Standalone selling price has now been established for all goods and services sold in a bundled contract using the adjusted market assessment approach or the cost plus a reasonable margin approach and maximizing the use of observable inputs. The impact on the consolidated statement of operations and comprehensive loss for the fiscal years ended March 31, 2022 and March 31, 2023 is an increase to product revenue of $7.1 million and $8.3 million respectively, an increase to service revenue of $3.6 million and $1.0 million respectively, and a decrease to pre-tax loss of $10.6 million and $9.3 million respectively. The impact to the consolidated balance sheet at March 31, 2022 and March 31, 2023 is an increase to short term deferred revenue of $0.6 million as at March 31, 2022, a decrease to short term deferred revenue of $2.7 million as at March 31, 2023, and a decrease to long term deferred revenue of $1.8 million and $7.8 million, respectively. 2. Application of Topic 815 related to classification of outstanding warrants - The Company inappropriately classified the warrants issued in 2018, 2020 and 2023 as equity. The impact on the consolidated statement of operations and comprehensive loss for the fiscal years ended March 31, 2022 and March 31, 2023 is an increase to the change in value of warrant liabilities of $60.0 million and $10.2 million, respectively, and a decrease to pre-tax loss of $60.0 million and $10.2 million respectively. The impact to the consolidated balance sheet at March 31, 2022 and March 31, 2023 is a decrease to warrant liabilities of $18.2 million and $8.0 million, respectively, and a decrease to additional paid-in capital of $20.2 million and $20.2 million, respectively. Below are our restated consolidated balance sheets as of March 31, 2023 and 2022, and the restated consolidated statements of operations and comprehensive loss, statements of stockholders’ equity, and statements of cash flows for each of the years ended March 31, 2023 and 2022. QUANTUM CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) March 31, 2023 As previously reported Restatement adjustments Reference As restated Assets Current assets: Cash and cash equivalents $ 25,963 $ — $ 25,963 Restricted cash 212 — 212 Accounts receivable, net of allowance for credit losses of $201 72,464 — 72,464 Manufacturing inventories 19,441 — 19,441 Service parts inventories 25,304 — 25,304 Prepaid expenses 4,158 — 4,158 Other current assets 5,513 — 5,513 Total current assets 153,055 — 153,055 Property and equipment, net 16,555 — 16,555 Intangible assets, net 4,941 — 4,941 Goodwill 12,969 — 12,969 Right-of-use assets, net 10,291 — 10,291 Other long-term assets 15,846 — 15,846 Total assets $ 213,657 $ — $ 213,657 Liabilities and Stockholders’ Deficit Current liabilities: Accounts payable $ 35,716 $ — 35,716 Accrued compensation 15,710 — 15,710 Deferred revenue, current portion 82,504 (2,697) (a) 79,807 Term debt, current portion 5,000 — 5,000 Warrant liabilities — 7,989 (b) 7,989 Other accrued liabilities 13,666 — 13,666 Total current liabilities 152,596 5,292 157,888 Deferred revenue, net of current portion 43,306 (7,811) 35,495 Revolving credit facility 16,750 — 16,750 Term debt, net of current portion 66,354 — 66,354 Operating lease liabilities 10,169 — 10,169 Other long-term liabilities 11,370 — 11,370 Total liabilities 300,545 (2,519) 298,026 Stockholders’ deficit Preferred stock: Preferred stock, 20,000 shares authorized; no shares issued — — — Common stock: Common stock, $0.01 par value; 225,000 shares authorized; 4,678 shares issued and outstanding 47 — 47 Additional paid-in capital 723,492 (20,233) (b) 703,259 Accumulated deficit (808,846) 22,752 (a) (b) (786,094) Accumulated other comprehensive loss (1,581) — (1,581) Total stockholders' deficit (86,888) 2,519 (84,369) Total liabilities and stockholders' deficit $ 213,657 $ — $ 213,657 QUANTUM CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) March 31, 2022 As previously reported Restatement adjustments Reference As restated Assets Current assets: Cash and cash equivalents $ 5,210 $ — $ 5,210 Restricted cash 283 — 283 Accounts receivable, net of allowance for credit losses of $422 69,354 — 69,354 Manufacturing inventories 33,546 — 33,546 Service parts inventories 24,254 — 24,254 Prepaid expenses 7,853 — 7,853 Other current assets 4,697 — 4,697 Total current assets 145,197 — 145,197 Property and equipment, net 12,853 — 12,853 Intangible assets, net 9,584 — 9,584 Goodwill 12,969 — 12,969 Right-of-use assets, net 11,107 — 11,107 Other long-term assets 9,925 — 9,925 Total assets $ 201,635 $ — $ 201,635 Liabilities and Stockholders’ Deficit Current liabilities: Accounts payable $ 34,220 $ — 34,220 Accrued compensation 16,141 — 16,141 Deferred revenue, current portion 86,517 611 (a) 87,128 Term debt, current portion 4,375 — 4,375 Warrant liabilities — 18,237 (b) 18,237 Other accrued liabilities 16,562 — 16,562 Total current liabilities 157,815 18,848 176,663 Deferred revenue, net of current portion 41,580 (1,792) 39,788 Revolving credit facility 17,735 — 17,735 Term debt, net of current portion 89,448 — 89,448 Operating lease liabilities 9,891 — 9,891 Other long-term liabilities 11,849 — 11,849 Total liabilities 328,318 17,056 345,374 Stockholders’ deficit Preferred stock: Preferred stock, 20,000 shares authorized; no shares issued — — — Common stock: Common stock, $0.01 par value; 225,000 shares authorized; 3,021 shares issued and outstanding 30 — 30 Additional paid-in capital 645,613 (20,233) (b) 625,380 Accumulated deficit (770,903) 3,177 (a) (b) (767,726) Accumulated other comprehensive loss (1,423) — (1,423) Total stockholders' deficit (126,683) (17,056) (143,739) Total liabilities and stockholders' deficit $ 201,635 $ — $ 201,635 QUANTUM CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except per share amounts) Year Ended March 31, 2023 As previously reported Restatement adjustments Reference As restated Revenue Product $ 266,537 $ 8,317 (a) $ 274,854 Service and subscription 132,510 1,008 (a) 133,518 Royalty 13,705 — 13,705 Total revenue 412,752 9,325 422,077 Cost of revenue Product 220,031 — 220,031 Service and subscription 58,782 — 58,782 Total cost of revenue 278,813 — 278,813 Gross profit 133,939 9,325 143,264 Operating expenses Sales and marketing 66,034 — 66,034 General and administrative 47,752 — 47,752 Research and development 44,555 — 44,555 Restructuring charges 1,605 — 1,605 Total operating expenses 159,946 — 159,946 Income (loss) from operations (26,007) 9,325 (16,682) Other income, net 1,956 — 1,956 Interest expense (10,560) — (10,560) Change in fair value of warrant liability — 10,250 (b) 10,250 Loss on debt extinguishment, net (1,392) — (1,392) Net income (loss) before income taxes (36,003) 19,575 (16,428) Income tax provision 1,940 — 1,940 Net income (loss) $ (37,943) $ 19,575 $ (18,368) Deemed dividend on warrants (389) 389 (b) — Net income (loss) attributable to common stockholders $ (38,332) $ 19,964 $ (18,368) Net income (loss) per share attributable to common stockholders- basic $ (8.49) $ 4.42 $ (4.07) Net income (loss) per share attributable to common stockholders - diluted $ (8.49) $ 2.85 $ (5.64) Weighted average shares - basic 4,517 4,517 4,517 Weighted average shares - diluted 4,517 4,559 4,559 Net income (loss) $ (37,943) $ 19,575 $ (18,368) Foreign currency translation adjustments, net (158) — (158) Total comprehensive income (loss) $ (38,101) $ 19,575 $ (18,526) QUANTUM CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except per share amounts) Year Ended March 31, 2022 As previously reported Restatement adjustments Reference As restated Revenue Product $ 223,761 $ 7,053 (a) $ 230,814 Service and subscription 133,689 3,552 (a) 137,241 Royalty 15,377 — 15,377 Total revenue 372,827 10,605 383,432 Cost of revenue Product 169,780 — 169,780 Service and subscription 56,012 — 56,012 Total cost of revenue 225,792 — 225,792 Gross profit 147,035 10,605 157,640 Operating expenses Research and development 51,812 — 51,812 Sales and marketing 62,957 — 62,957 General and administrative 45,256 — 45,256 Restructuring charges 850 — 850 Total operating expenses 160,875 — 160,875 Income (loss) from operations (13,840) 10,605 (3,235) Other expense, net (251) — (251) Interest expense (11,888) — (11,888) Change in fair value of warrant liabilities — 60,030 (b) 60,030 Loss on debt extinguishment, net (4,960) — (4,960) Net income (loss) before income taxes (30,939) 70,635 39,696 Income tax provision 1,341 — 1,341 Net income (loss) $ (32,280) $ 70,635 $ 38,355 Net income (loss) per share - basic $ (10.96) $ 23.99 $ 13.03 Net income (loss) per share - diluted $ (10.96) $ 4.48 $ (6.48) Weighted