UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K/A

Amendment No. 1

CURRENT REPORT

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

Date of report (date of earliest event reported):

October 31, 2013

EXTREME NETWORKS, INC.

(Exact name of registrant as specified in its charter)

145 Rio Robles

San Jose, California 95134

(Address of principal executive offices)

Registrant’s telephone number, including area code:

(408) 579-2800

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

This Amendment No. 1 on Form 8-K/A amends the Current Report on Form 8-K filed by Extreme Networks, Inc. (“Extreme”) with the Securities and Exchange Commission on November 1, 2013 (“November 8-K”) related to Extreme’s acquisition of Enterasys Networks, Inc. (“Enterasys”) to include: the consolidated financial statements of Enterasys as required under Item 9.01(a), the pro forma financial information as required under Item 9.01(b) and related exhibits under Item 9.01 (d). The information previously reported in the November 8-K is hereby incorporated by reference into this Form 8-K/A.

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Item 9.01 Financial Statements and Exhibits.

(a)                                 Financial Statements of Businesses Acquired

The audited consolidated financial statements of Enterasys as of and for the years ended September 30, 2013 and 2012, are attached hereto as Exhibit 99.1 and are incorporated by reference in their entirety herein. The audited consolidated financial statements of Enterasys as of and for the years ended September 30, 2012 and 2011, are attached hereto as Exhibit 99.2 and are incorporated by reference in their entirety herein.

(b)                                 Unaudited Pro Forma Financial Information

The following unaudited pro forma condensed combined financial information required by Item 9.01(b) of Form 8-K is attached hereto as Exhibit 99.3 and is incorporated by reference in its entirety herein:

i.                  Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2013.

ii.               Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended September 30, 2013.

iii.            Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended June 30, 2013.

iv.           Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

(d)                                 Exhibits

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:  January 13, 2014

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EXHIBIT INDEX

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Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement Nos. 333-192507, 333-165268, 333-112831, 333-105767, 333-76798, 333-65636, 333-58634, 333-55644, 333-54278, 333-131705, and 333-83729 on Forms S-8 of our report dated December 24, 2013, relating to the consolidated financial statements of Enterasys Networks, Inc. as of and for the years ended September 30, 2013 and 2012 (which report expresses an unmodified opinion and includes an emphasis-of-matter paragraph relating to affiliated transactions) and our report dated October 28, 2013, relating to the consolidated financial statements of Enterasys Networks, Inc. as of and for the years ended September 30, 2012 and 2011 (which report expresses an unmodified opinion and includes an emphasis-of-matter paragraph relating to affiliated transactions)  appearing in this Current Report on Form 8-K/A of Extreme Networks, Inc.

/s/ Deloitte & Touche LLP

Boston, Massachusetts

January 13, 2014

Exhibit 99.1

Enterasys Networks, Inc.

Consolidated Financial Statements as of and for the Years Ended September 30, 2013 and 2012, and Independent Auditors’ Report

ENTERASYS NETWORKS, INC.

TABLE OF CONTENTS

INDEPENDENT AUDITORS’ REPORT

To the Stockholder of
Enterasys Networks, Inc.
Salem, New Hampshire

We have audited the accompanying consolidated financial statements of Enterasys Networks, Inc. and subsidiaries (the “Company”) which comprise the consolidated balance sheets as of September 30, 2013 and 2012, and the related consolidated statements of operations, comprehensive (loss) income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2013 and 2012, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter

As discussed in Notes 1, 10 and 12, the consolidated financial statements include significant transactions with Enterprise Networks Holdings B.V. and its affiliates and are not necessarily indicative of the conditions that would have existed or the results of operations if the Company had been operated as an unaffiliated company. Our opinion is not modified with respect to this matter.

December 24, 2013

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ENTERASYS NETWORKS, INC.

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2013 AND 2012

(In thousands, except share and per share data)

See notes to consolidated financial statements.

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ENTERASYS NETWORKS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

(In thousands)

See notes to consolidated financial statements.

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ENTERASYS NETWORKS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

(In thousands)

See notes to consolidated financial statements.

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ENTERASYS NETWORKS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

(In thousands, except share data)

See notes to consolidated financial statements.

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ENTERASYS NETWORKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

(In thousands)

See notes to consolidated financial statements.

