UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Amendment No. 1

For the fiscal year ended December 31, 2015

For the transition period from              to             

Commission File Number 000-22920

NUMEREX CORP.

(Name of Registrant as Specified in Its Charter)

(770) 693-5950

(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes ¨           No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act.     Yes ¨           No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes þ         No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨    Accelerated filer þ  Non-accelerated filer ¨  Smaller Reporting Company¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes ¨           No þ

The aggregate market value of the registrant’s outstanding common stockClass A Common Stock held by non-affiliates of the registrant was $130.6 million based on a closing price of $8.54 on June 30, 2015, as quoted on the NASDAQ Global market.

The number of shares outstanding of the registrant’s Class A Common Stock as of March 10, 2016, was 19.4 million shares.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 31, 2015. The proxy statement is incorporated herein by reference into the following parts of the Form 10-K:Not applicable.

Part III, Item 10, Directors, Executive Officers and Corporate Governance;

Part III, Item 11, Executive Compensation;

Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters;

Part III, Item 13, Certain Relationships and Related Transactions, and Director Independence; and

Part III, Item 14, Principal Accountant Fees and Services.

NUMEREX CORP.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014

TABLE OF CONTENTS

Forward-Looking StatementsTABLE OF CONTENTS

This document contains, and other statements may contain, forward-looking statements with respect to Numerex future financial or business performance, conditions or strategies and other financial and business matters, including expectations regarding growth trends and activities. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "intend," "estimate," "assume," "strategy," "plan," "outlook," "outcome," "continue," "remain," "trend," and variations of such words and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may," or similar expressions. Numerex cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. These forward-looking statements speak only as of the date of this filing, and Numerex assumes no duty to update forward-looking statements. Actual results could differ materially from those anticipated in these forward-looking statements and future results could differ materially from historical performance.

The following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: our inability to reposition our platform to capture greater recurring subscription revenues; the risks that a substantial portion of revenues derived from contracts may be terminated at any time; the risks that our strategic suppliers materially change or disrupt the flow of products or services; variations in quarterly operating results; delays in the development, introduction, integration and marketing of new products and services; customer acceptance of services; economic conditions resulting in decreased demand for our products and services; the risk that our strategic alliances, partnerships and/or wireless network operators will not yield substantial revenues; changes in financial and capital markets, and the inability to raise growth capital; the inability to attain revenue and earnings growth; changes in interest rates; inflation; the introduction, withdrawal, success and timing of business initiatives and strategies; competitive conditions; the inability to realize revenue enhancements; disruption in key supplier relationships and/or related services; and extent and timing of technological changes.

PART I.

Item 1. BUSINESS

Overview

Numerex Corp. (“Numerex,” the “Company” or “we”) is headquartered in Atlanta, Georgia, and is a corporation organized under the laws of the Commonwealth of Pennsylvania. We are a single source, leading provider of managed enterprise solutions enabling the Internet of Things (IoT). We empower enterprise operations with world-class, managed IoT solutions that are simple, innovative, scalable and secure.

Our core strategy is to generate long term and sustainable recurring revenue through a portfolio of managed, end-to-end IoT solutions which are generally sold on a subscription basis and built on our horizontal, integrated platform. Our solutions incorporate the key IoT building blocks – Device, Network, Application and Platform. Our solutions also simplify the implementation and improve the speed to market for enterprise users in select, targeted verticals in the asset monitoring and optimization, asset tracking, and safety and security markets.

Our technology encompasses a broad spectrum of the IoT ecosystem and delivers managed solutions for enterprise users which derive added value through device, network, application and platform enablement. Our industry leading solutions combine over 20 years of expertise and experience through a modular, end-to-end platform infrastructure, and are already market proven with pre-packaged, hosted IoT vertical solutions that are being rapidly deployed by thousands of enterprises. At the end of 2015, we supported more than 2 million IoT subscriptions.

An IoT solution is generally viewed as a combination of devices, software and services that operate with little or no human interaction. More specifically, it consists of using a device or sensor (e.g., tracker or communicator, etc.) to capture “event” data (e.g., fill level, inventory status, location, temperature, etc.) relaying the data through a network (e.g., cellular or satellite) to an application (often with cloud or Internet based software), by way of a horizontal platform, which then translates the captured data into actionable information (e.g. alarm notification send help, the whereabouts of a person of interest, the location of an asset being tracked, the fill level in a tank is too low, etc.).

Our subscription-based vertical solutions and platform services, which are intended to generate streams of long-term, high-margin recurring revenues, are the cornerstone of our business model. We create value by helping our customers implement IoT solutions through a single source – rapidly, efficiently, reliably and securely. We put a strong emphasis on data security, including the use of authentication, encryption and virtual private network technologies referred to as “VPN”, to protect customer data.

We operate in the Business-to-Business market, and our customers, in general, serve the final end users. Our products and services are primarily sold to enterprise and government organizations, some with global deployments. Our targeted vertical markets include oil and gas, healthcare and medical devices, manufacturing and supply chain management, transportation, waste management, and public safety. We offer a complete solution through a single source, rather than requiring customers to utilize multiple vendors. We also provide several enabling value-added services and accelerate the go-to-market process for our customers by simplifying the complexity of a successful IoT implementation through our cloud-based, horizontal IoT platform.EXPLANATORY NOTE

In addition to selling pre-configured, off-the-shelf managed solutions to targeted vertical markets, we also sell our solutions as white labeled IoT solutions to our channel partners who have well-defined markets and a sales organization that can ramp up quickly with scale to deploy these solutions to their customers. Examples of such white labeled solutions include asset tracking, tank monitoring, mPERS (mobile personal emergency response systems), and fleet tracking.

Our offerings use cellular, satellite, broadband and wireline networks worldwide to transmit data. We understand and manage all the requirements associated with international connectivity including regulations, processes and data requirements.

We have an international ISO/IEC 27001:2005 Certification (ISO 27001). ISO 27001 is ISO’s highest security certification for information security that ensures data confidentiality, integrity and availability every step of the way. The ISO 27001 certification facilitates compliance with an array of information security-related legislation and regulations in our target markets such as utilities (NERC CIP Cyber Security mandates), financial services (GLBA and PCI DSS), healthcare (HIPAA), government (FISMA), and across markets (state laws governing security breach notification and Sarbanes Oxley Act). In December 2013, we completed the three-year ISO 27001 standard re-certification.

We utilize a diverse range of third party manufacturing sources and telecommunications standards. Our ability to use a scalable, horizontal platform as a service to enable a robust management portal that can manage carrier relationships, consolidate disparate networks, and keep track of thousands, if not millions of devices – all while providing customers with a complete view of their activity – is a unique strength of Numerex and a clear differentiator from our competitors.

HISTORY

Numerex was founded in 1992 and first traded publicly in March 1994 on the NASDAQ stock exchange under the ticker symbol ‘NMRX’. At that time, the Company focused on “derived channel”, a wireline-based telemetry data communications solution (“telemetry” was eventually replaced by the “M2M”, and then the “IoT” acronym) and served select vertical markets that included alarm security and line monitoring. In November 1999, we sold our wireline business to British Telecommunications PLC (BT) in order to focus on our early stage wireless data communications business.

In May 1998, Numerex Corp. formed Cellemetry LLC, a joint venture between Numerex and BellSouth Wireless, Inc. Cellemetry LLC provided a cost-effective, two-way wireless data communications network throughout the United States, Canada, Mexico, Colombia, Argentina, Paraguay, the Dutch Antilles, and Puerto Rico. On March 28, 2003, we acquired our partner’s interest in Cellemetry LLC.

At the beginning of 2006, we further enhanced our portfolio of wireless products and services through the acquisition of the assets of Airdesk, Inc. comprised of wireless data solutions, network access and technical support.

In 2007, we acquired the assets of Orbit One Communications, Inc., which provided satellite data products and services to government agencies and the emergency service market.

In October 2008, we acquired Ublip, Inc., a privately-held IoT software and service company headquartered in Dallas, Texas. With this acquisition, we gained an infusion of technology and expertise, including middleware designed to simplify and jumpstart application development and deployment.

In October 2012, we acquired certain assets, technology and intellectual property including a portfolio of patents that will support and widen our IoT platform capabilities in real-time monitoring of critical assets and events. In February 2013, we purchased a privately-held IoT business headquartered in Dallas, TX; and in December 2013 we purchased another privately-held IoT business headquartered in Oklahoma. These acquisitions included certain assets, products and technology used primarily in monitoring of oil and gas wells and pipelines, and in the remote monitoring and management of bulk tanks and route optimization of regional oil distributors.

On May 5, 2014, we merged a wholly-owned subsidiary of Numerex with and into Omnilink Systems Inc. (Omnilink) with Omnilink surviving the merger as a wholly-owned subsidiary of the Company. 

Omnilink provides tracking and monitoring services for people and valuable assets via Omnilink’s IoT platform that connects hardware, networks, software, and support services. The merger enabled us to expand our position in the fast growing security and safety, tracking and monitoring market segments and, in particular, into the offender monitoring market. The assets, liabilities and operating results of Omnilink are reflected in our consolidated financial statements commencing from the merger date.  

SERVICE DELIVERY PLATFORM AND ENABLING SERVICES

In a rapidly changing business environment requiring visibility and real-time access to information, rapid solutions deployment with the ability to manage networks, devices and applications from a single source platform can have a significant impact on business processes and contribute to improved operational efficiencies. Our broad IoT horizontal service delivery platform was designed with that goal in mind.

The Numerex platform combines IoT service enablement features with configurable application frameworks to deploy solutions quickly and to reduce or eliminate development costs. Operating in a cloud-based environment, the platform focuses on the core enablement of IoT solutions and provides the ability to deliver value-added services with speed and ease. Our platform provides a wide range of capabilities such as application enablement frameworks; self-care portal for device and subscriber; gateway as a service; data management and warehousing; billing service; policy and performance management; connectivity management; and network management.

Our platform also provides scalability and flexibility with service delivery options that can be accessed independently or as a fully integrated solution without costly development and coding. Whether customers desire to exploit a new revenue opportunity or to gain visibility into existing operations to reduce costs, our platform can be utilized in many ways. Typical offerings include white labeled applications; application extension to a mobile IoT environment; sensor and tracking data management from wireless devices into the customer’s back office enterprise applications; and distributed service offerings to dealers and representatives.

We offer an extensive range of products and services that work with our hosted platform and that make integration between smart device, network, application, and customer systems a seamless process. From asset tracking on a global scale to stationary or “static” solutions that involve monitoring, measuring, and metering applications, our team of IoT on-boarding specialists and engineers work together to optimize commercialization of a solution. Examples of enabling services include: network connection setup, device installation support and services, 24x7x365 customer support; flexible billing; integration services; automated provisioning; a device management portal; a monitoring and network operations center; network redundancy; product certification; and ancillary services such as, but not limited to, warehousing and fulfillment.

SALES, MARKETING AND DISTRIBUTION

We sell our configured solutions and related services to, with, and through our strategic partner channels including integrators, consultative groups, wireless network operators, key supply chain partners and large end-user enterprises. We also sell direct to enterprise users in most of the markets we operate in.

We primarily employ an indirect sales model for our unbranded (white label) products through Value Added Resellers (VARs), vertically focused System Integrators (SIs) and Original Equipment Manufacturers (OEMs) who integrate our products and services into their own solutions. We also indirectly market and sell certain Numerex branded products and services through distribution and dealer channels, specifically the UplinkSecurity Solutions. Uplink alarm security products are sold “off the shelf” into distribution channels and to dealers throughout North America.

KEY CUSTOMER

We have a hardware customer who accounted for 14.3% or $12.8 million of our consolidated revenue for the year ended December 31, 2015, and 14.3% or, $13.5 million, for the year ended December 31, 2014. As a result of our decision to concentrate on selling higher margin, integrated managed service subscriptions that include the full suite of our devices, networks, applications and platform, we do not anticipate significant sales to this customer during the year ended December 31, 2016.

SUPPLIERS

We rely on third-party contract manufacturers, component suppliers, and wireless network operators and carriers to manufacture and supply most of the equipment used to provide our wireless IoT solutions, networking equipment and products. We also rely on multiple third-party wireless network operators to provide the underlying network service infrastructure that we use to support our IoT data network. These third party suppliers and wireless network operators are located primarily in the United States but also include other North American and international vendors.

Several GSM-based wireless carriers have announced their intention to discontinue their second generation (2G) networks and fully deploy third and fourth generation (3G/4G) networks between 2016 and 2020. CDMA-based carriers have announced their intention to discontinue 2G networks as early as 2020. We have entered into a reseller agreement with one of our network service providers that will allow us to continue supporting 2G devices well into this decade while at the same time, introducing 3G/4G/LTE (Long-Term Evolution) products for more advanced services.

COMPETITION

The market for our technology and platforms remains characterized by rapid technological change. The principal competitive factors in this market continue to be product performance, ease of use, reliability, price, breadth of product lines, sales and distribution capability, technical support and service, customer relations, and general industry and economic conditions. 

