NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Internap Corporation ("we," "us," "our," "INAP," or "the Company") is a leading-edge provider of high-performance data center and cloud solutions with 100 network Points of Presence (“POP”) worldwide. INAP's full-spectrum portfolio of high-density colocation, managed cloud hosting and network solutions supports evolving IT infrastructure requirements for customers ranging from the Fortune 500 to emerging startups. INAP operates in 21 metropolitan markets, primarily in North America, with 14 INAP Data Center Flagships connected by a low-latency, high-capacity network.

We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information. These financial statements include all of our accounts and those of our wholly-owned subsidiaries. We have eliminated all intercompany transactions and balances in the accompanying financial statements. In the opinion of management, all adjustments necessary for a fair presentation of the interim results have been reflected therein. All such adjustments were of a normal and recurring nature with the exception of those related to the adoption of new accounting standards as discussed in Note 2, "Recent Accounting Pronouncements" and Note 4, "Leases."

We have condensed or omitted certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP. The accompanying financial statements reflect all adjustments, which consist of normal recurring adjustments unless otherwise disclosed, necessary for a fair statement of our financial position as of September 30, 2019 and our operating results and cash flows for the interim periods presented. The balance sheet at December 31, 2018 was derived from our audited financial statements, but does not include all disclosures required by GAAP. You should read the accompanying financial statements and the related notes in conjunction with our financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission ("SEC").

The preparation of financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Actual results may differ materially from these estimates. The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the 2019 fiscal year or any future periods.

Correction of Immaterial Error

The Company corrected an error in the consolidated statements of cash flows for all periods in 2017, 2018, the three months ended March 31, 2019 and the six months ended June 30, 2019. The Company had previously included only a portion of the additions to property and equipment that were outstanding in accounts payable in the supplemental disclosures of cash flow information, “Additions to property and equipment included in accounts payable,” and the related adjustments to "Accounts payable" and "Purchases of property and equipment" on the consolidated statements of cash flows. The correction had no impact on the consolidated statements of operations and comprehensive loss or the consolidated balance sheets. The Company has evaluated this correction in accordance with Accounting Standards Codification ("ASC") 250-10-S99, SEC Materials (formerly SEC Staff Accounting Bulletin 99, Materiality) and concluded that the correction was not material.

The adjustments to the Company’s previously issued consolidated statements of cash flows are as follows (in thousands):



	Three Months Ended March 31, 2017
	As reported			Adjustments			As restated

Accounts payable	$	(2,247	)	$	(512	)	$	(2,759	)
Net cash provided by operating activities	7,264			(512		)	6,752

Purchases of property and equipment	(5,789		)	512			(5,277		)
Net cash used in investing activities	(5,989		)	512			(5,477		)

Additions to property and equipment included in accounts payable	$	1,247		$	2,744		$	3,991



	Six Months Ended June 30, 2017
	As reported			Adjustments			As restated

Accounts payable	$	477		$	(2,100	)	$	(1,623	)
Net cash provided by operating activities	24,634			(2,100		)	22,534

Purchases of property and equipment	(12,293		)	2,100			(10,193		)
Net cash used in investing activities	(12,737		)	2,100			(10,637		)

Additions to property and equipment included in accounts payable	$	1,269		$	4,331		$	5,600



	Nine Months Ended September 30, 2017
	As reported			Adjustments			As restated

Accounts payable	$	(3,498	)	$	1,330		$	(2,168	)
Net cash provided by operating activities	27,940			1,330			29,270

Purchases of property and equipment	(23,198		)	(1,330		)	(24,528		)
Net cash used in investing activities	(19,789		)	(1,330		)	(21,119		)

Additions to property and equipment included in accounts payable	$	701		$	901		$	1,602



	Year Ended December 31, 2017
	As reported			Adjustments			As restated

Accounts payable	$	(1,167	)	$	218		$	(949	)
Net cash provided by operating activities	41,748			218			41,966

Purchases of property and equipment	(35,714		)	(218		)	(35,932		)
Net cash used in investing activities	(32,209		)	(218		)	(32,427		)

Additions to property and equipment included in accounts payable	$	1,932		$	2,014		$	3,946



	Three Months Ended March 31, 2018
	As reported			Adjustments			As restated

Accounts payable	$	(636	)	$	(124	)	$	(760	)
Net cash provided by operating activities	3,697			(124		)	3,573

