SECURITIES & EXCHANGE COMMISSION EDGAR FILING

SECURITIES & EXCHANGE COMMISSION EDGAR FILING

QUANTUM CORP /DE/

Form: 10-K Date Filed: 2019-08-06

Corporate Issuer CIK: 709283

? Copyright 2019, Issuer Direct Corporation. All Right Reserved. Distribution of this document is strictly prohibited, subject to the terms of use.

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM

TO

Commission File Number 1-13449

QUANTUM CORPORATION

(Exact name of Registrant as specified in its Charter)

Delaware

( State or other jurisdiction of incorporation or organization)

94-2665054

(I.R.S. Employer Identification No.)

224 Airport Parkway, Suite 550 San Jose, California

(Address of principal executive offices)

95510

(Zip Code)

Registrant's telephone number, including area code: (408) 944-4000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Common Stock

Trading Symbol(s)

QMCO

Name of each exchange on which registered

OTC Markets

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES NO

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES NO

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES NO

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (?232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Non-accelerated filer

Accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES NO

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on the New York Stock Exchange (on which Registrant was listed) on September 28, 2018, the last business day of the Registrant's most recently completed second fiscal quarter was approximately $64,344,842. For purposes of this disclosure, shares of common stock held or controlled by executive officers and directors of the Registrant and by persons who held more than 5% of the outstanding shares of common stock as of September 28, 2018, have been treated as shares held by affiliates. However, such treatment should not be construed as an admission that such person is an "affiliate" of the Registrant.

The number of shares of Registrant's Common Stock outstanding as of September 28, 2018 was 35,551,570

DOCUMENTS INCORPORATED BY REFERENCE

None

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Table of Contents

Explanatory Note

Page

PART I

Item 1.

Business

3

Item 1A.

Risk Factors

12

Item 1B.

Unresolved Staff Comments

30

Item 2.

Properties

31

Item 3.

Legal Proceedings

31

Item 4.

Mine Safety Disclosures

32

PART II

Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 33

Selected Financial Data

34

Management's Discussion and Analysis of Financial Condition and Results of Operations

35

Quantitative and Qualitative Disclosures About Market Risk

59

Financial Statements and Supplementary Data

60

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

126

Controls and Procedures

127

Other Information

131

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

131

Item 11.

Executive Compensation

147

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

185

Item 13.

Certain Relationships and Related Transactions, and Director Independence

190

Item 14.

Principal Accounting Fees and Services

191

PART IV

Item 15.

Exhibits, Financial Statement Schedules

192

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Forward-Looking and Cautionary Statements

This Annual Report on Form 10-K, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7, contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Quantum Corporation and its consolidated subsidiaries ("Quantum") may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of revenue, margins, expenses, effective tax rates, the impact of the U.S. Tax Cuts and Job Act of 2017, including the effect on deferred tax assets, net earnings, net earnings per share, cash flows, currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring charges; any statements of the plans, strategies and objectives of management for future operations, as well as the execution of transformation and restructuring plans and any resulting cost savings, revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on Quantum and its financial performance; any statements regarding pending investigations, claims or disputes; the resolution of pending investigations; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the need to address the many challenges facing Quantum's businesses; the competitive pressures faced by Quantum's businesses; risks associated with executing Quantum's strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of Quantum's products and the delivery of Quantum's services effectively; the protection of Quantum's intellectual property assets, including intellectual property licensed from third parties; risks associated with Quantum's international operations; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by Quantum and its suppliers, customers, clients and partners; the hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; and the execution, timing and results of any transformation or restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of Quantum's business) and the anticipated benefits of the transformation and restructuring plans; the outcome of any claims and disputes; and other risks that are described herein, including but not limited to the items discussed in "Risk Factors" in Item 1A of Part I of this report and that are otherwise described or updated from time to time in Quantum's other filings with the Securities and Exchange Commission. Quantum assumes no obligation and does not intend to update these forward-looking statements.

Explanatory Note

This Annual Report on Form 10-K for the fiscal year ended March 31, 2019 includes Quantum Corporation's ("Quantum", the "Company", "us" or "we") audited consolidated financial statements for the fiscal years ended March 31, 2019, 2018 and 2017. The consolidated financial statements for the fiscal year ended March 31, 2017 and selected financial data for the fiscal years ended March 31, 2017, 2016 (unaudited) and 2015 (unaudited) are restated.

Background of Special Committee Investigation and Subsequent Management Review

On January 11, 2018, we received a subpoena from the Securities and Exchange Commission ("SEC") regarding our accounting practices and internal controls related to revenue recognition for transactions commencing April 1, 2016. As a result, we postponed the release of our financial results for the third quarter of fiscal 2018. In February 2018, the Audit Committee ("Audit Committee") of our Board of Directors ("Board"), and subsequently a special committee of the Board (the "Special Committee") consisting of two members of the Audit Committee, conducted an internal investigation, with the assistance of independent accounting and legal advisors, into matters related to our accounting practices and internal control over financial reporting related to revenue recognition for transactions occurring between January 1, 2016 and March 31, 2018.

In September 2018, the Special Committee substantially completed and finalized its principal findings with respect to its investigation. The principal findings included a determination that we engaged in certain business and sales practices that may have undermined our historical accounting treatment for transactions with several key distributors and at least one end customer. The Special Committee found that the identified transactions potentially affected by such practices commenced at least in the fourth quarter of fiscal 2015 and continued at least through the fourth quarter of fiscal 2018. The

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