Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 07, 2017 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | NUMEREX CORP /PA/ | |
Entity Central Index Key | 870,753 | |
Trading Symbol | nmrx | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 19,679,345 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 |
UNAUDITED CONDENSED CONSOLIDATE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 6,575 | $ 9,285 |
Restricted cash | 221 | 221 |
Accounts receivable, less allowance for doubtful accounts of $583 and $767 | 8,961 | 9,436 |
Financing receivables, current | 1,521 | 1,778 |
Inventory, net of reserves | 5,909 | 9,011 |
Prepaid expenses and other current assets | 1,461 | 1,421 |
TOTAL CURRENT ASSETS | 24,648 | 31,152 |
Financing receivables, less current portion | 1,580 | 2,227 |
Property and equipment, net of accumulated depreciation and amortization | 5,608 | 6,022 |
Software, net of accumulated amortization | 5,654 | 6,530 |
Other intangible assets, net of accumulated amortization | 10,773 | 11,519 |
Goodwill | 33,554 | 33,554 |
Other assets | 269 | 474 |
TOTAL ASSETS | 82,086 | 91,478 |
CURRENT LIABILITIES | ||
Accounts payable | 15,007 | 15,894 |
Accrued expenses and other current liabilities | 2,127 | 3,209 |
Deferred revenues | 1,491 | 1,882 |
Current maturities of long-term debt, net of debt issuance costs | 5,702 | 1,275 |
Current obligations under capital lease | 312 | 291 |
TOTAL CURRENT LIABILITIES | 24,639 | 22,551 |
Long-term debt, net of debt issuance costs, less current maturities | 10,043 | 14,885 |
Obligations under capital lease, noncurrent | 608 | 797 |
Deferred tax liabilities, noncurrent | 705 | 468 |
Other liabilities | 1,435 | 1,512 |
TOTAL LIABILITIES | 37,430 | 40,213 |
SHAREHOLDERS' EQUITY | ||
Preferred stock, no par value; 3,000 authorized; none issued | ||
Additional paid-in capital | 109,333 | 105,112 |
Treasury stock, at cost, 1,463 and 1,327 shares | (5,773) | (5,466) |
Accumulated other comprehensive loss | (104) | (110) |
Accumulated deficit | (58,800) | (48,271) |
TOTAL SHAREHOLDERS' EQUITY | 44,656 | 51,265 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 82,086 | 91,478 |
Class A Common Stock | ||
SHAREHOLDERS' EQUITY | ||
Common stock value | ||
Class B Common Stock | ||
SHAREHOLDERS' EQUITY | ||
Common stock value |
UNAUDITED CONDENSED CONSOLIDAT3
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Accounts receivable, allowance for doubtful accounts (in dollars) | $ 583 | $ 767 |
Preferred stock, no par value (in dollars per share) | $ 0 | $ 0 |
Preferred stock, shares authorized | 3,000 | 3,000 |
Preferred stock, shares issued | 0 | 0 |
Treasury stock, at cost, shares | 1,463 | 1,327 |
Class A Common Stock | ||
Common stock, no par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized | 30,000 | 30,000 |
Common stock, shares issued | 21,138 | 20,935 |
Common stock, shares outstanding | 19,675 | 19,608 |
Class B Common Stock | ||
Common stock, no par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized | 5,000 | 5,000 |
Common stock, shares issued | 0 | 0 |
UNAUDITED CONDENSED CONSOLIDAT4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Net revenues: | ||||
Subscription and support revenues | $ 11,983 | $ 14,388 | $ 38,133 | $ 44,183 |
Embedded devices and hardware | 3,320 | 3,024 | 7,535 | 8,886 |
Total net revenues | 15,303 | 17,412 | 45,668 | 53,069 |
Cost of sales | ||||
Subscription and support revenues | 5,087 | 5,828 | 15,915 | 17,242 |
Embedded devices and hardware | 3,458 | 3,082 | 7,748 | 9,027 |
Inventory reserves | 1,301 | 27 | 1,355 | 514 |
Gross profit | 5,457 | 8,475 | 20,650 | 26,286 |
Operating expenses: | ||||
Sales and marketing | 2,183 | 3,229 | 8,019 | 9,444 |
General and administrative | 2,314 | 3,280 | 7,691 | 11,269 |
Engineering and development | 1,341 | 2,229 | 5,260 | 6,920 |
Depreciation and amortization | 1,426 | 1,658 | 4,392 | 4,992 |
Impairment of goodwill and other intangible assets | 4,172 | |||
Restructuring charges | 655 | 276 | 1,435 | 1,520 |
Operating loss | (2,462) | (2,197) | (6,147) | (12,031) |
Interest expense | 919 | 469 | 2,282 | 1,196 |
Loss on extinguishment of debt | 1,089 | 290 | ||
Other (income) expense, net | (34) | (33) | 767 | (99) |
Loss before income taxes | (3,347) | (2,633) | (10,285) | (13,418) |
Income tax expense (benefit) | 79 | (87) | 244 | (257) |
Net loss | (3,426) | (2,546) | (10,529) | (13,161) |
Other items of comprehensive (loss) income, net of income taxes: | ||||
Foreign currency translation adjustment | 1 | (6) | 12 | |
Comprehensive loss | $ (3,426) | $ (2,545) | $ (10,535) | $ (13,149) |
Loss per share: | ||||
Basic (in dollars per share) | $ (0.17) | $ (0.13) | $ (0.54) | $ (0.68) |
Diluted | $ (0.17) | $ (0.13) | $ (0.54) | $ (0.68) |
Weighted average shares outstanding used in per share calculation | ||||
Basic (in shares) | 19,646 | 19,542 | 19,575 | 19,456 |
Diluted (in shares) | 19,646 | 19,542 | 19,575 | 19,456 |
UNAUDITED CONDENSED CONSOLIDAT5
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - 9 months ended Sep. 30, 2017 - USD ($) shares in Thousands, $ in Thousands | Common Shares | Additional Paid-in Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total |
Balance at Dec. 31, 2016 | $ 105,112 | $ (5,466) | $ (110) | $ (48,271) | $ 51,265 | |
Balance (in shares) at Dec. 31, 2016 | 20,935 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Equity-based compensation expense | 1,400 | 1,400 | ||||
Exercises, vesting and other equity- based compensation plan activity, net | (289) | (289) | ||||
Exercises, vesting and other equity- based compensation plan activity, net (in shares) | 203 | |||||
Value of shares retained to pay employee taxes | (202) | (18) | (220) | |||
Warrants issued | 3,023 | 3,023 | ||||
Translation adjustment | 6 | (6) | ||||
Net loss | (10,529) | (10,529) | ||||
Balance at Sep. 30, 2017 | $ 109,333 | $ (5,773) | $ (104) | $ (58,800) | $ 44,656 | |
Balance (in shares) at Sep. 30, 2017 | 21,138 |
UNAUDITED CONDENSED CONSOLIDAT6
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash flows from operating activities: | ||
Net loss | $ (10,529) | $ (13,161) |
Adjustments to reconcile net loss to net cash (used in) operating activities: | ||
Depreciation and amortization | 5,757 | 5,997 |
Impairment of goodwill and other intangible assets | 4,172 | |
Non-cash restructuring charges | 345 | |
Equity-based compensation expense | 1,111 | 2,202 |
Loss on extinguishment of debt | 1,089 | 290 |
Deferred income taxes | 237 | (268) |
Bad debt expense | 235 | 327 |
Provision for inventory reserves | 1,355 | 514 |
Non-cash interest | 975 | 138 |
Changes in assets and liabilities: | ||
Accounts and financing receivables | 1,143 | (303) |
Inventory, net | 110 | (1,323) |
Accounts payable | (887) | 427 |
Deferred revenue | (345) | (554) |
Other | (1,036) | 394 |
Net cash used in operating activities | (785) | (803) |
Cash flows from investing activities: | ||
Purchases of property and equipment | (315) | (789) |
Capitalized software development and purchases of software | (1,767) | (1,662) |
Net cash used in investing activities | (2,082) | (2,451) |
Cash flows from financing activities: | ||
Proceeds from long-term debt | 18,591 | 17,000 |
Principal payments on debt | (17,000) | (19,349) |
Principal payments on capital lease obligations | (168) | |
Exercises, vesting and other equity- based compensation plan activity | 486 | |
Payment of taxes on equity-based awards | (220) | (258) |
Deferred financing costs paid | (1,046) | (1,038) |
Net cash provided by (used in) financing activities | 157 | (3,159) |
Net decrease in cash and cash equivalents | (2,710) | (6,413) |
Cash and cash equivalents at beginning of period | 9,285 | 9,285 |
Cash and cash equivalents at end of period | 6,575 | 2,872 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | 1,307 | 1,047 |
