___________________________

 ___________________________

(Mark One)

For the quarterly period ended March 31, 2015

OR

For the transition period from to

Commission file number 000-25711

 ___________________________

(Exact name of registrant as specified in its charter)

 ___________________________

Registrant's telephone number, including area code: (408) 579-2800

___________________________

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   x     No   o

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   x     No   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 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   o     No   x

The number of shares of the Registrant's Common Stock, $.001 par value, outstanding at April 29, 2015 was 100,053,435 .

EXTREME NETWORKS, INC.

FORM 10-Q

QUARTERLY PERIOD ENDED March 31, 2015

INDEX

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

EXTREME NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

See accompanying notes to the condensed consolidated financial statements.

EXTREME NETWORKS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The unaudited condensed consolidated financial statements of Extreme Networks, Inc. (referred to as the "Company" or "Extreme Networks") 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 generally accepted accounting principles have been condensed or omitted under such rules and regulations. The condensed consolidated balance sheet at June 30, 2014 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, 2014 .

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 Networks at March 31, 2015 .

The results of operations for the three and nine months ended March 31, 2015 are not necessarily indicative of the results that may be expected for fiscal 2015 or any future periods.

2. Summary of Significant Accounting Policies

For a description of significant accounting policies, see Note 3, 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, 2014 . There have been no material changes to the Company's significant accounting policies since the filing of the Annual report on Form 10-K.

3. Recently Issued Accounting Pronouncements

In May 2014, the FASB, jointly with the International Accounting Standards Board, issued Accounting Standard Update No. 2014-09 (Topic 606) - Revenue from Contracts with Customers ("ASU 2014-09"). This ASU's core principle is that a reporting entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying this new guidance to contracts within its scope, an entity will: (1) identify the contract(s) with a customer, (2) identify the performance obligation in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. Additionally, this new guidance will require significantly expanded disclosures about revenue recognition. ASU 2014-09 is effective for annual reporting periods (including interim reporting periods within those annual periods) beginning after December 15, 2016. In April 2015, the FASB approved a one-year deferral of the effective date of the new standard. The new standard will be effective for the Company's fiscal 2019, with early adoption permitted.

Entities have the option of using either a full retrospective or a modified retrospective approach to adopt this ASU. The Company is currently evaluating the potential effect on its consolidated financial statements from adoption of this standard.

In November 2014, the FASB has issued ASU 2014-15, Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern , which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements and provide certain disclosures when there is substantial doubt about the entity's ability to continue as a going concern. This guidance applies to all entities and is effective for annual periods beginning after December 15, 2015, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the potential effect on its consolidated financial statements from adoption of this standard.

In January 2015, the FASB issued ASU 2015-01 which provides guidance on the elimination of the concept of extraordinary items under GAAP. This ASU is effective for annual periods ending after December 15, 2016, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the potential effect on its consolidated financial statements from adoption of this standard.

In February 2015, the FASB issued ASU 2015-02 which provides consolidation guidance and changes the way reporting enterprises evaluate consolidation for limited partnerships, investment companies and similar entities, as well as variable interest

entities. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2015. The Company is currently evaluating the potential effect on its consolidated financial statements from adoption of this standard.

In April 2015, the FASB issued ASU 2015-03 – Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 requires retrospective adoption and will be effective for annual and interim periods in fiscal years beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the potential effect on its consolidated financial statements from adoption of this standard.

4. Business combinations

On October 31, 2013, (the "Acquisition Date"), the Company completed the acquisition of Enterasys Networks, Inc. ("Enterasys"), a privately held provider of wired and wireless network infrastructure and security solutions, for $180.0 million , net of cash acquired. The Company also assumed outstanding options and restricted stock units of Enterasys at the Acquisition Date, all of which were unvested.

The acquisition was accounted for using the acquisition method of accounting. The preliminary and final purchase price allocation as of the date of the acquisition is set forth in the table below and reflects various fair value estimates.

The following table summarizes the final allocation as of September 30, 2014, of the tangible and identifiable intangible assets acquired and liabilities assumed as compared to the allocation as of December 31, 2013, the quarter in which the transaction was completed (in thousands):

of $0.2 million and $1.0 million , respectively. The decrease in depreciation expense due to the change in fair value of property and equipment was immaterial.

