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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

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

If an emerging growth company, indicate by checkmark 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 number~~Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

As of October 28, 2021, the registrant had 129,879,238 shares of ~~the Registrant’s Common Stock, $.001~~common stock, $0.001 par value ~~outstanding at February 2, 2018, was 115,267,499~~

	December 31, 2017			June 30, 2017
				(As adjusted)			September 30, 2021			June 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	127,108		$	130,450
Accounts receivable, net of allowance for doubtful accounts of $1,382 at December 31, 2017 and $1,190 at June 30, 2017		154,906			93,115
Cash							$	191,349		$	246,894
Accounts receivable, net								129,611			156,476
Inventories		83,377			47,410			32,439			32,885
Prepaid expenses and other current assets		24,772			27,867			70,772			51,340
Total current assets		390,163			298,842			424,171			487,595
Property and equipment, net		68,565			30,240			52,878			55,004
Operating lease right-of-use assets, net								33,820			36,927
Intangible assets, net		92,925			25,337			45,898			36,038
Goodwill		130,988			80,216			387,808			331,159
Other assets		44,267			25,065			64,229			63,370
Total assets	$	726,908		$	459,700		$	1,008,804		$	1,010,093
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	22,426		$	12,280
Current portion of long-term debt, net of unamortized debt issuance costs of $2,356 and $2,404, respectively							$	26,144		$	23,721
Accounts payable		73,553			31,587			63,394			60,142
Accrued compensation and benefits		49,104			42,662			52,098			71,610
Accrued warranty		13,010			10,584			10,780			11,623
Deferred revenue		113,664			79,048
Current portion of operating lease liabilities								18,453			18,743
Current portion of deferred revenue								216,807			212,412
Other accrued liabilities		74,517			37,044			67,384			57,449
Total current liabilities		346,274			213,205			455,060			455,700
Deferred revenue, less current portion		38,693			25,293			139,216			133,172
Long-term debt, less current portion		160,712			80,422
Long-term debt, less current portion, net of unamortized debt issuance costs of $4,121 and $4,760, respectively								297,379			315,865
Operating lease liabilities, less current portion								28,744			32,515
Deferred income taxes		5,163			6,576			3,986			3,828
Other long-term liabilities		64,347			8,526			12,094			14,545
Commitments and contingencies (Note 9)
Stockholders’ equity:
Convertible preferred stock, $.001 par value, issuable in series, 2,000,000 shares authorized; none issued		—			—
Common stock, $.001 par value, 750,000,000 shares authorized; 113,931,341 shares issued and outstanding at December 31, 2017 and 110,924,508 shares issued and outstanding at June 30, 2017		114			111
Convertible preferred stock, $0.001 par value, issuable in series, 2,000 shares authorized; NaN issued								—			—
Common stock, $0.001 par value, 750,000 shares authorized; 136,351 and 133,279 shares issued, respectively; 129,754 and 126,682 shares outstanding, respectively								136			133
Additional paid-in-capital		921,716			909,155			1,084,671			1,078,602
Accumulated other comprehensive loss		(1,278	)		(2,302	)		(3,722	)		(2,811	)
Accumulated deficit		(808,833	)		(781,286	)		(965,647	)		(978,343	)
Treasury stock at cost, 6,597 shares								(43,113	)		(43,113	)
Total stockholders’ equity		111,719			125,678			72,325			54,468
Total liabilities and stockholders’ equity	$	726,908		$	459,700		$	1,008,804		$	1,010,093

	Three Months Ended
	September 30, 2021			September 30, 2020
Net revenues:
Product	$	185,161		$	161,396
Service and subscription		82,523			74,406
Total net revenues		267,684			235,802
Cost of revenues:
Product		80,944			73,395
Service and subscription		31,137			27,389
Total cost of revenues		112,081			100,784
Gross profit:
Product		104,217			88,001
Service and subscription		51,386			47,017
Total gross profit		155,603			135,018
Operating expenses:
Research and development		47,766			49,524
Sales and marketing		69,527			64,325
General and administrative		17,003			16,461
Acquisition and integration costs		1,510			1,975
Restructuring and related charges		279			1,001
Amortization of intangibles		1,154			1,792
Total operating expenses		137,239			135,078
Operating income (loss)		18,364			(60	)
Interest income		110			118
Interest expense		(3,880	)		(6,663	)
Other income (expense), net		171			(887	)
Income (loss) before income taxes		14,765			(7,492	)
Provision for income taxes		2,069			1,320
Net income (loss)	$	12,696		$	(8,812	)

Basic and diluted income (loss) per share:
Net income (loss) per share - basic	$	0.10		$	(0.07	)
Net income (loss) per share - diluted	$	0.10		$	(0.07	)

Shares used in per share calculation - basic		128,324			121,705
Shares used in per share calculation - diluted		133,225			121,705

Three Months Ended

Six Months Ended

December 31,
2017

December 31,
2016

December 31,
2017

December 31,
2016

(As adjusted)

(As adjusted)

Net revenues:

Product

$
174,850

$
118,055

$
339,624

$
208,148

Service

56,273

38,322

103,214

70,833

Total net revenues

231,123

156,377

442,838

278,981

Cost of revenues:

Product

78,472

62,627

158,517

106,876

Service

23,665

14,098

42,954

26,567

Total cost of revenues

102,137

76,725

201,471

133,443

Gross profit:

Product

96,378

55,428

181,107

101,272

Service

32,608

24,224

60,260

44,266

Total gross profit

128,986

79,652

241,367

145,538

Operating expenses:

Research and development

45,907

24,013

80,192

42,312

Sales and marketing

65,659

41,025

121,220

77,884

General and administrative

11,669

9,397

23,854

17,684

Acquisition and integration costs, net of bargain purchase gain

34,115

4,169

38,359

6,490

Restructuring and related charges, net of reversals

—

1,853

—

1,853

Amortization of intangibles

2,746

2,175

4,360

6,317

Total operating expenses

160,096

82,632

267,985

152,540

Operating loss

(31,110
)

(2,980
)

(26,618
)

(7,002
)
Interest income

717

81

1,364

138

Interest expense

(2,504
)

(1,176
)

(4,719
)

(1,823
)
Other income (expense), net

(643
)

1,025

2,484

802

Loss before income taxes

(33,540
)

(3,050
)

(27,489
)

(7,885
)
Provision (benefit) for income taxes

(1,617
)

1,179

58

2,086

Net loss

$
(31,923
)

$
(4,229
)

$
(27,547
)

$
(9,971
)
Basic and diluted net loss per share:

Net loss per share - basic

$
(0.28
)

$
(0.04
)

$
(0.24
)

$
(0.09
)
Net loss per share - diluted

$
(0.28
)

$
(0.04
)

$
(0.24
)

$
(0.09
)
Shares used in per share calculation - basic

113,621

107,425

112,931

106,690

Shares used in per share calculation - diluted

113,621

107,425

112,931

106,690

	Three Months Ended
	September 30, 2021			September 30, 2020
Net income (loss)	$	12,696		$	(8,812	)
Other comprehensive income (loss):
Derivatives designated as hedging instruments:
Change in unrealized gains and losses on interest rate swaps		(85	)		(173	)
Reclassification adjustment related to interest rate swaps		281			160
Change in unrealized gains and losses on foreign currency forward contracts		(201	)		—
Net decrease from derivatives designated as hedging instruments		(5	)		(13	)
Net change in foreign currency translation adjustments		(906	)		1,455
Other comprehensive income (loss)		(911	)		1,442
Total comprehensive income (loss)	$	11,785		$	(7,370	)

	Common Stock				Additional Paid-			Accumulated Other			Treasury Stock						Accumulated			Total Stockholders'
	Shares		Amount		In-Capital			Comprehensive Loss			Shares			Amount			Deficit			Equity
Balance at June 30, 2020		127,114	$	127	$	1,035,041		$	(6,378	)		(6,597	)	$	(43,113	)	$	(980,279	)	$	5,398
Net loss		—		—		—			—			—			—			(8,812	)		(8,812	)
Other comprehensive income		—		—		—			1,442			—			—			—			1,442
Issuance of common stock from equity incentive plans, net of tax withholdings		2,418		3		3,578			—			—			—			—			3,581
Share-based compensation		—		—		8,302			—			—			—			—			8,302
Balance at September 30, 2020		129,532	$	130	$	1,046,921		$	(4,936	)		(6,597	)	$	(43,113	)	$	(989,091	)	$	9,911

Balance at June 30, 2021		133,279		133		1,078,602			(2,811	)		(6,597	)		(43,113	)		(978,343	)		54,468
Net income		—		—		—			—			—			—			12,696			12,696
Other comprehensive loss		—		—		—			(911	)		—			—			—			(911	)
Issuance of common stock from equity incentive plans, net of tax withholdings		3,072		3		(4,375	)		—			—			—			—			(4,372	)
Share-based compensation		—		—		10,444			—			—			—			—			10,444
Balance at September 30, 2021		136,351	$	136	$	1,084,671		$	(3,722	)		(6,597	)	$	(43,113	)	$	(965,647	)	$	72,325

Three Months Ended

Six Months Ended

December 31,
2017

December 31,
2016

December 31,
2017

December 31,
2016

(As adjusted)

(As adjusted)

Net loss:

$
(31,923
)

$
(4,229
)

$
(27,547
)

$
(9,971
)
Other comprehensive income (loss), net of tax:

Available for sale securities:

Change in unrealized gains on available for sale securities

54

—

237

—

Net change in foreign currency translation adjustments

432

(421
)

787

(974
)
Other comprehensive income (loss), net of tax:

486

(421
)

1,024

(974
)
Total comprehensive loss

$
(31,437
)

$
(4,650
)

$
(26,523
)

$
(10,945
)

	Six Months Ended
	December 31, 2017			December 31, 2016			Three Months Ended
				(As adjusted)			September 30, 2021			September 30, 2020
Cash flows from operating activities:
Net loss	$	(27,547	)	$	(9,971	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Net income (loss)							$	12,696		$	(8,812	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		8,093			4,832			5,155			6,727
Amortization of intangible assets		11,023			11,593			6,440			8,491
Reduction in carrying amount of right-of-use asset								3,902			4,038
Provision for doubtful accounts		1,180			154			26			-
Stock-based compensation		11,828			6,856
Share-based compensation								10,444			8,302
Deferred income taxes		(2,135	)		923			682			312
Non-cash restructuring and related charges		—			1,718
Realized gain on sale of non-marketable equity investment		(3,757	)		—
Realized gain on bargain purchase		(4,920	)		—
Other non-cash items		1,818			(243	)
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed
Non-cash interest expense								1,314			1,103
Other								(176	)		1,380
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable		(11,188	)		(7,756	)		28,281			(910	)
Inventories		(449	)		4,313			604			6,628
Prepaid expenses and other assets		1,188			6,823			(18,640	)		(1,521	)
Accounts payable		17,547			(4,444	)		2,577			10,628
Accrued compensation and benefits		3,734			(916	)		(22,540	)		(5,482	)
Operating lease liabilities								(4,839	)		(4,812	)
Deferred revenue		4,446			(2,469	)		7,680			6,607
Other current and long-term liabilities		3,387			7,875			6,648			(7,934	)
Net cash provided by operating activities		14,248			19,288			40,254			24,745
Cash flows from investing activities:
Capital expenditures		(13,309	)		(4,662	)		(3,410	)		(3,023	)
Acquisitions		(97,581	)		(51,088	)
Proceeds from sale of non-marketable equity investment		4,922			—
Business acquisition, net of cash acquired								(69,517	)		—
Net cash used in investing activities		(105,968	)		(55,750	)		(72,927	)		(3,023	)
Cash flows from financing activities:
Borrowings under Term Loan		100,000			48,250
Repayments of debt		(8,686	)		(5,513	)
Loan fees on borrowings		(1,494	)		(1,327	)
Proceeds from issuance of common stock, net of tax withholding		(1,536	)		4,831
Net cash provided by financing activities		88,284			46,241
Payments on debt obligations								(16,750	)		(24,750	)
Payments for tax withholdings, net of proceeds from issuance of common stock								(4,372	)		3,581
Payment of contingent consideration obligations								(559	)		(603	)
Deferred payments on an acquisition								(1,000	)		(1,000	)
Net cash used in financing activities								(22,681	)		(22,772	)
Foreign currency effect on cash		94			(115	)		(191	)		294
Net (decrease) increase in cash and cash equivalents		(3,342	)		9,664
Net decrease in cash								(55,545	)		(756	)

Cash and cash equivalents at beginning of period		130,450			94,122
Cash and cash equivalents at end of period	$	127,108		$	103,786
Cash at beginning of period								246,894			193,872
Cash at end of period							$	191,349		$	193,116

Extreme Networks, Inc., together with its subsidiaries (collectively referred to as “Extreme” or the “Company”), is a leader in providing software-driven networking solutions for enterprise customers. The Company conducts its sales and marketing activities on a worldwide basis through distributors, resellers and the Company’s field sales organization. Extreme was incorporated in California in 1996 and reincorporated in Delaware in 1999.

The unaudited condensed consolidated financial statements of Extreme included herein have been prepared under the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted under such rules and regulations. The condensed consolidated balance sheet at June 30, ~~2017~~2021 was derived from audited financial statements as of that date but does not include all disclosures required by generally accepted accounting principles for complete financial statements. These interim financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017.~~2021.

The unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations and cash flows for the interim periods presented and the financial condition of Extreme at ~~December 31, 2017.~~September 30, 2021. The results of operations for the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2021 are not necessarily indicative of the results that may be expected for fiscal ~~2018~~2022 or any future periods.

Effective July 1, 2017, the Company adopted the requirements of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers. All amounts and disclosures set forth in this Form 10-Q have been updated to comply with the new standards, as indicated by the “as adjusted” footnote.

The Company uses a fiscal calendar year ending on June 30. All references herein to “fiscal ~~2018”~~2022” or ~~“2018”~~“2022” represent the fiscal year ending June 30, ~~2018.~~2022. All references herein to “fiscal ~~2017”~~2021” or ~~“2017”~~“2021” represent the fiscal year ~~ending~~ended June 30, ~~2017.~~2021.

The unaudited condensed consolidated financial statements include the accounts of Extreme and its ~~wholly-owned~~wholly owned subsidiaries. All inter-company accounts and transactions have been eliminated.

The Company predominantly uses the United States Dollar as its functional currency. The functional currency for certain of its foreign subsidiaries is the local currency. For those subsidiaries that operate in a local functional currency ~~functional~~ environment, all assets and liabilities are translated to United States Dollars at current month end rates of ~~exchange;~~exchange and ~~revenue~~revenues and expenses are translated using the monthly average rate.

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates are used for, but are not limited to, the accounting for the allowances for doubtful accounts and sales returns, determining the fair value of acquired assets and assumed liabilities, estimated selling prices, inventory valuation and purchase commitments, depreciation and amortization, impairment of long-lived assets including goodwill, warranty accruals, restructuring liabilities, measurement of share-based compensation costs and income taxes. Actual results could differ from these estimates.

~~Certain amounts from prior years have been reclassified to conform to the current year’s presentation in the accompanying condensed consolidated statements of cash flow.~~ ~~The reclassification had no impact on previously reported net loss or accumulated deficit.~~

The Company completed three acquisitions during the six months ended December 31, 2017. The acquisitions have been accounted for using the acquisition method of accounting. The purchase price has been allocated on a preliminary basis to tangible and identifiable intangible assets acquired and liabilities assumed. The fair value of working capital related items, such as other current assets and accrued liabilities, approximated their book values at the date of acquisition. Inventories were valued at fair value using the net realizable value approach. The fair value of property and equipment was determined using a cost approach. The fair value of the acquired deferred revenue was estimated using the cost build-up approach. The cost build-up approach determines fair value using estimates of the costs required to provide the contracted deliverables plus an assumed profit. The total costs including the assumed profit were adjusted to present value using a discount rate considered appropriate. The resulting fair value approximates the amount that the Company would be required to pay to a third party to assume the obligation. Valuations of the intangible assets were valued using income approaches based on management projections, which we consider to be Level 3 inputs. The Company also continues to analyze the tax implications of the acquisition of the intangible assets which may ultimately impact the overall level of goodwill associated with the acquisition.

The final purchase price allocation is pending the finalization of valuations, which may result in an adjustment to the preliminary purchase price allocation. Also, additional information which existed as of the acquisition dates, but was unknown to the Company at that time, may become known to the Company during the remainder of the measurement period (up to one year from the acquisition dates), and may result in a change in the purchase price allocation. While management believes that its preliminary estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. Results of operations of the acquired entities are included in the Company’s operations beginning with the closing date of each acquisition.

On October 27, 2017 (the “Brocade Closing”), the Company completed its acquisition of the data center business (the “Data Center Business”) of Brocade Communication Systems, Inc.’s (“Brocade”), pursuant to an Asset Purchase Agreement (the “Brocade APA”) dated as of October 3, 2017, by and between the Company and Brocade. Under the terms and conditions of the Brocade APA, the Company acquired customers, employees, technology and other assets of the Data Center Business as well as assumed certain contracts and other liabilities of the Data Center Business.

~~The fair value of consideration transferred on the Brocade Closing date includes:~~

~~The components of aggregate estimated purchase consideration are as follows (in thousands):~~

~~The following table below summarizes the preliminary allocation as of October 27, 2017 of the tangible and identifiable intangible assets acquired and liabilities assumed:~~

~~The following table presents details of the identifiable intangible assets acquired as part of the acquisition (in thousands, except years):~~

The amortization for the developed technology is recorded in “Cost of revenues” for product and the amortization for the remaining intangibles is recorded in “Amortization of intangibles” in the accompanying condensed consolidated statements of operations. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of the Data Center Business. The Company anticipates both the goodwill and intangible assets to be fully deductible for income tax purposes.

~~The results of operations of the~~ ~~Data Center Business~~ ~~are included with those of the Company beginning October 28, 2017.~~ The associated expenses of the Data Center Business have been incorporated with the results of operations of the Company as a product line and, therefore, stand-alone operating results are not available. In the three and six months ended December 31, 2017 the Company incurred $32.5 million and $33.8 million, respectively, of acquisition and integration related expenses associated with the acquisition of the Data Center Business, including a $25.0 consent fee paid to terminate a previous asset purchase agreement entered into by the Company to purchase the Data Center Business from Broadcom Corporation, in anticipation of Broadcom’s proposed acquisition of Brocade. The fee was paid to allow the Company to buy the Data Center Business directly from Brocade. ~~Such acquisition-related costs are included in “Acquisition and integration costs,~~ ~~net of bargain purchase gain~~” in the accompanying condensed consolidated statements of operations. The costs, which the Company expensed as incurred, consist primarily of professional fees to financial and legal advisors and IT consultants and companies.

On July 14, 2017, (the “Avaya Closing Date”) the Company completed its acquisition of Avaya Inc.’s. (“Avaya”) fabric-based secure networking solutions and network security solutions business (the “Campus Fabric Business”) that had been announced on March 7, 2017. Upon the terms and subject to the conditions of the Asset Purchase Agreement (the “Avaya APA”), the Company acquired the customers, employees, technology and other assets of the Campus Fabric Business, as well as assumed certain contracts and other liabilities of the Campus Fabric Business, for total provisional consideration of ~~$79.8~~ million, calculated as $100.0 million, less adjustments set forth in the Avaya APA related to net working capital, deferred revenue, certain assumed lease obligations and certain assumed pension obligations for transferring employees of the Campus Fabric Business. Pursuant to certain ancillary agreements, Avaya will also provide the Company with transition services for a period of time following the Avaya Closing Date. As a condition of the Avaya APA, the Company had made deposits of $10.2 million in the third quarter of fiscal 2017, which were applied to the purchase price upon the Avaya Closing Date.

~~The following table below summarizes the preliminary allocation as of December 31, 2017 of the tangible and identifiable intangible assets acquired and liabilities assumed:~~

Preliminary Allocation as of
September 30, 2017

Change during three months ended December 31, 2017

Preliminary Allocation as of
December 31, 2017

Accounts receivables
$
18,112

$
183

(a)
$
18,295

Inventories

16,605

(1,060
)
(b)(c)

15,545

Prepaid expenses and other current assets

673

—

673

Property and equipment

3,768

—

3,768

Other assets

2,568

2,743

(c)

5,311

Accounts payable and accrued expenses

(29,716
)

(2,203
)
(d)(f)

(31,919
)
Deferred revenue

(10,214
)

163

(d)(e)

(10,051
)
Other long-term liabilities

(6,608
)

1,403

(f)

(5,205
)
Net tangible assets acquired

(4,812
)

1,229

(3,583
)
Identifiable intangible assets

44,000

2,900

(g)

46,900

In-process research and development

2,300

200

(g)

2,500

Goodwill

38,338

(4,329
)

34,009

Total intangible assets acquired

84,638

(1,229
)

83,409

Total net assets acquired
$
79,826

$
—

$
79,826

The changes during the period in the table above include: a) additional information on accounts receivable as of the acquisition date, b) additional receipts of product, c) a reclassification from inventories to other assets related to service parts, d) a reclassification from deferred revenue to accounts payable, e) an adjustment of the fair value of deferred maintenance revenue, f) a reclassification from long-term liabilities to short-term related to liabilities assumed, g) revised net realizable value based on usefulness of identifiable intangible assets and in-process research and development acquired.

~~The following table presents details of the identifiable intangible assets acquired as part of the acquisition (in thousands, except years):~~

The amortization for the developed technology is recorded in “Cost of revenues” for product and the amortization for the remaining intangibles is recorded in “Amortization of intangibles” in the accompanying condensed consolidated statement of operations. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of the Campus Fabric Business. The Company anticipates both the goodwill and intangible assets to be fully deductible for income tax purposes.

The Company also acquired an indefinite lived asset of $2.5 million which represents the fair value of in-process research and development activities. Once the related research and development efforts are completed, the Company will determine whether the asset will continue to be an indefinite lived asset or become a finite lived asset and apply the appropriate accounting accordingly.

~~The results of operations of the~~ ~~Campus Fabric~~ ~~Business are included in the accompanying condensed consolidated results of operations beginning July 14, 2017.~~ The associated expenses of the Campus Fabric Business have been incorporated with the results of operations of the Company as a product line and, therefore, stand-alone operating results are not available. In the three and six months ended December 31, 2017, the Company incurred $6.6 million and $9.5 million, respectively, of acquisition and integration related expenses associated with the acquisition of the Campus Fabric Business. Such acquisition-related costs are included in “Acquisition and integration costs~~, net of bargain purchase gain~~” in the accompanying condensed consolidated statements of operations. The costs, which the Company expensed as incurred, consist primarily of professional fees to financial and legal advisors and IT consultants and companies.

On December 1, 2017, Company completed its acquisition of a capital financing business (the “CF Business”), pursuant to a Bill of Sale and Assignment and Assumption Agreement (the “Assumption Agreement”) between the Company and Broadcom. Under the terms and conditions of the Assumption Agreement, the Company acquired customers, employees, contracts and lease equipment of the CF Business equal to the earn out payments to Broadcom of 90% of acquired financing receivables to be collected commencing at the closing date.

Net assets acquired included financing receivables of $13.8 million, lease equipment of $3.5 million and identifiable intangible assets of $0.6 million, and the fair value of the contingent consideration was $12.9 million. As the preliminary fair value of the net assets acquired exceeded the fair value of the purchase consideration, the Company recorded a gain from the bargain purchase of $4.9 million in “Acquisition and integration costs, net of bargain purchase gain” in the accompanying condensed consolidated statements of operations for the second quarter of fiscal 2018. Acquisition and integration related expenses associated with the acquisition of the CF Business were immaterial.

On ~~October 28, 2016, the Company completed the acquisition of the~~ wireless local area network business (“WLAN Business”) from Zebra Technologies Corporation. Under the terms of the WLAN Asset Purchase Agreement, the Company acquired customers, employees, technology and other assets as well as assumed certain contracts and other liabilities of the WLAN Business, for a net cash consideration to $49.5 million. ~~The following table below summarizes the final allocation of the tangible and identifiable intangible assets acquired and liabilities assumed:~~

The following unaudited pro forma results of operations are presented as though the acquisitions of the Data Center Business, CF Business, Campus Fabric Business and WLAN Businesses had occurred as of the beginning of the earliest period presented after giving effect to purchase accounting adjustments relating to inventories, deferred revenue, depreciation and amortization on acquired property and equipment and intangibles, acquisition costs, interest income and expense and related tax effects.

The pro forma results of operations are not necessarily indicative of the combined results that would have occurred had the acquisition been consummated as of the earliest period presented, nor are they necessarily indicative of future operating results. The unaudited pro forma results do not include the impact of synergies, nor any potential impacts on current or future market conditions which could alter the unaudited pro forma results.

The unaudited pro forma financial information for the three and six months ended December 31, 2017, combines the results for Extreme for the three and six months ended December 31, 2017, which include the results of the Data Center Business, CF Business and Campus Fabric Business subsequent to the acquisition date and their historical results up to the acquisition date.

The unaudited pro forma financial information for the three and six months ended December 31, 2016, combines the historical results for Extreme for those periods, as adjusted for the adoption of ASC 606, with the historical results of the Data Center Business, CF Business and Campus Fabric Business for the three and six months ended December 31, 2016, as well as the historical results of the WLAN Business up to the acquisition date.