Net cash paid for income taxes | 9 | 6 |
Disclosure of non-cash investing and financing activities: | ||
Capital expenditures in accounts payable | 222 | 196 |
Fixed assets acquired under a capital lease | 1,237 | |
Warrants issued to Kenneth Rainin Foundation | 595 | |
Warrants issued to Hale Capital | 2,428 | |
Transfer of inventory to monitoring equipment | $ 1,636 | $ 2,087 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Numerex Corp. (NASDAQ: NMRX) is a holding company incorporated in Pennsylvania, and through its subsidiaries, is a single source, leading provider of managed enterprise solutions enabling the Internet of Things (IoT). An IoT solution is generally viewed as a combination of devices, software and services that operate with little or no human interaction. Our managed IoT solutions are simple, innovative, scalable and secure. Our solutions incorporate each of the four key IoT building blocks – Device, Network, Application and Platform. We provide our technology and service solutions through our integrated IoT horizontal platforms, which are generally sold on a subscription basis. Foreign operations were not significant to us for the three and nine months ended September 30, 2017 or 2016. Basis of Presentation We prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, referred to as GAAP, for interim financial information and the Rules and Regulations issued by the Securities Exchange Commission, or SEC, as applicable. These financial statements include all of our accounts and those of our wholly-owned subsidiaries. We have eliminated intercompany transactions and balances in consolidation. Certain prior period amounts in the condensed consolidated financial statements and notes thereto have been reclassified to conform to the current period’s presentation. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted, although we believe that the disclosures made are adequate to make the information not misleading. In the opinion of management, the accompanying financial statements reflect all adjustments, which consist of normal recurring adjustments unless otherwise disclosed, considered necessary for a fair presentation of our financial position as of September 30, 2017 and our operating results and cash flows for the interim periods presented. The accompanying condensed consolidated balance sheet as of December 31, 2016 was derived from our audited financial statements, but does not include all disclosures required by GAAP. The financial information presented herein should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2016 which includes information and disclosures not included in this quarterly report. Estimates and Assumptions The preparation of financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Actual results may differ materially from these estimates. Operating results for the three or nine months ended September 30, 2017 may not be indicative of the results that may be expected for the year ending December 31, 2017 or any future periods. Liquidity The Company incurred an operating loss totaling $6.1 million and cash used in operations was $0.8 million for the nine months ended September 30, 2017. The Company also incurred an operating loss totaling $22.8 million and cash used in operations totaled $0.5 million for the year ended December 31, 2016. As of September 30, 2017, the Company has an accumulated deficit of $58.8 million, and cash and cash equivalents of $6.6 million. The Company’s cash flow requirements during the fiscal year 2016 and to date in 2017 were financed by cash on hand, cash generated by operations, and proceeds from the recent financing with Hale. The Company had total term debt (net of deferred financing costs), including current portion, of $15.7 million as of September 30, 2017. The Company’s ability to continue in business is dependent on its ability to continue to generate operating cash flows, to maintain sufficient cash on hand, to raise additional capital, and to control expenditures. Management believes that the Company will maintain sufficient liquidity through at least September 2018. The consolidated financial statements do not include any adjustments that might result from this uncertainty. Restricted Cash As of September 30, 2017, and 2016, cash of $0.2 million was held in escrow related to certain vendor obligations. |
INVENTORY
INVENTORY | 9 Months Ended |
Sep. 30, 2017 | |
Inventory [Abstract] | |
INVENTORY | NOTE B - INVENTORY Inventory consisted of the following (in thousands): September 30, December 31, 2017 2016 Raw materials $ 1,843 $ 2,953 Finished goods 5,747 $ 8,504 Inventory reserves (1,681 ) $ (2,446 ) $ 5,909 $ 9,011 During the three and nine months ended September 30, 2017, we transferred $0.5 million and $1.6 million of inventory to monitoring equipment within property and equipment, respectively, and disposed of $0.0 million and $0.3 million of fully reserved inventory, respectively. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE C – PROPERTY AND EQUIPMENT Property and equipment consisted of the following (in thousands): September 30, December 31, 2017 2016 Computer, network and other equipment $ 8,924 $ 8,805 Monitoring equipment 7,328 5,692 Furniture and fixtures 486 486 Leasehold improvements 255 264 Total property and equipment 16,993 15,247 Accumulated depreciation and amortization (11,385 ) (9,225 ) $ 5,608 $ 6,022 During the three and nine months ended September 30, 2017, we transferred $0.5 million and $1.6 million of inventory to monitoring equipment as part of our managed services business. Depreciation and amortization related to property and equipment was $0.3 million and $0.9 million for the three and nine months ended September 30, 2017, respectively. Depreciation and amortization related to property and equipment was $0.4 million and $1.1 million for the three and nine months ended September 30, 2016, respectively. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2017 | |
Intangible Assets [Abstract] | |
INTANGIBLE ASSETS | NOTE D – INTANGIBLE ASSETS Impairment Charges We recorded $4.2 million in impairment charges for trade names, technology and goodwill as of June 30, 2016. The Omnilink and Do-It-Yourself (DIY) product lines and reporting units had not generated results of operations consistent with our expectations and forecasts for the three months ended June 30, 2016. The lower operating results and future expectations for Omnilink were principally related to strategic changes and delays associated with the launch of a new personal tracking product line. We also continue to evaluate different strategic options for the DIY reporting unit. These factors were triggering events that indicated that it was more likely than not that the fair value of the Omnilink and DIY reporting units were less than their carrying amounts. As a result, we performed initial assessments of goodwill for impairment, along with other intangible assets of the reporting units, as of June 30, 2016. We estimated the fair value of the reporting units using a combination of market and income approaches and concluded that the estimated fair value of the Omnilink and DIY reporting units were less than their carrying values. We assessed the implied fair value of goodwill in the same manner as if we were acquiring the reporting units in a business combination. Specifically, we allocated the estimated fair value of the reporting units to all of the assets and liabilities of those units, including any unrecognized intangible assets, in a hypothetical calculation, referred to as Step Two. We assessed the amortizing long-lived assets for impairment based on undiscounted cash flows and concluded that, with the exception of DIY technology, the