3. Restatement of Previously Issued Financial Statements

On March 11, 2020, management in concurrence with the Audit Committee of the Board of Directors, concluded that our 2018 and 2017 consolidated financial statements, included in our Annual Reports on Form 10-K as of and for the fiscal years ended December 31, 2018 and 2017, and our unaudited consolidated financial statements as of and for each of the first three quarterly periods in 2019 and all quarterly periods in 2018, included in our Quarterly Reports on Form 10-Q for the respective periods, should no longer be relied upon due to misstatements that are described in greater detail below, and that we would restate such financial statements to make the necessary accounting corrections. Details of the restated consolidated financial statements as of and for the fiscal years ended December 31, 2018 and 2017 are provided below. In addition, details of the restated interim financial information for each of the quarterly periods in fiscal 2018 and for the first three quarters of fiscal 2019, as presented in Note 20, Unaudited Quarterly Financial Data.

The restatements reflect adjustments to correct errors including the Company’s non-accrual of a liability related to dissenting shareholders arising out of the Novitex Business Combination, the under accrual of certain reimbursement obligations under the Consent, Waiver and Amendment, certain errors in recognition of revenues under ASC 605, incorrect classification of the loss on extinguishment of debt as cash flows from financing activities instead of cash flows from operating activities, incorrect capitalization of outsourced contracts costs and other miscellaneous adjustments. The nature and impact of these adjustments are described below and detailed in the tables below. Also see Note 20, Unaudited Quarterly Financial Data, for the impact of these adjustments on each of the quarterly periods.

(a)

Appraisal Action Liability Adjustments

During the fourth quarter of fiscal 2019, the Company identified an error as a result of non-accrual of liability and interest thereon for the obligation to pay the fair market value of the shares of certain former stockholders of SourceHOV under the Appraisal Action. As previously reported, on September 21, 2017, former stockholders of SourceHOV, who owned 10,304 shares of SourceHOV common stock, filed a petition for Appraisal Action arising out of the Novitex Business Combination. In the Appraisal Action, the petitioners sought, among other things, a determination of the fair value of their shares at the time of the Novitex Business Combination; an order that SourceHOV pay that value to the petitioners, together with interest at the statutory rate; and an award of costs, attorneys’ fees, and other expenses. The parties and their experts offered competing valuations of the SourceHOV shares as of the date of the Novitex Business Combination. On January 30, 2020, the Court issued its post-trial Memorandum Opinion in the Appraisal Action, in which it found that the fair value of SourceHOV as of the Closing Date was $4,591 per share, and on March 26, 2020, the Court issued its final order and judgment awarding the petitioners $57,698,426 inclusive of costs and interest. Per the Court’s opinion, the legal rate of interest, compounded quarterly, accrues on the per share value from the Closing Date until the date of payment to petitioners. As a result of the Appraisal Action, 4,570,734 shares of our Common Stock issued to Ex-Sigma 2, our principal stockholder at the Closing of the Novitex Business Combination, have been returned to the Company during the first quarter of 2020. Interest accrues on the value of the shares from the date of the Business Combination until the liability is paid. Until the third quarter of 2019, the Company had included a disclosure on the Appraisal Action as a part of the Commitment and Contingencies footnote in its consolidated financial statements but had not recorded a liability or accrued interest thereon for the obligation. After evaluating the historical accounting treatment applied to the Appraisal Action, the Company has determined that its historical accounting was in error and the obligation to pay the fair market value of the former stockholders’ shares represented an obligation as of the date the Appraisal Action was submitted in September 2017. The liability should have been recorded in 2017 at the estimated fair value of the shares tendered. This error resulted in $43.1 million, $40.6 million and $37.8 million understatement of accrued liabilities and commensurate understatement of total stockholders’ deficit, as at September 30, 2019, December 31, 2018 and 2017, respectively. Further, this error resulted in $2.4 million, $2.9 million and $1.2 million understatement of loss for the nine months ended September 30, 2019 and for the years ended December 31, 2018 and 2017, respectively, due to the unrecorded interest expense accrual associated with the Company’s obligations related to the Appraisal Action. Interest should have been accrued in the relevant periods at the rate set by the Delaware Court of Chancery. The correction of this error also reduced the number of shares outstanding by 4,570,734 shares for purposes of the weighted average outstanding common shares computation used to calculate basic and diluted loss per share during the respective periods. These are the number of shares of our Common Stock issued at the Closing of the Novitex Business Combination to Ex-Sigma 2 in respect of the former stockholders’ shares subject to the Appraisal Action that were returned to the Company during the first quarter of 2020.

