Annual report pursuant to Section 13 and 15(d)

QUARTERLY FINANCIAL DATA (UNAUDITED)

v3.19.2
QUARTERLY FINANCIAL DATA (UNAUDITED)
12 Months Ended
Mar. 31, 2019
Quarterly Financial Information Disclosure [Abstract]  
UNAUDITED QUARTERLY FINANCIAL DATA
NOTE 13:
QUARTERLY FINANCIAL DATA (UNAUDITED)
As further described in Note 2:
Restatement
, in lieu of filing quarterly reports on Form
10-Q
for the three months ended June 30, 2018 and 2017 (restated), the three and six months ended September 30, 2018 and 2017 (restated) and the three and nine months ended December 31, 2018 and 2017, quarterly financial data for these periods is included in this Annual Report on Form
10-K
in the tables that follow. Amounts are computed independently each quarter; therefore, the sum of the quarterly amounts may not equal the total amount for the respective year due to rounding.
 
 
QUANTUM CORPORATION
QUARTERLY CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
 
   
June 30, 2017
   
September 30, 2017
 
   
As Reported
   
Adjustments
   
As Restated
   
As Reported
   
Adjustments
   
As Restated
 
ASSETS
                                               
Current assets
                                               
Cash and cash equivalents
  $ 8,661     $ —       $ 8,661     $ 9,504     $ 4,479     $ 13,983  
Accounts receivable, net of allowance for doubtful accounts of $29 and $317 as of June 30, 2017 and September 30, 2017
    109,418       (11,910     97,508       105,771       (6,545     99,226  
Manufacturing inventories
    27,821       8,865       36,686       29,119       5,593       34,712  
Service part inventories
    19,788       —         19,788       19,915       —         19,915  
Other current assets
    10,005       (245     9,760       8,795       786       9,581  
Restricted cash
    1,891       1,111       3,002       1,969       1,094       3,063  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total Current Assets
    177,584       (2,179     175,405       175,073       5,407       180,480  
Property and equipment, less accumulated depreciation
    10,455       (318     10,137       10,745       (325     10,420  
Intangible assets, less accumulated amortization
    240       —         240       204       —         204  
Restricted cash, long-term
    20,000       —         20,000       20,000       —         20,000  
Other long-term assets
    4,753       1,552       6,305       5,127       1,419       6,546  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total Assets
  $ 213,032     $ (945   $ 212,087     $ 211,149     $ 6,501     $ 217,650  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
                                               
Liabilities
                                               
Current liabilities
                                               
Accounts payable
  $ 45,007     $ (513   $ 44,494     $ 48,488     $ —       $ 48,488  
Accrued warranty
    3,161       (3,161     —         2,950       (2,950     —    
Deferred revenue, current
    79,996       10,460       90,456       77,090       11,415       88,505  
Accrued restructuring charges, current
    2,249       629       2,878       1,743       627       2,370  
Convertible subordinated debt, current
    62,926       —         62,926       57,034       —         57,034  
Accrued compensation
    22,186       (968     21,218       23,179       (924     22,255  
Other accrued liabilities
    13,309       4,035       17,344       12,927       3,634       16,561  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total current liabilities
    228,834       10,482       239,316       223,411       11,802       235,213  
Deferred revenue, long-term
    36,697       1,452       38,149       35,906       868       36,774  
Accrued restructuring charges, long-term
    544       3,501       4,045       423       3,192       3,615  
Long-term debt, net of current portion
    60,219       1,515       61,734       70,631       5,860       76,491  
Other long-term liabilities
    4,736       5,666       10,402       5,112       5,924       11,036  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total liabilities
    331,030       22,616       353,646       335,483       27,646       363,129  
Commitment and contingencies (Note 11)
                                               
Stockholders’ deficit
                                               
Preferred stock 20,000 shares authorized; no shares issued as of June 30, 2017 and September 30, 2017
    —         —         —         —         —         —    
Common stock, $0.01 par value; 1,000,000 shares authorized; 34,101 and 34,663 shares issued and outstanding at June 30, 2017 and September 30, 2017, respectively
    341       —         341       347       —         347  
Additional paid-in capital
    475,357       —         475,357       476,409       (316     476,093  
Accumulated deficit
    (596,969     (18,961     (615,930     (604,832     (16,196     (621,028
Accumulated other comprehensive income (loss)
    3,273       (4,600     (1,327     3,742       (4,633     (891
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total stockholders’ deficit
    (117,998     (23,561     (141,559     (124,334     (21,145     (145,479
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total liabilities and stockholders’ deficit
  $ 213,032     $ (945   $ 212,087     $ 211,149     $ 6,501     $ 217,650  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
                                                 