Pro forma results of operations from the Data Center Business, CF Business, Campus Fabric Business and WLAN Business acquisitions included in the pro forma results of operations for the three and six months ended December 31, 2016 or 2017 have not

~~been adjusted for the adoption of ASC 606 because the Company determined that it is impractical to estimate the impact of the adoption.~~

~~The following table summarizes the unaudited pro forma financial information (in thousands, except per share amounts):~~

Three Months Ended

Six Months Ended

December 31,
2017

December 31,
2016

December 31,
2017

December 31,
2016

(As adjusted)

(As adjusted)

Net revenues

$
252,532

$
311,503

$
537,040

$
644,435

Net income (loss)

$
1,152

$
(62,134
)

$
(7,622
)

$
(95,972
)
Net income (loss) per share - basic

$
0.01

$
(0.58
)

$
(0.07
)

$
(0.90
)
Net income (loss) per share - diluted

$
0.01

$
(0.58
)

$
(0.07
)

$
(0.90
)
Shares used in per share calculation - basic

113,621

107,425

112,931

106,690

Shares used in per share calculation - diluted

119,656

107,425

112,931

106,690

For a description of significant accounting policies, see Note 3,2, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017. Except for the following policies, there~~2021. There have been no material changes to the Company’s significant accounting policies since the filing of the Annual Report on Form 10-K.

The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company adopted on July 1, 2017, using the retrospective method. The Company derives the majority of its revenue from sales of its networking equipment, with the remaining revenue generated from service fees relating to maintenance contracts, professional services, and training for its products. The Company sells its products and maintenance contracts direct to customers and to partners in two distribution channels, or tiers. The first tier consists of a limited number of independent distributors that stock its products and sell primarily to resellers. The second tier of the distribution channel consists of a non-stocking distributors and value-added resellers that sell directly to end-users. Products and services may be sold separately or in bundled packages.

The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. For each contract, the Company considers the promise to transfer products and services, each of which are distinct, to be the identified performance obligations. In determining the transaction price the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled.

For all of the Company’s sales and distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment for product sales. Revenue from maintenance contracts is recognized over time as the Company’s performance obligations are satisfied. This is typically the contractual service period, which ranges from one to three years. For product sales to value-added resellers of the Company, non-stocking distributors and end-user customers, the Company generally does not grant return privileges, except for defective products during the warranty period, nor does the Company grant pricing credits. Sales incentives and other programs that the Company may make available to these customers are considered to be a form of variable consideration and the Company maintains estimated accruals and allowances using the expected value method. There were no material changes in the current period to the estimated transaction price for performance obligations which were satisfied or partially satisfied during previous periods.

Sales to stocking distributors are made under terms allowing certain price adjustments and limited rights of return (known as “stock rotation”) of the Company’s products held in their inventory. Revenue from sales to distributors is recognized upon the transfer of control to the distributor. Frequently, distributors need to sell at a price lower than the contractual distribution price in order to win business, and submit rebate requests for Company pre-approval prior to selling the product through at the discounted price. At the time the distributor invoices its customer or soon thereafter, the distributor submits a rebate claim to the Company to adjust the distributor’s cost from the contractual price to the pre-approved lower price. After the Company verifies that the claim was pre-approved, a credit memo is issued to the distributor for the rebate claim. In determining the transaction price, the Company considers these rebate adjustments to be variable consideration. Such price adjustments are estimated using the expected value method based on an analysis of actual claims, at the distributor level over a trailing twelve-month period of time considered adequate to account for current pricing and business trends. Stock rotation rights grant the distributor the ability to return certain specified amounts of inventory. Stock rotation adjustments are an additional form of variable consideration and are also estimated using the expected value

method based on historical return rates. There were no material changes in the current period to the estimated variable consideration for performance obligations which were satisfied or partially satisfied during previous periods.

~~Performance Obligations.~~ A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Certain of the Company’s contracts have multiple performance obligations, as the promise to transfer individual goods or services is separately identifiable from other promises in the contracts and, therefore, is distinct. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on its relative standalone selling price. The stand-alone selling prices are determined based on the prices at which the Company separately sells these products. For items that are not sold separately, the Company estimates the stand-alone selling prices using the best estimated selling price approach.

The Company’s performance obligations are satisfied at a point in time or over time as work progresses. Substantially all of the Company’s product sales revenues as reflected on the consolidated statements of operations for the three-month and six-month periods ended December 31, 2017, and 2016 are recognized at a point in time. Substantially all of the Company’s service revenue is recognized over time. For revenue recognized over time, the Company uses an input measure, days elapsed, to measure progress.

On December 31, 2017, the Company had $152.4 million of remaining performance obligations, which is comprised of deferred maintenance revenue and services not yet delivered. The Company expects to recognize approximately 54 percent of its remaining performance obligations as revenue in fiscal 2018, an additional 31 percent by fiscal 2019 and 15 percent of the balance thereafter.

~~Contract Balances.~~ The timing of revenue recognition, billings and cash collections results in billed accounts receivable and deferred revenue in the consolidated balance sheet. Services provided under renewable support arrangements of the Company are billed in accordance with agreed-upon contractual terms, which are typically at periodic intervals (e.g., quarterly or annually). The Company sometimes receives payments from its customers in advance of services being provided, resulting in deferred revenues. These liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period.

Revenue recognized for the six-month periods ended December 31, 2017 and 2016, that was included in the deferred revenue balance at the beginning of each period was $53.1 million and $49.7 million respectively. Revenue recognized for the three-month periods ended December 31, 2017 and 2016, that was included in the deferred revenue balance at the beginning of each period was $36.9 million and $33.5 million, respectively.

~~Contract Costs~~. The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. Management expects that commission fees paid to sales representative as a result of obtaining service contracts and contract renewals are recoverable and therefore the Company capitalized them as contract costs in the amount of $3.0 million and $2.5 million at December 31, 2017 and June 30, 2017, respectively. Capitalized commission fees are amortized on a straight-line basis over the average period of service contracts of approximately three years, and are included in “Sales and marketing” in the accompanying condensed consolidated statements of operations. Amortization recognized during the three-month period ended December 31, 2017 and 2016, was $0.5 million and $0.4 million, respectively. Amortization recognized during the six-month period ended December 31, 2017 and 2016, was $0.9 million and $0.7 million, respectively. There was no impairment loss in relation to the costs capitalized.

~~Revenue by Category:~~ ~~The following table sets forth the Company’s revenue disaggregated by sales channel and geographic region based on the billing addresses of its customers (in thousands, unaudited):~~

Three Months Ended

December 31,
2017

December 31,
2016

(As adjusted)

Distributor

Direct

Total

Distributor

Direct

Total

Americas:

United States

$
56,269

$
54,559

$
110,828

$
39,063

$
38,396

$
77,459

Other

1,155

5,698

6,853

2,827

3,243

6,070

Total Americas

57,424

60,257

117,681

41,890

41,639

83,529

EMEA:

55,956

33,624

89,580

36,070

24,361

60,431

APAC:

5,131

18,731

23,862

1,613

10,804

12,417

Total net revenues

$
118,511

$
112,612

$
231,123

$
79,573

$
76,804

$
156,377

Six Months Ended

December 31,
2017

December 31,
2016

(As adjusted)

Distributor

Direct

Total

Distributor

Direct

Total

Americas:

United States

$
98,661

$
105,549

$
204,210

$
66,054

$
65,225

$
131,279

Other

15,491

12,093

27,584

4,220

12,871

17,091

Total Americas

114,152

117,642

231,794

70,274

78,096

148,370

EMEA:

107,188

61,527

168,715

67,369

40,890

108,259

APAC:

8,395

33,934

42,329

3,065

19,287

22,352

Total net revenues

$
229,735

$
213,103

$
442,838

$
140,708

$
138,273

$
278,981

The Company applies the acquisition method of accounting for business combinations. Under this method of accounting, all assets acquired and liabilities assumed are recorded at their respective fair values at the date of the completion of the transaction. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, intangibles and other asset lives, among other items. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Market participants are assumed to be buyers and sellers in the principal (most advantageous) market for the asset or liability. Additionally, fair value measurements for an asset assume the highest and best use of that asset by market participants. As a result, we may have been required to value the acquired assets at fair value measures that do not reflect its intended use of those assets. Use of different estimates and judgments could yield different results.

Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill. If the fair value of net assets acquired exceeds the fair value of purchase price, a gain on bargain purchase is recognized in the statements of operations. Although we believe the assumptions and estimates we have made are reasonable and appropriate, they are bas ed in part on historical experience and information that may be obtained from the management of the acquired company and are inherently uncertain. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.

In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2017-12, Derivatives and Hedging (Topic 815) – Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”), which is intended to allow companies to better align risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results by expanding and refining hedge accounting for both nonfinancial and financial risk components and aligning the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The guidance is effective for fiscal years beginning after December 15, 2018. The Company is evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption. This guidance is effective for the Company beginning with its fiscal year 2020.

In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718) - Scope of Modification Accounting (“ASU 2017-09”) which amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The guidance is effective prospectively for fiscal years beginning after December 15, 2017, and interim periods within that reporting period. Early

adoption is permitted, including adoption in any interim period. The Company does not expect the adoption of this guidance to have a material effect on our financial statements. This guidance will be effective for the Company beginning with its fiscal year 2019.

~~In January 2016, the FASB issued ASU No. 2016-01,~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~, which provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures. This guidance will become effective for the Company beginning with its fiscal year 2019.

~~In February 2016, the FASB issued ASU No. 2016-02 (Topic 842),~~ ~~Leases~~ (“ASU 2016-02”) which requires the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a twelve-month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing, while the statement of operations will reflect lease expense for operating leases and amortization/interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption of ASU 2016-02 must be calculated using the applicable incremental borrowing rate at the date of adoption. In addition, ASU 2016-02 requires the use of the modified retrospective method, which will require adjustment to all comparative periods presented in the consolidated financial statements. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and footnote disclosures. This guidance will become effective for the Company beginning with its fiscal year 2020.

In ~~May 2014,~~December 2019, the FASB issued ASU 2019-12, Income taxes – Simplifying the Accounting for Income Taxes (Topic 740), which reduces the complexity of accounting for income taxes including the removal of certain exceptions to the general principles of ASC 740, Income Taxes, and simplification in several other areas such as accounting for franchise tax (or similar tax) that is partially based on income. This standard is effective for fiscal years beginning after December 15, 2020, including interim periods within the fiscal year. The standard was adopted on July 1, 2021 and did not have a material impact on the Company’s financial statements upon adoption.

The Company accounts for revenues in accordance with ASU 2014-09, Revenue from Contracts from Customers (Topic 606), which the Company adopted on July 1, 2017. The Company derives the majority of its revenues from sales of its networking equipment, with ~~Customers~~ (the remaining revenues generated from sales of services and subscriptions, which primarily includes maintenance contracts and software subscriptions delivered as software as a service (“SaaS”) and additional revenues from professional services, and training for its products. The Company sells its products, maintenance contracts and SaaS direct to customers and to partners in 2 distribution channels, or tiers. The first tier consists of a limited number of independent distributors that stock its products and sell primarily to resellers. The second tier of the distribution channel consists of non-stocking distributors and value-added resellers that sell directly to end-users. Products and services may be sold separately or in bundled packages.

Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in Topic ~~606),~~606. A contract’s transaction price is allocated to ~~clarify~~each distinct performance obligation and recognized as revenue when, or as, the ~~principles~~performance obligation is satisfied. Certain of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. Under ASU 2014-09, revenue is recognized when a customer obtains control of promisedthe Company’s contracts have multiple performance obligations, as the promise to transfer individual goods or services is separately identifiable from other promises in the contracts and, therefore, is distinct. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on its relative standalone selling price. The stand-alone selling prices are determined based on the prices at which the Company separately sells these products. For items that are not sold separately, the Company estimates the stand-alone selling prices using other observable inputs.

The Company’s performance obligations are satisfied at a point in time or over time as the customer receives and consumes the benefits provided. Substantially all of the Company’s product sales revenues are recognized at a point in time. Substantially all of the Company’s service, subscription, and SaaS revenues are recognized over time. For revenues recognized over time, the Company uses an input measure, days elapsed, to measure progress.

On September 30, 2021, the Company had $356.0 million of remaining performance obligations, which are primarily comprised of deferred maintenance and SaaS revenues. The Company expects to recognize approximately 52 percent of its deferred revenue as revenue in fiscal 2022, an additional 25 percent in fiscal 2023 and 23 percent of the balance thereafter.

Contract Balances. The timing of revenue recognition, billings and cash collections results in billed accounts receivable and deferred revenue in the condensed consolidated balance sheets. Services provided under renewable support arrangements of the Company are billed in accordance with agreed-upon contractual terms, which are either billed fully at the inception of contract or at periodic intervals (e.g., quarterly or annually). The Company sometimes receives payments from its customers in advance of services being provided, resulting in deferred revenues. These liabilities are reported on the condensed consolidated balance sheets on a contract-by-contract basis at the end of each reporting period.

Revenue recognized for the three months ended September 30, 2021 and 2020 that was included in the deferred revenue balance at the beginning of each period was $73.4 million and $66.9 million, respectively.

Contract Costs. The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. Management expects that commission fees paid to sales representatives as a result of obtaining service contracts and contract renewals are recoverable and therefore the Company’s condensed consolidated balance sheets included capitalized balances in the amount ~~that reflects~~of $13.5 million and $13.1 million at September 30, 2021 and June 30, 2021, respectively. Capitalized commission fees are amortized on a straight-line basis over the average period of service contracts of approximately three years, and are included in “Sales and marketing” in the accompanying condensed consolidated statements of operations. Amortization recognized during the three months ended September 30, 2021 and 2020, was $1.8 million and $1.2 million, respectively.

Estimated Variable Consideration. There were no material changes in the current period to the estimated variable consideration ~~expected to be received~~for performance obligations, which were satisfied or partially satisfied during previous periods.

The Company operates in three geographic regions: Americas, which includes the United States, Canada, Mexico, Central America and South America; EMEA, which includes Europe, Russia, Middle East and Africa; and APAC, which includes Asia Pacific, China, South Asia and Japan. The following table sets forth the Company’s revenues disaggregated by sales channel and geographic region based on the billing addresses of its customer’s (in thousands):

	Three Months Ended
	September 30, 2021						September 30, 2020
	Distributor		Direct		Total		Distributor		Direct		Total
Americas:
United States	$	56,068	$	67,331	$	123,399	$	60,670	$	57,347	$	118,017
Other		7,799		3,367		11,166		8,241		4,090		12,331
Total Americas		63,867		70,698		134,565		68,911		61,437		130,348
EMEA		77,898		35,731		113,629		47,529		33,576		81,105
APAC		4,335		15,155		19,490		5,051		19,298		24,349
Total net revenues	$	146,100	$	121,584	$	267,684	$	121,491	$	114,311	$	235,802

For the three months ended September 30, 2021 the Company generated 11% of its revenues from the Netherlands and 10% of its revenues from the Germany. No other foreign country accounted for 10% or more of revenue for the three months ended September 30, 2021 or 2020.

The Company performs ongoing credit evaluations of its customers and generally does not require collateral in exchange for ~~such goods~~credit.

The following table sets forth customers accounting for 10% or ~~services. In addition, ASU 2014-09 requires disclosure~~more of the ~~nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.~~Company’s net revenues for the periods indicated below:

The following table sets forth customers accounting for 10% or more of the Company’s accounts receivable balance:

On September 14, 2021 (the “Acquisition Date”), the Company ~~adopted Topic 606~~completed its acquisition (the “Acquisition”) of Ipanematech SAS (“Ipanema”), the cloud-native enterprise Software-Defined Wide Area Network (“SD-WAN”) business unit of Infovista pursuant to a Sale and Purchase Agreement (“the Agreement”). Under the terms of the Acquisition, the net consideration paid by Extreme to Ipanema stockholders was $70.9 million which was funded from existing cash on ~~July 1, 2017,~~hand. The primary reason for the acquisition was to acquire the talent and the technology which will allow us to expand our portfolio with new cloud-managed SD-WAN and security offerings to support our enterprise customers.

The Acquisition has been accounted for using the ~~full retrospective method. This adoption~~acquisition method of accounting whereby the acquired assets and liabilities of Ipanema have been recorded at their respective fair values and added to those of the Company including an amount for goodwill

calculated as the difference between the acquisition consideration and the fair value of the identifiable net assets. The purchase price has been preliminarily allocated to tangible and identifiable intangible assets acquired and liabilities assumed. The final purchase price allocation is pending the finalization of valuations primarily ~~affected the Company’s accounting for distributor~~intangible assets and ~~resellers revenues from a primarily “sell-through” model, where~~deferred revenue, ~~is recognized upon the sale from the distribution channel~~which may result in an adjustment to the ~~end customer, to the “sell-in” method where revenue is recognized upon transfer~~preliminary purchase price allocation.

The estimated fair values were determined through established and generally accepted valuation techniques, including work performed by third-party valuation specialists. The fair value of control to its customers, including distributors. Under the sell-in method, the Company is required to make estimates at the time of shipment to its distributors of variable consideration as well as estimated returns under stock rotation rights granted to the distributors. Additionally, the Company capitalizes contract acquisition costsworking capital related items, such as ~~commissions paid for maintenance services contracts in excess of one year. Following the adoption of ASU 2014-09, the revenue recognition for the Company’s~~accounts receivable, other ~~sales arrangements remained materially consistent with our historical practice.~~

~~Upon adoption of Topic 606, we applied the standard’s practical expedients that allows a) an entity to use the transaction price~~current assets and accrued liabilities, approximated their book values at the date of acquisition. The fair value of the ~~contract~~acquired deferred revenue was ~~completed rather than estimating variable consideration amounts~~estimated using the cost build-up approach. The cost build-up approach determines fair value using estimates of the costs required to provide the contracted deliverables plus an assumed profit. The total costs including the assumed profit were adjusted to present value using a discount rate considered appropriate. The resulting fair value approximates the amount that the Company would be required to pay to a third party to assume the obligation. Valuations of the intangible assets were valued using income approaches based on management projections, which the Company considers to be Level 3 inputs. The Company also continues to analyze the tax implications of the acquisition of the intangible assets which may ultimately impact the overall level of goodwill associated with the acquisition. Results of operations of Ipanema have been included in the ~~comparative reporting periods, b) that permits the omission~~operations of ~~prior-period information about our performance obligations, and c) that allows~~ the Company beginning with the Acquisition Date.

The preliminary purchase price allocation is set forth in the table below and reflects estimated fair values (in thousands):

The following table presents details of the identifiable intangible assets acquired as part of the acquisition (in thousands):

The amortization for the developed technologies is recorded in “Cost of revenues” for product and the amortization for the remaining intangibles is recorded in “Amortization of intangibles” in the accompanying condensed consolidated statements of operations. The goodwill recognized is attributable primarily to ~~reflect~~expected synergies and the ~~aggregate effect~~assembled workforce of ~~all modifications that occur before~~Ipanema. The Company will not be entitled to amortization of the goodwill and intangible assets for tax purposes as this acquisition is a nontaxable stock acquisition.

The results of operations of Ipanema are included in the accompanying condensed consolidated results of operations beginning September 15, 2021. The overall results of Operations of Ipanema were not material to the condensed consolidated financial statements of Extreme.

In the quarter ended September 30, 2021, the Company incurred acquisition and integration related expenses of $1.5 million associated with the acquisition of Ipanema. Acquisition and integration costs consist primarily of professional fees for financial and legal advisory services. Such acquisition-related costs were expensed as incurred and are included in “Acquisition and integration costs” in the accompanying condensed consolidated statements of operations.

The following unaudited pro forma results of operations are presented as though the Acquisition had occurred as of the beginning of the earliest period presented, ~~when identifying~~July 1, 2020, the ~~satisfied~~beginning of fiscal 2021, after giving effect to purchase accounting adjustments relating to deferred revenue, depreciation and ~~unsatisfied performance obligations, determining the transaction price~~amortization of intangibles and ~~allocating the transaction price to the satisfied~~acquisition and ~~unsatisfied performance obligations.~~ integration costs.

~~See the tables at the end~~The pro forma results of ~~this note for the effects~~operations are not necessarily indicative of the ~~adoption of ASU 2014-09 on our condensed consolidated financial statements~~combined results that would have occurred had the acquisition been consummated as of ~~June 30, 2017, and~~the beginning of fiscal 2021, nor are they necessarily indicative of future operating results. The unaudited pro forma results do not include the impact of synergies, nor any potential impacts on current or future market conditions which could alter the unaudited pro forma results.

The unaudited pro forma financial information for the three ~~and six~~ months ended ~~December 31, 2016. See Note 3. “Summary~~September 30, 2020 combines the historical results for Extreme for such periods assuming the transaction closed on July 1, 2020, which include the results of ~~Significant Accounting Policies”~~Ipanema subsequent to ~~our condensed consolidated financial statements for further discussion of~~ the ~~effects of~~Acquisition Date, and Ipanema’s historical results up to the ~~adoption of ASU 2014-09 on our significant accounting policies.~~

~~Adjustments to Previously Reported Financial Statements from the Adoption of Accounting Pronouncements~~Acquisition Date.

The following table ~~presents~~summarizes the ~~effect of the adoption of ASU 2014-09 on our condensed consolidated balance sheet (unaudited) as of June 30, 2017, (in thousands):~~

As of June 30, 2017

As Reported

Adjustment

As Adjusted

Accounts receivable, net
$
120,770

$
(27,655
)

$
93,115

Inventories

45,880

1,530

47,410

   Total current assets

324,967

(26,125
)

298,842

Other assets

22,586

2,479

25,065

   Total assets

483,346

(23,646
)

459,700

Accrued warranty

10,007

577

10,584

Other accrued liabilities

36,713

331

37,044

Deferred distributors revenue, net of cost of sales to distributors

43,525

(43,525
)

—

   Total current liabilities

255,822

(42,617
)

213,205

Accumulated deficit

(800,257
)

18,971

(781,286
)
Total stockholders’ equity

106,707

18,971

125,678

Total liabilities and stockholders’ equity
$
483,346

$
(23,646
)

$
459,700

~~The following tables present the effect of the adoption of ASU 2014-09 on our condensed consolidated statements of operations (unaudited) for the three and six months ended December 31, 2016~~unaudited pro forma financial information (in thousands, except per share amounts):

Three Months Ended December 31, 2016

As Reported

Adjustment

As Adjusted

Net revenues

   Product
$
109,789

$
8,266

$
118,055

   Service

38,322

—

38,322

        Total net revenues

148,111

8,266

156,377

Cost of revenues

   Product

58,659

3,968

62,627

   Service

14,098

—

14,098

        Total cost of revenues

72,757

3,968

76,725

Gross profit

   Product

51,130

4,298

55,428

   Service

24,224

—

24,224

        Total Gross profit

75,354

4,298

79,652

Sales and marketing expenses

41,109

(84
)

41,025

Operating loss

(7,362
)

4,382

(2,980
)
Net loss before tax

(7,432
)

4,382

(3,050
)
Net loss
$
(8,611
)

$
4,382

$
(4,229
)

Basic and diluted net loss per share

Net loss per share - basic
$
(0.08
)

$
(0.04
)
Net loss per share - diluted
$
(0.08
)

$
(0.04
)

Shares used in per share calculation - basic

107,425

107,425

Shares used in per share calculation - diluted

107,425

107,425

Six Months Ended December 31, 2016

As Reported

Adjustment

As Adjusted

Net revenues

   Product
$
199,920

$
8,228

$
208,148

   Service

70,833

—

70,833

        Total net revenues

270,753

8,228

278,981

Cost of revenues

   Product

103,586

3,290

106,876

   Service

26,567

—

26,567

        Total cost of revenues

130,153

3,290

133,443

Gross profit

   Product

96,334

4,938

101,272

   Service

44,266

—

44,266

        Total Gross profit

140,600

4,938

145,538

Sales and marketing expenses

78,065

(181
)

77,884

Operating loss

(12,121
)

5,119

(7,002
)
Net loss before tax

(13,004
)

5,119

(7,885
)
Net loss
$
(15,090
)

$
5,119

$
(9,971
)

Basic and diluted net loss per share

Net loss per share - basic
$
(0.14
)

$
(0.09
)
Net loss per share - diluted
$
(0.14
)

$
(0.09
)

Shares used in per share calculation - basic

106,690

106,690

Shares used in per share calculation - diluted

106,690

106,690

~~The following tables present the effect of the adoption of ASU 2014-09 on our condensed consolidated statement of cash flows (unaudited) for the six months ended December 31, 2016 (in thousands):~~

Six Months Ended December 31, 2016

As Reported

Adjustment

As Adjusted

Cash flows from operating activities

Net loss
$
(15,090
)

$
5,119

$
(9,971
)
Changes in operating assets and liabilities, net

      Accounts receivable

(18,737
)

10,981

(7,756
)
      Inventories

6,004

(1,691
)

4,313

      Prepaid and other assets

7,004

(181
)

6,823

      Deferred distributors revenue, net of cost of sales to distributors

14,516

(14,516
)

—

      Other current and long term liabilities

7,587

288

7,875

Net cash provided by operating activities

19,288

—

19,288

Cash flows from investing activities

(55,750
)

—

(55,750
)
Cash flows from financing activities

46,241

—

46,241

Foreign currency effect on cash

(115
)

—

(115
)
Net increase in cash and cash equivalents
$
9,664

$
—

$
9,664

~~The following is a summary of cash, cash equivalents and marketable securities (in thousands):~~

The Company considers highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Marketable securities are recorded in “Prepaid expense and other current assets” in the accompanying condensed consolidated balance sheet as these original maturities are greater than three months, but less than one year at the balance sheet date. Marketable securities are classified as available-for-sale and reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive loss” in the accompanying condensed consolidated balance sheets.

The Company values its inventory at the lower of cost or net realizable value. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis. The Company ~~has established~~adjusts the carrying value of its inventory ~~allowances primarily determined by the demand of inventory or~~ when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand. At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. Any previously written down or obsolete inventory subsequently sold has not had a material impact on gross margin for any of the periods ~~disclosed.~~presented.