(b)

Outsourced Contract Cost Adjustments

A $5.3 million understatement of loss for the nine months ended September 30, 2019 and a $3.2 million overstatement of loss for the year ended December 31, 2018, due to incorrect capitalization of employee training related costs during the set-up phase as costs of fulfilling contracts which should have been expensed under ASC 340-40. Additionally, an adjustment of $15.4 million was recorded to increase accumulated deficit as of January 1, 2018 to correct the previously-recorded transition adjustment for costs of fulfilling contracts upon the adoption of ASC 606 and ASC 340-40. These errors resulted in $17.3 million and $12.0 million overstatement of intangible assets, net as of September 30, 2019 and December 31, 2018, respectively.

(c)

Other Misstatement Adjustments

Expense Reimbursement Adjustments:

During the second half of 2019, we reimbursed Ex-Sigma 2 approximately $4.5 million in total, out of that $2.1 million of underwriting discount and commission expenses and $0.3 million of advisory fee were incurred by Ex-Sigma 2 in a secondary offering in April 2018 and $2.1 million of expenses related to the discount to the market price on shares sold by Ex-Sigma 2 in a secondary offering in June 2019 and required to be reimbursed pursuant to the terms of the Consent, Waiver and Amendment, amending the Novitex Business Combination Agreement, dated February 21, 2017. Approximately $2.4 million and $2.1 million of these expenses should have been recorded in the 2018 and the second quarter of 2019, respectively. This error resulted in a $2.1 million and $2.4 million understatement of loss for the quarter ended June 30, 2019 and for the year ended December 31, 2018, respectively.

Further, $1.5 million paid to Ex-Sigma 2 in July 2019 for the fees incurred in connection with the secondary offering, out of total reimbursement of $4.5 million in the second half of 2019 as discussed above, was erroneously recorded as selling, general and administrative expenses in the third quarter of 2019. This error resulted in a $1.5 million overstatement of loss for the third quarter of 2019.

Additionally, the Company did not record related party expense accrual associated with the Company’s obligation to reimburse Ex-Sigma 2 in connection with premium payments made by Ex-Sigma 2 under the Margin Loan and required to be reimbursed pursuant to the terms of the Consent, Waiver and Amendment. It resulted in a $1.7 million and $5.2 million understatement of loss for the nine months ended September 30, 2019 and for the year ended December 31, 2018.

The above errors, together, resulted in an understatement of related party payables by $5.0 million as of the reported interim quarters ended June 30, 2018 and September 30, 2018; an understatement of related party payables by $7.6 million as of the year ended December 31, 2018 and the reported interim quarter ended March 31, 2019; and an understatement of related party payables by $11.4 million and $9.9 million as of the quarters ended June 30, 2019 and September 30, 2019, respectively.

The Company incorrectly classified $0.5 million and $0.4 million of related party expense as selling, general and administrative expenses for the nine months ended September 30, 2019 and for the year ended December 31, 2018, respectively. This resulted in an overstatement of selling, general and administrative expenses and understatement of related party expense. This error had no impact on net loss.

