☒ | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Pennsylvania | 11-2948749 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) | |
3330 Cumberland Blvd, Suite 700, Atlanta, GA | 30339 | |
(Address of Principal Executive Offices) | (Zip Code) |
Class A Common Stock, no par value (Title of each class) | The NASDAQ Stock Market LLC (Name of each exchange on which registered) |
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v | The Numerex M2M Platform |
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v | Enabling Services |
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● | Wireless/cellular signal transport |
● | Alarm and security system signaling |
● | Location-based signaling |
● | Remote asset and personal monitoring and tracking |
● | Vending |
● | Voice and video signal transport |
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Name | Age | Position | |||
Stratton J. Nicolaides* | 61 | Chairman of the Board of Directors, Chief Executive Officer | |||
Richard A. Flynt | 55 | Chief Financial Officer | |||
Louis Fienberg | 60 | Executive Vice President, Corporate Development | |||
Jeffery O. Smith, PhD | 54 | Chief Innovation and Technology Officer |
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● | incur additional indebtedness; |
● | create liens; |
● | enter into transactions with affiliates; |
● | transfer assets; |
● | pay dividends or make distributions on, or repurchase our stock; or |
● | merge or consolidate. |
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● | changes in government programs that are related to our hardware solutions and services; |
● | adoption of new laws or regulations relating to government contracting or changes to existing laws or regulations; changes in political or public support for programs; |
● | delays or changes in the government appropriations process; and |
● | delays in the payment of invoices by government payment offices and the prime contractors. |
● | terminate existing contracts for convenience, as well as for default; |
● | reduce or modify contracts or subcontracts; |
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● | cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable; |
● | decline to exercise an option to renew a multi-year contract; |
● | claim rights in our hardware solutions and services; |
● | suspend or debar us from doing business with the federal government or with a governmental agency; and |
● | control or prohibit the export of our hardware solutions and services. |
● | an international economic downturn; |
● | export control requirements, including restrictions on the export of critical technology; |
● | restrictions imposed by local laws and regulations; |
● | restrictions imposed by local product certification requirements; |
● | currency exchange rate fluctuations; |
● | generally longer receivable collection periods and difficulty in collecting accounts receivable; |
● | trade restrictions and changes in tariffs; |
● | difficulties in repatriating earnings; |
● | difficulties in staffing and managing international operations; and |
● | potential insolvency of channel partners. |
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Location | Principal Business | Square Footage | Lease Expiration | ||||||||
Atlanta, Georgia | Principal Executive Office – includes Network Services and Support, Engineering and Development, Sales and Marketing and General and Administrative | 37,538 | 2022 | ||||||||
Dallas, Texas | Network Services, Engineering and Development and Sales | 13,256 | 2018 | ||||||||
Alpharetta, Georgia | Network Services, Engineering and Development, Monitoring Operations Center and Sales | 10,933 | 2017 | ||||||||
Alpharetta, Georgia | Warehousing and Logistics | 10,701 | 2020 | ||||||||
Edmond, Oklahoma | Network Services and Sales/Support | 1,000 | 2015 | ||||||||
Bozeman, Montana | Network Services and Sales/Support | 1,345 | Month to Month | ||||||||
Doylestown, Pennsylvania | Sales and Administrative | 905 | 2015 |
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Fiscal 2014 | High | Low | |||||||
First Quarter (January 1, 2014 to March 31, 2014) | $ | 15.98 | $ | 10.42 | |||||
Second Quarter (April 1, 2014 to June 30, 2014) | 12.19 | 9.88 | |||||||
Third Quarter (July 1, 2014 to September 30, 2014) | 11.94 | 9.70 | |||||||
Fourth Quarter (October 1, 2014 to December 31, 2014) | 13.17 | 10.29 | |||||||
Fiscal 2013 | High | Low | |||||||
First Quarter (January 1, 2013 to March 31, 2013) | $ | 13.86 | $ | 11.60 | |||||
Second Quarter (April 1, 2013 to June 30, 2013) | 12.75 | 8.85 | |||||||
Third Quarter (July 1, 2013 to September 30, 2013) | 11.87 | 9.57 | |||||||
Fourth Quarter (October 1, 2013 to December 31, 2013) | 13.99 | 10.75 |
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As of and for the year ended December 31, | ||||||||||||||||||||
(in thousands except per share data) | 2014(1) | 2013 | 2012 | 2011 | 2010(2) | |||||||||||||||
Statement of Operations Data | ||||||||||||||||||||
Net revenues | $ | 93,869 | $ | 77,832 | $ | 65,032 | $ | 55,920 | $ | 58,243 | ||||||||||
Gross profit | 43,264 | 32,140 | 27,875 | 24,903 | 25,657 | |||||||||||||||
Litigation settlement and related expenses | - | - | - | 338 | 3,025 | |||||||||||||||
Operating income (loss) | 2,115 | (419 | ) | 2,967 | 1,697 | (400 | ) | |||||||||||||
Income (loss) from continuing operations before income taxes | 2,655 | (404 | ) | 2,131 | 1,498 | (524 | ) | |||||||||||||
Income tax expense (benefit)(3) | 419 | (2,369 | ) | (4,902 | ) | (62 | ) | (144 | ) | |||||||||||
Income (loss) from continuing operations, net of incometax expense (benefit) | 2,236 | 1,965 | 7,033 | 1,560 | (380 | ) | ||||||||||||||
(Loss) income from discontinued operations, net of income taxes | (492 | ) | (1,380 | ) | 132 | 294 | - | |||||||||||||
Net income (loss) | 1,744 | 585 | 7,165 | 1,854 | (380 | ) | ||||||||||||||
Basic earnings (loss) per share: | ||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.12 | $ | 0.11 | $ | 0.46 | $ | 0.10 | $ | (0.03 | ) | |||||||||
(Loss) income from discontinued operations | (0.03 | ) | (0.08 | ) | 0.00 | 0.02 | 0.00 | |||||||||||||
Net income (loss) | $ | 0.09 | $ | 0.03 | $ | 0.46 | $ | 0.12 | $ | (0.03 | ) | |||||||||
Diluted earnings (loss) per share: | ||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.12 | $ | 0.10 | $ | 0.44 | $ | 0.10 | $ | (0.03 | ) | |||||||||
(Loss) income from discontinued operations | (0.03 | ) | (0.07 | ) | 0.01 | 0.02 | 0.00 | |||||||||||||
Net income (loss) | $ | 0.09 | $ | 0.03 | $ | 0.45 | $ | 0.12 | $ | (0.03 | ) | |||||||||
Balance Sheet Data | ||||||||||||||||||||
Cash, cash equivalents, restricted cashand short term investments | $ | 17,270 | $ | 25,603 | $ | 4,948 | $ | 9,768 | $ | 10,516 | ||||||||||
Total assets | 130,943 | 101,290 | 72,147 | 61,428 | 57,146 | |||||||||||||||
Total debt and capital lease obligations(short and long term) | 23,749 | 1,562 | 8,294 | 5,937 | 684 | |||||||||||||||
Shareholders’ equity | 88,862 | 83,977 | 52,805 | 44,197 | 42,718 | |||||||||||||||
Cash Flow Data | ||||||||||||||||||||
Net cash provided by (used in) continuing operations | 10,455 | 6,088 | 1,924 | (1,722 | ) | 8,555 |