average shares - basic 2,944 2,944 2,944 Weighted average shares - diluted 2,944 3,301 3,301 Net income (loss) $ (32,280) $ 70,635 $ 38,355 Foreign currency translation adjustments, net (567) — (567) Total comprehensive income (loss) $ (32,847) $ 70,635 $ 37,788 QUANTUM CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended March 31, 2023 As previously reported Restatement adjustments Reference As restated Operating activities Net income (loss) $ (37,943) $ 19,575 (a) (b) $ (18,368) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 10,118 — 10,118 Amortization of debt issuance costs 1,624 — 1,624 Long-term debt related costs 992 — 992 Provision for manufacturing and service inventories 18,052 — 18,052 Stock-based compensation 10,750 — 10,750 Change in fair value of warrant liabilities — (10,250) (b) (10,250) Other non-cash (2,067) — (2,067) Changes in assets and liabilities, net of effect of acquisitions: Accounts receivable (2,966) — (2,966) Manufacturing inventories (1,839) — (1,839) Service parts inventories (3,503) — (3,503) Accounts payable 1,158 — 1,158 Prepaid expenses 3,695 — 3,695 Deferred revenue (2,286) (9,325) (a) (11,611) Accrued compensation (431) — (431) Other assets (1,270) — (1,270) Other liabilities 1,022 — 1,022 Net cash used in operating activities (4,894) — (4,894) Investing activities Purchases of property and equipment (12,581) — (12,581) Business acquisitions (3,020) — (3,020) Net cash used in investing activities (15,601) — (15,601) Financing activities Borrowings of long-term debt, net of debt issuance costs — — — Repayments of long-term debt (24,596) — (24,596) Borrowings of credit facility 497,280 — 497,280 Repayments of credit facility (498,665) — (498,665) Borrowings of paycheck protection program — — — Proceeds from secondary offering, net — — — Payment of taxes due upon vesting of restricted stock — — — Proceeds from issuance of common stock 67,146 — 67,146 Net cash provided by financing activities 41,165 — 41,165 Effect of exchange rate changes on cash and cash equivalents 12 — 12 Net change in cash, cash equivalents, and restricted cash 20,682 — 20,682 Cash, cash equivalents, and restricted cash at beginning of period 5,493 — 5,493 Cash, cash equivalents, and restricted cash at end of period $ 26,175 $ — $ 26,175 Supplemental disclosure of cash flow information Cash paid for interest $ 8,701 $ — $ 8,701 Cash paid for income taxes, net of refunds $ 1,418 $ — $ 1,418 Non-cash transactions Purchases of property and equipment included in accounts payable $ 1,049 $ — $ 1,049 Transfer of manufacturing inventory to services inventory $ 4,045 $ — $ 4,045 Transfer of manufacturing inventory to property and equipment $ 343 $ — $ 343 Payment of litigation settlements with insurance proceeds $ — $ — $ — Paid-in-kind interest $ 319 $ — $ 319 Deemed dividend $ 389 $ (389) (b) $ — The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the statement of cash flows: Cash and cash equivalents $ 25,963 $ — $ 25,963 Restricted cash, current 212 — 212 Total cash, cash equivalents and restricted cash at the end of period $ 26,175 $ — $ 26,175 QUANTUM CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended March 31, 2022 As previously reported Restatement adjustments Reference As adjusted Operating activities Net income (loss) $ (32,280) $ 70,635 (a) (b) $ 38,355 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 9,418 — 9,418 Amortization of debt issuance costs 2,414 — 2,414 Long-term debt related costs 8,471 — 8,471 Provision for manufacturing and service inventories 5,740 — 5,740 Gain on PPP loan extinguishment (10,000) — (10,000) Stock-based compensation 13,829 13,829 Change in fair value of warrant liabilities — (60,030) (b) (60,030) Other non-cash (832) — (832) Changes in assets and liabilities, net of effect of acquisitions: Accounts receivable 3,651 — 3,651 Manufacturing inventories (12,069) — (12,069) Service parts inventories (4,400) — (4,400) Accounts payable (1,939) — (1,939) Prepaid expenses (3,959) — (3,959) Deferred revenue (2,514) (10,605) (a) (13,119) Accrued restructuring charges (580) — (580) Accrued compensation (3,073) — (3,073) Other assets (2,602) — (2,602) Other liabilities (3,003) — (3,003) Net cash used in operating activities (33,728) — (33,728) Investing activities Purchases of property and equipment (6,316) — (6,316) Business