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ENTERASYS NETWORKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

1.                      BASIS OF PRESENTATION AND BUSINESS

Business — Enterasys designs, develops, markets, and supports comprehensive network solutions architecture to address the network communication, management, and security requirements facing global enterprises. The Company believes its solutions offer customers the secure, high-capacity, and cost-effective network connectivity required to facilitate the exchange of information among employees, customers, suppliers, business partners, and other network users. The Company is focused on delivering networking solutions that include security features within the network architecture. Enterasys believes its solutions enable customers to meet their network software requirements for continuity, context, control, compliance, and consolidation through an architecture and management interface designed for ease of use. Enterasys’ installed base of customers consist of commercial enterprises, governmental entities, health care, financial, educational, nonprofit institutions, and various other organizations.

Immaterial Correction of Prior Period Amounts — During 2013, the Company identified an error within the financing activities section of the 2012 consolidated statement of cash flows.  Cash inflows from Borrowings on affiliate debt and cash outflows from the Repayment of affiliate debt were each inappropriately stated in the amount of approximately $8.9m.  This amount represented payments of interest to the affiliate and not cash flows resulting from borrowings or repayments of principle.  The Company has corrected the presentation error of the 2012 consolidated statement of cash flows within these consolidated financial statements.  There was no impact to cash flows from financing activities during 2012 as a result of the correction.

Basis of Presentation — The consolidated financial statements include the accounts of Enterasys Networks, Inc., and its subsidiaries (“Enterasys” or the “Company”). On February 22, 2012, Gores ENT Holdings, Inc. (“Gores ENT”), was merged into Enterasys. Gores ENT was formed as a Delaware corporation on October 28, 2005. On March 1, 2006, Gores ENT acquired 100% of the outstanding common shares of Enterasys. On October 1, 2008, Siemens AG and the Gores Group LLC (“Gores”) completed a joint venture (JV) transaction whereby Gores and Siemens AG acquired 51% and 49% interests, respectively. Upon formation of the JV, Gores formed Enterprise Networks Holdings B.V. (“JV Co”). JV Co formed Enterprise Networks Holdings, Inc. (“EN Holdings”), for the purpose of holding Gores ENT, SER Holdings and subsidiaries, Siemens Enterprise Communications, and Chantry Networks and subsidiary (“Chantry”).

On September 12, 2013, EN Holdings entered into a stock purchase agreement to sell all of the issued and outstanding shares of the Company’s common stock to Extreme Networks, Inc. for approximately $180 million, subject to certain adjustments defined in the agreement.  On October 31, 2013, the Company was sold to Extreme Networks, Inc. for $182.2 million.

The consolidated financial statements include significant transactions with JV Co and its affiliates and are not necessarily indicative of the conditions that would have existed or the results of operations if the Company had been operated as an unaffiliated company.

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The consolidated financial statements include revenues and expense transactions with JV Co, including, but not limited to, sales of products and services, research and development services, employee benefits and incentives, and financing activities, including:

Revenue — For the years ended September 30, 2013 and 2012, the Company sold, to various companies within the JV Co, products of $28.6 million and $36.9 million and services of $5.5 million and $5.3 million, respectively. Companies within the JV Co are considered platinum partners and receive the same discounts as other third-party platinum customers.

Research and Development Costs — The Company reimburses Chantry for all research and development costs incurred on its behalf. Costs reimbursed totaled $10.8 million and $11.3 million for the years ended September 30, 2013 and 2012, respectively.

Self-Insured Medical Costs — The Company participates in a self-insured medical plan administered by Gores. Total costs associated with the medical plan were $6.1 million and $5.1 million for the years ended September 30, 2013 and 2012, respectively. These expenses were charged to selling, general, and administrative when incurred.

Workers’ Compensation, Auto, and General Liability Insurance — Enterasys is the beneficiary of an umbrella insurance policy carried by JV Co. Costs associated with the insurance plans totaled $0.2 million and $0.1 million for the years ended September 30, 2013 and 2012, respectively. These expenses were charged to selling, general, and administrative when incurred.

Global Management Incentive Plan (GMIP) — The Company participates in the JV Co’s GMIP. GMIP expenses recorded were $6.6 million and $2.6 million for the years ended September 30, 2013 and 2012, respectively. Costs were charged to the function from which the bonus was earned.

Interest Expense — The Company’s debt is held by a 100%-owned subsidiary of JV Co. Enterasys recorded interest expense of $8.6 million and $8.8 million for the years ended September 30, 2013 and 2012, respectively.