(1) | On May 5, 2014,weacquired the business operations of Omnilink, the financial results of which have now been included inour results. The consolidated financial data, as reported and shown above, include results from Omnilink since the date of acquisition. Included in the 2014 financial data shown above are revenues, cost of revenues and gross profit related to Omnilink of $ 8.7 million, $3.8 million and $4.9 million, respectively. |
(2) | In June 2014, we completed the sale and disposition of components of our business classified as discontinued operations. These components were classified as discontinued operations in June 2013, when we decided to exit certain businesses and related products that were not core to future business plans. All statement of operations and cash flow data presented for the years ended December 31, 2014, 2013, 2012 and 2011 reflect discontinued operations on a reclassified and segregated basis from continuing operations. Discontinued operations have not been reclassified for statement of operations and cash flow data presented for the year ended December 31, 2010. See Note C to the accompanying consolidated financial statements. |
(3) | During the year ended December 31, 2013, we recognized a $2.4 million deferred income tax benefit from a tax accounting method change allowing a one-time acceleration and catch-up of depreciation and amortization. During the year ended December 31, 2012, we recognized a deferred income tax benefit of $4.9 million from the release of a valuation allowance against certain deferred tax assets. See Note K to the accompanying consolidated financial statements. |
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For the years ended December 31, | 2014 vs. 2013 | 2013 vs. 2012 | ||||||||||||||||||
2014 | 2013 | 2012 | % Change | % Change | ||||||||||||||||
Net revenue: | ||||||||||||||||||||
Subscription and support revenue | $ | 65,020 | $ | 51,640 | $ | 43,067 | 25.9 | % | 19.9 | % | ||||||||||
Embedded devices and hardware sales | 28,849 | 26,192 | 21,965 | 10.1 | % | 19.2 | % | |||||||||||||
Total net revenue | 93,869 | 77,832 | 65,032 | 20.6 | % | 19.7 | % | |||||||||||||
Cost of revenue, exclusive of a portion of depreciation and amortization shown below: | ||||||||||||||||||||
Subscription and support | 25,371 | 21,754 | 17,955 | 16.6 | % | 21.2 | % | |||||||||||||
Embedded devices and hardware | 25,234 | 23,938 | 19,202 | 5.4 | % | 24.7 | % | |||||||||||||
Gross profit | 43,264 | 32,140 | 27,875 | 34.6 | % | 15.3 | % | |||||||||||||
Gross profit % | 46.1 | % | 41.3 | % | 42.9 | % | ||||||||||||||
Operating expenses: | ||||||||||||||||||||
Sales and marketing | 11,876 | 9,544 | 8,242 | 24.4 | % | 15.8 | % | |||||||||||||
General and administrative | 15,063 | 13,281 | 10,257 | 13.4 | % | 29.5 | % | |||||||||||||
Engineering and development | 8,009 | 4,915 | 3,096 | 63.0 | % | 58.8 | % | |||||||||||||
Depreciation and amortization | 6,201 | 4,819 | 3,313 | 28.7 | % | 45.5 | % | |||||||||||||
Operating income (loss) | 2,115 | (419 | ) | 2,967 | 604.8 | % | -114.1 | % | ||||||||||||
Interest expense | 798 | 304 | 336 | 162.5 | % | -9.5 | % | |||||||||||||
Other (income) expense, net | (1,338 | ) | (319 | ) | 500 | 319.4 | % | -163.8 | % | |||||||||||
Income (loss) from continuing operationsbefore income taxes | 2,655 | (404 | ) | 2,131 | 757.2 | % | -119.0 | % | ||||||||||||
Income tax expense (benefit) | 419 | (2,369 | ) | (4,902 | ) | 117.7 | % | -51.7 | % | |||||||||||
Income from continuing operations, net of income taxes | 2,236 | 1,965 | 7,033 | 13.8 | % | -72.1 | % | |||||||||||||
(Loss) income from discontinued operations, net of income taxes | (492 | ) | (1,380 | ) | 132 | nm | nm | |||||||||||||
Net income | $ | 1,744 | $ | 585 | $ | 7,165 | 198.1 | % | -91.8 | % | ||||||||||
Adjusted EBITDA(1) | $ | 12,621 | $ | 8,353 | $ | 8,037 | 51.1 | % | 3.9 | % |
(1) | Refer to the section “Non-GAAP Financial Measures” for a discussion of these non-GAAP financial measures |
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● | EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, income taxes, depreciation and amortization, which can vary substantially from company-to-company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired; and |
● | Investors commonly adjust EBITDA information to eliminate the effect of equity-based compensation and other unusual or infrequently occurring items which vary widely from company-to-company and impair comparability. |
We use EBITDA, Adjusted EBITDA and Adjusted EBITDA per diluted share:
● | as a measure of operating performance to assist in comparing performance from period-to-period on a consistent basis |
● | as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; and |
● | in communications with the board of directors, analysts and investors concerning our financial performance. |
Although we believe, for the foregoing reasons, that the presentation of non-GAAP financial measures provides useful supplemental information to investors regarding our results of operations, the non-GAAP financial measures should only be considered in addition to, and not as a substitute for, or superior to, any measure of financial performance prepared in accordance with GAAP.
Use of non-GAAP financial measures is subject to inherent limitations because they do not include all the expenses that must be included under GAAP and because they involve the exercise of judgment of which charges should properly be excluded from the non-GAAP financial measure. Management accounts for these limitations by not relying exclusively on non-GAAP financial measures, but only using such information to supplement GAAP financial measures. The non-GAAP financial measures may not be the same non-GAAP measures, and may not be calculated in the same manner, as those used by other companies.
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2014 | 2013 | 2012 | ||||||||||
Income from continuing operations, net of income tax benefit (GAAP) | $ | 2,236 | $ | 1,965 | $ | 7,033 | ||||||
Depreciation and amortization | 6,812 | 5,119 | 3,313 | |||||||||
Interest expense and other non-operating (income) expense, net | (540 | ) | (15 | ) | 836 | |||||||
Income tax expense (benefit) | 419 | (2,369 | ) | (4,902 | ) | |||||||
EBITDA (non-GAAP) | 8,927 | 4,700 | 6,280 | |||||||||
Equity-based compensation | 2,565 | 1,879 | 1,388 | |||||||||
Infrequent or unusual items, including transaction and other costs | 1,129 | 1,774 | 369 | |||||||||
Adjusted EBITDA (non-GAAP) | $ | 12,621 | $ | 8,353 | $ | 8,037 | ||||||
Income from continuing operations, net of income tax benefit, per diluted share (GAAP) | $ | 0.12 | $ | 0.10 | $ | 0.44 | ||||||
EBITDA per diluted share (non-GAAP) | 0.46 | 0.25 | 0.39 | |||||||||
Adjusted EBITDA per diluted share (non-GAAP) | 0.66 | 0.44 | 0.50 | |||||||||
Weighted average shares outstanding in computing diluted earnings per share | 19,268 | 18,950 | 16,014 |
For the Years Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Cash flow provided by (used in) continuing operations | ||||||||||||
Operating activities | $ | 10,456 | $ | 6,088 | $ | 1,924 | ||||||
Investing activities | (41,424 | ) | (5,862 | ) | (6,452 | ) | ||||||
Financing activities | 22,493 | 20,347 | 150 | |||||||||
(Decrease) increase in cash and cash equivalents | $ | (8,475 | ) | $ | 20,573 | $ | (4,378 | ) |
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Loan Agreement Principal Repayment Schedule | ||||||||
Quarterly | Annually | |||||||