carrying values of other amortizing long-lived assets and intangible assets were recoverable. Based on Step Two calculations, we recorded non-cash impairment charges as of June 30, 2016 of $1.6 million for indefinite-lived trade names and $2.3 million for goodwill of the Omnilink reporting unit, and $0.1 million for technology and $0.2 million for goodwill of the DIY reporting unit. Omnilink DIY Total Trade Names Goodwill Technology Goodwill Impairment January 1, 2016 $ 2,972 $ 17,580 $ 245 $ 1,656 Amortization - - (27 ) - Impairment (1,612 ) (2,264 ) (81 ) (215 ) $ (4,172 ) September 30, 2016 $ 1,360 $ 15,316 $ 137 $ 1,441 Intangible Assets Other Than Goodwill Intangible assets other than goodwill are summarized as follows (dollars in thousands): As of September 30, 2017 As of December 31, 2016 Remaining Useful Lives Gross Accumulated Net Book Gross Accumulated Net Book Purchased and developed software 1.5 $ 19,060 $ (15,176 ) $ 3,884 $ 18,205 $ (12,806 ) $ 5,399 Software in development n/a 1,770 - 1,770 1,131 - 1,131 Total software 20,830 (15,176 ) 5,654 19,336 (12,806 ) 6,530 Licenses 2.6 13,215 (12,864 ) 351 13,215 (12,534 ) 681 Customer relationships 6.8 8,167 (3,604 ) 4,563 8,167 (3,039 ) 5,128 Technologies 10.2 4,235 (984 ) 3,251 4,235 (822 ) 3,413 Patents and trademarks 1.4 4,313 (2,623 ) 1,690 3,747 (2,368 ) 1,379 Trade names Indefinite 918 - 918 918 - 918 Total other intangible assets 30,848 (20,075 ) 10,773 30,282 (18,763 ) 11,519 $ 51,678 $ (35,251 ) $ 16,427 $ 49,618 $ (31,569 ) $ 18,049 Remaining useful lives in the preceding table were calculated on a weighted average basis as of September 30, 2017. Amortization expense related to intangible assets was $1.2 million and $3.5 million for the three and nine months ended September 30, 2017, respectively. Amortization expense related to intangible assets was $1.3 million and $2.6 million for the three and nine months ended September 30, 2016, respectively. Amortization expense recorded in cost of subscription revenues was $0.5 million and $1.3 million, respectively, for the three and nine months ended September 30, 2017, compared to $0.4 million and $1.0 million, respectively, for the three and nine months ended September 30, 2016. Additionally, we have capitalized approximately $0.6 million and $1.8 million of internally generated software development costs for the three and nine months ended September 30, 2017, respectively, and $0.5 million and $1.1 million for the three and nine months ended September 30, 2016, respectively. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2017 | |
Income Taxes [Abstract] | |
INCOME TAXES | NOTE E – INCOME TAXES We calculate our interim income tax provision in accordance with the accounting guidance for income taxes in interim periods. At the end of each interim period, we make our best estimate of the annual expected effective tax rate and apply that rate to our ordinary year-to-date income or loss. In addition, we calculate a year-to-date adjustment to increase or decrease our income tax provision to take into account our current expected effective tax rate. The tax or benefit related to significant, unusual, or extraordinary items are individually computed and recognized in the interim period in which those items occur. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider projections of future taxable income, tax planning strategies and the reversal of temporary differences in making this assessment. During 2015, we determined that we would not meet the criteria of “more likely than not” that our federal and state net operating losses and certain other deferred tax assets would be recoverable. This determination was based on our assessment of both positive and negative evidence regarding realization of our deferred tax assets, in particular, the strong negative evidence associated with 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 2017 and 2036. We will maintain the valuation allowance against the net deferred tax assets until sufficient positive evidence outweighs any negative evidence to support reversal. Income tax expense recorded in the future will be reduced or increased to the extent of offsetting decreases or increases to the valuation allowance. As a result of recording a valuation allowance, we recognized deferred tax expense of less than $0.1 million and $0.2 million, representing an effective tax rate of (2.4%), for the three months and nine months ended September 30, 2017. The deferred tax expense recognized on a net loss before income taxes, and the difference in the effective tax rate from the federal statutory rate, is due primarily to the book and tax basis and accounting differences for certain long and indefinite lived intangible assets. We have also recognized a provision for income tax expense for certain state income taxes that cannot utilize offsetting net operating losses. Income tax expense recorded in the future will be reduced or increased to the extent of offsetting decreases or increases to the valuation allowance. We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitation. The 2012 through 2016 tax years generally remain subject to examination by federal and most state tax authorities. However, certain returns from earlier years in which net operating losses have arisen are still open for examination by the tax authorities. |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
DEBT | NOTE F – DEBT Debt consisted of the following (dollars in thousands): September 30, December 31, 2017 2016 Notes payable to Hale Capital $ 13,981 $ - Note payable to Kenneth Rainin Foundation (a related party) 5,000 - Note payable to Crystal Financial LLC, with interest at LIBOR plus margin - 17,000 Less deferred financing costs (3,236 ) (840 ) 15,745 16,160 Less current portion of long-term debt (net of deferred financing costs) (5,702 ) (1,275 ) Noncurrent portion of long-term debt $ 10,043 $ 14,885 Hale Notes On June 7, 2017 (the "Closing Date"), the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) by and among the Company, as borrower, certain subsidiaries of the Company, as guarantors, the purchasers from time to time party thereto, and HCP-FVF, LLC, an affiliate of Hale Capital Partners LP, as collateral agent and as purchaser ("Hale Capital"). Pursuant to the Note Purchase Agreement, the Company issued and sold to Hale Capital senior secured promissory notes in an aggregate original principal amount of $13.5 million (the "Notes"), the proceeds of which were used to repay the outstanding term loans and other obligations under the Term Loan Agreement, dated as of March 9, 2016, by and among the Company, certain subsidiaries of the Company, the lenders party thereto and Crystal Financial LLC (the “Crystal Loan Agreement”). We recorded a charge of $1.1 million to loss on extinguishment of debt, of which $0.5 million related to unamortized deferred financing costs related to the Crystal Loan Agreement, and $0.6 million related to prepayment penalties and other extinguishment related costs, which is recorded as a separate line item on the consolidated statement of operations and comprehensive loss for the nine month period ended September 30, 2017. The Notes are secured by a first priority security interest in substantially all assets of the Company and its subsidiaries. The Notes bear interest at a rate equal to the prime rate plus 700 (currently 11% per year), payable monthly in arrears. From June 7, 2017 until June 29, 2018, the monthly interest payment will be in the form of additional Notes. Thereafter, the interest will be payable monthly in cash in arrears. Interest on the Notes will be computed on the basis of a 360-day year comprising twelve 30-day months. The Notes will bear interest at a rate five percent (5%) above the