Annual report [Section 13 and 15(d), not S-K Item 405]

INCOME TAXES

v3.26.1
INCOME TAXES
 12 Months Ended
Mar. 31, 2026
Income Tax Disclosure [Abstract]  
INCOME TAXES
NOTE 9: INCOME TAXES
Pre-tax loss reflected in the consolidated statements of operations and comprehensive loss for the years ended March 31, 2026 and 2025 is as follows (in thousands):
Year Ended March 31,
2026 2025
U.S. $ (98,392) $ (112,416)
Foreign (1,646) (1,854)
Total $ (100,038) $ (114,270)

Income tax provision consists of the following (in thousands):
Year Ended March 31,
2026 2025
Current tax expense
   Federal $ —  $ — 
   State 19  36 
   Foreign 1,312  741 
      Total current tax expense 1,331  777 
Deferred tax expense (benefit)
   Federal 19  20 
   State 7  37 
   Foreign (349) (13)
      Total deferred tax expense (benefit) (323) 44 
Income tax provision $ 1,008  $ 821 

Income taxes paid, net of refunds received (in thousands):
For the year ended March 31,
2026
Federal $ — 
State (52)
Foreign
Belgium 116 
France 77 
India 149 
Israel 449 
Italy 93 
Malaysia 79 
Mexico 80 
United Kingdom 103 
Other Foreign Jurisdictions 100 
Total Foreign 1,246 
Total Income Taxes paid, net of refunds received $ 1,194 
Beginning with 2026 annual reporting, the Company adopted ASU 2023-09, Improvements to Income Tax Disclosures, prospectively as described in Note 9. In FY26, state and local income taxes in California, South Carolina, Minnesota, and New Jersey comprise the majority of the state and local income taxes, net of federal effect category.
A reconciliation of the federal statutory income tax rate of 21% to the effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended March 31, 2026 was as follows (in thousands, except percentages):
For the year ended March 31,
2026
At Statutory Rate $ (21,008) 21.0  %
State Income Taxes, net of Federal Effect 1,733  (1.7) %
Change in Valuation Allowance (7,131) 7.1  %
Nontaxable or Nondeductible Items
Loss on Debt Extinguishment 12,526  (12.5) %
Warrants Mark-to-Market (2,376) 2.4  %
Legal Services 2,368  (2.4) %
Other Nondeductible Items 1,477  (1.5) %
Changes in Tax Laws or Rates —  —  %
Tax Credits
R&D Credits 4,614  (4.6) %
Foreign Tax Credit 11,915  (11.9) %
Cross-Border Tax Laws
Subpart F Inclusion 281  (0.3) %
Worldwide Changes in UTB (4,683) 4.7  %
Other 519  (0.5) %
Foreign Tax Effects
Other Foreign Jurisdictions 773  (0.8) %
Total Tax Expense $ 1,008  (1.0) %

The income tax provision differs from the amount computed by applying the federal statutory rate of 21% to loss before income taxes as follows (in thousands):
For the year ended March 31,
2026 2025
Expense (benefit) at the federal statutory rate $ (21,008) 21.0  % $ (24,122) 21.1  %
Equity compensation 188  (0.2) % 580  (0.5) %
Permanent items 17,351  (17.3) % 309  (0.3) %
Foreign taxes 1,135  (1.1) % 299  (0.3) %
State income taxes 1,733  (1.7) % 36  —  %
Valuation allowance (7,152) 7.1  % 13,907  (12.2) %
Uncertain tax positions (4,722) 4.7  % (6,672) 5.8  %
Expiration of attributes 16,963  (17.0) % 8,427  (7.4) %
Research and development credits (367) 0.4  % (844) 0.7  %
Warrant fair value adjustments (2,376) 2.4  % 9,507  (8.3) %
Other (737) 0.8  % (606) 0.5  %
Income tax provision $ 1,008  (1.0) % $ 821  (0.7) %
Significant components of deferred tax assets and liabilities are as follows (in thousands):
As of March 31,
2026 2025
Deferred tax assets
Loss carryforwards $ 71,533  $ 61,466 
Deferred revenue 23,865  25,895 
Capitalized research and development 23,094  28,824 
Tax credits 2,817  15,517 
Disallowed interest 22,890  19,696 
Other accruals and reserves not currently deductible for tax purposes 3,651  3,913 
Lease obligations 1,853  2,016 
Inventory 4,537  3,779 
Acquired intangibles 989  1,285 
Accrued warranty expense 178  277 
Depreciation 1,491  1,755 
Gross deferred tax assets 156,898  164,423 
Valuation allowance (154,616) (161,730)
   Total deferred tax assets, net of valuation allowance 2,282  2,693 
Deferred tax liabilities
Lease assets (1,529) (1,711)
Other 290  (323)
   Total deferred tax liabilities (1,239) (2,034)
           Net deferred tax assets (liabilities) $ 1,043  $ 659 