~~The following tables summarize the components of gross and net intangible asset balances (dollars in thousands)~~

Weighted Average

Remaining Amortization

Gross Carrying

Accumulated

Net Carrying

Period

Amount

Amortization

Amount

December 31, 2017

Developed technology

4.5 years

$
116,000

$
48,334

$
67,666

Customer relationships

3.9 years

51,410

38,674

12,736

Maintenance contracts

0.8 years

17,000

14,166

2,834

Trademarks

3.9 years

9,100

3,411

5,689

Backlogs

— years

1,800

1,800

—

License agreements

6.1 years

2,445

1,255

1,190

Other intangibles

2.2 years

1,382

1,072

310

Total intangibles, net with finite lives

199,137

108,712

90,425

In-process research and development, with indefinite life

2,500

—

2,500

Total intangibles, net

$
201,637

$
108,712

$
92,925

Weighted Average

Remaining Amortization

Gross Carrying

Accumulated

Net Carrying

Period

Amount

Amortization

Amount

June 30, 2017

Developed technology

5.3 years

$
55,400

$
42,689

$
12,711

Customer relationships

3.3 years

40,300

37,567

2,733

Maintenance contracts

1.3 years

17,000

12,467

4,533

Trademarks

4.3 years

5,100

2,846

2,254

License agreements

6.4 years

2,445

1,120

1,325

Other intangibles

2.7 years

1,382

1,001

381

Total intangibles, net with finite lives

121,627

97,690

23,937

In-process research and development, with indefinite life

1,400

—

1,400

Total intangibles, net

$
123,027

$
97,690

$
25,337

During the six months ended December 31, 2017, in-process research and development of $1.4 million was reclassified to developed technology upon completion of the project and is being amortized over its estimated useful life.

~~The amortization expense of intangibles for the periods presented is summarized below (in thousands):~~

~~The amortization expense that is recognized in “Cost of revenues: Product” is comprised of amortization for developed technology, license agreements and other intangibles.~~

~~The following table summarizes goodwill for the periods presented (in thousands):~~

During the six months ended December 31, 2017, the Company completed acquisitions of the Campus Fabric Business and the Data Center Business, resulting in an additional goodwill of $34.0 million and $16.8 million, respectively. See Note 2 for additional information related to the acquisitions.

~~The Company offers~~Deferred revenue represents amounts for ~~sale to its customers, renewable~~deferred maintenance, support, ~~arrangements that range from one to five years as well as~~SaaS, and other deferred revenue ~~for~~including professional services and training ~~services.~~

In connection with the closing of Campus Fabric Business discussed in Note 2, the Company entered into the Second Amendment to the Amended and Restated Credit Agreement (“Second Amendment”), which amended the Amended and Restated Credit Agreement, dated as of October 28, 2016 (the “Credit Facility, as amended”), by and among the Company, as borrower, Silicon Valley Bank, as administrative agent and collateral agent, and lenders. Among other things, the Second Amendment (i) increased the amount of the available borrowing under the Credit Facility from $140.5 million to $243.7 million, composed of (a) the five-year term loan (“Term Loan”) in a principal amount of up to $183.7 million and (b) the five-year revolving credit facility (“Revolver”) in a principal amount of up to $60.0 million, (ii) extends the maturity date under the existing Term Loan and the termination date under the existing Revolver, (iii) provides for an uncommitted additional incremental loan facility in the principal amount of up to $50.0 million (“Incremental Facility”), and (iv) joins certain additional banks, financial institutions and institutional lenders as lenders pursuant to the terms of the Credit Facility, as amended. On July 14, 2017, the Company borrowed $80.0 million under the Term Loan which was used to fund the purchase of Campus Fabric Business.

~~In connection with the closing of the acquisition of the Data Center Business discussed in Note 2,~~ ~~the Company entered into the Third Amendment to the Credit Facility (the “Third Amendment”)~~ on October 26, 2017. Among other things, the Third Amendment (i) amends the negative covenant governing dispositions to increase the general dispositions basket for the fiscal year of the Company ending June 30, 2018, and (ii) amends certain definitions and provisions to update certain references to the Brocade Purchase Agreement (as defined above). On the Brocade Closing Date, the Company borrowed $20.0 million on the Term Loan to partially fund the acquisition of the Data Center Business.

Borrowings under the Term Loan bear interest, at our option, at a rate equal to either the LIBOR rate (subject to a 0.0% LIBOR floor), plus an applicable margin (currently 3.25% per annum based on a stated consolidated leverage ratio) or the adjusted base rate, plus an applicable margin (currently 1.25% per annum based on the Company’s consolidated leverage ratio). Borrowings under the Revolver bear interest, at the Company’s option, at a rate equal to either the LIBOR rate (subject to a 0.0% LIBOR floor), plus an applicable margin (currently 3.25% per annum based on a stated consolidated leverage ratio) or the adjusted base rate, plus an applicable margin (currently 1.25% per annum based on a stated consolidated leverage ratio). The Revolver has a commitment fee payable on the undrawn amount ranging from 0.375% to 0.50% per annum based upon a stated consolidated leverage ratio.

~~The Company had $1.2 million of outstanding letters of credit and $48.8 million of availability under the Revolver as of December 31, 2017.~~revenue recognition criteria have not been met.

~~Networking products may contain undetected~~The majority of the Company’s hardware ~~or software errors when new products or new versions or updates of existing~~ products are ~~released to the marketplace. The Company’s standard hardware~~shipped with either a one-year warranty ~~period is typically 12 months from the~~

~~date of shipment to end-users and 90 days for software. For certain access products, the Company offers~~or a limited lifetime ~~hardware~~ warranty, ~~commencing on the date of shipment from the Company~~ and ~~ending five (5) years following the Company’s announcement of the end of sale of such product.~~software products receive a 90-day warranty. Upon shipment of products to its customers, the Company estimates expenses for the cost to repair or replace products that may be returned under warranty and ~~accrue~~accrues a liability in cost of product ~~revenue~~revenues for this amount. The determination of the Company’s warranty requirements is based on actual historical experience with the product or product family, estimates of repair and replacement costs and any product warranty problems that are identified after shipment. The Company estimates and adjusts these accruals at each balance sheet date in accordance with changes in these factors.

~~Upon issuance of a standard product warranty, the Company discloses and recognizes a liability for the obligations it assumes under the product warranty.~~ The following table summarizes the activity related to the Company’s product warranty liability during the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2021 and ~~2016~~2020 (in thousands):

To facilitate sales of its products in the normal course of business, the Company indemnifies its resellers and end-user customers with respect to certain matters. The Company has agreed to hold the customer harmless against losses arising ~~from a breach of~~for intellectual property infringement ~~or other.~~and certain other losses. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. It is not possible to estimate the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements have not had a material impact on its operating results or financial position.

~~All advertising costs are expensed as incurred. Advertising expenses for three and six months ended December 31, 2017 and 2016, were immaterial.~~

The Company may be subject to concentration of credit risk as a result of certain financial instruments consisting of accounts ~~receivable and marketable securities.~~receivable. The Company does not invest an amount exceeding 10% of its combined cash ~~or cash equivalents~~ in the securities of any one obligor or maker, except for obligations of the United States government, obligations of United States government agencies and money market accounts.

~~The Company performs ongoing credit evaluations of its customers and generally does not require collateral in exchange for credit.~~

~~The following table sets forth major customers accounting for 10% or more of our net revenue:~~

~~The following customers account for more than 10% of the Company’s accounts receivable outstanding as of December 31, 2017, Westcon Group 24%, Tech Data 21% and Avnet 11%.~~

A three-tier fair value hierarchy is utilized to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels are defined as follows:

The following table presents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis at September 30, 2021 and June 30, 2021 (in thousands):.

December 31, 2017

Level 1

Level 2

Level 3

Total

Assets

Investments:

Money market funds

$
4,500

$
—

$
—

$
4,500

Marketable securities

1,104

—

—

1,104

Total assets measured at fair value

$
5,604

$
—

$
—

$
5,604

Liabilities

Acquisition-related contingent consideration obligations

$
—

$
—

$
47,030

$
—

Total liabilities measured at fair value

$
—

$
—

$
47,030

$
—

September 30, 2021	Level 1		Level 2		Level 3		Total
Liabilities
Foreign currency derivatives	$	—	$	740	$	—	$	740
Interest rate swaps		—		937		—		937
Acquisition-related contingent consideration obligations		—		—		358		358
Total liabilities measured at fair value	$	—	$	1,677	$	358	$	2,035

June 30, 2017

Level 1

Level 2

Level 3

Total

Assets

Investments:

Money market funds

$
4,291

$
—

$
—

$
4,291

Investment in non-marketable equity

—

—

3,000

3,000

Total assets measured at fair value

$
4,291

$
—

$
3,000

$
7,291

June 30, 2021	Level 1		Level 2		Level 3		Total
Liabilities
Foreign currency derivatives	$	—	$	560	$	—	$	560
Interest rate swaps		—		1,133		—		1,133
Acquisition-related contingent consideration obligations		—		—		913		913
Total liabilities measured at fair value	$	—	$	1,693	$	913	$	2,606

~~During the first quarter~~The Company’s financial instruments consist of ~~fiscal 2018, pursuant~~cash, accounts receivable, accounts payable, and accrued liabilities. The Company states accounts receivable, accounts payable and accrued liabilities at their carrying value, which approximates fair value due to the ~~sale of an investment in non-marketable equity securities,~~short time to the ~~Company received 41,685 shares of a company publicly traded on the London Stock Exchange. As of December 31, 2017, the shares received have a~~expected receipt or payment.

The fair value of derivative instruments under the Company’s foreign exchange forward contracts and interest rate swaps are estimated based on valuations provided by alternative pricing sources supported by observable inputs which is considered Level 2.

As of September 30, 2021 and June 30, 2021, the Company had foreign exchange forward contracts that were not designated as hedging instruments with notional principal amount of $22.6 million and $23.0 million, respectively. These contracts have maturities of 40 days or less. Changes in the fair value of these foreign exchange forward contracts are included in other income (expense), net in the condensed consolidated statement of operations. For the three months ended September 30, 2021, there were net losses of $0.2 million. For the three months ended September 30, 2020, there were gains of less than $0.1 million. As of September 30, 2021 and June 30, 2021, the Company had foreign exchange forward contracts that were designated as hedging instruments with notional principal amount of $11.3 million and $21.8 million, respectively. These contracts have maturities of less than twelve months. Gains and losses arising from these contracts designated as hedging instruments are recorded as a component of accumulated other comprehensive income (loss). As of September 30, 2021 and June 30, 2021, these contracts had unrealized losses of $0.4 million and $0.2 million, respectively. See Note 13, Derivatives and Hedging, for additional information.

The fair values of the interest rate swaps are based upon inputs corroborated by observable market data which is considered Level 2. As of September 30, 2021 and as of June 30, 2021, the Company had interest rate swap contracts, designated as cash flow hedges, with the total notional amount of $200.0 million. Changes in fair value of these contracts are recorded as a component of accumulated other comprehensive loss. As of September 30, 2021and as of June 30, 2021, these contracts had an unrealized loss of $0.9 million and $1.1 ~~million. (See below, Level 3 investments)~~million, respectively. See Note 13, Derivatives and Hedging, for additional information.

The Company includes U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, and state, municipal and provincial obligations for which quoted prices are available as Level 2. There were no transfers of assets or liabilities between Level 1 and Level 2 for the periods presented.

The fair value of the borrowings under the 2019 Credit ~~Facility, as amended~~Agreement (as discussed in Note 8) is estimated based on valuations provided by alternative pricing sources supported by observable inputs which is considered Level 2. ~~Due to~~Since the ~~short duration until maturity of~~interest rate is variable for the ~~credit facility,~~2019 Credit Agreement, the fair value approximates the face amount of the Company’s indebtedness of ~~$185.0~~$330.0 million and ~~$93.7~~$346.7 million as of ~~December 31, 2017~~September 30, 2021, and June 30, ~~2017,~~2021, respectively. ~~Such amounts are immaterial for all periods presented.~~

Certain of the Company’s assets, including intangible assets and goodwill are measured at fair value on a non-recurring basis if impairment is indicated.

~~As of~~At September 30, 2021 and June 30, ~~2017,~~2021, the Company reflected ~~its non-marketable equity investment as Level 3 in the~~one liability measured at fair value ~~hierarchy as it is based on unobservable inputs that market participants would use in pricing this asset due to the absence~~ of recent comparable market transactions and inherent lack of liquidity. During fiscal 2015, the Company purchased a $3.0 million equity interest in a company that operated in the enterprise software platform industry. The Company did not enter into any other transactions with the investee during fiscal 2017 or the first quarter of fiscal 2018. During the three months ended September 30, 2017, the investee was acquired by a third party. The Company received $6.8 million as consideration for its equity interest in the investee, including $5.4 million in cash and 65,937 shares the third party’s common stock with a market value of $1.4 million. During the first quarter of fiscal 2018, the Company received $5.8 million of the consideration, consisting of $4.9 million in cash and 41,685 shares with a market value of $0.9 million. The remainder of the consideration consisting of $0.5$0.4 million and ~~$0.5~~$0.9 million, ~~of cash and shares,~~ respectively, will remain in escrow for a period of 18 months from the date of sales for general representations and warranties. A gain of $3.8 million related to this sale was recorded in “Other income (expense), net” in the accompanying condensed consolidated statements of operations for the six months ended December 31, 2017. The 41,685 shares received and held as of December 31, 2017 were considered Level 1 investments as these have quoted prices in active markets.

~~During the quarter ended December 31, 2017, the Company recorded a liability~~ for contingent consideration related to ~~its acquisitions of the Data Center Business and the CF Business (see Note 2 for additional information related to the acquisitions).~~a certain acquisition completed in fiscal 2018. The fair value measurement of the contingent consideration ~~obligations~~obligation is determined using Level 3 inputs. ~~The fair value of contingent consideration obligations is based on a discounted cash flow model.~~ These fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in the market. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given period. Changes in the value of the contingent consideration obligations ~~would be~~is recorded in general and administrative expenses in the accompanying condensed consolidated statements of operations.

The change in the acquisition-related contingent consideration obligations is as follows (in thousands):

There were no0 transfers of assets or liabilities between Level 1, Level 2 and Level 3 during the ~~first six~~three months ~~of fiscal year 2018 or 2017.~~ended September 30, 2021 and 2020. There were no0 impairments recorded for the ~~first six~~three months ~~of fiscal 2018 or 2017.~~

The Company ~~had reserved for issuance~~determines the basis of the cost of a security sold or the amount reclassified out of accumulated other comprehensive loss into earnings using the specific identification method.

The following tables summarize the components of gross and net intangible asset balances (dollars in thousands):

	Weighted Average
	Remaining Amortization	Gross Carrying		Accumulated		Net Carrying
	Period	Amount		Amortization		Amount
September 30, 2021
Developed technology	3.4 years	$	170,600	$	135,112	$	35,488
Customer relationships	4.6 years		64,839		55,074		9,765
Backlog	— years		400		400		—
Trade names	0.6 years		10,700		10,429		271
License agreements	5.2 years		2,445		2,071		374
Total intangibles, net		$	248,984	$	203,086	$	45,898

	Weighted Average
	Remaining Amortization	Gross Carrying		Accumulated		Net Carrying
	Period	Amount		Amortization		Amount
June 30, 2021
Developed technology	1.8 years	$	156,100	$	129,861	$	26,239
Customer relationships	4.8 years		63,039		54,204		8,835
Backlog	— years		400		400		—
Trade names	0.7 years		10,700		10,128		572
License agreements	5.4 years		2,445		2,053		392
Total intangibles, net		$	232,684	$	196,646	$	36,038

The amortization expense of intangibles for the periods ~~noted~~presented is summarized below (in thousands):

~~Share-based compensation~~The amortization expense that is recognized in “Total cost of revenues” is comprised of amortization for developed technology, license agreements and other intangibles.

The Company’s debt is comprised of the ~~condensed consolidated financial statements by line item caption is as follows~~following (in thousands):

Three Months Ended

Six Months Ended

December 31,
2017

December 31,
2016

December 31,
2017

December 31,
2016

Cost of product revenue

$
134

$
122

$
226

$
190

Cost of service revenue

296

186

429

418

Research and development

1,829

906

2,880

1,968

Sales and marketing

2,699

1,180

4,342

2,321

General and administrative

2,067

987

3,951

1,959

Total share-based compensation expense

$
7,025

$
3,381

$
11,828

$
6,856

	September 30, 2021			June 30, 2021
Current portion of long-term debt:
Term Loan	$	28,500		$	26,125
Less: unamortized debt issuance costs		(2,356	)		(2,404	)
Current portion of long-term debt	$	26,144		$	23,721

Long-term debt, less current portion:
Term Loan	$	301,500		$	320,625
Less: unamortized debt issuance costs		(4,121	)		(4,760	)
Total long-term debt, less current portion		297,379			315,865
Total debt	$	323,523		$	339,586

~~During~~In connection with the ~~six months ended December 31, 2017 or 2016,~~acquisition of Aerohive Networks, Inc., on August 9, 2019, the Company ~~did~~entered into an Amended and Restated Credit Agreement (the “2019 Credit Agreement”), by and among the Company, as borrower, several banks and other financial institutions as Lenders, BMO Harris Bank N.A., as an issuing lender and swingline lender, Silicon Valley Bank, as an Issuing Lender, and Bank of Montreal, as administrative agent and collateral agent for the Lenders.

The 2019 Credit Agreement provides for a five-year first lien term loan facility in an aggregate principal amount of $380 million and a five-year revolving loan facility in an aggregate principal amount of $75 million (the “2019 Revolving Facility”). In addition, the Company may request incremental term loans and/or incremental revolving loan commitments in an aggregate amount not ~~capitalize any share-based compensation expense in inventory, as~~to exceed the ~~amounts were immaterial.~~sum of $100 million plus an unlimited amount that is subject to pro forma compliance with certain financial tests. On August 9, 2019, the Company used the additional proceeds from the term loantopartially fund the Acquisition and for working capital and general corporate purposes.

~~Stock awards~~At the Company’s election, the initial term loan under the 2019 Credit Agreement may be ~~granted under~~made as either base rate loans or Eurodollar loans. The applicable margin for base rate loans ranges from 0.25% to 2.50% per annum and the ~~2013 Equity Incentive Plan (the “2013 Plan”~~applicable margin for Eurodollar loans ranges from 1.25% to 3.50%, in each case based on Extreme’s consolidated leverage ratio. All Eurodollar loans are subject to a Base Rate of 0.00%. In addition, the Company is required to pay a commitment fee of between 0.25% and 0.40% quarterly (currently 0.30%) on ~~terms approved by~~ the ~~Compensation Committee~~unused portion of the Board of Directors. Stock awards generally provide for the issuance of restricted stock units (“RSUs”) including performance or market-based RSUs which vest over a fixed period of time or based upon the satisfaction of certain performance criteria. The Company uses the straight-line method for expense attribution, and beginning with fiscal 2017, the Company does not estimate forfeitures, but accounts for them as incurred.

~~The following table summarizes stock award activity for the six months ended December 31, 2017 (in thousands, except grant date fair value):~~

~~The following table summarizes stock option activity for the six months ended December 31, 2017(in thousands, except per share and contractual term):~~

The fair value of each stock option grant under the 2013 Plan and 2005 Equity Incentive Plan is estimated on the date of grant using the Black-Scholes-Merton option valuation model with the weighted average assumptions noted in the following table. The Company uses the Monte-Carlo simulation model to determine the fair value and the derived service period of stock awards with market conditions, on the date of the grant. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The risk-free rate is based upon the estimated life of the option and the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is2019 Revolving Facility, also based on the ~~historical volatility~~Company’s consolidated leverage ratio. Principal installments are payable on the ~~Company’s stock.~~

The fair value of each RSUs grant with performance-based vesting criteria (“PSUs”) under the 2013 Plan is estimated on the date of grant using the Monte-Carlo simulation model to determine the fair valuenew term loan in varying percentages quarterly starting December 31, 2019 and ~~the derived service period of stock awards with market conditions, on the date of the grant.~~

During the first quarter of fiscal 2018, the Company approved the grant of 1,154,014 stock awards to its vice president level employees or above (“VPs”), including 560,344 stock awards to its Executive Officers, and 939,925 stock awards to its other employees. Fifty percent (50%) of the stock awards granted to the ~~VPs, except the chief executive officer, were in the form of PSUs, with grant date fair values of $10.90, and fifty percent (50%) of the stock awards granted were in the form of service-based RSUs.~~extent not previously paid, all outstanding balances are to be paid at maturity. The Company’s chief executive officer received sixty percent (60%) of his stock award grant in the form of PSUs, while forty percent (40%) of this award were in the form of RSUs, with a grant date fair value of $10.90. The RSUs vest from the original grant date as to one-third (1/3) on the one year anniversary and one-twelfth (1/12) each quarter thereafter, subject to continued service to the ~~Company. No PSUs were granted during the second quarter of fiscal 2018.~~

~~For the~~ ~~PSUs referenced in the preceding paragraph, they will be considered earned once the Company~~’~~s combined earnings per share equals or exceeds $0.32 for two consecutive quarters. (the~~ “~~FY18 Performance Threshold~~”~~). Once the FY18 Performance Threshold~~2019 Credit Agreement is satisfied the PSUs shall vest with respect to the number of RSUs granted on the same date that have vested as of the date the FY18 Performance Threshold is satisfied and thereafter shall vest on the same schedule as the RSUs, subject to continued service to the Company. If the FY18 Performance Threshold is not metsecured by ~~the third anniversary of the grant date the award is canceled. In addition, the FY18 Performance Threshold shall be deemed satisfied upon the closing of a Change in Control (within the meaning~~substantially all of the Company’s ~~2013 Equity Incentive Plan) in~~assets.

The 2019 Credit Agreement requires the ~~event~~Company to maintain certain minimum financial ratios at the ~~per share consideration received by~~end of each fiscal quarter. The 2019 Credit Agreement also includes covenants and restrictions that limit, among other things, the Company’s ~~stockholders equals~~ability to incur additional indebtedness, create liens upon any of its property, merge, consolidate or ~~exceeds $16.00 per share.~~

~~During the three months and six months ended December 31, 2017, none~~sell all or substantially all of its assets. The 2019 Credit Agreement also includes customary events of default which may result in acceleration of the ~~PSU grants referenced above achieved their FY18 Performance Threshold.~~payment of the outstanding balance.

~~During~~On April 8, 2020, the Company entered into the first ~~quarter~~amendment to the 2019 Credit Agreement (the “First Amendment”) to waive certain terms and financial covenants of ~~fiscal 2017,~~the 2019 Credit Agreement through July 31, 2020. On May 8, 2020, the Company ~~approved~~entered into the ~~grant~~second amendment to the 2019 Credit Agreement (the “Second Amendment”) which superseded the First Amendment and provided certain revised terms and financial covenants through March 31, 2021. Subsequent to March 31, 2021, the original terms and financial covenants under the 2019 Credit Agreement resumed in effect. The Second Amendment required the Company to maintain certain minimum cash requirement and certain financial metrics at the end of ~~1,505,120 stock awards to its VPs, including 680,000 stock awards to its Executive Officers, and 1,053,300 stock awards to other Company employees. Fifty percent (50%)~~each fiscal quarter through March 31, 2021.

Under the terms of the Second Amendment, the Company was not permitted to exceed $55.0 million in its outstanding balance under the 2019 Revolving Facility, the applicable margin for Eurodollar rate was 4.5%, and the Company was restricted from pursuing certain activities such as incurring additional debt, stock ~~awards granted~~repurchases, making acquisitions or declaring a dividend, until the Company was in compliance with the original covenants of the 2019 Credit Agreement.

On November 3, 2020, The Company and its lenders entered into the Third Amendment to the ~~VPs were in~~2019 Credit Agreement (the “Third Amendment”), to increase the ~~form~~sublimit for letters of ~~PSUs, with grant date fair values ranging from $3.02~~credit to ~~$3.09,~~$20.0 million. On December 8, 2020, the Company and ~~fifty percent (50%~~its lenders entered into the fourth amendment to the 2019 Credit Agreement (the “Fourth Amendment”), to waive and amend certain terms and financial covenants within the 2019 Credit Agreement through March 31, 2021.

The Second Amendment provided for the Company to end the covenant Suspension Period early and revert to the covenants and interest rates per the original terms of the ~~stock awards granted were in~~2019 Credit Agreement dated August 9, 2019 by filing a Suspension Period Early Termination Notice and Covenant Certificate demonstrating compliance. For the form of RSUs. The RSUs vest from the original grant date as to one-third (1/3) on the one year anniversary and one-twelfth (1/12) each quarter thereafter, subject to continued service to the Company. ~~No PSUs were granted during the second quarter of fiscal 2017.~~

~~The~~ ~~PSUs were considered earned once the Company’s stock price equaled or exceeded $5.00 per share for 30 consecutive trading days after January 1, 2017 (the~~ “~~FY17 Performance Threshold~~”~~). Once the FY17 Performance Threshold goal was attainted the PSUs began to vest on the same schedule as the RSUs that were granted at the same time, subject to continued service to the Company.~~

~~During the quarter~~twelve-month period ended March 31, ~~2017, all of~~2021 the ~~PSU grants referenced above achieved their FY17 Performance Threshold~~Company’s financial performance was in compliance with the original covenants defined in the 2019 Credit Agreement and as such ~~began vesting~~the Company filed a Suspension Early Termination Notice and ~~will be released on the schedule as noted, subject to continued service to the Company.~~

~~The fair value of each share purchase option under the Company~~’~~s Employee Stock Purchase Plan (“ESPP”) is estimated on the date of grant using the Black-Scholes-Merton option valuation model~~Covenant Certificate with the ~~weighted average assumptions noted~~administration agent subsequent to filing our Form 10-Q for the quarterly period ended March 31, 2021. Returning to compliance with the covenants per the original terms of the 2019 Credit Agreement dated August 9, 2019 resulted in the ~~following table. The expected term~~Company’s Eurodollar loan spread decreasing from 4.5% during the suspension period to 2.75% and unused facility commitment fee decreasing from 0.4% to 0.35%, and the limitation on revolver borrowings being removed effective May 1, 2021 after filing of the ~~ESPP represents~~certificate with the administrative agent.

