Commitments and Contingencies

Capital Leases

The Company has vehicles and equipment under capital leases that were assumed through its acquisition of Ctrack. The future minimum payments under capital leases were as follows at December 31, 2018 (in thousands):



2019	$	1,137
2020	476
2021	165
2022	94
2023	10
Thereafter	—
Total minimum capital lease payments	1,882
Less: amounts representing interest	(181		)
Present value of net minimum capital lease payments	$	1,701

The present value of net minimum capital lease payments at December 31, 2018 consists of approximately $1.0 million included in accrued expenses and other current liabilities in the consolidated balance sheet and approximately $0.7 million included in long-term liabilities in the consolidated balance sheet.

Operating Leases

The Company leases its office space and certain equipment under non-cancellable operating leases with various terms through 2023. The minimum annual rent on the Company’s office space is subject to increases based on stated rental adjustment terms, property taxes and operating costs and contains rent concessions. For financial reporting purposes, rent expense is recognized on a straight-line basis over the term of the lease. Accordingly, rent expense recognized in excess of rent paid is reflected as deferred rent. During the years ended December 31, 2018 and 2017, rent expense under operating leases was $2.1 million and $2.7 million, respectively. The Company’s office space lease contains incentives in the form of reimbursement from the landlord for a portion of the costs of leasehold improvements incurred by the Company which are recorded to rent expense on a straight-line basis over the term of the lease.

The future minimum payments under non-cancellable operating leases were as follows at December 31, 2018 (in thousands):



2019	$	2,666
2020	1,382
2021	645
2022	341
2023	95
Thereafter	—
Total	$	5,129

Tariffs

In September 2018, the Office of the U.S. Trade Representative (the “USTR”) enacted tariffs on imports into the U.S. from China, including communications equipment products and components manufactured and imported from China. The tariff became effective in September 2018, with an initial rate of 10% and was scheduled to increase from 10% to 25% on January 1, 2019. However, the scheduled increase has been delayed indefinitely.

The Company has taken actions that it believes have completely mitigated the impact of such tariffs. These actions include moving the Company’s contract manufacturing out of mainland China and working directly with U.S. Customs and Border Protection (“CBP”) to address the harmonized tariff codes used for its products. The ruling requests the Company has filed with the CBP have not yet been ruled upon, however there have been recent favorable CBP rulings for products that are similar or identical to the Company’s, and based on those rulings, the Company believes that its position that it is not probable that it will have to pay the new tariff is supportable. If the CBP does not rule in the Company’s favor, it would be required to pay tariffs of approximately $3.7 million based on the initial tariff rate.

Legal

The Company is currently named as a defendant or co-defendant in a patent infringement lawsuit in the United States and is indirectly participating in other U.S. patent infringement actions pursuant to its contractual indemnification obligations to certain customers. Based on an evaluation of these matters and discussions with the Company’s intellectual property litigation counsel, the Company believes that liabilities arising from or sums paid in settlement of these existing matters would not have a material adverse effect on its consolidated results of operations or financial condition, other than those discussed below.

On May 27, 2015, a patent infringement action was brought against Novatel Wireless by Carucel Investments, L.P. (“Carucel”), a non-practicing entity (Carucel Investments, L.P. v. Novatel Wireless, Inc., et al., U.S.D.C. S.D. Florida, Civil Action No. 0:15-cv-61116-BB). The complaint alleged that certain MiFi mobile hotspots manufactured by Novatel Wireless infringed claims of patents owned by Carucel. On April 10, 2017, judgment was entered in favor of Novatel Wireless. Carucel filed to appeal certain orders in the litigation and on July 13, 2018, the U.S. Federal Circuit Court of Appeals affirmed the judgment.

On May 11, 2017, the Company initiated a lawsuit against the former stockholders of RER in the Court of Chancery of the State of Delaware seeking recovery of damages for civil conspiracy, fraud in the inducement, unjust enrichment and breach of fiduciary duty. On January 16, 2018, the former stockholders of RER filed an answer and counterclaim in the matter seeking recovery of certain deferred and earn-out payments allegedly owed to them by the Company in connection with the Company’s acquisition of RER. On July 26, 2018, the Company and the former stockholders of RER entered into a mutual general release and settlement agreement (the “Settlement Agreement”) pursuant to which the parties agreed to release all claims against each other and the Company agreed to (i) pay the former stockholders of RER $1.0 million in cash by August 17, 2018, (ii) immediately instruct its transfer agent to permit the transfer or sale of 973,333 shares of the Company’s common stock that the Company had issued to the former stockholders of RER in March 2017, (iii) immediately issue 500,000 shares of the Company’s common stock to the former stockholders of RER, (iv) within 12 months following the execution of the Settlement Agreement, deliver to the former stockholders of RER an additional $1.0 million in cash, common stock, or a combination thereof, at the Company’s option, (v) within 24 months following the execution of the Settlement Agreement deliver to the former stockholders of RER an additional $1.0 million in cash, common stock, or a combination thereof, at the Company’s option, and (vi) file one or more registration statements with respect to the resale of the shares of the Company’s common stock issued to the former stockholders of RER pursuant to the Settlement Agreement. In connection with the settlement, the Company recognized a gain of $17.2 million, which is included in extinguishment of acquisition-related liabilities in the consolidated statement of operations for the period ended December 31, 2018. The Company’s remaining liability under the Settlement Agreement at December 31, 2018 consists of approximately $1.0 million in current liabilities and $1.0 million in long-term liabilities.

Indemnification

In the normal course of business, the Company periodically enters into agreements that require the Company to indemnify and defend its customers for, among other things, claims alleging that the Company’s products infringe third-party patents or other intellectual property rights. The Company’s maximum exposure under these indemnification provisions cannot be estimated but the Company does not believe that there are any matters individually or collectively that would have a material adverse effect on its consolidated results of operations or financial condition.