Product Service and Support — The Company reimbursed an affiliate for costs associated with the service and support of product. Reimbursed costs totaled $0.1 million and $0.5 million for the years ended September 30, 2013 and 2012, respectively, and were recorded in the cost of revenue — service and selling, general, and administrative.

These transactions may not, however, reflect the expenses the Company would have incurred as an independent company for the years presented. Actual costs that may have been incurred if the Company had been a stand-alone company would depend on a number of factors, including the organizational structure; what functions were outsourced or performed by employees; and strategic decisions made in areas, such as information technology (IT) and infrastructure. The Company is unable to determine what such costs would have been had the Company been independent.

The accompanying consolidated financial statements have been prepared in U.S. dollars in accordance with the accounting principles generally accepted in the United States of America (GAAP or “generally accepted accounting principles”).

Subsequent Events — The Company has evaluated subsequent events through December 24, 2013, the date on which the consolidated financial statements were available to be issued, noting no events requiring adjustment to the consolidated financial statements.

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2.                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation — The consolidated financial statements include the accounts of Enterasys and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates and Judgments — The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and judgments relied upon in preparing these consolidated financial statements include revenue recognition for multiple-element arrangements, inventory valuations, warranty provisions, legal contingencies, and recoverability of Enterasys’ net deferred tax assets and the related valuation allowances. Enterasys regularly assesses these estimates and records changes in estimates in the period in which they become known. Enterasys bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Risks and Uncertainties — The markets for the Company’s products are characterized by rapid technological development, intense competition, and frequent new product introductions, all of which could affect the future realizability of the Company’s assets.

Revenue Recognition — The Company’s revenue is primarily derived from sales of networking products, which typically have both software and nonsoftware components that function together to deliver the products’ essential functionality, professional services, software licenses, and maintenance and support services.

The Company recognizes revenue from sales when persuasive evidence of an arrangement exists, delivery has occurred, the sale price is fixed or determinable, and collectability of the related receivable is probable. In instances where the customer has specifically bargained for acceptance criteria, revenue is deferred until the acceptance has been achieved. When fees for products or services are not fixed and determinable, the Company defers the recording of receivables and revenue until such time as the fees become due or are collected.

The Company’s arrangements typically include multiple elements, such as products, software licenses, maintenance and support services, and professional services. When the Company’s sales arrangements contain multiple elements, the Company allocates the arrangement fee based upon the relative value of the stand-alone selling price for each element. The stand-alone selling price of each element is determined using a selling price hierarchy. Under the selling price hierarchy, the selling price for each deliverable is based on the Company’s vendor-specific objective evidence (VSOE), which is determined by a substantial majority of the Company’s historical stand-alone sales transactions for a product or service falling within a narrow range. If VSOE is not available due to a lack of stand-alone sales transactions or lack of pricing within a narrow range, then third-party evidence (TPE), as determined by the stand-alone pricing of competitive vendor products in similar markets, is used, if available. TPE typically is difficult to establish due to the Company’s various product and service offerings containing a significant level of customization and differentiation and difficulty in obtaining reliable competitive stand-alone pricing information. When neither VSOE nor TPE is available, the Company determines its best estimate of stand-alone selling price (ESP) for a product or service and does so by considering several factors, including, but not limited to, the sales prices, sales channel, geography, gross margin objective, competitive product pricing, and product life cycle. In consideration of all relevant pricing factors, the Company applies management judgment to determine the Company’s best estimate of

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selling price. Generally, the stand-alone selling price of product and services is determined using VSOE and the stand-alone selling price of other unique deliverables is determined by using ESP. The Company limits the amount of revenue recognized for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations, or subject to customer-specific return or refund privileges.

For software license sales, the Company recognizes revenue in accordance with the accounting standards for software revenue recognition. These arrangements typically include multiple elements, such as the software license, professional services, and maintenance and support services. Revenue for software license arrangements is recognized utilizing the residual method whereby the arrangement fee is first allocated to any undelivered elements that are considered not essential to the functionality of the license based upon the VSOE for those elements and the remainder of the arrangement fee is recognized upon delivery of the license. If the Company does not have VSOE for each undelivered element, it defers all revenue on the entire arrangement until VSOE is established or until such elements are delivered, provided that all other revenue recognition criteria are met.

The Company sells its products to stocking distributors, nonstocking distributors, and value-added resellers that sell directly to end users. The majority of revenue is from a select group of stocking distributors with contractually agreed product rotation rights. The Company defers the revenue associated with all sales to its stocking distributors until the distributors sell the product, as evidenced by “sales-out” reports that the distributors provide. For product sales to nonstocking distributors and value-added resellers, the Company does not grant return privileges, except for defective products during the warranty period. Accordingly, the Company recognizes revenue upon shipment, provided that all other revenue recognition criteria are met.

