3. Acquisitions

Skygistics Ltd.

On May 26, 2016, pursuant to an Asset Purchase Agreement entered into on April 11, 2016 among a wholly owned subsidiary of the Company, Skygistics Propriety Limited and Satconnect Propriety Limited (the “Skygistics Sellers”), the Company completed the acquisition of substantially all of the assets of Skygistics (PTY) Ltd. (“Skygistics”), for a purchase price of $3,835 and additional contingent consideration of up to $954, subject to certain operational milestones (the “Skygistics Acquisition”).

Preliminary Estimated Purchase Price Allocation

The Skygistics Acquisition has been accounted for using the acquisition method of accounting in accordance with FASB ASC Topic 805 “Business Combinations” (“ASC 805”). This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date (the “Acquisition Method”). The excess of the purchase price over the net assets was recorded as goodwill. The preliminary allocation of the purchase price was based upon a preliminary valuation and the estimates and assumptions are subject to change during the one-year measurement period. The total consideration for the Skygistics Acquisition was $4,349, of which $514 represents acquisition date contingent consideration at fair value, in a debt free, cash free transaction. The preliminary estimated purchase price allocation for the Skygistics Acquisition is as follows:

	Amount
Cash and cash equivalents	$	383
Accounts receivable		989
Inventories		292
Other current assets		112
Property, plant and equipment		418
Deferred tax assets		90
Intangible assets		1,545
Total identifiable assets acquired		3,829
Accounts payable and accrued expenses		410
Deferred tax liabilities		433
Other liabilities		11
Total liabilities assumed		854
Net identifiable assets acquired		2,975
Goodwill		1,374
Total preliminary purchase price	$	4,349

Intangible Assets

The estimated fair value of the customer lists was determined using the “excess earnings method” under the income approach, which represents the total income to be generated by the asset. Some of the more significant assumptions inherent in the development of those asset valuations include the projected revenue associated with the asset, the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, as well as other factors (the “Customer List Valuation Technique”). The discount rate used to arrive at the present value at the acquisition date of the customer lists was 19%. The remaining useful lives of customer lists were based on the customer attrition and the projected economic benefit of these customers. The Company recorded a customer list intangible asset in the amount of $1,545 and assigned an estimated useful life of 13 years to the customer list.

Goodwill

The Skygistics Acquisition provides a broad range of satellite and cellular connectivity options as well as telematics solutions centered on the management of remote and mobile assets to more than 250 telematics and enterprise customers. These factors contributed to a preliminary estimated purchase price resulting in recognition of goodwill. The goodwill attributable to the Skygistics Acquisition is not deductible for tax purposes.

Indemnification Asset

In connection with the Asset Purchase Agreement, the Company entered into an escrow agreement with the Skygistics Sellers and an escrow agent. Under the terms of the escrow agreement, $757 was placed in an escrow account through August 2017 to fund any indemnification obligations owed to the Company under the Asset Purchase Agreement. On June 1, 2016, $304 was released from the escrow fund to the Skygistics Sellers in accordance with the terms of the escrow agreement.

Contingent Consideration

Additional consideration is conditionally due to the Skygistics Sellers upon achievement of certain financial milestones through April 2017. The fair value measurement of the contingent consideration obligation is determined using Level 3 unobservable inputs supported by little or no market activity based on the Company’s own assumptions. The estimated fair value of the contingent consideration was determined based on the Company’s preliminary estimates using the probability-weighted discounted cash flow approach. As of September 30, 2016, the Company recorded $517 in accrued expenses on the condensed consolidated balance sheet in connection with the contingent consideration. For the quarter and nine months ended September 30, 2016, charges of $3, were recorded to selling, general and administrative (“SG&A”) expenses for accretion associated with the contingent consideration.

WAM Technologies, LLC

On October 6, 2015, pursuant to an Asset Purchase Agreement entered into by a wholly owned subsidiary of the Company, WAM Technologies, LLC (“WAM”) and the individual owners of WAM (the “WAM Sellers”), the Company completed the acquisition of substantially all of the assets of WAM for total consideration of $8,689, inclusive of a working capital settlement of $189, of which $1,100 was deposited in escrow in connection with certain indemnification obligations (the “WAM Acquisition”).