Financing costs incurred in connection with obtaining long-term financing are deferred and amortized over the term of the ~~offering period of each option. The risk-free rate is based upon~~related indebtedness or credit agreement. During the ~~estimated life and on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on the historical volatility on the Company’s stock.~~

~~There were no shares granted under the ESPP during the three months~~year ended ~~December 31, 2017 or 2016.~~ The weighted-average fair value of shares granted under the Company’s 2014 ESPP during the six months ended December 31, 2017 and 2016, was $2.41 and $1.00, respectively. There were 1,267,930 and 1,103,599 shares issued under the Company’s 2014 ESPP during the six months ended December 31, 2017 and 2016, respectively.

~~No restructuring charges were recorded during the three or six months ended December 31, 2017.~~

~~For the three and six months ended December 31, 2016,~~June 30, 2020, the Company ~~recorded $1.9~~incurred $10.5 million of deferred financing costs in ~~restructuring~~conjunction with the 2019 Credit Agreement and ~~other charges including accelerated depreciation~~$1.5 million of ~~leasehold improvements~~deferred financing costs from the amendments, and continues to amortize $1.6 million of debt issuance costs as of August 9, 2019 that were associated with the previous facility. The interest rate as of September 30, 2021 was 2.4%. and ~~fixed assets~~as of September 30, 2020 was 4.9%.

Amortization of deferred financing costs included in the amount of $1.7 million and adjustments to estimated sub-lease income to be received related to the estimated future obligations for non-cancelable lease payments for excess facilities of $0.1 million.

Restructuring liabilities consisted of obligations pertaining to the estimated future obligations for non-cancelable lease payments, as well as severance and benefits obligations. The restructuring liabilities are recorded in “Other accrued liabilities” and “Other long-term liabilities”“Interest expense” in the accompanying condensed consolidated ~~balance sheets.~~statements of operations totaled $0.8 million and $0.8 millionfor the three months ended September 30, 2021 and 2020

InDuring the fiscal ~~2017, the Company announced a reduction-in-force (“RIF”). The Company recorded $5.6 million in severance and benefits charges, net during the~~ year ended June 30, ~~2017. Cash payments of $2.2~~2021, the Company repaid $55.0 million ~~were paid during the first six months of fiscal 2018. The~~against its 2019 Revolving Facility’s outstanding balance of ~~cash payments for~~$55.0 million and has 0 remaining outstanding balance at September 30, 2021. The Company has $60.2 million of availability under the ~~RIF was immaterial~~2019 Revolving Facility as of ~~December 31, 2017.~~ September 30, 2021. During the three months ended September 30, 2021, the Company made an additional payment of $12 million against its term loan facility.

~~Total restructuring and related liabilities consist~~Company had $14.8 million of ~~(in thousands):~~outstanding letters of credit as of September 30, 2021.

The Company currently has arrangements with contract manufacturers and suppliers for the manufacture of its products. Those arrangements allow the contract manufactures to procure long lead-time component inventory based upon a rolling production forecast provided by the Company. The Company is obligated to purchase long lead-time component inventory that its contract manufacturer procures in accordance with the ~~Company’s~~ forecast, unless the Company gives notice of order cancellation outside of applicable component ~~lead-times.~~lead-times. As of ~~December 31, 2017,~~September 30, 2021, the Company had ~~non-cancelable~~ commitments to purchase ~~$145.3~~$64.9 million of ~~such~~inventory.

~~inventory. As of December 31, 2017 the Company had non-cancelable software and maintenance support commitments to purchase $19.0 million of software and support services.~~

The Company may from time to time be party to litigation arising in the course of its business, including, without limitation, allegations relating to commercial transactions, business relationships or intellectual property rights. Such claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources. Litigation in general, and intellectual property ~~and securities litigation~~ in particular, can be expensive and disruptive to normal business operations. Moreover, the results of legal proceedings are difficult to predict.

In accordance with applicable accounting guidance, the Company records accruals for certain of its outstanding legal proceedings, investigations or claims when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company evaluates, at least on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would result in a loss contingency to become both probable and reasonably estimable. When a loss contingency is not both probable and reasonably estimable, the Company does not record a loss accrual. However, if the loss (or an additional loss in excess of any prior accrual) is at least ~~a reasonable possibility~~reasonably possible and material, then the Company would disclose an estimate of the possible loss or range of loss, if such estimate can be made, or disclose that an estimate cannot be made. The assessment whether a loss is probable or a reasonable possibility, and whether the loss or a range of loss is estimable, involves a series of complex judgments about future events. Even if a loss is reasonably possible, the Company may not be

able to estimate a range of possible loss, particularly where (i) the damages sought are substantial or indeterminate, (ii) the proceedings are in the early stages, or (iii) the matters involve novel or unsettled legal theories or a large number of parties. In such cases, there is considerable uncertainty regarding the ultimate resolution of such matters, including the amount of any possible loss, fine or penalty. ~~Accordingly, for current proceedings, except as noted below, the Company is currently unable to estimate any reasonably possible loss or range of possible loss. However, an~~An adverse resolution of one or more of such matters could have a material adverse effect on the Company's results of operations in a particular quarter or fiscal year.

On May 28, 2007, the Public Treasury Department of the State of Sao Paolo, Brazil (the “Tax Authority”) assessed our Brazilian subsidiary, Enterasys Networks do Brasil Ltda. (“Enterasys Brasil”), based on an alleged underpayment of taxes. The Tax Authority also charged interest and penalties with respect to the assessment (collectively, the “ICMS Tax Assessment”). The Tax Authority denied Enterasys Brasil the use of certain presumed tax credits granted by the State of Espirito Santo, Brazil under the terms of the FUNDAP program for the period from February 2003 to December 2004. The value of the disallowed presumed tax credits is BRL 3.4 million (approximately U.S. $1.0 million), excluding interest and penalties. All currency conversions in this Legal Proceedings section are as of December 31, 2017.

Unable to resolve the matter at the administrative level, on October 1, 2014, Enterasys Brasil filed a lawsuit in the 11th Public Treasury Court of the Sao Paolo State Court of Justice (Judiciary District of Sao Paolo) to overturn or reduce the ICMS Tax Assessment. As part of this lawsuit, Enterasys Brasil requested a stay of execution, so that no tax foreclosure could be filed and no guarantee would be required until the court issued its final ruling. On or about October 6, 2014, the court granted a preliminary injunction staying any execution on the assessment, but requiring that Enterasys Brasil deposit the assessed amount with the court. Enterasys Brasil appealed this ruling and, on or about January 28, 2015, the appellate court ruled that no cash deposit (or guarantee) was required. In a decision dated August 28, 2017, and published on October 3, 2017, the court validated the assessment and penalty imposed by the Tax Authority, but ruled that the Tax Authority was charging an unlawfully high interest rate on the tax assessment and penalty amounts, and ordered the interest rate reduced to the maximum Federal rate. The August 28, 2017 decision, were it to become final, would require Enterasys Brasil to pay a total of BRL 16.7 million (approximately U.S. $5.1 million), which includes penalties, court costs, attorneys’ fees, and accrued interest as of December 31, 2017. The Company believes the ICMS Tax Assessment against Enterasys Brasil is without merit, has appealed the lower court’s decision and has requested a stay of execution.

Based on the currently available information, the Company believes the ultimate outcome of the ICMS Tax Assessment litigation will not have a material adverse effect on the Company's financial position or overall results of operations. However, due to the complexities and uncertainty surrounding the judicial process in Brazil and the nature of the claims asserted, there can be no assurance of a favorable outcome for Enterasys Brasil, which recorded an accrual of BRL 9.4 million (approximately U.S. $2.9 million) as of the date the Company acquired Enterasys Networks.

The Company made a demand on April 11, 2014 for a defense from, and indemnification by, the former equity holder of Enterasys Networks, Inc. (“Seller”) in connection with the ICMS Tax Assessment. Seller agreed to assume the defense of the ICMS Tax Assessment on May 20, 2014. In addition, through the settlement of an indemnification-related lawsuit with the Seller on June 18, 2015, Seller agreed to continue to defend the Company with respect to the ICMS Tax Assessment and to indemnify the Company for losses related thereto subject to certain conditions. These conditions include the offsetting of foreign income tax benefits realized by

the Company in connection with the acquisition of Enterasys. Based upon current projections of the foreign income tax benefits to be realized, and the potential liability in the event of an adverse final judgment in the ICMS Tax Assessment litigation, the Company does not presently anticipate that any amounts under the indemnification will be due from the Seller in connection with the ICMS Tax Assessment.

On October 23 and 29, 2015, putative class action complaints alleging violations of securities laws were filed in the U.S. District Court for the Northern District of California against the Company and three of its former officers (Charles W. Berger, Kenneth B. Arola, and John T. Kurtzweil). Subsequently, the cases were consolidated (In re Extreme Networks, Inc. Securities Litigation, No. 3:15-CY-04883-BLF). Plaintiffs allege that defendants violated the securities laws by disseminating materially false and misleading statements and concealing material adverse facts regarding the Company’s financial condition, business operations and growth prospects. Plaintiffs seek unspecified damages on behalf of a purported class of investors who purchased the Company’s common stock from September 12, 2013 through April 9, 2015. On June 28, 2016, the Court appointed a lead plaintiff. On September 26, 2016, the lead plaintiff filed a consolidated complaint. On November 10, 2016, defendants filed a motion to dismiss, which the Court granted with leave to amend on April 27, 2017. On June 2, 2017, the lead plaintiff filed an amended complaint, which, on July 10, 2017, defendants again moved to dismiss. The Court held a hearing on Defendants’ motion to dismiss on December 14, 2017, and a ruling is expected in the next few months. The Company believes plaintiffs’ claims are without merit and intends to defend them vigorously.

~~On February 18, 2016, a shareholder derivative case was filed in the Superior Court of California, Santa Clara County (Shaffer v. Kispert et al.~~, No. 16 CV 291726). The complaint names current and former officers and directors as defendants, and seeks recovery on behalf of the Company based on substantially the same allegations as the securities class action litigation described above. The parties have agreed to stay the case pending further activities in the securities class action litigation, and the court signed a stipulation and order to that effect.

XR Communications, LLC d/b/a Vivato Technologies ~~LLC~~ v. Extreme Networks, Inc.

On April 19, 2017, XR Communications, LLC (“XR”) (d/b/a Vivato Technologies) ~~sued~~filed a patent infringement lawsuit against the Company in the Central District of ~~California (XR Communications, LLC, dba Vivato Technologies v. Extreme Networks, Inc., No. 2:17-cv-2953-AG).~~California. The operative Second Amended Complaint asserts infringement of certain U.S. Patent ~~Nos. 7,062,296, 7,729,728, and 6,611,231~~ based on the Company’s manufacture, use, sale, offer for sale, and/or importation into the United States of certain access points and routers supporting multi-user, multiple-input, multiple-output technology. XR seeks unspecified damages, on-going royalties, pre- and post-judgment interest, and attorneys’ ~~fees (but no injunction).~~ fees. The stay issued by the District Court in 2018 has been lifted.

Orckit IP, LLC v. Extreme Networks, Inc., Extreme Networks Ireland Ltd., and Extreme Networks GmbH

On ~~July 24, 2017,~~February 1, 2018, Orckit IP, LLC (“Orckit”) filed a patent infringement lawsuit against the Company ~~filed~~and its ~~answer.~~ InIrish and German subsidiaries in the District Court in Dusseldorf, Germany. The lawsuit alleges direct and indirect infringement of the German portion of a patent (“EP ’364”) based on the offer, distribution, use, possession and/or importation into Germany of certain network switches that equipped with the ExtremeXOS operating system. Orckit is seeking injunctive relief, accounting, and an ~~order entered~~unspecified declaration of liability for damages and costs of the lawsuit. On January 28, 2020, the Court rendered a decision in the infringement case in favor of the Company. The matter is proceeding through the appellate process, and an oral hearing was held on October 21, 2021. A decision is pending.

On April 23, ~~2017,~~2019, Orckit filed an extension of the ~~court scheduled~~patent infringement complaint against the Company and its Irish and German subsidiaries in the District Court in Dusseldorf, Germany. With this extension, Orckit alleges infringement of the German portion of a ~~claim construction hearing~~second patent (“EP ‘077”) based on the offer, distribution, use, possession and/or importation into Germany of certain network switches that the Company no longer sells in Germany. Orckit is seeking injunctive relief, accounting and sales information, and a declaration of liability for ~~April 10,~~damages as well as costs of the lawsuit. On October 13, 2020, the Court issued an infringement decision against the Company and granted to Orckit the right to enforce the judgment against the Company, which Orckit has provided notification to the Company that it will enforce the judgment. The matter is proceeding through the appellate process.

The Company filed a nullity action related to the EP ‘364 patent on May 3, 2018, and ~~ordered any trial~~one related to the EP ‘077 patent on October 31, 2019, both in the Federal Patent Court in Munich. The court found the EP ‘364 patent to be valid and the Company is considering an appeal. The case filed to seek to invalidate the EP ‘077 patent is proceeding.

SNMP Research, Inc. and SNMP Research International, Inc. v. Broadcom Inc., Brocade Communications Systems LLC, and Extreme Networks, Inc.

On October 26, 2020, SNMP Research, Inc. and SNMP Research International, Inc. (collectively, “SNMP”) filed a lawsuit against the Company in the Eastern District of ~~this matter~~Tennessee for copyright infringement, alleging that the Company was not properly licensed to ~~commence no earlier than March 19, 2019.~~ use their software. SNMP is seeking actual damages and profits attributed to the infringement, as well as equitable relief. The Company ~~believes~~has filed a motion to dismiss and a motion to transfer the ~~claims~~case to the Northern District of California. Both motions are ~~without merit~~pending. A trial date has been set for November 2022.

Mala Technologies Ltd. v. Extreme Networks GmbH, Extreme Networks Ireland Ops Ltd., and ~~intends~~Extreme Networks, Inc.

On April 15, 2021, Mala Technologies Ltd. (“Mala”) filed a patent infringement lawsuit against the Company and its Irish and German subsidiaries in the District Court in Dusseldorf, Germany. The lawsuit alleges indirect infringement of the German portion of a patent (“EP ‘498”) based on the offer and sale in Germany of certain network switches equipped with the ExtremeXOS operating system. Mala is seeking injunctive relief, accounting, and an unspecified declaration of liability for damages and costs of the lawsuit. A hearing date has been set for July 14, 2022. The Company filed a nullity action related to ~~defend them vigorously.~~the EP’498 patent on September 24, 2021 in the German Federal Patent Court.

Subject to certain limitations, the Company may be obligated to indemnify its current and former directors, officers and employees. These obligations arise under the terms of its certificate of incorporation, its bylaws, applicable contracts, and applicable law. The obligation to indemnify, where applicable, generally means that the Company is required to pay or reimburse, and in certain circumstances the Company has paid or reimbursed, the individuals' reasonable legal expenses and possibly damages and other liabilities incurred in connection with certain legal matters. For example, the Company currently is paying or reimbursing legal expenses being incurred by certain current and former officers and directors in connection with the shareholder litigation described above. The Company also procures Directors and Officers liability insurance to

help cover its defense and/or indemnification costs, although its ability to recover such costs through insurance is uncertain. While it is not possible to estimate the maximum potential amount that could be owed under these ~~indemnification~~governing documents and agreements due to the Company’s limited history with prior indemnification claims, indemnification (including defense) costs could, in the future, have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows.

On April 26, 2012, the Company entered into an Amended and Restated Rights Agreement between the Company and Computershare Shareholder Services LLC as the rights agent (as amended, the “Restated Rights Plan”). The Restated Rights Plan governs the terms of each right (“Right”) that has been issued with respect to each share of common stock of Extreme Networks. Each Right initially represents the right to purchase one one-thousandth of a share of the Company’s Preferred Stock.

The Company’s Board of Directors (the “Board”) adopted the Restated Rights Plan to preserve the value of deferred tax assets, including net operating loss carry forwards of the Company, with respect to its ability to fully use its tax benefits to offset future income which may be limited if the Company experiences an “ownership change” for purposes of Section 382 of the Internal Revenue Code of 1986 as a result of ordinary buying and selling of shares of its common stock. Following its review of the terms of the plan, the Board decided it was necessary and in the best interests of the Company and its stockholders to enter into the Restated Rights Plan. From 2013 through 2020, the Board and stockholders approved amendments providing for one-year extensions of the term of the Restated Rights Plan. On May 17, 2021, the Board unanimously approved the 2021 Tax Benefit Preservation Plan, which amended and restated the Restated Rights Plan with a term that expires on May 17, 2024. The amendment was approved by the stockholders of the Company at the annual meeting of stockholders on November 4, 2021.

The Compensation Committee of the Board unanimously approved an amendment to the Extreme Networks, Inc. Amended and Restated 2013 Equity Incentive Plan (the “2013 Plan”) on August 11, 2021 to update tax withholding obligations. The Compensation Committee of the Board unanimously approved an amendment to the 2013 Plan on September 10, 2021 to increase the maximum number of available shares by 7.9 million shares, which amendment was approved by the stockholders at the Company’s annual meeting of stockholders held on November 4, 2021.

The Compensation Committee of the Board unanimously approved an amendment to the 2014 Employee Stock Purchase Plan (the “ESPP”) on September 9, 2021 to increase the maximum number of shares that will be available for sale thereunder by 7.5 million shares. The amendment was approved by the stockholders of the Company at the annual meeting of stockholders held on November 4, 2021.

On November 2, 2018, the Company announced the Board had authorized management to repurchase up to $60.0 million of the Company’s common stock over a two-year period from the date of authorization. Purchases may be made from time to time through any means including, but not limited to, open market purchases and privately negotiated transactions. In February 2020, the Board increased the authorization to repurchase by $40.0 million to $100.0 million and extended the period for repurchase for three years from February 5, 2020. A maximum of $30.0 million of the Company’s common stock may be repurchased in any calendar year.

There were 0 shares repurchased during the three months ended September 30, 2021 and 2020.

The Company had the following reserved shares of common stock for future issuance as of the dates noted (in thousands):

Share-based compensation expense recognized in the condensed consolidated financial statements by line-item caption is as follows (in thousands):

The following table summarizes stock option activity for the three months ended September 30, 2021 (in thousands, except per share and contractual term):

The fair value of each stock option grant under the 2013 Plan is estimated on the date of grant using the Black-Scholes-Merton option valuation model. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The risk-free rate is based upon the estimated life of the option and the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on the historical volatility on the Company’s stock. There were 0 stock options granted during the three months ended September 30, 2021 and 2020.

Stock awards may be granted under the 2013 Plan on terms approved by the Compensation Committee of the Board. Stock awards generally provide for the issuance of restricted stock units (“RSUs”) including performance-condition or market-condition RSUs which vest over a fixed period of time or based upon the satisfaction of certain performance criteria or market conditions. The Company recognizes compensation expense on the awards over the vesting period based on the awards’ fair value as of the date of grant. The Company does not estimate forfeitures, but accounts for them as incurred.

The following table summarizes stock award activity for the three months ended September 30, 2021 (in thousands, except grant date fair value):

The RSU's granted under the 2013 plan vest over a period of time, generally one to three years, and are subject to participant's continued service to the Company. The stock awards granted during the three months ended September 30, 2021 included 0.9 million RSUs including the market condition awards discussed below to named executive officers and directors.

During the three months ended September 30, 2021 and 2020, the Compensation Committee of the Board approved 0.7 million and 0.5 million RSUs, respectively, with vesting based on market conditions (“MSU”) to certain of the Company’s executive officers. These MSUs vest based on the Company’s total shareholder return (“TSR”) relative to the TSR of the Russell 2000 Index (“Index”). The MSU award represents the right to receive a target number of shares of common stock up to 150% of the original grant. The MSUs vest based on the Company’s TSR relative to the TSR of the Index over performance periods of three years from the grant date, subject to the grantees’ continued service through the certification of performance.

Total shareholder return is calculated based on the average closing price for the 30-trading days prior to the beginning and end of the performance periods. Performance is measured based on three periods, with the ability for up to one-third of target shares to vest after years 1 and 2 and the ability for up to the maximum of the full award to vest based on the full 3-year TSR less any shares vested based on 1- and 2-year periods. Linear interpolation is used to determine the number of shares vested for achievement between target levels.

The grant date fair value of each MSU was determined using the Monte Carlo simulation model. The weighted-average grant-date fair value of these MSU granted during the three months ended September 30, 2021 was $12.69 per share. The assumptions used in the Monte-Carlo simulation included the expected volatility of 66%, risk-free rate of 0.44%, 0 expected dividend yield, expected term of 3 years and possible future stock prices over the performance period based on the historical stock and market prices. The Company recognizes the expense related to these MSUs on a graded-vesting method over the estimated term.

The weighted-average grant-date fair value of these MSU granted during the three months ended September 30, 2020 was $5.32 per share. The assumptions used in the Monte Carlo simulation included the expected volatility of 69%, risk-free rate of 0.18%, 0 expected dividend yield, expected term of 3 years and possible future stock prices over the performance period based on the historical stock and market prices.

The fair value of each share purchase option under the ESPP is estimated on the date of grant using the Black-Scholes-Merton option valuation model with the weighted average assumptions noted in the following table. The expected term of the ESPP represents the term of the offering period of each option. The risk-free rate is based upon the estimated life and on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on the historical volatility on the Company’s stock.

There were 1.0 million and 1.5 million shares issued under the ESPP during the three months ended September 30, 2021 and 2020, respectively. The following assumptions were used to determine the grant-date fair values of the ESPP shares during the following periods:

The weighted-average grant-date fair value of shares under the ESPP during the three months ended September 30, 2021 and 2020 was $3.18 and $2.23 per share, respectively.

The Company operates in 1 segment, the development and marketing of network infrastructure equipment and related software. The Company conducts business globally and is managed geographically. Revenues are attributed to a geographical area based on the billing address of customers. The Company operates in 3 geographical areas: Americas, which includes the United States, Canada, Mexico, Central America and South America; EMEA, which includes Europe, Russia, Middle East and Africa; and APAC which includes Asia Pacific, South Asia, India, Australia and Japan. The Company’s chief operating decision maker, who is its CEO, reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.

See Note 3, Revenues, for the Company’s revenues by geographic regions and channel based on the customer’s billing address.

The Company’s long-lived assets are attributed to the geographic regions as follows (in thousands):

The Company is exposed to interest rate risk on its debt. The Company enters into interest rate swap contracts to effectively manage the impact of fluctuations of interest rate changes on its outstanding debt which has floating interest rate. The Company does not enter into derivative contracts for trading or speculative purposes.

At the inception date of the derivative contract, the Company performs an assessment of these contracts and has designated these contracts as cash flow hedges. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreement without exchange of the underlying notional amount. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, by performing qualitative and quantitative assessment, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flow of hedged items. Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge are recorded in other comprehensive income (loss). When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively. In accordance with ASC 815 “Derivatives and Hedging,” the Company may prospectively discontinue the hedge accounting for an existing hedge if the applicable criteria are no longer met, the derivative instrument expires, is sold, terminated or exercised or if the Company removes the designation of the respective cash flow hedge. In those circumstances, the net gain or loss remains in accumulated other comprehensive loss and is reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings, unless the forecasted transaction is no longer probable in which case the net gain or loss is reclassified into earnings immediately.

During fiscal 2020, the Company entered into multiple interest rate swap contracts, designated as cash flow hedges, to hedge the variability of cash flows in interest payments associated with the Company’s various tranches of floating-rate debt. As of September 30, 2021 and September 30, 2020, the total notional amount of these interest rate swaps was $200.0 million and had maturity dates through April 2023. As of September 30, 2021 and September 30, 2020, these contracts had unrealized losses of $0.9 million and $1.8 million, respectively, which are recorded in “Accumulated other comprehensive loss” with the associated liability in “Other accrued liabilities” in the condensed consolidated balance sheet. Cash flows associated with periodic settlements of interest rate swaps are classified as operating activities in the condensed consolidated statement of cash flows. Realized gains and losses are recognized as they accrue in interest expense. Amounts reported in accumulated other comprehensive loss related to these cash flow hedges are reclassified to interest expense over the life of the swap contracts. The Company estimates that $0.8 million will be reclassified to interest expense over the next twelve months. The classification and fair value of these cash flow hedges are discussed in Note 6, Fair Value Measurements.

The Company uses derivative financial instruments to manage exposures to foreign currency that may or may not be designated as hedging instruments. The Company’s objective for holding derivatives is to use the most effective methods to minimize the impact

of these exposures. The Company does not enter into derivatives for speculative or trading purposes. The Company enters into foreign exchange forward contracts primarily to mitigate the effect of gains and losses generated by foreign currency transactions related to certain operating expenses and re-measurement of certain assets and liabilities denominated in foreign currencies.