acquisitions (7,808) — (7,808) Net cash used in investing activities (14,124) — (14,124) Financing activities Borrowings of long-term debt, net of debt issuance costs 94,961 — 94,961 Repayments of long-term debt (94,301) — (94,301) Borrowings of credit facility 309,000 — 309,000 Repayments of credit facility (291,265) — (291,265) Proceeds from issuance of common stock 1,762 1,762 Net cash provided by financing activities 20,157 — 20,157 Effect of exchange rate changes on cash and cash equivalents 51 — 51 Net change in cash, cash equivalents, and restricted cash (27,644) — (27,644) Year Ended March 31, 2022 As previously reported Restatement adjustments Reference As adjusted Cash, cash equivalents, and restricted cash at beginning of period 33,137 — 33,137 Cash, cash equivalents, and restricted cash at end of period $ 5,493 $ — $ 5,493 Supplemental disclosure of cash flow information Cash paid for interest $ 9,140 $ — $ 9,140 Cash paid for income taxes, net of refunds $ 944 $ — $ 944 Non-cash transactions Purchases of property and equipment included in accounts payable $ 147 $ — $ 147 Transfer of manufacturing inventory to services inventory $ 211 $ — $ 211 The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the statement of cash flows: Cash and cash equivalents $ 5,210 $ — $ 5,210 Restricted cash, current 283 — 283 Total cash, cash equivalents and restricted cash at the end of period $ 5,493 $ — $ 5,493 QUANTUM CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (in thousands) Common Stock Additional Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Deficit Reference Shares Amount As previously reported Balance, March 31, 2022 3,021 $ 30 $ 645,613 $ (770,903) $ (1,423) $ (126,683) Net loss — — — (37,943) — (37,943) Foreign currency translation adjustments, net — — — — (158) (158) Shares issued under employee stock purchase plan 30 1 896 — — 897 Shares issued under employee incentive plans, net 109 1 (1) — — — Shares issued in connection with rights offering, net 1,500 15 66,234 — — 66,249 Shares issued in connection with business acquisition 18 — — — — — Stock-based compensation — — 10,750 — — 10,750 Balance, March 31, 2023 4,678 $ 47 $ 723,492 $ (808,846) $ (1,581) $ (86,888) Adjustments March 31, 2022 (a) (b) — — (20,233) 3,177 — (17,056) Net loss (a) (b) — — — 19,575 — 19,575 March 31, 2023 — $ — $ (20,233) $ 22,752 $ — $ 2,519 As restated March 31, 2022 3,021 $ 30 $ 625,380 $ (767,726) $ (1,423) $ (143,739) Net loss — — — (18,368) — (18,368) Foreign currency translation adjustments, net — — — — (158) (158) Shares issued under employee stock purchase plan 30 1 896 — — 897 Shares issued under employee incentive plans, net 109 1 (1) — — — Shares issued in connection with rights offering, net 1,500 15 66,234 — — 66,249 Shares issued in connection with business acquisition 18 — — — — — Stock-based compensation — — 10,750 — — 10,750 March 31, 2023 4,678 $ 47 $ 703,259 $ (786,094) $ (1,581) $ (84,369) QUANTUM CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (in thousands) Common Stock Additional Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders' Deficit Reference Shares Amount As previously reported Balance, March 31, 2021 2,846 $ 28 $ 627,206 $ (738,623) $ (856) $ (112,245) Net loss — — — (32,280) — (32,280) Foreign currency translation adjustments, net — — — — (567) (567) Shares issued under employee stock purchase plan 19 — 1,762 — — 1,762 Shares issued under employee incentive plans, net 115 1 (1) — — — Shares issued in connection with business acquisition 41 1 2,817 — — 2,818 Stock-based compensation — — 13,829 — — 13,829 Balance, March 31, 2022 3,021 $ 30 $ 645,613 $ (770,903) $ (1,423) $ (126,683) Adjustments March 31, 2021 (a) (b) — — (20,233) (67,458) — (87,691) Net loss (a) (b) — — — 70,635 — 70,635 March 31, 2022 — $ — $ (20,233) $ 3,177 $ — $ (17,056) As restated March 31, 2021 2,846 $ 28 $ 606,973 $ (806,081) $ (856) $ (199,936) Net loss — — — 38,355 — 38,355 Foreign currency translation adjustments, net — — — — (567) (567) Shares issued under employee stock purchase plan 19 — 1,762 — — 1,762 Shares issued under employee incentive plans, net 115 1 (1) — — — Shares issued in connection with business acquisition 41 1 2,817 — — 2,818 Stock-based compensation — — 13,829 — — 13,829 March 31, 2022 3,021 $ 30 $ 625,380 $ (767,726) $ (1,423) $ (143,739) |
