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Restatement of Previously Issued Consolidated Financial Statements
12 Months Ended
Dec. 31, 2017
Accounting Changes and Error Corrections [Abstract]  
Restatement of Previously Issued Consolidated Financial Statements
Restatement of Previously Issued Consolidated Financial Statements

Restatement Background

Subsequent to the issuance of the condensed consolidated financial statements as of September 30, 2017, the Audit Committee of our Board of Directors (the “Audit Committee”) commenced an investigation (the “Investigation”) with the assistance of outside counsel relating to certain accounting and internal control matters at the Company, principally focused on certain revenue recognition matters from the fourth quarter of 2015 through the fourth quarter of 2017 inclusive. The investigation was conducted with the assistance of outside counsel and independent counsel. Counsel retained forensic accountants to assist with their work. The investigation commenced following the identification of violations of the Company's Insider Trading Policy and Code of Conduct by a mid-level employee within the finance department, and as a result it was determined that further review and procedures relating to certain accounting and internal control matters should be undertaken.
 
During the course of this Investigation, code of conduct breaches and accounting and financial reporting errors were identified. The matters primarily resulted in modification to the timing of the recognition of revenue in a limited number of sale transactions between the Company and its resellers and distributors. The Company determined the need to restate the consolidated financial statements as of and for the year ended December 31, 2016. The Company is also adjusting the consolidated financial statements as of and for the year ended December 31, 2015 to correct identified immaterial errors.

Revenue Recognition Adjustments

During the year ended December 31, 2016, revenue was recognized prematurely at the time, as it was determined that there was an oversight or misuse of facts which indicated that the reseller’s or distributor’s price was not fixed or determinable, or that collectability was not reasonably assured, because the reseller’s or distributor’s payment to the Company was contingent on resale of the product or the transaction included extended payment terms beyond the Company’s customary terms. During the year ended December 31, 2015, revenue on certain sale transactions was recognized prematurely, as it was determined that there was an oversight of facts that indicated collectability was not reasonably assured, because the reseller’s or distributor’s payment to the Company was contingent on resale of the product or the transaction included extended payment terms beyond the Company’s customary terms.

To correct these errors, the related revenue and cost of revenue were reversed in the period in which the accounting errors took place and, except for one 2016 transaction, have been recognized in subsequent periods when all of the revenue recognition criteria were met. Additionally, certain adjustments to reverse accounts receivable, net of allowances, recognize inventory, and adjust deferred revenue, current, were made to the consolidated balance sheet at the end of the period in which the accounting errors occurred.

Other Adjustments

In addition to the restatement adjustments described above, we have identified other revenue and expense classification errors that are not material, individually or in the aggregate that have been corrected in connection with the restatement.

Tax effect of restatement adjustments

The Company recorded adjustments to its deferred taxes as a result of the restatement. The overall impact of the restatement is an increase to deferred taxes with the corresponding increase to the valuation allowance with no impact to the effective tax rate or income tax expense.

Impact of the Restatement

The following table presents the consolidated balance sheet as previously reported, restatement adjustments and the consolidated balance sheet as restated at December 31, 2016 and 2015 (in thousands):
 
December 31, 2016
 
As Previously Reported
 
Revenue Recognition Adjustments
 
As Restated
Current Assets:
 
 
 
 
 
Accounts receivable
$
66,755

 
$
(5,468
)
 
$
61,287

Inventory
$
15,070

 
$
779

 
$
15,849

Prepaid expenses and other current assets
$
5,137

 
$
84

 
$
5,221

Total current assets
$
201,309

 
$
(4,605
)
 
$
196,704

Total Assets
$
221,338

 
$
(4,605
)
 
$
216,733

Current Liabilities:
 
 
 
 
 
Deferred revenue, current
$
61,334

 
$
(1,291
)
 
$
60,043

Total current liabilities
$
102,710

 
$
(1,291
)
 
$
101,419

Total Liabilities
$
135,272

 
$
(1,291
)
 
$
133,981

Accumulated deficit
$
(242,759
)
 
$
(3,314
)
 
$
(246,073
)
Total StockholdersEquity
$
86,066

 
$
(3,314
)
 
$
82,752

Total Liabilities and Stockholders’ Equity
$
221,338

 
$
(4,605
)
 
$
216,733


 
December 31, 2015
 
As Previously Reported
 
Revenue Recognition Adjustments
 
As Restated
Current Assets:
 
 
 
 
 
Accounts receivable
$
57,778

 
$
(3,025
)
 
$
54,753

Inventory
$
18,291

 
$
366

 
$
18,657

Total current assets
$
179,250

 
$
(2,659
)
 
$
176,591

Total Assets
$
192,551

 
$
(2,659
)
 
$
189,892

Current Liabilities:
 
 
 
 
 
Deferred revenue, current
$
49,572

 
$
(796
)
 
$
48,776

Total current liabilities
$
87,837

 
$
(796
)
 
$
87,041

Total Liabilities
$
112,483

 
$
(796
)
 
$
111,687

Accumulated deficit
$
(221,819
)
 
$
(1,863
)
 
$
(223,682
)
Total StockholdersEquity
$
80,068

 
$
(1,863
)
 
$
78,205

Total Liabilities and Stockholders’ Equity
$
192,551

 
$
(2,659
)
 
$
189,892


The following tables present the consolidated statement of operations as previously reported, restatement adjustments and the consolidated statement of operations as restated for the years ended December 31, 2016 and 2015 (in thousands, except per share amounts):