June 2014 - March 2015 | $ | 625,000 | $ | 2,500,000 | ||||
June 2015 - March 2016 | 937,500 | 3,750,000 | ||||||
June 2016 - March 2017 | 937,500 | 3,750,000 | ||||||
June 2017 - March 2018 | 1,250,000 | 5,000,000 | ||||||
June 2018 - March 2019 | 1,250,000 | 5,000,000 | ||||||
Outstanding balance due May 2019 | - | 5,000,000 |
Payments due by period | ||||||||||||||||||||
Total | Less than 1 Year | 1 - 3 Years | 3 - 5 Years | More than 5 Years | ||||||||||||||||
Term loan(1) | $ | 25,368 | $ | 4,530 | $ | 9,550 | $ | 11,288 | $ | - | ||||||||||
Promissory note(2) | 482 | 482 | - | - | - | |||||||||||||||
Capital lease obligations(3) | 157 | 157 | - | - | - | |||||||||||||||
Operating lease obligations(4) | 10,154 | 1,514 | 3,097 | 2,523 | 3,020 | |||||||||||||||
Purchase commitments(5) | 5,416 | 5,416 | - | - | - | |||||||||||||||
Total(6) | $ | 41,577 | $ | 12,099 | $ | 12,647 | $ | 13,811 | $ | 3,020 |
(1) | Amounts represent future principal and interest payments at 2.75%, which is an interest rate based on LIBOR plus a margin. Payments due in less than one year include excess cash flow recapture. See Note M to the accompanying consolidated financial statements. |
(2) | Amounts represent future principal and interest payments at a 4.25% interest rate. |
(3) | Amounts represent future minimum lease payments under non-cancelable capital leases for networking and computer equipment. |
(4) | Amounts represent future minimum rental payments under non-cancelable operating leases for our facilities. |
(5) | Amounts represent future obligations to purchase inventory. |
(6) | Liabilities of approximately $0.1 million related to Accounting Standards Codification Subtopic 740-10, Income Taxes have not been included in the table above because we are uncertain as to if or when such amounts may be settled. See Note K to the accompanying consolidated financial statements. |
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● | significant decrease in the market value of an asset; |
● | significant adverse change in physical condition or manner of use of an asset; |
● | significant adverse change in legal factors or negative industry or economic trends; |
● | a current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset; |
● | significant decline in our stock price for a sustained period; and |
● | an expectation that, more likely than not, an asset will be sold or otherwise disposed of before the end of its previously estimated useful life. |
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CONSOLIDATED BALANCE SHEETS
(In thousands)
As of December 31, | ||||||||
2014 | 2013 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 17,270 | $ | 25,603 | ||||
Accounts receivable, less allowance for doubtful accounts of $1,106 and $674 | 12,287 | 9,385 | ||||||
Financing receivables, current | 1,595 | 1,223 | ||||||
Inventory, net of reserve for obsolescence | 8,410 | 8,315 | ||||||
Prepaid expenses and other current assets | 2,329 | 1,833 | ||||||
Deferred tax assets, current | 3,161 | 2,742 | ||||||
Assets of discontinued operations | - | 840 | ||||||
TOTAL CURRENT ASSETS | 45,052 | 49,941 | ||||||
Financing receivables, less current portion | 2,984 | 3,029 | ||||||
Property and equipment, net of accumulated depreciation and amortization | 4,889 | 3,125 | ||||||
Software, net of accumulated amortization | 6,106 | 6,381 | ||||||
Other intangible assets, net of accumulated amortization | 19,163 | 5,617 | ||||||
Goodwill | 44,548 | 26,941 | ||||||
Deferred tax assets, less current portion | 5,616 | 3,958 | ||||||
Other assets | 2,585 | 2,298 | ||||||
TOTAL ASSETS | $ | 130,943 | $ | 101,290 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 12,257 | $ | 9,953 | ||||
Accrued expenses and other current liabilities | 2,471 | 2,004 | ||||||
Deferred revenues | 2,258 | 1,894 | ||||||
Current portion of long-term debt | 4,251 | 633 | ||||||
Obligations under capital lease | 148 | 306 | ||||||
Liabilities of discontinued operations | - | 207 | ||||||
TOTAL CURRENT LIABILITIES | 21,385 | 14,997 | ||||||
Long-term debt, less current portion | 19,350 | 475 | ||||||
Obligations under capital lease, less current portion | - | 148 | ||||||
Other liabilities | 1,346 | 1,693 | ||||||
TOTAL LIABILITIES | 42,081 | 17,313 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||
Preferred stock, no par value; authorized 3,000; none issued | - | - | ||||||
Class A common stock, no par value; 30,000 authorized;20,284 and 20,069 issued; 18,992 and 18,828 outstanding | - | - | ||||||
Class B common stock, no par value; authorized 5,000; none issued | - | - | ||||||
Additional paid-in capital | 99,056 | 95,777 | ||||||
Treasury stock, at cost, 1,292 and 1,241 shares | (5,352 | ) | (5,238 | ) | ||||
Accumulated other comprehensive loss | (48 | ) | (24 | ) | ||||
Accumulated deficit | (4,794 | ) | (6,538 | ) | ||||
TOTAL SHAREHOLDERS’ EQUITY | 88,862 | 83,977 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 130,943 | $ | 101,290 |
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CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
For the Years Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Net revenues: | ||||||||||||
Subscription and support revenues | $ | 65,020 | $ | 51,640 | $ | 43,067 | ||||||
Embedded devices and hardware | 28,849 | 26,192 | 21,965 | |||||||||
Total net revenues | 93,869 | 77,832 | 65,032 | |||||||||
Cost of sales, exclusive of a portion ofdepreciation and amortization shown below: | ||||||||||||
Subscription and support revenues | 25,371 | 21,754 | 17,955 | |||||||||
Embedded devices and hardware | 25,234 | 23,938 | 19,202 | |||||||||
Gross profit | 43,264 | 32,140 | 27,875 | |||||||||
Operating expenses: | ||||||||||||
Sales and marketing | 11,876 | 9,544 | 8,242 | |||||||||
General and administrative | 15,063 | 13,281 | 10,257 | |||||||||
Engineering and development | 8,009 | 4,915 | 3,096 | |||||||||
Depreciation and amortization | 6,201 | 4,819 | 3,313 | |||||||||
Operating income (loss) | 2,115 | (419 | ) | 2,967 | ||||||||
Interest expense | 798 | 304 | 336 | |||||||||
Other (income) expense, net | (1,338 | ) | (319 | ) | 500 | |||||||
Income (loss) from continuing operations before income taxes | 2,655 | (404 | ) | 2,131 | ||||||||
Income tax expense (benefit) | 419 | (2,369 | ) | (4,902 | ) | |||||||
Income from continuing operations, net of income taxes | 2,236 | 1,965 | 7,033 | |||||||||
(Loss) income from discontinued operations, net of income taxes | (492 | ) | (1,380 | ) | 132 | |||||||
Net income | 1,744 | 585 | 7,165 | |||||||||
Other items of comprehensive income, net of income taxes: | ||||||||||||
Foreign currency translation adjustment | (24 | ) | (16 | ) | 5 | |||||||
Comprehensive income | $ | 1,720 | $ | 569 | $ | 7,170 | ||||||
Basic earnings per share: | ||||||||||||
Income from continuing operations | $ | 0.12 | $ | 0.11 | $ | 0.46 | ||||||
(Loss) income from discontinued operations | (0.03 | ) | (0.08 | ) | 0.00 | |||||||
Net income | $ | 0.09 | $ | 0.03 | $ | 0.46 | ||||||
Diluted earnings per share: | ||||||||||||
Income from continuing operations | $ | 0.12 | $ | 0.10 | $ | 0.44 | ||||||
(Loss) income from discontinued operations | (0.03 | ) | (0.07 | ) | 0.01 | |||||||
Net income | $ | 0.09 | $ | 0.03 | $ | 0.45 | ||||||
Weighted average shares outstanding used in computing earnings per share: | ||||||||||||