The valuation allowance increased by $6.9 million during the year ended March 31, 2026 and increased by $14.1 million during the year ended March 31, 2025, respectively.

A reconciliation of the gross unrecognized tax benefits is as follows (in thousands):
For the year ended March 31,
2026 2025
Beginning Balance $ 81,678  $ 88,341 
Increase in balances related to tax positions in current period 1,050  1,558 
Increase (decrease) in balances related to tax positions in prior period 40  (12)
Decrease in balances due to lapse in statute of limitations (6,179) (8,209)
Ending balance $ 76,589  $ 81,678 

During fiscal 2026, excluding interest and penalties, there was a $(5.1) million change in the Company's unrecognized tax benefits. Including interest and penalties, the total unrecognized tax benefit at March 31, 2026 was $77.8 million, of which $68.8 million, if recognized, would favorably affect the effective tax rate. At March 31, 2026, accrued interest and penalties totaled $1.2 million. The Company's practice is to recognize interest and penalties related to income tax matters in the income tax provision in the consolidated statements of operations and comprehensive loss. As of March 31, 2026, $70.9 million of unrecognized tax benefits were recorded as a contra deferred tax asset in other long-term assets in the consolidated balance sheets and $6.9 million (including interest and penalties) were included in other long-term liabilities in the consolidated balance sheets.
The Company files its tax returns as prescribed by the laws of the jurisdictions in which it operates. The Company's U.S. tax returns have been audited for years through 2002 by the Internal Revenue Service. In other major
jurisdictions, the Company is generally open to examination for the most recent three to five fiscal years. During the next 12 months, it is reasonably possible that approximately $2.6 million of tax benefits, inclusive of interest and penalties, that are currently unrecognized could be recognized as a result of the expiration of applicable statutes of limitations. Upon recognition of the tax benefit related to the expiring statutes of limitation, $1.7 million will be offset by the establishment of a related valuation allowance. The net tax benefit recognized in the consolidated statements of operations and comprehensive loss is estimated to be $0.9 million.
As of March 31, 2026, the Company had federal net operating loss and tax credit carryforwards of approximately $324.8 million and $26.7 million, respectively. The net operating loss and tax credit carryforwards expire in varying amounts in fiscal 2026 if not previously utilized, and $151.5 million are indefinite-lived net operating loss carryforwards. These carryforwards include $5.3 million of acquired net operating losses, the utilization of which is subject to various limitations due to prior changes in ownership.
Certain changes in stock ownership could result in a limitation on the amount of both acquired and self-generated net operating loss and tax credit carryovers that can be utilized each year. If the Company has previously undergone, or should it experience in the future, such a change in stock ownership, it could severely limit the usage of these carryover tax attributes against future income, resulting in additional tax charges.
Due to its history of net losses and the difficulty in predicting future results, Quantum believes that it cannot rely on projections of future taxable income to realize the deferred tax assets. Accordingly, it has established a full valuation allowance against its U.S. and certain foreign net deferred tax assets. Significant management judgment is required in determining the Company's deferred tax assets and liabilities and valuation allowances for purposes of assessing its ability to realize any future benefit from its net deferred tax assets. The Company intends to maintain this valuation allowance until sufficient positive evidence exists to support the reversal of the valuation allowance. The Company's income tax expense recorded in the future will be reduced to the extent that sufficient positive evidence materializes to support a reversal of, or decrease in, its valuation allowance.