Several businesses that share our IoT space can be viewed to some extent as competitors, including companies offering Service Delivery Platforms (SDP), Service Enablement Services (SES), Application Enablement Platforms (AEP), Application Development Platforms (ADP), and Connected Device Platforms (CDP); IoT focused Original Equipment Manufacturers (OEMs), vertically focused IoT Application Service Providers (ASP), Mobile Virtual Network Operators (MVNOs); system integrators; and wireless operators and carriers that offer a variety of the components and services required for the delivery of complete IoT solutions. However, we believe that we have a competitive advantage and are uniquely positioned since we provide all of the key components of the IoT value chain, including cloud-based enabling platforms, multiple wireless technologies, custom applications, and wireless network services through one single source. Some module manufacturers have started to market application development platforms while other IoT players offer airtime services, making integration capabilities available to their customers.

We believe that our current IoT services, combined with the continuing development of our network offerings, infrastructure and technology, positions us to compete effectively with emerging providers of IoT and IoT solutions using GSM, CDMA, LTE, and satellite technologies. Other potentially competitive offerings may include Wi-Fi, Low Power Wide Area Network (LPWAN), and other technologies and networks. We continue to closely monitor the industry trend and evaluate our network options.

We believe that our longevity in the industry; our repository of intellectual property, know-how, prior art, and numerous patents and licenses in conjunction with our ability to offer fully-integrated solutions; global reach; data protection; rapid response, scalability and flexibility are critical differentiators.

Our Uplink security products and services have five primary competitors in the existing channels of distribution — Alarm.com; Honeywell’s AlarmNet; NAPCO Security Technologies; Telular’s Teleguard and DSC, the security division of Tyco. We believe that the principal competitive factors when making a product selection in the business and consumer security industry are hardware price, service price, reliability, industry certification status and feature requirements for specific security applications, for example fire, burglary, bank vault, etc.

ENGINEERING AND DEVELOPMENT

Our success depends, in part, on our ability to enhance our existing products and introduce new products and applications on a timely basis. We plan to continue to devote a meaningful portion of our resources to engineering and development. We incurred $9.0 million of engineering and development costs during the year ended December 31, 2015, of which $2.2 million was capitalized as internally developed software.

We continue to invest in new services and improvements to our various technologies, especially networks and digital fixed and mobile solutions. We primarily focus on the development of IoT solutions and enabling platforms, enhancement of our gateway and network services, reductions in the cost of delivery of our solutions, and enhancements and expansion of our application capabilities including application frameworks.

PRODUCT WARRANTY AND SERVICES

Our IoT business typically provides a limited, one-year repair or replacement warranty on purchased hardware-based products. We provide limited repair or replacement warranty on managed service hardware-based products over the term of the managed service agreement ranging from three to five years. To date, warranty costs and the cost of maintaining our warranty programs have not been material to our business.

INTELLECTUAL PROPERTY

We and our subsidiaries hold rights to patents to certain aspects of our hardware devices, software, and network and platform services. We have also registered or applied for trademarks in the United States, Europe, Canada, Mexico and a number of other foreign countries. Our portfolio of registered United States, European, Canadian, and Mexican trademarks includes such “core” marks as NUMEREX®, UPLINK®, NUMEREX DNA®, FOCALPOINT® OMNILINK®, IMANAGE™, ITANK™ AND MYSHIELD™. Although we believe the ownership of patents and trademarks is an important factor in our business and that our success depends in part on such ownership, we rely more on the talent, competence, and professional abilities of our personnel than on the accumulation of intellectual property rights.

We regularly file patent applications to protect innovations arising from our internal engineering and development activities. In recent years, our patent filings have increased reflecting our increased investment in new product development. In deciding whether to file a patent application, we consider the commercial benefit patent protection will provide over our obligation to disclose our innovation to the public and the cost of pursuing patent protection. We make decisions concerning our pursuit patent protection in foreign countries using the same philosophy.

Most of our patents, patent applications, and patents pending fall into one or more of the following categories:

No single patent is solely responsible for protecting our products. United States patents have a limited legal lifespan, typically 20 years from the filing date for a utility patent filed on or after June 8, 1995. We believe the duration of our patents is adequate relative to the expected lifespan of our products. No single patent covers products or services that comprise a material portion of our 2015 revenues. No assurance can be given regarding the scope of patent protection.

Many of our products utilize intellectual property rights of third parties. It may be necessary in the future to seek or renew licenses relating to various aspects of our products and business methods. While we have generally been able to obtain such licenses on commercially reasonable terms in the past, there is no guarantee that such licenses could be obtained in the future on reasonable terms or at all. Because of technological changes in the industries in which we compete, current extensive patent coverage, and the rapid rate of issuance of new patents, it is possible that certain components of our products and business methods may unknowingly infringe upon existing patents or intellectual property rights of others. We periodically receive offers from third parties to obtain licenses for patents and other intellectual rights in exchange for royalties or other payments. From time to time, we have been notified that we may be infringing certain patents or other intellectual property rights of third parties.

We also hold other intellectual property rights including, without limitation, copyrights, trademarks, and trade secret protections relating to our technology, products, and processes. We believe that rapid technological developments in the telecommunications and location based services industries may limit the protection afforded by patents.

In an effort to maintain the confidentiality and ownership of our trade secrets and proprietary information, we require all of our employees and consultants to sign confidentiality, non-compete, and non-solicit agreements. Employees and consultants involved in technical endeavors also sign invention assignment agreements.

REGULATION

Federal, state, and local telecommunications laws and regulations have not posed any significant impediments to either the delivery of wireless data signals/messaging or services using our various platforms. However, we may be subject to certain governmentally imposed taxes, surcharges, fees, and other regulatory charges, as well as new laws and regulations governing fixed and mobile communications devices, associated services, our business and markets. As we expand our international sales, we may be subject to telecommunications regulations in those foreign jurisdictions.

EMPLOYEES

As of March 10, 2016, we had 190 employees in the U.S. consisting of 66 in sales, marketing and customer service, 92 in engineering and operations and 32 in management and administration. We have experienced no work stoppages and none of our employees are represented by collective bargaining arrangements. We believe our relationship with our employees is good.

AVAILABLE INFORMATION

We make available free of charge through our website at www.numerex.com our annual reportsThis Amendment No. 1 on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and all amendments thereto filed10-K/A (“Amendment No. 1”) amends Numerex Corp’s (“Numerex”, “we”, “our”, “us” or furnished pursuant to 13(a) or 15(d) of the Securities and Exchange act of 1934, as soon as reasonably practicable after such reports are filed with or furnished to the Securities and Exchange Commission. Additionally, our board committee charters and code of ethics are available on our website. We intend to post to this website all amendments to the charters and code of ethics.

Our filings are also available through the Securities and Exchange Commission via their website,http://www.sec.gov. You may also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The information contained on our website is not incorporated by reference in this annual report on form 10-K and should not be considered a part of this report.

EXECUTIVE OFFICERS OF THE REGISTRANT

Our executive officers, and all persons chosen to become executive officers, and their ages and positions as of March 10, 2016, are as follows:

*Member of the Board of Directors

Mr. Zionts began serving as Chief Executive Officer of the Company on October 1, 2015. Prior to that, he was the Chief Executive Officer and President of Aicent, Inc. from September 2013 until its acquisition by Syniverse in August 2014. Prior to Aicent, Mr. Zionts was a Vice President at Allot Communications who acquired Ortiva Wireless, Inc. in May 2012 where he was the President and Chief Executive Officer from January 2008. Between August 1987 and December 2007, Mr. Zionts led three additional firms including FastMobile which was sold to Research in Motion/Blackberry.

Mr. Gayron began serving as Chief Financial Officer on March 7, 2016. Prior to joining Numerex, Mr. Gayron was Chief Financial Officer of Osmotica Pharmaceuticals, an international medical technology company. At Osmotica, Mr. Gayron was instrumental in driving growth and improving profitability over 300%, resulting in a successful exit to Vertical Pharmaceuticals, a portfolio company for Avista Capital. Mr. Gayron’s experience also includes roles as VP Finance and Treasurer of Sensus, where he was a leader in building a scalable business platform for over a $1 billion communications company, and Treasurer of Nuance Communications, a $2 billion technology company. Prior to becoming a financial executive, Mr. Gayron was an investment banker for 10 years at UBS and CIBC World Markets. During his time on Wall Street, Mr. Gayron completed over 60 transactions where he provided capital raising and advisory services to technology and private equity clients.

Mr. Gan began serving as Chief Marketing Officer on October 5, 2015. Mr. Gan most recently served as corporate VP and GM of Strategic Solutions at Syniverse. Prior to Syniverse, he served as EVP at Aicent where he led multiple functions spanning product management, marketing, strategic business development, and global sales as the company grew from startup stage to market leadership serving 200+ carriers worldwide, with most of its products and services ranked among the top three in global market share. Mr. Gan has also held executive positions for Danghong Technologies and FutureDial, both pioneering software-as-a-service providers.

Mr. Costello began serving as Chief Revenue Officer on October 12, 2015. Previously, Mr. Costello served as President and VP of Sales of the Americas for Allot Communications. Earlier in his career, Mr. Costello held numerous positions of increasing responsibility at NYNEX, where he founded and led the NYNEX Network Integration business unit. Upon the merger with Bell Atlantic, Mr. Costello was named President and CEO of Bell Atlantic Network Integration which eventually became a part of Verizon Communications. Mr. Costello next helped lead an optical networking start-up Corvis Corporation, where he served as VP of Sales and assisted in achieving an initial public offering which exceeded $1 billion.

Mr. Ramachandran began serving as Chief Technology Officer in November 2015. Mr. Ramachandran is a technology veteran with several decades of experience in the communication and IoT markets, bringing to Numerex deep industry experience in IP and mobile communications. He is passionate about the innovation lifecycle and has successfully led product teams from ideation to market. He most recently served as CTO of Utilidata, an IoT and data analytics company driving energy efficiency in the electric power grid. Prior to that, he was CTO of Telcordia/Ericsson Interconnection Solutions, where he launched and established a new mobile messaging business. He joined Telcordia after a successful tenure as CTO of NexTone Communications, which he co-founded and where he pioneered the Session Border Controller (SBC) - a critical component of VoIP networks. Sri is recognized as an industry thought leader and holds several patents for his work developing the SBC.  He is also regularly sought out as an industry advisor in the communications space.

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the following information about these risks before buying shares of our common stock. If any of these risks occur, our business could be materially harmed, and our financial condition and results of operations could be materially and adversely affected. As a result, the price of our common stock could decline, and you could lose all or part of your investment. You should also refer to the other information contained in this“Company”) Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the Securities and Exchange Commission (“SEC”) on March 15, 2016 (the Annual Report) or incorporated herein by reference, including our consolidated financial statements and“Original Filing”). We are filing this Amendment No. 1 solely for the notes to those statements. See also Forward-Looking Statements.

Risks Related to Our Business and Industry

We have a historypurpose of losses and are uncertainproviding the information required in Part III of Form 10-K. Except as to our future profitability.

We have had mixed success with regard to generating net income. After generating net income in each of the years 2011 to 2014, we incurred net losses in 2015. Beginningdescribed above, this Amendment No. 1 does not amend any other information set forth in the third quarter of 2015,Original Filing, and we beganhave not updated disclosures included therein to concentrate on selling higher margin, integrated managed service subscriptions that include the full suite of our devices, networks, applications and platform while moving away from the sale of individual components – especially hardware only. Because of this strategic change, we anticipate hardware revenue will decline significantly in 2016 and remain relatively modest as compared to historical levels thereafter. Our new sales strategy may not be effective.reflect any subsequent events.

As a holding companyused in the Amendment No. 1, “FY 2014,” “FY 2015” and “FY 2016” mean the Company’s fiscal year ended December 31, 2014, 2015 and 2016, respectively.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information About our primary material assets are our ownership interests in our subsidiaries and in certain intellectual property rights. Consequently, our operating results derive from our subsidiaries and we depend on accumulated cash flows, distributions, and other inter-affiliate transfers from our subsidiaries. In viewExecutive Officers

A list of our limitedexecutive officers and inconsistent historytheir biographical information appears in Part I, Item 1 of generating net income, unproven new sales strategy, level of operating costs, and all other risk factors discussed in this annual report, we may not be profitable inour Annual Report on Form 10-K for the future.fiscal year ended December 31, 2015, as filed with the SEC on March 15, 2016.

The markets in which we operate are highly competitive and we may not be able to compete effectively.Information About our Board of Directors (the “Board”)

We sell our products in highly competitive markets. SomeListed below are the Company’s eight directors. Each of the directors serves a one-year term expiring at the next annual meeting of shareholders.

Set forth below is a brief description of the principal occupation and business experience of each of our competitors and potential competitors have significantly greater financial, technical, sales and marketing and other resources than we do. Existing or new products and services that provide alternatives to our products and services could materially impact our ability to compete in these markets. Asnominees for director, as well as the markets for our products and services continue to develop, additional companies, including companies with significant market presence in the IoT industry, could enter the markets in which we compete and further intensify competition. In addition, we believe price competition could become a more significant competitive factor in the future. As a result, we may not be able to maintain our historic prices and margins, which could adversely affect our business, results of operations and financial condition.