5. Balance Sheet Accounts

Cash, Cash Equivalents, Short-Term Investments

Summary of Cash and Available-for-Sale Securities (in thousands)

Available-for-Sale Securities

The following is a summary of available-for-sale securities (in thousands): 

The amortized cost and estimated fair value of available-for-sale investments in debt securities at March 31, 2015 , by contractual maturity, were as follows (in thousands):

The Company considers highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Investments with original maturities of greater than three months, but less than one year at the balance sheet date are classified as Short-term investments.

The Company accumulates unrealized gains and losses on the Company's available-for-sale debt securities, net of tax, in accumulated other comprehensive income (loss) in the stockholders' equity section of its balance sheets. If the fair value of an available-for-sale debt instrument is less than its amortized cost basis, an other-than-temporary impairment is triggered in circumstances where (1) the Company intends to sell the instrument, (2) it is more likely than not that the Company will be required to sell the instrument before recovery of its amortized cost basis, or (3) the Company does not expect to recover the entire amortized cost basis of the instrument (that is, a credit loss exists).

The Company determines the basis of the cost of a security sold or the amount reclassified out of accumulated other comprehensive income (loss) into earnings using the specific identification method. The Company recorded an other-than temporary impairment loss of $148,000 during the nine months ended March 31, 2014 .

Deferred Revenue, Net

Deferred revenue, net represents amounts for (i) deferred services revenue (support arrangements, professional services and training), and (ii) deferred product revenue net of the related cost of revenue when the revenue recognition criteria have not been met. The following table summarizes deferred revenue, net (in thousands):

The Company offers for sale to its customers, renewable support arrangements that range from one to five years. Deferred support revenue is included within deferred revenue, net within the services category above. The change in the Company's deferred support revenue balance in relation to these arrangements was as follows (in thousands):

Deferred Distributors Revenue, Net of Cost of Sales to Distributors

The Company records revenue from its distributors on a sell-through basis, recording deferred revenue and deferred cost of sales associated with all sales transactions to its distributors in "Deferred distributor' revenue, net of cost of sales to distributors"

in the liability section of its condensed consolidated balance sheet. The amount shown as "Deferred distributors revenue, net of cost of sales to distributors" represents the deferred gross profit on sales to distributors based on contractual pricing.

The following table summarizes deferred distributors revenue, net of cost of sales to distributors (in thousands):

Debt

The Company's debt is comprised of the following (in thousands):

On October 31, 2013, the Company entered into a Credit Agreement (the "Credit Agreement") which provides for a five -year revolving credit facility for up to $60.0 million (the "Revolving Facility") and a $65.0 million five -year term loan (the "Term Loan") and together with the Revolving Facility (the "Senior Secured Credit Facilities").  The Company drew $24.0 million in the first quarter of fiscal 2015 to fund working capital requirements. During the three months ended December 31, 2014, the Company amended the Credit Agreement and among other things modified certain financial covenants governing quick and leverage ratios. The Company repaid $30.0 million and $19.0 million of the Revolving Facility during the second and third fiscal quarters of 2015, respectively.

The Credit Agreement contains, among others, certain financial covenants that require the Company to maintain defined minimum financial ratios which limit the Company's availability to borrowings under the Revolving Facility. As of March 31, 2015 , the Company had $8.6 million of additional availability under the Revolving Facility, due to these financial covenants.

The Company had $1.0 million of outstanding letters of credit as of March 31, 2015 .

Guarantees and Product Warranties

Upon issuance of a standard product warranty, the Company discloses and recognizes a liability for the obligation it assumes under the warranty. The Company's standard hardware warranty period is typically 12 months from the date of shipment to end-users and 90 days for software. For certain products, the Company offers 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. The following table summarizes the activity related to the Company's product warranty liability during the three and nine months ended March 31, 2015 and 2014 , (in thousands):

The Company has agreed to hold the customer harmless against losses arising from a breach of intellectual property infringement or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is not estimable. We have not recorded a liability related to these indemnification and guarantee provisions and our guarantee and indemnification arrangements have not had any significant impact on our consolidated financial statements to date.

