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Acquisitions | 6 Months Ended
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Jun. 30, 2015
Business Combinations [Abstract] |
Acquisitions | Acquisitions DigiCore Holdings Limited On June 18, 2015, the Company entered into a transaction implementation agreement (the “TIA”) with DigiCore Holdings Limited (“DigiCore”). Pursuant to the terms of the TIA, the Company will acquire 100% of the issued and outstanding ordinary shares of DigiCore (with the exception of certain excluded shares, including treasury shares) for 4.40 South African Rand per ordinary share outstanding, for a total cash purchase price of approximately $87 million (based on currency exchange rates in effect at the time that the TIA was executed); provided that, the total cash consideration shall in no event exceed 1,094,223,363.20 South African Rand, or approximately $88.3 million (based on currency exchange rates in effect at the time that the TIA was executed) (the “Maximum Consideration Amount”). The total cash purchase price has been guaranteed, on behalf of the Company, by a registered South African bank. To obtain such guarantee, the Company placed the Maximum Consideration Amount into escrow with the South African bank, which is included in “Acquisition-related escrow” on the unaudited condensed consolidated balance sheet at June 30, 2015. The acquisition will be effected pursuant to a scheme of arrangement under South African law (the “Scheme”). Because the Scheme will be implemented in accordance with the laws of South Africa, the transaction will be subject to the approval of various South African governmental bodies, including the Takeover Regulation Panel in South Africa, the Financial Surveillance Department of the South African Reserve Bank, and the JSE Limited, the stock exchange on which the DigiCore ordinary shares are publicly traded. The transaction will also be subject to the approval of the DigiCore shareholders. Upon consummation of the acquisition, DigiCore will become an indirect wholly-owned subsidiary of the Company. DigiCore specializes in the research, development, manufacturing, sales and marketing of telematics tools used for fleet and mobile asset management solutions and user-based insurance applications. DigiCore’s products and services provide enterprise fleets, international businesses and consumers with solutions for maximizing the security and efficient operation of their global assets. R.E.R. Enterprises, Inc. (DBA Feeney Wireless) On March 27, 2015, the Company acquired all of the issued and outstanding shares of R.E.R. Enterprises, Inc. (“RER”) and its wholly-owned subsidiary and principal operating asset, Feeney Wireless, LLC, an Oregon limited liability company (collectively, “FW”), which develops and sells solutions for the Internet of Things that integrate wireless communications into business processes. This strategic acquisition expanded the Company’s product and solutions offerings to include private labeled cellular routers, in-house designed and assembled cellular routers, high-end wireless surveillance systems, modems, computers and software, along with associated hardware, purchased from major industry suppliers. Additionally, FW’s services portfolio includes consulting, systems integration and device management services. During the three and six months ended June 30, 2015, the Company incurred $0.2 million and $0.8 million, respectively, in costs and expenses related to the Company's acquisition of FW that are included in general and administrative expenses in the unaudited condensed consolidated statement of operations. Purchase Price The total preliminary purchase price was approximately $24.8 million and included a cash payment at closing of approximately $9.3 million, $1.5 million of which was placed into an escrow fund to serve as partial security for the indemnification obligations of RER and its former shareholders, the Company’s assumption of $0.5 million in certain transaction-related expenses incurred by FW, and the future issuance of shares of the Company's common stock valued at $15.0 million, payable no later than the tenth business day after the Company files its Annual Report on Form 10-K for the year ended December 31, 2015 with the SEC. The total purchase price of $24.8 million does not include amounts, if any, payable under an earn-out arrangement under which the Company may be required to pay up to an additional $25.0 million to the former shareholders of RER contingent upon FW’s achievement of certain financial targets for the years ending December 31, 2015, 2016, and 2017, which are payable in either cash or stock at the discretion of the Company over the next four years. Payment, if any, under the earn-out arrangement will be recorded as compensation expense during the service period earned. As of June 30, 2015, the Company estimated the amount earned under the earn-out arrangement to be approximately $1.4 million, which is included in “Accrued expenses” in the unaudited condensed consolidated balance sheet. Set forth below is supplemental purchase consideration information related to the FW acquisition (in thousands):