Purchases of property and equipment	(6,082		)	124			(5,958		)
Net cash used in investing activities	(138,065		)	124			(137,941		)

Additions to property and equipment included in accounts payable	$	2,287		$	2,138		$	4,425



	Six Months Ended June 30, 2018
	As reported			Adjustments			As restated

Accounts payable	$	6,939		$	(3,598	)	$	3,341
Net cash provided by operating activities	18,533			(3,598		)	14,935

Purchases of property and equipment	(16,102		)	3,598			(12,504		)
Net cash used in investing activities	(148,649		)	3,598			(145,051		)

Additions to property and equipment included in accounts payable	$	4,023		$	5,613		$	9,636



	Nine Months Ended September 30, 2018
	As reported			Adjustments			As restated

Accounts payable	$	9,372		$	(4,217	)	$	5,155
Net cash provided by operating activities	28,598			(4,217		)	24,381

Purchases of property and equipment	(27,317		)	4,217			(23,100		)
Net cash used in investing activities	(160,623		)	4,217			(156,406		)

Additions to property and equipment included in accounts payable	$	4,004		$	6,231		$	10,235



	Year Ended December 31, 2018
	As reported			Adjustments			As restated

Accounts payable	$	1,339		$	207		$	1,546
Net cash provided by operating activities	34,572			207			34,779

Purchases of property and equipment	(38,298		)	(207		)	(38,505		)
Net cash used in investing activities	(174,037		)	(207		)	(174,244		)

Additions to property and equipment included in accounts payable	$	2,459		$	1,807		$	4,266



	Three Months Ended March 31, 2019
	As reported			Adjustments			As restated

Accounts payable	$	763		$	(556	)	$	207
Net cash provided by operating activities	2,262			(556		)	1,706

Purchases of property and equipment	(8,094		)	556			(7,538		)
Net cash used in investing activities	(8,568		)	556			(8,012		)

Additions to property and equipment included in accounts payable	$	1,850		$	1,881		$	3,731



	Six Months Ended June 30, 2019
	As reported			Adjustments			As restated

Accounts payable	$	3,375		$	(944	)	$	2,431
Net cash provided by operating activities	14,081			(944		)	13,137

Purchases of property and equipment	(15,642		)	944			(14,698		)
Net cash used in investing activities	(16,359		)	944			(15,415		)

Additions to property and equipment included in accounts payable	$	1,268		$	2,751		$	4,019

Out of Period Adjustment

In connection with the preparation, review and audit of the Company's consolidated financial statements required to be included in the Annual Report on Form 10-K for the year ended December 31, 2018, management identified certain errors in the Company's historical financial statements, resulting in a conclusion that certain corrections need to be made to the Company's unaudited quarters during 2018. The Company has revised its prior period consolidated financial statements accordingly and included such revisions herein. Based on an analysis of quantitative and qualitative factors, the Company concluded that these errors were not material to the consolidated financial position, results of operations or cash flows as presented in the Company’s quarterly financial statements that have been previously filed in the Company’s Quarterly Reports on Form 10-Q. As a result, amendment of such reports was not required. The revisions to correct errors relate to the correction of accounting for an amendment to a capital lease executed in February 2018.

The adjustments to the Company’s previously issued quarterly financial statements for the three and nine months ended September 30, 2018 are as follows (in thousands):



	Three and Nine Months Ended September 30, 2018
	As reported			Adjustments			As adjusted

Costs of sales and services, exclusive of depreciation and amortization - QTD	$	28,866		$	(645	)	$	28,221
Costs of sales and services, exclusive of depreciation and amortization - YTD	81,880			(1,720		)	80,160
Depreciation and amortization - QTD	23,431			122			23,553
Depreciation and amortization - YTD	67,097			325			67,422
Interest expense - QTD	16,898			896			17,794
Interest expense - YTD	47,786			2,352			50,138
Net loss attributable to INAP shareholders - QTD	(15,106		)	(373		)	(15,479		)
Net loss attributable to INAP shareholders - YTD	(43,089		)	(957		)	(44,046		)
Property and equipment, net	477,423			10,193			487,616
Total assets	746,038			10,193			756,231
Capital lease obligations - non-current	252,599			11,077			263,676
Total liabilities	765,004			11,150			776,154
Accumulated deficit	(1,343,609		)	(957		)	(1,344,566		)
Total stockholders' (deficit) equity	$	(18,966	)	$	(957	)	$	(19,923	)