Concentrations

The Company may be subject to concentration of credit risk as a result of certain financial instruments consisting principally of marketable investments and accounts receivable. The Company has placed its investments with high-credit quality issuers. The Company does not invest an amount exceeding 10% of its combined cash, cash equivalents, short-term investments and marketable securities 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 following table sets forth major customers accounting for 10% or more of our net revenue for the periods indicated:

6. Fair Value Measurements

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 Company uses forward foreign currency contracts to hedge market risks relating to possible adverse changes in foreign exchange rates.

The following table presents the Company's fair value hierarchy for its financial assets measured at fair value on a recurring basis (in thousands):

Level 2 investment valuations are based on inputs such as quoted market prices of similar instruments, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, and state, municipal and provincial obligations. There were no transfers of assets or liabilities between Level 1 and Level 2 during the three and nine months ended March 31, 2015 .

During the quarter, the Company obtained a $3.0 million equity interest in a Company that operates in the enterprise software platform industry.  The Company has not entered into any other transactions with the entity that are considered significant to the Company's consolidated financial statements during the three and nine months ended March 31, 2015 .

The Company reflects a non-marketable equity investment as Level 3 in the 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. Significant inputs and assumptions are management's estimate of the enterprise value used to calculate the present value of the asset. Significant changes in any Level 3 input or assumption would result in increases or decreases to fair value measurements for this asset.

There were no liabilities as of March 31, 2015 that were being measured using fair value on a recurring basis. The fair values of accounts receivable, accounts payable, and accrued liabilities, due within one year approximates their carrying values due to their short-term nature.

The Company does not have any assets or liabilities measured at fair value on a non-recurring basis as of March 31, 2015 , and June 30, 2014 .

7. Share-based Compensation

As of March 31, 2015 , the Company had 15,578,378 shares available for issuance, of which 12,000,000 shares are available under the 2014 Employee Stock Purchase Plan ("ESPP"), which was approved by the shareholders on November 12, 2014. There are 66,382 shares available under the 1999 ESPP and 3,511,996 shares available under the 2013 Stock Plan.

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

The Company did not capitalize any stock-based compensation expense in inventory, as the amounts were immaterial during the three and nine months ended March 31, 2015 and 2014 , respectively.

Stock Awards

Stock awards may be granted under the 2013 Plan on terms approved by the Board of Directors. Stock awards generally provide for the issuance of restricted stock which vests over a fixed period.

During the three months ended March 31, 2015 , the Company began expensing market-performance based restricted stock units to senior executive officers that had been granted during the second quarter of fiscal 2015.

The following table summarizes stock award activity for the nine months ended March 31, 2015 :

Stock Options

The following table summarizes stock option activity under all plans for the nine months ended March 31, 2015 .

The weighted-average grant-date per share fair value of options granted was $1.34 and $2.71 during the three months ended March 31, 2015 and 2014 , respectively.

The weighted-average grant-date per share fair value of options granted was $1.91 and $2.39 during the nine months ended March 31, 2015 and 2014 , respectively.

The Company uses the Monte-Carlo simulation model to determine the fair value and the derived service period o performance-based option awards, with market conditions, on the date of the grant.

ESPP

The weighted-average estimated per share fair value of shares purchased under the Company's ESPP was $0.59 and $1.62 during the three months ended March 31, 2015 and 2014 , respectively.

The weighted-average estimated per share fair value of shares purchased under the Company's ESPP was $1.02 and $1.44 during the nine months ended March 31, 2015 and 2014 , respectively.

Excluding the options assumed as part of the Enterasys acquisition, the fair value of each option award and share purchase option under the Company's 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.

8. Commitments and Contingencies

Purchase Commitments

The Company currently has arrangements with contract manufacturers and suppliers for the manufacture of its products. The arrangements allow them to procure long lead-time component inventory based upon a rolling production forecast provided by the Company. The Company is obligated to the purchase of long lead-time component inventory that its contract manufacturer procures in accordance with the forecast, unless the Company gives notice of order cancellation outside of applicable component lead-times. The Company had non-cancelable commitments to purchase $100.7 million of such inventory as of March 31, 2015 .

Legal Proceedings

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 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 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.