Revenue Recognition Adjustments:

A $4.8 million understatement of loss, for the year ended December 31, 2017, was due to incorrect recognition of revenue of $6.4 million and related cost of revenue of $1.6 million in 2017 related to a multiple element arrangement that included a software license where vendor specific objective evidence (VSOE) of fair value was not established for the undelivered elements of the arrangement under the previous revenue recognition guidance in ASC 985-605. This error resulted in a $6.4 million understatement of deferred revenue and a $1.6 million understatement of prepaid expenses and other current assets as at December 31, 2017. After correction of this error in the fiscal 2017 financial statements, the Company derecognized this deferred revenue of $6.4 million and prepaid expenses and other current assets of $1.6 million, resulting in net increase in the retained earnings of $4.8 million on adoption of ASC 606 and ASC 340-40 on January 1, 2018.

Further, a $1.9 million understatement of revenues and understatement of cost of revenue by the same amount for the nine months ended September 30, 2019, were due to incorrect application of the gross vs. net presentation guidance under ASC 606. The Company incorrectly netted the costs of rendering service from the revenue under a contract with one customer. This error had no impact on net loss.

Cash Flows Classification Adjustments:

The Company determined that operating cash flows were understated and financing cash flows overstated in the statement of cash flows by $0.1 million and $34.5 million for the years ended December 31, 2018 and 2017, respectively, as a result of the incorrect interpretation of ASU 2016-15 (Classification of Certain Receipts and Cash Payments) and application on a retrospective basis upon adoption of ASU 2016-15 in 2018. Further, the Company determined that operating cash flows were overstated and investing cash flows understated in the statement of cash flows by $14.3 million, $7.5 million and $11.0 million for the nine months ended September 30, 2019 and for the years ended December 31, 2018 and 2017, respectively, as a result of misclassification of cash flows associated with outsourced contract costs.

Other Adjustments:

In addition to the errors described above, the restated financial statements also include adjustments to correct certain other immaterial errors, including previously unrecorded immaterial adjustments identified in audits of prior years’ financial statements.

Exela Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands of United States dollars except share and per share amounts)


	As of December 31, 2018
	As Previously Reported		Restatement Adjustment		As Restated		Restatement Reference
Assets
Current assets
Cash and cash equivalents	$	25,615	$	10,591	$	36,206		c
Restricted cash		18,239		(10,591)		7,648		c
Accounts receivable, net of allowance for doubtful accounts of $4,359		270,812		—		270,812
Inventories, net		16,220		—		16,220
Prepaid expenses and other current assets		25,015		(78)		24,937		c
Total current assets		355,901		(78)		355,823
Property, plant and equipment, net of accumulated depreciation of $154,060		132,986		—		132,986
Goodwill		708,258		—		708,258
Intangible assets, net		407,021		(12,001)		395,020		b
Deferred income tax assets		16,225		120		16,345		c
Other noncurrent assets		19,391		—		19,391
Total assets	$	1,639,782	$	(11,959)	$	1,627,823

Liabilities and Stockholders' Equity (Deficit)
Liabilities
Current liabilities
Accounts payables	$	99,853	$	—	$	99,853
Related party payables		7,735		7,628		15,363		c
Income tax payable		1,996		—		1,996
Accrued liabilities		66,008		41,347		107,355		a, c
Accrued compensation and benefits		54,583		(2,372)		52,211		c
Accrued interest		49,071		—		49,071
Customer deposits		34,235		—		34,235
Deferred revenue		16,504		—		16,504
Obligation for claim payment		56,002		—		56,002
Current portion of finance lease liabilities		17,498		—		17,498
Current portion of long-term debts		29,237		—		29,237
Total current liabilities		432,722		46,603		479,325
Long-term debt, net of current maturities		1,306,423		—		1,306,423
Finance lease liabilities, net of current portion		26,738		—		26,738
Pension liabilities		25,269		2,372		27,641		c
Deferred income tax liabilities		11,212		2		11,214		c
Long-term income tax liabilities		3,024		—		3,024
Other long-term liabilities		15,400		(683)		14,717		c
Total liabilities		1,820,788		48,294		1,869,082
Commitments and Contingencies (Note 14)