 
QUANTUM CORPORATION
QUARTERLY CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
 
   
As Restated
                         
   
June 30, 2017
   
September 30,
2017
   
December 31,
2017
   
June 30, 2018
   
September 30,
2018
   
December 31,
2018
 
ASSETS
                                               
Current Assets:
                                               
Cash and cash equivalents
  $ 8,661     $ 13,983     $ 10,309     $ 10,227     $ 5,704     $ 10,926  
Accounts receivable, net of allowance for doubtful accounts of $29, $317, $314, $1, $518 and $1,068; as of June 30, 2017, September 30, 2017, December 31, 2017, June 30, 2018, September 30, 2018, and December 31, 2018
    97,508       99,226       96,156       81,427       76,304       79,571  
Manufacturing inventories
    36,686       34,712       35,461       30,666       21,084       15,563  
Service part inventories
    19,788       19,915       19,061       19,397       18,642       18,551  
Other current assets
    9,760       9,581       8,335       11,348       11,291       7,877  
Restricted cash
    3,002       3,063       3,054       1,220       6,124       1,098  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total Current Assets
    175,405       180,480       172,376       154,285       139,149       133,586  
Property and equipment, less accumulated depreciation
    10,137       10,420       10,226       9,361       8,925       8,773  
Intangible assets, less accumulated amortization
    240       204       164       112       86       60  
Restricted cash, long-term
    20,000       20,000       12,000       5,000       —         5,000  
Other long term-assets
    6,305       6,546       8,663       8,500       6,034       7,572  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total Assets
  $ 212,087     $ 217,650     $ 203,429     $ 177,258     $ 154,194     $ 154,991  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
                                               
LIABILITIES
                                               
Current Liabilities
                                               
Accounts payable
  $ 44,494     $ 48,488     $ 57,142     $ 51,601     $ 45,021     $ 38,774  
Deferred revenue, current
    90,456       88,505       87,388       94,063       89,020       84,879  
Accrued restructuring charges, current
    2,878       2,370       5,086       2,681       4,437       3,947  
Long-term debt current portion
    —         —         —         9,000       127,514       1,500  
Convertible subordinated debt, current
    62,926       57,034       —         —         —         —    
Accrued compensation
    21,218       22,255       20,144       15,182       15,559       14,705  
Other accrued liabilities
    17,344       16,561       19,024       23,114       29,150       25,295  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total current liabilities
    239,316       235,213       188,784       195,641       310,701       169,100  
Deferred revenue, long-term
    38,149       36,774       35,824       36,520       34,577       34,361  
Accrued restructuring charges, long-term
    4,045       3,615       3,098       2,432       —         —    
Long-term debt, net of current portion
    61,734       76,491       117,301       112,255       —         137,073  
Other long-term liabilities
    10,402       11,036       11,126       11,823       10,564       10,695  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total liabilities
    353,646       363,129       356,133       358,671       355,842       351,229  
Commitment and contingencies (Note 11)
                                               
Stockholders’ Deficit
                                               
Preferred stock:
                                               
Preferred stock 20,000 shares authorized; no shares issued as of June 30, 2017, September 30, 2017, December 31, 2017, June 30, 2018, September 30, 2018, and December 31, 2018
    —         —         —         —         —         —    
Common stock:
                                               
Common stock, $0.01 par value; 1,000,000 shares authorized; 34,101, 34,663, 35,077, 35,443, 35,556, and 35,553 shares issued and outstanding at June 30, 2017, September 30, 2017, December 31, 2017, June 30, 2018, September 30, 2018, and December 31, 2018, respectively
    341       347       351       356       358       358  
Additional paid-in capital
    475,357       476,093       479,289       482,028       483,494       493,347  
Accumulated deficit
    (615,930     (621,028     (631,224     (662,640     (684,257     (688,543
Accumulated other comprehensive loss
    (1,327     (891     (1,120     (1,157     (1,243     (1,400
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total stockholders’ deficit
    (141,559     (145,479     (152,704     (181,413     (201,648     (196,238
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total liabilities and stockholders’ deficit
  $ 212,087     $ 217,650     $ 203,429     $ 177,258     $ 154,194     $ 154,991  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
 
QUANTUM CORPORATION
QUARTERLY CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
 
   
As Restated
                         
   
Three Months
Ended June 30,
2017
   
Three Months Ended
September 30, 2017
   
Six Months
Ended June 30,
2017
   
Three Months
Ended December 31,
2017
   
Nine Months
Ended December 31,
2017
   
Three Months Ended
March 31, 2018
 
Revenue
                                               
Product revenue
  $ 69,483     $ 67,596     $ 137,079     $ 75,343     $ 212,422     $ 56,160  
Service revenue
    35,117       34,910       70,027       34,875       104,902       31,621  
Royalty revenue
    9,995       9,280       19,275       5,776       25,051       7,528  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenue
    114,595       111,786       226,381       115,994       342,375       95,309  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Costs and expenses:
                                               