otherwise applicable interest rate during the continuance of a default or event of default. The maturity date of the Notes is March 31, 2021. Beginning June 30, 2018, the Company is required to prepay the Notes in principal installments of $250,000 per month. In addition, the Company will be required to redeem all of the Notes upon a change of control and will be required to make mandatory prepayments on the Notes with the net proceeds of (i) any voluntary or involuntary sale or disposition of assets (including casualty losses and condemnation awards, subject to certain exceptions) and (ii) the issuance or sale of any equity, except for a portion of which may be used to pay down the Company's existing subordinated note. The Company may also prepay to Notes in whole or in part at any time. All prepayments of the Notes (whether mandatory, optional or as result of the acceleration of the Notes) are subject to a prepayment penalty as follows: (A) if prepayment is on or before the second anniversary of the Closing Date, 5% of the principal prepaid; (B) if prepayment is after the second anniversary but on or before the third anniversary of the Closing Date, 3% of the principal prepaid; and (C) if prepayment is after the third year anniversary but before the maturity date, 1% of the principal prepaid. Pursuant to the terms of the Notes, the Company is required to meet certain financial and other restrictive covenants customary with this type of facility, including maintaining a minimum EBITDA, Minimum Total Liquidity, Minimum Liquidity and minimum Monthly Recurring Revenue, as defined in the Note Purchase Agreement. The Company was in compliance with these covenants as of September 30, 2017. Additionally, the Company is also prohibited from taking certain actions during the term of the Notes without consent of the purchasers, including, without limitation, incurring additional indebtedness, entering into certain mergers or other business combination transactions, disposing of or permitting liens or other encumbrances on the Company's assets and making restricted payments, including cash dividends on shares of the Company's common stock, except as expressly permitted under the Note Purchase Agreement. The Note Purchase Agreement contains customary events of default. If a default occurs and is not cured within the applicable cure period or is not waived, any outstanding obligations under the Note Purchase Agreement may be accelerated. The Note Purchase Agreement and related Note documents also contain additional representations and warranties, covenants, indemnities and conditions, in each case customary for transactions of this type. In connection with the execution of the Note Purchase Agreement, the Company issued to Hale Capital detachable warrants to purchase up to 895,944 shares of common stock (subject to adjustment) at an exercise price equal to $4.14 per share. The exercise price of the warrants is subject to adjustment upon certain events, including a down round provision, and the term of the warrants is ten years from the Closing Date. The warrants were valued using a Monte Carlo valuation model and had a fair value at grant date of $2.4 million. The warrants have been recorded as deferred financing costs, and are being amortized over the term of the Notes. Senior Subordinated Promissory Note On March 31, 2017, the Kenneth Rainin Foundation, a California corporation, and the Company entered into a Senior Subordinated Promissory Note (“KRF Note”) in the amount of $5 million, with a maturity date of April 1, 2018, and an annual interest rate of 12%, which was used to pay down a portion of the outstanding term loans under the Crystal Loan Agreement. In connection with the KRF Note, the Company issued to Kenneth Rainin Foundation a warrant to purchase 125,000 shares of our common stock at a warrant price of $0.01 per share. The warrants had a fair value of $0.6 million at the grant date, have been recorded as deferred financing costs, and are being amortized over the term of the KRF Note. Brian Igoe, a director of the Company, is the Chief Investment Officer of the Kenneth Rainin Foundation. Crystal Term Loan Agreement - Amendment, Waiver and Repayment On March 31, 2017, we entered into an amendment to the Crystal Loan Agreement which, among other things, (i) required a $5.0 million prepayment of the term loans with the proceeds of the KRF Note, (ii) required the payment of an amendment fee in the amount of $2.0 million, half of which was paid upon execution of the amendment, with the remainder due only if certain events did not occur by June 1, 2017 (which date was subsequently extended to June 7, 2017), (iii) modified the covenants related to minimum adjusted EBITDA, minimum fixed charge coverage ratio, maximum net leverage, and maximum subscriber churn, (iv) waived certain specified events of default, including financial covenant defaults, (v) increased the interest rate payable on the term loans from 8.5% to 10.5%, and (vi) required a prepayment in the amount of $2.0 million if certain events did not occur by June 1, 2017 (which date was subsequently extended to June 7, 2017). As a result of the $5.0 million prepayment of the term loans with the proceeds of the KRF Note, we recorded a $0.2 million loss on partial extinguishment of the Crystal Loan Agreement, which is recorded as a separate line item on the consolidated statement of operations for the three month period ending March 31, 2017. On June 7, 2017, all outstanding term loans and other obligations under the Crystal Loan Agreement were repaid in full with the proceeds of the Notes issued pursuant to the Note Purchase Agreement. |
NET LOSS PER SHARE
NET LOSS PER SHARE | 9 Months Ended |
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
NET LOSS PER SHARE | NOTE G – NET LOSS PER SHARE Basic (loss) earnings per share attributable to common shareholders is based on the weighted-average number of common shares outstanding excluding the dilutive impact of common stock equivalents. Diluted (loss) earnings per share include the effect of all potentially dilutive securities on earnings per share. The dilutive effect of outstanding equity-based compensation awards is computed using the treasury stock method. The computation of diluted earnings per shares does not assume exercise of securities that would have an anti-dilutive effect on earnings. Diluted (loss) earnings per share is not presented separately because there are no adjustments to the numerator in calculating dilutive net loss per share and all potentially dilutive common stock equivalents would be antidilutive. The following table presents a reconciliation of the shares used in the calculation of basic and dilutive (loss) earnings per share and anti-dilutive equity based compensation awards (in thousands): For the Three Months Ended For the Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Weighted average common shares outstanding Basic 19,646 19,542 19,575 19,456 Dilutive effect of commons stock equivalents - - - - Total 19,646 19,542 19,575 19,456 Anti-dilutive equity-based compensation awards 1,091 1,571 1,035 1,576 |
RESTRUCTURING
RESTRUCTURING | 9 Months Ended |
Sep. 30, 2017 | |
Restructuring Costs [Abstract] | |