Basic | 18,922 | 18,413 | 15,412 | |||||||||
Diluted | 19,268 | 18,950 | 16,014 |
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
Accumulated Other | Total | |||||||||||||||||||||||
Common | Additional | Treasury | Comprehensive | Accumulated | Shareholders’ | |||||||||||||||||||
Shares | Paid-in Capital | Stock | Loss | Deficit | Equity | |||||||||||||||||||
Balance at January 1, 2012 | 16,691 | $ | 66,634 | $ | (8,136 | ) | $ | (13 | ) | $ | (14,288 | ) | $ | 44,197 | ||||||||||
Issuance of shares in connection with acquisition | 42 | 476 | - | - | - | 476 | ||||||||||||||||||
Equity-based compensation expense | 54 | 1,388 | - | - | - | 1,388 | ||||||||||||||||||
Equity-based compensation plan activity | 339 | 589 | - | - | - | 589 | ||||||||||||||||||
Value of shares retained to pay employee taxes | - | (1,202 | ) | - | - | - | (1,202 | ) | ||||||||||||||||
Exercise of warrants | 45 | 187 | - | - | - | 187 | ||||||||||||||||||
Translation adjustment | - | - | - | 5 | - | 5 | ||||||||||||||||||
Net income | - | - | - | - | 7,165 | 7,165 | ||||||||||||||||||
Balance at December 31, 2012 | 17,171 | 68,072 | (8,136 | ) | (8 | ) | (7,123 | ) | 52,805 | |||||||||||||||
Sale of shares, net of issuance costs and expenses | 2,662 | 27,731 | - | - | - | 27,731 | ||||||||||||||||||
Issuance of shares in connection with acquisition | 74 | 925 | - | - | - | 925 | ||||||||||||||||||
Equity-based compensation expense | 190 | 1,879 | - | - | - | 1,879 | ||||||||||||||||||
Equity-based compensation plan activity | 201 | 341 | - | - | - | 341 | ||||||||||||||||||
Value of shares retained to pay employee taxes | - | (466 | ) | - | - | - | (466 | ) | ||||||||||||||||
Exercise of warrants | 92 | 193 | - | - | - | 193 | ||||||||||||||||||
Retirement of treasury shares | (321 | ) | (2,898 | ) | 2,898 | - | - | - | ||||||||||||||||
Translation adjustment | - | - | - | (16 | ) | - | (16 | ) | ||||||||||||||||
Net income | - | - | - | - | 585 | 585 | ||||||||||||||||||
Balance at December 31, 2013 | 20,069 | 95,777 | (5,238 | ) | (24 | ) | (6,538 | ) | 83,977 | |||||||||||||||
Equity-based compensation expense | 1 | 2,565 | - | - | - | 2,565 | ||||||||||||||||||
Equity-based compensation plan activity | 214 | 867 | - | - | - | 867 | ||||||||||||||||||
Value of shares retained to pay employee taxes | - | (153 | ) | (114 | ) | - | - | (267 | ) | |||||||||||||||
Translation adjustment | - | - | - | (24 | ) | - | (24 | ) | ||||||||||||||||
Net income | - | - | - | - | 1,744 | 1,744 | ||||||||||||||||||
Balance at December 31, 2014 | 20,284 | $ | 99,056 | $ | (5,352 | ) | $ | (48 | ) | $ | (4,794 | ) | $ | 88,862 |
43 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Years Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 1,744 | $ | 585 | $ | 7,165 | ||||||
Less (loss) income from discontinued operations, net of income taxes | (492 | ) | (1,380 | ) | 132 | |||||||
Income from continuing operations, net of income taxes | 2,236 | 1,965 | 7,033 | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 6,812 | 5,119 | 3,442 | |||||||||
Equity-based compensation expense | 2,565 | 1,879 | 1,388 | |||||||||
Deferred income taxes | 365 | (2,128 | ) | (4,872 | ) | |||||||
Bad debt expense | 392 | 444 | 188 | |||||||||
Inventory reserves | 544 | 807 | 148 | |||||||||
Gain on sale of cost method investment | (1,109 | ) | (328 | ) | - | |||||||
Other non-cash expense | 98 | 79 | 93 | |||||||||
Changes in assets and liabilities, net of effects of acquisitions: | ||||||||||||
Accounts and financing receivables | (1,034 | ) | (3,201 | ) | (3,405 | ) | ||||||
Inventory, net | 233 | (1,625 | ) | (633 | ) | |||||||
Accounts payable | 665 | 1,477 | (670 | ) | ||||||||
Deferred revenue | 154 | 508 | (46 | ) | ||||||||
Other | (1,465 | ) | 1,092 | (742 | ) | |||||||
Net cash provided by operating activities | 10,456 | 6,088 | 1,924 | |||||||||
Cash flows from investing activities: | ||||||||||||
Net cash paid for acquisition | (37,287 | ) | (2,794 | ) | (2,000 | ) | ||||||
Purchases of property and equipment | (2,209 | ) | (1,004 | ) | (1,679 | ) | ||||||
Purchases of intangible and other assets | (3,237 | ) | (3,430 | ) | (2,773 | ) | ||||||
Proceeds from sale of cost basis investment | 1,309 | 650 | - | |||||||||
Proceeds from sale-leaseback of equipment | - | 716 | - | |||||||||
Net cash used in investing activities | (41,424 | ) | (5,862 | ) | (6,452 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Principal payments on debt | (2,508 | ) | (7,186 | ) | (2,306 | ) | ||||||
Fees paid for credit facility | (293 | ) | - | (73 | ) | |||||||
Principal payments on capital lease obligations | (306 | ) | (263 | ) | (237 | ) | ||||||
Proceeds from underwritten offering, net of offering costs | - | 27,731 | - | |||||||||
Proceeds from long-term debt | 25,000 | - | 3,000 | |||||||||
Equity-based compensation plan activity | 867 | 338 | 560 | |||||||||
Payment of employee taxes on equity-based awards | (267 | ) | (466 | ) | (1,202 | ) | ||||||
Proceeds from exercise of warrants | - | 193 | 187 | |||||||||
Restricted cash | - | - | 221 | |||||||||
Net cash provided by financing activities | 22,493 | 20,347 | 150 | |||||||||
Cash flows from discontinued operations: | ||||||||||||
Cash provided by (used in) operating activities | 142 | 93 | (221 | ) | ||||||||
Cash used in investing activities | - | (11 | ) | - | ||||||||
Net cash provided by (used in) discontinued operations | 142 | 82 | (221 | ) | ||||||||
Net (decrease) increase in cash and cash equivalents | (8,333 | ) | 20,655 | (4,599 | ) | |||||||
Cash and cash equivalents at beginning of year | 25,603 | 4,948 | 9,547 | |||||||||
Cash and cash equivalents at end of year | $ | 17,270 | $ | 25,603 | $ | 4,948 |
44 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Years Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Cash paid for interest | $ | 703 | $ | 272 | $ | 271 | ||||||
Cash paid for income taxes | 146 | 97 | 175 | |||||||||
Disclosure of non-cash investing and financing activities: | ||||||||||||
Acquisition of property under capital lease | - | 716 | - | |||||||||
Capital expenditures in accounts payable | 417 | 923 | 202 | |||||||||
Common stock issued in connection with acquisition | - | 925 | 476 | |||||||||
Deferred payment issued in connection with acquisition | - | 200 | - | |||||||||
Promissory note issued in connection with acquisition | - | - | 1,900 | |||||||||
Managed services inventory transferred to fixed assets | 1,739 | - | - |
45 |
Fair Value of Financial Instruments
The fair value of financial instruments classified as current assets or liabilities, including cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate carrying value, principally because of the short-term, maturity of those items. The fair value of our capitalized lease obligation approximates carrying value based on the short-term maturity of the obligation. The fair value of our long-term financing receivables and note payable approximates carrying value based on their effective interest rates compared to current market rates and similar type borrowing arrangements.
We measure and report certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents. The major categories of nonfinancial assets and liabilities that we measure at fair value include reporting units measured at fair value in step one of our goodwill impairment test.