Preliminary Estimated Purchase Price Allocation

The WAM Acquisition has been accounted for using the Acquisition Method. The excess of the purchase price over the net assets was recorded as goodwill. The total consideration for the WAM Acquisition was $8,689 in a debt-free, cash-free transaction. The preliminary estimated purchase price allocation for the WAM Acquisition is as follows:

	Amount
Accounts receivable	$	563
Property, plant and equipment		122
Intangible assets		4,810
Total identifiable assets acquired		5,495
Accounts payable and accrued expenses		204
Deferred revenues		7,326
Total liabilities assumed		7,530
Net identifiable assets acquired		(2,035	)
Goodwill		10,724
Total preliminary purchase price	$	8,689

Intangible Assets

The estimated fair value of the technology and trademark intangible assets was determined using the “relief from royalty method” under the income approach, which is a valuation technique that provides an estimate of the fair value of an asset based on the costs savings that are available through ownership of the asset by the avoidance of paying royalties to license the use of the assets from another owner (the “Technology and Trademark Valuation Technique”). The estimated fair value of the customer lists was determined using the Customer List Valuation Technique. The discount rate used to arrive at the present value at the acquisition date of the customer lists, technology and trademarks was 26%. The remaining useful lives of the technology and trademarks were based on historical product development cycles, the projected rate of technology migration and a market participant’s use of these intangible assets and the pattern of projected economic benefit of these intangible assets. The remaining useful lives of customer lists were based on the customer attrition and the projected economic benefit of these customers.

	Estimated
	Useful life
	(years)		Amount
Customer lists - one customer		10	$	3,720
Customer lists - all other customers		11		600
Technology		10		450
Trademarks		1		40
			$	4,810

Goodwill

The WAM Acquisition expands and strengthens the Company’s cold chain monitoring solutions, which include trailers, rail cars, gensets and sea containers. With the addition of WAM’s installed base, the Company is expected to become a leader in monitoring cargo shipments. These factors contributed to a preliminary estimated purchase price resulting in recognition of goodwill. The goodwill attributable to the WAM Acquisition is deductible for tax purposes.

Indemnification Asset

In connection with the Asset Purchase Agreement, the Company entered into an escrow agreement with the WAM Sellers and an escrow agent. Under the terms of the escrow agreement, $1,100 was placed in an escrow account through December 2017 to fund any indemnification obligations owed to the Company under the Asset Purchase Agreement.

Unaudited Pro Forma Results of Operation

The following tables present the unaudited pro forma consolidated operating results for the Company, as though the WAM Acquisition had occurred as of the beginning of the prior annual reporting period. The unaudited pro forma results reflect certain adjustments related to past operating performance, acquisition costs and acquisition accounting adjustments, such as increased depreciation and amortization expense based on the fair valuation of assets acquired and the related tax effects. The pro forma results do not include any anticipated synergies which may be achievable subsequent to the acquisition date. Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisition been completed on the dates indicated, nor are they indicative of the future operating results of the combined company:

	Three Months Ended September 30, 2015
	As Reported		WAM Acquisition		Pro Forma
Net revenues	$	46,084	$	1,628	$	47,712
Net income attributable to common shareholders	$	1,582	$	548	$	2,130
Earnings per share:
Basic	$	0.02			$	0.03
Diluted	$	0.02			$	0.03

	Nine Months Ended September 30, 2015
	As Reported			WAM Acquisition		Pro Forma
Net revenues	$	133,297		$	5,234	$	138,531
Net (loss) income attributable to common shareholders	$	(13,517	)	$	1,147	$	(12,370	)
Earnings per share:
Basic	$	(0.19	)			$	(0.18	)
Diluted	$	(0.19	)			$	(0.18	)

InSync Software, Inc.

On January 16, 2015, pursuant to a Share Purchase Agreement entered into by the Company, IDENTEC Group AG (“IDENTEC”) and InSync Software, Inc. (“InSync”), the Company completed the acquisition of 100% of the outstanding shares of InSync from IDENTEC for an aggregate consideration of (i) $10,850 in cash, comprised of various components and inclusive of net working capital adjustments of $250, of which $1,320 was deposited in escrow in connection with certain indemnification obligations; and (ii) additional contingent consideration of up to $5,000 (the “InSync Acquisition”). The InSync Acquisition supports the Company’s strategy to seek to provide the most complete set of applications and capabilities in the M2M and IoT industry, while broadening the Company’s market access to a wide range of industries.