RESTRUCTURING | NOTE H – RESTRUCTURING We recorded restructuring charges of $1.4 million and $1.5 million, for the nine months ended September 30, 2017 and 2016 respectively. The restructuring charges for the nine months ended September 30, 2017 include $0.6 million of severance costs, $0.7 million of legal costs, and $0.1 million for the loss on sublease of our Dallas office. The restructuring charges for the nine months ended September 30, 2016 include $0.8 million related to the relocation of our corporate headquarters and $0.7 million in severance costs. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | NOTE I – FAIR VALUE MEASUREMENTS We account for certain assets at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are: Level 1 Level 2 Level 3 We have no assets measured at fair value on a recurring basis. We do not have any liabilities measured at fair value on a recurring basis. The following table summarizes assets measured at fair value on a nonrecurring basis during the nine months ended September 30, 2016 (in thousands): Fair Total Value Level 3 Losses April 1, 2016 Omnilink Reporting Unit Indefinite lived trade names $ 1,360 $ 1,360 $ 1,612 Goodwill 15,316 15,316 2,264 DIY Reporting Unit Technology 146 146 81 Goodwill 1,441 1,441 215 Total nonrecurring fair value $ 18,263 $ 18,263 $ 4,172 |
MERGER AGREEMENT
MERGER AGREEMENT | 9 Months Ended |
Sep. 30, 2017 | |
Merger Agreement [Abstract] | |
MERGER AGREEMENT | NOTE J – MERGER AGREEMENT On August 2, 2017, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Sierra Wireless, Inc., a Canadian corporation (“Sierra”), and Wireless Acquisition Sub, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of Sierra (“Merger Sub”). The Merger Agreement provides that, subject to the terms and conditions set forth therein, Merger Sub will merge with and into the Company, with the Company surviving as a wholly-owned subsidiary of Sierra (the “Merger”). The Merger Agreement was unanimously approved and adopted by the board of directors of each of the Company and Sierra. Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), the Company’s shareholders will have the right to receive 0.1800 common shares, no par value, of Sierra (“Sierra Common Stock”) for each share of Class A common stock, no par value, of the Company (“Company Common Stock”) (such consideration, the “Merger Consideration”). Additionally, each outstanding restricted stock unit, in-the-money option and in-the-money stock appreciation right will be cancelled in exchange for the right to receive the Merger Consideration in accordance with the terms of the Merger Agreement. Except as described below and specified in the Merger Agreement, if exercised following notice of the Merger, each outstanding warrant issued by the Company will be cancelled in exchange for the right to receive the Merger Consideration or, if not exercised, will be cancelled at the Effective Time. The Merger Agreement contains customary representations and warranties from each of the Company and Sierra, and each party to the Merger Agreement has agreed to customary covenants, including, among others, covenants relating to (1) the conduct of the Company’s and Sierra’s businesses during the interim period between the execution of the Merger Agreement and the Effective Time, (2) the obligation of the Company to call a meeting of its shareholders to adopt the Merger Agreement, and, subject to certain exceptions, to recommend that its shareholders adopt the Merger Agreement and (3) the Company’s non-solicitation obligations relating to alternative acquisition proposals. Each of the Company and Sierra has also agreed to apply for, or otherwise seek, and use its respective commercially reasonable efforts to obtain, all consents and approvals of governmental entities required to be obtained by it for the consummation of the transactions contemplated by the Merger Agreement. The completion of the Merger is subject to customary conditions, including (1) the adoption of the Merger Agreement by the Company’s shareholders, (2) the receipt of conditional approval of the shares of Sierra Common Stock to be issued in the Merger for listing on the Toronto Stock Exchange, subject only to customary post-closing deliverables, and on The NASDAQ Global Market, subject only to official notice of issuance, (3) the expiration or early termination of all applicable waiting periods applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (4) the effectiveness of the registration statement on Form F-4 by the Securities and Exchange Commission for the Sierra Common Stock to be issued in the Merger, (5) the absence of any order, injunction or other legal restraint preventing the completion of the Merger or making the completion of the Merger illegal and (6) the absence of any pending legal proceeding instituted by any governmental entity seeking to restrain, enjoin or otherwise prohibit the consummation of the transactions contemplated by the Merger Agreement. Each party’s obligation to complete the Merger is also subject to certain additional customary conditions, including (1) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (2) performance in all material respects by the other party of its obligations under the Merger Agreement, (3) the absence of a material adverse effect with respect to the other party and (4) receipt by such party of a tax opinion to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986. The Merger Agreement also provides certain termination rights for each of the Company and Sierra and further provides that a termination fee equal to 3.75% of the aggregate equity value of the Merger as of the date of the Merger Agreement will be payable by the Company upon termination of the Merger Agreement under certain circumstances specified in the Merger Agreement. In addition, upon termination of the Merger Agreement by Sierra as a result of either Numerex’s shareholders not approving the transaction or Numerex’s fraud or willful and material breach of a representation, warranty or covenant, Numerex may be required to reimburse Sierra for its out-of-pocket costs and expenses incurred in connection with the Merger in an amount not to exceed $850,000 in the event of a no vote and $2 million in the event of fraud or a willful and material breach. In connection with entering into the Merger Agreement, the Company agreed to repurchase the Hale Capital warrants for a purchase price of $4.0 million, immediately prior to, and contingent upon, the consummation of the Merger. In addition, Hale Capital has agreed to waive any event of default under the Note Purchase Agreement that may be caused by the execution of the Merger Agreement or the consummation of the Merger; provided that (i) the repurchase price for the warrant and all principal, interest and other amounts owed under the Notes are paid in full substantially concurrently with the Effective Time of the Merger and (ii) the Effective Time of the Merger occurs on or before August 1, 2018. |
RECENT ACCOUNTING PRONOUNCEMENT
RECENT ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 30, 2017 | |
Recent Accounting Pronouncements [Abstract] | |