Revenue from maintenance and support services is recognized ratably over the service period. Revenue from other professional services is typically recognized as the services are accepted by the customer, if all other revenue recognition criteria have been met.

Deferred revenue typically includes amounts associated with maintenance and support contracts or professional services. Deferred revenue expected to be recognized as revenue more than one year subsequent to the consolidated balance sheet date is reported within long-term liabilities in the consolidated balance sheets. The Company defers recognition of incremental direct costs, such as cost of goods and third-party installations, until recognition of the related revenue.

The Company excludes any taxes assessed by a governmental authority that are directly imposed on a revenue-producing transaction (i.e., sales, use, value added) from its revenue and costs. Reimbursement received for out-of-pocket expenses and shipping costs is recorded as revenue.

Cash and Cash Equivalents — Cash and cash equivalents consist of all highly liquid investments with a maturity at date of purchase of 90 days or less. Cash and cash equivalents are carried at cost, which approximates fair value.

Enterasys maintains its cash and cash equivalents in bank deposit accounts, which, at times may exceed federally insured limits. The Company has not experienced losses in such accounts. The Company believes that it is not exposed to any significant credit risk for cash.

Allowance for Doubtful Accounts — The Company estimates the collectability of its accounts receivable and the related amount of bad debts that may be incurred in the future. The allowance for doubtful accounts results from an analysis of specific customer accounts, historical experience, customer concentrations, credit ratings, and current economic trends.

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Restricted Cash — The Company classifies as restricted cash all cash pledged as collateral to secure long-term obligations and all cash whose use is otherwise limited by contractual provisions. Restricted cash consists of state insurance requirements and various lease deposits.

Inventories — Inventories are reported at the lower of cost or market. Costs are measured at standard, which approximates actual cost on a first-in, first-out method. The Company records a provision for excess and obsolete raw materials and finished goods inventory using a reserve methodology based primarily on forecasts of future demand. Finished goods inventory includes customer evaluation units, as well as products shipped to stocking distributors where revenue is not recognized until the products are shipped to their customers. Service inventory represents inventory used by the Company as replacement parts for customers whom have purchased long-term service contracts. The Company records a provision for excess and obsolete service inventory based upon a review of estimated product service lives and usage estimates.

Property, Plant, and Equipment — Property and equipment is stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from two to five years. Leasehold improvements are amortized over the lesser of the lease term or its useful life. When an asset is sold or retired, the cost and related accumulated depreciation or amortization is eliminated, and the resulting gain or loss, if any, is recognized in income (loss) from operations in the consolidated statements of operations. The Company reviews property and equipment for impairment in the same manner as intangible assets discussed below.

Intangible Assets and Goodwill — Intangible assets are composed of intellectual property and customer relations, which are amortized over their estimated useful lives. Intangible assets are reviewed for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable based upon the estimated undiscounted cash flows.

Goodwill is recorded when the consideration for an acquisition exceeds the fair value of net tangible and identifiable intangible assets acquired. Goodwill is not amortized, but instead is tested for impairment at least annually or if indicators of potential impairment exist by comparing the fair value of the Company’s reporting unit to its carrying value. The Company estimates the fair value of its reporting unit using a discounted cash flow model or other valuation models, such as comparative transactions and market multiples. There was no impairment of goodwill recorded for the years ended September 30, 2013 and 2012.

Intangible assets with estimated lives and other long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of intangible assets with estimated lives and other long-lived assets is measured by a comparison of the carrying amount of an asset or asset group to future net undiscounted cash flows expected to be generated by the asset or asset group. If these comparisons indicate that an asset is not recoverable, the Company will recognize an impairment loss for the amount by which the carrying value of the asset or asset group exceeds the related estimated fair value. Estimated fair value is based on either discounted future operating cash flows or appraised values, depending on the nature of the asset. There were no impairments of intangible assets recorded for the years ended September 30, 2013 and 2012.

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Financial Instruments — The Company’s financial instruments include cash and cash equivalents, accounts receivable, affiliate accounts receivable, accounts payable, affiliate accounts payable, accrued expenses, and affiliate debt. Because of their short maturity, the carrying amounts of cash and cash equivalents, accounts and notes receivable, accounts payable, accrued expenses, and short-term borrowings approximate fair value. The Company’s affiliate debt carries a variable interest rate and the carrying value of the affiliate debt approximates fair value.