46 |
47 |
● | Machinery and equipment | 4-10 years | |
● | Furniture, fixtures and fittings | 3-10 years | |
● | Leasehold improvements | up to 10 years |
48 |
49 |
50 |
51 |
52 |
Estimated | ||||||||
Fair Value | Useful Lives | |||||||
Cash | $ | 195 | n/a | |||||
Accounts receivable | 2,677 | n/a | ||||||
Inventory | 873 | n/a | ||||||
Prepaid and other assets | 377 | n/a | ||||||
Property and equipment | 1,613 | 4(a) | ||||||
Deferred tax asset | 2,400 | n/a | ||||||
Customer relationships | 6,056 | 11 | ||||||
Technology | 4,998 | 14 | ||||||
Trade names | 3,632 | Indefinite | ||||||
Goodwill | 17,518 | Indefinite | ||||||
Total identifiable assets acquired | 40,339 | |||||||
Accounts payable | (1,756 | ) | n/a | |||||
Accrued expenses | (1,037 | ) | n/a | |||||
Deferred revenue | (64 | ) | n/a | |||||
Total liabilities assumed | (2,857 | ) | ||||||
Net assets acquired | $ | 37,482 |
(a) | The weighted average remaining useful life for all property and equipment is approximately four years. |
53 |
Unaudited Pro Forma Results | ||||||||
For the Years Ended December 31, | ||||||||
2014 | 2013 | |||||||
Net revenues | $ | 98,134 | $ | 90,628 | ||||
Income (loss) from continuing operations,before income tax | 2,719 | (2,370 | ) | |||||
Net income (loss) | 2,147 | (856 | ) | |||||
Basic and diluted income (loss) percommon share | 0.11 | (0.05 | ) |
● | Adjust depreciation expense for a 2014 net historical Omnilink reduction of $0.1 million and a 2013 net historical Omnilink reduction of $0.1 million for the effect of recording property and equipment at estimated fair value. |
● | Adjust amortization expense for a 2014 net increase of $0.3 million and a 2013 net increase of $0.9 million for the effect of recording intangible assets at estimated fair value. |
● | Adjust interest expense for a 2014 net increase of $0.1 million and a 2013 net increase of $0.6 million due to the repayment of Omnilink’s debt balances in conjunction with the merger and the merger-related debt incurred by Numerex and related amortization of deferred financing costs. |
● | Adjust expense by $1.0 million to reclassify expense recorded for merger-related costs in the year ended December 31, 2014, to the year ended December 31, 2013, to reflect the expenses as of the pro forma merger date of January 1, 2013. |
54 |
Fair | Useful | |||||||
Value | Lives | |||||||
Accounts receivable | $ | 175 | n/a | |||||
Inventory | 78 | n/a | ||||||
Fixed assets | 5 | 3 | ||||||
Software | 110 | 3 | ||||||
Customer relationships | 265 | 7 | ||||||
Other intangibles | 389 | 3 | ||||||
Goodwill | 1,612 | Indefinite | ||||||
Leases receivable | 275 | n/a | ||||||
Accounts payable | (81 | ) | n/a | |||||
Other liabilities | (11 | ) | n/a | |||||
Net assets acquired | $ | 2,817 |
Fair | Useful | |||||||
Value | Lives | |||||||
Accounts receivable | $ | 35 | n/a | |||||
Inventory | 55 | n/a | ||||||
Fixed assets | 25 | 3-5 | ||||||
Software | 967 | 3.5 | ||||||
Trademarks | 32 | 5 | ||||||
Deferred revenue | (12 | ) | n/a | |||||
Net assets acquired | $ | 1,102 |
55 |
56 |
For the Years Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Revenues from discontinued operations | $ | 207 | $ | 1,163 | $ | 1,708 | ||||||
(Loss) income from discontinued operations before income taxes | (285 | ) | (1,567 | ) | 225 | |||||||
Income tax (benefit) expense | (127 | ) | (187 | ) | 93 | |||||||
(Loss) income from discontinued operations, net of income taxes | (158 | ) | (1,380 | ) | 132 | |||||||
Loss on disposal of subsidiary included in discontinued operations | (309 | ) | — | — | ||||||||
Loss on dissolution of subsidiaries included in discontinued operations | (25 | ) | — | — | ||||||||
Net (loss) income from discontinued operations | $ | (492 | ) | $ | (1,380 | ) | $ | 132 |
57 |
December 31, | ||||
2013 | ||||
ASSETS | ||||
CURRENT ASSETS | ||||
Accounts receivable, less allowancefor doubtful accounts of $600 | $ | 253 | ||
Inventory, net of reserve for obsolescence of $30 | 122 | |||
Prepaid expenses and other current assets | 164 | |||
TOTAL CURRENT ASSETS | 539 | |||
Property and equipment, net | 9 | |||
Other assets | 292 | |||
TOTAL ASSETS OF DISCONTINUED OPERATIONS | $ | 840 | ||
LIABILITIES | ||||
CURRENT LIABILITIES | ||||
Accounts payable | $ | 10 | ||
Accrued expenses and other current liabilities | 171 | |||
Deferred revenues | 26 | |||
TOTAL LIABILITIES OF DISCONTINUED OPERATIONS | $ | 207 |
58 |
As of December 31, | ||||||||
2014 | 2013 | |||||||
Accounts receivable | $ | 12,997 | $ | 9,521 | ||||
Unbilled accounts receivable | 396 | 538 | ||||||
Allowance for doubtful accounts | (1,106 | ) | (674 | ) | ||||
$ | 12,287 | $ | 9,385 |
As of December 31, | ||||||||
2014 | 2013 | |||||||
Total minimum lease payments receivable | $ | 4,785 | $ | 4,338 | ||||
Unearned income | (206 | ) | (86 | ) | ||||
Present value of future minimum lease payments receivable | 4,579 | 4,252 | ||||||
Less current portion | (1,595 | ) | (1,223 | ) | ||||
Amounts due after one year | $ | 2,984 | $ | 3,029 |
2015 | $ | 1,709 | ||
2016 | 1,535 | |||
2017 | 1,120 | |||
2018 | 416 | |||
2019 | 5 | |||
$ | 4,785 |
59 |
December 31, | ||||||||
2014 | 2013 | |||||||
Raw materials | $ | 2,228 | $ | 1,503 | ||||
Finished goods | 7,579 | 7,922 | ||||||
Reserve for obsolescence | (1,397 | ) | (1,110 | ) | ||||
$ | 8,410 | $ | 8,315 |
As of December 31, | ||||||||
2014 | 2013 | |||||||
Prepaid expenses | $ | 1,358 | $ | 1,223 | ||||
Deferred costs | 578 | 488 | ||||||
Other | 393 | 122 | ||||||
$ | 2,329 | $ | 1,833 |
As of December 31, | ||||||||
2014 | 2013 | |||||||
Prepaid carrier fees | $ | 1,860 | $ | 1,658 | ||||
Deferred activation fees | 310 | 168 | ||||||
Deferred financing fees | 260 | 104 | ||||||
Deposits | 155 | 168 | ||||||
Cost method investment | - | 200 | ||||||
$ | 2,585 | $ | 2,298 |
60 |
As of December 31, | ||||||||
2014 | 2013 | |||||||
Computer, network and other equipment | $ | 7,630 | $ | 4,196 | ||||
Furniture and fixtures | 746 | 600 | ||||||
Leasehold improvements | 328 | 208 | ||||||
Total property and equipment | 8,704 | 5,004 | ||||||