As a further result of such competition, our new solutions and sales strategy could fail to gain market acceptance. We have recently introduced several managed services including but not limited to: iManage, a supply chain and logistics optimization solution, iTank, a bulk tank liquid monitoring and distribution optimization solution, and mySHIELD, a mobile personal emergency people tracking solution for lone workers. If these solutions and services, or anysummary of our other existing solutionsviews as to the qualifications of each nominee to serve on the Board and services, doeach board committee of which he or she is a member. Our views are formed not perform as expected, or if our sales fall short of expectations, our business may be adversely affected.

We operate in new and rapidly evolving markets where rapid technological change can quickly make hardware solutions and services, including those that we offer, obsolete.

The markets in which we operate are subject to rapid advances in technology, continuously evolving industry standards and regulatory requirements, and ever-shifting customer requirements. The IoT industry, in particular, is currently undergoing profound and rapid technological change. For example, many ofonly by the current subscribers we host connect to cellular networks using 2G-based devices. Several GSM-based wireless carriers have announced their intention to discontinue their 2G networks and fully deploy 3G/4G/LTE networks between 2016prior employment and 2020. CDMA-based carriers have announced their 2G sunset for as early as 2020. While we have begun to market, sell, and support 3G/4G/LTE-based devices and service, we may not be successful in transitioning alleducational background of our 2G-based subscribersdirectors, but also by the Board's experience in working with their fellow directors. All but two directors have served on the Board for at least three years, and certain directors have ten or more years of experience on our Board. Accordingly, the Board has had significant experience with the incumbent directors and has had the opportunity to 3G/4G/LTE andassess the contributions that the directors have lost, and may continue to lose customers as a result. In additionmade to the carriers’ migrations away from 2G technologyboard as well as their industry knowledge, judgment and our need to respond to that change, the introduction of unanticipated new technologies by carriers, or the development of unanticipated new end applications by our customers, could render our current solutions obsolete. In that regard, we must discern current trends and anticipate an uncertain future. We must engage in product development efforts in advance of events that we cannot be sure will happen and time our production cycles and marketing activities accordingly. If our projections are incorrect, or if our product development efforts are not properly directed and timed, or if the demands of the marketplace shift in directions that we failed to anticipate, we may lose market share and revenues as a result. To remain competitive, we continue to support engineering and development efforts intended to bring new hardware solutions and services to the markets that we serve. However, those efforts are capital intensive. If we are unable to adequately fund our engineering and development efforts, we may not be successful in keeping our product line current and in sync with advances in technology and evolving customer requirements. Even with adequate funding, our development efforts may not yield any appreciable short-term results and may never result in hardware solutions and services that produce revenues over and above our cumulative development costs or that gain traction in the marketplace, causing us to either lose market share or fail to increase and forego increased sales and revenues as a result.leadership capabilities.

E. James Constantine has served as a director of the Company since October 2008. From 2006 through 2011, Mr. Constantine has served as CEO of HPE America LLC, a holding of Piero Ferrari involved in power train development for NASCAR and Formula 1 racing vehicles. The Company closed its operations in the U.S. in 2011 at which time Mr. Constantine retired. From February 2003 until July 2006, Mr. Constantine was the CEO of Delta Motors LLC and a private holding company, MY Ventures, LLC, which held entities engaged in development of embedded cellular transceivers, GPS and location-based services and technology, special purpose vehicles, and commercial real estate. He previously served on the Board of Governors of Claremont McKenna College's Kravis Leadership Institute, and was the commercial consultant to the City of Los Angeles for the creation of its electric vehicle initiative and development of the first parallel hybrid vehicle. Mr. Constantine’s tenure as CEO of a company in the auto industry and a wireless communications company provide valuable business, leadership and management experience, including expertise in creating value and product development for our customers in the auto and real estate sectors. Mr. Constantine's experience as a CEO also provides valuable insights as a member of the Nominating and Corporate Governance Committee and a member of the Audit Committee.

Tony G. Holcombe was appointed as a director in 2011. Currently, Mr. Holcombe is Vice Chairperson of the Board of Syniverse, where he served as that company’s President and CEO from 2006 to until his retirement in 2011. He has been a member of the Syniverse Board since 2003. He also serves on the Nominating and Governance Committee of Syniverse. During his time as President and CEO of Syniverse, Mr. Holcombe's many accomplishments included diversifying the business through several key acquisitions; defining a strategic vision that transformed Syniverse from a North American roaming and clearing house provider to a leading global provider of technology and business services to the mobile industry; and solidifying The Carlyle Group as the company's single investor in January 2011 for $2.6 billion. Before becoming Syniverse's President and CEO, Mr. Holcombe served as president of Emdeon Corp., formerly WebMD, and as president of Emdeon Business Services. Mr. Holcombe has more than 20 years of executive-level experience in the transaction processing and technology services industry. He was CEO of Valutec Card Solutions and served in various executive positions at Ceridian Corporation, including EVP of Ceridian Corporation, president of Ceridian Employer Employee Services and president of Comdata. Mr. Holcombe received his bachelor’s degree from Georgia State University, where he currently serves as an Advisor for the Robinson College of Business. Mr. Holcombe’s wide-ranging business experience provides valuable knowledge to our Audit Committee and as the Chairperson of the Compensation Committee.

Sherrie G. McAvoywas appointed to the board in 2013. She spent her 31 year career at Deloitte & Touche LLP, a global accounting, auditing and professional services firm. During her last five years with Deloitte, Ms. McAvoy served as the lead audit partner supervising audits of both public and private companies in a diverse group of industries including retail, leisure and technology services. She also held regional and national leadership positions in the retail and governance practices. Ms. McAvoy brings to our Board diversified business experience as well as deep expertise on accounting, auditing, internal controls, risk management, corporate compliance and ethics, and corporate governance. Ms. McAvoy received her Bachelor of Science degree from The Pennsylvania State University in 1980. She is a Certified Public Accountant and a member of The American Institute of Certified Public Accountants. Ms. McAvoy served as an advisor to The Institute for Excellence in Corporate Governance at The University of Texas at Dallas from its inception in 2002 through 2011. We believe that Ms. McAvoy's expertise garnered over 31 years with Deloitte brings a valuable perspective to our Board on accounting, financial and internal control matters. She is Chairperson of the Audit Committee and a member of the Nominating and Governance Committee and the Compensation Committee.

Stratton J. Nicolaides served as CEO of the Company from April 2000 to September 2015, and served as COO from April 1999 until March 2000, and as Chairman of the Board since December 1999. In 2007, Mr. Nicolaides began serving as a director of the Taylor Hooton Foundation, a non-profit organization formed to fight steroid abuse by America's youth. With his years of experience in the wireless communication industry, including more than fifteen years of senior management experience at Numerex , we believe that Mr. Nicolaides' deep industry knowledge and expertise in operations, product development, competitive intelligence and corporate strategy provides the Board with significant insight across a broad range of issues critical to our business.

Jerry A. Rosewas appointed to the board in 2013 and brings a successful track record of leading and driving growth in key businesses such as General Electric (GE) and United Technologies Corporation (UTC). He was a Vice President of Product Management of GE Security, Inc. since June 2007 until 2010 and was instrumental in the sale of GE Security to UTC. In 2010, Mr. Rose joined UTC as Vice President of Global Product Management. Mr. Rose held several global leadership positions during his 26 years at GE including Executive Officer roles in GE's Appliances, Lighting and Security businesses. We believe his product development and management knowledge and his leadership in global strategy and integration is a valuable addition to the Board. Mr. Rose currently serves as Chair of the Nominating and Governance Committee and as a member of the Compensation Committee.

Andrew J. Ryanhas served as a director of the Company since May 1996. Mr. Ryan currently practices law with The Ryan Law Group (TRLG) a law firm he founded in May 2014. Prior to TRLG, he practiced law with the firm of Salisbury & Ryan since August 1994. Mr. Ryan serves as the Board designee of Gwynedd Resources, Ltd. in accordance with its contractual right to designate a member of the Board. Mr. Ryan's wide-ranging legal practice and breadth of experience gained with his more than 20 years of experience with the Company has been of particular value in assisting the Board with evaluating business and strategic issues. Mr. Ryan provides the Board with significant operational insights regarding strategies and corporate governance issues.

Eric Singer was appointed as Director and a member of the Audit and Nominating and Governance Committee in March of 2016. Mr. Singer serves as the designee of VIEX Capital Advisors, LLC pursuant to the agreement described below. Mr. Singer has served as the managing member of each of VIEX GP, LLC, the general partner of VIEX Opportunities Fund, LP, and various VIEX Opportunities Funds, as well as certain other investment funds since May 2014. Mr. Singer served as co-managing member of Potomac Capital Management III, LLC from March 2012 until September 2014, and General Partner of several of its related entities from May 2009 until September 2014. From July 2007 to April 2009, Mr. Singer was a senior investment analyst at Riley Investment Management. He has served on the board of directors of TigerLogic Corporation since January 2015 and IEC Electronics Corp., since February 2015. Singer previously served as a director at Meru Networks, Inc. from January 2014 until January 2015, PLX Technology, Inc. from December 2013 until its sale in August 2014, Sigma Designs, Inc. from August 2012 until December 2013, including as its Chairman of the Board from January 2013 until December 2013, and Zilog Corporation from August 2008 until its sale in February 2010. Mr. Singer holds a B.A. from Brandeis University. Mr. Singer brings to the Board experience as a director at other public companies and significant financial and investment experience, including capital allocation and transactional experience.

Marc Zionts was appointed Chief Executive Officer of Numerex Corp. in September of 2015. Mr. Zionts, a telecom executive and entrepreneur over three decades, focuses on developing emerging technologies and services companies in high growth markets. Mr. Zionts has previously led 6 companies since 1987, resulting in 5 trade sales and 1 IPO. Most recently, Mr. Zionts was the President and CEO of Aicent, sold to Syniverse. Prior to starting his first company in 1987, Mr. Zionts worked for GTE (now Verizon). Mr. Zionts earned his Bachelor’s degree and Master’s degree in Management from the Georgia Institute of Technology and remains active at Georgia Tech as an Alumni Mentor. Mr. Zionts is also an Independent Board Director for Pivot 3, based in Austin, TX, TEOCO, a TA Associates portfolio company, based in Fairfax, VA, and Friends of the Earth, a Washington, D.C. based environmental group. Mr. Zionts provides insight to the Board regarding day-to-day operations, customer information, competitive intelligence, general trends in our industry as well as financial results.

Family Relationships

There are no family relationships among any of our directors or executive officers.

Right to Designate Director and Board Composition

On March 30, 2016, the Company entered into an agreement with Vertex Opportunities Fund, LP – Series One, Vertex Special Opportunities Fund II, LP, Vertex Special Opportunities Fund III, LP, Vertex GP, LLC, Vertex Special Opportunities GP II, LLC, Vertex Special Opportunities GP III, LLC, Vertex Capital Advisors, LLC, and Eric Singer (collectively, “VIEX”) under which the Company agreed:

The Company previously entered into an agreement providing Gwynedd Resources Ltd. (Gwynedd) the right to designate one director to the Board. Additionally, if the Board consists of more than seven directors, Gwynedd, at its option, may designate one additional director. Any designee’s appointment will be subject to the exercise by the Board of its fiduciary duties and the approval of the Company’s shareholders upon the expiration of any appointed term at the next annual meeting of shareholders. Gwynedd waived its right to appoint an additional director during the Standstill Period. Gwynedd’s right to designate a director will cease at such time as Gwynedd’s equity interest in the Company drops below 10% of the outstanding shares of Common Stock. Mr. Ryan currently serves as Gwynedd’s sole designee on the Board. In connection with the Company’s agreement with VIEX, Gwynedd agreed to vote all its shares of Common Stock in favor of the election of the 2016 Nominees.

Section 16(a) Beneficial Ownership Compliance

Under Section 16(a) of the Exchange Act, the Company’s directors, executive officers and persons who are the beneficial owners of more than 10% of the outstanding Common Stock are required to report their beneficial ownership of Common Stock and any changes in that ownership to the SEC. Based solely on a review of the copies of reports furnish to, or filed by, us and written representations that no other reports were required, we believe that during FY 2015, the Company’s officers and directors complied with all applicable Section 16(a) filing requirements, except as follows:

There was one late Form 4 filing in FY 2015 as follows: July 29, 2015 for Jeffrey Smith for grants of share-based compensation.

Stock Ownership and Holding Requirements

In March 2015, we instituted a named executive officer stock ownership policy to more closely align the interests of our Named Executive Officers (NEOs) with those of our stockholders. The stock ownership policy requires the CEO to own stock worth at least 3.0 times his base salary and all other NEOs to own stock worth at least 1.0 times their base salary. NEOs have five years from the date of adoption of the policy to meet their respective stock ownership guideline.