Stockholders' equity (deficit)
Common stock, par value of $0.0001 per share; 1,600,000,000 shares authorized; 152,692,140 shares issued and 150,142,955 shares outstanding (including the 4,570,734 shares returned to the Company in the first quarter of 2020 in connection with the Appraisal Action)		15		—		15
Preferred stock, par value of $0.0001 per share; 20,000,000 shares authorized; 4,569,233 shares issued and outstanding		1		—		1
Additional paid in capital		482,018		(36,566)		445,452
Less: Common Stock held in treasury, at cost; 2,549,185 shares		(10,342)		—		(10,342)
Equity-based compensation		41,731		—		41,731
Accumulated deficit		(678,563)		(23,829)		(702,392)
Accumulated other comprehensive loss:
Foreign currency translation adjustment		(6,565)		142		(6,423)
Unrealized pension actuarial losses, net of tax		(9,301)		—		(9,301)
Total accumulated other comprehensive loss		(15,866)		142		(15,724)
Total stockholders’ deficit		(181,006)		(60,253)		(241,259)
Total liabilities and stockholders’ deficit	$	1,639,782	$	(11,959)	$	1,627,823

As of December 31, 2018

(a)

Appraisal Action Liability Adjustments: The correction of this misstatement resulted in an increase of $40.6 million to accrued liabilities at December 31, 2018.

(b)

Outsourced Contract Cost Adjustments: The correction of this misstatement resulted in $12.0 million of decrease to intangible assets, net at December 31, 2018.

(c)

Other Misstatement Adjustments:

Expense Reimbursement Adjustments: The correction of this misstatement resulted in an increase of $7.6 million to related party payables.

Other Adjustments - Corrections to other misstatements were as follows: (i) Reclassification of operating accounts that are not restricted resulted in an increase of $10.6 million in cash and cash equivalents and decrease of $10.6 million to restricted cash. (ii) Reclassification of pension liabilities between long-term and short-term resulted in a decrease of $2.4 million to Accrued compensation and benefits and an increase of $2.4 million to pension liabilities. (iii) Correction of ASC 842 implementation related deferred rents decreased other long-term liabilities by $0.7 million. (iv) Correction of non-accrual of legal expenses related to 2019 resulted in an increase of $0.7 million to accrued liabilities.

Exela Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands of United States dollars except per share amounts)


	For the Year Ended December 31, 2018						For the Year Ended December 31, 2017
	As Previously		Restatement				As Previously		Restatement				Restatement
	Reported		Adjustment		As Restated		Reported		Adjustment		As Restated		Reference
Revenue	$	1,586,222	$	—	$	1,586,222	$	1,152,324	$	(6,433)	$	1,145,891	c
Cost of revenue (exclusive of depreciation and amortization)		1,209,874		3,529		1,213,403		829,143		(1,599)		827,544	b, c
Selling, general and administrative expenses (exclusive of depreciation and amortization)		184,651		257		184,908		220,955		—		220,955	c
Depreciation and amortization		145,485		(7,408)		138,077		98,890		—		98,890	b
Impairment of goodwill and other intangible assets		48,127		—		48,127		69,437		—		69,437
Related party expense		4,334		8,069		12,403		33,431		—		33,431	c
Operating loss		(6,249)		(4,447)		(10,696)		(99,532)		(4,834)		(104,366)
Other expense (income), net:
Interest expense, net		153,095		2,896		155,991		128,489		1,187		129,676	a
Debt modification and extinguishment costs		1,067		—		1,067		35,512		—		35,512
Sundry expense (income), net		(3,271)		—		(3,271)		2,295		—		2,295
Other expense (income), net		(3,030)		—		(3,030)		(1,297)		—		(1,297)
Net loss before income taxes		(154,110)		(7,343)		(161,453)		(264,531)		(6,021)		(270,552)
Income tax (expense) benefit		(8,407)		54		(8,353)		60,246		822		61,068
Net loss	$	(162,517)	$	(7,289)	$	(169,806)	$	(204,285)	$	(5,199)	$	(209,484)
Dividend equivalent on Series A Preferred Stock related to beneficial conversion feature		—		—		—		(16,375)		—		(16,375)
Cumulative dividends for Series A Preferred Stock		(3,655)		—		(3,655)		(2,489)		—		(2,489)	c
Net loss attributable to common stockholders	$	(166,172)	$	(7,289)	$	(173,461)	$	(223,149)	$	(5,199)	$	(228,348)
Loss per share:
Basic and diluted	$	(1.09)	$	(0.08)	$	(1.17)	$	(2.08)	$	(0.10)	$	(2.18)