Accumulated depreciation and amortization | (3,815 | ) | (1,879 | ) | ||||
$ | 4,889 | $ | 3,125 |
61 |
As of December 31, 2014 | As of December 31, 2013 | |||||||||||||||||||||||||||
Remaining Useful Lives | Gross Carrying Amount | Accumulated Amortization | Net Book Value | Gross Carrying Amount | Accumulated Amortization | Net Book Value | ||||||||||||||||||||||
Purchased and developed software | 2.5 | $ | 11,176 | $ | (6,409 | ) | $ | 4,767 | $ | 8,836 | $ | (3,706 | ) | $ | 5,130 | |||||||||||||
Software in development | n/a | 1,339 | - | 1,339 | 1,251 | - | 1,251 | |||||||||||||||||||||
Total software | 12,515 | (6,409 | ) | 6,106 | 10,087 | (3,706 | ) | 6,381 | ||||||||||||||||||||
Licenses | 0.5 | 12,763 | (11,886 | ) | 877 | 12,646 | (11,415 | ) | 1,231 | |||||||||||||||||||
Customer relationships | 8.5 | 8,287 | (1,359 | ) | 6,928 | 2,231 | (602 | ) | 1,629 | |||||||||||||||||||
Technologies | 13.3 | 4,998 | (237 | ) | 4,761 | - | - | - | ||||||||||||||||||||
Patents and trademarks | 4.1 | 3,343 | (1,657 | ) | 1,686 | 2,846 | (1,172 | ) | 1,674 | |||||||||||||||||||
Trade names | Indefinite | 3,632 | - | 3,632 | - | - | - | |||||||||||||||||||||
Other | n/a | 1,279 | - | 1,279 | 1,083 | - | 1,083 | |||||||||||||||||||||
Total other intangible assets | 34,302 | (15,139 | ) | 19,163 | 18,806 | (13,189 | ) | 5,617 | ||||||||||||||||||||
$ | 46,817 | $ | (21,548 | ) | $ | 25,269 | $ | 28,893 | $ | (16,895 | ) | $ | 11,998 |
2015 | $ | 4,621 | ||
2016 | 3,241 | |||
2017 | 2,050 | |||
2018 | 1,516 | |||
2019 | 1,253 | |||
Thereafter | 6,338 | |||
$ | 19,019 |
62 |
January 1, 2013 | $ | 25,418 | ||
Acquisition | 1,523 | |||
December 31, 2013 | 26,941 | |||
Measurement period adjustment | 89 | |||
Acquisition | 17,518 | |||
December 31, 2014 | $ | 44,548 |
For The Years Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Current: | ||||||||||||
Federal | $ | 73 | $ | (183 | ) | $ | (19 | ) | ||||
State | 38 | 22 | 30 | |||||||||
Reserve | (57 | ) | (80 | ) | (41 | ) | ||||||
Deferred: | ||||||||||||
Federal | 546 | (2,033 | ) | (4,502 | ) | |||||||
State | (181 | ) | (95 | ) | (370 | ) | ||||||
$ | 419 | $ | (2,369 | ) | $ | (4,902 | ) |
63 |
For The Years Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Income tax expense (benefit) computed at | ||||||||||||
U.S. corporate tax rate of 34% | $ | 903 | $ | (137 | ) | $ | 725 | |||||
Adjustments attributable to: | ||||||||||||
Deferred balance adjustments | - | (1,893 | ) | - | ||||||||
Valuation allowance | 1,077 | - | (5,545 | ) | ||||||||
Income tax payable adjustments | - | (71 | ) | - | ||||||||
State income tax | 24 | (73 | ) | 24 | ||||||||
Reserve for uncertain tax positions | (57 | ) | (80 | ) | (41 | ) | ||||||
Non-deductible expenses | (1,575 | ) | (97 | ) | (56 | ) | ||||||
Other | 47 | (18 | ) | (9 | ) | |||||||
$ | 419 | $ | (2,369 | ) | $ | (4,902 | ) |
64 |
As of December 31, | ||||||||
2014 | 2013 | |||||||
Current deferred tax asset: | ||||||||
Inventories | $ | 549 | $ | 438 | ||||
Accruals | 417 | 145 | ||||||
Federal and state net operating loss carryforwards | 2,380 | 2,463 | ||||||
Other | 495 | 318 | ||||||
Valuation allowance | (680 | ) | (622 | ) | ||||
3,161 | 2,742 | |||||||
Non-current deferred tax asset | ||||||||
Equity-based compensation | 2,030 | 1,357 | ||||||
Difference between book and taxbasis of property | (305 | ) | (111 | ) | ||||
Intangible assets | (3,698 | ) | 621 | |||||
Federal, state and foreign net operating loss carry forwards | 8,694 | 1,763 | ||||||
Tax credit carry forward | 1,323 | 1,251 | ||||||
Valuation allowance | (2,428 | ) | (923 | ) | ||||
5,616 | 3,958 | |||||||
Net deferred tax assets | $ | 8,777 | $ | 6,700 |
Year of | ||||||||
Amount | Expiration | |||||||
Federal net operating losses | $ | 25,000 | 2023-2035 | |||||
State net operating losses | 63,000 | 2015-2035 | ||||||
Alternative minimum tax credit carryforward | 810 | n/a | ||||||
General business credit carryforward | 510 | 2018-2031 |
65 |
2014 | 2013 | |||||||
Balance at January 1 | $ | 102 | $ | 159 | ||||
Decreases as a result of positions taken during prior periods | (48 | ) | (57 | ) | ||||
Balance at December 31 | $ | 54 | $ | 102 |
As of December 31, | ||||||||
2014 | 2013 | |||||||
Payroll related | $ | 696 | $ | 1,269 | ||||
Accrued expenses | 1,775 | 735 | ||||||
$ | 2,471 | $ | 2,004 |
As of December 31, | ||||||||
2014 | 2013 | |||||||
Deferred revenue | $ | 414 | $ | 560 | ||||
Deferred rent | 932 | 1,133 | ||||||
$ | 1,346 | $ | 1,693 |
December 31, | ||||||||
2014 | 2013 | |||||||
Note payable to Silicon Valley Bank, with interest at ouroption of prime rate or LIBOR rate plus margin. | $ | 23,125 | $ | - | ||||
Seller financed note payable, with interest at 4.25%, monthlypayments of principal and interest, secured by equipment, due September 2015 | 476 | 1,108 | ||||||
23,601 | 1,108 | |||||||
Less current portion of long-term debt | 4,251 | 633 | ||||||
Noncurrent portion of long-term debt | $ | 19,350 | $ | 475 |
66 |
Loan Agreement Principal Repayment Schedule | ||||||||
Quarterly | Annually | |||||||
June 2014 - March 2015 | $ | 625,000 | $ | 2,500,000 | ||||
June 2015 - March 2016 | 937,500 | 3,750,000 | ||||||
June 2016 - March 2017 | 937,500 | 3,750,000 | ||||||
June 2017 - March 2018 | 1,250,000 | 5,000,000 | ||||||
June 2018 - March 2019 | 1,250,000 | 5,000,000 | ||||||
Outstanding balance due May 2019 | - | 5,000,000 |
2015 | $ | 4,251 | ||
2016 | 3,750 | |||
2017 | 4,688 | |||
2018 | 5,000 | |||
2019 | 5,912 | |||
$ | 23,601 |
67 |
Total minimum lease payments | $ | 158 | ||
Less amounts representing interest | (10 | ) | ||
Present value of future minimum leasepayments, all current | $ | 148 |
Year Ending December 31, | ||||
2015 | $ | 1,514 | ||
2016 | 1,581 | |||
2017 | 1,516 | |||
2018 | 1,395 | |||
2019 | 1,128 | |||
Thereafter | 3,020 | |||
$ | 10,154 |
68 |
For The Years Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Volatility | 57.8 | % | 67.5 | % | 66.6 | % | ||||||
Expected term (in years) | 6.2 | 6.3 | 6.3 | |||||||||