Compensation Claw Back Policy

In March 2015, we adopted a compensation “claw back” policy applying to NEOs. In the event of a material restatement of the Company’s financial results, the Board of Directors, after considering the facts and circumstances of the restatement, may take action against the NEO including recoupment of all or part of any compensation paid to the NEO that was based up on the achievement of the financial results that were subsequently restated.

Board Committees

The Board has a standing Audit Committee (the “Audit Committee”), Compensation Committee (the “Compensation Committee”), and Nominating and Corporate Governance Committee (the “Nominating Committee”). The Board has determined that all committee chairs and committee members are independent under the applicable NASDAQ and SEC rules. The members of each of the Company’s committees during FY 2015 are identified in the table below. Mr. Singer was appointed as a member of the Nominating and Audit committees in connection with the Company’s agreement with VIEX on March 30, 2016.

Audit Committee

The Board determined that Sherrie McAvoy, Chairperson of the Audit Committee during FY 2015, is an “audit committee financial expert” as defined by the SEC. The principal functions of the Audit Committee are to: (a) assist in the oversight of the integrity of the Company’s financial statements, the Company’s internal controls related to compliance with legal and regulatory requirements, the qualifications and independence, as well as the performance, of the Company’s independent accountants; (b) approve the selection, appointment, retention and/or termination of the Company’s independent accountants, as well as approving the compensation thereof; and (c) approve all audit and permissible non-audit services provided to the Company and certain other persons by such independent accountants.  The Audit Committee Charter is available on the Company’s website athttp://www.numerex.com/about/corporate-governance.

Compensation Committee

The Compensation Committee is responsible primarily for reviewing the compensation arrangements for the Company's executive officers, including the CEO, and for formulating the Company's equity compensation plans. The Compensation Committee Charter is available on the Company’s website at http://investor.numerex.com/corporate-governance.cfm. All of the members of the Compensation Committee have been determined by the Board to be independent under applicable NASDAQ and SEC rules.

IfNominating and Corporate Governance Committee

The Nominating Committee assists the Board in identifying qualified individuals to become directors, determines the composition of the Board and its committees, monitors the process to assess the Board's effectiveness and helps develop and implement the Company's Corporate Governance Guidelines. The Nominating Committee reviews the performance of the Board, its committees and individual members of the Board. The Nominating Committee also considers nominees for election as directors proposed by shareholders. The Nominating Committee Charter specifies that the composition of the Board should reflect experience in the following areas: finance, compensation, sales and marketing, technology and production. The Nominating Committee Charter is available on the Company’s website athttp://investor.numerex.com/corporate-governance.cfm.

Code of Ethics

The Company has a Code of Ethics and Business Conduct (the “Code”) that applies to the Company’s directors, officers, and employees, including the Company’s NEOs. The Code is available on the Company’s website at.http://investor.numerex.com/corporate-governance.cfm. We will disclose any future amendments to, or waivers from, provisions of these ethics policies and standards on our goodwill or other intangible assets become impaired wewebsite as promptly as practicable, as may be required to record a significant charge to earnings.under applicable SEC and NASDAQ rules.

Director Independence

The Board has determined that all Board members, excluding Mssrs. Nicolaides, Zionts, and Ryan, are independent under applicable NASDAQ and SEC rules. Furthermore, the Board has determined that each member of each of the committees of the Board is independent within the meaning of NASDAQ’s and the SEC’s director independence standards. In making this determination, the Board solicited information from each of the Company’s directors regarding several factors, including whether such director, or any member of his immediate family, had a direct or indirect material interest in any transactions involving the Company, was involved in a debt relationship with the Company or received personal benefits outside the scope of such person’s normal compensation. The Board considered the responses of the Company’s directors, and independently considered all other material information relevant to each such director in determining such director’s independence under applicable SEC and NASDAQ rules.

ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis explains the objectives, strategy and features of our executive compensation program, and it describes how the compensation of our executive management aligns with our corporate objectives and shareholder interests. Although our executive compensation program is generally applicable to all our senior executives, this discussion and analysis focuses primarily on the program as applied to our “Named Executive Officers” (“NEOs”): the CEO, the CFO and the other officers included in the “Summary Compensation Table”.

EXECUTIVE SUMMARY

The Company requires a highly skilled, motivated and experienced executive team to lead its efforts to develop and sell complex end-to-end IoT solutions that help customers monitor processes, equipment, condition or location. We have significant intangible assets, including goodwillmust make investments that might not pay off for several years, while managing costs and intangible assets with indefinite lives, which are susceptiblestaying ahead of a market that changes rapidly due to valuation adjustments as a result of changesadvances in various factors or conditions. The most significant intangible assets are customer relationships, patents and core technology, completed technology and trademarks. Customer relationshipscompetitive conditions.

While our business offers great opportunities, as the uses of our products and services are amortizedbroad-ranging, there is potential for over-investment in initiatives that do not find a market. Consequently, our FY 2015 growth strategy maintained a balance of revenue and earnings targets.

During FY 2015, Numerex transitioned to a new leadership team and began the process of revisiting its growth strategy. While that process was completed in FY 2015, with one exception, the new leadership team was hired under the same compensation strategy and financial targets set earlier in FY 2015. Annual cash bonuses were based on an accelerated basis based uponachieving revenue and Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, excluding the pattern in whicheffect of equity-based compensation and non-operational items) goals set by the economic benefitsCompensation Committee at the beginning of customer relationships are being utilized. Other identifiable intangible assets are amortized on a straight-line basis over their estimated useful lives. We assess the potential impairment of intangible assets on an annual basis as well as whenever events or changes in circumstances indicateFY 2015. The one exception is that the carrying value may not be recoverable. During the year ended December 31, 2015, we recorded charges of $2.7 millionnew Chief Revenue Officer had a bonus target based purely on revenue targets for the impairment of goodwill and other intangible assets.entire company for the period subsequent to his hire.

Factors that may be considered a change in circumstances, indicating thatNo formal compensation benchmarking was used to determine pay for the carrying valuenew leadership team. Instead, the compensation committee of the Board (“Compensation Committee”) negotiated the employment terms with the new CEO and assessed competitiveness by considering the compensation package of the former CEO and relying on the business experience of Compensation Committee members. Similarly, the new CEO negotiated the employment terms with each new member of his team assessing competitiveness using his business experience, the pay of similarly situated prior executives at Numerex with advice and approval from the Compensation Committee.

During FY 2015, our results fell short of our goodwill or long-lived assets may notbonus targets and, consequently, with the exception of the Chief Revenue Officer, neither any prior NEO nor any newly hired NEO earned an incentive cash award under our 2015 non-equity incentive plan. Our Chief Revenue Officer received a fourth quarter bonus assessed at 75% of target (prorated for his hire date).

THE ROLE OF THE COMPENSATION COMMITTEE

The three-member Compensation Committee oversees the Company’s executive compensation program. All of the members of the Compensation Committee have been determined by the Board to be recoverable, include the following:independent under applicable NASDAQ and SEC rules.

The Compensation Committee’s responsibilities include:

Future adverse changes in these or other unforeseeable factors could result in material impairment charges that would negatively impact our results of operations and financial positionThe Company’s CEO participates in the reporting period identified.Compensation Committee’s meetings and provides input into compensation decisions at the Compensation Committee’s request. In particular, the Company’s CEO participates by making recommendations on NEO compensation and input on objectives (other than for himself). The CEO’s compensation is determined solely by the Compensation Committee.

Our internal control over financial reporting may not be effective.The Use of Compensation Consultants

In FY 2015, the committee engaged Deloitte Consulting, LLP as its compensation consultant. During FY 2015, Deloitte provided the process of completingCompensation Committee with ad hoc advice on pay issues, equity targets for new hires and in reviewing the audit of our financial statementsnew CEO’s employment agreement. The Committee is solely and directly responsible for the period ended December 31, 2015, management became awareappointment, compensation and oversight of the existenceconsultant. The Committee considers a number of material weaknesses in the design and operation of the internal control over financial reporting related to the evaluation process for impairment of goodwill and other intangible assets, and capitalization of internally developed softwarefactors that could adversely affect our ability to record, process, summarize and report financial data consistent with our assertions inDeloitte’s independence including that the financial statements. We may also identify additional material weaknesses and significant deficiencies inconsultant provides no other services for Numerex other than its engagement by the future. If we fail to maintainCommittee. Based on this review, the adequacy of our internal controls, including any failure to implement or difficulty in implementing required new or improved controls, our business and results of operations could be harmed,Committee has determined the results of operations we report could be subject to adjustments, we could incur further remediation costs, we could failconsultant’s work for the Committee to be able to provide reasonable assurance as to our financial results or the effectivenessfree from conflicts of our internal controls, or fail to meet our reporting obligations under SEC regulations on a timely basis and there could be a material adverse effect on the price of our common stock.interest.

The compensation consultant met as needed with the Compensation Committee and has direct access to the Compensation Committee chair during and between meetings.

The Use of Compensation Survey Data and Peer Companies

During FY 2015, the Compensation Committee did not conduct any formal competitive pay benchmarking. Instead the competitiveness of the pay offered to the newly hired leadership team was based on negotiations, reference to general compensation trends, the pay of prior similarly situated executives at Numerex, and the broad business experience of members of the Compensation Committee.

COMPENSATION OBJECTIVES AND INDIVIDUAL ELEMENTS

The Committee does not use any particular formula to determine specific allocations among the key elements of NEO compensation: base, annual cash bonus and equity. Instead, the Committee looks to ensure that NEO compensation effectively drives a mix of short- and long-term performance and is aligned with shareholders’ long-term interests.

The following describes the general purpose of each element of compensation and how the Committee made FY 2015 pay decisions around each element.

Elements of Compensation

Base Salaries

We strive to provide competitive base salaries that allow us to attract and retain a high performing leadership team at a reasonable level of fixed costs. Base pay levels generally are set with reference to what the Compensation Committee determines to be market competitive but recognizes that exceptions can exist to reflect a variety of factors such as skills and experience, individual performance track record, the difficulty of replacement and affordability. Base salaries are reviewed annually and at other times if an executive officer’s responsibilities have materially changed or other special circumstances warrant a review.

Non-Equity Incentive Based Awards

The annual “non-equity incentive based awards,” or cash bonuses, are designed to maintain NEO focus and motivation around annual activities deemed critical to growing shareholder value. In FY 2015, we continued our focus on a balance of growing both revenue and earnings and our bonus plan was structured to support that.

With the exception of our Chief Revenue Officer, the incentive awards pay out at targeted levels if revenue and Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, excluding the effect of equity-based compensation and non-operational items) achieve the challenging growth goals budgeted for the fiscal year. Goals are based on company-wide results to encourage alignment among the business units. The Committee determined the revenue and Adjusted EBITDA budgets prior to the beginning of the fiscal year. Our Committee derives compensation targets from the same process by which we develop our internal annual budget for the current fiscal year and projections for future fiscal years. The Committee sets targets that it believes will be challenging for the NEOs to achieve and will require significant growth and progress by the Company in furtherance of its business objectives. The Chief Revenue Officer’s targets were based solely on achievement of company-wide revenue goals determined for the period subsequent to his hire.

The targeted bonus is payable only if both revenue and Adjusted EBITDA reach at least the budgeted goal. An additional bonus, up to a maximum, is payable, prorated on a straight line basis, if the results are between the budget and the “stretch” target. The FY 2015 targets were $121.4 million for revenue and $19.7 million for Adjusted EBITDA (prior to bonus payments). Our targets were not met in either of these areas and no bonuses were paid relative to these metrics. The all-company revenue goal for the Chief Revenue Officer was established at $19.9 million for the fourth quarter and Numerex’s total revenue was 94.5% of the goal resulting in a bonus payout of 75% of the CRO’s target.

The Compensation Committee decided to keep the FY 2014 bonus targets in place for the prior NEOs during FY 2015. The newly hired NEOs, with the exception of the Chief Revenue Officer as noted above, had the same bonus targets as the similarly situated prior NEOs.

Equity Awards

We use equity compensation as a long-term incentive to enhance the alignment of NEO compensation with shareholder returns and as a retention tool focused on top executives that have the most direct line of sight to results.

In FY 2014, the Company established a range of annual target equity grants based on those recommended as competitive by our Independent Compensation Consultant. These targets remain unchanged for FY 2015 as follows:

The primary form of equity compensation awarded by the Committee is nonqualified stock options and restricted share units (RSUs) with the granted value split between the two. While the Committee references the competitive annual target range, the number of stock options and RSUs awarded also reflects the Committee’s qualitative assessment of a variety of factors including the Company’s overall financial performance, individual contributions towards that performance, prior grants and holdings, and individual contributions to particular strategic initiatives or special projects.

If our efforts, or those of third party service providers, to maintain the privacyPerquisites and security of our customer, confidential, or sensitive information are not successful at preventing a significant data breach or cyber-attack, we could incur substantial additional costs, become subject to litigation, enforcement actions or regulatory investigation, and suffer reputational damage.