For foreign exchange forward contracts not designated as hedging instruments, the fair value of the Company’s derivatives in a gain position are recorded in “Prepaid expenses and other current assets” and derivatives in a loss position are recorded in “Other accrued liabilities” in the accompanying condensed consolidated balance sheets. Changes in the fair value of derivatives are recorded in “Other income (expense), net” in the accompanying condensed consolidated statements of operations. As of September 30, 2021 and 2020, foreign exchange forward contracts not designated as hedging instruments had the total notional principal amount of $22.6 and $7.5 million, respectively. These contracts have maturities of 40 days or less. The net gains and losses recorded in the condensed consolidated statement of operations from these transactions during the three months ended September 30, 2021 and 2020 were losses of $0.2 million and gains of less than $0.1 million, respectively. Changes in the fair value of these foreign exchange forward contracts are offset largely by remeasurement of the underlying assets and liabilities

For foreign exchange forward contracts designated as hedging instruments, gains and losses arising from these contracts are recorded as a component of accumulated other comprehensive income (loss) on the condensed consolidated balance sheets. The hedging gains and losses in accumulated other comprehensive income are subsequently reclassified to expenses, as applicable, in the condensed consolidated statements of operations in the same period in which the underlying transactions affect our earnings. As of September 30, 2021, foreign exchange forward contracts designated as hedging instruments had the notional amount of $11.3 million. These contracts have maturities of less than twelve months. As of September 30, 2021, these contracts had unrealized losses of $0.4 million which are recorded in accumulated other comprehensive income (loss) with the associated liability in other accrued liabilities in the accompanying consolidated balance sheets. There were 0 foreign exchange forward contracts at September 30, 2020 that were designated as hedging instruments.

The Company recognized total foreign currency gains of $0.3 million and losses of $1.2 million for the three months ended September 30, 2021 and 2020, respectively related to the change in fair value of foreign currency denominated assets and liabilities.

The Company recorded $0.3 million of restructuring and related charges during the three months ended September 30, 2021 which primarily included facility related charges of $0.3 million for the three months ended September 30, 2021. Severance and benefit restructuring charges consisted primarily of employee severance and benefit expenses incurred under the reduction-in-force action initiated in the third quarter of fiscal 2020 (the “2020 Plan”) to reduce operating costs and enhance financial flexibility as a result of disruptions caused by the COVID-19 global pandemic. With the reduction and realignment of the headcount under the 2020 Plan, the Company is relocating certain of its lab test equipment to third-party consulting companies. The Company has incurred $9.6 million of charges under the 2020 Plan through September 30, 2021. The Company expects to incur additional equipment related relocation expenses of $0.1 million and expects to substantially complete these activities by the first half of fiscal 2022. The facility restructuring charges included additional facilities expenses related to previously impaired facilities.

The Company recorded $1.0 million of restructuring and related charges during the three months ended September 30, 2020. The charges included $0.3 million for charges related to facilities which the Company has exited, and $0.7 million for employee severance and benefit expenses incurred under the Company’s restructuring plans.

Restructuring liabilities related to severance, benefits, and equipment relocation obligations are recorded in “Other accrued liabilities” in the accompanying condensed consolidated balance sheets. The following table summarizes the activity related to the severance, benefits, and equipment relocation liabilities during the three months ended September 30, 2021 (in thousands):

For the three months ended ~~December 31, 2017~~September 30, 2021 and ~~2016,~~2020, the Company recorded ~~income tax benefit of $1.6 million and~~an income tax provision of ~~$1.2 million, respectively. For the six months ended December 31, 2017 and 2016, the Company recorded income tax provision of $0.1~~$2.1 million and ~~$2.1~~$1.3 million, respectively.

The income tax provisions for the three months ended ~~December 31, 2017~~September 30, 2021 and ~~2016,~~2020, consisted ~~primarily~~ of (1) taxes on the income of the Company’s foreign subsidiaries, ~~as well as~~(2) foreign withholding taxes, (3) state taxes in jurisdictions where the Company has 0 remaining state net operating losses (“NOLs”) and (4) tax expense associated with the establishment of a U.S. deferred tax liability for amortizable goodwill resulting from the acquisition of Enterasys Networks, Inc., the wireless local area network business from Zebra ~~WLAN Business and~~Technologies Corporation, the Campus Fabric ~~Business.~~Business from Avaya and the Data Center Business from Brocade. The interim income tax ~~provision~~provisions for the three months ended ~~December 31, 2017~~September 30, 2021 and 2020 were calculated using the discrete effective tax rate method as allowed by Accounting Standards Codification (“ASC”) 740-270-30-18, “Income Taxes – Interim Reporting.” The discrete method is ~~offset by a tax benefit of $2.5 million resulting from~~applied when the ~~reduction~~application of the ~~U.S. Federal~~estimated annual effective tax rate ~~from 35%~~is impractical because it is not possible to 21% applied to our deferred tax liability related to amortizable goodwill as required by the recently enacted U.S. tax legislation discussed below. The income tax provisions for both fiscal years were calculated based on the actual results of operations for the three months ended December 31, 2017 and 2016, and therefore may not reflectreliably estimate the annual effective tax rate.

The discrete method treats the year to date period as if it was the annual period and determines the income tax ~~provisions for~~expense or benefit on that basis. The Company believes that, at this time, the ~~six months ended December 31, 2017 and 2016 consisted primarily~~use of ~~taxes on~~this discrete method is more appropriate than the income of the Company’s foreign subsidiaries as well as tax expense associated with the establishment of a U.S. deferred tax liability for amortizable goodwill resulting from the acquisitions referenced above. The income tax provision for the six months ended December 31, 2017 is offset by the tax benefit of $2.5 million resulting from the U.S. Federal tax legislation referenced above.

~~On December 22, 2017, the President of the United States signed and enacted into law H.R. 1, the Tax Cuts and Jobs Act (“TCJA”), which, except for certain provisions, is~~annual effective for tax years beginning on or after January 1, 2018. As a fiscal year taxpayer, the Company will not be subject to the majority of the tax law provisions until fiscal year 2019; however, there are certain significant items of impact that will be recognized in fiscal year 2018. Because a change in tax law is accounted for in the period of enactment, the effects of the TCJA, a tax benefit of $2.5 million, have been reflected in the second quarter of fiscal 2018.

~~The TCJA’s primary change is a reduction in the U.S. Federal statutory corporate~~ tax rate ~~from 35% to 21%, including a pro rata reduction from 35% to 28% for~~method as (i) the ~~Company in fiscal 2018. As a result, the Company has recognized a~~estimated annual effective tax ~~benefit in the amount of $2.5 million in the second quarter of fiscal 2018~~rate method is not reliable due to the ~~revaluation~~high degree of uncertainty in estimating annual pretax earnings on a jurisdictional basis and (ii) the ~~Company's deferred tax liability related to amortizable goodwill to reflect~~Company’s ongoing assessment that the ~~lower statutory rate. Because the~~recoverability of certain U.S. and Irish deferred tax assets are offset by a full valuation allowance, the reduction in deferred tax assets for the lower rate was fully offset by a corresponding reduction in valuation allowance resulting in no additional tax provision.

The TCJA moves the U.S. from a global taxation regime to a modified territorial regime. Under the territorial regime, the company’s foreign earnings will generally not be subject to tax in the US. As part of transitioning to this new regime, U.S. companies are required to pay tax on historical earnings generated offshore that have not been repatriated to the U.S. (“Transition Tax”). The Company has estimated as of the second quarter of fiscal 2018, there will be no incremental tax provision relating to the Transition Tax given the Company’s ability to utilize existing tax attributes to offset the impact of the deemed repatriation.

The TCJA makes broad and complex changes to the U.S. tax code, and in certain instances, lacks clarity and is subject to interpretation until additional U.S. Treasury guidance is issued. On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allows registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations. However, the measurement period is deemed to have ended earlier when the registrant has obtained, prepared and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared or analyzed. The SAB summarizes a three-step process to be applied at each reporting period to account for and qualitatively disclose: (1) the effects of the change in tax law for which accounting is complete; (2) provisional amounts (or adjustments to provisional amounts) for the effects of the tax law where accounting is not complete, but that a reasonable estimate has been determined; and (3) a reasonable estimate cannot yet be made and therefore taxes are reflected in accordance with law prior to the enactment of the TCJA.

Amounts recorded where accounting is complete in the three and six months ended December 31, 2017 principally relate to the reduction in the U.S. federal tax rate to 21 percent, which resulted in the Company reporting an income tax benefit of $2.5 million to remeasure deferred taxes liabilities associated with indefinitely lived intangible assets that will reverse at the new 21% rate. Absent this deferred tax liability, the Company is in a net deferred tax asset position that is offset by a full valuation allowance. Though the impact of the rate change related to net deferred tax assets has a net tax effect of zero, the accounting to determine the gross change in the deferred tax position and the offsetting valuation is not yet complete. In accordance with Staff Accounting Bulletin (“SAB”) 118, the estimated income tax impact associated with the Transition Tax of zero represents our best estimate based on interpretation of the U.S. legislation as we are still accumulating data to finalize the underlying calculation. In accordance with SAB 118, estimated income tax impact associated with the Transition Tax is considered provisional and will be finalized prior to the end of the measurement period. The ultimate impact may differ from these provisional amounts, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the TCJA.

With respect to provisions of the TCJA effective for tax years beginning on or after January 1, 2018, the company anticipates several new provisions may potentially impact tax provisions in future periods including limitations on the deductibility of interest expense and certain executive compensation, a minimum tax on certain foreign earnings (i.e., global intangible low-taxed income or “GILTI”), as well as a base-erosion and anti-abuse tax (“BEAT”). The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. Based on initial assessment and interpretation of the new provision, the Company expects that it will be subject to incremental U.S. tax on GILTI income beginning in fiscal 2019. The Company may elect to account for GILTI tax as a component of tax expense in the period in which it is incurred or account for the GILTI tax in the measurement of deferred taxes. The Company is continuing to evaluate this particular provision and therefore has not yet elected a method but will do so once our analysis is complete.. The BEAT provisions in the Tax Reform Act eliminate the deduction of certain base-erosion payments made to related foreign corporations, and impose a minimum tax if greatermore likely than regular tax. There is a reasonable amount of uncertainty surrounding the interpretation of this new provision, however, based on initial assessment and a conservative interpretation of the new provision, the Company expects that it will be subject to the incremental U.S. tax on BEAT income beginning in fiscal 2019.not.

The Company has provided a full valuation allowance against all of its U.S. federal and state deferred tax assets as well as a portion of the deferred tax assets in ~~Australia, Brazil and Japan.~~Ireland. A valuation allowance is determined by assessing both negative and positive evidence to determine whether it is “more likely than not” that ~~the~~ deferred tax assets are recoverable; such assessment is required on a ~~jurisdiction by jurisdiction~~jurisdiction-by-jurisdiction basis. The Company's inconsistent earnings in recent periods, including a cumulative loss over the last three years, coupled with its difficulty in forecasting future revenue trends ~~as well as~~and the cyclical nature of its business represent sufficient negative evidence to require a full valuation ~~allowance~~allowances against its U.S. federal and state net deferred tax assets as well as a portion of the ~~above mentioned foreign jurisdictions. This~~deferred tax assets in Ireland. These valuation ~~allowance~~allowances will be evaluated periodically and can be reversed partially or in whole if business results and the economic environment have sufficiently improved to support realization of some or all of the Company's deferred tax assets.

The acquisition of Enterasys in October 2013 included a U.S. parent company as well as its wholly-owned domestic and foreign subsidiaries. The Company elected to treat this stock acquisition as an asset purchase by filing the required election forms under IRC Sec 338(h)(10). Additionally,

On September 14, 2021, the Company completed ~~asset purchases~~its acquisition of Ipanema. This acquisition is treated as a non-taxable stock acquisition and therefore, Extreme will have carryover tax basis in the ~~Zebra WLAN Business, the Campus Fabric Business~~assets and the Brocade Data Center Business in October 2016, July 2017 and October 2017, respectively. The Company has estimated the value of the intangible assets from these transactions and is amortizing the amounts over 15 years for tax purposes. During the three and six months ended December 31, 2017, the Company deducted $2.1 million and $3.7 million of tax amortization expense respectively, for each period related to capitalized goodwill resulting from these acquisitions. As of December 31, 2017, the Company recorded a deferred tax liability of $4.9 million related to this goodwill amortization which is not considered a future source of taxable income in evaluating the need for a valuation allowance against its deferred tax assets.liabilities acquired.

The Company had ~~$19.0~~$19.1 million of unrecognized tax benefits as of ~~December 31, 2017. The~~September 30, 2021. If fully recognized in the future, $0.4 million would impact of the ~~unrecognized~~effective tax ~~benefit of $18.9~~rate and $18.7 million, ~~if recognized,~~ would result in adjustments to deferred tax assets and corresponding adjustments to the valuation ~~allowance.~~allowance with no impact to the effective tax rate. The Company does not anticipate any events to occur during the next twelve months that would materially reduce the unrealized tax benefit as currently stated in the Company’s balance sheet.

The Company’s policy is to accrue interest and penalties related to the underpayment of income taxes as a component of tax expense in the accompanying condensed consolidated statements of operations.

In general, the Company’s U.S. federal income tax returns are subject to examination by tax authorities for fiscal years 2001 forward due to net operating losses and the Company's state income tax returns are subject to examination for fiscal years 2000 forward due to net operating losses. The Company is not currently under ~~examination by the state of North Carolina for the fiscal years ended 2014, 2015 and 2016.~~audit in any material jurisdictions.

Basic ~~earnings~~net income (loss) per share is calculated by dividing net ~~earnings~~income (loss) by the weighted average number of shares of common ~~shares~~stock outstanding during the period. Dilutive ~~earnings~~income per share is calculated by dividing net ~~earnings~~income by the weighted average number of shares of common ~~shares~~stock used in the basic ~~earnings~~net income (loss) per share calculation plus the dilutive effect of shares subject to repurchase, options ~~warrants~~ and unvested ~~restricted stock units.~~RSUs.

The following table presents the calculation of net ~~loss~~income (loss) per share of basic and diluted (in thousands, except per share data):

Three Months Ended

Six Months Ended

December 31,
2017

December 31,
2016

December 31,
2017

December 31,
2016

(As adjusted)

(As adjusted)

Net loss

$
(31,923
)

$
(4,229
)

$
(27,547
)

$
(9,971
)
Weighted-average shares used in per share calculation - basic and diluted

113,621

107,425

112,931

106,690

Net loss per share - basic and diluted

$
(0.28
)

$
(0.04
)

$
(0.24
)

$
(0.09
)

	Three Months Ended
	September 30, 2021		September 30, 2020
Net income (loss)	$	12,696	$	(8,812	)
Weighted-average shares used in per share calculation - basic		128,324		121,705
Options to purchase common stock		651		—
Restricted stock units		4,250		—
Employee Stock Purchase Plan shares		—		—
Weighted-average shares used in per share calculation - diluted		133,225		121,705

Net income (loss) per share - basic and diluted
Net income (loss) per share - basic	$	0.10	$	(0.07	)
Net income (loss) per share - diluted	$	0.10	$	(0.07	)

The following securities were excluded from the computation of net ~~loss~~income (loss) per diluted share of common stock for the periods presented as their effect would have been anti-dilutive (in thousands):

The Company uses derivative financial instruments to manage exposures to foreign currency. The Company’s objective for holding derivatives is to use the most effective methods to minimize the impact of these exposures. The Company does not enter into derivatives for speculative or trading purposes. The fair value of the Company’s derivatives in a gain position are recorded in “Prepaid expenses and other current assets” and derivatives in a loss position are recorded in “Other accrued liabilities” in the accompanying condensed consolidated balance sheets. Changes in the fair value of derivatives are recorded in “Other income (expense), net” in the accompanying condensed consolidated statements of operations. The Company enters into foreign exchange forward contracts to mitigate the effect of gains and losses generated by foreign currency transactions related to certain operating expenses and re-measurement of certain assets and liabilities denominated in foreign currencies. These derivatives do not qualify as hedges.

As of December 31, 2017, forward foreign currency contracts had a notional principal amount of $1.5 million and an immaterial unrealized gain. These contracts have maturities of less than 60 days. Changes in the fair value of these foreign exchange forward contracts are offset largely by re-measurement of the underlying assets and liabilities. As of December 31, 2016, the Company did not have any derivative instruments outstanding.

Foreign currency transactions gains and losses from operations was loss of $0.6 million and gain of $1.1 million for the three months ended December 31, 2017 and 2016, respectively. Foreign currency transactions gains and losses from operations was loss of $1.1 million and gain of $0.8 million for the six months ended December 31, 2017 and 2016, respectively.

The Company operates in one segment, the development and marketing of network infrastructure equipment. The Company conducts business globally and is managed geographically. Revenue is attributed to a geographical area based on the location of its customers. The Company operates in three geographical areas: Americas, which includes the United States, Canada, Mexico, Central America and South America; EMEA, which includes Europe, Russia, Middle East and Africa; and APAC which includes Asia Pacific, South Asia, India, Australia and Japan.

~~The Company attributes revenues to geographic regions and channels based on the customer's ship-to location as follows (in thousands):~~

~~The Company’s long-lived assets are attributed to the geographic regions as follows (in thousands):~~

On January 31, 2018, the Company approved and on February 2, 2018 began executing a reduction-in-force (the “Plan”) to re-align the Company’s resources as a result of the Company’s recent acquisitions of the Campus Fabric Business and the Data Center Business. The Plan is expected to reduce the overall costs of the Company and to accelerate the achievement of the Company’s operating margin target objectives. The Company expects to incur charges of approximately $4.0 million in connection with the Plan. Upon completion of the Plan, the potential savings expected to be achieved as a result of reduced employee related expenses and lower operating costs will yield annualized savings of $7.0 - $9.0 million. The costs associated with this Plan primarily include employee severance and benefits expenses. The amount and timing of the actual charges may vary due to required consultation activities with certain employees as well as compliance with statutory severance requirements in local jurisdictions.

Item 2. Management’s Discussion and Analysis ofof Financial Condition and Results of Operations

This quarterly report on Form 10-Q, including the following sections, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including in particular, our expectations regarding market demands, customer requirements and the general economic environment, future results of operations, and other statements that include words such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and similar expressions. These forward-looking statements involve risks and uncertainties. We caution investors that actual results may differ materially from those projected in the forward-looking statements as a result of certain risk factors identified in the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q for the ~~second~~first quarter ~~of fiscal six months~~ ended ~~December 31, 2016,~~September 30, 2021, our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017,~~2021, and other filings we have made with the Securities and Exchange Commission. These risk factors, include, but are not limited to: fluctuations in demand for our products and services; a highly competitive business environment for network switching equipment; our effectiveness in controlling expenses; the possibility that we might experience delays in the development or introduction of new technology and products; customer response to our new technology and products; fluctuations in the global ~~economy;~~economy, including political, social, economic, currency and regulatory factors (such as the outbreak of COVID-19); risks related to pending or future litigation; a dependency on third parties for certain components and for the manufacturing of our products and our ability to receive the anticipated benefits of ~~the acquisition of the Zebra Business.~~acquired businesses.

The following discussion is based upon our unaudited condensed consolidated financial statements included elsewhere in this Report. In the course of operating our business, we routinely make decisions as to the timing of the payment of invoices, the collection of receivables, the manufacturing and shipment of products, the fulfillment of orders, the purchase of supplies, and the building of inventory and service parts, among other matters. Each of these decisions has some impact on the financial results for any given period. In making these decisions, we consider various factors including contractual obligations, customer satisfaction, competition, internal and external financial targets and expectations, and financial planning objectives. For further information about our critical accounting policies and estimates, see the “Critical Accounting Policies and Estimates” section included in this “Management's Discussion and Analysis of Financial Condition and Results of Operations.”

Extreme Networks, Inc.~~, together with its subsidiaries (collectively referred to as “Extreme” and as “we”, “us” and “our”~~ (“Extreme” or “Company”) is a ~~leader in providing software-driven~~leading provider of end-to-end, cloud-driven networking solutions ~~for enterprise customers.~~and top-rated services and support. Providing a ~~combined end-to-end solution~~set of comprehensive solutions from the ~~data center~~Internet of Things (“IoT”) edge to the ~~access point,~~cloud, Extreme designs, develops, and manufactures wired and wireless network infrastructure equipment as well as a leading cloud networking platform and ~~develops the software for~~applications portfolio using cloud management, machine learning (“ML”), and artificial intelligence (“AI”) to deliver network ~~management,~~ policy, analytics, security, and access controls. ~~We strive~~Our solutions enable companies to ~~help~~embrace the value of new cloud technology without having to rip and replace existing infrastructures. Extreme has been pushing the boundaries of networking technology for a quarter of a century, driven by a higher purpose of helping our customers connect beyond the network. Extreme’s cloud-driven technologies provide flexibility and ~~partners Connect Beyond~~scalability in deployment, management, and licensing of networks globally. Our global footprint provides service to over 50,000 customers across the ~~Network™ by building world-class~~world including some of the world’s leading names in business, hospitality, retail, transportation and logistics, education, government, healthcare, manufacturing and service providers. We derive all our revenues from the sale of our networking equipment, software subscriptions, and ~~network infrastructure solutions that solve the wide range of problems faced by information technology~~related maintenance contracts.

~~Enterprise~~delivery models and applications that require fundamental network ~~administrators~~alterations and enhancements spanning from the ~~data center~~access edge to the ~~access layer need to respond to~~data center. With the rapid digital transformational trends of cloud, mobility, big data, social business and the ever-present need for network security. Accelerators such as Internet of Things (“IoT”), artificial intelligence (“AI”), bring your own device (“BYOD”), machine learning, cognitive computing, and robotics add complexity to challenge the capabilities of traditional networks. Technology advances have a profound effect across the entire enterprise network by placing unprecedented demands on network administrators to enhance management capabilities, scalability, programmability, agility, and analyticsimpact of the ~~enterprise networks they manage.~~global pandemic, we believe IT teams in every industry will need more control and better insights than ever before to ensure secure, distributed connectivity and comprehensive centralized visibility. ML and AI technologies have the potential to vastly improve the network experience in the post-pandemic world by collating large data sets to increase accuracy and derive resolutions to improve the operation of the network. When applied with cloud-driven networking and automation, administrators can quickly scale to provide productivity, availability, manageability, security, and speed, regardless of how distributed the network is.

We believe that ~~understanding~~ the ~~following~~network has never been more vital than it is today. As administrators grapple with more data, coming from more places, more connected devices, and more Software-as-a-service (“SaaS”) based applications, the cloud is fundamental to establishing a new normal. Traditional network offerings are not well-suited to fulfill enterprise expectations for rapid delivery of new services, more flexible business models, real-time response, and massive scalability. As enterprises continue to migrate increasing numbers of applications and services to either private clouds or public clouds offered by third parties and to adopt new IT delivery models and applications, they are required to make fundamental network alterations and enhancements spanning from device access points (“AP”) to the network core. In either case, the network infrastructure must adapt to this new dynamic environment. Intelligence and automation are key ~~developments is helpful~~if enterprises are to derive maximum benefit from their cloud deployments. Service providers are also investing in network enhancements with platforms and applications that deliver data insights, provide flexibility, and can quickly respond to new user demands and 5G use cases.

We believe Extreme stands to benefit from the use of its technology to manage distributed campus network architecture centrally from the cloud. Extreme has blended a dynamic fabric attach architecture, that delivers simplicity for moves and changes at the edge of the network, together with corporate-wide role-based policy. This enables customers to migrate to new cloud managed switching and Wi-Fi, agnostic of the existing networking or wireless equipment they already have installed. In the end, we expect these customers to see lower operating and capital expenditures, lower subscription costs, lower overall cost of ownership and more flexibility along with a more resilient network. We estimate the total addressable market for our Enterprise Networking solutions consisting of cloud networking, wireless local area networks (“WLAN”), data center networking, ethernet switching, campus local area networks (“LAN”), and software-defined wide area network (“SD-WAN”) solutions to be approximately $26 billion and growing at approximately five percent per year over the next three years. In addition, 5G provides an ~~understanding of our operating results~~estimated $3 billion serviceable available market for ~~the fiscal quarter ended December 31, 2017.~~

The year 2020 resulted in unprecedented change – from the physical footprint of offices, to ~~be invigorated by a wave of technological change:~~supply chain operations, to how we connect. Organizations and workforces extend anywhere and everywhere. IT leaders are now tasked with ensuring the global, hybrid workforce is functional and successful no matter where they are and ensure people can work wherever they want.

Extreme has recognized that the way we and our customers communicate has changed and the new normal has given rise to these distributed enterprise environments, or in other words, the Infinite Enterprise, which has three key tenets:

~~Ethernet (wired~~Extreme’s broad product, solutions and ~~wireless) has solidified its role in both public~~technology portfolio supports these three tenets and ~~private networks through its scalability, adaptability and cost-effectiveness.At the same time, the enterprises and service providers expect the technology to follow a price-performance curve that mandates continued innovation by Ethernet vendors.~~

Verticals such as healthcare, education, manufacturing, government, and hospitality, which includes sports and entertainment venues and retail are connecting with their customers and guests beyond the network. ~~These enterprises are investing in guest and location technologies that connect with their customers via their mobile devices over their WLAN. This allows~~evolve them to ~~obtain rich analytics for contextual marketing, which in turn, enables them to deliver a personalized brand experience. ExtremeGuest™~~help businesses succeed.

Key elements of Extreme’s strategy and ExtremeLocation™ have been built on cloud-based technology for simple implementation and fast release to market to better provide necessary insights into guest demographics and location-based analytics.differentiation include:

•

Creating effortless networking solutions that allow all of us to advance. We believe that progress is achieved when we connect—allowing us to learn, understand, create, and grow. We make connecting simple and easy with effortless networking experiences that enable all of us to advance how we live, work, and share.