 
Year Ended December 31, 2016
 
As Previously Reported
 
Revenue Recognition Adjustments
 
Other Adjustments
 
As Restated
Revenue:
 

 
 

 
 
 
 

Products
$
153,920

 
$
(2,858
)
 
$
1,246

 
$
152,308

Services
76,083

 
152

 
(1,246
)
 
74,989

Total revenue
230,003

 
(2,706
)
 

 
227,297

Cost of revenue:
 

 
 
 
 
 
 
Products
37,680

 
(497
)
 
337

 
37,520

Services
17,230

 

 
(337
)
 
16,893

Total cost of revenue
54,910

 
(497
)
 

 
54,413

Gross profit
$
175,093

 
$
(2,209
)
 
$

 
$
172,884

Operating expenses:
 

 
 
 
 
 
 

General and administrative
$
27,063

 
$
(758
)
 
$

 
$
26,305

Total operating expenses
$
194,212

 
$
(758
)
 
$

 
$
193,454

Loss from operations
$
(19,119
)
 
$
(1,451
)
 
$

 
$
(20,570
)
Loss before income taxes
$
(20,183
)
 
$
(1,451
)
 
$

 
$
(21,634
)
Net loss
$
(20,940
)
 
$
(1,451
)
 
$

 
$
(22,391
)
Net loss per share:
 

 
 
 
 
 
 
Basic and diluted
$
(0.32
)
 
 
 
 
 
$
(0.34
)
Weighted-average shares used in computing net loss per share:
 

 
 
 
 
 
 
Basic and diluted
65,701

 
 
 
 
 
65,701


 
Year Ended December 31, 2015
 
As Previously Reported
 
Revenue Recognition Adjustments
 
Other Adjustments
 
As Restated
Revenue:
 

 
 

 
 
 
 

Products
$
138,301

 
$
(2,193
)
 
$
(1,177
)
 
$
134,931

Services
60,654

 
(264
)
 
964

 
61,354

Total revenue
198,955

 
(2,457
)
 
(213
)
 
196,285

Cost of revenue:
 

 
 
 
 
 
 
Products
33,096

 
(366
)
 
33

 
32,763

Services
15,672

 

 
(33
)
 
15,639

Total cost of revenue
48,768

 
(366
)
 

 
48,402

Gross profit
$
150,187

 
$
(2,091
)
 
$
(213
)
 
$
147,883

Operating expenses:
 

 
 
 
 
 
 
General and administrative
$
27,055

 
$
(228
)
 
$
(213
)
 
$
26,614

Total operating expenses
$
188,633

 
$
(228
)
 
$
(213
)
 
$
188,192

Loss from operations
$
(38,446
)
 
$
(1,863
)
 
$

 
$
(40,309
)
Loss before income taxes
$
(39,287
)
 
$
(1,863
)
 
$

 
$
(41,150
)
Net loss
$
(40,034
)
 
$
(1,863
)
 
$

 
$
(41,897
)
Net loss per share:
 

 
 
 
 
 
 
Basic and diluted
$
(0.64
)
 
 
 
 
 
$
(0.67
)
Weighted-average shares used in computing net loss per share:
 

 
 
 
 
 
 
Basic and diluted
62,428

 
 
 
 
 
62,428


The following tables present the consolidated statement of cash flows as previously reported, restatement adjustments, and the consolidated statement of cash flows as restated for the years ended December 31, 2016 and 2015 (in thousands):

 
Year Ended December 31, 2016
 
As Previously Reported
 
Revenue Recognition Adjustments
 
As Restated
Cash flows from operating activities:
 
 
 
 
 
Net loss
$
(20,940
)
 
$
(1,451
)
 
$
(22,391
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
 
Provision for doubtful accounts and sales returns
$
1,731

 
$
(152
)
 
$
1,579

Changes in operating assets and liabilities:
 
 
 
 
 
Accounts receivable, net
$
(11,319
)
 
$
2,595

 
$
(8,724
)
Inventory
$
892

 
$
(413
)
 
$
479

Prepaid expenses and other assets
$
(96
)
 
$
(84
)
 
$
(180
)
Deferred revenue
$
20,104

 
$
(495
)
 
$
19,609

Net cash provided by operating activities
$
18,778

 
$

 
$
18,778

 
Year Ended December 31, 2015
 
As Previously Reported
 
Revenue Recognition Adjustments
 
As Restated
Cash flows from operating activities:
 
 
 
 
 
Net loss
$
(40,034
)
 
$
(1,863
)
 
$
(41,897
)
Changes in operating assets and liabilities:
 
 
 
 
 
Accounts receivable, net
$
(5,977
)
 
$
3,025

 
$
(2,952
)
Inventory
$
(430
)
 
$
(366
)
 
$
(796
)
Deferred revenue
$
15,584

 
$
(796
)
 
$
14,788

Net cash provided by operating activities
$
3,391

 
$

 
$
3,391



The only change to the consolidated statement of comprehensive loss and the consolidated statement of stockholders’ equity for the years ended December 31, 2016 and 2015 as a result of the restatements is due to the changes in net loss. There was no cumulative effect of the errors as of January 1, 2015, the beginning of the earliest period presented. As such, no tables are presented relating to the restatement adjustments. Refer to the consolidated statement of comprehensive loss and the consolidated statement of stockholders’ equity as restated.