Risk-free rate | 1.88 | % | 1.52 | % | 1.10 | % | ||||||
Dividend yield | 0 | % | 0 | % | 0 | % |
69 |
Weighted | ||||||||
Average | ||||||||
Shares | Exercise Price | |||||||
Outstanding, January 1, 2014 | 1,437 | $ | 7.77 | |||||
Granted | 332 | 11.56 | ||||||
Exercised | (270 | ) | 6.69 | |||||
Forfeited or expired | (167 | ) | 7.85 | |||||
Outstanding, at December 31, 2014 | 1,332 | 8.93 | ||||||
Exercisable at December 31, 2014 | 727 | 7.06 |
Outstanding | Exercisable | |||||||
Total shares | 1,332 | 727 | ||||||
Aggregate intrinsic value | $ | 4,264 | $ | 3,601 | ||||
Weighted-average remaining | ||||||||
contractual term (years) | 6.6 | 4.9 |
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Options and SARs exercised | 270 | 433 | 638 | |||||||||
Net shares issued | 214 | 199 | 336 | |||||||||
Total intrinsic value exercised | $ | 1,533 | $ | 2,552 | $ | 3,967 | ||||||
Cash received | 931 | 338 | 560 | |||||||||
Recognized tax benefit | 1,300 | 2,208 | 2,619 |
70 |
Weighted | ||||||||
Average Grant | ||||||||
Shares | Date Fair Value | |||||||
Outstanding, as of January 1, 2014 | 190 | $ | 12.09 | |||||
Granted | 435 | 10.95 | ||||||
Vested | (95 | ) | 11.57 | |||||
Forfeited | (42 | ) | 11.74 | |||||
Outstanding, as of December 31, 2014 | 488 | 11.19 |
71 |
72 |
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Income from continuing operations | $ | 2,236 | $ | 1,965 | $ | 7,033 | ||||||
(Loss) income from discontinued operations | (492 | ) | (1,380 | ) | 132 | |||||||
Net income | $ | 1,744 | $ | 585 | $ | 7,165 | ||||||
Common Shares: | ||||||||||||
Weighted average common shares outstanding | 18,922 | 18,413 | 15,412 | |||||||||
Dilutive effect of common stock equivalents | 346 | 537 | 602 | |||||||||
Total | 19,268 | 18,950 | 16,014 | |||||||||
Basic earnings per share: | ||||||||||||
Income from continuing operations | $ | 0.12 | $ | 0.11 | $ | 0.46 | ||||||
(Loss) income from discontinued operations | (0.03 | ) | (0.08 | ) | 0.00 | |||||||
Net income | $ | 0.09 | $ | 0.03 | $ | 0.46 | ||||||
Diluted earnings per share: | ||||||||||||
Income from continuing operations | $ | 0.12 | $ | 0.10 | $ | 0.44 | ||||||
(Loss) income from discontinued operations | (0.03 | ) | (0.07 | ) | 0.01 | |||||||
Net income | $ | 0.09 | $ | 0.03 | $ | 0.45 |
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
U.S. | 94 | % | 94 | % | 88 | % | ||||||
Canada | 4 | % | 4 | % | 10 | % | ||||||
Others | 2 | % | 2 | % | 2 | % | ||||||
100 | % | 100 | % | 100 | % |
73 |
For The Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2014 | 2014 | 2014 | 2014 | |||||||||||||
Net revenues | $ | 20,773 | $ | 22,578 | $ | 25,663 | $ | 24,855 | ||||||||
Gross profit | 9,840 | 10,722 | 11,287 | 11,415 | ||||||||||||
Operating earnings (loss) | 662 | (252 | ) | 802 | 903 | |||||||||||
Income (loss) from continuing operations before income taxes | 1,741 | (444 | ) | 621 | 737 | |||||||||||
Income tax expense (benefit) | 595 | (670 | ) | 358 | 136 | |||||||||||
Income from continuing operations, net of income tax benefit | 1,146 | 226 | 263 | 601 | ||||||||||||
Loss from discontinued operations | (56 | ) | (436 | ) | - | - | ||||||||||
Net income (loss) | 1,090 | (210 | ) | 263 | 601 | |||||||||||
Basic earnings (loss) per share: | ||||||||||||||||
Income from continuing operations | $ | 0.06 | $ | 0.01 | $ | 0.01 | $ | 0.03 | ||||||||
Income (loss) from discontinued operations | 0.00 | (0.02 | ) | 0.00 | 0.00 | |||||||||||
Net income (loss) | $ | 0.06 | $ | (0.01 | ) | $ | 0.01 | $ | 0.03 | |||||||
Diluted earnings (loss) per share | ||||||||||||||||
Income from continuing operations | $ | 0.06 | $ | 0.01 | $ | 0.01 | $ | 0.03 | ||||||||
Income (loss) from discontinued operations | 0.00 | (0.02 | ) | 0.00 | 0.00 | |||||||||||
Net income (loss) | $ | 0.06 | $ | (0.01 | ) | $ | 0.01 | $ | 0.03 |
For The Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2013 | 2013 | 2013 | 2013 | |||||||||||||
Net revenues | $ | 16,437 | $ | 17,271 | $ | 21,951 | $ | 22,173 | ||||||||
Gross profit | 6,905 | 6,666 | 8,981 | 9,588 | ||||||||||||
Operating earnings (loss) | 45 | (1,983 | ) | 645 | 874 | |||||||||||
(Loss) income from continuing operations before income taxes | (37 | ) | (2,042 | ) | 540 | 1,135 | ||||||||||
Income tax (benefit) expense | (65 | ) | (2,454 | ) | (35 | ) | 185 | |||||||||
Income from continuing operations, net of income tax benefit | 28 | 412 | 575 | 950 | ||||||||||||
(Loss) income from discontinued operations | (17 | ) | (1,424 | ) | - | 61 | ||||||||||
Net income (loss) | 11 | (1,012 | ) | 575 | 1,011 | |||||||||||
Basic earnings (loss) per share: | ||||||||||||||||
Income from continuing operations | $ | 0.00 | $ | 0.02 | $ | 0.03 | $ | 0.05 | ||||||||
Income (loss) from discontinued operations | 0.00 | (0.07 | ) | 0.00 | 0.00 | |||||||||||
Net income (loss) | $ | 0.00 | $ | (0.05 | ) | $ | 0.03 | $ | 0.05 | |||||||
Diluted earnings (loss) per share | ||||||||||||||||
Income from continuing operations | $ | 0.00 | $ | 0.02 | $ | 0.03 | $ | 0.05 | ||||||||
Income (loss) from discontinued operations | 0.00 | (0.08 | ) | 0.00 | 0.00 | |||||||||||
Net income (loss) | $ | 0.00 | $ | (0.06 | ) | $ | 0.03 | $ | 0.05 |
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/s/ GRANT THORNTON LLP |
Atlanta, Georgia |
March 11, 2015 |
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77 |
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We have audited the internal control over financial reporting of Numerex Corp. (a Pennsylvania Corporation) and subsidiaries (the “Company”) as of December 31, 2014, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of Omnilink Systems, Inc., a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 31 and 9 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2014. As indicated in Management’s Report, Omnilink Systems, Inc. was acquired during 2014. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of Omnilink Systems, Inc.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established in the 2013Internal Control–Integrated Framework issued by COSO.