Our business, like that of many others, involves the receipt, storage and transmission of personal information and payment card information of our customers, confidential information about our employees and suppliers, and other sensitive information about our company, such as our business plans, transactions and intellectual property (confidential information). In addition, we provide confidential, proprietary and personal information to third party service providers when it is necessary to pursue business objectives.Other Benefits

The methods usedCompany does not provide its NEOs with perquisites or employee benefits that are not generally available to obtain unauthorized access, disableother full-time employees. These include a medical, dental, and life insurance plans and a 401(k) that matches 50% of an employee’s contributions up to the first 6% of the employee’s salary subject to an overall dollar cap. The Company does not provide a pension plan or degrade service,a supplemental retirement plan for its named executive officers or sabotage systems are constantly changing and evolving, and may be difficult to anticipate or detect for long periods of time. Cyber-attacks, such as denial of service, advanced persistent threats,any other malicious attacks, unauthorized access or distribution of confidential information by third parties or employees, errors or breaches by third party suppliers, or other breaches of security could disrupt our internal systems and applications, impair our ability to provide services to our customers, and protect the privacy and confidentiality of our sensitive information. Such attacks against companies are occurring with greater frequency and may be perpetrated by a variety of groups or persons, including those in jurisdictions where U.S. law enforcement is or has been unable to effectively address such attacks.employees.

Although we regularly review our processesDuring FY 2015, the Company implemented an Incentive Share Purchase Incentive Program in which all employees, including NEOs, are eligible to participate. The Plan allows employees to elect to “purchase” Numerex shares through an irrevocable annual payroll reduction. Shares are granted at January 1, 2016 and procedureshave a value of 150% of the annual payroll reduction. The entire share grant, including the additional 50%, vests at 50% per year over two years. Vesting is prorated upon involuntary termination of employment.

COMPENSATION DECISIONS FOR FY 2015

Pay for the newly hired CEO was negotiated by the Compensation Committee. For the other newly hired NEOs, pay was negotiated between the CEO and the NEOs with Compensation Committee approval. There were no base pay adjustments or bonuses paid to protectany former NEO. Former NEOs received an equity grant at the target level during FY 2015.

As noted above, the Chief Revenue Officer received a bonus in FY 2015 based on his performance against unauthorized accessrevenue targets for the period subsequent to or use of sensitive data and to prevent data loss, the ever-evolving threat landscape requires us to continually evaluate and adapt our systems and processes. We cannot assure you that the security measures and preventive actions we take will be adequate to repel a significant attack, prevent information security breaches or the misuses of data, unauthorized access by third parties or employees, or exploits against third party supplier environments. We may incur significant costs, be subject to regulatory investigations, sanctions and private litigation, experience disruptions to our operations or may suffer damage to our reputation that negatively impacts customer confidence as a consequence of such attacks. Although we and our third party service providers have been subjected to unsuccessful cyber-attackshis hire in the past that have not caused significant harm to our company, past and future cyber-attacks may materially adversely affect our business, results of operations and financial condition.4^th quarter.

We may be subject to breaches of our information technology systems, which could damage our reputation, vendor and customer relationships, and our customers’ access to our services.SUMMARY COMPENSATION TABLE

Our business requires usThe following table sets forth certain information with respect to usecompensation for the fiscal years ended December 31, 2015, 2014 and store customer, employee, and business partner personally identifiable information. This may include names, addresses, phone numbers, email addresses, contact preferences, tax identification numbers, and payment account information. While we require user names and passwords2013 earned by or paid to the Company’s named executive officers, as determined in order to access our information technology systems, and also use encryption and authentication technologies to secure the transmission and storage of data, these security measures may be compromised as a result of third-party security breaches, employee error, malfeasance, faulty password management, or other irregularity, and result in persons obtaining unauthorized access to our data or accounts. Third parties may attempt to fraudulently induce employees or customers into disclosing user names, passwords or other sensitive information, which may in turn be used to access our information technology systems. If a computer security breach affects our systems or results in the unauthorized release of personally identifiable information, our reputation and brand could be materially damaged and use of our products and services could decrease. Accordingly, we would also be exposed to a risk of loss or litigation and possible liability, which could result in a material adverse effect on our business, results of operations and financial condition.

A natural disaster, terrorist attack, or other catastrophic event could diminish our ability to provide service and hardware to our customers and our revenues may be impacted by weather patterns and climate change.accordance with applicable SEC rules.

Events such as severe storms, tornadoes, earthquakes, floods, solar flares, industrial accidents, and terrorist attacks including, without limitation, the actions of computer hackers, could damage or destroy both our primary and redundant facilities as well as the facilities and operations of third party cellular and satellite carriers and hardware suppliers we are reliant on, which could result in a significant disruption of our operations. Further, in the event of an emergency, the telecommunications networks that we rely upon may become capacity constrained or preempted by governmental authorities. We may also be unable, due to loss of personnel or the inability of personnel to access our facilities, to provide some services to our customers or maintain all of our operations for a period of time. With respect to our satellite-based mobile asset tracking solution in particular, sales may be influenced by weather patterns and climate change. For example, if government agencies and emergency responders anticipate relatively “mild” weather over one or more storm seasons on account of cyclical weather patterns or long-term climate change, they may buy fewer of our mobile asset tracking units for deployment in support of disaster response operations.

We are dependent on third party telecommunications service providers and other suppliers, including domestic and international cellular and satellite carriers and hardware manufacturers, the loss of any one of which could adversely impact our ability to supply or service our customers.

Our long-term success depends on our ability to operate, manage, and maintain a reliable and cost effective network, as well as our ability to keep pace with changes in technology. As described above, several wireless carriers have announced their intention to discontinue their 2G networks and fully deploy 3G, 4G and LTE networks. We, through select network service providers, intend to continue supporting 2G through at least 2020. The loss or disruption of key telecommunications infrastructure and key wireless and satellite-based network services supplied to us by carriers in the U.S., Canada, and other locations would unfavorably impact our ability to adequately service our customers. If we experience technical or logistical impediments to our ability to transfer traffic to third party facilities, or if our third party carriers experience technical or logistical difficulties of their own, such as disruptions to their supply chains caused by weather events, natural disasters, or terrorism, and are unable to carry our network traffic, we may not achieve our revenue goals or otherwise be successful in growing our business. We may not be able to continue providing service to 2G customers and may not be able to successfully transition 2G customers to other services. Given our dependence on cellular and satellite telecommunications service providers, risks specific or unique to their technologies should also be viewed as having the potential to impair our ability to provide services. For example, the loss or malfunction of a cell tower, a satellite, or a satellite ground station, could impair our ability to provide services.

We outsource our hardware manufacture to independent companies and do not have internal manufacturing capabilities to meet the demands of our customers. Any delay, interruption, or termination of our hardware manufacture could harm our ability to provide our solutions to our customers and, consequently, could have a material adverse effect on our business and operations. Our hardware manufacture requires specialized know-how and capabilities possessed by a limited number of enterprises. Consequently, we are reliant on just a few manufacturers. If a key supplier experiences production problems, financial difficulties, or has difficulties with its supply chain as a result of severe weather, a natural disaster, terrorism, or other unforeseen event, we may not be able to obtain enough units to meet demand, which could result in failure to meet our contractual commitments to our customers, further causing us to lose sales and generate less revenue. 

Our operations and systems capabilities are dependent on the use of cloud services and disruptions in access to cloud services could cause both revenue impacts and degradation of our levels of customer service.

We rely heavily on both a private cloud service that we have developed and maintain as well as various public cloud services provided by third parties. In all cases, while we and third parties maintain redundant systems and backup databases and applications software in these redundant sites and we don’t expect to experience downtime during which we or our customers will lack access to the cloud services, it is possible that access to the software capabilities could become impaired if the cloud service goes down and becomes inaccessible. In that event, our customer service would be impaired and this could affect our reputation as well as potentially our revenue generating capability. The extent to which cloud service accessibility could be impaired would depend upon specific facts related to the cause of the downtime which is prospectively indeterminate. However, in the event of a prolonged period of inaccessibility to our cloud services, an unfavorable material impact on our revenues and our financial results from operations may occur.

We face substantial inventory and other asset risk in addition to purchase commitment cancellation risk.

We record a write-down for product and component inventories that have become obsolete or exceed anticipated demand or net realizable value and accrue necessary cancellation fee reserves for orders of excess products and components. We also review our long-lived assets for impairment whenever events or changed circumstances indicate the carrying amount of an asset may not be recoverable. If we determine that impairment has occurred, we record a write-down equal to the amount by which the carrying value of the assets exceeds its fair market value. Although we believe the provisions related to inventory, other assets and purchase commitments are currently adequate, no assurance can be given that we will not incur additional related charges given the rapid and unpredictable pace of product obsolescence in the industries in which we compete. Such charges could materially adversely affect our financial condition and operating results.

We are contractually obligated to provide certain of our manufacturers with forecasts of our demand for components of our hardware solutions. Specific terms and conditions vary by contract, however, if our forecasts do not result in the production of a quantity of units sufficient to meet demand we may be subject to contractual penalties under certain of our contracts with our customers. By contrast, overproduction of units based on forecasts that overestimate demand could result in an accumulation of excess inventory that, under some of our contracts with our customers, would have to be managed at our expense thus adversely impacting our margins.

Excess inventory that becomes obsolete or that we are otherwise unable to sell would also be subject to write-offs resulting in adverse effects on our margins. Because our markets are volatile, competitive and subject to rapid technology and price changes, there is a risk that we will forecast incorrectly and order excess or insufficient amounts of components or products, or not fully utilize firm purchase commitments. Our financial condition and operating results could in the future be materially adversely affected by our ability to manage our inventory levels and respond to short-term shifts in customer demand patterns.GRANTS OF PLAN-BASED AWARDS

We provide product warrantiesThe following table summarizes, except as noted, all plan based awards that the Company’s NEOs were eligible to our customers which could create a substantial demand on operations to process and could result in a material impact on our results.receive for FY 2015 performance. With the exception of Mr. Costello, none of the Company’s NEO received an award payout under the Non-Equity Incentive Plan

STOCK OPTION EXERCISES AND STOCK VESTED

We are required to provide repair or replacement services onThe following table shows the number of shares acquired upon exercise of stock options and vesting of performance shares for each of our equipment under managed service and warranty programs we offer to our customers. While our warranty obligations are passed through to our vendors who manufacture equipment on our behalf and, in the past, these claims have had immaterial impact on our financial results from operations, there may be events in the future where we are required to take back equipment from customers for which we may be required to absorb the cost of these returns, especially under customers’ managed service arrangements. Consequently, there could be a financial cost in the future related to such returns that could cause a material impact on our financial results from operations.named executive officers during FY 2015.

We may experience quality problems from time to time, resulting in decreased sales and operating margins and the loss of customers.

While we test our products and services, they may still have errors, defects, or bugs that we find only after commercial production has begun. In the past, we have experienced errors, defects, and bugs in connection with new solutions. Our customers may not make purchases from us, or may make fewer purchases, if they are concerned about such problems. Furthermore, correcting problems could require additional capital expenditures, result in increased design and development costs, and force us to divert resources from other efforts. Failure to remediate problems could result in lost revenue, harm our reputation, and lead to costly warranty or other legal claims against us by our customers, and could have a material adverse impact on our financial condition and operating results. Historically, the time required for us to correct problems has caused delays in product shipments and has resulted in lower than expected revenues.

Interruptions in service or performance problems, no matter what their ultimate cause, could undermine confidence in our services and cause us to lose customers or make it more difficult to attract new customers. In addition, because most of our customers are businesses, any significant interruption in service could result in lost profits or other losses to our customers. It may also be difficult to identify the source of the problem due to the overlay of our network with cellular, and/or satellite networks and our network’s reliance on those other networks. The occurrence of hardware or software errors, regardless of whether such errors are caused by our hardware, solutions or services, or our internal facilities, may result in the delay or loss of market acceptance of our solutions, and any necessary revisions may result in significant and additional expenses. Although we attempt to disclaim or limit our liability in our agreements with our customers, a court may not enforce these limitations, which could expose us to substantial losses. While some portion of these claims and liability may be insured, we could face a material loss that could substantially impact or eliminate earnings and could materially impair cash flow.

Adverse macroeconomic and market conditions could negatively affect our customers’ current financial condition.

We provide enterprise solutions and solutions that are resold by our customers – primarily value-added resellers whose customers are end users of our solutions and distributors who sell to other resellers of our solutions. Many of our customers, especially value-added resellers, operate on narrow margins and are affected by overall economic conditions. Current economic conditions, while having improved recently, may deteriorate and negatively impact demand for our customers’ solutions, reducing their demand for our solutions. Our customers may also face higher financing and operating costs. If current economic conditions do not continue to improve, or alternatively, worsen, we may experience reduced revenue growth or a decrease in revenues and an increase in expenses, particularly in the form of bad debts on the part of our customers. All of these and other macroeconomic factors could have a material adverse effect on demand for our solutions and on our financial condition and operating results.