Financial instruments with remaining maturities of less than one year, or that are due within one year from the consolidated balance sheet date, are classified as current. Financial instruments with remaining maturities or that are payable more than one year from the consolidated balance sheet date are classified as noncurrent.

Concentrations of Credit Risk and Significant Customers — The Company grants credit to its customers during the normal course of business and generally requires no collateral from its customers. However, management routinely assesses the financial condition of its customers and, as a consequence, believes that its trade accounts receivable credit risk exposure is limited. As of September 30, 2013 and 2012, five customers account for 38% and 29% of the Company’s total accounts receivable, respectively. During the years ended September 30, 2013 and 2012, five customers account for 64% and 68% of the Company’s total revenue, respectively.

Enterasys has six major contract manufacturers. Failure to manage the activities of these manufacturers or any disruption in these relationships could result in the disruption in the supply of its products and in delays in the fulfillment of the Company’s customer orders. During the years ended September 30, 2013 and 2012, purchases from the Company’s top six vendors accounted for 94% and 95% of the Company’s inventory purchases, respectively.

Research and Development Costs and Software Costs — Expenditures related to the development of new products, including significant improvements and refinements to existing products and the development of software are expensed as incurred. Software development costs are required to be capitalized beginning when the technological feasibility of a product has been established and ending when a product is available for general release to customers. The Company’s process for developing software is essentially completed concurrent with the establishment of technological feasibility, accordingly, no costs have been capitalized to date.

Advertising Costs — Advertising expenditures are charged to expense as incurred. Advertising expenses for the years ended September 30, 2013 and 2012, was $3.1 million for each period presented.

Operating Segments — Enterasys operates in a single segment. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions regarding resource allocation and assessing performance. To date, the chief operating decision maker has made such decisions and assessed performance at the company level as one segment. The Company’s chief operating decision maker is its chief executive officer.

Income Taxes — Deferred tax assets and liabilities are recognized for the expected future consequences of events that have been reflected in the consolidated financial statements. Deferred tax assets and liabilities are determined based on the differences between the book and tax bases of assets and liabilities and operating loss carryforwards, using tax rates expected to be in effect for the years in which the differences are expected to reverse. Such differences arise primarily from depreciation, accruals and reserves, deferred revenue, tax credits, net operating loss carryforwards, and allowances for accounts receivable. Enterasys records valuation allowances to reduce deferred income tax assets to the amount

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that is more likely than not to be realized. The Company has not provided for U.S. income taxes on the undistributed earnings of non-U.S. subsidiaries, as the Company plans to permanently reinvest these amounts.

The domestic entities of the Company join in the filing of a consolidated U.S. federal return and certain state tax returns (where permitted) with related U.S. entities not included in these consolidated financial statements. Although the Company could not have used certain federal and state attributes on a stand-alone basis, other related U.S. entities within the consolidated U.S. federal return have been able to utilize these tax attributes. The Company uses the modified separate return approach whereby an entity may consider a tax attribute realized if it is used in a consolidated tax return even if it could not be realized on a stand-alone basis.

The Company determines whether it is more likely than not that a tax position will be sustained upon examination. If it is not more likely than not that a position will be sustained, no amount of the benefit attributable to the position is recognized. The tax benefit to be recognized of any tax position that meets the more-likely-than-not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon resolution of the contingency. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes.

Comprehensive Income — The Company presents comprehensive (loss) income in its consolidated statements of comprehensive (loss) income and is composed of net income and foreign currency translation adjustments. The foreign currency translation amounts are $(2.4) million and $(1.9) million for the years ended September 30, 2013 and 2012, respectively.

Foreign Currency Translation — For foreign subsidiaries where the functional currency is the local currency, assets and liabilities are translated into U.S. dollars at the current exchange rate on the consolidated balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during each period. Translation adjustments for these subsidiaries are included in accumulated other comprehensive loss.

For foreign subsidiaries where the functional currency is the U.S. dollar, monetary assets and liabilities are translated into U.S. dollars at the current exchange rate on the consolidated balance sheet date. Nonmonetary assets and liabilities are remeasured into U.S. dollars at historical exchange rates. Revenue and expense items are translated at average rates of exchange prevailing during each period.