Litigation

Commonwealth of Kentucky

On or about February 3, 2014, a class action lawsuit was filed in the Commonwealth of Kentucky against Enterasys Networks, Inc. and two other defendants.  The complaint alleges that Enterasys and its subcontractor, TJL Information Technologies, Inc., d.b.a. Unbridled Information Technologies ("Subcontractor"), violated Kentucky's wage and hour laws and failed to pay the prevailing wage in violation of the Kentucky State Prevailing Wage Act (the "Act") on various public works projects for a number of Kentucky government agencies since January 2010.  Plaintiffs also allege common law actions for quantum merit and unjust enrichment and they seek monetary damages, costs, expenses and attorney fees, although there was no quantified amount identified.  One of the defendants, Integrated Facility Systems, LLC ("IFS"), has also filed a cross-claim against Enterasys.  The Company denies the claims and filed answers to both the complaint and cross-claim on April 16, 2014.  In addition, the Company filed a cross-claim for indemnity against IFS. 

Plaintiffs filed a first amended complaint on September 26, 2014, in which they named Commonwealth of Kentucky's Office of Technology under the State's Finance and Administration Cabinet ("COT") as a defendant.  The Company filed an answer to the Plaintiffs' first amended complaint on October 10, 2014. COT then filed a motion to dismiss COT as a defendant in this lawsuit and the court granted COT's motion. Plaintiffs filed a motion for Summary Judgment/Adjudication on the issue of whether the work performed by the defendants constitutes "construction" under the Act, which was denied on February 26, 2015. Given the preliminary nature of the lawsuit, it is premature to assess the likelihood of a particular outcome.

ICMS Tax Assessment Matters

The State of Sao Paolo (Brazil) denied Enterasys Networks do Brazil Ltda. the use of certain credits derived from the State of Espirito Santo under the terms of the FUNDAP scheme for the tax years of 2002 through 2009. Enterasys' application to resolve the ICMS Tax Assessments at the administrative level of the Sao Paolo Tax Department under the amnesty relief program (Reference No 3.056.963-1) was denied in March, 2014, by the Sao Paolo Tax Administration. The value of the ICMS tax credits that were disallowed by the Sao Paolo Tax Administration is approximately BR 3,443,914 (or approximately US $1.5 million ), plus interest and penalties (that are currently estimated to be approximately US $9.0 million ). On January 10, 2014, Enterasys filed a lawsuit to overturn or reduce the assessment, which lawsuit remains on-going. As part of this lawsuit, Enterasys made a request for a stay of execution, so that no tax foreclosure can be filed until a final ruling is made and no guarantee needs to be presented. On or about October 6, 2014, the preliminary injunction was granted with regard to the stay of execution, and in response to an appeal on the guarantee requirement, the appellant court further ruled on or about January 28, 2015 that no cash deposit (or guarantee) need be made by Enterasys. 

Given the preliminary nature of the lawsuit, it is premature to assess the likelihood of a particular final outcome. Based on the currently available information, the Company believes the ultimate outcome of this audit will not have material adverse effect on the Company's financial position or overall trends in results of operations. The range of the potential total tax liability related to these matters is estimated to be from US $0 million to US $9.0 million , of which the Company believes US $4.3 million is the best estimate within the range and has recorded an accrual as of the acquisition date of Enterasys as such matter relates to the period before the acquisition.

Unify U.S. Holdings, Inc. (formerly known as Enterprise Networks Holdings, Inc.).

On or about April 8, 2015, Company filed a lawsuit against Unify U.S. Holdings, Inc. (formerly known as Enterprise Networks Holdings, Inc.) ("Seller") for breach of, and indemnification by Seller under, the purchase agreement, between Seller and Company, for Company's purchase of Enterasys Networks, Inc. and its subsidiaries (the "Purchase Agreement"). The complaint alleges numerous claims for indemnification resulting from Seller's violations of certain clauses in the Purchase Agreement and Seller's failure to make accurate and proper disclosures as required by the Purchase Agreement. The Company was compelled to file this action to perfect and preserve the Company's right to indemnification by Seller under the Purchase Agreement. Although the Company's complaint has not quantified the amount being sought, the complaint seeks, among other things, monetary damages, costs, expenses and attorney fees in connection with each of the claims. Given the preliminary nature of the lawsuit, it is premature to assess the likelihood of a particular or final outcome.