/s/ GRANT THORNTON LLP |
Atlanta, Georgia |
March 11, 2015 |
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1. | Consolidated Financial Statements. All financial statements of the Company as described in Item I of this report on Form 10-K. The consolidated financial statements required to be filed hereunder are listed in the Index to Consolidated Financial Statements on page40 of this report. |
2. | Financial statement schedule included in Part IV of this Form: |
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3. Exhibits: |
3.11 | Amended and Restated Articles of Incorporation of the Company | |
3.21 | Bylaws of the Company | |
10. 12 | Registration Agreement between the Company and Dominion dated July 13, 1992 | |
10. 23 | Letter Agreement between the Company and Dominion (now Gwynedd) dated October 25, 1994, re: designation of director | |
10. 34 | 2006 Long-Term Incentive Plan (2006 Plan)* | |
10. 45 | Form of Non-Qualified Stock Option Grant Agreement (consultants) under 2006 Long-Term Incentive Plan* | |
10. 55 | Form of Non-Qualified Stock Option Grant Agreement (non-employee directors) under 2006 Long-Term Incentive Plan* | |
10. 65 | Form of Incentive Stock Option Grant Agreement (employees) under 2006 Long-Term Incentive Plan* | |
10. 76 | Severance Agreement, by and between Stratton Nicolaides and the Company dated August 5, 2014. (Management Compensation Plan)* | |
10. 87 | Form of Stock Appreciation Right Agreement under 2006 Long-Term Incentive Plan * | |
10. 98 | Numerex Corp. 2014 Stock and Incentive Plan. [Incentive] Stock Option Agreement. | |
10.108 | Numerex Corp. 2014 Stock and Incentive Plan. Restricted Stock Units Grant Notice. | |
10. 119 | Omnilink Systems, Inc. Agreement and Plan of Merger dated April 28, 2014. | |
10. 1210 | Second Amended and Restated Loan and Security Agreement, by and among the Company, its subsidiaries party thereto and Silicon Valley Bank, dated as of May 5, 2014. | |
18. 111 | Letter re: change in accounting principles (Preferability letter) for change in annual goodwill impairment testing measurement date from December 31 to October 1, effective September 20, 2013 | |
21 | Subsidiaries of Numerex Corp. | |
23 | Consent of Grant Thornton, LLP | |
24 | Power of Attorney (included with signature page) | |
31.1 | Rule 13a-14(a) Certification of Chief Executive Officer | |
31.2 | Rule 13a-14(a) Certification of Chief Financial Officer |
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32.1 | Rule 13a-14(b) Certification of Chief Executive Officer | |
32.2 | Rule 13a-14(b) Certification of Chief Financial Officer | |
101 | Interactive Data Files - The following financial information from Numerex Corp. Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 11, 2015, formatted in XBRL includes: (i) Consolidated Balance Sheets at December 31, 2014 and December 31, 2013, (ii) Consolidated Statements Income for the fiscal periods ended December 31, 2014, 2013 and 2012, (iii) Consolidated Statements of Cash Flows for the fiscal periods ended December 31, 2014, 2013 and 2012, (iv) Consolidated Statement of Shareholders’ Equity and Comprehensive Income for the fiscal period ended December 31, 2014, and (v) the Notes to Consolidated Financial Statements.** | |
*Indicates a management contract of any compensatory plan, contract or arrangement. | ||
**This exhibit is furnished and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that the Registrant specifically incorporates it by reference. |
1 | Incorporated by reference to the Exhibits filed with the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended October 31, 1995 (File No. 000-22920) |
2 | Incorporated by reference to the Exhibit filed with the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 20, 1994 (File No. 000-22920) |
3 | Incorporated by reference to the Exhibits filed with the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission (File No. 33-89794) |
4 | Incorporated by reference to the Exhibits filed with the Company’s Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 10, 2006 (File No. 000-22920) |
5 | Incorporated by reference to Exhibits 10.1, 10.2 and 10.3 filed with the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 12, 2007 (File No. 000-22920) |
6 | Incorporated by reference to Exhibit 10.1 filed with the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 5, 2014 (File No. 000-22920) |
7 | Incorporated by reference to Exhibit 10.1 filed with the Company’s Current Report on Form 8-K filed with Securities and Exchange Commission on May 27, 2010 (File No. 000-22920) |
8 | Incorporated by reference to Exhibit 10.2 and 10.3 filed with the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 5, 2014 (File No. 000-22920) |
9 | Incorporated by reference to Exhibit 10.1 filed with the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 2, 2014 (File No. 000-22920) |
10 | Incorporated by reference to Exhibit 10.1 filed with the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 9, 2014 (File No. 000-22920) |
11 | Incorporated by reference to Exhibit 18.1 filed with the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 7, 2013 (File No. 000-22920) |
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Balance at | Additions | ||||||||||||||||
beginning of | charged to | Balance at | |||||||||||||||
Description | Period | expense | Deductions | end of Period | |||||||||||||
Year ended December 31, 2014: | |||||||||||||||||
Accounts and financing receivables | |||||||||||||||||
Allowance for uncollectible accounts, continuing operations | $ | 674 | $ | 392 | 40 | (a) | $ | 1,106 | |||||||||
Allowance for uncollectible accounts, discontinued operations | 600 | - | (600 | ) | (a) | - | |||||||||||
Inventory | |||||||||||||||||
Reserve for obsolescence, continuing operations | 1,110 | 544 | (257 | ) | 1,397 | ||||||||||||
Reserve for obsolescence, discontinued operations | 30 | - | (30 | ) | - | ||||||||||||
Deferred tax assets | |||||||||||||||||
Valuation allowance, continuing operations | 1,545 | - | 1,563 | 3,108 | |||||||||||||
Valuation allowance, discontinued operations | 462 | - | (462 | ) | - | ||||||||||||
Year ended December 31, 2013: | |||||||||||||||||
Accounts and financing receivables | |||||||||||||||||
Allowance for uncollectible accounts, continuing operations | 367 | 444 | (137 | ) | (a) | 674 | |||||||||||
Allowance for uncollectible accounts, discontinued operations | 16 | 602 | (18 | ) | (a) | 600 | |||||||||||
Inventory | |||||||||||||||||
Reserve for obsolescence, continuing operations | 332 | 807 | (29 | ) | 1,110 | ||||||||||||
Reserve for obsolescence, discontinued operations | 30 | - | - | 30 | |||||||||||||
Deferred tax assets | |||||||||||||||||
Valuation allowance, continuing operations | 1,650 | - | (105 | ) | 1,545 | ||||||||||||
Valuation allowance, discontinued operations | 460 | - | 2 | 462 | |||||||||||||
Year ended December 31, 2012: | |||||||||||||||||
Accounts and financing receivables | |||||||||||||||||
Allowance for uncollectible accounts, continuing operations | 236 | 188 | (57 | ) | (b) | 367 | |||||||||||
Allowance for uncollectible accounts, discontinued operations | - | 67 | (51 | ) | (b) | 16 | |||||||||||
Inventory | |||||||||||||||||
Reserve for obsolescence, continuing operations | 578 | 148 | (394 | ) | (c) | 332 | |||||||||||
Reserve for obsolescence, discontinued operations | - | - | 30 | (c) | 30 | ||||||||||||
Deferred tax assets | |||||||||||||||||
Valuation allowance, continuing operations | 11,000 | - | (9,350 | ) | (c) | 1,650 | |||||||||||
Valuation allowance, discontinued operations | - | 460 | (c) | 460 |
(a) Amounts written off as uncollectible, net of recoveries | |
(b) Amounts written off as uncollectible, net of recoveries and reclassification to discontinued operations | |
(c) Includes reclassification to discontinued operations. |
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By: | /s/ Stratton J. Nicolaides | |
Stratton J. Nicolaides, | ||
Chairman and Chief Executive Officer | ||
Date: March 11, 2015 |
Signature | Title | Date | ||
/s/ Stratton J. Nicolaides | Chairman of the Board of Directors | March 11, 2015 | ||
Stratton J. Nicolaides | and Chief Executive Officer | |||
/s/ E. James Constantine | Director | March 11, 2015 | ||
E. James Constantine | ||||
/s/ Tony G. Holcombe | Director | March 11, 2015 | ||
Tony G. Holcombe | ||||
/s/ Sherrie G. McAvoy | Director | March 11, 2015 | ||
Sherrie G. McAvoy | ||||
/s/ Jerry A. Rose | Director | March 11, 2015 | ||
Jerry A. Rose | ||||
/s/ Andrew J. Ryan | Director | March 11, 2015 | ||
Andrew J. Ryan | ||||
/s/ Richard A. Flynt | Chief Financial Officer, Principal | March 11, 2015 | ||
Richard A. Flynt | Financial and Accounting Officer |
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