RECENT ACCOUNTING PRONOUNCEMENTS | NOTE K – RECENT ACCOUNTING PRONOUNCEMENTS In January 2017, the Financial Accounting Standards Board (FASB) issued guidance simplifying the test for goodwill impairment. The guidance eliminates step two from the goodwill impairment test and instead requires an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The updated guidance requires a prospective adoption, with early adoption permitted. The guidance is effective for the Company beginning in 2020. The Company is in the process of evaluating the effects of the provisions of this guidance on our financial statements. In January 2017, the FASB issued guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The updated guidance requires a prospective adoption. Early adoption is permitted. This update will be effective for the Company beginning in 2018. The Company does not expect the provisions of this guidance to have a material impact on our financial statements. In November 2016, the FASB issued guidance impacting restricted cash presentation on the statement of cash flows. The guidance requires that a statement of cash flows explain the change during the period of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This standard becomes effective for the Company during the first quarter of 2018 and will be applied using a retrospective approach for each period presented. In February 2016, the FASB issued guidance that requires lessees to recognize most leases as assets and liabilities on the balance sheet. Qualitative and quantitative disclosures will be enhanced to better understand the amount, timing and uncertainty of cash flows arising from leases. The guidance is effective for annual and interim periods beginning after December 15, 2018. The updated standard mandates a modified retrospective transition method with early adoption permitted. We are currently evaluating the effect that the updated standard will have on our financial statements. In May 2014, the FASB issued guidance which amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued additional guidance which delays the effective date by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued guidance which clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. We currently anticipate adopting the new standard effective January 1, 2018. The new standard also permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). We currently anticipate adopting the standard using the modified retrospective method. We are continuing to work towards establishing policies, updating our processes and implementing necessary changes to data and processes to be able to comply with the new requirements. Based on the results of our assessment to date, we do not expect that the new standard will result in significant changes in our units of accounting or the amounts of revenue allocated between units of accounting. Further, our initial evaluation is that monthly recurring service revenue for security, network, and asset identification and optimization, which is the majority of our revenue, would not be materially impacted by the adoption of this standard. Our initial conclusion may change when we complete our evaluation which is proceeding as planned. While we are continuing to assess all potential impacts of the standard, we currently believe the most significant impact relates to additional disclosures related to qualitative and quantitative information concerning the nature, amount, timing, and any uncertainty of revenue and cash flows from contracts with customers. Effective January 1, 2017, the Company adopted guidance which simplifies the measurement of inventory. The guidance changed the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value and eliminates the requirement to consider replacement cost or net realizable value less an approximately normal profit margin when measuring inventory. The provisions of this standard were adopted on a prospective basis and adoption of this standard did not have an impact on the Company's financial position, results of operations or cash flows. In July 2017, the Company adopted guidance which changes the classification analysis of certain equity-linked instruments with down round features. The guidance changed the requirement that a down round feature precluded equity classification when assessing whether the instrument is indexed to an entity’s own stock. The provisions of this standard were early adopted as of June 30, 2017. As of September 30, 2017, the only equity linked instruments with down-round features for the Company were the warrants issued in connection with the Hale Financing (see Note F- Debt). |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE L – SUBSEQUENT EVENTS On October 4, 2017, a putative class action was filed against the Company and certain of its directors and officers in the United States District Court for the Northern District of Georgia. This suit is captioned Litwin v. Numerex Corp. et al Franchi v. Numerex Corp. et al |
SUMMARY OF SIGNIFICANT ACCOUN19
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation We prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, referred to as GAAP, for interim financial information and the Rules and Regulations issued by the Securities Exchange Commission, or SEC, as applicable. These financial statements include all of our accounts and those of our wholly-owned subsidiaries. We have eliminated intercompany transactions and balances in consolidation. Certain prior period amounts in the condensed consolidated financial statements and notes thereto have been reclassified to conform to the current period’s presentation. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted, although we believe that the disclosures made are adequate to make the information not misleading. In the opinion of management, the accompanying financial statements reflect all adjustments, which consist of normal recurring adjustments unless otherwise disclosed, considered necessary for a fair presentation of our financial position as of September 30, 2017 and our operating results and cash flows for the interim periods presented. The accompanying condensed consolidated balance sheet as of December 31, 2016 was derived from our audited financial statements, but does not include all disclosures required by GAAP. The financial information presented herein should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2016 which includes information and disclosures not included in this quarterly report. |
Estimates and Assumptions | Estimates and Assumptions The preparation of financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Actual results may differ materially from these estimates. Operating results for the three or nine months ended September 30, 2017 may not be indicative of the results that may be expected for the year ending December 31, 2017 or any future periods. |
Liquidity | Liquidity The Company incurred an operating loss totaling $6.1 million and cash used in operations was $0.8 million for the nine months ended September 30, 2017. The Company also incurred an operating loss totaling $22.8 million and cash used in operations totaled $0.5 million for the year ended December 31, 2016. As of September 30, 2017, the Company has an accumulated deficit of $58.8 million, and cash and cash equivalents of $6.6 million. The Company’s cash flow requirements during the fiscal year 2016 and to date in 2017 were financed by cash on hand, cash generated by operations, and proceeds from the recent financing with Hale. The Company had total term debt (net of deferred financing costs), including current portion, of $15.7 million as of September 30, 2017. The Company’s ability to continue in business is dependent on its ability to continue to generate operating cash flows, to maintain sufficient cash on hand, to raise additional capital, and to control expenditures. Management believes that the Company will maintain sufficient liquidity through at least September 2018. The consolidated financial statements do not include any adjustments that might result from this uncertainty. |
Restricted Cash | Restricted Cash As of September 30, 2017, and 2016, cash of $0.2 million was held in escrow related to certain vendor obligations. |
INVENTORY (Tables)
INVENTORY (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Inventory [Abstract] | |
Schedule of inventory | September 30, December 31, 2017 2016 Raw materials $ 1,843 $ 2,953 Finished goods 5,747 $ 8,504 Inventory reserves (1,681 ) $ (2,446 ) $ 5,909 $ 9,011 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of components of property and equipment | September 30, December 31, 2017 2016 Computer, network and other equipment $ 8,924 $ 8,805 Monitoring equipment 7,328 5,692 Furniture and fixtures 486 486 Leasehold improvements 255 264 Total property and equipment 16,993 15,247 Accumulated depreciation and amortization (11,385 ) (9,225 ) $ 5,608 $ 6,022 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Intangible Assets [Abstract] | |