Product cost of revenue
    50,680       51,602       102,282       58,119       160,401       45,710  
Service cost of revenue
    15,077       14,865       29,942       14,915       44,857       13,932  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total cost of revenue
    65,757       66,467       132,224       73,034       205,258       59,642  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Gross profit
    48,838       45,319       94,157       42,960       137,117       35,667  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Operating expenses:
                                               
Research and development
    10,605       10,190       20,795       9,162       29,957       8,605  
Sales and marketing
    27,078       25,824       52,902       26,711       79,613       22,629  
General and administrative
    12,424       11,506       23,930       12,416       36,346       15,782  
Restructuring charges
    1,631       70       1,701       4,239       5,940       2,534  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
    51,738       47,590       99,328       52,528       151,856       49,550  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Income (loss) from operations
    (2,900     (2,271     (5,171     (9,568     (14,739     (13,883
Other (income) expense, net:
                                               
Interest expense, net
    2,579       2,638       5,217       2,968       8,185       3,485  
Loss on debt extinguishment
    -       39       39       -       39       6,895  
Other (income) expenses
    (98     (77     (175     (210     (385     (382
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Loss before income taxes
    (5,381     (4,871     (10,252     (12,326     (22,578     (23,881
Income tax expense (benefit)
    (1,262     228       (1,034     (2,127     (3,161     48  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net loss
  $ (4,119   $ (5,099   $ (9,218   $ (10,199   $ (19,417   $ (23,929
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net loss per share
                                               
Basic
  $ (0.12   $ (0.15   $ (0.27   $ (0.29     (0.56   $ (0.68
Diluted
  $ (0.12   $ (0.15   $ (0.27   $ (0.29     (0.56   $ (0.68
Weighted average number of common shares
                                               
Basic
    34,093       34,580       34,338       34,820       34,499       35,263  
Diluted
    34,093       34,580       34,338       34,820       34,499       35,263  
 
 
   
Three Months
Ended June 30,
2018
   
Three Months
Ended September 30,
2018
   
Six Months
Ended September 30,
2018
   
Three Months
Ended December 31,
2018
   
Nine Months
Ended December 31,
2018
   
Three Months
Ended March 31,
2019
 
Revenue
                                               
Product revenue
  $ 66,869     $ 51,622     $ 118,491     $ 62,986     $ 181,477     $ 63,177  
Service revenue
    33,564       33,352       66,916       34,097       101,013       33,683  
Royalty revenue
    7,079       4,938       12,017       4,896       16,913       6,417  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenue
    107,512       89,912       197,424       101,979       299,403       103,277  
Costs and expenses:
                                               
Product cost of revenue
    45,438       41,319       86,757       45,819       132,576       47,270  
Service cost of revenue
    15,735       13,066       28,801       13,078       41,879       13,341  
Total cost of revenue
    61,173       54,385       115,558       58,897       174,455       60,611  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Gross profit
    46,339       35,527       81,866       43,082       124,948       42,666  
Operating expense
                                               
Research and development
    8,261       7,862       16,123       7,907       24,030       8,083  
Sales and marketing
    19,125       16,682       35,807       16,990       52,797       16,603  
General and administrative
    19,391       14,072       33,463       13,481       46,944       18,333  
Restructuring charges
    3,907       294       4,201       1,227       5,428       142  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
    50,684       38,910       89,594       39,605       129,199       43,161  
Total costs and expenses
    111,857       93,295       205,152       98,502       303,654       103,772  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Gain (loss) from operations
    (4,345     (3,383     (7,728     3,477       (4,251     (495
Other expenses and losses, net:
                                               
Interest expense, net
    3,935       4,636       8,571       6,238       14,809       6,286  
Loss on debt extinguishment
    —         12,425       12,425       5,033       17,458       —    
Other expenses (income)
    (220     196       (24     (3,846     (3,870     992  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net loss before income taxes
    (8,060     (20,640     (28,700     (3,948     (32,648     (7,773
Income tax expense
    (575     977       402       337       739       1,637  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net Loss
  $ (7,485   $ (21,617   $ (29,103   $ (4,285   $ (33,387   $ (9,410
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net Loss Per Share
                                               
Basic
  $ (0.21   $ (0.61   $ (0.82   $ (0.12   $ (0.94   $ (0.26
Diluted
  $ (0.21   $ (0.61   $ (0.82   $ (0.12   $ (0.94   $ (0.26
Weighted average number of common shares
 