For the year ended December 31, 2018

(a)

Appraisal Action Liability Adjustments: The correction of this misstatement resulted in an increase of $2.9 million to interest expense for the year ended December 31, 2018.

(b)

Outsourced Contract Cost Adjustments: The correction of this misstatement resulted in $4.2 million of increase to cost of revenue and a decrease of $7.4 million to depreciation and amortization for the year ended December 31, 2018.

(c)

Other Misstatement Adjustments:

Expense Reimbursement Adjustments: The correction of this misstatement resulted in an increase of $8.1 million to related party.

Other Adjustments - Corrections to other misstatements were as follows: (i) Correction of ASC 842 implementation related deferred rents decreased cost of revenue by $0.7 million. (ii) Correction of non-accrual of legal expenses related to 2019 resulted in an increase of $0.3 million to selling, general and administrative expenses.

For the year ended December 31, 2017

(a)

Appraisal Action Liability Adjustments: The correction of this misstatement resulted in an increase of $1.2 million to interest expense for the year ended December 31, 2018.

(c)

Other Misstatement Adjustments:

Revenue Recognition Adjustments: The correction of this misstatement resulted in a decrease of $6.4 million to revenue and a decrease of $1.6 million to cost of revenue for the year ended December 31, 2017.

Other Adjustments - Corrections to other misstatements were as follows: (i) The correction of all misstatements resulted in an increase of $0.8 million to income tax expense.

Exela Technologies, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Loss

(in thousands of United States dollars)


	For the Year Ended December 31, 2018						For the Year Ended December 31, 2017
	As Previously		Restatement				As Previously		Restatement				Restatement
	Reported		Adjustment		As Restated		Reported		Adjustment		As Restated		Reference
Net loss	$	(162,517)	$	(7,289)	$	(169,806)	$	(204,285)	$	(5,199)	$	(209,484)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(6,371)		167		(6,204)		3,353		(25)		3,328	c
Unrealized pension actuarial gains (losses), net of tax		1,753		—		1,753		1,285		—		1,285
Total other comprehensive loss, net of tax	$	(167,135)	$	(7,122)	$	(174,257)	$	(199,647)	$	(5,224)	$	(204,871)

For the year ended December 31, 2018

The $2.1 million decrease to net income was primarily driven by the misstatements in the Appraisal Action liability adjustments, outsourced contract adjustments, expense reimbursement adjustments and other adjustments. See additional descriptions of the net income impacts in the consolidated statement of operations for the year ended December 31, 2018 section above.

For the year ended December 31, 2017

The $5.2 million decrease to net income was primarily driven by the misstatements in the Appraisal Action liability adjustments, revenue recognition adjustments and other adjustments. See additional descriptions of the net income impacts in the consolidated statement of operations for the year ended December 31, 2017 section above.