Realized and unrealized foreign currency gains and losses arising from transactions denominated in currencies other than the subsidiary’s functional currency are reflected in earnings with the exception of intercompany transactions considered to be of a long-term investment nature. Foreign currency transaction loss was $1.1 million and $2.5 million for the years ended September 30, 2013 and 2012, respectively.

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Fair Value Measurements — Accounting standards define fair value, establish a framework for measuring fair value under generally accepted accounting principles, and enhance disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s assets that are measured at fair value on a recurring basis include cash equivalents that represent overnight deposits in the Federated Prime Obligations (ticker symbol POIXX) money market mutual fund. As of September 30, 2013 and 2012, the fair value was as follows (in thousands):

Loss Contingencies and Reserves

Loss Contingencies — The Company is subject to ongoing business risks arising in the ordinary course of business that affect the estimation process of the carrying value of assets, the recording of liabilities, and the possibility of various loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. The Company regularly evaluates current information available to determine whether such amounts should be adjusted and record changes in estimates in the years they become known.

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Reserve for Product Warranty Costs — The Company extends a limited lifetime warranty (LLW) on certain fixed switching, access point and controllers, and K-series modular switching products within the portfolio.

The warranty period typically covers the sales life of the product, plus five years of service life once the product is announced as end-of-sales life (EOSL). For most products under a LLW, the sales life is anticipated to be three years, therefore, the initial accrual period spans eight years. This is adjusted, as necessary, if the sales life is extended.

The per unit accrual rate for LLW products is determined based upon forecasted unit shipments, EOSL schedule, estimated technical return rates, and transactional costs related to the return and repair process.

Accrual for Royalties — The Company accrues for royalties for technology that it licenses from vendors based on established royalty rates and usage.

Reserve for Litigation and Legal Fees — The Company is subject to various legal claims, including securities litigation. The Company reserves for legal contingencies and legal fees when it is probable that a loss has been incurred and the amounts are reasonably estimable.

3.                      ACCOUNTS RECEIVABLE — NET

Accounts receivable — net as of September 30, 2013 and 2012, consist of the following (in thousands):

The Company does not recognize revenue on product shipments to certain stocking distributors until those distributors have sold the product to the end customer. As of September 30, 2013 and 2012, $6.4 million and $4.8 million, respectively, of product shipments had been billed and revenue had not been recognized, of which $1.5 million and $3.3 million, respectively, were paid and included in customer advances. The balance of $4.9 million and $1.5 million, respectively, were unpaid and are recorded as a contra account to gross accounts receivable.

4.                      INVENTORY

Inventory as of September 30, 2013 and 2012, consists of the following (in thousands):

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The Company records shipments to stocking distributors as a component of finished goods inventory. When the products are sold to end users, the associated cost of the inventory is recorded as a component of cost of revenue. As of September 30, 2013 and 2012, $1.3 million and $0.9 million, respectively, of the Company’s finished goods inventory was held by stocking distributors.

For the years ended September 30, 2013 and 2012, service inventory of $9.6 million and $14.4 million, respectively, have been classified as long-term and is a component of other assets.

5.                      PROPERTY AND EQUIPMENT

Property and equipment as of September 30, 2013 and 2012, consists of the following (in thousands):

The Company recorded depreciation expense related to property and equipment of $5.1 million and $3.9 million for the years ended September 30, 2013 and 2012, respectively.

The Company had no property or equipment under capital lease for any of the years presented.

6.                      INTANGIBLE ASSETS AND GOODWILL

A reconciliation of changes in the carrying amount of goodwill as of September 30, 2013 and 2012, is as follows (in thousands):

The Company has designated September 30 as the date of the annual goodwill impairment test. Based on the annual impairment test, there was no impairment of goodwill as of September 30, 2013 or 2012.

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Gross amortizable intangible assets and the related accumulated amortization as of September 30, 2013 and 2012, respectively, are as follows (in thousands):

Amortization expense of the intangible assets was $8.0 million and $9.8 million for the years ended September 30, 2013 and 2012, respectively.

Expected future intangible asset amortization as of September 30, 2013, was as follows (in thousands):

7.                      ACCRUED EXPENSES

Accrued expenses as of September 30, 2013 and 2012, consist of the following (in thousands):

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For the years ended September 30, 2013 and 2012, warranty reserves of $2.9 million and $2.5 million, respectively, have been classified as long term and are a component of other liabilities.

8.                      INCOME TAXES

Income before income taxes as of September 30, 2013 and 2012, is as follows (in thousands):