Schedule of indefinite-lived | Omnilink DIY Total Trade Names Goodwill Technology Goodwill Impairment January 1, 2016 $ 2,972 $ 17,580 $ 245 $ 1,656 Amortization - - (27 ) - Impairment (1,612 ) (2,264 ) (81 ) (215 ) $ (4,172 ) September 30, 2016 $ 1,360 $ 15,316 $ 137 $ 1,441 |
Schedule of intangible assets other than goodwill | As of September 30, 2017 As of December 31, 2016 Remaining Useful Lives Gross Accumulated Net Book Gross Accumulated Net Book Purchased and developed software 1.5 $ 19,060 $ (15,176 ) $ 3,884 $ 18,205 $ (12,806 ) $ 5,399 Software in development n/a 1,770 - 1,770 1,131 - 1,131 Total software 20,830 (15,176 ) 5,654 19,336 (12,806 ) 6,530 Licenses 2.6 13,215 (12,864 ) 351 13,215 (12,534 ) 681 Customer relationships 6.8 8,167 (3,604 ) 4,563 8,167 (3,039 ) 5,128 Technologies 10.2 4,235 (984 ) 3,251 4,235 (822 ) 3,413 Patents and trademarks 1.4 4,313 (2,623 ) 1,690 3,747 (2,368 ) 1,379 Trade names Indefinite 918 - 918 918 - 918 Total other intangible assets 30,848 (20,075 ) 10,773 30,282 (18,763 ) 11,519 $ 51,678 $ (35,251 ) $ 16,427 $ 49,618 $ (31,569 ) $ 18,049 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of debt | September 30, December 31, 2017 2016 Notes payable to Hale Capital $ 13,981 $ - Note payable to Kenneth Rainin Foundation (a related party) 5,000 - Note payable to Crystal Financial LLC, with interest at LIBOR plus margin - 17,000 Less deferred financing costs (3,236 ) (840 ) 15,745 16,160 Less current portion of long-term debt (net of deferred financing costs) (5,702 ) (1,275 ) Noncurrent portion of long-term debt $ 10,043 $ 14,885 |
NET LOSS PER SHARE (Tables)
NET LOSS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
Schedule of calculation of basic and dilutive earnings per share and anti-dilutive equity based compensation awards | For the Three Months Ended For the Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Weighted average common shares outstanding Basic 19,646 19,542 19,575 19,456 Dilutive effect of commons stock equivalents - - - - Total 19,646 19,542 19,575 19,456 Anti-dilutive equity-based compensation awards 1,091 1,571 1,035 1,576 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value on a nonrecurring basis | Fair Total Value Level 3 Losses April 1, 2016 Omnilink Reporting Unit Indefinite lived trade names $ 1,360 $ 1,360 $ 1,612 Goodwill 15,316 15,316 2,264 DIY Reporting Unit Technology 146 146 81 Goodwill 1,441 1,441 215 Total nonrecurring fair value $ 18,263 $ 18,263 $ 4,172 |
SUMMARY OF SIGNIFICANT ACCOUN26
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Detail Textuals) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Accounting Policies [Abstract] | ||||||
Operating loss | $ (2,462) | $ (2,197) | $ (6,147) | $ (12,031) | $ 22,800 | |
Cash used in operations | (785) | (803) | 500 | |||
Accumulated deficit | (58,800) | (58,800) | (48,271) | |||
Cash and cash equivalents | 6,575 | $ 2,872 | 6,575 | $ 2,872 | 9,285 | $ 9,285 |
Long-term debt | 15,745 | 15,745 | 16,160 | |||
Cash held in escrow | $ 200 | $ 200 | $ 200 |
INVENTORY - Summary of inventor
INVENTORY - Summary of inventory (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Inventory [Abstract] | ||
Raw materials | $ 1,843 | $ 2,953 |
Finished goods | 5,747 | 8,504 |
Inventory reserves | (1,681) | (2,446) |
Inventory, net | $ 5,909 | $ 9,011 |
INVENTORY (Detail Textuals)
INVENTORY (Detail Textuals) - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Sep. 30, 2017 | |
Inventory [Abstract] | ||
Value of inventory transferred to monitoring equipment | $ 500,000 | $ 1,600,000 |
Disposed of fully reserved inventory | $ 0 | $ 300,000 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | $ 16,993 | $ 15,247 |
Accumulated depreciation and amortization | (11,385) | (9,225) |
Property and equipment, net | 5,608 | 6,022 |
Computer, network and other equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 8,924 | 8,805 |
Monitoring equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 7,328 | 5,692 |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 486 | 486 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | $ 255 | $ 264 |
PROPERTY AND EQUIPMENT (Detail
PROPERTY AND EQUIPMENT (Detail Textuals) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | ||||
Value of inventory transferred to monitoring equipment | $ 0.5 | $ 1.6 | ||
Depreciation and amortization | $ 0.3 | $ 0.4 | $ 0.9 | $ 1.1 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Finite And Indefinite Lived Intangible Assets [Roll Forward] | ||||
Amortization | $ (1,200) | $ (1,300) | $ (3,500) | $ (2,600) |
Impairment | (4,172) | |||
DIY | Technology | ||||
Finite And Indefinite Lived Intangible Assets [Roll Forward] | ||||
January 1, 2016 | 245 | |||
Amortization | (27) | |||
Impairment | (81) | |||
September 30, 2016 | 137 | 137 | ||
Trade names | Omnilink Systems, Inc. | ||||
Finite And Indefinite Lived Intangible Assets [Roll Forward] | ||||
January 1, 2016 | 2,972 | |||
Impairment | (1,612) | |||
September 30, 2016 | 1,360 | 1,360 | ||
Goodwill | Omnilink Systems, Inc. | ||||
Finite And Indefinite Lived Intangible Assets [Roll Forward] | ||||
January 1, 2016 | 17,580 | |||
Impairment | (2,264) | |||
September 30, 2016 | 15,316 | 15,316 | ||
Goodwill | DIY | ||||
Finite And Indefinite Lived Intangible Assets [Roll Forward] | ||||
January 1, 2016 | 1,656 | |||
Impairment | (215) | |||
September 30, 2016 | $ 1,441 | $ 1,441 |
INTANGIBLE ASSETS - Summary of
INTANGIBLE ASSETS - Summary of intangible assets other than goodwill (Details 1) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | |
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | $ 51,678 | $ 49,618 | |
Accumulated Amortization | (35,251) | (31,569) | $ (4,172) |
Net Book Value | $ 16,427 | 18,049 | |
Purchased and developed software | |||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | |||
Remaining Useful Lives | 1 year 6 months | ||
Gross Carrying Amount | $ 19,060 | 18,205 | |
Accumulated Amortization | (15,176) | (12,806) | |
Net Book Value | 3,884 | 5,399 | |
Software in development | |||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 1,770 | 1,131 | |
Net Book Value | 1,770 | 1,131 | |
Total software | |||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 20,830 | 19,336 | |
Accumulated Amortization | (15,176) | (12,806) | |
Net Book Value | $ 5,654 | 6,530 | |
Licenses | |||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | |||
Remaining Useful Lives | 2 years 7 months 6 days | ||
Gross Carrying Amount | $ 13,215 | 13,215 | |
Accumulated Amortization | (12,864) | (12,534) | |
Net Book Value | $ 351 | 681 | |
Customer relationships | |||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | |||
Remaining Useful Lives | 6 years 9 months 18 days | ||
Gross Carrying Amount | $ 8,167 | 8,167 | |
Accumulated Amortization | (3,604) | (3,039) | |
Net Book Value | $ 4,563 | 5,128 | |
Technologies | |||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | |||
Remaining Useful Lives | 10 years 2 months 12 days | ||
Gross Carrying Amount | $ 4,235 | 4,235 | |
Accumulated Amortization | (984) | (822) | |
Net Book Value | $ 3,251 | 3,413 | |
Patents and trademarks | |||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | |||
Remaining Useful Lives | 1 year 4 months 24 days | ||
Gross Carrying Amount | $ 4,313 | 3,747 | |
Accumulated Amortization | (2,623) | (2,368) | |
Net Book Value | $ 1,690 | 1,379 | |
Trade names | |||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | |||
Weighted Remaining Average Useful Lives | Indefinite | ||
Gross Carrying Amount | $ 918 | 918 | |
Net Book Value | 918 | 918 | |
Total Other Intangibles Assets | |||
Finite Lived And Indefinite Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 30,848 | 30,282 | |
