Acquisitions

Feeney Wireless, LLC

On March 27, 2015, the Company acquired all of the issued and outstanding shares of R.E.R Enterprises, Inc. (“RER”) and its wholly-owned subsidiary and principal operating asset, Feeney Wireless, LLC, an Oregon limited liability company (“FW”). FW, a privately-held company headquartered in Eugene, Oregon, develops and sells solutions for the Internet of Things that integrate of wireless communications into business processes. This strategic acquisition expands the Company’s product and solutions offerings to include private labeled cellular routers, in-house designed and assembled cellular routers, high-end wireless surveillance systems, modems, computers and software, along with associated hardware, purchased from major industry suppliers. Additionally, FW’s services portfolio includes consulting, systems integration and device management services.

During the three months ended March 31, 2015, the Company incurred $0.9 million in costs and expenses related to the Company's acquisition of FW that are included in general and administrative expenses in the condensed consolidated statement of operations.

Purchase Price

The total preliminary purchase price was approximately $24.8 million and included cash payments at closing of approximately $9.3 million, $1.5 million of which was placed into an escrow fund to serve as partial security for the indemnification obligations of RER and its former shareholders, the Company’s assumption of $0.5 million in certain transaction-related expenses incurred by FW, and the future issuance of shares of the Company's common stock valued at $15.0 million, payable no later than the tenth business day after the Company files its Annual Report on Form 10-K for the year ended December 31, 2015 with the SEC.

The total purchase price of $24.8 million does not include amounts, if any, payable under an earn-out arrangement under which the Company may be required to pay up to an additional $25.0 million to the former shareholders of RER contingent upon FW's achievement of certain financial targets for the years ending December 31, 2015, 2016, and 2017, which are payable in either cash or stock at the discretion of the Company over the next four years. Payment, if any, under the arrangement will be recorded as compensation expense during the service period earned.

As of March 31, 2015, the Company estimated the amount earned under the earn-out arrangement to be approximately $0.1 million, which is included in "Accrued liabilities" in the condensed consolidated statement of operations.

Set forth below is supplemental cash flow information related to the FW acquisition (in thousands):



	Three Months Ended March 31, 2015
Cash payments	$	9,268
Future issuance of common stock	15,000
Other assumed liabilities	509
Total purchase price	$	24,777

Preliminary Allocation of Fair Value

The Company accounted for the transaction using the acquisition method and, accordingly, the consideration has been allocated to the tangible and intangible assets acquired and liabilities assumed on the basis of their respective estimated fair values on the acquisition date as set forth below. Goodwill resulting from this acquisition is largely attributable to the experienced workforce of FW and synergies expected to arise after the integration of FW’s products and operations into those of the Company. Goodwill resulting from this acquisition is not deductible for tax purposes. Identifiable intangible assets acquired as part of the acquisition included definite-lived intangible assets for developed technologies, customer relationships, and trademarks, which are being amortized using the straight-line method over their estimated useful lives, as well as indefinite-lived intangible assets, including in-process research and development. Liabilities assumed from FW included a term loan and capital lease obligations. The term loan and certain capital lease obligations were paid in full by the Company immediately following the closing of the acquisition on March 27, 2015. The initial accounting for this acquisition is not complete and the Company is continuing to gather supporting information in its detailed analysis of the facts and circumstances that existed as of the acquisition date.

The preliminary fair value has been initially allocated based on the estimated fair values of assets acquired and liabilities assumed as follows (in thousands):



	March 27, 2015
Cash	$	205
Accounts receivable	3,331
Inventory	10,172
Property and equipment	535
Intangible assets	20,370
Goodwill	1,776
Other assets	728
Accounts payable	(7,494		)
Accrued and other liabilities	(1,581		)
Deferred revenues	(270		)
Note payable	(2,575		)
Capital lease obligations	(420		)
Net assets acquired	$	24,777

The above fair value allocation is considered preliminary and is subject to revision during the measurement period. Management is in the process of completing its evaluation of acquired intangible assets and deferred revenue. Additionally, the Company is in the process of validating the fair values of inventory, accounts receivable and other assets, and obligations related to income tax and other liabilities.

Valuation of Intangible Assets Acquired

The following table sets forth the preliminary components of intangible assets acquired in connection with the FW acquisition (dollars in thousands):



	Amount Assigned		Amortization Period (in years)
Definite-lived intangible assets:
Developed technologies	$	3,670	6.0
Trademarks	4,640		10.0
Customer relationships	10,020		10.0
Indefinite-lived intangible assets:
In-process research and development	2,040
Total intangible assets acquired	$	20,370

Actual and Pro Forma Results of FW Acquisition

FW’s net revenues and net loss following the March 27, 2015 date of acquisition are included in the Company’s operating results for the three months ended March 31, 2015, and were $0.3 million and $0.4 million, respectively.

The unaudited preliminary consolidated pro forma results for the three months ended March 31, 2015 and 2014 are set forth in the table below. These pro forma consolidated results combine the results of operations of the Company and FW as though FW had been acquired as of January 1, 2014 and include amortization charges for the acquired intangibles and interest expense related to the Company's borrowings to finance the acquisition. The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of 2014.



	Three Months Ended March 31,
	2015			2014
	(in thousands)
Net revenues	$	58,841		$	53,926
Net loss	$	(7,997	)	$	(8,368	)