|  | Six Months Ended June 30, 2015
Cash payments |  | $ | 9,268 |
Future issuance of common stock |  | 15,000 |
Other assumed liabilities |  | 509 |
Total purchase price |  | $ | 24,777 |
Preliminary Allocation of Fair Value The Company accounted for the transaction using the acquisition method and, accordingly, the consideration has been allocated to the tangible and intangible assets acquired and liabilities assumed on the basis of their respective estimated fair values on the acquisition date as set forth below. Goodwill resulting from this acquisition is largely attributable to the experienced workforce of FW and synergies expected to arise after the integration of FW’s products and operations into those of the Company. Goodwill resulting from this acquisition is not deductible for tax purposes. Identifiable intangible assets acquired as part of the acquisition included definite-lived intangible assets for developed technologies, customer relationships, and trademarks, which are being amortized using the straight-line method over their estimated useful lives, as well as indefinite-lived intangible assets, including in-process research and development. Liabilities assumed from FW included a term loan and capital lease obligations. The term loan and certain capital lease obligations were paid in full by the Company immediately following the closing of the acquisition on March 27, 2015. The preliminary fair value has been initially allocated based on the estimated fair values of assets acquired and liabilities assumed as follows (in thousands):
|  | March 27, 2015
Cash |  | $ | 205 |
Accounts receivable |  | 3,331 |
Inventory |  | 10,008 |
Property and equipment |  | 535 |
Intangible assets |  | 20,370 |
Goodwill |  | 1,704 |
Other assets |  | 544 |
Accounts payable |  | (7,494 | )
Accrued and other liabilities |  | (1,161 | )
Deferred revenues |  | (270 | )
Note payable |  | (2,575 | )
Capital lease obligations |  | (420 | )
Net assets acquired |  | $ | 24,777 |
The above fair value allocation is considered preliminary and is subject to revision during the measurement period. Management is in the process of completing its evaluation of acquired intangible assets and deferred revenue. Additionally, the Company is in the process of validating the fair values of inventory, accounts receivable and other assets, and obligations related to income tax and other liabilities. Valuation of Intangible Assets Acquired The following table sets forth the preliminary components of intangible assets acquired in connection with the FW acquisition (dollars in thousands):
|  | Amount Assigned |  | Amortization Period (in years)
Definite-lived intangible assets: |  |  |  |
Developed technologies |  | $ | 3,670 |  |  | 6.0
Trademarks |  | 4,640 |  |  | 10.0
Customer relationships |  | 10,020 |  |  | 10.0
Indefinite-lived intangible assets: |  |  |  |
In-process research and development |  | 2,040 |  |  |
Total intangible assets acquired |  | $ | 20,370 |  |  |
Actual and Pro Forma Results of FW Acquisition FW’s net revenues and net loss following the March 27, 2015 date of acquisition are included in the Company’s operating results for the three and six months ended June 30, 2015, and were $11.9 million and $0.9 million, respectively, for the three months ended June 30, 2015 and $12.2 million and $1.3 million, respectively, for the six months ended June 30, 2015. The unaudited preliminary consolidated pro forma results for the three and six months ended June 30, 2015 and 2014 are set forth in the table below (in thousands). These pro forma consolidated results combine the results of operations of the Company and FW as though FW had been acquired as of January 1, 2014 and include amortization charges for the acquired intangibles and interest expense related to the Company's borrowings to finance the acquisition. The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of 2014.
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2015 |  | 2014 |  | 2015 |  | 2014
Net revenues | $ | 54,815 |  |  | $ | 42,591 |  |  | $ | 113,656 |  |  | $ | 95,766 |
Net loss | $ | (9,220 | ) |  | $ | (18,116 | ) |  | $ | (17,217 | ) |  | $ | (27,748 | )

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