                               
Basic
    35,444       35,502       35,473       35,552       35,500       35,710  
Diluted
    35,444       35,502       35,473       35,552       35,500       35,710  
 
QUANTUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS    
(in thousands)    
 
   
Three Months Ended
June 30, 2017

(as Restated)
   
Six Months Ended
September 30, 2017
(as Restated)
   
Nine Months Ended
December 31, 2017
 
Cash flows from operating activities:
                       
Net loss
  $ (4,119   $ (9,218   $ (19,417
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
                       
Depreciation
    1,313       2,610       3,822  
Amortization of debt issuance costs
    427       855       1,263  
Provision for product and service parts inventories
    2,221       4,163       7,073  
Stock based compensation
    1,613       3,013       4,583  
Non-cash
loss on debt extinguishment
    —         39       121  
Non-cash
restructuring charges
    —         —         598  
Pension Expense
    393       733       1,075  
Bad Debt Expense
    11       292       290  
Deferred Income Taxes, net
    98       (319     (2,700
Loss on Asset Disposal
    —         2       20  
Unrealized Foreign Exchange (Gain) loss
    1,679       1,019       963  
Change in fair value of warrants
    —         —         33  
(Gain) loss on investment
    35       72       113  
Changes in assets and liabilities:
                       
Accounts receivable
    4,595       3,065       5,846  
Manufacturing inventories
    (1,781     (1,199     (2,976
Service parts inventories
    (1,195     (2,384     (3,426
Accounts payable
    3,650       7,375       16,229  
Accrued restructuring charges
    641       (297     1,902  
Accrued compensation
    (2,964     (2,267     (4,720
Deferred revenue
    (2,621     (5,947     (8,015
Other assets and liabilities
    (3,227     (2,913     552  
   
 
 
   
 
 
   
 
 
 
Net cash provided by (used in) operating activities
    769       (1,306     3,229  
Cash flows from investing activities:
                       
Purchases of property and equipment
    (178     (1,151     (2,060
Proceeds from sale of assets
    65       275       4  
Cash distributions from investments
    278       278       278  
   
 
 
   
 
 
   
 
 
 
Net cash provided by (used in) investing activities
    165       (598     (1,778
Cash flows from financing activities:
                       
Borrowings of long-term debt and convertible debt, net
    72,077       165,270       290,404  
Repayments on debt
    (77,175     (155,766     (239,109
Repayment of convertible subordinated debt
    —         (6,030     (62,836
Payment of taxes due upon vesting of restricted stock
    (107     (1,777     (1,807
Proceeds from issuance of common stock, net
    1       1,012       1,012  
   
 
 
   
 
 
   
 
 
 
Net cash provided by (used in) financing activities
    (5,204     2,709       (12,336
Effect of exchange rate changes on cash, cash equivalents and restricted cash
    21       329       336  
Net increase (decrease) in cash, cash equivalents and restricted cash
    (4,249     1,134       (10,549
   
 
 
   
 
 
   
 
 
 
Cash, cash equivalents and restricted cash at the beginning of period
    35,912       35,912       35,912  
   
 
 
   
 
 
   
 
 
 
Cash, cash equivalents and restricted cash at the end of period
  $ 31,663     $ 37,046     $ 25,363  
   
 
 
   
 
 
   
 
 
 
Supplemental disclosure of cash flow information
                       
Purchases of property and equipment included in accounts payable
  $ 17     $ 287     $ 88  
Transfer of inventory to property and equipment
  $ 407     $ 919     $ 934  
Cash Paid For
                       
Interest
  $ 1,561     $ 4,515     $ 7,118  
Taxes, net of refund
  $ 508     $ 914     $ 1,179  
 
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.
 
 
Cash and cash equivalents
  $ 8,661     $ 13,983     $ 10,309  
Restricted cash
    3,002       3,063       3,054  
Restricted cash, long-term
    20,000       20,000       12,000  
   
 
 
   
 
 
   
 
 
 
Total cash, cash equivalents and restricted cash at the end of period
  $ 31,663     $ 37,046     $ 25,363  
   
 
 
   
 
 
   
 
 
 
 
QUANTUM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
 
   
Three Months Ended
June 30, 2018
   
Six Months Ended
September 30, 2018
   
Nine Months Ended
December 31, 2018
 
Cash flows from operating activities:
                       
Net loss
  $ (7,485   $ (29,102   $ (33,387
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
                       