Accumulated Amortization | (20,075) | (18,763) | |
Net Book Value | $ 10,773 | $ 11,519 |
INTANGIBLE ASSETS (Detail Textu
INTANGIBLE ASSETS (Detail Textuals) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Business Acquisition [Line Items] | ||||
Amortization expense of intangible assets | $ 1,200 | $ 1,300 | $ 3,500 | $ 2,600 |
Amortization of intangible assets recorded in cost of subscription revenue | 500 | 400 | 1,300 | 1,000 |
Internally generated software development costs | $ 600 | $ 500 | $ 1,800 | 1,100 |
Impairment | 4,172 | |||
Technology | DIY | ||||
Business Acquisition [Line Items] | ||||
Amortization expense of intangible assets | 27 | |||
Impairment | 81 | |||
Goodwill | Omnilink Systems, Inc. | ||||
Business Acquisition [Line Items] | ||||
Impairment | 2,264 | |||
Goodwill | DIY | ||||
Business Acquisition [Line Items] | ||||
Impairment | 215 | |||
Trade names | Omnilink Systems, Inc. | ||||
Business Acquisition [Line Items] | ||||
Impairment | $ 1,612 |
INCOME TAXES (Detail Textuals)
INCOME TAXES (Detail Textuals) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Taxes [Abstract] | |||
Deferred tax expense | $ 100 | $ 237 | $ (268) |
Percentage of tax expense effective tax rate | 2.40% | 2.40% |
DEBT - Summary of debt (Details
DEBT - Summary of debt (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Debt Instrument [Line Items] | ||
Less deferred financing costs | $ (3,236) | $ (840) |
Long-term debt, total | 15,745 | 16,160 |
Less current portion of long-term debt (net of deferred financing costs) | (5,702) | (1,275) |
Noncurrent portion of long-term debt | 10,043 | 14,885 |
Notes payable to Hale Capital | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | 13,981 | |
Note payable to Kenneth Rainin Foundation (a related party) | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | $ 5,000 | |
Note payable to Crystal Financial LLC, with interest at LIBOR plus margin | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | $ 17,000 |
DEBT (Detail Textuals)
DEBT (Detail Textuals) - USD ($) | Jun. 07, 2017 | Mar. 31, 2017 | Sep. 30, 2017 | Sep. 30, 2016 |
Debt Instrument [Line Items] | ||||
Loss on extinguishment of debt | $ (1,089,000) | $ (290,000) | ||
Net proceeds from the term loan, amount cash in hand | 18,591,000 | 17,000,000 | ||
Loss on extinguishment of debt | (1,089,000) | (290,000) | ||
Prepayment of milestone | 17,000,000 | $ 19,349,000 | ||
Note payable to Kenneth Rainin Foundation (a related party) | ||||
Debt Instrument [Line Items] | ||||
Long-term debt, gross | 5,000,000 | |||
Annual interest rate of promissory note | 12.00% | |||
Number of warrants to purchase common stock | 125,000 | |||
Price of warrant per share (in dollars per share) | $ 0.01 | |||
Amount of fair value of warrant | $ 600,000 | |||
Amendment to the Crystal Loan Agreement | ||||
Debt Instrument [Line Items] | ||||
Annual interest rate of promissory note | 8.50% | |||
Increased interest rate payable | 10.50% | |||
Repayment of principal amount | $ 2,000,000 | |||
Repayment of senior subordinated promissory note | 5,000,000 | |||
Loss on extinguishment of debt | $ 2,000,000 | |||
Prepayment of milestone | $ 2,000,000 | |||
Notes payable to Hale Capital | ||||
Debt Instrument [Line Items] | ||||
Long-term debt, gross | $ 13,981,000 | |||
Loss on extinguishment of debt | 1,100,000 | |||
Unamortized deferred financing costs related to the Crystal Loan Agreement | 500,000 | |||
Amount of prepayment penalties and other extinguishment related costs | $ 600,000 | |||
Annual interest rate of promissory note | 5.00% | |||
Amount of periodic principal payments | $ 250,000 | |||
Number of warrants to purchase common stock | 895,944 | |||
Price of warrant per share (in dollars per share) | $ 4.14 | |||
Amount of fair value of warrant | $ 2,400,000 | |||
Term of warrants (in years) | 10 years | |||
Interest rate during period | 11.00% | |||
Description of prepayment penalty | if prepayment is on or before the second anniversary of the Closing Date, 5% of the principal prepaid; (B) if prepayment is after the second anniversary but on or before the third anniversary of the Closing Date, 3% of the principal prepaid; and (C) if prepayment is after the third year anniversary but before the maturity date, 1% of the principal prepaid. | |||
Notes payable to Hale Capital | Prime rate | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 7.00% | |||
Description of variable rate basis | prime rate plus 700 |
NET LOSS PER SHARE (Details)
NET LOSS PER SHARE (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Weighted average common shares outstanding | ||||
Basic (in shares) | 19,646 | 19,542 | 19,575 | 19,456 |
Dilutive effect of common stock equivalents | 0 | 0 | 0 | 0 |
Diluted (in shares) | 19,646 | 19,542 | 19,575 | 19,456 |
Anti-dilutive equity-based compensation awards | 1,091 | 1,571 | 1,035 | 1,576 |
RESTRUCTURING (Detail Textuals)
RESTRUCTURING (Detail Textuals) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Restructuring Costs [Abstract] | ||
Restructuring charges | $ 1.4 | $ 1.5 |
Relocation charges | 0.8 | |
Severance costs | 0.6 | $ 0.7 |
Legal fees | 0.7 | |
Sublease loss | $ 0.1 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Total Losses | $ 4,172 |
Omnilink Systems, Inc. | Goodwill | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Total Losses | 2,264 |
Omnilink Systems, Inc. | Indefinite lived trade names | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Total Losses | 1,612 |
DIY | Technology | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Total Losses | 81 |
DIY | Goodwill | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Total Losses | 215 |
Nonrecurring basis | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Total nonrecurring fair value measurements | 18,263 |
Total Losses | 4,172 |
Nonrecurring basis | Omnilink Systems, Inc. | Goodwill | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Total nonrecurring fair value measurements | 15,316 |
Nonrecurring basis | Omnilink Systems, Inc. | Indefinite lived trade names | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Total nonrecurring fair value measurements | 1,360 |
Total Losses | 1,612 |
Nonrecurring basis | DIY | Technology | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Total nonrecurring fair value measurements | 146 |
Total Losses | 81 |
Nonrecurring basis | DIY | Goodwill | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Total nonrecurring fair value measurements | 1,441 |
Total Losses | 215 |
Nonrecurring basis | Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Total nonrecurring fair value measurements | 18,263 |
Nonrecurring basis | Level 3 | Omnilink Systems, Inc. | Goodwill | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Total nonrecurring fair value measurements | 15,316 |
Total Losses | 2,264 |
Nonrecurring basis | Level 3 | Omnilink Systems, Inc. | Indefinite lived trade names | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Total nonrecurring fair value measurements | 1,360 |
Nonrecurring basis | Level 3 | DIY | Technology | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Total nonrecurring fair value measurements | 146 |
Nonrecurring basis | Level 3 | DIY | Goodwill | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Total nonrecurring fair value measurements | $ 1,441 |
MERGER AGREEMENT (Detail Textua
MERGER AGREEMENT (Detail Textuals) | Aug. 02, 2017USD ($)shares |
Merger Agreement [Abstract] | |
Number of common shares right to recieve | shares | 0.1800 |
Termination fee percentage | 3.75% |
Maximum out of pocket costs and expenses reimbursement | $ 850,000 |
Reimbursement in case of fraud or willful and material | 2,000,000 |
Warrants fixed repurchase price | $ 4,000,000 |