Our operations are also influenced by the economic strength of the housing sector, and to a lesser extent, the oil and gas, and automotive sectors. If improvements in the housing sector are not sustained, sales of our residential and commercial alarm monitoring solutions may be impaired. If overall conditions do not continue to improve, residential and commercial consumers may decide to cancel wireless monitoring services in an effort to eliminate expenses viewed as discretionary or non-critical. Recent declines in the price of oil have depressed demand for certain of our oil and gas products and solutions, and ongoing low oil prices may continue or exacerbate the decline in this market segment. Similarly, a reversal of the recent improvement in vehicle sales would negatively impact sales of our vehicle tracking solutions.

We experience long sales cycles for some of our solutions.

Certain of our product offerings are subject to long sales cycles in view of the need for testing of our hardware solutions and services in combination with our customers’ applications and third parties’ technologies, the need for regulatory approvals and export clearances, and the need to resolve other complex operational and technical issues. For example, in the government contracting arena, longer sales cycles are reflective of the fact that government contracts can take months or longer to progress from a “request for proposal” to a finalized contract document pursuant to which we are able to sell a finished product or service. Delays in sales could cause significant variability in our revenue and operating results for any particular period. For that reason, quarter-over-quarter comparisons of our financial results may not always be meaningful.

A portion of our future revenue, in particular the revenue deriving from our sale of mobile asset and personal tracking solutions, may be derived from contracts with the U.S. government, state governments, or government contractors. Those contracts are subject to uncertain funding.OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The funding of government programs is uncertain and, at the federal level, is dependent on continued congressional appropriations and administrative allotment of funds based on an annual budgeting process. We cannot assure that current levels of congressional funding for programs supporting by our offerings will continue, particularly as result of the Budget Control Act and the mandated substantial automatic spending cuts which began in 2013 and will last for ten years, unless Congress modifies these cuts. In particular, a significant portion of our revenues from the sale of satellite-based tracking solutions through our location-based services division has been derived from sales made by us indirectly as a subcontractor to a prime government contractor that has the direct relationship with the U.S. government. In addition, these cuts could adversely affect the viability of the prime contractor of our program. If the prime contractor loses businessfollowing table sets forth certain information with respect to which we serve as a subcontractor, our government business would be hurt. the outstanding equity awards at December 31, 2015 for each of the named executive officers.

Our operating results may be negatively affected by developments affecting government programs generally, including the following:

These developments and other factors could cause governmental agencies to reduce their purchases under existing contracts, to exercise their rights to terminate contracts at-will or to abstain from renewing contracts, any of which would cause our revenue to decline and could otherwise harm our business, financial condition and results of operations. 

Government contracts contain provisions that are unfavorable to us.

Government contracts contain provisions, and are subject to laws and regulations, that give the government rights and remedies not typically found in commercial contracts. These provisions may allow the government to

If the government terminates a contract for convenience, we may recover onlyPOTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

The employment of all of our incurred or committed costs, settlement expenses and profit on work completed priornamed executive officers is at will. However, they are entitled to certain severance benefits upon their termination of employment under certain defined circumstances, as described further below.  There are no payments made to the termination. If the government terminates a contract for default, we may not recover even those amounts, and instead may be liable for excess costs incurred by the governmentnamed executive officers upon voluntary retirement, voluntary resignation or upon death or disability.

The Company’s named executive officers have taken professional risks in procuring undelivered items and services from another source. We may experience performance issues on some of our contracts. We may receive show causeleaving prior employers or, cure notices under contracts that, if not addressed to the government’s satisfaction, could give the government the right to terminate those contracts for default or to cease procuring our services under those contracts in the future.case of former NEOs, made major contributions towards building the Company into the enterprise that it is today. The Company believes that it is important to protect them in the event of an involuntary termination. Further, it is the Company’s belief that the interests of its shareholders will be best served if the interests of the Company’s senior management team are aligned with them, and providing change in control benefits should eliminate, or at least reduce, the reluctance of senior management to pursue potential change in control transactions that are in the best interests of the Company’s shareholders.

Agreements with government agencies may lead to regulatory or other legal action against us including, without limitation, claims against us underAccordingly, the Federal False Claims Act or other federal statutes. These claims could result in substantial fines and other penalties.

We must comply with a complex set of rules and regulations applicable to government contractors and their subcontractors. Failure to comply with an applicable rule or regulation could result in our suspension of doing business with the government, or with the prime government contractors, or cause us to incur substantial penalties. OurCompany has entered into agreements with the U.S. governmentNEOs that provide the following benefits:

In all cases, all unvested equity grants are subjectvested upon a change-in-control.

Pursuant to substantial financial penaltiesthose agreements, “termination without cause” is deemed to be a “separation from service” as defined under the Civil Monetary Penalties Act and the False Claims Act and, in particular, actions under the False Claims Act’s “whistleblower” provisions. Private enforcement of fraud claims against businesses on behalfSection 409A of the U.S. government has increased dueInternal Revenue Code of 1986 (“the Code”). The concept of “resignation for good reason” encompasses termination of employment following a diminution in large part to amendments to the False Claims Act that encourage private individuals to sue on behalf of the government. These whistleblower suits by private individuals, known as qui tam actions, may be filed by almost anyone, including present and former employees. The False Claims Act statute provides for treble damages and up to $11,000 per claim on the basis of the alleged claims. Prosecutions, investigationstitle, responsibility, orqui tam actions could have a material adverse effect on our liquidity, financial condition and results of operations.

Finally, various state false claim and anti-kickback laws also may apply to us. Violation of any of the foregoing statutes can result in criminal and/or civil penalties that could have a material adverse effect our business.

Economic and market conditions may adversely affect our business and financial performance, salary level as well as our access to financing on favorable terms or at all.

Our business and financial performance are sensitive to changes in general economic conditions, including interest rates, consumer credit conditions, consumer debt levels, consumer confidence, ratesrequired relocation outside of inflation (or concerns about deflation), unemployment rates, economic growth, energy costs and other macro-economic factors. Difficult, or worsening, general economic conditions could have a material adverse effect on our business, financial condition and results of operations.

Market volatility, economic uncertainty, and weak economic conditions may materially adversely affect our business and financial performance in a number of ways. Our services are available to a broad customer base, a significant segment of which may be more vulnerable to weak economic conditions. We may have greater difficulty in gaining new customers within this segment and existing customers may be more likely to terminate service due to an inability to pay.

Weak economic conditions and credit conditions may also adversely impact our suppliers and customers, some of which may be experiencing cash flow or liquidity problems or are unable to obtain or refinance credit such that they may no longer be able to operate. Any of these could adversely impact our ability to distribute, market, or sell our products and services.

In addition, instability in50 miles from the global financial markets could lead to periodic volatility in the credit, equity and fixed income markets. This volatility could limit our access to the credit markets, leading to higher borrowing costs or, in some cases, the inability to obtain financing on terms that are acceptable to us, or at all.Company’s current headquarters location.

We may require additional capitalA “change in control” as defined in the change in control agreements is deemed to fund further development, and our competitive position could declineoccur if we are unable to obtain additional capital,(a) the Company consummates a sale, transfer, assignment, exchange, or access the credit markets.

To address our long-term capital needs, we intend to continue to pursue strategic relationships that would provide resources for the further developmentother conveyance of our product candidates. There can be no assurance, however, that these discussions will result in relationshipsall or additional funding. In addition, we may seek to raise capital through the public or private sale of securities, if market conditions are favorable for doing so. If we are successful in raising additional funds through the issuance of equity securities, stockholders will likely experience dilution, or the equity securities may have rights, preferences, or privileges senior to thosesubstantially all of the holdersassets of our common stock. If we raise funds through the issuanceCompany, (b) there is a sale, transfer, assignment, exchange, or other conveyance resulting in any third party’s acquisition of debt securities, those securities would have rights (directlymore than 50% of the outstanding voting stock of the Company, or indirectly), preferences, and privileges senior to thosea merger or consolidation occurs which results in a third party’s ownership of our common stock.

Our loan agreements contain financial and operating restrictions that may limit our access to credit. If we fail to comply with covenants inmore than 50% of the loan agreements, we may be required to repay any potential indebtedness there-under, which may have an adverse effect on our liquidity and, in turn, may have a material adverse effect on our financial condition and operating results.

On March 9, 2016, we entered into a new term loan agreement with Crystal Financial LLC as Term Agent (the “Crystal Loan Agreement”) in order to, among other things, establish a term loan of $17.0 million. The net proceeds from the Crystal Loan Agreement, along with $2.9 million of cash on hand, were used to repay the $19.4 outstanding debt under the Second Amended and Restated Loan and Security Agreement (the “SVB Loan Agreement”) with Silicon Valley Bank (SVB) and pay related transaction fees. See Note M – Debt and Note U – Subsequent Events for more information regarding the loan agreements.merged or consolidated entity.

The loan agreements contain negative covenants and restrictions that will, among other things, limit or prohibit our ability to:

In addition, we are requiredtable below reflects the amount of compensation payable to meet certain financial covenants and ratios customary with similar types of loan agreements. We were not in compliance with a covenanteach of the existing SVB Loan AgreementCompany’s named executive officers in the event of a termination as defined above. For illustrative purposes, the tables assume that such termination was effective as of December 31, 2015. We subsequently entered intoThe stock price used was the Crystal Loan Agreement and repaid allclosing price of the outstanding indebtedness under the SVB Loan Agreement. We anticipate compliance with the new financial covenants and ratios in the future, but cannot provide any assurances. Our failure to comply with the covenants may result in the declarationCompany’s Common Stock on December 31, 2015, or $6.42 per share.

Compensation of an event of default and, if not cured or waived, may require us to pay part or all amounts outstanding. If an event of default occurs, we may not be able to cure it within any applicable cure period, if at all. If the maturity of our indebtedness is accelerated, we may not have sufficient funds available for mandatory repayment or we may not have the ability to borrow or obtain sufficient funds to replace the accelerated indebtedness on terms acceptable to us, or at all. Directors – FY 2015

We rely on highly-skilled personnel throughout all levelsThe Board uses a combination of our business. Our business could be harmed if we are unable to retain or motivate key personnel, hire qualified personnel or maintain our corporate culture.

In our industry, there is substantialcash and continuous competition for highly-skilled business, product development, technical, and other personnel. If any of our key employees were to leave, we could face substantial difficulty in hiring qualified successors and could experience a loss in productivity while any successor obtains the necessary training and experience. Our employment relationships are generally at-will and we have had key employees leave in the past. We cannot assure you that one or more key employees will not leave in the future. We intend to continue to hire additional highly qualified personnel, including engineers and operational personnel, but may not be ablestock-based incentives to attract assimilate orand retain qualified personnel incandidates to serve as directors. In determining director compensation, the future. Any failure to attract, integrate, motivate and retain these employees could harm our business.

We believe that our future success depends in substantial part on our ability to recruit, hire, motivate, develop, and retain talented and highly-skilled personnel. Doing so may be difficult due to many factors, including fluctuations in economic and industry conditions, competitors’ hiring practices, employee tolerance forBoard considers the significant amount of change within and demands on our company and our industry, and the effectivenesstime required of our directors in fulfilling their duties, as well as the skill and expertise of our directors. The Compensation Committee periodically reviews director compensation programs. Our continued abilitywith the assistance of our independent compensation consultant and recommends to compete effectively dependsthe Board the form and amount of compensation to be provided.

The annual retainer fee for directors is $25,000 plus additional fees for participation on our abilitycommittees of the Board as follows: $6,500 for the Lead Director, Compensation Committee Chairperson, and Nominating Committee Chairperson, $10,000 for the Audit Committee Chairperson, and $5,000 for Audit, Compensation, Nominating and Executive Committee members. Fees are paid quarterly. Directors also receive reimbursement of expenses incurred in attending meetings. Non-employee directors may elect to retain and motivate our existing employees andhave a portion or all of their annual fees paid in shares of stock having a value equivalent to attract new employees. If we do not succeedthe cash amount at the end of the fiscal quarter. One director, Ms. McAvoy, has elected to receive stock for a portion of her compensation in retaining and motivating our existing key employees andlieu of cash. All of the other non-employee directors elected to have all FY 2015 annual fees paid in attracting new key personnel, we may not be able to meet our business plan and, as a result, our revenue growth and profitability may be materially adversely affected.cash.

If we achieve our growth goals, we mayIn addition to the fees discussed above, each non-employee director receives an award of restricted stock units with a targeted value of $125,000 on the date of the grant. On July 29, 2016, non-employee directors were awarded 15,100 restricted stock units that will vest on the first anniversary of the grant date and will be unable to manage our resulting expansion.settled with shares of Common Stock.

ToThe following table provides information concerning compensation paid by the extent that we are successful in implementingCompany to its non-employee directors for FY 2015. Mr. Nicolaides was not additionally compensated for his service as director.

Compensation Committee Interlocks and Insider Participation

Messrs. Holcombe, Rose and Ms. McAvoy served on our business strategy, we may experience periodsCompensation Committee during FY 2015. No members of rapid expansion and corresponding demand for our products. In order to effectively manage growth, whether organicthe Committee during FY 2015 served as an officer, former officer, or through acquisitions, we will need to maintain and improve our operations, includingemployee of the ability to quickly scale our products, and effectively train and manage our employees. Our expansion through acquisitions is contingent on successful management of those acquisitions, which will require proper integration of new employees, processes and procedures, and information systems, which can be both difficult and demanding from an operational, managerial, cultural, and human resources perspective. We must also expand the capacityCompany or had a relationship requiring disclosure under “Related Person Transactions.”  