Depreciation
    1,105       2,129       3,150  
Amortization of intangible assets
    26       52       78  
Amortization of debt issuance costs
    171       842       2,211  
Provision for product and service parts
    3,871       5,859       7,385  
Stock based compensation
    427       1,718       2,818  
Non-cash
interest expense, net
    632       1,103       1,670  
Non-cash
loss on debt extinguishment
    —         12,425       17,459  
Pension expense
    287       514       787  
Bad debt expense
    (895     (383     167  
Deferred income taxes, net
    (376     603       903  
Loss on asset disposal
    1       3       31  
Unrealized foreign exchange (gain) loss
    (238     (286     (382
Change in fair value of warrants
    (108     164       (942
(Gain) loss on investment
    (16     (43     (2,861
Changes in assets and liabilities:
                       
Accounts receivable
    15,017       19,434       15,677  
Manufacturing inventories
    3,170       11,677       16,475  
Service parts inventories
    (860     (1,122     (2,050
Accounts payable
    (11,048     (17,520     (24,031
Accrued warranty
                       
Accrued restructuring charges
    (706     (1,382     (1,872
Accrued compensation
    (4,564     (4,415     (5,542
Deferred revenue
    (4,433     (11,426     (15,783
Other assets and liabilities
    8,576       11,826       7,744  
   
 
 
   
 
 
   
 
 
 
Net cash provided by (used in) operating activities
    2,554       2,670       (10,295
Cash flows from investing activities:
                       
Purchases of property and equipment
    (695     (1,331     (1,755
Proceeds from sale of assets
    —         —         50  
Cash distributions from investments
    322       41       2,892  
   
 
 
   
 
 
   
 
 
 
Net cash provided by (used in) investing activities
    (373     (1,290     1,187  
Cash flows from financing activities:
                       
Borrowings of long-term debt and convertible debt, net
    77,806       164,968       397,088  
Repayments on debt
    (80,674     (171,584     (388,074
Proceeds from issuance of common stock, net
    (6     (6     (6
   
 
 
   
 
 
   
 
 
 
Net cash provided by (used in) financing activities
    (2,874     (6,622     9,008  
Effect of exchange rate changes on cash, cash equivalents and restricted cash
    (67     (137     (84
Net increase (decrease) in cash, cash equivalents and restricted cash
    (760     (5,379     (184
   
 
 
   
 
 
   
 
 
 
Cash, cash equivalents and restricted cash at the beginning of period
    17,207       17,207       17,207  
   
 
 
   
 
 
   
 
 
 
Cash, cash equivalents and restricted cash at the end of period
  $ 16,447     $ 11,828     $ 17,023  
   
 
 
   
 
 
   
 
 
 
Supplemental disclosure of cash flow information
                       
Purchases of Property and Equipment included in Accounts Payable
  $ 2     $ 104     $ 159  
Transfer of Inventory to Property and Equipment
  $ 72     $ 176     $ 393  
       
Cash Paid For
                       
Interest
  $ 4,399     $ 9,938     $ 12,140  
Taxes, net of refund
  $ (58   $ 4,458     $ 64  
 
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.
 
 
Cash and cash equivalents
  $ 10,227     $ 5,704     $ 10,927  
Restricted cash
    1,220       6,124       1,096  
Restricted cash, long-term
    5,000       —         5,000  
   
 
 
   
 
 
   
 
 
 
Total cash, cash equivalents and restricted cash at the end of period
  $ 16,447     $ 11,828     $ 17,023  
   
 
 
   
 
 
   
 
 
 
Consolidated Financial Statement Adjustments Tables
The following tables present the restatement adjustments to previously issued consolidated financial statements, including the previously reported consolidated balance sheet as of June 30, 2017 and September 30, 2017 and the consolidated statements of operations, comprehensive loss and cash flows for the three month periods ended June 30, 2017 and September 30, 2017 and the six month period ended September 30, 2017.
The categories of restatement adjustments are described below:
 
(a)
Investigation Related Revenue –
As disclosed in Note 2
– Restatement, the Company prematurely recognized product revenue sold to certain distributors, resellers and end-user customers. The associated product cost of revenue for each product revenue sales order was also recognized in the incorrect period. Additionally, for all transactions where product revenue was recognized prematurely, a reclassification is recorded at sell-in to reflect the movement of inventory at Quantum’s warehouse to inventory at its distributor’s warehouse. For the transactions where revenue was recognized prematurely, the Company restated the consolidated financial statements to reflect the revenue in the period in which the criteria for revenue recognition under U.S. GAAP have been satisfied. For revenue transactions where the criteria for revenue recognition under U.S. GAAP have not yet been satisfied, we deferred revenue recognition until all criteria are satisfied.
 