SkyWave Mobile Communications Inc.

On January 1, 2015, pursuant to an Arrangement Agreement dated November 1, 2014, among the Company, the Company’s acquisition subsidiary, SkyWave Mobile Communications Inc. (“SkyWave”) and the representatives of certain SkyWave shareholders, the Company completed the acquisition of 100% of the outstanding shares of SkyWave for total consideration of $130,203 consisting of (i) $122,373 cash consideration, inclusive of a working capital settlement of $300, of which $10,600 was deposited in escrow in connection with certain indemnification obligations; and (ii) $7,500 in the form of a promissory note settled by the transfer of assets to Inmarsat Global Limited (“Inmarsat”) pursuant to an agreement with Inmarsat (the “SkyWave Acquisition”). The $7,500 note was not considered part of the purchase price for accounting purposes. The SkyWave Acquisition furthers the Company’s strategy to seek to provide the most complete set of options and capabilities in the industry. SkyWave’s distribution channels in South America, Asia and the Middle East, along with Inmarsat’s support, provide the Company with broader global distribution and provide the Company access to new geographies in Eastern Europe and Asia while adding diverse vertical markets, such as security and marine. The addition of SkyWave’s higher bandwidth, low-latency satellite products and services that leverage the IDP technology, which is now jointly owned by the Company and Inmarsat, also further expands the breadth of the Company’s solutions portfolio.

Euroscan Holding B.V.

On March 11, 2014, pursuant to the Share Purchase Agreement entered into by the Company and MWL Management B.V., R.Q. Management B.V., WBB GmbH, ING Corporate Investments Participaties B.V. and Euroscan Holding B.V., as sellers (the “Share Purchase Agreement”), the Company completed the acquisition of 100% of the outstanding equity of Euroscan Holding B.V., including, indirectly, its wholly-owned subsidiaries Euroscan B.V., Euroscan GmbH Vertrieb Technischer Geräte, Euroscan Technology Ltd. and Ameriscan, Inc. (collectively, the “Euroscan Group” or “Euroscan”) for an aggregate consideration of (i) $29,163, inclusive of net working capital adjustments and net cash (on a debt free, cash free basis); (ii) issuance of 291,230 shares of the Company’s common stock, valued at $7.70 per share, which reflected the Company’s closing price on the acquisition date; and (iii) additional contingent considerations of up to $6,547 (the “Euroscan Acquisition”). The Euroscan Acquisition allowed the Company to complement its North American operations in M2M by adding a significant distribution channel in Europe and other key geographies where Euroscan has market share.

Contingent Consideration

Additional consideration is conditionally due to MWL Management B.V. and R.Q. Management B.V. upon achievement of financial and operational milestones through March 2017. The fair value measurement of the contingent consideration obligation is determined using Level 3 unobservable inputs supported by little or no market activity based on our own assumptions. The estimated fair value of the contingent consideration was determined based on the Company’s preliminary estimates using the probability-weighted discounted cash flow approach. As of September 30, 2016, the Company recorded $805 in accrued expenses on the condensed consolidated balance sheet in connection with the contingent consideration. As of December 31, 2015, the Company recorded $1,719 in other non-current liabilities on the condensed consolidated balance sheet in connection with the contingent consideration. Changes in the fair value of the contingent consideration obligations are recorded in the condensed consolidated statement of operations. In the quarter and nine months ended September 30, 2016, the Company recorded a reduction of the contingent liability of $245 and $443, respectively, in SG&A expenses in the condensed consolidated statements of operations due to a decrease in the estimated fair value of the contingent consideration. The Company recorded an increase of the contingent liability of $182 in SG&A expenses in the condensed consolidated statements of operations for the nine months ended September 30, 2016 in connection with the achievement of one operational milestone. A total of $694 was paid to MWL Management B.V. and R.Q. Management B.V. in cash and common stock of the Company during the quarter ended June 30, 2016 upon achievement of this milestone. For the quarter and nine months ended September 30, 2016, charges of $23 and $45, respectively, were recorded in SG&A expenses in the condensed consolidated statement of operations for accretion associated with the contingent consideration. For the quarter and nine months ended September 30, 2015, charges of $76 and $252, respectively, were recorded in SG&A expenses in the condensed consolidated statement of operations for accretion associated with the contingent consideration.