•

Provide a differentiated end-to-end cloud architecture. Cloud networking is estimated to be a $2 billion segment of the networking market and is projected to be the fastest growing part of the networking industry at approximately 20% per year over the next three years, according to data from 650 Group Market Research. Cloud management technology has evolved significantly over the past decade. We believe we deliver a combination of innovation, reliability, and security with the leading end-to-end cloud management platform powered by ML and AI that spans from the IoT edge to the enterprise data center. Key characteristics of our cloud architecture include:

A robust cloud management platform that delivers visibility, intelligence, and assurance from the IoT edge to the core.

Cloud Choice for customers: Our cloud networking solution is available on all major cloud providers (Amazon Web Services (“AWS”), Google Cloud Platform (“GCP”) and Microsoft Azure).

Unlimited Network Data plans for the length of the cloud subscription to improve an organization’s ability to make smarter, more effective business decisions.

Consumption Flexibility: Offer a range of financing and network purchase options. Our value-based subscription tiers (including Connect, Navigator and Pilot) provide customers with flexibility to grow as they go, as well as offer pool-able and portable licenses that can be transferred between products (e.g. access points and switches) at one fixed price.

“No 9s” Reliability and Resiliency to ensure business continuity for our customers.

Zero-Trust Security (Information Security Management (“ISO”) 27001 Certified).

•

Offer customers choice: public or private cloud, or on-premises. We leverage the cloud where it makes sense for our customers and provide on-premises solutions where customers need it and also have a solution for those who want to harness the power of both. Our hybrid approach gives our customers options to adapt the technology to their business. At the same time, all of our solutions have visibility, control and strategic information built in, all tightly integrated with a single view across all of the installed products. Our customers can understand what is going on across their network and applications in real time – who, when, and what is connected to the network - critical for bring your own device (“BYOD”) and IoT usage.

•

Highest value of cloud management subscriptions. ExtremeCloud IQ Pilot provides our customers with four key applications enabling organizations to eliminate overlays.

•o

~~Growing usage~~Extreme AirDefense™ is a comprehensive wireless intrusion prevention system (“WIPS”) that simplifies the protection, monitoring and security of wireless networks. With the added Bluetooth and Bluetooth low energy intrusion prevention, network administrators can address growing threats against bluetooth and low energy devices.

ExtremeLocation™ delivers proximity, presence and location-based services for advanced contact tracing in support of the ~~cloud.~~ ~~Enterprises have migrated increasing numbers~~location-intelligent enterprise.

ExtremeGuest™ is a comprehensive guest engagement solution that enables IT administrators to use analytical insights to engage visitors with personalized engagements.

Extreme IoT™ delivers simple and secure onboarding, profiling, segmentation and filtering of ~~applications~~IoT devices on a production network.

•

Offers universal platforms for enterprise class switching and ~~services~~wireless infrastructure. Extreme offers universal platforms which support multiple deployment use cases, providing flexibility and investment protection.

Universal switches (5520/5420) support fabric or traditional networking with a choice of cloud or on-premises (air-gapped or cloud connected) management.

Universal WiFi 6 APs (300/400 series) support campus or distributed deployments with a choice of cloud or on-premises (air-gapped or cloud connected) management.

Universal licensing with one portable management license for any device and for any type of management. For switches, OS feature licenses are portable, and bulk activated through ExtremeCloud IQ.

•

Enable a common fabric to ~~either private clouds or public clouds offered by third parties. In either case,~~simplify and automate the network. Fabric technologies virtualize the network infrastructure ~~must adapt~~(decoupling network services from physical connectivity) which enables network services to ~~this new dynamic environment. Intelligence~~be turned up faster, with lower likelihood of error. They make the underlying network much easier to design, implement, manage and automation are key if enterprises are to derive maximum benefit from their cloud deployments. Ethernet speeds, scaling from 10 Gigabits per second (“G”) to 40G and even 100G, provide the infrastructure for both private and public clouds. In addition, there is growing interest in software-defined networking (“SDN”) approaches that may include technologies such as OpenFlow, OpenStack, and CloudStack for increased network agility.troubleshoot.

•

End-to-End Portfolio. Our cloud-driven solutions provide visibility, control and strategic intelligence from the edge to the data center, across networks and applications. Our solutions include wired switching, wireless switching, wireless access points, WLAN controllers, routers, and an extensive portfolio of software applications that deliver AI-enhanced access control, network and application analytics, as well as network management. All can be managed, assessed and controlled from a single pane of glass on premises or from the cloud.

•

Provide high-quality “in-house” customer service and support. We seek to enhance customer satisfaction and build customer loyalty through high-quality service and support. This includes a wide range of standard support programs to the level of service our customers require, from standard business hours to global 24-hour-a-day, 365-days-a-year real-time responsive support.

•

Extend switching and routing technology leadership. Our technological leadership is based on innovative switching, routing and wireless products, the depth and focus of our market experience and our operating systems - the software that runs on all of our networking products. Our products reduce operating expenses for our customers and enable a more flexible and dynamic network environment that will help them meet the upcoming demands of IoT, mobile, and cloud.

•

Expand Wi-Fi technology leadership. Wireless is today’s network access method of choice and every business must deal with scale, density and BYOD challenges. The network edge landscape is changing as the explosion of mobile devices increases the demand for mobile, transparent, and always-on wired to wireless edge services. The unified access layer requires distributed intelligent components to ensure that access control and resiliency of business services are available across the entire infrastructure and manageable from a single console. We are at a technology inflection point with the pending migration from Wi-Fi 5 solutions to Wi-Fi 6 (802.11ax), focused on providing more efficient access to the broad array of connected devices. We believe we have the industry’s broadest Wi-Fi 6 wireless portfolio providing intelligence for the wired/wireless edge and enhanced by our cloud architecture with machine learning and AI-driven insights.

•

Offer a superior quality of experience. Our network-powered application analytics provide actionable business insights by capturing and analyzing context-based data about the network and applications to deliver meaningful intelligence about applications, users, locations and devices. With an easy to comprehend dashboard, our applications help businesses turn their network into a strategic business asset that helps executives make faster and more effective decisions.

•

Expand market penetration by targeting high-growth market segments. Within the campus, we focus on the mobile user, leveraging our automation capabilities and tracking WLAN growth. Our data center approach leverages our product portfolio to address the needs of public and private cloud data center providers. We believe that the cloud networking compound annual growth rate will continue to outpace the compound annual growth rate for on-premises managed networking. Our focus is on expanding our technology foothold in the critical cloud networking segment to accelerate not only cloud management adoption, but also subscription-based licensing (SaaS) consumption.

•

Leverage and expand multiple distribution channels. We distribute our products through select distributors, a large number of resellers and system-integrators worldwide, as well as several large strategic partners. We maintain a field sales force to support our channel partners and to sell directly to certain strategic accounts. As an independent networking vendor, we seek to provide products that, when combined with the offerings of our channel partners, create compelling solutions for end-user customers.

•

Maintain and extend our strategic relationships. We have established strategic relationships with a number of industry-leading vendors to both, provide increased and enhanced routes to market, and collaboratively develop unique solutions.

~~Vendor consolidation is expected~~Acquisition

On September On September 14, 2021 (the “Acquisition Date”), the Company completed its acquisition (the “Acquisition”) of Ipanematech SAS (“Ipanema”), the cloud-native enterprise Software-Defined Wide Area Network (“SD-WAN”) business unit of Infovista pursuant to ~~continue.Consolidation of vendors within~~ a Sale and Purchase Agreement (“the enterprise network equipment market and between adjacent markets (storage, security, wireless & voice software and applications) continues to gain momentum. We identified this trend in 2013 with our acquisition of Enterasys. Further, we believe customers are demanding more end-to-end, integrated networking solutions. To address this demand, we acquiredAgreement”). Under the wireless local area network business (the “WLAN Business”) from Zebra Technologies Corporation in October 2016, Avaya’s fabric-based secure networking solutions and network security solutions business (the “Campus Fabric Business”) in July 2017, and Brocade’s data center business (the “Data Center Business”) in October 2017.

~~We seek to differentiate ourselves in the market by delivering a value proposition based on a software-driven approach to network management, control and analytics.~~

~~Extreme sells products primarily through an ecosystem of channel partners which combine our Ethernet, wireless and management and software analytics products with their vertical-specific~~ offerings to ~~create IT solutions for end user~~support our enterprise customers.

On July 14, 2017 (“Avaya Closing Date”), we completed the acquisition of Avaya Inc’s. fabric-based secure networking solutions and network security solutions business (the “Campus Fabric Business”), that had been announced on March 7, 2017, and funds were remitted to Avaya pursuant to the Avaya Purchase Agreement. We acquired customers, employees, technology and other assets, as well as assumed contracts and other liabilities of the Campus Fabric Business, for a purchase price of $79.8 million,

including all adjustments. Pursuant to certain ancillary agreements, Avaya also provides us transition services for a period of time following the Avaya Closing Date. See Note 2. Business Combination for additional information.

The acquisition was accounted for using the acquisition method of accounting whereby the acquired assets and liabilities of the Campus Fabric Business is recorded at their respective fair values and added to those of ours including an amount for goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets. Results of operations of the Campus Fabric Business are included in our operations beginning with the Avaya Closing Date.

During the three months and six months ended December 31, 2017, we recognized acquisition and integration costs of $6.6 million and $9.5 million, respectively, related to the Campus Fabric Business which is included in “Acquisition and integration costs, net of bargain purchase gain” in the accompanying condensed consolidated statements of operations.

On October 27, 2017 (“Brocade Closing Date”), we completed our acquisition of Brocade Communication Systems, Inc.’s (“Brocade”) Data Center Business that had been announced on October 3, 2017. Upon the terms and subject to the conditions of the Brocade Asset Purchase Agreement, we acquired customers, employees, technology and other assets of the Data Center Business, as well as assumed certain contracts and other liabilities of the Data Center Business, for an upfront cash closing payment equal to $23.0 million, plus deferred payments of $20.0 million to be paid $1.0 million per quarter for 20 quarters following the Brocade Closing Date, plus quarterly earn out payments equal to 50% of profits of the Data Center Business for the five-year period commencing at the end of our first full fiscal quarter following the Brocade Closing Date. Pursuant to certain ancillary agreements, Brocade also provides us with transition services for a period of time following the Brocade Closing Date. See Note 2. Business Combination for additional information.

~~The acquisition was accounted for using the acquisition method of accounting whereby the acquired assets and liabilities of the Data~~ Center Business is recorded at their respective fair values and added to those of ours including an amount for goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets. Results of operations of the Data Center Business are included in our operations beginning with the Closing Date.

During the three and six months ended December 31, 2017, we recognized acquisition costs of $32.5 million and $33.8 million, respectively, including a $25.0 million consent fee paid to Broadcom Corporation (“Broadcom”), to terminate a previous asset purchase agreement entered into by the Company to purchase the Data Center Business from Broadcom, in anticipation of Broadcom’s acquisition of Brocade. The fee was paid to Broadcom to allow the Company to buy the Data Center Business directly from Brocade. Acquisitions costs are included in “Acquisition and integration costs, net of bargain purchase gain” in the accompanying condensed consolidated statements of operations.

During the ~~second~~first quarter of fiscal ~~2018,~~2022, we ~~reflected~~achieved the following results:

The following table presents net product and service ~~revenue~~and subscription revenues for the periods presented (dollars in thousands):

Three Months Ended

Six Months Ended

December 31,
2017

December 31,
2016

$
Change

%
Change

December 31,
2017

December 31,
2016

$
Change

%
Change

(As adjusted)

(As adjusted)

Net Revenues:

Product

$
174,850

$
118,055

$
56,795

48.1
%

$
339,624

$
208,148

$
131,476

63.2
%
Percentage of net revenue

75.7
%

75.5
%

76.7
%

74.6
%

Service

56,273

38,322

17,951

46.8
%

103,214

70,833

32,381

45.7
%
Percentage of net revenue

24.3
%

24.5
%

23.3
%

25.4
%

Total net revenues

$
231,123

$
156,377

$
74,746

47.8
%

$
442,838

$
278,981

$
163,857

58.7
%

	Three Months Ended
	September 30, 2021			September 30, 2020			$ Change		% Change
Net revenues:
Product	$	185,161		$	161,396		$	23,765		14.7	%
Percentage of net revenues		69.2	%		68.4	%
Service and subscription		82,523			74,406			8,117		10.9	%
Percentage of net revenues		30.8	%		31.6	%
Total net revenues	$	267,684		$	235,802		$	31,882		13.5	%

Product revenues increased ~~$56.8~~$23.8 million or ~~48.1%~~14.7% for the three months ended ~~December 31, 2017~~September 30, 2021, as compared to the corresponding period of fiscal ~~2017. Product~~2021. The product revenues ~~increased $131.5 million or 63.2%~~increase for the ~~six~~three months ended ~~December 31, 2017as compared~~September 30, 2021 was primarily due to the material slow-down in global demand during the corresponding period of fiscal ~~2017. The increase in product revenues for both periods of fiscal 2018 were attributable to low single digit organic growth and growth related~~2021 due to the ~~acquisitions~~global outbreak of ~~the WLAN Business, Campus Fabric Business and the Data Center Business.~~COVID-19.

Service and subscription revenues increased ~~$18.0~~$8.1 million, or ~~46.8%~~10.9% for the three months ended ~~December 31, 2017~~September 30, 2021 as compared to the corresponding period ofin fiscal ~~2017. Service revenues increased $32.4 million or 45.7% for the six months ended December 31, 2017 as compared to the corresponding period of fiscal 2017.~~ 2021. The increase in service ~~revenue~~ ~~for both periods of fiscal 2018~~ ~~were~~and subscription revenues was primarily due to the ~~increased number of service contracts acquired as a result of the acquisitions of the~~ ~~WLAN Business,~~ ~~Campus Fabric Business and the Data Center Business.~~growth in subscription revenues.

The following table presents the product and service and subscription, gross profit and the respective gross profit percentages for the periods presented (dollars in thousands):

Three Months Ended

Six Months Ended

December 31,
2017

December 31,
2016

$
Change

%
Change

December 31,
2017

December 31,
2016

$
Change

%
Change

(As adjusted)

(As adjusted)

Gross profit:

Product

$
96,378

$
55,428

$
40,950

73.9
%

$
181,107

$
101,272

$
79,835

78.8
%
Percentage of product revenue

55.1
%

47.0
%

53.3
%

48.7
%

Service

32,608

24,224

8,384

34.6
%

60,260

44,266

15,994

36.1
%
Percentage of service revenue

57.9
%

63.2
%

58.4
%

62.5
%

Total gross profit

$
128,986

$
79,652

$
49,334

61.9
%

$
241,367

$
145,538

$
95,829

65.8
%
Percentage of net revenue

55.8
%

50.9
%

54.5
%

52.2
%

	Three Months Ended
	September 30, 2021			September 30, 2020			$ Change		% Change
Gross profit:
Product	$	104,217		$	88,001		$	16,216		18.4	%
Percentage of product revenues		56.3	%		54.5	%
Service and subscription		51,386			47,017			4,369		9.3	%
Percentage of service and subscription revenues		62.3	%		63.2	%
Total gross profit	$	155,603		$	135,018		$	20,585		15.2	%
Percentage of net revenues		58.1	%		57.3	%

Product gross profit increased ~~$41.0~~$16.2 million or ~~73.9%~~18.4% for the three months ended ~~December 31, 2017~~September 30, 2021, as compared to the corresponding period in fiscal ~~2017,~~ ~~primarily due to the acquisitions of the~~ ~~WLAN Business,~~ the Campus Fabric Business and the Data Center Business and the corresponding revenues attributed to those acquisitions, more favorable manufacturing costs due to cost reduction efforts and a decrease in integration costs of $3.9 million including excess inventory charges related to the discontinuance of certain product lines due to the acquisition of the Data Center Business as opposed to the same charges incurred related to the acquisition of the WLAN Business in the corresponding period in fiscal 2017.2021. The ~~increases~~increase in product gross profit was primarily due to increased revenues along with lower distribution charges of $0.5 million, which were ~~partially offset by increases in~~mainly due to decreased tariffs, lower excess and obsolete inventory charges of $0.6 million, lower warranty costs of $0.4 million and lower amortization of ~~developed technology~~ intangibles ~~of $2.2 million~~due to certain intangibles being fully depreciated.

~~Product~~subscription gross profit increased ~~$79.8~~$4.4 million or ~~78.8% for the six months ended December 31, 2017 as compared to the corresponding period of fiscal 2017,~~ ~~primarily due to the acquisitions of the~~ ~~WLAN Business,~~ Campus Fabric Business and the Data Center Business and the corresponding revenues attributed to those acquisitions and more favorable manufacturing costs due to cost reduction efforts. The increases in product gross profit were partially offset by increases in warranty charges of $2.7 million, royalty charges of $1.4 million, amortization of developed technology intangibles of $1.1 million, and integration costs of $0.9 million including excess inventory charges related to the discontinuance of certain product lines due to the acquisitions of the Campus Fabric Business and the Data Center Business as opposed to the same charges incurred related to the acquisition of the WLAN Business in the corresponding period in fiscal 2017.

~~Service gross profit increased $8.4 million or 34.6%~~9.3% for the three months ended ~~December 31, 2017~~September 30, 2021, as compared to the corresponding period in fiscal ~~2017,~~ 2021. The increase was primarily due to ~~the acquisitions of the WLAN Business, Campus Fabric Business~~increased service and ~~the Data Center Business as a result of~~subscription revenues, partially offset by higher ~~number of maintenance contracts.~~

~~Service gross profit~~personnel costs, professional fees and increased ~~$16.0 million or 36.1% for the six months ended December 31, 2017 as compared to the corresponding period in fiscal 2017,~~ ~~primarily due the acquisitions of the WLAN Business, Campus Fabric Business and the Data Center Business as a result of higher number of maintenance contracts.~~cloud service costs.

The following table presents operating expenses for the periods presented (dollars in thousands):

	Three Months Ended										Six Months Ended
	December 31, 2017		December 31, 2016		$ Change			% Change			December 31, 2017		December 31, 2016		$ Change			% Change			Three Months Ended
			(As adjusted)										(As adjusted)								September 30, 2021		September 30, 2020		$ Change			% Change
Research and development	$	45,907	$	24,013	$	21,894			91.2	%	$	80,192	$	42,312	$	37,880			89.5	%	$	47,766	$	49,524	$	(1,758	)		(3.5	)%
Sales and marketing		65,659		41,025		24,634			60.0	%		121,220		77,884		43,336			55.6	%		69,527		64,325		5,202			8.1	%
General and administrative		11,669		9,397		2,272			24.2	%		23,854		17,684		6,170			34.9	%		17,003		16,461		542			3.3	%
Acquisition and integration costs, net of bargain purchase gain		34,115		4,169		29,946			718.3	%		38,359		6,490		31,869			491.0	%
Restructuring and related charges, net of reversals		—		1,853		(1,853	)		(100.0	)%		—		1,853		(1,853	)		(100.0	)%
Acquisition and integration costs																						1,510		1,975		(465	)		(23.5	)%
Restructuring and related charges																						279		1,001		(722	)		(72.1	)%
Amortization of intangibles		2,746		2,175		571			26.3	%		4,360		6,317		(1,957	)		(31.0	)%		1,154		1,792		(638	)		(35.6	)%
Total operating expenses	$	160,096	$	82,632	$	77,464			93.7	%	$	267,985	$	152,540	$	115,445			75.7	%	$	137,239	$	135,078	$	2,161			1.6	%

Research and development expenses consist primarily of ~~salaries~~personnel costs (which consist of compensation, benefits and ~~related personnel expenses,~~share-based compensation), consultant fees and prototype expenses related to the design, development, and testing of our products.

Research and development expenses ~~increased~~decreased by ~~$21.9~~$1.8 million or ~~91.2%~~3.5% for the three months ended ~~December 31, 2017~~September 30, 2021, as compared to the corresponding period ofin fiscal ~~2017.~~2021. The ~~increase~~decrease in research and development expenses was due to ~~higher personnel costs (which consists of compensation, benefits and non-cash stock based compensation) of $18.5~~a $1.3 million ~~due to increased headcount related to the acquisitions~~ ~~of the WLAN Business, the~~ ~~Campus Fabric Business and the Data Center Business, $2.8 million~~decrease in ~~increased~~ facility and information technology costs and a $1.4 million decrease in software licenses and engineering project costs which lowered depreciation expense, partially offset by a $0.6 million increase in professional and contractor fees and a $0.4 million ~~in increased supplies and equipment costs and $0.2 million in increased travel and other costs.~~

~~Research and development expenses increased by $37.9 million or 89.5% for the six months ended December 31, 2017as compared to the corresponding period of fiscal 2017. The~~ increase in ~~research and development expenses was due to higher~~ personnel ~~costs (which consists of compensation, benefits and non-cash stock based compensation) of $29.7 million due to increased headcount~~ related ~~to the acquisitions~~ ~~of the WLAN Business,~~ the Campus Fabric Business and the Data Center Business, $5.3 million in increased facility and information technology costs, $1.8 million in increased supplies and equipment costs and $1.1 million in increased travel and other costs.

Sales and marketing expenses consist primarily of ~~salaries, commissions~~personnel costs (which consist of compensation, benefits and ~~related expenses for personnel engaged in marketing and sales functions,~~share-based compensation), as well as trade shows and promotional expenses.

Sales and marketing expenses increased by ~~$24.6~~$5.2 million or ~~60.0%~~8.1% for the three months ended ~~December 31, 2017~~September 30, 2021, as compared to the corresponding period ofin fiscal ~~2017~~ ~~three and six months ended December 31, 2017 primarily as a result of the acquisitions of the WLAN Business, the Campus Fabric Business and the Data Center Business.~~2021. The increase ~~consisted of higher personnel costs including benefits and non-cash stock compensation of $18.5 million, $3.0 million~~ in ~~increased travel, meeting and conference costs, and~~ ~~$1.8 million in increased facility and information technology costs and~~ ~~$0.9 million in additional professional fees.~~

~~Sales~~sales and marketing expenses ~~increased by $43.3~~ was primarily due to a $4.1 million ~~or 55.6% for the six months ended December 31, 2017 as compared to the corresponding period of fiscal 2017~~ ~~three and six months ended December 31, 2017 primarily as a result of the acquisitions of the WLAN Business, the Campus Fabric Business and the Data Center Business. The~~ increase ~~consisted of higher~~in personnel costs ~~including~~primarily due to higher compensation and benefits costs due to increase in headcount, a $1.0 million increase in travel costs and ~~non-cash stock compensation of $30.9~~a $0.4 million ~~$6.7~~ increase in other expenses primarily marketing and sales promotions costs, partially offset by a $0.3 million decrease in ~~increased travel, meeting and conference costs,~~ ~~$3.4 million in increased facility and information technology costs~~ ~~and $2.1 million in additional~~ professional fees.

General and administrative ~~expense consists~~expenses consist primarily of personnel costs (which consist of compensation, benefits and share-based compensation), legal and professional service costs, ~~share-based compensation, travel~~ and facilities and information technology costs.

General and administrative expenses increased by ~~$2.3~~$0.5 million or ~~24.2%~~3.3% for the three months ended ~~December 31, 2017~~September 30, 2021, as compared to the corresponding period ofin fiscal ~~2017~~2021. The increase in general and administrative expenses was primarily due to ~~$1.6~~a $1.2 million increase in ~~higher~~personnel costs primarily compensation ~~benefits and non-cash stock based compensation,~~expenses partially offset by a $0.7 million decrease in ~~higher bad debts provision, $0.3 million in higher~~legal and professional ~~fees and $0.3 million in reduced facility and information technology costs.~~

~~General and administrative expenses increased by $6.2 million or 34.9%~~ ~~for the~~ ~~six months ended December 31, 2017~~ ~~as compared to~~ the corresponding period of fiscal 2017 primarily due to $3.8 million in higher compensation, benefits and non-cash stock based compensation, $1.3 million in higher professional fees and $1.1 million in higher bad debts provision.fees.

During the three months ended ~~December 31, 2017~~September 30, 2021, we incurred $1.5 million of integration costs which consisted primarily of professional fees for legal advisory services and ~~2016,~~financial services related to the acquisition of Ipanema.

During the three months ended September 30, 2020, we ~~recorded $34.1~~incurred $2.0 million ~~and $4.2 million, respectively,~~ of acquisition and integration costs. Acquisition and integration costs consisted primarily of additional professional fees for system integration and financial services related to Aerohive acquisition.

For the three months ended September 30, 2021, we recorded restructuring and related charges of $0.3 million which primarily comprised of facility-related charges related to our previously impaired facilities.

For the three months ended ~~December 31, 2017,~~September 30, 2020, we ~~incurred $4.6 million~~recorded restructuring charges of ~~acquisition~~$1.0 million. We continued our reduction-in-force initiative began in the third quarter of fiscal 2020 and ~~$1.9 million~~recorded related severance and benefits charges of integration costs related to the acquisition of the Campus Fabric Business and $30.3 million of acquisition and $2.2 million of integration costs related to the acquisition of the Data Center Business. The Data Center Business acquisition costs includes a $25.0 million consent fee paid to Broadcom, to terminate a previous asset purchase agreement entered into by the Company to purchase the Data Center Business from Broadcom, in anticipation of Broadcom’s acquisition of Brocade. The fee was paid to Broadcom to allow the Company to buy the Data Center Business directly from Brocade. ~~Included in Acquisition and Integration Costs is a gain on bargain purchase of $4.9~~$0.7 million related to the ~~acquisition~~2020 Plan. In addition, we had facility-related charges of ~~the capital financing business (“CF Business”).~~

~~Expenses for the three months ended December 31, 2016 consisted primarily of legal and accounting services associated with the acquisition of the WLAN Business.~~

~~During the six months ended December 31, 2017 and 2016, we recorded $38.4 million and $6.5 million, respectively, of acquisition and integration costs.~~

For the six months ended December 31, 2017, we incurred $5.9 million of acquisition and $3.4 million of integration costs related to the acquisition of the Campus Fabric Business and $31.6 million of acquisition and $2.2 million of integration costs related to the acquisition of the Data Center Business. We also recorded a gain on bargain purchase of $4.9$0.3 million related to ~~the acquisition of the CF Business.~~

~~Expenses for the six months ended~~ ~~December 31, 2016 consisted primarily of legal and accounting services associated with the acquisition of the WLAN Business.~~

~~No restructuring charges were recorded for the three or six months ended December 31, 2017.~~

For the three and six months ended December 31, 2016, we incurred $1.9 million in restructuring and other charges including accelerated depreciation of leasehold improvements and fixed assets in the amount of $1.7 million and adjustments to estimated sub-lease income to be received related to the estimated future obligations for non-cancelable lease payments for excess facilities of $0.1 million.our previously impaired facilities.