During FY 2015, none of our sales and distribution networks in order to achieve continued growth in our existing and future markets. The failure to manage growth effectively in any of these areas could have a material adverse effect on our financial condition and operating results.executive officers served as:

Risks related to Legal and Regulatory MattersITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

We are subjectThe following table sets forth certain information regarding the beneficial ownership of the Company’s common stock as of April 25, 2016, by (i) each person known by the Company to risks associated with laws, regulations and industry-imposed standards related to fixed and mobile communications devices and associated services.

Laws and regulations related to fixed and mobile communications devices and associated services and end applications are extensive, vary by jurisdiction, and are subject to change. Such changes, could include, without limitation, restrictions onbe the production, manufacture, distribution, and usebeneficial owner of communications devices, restrictions on the ability to port devices and associated services to new carriers’ networks, requirements to make devices and associated services compatible with more than one carrier’s network,5% of the Common Stock, (ii) each director, director nominee, and named executive officer of the Company, and (iii) all current directors and executive officers of the Company as a group. Except as otherwise indicated below, the beneficial owners of the Common Stock listed below have sole investment and voting power with respect to such shares. The shares “beneficially owned” by an individual are determined in accordance with the definition of “beneficial ownership” set forth in the regulations of the SEC. Accordingly, they may include shares owned by or restrictions on end use could, by preventing us from fully serving affected markets, have a material adverse effect on our financial condition and operating results. 

In particular, communication devices we sell,for, among other things, the spouse, minor children or certain other relatives of such individual, as well as other shares as to which our customer wish usthe individual has or shares votes or investment power or has the right to support, are subject to regulation or certification by governmental agencies such as the Federal Communications Commission (FCC), industry standardization bodies such as the PCS Type Certification Review Board (PTCRB), and particular carriers for use on their networks. The procedures for obtaining required regulatory approvals and certifications are extensive and time consuming. The process of obtaining regulatory approval may require us to conduct additional testing, make modifications to our hardware solutions and services, or cause a delay in product launch and shipment dates, any of which could have a material adverse effect on our financial condition and operating results. 

Our business is subject to a variety of U.S. and international laws, rules, policies and other obligations regarding data protection.

We are subject to federal, state and international laws relating to the collection, use, retention, security and transfer of personally identifiable information. In many cases, these laws apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, and among us, our subsidiaries and other parties with which we have commercial relations. Several jurisdictions have passed recent laws in this area, and other jurisdictions are considering imposing additional restrictions. These laws continue to develop and may be inconsistent from jurisdiction to jurisdiction. Complying with emerging and changing international requirements may cause us to incur substantial costs or require us to change our business practices. Noncompliance could result in penalties or significant legal liability. 

Our privacy policies and practices concerning the use and disclosure of data are posted on our website. Any failure by us, our suppliers or other parties with whom we do business to comply with our posted privacy policies or with other federal, state or international privacy-related or data protection laws and regulations could result in proceedings against us by governmental entities or others, which could have a material adverse effect on our business, results of operations and financial condition. 

We are also subject to payment card association rules and obligations under our contracts with payment card processors. Under these rules and obligations, if information is compromised, we could be liable to payment card issuers for the cost of associated expenses and penalties. In addition, if we fail to follow payment card industry security standards, even if no customer information is compromised, we could incur significant fines or experience a significant increase in payment card transaction costs.acquire within 60 days after April 25, 2016.

Changes in domestic tax regulations or unanticipated foreign tax liabilities could affect our results. 

The issuance by the Internal Revenue Service and/or state tax authorities of new tax regulations or changes to existing standards and actions by federal, state or local tax agencies and judicial authorities with respect to applying applicable tax laws and regulations could impose costs on us that we are unable to fully recover. 

We are doing business in, and are expanding into, foreign tax jurisdictions. We believe that we have complied in all material respects with our obligations to pay taxes in these jurisdictions. If the applicable taxing authorities were to challenge successfully our current tax positions, or if there were changes in the manner in which we conduct our activities, we could become subject to material unanticipated tax liabilities. We may also become subject, prospectively or retrospectively, to additional tax liabilities following changes in tax laws. The application of existing, new or future laws could have adverse effects on our business, prospects and operating results. There have been, and will continue to be, substantial ongoing costs associated with complying with the various indirect tax requirements in the numerous markets in which we conduct or will conduct business.

The loss of intellectual property protection, both in the U.S. and internationally, could have a material adverse effect on our operations. 

Our future success and competitive position depend upon our ability to obtain and maintain intellectual property protection, especially with regard to our core business. We cannot be sure that steps taken by us to protect our technology will prevent misappropriation of the technology. Our services are highly dependent upon our technology and the scope and limitations of our proprietary rights therein. If our assertion of proprietary rights is held to be invalid, or if another party’s use of our technology were to occur to any substantial degree, our business, financial condition and results of operations could be materially adversely affected. In order to protect our technology, we rely on a combination of patents, copyrights, and trade secret laws, as well as certain customer licensing agreements, employee and customer confidentiality and non-disclosure agreements, and other similar arrangements. Loss of such protection could compromise any advantage obtained and, therefore, impact our sales, market share, and results. To the extent that our licensees develop inventions or processes independently that may be applicable to our hardware solutions and services, disputes may arise as to the ownership of the proprietary rights to this information. These inventions or processes will not necessarily become our property, but may remain the property of these licensees or their full-time employers. We could be required to make payments to the owners of these inventions or processes, in the form of either cash or equity, or a combination of both. 

Furthermore, our future or pending patent applications may not be issued with the scope of the claims sought by us, if at all. In addition, others may develop technologies that are similar or superior to our technology, duplicate our technology or design around the patents owned or licensed by us. Effective patent, trademark, copyright, and trade secret protection may be unavailable or limited in foreign countries where we may need protection.

We rely on access to third-party patents and intellectual property, and our future results could be materially adversely affected if we are unable to secure such access in the future.

Many of our hardware solutions and services are designed to include third-party intellectual property, and in the future we may need to seek or renew licenses relating to such intellectual property. Although we believe that, based on past experience and industry practice, such licenses generally can be obtained on reasonable terms; there is no assurance that the necessary licenses would be available on acceptable terms or at all. Some licenses we obtain may be nonexclusive and, therefore, our competitors may have access to the same technology licensed to us. If we fail to obtain a required license or are unable to design around a patent, we may be unable to sell some of our hardware solutions and services, and there can be no assurance that we would be able to design and incorporate alternative technologies, without a material adverse effect on our business, financial condition, and results of operations. 

Our competitors have or may obtain patents that could restrict our ability to offer our solutions and services, or subject us to additional costs, which could impede our ability to offer our solutions and services and otherwise adversely affect us. We may, from time to time, also be subject to litigation over intellectual property rights or other commercial issues. 

Several of our competitors have obtained and can be expected to obtain patents that cover solutions and services directly or indirectly related to those offered by us. There can be no assurance that we are aware of all patents containing claims that may pose a risk of infringement by its solutions and services. In addition, in some cases, patent applications in the United States are kept confidential until a patent is issued and, accordingly, we cannot fully evaluate the extent to which our solutions and services may infringe on future patent rights held by others. 

Even with technology that we develop independently, a third party may claim that we are using inventions covered by their patents and may go to court to stop us from engaging in our normal operations and activities, such as engineering and development and the sale of any of our solutions and services. Furthermore, because of technological changes in the IoT industry, current extensive patent coverage, and the rapid issuance of new patents, it is possible that certain components of our solutions, services, and business methods may unknowingly infringe the patents or other intellectual property rights of third parties. From time to time, we have been notified that we may be infringing such rights. 

In the highly competitive and technology-dependent telecommunications field in particular, litigation over intellectual property rights is a significant business risk, and some entities are pursuing a litigation strategy the goal of which is to monetize otherwise unutilized intellectual property portfolios via licensing arrangements entered into under threat of continued litigation. Regardless of merit, responding to such litigation can consume significant time and expense. In certain cases, we may consider the desirability of entering into licensing agreements, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur. If we are found to be infringing such rights, we may be required to pay substantial damages. If there is a temporary or permanent injunction prohibiting us from marketing or selling certain solutions and services or a successful claim of infringement against us requires us to pay royalties to a third party, our financial condition and operating results could be materially adversely affected, regardless of whether we can develop non-infringing technology. While in management’s opinion we do not have a potential liability for damages or royalties from any known current legal proceedings or claims related to the infringement of patent or other intellectual property rights that would individually or in the aggregate have a material adverse effect on our financial condition and operating results, the results of such legal proceedings cannot be predicted with certainty. Should we fail to prevail in any of the matters related to infringement of patent or other intellectual property rights of others or should several of these matters be resolved against us in the same reporting period, our financial condition and operating results could be materially adversely affected. 

We operate internationally, which subjects us to international regulation and business uncertainties that create additional risk for us.

We have been doing business directly, or via our distributors, primarily in the United States and North America, and are expanding, directly or via our distributors, into additional countries worldwide. Accordingly, we or our distributors are subject to additional risks, such as:

We have only limited experience in marketing and operating our services in certain international markets. Moreover, we have in some cases experienced and expect to continue to experience in some cases higher costs as a percentage of revenues in connection with establishing and providing services in international markets versus the U.S. In addition, certain international markets may be slower than the U.S. in adopting the outsourced communications solutions and so our operations in international markets may not develop at a rate that supports our level of investments. 

Furthermore, because regulatory schemes vary by country, we may also be subject to regulations in foreign countries of which we are not presently aware. If that were to be the case, we could be subject to sanctions by a foreign government that could materially and adversely affect our ability to operate in that country. We cannot assure that any current regulatory approvals held by us are, or will remain, sufficient in the view of foreign regulatory authorities, or that any additional necessary approvals will be granted on a timely basis or at all, in all jurisdictions in which we operate or wish to operate, or that applicable restrictions in those jurisdictions will not be unduly burdensome. The failure to obtain the authorizations necessary to operate satellites internationally could have a material adverse effect on our ability to generate revenue and our overall competitive position. We, our customers and companies with which we do business may be required to have authority from each country in which we or they provide services or provide our customers use of our hardware solutions and services. Because regulations in each country are different, we may not be aware if some of our customers and/or companies with which we do business do not hold the requisite licenses and approvals. 

We purchase from vendors located outside of the United States and consequently rely upon transportation from such vendors that is outside our control.

Several of the products we sell are manufactured by vendors who are located outside of the United States. Transportation time varies considerably for these products, especially in the case of transport involving ocean freight and local customs clearing processes in the country of origin. Both transportation and customs issues which may cause delays are especially relevant and complicated for products sourced from manufacturers located in Asia. As a result, we may face delays in committed deliveries that could either result in charges from our customers or, at times, cancelled orders. While we have not had any incidence of meaningful cost related to such exposure to date, there can be no assurance that there will not be a financial impact from such events in the future.

Results of legal proceedings could materially adversely affect us.

We are involved in various legal proceedings and claims that have arisen out of the ordinary conduct of our business. Results of legal proceedings cannot be predicted with certainty. Regardless of its merit, litigation may be both time-consuming and disruptive to our operations and cause significant expense and diversion of management attention. In recognition of these considerations, we may enter into material settlements. Should we fail to prevail in certain matters, or should several of these matters be resolved against us in the same reporting period, we may be faced with significant monetary damages or injunctive relief against us that would materially adversely affect a portion of our business and might materially affect our financial condition and operating results. 

Risks Related to Ownership of our Common Stock

Because our stock is held by a relatively small number of investors and is thinly traded, it may be more difficult for shareholders to sell our shares or buy additional shares when they desire and share prices may be volatile.

Our common stock is currently listed on the NASDAQ. Our stock is thinly traded and we cannot guarantee that an active trading market will develop, or that it will maintain its current market price. A large number of shares of our common stock are held by a small number of investors. An attempt to sell a large number of shares by a large holder could materially adversely affect the price of our stock. In addition, it may be difficult for a purchaser of our shares of our common stock to sell such shares without experiencing significant price volatility. Because our shares are thinly traded, in some cases attempts to sell a large number of shares may be unsuccessful at any price due to insufficient buy side demand to complete a sell side trade.

The exercise or conversion of outstanding stock options and stock appreciation rights into common stock will dilute the percentage ownership of our other shareholders and the sale of such shares may adversely affect the market price of our common stock.

As of March 10, 2016, there are outstanding stock options and stock-settled stock appreciation rights to purchase an aggregate of approximately 1.5 million shares of our common stock and more stock options and stock appreciation rights will likely be granted in the future to our officers, directors, employees and consultants. We may issue warrants in connection with acquisitions, borrowing arrangements or other strategic or financial transactions. The exercise of outstanding stock options, stock appreciation rights and warrants will dilute the percentage ownership of our other shareholders. The exercise of these stock options, stock appreciation rights and warrants and the subsequent sale of the underlying common stock could cause a decline in our stock price. 