Exela Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands of United States dollars)


	For the Year Ended December 31, 2018						For the Year Ended December 31, 2017
	As Previously		Restatement				As Previously		Restatement				Restatement
	Reported		Adjustment		As Restated		Reported		Adjustment		As Restated		Reference
Cash flows from operating activities
Net loss	$	(162,517)	$	(7,289)		(169,806)	$	(204,285)	$	(5,199)		(209,484)
Adjustments to reconcile net loss						—						—
Depreciation and amortization		145,485		(7,408)		138,077		98,890		—		98,890	b
Fees paid in stock		—		—		—		23,875		4,698		28,573	c
HGM contract termination fee paid in stock		—		—		—		10,000		—		10,000
Original issue discount and debt issuance cost amortization		10,913		—		10,913		12,280		—		12,280
Debt modification and extinguishment costs		—		103		103		—		34,459		34,459	c
Impairment of goodwill and other intangible assets		48,127		—		48,127		69,437		—		69,437
Provision for doubtful accounts		2,767		—		2,767		500		—		500
Deferred income tax provision		3,352		(132)		3,220		(66,723)		(822)		(67,545)	c
Share-based compensation expense		7,647		—		7,647		6,743		—		6,743
Foreign currency remeasurement		(1,180)		—		(1,180)		1,382		—		1,382
Loss (gain) on sale of assets		2,095		592		2,687		399		157		556	c
Fair value adjustment for interest rate swap		(2,540)		—		(2,540)		(1,297)		—		(1,297)
Change in operating assets and liabilities, net of effect from acquisitions
Accounts receivable		(19,319)		—		(19,319)		(4,832)		—		(4,832)
Prepaid expenses and other assets		(2,820)		—		(2,820)		2,628		(1,599)		1,029	c
Accounts payable and accrued liabilities		5,157		3,658		8,815		69,551		7,620		77,171	c
Related party payables		(6,710)		7,628		918		4,907		—		4,907	c
Additions to outsource contract costs		—		(4,009)		(4,009)		—		(10,992)		(10,992)	b
Net cash provided by (used in) operating activities		30,457		(6,857)		23,600		23,455		28,322		51,777

Cash flows from investing activities
Purchase of property, plant and equipment		(20,072)		—		(20,072)		(14,440)		—		(14,440)
Additions to internally developed software		(7,438)		—		(7,438)		(7,843)		—		(7,843)
Additions to outsourcing contract costs		(7,552)		7,552		—		(10,992)		10,992		—	b
Cash acquired in Quinpario reverse merger		—		—		—		91		—		91
Cash paid in acquisition, net of cash received		(34,810)		—		(34,810)		(423,797)		—		(423,797)
Proceeds from sale of assets		3,568		—		3,568		4,607		—		4,607
Net cash provided by (used in) investing activities		(66,304)		7,552		(58,752)		(452,374)		10,992		(441,382)

Cash flows from financing activities
Change in bank overdraft		—		—		—		(210)		—		(210)
Loss on extinguishment of debt		1,067		(1,067)		—		35,512		(35,512)		—	c
Proceeds from issuance of stock		—		—		—		204,417		—		204,417
Cash received from Quinpario		—		—		—		27,031		(4,698)		22,333	c
Repurchases of Common Stock		(7,221)		—		(7,221)		(249)		—		(249)
Contribution from Shareholders		—		—		—		20,548		—		20,548
Cash paid for equity issuance costs		(7,500)		—		(7,500)		(149)		—		(149)
Lease terminations		—		(592)		(592)		—		(157)		(157)	c
Retirement of previous credit facilities		—		—		—		(1,055,736)		—		(1,055,736)
Cash paid for debt issuance costs		(1,094)		964		(130)		(39,837)		1,053		(38,784)	c
Principal payments on finance lease obligations		(16,068)		—		(16,068)		(11,361)		—		(11,361)
Borrowings from senior secured revolving facility		30,000		—		30,000		72,600		—		72,600
Repayments on senior secured revolving facility		(30,000)		—		(30,000)		(72,500)		—		(72,500)
Proceeds from issuance of notes		—		—		—		977,500		—		977,500
Proceeds from senior secured term loans		30,000		—		30,000		343,000		—		343,000
Borrowings from other loans		11,557		—		11,557		3,116		—		3,116
Principal repayments on senior secured term loans and other loans		(12,651)		—		(12,651)		(27,955)		—		(27,955)
Net cash provided by (used in) financing activities		(1,910)		(695)		(2,605)		475,727		(39,314)		436,413
Effect of exchange rates on cash		122		—		122		429		—		429
Net decrease in cash and cash equivalents		(37,635)		—		(37,635)		47,237		—		47,237
Cash, restricted cash, and cash equivalents
Beginning of period		81,489		—		81,489		34,252		—		34,252
End of period	$	43,854	$	—	$	43,854	$	81,489	$	—	$	81,489