During the three months ended ~~December 31, 2017~~September 30, 2021 and ~~2016,~~2020, we recorded ~~$2.7~~$1.2 million and ~~$2.2~~$1.8 million, respectively, of operating expenses for amortization of ~~our~~ intangibles. The ~~increase~~decrease was ~~mainly~~primarily due to ~~additional~~lower amortization related to ~~the~~certain acquired intangibles from ~~the Campus Fabric and the Data Center Business, partially offset by the acquired intangibles from the Enterasys acquisition~~previous acquisitions becoming fully amortized.

During the six months ended December 31, 2017 and 2016, we recorded $4.4 million and $6.3 million, respectively of amortization expense as operating expenses in the accompanying condensed consolidated statements of operations. The reduction was due to the acquired intangibles from the Enterasys acquisition becoming fully amortized, partially offset by additional amortization related to the acquired intangibles from the Campus Fabric and the Data Center Business.

During the three months ended ~~December 31, 2017~~September 30, 2021 and ~~2016,~~2020, we recorded ~~$2.5~~$3.9 million and ~~$1.2~~$6.7 million, respectively, in interest expense. The ~~increase~~decreases in interest expense ~~was~~were primarily ~~in connection with~~driven by lower average loan balances and lower average rates for the ~~increased balance of our Credit Facility due to the acquisitions of the Campus Fabric Business and the Data Center Business.~~

~~During the six~~three months ended ~~December 31, 2017 and 2016, we recorded $4.7 million and $1.8 million, respectively, in interest expense. The increase in interest expense was primarily in connection with the increased balance of~~September 30, 2021under our 2019 Credit ~~Facility due to the acquisitions of the WLAN Business, the Campus Fabric Business and the Data Center Business.~~Agreement.

During the three months ended ~~December 31, 2017~~September 30, 2021 and ~~2016,~~2020, we recorded ~~expense~~other income, net of ~~$0.6~~$0.2 million and ~~income~~other expense, net of ~~$1.0~~$0.9 million, ~~respectively, in other income (expense), net.~~ respectively.The ~~change~~changes for the three months ended September 30, 2021 was primarily due to foreign exchange ~~gains and~~ losses from the revaluation of certain assets and liabilities denominated in foreign currencies into U.S. Dollars.

During the six months ended December 31, 2017 and 2016, we recorded income of 2.5 million and $0.8 million, respectively, in other income (expense), net. The income for fiscal 2018 period was primarily driven by a gain of $3.8 million due to the sale of non-marketable equity investment, partially offset by foreign exchange losses. The income for fiscal 2017 period was primarily due to foreign exchange gains from the revaluation of certain assets and liabilities denominated in foreign currencies into U.S. Dollars.

For the three months ended ~~December 31, 2017~~September 30, 2021 and ~~2016,~~2020, we recorded an income tax ~~benefit~~provision of ~~$1.6~~$2.1 million and an$1.3 million, respectively.

The income tax ~~provision~~provisions for the three months ended September 30, 2021 and 2020 consisted of ~~$1.2 million, respectively, which consisted primarily of~~(1) taxes on the income of our foreign subsidiaries, ~~as well as~~(2) foreign withholding taxes, (3) state taxes in jurisdictions where we have no remaining state net operating losses and (4) tax expense associated with the establishment of a U.S. deferred tax liability for amortizable goodwill resulting from the acquisition of Enterasys Networks, Inc., the WLAN Business, ~~and~~ the Campus Fabric ~~Business. The tax provision for~~Business and the three months ended December 31, 2017 is offset by a tax benefit resulting from the reduction of the U.S. Federal tax rate from 35% to 21% applied to our deferred tax liability related to amortizable goodwill as required by the recently enacted U.S. tax legislation discussed in Note 10 of the accompanying condensed consolidated financial statements. The income tax provisions for both fiscal years were calculated based on the actual results of operations for the three months ended December 31, 2017 and 2016, and therefore may not reflect the annual effective tax rate.Data Center Business.

For the six months ended December 31, 2017 and 2016, we recorded an income tax provision of $0.1 million and $2.1 million, respectively, which consisted primarily of taxes on the income of the Company’s foreign subsidiaries as well as tax expense associated with the establishment of a U.S. deferred tax liability for amortizable goodwill resulting from the acquisitions referenced above. The income tax provision for the six months ended December 31, 2017 is offset by the tax benefit referenced above.

On December 22, 2017, the President of the United States signed and enacted into law H.R. 1, the Tax Cuts and Jobs Act (“TCJA”), which, except for certain provisions, is effective for tax years beginning on or after January 1, 2018. As a fiscal year taxpayer, we will not be subject to the majority of the tax law provisions until fiscal year 2019; however, there are certain significant items of impact that will be recognized in fiscal year 2018. Because a change in tax law is accounted for in the period of enactment, the effects of the TCJA, a tax benefit of $2.5 million, have been reflected in the second quarter of fiscal 2018. See Note 10 to the consolidated financial statements includes a detailed discussion of the various provisions of the new U.S. tax legislation.

Our unaudited condensed consolidated financial statements and the related notes included elsewhere in this ~~report~~Report are prepared in accordance with accounting principles generally accepted in the United States. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted under SEC rules and regulations. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. In many instances, we could have reasonably used different accounting estimates, and in other instances changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. On an ongoing basis, we evaluate our estimates and assumptions. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

As discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended June 30, ~~2017,~~2021, we consider the following accounting policies to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements:

~~The following~~There have been no changes to our critical accounting policies ~~are the only change~~ since the filing of our last Annual Report on Form 10-K.

We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which we adopted on July 1, 2017, using the full retrospective method. The adoption of this ASC, which we opted to early adopt pursuant to the guidance, requires us, among other things to restate prior periods to conform to current presentation and the adoption of ASC 606 is considered an accounting change. Under ASC 606 revenue is recognized when a customer obtains control of promised goods or services and is recognized at an amount that reflects the consideration expected to be received in exchange for such goods or services.

We derive the majority of our revenue from sales of our networking equipment, with the remaining revenue generated from service fees relating to maintenance contracts, professional services, and training for our products. We sell our products and maintenance contracts to partners in two distribution channels, or tiers. The first tier consists of a limited number of independent distributors that stock our products and sell primarily to resellers. The second tier of the distribution channel consists of a non-stocking distributors and value-added resellers that sell directly to end-users. Products and services may be sold separately or in bundled packages.

We consider customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. For each contract, we consider the promise to transfer products, each of which are distinct, to be the identified performance obligations. In determining the transaction price we evaluate whether the price is subject to refund or adjustment to determine the net consideration to which we expect to be entitled.

For all of our sales and distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e. when our performance obligation is satisfied), which typically occurs at shipment for product sales. For product sales to our value-added resellers, non-stocking distributors and end-user customers, we generally do not grant return privileges, except for defective products during the warranty period. Sales incentives and other programs that we may make available to these customers are considered to be a form of variable consideration and we maintain estimated accruals and allowances using the expected value method.

Sales to stocking distributors are made under terms allowing certain price adjustments and limited rights of return (known as “stock rotation”) of the Company’s products held in their inventory. Revenue from sales to distributors is recognized upon the transfer of control to the distributor. Frequently, distributors need to sell at a price lower than the contractual distribution price in order to win business, and submits rebate requests for Company pre-approval prior to selling the product through at the discounted price. At the time the distributor invoices its customer or soon thereafter, the distributor submits a rebate claim to the Company to adjust the distributor’s cost from the contractual price to the pre-approved lower price. After the Company verifies that the claim was pre-approved, a credit memo is issued to the distributor for the rebate claim. In determining the transaction price, the Company considers these rebate adjustments to be variable consideration. Such price adjustments are estimated using the expected value method based on an analysis of actual claims, at the distributor level over a trailing twelve-month period of time considered adequate to account for current pricing and business trends. Stock rotation rights grant the distributor the ability to return certain specified amounts of inventory. Stock rotation adjustments are an additional form of variable consideration and are also estimated using the expected value method based on historical return rates The Company did not experience significant differences in its estimates during the six months ended December 31, 2017. For additional information, see Note 3, Summary of Significant Accounting Policies.

We apply the acquisition method of accounting for business combinations. Under this method of accounting, all assets acquired and liabilities assumed are recorded at their respective fair values at the date of the completion of the transaction. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, intangibles and other asset lives, among other items. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Market participants are assumed to be buyers and sellers in the principal (most advantageous) market for the asset or liability. Additionally, fair value measurements for an asset assume the highest and best use of that asset by market participants. As a result, we may have been required to value the acquired assets at fair value measures that do not reflect its intended use of those assets. Use of different estimates and judgments could yield different results. Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill. If the fair value of net assets acquired exceeds the fair value of purchase price, a gain on bargain purchase is recognized in the statements of operations. Although we believe the assumptions and estimates we have made are reasonable and appropriate, they are based in part

on historical experience and information that may be obtained from the management of the acquired company and are inherently uncertain. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.

See Note 4 of the accompanying condensed consolidated financial statements for a full description of new accounting pronouncements, including the respective expected dates of adoption and effects on results of operations and financial condition.

The following table summarizes information regarding our cash ~~cash equivalents, marketable securities, and working capital~~ (in thousands):

As of ~~December 31, 2017,~~September 30, 2021, our principal sources of liquidity consisted of cash ~~cash equivalents~~of $191.3 million and ~~marketable securities of $128.2 million,~~ accounts receivable, net of ~~$154.9~~$129.6 million, and ~~availability~~ available borrowings under our five-year 2019 Revolving Facility of ~~borrowings from the~~ ~~five-year revolving credit facility (“Revolver”)~~ ~~of $48.8~~$60.2 million. Our principal uses of cash ~~will~~ include ~~repayments of debt and related interest,~~the purchase of finished goods inventory from our contract manufacturers, payroll ~~restructuring expenses~~ and other operating expenses related to the development and marketing of our products, ~~and~~ purchases of property and ~~equipment.~~equipment, and repayments of debt and related interest. We believe that our ~~$128.2~~$191.3 million of cash at September 30, 2021, our cash ~~equivalents and marketable securities at December 31, 2017, cash flows~~flow from operations, ~~along with~~and the availability of borrowings from the ~~Revolver~~2019 Revolving Facility will be sufficient to fund our ~~principal uses of cash~~planned operations for at least the next 12 months.

On ~~July 14, 2017,~~November 2, 2018, our Board of Directors announced that it had authorized management to repurchase up to $60.0 million of its shares of common stock for two years from the date of authorization, of which $15.0 million was used for repurchases in fiscal 2019 and $30.0 million was used for repurchases in fiscal 2020. In February 2020, our Board of Directors increased the authorization to repurchase by $40.0 million to $100.0 million and extended the period for repurchases for three years from February 5, 2020. Purchases may be made from time to time in the open market or in privately negotiated transactions. The manner, timing and amount of any future purchases will be determined by our management based on their evaluation of market conditions, stock price, Extreme’s ongoing determination that it is the best use of available cash and other factors. The repurchase program does not obligate Extreme to acquire any shares of its common stock, may be suspended or terminated at any time without prior notice and will be subject to regulatory considerations. There were no repurchases in the three months ended September 30, 2021.

In connection with the ~~closing of the~~ acquisition of Aerohive, as of August 9, 2019, we amended the ~~Campus Fabric Business, we~~2018 Credit Agreement, which is no longer outstanding, and entered into the ~~Second Amendment to the Amended and Restated~~2019 Credit Agreement, ~~(“Second Amendment”), which amends the Amended and Restated Credit Agreement, dated as of October 28, 2016 (as amended, the “Credit Facility”),~~ by and among us, as borrower, several banks and other financial institutions as Lenders, BMO Harris Bank N.A., as an issuing lender and swingline lender, Silicon Valley Bank, as an Issuing Lender, and Bank of Montreal, as administrative agent and collateral agent ~~and~~for the Lenders. ~~Among other things, the Second Amendment (i) increased the amount of the available borrowing under the~~The 2019 Credit ~~Facility from $140.5 million to $243.7 million, consisted of (a) the~~Agreement provides for a five-year first lien term loan ~~(“Term Loan”) facilities~~facility in aan aggregate principal amount of ~~up to $183.7~~$380.0 million and ~~(b) the Revolver~~a five-year revolving loan facility in aan aggregate principal amount of up$75.0 million (“2019 Revolving Facility”). In addition, we may request incremental term loans and/or incremental revolving loan commitments in an aggregate amount not to ~~$60.0~~exceed the sum of $100.0 million ~~(ii) extends~~plus an unlimited amount that is subject to pro forma compliance with certain financial tests. On August 9, 2019, we used the maturity date under the existing Term Loan and the termination date under the existing Revolver until July 2022, (iii) provides for an uncommitted additional incremental loan facility in a principal amount of up to $50.0 million (“Incremental Facility”), and (iv) joins certain additional banks, financial institutions and institutional lenders as Lenders pursuant to the terms of the Credit Facility. On July 14, 2017, we borrowed $80.0 million under the Term Loan which was used to fund the purchase of Campus Fabric Business.

On October 26, 2017, we entered into the Third Amendment to the Credit Facility (the “Third Amendment”). Among other things, the Third Amendment (i) amends the negative covenant governing dispositions to increase the general dispositions basket for our fiscal year ending June 30, 2018, and (ii) amends certain definitions and provisions to update certain references to the Brocade Purchase Agreement. On October 27, 2017, we borrowed $20.0 million on the Term Loanproceeds to partially fund the acquisition of Aerohive and for working capital and general corporate purposes.

~~Borrowings~~initial term loan (the “Initial Term Loan”) under the ~~Term Loan bear interest, at our option, at a~~2019 Credit Agreement may be made as either base rate ~~equal~~loans or Eurodollar loans. The applicable margin for base rate loans ranges from 0.25% to ~~either~~2.50% per annum and the ~~LIBOR rate (subject~~applicable margin for Eurodollar loans ranges from 1.25% to 3.50%, in each case based on Extreme’s Consolidated Leverage Ratio. All Eurodollar loans are subject to a ~~0.0% LIBOR floor), plus an applicable margin (currently 3.25% per annum) or the adjusted base rate, plus an applicable margin (currently 1.25% per annum)~~Base Rate floor of 0.00%. Borrowings under the Revolver bear interest, at our option, at a rate equal to either the LIBOR rate, plus an applicable margin (currently 3.25% per annum) or the adjusted base rate, plus an applicable margin (currently 1.25% per annum based). The ~~Revolver has a commitment fee payable on the undrawn amount ranging from 0.375% to 0.50% per annum.~~

~~If not repaid earlier, the borrowings on the Revolver shall be repaid on the termination date. The~~2019 Credit ~~Facility~~Agreement is secured by substantially all of our ~~assets and is jointly and severally guaranteed by us and certain of our subsidiaries.~~assets.

The 2019 Credit ~~Facility contains financial covenants that require~~Agreement requires us to maintain acertain minimum ~~Consolidated Fixed Charge Coverage Ratio and a Consolidated Quick Ratio and a maximum Consolidated Leverage Ratio as well as several other~~ financial ~~and non-financial~~ratios at the end of each fiscal quarter. The 2019 Credit Agreement also includes covenants and restrictions that limit, among other things, our ability to incur additional indebtedness, create liens upon any of our property, merge, consolidate or sell all or substantially all of our ~~assets, etc. These covenants, are subject to certain exceptions.~~

assets. The 2019 Credit ~~Facility~~Agreement also includes customary events of default ~~including failure to pay principal, interest or fees when due, failure to comply with covenants, if any representation or warranty made by us is false or misleading~~which may result in ~~any material respect, certain insolvency or receivership events affecting us and our subsidiaries, the occurrence of certain material judgments, the occurrence of certain ERISA events, the invalidity~~acceleration of the ~~loan documents or a change in control of us. The amounts~~ outstanding balance.

Financial covenants under the 2019 Credit ~~Facility may be accelerated~~Agreement require us to maintain a minimum consolidated fixed charge and consolidated leverage ratio at the end of each fiscal quarter through maturity. The 2019 Credit Agreement also includes covenants and restrictions that limit, among other things, our ability to incur additional indebtedness, create liens upon ~~certain~~any of our property, merge, consolidate or sell all or substantially all of our assets. The 2019 Credit Agreement also includes customary events of ~~default.~~ At~~December~~default which may result in acceleration of the outstanding balance.

On April 8, 2020, we entered into the First Amendment to waive certain terms and financial covenants of the 2019 Credit Agreement through July 31, ~~2017~~,2020. On May 8, 2020, we entered into the Second Amendment which superseded the First Amendment and provided certain revised terms and financial covenants through March 31, 2021. Subsequent to March 31, 2021, the original terms

and financial covenants under the 2019 Credit Agreement resumed in effect. The Second Amendment required us to maintain certain minimum cash requirement and certain financial metrics at the end of each fiscal quarter through March 31, 2021. Under the terms of the Second Amendment, we were not permitted to exceed $55.0 million in our outstanding balance under the 2019 Revolving Facility, the applicable margin for Eurodollar rate was 4.5% and we were restricted from pursuing certain activities such as incurring additional debt, stock repurchases, making acquisitions or declaring a dividend, until we are in compliance with the original covenants of the 2019 Credit ~~Facility~~Agreement. On November 3, 2020, we and ~~they are not expected~~our lenders entered into the Third Amendment to ~~impact~~increase the sublimit for letters of credit to $20.0 million. On December 8, 2020, we and our ~~liquidity or capital resources.~~lenders entered into the Fourth Amendment to waive and amend certain terms and financial covenants within the 2019 Credit Agreement through March 31, 2021.

The Second Amendment provided for us to end the covenant Suspension Period early and revert to the covenants and interest rates per the original terms of the 2019 Credit Agreement dated August 9, 2019 by filing a Suspension Period Early Termination Notice and Covenant Certificate demonstrating compliance. For the twelve-month period ended March 31, 2021 our financial performance was in compliance with the original covenants defined in the 2019 Credit Agreement and as such we filed a Suspension Early Termination Notice and Covenant Certificate with the administration agent subsequent to filing our Form 10-Q for the quarterly period ended March 31, 2021. Returning to compliance with the covenants per the original terms of the 2019 Credit Agreement dated August 9, 2019, resulted in our Eurodollar loan spread decreasing from 4.5% during the suspension period to 2.75% and unused facility commitment fee decreasing from 0.4% to 0.35%, and the limitation on revolver borrowings being removed effective May 1, 2021 after filing of the certificate with the administrative agent.

A summary of the sources and uses of cash ~~and cash equivalents~~ is as follows (in thousands):

Cash flows provided by operations in the ~~six~~three months ended ~~December 31, 2017~~September 30, 2021, were ~~$14.2~~$40.3 million, including our net ~~loss~~income of ~~$27.5~~$12.7 million and non-cash expenses of ~~$23.1~~$27.8 million for items such as amortization of intangibles, ~~stock-based~~share-based compensation, depreciation, reduction in carrying amount of right-of-use assets, deferred income taxes, ~~gain on bargain purchase~~ and ~~gain on sale~~interest. Other sources of ~~non-marketable equity investment as well as~~cash for the period included decreases in accounts receivables and inventory and increases in accounts payable, ~~accrued compensation,~~ deferred ~~revenue~~revenues and other ~~current and long-term liabilities and a decrease in prepaid expenses and other assets. This was partially offset by increases in accounts receivable and inventories.~~

Cash flows provided by operations in the six months ended December 31, 2016 were $19.3 million, including net loss of $10.0 million and non-cash expenses of $25.8 million such as amortization of intangibles, stock-based compensation, depreciation, deferred income taxes and non-cash restructuring and related charges as well as decreases in inventories, prepaid expenses and other current assets and an increase in current and long-term liabilities. This was partially offset by an increase ~~of accounts receivable~~in prepaid expenses and other current assets and decreases ~~of accounts payable,~~in accrued compensation and operating lease liabilities.

Cash flows provided by operations in the three months ended September 30, 2020, were $24.7 million, including our net loss of $8.8 million and non-cash expenses of $30.4 million for items such as amortization of intangibles, share-based compensation, depreciation, reduction in carrying amount of right-of-use assets, deferred ~~revenue.~~income taxes and imputed interest. Other sources of cash for the period included a decrease in inventory and increase in accounts payable and deferred revenues. This was partially offset by decreases in accrued compensation, other current and long-term liabilities, and operating lease liabilities and increases in accounts receivables and prepaid expenses and other current assets.

Cash flows used in investing activities in the ~~six~~three months ended ~~December 31, 2017~~September 30, 2021 were ~~$106.0~~$72.9 million ~~which consisted~~primarily due to the payment of ~~expenditures for acquisitions~~$69.5 million (net of ~~$97.6 million consisting of $69.6 million~~cash acquired) for the acquisition of ~~the Campus Fabric Business~~Ipanema and ~~$29.5~~$3.4 million for the ~~acquisition of the Data Center Business, less receipt of $1.6 million as final settlement of a working capital adjustment related to the WLAN Business acquisition,~~ purchases of property and ~~equipment of $13.3 million and proceeds of $4.9 million related to the sale of non-marketable equity investment.~~equipment.

Cash flows used in investing activities in the ~~six~~three months ended ~~December 31, 2016~~September 30, 2020 were ~~$55.8 million which~~ ~~consisted of expenditures of $51.1~~$3.0 million for the ~~WLAN Business acquisition and $4.7 million of~~ purchases of property and equipment.

Cash flows ~~provided by~~used in financing activities in the ~~six~~three months ended ~~December 31, 2017~~September 30, 2021 were ~~$88.3~~$22.7 million ~~including new borrowings~~due primarily to debt repayments of ~~$100.0~~$16.8 million, ~~to fund our~~ payment of contingent consideration of $0.6 million, $1.0 million for deferred payments on acquisitions ~~of the Campus Fabric Business~~ and ~~the Data Center Business, $5.6~~$4.4 million for taxes paid on vested and released stock awards net of proceeds from the issuance of shares of our common stock under our Employee Stock Purchase Plan (“ESPP”) and ~~the~~ exercise of stock options less $7.1 million of taxes paid on vested and released stock awards, partially offset by repayments of debt totaling $8.7 million and $1.5 million of loan fees incurred in connection with the Second Amendment of our Credit Facility.options.

Cash flows ~~provided by~~used in financing activities in the ~~six~~three months ended ~~December 31, 2016~~September 30, 2020 were ~~$46.2~~$22.8 million ~~which consisted~~due primarily to debt repayments of ~~new borrowings~~$24.8 million, payment of ~~$48.3~~contingent consideration of $0.6 million, ~~under our Credit Facility, as amended, $4.8~~and $1.0 million for deferred payments on acquisitions. This was partially offset by $3.6 million of proceeds from the issuance of shares of our

common stock under our ESPP and ~~the~~ exercise of stock options, net of taxes paid on vested and released stock ~~awards, offset by repayments of debt totaling $5.5 million and $1.3 million of loan fees incurred in connection with the Credit Facility, as amended.~~awards.

Foreign currency effect on cash increased in the three ~~and six~~ months ended ~~December 31, 2017,~~September 30, 2021 and 2020, primarily due to changes in foreign currency exchange rates between the U.S. Dollar and particularly the ~~Brazilian Real, British Pound,~~ Indian Rupee, the UK Pound, and the EURO.

The following summarizes our contractual obligations as of ~~December 31, 2017,~~September 30, 2021, and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):

	Total		Less than 1 Year		1-3 years		3-5 years		More than 5 years		Payments due by Period
Contractual Obligations:
											Total		Less than 1 Year		1-3 years		3-5 years		More than 5 years
Contractual obligations:
Debt obligations	$	185,027	$	22,964	$	70,985	$	91,078	$	—	$	330,000	$	28,500	$	301,500	$	—	$	—
Interest on debt obligations		25,383		8,259		12,437		4,687		—		21,711		8,811		12,900		—		—
Non-cancellable inventory purchase commitments		145,261		145,261		—		—		—
Non-cancellable purchase commitments		19,000		5,000		11,000		3,000		—
Non-cancellable operating lease obligations		103,958		21,164		35,169		26,533		21,092
Unconditional purchase obligations												64,910		64,910		—		—		—
Contractual commitments												90,844		27,732		39,416		17,233		6,463
Lease payments on operating leases												50,995		15,566		22,732		8,765		3,932
Deferred payments for an acquisition		20,000		4,000		12,000		4,000		—		6,000		4,000		2,000		—		—
Contingent consideration for acquisitions		47,030		11,270		28,850		6,910		—
Contingent consideration for an acquisition												358		358		—		—		—
Other liabilities		1,107		244		488		375		—		517		181		336		—		—
Total contractual cash obligations	$	546,766	$	218,162	$	170,929	$	136,583	$	21,092	$	565,335	$	150,058	$	378,884	$	25,998	$	10,395

~~Non-cancelable inventory~~The contractual obligations referenced above are more specifically defined as follows:

Interest on debt obligations includes the effect of our interest rate swap agreements.