(b)
Service Revenue Amortization Convention
– The Company inappropriately recognized service revenue on a monthly convention at the beginning of the initial month of service regardless of the service period start date resulting in an acceleration of revenue recognition. Additionally, certain annual service contracts were inappropriately recognized over a 13-month period resulting in a deceleration of revenue recognition.
 
(c)
Cash Consideration Paid to Customers –
The Company inappropriately recorded cash consideration paid to customers as expenses rather than as a reduction of revenue as such payments did not meet the identifiable benefit criteria within the Accounting Standards Codification (“ASC”) 605,
Revenue Recognition
(“Topic 605”) guidance. We have reclassified these expenses from sales and marketing expense to product revenue.
 
(d)
Accrued Warranty –
The Company reviewed its warranty accrual methodology and determined that previous estimates did not appropriately reflect the Company’s historical experience. The Company changed its method in calculating the warranty accrual and applied the adjustments retroactively.
 
(e)
Commissions Accrual
– Relating to misstatement (a), when the Company prematurely recognized revenue, the associated commission expense was also prematurely recognized. The Company restated commission expense to match the timing of associated revenue recognition
 
(f)
Short Term Disability Plan –
The Company inappropriately accounted for its employee funded disability plan and did not reflect employee contributions within restricted cash and did not recognize the obligation to fund disability claims as incurred.
 
(g)
Third Party Maintenance Contracts –
The Company changed its method to appropriately accounting for capitalized third party maintenance contracts.
 
(h)
Debt Issuance Costs –
The Company reclassified capitalized debt issuance costs on its revolver loan from long term debt to a current asset. There was no cumulative impact to pre-tax earnings for the fiscal year ended March 31, 2017.
 
(i)
Restructuring –
The Company did not properly calculate expenses related to its restructuring activities, including failure to apply appropriate discount rates and omitting certain facilities in calculating the restructuring liabilities.
 
(j)
Performance Based Stock Units –
The Company previously accrued stock-based compensation expense on performance based stock units (“PSUs”) assuming the shares would be earned. The Company determined the likelihood of meeting the required conditions at the time was remote and therefore should not have recognized stock-based compensation expense for the related PSUs.
 
(k)
Debt –
The Company incorrectly accounted for multiple amendments to the term loan and revolving credit agreements described in Note 5:
Long-Term Debt,
resulting in errors in the treatment of debt extinguishment and issuance costs.
 
(I)
Certain activities in the statement of cash flows and consolidated balance sheets have been reclassified to conform with current fiscal year’s presentation.
 
(m)
Australian Deferred Tax Assets and Valuation Allowance –
The Company failed to record deferred tax assets for certain book-tax differences at an Australian affiliate and to further establish a valuation allowance against certain of the tax assets.
 
(n)
Deferred Tax Liability Related to Unrealized Swiss Currency Gains
– The Company misclassified and under accrued Swiss income tax on unrealized currency gains attributable to a dollar-denominated intercompany note receivable.
 
(o)
Reserves for Uncertain Tax Positions on Transfer Pricing –
The Company did not accrue a reserve for foreign taxes payable due to uncertain tax positions relating to its transfer pricing for services and interest income on intercompany notes and payables.
 
(p)
Valuation Allowance for State Net Operating Losses
– The Company failed to analyze all evidence, both positive and negative, when considering the future realization of its Texas state net operating loss carryforward and inappropriately established a 100% valuation allowance against the related deferred tax asset. The Company reevaluated the evidence and partially removed this valuation allowance.
 
(q)
Tax Accounting
– The Company recalculated its income tax expense on an annual and quarterly basis to account for certain errors in the previous calculations of its federal income tax receivable and state income tax payable. Restatements impacting book income and various asset and liability accounts had no net effect on deferred taxes or tax expense due to the Company’s position of losses and a full valuation allowance.
 
(r)
Other Adjustments – There are other restatement matters otherwise not described in items (a) through (m) of this Note. The related adjustments are individually insignificant in the fiscal year ended March 31, 2017 but in aggregate are material to the consolidated financial statements. These misstatements include:
 
   
Unrecognized gain (loss) of cumulative translation adjustments upon the liquidation of certain foreign entities
 
   
Unrecognized asset retirement obligations
 
   
Incorrect accounting for a cost method investment
 
   
Accruals recorded in the incorrect accounting period
 
   
Three Months Ended June 30, 2017
 
   
As Previously
Reported
   
Restatement

Adjustments
   
Restatement

Reference
 
As Restated
 
Revenue
                           
Product Revenue
  $ 71,618     $ (2,135   a, c   $ 69,483  
Service Revenue
    35,246       (129   b     35,117  
Royalty revenue
    9,995       —             9,995  
   
 
 
   
 
 
       
 
 
