Quantum sells service inventory assets for $15 million

Quantum, beset by financial accounting issues, has realized $15 million by selling “certain service inventory assets” to an unnamed partner that will now provide third party logistics and asset management for Quantum’s Global Services operation.

Unstructured data manager and protector Quantum is facing difficulties in reporting its second fiscal 2024 quarter’s financial results due to problems reconciling the standalone selling prices for components it sold in bundles of products. These are proving so difficult to work out in a large number of transactions that it has had to ask for a reporting extension to May 7 from the Nasdaq stock exchange, where its shares are listed. Reporting failures could lead to Quantum’s shares being delisted.

The problems are delaying the reporting of Quantum’s third fiscal 2024 quarter’s results too, covering the three months to December 31, and the company admitted it has not completed preparation of financial statements for the fourth quarter and full fiscal 2024 year ended March 31, 2024. 

Quantum’s shares could also be delisted from Nasdaq due to the average share value falling below $1 dollar for 30 days. Quantum requested a hearing before delisting takes place and this is scheduled with the Nasdaq Hearings Panel for May 14. The company said in a statement it is “diligently working to comply with all of the applicable Nasdaq listing criteria within the period of time that the Panel may grant.”

It used a reverse stock split transaction in April 2017 to avoid a similar NYSE delisting threat.

The company has been able to issue unaudited cash and long-term debt balances as of March 31:

  • Cash and cash equivalents were $26.1 million 
  • Outstanding term loan debt was $87.9 million  
  • Outstanding borrowings under a revolving credit facility were $26.6 million  
  • Total interest expense for the three-month period ended March 31 was $4.1 million

The debt situation has improved because the service operation deal means Quantum can use the $15 million to pay down approximately $12.3 million of existing debt.

In related news, Quantum confirmed that after a three-year process it has completed implementation of its new Enterprise Resource Planning (ERP) system, and should see “a material reduction in associated capital expenditures in the future” and gain “future operational efficiencies throughout the organization.”

We now wait for Quantum to issue second, third, fourth quarter and full fiscal 2024 year results by May 7, and work out a stock delisting avoidance strategy by May 14.