Wetro LAN LLC

On Mar 23, 2015, Wetro LAN LLC (Wetro), a non-practicing entity, filed a complaint against Extreme in the Eastern District of Texas asserting infringement of United States Patent No. 6,795,918 (the " ‘918 Patent"). Wetro alleges that Extreme "makes, uses, provides, offers for sale, and sells their product entitled Extreme Networks- Altitude 4700 Series Access Points and similarly situated wireless routers" and thereby has infringed the 918 Patent. Wetro sued a number of other technology companies in January and February 2015 for the same patent. Indications at the USPTO are that the 918 Patent has expired, limiting potential damages including all future damages in the case. Wetro seeks monetary damages, although the complaint seeks no quantified amount. Given the preliminary nature of the lawsuit, it is premature to assess the likelihood of a particular or final outcome.

9. Income Taxes

The Company recorded an income tax provision of $1.1 million and $3.5 million , for the three and nine months ended March 31, 2015 , respectively. The Company recorded an income tax provision of $0.9 million and $2.3 million for the three and nine months ended March 31, 2014 , respectively.

The income tax provisions for the three and nine months ended March 31, 2015 and 2014 , consisted primarily of taxes on the income of our foreign subsidiaries as well as 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 income tax provisions for both fiscal years were calculated based on the actual results of operations for the three and nine months ended March 31, 2015 and 2014 , and therefore may not reflect the annual effective tax rate.

The Company has provided a full valuation allowance against all of its U.S. federal and state deferred tax assets as well as substantially all of the acquired Enterasys foreign entities' deferred tax assets. No valuation allowance has been established against the non-U.S. deferred tax assets of the legacy Extreme Networks, Inc. foreign subsidiaries. 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 basis. The Company's inconsistent earnings in recent periods, coupled with the Company's inability to forecast greater than one quarter in advance and the cyclical nature of its business represent sufficient negative evidence to require a full valuation allowance against its U.S. federal and state net deferred tax assets as well as the above mentioned foreign jurisdictions. This valuation allowance 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 included a U.S. parent company as well as its wholly-owned domestic and foreign subsidiaries. The Company has elected to treat this stock acquisition as an asset purchase by filing the required election forms under IRC Sec 338(h)(10). The Company has estimated the value of the intangible assets from this transaction and is amortizing the amount over 15 years for tax purposes. The Company deducted $1.1 million and $3.4 million , during the three and nine months ended March 31, 2015 , respectively of tax amortization expense related to capitalized goodwill. The Company recorded a deferred tax liability of $2.4 million related to this amortization which is not considered a future source of taxable income in evaluating the need for a valuation allowance against our deferred tax assets as of March 31, 2015 .

The Company had $11.3 million of unrecognized tax benefits as of March 31, 2015 . The future impact of the unrecognized tax benefit of $11.3 million , if recognized, would result in adjustments to deferred tax assets and corresponding adjustments to the valuation allowance. The Company does not anticipate any events to occur during the next twelve months that would reduce the unrealized tax benefit as currently stated in the Company's balance sheet.

Estimated interest and penalties related to the underpayment of income taxes are classified as a component of tax expense in the Condensed Consolidated Statements of Operations and were immaterial for the three and nine months ended March 31, 2015 and 2014 . Accrued interest and penalties were $42,000 as of March 31, 2014 , and have been fully reversed as of March 31, 2015 .

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 2003 forward due to net operating losses.

10. Net Loss Per Share

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

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

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

11. Foreign Exchange Forward Contracts

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 Company records all derivatives on the balance sheet as "Other assets" at fair value. Changes in the fair value of derivatives are recognized in earnings as Other Income (Expense). The Company from time to time enters into foreign exchange forward contracts to mitigate the effect of gains and losses generated by the foreign currency forecast 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 March 31, 2015 , the Company did not have any foreign currency contracts.

Foreign currency transaction gains and losses from operations was a loss of $0.5 million and $0.1 million for the three months ended March 31, 2015 and 2014 , respectively. Foreign currency transaction gains and losses from operations were a loss of $0.9 million and $1.2 million for the nine months ended March 31, 2015 and 2014 , respectively.

12. Disclosure about Segments of an Enterprise and Geographic Areas

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; Europe, the Middle East and Africa ("EMEA"); which includes Europe, Russia, the Middle East and Africa; and APAC; which includes Asia Pacific, South Asia, India, Australia and Japan.

The Company attributes revenues to geographic regions primarily based on the customer's ship-to location. Information regarding geographic areas is as follows (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" "expect" or "believe" . 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 Report, our Quarterly Report on Form 10-Q for the third quarter of fiscal 2015 , our Annual Report on Form 10-K for the fiscal year ended June 30, 2014 , 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; the timing of any recovery in the global economy; 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 Enterasys.

Business Overview

We are a leading provider of network infrastructure equipment and services for enterprises, data centers, and service providers. We were incorporated in California in May 1996, and reincorporated in Delaware in March 1999. The shares of Extreme Networks, Inc. ("EXTR") began trading on NASDAQ in April 1999. Our corporate headquarters are located in San Jose, California. We develop and sell network infrastructure equipment to our enterprise, data center and telecommunications service provider customers.

On October 31, 2013 (the "Acquisition Date"), we completed the acquisition of Enterasys Networks, Inc. ("Enterasys"), a privately held provider of wired and wireless network infrastructure and security solutions, for $180.0 million , net of cash acquired, whereby Enterasys became our wholly-owned subsidiary.  The combined entity immediately became a networking industry leader with more than 14,000 customers. As a combined Company, we believe we will set the standard for the networking industry with a strategic focus on three principles:

Highly scaled and differentiated products and solutions: Our combined product portfolio spans data center networking, switching and routing, Software-Defined Networking ("SDN"), wired and wireless LAN access, network management with analytics and integrated security features. This broader solutions portfolio can be leveraged to better serve existing and new customers. We will continue to enhance and support the product roadmaps of both companies going forward to protect the investments of customers and avoid any disruption to their businesses. We intend to increase research and development to accelerate our vision for high-performance, modular, open networking.

Leading customer service and support: We are working to augment our current outsourced support model by integrating Enterasys' in-sourced expertise, building on Enterasys' award-winning heritage and strong commitment to exceptional customer experience. The Company's expanded global network of channel partners and distributors will benefit from expanded services and support capabilities.

Strong Channels and Strategic Partners: Our focus is to leverage the capabilities of the combined Company and expand existing partnerships with Ericsson and the developing partnership with Lenovo as well as continue to add new strategic partnerships in the future. Additionally, we will increase our focus on partnering with distributors and channel partners globally. The goal is to develop and enhance relationships that grow revenue and profits for the Company and our alliance and channel partners. At the same time, we are investing in infrastructure to make doing business with the Company easier and more efficient.

We conduct our sales and marketing activities on a worldwide basis through a distribution channel utilizing distributors, resellers and our field sales organization. We primarily sell our products through an ecosystem of channel partners who combine our Ethernet, wireless and software analytics products with their offerings to create compelling information technology solutions for end-user customers. We utilize our field sales organization to support our channel partners and to sell direct to end-user customers, including some large global accounts. Our customers include businesses, hospitals, hotels, universities, sports venues, telecommunications companies and government agencies around the world.

We outsource the majority of our manufacturing and supply chain management operations as part of our strategy to maintain global manufacturing capabilities and to reduce our costs. We conduct quality assurance, manufacturing engineering, document control and test development at engineering facilities in San Jose, California; Research Triangle Park, North Carolina; Salem, New Hampshire; Toronto, Canada and Chennai, India. This approach enables us to reduce fixed costs and to flexibly respond to changes in market demand.

The market for network infrastructure equipment is highly competitive and dominated by a few large companies. The current economic climate has further driven consolidation of vendors within the Ethernet networking market and with vendors from adjacent markets, including storage, security, wireless and voice applications. We believe that the underpinning technology for all of these adjacent markets is Ethernet. As a result, we believe that, as an independent Ethernet switch vendor, we must provide products that, when combined with the products of our large strategic partners, create compelling solutions for end user customers. Our approach is to focus on the intelligence and automation layer that spans our hardware and software products that facilitates end-to-end solutions, as opposed to positioning Extreme Networks as a low-cost-vendor with point products.

We believe that continued success in our marketplace is dependent upon a variety of factors that includes, but is not limited to, our ability to design, develop and distribute new and enhanced products employing leading-edge technology.

Critical Accounting Policies and Estimates

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. 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, 2014 , 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.

New Accounting Pronouncements

See Note 3 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.