Our stock price may be volatile, and may fluctuate based upon factors that have little or nothing to do with our business, financial condition and operating results.

The trading prices of the securities of communications companies historically have been highly volatile, and the trading price of our common stock may be subject to wide fluctuations. Our stock price may fluctuate in reaction to a number of events and factors that may include, among other things:

In addition, the stock market has been volatile in the recent past and has experienced significant price and volume fluctuations, which may continue for the foreseeable future. This volatility has had a significant impact on the trading price of securities issued by many companies, including companies in the communications industry. These changes frequently occur irrespective of the operating performance of the affected companies. Hence, the trading price of our common stock could fluctuate based upon factors that have little or nothing to do with our business, financial condition and operating results.

The structure of our company limits the voting power of our stockholders and certain factors may inhibit changes in control of our company.

The concentration of ownership of our common stock may have the effect of delaying, deferring, or preventing a change in control, merger, consolidation, or tender offer that could involve a premium over the price of our common stock. Currently, our executive officers, directors and greater-than-five percent stockholders and their affiliates, in the aggregate, beneficially own approximately 49% of our outstanding common stock. These stockholders, if they vote together, are able to exercise significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions and matters. The interests of these stockholders may be different than those of our unaffiliated stockholders and our unaffiliated stockholders may be dissatisfied with the outcome of votes that may be controlled by our affiliated stockholders. 

Our articles of incorporation generally limit holdings by persons of our common stock to no more than 10% without prior approval by our Board. Except as otherwise permitted by the Board, no stockholder has the right to cast more than 10% of the total votes regardless of the number of shares of common stock owned. In addition, if a person acquires holdings in excess of this ownership limit, our Board may terminate all voting rights of the person during the time that the ownership limit is violated, bring a lawsuit against the person seeking divestiture of amounts in excess of the limit, or take other actions as the Board deems appropriate. Our articles of incorporation also have a procedure that gives us the right to purchase shares of common stock held in excess of the ownership limit. In addition, our articles of incorporation permit our Board to authorize the issuance of preferred stock without stockholder approval. Any future series of preferred stock may have voting provisions that could delay or prevent a change in control or other transaction that might involve a premium price or otherwise be in the best interests of our common stockholders. In addition to inhibiting changes of control, the provisions of our Articles of Incorporation may suppress the price of our shares.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

All of our facilities are leased. Set forth below is certain information with respect to our leased facilities:

We conduct engineering, sales and marketing, and administrative activities at many of these locations.We believe that our existing facilities are adequate for our current needs. As we grow and expand into new markets and develop additional hardware, we may require additional space, which we believe will be available at reasonable rates.

We engage in limited manufacturing, equipment and hardware assembly and testing for certain hardware. We also use contract manufacturers for production, sub-assembly and final assembly of certain hardware and a third-party logistics service provider to manage a portion of our inventory. We believe there are other manufacturers and service providers that could perform this work on comparable terms.

Item 3. Legal Proceedings.

From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse effect on us because of defense and settlement costs, diversion of management resources and other factors.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters and Issuer Purchases of Equity Securities.

The Company’s Common Stock trades publicly on the NASDAQ Global Market System under the symbol “NMRX”.

The following table sets forth, for the fiscal quarters indicated, the high and low sales prices per share for the Common Stock on the NASDAQ Global Market for the applicable periods.

On March 10, 2016, the last reported sale price of our Class A common stock on The NASDAQ Global Market was $5.80 per share.

As of March 10, 2016, there were approximately 105 holders of record of our Common Stock and 19.4 million shares of Common Stock outstanding. Because many of the shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

Dividend Policy

We currently do not pay any cash dividends. In deciding whether or not to declare or pay dividends in the future, the Board of Directors will consider all relevant factors, including our earnings, financial condition and working capital, capital expenditure requirements, any restrictions contained in loan agreements and market factors and conditions. We have no plans now or in the foreseeable future to declare or pay cash dividends on our common stock.

Performance Graph

The following graph shows a comparison of the cumulative total shareholder return on our common stock, the NASDAQ Composite Index and the NASDAQ Telecomm Index, over the preceding five-year period. The indices assume the reinvestment of all dividends.

The comparison of total return on investment (change in year-end stock price plus reinvested dividends) assumes that $100 was invested on December 31, 2010 in our common stock, the NASDAQ Composite Index and the NASDAQ Telecomm Index.

The corporate performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.

Item 6. Selected Consolidated Financial Data.

The following selected financial data should be read in conjunction with the consolidated financial statements and the notes contained in “Item 8. Financial Statements and Supplementary Data” and the information contained in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K. Historical results are not necessarily indicative of future results.

The following financial information was derived using the consolidated financial statements of Numerex Corp. The table lists historical financial data of the Company for each of the five years in the period ended December 31, 2015.

Item 7. Management's Discussion and Analysis*Represents less than 1% of Financial Condition and Resultsthe Company’s total number of Operations.shares outstanding on April 25, 2016.

This management’s discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties. See “Forward Looking Statements” on page 3 for a discussion of the uncertainties, risks and assumptions associated with these statements. You should read the following discussion in conjunction with our historical consolidated financial statements and the notes thereto appearing elsewhere in this Annual Report. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods and our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those listed under “Risk Factors” in Section 1A of this Annual Report.

Overview

We are a holding company and, through our subsidiaries, are a single source, leading provider of managed enterprise solutions enabling the Internet of Things (IoT). We empower enterprise operations with world-class, managed IoT solutions that are simple, innovative, scalable and secure. An IoT solution is generally viewed as a combination of devices, software and services that operate with little or no human interaction. Our solutions incorporate each of the four key IoT building blocks – Device, Network, Application and Platform.

Our network services are provided through cellular, satellite, broadband and wireline networks. Cellular networks include national and regional carriers and consist of second (2G), third (3G) and fourth generation (4G and LTE) technology. Several wireless carriers have announced their intention to discontinue their 2G networks and fully deploy 3G and 4G networks between 2016 and 2020 while other carriers have announced their intention to discontinue 2G networks as early as 2020. We intend to continue support existing 2G customers through the transition to subsequent technology. Additionally, we have introduced 3G/4G products offering advanced services across our product lines.

Beginning in the third quarter of 2015, we began to concentrate on selling higher margin, integrated managed service subscriptions that include the full suite of our devices, networks, applications and platform while moving away from the sale of individual components – especially hardware only. We expect this strategic change to help us grow sustainable service revenue along with corresponding gross margins. However, we also anticipate hardware revenue will decline significantly in 2016 and remain relatively modest as compared to historical levels thereafter.

On May 5, 2014, we merged with the business operations of Omnilink. Omnilink provides tracking and monitoring services for people and valuable assets via Omnilink’s proprietary IoT platform that connects hardware, networks, software, and support services. The consolidated financial data, as reported and shown above, include results of Omnilink from the date of acquisition. The merger consideration was $37.5 million cash.

During the year ended December 31, 2015, we had revenues of $89.5 million and net loss $19.2 million. This compares with revenues of $93.9 million and net income from continuing operations $2.2 million for the year ended December 31, 2014.

Our core strategy is to generate long term and sustainable recurring revenue through a portfolio of managed, end-to-end IoT solutions which are generally sold on a subscription basis and built on our horizontal, integrated platform. Our solutions incorporate the key IoT building blocks – Device, Network, Application and Platform. Our solutions also simplify the implementation and improve the speed to market for enterprise users in select, targeted verticals in the asset monitoring and optimization, asset tracking, and safety and security markets.

Our strategy requires significant capital investment to develop and enhance our use of technology and to maintain our leadership position and competitive advantage in the markets we serve.

Subscription revenue is recognized monthly as services are provided and sales of embedded devices and hardware are recognized when title passes. Other upfront payment revenue is deferred and amortized on a straight line basis.

Due to fluctuations of the commencement of new contracts and renewal of existing contracts, we expect variability of sequential quarterly trends in revenues, margins and cash flows. Other factors contributing to sequential quarterly trends include usage, rate changes, and repricing of contract renewals and technology changes.

Cost of sales for the year ended December 31, 2015 includes a significant increase in the inventory reserve of $1.1 million and impairment of other assets of $1.3 million. We entered into new and amended agreements with wireless carriers in September 2015 that make adding 2G devices to wireless networks financially unfavorable under most circumstances. As a result of these agreements, we performed a lower of cost or market analysis leading to the increased reserve related to older, 2G cellular telecommunication devices and older satellite devices as well as an accrual for a purchase commitment related to raw materials for the older satellite devices that we will not fulfill.

The $1.3 million impairment of other assets is related to a prepaid discount of carrier fees. In September 2015, we entered into a mutual agreement with the vendor to (1) cancel the existing agreement, (2) repurchase certain equipment from the vendor and (3) assume certain national carrier and other agreements from the vendor. Total consideration was $1.2 million and included (1) $0.5 million in cash, (2) 30,000 shares of our common stock having a value of $0.3 million and (3) a prepayment to license additional network access having a carrying value of $0.4 million. Consummation of the transaction, which was contingent upon obtaining consents from certain of our vendor’s carriers, took place in October 2015. During negotiations with the vendor in the third quarter of fiscal year 2015, a triggering event was identified, for purposes of assessment of asset impairment, as it was more likely than not that the aforementioned assets may be disposed of significantly before the end of their previously estimated useful life. As a result of this transaction and in conjunction with a separate agreement with a mutual national carrier, we determined that the prepaid expenses had no continuing value. We recorded a charge of $1.3 million in cost of sales to write-off the carrying value of the prepaid carrier fees as a settlement of a pre-existing relationship with the vendor.

As part of our annual assessment of goodwill and other intangible assets for impairment as of October 1, 2015, we determined that technology and indefinite-lived trade names acquired in the merger with Omnilink were impaired by $1.3 million. The decrease in the fair value of both trade names and technology was principally due to a change in the projected revenues and financial returns on intangible assets from the amounts originally projected at the date of the merger. We also recorded impairment charges during the year ended December 31, 2015 totaling $1.4 million related to our Do-It-Yourself (DIY) product line and reporting unit. The DIY impairment charges were due to the reporting unit not generating results of operations consistent with our expectations and previous forecasts, and management is evaluating different strategic options for the reporting unit.

During 2015, we determined that we would not meet the criteria of “more likely than not” that the cumulative federal net operating losses and certain other deferred tax assets would be recoverable. This determination was based on our cumulative loss over the past three years. Accordingly, we recorded a valuation allowance against these items. The deferred tax assets consist of federal net operating losses, state net operating losses, tax credits, and other deferred tax assets, most of which expire between 2015 and 2035. As a result of recording the valuation allowance, we recognized deferred tax expense of $9.9 million for the year ended December 31, 2015. Income tax expense recorded in the future will be reduced or increased to the extent of offsetting decreases or increases to the valuation allowance.

Historically, our revenues and expenses in the first quarter have been modestly affected by slowing of customer purchase activities during the holidays. As a result, historical quarterly fluctuations may not be indicative of future operating results.

As part of our effort to build and enhance our core business, we conduct ongoing business strategy reviews. During our review, we consider opportunities for growth in existing and new markets that may involve growth derived from both existing operations as well as from future acquisitions, if any. To the extent existing business lines and service offerings are not considered to be compatible with delivery of our core business services or with meeting our financial objectives, we may exit non-core lines of business or stop offering these services in part or in whole. As a result of the June 2013 decision to exit certain non-core businesses in 2013 and their subsequent reclassification to discontinued operations, we have a single reportable segment.

Results of OperationsEquity Compensation Plan Information

The following table sets forth selected financial data from our consolidated statementsprovides information as of operations and comprehensive (loss) income for the periods presented along with percentage change between the periods (dollars in thousands):

Comparison of Fiscal Years Ended December 31, 2015 about the securities authorized for issuance to our employees and December 31, 2014non-employee directors under our stock-based compensation plans:

During 2015, total revenue decreased $4.4 million, or 4.7%, to $89.5 million from $93.9 million in 2014. The decrease in revenue is primarily attributable to lower hardware sales which declined $3.8 million or 13.1% to $25.1 million from $28.8 million in 2014. This decline in hardware sales was primarily due to a strategic shift in how we sell our products and services. In the third quarter of 2015, we began to concentrate on selling higher margin, integrated managed service subscriptions that include the full suite, or subsets, of our devices, networks, applications and platform while moving away from the sale of individual components – especially hardware only. Because of this strategic change, we anticipate hardware revenue will decline significantly in 2016 and remain relatively modest thereafter.

Subscription and support revenues decreased $0.6 million, or 1.0%, to $64.4 million from $65.0 million in 2014. The decrease is primarily attributable to declines in network only customers of $2.1 million. The decrease reflects losses associated with network customers’ 2G conversions at a time when we did not have a competitive offer during the year until the fourth quarter of 2015. The decrease in revenue is also attributed to the shift to the integrated managed service subscription offerings. The declines in network only customers were partially offset by an increase in revenues of $1.5 million from our introduction of new product lines, including those recently acquired.