 
Total Revenue
    116,859       (2,264         114,595  
Costs and expenses:
                           
Product cost of revenue
    50,949       (269   a     50,680  
Service cost of revenue
    15,090       (13   d     15,077  
   
 
 
   
 
 
       
 
 
 
Total cost of revenue
    66,039       (282         65,757  
   
 
 
   
 
 
       
 
 
 
Gross profit
    50,820       (1,982         48,838  
Operating expense
                           
Research and development
    10,605       —             10,605  
Sales and marketing
    27,824       (746   c, e     27,078  
General and administrative
    12,509       (85   r     12,424  
Restructuring charges
    2,335       (704   i     1,631  
   
 
 
   
 
 
       
 
 
 
Total operating expenses
    53,273       (1,535         51,738  
   
 
 
   
 
 
       
 
 
 
Loss from operations
    (2,453     (447         (2,900
Other expenses and losses, net:
                           
Interest (income) expense
    2,558       21     r     2,579  
Other income
    (98     —             (98
Loss before income taxes
    (4,913     (468         (5,381
Income tax benefit
    (1,240     (22  
m, o-q
    (1,262
   
 
 
   
 
 
       
 
 
 
Net loss
  $ (3,673   $ (446       $ (4,119
   
 
 
   
 
 
       
 
 
 
Loss per share:
                           
Basic
  $ (0.11               $ (0.12
Diluted
  $ (0.11               $ (0.12
Weighted average common shares outstanding - basic
    34,093                   34,093  
Weighted average common shares outstanding - diluted
    34,093                   34,093  
 
QUANTUM CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)
 
   
June 30, 2017
 
   
As Previously
Reported
   
Restatement
Adjustments
   
Restatement
Reference
 
As Restated
 
ASSETS
                           
Current assets:
                           
Cash and cash equivalents
  $ 8,661     $ —           $ 8,661  
Accounts receivable, net of allowance for doubtful accounts of $5,145 as of
    109,418       (11,910   a     97,508  
June 30, 2017
    —                     —    
Manufacturing inventories
    27,821       8,865     a     36,686  
Service part inventories
    19,788       —             19,788  
Other current assets
    10,005       (245   g, q     9,760  
Restricted cash
    1,891       1,111     f     3,002  
   
 
 
   
 
 
       
 
 
 
Total current assets
    177,584       (2,179         175,405  
Property and equipment, less accumulated depreciation
    10,455       (318   r     10,137  
Intangible assets, less accumulated amortization
    240       —             240  
Restricted cash, long-term
    20,000       —             20,000  
Other long term assets
    4,753       1,552     h, m, p, r     6,305  
   
 
 
   
 
 
       
 
 
 
Total Assets
  $ 213,032     $ (945       $ 212,087  
   
 
 
   
 
 
       
 
 
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
                           
Liabilities:
                           
Current liabilities
                           
Accounts payable
  $ 45,007     $ (513   g   $ 44,494  
Accrued warranty
    3,161       (3,161   l     —    
Deferred revenue, current
    79,996       10,460     a, b     90,456  
Accrued restructuring charges, current
    2,249       629     i     2,878  
Convertible subordinated debt, current
    62,926       —             62,926  
Accrued compensation
    22,186       (968   e, f     21,218  
Other accrued liabilities
    13,309       4,035     a, d, l, n, q, r     17,344  
   
 
 
   
 
 
       
 
 
 
Total current liabilities
    228,834       10,482           239,316  
Deferred revenue, long-term
    36,697       1,452     b     38,149  
Accrued restructuring charges, long-term
    544       3,501     i     4,045  
Long-term debt, net of current portion
    60,219       1,515     h     61,734  
Other long-term liabilities
    4,736       5,666     n, p, q     10,402  
   
 
 
   
 
 
       
 
 
 
Total liabilities
    331,030       22,616           353,646  
   
 
 
   
 
 
       
 
 
 
Commitment and contingencies (Note 11)
                           
Stockholders’ deficit
                           
Preferred stock:
                           
Preferred stock 20,000 shares authorized; no shares issued as of June 30, 2017
    —         —             —    
Common stock:
                           
Common stock, $0.01 par value; 1,000,000 shares authorized; 34,101
    341       —             341  
shares issued and outstanding at June 30, 2017
                           
Additional paid-in capital
    475,357       —             475,357  
Accumulated deficit
    (596,969     (18,961  
a-b, d-e, m, o-q, r
    (615,930
Accumulated other comprehensive income
    3,273       (4,600   n, r     (1,327
   
 
 
   
 
 
       
 
 
 
Total Stockholders’ deficit
    (117,998     (23,561         (141,559
   
 
 
   
 
 
       
