Quantum (QMCO) risk factors, FY2025 10-K

Risks Related to Our Supply Chain, Customers and Sales Strategy

1. 01Cost increases, supply disruptions, or raw material shortages, including in single source components, could harm our business
2. 02We outsource our component supply, manufacturing, and service repair operations to third parties. Our business, financial condition, and operating results could face material adverse impacts if we cannot obtain parts, products, and services in a cost effective and timely manner that meets our customers’ expectations
3. 03Sole source of product supply
4. 04Cost and purchase commitments and processes
5. 05impact from any forecast reduction or product mix shift relative to materials already purchased under a prior forecast, including the cost of finished goods in excess of current customer demand or for excess or obsolete inventory
6. 06Financial condition and stability
7. 07Quality and supplier conduct
8. 08As a result of our global manufacturing and sales operations, we are subject to a variety of risks related to our business outside of the U.S., any of which could, individually or in the aggregate, have a material adverse effect on our business
9. 09We rely on indirect sales channels to market and sell our branded products. The loss of or deterioration in our relationship with one or more of our resellers or distributors, or our inability to establish new indirect sales channels to drive growth of our branded revenue, could negatively affect our operating results
10. 10disrupt our product distribution and reduce our revenue, which could materially and adversely affect our business, financial condition, and operating results
11. 11In addition, our sales efforts may involve long sales cycles during which we incur expenses to educate our customers about product use and benefits and support customer-driven product evaluations. These cycles may make it difficult for us to predict when, or if, future sales will occur
12. 12The U.S. federal government is an important customer, and our business may be materially and adversely harmed by changes in government purchasing activity

Risks Related to Our Operating Results, Financial Condition, or Stock Price

1. 13We continue to face risks related to inflation, economic uncertainty, and slow economic growth
2. 14Our stock price has experienced significant volatility in the past, and continued volatility may cause our common stock trading price to remain volatile or decline
3. 15Significant changes to our leadership team and management transitions might harm our future operating results
4. 16We may be unable to attract and retain key talent necessary to effectively meet our business objectives
5. 17Our quarterly operating results have fluctuated significantly, and past results should not be used to predict future performance
6. 18Our operating results depend on continuing and increasing market acceptance of our existing products and on new product introductions, which may be unsuccessful, in which case our business, financial condition and results of operations may be materially and adversely affected
7. 19A significant decline in our media royalty or branded software revenues could materially and adversely affect our business, financial condition and operating results

Risks Related to Our Indebtedness and Liquidity

1. 20We must maintain compliance with the terms of our existing credit facilities or receive a waiver for any non-compliance. The failure to do so could have a material adverse effect on our ability to finance our ongoing operations and we may not be able to find an alternative lending source if a default occurs
2. 21On January 25, 2025, we entered into the SEPA with YA II PN, Ltd., a Cayman Islands exempt limited partnership (“YA”), pursuant to which YA committed to purchase up to $200.0 million in shares of our common stock, subject to certain limitations and conditions

Risks Related to Our Business and Industry

1. 22If we do not successfully manage the changes that we have made and may continue to make to our business model, infrastructure, and management, our business could be disrupted, and that could adversely impact our operating results and financial condition
2. 23We have taken considerable steps towards reducing our cost structure. The steps we have taken may not reduce our cost structure to a level appropriate in relation to our future sales and therefore, these cost reductions may be insufficient to achieve profitability
3. 24The failure to successfully integrate future acquired businesses, products or technologies could harm our business, financial condition, and operating results
4. 25We maintain sensitive data related to our employees, strategic partners, and customers, including personally identifiable information, intellectual property, and proprietary business information on our own systems. In addition, many of our customers and partners store sensitive data on our products
5. 26If our products fail to meet our or our customers’ specifications for quality and reliability, we may face liability and reputational or financial harm which may adversely impact our operating results and our competitive position may suffer
6. 27These factors could cause our business, financial condition and results of operations to be materially and adversely affected
7. 28Competition is intense in the data storage and protection market in which we operate
8. 29Some of those competitors are much larger and financially stronger, have more diverse product offerings, and aggressively compete based on their reputations and greater size

Risks Related to Intellectual Property

1. 30Some of our products contain licensed, third-party technology that provides important product functionality and features. The loss or inability to obtain any such license could have a material adverse effect on our business
2. 31Third-party intellectual property infringement claims could result in substantial liability and significant costs, and, as a result, our business, financial condition and results of operations may be materially and adversely affected
3. 32If we fail to protect our intellectual property or if others use our proprietary technology without authorization, our competitive position may suffer

Risks Related to Regulatory Matters

1. 33We are subject to many laws and regulations, and violation of or changes in those requirements could materially and adversely affect our business
2. 34Our actual or perceived failure to adequately protect personally identifiable information could adversely affect our business, financial condition, and operating results

Risks Related to Being a Public Company

1. 35We incur significant costs as a result of operating as a public company, and our management devotes substantial time to complying with public company regulations
2. 36The listing of our common stock on the Nasdaq Global Market is contingent on our compliance with the Nasdaq Global Market’s rules for continued listing
3. 37Form 10-Q for the fiscal quarters ended September 30, 2023 and December 31, 2023. The Nasdaq Staff initially provided us until May 7, 2024 to regain compliance with the Filings Requirement
4. 38On September 17, 2024, we received a letter from the Nasdaq Staff confirming that we regained compliance and that our securities will continue to be listed on Nasdaq
5. 39On July 17, 2025, we received written notice from Nasdaq that we were not in compliance with the Filings Requirement as a result of our failure to timely file the Annual Report on Form 10-K for the fiscal year ended March 31, 2025 (the "2025 10-K")
6. 40We have restated certain of our prior consolidated financial statements, which has resulted in unanticipated costs and may lead to additional risks and uncertainties, including loss of investor confidence and negative impacts on our stock price
7. 41Some of these material weaknesses resulted in the restatement of the unaudited condensed quarterly financial information for the quarterly period ended December 31, 2024
8. 42We face risks related to health epidemics which could have a material adverse effect on our business and results of operations
9. 43We are exposed to fluctuations in foreign currency exchange rates, and an adverse change in foreign currency exchange rates relative to our position in such currencies could have a material adverse impact on our business, financial condition and results of operations
10. 44If the future outcomes related to the estimates used in recording tax liabilities to various taxing authorities result in higher tax liabilities than estimated, then we would have to record tax charges, which could be material
11. 45We have never paid dividends on our capital stock, and we do not anticipate paying dividends in the foreseeable future
12. 46Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt