Acquisitions

DigiCore Holdings Limited

On June 18, 2015, the Company entered into a transaction implementation agreement (the “TIA”) with DigiCore Holdings Limited (“DigiCore”). 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.

Pursuant to the terms of the TIA, the Company agreed to 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; provided that, the total cash consideration could not exceed 1,094,223,363.20 South African Rand (the “Maximum Consideration Amount”). The total cash purchase price was guaranteed, on behalf of the Company, by a registered South African bank. To obtain such guarantee, the Company placed the Maximum Consideration Amount, in South African Rand, into escrow with the South African bank, the value of which is included in “Acquisition-related escrow” on the unaudited condensed consolidated balance sheet. From the date of execution of the TIA through September 30, 2015, the Maximum Consideration Amount placed into escrow experienced a non-cash loss of $10.3 million due to the weakening of the South African Rand. This amount is included in “Non-cash change in acquisition-related escrow” in the unaudited condensed consolidated statement of operations. The balance of the acquisition-related escrow was $78.0 million at September 30, 2015.

During the three and nine months ended September 30, 2015, the Company incurred $0.5 million and $1.6 million, respectively, in costs and expenses related to the Company's acquisition of DigiCore that are included in general and administrative expenses in the unaudited condensed consolidated statement of operations.

On October 5, 2015, subsequent to the balance sheet date, the transaction closed and the Company acquired all of the issued and outstanding ordinary shares of DigiCore (with the exception of certain excluded shares, including treasury shares) for a total cash purchase price of 1,085,705,720.98 South African Rand, or approximately $79.0 million (based on currency exchange rates in effect at the time the transaction closed). Upon consummation of the acquisition, DigiCore became an indirect wholly-owned subsidiary of the Company.

The Company will account for the transaction using the acquisition method and, accordingly, the consideration will be allocated to the tangible and intangible assets acquired and liabilities assumed on the basis of their respective estimated fair values on the acquisition date. Due to the limited time since the acquisition date, the initial accounting for the business combination and the accounting for any transactions that are to be recognized separately from the acquisition are incomplete. As a result, the Company is unable to provide amounts recognized as of the acquisition date for major classes of assets and liabilities acquired, the fair value of consideration, and any other transactions that are recognized separately from the acquisition. In addition, the required supplemental pro forma information has not been provided, as it is impracticable at this time.

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 nine months ended September 30, 2015, the Company incurred $0.1 million and $0.9 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 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 September 30, 2015, the Company estimated the amount earned under the earn-out arrangement to be approximately $4.0 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):



	Nine Months Ended September 30, 2015
Cash payments	$	9,268
Future issuance of common stock	15,000
Other assumed liabilities	509
Total purchase price	$	24,777

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 fair value has been 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	18,880
Goodwill	3,194
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 subject to revision during the measurement period.

Valuation of Intangible Assets Acquired

The following table sets forth the 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	$	3,660	6.0
Trademarks	4,700		10.0
Customer relationships	8,500		10.0
Indefinite-lived intangible assets:
In-process research and development	2,020
Total intangible assets acquired	$	18,880

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 nine months ended September 30, 2015, and were $5.5 million and $3.8 million, respectively, for the three months ended September 30, 2015 and $17.7 million and $5.1 million, respectively, for the nine months ended September 30, 2015.

The unaudited consolidated pro forma results for the three and nine months ended September 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 September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net revenues	$	54,577		$	49,198		$	167,957		$	144,964
Net loss	$	(20,847	)	$	(9,287	)	$	(38,479	)	$	(36,958	)