 
 
 
Total liabilities and stockholders’ deficit
  $ 213,032     $ (945       $ 212,087  
   
 
 
   
 
 
       
 
 
 
 
QUANTUM CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share amounts)
 
   
Three Months Ended September 30, 2017
 
   
As Previously
Reported
   
Restatement

Adjustments
   
Restatement

Reference
   
As Restated
 
Revenue:
                               
Product revenue
  $ 63,606     $ 3,990       a, c     $ 67,596  
Service revenue
    34,165       745       b       34,910  
Royalty revenue
    9,280       —                 9,280  
   
 
 
                   
 
 
 
Total revenue
    107,051       4,735               111,786  
   
 
 
   
 
 
           
 
 
 
Costs and expenses:
                               
Product cost of revenue
    48,561       3,041       a       51,602  
Service cost of revenue
    14,717       148       d       14,865  
Total cost of revenue
    63,278       3,189               66,467  
   
 
 
   
 
 
           
 
 
 
Gross profit
    43,773       1,546               45,319  
   
 
 
   
 
 
           
 
 
 
Operating expense
                               
Research and development
    10,190       —                 10,190  
Sales and marketing
    26,179       (355     c, e       25,824  
General and administrative
    12,158       (652     j, r       11,506  
Restructuring charges
    31       39       i       70  
   
 
 
   
 
 
           
 
 
 
Total operating expenses
    48,558       (968             47,590  
   
 
 
   
 
 
           
 
 
 
Total costs and expenses
    111,836       2,221               114,057  
   
 
 
   
 
 
           
 
 
 
Income (loss) from operations
    (4,785     2,514               (2,271
Other (income) expenses:
                               
Interest expense, net
    2,617       21       r       2,638  
Loss on debt extinguishment
    39       —                 39  
Other income
    (77     —                 (77
   
 
 
   
 
 
           
 
 
 
Net income loss before income taxes
    (7,364     2,493               (4,871
   
 
 
   
 
 
           
 
 
 
Income tax expense (benefit)
    499       (271    
m, o-q
      228  
   
 
 
   
 
 
           
 
 
 
Net income (loss)
  $ (7,863   $ 2,764             $ (5,099
   
 
 
   
 
 
           
 
 
 
Loss per share:
                               
Basic
  $ (0.23                   $ (0.15
Diluted
  $ (0.23                   $ (0.15
Weighted average common shares outstanding - basic
    34,580                       34,580  
Weighted average common shares outstanding - diluted
    34,580                       34,580  
   
Six Months Ended September 30, 2017
 
   
As Previously
Reported
   
Restatement

Adjustments
   
Restatement

Reference
   
As Restated
 
Revenue
                               
Product revenue
  $ 135,224     $ 1,855       a, c     $ 137,079  
Service revenue
    69,410       617       b       70,027  
Royalty revenue
    19,275       —                 19,275  
   
 
 
   
 
 
           
 
 
 
Total Revenue
    223,909       2,472               226,381  
Costs and expenses:
                               
Product cost of revenue
    99,510       2,772       a       102,282  
Service cost of revenue
    29,807       135       d       29,942  
   
 
 
   
 
 
           
 
 
 
Total cost of revenue
    129,317       2,907               132,224  
   
 
 
   
 
 
           
 
 
 
Gross profit
    94,592       (435             94,157  
Operating expense
                               
Research and development
    20,795       —                 20,795  
Sales and marketing
    54,003       (1,101     c, e       52,902  
General and administrative
    24,667       (737     j, r       23,930  
Restructuring charges
    2,366       (665     i       1,701  
Goodwill impairment
    —         —                 —    
   
 
 
   
 
 
           
 
 
 
Total operating expenses
    101,831       (2,503             99,328  
   
 
 
   
 
 
           
 
 
 
Loss from operations
    (7,239     2,068               (5,171
Other (income) expense, net:
                               
Interest expense, net
    5,175       42       r       5,217  
(Gain) loss on debt extinguishment
    39       —                 39  
Other expenses (income)
    (175     —                 (175
   
 
 
   
 
 
           
 
 
 
Net loss before income taxes
    (12,278     2,026               (10,252
Income tax benefit
    (741     (293    
m, o-q
      (1,034
   
 
 
   
 
 
           
 
 
 
Net income (net loss)
  $ (11,537   $ 2,319             $ (9,218
   
 
 
   
 
 
           
 
 
 
Net loss per share:
                               
Basic
  $ (0.34                   $ (0.27
Diluted
  $ (0.34                   $ (0.27
Weighted average common shares outstanding - basic
    34,338                       34,338  
Weighted average common shares outstanding - diluted
    34,338                       34,338