Unconditional purchase ~~commitments~~obligations represent the purchase of long lead-time component inventory that our contract manufacturers procure in accordance with our ~~forecast. Inventory purchase commitments were $145.3 million as of December 31, 2017.~~forecasts. We expect to honor the inventory purchase commitments within the next 12 months.

~~Non-cancelable purchase~~Contractual commitments to suppliers represent commitments for future services.

~~Non-cancelable~~on operating ~~lease obligations~~leases represent base rents and operating expense obligations to landlords for facilities we occupy at various locations.

Deferred payments for anthe acquisition of the Data Center Business represent a payments of $1.0 million per ~~quarter for our next twenty full fiscal quarters following the acquisition date of October 27, 2017.~~quarter.

Contingent consideration for ~~acquisitions~~an acquisition of a capital financing business in December 2017 from Broadcom, at the ~~Data Center Business and the Capital Financing Business is recorded at~~estimated fair ~~value and actual results~~value. Actual payments could be different.

Other liabilities include our commitments towards debt related fees and specific arrangements other than inventory.

The amounts in the table above exclude immaterial income tax liabilities related to uncertain tax positions as we are unable to reasonably estimate the timing of settlement.

We did not have any material commitments for capital expenditures as of ~~December 31, 2017.~~September 30, 2021.

For the three months ended September 30, 2021 and 2020, the Company recorded an income tax provision of $2.1 million and $1.3 million, respectively.

The income tax provisions for the three months ended September 30, 2021 and 2020, consisted of (1) taxes on the income of the Company’s foreign subsidiaries, (2) foreign withholding taxes, (3) state taxes in jurisdictions where the Company has 0 remaining state net operating losses (“NOLs”) and (4) tax expense associated with the establishment of a U.S. deferred tax liability for amortizable goodwill resulting from the acquisition of Enterasys Networks, Inc., the wireless local area network business from Zebra Technologies Corporation, the Campus Fabric Business from Avaya and the Data Center Business from Brocade. The interim income tax provisions for the three months ended September 30, 2021 and 2020 were calculated using the discrete effective tax rate method as allowed by Accounting Standards Codification (“ASC”) 740-270-30-18, “Income Taxes – Interim Reporting.” The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year to date period as if it was the annual period and determines the income tax expense or benefit on that basis. The Company believes that, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method as (i) the estimated annual effective tax rate method is not reliable due to the high degree of uncertainty in estimating annual pretax earnings on a jurisdictional basis and (ii) the Company’s ongoing assessment that the recoverability of certain U.S. and Irish deferred tax assets is not more likely than not.

The Company has provided a full valuation allowance against all of its U.S. federal and state deferred tax assets as well as a portion of the deferred tax assets in Ireland. A valuation allowance is determined by assessing both negative and positive evidence to determine whether it is “more likely than not” that deferred tax assets are recoverable; such assessment is required on a jurisdiction-by-jurisdiction basis. The Company's inconsistent earnings in recent periods, including a cumulative loss over the last three years, coupled with its difficulty in forecasting future revenue trends and the cyclical nature of its business represent sufficient negative evidence to require full valuation allowances against its U.S. federal and state net deferred tax assets as well as a portion of the deferred tax assets in Ireland. These valuation allowances will be evaluated periodically and can be reversed partially or in whole if business results and the economic environment have sufficiently improved to support realization of some or all of the Company's deferred tax assets.

On September 14, 2021, the Company completed its acquisition of Ipanema. This acquisition is treated as a non-taxable stock acquisition and therefore, Extreme will have carryover tax basis in the assets and liabilities acquired.

The Company had $19.1 million of unrecognized tax benefits as of September 30, 2021. If fully recognized in the future, $0.4 million would impact the effective tax rate and $18.7 million, would result in adjustments to deferred tax assets and corresponding adjustments to the valuation allowance with no impact to the effective tax rate. The Company does not anticipate any events to occur during the next twelve months that would materially reduce the unrealized tax benefit as currently stated in the Company’s balance sheet.

Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Dilutive income per share is calculated by dividing net income by the weighted average number of shares of common stock used in the basic net income (loss) per share calculation plus the dilutive effect of shares subject to repurchase, options and unvested RSUs.

The following table presents the calculation of net income (loss) per share of basic and diluted (in thousands, except per share data):

The following securities were excluded from the computation of net income (loss) per diluted share of common stock for the periods presented as their effect would have been anti-dilutive (in thousands):

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report on Form 10-Q, including the following sections, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including in particular, our expectations regarding market demands, customer requirements and the general economic environment, future results of operations, and other statements that include words such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and similar expressions. These forward-looking statements involve risks and uncertainties. We caution investors that actual results may differ materially from those projected in the forward-looking statements as a result of certain risk factors identified in the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q for the first quarter ended September 30, 2021, our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, and other filings we have made with the Securities and Exchange Commission. These risk factors, include, but are not limited to: fluctuations in demand for our products and services; a highly competitive business environment for network switching equipment; our effectiveness in controlling expenses; the possibility that we might experience delays in the development or introduction of new technology and products; customer response to our new technology and products; fluctuations in the global economy, including political, social, economic, currency and regulatory factors (such as the outbreak of COVID-19); risks related to pending or future litigation; a dependency on third parties for certain components and for the manufacturing of our products and our ability to receive the anticipated benefits of acquired businesses.

Extreme Networks, Inc. (“Extreme” or “Company”) is a leading provider of end-to-end, cloud-driven networking solutions and top-rated services and support. Providing a set of comprehensive solutions from the Internet of Things (“IoT”) edge to the cloud, Extreme designs, develops, and manufactures wired and wireless network infrastructure equipment as well as a leading cloud networking platform and applications portfolio using cloud management, machine learning (“ML”), and artificial intelligence (“AI”) to deliver network policy, analytics, security, and access controls. Our solutions enable companies to embrace the value of new cloud technology without having to rip and replace existing infrastructures. Extreme has been pushing the boundaries of networking technology for a quarter of a century, driven by a higher purpose of helping our customers connect beyond the network. Extreme’s cloud-driven technologies provide flexibility and scalability in deployment, management, and licensing of networks globally. Our global footprint provides service to over 50,000 customers across the world including some of the world’s leading names in business, hospitality, retail, transportation and logistics, education, government, healthcare, manufacturing and service providers. We derive all our revenues from the sale of our networking equipment, software subscriptions, and related maintenance contracts.

Enterprises are adopting new Information Technology (“IT”) delivery models and applications that require fundamental network alterations and enhancements spanning from the access edge to the data center. With the impact of the global pandemic, we believe IT teams in every industry will need more control and better insights than ever before to ensure secure, distributed connectivity and comprehensive centralized visibility. ML and AI technologies have the potential to vastly improve the network experience in the post-pandemic world by collating large data sets to increase accuracy and derive resolutions to improve the operation of the network. When applied with cloud-driven networking and automation, administrators can quickly scale to provide productivity, availability, manageability, security, and speed, regardless of how distributed the network is.

We believe that the network has never been more vital than it is today. As administrators grapple with more data, coming from more places, more connected devices, and more Software-as-a-service (“SaaS”) based applications, the cloud is fundamental to establishing a new normal. Traditional network offerings are not well-suited to fulfill enterprise expectations for rapid delivery of new services, more flexible business models, real-time response, and massive scalability. As enterprises continue to migrate increasing numbers of applications and services to either private clouds or public clouds offered by third parties and to adopt new IT delivery models and applications, they are required to make fundamental network alterations and enhancements spanning from device access points (“AP”) to the network core. In either case, the network infrastructure must adapt to this new dynamic environment. Intelligence and automation are key if enterprises are to derive maximum benefit from their cloud deployments. Service providers are also investing in network enhancements with platforms and applications that deliver data insights, provide flexibility, and can quickly respond to new user demands and 5G use cases.

We believe Extreme stands to benefit from the use of its technology to manage distributed campus network architecture centrally from the cloud. Extreme has blended a dynamic fabric attach architecture, that delivers simplicity for moves and changes at the edge of the network, together with corporate-wide role-based policy. This enables customers to migrate to new cloud managed switching and Wi-Fi, agnostic of the existing networking or wireless equipment they already have installed. In the end, we expect these customers to see lower operating and capital expenditures, lower subscription costs, lower overall cost of ownership and more flexibility along with a more resilient network. We estimate the total addressable market for our Enterprise Networking solutions consisting of cloud networking, wireless local area networks (“WLAN”), data center networking, ethernet switching, campus local area networks (“LAN”), and software-defined wide area network (“SD-WAN”) solutions to be approximately $26 billion and growing at approximately five percent per year over the next three years. In addition, 5G provides an estimated $3 billion serviceable available market for Service Provider Networking.

The year 2020 resulted in unprecedented change – from the physical footprint of offices, to supply chain operations, to how we connect. Organizations and workforces extend anywhere and everywhere. IT leaders are now tasked with ensuring the global, hybrid workforce is functional and successful no matter where they are and ensure people can work wherever they want.

Extreme’s broad product, solutions and technology portfolio supports these three tenets and continues to innovate and evolve them to help businesses succeed.

The following table presents net product and service and subscription revenues for the periods presented (dollars in thousands):

Product revenues increased $23.8 million or 14.7% for the three months ended September 30, 2021, as compared to the corresponding period of fiscal 2021. The product revenues increase for the three months ended September 30, 2021 was primarily due to the material slow-down in global demand during the corresponding period of fiscal 2021 due to the global outbreak of COVID-19.

Service and subscription revenues increased $8.1 million, or 10.9% for the three months ended September 30, 2021 as compared to the corresponding period in fiscal 2021. The increase in service and subscription revenues was primarily due to the growth in subscription revenues.

The following table presents the product and service and subscription, gross profit and the respective gross profit percentages for the periods presented (dollars in thousands):

	Three Months Ended
	September 30, 2021			September 30, 2020			$ Change		% Change
Gross profit:
Product	$	104,217		$	88,001		$	16,216		18.4	%
Percentage of product revenues		56.3	%		54.5	%
Service and subscription		51,386			47,017			4,369		9.3	%
Percentage of service and subscription revenues		62.3	%		63.2	%
Total gross profit	$	155,603		$	135,018		$	20,585		15.2	%
Percentage of net revenues		58.1	%		57.3	%

Product gross profit increased $16.2 million or 18.4% for the three months ended September 30, 2021, as compared to the corresponding period in fiscal 2021. The increase in product gross profit was primarily due to increased revenues along with lower distribution charges of $0.5 million, which were mainly due to decreased tariffs, lower excess and obsolete inventory charges of $0.6 million, lower warranty costs of $0.4 million and lower amortization of intangibles due to certain intangibles being fully depreciated.

Service and subscription gross profit increased $4.4 million or 9.3% for the three months ended September 30, 2021, as compared to the corresponding period in fiscal 2021. The increase was primarily due to increased service and subscription revenues, partially offset by higher personnel costs, professional fees and increased cloud service costs.

The following table presents operating expenses for the periods presented (dollars in thousands):

	Three Months Ended
	September 30, 2021		September 30, 2020		$ Change			% Change
Research and development	$	47,766	$	49,524	$	(1,758	)		(3.5	)%
Sales and marketing		69,527		64,325		5,202			8.1	%
General and administrative		17,003		16,461		542			3.3	%
Acquisition and integration costs		1,510		1,975		(465	)		(23.5	)%
Restructuring and related charges		279		1,001		(722	)		(72.1	)%
Amortization of intangibles		1,154		1,792		(638	)		(35.6	)%
Total operating expenses	$	137,239	$	135,078	$	2,161			1.6	%

Research and development expenses consist primarily of personnel costs (which consist of compensation, benefits and share-based compensation), consultant fees and prototype expenses related to the design, development, and testing of our products.

Research and development expenses decreased by $1.8 million or 3.5% for the three months ended September 30, 2021, as compared to the corresponding period in fiscal 2021. The decrease in research and development expenses was due to a $1.3 million decrease in facility and information technology costs and a $1.4 million decrease in software licenses and engineering project costs which lowered depreciation expense, partially offset by a $0.6 million increase in professional and contractor fees and a $0.4 million increase in personnel related costs.

Sales and marketing expenses consist primarily of personnel costs (which consist of compensation, benefits and share-based compensation), as well as trade shows and promotional expenses.

Sales and marketing expenses increased by $5.2 million or 8.1% for the three months ended September 30, 2021, as compared to the corresponding period in fiscal 2021. The increase in sales and marketing expenses was primarily due to a $4.1 million increase in personnel costs primarily due to higher compensation and benefits costs due to increase in headcount, a $1.0 million increase in travel costs and a $0.4 million increase in other expenses primarily marketing and sales promotions costs, partially offset by a $0.3 million decrease in professional fees.

General and administrative expenses consist primarily of personnel costs (which consist of compensation, benefits and share-based compensation), legal and professional service costs, and facilities and information technology costs.

General and administrative expenses increased by $0.5 million or 3.3% for the three months ended September 30, 2021, as compared to the corresponding period in fiscal 2021. The increase in general and administrative expenses was primarily due to a $1.2 million increase in personnel costs primarily compensation expenses partially offset by a $0.7 million decrease in legal and professional fees.

During the three months ended September 30, 2021, we incurred $1.5 million of integration costs which consisted primarily of professional fees for legal advisory services and financial services related to the acquisition of Ipanema.

During the three months ended September 30, 2020, we incurred $2.0 million of acquisition and integration costs. Acquisition and integration costs consisted primarily of additional professional fees for system integration and financial services related to Aerohive acquisition.

For the three months ended September 30, 2020, we recorded restructuring charges of $1.0 million. We continued our reduction-in-force initiative began in the third quarter of fiscal 2020 and recorded related severance and benefits charges of $0.7 million related to the 2020 Plan. In addition, we had facility-related charges of $0.3 million related to our previously impaired facilities.

During the three months ended September 30, 2021 and 2020, we recorded $1.2 million and $1.8 million, respectively, of operating expenses for amortization of intangibles. The decrease was primarily due to lower amortization related to certain acquired intangibles from previous acquisitions becoming fully amortized.

During the three months ended September 30, 2021 and 2020, we recorded $3.9 million and $6.7 million, respectively, in interest expense. The decreases in interest expense were primarily driven by lower average loan balances and lower average rates for the three months ended September 30, 2021under our 2019 Credit Agreement.

During the three months ended September 30, 2021 and 2020, we recorded other income, net of $0.2 million and other expense, net of $0.9 million, respectively. The changes for the three months ended September 30, 2021 was primarily due to foreign exchange losses from the revaluation of certain assets and liabilities denominated in foreign currencies into U.S. Dollars.

For the three months ended September 30, 2021 and 2020, we recorded an income tax provision of $2.1 million and $1.3 million, respectively.

The income tax provisions for the three months ended September 30, 2021 and 2020 consisted of (1) taxes on the income of our foreign subsidiaries, (2) foreign withholding taxes, (3) state taxes in jurisdictions where we have no remaining state net operating losses and (4) tax expense associated with the establishment of a U.S. deferred tax liability for amortizable goodwill resulting from the acquisition of Enterasys Networks, Inc., the WLAN Business, the Campus Fabric Business and the Data Center Business.

Our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Report are prepared in accordance with accounting principles generally accepted in the United States. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted under SEC rules and regulations. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. In many instances, we could have reasonably used different accounting estimates, and in other instances changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. On an ongoing basis, we evaluate our estimates and assumptions. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

As discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended June 30, 2021, we consider the following accounting policies to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements:

There have been no changes to our critical accounting policies since the filing of our last Annual Report on Form 10-K.

As of September 30, 2021, our principal sources of liquidity consisted of cash of $191.3 million and accounts receivable, net of $129.6 million, and available borrowings under our five-year 2019 Revolving Facility of $60.2 million. Our principal uses of cash include the purchase of finished goods inventory from our contract manufacturers, payroll and other operating expenses related to the development and marketing of our products, purchases of property and equipment, and repayments of debt and related interest. We believe that our $191.3 million of cash at September 30, 2021, our cash flow from operations, and the availability of borrowings from the 2019 Revolving Facility will be sufficient to fund our planned operations for at least the next 12 months.

On November 2, 2018, our Board of Directors announced that it had authorized management to repurchase up to $60.0 million of its shares of common stock for two years from the date of authorization, of which $15.0 million was used for repurchases in fiscal 2019 and $30.0 million was used for repurchases in fiscal 2020. In February 2020, our Board of Directors increased the authorization to repurchase by $40.0 million to $100.0 million and extended the period for repurchases for three years from February 5, 2020. Purchases may be made from time to time in the open market or in privately negotiated transactions. The manner, timing and amount of any future purchases will be determined by our management based on their evaluation of market conditions, stock price, Extreme’s ongoing determination that it is the best use of available cash and other factors. The repurchase program does not obligate Extreme to acquire any shares of its common stock, may be suspended or terminated at any time without prior notice and will be subject to regulatory considerations. There were no repurchases in the three months ended September 30, 2021.

In connection with the acquisition of Aerohive, as of August 9, 2019, we amended the 2018 Credit Agreement, which is no longer outstanding, and entered into the 2019 Credit Agreement, by and among us, as borrower, several banks and other financial institutions as Lenders, BMO Harris Bank N.A., as an issuing lender and swingline lender, Silicon Valley Bank, as an Issuing Lender, and Bank of Montreal, as administrative agent and collateral agent for the Lenders. The 2019 Credit Agreement provides for a five-year first lien term loan facility in an aggregate principal amount of $380.0 million and a five-year revolving loan facility in an aggregate principal amount of $75.0 million (“2019 Revolving Facility”). In addition, we may request incremental term loans and/or incremental revolving loan commitments in an aggregate amount not to exceed the sum of $100.0 million plus an unlimited amount that is subject to pro forma compliance with certain financial tests. On August 9, 2019, we used the proceeds to partially fund the acquisition of Aerohive and for working capital and general corporate purposes.

At our election, the initial term loan (the “Initial Term Loan”) under the 2019 Credit Agreement may be made as either base rate loans or Eurodollar loans. The applicable margin for base rate loans ranges from 0.25% to 2.50% per annum and the applicable margin for Eurodollar loans ranges from 1.25% to 3.50%, in each case based on Extreme’s Consolidated Leverage Ratio. All Eurodollar loans are subject to a Base Rate floor of 0.00%. The 2019 Credit Agreement is secured by substantially all of our assets.

The 2019 Credit Agreement requires us to maintain certain minimum financial ratios at the end of each fiscal quarter. The 2019 Credit Agreement also includes covenants and restrictions that limit, among other things, our ability to incur additional indebtedness, create liens upon any of our property, merge, consolidate or sell all or substantially all of our assets. The 2019 Credit Agreement also includes customary events of default which may result in acceleration of the outstanding balance.

Financial covenants under the 2019 Credit Agreement require us to maintain a minimum consolidated fixed charge and consolidated leverage ratio at the end of each fiscal quarter through maturity. The 2019 Credit Agreement also includes covenants and restrictions that limit, among other things, our ability to incur additional indebtedness, create liens upon any of our property, merge, consolidate or sell all or substantially all of our assets. The 2019 Credit Agreement also includes customary events of default which may result in acceleration of the outstanding balance.

On April 8, 2020, we entered into the First Amendment to waive certain terms and financial covenants of the 2019 Credit Agreement through July 31, 2020. On May 8, 2020, we entered into the Second Amendment which superseded the First Amendment and provided certain revised terms and financial covenants through March 31, 2021. Subsequent to March 31, 2021, the original terms

and financial covenants under the 2019 Credit Agreement resumed in effect. The Second Amendment required us to maintain certain minimum cash requirement and certain financial metrics at the end of each fiscal quarter through March 31, 2021. Under the terms of the Second Amendment, we were not permitted to exceed $55.0 million in our outstanding balance under the 2019 Revolving Facility, the applicable margin for Eurodollar rate was 4.5% and we were restricted from pursuing certain activities such as incurring additional debt, stock repurchases, making acquisitions or declaring a dividend, until we are in compliance with the original covenants of the 2019 Credit Agreement. On November 3, 2020, we and our lenders entered into the Third Amendment to increase the sublimit for letters of credit to $20.0 million. On December 8, 2020, we and our lenders entered into the Fourth Amendment to waive and amend certain terms and financial covenants within the 2019 Credit Agreement through March 31, 2021.

Cash flows provided by operations in the three months ended September 30, 2021, were $40.3 million, including our net income of $12.7 million and non-cash expenses of $27.8 million for items such as amortization of intangibles, share-based compensation, depreciation, reduction in carrying amount of right-of-use assets, deferred income taxes, and interest. Other sources of cash for the period included decreases in accounts receivables and inventory and increases in accounts payable, deferred revenues and other current and long-term liabilities. This was partially offset by increase in prepaid expenses and other current assets and decreases in accrued compensation and operating lease liabilities.

Cash flows provided by operations in the three months ended September 30, 2020, were $24.7 million, including our net loss of $8.8 million and non-cash expenses of $30.4 million for items such as amortization of intangibles, share-based compensation, depreciation, reduction in carrying amount of right-of-use assets, deferred income taxes and imputed interest. Other sources of cash for the period included a decrease in inventory and increase in accounts payable and deferred revenues. This was partially offset by decreases in accrued compensation, other current and long-term liabilities, and operating lease liabilities and increases in accounts receivables and prepaid expenses and other current assets.

Cash flows used in investing activities in the three months ended September 30, 2021 were $72.9 million primarily due to the payment of $69.5 million (net of cash acquired) for the acquisition of Ipanema and $3.4 million for the purchases of property and equipment.

Cash flows used in investing activities in the three months ended September 30, 2020 were $3.0 million for the purchases of property and equipment.

Cash flows used in financing activities in the three months ended September 30, 2021 were $22.7 million due primarily to debt repayments of $16.8 million, payment of contingent consideration of $0.6 million, $1.0 million for deferred payments on acquisitions and $4.4 million for taxes paid on vested and released stock awards net of proceeds from the issuance of shares of our common stock under our Employee Stock Purchase Plan (“ESPP”) and exercise of stock options.

Cash flows used in financing activities in the three months ended September 30, 2020 were $22.8 million due primarily to debt repayments of $24.8 million, payment of contingent consideration of $0.6 million, and $1.0 million for deferred payments on acquisitions. This was partially offset by $3.6 million of proceeds from the issuance of shares of our common stock under our ESPP and exercise of stock options, net of taxes paid on vested and released stock awards.

Foreign currency effect on cash increased in the three months ended September 30, 2021 and 2020, primarily due to changes in foreign currency exchange rates between the U.S. Dollar and particularly the Indian Rupee, the UK Pound, and the EURO.

The following summarizes our contractual obligations as of September 30, 2021, and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):

	Payments due by Period
	Total		Less than 1 Year		1-3 years		3-5 years		More than 5 years
Contractual obligations:
Debt obligations	$	330,000	$	28,500	$	301,500	$	—	$	—
Interest on debt obligations		21,711		8,811		12,900		—		—
Unconditional purchase obligations		64,910		64,910		—		—		—
Contractual commitments		90,844		27,732		39,416		17,233		6,463
Lease payments on operating leases		50,995		15,566		22,732		8,765		3,932
Deferred payments for an acquisition		6,000		4,000		2,000		—		—
Contingent consideration for an acquisition		358		358		—		—		—
Other liabilities		517		181		336		—		—
Total contractual cash obligations	$	565,335	$	150,058	$	378,884	$	25,998	$	10,395

The contractual obligations referenced above are more specifically defined as follows:

Interest on debt obligations includes the effect of our interest rate swap agreements.

Unconditional purchase obligations represent the purchase of long lead-time component inventory that our contract manufacturers procure in accordance with our forecasts. We expect to honor the inventory purchase commitments within the next 12 months.

Lease payments on operating leases represent base rents and operating expense obligations to landlords for facilities we occupy at various locations.

Deferred payments for the acquisition of the Data Center Business represent payments of $1.0 million per quarter.

Contingent consideration for an acquisition of a capital financing business in December 2017 from Broadcom, at the estimated fair value. Actual payments could be different.

Other liabilities include our commitments towards debt related fees and specific arrangements other than inventory.

The amounts in the table above exclude immaterial income tax liabilities related to uncertain tax positions as we are unable to reasonably estimate the timing of settlement.

We did not have any ~~off-balance sheet arrangements~~material commitments for capital expenditures as of ~~December 31, 2017.~~September 30, 2021.

The following table presents the amounts of our cash equivalents that are subject to market risk by range of expected maturity and weighted-average interest rates as of December 31, 2017 (dollars in thousands).

~~The following tables present hypothetical changes in fair value of the financial instruments held at December 31, 2017, that are sensitive to changes in interest rates (in thousands):~~

~~At certain points in time we are exposed to the impact of interest rate fluctuations, primarily in the form of variable rate borrowings from our credit facility.~~

At certain points in time we are exposed to the impact of interest rate fluctuations, primarily in the form of variable rate borrowings from the Second Amendment to our Credit Facility. Our debt and Credit Facilities, as amended, are fully described in the Note 3 of our Notes to the Consolidated Financial Statements in our annual report on Form 10-K. At December 31, 2017, we had $185.0 million of debt outstanding, all of which was from our Credit Facilities, as amended. Through the second quarter of fiscal 2018, the average daily outstanding amount was $183.9 million with a high of $189.6 million and a low of $169.6 million.

The following table presents hypothetical changes in interest expense for the quarter ended December 31, 2017, on outstanding credit facility borrowings as of December 31, 2017 , that are sensitive to changes in interest rates (in thousands):

A majority of our sales and expenses are denominated in United States Dollars. While we conduct some sales transactions and incur certain operating expenses in foreign currencies and expect to continue to do so, we do not anticipate that foreign exchange gains or losses will be significant, in part because of our foreign exchange risk management process discussed below.