Supplemental cash flow data:
Income tax payments, net of refunds received	$	7,827	$	—	$	7,827	$	5,711	$	—	$	5,711
Interest paid		146,076		—		146,076		69,622		—		69,622
Noncash investing and financing activities:
Assets acquired through right-of-use arrangements		14,920		—		14,920		6,973		—		6,973
Leasehold improvements funded by lessor		1,565		—		1,565		146		—		146
Issuance of Common Stock as consideration for Novitex		—		—		—		244,800		—		244,800
Accrued capital expenditures		2,820		—		2,820		1,621		—		1,621
Dividend equivalent on Series A Preferred Stock		—		—		—		16,375		—		16,375
Liability assumed of Quinpario		—		—		—		4,672		26		4,698

For the year ended December 31, 2018

Refer to descriptions of the adjustments and their impact on net loss in the Consolidated Statement of Operations section for the year ended December 31, 2018 above.

Cash flow classification adjustment related to incorrect interpretation of ASU 2016-15 (Classification of Certain Receipts and Cash Payments) in 2018 resulted in a net increase to cash flows provided by operating activities of $0.1 million, a decrease to net cash flows provided by financing activities of $0.1 million for the year ended December 31, 2018. (Debt modification and extinguishment costs, loss on extinguishment of debt & cash paid for debt issuance costs)

The misstatements in the cash flow misclassifications category related to lease terminations resulted in a decrease to net cash flows provided by financing activities of $0.6 million and an increase to net cash flows provided by operating activities of $0.6 million for the year ended December 31, 2018. (Loss on sale of assets and lease terminations)

The misstatements in the outsourcing contract cost adjustment category resulted in a decrease to net cash flows provided by operating activities of $11.4 million ($7.4 million of depreciation and amortization and $4.0 million of additions to outsourcing contract costs), and an increase to net cash flows provided by investing activities of $7.6 million (Additions to outsourcing contract costs) for the year ended December 31, 2018.

No other misstatements impacted the classifications between net operating, net investing, or net financing cash flow activities for the year ended December 31, 2018.

For the year ended December 31, 2017

Refer to descriptions of the adjustments and their impact on net loss in the Consolidated Statement of Operations section for the year ended December 31, 2017 above.

Cash flow classification adjustment related to incorrect interpretation of ASU 2016-15 (Classification of Certain Receipts and Cash Payments) in 2017 resulted in a net increase to cash flows provided by operating activities of $34.5 million, a decrease to net cash flows provided by financing activities of $34.5 million for the year ended December 31, 2017 (Debt modification and extinguishment costs, loss on extinguishment of debt & cash paid for debt issuance costs).

The misstatements in the cash flow misclassifications category related to (a) Lease terminations resulted in a decrease to net cash flows provided by financing activities of $0.2 million and an increase to net cash flows provided by operating activities of $0.2 million (loss on sale of assets and lease terminations) and (b) Fees paid in stock to Quinpario resulted in an increase of $4.7 million to net cash provided by operating activities and a decrease of $4.7 million to cash flows provided by net financing cash flow activities for the year ended December 31, 2017.

The misstatements in the outsourcing contract cost adjustment category resulted in a decrease to net cash flows provided by operating activities of $11.0 million (Additions to outsourcing contract costs), and an increase to net cash flows provided by investing activities of $11.0 million (Additions to outsourcing contract costs) for the year ended December 31, 2017.

No other misstatements impacted the classifications between net operating, net investing, or net financing cash flow activities for the year ended December 31, 2017.