Liquidity and Capital Resources

The following summarizes information regarding our cash, investments, and working capital (in thousands):

As of March 31, 2015 , our principal sources of liquidity consisted of cash, cash equivalents and investments of $75.6 million , net accounts receivable of $78.7 million and $1.0 million of letters of credit and borrowings from the Revolving Facility under which we had $8.6 million of additional availability as of March 31, 2015 . Our principal uses of cash will include 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, repayments of debt and related interest. We believe that our $75.6 million of cash and cash equivalents and investments as of March 31, 2015 , along with the availability of borrowings from the Revolving Facility will be sufficient to fund our principal uses of cash for at least the next 12 months.

Our Credit Agreement contains financial covenants that require us to maintain a minimum Consolidated Fixed Charge Coverage Ratio, a Consolidated Quick Ratio and a maximum Consolidated Leverage Ratio

and several other covenants and restrictions that limit 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. During the three months ended December 31, 2014, we amended the Credit Agreement and among other things modified certain financial covenants governing the Quick and Leverage ratios.

The Credit 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 in any material respect, certain insolvency or receivership events affecting Extreme and its subsidiaries, the occurrence of certain material judgments, the occurrence of certain ERISA events, the invalidity of the loan documents or a change in control of our Company.  The amounts outstanding under the Credit Agreement may be accelerated upon certain events of default. We believe we are in compliance and expect to remain in compliance with our Credit Agreement covenants and they are not expected to impact our liquidity or capital resources.

Key Components of Cash Flows and Liquidity

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

Net Cash Provided by (Used In) Operating Activities

Cash flows provided by operations was $33.6 million in the nine months ending March 31, 2015 . Current period's net loss was primarily offset by non-cash expenses such as amortization of intangibles, stock-based compensation expense and depreciation. Accounts receivables decreased primarily due to lower sales during the current quarter and to our higher collections efforts. Inventories increased primarily due to the reduced sales during the third quarter. Accounts payable increased due to timing of payments. The increases in cash inflows were offset by decreases in accrued compensation due to lower commissions and bonus accruals.

Cash flows used in operations was $30.6 million in the nine months ending March 31, 2014 . The net loss for the period was primarily offset by non-cash expenses such as amortization of intangibles, stock-based compensation expense and depreciation. Accounts receivables, inventory and accounts payables primarily increased due to increased activity post acquisition.

Net Cash Provided by (Used In) Investing Activities

Cash flow provided by investing activities was $21.7 million , in the nine months ending March 31, 2015 , primarily comprised of proceeds from the sale and maturities of investments of $9.1 million and $21.8 million of investments, respectively, offset by $5.6 million used to purchase property and equipment and $3.0 million used to acquire a non-marketable equity interest.

Cash flow used in investing activities was $127.0 million in the nine months ending March 31, 2014 , comprised of $180.0 million net cash used in the acquisition of Enterasys, purchases of investments of $9.0 million, $12.6 million used to purchase property and equipment offset by proceeds of $20.1 million from the maturities of investments and proceeds of $54.6 million from the sale of investments.

Net Cash (Used In) Provided by Financing Activities

Cash flow used in financing activities was $50.6 million in the nine months ending March 31, 2015 , comprised of $77.1 million of cash used for repayment of debt offset by a draw on the Revolving Facility of $24 million during the nine months ended March 31, 2015 , for working capital requirements, $2.5 million proceeds from the exercise of stock options and issuance of shares of our common stock under the ESPP, net of taxes paid on vested and released stock awards.

Cash flow provided by financing activities was $104.0 million in the nine months ending March 31, 2014 , comprised of the issuance of a Term Loan of $65.0 million and a draw on the Revolving Facility of $35 million used for the acquisition of Enterasys, $4.8 million proceeds from the exercise of stock options and issuance of shares of our common stock under the ESPP, net of taxes paid on vested and released stock awards offset by $0.8 million of cash used for repayment of debt.

Foreign currency effect on cash

Foreign currency effect on cash increased in the nine months ending March 31, 2015 , primarily due to the strengthening US Dollar and the resulting changes in foreign currency exchange rates between the US Dollar and particularly the Euro, Great Britain Pound, Brazilian Real, Swedish Krona, Indian Rupee and Australian Dollar.

Contractual Obligations

The following summarizes our contractual obligations as of  March 31, 2015 , and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):